Exactly a year ago, I recommended top slicing your holdings in Jarvis Securities (JIM:460p), a stockbroker and financial services outsourcer (‘Targeting a break-out’, 21 August 2017), having first suggested buying at 305p, in the autumn of 2016 ('High-yielding income play with capital upside', 15 November 2016).
Admittedly, I failed to call the very top as the company's share price subsequently went on to hit a record high of 645p as investors warmed further to improved trading prospects for both of Jarvis’s business units: a corporate division, which provides outsourced and partnered financial administration services to a number of third-party organisations and has cash under administration in excess of £150m, all of which is placed on short-term deposit with triple-A-rated banks; and a broking operation that has more than 100,000 retail clients who use its ShareDeal-Active and X-O low-cost online share trading services. They had reason to be positive as the company subsequently delivered a 22 per cent surge in its 2017 pre-tax profits and EPS to a record £4.4m and 32.4p, respectively, and rewarded shareholders with a 23 per cent hike in the payout per share to 23.5p.
One reason for maintaining a financial interest when I last reviewed the investment case (‘Repeat buying opportunities’, 26 February 2018) is because the turn in the UK interest rate cycle is highly significant to Jarvis. That’s because interest earned from Treasury and bank cash deposits accounts for over 40 per cent of the annual revenue it earns, although it will need to see a series of base rate rises before there is a material impact on profits.