1 Apr 2020 07:00
1 April 2020
finnCap Group plc
("finnCap" or the "Group")
Trading Update
The Board is pleased to announce that the Group's trading performance since the announcement of 27 February has been in line with the Board's cautious expectations set out at that date. The second half trading performance is expected to be broadly breakeven with the equity capital markets division performing in line with the first half and the M&A division behind, as was previously stated. Turnover for the year is expected to be approximately £25.8m (11 months ended 31 March 2019: £24.5m).
An indication of how rapidly the world has changed is that on 27 February we only noted the spread of Covid19 and yet five weeks later the government has implemented extreme social and economic measures in response to Covid19 and the United Kingdom is now in a "lockdown". Clearly these factors are expected to have a material negative impact on the Group's performance in the financial year to 31 March 2021 ("FY 2021"). However, the nature and the timescale of such impact is currently very uncertain. For the time being we still have a strong pipeline of M&A deals for Q1 FY 2021, albeit we expect to see a number of deals pulled or delayed, and the equity capital markets division continues to complete transactions.
In response to recent events the Group has moved all of its employees to remote working and is pleased to note this has had no material impact on our ability to operate to date. The Board has also reviewed the Group's operating expenses and taken swift action to minimise the financial impact of the uncertainty caused by Covid19. The measures taken include salary and fee sacrifices for all Board members for a period of three months (being 100 per cent of fees for non executive directors and between 92.5 per cent. and 44.0 per cent. of salary for executive directors), salary sacrifices by Group employees for three months, the furloughing of a number of staff and the cancellation or deferral of all discretionary expenditure. Together with the cost reductions referred to in the announcement of 27 February (which included the closure of the Slide Rule Fund), these actions -will reduce the cash monthly operating expenses of the Group to be 31% lower than those incurred in February 2020.
The Board intends to maintain a strong balance sheet and currently has financial resources well in excess of its regulatory requirements. The Group will take advantage of its ability to defer payment of VAT in line with the government's proposals. The Board has also taken the difficult decision that it will not pay the second dividend for the year ended 31 March 2020 in light of the current crisis and the cash conservation measures outlined above.
The Board is planning for a very difficult trading period ahead, particularly in the Group's M&A division. In light of this it is pleasing that the Group's equity capital markets division has continued to advice on deals throughout the last few weeks including equity fundraises for Synairgen plc, PCI-Pal PLC and Trackwise Designs PLC, and some of the fees associated with these will be recognised in FY 2021. The Group has also continued to generate secondary trading commission, make markets profitably, sign up retained clients in the equity capital markets division and secure mandates in the M&A division since the beginning of March.
Our ability to do this and move to operating remotely is testament to the dedication and quality of our employees who have quickly adjusted to the current environment. In order to recompense staff for sacrificing salary for the next three months, the Board today intends to grant options over approximately 5.3m ordinary shares exercisable at a price of 1p each (representing 3.0% of the existing issued share capital and granted on the basis of 10 options for every pound of salary forgone) which will be exercisable from 1 October 2021. No directors are receiving options.
The trading environment has never been more uncertain. However, with a strong balance sheet strengthened by the actions that we have taken, we believe that we are well placed to weather the storm and to continue to service our clients to the highest standard.
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Contacts
finnCap Group plc Tel: +44 (0) 20 7220 0500
Sam Smith, Chief Executive Officer investor.relations@finncap.com
Tom Hayward, Chief Financial Officer
Grant Thornton (Nominated Adviser) Tel: +44 (0) 20 7383 5100
Philip Secrett/Samantha Harrison/Seamus Fricker
finnCap Ltd (Broker) Tel: +44 (0) 20 7220 0500
Rhys Williams
Tim Redfern