REG - Cavendish Financial - 2024 Full Year Results
15/07/2024 07:00
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RNS Number : 3170W Cavendish Financial PLC 15 July 2024
2024 FULL YEAR RESULTS
15 JULY 2024: Cavendish Financial plc (together with its subsidiary
undertakings, "Cavendish" or the "Group") today announces full year results
for the period ended 31 March 2024.
JULIAN MORSE AND JOHN FARRUGIA, CO-CHIEF EXECUTIVE OFFICERS AT CAVENDISH,
SAID:
"Since merging in September last year, our business has performed strongly
with H2 revenue of £35m, 80% higher than H1 on a combined basis. The
business has continued to operate well through the first quarter of the new
financial year, demonstrating the strength of our diversified offering and
broad client base, in what remains a challenging market.
We continue to win high quality mandates and have executed transactions worth
c£2.5 billion across all divisions in the nine months since the merger.
Despite the significant one-off costs of merger, our cash balance at March 31
was £21m. This solid position, a strong second half and a good start to the
new financial year has enabled the board to recommend the resumption of
dividend payments with the prospect of further returns in the current year.
We believe Cavendish's strong performance reflects our wide-ranging technical
and sector expertise which enables us to tailor optimal solutions for our
clients. Through the merger we have created a platform which has been
profitable in the second half and generated cash in a challenging market. We
are therefore well positioned to capitalise on improving market conditions
when they come. We continue to make strategic hires in a number of areas to
strengthen our offering and explore wider opportunities to grow our business."
STRONG POST-MERGER PERFORMANCE
• Revenues of £35m in H2, 80% higher than in H1 (on a
combined basis).
• Appointed by 13 new quoted clients and executed over
120 transactions.
• £7m annualised cost synergies delivered on schedule.
• Strong balance sheet position with cash of £20.7m on
31 March 2024.
• Healthy transaction pipeline.
FINANCIAL OVERVIEW((2))
Consolidated results include the results of Cenkos from 7 September 2023.
• Consolidated revenue: £48.0m (FY23: £32.8m), +46%.
• Operating loss: £3.9m (FY23: loss £1.9m).
• Adjusted Operating loss: £1.7m (FY23: loss £1.7m)
((3)).
• Loss per share: 1.40p (FY23: 3.25p).
• Adjusted loss per share: 0.65p (FY23 0.94p).
• Dividend 0.25p (FY23 1.15p).
OUTLOOK
The business is performing well in the new financial year, with deal flow
balanced across ECM, Public and Private M&A, Debt Advisory and Private
Growth Capital. As we look ahead, we see many reasons to be positive,
including continued equity issuance, private and public M&A, further
client wins and a number of emerging IPO opportunities as companies seek to
join the UK markets. Clearly there remain uncertainties and macro issues
which impact market sentiment, but with our well diversified offering and
robust platform we look forward to returning to a profitable year as the
merger synergies are fully realised and with that the compensation ratio
returning to normal levels.
CONTACTS
Cavendish
(Management)
Tel: +44 (0) 20 7220 0500
Julian Morse, Co-Chief Executive Officer
investor.relations@cavendish.com
John Farrugia, Co-Chief Executive
Officer
Ben Procter, Chief Financial Officer
Spark Advisory Partners (Nominated Adviser) Tel: +44
(0) 203 368 3550
Matt Davis/Adam Dawes
Cavendish (Broker)
Tel: +44 (0) 20 7220 0500
Tim Redfern
Hudson Sandler (PR adviser)
Tel: +44 (0) 20 7796 4133
Dan de Belder/Rebekah Chapman
(1) Basis of preparation: the results for the year to 31 March
2024 include the consolidation of the results for Cavendish Securities plc
(previously Cenkos Securities plc) from completion of its merger with finnCap
Group plc for the period from 7 September 2023 .
(2) Provides a consistent measure of the profits from the core
business activities. Calculated excluding share-based payments,
non-recurring incomes from the revaluation of options held, share of associate
and joint venture profits and non-recurring costs from the acquisition of
Cavendish Securities plc (previously Cenkos Securities plc).
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
BUSINESS REVIEW
The past 12 months have been transformative for our Group. Against a
challenging operating and economic environment, we have created a leading
full-service investment bank.
At the start of our financial year, we announced our intention to merge
finnCap Group plc and Cenkos Securities plc, completed the process in
September 2023 and implemented a fast operational integration. We rebranded
the Group as Cavendish, giving a new identity which reflects our strength and
capability to provide a comprehensive range of investment banking services,
supporting our clients throughout their entire growth cycle.
Following the announcement of our merger, we worked hard to ensure the
combination was seamless, whilst maintaining high quality client service and
transaction execution. Careful planning, clear operational design and
disciplined cost control allowed us to save £7 million on an annualised basis
whilst creating a robust and scalable platform. This cost-efficient model
has created a profitable and cash generating foundation which is well
positioned to capitalise on market growth. The reported loss for the year
reflects the decision we made to pay bonuses to reward and retain staff
following a strong post-merger performance.
CAPITAL MARKET REFORMS
The previous Chancellor outlined reforms to boost pensions and increase
investment in British businesses in his Mansion House speech in July 2023 that
could unlock up to £50bn for high growth companies by 2030.
All the signs are that the new Labour Government will support the reforms
being proposed. It is vital that everyone involved in the Mansion House
Compact recognises that the AIM Market qualifies for inclusion in the proposed
pension allocations to private and unlisted assets. To ignore AIM would be to
ignore the key market for UK growth companies.
MARKET CONDITIONS
The AIM All Share index fell 8% in the 12-month period to 31 March 2024,
underperforming the larger cap FTSE100, which gained 4%. High interest rates
have challenged equity flows. Data from the Investment Association pointed to
£13bn of retail selling of UK equities in the year, marking an unprecedented
32 months of consecutive equity outflows. UK smaller companies experienced
over £1bn of outflows, bringing the cumulative selling to £2.7bn in the 3
years to end of March.
While heavy retail selling of UK equities continued in April, indications are
that this eased in May. The shift in rate expectations this year has also not
helped with the market still pricing in rates to remain at 4.5%. However,
even though rate cuts have been pushed back, we have now seen the peak in
interest rates and the conclusion of the general election has removed
political uncertainty. This more stable backdrop, together with the recent
successful IPO of Raspberry Pi, is positive for the new issue market.
REVENUE((3))
Revenue comprises regular retainer income from corporate clients, advisory
fees from public and private market transactions and trading income from
market making and agency commission.
On a reported bases, revenue increased by 46% reflecting the increase in scale
of the equity capital markets business following the merger.
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Retainers 10,028 6,956
Transactions 33,512 22,632
Securities 4,548 3,276
Total revenue 48,088 32,864
OPERATING EXPENSES
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Employee costs 34,964 22,680
Share based payments 1,747 577
Introducer fees 773 147
Non-employee costs 14,159 11,139
Administrative costs 51,643 34,543
Administrative costs, increased by 50% with employee costs rising overall by
54% due to the inclusion of employees from Cavendish Securities plc
(previously Cenkos Securities plc) following the merger and an increase in
variable remuneration.
The combined Group has consolidated its London operations into one location
saving £1.3m per year, migrated onto a single trading platform saving £0.8m
per year and reduced headcount saving £4.9m per year. Further smaller
savings are anticipated as licences for duplicated services come up for
renewal.
Employee costs as a percentage of revenue were 73% (69% in FY23) reflecting
bonuses awarded for people's contributions to our strong post-merger
performance.
BOARD CHANGES
There have been several changes to the Board's composition during the year. In
connection with the merger, Barbara Firth and Andy Hogarth stepped down as
Non-Executive Directors, and Geoff Nash stepped down as an Executive Director
(but remains with the business as a senior Director in the Corporate Finance
team). Lisa Gordon (Chair), Julian Morse (Co-CEO), Ben Procter (CFO) and
Jeremy Miller (Non-Executive Director) all joined the Board on the merger
effective date. Robert Lister stepped down as a Non-Executive Director on 31
December, and we welcomed Mark Astaire to the Board as a Non-Executive
Director on 1 January 2024. Since the year-end, Richard Snow (who remained on
the Board as Chief Operational Officer following the merger) has signalled his
intention to step down from the Board at the end of July. Most recently
Annette Andrews has informed us of her decision not to stand for re-election
at the AGM on 16 September 2024.
NON-RECURRING COSTS
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Negative goodwill (5,771) -
Onerous contracts 2,563 -
Group restructuring costs 2,026 3,247
Transaction costs 1,234 411
Total non-recurring items 52 3,658
Negative goodwill reflects the difference between of the fair value of
Cavendish Securities plc's (previously Cenkos Securities plc's) net assets at
merger and the fair value of consideration for the purchase. Onerous contracts
reflect the write down of the property no longer occupied and redundant IT
systems. Group restructuring is the cost of the headcount reduction programme
and Transaction costs cover the advisory and execution fees relating to the
merger.
Overall, the direct costs of the merger are estimated to be c.£3.8m (group
restructuring and transaction costs) including £0.5m incurred by Cavendish
Securities plc (previously Cenkos Securities plc) prior to the merger. The
overall annualised savings for the Group will be more than £7.0m.
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Revenue 48,088 32,864
Other operating expenses (293) (214)
Administrative expenses (51,643) (34,543)
Operating loss before non-recurring items (3,848) (1,893)
Non-recurring items (52) (3,658)
Operating loss before non-recurring items (3,900) (5,551)
Share of joint venture and associate losses (346) (297)
Finance income 359 65
Finance charge (425) (502)
Loss before taxation (4,312) (6,285)
Taxation 766 767
Loss attributable to equity shareholders (3,546) (5,518)
Total comprehensive loss for the year (3,546) (5,518)
Loss per share (pence)
Basic (1.40) (3.25)
Diluted (1.40) (3.25)
There are no items of other comprehensive income.
All results derive from continuing operations.
CONSOLIDATED BALANCE SHEET
31 March 31 March
2024 2023
£'000 £'000
Non-current assets
Property, plant and equipment 11,052 12,239
Intangible assets 13,436 13,492
Financial assets held at fair value 538 404
Investment in associates and joint ventures 1,982 2,106
Deferred tax asset 3,626 886
Total non-current assets 30,634 29,127
Current assets
Trade and other receivables 22,714 12,736
Corporation taxation receivable - 450
Current assets held at fair value 4,210 269
Cash and cash equivalents 20,739 9,382
Total current assets 47,663 22,837
Total assets 78,297 51,964
Non-current liabilities
Trade and other payables 8,713 10,008
Borrowings 98 481
Provisions 82 29
Total non-current liabilities 8,893 10,518
Current liabilities
Trade and other payables 29,398 14,632
Borrowings 386 843
Total current liabilities 29,784 15,475
Equity
Share capital 3,847 1,811
Share premium 3,099 1,716
Own shares held (4,799) (1,926)
EBT reserve (274) (294)
Merger relief reserve 25,151 10,482
Share based payments reserve 3,766 1,771
Retained earnings 8,830 12,411
Total equity 39,620 25,971
Total equity and liabilities 78,297 51,964
CONSOLIDATED STATEMENT OF CHANGE IN EQUITY
Own Merger Share Based
Share Share Shares EBT Relief Payments Retained Total
Capital Premium Held Reserve Reserve Reserve Earnings Equity
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 March 2022 1,799 1,475 (1,926) (322) 10,482 1,294 20,261 33,063
Total comprehensive loss for the period - - - 28 - - (5,546) (5,518)
Transactions with owners:
Share based payments charge - - - - - 577 - 577
Deferred tax on share based payments - - - - - - (450) (450)
Dividends paid - - - - - - (1,954) (1,954)
Share options exercised 12 241 - - - (100) 100 253
12 241 - - - 477 (2,304) (1,574)
Balance at 31 March 2023 1,811 1,716 (1,926) (294) 10,482 1,771 12,411 25,971
Total comprehensive loss for the period - - - 20 - - (3,566) (3,546)
Transactions with owners:
Share based payments charge - - - - - 1,747 - 1,747
Investment in subsidiaries 1,811 1,383 (3,164) - 14,669 590 - 15,289
Purchase of shares - - (67) - - - - (67)
Issued share capital 225 - 358 - - (342) (15) 226
2,036 1,383 (2,873) - 14,669 1,995 (15) 17,195
Balance at 31 March 2024 3,847 3,099 (4,799) (274) 25,151 3,766 8,830 39,620
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Cash flows from operating activities
Loss before taxation (4,312) (6,285)
Adjustments for:
Depreciation 1,899 1,789
Negative Goodwill (5,771) -
Onerous contracts 1,522 -
Amortisation of intangible assets 157 60
Finance income (359) (65)
Finance charge 425 502
Share of associate profits 346 297
Share based payments charge 1,747 577
Net fair value losses recognised in profit or loss 305 382
Payments received of non-cash assets (55) (854)
(4,096) (3,597)
Changes in working capital:
Decrease/(increase) in trade and other receivables (1,796) 398
(Decrease)/increase in trade and other payables 7,546 (5,951)
(Decrease)/increase in provisions 53 (65)
Cash generated from operations 1,704 (9,215)
Net cash receipts /(payments) for current asset investments
held at fair value through profit or loss (305) 602
Tax paid 256 (1,155)
Net cash (outflow)/inflow from operating activities 1,655 (9,768)
Cash flows from investing activities
Purchase of property, plant and equipment (174) (724)
Purchase of intangible assets (101) (40)
Investment in associates and joint ventures (150) (2,029)
Acquisition of Cavendish Securities plc 11,576 -
Proceeds on sale of investments 83 870
Interest received 359 65
Net cash (outflow)/inflow from investing activities 11,593 (1,858)
Cash flows from financing activities
Equity dividends paid - (1,954)
Issue of share capital and exercise of options 1,540 3
Interest paid (34) (38)
Lease liability payments (2,557) (1,555)
Net proceeds from borrowings (840) 117
Net cash (outflow) from financing activities (1,891) (3,427)
Net (decrease)/increase in cash and cash equivalents 11,357 (15,053)
Cash and cash equivalents at beginning of year 9,382 24,435
Cash and cash equivalents at end of year 20,739 9,382
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
a. Basis of preparation
These consolidated and Parent Company Financial Statements contain information
about the Group and have been prepared on a historical cost basis except for
certain Financial Instruments which are carried at fair value. Amounts are
rounded to the nearest thousand, unless otherwise stated and are presented in
pounds sterling, which is the currency of the primary economic environment in
which the Group operates.
These consolidated and Parent Company Financial Statements have been prepared
in accordance with UK Adopted International Accounting Standards.
The preparation of Financial Statements in compliance with adopted IFRS
requires the use of certain critical accounting estimates. It also requires
Group management to exercise judgement in applying the Group's accounting
policies.
The consolidated financial information contained within these financial
statements does not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006. The auditor has reported on the
statutory financial statements and the audit report was unqualified. The
annual report and accounts for the year ended 31 March 2024 is expected to be
filed with the Registrar of Companies and posted to Shareholders in August.
Further copies will be available from the Company Secretary at the Company's
registered office and on the Company's web-site www.Cavendish.com.
b. Basis of consolidation
The Group's consolidated Financial Statements include the Financial Statements
of the Company and all its subsidiaries. Subsidiaries are entities over which
the Group has control if all three of the following elements are present:
power over the investee, exposure to variable returns from the investee and
the ability of the investor to use its power to affect those variable returns.
Subsidiaries are fully consolidated from the date on which control is
established and de-consolidated on the date that control ceases.
The acquisition method of accounting is used for the acquisition of
subsidiaries. Transactions and balances between members of the Group are
eliminated on consolidation and consistent accounting policies are used
throughout the Group for the purposes of consolidation.
c. Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Letter
from the Chair. The Strategic Report and Directors' Report describe the
financial position of the Group; the Group's objectives, policies and
processes for managing its capital; its financial risk management objectives;
and its exposure to credit risk and liquidity risk.
As normal, the Company has assessed the appropriateness of accounting on a
going concern basis. This process involved the review of a forecast for the
coming 15 months, along with stress testing a second downside scenario. Both
cases showed that the Group has the required resources to operate within its
resources during the period.
The Directors believe that the Company has adequate resources to continue
trading for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and Accounts.
2. Dividends
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Dividends proposed and paid during the year - 1,954
Dividends per share -p 1.15p
Dividends are declared at the discretion of the Board.
The Board has proposed a final dividend of 0.25p per share. The dividend,
subject to approval at the AGM, are expected to be paid on 15 October 2024 to
shareholders and on the register on 20 September 2024.
3. Website publication
The full Financial Statements are included in our Annual Report and Accounts,
which will be published on the Company's website in accordance with
legislation in the United Kingdom governing the preparation and dissemination
of Financial Statements, which may vary from legislation in other
jurisdictions.
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