REG - Jarvis Securities - Half-year Report
08/08/2024 07:00
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RNS Number : 6098Z Jarvis Securities plc 08 August 2024
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 2024
Chairman's statement
· £877,151 (12.0%) decrease in revenue versus six months to 30
June 2023
· £1,100.983 (28.9%) decrease in profit before tax versus six
months to 30 June 2023
· Cash under administration has decreased 15.5% versus 30 June 2023
· EPS decreased to 4.55p (2023: 6.52p)
As announced on 27 June 2024, Jarvis continues to work through the skilled
person recommendations and is creating an additional remediation plan to
address the points arising from the report. Phase 2, which requires the
Skilled Person to review the remediation work undertaken by JIML on
the matters raised in any of the three s.166 reports, has now commenced and
is expected to be completed by Q4 2024. As part of this work the Skilled
Person will also be required to provide a Reasonable Assurance Opinion to the
FCA (confirming the Skilled Person is confident as to the completeness of the
remediation) along with any final recommendations.
The voluntary agreed restrictions (the "VREQ") on JIML, as announced on
16th September 2022, remain in place. JIML will continue to work with the
Skilled Person and the FCA with the aim of having these restrictions lifted on
its impacted Model B clients as soon as possible.
The ramifications of the S166 review and costs of remediation, combined with
market transaction volumes that continue to remain subdued, are reflected in
the financial performance for the period. Fortunately, interest rates have
remained relatively constant during the past six months, which has been
beneficial for Jarvis enabling it to meet these costs and continue to produce
overall profit.
Current Trading
Due to subdued trading volumes; the increasing costs of the Skilled Person
review; the costs of the associated remediation work and the ongoing impact of
the VREQ on the Company's Model B clients, the directors anticipate that the
trading for the full year ending 31 December 2024 will be significantly below
market expectations.
Outlook
Although the regulatory review is ongoing, as a firm we are currently
committed to working through it and emerging in a more robust state and ready
to focus on the future of the firm and its plans for growth.
As always, I would like to thank our staff for their relentless hard work and
support over what continues to be a difficult period for the firm.
Enquiries:
Jarvis Securities plc 01892 510 515
Andrew Grant
Kieran Price
Zeus Capital Limited 0203 829 5000
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 2024 where measurement over a year is required.
KPI: 30/6/24 30/6/23 Target
Profit before tax margin 42% 52% 20%
Revenue per employee (annualised) £238,821 £261,618 to increase
Company No.: 5107012
Consolidated income statement for the period ended 30 June 2024
Six months ended Six months ended
Notes 30/6/24 (unaudited) 30/6/23
(unaudited)
£ £
Continuing operations
Revenue 6,448,156 7,325,307
Administrative expenses (3,345,214) (3,261,721)
Exceptional administrative expenses (382,399) (240,289)
Lease finance costs (7,211) (8,982)
Profit before income tax 2,713,332 3,814,315
Income tax charge 4 (680,078) (896,364)
Profit for the period 2,033,254 2,917,951
Attributable to equity holders of the parent 2,033,254 2,917,951
Earnings per share 5 P P
Basic 4.55 6.52
Consolidated statement of financial position at 30 June 2024
Notes 30/6/24 31/12/23 30/6/23
(unaudited) (audited) (unaudited)
£ £ £
Assets
Non-current assets
Property, plant and equipment 461,087 505,184 551,519
Intangible assets 32,652 45,331 58,118
Goodwill 342,872 342,872 342,872
836,612 893,387 952,509
Current assets
Trade and other receivables 2,803,881 2,011,608 2,529,667
Investments held for trading 18,371 11,966 9,638
Cash and cash equivalents 5,928,453 5,514,075 5,705,734
8,750,706 7,537,649 8,245,039
Total assets 9,587,318 8,431,036 9,197,548
Equity and liabilities
Capital and reserves
Share capital 7 111,828 111,828 111,828
Merger reserve 9,900 9,900 9,900
Capital redemption reserve 9,845 9,845 9,845
Retained earnings 5,492,491 4,912,384 4,855,550
Total equity 5,624,064 5,043,957 4,987,123
Non-current liabilities
Deferred income tax 54,266 54,266 60,044
Lease liabilities 185,114 223,515 260,972
239,380 277,781 321,016
Current liabilities
Trade and other payables 2,964,669 2,541,690 2,922,355
Lease liabilities 75,859 73,997 72,182
Income tax 4 683,347 493,611 894,872
3,723,874 3,109,298 3,889,409
Total liabilities 3,963,254 3,387,079 4,210,425
Total equity and liabilities 9,587,318 8,431,036 9,197,548
Consolidated statement of comprehensive income
Six months ended 30/6/24 Six months ended 30/6/23
(unaudited) (unaudited)
Profit for the period 2,033,254 2,917,951
Total comprehensive income for the period 2,033,254 2,917,951
Attributable to equity holders of the parent 2,033,254 2,917,951
Consolidated statement of changes in equity for the period
Unaudited for the 6 months ended 30 June 2024
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 31/12/22 111,828 - 9,900 9,845 4,845,114 - 4,976,687
Profit for the period - - - - 2,917,951 - 2,917,951
Dividends - - - - (2,907,515) - (2,907,515)
Balance at 30/6/23 111,828 - 9,900 9,845 4,855,550 - 4,987,123
Profit for the period - - - - 1,063,282 - 1,063,282
Dividends - - - - (1,006,447) - (1,006,447)
Balance at 31/12/23 111,828 - 9,900 9,845 4,912,385 - 5,043,958
Profit for the period - - - - 2,033,254 - 2,033,254
Dividends - - - - (1,453,148) - (1,453,148)
Balance at 30/6/24 111,828 - 9,900 9,845 5,492,491 - 5,624,064
Consolidated statement of cashflows for the period ended 30 June 2024
Six months ended 30/6/24 Six months ended 30/6/23
(unaudited) (unaudited)
£ £
Cash flow from operating activities
Profit before tax 2,713,332 3,814,315
Finance Cost 7,211 8,982
Depreciation charges 44,096 46,525
Amortisation charges 12,679 12,774
2,777,318 3,882,596
(Increase)/ decrease in receivables (792,273) 859,259
(Decrease) / increase in payables 430,190 192,008
(Increase) / decrease in investments held for trading (6,405) (869)
Cash generated from operations 2,408,830 4,932,994
Income tax (paid) (490,343) (545,000)
Net cash from operating activities 1,918,487 4,387,994
Cash flows from investing activities
Purchase of intangible fixed assets - (750)
Net cash used in investing activities - (750)
Cash flows from financing activities
Repayment of lease liability (43,750) (43,750)
Dividends to equity shareholders (1,453,148) (2,907,515)
Interest paid (7,211) (8,982)
Net cash used in financing activities (1,504,109) (2,960,247)
Net increase / (decrease) in cash & cash equivalents 414,378 1,426,997
Cash and cash equivalents at 1 January 5,514,075 4,278,737
Cash and cash equivalents at 30 June 5,928,453 5,705,734
Of which:
Balance at bank and in hand 5,493,875 5,912,069
Cash held for settlement of market 434,578 (206,335)
transactions
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 2023 accounts was
unqualified and did not contain a statement under Section 498 (2) or (3) of
the Companies Act 2006. The directors have a reasonable expectation that the
group has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern basis of
accounting in preparing these interim financial statements.
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 meet our risk management parameters. 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 2024.
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
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
temporary 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) Investments
Investments held for trading
Under IFRS investments held for trading are recognised as financial assets
measured at fair value through profit and loss.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less provision for any
impairment in value.
(j) 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.
(k) Cash and cash equivalents
Cash and cash equivalents comprise:
Balance at bank and in hand - cash in 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.
Cash held for settlement of market transactions - this balance is cash generated through settlement activity, and can either be a surplus or a deficit. A surplus arises when settlement liabilities exceed settlement receivables. This surplus is temporary and is accounted for separately from the balance at bank and in hand as it is short term and will be required to meet settlement liabilities as they fall due. A deficit arises when settlement receivables exceed settlement liabilities. In this instance Jarvis will place its own funds in the client account to ensure CASS obligations are met. This deficit is also temporary and will reverse once settlement receivables are settled.
(l) 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.
(m) Dividend distribution
Dividend distribution to the company's shareholders is recognised as a
liability in the group's financial statements in the period in which interim
dividends are notified to shareholders and final dividends are approved by the
company's shareholders.
(n) IFRS 9 'Financial Instruments'
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.
(o) IFRS 16 'Leases'
The lease liability is 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.
The carrying amount of right-of-use assets recognised was £384,985 at the
lease start date of 27 September 2022. A finance charge of 5% APR is used to
calculate the finance cost of the lease.
3. Group Revenue and Segmental information
The revenue of the group during the period was wholly in the United Kingdom.
6m ended 30 June 2024 6m ended 30 June 2023
£ £
Gross interest earned from treasury deposits, cash at bank and overdrawn 4,294,320 4,000,773
client accounts
Commissions 1,168,559 1,574,869
Fees 985,277 1,749,665
6,448,156 7,325,307
All of the reported revenue and operational results for the period derive from
the group's external customers and continuing financial services operations.
All non-current assets are held within the United Kingdom. The group is not
reliant on any one customer and no customer accounts for more than 10% of the
group's external revenues.
As noted in 2 (g) the directors regard the operations of the group as a single
reporting segment on the basis there is only a single organisational unit that
is reported to key management personnel for the purpose of performance
assessment and future resource allocation.
4. Income tax charge
Interim period income tax is accrued based on an estimated average annual
effective income tax rate of 25% (2023: 23.5%).
5. Earnings per share
Six months ended 30/6/24 Six months ended 30/6/23
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
2,033,254 44,731,000 4.55 2,917,951 44,731,000 6.52
6. Dividends
During the interim period dividends totalling 3.25p (2023: 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.
Going concern
The financial position of the group, its cash flows, liquidity position and
borrowing facilities are described within these interim financial statements.
The group has sufficient financial resources, long term contracts with all its
significant suppliers and a diversified income stream. The group does not have
any current borrowing or any anticipated borrowing requirements. As a
consequence, the directors believe that the group is well placed to manage its
business risks successfully.
The directors have a reasonable expectation that the group has adequate
resources to continue in operational existence for the foreseeable future.
Thus they continue to adopt the going concern basis of accounting in preparing
the annual financial statements.
10. Financial Instruments
The group's principal financial instruments comprise cash and various items
such as trade receivables, trade payables etc. that arise directly from
operations. The main purpose of these financial instruments is the funding of
the group's trading activities. Cash and cash equivalents and trade and other
receivables are categorised as held at amortised cost, and trade and other
payables are classified as held at amortised cost. Other than investments held
for trading all financial assets and liabilities are held at amortised cost
and their carrying value approximates to their fair value.
The main financial asset of the group is cash and cash equivalents which is
denominated in Sterling. The group operates a low risk investment policy and
surplus funds are placed on deposit with at least A rated banks or equivalent
at floating interest rates.
The group also holds investments in equities, treasury shares and property.
11. Immediate and ultimate parent undertaking
There is no immediate or ultimate controlling party.
12. Related party transactions
The Group 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. The lease was
assigned by Jarvis Securities Plc to Jarvis Investment Management Limited on
23 May 2024, to better reflect the associated costs.
13. Capital commitments
At 30 June 2024 the company had no material capital commitments.
14. Exceptional administrative costs
Exceptional administrative costs represent external third party professional
advice and consultancy relating to the ongoing remediation and skilled persons
work within the firm's subsidiary Jarvis Investment Management Limited.
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