City broker Cenkos’ shares crash as profits fall 90 per cent
City broker Cenkos’ shares fell seven per cent in early morning trading today as it revealed a 92 per cent plunge in profits.
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The figures
The stockbroker’s post-tax profits dropped to just £300,000 for the six months ending June, compared to the £3.7m it recorded in the same period for 2017. Pre-tax profits fell from £4.6m last year to £500,000 this year.
Revenue also slipped by more than a third to £18.1m for the half year, while the interim divided more than halved from 4.5p last year to just 2p, with basic earnings per share down at 0.6p.
Its cash increased slightly to £21.7m and net assets stood at £26.3m, down from £27.7m the year before.
Why it’s important
Cenkos's share price slipped 12 per cent before partly recovering, with the firm blaming its drop in revenue on a fall in fundraising rounds among growth companies, on which it earns money as an advisor.
It completed 15 transactions – including three IPOs – in the first half of 2018, compared to 19 in the same period last year, two of which were IPOs. It raised £666m from its transactions this year, compared to almost £1bn last year.
Pointing out that £10.6m of its 2017 revenue came from one transaction, Cenkos said the highest value transaction for 2018 has been £2.4m, and admitted the results are “disappointing”.
A breakdown of its revenue streams shows it felt declines in all areas, but corporate finance almost halved, from £21.2m in the first half of 2017 to £11.9m this year.
Accounting for the drop, the broker said a number of transactions it had expected to close before June had been pushed into the second half of the year, during which it said transactions have "begun to gather pace".
What Cenkos said
Cenkos chief executive Anthony Hotson said:
“Following my appointment as chief executive in August 2017, we have focused on our core business, closing our Singapore office, and are in the process of acquiring a team of Nomad advisers from Smith and Williamson. A strategic review of our front and back office capabilities has been started together with a review of the markets we serve.
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“Our board recognises the increasing complexity of the financial markets and the demands, correctly, placed upon us by our customers, regulators and the public. The strategic reviews sought to put in place appropriate front and back office structures with systems and controls to provide good client outcomes in a way that can be clearly demonstrated.
“The two-year transition programme of refreshing our brand values; focusing on strengthening our core competencies; and undertaking opportunistic acquisitions to complement our core business is well underway.”