Numis Corporation — M&A and private markets make up for lower IPOs

Numis Corporation (LSE: NUM)

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Research: Financials

Numis Corporation — M&A and private markets make up for lower IPOs

In its AGM trading update Numis noted that the recent reduction in market risk appetite has meant lower capital markets activity. However, its first quarter was strong and the company has a healthy pipeline for H222, subject to market background. Encouragingly, investment in developing its M&A, private markets and international equity capital markets capabilities is helping to sustain revenues in the near term as well as creating a broader base for longer-term growth.

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Financials

Numis Corporation

M&A and private markets make up for lower IPOs

AGM trading update

Financial services

8 February 2022

Price

299p

Market cap

£330m

Net cash (£m) at end September 2021

134.1

Shares in issue

110.5m

Free float

75%

Code

NUM

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.7)

(13.4)

(11.9)

Rel (local)

(12.4)

(14.7)

(22.8)

52-week high/low

398p

297p

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 September 2021 it employed 319 staff in offices in London, Dublin and New York, and had 182 corporate clients.

Next events

H122 trading update

End March (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

In its AGM trading update Numis noted that the recent reduction in market risk appetite has meant lower capital markets activity. However, its first quarter was strong and the company has a healthy pipeline for H222, subject to market background. Encouragingly, investment in developing its M&A, private markets and international equity capital markets capabilities is helping to sustain revenues in the near term as well as creating a broader base for longer-term growth.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/19

111.6

12.4

8.1

12.0

36.8

4.0

09/20

154.9

37.1

26.7

12.0

11.2

4.0

09/21

215.6

74.2

49.1

13.5

6.1

4.5

09/22e

181.4

44.3

30.2

13.5

9.9

4.5

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

4M22 update: Strong Q1, slower start to Q2

Numis reports that, for its first quarter, revenue was in line with the run rate seen in the second half of FY21 (when revenue was £100.2m) with continued strength in M&A and Growth Capital Solutions (private markets) offsetting a downturn in initial public offering (IPO) activity (see Exhibit 1 for selected transactions carried out since the start of FY22). The equity business broadly maintained its level of contribution.

Encouraging H2 outlook, estimates unchanged

Macroeconomic factors have had an impact on equity markets recently and this has meant that Numis has seen a slower start to its Q222, from January. Positively, the momentum in M&A activity remains strong and this together with potential related equity issuance means that the group sees a positive outlook for its second half. Reflecting this we are not changing our FY22 estimate: our forecast already allowed for some normalisation following last year’s very strong result.

Valuation

Following a period of relative price weakness, Numis shares trade on a prospective P/E of under 10x, below the average for the US/EU investment banks and advisory firms (13.5x). The yield is 4.5% and the price to book ratio of 1.8x compares 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 14.7% compared with the 18% level of the 10-year average and our forecast for FY22.

Selected transactions

Exhibit 1 collates selected transactions carried out by Numis so far in FY22. The list includes examples of private markets transactions and Numis’s role in its first US IPO (Nu Holdings).

Exhibit 1: Numis – selected transactions since end FY21

Company

Date

Role

Transaction

Money raised/ value (£m)

Synthomer

Oct-21

Joint bookrunner

Placing

205

Arrow Global

Oct-21

Joint financial adviser and joint broker

M&A

563

Oxford Nanopore

Oct-21

Joint bookrunner

IPO

603

Eurowag

Oct-21

Joint bookrunner

IPO

c 1,000

XPS Pensions

Nov-21

Debt adviser

Refinancing

100

Truecaller

Nov-21

Joint bookrunner

IPO (Nasdaq Stockholm)

1,630

Hyve

Nov-21

Sole bookrunner and debt adviser

Placing

29

Ashtead Technology

Nov-21

Sole bookrunner and nomad

IPO

129

Stock Spirits

Nov-21

Joint financial adviser

M&A

767

Synthomer

Nov-21

Joint bookrunner

Placing

205

PodPoint

Nov-21

Joint bookrunner

IPO

352

JTC

Nov-21

Joint bookrunner and broker

Placing

79

Hostmore

Nov-21

Joint financial adviser and sole sponsor

M&A

N/A

Benchmark Holdings

Nov-21

Sole bookrunner

Placing

21

Clinigen

Dec-21

Financial adviser, corporate broker and nomad

M&A

1,200

Ideagen

Dec-21

Joint bookrunner

Placing

104

Nu (Nubank)

Dec-21

Adviser

IPO (NYSE)

37,847

Hilton Food

Dec-21

Solebookrunner

Placing

75

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

Source: Numis, Edison Investment Research

Exhibit 2: 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

181,440

Administrative expenses (excl. amortisation and depreciation)

(76,120)

(83,626)

(94,603)

(85,432)

(105,327)

(133,651)

(124,010)

Share based payment

(6,229)

(10,454)

(10,583)

(10,914)

(9,961)

(9,634)

(7,000)

EBITDA

 

 

29,986

36,015

30,861

15,264

39,611

72,297

50,430

Depreciation

 

 

(1,126)

(1,226)

(1,113)

(1,124)

(3,016)

(4,416)

(5,020)

Amortisation

(125)

(89)

(49)

(44)

(105)

(158)

(70)

Operating profit (before other operating income)

 

 

28,735

34,700

29,699

14,096

36,490

67,723

45,340

Net finance income

37

188

212

550

263

(2,288)

(1,050)

Other operating income

3,759

3,431

1,733

(2,210)

310

8,715

0

Profit before tax

 

 

32,531

38,319

31,644

12,436

37,063

74,150

44,290

Tax

(6,132)

(7,942)

(4,967)

(3,110)

(5,713)

(16,303)

(8,415)

Profit after tax (FRS 3)

 

 

26,399

30,377

26,677

9,326

31,350

57,847

35,875

Average diluted number of shares outstanding (m)

118.0

117.2

115.8

114.9

117.3

117.7

118.6

EPS - basic (p)

23.5

27.4

25.1

8.8

29.9

54.2

32.7

EPS - diluted (p)

 

 

22.4

25.9

23.0

8.1

26.7

49.1

30.2

Dividend per share (p)

12.00

12.00

12.00

12.00

12.00

13.50

13.50

NAV per share (p)

113.5

125.0

135.0

131.3

149.8

168.3

184.1

ROE (%)

22%

23%

19%

6.6%

21.2%

33.6%

18.5%

EBITDA margin (%)

26.7%

27.7%

22.7%

13.7%

25.6%

33.5%

27.8%

Operating margin (%)

25.6%

26.7%

21.8%

12.6%

23.6%

31.4%

25.0%

BALANCE SHEET

Fixed assets

 

 

5,522

6,147

8,215

6,832

12,639

52,641

47,905

Current assets

 

 

312,462

407,850

533,033

326,641

509,034

683,319

700,785

Total assets

 

 

317,984

413,997

541,248

333,473

521,673

735,960

748,690

Current liabilities

 

 

(188,895)

(280,371)

(398,112)

(195,319)

(361,397)

(509,654)

(509,654)

Long term liabilities

(12)

0

0

0

(2,643)

(39,580)

(37,376)

Net assets

 

 

129,077

133,626

143,136

138,154

157,633

186,726

201,660

CASH FLOW

Operating cash flow

 

 

48,735

43,369

45,830

(2,748)

65,953

58,329

51,001

Net cash from investing activities

84

(198)

(1,014)

(77)

(474)

(9,190)

(3,390)

Net cash from (used in) financing

(19,580)

(36,359)

(29,035)

(24,646)

(24,451)

(39,857)

(30,145)

Net cash flow

 

 

29,239

6,812

15,781

(27,471)

41,028

9,282

17,466

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)

0

Closing net (cash)/debt

 

 

(89,002)

(95,852)

(111,673)

(84,202)

(125,217)

(134,125)

(151,591)

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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