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Research: Financials
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.
Written by
Numis Corporation |
M&A and private markets make up for lower IPOs |
AGM trading update |
Financial services |
8 February 2022 |
Share price performance
Business description
Next events
Analysts
Numis Corporation is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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
|
|
Research: Industrials
Over several decades Carr’s Group has diversified both within and outside the UK agricultural market. This has reduced the group’s exposure to the vagaries of the British climate, farming policy and volatile commodity prices and taken it into activities that generate substantially higher margins and present opportunities for stronger growth than the traditional agriculture sector in individual countries. However, while the board sees potential for growth in each of the three divisions, there are limited opportunities to exploit inter-divisional synergies, so it has announced a strategic review.