REG - Peel Hunt Limited - Full-Year Results
09/06/2022 07:00
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RNS Number : 2564O Peel Hunt Limited 09 June 2022
9 June 2022
Peel Hunt Limited
Full-Year Results
For the year ended 31 March 2022
Resilient performance in challenging markets through diversified business
model
Peel Hunt Limited ("Peel Hunt" or the "Company") together with its
subsidiaries (the "Group") today announces audited results for the year ended
31 March 2022 ("FY22").
The full-year results for the Group consolidate Peel Hunt LLP, a limited
liability partnership which, up until the IPO of the Company on 29 September
2021, had individual members. Profits derived from the partnership during FY22
are allocated between all members, including corporate members. Profits
attributable to corporate members are retained within the Group and are
subject to corporation tax; profits attributable to all other members (prior
to the IPO) comprise the non-controlling interests, with those members bearing
tax liabilities individually. Following the IPO, individual members became
employees of Peel Hunt LLP with all future earnings attributable to the Group.
This presentation is consistent with prior financial periods and with the
requirements of the Companies Act 2006 as applied to limited liability
partnerships.
For reference, an unaudited illustrative consolidated statement of
comprehensive income to 31 March 2022 (together with comparatives to 31 March
2021 ("FY21")) is also presented. This statement illustrates the impact that
the reorganisation of the Group's corporate structure, and the IPO, would have
had on the consolidated statement of comprehensive income had it taken place
on or before 31 March 2020. This statement retains the actual revenue results
and considers the addition of continuing items comprising former members of
Peel Hunt LLP being remunerated as employees in FY21 and H1 of FY22,
additional National Insurance contributions and additional pension costs; the
statement has also been adjusted to remove the impact of one-off costs
relating to the IPO, and tax-related prior year items arising in the period.
Partnership profits historically allocated to the former individual members,
or non-controlling interests, are attributed to the Group in full and are
shown as if subject to corporation tax.
Highlights
· Full year revenue of £131.0m (FY21: £196.9m), ahead of revised
analyst expectations, with profit before tax of £41.2m (FY21: £120.1m)
against exceptional prior year performance, as market activity and volumes
have moderated from the highs of the pandemic.
· All three business divisions continued to make progress:
§ Investment Banking achieved record results for the second consecutive year,
with revenue up 32% to £57.9m; we were the most active investment bank in UK
equity capital markets ("ECM") transactions, executing 46 equity fundraises;
our advisory revenue was up 166% to £8.48m as we acted on 19% of all
announced UK mid- and small-cap takeover situations.
§ Diversified business model supported by Execution Services performance
above the pre-pandemic run rate through periods of high market volatility and
lower capital markets activity delivering revenue of £42.9m (FY21: £116.7m).
§ Research & Distribution performance was resilient with revenues
of £30.2m (FY21: £36.3m) as we gained market share in institutional
commissions, and were named the best overall broker for UK mid- and small-cap
companies in Institutional Investor's 2021 Survey.
· We gained 19 new corporate clients, with another 4 added in the period
since the year end, bringing our current total number of corporate clients to
164, including 35 in the FTSE 350.
· Strong balance sheet and capital position, with net assets up 107% to
£100.1m.
· The Board has proposed a final dividend of 3.1p, in line with the
dividend policy.
· We made good progress against our strategic priorities, including
investing in our US distribution capability, progress towards establishing our
platform in the EU (with the opening of our Copenhagen office planned to take
place during the current financial year ("FY23")) and ongoing investment in
our digital strategy and proprietary technology.
· Market conditions were challenging in the second half, particularly in
the last quarter where exceptionally low levels of capital markets activity
were experienced market wide. We expect ECM activity to continue in line with
Q4 of FY22 through the first half of FY23. Despite this market backdrop, we
have acted on some of the more significant UK mid-cap ECM transactions that
have been executed since the start of FY23, and remain hopeful that market
conditions in the second half of our financial year will support execution of
our strong pipeline of Investment Banking transactions.
Key statistics
Illustrative financial highlights((1)) 2022 2021 Change
Revenue £131.0m £196.9m (33.5%)
Profit before tax £33.1m £77.0m (57.0%)
Basic EPS 21.1p 47.8p ( 26.7p)
Compensation ratio((1)) 46.3% 45.7% 0.6ppts
Actual financial highlights
Revenue £131.0m £196.9m (33.5%)
Profit before tax £41.2m £120.1m (65.7%)
Basic EPS 15.4p 17.7p (2.3p)
Dividend 3.1p N/A N/A
Compensation ratio 47.1% 44.3% 2.8ppts
Operating highlights
Cash £76.7m £103.4m (25.8%)
Net assets £100.1m £48.4m 106.8%
Investment Banking clients 162 156 3.8%
Average market cap of clients £683.7m £732.4m (6.6%)
Notes:
1) Illustrative financials are outlined in the Unaudited Illustrative
Statement of Comprehensive Income
Commenting on the results, Steven Fine, Chief Executive Officer said:
"I'm grateful to our outstanding team for their dedication in a challenging
year, which included our own IPO and navigating volatile market conditions in
the period since, particularly in the last quarter of our financial year.
Against this backdrop, our performance was resilient, with all three divisions
continuing to make progress, demonstrating the benefit of our diversified
business model. We generated record Investment Banking revenue for the second
consecutive year, continuing to grow our corporate client base while being
more active than any other investment bank in UK ECM transactions. Alongside
this, both Execution Services and Research & Distribution delivered solid
performances, as we continued to develop our trading technologies and to win
market share in institutional commissions.
We are continuing to invest in the business to drive long-term growth, having
made good progress against our strategic priorities. This includes investing
in our US distribution capability, progress towards establishing our expanded
platform in the EU and ongoing investment in our digital strategy. Our
proprietary technology clearly differentiates us from our peers and we expect
it to be a continuing source of value creation for our clients and
shareholders."
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).
For further information, please contact:
Peel Hunt via MHP
Steven Fine, CEO
Sunil Dhall, CFOO
MHP (Financial PR) +44 (0)20 3128 8540
peelhunt@mhpc.com
Andrew Jaques
Charlie Barker
Robert Collett-Creedy
Grant Thornton UK LLP (Nominated Adviser) +44 (0)20 7728 2942
Colin Aaronson
Daphne Zhang
Sam Littler
Keefe, Bruyette & Woods (Corporate Broker) +44 (0) 207 710 7600
Alistair McKay
Alberto Moreno Blasco
Fred Walsh
Dennis Towers
Notes to editors
Peel Hunt is a leading specialist in UK Investment Banking, ranked number one
broker for UK mid- and small-cap companies in Institutional Investor's 2021
Survey. Our purpose is to nurture and guide people through the evolution of
business. We achieve this through a proven, joined-up approach that
consistently delivers value to UK corporates, global institutions and trading
counterparties alike.
We have 164 corporate clients (including 35 in the FTSE 350), with an average
market capitalisation of approximately £650m. Our award-winning research is
distributed to over 1,235 institutions across the UK, Europe and US. Our
trading platform makes markets in over 10,000 instruments on over 45 markets
and is an increasingly important provider of trade execution services to UK
retail platforms and brokers.
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) Peel Hunt 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.
BUSINESS REVIEW
Market review
The UK's IPO and fundraising markets began 2021 at their busiest since 2014
due to pent-up demand over the pandemic, with retail investors continuing to
play a more active role in UK equity capital markets ("ECM"). However, during
the second half, inflationary pressures and interest rate increases hit
activity. Investor sentiment was knocked further by geopolitical concerns and
macroeconomic events including most notably the war in Ukraine which shook
global markets(1) (#_ftn1) . As a result, investors' appetite for risk dropped
significantly, and, in Q4, we saw an exceptional reduction in ECM and IPO
volumes. Investors similarly turned away from growth stocks and took a greater
value bias, leading to material devaluations in growth names. Overall, the
FTSE 250 declined c.13% over the course of the first 5 months of the calendar
year.
Despite this, our Execution Services team and our advisory team in Investment
Banking both produced creditable performances, demonstrating the resilience of
our diversified business model during periods of volatility and lower capital
markets activity.
Divisional review: Investment Banking
Investment Banking reported record results in terms of both revenue and number
of retained corporate clients, as we broadened our offering to our retained
corporate clients to support them through the evolution of their businesses.
Revenue increased from £43.9m in FY21 to £57.9m. We acted on 46 ECM
transactions over FY22 (H1: 30; H2: 16), the highest number for a UK
investment bank, and advised on approximately 19% of all announced UK takeover
situations in the mid- and small-cap segment of the market(2).
The year started well with trading in line with expectations through to the
end of Q3, and a healthy deal pipeline across a broad spread of products and
sectors. We achieved record results for the first half of the year, with
revenue up 43% to £32.7m and retainer income up 15%, reflecting new client
wins.
As we entered the final quarter, the operating environment became much more
challenging with greater market volatility, heightened economic uncertainty
and escalating macroeconomic and geopolitical tensions taking hold. This
affected market-wide investment banking performance particularly in our Q4.
The consistent growth in the number of our retained corporate clients and
their relative average market capitalisation has generated opportunities for
us to advise more frequently, on both larger and more complex transactions. In
early FY22, we entered into an underwriting collaboration agreement with Banco
Santander SA, which significantly extends our capability for underwriting
large or multiple simultaneous equity offerings.
We have invested in a broad range of services to meet the needs of our
clients, as their businesses develop and their financing needs become more
sophisticated. In FY22, we continued to build our Retail Capital Markets
capabilities, advising corporate clients on structuring, marketing and
distributing securities to UK retail investors using REX, our own proprietary
electronic distribution platform.
We believe UK retail investors will have an increasingly important role to
play in supporting corporate fund raises as upcoming market reforms, including
anticipated reforms to the prospectus regime, will give them more
opportunities to take part in UK ECM transactions. In Private Capital Markets
("PCM"), we have widened our focus to include larger and later stage fund
raises, as well as smaller and earlier stage financings. We see significant
opportunities to develop PCM in advisory, financing (equity and debt) and
liquidity provision. In FY22, we added Debt Advisory to our franchise, and
will continue to develop our capability in private placements of bonds during
FY23.
Divisional review: Execution Services
Execution Services is a market-leading liquidity provider to retail and
institutional investors, earning trading income as a market maker. We
delivered a solid performance this year, generating revenue of £42.9m. As
expected, this was lower than last year's exceptional performance during the
pandemic of £116.7m, but higher than pre-pandemic levels (FY20: £26.3m). Our
ongoing investment in technology helps us to retain a high market share of
retail trading and continue to build our overall UK trading volumes.
Our presence and market share of trading in the retail and institutional
investor markets give us deep insight into the markets and capital flow,
through data insights generated from our quote and trading database. This in
turn supports information flow with our Research & Distribution and
Investment Banking teams.
Technology is integral to our trading ability, risk controls and ability to
outperform. Our automated risk management controls protect Peel Hunt, but also
give traders the confidence to win more business through their pricing
strategies. Technology also allows greater speed in fast markets, leading to
better pricing. Our trading team can therefore manage more stocks, improving
operational gearing.
Our technology, mainly developed in-house over the last 10 years, has enabled
us to secure a market-leading share in retail equity trading, working closely
with intermediary investor platforms. PHAT (Peel Hunt Automated Trading) is
our robust and scalable execution and trading system. PHAT allows algorithmic
institutional execution, and automated on-exchange and retail flow
market-making, which means we can achieve better outcomes, such as price
improvements, for our trading and institutional clients.
During the year, our developers continued to enhance our trading and execution
products and platforms. We are investing to generate further trading
efficiencies and create more revenue opportunities, and to leverage ongoing
structural changes in financial markets. In FY22, we signed a five-year
agreement with the leading provider of trading and order management systems to
use their European trading platform, which gives us more capacity to meet
increasing trading volumes from different investors, including new retail
platforms.
Divisional review: Research & Distribution
Despite the challenging macroeconomic environment, and a significant decline
in UK capital market volumes, our performance in Research & Distribution
has been resilient, with revenue from research payments and execution
commissions of £30.2m (FY21: £36.3m). This reflects long-term growth in
revenue and market share from our institutional clients, thanks to our
expanding team of expert analysts and sales specialists, and their
understanding of our corporate and institutional clients' needs across the UK
and international markets. As expected, our commission revenues from servicing
retail intermediary platforms with overseas equity execution moderated down
from the exceptional volumes we saw during the pandemic in the prior year.
In a commoditised research market, our institutional and corporate clients
deal with limited providers. They demand best-in-class service and
highly-ranked MiFID II-relevant investment banks, which is our guiding
principle. The quality of our research and distribution teams is a key driver
for winning new corporate clients and IPO mandates. During the year, we both
increased the number of clients that pay us for our research, and increased
market share from our existing clients. We now have 1,235 relationships with
clients who value our top-rated research, and this number of relationships has
increased by 3.4% compared with FY21.
How research is consumed and what institutional clients want is changing. We
are making our research more relevant, engaging and accessible, with ESG
ratings and analysis integral to our research. We write research on companies
that people care about and want to read about, and this is reflected in our
market share of global commission and research payments in UK equities, which
has doubled over 5 years. We are proactive about distributing our research,
with annual sales interactions of 16,372 in FY22, a CAGR of 13% over 2 years.
We are investing in increasing our US distribution and further pushing into
European markets with the opening of our office in Copenhagen (planned to take
place in FY23). This builds on our leading Institutional Investor ranking in
both geographies, and will give more global investors the opportunity to
invest into UK plc.
We are increasingly using technology to improve our service. Over the past
year, we have invested in technology so we can better interrogate data and
produce more in-depth reports. We are developing a new portal for investors,
providing access to our research and enhanced screening tools. We are also
continuing to invest in our digital media capabilities. In FY22, we started to
use our new recording studio to deliver podcasts and videos, enhancing how we
engage with corporate and institutional clients. We believe both this and our
own in-house developed technologies will give us the opportunity to enhance
our research, and improve our ability to inform our clients with deeper
insights.
Current trading and outlook
Market conditions were challenging in the second half of FY22, particularly in
the last quarter where exceptionally low levels of capital markets activity
were experienced market wide. We expect ECM activity to continue in line with
Q4 of FY22 through the first half of FY23. Despite this market backdrop,
since the start of FY23, we have continued to benefit from our diversified
business model, strengthened our corporate client base and have acted on some
of the more significant UK mid-cap ECM transactions that have been executed.
We remain hopeful that market conditions in the second half of our financial
year will support execution of our strong pipeline of Investment Banking
transactions.
FINANCIAL REVIEW
Revenue performance
We delivered a solid revenue performance in a year where market conditions,
particularly in the second half, were very challenging. Whilst overall revenue
performance is down relative to the prior year, this was in line with our
expectations, given the prior year saw exceptional trading and heightened
activity during the pandemic. Our continued investment in the business, both
in technology and our people, remains important to the long-term growth of the
business.
Revenue comprises the following:
FY22 FY21 %
£000 £000 change
Investment Banking revenue 57,948 43,910 32.0%
Research payments and execution commission 30,241 36,258 (16.6%)
Execution Services revenue 42,857 116,706 (63.3%)
Total revenue for the year 131,046 196,874 (33.4%)
Revenue for the year was £131.0m (FY21: £196.9m). Despite the difficult
market environment, this constituted record revenues in Investment Banking for
the second year in succession, a solid performance by Execution Services and
resilient revenues for Research & Distribution.
Investment Banking performance
FY22 FY21 %
£000 £000 change
Investment Banking fees 49,643 36,701 35.3%
Investment Banking retainers 8,305 7,209 15.2%
Total Investment Banking revenue 57,948 43,910 32.0%
Investment Banking delivered record revenue for the year of £57.9m (FY21:
£43.9m). The first half of the year saw us execute a healthy deal pipeline
across a broad spread of products and sectors along with a number of new
client wins.
The final quarter of the financial year saw the operating environment become
much more challenging with greater market volatility, heightened economic
uncertainty and geopolitical tensions taking hold. We therefore saw a
corresponding reduction in performance across the market in the second half.
While this affected our Investment Banking deals, we were encouraged by our
advisory activity, where we acted on approximately 19% of all announced UK
takeover situations in the mid- and small-cap segment of the market. This
shows the resilience of our diversified offering in Investment Banking.
Execution Services performance
FY22 FY21 %
£000 £000 change
Execution Services revenue 42,857 116,706 (63.3%)
Execution Services revenue in FY22 of £42.9m was in line with our
expectations, being lower than in FY21 (£116.7m), but ahead of FY20
(£26.3m). FY21 was buoyed by much higher volumes and volatility amid
market-wide uncertainty at the onset of the pandemic, while FY20 was a more
comparable, pre-pandemic market environment. We retained our leading trading
position with a 17% share of LSE volume.
During FY22, Execution Services' performance was solid, with our ongoing
investment in technology helping us to capture additional liquidity. This
investment has created further efficiencies in our systematic trading
products, which we have been rolling out to more product lines.
Research & Distribution performance
FY22 FY21 %
£000 £000 change
Research payments and execution commission 30,241 36,258 (16.6%)
Despite the macroeconomic environment and the significant decline in UK equity
volumes in FY22, Research & Distribution returned a resilient performance
of £30.2m. This reflects long-term growth in revenue and market share from
our institutional clients. Revenue from servicing retail wealth management
platforms with overseas equity execution was lower compared to the prior year
due to market volumes falling back from the highs experienced during the
pandemic.
During FY22, we increased our number of research agreements with institutional
clients. We also increased market share from our existing client base to 2%,
continuing the trend of the last five years, during which we have doubled our
overall market share.
Operating costs
FY22 FY21 %
£000 £000 change
Illustrative staff costs(3) 60,680 89,885 (32.5%)
Illustrative non-staff costs(3) 35,665 28,256 26.2%
Total illustrative administration costs(3) 96,345 118,141 (18.4%)
Illustrative compensation ratio(3) 46.3% 45.7% 0.6ppts
Actual staff costs(4) 41,465 23,090 79.6%
Actual non-staff costs 36,852 31,836 15.8%
Total actual administration costs( ) 78,317 54,926 42.6%
Actual compensation ratio 47.1% 44.3% 2.8ppts
Period-end headcount 309 285 8.4%
Average headcount 299 271 10.3%
Actual staff costs (not including partner profit share) in FY22 were higher than FY21, largely due to the changes in compensation structure of the Group, including all former members of Peel Hunt LLP being remunerated as employees, plus the resulting additional National Insurance contributions, variable compensation and pension costs. We also hired more staff to support our growth which is reflected in higher actual staff costs. In readiness for the new Investment Firm Prudential Regulation (IFPR) remuneration requirements (the MIFIDPRU Remuneration Code) and also in response to market pressures for talent, during the year we benchmarked the fixed and variable pay of our staff and, where necessary, increased salaries with effect from the start of FY23. IFPR requires a proportion of the variable compensation of certain staff members to be paid in shares and deferred over multiple years. There is also a requirement to set an overall limit on the ratio of fixed to variable compensation. Illustrative staff costs (including variable remuneration) in FY22 were lower than FY21, in line with the reduction in revenue and the associated reduction in variable remuneration expense. This has resulted in a small increase in the illustrative compensation ratio compared with FY21.
Actual non-staff costs increased in FY22 due to costs associated with the IPO, increased audit and corporate governance requirements and our continued investment in technology. Illustrative non-staff costs increased on FY21 due to higher property costs following our move to our new offices in January 2021.
Average headcount grew by 10.3% over the corresponding period in FY21, reflecting the strategic investment in additional people to support business expansion, improved governance and to ensure that we maintain exceptional client service.
Balance sheet
The Group's net asset position as at 31 March 2022 was £100.1m (31 March 2021: £48.4m), representing an increase of 106.8% compared to the prior year. The net assets include the net proceeds of £35.9m raised in the IPO.
Capital and liquidity
Pillar 1 coverage over net assets as at 31 March 2022 was 558% (31 March 2021: no equivalent comparative) due to the increase of the net assets of the Group following our IPO. This has helped provide a stable regulatory capital position for the Group as we look to provide additional capital for our trading strategies and additional comfort for our underwriting activities.
Following the introduction of IFPR on 1 January 2022, our Pillar 1 regulatory capital requirement decreased in comparison to the previous regime(5) (6)
(#_ftn5)
(#_ftn6)
, however we will not have certainty of our total regulatory capital requirements until the Financial Conduct Authority (FCA) has reviewed our Internal Capital and Risk Assessment (ICARA).
Our cash balance has decreased to £76.7m against the prior year end (FY21: £103.4m) predominantly due to the exceptional trading performance and greater cash generation in FY21. There has also been higher cash utilisation in FY22 due to IPO-related costs and final payments for the fit-out of our new corporate headquarters.
During the year, we continued our partnership with Lloyds and refinanced our Senior Facilities Agreement (SFA) just prior to our IPO, with a total facility of £50m over a new five-year term. We drew down £30m, with the rest either being cancelled or allowed to expire, as we refined the Group's liquidity requirements. At the year end, our SFA loan balance was £27m (FY21: £24m).
We also increased the size of our revolving credit facility (RCF) with Lloyds prior to the IPO, increasing this from £10m to £30m. This facility is for working capital purposes and provides much greater flexibility for us to manage our cash flows during the year. At the year end, the facility was undrawn.
Dividend
The Board has proposed a final dividend for the year of 3.1p per share. The dividend is in line with the policy stated at the time of our IPO and represents the policy applied to the actual H2 FY22 results. The dividend, subject to approval at the AGM, will be paid on 15 July 2022 to shareholders on the register on 17 June 2022.
Unaudited Illustrative Statement of Comprehensive Income
The unaudited illustrative Statement of Comprehensive Income set out below has been prepared to illustrate the impact that the reorganisation of the Group's corporate structure, and the IPO, would have had on the consolidated statement of comprehensive income had it taken place on or before 31 March 2020. The statement has been adjusted to remove the impact of one-off costs relating to the IPO, the office move in the year ended 31 March 2021, and tax-related prior year items arising in the period. The illustrative consolidated income statement addresses a hypothetical situation and therefore does not represent the Group's actual financial position, results or costs and expenses.
Year ended Year ended
31 March 22 31 March 21
Continuing activities Notes £'000 £'000
Revenue 131,046 196,874
Illustrative administrative expenses (a) (96,345) (118,141)
Illustrative profit from operations 34,701 78,733
Finance income 15 30
Finance expenses (1,664) (2,106)
Other income 56 360
Illustrative profit before tax 33,108 77,017
Illustrative corporation tax (b) (7,566) (19,108)
Illustrative profit after tax 25,542 57,909
Illustrative dividend (c) (10,217) (23,164)
Illustrative retained profit for the period (d) 15,325 34,745
Illustrative performance metrics
Compensation ratio 46.3% 45.7%
Non-staff cost ratio 28.4% 15.2%
Profit before tax margin 25.3% 39.1%
Notes to the Unaudited Illustrative Statement of Comprehensive Income
(a) Illustrative administrative expenses - the illustrative administrative
expenses in all periods include the impact of changes to the compensation
structure of the Group, including the former members of Peel Hunt LLP being
remunerated as employees plus the resulting additional National Insurance
contributions and pension costs. In addition, for the periods:
i. Illustrative administrative expenses in the year ended 31 March 2022
exclude one-off costs of £4.1m (£1.2m of staff costs relating to the
reorganisation of the Group's corporate structure, and £2.9m of non-staff
costs relating to the IPO).
ii. Illustrative administrative expenses in the year ended 31 March 2021
exclude one-off costs of £3.4m (relocation to 100 Liverpool Street).
(b) Illustrative corporation tax - the illustrative corporation tax includes
the effect of the Group being subject to corporation tax at the standard rate
(19%) on additional profits, as well as the bank surcharge levy (8% on annual
profits over £25m). The illustrative corporation tax for 31 March 2022
excludes £1.6m of tax charged in respect of prior years.
(c) Illustrative dividend - the illustrative dividend includes the
targeted basic dividend pay-out ratio of the Group (40%), applied to the
illustrative profits after tax for the period.
(d) Adjustments in relation to other matters such as equity incentive
structures that may be implemented have not been reflected in the Illustrative
Consolidated Income Statement because they would not currently be factually
supportable since their quantum would not have been known at that time.
Reconciliation of Illustrative to Actual Consolidated Comprehensive Income
The impact of Notes (a) to (c) on the Unaudited Illustrative Statement of
Comprehensive Income on FY22 is summarised below:
Administrative expenses ((1))
Actual financials - FY22 Include: revised compensation structure ((2)) Exclude: one-off expenses Exclude: one-off tax charge in respect of prior years Include: additional corporation tax (incl. bank levy) Include: illustrative 40% dividend Illustrative financials - FY22
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Profit before tax for the period 41,228 (12,193) 4,073 33,108
Tax (5,280) 1,559 (3,845) (7,566)
Profit after tax 35,948 (12,193) 4,073 1,559 (3,845) 25,542
Illustrative dividend (10,217) (10,217)
Illustrative retained profit for the period 15,325
(1) Illustrative administration expenses includes members' remuneration
charged as an expense; this is presented separately from the actual
administration expenses shown in the Statement of Comprehensive Income below.
(2) Includes National Insurance, pension costs and variable remuneration
related to former members of Peel Hunt LLP.
Consolidated Statement of Comprehensive Income
Audited for the year ended 31 March 2022
Year ended Year ended
31 March 2022 31 March 2021
Continuing activities Notes £'000 £'000
Revenue 2 131,046 196,874
Administrative expenses 3 (78,317) (54,926)
Profit from operations 52,729 141,948
Finance income 4 15 30
Finance expense 4 (1,664) (2,106)
Other income 56 360
Profit before remuneration to the members of Peel Hunt LLP and tax 51,136 140,232
Members' remuneration charged as an expense 3 (9,908) (20,117)
Profit before tax for the year 41,228 120,115
Tax 5 (5,280) (1,546)
Profit for the year 35,948 118,569
Other comprehensive income for the year 27 -
Total comprehensive income for the year 35,975 118,569
Attributable to:
Owners of the Company 10,954 3,725
Non-controlling interests 6 24,994 114,844
Profit for the year 35,948 118,569
Attributable to:
Owners of the Company 10,981 3,725
Non-controlling interests 6 24,994 114,844
Total comprehensive income for the year 35,975 118,569
Earnings per share - attributable to owners of the Company:
Basic 8 15.4p 17.7p
Diluted 8 15.4p 17.2p
Consolidated Balance Sheet
Audited as at 31 March 2022
As at 31 March 2022 As at 31 March 2021
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 9,341 9,754
Intangible assets 110 138
Investments not held for trading - 20
Right-of-use assets 18,219 20,517
Deferred tax asset 259 426
Total non-current assets 27,929 30,855
Current assets
Securities held for trading 50,341 47,296
Market and client debtors 559,485 531,178
Trade and other debtors 13,200 9,139
Amounts due from members - 62
Cash and cash equivalents 76,719 103,363
Total current assets 699,745 691,038
LIABILITIES
Current liabilities
Securities held for trading (32,705) (33,727)
Market and client creditors (505,475) (464,796)
Amounts due to members (21,837) (113,448)
Trade and other creditors (16,790) (14,557)
Long-term loan (6,000) (3,000)
Lease liabilities (2,544) (313)
Provisions (540) (431)
Total current liabilities (585,891) (630,272)
Net current assets 113,854 60,766
Non-current liabilities
Long-term loan (21,000) (21,000)
Lease liabilities (20,649) (22,251)
Total non-current liabilities (41,649) (43,251)
Net assets 100,134 48,370
Consolidated Balance Sheet
Audited as at 31 March 2022
As at 31 March 2022 As at 31 March 2021
£'000 £'000
EQUITY
Ordinary share capital 40,099 99
Own Shares held by the company - (14)
Other reserves 60,035 48,285
Total equity 100,134 48,370
Consolidated Statement of Changes in Equity
Audited for the year ended 31 March 2022
Ordinary share Other Total
capital
Own shares
reserves
held by the
Company
Group £'000 £'000 £'000 £'000
Balance at 31 March 2020 99 (12) 45,445 45,532
Profit for the period - - 3,725 3,725
Purchase of treasury shares - (2) (885) (887)
Balance at 31 March 2021 99 (14) 48,285 48,370
Profit for the period - - 10,981 10,981
New share issue 40,000 - - 40,000
Share issuance expenses - - (2,513) (2,513)
Gain on option exercise 730 730
Sale of treasury shares - 14 2,552 2,566
Balance at 31 March 2022 40,099 - 60,035 100,134
Sunil Dhall
Chief Financial & Operating Officer
9 June 2022
Consolidated Statement of Cash Flows
Audited for the year ended 31 March 2022
Year ended Year ended
31 March 2022 31 March 2021
Notes £'000 £'000
Net cash (used in)/generated from operations 9 (68,022) 84,580
Cash flows from investing activities
Purchase of tangible assets (1,346) (9,444)
Purchase of intangible assets (6) (16)
Disposal of equity investments not held for trading 47 -
Net cash used in investing activities (1,305) (9,460)
Cash flows from financing activities
Interest paid (732) (1,459)
Repayment of borrowings - (7,500)
Lease liability payments (316) (1,247)
Revaluation of right-of-use asset and lease liability (52) 46
Proceeds from share issuance 40,000 -
Sale/(purchase) of treasury shares 2,566 (887)
Gain on option exercise 730 -
Share issuance expenses (2,513) -
Long-term loan 3,000 (3,000)
Net cash generated from/(used in) financing activities 42,683 (14,047)
Net (decrease)/increase in cash and cash equivalents (26,644) 61,073
Cash and cash equivalents at start of period 103,363 42,290
Cash and cash equivalents at end of period 76,719 103,363
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
Peel Hunt Limited (until 21 September 2021, PH Capital Limited) is a
non-cellular company limited by shares, registered in Guernsey. Its registered
office is Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey,
GY1 2HT. The consolidated financial information of the Company comprises the
Company and its subsidiaries, together referred to as the "Group".
The financial information is presented in pounds sterling and all values are
rounded to the nearest thousand (£'000), except where indicated otherwise.
The financial information has been prepared on the historical cost basis,
except for financial instruments. Historical cost is generally based on the
fair value of the consideration given in exchange for the assets.
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.
During the period, there were no significant new standards or amendments to
IFRS that became effective and were adopted by the Company and the Group.
2. Revenue
Year ended Year ended
31 Mar 2022 31 Mar 2021
£'000 £'000
Research payments and execution commission 30,241 33,780
Execution Services revenue 42,857 116,154
Investment Banking fees and retainers 57,948 46,940
Total revenue for the period 131,046 196,874
3. Staff costs
Year ended Year ended
31 Mar 2022 31 Mar 2021
£'000 £'000
Wages and salaries 33,179 18,770
Social security costs 6,051 2,273
Pensions costs 1,473 759
Other costs 762 2,101
Total staff costs for the period 41,465 23,903
Members' remuneration charged as an expense 9,908 20,117
Total staff costs and members' remuneration charged as an expense for the 51,373 44,020
period
The average number of employees and members of Group during the period has
increased to 299 (31 March 2021: 271).
4. Net finance expense
Year ended Year ended
31 Mar 2022 31 Mar 2021
£'000 £'000
Finance income
Bank interest received 15 30
Finance expense
Bank interest paid (72) (253)
Interest on lease liabilities (934) (646)
Interest accrued on long-term loan (658) (1,207)
Finance expense for the period (1,664) (2,106)
Net finance expense for the period (1,649) (2,076)
5. Tax charge
The Group tax charge in the year ended 31 March 2022 includes £1.6m relating
to tax charges in respect of prior years.
6. Non-controlling interest
The non-controlling interest relates to the former individual members of Peel
Hunt LLP; these amounts are included in amounts due to members on the
Consolidated Balance Sheet.
7. Balance sheet items
(a) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and impairment losses. Depreciation is charged to the income statement on a
straight-line basis over the estimated useful economic lives of each item.
(b) Intangible assets
Intangible assets represent computer software and sports debentures.
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful economic lives of each item. Computer software is
amortised over five years and sports debentures are amortised over the life of
the ticket rights.
(c) Right-of-use asset and lease liabilities
The right-of-use asset and lease liabilities (current and non-current)
represent the two property leases that the Group currently uses for its
offices in London and New York.
(d) Market and client debtors and creditors
The market and client debtor and creditor balances represent unsettled sold
securities transactions and unsettled purchased securities transactions, which
are recognised on a trade date basis. The majority of open bargains were
settled in the ordinary course of business (trade date plus two days). Market
and client debtor and creditor balances in these financial statements include
agreed counterparty netting of £17.4m (31 March 2021: £9.7m).
(e) Financial instruments
Financial assets and financial liabilities are recognised in the statement of
financial position when the Group becomes a party to the contractual
provisions of the financial instrument. The type of financial instruments held
by the Group at 31 March 2022 and 31 March 2021 are consistent with those held
at prior year end. The majority of financial instruments are classified as
'Level 1', with quoted prices in active markets.
(f) Stock borrowing collateral
The Group enters into stock borrowing agreements with a number of institutions
on a collateralised basis. Under such agreements, securities are purchased
with a commitment to return them at a future date and price. The securities
purchased are not recognised on the statement of financial position. The cash
advanced is recorded on the statement of financial position as cash collateral
within trade and other debtors, the value of which is not significantly
different from the value of the securities purchased. The total value of cash
collateral held on the statement of financial position is £2.8m (31 March
2021: £1.6m).
(g) Long-term loan
The Senior Facilities Agreement with Lloyds was refinanced in the period, with
a total facility of £50m over a new five-year term, of which £30m has been
drawn. £10m of the undrawn amount was not required and was allowed to expire,
and we elected to cancel the remaining £10m.
(h) Admission to trading on AIM
As at 28 September 2021, immediately prior to the IPO, the Company's issued
share capital comprised 25,000,000 A Ordinary Shares of 0.1 pence each and
73,618,125 B Ordinary Shares of 0.1 pence each (all of which were fully paid).
On 29 September 2021:
i. The A Ordinary Shares and B Ordinary Shares were consolidated into
24,654,526 Ordinary Shares of no par value.
ii. The Company, Peel Hunt Partnership Group Limited (formerly Macsco 22
Limited) and all individual members of Peel Hunt LLP executed a sale and
purchase agreement pursuant to which those members transferred and assigned to
Peel Hunt Partnership Group Limited their member share units and all rights
and powers, and subject to all the obligations, restrictions and liabilities
in respect of their member share units (other than the right to participate in
the profits of Peel Hunt LLP generated prior to such transfer), in exchange
for 80,608,699 Ordinary Shares of no par value.
iii. All individual members of Peel Hunt LLP retired as members and became
employees of Peel Hunt LLP.
iv. 17,543,860 Ordinary Shares were issued by the Company pursuant to an
offer for the issue of Ordinary Shares of no par value in exchange for cash.
v. 122,807,085 Ordinary Shares of no par value were admitted to trading on
AIM.
8. Earnings per share
Year ended Year ended
31 March 2022 31 March 2021
Basic weighted average number of ordinary shares in issue during the year 71,231,123 21,078,123
Dilutive effect of 2015 option grant 259,971 534,688
Diluted weighted average number of ordinary shares in issue during the year 71,491,094 21,612,811
Basic earnings per share is calculated on a total comprehensive income for the
year, attributable to the owners of the Company, of £11.0m (31 March 2021:
£3.7m) and 71,231,123 (31 March 2021: 21,078,123) ordinary shares, being the
weighted average number of ordinary shares in issue during the year. Diluted
earnings per share is calculated after adjusting for the number of options
expected to be exercised from the 2015 option grant. The weighted average
number of ordinary share in issue in the prior year has been adjusted for the
share consolidation that took place in September 2021.
The calculations exclude treasury shares held by the Employee Benefit Trust on
behalf of the Group.
The Company does not have any further dilutive equity instruments outstanding
as at 31 March 2022.
9. Reconciliation of profit before tax to cash from operating activities
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Profit before tax for the period 41,228 120,115
Adjustments for:
Depreciation and amortisation 4,154 3,632
Impairment loss on loans and receivables 244 30
Fair value gain on sale of securities not held for trading 27 -
Increase in provisions 109 203
Foreign exchange movement on deferred tax asset (8) 5
Net finance costs 1,649 2,076
Change in working capital:
(Increase)/decrease in net securities held for trading (4,068) 4,057
Decrease/(increase) in net market and client debtors 12,373 (16,045)
(Increase) in trade and other debtors (4,017) (2,126)
(Decrease) in net amounts due to members (116,565) (31,982)
Increase in trade and other creditors 3,001 6,074
Cash (used in)/generated from operations (61,873) 86,039
Interest received 15 30
Corporation tax paid (6,164) (1,489)
Net cash (used in)/generated from operations (68,022) 84,580
END
(1 )We do not have any exposure to Russia or any sanctioned persons/entities.
(2 )'Small and mid-cap segment' is defined as where the transaction equity
value falls between £100m and £1,500m
(3 )Illustrative financials are outlined in the Unaudited Illustrative
Statement of Comprehensive Income
(4 )Actual staff costs include variable remuneration costs for employees but
not for former members
(5 )Capital Requirements Regulations, Regulation (EU) No 575/2013
(6 )Capital Requirements Directive, Directive 2013/36/EU
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