- Underlying pre-tax profit up 47 per cent to £5.9mn
- 18 per cent higher revenue of £37.2mn
- Full-year earnings per share soars 92 per cent to 7.1p
- Dividend per share hiked 21 per cent to 4.25p
- Net cash of £33.5mn (59p a share)
- Strong start to 2022 financial year
Corporate broker Cenkos Securities (CNKS:71p) has delivered a near 50 per cent rise in annual adjusted pre-tax profit to £5.9mn, and that’s after trebling profits in 2020.
The group’s corporate division completed 34 deals for clients last year, raising over £1.2bn in the 12-month trading period. The split was pretty even between the first and second halves, the largest deal being a £175mn equity raise for Smart Metering Systems (SMS), the Glasgow-based installer of smart electric meters and other carbon-reduction infrastructure. The diverse range of companies raising money included builders' merchants, music royalty finance providers, smart fabrics companies and even oncology diagnostic firms, highlighting the ongoing shift in London’s junior market towards well-run quality companies. Cenkos added 17 new clients to the roster, too, segmenting its place as a leading broker to Aim companies.
Importantly, the 2022 financial year has started well, too. Cenkos has completed nine deals (three IPOs, four placings and two M&A transactions) including a £130mn placing for Marlowe (MRL), a leader in business critical services and software which assure regulatory compliance, and the IPO of Neometals (NMT), a sustainable minerals and advanced materials project developer. These companies have market capitalisations of £755mn and £540mn, respectively.
Rightly, shareholders are reaping the benefits with the annual dividend hiked a fifth to 4.25p. The 6 per cent dividend yield aside, Cenkos’s rock-solid balance sheet includes cash of £33.5mn which backs up 83 per cent of its own market capitalisation of £40.2mn. Effectively, you are getting an operational business in the price for £6.7mn, little more than the underlying profit Cenkos earned last year. The implication is that deal flow will collapse, something that clearly has not happened yet even in a highly volatile market environment.
The holding has delivered a 30.8 per cent total return (TR) since I included the shares, at 56p, in my market-beating 2020 Bargain Shares Portfolio (TR of 45 per cent), outperforming both the TRs on the FTSE All-Share (6.7 per cent) and FTSE Aim All-Share (9.3 per cent). The share price pullback since I covered the haklf-year results (‘Bargain shares: Looking for profitable gains’, 9 September 2021) is at odds with the strength of Cenkos's operational performance, and offers an attractive entry point. Buy.
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