10 Mar 2023 07:00
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
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|
| 2022 | 2021 | ||
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| £ 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
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| 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
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|
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| 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 paid | (12,184) | 7,374 | ||||
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 share | 1,548 | 1,280 | ||||
Interim dividend for the period to 30 June 2022 of 1.00p (June 2021: 1.25p) per share | 500 | 642 | ||||
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.