Numis Corporation - Final Results
08/12/2022 07:00
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RNS Number : 9741I Numis Corporation PLC 08 December 2022
2022 Full year results
8 December 2022: Numis Corporation Plc ("Numis") today announces audited final
results for the year ended 30 September 2022.
Alex Ham and Ross Mitchinson, Co-Chief Executive Officers at Numis, said:
"Staying focused on our longstanding strategic priorities has enabled us to
navigate the significant challenges of the year and demonstrate the growing
resilience of our business and its ability to continue to deliver value for
our shareholders through dividends and buy-backs.
Over the past few years, we have successfully diversified into new products,
geographies and markets as part of our long-term strategic vision. This has
included building out an M&A franchise and setting up an international
private markets business. This year we went further with the opening of our
Dublin office to support non-UK issuers and expand our European investor
coverage.
We benefit from a strong balance sheet and a long track record of growing the
business through market cycles. We remain focused on delivering robust
shareholder returns and executing our clear strategic plan which will include
taking advantage of opportunities to enhance our capabilities during this
period of market uncertainty."
Highlights
· Revenue of £144.2m, down 33% compared to record performance in FY21 as
market conditions deteriorated from highly supportive levels
· Profit Before Tax (PBT) of £20.9m, down 72%, reflecting
operational gearing in the business
· Capital markets revenues down 62% as UK ECM volumes dropped to a 10
year low; Investment banking revenues declined 39%
· Significant progress made in the diversification of the business
model
· Record Advisory revenue for second successive year, up 26% vs prior
year, demonstrating excellent strategic progress in M&A and larger
mandates
· Growth Capital Solutions advised on $1.1bn of private deals for
ambitious, high growth private companies
· Geographic expansion of the business continues with the opening of
our EU office in Dublin
· FTSE350 client base increased for fifth consecutive year to 68
despite the headwind of elevated client takeover activity
· Resilient equities performance despite market declines and UK
fund outflows
· Full year dividend of 13.5p consistent with the prior year, and a
further £11.6m spent on share repurchases
Outlook
The capital markets outlook remains challenging with deal volumes remaining
subdued and unfavourable conditions persisting as the market digests the
impact of sustained inflation and higher interest rates. However, momentum
in our M&A business has been maintained in FY23 with a strong near-term
pipeline of transactions due to complete in the first half of the year. Our
equities business has benefited from an improved financial performance in the
first two months of FY23, driven by strong trading gains.
Our experience suggests that market uncertainty and macro-economic conditions
are likely to affect the investment banking industry for some time.
Similarly, when markets stabilise, our commitment to building a more
diversified investment banking platform leaves us well placed to benefit from
any future recovery in activity levels.
Key statistics
Financial highlights 2022 2021 Change
Revenue £144.2m £215.6m (33.1%)
Underlying operating profit £20.5m £68.1m (69.9%)
Profit before tax £20.9m £74.2m (71.9%)
EPS 11.9p 49.1p (75.8%)
Cash £105.7m £134.1m (21.2%)
Net assets £185.2m £186.7m (0.8%)
Operating highlights
Corporate clients 176 182 (6)
Average market cap of clients £1.0bn £1.4bn (26.8%)
Revenue per head £445k £738k (39.8%)
Operating margin 14.2% 31.6% (17.4ppts)
Spend on share repurchases £11.6m £24.2m (52.2%)
Notes:
1. Revenue, underlying operating profit, operating margin and revenue per
head all exclude investment income / losses and one-off relocation costs.
2. Diluted EPS.
Contacts
Numis:
Noreen Biddle-Shah, Head of Communications 020 7260 1441
FTI Consulting LLP:
Edward Bridges 07768 216607
Daisy Hall 07807 298568
Grant Thornton UK LLP (Nominated Adviser):
Philip Secrett 020 7728 2578
Harrison Clarke 020 7184 4384
Notes for editors
Numis (LON: NUM) is an international investment bank that partners with the
most ambitious companies and investors, offering strategic advice, unique
insights and connectivity to the capital markets.
Already a leader in the UK market, Numis is the adviser of choice for listed
companies, including one-fifth of the FTSE 350 index(( 1 )), with an average
market capitalisation of £1.0bn(( 2 )), and has acted on the most UK IPOs
over the past decade.
Since 2016, Numis has diversified its strategy to grow its UK M&A
franchise, expand internationally and develop its private markets business,
which combined now represent more than half of investment banking
revenues(( 3 )).
Numis is listed on London's AIM and has offices in London, New York and
Dublin.
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 (as it forms part of domestic law
of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018).
Forward-looking statements
This announcement contains forward-looking statements. Forward-looking
statements sometimes use words such as 'may', 'will', 'could', 'seek',
'continue', 'aim', 'anticipate', 'target', 'project', 'expect', 'estimate',
'intend', 'plan', 'goal', 'believe', 'achieve' or other words of similar
meaning. Past performance is no guide to future performance and any
forward-looking statements and forecasts 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. These statements and forecasts are
subject to various risks and uncertainties and 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.
The forward-looking statements contained in this document speak only as of the
date of this announcement and (except as required by applicable regulations or
by law) Numis does not undertake to publicly update or review 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.
No offer of securities
The information, statements and opinions contained in this announcement do not
constitute or form part of, and should not be construed as, any public offer
under any applicable legislation, or an offer, or solicitation of an offer, to
buy or sell any securities or financial instruments in any jurisdiction, or
any advice or recommendation with respect to any securities or financial
instruments.
Co-CEO review
Diversifying to grow stronger
Through difficult market conditions, we demonstrated our resilience, due in
great measure to our longstanding strategic focus on diversification. For the
past few years, we have prioritised investing in new products and markets.
This focus has enabled us to navigate the challenges of the year, support our
clients and ensure we are well positioned to emerge stronger and capitalise on
new opportunities in the future.
Offering broader investment banking capability
Diversifying into M&A advisory and private markets, through our growth
capital solutions (GCS) business, means that we are less reliant on the UK
capital raising cycle. This proved critical in a year when the IPO market was
largely closed. Our M&A and GCS businesses together accounted for
approximately half of our total investment banking revenues for the year.
In a much tougher environment for equity capital markets (ECM), with
heightened volatility and reduced institutional demand, deal volumes were
materially down on the prior year across the industry. We were involved in a
small number of IPOs in Q1 but capital raising activity amongst the corporate
client base was subdued throughout the year.
This downturn in ECM activity was partially offset by the increase in our
M&A advisory business. Our investment in this area over many years enabled
the team to secure a significant number of financial adviser mandates as
M&A activity accelerated through the year. We were particularly active in
M&A defence, acting on 12 bid situations for corporate broking clients,
which compares favourably to many of our larger investment banking
competitors. As a result, we achieved record advisory revenue, with a 26%
increase on the prior year. Revenues overall for our investment banking
division were £94.2m, 39% down on the record year in 2021.
Our success in winning more advisory mandates reflects how we are increasingly
recognised for our capabilities across a broader range of products.
Navigating a challenging year for equities
Given that UK small and mid-cap indices have been very weak, it has been a
challenging year for the equities business. Over the course of the financial
year, the FTSE 250 was down 25% and the NSCI was down 20%. Against that
backdrop, equities revenues of £50.1m, an 18% decline on the record revenues
of the previous year, reflect a resilient performance. In particular, trading
gains of £12.8m compared to £19.7m the previous year, represent a creditable
performance in very difficult market conditions.
Institutional income declined 9%, again reflecting the challenging environment
for clients. While income from clients reduced, interactions with clients
increased. We have been very proactive, spending more time with clients to
help them navigate the many investment challenges they have faced this year.
As a result, we continue to build trust and deepen relationships. This is
reinforced by client reviews, which underline how we have increased our
standing with our institutional clients through the year. The number of
clients who rank us as their preferred broker in UK equities continues to
increase.
Enhancing our client relationships
Throughout the year, we continued to focus on developing our relationships
with existing clients and winning new clients. Overall, our total number of
corporate clients reduced slightly during the year to 176. This was due
primarily to the high number being acquired during the year. Offsetting this
unavoidable reduction, we have won 18 new clients and, despite the overall
decline, we have increased our FTSE 350 client base for the fifth consecutive
year.
We will continue to focus on working with high-quality companies and we are
proud of our strong track record of retaining clients and developing ever
stronger relationships with them through the years. The average tenure of our
corporate broking client base is now seven years and we believe our
credentials in assisting companies over the long term will be valuable in
securing new clients during this period of market uncertainty.
Doing more for our clients
Thinking laterally and broadening the engagement with our clients lies at the
heart of our diversification strategy. Our clients tend to be ambitious and
active, as a result they can benefit from a range of products and services,
therefore it is a natural evolution for us to expand our capabilities to
support their ambition.
Alongside our strategic focus on M&A advisory, which came to the fore this
year, we have also prioritised growth in private markets, through GCS. We
acted on a number of exciting transactions during the year, raising nearly
$1.1bn for some of the world's most ambitious private companies.
However, it was a year of two halves for GCS. In the first six months, deal
volumes and revenues were consistent with the active prior year. However, the
downturn in public markets, notably the de-rating in listed growth stocks, had
a corresponding impact on private markets in the second half of the year. This
resulted in deals taking longer to execute and some transactions being
postponed or aborted which impacted second half revenues.
Given the scale of capital still to be deployed, we believe that private
markets activity will pick up once volatility declines, and valuations
stabilise. In the meantime, we continue to invest in the team, to build our
capability, to broaden our network globally in terms of both companies and
institutional investors.
Adding to our diversification in the investment banking business, we
established our debt advisory team three years ago to service client needs in
this area. As a result, we not only have an additional revenue stream but
importantly, greater, more in-depth dialogue with our clients, which helps to
strengthen our relationships. This is proving to be particularly valuable to
our corporate clients, given current volatility in the debt markets.
Diversifying across equities
In equities, we have diversified our products and services in several ways
over recent years, broadening our capabilities for clients and adding
complementary revenue streams.
Our electronic trading product has made further progress and delivered growth
on the prior year despite the decline in markets. The product now accounts for
14% of our institutional commission, and we see further growth to come as we
target European and US clients. This is another example of how we focus on
increasing our breadth of engagement with clients, driven by their
requirements.
Our event driven team, which we established three years ago, continued to grow
their client base and presence in the market through the year. At a time of
heightened bid activity for UK small and mid-cap companies, our team performed
well in capturing the event driven and arbitrage trading surrounding these bid
situations.
Focusing beyond the UK
International expansion, notably across Europe, is another key aspect of our
diversification strategy. We took a major step forward by gaining regulatory
approval in June 2022 for our new European entity in Ireland, Numis Europe
Limited. We have hired a strong team and our Dublin office opened for clients
on 1(st) September 2022.
With a European hub, we aim to grow our European institutional client base. We
have an excellent range of high-quality products to offer, including top-rated
equity research, leading distribution, electronic trading, substantial market
share, and access to our capital markets deal flow. This, combined with our
existing presence in London and New York, makes us one of the strongest
distribution platforms for UK equities.
Our European office will also further strengthen our capabilities to serve
international corporate clients. We believe there is an opportunity to apply
our distinctively agile investment banking approach in new territories. We are
now beginning to focus our marketing efforts across Europe, selectively
building our network of both issuers, sponsors and other advisers.
Investing in talent
Our strong client relationships are reinforced by our highly collaborative
one-firm culture, where everyone works together to excel. We aim to attract
and retain the best talent, people who will thrive and contribute to our
culture.
Throughout a tough year in terms of the markets, we continued to invest in
developing and broadening the capabilities of our people, who, as always, are
at the heart of our success.
Just as we have been focusing on diversifying our products and services and
our geographies, we are keen to diversify our talent base.
We aim to hire the best people from a diverse range of backgrounds and
experiences, in order to provide a wider range of perspectives and insights,
both internally and to clients. From our graduate intake to senior hires, we
continue to make progress in terms of broadening the demographic of talent
within the organisation. This is critical for the strength and vibrancy of our
organisation, for the breadth and creativity of our perspectives and thinking,
and ultimately for the quality of advice we offer our clients.
Continuing to prioritise ESG
As a firm, we continue to prioritise the most relevant environmental, social
and governance (ESG) issues. Last year, we undertook a materiality assessment
to identify the most important ESG matters for internal and external
stakeholders and established our ESG framework and priorities. Our four key
focus areas are: empowering employees, responsible governance, serving our
community and embedding ESG into advisory. This year, we have been
concentrating on delivering against these priorities.
From corporates to institutions, ESG issues are clearly critical for our
clients. We make sure we understand the individual situations and challenges
of each of our clients, from ESG-focused funds to companies looking to
navigate the particular issues of their sector.
ESG adds layers of complexity for boards who face mounting pressures and
challenges from all corners, whether that is supply chain disruption, wage
inflation or new ways of working. We advise each of our clients on their
specific situation, from what their shareholders are generally concerned about
to how to respond to specific issues.
Delivering consistent returns
We have a long track record of delivering a resilient dividend to shareholders
across multiple market cycles. The dividend has grown 170% over the past 15
years and has not been reduced during that period. This year, the dividend has
been maintained in line with the upward re-based dividend of last year. In
addition, we have consistently repurchased shares this year, spending a total
of £12m, reflecting a commitment to shareholder returns and demonstrating the
strength of our balance sheet.
Looking ahead
The unfavourable market backdrop that impacted much of FY22 has persisted
through the early months of FY23. Capital markets activity has remained
subdued and UK investor sentiment remains weak. However, the M&A pipeline
remains strong, with bid activity for UK-listed mid-market corporates
continuing to generate fee opportunities.
These challenging market conditions have enabled us to demonstrate our
resilience, reinforced by the diversification strategy we have been
implementing for the past few years. When markets eventually recover, we will
be better placed than ever to capitalise on this with our clients. We have a
broader set of capabilities and products, a large high-quality client base,
considerable financial strength, a growing reputation in the world of
investment banking and, above all, our great people.
In the meantime, we remain on the front foot. We will continue to selectively
invest in talent to support our clients and deliver on our strategy.
Financial review
Revenue performance
Macroeconomic headwinds strengthened during the year, leading to a far more
challenging market backdrop for the investment banking industry. However, the
consistent investment in the business over the past five years has delivered
greater revenue diversification and a more robust financial performance. The
markets in which we operate are clearly subject to cycles and periods of
uncertainty. However, our strategy to maintain a strong balance sheet whilst
continuing to invest in the business has enabled the firm to deliver
consistent shareholder returns over the long term.
2022 2021 %
£m £m change
Investment banking 94.2 154.9 (39.2%)
Equities 50.1 60.7 (17.5%)
Revenue 144.2 215.6 (33.1%)
Investment income (1.4) 8.7 n.m.
Total income 142.8 224.3 (36.3%)
Revenue for the year was £144.2m (2021: £215.6m), representing a decline of
33%. Whilst M&A activity increased compared to the prior year, capital
markets volumes and IPOs in particular declined significantly. Revenue per
head declined by 40% to £445k, reflecting both the reduced revenue and our
continued investment in headcount. The strengthening of the US dollar
generated foreign exchange gains in the year, which were offset by the loss on
revaluation of the investment portfolio, resulting in investment income
materially lower than FY21.
Investment banking
2022 2021 %
£m £m change
Capital markets 42.7 111.5 (61.7%)
Advisory 39.0 30.9 26.4%
Corporate retainers 12.4 12.5 (0.6%)
Investment banking revenue 94.2 154.9 (39.2%)
The investment banking division delivered revenue of £94.2m (2021: £154.9m),
representing a decrease of 39% on the prior year, which was a record
performance. Deal volumes declined across the industry due to geopolitical and
inflation concerns. In addition, our average deal fee also declined, primarily
due to the absence of large capital markets transactions this year.
The challenging market conditions had the greatest impact on our capital
markets business, which delivered revenues of £42.7m, down 62% on the record
prior year performance. The IPO market effectively closed after the first
quarter and equity issuance by clients declined significantly as market
turbulence impeded corporate growth strategies. Overall, this was one of the
weakest years in recent times for deal volumes across the UK market.
Whilst GCS, our private markets business, delivered a robust performance in
the first half, deal volumes reduced in the second half as listed company
valuations declined significantly. Looking through the near-term market
turbulence, growing our private markets presence remains a strategic focus for
the business and an important contributor to our geographic diversification.
GCS offers a global product; all the transactions completed during the year
involved raising capital for companies based outside of the UK for the second
successive year.
The opening of our European office at the end of the financial year will
facilitate origination of European ECM transactions and enable the
distribution of UK ECM deals to a broader European client base. International
ECM revenues were lower this year; however, we did complete our first US IPO,
demonstrating the relevance of our distribution network and track record to
issuers based outside the UK. In the near term, international ECM revenues
will likely be correlated to IPO market activity; when these markets recover,
we will be well positioned to leverage our European platform.
A second successive record advisory revenue performance partially offset the
significant slowdown in capital markets activity. Advisory revenues were up
26% on the prior year to £39.0m. In a year when UK public M&A activity
has increased, our strategic focus on being mandated as financial adviser by
our corporate broking clients on bid defence situations has resulted in growth
in both deal volumes and average deal fees. Average M&A fees were 6%
higher than the prior year and 62% higher than three years ago, demonstrating
the success of our strategy. We now have strong credentials and markets in
public M&A, which we believe we can leverage across a wider range of
M&A fee opportunities.
The slight decline in corporate clients to 176 was attributable to the rise in
successful takeovers across the UK market. During the year, 15 clients were
lost due to transactions, which more than offset the wins in the period.
Retainer fee income declined 1% to £12.4m (2021: £12.5m), reflecting the
small decline in our corporate client list. We will continue to selectively
grow the client list, focused on high-quality opportunities where we can
leverage the combined strength of our investment banking and equities
platforms.
Equities
2022 2021 %
£m £m change
Institutional income 37.3 41.0 (8.9%)
Trading 12.8 19.7 (35.4%)
Equities revenue 50.1 60.7 (17.5%)
Against a market backdrop of falling equity markets and persistent outflows
from UK funds, the equities business delivered a resilient performance.
Revenues were down 18% relative to the record revenue performance of FY21.
Institutional income was down 9%, reflecting a decline in the aggregate value
of commission payments across UK equities during the second half of this year.
Despite the decline in market volumes, electronic trading delivered another
year of growth. We continue to build the client base for this product, which
is aligned with our geographic diversification strategy.
Payments for research were flat on the prior year, reflecting the consistent
strength of our research product and analysts. Whilst not a significant
revenue generator for the firm, the strategic value of a strong research
offering remains central to both our core UK business and our European growth
plans.
Trading delivered gains of £12.8m, down 35% on the prior year. This reflects
a robust performance given the steep market declines suffered by the equity
markets for sustained periods during the year. The investment trusts team
delivered a particularly strong performance, benefiting from the increase in
volatility.
During the year, we invested in technology to facilitate more efficient access
to retail trading liquidity, which we believe will be complementary to our
institutional business where we typically have strong market share.
Administrative expenses
2022 2021 %
£m £m change
Staff costs 74.9 99.0 (24.3%)
Share-based payment 6.3 9.6 (34.2%)
Non-staff costs 42.4 39.3 8.1%
Total administrative costs 123.7 147.9 (16.3%)
Year-end headcount 336 319 5.3%
Average headcount 324 292 11.0%
Compensation ratio 56.4% 50.4% (6.0 ppts)
Total costs decreased to £123.7m (2021: £147.9m), primarily due to a
reduction in variable compensation. Average headcount increased by 11%, which
was attributable to the build out of our new office in Dublin and the
continued focus on recruitment of junior and mid-level investment banking
staff to support our growth strategy. Over the past three years, we have
focused on increasing the capacity of the business by adding talented junior
resource. Given the current market environment, further hiring activity will
be targeted on strategic growth areas. Historically, market downturns have
presented opportunities to recruit high-quality people to enhance our
platform. We believe similar opportunities may arise over the next year.
The lower revenue performance resulted in materially lower variable
compensation, which resulted in a 24% decline in our overall staff costs. Our
share-based payment charge, which relates to equity awarded to staff as part
of their annual compensation, was lower than the prior year at £6.3m (2021:
£9.6m) due to the vesting of several long-term awards last year. The
Investment Firm Prudential Regime (IFPR) will impact Numis in FY23 and, over
time, lead to a gradual increase in our share scheme charges as certain senior
roles are required to have a greater proportion of their total compensation
deferred and delivered in equity.
Compensation costs as a percentage of revenue increased to 56.4% (2021: 50.4%)
as a result of the weaker revenue performance and operational gearing. This
ratio remains comfortably within our target range of 50% to 60% and reflects
our consistent approach to compensation across market cycles.
Non-staff costs increased 8% compared to the prior year. We incurred an
additional £1.5m in relation to our new Dublin office and we continued to
invest in technology across the business. In addition, travel and
entertainment spend recovered to pre-pandemic levels. Costs are being reviewed
as we aim to mitigate the impact of higher inflation and the strong dollar.
Profit
2022 2021 %
£m £m change
Statutory profit before tax 20.9 74.2 (71.9%)
Adjustments:
Investment losses / (gains) 1.4 (8.7) n.m.
Relocation expenses - 0.4 n.m.
Net finance (income) / expense (1.8) 2.3 n.m.
Underlying operating profit 20.5 68.1 (69.9%)
Underlying operating margin 14.2% 31.6% (17.4ppts)
The decline in revenue, combined with the operational gearing in our business,
resulted in profits being materially lower than the prior year. The weaker
revenue performance was partially offset by a decrease in variable
compensation; however, the majority of the cost base is fixed. Underlying
operating profit, which excludes investment income and finance costs, was
materially lower at £20.5m (2021: £68.1m) and operating margin decreased to
14.2% (2021: 31.6%).
Profit before tax for the year was £20.9m, representing a decrease of 72%
compared to the record profit achieved in the prior year. Investment portfolio
losses of £1.4m were offset by foreign exchange gains on US dollar exposures;
this includes holdings within the portfolio, the majority of which are US
dollar investments. We expect to generate higher returns on our significant
cash positions next year as we benefit from higher interest rates.
Our tax charge benefited from a one-off adjustment in respect of the prior
vesting of share awards. However, this was more than offset by an increase in
our effective tax this year attributable to the share price decline, which
impacts the tax exposure on our share schemes, and a tax charge attributable
to investment portfolio disposals during the year. Looking ahead, we expect to
benefit from the increase in the bank surcharge profit threshold; however,
this will be mostly offset by the reinstated increase in the UK corporation
tax rate.
Diluted EPS decreased by 76% to 11.9p per share (2021: 49.1p). Following the
one-off increase in share count last year, we returned to delivering a gradual
decline in the share count this year.
2022 2021 %
£m £m change
Statutory profit before tax 20.9 74.2 (71.9%)
Tax 7.2 16.3 (56.1%)
Profit after tax 13.7 57.8 (76.3%)
Weighted average issued share count 110.7 106.7 3.8%
Year end share count 109.1 111.0 (1.7%)
Diluted EPS 11.9p 49.1p (75.8%)
Basic EPS 12.4p 54.2p (77.1%)
Investment portfolio
On 30 September 2022, our investment portfolio was valued at £18.4m (2021:
£21.8m). The global de-rating of the listed technology sector and growth
stocks in general resulted in negative fair value adjustments to several of
our holdings. We completed two disposals during the year, realising total
proceeds of £8.0m. This included the disposal of our holding in Oxford
Nanopore Technologies plc, which was completed at the start of the financial
year following their IPO. The proceeds were partially reinvested across three
new investments aligned with our private markets activities. We continue to
seek liquidity events for our legacy holdings whilst maximising the strategic
value and network benefits of more recent portfolio investments. We do not
anticipate adding to the number of holdings in our portfolio in the short
term.
Capital and liquidity
During periods of market uncertainty, the strength of our balance sheet
supports shareholder returns and provides the agility to pursue our strategy
through the cycle. During the year, we capitalised our European subsidiary and
re-initiated the share buyback programme, despite the deterioration in market
conditions and decline in profit. The Group's net asset position was broadly
flat at £185.2m (2021: £186.7m), as returns to shareholders offset profit
and increases in equity over the year.
The business now operates under a new regulatory capital regime, with IFPR
having taken effect on 1 January 2022. Our Pillar 1 capital requirement is
lower under the new regulation; however, we remain in a transition period,
whereby our overall capital requirement will remain unchanged until the FCA
completes its review of our internal assessment.
As of 30 September 2022, our cash position was £105.7m (2021: £134.1m), down
21% relative to the prior year. The decline was attributable to variable
compensation payments related to the prior year, and the short-term cash
movements associated with trading and settlement activities. The average daily
cash position over the year was £110m (2021: £115m) and the variance between
our daily high and low cash positions over the financial year was £106m
(2021: £77m).
We have recently completed the refinancing of our committed revolving credit
facility, securing an increase in facility size to £50m whilst lowering the
margin, and obtaining greater financial flexibility. We expect the facility to
remain undrawn for much of the year; however, it will provide short-term
liquidity to support our core business activities.
Dividends and shareholder returns
The Board has proposed a final dividend of 7.5p per share, giving a total
dividend in relation to FY22 of 13.5p per share. The dividend, subject to
approval at the AGM, will be paid on 10 February 2023 to shareholders on the
register on 16 December 2022.
The FY22 dividend is in line with the prior year dividend that was increased
by 12.5% following the strong performance of FY21. We believe this re-based
distribution is sustainable across market cycles, yet also provides sufficient
flexibility to continue investing consistently in our strategic growth
opportunities.
In December 2021, the Board reinstated the on-market share buyback programme,
spending £8.2m over the course of the year, resulting in a reduction to the
issued share count. The buyback programme has continued into FY23, with a
further £1m spent to date as we aim to offset the dilutive impact of employee
equity awards.
Consolidated income statement
For the year ended 30 September 2022
2022 2021
Note £'000 £'000
Revenue 3 144,229 215,582
Other operating income/loss 4 (1,432) 8,715
Total income 142,797 224,297
Administrative expenses 5 (123,716) (147,859)
Operating profit 19,081 76,438
Finance income 6 3,906 1
Finance costs 6 (2,131) (2,289)
Profit before tax 20,856 74,150
Taxation 7 (7,153) (16,303)
Profit for the year 13,703 57,847
Attributable to:
Owners of the parent 13,703 57,847
Earnings per share
Basic 8 12.4p 54.2p
Diluted 8 11.9p 49.1p
Dividends 9 (15,580) (12,726)
Consolidated statement of comprehensive income
For the year ended 30 September 2022
2022 2021
£'000 £'000
Profit for the year 13,703 57,847
Items that may be reclassified to the Income Statement on fulfilment of
specific conditions:
Exchange differences on translation of foreign operations 1,051 10
Items that will not be reclassified to the Income Statement:
Excess of tax deduction over cumulative share scheme charges 5,058 -
Other comprehensive income for the year, net of tax 6,109 10
Total comprehensive income for the year, net of tax, attributable to owners of 19,812 57,857
the parent
Consolidated balance sheet
As at 30 September 2022
2022 2021
Note £'000 £'000
Non-current assets
Property, plant and equipment 9,458 10,044
Intangible assets 275 558
Right-of-use assets 35,400 38,033
Deferred tax 10a 1,354 4,006
46,487 52,641
Current assets
Trade and other receivables 10b 403,416 467,799
Trading investments 10c 36,071 58,972
Stock borrowing collateral 10d 20,354 18,623
Current income tax receivable 10,792 3,171
Derivative financial instruments 22 629
Cash and cash equivalents 10f 105,653 134,125
576,309 683,319
Current liabilities
Trade and other payables 10b (385,720) (481,946)
Trading instruments 10e (10,340) (27,217)
Lease liabilities (605) (491)
(396,665) (509,654)
Net current assets 179,644 173,665
Non-current liabilities
Lease liabilities (40,910) (39,580)
Net assets 185,221 186,726
Equity
Share capital 5,718 6,252
Capital redemption reserve 10g 534 -
Other reserves 10,641 9,037
Retained earnings 168,328 171,437
Total equity 185,221 186,726
Consolidated statement of changes in equity
For the year ended 30 September 2022
Share Capital redemption Other Retained Total
capital reserve reserves earnings equity
£'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 6,252 - 9,037 171,437 186,726
Profit for the year - - - 13,703 13,703
Other comprehensive income - - 1,051 5,058 6,109
Total comprehensive income for the year - - 1,051 18,761 19,812
Treasury shares cancelled (534) 534 - - -
Dividends paid - - - (15,580) (15,580)
Net movement in Treasury shares - - - (8,183) (8,183)
Movement in respect of employee share plans - - 553 2,442 2,995
Deferred tax related to share-based payments - - - (549) (549)
Transactions with shareholders (534) 534 553 (21,870) (21,317)
Balance at 30 September 2022 5,718 534 10,641 168,328 185,221
Share Other Retained Total
capital reserves earnings equity
£'000 £'000 £'000 £'000
Balance at 1 October 2020 5,922 22,421 129,290 157,633
Profit for the year - - 57,847 57,847
Other comprehensive income - 10 - 10
Total comprehensive income for the year - 10 57,847 57,857
New shares issued 330 - - 330
Dividends paid - - (12,726) (12,726)
Net movement in Treasury shares - - 7,176 7,176
Movement in respect of employee share plans - (13,394) (9,082) (22,476)
Deferred tax related to share-based payments - - (1,068) (1,068)
Transactions with shareholders 330 (13,394) (15,700) (28,764)
Balance at 30 September 2021 6,252 9,037 171,437 186,726
Consolidated statement of cash flows
For the year ended 30 September 2022
2022 2021
Note £'000 £'000
Cash flows generated from operating activities 11 7,902 77,115
Taxation paid (7,164) (17,599)
Interest received in relation to operating activities 436 1
Interest paid in relation to operating activities - (1,187)
Net cash generated from operating activities 1,174 58,330
Investing activities
Purchase of property, plant and equipment (1,114) (8,881)
Purchase of intangible assets (19) (310)
Net cash used in investing activities (1,133) (9,191)
Financing activities
Purchases of own shares - Treasury (8,183) (1,555)
Purchases of own shares - Employee Benefit Trust (3,385) (22,663)
Cash paid in respect of lease arrangements - principal (555) (1,811)
Interest paid (537) (1,102)
Dividends paid (15,580) (12,726)
Net cash used in financing activities (28,240) (39,857)
Net movement in cash and cash equivalents (28,199) 9,282
Opening cash and cash equivalents 134,125 125,217
Net movement in cash and cash equivalents (28,199) 9,282
Exchange movements (273) (374)
Closing cash and cash equivalents 105,653 134,125
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 2022 will be delivered to the Registrar of
Companies in due course. The annual report and statutory accounts will be
posted to those shareholders that have specifically requested them on 20
December 2022 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 7 February 2023.
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 results have been applied on a consistent basis
with the statutory accounts for the years ended 30 September 2022 and 30
September 2021. 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
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
Numis Corporation PLC transitioned to UK-adopted International Accounting
Standards in its consolidated financial statements on 1 October 2021. This
change constitutes a change in accounting framework. However, there is no
impact on recognition, measurement or disclosure in the period reported as a
result of the change in framework.
The consolidated financial information contained within these financial
statements has been prepared in accordance with UK-adopted International
Accounting Standards with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards and are in accordance
with the accounting policies that were applied in the Group's statutory
accounts for the year ended 30 September 2022.
There are no new mandatory standards, amendments or interpretations for the
Group's and the Company's accounting year ended 30 September 2022.
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. Geographical information
The Group earns its revenue in the following geographical locations:
2022 2021
£'000 £'000
United Kingdom 137,056 207,200
United States of America 7,141 8,382
Republic of Ireland 32 -
Revenue (see note 3) 144,229 215,582
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:
2022 2021
£'000 £'000
United Kingdom 42,225 46,109
United States of America 2,584 2,526
Republic of Ireland 323 -
Total non-current assets 45,132 48,635
Geographical information is based on the location of the contracting legal
entity. The group's Irish subsidiary, Numis Europe Limited, commenced
trading in September 2022. Its non-current assets primarily comprise its
right-of-use asset in respect of its office lease in Dublin.
3. Revenue
2022 2021
£'000 £'000
Net trading gains 12,764 19,754
Institutional income 37,314 40,957
Equities income 50,078 60,711
Corporate retainers 12,395 12,471
Advisory fees 39,023 30,884
Capital markets fees 42,733 111,516
Investment banking revenue 94,151 154,871
Total revenue 144,229 215,582
There are no clients who accounted for more than 10% of revenues in the year
ended 30 September 2022 (2021: nil).
4. Other operating income/(loss)
Other operating income represents net gains/losses made on investments which
are held outside of the market-making portfolio, which are disclosed within
Trading Investments.
2022 2021
£'000 £'000
Investment activity net (losses) / gains (1,432) 8,715
5. Administrative expenses
2022 2021
£'000 £'000
Wages and salaries 62,089 81,968
Social security costs 9,204 14,686
Pension costs 2,106 1,792
Share-based payments 6,345 9,634
Other staff costs 1,547 534
Total staff costs 81,290 108,614
Depreciation of property, plant and equipment 1,731 1,154
Depreciation of right-of-use assets 3,063 3,262
Amortisation of intangible assets 302 158
Other non-staff costs 37,330 34,671
Total non-staff costs 42,426 39,245
Total administrative expenses 123,716 147,859
The average number of employees during the year increased to 324 (2021: 292)
with the number as at 30 September 2022 totalling 336 (30 September 2021:
319). Compensation costs as a percentage of revenue increased to 56% (2021:
50%).
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.
6. Finance income / Finance costs
Finance income 2022 2021
£'000 £'000
Interest income 477 1
Net foreign exchange gains 3,429 -
Total finance income 3,906 1
Finance costs 2022 2021
£'000 £'000
Interest expense 495 439
Interest expense on lease liabilities 1,636 1,102
Net foreign exchange losses - 721
Other finance costs - 27
Total finance costs 2,131 2,289
Interest income comprises interest on surplus cash balances. 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 and costs associated with the stand-by RCF facility. Interest
expense on lease liabilities relates to the leases treated as finance leases
under IFRS 16.
7. Taxation
2022 2021
£'000 £'000
Current tax 6,395 10,865
Corporation tax at 19.0% (2021: 19.0%)
Corporation tax surcharge at 8.0% (2021: 8.0%) 631 2,544
Adjustments in respect of prior years (current tax) (2,131) 2,351
Adjustments in respect of prior years (deferred tax) 2,486 -
Total current tax 7,381 15,760
Deferred Tax
Origination and reversal of timing differences (236) 508
Changes in tax rate 8 35
Total tax charge 7,153 16,303
Factors affecting the tax charge for the year
2022 2021
£'000 £'000
Profit before tax 20,856 74,150
Profit before tax multiplied by the standard rate of UK corporation tax 19% 3,963 14,088
(2021: 19%)
Effects of:
Non-deductible expenses and non-taxable income 138 (1,964)
Profits taxed at rates other than 19%, principally banking surcharge tax 631 2,544
Permanent differences in respect of share-based payments 1,991 (1,101)
Tax on share-based payments vesting in period taken to Reserves 103
Realised Gains on Investments 1,243 -
Adjustments in respect of prior years 355 2,330
Changes in tax rate and other temporary differences (1,271) 406
Total tax charge 7,153 16,303
The tax charge reflects a realisation basis for taxation on the investment
portfolio, including the realised gain on disposal of Oxford Nanopore and a
net deferred tax liability of £2.49m recognised as a prior year adjustment
regarding temporary differences in respect of net unrealised gains, of which
£1.76m has been released in the current period. As well as a tax charge of
£2.5m arising in respect of permanent differences for share-based payments,
the tax charge has benefitted from a one-off adjustment of £2.64m in the
period related to share scheme vestings at the end of FY21 (a further benefit
of £4.911m benefit has also been taken to equity in this regard).
8. Earnings per share
Basic earnings per share is calculated on a profit after tax of £13,703,000
(2021: £57,847,000) and 110,730,066 (2021: 106,687,884) 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.
2022 2021
number number
thousands thousands
Weighted average number of ordinary shares in issue during the year - basic 110,730 106,688
Dilutive effect of share awards 4,233 11,021
Diluted number of ordinary shares 114,963 117,709
9. Dividends
2022 2021
£'000 £'000
Final dividend for year ended 30 September 2020 (6.50p) - 6,825
Interim dividend for year ended 30 September 2021 (5.50p) - 5,901
Final dividend for year ended 30 September 2021 (8.0p) 8,943 -
Interim dividend for year ended 30 September 2022 (6.0p) 6,637 -
Distribution to equity holders of Numis Corporation Plc 15,580 12,726
The Board has proposed a final dividend of 7.5p per share for the year ended
30 September 2022. 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
results do not reflect this final dividend.
The final dividend for 2022 will be payable on 10 February 2023 to
shareholders on the register of members at the close of business on 16
December 2022, subject to shareholder approval at the Annual General Meeting
on 7 February 2023. 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 2022 Annual Report and Accounts, which will be circulated to all
shareholders on 20 December 2022.
10. Balance sheet items
(a) Deferred tax
As at 30 September 2022 deferred tax assets totalling £1,354,000 (2021:
£4,006,000) 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 and unutilised trading
losses of overseas affiliates.
(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 £18,898,000 (2021: £17,035,000).
(c) Trading investments
Included within trading investments is £18,434,000 (2021: £21,783,000) of
investments held outside of the market making portfolio. There were new
investment purchases of £3,974,000 disposals of £8,017,000 and fair value
net decreases of £994,000 in relation to these investments, which are
predominantly unlisted investments.
As at 30 September 2022 no trading investments had been pledged to
institutions under stock borrowing arrangements (2021: 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.
(e) Trading instruments
Trading instruments 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 £7.3m long as at 30 September
2022 (2021: £10.6m long). The magnitude of trading instruments 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.
(f) Cash and cash equivalents
Cash balances reflect movement in market making positions, the operating
performance of the business offset by dividend distributions (£15.6m cash
outflow) and share buy-backs through the repurchase of shares into Treasury
and the Employee Benefit Trust (£11.6m cash outflow).
At 30 September, the Group had a £35m unsecured Revolving Credit Facility
('RCF') with Barclays and AIB. Subsequent to year end, a new RCF of £50m was
put in place which replaces the existing facility. The facility is
undrawn.
(g) Capital redemption reserve: cancellation of treasury shares
The Company reduced its capital by the cancellation of 10,671,088 ordinary
shares of £0.05 purchased by the Company between June 2013 and February 2021
following a special resolution passed at the AGM on 8 February 2022. This
created a capital redemption reserve of £534,000.
11. Reconciliation of profit before tax to cash flows from operating
activities
2022 2021
£000 £000
Profit before tax 20,856 74,150
Net finance costs/(income) (1,775) 2,288
Disposals of property, plant and equipment 11 279
Depreciation charges on property, plant and equipment 1,731 1,154
Depreciation charges on right-of-use assets 3,063 3,262
Amortisation charges on intangible assets 302 158
Share scheme charges 6,345 9,634
(Increase)/decrease in trading investments 7,050 (20,883)
(Increase) in trade and other receivables 72,571 (141,643)
(Increase) in stock borrowing collateral (1,731) (401)
Increase in trade and other payables (101,129) 149,728
(Increase)/decrease in derivatives 606 (611)
Cash flows from operating activities 7,902 77,115
Cash flows in 2022 reflect lower profit before tax and an increase in cash
deployed in working capital.
1 Corporate client base includes 68 companies out of the FTSE 350, ie
one-fifth. - Numis data (30 September 2022).
2 Average market capitalisation of corporate client base £1.0bn. - Numis
data (30 September 2022).
3 As at year end 2022. - Numis data (30 September 2022).
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