Jarvis Securities Q&A: Expecting volumes to double (LON:JIM)

Jarvis Securities plc (LON:JIM) Chairman and Chief Executive Officer Andrew Grant caught up with DirectorsTalk for an exclusive interview to discuss the company, its increase in growth and profit before tax, the four-for-one stock split, dividend payments and the main opportunities for the business.

Q1: Andrew, can you start by giving our listeners a little background on Jarvis Securities?

A1: We are the AIM listed parent company of its trading subsidiary, Jarvis Investment Management.

Jarvis Investment Management is the London Stock Exchange member firm to enable the business to carry out its financial services, execution-only broking custody outsourcing.

The business itself started way back in the late eighties, has developed and grown through and now employees about 60 people in Tunbridge Wells, was introduced to AIM in 2004 and has really developed and grown organically from there.

Q2: Now, the company’s interim results for the six months ended 30th of June 2020 showed a 30.8% increase in revenue and a 50.3% increase in profit before tax, versus the same period last year. What’s driven this tremendous growth?

A2: Predominantly, the driver would have been volume and that’s executed trades via the LSE where for the last two years, we’ve been under the Brexit exit cloud and generally bad sentiment causing a lot of people really to sit on hands and not invest their money.

We are driven by volume and whilst the underlying business has continued to expand in terms of client numbers and commercial relationships, they didn’t really flow through to this lack of volume.

Now, with Brexit more or less out of the way, or at least sentiments changed, and the COVID wave of activity in the early part of the year, that’s really what’s driven the bottom line.

Q3: Last month you did a four-for-one stock split, can you explain for us what that is and the benefit for investors?

A3: There’s no, as such, real benefit. The perceived benefit is that we are aiming to increase liquidity in the shares by having more shares out there, there is a accepted mentality that retail investors do have a reluctance to buy expensive shares and would prefer to buy shares that are sort of sub £5 rather than £10/£20 each. So, one of the criticisms has been a lack of liquidity and that’s what we’re trying to address with the stock split.

Q4: Now, whilst many plc’s have stopped or cut back their dividends, you’ve rewarded investors with a record year of dividend payments. What’s the current payout for 2020 and what’s the future dividend strategy going forward?

A4: The payout for the current year is 11.1p which currently represents a 5.5% yield.

The general strategy is that, as I mentioned earlier, we are a business growing organically, we are not looking to invest or buy other businesses or expand into things that we either don’t know about or taking a risk.

Therefore, whilst we had an informal policy historically of paying out two thirds of our dividends, the one third that gets left behind does accumulate into a meaningful sum of money and therefore we occasionally pay out a special dividend.

In the meantime, we will continue to distribute earned profits as far as we can, not obviously putting at jeopardy any resourcing requirements or capital requirements from a regulatory point of view.

So, generally we are looking to pay out the dividends we make as we make them.

Q5: As we look forward into 2021, what do you see as the main opportunities in Jarvis Securities and why should listeners invest?

A5: We are continuing to have a very healthy and expanding pipeline of potential new commercial customers and with that will come more volume, which is our driver.

We are also hopefully going to be seeing the end of the COVID challenge, Brexit will be out of the way and I’m hoping that volumes will again return to their sort of levels of 3 or 4 years ago which, which, as far as we’re concerned, are probably double what we’re currently seeing. As a sort of hint towards that, the vaccine hysteria this week, we were turning over double volume in those days.

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