TIDMNUM
RNS Number : 5680V
Numis Corporation PLC
04 December 2019
Numis Corporation Plc
Full Year Results
for the year ended 30 September 2019
London, 4 December 2019: Numis Corporation Plc ("Numis") today
announces preliminary results for the year ended 30 September
2019.
Highlights
-- Difficult market environment and political uncertainty
persisted throughout the year impacting revenues across the
business
o Investment Banking revenues 16% lower than last year due to
substantial decline in UK deal activity
o Market share gains in Equities but revenue down 21% reflecting
weak UK investor sentiment and lower trading profits
-- Corporate client base continues to strengthen - 217 clients
and 7% increase in average market cap
-- Payments for research remain stable despite reduction in overall market spend by institutions
-- Costs controlled in response to market conditions
-- Full year dividend maintained at 12p for fourth successive
year, and GBP12.0m spent on share repurchases
-- Strong balance sheet and liquidity position maintained
-- Encouraging start to the current financial year with improved
revenue performance across the business
Key statistics
Financial highlights 2019 2018 Change
------------------------------- ---------- ---------- ----------
Revenue GBP111.6m GBP136.0m (18.0%)
------------------------------- ---------- ---------- ----------
Underlying Operating profit GBP14.1m GBP29.7m (52.5%)
------------------------------- ---------- ---------- ----------
Profit before tax GBP12.4m GBP31.6m (60.7%)
------------------------------- ---------- ---------- ----------
EPS 8.8p 25.1p (64.9%)
------------------------------- ---------- ---------- ----------
Cash GBP84.2m GBP111.7m (24.6%)
------------------------------- ---------- ---------- ----------
Net assets GBP138.2m GBP143.1m (3.5%)
------------------------------- ---------- ---------- ----------
Operating highlights
------------------------------- ---------- ---------- ----------
Corporate clients 217 210 +7
------------------------------- ---------- ---------- ----------
Average market cap of clients GBP888m GBP829m 7.1%
------------------------------- ---------- ---------- ----------
Revenue per head GBP404k GBP538k (24.8%)
------------------------------- ---------- ---------- ----------
Operating margin 12.6% 21.8% (9.2ppts)
------------------------------- ---------- ---------- ----------
Spend on share repurchases GBP12.0m GBP16.3m (26.3%)
------------------------------- ---------- ---------- ----------
Notes:
1) Revenue, Underlying Operating profit, Operating margin and
Revenue per head all exclude investment income / losses
2) EPS represents Basic EPS
Alex Ham and Ross Mitchinson, Co-Chief Executive Officers,
said:
"It has without doubt been a challenging year for everyone in
the industry and our results have inevitably been impacted by the
persistent political uncertainty, macro-economic factors and
subdued, yet volatile markets.
But our ambitions for the business remain unchanged. We continue
to add to our capabilities and to selectively hire brilliant
people, taking full advantage of the opportunities that are
presented by challenging times. We have the best corporate client
list we have ever had; we have the best people we have ever had,
and we have a broader offering for our clients than ever
before.
We continue to be actively focused on our clients and believe we
are better positioned than ever to continue winning market share,
achieving progress against our strategic objectives, and returning
to delivering strong growth as and when market conditions
improve."
Contacts:
Numis Corporation:
Alex Ham & Ross Mitchinson, Co-Chief Executives 020 7260
1245
Andrew Holloway, Chief Financial Officer 020 7260 1266
Brunswick:
Nick Cosgrove 020 7404 5959
Simone Selzer 020 7404 5959
Grant Thornton UK LLP (Nominated Adviser):
Philip Secrett 020 7728 2578
Harrison Clarke 020 7865 2411
Niall McDonald 020 7728 2347
Notes for Editors
Numis is a leading independent investment banking group offering
a full range of research, execution, corporate broking and advisory
services to companies and their investors. Numis is listed on AIM,
and employs approximately 270 staff in London and New York.
Business review
A challenging year impacted by low activity levels in UK
markets
Our performance for the year was significantly impacted by
domestic political uncertainty which both inhibited transaction
activity amongst our client base, and led to a decline in volumes
in UK equities. However, we continued to make good strategic
progress in delivering market share gains and developing the
quality and capabilities of the business. Our balance sheet remains
very strong and we aim to provide the best possible advice and
support for all our clients across the business, in all market
environments.
Equity markets declined sharply during the first quarter of the
financial year and whilst indices gradually recovered over the
remainder of the year, we witnessed increased volatility levels as
a result of global economic and Brexit concerns. The UK market has
not experienced a year with volatility levels as high since
2012.
As a result, UK Equity Capital Markets (ECM) volumes declined
significantly compared to the prior year and, given the low
transaction volume, deal fees were concentrated amongst a far
smaller group of deals compared to more active years. Merger &
Acquisition (M&A) volumes also declined over the year although
we saw an increase in bid activity toward the end of the year.
The persistent uncertainty facing the UK also impacted
institutional investors as they typically adopted a more cautious
approach toward investing in UK equities. Many overseas
institutions maintained underweight positions limiting their
exposure to the UK market, whilst many domestic long-only
institutions suffered outflows in UK equity strategies.
Consequently activity levels amongst our institutional clients were
generally subdued.
In contrast private markets continue to advance, benefitting
from growing capital allocations which supported an increase in
transaction volumes, and higher value transactions. In recent
times, high growth private businesses have repeatedly demonstrated
that raising significant capital from a variety of investors at
attractive valuations no longer demands a public listing. Whilst
such transactions are global in their distribution, our long
history of raising capital for growth businesses provides a
platform from which we can continue to progress our participation
in these private transactions and add to our developing track
record.
Investment Banking - building the client base and
diversifying
During the year we made good progress in broadening the
capabilities and track record of our Investment Banking division.
We continued to invest in hiring talent to complement our strong
corporate broking and ECM platform. We have strengthened our pool
of senior bankers across a range of sectors and continued to
recruit exciting talent at all levels. Our ability to recruit high
quality individuals at all levels has been materially enhanced in
recent years as we continue to raise our profile, work with
interesting clients and promote a culture which is differentiated
from our larger investment banking competitors.
The increase in market volatility and decline in business
confidence has prompted boards to ensure they are receiving the
best advice and market insights. This has presented opportunities
for us to win new corporate brokerships and continue our strategic
ambition to enhance the quality of our client base. We added a net
seven brokerships during the year with companies such as Fever-Tree
and Euromoney joining our list of clients. The average market cap
of our client base increased 7% during the year notwithstanding
indices having declined over the year. We now act for 47 FTSE250
clients and seven FTSE100 clients. Over the past year the average
market cap of our clients wins was more than double that of our
losses.
Our stability and trusted advice has significantly contributed
to our sustained track record of client growth. We believe the
current market environment, whilst uncertain in the short term,
presents further opportunities for the business to continue
advancing the quality of the client base.
Investment Banking revenue declined 16% compared to the prior
year, driven by lower deal fee income. In particular we executed
fewer capital raising transactions for our corporate clients as UK
business confidence weakened and decisions regarding significant
transactions were typically deferred. When clients did execute
deals they tended to be smaller in size, reflecting the cautious
sentiment of all market participants. This resulted in fewer large
fee events this year and a decline in average deal fees compared to
the prior year.
Capital markets revenues declined by 18% and we broadly
maintained market share in UK ECM despite not being involved in the
largest deals to complete this year. The UK IPO market was
particularly weak, recording the lowest volume of deals since 2012.
Despite this decline we managed to complete more IPOs this year
compared to the prior year including the successful IPO of AJ Bell,
a sole bank deal, which has traded particularly well in the
after-market. We expect our capital markets revenues to improve as
soon as ECM market volumes recover and, given our track record and
client base, we believe we are well positioned to maintain a market
leading position and capture greater share.
Whilst public market activity declined, we recorded revenues of
approximately GBP9m from private markets transactions, representing
a meaningful improvement on the prior year. We successfully
repositioned our strategy in private markets, adopting a more
targeted approach, focused on late-stage transactions for companies
both in the UK and overseas. Notably, our largest investment
banking transaction of the year was a private fund raise for
Swedish fintech business, Klarna. Numis acted as exclusive placing
agent raising $460m for the business at a valuation of $5.5bn. We
have a good pipeline of private markets opportunities and we are
focused on building a strong track record to establish Numis as a
leading player in this relatively new market.
Advisory revenue remains a core strategic focus for the business
and whilst revenues declined, the market backdrop has not been
particularly supportive of public M&A transactions for the
majority of the year. However, in recent months activity has
increased, particularly amongst private equity firms who are
increasingly identifying the UK public markets as a source of good
investment opportunities. We continue to expand our advisory
capabilities within Investment Banking by hiring bankers with
strategic advisory and M&A experience. Accordingly, we are
targeting an improved performance in FY20.
Equities - continuing to gain market share
As well as strengthening our core product offering to
institutional investors and gaining market share, we continue to
expand our capabilities in Equities as we seek to serve a wider
investor base and establish Numis as the leading UK equities
business. In response to the increased penetration of low-touch
trading we expect to launch an electronic trading product during
the first half of FY20 which we believe will both provide access to
a new client base and also facilitate broader trading relationships
with some existing clients.
Whilst our institutional income, which comprises both execution
commission and payments for research under MIFID II, declined 12%
against the prior year, we continued to gain market share in UK
equities. The number of UK institutions who consider Numis their
top rated UK broker also continues to grow.
In June, we won the UK Small & Mid Cap Extel survey for the
seventh consecutive year, as voted by institutions, confirming our
market leading position in equity research. This sustained success
reflects the quality of our research product and service to
institutions, both of which underpin our deep, longstanding
relationships with the investor community. Such connectivity is
critical to our business model and enables us to formulate valued
advice and guidance for our corporate clients.
The quality and experience of our staff across research, sales
and trading is a material competitive advantage in a market which
has been subject to regulatory disruption. Our market share gains
have been supported by the investment in new hires across the
research and sales teams completed in 2018.
Following the introduction of MiFID II in January 2018, payments
for research have been subject to significant scrutiny by asset
managers with the outcome invariably resulting in a reduction in
payment to the broking sector. We are pleased to report our
research payments remain stable despite the undoubted recent
decline in market wallet for this product. Such market share gains
are important not just in securing the stability of this revenue
stream but as a financial endorsement of the quality of our service
which benefits all client activities across the firm.
Whilst our research revenues were stable, our execution
commission declined over the year, reflecting the fall in market
volumes and the generally weak investor sentiment toward the UK
throughout the year. Once the political uncertainty dissipates and
investor confidence returns, we would expect execution revenues to
recover.
Trading gains were GBP4.0m in the year which was down on the
prior year, however the first half was impacted by a one-off loss
associated with underwriting of the Kier rights issue. Excluding
this loss, trading has delivered a reasonable performance in the
year given the increased volatility and variable markets.
Current trading and outlook
Revenue for the first two months of the year is ahead of the
comparative period. We have benefited from an increase in ECM deal
volumes including raising GBP152m for Bovis Homes Plc and GBP104m
for Future Plc. In addition we acted as financial adviser to Unite
Group Plc in relation to the GBP1.4bn acquisition of Liberty
Living. We continue to build our track record in private markets -
in November we completed another significant transaction in the
fintech sector. Our private markets pipeline of opportunities, both
in the UK and internationally, continues to grow.
Equities has also delivered an improved revenue performance with
strong trading gains and an increase in execution commissions
contributing to a strong two month performance, materially ahead of
the comparative period.
Whilst the political uncertainty and macroeconomic concerns
impacting our FY19 results have not subsided, we are encouraged by
the recent performance of the business. Market conditions and the
upcoming general election will likely impact the pipeline of deals
in the short-term but we remain well positioned to progress our
strategy.
Financial review
We continue to make strategic progress and maintain a strong
financial position affording us the opportunity to pursue our
ambitions for the business through difficult markets.
2019 2018 %
GBPm GBPm Change
------------------- ----- ----- -------
Investment Banking 74.3 88.6 (16.1%)
------------------- ----- ----- -------
Equities 37.3 47.5 (21.4%)
------------------- ----- ----- -------
Revenue 111.6 136.0 (18.0%)
------------------- ----- ----- -------
Investment income (2.2) 1.7
------------------- ----- ----- -------
Total Income 109.4 137.8 (20.6%)
------------------- ----- ----- -------
Revenue for the year was GBP111.6m (2018: GBP136.0m),
representing a decline of 18% as the unfavourable market conditions
impacted all aspects of our business consistently across the
financial year. Revenue per head declined by 24.8% to GBP404k
reflecting the increase in average headcount compared to the prior
year. Total income was down 20.6% due to the negative fair value
adjustments within the investment portfolio which closed the year
at GBP14.8m (2018: GBP16.3m).
Investment Banking
2019 2018 %
GBPm GBPm Change
--------------------------- ----- ----- -------
Capital Markets 48.4 58.8 (17.8%)
--------------------------- ----- ----- -------
Advisory 12.6 17.3 (27.5%)
--------------------------- ----- ----- -------
Corporate retainers 13.4 12.4 7.5%
--------------------------- ----- ----- -------
Investment Banking revenue 74.3 88.6 (16.1%)
--------------------------- ----- ----- -------
The Investment Banking division delivered revenue of GBP74.3m
(2018: GBP88.6m), resulting in a 16% decline on the prior year.
Public markets have clearly experienced a difficult year and our
volume of completed transactions was lower as a result. Our
corporate client base continues to be the main source of deal flow
and given our domestic mid-market bias, these clients have
typically been less active this year. As a result, we have
experienced a significant decline in the volume of deals at the
larger end of our typical fee range which has resulted in a
reduction in our average deal fees this year.
Capital markets fees were 18% lower as ECM transaction volumes
in the small and mid cap sector were materially lower this year.
However, the decline in public markets deal volumes was partially
offset by a significantly improved revenue contribution from our
private markets activities. Advisory fees were similarly impacted
by a decline in UK transaction volumes. Notwithstanding the revenue
decline of 28% to GBP12.6m this year, we expect an improved
performance in the near term and believe the investment we have
made in this strategic priority will enable us to capture a greater
share of M&A fee opportunities, in particular those
opportunities generated by our list of retained corporate
clients.
The retainer fee income growth of 8% to GBP13.4m (2018:
GBP12.4m) reflects the continued expansion of the corporate client
base and contractual fee increases relating to existing clients. We
now have 217 corporate clients and we are seeing further near-term
opportunities to continue growing this list, partially assisted by
the changing strategic focus of some of our larger investment
banking competitors.
Equities
2019 2018 %
GBPm GBPm change
--------------------- ----- ----- -------
Institutional income 33.3 37.9 (12.0%)
--------------------- ----- ----- -------
Trading 4.0 9.6 (58.2%)
--------------------- ----- ----- -------
Equities revenue 37.3 47.5 (21.4%)
--------------------- ----- ----- -------
Equities delivered revenue of GBP37.3m (2018: GBP47.5m), which
represented a decline of 21%. Institutional income declined 12%
against the prior year which featured the introduction of MiFID II
at the start of January 2018. Our institutional income performance
reflects a significant decline in overall market wallet this year
which was partially offset by further market share gains.
The mix of our institutional income shifted toward payments for
research which remained resilient, and away from execution
commissions which suffered a reasonable decline due to weak markets
and low investor sentiment.
Trading reported gains for the year of GBP4.0m (2018: GBP9.6m).
The decline in performance is attributable, in part, to the first
half loss associated with the underwriting of the Kier rights
issue. The challenges presented by increased volatility and varied
market performance over the year resulted in a 23% increase in the
number of loss days compared to the prior year. We continue to
operate within conservative trading book limits and utilised a
consistent amount of capital compared with recent years.
Investment portfolio
We hold a portfolio of strategic investments consisting of
mostly early-stage private opportunities where we believe we can
contribute to the development of the Company through our network
and position in the market. Our investment portfolio decreased in
value by GBP2.2m over the year reflecting a number of write-downs
in relation to our early-stage unquoted investments. Further
amounts totalling GBP0.7m were deployed into existing portfolio
businesses during the year. The total number of investments in our
portfolio remains the same as the prior year and we continue to
seek liquidity events for our legacy holdings whilst maximising the
strategic value and network benefits of more recent portfolio
investments.
Costs
2019 2018 %
GBPm GBPm Change
--------------------------- ----- ----- --------
Staff costs 53.6 64.7 (17.2%)
--------------------------- ----- ----- --------
Share-based payment 10.9 10.6 3.1%
--------------------------- ----- ----- --------
Non-staff costs 33.0 31.0 6.3%
--------------------------- ----- ----- --------
Total administrative costs 97.5 106.3 (8.3%)
--------------------------- ----- ----- --------
Year end headcount 277 273 1.5%
--------------------------- ----- ----- --------
Average headcount 276 253 9.1%
--------------------------- ----- ----- --------
Compensation ratio 57.8% 55.4% +2.4ppts
--------------------------- ----- ----- --------
Total costs declined to GBP97.5m (2018: GBP106.3m) representing
a reduction of 8%. Staff related costs comprise the majority of our
cost base. Average headcount increased 9% reflecting the hiring
activity completed in the final few months of the prior year. Our
year end headcount was broadly flat as we responded to the
prevailing market by focusing on efficiency and productivity gains,
as well as integrating the hires completed last year to optimise
client service. Overall our fixed staff costs increased in line
with average headcount growth over the year.
The decline in revenue performance resulted in a material
reduction in variable compensation. This reduction more than offset
the increase in fixed staff costs resulting in an aggregate staff
cost decline for the year of 17%.
Our share-based payment charge was in line with the prior year
at GBP10.9m (2018: GBP10.6m). This charge has been subject to
minimal variance over the last three years demonstrating the
consistency of our compensation policy across this period. We will
continue to use equity to reward and incentivise our staff, both as
part of our year end compensation round and to facilitate hiring
activity.
Compensation costs as a percentage of revenue increased to 57.8%
(2018: 55.4%) as a result of the lower revenue performance and a
disciplined approach to staff compensation. This ratio reflects the
upper end of our target range of 50% to 60% which we believe to be
appropriate given the potential for market cycles to significantly
impact revenue performance.
Our non-staff costs increased 6% over the year as we continued
to execute the changes demanded by regulation, and those required
to satisfactorily mitigate the risks inherent in our industry.
During the period we upgraded our settlement system and prepared
the business for the introduction of SMCR.
Non-staff costs were lower in the second half compared to the
first six months as we implemented a number of efficiency savings.
In addition, we continue to invest in client focused initiatives
targeted to ensure we are able to offer our clients best in class
service.
Office relocation
As announced in September, the lease on our current London
office of 31,000 sq. ft. expires in September 2021 and we have
entered into a 15-year lease of 50,000 sq. ft. at 40 Gresham
Street. The lease is currently expected to commence near the end of
FY20 upon completion of the building and we expect to relocate
during the second half of FY21.
Whilst we will have the cash flow benefit of a three year
rent-free period, the increased size of the premises, and the
prevailing level of City rents will result in an increase of
approximately GBP3m to our ongoing property costs commencing FY21.
This cost increase includes the impact of IFRS 16 which will be
adopted next year and will result in higher costs being recognised
in earlier years of the lease, offset by lower costs in the later
years.
We will also incur fit out costs in relation to 40 Gresham
Street during the course of the next year, these will be
capitalised and amortised over the life of the new lease.
Profit
2019 2018 %
GBPm GBPm Change
---------------------------- ----- ----- ---------
PBT 12.4 31.6 (60.7%)
---------------------------- ----- ----- ---------
Adjustments:
---------------------------- ----- ----- ---------
Investment (income) /
losses 2.2 (1.7)
---------------------------- ----- ----- ---------
Net finance income (0.6) (0.2)
---------------------------- ----- ----- ---------
Underlying operating profit 14.1 29.7 (52.5%)
---------------------------- ----- ----- ---------
Operating margin 12.6% 21.8% (9.2ppts)
---------------------------- ----- ----- ---------
Owing to the operational gearing in our business, any reduction
in revenue has a more significant impact on operating profit which
was down 53% to GBP14.1m (2018: GBP29.7m). Similarly, the
Underlying operating margin declined to 12.6% (2018: 21.8%) as the
reduction in costs only partially offset the revenue decline.
PBT for the year was GBP12.4m, representing a decline of 61%
compared to the prior year, this included the impact of losses of
GBP2.2m in relation to the investment portfolio compared to gains
of GBP1.7m in the prior year. Our effective tax rate for the year
increased to 25%, resulting in profit after tax 65% lower at
GBP9.3m (2018: GBP26.7m), largely due to the share price decline
over the period having an adverse impact on the deferred tax
asset.
EPS declined in line with profits to 8.8p per share as the small
reduction in share count achieved by the share buyback programme
was immaterial compared to the decline in profits for the year.
Capital and Liquidity
The Group's net asset position as at 30 September 2019 was
GBP138.2m representing a small decline of 4% compared to the prior
year. The profits of the Group and the movement attributable to
equity compensation were more than offset by dividend distributions
and share repurchases. We continue to operate significantly in
excess of our regulatory capital requirements and believe this
provides the Group stability, and strategic flexibility, throughout
periods of lower profitability. Furthermore, in periods of market
dislocation the strength of our balance sheet provides significant
comfort to our clients and counterparties.
Our liquidity position is subject to material daily movements as
a result of our trading and underwriting activities. As at 30
September 2019, our cash position was GBP84.2m which was lower than
the prior year reflecting trading book movements and cash outflows
relating to dividends and share repurchases.
The Group operates with a cash position materially above its
minimum liquidity obligations, however the liquidity requirements
of the Group are likely to continue increasing as a result of our
participation in larger and more complex equity transactions.
Accordingly, during the year the Group entered into a revolving
credit facility agreement with Barclays and AIB to provide access
to a further GBP35m of liquidity. The facility is committed for 3
years providing additional capacity to support our strategy and
also offers us greater cash management flexibility. The facility is
currently undrawn.
Dividends and shareholder returns
The Board has declared a final dividend for the year of 6.5p per
share. The dividend will be paid on 7 February 2020 to shareholders
on the Register on 13 December 2019.
Our goal is to pay a stable ordinary dividend and re-invest in
our platform, pursue selective growth opportunities and return
excess cash to shareholders subject to capital and liquidity
requirements and market outlook.
During the year 4.7m shares were repurchased at a weighted
average price of 257p per share, this compares to 4.5m shares
purchased in the prior year at an average price of 363p per share.
The impact of the share repurchases has been to reduce the issued
share count by 1.0m shares over the course of the financial year.
Our issued share count is now 8.7m lower than the level three years
ago. Whilst the issued share count will increase with the vesting
of various share awards, our intention is to ensure that, over the
medium term, the dilutive impact of these awards is offset through
buybacks.
Consolidated Income Statement
FOR THE YEARED 30 SEPTEMBER 2019
2019 2018
Note GBP'000 GBP'000
--------------------------------- ---- -------- ---------
Revenue 3 111,610 136,047
Other operating (expense)/income 4 (2,210) 1,733
--------------------------------- ---- -------- ---------
Total income 109,400 137,780
Administrative expenses 5 (97,514) (106,348)
--------------------------------- ---- -------- ---------
Operating profit 11,886 31,432
Finance income 684 393
Finance costs (134) (181)
--------------------------------- ---- -------- ---------
Profit before tax 12,436 31,644
Taxation (3,110) (4,967)
Profit for the year 9,326 26,677
--------------------------------- ---- -------- ---------
Attributable to:
Owners of the parent 9,326 26,677
--------------------------------- ---- -------- ---------
Earnings per share
Basic 6 8.8p 25.1p
Diluted 6 8.1p 23.0p
Dividends 7 (12,650) (12,763)
--------------------------------- ---- -------- ---------
Consolidated Statement of Comprehensive Income
FOR THE YEARED 30 SEPTEMBER 2019
2019 2018
GBP'000 GBP'000
----------------------------------------- ------- -------
Profit for the year 9,326 26,677
Exchange differences on translation of
foreign operations (96) 115
Other comprehensive income for the year,
net of tax (96) 115
Total comprehensive income for the year,
net of tax, attributable to owners of
the parent 9,230 26,792
------------------------------------------ ------- -------
Consolidated Balance Sheet
AS AT 30 SEPTEMBER 2019
2019 2018
Note GBP'000 GBP'000
---------------------------------- ----- ---------- ----------
Non-current assets
Property, plant and equipment 2,790 3,200
Intangible assets 80 77
Deferred tax 8a 3,962 4,938
---------------------------------- ----- ---------- ----------
6,832 8,215
Current assets
Trade and other receivables 8b 188,233 369,304
Trading investments 8c 38,463 43,800
Stock borrowing collateral 8d 14,640 7,906
Derivative financial instruments 1,103 350
Cash and cash equivalents 8g 84,202 111,673
---------------------------------- ----- ---------- ----------
326,641 533,033
Current liabilities
Trade and other payables 8b (179,588) (381,607)
Financial liabilities 8e (14,153) (14,632)
Current income tax (1,578) (1,873)
(195,319) (398,112)
Net current assets 131,322 134,921
---------------------------------- ----- ---------- ----------
Net assets 138,154 143,136
---------------------------------- ----- ---------- ----------
Equity
Share capital 5,922 5,922
Other reserves 20,639 17,537
Retained earnings 111,593 119,677
---------------------------------- ----- ---------- ----------
Total equity 138,154 143,136
---------------------------------- ----- ---------- ----------
Consolidated Statement of Changes in Equity
FOR THE YEARED 30 SEPTEMBER 2019
Share Other Retained Total
Capital Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- --------- ---------
Balance at 1 October 2018 5,922 17,537 119,677 143,136
Profit for the year 9,326 9,326
Other comprehensive income (96) (96)
-------------------------------------- -------- --------- --------- ---------
Total comprehensive income
for the year - (96) 9,326 9,230
-------------------------------------- -------- --------- --------- ---------
Dividends paid (12,650) (12,650)
Net movement in Treasury
shares (2,303) (2,303)
Movement in respect of employee
share plans 3,198 (1,879) 1,319
Deferred tax related to share-based
payments (578) (578)
Transactions with shareholders - 3,198 (17,410) (14,212)
-------------------------------------- -------- --------- --------- ---------
Balance at 30 September 2019 5,922 20,639 111,593 138,154
-------------------------------------- -------- --------- --------- ---------
Share Other Retained Total
Capital Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- --------- ---------
Balance at 1 October 2017 5,922 13,416 114,288 133,626
Profit for the year 26,677 26,677
Other comprehensive income 115 115
-------------------------------------- -------- --------- --------- ---------
Total comprehensive income
for the year - 115 26,677 26,792
-------------------------------------- -------- --------- --------- ---------
Dividends paid (12,763) (12,763)
Net movement in Treasury
shares (5,750) (5,750)
Movement in respect of employee
share plans 4,006 (3,779) 227
Deferred tax related to share-based
payments 1,004 1,004
Transactions with shareholders - 4,006 (21,287) (17,282)
-------------------------------------- -------- --------- --------- ---------
Balance at 30 September 2018 5,922 17,537 119,677 143,136
-------------------------------------- -------- --------- --------- ---------
Consolidated Statement of Cash Flows
FOR THE YEARED 30 SEPTEMBER 2019
2019 2018
Note GBP'000 GBP'000
------------------------------------------- ------ --------- ---------
Cash flows generated from operating
activities 9 391 55,661
Interest paid (134) (222)
Taxation paid (3,005) (9,609)
-------------------------------------------- ----- --------- ---------
Net cash (used in) / generated from
operating activities (2,748) 45,830
-------------------------------------------- ----- --------- ---------
Investing activities
Purchase of property, plant and
equipment (714) (1,314)
Purchase of intangible assets (47) (93)
Interest received 684 393
-------------------------------------------- ----- --------- ---------
Net cash used in investing activities (77) (1,014)
-------------------------------------------- ----- --------- ---------
Financing activities
Purchases of own shares - Treasury (7,774) (10,675)
Purchases of own shares - Employee
Benefit Trust (4,222) (5,597)
Dividends paid (12,650) (12,763)
-------------------------------------------- ----- --------- ---------
Net cash used in financing activities (24,646) (29,035)
-------------------------------------------- ----- --------- ---------
Net movement in cash and cash equivalents 27,471 15,781
-------------------------------------------- ----- --------- ---------
Opening cash and cash equivalents 111,673 95,852
Net movement in cash and cash equivalents (27,471) 15,781
Exchange movements - 40
-------------------------------------------- ----- --------- ---------
Closing cash and cash equivalents 84,202 111,673
-------------------------------------------- ----- --------- ---------
Notes to the Financial Statements
1. Basis of preparation and accounting policies
Basis of preparation
The consolidated financial information contained within these
financial statements is unaudited and does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act
2006. The statutory accounts for the year ended 30 September 2019
will be delivered to the Registrar of Companies in due course. The
annual report and statutory accounts will be posted to shareholders
on 2nd January 2020 and further copies will be available from the
Company Secretary at the Company's registered office. The Company's
Annual General Meeting will be held on 4th February 2020.
The preparation of these financial statements requires the use
of estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. The significant judgements and estimates applied by the
Group in these preliminary results have been applied on a
consistent basis with the statutory accounts for the years ended 30
September 2018 and 30 September 2017. Although such estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those of
estimates.
The consolidated financial information contained within these
financial statements has been prepared on the historical cost
basis, except for the revaluation of certain financial
instruments.
The consolidated financial information contained within these
financial statements has been prepared on a going concern basis as
the Directors have satisfied themselves that, at the time of
approving the financial information and having taken into
consideration the strength of the Group balance sheet and cash
balances, the Group has adequate resources to continue in
operational existence for at least the next twelve months.
Accounting policies
The consolidated financial information contained within these
financial statements has been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU) and in accordance with International
Financial Reporting Interpretations Committee (IFRIC)
interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS, and are in accordance
with the accounting policies that were applied in the Group's
statutory accounts for the year ended 30 September 2019.
IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from
Contracts with Customers' have been adopted by the Group and
Company for the accounting year ended 30 September 2019. There are
no other new mandatory standards, amendments or interpretations for
the Group's and the Company's accounting year ended 30 September
2019.
IFRS 9 introduces new requirements for classifying and measuring
financial assets. The Group has implemented this standard and it is
not material to the financial statements, as all the relevant
financial assets held by the Group are held either at amortised
cost or fair value through profit and loss. In addition, the Group
has no debt instruments in issue.
IFRS 15 is a convergence standard aimed at improving the
financial reporting of revenue and the comparability of the revenue
line in financial statements globally. The Group has implemented
this standard and it is not material to the financial statements
due to the type of revenue which is earned within the Group and the
absence of any long-term contract arrangements.
As at the date of authorisation of the financial statements, the
following relevant standards, amendments and interpretations to
existing standards are not yet effective and have not been early
adopted by the Group:
IFRS 16 "Leases" brings all material leases onto the balance
sheet with a liability representing future lease payments and an
asset representing right of use. This will impact the Group for all
its leases that fall within the scope of the standard. All leases
have been assessed, and those that fall within the standard will be
the two property leases that the Group has in place. The standard
is applicable for the Group's 2020 accounting year end. The initial
assessment shows that the impact will not be material to the income
statement, although it will introduce material additional balances
to the assets and liabilities of the Group. In relation to the two
property leases that the Group currently has in place, where the
space is available for use, the net present value of the remaining
lease liabilities, and therefore also the right of use assets, is
approximately GBP6m and the impact on the income statement is
immaterial.
2. Segmental analysis
Geographical information
The Group is managed as an integrated investment banking
business and although there are different revenue types, (which are
separately disclosed in note 3), the nature of the Group's
activities is considered to be subject to the same and/or similar
economic characteristics. Consequently the Group is managed as a
single business unit.
The Group earns its revenue in the following geographical
locations:
2019 2018
GBP'000 GBP'000
-------------------------- --------- ---------
United Kingdom 106,077 124,990
United States of America 5,533 11,057
Revenue (see note 3) 111,610 136,047
--------------------------- --------- ---------
There are no clients who accounted for more than 10% of revenues
in the year ended 30 September 2019 (2018: nil).
The following is an analysis of the carrying amount of
non-current assets (excluding financial instruments and deferred
tax assets) by the geographical area in which the assets are
located:
2019 2018
GBP'000 GBP'000
--------------------------- -------- --------
United Kingdom 2,394 2,713
United States of America 476 564
Total non-current assets 2,870 3,277
---------------------------- -------- --------
Other information
In addition, the analysis below sets out the revenue performance
and net asset split between our investment banking business and the
small number of equity holdings which constitute our investment
portfolio.
2019 2018
GBP'000 GBP'000
---------------------------------------- -------- --------
Equities income 37,325 47,460
Corporate retainers 13,357 12,430
Total deal fees 60,928 76,157
Revenue (see note 3) 111,610 136,047
Investment activity net gains/(losses) (2,210) 1,733
Contribution from investment portfolio (2,210) 1,733
---------------------------------------- -------- --------
Total 109,400 137,780
---------------------------------------- -------- --------
Net assets
Investment banking activities 39,105 15,121
Investing activities 14,847 16,342
Cash & cash equivalents 84,202 111,673
---------------------------------------- -------- --------
Total net assets 138,154 143,136
---------------------------------------- -------- --------
3. Revenue
2019 2018
GBP'000 GBP'000
---------------------------- --------- ---------
Net trading gains 4,008 9,594
Institutional income 33,317 37,866
----------------------------- --------- ---------
Equities revenue 37,325 47,460
Corporate retainers 13,357 12,430
Advisory fees 12,576 17,335
Capital markets fees 48,352 58,822
----------------------------- --------- ---------
Investment banking revenue 74,285 88,587
Total 111,610 136,047
----------------------------- --------- ---------
4. Other operating income/(expense)
Other operating income/(expense) represents net gains/(losses)
made on investments which are held outside of the market making
portfolio.
5. Administrative expenses
2019 2018
GBP'000 GBP'000
-------------------------------- -------- ---------
Wages and salaries 45,181 53,292
Social security costs 6,301 9,477
Compensation for loss of
office 302 223
Other pension costs 1,845 1,751
Share-based payments 10,914 10,583
--------------------------------- -------- ---------
Total staff costs 64,543 75,326
Non-staff costs 32,971 31,022
Total administrative expenses 97,514 106,348
--------------------------------- -------- ---------
The average number of employees during the year increased to 276
(2018: 253) with the number as at 30 September 2019 totalling 277
(30 September 2018: 273). Compensation costs as a percentage of
revenue has increased to 58% (2018: 55%).
Non-staff costs comprise expenses incurred in the normal course
of business, the most significant of which relate to technology,
information systems, market data, brokerage, clearing and exchange
fees. Investment relating to regulatory requirements and in respect
of our platform continue to impact such costs.
6. Earnings per share
Basic earnings per share is calculated on a profit after tax of
GBP9,326,000 (2018: GBP26,677,000) and 105,443,304 (2018:
106,435,314) ordinary shares being the weighted average number of
ordinary shares in issue during the year. Diluted earnings per
share takes account of contingently issuable shares arising from
share scheme award arrangements where their impact would be
dilutive. In accordance with IAS 33, potential ordinary shares are
only considered dilutive when their conversion would decrease the
profit or loss per share from continuing operations attributable to
the equity holders.
The calculations exclude shares held by the Employee Benefit
Trust on behalf of the Group and shares held in Treasury.
2019 2018
Number Number
Thousands Thousands
------------------------------------- ---------- ----------
Weighted average number of ordinary
shares in issue during the year
- basic 105,443 106,435
Dilutive effect of share awards 9,424 9,374
------------------------------------- ---------- ----------
Diluted number of ordinary shares 114,867 115,809
------------------------------------- ---------- ----------
7. Dividends
2019 2018
GBP'000 GBP'000
----------------------------------- -------- --------
Final dividend for year ended 30
September 2017 (6.50p) 6,902
Interim dividend for year ended
30 September 2018 (5.50p) 5,861
Final dividend for year ended 30
September 2018 (6.50p) 6,837
Interim dividend for year ended
30 September 2019 (5.50p) 5,813
----------------------------------- -------- --------
Distribution to equity holders of
Numis Corporation Plc 12,650 12,763
----------------------------------- -------- --------
The Board has proposed a final dividend of 6.5p per share for
the year ended 30 September 2019. This has not been recognised as a
liability of the Group at the year end as it has not yet been
approved by the shareholders. These preliminary results do not
reflect this dividend payable.
The final dividend for 2019 will be payable on 7th February 2020
to shareholders on the register of members at the close of business
on 13th December 2019, subject to shareholder approval at the
Annual General Meeting on 4th February 2020. Shareholders have the
option to elect to use their cash dividend to buy additional shares
in Numis through a Dividend Re-Investment Plan (DRIP). The details
of the DRIP will be explained in a circular to accompany our 2019
Annual Report and Accounts, which will be circulated to all
shareholders on 2nd January 2020.
8. Balance sheet items
(a) Deferred tax
As at 30 September 2019 deferred tax assets totalling
GBP3,962,000 (2018: GBP4,938,000) have been recognised reflecting
management's confidence that there will be sufficient levels of
future taxable gains against which the deferred tax asset can be
utilised. The deferred tax asset principally comprises amounts in
respect of share-based payments. A deferred tax asset of
GBP1,470,000 (2018: GBP503,000) relating to unrelieved trading
losses incurred has not been recognised as there is insufficient
supportable evidence within the relevant legal entity that there
will be taxable gains in the future against which the deferred tax
asset could be utilised.
(b) Trade and other receivables and Trade and other payables
Trade and other receivables and Trade and other payables
principally comprise amounts due from and due to clients, brokers
and other counterparties. Such amounts represent unsettled sold and
unsettled purchased securities transactions and are stated gross.
The magnitude of such balances varies with the level of business
being transacted around the reporting date. Included within Trade
and other receivables are cash collateral balances held with
securities clearing houses of GBP12,007,000 (2018:
GBP8,630,000).
(c) Trading investments
Included within trading investments is GBP14,847,000 (2018:
GBP16,342,000) of investments held outside of the market making
portfolio. There were new investments of GBP670,000 and fair value
net decreases of GBP2,165,000.
As at 30 September 2019 no trading investments had been pledged
to institutions under stock borrowing arrangements (2018: nil).
(d) Stock borrowing collateral
The Group enters stock borrowing arrangements with certain
institutions which are entered into on a collateralised basis with
cash advanced as collateral. Under such arrangements a security is
purchased with a commitment to return it at a future date at an
agreed price.
The securities purchased are not recognised on the balance
sheet. An asset is recorded on the balance sheet as stock borrowing
collateral at the amount of cash collateral advanced.
On the rare occasion where trading investments have been pledged
as security these remain within trading investments and the value
of the security pledged disclosed separately except in the case of
short-term highly liquid assets with an original maturity of 3
months or less, which are reported within cash and cash equivalents
with the value of security pledged disclosed separately.
(e) Financial liabilities
Financial liabilities comprise short market making positions and
include shares listed on the London Stock Exchange Main Market and
quoted on the AIM market as well as overseas exchanges. In
conjunction with the long market making positions included within
Trading investments, these two combined represent the net position
of holdings within the market making book, including derivatives,
which, year on year, decreased to GBP10.6m long as at 30 September
2019 (2018: GBP13.2m long). The magnitude of financial liabilities
will depend, in part, on the nature and make-up of long positions
combined with the market makers' view of those long positions over
the short and medium term, taking into consideration market
volatility, liquidity, client demand and future corporate
actions.
During the year the Group agreed a GBP35m unsecured Revolving
Credit Facility ('RCF') with Barclays and AIB. The facility is
undrawn.
(f) Contingent liabilities
The Company has signed a subscription agreement where the full
amount of the subscription had not been called upon at the balance
sheet date.
An investment in a U.S. private fund with a total subscription
value of $1.0m had been signed. The fund calls upon capital as it
is required and at the balance sheet date $890k had been called up
and paid. This is classified within Trading Investments. The
remaining $110k has not yet been called and is therefore a
commitment until it is paid over to the fund. The subscription
agreement allows that the investment can be called any time up till
the 5th anniversary of the agreement, which is June 2023.
(g) Cash and cash equivalents
Cash balances reflect movement in market making positions, the
operating performance of the business offset by dividend
distributions (GBP12.7m cash outflow) and share buy-backs through
the repurchase of shares into Treasury and the Employee Benefit
Trust (GBP12.0m cash outflow).
9. Reconciliation of profit before tax to cash flows from operating activities
2019 2018
GBP000 GBP000
---------------------------------------- ---------- ----------
Profit before tax 12,436 31,644
Net finance income (550) (212)
Depreciation charges on property,
plant and equipment 1,124 1,113
Amortisation charges on intangible
assets 44 49
Share scheme charges 10,914 10,583
Decrease in current asset trading
investments 5,337 3,624
Decrease/(increase) in trade and other
receivables 181,071 (122,100)
(Increase)/decrease in stock borrowing
collateral (6,734) 700
(Decrease)/increase in trade and other
payables (202,498) 130,580
(Increase)/decrease in derivatives (753) (320)
Cash flows from operating activities 391 55,661
---------------------------------------- ---------- ----------
Cash flows in 2019 benefitted from lower trade and other
receivables, but were offset by higher trade and other payables and
lower profit before tax.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR MMMGZLFGGLZM
(END) Dow Jones Newswires
December 04, 2019 02:00 ET (07:00 GMT)
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