Numis Corporation — Positive year-end update

Numis Corporation (LSE: NUM)

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Research: Financials

Numis Corporation — Positive year-end update

Following a positive update in July, Numis’s year-end update confirmed that trading remained strong through to the financial year end (September). Both corporate and institutional sides of the business contributed to the outcome and prospectively the company indicates a strong deal pipeline. We have increased our estimate for FY17 to match company guidance but left FY18e revenue and pre-tax profit unchanged at this stage. Continuation of benign market conditions could mean the current year estimate proves conservative, while on a longer view the strength of the franchise Numis has established is a key attraction for investors.

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Financials

Numis Corporation

Positive year-end update

FY17 trading update

Financial services

5 October 2017

Price

288.5p

Market cap

£308m

Net cash (£m) at 31 March 2017

71.2

Shares in issue

106.9m

Free float

58.5%

Code

NUM

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.8

20.2

29.5

Rel (local)

2.8

17.9

21.6

52-week high/low

293.2p

221.8p

Business description

Numis is one of the UK's leading independent corporate advisory and stockbroking groups, offering a full range of research, execution, equity capital markets, corporate broking and advisory services. It employs c 200 staff in offices in London and New York, and at end March 2017 had 199 corporate clients.

Next events

FY17 results

6 December 2017

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Numis Corporation is a research client of Edison Investment Research Limited

Following a positive update in July, Numis’s year-end update confirmed that trading remained strong through to the financial year end (September). Both corporate and institutional sides of the business contributed to the outcome and prospectively the company indicates a strong deal pipeline. We have increased our estimate for FY17 to match company guidance but left FY18e revenue and pre-tax profit unchanged at this stage. Continuation of benign market conditions could mean the current year estimate proves conservative, while on a longer view the strength of the franchise Numis has established is a key attraction for investors.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/15

98.0

26.1

18.3

11.5

15.7

4.0

09/16

112.3

32.5

22.4

12.0

12.9

4.2

09/17e

129.0

36.5

25.0

12.0

11.5

4.2

09/18e

119.5

30.8

22.1

12.5

13.0

4.3

Note: *PBT and EPS are on a reported basis.

Trading update

The year-end update indicates that FY17 revenue increased by 15% and profit by a similar percentage. Growth in Corporate Broking and Advisory (CB&A) and Equities were similar. Within CB&A, equity fund raises totalled £2.5bn (+38%) feeding into strong placing commissions. The generally positive trend in markets helped both trading revenues and institutional commissions to contribute to Equities growth. Looking ahead the group highlights a strong deal pipeline and mentions its increased focus on supporting unquoted companies through its Venture Broking operation. Discussions with clients relating to MiFID II continue. This is an area of uncertainty, as for other brokers, but the firm believes it is well positioned ahead of implementation (within our estimate institutional commissions accounted for c 28% of revenue FY17).

Estimate changes and other developments

Our FY17 estimate is adjusted to reflect the trading update with a revenue increase of 2.4% and pre-tax profit increase of 3.9% compared with our previous numbers while our FY18 estimate is unchanged at the revenue and pre-tax profit level (see exhibits 1 and 2 overleaf). EPS for both years benefit from the purchase of c 6.3m shares into treasury in H217 with increases in estimate of 5.0% and 5.5% for FY17 and FY18 respectively. Other recent developments include two of the previously announced board changes (see last note) with Marcus Chorley and Lorna Tilbian standing down from the board at the end of September; the sale by Tilbian of her shareholding in Numis (5.26%); and the acquisition of an 11.26% holding by Aktieselskabet af 1 March 2017 (controlled by Anders Holch Povlsen).

Valuation

The shares have shown further strength in the last two months but are moderately rated in terms of P/E multiples compared with peers. Our (unchanged) central ROE/COE valuation of 323p points to potential upside of over 10%.

Exhibit 1: Financial summary

£'000s

2015

2016

2017e

2018e

Year end 30 September

PROFIT & LOSS

Revenue

 

 

97,985

112,335

129,000

119,500

Other operating income

 

 

(1,978)

3,759

2,991

700

Total income

 

 

96,007

116,094

131,991

120,200

Cost of Sales (excl. amortisation and depreciation)

(65,018)

(76,120)

(82,189)

(78,247)

Share based payment

(4,104)

(6,229)

(12,100)

(10,000)

EBITDA

 

 

28,863

29,986

34,711

31,253

Depreciation

 

 

(882)

(1,126)

(1,214)

(1,214)

Amortisation

(111)

(125)

(88)

(88)

Operating Profit (before amort. and except).

 

 

27,870

28,735

33,409

29,951

Net finance income

190

37

100

100

Other operating income

(1,978)

3,759

2,991

700

Profit Before Tax (norm)

 

 

26,082

32,531

36,500

30,751

Tax

(4,533)

(6,132)

(7,490)

(5,995)

Profit after tax (FRS 3)

 

 

21,549

26,399

29,010

24,756

Average diluted number of shares outstanding (m)

117.6

118.0

116.0

112.0

EPS - basic (p)

19.5

23.5

26.4

23.4

EPS - diluted (p)

 

 

18.3

22.4

25.0

22.1

Dividend per share (p)

11.50

12.00

12.00

12.50

NAV per share (p)

102.0

113.5

121.9

132.5

ROE (%)

19%

22%

22%

18%

EBITDA margin (%)

29.5%

26.7%

26.9%

26.2%

Operating margin (before GW and except.) (%)

28.4%

25.6%

25.9%

25.1%

BALANCE SHEET

Fixed assets

 

 

6,724

5,522

5,580

4,778

Current assets

 

 

279,114

312,462

317,508

329,401

Total assets

 

 

285,838

317,984

323,088

334,179

Current liabilities

 

 

(170,319)

(188,895)

(192,835)

(192,835)

Long term liabilities

0

(12)

(11)

(11)

Net assets

 

 

115,519

129,077

130,242

141,333

CASH FLOW

Operating cash flow

 

 

6,467

48,735

36,673

30,658

Net cash from investing activities

(3,632)

84

(119)

(100)

Net cash from (used in) financing

(17,510)

(19,580)

(41,333)

(23,665)

Net cash flow

 

 

(14,675)

29,239

(4,779)

6,892

Opening net (cash)/debt

 

 

(74,518)

(59,591)

(89,002)

(84,048)

Fx effect

 

 

(252)

172

(175)

0

Closing net (cash)/debt

(59,591)

(89,002)

(84,048)

(90,941)

Source: Edison Investment Research, Numis Corporation accounts

Exhibit 2: Estimate changes

Revenue (£m)

PBT (£m)

EPS (p)

DPS (p)

Old

New

Change

Old

New

Change

Old

New

Change

Old

New

Change

09/17e

126.0

129.0

2.4%

35.1

36.5

3.9%

23.8

25.0

5.0%

12.0

12.0

0.0%

09/18e

119.5

119.5

0.0%

30.8

30.8

0.0%

21.0

22.1

5.5%

12.5

12.5

0.0%

Source: Edison Investment Research. Note: EPS diluted

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Numis Corporation and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Numis Corporation and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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