Final Results

RNS Number : 0983B

Cenkos Securities PLC

31 March 2017

Cenkos Securities plc

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

Cenkos Securities plc ("Cenkos" or "the Company") together with its subsidiaries ("the Group"), today announced its final results for the year ended 31 December 2016. Cenkos is an independent, specialist institutional securities group, focused on small and mid-cap companies and investment funds.

Highlights		31-Dec-16	31-Dec-15
Revenue	- 43%	£43.7 m	£76.5 m
Profit before tax	- 78%	£4.4 m	£19.9 m
Cash	- 28%	£23.8 m	£33.1 m
Basic earnings per share	- 83%	4.7 p	27.2 p
Full year dividend per share paid and proposed ⁽¹⁾	- 57%	6.0 p	14.0 p

⁽¹⁾ Includes a proposed final dividend of 5p (2015: 1p)

Since it was admitted to trading on AIM in 2006, the Company will have returned £105.5 million of cash to shareholders, equivalent to 160.8p per share, following the payment of dividends declared and proposed.

Commenting on the results, Jim Durkin, Chief Executive Officer, said:

"Our successful strategy of being a leading UK institutional broker to growth companies and investment funds has led to us being profitable in every single year of operation and this continued into 2016. Since our first equity raise in 2005 we have raised almost £16 billion of equity capital for our clients. Excluding the revenues associated with a large fundraising completed in 2015, 2016's revenues fell 12% to £43.7 million on the back of lower equity fundraisings for our corporate clients in first half of 2016.

There continues to be good institutional demand to fund high quality companies and ideas. I am pleased that we remain ranked as one of the leading brokers in London for growth companies. Since the start of this year we have been engaged in a number of fund raisings for clients and our current pipeline is encouraging."

For further information contact:

Jim Durkin +44 20 7397 8900

Chief Executive Officer

Cenkos Securities plc

Dr Azhic Basirov / David Jones / Ben Jeynes +44 20 7131 4000

Nominated Adviser

Smith & Williamson Corporate Finance Limited

David Rydell / Duncan Mayall +44 20 3772 2500

Bell Pottinger

Strategic report

Introduction

The Board of Cenkos is pleased to present its Strategic Report on the development and performance of Cenkos during the year ended 31 December 2016, its financial position as at 31 December 2016 and the principal risks to which the Group is exposed. This report covers our strategy, business model, how well the business performed in 2016 (including a review of our key performance indicators) and the principal risks we face.

After generating £15.3 million of revenues in the first half of 2016, we are pleased to report that our performance improved in the second half of 2016 leading to full year revenues of £43.7 million. Profit before tax was £4.4 million (2015: £19.9 million) and basic earnings per share fell to 4.7p (2015: 27.2p).

We continue to be rated as one of the leading brokers in London for growth companies. Adviser Rankings Limited's 'AIM Adviser Rankings Guide' for January 2017 shows the Company as the number two Nominated Adviser ("Nomad") on AIM by both client market capitalisation and number of AIM clients.

Our strategy

The Company was founded in 2004 and over the past 12 years has established a successful platform that has been profitable in every year of its existence and delivered strong returns to shareholders. Our strategy - which has remained effective and constant over the years - is to build from these solid foundations to become the pre-eminent UK institutional broker to growth companies and investment funds admitted to trading or listed on a UK market. We aim to achieve this through:

n Understanding the needs of our clients, enabling us to provide successful fund raising and advice through an innovative and entrepreneurial approach;

n Delivering sustainable, diversified and growing income streams;

n Adding high quality individuals to the teams; and

n Managing costs and risks carefully,

thereby delivering a high return on equity and shareholder value through earnings growth and attractive cash returns to shareholders.

Our business model

We provide corporate finance, corporate broking, research and execution services to small and mid-cap growth companies and, increasingly, larger companies, across a wide range of industry sectors, as well as investment funds. We focus on companies that seek admission of their shares to trading on the UK's AIM or the LSE's main market, or companies that are already quoted on those markets. For growing companies that require access to capital and international exposure, AIM's flexibility, with its Nomad based regulatory framework, provides a firm foundation for financing and corporate development. We offer our clients advice and access to equity finance at all stages of their development.

Our resources are allocated as follows:

- Corporate finance: as well as providing strategic advice and regulatory guidance to our corporate clients, the team provides specialist corporate finance and technical advice on all forms of corporate transactions including IPOs, fundraisings, mergers and acquisitions, disposals, restructurings and tender offers;

- Corporate broking, sales and investor relations: we provide an effective and dedicated interface between investing institutions and corporates. Our business revolves around building and maintaining relationships with our retained corporate brokerships through which we act as the intermediary between our clients' Boards, shareholders and potential institutional investors. We have a proven track record of raising a significant amount of equity finance for a wide range of companies utilising our network of institutional investors. As corporate broker, our clients' Boards engage us to help them create and maintain supportive shareholder registers, provide an informed and effective interface with shareholders and potential investors and advise on all pertinent market issues;

- Research analysts: our analysts provide research on both corporate and non-corporate clients covering over 195 companies across 12 sectors;

- Execution services, including market making and sales trading: we actively provide liquidity to the market via our Retail Service Providers and facilitate institutional business in both small and large cap equities and investment funds. We strive to achieve a leading market share in the trading of all our broking clients and thus have superior visibility of buyers / sellers. Our market making capital is used to facilitate market liquidity for investors, not to trade proprietary positions; and

- Support functions covering areas such as finance, compliance, operations, HR, IT, risk, internal audit and facilities.

Revenue streams

Cenkos earns fees from primary and secondary equity fundraising, providing access to capital through acting as a key intermediary between growth companies or investment funds and institutional providers of capital. We seek to establish and maintain long-term relationships with our corporate and institutional clients. In 2016 we raised over £1.3 billion of funds for our clients. We have raised a total of almost £16 billion for our clients from our first equity placing in 2005 to the end of December 2016. In most of these transactions we acted as the sole or main broker.

We aim to provide equity financing and strong and supportive shareholder lists for companies and healthy returns for institutional investors. Corporate finance fees are earned from providing strategic advice and regulatory guidance to clients, as well as advice on all forms of corporate transactions including fundraisings, mergers and acquisitions, disposals, restructurings and tender offers. Fees are also generated from acting as Nomad, sponsor, broker or financial adviser to our corporate clients. Commission is earned from execution and research services and revenue is also generated from our market-making activities.

Management systems and controls

We aim to operate an efficient and flexible business model in the context of a highly regulated environment. It is therefore critical that we continue to maintain an appropriate and proportionate level of systems and controls, commensurate with our size, complexity, activities and risk appetite. The regulatory environment continues to evolve at a rapid pace with additional regulations coming in to force year on year, including an increased focus on conduct, culture, managing conflicts of interest and heightened regulatory scrutiny. The industry is working on further changes that will come into play in 2017 and beyond, including EU driven legislation such as MIFID II. We are therefore dedicating increasing levels of resources to monitoring, assessing and then implementing these changes, putting our clients' interests at the centre of everything we do and ensuring that we have an appropriate governance and assurance framework to oversee and manage this.

We manage our cost base carefully. We offer our client-facing staff relatively low basic salaries but reward their performance based on factors that include their revenues and costs, as well as risk factors. This cost flexibility allows us to operate during economic downturns more successfully than many of our competitors who have higher levels of fixed or guaranteed pay. We selectively use outsourcing partners to help us maintain this cost flexibility in areas where volumes can be unpredictable. Our settlement and core trading systems and associated support are outsourced to Pershing and Fidessa respectively. We work closely with these key outsourced suppliers to ensure that they continue to deliver the services needed for the long term health of our business in an efficient, secure and transparent manner. We have paid increasing attention to potential cyber crime vulnerability internally and with our suppliers.

Culture, conduct and people

Our success is based on putting our corporate and institutional clients at the core of what we do. As an FCA regulated firm, we constantly seek to maintain high standards of business conduct, thereby safeguarding our reputation for the longer term. To achieve this, we seek to maintain experienced and stable teams, whose members build professional relationships and achieve results through a committed and entrepreneurial approach, acting with honesty, fairness, reliability and competency. We endeavour to remunerate our staff to a level which not only retains them but also motivates them to perform in line with the longer-term growth objectives of the Group.

Our key objectives and key performance indicators ("KPIs")

Our key objectives are to:

n Grow the business by both retaining existing corporate clients and winning new ones, helping clients achieve their strategies through the provision of advice and fundraising capabilities, ensuring we have the right calibre and number of staff deployed to support this; and

n Reward our shareholders by generating a high return on equity (within acceptable risk limits), leading to an attractive dividend yield - or other returns to shareholders such as share buy-backs where appropriate - and share price growth.

Our KPIs include, but are not limited to, measures such as:

n The size of our corporate client base (Nomad / sponsor / broker / financial adviser appointments): this decreased from 124 in 2015 to 116 as at 31 December 2016. A number of our clients were acquired in the year and some of our smaller clients were potentially better suited to other Nomads;

n Funds raised for clients: in 2016 we raised £1.3 billion (2015: £3.1 billion including £1.1 billion for BCA Marketplace plc) for our clients. We achieved a market share of around 13% of all fundraisings on AIM in 2016 (2015: 17%) and continued to demonstrate our ability to raise funds not only on AIM but also for larger companies and listed investment funds on the LSE's main market.

n Revenue per head, profit before tax, earnings per share:

n Revenue per head: this fell from £0.64 million in 2015 to £0.37 million in 2016. Revenues were materially down when compared to 2015 due to an overall fall in our equity placings for clients. Our average headcount between 2015 and 2016 was broadly flat. Over the previous 5 years, our revenues per head have been ahead of all of our main competitors;

n Profit before tax: this fell 78% to £4.4 million in 2016 (2015: £19.9 million) on the back of the fall in revenues, partly offset by a fall in performance related pay;

n Basic earnings per share ("EPS"): this fell 83% to 4.7p (2015: 27.2p) due to lower profit before tax, and the impact of a rise in our effective tax rate.

n Post tax return on average equity, total shareholder returns:

n Post tax return on average equity: our post tax return on average equity fell from 43% in 2015 to 10% in 2016 due to lower profitability;

n Total shareholder returns were minus 53% (2015: plus 21%) due primarily to the fall in our share price over the year; and

n Various key risk indicators, including capital resources and cash. As at 31 December 2016 we held £23.8 million of cash (2015: £33.1 million) and had a capital resources surplus of £9.8 million (2015: £11.0 million) in excess of our overall Pillar 1 regulatory capital requirements. We continue to maintain healthy cash reserves, reflecting our positive cash flow cycle.

Review of the year

Financial results

Revenues

Revenue for the year declined by 43% to £43.7 million (2015: £76.5 million). In 2016 we raised £1.3 billion of equity for our clients (2015: £3.1 billion). Excluding the impact of one large deal in 2015, the 12% fall in revenues reflects quieter equity markets - including AIM - than those experienced in 2015. Against the backdrop of the Brexit vote and wider European macro-economic uncertainty, total funds raised by AIM companies fell by 13% to £4.8 billion in 2016, when compared to 2015 (source: LSE AIM factsheet December 2016). We helped our clients raise around 13% of all of the funds raised on AIM in 2016. During the year we completed 36 transactions - including four IPOs. In addition, we also completed ten M&A corporate finance transactions (2015: nine). Our corporate finance revenue (including fees from equity placings) fell 51% to £29.7 million in 2016 (2015: £60.1 million).

We remain ranked as one of the leading brokers in London for growth companies, as demonstrated by Adviser Rankings Limited's 'AIM Adviser Rankings Guide' for January 2017 where we were ranked as number two Nomad by both client market capitalisation and by number of AIM clients. We are also ranked number one Nomad for Oil and Gas and for Industrials by client market capitalisation and number two Nomad for Consumer Services by client market capitalisation.

We make markets in the securities of all the companies where we have a broking relationship to support the other services we provide. We actively provide liquidity to the market and facilitate institutional business in small, mid and selected large-cap equities. Our trading desks make markets in the shares of 403 (2015: 415) companies and investment trusts. Importantly, we maintained a top three market share in 73% of our clients' stock and the top market share in 48%. Despite this, we continue to restrict the amount of capital committed to this activity to limit market risk exposure without adversely affecting our market-making services and the revenue generated.

Our corporate broking, market making, research fees and commission revenues fell 15% to £14.0 million in 2016 (2015: £16.4 million). Market making income fell as we saw lower flows on key stocks. Our corporate broking income fell on the back of lower client numbers. Commission income rose slightly, helped in part by new staff hired in the year. However, the pressure on secondary commissions shows no sign of relenting, including the potential impact of the EU's MiFID II (Markets in Financial Instruments Directive II) in terms of the unbundling of dealing commission and payment for equity research. The potential financial impact on Cenkos as a whole is expected to be relatively modest given that such commission is not a major income stream for us and we believe that institutions will continue to require access to (and be prepared to pay for) insightful research on companies.

Costs, profit and earnings per share

Administrative expenses fell by £17.3 million (31%) in the year, primarily driven by lower performance-related pay on the back of lower net revenues. In August 2016 we were fined £0.5 million by the FCA for regulatory breaches following an investigation into our role as sponsor to Quindell plc ("Quindell") (now known as Watchstone Group plc) in relation to Quindell's planned move from AIM to the premium segment of the main market of the LSE in June 2014 and our systems and controls concerning the provision of sponsor services. We have expensed this fine and the legal costs incurred in 2016 (and in prior years) to address the issues raised by the FCA and accrued for the insurance recovery associated with these legal costs in these results. The FCA's investigation into us was concluded in August 2016, with the FCA acknowledging the extensive remediation programme the Company undertook in order to enhance and improve its systems and controls in relation to the provision of sponsor services. Our costs during the period also reflect a continued investment in staff, systems and processes to allow ourselves to execute both larger and a greater number of transactions in the future.

Included in administrative expenses are £1.2 million (2015: £2.8 million) of staff costs resulting from the Compensatory Award Phantom Dividend Plan 2009 (the "CAP"). Payments under this scheme are triggered only by the payment of a dividend to ordinary shareholders. A CAP cost was incurred during the year as a result of the second interim and final dividend for 2015 and the interim dividend for 2016 totalling 8p paid in 2016. This compares to a CAP cost incurred in 2015 in respect of 17p of dividends covering 2014's final dividend and 2015's interim dividend.

Profit before tax fell by 78% to £4.4 million (2015: £19.9 million). The tax charge for the year from continuing operations as presented in the income statement was £1.9 million (2015: £4.5 million), which equated to an effective rate of tax of 42% (2015: 23%) reflecting, in part, the non-tax deductibility of the FCA penalty noted above, and deferred tax charges on our CAP share scheme driven by a fall in our share price by the end of the year. Profit after tax fell by 83% to £2.5 million (2015: £15.4 million). Basic earnings per share fell by 83% to 4.7p (2015: 27.2p).

Financial position and cash flow

As at 31 December 2016 our net trading investments were £11.1 million (2015: £10.2 million). Cash held at 31 December 2016 was £23.8 million (2015: £33.1 million). The year to 31 December 2016 saw a net outflow of cash of £9.3 million (2015 inflow: £0.2 million). This reflects a number of factors including our profitable trading in 2016, offset by factors such as £4.4 million in dividend payments, £2.5m of corporation tax paid and a £6.1m increase in trade and other receivables, including equities trading in the course of settlement. As part of our Individual Liquidity Adequacy Assessment process, we review our liquidity requirements over the medium term to ensure that we always have adequate liquidity, even after the application of a variety of stress tests.

Dividend policy and capital levels

A key consideration in our dividend policy is to retain sufficient capital and reserves to meet our regulatory capital and cash requirements, after taking into account anticipated future working capital needs and potential growth requirements. As at 31 December 2016, the Company had a capital resources surplus of £9.8 million (2015: £11.0 million) in excess of our overall Pillar 1 regulatory capital requirements before including second half's retained earnings.

No ordinary shares were bought back by Cenkos for cancellation in the year (2015: 10.18 million shares). On 28 April 2016 we announced that the trustees of the Cenkos EBT had launched a share purchase plan to buy up to £50,000 of Cenkos shares a month. 419,900 shares were purchased in 2016 under this plan at a cost of £438,441 (2015: none). The increase in the size of the Company's EBTs reflects, in part, the potential future demand for Cenkos' shares to satisfy share awards under the Company's deferred bonus scheme.

Since our flotation on AIM in October 2006, we have paid out 116.5p in dividends (prior to the 5p proposed final dividend for 2016) and bought back 19.5 million shares at a cost of £25.4 million for cancellation, thereby increasing the Group's prospective earnings per share. Following the payment of the 5p final dividend for 2016, the Company will have returned £105.5 million of cash to shareholders, equivalent to 160.8p per share since our flotation in 2006.

The Board proposes a final dividend of 5p per share, making our full year dividend 6p per share (2015: 14.0p). The payment of this final dividend will trigger payments to staff under the CAP of £0.6 million in the first half of 2017 (2015: £1.8 million in the first half of H1 2016). In setting the level of the final dividend, the Board considered, inter alia, the second half's performance and outlook as well as regulatory capital and cash requirements, working capital needs and potential growth requirements.

Subject to approval at the Annual General Meeting to be held on 17 May 2017, the final dividend will be paid on 26 May 2017 to all shareholders on the register at 28 April 2017. In line with existing shareholder authorisation, the Board will continue to assess opportunities for share buy-backs, tender offers and the funding of share purchases by the EBT where this is beneficial to shareholders.

People

The commitment of our employees has enabled us to achieve this performance. We continue to look to recruit staff attracted by our culture and business model. We aim to take advantage of further regional opportunities in the UK and in Asia. We are pleased to report that we have now formally opened our Singapore office. The Monetary Authority of Singapore approved Cenkos Securities Asia Pte. Ltd's application for a Capital Markets Services Licence on 27 June 2016.

Jeremy Warner Allen resigned as an executive Director of the Company on 22 November 2016. The Board wishes to thank him for his significant contribution to the Board and to the Company over the 11 years he worked at Cenkos.

We endeavour to remunerate our staff to a level and in a manner which not only retains but also motivates them to perform in line with the longer-term growth objectives of the Group. Our staff's skill, commitment and determination will continue to provide us with a solid platform on which to continue to build our franchise.

Principal risks

We face a range of risks which could affect both our financial performance and the achievement of our strategic objectives. One of our key risks is that our income is dependent on the health of the financial markets and in particular the economic conditions of the UK and how they impact equity fundraising. We also believe that one of the greatest risks we face comes from potential damage to our reputation. On an ongoing basis, the Board regularly reviews reputational issues. These risks will be laid out in our Annual Report.

Outlook

Jim Durkin

Chief Executive Officer

Consolidated income statement

For the year ended 31 December 2016

	2016	2015
	£ 000's	£ 000's
Continuing operations
Revenue	43,745	76,513
Administrative expenses	(39,426)	(56,751)

Operating profit	4,319	19,762

Investment income - interest receivable	83	138
Interest expense	-	(4)

Profit before tax from continuing operations for the year	4,402	19,896
Tax	(1,858)	(4,525)

Profit after tax	2,544	15,371

Attributable to:
Equity holders of Cenkos Securities plc	2,544	15,371

Basic earnings per share	4.7p	27.2p
Diluted earnings per share	n/a	26.8p


The profit attributable to the Company in the year ended 31 December 2016 was £3.2 million (31 December 2015: £15.7 million).

Consolidated statement of comprehensive income

For the year ended 31 December 2016

	2016	2015
	£ 000's	£ 000's

Profit for the year	2,544	15,371

Amounts that will be recycled to income statement in future periods
Gain / (loss) on available-for-sale financial assets	79	(2)
Tax on available-for-sale financial assets	(16)	-
Exchange differences on translation of foreign operations	105	-

Other comprehensive income for the year	168	(2)

Total comprehensive income for the year	2,712	15,369

Attributable to:
Equity holders of Cenkos Securities plc	2,712	15,369

Consolidated statement of financial position

As at 31 December 2016

	2016	2015
	£ 000's	£ 000's
Non-current assets
Property, plant and equipment	389	296
Deferred tax asset	236	1,330

	625	1,626
Current assets
Trade and other receivables	24,526	18,354
Available-for-sale financial assets	560	559
Other current financial assets	13,811	12,706
Cash and cash equivalents	23,795	33,106

	62,692	64,725

Total assets	63,317	66,351

Current liabilities
Trade and other payables	(32,560)	(34,881)
Other current financial liabilities	(2,694)	(2,551)

	(35,254)	(37,432)

Net current assets	27,438	27,293

Non-current liabilities
Trade and other payables	(880)	(351)

Total liabilities	(36,134)	(37,783)

Net assets	27,183	28,568

Equity
Share capital	567	567
Share premium	3,331	3,321
Capital redemption reserve	195	195
Own shares	(3,556)	(3,193)
Available-for-sale reserve	165	102
Foreign currency translation reserve	105	-
Retained earnings	26,376	27,576

Total equity	27,183	28,568

Consolidated cash flow statement

For the year ended 31 December 2016

	2016	2015
	£ 000's	£ 000's
Profit for the year	2,544	15,371
Adjustments for:
Net finance income	(82)	(134)
Tax expense	1,858	4,525
Depreciation of property, plant and equipment	182	241
Shares and options received in lieu of fees	(5,770)	(4,967)
Transfer of shares from SIP to employees	27	-
Share-based payment expense	776	502

Operating cash flows before movements in working capital	(465)	15,538

Decrease in net trading investments and available-for-sale financial assets	4,886	2,283
(Increase) / decrease in trade and other receivables	(6,055)	1,367
(Decrease) / increase in trade and other payables	(218)	12,538

Net cash flow from operating activities before interest and tax paid	(1,852)	31,726

Interest paid	-	(4)
Tax paid	(2,533)	(5,049)

Net cash flow from operating activities	(4,385)	26,673

Investing activities
Interest received	93	133
Purchase of property, plant and equipment	(272)	(174)
Reclassification of stamp duty	-	58

Net cash (outflow) / inflow from investing activities	(179)	17

Financing activities
Dividends paid	(4,367)	(9,740)
Proceeds from issue of own shares	-	3,099
Proceeds from sale of own shares to employee share plans	58	47
Acquisition of own shares by EBT	(438)	-
Acquisition of own shares for cancellation	-	(18,777)
Acquisition of CAP options cancelled as part of tender offer buy-back	-	(1,145)

Net cash used in financing activities	(4,747)	(26,516)

Net (decrease) / increase in cash and cash equivalents	(9,311)	174

Cash and cash equivalents at beginning of year	33,106	32,932

Cash and cash equivalents at end of year	23,795	33,106

Consolidated statement of changes in equity

For the year ended 31 December 2016

	Equity attributable to equity holders of the parent
	Share capital	Share premium	Capital redemption reserve	Own Shares	Available-for-sale reserve	Foreign currency translation reserve	Retained earnings	Total
	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's	£ 000's
At 1 January 2015	637	232	93	(3,218)	104	-	41,713	39,561
Profit for the year	-	-	-	-	-	-	15,371	15,371
Loss on available-for-sale financial assets net of tax	-	-	-	-	(2)	-	-	(2)
Total comprehensive income for the year	-	-	-	-	(2)	-	15,371	15,369
Shares issued in the year	32	3,067	-	-	-	-	-	3,099
Transfer of shares to employee share plans	-	22	-	25		-	-	47
Acquisition of own shares for cancellation	(102)	-	102	-	-	-	(18,777)	(18,777)
Charge to equity for cancelled CAP options	-	-	-	-	-	-	(1,145)	(1,145)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	502	502
Deferred tax on share-based payments	-	-	-	-	-	-	(903)	(903)
Current tax on share-based payments	-	-	-	-	-	-	555	555
Dividends paid	-	-	-	-	-	-	(9,740)	(9,740)
At 31 December 2015	567	3,321	195	(3,193)	102	-	27,576	28,568
Profit for the year	-	-	-	-	-	-	2,544	2,544
Gain on available-for-sale financial assets net of tax	-	-	-	-	63	-	-	63
Exchange differences on translation of foreign operations	-	-	-	-	-	105	-	105
Total comprehensive income for the year	-	-	-	-	63	105	2,544	2,712
Transfer of shares to employee share plans	-	10	-	48	-	-	-	58
Transfer of shares from SIP to employees	-	-	-	27	-	-	-	27
Acquisition of own shares by EBT	-	-	-	(438)	-	-	-	(438)
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	776	776
Deferred tax on share-based payments	-	-	-	-	-	-	(153)	(153)
Dividends paid	-	-	-	-	-	-	(4,367)	(4,367)
At 31 December 2016	567	3,331	195	(3,556)	165	105	26,376	27,183

1. Accounting policies

General information

The consolidated financial information contained within this announcement does not constitute statutory accounts for the year ended 31 December 2016 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. The statutory accounts for the year ended 31 December 2016 will be delivered to the Registrar of Companies in due course. The annual report and statutory accounts will be sent to shareholders and made available to the public on the Company's website: www.cenkos.com or, upon request, copies may be obtained from the Company Secretary at the registered office of Cenkos Securities plc, 6.7.8. Tokenhouse Yard, London, EC2R 7AS. The Company's Annual General Meeting will be held on 17 May 2017.

The consolidated financial information contained within these financial statements has been prepared on the historical cost

basis, except for the revaluation of certain financial instruments.

Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, the financial position of the Group, its cash flows and liquidity position are set out in the Strategic Report. The financial statements of the Group have been prepared on a going concern basis as the Directors have satisfied themselves that, at the time of approving the financial statements and having taken into consideration the strength of the Group's statement of financial position and cash balances, the Group has adequate resources to continue in operational existence for at least the next 12 months from the signing of these financial statements.

Basis of accounting

The consolidated financial information contained within these financial statements has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, and are in accordance with the accounting policies that were applied in the Group's statutory accounts for the year ended 31 December 2015.

2. Dividends

	2016	2015
Amounts recognised as distributions to equity holders in the year:	£ 000's	£ 000's

Amounts recognised as distributions to equity holders in the year:
Second interim dividend for the year ended 31 December 2015 of 6p (2014: nil) per share	3,269	-
Final dividend for the year ended 31 December 2015 of 1.0p (2014: 10p) per share	550	5,656
Interim dividend for the period to 30 June 2016 of 1.0p (June 2015: 7.0p) per share	548	4,084

	4,367	9,740

A final dividend of 5p per share has been proposed for the year ended 31 December 2016 (2015: 1.0p). The proposed final dividend is subject to approval at the Annual General Meeting and is not recognised as a liability as at 31 December 2016. Under the CAP, the payment of a dividend to ordinary shareholders will trigger a cash payment to holders of options under the CAP. The payment of the final dividend will increase staff costs by £0.58 million in the first half of 2017 (6p 2015 second interim and 1.0p 2015 final dividend increased staff costs by £0.82 million in the first half of 2016). See note 22 for details of the CAP scheme.