TIDMNUM
RNS Number : 8369H
Numis Corporation PLC
08 December 2020
Numis Corporation Plc
Full Year Results
for the year ended 30 September 2020
London, 8 December 2020: Numis Corporation Plc ("Numis") today
announces preliminary results for the year ended 30 September
2020.
Highlights
-- In an extraordinarily challenging year for our clients and
our staff we delivered record revenues up 39% versus the prior
year
-- Strong growth in average deal fees and capital raising
activity from our retained client base resulted in investment
banking revenue growth of 37%
-- Market share gains and strong trading performance resulted in Equities revenue growth of 43%
-- Our response to COVID-19 was collaborative and agile and
ensured client service levels were sustained and staff wellbeing
protected
-- For the first time average market capitalisation of our
corporate client base in excess of GBP1bn and includes 62 FTSE350
companies
-- Dividend maintained at 12p for fifth successive year and GBP9.8m spent on share repurchases
-- Balance sheet position enhanced providing a solid foundation for further growth
-- Strong start to FY21 underpinned by continued momentum in
Growth Capital Solutions and early indications of a recovery in
Advisory revenues
Key statistics
Financial highlights 2020 2019 Change
------------------------------- ---------- ---------- ----------
Revenue GBP154.9m GBP111.6m 38.8%
------------------------------- ---------- ---------- ----------
Underlying Operating profit GBP37.8m GBP14.1m 168%
------------------------------- ---------- ---------- ----------
Profit before tax GBP37.1m GBP12.4m 198%
------------------------------- ---------- ---------- ----------
EPS 29.9p 8.8p 240%
------------------------------- ---------- ---------- ----------
Cash GBP125.2m GBP84.2m 48.7%
------------------------------- ---------- ---------- ----------
Net assets GBP157.6m GBP138.2m 14.1%
------------------------------- ---------- ---------- ----------
Operating highlights
------------------------------- ---------- ---------- ----------
Corporate clients 188 217 (29)
------------------------------- ---------- ---------- ----------
Average market cap of clients GBP1.1bn GBP888m 20.5%
------------------------------- ---------- ---------- ----------
Revenue per head GBP549k GBP404k 35.8%
------------------------------- ---------- ---------- ----------
Operating margin 24.4% 12.6% +11.8ppts
------------------------------- ---------- ---------- ----------
Spend on share repurchases GBP9.8m GBP12.0m (18.6%)
------------------------------- ---------- ---------- ----------
Notes:
1) Revenue, Underlying Operating profit, Operating margin and
Revenue per head all exclude investment income / losses
2) Underlying Operating profit and Operating margin exclude
relocation related expenses of GBP1.3m
3) Basic EPS
Alex Ham and Ross Mitchinson, Co-Chief Executive Officers,
said:
"This year was one that we could not have planned for or
envisaged. However, in response, we have achieved an excellent
performance, strengthened the business and remained constant to our
core beliefs, our strategy and ambition.
We are proud of the strength of our core corporate client
relationships, which have been built up over many years and truly
came into their own this year as we were able to support our
clients through their refinancing activities and raise equity to
take advantage of emerging growth opportunities. Similarly, our
commitment to providing deep research expertise and experience has
been valuable for our clients for many years, and in this
tumultuous year it has been appreciated even more.
Our culture and people are central to the performance of the
business, especially so this year, and we would like to thank
everyone in the firm for their outstanding dedication and
contributions.
We will continue to be a dynamic, creative investment bank that
works in partnership with our clients to excel for them. Whilst
many challenges undoubtedly remain and the outlook is
unpredictable, we are excited about the future and we have made a
very encouraging start to the year."
Contacts:
Numis:
Alex Ham & Ross Mitchinson, Co-Chief Executives 020 7260
1245
Andrew Holloway, Chief Financial Officer 020 7260 1416
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
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 admitted to
trading on AIM, and employs approximately 290 staff in London and
New York.
The information, statements and opinions contained in this
announcement do not constitute a public offer under any applicable
legislation or an offer to sell or solicit of any offer to buy any
securities or financial instruments or any advice or recommendation
with respect to such securities or other financial instruments.
There are a number of key judgement areas, which are based on
models and which are subject to ongoing modification and
alteration. The reported numbers reflect our best estimates and
judgements at the given point in time.
Forward-looking statements
This announcement contains forward-looking statements.
Forward-looking statements sometimes use words such as 'may',
'will', 'seek', 'continue', 'aim', 'anticipate', 'target',
'projected', 'expect', 'estimate', 'intend', 'plan', 'goal',
'believe', 'achieve' or other words of similar meaning. Such
statements and forecasts involve risk and uncertainty because they
are based on current expectations and assumptions but relate to
events and depend upon circumstances in the future and you should
not place reliance on them. There are a number of factors that
could cause actual results or developments to differ materially
from those expressed or implied by forward-looking statements and
forecasts. Forward-looking statements and forecasts are based on
the Directors' current view and information known to them at the
date of this announcement.
Subject to our obligations under the applicable laws and
regulations of any relevant jurisdiction, in relation to disclosure
and ongoing information, we undertake no obligation to update
publicly or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Nothing in this announcement constitutes or should be construed
as constituting a profit forecast.
Business review
Market conditions
Two major events determined the profile of transaction activity
across the year. The first quarter of the financial year suffered
from subdued equity markets and weak corporate activity in advance
of the UK General Election. Subsequently markets delivered strong
gains and UK equity market activity improved significantly.
However, there was insufficient opportunity for deal flow to
recover in response to the General Election result as the second
quarter was swiftly dominated by the COVID-19 pandemic which caused
an unprecedented decline in global markets and extraordinary
volatility levels.
During our second half, ECM deal volumes increased significantly
as companies accessed the public markets in response to COVID-19.
However, this was offset by material declines in M&A and IPO
volumes as uncertainty dominated equity markets and strategic plans
were paused while balance sheet and funding considerations were
prioritised. Nevertheless, as market volatility declined towards
the end of the year and investor sentiment recovered, it became
clear that several trends had been accelerated and new emerging
growth opportunities required financing. Consequently, at the end
of our financial year companies were able to access both public and
private markets in support of revised growth strategies.
Overall, UK equity market indices declined over the course of
the year, however the trading range was extraordinarily wide as
volatility reached record highs. UK ECM volumes were up on the
prior year, but not materially so given the sustained periods of
limited transaction activity across the financial year. M&A
transaction volumes are now recovering but were materially down on
the year. Private markets activity slowed during the early stages
of the pandemic but swiftly recovered and continued to benefit from
the structural trend.
Investment Banking
Our commitment to building a high-quality corporate client list
has been constant over many years irrespective of market
environments. The corporate client base is our most important
source of deal revenue and remains critical to our business model.
In recent years we have enhanced the service levels provided to our
clients through sector-focused hiring and by developing greater
depth of expertise in certain product areas. In a year of
disruption, we were able to rely on this investment to serve our
clients with absolute commitment and deploy the necessary resource
to successfully execute transactions during a period of exceptional
activity. In addition, we continued to leverage the strength of our
excellent Equities platform to build our client base in targeted
segments and ensure we provide our existing clients with the best
possible service.
During the second half of the year we made the decision to exit
the Natural Resources sector. This resulted in a small number of
headcount reductions in both Equities and Investment Banking and
our resignation from 18 corporate broking clients. These clients
had an average market capitalisation of GBP290m. Only 3 remained on
our client list at 30 September 2020 and we expect to exit these
following the expiry of the agreed notice periods.
The average market capitalisation of our client base is now over
GBP1bn for the first time and includes 62 FTSE350 clients as at the
year end. However, size is not the determining factor in our
identification and targeting of potential clients. We are focused
on winning clients with long-term ambition where we believe our
service can add value. The benefit of this approach is illustrated
by two of our largest client mandates of the past year. We executed
capital raisings for Ocado and Beazley. Both companies have been
clients for more than 9 years since their IPOs, when they listed
with market capitalisations of GBP500m and GBP170m respectively.
The strength of our corporate client base has been the foundation
of Investment Banking revenues that exceeded GBP100m for the first
time this year.
As the market volatility rapidly accelerated during the early
stages of the pandemic we encouraged our teams to support their
clients and increase levels of interaction. We were proactive in
engaging with our clients to assess their funding requirements, and
the strategic opportunities arising from the impact of COVID-19.
Our connectivity with institutional investors was pivotal in being
able to provide timely and critical advice to our corporate
clients. In addition, our recently launched Debt Advisory offering
provided valuable support and guidance for our corporate clients as
they sought both equity and debt funding solutions.
Our Capital Markets deal volumes increased significantly during
the second half as many clients accessed the market to secure
funding in response to the disruption caused by the pandemic.
Following the immediate liquidity impact of COVID-19, it became
apparent that several trends had been accelerated as a result of
COVID-19, and many of our corporate clients required equity to
finance an increase in near term growth opportunities. For the
period post-lockdown, the majority of the funds raised by our
clients related to growth financing rather than recapitalisation
transactions.
This year we branded our private markets activities as Growth
Capital Solutions (GCS). Whilst expansion of the team has been
limited by COVID-19, we have achieved another strong performance in
this area with more than 20% of our Capital Markets revenue
attributable to private markets transactions. We benefited from the
rapid recovery in global private markets activity as the impact of
COVID-19 accelerated a number of digital trends. Importantly, our
reputation continues to be enhanced by the size and quality of the
companies we have acted for, and the profile of the investors who
have participated in our transactions. We continue to develop our
GCS capability, selectively adding resource and talent, while
remaining resolutely focused on partnering with the most talented
entrepreneurs globally.
Overall, we delivered 59% growth in Capital Markets revenues.
This performance was achieved by executing capital raisings for our
client base and progressing our GCS strategy. However, not all
products saw an increase in activity levels. IPO volumes were
significantly impacted, resulting in the smallest revenue
contribution for more than 10 years as we completed only one IPO in
the year. We expect IPO activity to recover and believe we are well
placed to benefit given the strength of our reputation and market
position in UK capital markets.
Advisory remains a significant growth opportunity for the
business. We continue to develop our skill set and expand our
relationships with corporate clients so that we can secure a higher
proportion of the advisory fee opportunity. In addition, we have
focused on securing mandates from the private equity sector who we
expect to deploy funds in UK public to private transactions. We
believe we are uniquely well positioned to leverage our knowledge
of public markets and institutional shareholders. Whilst the
current year revenue performance was adversely impacted by M&A
deal flow declining in reaction to COVID-19, we are making progress
in building a pipeline of opportunities and expect Advisory to
comprise a larger proportion of our revenues in the future.
Equities
This year our institutional clients faced disruption,
unprecedented market volatility levels, and significant challenges
in assessing the near-term outlook and financial position of some
of their holdings. Whilst extremely difficult at times, the market
environment provided an opportunity for our Equities business to
differentiate itself from many of our competitors and demonstrate
the value of our significant experience and expertise.
At the peak of the crisis, we responded to our clients' needs
and ensured our engagement with the buyside increased,
notwithstanding the parallel transition of our Equities platform to
a fully remote operation. We provided innovative solutions to
facilitate interaction between companies and institutional
investors at a time when real time analysis, insights and access to
management teams were of essential importance to shareholders.
Our strategic decision to invest in our Equities business over
the past few years ensured we were well positioned as an obvious
partner and trusted source of information for institutional
investors. Consequently, we were able to deliver further market
share gains in UK equities this year. We were delighted
institutions continued to recognise the quality of our Equities
offering with all of our relevant Sector Research teams voted in
the Top 3 in the most recent Extel Survey. In addition, the market
intelligence gathered by our Equities business, and the
connectivity with institutions, provided critical support to our
investment bankers in their efforts to execute capital raises for
corporate clients.
Electronic Trading launched during the year and is delivering an
increasing proportion of our execution revenues. The market
opportunity for this product remains compelling and we are now
increasing our marketing efforts internationally to continue
growing the list of clients accessing this service.
Our trading book performance benefitted from the increased
volatility and elevated market volumes. We actively managed our
limits to navigate the periods of extreme volatility, but we also
ensured we maintained our position as a leading provider of
liquidity for our institutional clients, particularly in small and
mid-cap stocks.
Despite the markets ending the year significantly lower than the
start, we were able to deliver our strongest ever Equities
performance, exceeding the levels achieved before the introduction
of MIFID II.
The past year has demonstrated the value to our Corporate
Broking business model of maintaining a leading, and highly
respected Equities business. We will selectively hire in areas
which require strengthening to ensure we build upon the recent
success and continue to target market share gains.
Brexit has influenced investor sentiment towards the UK for a
significant period. This year, we derived less than 5% of
institutional income from EU-based clients. We continue to await
clarity regarding the future framework for UK access to certain
EU-based institutional clients and will respond appropriately to
mitigate potential disruption. Our US office is a key feature of
our Equities platform and would clearly benefit from any
improvement in US investor asset allocations to the UK post Brexit
uncertainty lifting.
Current trading & outlook
Revenue performance over the first two months of the year has
continued in line with the strong second half performance of
FY20.
Markets have reacted to the latest vaccine developments
providing a favourable environment for our Equities business. This
has supported strong execution commissions and trading gains.
Private markets deal flow has continued and a recovery in
M&A activity has already started to benefit our Investment
Banking revenues. We are engaged on several M&A mandates
involving corporate clients, some of which require equity issuance
to finance acquisition opportunities. Overall, the Investment
Banking pipeline is encouraging, in particular our IPO pipeline is
stronger than it has been for some time.
Brexit and the ongoing COVID-19 situation will likely present
some challenges for us, and our clients in the near term, however
we remain well positioned to navigate these challenges and build on
our strong performance.
Financial review
Our sustained investment across the cycle has enabled the
business to respond to the challenging market environment, deliver
significant growth in revenue and profits, and strengthen its
financial position.
2020 2019 %
GBPm GBPm Change
------------------- ----- ----- -------
Investment Banking 101.7 74.3 36.9%
------------------- ----- ----- -------
Equities 53.2 37.3 42.5%
------------------- ----- ----- -------
Revenue 154.9 111.6 38.8%
------------------- ----- ----- -------
Investment income 0.3 (2.2)
------------------- ----- ----- -------
Total Income 155.2 109.4 41.9 %
------------------- ----- ----- -------
Revenue for the year was GBP154.9m (2019: GBP111.6m),
representing growth of 39% as the business benefitted from an
increase in client activity levels and periods of elevated market
volatility. Revenue per head increased by 36% to GBP549k,
reflecting the significant growth in revenue relative to lower
headcount growth. Total income increased 42%, this includes fair
value adjustments within the investment portfolio which closed the
year at GBP14.7m.
Investment Banking
2020 2019 %
GBPm GBPm Change
--------------------------- ----- ----- -------
Capital Markets 77.0 48.4 59.3%
--------------------------- ----- ----- -------
Advisory 11.1 12.6 (11.4%)
--------------------------- ----- ----- -------
Corporate retainers 13.5 13.4 1.3%
--------------------------- ----- ----- -------
Investment Banking revenue 101.7 74.3 36.9%
--------------------------- ----- ----- -------
The Investment Banking division delivered record revenue of
GBP101.7m (2019: GBP74.3m), representing an increase of 37% on the
prior year. Growth in average deal fees, rather the deal volumes,
was the key contributor to the improved performance. Our average
deal fee growth is an important function of our strategy and is
attributable to an increase in the size of our corporate clients,
an increase in our share of fees on high value transactions and an
increase in private markets transactions which have typically
attracted fees at the upper end of our range. Whilst client
activity levels did increase relative to the prior year, this was
offset by a reduction in IPO activity, resulting in overall deal
volumes across the year being marginally below the prior year.
Capital Markets growth of 59% was underpinned by our corporate
client base accessing the public markets to address the financial
impact of COVID-19 and finance growth opportunities. Our Capital
Markets revenues also benefited from our strategic focus on
fundraising activity in private markets. GCS delivered revenue
growth for the year and contributed more than a fifth of our
Capital Markets revenue for the year.
Advisory revenues declined 11% compared to the prior year. The
pipeline of transactions which was building post the UK General
Election was severely disrupted by COVID-19, resulting in a decline
in M&A deal volumes, particularly in the second half. Debt
Advisory completed several mandates during the year, resulting in
an improved performance relative to the previous year. However,
this was more than offset by the decline in M&A related
revenue.
Retainer fee income growth of 1% to GBP13.5m (2019: GBP13.4m)
reflects our focus on ensuring an appropriate fee is charged for
our Corporate Broking service. However, fee increases were offset
by the closure of the Natural Resources sector towards the end of
the financial year which has contributed to a reduction to our
corporate client list. In aggregate this sector contributed
approximately GBP1.5m of annual retainer fee revenue. We now have
188 corporate clients and will selectively grow the client list as
we seek to benefit from our strong competitive position which we
believe has been enhanced over the past year. However, we do not
expect retainer fee income to return to FY20 levels in the short
term.
Equities
2020 2019 %
GBPm GBPm change
--------------------- ----- ----- -------
Institutional income 37.2 33.3 11.6%
--------------------- ----- ----- -------
Trading 16.0 4.0 299%
--------------------- ----- ----- -------
Equities revenue 53.2 37.3 42.5%
--------------------- ----- ----- -------
Equities delivered revenue of GBP53.2m (2019: GBP37.3m), which
represented growth of 43%. Institutional income increased 12%
against the prior year, which was the first full year since the
introduction of MIFID II. Our institutional income growth reflects
an increase in market volumes across the period of peak
COVID-19-related volatility which led to increased execution
revenues. In addition, we continued to achieve market share gains
in UK equities underpinned by the quality of our overall service to
institutions.
The mix of our institutional income shifted towards execution
commissions given the improved market activity levels and the
increasing contribution from our new Electronic Trading product.
Our research income declined slightly on the year given the
continued industry pressure on payments for research as the buyside
continues to review budgets in response to asset flows,
consolidation and regulation.
Trading delivered gains materially ahead of the prior year which
included the GBP3m loss associated with the underwriting of the
Kier rights issue. We actively managed our trading book risk
exposure during the period of heightened market volatility by
reducing our exposure before relaxing book limits as markets
stabilised and recovered. Profitability was maintained across the
period despite material market movements in relation to the UK
General Election and the early stages of pandemic. We reported 30%
fewer loss days compared to the previous year, illustrating the
consistency in performance across difficult markets. Our reputation
as a leading provider of liquidity in small and mid-cap equities
has been enhanced over this challenging period.
Investment portfolio
Our investment portfolio is currently valued at GBP14.7m (2019:
GBP14.9 m). The majority of the write-downs incurred at the half
year were written back following a recovery in equity markets
during the course of the second half. During the second half we
recorded GBP1.9m of fair value gains reversing the loss of GBP1.9m
in first half, and we sold our final listed holding for proceeds of
GBP0.4m. The portfolio comprises a combination of private operating
companies and funds, with approximately 40% of the portfolio value
held in funds or diversified investment vehicles. We continue to
seek liquidity events for our legacy holdings whilst maximising the
strategic value and network benefits of more recent portfolio
investments.
Costs
2020 2019 %
GBPm GBPm Change
--------------------------- ------ ----- ---------
Staff costs 76.0 53.6 41.7%
--------------------------- ------ ----- ---------
Share-based payment 10.0 10.9 (8.7%)
--------------------------- ------ ----- ---------
Non-staff costs 32.4 33.0 (1.6%)
--------------------------- ------ ----- ---------
Total administrative costs 118.4 97.5 21.4%
--------------------------- ------ ----- ---------
Year-end headcount 292 277 5.4%
--------------------------- ------ ----- ---------
Average headcount 282 276 2.2%
--------------------------- ------ ----- ---------
Compensation ratio 55.5% 57.8% (2.3ppts)
--------------------------- ------ ----- ---------
Total costs increased to GBP118.4m (2019: GBP97.5m) representing
an increase of 21%. Average headcount increased by 2% which was
attributable to recruitment of junior staff and an increase in
support function roles as we focused on maintaining the operational
resilience of the business throughout the challenging environment.
Recruitment of senior front office roles slowed down due to the
pandemic. We will continue to hire selectively in areas where there
are clear growth opportunities for the business aligned to our
strategic priorities.
The increase in staff costs of 42% is primarily attributable to
an increase in variable compensation resulting from the significant
improvement in operating performance of the business. At no stage
did we furlough any staff and neither did we deem it appropriate to
access any of the Government schemes designed to provide financial
support for businesses through the pandemic.
Our share-based payment charge was slightly below the prior year
at GBP10.0m (2019: GBP10.9m). 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 decreased to 55.5%
(2019: 57.8%) as a result of the improved revenue performance and
consistent approach to staff compensation. This ratio reflects the
mid-point of our target range of 50% to 60% which we believe allows
for appropriate alignment between staff compensation, business
performance and shareholder returns whilst recognising the
prevailing market conditions and outlook.
2020 2019 %
GBPm GBPm Change
------------------------------ ----- ----- -------
Depreciation of PPE 1.2 1.1 8.8%
------------------------------ ----- ----- -------
Depreciation of right-of-use
asset (IFRS16) 1.8 - -
------------------------------ ----- ----- -------
Operating lease costs - 1.9 -
------------------------------ ----- ----- -------
Relocation expenses 1.3 - -
------------------------------ ----- ----- -------
Non-staff costs (ex. Property
related) 28.1 30.0 (6.3%)
------------------------------ ----- ----- -------
Total non-staff costs 32.4 33.0 (1.6%)
------------------------------ ----- ----- -------
Our non-staff costs were slightly lower than the prior year, the
net cost reductions arising as a result of COVID-19 were offset by
costs incurred in relation to our upcoming office move.
Excluding property related expenses, our non-staff costs
decreased 6% over the year largely due to a reduction in travel and
entertainment spend which was impacted by the pandemic. It remains
difficult to predict when, or if this spend will recover to
previous levels. Minimal spend was required to facilitate effective
remote working for the entire business given the investment in our
technology infrastructure across recent years. We continue to
operate with a majority of our staff working remotely and will
react to any changes in government guidance confident we have the
systems to accommodate a variety of scenarios.
Notwithstanding the decline in non-staff costs, we continued to
invest in the Numis platform. During the year we completed the
investment required to launch our Electronic Trading platform both
in the UK and the US; we launched a new corporate website, and we
completed the upgrade of our settlements system.
Office move
Following a delay to the construction of our new London office
due to the pandemic, we now expect the completion of the building
early in 2021 and we plan to move into the new office towards the
end of next summer ahead of the expiry of our current lease at the
end of September 2021. In recognition of the likely changes to
working practices moving forward, we re-engaged with staff during
lockdown to ensure we have maximised the opportunity to build a
flexible and collaborative working environment which promotes our
corporate values.
In addition, over the past few months we have reassessed our
space requirements in view of the current working practices and
concluded that our current real estate strategy remains appropriate
for our busines, and its growth trajectory. We believe a
high-quality office environment is vitally important in ensuring
our business continues to thrive and we look forward to welcoming
clients to our new office next year.
During the year we incurred costs of GBP1.3m related to the
office. This includes the likely reinstatement costs associated
with the exit of our current office. As previously indicated, the
impact of the higher rent and larger office space will increase our
ongoing occupancy costs by approximately GBP3m annually. In
addition to this, we expect to incur an additional c. GBP1m in FY21
attributable to the overlap in costs on the two buildings for
approximately nine months. In addition, we expect to incur one-off
expenses related to the move of a similar amount to this year.
We have adopted IFRS16 during the period for the first time;
given the short duration remaining on our head office lease, the
impact is immaterial.
Profit
2020 2019 %
GBPm GBPm Change
---------------------------- ----- ----- ---------
Profit before tax 37.1 12.4 198%
---------------------------- ----- ----- ---------
Adjustments:
---------------------------- ----- ----- ---------
Investment (income) /
losses (0.3) 2.2
---------------------------- ----- ----- ---------
Relocation expenses 1.3 -
---------------------------- ----- ----- ---------
Net finance income (0.3) (0.6)
---------------------------- ----- ----- ---------
Underlying operating profit 37.8 14.1 168%
---------------------------- ----- ----- ---------
Operating margin 24.4% 12.6% +11.8ppts
---------------------------- ----- ----- ---------
The business benefits from operational gearing. The strong
growth in revenue was only partially offset by an increase in staff
costs, specifically variable compensation. Therefore, Underlying
Operating profit was materially higher at GBP37.8m (2019: GBP14.1m)
and operating margin increased to 24.4% (2019: 12.6%).
Profit before tax for the year was GBP37.1m, representing an
increase of 198% compared to the prior year. This included the
impact of gains of GBP0.3m in relation to the investment portfolio
which compared to a loss of GBP2.2m in the prior year. Our
effective tax rate for the year decreased to 15.4% (2019: 25.0%),
resulting in profit after tax of GBP31.3m (2019: GBP9.3m), largely
due to an increase in the deferred tax asset as a result of the
share price increase over the period.
EPS increased in line with profits to 29.9p per share given the
share count was flat compared to the prior year.
Capital and liquidity
The Group's net asset position as at 30 September 2020 was
GBP157.6m, representing an increase of 14% compared to the prior
year. The profits of the Group and the movement attributable to
equity compensation more than compensated for the dividend
distributions and share repurchases. We continue to operate
significantly in excess of our regulatory capital requirements and
believe this affords the Group long-term stability, and strategic
flexibility. 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 2020, our cash position was GBP125.2m (2019: GBP84.2m)
which was GBP41m higher than the prior year, reflecting the
improved financial performance over the year and favourable trading
book movements which more than offset cash outflows relating to
dividends and share repurchases. The average daily cash position
over the year was GBP89m. In addition, we have a GBP35m revolving
credit facility which is currently undrawn.
The Group always operates with a cash position materially above
its minimum liquidity obligations. However, the nature of our
business activities means that our liquidity position can be highly
volatile on a short-term basis. The variance between our daily high
and low cash positions over the financial year was GBP78m,
illustrating the importance of maintaining a strong liquidity
position.
Over the course of the next year our cash position will be
impacted by the capital expenditure requirements of the new office
fit-out. The majority of this spend will be incurred during FY21.
In addition, due to the higher than usual volume of share award
vestings in FY21 we will have a higher cash spend funding
off-market share repurchases to facilitate net settlement for
staff.
Dividends and shareholder returns
The Board has proposed a final dividend for the year of 6.5p per
share. The dividend, subject to approval at the AGM, will be paid
on 12 February 2021 to shareholders on the Register on 18 December
2020.
Our goal is to pay a stable ordinary dividend and reinvest 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 3.5m shares were repurchased at a weighted
average price of 283p per share. This compares to 4.7m shares
purchased in the prior year at an average price of 257p per share.
The impact of the share repurchases resulted in our issued share
count ending the year in line with the prior financial year. Our
issued share count is now 8.2m lower than five years ago. It is
likely the share count will increase during this year given the
September 2021 vesting date of the 2016 LTIP awards. However, our
intention remains to ensure that the dilutive impact of staff
equity awards is mitigated through buybacks over time.
Consolidated Income Statement
FOR THE YEARED 30 SEPTEMBER 2020
2020 2019
Note GBP'000 GBP'000
--------------------------------- ---- --------- --------
Revenue 3 154,899 111,610
Other operating income/(expense) 4 310 (2,210)
Total income 155,209 109,400
Administrative expenses 5 (118,409) (97,514)
--------------------------------- ---- --------- --------
Operating profit 36,800 11,886
Finance income 6 986 684
Finance costs 6 (723) (134)
--------------------------------- ---- --------- --------
Profit before tax 37,063 12,436
Taxation (5,713) (3,110)
Profit for the year 31,350 9,326
--------------------------------- ---- --------- --------
Attributable to:
Owners of the parent 31,350 9,326
--------------------------------- ---- --------- --------
Earnings per share
Basic 7 29.9p 8.8p
Diluted 7 26.7p 8.1p
Dividends 8 (12,582) (12,650)
--------------------------------- ---- --------- --------
Consolidated Statement of Comprehensive Income
FOR THE YEARED 30 SEPTEMBER 2020
2020 2019
GBP'000 GBP'000
----------------------------------------- ------- -------
Profit for the year 31,350 9,326
Exchange differences on translation of
foreign operations 227 (96)
Other comprehensive income for the year,
net of tax 227 (96)
Total comprehensive income for the year,
net of tax, attributable to owners of
the parent 31,577 9,230
------------------------------------------ ------- -------
Consolidated Balance Sheet
AS AT 30 SEPTEMBER 2020
2020 2019
Note GBP'000 GBP'000
---------------------------------- ----- ------------- ------------
Non-current assets
Property, plant and equipment 2,596 2,790
Intangible assets 406 80
Right-of-use assets 4,020 -
Deferred tax 9a 5,617 3,962
---------------------------------- ----- ------------- ------------
12,639 6,832
Current assets
Trade and other receivables 9b 326,156 187,258
Trading investments 9c 38,089 38,463
Stock borrowing collateral 9d 18,222 14,640
Current income tax receivable 1,332 -
Derivative financial instruments 18 1,103
Cash and cash equivalents 9g 125,217 84,202
---------------------------------- ----- ------------- ------------
509,034 325,666
Current liabilities
Trade and other payables 9b (340,265) (178,613)
Financial liabilities 9e (19,170) (14,153)
Lease liabilities (1,962) -
Current income tax payable - (1,578)
(361,397) (194,344)
Net current assets 147,637 131,322
---------------------------------- ----- ------------- ------------
Non-current liabilities
Lease liabilities (2,643) -
Net assets 157,633 138,154
---------------------------------- ----- ------------- ------------
Equity
Share capital 5,922 5,922
Other reserves 22,421 20,639
Retained earnings 129,290 111,593
---------------------------------- ----- ------------- ------------
Total equity 157,633 138,154
---------------------------------- ----- ------------- ------------
Consolidated Statement of Changes in Equity
FOR THE YEARED 30 SEPTEMBER 2020
Share Other Retained Total
Capital Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- --------- ---------
Balance at 1 October 2019 5,922 20,639 111,593 138,154
Profit for the year 31,350 31,350
Other comprehensive income 227 227
-------------------------------------- -------- --------- --------- ---------
Total comprehensive income
for the year - 227 31,350 31,577
-------------------------------------- -------- --------- --------- ---------
Dividends paid (12,582) (12,582)
Net movement in Treasury
shares (37) (37)
Movement in respect of employee
share plans 1,555 (1,711) (156)
Deferred tax related to share-based
payments 677 677
Transactions with shareholders - 1,555 (13,653) (12,098)
-------------------------------------- -------- --------- --------- ---------
Balance at 30 September 2020 5,922 22,421 129,290 157,633
-------------------------------------- -------- --------- --------- ---------
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
-------------------------------------- -------- --------- --------- ---------
Consolidated Statement of Cash Flows
FOR THE YEARED 30 SEPTEMBER 2020
2020 2019
Note GBP'000 GBP'000
-------------------------------------------- --------- --------- ---------
Cash flows generated from operating
activities 10 76,051 391
Interest paid (497) (134)
Taxation paid (9,601) (3,005)
-------------------------------------------------- --- --------- ---------
Net cash generated from / (used
in) operating activities 65,953 (2,748)
-------------------------------------------------- --- --------- ---------
Investing activities
Purchase of property, plant and
equipment (1,029) (714)
Purchase of intangible assets (431) (47)
Interest received 986 684
-------------------------------------------------- --- --------- ---------
Net cash used in investing activities (474) (77)
-------------------------------------------------- --- --------- ---------
Financing activities
Purchases of own shares - Treasury (5,426) (7,774)
Purchases of own shares - Employee
Benefit Trust (4,344) (4,222)
Cash paid in respect of lease arrangements
- principal (1,873) -
Cash paid in respect of lease arrangements
- interest (226) -
Dividends paid (12,582) (12,650)
-------------------------------------------------- --- --------- ---------
Net cash used in financing activities (24,451) (24,646)
-------------------------------------------------- --- --------- ---------
27,471
Net movement in cash and cash equivalents 41,028 27,471
-------------------------------------------- ---- --- --------- ---------
Opening cash and cash equivalents 84,202 111,673
Net movement in cash and cash equivalents 41,028 (27,471)
Exchange movements (13) -
-------------------------------------------- ---- --- --------- ---------
Closing cash and cash equivalents 125,217 84,202
-------------------------------------------------- --- --------- ---------
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 2020
will be delivered to the Registrar of Companies in due course. The
annual report and statutory accounts will be posted to shareholders
on 5 January 2021 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 9th February 2021.
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 2020 and 30 September 2019. 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 2020.
IFRS 16 "Leases" has been adopted by the Group for the
accounting year ended 30 September 2020. IFRS 16 brings all
material leases onto the balance sheet with a liability
representing future lease payments and an asset representing right
of use. This has impacted the Group for 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, where the space is available for use, as
well as photocopier leases in the US subsidiary company. The
adoption of the standard has not been material to the income
statement, although it has introduced material additional balances
to the assets and liabilities of the Group.
There are no other new mandatory standards, amendments or
interpretations for the Group's and the Company's accounting year
ended 30 September 2020.
As at the date of authorisation of the financial statements,
there were no relevant standards, amendments or interpretations to
existing standards not yet effective, which have been early adopted
by the Group.
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:
2020 2019
GBP'000 GBP'000
-------------------------- --- -------- ---------
United Kingdom 144,333 106,077
United States of America 10,566 5,533
111,610
Revenue (see note 3) 154,899 111,610
-------------------------- --- -------- ---------
There are no clients who accounted for more than 10% of revenues
in the year ended 30 September 2020 (2019: nil).
The following is an analysis of the carrying amount of
non-current assets (excluding deferred tax assets) by the
geographical area in which the assets are located:
2020 2019
GBP'000 GBP'000
--------------------------- -------- --------
United Kingdom 3,994 2,394
United States of America 3,028 476
Total non-current assets 7,022 2,870
---------------------------- -------- --------
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 unlisted equity holdings which constitute our
investment portfolio.
2020 2019
GBP'000 GBP'000
-------------------------------------------- -------- --------
Equities income 53,195 37,325
Corporate retainers 13,536 13,357
Total deal fees 88,168 60,928
Revenue (see note 3) 154,899 111,610
Investment activity net gains/(losses) 310 (2,210)
Contribution from investment portfolio 310 (2,210)
-------------------------------------------- -------- --------
Total 155,209 109,400
-------------------------------------------- -------- --------
Net assets
Investment banking and equities activities 17,685 39,105
Investing activities 14,731 14,847
Cash & cash equivalents 125,217 84,202
-------------------------------------------- -------- --------
Total net assets 157,633 138,154
-------------------------------------------- -------- --------
3. Revenue
2020 2019
GBP'000 GBP'000
---------------------------- -------- --------
Net trading gains 16,003 4,008
Institutional income 37,192 33,317
----------------------------- -------- --------
Equities income 53,195 37,325
Corporate retainers 13,536 13,357
Advisory fees 11,146 12,576
Capital markets fees 77,022 48,352
----------------------------- -------- --------
Investment banking revenue 101,704 74,285
Total 154,899 111,610
----------------------------- -------- --------
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
2020 2019
GBP'000 GBP'000
-------------------------------- -------- --------
Wages and salaries 63,086 45,181
Social security costs 10,771 6,301
Compensation for loss of
office 440 302
Other pension costs 1,719 1,845
Share-based payments 9,961 10,914
--------------------------------- -------- --------
Total staff costs 85,977 64,543
Depreciation of property,
plant and equipment 1,223 1,124
Depreciation of right-of-use
assets 1,793 -
Amortisation of intangible
assets 105 44
Operating lease costs - 1,871
Other non-staff costs 29,311 29,932
--------------------------------- -------- --------
Total non-staff costs 32,432 32,971
Total administrative expenses 118,409 97,514
--------------------------------- -------- --------
The average number of employees during the year increased to 282
(2019: 276) with the number as at 30 September 2020 totalling 292
(30 September 2019: 277). Compensation costs as a percentage of
revenue decreased to 56% (2019: 58%).
Other 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. During the year, travel and entertainment costs
have declined as a result of COVID-19. This decline more than
offset incremental technology spend associated with enabling remote
working. Other non-staff costs also reflect the adoption of IFRS
16. Given the limited remaining duration of our head office lease,
the impact of the new standard on non-staff costs is immaterial.
Other non-staff costs include GBP1,330k of non-recurring costs
related to the head office relocation, which is anticipated to take
place next year.
6. Finance income / Finance costs
Finance income 2020 2019
GBP'000 GBP'000
---------------------------- -------- --------
Interest income 261 581
Net foreign exchange gains 650 74
Other income 75 29
----------------------------- -------- --------
Total finance income 986 684
----------------------------- -------- --------
Finance costs 2020 2019
GBP'000 GBP'000
---------------------------- -------- --------
Interest expense 497 134
Unwind of lease liability
discount 226 -
Total finance costs 723 134
----------------------------- -------- --------
Interest income comprises interest on surplus cash balances
placed on call deposit and interest receivable on certain staff
loans. Net foreign exchange gains relate to activities in the
normal course of business and investments held in foreign
currencies, such as USD.
Interest expense comprises amounts paid on overdrawn balances
with clearing institutions. Interest expense has increased due to
drawdowns of the Revolving Credit Facility for trading purposes in
the normal course of business. The unwind of the lease liability
discount relates to the leases treated as finance leases under IFRS
16, which was effective for the 2020 financial year end.
7. Earnings per share
Basic earnings per share is calculated on a profit after tax of
GBP31,350,000 (2019: GBP9,326,000) and 104,986,698 (2019:
105,443,304) 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.
2020 2019
Number Number
Thousands Thousands
------------------------------------- ---------- ----------
Weighted average number of ordinary
shares in issue during the year
- basic 104,987 105,443
Dilutive effect of share awards 12,313 9,424
------------------------------------- ---------- ----------
Diluted number of ordinary shares 117,300 114,867
------------------------------------- ---------- ----------
8. Dividends
2020 2019
GBP'000 GBP'000
----------------------------------- -------- --------
Final dividend for year ended 30
September 2018 (6.50p) 6,837
Interim dividend for year ended
30 September 2019 (5.50p) 5,813
Final dividend for year ended 30
September 2019 (6.50p) 6,788
Interim dividend for year ended
30 September 2020 (5.50p) 5,794
----------------------------------- -------- --------
Distribution to equity holders of
Numis Corporation Plc 12,582 12,650
----------------------------------- -------- --------
The Board has proposed a final dividend of 6.5p per share for
the year ended 30 September 2020. 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 final dividend.
The final dividend for 2020 will be payable on 12th February
2021 to shareholders on the register of members at the close of
business on 18th December 2020, subject to shareholder approval at
the Annual General Meeting on 9th February 2021. 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 2020 Annual Report and Accounts, which will be circulated to
all shareholders on 5 January 2021.
9. Balance sheet items
(a) Deferred tax
As at 30 September 2020 deferred tax assets totalling
GBP5,617,000 (2019: GBP3,962,000) 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 GBP562,000
(2019: GBP1,806,000) relating to unrelieved trading losses incurred
in a subsidiary entity 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 GBP12,687,000 (2019:
GBP12,007,000).
(c) Trading investments
Included within trading investments is GBP14,701,000 (2019:
GBP14,847,000) of investments held outside of the market making
portfolio. There were new investment purchases of GBP39,000,
disposals of GBP400,000 and fair value net increases of GBP215,000
in relation to these investments, which are now exclusively
unlisted investments.
As at 30 September 2020 no trading investments had been pledged
to institutions under stock borrowing arrangements (2019: 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 GBP4.2m long as at 30 September
2020 (2019: GBP10.6m 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.
The Group has 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 $940k had been called up
and paid. This is classified within Trading Investments. The
remaining $60k has not been called at the balance sheet date 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 (GBP12.58m cash outflow) and share buy-backs through
the repurchase of shares into Treasury and the Employee Benefit
Trust (GBP9.77m cash outflow).
10. Reconciliation of profit before tax to cash flows from operating activities
2020 2019
GBP000 GBP000
------------------------------------------- ---------- ----------
Profit before tax 37,063 12,436
Net finance income (263) (550)
Depreciation charges on property,
plant and equipment 1,223 1,124
Depreciation charges on right-of-use
assets 1,793 -
Amortisation charges on intangible
assets 105 44
Share scheme charges 9,806 10,914
Decrease in current asset trading
investments 374 5,337
(Increase)/decrease in trade and other
receivables (138,898) 182,046
(Increase) in stock borrowing collateral (3,582) (6,734)
Increase/(decrease) in trade and other
payables 166,669 (203,473)
Other balance sheet movements in relation
to leases 676 -
Decrease/(increase) in derivatives 1,085 (753)
Cash flows from operating activities 76,051 391
------------------------------------------- ---------- ----------
Cash flows in 2020 benefitted from a higher profit before tax
and an increase in trade and other payables, but were partially
offset by an increase in trade and other receivables.
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