I really can have no complaints with the performance of Aim-traded stockbroker and financial services outsourcer Jarvis Securities (JIM: 435p) as the shares have almost doubled in value since I initiated coverage when the price was 220p ('Solid income buy', 25 Feb 2013). However, with a significantly higher share price comes a higher rating and less margin for error. In the case of Jarvis, it's fiscal 2014 reported pre-tax profits were only 2 per cent down on WH Ireland's pre-tax profit estimate of £3.24m, and still well up on the 2013 reported figure of £3.07m. But behind that performance there was a definite slowdown in the second half, inline with the experience of many stockbrokers when the autumn chill in the stock market hit trading volumes. In fact, Jarvis's second-half pre-tax profits actually declined slightly to £1.5m, and were well down on the £1.68m reported in the first six months of the year.
This more subdued trading backdrop has prompted analyst Nick Spoliar at broking house WH Ireland to rein back his 2015 pre-tax profit forecast by over £200,000 and he now expects a flat performance this year and a maintained dividend of 16.5p per cent, albeit that payout is still well up on the 14.5p a share declared in 2013, and covered 1.4 times by EPS of 23p. Still, with expectations being dampened down somewhat, even though Jarvis flagged up a decent pipeline of business for its outsourcing business where it provides partnered financial administration services to a number of third-party organisations, then there is a definite lack of a catalyst for immediate share price upside. It also explains why the shares have drifted since I reiterated my buy advice last autumn ('Exploit a cash rich income play', 6 November 2014).