Final Results
Cenkos Securities plc (the "Company") together with its subsidiaries (the "Group")
ANNUAL FINANCIAL RESULTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2011
Cenkos Securities plc today announced its audited final results for the year to 31 December 2011. The highlights of the results, comparing them with the prior year, are:
Financial highlights
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31 December 2011
|
31 December 2010 |
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Revenue on continuing operations |
£43.7m |
£58.5m |
|
|
Underlying operating profit on continuing operations* |
£5.7m |
£11.7m |
|
|
Operating profit on continuing operations |
£5.7m |
£6.4m |
|
|
Profit before tax on continuing operations |
£6.0m |
£6.6m |
|
|
Basic and diluted earnings per share on continuing operations |
5.6p |
5.0p |
|
|
Basic and diluted earnings per share on continuing and discontinued operations |
5.2p |
5.2p |
|
|
Dividends per share (interim and proposed final) |
5p |
8p |
|
|
Capital resources in excess of Pillar 1 and 2 regulatory capital requirements |
£7.7m |
£7.7m |
|
Business highlights
|
Funds raised for clients |
£838 million
|
£1.44 billion |
|
|
Nominated adviser or corporate broker / financial adviser to |
111 companies
|
104 companies |
|
|
Funds raised since period end |
£158 million |
|
|
Commenting on the final results, Chief Executive Officer Jim Durkin noted:
"Whilst not immune to events in the general economy, our pipeline remains strong and we have made an encouraging start to 2012. Since 31 December 2011, we have undertaken a number of corporate and issuance transactions and raised £158 million for our clients."
For further information contact:
Jim Durkin 020 7397 8900 David Rydell 020 7861 3886
Chief Executive Officer Pelham Bell Pottinger
Cenkos Securities plc
* The Group uses a non-Generally Accepted Accounting Practice ("non-GAAP") financial measure, "underlying operating profit and continuing operations", in addition to those reported under IFRS. This is since this gives a clearer picture of the underlying financial and operating performance of the Group, for example by adjusting for the impact of significant "one-off" income or expenses.
STRATEGY
Cenkos was founded in 2005 and has, over the past six years, established a successful platform that has been profitable in every year of its existence and delivered a strong dividend stream. The Company's prime strategy is to build from this base to become the principal UK institutional broker to growth companies based in the UK and abroad. Cenkos aims to achieve this through:
- Successful fund raising and advice to clients through an innovative and entrepreneurial approach;
- Delivering sustainable, diversified and growing income streams;
- Operating a transparent and meritocratic model for staff;
- Adding high quality individuals to the teams; and
- Managing costs and risks carefully,
thereby providing shareholder value through share price growth and a strong dividend yield.
CHIEF EXECUTIVE OFFICER'S REPORT
I am pleased to report that, despite the difficult economic conditions that prevailed during the period, Cenkos and its subsidiaries (together the "Group") remained profitable in both the first and second half of 2011. This has been achieved against a backdrop of fragile and volatile equity markets. Cenkos' robust business model ensures a low fixed cost base and a remuneration structure highly geared to performance. We have a positive cash cycle and a limited exposure to credit and market risk. This, combined with the high quality, dedication and experience of our employees, has enabled the Group to produce this performance.
Despite difficult markets, the Group has continued to raise equity capital for its corporate clients with the result that we are now one of the leading brokers in London for growth companies. In May 2011 Cenkos was voted "Alternative Investment Market (AIM) broker of the year" at the Growth Company Awards 2011. Cenkos remains highly placed in its chosen markets, as noted in Morningstar Professional Services Rankings Guide for Q1 2012, where Cenkos was ranked first in terms of nominated advisers (Nomad) to the top 50 and top 100 companies listed on AIM.
Financial results
After a strong first half in 2011, the second half was far more challenging as the economic slowdown started to have an impact on financial markets. I am therefore pleased that we remained profitable in the second half even at this historically low level of corporate activity on AIM.
Total revenue on continuing operations for the year decreased by 25% to £43.7 million (2010: £58.5 million). This is against a market backdrop of a 39% year on year fall to £4.3bn in the total money raised by all companies on AIM in 2011, with new issues by all companies on AIM falling by as much as 50% on the levels seen in 2010 (source: LSE AIM factsheet December 2011). This fall in deal flow has materially impacted the industry's profitability. A number of our competitors have been acquired by larger partners, or have chosen to close their broking businesses altogether. This turmoil has provided us with a window of opportunity to win new clients and add high quality individuals to our existing teams.
Revenues from Fund and Wealth Management also fell when compared to last year. Our offshore Fund and Wealth Management business (Cenkos Channel Islands) experienced lower stock broking revenues in the second half of the year. We are currently undertaking a strategic review of this business. Our onshore fund management business also experienced decreased revenues. A decision to sell this business was made in 2011 and the sale completed in February 2012, hence their results are shown as discontinued operations.
The Group's underlying cost base fell by £8.8m (19%) in the period, mainly reflecting a fall in performance-related pay, driven by lower net revenues.
Profit before tax on continuing operations was £6.0 million (2010: £6.6 million). This 9% fall reflected the fall in revenues noted above, offset by falls in performance-related pay and the fact that the significant "one-off" costs on continuing operations experienced in 2010 did not reoccur in 2011.
Cenkos continues to maintain a firm control over risk, enjoys healthy cash levels and remains well capitalised against regulatory requirements.
People
Whilst the market in which we operate remains unsettled, the continued professionalism of our employees has enabled us to continue our strong performance. I am proud to lead a group of such dedicated and talented individuals. Their skill, commitment and determination will continue to provide us with a solid platform on which to build our franchise.
During the year there were a number of changes to the Board. On 4 July Oliver Ellingham, a non-executive Director of the Company, stepped down from the Board due to other business commitments. Simon Melling stepped down from the position of Chief Executive Officer on 13 December 2011 and resigned as a Director on 16 December 2011. The Board would like to thank Oliver and Simon for their contributions to the Company. Following an executive search and a review of the Company's executive structure, I was appointed to the Board and to the position of Chief Executive Officer on 13 December 2011.
Dividend
As we have consistently stated, we only intend to retain sufficient capital and reserves to meet the Group's regulatory capital and cash requirements, after taking account of the likely future working capital requirements of the Group. Since our flotation onto AIM in October 2006, we have paid some 64 pence in dividends.
The Board proposes a final dividend of 1p per share (2010: 4p). This makes a total dividend of 5p for the year (2010: 8p).
Subject to approval at the Annual General Meeting to be held on 10 May 2012, the final dividend will be paid on 15 May 2012 to all shareholders on the register at 13 April 2012.
Outlook
Whilst not immune to events in the general economy, our pipeline remains strong and we have made an encouraging start to 2012. Since 31 December 2011, we have undertaken a number of corporate and issuance transactions and raised £158 million for our clients.
Jim Durkin
Chief Executive Officer
15 March 2012
Responsibility statement
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
- the management report, (which is incorporated into the Chief Executive Officer's report, Business Review, Financial Review and principal risks and uncertainties), includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole.
Forward-looking statements
These financial statements contain forward-looking statements with respect to the financial condition, results, operations and businesses of the Group. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Such statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
BUSINESS REVIEW
Key performance indicators (KPIs)
The Group's principal KPIs include, but are not limited to, measures such as:
- the Group's overall profit before tax, the revenue and profitability of each business segment, cost management, earnings per share;
- our corporate client base (e.g. Nomad / broker appointments), the aggregate funds raised for clients; and
- various key risk indicators, including regulatory ratios and cash flow measures.
Commentary on KPIs is included in this Business Review and in the Financial Review.
Corporate Broking and Advisory
This business segment includes the results of our growth company and investment funds activities, including the results of our market making capability that supports these areas. Revenue in this segment is made up of placing commission on fund raisings, corporate finance fees and retainer income, market making profits and commissions on secondary market transactions. Revenue was down 25% to £35.2 million (2010: £46.7 million) due largely to fewer placings taking place in 2011 and a combination of both lower transactional volumes and more turbulent trading conditions experienced by our market making operations. Corporate finance revenues fell from £36.4 million in 2010 to £25.8 million in 2011 and corporate broking and market making fees fell from £9.2 million in 2010 to £6.7 million in 2011. The segment result before unallocated administrative expenses was down 14% to £16.2 million (2010: £18.9 million) as set out in note 3 to the financial statements.
In our core market, AIM, the total value of all primary admissions to AIM fell from £1,219 million in 2010 to £609 million in 2011, and subsequent placings on AIM fell from £5,738 million to £3,660 million in 2011(source: LSE AIM factsheet December 2011). Against this backdrop, we are pleased to announce that during the year we completed 23 transactions (excluding investment funds) raising a total of £550 million (2010: £833 million), which included three primary issues.
As at 31 December 2011, the Group was nominated adviser, broker or financial adviser to 111 companies or trusts (2010: 104). In the period we also completed 21 "merger and acquisition" corporate finance transactions (2010: 17). This performance is particularly encouraging as it was achieved during a period of limited transactional revenue and continued competitive pressure. Our broking teams cover a wide range of sectors. We have been ranked highly by Morningstar Professional Services Rankings Guide for Q1 2012, where we were the top Nomad by number of clients for the Oil & Gas sector, and ranked second for both the Telecommunications and Financial sectors.
Some of the transactions we were involved in are noted below:
In February 2011, Cenkos acted as nominated adviser and broker to OPG Power Ventures plc in its £60 million placing to fund capacity expansion. Cenkos acted as nominated adviser, sole book runner and joint broker to Providence Resources plc, an oil and gas company, in raising approximately £41 million.
In May 2011, Cenkos acted as financial adviser, sponsor and broker to Stobart Group Limited in its placing and open offer to raise £120 million to fund the company's expansion strategy.
In July 2011, Cenkos acted as Nomad and sole broker to Smart Metering Systems plc in connection with its placing and admission to AIM with a market capitalisation of £50 million.
In August 2011 Cenkos helped NewRiver Retail Limited raise £42.5 million in a share placing. This was used to acquire four retail properties for approximately £68 million.
In November 2011, Cenkos acted as sponsor and joint broker to Assura Group in its £35 million rights issue.
Our investment funds team provides a broad range of services to investment companies including primary and secondary sales, market making, research, corporate broking and corporate finance advice. Their sales team services both institutional and wealth manager clients. Some of the transactions we were involved in are noted below:
In February 2011, Cenkos acted as the sole book runner and financial adviser on a further £166 million equity issue for the Anthony Bolton-managed Fidelity China Special Situations plc. Since its flotation on the London Stock Exchange in April 2010, this company has now raised a total of £676 million of equity with Cenkos.
In April 2011, Cenkos acted as listing sponsor and sole placing agent for the £50 million launch of The Diverse Income Trust plc, a main market London-listed investment trust managed by Gervais Williams.
These transactions helped bring the total raised for investment funds in 2011to £288 million including £166 million for Fidelity China Special Situations (2010: £609 million, including £460 million for Fidelity China Special Situations).
The Group makes markets in the securities of all the companies where it has a broking relationship to support the other services it provides to its clients. During the period, we expanded our market making service and our equity desk now covers 207 companies and our investment trust desk 129. Despite this increase in coverage, we continue to actively restrict the amount of capital committed to this activity to limit the market risk exposure without adversely affecting the revenue generated. The Group does not engage in proprietary trading and applies position limits and monitoring procedures to ensure it controls the risks taken. The Group does from time to time take stock in lieu of fees and the market movement on these items is also included in this income stream.
Institutional Equities
The Institutional Equities team provides research-driven investment recommendations to institutional clients. Whilst many of our clients continue to pay for our research services directly, more are choosing to transact business through Cenkos as well.
Institutional Equities suffered a decline in revenues in comparison with the same period last year. Market volumes were running at 30% below the levels of 2010, however, we continue to look to grow the business. Recruiting has been somewhat challenging given that rival firms were offering guaranteed packages, but Cenkos refuses to change its business model and will only take on people who embrace our transparent, performance-driven culture. We believe that Cenkos has a good reputation in secondary equities, but lacks scale. The impending shake-out amongst market practitioners should give us the opportunity to rectify this and we added two new sales people and one new analyst in 2011.
Revenues for Institutional Equities dropped by 56% to £2.2m (2010: £5.0m), although secondary income fell by a smaller amount, 43%, and the segment result was £0.5m (2010: £1.5m). We are pleased to have made a profit under such market conditions, but are disappointed not to have done better. Nevertheless, we will continue to invest and use this turbulent period to improve the service we provide to our clients.
Our execution business is strictly focused on client facilitation. We do not engage in proprietary trading. We believe that the continued organic growth of this area will enhance Cenkos' overall service to its expanding client base.
Fund and Wealth Management
Our offshore fund and wealth management services are provided by our 50% owned Guernsey based subsidiary Cenkos Channel Islands and its own Channel Island based subsidiaries (together the "Cenkos Channel Islands Group"). Varying levels of stock broking services are offered, from fully discretionary to execution only, to high net worth individuals, financial intermediaries and institutions. In addition to stockbroking offices in both Guernsey and Jersey, Cenkos Channel Islands also offers segregated investment management services as well as managing the unitised Cenkos Channel Islands Investment Fund range of funds, which launched a third sub-fund during the year.
The offshore asset management business has continued to grow and has made a positive contribution to the Group's results, with 2,643 clients (2010: 2,197) and £964 million funds under management (2010: £1.10 billion). Lower stockbroking revenues in the second half of the year compared with the same period in 2010 meant that overall revenues fell 7% to £6.3m (2010: £6.8m).
The onshore fund management business is provided by Cenkos Fund Managers Limited, a subsidiary 70% owned by Cenkos Fund Management Limited, which is a 65% owned subsidiary of Cenkos Securities plc. This operation has an investment management agreement with an AIM-quoted fund. The fund has been put into run off and although investment management fees continue to be generated, these are declining over time. A decision was made by the Board to sell this business to local management in November 2011 and this sale was completed on 1 February 2012. The results for the year of this business, and the loss on sale, are shown as "discontinued operations" and the comparative results for 2010 have also been restated accordingly. 2010 results for Cenkos Fund Managers Limited included £0.7 million in performance fees that did not re-occur in 2011, and a reduction in the net asset value of the fund it advises has lead to reduced investment management fees in 2011.
The segment result on continuing operations (Cenkos Channel Islands Group) decreased by 41% to £0.9 million (2010: £1.5 million) due to lower income and increased costs reflecting further investment in the business.
FINANCIAL REVIEW
Income statement
We set out below a schedule which re-analyses information included in the statutory income statement. The Group uses a non-Generally Accepted Accounting Practice ("non-GAAP") financial measure, "underlying operating profit," in addition to those reported under IFRS. This gives a clearer picture of the underlying financial and operating performance of the Group, as it removes the "one-off" costs we incurred in 2010: namely the re-organisation of the Edinburgh office; redundancy costs associated with the closure of the Credit Markets operation; aborted acquisition costs and the net cost of settlement of litigation with a sub-broker. These adjusting items amount to £5.3 million in 2010. In 2011, underlying operating profit on continuing operations decreased by 51% to £5.7 million from £11.7 million.
Total Group revenue on continuing operations was £43.7 million compared to £58.5 million last year, a decrease of 25%. There were no significant "one-off costs" in 2011, and therefore, despite a large fall in revenues, our operating profit on continuing operations only fell 12% to £5.7m. Our earnings per share on continuing operations increased by 13% to 5.6p.
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2011 |
2010 |
||||
|
|
|
Underlying 'non-GAAP' income statement |
Adjusting items |
GAAP income statement |
Underlying 'non-GAAP' income statement |
Adjusting items |
GAAP income statement |
|
|
|
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
|
Continued operations |
|
|
|
|
|
|
|
|
Revenue |
|
43,704 |
- |
43,704 |
58,531 |
- |
58,531 |
|
Administrative expenses (2010 restated) |
|
(38,003) |
- |
(38,003) |
(46,833) |
- |
(46,833) |
|
One off costs in 2010 noted above (re-organisation of Edinburgh office, closure of Credit Markets operations, aborted acquisition costs and sub broker litigation) |
|
- |
- |
- |
- |
(5,254) |
(5,254) |
|
Operating profit from continuing operations |
|
5,701 |
- |
5,701 |
11,698 |
(5,254) |
6,444 |
|
|
|
|
|
|
|
|
|
|
Investment income - interest receivable |
|
325 |
- |
325 |
454 |
- |
454 |
|
Finance costs - interest payable |
|
(9) |
- |
(9) |
(1) |
- |
(1) |
|
(Loss)/gain on sale of available-for-sale financial asset
|
|
- |
- |
- |
(294) |
- |
(294) |
|
Profit before tax from continuing operations |
|
6,017 |
- |
6,017 |
11,857 |
(5,254) |
6,603 |
|
|
|
|
|
|
|
|
|
|
Tax |
|
(1,549) |
- |
(1,549) |
(3,916) |
1,753 |
(2,163) |
|
Profit for the year from continuing operations |
|
4,468 |
- |
4,468 |
7,941 |
(3,501) |
4,440 |
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/ profit after tax for the year from operations discontinued in 2011 |
|
- |
(457) |
(457) |
- |
384 |
384 |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
4,468 |
(457) |
4,011 |
7,941 |
(3,117) |
4,824 |
|
Attributable to: |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
4,168 |
(457) |
3,711 |
6,843 |
(3,117) |
3,726 |
|
Non-controlling interests |
|
300 |
- |
300 |
1,098 |
- |
1,098 |
|
|
|
4,468 |
(457) |
4,011 |
7,941 |
(3,117) |
4,824 |
|
|
|
|
|
|
|
|
|
|
Earnings per share on continuing operations |
|
|
|
|
|
|
|
|
Basic |
|
6.3p |
|
5.6p |
9.4p |
|
5.0p |
|
Diluted |
|
6.3p |
|
5.6p |
9.3p |
|
5.0p |
|
Earnings per share on continuing and discontinued operations |
|
|
|
|
|
|
|
|
Basic and diluted |
|
5.8p |
|
5.2p |
9.6p |
|
5.2p |
|
|
|
|
|
|
|
|
|
Underlying results for 2010 have been restated for operations discontinued in 2011. Administrative expenses are shown after charging £2.4 million relating to staff bonuses resulting from the Compensatory Award Phantom Dividend Plan 2009 (2010: £2.1 million). Payments under this scheme are only triggered by the payment of a dividend to ordinary shareholders. This charge was excluded from underlying operating profit shown in our 2010 Annual Report. For consistency, the comparator for underlying profit shown in the financial highlights for 2010 has been restated for this.
The reduction in underlying operating margins to 13% from 20% reflects a number of factors. We have seen a change in the mix in revenue by team, with large falls in corporate activity on AIM, therefore lowering our fees generated on placings and corporate finance advice. In addition, our back office costs have remained relatively static as we believe these costs already reflect what we believe we need to spend to operate and control a business of our size and complexity. The largest fall in our cost base was due to lower performance-based pay on the back of lower revenues. We endeavour to remunerate our staff to a level which not only retains but also motivates them to behave in line with the longer-term growth objectives of the Company. We continue to pursue a policy of maintaining a low fixed cost base and a remuneration policy of low basic salaries and rewarding net income generation.
Underlying operating profit on continuing operations fell by 51% to £5.7 million (2010: £11.7 million). This fall is primarily due to a large fall in revenue across all segments, offset by a decrease in performance-related pay.
Operating profit on continuing operations fell by 12% to £5.7m (2010: £6.4 million). In 2010 this was after charging for a number of significant "one-off" items which have not re-occurred in 2011.
Profit before tax on continuing operations fell by 9% to £6.0 million (2010: £6.6 million). This decrease is due to the factors noted above and that 2010's results also included a £0.3 million loss on sale of the Company's remaining holding in PLUS Markets Group plc.
The tax charge for the year on continuing operations was £1.5 million (2010: £2.2 million), which equates to an effective rate of tax of 26% (2010: 33%).
Basic and diluted earnings per share for the year on continuing operations are 5.6p (2010: 5.0p).
Balance sheet and cash flow
As mentioned above, we continue to manage the amount of capital committed to our market making activities closely and consequently have net trading investments of £7.7 million (2010: £7.5 million).
We currently hold healthy cash levels at £14.0 million (2010: £28.5 million). Our cash holdings include £0.5 million held on trust for creditors as a result of the cancellation of our share premium account in 2010 (2010: £5m held on trust for creditors). The year to 31 December 2011 saw an outflow of cash from operating activities of £7.8 million against an inflow of £15.6 million in 2010. The outflow in 2011 reflects a number of factors including the payment of the second interim and final dividend in respect of 2010, the settlement of litigation with a sub broker and the payment of accrued 2010 performance related pay (reflecting the materially higher revenues of that year).
The Group retains sufficient capital to satisfy the UK Financial Services Authority's capital requirements. These requirements vary from time to time depending on the business conducted by the Group. As at 31 December 2011, Cenkos had a solvency ratio based on capital resources against Pillar 1 capital requirement of 227% (2010: 212%) based on audited profits and a capital resources surplus (including £0.5m held on trust for creditors) of £7.7 million (2010: £7.7 million) in excess of our Pillar 1 and 2 regulatory capital requirements.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties currently faced by the Group, and how these are managed, are outlined below. The fundamental risk to the Group is that Cenkos' income is dependent on the health of financial markets and in particular the economic conditions of the UK.
Notwithstanding this risk, the remaining risks outlined below are those that the Group believes have the potential to have a significant detrimental impact on its financial performance and future prospects. These risks should not be regarded as a comprehensive list of all the risks and uncertainties that the Group may potentially face, which could adversely impact its performance.
As part of general corporate governance requirements, Cenkos has a risk framework covering all aspects of its risks. This enables it to identify, assess and manage its key risks. Cenkos' senior management review and evaluate the business processes and associated risks within each area of the firm's business, identifying and assessing the mitigating controls and procedures in place as well as the action plan to address any weaknesses in control. This framework includes a formal approach to risk event reporting, which involves the identification of an event, assessment of its materiality, analysis of the cause, the establishment of remedial action required and escalation to the Chief Executive Officer, the Group Risk and Compliance Committee and Audit Committee as required, within an overall framework and associated risk appetite that is set by the Board.
This framework and associated reporting and stress testing form the basis of the Group's Individual Capital Adequacy Assessment Process (ICAAP) and Individual Liquidity Adequacy Assessment process (ILAA). Cenkos' website shows the Pillar 3 disclosures which the firm is required to make under FSA regulations concerning the Group's capital, risk exposures and risk assessment processes.
The risk framework is supported and validated by a dedicated internal audit function which is outsourced to KPMG LLP. A three-year internal audit programme has been approved by the Audit Committee and is progressing to plan.
In addition to the economic risks noted above, the key risk areas that could impact the Group's future performance, and how they are managed, are categorised as follows:
- reputational risk;
- operational risk, including regulatory risk, people risk and litigation risk;
- credit risk; and
- market risk and liquidity risk.
Reputational risk
The Group believes that one of the greatest risks it faces comes from the potential loss of its reputation. Whilst entrepreneurial employees are encouraged to develop new clients and streams of revenue, all new business is subject to a rigorous appraisal process from the New Business Committee to ensure that it meets the Group's strict criteria. The Group also aims to demonstrate a high level of integrity in all of its activities. The Executive Management Committee as well as Group Compliance instils awareness in all employees of the need to display the highest ethical standards and confidentiality in all the work that they undertake for the Group.
Operational risk
Operational risk is the risk that the Group suffers a loss directly or indirectly from inadequate or failed internal processes, people, systems, or external events. Group Compliance and senior management closely ensure that the risk framework is working well and that any significant operational risks and their controls are continually reviewed, tested and assessed and, where applicable, corrective action plans are put in place. There is also an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, including fraud. Cenkos' low cost and responsive business model relies on consistent delivery from its key suppliers for its trading systems (primarily Fidessa) and settlements (Pershing). Cenkos maintains regular dialogue and meetings with these vendors and the risk framework ensures there is the necessary oversight of the risks associated with outsourcing.
The Group continuously reviews its business continuity plans, and has disaster recovery facilities in place in order to mitigate any substantial disruption to its operations. This was reviewed by our internal audit team in May 2011 and in February 2012 the Company's annual Business Continuity Plan was tested. No issues of concern were raised in respect of this test.
Other specific operational risks that are material to the Group's performance are regulatory risk, people risk and litigation risk. These are commented on in more detail below.
Regulatory risk
The Company and its principal subsidiaries are regulated entities. The Board, Executive Management Committee and Group Compliance have established a strong culture of regulatory and legal compliance throughout the Group. There is strict adherence to applicable regulation, focusing particularly on our ongoing obligations and responsibilities as an AIM nominated advisor (Nomad) and a UK Listing Authority (UKLA) Sponsor. Cenkos continues to focus heavily on prudential risks to ensure the appropriate systems and controls, reporting, capital and liquidity requirements are in place to meet the ongoing obligations of an FSA regulated (BIPRU Investment) firm.
During the year a number of reviews were undertaken, specifically focusing on regulatory reporting, controls around operations and market making limit setting and monitoring.
People risk
The Group's employees are its greatest asset and the future success of the Group depends on Cenkos' ability to attract and retain high quality employees. Failure to recruit or retain such employees could significantly affect the performance of the Group. Cenkos seeks to minimise this risk by creating the right culture and working environment and by rewarding employees through an overall remuneration package that is geared towards performance and share-based payments that aims to align the interests of the employees and shareholders. People risk is also mitigated via a succession planning process overseen by the Remuneration Committee.
Litigation risk
There is always a risk that some form of litigious action may be taken against the Group. Before any decision to enter into litigation is made the Board, senior management and the Group's legal advisers will review all aspects of the case to assess and consider if it is in the best interests of the Group and ultimately the shareholders to either instigate proceedings or defend itself against litigation.
Credit risk
The Group faces limited credit risks in the normal course of business as its market making activities are carried out on a delivery versus payment basis. Hence any counterparty exposure here will manifest itself as either an operational risk (in the form of settlement risk), or a market risk in terms of an underlying exposure to equities. Although Cenkos' transaction fees are generally paid out of the proceeds of any funds raised, Cenkos faces some credit risk in respect of collecting fees due for other advice provided, such as Nomad fees. Overdue fees are reviewed regularly and appropriate action taken to ensure recoverability.
Market risk
The Group is exposed to market risk arising from its short-term positions in predominantly market making stocks in AIM listed companies. To mitigate this risk the Group manages market risk by establishing individual stock limits and overall trading book limits. There are daily procedures in place to monitor the utilisation of these limits. These limits are reviewed on a continuous basis by the Chief Executive Officer and also by the Group Risk and Compliance Committee. Some AIM listed stocks are subject to low levels of underlying liquidity.
Liquidity risk
The Group is also exposed to liquidity risk being that it is unable to fund its commitments as and when they arise. To mitigate this risk, the Group has in place an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Board has oversight and approves the liquidity risk management framework and ILAA at least annually. The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Given the nature of the Group's business, the Group does not run any significant liquidity mismatches, financial liabilities are on the whole short-term and the Group has sufficient cash retained to cover all these liabilities.
Cenkos continues to focus heavily on prudential risks to ensure the appropriate systems and controls and reporting requirements are in place to meet the obligations of a BIPRU Investment firm.
Changes in Cenkos' risk profile in 2011 and 2012
In terms of material risks that have changed during the period from 1 January 2011 to the date of signing of this report, the economic outlook has been depressed, which may lead to a continuation of the slowdown in primary and secondary fundraising seen in the second half of 2011. This could impact Cenkos' revenues in 2012.
As noted in the 'People' section of the Chief Executive Officer's report, there have been a number of Board changes in 2011. Jim Durkin's transition from senior management to Chief Executive Officer was helped by the fact that he has been working for Cenkos since it was founded, and that he was previously a Board member.
|
Consolidated income statement for the year ended 31 December 2011 |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 January |
1 January |
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
Notes |
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
3 |
43,704 |
58,531 |
|
Administrative expenses |
|
|
|
|
(38,003) |
(52,087) |
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
|
|
5,701 |
6,444 |
|
|
|
|
|
|
|
|
|
Investment income - interest receivable |
|
|
|
4 |
325 |
454 |
|
Loss on sale of available-for-sale financial assets |
|
|
- |
(294) |
||
|
Interest expense |
|
|
|
5 |
(9) |
(1) |
|
|
|
|
|
|
|
|
|
Profit before tax |
|
|
|
7 |
6,017 |
6,603 |
|
Tax |
|
|
|
8 |
(1,549) |
(2,163) |
|
|
|
|
|
|
|
|
|
Profit for the year from continuing operations |
|
|
4,468 |
4,440 |
||
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
(Loss) / profit on discontinued operations |
|
|
|
9 |
(457) |
384 |
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
4,011 |
4,824 |
||
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
|
3,711 |
3,726 |
|
Non-controlling interests |
|
|
|
|
300 |
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,011 |
4,824 |
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
From continuing operations |
|
|
|
|
|
|
|
Basic |
|
|
|
11 |
5.64p |
4.99p |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
11 |
5.64p |
4.96p |
|
|
|
|
|
|
|
|
|
From continuing and discontinued operations |
|
|
|
|||
|
Basic |
|
|
|
11 |
5.21p |
5.24p |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
11 |
5.21p |
5.21p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The profit attributable to the Company in the year ended 31 December 2011 was £3,933,666 (31 December 2010: £3,382,141). |
||||||
|
|
|
|
|
|
|
|
|
Consolidated statement of comprehensive income for the year ended 31 December 2011 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 January |
1 January |
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
4,011 |
4,824 |
||
|
Available-for-sale financial assets: |
|
|
|
|
|
|
|
Gains arising during the year |
|
|
|
|
- |
48 |
|
|
|
|
|
|
|
|
|
Other comprehensive income for the year |
|
|
|
|
- |
48 |
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
4,011 |
4,872 |
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
|
3,711 |
3,774 |
|
Non-controlling interests |
|
|
|
|
300 |
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,011 |
4,872 |
|
|
|
|
|
|
|
|
|
Consolidated statement of financial position as at 31 December 2011 |
|
|
||||
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
£ 000's |
£ 000's |
|
Non-current assets |
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
1,133 |
931 |
|
Deferred tax asset |
|
|
|
|
97 |
123 |
|
Trade and other receivables |
|
|
|
|
3,839 |
4,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,069 |
5,502 |
|
Current assets |
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
10,263 |
10,962 |
|
Trade and other receivables |
|
|
|
|
21,800 |
27,142 |
|
Cash and cash equivalents |
|
|
|
|
14,010 |
28,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,073 |
66,572 |
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
51,142 |
72,074 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
(2,539) |
(3,481) |
|
Trade and other payables |
|
|
|
|
(23,518) |
(41,338) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,057) |
(44,819) |
|
|
|
|
|
|
|
|
|
Net current assets |
|
|
|
|
20,016 |
21,573 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
(26,057) |
(44,819) |
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
25,085 |
27,255 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Share capital |
|
|
|
|
728 |
728 |
|
Own shares |
|
|
|
|
(2,190) |
(2,147) |
|
Retained earnings |
|
|
|
|
25,142 |
27,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
23,680 |
25,715 |
||
|
Non-controlling interests |
|
|
|
|
1,405 |
1,540 |
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
25,085 |
27,255 |
|
|
|
|
|
|
|
|
|
The financial statements were approved by the Board of Directors and authorised for issue on 15 March 2012. They were signed on its behalf by: |
||||||
|
|
|
|
|
|
|
|
|
Peter Sullivan |
|
|
Jim Durkin |
|
|
|
|
Chairman |
|
|
Chief Executive Officer |
|
|
|
|
15 March 2012
|
|
|
15 March 2012
|
|
|
|
|
Registered Number: 05210733 |
|
|
|
|
|
|
|
Consolidated cash flow statement for the year ended 31 December 2011 |
|
|
||||
|
|
|
|
|
|
1 January |
1 January |
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
Notes |
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
|
4,011 |
4,824 |
|
Adjustments for: |
|
|
|
|
|
|
|
Net Finance income |
|
|
|
4,5 |
(315) |
(454) |
|
Loss on sale of available-for-sale financial asset |
|
|
|
- |
294 |
|
|
Tax expense |
|
|
|
8 |
1,549 |
2,318 |
|
Depreciation of property, plant and equipment |
|
|
|
362 |
346 |
|
|
Profit on sale of fixed assets |
|
|
|
|
(1) |
- |
|
Attributable tax expense on discontinued operations |
|
|
9 |
(105) |
- |
|
|
Fair value less costs to sell of discontinued operations |
|
|
|
296 |
- |
|
|
Non-controlling interests adjustment for discontinued operations |
|
(162) |
- |
|||
|
Shares and options received in kind |
|
|
|
|
(607) |
(1,143) |
|
Share based payment expense |
|
|
|
|
195 |
570 |
|
|
|
|
|
|
|
|
|
Operating cash flows before movements in working capital |
5,223 |
6,755 |
||||
|
|
|
|
|
|
|
|
|
Decrease / (Increase) in net trading investments |
|
|
|
365 |
(243) |
|
|
Decrease / (Increase) in trade and other receivables |
|
|
|
6,138 |
5,157 |
|
|
(Decrease) / Increase in trade and other payables |
|
|
|
(17,376) |
6,425 |
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
|
|
|
(5,650) |
18,094 |
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
|
(9) |
(1) |
|
Tax paid |
|
|
|
|
(2,172) |
(2,543) |
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
|
|
|
(7,831) |
15,550 |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Interest received |
|
|
|
|
124 |
65 |
|
Acquisition of interest in a subsidiary by a subsidiary |
|
(8) |
- |
|||
|
Net proceeds from the sale of fixed assets |
|
|
|
5 |
- |
|
|
Purchase of property, plant and equipment |
|
|
|
|
(568) |
(405) |
|
Proceeds from the sale of available-for-sale investments |
|
|
|
- |
265 |
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
|
|
(447) |
(75) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
Dividends paid |
|
|
|
10 |
(5,699) |
(6,416) |
|
Distributions made to non-controlling interests |
|
|
|
(345) |
(395) |
|
|
Payments in relation to pre-IPO share options |
|
|
|
|
(69) |
(81) |
|
Proceeds from issue of equity shares |
|
|
|
|
- |
1 |
|
Acquisition of own shares |
|
|
|
|
(43) |
(110) |
|
Acquisition of own shares by a subsidiary |
|
|
|
|
(24) |
- |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
(6,180) |
(7,001) |
||||
|
|
|
|
|
|
|
|
|
Net (decrease) / increase in cash and cash equivalents |
(14,458) |
8,474 |
||||
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
28,468 |
19,994 |
||||
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
|
|
14,010 |
28,468 |
|
|
|
|
|
|
|
|
|
Consolidated statement of changes in equity for the year ended 31 December 2011 |
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|||||
|
|
Share capital |
Share premium |
Own Shares |
Available-for-sale reserve |
Retained earnings |
Total |
Non-controlling interests |
Total |
|
|
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010 |
727 |
22,700 |
(2,037) |
(48) |
6,626 |
27,968 |
837 |
28,805 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
3,726 |
3,726 |
1,098 |
4,824 |
|
Other comprehensive income for the year |
- |
- |
- |
48 |
- |
48 |
- |
48 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
48 |
3,726 |
3,774 |
1,098 |
4,872 |
|
|
|
|
|
|
|
|
|
|
|
Shares issued |
1 |
- |
- |
- |
- |
1 |
- |
1 |
|
Cancellation of share premium account |
- |
(22,700) |
|
|
22,700 |
- |
- |
- |
|
Own shares acquired in the year |
- |
- |
(110) |
- |
- |
(110) |
- |
(110) |
|
Credit to equity for equity settled share based payments |
- |
- |
- |
- |
570 |
570 |
- |
570 |
|
Payments in relation to pre-IPO share options |
- |
- |
- |
- |
(81) |
(81) |
- |
(81) |
|
Deferred tax on share based payments |
- |
- |
- |
- |
9 |
9 |
- |
9 |
|
Dividends paid |
- |
- |
- |
- |
(6,416) |
(6,416) |
(395) |
(6,811) |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010 |
728 |
- |
(2,147) |
- |
27,134 |
25,715 |
1,540 |
27,255 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
3,711 |
3,711 |
300 |
4,011 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
- |
3,711 |
3,711 |
300 |
4,011 |
|
|
|
|
|
|
|
|
|
|
|
Own shares acquired in the year |
- |
- |
(43) |
- |
- |
(43) |
- |
(43) |
|
Increase in investment in subsidiary |
- |
- |
- |
- |
(62) |
(62) |
54 |
(8) |
|
Subsidiary's acquisition of own shares |
- |
- |
- |
- |
- |
- |
(24) |
(24) |
|
Share of profit/(loss) of discontinued operation attributable to Non-controlling interests |
- |
- |
- |
- |
- |
- |
(162) |
(162) |
|
Credit to equity for equity settled share based payments |
- |
- |
- |
- |
153 |
153 |
42 |
195 |
|
Payments in relation to pre-IPO share options |
- |
- |
- |
- |
(69) |
(69) |
- |
(69) |
|
Deferred tax on share based payments |
- |
- |
- |
- |
(26) |
(26) |
- |
(26) |
|
Dividends paid |
- |
- |
- |
- |
(5,699) |
(5,699) |
(345) |
(6,044) |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011 |
728 |
- |
(2,190) |
- |
25,142 |
23,680 |
1,405 |
25,085 |
|
|
|
|
|
|
|
|
|
|
|
Notes to the financial statements for the year ended 31 December 2011 |
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
1. Accounting policies General information
|
|
|
|
|
|
||||||||||
|
Cenkos Securities plc is a company incorporated in the United Kingdom under the Companies Act 2006 (Company Registration No. 05210733). These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and therefore has not produced a Company income statement or accompanying notes.
Prior year comparatives have been amended to conform to the presentation in the current period, due to the discontinued operation as required by IFRS 5, in the Consolidated income statement, Consolidated statement of financial position, Company statement of financial position, Consolidated cash flow statement and Company cash flow statement. This includes reclassifying from current assets to non-current assets the loans due in respect of the partly paid B shares, as the amounts are due for repayment in July 2013.
|
|||||||||||||||
|
Basis of accounting |
|
|
|
|
|
||||||||||
|
The Group's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, with the prior period being presented on the same basis.
|
|||||||||||||||
|
Adoption of new and revised standards |
|||||||||||||||
|
During the year, a number of amendments to IFRS became effective and were adopted by the Group, none of which had a material impact on the Group's net cash flows, financial position, Consolidated statement of comprehensive income or earnings per share.
|
|||||||||||||||
|
Basis of consolidation |
|||||||||||||||
|
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
|
|||||||||||||||
|
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the Non-controlling party's share of changes in equity since the date of the combination. Losses applicable to the Non-controlling party in excess of the Non-controlling party's interest in the subsidiary's equity are allocated against the interests of the Group except to the extent that the Non-controlling party has a binding obligation and is able to make an additional investment to cover the losses.
|
|||||||||||||||
|
The results of subsidiaries acquired or disposed of during a year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
The Company continues to consolidate the Cenkos Channel Islands Group on the basis of the ownership of 50% of the voting shares and the control it exerts over the subsidiaries.
|
|||||||||||||||
|
All intra-group transactions, balances, income and expenses are eliminated on consolidation. |
|||||||||||||||
|
|
|||||||||||||||
|
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 Business Review and Financial Review. |
|||||||||||||||
|
|
|||||||||||||||
|
Financial instruments |
|
|
|
|
|
||||||||||
|
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. |
|||||||||||||||
|
Financial assets |
|
|
|
||||||||||||
|
Investments are recognised and derecognised on trade date when the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as fair value. |
|||||||||||||||
|
Financial assets at fair value through profit or loss |
|||||||||||||||
|
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. |
|||||||||||||||
|
Trading investments pertain to investment securities which are held for trading purposes. These investments comprise both long and short positions and are initially measured at fair value excluding transaction costs. Subsequently and at each reporting date, these investments are measured at their fair values, with the resultant gains and losses arising from changes in fair value being taken to the income statement. Trading investments include securities and options over securities which have been received as consideration for corporate finance services rendered.
|
|||||||||||||||
|
Financial assets are classified as financial assets at FVTPL where the Group acquires the financial asset principally for the purpose of selling in the near term, the financial asset is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit taking as well as all derivatives that are not designated as FVTPL and hedging instruments. Financial assets at fair value through profit or loss are stated at fair value, with any resulting gain or loss recognised in the income statement. The net gain or loss recognised in the income statement incorporates any dividend or interest earned on the financial asset.
|
|||||||||||||||
|
Held to maturity investments |
|||||||||||||||
|
Debentures with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis. |
|||||||||||||||
|
Available-for-sale investments |
|||||||||||||||
|
Listed shares held by the Group that are traded in an active market are classified as available for sale investments and are initially measured at fair value, including transaction costs. At each reporting date, these investments are measured at their fair values and the resultant gains and losses, after adjusting for taxation, are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. |
|||||||||||||||
|
Trade and other receivables |
|||||||||||||||
|
Market debtors are measured at fair value. Unpaid share premium and loans due from staff are initially measured at fair value and revalued to amortised cost at each subsequent reporting date. All other debtors are measured at amortised cost using the effective interest method, less any impairment. Appropriate allowance for estimated irrecoverable amounts is recognised in the profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
|
|||||||||||||||
|
Impairment of financial assets |
|||||||||||||||
|
Financial assets, other than those held for trading purposes or held at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For loans and receivables the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
|
|||||||||||||||
|
Cash and cash equivalents |
|
|
|
|
|
||||||||||
|
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
|
|||||||||||||||
|
Derecognition of financial assets |
|
|
|
|
|
||||||||||
|
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
|
|||||||||||||||
|
Financial liabilities |
|
|
|
|
|
||||||||||
|
Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.
|
|||||||||||||||
|
Financial liabilities at FVTPL |
|
|
|
|
|
||||||||||
|
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL upon initial recognition. |
|||||||||||||||
|
- it has been incurred principally for the purpose of disposal in the near future; or |
|||||||||||||||
|
- it is part of an identified portfolio of financial instruments that the Group manages together and has a recent pattern of short term profit taking; or |
|||||||||||||||
|
- it is a derivative that is not designated and effective as a hedging instrument. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: |
|||||||||||||||
|
- such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or |
|||||||||||||||
|
- the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the Group is provided internally on that basis; or - it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. |
|||||||||||||||
|
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.
|
|||||||||||||||
|
Other financial liabilities |
|||||||||||||||
|
Trade payables are initially measured at fair value. At each reporting date, these trade payables are measured at amortised cost using the effective interest rate method.
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. |
|||||||||||||||
|
De-recognition of financial liabilities |
|||||||||||||||
|
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or expire. |
|||||||||||||||
|
Equity instruments |
|||||||||||||||
|
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
Derivative financial instruments |
|
|
|
||||||||||||
|
The Group has no significant exposure to derivative financial instruments but will occasionally enter into futures to manage its exposure to market risk. |
|||||||||||||||
|
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss is recognised in the profit or loss immediately. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
Provisions |
|
|
|
|
|
|
|||||||||
|
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
Non-current assets held for sale and discontinued operations |
|||||||||||||||
|
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. In the statement of comprehensive income, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the statement of comprehensive income. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
Foreign currencies |
|||||||||||||||
|
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date. Gains and losses arising during the period on transactions denominated in foreign currencies are translated at the prevailing rate and included in the income statement. |
|||||||||||||||
|
|
|||||||||||||||
|
Investments in subsidiary undertakings |
|||||||||||||||
|
Investments held as fixed assets are stated at cost, less any provision for diminution in value. |
|||||||||||||||
|
|
|||||||||||||||
|
Operating leases |
|||||||||||||||
|
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Where a rent free period or discount is negotiated it is amortised over the period of the lease. |
|||||||||||||||
|
|
|||||||||||||||
|
Property, plant and equipment |
|||||||||||||||
|
Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment. Depreciation is provided at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its estimated useful life as follows: |
|||||||||||||||
|
|
|||||||||||||||
|
Leasehold improvements: Fixtures and fittings: IT equipment: |
Ten years Three years Three years |
|
|
||||||||||||
|
|
|||||||||||||||
|
The carrying values of property, plant and equipment are subject to annual review and any impairment is charged to the income statement. |
|||||||||||||||
|
Taxation |
|
|
|
|
|
|
|||||||||
|
The tax expense represents the sum of the tax currently payable and deferred tax. |
|||||||||||||||
|
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. |
|||||||||||||||
|
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. |
|||||||||||||||
|
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
|
|||||||||||||||
|
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
|
|||||||||||||||
|
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
|
|||||||||||||||
|
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.
|
|||||||||||||||
|
Revenue recognition |
|
|
|
||||||||||||
|
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales related taxes. |
|||||||||||||||
|
Revenue comprises fees for corporate finance advisory services which are taken to the income statement when contractual entitlement is met. Revenue also comprises profits on dealing operations, being gains less losses, both realised and unrealised, on financial assets, arrived at after taking into account attributable dividends and directly related interest, together with commission income receivable. |
|||||||||||||||
|
Interest income is recognised at the effective interest rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. |
|||||||||||||||
|
Dividend income from investments is recognised when the shareholders' rights to receive payment have been established. |
|||||||||||||||
|
Revenue includes the fair value of options over securities which have been received as consideration for corporate finance services rendered.
|
|||||||||||||||
|
Segment reporting |
|||||||||||||||
|
IFRS 8 requires that an entity disclose financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments. These operating segments are identified on the basis of internal reports that are regularly reviewed by the Chief Executive Officer to allocate resources and to assess performance. Using the Group's internal management reporting as a starting point, the reporting segments set out in note 3 have been identified. |
|||||||||||||||
|
Share-based payments |
|||||||||||||||
|
The Group has applied the requirements of IFRS 2 Share-based payment. The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
|
|||||||||||||||
|
2. Critical accounting judgement and key sources of estimation uncertainty |
|
||||||||||||||
|
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are set out below:
|
|||||||||||||||
|
a) Equity-settled share-based payments |
|
|
|||||||||||||
|
The fair value of share based payments is calculated by reference to a Monte Carlo simulation model. Inputs into the model are based on management's best estimates of appropriate volatility, discount rate and share price growth. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
b) Valuation of investments |
|
|
|
|
|||||||||||
|
Trading investments include options over securities which have been received as consideration for corporate finance services rendered. The fair value of these investments has been calculated by reference to a Monte Carlo simulation model. Inputs into the model are based on management's best estimates of appropriate volatility, discount rate and share price growth. The volatility input has been calculated based on the volatility of historic share price movements. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
c) Bad debt policy |
|
|
|
|
|||||||||||
|
The Group regularly reviews all outstanding balances, including the unpaid amounts relating to the partly paid B shares, and provides for amounts it considers irrecoverable. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
d) Provisions and contingent liabilities |
|
|
|
||||||||||||
|
Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation. These judgements and estimates are based on a detailed consideration of the issues and relevant legal advice, leading to an assessment of the probability of litigation and subsequent cash outflow.
|
|||||||||||||||
|
e) Consolidated financial statements |
|
|
|
||||||||||||
|
The Company continues to consolidate the Cenkos Channel Islands Group on the basis of the ownership of 50% of the voting shares, the dispersed nature of other shareholders and the on-going business relationship with the entity.
|
|||||||||||||||
|
f) Related party disclosures |
|||||||||||||||
|
Key management personnel comprise Board members of the Group and members of the Group's Executive Management Committee who exert significant influence over the financial and operating policies of the Group. |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
3. Business and geographical segments
|
|
|
|
|||||||||||
|
|
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive Officer to monitor segment performance and to allocate resources between segments. |
||||||||||||||
|
|
Services from which reportable segments derive their revenues
|
|
|
||||||||||||
|
|
Based on its internal management reporting, the Group has identified three reportable segments and the following services provided by these segments:
|
||||||||||||||
|
|
Corporate Broking and Advisory
|
|
|
|
|||||||||||
|
|
This segment provides corporate finance, corporate broking and market making services to growth companies and investment funds. |
||||||||||||||
|
|
Institutional Equities
|
|
|
|
|||||||||||
|
|
The institutional equities team currently provides research-driven investment recommendations and execution capabilities to institutional clients.
|
||||||||||||||
|
|
Fund and Wealth Management
|
|
|
|
|||||||||||
|
|
Offshore wealth management and stockbroking services are provided through the Cenkos Channel Islands Group. |
||||||||||||||
|
|
The onshore fund management business is provided by Cenkos Fund Management Limited. This onshore business has been classified as a discontinued operation - see note 9. |
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
An analysis of the Group's revenue and result by reportable segment is as follows: |
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
1 January 2011 to 31 December 2011 |
|||||||
|
|
|
Corporate Broking and |
Institutional |
Fund and Wealth |
Less: Discontinued |
Group |
||||
|
|
|
|||||||||
|
|
|
Advisory |
Equities |
Management |
Operations* |
Total |
||||
|
Segment revenues and results |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
|||||
|
Corporate finance |
25,754 |
239 |
- |
- |
25,993 |
|||||
|
Corporate broking & market making |
6,666 |
548 |
- |
- |
7,214 |
|||||
|
Research fees & commission |
2,760 |
1,394 |
- |
- |
4,154 |
|||||
|
Management fees & stockbroking services |
- |
- |
6,745 |
(402) |
6,343 |
|||||
|
Segment revenue |
|
35,180 |
2,181 |
6,745 |
(402) |
43,704 |
||||
|
|
|
|
|
|
|
|
||||
|
Administrative expenses |
|
(18,995) |
(1,638) |
(6,226) |
780 |
(26,079) |
||||
|
Segment results |
|
16,185 |
543 |
519 |
378 |
17,625 |
||||
|
|
|
|
|
|
|
|
||||
|
Unallocated Administrative expenses |
|
|
|
|
(11,924) |
|||||
|
|
|
|
|
|
|
|
||||
|
Operating Profit |
|
|
|
|
|
5,701 |
||||
|
|
|
|
|
|
|
|
||||
|
Investment income - interest receivable |
|
|
|
|
325 |
|||||
|
Finance costs - interest payable |
|
|
|
|
(9) |
|||||
|
|
|
|
|
|
|
|
||||
|
Profit before tax |
|
|
|
|
|
6,017 |
||||
|
Tax |
|
|
|
|
|
(1,549) |
||||
|
Loss after tax for the year from discontinued operations (in Fund and Wealth Management)* |
|
(457) |
||||||||
|
|
|
|
|
|
|
|
||||
|
Profit for the year |
|
|
|
4,011 |
||||||
|
|
|
|
|
|
|
|
||||
|
*See note 9 for details. Loss after tax for the year from discontinued operations is arrived at after reviewing the carrying value of Cenkos Fund Managers Limited. |
||||||||||
|
|
1 January 2011 to 31 December 2011 |
|
|||||
|
|
Corporate |
|
Fund |
Less: |
|
|
|
|
Broking and |
Institutional |
and Wealth |
Discontinued |
|
Group |
||
|
|
Advisory |
Equities |
Management |
Operations* |
Unallocated |
Total |
|
|
|
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
|
|
Other segment information: |
|
|
|
|
|
|
|
|
Assets |
13,475 |
- |
8,141 |
(300) |
29,826 |
51,142 |
|
|
Liabilities |
(2,539) |
- |
(4,984) |
4 |
(18,538) |
(26,057) |
|
|
Depreciation and amortisation |
21 |
4 |
85 |
(1) |
253 |
362 |
|
|
Additions to non-current assets |
- |
- |
368 |
- |
200 |
568 |
|
|
|
|
|
|
|
|
|
|
|
Segment assets have been allocated on the basis of the internal reports received by the Chief Executive Officer for the purposes of monitoring segment performance and allocating resources between segments. |
|||||||
|
|
|
|
|
|
|
|
||||||
|
|
|
|
1 January 2010 to 31 December 2010 |
|
||||||||
|
|
|
Corporate |
|
Fund |
Less: |
|
|
|||||
|
|
Broking and |
Institutional |
and Wealth |
Discontinued |
Group |
|
||||||
|
|
|
Advisory |
Equities |
Management |
Operations |
Total |
|
|||||
|
Segment revenues and results |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
|
||||||
|
Corporate finance |
36,356 |
- |
5 |
- |
36,361 |
|
||||||
|
Corporate broking & market making |
9,188 |
- |
- |
- |
9,188 |
|
||||||
|
Research fees & commission |
1,189 |
4,955 |
- |
- |
6,144 |
|
||||||
|
Management fees & stockbroking services |
- |
- |
8,614 |
(1,776) |
6,838 |
|
||||||
|
Segment revenue |
46,733 |
4,955 |
8,619 |
(1,776) |
58,531 |
|
||||||
|
|
|
|
|
|
|
|
|
|||||
|
Administrative expenses |
(27,862) |
(3,421) |
(6,572) |
1,237 |
(36,618) |
|
||||||
|
Segment results |
18,871 |
1,534 |
2,047 |
(539) |
21,913 |
|
||||||
|
|
|
|
|
|
|
|
|
|||||
|
Unallocated Administrative expenses |
|
|
|
(15,469) |
|
|||||||
|
|
|
|
|
|
|
|
|
|||||
|
Operating Profit |
|
|
|
6,444 |
|
|||||||
|
|
|
|
|
|
|
|
|
|||||
|
Investment income - interest receivable |
|
454 |
|
|||||||||
|
Loss on sale of available-for-sale financial asset |
|
(294) |
|
|||||||||
|
Finance costs - interest payable |
|
(1) |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||
|
Profit before tax |
|
|
6,603 |
|
||||||||
|
Tax |
|
|
|
|
|
(2,163) |
|
|||||
|
Profit after tax for the year from discontinued operations (in Fund and Wealth Management) |
|
384 |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||
|
Profit for the year |
|
|
|
4,824 |
|
|||||||
|
|
|
|
|
|
|
|
|
|||||
|
|
1 January 2010 to 31 December 2010 |
||||||
|
|
Corporate |
|
Fund |
Less: |
|
|
|
|
Broking and |
Institutional |
and Wealth |
Discontinued |
|
Group |
||
|
|
Advisory |
Equities |
Management |
Operations* |
Unallocated |
Total |
|
|
Other segment information: |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
|
|
Assets |
13,254 |
- |
8,317 |
- |
50,503 |
72,074 |
|
|
Liabilities |
(3,481) |
- |
(5,832) |
- |
(35,506) |
(44,819) |
|
|
Depreciation and amortisation |
27 |
6 |
66 |
- |
247 |
346 |
|
|
Additions to Non-current assets |
- |
- |
44 |
- |
361 |
405 |
|
|
The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 1. Segment profit represents the profit earned by each segment without allocation of the parent's central administration costs, investment revenue and finance costs, and income tax expense. This is the measure reported to the Chief Executive Officer for the purpose of resource allocation and assessment of segment performance.
|
|||||||
|
An analysis of the Group’s revenue and result on continuing operations by geographical location is as follows:
|
|
Geographical information
|
1 January 2011 to 31 December 2011
|
1 January 2010 to 31 December 2010
|
||||
|
|
United
|
Channel
|
Group
|
United
|
Channel
|
Group
|
|
|
Kingdom
|
Islands
|
Total
|
Kingdom
|
Islands
|
Total
|
|
|
£ 000's
|
£ 000's
|
£ 000's
|
£ 000's
|
£ 000's
|
£ 000's
|
|
|
||||||
|
Revenue (a)
|
37,361
|
6,343
|
43,704
|
51,688
|
6,843
|
58,531
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Non-current assets
|
1,133
|
-
|
1,133
|
875
|
56
|
931
|
|
|
|
|
|
|
|
|
|
(a) Revenues are attributed on the basis of the entities location. All discontinued operations were located in the United Kingdom. |
||||||
|
Major clients |
|||||
|
No revenue from one particular client amounted to more than 10% of the Group's total revenue.
|
|
||||
|
4. Interest income |
|
|
1 January |
1 January |
||
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
Interest income generated from: |
£ 000's |
£ 000's |
||||
|
Cash and cash equivalents |
62 |
47 |
||||
|
Held to maturity investments |
22 |
19 |
||||
|
Trade and other receivables |
241 |
388 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
325 |
454 |
|
|
|
|
|
|
|
|
|
|
Interest income generated from trade and other receivables includes the recognition of the unwinding of the discount factor applied to loans due from staff related to the issue of the partly paid B shares, which amounted to £209,513 (2010: £387,720).These loans were fair valued when granted and the discount factor unwinds over the period until they are due to be repaid. |
|
|||||
|
|
|
|
|
|
|
|
|
5. Interest expense |
1 January |
1 January |
|||
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
Interest on bank overdrafts and loans |
9 |
1 |
|||
|
|
|
|
|
|
|
|
6. Staff costs |
|
|
|
|
|
|
|
|
|
|
1 January |
1 January |
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
£ 000's |
£ 000's |
|
Staff costs comprise: |
|
|
|||
|
Wages and salaries |
24,479 |
31,702 |
|||
|
Social security costs |
2,804 |
4,075 |
|||
|
IFRS 2 share based payments |
259 |
489 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
27,542 |
36,266 |
|
|
|
|
|
|
|
|
The Company does not operate or contribute to any pension scheme on behalf of its employees. It does, however, provide access to a Company designated stakeholder pension scheme. |
|||||
|
|
|
2011 |
2010 |
||||
|
The average number of employees (including executive Directors) was: |
|
No. |
No. |
||||
|
|
|
|
|
|
|
|
|
|
Corporate finance |
|
18 |
12 |
||||
|
Corporate broking |
|
75 |
85 |
||||
|
Administration |
|
|
|
|
44 |
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137 |
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
|
|
The total emoluments of the highest paid director serving during the year were: |
457 |
1,002 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Profit for the year |
|
|
|
|||||||||||||
|
Profit for the year has been arrived at after charging/(crediting): |
|
|
||||||||||||||
|
|
Continuing operations |
Discontinued operations |
Total |
|||||||||||||
|
|
1 January 2011 to 31 December 2011 £ 000's |
1 January 2010 to 31 December 2010 £ 000's |
1 January 2011 to 31 December 2011 £ 000's |
1 January 2010 to 31 December 2010 £ 000's |
1 January 2011 to 31 December 2011 £ 000's |
1 January 2010 to 31 December 2010 £ 000's |
||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
Operating lease rentals |
703 |
676 |
23 |
- |
726 |
676 |
||||||||||
|
Auditors' remuneration (refer to analysis below) |
138 |
539 |
5 |
5 |
143 |
544 |
||||||||||
|
Depreciation of property, plant and equipment |
362 |
346 |
1 |
- |
363 |
346 |
||||||||||
|
Staff costs (see note 6) |
27,542 |
36,266 |
672 |
- |
28,214 |
36,266 |
||||||||||
|
Change in fair value of financial assets designated as at FVTPL |
323 |
108 |
- |
- |
323 |
108 |
||||||||||
|
Costs associated with aborted takeover bid |
- |
1,285 |
- |
- |
- |
1,285 |
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
1 January |
1 January |
||||||||||
|
|
|
|
|
|
2011 to |
2010 to |
||||||||||
|
|
|
|
|
|
31 December |
31 December |
||||||||||
|
|
|
|
|
|
2011 |
2010 |
||||||||||
|
The analysis of auditors' remuneration is as follows: |
£ 000's |
£ 000's |
||||||||||||||
|
Fees payable to the Company's auditor for the audit of the Group's annual accounts and consolidation |
112 |
112 |
||||||||||||||
|
Fees payable to the Company's auditor for other services: |
|
|
||||||||||||||
|
- The audit of the Company's subsidiaries, pursuant to legislation |
5 |
41 |
||||||||||||||
|
- Fees payable to other auditors for the audit of the Company's subsidiaries, pursuant to legislation |
42 |
- |
||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
Total Audit Fees |
|
159 |
153 |
|||||||||||||
|
- Other services, pursuant to legislation: half year review |
18 |
43 |
||||||||||||||
|
- Fees paid to the predecessor auditor for corporate finance services (associated with aborted takeover bid) |
- |
348 |
||||||||||||||
|
- Fees payable to other auditors for the half year review of the Company's subsidiaries, pursuant to legislation |
14 |
- |
||||||||||||||
|
|
|
|
|
|
32 |
391 |
||||||||||
|
|
|
|
|
|
191 |
544 |
||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
8. Tax |
|
|
|
|
1 January |
1 January |
|
The tax charge comprises: |
|
2011 to |
2010 to |
|||
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
£ 000's |
£ 000's |
|
Current tax |
|
|
|
|
|
|
|
United Kingdom corporation tax at 26.5% (2010: 28%) based on the profit for the year |
1,473 |
2,200 |
||||
|
Overseas tax charge born by subsidiaries operating in other jurisdictions |
12 |
5 |
||||
|
Adjustment in respect of prior period |
|
|
|
|
|
|
|
United Kingdom corporation tax at 26.5% (2010: 28%) |
63 |
- |
||||
|
|
|
|
|
|
|
|
|
Total current tax |
|
1,548 |
2,205 |
|||
|
|
|
|
|
|
|
|
|
Deferred Tax |
|
|
|
|
|
|
|
Credit on account of temporary differences |
|
(94) |
- |
|||
|
Charge on account of temporary differences |
|
95 |
113 |
|||
|
|
|
|
|
|
|
|
|
Total deferred tax |
|
1 |
113 |
|||
|
|
|
|
|
|
|
|
|
Total tax on profit on ordinary activities |
|
|
1,549 |
2,318 |
||
|
|
|
|
|
|
|
|
|
The tax expense in the income statement is disclosed as follows: |
|
|
|
|||
|
Income tax expense on continuing operations |
|
1,549 |
2,163 |
|||
|
Income tax (credit) / expense on discontinued operations |
|
(105) |
155 |
|||
|
|
|
|
|
|
1,444 |
2,318 |
|
|
|
|
|
|
|
|
|
The tax charge for the year differs from that resulting from applying the standard rate of UK corporation tax of 26.5% (2010: 28%) to the profit before tax for the reasons set out in the following reconciliation. |
||||||
|
|
|
|
|
|
1 January |
1 January |
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
Profit before tax on continuing operations |
|
6,017 |
6,603 |
|||
|
(Loss) / profit on discontinued operations before tax |
(378) |
539 |
||||
|
Profit before tax on continuing and discontinued operations |
5,639 |
7,142 |
||||
|
|
|
|
||||
|
Tax on profit on ordinary activities at the UK corporation tax rate of 26.5% (2010: 28%) |
1,494 |
2,000 |
||||
|
Tax effect of: |
|
|
|
|
|
|
|
Expenses that are not deductible in determining taxable profits |
|
172 |
443 |
|||
|
Non-allowable loss on sale of available-for-sale financial asset |
- |
294 |
||||
|
Different tax rates of subsidiaries operating in other jurisdictions |
(226) |
(419) |
||||
|
Income not subject to corporation tax |
(61) |
- |
||||
|
Expenses not allowable on disposal of discontinued operations |
|
(13) |
- |
|||
|
Adjustment for loss relief not claimed |
|
|
15 |
- |
||
|
Adjustment in respect of prior period |
|
|
63 |
- |
||
|
|
|
|
|
|
|
|
|
Tax expense for the year |
|
1,444 |
2,318 |
|||
|
|
|
|
|
|
|
|
|
The prior year figures have been restated due to updated disclosure requirements. This change does not impact the primary statements. |
||||||
|
|
||||||
|
In addition to the amount charged to the income statement, deferred tax relating to share-based payments amounting to £25,992 has been charged directly to equity (2010: £10,353 credited directly to equity). |
||||||
|
|
|
|
1 January |
1 January |
||
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
Deferred tax |
|
|
|
|
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
Arising on share-based payments |
|
|
(26) |
10 |
||
|
|
|
|
|
|
|
|
|
Total income tax recognised directly in equity |
(26) |
10 |
||||
|
|
|
|
|
|
|
|
|
9. Discontinued operations |
|
|
|
|||
|
In 2012, the Group disposed of its entire holding in Cenkos Fund Managers Limited, which carried out all of the Group's onshore fund management activity. This operation has an investment management agreement with an AIM-quoted fund. The fund has been put into run off and although investment management fees continue to be generated, Cenkos Fund Managers Limited made a loss in 2011. The disposal was effected in order to remove the impact of future losses from the Group. The decision to dispose of Cenkos Fund Managers Limited was taken in November 2011 and as at 31 December 2011, Cenkos Fund Managers Limited was classified as held for sale and as a discontinued operation, given it was a separate major line of business. The disposal was completed on 1 February 2012, at which date control of Cenkos Fund Managers Limited passed to the acquirer for the consideration of £1.
|
||||||
|
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows: |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 January |
1 January |
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
£ 000's |
£ 000's |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
402 |
1,776 |
|
Administrative expenses |
|
(780) |
(1,237) |
|||
|
|
|
|
|
|
|
|
|
Profit before tax |
|
(378) |
539 |
|||
|
|
|
|
|
|
|
|
|
Income tax (credit) / expense |
|
105 |
(155) |
|||
|
Loss on disposal of discontinued operations |
(184) |
- |
||||
|
|
|
|
|
|
|
|
|
Net loss attributable to discontinued operations (attributable to the owners of the Company) |
(457) |
384 |
||||
|
|
|
|
|
|
|
|
|
The major classes of assets and liabilities of Cenkos Fund Managers Limited as at 31 December 2011 were as follows: |
||||||
|
|
|
|
|
|
31 December |
|
|
|
|
|
|
|
2011 |
|
|
|
|
|
|
|
£ 000's |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
1 |
|
||||
|
Deferred tax asset |
105 |
|
||||
|
Trade and other receivables |
194 |
|
||||
|
Trade and other payables |
(4) |
|
||||
|
Fair value less costs to sell |
(296) |
|
||||
|
Assets held for resale |
- |
|
||||
|
|
|
|
|
|
|
|
|
10. Dividends |
|
|
|
|
1 January |
1 January |
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
Amounts recognised as distributions to equity holders in the period: |
£ 000's |
£ 000's |
||||
|
|
|
|
|
|
|
|
|
Final Dividend for the year ended 31 December 2010 of 4p (December 2009: 5p) per share |
2,849 |
3,565 |
||||
|
Interim dividend for the period to 30 June 2011 of 4p (June 2010: 2p) per share |
2,850 |
1,425 |
||||
|
Interim dividend for the period to 30 November 2011 of nil (November 2010: 2p) per share |
- |
1,426 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,699 |
6,416 |
|
|
|
|
|
|
|
|
|
A final dividend of 1 pence per share has been proposed for the year ended 31 December 2011 (2010: 4p). |
|
|||||
|
|
|
|
|
|
|
|
|
11. Earnings per share |
|
|
1 January |
1 January |
||
|
|
|
|
|
|
2011 to |
2010 to |
|
|
|
|
|
|
31 December |
31 December |
|
|
|
|
|
|
2011 |
2010 |
|
|
|
|
|
|
£ 000's |
£ 000's |
|
Earnings from continuing and discontinued operations |
|
|
||||
|
The calculation of the basic and diluted earnings per share is based on the following data: |
|
|
||||
|
Earnings |
|
|
|
|
|
|
|
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent |
3,711 |
3,726 |
||||
|
Effect of dilutive potential ordinary shares: |
|
|
|
|||
|
Share options |
|
|
|
|
- |
- |
|
|
|
|
|
|
|
|
|
Earnings for the purpose of diluted earnings per share |
|
3,711 |
3,726 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. |
No. |
|
Number of shares |
|
|
|
|||
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
71,250,584 |
71,164,543 |
||||
|
Effect of dilutive potential ordinary shares: |
|
|
|
|
||
|
Share options |
|
|
- |
401,417 |
||
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for the purpose of diluted earnings per share |
71,250,584 |
71,565,960 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The weighted average number of shares considered for the current period also includes the total number of B shares, even though they are partly paid shares, as these shares are entitled to a full dividend payout.
On 22 October 2009, 1,428,750 shares were transferred to the Cenkos Securities Employee Benefit Trust (CSEBT). On 31 March 2010 it acquired a further 90,000 shares, on 20 December 2011 a further 20,000 shares and on 21 December 2011 a further 45,000 shares. These shares are held by the trust in treasury and have been excluded from the weighted average number of shares calculation up to this date. |
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1 January |
1 January |
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2011 to |
2010 to |
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31 December |
31 December |
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2011 |
2010 |
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£ 000's |
£ 000's |
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Earnings from continuing operations |
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Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent |
3,711 |
3,726 |
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|
Adjustment to exclude parent share of discontinued operation |
308 |
(174) |
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Earnings from continuing operations for the purpose of basic earnings per share excluding discontinued operations |
4,019 |
3,552 |
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Effect of dilutive potential ordinary shares: |
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Share options |
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- |
- |
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Earnings from continuing operations for the purpose of diluted earnings per share excluding discontinued operations |
4,019 |
3,552 |
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The denominators used are the same as those detailed above for both basic and diluted earnings per share from continuing and discontinued operations. |
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1 January |
1 January |
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2011 to |
2010 to |
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31 December |
31 December |
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2011 |
2010 |
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£ 000's |
£ 000's |
|
Earnings from discontinued operations |
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||
|
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Basic |
|
|
|
|
(0.43)p |
0.24p |
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Diluted |
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|
|
|
(0.43)p |
0.24p |
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12. Provisions and accruals |
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A provision was set up in 2010 for legal fees on a case concerning litigation with a sub broker, which was determined in 2011. The provision was utilised in 2011 when the case was settled in full.
A cash-settled shadow equity scheme was set up in 2009 for the Cenkos team based in Edinburgh. The Company re-organised this office in the second half of 2010 resulting in the cessation of this arrangement and a number of staff leaving the Company. A provision for this re-organisation was established in 2010 to cover any resultant liabilities. The Company is currently in dispute with a former member of staff. After taking legal advice, the Directors are of the opinion that appropriate accruals have been made in these financial statements for any potential liability. A breakdown of the amount accrued has not been given as any additional disclosure could, in the opinion of the Directors, prove seriously prejudicial to the interests of the Group. |
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13. Contingent liabilities |
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During the reporting period, certain underlying clients of a 50% owned subsidiary, Cenkos Channel Islands Limited (CCIL), had exposure to MF Global UK Limited when that company entered the Special Administration Regime on 31 October 2011 and this exposure still remains unsettled. Further details of the exposures have not been given as any additional disclosures could, in the opinion of the Directors of both CCIL and the Company, prove seriously prejudicial to the interests of CCIL and its clients due to the ongoing special administration process. Based on information received to date, the Boards of both CCIL and the Company are currently of the view that the situation should be resolved without a material impact on the financial or trading position of CCIL or the Group. |
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14. Subsequent events |
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The Group's onshore fund management business, Cenkos Fund Managers, was sold on 1 February 2012. As a decision to sell this business was made in November 2011, this has been treated as a discontinued operation in these financial statements. Aside from this, there have been no events subsequent to the year-end which have had a material impact on the estimates and provisions made within these financial statements. |
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Additional Information
The financial information included in this statement does not constitute the Group's statutory accounts (within the meaning of section 434 of the Companies Act 2006) for the years ended 31 December 2011 or 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.
The Annual General Meeting of Cenkos Securities plc will be held at 6.7.8. Tokenhouse Yard, London EC2R 7AS on 10 May 2012 at 12.00 noon.
This information is provided by RNS
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