Cenkos Securities Plc (LON:CNKS) maintained its record of unbroken profitability in 2016 despite tougher markets. The business model, based on relatively low basic remuneration and variable team rewards transparently linked to results, has proved resilient across the cycle and encourages an entrepreneurial approach, attracting clients and mandates, increasingly for substantial transactions. The level of profit is subject to market fluctuations but the current valuation appears to reflect cautious assumptions given the group’s historical performance.
2016 results
Despite a recovery in H2, full-year revenues declined noticeably (43%) from the high levels of 2014/15 in quieter markets and in the absence of the very large (£1bn plus) transactions that characterised those years. Excluding the BCA transaction from 2015, the revenue decline of 12% broadly matched the weaker trend in AIM equity issuance, which was 13% lower in the year at £4.8bn (with Cenkos taking a 13% market share). In response to lower revenues, costs were well controlled with performance-related pay reducing and non-staff costs falling slightly. Pre-tax profits were £4.4m (2015: £19.9m), ROE 10% and profits were again fully distributed (6p dividend).
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