2022
Cenkos Securities Plc
Annual Report
About Cenkos
Cenkos Securities plc* is an independent, specialist institutional stockbroker
We act as a nominated adviser, sponsor, broker and financial adviser to a range of companies and investment funds, at all stages
of their growth and across all sectors. We concentrate on companies that seek admission of their shares to trading on AIM or the
main market of the London Stock Exchange (“LSE”) and companies that are already quoted on those markets. We seek long-term
relationships with our clients throughout the various stages of their development. Our ethos is to focus on understanding our
clients’ financing needs to deliver good outcomes for them.
Cenkos’ shares were admitted to trading on AIM in 2006. The Company is authorised and regulated by the Financial Conduct
Authority (“FCA”) and is a member of the LSE. It has offices in London and Edinburgh.
* The “Company”, “Cenkos” or the “Firm”
Contents
Strategic Report
Our Services
1
Chairman’s statement
2
Chief Executive Officer’s statement
3
Strategic report
4
Our business model
6
Key performance indicators
8
Review of performance
10
Principal risks and uncertainties
12
Financial position
15
Stakeholder engagement
16
2022 ESG report
18
Governance
Governance policy and framework
22
Board of Directors
26
Remuneration Committee report
32
Audit, Risk and Compliance Committee report
38
Nomination Committee report
41
Statements of Directors’ responsibilities
43
Directors’ report
44
Independent Auditor’s report
48
Financial Statements
Income statement
54
Statement of comprehensive income
54
Statement of financial position
55
Cash flow statement
56
Statement of changes in equity
57
Notes to the financial statements
58
Other Information
Notice of Annual General Meeting
84
Explanatory notes to the notice of AGM
88
Information for shareholders
90
Continuing Operations
Revenue
2022
2021
£20.3m
£37.2m
Underlying profit *
2022
2021 (Restated) **
£0.2m
£4.4m
(Loss)/profit before tax
2022
2021
£(2.7)m
£4.0m
(Loss)/profit after tax
2022
2021
£(2.2)m
£3.4m
Cash
2022
2021
£14.2m
£33.5m
Net Assets
2022
2021
£21.8m
£27.0m
Basic earnings per share
2022
2021
(4.9)p
7.1p
Total dividend per share
2022
2021
1.50p
4.25p
* Underlying profit is disclosed before the impact of the day 1 value of
options and warrants received in the period and the associated fair value
gains and losses on the options and warrants held, restructuring costs and
costs associated with incentive plans. A reconciliation between Underlying
profit before tax and profit before tax is shown in the table on page 10.
** Restated as explained on page 11.
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Governance
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Our Services
Corporate Finance
Cenkos focusses on small and mid-cap growth companies and
investment trusts across a wide range of sectors, including
technology, healthcare, energy and industrial. The teams provide
specialist technical advice on all forms of corporate transactions
including IPOs, fund raisings, M&A, disposals, restructuring and
tender offers. Our track record in raising substantial equity capital
for our clients is underpinned by our wide and deep network of
institutional investors.
Revenue (Corporate finance fees)
2022
2021
£13.2m
£27.2m
Funds raised
2022
2021
£524m
£1,207m
Number of transactions
2022
2021
16
34
Number of transactions of which are IPOs
2022
2021
3
2
Nomad, Broking and Research
At the heart of our business is the depth of our relationship with our
retained corporate and investment fund clients. We act as the
intermediary between our clients, existing shareholders and
potential investors, with teams that have proven track records in
raising equity finance and other funding solutions. In addition to
transactional advice, Cenkos provides strategic advice, regulatory
guidance, assistance with investor relations and research.
Revenue (Retainer fees and commission)
2022
2021
£6.6m
£6.2m
Number of clients
2022
2021
107
101
Number of clients of which AIM quoted
2022
2021
78
74
Number of clients of which Main Market listed
2022
2021
25
24
Execution Services
With access to multiple trading platforms, we provide liquidity and
facilitate institutional business, making markets in both small and
large cap equities and investment funds.
Revenue (net trading gains)
2022
2021
£0.5m
£3.9m
Number of stocks we make markets in
2022
2021
315
231
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Chairman’s statement
2022 performance
2022 was a poor year for UK equities. The UK Smaller Companies indices including AIM, recorded disappointing returns, which were
significantly lower than the more internationally exposed larger cap indices of UK equities.
The reasons are now well known, being a combination of rising energy and commodity prices, leading to sharply higher than expected
rates of inflation which the Bank of England has responded to by raising short term interest rates. This was further compounded by
the highly damaging economic and political turmoil of the short-lived Truss/Kwarteng administration in September which damaged
international confidence in UK debt markets. The UK now finds itself in the midst of high inflation and a tight labour market which has
led to the highest number of working days lost to strike action for more than a decade.
All of the above combined to produce a backdrop of significantly depressed market conditions for 2022, with the overall level of
money raised on AIM at its lowest since 2003 and new issues at their lowest level since launch in 1995. However, it could be argued
that much of the economic risk has been priced into valuations and certainly 2023 has already started more positively.
Notwithstanding market conditions throughout 2022, we successfully focused on gaining market share and completed the three
largest AIM IPOs by money raised during the course of the year, added 17 new clients and performed a Nomad and/or broker role on
transactions representing around 15% of total money raised on AIM.
Our flexible operating model, with its relatively low fixed cost base stood us in particularly good stead in 2022 and as a result we have
maintained a strong balance sheet and cash position while making targeted investments in people to further develop our franchise.
Despite a sharp decline in market volumes and the subsequent impact on revenues, the Board still intends to maintain its unbroken
dividend distribution record and is pleased to declare a final dividend of 0.5p. We are able to do this due to our flexible operating
model with the executives and employees leading from the front in protecting our balance sheet.
Our People
March marks my third anniversary at Cenkos and over the course of that time, I have grown more and more impressed by the quality
of our team. Broking is often seen as industry of individuals, led by so-called ‘rainmakers’. However, it’s my personal belief that the
most successful companies in any field are made up of teams united by a shared vision, trust and mutual respect. I said in my last
statement that we may not be the biggest, but we are determined to be the best and that journey continues apace. The past year has
tested the resilience and ability of every member of the Cenkos team and I am so impressed by the way each person has stepped up
to meet that challenge. The direct feedback I receive from corporate and institutional clients about the way in which our teams have
proactively supported them through challenging times – never shying away from difficult conversations – is indicative of the Cenkos
culture we have worked so hard to create. The financial rewards for our employees may not be as good as in previous years but in
many ways, everyone has achieved much more in terms of personal and professional development and gained invaluable expertise,
which sets us up well to fully maximise the benefits of a market upturn. As a firm we cannot singlehandedly transform market
conditions, but it is the growing quality of our people that will turbocharge our financial performance when markets improve. The
early signs of more benign market conditions have already appeared in the opening months of 2023, but we will continue to manage
the business tightly, invest wisely in people and technology and keep an eye out for potential headwinds.
Lisa Gordon
Non-executive Chairman
9 March 2023
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Chief Executive Officer’s statement
Weathering the storm
Looking back over the past 12-months, there is much to reflect on. All sectors and all markets have faced challenges from the
compounding effects of global events; from war to supply chain issues, rising inflation and energy costs, through to subdued economic
growth and market volatility. Constrained times have forced all businesses to consider their resilience and we have devoted significant
energy to considering how best to support our clients to navigate the impacts of these events.
Against such a backdrop, reduced revenues are no surprise but are only one part of a broader picture. Our ability to pay a dividend,
breakeven at the underlying profit level and gain market share reinforces that we are on the right track despite the market headwinds.
Our capacity to consistently serve our clients and deliver growth capital in pressured markets is only possible due to the knowledge,
experience and tenacity of our teams and I thank them all for their determination and drive.
Opportunity from Volatility
Despite the AIM market experiencing its lowest levels of activity for almost two decades, a continued attention to cost control, paired
with a resolute focus on our strengths, has allowed us to find opportunity despite the volatility.
In spite of the general hiatus, we found the markets remained receptive to quality ideas and the strength of our institutional contacts
allowed us to continue raising funds. It was particularly pleasing that we completed the three largest AIM IPOs by money raised during
2022, which accounted for 55% of the funds raised on AIM relating to new issues. Overall, we also managed to grow our market share
to advise on transactions accounting for 15% of all money raised on AIM.
Client relationships remain at the core of what we do and with an average client tenure of over five years, we have been well placed
to guide our clients through the current market uncertainty. It is a validation of our approach to client service and our positive attitude
towards the markets that we added 17 new clients during the period.
Building on our Strengths
As the industry grapples with broader economic conditions and lower levels of market activity, we have remained committed to our
core strengths and strategy of building from a resilient base. With a strong balance sheet and reserves in excess of our regulatory
requirements, we use that resilience to move forward with conviction.
From this foundation, we have been able to take advantage of opportunities to develop our client proposition as they have arisen.
We have bolstered our M&A and sponsor services capabilities with selective hiring and have grown our distribution facilities with a
chaperone arrangement facilitating greater access to US markets.
The Road Ahead
The tough conditions of 2022 have eased slightly in the early part of 2023 but capital markets remain subdued relative to 2021. Despite
this, we believe that our ongoing emphasis on working closely with clients and maintaining a proactive dialogue with investors will
continue to generate opportunities and attract new clients. Our business model enables us to generate cash at an operational level
and profits even in difficult market conditions and our perseverance means we are well placed at an operational level as markets
begin to recover. We believe our gains in market share, selective hiring of quality individuals and teams, a growing client base and a
disciplined approach to costs, put us on the front foot to deliver success for our clients, colleagues and shareholders alike.
Julian Morse
Chief Executive Officer
9 March 2023
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Strategic report
About this report
In accordance with Section 414A of the Companies Act 2006, the Directors are pleased to present their Strategic report on the
development and performance of the Company during the year ended 31 December 2022, the financial position of the Company as
at 31 December 2022 and the principal risks to which the Company is exposed.
This report is a key part of the Annual Report and Accounts and provides an opportunity for the Directors to communicate our
objectives and strategy (Strategic objectives), the measures we used to determine how well the Firm is performing (Key performance
indicators) and the key enterprise-wide risks (Principal risks) faced by the Firm which could prevent these goals from being achieved.
We also provide an overview of how the Firm is structured (Our business model) and a review of the Company’s performance for the
year ended 31 December 2022 (Review of performance) in order to add context to the results presented in the financial statements.
Finally, we summarise the Firm’s financial position (Financial position) and have commented upon the future prospects for the Firm
(Chief Executive Officer’s statement).
Strategic objectives
Our aim is to be the first-choice partner for growth to ambitious companies seeking equity capital. We will achieve this through an
integrated business model, providing corporate finance advice, sales, research and execution services to facilitate clients’ access to
knowledgeable, committed investors.
We have continued to develop our business model by making select appointments to enhance our sponsor services, our M&A
capabilities and our own management capability. We continue to operate systems and dedicate resources to orchestrate our business
development efforts, ensuring we identify quality companies at an early stage in their growth. We are driving collaboration across the
business to continue to strengthen our network of investors.
To be the first-choice growth partner to ambitious companies, we must attract and retain the highest quality talent. To that end, we
continue to review our career pathways for our colleagues to ensure appropriate incentivisation and development opportunities at
each stage of their career at Cenkos. Agile working, training and an entrepreneurial culture are elements within a framework of non-
financial incentives that we use to develop and motivate our team. We continue to raise the public profile of Cenkos, promoting our
success and our values through a variety of channels, creating a proposition that appeals to both talent and clients alike.
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Progress
Outlook
Strategic Objective
Provide an integrated capital
market proposition, focussed
on employing high quality
talent providing responsive
client service to develop our
existing client base whilst
attracting new ones.
Number of clients
107
at 31 December 2022, compared to
101 in 2021
During 2022 Cenkos won 17 (2021:
17) new clients
Funds Raised
£0.52bn
at 31 December 2022, compared to
£1.21bn in 2021
A strong ethos of client trust.
With an average client tenure of over five
years, Cenkos is well placed to guide our
clients through the current uncertainty.
Strategic Objective
Develop a collaborative,
entrepreneurial team
culture that appropriately
incentivises and develops
careers to attract and retain
the highest quality talent.
Average number of staff
97
during 2022, compared to 91 in
2021
Revenue per head
£0.21m
at 31 December 2022, compared to
£0.41m in 2021
Culture conducive to the support and
continuous development of staff.
Collaborative environment across Firm to
leverage the talents of employees and
ensure good outcomes for our clients.
Strategic Objective
Follow a disciplined approach
to operational efficiency.
Administrative expenses
to
revenue
102%
in 31 December 2022, compared to
89% in 2021
Keep fixed costs low to mitigate the impact
of swings in the financial markets.
Strategic Objective
Maintain our strong balance
sheet and capital position to
opportunistically grow the
business.
Cash
£14.2m
at 31 December 2022, compared to
£33.5m in 2021
Regulatory capital
£20.4m
at 31 December 2022, compared to
£23.5m in 2021.
The Company has a strong balance sheet
with cash resources of £14.2m as at 31
December 2022 (2021: £33.5m).
Maintain strong liquidity and capital
position in excess of its regulatory
requirements to mitigate the impact of
swings in the financial markets.
3
1
2
4
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Our business model
We sit at the intersection of corporates and capital markets. Cenkos provides an
integrated approach to capital markets for trading and investment companies. We offer
corporate finance advice, sales, research and execution in one place to enable our
clients to reach their strategic goals.
Our clients
Our corporate clients are exciting, ambitious companies who are looking to use equity capital as part of their growth strategy. Cenkos
works closely with its clients to review and understand their strategy. Our corporate finance team draws on a range of professional
backgrounds and we strive to maintain corporate client to corporate finance adviser ratios that are among the most favourable in the
City.
From this point of understanding, we have the research and broking capabilities to communicate the investment opportunity to the
wider capital markets. With an average length of client relationship of over 5 years, we take a long-term view and look to partner with
our clients during the fundraising process and beyond.
With a breadth of experience and expertise, we are able to source and have in our network a knowledgeable and committed base of
investors.
Our network
We are proactive in maintaining contact with our institutional clients and are continuously identifying new pools of capital to draw
on. Through a mixture of face to face and virtual communications, we take the time to understand our institutional clients’ investment
mandates. These relationships are built on trust and many have been built over a period of years.
The relationship we have with institutional fund managers is strong and is based on the quality of the portfolio of corporate clients
that we act for and on the quality of our institutional sales, research, execution and investor relations functions.
What this means in practice is that we understand what sort of investment opportunities our investor clients are looking for, both in
terms of sector and size and where they may fit in their investment strategy.
Our people
At the core of our offering is our people. Cenkos is a collection of
highly intelligent and talented individuals. It is our business to
identify growth and success wherever it may occur and we apply
the same principles to building our team. We recognise the
significant benefits of developing an environment that engenders
diversity of thought. This is always a work in progress but we are
committed to employing talent regardless of cultural background
or education or career route. We have a strong history of offering
development opportunities to our staff and are delighted to have
seen colleagues move around the business as they move forward in
their careers.
Allied to our recruitment and development processes, we maintain
a strong focus on culture and conduct. As a financial services
business we, correctly, operate within a stringently regulated
environment. More than this, however, ensuring good outcomes
for our clients within proper standards of market conduct
safeguards our reputation and enables us to partner clients for the
long term. In short, it is simple business sense.
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To develop our talent and guide our culture and conduct, all our employees are members of the Chartered Institute for Securities and
Investment and each employee has a mandatory level of continuous professional development that must be completed each year.
This is supplemented with training and programmes from our relevant professional and educational bodies as appropriate for the role
and career stage.
We also believe that our success is dependent on the effective operation of all our parts and therefore, collaboration between all of
our talent, whether client-facing or not, is core to our strategy. The principles of honesty, integrity, competence and ensuring Cenkos
is an enjoyable place to work are paramount.
We remunerate our people within a framework that incorporates basic and performance-related pay. This framework emphasises
culture and conduct as the foundation of our business and recognises that without these elements we will not reach our strategic
objectives. Our performance related pay includes deferrals, adjustments for conduct and clawback to align financial performance with
our long term, sustainable focus.
Details of governance arrangements and associated risk management processes are outlined in more detail in the Governance, policy
and framework section and, for financial risks, in note 24 of the financial statements.
Our business model
Cenkos is reliant on the health of the financial markets and investor sentiment, which in turn are impacted by macro-economic factors
and geo-political events. The swings of the financial markets can lead to a certain amount of volatility in performance year-on-year.
Part of our revenue is generated from corporate finance transactions, the commissions on which are usually large and irregular by
nature. To mitigate this, we operate an efficient and flexible business model specifically designed to allow for volatility by keeping
fixed costs low and controlled, while focusing on growing our client base. Our remuneration policy reflects the business model and
disciplined approach to costs by aligning remuneration with the long-term success of Cenkos through the use of performance-related
pay.
The main revenue streams are described below:
1
Corporate finance
Commission is earned on primary and secondary capital
raising, where Cenkos brings together our clients
requiring capital with those investors willing to provide
capital and fees earned in relation to corporate finance
advisory work, generally in connection with corporate
actions,
mergers
and
acquisitions,
disposals,
restructuring and tender offers. The revenue is
generally dependent upon the size and complexity of
the transaction.
2
Nomad, Broking and Research
Annual retainer fees are received for acting as Nomad,
broker and/or financial adviser, generated from our
corporate and investment trust clients.
3
Execution
Gains or losses are made from positions in shares we
hold as market maker or where we receive shares in lieu
of fees. The role of a market maker is mainly that of
providing liquidity to other market participants to
ensure there is an active market in the relevant share.
Client-facing employees are underpinned by a support services team and selective outsourcing arrangements that provide high levels
of resilience and expertise and an ability to scale to support higher revenues with very little additional cost.
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Key performance indicators
Revenue per head
Corporate client base
Link to strategic objective
Link to strategic objective
The total revenue expressed as a
ratio to the total (full time
equivalent) number of employees.
1. Provide an integrated capital
market proposition, focussed on
employing high quality talent
providing responsive client service
to develop our existing client base
whilst attracting new ones.
2.
Develop
a
collaborative,
entrepreneurial team culture that
appropriately
incentivises
and
develops careers to attract and
retain the highest quality talent.
4. Maintain our strong balance
sheet and capital position to
opportunistically
grow
the
business.
The total number of retained
clients.
1. Provide an integrated capital
market proposition, focussed on
employing high quality talent
providing responsive client service
to develop our existing client base
whilst attracting new ones.
2.
Develop
a
collaborative,
entrepreneurial team culture that
appropriately
incentivises
and
develops careers to attract and
retain the highest quality talent.
FY22 Progress
Key Risks
FY22 Progress
Key Risks
Increase in the size of the client
base to 107 clients (2021: 101).
The possible continuation of
adverse trading conditions as
seen in 2022, resulting from
the war in Ukraine, global
supply chain issues, high levels
of inflation and interest rates,
could in turn result in lower
placing and corporate finance
fees.
Putting our corporate and
investment trust clients at the
core of what we do is a key
factor in determining the long-
term success of the business.
Increase in the size of the
client base to 107 clients
(2021: 101).
High levels of inflation and
interest rates increase the risk
of recession and as such client
departures through M&A or
corporate failure.
Funds raised for clients
Non-corporate finance revenue to fixed costs
Link to strategic objective
Link to strategic objective
Total funds raised.
1. Provide an integrated capital
market proposition, focussed on
employing high quality talent
providing responsive client service
to develop our existing client base
whilst attracting new ones.
2.
Develop
a
collaborative,
entrepreneurial team culture that
appropriately
incentivises
and
develops careers to attract and
retain the highest quality talent.
1. Provide an integrated capital
market proposition, focussed on
employing high quality talent
providing responsive client service
to develop our existing client base
whilst attracting new ones.
3. Follow a disciplined approach to
operational efficiency.
FY22 Progress
Key Risks
FY22 Progress
Key Risks
Depressed market conditions
saw total funds raised by
companies on the AIM Market
decreasing by 73% to £2.4bn
(2021: £8.7bn). Despite this,
Cenkos
completed
16
transactions including 3 IPOs,
raising £0.5bn for its clients, of
which £0.3bn was on AIM,
equivalent to a market share to
15% (2021: 10%).
The possible continuation of
adverse trading conditions as
seen in 2022, resulting from
the war in Ukraine, global
supply chain issues, high levels
of inflation and interest rates,
could in turn result in fewer
transactions
completing,
possibly smaller in size.
High levels of inflation and
interest rates increase the risk
of recession and as such client
departures through M&A or
corporate failure.
We operate an efficient and
flexible
business
model
specifically
designed
to
mitigate against the volatility
in the financial markets.
Increase in the size of the
client base to 107 clients
(2021: 101).
The possible continuation of
adverse trading conditions as
seen in 2022, resulting from
the war in Ukraine, global
supply chain issues, high
levels of inflation and interest
rates, could in turn result in
fewer
transactions
completing, possibly smaller
in size.
High levels of inflation and
interest rates increase the risk
of recession and as such client
departures through M&A or
corporate failure.
£0.41m
£0.23m
£0.35m
£0.41m
£0.22m
2018
2019
2020
2021
2022
116
100
94
101
107
2018
2019
2020
2021
2022
£1,193m
£664m
£944m
£1,207m
£524m
2018
2019
2020
2021
2022
50%
41%
57%
54%
38%
2018
2019
2020
2021
2022
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Cash at Bank
Dividend per share
Link to strategic objective
Link to strategic objective
4. Maintain our strong balance
sheet and capital position to
opportunistically
grow
the
business.
1. Provide an integrated capital
market proposition, focussed on
employing high quality talent
providing responsive client service
to develop our existing client base
whilst attracting new ones.
4. Maintain our strong balance
sheet and capital position to
opportunistically
grow
the
business.
FY22 Progress
Key Risks
FY22 Progress
Key Risks
We operate an efficient and
flexible
business
model
specifically designed to mitigate
against the volatility in the
financial
markets
enabling
Cenkos to meet the challenges
and opportunities ahead.
The possible continuation of
adverse trading conditions as
seen in 2022, resulting from
the war in Ukraine, global
supply chain issues, high levels
of inflation and interest rates,
could in turn result in fewer
transactions
completing,
possibly smaller in size.
Dividend per share reflecting
2022’s performance and the
strength
of
the
business
model.
The
sustainability
of
the
dividend per share will be
dependent
upon
business
performance and subject to
the Board’s dividend policy.
Underlying profit
Link to strategic objective
1. Provide an integrated capital
market proposition, focussed on
employing high quality talent
providing responsive client service
to develop our existing client base
whilst attracting new ones.
2.
Develop
a
collaborative,
entrepreneurial team culture that
appropriately
incentivises
and
develops careers to attract and
retain the highest quality talent.
FY22 Progress
Key Risks
Underlying
profit
reflecting
2022’s performance.
The possible continuation of
adverse trading conditions as
seen in 2022, resulting from
the war in Ukraine, global
supply chain issues, high levels
of inflation and interest rates,
could in turn result in fewer
transactions
completing,
possibly smaller in size.
In prior years, Regulatory surplus over Pillar 1 capital requirements has been disclosed as a KPI. For 2022, this has not been disclosed
as the applicable regulatory capital regime for investment firms changed, with IFPR taking effect from 1 January 2022. While the
transitional provisions mean our overall capital requirement is at a similar level to previous periods, there is no comparable amount
equivalent to the calculated Pillar 1 figure under the new regime. Consequently, the KPI has been removed for this year.
£33.6m
£18.3m
£32.7m £33.5m
£14.2m
2018
2019
2020
2021
2022
£4.6m
£1.4m
£4.0m
£4.4m
£0.2m
2018
2019
2020
2021
2022
4.5p
3.0p
3.5p
4.3p
0.50p
2018
2019
2020
2021
2022
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Review of performance
Revenue
Depressed market conditions following the Russian invasion of Ukraine and the impact on global supply chains, already stressed due
to Covid-related restrictions resulted in significantly reduced levels of market activity. This saw the total funds raised by companies
on the AIM Market decreasing by 73% to £2.4bn (2021: £8.7bn) (Source: LSE AIM Market factsheets December 2022). This in turn has
led to a 46% decrease in revenue generated to £20.3m (2021: £37.2m).
A summary of the revenue streams from the Company’s business activities and costs is set out in the income statement below:
2022
2021
Restated **
Revenue streams
£ 000's
£ 000's
% change
Corporate finance
13,162
27,184
-52%
Nomad, broking and research
6,577
6,172
7%
Execution - net trading gains
521
3,869
-87%
Revenue
20,260
37,225
-46%
Day 1 value of options and warrants received as part of fees
(567)
(1,614)
-65%
Staff costs excluding restructuring costs and incentive plans
(12,566)
(24,080)
-48%
Administrative expenses before restructuring and incentive plans
(6,890)
(7,158)
-4%
Underlying profit
237
4,373
-95%
Day 1 value of options and warrants received as part of fees
567
1,614
-65%
Other operating expense
(2,158)
(87)
2381%
Restructuring costs and incentive plans *
(1,289)
(1,796)
-28%
Operating (loss) / profit
(2,643)
4,104
-164%
Investment income - interest income
109
17
541%
Finance costs - interest on lease liability
(169)
(171)
-1%
(Loss) / profit before tax
(2,703)
3,950
-168%
Tax
462
(552)
-192%
(Loss) / profit after tax
(2,241)
3,398
-165%
* Restructuring costs and incentive plans includes legal fees associated with redundancy.
** Restated as explained on page 11.
Business activities
Corporate finance
Corporate finance revenue decreased by 52% to £13.2m (2021: £27.2m). This followed the completion of 16 placing transactions
(2021: 34) including three IPOs (2021: two). Cenkos raised £0.5bn (2021: £1.2bn) for its clients, of which £0.4bn (2021: £0.8bn) was
raised on AIM. This is equivalent to 15% (2021: 10%) of all funds raised on AIM in 2022.
During the year, Cenkos completed IPOs for Facilities by ADF raising £18.4m, Clean Power Hydrogen Group raising £30.5m and Sondrel
Holdings raising £20m, which were the three largest IPOs by money raised completed on AIM during 2022. Other notable deals
included secondary placings for Marlowe raising £130m and FRP Advisory raising £39m.
Nomad, broking and research
Nomad, broking & research fees increased by 7% to £6.6m (2021: £6.2m) due to an increase in the size of its client base to 107
companies and investment trusts (2021: 101). Of these, 78 (2021: 74) were listed for trading on AIM, equating to a market share of
10% (2021: 9%) of the 816 (2021: 852) companies listed at 31 December 2022.
According to the Corporate Advisers Rankings Guide, as a nominated adviser, Cenkos is ranked 2nd by number of AIM clients and 4th
by their aggregate market capitalisation.
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Execution services
Execution services delivered net trading gains of £0.5m in 2022 (2021: £3.9m), a decrease of 87% against the prior year due to falling
asset values and the impact of inflation and interest rate increases. Against this backdrop of volatile markets, Cenkos still maintained
a top 3 market share in 68% (2021: 74%) of clients’ stocks and makes markets in the stocks of 315 (2021: 231) companies and
investment trusts listed on AIM and the Main Market of LSE.
Administrative expenses
Staff costs excluding restructuring costs and incentive plans
Staff costs decreased by 48% to £12.6m (2021: £24.1m) due to a reduction in variable remuneration in line with the Company
performance. Average headcount increased to 97 (2021: 91) following the Firm’s policy of selective recruitment in areas to support
business expansion.
Administrative expenses before restructuring and incentive plans
Administrative expenses before restructuring and incentive plan costs for the year decreased by 4% to £6.9m (2021: £7.2m) due
mainly to a decrease in transactions costs associated with the level of corporate finance activity.
Other operating expense
Other operating expense represents the decrease in the fair value of the options and warrants held in client companies. Usually
received as part of fee arrangements, these instruments are marked to model. A key input to the model is the market price of the
underlying shares, which over the course of 2022 have largely decreased leading to the loss of £2.2m (2021: -£0.1m)
Restructuring costs and incentive plans
Restructuring and incentive plans costs decreased by 28% to £1.3m (2021: £1.8m) following the vesting of the Short-Term Incentive
Plan (‘STIP’) in March, a decrease in redundancy costs and no further restructuring costs incurred during the year. This was partially
offset by the grant of further awards under the Company Share Option Plan (‘CSOP’) and Long-Term Incentive Plan (‘LTIP’) in March
and April 2022 respectively. The CSOP plan provides for the grant of HMRC tax advantaged and non-tax advantaged share options
with an exercise price equivalent to the share price at the date of grant, vesting after 3 years subject to the achievement of targets
based on Total Shareholder Return (‘TSR’). The LTIP provides for the grant of nil paid share options to Executive Directors, Senior
Managers and other key staff vesting in tranches after 3, 4 and 5 years subject to the achievement of certain TSR targets. The charge
associated with the fair value of incentive plans allocated to this year amounts to £1.3m (2021: £1.4m).
Profit and earnings per share
Underlying profit before tax decreased to £0.2m from £4.4m in the prior year. The comparative figures have been restated to reflect
the current definition of underlying profit. In the current period, in addition to adjusting for restructuring costs and costs associated
with incentive plans, this is disclosed before the impact of the day one value of options and warrants received in the period and the
associated fair value gains and losses on the options and warrants held. The Directors believe this provides a clearer view of the
operational performance of the business in the period as their lifespan may overlap several periods before crystallisation. During this
time, their value in the financial statements is marked-to-model and highly volatile, subject to changes in the share price, although
vesting criteria may not have been, or indeed may never be, reached.
Loss before tax from continuing operations of £2.7m was generated, compared to a profit before tax of £4.0m in the prior year. The
tax credit for the year of £0.5m (2021: charge of £0.6m) equates to an effective tax rate of 17% (2021: 14%) on continuing operations.
Loss after tax on continuing operations of £2.2m was generated, compared to a profit after tax of £3.4m in the prior year.
Basic earnings per share from continuing operations decreased to -4.9p (2021: 7.1p).
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Principal risks and uncertainties
The Board is responsible for determining the Company’s risk appetite and ensuring that
the risk management framework is appropriate and operating effectively.
An awareness and appreciation of risks to which our activities are exposed are built into our culture where employees are encouraged
to take responsibility for ensuring that the identification, escalation and management of risk, be it reputational, operational, conduct,
or other risks specific to their own business area, are integrated into their own working practices and thereby ensuring a robust
governance framework from the bottom up as well as from the top down.
The day-to-day management of risk has been delegated by the Board to the senior executives across the Firm overseen by the Audit,
Risk and Compliance Committee (ARCC) and underpinned by robust systems and controls proportionate with the Firm’s risk appetite
and governance arrangements.
Cenkos prides itself on its entrepreneurial and commercial approach, focussed on generating value and the best outcomes for its
clients. However, the Board recognises that this must be balanced with a culture that seeks to ensure that all significant and relevant
risk exposures are identified and appropriately managed and that mitigation strategies employed are effective.
The Governance policy and framework section on page 22 describes how the Board receives input from other key governance
committees along with the framework employed by the Company to manage the risks faced in the normal course of business.
In financial terms, the Board’s policy aim is to hold sufficient regulatory capital that, at a minimum, it will meet its own interpretation
of the most severe but plausible stress test measures and, thereby, maintaining an additional capital buffer available for use should
adverse circumstances arise outside the Firm’s normal and direct control.
The ongoing conflict between Russia and Ukraine, the sustained effects of Covid particularly within the Asian markets exacerbating
global supply chain issues, spiralling energy costs and inflationary pressure all have the potential to detrimentally impact investor
sentiment, the health of the financial markets and contribute to the possibility that the global economy entering into a recession in
2023. Accordingly, the principal risks to which the Company is exposed are set out in the table below against the backdrop of the
current economic climate. Although not exhaustive, this highlights the risks that are currently considered to be of most significance
to the Company’s activities and which could affect the ongoing financial health of the Firm.
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Description
How the risk is mitigated
Change in the year and trend in residual risk
People
At Cenkos the health and well-
being of our employees is of
fundamental importance as
they are central to our success
in delivering high quality
service and advice to our
clients and are a critical factor
in determining the long-term
success of the business.
Attracting, developing and
retaining talent is essential to
maintain the Company’s
competitive advantage.
The retention, professional development
and growth of our people remains at the
top of the Board’s agenda.
We seek to minimise people risk by creating
a workplace and culture that is welcoming
and inclusive for everyone to drive the best
outcomes for clients and by positively
rewarding our people with a competitive
total remuneration package.
We have specific policies in place on
diversity and inclusion, family related, and
agile working to support our employees and
ensure our ongoing operational resilience
whether they are working in the office or
from home.
The Firm’s financial performance in 2022 has
meant a reduction in variable remuneration
awards to staff.
In addition, the impact of inflation combined with
comparatively low base salaries paid in accordance
with the low fixed cost business model serves to
increase people risk.
During 2021 and 2022, Cenkos ran several share
incentive schemes to enable all staff to have an
interest in the Firm’s equity. The fall in the share
price during the year limits the ability of these
schemes to mitigate people risk.
Demand for talent is high. This risk is therefore
likely to remain high throughout 2023 until market
sentiment returns and Cenkos’ share price
recovers.
An increase in residual risk
Health of
financial
markets and
investor
sentiment
Our income is heavily
dependent upon the health of
the financial markets and in
particular the economic
conditions of the UK and how
they impact the equity capital
markets.
Cenkos continues to demonstrate success in
raising capital for its corporate clients,
which during 2022 included completing the
three largest IPOs (by money raised) on
AIM. It also added 17 new clients bringing
the total number of retained companies and
investment trusts to 107.
Its strong balance sheet and flexible
business model mean it is well-placed to
withstand the financial turmoil, ready for
the return of market sentiment
The Russian invasion of Ukraine, the ongoing war
and the impact on global supply chains, already
stressed due to Covid-related restrictions led to
significantly reduced levels of market activity.
Conditions remain challenging and the outlook
uncertain even though markets have made a more
encouraging start to 2023.
The risk is likely to remain high in 2023.
No change
Reputational
One of the most significant
risks the Company faces is the
damage to our reputation and
the potential impact that may
have on relationships with our
stakeholders including our
clients and shareholders and
the future performance of the
business.
Reputational risk can arise
from financial, operational,
legal or conduct risks or a
failure to meet the
expectation of one of the
Company’s stakeholders.
The Board sets the Company’s cultural tone
by requiring a strong ethical and
professional culture with a commitment to
diversifying its cognitive thought.
All new business is subject to rigorous multi-
tier and multi-disciplinary committees each
of which must approve any new business
and/or appointments.
Emphasis is placed upon hiring the right
people with a strong work ethic and
professional mindset.
We regularly engage with stakeholders and
market practitioners to understand how our
reputation is perceived.
Notwithstanding market conditions, we have
focused on gaining market share and have
managed to complete the three largest AIM IPOs
by money raised during 2022, added 17 new
clients bringing our retained corporate clients total
to 105 and performed a Nomad and/or broker role
on transactions representing around 15% of total
money raised on AIM. Consequently, we believe
our reputation remains strong, which has been
enhanced by the Company’s ability to continue to
operate effectively and raise funds throughout this
period.
There is, however, no room for complacency with
a continued focus on all mitigating factors.
The residual risk remains static at medium/high.
No change
Strategic
The Board recognises that the
key to the Company’s long-
term success is the clear
articulation and execution of
its strategy.
The Executive Committee (ExCo) is subject
to robust and healthy challenge from the
Board and its sub-committees on the
Company’s strategic direction and
execution. The Board reviews strategy
execution and the risks that threaten the
achievement of the strategy.
The corporate governance structure and
relatively small size of the Company ensures
that the Board has sufficient, well-
articulated, timely and accurate information
on which they can make informed decisions
and gain appropriate levels of assurance.
Although, depressed market conditions resulted in
a reduction in corporate finance activity which in
turn led to a 46% decrease in revenue generated
to £20.0m (2021: £37.2m), during the course of
the year, Cenkos added 17 new clients, bringing
the total retained clients to 107.
This increase in size of the client base
demonstrates a reasonable execution of the
strategy. However, conditions remain challenging
and the outlook uncertain even though markets
have made a more encouraging start to 2023.
Consequently, this risk remains high.
No Change
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Conduct,
regulatory &
legal
Conduct risk is defined as the
risk that inappropriate
behaviour, conduct or
practices result in poor
outcomes for clients, the
Company or for the wholesale
markets.
Regulatory and legal risk is the
risk of fines, penalties,
sanctions or legal action
arising from the Company’s
failure to identify or meet
regulatory, legislative or its
legal requirements.
By continuing to place emphasis on a robust
corporate governance framework, the
Board leads through its action and tone
from the top which is reinforced by senior
management’s tone from the middle.
Together these ensure conduct risk is
mitigated to the fullest extent possible.
Training continues to support in this area
through a combination of internally
delivered sessions delivered by the Head of
Compliance and other senior managers and
external third parties as appropriate.
The Compliance Function monitors and
updates systems and controls where
necessary and as new regulation and
legislation requires this or where market
practice and regulatory expectations
develop.
The control framework includes a robust
monitoring programme which is reasonably
designed to focus on areas identified by the
FCA in its Business Plan but also takes into
account Cenkos’ own risk assessments to
ensure that, together with ongoing training
of staff on their responsibilities and the
regulatory environment in which they
operation, the emergence of any conduct
risk indicators are identified and managed.
The tough macro-economic conditions in 2022
have meant greater competition for business
opportunities within the sector. The FCA’s
supervisory imperatives continue to focus on
operationally sustainable activities that have at
their core obtaining the best possible results for
consumers. The Consumer Duty which comes into
effect later in 2023 is testament to this. We
continue to strengthen our systems and controls in
order to ensure the Company’s robust approach to
its regulated activities enables it to remain
relevant and focussed but do not consider the
residual risk to have changed from its previous
level.
No Change
Operational
resilience
Operational risks can arise
from the failure of the
Company’s core business
processes or one of its third-
party providers which then
materially impact its ability to
provide services to clients.
We aim to be able to sustain resilient
operations and client services with
minimum disruption from a combination of
strong supplier relations, cloud-based data
storage, remote collaborative
communication tools and business
continuity planning.
Senior management is actively involved in
identifying and analysing operational risks
to find the most effective means to mitigate
them particularly where these involve the
outsourcing of critical or important
functions.
Operational risk exposures remain at similar levels
to those in prior years, with the exception of
technology, information security, cyber security
and fraud, where the risk has increased due to the
shift to online platforms and the economic climate.
We continue to invest in systems and training our
people to understand and manage those risks,
especially in the hybrid working environment.
Consequently, the residual risk after mitigating
actions remains static at medium/high.
No Change
Financial
Financial risks are set out and
described in more detail in
note 24 to the financial
statements.
Financial risks include:
Market;
Credit/Counterparty;
Liquidity; and
Capital.
As a regulated entity, the Company is
required to stress test its business model
under various scenarios to measure its
resilience in terms of its solvency and
liquidity and its recovery capacity under
stress. This is conducted under the Internal
Capital and Risk Assessment (ICARA)
process. In addition, the capital and liquidity
positions are closely monitored, forecast
and reported upon. These reports are
updated regularly and reviewed by the
ARCC and Board – see the Governance
section.
The ongoing conflict between Russia and Ukraine,
the sustained effects of Covid particularly within
the Asian markets exacerbating global supply chain
issues, spiralling energy costs and inflationary
pressure have all detrimentally impacted market
conditions and contributed to the possibility that
the global economy will enter into a recession in
2023. These stresses have been modelled, in all
but name, in the stress tests detailed in the Firm’s
ICARA.
The strength of the Company’s balance sheet, the
flexibility of the business model and low fixed cost
base, results in it being well placed to withstand
the financial turmoil, ready for the return of
market sentiment. Notwithstanding this, the
financial risk remains high, similar to the previous
year. Consequently, the residual risk after
mitigating actions remains static at medium/high.
No Change
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Financial position
Cenkos’ total equity decreased during 2022 to £21.8m (2021: £27.0m). Although, the 2022 loss for the year was offset by the
movement attributable to share based payments, the decrease in equity can be attributed to the dividends paid of £2.0m (2021:
£1.9m) and own shares acquired of £3.4m (2021: £3.1m) to satisfy equity-settled employee incentive schemes. The decrease in cash
and cash equivalents to £14.2m (2021: £33.5m) can also be attributed to the dividends paid during the year and the own shares
acquired in addition to the payment of variable remuneration with respect to the performance year 2021.
2022
2021
Change
Net assets summary
£ 000's
£ 000's
£ 000's
Non-current assets
5,574
5,130
444
Other current financial assets
4,811
7,231
(2,420)
Other current financial liabilities
(1,312)
(1,915)
603
Net trading investments
3,499
5,316
(1,817)
Trade and other receivables
8,334
10,547
(2,213)
Trade and other payables - current
(5,684)
(23,027)
17,343
Trade and other payables - non current
(4,187)
(4,436)
249
Cash and cash equivalents
14,220
33,457
(19,237)
21,756
26,987
(5,231)
At 31 December 2022, Cenkos held regulatory capital of £20.4m (2021: £23.5m). From the beginning of January 2022, the prudential
regime changed from Capital Requirements Regulation (‘UKCRR’) to Investment Firms Prudential Regime (‘IFPR’). The transitional
provisions mean Cenkos’ overall capital requirement is at a similar level to previous periods and as such it continues to maintain a
surplus ahead of regulatory capital requirements.
The Board continues to review the amount of capital held over and above the minimum regulatory requirement and the Company’s
liquidity position as part of its ICARA in light of the depressed levels of market activity following the war in Ukraine, the impact on
global supply chains and inflation. The Board is pleased to announce a final dividend of 0.5p per share (2021: 3.0p per share) which
results in a total dividend for the year of 1.50p per share (2021: 4.25p per share).
From time to time, it is the intention to purchase shares to match unvested share awards and manage our issued share capital.
This report was approved by the Board of Directors on 9 March 2023 and signed on its behalf by:
Julian Morse
Chief Executive Officer
9 March 2023
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Stakeholder engagement
A key focus of the Board is to promote the success of the Company for the benefit of its members while having regards to other
matters as outlined in Section 172 of the Companies Act 2006. Section 172 of the Companies Act 2006 requires a director of a company
to act in the way they consider, in good faith, would most likely promote the success of the company for the benefit of its members.
As part of the Board’s decision-making process, the Board and its committees consider the potential impact of decisions made on
relevant stakeholders whilst also having regard to a number of broader factors, including the impact on the Company’s operations
and the likely consequences of decisions made in the long term. Set out below are the Company’s key stakeholder groups and how
the Board and the Company have engaged with them during the year.
Staff
Our employees are fundamental to our ability to deliver high quality service and advice to our clients and are a critical factor in
ensuring the longer-term success of the business. Establishing a corporate culture and working environment that attracts and retains
talent is paramount. The Board and management are committed to creating a workplace and culture that is welcoming and inclusive
for everyone. We value the contribution of all our people and recognise that diversity of background, experience, and thought
improves both culture and the quality of our client offering.
We engage closely with employees at all levels of the organisation, both formally and informally, to discuss their needs and support
them. This approach underpins our collaborative and entrepreneurial way of working. We ensure that employees’ views can be
factored into account when making decisions that are likely to affect their interests or which are important to them. This continues
to be particularly important in a post-pandemic environment with staff continuing to work more flexibly than previously.
The Board through the Chairman, the Chief Executive Officer and management engages with its employees through various mediums,
including staff forums, “Town Hall” meetings and newsletter updates. This allows us to keep employees updated on developments
within the Company including business updates, regulatory and compliance issues and strategic initiatives.
The Company continues to carry out at least an annual employee survey to encourage feedback on what the Company does well,
where it could improve and to seek other views that employees wish to provide. The results of such surveys are considered at both
executive management and Board level and help inform specific areas of strategic and practical focus.
While keen to retain the benefits of the interaction that occurs when working primarily in an office environment, the Company
currently continues to operate an Agile Working Policy, providing greater flexibility to the way in which staff can work than was the
case in the pre-pandemic environment. This is kept under review to ensure the approach provides the best for both staff and the
business.
Shareholders
The Board believes that it is important to maintain open and constructive relationships with shareholders and is committed to this
communication. Such an approach is in accordance with Principle 2 of the QCA Corporate Governance Code with which the Company
complies. During the year, the Chief Executive Officer was in contact with the Company’s major institutional shareholders and was
responsible for ensuring that shareholders’ views were communicated to the Board. As well as being in dialogue with the institutional
shareholders, the Chief Executive Officer was also in dialogue with several significant individual shareholders. Internally, staff also
hold a significant proportion of the Company’s ordinary share capital and briefings and updates are also provided to staff recognising
the importance for the Company to act fairly and to engage appropriately with all its shareholders.
The Chief Executive Officer communicates the Company’s strategy and results to shareholders and analysts through meetings
following announcements of the Company’s final and half-year results. Shareholders are also encouraged to attend the Annual
General Meeting at which all members of the Board are available to answer questions. All resolutions proposed at the 2022 Annual
General Meeting were passed by shareholders with majorities of over 99% of those voting.
The Company’s website contains electronic versions of the latest and prior years’ annual report and accounts and half-year reports,
together with share price and other relevant information concerning the Company including copies of its regulatory announcements
in accordance with AIM Rule 26.
Regulators
The Board and management recognise the importance of open and cooperative dialogue with its regulators and have a close ongoing
relationship with both the Financial Conduct Authority, including Primary Market Oversight, and AIM Regulation both as an AIM
Company and as a Nominated Adviser to AIM Companies. Through positive, constructive relationships with all our regulators including
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the Takeover Panel and the London Stock Exchange and active engagement with them we comply with best practice and position
ourselves to understand emerging regulatory developments so that we can continue to provide regulatory compliant services to our
clients. We have an open and transparent dialogue with the regulators and formal scheduled meetings were held throughout the year
with them.
The Board and management are kept appraised of regulatory issues and updates from the regulators through regular compliance
reports presented by the Head of Compliance. During the year, as a member of the Quoted Company Alliance, with other industry
bodies or directly, we have engaged with our regulators on a number of consultation papers including those in relation to the new
Consumer Duty, ESMA’s Call for Evidence on pre-hedging and HM Treasury’s consultation of Financial Promotion Order exemptions
for high-net-worth Individuals and Sophisticated Investors.
The Board and management are committed to ensuring that all staff are appropriately trained on financial regulation and how it
applies to their respective roles and regulatory training has taken place throughout the year covering not only current regulatory and
Compliance-related issues but also emerging regulatory developments.
Clients
The Board recognises that the Company’s clients’ interests lie at the heart of the business. Management works closely with corporate
clients to understand their needs and ambitions, so that Cenkos may provide the most appropriate advice and deliver its services most
effectively. Whether this is in relation to fundraising strategies, merger and acquisitions, enhancing or diversifying shareholder lists or
providing objective advice on board composition, the Company’s goal is to achieve the best outcome for its corporate clients.
This ethos applies equally to the Company’s institutional clients. The depth of our relationships means that we are well placed to
understand their investment strategies and consequently able to assist in the delivery of those including introducing them to
appropriate investment opportunities in terms of size, sector and stage of development.
The Board believes that these close relationships are a key factor in determining the long-term success of the business As a trusted
adviser, the Company is actively involved with its corporate clients in helping them to achieve their respective objectives. Cenkos
maintains regular dialogue with them, holding virtual and physical meetings, arranging investor meetings, undertaking site visits and
hosting physical and virtual events such as the Annual Cenkos Growth & Innovation Forum and the ongoing series of Non-Executive
Directors’ Breakfasts covering topical industry subjects.
Suppliers
Our suppliers provide us with essential support through their advice, expertise, products and services. These enable us to meet the
consistently high expectations of our clients. Our key suppliers provide business-critical infrastructure services across IT,
telecommunications, market data, and clearing and settlement activities. Regular engagement with suppliers sees us focus on
performance monitoring, risk management and delivery and ongoing review and replacement or renewal of services ensures that we
continue to be provided with appropriate levels of service.
Community and environment
We set out below in our separate 2022 ESG Report, setting out the steps that the Company takes to contribute to its wider community
and minimise any negative impact it has on the environment.
Members of the Board, both individually and collectively, consider that they have acted together, in good faith, and in a way, that
would be most likely to promote the success of the Company for the benefit of its members (having regard to the stakeholders and
matters set out in section 172 (1) (a-f) of the Companies Act 2006).
This report was approved by the Board of Directors on 9 March 2023 and signed on its behalf by:
Julian Morse
Chief Executive Officer
9 March 2023
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2022 ESG report
Introduction
At Cenkos, we recognise the importance of embedding sustainability into business practice to help mitigate the issues that our
societies and environment face at a global scale. By considering environmental, social and governance (ESG) factors within our
operations, we can identify opportunities to reduce our negative impact, contribute to positive real-world outcomes and increase our
resilience in a rapidly changing world. This report summarises our ESG activities over the last year and highlights our ambition for
future progress.
Given the importance of ESG, the Company has established an ESG Committee that reports directly to the Company’s Executive
Committee. The ESG Committee comprises members from various areas of the organisation including executive management and is
responsible for the development of the Company’s ESG policies, procedures and associated reporting, and for making
recommendations to the Executive Committee and ultimately the Board in this regard. With the assistance of an independent ESG
consultant, the ESG Committee has developed a formal ESG policy and framework which has been adopted by the Company and is
set out in a separate ESG section of our website. We will continue to develop the initiatives and the related disclosures detailed there
to strengthen the sustainability of our business and better integrate ESG factors into the Company’s governance framework.
ESG at Cenkos
For the various elements that fall under the topic of ESG, we have highlighted the initiatives we have implemented to date, as well as
indicating our plans for future progress.
Environmental
The existential threats that the world faces through climate change and biodiversity loss, mean that all businesses, including Cenkos,
must identify and reduce their environmental impact where possible.
Our main environmental impact continues to lie in direct and indirect carbon emissions from energy consumption in our offices and
from employee travel. Employee travel remains at reduced levels in the post-pandemic environment, with a greater predisposition to
make use of video and telephone conferencing technology as an environmentally preferable alternative where appropriate. Our Green
Travel Plan promotes a more sustainable approach to physical travel where it is required and sets out how we as a business look to
ensure our conduct reduces our Firm’s and our colleagues’ carbon footprints when travelling, thereby collectively reducing our carbon
emissions.
During 2022, the Company introduced an electric vehicle leasing scheme for employees to encourage take up and use of non-polluting
vehicles. Cycling continues to be a popular form of commuting and for staff based in the London office and during the year, the
Company has improved its showering and dressing room facilities to further encourage this and allow more people to adopt cycling
as a method of commuting. In Edinburgh, we have taken advantage of a grant scheme run by Cycling Scotland, which provides grants
to encourage staff to cycle, rather than use vehicles, on a day-to-day basis to provide staff with access to e-bikes for work related
travel. The Company also promotes the Cycle to Work Scheme which allows employees a tax-free loan to purchase a bicycle and
associated equipment.
Our key challenge remains as an occupier of older office space, seeking to increase the energy efficiency of our London and Edinburgh
premises. This challenge has in part been addressed by a move of the Edinburgh office to new and more modern premises with
improved environmental credentials to its predecessor. In London we continue to explore improvements to our energy consumption
and primarily, following increased engagement with a change of landlord and some improvements to the lighting in some parts of the
building, the practicalities of upgrading outstanding elements of inefficient ceiling lighting. In 2022, our Edinburgh offices consumed
12,148 Kwh (2021: 16,432 Kwh) of energy, while our London office consumed 168,865 Kwh (2021: 155,485 Kwh) of energy.
We also focus on our waste and recycling arrangements as another key area to reduce our environmental impact. We do not make
use of individual desk bins in order to centralise waste arrangements and encourage greater recycling. In respect of recycling and
waste management during the year, our London office generated approximately 5419 kg of waste of which 1739 kg (32%) was
recycling and the remainder treated as diverted waste with nothing going to landfill. We have also registered for the Clean City Award
Scheme which promotes good sustainability practices across a variety of areas.
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Social
Our people are our main asset, and their wellbeing is of fundamental importance. We also recognise how this view fits into broader
society and our role in encouraging fairness and decent work practices for all.
Post-pandemic environment
In the post-pandemic environment, we continue to operate our Agile Working Policy which gives employees the flexibility to work in
a hybrid fashion, part of the time from home and part of the time from the office. In keeping with our desire to retain the benefits of
the interaction that occurs when working primarily in an office environment, the policy requires attendance at the office on a number
of key days to provide what we believe is the best of both worlds. We believe that this approach, in accordance with the majority view
of our employees, offers a flexible approach which should help retain and attract a more diverse workforce. We will however keep
our approach under review to ensure it provides the best for both staff and the business.
Culture and employee engagement
As noted previously, our employees are central to our success in delivering high quality service and advice to our clients. Establishing
a corporate culture and working environment that attracts and retains talent is paramount. Our current data confirms a continuing
average length of service of 6.4 years per employee. We believe this demonstrates our ability to retain talent and continue to provide
our employees with the challenges and development that they seek during their tenure. We are also proud of recent senior hires
demonstrating our ability to attract new talent from both our peers and larger investment banks.
In order to ensure continued direct feedback from employees to management (outside of the usual management channels and end
of year performance review process), the Company continues to carry out at least an annual anonymous employee survey to
encourage candid feedback on what the Company does well, where it could improve and to seek other views that employees wish to
provide.
Learning and development
The Board is committed to ensuring that its staff are appropriately trained on financial regulation and how it applies to their respective
roles. During 2022, our staff participated in undertaking in total over 2,387 individual hours of compliance and continuing professional
development training. This training took a number of mediums including online courses and virtual sessions delivered in-house by
senior members of Compliance and the Company’s core business areas and tailored virtual training from external third-party
providers.
Diversity and inclusion
We are committed to creating a workplace and culture that is welcoming and inclusive for everyone. We value the contribution of all
our people and recognise that diverse backgrounds, experiences, and ideas improve both culture and the quality of our client offering.
The Company is committed to achieving a working environment which provides equality of opportunity and freedom from
discrimination. The Company believes that all employees and clients are entitled to be treated with respect and dignity and is
committed to actively opposing all forms of discrimination. The Company has specific policies in place on diversity and inclusion, family
related, and flexible working policies to assist its workforce. The percentage of females in our workforce has decreased slightly on last
year to 25% and increasing this percentage further remains a focus of the Board.
The Company also participated in the initial 10,000 Black Interns Programme, designed to help transform the horizons and prospects
of young Black people in the UK by offering paid work experience. The Company hosted two interns in various areas of the business
and was pleased to receive positive feedback from both on their experiences. In 2023, we will look to continue our relationship with
the 10,000 Black Interns Programme and build on the success of 2022.
Anti-corruption and bribery and the Modern Slavery Act
We are committed to ensuring that the behaviours and practices of our organisation, including those within our supply chains, reflect
our own high business standards and compliance with applicable laws and standards. We have a zero-tolerance approach to slavery
and human trafficking and bribery and corruption within our workforce and set the same robust expectations in relation to our supply
chain and vendors. During the year, we provided training to everyone at the Firm on human trafficking and the Modern Slavery Act.
As a provider of financial services, we do not have a very long or complex supply chain – our main vendors are either providers of
office supplies and support services such as reprographics, IT, recruitment, and facilities management or professional advisers such
as legal, accountancy and advisory firms. Whilst we consider our vendors to be at relatively low risk of engaging in practices of modern
slavery and human trafficking and/or bribery and corruption, we nevertheless remain committed to preventing the occurrence of
such practices both in our business and our supply chain.
We are confident that the policies and procedures that we have in relation to anti-slavery and human trafficking are in compliance
with the Modern Slavery Act 2015 and our public statement, to this effect, is available on the Cenkos website.
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Health and safety
We are committed to providing a safe environment for our employees and visitors. We have arrangements in place to ensure that we
meet ongoing health and safety obligations to our employees and other stakeholders, such as visitors to our premises. Our Board is
ultimately responsible for the overarching Health and Safety policies and procedures and we confirm that we comply with the Health
and Safety at Work Act 1974 and all associated regulations and codes. During the year we provided mindfulness training to everyone
at the Firm.
Community
Cenkos continues to operate its Charity Committee, mandated to identify, implement and oversee the Firm’s charitable initiatives.
Having enjoyed a prior and successful relationship with Great Ormond Street Hospital Children’s Charity throughout 2021, it was felt
that the Firm should look to support a smaller charity where it could potentially make more of an impact. Therefore, at the beginning
of 2022, the Charity Committee asked employees to propose a new charity for Cenkos to support more in line with that philosophy
and the Cenkos ethos. Several proposals were submitted which fitted the criteria and eventually, after deliberation, Project 17 was
chosen.
Project 17 is a London based charity which works to end destitution among migrant families with no recourse to public funds. It works
with families experiencing exceptional poverty to improve their access to local authority support, providing advice, advocacy and
support for individuals, building capacity in other organisations and campaigning for the improved implementation of statutory
support. Members of staff have assisted Project 17 in small administrative ways as well as financially and we look to continue to do
so into 2023.
In addition to the ongoing financial support of Project 17, Cenkos has supported over 25 other charities throughout the year for 37
members of staff with its popular staff charity matching and sponsorship scheme whereby it will donate to employees’ personal
fundraising initiatives or indeed match employees’ personal charitable donations up to £250 per annum.
The Charity Committee has an ongoing remit to explore further ways in which it can promote and support other charitable and wider
community initiatives and will report on its progress accordingly.
Governance
Good governance breeds success. It requires effective oversight, sound decision making and a tone from the top that permeates
through the organisation facilitating the right ‘tone from above’. This in turn shapes our culture and results in the best outcome for
our clients and reduction of potential harm to them, to us and to the market more generally. Governance, purpose and culture are
central to how we embed environmental and social considerations into business and risk decisions and the Board is fully committed
in driving the ESG agenda throughout the Company.
As an AIM Company, Cenkos has adopted the QCA Code of Corporate Governance for Smaller Companies. Further disclosures in this
regard are set out on page 22. The Board has a female independent Chairman in Lisa Gordon and an additional two independent Non-
Executive Directors, providing a significant level of independence on the Board and going beyond the minimum requirements for
compliance with the QCA Code in this respect. The Chief Executive Officer and other Executive Director are from the Sales and
Corporate Finance sides of the firm respectively, providing an appropriate balance of skills and outlooks to drive an appropriate
compliant culture within the Company.
On 5 December 2022, the Company announced Ben Procter’s recruitment and appointment as Chief Financial Officer and Chief
Operating Officer to further strengthen the senior management team. It is intended that Ben will join the Board as an Executive
Director once regulatory approval from the FCA is received. Previously Ben held a number of different roles at UBS AG in both the UK
and the US, including Co-Head of Finance Technology, Head of Service Management & Billing and most recently leading Global Finance
Transformation.
The Governance framework includes not only the Board and its sub-committees noted on page 25 but also a number of executive
management committees providing diversity of thought and ensuring that the Company conducts its business appropriately
considering not just the commercial aspects of a relationship but also the reputational and regulatory aspects as well. These structures
together with the close engagement of the Board allow our employees to excel and to be able to harness the entrepreneurial spirit
on which the Company was originally created.
Further details on the Company’s Governance and Risk Management framework are set out on page 22 to 25.
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Whistleblowing policy
Whilst we believe we have a robust governance framework in place and a commitment to doing the right thing, where these high
standards have not been met, we encourage our workforce to speak up and come forward through our Whistleblowing Policy.
This report was approved by the Board of Directors on 9 March 2023 and signed on its behalf by:
Julian Morse
Chief Executive Officer
9 March 2023
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Governance policy and framework
Governance policy
The Board recognises the importance of high standards of corporate governance and considers that the Company’s success is
enhanced by the imposition of a strong corporate governance framework.
The Board has agreed to apply the Quoted Companies Alliance Corporate Governance Code (the QCA Code). The QCA Code is based
around 10 broad principles of good corporate governance, aimed at delivering growth, maintaining a dynamic management
framework and building trust. The application of the QCA Code requires Cenkos to apply these 10 principles and to explain how the
Company meets these principles. The Board does not consider there to be any practices that differ from the expectations set by the
QCA Code during 2022.
The following report sets out how Cenkos has measured itself against these principles in terms of the substance and form of good
Corporate Governance.
Principle one
Establish a strategy and business model which promotes long-term value for shareholders.
Over the past 19 years the Company has established a successful platform that has been profitable at an underlying level in every year
of its existence and delivered strong returns to shareholders. The prime strategy is to become the pre-eminent UK institutional broker
to growth companies and investment funds admitted to trading or listed on a UK market. We aim to achieve this through:
Understanding the needs of our clients, enabling us to deliver successful fund raisings and advice through an innovative and
entrepreneurial approach.
Delivering sustainable, diversified and growing income streams.
Growing revenues by retaining existing clients and gaining new clients.
Creating a strong team culture aimed at attracting and developing talent.
Using our strong balance sheet and capital position to grow the business.
Managing costs and risks carefully.
Upholding a strong ethical and regulatory culture.
Delivering increased shareholder returns.
We have an integrated business model that allows the combined expertise from within the Company to work together for the benefit
of our clients.
Our business is about providing an integrated service to our clients. We offer advice and access to equity finance at all stages of our
clients’ development and provide corporate finance, Nomad, Sponsor and broking, research and execution services to small and mid-
cap growth companies and investment funds across a wide range of sectors.
Further details concerning the Company’s strategy and business model can be found on pages 4 to 7.
Principle two
Seek to understand and meet shareholder needs and expectations.
The Board believes that it is important to maintain open and constructive relationships with shareholders and is committed to this.
During the year, the Chief Executive Officer was in contact with the Company’s major institutional shareholders and was responsible
for ensuring that shareholders’ views were communicated to the Board. As well as being in dialogue with the institutional
shareholders, the Chief Executive Officer was in dialogue with several significant individual shareholders. Internally, staff also hold a
significant proportion of the Company’s ordinary share capital and briefings and updates are provided to staff.
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Principle three
Considering wider stakeholder and social responsibilities.
The Board recognises that the long-term success of the Company is reliant upon open communication with its internal and external
stakeholders: shareholders, clients, regulators and of course its employees. The Company has close ongoing relationships with a broad
range of its stakeholders and provides them through regular contact with the opportunity to raise issues and provide feedback.
Further details concerning the Company’s wider stakeholder and social responsibilities can be found on pages 18 to 21.
Principle four
Embed effective risk management throughout the organisation.
The Board is responsible for determining the Company’s risk appetite and for ensuring that the risk management framework is
appropriate and operating effectively. The day-to-day management of risk has been delegated by the Board to the senior managers
across the Firm overseen by the Executive Committee and is underpinned by proportionate systems and controls. The management
of risk is embedded into the Company’s culture where each employee takes on the responsibility of ensuring that the management
of risk is built into all their working practices. The Company has enhanced its risk management framework with assistance from
Promontory Financial Group via the implementation of an automated system to assist management on reviewing its risk.
Further details concerning the principal risks faced by the Company can be found on pages 12 to 14 of the Strategic Report.
Principles five and six
Maintain the Board as a well-functioning, balanced team led by the Chairman; and that the Directors have the necessary up to date
experience, skills, and capabilities.
The Board currently consists of two Executive and three Non-executive Directors. In addition, at the end of 2022, the Company
recruited a new Chief Financial Officer/Chief Operating Officer to further strengthen senior management who it is intended will join
the Board as an additional Executive Director, subject to FCA approval. The Directors collectively bring a broad range of business
experience to the Board which is considered essential for the effective management of the Company. The Board is responsible for
strategic and major operational issues affecting the Company. It reviews financial performance, regulatory compliance, monitors key
performance indicators and will consider any matters of significance to the Company, including corporate activity. Certain matters
can only be decided by the Board, and these are contained in the recently updated terms of reference of the Board. The Board also
delegates certain responsibilities to committees of the Board and reviews the decisions of those committees at each of its meetings.
The day-to-day management of the Company’s business is delegated to the Chief Executive Officer. He is assisted by the Executive
Committee. The Non-executive Chairman is responsible for leading the Board, ensuring its effectiveness, and steering its agenda. The
Non-executive Chairman and other Non-executive Directors are all considered to be independent and bring independent judgement,
knowledge, and experience to the Board.
Further details concerning the current Directors and their biographies can be found on pages 26 to 27.
Principle seven
Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.
An evaluation of the performance of the Board was undertaken by the Non-executive Chairman of the Board in respect of 2022 and
following a similar process to that adopted previously. The evaluation process included Board members having individual meetings
with the Non-executive Chairman and also completing a questionnaire. The review assessed board structure, functionality, objectives,
meetings, administration, management, strategy, and succession planning and followed on from progress made against some previous
recommendations including relating to Board interaction with the business, employee engagement, management information flow
and infrastructure management. The Chairman assessed the feedback and reported her findings to the Board. Some of the main
themes and recommendations resulting from the Board evaluation included:
Continuing to develop the Board’s greater focus on more strategic issues;
Further improvements to the operational management information to the Board to facilitate appropriate analysis, including
benchmarking data; and
Further consideration on succession planning and Board exposure to the senior and middle management levels.
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In addition, RSM UK Risk Assurance Services conducted an internal audit review of the Company’s corporate governance procedures,
concluding that Cenkos has an effective corporate governance framework in place and identifying only a small number of medium or
low rated items, all of which have since been considered by the Board and addressed as deemed appropriate.
Further details including an explanation of how the evaluation was undertaken and the results of evaluation can be found on page 30.
Principle eight
Promote a corporate culture that is based on ethical values and behaviours.
The corporate governance arrangements that the Board has adopted are designed to instil a firm ethical code to be followed by all
staff. The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company which in
turn will impact the Company’s performance. The Company strives to achieve and maintain an open and respectful dialogue with
shareholders, clients, regulators, and its staff. The importance of sound ethical values and behaviours is crucial to the ability of the
Company to successfully achieve its corporate objectives.
This culture is reinforced by all staff having to also undertake compulsory mandatory online training on various regulatory and
compliance related issues as well as on ethical values and behaviours with the Chartered Institute for Securities and Investment.
During the year, all line managers undertook relevant training on managing in the regulatory environment and conduct risk.
To assist in strategic and organisational change initiatives, corporate cultural developments, and employee engagement the Company
undertakes a regular employee feedback survey, the result of which are reviewed by the Board.
Further details including culture and engagement can be found on page 16.
Principle nine
Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.
The ultimate authority for all aspects of the Company’s activities rests with the Board. The Board has adopted appropriate delegations
of authority which set out matters which are reserved for the Board. Certain responsibilities have been delegated to Board
committees. The respective Chairman of those committees reports on those committee issues to the Board. The Chairman is
responsible for the effectiveness of the Board, while the Chief Executive Officer is responsible for the executive running of the
Company on a daily basis.
The Board retains full and effective control over the Company and holds regular meetings at which financial, operational, regulatory
and other reports are considered. The Board is responsible for the Company’s strategy and key financial and compliance issues.
Further details concerning the reporting and governance structure of the Board and its committees can be found on pages 28 to 42.
Principle ten
Communicate how the Company is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
All shareholders can raise questions with the Board at the Annual General Meeting and are encouraged to attend. The results of all
General Meetings are announced as soon as possible following the conclusion of the meeting. All resolutions proposed at the 2022
Annual General Meeting were passed by shareholders with majorities of over 99% of those voting.
All result announcements, annual reports, regulatory news announcements and items detailing recent transactions concerning clients
are made available on the Company’s website (www.cenkos.com).
The Chief Executive Officer meets whether by video, conference call or in person with the main institutional shareholders and also
with the larger individual shareholders at least twice a year (normally after the announcement of the interim and final results of the
Company). The staff also hold a significant proportion of the Company’s ordinary share capital and briefings and updates are also
provided to staff by the Chairman and Chief Executive Officer.
Further details detailing how the Company maintains a dialogue with shareholders and other relevant stakeholders can be found on
pages 16 to 17.
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Governance framework
The Board is authorised to manage the business of the Company on behalf of the shareholders and in accordance with the Company’s
Articles of Association. This is achieved through its own decision-making and by delegating responsibilities to the Board committees
and to the Chief Executive Officer to manage the business through management committees.
The diagram below sets out the main components of the Company’s governance framework, the delegations of authority by the
Board together with an indication of how this achieves the required levels of independent oversight.
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Board of Directors (as at 9 March 2023)
Executive Directors
Julian Morse — Chief Executive Officer
Julian was appointed as an Executive Director of the Company in May 2020 and to the position of Chief Executive Officer in May 2021.
Julian was previously the Head of the Cenkos Growth Companies Team, having led that team since 2016. He was one of the founding
members of the team having joined Cenkos in 2006. He has over 25 years’ experience in the City where he has advised and raised
equity on IPO’s and secondary fund raisings for a wide range of companies across a broad range of sectors. Previously, Julian was a
Director at Beeson Gregory and Evolution Securities.
Jeremy Osler — Executive Director
Jeremy was appointed as an Executive Director to the Company in May 2021.
Jeremy is Head of Corporate Finance and acts as General Counsel, having joined the Company in 2016. Jeremy has over 20 years of
corporate finance experience across multiple sectors covering both equity capital markets and M&A transactions for AIM quoted and
Main List companies. Prior to joining Cenkos, Jeremy was at J.P. Morgan for 8 years and latterly Hannam & Partners for 2 years, holding
both corporate finance and legal positions, and prior to that he was a corporate solicitor at Ashurst where he qualified.
Non-executive Directors
Lisa Gordon — Non-executive Chairman
Lisa was appointed as a Non-executive Director and Chairman of the Company in June 2020.
Lisa has more than 25 years of board experience, in both Executive and Non-Executive roles at both listed and private companies. Lisa
is a Non-executive Director of Alpha FX Group plc, an AIM quoted corporate foreign exchange specialist and she chairs their
Remuneration Committee. She is also the Senior Independent Non-executive Director at M&C Saatchi Plc, the listed global marketing
group and a Non-executive Director of Magic Light Pictures Limited, a leading film and television production company and JPMorgan
Mid Cap Investment Trust plc.
Lisa has held a number of senior and board positions. She was a founding director and the Corporate Development Director of Local
World plc (prior to its acquisition by Trinity Mirror) (2012-2015); the Chief Operating Officer of Yattendon Group (2007-2013), a private
conglomerate; and the Director of Corporate Development of Chrysalis Group PLC, the media group (1994-2004). Prior to this, Lisa’s
early background was in financial services as an analyst with County NatWest Securities.
Lisa is the Chairman of the Company's Nomination Committee and is a member of the Audit, Risk and Compliance Committee, as well
as the Remuneration Committee.
Andrew Boorman — Non-executive Director
Andrew was appointed a Non-executive Director of the Company in November 2017.
Andrew has extensive financial services experience and has worked with main boards covering remuneration, finance and risk issues
as well as setting business strategies and delivering change management programmes. Since 2013, he has acted as an independent
consultant and has advised boards on strategic human resources issues including conduct, governance, risk management and
remuneration. He has previously held a number of senior roles at Henderson Group plc over a period of 10 years, including Managing
Director, Corporate Services and Group HR Director. Andrew is also a director of BESTrustees Limited which provides governance
services and advice to a number of companies.
Andrew is Chairman of the Remuneration Committee and a member of the Audit, Risk and Compliance Committee as well as the
Nomination Committee.
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Jeremy Miller — Non-executive Director
Jeremy was appointed a Non-executive Director of the Company in July 2019.
Jeremy has over 30 years' investment banking experience working for leading financial services firms. He held senior roles at
Centerview Partners (2009 - 2016) including London Chief Operating Officer, Simon Robertson Associates (2004 - 2009), Dresdner
Kleinwort Wasserstein (1991 - 2003) including being Head of the European M&A Department and James Capel (1985 -1991). Prior to
1985 he qualified as a Chartered Accountant with KPMG and had been seconded to The Takeover Panel. He was previously a Non-
executive Director at Countryside Properties and chaired their Audit and Remuneration Committees. He is Chairman of The National
Merchant Buying Society, one of the UK's largest co-operative societies, a Non-Executive Director and Chairman of the Audit
Committee of CPP Group plc and a Non-Executive Director, Chairman of the Finance & Investment Committee and member of the
Audit Committee of This Land Limited.
Jeremy is Chairman of the Audit, Risk and Compliance Committee and a member of the Remuneration Committee as well as the
Nomination Committee.
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The Board
Chairman and Chief Executive Officer
The Chairman is responsible for leading the Board, ensuring its effectiveness and steering its agenda. The Chairman is also responsible
for promoting a healthy culture of challenge and debate and to also ensure the successful implementation of good corporate
governance practices with the Board. The Chairman evaluates the performance of the Chief Executive Officer and is responsible for
succession planning and leads the Nomination Committee. Lisa Gordon served as the Non-executive Chairman of the Company
throughout 2022.
The Chief Executive Officer is responsible for the executive running of the Company on a daily basis and making recommendations to
the Board on strategy. Julian Morse has served as the Chief Executive Officer since May 2021.
The Board
The Board is responsible for the stewardship of the Company, overseeing this strategy, conduct and affairs to create sustainable value
and growth.
The Directors collectively bring a broad range of business experience to the Board, which is essential for the effective running of the
Company. This is achieved through its own decision-making and by delegation of certain responsibilities to Board committees and by
authority to manage the business to the Chief Executive Officer.
The Board is satisfied that each of the Directors is able to allocate sufficient time to the Company to discharge their responsibilities
effectively.
All Directors receive regular updates and training on legal, regulatory and governance issues. External advisers present to the Board
regularly on thematic topics, providing training that is relevant to the business and to keep them abreast with developments in
governance and AIM regulations. During the year, this included advice from Travers Smith LLP, Simmons & Simmons LLP, Promontory
Financial Group LLP and Spark Advisory Partners Limited (the Company’s NOMAD). At each Board meeting the Board also receives
regular updates from the Chief Executive Officer, CFO and Head of Finance, and the Head of Compliance and throughout the year
presentations were also made to the Board from each of the operating businesses from within the Company.
All Directors have access to the Company’s NOMAD, Company Secretary, legal advisers and auditors and are able to obtain
independent advice from other external professionals as and when required. The Directors receive internal and external training
tailored to the specific requirements.
All Directors are properly briefed to enable them to discharge their duties and are provided with detailed Board packs which are
distributed several days in advance of formal scheduled meetings.
The Board meets a set number of times a year and at other times as necessary to discuss formal matters reserved for its decision
which include:
The Company’s strategy and its associated risks.
Acquisition, disposals, closures and other material transactions.
Risk management strategy and risk appetite.
Financial performance, annual budgets, periodic forecasts, half year results, the Annual Report and Accounts and dividends.
Changes to the Company’s capital structure.
Appointments to and removals from the Board and committees of the Board.
Remuneration policy.
Communication with shareholders.
Conflicts of interest relating to Directors.
The biographical details, skills and experiences of each current serving Director is set out on pages 26 to 27.
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Board and committee composition
Board composition
Lisa Gordon, Andrew Boorman, Jeremy Miller, Julian Morse and Jeremy Osler have all served throughout the year and the current
composition of the Board reflects good corporate governance by having a majority of independent Non-executive Directors in place.
On 5 December 2022, the Company announced Ben Procter’s recruitment and appointment as Chief Financial Officer and Chief
Operating Officer to further strengthen the senior management team. It is intended that Ben will join the Board as an Executive
Director once regulatory approval from the FCA is received. Previously Ben held a number of different roles at UBS AG in both the UK
and the US, including Co-Head of Finance Technology, Head of Service Management & Billing and most recently leading Global Finance
Transformation.
Board and committee attendance
The Board is responsible for overseeing the management of the business and for ensuring that high standards of corporate governance
are maintained throughout the Company. There were seven scheduled and two ad-hoc Board meetings held during the year.
The attendance at Board Meetings during the year is set out below.
Position
Board
Committee
At 31 December 2022 or
retirement/resignation
if earlier
Maximum
possible
attendances
Meetings
attended
Audit, Risk and
Compliance
Committee
Remuneration
Committee
Nomination
Committee
Considered
Independent
Julian Morse
Chief Executive Officer
9
9
Jeremy Osler
Executive Director
9
9
Lisa Gordon
Non-executive Chairman
9
8
Y
Andrew Boorman
Non-executive Director
9
9
Y
Jeremy Miller
Non-executive Director
9
9
Y
Chairman
Member
Balance and independence
During the year ended 31 December 2022, the Board maintained a balance of Executive and Non-executive Directors.
The QCA Code requires that a board should have an appropriate balance between Executives and Non-executive Directors and should
have at least two independent Non-executive Directors. The primary objective is that a board should be of sufficient size that the
requirements of the business can be met and that an appropriate combination of Executive and Non-executive Directors should be
maintained to ensure that no one individual or small group can dominate the board’s decision making. As at 31 December 2022, there
were five Directors: the Non-executive Chairman, the Chief Executive Officer, an Executive Director and two further Non-executive
Directors.
The Board considers that the Non-executive Directors bring considerable valuable and relevant experience to the Board and that they
act in the best interests of the Company, free of any conflicts or undue influence. The Board was satisfied that the Non-executive
Directors remained independent throughout the year.
The Board has determined that the formal appointment of a senior independent Director is unnecessary given the structure and
composition of the Board. In addition, given the size of the Company and active dialogue with the institutional shareholders, the Board
considers such an appointment would not provide any further benefit in assisting with shareholder communication.
Directors’ appointments and time commitment
The Company’s Articles of Association require that at every Annual General Meeting all Directors offer themselves for either election
or re-election to the Board.
Non-executive Directors’ letters of appointments stipulate that they are required to commit sufficient time to carry out their duties.
The Board reviews the time commitments of any external appointments that each Non-executive Director may have prior to
recommending their election or re-election to shareholders.
Board induction and training
A personalised induction programme is provided to all new Directors in order to help familiarise them with their duties, the Company’s
culture, strategy, and business model. The programme includes:
Meeting all members of the Board and its committees.
One-to-one meetings with other senior management from all parts of the business.
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Access to Board, committee reports, corporate documents, and minutes.
Meeting with relevant external advisers including the Nomad, the external and internal auditors.
A series of technical updates and briefing sessions are arranged with internal and external sources to ensure the ongoing training
requirements of Directors have been satisfied.
Board evaluation
An evaluation of the performance of the Board and its committees for 2022 has been undertaken.
The Non-Executive Chairman of the Board undertook the formal internal annual evaluation process of the Board and that of its
committees, following a similar process to that adopted previously. The evaluation process included Board members having individual
meetings with the Non-executive Chairman and also completing a questionnaire. The questionnaire was designed to be proportionate
to the nature and size of the Company and followed on from progress made against some previous recommendations including
relating to Board interaction with the business, employee engagement, management information flow and infrastructure
management.
The Chairman assessed the feedback and reported her findings to the Board. The outcomes and principal findings were discussed with
the Board and, where appropriate, an action list of objectives, targets and aspirations for the coming year is made in order that the
Board can measure its effectiveness in achieving those targets throughout the year.
Some of the main themes and recommendations resulting from the Board evaluation include:
Continuing to develop the Board’s greater focus on more strategic issues;
Further improvements to the operational management information to the Board to facilitate appropriate analysis, including
benchmarking data; and
Further consideration on succession planning and Board exposure to the senior and middle management levels.
In addition, RSM UK Risk Assurance Services conducted an internal audit review of the Company’s corporate governance procedures,
concluding that Cenkos has an effective corporate governance framework in place and identifying only a small number of medium or
low rated items, all of which have since been considered by the Board and addressed as deemed appropriate.
Board committees
The Board has delegated certain of its responsibilities to its Audit, Risk and Compliance Committee, Remuneration Committee and
the Nomination Committee. Each committee has appropriate terms of reference which have been recently updated, reviewed and
approved by the Board.
The respective chairman of each committee formally reports to the Board on the activities undertaken by the committee.
Audit, Risk and Compliance Committee (ARCC)
The ARCC is responsible for monitoring the Company’s risk framework, internal control environment and financial reporting. The ARCC
reports to the Board on the Company’s full and half-year results. In addition, the committee has direct and unrestricted access to the
internal and external audit functions and sets the scope of their work and monitors their effectiveness, independence and objectivity.
The ARCC Report is set out on pages 38 to 40.
Remuneration Committee
The Remuneration Committee’s primary responsibility is to review salary levels, discretionary variable remuneration and the terms
and conditions of service of the Executive Directors. The Remuneration Committee also reviews the compensation decisions made in
respect of all other senior managers and those employees determined to be Remuneration Code Staff under the FCA’s Remuneration
Code rules.
The Remuneration Committee is also responsible for determining the overarching remuneration policy of the Company, including the
quantum of variable remuneration after taking into account relevant regulatory and corporate governance developments.
The Remuneration Committee Report is set out on pages 32 to 37.
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Nomination Committee
The Nomination Committee is responsible for identifying and nominating candidates, for making recommendations on Board
composition, and for considering succession planning requirements to ensure that the requisite skills and expertise are available to
the Board to address future challenges and opportunities.
The Nomination Committee Report is set out on pages 41 to 42.
Management Committees
To assist the Chief Executive Officer and senior management in the discharge of their duties, the Company has a number of
management committees. These committees are set out on page 25 under the Governance Framework.
This report was approved by the Board on 9 March 2023 and signed on its behalf by:
Lisa Gordon
Non-executive Chairman
9 March 2023
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Remuneration Committee report
Introduction
The Remuneration Committee has delegated responsibility from the Board for developing the Company’s remuneration strategy and
for setting the remuneration of its Executive Directors and senior managers.
Members and meetings
The Remuneration Committee comprises all Non-executive Directors and is chaired by Andrew Boorman. As set out in his biography
on page 26, Andrew has significant and related experience advising main boards on strategic human resource issues including
governance, risk management and remuneration. Lisa Gordon and Jeremy Miller served as members of the Committee throughout
the year. The members of the Remuneration Committee have significant experience in corporate governance and financial matters in
the financial services sector.
The Remuneration Committee met four times during the year. The Chief Executive Officer, CFO, Head of Human Resources, Head of
Compliance, Head of Finance, the other Executive Director and relevant senior managers are invited to attend these meetings as
appropriate but are not present when their own remuneration is discussed. The secretary of the Remuneration Committee is the
Company Secretary. External advisers are consulted on remuneration and regulatory issues, when appropriate.
The composition and attendance of the Remuneration Committee for the year ended 31 December 2022 is set out below:
Maximum possible attendances
Meetings attended
Andrew Boorman - Chairman of the Committee
4
4
Lisa Gordon
4
4
Jeremy Miller
4
4
Role of the Remuneration Committee
The Remuneration Committee’s primary responsibility is to review salary levels, discretionary variable remuneration (including share
awards) and the terms and conditions of service of the Executive Directors. It also reviews the compensation decisions made in respect
of all other senior managers and those employees determined to be Material Risk Takers under the FCA’s Remuneration Code rules
and any other member of staff whose remuneration is in the same range. The Remuneration Committee is also responsible for
determining the overarching remuneration policy applied by the Company for all staff, including share awards, the quantum of
variable remuneration and the method of delivery, taking into account relevant regulatory and corporate governance developments
including the Senior Managers and Certification Regime (SMCR).
Remuneration Policy
The Company’s remuneration policy is designed to attract and retain individuals of the highest calibre and probity and reward them
so that they are motivated to grow and share in the long-term development and success of the business. The Remuneration
Committee considers the need to balance all stakeholders’ interests and to be flexible in its approach to determining the remuneration
policy. A substantial proportion of the total remuneration is performance related and therefore aligned to performance measures
that benefit all shareholders. Historically, a significant component of variable compensation has been paid in shares whose vesting is
also deferred over three years although this has not been the case in 2022 given the reduced levels of cash bonus. Awards are subject
to malus and/or clawback and customary good/bad leaver provisions.
Remuneration consists of two components, fixed remuneration consisting of a base salary together with benefits and variable
remuneration based on a performance (financial and non-financial) related bonus award and share option awards. The performance
related bonus award is a discretionary award which reflects the extent of the Company meeting its targets and objectives and is,
therefore, substantially reflective of the Company’s overall financial performance. The quantum of the discretionary bonus pool is
determined by the Committee considering the corporate financial and non-financial performance, overall Company culture, attitude
to risk as well as having regard to the need to balance all stakeholder interests. All individual awards are made at the discretion of the
Remuneration Committee reflecting the individual’s performance, after risk factors (including behaviour and conduct) have been
considered. This policy applies to all revenue generating and non-revenue generating staff. Some elements of variable remuneration
have historically been subject to the terms and conditions of the Company’s bonus share deferral scheme whereby a portion of
variable remuneration is deferred and vests in shares or cash over a three-year period. However, this has not been the case in 2022
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due to the reduction in levels of cash bonuses. Cash bonuses paid to Material Risk Takers are subject to clawback provisions in line
with the FCA’s Remuneration Code requirements.
A review of the Firm’s Remuneration Policy is undertaken annually. To ensure that employees had an equity share interest in the
Company, thereby aligning their interests with the shareholders, awards were made under the under the existing Company Share
Option Plan to staff and also under a newly established Long Term Incentive Plan for Executive Directors’ and senior managers. All the
awards contain a performance hurdle and the purpose of the awards under the Long-Term Incentive Plan is to incentivise the
management team in delivering increased shareholder value. Further details are set out on pages 39 to 40.
Regulatory considerations applying to the Company’s remuneration approach
The Company’s approach to remuneration takes account of relevant legislation, regulation, corporate governance standards and
guidance issued by regulators and shareholder representative bodies. For 2022, the Company followed the MIFIDPRU Remuneration
Code.
Remuneration for the year
The Directors’ remuneration and other benefits (medical and life assurance cover) during the year in respect of the performance of
their role as a Director for the year ended 31 December 2022 are set out in the table below.
Base salary
/fees 2022
Annual
Performance
Award 2022
Vested cash
received in
respect of the
2019 deferred
bonus scheme
Value of vested
share awards
received in
respect of the
deferred bonus
scheme and the
short term
incentive plan(2)
Payment
In lieu of
Notice
Benefits 2022
Total 2022
Total 2021
£000s
£000s
£000s
£000s
£000s
£000s
£000s
£000s
Executive Director
Jim Durkin (1)
–
–
–
–
–
–
–
318
Julian Morse
275
–
20
341
–
3
639
1,533
Jeremy Osler
200
–
–
37
–
3
240
345
NE Director
Lisa Gordon
150
–
–
–
–
–
150
150
Andrew Boorman
71
–
–
–
–
–
71
66
Jeremy Miller
71
–
–
–
–
–
71
66
767
–
20
378
–
6
1,171
2,478
1. Retired as an Executive Director on 12 May 2021.
2. The value of the vested awards to Julian Morse and Jeremy Osler are based on the share price as at the date of vesting. In respect of the deferred bonus scheme for
2018 and 2020, this was 08 April 2022 and amounted to £138,417 and £37,335 respectively. In respect of the Short-Term Incentive Plan this was as at 30 April 2022 and
for Julian Morse this amounted to £202,170. None of the LTIP or CSOP awards vested during the year.
The Company has a workplace pension scheme (the “Scheme”) with Aviva. During the year, the Company contributed £1,320 in
respect of Julian Morse and £1,320 in respect of Jeremy Osler to the Scheme. The Non-executive Directors are ineligible for this
Scheme. The Company does not operate any other pension scheme on behalf of its employees or Directors.
Basis of determining annual performance awards for Executive Directors
The annual performance related bonus award is a significant variable component of the overall remuneration of Directors and senior
managers and is at the sole discretion of the Remuneration Committee. The level of performance award that is made to the Executive
Directors is based upon a number of performance measures that are assessed by the Remuneration Committee including:
The financial performance of the Company;
Shareholder returns;
Risk factors including conduct and SMCR adherence; and
Individual performance measures:
Strategic development of the Company;
Leadership and culture; and
Development of the executive team.
In respect of the Chief Executive Officer, the performance award also takes into account his contribution within the Growth Companies
Team.
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Remuneration principles used in recruitment
The Company may choose to compensate potential employees for remuneration forfeited by them as part of the recruitment process,
where amounts are reasonable and there is tangible proof in support of forfeiture. The Company will not make any form of guaranteed
variable compensation commitment above and beyond buyout provisions (which are subject to the employee remaining in
employment) or that fall outside the exceptional circumstances envisaged within the relevant regulation.
Payments for loss of office
The Remuneration Committee may agree additional exit payments where such payments are made in good faith to discharge existing
legal obligations, or as damages for breach of such obligations, or in settlement (but not necessarily admission) or compromise of any
claim. No payments for loss of office were made in 2022 (2021: £nil).
Non-executive Directors’ remuneration
Non-executive Directors’ remuneration is set by the Board based upon the recommendation of the Executive Directors considering
comparisons with peer group companies, experience, and responsibility of the individual and the level of work carried out in the year.
Remuneration comprises an annual fee with reimbursement of all reasonable expenses. The Chief Executive Officer has recommended
that if any additional work is undertaken by a Non-executive Director (at the request of the Company) then a further fee may be paid
to them covering the additional work and time required. Any such work is usually undertaken providing the Board is fully satisfied
that the Non-executive Director is independent, and objectivity is not compromised in any matter. There were no additional fees paid
in 2022 (2021: £nil).
The annualised base fee for 2022 for the Non-executive Chairman is set at £150,000 and for the remaining Non-executive Directors’
is set at £66,000. Jeremy Miller and Andrew Boorman will also receive an additional fee of £5,000 for undertaking the chairmanship
of a board committee.
The Non-executive Directors’ base fees, and extra responsibility allowances for acting as chairman of a committee during the year,
are set out below.
Base fee
2022
Additional fee for acting as
Chairman of a Committee
2022
Total 2022
Total 2021
£000s
£000s
£000s
£000s
Lisa Gordon (1)
150
-
150
150
Andrew Boorman (2)
66
5
71
66
Jeremy Miller (2)
66
5
71
66
282
10
292
243
1. Within the base fee was £10,000 which was awarded in shares in the Company.
2. Within the base fee was £5,000 which was awarded in shares in the Company.
Directors’ service contracts
Executive Directors
The general principle is that all Executive Directors will have a rolling contract of employment with mutual notice periods of at least
six months. Service contracts do not contain any provision for compensation upon early termination as parties are expected to rely
on employment rights conferred by law.
The table below provides details of service contracts of the Executive Directors as at 31 December 2022.
Date of Appointment
Nature of contract
Notice period
from Company
Notice period
from Director
Next re-election
Executive Director
Julian Morse
13 May 2020
Rolling
6 months
6 months
2023
Jeremy Osler
12 May 2021
Rolling
6 months
6 months
2023
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Non-executive Directors
Non-executive Directors are engaged under letters of appointment, which are available for shareholders to view at the Company’s
registered office and will be available at the Annual General Meeting.
The table below provides details of the date of appointment of the Non-executive Directors together with the next election or re-
election date as at 31 December 2022.
Date of Appointment
Next election or re-election
Notice period by either party
Non-executive Directors
Lisa Gordon
25 June 2020
2023
3 months
Andrew Boorman
17 November 2017
2023
1 month
Jeremy Miller
22 July 2019
2023
1 month
Directors’ interests in share incentive plans and employee share plans
The Company has the following share incentive plans (the Non-executive Directors are ineligible for these) through which discretionary
share-based awards can be made:
Short Term Incentive Plan
The plan provides an award of restricted shares, which are subject to vesting restrictions and will generally be released over a two-
year period with 50% of the restricted share award being released after one year and the remainder being released after the second
year. The shares are subject to certain forfeiture conditions. 27 employees held restricted share awards in the plan.
The Executive Directors’ interest in the Company’s Ordinary Shares that are held in the Short-Term Incentive Plan as at 31 December
2022 are set out below.
Restricted Share Award
as at 31 December 2021
Awarded during
the year
Vested during
the year
Restricted Share Award
as at 31 December 2022
Executive Directors
Julian Morse
293,000
-
293,000
-
Jeremy Osler (1)
-
-
-
-
1. Appointed as an Executive Director on 12 May 2021.
Company Share Option Plan (CSOP)
The CSOP provides for the grant of HMRC tax advantage and non-tax advantage share options. As at 31 December 2022, a total of 84
employees held 6,060,000 HMRC tax advantaged and non-tax advantaged share options (2021: 4,372,500). These options were
granted with an option price of 73.5p over the ordinary shares in the Company and they will be exercisable after three years from the
date of grant if the total shareholder return (TSR) growth measurement over the three-year period exceeds 35%.
The Executive Directors’ interests in the Company’s Ordinary Shares that were awarded under the CSOP as at 31 December 2022 are
set out below.
Number of shares under
option as at 31 December
2021
Awarded during the
year
Lapsed during
the year
Vested during the
year
Number of shares under
option as at 31 December
2022
Executive Directors
Julian Morse
40,000
-
-
-
40,000
Jeremy Osler (1)
40,000
-
-
-
40,000
1. Appointed as an Executive Director on 12 May 2021.
Long Term Incentive Plan (LTIP)
Under the LTIP, Executive Directors and a number of senior managers of the Company have been granted nil cost options over ordinary
shares in the Company. The purpose of the awards is to ensure appropriate ongoing incentivisation of the new executive management
team and to align rewards with an increase in shareholder value. As at 31 December 2022, 13 employees held a total of 6,630,000
share options. The LTIP is based on a five-year period and each award is separated into three equal tranches. The vesting of the awards
is conditional on meeting a TSR growth measurement over a three, four and five-year period as detailed below:
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Tranche
Measurement Period
Performance Condition
Number of Awards that vest if the Performance Condition is
satisfied
Tranche 1
3 years from 1 January in the
year of grant
Tranche 1 TSR Growth is equal to or greater
than 50% of the base TSR of 66.8645p
Fixed number at grant equal to 33.3% of total and rounded down
to the nearest whole Award
Tranche 2
4 years from 1 January in the
year of grant
Tranche 2 TSR Growth is equal to or greater
than 75% of the base TSR of 66.8645p
Fixed number at grant equal to 33.3% of total and rounded down
to the nearest whole Award
Tranche 3
5 years from 1 January in the
year of grant
Tranche 3 TSR Growth is equal to or greater
than 100% of base TSR of 66.8645p
Balance of total Awards
There is a further two-year holding period requirement for Executive Directors and certain other senior managers during which any
ordinary shares held as a result of exercise of any award cannot be sold. The awards are subject to standard malus and clawback
provisions. Vesting awards will also be subject to an underpin whereby the Remuneration Committee will need to be satisfied that
vesting is warranted based on financial, compliance, culture and risk performance over the performance period. The Remuneration
Committee retains standard discretions in terms of the ability to amend or adjust the performance conditions if an event occurs which
means the original measure is no longer appropriate.
The Executive Directors’ interests in the Company’s ordinary shares that are awarded under the LTIP as at 31 December 2022 are set
out below.
Number of shares under
option as at 31 December
2021
Awarded during the
year
Lapsed during
the year
Vested during the
year
Number of shares
under option as at 31
December 2022
Executive Directors
Julian Morse
1,460,000
-
-
-
1,460,000
Jeremy Osler (1)
510,000
-
-
-
510,000
1. Appointed as an Executive Director on 12 May 2021.
Share Investment Plan (SIP)
The SIP is a HMRC approved plan and consists of free shares, partnership shares, matching shares and dividend shares. Under the
terms and conditions of the SIP, the free and matching shares are subject to certain forfeiture conditions if they are not held for three
years from the award date. 47 employees participate in the SIP.
The Executive Directors’ interests in the Company’s ordinary shares that are held in the SIP as at 31 December 2022 are set out below.
Shares held at
31 December 2021
Shares held as at
31 December 2022
Executive Directors
Julian Morse
18,842
18,842
Jeremy Osler (1)
8,274
8,274
1. Appointed as an Executive Director on 12 May 2021.
Save As You Earn Scheme (SAYE)
The SAYE is an HMRC approved plan. 35 employees have entered a three-year savings contract with an option to purchase a fixed
number of shares at the maturity date. If a participant stops saving at any time before the end of the savings term the option may
lapse.
The Executive Directors’ interests in SAYE options over ordinary shares in the Company as at 31 December 2022 are set out below.
Number held as at 31
December 2021
Number held as at 31
December 2022
Exercise price
Date of grant
Earliest
exercise date
Latest exercise
date
Executive Directors
Julian Morse:
44,698
44,698
40.27p
16 Nov 20
1 Jan 24
30 Jun 24
Jeremy Osler (1)
44,698
44,698
40.27p
16 Nov 20
1 Jan 24
30 Jun 24
1. Appointed as an Executive Director on 12 May 2021.
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Deferred Bonus Scheme
Historically, variable remuneration has been subject to the terms and conditions of the Company’s Deferred Bonus Scheme which
takes the form of a share award, which vests over a three-year period, although that has not been the case for 2022 given the reduced
level of cash bonuses. Further details on the Deferred Bonus Scheme can be found in note 23 of the Notes to the Financial Statements.
84 employees have deferred shares under this scheme.
The awards that had been made to the Executive Directors under the Deferred Bonus Scheme are set out below:
Deferred share
awards outstanding
as at
31 December 2021
Shares vested during
the year
Awarded during
the year
Deferred
share award as at
31 December 2022
Executive Directors
No of shares
No of shares
No of shares
No of shares
Julian Morse
363,160
185,795
276,006
453,371
Jeremy Osler (1)
93,470
50,114
99,832
143,188
1. Appointed as an Executive Director on 12 May 2021.
These awards will vest over a three-year period, one-third vesting on each of the anniversaries from the date of grant. The awards
that vested in 2022 are included within the remuneration for the year table on page 33.
Directors’ interests in ordinary shares
The Directors’ interests in the ordinary shares in the Company as at 31 December 2022 are shown on page 44 within the Directors’
report. To ensure appropriate alignment with the interests of our shareholders, Executive Directors, individually or with their
connected persons, are expected to satisfy a shareholding guideline of acquiring shares in the Company where that value at least
matches their basic salary within three years from their date of appointment which is being met.
This report was approved by the Remuneration Committee on 9 March 2023 and signed on its behalf by:
Andrew Boorman
Chairman of the Remuneration Committee
9 March 2023
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Audit, Risk and Compliance Committee report
Introduction
The Audit, Risk and Compliance Committee (“ARCC”) has delegated responsibility from the Board and is responsible for monitoring
the Company’s risk and regulatory framework, internal control environment and financial reporting.
Members and meetings
The ARCC is chaired by Jeremy Miller. As set out in his biography on page 27, as well as being a qualified accountant, Jeremy has recent
and relevant financial experience. Lisa Gordon and Andrew Boorman served as members of the Committee throughout the year. The
ARCC meets at least three times every year. Internal and external auditors are invited to attend all meetings. The CFO, Head of
Compliance, the Head of Finance and members of the Board are also invited to attend. The secretary of the ARCC is the Company
Secretary.
The composition and attendance of the ARCC for the year ended 31 December 2022 is set out below:
Maximum possible attendances
Meetings attended
Jeremy Miller - Chairman of the Committee
3
3
Andrew Boorman
3
3
Lisa Gordon
3
3
Roles and responsibilities
The Board has delegated certain responsibilities to the ARCC and the terms of reference of the ARCC are available on the Company’s
website. The key responsibilities of the ARCC include:
Monitoring the content and integrity of financial reporting.
Reviewing appropriateness of accounting estimates and judgements.
Reviewing the Company’s risk and compliance policies.
Reviewing the Company’s regulatory reporting procedures and relationship with the regulators.
Reviewing the Company’s risk appetite and making recommendations to the Board.
Reviewing and approving of financial and other risk limits and adherence to them.
Reviewing and challenging the Company’s process for the ICARA.
Reviewing the performance of the Internal Audit function.
Reviewing the performance of the External Auditors.
The ARCC reported to the Board on how it has discharged its responsibilities during the year. This has included reporting and making
recommendations on remedial action to address any matters or areas in the Company where the Committee has considered
improvements were required.
Significant issues and material judgements
In discharging its duties during the year, the ARCC considered the following significant issues in relation to the financial statements
for the year:
Ensuring revenue is recognised in the correct period where any corporate finance transactions that straddled reporting periods
to ensure compliance with the Company’s accounting policies, as explained in note 1 of the financial statements. There were no
issues with revenue recognition during 2022 or at the year-end;
The appropriateness of valuations of financial instruments, including the valuation of warrants and options held over AIM stocks,
classified as Level 3 in the fair value hierarchy. Valuation factors considered for these financial instruments classified as Level 3
include an option pricing model and associated inputs. Further detail is provided in note 24 of the financial statements; and
The appropriateness of the valuation of share-based payments. Valuation factors considered include the option pricing model
used to value these instruments and the associated inputs. Further detail is provided in note 23 of the financial statements.
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Risk management, compliance and internal controls
The Board is responsible for the overall adequacy of the Company’s system of internal controls and risk management. The Board has
delegated responsibility to the ARCC for reviewing and monitoring the effectiveness of the Company’s systems of risk management,
regulatory compliance and internal control.
The systems of internal control are designed to manage, rather than eliminate, risk. Consequently, these controls provide reasonable,
but not absolute, assurance against material misstatement or loss. The risk management and internal control framework in place
during the year was as follows:
Principal risks have been identified and evaluated by the Board (see Principal risks on pages 12 to 14). Significant risks were
identified and evaluated by the Senior Managers in the areas of business for which they held responsibility guided by the
Compliance and Finance Functions, and these formed the basis for the risk register compiled centrally and regularly reviewed by
the ARCC. The Board inputted a top-down view of risks into this review. Actions to mitigate risks were a major focus of the Board
with delegated accountabilities to relevant management.
The Compliance Function’s review of regulatory and internal control requirements including the risk register form the basis for
testing the efficacy of the control environment and informing internal audit planning. Oversight and challenge have been
maintained by a series of reviews at the ARCC and the Board.
The identification and evaluation of the risks from the above processes are aligned with the ICARA and the Recovery and Resolution
Plan.
Following a review, the ARCC has concluded that the risk management process supports the Board’s summary of the principal risks
presented in the Strategic report on pages 12 to 14 of this Annual Report.
Internal audit
The internal audit function, outsourced to RSM (UK) LLP throughout the year, provided independent assurance over the adequacy
and effectiveness of the systems of internal control throughout the Company.
During the year a number of internal audit reviews were undertaken, and the findings were presented in the first instance directly to
the Chairman and, subsequently, to the ARCC.
External auditor independence
The ARCC ensures the external auditor has longstanding safeguards in place to avoid the possibility that objectivity and independence
could be compromised. These safeguards include the auditor’s report to the ARCC on the actions it takes to comply with professional,
ethical, and regulatory requirements and best practice which are, designed to ensure its independence.
The annual appointment of the auditor by shareholders in the Annual General Meeting is a fundamental safeguard to auditor
independence, but beyond this, the ARCC monitors and controls additional, non-audit, work provided by the auditor. The ARCC
considers there are some areas of work that are prohibited by the external auditor, including where:
The provision of the services would contravene any relevant regulation or ethical standard.
The external auditor is not considered to be expert providers of the non-audit service.
The provision of such services by the external auditor creates a conflict of interest for the Board.
The potential services provided are considered to be likely to inhibit the auditor’s independence or objectivity of auditors.
The ARCC has stipulated that the fees paid to the auditor for any individual item of non-audit work should not exceed £20,000 without
approval by the ARCC. Any such service should be agreed by the ARCC prior to commencement of the services and be accompanied
by terms regarding liability, cost and responsibilities.
External auditor performance and appointment
The ARCC evaluates the performance of the auditor annually factoring the objectivity and effectiveness of the audit, the quality of
formal and informal communications with the ARCC and the views of management.
The ARCC has confirmed that it is satisfied with the performance of BDO LLP and has recommended to the Board that the auditors
be-reappointed, and that there will be a resolution to that effect at the forthcoming Annual General Meeting.
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External auditor’s fees for audit and non-audit services
The ARCC evaluates the fees charged in light of the performance of the auditor.
2022
2021
£000’s
£000’s
Fee payable to the Company’s auditor for the audit of the Company’s annual accounts
262
230
Other assurance services
45
47
Non-audit services
-
-
Total fees payable to the Company’s auditor and their associates
307
277
This report was approved by the ARCC on 9 March 2023 and signed on its behalf by:
Jeremy Miller
Chairman of the Audit, Risk and Compliance Committee
9 March 2023
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The Nomination Committee Report
Introduction
The Nomination Committee has delegated responsibility from the Board for ensuring that the Board has the right balance and skills
to ensure that the Board, its committees and the senior management can discharge its respective duties and responsibilities.
Members and meetings
The Committee comprises all Non-executive Directors and was chaired by Lisa Gordon. Andrew Boorman and Jeremy Miller served as
members of the Committee throughout the year. The members of the Committee have significant experience in corporate governance
and financial matters in the financial services sector.
The Chief Executive Officer and relevant senior managers are invited to attend these meetings as appropriate. The secretary of the
Committee is the Company Secretary. External advisers are consulted on issues, when appropriate.
The Committee met twice during the year.
The composition and attendance of the committee for the year ended 31 December 2022 is set out below:
Maximum possible attendances
Meetings attended
Lisa Gordon
2
1
Andrew Boorman
2
2
Jeremy Miller
2
2
Role of the committee
The Committee’s primary roles are:
To keep the Board’s composition in terms of competency, skills, experience, background and diversity under regular review in
response to changing business needs.
To identify the competency and experience required for specific Board appointments and conduct the search and selection
process.
To recommend the appointment of new candidates to the Board and the renewal, where appropriate, of existing Non-executive
Director appointments.
To review, support and challenge senior management development and succession plans in order to ensure the executive team
is equipped to oversee governance, financial controls and risk management.
Nomination Committee activity
The Committee focussed on senior management team development.
In December 2022, it was announced that Ben Procter had joined the firm in the role of Chief Financial Officer and Chief Operating
Officer to further strengthen the senior management team. It is intended that Ben will join the Board as an Executive Director once
regulatory approval from the FCA is received. Previously Ben held a number of different roles at UBS AG in both the UK and the US,
including Co-Head of Finance Technology, Head of Service Management & Billing and most recently leading Global Finance
Transformation.
Diversity
The Board seeks to ensure it remains an effective driver of diversity in its broadest sense, having regard to gender, ethnicity,
background, skill set and breadth of experience, both in Executive and Non-executive appointments and in recruitment practices
throughout the Company.
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Induction Process
On joining the Board, new members receive a comprehensive induction, involving meetings with management and external advisers.
If required, they will also receive training and regulatory updates to enable them to undertake their roles. The programme is tailored
for their role.
This report was approved by the Nomination Committee on 9 March 2023 and signed on its behalf by:
Lisa Gordon
Chairman of the Nomination Committee
9 March 2023
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Statement of Directors’ responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required
to prepare the group financial statements in accordance with UK adopted international accounting standards. Under company law
the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that period. The Directors are also required to prepare financial
statements in accordance with rules of the London Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with UK adopted international accounting standards subject to any
material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company
and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial
statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Responsibility statement
We confirm that to the best of our knowledge:
The financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company; and
The Strategic report on pages 1 to 18 includes a fair review of the development and performance of the business and the position
of the Company together with a description of the principal risks that it faces.
This statement was approved by the Board of Directors on 9 March 2023 and signed on its behalf by:
Julian Morse
Chief Executive Officer
9 March 2023
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Directors’ report
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and
regulations.
The Directors serving during the year ended 31 December 2022 and up to the date of signing the financial statements present their
report on the affairs of the Company (Cenkos Securities plc) together with the audited financial statements and the associated
independent auditor’s report thereon, for the year ended 31 December 2022.
Cenkos is an independent, specialist institutional securities company, focussed on small and mid-cap companies and investment funds.
Its principal activity is institutional stockbroking.
Business review and future developments
A review of the Company’s operations and performance during the financial year, setting out the position at the year end, significant
changes during the year and the principal risks to which the Company is exposed is provided within the Strategic Report, along with
an indication of the outlook for the future. Our risk management processes are outlined in more detail in the Governance section and
in note 24 of this Annual Report. The Directors have considered section 172 of the Companies Act 2006 and are aware of their wider
responsibilities not only to the Company and its members but also to a wider group of stakeholders; further details concerning the
Company’s considerations of stakeholder engagement can be found on pages 16 to 17.
Results and dividends
The results for the year are set out in the income statement on page 54.
An interim dividend of 1.00p per share was paid to shareholders on 11 November 2022 (2021: interim dividend of 1.25p per share).
The Directors recommend the payment of a final dividend of 0.5p per share (2021: final dividend of 3.0p per share).
The total interim and final dividends in respect of the year ended 31 December 2022 are 1.5p (2021: 4.25p). Subject to approval at
the Annual General Meeting to be held on 10 May 2023 the final dividend will be paid on 22 June 2023 to the shareholders on the
register at the close of business on 26 May 2023.
Directors
The names of the current serving Directors of the Company are set out on pages 26 to 27. These Directors have served throughout
the year or since their respective appointments to the Board.
At the Annual General Meeting to be held on 10 May 2023, Lisa Gordon, Jeremy Miller, Andrew Boorman, Julian Morse and Jeremy
Osler will offer themselves for re-election to the Board.
Share capital
The Company’s share capital comprises one class of ordinary share with a nominal value of 1p per share. As at 31 December 2022,
56,694,783 (2021: 56,694,783) ordinary shares were in issue. No new shares were issued by the Company in 2022 (2021: nil). The
total voting rights in the Company as at 31 December 2022 was based on 56,694,783 (2021: 56,694,783) ordinary shares.
Directors’ interests in ordinary shares
The Directors’ interests in the share capital of the Company as at 31 December 2022 are set out below.
Number held as at
31 December 2022
Percentage interest as at
31 December 2022
Number held as at
31 December 2021
Percentage interest as at
31 December 2021
Directors
Executive Director
Julian Morse (1)
1,674,927
2.95%
1,637,750
2.89%
Jeremy Osler (1) (2)
226,133
0.40%
151,371
0.27%
Non-executive Directors
Lisa Gordon
100,000
0.18%
100,000
0.18%
Andrew Boorman
128,152
0.23%
108,152
0.19%
Jeremy Miller
55,000
0.10%
55,000
0.10%
1. This includes interests in shares held in the Company’s share schemes.
2. Appointed as an Executive Director on 12 May 2021.
The Directors have confirmed that none of their ordinary shares have been used for security or have had a charge, lien or other encumbrance placed upon them.
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Directors’ interests in options
The Directors’ interests in options over ordinary shares in the Company as at 31 December 2022 are set out on pages 35 to 37 in the
Directors’ Remuneration Report.
Directors’ indemnities
Directors’ and officers’ liability insurance is maintained by the Company for all directors and officers of the Company as permitted by
the Companies Act 2006. The Company indemnifies its directors against any claim made against them as a consequence of the
execution of their duties as a director of the Company, to the extent permitted by law and in accordance with its Articles of Association.
The indemnity was in force during the year and up to the date of approval of the financial statements.
Substantial shareholders
In addition to the Directors’ interests shown above, the Directors have been notified of substantial shareholders, set out below, who
have an interest in 3% or more of the Company as at 31 December 2022.
Holder
Number held at 31 December 2022
Percentage interest at 31 December 2022
Canaccord Genuity Group Inc
5,500,000
9.70%
Bridger Limited (Stewart family holding)
5,477,162
9.66%
Jim Durkin
4,677,343
8.25%
Nick Wells
2,214,174
3.91%
Purchase of own shares
The Company has Employee Benefit Trusts (EBTs) to service its share schemes and the Deferred Bonus Scheme. The EBTs are funded
by the Company and have the power to acquire shares from the Company or in the open market to meet the Company’s future
obligations. During the year ended 31 December 2022, the EBTs purchased an aggregate of 5,032,023 (2021:3,853,079) ordinary
shares in the Company. The number of shares purchased represents 8.9% of the Company’s issued share capital as at 31 December
2022 (2021: 6.8%) for an aggregate consideration of £3.40m (2021: £3.07m).
No shares were repurchased by the Company for Treasury (2021: nil).
Employment policies
The Company’s employment policies are based upon a commitment to equal opportunities from selection and recruitment processes
through training, development, appraisal and promotion.
The Company provides its employees with information on matters of concern to them so that their views can be factored into account
when making decisions that are likely to affect their interests.
Employees participate in the success of Cenkos through performance-based incentive schemes including the use of employee share
plans.
Political donations
During the year the Company made no political donations (2021: £nil).
Charitable donations
During the year the Company made charitable donations of £18,284 (2020: £20,133).
Energy and carbon emissions
This is the Company’s third year reporting on carbon emissions under UK Streamlined Energy & Carbon Reporting Regulations (SECR).
The Company’s business is predominantly conducted from our offices in London and Edinburgh and as an office-based business our
activities are generally not regarded as having a high environmental impact. The Company’s total carbon emissions for the year have
been determined by multiplying the Company’s total consumption of electricity for the year together with a relevant conversion factor
for Scope 2 electricity.
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Energy use and emissions
Energy KWh
Factor per unit
kgCO2e/kWh*
Emissions teCO2e
Percent
2022 change
from 2021
2021
Energy and emissions
London Office (Scope 2)
168,865
0.19338
32.655
93.3%
(1.09%)
33.014
Edinburgh Office (Scope 2)
12,148
0.19338
2.349
6.7%
(43%)
3.489
Total
181,013
35.004
100.0%
Intensity ratio: emissions per FTE
Business metric:
92
3.37%
89
Intensity ratio units
kgCO2e/FTE
Intensity ratio value
0.380
(7.32%)
0.410
* BEIS June 2022 Conversion factor
Intensity ratio
The emissions intensity ratio is based on the average number of full-time equivalents (FTE) over the year. We consider the FTE as the
most relevant business metric for the purposes of ongoing intensity ratio reporting.
Energy efficient initiatives that have been undertaken
The Company is working to identify and focus on initiatives where it can make positive difference and some of the existing
sustainability initiatives include:
Move to more modern premises in Edinburgh
Ongoing replacement and updating of energy inefficient IT hardware.
Encouragement and assistance given to staff to cycle to work.
Increased use of video conferencing.
Flexible and remote working initiatives to reduce the need for staff to commute.
Beyond reducing our carbon emissions, a number of other initiatives have been put in place over the last few years to further minimise
our environmental impact, including the reduction of single use plastic, water saving devices, and recycling and waste management
initiatives.
Further details concerning the Company’s progress in reducing its impact on the environment can be found on page 18 of the 2022
ESG Report.
Going concern
The Board reviewed the financial information prepared by management to support the fact that it is appropriate to adopt the going
concern basis in preparing the financial statements presented in this Annual Report and Accounts. This included financial forecasts
and modelling which reflected the current and anticipated trading performance for the period to December 2024. These forecasts
were then stress tested to reflect the possible continuation of the adverse trading conditions experienced in 2022 and its impact on
fee income. The resulting market uncertainty arose from the ongoing war in Ukraine, restrictions in energy and gas supplies leading
to high levels of inflation and interest rate increases designed to combat inflation, raising the possibility of recession. Following this
detailed assessment, the Board concluded that it is appropriate to adopt the going concern basis in preparing the financial statements
in this Annual Report and Accounts. Further details in relation to going concern are set out in note 1 of the notes to the financial
statements.
Disclosure of information to the Auditor
Each of the persons who are directors at the date of approval of this Annual Report and Accounts confirms that:
So far as the director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
They have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of that information.
The confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
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Independent auditor
BDO LLP has expressed its willingness to continue in office as auditor and a resolution to re-appoint BDO LLP as auditor of the Company
will be proposed at the forthcoming Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held at 6.7.8 Tokenhouse Yard, London EC2R 7AS on 10 May 2023 at 9.30 am. A
copy of the Notice of the Annual General Meeting together with an explanation of the Resolutions to be proposed is set out on pages
84 to 89.
If any changes are made to the holding of the Annual General Meeting these will in the first instance be detailed on the Company’s
website. Shareholders should visit the https://www.Cenkos/investors/agm for the latest updates.
This report was approved by the Board of Directors on 9 March 2023 and signed on its behalf by:
Jeremy Osler,
Company Secretary
9 March 2023
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Independent Auditor’s report to the members of
Cenkos Securities Plc
Opinion on the financial statements
In our opinion the financial statements:
give a true and fair view of the state of the Company’s affairs as at 31 December 2022 and of its loss for the year then ended;
have been properly prepared in accordance with UK adopted international accounting standards; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Cenkos Securities Plc (the ‘Company’) for the year ended 31 December 2022 which
comprise the Income Statement, the Statement of Comprehensive Income, the Statement of Financial Position, the Cash Flow
Statement, the Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international
accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to
continue to adopt the going concern basis of accounting included:
We have reviewed the directors trading and cash flow forecasts for a period of at least 12 months from the date when the financial
statements are authorised for issue and substantiated key inputs into forecasts to supporting evidence;
We have considered the ability of the directors to forecast accurately by comparing actual performance to forecasts in the prior
year;
We have challenged the directors assessment including their stress test analysis and reverse stress testing, to determine the
impact on liquidity and risk posted to the Company in respect of going concern;
We have critically assessed the assumptions used by the directors in making their assessment using historical financial information
or external sources as relevant and have considered whether the events or conditions that impact going concern give rise to
management bias;
We have reviewed the regulatory capital requirements and headroom calculations at year end and performed procedures to test
the integrity of the information being used such as the inputs, Managements Internal Capital Adequacy and Risk Assessment
(ICARA) and regulatory reports; and
We have read the disclosures in the financial statements regarding the directors going concern assessment and assessed whether
it met the requirements of the financial reporting framework and was in line with our understanding gained throughout the audit.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
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Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
Overview
Key audit matters
2022
2021
Revenue Recognition – Placing Fees
Revenue Recognition – Retainer Fees
x
Revenue Recognition – Market Making
x
Valuation of Options and Warrants
Revenue Recognition – Retainer Fees is no longer considered to be a key audit
matter as a result of the decreased level of judgement required in determining the
revenue recognition thereof.
Materiality
Financial statements as a whole
£301k (2021: £557k) based on 1.5% (2021: 1.5%) of revenue.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal
control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a
risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in
the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How the scope of our audit addressed the key audit matter
Revenue Recognition - Placing Fees (Note 1,2(c) and 3)
Revenue is a key area for the users of the financial statements, as it is a
strong indicator of performance. Revenue arises from corporate finance
fees, nomad, broking and research, and execution services. Recognised
within the corporate finance revenue stream are placing fees. Placing fees
are received when Cenkos facilitate a placement of shares for a client.
As placing fees are recognised at a point in time when the obligations under
the contract have been fulfilled, there is judgement involved in determining
when each performance obligation has been met.
We consider there is a risk that if the placement takes place around the year
end, the revenue is not recognised in accordance with the contractual
entitlement, particularly in relation to significant deals occurring at or
around financial year end. In addition, there is a potential fraud risk as there
may be an incentive to recognise revenue early to improve performance.
For these reasons we considered the revenue recognition from placing fees
to be a key audit matter.
Our audit procedures included the following:
We read the accounting policies for placing fees and assessed the
appropriateness against the requirements of IFRS 15;
We obtained a list of placing fees recognised prepared by management and
agreed this to the trial balance at as 31 December 2022;
For all placing fees, we agreed the date revenue was recognised by agreeing to
correspondence or external announcements of the completion of deals and
general meetings to gain assurance over the point in time of revenue
recognition;
We tested that revenue was recorded in the correct period by selecting a
sample of transactions recorded around the year end (both in December 2022
and January 2023) and, with reference to source documents (such as
engagement letter, external announcements, invoices and bank receipts),
inspected that the revenue was recorded in the period in which the
performance obligations were satisfied.
Where the revenue was settled through Stock in Lieu of Fees (SILOF), we agreed
this to share certificates or platform confirmation, agreeing fair value to price
on day of placing;
Where a transaction had a variable consideration component, we considered
management's assessment of variable consideration arising under IFRS 15. We
reviewed management's assessment of the contractual terms and the
variability in the amount of the consideration receivable including the
assessment of the probability of the variable consideration and its subjectivity
to significant reversal giving rise to variable consideration constraint;
Where there were amendments to fees since the date of the signed
engagement letter, we have obtained alternative evidence to support fee rates,
including an updated engagement letter or email correspondence with clients.
Key observations:
Based on our procedures performed, we did not identify any matters which would indicate that placing fee revenue is not materially recognised in accordance with
the requirements of applicable accounting standards
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Revenue Recognition – Market Making (Note 1 and 3)
Revenue is a key area for the users of the financial statements, as it is a
strong indicator of performance. Revenue arises from corporate finance
fees, nomad, broking and research, and execution services. Recognised
within the execution services revenue stream are realised and unrealised
gains and losses on market making activities.
The calculation of realised and unrealised gains and losses is driven by
reporting from the third-party service provider and the trading system.
These processes are largely automated and provides the Cenkos Finance
team with a Transaction Report (TR).
Outside of the above-mentioned automated process, there are a number of
manual adjustments made to the data extracted via the TR by the finance
team, before the journals are recognised within the accounting system.
We have therefore considered there to be a specific risk around the manual
adjustments not being complete or accurate.
There is also a potential fraud risk as there is incentive to make adjustments
that will inflate revenue in order to improve performance.
For these reasons we considered the revenue recognition from market
making to be a key audit matter.
Our audit procedures included the following;
We gained an understanding of the processes and controls, including IT controls
around the end-to-end market making revenue process and evaluated the
design and implementation of key controls. We tested the design and
effectiveness of the control relating to a sample of daily reconciliations
between the transaction systems, in order to identify potential issues between
the data transfer;
We obtained and reviewed the Service Organisation Controls reports in respect
of the third-party service organisation and the trading system, for any relevant
matters that could affect the reliability thereof.
We read the accounting policies for market making income and assessed the
suitability against the requirements of IFRS 15;
We obtained management’s reconciliation of the TR report to the financial
statements and agreed this to the trial balance as at 31 December 2022;
For all material manual adjustments we:
-
obtained an understanding of the business rationale behind these
adjustments, including why the balances are not included within the
transaction systems; and
-
tested the adjustments, through recalculation and agreement to
supporting documentation, including holding certificates and exchange
rates;
We considered the completeness of the adjustments through review of the
prior year reconciliation, as well as knowledge obtained from other areas of the
audit.
With the assistance of our IT audit specialist team members we performed
testing around the transaction systems in order to obtain comfort over the
transfer of data between these two systems;
We recalculated the gain or loss on one market making transaction during the
year, in order to obtain assurance over the design and operating effectiveness
of the automated process within the transaction system;
We agreed the year end position to a confirmation received directly from the
third party service organisation.
Key observations:
Based on our procedures performed, we did not identify any matters which would indicate that market making revenue is not materially recognised in accordance
with the requirements of applicable accounting standards
Valuation of options and warrants (notes 1, 2(b) and 17)
Financial instruments, including options and warrants, are received by the
Company in lieu of fees.
During 31 December 2021, the financial instrument valuations were
prepared by managements experts using a Monte Carlo
simulation.
During 31 December 2022, there was a change and the financial
instrument valuations have been prepared by management, using a
Binomial Tree model.
There is a potential risk of material misstatement in the financial
instrument valuations as the valuation of level 3 financial instruments are
based on unobservable inputs and as such are subject to estimation
uncertainty. Therefore this was considered to be a key audit matter.
Our audit procedures included the following:
We obtained the in-house valuation reports prepared by management and
agreed these to the trial balance as at 31 December 2022. We assessed the
competency of management, in order to obtain assurance that they have the
appropriate skills and resources to prepare the valuations;
With the assistance of our internal valuations experts, we obtained an
understanding of the valuation methodology used by management and tested
that the valuation techniques and assumptions were appropriate;
We tested the key inputs and assumptions in the model, such as volatility, by
agreeing them to third party evidence, such as warrant instrument
documentation;
We tested that the valuation methodology applied is in accordance with the
International Private Equity and Venture Capital (“IPEV”) valuation guidelines;
and
We checked that the change in valuation methodology was disclosed in the
financial statements.
Key observations:
Based on our procedures performed, we did not identify any matters which would indicate that assumptions and judgements used by management in valuing the
options and warrants were inappropriate.
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Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality
as follows:
Company Financial Statements
2022
£’000
2021
£’000
Materiality
301
557
Basis for determining materiality
1.5% of revenue
Rationale for the benchmark applied
We considered that users of the financial statements would typically focus on an activity-based measure.
Given the prominence of revenue as reflected in the Company’s trading updates to the market, and revenue
being the key benchmark used by the stakeholders to assess the performance of the Company, we concluded
that revenue is the most appropriate basis of materiality.
Performance materiality
210
389
Basis for determining performance materiality
70% Materiality
On the basis of our experience with the entity (including managements attitude towards identifying and
responding to risk, the overall control environment, and the level of expected misstatement), our own risk
assessment and planned audit procedures, we determined that a performance materiality of 70% of
materiality was appropriate.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £6,000 (2021: £13,000).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic report or the Directors’
report.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been
received from branches not visited by us ; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
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Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates,
and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. We
considered the significant laws and regulations to be Companies Act 2006, UK adopted International Accounting Standards and the
Financial Conduct Authority’s regulations.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements. Our tests included:
agreement of the financial statement disclosures to underlying supporting documentation;
Enquiries of management and those charged with governance including consideration of known or suspected non-compliance
with laws and regulations and fraud; and
review of minutes of board meetings throughout the period and correspondence with the relevant regulators for any instances
of non-compliance with laws and regulations.
We assessed the susceptibility of the financial statements to material misstatement including fraud and considered these to be the
risk of fraudulent revenue recognition, the valuation of options and warrants and the risk of management override of controls.
Our procedures in response to the above included:
The procedures set out in the key audit matters section of our report; and
In addressing the risk of management override of controls, testing journals identified that met a defined risk criteria to supporting
documentation and evaluating whether there was evidence of bias by the Directors that represented a risk of material
misstatement due to fraud.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. The engagement partner
has assessed and confirmed that the engagement team collectively had the appropriate competence and capabilities to identify or
recognize non-compliance with laws and regulations.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations
in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we are to become aware of it.
A
further
description
of
our
responsibilities
is
available
on
the
Financial
Reporting
Council’s
website
at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Neil Fung-On (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
9 March 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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Financial Statements
Income statement
For the year ended 31 December 2022
2022
2021
Note
£ 000's
£ 000's
Continuing operations
Revenue
3
20,260
37,225
Other operating expense
4
(2,158)
(87)
Administrative expenses
(20,745)
(33,034)
Operating (loss) / profit
(2,643)
4,104
Investment income - interest income
5
109
17
Finance costs - interest on lease liability
6
(169)
(171)
Share of post-tax profits of equity-accounted associates
-
-
(Loss) / profit before tax from continuing operations for the year
8
(2,703)
3,950
Tax
9
462
(552)
(Loss) / profit after tax for the year
(2,241)
3,398
Attributable to:
Equity holders of Cenkos Securities plc
(2,241)
3,398
Basic earnings per share
11
(4.9)p
7.1p
Diluted earnings per share
11
(4.9)p
6.0p
The notes on pages 58 to 83 form an integral part of these financial statements.
Statement of comprehensive income
For the year ended 31 December 2022
2022
2021
£ 000's
£ 000's
(Loss) / profit for the year
(2,241)
3,398
Total comprehensive (expense) / income for the year
(2, 241)
3,398
Attributable to:
Equity holders of Cenkos Securities plc
(2,241)
3,398
The notes on pages 58 to 83 form an integral part of these financial statements.
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Statement of financial position
As at 31 December 2022
2022
2021
Notes
£ 000's
£ 000's
Non-current assets
Property, plant and equipment
12
409
398
Right-of-use assets
13
3,539
3,577
Deferred tax asset
20
1,525
1,154
Investments in subsidiary undertakings
14
1
1
Investments in equity-accounted associates
15
100
-
5,574
5,130
Current assets
Trade and other receivables
16
8,334
10,547
Other current financial assets
17
4,811
7,231
Cash and cash equivalents
18
14,220
33,457
27,365
51,235
Total assets
32,939
56,365
Current liabilities
Trade and other payables
19
(5,684)
(23,027)
Other current financial liabilities
17
(1,312)
(1,915)
(6,996)
(24,942)
Net current assets
20,369
26,293
Non-current liabilities
Trade and other payables
19
(4,187)
(4,436)
Total liabilities
(11,183)
(29,378)
Net assets
21,756
26,987
Equity
Share capital
21
567
567
Share premium
3,331
3,331
Capital redemption reserve
21
195
195
Own shares
22
(9,654)
(8,360)
FVOCI reserve
-
(170)
Retained earnings
27,317
31,424
Total equity
21,756
26,987
The notes on pages 58 to 83 form an integral part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 9 March 2023.
They were signed on its behalf by:
Julian Morse
Chief Executive Officer
9 March 2023
Registered Number: 05210733
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Cash flow statement
For the year ended 31 December 2022
2022
2021
Notes
£ 000's
£ 000's
(Loss) / profit for the year
(2,241)
3,398
Adjustments for:
Investment income - interest income
(109)
(17)
Finance costs - interest on lease liability
169
171
Tax (credit) / expense
9
(462)
552
Depreciation of property, plant and equipment and ROU assets
611
649
Shares and options received in lieu of fees
(1,426)
(1,820)
Share-based payment expense
2,650
2,920
Operating cash (outflow) / inflow before movements in working capital
(808)
5,853
Decrease in net trading investments
3,243
804
Decrease in trade and other receivables
2,236
2,459
Decrease in trade and other payables
(16,855)
(1,742)
Net cash (outflow) / inflow from operating activities before interest and tax paid
(12,184)
7,374
Interest paid
(2)
-
Tax paid
(650)
(783)
Net cash (outflow) / inflow from operating activities
(12,836)
6,591
Investing activities
Interest received
65
4
Investment in equity-accounted associate
(100)
-
Purchase of property, plant and equipment
12
(138)
(150)
Net cash outflow from investing activities
(173)
(146)
Financing activities
Rent paid under lease arrangement
(795)
(754)
Dividends paid
10
(2,048)
(1,922)
Proceeds from sale of shares to employees on dividend reinvestment
15
20
Acquisition of own shares
(3,400)
(3,067)
Net cash used in financing activities
(6,228)
(5,723)
Net (decrease) / increase in cash and cash equivalents
(19,237)
722
Cash and cash equivalents at beginning of year
33,457
32,735
Cash and cash equivalents at end of year
14,220
33,457
The notes on pages 58 to 83 form an integral part of these financial statements.
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Statement of changes in equity
For the year ended 31 December 2022
Equity attributable to equity holders
Share
capital
Share
premium
Capital
redemption
reserve
Own
shares
held in
treasury
FVOCI
reserve
Retained
earnings
Total
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
At 1 January 2021
567
3,331
195
(6,607)
(170)
28,309
25,625
Profit for the year
-
-
-
-
-
3,398
3,398
Total comprehensive income for the year
-
-
-
-
-
3,398
3,398
Issue of shares to employees on dividend
reinvestment
-
-
-
12
-
8
20
Transfer of shares from share plans to
employees (note 22)
-
-
-
1,302
-
(1,302)
-
Acquisition of own shares (note 22)
-
-
-
(3,067)
-
-
(3,067)
Credit to equity for equity-settled share-
based payments (note 23)
-
-
-
-
-
2,839
2,839
Deferred tax on share-based payments
-
-
-
-
-
94
94
Dividends paid (note 9)
-
-
-
-
-
(1,922)
(1,922)
At 31 December 2021
567
3,331
195
(8,360)
(170)
31,424
26,987
Balance at 1 January 2022
567
3,331
195
(8,360)
(170)
31,424
26,987
Loss for the year
-
-
-
-
-
(2,241)
(2, 241)
Total comprehensive income for the year
-
-
-
-
-
(2, 241)
(2, 241)
Transfer of FVOCI reserve to retained
earnings
-
-
-
-
170
(170)
-
Issue of shares to employees on dividend
reinvestment
-
-
-
20
-
(5)
15
Transfer of shares from share plans to
employees (note 22)
-
-
-
2,086
-
(2,086)
-
Acquisition of own shares (note 22)
-
-
-
(3,400)
-
-
(3,400)
Credit to equity for equity-settled share-
based payments (note 23)
-
-
-
-
-
2,527
2,527
Deferred tax on share-based payments
-
-
-
-
-
(84)
(84)
Dividends paid (note 10)
-
-
-
-
-
(2,048)
(2,048)
At 31 December 2022
567
3,331
195
(9,654)
-
27,317
21,756
The notes on pages 58 to 83 form an integral part of these financial statements.
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Notes to the financial statements
1. Accounting policies
General information
Cenkos Securities plc is a public company limited by shares incorporated in England, United Kingdom under the Companies Act 2006
(Company Registration No. 05210733). These financial statements are presented in pounds sterling because that is the currency of
the primary economic environment in which the Company operates.
Basis of accounting
The Company’s financial statements are properly prepared in accordance with UK adopted International Accounting Standards. As
the Company has no material subsidiaries, the financial statements presented are for the Company only.
Adoption of new and revised standards
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective
from 1 January 2022, none of which have a material impact on these financial statements.
Going concern
The Company’s business activities, together with the factors likely to affect its future development and performance, the financial
position of the Company, its cash flows, capital and liquidity position are set out in the Strategic Report on pages 1 to 21. In addition,
note 24 includes the Company’s objectives, policies and processes for managing its capital, its financial risk management objectives,
details of its financial instruments and its exposures to credit risk and liquidity risk.
Despite the depressed market conditions experienced during 2022, in addition to being appointed by several new clients, Cenkos was
still able to complete transactions and assist its clients to raise funds, albeit that these transactions were of smaller size than in
previous years. Cenkos is reliant on the health of financial markets and investor sentiment. Moving into 2023, with no end in sight to
the war in Ukraine, increased levels of inflation and interest rates, the prospect of recession could mean the continuation of these
significantly reduced levels of market activity. For Cenkos, this could result in a reduction in fees generated from placing and corporate
finance activity and a decline in fair values of listed and unlisted equities, options and warrants. This has been considered when
conducting the impact analysis as part of the going concern assessment.
The principal risks to which the Company is exposed are set out on pages 12 to 14 against the backdrop of the current economic
climate.
In order to mitigate the risk associated with fluctuations in the financial markets, the Company operates a flexible business model
which links risk adjusted variable remuneration to corporate performance. Fixed costs are kept low and controlled, providing a strong
foundation. Cenkos is not reliant on external borrowings but is funded entirely by share capital and retained earnings. The business is
not capitally intensive. The trading book is tightly controlled by book limits and, apart from shares received in lieu of fees, is held for
market making purposes or to facilitate client business. Cenkos has a positive cash cycle and does not run any liquidity mismatches.
Cash is the largest asset on the statement of financial position and consequently its exposure to credit risk is largely due to its bank
deposits before risk weighting.
Management has also performed an impact analysis as part of its going concern assessment using information available to the date
of issue of these financial statements. As part of this analysis, a number of adverse scenarios have been modelled to assess the
potential impact on the Company’s revenue streams, in particular corporate finance fees, and on asset values, liquidity and capital
adequacy. In addition, a reverse stress test has been modelled to assess the stresses the balance sheet has to endure before there is
a breach of the relevant regulatory capital requirement or insufficient cash resources and includes an assessment of any relevant
mitigations management has within their control to implement. Having performed this analysis, management believes regulatory
capital requirements continue to be met and the Company has sufficient liquidity to meet its liabilities for the next 12 months from
the date when the financial statements were authorised for issue and that the preparation of the financial statements on a going
concern basis remains appropriate as the Company expects to be able to meet its obligations as and when they fall due for the
foreseeable future.
Cenkos Securities Employee Benefit Trust (EBT)
The Cenkos Securities Employee Benefit Trust (EBT), the Deferred Bonus Scheme EBT, the shares held in the Short-Term Incentive
Plan (STIP) and the Share Incentive Plan (SIP) are included in the Company only numbers and treated as an extension of the Company
rather than as a separate subsidiary company. The Company has no material subsidiaries as the remaining subsidiaries are all dormant
companies, and, as a result, the Company is able to take advantage of the exemption under section 405 of the Companies Act 2006
and prepare separate financial statements for the Company only, rather than prepare both consolidated and parent company financial
statements. This provides a clearer view of the financial performance and position of the Company for the users of the financial
statements.
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Associate
Where the Company has the power to participate in (but not control) the financial and operating policy decisions of another entity, it
is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently
associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other
comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for
losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).
Financial instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position when it becomes a party to
the contractual provisions of the instrument.
Financial assets
Financial assets are recognised and derecognised on trade date when the purchase or sale of an investment is under a contract whose
terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at
fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, any transaction costs that are
directly attributable to their acquisition or issue.
Financial assets are classified into the following specified categories: financial assets as “at fair value through profit or loss” (“FVTPL”)
and “amortised cost”. The classification depends on the nature and purpose of the financial assets and is determined at the time of
initial recognition.
Financial assets at fair value through profit or loss
Financial assets are classified as at FVTPL when they fail the contractual cash flow test or they are held in a business model that is to
manage them and evaluate their performance on a fair value basis.
Financial assets are classified as financial assets at FVTPL – held for trading where the Company acquires the financial asset principally
for the purpose of selling it in the near term, the financial asset is a part of an identified portfolio of financial instruments that the
Company manages together and has a recent actual pattern of short-term profit taking, as well as all derivatives that are not
designated as FVTPL and hedging instruments. Financial assets at fair value through profit or loss are stated at fair value, with any
resulting gain or loss recognised in the income statement. The net gain or loss recognised in the income statement incorporates any
dividend or interest earned on the financial asset.
Financial assets at amortised cost
The Company measures financial assets at amortised cost if the financial asset is held within a business model with the objective to
hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Company’s financial assets
at amortised cost includes trade receivables.
Trading investments
Trading investments pertain to investment securities which are held for trading purposes. These investments comprise both long and
short positions and are initially measured at fair value excluding transaction costs. Subsequently and at each reporting date, these
investments are measured at their fair values, with the resultant gains and losses arising from changes in fair value being taken to the
income statement. Trading investments include securities which have been received as consideration for corporate finance and other
services rendered.
Derivative financial assets
Derivative financial assets include equity options and warrants over listed securities earned by the Company as part of fee
arrangements. The Directors consider that the initial valuation reflects fair consideration for the services provided. All gains and losses
on subsequent valuations are recorded in the income statement.
Trade and other receivables
Trade and other receivables are measured at amortised cost using the effective interest method, less any impairment. The effective
interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial asset or,
where appropriate, a shorter period to the net carrying amount on initial recognition.
Impairment of financial assets
The Company recognises an allowance for expected credit losses (ECL) for all debt instruments not held at fair value through profit or
loss.
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For trade receivables and contract assets, the Company applies a simplified approach in calculating ECLs. Therefore, the Company
does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The
Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
Cash at bank
Cash at bank comprises cash on hand and demand deposits, which are subject to an insignificant risk of changes in value.
Derecognition of financial assets
The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company
neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the
Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains
substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial
asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities
Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL where the financial liability is held for trading.
A financial liability is classified as held for trading if:
It has been incurred principally for the purpose of disposal in the near future; or
It is part of an identified portfolio of financial instruments that the Company manages together and has a recent pattern of short-
term profit taking; or
It is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in the income statement. The net gain
or loss recognised in the income statement incorporates any interest paid on the financial liability.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value plus any transaction costs that are directly
attributable to the acquisition or issue of the financial liability.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest which is
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability or, where appropriate, a shorter period to the net carrying amount on initial recognition.
Trade and other payables
Trade payables are initially measured at fair value. At each reporting date, these trade payables are measured at amortised cost using
the effective interest rate method.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they
expire.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Company are recognised as the proceeds are received, net of direct issue costs.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. If re-issued, the
amount of consideration above the carrying amount is recognised in the share premium account, while if re-issued at an amount less
than the carrying amount the difference is recognised in retained earnings.
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
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The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable
is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured
reliably.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are reported at the rates of exchange prevailing at that date. Gains and losses
arising during the year on transactions denominated in foreign currencies are translated at the prevailing rate and included in the
income statement.
Investments in subsidiary undertakings
Investments in subsidiaries are stated at cost, less any provision for impairment.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases
with a duration of 12 months or less.
At the commencement date of a lease, the liability to make lease payments (i.e. the lease liability) and an asset representing the right
to use the underlying asset during the lease term (i.e. the right-of-use asset) is recognised. The interest expense on the lease liability
and the depreciation expense on the right-of-use asset are charged to the income statement and separately recognised.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. Depreciation is provided at
rates calculated to write off the cost, less estimated residual value, of each asset evenly over its estimated useful life as follows:
Leasehold improvements: Remaining term of the lease.
Fixtures and fittings: Three years.
IT equipment:
Three years.
The carrying values of property, plant and equipment are subject to annual review and any impairment is charged to the income
statement.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition
of goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity. Deferred tax on share-based payments is recognised in the income statement
up to the level of the income statement charge with any excess DTA above this being credited directly to equity
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current
tax assets and liabilities on a net basis.
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Revenue recognition
All revenue streams apart from Execution – net trading gains, are recognised in accordance with IFRS 15, to the extent that the fair
value of the consideration received or receivable is expected to flow to the Company. It represents amounts receivable for services
provided in the normal course of business, net of discounts, VAT and other sales related taxes. Where consideration includes financial
instruments or other non-cash items, revenue is measured at fair value using an appropriate valuation method.
Corporate finance
Revenue under this caption comprises commission earned on primary and secondary capital raising and fees earned in relation to
corporate advisory services, all of which are taken to the income statement at the point in time when, under the terms of the contract,
the conditions have been met such that Cenkos is entitled to the fees specified. For instance, commission earned on primary and
secondary fund raisings are recognised on the later of the trade date and the date of the client’s EGM to approve the transaction.
Nomad broking and research
Revenue under this caption comprises:
Retainer fees from clients for ongoing advice and research services are taken to the income statement over the period of time on
a straight-line basis when, under the terms of the contract, the conditions have been met such that Cenkos is entitled to the fees
specified.
Commission earned from trading shares on an agency basis, which is recognised at the point in time when receivable in
accordance with the date of the underlying transaction.
Execution – net trading gains
Revenue under this caption comprises:
Net trading gains, both realised and unrealised, on financial assets and financial liabilities, arrived at after taking into account
attributable dividends and directly related interest are taken to income on a trade date basis.
Dividend income from investments which is recognised when the shareholder’s right to receive payment has been established.
Other operating income/(expense)
Revenue under this caption comprises fair value gains and losses on options and warrants over securities which have been received
as consideration for corporate finance services rendered. The initial value of the options or warrants is posted to corporate finance
revenue and any gain or loss on subsequent re-measurement posted to this caption.
Segment reporting
IFRS 8 requires that an entity discloses financial and descriptive information about its reportable segments, which are operating
segments or aggregations of operating segments. Cenkos is managed as an integrated UK institutional stockbroking business and
although it has different revenue streams it has one consolidated reportable segment. It considers its activities to be subject to similar
economic characteristics. The internal reports used by the ExCo, as chaired by the Chief Executive Officer, for the purpose of
monitoring performance and allocating resources reflect that integration.
Share-based payments
The Company has applied the requirements of IFRS 2 “Share-based payments”. The Company issues equity-settled share-based
payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non- market-
based vesting conditions) at the date of grant. The cost of these awards is measured by reference to the fair value determined at the
grant date of the equity-settled share-based payments and the expected number of employees likely to become fully entitled to the
award. This cost is expensed on a straight-line basis over the vesting period. At each reporting date, the Company revises its estimate
of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of
the revision of the original estimates, if any, is recognised in the income statement such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to equity.
Deferred Bonus Scheme
In April 2015, Cenkos introduced a Deferred Bonus Scheme (the “Scheme”), the deferred element of any bonus award is to be held in
Cenkos ordinary shares in an EBT and released to the employee evenly split on each of the three anniversaries of deferral into the
Scheme. In 2019, the deferred element of any bonus was to be held in cash on the Company’s statement of financial position and
released in the same manner. The fair value of the cash deferral is recognised as a staff cost over a similar period with the recognition
of a corresponding liability. The Company has applied the requirements of IFRS 2: Share-based payments. The cost of equity-settled
and cash-settled awards are fair valued at the date of grant and expensed on a straight-line basis over the vesting period. The assets
and liabilities of the EBT have been accounted for as part of the Company. In 2022, the overall corporate performance has meant that
this year the scheme has not been run.
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Related party disclosures
The compensation of the key management personnel of the Company and their interests in the shares and options over the shares of
Cenkos Securities plc are set out in note 25.
Key management personnel comprise senior managers who are members of Executive Committee as they are able to exert significant
influence over the financial and operating policies of the Company.
2. Significant accounting judgement and key sources of estimation uncertainty
The preparation of financial statements in conformity with adopted IFRS requires the use of judgements, 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 estimates.
The key sources of estimation uncertainty and areas of critical accounting judgement that could have a significant effect on the
carrying amounts of assets and liabilities are set out below:
a) Equity-settled share-based payments
The fair value of share-based payments is calculated by Mercer Limited, a third-party valuation specialist, using a Monte Carlo
simulation. Inputs into the model are based on management’s best estimates of expected volatility and risk-free rate of return. As a
measure of implied volatility of the share-based payment is not available, a measure of the historic volatility of Cenkos’ share price
has been used as a proxy. This expected volatility reflects the assumption that the historical volatility over a period similar to the life
of the share-based payment is indicative of future trends, which may not necessarily be the actual outcome. Further details of the
Company’s share-based payment schemes are provided in note 23.
b) Valuation of derivative financial assets
Derivative financial assets comprise equity options and warrants over listed securities which include those received as non-cash
consideration for advisory and other services. Contractual obligations to pay away to third parties relates to the obligation to pay
away part of the proceeds on exercise or sale of warrants acquired. On the grant date, these instruments are fair valued. Thereafter,
at each period end, where there is no traded market price, they are revalued using a Binomial model. In previous years, a Monte Carlo
simulation has been used, however while both are appropriate methods of valuing these American style warrants and options, Cenkos
is able to value the instruments internally using a Binomial model. Inputs to the model include share price, risk free rate of return and
implied volatility. Although the underlying securities are listed, the equity options and warrants themselves are not. As a measure of
implied volatility of the instrument is therefore not available, either the historic volatility of the underlying securities share price or
that of a comparable company has been used as a proxy. The Directors consider that the initial valuation reflects fair consideration
for the services provided. Further details of the Company’s derivative financial assets are provided in note 24.
c) Revenue recognition under the Corporate Finance where a capital raising transaction straddles a period end
As stated in the accounting policies in note 1, commission earned on a primary and secondary capital raising is taken to the income
statement at the point in time when, under the terms of the contract, the conditions have been met such that Cenkos is entitled to
the fees specified. Where transactions straddle reporting periods consideration is given as to the point in time when Cenkos became
unconditionally entitled to the fees, usually the later of the trade date and the date of the client’s general meeting to approve the
transaction to ensure revenue is recognised in the correct accounting period.
d) Associate
During the year, the Company paid a total of £100,000 in exchange for a 20% interest in BB Technology Limited. Cenkos considers that
as it holds 20% of the voting rights, it has the power to exercise significant influence over BB Technology. Consequently, it is treated
as an associate and accounted for in the financial statements using the equity method.
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3. Revenue
Revenue is wholly attributable to the principal activity of the Company and arises solely within the UK.
Major Clients
In the year to 31 December 2022, no one client contributed more than 10% of Cenkos' total revenue. (2021: one client contributed
more than 10% of Cenkos' total revenue. The aggregate amount was £3.8m).
2022
2021
Revenue streams
£ 000's
£ 000's
Corporate finance
13,162
27,184
Nomad, broking and research
6,577
6,172
Total fee and commission income
19,739
33,356
Execution - net trading gains
521
3,869
20,260
37,225
Total fee and commission income may be further disaggregated as follows:
Services transferred at a point in time
13,941
28,178
Services transferred over a period of time
5,798
5,178
19,739
33,356
All of Cenkos’ contracts are either for the provision of services within the next 12 months or where revenue is recognised on the
satisfaction of a performance obligation for which the practical expedient in paragraph 121(a) of IFRS 15 applies.
Contract Assets
Contract Liabilities
2022
2021
2022
2021
Movements in contract balances
£ 000's
£ 000's
£ 000's
£ 000's
1 January
603
178
(646)
(549)
Transfer to trade and other receivables
(603)
(178)
-
-
Recognised as revenue during the period
247
603
646
549
Cash recognised in advance not recognised as revenue during the year
-
-
(606)
(646)
31 December
247
603
(606)
(646)
Contract assets and contract liabilities are included within “trade and other receivables” and “trade and other payables” respectively
on the face of the statement of financial position. They relate to accrued and deferred client retainer fee income for ongoing advice
and research services which under the terms of the contract, are billed either annually, half-yearly or quarterly in advance or in arrears.
These fees are recognised in the Income statement over the period-of-time to which they relate, once the conditions have been met
such that Cenkos is entitled to the fees specified which may not necessarily equal the cumulative payments received from clients at
each balance sheet date.
4. Other operating expense
2022
2021
£ 000's
£ 000's
Initial gain on warrants acquired
-
1,116
Fair value movements of options and warrants
(2,723)
(2,627)
Fair value movement in pay away to third party
565
1,424
(2,158)
(87)
Other operating expense includes the fair value gains and losses on options and warrants, which is shown separately from execution
– net trading gains under the revenue caption as the Directors believe this provides a clearer view of the performance of the business
by separating out from revenue the gains and losses on level 3 instruments.
In the prior year, a number of warrants were acquired from a third-party and it was agreed that were any value to be realised from
the sale or exercise of the warrants, a portion of the proceeds would be paid back to the third party. The fair value of this pay away is
disclosed under the caption pay away to third party in the note above.
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5. Investment income - interest income
2022
2021
£ 000's
£ 000's
Interest income generated from:
Cash and cash equivalents
96
1
Trade and other receivables
13
15
109
16
Interest income generated from cash and cash equivalents comprises the interest generated from instant access deposits held with
banks.
6. Finance costs - interest on lease liability
2022
2021
£ 000's
£ 000's
Interest on lease liability
165
171
Other interest
4
-
169
171
The interest on lease liability represents the incremental cost of borrowing applied to the lease liability.
7. Staff costs
2022
2021
£ 000's
£ 000's
Staff costs comprise:
Wages and salaries
8,657
18,700
Social security costs
1,609
3,148
Compensation for loss of office
33
388
Defined contribution pension
143
126
IFRS 2 share-based payments
2,528
2,840
Cash-settled deferred bonus payments relating to the current year
121
122
13,091
25,324
To comply with the Pensions Act, Cenkos has enrolled all qualifying employees into a defined contribution pension scheme. Under
this scheme, qualifying employees are required to contribute a percentage of their relevant earnings. The Company contributed 3%
of relevant earnings (2021: 3% of relevant earnings).
In prior years, Cenkos has run a Deferred Bonus Scheme for all employees. This will not be run in the current year. See note 23 for
further details of the impact of the scheme operated in prior years on the current year results.
2022
2021
The average number of employees (including executive Directors) was:
Corporate finance
23
21
Corporate broking
39
35
Support services
35
35
97
91
2022
2021
£ 000's
£ 000's
The total emoluments of the highest paid Director serving during the year were:
639
1,533
Details of the remuneration of key management personnel are set out in note 25. Details of the Directors' remuneration is set out in
the Remuneration Committee Report on pages 32 to 37.
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8. Profit for the year
2022
2021
Profit for the year has been arrived at after charging / (crediting)
£ 000's
£ 000's
Amortisation of right-to-use asset
484
481
Amortisation of intangible asset
-
33
Depreciation of property, plant and equipment
126
135
Auditors’ remuneration (refer to analysis below)
307
277
Staff costs (see note 7)
13,091
25,324
Net loss / (gain) from financial assets at FVTPL on trading book
97
(3,808)
Exchange differences recognised in profit or loss
(433)
(24)
Change in fair value of share options and warrants at FVTPL
1,739
(544)
Provision for impairment
2
83
The analysis of auditors' remuneration is as follows:
Audit of financial statements
262
230
Fees payable to the auditor and their associates for the audit of the annual accounts
262
230
Other assurance services
45
42
Other non-audit advisory services, including taxation
-
5
Total fees payable to the auditor and their associates
307
277
The movement in administrative expenses is further discussed on page 11 in the Review of Performance.
Other assurance services include the fee for the review of the Interim Financial Information and CASS limited assurance report.
A description of the work of the ARCC is set out on pages 38 to 40 of this Annual Report and includes an explanation of how auditor
objectivity and independence are safeguarded when non-audit services are provided by the auditor.
9. Tax
The tax (credit) / charge is based on the (loss) / profit for the year (see page 11 of the Review of Performance) and comprises:
2022
2021
£ 000's
£ 000's
Current tax
United Kingdom corporation tax at 19.00% (2021 - 19.00%) based on the profit for the year
-
885
Adjustment in respect of prior period
United Kingdom corporation tax at 19.00% (2021: 19.00%)
(7)
1
Total current tax
(7)
886
Deferred tax
Origination and reversal of temporary differences
(455)
(334)
Total deferred tax (refer to note 20)
(455)
(334)
Total tax (credit) / charge on (loss) / profit on ordinary activities from continuing operations
(462)
552
A reconciliation of the tax (credit) / charge for 2022 and 2021 and the accounting (loss) / profit multiplied by the standard rate of UK
corporation tax of 19.00% (2021: 19.00%), is set out below:
2022
2021
£ 000's
£ 000's
(Loss) / profit before tax from continuing operations
(2,703)
3,950
Tax on profit on ordinary activities at the UK corporation tax rate of 19% (2021: 19%)
(514)
751
Tax effect of:
Non-deductible expenses for tax purposes
38
45
Adjustment for loss relief not claimed
(187)
-
Fair value movements in relation to the DTA on share-based payments
368
(44)
Deferred tax rate change adjustment
(160)
(201)
Adjustment in respect of prior year current tax
(7)
1
Tax expense for the year
(462)
552
The effective tax rate for the Company during the year is 17% (2021: 14%).
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In addition to the tax expense presented in the income statement, the following amounts have been recognised through other
comprehensive income and directly in equity:
2022
2021
£ 000's
£ 000's
Statement of Changes in Equity (SOCIE)
Deferred tax charge / (credit) arising on share-based payments
84
(94)
10. Dividends
Amounts recognised as distributions to equity holders in the year:
2022
2021
£ 000's
£ 000's
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2021 of 3.0p (2020: 2.5p) per share
1,548
1,280
Interim dividend for the period to 30 June 2022 of 1.00p (June 2021: 1.25p) per share
500
642
2,048
1,922
A final dividend of 0.5p per share has been proposed for the year ended 31 December 2022 (2021: 3.0p). The proposed final dividend
is subject to approval at the Annual General Meeting and is not recognised as a liability as at 31 December 2022.
11. Earnings per share
2022
2021
From continuing operations
Basic earnings per share
(4.9p)
7.1p
Diluted earnings per share
(4.9p)
6.0p
2022
2021
£ 000's
£ 000's
Earnings from continuing operations
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity
holders
(2,241)
3,398
2022
2021
No.
No.
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
45,605,596
47,965,471
Effect of dilutive potential ordinary shares
-
8,298,363
Weighted average number of ordinary shares for the purpose of diluted earnings per share
45,605,596
56,263,834
In accordance with IAS 33, when calculating the weighted average number of shares for the purpose of basic earnings per share,
contingently issuable shares held by the SIP and DBS for the benefit of employees have been deducted. This adjustment is required
by IAS 33 notwithstanding the fact that the employees have an un-forfeitable right to the dividend prior to the date of vesting from
the date of grant. Although these contingently issuable shares would have been included when calculating diluted earnings per share,
as a loss has been generated in the year, they are not considered to have a dilutive impact.
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12. Property, plant and equipment
Leasehold
Fixtures
and
IT
improvements
fittings
equipment
Total
Cost
£ 000's
£ 000's
£ 000's
£ 000's
At 31 December 2020
1,818
320
2,036
4,174
Additions
60
2
88
150
At 31 December 2021
1,878
322
2,124
4,324
Additions
73
42
23
138
At 31 December 2022
1,951
364
2,147
4,462
Accumulated depreciation
At 31 December 2020
(1,546)
(308)
(1,938)
(3,792)
Charge for the year
(61)
(11)
(62)
(134)
At 31 December 2021
(1,607)
(319)
(2,000)
(3,926)
Charge for the year
(61)
(10)
(56)
(127)
At 31 December 2022
(1,668)
(329)
(2,056)
(4,053)
Net book value
At 31 December 2022
284
35
91
409
At 31 December 2021
271
3
124
398
13. Right-of-use assets
Edinburgh
London
Total
Present value of future lease payments
£ 000's
£ 000's
£ 000's
At 31 December 2020
130
5,025
5,155
At 31 December 2021
130
5,025
5,155
Additions
446
-
446
Disposal
(130)
-
(130)
At 31 December 2022
446
5,025
5,471
Amortisation of right-to-use assets
At 31 December 2020
(80)
(1,016)
(1,096)
Amortisation of right-to-use asset
(40)
(442)
(482)
At 31 December 2021
(120)
(1,458)
(1,578)
Amortisation of right-to-use asset
(43)
(441)
(484)
Disposal
130
-
130
At 31 December 2022
(33)
(1,899)
(1,932)
Net book value
At 31 December 2022
413
3,126
3,539
At 31 December 2021
10
3,567
3,577
The right-of-use assets represents the discounted value of the contracted payments and receipt of landlord lease incentives under
the terms of the leases for the Edinburgh and London offices at the later of lease commencement, IFRS16 date of initial application
and the date of the lease modification. The lease payments have been discounted by a rate equivalent to the incremental cost of
borrowing. The right-of-use assets are being amortised over the remaining terms of the leases. The Edinburgh office lease expired on
18 March 2022. A new lease for offices at 125 Princes Street, Edinburgh EH2 4AD was entered into from 07 April 2022 for a term of
10 years, with a tenant’s break option on 7 April 2027. The rent is fixed up to 7 April 2027. The Company has taken advantage of the
low value asset exemption with respect to the lease of car parking spaces at the Edinburgh Offices. Further details relating to the lease
liability can be found in note 19.
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14. Investment in subsidiaries
Shares in subsidiary undertakings
2022
2021
£ 000's
£ 000's
Cost
At 31 December
1
1
The Company has investments in the following subsidiary undertakings, consisting solely of ordinary shares, of:
Proportion of ordinary shares
and voting rights held
Direct holdings
Principal activity
Cenkos Nominee UK Limited
Nominee company
100%
Cenkos Securities (Trustees) Limited
Nominee company
100%
Cenkos Fund Management Limited
Dormant company
98%
Tokenhouse Limited
Dormant company
100%
Tokenhouse Stockbrokers Limited
Dormant company
100%
Tokenhouse Yard Securities Limited
Dormant company
100%
Tokenhouse Partners Limited
Dormant company
100%
THY Securities Limited
Dormant company
100%
All of these subsidiary undertakings are registered in England. The registered address for all subsidiaries is 6.7.8. Tokenhouse Yard,
London EC2R 7AS. In the opinion of the Directors, the value of the investments is not less than the amount at which they are stated
in the Company's statement of financial position.
The assets and liabilities of the Cenkos Securities Employee Benefit Trust (EBT), the Deferred Bonus Scheme Employee Benefit Trust
and the Cenkos Securities plc Share Incentive Plan Trust (SIP) excluding the Partnership and Dividend shares are included in the
Company Statement of Financial Position.
15. Investment in equity-accounted associate
Country of incorporation principal place of
business
Proportion of ownership
interest held
2022
2021
%
%
BB Technology Limited
United Kingdom
20
-
During the year, the Company paid a total of £100,000 in exchange for a 20% interest in BB Technology Limited. This Company was
set up to develop a technology solution enabling retail investors access to capital raises and IPOs through UK based retail brokers and
financial advisers. The platform was launched following regulatory approval and since the year end, transactions have been
successfully completed across it. BB Technology Limited was incorporated on 13 July 2021. It's first year accounts are to be made up
to 31 July 2022 and are not due to be filed at Companies House until account 13 April 2023. As this information is not yet available,
summarised financial information has not been included. Its principal place of business is the United Kingdom. There have been no
other factors brought to the Board's attention which would suggest that there has been a fall in the fair value, therefore the carrying
value has been maintained at its historic cost and included in the financial statements using the equity method.
16. Trade and other receivables
2022
2021
£ 000's
£ 000's
Current assets
Financial assets
Market and client receivables
5,936
8,432
Accrued income
191
184
Contract assets
247
606
Other receivables
657
700
7,031
9,922
Non-financial assets
Prepayments and other assets
1,303
625
8,334
10,547
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As at 31 December, the ageing analysis of financial assets is, as follows:
Days past due
Total
Not past
due
< 30 days
30-60 days
61-90 days
> 91 days
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
31 December 2022
7,031
4,798
1,684
248
36
265
31 December 2021
9,922
8,059
1,142
183
222
316
The average credit period taken is 37 days (2021: 22 days).
As at 31 December, the impairment and credit loss provision is made up as follows:
Days past due
Total
Not past
due
< 30 days
30-60 days
61-90
days
> 91 days
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
31 December 2021
83
-
-
-
5
78
Receivable written off
(83)
-
-
-
(5)
(78)
Individual receivables considered doubtful
-
-
-
-
-
-
Increase during they year
-
-
-
-
-
-
31 December 2022
-
-
-
-
-
-
The Company has recognised expected credit losses amounting to £nil (2021: £nil) in accordance with the requirements of IFRS 9. The
amount charged to the income statement for impairment is £1,781 (2021: £82,910).
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Having reviewed the
impact of the war in Ukraine, increased levels of inflation and interest rates, the prospect of recession and climate change on the
business, the Directors have not changed their assessment of credit risk and consequently their credit risk policy or approach.
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs
by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is
recognised for the earned consideration that is conditional. Contract assets include retainer fee income accrued for ongoing advice
to clients.
Credit risk
The Company’s principal financial assets are cash at bank (see note 18), trade and other receivables and investments. The Company’s
credit risk is primarily attributable to its cash at bank and trade and other receivables. Trade and other receivables include amounts
due from Cenkos’ corporate and investment trust clients for corporate finance advisory services and Nomad, broking and research
retainer fees. The amounts presented in the statement of financial position are net of allowance for impairment. An allowance for
impairment is made where there is an expectation of credit losses over the remaining life of the exposure based on future expected
default rates. The Company has no significant concentration of credit risk, other than those disclosed in note 24. In addition, the risk
associated with financial assets is set out in note 24.
17. Other current financial assets and liabilities
2022
2021
£ 000's
£ 000's
Financial assets at FVTPL
Trading investments carried at fair value
3,832
4,096
Derivative financial assets - share options and warrants
979
3,135
4,811
7,231
Financial liabilities at FVTPL
Contractual obligation to acquire securities
(1,312)
(1,351)
Contractual obligation to pay away to third parties
-
(564)
Contractual obligation to acquire securities
(1,312)
(1,915)
Trading investments carried at fair value included above under financial assets at FVTPL and financial liabilities at FVTPL include long
positions and short positions (contractual obligations to acquire securities), respectively, in listed equity securities that present the
Company with the opportunity for return through dividend income and net trading gains. The fair values of these securities are based
on quoted market prices. Net trading gains from the financial assets and liabilities at FVTPL relate to market making activities and are
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included under Execution - Net Trading Gains in the Income Statement. The management of risk resulting from these positions is
described in note 24.
Derivative financial assets include options over the shares of client companies taken in lieu of fees. See notes 1 and 2 (b) for an
explanation of how they have been treated in these financial statements.
2022
2021
Movements in net trading and FVOCI investments in the cash flow statement
£ 000's
£ 000's
Financial assets at FVTPL
2,420
(1,919)
Financial liabilities at FVTPL
(603)
904
FVOCI investments, net of tax
-
(1)
Shares and options received in lieu of fees
1,426
1,820
3,243
804
18. Cash and cash equivalents
2022
2021
£ 000's
£ 000's
Cash and cash equivalents
14,220
33,457
Cash at bank comprises cash held by the Company and instant access bank deposits. The carrying amount of these assets approximates
their fair value. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies (see note XX).
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19. Trade and other payables
2022
2021
£ 000's
£ 000's
Current liabilities
Financial liabilities
Trade creditors
2,459
6,781
Lease liabilities
611
563
Cash-settled deferred bonus scheme
128
115
Accruals
1,525
13,961
Other creditors
420
372
5,143
21,792
Non-financial liabilities
Contract liabilities
606
646
Corporation tax payable
(65)
589
541
1,235
5,684
23,027
Non-current liabilities
Financial liabilities
Lease liabilities
4,134
4,366
Cash-settled deferred bonus scheme
53
70
4,187
4,436
Edinburgh
London
Total
Lease liabilities on a discounted basis
£ 000's
£ 000's
£ 000's
At 1 January 2021
41
5,471
5,512
Accretion of interest
1
170
171
Rent prepaid and paid during the year
(42)
(712)
(754)
At 31 December 2021
-
4,929
4,929
New lease
389
-
389
Accretion of interest
15
150
165
Rent prepaid and paid during the year
(26)
(712)
(738)
At 31 December 2022
378
4,366
4,744
Maturity analysis of lease liabilities on an undiscounted basis
Within one year
-
712
712
In the second to fifth years inclusive
-
2,849
2,849
After five years
-
2,033
2,033
At 31 December 2021
-
5,594
5,594
Within one year
47
712
759
In the second to fifth years inclusive
176
2,849
3,025
After five years
248
1,321
1,569
At 31 December 2022
471
4,882
5,353
The following are the amounts recognised in the income statement
Depreciation expense on right-of-use assets
40
442
482
Interest expense on lease liabilities
1
170
171
Charge for the year ended 31 December 2021
41
612
653
Depreciation expense on right-of-use assets
43
441
484
Interest expense on lease liabilities
15
150
165
Charge for the year ended 31 December 2022
58
591
649
The lease liabilities represent the discounted value of the contractual payments and receipt of landlord lease incentives under the
terms of the leases for the Edinburgh and London offices at the later of the beginning of the year or the date of the lease modification.
The lease payments are offset against this liability and interest charged on the outstanding balance at a rate equivalent to the
incremental cost of borrowing. For further details of the leases see note 13.
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20. 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 Company and the movement thereon during the current and prior reporting year.
Temporary differences
Bonus
Property,
plant &
Share-based
Tax
payments
equipment
payments
losses
Total
Deferred tax assets
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
At 31 December 2020
756
7
(36)
-
727
Origination and reversal of temporary differences credit /
(expense)
154
(14)
193
-
333
Deferred tax credit to equity
-
-
94
-
94
At 31 December 2021
910
(7)
251
-
1,154
Origination and reversal of temporary differences (expense) /
credit
(453)
(14)
144
778
455
Deferred tax charge to equity
-
-
(84)
-
(84)
At 31 December 2022
457
(21)
311
778
1,525
The standard corporation tax in the UK was 19% throughout the reporting period. As announced at Budget 2020 and maintained by
Finance Act 2021, the corporation tax rate for the fiscal years 2021 and 2022 will remain at 19%. Finance Act 2021, which includes
provision for the main rate of corporation tax to increase to 25% with effect from 1 April 2023, was substantially enacted on 24 May
2021. Deferred tax assets have been recognised in respect of the tax losses and other temporary differences giving rise to deferred
tax assets where the Directors believe it is probable that these assets will be recovered. The deferred tax balances at 31 December
2022 have been stated at 25% and 19% as these are the expected prevailing rates when the individual temporary differences are
expected to reverse.
The Company 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 (£75,565 at 25%).
21. Share capital and capital redemption reserve
2022
2021
£ 000's
£ 000's
Authorised:
179,185,700 (2020 - 179,185,700) ordinary shares of 1p each
1,792
1,792
20,814,300 (2020 - 20,814,300) B shares of 1p each
208
208
2,000
2,000
Allotted:
56,694,783 (2020: 56,694,783) ordinary shares of 1p each fully paid
567
567
1 January 2022 to 31 December 2022
There were no shares issued or cancelled during the year.
1 January 2021 to 31 December 2021
There were no shares issued or cancelled during the year.
2022
2021
2022
2021
Capital redemption reserve
Number
Number
£ 000's
£ 000's
At 1 January
19,466,388
19,466,388
195
195
At 31 December
19,466,388
19,466,388
195
195
Nature and purpose of reserve
The capital redemption reserve was created to hold the nominal value of own shares purchased and cancelled by the Company.
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22. Own shares
Own shares represent the cost of shares purchased by the Company's Employee Benefit Trust (EBT) and those transferred to the
Short-Term Incentive Plan (STIP), deferred bonus scheme EBT and the Cenkos Securities plc Share Incentive Plan (SIP).
The EBT was established by the Company in 2009. It is funded by the Company and has the authority to acquire Cenkos Securities plc
shares. The EBT is treated as an extension of the Company and therefore the shares held by the EBT are included under own shares
in equity.
2022
2021
Number
Cost
Number
Cost
Shares held by the EBT
of shares
£ 000's
of shares
£ 000's
At 1 January
3,581,254
2,784
3,024,352
1,475
Acquired during the year
3,682,390
2,459
3,477,942
2,733
Transferred to the deferred bonus scheme and STIP EBT
(2,250,000)
(1,749)
(2,921,040)
(1,424)
At 31 December
5,013,644
3,494
3,581,254
2,784
Shares held in the deferred bonus scheme EBT
At 1 January
4,486,025
3,576
2,135,982
2,279
Transferred in from the EBT
2,250,000
1,749
2,921,040
1,424
Vesting shares transferred to employees
(1,413,704)
(1,099)
(946,134)
(461)
Acquired during the year
1,349,633
941
375,137
334
At 31 December
6,671,954
5,167
4,486,025
3,576
Shares held in the STIP
At 1 January
1,600,000
1,017
3,200,000
1,797
Vesting shares transferred to employees
(1,355,500)
(880)
(1,600,000)
(780)
At 31 December
244,500
137
1,600,000
1,017
Free and matching shares held by the SIP
At 1 January
770,781
983
920,011
1,056
Dividend re-investment
(26,145)
(20)
(24,227)
(12)
Shares transferred to employees
(137,284)
(107)
(125,003)
(61)
At 31 December
607,352
856
770,781
983
At 31 December: Total own shares
12,537,450
9,654
10,438,060
8,360
23. Share-based payments
The Company has a Save-As-You-Earn (SAYE) scheme, a Share Incentive Plan (SIP), a Deferred Bonus Scheme (DBS), a Short-Term
Incentive Plan (STIP), a Company Share Option Plan (CSOP) and a Long-Term Incentive Plan (LTIP) for all qualifying employees of the
Company.
Save-As-You-Earn (SAYE) scheme
In May 2018, Cenkos launched a SAYE scheme, which was followed by a second scheme being launched in November 2020. Under the
scheme employees may elect to save up to £500 per month from their net salary over three years. At the end of this period, employees
have the option to acquire Cenkos ordinary shares at an exercise price which was set at a 20% discount to the share price at the date
of the launch of the scheme. Details of the SAYE share options outstanding during the year are as follows:
2022
2021
Number of
shares
options
Weighted
average
exercise
price (in £)
Number of
shares
options
Weighted
average
exercise
price (in £)
Outstanding at beginning of year
966,986
0.40
1,050,495
0.42
Lapsed during the year
(91,629)
0.40
(38,811)
0.85
Forfeited during the year
-
-
(44,698)
0.40
Outstanding and exercisable at the end of the year
875,357
0.40
966,986
0.40
2022
2021
Date of
Grant
Vesting
date
Date of
Expiry
Remaining
contractual
life, months
Number of
shares
options
Number of
shares
options
Options exercisable at £0.4027 per share
Nov-20
Jan-24
Jun-24
18
875,357
966,986
Options in issue at the end of 31 December
875,357
966,986
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The options outstanding at 31 December 2022 have a weighted average remaining contractual life of 1.5 years (2021: 2.5 years). At
the date of grant, the options had an aggregate estimated fair value of £134,140 (2021: £143,661).
Share incentive plan (SIP)
In June 2014, Cenkos introduced a SIP scheme, whereby employees were invited to sacrifice up to £1,800 of earnings in order to
acquire Cenkos ordinary shares ("Partnership Shares") to be held in trust. Shares acquired under this scheme were matched by Cenkos
on the basis of two "Matching Shares" for everyone Partnership share held. In addition, employees were also offered the chance to
apply for "Free Shares" to be held in trust. The SIP scheme was launched again for staff in December 2017 and completed on January
2018 on the same basis as previous schemes.
The table below gives details of the number of shares held within the scheme:
2022
2021
Number
Number
of shares
of shares
At 1 January
1,072,265
1,268,606
Contributions during the year: Dividend shares
26,145
24,227
Free and matching shares transferred to employees
(163,429)
(149,230)
Partnership and dividend shares transferred to employees
(71,785)
(71,338)
At 31 December
863,196
1,072,265
At 31 December
SIP shares allocated to individuals
678,428
861,352
Forfeited shares held by SIP
184,768
210,913
863,196
1,072,265
Deferred bonus scheme (DBS)
In April 2015, Cenkos introduced a Deferred Bonus Scheme (the "Scheme"), whereby a percentage of staff bonus awards was deferred
over a three-year period. The deferred element of any bonus award being released to the employee evenly split on each of the three
anniversaries of deferral into the Scheme. Although, the scheme has not been run for 2022, in previous years, the deferred element
of bonus awards was either held in Cenkos ordinary shares in an EBT or into cash. The fair value of the deferral at the date of grant is
charged to the Income Statement as a staff cost over the service period with a corresponding amount credited to reserves where
equity-settled or recognised as a liability where cash-settled.
As the scheme was not run in 2022, none of the 2022 bonus was deferred (2021: £2.49 million), in aggregate £2.17 million (2021:
£3.54 million) will be charged to the P&L in future years over the life of the scheme.
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2022
Amount
brought
forward from
prior years
Gross
bonus
deferred
Charge to
income
statement
Amount to
be
charged in
future
years
£ 000's
£ 000's
£ 000's
£ 000's
2018, 2019, 2020 & 2021 Bonus deferral into cash
278
-
121
157
278
-
121
157
2017, 2018, 2019, 2020 & 2021 Bonus deferral into shares
3,259
-
1,241
2,018
2017 - 2022 Bonus deferral into shares
3,259
-
1,241
2,018
3,537
-
1,362
2,175
2021
Amount
brought
forward from
prior years
Gross
bonus
deferred
Charge to
income
statement
Amount to
be
charged in
future
years
£ 000's
£ 000's
£ 000's
£ 000's
2018, 2019 & 2020 Bonus deferral into cash
270
-
80
190
2021 Bonus deferral into cash
-
130
42
88
270
130
122
278
2017, 2018, 2019 & 2020 Bonus deferral into shares
2,349
-
668
1,681
2021 Bonus deferral into shares
-
2,353
775
1,578
2017 - 2021 Bonus deferral into shares
2,349
2,353
1,443
3,259
2,619
2,483
1,565
3,537
2022
2021
Number
Number
Shares held in the deferred bonus scheme EBT
of shares
of shares
At 1 January
4,486,025
2,135,982
Shares acquired during the year to settle prior year scheme awards
3,599,633
3,296,177
Vesting shares transferred to employees
(1,413,704)
(946,134)
At 31 December
6,671,954
4,486,025
Short Term Incentive Plan (STIP)
In April 2020, Cenkos introduced a Short-Term Incentive Plan (STIP) as a one-off plan to retain and incentivise key members of staff.
Under the plan, share awards were made using shares already held in the EBT, which will vest on the first and second anniversaries
of grant. The fair value of the deferral is charged to the Income Statement as a staff cost over the service period with the recognition
of a corresponding credit to reserves.
2022
2021
Number
Number
Shares held in the STIP
of shares
of shares
At 1 January
1,600,000
3,200,000
Vesting shares transferred to employees
(1,355,500)
(1,600,000)
At 31 December
244,500
1,600,000
Company Share Option Plan (CSOP)
The plan provides for the grant of HMRC tax advantaged and non-tax advantaged share options. In March 2021, under the plan, share
options were awarded to all employees with an exercise price equivalent to the share price at the date of grant. In March 2022, under
the plan, options were awarded on the same terms to all new employees who had missed out on the prior years allocation. The
options vest after 3 years subject to the achievement of a performance condition over that period based on an Absolute TSR (Total
Shareholder Return) target. Comprehensive malus and clawback provisions have been included. The options granted under the plan
were fair valued at the date of grant and charged to the Income Statement as a staff cost over the vesting period with a corresponding
credit recognised in reserves.
Details of the CSOP share options outstanding during the year are as follows:
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2022
2021
Number of
shares
options
Weighted
average
exercise
price (in £)
Number of
shares
options
Weighted
average
exercise
price (in £)
Outstanding at beginning of year
4,372,500
0.74
-
-
Issued during the year
2,032,500
0.74
5,112,500
0.74
Forfeited during the year
(345,000)
0.74
(740,000)
0.74
Outstanding and exercisable at the end of the year
6,060,000
0.74
4,372,500
0.74
2022
2021
Date of
Grant
Vesting
date
Date of
Expiry
Remaining
contractual
life, months
Number of
shares
options
Number of
shares
options
Options exercisable at £0.735 per share
Mar-21
Mar-24
Mar-31
15
4,047,500
4,372,500
Options exercisable at £0.735 per share
Mar-22
Mar-25
Mar-32
27
2,012,500
-
Long Term Incentive Plan (LTIP)
In April 2021 and again in April 2022, under the plan, nil paid share options were awarded to Executive Directors’, senior managers
and other key staff. The LTIP awards are split into three tranches, vesting only on the satisfaction of performance conditions, measured
over a period of three, four or five years respectively. The performance conditions are based on the achievement of certain Absolute
TSR (Total Shareholder Return) targets. Comprehensive malus and clawback provisions have been included along with an additional
two-year holding period for Executive Directors and certain other senior managers. The options granted under the plan were fair
valued at the date of grant and charged to the Income Statement as a staff cost over the vesting period of each tranche with a
corresponding credit recognised in reserves.
Details of the LTIP share options outstanding during the year are as follows:
2022
2021
Number of
shares
options
Weighted
average
exercise
price (in £)
Number of
shares
options
Weighted
average
exercise
price (in £)
Outstanding at beginning of year
5,070,000
-
-
-
Issued during the year
1,560,000
-
5,070,000
-
Outstanding and exercisable at the end of the year
6,630,000
-
5,070,000
-
2022
2021
Date of
Grant
Vesting
date
Date of
Expiry
Remaining
contractual
life, months
Number of
shares
options
Number of
shares
options
Options exercisable at £nil per share
Apr-21
Apr-24
Apr-31
15
1,690,000
1,690,000
Options exercisable at £nil per share
Apr-21
Apr-25
Apr-31
27
1,690,000
1,690,000
Options exercisable at £nil per share
Apr-21
Apr-26
Apr-31
39
1,690,000
1,690,000
Options exercisable at £nil per share
Apr-22
Apr-25
Apr-32
27
520,000
1,690,000
Options exercisable at £nil per share
Apr-22
Apr-26
Apr-32
39
520,000
1,690,000
Options exercisable at £nil per share
Apr-22
Apr-27
Apr-32
51
520,000
1,690,000
During the year the Company recognised expenses of £2,528,173 (2021: £2,839,560) related to equity-settled share-based payment
transactions. These consist of charges in respect of the SAYE scheme of £36,228 (2021: £43,683), the SIP schemes of £nil (2021: £643),
the STIP scheme a credit of £1,122 (2021: charge £542,639), the CSOP scheme of £437,421 (2021: £288,296), the LTIP scheme of
£814,434 (2021: £521,536) and the deferred bonus scheme of £1,241,212 (2021: £1,442,763).
In addition, the Company recognised expenses of £121,483 (2021: £122,990) related to cash-settled payment transactions of the
deferred bonus scheme.
24. Financial instruments
Capital risk management
The Company manages capital to ensure that it will be able to continue as a going concern while aiming to maximise the return to
stakeholders. The capital structure of the Company consists of equity attributable to equity holders of the Company, comprising issued
capital, reserves and retained earnings as disclosed in the statement of changes in equity. At present the Company has no gearing and
it is the responsibility of the Board to review the Company’s gearing levels on an ongoing basis.
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Externally imposed capital requirement
The Company is required to retain sufficient capital to satisfy the FCA capital requirements. These requirements vary from time to
time depending on the business conducted by the Company. The Company always retains a buffer above the FCA minimum
requirements and has complied with these requirements during and subsequent to the period under review.
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 to the financial statements.
Financial risk management objectives
The Chief Executive Officer monitors and manages the financial risks relating to the operations of the Company through internal risk
reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including price risk), credit risk
and liquidity risk. Summaries of these reports are reviewed by the Board. Compliance with policies and exposure limits is reviewed by
the Chief Executive Officer and senior management on a continuous basis.
Interest rate risk management
The Company is exposed to interest rate risk because it has financial instruments on its statement of financial position which are at
both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and
floating rate instruments.
The Company’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity and interest rate risk
table section of this note.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative
instruments at the reporting date. For floating rate assets, the analysis is prepared based on the average rate due on the asset or
liability through the year. An increase or decrease of 25 basis points is considered reasonable by senior management as it represents
their assessment of significant change in interest rates prompted by economic events.
If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s loss for the year
ended 31 December 2022 would increase/decrease by £0.03m (2021: increase/decrease by £0.06m). This is attributable to the
Company’s exposure to interest rates on its variable rate instruments.
Market risk (including equity price risks)
The Company is exposed to market risk arising from short-term positions in market making stocks in predominantly AIM quoted
companies. The Company has a low market risk appetite and manages this risk by establishing individual stock position limits and
overall trading book limits. It is exposed to equity price risk arising from these equity investments, which present the Company with
opportunity for return through dividend income and net trading gains.
Equity price sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date and, in the
opinion of senior management, a material movement in equity prices. This is based on the largest fall in the All-Share AIM index in
one day and over a two-week period. These parameters are also considered in the Company’s ICARA.
If equity prices had been 25% higher/lower, net profit for the year ended 31 December 2022 would have been £0.83m higher/lower
(2021: £1.33m higher/lower) due to change in the value of FVTPL held for trading investments.
The Company’s exposure to equity price risk is closely managed. The Company has built a framework of overall and individual stock
limits and these along with Value at Risk metrics are actively monitored by senior management on a daily basis. This framework also
limits the concentration of risks. The Company’s overall exposure to equity price risk is set by the Board.
Foreign currency risk
The Company has limited exposure to foreign currency risk arising from short-term positions in market making stocks and cash
balances denominated in US Dollars and Euros. The Company has a low appetite for foreign currency risk and manages this risk by
establishing individual stock position limits and maintaining sufficient foreign currency only to cover its immediate needs and those
of its clients.
Foreign currency risk sensitivity analysis
If foreign exchange rates had been 25% higher/lower, net profit for the year ended 31 December 2022 would have been £0.65m
higher/lower (2021: £0.89 million higher / lower) due to change in the value of FVTPL held for trading foreign currency denominated
investments and cash balances. A 25% movement in currency rates is considered reasonable by senior management as it represents
their assessment of significant change in foreign exchange rates prompted by economic events.
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Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
These parties may default on their obligations due to the bankruptcy, lack of liquidity, operational failure and other reasons. The
exposure of the Company to its counterparties is closely monitored and the limits set to minimise the concentration of risks. An
allowance for impairment is made where there is an expectation of credit losses over the remaining life of the exposure.
The majority of the Company’s credit risk arises from the settlement of security transactions. However, the settlement model primarily
used by the Company does not expose the Company to counterparty risk as a principal to a trade. Rather, the Company’s exposure
lies solely with Pershing Securities Limited (Pershing), a wholly owned subsidiary of the Bank of New York Mellon Corporation, a AA-
(2021: AA-) rated bank. In addition, in circumstances in which the Company does act as principal when acting as a market maker, the
counterparty will normally be an FCA regulated market counterparty rather than a corporate or individual trader. The Company does
not have any significant credit risk exposure to any single counterparty with the exception of Pershing.
Cash resources also give rise to potential credit risk. The Company’s cash balances are held with HSBC Bank plc (an AA- rated bank),
and Barclays Bank plc (an A+ rated bank). The banks with which the Company deposits money are reviewed by the Board and are
required to have at least an investment grade credit rating. To limit the concentration risk in relation to cash deposits, the maximum
amount which may be deposited with any one financial institution is set at no more than 100% of the Company’s regulatory capital.
Trade receivables not related to the settlement of market transactions consist almost entirely of outstanding corporate finance fees
and retainers and are spread across a wide range of industries. Contract assets consist almost entirely of accrued corporate finance
fees and retainers and are spread across a wide range of industries. All new corporate finance clients are subject to a review by the
New Business Committee. This Committee considers, amongst other issues, the financial soundness of any client taken on.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the
Company’s maximum exposure to credit risk without taking account of the value of any collateral obtained. Having reviewed the
impact of current market conditions on the business, the Directors have not changed their assessment of credit risk and consequently
their credit risk policy or approach.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit
rating agencies.
The table below summarises the Company’s exposure to credit risk by asset class and credit rating. All assets within each class are
uncollateralised.
2022
2021
Exposure to credit risk
£ 000's
£ 000's
Derivative financial assets - share options and warrants
Unrated
979
3,135
Market and client receivables
Unrated
5,358
6,429
Market and client receivables
AA-
514
1,897
Market and client receivables
A+
64
259
Accrued income
Unrated
201
187
Contract assets
Unrated
237
603
Other receivables
Unrated
657
547
Cash and cash equivalents
AA-
9,901
20,342
Cash and cash equivalents
A+
4,319
13,115
22,230
46,514
The actual credit losses in relation to the above credit exposures amount to £ nil (2021: £nil).
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board. It has, however, delegated day-to-day management to the
Chief Executive Officer. The Company has in place an appropriate liquidity risk management framework for the management of its
short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining
adequate reserves, banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities. Given the nature of the Company’s business, it does not run any material liquidity mismatches,
financial liabilities are on the whole short-term and the Company has sufficient liquid assets to cover all of these liabilities.
Liquidity and interest risk tables
The following tables detail the Company’s remaining contractual maturity for its non-derivative financial assets and liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
Company is required to pay. The table includes both interest and principal cash flows. The tables also detail the Company’s expected
maturity for its non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual
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maturities of the financial assets including interest that will be earned on those assets. No maturity date has been listed where there
is no contractual maturity for the financial assets.
Weighted
No
average
Maturity
Within
Within
After
effective
Date
1 year
5 years
5 years
Total
31 December 2022
interest rate
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
Financial assets at FVTPL
NIB
3,832
3
976
-
4,811
Trade and other receivables
NIB, FIRI
-
7,031
-
-
7,031
Financial liabilities at FVTPL
NIB
-
(1,312)
-
-
(1,312)
Trade and other payables
NIB
-
(5,143)
(3,078)
(1,569)
(9,790)
Cash at bank
VIRI(0%)
-
14,220
-
-
14,220
3,832
14,799
(2,102)
(1,569)
14,960
NIB - Non-interest bearing
VIRI - Variable interest rate instruments
FIRI - Fixed interest rate instruments
Weighted
No
average
Maturity
Within
Within
After
effective
Date
1 year
5 years
5 years
Total
31 December 2021
interest rate
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
Financial assets at FVTPL
NIB
4,096
117
3,018
-
7,231
Trade and other receivables
NIB, FIRI
-
9,922
-
-
9,922
Financial liabilities at FVTPL
NIB
-
(1,915)
-
-
(1,915)
Trade and other payables
NIB
-
(21,792)
(2,919)
(2,033)
(26,744)
Cash at bank
VIRI(0%)
-
33,457
-
-
33,457
4,096
19,789
99
(2,033)
21,951
The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate
their fair values.
Fair value hierarchy
All financial instruments carried at fair value are placed in three categories, defined as follows:
Level 1 – Quoted market prices
Level 2 – Valuation techniques (market observable)
Level 3 – Valuation techniques (non-market observable)
The Company held the following financial instruments measured at fair value:
2022
Level 1
Level 2
Level 3
Total
£ 000's
£ 000's
£ 000's
£ 000's
Financial assets at FVTPL:
Market and client receivables
5,936
-
-
5,936
Derivative financial assets - share options and warrants
-
-
979
979
Non-derivative financial assets held for trading
3,832
-
-
3,832
9,768
-
979
10,747
Financial liabilities at FVTPL:
Contractual obligation to acquire securities
1,312
-
-
1,312
2021
Level 1
Level 2
Level 3
Total
£ 000's
£ 000's
£ 000's
£ 000's
Financial assets at FVTPL:
Market and client receivables
8,586
-
-
8,586
Derivative financial assets - share options and warrants
-
-
3,135
3,135
Non-derivative financial assets held for trading
4,096
-
-
4,096
12,682
-
3,135
15,817
Financial liabilities at FVTPL:
Contractual obligation to acquire securities
1,351
-
-
1,351
Contractual obligation to pay away to third party
-
-
564
564
1,351
-
564
1,915
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For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company 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.
Reconciliation of recurring fair value measurements categorised within Level 3 of the fair value hierarchy
Share
Pay away
options and
to third
warrants
party
Total
£ 000's
£ 000's
£ 000's
Opening balance 1 January 2022
3,135
(565)
2,570
Exercise of warrants
(418)
-
(418)
Options and warrants received in lieu of fees
567
-
567
Fair value movement recognised in income statement
(2,304)
565
(1,739)
Closing balance 31 December 2022
979
-
979
Share
Pay away
options and
to third
warrants
party
Total
£ 000's
£ 000's
£ 000's
Opening balance 1 January 2021
1,007
-
1,007
Disposal of warrants
(908)
496
(412)
Exercise of warrants
(219)
-
(219)
Options and warrants received in lieu of fees
1,650
-
1,650
Fair value of warrants acquired
3,105
(1,989)
1,116
Fair value movement recognised in income statement
(1,500)
928
(572)
Closing balance 31 December 2021
3,135
(565)
2,570
Level 3 financial instruments consist of derivative financial assets with no quoted market price.
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 25% 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 £0.14m or a decrease of £0.18m respectively to the
profit in the income statement.
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, which include trading assets and liabilities are measured at fair value on an ongoing basis. 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 “non-observable”. For these instruments, the fair value derived is more judgemental. “Non-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 Company
anticipates would be used by a third-party market participant to establish fair value.
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Fair value at 31
December 2022
£ 000’s
Valuation Technique
Unobservable input
Range
Share options and warrants
979
Binomial model
Volatility
15-162%
Pay away to third party
-
% value of related
warrant
Value of related warrant
n/a
979
25. Related party transactions
Transactions with related parties are made at arm's length. There were no outstanding balances with related parties at the year-end
(2021: none). There have been no guarantees provided or received for any related party receivables or payables. The Board includes
those employees considered to be key management personnel. The compensation of the key management personnel of the Company
(including the Directors) and their interests in the shares and options over the shares of Cenkos Securities plc is disclosed by individual
in the Directors’ report and in aggregate below:
2022
2021
£ 000's
£ 000's
The total emoluments of the highest paid Director serving during the year were:
639
1,533
The aggregate emoluments paid to Directors who served during the year were:
1,171
2,478
To comply with the Pensions Act, all qualifying employees are enrolled in a pension scheme. Under the scheme, qualifying employees
are required to contribute a percentage of their relevant earnings. The Company also contributes 3% (2021: 3%) of relevant earnings.
During the year ended 31 December 2022, Cenkos paid £2,640 (2021: £2,642) into this scheme in respect of the Directors.
2022
2021
Related party interests in ordinary shares of Cenkos Securities plc
No.
No.
Number of shares
2,184,212
2,052,273
Percentage interest
4%
4%
The related party interests in ordinary shares of Cenkos Securities plc include the following interests held in the SIP scheme:
No. of shares held
subject to forfeiture
conditions
No. of shares held
2022
2021
2022
2021
No.
No.
No.
No.
Related party interests in SIP
27,116
27,116
27,116
27,116
Related party interests in STIP
-
293,000
-
293,000
Related party interests in DBS
596,559
456,630
596,559
456,630
Earliest
Latest
Exercise
Grant
exercise
exercise
2022
2021
Related party interests in share options
price
date
date
date
No.
No.
SAYE Scheme
£0.40
17/11/2020
01/01/2024
30/06/2024
89,936
89,936
LTIP Scheme
£ nil
08/04/2021
08/04/2024
07/04/2031
656,667
656,667
LTIP Scheme
£ nil
08/04/2021
08/04/2025
07/04/2031
656,667
656,667
LTIP Scheme
£ nil
08/04/2021
08/04/2026
07/04/2031
656,667
656,667
CSOP Scheme
£0.74
26/03/2021
26/03/2024
25/03/2031
80,000
80,000
26. Standards issued but not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective
in future accounting periods that the group has decided not to adopt early. The following amendments are effective for the period
beginning 1 January 2023:
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
Definition of Accounting Estimates (Amendments to IAS 8); and
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
The following amendments are effective for the period beginning 1 January 2024:
IFRS 16 Leases (Amendment – Liability in a Sale and Leaseback)
IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-current)
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IAS 1 Presentation of Financial Statements (Amendment – Non-current Liabilities with Covenants)
It is not expected that the amendments listed above, once adopted, will have a material impact on the financial statements.
27. Events after the reporting period
There were no material events to report on that occurred between 31 December 2022 and the date at which the Directors signed the
Annual Report.
28. Contingent liabilities
From time to time the Company may become subject to various litigation, regulatory or employment related claims. The Directors
have considered any current matters pending against the Company. Based on the evidence available, the facts and circumstances and
insurance cover available, the Board has concluded that the outcome of these will be resolved with no material impact on the
Company’s financial position or results of operations.
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Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Cenkos Securities plc (the “Company”) will be held at 6.7.8 Tokenhouse
Yard, London EC2R 7AS on 10 May 2023 at 9.30 am (the “Meeting”) for the transaction of the following business:
To consider and, if thought fit, to pass the following Resolutions, each of which will be proposed as an ordinary resolution,
save for Resolutions 11 and 12 which will be proposed as special resolutions:
1.
That the Company’s Annual Accounts for the year ended 31 December 2022, together with the Directors’ Report and the
Auditor’s Report on those accounts, be received.
2.
That the final dividend recommended by the Directors of 0.5p per ordinary share for the year ended 31 December 2022 be
declared payable on 22 June 2023 to the holders of ordinary shares registered at the close of business on 26 May 2023.
3.
That Andrew Boorman be re-elected as a Director of the Company.
4.
That Jeremy Miller be re-elected as a Director of the Company.
5.
That Julian Morse be re-elected as a Director of the Company.
6.
That Lisa Gordon be re-elected as a Director of the Company.
7.
That Jeremy Osler be re-elected as a Director of the Company.
8.
That BDO LLP be re-appointed as auditor to the Company until the conclusion of the next Annual General Meeting of the
Company.
9.
That the Directors be authorised to fix the auditor’s remuneration.
10.
That the Directors be generally and unconditionally authorised pursuant to and in accordance with section 551 of the
Companies Act 2006 (the "Act") to exercise all the powers of the Company to allot shares in the Company and grant rights to
subscribe for or to convert any security into shares in the Company:
10.1
up to a nominal amount of £188,982.00; and
10.2
comprising equity securities (as defined in section 560(1) of the Act) up to an aggregate nominal amount of
£188,982.00 in connection with an offer by way of a rights issue to:
(i)
ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii)
holders of other equity securities as required by the rights of those securities or, subject to such rights as
the Directors otherwise consider necessary,
and so that the Directors may impose any limits or restrictions and make any arrangements which they consider
necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or
practical problems in, or under the laws of, any territory or any other matter.
The authorities conferred on the Directors to allot securities under paragraphs 10.1 and 10.2 will expire at the conclusion of
the Annual General Meeting of the Company to be held in 2024 or, if earlier, at 6.00pm on 10 August 2024 (unless previously
renewed, varied or revoked by the Company at a general meeting). The Company may before these authorities expire, make
an offer or enter into an agreement which would or might require such securities to be allotted after such expiry and the
Directors may allot such securities in pursuance of that offer or agreement as if the power conferred by this resolution had not
expired.
11.
That, subject to the passing of Resolution 10, the Directors be authorised to allot equity securities (as defined in section 560(1)
of the Companies Act 2006 (the "Act")) for cash under the authority given by Resolution 10 and/or sell ordinary shares held by
the Company as treasury shares for cash as if section 561 of the Act did not apply to any such allotment or sale, provided that
the power conferred by this Resolution shall be limited to:
11.1
the allotment of equity securities or sale of treasury shares in connection with an offer of, or invitation to apply for,
equity securities (but in the case of the authority granted under Resolution 10.2 by way of a rights issue only) to (i)
ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii) holders of
other equity securities as required by the rights of those securities, or subject to such rights as the Directors
otherwise consider necessary, in each case subject only to such limits, restrictions or other arrangements as the
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Directors may consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates
or legal, regulatory or practical problems under the laws or requirements of any recognised regulatory body or stock
exchange in any territory; and
11.2
the allotment of equity securities or sale of treasury shares for cash (otherwise than pursuant to sub-paragraph 11.1
above) up to an aggregate nominal value not exceeding £28,347.00,
11.3
the allotment of equity securities or sale of treasury shares (otherwise than under paragraph 11.1 or 11.2 above) up
to a nominal amount equal to 20 per cent. of any allotment of equity securities from time to time under paragraph
11.2 above, such authority to be used only for the purposes of making a follow-on offer which the Directors
determine to be of a kind contemplated by paragraph 3 of Section 2B of the Statement of Principles on Disapplying
Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice,
and these authorities shall, unless renewed, varied or revoked by the Company in general meeting, expire at the
conclusion of the Annual General Meeting of the Company to be held in 2024 or, if earlier, at 6.00pm on 10 August
2024, but shall extend to the making, before such expiry of an offer or agreement that would or might require equity
securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or
agreement as if the authority conferred hereby had not expired.
12.
That the Company be and is hereby generally and unconditionally authorised for the purpose of section 701 of the Companies
Act 2006 (the “Act”) to make market purchases (as defined in section 693 of the Act) of ordinary shares of 1 penny each in the
capital of the Company (“ordinary shares”) provided that:
12.1
the maximum number of ordinary shares hereby authorised to be purchased is 5,663,808;
12.2
the minimum price (exclusive of expenses) that may be paid for such ordinary shares is 1 penny per ordinary share,
being the nominal amount thereof;
12.3
the maximum price (exclusive of expenses) that may be paid for such ordinary shares shall be an amount equal to
the higher of (i) 5% above the average of the middle market quotations for such shares taken from the AIM appendix
to The London Stock Exchange Daily Official List for the five business days immediately preceding the day on which
the purchase is made and (ii) the higher of the price of the last independent trade of an ordinary share and the
highest current independent bid for an ordinary share as derived from the trading venue where the purchase is
carried out;
12.4
the authority hereby conferred shall (unless previously renewed or revoked) expire on the earlier of the end of the
next Annual General Meeting of the Company and the date which is 18 months after the date on which this
Resolution is passed; and
12.5
the Company may make a contract to purchase its own ordinary shares under the authority conferred by this
Resolution prior to the expiry of such authority, and such contract will or may be executed wholly or partly after the
expiry of such authority, and the Company may make a purchase of its own ordinary shares in pursuance of any such
contract.
By order of the Board
Jeremy Osler
Company Secretary
9 March 2023
Registered office:
6.7.8 Tokenhouse Yard
London
EC2R 7AS
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Notes in respect of the Annual General Meeting
We are, as always, committed to engagement with our shareholders. If you have questions which you would like to discuss in advance
of the Annual General Meeting, please contact the Company Secretary by email on Secretariat@Cenkos.com or send it in writing with
your Form of Proxy to the Registrar, to arrive no later than two days in advance of the AGM. The Company Secretary will pass your
questions on to the appropriate person at the Company who will endeavour to respond as soon as practicable. Responses will either
be made by return email or published on our investors' website at www.Cenkos.com/investors, as deemed appropriate by the Board.
Notes in respect of casting proxy votes
A member entitled to attend and vote at the Meeting convened by the above Notice is entitled to appoint one or more proxies to
exercise all or any of the rights of the member to attend and speak and vote in his/her place. A proxy need not be a member of
the Company.
A member may appoint more than one proxy in relation to the Meeting, provided that each proxy is appointed to exercise the
rights attached to a different share or shares held by that member.
To appoint a proxy you may use the Form of Proxy enclosed with this Notice. To be valid, the Form of Proxy, together with the
power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of the same, must be
deposited by 9.30 am on 5 May 2023 (being not less than 48 hours before the Meeting, not including any part of a day that is not
a working day), or in the event of any adjournment not less than 48 hours (excluding any part of a day that is not a business day)
before the time appointed for holding the adjourned meeting, at the offices of the Company’s registrars, Link Group PXS1, 10th
Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL. Completion of the Form of Proxy will not prevent you from attending
and voting in person.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for
the Meeting and any adjournment(s) thereof by utilising the procedures described in the CREST manual. CREST personal members
or other CREST-sponsored members and those CREST members who have appointed a voting service provider(s), should refer to
their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK and International’s specifications and must contain
the information required for such instructions, as described in the CREST manual. The message must be transmitted so as to be
received by the issuer’s agent (ID RA10), by the latest time for receipt of proxy appointments specified in this Notice. For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK and
International does not make available special procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy Instructions.
It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored
member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to
those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) of the Uncertificated
Securities Regulations 2001 (as amended).
Appointment of a proxy through CREST will not prevent a member from attending and voting in person.
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process
which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to
www.proxymity.io. Your proxy must be lodged by 9.30am on Friday 5 May 2023 in order to be considered valid or, in the event of
any adjournment, close of business on the date which is two working days before the time of the adjourned meeting. Before you
can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important
that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. An
electronic proxy appointment via the Proxymity platform may be revoked completely by sending an authenticated message via
the platform instructing the removal of your proxy vote.
To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the votes they may
cast), shareholders must be registered in the register of members of the Company by close of business on 5 May 2023 (or, in the
event of any adjournment on the date which is two days before the time of the adjourned Meeting, excluding non-business days).
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Changes to the register of members after the relevant times shall be disregarded in determining the rights of any person to attend
and vote at the Meeting.
In the case of joint holders, the vote of the senior holder who tenders a vote whether in person or by proxy shall be accepted to
the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the
names stand in the register of members of the Company in respect of the relevant joint holding.
As at 9 March 2023 (being the last business day prior to publication of the Notice), the Company’s issued share capital consists of
56,694,783 ordinary shares of one penny each, carrying one vote each. No shares are held in treasury. Therefore, the total voting
rights in the Company as at 9 March 2023 are 56,694,783.
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Explanatory notes to the Annual General Meeting
Resolution 1
Company’s Annual Report and Accounts 2022 (ordinary resolution)
Company law requires the Directors to present to the Annual General Meeting the Annual Accounts, the Directors’ Report and the
Auditor’s Report on those accounts.
Resolution 2
Final dividend (ordinary resolution)
The payment of a final dividend of 0.5p per ordinary share in respect of the year ended 31 December 2022, which is recommended
by the Board, requires the approval of the shareholders at the Annual General Meeting.
Resolution 3 to 7
Re-election and election of Directors (ordinary resolutions)
The Articles require that all serving Directors should submit themselves for re-election and election each year. At the Annual General
Meeting, Andrew Boorman, Jeremy Miller, Julian Morse, Lisa Gordon and Jeremy Osler will retire and submit themselves for re-
election. Resolutions 3 to 7 propose their re-elections and elections.
The Directors believe that the Board continues to maintain an appropriate balance of knowledge and skills and that all the Non-
executive Directors are independent in character and judgement. Biographical details of all our Directors’ seeking re-election or
election can be found on page 26 and 27 of the 2022 Annual Report.
Resolutions 8 and 9
Re-appointment of auditor and determination of their remuneration (ordinary resolutions)
The Company is required to appoint an auditor at each Annual General Meeting at which accounts are presented, to hold office until
the conclusion of the next such meeting. The Audit, Risk and Compliance Committee (ARCC) has reviewed the effectiveness,
independence and objectivity of the external Auditor, BDO LLP, on behalf of the Board. Resolution 8 proposes the re-appointment of
BDO LLP as the Company’s Auditor and Resolution 9 authorises the Directors, in accordance with standard practice, to negotiate and
agree the remuneration of the Auditors. In practice, the ARCC will consider the audit fees for recommendation to the Board.
Resolution 10
Authority to allot shares (ordinary resolution)
Resolution 10 asks shareholders to grant the Directors authority under section 551 of the Companies Act 2006 (the “Act”) to allot
shares or grant subscription or conversion rights as are contemplated by section 551 (a) and (b) of the Act respectively up to a
maximum aggregate nominal value of £377,964, being approximately 66% of the nominal value of the issued share capital of the
Company as at 9 March 2023 (being the latest practicable date prior to the publication of this document), £188,982 of this authority
is reserved for a fully pre-emptive rights issue. This is the maximum permitted amount under best practice corporate governance
guidelines. The authority will expire at the end of the Annual General Meeting of the Company in 2024 or, if earlier, at 6.00 pm on 10
August 2024. The Directors have no present intention of exercising such authority. The Resolution replaces a similar resolution passed
at the Annual General Meeting held in 2022.
Resolution 11
Disapplication of pre-emption rights (General) (special resolution)
If the Directors wish to allot new shares or other equity securities for cash or sell any shares which the Company holds in treasury
following a purchase of its own shares pursuant to the authority in Resolution 12 below (or otherwise), the Act requires that such
shares or other equity securities are offered first to existing shareholders in proportion to their existing holding. Resolution 11 asks
shareholders to grant the Directors authority to allot equity securities for cash up to an aggregate nominal value of £28,347 (being
approximately 5% of the Company’s issued share capital as at 9 March 2023) without first offering the securities to existing
shareholders. The Resolution also disapplies the statutory pre- emption provisions in connection with a rights issue, but only in relation
to the amount permitted under Resolution 10.2, and allows the Directors, in the case of a rights issue, to make appropriate
arrangements in relation to treasury shares, fractional entitlements, record dates or other legal, regulatory or practical problems
which might arise. Resolution 11 also permits Directors the authority to allot new shares or other equity securities or sell any shares
which the Company holds in treasury (otherwise than under paragraphs 11.1 and 11.2 of Resolution 11) up to an aggregate nominal
amount of £11,338.80, which represents approximately 2 per cent. of the Company's issued ordinary share capital as at 9 March 2023
(being the latest practicable date prior to the publication of this document) to be used only for the purposes of making a follow-on
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Governance
Financial
offer to retail investors or existing investors not allocated shares in the offer The authority will expire at end of the Annual General
Meeting of the Company in 2024 or, if earlier, at 6.00pm on 10 August 2024. The Resolution replaces a similar resolution passed at
the Annual General Meeting of the Company held in 2022, save that as above the authority has been increased in line with the Pre-
Emption Group's Statement of Principles for up to an additional 2 per cent. in connection with a follow-on offer to retail investors or
existing investors not allocated shares in the offer.
Resolution 12
Authority to purchase the Company’s own ordinary shares (special resolution)
Resolution 12 to be proposed at the Annual General Meeting seeks authority from shareholders for the Company to make market
purchases of its own ordinary shares, such authority being limited to the purchase of 9.99% of the ordinary shares of 1 penny each in
issue as at • March 2023. The maximum price payable for the purchase by the Company of its own ordinary shares will be limited to
the higher of 5% above the average of the middle market quotations of the Company’s ordinary shares, as derived from the AIM
Appendix to the Daily Official List of the London Stock Exchange, for the five business days prior to the purchase and the higher of the
price of the last independent trade of an ordinary share and the highest current independent bid for an ordinary share as derived
from the trading venue where the purchase is carried out.
The minimum price payable by the Company for the purchase of its own ordinary shares will be 1 penny per ordinary share (being the
nominal value of an ordinary share). The authority to purchase the Company’s own ordinary shares will only be exercised if the
Directors consider there is likely to be a beneficial impact on the earnings per ordinary share and that it is in the best interests of the
Company at the time. This Resolution renews a similar resolution passed at the Annual General Meeting held in 2022. The Company
is allowed to hold in treasury any shares purchased by it using its distributable profits. Such shares will remain in issue and will be
capable of being re-sold by the Company or used in connection with certain of its share schemes. The Company would consider, at
the relevant time, whether it was appropriate to take advantage of this ability to hold the purchased shares in treasury.
Options to subscribe for 13,556,418 ordinary shares have been granted and are outstanding as at 9 March 2023 (being the latest
practicable date prior to publication of this document) representing 23.91% of the issued ordinary share capital at that date. If the
Directors were to exercise in full the power for which they are seeking authority under Resolution 12, the options outstanding as at 9
March 2023 would represent 26.57% of the ordinary share capital in issue following such exercise.
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90 www.cenkos.com
Information for shareholders
Directors
Lisa Gordon
(Non-executive Chairman)
Andrew Boorman
(Non-executive Director)
Jeremy Miller
(Non-executive Director)
Julian Morse
(Chief Executive Officer)
Jeremy Osler
(Executive Director)
Company Secretary
Jeremy Osler
Anticipated Financial Calendar
March
Year-end results announced
May
Annual General Meeting
June
Final dividend paid
September
Half-year results announced
November
Interim dividend paid
Company Registration Number
05210733, England
and Country of Incorporation
Registered Office
6.7.8 Tokenhouse Yard
London EC2R 7AS
Banker
HSBC
Corporate Banking
60 Queen Victoria Street
London EC4N 4TR
Solicitors
Simmons & Simmons
City Point
1 Ropemaker Street
London EC2Y 9SS
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Registrars
Link Asset Services
The Registry
10th Floor Central Square
29 Wellington Street
Leeds LS1 4DL
Nominated Adviser
Spark Advisory Partners Limited
5 St John’s Lane
London EC1M 4BH
Broker
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
Website
www.cenkos.com
Printed by DG3 using Revive 100 Silk which is a white triple coated sheet, manufactured from FSC® Recycled certified fibre
derived from 100% pre and post-consumer waste.
Cenkos Securities Plc
LONDON
6.7.8 Tokenhouse Yard
London
EC2R 7AS
Telephone: +44 (0)207 397 8900
EDINBURGH
125 Princes Street
Edinburgh
EH2 4AD
Telephone: +44 (0)131 220 6939
Email: info@cenkos.com
www.Cenkos.com