Currency in GBP
Last close As at 27/03/2023
GBP2.15
▲ −3.00 (−1.38%)
Market capitalisation
GBP240m
Research: Financials
The trends seen in Numis’s H222 have continued in the first four months of FY23. Capital markets activity and revenues have been subdued but the strong momentum in M&A advisory has also been maintained, underlining the diversification benefits of previous investments in developing this area. A strong balance sheet provides flexibility to take further opportunities to broaden the group’s capabilities, which should support growth and returns through market cycles.
Numis |
Revenues running in line with H222 |
AGM trading update |
Financial services |
7 February 2023 |
Share price performance
Business description
Next events
Analyst
Numis is a research client of Edison Investment Research Limited |
The trends seen in Numis’s H222 have continued in the first four months of FY23. Capital markets activity and revenues have been subdued but the strong momentum in M&A advisory has also been maintained, underlining the diversification benefits of previous investments in developing this area. A strong balance sheet provides flexibility to take further opportunities to broaden the group’s capabilities, which should support growth and returns through market cycles.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/20 |
154.9 |
37.1 |
26.7 |
12.0 |
8.2 |
5.5 |
09/21 |
215.6 |
74.2 |
49.1 |
13.5 |
4.5 |
6.1 |
09/22 |
144.2 |
20.9 |
11.9 |
13.5 |
18.5 |
6.1 |
09/23e |
151.8 |
24.0 |
16.8 |
13.5 |
13.1 |
6.1 |
Note: *PBT and EPS are on a reported basis and EPS is fully diluted.
4M23 update: Tough background but M&A strong
In its AGM update Numis reported that the overall run-rate for revenues in 4M23 was similar to H222. Within investment banking, capital markets activity remained very subdued but this was mitigated by a continued strong performance from M&A advisory. Notable M&A mandates contributing to revenues in the period included AVEVA, Micro Focus, Euromoney, Countryside Partnerships and Biffa. Equities revenue was slightly ahead of the H222 run-rate benefiting from the significant rally seen in small and mid-cap equity indices.
Focus on strengthening franchise sustained
While Numis notes that the timing of any meaningful recovery in capital markets activity is uncertain it does see some improvement in institutional appetite for both primary and secondary offerings, a potentially encouraging early indicator. The near-term pipeline for M&A activity remains strong. In any event the company continues to concentrate on strengthening and broadening its capabilities, taking opportunities presented by more difficult markets. Evidencing this Numis has hired an experienced banker, Mitesh Soni, to lead a Cleantech team. The company also reports that, as planned, the opening of its Dublin office is enabling it to participate in EU equity capital markets transactions and to distribute offerings from UK issuers across Europe.
Estimates and valuation
Our estimates for the year are unchanged (see Exhibit 5). The shares trade on a price/book value of 1.3x (10-year average c 2x) and an FY23e P/E multiple of 13.1x.
Background
For reference we have updated four charts we use to illustrate the market background for Numis. The first two charts show the very subdued level of equity issuance on both the Main Market and AIM in recent months. As Numis noted, the timing of a revival in capital markets activity is uncertain and given the preparation required for an IPO, new issuance may take some time to revive. Placings, block trades and debt issuance are likely to respond more promptly to improvements in the market background.
Exhibit 1: LSE Main Market issuance (money raised) |
Exhibit 2: LSE AIM issuance (money raised) |
Source: London Stock Exchange (last data January) |
Source: London Stock Exchange (last data January) |
Exhibit 1: LSE Main Market issuance (money raised) |
Source: London Stock Exchange (last data January) |
Exhibit 2: LSE AIM issuance (money raised) |
Source: London Stock Exchange (last data January) |
Trading activity (Exhibit 3) previously peaked with the onset of the pandemic in March 2020 (Main Market) and subsequently on AIM when there was a rotation into higher-risk/small-cap stocks. That rotation was also evident in the relative performance of the CBOE All-Companies and Small-Cap indices. Since then activity levels have been subdued, particularly for AIM, although both markets have shown a tick up in the latest readings. The equity indices (Exhibit 4) fell in reaction to the attack on Ukraine and its economic repercussions. Subsequently there was a recovery and then fluctuations reflecting continuing macroeconomic uncertainty. Again, the most recent trend has been positive as fears regarding the economic outlook have moderated.
Exhibit 3: LSE average daily value traded (£m) |
Exhibit 4: UK equity indices |
Source: London Stock Exchange (Main Market order book and AIM) |
Source: Refinitiv, CBOE indices |
Exhibit 3: LSE average daily value traded (£m) |
Source: London Stock Exchange (Main Market order book and AIM) |
Exhibit 4: UK equity indices |
Source: Refinitiv, CBOE indices |
Exhibit 5: Financial summary
£'000s |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023e |
||
Year end 30 September |
|||||||||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
130,095 |
136,047 |
111,610 |
154,899 |
215,582 |
144,229 |
151,820 |
Administrative expenses (excl. amortisation and depreciation) |
(83,626) |
(94,603) |
(85,432) |
(105,327) |
(133,651) |
(112,275) |
(116,530) |
||
Share based payment |
(10,454) |
(10,583) |
(10,914) |
(9,961) |
(9,634) |
(6,345) |
(6,600) |
||
EBITDA |
|
|
36,015 |
30,861 |
15,264 |
39,611 |
72,297 |
25,609 |
28,690 |
Depreciation |
|
|
(1,226) |
(1,113) |
(1,124) |
(3,016) |
(4,416) |
(4,794) |
(4,858) |
Amortisation |
(89) |
(49) |
(44) |
(105) |
(158) |
(302) |
(260) |
||
Operating Profit |
|
|
34,700 |
29,699 |
14,096 |
36,490 |
67,723 |
20,513 |
23,572 |
Net finance income |
188 |
212 |
550 |
263 |
(2,288) |
1,775 |
400 |
||
Non recurring items |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other operating income |
3,431 |
1,733 |
(2,210) |
310 |
8,715 |
(1,432) |
0 |
||
Profit before tax |
|
|
38,319 |
31,644 |
12,436 |
37,063 |
74,150 |
20,856 |
23,972 |
Tax |
(7,942) |
(4,967) |
(3,110) |
(5,713) |
(16,303) |
(7,153) |
(5,487) |
||
Profit after tax (FRS 3) |
|
|
30,377 |
26,677 |
9,326 |
31,350 |
57,847 |
13,703 |
18,485 |
Average diluted number of shares outstanding (m) |
117.2 |
115.8 |
114.9 |
117.3 |
117.7 |
115.0 |
110.2 |
||
EPS - basic (p) |
27.4 |
25.1 |
8.8 |
29.9 |
54.2 |
12.4 |
17.3 |
||
EPS - diluted (p) |
|
|
25.9 |
23.0 |
8.1 |
26.7 |
49.1 |
11.9 |
16.8 |
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 |
131.6 |
150.0 |
163.3 |
166.4 |
170.5 |
||
ROE (%) |
23% |
19% |
6.6% |
21.2% |
33.6% |
7.4% |
10.0% |
||
EBITDA margin (%) |
27.7% |
22.7% |
13.7% |
25.6% |
33.5% |
17.8% |
18.9% |
||
Operating margin (%) |
26.7% |
21.8% |
12.6% |
23.6% |
31.4% |
14.2% |
15.5% |
||
BALANCE SHEET |
|||||||||
Fixed assets |
|
|
6,147 |
8,215 |
6,832 |
12,639 |
52,641 |
46,487 |
40,467 |
Current assets |
|
|
407,850 |
533,033 |
326,641 |
509,034 |
683,319 |
576,308 |
579,740 |
Total assets |
|
|
413,997 |
541,248 |
333,473 |
521,673 |
735,960 |
622,795 |
620,207 |
Current liabilities |
|
|
(280,371) |
(398,112) |
(195,319) |
(361,397) |
(509,654) |
(396,665) |
(396,665) |
Long term liabilities |
0 |
0 |
0 |
(2,643) |
(39,580) |
(40,909) |
(39,351) |
||
Net assets |
|
|
133,626 |
143,136 |
138,154 |
157,633 |
186,726 |
185,221 |
184,191 |
CASH FLOW |
|||||||||
Operating cash flow |
|
|
43,369 |
45,830 |
(2,748) |
65,953 |
58,330 |
1,174 |
31,913 |
Net cash from investing activities |
(198) |
(1,014) |
(77) |
(474) |
(9,191) |
(1,133) |
(808) |
||
Net cash from (used in) financing |
(36,359) |
(29,035) |
(24,646) |
(24,451) |
(39,857) |
(28,240) |
(27,673) |
||
Net cash flow |
|
|
6,812 |
15,781 |
(27,471) |
41,028 |
9,282 |
(28,199) |
3,432 |
Opening net (cash)/debt |
|
|
(89,002) |
(95,852) |
(111,673) |
(84,202) |
(125,217) |
(134,125) |
(105,653) |
FX effect |
|
|
38 |
40 |
0 |
(13) |
(374) |
(273) |
0 |
Closing net (cash)/debt |
|
|
(95,852) |
(111,673) |
(84,202) |
(125,217) |
(134,125) |
(105,653) |
(109,085) |
Source: Company data, Edison Investment Research
|
|
Research: Healthcare
In a positive development for its US commercial strategy, Respiri has announced receipt of its first reimbursement claims from the Centers for Medicare and Medicaid Services (CMS) for its wheezo remote patient monitoring (RPM) programme (through one of its partners, Access Telehealth), making it the first Australian company to receive RPM reimbursement. As a reminder, a key component of Respiri’s revenue model is a monthly annuity (US$10–20/patient) derived from the CMS reimbursement to prescribing physicians and this announcement marks the first recurring revenue inflows, on top of the revenue from device sales. There are 20 patients on the RPM programme and with onboarding ongoing at multiple locations (500 prospective patients have been identified), we expect the claims quantum to rise in the near term, supporting top-line growth. We await further visibility on commercial progress before revisiting our estimates and for now keep our valuation unchanged at A$0.24/share.
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