In early morning trading today, the shares of Cenkos, a city broker, declined by seven percent as the company reported a decrease of 92 percent in its profits.
The post-tax profits of the stockbroker crashed to only £300,000 for the six months ending June, as compared to the £3.7 million that it recorded during the same period in the previous year. Its pre-tax profits dropped from £4.6m in 2017 to £500,000 in 2018.
The revenue of the company also declined by more than a third to £18.1m for the half year, while the interim fell by more than half from 4.5p during the previous year to only 2p. The basic earnings per share was down at 0.6p.
The company’s cash had a slight increase to £21.7m and its net assets stood at £26.3m. It is down from the £27.7m that was recorded the year before.
The share price of Cenkos dropped by 12 percent prior to being able to partly recover, with the company attributing its decline in revenue on a drop in fundraising rounds among growth firms, on which it earns money acting as an advisor.
The broker completed 15 transactions – which included three IPOs – during the first half of this year, as compared to the 19 that was completed during the same period in 2017, two of which were IPOs. This year, it was able to raise £666m from its transactions as compared to nearly £1bn during the previous year.
It pointed out that £10.6m of its revenue last year came from a single transaction, Cenkos said that the highest value transaction for this year has only been £2.4m. It admitted that the results are “disappointing.”
A breakdown of the company’s revenue streams reveals that it experienced declines in all areas, however, corporate finance nearly halved, from the £21.2m during the first half of last year to only £11.9m this year.
Accounting for the decline, the broker said that some of the transactions that it had anticipated to close before June had been pushed into the second half of the year. It said that the transactions have “begun to gather pace.”
Anthony Hotson, the chief executive of Cenkos, stated: “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.”
He added: “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.
Hotson continued: “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.”