Contents. 1 Summary information and highlights. 2 Interim management report. 6 Condensed consolidated income statement

Transcription

1 Cenkos Securities plc Interim Report 2017

2 Contents 1 Summary information and highlights 2 Interim management report 6 Condensed consolidated income statement 7 Condensed consolidated statement of comprehensive income 8 Condensed consolidated statement of financial position 9 Condensed consolidated cash flow statement 10 Condensed consolidated statement of changes in equity 11 Notes to the condensed consolidated financial statements 25 Independent review report 26 Information for shareholders

3 Summary information Cenkos Securities plc (the Company or Cenkos ) together with its subsidiaries (the Group ) is an independent, specialist institutional securities group, focused on small and mid-cap companies and investment funds. The Group s principal activity is institutional stockbroking. 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. Financial highlights 30 June 30 June Revenue +91% 29.2m 15.3m Profit before tax +156% 4.2m 1.7m Cash 1% 19.8m 20.1m Basic earnings per share +406% 6.1p 1.2p Interim dividend per share declared +350% 4.5p 1.0p Commenting on the interim results, Chief Executive Officer Anthony Hotson noted: Revenue for the first half of 2017 increased by 91% to 29.2m (H1 2016: 15.3 million), with profits increasing by 156% to 4.2m (H1 2016: 1.7m). We are well placed to benefit from improvements in market conditions and have made a very good start to the second half of the year. There is institutional demand to fund high quality companies and ideas and since the period end we have been engaged in a number of significant fund raisings. Our current pipeline of transactions is encouraging. We have been profitable in every year since our formation in 2005 and have raised in excess of 17 billion of equity capital for our clients. For further information contact: Jim Durkin Chief Executive Officer Cenkos Securities plc Dr Azhic Basirov / David Jones / Ben Jeynes Nominated Adviser Smith & Williamson Corporate Finance Limited David Rydell / Duncan Mayall / James Newman Bell Pottinger 1

4 Interim management report Review of performance Overall performance I am pleased to report that we delivered 29.2 million of revenues and 4.2 million of profit before tax in the six months ending 30 June We continue to demonstrate the strength of our equity placing capabilities and raised a total of 982m in aggregate for our clients in H Indeed, we have now raised 17 billion of equity for clients mainly acting as sole broker over our 12 year history. Revenues Revenue for the period increased by 91% to 29.2 million (H1 2016: 15.3 million). In H we raised 982 million for our corporate clients (H1 2016: 529 million), including 386 million on the IPO of Eddie Stobart Logistics plc. H s results were helped by this larger IPO and by a general improvement in market conditions total funds raised by AIM companies rose by 4% to 2,016 million in H1 2017, when compared to H (source: LSE AIM factsheet June 2017). We remain ranked as one of the leading brokers in London for growth companies, as demonstrated by Adviser Rankings Limited s July 2017 AIM Adviser Rankings Guide where we were ranked number 2 Nominated Adviser by number of AIM clients. We were also ranked top Nominated Adviser for Oil and Gas and Industrials (by client market capitalisation), number 2 Nominated Advisor for Consumer Goods and Consumer Services (by number of clients) and number 3 Nominated Adviser for Technology companies (by number of AIM clients). The size of our corporate client base (where the Company is retained as Nominated Adviser / broker and / or financial adviser) rose slightly to 120 at 30 June 2017 (H1 2016: 119). This includes 33 main market listed investment trust and 9 main market listed corporate clients. Our corporate broking, research and commission revenue fell by 15% to 4.4 million (H1 2016: 5.1 million) due to a continued squeeze on commission rates, while our market making profits increased by 555% to 3.7 million (H1 2016: 0.6 million) due to gains made on shares received in lieu of fees and improvements in market conditions. We make markets in the securities of all the companies where we have a broking relationship to support the other services we provide to our clients. We provide liquidity to the market and facilitate institutional business in both small and large cap equities. Our trading desks now make markets in the shares of 308 (H1 2016: 339) companies and investment funds. Importantly, we maintained a top three market share in 79% of our corporate clients shares and the top market share in 50%. Costs Costs rose 82% to 25.0 million (H1 2016: 13.7 million) in the period, due, mainly, to higher performance-related pay on the back of higher levels of net revenue. Our costs in 2016 reflected the extensive remediation programme the Company undertook in order to enhance and improve our systems and controls in relation to the provision of sponsor services. We continue to invest in staff, systems and processes in the run up to MiFID II and the Senior Managers and Certification Regime. We have also incurred an expense of 0.6 million (H1 2016: 0.9 million) due to staff costs resulting from the Compensatory Award Phantom Dividend Plan 2009 (the CAP ). Payments under this scheme are triggered only by the payment of a dividend to ordinary shareholders. A CAP cost was incurred during the period as a result of the final dividend for 2016 totalling 5p paid in H This compares to a H CAP cost incurred in respect of 7p for the second interim and the final dividend for

5 Profit and earnings per share Profit before tax increased by 156% to 4.2 million (H1 2016: 1.7 million) and profit after tax increased by 409% to 3.3 million (H1 2016: 0.7 million) on the back of a lower effective tax rate. Our basic earnings per share ( EPS ) rose by 406% to 6.1p (H1 2016: 1.2p). Statement of consolidated financial position and cash flow At 30 June 2017, our net trading investments were 17.3 million (H1 2016: 6.6 million) and cash held was 19.8 million (H1 2016: 20.1 million). During the six months to 30 June 2017 there was a net decrease in cash and cash equivalents of 4.0 million. This is due, mainly, to the payment of accrued bonuses in respect of 2016, increases in trading investments (including shares received in lieu of fees) and the 2016 final dividend payment which were offset partly by operating cash flow in H Dividend and capital levels We aim to retain sufficient capital and reserves to meet our regulatory capital and cash requirements after taking account of the likely future working capital needs and potential growth requirements. Since our flotation on AIM in October 2006, we have paid out 121.5p in dividends (prior to the 4.5p proposed interim dividend for 2017) and bought back 19.5 million shares at a cost of 25.4m for cancellation, thereby increasing the Group s prospective earnings per share. We have therefore returned 105.6m of cash to shareholders, equivalent to 160.8p per share (before 2017 s interim dividend) since our flotation in The Board proposes an interim dividend of 4.5p per share reflecting the earnings per share of H The payment of this interim dividend will trigger payments to staff under the CAP of 0.5 million in H (H2 2016: 0.1 million). The dividend will be paid on 9 November 2017 to all shareholders on the register at 13 October On 28 April 2016 Cenkos announced that the trustees of the Cenkos Employee Benefit Trust ( EBT ) had launched a share purchase plan to buy up to 50,000 of Cenkos shares a month, and this plan was extended for another year on 23 May ,498 shares were purchased in H under this plan at a cost of 299,834. The increase in the size of the Company s EBT reflects, in part, the potential future demand for Cenkos shares to satisfy share awards under the Group s deferred bonus scheme. People During the period and since the period end a number of changes to the Board have been made. Jim Durkin retired as an Executive Director and from the position of Chief Executive Officer on 1 August 2017 and was replaced by Anthony Hotson. Nick Wells, head of Corporate Finance, stood down from the Board on 17 May Mike Chilton resigned as Finance Director on 4 August 2017 and Philip Anderson was appointed as his successor (subject to FCA approval), on 13 September We continue to look to recruit staff who are attracted by our culture and business model. 3

6 Interim management report continued Principal risks and uncertainties We continue to see some uncertainty in equity markets since the Brexit referendum and we continue to monitor the situation. Aside from this, the principal risks and uncertainties that Cenkos currently faces, and how these are managed, have not materially changed from those outlined in the Strategic Report section of our 2016 Annual Report, namely the health of UK equity markets as well as reputational, operational, regulatory, conduct and market risk. Notwithstanding these, the key changes that may impact Cenkos risk profile over the next six months and how they are being managed relate to: The pace of change in the regulatory environment we continue to focus heavily on our regulatory risks to ensure the appropriate systems and controls, reporting, capital and liquidity requirements, resources, conduct and culture are all in place to meet the ongoing obligations of an FCA regulated (IFPRU investment) firm, including those related to MiFID II and the extension of the Senior Managers and Certification Regime to Cenkos in 2018; and Ensuring that we continue to retain and attract high quality staff. Outlook We have made a very good start to the second half of the year. There is institutional demand to fund high quality companies and ideas. Since July we have been engaged in relation to a number of significant fundraisings and our pipeline for the rest of the year is encouraging. Anthony Hotson Chief Executive Officer 25 September

7 Responsibility statement We confirm that to the best of our knowledge: a) The condensed set of financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of Cenkos Securities plc and the undertakings included in the consolidation taken as a whole as at 30 June 2017; and b) The interim management report includes a fair review of the development and performance of the business and the position of Cenkos Securities plc and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces. Forward-looking statements These financial statements contain forward-looking statements with respect to the financial condition, results, operations and businesses of Cenkos Securities plc. Although the Group believes that the expectations reflected in these forwardlooking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Such statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 5

8 Condensed consolidated income statement for the six months ended 30 June 2017 Unaudited Unaudited six months six months Audited ended ended year ended Note 30 June 30 June 31 December Continuing operations Revenue 2 29,249 15,344 43,745 Administrative expenses (25,032) (13,726) (39,426) Operating profit 4,217 1,618 4,319 Investment income interest income Profit before tax from continuing operations 4,225 1,650 4,402 Tax 3 (904) (997) (1,858) Profit after tax 3, ,544 Attributable to: Equity holders of Cenkos Securities plc 3, ,544 Basic earnings per share 5 6.1p 1.2p 4.7p Diluted earnings per share has not been disclosed as share options in issue are anti-dilutive (see note 5). 6

9 Condensed consolidated statement of comprehensive income for the six months ended 30 June 2017 Unaudited Unaudited six months six months Audited ended ended year ended 30 June 30 June 31 December Profit for the period 3, ,544 Amounts that will be recycled to income statement in future periods (Loss) / gain on available-for-sale financial asset 14 (164) Tax on available-for-sale financial asset 32 (7) (16) Exchange differences on translation of foreign operations (3) Other comprehensive income (135) Total comprehensive income 3, ,712 Attributable to: Equity holders of Cenkos Securities plc 3, ,712 7

10 Condensed consolidated statement of financial position as at 30 June 2017 Unaudited Unaudited Audited Notes 30 June 30 June 31 December Non-current assets Property, plant and equipment Deferred tax asset , Current assets Trade and other receivables 7 38,726 26,810 24,526 Available-for-sale financial assets Other current financial assets 8 19,868 8,316 13,811 Cash and cash equivalents 9 19,778 20,067 23,795 78,514 55,640 62,692 Total assets 79,789 56,341 63,317 Current liabilities Trade and other payables 10 (48,763) (28,500) (32,560) Other current financial liabilities 8 (2,609) (1,715) (2,694) (51,372) (30,215) (35,254) Net current assets 27,142 25,425 27,438 Non-current liabilities Trade and other payables 10 (684) (521) (880) Total liabilities (52,056) (30,736) (36,134) Net assets 27,733 25,605 27,183 Equity Share capital Share premium 3,331 3,334 3,331 Capital redemption reserve Own shares 13 (3,684) (3,280) (3,556) Available-for-sale reserve Foreign currency translation reserve Retained earnings 27,189 24,573 26,376 Total equity 27,733 25,605 27,183 8

11 Condensed consolidated cash flow statement for the six months ended 30 June 2017 Unaudited Unaudited six months six months Audited ended ended year ended Notes 30 June 30 June 31 December Profit 3, ,544 Adjustments for: Net finance income (8) (32) (82) Tax expense ,858 Depreciation of property, plant and equipment Exchange differences on translation of foreign operations 80 Shares and options received in lieu of fees (3,684) (5,770) Share-based payment expense Operating cash flows before movements in working capital 1,032 2,116 (465) (Increase) / decrease in net trading investments and available-for-sale financial assets (2,204) 3,697 4,886 Increase in trade and other receivables (14,200) (8,459) (6,055) Increase / (decrease) in trade and other payables 14,683 (4,475) (218) Net cash flow from operating activities before interest and tax paid (689) (7,121) (1,852) Tax paid (204) (1,939) (2,533) Net cash flow from operating activities (893) (9,060) (4,385) Investing activities Interest received Purchase of property, plant and equipment 6 (124) (103) (272) Net cash outflow from investing activities (116) (68) (179) Financing activities Dividends paid (2,743) (3,819) (4,367) Proceeds from sale of own shares to employee share plans Acquisition of own shares by the EBT (300) (143) (438) Net cash used in financing activities (3,008) (3,911) (4,747) Net decrease in cash and cash equivalents (4,017) (13,039) (9,311) Cash and cash equivalents at beginning of period 23,795 33,106 33,106 Cash and cash equivalents at end of period 9 19,778 20,067 23,795 9

12 Condensed consolidated statement of changes in equity for the six months ended 30 June 2017 Foreign Capital Available- currency Share Share redemption Own for-sale translation Retained capital premium reserve shares reserve reserve earnings Total 000 s 000 s Balance at 1 January , (3,193) ,576 28,568 Profit Gain on available-for-sale financial assets net of tax Exchange differences on translation of foreign operations Total comprehensive income Proceeds from sale of own shares to employee share plans Transfer of shares from the SIP to employees 18 (18) Acquisition of own shares by the EBT (143) (143) Credit to equity for equity-settled share-based payments Deferred tax on share-based payments (153) (153) Dividends paid (3,819) (3,819) Balance at 30 June , (3,280) ,573 25,605 Profit 1,891 1,891 Gain on available-for-sale financial assets net of tax Exchange differences on translation of foreign operations Total comprehensive income ,891 1,945 Proceeds from sale of own shares to employee share plans (3) 10 7 Transfer of shares from the SIP to employees Acquisition of own shares by the EBT (295) (295) Credit to equity for equity-settled share-based payments Dividends paid (548) (548) Balance at 31 December , (3,556) ,376 27,183 Balance at 1 January , (3,556) ,376 27,183 Profit 3,321 3,321 Loss on available-for-sale financial assets net of tax (132) (132) Exchange differences on translation of foreign operations (3) (3) Total comprehensive income (132) (3) 3,321 3,186 Proceeds from sale of own shares to employee share plans 36 (1) 35 Transfer of shares from the SIP and deferred bonus scheme to employees 136 (136) Acquisition of own shares by the EBT (300) (300) Credit to equity for equity-settled share-based payments Dividends paid (2,743) (2,743) Balance at 30 June , (3,684) ,189 27,733 10

13 Notes to the condensed consolidated financial statements 1. Accounting policies General information The interim condensed consolidated financial statements of Cenkos Securities plc (the Company or Cenkos ) together with its subsidiaries (the Group ) for the six months ended 30 June 2017 are unaudited and were approved by the Board of Directors for issue on 25 September The Company is incorporated in England under the Companies Act 2006 (company registration No ) and its shares are publicly traded. The Group s principal activity is as an institutional stockbroker to UK small and midcap companies and investment funds. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management s best knowledge of the amount, event or actions, actual results ultimately may differ from those of estimates. These financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. Where appropriate, prior year figures have been restated to conform to the current year presentation. Basis of accounting The interim condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group s annual financial statements for the year ended 31 December The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group s annual financial statements for the year ended 31 December 2016, which are prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union. The financial information contained in these interim condensed consolidated financial statements does not constitute the Group s statutory accounts within the meaning of section 434 of the Companies Act The comparative information contained in this report for the year ended 31 December 2016 does not constitute the statutory accounts for that financial period. Those accounts have been reported on by the Company s auditors Ernst & Young LLP and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act Going concern The Group s business activities, together with the factors likely to affect its future development and performance, its principal risks and uncertainties, the financial position of the Group, its cash flows and liquidity position are set out in the Strategic Report in the Group s Annual Report for the year ended 31 December The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the Directors continue to adopt a going concern basis in preparing the interim financial statements. Adoption of new and revised standards During the period, a number of amendments to IFRS became effective and were adopted by the Group, none of which had a material impact on the Group s net cash flows, financial position, statement of comprehensive income or earnings per share. 11

14 Notes to the condensed consolidated financial statements continued 2. Business and geographical segments Cenkos is managed as an integrated UK institutional stockbroking business and although it has different revenue streams, the nature of its activities is considered to be subject to similar economic characteristics. The internal reports used by the Chief Executive Officer for the purpose of monitoring performance and allocating resources reflect that Cenkos is managed as a single business unit. Virtually all revenue is attributable to the principal activity of the Company. The Company s revenue has arisen solely within the UK. Major clients In the six months ended 30 June 2017, one of Cenkos clients contributed more than 10% of Cenkos total revenue. The amount was million (six months ended 30 June 2016: 2.69 million; year ended 31 December 2016: 5.11 million). Revenue streams Six months Six months ended ended Year ended 30 June 30 June 31 December Corporate finance and placing fees 21,209 9,675 29,720 Corporate broking, research and commission revenue 4,351 5,106 10,505 Market making 3, ,520 29,249 15,344 43,745 Market making includes 1.29 million of gains (H1 2016: 1.63 million of losses) on shares and options received in lieu of fees. 3. Tax The tax charge is based on the profit for the period and comprises: Six months Six months ended ended Year ended 30 June 30 June 31 December Current tax United Kingdom corporation tax at 19.25% (2016: 20%) based on the profit for the period 1, Adjustment in respect of prior period United Kingdom corporation tax at 19.25% (2016: 20%) 47 Total current tax 1, Deferred tax (Credit) / charge on account of temporary differences (653) Deferred tax prior period adjustment (5) Total deferred tax (refer to note 11) (653) Total tax on profit on ordinary activities from continuing operations ,858 12

15 3. Tax continued The tax charge for the period differs from that resulting from applying the standard rate of UK corporation tax of 19.25% (2016: 20%) to the profit before tax for the reasons set out in the following reconciliation: Six months Six months ended ended Year ended 30 June 30 June 31 December Profit before tax from continuing operations 4,225 1,650 4,402 Tax on profit on ordinary activities at the UK corporation tax rate of 19.25% (2016: 20%) Tax effect of: Non-deductible expenses for tax purposes Current year losses of overseas subsidiary for which no deferred tax asset has been recognised Fair value movements in relation to the deferred tax asset on share-based payments (15) Deferred tax rate change adjustment 9 (42) (54) Adjustment in respect of prior period deferred tax (5) Adjustment in respect of prior period current tax 47 Tax expense for the period ,858 In addition to the tax expense presented in the income statement, the following amounts have been recognised directly in equity: Six months Six months ended ended Year ended 30 June 30 June 31 December Other Comprehensive Income (OCI) Current tax (credit) / expense arising on available-for-sale financial asset (32) 7 16 Statement of Changes in Equity (SOCIE) Deferred tax charge arising on share-based payments Total income tax recognised directly in equity (32)

16 Notes to the condensed consolidated financial statements continued 4. Dividends Six months Six months ended ended Year ended 30 June 30 June 31 December Amounts recognised as distributions to equity holders in the period: Second interim dividend for the year ended 31 December 2015 of 6.0p (2014: nil) per share 3,269 3,269 Final dividend for the year ended 31 December 2016 of 5.0p (2015: 1p) per share 2, Interim dividend for the period to 30 June 2016 of 1.0p (June 2015: 7.0p) per share 548 2,743 3,819 4,367 The proposed interim dividend for 30 June 2017 of 4.5p (30 June 2016: 1.0p) per share was approved by the Board on 25 September 2017 and has not been included as a liability as at 30 June The dividend will be payable on 9 November 2017 to all shareholders on the register at 13 October Under the Compensatory Award Plan ( CAP ), as described in the 2016 Annual Report, the payment of a dividend to ordinary shareholders will trigger a cash payment to holders of options under the CAP. The payment of this interim dividend will increase staff costs by 0.5 million in the second half of 2017 (1.0p 2016 interim dividend increased staff costs by 0.1 million in the second half of 2016). 5. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Six months Six months ended ended Year ended 30 June 30 June 31 December Basic earnings per share 6.1p 1.2p 4.7p Diluted earnings per share n/a n/a n/a For the period ended 30 June 2017, the share options were anti-dilutive due to the interaction of the dividends paid in the period, the exercise price of the options and the share price. Earnings Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of the parent 3, ,544 Effect of dilutive potential ordinary shares: Share options Earnings for the purpose of diluted earnings per share 3, ,577 14

17 5. Earnings per share continued 30 June 30 June 31 December No. No. No. Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share 54,663,048 54,421,225 54,724,986 Effect of dilutive potential ordinary shares: Share options 1,538, ,984 Weighted average number of ordinary shares for the purpose of diluted earnings per share 54,663,048 55,959,958 55,125,970 The Board has agreed to continue to fund the Group s Employee Benefit Trust ( EBT ) so that it can make market purchases in Cenkos Securities plc shares as and when market conditions allow. These shares held by the EBT have been excluded from the weighted average number of shares calculation up to this date. Details of the transactions in ordinary shares by the EBT, the deferred bonus scheme EBT and the Cenkos Securities plc Share Incentive Plan are shown in note Property, plant and equipment During the period, the Group spent approximately 124,278 (30 June 2016: 102,864, 31 December 2016: 271,843) on property, plant and equipment. This mostly related to the purchase of IT equipment. 7. Trade and other receivables 30 June 30 June 31 December Current assets Financial assets Market and client receivables 35,753 23,833 19,263 Loans due from staff Accrued income 845 1,093 3,240 Other receivables ,428 25,792 23,457 Non-financial assets Prepayments 1,298 1,018 1,069 38,726 26,810 24,526 As at 30 June 2017 the ageing analysis of trade and other receivables is as follows: Neither past due nor Past due but not impaired Total impaired < 30 days days days > 91 days 30 June ,726 35,618 3, June ,810 24,971 1, December ,526 21,411 2,

18 Notes to the condensed consolidated financial statements continued 8. Other current financial assets and liabilities 30 June 30 June 31 December Financial assets at FVTPL Trading investments carried at fair value 18,514 8,223 13,726 Derivative financial assets share options and warrants 1, ,868 8,316 13,811 Financial liabilities at FVTPL Contractual obligation to acquire securities (2,609) (1,715) (2,694) Gains / losses from financial assets and liabilities at FVTPL are included within Revenue in the condensed consolidated income statement. 9. Cash and cash equivalents 30 June 30 June 31 December Cash and cash equivalents 19,778 20,067 23, Trade and other payables 30 June 30 June 31 December Current liabilities Financial liabilities Trade creditors 30,376 19,317 12,305 Other creditors ,753 19,652 12,856 Non-financial liabilities Accruals and deferred income 16,346 8,642 19,361 Corporation tax payable 1, ,010 8,848 19,704 48,763 28,500 32,560 Non-current liabilities Non-financial liabilities Cash-settled deferred bonus scheme

19 11. Deferred tax Deferred tax arises on all taxable and deductible temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The following are the deferred tax assets and liabilities recognised by the Group and the Company and the movement thereon during the current and prior reporting periods. Group and Company temporary differences Deferred Property, Sharebonus plant and based payments equipment payments Total 000 s At 31 December ,330 Origination of temporary differences expense (198) (13) (584) (795) Deferred tax credit / (charge) to equity 1 (153) (152) At 30 June (5) (76) 383 Origination of temporary differences expense (70) (80) (150) Deferred tax prior period adjustment 4 4 Deferred tax charge to equity (1) (1) At 31 December (5) (156) 236 Reversal of temporary differences credit At 30 June ,005 (4) (112) 889 A 21% corporate tax rate came into effect from 1 April 2014 and fell to 20% with effect from 1 April In the Summer Budget 2015 the Government announced a further reduction in the main rate of corporation tax to 19% from 1 April 2017 and 18% from 1 April These changes were substantially enacted on 18 November The Finance Bill 2016 reduced the main rate of corporation tax to 17% from 1 April These changes were substantially enacted on 6 September This will reduce the Company s future current tax charge accordingly. The deferred tax balances at 30 June 2017 have been stated at 19% as this is the expected prevailing rate when the individual temporary differences are expected to reverse. The Group has unutilised capital losses on which a deferred tax asset has not been recognised as future utilisation of the losses is dependent on future chargeable gains. The unrecognised deferred tax asset in respect of capital losses carried forward is gross 302,261 (net 57,430 at 19%). In addition, during the period, Cenkos Securities Asia Pte. Ltd. incurred losses of 331,278 (30 June 2016: losses of 276,308, 31 December 2016: 661,209). A deferred tax asset has not been recognised as future utilisation of the losses is dependent on future taxable profits which are uncertain. The unrecognised deferred tax asset in respect of the overseas subsidiary s trading losses carried forward is gross 1,568,054 (net 266,569 at 17%) (30 June 2016: trading losses of 851,875 (net: 144,819 at 17%), 31 December 2016: trading losses of 1,236,777 (net 210,252 at 17%)). 17

20 Notes to the condensed consolidated financial statements continued 12. Share capital The issued share capital as at 30 June 2017 amounted to 566,948 (30 June 2016: 566,948, 31 December 2016: 566,948). 1 January 2016 to 31 December 2016 There were no shares issued or cancelled during the period. 1 January 2017 to 30 June 2017 There were no shares issued or cancelled during the period. 13. Own shares Own shares represent the cost of shares purchased by the Group s Employee Benefit Trust ( EBT ) and those transferred to the deferred bonus scheme EBT and the Cenkos Securities plc Share Incentive Plan ( SIP ). The EBT was established by Cenkos in It is funded by the Company and has the authority to acquire Cenkos Securities plc shares. The shares held by the EBT have been excluded from the weighted average number of shares calculation up to this date. Six months ended Six months ended Year ended 30 June June December 2016 Number Number Number Shares held by EBT of shares 000 s of shares 000 s of shares 000 s At 1 January 2,080,510 2,136 2,785,630 2, ,785,630 2,847 Acquired during the period 304, , , Transferred to the SIP Free shares (292,160) (298) (292,160) (298) Matching shares (279,590) (285) (279,590) (285) Dividend reinvestment (35,201) (36) (36,680) (38) (46,533) (48) Transferred to the deferred bonus scheme EBT (430,964) (442) (506,737) (518) (506,737) (518) At the period ended 1,918,843 1,958 1,772,463 1,851 2,080,510 2,136 Six months ended Six months ended Year ended 30 June June December 2016 Transferred to the deferred Number Number Number bonus scheme EBT of shares 000 s of shares 000 s of shares 000 s At 1 January 506, Transferred in from the EBT 430, , , Vesting shares transferred to employees (124,481) (127) At the period ended 813, , ,

21 13. Own shares continued Free and Matching shares held by the Cenkos Securities plc Number Number Number Share Incentive Plan of shares 000 s of shares 000 s of shares 000 s At 1 January 883, , , Transferred from the EBT Free shares 292, , Matching shares 279, , Shares transferred to employees (8,448) (9) (17,758) (18) (26,206) (27) At the period ended 875, , , Own shares held at the period ended 3,607,333 3,684 3,171,366 3,280 3,470,965 3, Financial instruments Risk management objectives For further information relating to the principal risks faced by the Group and how it mitigates and manages this exposure please refer to the Strategic Report in the 2016 Annual Report. Externally imposed capital requirement The Group and Company have to retain sufficient capital to satisfy the UK Financial Conduct Authority s ( FCA ) capital requirements. These requirements vary from time to time depending on the business conducted by the Group. The Group and Company always retains a buffer above the FCA minimum requirements and has complied with these requirements during and subsequent to the period under review. As at 30 June 2017, Cenkos Securities plc had a solvency ratio of 150% (30 June 2016: 172%, 31 December 2016: 164%). Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 of the Group s financial statements for the year ended 31 December The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values. For further information concerning the Group s financial assets and liabilities please refer to notes 7, 8 and 10. Fair value hierarchy All financial instruments carried at fair value are categorised in three categories, defined as follows: Level 1 Quoted market prices Level 2 Valuation techniques (market observable) Level 3 Valuation techniques (non-market observable) 19

22 Notes to the condensed consolidated financial statements continued 14. Financial instruments continued The Group held the following financial instruments measured at fair value: Level 1 Level 2 Level 3 Total As at 30 June s Available-for-sale financial assets Financial assets at FVTPL Derivative financial assets 1,354 1,354 Trading investments carried at fair value 18,514 18,514 18,514 1,354 19,868 18,514 1,496 20,010 Financial liabilities at FVTPL Contractual obligation to acquire securities 2,609 2,609 There were no transfers between Level 1, 2 and 3 during the period. Level 1 Level 2 Level 3 Total As at 30 June s Available-for-sale financial assets Financial assets at FVTPL Derivative financial assets Trading investments carried at fair value 8,223 8,223 8, ,316 8, ,763 Financial liabilities at FVTPL Contractual obligation to acquire securities 1,715 1,715 There were no transfers between Level 1, 2 and 3 during the period. Level 1 Level 2 Level 3 Total As at 31 December s Available-for-sale financial assets Financial assets at FVTPL Derivative financial assets Trading investments carried at fair value 13,726 13,726 13, ,811 13, ,371 Financial liabilities at FVTPL Contractual obligation to acquire securities 2,694 2,694 For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lower level input that is significant to the fair value measurement as a whole) at the end of the reporting period. There were no transfers between Level 1, 2 and 3 during the period. 20

23 14. Financial instruments continued Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy Share Unlisted options and securities warrants Total Opening balance 1 January Share options and warrants received in lieu of fees Net unrealised gain recognised in income statement Disposal of unlisted securities (172) (172) Impairment recognised in administrative expenses (82) (82) Net unrealised loss recognised in equity (164) (164) Closing balance 30 June ,354 1,496 Level 3 financial instruments consist of derivative financial assets and unlisted shares received in lieu of fees. The unlisted equity shares are carried as available-for-sale financial assets, classified as Level 3 within the fair value hierarchy. A number of valuation techniques have been used to provide a range of possible values for these shareholdings in accordance with the International Private Equity and Venture Capital ( IPEV ) valuation guidelines. The carrying values have been adjusted to values within these ranges. There have been no other factors brought to the Board s attention which would suggest that there has been a further impairment. The derivative financial assets are carried as financial assets at FVTPL classified as Level 3 within the fair value hierarchy and comprise equity options and warrants over listed securities. Impact of reasonably possible alternative assumptions The significant unobservable input used in the fair value measurement of Cenkos holdings of share options and warrants is the volatility measure. Significant increases / (decreases) in the volatility measure would result in a significantly higher / (lower) fair value measurement. A sensitivity analysis based on a 10% increase / decrease in the volatility measure used as an input in the valuation of the share options and warrants shows the impact of such a movement would be an increase of 0.07 million / decrease of 0.08 million respectively of the profit shown in the income statement. A sensitivity analysis based on a 10% increase / decrease in the share prices used as an input in the valuation of the unlisted securities shows the impact of such a movement would be an increase / decrease of 0.01 million respectively of the statement of comprehensive income. Determination of fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments measured at fair value on an ongoing basis include trading assets and liabilities and financial investments classified as available-for-sale. 21

24 Notes to the condensed consolidated financial statements continued 14. Financial instruments continued Financial instruments are valued using models where one or more significant inputs are not observable. The best evidence of fair value is a quoted price in an actively traded market. In the event that the market for a financial instrument is not active, a valuation technique is used. The majority of valuation techniques employ only observable market data and so the reliability of the fair value measurement is high. However, certain financial instruments are valued on the basis of valuation techniques that feature one or more significant market inputs that are Not observable. For these instruments, the fair value derived is more judgemental. Not observable in this context means that there are few or no current market data available from which to determine the level at which an arm s length transaction would be likely to occur. It generally does not mean that there is absolutely no market data available upon which to base a determination of fair value (historical data may, for example, be used). Furthermore, the assessment of hierarchy level is based on the lowest level of input that is significant to the fair value of the financial instrument. The valuation models used where quoted market prices are not available incorporate certain assumptions that the Group anticipates would be used by a third party market participant to establish fair value. Fair value at 30 June s Valuation technique Unobservable input Range Share options and warrants 1,354 Monte Carlo simulation Volatility % Unlisted securities 142 IPEV valuation guidelines Price of recent * transactions 1,496 * A meaningful range cannot be provided as there are a number of unlisted securities included within available-for-sale financial instruments. 15. Related party transactions Transactions with related parties are made at arm s length. Transactions or balances between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and, in accordance with IAS 24, are not disclosed in this note. The Board includes all employees considered to be key management personnel. 30 June 30 June 31 December Amounts owed by related parties Cenkos Securities Employee Benefit Trust ( CSEBT ) 3,684 3,279 3,556 Cenkos Securities Asia Pte. Ltd Cenkos Nominee (UK) Limited

25 15. Related party transactions continued The compensation of the key management personnel of the Group (including the Directors) and their interests in the shares and options over the shares of Cenkos Securities plc were as follows: Six months Six months ended ended Year ended 30 June 30 June 31 December Aggregate emoluments 1, ,681 During 2014, in order to comply with the Pensions Act, Cenkos was required to enrol all qualifying employees in a pension scheme. Under the scheme, qualifying employees are required to contribute a percentage of their relevant earnings. The Group also contributes 1% of relevant earnings. During the period to 30 June 2017, Cenkos made payments totalling nil (30 June 2016: 91, 31 December 2016: 91) in respect of one Director who was a member of this scheme. Related party interests in ordinary shares of Cenkos Securities plc 30 June 30 June 31 December No. No. No. Number of shares 11,317,612 14,865,194 13,484,076 Percentage interest 20% 26% 24% The related party interests in ordinary shares of Cenkos Securities plc includes the following interest held in the SIP scheme: Number of shares held subject to forefeiture conditions Number of shares held 30 June 30 June 31 December 30 June 30 June 31 December No. No. No. No. No. No. Related party interest in SIP 33,792 50,688 42,240 49,640 68,875 57,841 Related party interests in share options Earliest Latest 30 June 30 June 31 December Grant exercise exercise date date date No. No. No. CAP (Exercise price 1.69) 01/10/ /10/ /09/ ,710 SAYE Scheme (Exercise price 1.73) 15/07/ /08/ /02/ ,664 52,080 41,664 23

26 Notes to the condensed consolidated financial statements continued 16. Events after the reporting period There were no material events to report on that occurred between 30 June 2017 and the date at which the Directors signed this Interim Report. 17. Contingent liabilities From time to time the Group may become subject to various litigation, regulatory or employment related claims. The Directors have considered any current matters pending against the Group and, based on the evidence, the facts and circumstances and insurance cover available, concluded that the outcome of these will be resolved with no material impact on the Group s financial position or results of operations. 24

27 Independent review report to Cenkos Securities plc Introduction We have been engaged by the Company to review the condensed set of consolidated financial statements in the halfyearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity and the related explanatory notes to the condensed consolidated financial statements We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors Responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the European Union. As disclosed in note 1, the annual consolidated financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union. Ernst & Young LLP London 25 September

28 Information for shareholders Directors Gerry Aherne (Non-executive Chairman) Dr. Anthony Hotson (Chief Executive Officer) Philip Anderson (Finance Director) (subject to FCA approval) Jeff Hewitt (Non-executive Director) Paul Hodges (Executive Director) Joe Nally (Executive Director) Company Secretary Stephen Doherty Financial Calendar March Year-end results announced May Annual General Meeting and final dividend paid September Half-year results announced November Interim dividend paid Company Registration Number and Country of Incorporation Registered Office Banker Solicitors , England Tokenhouse Yard London EC2R 7AS HSBC Corporate Banking 60 Queen Victoria Street London EC4N 4TR Ashurst LLP Broadwalk House 5 Appold Street London EC2A 2HA Travers Smith LLP 10 Snow Hill London EC1A 2AL Auditors Registrars Nominated Adviser and Broker Website Ernst & Young LLP 25 Churchill Place London E14 5EY Capita Asset Services The Registry 34 Beckenham Road Kent BR3 4TU Smith and Williamson Corporate Finance Limited 25 Moorgate London EC2R 6AY 26

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32 Cenkos Securities plc London Tokenhouse Yard London EC2R 7AS Telephone: Fax: Edinburgh 3rd Floor 66 Hanover Street Edinburgh EH2 1EL Telephone: Fax: Liverpool Mezzanine Level Exchange Station Tithebarn Street Liverpool L2 2QP Telephone: Cenkos Securities Asia Pte Limited Singapore 137 Market Street #13-02 Singapore Telephone: