Numis — A further very strong period

Numis Corporation (LSE: NUM)

Last close As at 27/03/2024

GBP3.43

0.00 (0.00%)

Market capitalisation

GBP402m

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Research: Financials

Numis — A further very strong period

A favourable market background has contributed to a record performance for Numis in its first half that also confirms the strength of the franchise it has built across its investment banking and equities businesses. Recent activity has been focused on areas benefiting from the acceleration of secular trends prompted by the pandemic. Numis’s exposure to clients in these areas, including through its private markets activities, is valuable currently but should also prove a long-term strength.

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Financials

Numis

A further very strong period

H121 trading update

Financial services

30 March 2021

Price

386p

Market cap

£416m

Net cash (£m) at end September 2020

125.2

Shares in issue

107.8m

Free float

75%

Code

NUM

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

14.3

11.0

83.8

Rel (local)

(4.5)

(14.7)

(4.2)

52-week high/low

388p

200p

Business description

Numis is one of the UK's leading independent investment banking groups, offering a full range of research, execution, equity capital markets, corporate broking and advisory services. It employs c 290 staff in offices in London and New York, and at the end of September 2020 had 188 corporate clients.

Next events

H121 results

7 May 2021

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Numis is a research client of Edison Investment Research Limited

A favourable market background has contributed to a record performance for Numis in its first half that also confirms the strength of the franchise it has built across its investment banking and equities businesses. Recent activity has been focused on areas benefiting from the acceleration of secular trends prompted by the pandemic. Numis’s exposure to clients in these areas, including through its private markets activities, is valuable currently but should also prove a long-term strength.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/18

136.0

31.6

23.0

12.0

16.8

3.1

09/19

111.6

12.4

8.1

12.0

47.5

3.1

09/20

154.9

37.1

26.7

12.0

14.4

3.1

09/21e

185.0

52.4

36.7

12.0

10.5

3.1

Note: *PBT and EPS are on a reported basis and EPS is fully diluted.

High activity levels continued through H121

Following the positive update on the first four months of FY21 (4M21), Numis’s update for H121 (to end March) reported continued very strong trading across the group. The year-on-year revenue growth guidance for the first half outpaces the 50% growth indicated for 4M21, with a 75% increase to c £110m expected. Investment Banking revenue is expected to be ahead of the high level achieved in H220, with increased IPO and M&A activity more than offsetting the tailing-off of COVID-19-related fund-raising for clients. Activity has tended to focus on those areas benefiting from changes accelerated by the pandemic evidencing Numis’s credibility in the digital economy. Equities is also expected to generate revenue ahead of H220, helped by increased market share, activity levels and strong gains on the trading book. Looking ahead, the Investment Banking pipeline is reported to be encouraging with further IPO and M&A activity in prospect, while the private markets business has leading technology disrupters as clients, which also bodes well for future activity.

A corresponding increase in estimates

Reflecting the first half revenue guidance, we have increased our FY21 revenue forecast by 14% to £185m cautiously assuming a normalisation of activity at some point in the second half (revenue assumed of c £75m). The outcome could be higher if current activity levels are maintained but the potential upside must be balanced against the considerable uncertainties surrounding the market and economic background. Operational gearing means that our FY21 pre-tax profit estimate is increased by 40% to £52.4m.

Valuation

The shares trade on a price to book value of 2.6x, above the 10-year average of 2.0x and, based on an ROE/COE model, the share price would be consistent with an assumed return on equity (ROE) of 19.5%, just above the historical five-year average of 18% but below our estimate for FY21 of 25%.

Selected transactions

As an indication of the range of transactions that contributed to the first half performance, Exhibit 1 shows selected transactions that Numis was involved in during H121.

Exhibit 1: Numis – selected transactions H121

Company

Date

Role

Transaction

Money raised/ value (£m)

Cazoo

Oct-20

Joint placement agent

Private fund raise

240

Draper Esprit

Oct-20

Nominated advisor, joint global coordinator, bookrunner and broker

Placing

110

Aquila Capital

Oct-20

Broker, adviser and joint bookrunner

Placing

116

Merian Global Investors

Oct-20

Joint bookrunner

IPO

95

Synairgen

Oct-20

Joint broker and bookrunner

Placing and open offer

87

Victoria

Oct-20

Debt adviser

Preferred equity investment

175

Aveva

Oct-20

Joint global coordinator, bookrunner and broker; sole sponsor

Rights issue to finance acquisition

2,800

Waterfall Asset Management

Nov-20

Financial adviser

M&A

639

Future

Nov-20

Sponsor, joint financial adviser and broker

M&A

594

Pets at Home

Nov-20

Sole financial adviser

M&A

100

Electrocomponents

Dec-20

Joint broker and bookrunner

Placing

180

Bytes Technology

Dec-20

Sole sponsor, financial and debt adviser, global coordinator and bookrunner

IPO

647

AJ Bell

Dec-20

Sole broker

Block trade

25

Clipper Logistics

Jan-21

Joint bookrunner

Block trade

62

Bambuser

Jan-21

Joint global coordinator and bookrunner

Placing

52

VH Global Sustainable Energy Opportunities

Jan-21

Sponsor and sole bookrunner

IPO

243

HSS Hire

Jan-21

Sponsor and nominated adviser

Placing and open offer

53

Scapa

Jan-21

Joint corporate broker and nominated adviser

M&A

403

Moonpig

Jan-21

Joint bookrunner

IPO

1,197

Foresight

Feb-21

Sole sponsor, joint global coordinator and bookrunner

IPO

455

Knights

Feb-21

Sole bookrunner

Block trade

62

Polypipe

Feb-21

Joint bookrunner and corporate broker

Placing

96

Future

Feb-21

Sole sponsor and joint adviser and broker

M&A

594

Hargreaves Lansdown

Feb-21

Joint global coordinator and bookrunner

Placing

300

Auto1

Feb-21

Bookrunner

IPO

6,690

Auction Technology

Feb-21

Sole sponsor and joint global coordinator and bookrunner

IPO

600

Cazoo

Feb-21

Sole financial adviser

M&A

N/A

Source: Numis, Edison Investment Research

Financials

Exhibit 2 shows an analysis of our revenue assumptions for FY21 with prior year comparatives. We have not provided an updated scenario analysis at this stage, but the considerable uncertainty over revenues in any particular period should be borne in mind when viewing the estimates. An indication of the sensitivity of profitability to changes in revenue can be seen in the scenario analysis included in our December 2020 note.

Exhibit 2: Revenue analysis

£000s

2018

2019

2020

2021e

Net trading gains

9,594

4,008

16,003

14,000

Institutional income

37,866

33,317

37,192

36,500

Equities

47,460

37,325

53,195

50,500

Corporate retainers

12,430

13,357

13,536

12,000

Advisory

17,335

12,576

11,146

18,000

Capital markets

58,822

48,352

77,022

104,500

Investment banking

88,587

74,285

101,704

134,500

Total revenue

136,047

111,610

154,899

185,000

Source: Edison Investment Research

Changes in the key numbers from our forecasts are shown below, with further detail from the new forecast given in the financial summary table (Exhibit 5).

Exhibit 3: Estimate changes

Revenue (£m)

PBT (£m)

Fully diluted EPS (p)

DPS (p)

Old

New

Change

Old

New

Change

Old

New

Change

Old

New

Change

09/21e

162.0

185.0

14.2%

37.3

52.4

40.4%

26.1

36.7

40.4%

12.0

12.0

0.0%

Source: Edison Investment Research

Valuation

The chart below shows a 10-year history of the price to book ratio for Numis. The current value is 2.6x, above the 10-year average of 2.0x. Using an ROE/COE model to infer the ROE required to match the current share price (386p) gives a value of 19.5%. This is above the five-year historical average of 18%, but below our estimate for the current year of 25%.

Exhibit 4: 10-year history of the price to book value ratio for Numis

Source: Refinitiv, Edison Investment Research

Exhibit 5: Financial summary

£000s

2015

2016

2017

2018

2019

2020

2021e

Year end 30 September

PROFIT & LOSS

Revenue

 

 

97,985

112,335

130,095

136,047

111,610

154,899

185,000

Administrative expenses (excl. amortisation and depreciation)

(65,018)

(76,120)

(83,626)

(94,603)

(85,432)

(105,327)

(118,690)

Share based payment

(4,104)

(6,229)

(10,454)

(10,583)

(10,914)

(9,961)

(9,000)

EBITDA

 

 

28,863

29,986

36,015

30,861

15,264

39,611

57,310

Depreciation

 

 

(882)

(1,126)

(1,226)

(1,113)

(1,124)

(3,016)

(5,293)

Amortisation

(111)

(125)

(89)

(49)

(44)

(105)

(110)

Operating Profit

 

 

27,870

28,735

34,700

29,699

14,096

36,490

51,907

Net finance income

190

37

188

212

550

263

470

Other operating income

(1,978)

3,759

3,431

1,733

(2,210)

310

0

Profit before tax

 

 

26,082

32,531

38,319

31,644

12,436

37,063

52,377

Tax

(4,533)

(6,132)

(7,942)

(4,967)

(3,110)

(5,713)

(9,952)

Profit after tax (FRS 3)

 

 

21,549

26,399

30,377

26,677

9,326

31,350

42,425

Average diluted number of shares outstanding (m)

117.6

118.0

117.2

115.8

114.9

117.3

115.6

EPS - basic (p)

19.5

23.5

27.4

25.1

8.8

29.9

40.0

EPS - diluted (p)

 

 

18.3

22.4

25.9

23.0

8.1

26.7

36.7

Dividend per share (p)

11.50

12.00

12.00

12.00

12.00

12.00

12.00

NAV per share (p)

102.0

113.5

125.0

135.0

131.3

149.8

161.8

ROE (%)

19%

22%

23%

19%

6.6%

21.2%

25.1%

EBITDA margin (%)

29.5%

26.7%

27.7%

22.7%

13.7%

25.6%

31.0%

Operating margin (%)

28.4%

25.6%

26.7%

21.8%

12.6%

23.6%

28.1%

BALANCE SHEET

Fixed assets

 

 

6,724

5,522

6,147

8,215

6,832

12,639

43,986

Current assets

 

 

279,114

312,462

407,850

533,033

326,641

509,034

526,630

Total assets

 

 

285,838

317,984

413,997

541,248

333,473

521,673

570,616

Current liabilities

 

 

(170,319)

(188,895)

(280,371)

(398,112)

(195,319)

(361,397)

(362,747)

Long term liabilities

0

(12)

0

0

0

(2,643)

(27,523)

Net assets

 

 

115,519

129,077

133,626

143,136

138,154

157,633

180,346

CASH FLOW

Operating cash flow

 

 

6,467

48,735

43,369

45,830

(2,748)

65,953

55,688

Net cash from investing activities

(3,632)

84

(198)

(1,014)

(77)

(474)

(7,260)

Net cash from (used in) financing

(17,510)

(19,580)

(36,359)

(29,035)

(24,646)

(24,451)

(30,833)

Net cash flow

 

 

(14,675)

29,239

6,812

15,781

(27,471)

41,028

17,596

Opening net (cash)/debt

 

 

(74,518)

(59,591)

(89,002)

(95,852)

(111,673)

(84,202)

(125,217)

FX effect

 

 

(252)

172

38

40

0

(13)

0

Closing net (cash)/debt

 

 

(59,591)

(89,002)

(95,852)

(111,673)

(84,202)

(125,217)

(142,813)

Source: Company data, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Numis Corporation and prepared and issued by Edison, in consideration of a fee payable by Numis Corporation. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Numis Corporation and prepared and issued by Edison, in consideration of a fee payable by Numis Corporation. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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