REG - Peel Hunt Limited - Half-year Results
01/12/2022 07:00
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RNS Number : 1708I Peel Hunt Limited 01 December 2022
1 December 2022
Peel Hunt Limited
Half-year results for the six months ended 30 September 2022
Continued strategic progress in difficult markets - positioned for growth
Peel Hunt Limited ('Peel Hunt', the 'Company') together with its subsidiaries
(the 'Group') today announces unaudited interim results for the period ended
30 September 2022 ('H1 FY23'). FY23 refers to the financial year ended 31
March 2023.
The half-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 a corporate member and individual members. Profits derived from the
partnership during the year ended 31 March 2022 ('FY22') were allocated
between the members. Profits attributable to the corporate member were
retained within the Group and subject to corporation tax; profits attributable
to individual members (prior to the IPO) comprised the non-controlling
interests, with those members bearing tax liabilities personally. Following
the IPO, individual members became employees of Peel Hunt LLP with all future
earnings attributable to the Group.
For reference, an unaudited illustrative consolidated statement of
comprehensive income to 28 September 2021 ('H1 FY22') and FY22 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 2021. This statement retains the actual revenue results and considers
the addition of all former members of Peel Hunt LLP being remunerated as
employees along with related National Insurance contributions and pension
costs on an ongoing basis. 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
· Strong balance sheet maintained with marginal profitability
despite a multi-decade low for equity capital markets activity
o Group revenue £41.1m (H1 FY22: £71.4m). Revenue down across all business
divisions year on year but cost base covered
o Maintained strong net assets £95.9m (FY22: £100.1m). Healthy cash
balances of £41.4m (FY22: £76.7m) moderating down following settlement of
payments attributable to the period before the IPO, investment in the trading
book and payment of the dividend
o Capital comfortably in excess of regulatory requirements
· Good strategic progress made across all business divisions and
the Group as a whole
o Investment Banking:
§ Increased the size and quality of our corporate client base with 13 new
corporate clients, including four in the FTSE 350. We now act for 36 FTSE 350
clients
§ Continued to diversify, building out our private capital markets capability
and investing in our M&A/advisory business
o Research & Distribution: Named best broker for UK Small and Mid-cap
companies in Institutional Investor's 2022 Europe Survey for the second year
running; named No. 1 for research in UK Mid and Small-cap for the sixth
consecutive year
o Execution Services: Whilst market volumes fell versus H1 FY22, we
continued to open up access to incremental, differentiated pools of liquidity
o REX: Our retail capital markets platform REX continues to be adopted
across the market, having been used on eight completed UK ECM offers with a
retail platform since August 2022, raising more funds than any other peer
o European office: Good progress establishing our European office;
regulatory approval expected during the first half of 2023
· Operating discipline
o Actions taken to rationalise costs since the start of H2 FY23
· Well positioned for growth as markets normalise
o Considerable operational leverage built into the business
Financial highlights H1 FY23 H1 FY22 Change
Revenue £41.1m £71.4m (42.4)%
Profit before tax((1)) £0.1m £29.5m((1)) (99.7)%
Profit after tax((2)) £0.0m £26.7m((2)) (100)%
Compensation ratio((3)) 58.5% 45.7%((3)) 12.8ppts
Operating highlights H1 FY23 FY22 Change
Cash £41.4m £76.7m (46.0)%
Net assets £95.9m £100.1m (4.2)%
Investment Banking clients 165 162 1.9%
Average market cap of clients £555.0m £683.7m (18.8)%
Notes:
(1) Illustrative PBT in H1 FY22 was £21.6m
(2) Illustrative PAT in H1 FY22 was £16.3m
(3) Illustrative compensation ratio is staff costs as a percentage
of revenue. Illustrative compensation ratio (using illustrative staff costs)
in H1 FY22 was 45.8%.
Steven Fine, Chief Executive Officer, commented:
"Challenging market conditions have persisted throughout our first half as the
macroeconomic and geopolitical backdrop has continued to have an adverse
impact on markets and investor sentiment. Equity capital markets activity has
been at a multi-decade low and market volumes have reduced materially during
this period. This is due to several factors including investor redemptions,
institutional investors building up cash positions and retail investors being
more cautious as equity markets responded to rising inflation, the
cost-of-living crisis and the possibility of a lengthy UK recession.
Our results have inevitably been considerably affected by these historically
low levels of activity, but the strength of our diversified business model has
enabled us to mitigate these headwinds and maintain a strong balance sheet
with marginal profitability. This has given us a stable platform to pursue our
strategic ambitions. During the period we have continued to grow the size and
quality of our corporate client base, build our M&A and private capital
markets businesses, invest in our international distribution platform and
progress our retail capital markets platform REX.
A return to a normalised interest rate environment has inevitably created
short-term challenges but it may also present a number of medium-term
opportunities. Whilst we expect that private capital will continue to be a
valuable source of funding for UK companies, a repricing of debt should drive
a resurgence in public equity finance. At the same time, we are encouraged by
the ongoing conversations we are having with HM Treasury, the Financial
Conduct Authority and the London Stock Exchange, who are all working together
to make UK equity markets the compelling destination for growth companies and
mid-cap companies."
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 (mailto:peelhunt@mhpc.com)
Charlie Barker
Robert Collett-Creedy
Grant Thornton UK LLP (Nominated Adviser) +44 (0)20 7728 2942
Colin Aaronson
Daphne Zhang
Sam Littler
+44 (0) 20 7710 7600
Keefe, Bruyette & Woods (Corporate Broker)
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 Small and Mid-cap companies in Institutional Investor's 2022
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.
Market conditions
During the period the FTSE 250 and AIM All-Share, which are a barometer for
our business activities, declined 18.9% and 22.60% respectively and both
market volumes and transaction levels have been suppressed with IPO and ECM
activity at record lows. In the first six months of 2022 there were only five
UK IPOs (compared to 37 in the equivalent prior year period) and UK ECM
activity was subdued with only 97 deals raising £7.9bn across the whole
market (compared to 257 deals raising £28.5bn in the equivalent prior year
period).
In our view several key factors are intersecting to make UK equity markets
more attractive in the medium term. First, the return to a normalised interest
rate environment ends a decade of cheap debt, which has fuelled private equity
dominance. Secondly, the rush to match pension assets to liabilities, which
has driven an exodus from equities into debt instruments, has left UK equities
looking significantly under-owned. Thirdly, and crucially, HM Treasury and UK
regulators are all working together effectively and in a co-ordinated manner
to increase the competitiveness and attractiveness of UK financial markets in
the post-Brexit era.
Overview of results
Against historically low levels of market-wide equity capital markets
activity, Group revenue for the period was £41.1m (H1 FY22: £71.4m) and
profit before tax decreased to £0.1m (H1 FY22: £29.5m), reflecting the
operational gearing in the business. Our balance sheet remained strong with
net assets of £95.9m as at
30 September 2022 (FY22: £100.1m), with capital comfortably in excess of
regulatory requirements and cash balances of £41.4m (FY22: £76.7m).
Divisional reviews
Investment Banking
H1 FY23 H1 FY22 Change
Investment Banking fees £7.5m £28.8m (74.0)%
Investment Banking retainers £4.4m £3.9m 12.8%
Investment Banking revenue £11.9m £32.7m (63.6)%
It has been a challenging period for UK equity capital markets with very low
volumes of activity, particularly in terms of equity issuance. The downturn
has suppressed client activity and stalled IPO activity. As a result, our
revenue for the first half was down by 63.6% to £11.9m, compared with £32.7m
in H1 FY22.
Nevertheless, our strategy of joined-up broking combining advice, research,
distribution and market share in trading volumes, allied to our sector
specialist approach, is still in demand and will put us in a good position as
market conditions normalise.
We continue to receive new mandate enquiries and we have a number of pipeline
deals that we expect to execute when market conditions permit. Our retained
corporate clients typically transact every three to five years and challenging
market conditions have resulted in delayed activity that may lead to deal flow
as markets normalise.
We have continued to strengthen our private capital markets capability
allowing us to act for both public and private companies alike and we have
continued to invest in our advisory business so that we can support more of
our retained corporate clients as financial adviser in relation to M&A
transactions.
In the first half we added 13 new retained corporate clients (including four
in the FTSE 350) more than offsetting client losses (including those resulting
from M&A). At the end of H1 FY23 we had 165 corporate clients (FY22: 162),
including 35 in the FTSE 350, with an average market capitalisation of
approximately £555.0m. We now act for 36 FTSE 350 clients.
Research & Distribution
H1 FY23 H1 FY22 Change
Research payments and execution commission £13.7m £14.7m (6.8)%
Market volumes in H1 FY23 reduced in comparison to H1 FY22, due to lower
institutional investor sentiment and interest rate and inflationary concerns
weighing on risk assets, including equities. Nevertheless, Research &
Distribution performance in the period was resilient. During the period, there
continued to be momentum in new account openings in both formal research
agreements and trading accounts. We also continued to expand our offering to a
wider universe of hedge funds, sovereign wealth funds, overseas funds and
family offices, which have opened up new commission opportunities.
Our differentiated, low-touch institutional electronic execution product
continues to build momentum with the technical build-out now complete and
client on-boarding ongoing.
We were pleased to retain our No. 1 Research ranking in the Institutional
Investor's UK Mid and Small-cap survey for the sixth consecutive year, with 10
of our sector teams ranked No. 1, and a record five of our analysts ranked
individually in the top 10 across all sectors. Our US and Continental European
Sales teams were also ranked
No. 1 for the second year running.
Our Copenhagen office, for which we expect to obtain regulatory approval
during the first half of 2023, will facilitate greater access to EU
institutions and further enhance our international distribution capability.
Execution Services
H1 FY23 H1 FY22 Change
Execution Services revenue £15.5m £24.0m (35.4)%
Execution Services revenue is diversified across a growing number of trading
strategies as we obtain access to incremental, differentiated pools of
liquidity, which in turn increase our ability to provide liquidity to our
clients and counterparties. As such, we continued to demonstrate our ability
to deliver positive returns from low-risk market making across the cycle.
Despite market volatility during the period, our traders have maintained good
risk management discipline, operating well within their risk limits.
During the period the FTSE 250 and AIM All-Share declined 18.9% and 22.60%
respectively and trading volumes remained much lower across the market as a
whole. Despite this backdrop, a number of our trading books have performed
well versus market drawdowns. Overall, Execution Services revenue was down
35.4% to £15.5m, although our volumes and LSE market share remained above
pre-pandemic levels.
REX
Our investment in technology continues to be a key focus and differentiator.
In particular, adoption of REX, our proprietary technology platform which
enables retail investors to participate in capital markets transactions, has
continued to make good progress. Since August, REX has been mandated on eight
completed transactions of which seven were non-Peel Hunt deals, raising more
funds than any other UK retail platform.
Capital and liquidity
Net assets remained strong at £95.9m (FY22: £100.1m) as at 30 September
2022. They were 4.2% lower than 31 March 2022, due to the £3.7m dividend
payment made in July 2022.
Our cash position also remained healthy (£41.4m as at 30 September 2022),
although this decreased from £76.7m at the end of FY22, largely due to
settlement of payments attributable to the period before the IPO as well as
investment in the trading book and payment of the dividend in July 2022. By
the end of FY23 all non-recurring payments due in relation to the period
before the IPO are expected to have been completed.
We continued to operate well in excess of our regulatory capital requirements
with Pillar 1 coverage over net assets of 596% at the end of H1 FY23 compared
to 558% at the end of FY22. The increase has been due to both good risk
management discipline during H1 FY23 and the reduction in net assets since
FY22.
We reduced long-term debt by £3.0m during the period to £24.0m and we have
access to a £30.0m revolving credit facility ('RCF'), which was renewed just
before the end of H1 FY23. £10.0m (FY22: £nil) of the RCF was drawn at the
period end for working capital purposes, but was repaid shortly thereafter.
Costs and people
H1 FY23 H1 FY22 Change
Illustrative staff costs((1)) £24.0m £32.7m (26.6)%
Illustrative non-staff costs((1)) £16.2m £16.4m (1.2)%
Total illustrative admin costs((1)) £40.2m £49.1m (18.1)%
Illustrative compensation ratio((1)) 58.5% 45.8% 12.7ppts
Illustrative non-staff costs ratio((1)) 39.3% 24.0% 15.3ppts
Actual staff costs((2)) £24.0m £13.4m 79.1%
Actual non-staff costs £16.2m £17.8m (9.0)%
Total actual admin costs £40.2m £31.2m 28.8%
Change in headcount((3)) 3.2% 3.5% (0.3)ppts
Notes:
(1) H1 FY23 are actual financial results while H1 FY22 are
illustrative financials as outlined in the Unaudited Illustrative Statement of
Comprehensive Income below.
(2) Actual staff costs in H1 FY22 include variable remuneration
costs for employees but not for members
(3) Change in headcount when compared to respective previous
financial year ends
Despite the challenging markets, we are confident in our strategy, which we
outlined during our IPO, and continue to invest in those strategic priorities.
We have recruited more people to help us expand the business, improve our
governance and continue to give our clients exceptional service. As a
consequence actual headcount grew by 3.2% in the first half.
Actual staff costs in H1 FY23 were higher than H1 FY22, partly due to the
increase in headcount, but largely due to the changes in our compensation
structure between the periods. In H1 FY22, all former members of Peel Hunt LLP
were remunerated as employees, with additional National Insurance
contributions and pension costs. Also, at the start of H1 FY22, the firm
rebalanced the compensation of staff between fixed and variable pay. This
brought fixed compensation in line with peer firms in an extremely competitive
market for talent and also prepared us to meet the Investment Firm Prudential
Regulation ('IFPR') remuneration requirements. IFPR requires that a proportion
of variable compensation for certain staff members must now be paid in shares
and deferred over multiple years.
Illustrative staff costs (including variable remuneration) in H1 FY23 were
lower than H1 FY22, reflecting the reduction in revenue and the associated
reduction in variable remuneration expense. This has resulted in an increased
illustrative compensation ratio compared with H1 FY22.
Actual non-staff costs decreased in H1 FY23 largely due to the corresponding
period in H1 FY22 including the costs associated with the IPO. However, H1
FY23 additional costs related to increased audit and corporate governance
requirements and our continued investment in technology. Illustrative
non-staff costs are largely consistent with H1 FY22.
We continually review costs and have taken actions to rationalise costs since
the start of H2 FY23. We will continue to carefully monitor costs in light of
market activity levels, whilst continuing to remain focused on our strategic
priorities.
Responsible business
Our commitments to diversity and sustainability are shaped by our board-level
ESG Committee. During the period, we have been developing our ESG priorities
through board and staff engagement and have further developed areas of focus
in the previous year. For instance, during H1 FY23 we were pleased to work
with our long-term partner The Brokerage to provide mentoring, masterclass and
internship programmes for disadvantaged students across inner London. Our
employees also raised over £30,000 through several fundraising events over
the six months for the benefit of Stem4, a charity that promotes positive
mental health in teenagers. We continue to focus on Diversity, Equity &
Inclusion ('DEI') initiatives including rolling out DEI training for all
managers, through our staff-led DEI forum.
The wellbeing of our staff has always been of paramount importance to Peel
Hunt and in addition to our comprehensive staff wellbeing programme, all
managers received mental health awareness training during the half year to
better support their teams when they most need it.
With the understanding of our carbon footprint established in FY22, we have
made good progress on our first carbon reduction plan, which we will submit
for verification by the Science Based Targets Initiative during 2023. Having
completed our materiality assessment and mapping exercise with our
stakeholders, we are now starting work on our first sustainability report.
Current trading and outlook
In the first few weeks of our second half we have seen an increase in market
activity which has led to an improved trend in the revenue performance of our
Execution Services business relative to the first half. However, in the short
term the outlook for capital markets and transactional activity remains
challenging.
Our unwavering commitment to grow the size and quality of our corporate client
base, strengthen our distribution capability, expand our M&A advisory and
private capital markets practices, attract more trading flows and invest in
our proprietary technology, will continue to drive the long-term success of
the business.
Steven Fine
Chief Executive Officer
1 December 2022
The information, statements and opinions contained in this announcement do not
constitute a public offer under any applicable legislation or an offer to buy
or sell any securities or financial instruments nor any advice or
recommendation with respect to such securities or other financial instruments.
There are a number of key judgement areas, which are based on models and which
are subject to ongoing modification and alteration. The reported numbers
reflect our best estimates and judgements at the given point in time.
Forward-looking statements
This announcement contains forward-looking statements. Forward-looking
statements sometimes use words such as 'may', 'will', 'seek', 'continue',
'aim', 'anticipate', 'target', 'projected', 'expect', 'estimate', 'intend',
'plan', 'goal', 'believe', 'on track', 'achieve' or other words of similar
meaning. Such statements and forecasts involve risk and uncertainty because
they are based on current expectations and assumptions but relate to events
and depend upon circumstances in the future and you should not place reliance
on them. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by
forward-looking statements and forecasts. Forward-looking statements and
forecasts are based on the Directors' current view and information known to
them at the date of this announcement.
Subject to our obligations under the applicable laws and regulations of any
relevant jurisdiction, in relation to disclosure and ongoing information, we
undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Nothing in this announcement constitutes or should be construed as
constituting a profit forecast.
Unaudited Illustrative Statement of Comprehensive Income
The unaudited illustrative statement of comprehensive income set out below has
been prepared for the comparative periods 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 2021. H1 FY23 are actual results whilst H1 FY22 and FY22 are prepared
on an illustrative basis.
Six months ended Six months ended Year ended
30 Sep 22 28 Sep 21 31 Mar 22
Continuing activities Note £'000 £'000 £'000
Revenue 41,067 71,355 131,046
Administrative expenses 1 (40,164) (49,103) (96,345)
Profit from operations 903 22,252 34,701
Finance income 170 5 15
Finance expenses (1,110) (712) (1,664)
Other income 98 23 56
Profit before tax 61 21,568 33,108
Tax 2 (15) (5,252) (7,566)
Profit after tax 46 16,316 25,542
Dividend 3 - (6,526) (10,217)
Retained profit for the period 46 9,790 15,325
Performance metrics
Compensation ratio 58.5% 45.8% 46,3%
Non-staff costs ratio 39.3% 24.0% 28.4%
Profit before tax margin 0.1% 30.2% 25.3%
Notes to the Unaudited Illustrative Consolidated Statement of Comprehensive
Income
(1) Administrative expenses - the administrative expenses in H1 FY22 and
FY22 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, H1 FY22 excludes 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).
(2) Tax - the corporation tax in H1 FY22 and FY22 includes the effect of
the Group being subject to corporation tax at the standard rate (19%) on
additional profits.
(3) Dividend - the dividend in H1 FY22 and FY22 includes the targeted
basic dividend pay-out ratio of the Group (40%), applied to the profits after
tax for the period.
Reconciliation of Illustrative to Actual Consolidated Statement of
Comprehensive Income for H1 FY22((1))
The impact of Notes (1) to (3) in the Unaudited Illustrative Statement of
Comprehensive Income is summarised below:
Administrative expenses ((2))
Actual Financials - Six months ended 28 September 2021 Include: Revised compensation model ((3)) 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 - Six months ended 28 September 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Profit before tax for the period 29,536 (12,041) 4,073 21,568
Tax (2,828) 1,559 (3,983) (5,252)
Profit after tax 26,708 (12,041) 4,073 1,559 (3,983) 16,316
Dividend (6,526) (6,526)
Retained profit for the period 9,790
(1) There is no reconciliation for H1 FY23 as the results remain the
same as the actual financial results.
(2) Administration expenses includes Members' remuneration charged
as an expense; this is presented separately from actual administration
expenses shown in the Consolidated Statement of Comprehensive Income below.
(3) Includes National Insurance, pension costs and variable
remuneration related to former members of Peel Hunt LLP.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
Unaudited for the six months ended 30 September 2022
Six months ended Six months ended Year ended
30 Sep 2022 28 Sep 2021 31 Mar 2022
Unaudited Unaudited Audited
Continuing activities Note £'000 £'000 £'000
Revenue 2 41,067 71,355 131,046
Administrative expenses 3 (40,164) (31,228) (78,317)
Profit from operations 3 903 40,127 52,729
Finance income 5 170 5 15
Finance expense 5 (1,110) (712) (1,664)
Other income 98 23 56
Profit before members' remuneration and tax 61 39,443 51,136
Members' remuneration charged as an expense 4 - (9,907) (9,908)
Profit before tax for the period 61 29,536 41,228
Tax 6 (15) (2,828) (5,280)
Profit for the period 46 26,708 35,948
Other comprehensive income for the period - - 27
Total comprehensive income for the period 46 26,708 35,975
Attributable to:
Owners of the Company 46 1,595 10,954
Non-controlling interests 8 - 25,113 24,994
Profit for the period 46 26,708 35,948
Attributable to:
Owners of the Company 46 1,595 10,981
Non-controlling interests 8 - 25,113 24,994
Total comprehensive income for the period 46 26,708 35,975
Earnings per share - attributable to owners of the Company
Basic 7 0.0p 7.7p 15.4p
Diluted 7 0.0p 7.5p 15.4p
Consolidated Balance Sheet
Unaudited as at 30 September 2022
As at 30 Sep 2022 As at 28 Sep 2021 As at 31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 8,920 9,930 9,341
Intangible assets 718 129 110
Investments not held for trading - 20 -
Right-of-use assets 17,156 19,358 18,219
Deferred tax asset 322 426 259
Total non-current assets 27,116 29,863 27,929
Current assets
Securities held for trading 55,180 67,067 50,341
Market and client debtors 451,633 484,578 559,485
Trade and other debtors 13,777 8,187 13,200
Amounts due from members - 26 -
Cash and cash equivalents 41,352 76,972 76,719
Total current assets 561,942 636,830 699,745
LIABILITIES
Current liabilities
Securities held for trading (27,604) (35,925) (32,705)
Market and client creditors (399,465) (427,911) (505,475)
Amounts due to members (5,041) (87,293) (21,837)
Trade and other creditors (4,095) (12,266) (16,790)
Borrowings (10,000) - -
Long-term loan (6,000) (6,000) (6,000)
Lease liabilities (2,907) (331) (2,544)
Provisions (518) (486) (540)
Total current liabilities (455,630) (570,212) (585,891)
Net current assets 106,312 66,618 113,854
Non-current liabilities
Long-term loan (18,000) (24,000) (21,000)
Lease liabilities (19,482) (22,516) (20,649)
Total non-current liabilities (37,482) (46,516) (41,649)
Net assets 95,946 49,965 100,134
Consolidated Balance Sheet
Unaudited as at 30 September 2022
As at 30 Sep 2022 As at 28 Sep 2021 As at 31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
EQUITY
Ordinary share capital 40,099 99 40,099
Own Shares held by the Company - (14) -
Other reserves 55,847 49,880 60,035
Total equity 95,946 49,965 100,134
Consolidated Statement of Changes in Equity
Unaudited for the six months ended 30 September 2022
Ordinary Share Capital Own shares held by the Company Other reserves Consolidated
£'000 £'000 £'000 £'000
Balance as at 31 March 2021 99 (14) 48,285 48,370
Profit for the period - - 1,595 1,595
Other comprehensive income - - - -
Total comprehensive income - - 1,595 1,595
Balance as at 28 September 2021 99 (14) 49,880 49,965
Profit for the period - - 9,358 9,358
Other comprehensive income - - 27 27
Total comprehensive income - - 9,386 9,386
Transactions with owners
New shares issued during the year (including costs of issuance) 40,000 - (2,513) 37,487
Gain on Option exercise - - 730 730
Sale of Company shares - 14 2,552 2,566
Balance as at 31 March 2022 40,099 - 60,035 100,134
Profit for the period - - 46 46
Other comprehensive income - - - -
Total comprehensive income - - 46 46
Transactions with owners
Share-based payments - - 305 305
Purchase of Company shares - - (808) (808)
Dividends paid - - (3,731) (3,731)
Balance as at 30 September 2022 40,099 - 55,847 95,946
Consolidated Statement of Cash Flows
Unaudited for the six months ended 30 September 2022
Six months ended 30 Sep 2022 Six months ended 28 Sep 2021 Year ended
31 Mar 2022
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Net cash used in operations 10 (34,697) (30,932) (68,074)
Cash flows from investing activities
Purchase of tangible assets (493) (1,026) (1,346)
Purchase of intangible assets (623) (6) (6)
Disposal of investments not held for trading - - 47
Net cash used in investing activities (1,116) (1,033) (1,305)
Cash flows from financing activities
Interest paid (603) (276) (732)
Short-term borrowings 10,000 - -
Lease Liability payments (1,412) (151) (316)
(Purchase)/sale of Company shares (808) - 2,566
Proceeds from exercise of share options - - 730
Share issuance expenses - - (2,513)
Proceeds from issuance of shares - - 40,000
Dividends paid (3,731) - -
(Repayment of)/proceeds from long-term loan (3,000) 6,000 3,000
Net cash generated from financing activities 446 5,573 42,735
Net decrease in cash and cash equivalents (35,367) (26,391) (26,644)
Cash and cash equivalents at start of period 76,719 103,363 103,363
Cash and cash equivalents at end of period 41,352 76,972 76,719
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
Peel Hunt Limited (the 'Company') (until 21 September 2021, PH Capital
Limited) is a non-cellular company limited by shares having its shares
admitted to trading on AIM, a market operated by The London Stock Exchange, on
29 September 2021. The Company is registered in Guernsey. Its registered
office is Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey,
GY1 2HT. The consolidated interim financial information of the Company
comprises the Company and its subsidiaries, together referred to as the
'Group'.
The financial information contained within these condensed consolidated
interim financial statements is unaudited and has been prepared in accordance
with International Accounting Standard 34 Interim Financial Reporting ('IAS
34'). The Financial Statements should be read in conjunction with the annual
financial statements for the year ended 31 March 2022, which have been
prepared in accordance with UK-adopted international accounting standards
(International Financial Reporting Standards ('IFRS') and International
Financial Reporting Interpretations Committee ('IFRIC')) and with the
requirements of the Companies (Guernsey) Law, 2008.
The preparation of the condensed consolidated interim financial statements in
conformity with IAS 34 requires the use of certain critical accounting
judgements and significant estimates. It also requires the Board of Directors
to exercise its judgement in the application of the Group's accounting
policies. The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 March 2022.
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 derivatives, financial assets measured at Fair value through profit
and loss ('FVTPL') and at Fair value through other comprehensive income
('FVTOCI'). Historical cost is generally based on the fair value of the
consideration given in exchange for the assets.
These condensed consolidated interim financial statements have been prepared
on a going concern basis as the Directors have satisfied themselves that, at
the time of approving these condensed consolidated interim financial
statements, the Company and the Group have adequate resources to continue in
operational existence for at least the next 12 months.
During the period, there were no new standards or amendments to IFRS that
became effective and were adopted by the Company and the Group with a material
impact.
2. Revenue
Six months ended Six months ended 28 Sep 2021 Year ended
30 Sep 2022 31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Research payments and Execution commission 13,748 14,665 30,241
Execution Services revenue 15,453 24,017 42,857
Investment Banking fees and retainers 11,866 32,673 57,948
Total revenue for the period 41,067 71,355 131,046
3. Profit from operations
The following items have been included in arriving at profit from operations:
Six months ended 30 Sep 2022 Six months ended 28 Sep 2021 Year ended
31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Depreciation and amortisation 892 993 1,793
Depreciation (right of use asset) 1,309 1,142 2,361
Interest (right of use asset) 506 453 934
Staff costs (see note 4) 24,010 13,402 41,465
Other non-staff costs 13,447 15,238 31,764
Total administrative costs 40,164 31,228 78,317
Other non-staff costs comprise expenses incurred in the normal course of
business, including technology costs, professional and regulatory fees,
auditors' fees, brokerage, clearing and exchange fees.
4. Staff costs
Six months ended 30 Sep 2022 Six months ended 28 Sep 2021 Year ended
31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Wages and salaries 20,034 10,257 33,179
Social security costs 2,882 1,457 6,051
Pensions costs 1,051 444 1,473
Other costs 43 1,244 762
Total staff costs for the period 24,010 13,402 41,465
Members' remuneration charged as an expense - 9,907 9,908
Total staff costs and Members' remuneration charged as an expense for the 24,010 23,309 51,373
period
The average number of employees of the Group during the period has increased
to 316 (H1 FY22 employees and members: 295). The number of employees of the
Group at the end of the period has increased to 319 (H1 FY22 employees and
members: 300).
5. Net finance expense
Six months ended 30 Sep 2022 Six months ended 28 Sep 2021 Year ended
31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Finance income:
Bank interest received 170 5 15
Finance expense:
Bank interest paid (14) (108) (72)
Interest on lease liabilities (507) (436) (934)
Interest accrued on long-term loan (589) (168) (658)
Finance expense for the period (1,110) (712) (1,664)
Net Finance expense for the period (940) (707) (1,649)
6. Tax charge
The Group tax charge in H1 FY22 and year ended 31 March 2022 includes £1.6m
relating to tax charges in respect of prior years.
7. Earnings per share
Six months ended 30 Sep 2022 Six months ended 28 Sep 2021 Year ended
31 Mar 2022
Number of shares Number of shares Number of shares
Unaudited Unaudited Audited
Weighted number of ordinary shares in issue during the period 119,986,084 20,829,742 71,231,123
Dilutive effect of share option grants 1,605,000 524,250 259,971
Diluted weighted average number of ordinary shares in issue during the period 121,591,084 21,353,992 71,491,094
Basic earnings per share is calculated on total comprehensive income for the
six-month period, attributable to owners of the Company, of £0.0m (H1 FY22:
£1.6m) and 119,986,084 (H1 FY22: 20,829,742) ordinary shares, being the
weighted average number of 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 share option grants.
The calculations exclude treasury shares held by the Employee Benefit Trust on
behalf of the Group.
8. Non-controlling interest
The non-controlling interest relates to the individual members of Peel Hunt
LLP; these amounts are included in Amounts due to members on the Statement of
Financial Position.
9. 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 internally generated intangible assets, 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. Internally generated intangible assets are amortised over three
years, computer software is amortised over five years and sports debentures
are amortised over the life of the ticket rights.
Internally generated intangible assets comprises of capitalised development
costs for certain technology developments for key projects in the Group. The
expenditure incurred in the research phase of these internal projects is
expensed. Intangible assets are recognised from the development phase if and
only if certain specific criteria are met in order to demonstrate the asset
will generate probable future economic benefits and that its costs can be
reliably measured. Amortisation begins when the asset is available for use.
(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 £14.3m (FY22: £17.4m).
(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 fair valuation hierarchy applied
is consistent with that outlined in the FY22 audited Financial Statements. The
value of 'Level 1' financial assets held by the Group at the end of H1 FY23
were £54.0m (FY22: £48.9m), 'Level 2' £0.8m (FY22: £1.1m) and 'Level 3'
£0.4m (FY22: £0.3m). The value of 'Level 1' financial liabilities held by
the Group at the end of H1 FY23 were £27.2m (FY22: £32.0m), 'Level 2'
£0.1m (FY22: £0.5m) and 'Level 3' £0.3m (FY22: £0.2m).
(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. 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 £3.3m (FY22: £2.8m).
(g) Borrowings
The Group has a committed Revolving Credit Facility ('RCF') of up to £30m in
order to further support its general corporate and working capital
requirements. As at 30 September 2022, £10m (FY22: £nil) was drawn.
(h) Long-term loan
During the period we have repaid £3.0m of the outstanding Senior Facilities
Agreement ('SFA'). As at 30 September 2022, £24m (FY22: £27.0m) was
outstanding.
(i) Post balance sheet events
There are no material post balance sheet events.
10. Reconciliation of profit before tax to cash from
operating activities
Six months ended 30 Sep 2022 Six months ended 28 Sep 2021 Year ended
31 Mar 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period 61 29,536 41,228
Adjustments for:
Depreciation and amortisation 2,201 2,027 4,154
(Decrease)/increase of expected credit losses on financial assets held at (40) 480 244
amortised cost
(Decrease)/increase in provisions (22) 56 109
FX movement on deferred tax asset 16 (6) (8)
Share-based payments - IFRS 2 Charge 305 -
Revaluation of Right-of-use asset and Lease liability (147) (1) (52)
Fair Value gain on sale of securities - - 27
Net finance costs 940 707 1,649
Changes in working capital:
(Increase) in net securities held for trading (9,940) (17,573) (4,068)
Decrease in net market and client debtors 1,841 9,715 12,373
(Increase)/decrease in trade and other debtors (537) 471 (4,017)
(Decrease) in net amounts due to members (16,790) (51,229) (116,565)
(Decrease)/increase in trade and other creditors (12,623) (2,350) 3,001
Cash used in operations (34,735) (28,168) (61,925)
Interest received 170 5 15
Corporation tax paid (132) (2,769) (6,164)
Net cash used in operations (34,697) (30,932) (68,074)
END
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