TIDMJIM
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
-- GBP1,606,681 (30.8%) increase in revenue versus six months to 30 June 2019
-- GBP1,202,967 (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) GBP227,574 GBP172,580 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
GBP GBP
Continuing operations
Revenue 6,827,225 5,220,544
Administrative expenses (3,227,094) (2,822,187)
Lease Finance Costs (3,301) (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
GBP GBP GBP
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 5,941,377 4,949,467 6,090,824
Own shares held in treasury (944,054) (981,136) (1,086,589)
Total equity 6,705,565 5,676,573 6,712,477
Non-current liabilities 38,664 38,664 37,451
Deferred income tax 106,956 148,633 189,691
Lease Liabilities
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 Six months
30/6/20 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
Attributable
to equity
Capital Share Own shares holders
Share Share Merger redemption option Retained held in of the
capital premium reserve reserve reserve earnings treasury company
GBP GBP GBP GBP GBP GBP GBP GBP
Balance at 31/12/18 111,828 1,576,669 9,900 9,845 - 5,523,363 (859,587) 6,372,018
Purchase of own
shares held in treasury - - - - - - (227,002) (227,002)
IFRS 16 Modified
Retrospective Lease
Adjustment - - - - - (5,600) - (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 - - - - - 2,913,432 - 2,913,432
Dividends - - - - - (1,938,967) - (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 Six months ended
ended 30/6/19
30/6/20
GBP GBP
Cash flow from operating activities
Profit before tax 3,596,829 2,393,862
Finance Cost 3,301 4,495
Depreciation charges 46,506 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 (3,301) (4,495)
Income tax (paid) (460,000) (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 Per Earnings Weighted Per share
average share average amount
no. of amount no. of
shares shares
GBP GBP p GBP GBP 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 GBP87,500, 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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END
IR SFDFMIESSESW
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