LONDON (Alliance News) - Capital markets company Numis Corp PLC on Friday reported a sharp drop in first half profit, blaming a "challenging market backdrop".
In the six months to March 31, Numis reported pretax profit of GBP7.1 million compared to GBP19.5 million in the corresponding period the year before - a 64% decrease.
The company's revenue slipped 25% to GBP55.7 million from GBP74.1 million.
"We operate in a cyclical industry and our financial performance will always be influenced to a certain extent by market conditions. Our first half performance has been impacted by a significant slowdown in UK deal activity and investors maintaining a cautious approach toward the UK market. However, we are encouraged by the continued progress of the business and believe our investment in recent years provides a strong platform from which we can continue to successfully execute our strategy," said co-chief executives Alex Ham and Ross Mitchinson.
Investment Banking revenue decreased 24% in the first half to GBP38.8 million from GBP50.9 million a year before. However, it was 3% higher than in the second half of 2018. The Capital Markets division within Investment Banking saw revenue fall 25% on a year before.
"The period started positively with a number of IPOs and Capital Markets transactions in October, and ended strongly with 13 deals completed in March; however, across the period, deal volumes were down compared to both 6 month periods of the prior year," the company said.
The Equities unit reported a 28% decrease in interim revenue, falling to GBP16.9 million from GBP23.3 million. The unit's trading division saw almost all of its revenue disappear, decreasing to GBP400,000 from GBP4.6 million the year before.
Numis explained: "This performance is reflective of lower volumes in the UK market as the prevailing uncertainty has reduced trading activity amongst our predominantly long-only institutional client base."
The company's administrative expenses decreased 13% to GBP47.6 million from GBP54.9 million the year before but did see its headcount rise almost 10%.
Numis maintained its interim dividend at 5.5 pence.
The company's net asset position ended the half at GBP140.2 million, "significantly in excess" of its regulatory capital requirements.
CEOs Ham and Mitchinson added: "Numis benefits from a strong financial position established over a period of many years. This stability provides reassurance to existing and potential clients, and ensures Numis continues to be a great platform for our staff, and potential new hires. Stability has also significantly contributed to our track record of outperformance during periods of difficult market conditions. We believe the current market environment, whilst uncertain in the short term, presents further opportunities for the business to advance its strategic ambitions within an evolving competitive landscape."
The stockbroker said it has completed a number of Capital Markets transaction in April, but Equities revenue is "running at similar levels to recent months".
"Once greater clarity regarding the UK political outlook is established, we expect a material improvement in corporate and institutional client activity," Numis added. But predicting the timing for such an improvement "remains difficult", it said.
Shares in Numis were down 3.8% Friday at 255.50 pence each.
