Preliminary Results

RNS Number : 4300J

Numis Corporation PLC

03 December 2008

 



EMBARGOED FOR RELEASE 7:00 am Wednesday 3 December 2008

Numis Corporation Plc Preliminary Results 

for the year ended 30 September 2008

Numis Corporation Plc ('Numis') today announces preliminary results for the year ended 30 September 2008. Numis is the holding company of Numis Securities Limited, the independent investment banking and broking business.

Financial Highlights

 

·                     Profit before tax £16.1m (2007: £38.8m)

 

·                     Profit after tax £14.8m (2007: £27.6m)

 

·                     Earnings per share 14.9p (2007: 27.5p)

 

·                     Final dividend of 5.00p, making a total dividend of 7.50p per share (2007: 7.00p)

 

 

Operational Highlights

 

·                     Voted Leading Brokerage Firm for UK Small Caps in The Thomson Extel 2007 survey (UK companies up to £1bn market cap) and Voted 2nd place overall in the equivalent 2008 survey

 

·                     Institutional commission remains resilient during a period of reduced volumes and falling share prices

 

·                     Corporate client base increased to 111 (2007: 109) with 10 of these being FTSE 250 and 21 new corporate brokerships won during the year

     

·                     Strong balance sheet with net assets of £118.4m (2007: £109.0m) and current cash and collateral balances of £80.6m

Commenting on the results, Oliver Hemsley, Chief Executive, said: 

'Despite the challenging market conditions we continue to attract clients and talent; and benefit from a strong operating platform. With our very strong balance sheet and prudent risk management we remain confident that Numis will emerge from the current financial turmoil as a leading player in the UK investment banking and stockbroking arena'.

Contacts:

Oliver Hemsley, Chief Executive	020 7260 1256
Bill Trent, CFO	020 7260 1333
Brunswick:
Gill Ackers	020 7396 5382
Carole Cable	020 7396 7458
PricewaterhouseCoopers LLP (Nominated Adviser):
Simon Boadle	020 7583 5000
Jon Raggett	020 7583 5000

  CHIEF EXECUTIVE'S STATEMENT

We are pleased to report another profitable year for Numis, a creditable performance in very challenging conditions. For the year ended 30 September 2008 total revenue was £51.4m (2007: £87.6m) and profit before tax for the year was £16.1m (2007: £38.8m). Profit after tax for the year was £14.8m (2007: £27.6m) and earnings per share were 14.9p (2007: 27.5p) while net assets increased to £118.4m (2007: £109.0m). 

There can be no doubt that a virtual cessation of capital markets activity coupled with a lack of liquidity present an extraordinarily challenging business environment. Therefore, it is pleasing to note that, against this back-drop, our secondary market business continues to generate resilient levels of income, both in the UK and US. Numis has also made great strides in building its franchise and whilst maintaining a very healthy balance sheet and appropriate cost control, we have been successful in recruiting some first class people during the year. We are particularly pleased to note the arrival of our new Investment Trust team and our increased capacity in program trading, both of which are developing into successful businesses. Since the year end we have attracted the pre-eminent mid-cap sales team together with industry leading corporate brokers and top ranked analysts.

Our investing activities have not been immune to the deterioration in market conditions. As previously reported, during the year we crystallised a profit through the IPO of Abbey Protection Ltd. This has more than offset the losses incurred on other investments and, excluding the gain treated as a profit on disposal of associate, the aggregate result for investment activities has been a modest profit of £0.7m.   

Numis' focus on balance sheet strength and risk management has proved its worth during the recent banking failures. It has enabled us to provide and maintain an excellent service to institutional and corporate clients during volatile and uncertain market conditions. Whilst we have avoided any exposure to the sub-prime and other credit markets, we are not immune from the challenging stock market conditions, but we are well positioned and remain committed to building the business during the downturn.  

Corporate Broking and Advisory

The results this year clearly have been affected by a much reduced equity capital raising activity. Total equity money raised on the LSE main and junior markets excluding bank rescues is 51% lower than last year. Therefore we are pleased to report that our clients raised a total of £654m (2007: £1,182m) through 20 transactions (2007: 40). Numis' ability to source mandates for private placements as well as for primary and secondary market offerings has continued to make a difference to our performance. The number of corporate clients for whom we act has risen over the year to 111 (September 2007: 109) and has resulted through 21 new corporate brokerships being won, partially offset by losses attributable, in the main, to M&A and takeover activity.  

Research, Sales and Trading

Our research and execution services are recognised as being exceptional. In the 2008 Thomson Extel survey, Numis was rated 2nd overall broker for UK companies of up to £1bn market capitalisation. Our research teams were ranked in the top 3 in a majority of sectors that we cover. Our highly rated independent analysts produce research on nearly 300 companies and we have a recognised capability in 14 sectors, including aerospace & defence, building & property, engineering, consumer goods, media, metals & mining, new energy & emissions, non-life insurance, retail, speciality financials, support services, technology, travel & leisure, and investment trusts & funds.

Our execution services continue to make a major contribution to the development of our reputation and the resilience of our institutional commissions. It is pleasing to note that, in the FTSE 250 stocks in which we trade, our market share has shown significant improvement throughout the year. Our execution business is focused on client facilitation, rather than generating proprietary trading profits and was rewarded with a 2nd place in the 2008 Thomson Extel survey. Having developed algorithmic and other electronic trading capabilities during the course of last year we continue to seek best execution for our institutional clients across multiple execution venues.  

Sales & Trading is a competitive area with pressure on commission levels for trades in liquid stocks from electronic trading. However, clients have a strong demand for independent and well-researched ideas combined with high quality execution. We believe our platform is well placed to improve performance for our 450+ institutional clients across the UK, Europe and the USA. 

Investment Business

During the year we used the strength of our balance sheet to increase our stake in Paternoster, the insurance company set up by Numis and Mark Wood to purchase closed final salary pension schemes and we have also made an investment in Randall & Quilter, the non-life run off insurance provider. Following the disposal of our associate holding in Abbey Protection we also disposed of our investment in Pinnacle Regeneration Group Ltd. The investment portfolio was valued at £29.7m as at 30 September 2008 (current value £25.3m) and includes a small number of quoted and private company holdings. We continue to monitor the performance of these investments and, where prudent and appropriate to do so, explore their monetisation.  

Dividend and Scrip Alternative

The Board has proposed a final dividend of 5.00p per share (2007: 5.00p) giving a total distribution of 7.50p per share (2007: 7.00p). The dividend will be payable on 6 February 2009 to all shareholders on the register at 12 December 2008. Shareholders will be offered the option to receive shares instead of a cash dividend, the details of which will be explained in a circular to accompany our Annual Report, which will be circulated to all shareholders on 5 January 2009.

Post year-end trading and outlook

Although market conditions remain challenging to both our securities and investment activities, Numis will use this period of market dislocation to attract high quality staff and corporate clients to the organisation. During the previous downturn of 2001 to 2003, Numis expanded significantly, building the business whilst others were retrenching. Our ability to act in a contracyclical fashion is what sets us apart from our competitors and is the reason why we have maintained very strong cash balances in the group.  

We cannot predict when conditions will improve but we can use this very difficult period to our advantage. We are increasingly confident that Numis will emerge from this financial turmoil as a key player in the UK investment banking and stockbroking arena.  

Oliver Hemsley

Chief Executive

2 December 2008

Consolidated Income Statement

FOR THE YEAR ENDED 30 SEPTEMBER 2008

			2008		2007
Continuing operations	Notes		£'000		£'000
Revenue	3		50,714		85,694
Other operating income			723		1,898
Total revenue			51,437		87,592
Administrative expenses	4		(47,757)		(54,097)
Operating profit			3,680		33,495
Analysed as follows:
Operating profit before exceptional non-recurring items			3,680		35,691
Exceptional non-recurring items	5		-		(2,196)
Operating profit			3,680		33,495
Share of results of associates			803		1,469
Profit on disposal of associate	6		5,854		-
Finance income			5,816		4,121
Finance costs			(60)		(285)
Profit before tax			16,093		38,800
Taxation			(1,317)		(11,169)
Profit after tax			14,776		27,631
Attributable to:
Equity holders of the parent			14,776		27,631
Earnings per share
Basic	7		14.9		27.5
Diluted	7		14.6		26.8
Memo - dividends	8		(7,700)		(5,876)

  Consolidated Balance Sheet

AS AT 30 SEPTEMBER 2008

					As restated
			2008		2007
	Notes		£'000		£'000
Non current assets
Property, plant and equipment			3,086		3,238
Intangible assets			290		382
Associates			-		3,063
Derivative financial instruments			1,796		1,071
Deferred tax			-		1,840
			5,172		9,594
Current assets
Trade and other receivables			221,373		157,086
Trading investments			36,136		38,106
Stock borrowing collateral			92		8,605
Derivative financial instruments			3,010		4,000
Current income tax			836		-
Cash and cash equivalents	1		59,899		76,666
			321,346		284,463
Current liabilities
Trade and other payables			(206,126)		(169,089)
Financial liabilities			(1,287)		(8,237)
Provisions			(75)		(2,377)
Current income tax			-		(3,391)
			(207,488)		(183,094)
Net current assets			113,858		101,369
Non current liabilities
Provisions			(616)		(1,927)
Net Assets			118,414		109,036
Equity
Share capital			5,378		5,324
Share premium account			24,719		22,376
Capital reserve			541		294
Retained profits			87,776		81,042
Equity attributable to equity holders of the parent			118,414		109,036

Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 30 SEPTEMBER 2008

		Share	Share	Capital	Retained
		Capital	Premium	Reserve	Profits	Total
		£'000	£'000	£'000	£'000	£'000
Attributable to equity holders of the parent at 1 October 2007		5,324	22,376	294	81,042	109,036
New shares		54	2,343	-	-	2,397
Profit after tax					14,776	14,776
Dividends paid					(7,700)	(7,700)
Items related to share based payments					(1,313)	(1,313)
Exchange differences on translation of foreign operations				(36)	-	(36)
Movement in respect of employee share plans				283	1,002	1,285
Other					(31)	(31)
Attributable to equity holders of the parent at 30 September 2008		5,378	24,719	541	87,776	118,414

Attributable to equity holders of the parent at 1 October 2006		5,295	20,727	68	67,481	93,571
New shares		29	1,649	-	-	1,678
Profit after tax					27,631	27,631
Dividends paid					(5,876)	(5,876)
Items related to share based payments					100	100
Exchange differences on translation of foreign operations				125	-	125
Movement in respect of employee share plans				101	(8,118)	(8,017)
Other					(176)	(176)
Attributable to equity holders of the parent at 30 September 2007		5,324	22,376	294	81,042	109,036

   Consolidated Cash Flow Statement

FOR THE YEAR ENDED 30 SEPTEMBER 2008

					As restated
			2008		2007
	Notes		£'000		£'000
Cash flows from operating activities	9		(14,072)		24,293
Interest paid			(60)		(285)
Taxation paid			(4,963)		(9,140)
Net cash (used in)/from operating activities			(19,095)		14,868
Investing activities
Purchase of property, plant and equipment			(671)		(3,097)
Purchase of intangible assets			(163)		(197)
Proceeds from disposal of associate			7,170		-
Interest received			5,520		4,121
Dividends received from associate			1,236		615
Net cash from investing activities			13,092		1,442
Financing activities
Net movement in respect of EBT			(5,462)		(10,345)
Dividends paid			(5,302)		(4,198)
Net cash used in financing activities			(10,764)		(14,543)
Net movement in cash and cash equivalents			(16,767)		1,767
Opening cash and cash equivalents			76,666		74,899
Net movement in cash and cash equivalents			(16,767)		1,767
Closing cash and cash equivalents			59,899		76,666

  Notes to the Financial Statements

1. Basis of preparation and prior year adjustment

Basis of preparation

The consolidated financial information contained within these preliminary results is unaudited and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 September 2008 will be delivered to the Registrar of Companies in due course. The annual report will be posted to shareholders on 5 January 2009 and further copies will be available from the Company Secretary at the Company's registered office. The Company's Annual General Meeting will be held on 27 January 2009.

The preparation of the preliminary results 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 significant judgements and estimates applied by the Group in these preliminary results have been applied on a consistent basis with the statutory accounts for the years ended 30 September 2007 and 2006. Although such estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those of estimates.

The accounting policies applied in these preliminary results are in accordance with International Financial Reporting Standards, as endorsed by the European Union ('IFRS'), and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, and are in accordance with the IFRS accounting policies that were applied in the Group's statutory accounts for the year ended 30 September 2007 with the addition of the following new standards:

IFRS 7 'Financial Instruments : Disclosures' has been adopted by the Group, however as these preliminary results contain only condensed financial statements full IFRS 7 disclosures are not required. The relevant IFRS 7 disclosures will be given in the Group's annual report for the year ended 30 September 2008.  

Prior year adjustment

Prior to our conversion to IFRS and indeed subsequently, Numis has consistently included certain cash collateral balances held with securities clearing houses (Fortis, EMCF and EUROCCP) as part of the reported cash and cash equivalent balances in all external and internal financial reporting. However, after discussion with our auditors and accounting advisers we have now concluded that such balances do not qualify under IFRS to be classified within cash and cash equivalents. Therefore these preliminary results include a prior year adjustment. There is no impact on reported net assets or profits however there is a decrease in the prior year cash and cash equivalent balance of £1,731,000 and a corresponding increase to trade and other receivables. In order to fully understand the year-on-year impact on our cash and cash equivalents balance the prior year adjustment together with the impact on the current year balance is set out below:

	2008	2007
	£000	£000
Previously reported in audited statements or reportable	69,773	78,397
Reclassification to trade and other receivables	(9,874)	(1,731)
Reported in preliminary results	59,899	76,666

The increase in these collateral balances is a direct result of increased trading activity across multiple platforms.  

2. Additional segmental analysis 

The analysis below sets out the revenue performance and net asset split between our core investment banking & broking business and our investing activities in order to provide additional useful disclosure.

	2008	2007
	£'000	£'000
Net institutional income	23,680	32,790
Total corporate transaction revenues	23,005	49,074
Corporate retainers	4,029	3,830
Revenue from Investment Banking & Broking (see note 3)	50,714	85,694
Investment activity gains	723	1,898
Share of associate	803	1,469
Profit on disposal of associate (see note 6)	5,854	-
Contribution from Investing Activities	7,380	3,367
Total pro-forma revenue	58,094	89,061
Net Assets
Investing activities	29,731	23,801
Investment banking & broking	28,784	8,569
Cash (see note 1)	59,899	76,666
Total net assets	118,414	109,036

3. Revenue

		2008	2007
		£'000	£'000
Net trading (losses) / gains		(3,460)	5,145
Institutional commissions		27,140	27,645
Net institutional revenues		23,680	32,790
Corporate retainers		4,029	3,830
Deal fees		9,751	15,461
Placing commissions		13,254	33,613
		50,714	85,694

4. Staff costs

		2008	2007
		£'000	£'000
Wages and salaries		17,582	14,000
Bonuses		5,638	14,145
Social security costs		2,573	3,896
Compensation for loss of office		166	53
Other pension costs		640	511
Share plan award charges		(65)	1,200
		26,534	33,805

5. Exceptional non-recurring items

	2008	2007
	£'000	£'000
Non-recurring property costs	-	(2,196)

Non-recurring property costs comprise costs associated with the exit from our previous principal office at 138 Cheapside, London EC2 in March 2007 and are included within administrative expenses on the face of the consolidated income statement.

6. Profit on disposal of associate

	2008	2007
	£'000	£'000
Gain on disposal of associate	5,890	-
Disposal expenses (comprising charges)	(36)	-
	5,854	-

The profit on disposal of associate relates to the reduction of the Group's holding in Abbey Protection Group Limited from 29.41% to 13.10% following the IPO of Abbey Protection Group Limited on 29 November 2007. Fair value gains and losses arising on the reduced holding subsequent to the IPO are included within other operating income on the face of the consolidated income statement. The gain on disposal is exempt from tax under substantial shareholdings relief.  

7. Earnings per share

Basic earnings per share is calculated on profit after tax of £14,776,000 (2007: £27,631,000) and 99,187,412 (2007: 100,389,740) ordinary shares being the weighted average number of ordinary shares in issue during the year. Diluted earnings per share assumes that options outstanding at 30 September 2008 were exercised at 1 October 2007 for options where the exercise price was less than the average price of the shares during the year.

	2008	2007
	Number	Number
Weighted average number of ordinary shares in issue during the year - basic	99,187	100,390
Effect of options over ordinary shares	1,835	2,713
Diluted number of ordinary shares	101,022	103,103

8. Dividends

	2008	2007
	£'000	£'000
Final dividend for year ended 30 September 2006 (3.75p)		3,842
Interim dividend for year ended 30 September 2007 (2.00p)		2,034
Final dividend for year ended 30 September 2007 (5.00p)	5,120
Interim dividend for year ended 30 September 2008 (2.50p)	2,580
Distribution to equity holders of the parent	7,700	5,876

The board has proposed a final dividend of 5.00p per share for the year ended 30 September 2008. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by the shareholders. These financial statements do not reflect this dividend payable.

9. Reconciliation of operating profit to net cash (used in)/from operating activities

		As restated
	2008	2007
	£000	£000
Operating profit	3,680	33,495
Impairment of property, plant and equipment	46	553
Depreciation charges on property, plant and equipment	800	681
Amortisation charges on intangible assets	255	229
Share based payments	(65)	1,200
Decrease/(increase) in current asset trading investments	3,285	(13,910)
Increase in trade and other receivables	(60,898)	(6,315)
Decrease/(increase) in stock borrow collateral	8,513	(546)
Increase in trade and other payables	29,816	11,292
Decrease/(increase) in derivatives	265	(2,399)
Other non-cash movements	231	13
Net cash from operating activities	(14,072)	24,293

 

END

 

 

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