REG - Jarvis Securities - Half-year report
14/07/2022 07:00
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RNS Number : 4113S Jarvis Securities plc 14 July 2022
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
Jarvis Securities
("Jarvis", the "Company" or the "Group")
Interim Results for the Six Months Ended 30 June 2022
Chairman's statement
· £1,864,061 (22.9%) decrease in revenue versus six months to 30 June
2021
· £1,492,774 (32.5%) decrease in profit before tax versus six months
to 30 June 2021
· Cash under administration has increased 1.8% versus 30 June 2021
· EPS decreased to 5.62p (2021: 8.45p)
During the period under review share trading volumes and the IPO market have
decreased significantly compared to last year which had record levels being
recorded, resulting in lower commission and fee income. The period began with
inflationary pressures spooking the market, then the geopolitical uncertainty
caused by the ongoing invasion of Ukraine by Russia dashed any hopes of a
speedy market recovery. This has affected all the stock broking industry, and
the wider economy as a whole where most segments are experiencing a general
slowdown. Market sentiment, which drives volumes, is beyond our control so
we will inevitably experience periods of lower activity but we remain well
placed to respond to the upturn when it presents itself.
Increases in the costs charged to us by suppliers have created further uplift
in expenses, particularly in compliance where the regulatory standards
required of financial service companies are becoming more complex. The silver
lining for Jarvis is that the base rate increases by the Bank of England in
its attempt to temper the inflation rate have been swifter than forecast and
we are now seeing the increasing benefit of this in our treasury interest
income. Maturing deposits are all being replaced at higher rates and the
impact of this should be more apparent in the second half of the year.
As always, I would like to thank all staff for their continued hard work.
Enquiries:
Jarvis Securities plc 01892 510 515
Andrew Grant
Jolyon Head
WH Ireland Limited 0113 394 6600
Katy Mitchell
Darshan Patel
Key performance indicators (KPI)
The key performance indicators (KPIs) are designed to give stakeholders in the
business a more rounded view of the Group's performance. Further details on
the KPIs and their measurement can be found in the last Annual Report. A
selection of KPIs and the Group's results to the interim period for these are
detailed below. These results have been annualised from the position at 30
June 2022 where measurement over a year is required.
KPI: 30/6/22 30/6/21 Target
Profit before tax margin 50% 57% 20%
Revenue per employee (annualised) £201,946 £257,917 to increase
Consolidated income statement for the period ended 30 June 2022
Six months ended Six months ended
Notes 30/6/22 (unaudited) 30/6/21
(unaudited)
£ £
Continuing operations
Revenue 6,260,330 8,124,391
Administrative expenses (3,153,669) (3,523,626)
Lease Finance Costs (809) (2,074)
Profit before income tax 3,105,852 4,598,691
Income tax charge 4 (590,112) (873,751)
Profit for the period 2,515,740 3,724,940
Attributable to equity holders of the parent 2,515,740 3,724,940
Earnings per share 5 P P
Basic 5.62 8.45
Consolidated statement of financial position at 30 June 2022
Notes 30/6/22 31/12/21 30/6/21
(unaudited) (audited) (unaudited)
£ £ £
Assets
Non-current assets
Property, plant and equipment 260,864 295,767 342,483
Intangible assets 70,790 93,606 104,171
Goodwill 342,872 342,872 342,872
674,526 732,245 789,526
Current assets
Trade and other receivables 4,074,211 6,361,707 7,226,862
Investments held for trading 1,354 1,958 6,199
Cash and cash equivalents 4,171,438 3,780,594 7,082,060
8,247,003 10,144,259 14,315,121
Total assets 8,921,529 10,876,504 15,104,647
Equity and liabilities
Capital and reserves
Share capital 7 111,828 111,828 111,828
Share premium - - 3,068,012
Merger reserve 9,900 9,900 9,900
Capital redemption reserve 9,845 9,845 9,845
Retained earnings 4,846,336 5,014,456 6,423,170
Total equity 4,977,909 5,146,029 9,622,755
Non-current liabilities
Deferred income tax 61,928 61,928 45,617
Lease liabilities - - 21,073
61,928 61,928 66,690
Current liabilities
Trade and other payables 3,268,547 4,900,444 4,453,775
Lease liabilities 21,712 64,653 85,884
Income tax 4 591,433 703,450 875,543
3,881,692 5,668,547 5,415,202
Total liabilities 3,943,620 5,730,475 5,481,892
Total equity and liabilities 8,921,529 10,876,504 15,104,647
Consolidated statement of comprehensive income
Six months ended Six months ended
30/6/21 30/6/20
(unaudited) (unaudited)
Profit for the period 2,515,740 3,724,940
Total comprehensive income for the period 2,515,740 3,724,940
Attributable to equity holders of the parent 2,515,740 3,724,940
Consolidated statement of changes in equity for the period
Unaudited for the 6 months ended 30 June 2022
Share capital Share premium Merger reserve Capital redemption reserve Retained earnings Own shares held in treasury Attributable to equity holders of the company
£ £ £ £ £ £ £
Balance at 31/12/20 111,828 1,655,640 9,900 9,845 5,672,848 (886,113) 6,573,948
Sale of own shares held in treasury - 1,412,372 - - (95,834) 886,113 2,202,651
Profit for the period - - - - 3,724,940 - 3,724,940
Dividends - - - - (2,878,784) - (2,878,784)
Balance at 30/6/21 111,828 3,068,012 9,900 9,845 6,423,170 - 9,622,755
Cancellation of share premium - (3,068,012) - - 3,068,012 - -
Profit for the period - - - - 2,455,911 - 2,455,911
Dividends - - - - (6,932,637) - (6,932,637)
Balance at 31/12/21 111,828 - 9,900 9,845 5,014,456 - 5,146,029
Profit for the period - - - - 2,515,740 - 2,515,740
Dividends - - - - (2,683,860) - (2,683,860)
Balance at 30/6/22 111,828 - 9,900 9,845 4,846,336 - 4,977,909
Consolidated statement of cashflows for the period ended 30 June 2022
Six months ended Six months ended
30/6/22 30/6/21
(unaudited) (unaudited)
£ £
Cash flow from operating activities
Profit before tax 3,105,852 4,598,691
Finance Cost 809 2,074
Depreciation charges 47,486 47,715
Amortisation charges 23,464 17,524
3,177,611 4,666,004
(Increase)/ decrease in receivables 2,287,496 (303,706)
(Decrease) / increase in payables (1,631,087) 279,819
(Increase) / decrease in investments held for trading 604 (2,016)
Cash generated from operations 3,834,624 4,640,101
Interest paid (809) (2,074)
Income tax (paid) (702,129) (601,002)
Net cash from operating activities 3,131,686 4,037,025
Cash flows from investing activities
Purchase of tangible assets (12,584) (10,385)
Purchase of intangible fixed assets (648) (19,677)
(13,232) (30,062)
Cash flows from financing activities
Repayment of finance leases (43,750) (43,750)
Proceeds from sale of shares held in treasury - 2,202,651
Dividends to equity shareholders (2,683,860) (2,878,784)
Net cash used in financing activities (2,727,610) (719,883)
Net increase / (decrease) in cash & cash equivalents 390,844 3,287,080
Cash and cash equivalents at 1 January 3,780,594 3,794,980
Cash and cash equivalents at 30 June 4,171,438 7,082,060
Of which:
Balance at bank and in hand 5,421,630 9,531,993
Cash held for settlement of market transactions (1,250,192) (2,449,933)
Notes forming part of the interim financial statements
1. Basis of preparation
The interim consolidated financial statements have been prepared in accordance
with International Accounting Standard (IAS) 34, Interim Financial Reporting.
These interim financial statements have been prepared in accordance with those
UK Adopted International Accounting Standards.
The preparation of these interim financial statements in accordance with UK
Adopted International Accounting Standards in conformity with the requirements
of the Companies Act 2006 requires the use of certain accounting estimates. It
also requires management to exercise judgement in the process of applying the
Group's accounting policies. The areas involving a high degree of judgement or
complexity, or areas where the assumptions and estimates are significant to
the consolidated interim financial statements are disclosed in Note 9.
The financial information contained in this report, which has not been
audited, does not constitute statutory accounts as defined by Section 434 of
the Companies Act 2006. The auditors' report for the 2021 accounts was
unqualified and did not contain a statement under Section 498 (2) or (3) of
the Companies Act 2006.
2. Accounting policies
(a) IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 requires that the recognition of revenue is linked to the fulfilment
of identified performance obligations that are enshrined in the customer
contract.
Commission - the group charges commission on a transaction basis. Commission
rates are fixed according to account type. When a client instructs us to act
as an agent on their behalf (for the purchase or sale of securities) our
commission is recognised as income on a point in time basis when the
instruction is executed in the market. Our commission is deducted from the
cash given to us by the client in order to settle the transaction on the
client's behalf or from the proceeds of the sale in instance where a client
sells securities.
Management fees - these are charged quarterly or bi-annually depending on
account type. Fees are either fixed or are a percentage of the assets under
administration. Management fees income is recognised over time as they are
charged using a day count and most recent asset level basis as appropriate.
Interest income - this is accrued on a day count basis up until deposits
mature and the interest income is received. The deposits pay a fixed rate of
interest. In accordance with FCA requirements, deposits are only placed with
banks that have been approved by our compliance department. Interest income is
recognised over time as the deposits accrue interest on a daily basis.
(b) Basis of consolidation
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more
than half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date on which control ceases. The group financial
statements consolidate the financial statements of Jarvis Securities plc,
Jarvis Investment Management Limited, JIM Nominees Limited, Galleon Nominees
Limited and Dudley Road Nominees Limited made up to 30 June 2022.
The Group uses the purchase method of accounting for the acquisition of
subsidiaries. The cost of an acquisition is measured as the fair value of the
assets given, equity instruments issued and liabilities incurred or assumed at
the date of exchange. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the
extent of any minority interest. The cost of acquisition over the fair value
of the Group's share of identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the
Group's share of the net assets of the subsidiary acquired, the difference is
recognised in the income statement.
Intra-group sales and profits are eliminated on consolidation and all sales
and profit figures relate to external transactions only. No profit and loss
account is presented for Jarvis Securities plc as provided by S408 of the
Companies Act 2006.
(c) Property, plant and equipment
All property, plant and equipment is shown at cost less subsequent
depreciation and impairment. Cost includes expenditure that is directly
attributable to the acquisition of the items. Depreciation is provided on cost
in equal annual instalments over the lives of the assets at the following
rates:
Leasehold improvements
- 33% on cost, or over the lease period if less
than 3 years
Motor vehicles
- 15% on cost
Office equipment
- 20% on cost
Land & Buildings
- Buildings are depreciated at 2% on cost. Land is
not depreciated.
Right of use asset
- Straight line basis over the lease period
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. Gains and losses on disposals are
determined by comparing proceeds with carrying amount. These are included in
the income statement. Impairment reviews of property, plant and equipment are
undertaken if there are indications that the carrying values may not be
recoverable or that the recoverable amounts may be less than the asset's
carrying value.
(d) Intangible assets
Intangible assets are carried at cost less accumulated amortisation. If
acquired as part of a business combination the initial cost of the intangible
asset is the fair value at the acquisition date. Amortisation is charged to
administrative expenses within the income statement and provided on cost in
equal annual instalments over the lives of the assets at the following rates:
Databases
- 4% on cost
Customer relationships
- 7% on cost
Software developments -
20% on cost
Website
- 33% on cost
Impairment reviews of intangible assets are undertaken if there are
indications that the carrying values may not be recoverable or that the
recoverable amounts may be less than the asset's carrying value.
(e) Goodwill
Goodwill represents the excess of the fair value of the consideration given
over the aggregate fair values of the net identifiable assets of the acquired
trade and assets at the date of acquisition. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Any
negative goodwill arising is credited to the income statement in full
immediately.
(f) Deferred income tax
Deferred income tax is provided in full, using the liability method, on
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. The deferred income
tax is not accounted for if it arises from initial recognition of an asset or
liability in a transaction, other than a business combination, that at the
time of the transaction affects neither accounting or taxable profit or loss.
Deferred income tax is determined using tax rates that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when
the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred income tax assets are recognised to the extent that it is probable
that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax is provided on temporary differences arising on
investments in subsidiaries except where the timing of the reversal of the
timing difference is controlled by the Group and it is probable that the
temporary differences will not reverse in the foreseeable future.
(g) Segmental reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. The directors regard the operations of
the Group as a single segment.
(h) Pensions
The group operates a defined contribution pension scheme. Contributions
payable for the year are charged to the income statement.
(i) Trading balances
Trading balances incurred in the course of executing client transactions are
measured at initial recognition at fair value. In accordance with market
practice, certain balances with clients, Stock Exchange member firms and other
counterparties are included as trade receivables and payables. The net balance
is disclosed where there is a legal right of set off.
(j) Investments
Investments held for trading
Investments held for trading are stated at fair value. An investment is
classified in this category if acquired principally for the purpose of selling
in the short term. Assets in this category are classified as current.
Purchases and sales of investments are recognised on the trade-date - the date
on which the Group commits to purchase or sell the asset. Investments are
initially recognised at fair value. Investments are derecognised when the
rights to receive cash flows from the investments have expired or been
transferred and the Group has transferred substantially all the risks and
rewards of ownership. Realised and unrealised gains and losses arising from
changes in fair value of investments held for trading are included in the
income statement in the period in which they arise. Unrealised gains and
losses arising in changes in the fair value of available-for-sale investments
are recognised in equity. When investments classified as available-for-sale
are sold or impaired, the accumulated fair value adjustments are included in
the income statement as gains and losses from investment securities.
The fair value of quoted investments is based on current bid prices. If the
market for an investment is not active, the Group establishes fair value by
using valuation techniques. These include the use of recent arm's length
transactions, reference to other instruments that are substantially the same,
or discounted cash flow analysis refined to reflect the issuer's specific
circumstances.
The Group assesses at each balance sheet date whether there is objective
evidence that an investment is impaired. In the case of investments classified
as available-for-sale, a significant or prolonged decline in the fair value
below its cost is considered in determining whether the security is impaired.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less provision for any
impairment in value.
(k) Foreign exchange
The group offers settlement of trades in sterling as well as various foreign
currencies. The group does not hold any assets or liabilities other than in
sterling and converts client currency on matching terms to settlement of
trades realising any currency gain or loss immediately in the income
statement. Consequently the group has no foreign exchange risk.
(l) Share capital
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction from proceeds, net of income tax. Where the
company purchases its equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs (net
of income tax), is deducted from equity attributable to the company's equity
holders until the shares are cancelled, reissued or disposed of. Where such
shares are subsequently sold or reissued, any consideration received, net of
any directly incremental transaction costs and the related income tax effects,
is included in equity attributable to the company's equity holders.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value.
(n) Current income tax
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
periods, that are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate based on the taxable profit for the year.
(o) Dividend distribution
Dividend distributions to the Company's shareholders are recognised when
payment has been made to shareholders.
(p) Expected credit loss
The group currently calculates a "bad debt" provision on customer balances
based on 25% of overdrawn client accounts which are one month past due date
and are not specifically provided for. Under IFRS 9 this assessment is
required to be calculated based on a forward - looking expected credit loss
('ECL') model, for which a simplified approach has been applied. This method
uses historic customer data, alongside future economic conditions to calculate
expected loss on receivables.
(q) Right of use of assets
The right-of-use asset is initially measured at cost and subsequently at cost
less any accumulated depreciation and impairment losses, and adjusted for
certain premeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implied in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
The Group has applied judgement to determine the lease term for contracts with
options to renew or exit early.
3. Segmental information
All of the reported revenue and operational results for the period derive from
the Group's continuing financial services operations.
4. Income tax charge
Interim period income tax is accrued based on an estimated average annual
effective income tax rate of 19%.
5. Earnings per share
Six months ended 30/6/22 Six months ended 30/6/21
Earnings Weighted average no. of shares Per Earnings Weighted average no. of shares Per share amount
share amount
£ £ p £ £ p
Earnings attributable to ordinary shareholders
2,515,740 44,731,000 5.62 3,724,940 44,104,076 8.45
6. Dividends
During the interim period dividends totalling 6p (2021: 6.5p) per ordinary
share were declared and paid.
7. Share capital
The company has one class of ordinary shares of £0.0025 each. During the
period and as at the period end no shares are held in treasury.
8. Interim measurement
Costs that incur unevenly during the financial year are anticipated or
deferred in the interim report only if it would also be appropriate to
anticipate or defer such costs at the end of the financial year.
9. Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. These
estimates and judgements are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable
under the circumstances. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets within the next financial year relate to
goodwill, intangible assets and the expense of employee options.
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 2 (e). These calculations
require the use of estimates.
The Group considers at least annually whether there are indications that the
carrying values of intangible assets may not be recoverable, or that the
recoverable amounts may be less than the asset's carrying value, in which case
an impairment review is performed. These calculations require the use of
estimates.
10. Related party transactions
The company has a lease with Sion Properties Limited, a company controlled by
A J Grant by virtue of his majority shareholding, for the rental of 78 Mount
Ephraim, a self-contained office building. The lease is included in the right
of use assets and has an annual rental of £87,500, being the market rate on
an arm's length basis, and expires on 26 September 2027. There is an option to
terminate the lease on 26 September 2022 and therefore this is the discounted
period.
11. Capital commitments
At 30 June 2022 the company had no material capital commitments.
12. Assets impairment review
The Group considers at least annually whether there are indications that the
carrying values of intangible assets may not be recoverable, or that the
recoverable amounts may be less than the asset's carrying value, in which case
an impairment review is performed. These calculations require the use of
estimates. The Group also calculates the implied levels of variables used in
the calculations at which impairment would occur.
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