2 Dec 2009 07:00
7:00 am Wednesday 2 December 2009
Numis Corporation Plc Preliminary Results
for the year ended 30 September 2009
Numis Corporation Plc ("Numis") today announces preliminary results for the year ended 30 September 2009. Numis is the holding company of Numis Securities Limited, the independent investment banking and broking business.
Financial Highlights
Operational Highlights
Commenting on the results, Oliver Hemsley, Chief Executive, said:
"We are encouraged by the improved market conditions during the second half and have taken full advantage of the opportunity to grow our secondary market business. Our focus on maintaining a strong balance sheet has allowed us to build our franchise even through the most difficult market conditions experienced during the early part of the year. We are pleased to report continued growth in number and quality of corporate clients and the recruitment of high calibre employees whilst maintaining our grip on cost control.
Numis was again voted Leading Brokerage Firm for UK companies (up to £1bn market capitalisation) in the 2009 Thompson Reuters Extel Survey. In addition, for the second year running Numis was ranked Number 1 for FTSE250 Best Recommendations by StarMine.
We have had an excellent start to the new year and are benefiting from the investment we have made in our people and our clients."
Contacts:
| Oliver Hemsley, Chief Executive | 020 7260 1256 |
| Brunswick: | |
| Gill Ackers | 020 7396 5382 |
| Carole Cable | 020 7396 7458 |
| PricewaterhouseCoopers LLP (Nominated Adviser): | |
| Simon Boadle | 020 7583 5000 |
| Jon Raggett | 020 7583 5000 |
CHIEF EXECUTIVE'S STATEMENT
Despite the challenging market conditions we are pleased to report that the business has delivered a creditable underlying performance, generating revenue of £47.5m (2008: £50.7m) and adjusted profit before tax of £4.2m (2008: £8.4m). Offsetting this were £7.8m of losses (2008: £7.4m gains) incurred on investments held outside of our market making business and £6.9m of charges (2008: £0.3m credit) relating to employee share scheme arrangements. A reconciliation of the adjusted profit to the statutory loss is set out in note 11.
Our balance sheet remains robust with cash and cash collateral balances totalling £77.8m (2008: £69.8m) while net assets remain broadly unchanged at £113.8m (2008: £118.4m). In particular, our business generated a strong operating cash inflow of £20.7m (2008: £12.3m outflow) for the year.
The year ended 30 September 2009 can be divided into two distinct halves. Our first half began post the collapse of Lehman Brothers. The cessation of capital markets activity and the associated lack of liquidity proved challenging but manageable due to our resilient balance sheet and strong franchise. The second half saw the equity market rebound with our combined commission and trading revenues reaching record levels driven, in part, by our increased market share. Our combined institutional commission and trading revenues grew by 6% year on year.
We have taken significant steps in building our business, have kept costs under control and maintained a strong balance sheet. Notably, we have been very successful in recruiting some first class people during the year and continue to add accomplished individuals in the UK and the US.
Our investment portfolio was impacted by the events of the first half of the year. Fair value losses of £8.0m were recorded in the first half, the majority of which occurred in October and November 2008. It should be noted that the bulk of this portfolio now comprises quoted investments. We will not be seeking to make any further additions to our investment portfolio at this time but will continue to monitor the performance of these investments and, where prudent and appropriate to do so, explore their monetisation.
We have made significant progress on cost reduction initiatives. The quantum of the annualised savings to our non-staff operational cost base is estimated at £2.5m, equivalent to 12% of our 2008 spend in this area. Some material benefits have accrued already with non-compensation costs down 7% year on year; however, the full annualised impact of these initiatives will not be seen until our 2010 financial year.
Corporate Broking and Advisory
We are pleased to report that our clients raised a total of £787m (2008: £654m) through 18 transactions (2008: 20). We have attracted a record number of high quality corporate clients this year with 44 new clients bringing the total number for whom we act to 122. Currently we represent 16 FTSE250 clients and were voted 4th overall Broker across UK All Caps in the Thomson Reuters Extel 2009 survey. To support the growth in client numbers, we have taken the opportunity to hire some more highly-rated, specialist corporate financiers to complement our strong equity franchise.
Research, Sales and Trading
Our research and execution services are recognised as being exceptional. In the 2009 Thomson Reuters Extel survey (for UK companies of up to £1bn market capitalisation), Numis was voted Leading Brokerage Firm for the second time in three years. In particular, our research teams were ranked in the top three in the majority of sectors that we cover. Our highly rated analysts produce research on over 400 companies and we have a recognised capability in seventeen key sectors, including Aerospace & Defence, Building, Property, Engineering, Fast Moving Consumer Goods, Life Sciences, Media, Metals & Mining, New Energy & Emissions, Non-Life Insurance, Oil & Gas, Retail, Speciality & Other Finance, Support Services, Technology, Travel & Leisure and Investment Trusts. Additional external recognition was achieved for the second year running as Numis was ranked number one for FTSE250 Best Recommendations by StarMine.
Our execution services, across a range of trading venues, continue to make a major contribution to the development of our reputation and the resilience of our institutional commissions. It is pleasing to note that, for the FTSE250 stocks in which we trade, our market share has shown significant and sustained improvement throughout the year.
Sales & Trading is an increasingly competitive area with pressure on commission levels for trades in liquid stocks from electronic trading. The integration into the firm of our highly respected Institutional Sales and Investment Trust teams has been very successful and continues to enhance our income generation. Our clients have a strong demand for independent and well-researched ideas combined with high quality execution. The contribution of our US office continues to grow and notably during the year we organised 30 road shows for FTSE250 companies in the US.
Investment Activities
Our investment portfolio was valued at £21.7m as at 30 September 2009 (2008: £29.7m), the majority of which now comprises holdings in quoted companies. We continue to monitor the performance of these investments and, where prudent and appropriate to do so, explore their monetisation.
Dividend and Scrip Alternative
In view of our robust cash position, the fact that our core business remains profitable and our strong start to the new year, the Board has proposed a final dividend of 5.50p per share (2008: 5.00p) giving a total distribution of 8.00p per share (2008: 7.50p). This represents the tenth successive year of rising dividends. The dividend will be payable on 19 February 2010 to all shareholders on the register at 11 December 2009. Shareholders will be offered the option to receive shares instead of a cash dividend, the details of which will be explained in a circular to accompany our Annual Report, which will be circulated to all shareholders on 4 January 2010.
Board Appointments
As previously announced, on the 5 May 2009 both Sir David Arculus and Gerald Corbett joined the Board in the roles of non-executive chairman and non-executive director, respectively. They bring with them extensive experience in working with Government and leading British companies in chairmanship and senior finance roles. The full details of these appointments were given in a separate announcement which was made on the 5 May 2009.
Post year-end trading and outlook
Numis has made an excellent start to its new financial year having already raised £353m of equity funds for its corporate clients and won a number of high quality corporate brokerships. Our pipeline of transactions looks healthy and we are confident, markets permitting, that the business should perform well in the future. We continue to attract talented individuals and we are focusing on providing the best possible service to our corporate and institutional clients alike.
Oliver Hemsley
Chief Executive
2 December 2009
Consolidated Income Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2009
| 2009 | 2008 | |||
| Continuing operations | Notes | £'000 |
| £'000 |
| Revenue | 3 | 47,533 | 50,714 | |
| Other operating (loss)/income |
| (7,846) |
| 723 |
| Total revenue | 39,687 | 51,437 | ||
| Administrative expenses | 4 | (52,915) |
| (47,757) |
| Operating (loss)/profit | (13,228) | 3,680 | ||
| Share of profits of associate | - | 803 | ||
| Profit on disposal of associate | 5 | - | 5,854 | |
| Loss on disposal of subsidiary | 6 | (138) | - | |
| Finance income | 2,901 | 5,816 | ||
| Finance costs | (54) |
| (60) | |
| (Loss)/profit before tax | (10,519) | 16,093 | ||
| Taxation | 1,870 | (1,317) | ||
|
|
|
|
|
|
| (Loss)/profit after tax |
| (8,649) |
| 14,776 |
| Attributable to: | ||||
| Equity holders of the parent |
| (8,649) |
| 14,776 |
| (Loss)/earnings per share | ||||
| Basic | 7 | (8.4p) | 14.9p | |
| Diluted | 7 | (8.4p) | 14.6p | |
| Memo - dividends for the year | 8 | (7,855) | (7,700) |
Consolidated Balance Sheet
AS AT 30 SEPTEMBER 2009
| 2009 | 2008 | ||||
|
| Notes |
| £'000 |
| £'000 |
| Non current assets | |||||
| Property, plant and equipment | 2,509 | 3,086 | |||
| Intangible assets | 146 | 290 | |||
| Derivative financial instruments | 645 | 1,796 | |||
| Deferred tax | 9a |
| 2,782 |
| - |
| 6,082 | 5,172 | ||||
| Current assets | |||||
| Trade and other receivables | 9b | 165,341 | 221,373 | ||
| Trading investments | 9c | 32,994 | 36,136 | ||
| Stock borrowing collateral | 9d | 5,759 | 92 | ||
| Derivative financial instruments | 2,002 | 3,010 | |||
| Current income tax | 463 | 836 | |||
| Cash and cash equivalents |
| 74,266 |
| 59,899 | |
| 280,825 | 321,346 | ||||
| Current liabilities | |||||
| Trade and other payables | 9b | (159,872) | (206,126) | ||
| Financial liabilities | (5,192) | (1,287) | |||
| Stock lending collateral | 9d | (6,900) | - | ||
| Provisions | (580) | (75) | |||
| (172,544) | (207,488) | ||||
| Net current assets |
|
| 108,281 |
| 113,858 |
| Non current liabilities | |||||
| Provisions | (546) | (616) | |||
| Net assets |
| 113,817 |
| 118,414 | |
| Equity | |||||
| Share capital | 5,557 | 5,378 | |||
| Share premium account | 28,971 | 24,719 | |||
| Capital reserve | 6,742 | 1,503 | |||
| Retained profits |
| 72,547 |
| 86,814 | |
| Equity attributable to equity holders of the parent | 113,817 | 118,414 |
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 SEPTEMBER 2009
| | Share | Share | Capital | Retained | |
| | Capital | Premium | Reserve | Profits | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 |
| Attributable to equity holders of the parent at 1 October 2008 | 5,378 | 24,719 | 1,503 | 86,814 | 118,414 |
| | | | | | |
| New shares issued | 179 | 4,252 | - | - | 4,431 |
| Loss after tax | | | | (8,649) | (8,649) |
| Dividends paid | | | | (7,855) | (7,855) |
| Deferred tax related to share based payments | | | | 936 | 936 |
| Exchange differences on translation of foreign operations | | | 62 | - | 62 |
| Movement in respect of employee share plans | | | 5,177 | 1,289 | 6,466 |
| Other | | | | 12 | 12 |
| Attributable to equity holders of the parent at 30 September 2009 | 5,557 | 28,971 | 6,742 | 72,547 | 113,817 |
|
Attributable to equity holders of the parent at 1 October 2007 | 5,324 | 22,376 | 294 | 81,042 | 109,036 |
| | | | | | |
| New shares issued | 54 | 2,343 | - | - | 2,397 |
| Profit after tax | | | | 14,776 | 14,776 |
| Dividends paid | | | | (7,700) | (7,700) |
| Deferred tax related to share based payments | | | | (1,313) | (1,313) |
| Exchange differences on translation of foreign operations | | | (36) | - | (36) |
| Movement in respect of employee share plans | | | 1,245 | 40 | 1,285 |
| Other | | | | (31) | (31) |
| Attributable to equity holders of the parent at 30 September 2008 | 5,378 | 24,719 | 1,503 | 86,814 | 118,414 |
Consolidated Cash Flow Statement
FOR THE YEAR ENDED 30 SEPTEMBER 2009
| 2009 | 2008 | ||||
| Notes | £'000 | £'000 | |||
| Cash flows from operating activities | 10 | 20,653 | (12,268) | ||
| Interest paid | (54) | (60) | |||
| Taxation refunded/(paid) |
|
| 643 |
| (4,963) |
| Net cash from/(used in) operating activities | 21,242 | (17,291) | |||
| Investing activities | |||||
| Purchase of property, plant and equipment | (191) | (671) | |||
| Purchase of intangible assets | (33) | (163) | |||
| Proceeds from disposal of subsidiary | 7 | - | |||
| Proceeds from disposal of associate | - | 7,170 | |||
| Interest received | 875 | 3,716 | |||
| Dividends received from associate | - | 1,236 | |||
| Net cash from investing activities | 658 | 11,288 | |||
| Financing activities | |||||
| Purchases of own shares | (2,533) | (5,462) | |||
| Dividends paid |
|
| (6,924) |
| (5,302) |
| Net cash used in financing activities | (9,457) | (10,764) | |||
| Net movement in cash and cash equivalents |
|
| 12,443 |
| (16,767) |
| Opening cash and cash equivalents | 59,899 | 76,666 | |||
| Net movement in cash and cash equivalents | 12,443 | (16,767) | |||
| Exchange movements | 1,924 | - | |||
| Closing cash and cash equivalents |
|
| 74,266 |
| 59,899 |
Notes to the Financial Statements
1. Basis of preparation
Basis of preparation
The consolidated financial information contained within these preliminary results is unaudited and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 September 2009 will be delivered to the Registrar of Companies in due course. The annual report will be posted to shareholders on 4 January 2010 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 2 February 2010.
The preparation of the preliminary results requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant judgements and estimates applied by the Group in these preliminary results have been applied on a consistent basis with the statutory accounts for the years ended 30 September 2008 and 2007. 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 accounting policies applied in these preliminary results are in accordance with International Financial Reporting Standards, as endorsed by the European Union ('IFRS'), and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, and are in accordance with the IFRS accounting policies that were applied in the Group's statutory accounts for the year ended 30 September 2008.
2. Additional segmental analysis
The analysis below sets out the revenue performance and net asset split between our core investment banking & broking business and our investing activities and is provided as supplementary analysis only.
| 2009 | 2008 | |
| £'000 | £'000 | |
| Net institutional commission and trading income | 25,191 | 23,680 |
| Total corporate transaction revenues | 17,759 | 23,005 |
| Corporate retainers | 4,583 | 4,029 |
| Revenue from investment banking & broking (see note 3) | 47,533 | 50,714 |
| Investment activity net (losses)/gains | (7,846) | 723 |
| Share of profits of associate | - | 803 |
| Profit on disposal of associate (see note 5) | - | 5,854 |
| Contribution from investing activities | (7,846) | 7,380 |
| Total | 39,687 | 58,094 |
| Net assets | ||
| Investment banking & broking | 17,818 | 28,784 |
| Investing activities | 21,733 | 29,731 |
| Cash and cash equivalents | 74,266 | 59,899 |
| Total net assets | 113,817 | 118,414 |
3. Revenue
| 2009 | 2008 | ||
|
|
| £'000 | £'000 |
| Net trading gains/(losses) | 1,716 | (3,460) | |
| Institutional commissions | 23,475 | 27,140 | |
| Net institutional income | 25,191 | 23,680 | |
| Corporate retainers | 4,583 | 4,029 | |
| Deal fees | 5,422 | 9,751 | |
| Placing commissions | 12,337 | 13,254 | |
|
|
| 47,533 | 50,714 |
4. Staff costs
| 2009 | 2008 | ||
|
|
| £'000 | £'000 |
| Wages and salaries | 22,323 | 23,728 | |
| Social security costs | 3,435 | 2,065 | |
| Compensation for loss of office | 230 | 166 | |
| Other pension costs | 943 | 640 | |
| Share based payments | 6,208 | (65) | |
|
|
| 33,139 | 26,534 |
5. Profit on disposal of associate
| 2009 | 2008 | |
| £'000 | £'000 | |
| Sale proceeds | - | 7,206 |
| Share of net assets disposed of | (1,316) | |
| Disposal expenses (comprising charges) | - | (36) |
| - | 5,854 |
The profit on disposal of associate in the prior year relates to the reduction of the Group's holding in Abbey Protection Group Limited from 29.41% to 13.10% following the IPO of Abbey Protection Group Limited on 29 November 2007. Gains and losses arising on the reduced holding subsequent to the IPO are included within other operating (loss)/income on the face of the consolidated income statement.
6. Loss on disposal of subsidiary
| 2009 | 2008 | |
| £'000 | £'000 | |
| Sale proceeds | 7 | - |
| Share of net assets disposed of | (138) | - |
| Disposal expenses (comprising charges) | (7) | - |
| (138) | - |
The loss on disposal of subsidiary relates to the sale of the Group's interest in Numis Caspian Limited LLP. This wholly owned subsidiary was created under the laws of the Republic of Kazakhstan and officially registered with the local authorities in September 2006. The company was formed to take advantage of perceived business opportunities arising in Kazakhstan at that time, however these did not materialise to the extent originally envisaged. As a result the Group disposed of its entire interest during the year. The activities of the subsidiary have not been treated as discontinued operations under IFRS 5 as they did not represent a separate major line of business or geographical area of operation.
7. (Loss)/earnings per share
Basic (loss)/earnings per share is calculated on a loss after tax of £8,649,000 (2008: profit £14,776,000) and 102,539,193 (2008: 99,187,412) ordinary shares being the weighted average number of ordinary shares in issue during the year. Diluted (loss)/earnings per share takes account of contingently issuable shares arising from share scheme award arrangements where their impact would be dilutive. However, in accordance with IAS 33, potential ordinary shares are only considered dilutive when their conversion would decrease the profit per share or increase the loss per share from continuing operations attributable to the equity holders. Therefore shares that may be considered dilutive while positive earnings are being reported may not be dilutive while losses are incurred.
In the current financial year, there are no potential ordinary shares whose conversion would result in an increase in the basic loss per share. The table below shows the diluted number of ordinary shares that would have been appropriate if the Group had reported a profit after tax.
| 2009 | 2008 | |
| Number | Number | |
| Thousands | Thousands | |
| Weighted average number of ordinary shares in issue during the year - basic | 102,539 | 99,187 |
| Dilutive effect of share awards | 3,518 | 1,835 |
| Diluted number of ordinary shares | 106,057 | 101,022 |
8. Dividends
| 2009 | 2008 | |
| £'000 | £'000 | |
| Final dividend for year ended 30 September 2007 (5.00p) | 5,120 | |
| Interim dividend for year ended 30 September 2008 (2.50p) | 2,580 | |
| Final dividend for year ended 30 September 2008 (5.00p) | 5,212 | |
| Interim dividend for year ended 30 September 2009 (2.50p) | 2,643 | |
| Distribution to equity holders of the parent | 7,855 | 7,700 |
The board has proposed a final dividend of 5.50p per share for the year ended 30 September 2009. 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 financial statements do not reflect this dividend payable.
9. Balance sheet items
(a) Deferred tax
As at 30 September 2008 potential deferred tax assets totalling £1,078,000 primarily in respect of share based payments were not recognised due to uncertainties in assessing the level of future taxable gains at that time. As at 30 September 2009 many of these uncertainties have been removed with the general improvement in market conditions and encouraging performance of the underlying business. Hence deferred tax assets totalling £2,782,000 have been recognised (as at 30 September 2009) reflecting managements' confidence that there will be sufficient levels of future taxable gains against which the deferred tax asset can be utilised. This deferred tax asset principally comprises amounts in respect of share based payments and relates to the activities of the UK trading entity. In addition, a deferred tax asset of £1,391,000 relating to unrelieved trading losses incurred by the Company has not been recognised as there is insufficient supportable evidence that there will be taxable gains in the future against which the deferred tax asset could be utilised.
(b) Trade and other receivables and Trade and other payables
Trade and other receivables and Trade and other payables principally comprise amounts due from and due to clients, brokers and other counterparties. Such amounts represent unsettled sold and unsettled purchased securities transactions and are stated gross. Also included within Trade and other receivables are cash collateral balances held with securities clearing houses of £3,500,000 (2008: £9,874,000).
(c) Trading investments
Included within trading investments is £19,086,000 (2008: £26,091,000) of investments held outside of the market making portfolio. As at 30 September 2009, £6,900,000 (2008: £ nil) of trading investments had been pledged to certain institutions under stock lending arrangements.
(d) Stock borrowing and lending collateral
The Group enters stock borrowing and lending arrangements with certain institutions which are entered into on a collateralised basis with securities or cash advanced or received as collateral. Under such arrangements a security is purchased or sold with a commitment to return it at a future date at an agreed price.
The securities purchased are not recognised on the balance sheet whereas the securities sold remain on the balance sheet with the transaction treated as a secured loan made for the purchase or sale price. Where cash has been used to effect the purchase or sale, an asset or liability is recorded on the balance sheet as stock borrowing or lending collateral at the amount of cash collateral advanced or received.
10. Reconciliation of operating (loss)/profit to net cash from/(used in) operating activities
| 2009 | 2008 | |
|
| £000 | £000 |
| Operating (loss)/profit | (13,228) | 3,680 |
| Impairment of property, plant and equipment | 5 | 46 |
| Depreciation charges on property, plant and equipment | 838 | 800 |
| Amortisation charges on intangible assets | 177 | 255 |
| Share based payments | 6,208 | (65) |
| Decrease in current asset trading investments | 3,142 | 3,285 |
| Decrease/(increase) in trade and other receivables | 62,979 | (59,996) |
| Movement in stock borrowing / lending collateral | 1,233 | 8,513 |
| (Decrease)/increase in trade and other payables | (42,652) | 30,989 |
| Decrease in derivatives | 2,159 | 265 |
| Other non-cash movements | (208) | (40) |
| Net cash from/(used in) operating activities | 20,653 | (12,268) |
11. Adjusted profit measures
The following table reconciles the statutory measures of (loss)/profit before tax, (loss)/profit after tax and (loss)/earnings per share to the adjusted measures used by management in their assessment of the underlying performance of the business:
| 2009 | 2008 | |
|
| £'000 | £'000 |
| Statutory group (loss)/profit before tax | (10,519) | 16,093 |
| Items not included within adjusted profit before tax: | ||
| Other operating loss/(income) | 7,846 | (723) |
| Share scheme charge/(credit) | 6,208 | (65) |
| NI provisions related to share scheme charge/(credit) | 660 | (238) |
| Share of profits of associate | - | (803) |
| Profit on disposal of associate | - | (5,854) |
| Adjusted group profit before tax | 4,195 | 8,410 |
| Group taxation | 1,870 | (1,317) |
| Tax impact of adjustments | (2,733) | (1,430) |
| Adjusted group taxation | (863) | (2,747) |
| Adjusted group profit after tax | 3,332 | 5,663 |
| 2009 | 2008 | |
| Basic weighted average number of shares, number | 102,539,193 | 99,187,412 |
| Adjusted basic earnings per share, pence | 3.2p | 5.7p |