“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in GBP
Last close As at 09/06/2023
GBP3.34
— 0.00 (0.00%)
Market capitalisation
GBP367m
Research: Financials
Tough market conditions have continued through Numis’s second half. This is likely to have left full year revenue down about a third compared with the prior year. The outcome would have been worse without the investment the firm has made to develop its mergers and acquisitions activity, which has mitigated the downturn. The outlook for the start of FY23 remains clouded, but on a longer view the group’s existing franchise and continued focus on developing its client base and expanding internationally and into complementary areas should underpin its performance through market cycles.
Numis Corporation |
A subdued H222 though M&A outlook positive |
Year-end trading update |
Financial services |
3 October 2022 |
Share price performance
Business description
Next events
Analysts
Numis Corporation is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Tough market conditions have continued through Numis’s second half. This is likely to have left full year revenue down about a third compared with the prior year. The outcome would have been worse without the investment the firm has made to develop its mergers and acquisitions activity, which has mitigated the downturn. The outlook for the start of FY23 remains clouded, but on a longer view the group’s existing franchise and continued focus on developing its client base and expanding internationally and into complementary areas should underpin its performance through market cycles.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
|
09/20 |
154.9 |
37.1 |
26.7 |
12.0 |
8.7 |
5.2 |
|
09/21 |
215.6 |
74.2 |
49.1 |
13.5 |
4.7 |
5.8 |
|
09/22e |
144.1 |
22.1 |
21.0 |
13.5 |
11.1 |
5.8 |
|
09/23e |
152.0 |
23.7 |
17.5 |
13.5 |
13.3 |
5.8 |
|
Note: *PBT and EPS are on a reported basis and EPS is fully diluted.
A challenging period in capital markets
In its year-end update, Numis has reported that full year revenues are expected to be approximately £144m, down c 33% versus FY21 and slightly below our expectation. Unsurprisingly the main source of weakness has been the capital markets activity, where macroeconomic and geopolitical concerns have had a chilling impact on activity. Positively, this was partly offset by M&A advisory, which achieved a further record result and Investment Banking revenues in total are expected to be down 39%. Within Equities the level of institutional activity has been affected, with clients experiencing fund outflows and revenue in this segment is expected to be more than £50m but down c 17%. A Dublin office was opened in Q422, which will facilitate providing services to non-UK issuers, European institutional investors and private companies seeking growth capital.
M&A is a bright spot in the near term
The near-term outlook is generally subdued given market volatility and the uncertain economic and geopolitical outlook. The M&A advisory area remains more active currently and is advising on nine announced public bids with an average transaction value of £1.5bn. Our profit estimate for FY22 is reduced by 12% to reflect the indicated revenue outcome and an allowance for negative valuation changes in the investment portfolio. In our new estimate for FY23 we have assumed that activity levels in H123 remain similar to H222, but that there is a degree of recovery in H223. For further discussion, see Estimate changes below.
Valuation
The difficult market background has meant Numis’s shares and those of its peers have been weak. Year-to-date Numis is down 32%, UK peers 49% and North American and European investment banks and advisory firms 32%. The shares trade on a multiple of 13.3x relatively depressed FY23e earnings and a price to book ratio of 1.4x compared with a 10-year average of 2.1x.
Estimate changes
We have adjusted our estimate for FY22 to reflect the year-end update and introduced an estimate for FY23.
Exhibit 1 shows a segmental analysis of our revenue assumptions for H222, FY22 and newly introduced estimates for FY23, with comparative historical periods. At this stage our assumptions for FY23 are tentative given that uncertainties about fluctuations in market sentiment and hence capital markets activity levels are heightened currently. We assume that FY23 starts on a relatively muted note and that overall revenue in the first half is similar to the indicated H222 outcome. While the current background seems foreboding, markets do attempt to discount future developments and we have allowed for an improvement in activity in H223 and hence a modest increase in revenue for FY23 as a whole.
Exhibit 1: Revenue analysis
£000s |
2020 |
2021 |
H122 |
H222e |
2022e |
2023e |
Net trading gains |
16,003 |
19,754 |
6,478 |
6,800 |
13,278 |
13,000 |
Institutional income |
37,192 |
40,957 |
19,633 |
17,300 |
36,933 |
35,000 |
Equities |
53,195 |
60,711 |
26,111 |
24,100 |
50,211 |
48,000 |
Corporate retainers |
13,536 |
12,471 |
6,111 |
6,180 |
12,291 |
12,490 |
Advisory |
11,146 |
30,884 |
17,246 |
18,500 |
35,746 |
37,000 |
Capital markets |
77,022 |
111,516 |
24,685 |
21,200 |
45,885 |
54,500 |
Investment banking |
101,704 |
154,871 |
48,042 |
45,880 |
93,922 |
103,990 |
Total revenue |
154,899 |
215,582 |
74,153 |
69,980 |
144,133 |
151,990 |
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 3). The larger reduction in FY22 profit compared with the revenue change reflects operational gearing and the assumption of negative valuation changes in the investment portfolio, which at the half year end was valued at £17.6m. This is included in other operating income for which we now assume a loss of £2m. For FY23 we factor in a return to a full tax charge (19%) following the one-off adjustment that gave rise to a tax credit in FY22; this explains the reduction in EPS between the two years.
Exhibit 2: Estimate changes
Revenue (£m) |
PBT (£m) |
Fully diluted EPS (p) |
DPS (p) |
|||||||||
Old |
New |
Change |
Old |
New |
Change |
Old |
New |
Change |
Old |
New |
Change |
|
09/22e |
145.8 |
144.1 |
-1.2% |
25.1 |
22.1 |
-12.1% |
23.5 |
21.0 |
-10.4% |
14.0 |
13.5 |
-3.6% |
09/23e |
N/A |
152.0 |
N/A |
23.7 |
N/A |
17.5 |
N/A |
13.5 |
||||
Source: Edison Investment Research
In previous notes we have given indications of profit sensitivity to different revenue outcomes, allowing for variable compensation and holding other variables stable. Updating this based on our new FY23 estimate suggests that a £10m change in our revenue assumption would move pre-tax profit by c £4m. On another calculation we estimate that revenue would have to fall to below approximately £117m before incurring a loss, and even at that level, cost containment might provide further leeway.
Exhibit 3: Financial summary
£'000s except where stated |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
||
Year end 30 September |
|||||||||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
130,095 |
136,047 |
111,610 |
154,899 |
215,582 |
144,133 |
151,990 |
Administrative expenses (excl. amortisation and depreciation) |
(83,626) |
(94,603) |
(85,432) |
(105,327) |
(133,651) |
(106,681) |
(114,480) |
||
Share based payment |
(10,454) |
(10,583) |
(10,914) |
(9,961) |
(9,634) |
(6,525) |
(6,600) |
||
EBITDA |
|
|
36,015 |
30,861 |
15,264 |
39,611 |
72,297 |
30,927 |
30,910 |
Depreciation |
|
|
(1,226) |
(1,113) |
(1,124) |
(3,016) |
(4,416) |
(4,566) |
(4,858) |
Amortisation |
(89) |
(49) |
(44) |
(105) |
(158) |
(258) |
(260) |
||
Operating Profit |
|
|
34,700 |
29,699 |
14,096 |
36,490 |
67,723 |
26,103 |
25,792 |
Net finance income |
188 |
212 |
550 |
263 |
(2,288) |
(2,051) |
(2,090) |
||
Non-recurring items |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other operating income |
3,431 |
1,733 |
(2,210) |
310 |
8,715 |
(2,000) |
0 |
||
Profit before tax |
|
|
38,319 |
31,644 |
12,436 |
37,063 |
74,150 |
22,052 |
23,702 |
Tax |
(7,942) |
(4,967) |
(3,110) |
(5,713) |
(16,303) |
1,773 |
(4,503) |
||
Profit after tax (FRS 3) |
|
|
30,377 |
26,677 |
9,326 |
31,350 |
57,847 |
23,825 |
19,199 |
Average diluted number of shares outstanding (m) |
117.2 |
115.8 |
114.9 |
117.3 |
117.7 |
113.3 |
109.6 |
||
EPS - basic (p) |
27.4 |
25.1 |
8.8 |
29.9 |
54.2 |
21.7 |
18.1 |
||
EPS - diluted (p) |
|
|
25.9 |
23.0 |
8.1 |
26.7 |
49.1 |
21.0 |
17.5 |
Dividend per share (p) |
12.00 |
12.00 |
12.00 |
12.00 |
13.50 |
13.50 |
13.50 |
||
NAV per share (p) |
125.0 |
135.0 |
131.3 |
149.8 |
168.3 |
172.3 |
172.3 |
||
ROE (%) |
23% |
19% |
6.6% |
21.2% |
33.6% |
12.8% |
10.4% |
||
EBITDA margin (%) |
27.7% |
22.7% |
13.7% |
25.6% |
33.5% |
21.5% |
20.3% |
||
Operating margin (%) |
26.7% |
21.8% |
12.6% |
23.6% |
31.4% |
18.1% |
17.0% |
||
BALANCE SHEET |
|||||||||
Fixed assets |
|
|
6,147 |
8,215 |
6,832 |
12,639 |
52,641 |
47,984 |
42,086 |
Current assets |
|
|
407,850 |
533,033 |
326,641 |
509,034 |
683,319 |
480,927 |
483,903 |
Total assets |
|
|
413,997 |
541,248 |
333,473 |
521,673 |
735,960 |
528,911 |
525,989 |
Current liabilities |
|
|
(280,371) |
(398,112) |
(195,319) |
(361,397) |
(509,654) |
(303,151) |
(303,151) |
Long term liabilities |
0 |
0 |
0 |
(2,643) |
(39,580) |
(39,778) |
(39,152) |
||
Net assets |
|
|
133,626 |
143,136 |
138,154 |
157,633 |
186,726 |
185,982 |
183,686 |
CASH FLOW |
|||||||||
Operating cash flow |
|
|
43,369 |
45,830 |
(2,748) |
65,953 |
58,329 |
7,175 |
33,907 |
Net cash from investing activities |
(198) |
(1,014) |
(77) |
(474) |
(9,190) |
(2,020) |
(2,210) |
||
Net cash from (used in) financing |
(36,359) |
(29,035) |
(24,646) |
(24,451) |
(39,857) |
(31,203) |
(28,720) |
||
Net cash flow |
|
|
6,812 |
15,781 |
(27,471) |
41,028 |
9,282 |
(26,048) |
2,976 |
Opening net (cash)/debt |
|
|
(89,002) |
(95,852) |
(111,673) |
(84,202) |
(125,217) |
(134,125) |
(108,409) |
FX effect |
|
|
38 |
40 |
0 |
(13) |
(374) |
332 |
0 |
Closing net (cash)/debt |
|
|
(95,852) |
(111,673) |
(84,202) |
(125,217) |
(134,125) |
(108,409) |
(111,385) |
Source: Company data, Edison Investment Research
|
|
Research: TMT
On Friday 30 September, the judge in the COMET trades secret misappropriation case confirmed the jury award and imposed an injunction on XP Power in relation to certain trade secrets. With the award and related legal fees already provided for, and no current business using the trade secrets, we make no changes to estimates. The company will provide a Q322 trading update on 11 October but confirmed that trading in Q3 had improved from the H122 run rate.
Get access to the very latest content matched to your personal investment style.
