Numis Corporation — Further evidence of diversification benefits

Numis Corporation (LSE: NUM)

Currency in GBP

Last close As at 03/02/2023

GBP2.12

6.00 (2.92%)

Market capitalisation

GBP226m

Research: Financials

Numis Corporation — Further evidence of diversification benefits

Numis has reported that its Q322 revenue was over £40m compared with the £37m run rate reported in H122. There was a strong improvement from Q222 with mergers and acquisitions (M&A) driving the performance of the investment banking activity. While conditions are less favourable for equity capital markets and equities, the group expects to meet market expectations for the full year and, allowing for a seasonally quiet summer period, our forecast is unchanged.

Andrew Mitchell

Written by

Andrew Mitchell

Director, Financials

Financials

Numis Corporation

Further evidence of diversification benefits

Q322 trading update

Financial services

6 July 2022

Price

246p

Market cap

£268m

Net cash (£m) at 31 March 2022

111.5

Shares in issue

113.3m

Free float

75%

Code

NUM

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.3)

1.0

(31.1)

Rel (local)

5.2

10.8

(27.0)

52-week high/low

383p

230p

Business description

Numis Corporation 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. At the end of March 2022, it employed 325 staff in offices in London, Dublin and New York and had 183 corporate clients.

Next events

FY22 trading update

End September (est)

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Numis Corporation is a research client of Edison Investment Research Limited

Numis has reported that its Q322 revenue was over £40m compared with the £37m run rate reported in H122. There was a strong improvement from Q222 with mergers and acquisitions (M&A) driving the performance of the investment banking activity. While conditions are less favourable for equity capital markets and equities, the group expects to meet market expectations for the full year and, allowing for a seasonally quiet summer period, our forecast is unchanged.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/19

111.6

12.4

8.1

12.0

30.3

4.9

09/20

154.9

37.1

26.7

12.0

9.2

4.9

09/21

215.6

74.2

49.1

13.5

5.0

5.5

09/22e

145.8

25.1

23.5

14.0

10.5

5.7

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

Positive M&A environment, subdued capital markets

Numis has invested in developing its M&A advisory, private markets (Growth Capital Solutions) and debt advisory capabilities and this has helped support investment banking revenue against a more difficult background for equity capital markets activities. M&A activity has been the main factor in this period and the group reports that the pipeline of announced and possible deals remains strong. For the future, the expected opening of a Dublin office in Q422 will facilitate providing services to non-UK issuers, European institutional investors and private companies seeking growth capital.

Equity revenue only slightly lower

On the equity side of the business, revenue was marginally below the run rate of the first half, reflecting more cautious investor sentiment and lower market and activity levels, particularly in UK small and mid-caps. However, trading performance improved, mitigating the impact of this weakness.

Valuation

Reflecting the more challenging equity capital market background, Numis shares are down c 27% year to date, which compares with -32% for UK peers and -26% for United States and European investment banks and advisory firms. The shares trade on a prospective P/E of under 11x and a price to book ratio of 1.4x compared with a 10-year average of 2.1x. A return on equity over cost of equity (ROE/COE) model suggests the current share price implies an ROE of 12.8% compared with the 18% 10-year average and our relatively muted current year estimate of 14%.

Selected transactions

Exhibit 1 shows selected transactions carried out by Numis since the beginning of the calendar year. It features examples of private market transactions, debt advisory mandates and a number of M&A transactions, particularly in Q322. Some of the transactions involved Numis corporate clients as M&A targets, but during the period examples of new corporate broking clients include Medica, Frasers, GB and Capita.

Exhibit 1: Numis – selected transactions since Q222 (January)

Company

Date

Role

Transaction

Money raised/ value (£m)

Chrysalis Investments

Jan-22

Joint bookrunner

Fundraise

60

TravelPerk

Jan-22

Financial adviser

Fundraise (private markets)

84

Flipdish

Jan-22

Financial adviser

Fundraise (private markets)

73

Georgia Capital

Jan-22

Sponsor and financial adviser

M&A

131

Microfocus

Jan-22

Debt and ratings adviser

Term loan issuance & RCF

1,365

Hilton Food

Jan-22

Debt adviser

Refinancing

420

Diploma

Feb-22

Debt adviser

Refinancing

422

Next15

Mar-22

Joint bookrunner, nomad and joint broker

Placing

50

Tyman

Mar-22

Debt adviser

Placing

60

Clipper Logistics

Mar-22

Sole financial adviser and corporate broker

M&A

c 1,000

VinaCapital

Mar-22

Debt adviser

Revolving credit facility

32

UK Mortgages

Apr-22

Sole financial adviser

M&A

710

Clinigen

Apr-22

Financial adviser, corporate broker and nomad

M&A

1,300

International Public Partnerships

Apr-22

Sole sponsor, broker and financial adviser

Fundraise

325

Accsys Technologies

Apr-22

Joint bookrunner

Placing

17

Clipper Logistics

May-22

Sole financial, Rule 3 adviser and corporate broker

M&A

c 1,000

Bluefield

Jun-22

Sole sponsor, broker and financial adviser

Fundraise

150

Asset Co

Jun-22

Sole financial adviser

M&A

289

Ocado

Jun-22

Joint broker and bookrunner

Placing

578

CareTech

Jun-22

Joint financial adviser and joint broker

M&A

c 870

Source: Numis, Edison Investment Research

London Stock Exchange issuance and trading volume

Exhibits 2 and 3 show the trend in new and further money raised on the Main Market and AIM. In the quarter to end-June there was a marked increase in Main Market issuance compared with the prior quarter, to end-March (+64%), although the level of issuance was down 52% compared with the prior year period. For AIM, total money raised was down 8% sequentially and 72% y-o-y.

Exhibit 2: LSE Main Market issuance (money raised)

Exhibit 3: LSE AIM issuance (money raised)

Source: London Stock Exchange (last data June)

Source: London Stock Exchange (last data June)

Exhibit 2: LSE Main Market issuance (money raised)

Source: London Stock Exchange (last data June)

Exhibit 3: LSE AIM issuance (money raised)

Source: London Stock Exchange (last data June)

Exhibit 4 tracks the average daily value traded on the Main Market order book and on AIM. The level of trading has increased on the Main Market since the middle of calendar 2021 and AIM volume is at a similar level to the prior year (though well below its recent peak in early 2021). Exhibit 5 shows how the UK Small-Cap index (CBOE) outperformed the All-Companies index from late 2020 but has more recently underperformed in a more risk-averse phase in the market, a feature that is likely to have played into the weakness in issuance seen on AIM.

Exhibit 4: LSE average daily value traded (£m)

Exhibit 5: UK equity indices

Source: London Stock Exchange (Main Market order book and AIM)

Source: Refinitiv, CBOE

Exhibit 4: LSE average daily value traded (£m)

Source: London Stock Exchange (Main Market order book and AIM)

Exhibit 5: UK equity indices

Source: Refinitiv, CBOE


Exhibit 6: Financial summary

£'000s

2016

2017

2018

2019

2020

2021

2022e

Year end 30 September

PROFIT & LOSS

Revenue

 

 

112,335

130,095

136,047

111,610

154,899

215,582

145,833

Administrative expenses (excl. amortisation and depreciation)

(76,120)

(83,626)

(94,603)

(85,432)

(105,327)

(133,651)

(107,801)

Share based payment

(6,229)

(10,454)

(10,583)

(10,914)

(9,961)

(9,634)

(6,525)

EBITDA

 

 

29,986

36,015

30,861

15,264

39,611

72,297

31,507

Depreciation

 

 

(1,126)

(1,226)

(1,113)

(1,124)

(3,016)

(4,416)

(4,566)

Amortisation

(125)

(89)

(49)

(44)

(105)

(158)

(258)

Operating Profit

 

 

28,735

34,700

29,699

14,096

36,490

67,723

26,683

Net finance income

37

188

212

550

263

(2,288)

(2,051)

Non-recurring items

0

0

0

0

0

0

0

Other operating income

3,759

3,431

1,733

(2,210)

310

8,715

442

Profit before tax

 

 

32,531

38,319

31,644

12,436

37,063

74,150

25,074

Tax

(6,132)

(7,942)

(4,967)

(3,110)

(5,713)

(16,303)

1,504

Profit after tax (FRS 3)

 

 

26,399

30,377

26,677

9,326

31,350

57,847

26,578

Average diluted number of shares outstanding (m)

118.0

117.2

115.8

114.9

117.3

117.7

113.3

EPS - basic (p)

23.5

27.4

25.1

8.8

29.9

54.2

24.2

EPS - diluted (p)

 

 

22.4

25.9

23.0

8.1

26.7

49.1

23.5

Dividend per share (p)

12.00

12.00

12.00

12.00

12.00

13.50

14.00

NAV per share (p)

113.5

125.0

135.0

131.3

149.8

168.3

173.7

ROE (%)

22%

23%

19%

6.6%

21.2%

33.6%

14.2%

EBITDA margin (%)

26.7%

27.7%

22.7%

13.7%

25.6%

33.5%

21.6%

Operating margin (%)

25.6%

26.7%

21.8%

12.6%

23.6%

31.4%

18.3%

BALANCE SHEET

Fixed assets

 

 

5,522

6,147

8,215

6,832

12,639

52,641

47,984

Current assets

 

 

312,462

407,850

533,033

326,641

509,034

683,319

482,072

Total assets

 

 

317,984

413,997

541,248

333,473

521,673

735,960

530,056

Current liabilities

 

 

(188,895)

(280,371)

(398,112)

(195,319)

(361,397)

(509,654)

(303,151)

Long term liabilities

(12)

0

0

0

(2,643)

(39,580)

(39,778)

Net assets

 

 

129,077

133,626

143,136

138,154

157,633

186,726

187,127

CASH FLOW

Operating cash flow

 

 

48,735

43,369

45,830

(2,748)

65,953

58,329

8,320

Net cash from investing activities

84

(198)

(1,014)

(77)

(474)

(9,190)

(2,020)

Net cash from (used in) financing

(19,580)

(36,359)

(29,035)

(24,646)

(24,451)

(39,857)

(31,203)

Net cash flow

 

 

29,239

6,812

15,781

(27,471)

41,028

9,282

(24,903)

Opening net (cash)/debt

 

 

(59,591)

(89,002)

(95,852)

(111,673)

(84,202)

(125,217)

(134,125)

FX effect

 

 

172

38

40

0

(13)

(374)

332

Closing net (cash)/debt

 

 

(89,002)

(95,852)

(111,673)

(84,202)

(125,217)

(134,125)

(109,554)

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 £60,000 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 2022 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 £60,000 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 2022 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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