Cenkos Securities - Annual Results for the year ended 31 December 2022
10/03/2023 07:00
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RNS Number : 5070S Cenkos Securities PLC 10 March 2023
10 March 2023
Cenkos Securities plc
Annual Results for the year ended 31 December 2022
Cenkos Securities plc (the "Company" or "Cenkos" or the "Firm"), the
independent institutional stockbroking firm, today announces its results for
the year ended 31 December 2022.
Cenkos' shares are admitted to trading on the AIM market of the London Stock
Exchange ("LSE"). The Company is authorised and regulated by the Financial
Conduct Authority ("FCA") and is a member of the LSE.
Highlights 31-Dec-22 31-Dec-21 change
Revenue £20.3m £37.2m - 46%
Underlying profit ((1) (2)) £0.2m £4.4m - 95%
(Loss) / profit before tax £(2.7)m £4.0m - 168%
(Loss) / profit after tax £(2.2)m £3.4m - 165%
Cash £14.2m £33.5m - £19.2m
Net assets £21.8m £27.0m - £5.2m
Basic earnings per share (4.9)p 7.1p
Full year dividend per share paid and proposed ((3)) 1.5p 4.25p
( )
(1) Underlying profit is profit before the impact of the day 1 value
of options and warrants received in the period and the associated fair value
gains and losses on the options and warrants held, restructuring costs and
costs associated with incentive plans.
(2) The comparative figures have been restated to reflect the
current definition of underlying profit. In the current period, in addition to
adjusting for restructuring costs and costs associated with incentive plans,
this is disclosed before the impact of the day one value of options and
warrants received in the period and the associated fair value gains and losses
on the options and warrants held. The Directors believe this provides a
clearer view of the operational performance of the business in the period as
their lifespan may overlap several periods before crystallisation.
(3) Includes a proposed final dividend of 0.5p (2021: 3.0p)
Outlook:
The tough conditions of 2022 have eased slightly in the early part of 2023 but
capital markets remain subdued relative to 2021. Despite this, we believe that
our ongoing emphasis on working closely with clients and maintaining a
proactive dialogue with investors will continue to generate opportunities and
attract new clients. Our business model enables us to generate cash at an
operational level and profits even in difficult market conditions and our
perseverance means we are well placed as markets begin to recover. We believe
our gains in market share, selective hiring of quality individuals and teams,
a growing client base and a disciplined approach to costs, put us on the front
foot to deliver success for our clients, colleagues and shareholders alike.
Julian Morse, Chief Executive Officer, commented: "Despite the AIM market
experiencing its lowest levels of activity for almost two decades, a continued
attention to cost control, paired with a resolute focus on our strengths, has
allowed us to find opportunity despite the volatility.
In spite of the general hiatus, we found the markets remained receptive to
quality ideas and the strength of our institutional contacts allowed us to
continue raising funds. It was particularly pleasing that we completed the
three largest AIM IPOs by money raised during 2022, which accounted for 55% of
the funds raised on AIM relating to new issues. Overall, we also managed to
grow our market share to advise on transactions accounting for 15% of all
money raised on AIM.
During the year, we added 17 new companies to our client list. Client
relationships remain at the core of what we do and with an average client
tenure of over five years, we have been well placed to guide our clients
through the current market uncertainty."
This announcement contains certain inside information for the purposes of
Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"),
and is disclosed in accordance with the Company's obligations under Article 17
of MAR.
Enquiries:
Cenkos Securities plc
Julian Morse - Chief Executive Officer +44 20 7397 8900
Nominated Adviser
Spark Advisory Partners Limited
Matt Davis +44 20 3368 3550
Chairman's statement
2022 performance
2022 was a poor year for UK equities. The UK Smaller Companies indices
including AIM, recorded disappointing returns, which were significantly lower
than the more internationally exposed larger cap indices of UK equities.
The reasons are now well known, being a combination of rising energy and
commodity prices, leading to sharply higher than expected rates of inflation
which the Bank of England has responded to by raising short term interest
rates. This was further compounded by the highly damaging economic and
political turmoil of the short-lived Truss/Kwarteng administration in
September which damaged international confidence in UK debt markets. The UK
now finds itself in the midst of high inflation and a tight labour market
which has led to the highest number of working days lost to strike action for
more than a decade.
All of the above combined to produce a backdrop of significantly depressed
market conditions for 2022, with the overall level of money raised on AIM at
its lowest since 2003 and new issues at their lowest level since launch in
1995. However, it could be argued that much of the economic risk has been
priced into valuations and certainly 2023 has already started more positively.
Notwithstanding market conditions throughout 2022, we successfully focused on
gaining market share and completed the three largest AIM IPOs by money raised
during the course of the year, added 17 new clients and performed a Nomad
and/or broker role on transactions representing around 15% of total money
raised on AIM.
Our flexible operating model, with its relatively low fixed cost base stood us
in particularly good stead in 2022 and as a result we have maintained a strong
balance sheet and cash position while making targeted investments in people to
further develop our franchise.
Despite a sharp decline in market volumes and the subsequent impact on
revenues, the Board still intends to maintain its unbroken dividend
distribution record and is pleased to declare a final dividend of 0.5p. We are
able to do this due to our flexible operating model with the executives and
employees leading from the front in protecting our balance sheet.
Our People
March marks my third anniversary at Cenkos and over the course of that time, I
have grown more and more impressed by the quality of our team. Broking is
often seen as industry of individuals, led by so-called 'rainmakers'.
However, it's my personal belief that the most successful companies in any
field are made up of teams united by a shared vision, trust and mutual
respect. I said in my last statement that we may not be the biggest, but we
are determined to be the best and that journey continues apace. The past
year has tested the resilience and ability of every member of the Cenkos team
and I am so impressed by the way each person has stepped up to meet that
challenge. The direct feedback I receive from corporate and institutional
clients about the way in which our teams have proactively supported them
through challenging times - never shying away from difficult conversations -
is indicative of the Cenkos culture we have worked so hard to create. The
financial rewards for our employees may not be as good as in previous years
but in many ways, everyone has achieved much more in terms of personal and
professional development and gained invaluable expertise, which sets us up
well to fully maximise the benefits of a market upturn. As a firm we cannot
singlehandedly transform market conditions, but it is the growing quality of
our people that will turbocharge our financial performance when markets
improve. The early signs of more benign market conditions have already
appeared in the opening months of 2023, but we will continue to manage the
business tightly, invest wisely in people and technology and keep an eye out
for potential headwinds.
Lisa Gordon
Non-executive Chairman
Chief Executive Officer's statement
Weathering the storm
Looking back over the past twelve months, there is much to reflect on. All
sectors and all markets have faced challenges from the compounding effects of
global events; from war to supply chain issues, rising inflation and energy
costs, through to subdued economic growth and market volatility. Constrained
times have forced all businesses to consider their resilience and we have
devoted significant energy to considering how best to support our clients to
navigate the impacts of these events.
Against such a backdrop, reduced revenues are no surprise but are only one
part of a broader picture. Our ability to pay a dividend, breakeven at the
underlying profit level and gain market share reinforces that we are on the
right track despite the market headwinds.
A reconciliation between underlying profit and statutory profit is included in
the income statement below:
2022 2021
Restated**
Revenue streams £ 000's £ 000's % change
Corporate finance 13,162 27,184 -52%
Nomad, broking and research 6,577 6,172 7%
Execution - net trading gains 521 3,869 -87%
Revenue 20,260 37,225 -46%
Day 1 value of options and warrants received as part of fees (567) (1,614) -65%
Staff costs excluding restructuring costs and incentive plans (12,566) (24,080) -48%
Administrative expenses before restructuring and incentive plans (6,890) (7,158) -4%
Underlying profit 237 4,373 -95%
Day 1 value of options and warrants received as part of fees 567 1,614 -65%
Other operating expense (2,158) (87) 2381%
Restructuring costs and incentive plans * (1,289) (1,796) -28%
Operating (loss) / profit (2,643) 4,104 -164%
Investment income - interest income 109 17 541%
Finance costs - interest on lease liability (169) (171) -1%
(Loss) / profit before tax (2,703) 3,950 -168%
Tax 462 (552) -192%
(Loss) / profit after tax (2,241) 3,398 -165%
* Restructuring costs and incentive plans includes legal fees associated with
redundancy.
** The comparative figures have been restated to reflect the current
definition of underlying profit. In the current period, in addition to
adjusting for restructuring costs and costs associated with incentive plans,
this is disclosed before the impact of the day one value of options and
warrants received in the period and the associated fair value gains and losses
on the options and warrants held. The Directors believe this provides a
clearer view of the operational performance of the business in the period as
their lifespan may overlap several periods before crystallisation.
Our capacity to consistently serve our clients and deliver growth capital in
pressured markets is only possible due to the knowledge, experience and
tenacity of our teams and I thank them all for their determination and drive.
Opportunity from Volatility
Despite the AIM market experiencing its lowest levels of activity for almost
two decades, a continued attention to cost control, paired with a resolute
focus on our strengths, has allowed us to find opportunity despite the
volatility.
In spite of the general hiatus, we found the markets remained receptive to
quality ideas and the strength of our institutional contacts allowed us to
continue raising funds. It was particularly pleasing that we completed the
three largest AIM IPOs by money raised during 2022, which accounted for 55% of
the funds raised on AIM relating to new issues. Overall, we also managed to
grow our market share to advise on transactions accounting for 15% of all
money raised on AIM.
Client relationships remain at the core of what we do and with an average
client tenure of over five years, we have been well placed to guide our
clients through the current market uncertainty. It is a validation of our
approach to client service and our positive attitude towards the markets that
we added 17 new clients during the period.
Building on our Strengths
As the industry grapples with broader economic conditions and lower levels of
market activity, we have remained committed to our core strengths and strategy
of building from a resilient base. With a strong balance sheet and reserves
in excess of our regulatory requirements, we use that resilience to move
forward with conviction.
From this foundation, we have been able to take advantage of opportunities to
develop our client proposition as they have arisen. We have bolstered our
M&A and sponsor services capabilities with selective hiring and have grown
our distribution facilities with a chaperone arrangement facilitating greater
access to US markets.
The Road Ahead
The tough conditions of 2022 have eased slightly in the early part of 2023.
Capital markets remain subdued relative to 2021, but despite this, we believe
that our ongoing emphasis on working closely with clients and maintaining a
proactive dialogue with investors will continue to generate opportunities and
attract new clients. Our business model enables us to generate cash at an
operational level and profits even in difficult market conditions and our
perseverance means we are well placed at an operational level as markets begin
to recover. We believe our gains in market share, selective hiring of quality
individuals and teams, a growing client base and a disciplined approach to
costs, put us on the front foot to deliver success for our clients, colleagues
and shareholders alike.
Julian Morse
Chief Executive Officer
9 March 2023
Income statement
For the year ended 31 December 2022
2022 2021
£ 000's £ 000's
Continuing operations
Revenue 20,260 37,225
Other operating expense (2,158) (87)
Administrative expenses (20,745) (33,034)
Operating (loss) / profit (2,643) 4,104
Investment income - interest income 109 17
Finance costs - interest on lease liability (169) (171)
Share of post-tax profits of equity-accounted associates - -
(Loss) / profit before tax from continuing operations for the year (2,703) 3,950
Tax 462 (552)
(Loss) / profit after tax for the year (2,241) 3,398
Attributable to:
Equity holders of Cenkos Securities plc (2,241) 3,398
Basic earnings per share (4.9)p 7.1p
Diluted earnings per share (4.9)p 6.0p
Statement of comprehensive income
For the year ended 31 December 2022
2022 2021
£ 000's £ 000's
(Loss) / profit for the year (2,241) 3,398
Total comprehensive (expense) / income for the year (2,241) 3,398
Attributable to:
Equity holders of Cenkos Securities plc (2,241) 3,398
Statement of financial position
As at 31 December 2022
2022 2021
£ 000's £ 000's
Non-current assets
Property, plant and equipment 409 398
Right-of-use assets 3,539 3,577
Deferred tax asset 1,525 1,154
Investments in subsidiary undertakings 1 1
Investments in equity-accounted associates 100 -
5,574 5,130
Current assets
Trade and other receivables 8,334 10,547
Other current financial assets 4,811 7,231
Cash and cash equivalents 14,220 33,457
27,365 51,235
Total assets 32,939 56,365
Current liabilities
Trade and other payables (5,684) (23,027)
Other current financial liabilities (1,312) (1,915)
(6,996) (24,942)
Net current assets 20,369 26,293
Non-current liabilities
Trade and other payables (4,187) (4,436)
Total liabilities (11,183) (29,378)
Net assets 21,756 26,987
Equity
Share capital 567 567
Share premium 3,331 3,331
Capital redemption reserve 195 195
Own shares (9,654) (8,360)
FVOCI reserve - (170)
Retained earnings 27,317 31,424
Total equity 21,756 26,987
The financial statements were approved by the Board of Directors and
authorised for issue on 9 March 2023.
They were signed on its behalf by:
Julian Morse
Chief Executive Officer
9 March 2023
Registered Number: 05210733
Cash flow statement
For the year ended 31 December 2022
2022 2021
£ 000's £ 000's
(Loss) / profit for the year (2,241) 3,398
Adjustments for:
Investment income - interest income (109) (17)
Finance costs - interest on lease liability 169 171
Tax (credit) / expense (462) 552
Depreciation of property, plant and equipment and ROU assets 611 649
Shares and options received in lieu of fees (1,426) (1,820)
Share-based payment expense 2,650 2,920
Operating cash (outflow) / inflow before movements in working capital (808) 5,853
Decrease in net trading investments 3,243 804
Decrease in trade and other receivables 2,236 2,459
Decrease in trade and other payables (16,855) (1,742)
Net cash (outflow) / inflow from operating activities before interest and tax (12,184) 7,374
paid
Interest paid (2) -
Tax paid (650) (783)
Net cash (outflow) / inflow from operating activities (12,836) 6,591
Investing activities
Interest received 65 4
Investment in equity-accounted associate (100) -
Purchase of property, plant and equipment (138) (150)
Net cash outflow from investing activities (173) (146)
Financing activities
Rent paid under lease arrangement (795) (754)
Dividends paid (2,048) (1,922)
Proceeds from sale of shares to employees on dividend reinvestment 15 20
Acquisition of own shares (3,400) (3,067)
Net cash used in financing activities (6,228) (5,723)
Net (decrease) / increase in cash and cash equivalents (19,237) 722
Cash and cash equivalents at beginning of year 33,457 32,735
Cash and cash equivalents at end of year 14,220 33,457
Statement of changes in equity
For the year ended 31 December 2022
Equity attributable to equity holders
Share capital Share premium Capital redemption reserve Own shares held in treasury FVOCI reserve Retained earnings Total
£ 000's £ 000's £ 000's £ 000's £ 000's £ 000's £ 000's
At 1 January 2021 567 3,331 195 (6,607) (170) 28,309 25,625
Profit for the year - - - - - 3,398 3,398
Total comprehensive income for the year - - - - - 3,398 3,398
Issue of shares to employees on dividend reinvestment - - - 12 - 8 20
Transfer of shares from share plans to employees - - - 1,302 - (1,302) -
Acquisition of own shares - - - (3,067) - - (3,067)
Credit to equity for equity-settled share-based payments - - - - - 2,839 2,839
Deferred tax on share-based payments - - - - - 94 94
Dividends paid - - - - - (1,922) (1,922)
At 31 December 2021 567 3,331 195 (8,360) (170) 31,424 26,987
Balance at 1 January 2022 567 3,331 195 (8,360) (170) 31,424 26,987
Loss for the year - - - - - (2,241) (2,241)
Total comprehensive income for the year - - - - - (2,241) (2,241)
Transfer of FVOCI reserve to retained earnings - - - - 170 (170) -
Issue of shares to employees on dividend reinvestment - - - 20 - (5) 15
Transfer of shares from share plans to employees - - - 2,086 - (2,086) -
Acquisition of own shares - - - (3,400) - - (3,400)
Credit to equity for equity-settled share-based payments - - - - - 2,527 2,527
Deferred tax on share-based payments - - - - - (84) (84)
Dividends paid - - - - - (2,048) (2,048)
At 31 December 2022 567 3,331 195 (9,654) - 27,317 21,756
Notes to the financial statements
1. Accounting policies
General information
Cenkos Securities plc is a public company limited by shares incorporated in
England, United Kingdom under the Companies Act 2006 (Company Registration No.
05210733). The financial information contained within this announcement does
not constitute statutory accounts for the year ended 31 December 2022 within
the meaning of Section 434 of the Companies Act 2006, but is derived from
those audited accounts. The auditors reported on those accounts and their
report was unqualified and did not contain any statement under section 498(2)
or section 498(3) of the Companies Act 2006. The statutory accounts for the
year ended 31 December 2022 will be delivered to the Registrar of Companies in
due course. The annual report and audited statutory accounts will be sent to
shareholders and will be made available to the public on the Company's
website: www.cenkos.com or, upon request, copies may be obtained from the
Company Secretary at the registered office of Cenkos Securities plc, 6.7.8.
Tokenhouse Yard, London, EC2R 7AS. The Company's Annual General Meeting will
be held on 10 May 2023.
The financial information contained within these financial statements has been
prepared on the historical cost basis, except for the revaluation of certain
financial instruments.
Basis of accounting
The Company's financial statements are properly prepared in accordance with UK
adopted International Accounting Standards. As the Company has no material
subsidiaries, the financial statements presented are for the Company only.
Going concern
The Company's business activities, together with the factors likely to affect
its future development and performance, the financial position of the Company,
its cash flows, capital and liquidity position are set out in the Strategic
Report in the Annual Report.
Despite the depressed market conditions experienced during 2022, in addition
to being appointed by several new clients, Cenkos was still able to complete
transactions and assist its clients to raise funds, albeit that these
transactions were of smaller size than in previous years. Cenkos is reliant on
the health of financial markets and investor sentiment. Moving into 2023, with
no end in sight to the war in Ukraine, increased levels of inflation and
interest rates, the prospect of recession could mean the continuation of these
significantly reduced levels of market activity. For Cenkos, this could result
in a reduction in fees generated from placing and corporate finance activity
and a decline in fair values of listed and unlisted equities, options and
warrants. This has been considered when conducting the impact analysis as part
of the going concern assessment.
In order to mitigate the risk associated with fluctuations in the financial
markets, the Company operates a flexible business model which links risk
adjusted variable remuneration to corporate performance. Fixed costs are kept
low and controlled, providing a strong foundation. Cenkos is not reliant on
external borrowings but is funded entirely by share capital and retained
earnings. The business is not capitally intensive. The trading book is tightly
controlled by book limits and, apart from shares received in lieu of fees, is
held for market making purposes or to facilitate client business. Cenkos has a
positive cash cycle and does not run any liquidity mismatches. Cash is the
largest asset on the statement of financial position and consequently its
exposure to credit risk is largely due to its bank deposits before risk
weighting.
Management has also performed an impact analysis as part of its going concern
assessment using information available to the date of issue of these financial
statements. As part of this analysis, a number of adverse scenarios have been
modelled to assess the potential impact on the Company's revenue streams, in
particular corporate finance fees, and on asset values, liquidity and capital
adequacy. In addition, a reverse stress test has been modelled to assess the
stresses the balance sheet has to endure before there is a breach of the
relevant regulatory capital requirement or insufficient cash resources and
includes an assessment of any relevant mitigations management has within their
control to implement. Having performed this analysis, management believes
regulatory capital requirements continue to be met and the Company has
sufficient liquidity to meet its liabilities for the next 12 months from the
date when the financial statements were authorised for issue and that the
preparation of the financial statements on a going concern basis remains
appropriate as the Company expects to be able to meet its obligations as and
when they fall due for the foreseeable future.
2. Dividends
Amounts recognised as distributions to equity holders in the year:
2022 2021
£ 000's £ 000's
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2021 of 3.0p (2020: 2.5p) per 1,548 1,280
share
Interim dividend for the period to 30 June 2022 of 1.00p (June 2021: 1.25p) 500 642
per share
2,048 1,922
A final dividend of 0.5p per share has been proposed for the year ended 31
December 2022 (2021: 3.0p). The proposed final dividend is subject to approval
at the Annual General Meeting and is not recognised as a liability as at 31
December 2022.
3. Events after the reporting period
There were no material events to report on that occurred between 31 December
2022 and the date at which the Directors signed the Annual Report.
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