RNS Number : 4113S

Jarvis Securities plc

14 July 2022

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 2022

Chairman's statement

   --    GBP1,864,061 (22.9%) decrease in revenue versus six months to 30 June 2021 
   --    GBP1,492,774 (32.5%) decrease in profit before tax versus six months to 30 June 2021 
   --    Cash under administration has increased 1.8% versus 30 June 2021 
   --    EPS decreased to 5.62p (2021: 8.45p) 

During the period under review share trading volumes and the IPO market have decreased significantly compared to last year which had record levels being recorded, resulting in lower commission and fee income. The period began with inflationary pressures spooking the market, then the geopolitical uncertainty caused by the ongoing invasion of Ukraine by Russia dashed any hopes of a speedy market recovery. This has affected all the stock broking industry, and the wider economy as a whole where most segments are experiencing a general slowdown. Market sentiment, which drives volumes, is beyond our control so we will inevitably experience periods of lower activity but we remain well placed to respond to the upturn when it presents itself.

Increases in the costs charged to us by suppliers have created further uplift in expenses, particularly in compliance where the regulatory standards required of financial service companies are becoming more complex. The silver lining for Jarvis is that the base rate increases by the Bank of England in its attempt to temper the inflation rate have been swifter than forecast and we are now seeing the increasing benefit of this in our treasury interest income. Maturing deposits are all being replaced at higher rates and the impact of this should be more apparent in the second half of the year.

As always, I would like to thank all staff for their continued hard work.

Enquiries :

   Jarvis Securities plc   01892 510 515 

Andrew Grant

Jolyon Head

   WH Ireland Limited   0113 394 6600 

Katy Mitchell

Darshan Patel

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 2022 where measurement over a year is required.

 KPI:                                  30/6/22      30/6/21       Target 
-----------------------------------  -----------  -----------  ------------ 
 Profit before tax margin                50%          57%           20% 
 Revenue per employee (annualised)    GBP201,946   GBP257,917   to increase 

Consolidated income statement for the period ended 30 June 2022

                                                                      Six months   Six months ended 
--------------------------  -------  ---  --------------------------------------  ----------------- 
                              Notes                          30/6/22 (unaudited)            30/6/21 
--------------------------  -------  ---  --------------------------------------  ----------------- 
                                                                             GBP                GBP 
 Continuing operations 
 Revenue                                                               6,260,330          8,124,391 
 Administrative expenses                                             (3,153,669)        (3,523,626) 
  Lease Finance Costs                                                      (809)            (2,074) 
 Profit before income tax                                              3,105,852          4,598,691 
 Income tax charge             4                                       (590,112)          (873,751) 
--------------------------  -------  ---  --------------------------------------  ----------------- 
 Profit for the period                                                 2,515,740          3,724,940 
==========================  =======  ===  ======================================  ================= 
 Attributable to equity 
  holders of the parent                                                2,515,740          3,724,940 
==========================  =======  ===  ======================================  ================= 
 Earnings per share            5                                               P                  P 
--------------------------  -------  ---  --------------------------------------  ----------------- 
 Basic                                                                      5.62               8.45 

Consolidated statement of financial position at 30 June 2022

                              Notes                    30/6/22                       31/12/21                       30/6/21 
                                                   (unaudited)                      (audited)                   (unaudited) 
                                                           GBP                            GBP                           GBP 
 Non-current assets 
 Property, plant and 
  equipment                                            260,864                        295,767                       342,483 
 Intangible assets                                      70,790                         93,606                       104,171 
 Goodwill                                              342,872                        342,872                       342,872 
                                                       674,526                        732,245                       789,526 
 Current assets 
 Trade and other 
  receivables                                        4,074,211                      6,361,707                     7,226,862 
 Investments held 
  for trading                                            1,354                          1,958                         6,199 
 Cash and cash equivalents                           4,171,438                      3,780,594                     7,082,060 
--------------------------  -------  -------------------------  ---  ------------------------  ---------------------------- 
                                                     8,247,003                     10,144,259                    14,315,121 
--------------------------  -------  -------------------------  ---  ------------------------  ---------------------------- 
 Total assets                                        8,921,529                     10,876,504                    15,104,647 
==========================  =======  =========================  ===  ========================  ============================ 
 Equity and liabilities 
 Capital and reserves 
 Share capital                 7                       111,828                        111,828                       111,828 
 Share premium                                               -                              -                     3,068,012 
 Merger reserve                                          9,900                          9,900                         9,900 
 Capital redemption 
  reserve                                                9,845                          9,845                         9,845 
 Retained earnings                                   4,846,336                      5,014,456                     6,423,170 
 Total equity                                        4,977,909                      5,146,029                     9,622,755 
--------------------------  -------  -------------------------  ---  ------------------------  ---------------------------- 
  Non-current liabilities 
  Deferred income 
   tax                                                  61,928                         61,928                        45,617 
  Lease liabilities                                          -                              -                        21,073 
   Current liabilities                                  61,928                         61,928                        66,690 
 Trade and other 
  payables                                           3,268,547                      4,900,444                     4,453,775 
 Lease liabilities                                      21,712                         64,653                        85,884 
 Income tax                    4                       591,433                        703,450                       875,543 
--------------------------  -------  -------------------------  ---  ------------------------  ---------------------------- 
                                                     3,881,692                      5,668,547                     5,415,202 
 Total liabilities                                   3,943,620                      5,730,475                     5,481,892 
==========================  =======  =========================  ===  ========================  ============================ 
 Total equity and 
  liabilities                                        8,921,529                     10,876,504                    15,104,647 
==========================  =======  =========================  ===  ========================  ============================ 
                 Consolidated statement of comprehensive income 
                                                                      Six months    Six months ended 
                                                                         30/6/21             30/6/20 
                                                                     (unaudited)         (unaudited) 
----------------------------------------  ----  ----  ----  --------------------  ------------------ 
 Profit for the period                                                 2,515,740           3,724,940 
----------------------------------------------------------  --------------------  ------------------ 
 Total comprehensive income for the period                             2,515,740           3,724,940 
----------------------------------------------   ---------  --------------------  ------------------ 
 Attributable to equity holders of the 
  parent                                                               2,515,740           3,724,940 
----------------------------------------------------------  --------------------  ------------------ 

Consolidated statement of changes in equity for the period

Unaudited for the 6 months ended 30 June 2022

                         Share      Share         Merger     Capital      Retained        Own         Attributable 
                          capital   premium        reserve   redemption    earnings       shares      to equity 
                                                             reserve                      held in     holders 
                                                                                          treasury    of the 
----------------------  ---------  ------------  ---------  -----------  --------------  ----------  ------------- 
                              GBP           GBP        GBP          GBP             GBP         GBP            GBP 
  Balance at 31/12/20     111,828     1,655,640      9,900        9,845       5,672,848   (886,113)      6,573,948 
  Sale of own shares 
   held in treasury             -     1,412,372          -            -        (95,834)     886,113      2,202,651 
 Profit for the 
  period                        -             -          -            -       3,724,940           -      3,724,940 
 Dividends                      -             -          -            -     (2,878,784)           -    (2,878,784) 
 Balance at 30/6/21       111,828     3,068,012      9,900        9,845       6,423,170           -      9,622,755 
----------------------  ---------  ------------  ---------  -----------  --------------  ----------  ------------- 
 Cancellation of 
  share premium                 -   (3,068,012)          -            -       3,068,012           -              - 
 Profit for the 
  period                        -             -          -            -       2,455,911           -      2,455,911 
 Dividends                      -             -          -            -     (6,932,637)           -    (6,932,637) 
 Balance at 31/12/21      111,828             -      9,900        9,845       5,014,456           -      5,146,029 
----------------------  ---------  ------------  ---------  -----------  --------------  ----------  ------------- 
 Profit for the 
  period                        -             -          -            -       2,515,740           -      2,515,740 
  Dividends                     -             -          -            -     (2,683,860)           -    (2,683,860) 
 Balance at 30/6/22       111,828             -      9,900        9,845       4,846,336           -      4,977,909 
----------------------  ---------  ------------  ---------  -----------  --------------  ----------  ------------- 

Consolidated statement of cashflows for the period ended 30 June 2022

                                                            Six months ended     Six months 
                                                                     30/6/22        30/6/21 
                                                                 (unaudited)    (unaudited) 
                                              ----  ----  ------------------  ------------- 
                                                                         GBP            GBP 
 Cash flow from operating 
--------------------------------------  ----  ----  ----  ------------------  ------------- 
 Profit before tax                                                 3,105,852      4,598,691 
 Finance Cost                                                            809          2,074 
  Depreciation charges                                                47,486         47,715 
 Amortisation charges                                                 23,464         17,524 
                                                                   3,177,611      4,666,004 
 (Increase)/ decrease in receivables                               2,287,496      (303,706) 
 (Decrease) / increase in payables                               (1,631,087)        279,819 
 (Increase) / decrease in investments 
  held for trading                                                       604        (2,016) 
 Cash generated from operations                                    3,834,624      4,640,101 
 Interest paid                                                         (809)        (2,074) 
  Income tax (paid)                                                (702,129)      (601,002) 
 Net cash from operating activities                                3,131,686      4,037,025 
 Cash flows from investing 
 Purchase of tangible assets                                        (12,584)       (10,385) 
 Purchase of intangible fixed 
  assets                                                               (648)       (19,677) 
                                                                    (13,232)       (30,062) 

Cash flows from financing activities

 Repayment of finance leases                   (43,750)       (43,750) 
  Proceeds from sale of shares 
   held in treasury                                   -      2,202,651 
 Dividends to equity shareholders           (2,683,860)    (2,878,784) 
 Net cash used in financing 
  activities                                (2,727,610)      (719,883) 
 Net increase / (decrease) in 
  cash & cash equivalents             390,844     3,287,080 
 Cash and cash equivalents at 
  1 January                         3,780,594     3,794,980 
 Cash and cash equivalents at 
  30 June                           4,171,438     7,082,060 
 Of which: 
 Balance at bank and in hand        5,421,630     9,531,993 
 Cash held for settlement of 
  market transactions             (1,250,192)   (2,449,933) 

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 UK Adopted International Accounting Standards.

The preparation of these interim financial statements in accordance with UK Adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 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 2021 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 2022.

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) 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.

(k) 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.

(l) 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.

(m) 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.

(n) 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.

(o) Dividend distribution

Dividend distributions to the Company's shareholders are recognised when payment has been made to shareholders.

(p) 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.

(q) 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 30/6/22                Six months ended 30/6/21 
                               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      2,515,740     44,731,000      5.62     3,724,940     44,104,076        8.45 

6. Dividends

During the interim period dividends totalling 6p (2021: 6.5p) per ordinary share were declared and paid.

7. Share capital

The company has one class of ordinary shares of GBP0.0025 each. During the period and as at the period end no 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. There is an option to terminate the lease on 26 September 2022 and therefore this is the discounted period.

11. Capital commitments

At 30 June 2022 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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July 14, 2022 02:00 ET (06:00 GMT)

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