REG - Cenkos Securities - Interim Results
9 September 2021
Cenkos Securities plc
Interim Results for the six months ended 30 June 2021
Cenkos Securities plc (the "Company" or "Cenkos" or the "Firm"), the independent institutional stockbroking firm, today announces its results for the six months ended 30 June 2021.
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
30 Jun-21
30-Jun-20
Revenue
£18.2 m
£13.3 m
Underlying profit (1)
£2.8 m
£2.0 m
Profit before tax
£1.7 m
£0.8 m
Profit after tax
£1.5m
£0.6m
Cash
£24.0m
£22.4 m
Net assets
£25.4m
£24.6m
Basic earnings per share (2)
3.1p
1.2p
Interim dividend per share
1.25p
1.0p
(1) Underlying profit is profit before restructuring costs and charges related to the Cenkos incentive plans and tax.
(2) Prior year comparatives have been restated to conform with current interpretation of IAS 33 such that there is no adjustment for dividends on shares held in SIP & DBS in arriving at Earnings for the purpose of basic earnings per share.
Since being admitted to trading on AIM in 2006, the Company has returned £116.4 million of cash to shareholders, equivalent to 180.8p per share, before the payment of the proposed 2021 interim dividend of 1.25p per share.
Outlook:
Since the end of the period, the completion of 2 IPOs and a further 8 fundraisings further demonstrate the ongoing strength of the business and its pipeline. Whilst we cannot always assume favourable conditions within equity markets, by continuing to lay the groundwork for growth and through our tenacity and long-term partnering with clients, we see reasons for optimism for the remainder of 2021 and beyond.
Julian Morse, Chief Executive Officer commented: "The healthy performance in the first six months of the year, with a 44% increase in underlying profits of £2.8m, a 37% increase in revenues to £18.2m and a 25% increase in our interim dividend, is testament to the quality of our clients and the focus and commitment of our colleagues. Our people are our greatest asset and I want to thank everyone for their hard work on delivering these results and setting us up with a strong pipeline. In recognition of the importance of our people, we are proud to have implemented a company-wide TSR-based share incentive scheme for the first time to align all our key stakeholders and ensure everyone at the firm is able to share in our success."
Enquiries:
Cenkos Securities plc
Julian Morse - Chief Executive Officer
+44 20 7397 8900
Nominated Adviser
Spark Advisory Partners Limited
Matthew Davis
+44 20 3368 3550
Public Relations
The Nisse Consultancy
Jason Nisse
+44 7769 688618
Andrew Garfield
+44 7974 982337
Chairman's statement
With a new leadership team in place, bringing energy and focus to delivering our strategic goals and further developing the firm's collaborative and entrepreneurial culture, I am heartened by our performance in the first six months of the financial year.
Against the backdrop of the ongoing challenges presented by Covid-19 and remote working, the leadership team have created a flexible and inclusive work environment for our employees and these results show how the firm's values of professionalism and teamwork are a key part of our recent success.
The Board is committed to building Cenkos to the number one position in our key markets and to achieve this, we must look beyond the short-term cyclicality of the markets. Our long-term strategy requires investment in both people and systems, and I am delighted to report that we continue to attract and develop the best talent to achieve this.
With an energised team, a strong balance sheet and a clear focus on our strategic goals, we are well-positioned to build further from here, creating value for our entire shareholder base.
Lisa Gordon
Non-Executive Chairman
8 September 2021
Chief Executive Officer's statement
The healthy performance in the first six months of the year, with a 44% increase in underlying profits of £2.8m, a 37% increase in revenues to £18.2m and a 25% increase in our interim dividend, is testament to the quality of our clients and the focus and commitment of our colleagues. Our people are our greatest asset and I want to thank everyone for their hard work on delivering these results and setting us up with a strong pipeline. In recognition of the importance of our people, we are proud to have implemented a company-wide TSR-based share incentive scheme for the first time to align all our key stakeholders and ensure everyone at the firm is able to share in our success.
Our drive and ambition helped us win twelve new clients across the business during the first six months of the year and successfully secure more than 10% of all funds raised on AIM during that time, as well as execute significant follow-on placings for a number of our main list investment company clients. 2 IPOs and a further 8 fundraisings since the end of the first half further demonstrate the ongoing strength of the business and its potential to continue to grow both revenue and market share.
We are seeing the benefits of our strategy begin to emerge. Maintaining a low-cost base and a strong balance sheet have allowed us to invest in people, systems and technology, provide high-touch service levels to our clients and create a resilient platform from which we can grow.
With 12 new hires in the first half, we continue to deepen our talent pool across the firm and will look to make further high-quality hires to deliver our mission of building market share.
The market for UK equities has been strong during the period, and while we see no reason for this to change in the near term, we cannot always assume favourable conditions. That said, a large proportion of our business is focused on raising money for corporates trading on AIM, which has seen the aggregate value of companies on the market double over the last seven years, and those companies consistently raise funds, with the amount raised each year on AIM ranging from £3.8 billion to £6.4 billion. By continuing to lay the groundwork for growth and through our tenacity and long-term partnering with innovative clients, we see reasons for optimism for the remainder of 2021 and beyond.
Performance
I am pleased to report that H1 2021 revenue increased by 37% to £18.2 million (H1 2020: £13.3 million) while underlying profit increased by 44% to £2.8 million (H1 2020: £2.0 million).
A summary of H1 2021 performance compared to H1 2020 is set out in the table below:
Six months ended
Six months ended
30 June
30 June
2021
2020
Revenue streams
£ 000's
£ 000's
% change
Corporate finance
12,732
9,216
38%
Nomad, broking and research
3,076
3,244
-5%
Execution - net trading gains
2,413
806
199%
Revenue
18,221
13,266
37%
Other operating expense
(45)
(361)
-88%
Staff costs
(11,778)
(7,392)
59%
Administrative expenses before restructuring and incentive plans
(3,565)
(3,539)
1%
Underlying profit
2,833
1,974
44%
Restructuring costs and incentive plans
(1,066)
(1,158)
-8%
Operating profit
1,767
816
117%
Investment income - interest income
7
23
-71%
Finance costs
(88)
(86)
2%
Profit before tax
1,686
753
124%
Tax
(183)
(163)
12%
Profit after tax
1,503
590
155%
Corporate finance
Corporate finance fees increased by 38% to £12.7 million (H1 2020: £9.2 million) reflecting an increased level of corporate activity across the market during the period. Cenkos completed 16 (H1 2020: 11) placing transactions helping its clients raise £0.58 billion in equity finance. Of this, £0.40 billion was raised on the AIM market which equates to just over 10% (H1 2020: 9%) of the £3.96 billion (H1 2020: £2.89 billion) raised by Companies during the period to 30 June 2021.
Nomad, broking and research
The number of clients represented by Cenkos increased over the first half of 2021 from 94 to 100 (June 2020: 97), although for timing reasons this is not fully reflected in the Nomad, broking and research fees generated, which decreased by 5% to £3.1 million (H1 2020: £3.2 million).
Execution
Net trading gains increased by 199% to £2.4 million (H1 2020: £0.8 million) against a backdrop of heightened market activity which had followed on from the final quarter of 2020 and continued throughout the first half of 2021. During this period, we maintained a top 5 market share in 90% (H1 2020: 94%) of our clients' stocks and overall made markets in 219 (H1 2020: 185) equities and Investment Trusts.
Other operating income
Other operating income includes the fair value gains and losses on options and warrants, which this year has been shown separately from execution - net trading gains under the revenue caption as the Directors believe this provides a clearer view of the performance of the business by separating out from revenue the gains and losses on level 3 instruments. To 30 June 2021, this showed a loss of £45k against the prior period loss of £361k, reflecting the fair value movement of the warrants received in lieu of fees and those acquired during the period.
Administrative expenses
Administrative expenses - staff costs
Staff costs increased by 59% to £11.8 million (H1 2020: £7.4 million) primarily due to an increase in the accrual for variable remuneration in line with the significant improvement in performance, but also as a result of a targeted increase in staff to 92 employees at 30 June 2021 (June 2020: 89) from 90 at 31 December 2020. This is in-line with Cenkos' aim to recruit ahead of the curve, so it may continue to provide a premium service to its clients as the business grows.
Administrative expenses - other
Other administrative expenses remained largely flat at £3.6 million (H1 2020: £3.5 million) reflecting continued tight control over the cost base offset by considered investment.
Administrative expenses - restructuring costs and Incentive Plans (STIP, LTIP & CSOP)
Costs associated with the restructuring and incentive plans decreased by 8% to £1.1 million (H1 2020: £1.2 million). In addition to the charges associated with the STIP ("Short Term Incentive Plan"), the incentive plan launched in April 2020, this caption also includes charges associated with the LTIP ("Long Term Incentive Plan") and CSOP ("Company Share Option Plan"). These schemes were launched in May 2021, aimed at retaining and incentivizing staff, with the LTIP focused on senior management and the CSOP all employees. The charge of £0.6 million (H1 2020: £0.5 million) in respect of these plans represents the portion of the fair value of the schemes allocated to this period.
Profit and earnings per share
Underlying profit increased by 44% to £2.8 million (H1 2020: £2.0 million). Underlying profit is disclosed before restructuring costs and costs associated with the incentive plans as the Directors believe this provides a clearer view of the performance of the business.
Statutory profit before tax for the period increased by 124% to £1.7 million (H1 2020: £0.8 million). The tax charge for the period of £0.2 million (H1 2020: £0.2 million) equates to an effective tax rate of 11% (H1 2020: 22%). Profit after tax for the period was £1.5 million (H1 2020: £0.6 million).
Basic earnings per share for the period was 3.1p (H1 2020 Restated: 1.2p).
Financial position
The statement of financial position shows net assets increased to £25.4 million as at 30 June 2021 (30 June 2021: £24.6 million), which reflects the profits generated over the period being partially offset by the cost of shares acquired by the EBT and dividends paid.
The decrease in non-current assets relates to the amortization of the right of use asset recognized in respect of the London and Edinburgh office leases, which has a corresponding impact on trade and other payables.
The increase in net trading investments is mainly due to the increase in asset prices and activity over the period. The increase in activity and the settlement of share trades is also reflected in the movements in trade and other receivables and trade and other payables. Profitable trading during the period has resulted in an increase in the accrual for variable remuneration and cash and cash equivalents.
30 June
30 June
2021
2020
Change
Net assets summary
£ 000's
£ 000's
£ 000's
Non-current assets
4,771
5,171
(400)
FVOCI financial assets
-
-
-
Other current financial assets
7,126
4,163
2,963
Other current financial liabilities
(2,678)
(681)
(1,997)
Net trading investments
4,448
3,482
965
Trade and other receivables
15,821
11,737
4,085
Trade and other payables
(23,620)
(18,155)
(5,465)
Cash and cash equivalents
23,982
22,352
1,630
25,402
24,587
816
Capital and Liquidity
The Board continuously assesses the Company's cash and capital requirements with the intention of maintaining a strong balance sheet, including a significant surplus over and above its Pillar 1, Individual Capital Guidance ('ICG') and Combined Capital Buffer ('CCB') requirements and sufficient liquid resources to cover at least 12 months of fixed overheads.
The new Investment Firms Prudential Regime ('IFPR') is due to come into force in January 2022. Whilst the legislation is subject to final approval, Management has conducted a high-level review and expect there to be little change to Cenkos' capital requirement under the new IFPR.
At 30 June 2021, Cenkos had a capital resources surplus of £17.0 million (H1 2020: £15.8 million) above its Pillar 1 regulatory capital requirement.
The Board
As previously announced, Jim Durkin retired from the Company on the 12 May 2021. Subsequent to the Annual General Meeting, Julian Morse took up the position of Chief Executive Officer and Jeremy Osler took up his role as an Executive Director of the Company, both positions having received regulatory approval from the Financial Conduct Authority.
Going concern
The Coronavirus ('COVID-19') continues to have a major impact worldwide. Many countries still have measures in place restricting travel, business operations and peoples' activities to contain the spread of the virus. In the UK, restrictions have been removed largely due to the success of the vaccination programme resulting in a fall in the number of new cases and hospitalizations. This is being closely monitored, as is the emergence of new variants and their resistance to the vaccines. Cenkos' offices are open and fully operational, although should restrictions be re-imposed, the business continuity plan will once again be enacted. Management has performed an impact analysis as part of its going concern assessment using information available to the date of issue of these financial statements. Having performed this analysis, management believes: (a) regulatory capital requirements will continue to be met; (b) the Company has sufficient liquidity to meet its liabilities for the next 12 months; and (c) 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.
Outlook
Since the end of the period, the completion of 2 IPOs and a further 8 fundraisings further demonstrate the ongoing strength of the business and its pipeline. Whilst we cannot always assume favourable conditions within equity markets, by continuing to lay the groundwork for growth and through our tenacity and long-term partnering with clients, we see reasons for optimism for the remainder of 2021 and beyond.
Dividend
The Board recognises the importance of dividends to our shareholders, and since being admitted to AIM we have returned the equivalent of 180.8p per share of cash to shareholders. The Board will continue to look to return significant value to shareholders while seeking to establish a level of consistency of dividend payments throughout variable market conditions.
The Board proposes an interim dividend of 1.25p (H1:2020 1.0p) per share. The dividend will be paid on 4 November 2021 to all shareholders on the register at 8 October 2021.
Julian Morse
Chief Executive Officer
8 September 2021
Condensed income statement
For the six months ended 30 June 2021
Unaudited
Unaudited
Audited
Six months ended
Six months ended
Year ended
30 June
30 June
31 December
2021
2020
2020
£ 000's
£ 000's
£ 000's
Continuing operations
Revenue
18,221
13,266
31,654
Other operating income/(expense)
(45)
(361)
259
Administrative expenses
(16,409)
(12,089)
(29,514)
Operating profit
1,767
816
2,399
Investment income - interest income
7
23
30
Finance costs - interest on lease liability
(88)
(86)
(176)
Profit before tax from continuing operations
1,686
753
2,253
Tax
(183)
(163)
(449)
Profit after tax
1,503
590
1,804
Attributable to:
Equity holders of Cenkos Securities plc
1,503
590
1,804
Restated*
Basic earnings per share
3.1p
1.2p
3.7p
Diluted earnings per share
2.7p
1.1p
3.3p
* Prior year comparatives have been restated to conform with IAS 33 such that there is no longer any adjustment for dividends on shares held in SIP & DBS in arriving at Earnings for the purpose of basic earnings per share.
Condensed statement of comprehensive income
For the six months ended 30 June 2021
Unaudited
Unaudited
Audited
Six months ended
Six months ended
Year ended
30 June
30 June
31 December
2021
2020
2020
£ 000's
£ 000's
£ 000's
Profit
1,503
590
1,804
Amounts that will not be recycled to income statement in future periods
Loss on FVOCI financial asset
-
(36)
(35)
Tax on FVOCI financial asset
-
6
6
Other comprehensive losses
-
(30)
(29)
Total comprehensive income
1,503
560
1,775
Attributable to:
Equity holders of Cenkos Securities plc
1,503
560
1,775
Condensed statement of financial position
As at 30 June 2021
Unaudited
Unaudited
Audited
30 June
30 June
31 December
2021
2020
2020
£ 000's
£ 000's
£ 000's
Non-current assets
Property, plant and equipment
320
434
382
Right-of-use assets
3,817
4,299
4,059
Intangible asset
16
50
33
Deferred tax asset
617
387
727
Investments in subsidiary undertakings
1
1
1
4,771
5,171
5,202
Current assets
Trade and other receivables
15,821
11,737
12,993
FVOCI financial assets
-
-
-
Other current financial assets
7,126
4,163
5,312
Cash and cash equivalents
23,982
22,352
32,735
46,929
38,252
51,040
Total assets
51,700
43,423
56,242
Current liabilities
Trade and other payables
(18,913)
(12,818)
(24,520)
Other current financial liabilities
(2,678)
(681)
(1,011)
(21,591)
(13,499)
(25,531)
Net current assets
25,338
24,753
25,509
Non-current liabilities
Trade and other payables
(4,707)
(5,337)
(5,086)
Total liabilities
(26,298)
(18,836)
(30,617)
Net assets
25,402
24,587
25,625
Equity
Share capital
567
567
567
Share premium
3,331
3,331
3,331
Capital redemption reserve
195
195
195
Own shares
(6,796)
(5,579)
(6,607)
FVOCI reserve
(170)
(171)
(170)
Retained earnings
28,275
26,244
28,309
Total equity
25,402
24,587
25,625
Condensed cash flow statement
For the six months ended 30 June 2021
Unaudited
Unaudited
Audited
Six months ended
Six months ended
Year ended
30 June
30 June
31 December
2021
2020
2020
£ 000's
£ 000's
£ 000's
Profit
1,503
590
1,804
Adjustments for:
Investment income - interest income
(7)
(22)
(30)
Finance costs - interest on lease liability
88
86
176
Tax expense
183
163
449
Depreciation of property, plant and equipment, ROU assets and intangible asset
329
348
691
Shares and options received in lieu of fees
(163)
(120)
(11)
Share-based payment expense
1,035
945
2,395
Operating cash inflow before movements in working capital
2,968
1,990
5,474
(Increase) / decrease in net trading investments and FVOCI financial assets
16
3,795
2,867
(Increase) / decrease in trade and other receivables
(2,823)
1,756
468
(Decrease) / increase in trade and other payables
(5,295)
(2,596)
8,301
Net cash (outflow) / inflow from operating activities before interest and tax paid
(5,134)
4,945
17,110
Tax paid
(485)
-
(99)
Net cash (outflow) / inflow from operating activities
(5,619)
4,945
17,011
Investing activities
Interest received
-
26
24
Purchase of property, plant and equipment
(9)
(7)
(41)
Net cash outflow from investing activities
(9)
19
(17)
Financing activities
Landlord incentive received as part of lease arrangement
-
500
500
Rent paid under lease arrangement
(378)
(22)
(117)
Dividends paid
(1,280)
(515)
(1,027)
Proceeds from sale of own shares to employees on dividend reinvestment
14
-
12
Acquisition of own shares
(1,481)
(908)
(1,960)
Net cash used in financing activities
(3,125)
(945)
(2,592)
Net (decrease) / increase in cash and cash equivalents
(8,753)
4,019
14,402
Cash and cash equivalents at beginning of period
32,735
18,333
18,333
Cash and cash equivalents at end of period
23,982
22,352
32,735
Condensed statement of changes in equity
For the six months ended 30 June 2021
Equity attributable to equity holders
Share capital
Share premium
Capital redemption reserve
Own shares
FVOCI reserve
Retained earnings
Total
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
Balance at 1 January 2020
567
3,331
195
(5,436)
(141)
26,142
24,658
Profit
-
-
-
-
-
590
590
Loss on FVOCI financial asset net of tax
-
-
-
-
(30)
-
(30)
Total comprehensive income
-
-
-
-
(30)
590
560
Transfer of shares from share plans to employees
-
-
-
765
-
(765)
-
Acquisition of own shares
-
-
-
(908)
-
-
(908)
Credit to equity for equity-settled share-based payments
-
-
-
-
-
792
792
Dividends paid
-
-
-
-
-
(515)
(515)
Balance at 30 June 2020
567
3,331
195
(5,579)
(171)
26,244
24,587
Profit
-
-
-
-
-
1,214
1,214
Loss on FVOCI financial assets net of tax
-
-
-
-
1
-
1
Total comprehensive income
-
-
-
-
1
1,214
1,215
Issue of shares to employees on dividend reinvestment
-
-
-
13
-
-
13
Transfer of shares from share plans to employees
-
-
-
11
-
(11)
-
Acquisition of own shares
-
-
-
(1,052)
-
-
(1,052)
Credit to equity for equity-settled share-based payments
-
-
-
-
-
1,374
1,374
Dividends paid
-
-
-
-
-
(512)
(512)
Balance at 31 December 2020
567
3,331
195
(6,607)
(170)
28,309
25,625
Share capital
Share premium
Capital redemption reserve
Own shares
FVOCI reserve
Retained earnings
Total
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
Balance at 1 January 2021
567
3,331
195
(6,607)
(170)
28,309
25,625
Profit
-
-
-
-
-
1,503
1,503
Total comprehensive income
-
-
-
-
-
1,503
1,503
Issue of shares to employees on dividend reinvestment
-
-
-
8
-
6
14
Transfer of shares from share plans to employees
-
-
-
1,284
-
(1,284)
-
Acquisition of own shares
-
-
-
(1,481)
-
-
(1,481)
Credit to equity for equity-settled share-based payments
-
-
-
-
-
985
985
Deferred tax on share-based payments
-
-
-
-
-
36
36
Dividends paid
-
-
-
-
-
(1,280)
(1,280)
Balance at 30 June 2021
567
3,331
195
(6,796)
(170)
28,275
25,402
Notes to the financial statements
1. Accounting policies
General information
The interim condensed financial statements of Cenkos Securities plc (the "Company" or "Cenkos") for the six months ended 30 June 2021 are unaudited and were approved by the Board of Directors for issue on 8 September 2021.
The Company is incorporated in England under the Companies Act 2006 (company registration No. 05210733) and its shares are publicly traded. The Company's principal activity is as an institutional stockbroker to UK small and mid- cap companies and investment funds. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates.
The preparation of financial statements in conformity with UK-adopted International Accounting Standards requires the use of 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 of estimates.
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions considered to be the most important to the portrayal of the Company's financial condition are those relating to equity-settled share-based payments, valuation of derivative financial assets, provisions and revenue recognition. These critical accounting policies and judgements are described on page 68 of the Cenkos Securities plc's 2020 Annual Report and Accounts. In addition to this, to the extent that derivative financial assets are traded, reference is made to recent bargains in estimating the fair value of these financial assets. The Directors consider that this reflects fair consideration for the services provided.
These financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.
Where appropriate prior year figures have been restated to conform to the current year presentation.
Basis of accounting
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. Cenkos Securities PLC transitioned to UK-adopted International Accounting Standards in its Financial Statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.
The interim condensed financial statements for the six months ended 30 June 2021 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2020.
The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2020 apart from in relation to derivative financial assets, where to the extent that they are traded, reference is made to recent bargains in estimating the fair value of these financial assets.
The financial information contained in these interim condensed financial statements does not constitute the Company's statutory accounts within the meaning of section 434 of the Companies Act 2006. The comparative information contained in this report for the year ended 31 December 2020 does not constitute the statutory accounts for that financial period. Those accounts have been reported on by the Company's auditors, BDO LLP and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Going Concern
The Group's business activities, together with the factors likely to affect its future development and performance, its principal risks and uncertainties, the financial position of the Group, its cash flows and liquidity position are set out in the Strategic Report in the Group's Annual Report for the year ended 31 December 2020.
In light of internal forecasts and the current pipeline of transactions, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the Directors continue to adopt a going concern basis in preparing the interim financial statements.
The Coronavirus ('COVID-19') continues to have a major impact worldwide. Many countries still have measures in place restricting travel, business operations and peoples' activities to contain the spread of the virus. In the UK, restrictions have been removed largely due to the success of the vaccination program resulting in a fall in the number of new cases and hospitalisations. This is being closely monitored as is the emergence of new variants and their resistance to the vaccines. Cenkos offices are open and fully operational, although should restrictions be re-imposed, the business continuity plan will once again be enacted.
In its 6th assessment report released in August 2021, the Intergovernmental Panel on Climate Change ('IPCC') highlights the catastrophic impact human activity is having on global warming and its links to recent extreme worldwide weather patterns. This report is timed to focus the minds of the governments, across 195 countries, ahead of the UN Climate change conference (COP26) in October this year and encourage multilateral agreement to significantly reduce greenhouse gas emissions. This potentially will have a wide-ranging impact on the conduct of business and our daily lives.
Cenkos has performed well in the first six months of the year and since the period end, has completed a number of equity fundraisings for our clients, including two IPOs. This could suggest the current favourable market conditions are set to continue. Alternatively, although our current pipeline is encouraging and we continue to win new clients, we recognize that our performance is reliant on the success of Government efforts to stimulate the economy; any commitments made at COP26 resulting in opportunities for Growth companies rather than having a negative impact on the economy; and the continued success of the vaccination program in combatting COVID-19 and any new variants, meaning further measures to control the spread of the virus such as lockdowns are not required.
Whilst it is not possible to quantify the overall impact of the events, as described above, if it were to lead to a period of inactivity this would most likely lead to a reduction in fees generated from placing and corporate finance and a decline in fair values of listed equities, options and warrants. Management continues to monitor the impact of the COVID-19 pandemic and Climate Change on the Company and the financial markets.
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. 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 including 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 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:
Six months ended
Six months ended
Year ended
30 June
30 June
31 December
2021
2020
2020
£ 000's
£ 000's
£ 000's
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2020 of 2.5p (2019: 1.0p) per share
1,280
515
515
Interim dividend for the period to 30 June 2020 of 1.0p (2019: 2.0p) per share
-
-
512
1,280
515
1,027
The proposed interim dividend for 30 June 2021 of 1.25p (30 June 2020: 1.0p) per share was approved by the Board on 8 September 2021 and has not been included as a liability as at 30 June 2021. The dividend will be payable on 4 November 2021 to all shareholders on the register at 8 October 2021.
3. Events after the reporting period
There were no material events to report on that occurred between 30 June 2021 and the date at which the Directors signed the Annual Report.
4. Market abuse regulation (MAR) disclosure
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.
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