Numis — Revenues running in line with H222

Numis Corporation (LSE: NUM)

Currency in GBP

Last close As at 27/09/2023

GBP3.37

0.50 (0.15%)

Market capitalisation

GBP370m

Research: Financials

Numis — Revenues running in line with H222

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.

Andrew Mitchell

Written by

Andrew Mitchell

Director, Financials

Numis-Corporation_resized

Financials

Numis

Revenues running in line with H222

AGM trading update

Financial services

7 February 2023

Price

220p

Market cap

£242m

Net cash (£m) at 30 September 2022

105.7

Shares in issue

110.0m

Free float

75%

Code

NUM

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.8

23.7

(26.5)

Rel (local)

3.5

15.1

(28.1)

52-week high/low

297.0p

170.4p

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 2022, it employed 336 staff in offices in London, Dublin and New York and had 176 corporate clients.

Next events

H123 update (estimated)

End-March 2023

Analyst

Andrew Mitchell

+44 (0)20 3077 5700

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*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

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


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 2023 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 2023 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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Respiri — Dollars in the bank with CMS reimbursement

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