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Jarvis Securities Plc

Jarvis Securities - Half-year Report

RNS Number : 1318T
Jarvis Securities plc
16 July 2020
 

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 2020

 

Highlights

·    £1,606,681 (30.8%) increase in revenue versus six months to 30 June 2019

 

·    £1,202,967 (50.3%) increase in profit before tax versus six months to 30 June 2019

 

·    Cash under administration has increased 23.0% versus 30 June 2019

 

Enquiries:

Jarvis Securities plc                                                            01892 510 515

Andrew Grant

Jolyon Head

 

WH Ireland Limited                                                            0113 394 6600

Katy Mitchell

Darshan Patel

 

Chairman's Statement

I wrote in my statement a year ago that I thought lower trading activity due to lack of clarity over the UK's Brexit position would not stay at the lower end of the spectrum indefinitely, and once volumes returned to the market we would be well positioned to capture financial benefits. Admittedly, the catalyst for increased volume may not have been solely Brexit related, but the second part of the comment has proven to be accurate.

I believed that the uncertainty between the vote to leave the EU in 2016 and the election at the end of 2019 created an artificially depressed trading environment. So, I am pleased to say that we have now seen a significant increase in trade volumes for which the corresponding increase in revenue has outstripped the increase in the marginal operating costs. As a consequence, the Directors believe the Company is trading ahead of current market expectations. I have long maintained that the business model would translate increased trade volumes into improved profits, and the conditions over this period has enabled us to demonstrate this and produce the results which are now published here.  We have been able to offset the effects of the depressed market conditions through organic growth and realigning the business model. We are now able to see the results which can be produced in a favourable market but still with no contribution from an increase in interest rates.

I am also pleased that we were able to cope operationally with the challenges COVID-19 presented. From this we anticipate further opportunities to grow the business and utilise working practices that had not previously been considered.

As always I would like to thank the staff of Jarvis but on this occasion I would like to extend a special thank you on behalf of all stakeholders to those individuals that have put in the hours and effort that has enabled Jarvis to meet the challenges of Covid 19.  It is further worthy of mention that we have not been put in a position of having to consider the furlough process or any Covid related financial schemes being offered to businesses.

As has historically been the case we will continue to maintain our general policy of returning profits to shareholders where the cash held is surplus to regulatory and operating requirements.

 

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 2020 where measurement over a year is required.

KPI:

30/6/20

30/6/19

Target

Profit before tax margin

53%

46%

20%

Revenue per employee (annualised)

£227,574

£172,580

to increase

 

Consolidated income statement for the period ended 30 June 2020

 

 

 

Six months ended

Six months ended

 

Notes

 

                  30/6/20

30/6/19

 

 

 

£

£

Continuing operations

 

 

 

 

Revenue

 

 

6,827,225

5,220,544

Administrative expenses

Lease Finance Costs

 

 

(3,227,094)

(3,301)

(2,822,187)

(4,495)

Profit before income tax

 

 

3,596,830

2,393,862

Income tax charge

4

 

(683,398)

(455,067)

Profit for the period

 

 

2,913,432

1,938,795

 

 

 

 

 

Attributable to equity holders of the parent

 

 

2,913,432

1,938,795

 

 

 

 

 

Earnings per share

5

 

P

P

Basic

 

 

26.66

17.75

 

Consolidated statement of financial position at 30 June 2020

 

Notes

30/6/20

 

31/12/19

      30/6/19

 

 

£

 

£

£

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

 

422,690

 

461,471

507,742

Intangible assets

 

88,330

 

105,428

93,410

Goodwill

 

342,872

 

342,872

342,872

 

 

853,892

 

909,771

944,024

Current assets

 

 

 

 

 

Trade and other receivables

 

9,014,246

 

3,373,427

4,559,959

Investments held for trading

 

3,419

 

4,600

1,696

Cash and cash equivalents

 

3,241,186

 

5,290,961

5,243,260

 

 

12,258,851

 

8,668,988

9,804,915

Total assets

 

13,112,743

 

9,578,759

10,748,939

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

Capital and reserves

 

 

 

 

 

Share capital

7

111,828

 

111,828

111,828

Share premium

 

1,576,669

 

1,576,669

1,576,669

Merger reserve

 

9,900

 

9,900

9,900

Capital redemption reserve

 

9,845

 

9,845

9,845

Retained earnings

Own shares held in treasury

 

5,941,377

(944,054)

 

4,949,467

(981,136)

6,090,824

(1,086,589)

Total equity

 

6,705,565

 

5,676,573

6,712,477

Non-current liabilities

Deferred income tax

Lease Liabilities

 

 

38,664

106,956

 

 

38,664

148,633

 

37,451

189,691

 

Current liabilities

 

145,620

 

187,297

227,142

Trade and other payables

 

5,506,103

 

3,184,059

3,272,363

Lease Liabilities

 

82,734

 

81,507

80,298

Income tax

4

672,721

 

449,323

456,659

 

 

6,261,558

 

3,714,889

3,809,320

Total liabilities

 

6,407,178

 

3,902,186

4,036,462

Total equity and liabilities

 

13,112,743

 

9,578,759

10,748,939

             

 

Consolidated statement of comprehensive income

 

 

 

 

 

Six months ended

 30/6/20

Six months ended

  30/6/19

Profit for the period

 

 

 

2,913,432

1,938,795

Total comprehensive income for the period

 

 

2,913,432

1,938,795

Attributable to equity holders of the parent

 

 

 

2,913,432

1,938,795

 

 

Consolidated statement of changes in equity for the period

 

Share capital

Share premium

Merger reserve

Capital redemption reserve

Share option reserve

Retained earnings

Own shares held in treasury

Attributable to equity holders of the company

 

£

£

£

£

£

£

£

£

Balance at 31/12/18

Purchase of own shares held in treasury

IFRS 16 Modified Retrospective Lease Adjustment

111,828

-

 

-

 

1,576,669

-

 

-

 

 

9,900

-

 

-

 

 

9,845

-

 

-

 

 

-

-

 

-

 

 

5,523,363

-

 

(5,600)

 

 

(859,587)

(227,002)

 

-

 

 

6,372,018

(227,002)

 

(5,600)

 

 

Profit for the period

-

-

-

-

-

1,938,795

-

1,938,795

Dividends

-

-

-

-

-

(1,365,734)

-

(1,365,734)

Balance at 30/6/19

111,828

1,576,669

9,900

9,845

-

6,090,824

(1,086,589)

6,712,477

Sale of own shares held in treasury

-

-

-

-

-

23,254

105,453

128,707

Profit for the period

-

-

-

-

-

1,971,935

-

1,971,935

Dividends

-

-

-

-

-

(3,136,546)

-

(3,136,546)

Balance at 31/12/19

111,828

1,576,669

9,900

9,845

-

4,949,467

(981,136)

5,676,573

Sale of own shares held in treasury

-

-

-

-

-

17,445

37,082

54,527

Profit for the period

Dividends

-

-

-

-

-

-

-

-

-

-

2,913,432

(1,938,967)

-

-

2,913,432

(1,938,967)

Balance at 30/6/20

111,828

1,576,669

9,900

9,845

-

5,941,377

(944,054)

6,705,565

                     

 

Consolidated statement of cashflows for the period ended 30 June 2020

 

 

 

 

Six months ended

30/6/20

Six months ended 30/6/19

 

 

 

 

£

£

Cash flow from operating activities

 

 

 

 

 

Profit before tax

 

 

 

3,596,829

 2,393,862

Finance Cost

Depreciation charges

 

 

3,301

46,506

4,495

45,929

Amortisation charges

 

 

24,473

39,454

 

 

 

 

3,671,109

2,483,740

 

 

 

 

 

 

(Increase)/ decrease in receivables

 

 

 

(5,640,819)

725,041

(Decrease) / increase in payables

 

 

 

2,325,344

(463,056)

(Increase) / decrease in investments held for trading

 

 

 

1,182

260

Cash generated from operations

 

 

 

356,816

2,745,985

 

 

 

 

 

 

Interest paid

Income tax (paid)

 

 

 

(3,301)

(460,000)

(4,495)

(446,250)

Net cash from operating activities

 

 

 

(106,485)

2,295,240

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of tangible assets

 

 

 

(7,725)

(31,567)

Purchase of intangible fixed assets

 

 

 

(7,375)

(39,400)

 

 

 

 

(15,100)

(70,967)

               

 

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 IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (July 2020).

These consolidated interim financial statements have been prepared in accordance with the accounting policies set out below, which have been consistently applied to all the periods presented. These accounting policies comply with applicable IFRS standards and IFRIC interpretations issued and effective at the time of preparing these statements.

The preparation of these interim financial statements in accordance with IFRS 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 2019 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 2020.

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) Operating leases and finance leases

Costs in respect of operating leases are charged on a straight line basis over the lease term in arriving at the profit before income tax. Where the company has entered into finance leases, the obligations to the lessor are shown as part of borrowings and the rights in the corresponding assets are treated in the same way as owned fixed assets. Leases are regarded as finance leases where their terms transfer to the lessee substantially all the benefits and burdens of ownership other than right to legal title.

(k) 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.

(l) 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

(m) 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.

(n) 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.

(o) 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.  

(p) 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.

(q) 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

(r) 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 30/6/20

Six months ended 30/6/19

 

Earnings

Weighted average no. of shares

Per

share amount

Earnings

Weighted average no. of shares

Per share amount

 

£

£

p

£

£

p

 

 

 

 

 

 

 

Earnings attributable to ordinary shareholders

 

2,913,432

 

10,929,758

 

26.66

 

1,938,795

 

10,921,228

 

17.75

               

 

6. Dividends

During the interim period dividends totalling 17.75p (2019: 12.5p) per ordinary share were declared and paid.

 

7. Share capital

During the period 9,600 shares were sold from treasury. At the period end 244,400 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.

 

11. Capital commitments

At 30 June 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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