NUM.L Regulatory News (NUM)

Numis Corporation Plc

Half Year Results

for the six months ended 31 March 2018

London, 4 May 2018: Numis Corporation Plc ("Numis") today announces unaudited results for the six months ended 31 March 2018. Numis is the holding company of Numis Securities Limited, the independent UK investment banking business (the "Group").

Highlights

· CB&A revenue up 76% to £50.9m following an improved contribution from Advisory fees and execution of Capital Markets transactions for our corporate client base

· Equities revenue in line with a strong performance in the comparative period despite the implementation of MiFID II in January 2018

· Annualised Revenue per head increased to £606k compared to £591k for FY 2017

· Investment portfolio gains of £0.4m in the period

· Operating margin 26.0% has declined compared to FY 2017 (26.7%) as a result of ongoing investment in headcount and the platform

· Cash spent on repurchasing shares totalled £9.7m (2017: £5.7m).

· Annualised return on equity increased to 24.6% from 23.1% for FY2017

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

"Numis has followed up an excellent performance in the second half of last year with another strong performance in the first half. This consistency in performance is particularly pleasing given the backdrop of variable market conditions in the final few months of the period and the implementation of MiFID II in January 2018.

We have established a strong reputation in the market by delivering a consistently high quality service to our clients, but now is not the time to stand still. As we look to take the business to the next level, we intend to enhance our client offering by investing further in our platform and recruiting a selective number of high calibre individuals.

As ever we are grateful to all of our staff whose efforts have not only contributed to the strong revenue performance in the first half but also secured a promising pipeline of deals for the second half."

Contacts:

Numis Corporation:

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

Andrew Holloway, Chief Financial Officer 020 7260 1266

Brunswick:

Nick Cosgrove 020 7404 5959

Simone Selzer 020 7404 5959

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

Notes for Editors

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

Review of Performance

Overall Performance

The business has delivered a strong performance during the six months ended 31 March 2018 across all areas of our business activities. Total income increased by 38% to £74.5m (2017: £53.8m) and profit before tax increased by 86% to £19.5m (2017: £10.5m). Profit before tax includes £0.4m of net gains recognised on investments held outside of our market making business (2017: £1.4m). Our balance sheet remains strong with cash balances totalling £82.5m (2017: £71.2m) while net assets have increased to £140.0m (2017: £130.7m).

Market Conditions

Market conditions have been mixed across the period with the first quarter witnessing generally favourable equity markets and second quarter subject to greater volatility and generally declining indices prompted by heightened geo-political concerns. Overall the FTSE All Share declined over the period from 1 October 2017 to 31 March 2018 by approximately 4%.

UK equity issuance levels have been 20% higher than the comparable prior period, but 25% lower than the second half of the prior financial year. UK M&A volumes have remained relatively low but increasingly we are aware of M&A becoming a higher strategic priority for corporate clients.

Corporate Broking & Advisory ("CB&A")

Numis has established a retained client list of 208 corporates across a broad variety of sectors ranging from FTSE100 to AIM companies. This client base has been built on the basis of quality of service across a variety of disciplines, long-term relationships and insightful market-related advice. Our client base is the key source of high quality transaction activity and fee opportunities.

(1) Certain fees charged in relation to Capital Markets transactions were previously categorised as Advisory revenues and have been reclassified. The value of fees affected by this reclassification is £545k H1 2017 and £2,115k for 2017 full year. In prior years Capital Markets revenue was disclosed as Placing Commissions.

Revenue from CB&A activities for the period totalled £50.9m representing an increase of 76% on the prior period which was a relatively slow revenue performance (2017: £29.0m) and only 10% lower than the very strong performance in the second half of the prior financial year. Encouragingly, the good performance in the first half has been delivered across both Capital Markets and Advisory activities. Transaction volumes have been broadly consistent with the comparable period, however we have benefited from a material increase in average deal fees which is reflective of our participation in larger transactions, an increase in the seniority of our role on both IPOs and M&A transactions, and our overall standing in the market.

Our strong performance in Capital Markets, which includes IPOs, secondary issuance for clients, and block trades has resulted in us capturing a strong share in UK ECM activities where we ranked 1st for the six month period ending 31 March 2018. Notable transactions included the $546m equity raise for Catco Reinsurance and IPO of Sabre Insurance Group.

Developing, and promoting, our advisory capability is a key element of our strategy in CB&A. Advisory fees for the period totalled £11.7m (2017: £6.3m) representing growth of 85% compared to the prior period. The significant majority of these fees relate to financial advisory mandates awarded by the existing corporate client base in relation to M&A activities. During the period we acted as financial adviser in relation to the £281m recommended cash offer for SQS Software Quality Systems AG and financial adviser to Helical Bar plc on the disposal of Renaissance Villages.

We continue to attract high quality corporate clients gaining a net 6 brokerships during the six month period to give a total of 208 clients. The market capitalisation of our client list now averages around £711m, and the median is £322m. We will continue to target corporate clients of all sizes where we believe we have the opportunity to provide a high quality service in support of the strategic ambitions of the board.

Equities

Equities delivered revenue of £23.3m for the period ended 31 March 2018 which was broadly in line with the comparable prior period and ahead of the second half of the financial year. Notwithstanding the significant regulatory change introduced through MiFID II, the foundations of our equities business will remain a high quality research and sales service, and strong execution capability.

Institutional income comprising commission, CSAs and MiFID II research fees earned post 3 January 2018, totalled £18.7m (2017: £18.4m). The amendments to our business model demanded by MiFID II involved a significant level of constructive engagement with our institutional clients. We are pleased to have implemented MiFID II whilst experiencing no material changes to the breadth and composition of our institutional client base. We believe this to be indicative of the value of our differentiated product offering across the institutional investor community.

Trading delivered another good performance in the period with gains of £4.6m (2017: £5.0m). Performance was impacted by the increase in volatility during the second quarter but we continue to apply a consistent approach to risk in our trading activities.

Costs and People

Administrative costs for the period increased by 26% to £54.8m. Total staff costs, including share based payments, have increased to £40.0m (2017: £30.3m) mainly due to investment in headcount and the improved revenue performance resulting in higher variable compensation. Fixed staff costs have increased broadly in line with average headcount which was 245 for the 6 month period (2017: 214), we ended the period with headcount of 254.

During the period we have made targeted senior hires across the business as we seek to enhance our capabilities in certain sectors and product areas. We will continue to recruit high quality individuals in the coming months who we believe can thrive as part of our culture and make a meaningful contribution to the development of the business. As a consequence we expect fixed staff costs to increase in the second half of the financial year as we absorb the impact of higher headcount and the initial costs associated with recruitment activities.

Compensation costs as a percentage of revenue have decreased to 54% (2017: 58%) as a result of the increase in revenue performance. We expect the share based payment charge to be marginally higher in the second half due to the impact of share awards granted in the period.

Non-staff costs have increased 14% to £14.9m (2017: £13.1m). The increase is largely attributable to continued investment in our technology platform and the implementation of MiFID II as well as other regulatory and business initiatives. We expect to continue investing in our platform over the remainder of the year as we seek to improve operational efficiency.

Strategic Investments

The value of our strategic investments as at 31 March 2018 totalled £27.6m (30 September 2017: £28.1m). Of this value, £12.5m represented seed investment in the Numis Mid Cap Fund. During the period we made the decision to liquidate the fund and return proceeds to the fund's investors. The fund performed broadly in line with benchmark since launch, however we did not consider the performance to be sufficiently strong to invest in marketing the fund to third party investors.

The unquoted portfolio has a valuation of £13.9m (30 September 2017: £13.5m). The movement during the period reflects new investments amounting to £0.6m, disposals of £0.9m and £0.7m of net fair value uplifts. We continue to explore opportunities to re-cycle our older portfolio investments in favour of attractive, early stage investment opportunities where we believe we can contribute to the development of the company through our network, and position in the market. Overall we do not anticipate the number of investments within the unquoted portfolio to materially change over the medium term.

Financial Position

We continue to maintain a strong balance sheet to support both business growth and shareholder returns. Our net asset position as at 31 March 2018 was £140.0m representing significant headroom over our minimum regulatory requirements. Our liquidity position is subject to material movements on a daily basis as a result of our trading activities. As at 31 March 2018 we held cash balances of £82.5m which is £11.3m higher than 31 March 2017 but down £13.3m on that reported as at 30 September 2017. The cash reduction during the six months ended 31 March 2018 reflects outflows in respect of seasonal expense items which fall within the first half of our financial year. The cash position at period end does not reflect the £12.5m proceeds from the closure of the Numis Mid Cap Fund which were received in the first week of April 2018.

During the period we spent £9.7m on the repurchase of shares into Treasury and the Employee Benefit Trust (2017: £5.3m). Including the final dividend payment in respect of previous financial year, the aggregate cash spend in the six months to 31 March 2018 is £16.6m (2017: £12.6m).

We will continue to repurchase our shares in order to avoid the prospective dilutive impact attached to unvested share awards with the medium term objective of reducing the number of shares in issue subject to capital and liquidity requirements, and market outlook.

Dividend

Alongside our results for the year ended 30 September 2017 we confirmed our intention to use earnings and cashflow to underpin shareholder returns through a combination of dividends and share buybacks. Our goal is to pay a stable ordinary dividend and re-invest in our platform, pursue selective growth opportunities and return excess cash to shareholders subject to capital and liquidity requirements and market outlook.

The Board has approved the payment of an interim dividend of 5.50p per share (2017: interim 5.50p per share, 2017 total: 12.00p per share). This dividend will be payable on 22 June 2018 to shareholders on the register of members at the close of business on 18 May 2018. 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

Trading in recent weeks has been positive with a number of Capital Markets transactions completed and Equities revenues running at similar levels to the first half. We will continue to review the impact of MiFID II on the Equities business but the early indications suggest the revenue impact will be limited, however the ultimate impact will only become clear following a longer period of trading under the new regime.

Our transaction pipeline remains strong, in particular we have been mandated on a number of IPOs which is reflective of our successful marketing efforts in the first half. Execution of the IPO pipeline will inevitably be dependent upon equity market conditions. In addition our pipeline is benefiting from good levels of M&A activity across the corporate client base.

We will continue to focus our efforts on providing high quality independent advice to our clients and, where appropriate, we will continue to take advantage of opportunities to strengthen our capabilities through investing in selective recruitment and growing our overall headcount. We have good momentum in the business and look forward to the second half with confidence.

Alex Ham & Ross Mitchinson

Co-Chief Executives

4 May 2018

Consolidated Income Statement

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2018

Consolidated Statement of Comprehensive Income

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2018

Consolidated Balance Sheet

UNAUDITED AS AT 31 MARCH 2018

Consolidated Statement of Changes in Equity

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2018

Consolidated Statement of Cash Flows

UNAUDITED FOR THE 6 MONTHS ENDED 31 MARCH 2018

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 2017, 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 2017. 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 investment banking 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:

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:

Other information

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

3. Revenue

(1) Certain fees charged in relation to Capital Markets transactions were previously categorised as Advisory revenues and have been reclassified. The value of fees affected by this reclassification is £545k H1 2017 and £2,115k for 2017 full year. In prior years Capital Markets revenue was disclosed as Placing Commissions.

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. In the period positive fair value movements in our unquoted holdings have been partially offset by negative movements in our listed portfolio.

5. Administrative expenses

The average number of employees during the period has increased to 245 (H1 2017: 214). Staff costs excluding share award related charges have increased by 37% compared to the prior period due to investment in headcount and the improved revenue performance resulting in higher variable compensation.

Non-staff costs have increased by 14% compared to the prior period. The increase is largely attributable to continued investment in our technology platform and the implementation of MiFID II as well as other regulatory and business initiatives.

6. Finance income and Finance costs

Finance income for the period:

Finance costs for the period:

7. Earnings per share

Basic earnings per share is calculated on profits after tax of £16,810,000 (2017: £8,829,000) and 106,654,473 (2017: 110,544,897) 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.

8. Dividends

The Board has approved the payment of an interim dividend of 5.50p per share (2017: interim 5.50p per share). This dividend will be payable on 22 June 2018 to shareholders on the register of members at the close of business on 18 May 2018. 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 2018 deferred tax assets totalling £4,102,000 (30 September 2017: £3,116,000) have been recognised reflecting management's 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 £13,994,000 (30 September 2017: £9,530,000).

(d) Trading investments

Included within trading investments is £27,577,000 (30 September 2017: £28,141,000) of investments held outside of the market making portfolio. The net decrease during the period has primarily been due to disposals, however this has been partially offset by net favourable fair value adjustments.

(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 higher than those reported at 31 March 2017 reflecting increased levels of operating profit and positive working capital movements. This has been achieved whilst maintaining dividend distributions (£6.9m cash outflow) and the repurchase of shares into Treasury and the Employee Benefit Trust (£9.7m cash outflow).

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

The cash from operating activities during the six months ended 31 March 2018 reflects the higher operational inflows, principally due to higher cash-based revenues, combined with outflows in respect of seasonal expense items which fall within the first half of our financial year.