Half-year Results

RNS Number : 3910E

Numis Corporation PLC

08 May 2017

 

Numis Corporation Plc

Half Year Results

for the six months ended 31 March 2017

London, 8 May 2017: Numis Corporation Plc ("Numis") today announces unaudited results for the six months ended 31 March 2017. Numis is the holding company of Numis Securities Limited, the independent corporate advisory and stockbroking business (the "Group").

Highlights

	H1 2017	H1 2016	Change
Revenue	£52.4m	£56.8m	-8%
Total income	£53.8m	£56.9m	-5%
Profit before tax	£10.5m	£16.8m	-38%
Earnings per share	8.0p	12.2p	-34%
Interim dividend	5.5p	5.5p	Flat
Cash balances	£71.2m	£72.0m	-1%
Net assets	£130.7m	£116.5m	+12%

·          Revenue down 8% to £52.4m, against record high revenues recorded in the comparative prior period.  Within this, we saw growth in Equities revenue up 31% to £23.4m offset by a decrease in Corporate Broking and Advisory ("CB&A") revenue which was down 26% to £29.0m.  Overall staff numbers were largely unchanged and we believe our revenue per head remains favourable when compared to industry peers.    

·          Profit before tax down 38% to £10.5m, which includes £1.4m of net gains on our strategic investment portfolio.     

·          We ended the period with cash balances of £71.2m (2016: £72.0m) and net assets of £130.7m (2016: £116.5m).  Lower revenues during the first half of 2017 combined with higher outflows in respect of seasonal expenses resulted in a small net operational cash outflow during the period.  Cash outflows in respect of dividend payments and share repurchases during the period totalled £12.6m (H1 16: £9.0m). This combined cash outflow to shareholders is at its highest in the Group's history for a half year period.

·          The Board has approved an unchanged interim dividend of 5.50p (2016: 5.50p).

·          The strong revenue performance within Equities matched the highest level recorded by the Group for a half year period and was driven by our continued focus on offering best-in-class research, sales and execution services. This was recognised in the Thomson Reuters Extel survey, in which we were ranked No 1 UK Small & Mid Cap Brokerage Firm for the 4th year in a row during 2016.  

·          The performance within CB&A reflects a scarcity of primary equity issuance in the UK market as a whole.  We completed 2 IPOs during the period compared to 10 in the first half of last year. However, we also experienced higher transaction volumes in non-primary activity reflecting the quality and breadth of our client base. During the period we carried out 2 IPOs, 18 secondary fund raises, 17  advisory mandates primarily in M&A and 9 block trades and secondary sell-downs.

·          On 21 March 2017, Alan Carruthers succeeded Gerald Corbett as Non-Executive Chairman. We are delighted to welcome Alan and feel certain that he will make a significant contribution to the continued development and success of Numis.  

·              Trading in the second half has started very well, with the completion of 10 corporate transactions generating over £10m of fees and a continuation of the high levels of revenue seen within our Equities division. When coupled with our deal pipeline, this gives us confidence that the business will have a satisfactory outcome for the full year.

Alex Ham and Ross Mitchinson, Co-Chief Executive Officers, said:

"Numis delivered a creditable performance when viewed against record revenue generation in the comparable prior period and muted primary issuance market-wide. The business remains focussed on servicing its high quality corporate client base whilst, at the same time, expanding the franchise into supporting unquoted as well as quoted companies.   

We believe our ability to nurture relationships with entrepreneurs and business leaders ranging from first fund-raisers through to stock market IPO candidates and into FTSE 100 market leaders gives us a unique insight into the UK's most exciting businesses.  When coupled with the strong relationships we enjoy with our institutional clients, this provides an excellent platform from which to further develop and build the business."

Contacts:

Numis Corporation:               

Alex Ham & Ross Mitchinson, Co-Chief Executives                   020 7260 1245

Simon Denyer, Group Finance Director                                       020 7260 1225

Brunswick:

Gill Ackers                                                                                020 7404 5959

Simone Selzer                                                                           020 7404 5959

Grant Thornton UK LLP (Nominated Adviser):
Philip Secrett                                                                             020 7728 2578
Harrison J Clarke                                                                      020 7184 4384 

Notes for Editors

Numis is a leading independent corporate advisory and stockbroking group offering a full range of research, execution, corporate broking and advisory services to companies in the UK and their investors. 

Alan Carruthers was appointed non-executive chairman of Numis on 21 March 2017. The details regarding his appointment are contained in our market announcement made on that date.   

Review of Performance

Overall Performance

We are pleased to report that the business has delivered a creditable performance during the six months ended 31 March 2017 against a mixed market backdrop and record levels of income recorded in the comparative prior period. During the six months ended 31 March 2017, total income decreased by 5% to £53.8m (2016: £56.9m) and profit before tax decreased by 38% to £10.5m (2016: £16.8m).  Profit before tax includes £1.4m of net gains recognised on investments held outside of our market making business (2016: £0.2m).  Our balance sheet remains strong with cash balances totalling £71.2m (2016: £72.0m) while net assets have increased to £130.7m (2016: £116.5m).  

Market Conditions

For the period from 1 October 2016 to 31 March 2017, all major UK equity indices recorded growth of 6% or more with the small cap sector approaching double-digit growth. Much of this performance was evenly spread across the period as the markets consolidated their view on Brexit and the US Presidential election result. During the period, the Numis Smaller Companies Index generated returns of +10.3%, and the Numis UK Mid Cap Index +7.7%, reflecting the relatively strong performance of this sector of the market.

For the market as a whole, the value of secondary trading on the London Stock Exchange has shown an improvement on the comparable six month period. However, equity issuance across the market has not experienced any appreciable upturn, with equity funds raised on AIM and the Main Market combined totalling £13.6bn, down 1% versus the comparable prior period. M&A activity across the market has also been muted although, as we are seeing within our own client base, the continued relative weakness of sterling combined with increasing availability of cheap finance is beginning to fuel M&A activity.

Corporate Broking & Advisory ("CB&A")

We believe in building long-term relationships with our corporate clients, endeavouring to provide them with service of exceptional quality, which is tailored to their needs. We pride ourselves on the strength of these relationships, which we believe is reflected in the momentum that we enjoy both in client numbers, as well as longevity of relationship and in fee generation over time.

Revenue from CB&A activities for the period totalled £29.0m (2016: £38.9m).  We have seen a scarcity of primary equity issuance in the UK market as a whole and M&A activity has yet to fully benefit our top line.  Whilst we are not immune to such conditions, our corporate division has experienced higher transaction volumes in non-primary activity than the same period last year, reflecting the quality of our client base. During the period we carried out 2 IPOs, 18 secondary fund raises, 17 advisory mandates primarily in M&A and 9 block trades and secondary sell-downs.  Our market share of UK ECM activity remains intact and we are ranked 4th in the UK ECM league tables for the six month period ending 31 March 2017.

We continue to attract high quality corporate clients in order to offset inevitable departures resulting from M&A and ended the period with 199 companies for whom we act as broker. The market capitalisation of our client list now averages around £637m, but it is important to note that the median is £276m and we remain as committed as ever to the small cap space. This is reflected in our wins during the period, which have included businesses from £48m market cap to well over £1bn market cap. We remain ranked #2 Broker and #2 Adviser overall by total number of stock market clients as per the most recent Corporate Advisers Rankings Guide.

Notable deals completed during the period included IPOs for Luceco and Premier Asset Management and a number of secondary raises for our corporate clients including INPP, Learning Technologies Group, Bluefield Solar Income Fund and John Menzies. In addition, we raised £150m through a private placement for Accelerated Digital Ventures and now act as financial advisor to two unquoted companies. In total, we raised £0.7bn of equity capital during the period (2016: £1.2bn).

Building our corporate advisory capabilities remains a major area of focus. We completed 17 pure advisory roles during the period including the acquisition by the McColl's Retail Group of 298 stores from the Co-operative Group, John Menzies acquisition of ASIG and the recommended offer by Madison Dearbom Partners for Powerflute.

We have also built up a strong track record in the successful execution of block trades and secondary sell downs.  During the period, we executed 9 such transactions with an aggregate value of £1.1bn.  We continue to develop our ability to conduct private placements. There is an ever deeper and more developed pool of capital that is happy to own unlisted securities, and often private companies want to access this capital without going through an IPO. In November we took part in a £150m private placement in Accelerated Digital Ventures and helped to raise money privately for Oxford Science & Innovation. This is an exciting growth area, which plays well to our strengths in matching up UK growth companies with sophisticated and long-term investors. Our Venture Broking team spend a significant amount of time and energy filtering those private companies, and we continue to expand our network of investors in this space as well as the resource that we devote to those opportunities.

Equities

High quality research and sales is at the heart of our Equities business. It creates relationships based on trust with our institutional clients and is at the core of our powerful international distribution capability. Our sector analysts cover approximately 370 companies across 16 sectors, whilst our Investment Funds research team covers around 400 investment companies and funds. Our highly regarded sales team provides a service to more than 440 active institutional clients across the UK, Europe, the Americas and Australia. Data from Starmine and the various alpha capture systems continue to demonstrate the very impressive value we add to our institutional clients.

Our US office continues to provide a best-in-class service in marketing UK equities to major North American institutional investors, including managing a significant number of roadshows and reverse roadshows. Our distribution offering also extends to the Private Client Fund Managers ("PCFM") through our PCFM team, who access a network of over 3,000 active fund managers at 200 PCFM houses in the UK, who collectively can be a very powerful pool of liquidity. 

We provide execution services in over 670 stocks, of which over 500 are listed on the Main Market of the London Stock Exchange. During the period we had #1 market share in 129 stocks (FY 2016: 127) across these markets, and were a top 3 provider in a further 80 stocks (FY 2016: 92). With access to multiple trading venues and liquidity providers, we are able to deliver an exceptionally strong execution capability to our institutional clients. 

Combined institutional commission & trading revenues for the period were impressive, totalling £23.4m (2016: £17.8m), an increase of 31%, and matched the highest level recorded by the Group for a half year period. Whilst there was an overall increase in market volume and value traded, we continue to gain market share of direct customer business and to prosper despite the rise of electronic trading systems and dark pools of liquidity.

Our well-resourced market-making and sales-trading teams ensure that we are very well placed to source liquidity on behalf of our institutional clients, which often requires skill and human effort that cannot be found in a dark pool or standalone electronic trading venue. The growth in institutional commissions was achieved despite the changes to the institutional broker payment model as they look to embrace MiFID II, which is due to be implemented in January 2018.  Our trading revenues saw a healthy increase and were achieved on moderately lower levels of capital usage.

Costs and People

Administrative expenses for the period totalled £43.3m (2016: £40.4m). Compensation costs as a percentage of revenue have increased to 58% (2016: 50%).  This is wholly attributable to an increase in share award related charges which, in part, reflects the increase in the Company's share price over the six month period ending 31 March 2017. Despite this, compensation costs are marginally below that recorded in the second half of 2016.

Non-compensation costs comprise expenses incurred in the normal course of business, the most significant of which relate to technology, information systems, market data, brokerage, clearing and exchange fees and occupancy.  The current non-compensation cost run-rate is 3% above that seen in the second half of 2016 and is likely to experience upward pressure as we increasingly commit resource to the implementation of MiFID II amongst other regulatory and business initiatives.

Average headcount remained stable at 214 (2016: 213) and we ended the period with a headcount of 217 (end 2016: 220). 

The calibre and dedication of our people was instrumental in Numis being voted #1 UK Small & Mid Cap Brokerage Firm by both companies and institutions for the fourth year in succession in the 2016 Thomson Reuters Extel Survey.

Strategic Investments

The value of our strategic investments total £32.3m (30 September 2016: £29.8m). Of this value, £17.1m is in quoted and fairly liquid securities, whilst £15.2m is invested in unquoted securities. The movement during the period reflects new investments and follow-on funding totalling £1.3m coupled with £1.2m of net fair value uplifts of which the majority came from our unquoted investments. We continue to believe the majority of these investments are complementary to our existing core business and that they offer an exciting opportunity for the Group to grow its presence in areas in which it has expertise or a relevant network of investors. Going forward, we will explore opportunities for re-cycling the portfolio where we see attractive investment propositions which are strategically relevant. 

Financial Position

Our balance sheet strengthened further during the period, with cash balances totalling £71.2m (2016: £72.0m), while net assets have increased to £130.7m (2016: £116.5m).  Cash balances remain broadly unchanged to those reported at 31 March 2016 but are down £17.8m on that reported as at 30 September 2016.  The cash used in operating activities during the six months ended 31 March 2017 reflects the lower operational inflows, principally due to lower cash-based revenues, combined with outflows in respect of seasonal expense items which fall within the first half of our financial year and an increase in the cash margin placed in respect of secondary trading activity.

We have been able to maintain dividend distributions (£7.3m cash outflow) in addition to the repurchase of shares into Treasury and the Employee Benefit Trust (£5.3m cash outflow) during the period. This combined cash outflow to shareholders is at its highest in the Group's history for a half year period and, in respect of the buy-back activity, compares to a £6.7m spend during the whole of our 2016 financial year.

Board Changes

On 21 March 2017, the Company announced the appointment of Alan Carruthers as Non-Executive Chairman.  Alan replaced Gerald Corbett who stepped down from the Board on the same date.  We are delighted to welcome Alan and feel certain that he will make a significant contribution to the continued development and success of Numis.   

Dividend

The Board has approved the payment of an interim dividend of 5.50p per share (2016: interim 5.50p per share, 2016 total:  12.00p per share). This dividend will be payable on 23 June 2017 to shareholders on the register of members at the close of business on 19 May 2017.  Shareholders have the option to elect to use their cash dividend to buy additional shares in Numis through a Dividend Re-Investment Plan (DRIP).

Current Trading and Outlook

Our second half has started very well with the completion of 10 fund raises generating fees of over £10m.  Equities revenues continue to run at the high levels seen in the first half.  The recent call for a general election in the UK during the summer as well as geo-political events further afield will undoubtedly cause an element of uncertainty. 

We will continue to focus our efforts on providing high quality independent advice to our clients.  We have a robust balance sheet, a quality corporate client base and a strong deal pipeline all of which positions Numis well to enjoy future success and gives us confidence that the business will have a satisfactory outcome for the full year.

Alex Ham & Ross Mitchinson

Co-Chief Executives

8 May 2017

Consolidated Income Statement

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2017

		6 months ended	6 months ended	Year ended
		31 March 2017	31 March 2016	30 September 2016
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Revenue	3	52,388	56,769	112,335
Other operating income	4	1,441	156	3,759
Total income		53,829	56,925	116,094
Administrative expenses	5	(43,340)	(40,353)	(83,600)
Operating profit		10,489	16,572	32,494
Finance income	6	179	224	427
Finance costs	6	(203)	(31)	(390)
Profit before tax		10,465	16,765	32,531
Taxation		(1,636)	(3,093)	(6,132)
Profit after tax		8,829	13,672	26,399
Attributable to:
Owners of the parent		8,829	13,672	26,399
Earnings per share	7
Basic		8.0p	12.2p	23.5p
Diluted		7.6p	11.6p	22.4p

Consolidated Statement of Comprehensive Income

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2017

		6 months ended	6 months ended	Year ended
		31 March 2017	31 March 2016	30 September 2016
		Unaudited	Unaudited	Audited
		£'000	£'000	£'000
Profit for the period		8,829	13,672	26,399
Exchange differences on translation of foreign operations		11	174	630
Other comprehensive income for the period, net of tax		11	174	630
Total comprehensive income for the period, net of tax, attributable to the owners of the parent		8,840	13,846	27,029

Consolidated Balance Sheet

UNAUDITED AS AT 31 MARCH 2017

		31 March 2017	31 March 2016	30 September 2016
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	9a	3,479	4,118	3,734
Intangible assets		78	178	122
Deferred tax	9b	2,502	1,923	1,666
		6,059	6,219	5,522
Current assets
Trade and other receivables	9c	272,151	179,680	170,490
Trading investments	9d	49,003	46,075	48,453
Stock borrowing collateral	9e	11,154	4,041	3,901
Derivative financial instruments		682	709	616
Cash and cash equivalents	9g	71,199	71,990	89,002
		404,189	302,495	312,462
Current liabilities
Trade and other payables	9c	(259,720)	(178,449)	(173,031)
Financial liabilities	9f	(17,606)	(10,567)	(12,293)
Current income tax		(2,198)	(3,171)	(3,571)
		(279,524)	(192,187)	(188,895)
Net current assets		124,665	110,308	123,567
Non current liabilities
Deferred tax	9b	(11)	(4)	(12)
Net assets		130,713	116,523	129,077
Equity
Share capital		5,922	5,922	5,922
Share premium		38,854	38,854	38,854
Other reserves		10,183	6,611	8,238
Retained earnings		75,754	65,136	76,063
Total equity		130,713	116,523	129,077

Consolidated Statement of Changes in Equity

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2017

		Share capital £'000	Share premium £'000	Other reserves £'000	Retained earnings £'000	Total £'000
Balance at 1 October 2015		5,922	38,854	5,631	65,112	115,519
Profit for the period					13,672	13,672
Other comprehensive income				174	-	174
Total comprehensive income for the period				174	13,672	13,846
Dividends paid					(12,861)	(12,861)
Movement in respect of employee share plans				806	1,230	2,036
Deferred tax related to share based payments					(158)	(158)
Net movement in Treasury shares					(1,859)	(1,859)
Transactions with shareholders		-	-	806	(13,648)	(12,842)
Balance at 31 March 2016		5,922	38,854	6,611	65,136	116,523

Balance at 1 October 2015		5,922	38,854	5,631	65,112	115,519
Profit for the year					26,399	26,399
Other comprehensive income				630	-	630
Total comprehensive income for the year				630	26,399	27,029
Dividends paid					(12,861)	(12,861)
Movement in respect of employee share plans					1,470	1,470
Deferred tax related to share based payments				1,977	(3,559)	(1,582)
Net movement in Treasury shares					(498)	(498)
Transactions with shareholders				1,977	(15,448)	(13,471)
Balance at 30 September 2016		5,922	38,854	8,238	76,063	129,077

Balance at 1 October 2016		5,922	38,854	8,238	76,063	129,077
Profit for the period					8,829	8,829
Other comprehensive income				11	-	11
Total comprehensive income for the period				11	8,829	8,840
Dividends paid					(7,307)	(7,307)
Movement in respect of employee share plans				1,934	(1,199)	735
Deferred tax related to share based payments					271	271
Net movement in Treasury shares					(903)	(903)
Transactions with shareholders		-	-	1,934	(9,138)	(7,204)
Balance at 31 March 2017		5,922	38,854	10,183	75,754	130,713

Consolidated Statement of Cash Flows

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2017

		6 months ended	6 months ended	Year ended
		31 March 2017	31 March 2016	30 September 2016
		Unaudited	Unaudited	Audited
	Notes	£'000	£'000	£'000
Cash (used in)/from operating activities	10	(1,217)	23,139	53,398
Interest paid		(34)	(2)	(182)
Taxation paid		(3,576)	(1,768)	(4,481)
Net cash (used in)/from operating activities		(4,827)	21,369	48,735
Investing activities
Purchase of property, plant and equipment		(344)	(174)	(346)
Purchase of intangible assets		-	-	-
Interest received		179	219	430
Net cash (used in)/from investing activities		(165)	45	84
Financing activities
Purchase of own shares - Employee Benefit Trust		(2,114)	(410)	(3,000)
Purchase of own shares - Treasury		(3,215)	(1,859)	(3,719)
Dividends paid		(7,307)	(6,713)	(12,861)
Net cash used in financing activities		(12,636)	(8,982)	(19,580)
Net movement in cash and cash equivalents		(17,628)	12,432	29,239
Opening cash and cash equivalents		89,002	59,591	59,591
Net movement in cash and cash equivalents		(17,628)	12,432	29,239
Exchange movements		(175)	(33)	172
Closing cash and cash equivalents		71,199	71,990	89,002

 

Notes to the Financial Statements

1.      Basis of preparation

Numis Corporation Plc is a UK AIM traded company incorporated and domiciled in the United Kingdom. The address of its registered office is 10 Paternoster Square, London, EC4M 7LT.  The Company is incorporated in the United Kingdom under the Companies Act 2006 (company registration No. 2375296).

The consolidated financial information contained within these financial statements is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. These financial statements have been prepared in accordance with AIM Rule 18. The statutory accounts for the year ended 30 September 2016, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies.  The report of the independent auditor on those statutory accounts contained no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.

The preparation of these interim financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The judgements and estimates applied by the Group in these interim financial statements have been applied on a consistent basis with the statutory accounts for the year ended 30 September 2016.  Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those of estimates.

These interim financial statements are prepared on the historical cost basis, except for the revaluation of certain financial instruments.

These interim financial statements are prepared on a going concern basis as the directors have satisfied themselves that, at the time of approving these interim financial statements, the Group has adequate resources to continue in operational existence for at least the next twelve months.

During the period, a number of amendments to IFRS became effective and were adopted by the Company and the Group.  None of these amendments have a material impact on the Group's income statement, statement of comprehensive income, balance sheet, statement of changes in equity or statement of cash flows.

2.     Segmental reporting

Geographical information

The Group is managed as an integrated corporate advisory and stockbroking business and although there are different revenue types (which are separately disclosed in note 3) the nature of the Group's activities is considered to be subject to the same and/or similar economic characteristics.  Consequently the Group is managed as a single business unit.

The Group earns its revenue in the following geographical locations:

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
United Kingdom	47,778	51,670	102,684
United States of America	4,610	5,099	9,651
	52,388	56,769	112,335

The following is an analysis of the carrying amount of non-current assets (excluding financial instruments and deferred tax assets) by the geographical area in which the assets are located:

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
United Kingdom	3,482	4,160	3,744
United States of America	75	136	112
	3,557	4,296	3,856

Other information

In addition, the analysis below sets out the income performance and net asset split between our core corporate advisory and stockbroking business and the small number of equity holdings which constitute our investment portfolio. 

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Net institutional income	23,433	17,832	38,419
Total corporate transaction revenues	23,340	34,446	64,293
Corporate retainers	5,615	4,491	9,623
Revenue (see note 3)	52,388	56,769	112,335
Investment activity net gains	1,441	156	3,759
Contribution from investment portfolio	1,441	156	3,759
Total income	53,829	56,925	116,094

Net assets	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Corporate advisory & broking	27,262	19,128	10,243
Investing activities	32,252	25,405	29,832
Cash and cash equivalents	71,199	71,990	89,002
Total net assets	130,713	116,523	129,077

3.     Revenue

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Net trading gains	4,997	1,780	6,496
Institutional commissions	18,436	16,052	31,923
Net institutional income (Equities)	23,433	17,832	38,419
Corporate retainers	5,615	4,491	9,623
Advisory fees	6,890	8,514	16,261
Placing commissions	16,450	25,932	48,032
Net corporate income (CB&A)	28,955	38,937	73,916
	52,388	56,769	112,335

4.      Other operating income

Other operating income represents net gains made on investments which are held outside of the market making portfolio. The gains reflect price movements on quoted holdings, fair value adjustments on unquoted holdings and related dividend income. Broadly, half of the net gains recorded in the current period result from fair value adjustments on unquoted holdings.   

5.     Administrative expenses

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Staff costs	30,254	28,281	58,882
Non-staff costs	13,086	12,072	24,718
	43,340	40,353	83,600

The average number of employees during the period has increased marginally to 214 (H1 2016: 213).  Staff costs excluding share award related charges have reduced by 6% compared to the prior period.  However, an increase in the Company's share price between 30 September 2016 and 31 March 2017 (219.0p to 246.5p) combined with the granting of performance based share awards within the last seven months has resulted in an overall increase in staff costs versus H1 2016.  Despite this, staff costs are marginally below that recorded for H2 2016.  

The major components of non-staff costs comprise our technology platform, premises costs and expenses incurred through brokerage, clearing and exchange fees. Certain elements within non-staff costs increase with activity levels, particularly brokerage, clearing and exchange fees which account for almost half of the increase seen versus the prior period.  This is in-line with the 15% increase seen in institutional commission over the same period.  The current non-staff cost run-rate is 3% above that seen in H2 2016 and is likely to experience upward pressure as we increasingly commit resource to the implementation of MiFD II amongst other regulatory and business initiatives.

6.     Finance income and Finance costs

Finance income for the period:

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Interest income	179	224	427

Finance costs for the period:

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Net foreign exchange losses	167	24	380
Interest expense	36	7	10
	203	31	390

7.     Earnings per share

Basic earnings per share is calculated on profits after tax of £8,829,000 (2016: £13,672,000) and 110,544,897 (2016: 111,887,475) ordinary shares being the weighted average number of ordinary shares in issue during the period. Diluted earnings per share takes account of contingently issuable shares arising from share scheme award arrangements where their impact would be dilutive.  In accordance with IAS 33, potential ordinary shares are only considered dilutive when their conversion would decrease the profit per share or increase the loss per share from continuing operations attributable to the equity holders.  Therefore shares that may be considered dilutive while positive earnings are being reported may not be dilutive while losses are incurred.

The calculations exclude shares held by the Employee Benefit Trust on behalf of the Group and shares held in Treasury.

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	Number	Number	Number
	Thousands	Thousands	Thousands
Weighted average number of ordinary shares  in issue during the period - basic	110,545	111,887	112,255
Dilutive effect of share awards	6,184	6,356	5,755
Diluted number of ordinary shares	116,729	118,243	118,010

8.     Dividends

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Final dividend year ended 30 September 2015 (6.00p)		6,713	6,713
Interim dividend year ended 30 September 2016 (5.50p)		6,148	6,148
Final dividend year ended 30 September 2016 (6.50p)	7,307
Distribution to equity holders of Numis Corporation Plc	7,307	12,861	12,861

The Board has approved the payment of an interim dividend of 5.50p per share (2016: interim 5.50p per share). This dividend will be payable on 23 June 2017 to shareholders on the register of members at the close of business on 19 May 2017. These financial statements do not reflect this dividend payable.

9.     Balance sheet items

(a)       Property, plant and equipment

The Group's offices in London underwent a program of refurbishment during 2015.  No material additions have been made since then.

(b)      Deferred tax

As at 31 March 2017 deferred tax assets totalling £2,502,000 (30 September 2016: £1,666,000) have been recognised reflecting managements' confidence that there will be sufficient levels of future taxable profits against which these deferred tax asset can be utilised. The deferred tax asset principally comprises amounts in respect of unvested share based payments. 

(c)       Trade and other receivables and Trade and other payables

Trade and other receivables and trade and other payables principally comprise amounts due from and due to clients, brokers and other counterparties. Such amounts represent unsettled sold and unsettled purchased securities transactions and are stated gross. The magnitude of such balances varies with the level of business being transacted around the reporting date. Included within Trade and other receivables are cash collateral balances held with securities clearing houses of £10,430,000 (30 September 2016: £7,670,000).

(d)      Trading investments

Included within trading investments is £32,252,000 (30 September 2016: £29,832,000) of investments held outside of the market making portfolio. The increase during the period is evenly split between net fair value adjustments and additional investments, some of which were follow-on raises.     

(e)       Stock borrowing collateral

The Group enters stock borrowing arrangements with certain institutions which are entered into on a collateralised basis with cash advanced as collateral. Under such arrangements a security is purchased with a commitment to return it at a future date at an agreed price. The securities purchased are not recognised on the balance sheet.  Where cash has been used to affect the purchase, an asset is recorded on the balance sheet as stock borrowing collateral at the amount of cash collateral advanced or received.

In the rare event that trading investments are pledged as security these remain within trading investments and the value of security pledged disclosed separately except in the case of short-term highly liquid assets with an original maturity of three months or less, which are reported within cash and cash equivalents with the value of security pledged disclosed separately.

(f)       Financial liabilities

Financial liabilities comprise short positions in quoted securities arising through the normal course of business in facilitating client order flow and form part of the market making portfolio.

(g)      Cash and cash equivalents

Cash balances are at similar levels to those reported at 31 March 2016.  This has been achieved whilst maintaining dividend distributions (£7.3m cash outflow) and the repurchase of shares into Treasury and the Employee Benefit Trust (£5.3m cash outflow).  This combined cash outflow to shareholders is at its highest in the Group's history for a half year period.

10.     Reconciliation of profit before tax to cash from operating activities

	6 months ended	6 months ended	Year ended
	31 March 2017	31 March 2016	30 September 2016
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Profit before tax	10,465	16,765	32,531
Net finance (expense)/income	24	(193)	(37)
Depreciation charge on property, plant and equipment	604	554	1,126
Amortisation charge on intangible assets	44	69	125
Share scheme charges	4,975	2,513	6,229
(Increase)/decrease in current asset trading investments	(550)	11,546	9,168
Increase in trade and other receivables	(101,665)	(19,183)	(10,476)
Net movement in stock borrowing	(7,253)	(3,219)	(3,079)
Increase in trade and other payables	92,205	14,313	17,744
(Increase)/decrease in derivatives	(66)	(26)	67
Cash (used in)/from operating activities	(1,217)	23,139	53,398

The cash used in operating activities during the six months ended 31 March 2017 reflects the lower operational inflows, principally due to lower cash-based revenues, combined with outflows in respect of seasonal expense items which fall within the first half of our financial year and an increase in the cash margin placed in respect of secondary trading activity directed through the London Clearing House.

 

END

 

 

IR LLFSREIIEIID