Jarvis Securities plc share price, company news, analysis and interviews

Jarvis Securities plc (LON:JIM) Finance Director Jolyon Christopher Head caught up with DirectorsTalk for an exclusive interview to discuss full year results, how recent uncertainty is affecting the business, the impact of interest rates and what investors can expect from the company in the coming months.

Q1: Jarvis Securities has recently announced full year results for 2021. Jolyon, how did the year unfold in your opinion?

A1: I think overall, it’s been an excellent year for us. We’ve released a record breaking set of results which shows that the company is moving in the right direction.

I think broken down between the two halves of the year, what we saw in the first half was incredibly high volumes, which had continued through from the back end of 2020. We saw that across the retail space and the model B space, which is our institutional business, that carried on to about the end of May. What we saw in the second half was slightly quieter volumes, the retail side of the business continued from strength to strength, but the model B side of the business was a bit quieter.

I think in hindsight, the reason for that was there was a lot of pent up demand from COVID for corporate services in terms of IPOs and placings and that came through in the first half of the year whereas now we’ve reverted to slightly more normal levels.

Q2: Now, there seems to be a lot of uncertainty around at the moment, how is it impacting the company?

A2: At the moment, we’re in a very interesting market and I think uncertainty is the buzzword for most people.

At the beginning of the year, we obviously had the spectrum of inflation coming through and how the central banks across the world would deal with that, and that weighed a little bit on equity prices. Then that’s obviously been followed up by Russia’s invasion of Ukraine, which is ongoing.

Now, that in itself, those two things have caused quite a lot of volatility in the equity markets and normally, for us, volatility is a good thing in that it increases volumes. What we are currently seeing is not what we would usually see in that whilst volumes are good, they are not where we would expect with this level of volatility. We are in a very uncertain time, we do hope for many reasons that the Ukrainian situation resolves itself as soon as possible.

Just looking at this purely from a commercial perspective, it does for feel quite a lot like when we were in the Brexit situation when there was a lot of uncertainty then, where I think a lot of investors were sitting on their hands. As soon as the situation was resolved, we saw a huge spike in volumes coming back into the market and that’s really where it feels like we’re at the moment.

Q3: Your business is impacted by interest rates, will the increases be positive for the business and will there be an immediate impact, do you think?

A3: I think this is an area where we have a little bit more certainty.

So, we have three main revenue streams. We have commission from trading volumes, we have interest income that we earn on client cash that we place on deposit and then we have various fixed fees that we levy on our institutional clients for compliance-type services.

In terms of the interest rate revenue stream, what we’ve seen over the last five years is a continuous decrease in the rates that we were able to obtain. So, we have a large treasury book where we effectively manage a considerable amount of money and it’s broken down into smaller amounts of £5-£10 million which is placed on deposit and comes off periodically. We probably have deposits maturing every couple of weeks, sometimes more regularly than that.

What we have definitely seen since the turn of the year is an increase and this is the first time we’ve seen this for several years, where funds that are maturing are being replaced at a higher rate than the rate that we were getting previously. So, that, for us, is a huge positive step. How much those increases will continue is an uncertain area because obviously it’s for the central banks to decide and it’s quite difficult to second guess exactly where their priorities will lie in terms of inflation, keeping the economy going, etc.

The other thing that we do know for certain is that what we saw in 2021 was a complete flattening of the rates that were available to us. So, a lot of the deposit were put out very short term, there was no benefit to putting money out for two years when the rate at three months was identical.

So, what we do have is a lot of the deposits that were placed in ‘21 will be maturing this year so, everything else being equal as it is at the moment, we will see a fairly immediate benefit to that revenue stream.

Q4: Just looking forward in terms of news flow, what can we expect from Jarvis Securities over the next few months?

A4: Well, hopefully, just the regular stuff that we would normally announce.

So, in terms of the way the business is managed, it’s still highly cash generative, nothing has changed in terms of management philosophy, we are still focusing on returning cash to shareholders as soon as possible.

So, we will have our dividend announcement on the 12th of May or shortly before, for the Q2 dividend, our interim accounts are published on the 14th of July this year and for anyone who is interested, all our information is available on our corporate website which is javissecurities.co.uk

Jarvis Securities plc (LON:JIM) Financial Director Jolyon Head caught up with DirectorsTalk for an exclusive interview to discuss interim results, significant cash on the balance sheet, financial performance over the next six months and whether there are any significant changes going forward.

Q1: An excellent set of results for Jarvis Securities, what your thoughts?

A1: Well, obviously, delighted with the way that things are going at the moment. I think the most satisfying thing for us is that these results prove that the year end results for 2020 weren’t so much of a one-off due to the extraordinary market conditions but are actually a fair reflection of where the business is at the moment.

I think these half year results really back up the fact that we’ve grown and that these are the type of results we would be expecting to release under normal market conditions.

Q2: I see that you have a significant amount of cash on the balance sheet, is this all required for operational purposes?

A2: Some of it is. I think you’re correct in that observation, we do have more cash than normal in the business and there are two reasons for that.

One is we sold off the treasury shares that we held during the period using Primary Bid, one of our clients, and that raised £2.2 million. These were shares that we bought back previously at a much lower price than we were able to sell them for.

The other reason is that the cash balance has just benefited from the excellent operational performance of the business.

In terms of our requirements, they’re obviously driven by regulatory reasons and operational. The business historically has made an effort to return cash to shareholders in a timely fashion where it’s not required and that certainly remains the case.

So, if, after review, we feel that we have excess cash, over and above both our current needs and our anticipated needs, we would certainly look to pay that out as dividends.

Q3: So, how do you anticipate the financial performance over the next six months?

A3: Hopefully more of the same, I don’t see any reason why not.

I think in the very near term, and by that I would mean July and August, we do see those months being a little bit quieter, a lot of our clients are on holiday, a lot of the brokers who work from our Model B are also on holiday.

By September, and through to the end of the year, I would expect that we will be experiencing similar levels of market activity to those that we saw in the first half of the year.

Q4: Do you have any significant changes planned for the business in the near future?

A4: No, we don’t. I think one of the strengths of Jarvis Securities is we know what we are and we know what we do, and we know what we do well so unless there’s a compelling reason to deviate from that, we don’t plan to do so. At present, there doesn’t seem to be any reason to do so.

We’re continuing to see a lot of growth within our existing portfolio of Model B clients, we signed up two Model B clients during the period just gone, we’ve got more inquiries in the pipeline that we would hope to onboard in the next few months.

In our retail proposition, particularly our very low cost X-O platform, is still acquiring new clients so I think from our perspective, it’s very much a case of if it ain’t broke, don’t fix it.