PMR.L Regulatory News (PMR)

13 Mar 2007 07:02

Panmure Gordon & Co. plc13 March 2007 13 March 2007 PANMURE GORDON & CO. PLC ("PANMURE GORDON" OR THE "GROUP") Preliminary Results for the year end 31 December 2006 Panmure Gordon & Co. plc today announces preliminary results for the year ended31 December 2006. Panmure Gordon together with its subsidiaries is a UKcorporate and institutional stockbroker focusing on corporate finance andbroking, institutional sales and trading, equity research and market making. HIGHLIGHTS Financial Highlights • Net revenue up 41% to £42.4m • Adjusted profit before tax up 113% to £12.9m • Adjusted earnings up 62% to £9.8m • Adjusted earnings per share up 17% to 15.8p • Strongly cash generative with net cash of £40m at year end Business Highlights • First full year of operation following the Durlacher transaction in 2005 • Good financial performance with strong improvement in operating results and continued focus on cost control • Well balanced business with approximately half of revenue coming from institutional equities and half from corporate finance • Since year end have announced the opening of a Liverpool office and the acquisition of ThinkEquity, a fast growing US based investment bank Operating Highlights • Revenue per employee up 21% to £345k • Ratio of employee compensation to turnover held at 55% • Average daily institutional net revenue up 65% to £81k • Cash generation from operating activities up 44% to £17.0m Tim Linacre, Chief Executive said: "2006 and the first few months of 2007 havebeen a very active and successful time for the business. Not only did the firmproduce good financial results but, through the continued process of internalimprovement, the soon to be opened Liverpool office and the acquisition ofThinkEquity, we have established a platform for further profitable growth. TheNew Year has started well for us and, although markets have very recently beenmore volatile, our corporate finance pipeline is encouraging and ourinstitutional equities business is performing well. While we expect to completethe acquisition by the end of March, the performance of ThinkEquity in the firstmonths of the year and the outlook for the rest of the year is veryencouraging." For further information, please contact Tim Linacre, Chief ExecutivePanmure Gordon & Co. plc 020 7614 8300 David Rydell/Nick Lambert/Chris HamiltonBell Pottinger Corporate & Financial 020 7861 3232 PANMURE GORDON & CO. PLC CHAIRMAN'S STATEMENT It gives me great pleasure to offer my first statement as Chairman of PanmureGordon. 2006 was our first full year of operation of the "new" Panmure Gordon followingthe merger with Durlacher in 2005. The integration of the two firms was sensiblyhandled, and quickly completed during 2005. The strong financial performance in2006 would not have been possible without this accomplishment. The firm's revenue rose to £42.4m in 2006, an increase of 41% on 2005. Operatingprofit before goodwill amortisation, FRS 20 option charges and exceptionalcharges, also grew to £11.6m. All areas of the business performed well, withrevenues being generated in fairly equal proportions by Corporate Finance andInstitutional Equities. During the year we acted as financial advisor or brokeron 13 UK public offers worth over £4 billion and acted as sponsor, nomad,bookrunner or broker on 10 IPOs. The volatile stock market environment during the year provided a challenge toall parts of our firm. The fact that we ended the year with a record result, andenjoyed from October to December our strongest quarterly performance,demonstrates to me both the strength and momentum of our business. Our sharerepurchase plan, which we put into effect during the year, was designed both toreturn some cash to shareholders, as well as to demonstrate our confidence inthe condition of our business. The Chief Executive's statement will review in more detail the development ofPanmure Capital and its migration, in early 2007, into Loudwater Trust Limited.We are pleased to have helped to give birth to Loudwater, and I believe that thespin-off to a listed public company is in the interest of shareholders. During 2006, we gave considerable thought as a Board to the opportunities togrow Panmure Gordon's business. While continuing to strive for excellence in ourexisting business must always be a priority of the first magnitude, we saw anumber of opportunities to develop our business through organic growth,acquisition and merger. The opening of a Liverpool office, and a strategicalliance with GMP Securities, were examples of opportunities we identified, andwe expect both will make important contributions in 2007. During 2006, we began discussions with a privately held, fast growing SanFrancisco based investment banking firm ThinkEquity Partners LLC, and inFebruary this year announced the acquisition of ThinkEquity. Following completion of the acquisition in March 2007, our business will trulybecome "dual national" - and we will confidently be able to serve clients in theUS as in the UK. Whether seen in the growth in the number of our offices (one toeight), the volume of shares we will trade, the number of institutional clientswe will serve, the number of capital raisings we will manage, or even simply inthe number of staff in our firm (from 125 to over 300), our business has beentransformed. We are excited about the combination of two firms who sharesimilar, entrepreneurial values, and about the chance to build a unique "bridge"between the growth equity markets in the US, and the international institutionalmarket that exists in London. I believe Panmure Gordon will be a wonderful,exciting and rewarding place to work. I look forward to welcoming Michael Moe and Deborah Quazzo, co-founders ofThinkEquity, on to our Board on completion of the transaction. During 2006, Richard Wyatt stepped down as Chairman of Panmure Gordon, butcontinues to serve as a Non-Executive Director. Richard was a primary architectof the new Panmure, and these brief words will not in any sense do justice tothe contribution he has made to the healthy condition in which we findourselves. However, I would, on behalf of our employees and shareholders, liketo thank him deeply for his efforts. At the beginning of 2007, Simon Heale joined the Board as a Non-ExecutiveDirector, and I formally welcome him to the Board. Following his appointment as Chairman of the Loudwater Trust, Howard Flightinformed me that he would not be standing for re-election to the Board at theAnnual General Meeting. I would like, on behalf of the Board, to thank Howardfor his contribution over the years to the Board of Panmure Gordon and itspredecessors. I would also like to express my gratitude to our staff for their efforts during2006. 2007 starts as a year of great promise for Panmure Gordon, but also willbe a year of hard work. I wish all our current employees, as well as thosejoining the firm, best wishes for success in 2007. Charles StonehillChairman12 March 2007 CHIEF EXECUTIVE'S REVIEW Introduction I am pleased to report on a particularly good set of results for a year in whichPanmure Gordon made excellent progress in establishing itself as a leadingindependent stockbroker. Since the end of the year we have made further progressthrough announcing the opening of an office in Liverpool and the acquisition ofThinkEquity, a fast growing US investment bank, both of which will providefurther impetus to growth and represent major expansions of the business. I talkabout these in greater detail below. As well as the strong financial performance of the business in 2006 there were anumber of other highlights, including: •Acting as financial advisor or broker on 13 UK public offers worth over £4 billion •Assisting corporate clients to raise over £1 billion on the public and private markets •Improving the quality of our corporate client list •Converting our holding in Panmure Capital into a stake in Loudwater Trust which was floated in January 2007 Results The business performed well during 2006 with a particularly strong last quarter.In December 2006 we announced that the performance of the business was ahead ofmarket expectations and that our revenue would be not less then £41m withadjusted earnings per share of not less than 15p. In fact the business producedrevenue of over £42.4m (2005: £30m) adjusted profit before tax of £12.9m (2005:£6.1m) and adjusted earnings per share of 15.83p (2005: 13.55p). It is alsoparticularly pleasing to note the strong cash generative nature of the business. I set out below further explanation of these numbers. Underlying Operating Profit and Earnings In order to give a more clear and consistent view of operating performance thanis contained in the statutory profit and loss account, I have set out belowoperating profit and earnings on an adjusted basis, excluding non-cashaccounting requirements such as the FRS 20 option charges. 2006 2005 £'000 £'000 Net revenue 42,428 30,014 Administrative expenses (including bonuses) (30,849) (24,556) ---------- ---------Adjusted operating profit 11,579 5,458 Interest receivable and similar items 1,336 612 ---------- ---------Adjusted profit before tax 12,915 6,070 Tax (3,082) (16) ---------- ---------Adjusted earnings (see note 5) 9,833 6,054 Adjusted earnings per share (p) 15.83 13.55 Adjusted diluted earnings per share (p) 15.20 12.92 Weighted average number of shares in issue 62,081,645 44,688,195 Diluted weighted average number of shares in issue 64,686,485 46,850,789 The adjusted earnings reconcile to the profit on ordinary activities aftertaxation contained in the consolidated profit and loss account as follows: 2006 2005 £'000 £'000 Adjusted earnings 9,833 6,054 Add/(less)FRS 20 charges (214) (542)FRS 20 charges arising as a result of the acquisition ofPanmure Gordon (UK) Limited (6,908) (7,112)Other exceptional costs - (2,714)Prior year (over)/under provision of tax 405 (380)Tax relief provided by exercise of share options 828 -Income on termination of discontinued activities 84 242Goodwill amortisation (450) - -------- --------Profit on ordinary activities after taxation 3,578 (4,452) -------- -------- Basic profit/(loss) per ordinary share 5.76p (9.96)p Key Performance Indicators The Board examines a number of Key Performance Indicators in evaluating theperformance of the business. The most important of these are: 2006 20051. Revenue per employee (£'000) 345 285 +21%2 Ratio of employee compensation to turnover 55% 56%3. Average daily institutional net revenue (£'000) 81 49 +65%4. Cash generation from operating activities (£m) 17.0 11.8 +44% Corporate Finance During the year we were involved in a broad range of corporate financetransactions assisting our corporate clients in flotations, secondaryfundraisings and takeovers. Mergers and acquisitions activity in the UK remained at a buoyant level duringthe year and we successfully worked as stockbroker, providing independent,objective advice alongside investment banks on a number of high profiletransactions. In addition we acted as financial advisor in our own right on anumber of public offers. In total, we acted as financial advisor or broker on 13UK public offers worth over £4 billion. We also had an active year assisting our clients raise money in the Londonmarket. We led a number of very successful fundraisings and established aparticular expertise in helping quoted property funds. As London becomes theinternational market of choice for growing companies our reach has continued toexpand. Of the ten IPOs we were involved in during 2006, five were UK companiesand five were companies from overseas. In total we assisted our clients to raiseover £1 billion from public and private markets during the year. We announced a strategic partnership with GMP Securities, the leadingindependent Canadian brokerage, covering both Canadian companies that wantaccess to the London market, and mining and extraction industries. Thecombination of GMP's expertise in natural resources and Panmure Gordon'sexpertise in London creates a powerful offering for our mutual clients. We have continued to improve the corporate client list. In 2006 we won 22 newcorporate clients and parted company from a similar number, sometimes as aresult of the client being taken over or of our continuing focus on seeking toact where the economic relationship is favourable and where we can provide theexpected level of service. Institutional Equities and Research Our research department went through significant change during the year, and weended the year with a much stronger team of research analysts than we startedit. We now write research on 13 sectors and cover 230 companies. InstitutionalEquities has generated almost half of the group's revenues in 2006 and wecontinue to serve around 500 institutional clients both at home and abroad. Our trading philosophy remains one of client facilitation rather thanproprietary trading. Panmure Capital We announced early in the year the creation of Panmure Capital, a co-investmentvehicle established by Panmure Gordon and Bank of Scotland. After the year endand following a very successful fundraising led by our previous Chairman,Richard Wyatt, the majority of the investments in Panmure Capital weretransferred to a new Guernsey closed end fund named Loudwater Trust (after thename of our founder, Harry Panmure Gordon's country estate). This business waslisted on the AIM market in January of this year. We remain a shareholder inLoudwater Trust and are working with them on a number of situations. Liverpool We announced after the year end the opening of an office in Liverpool followingthe recruitment of a number of talented individuals based in that city. Thisoffice will open in April and we anticipate significant growth in the officeover the rest of this year. There are a number of high quality corporate andinstitutional clients for whom a London based broker is not ideal, and for whoma northern office will provide real benefit. ThinkEquity We also announced after the end of the year the acquisition of ThinkEquity, a USbased, fast growing investment bank. We are acquiring ThinkEquity for a number of reasons; firstly the business is animpressive business in its own right with good relationships in the importantgrowth markets of the US. Secondly, the markets we operate in are becoming moreinternational with US institutions wanting to trade in equities listed inLondon, and US companies looking at London as a possible market on which to listtheir shares. It is not a one-way process; increasingly London basedinstitutions want access to growth ideas and research from the US and ourcorporate clients want access to the US capital markets. Following the acquisition, the business will trade as Panmure Gordon in Europe,and as ThinkEquity, a Panmure Gordon Company in the US. We will have aninternational footprint through our principal offices in London and SanFrancisco and further offices in New York, Boston, Chicago, Minneapolis,Liverpool and Chennai in India. We will employ approximately 320 people, makemarkets and provide research on approximately 500 companies and service over 800institutional accounts. ThinkEquity currently advises more than $835 million through its WealthManagement operation and we see potential for this to grow significantly. Consideration for the acquisition will be US$62.3 million (£32.3 million). Ofthis approximately US$35.3 million (£18.3 million) will be paid for the equityof ThinkEquity and approximately US$27 million (£14.0 million) for theassumption and repayment of debt and all net current liabilities, and therecapitalisation of the business. The consideration will be funded by the issueof approximately 9.9 million new shares in Panmure Gordon and approximately£14.0 million of cash from Panmure Gordon's own resources. A contingent performance pool has been established over an additional 16.85million shares available for award over the next three years dependent on anumber of conditions including financial performance targets. At all levels ofvesting, the transaction would be earnings enhancing for Panmure Gordon. Anyshares issued by way of the contingent performance pool will vest over theperiod 2009 to 2013. While we expect to complete the acquisition by the end of March, the performanceof ThinkEquity in the first months of this year and the outlook for the rest ofthe year is very encouraging. The acquisition of ThinkEquity has been described as a bold move. I also believeit will be a very successful one. Development of the business 2006 and the first few months of 2007 have been a very active and successfultime for the business. I said in my report last year that we thought PanmureGordon had the ability to become a broader and more stable business through bothorganic growth and through acquisitions. Not only did the firm produce goodfinancial results but, through the continued process of internal improvement,the soon to be opened Liverpool office and the acquisition of ThinkEquity, wehave established a platform for further profitable growth. After we close the acquisition of ThinkEquity more than half of the business, interms of staff numbers, will be based in the USA, and over the next two years Iexpect the majority of the revenue will be also earned from the USA as we seekto exploit the many opportunities available to the combined business. I am fortunate in having excellent fellow board members and colleagues in thefirm. Panmure Gordon has undergone substantial change over past years both as aprivate and public company and has never been in better shape thanks to theefforts of everyone involved. Outlook The New Year has started well for us and, although markets have very recentlybeen more volatile, our corporate finance pipeline is encouraging, with all theusual issues as to visibility and execution risk. Our institutional equitiesbusiness is performing well, and we look forward to working with our newcolleagues in the USA to expand our reach into overseas institutions. I will close with the same comment I made last year. Throughout Panmure Gordon's130 year history the firm has had a reputation for careful dealing andintegrity; no matter how the firm grows over the years ahead, this will remaincore to our management ethos. Tim LinacreChief Executive12 March 2007 CONSOLIDATED PROFIT & LOSS ACCOUNTfor the year ended 31 December 2006----------------------------- ------- ----------- ---------- Notes Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000----------------------------- ------- ----------- ----------Turnover 1 43,778 31,606 Cost of sales 2 (1,737) (1,592)----------------------------- ------- ----------- ----------Gross profit 42,041 30,014 Other operating income 3 387 ------------------------------ ------- ----------- ----------Net revenue 42,428 30,014----------------------------- ------- ----------- ----------Administrative expenses before goodwillamortisation, FRS 20 option charges andexceptional items (30,849) (24,556)----------------------------- ------- ----------- ----------Operating profit before goodwillamortisation, FRS 20 option charges andexceptional items 11,579 5,458----------------------------- ------- ----------- ---------- Goodwill amortisation (450) - FRS 20 option charges (214) (542)FRS 20 option charges arising as a result ofthe acquisition of Panmure Gordon (UK) Limited (6,908) (7,112) Reorganisation costs arising as a result ofthe acquisition of Panmure Gordon (UK) Limited - (2,714)----------------------------- ------- ----------- ---------- Total administrative expenses (38,421) (34,924)----------------------------- ------- ----------- ---------- Operating profit/(loss) 4,007 (4,910) Net income on termination of discontinuedactivities 84 242Net interest receivable and similar items 1,336 612----------------------------- ------- ----------- ----------Profit/(loss) on ordinary activities beforetaxation 5,427 (4,056) Taxation on profit/(loss) on ordinaryactivities (1,849) (396)----------------------------- ------- ----------- ----------Profit/(loss) on ordinary activities aftertaxation 3,578 (4,452)----------------------------- ------- ----------- ---------- Basic profit/(loss) per ordinary share 5.76p (9.96)pDiluted profit/(loss) per ordinary share 5.53p - Adjusted earnings per share (profit on continuing activities before FRS 20option charges, goodwill amortisation and exceptional items and after underlyingtaxation) is disclosed in note 5. CONSOLIDATED STATEMENT OF TOTAL RECOGNISEDGAINS AND LOSSESfor the year ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Profit/(loss) on ordinary activities aftertaxation 3,578 (4,452) ---------- ---------- Total recognised gains and losses 3,578 (4,452) Prior year adjustment in respect of adoption of FRS 20'share-based' payments - (528) ---------- ---------- Total recognised gains and losses since thepast annual report 3,578 (4,980) ---------- ---------- CONSOLIDATED BALANCE SHEETAs at 31 December 2006 31 December 31 December 2006 2005 £'000 £'000----------------------------- ------ ---------- ----------Fixed assetsIntangible assets 12,751 13,201Tangible assets 1,628 1,702Available for sale investments 5,459 ------------------------------ ------ ---------- ----------Total fixed assets 19,838 14,903----------------------------- ------ ---------- ---------- Current assetsInvestment securities held for trading 7,763 8,114Debtors 30,030 42,759Cash and cash equivalents 43,782 21,070----------------------------- ------ ---------- ---------- 81,575 71,943 Creditors - amounts falling due within one (42,409) (48,065)year ------ ---------- ---------------------------------------Net current assets 39,166 23,878----------------------------- ------ ---------- ---------- Total assets less current liabilities 59,004 38,781 Creditors - amounts falling due after oneyear:Subordinated loan (3,000) (3,000)Provision for liabilities and charges (766) (1,189)----------------------------- ------ ---------- ----------Net assets 55,238 34,592----------------------------- ------ ---------- ---------- Share capital & reservesOrdinary shares 2,530 2,260----------------------------- ------ ---------- ----------Called up share capital 2,530 2,260Treasury shares (2,810) -Share premium account 12,595 19Merger reserve 21,810 21,810Special reserve 9,595 9,595Other reserve (712) (741)Profit and loss account 12,230 1,649----------------------------- ------ ---------- ----------Equity Shareholders' funds 55,238 34,592----------------------------- ------ ---------- ---------- Approved by the Board on 12 March 2007 and signed on its behalf by: Timothy Linacre David LiddellChief Executive Finance Director CONSOLIDATED CASH FLOW Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Net cash inflow from operating activities 16,954 11,787 Returns on investment and servicing offinance 1,336 635 Payment of taxation (918) - Capital expenditure and financial investment (5,479) (812) Acquisitions and disposals 84 809 ----------- ----------Cash inflow before financing 11,977 12,419 FinancingProceeds of issue of ordinary share capital 9,916 94Increase in short term loan 819 - ----------- ----------Net cash inflow from financing activities 10,735 94 ----------- ----------Increase in cash 22,712 12,513 ----------- ---------- Reconciliation of cash inflow to movementin net funds: Increase in cash for the period 22,712 12,513Increase in short term loan (819) -Subordinated debt acquired with subsidiary - (3,000) ----------- ----------Change in net funds resulting from cash flows 21,893 9,513 Net funds 1 January 2006/1 January 2005 18,070 8,557 ----------- ----------Net funds 31 December 2006/31 December 2005 39,963 18,070 ----------- ---------- 1. TOTAL TURNOVER ANALYSIS The following provides an analysis of turnover by major activity: Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Institutional Equities and other commission 20,410 12,435Corporate Finance and other fees 23,368 19,171 ----------- -----------Total 43,778 31,606 ----------- ----------- 2. COST OF SALES Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Commission payable and settlement costs 1,737 1,592 ----------- -----------Total 1,737 1,592 ----------- ----------- 3. OTHER OPERATING INCOME Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Profit on disposal of available for saleinvestments 387 - ----------- -----------Total 387 - ----------- ----------- 4. STAFF COSTS Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000Staff costs including Directors' emolumentsWages and salaries 20,139 14,855Social security costs 2,527 1,966Pensions (defined contribution scheme) 1,072 815 ----------- -----------Total 23,738 17,636 ----------- ----------- The group operates a defined contribution pension scheme, accruing costs aspaid. At the balance sheet date the group had no outstanding pensioncontribution liabilities. The charge for the period to 31 December 2006 was£1,072,000 (2005: £815,000). Average number of persons, including Directors, employed by the Group during theyear: 2006 2005 Institutional Equities 63 55Corporate Finance 28 25Other 36 31 ----------- ----------- Total 127 111 ----------- ----------- As at 31 December 2006, the number of persons, including Directors, employed bythe Group was: Institutional Equities 59Corporate Finance 30Other 36 --------Total 125 -------- 5. EARNINGS PER SHARE The calculations of earnings per share are based on the following profits andnumbers of shares: Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Profit/(loss) attributable to ordinaryshareholders: 3,578 (4,452) Weighted average number of shares inissue 62,081,645 44,688,195 Diluted weighted average number ofshares in issue 64,686,485 - Basic profit/(loss) per share (pence) 5.76 (9.96) Diluted profit/(loss) per share (pence) 5.53 - ADJUSTED EARNINGS PER SHARE Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000------------------------------- ----------- -----------Profit/(loss) on ordinary activitiesafter taxation 3,578 (4,452)Reorganisation costs arising as a resultof the acquisition of Panmure Gordon (UK) Limited - 2,714FRS 20 option charges arising as a result of theacquisition of Panmure Gordon (UK) Limited 6,908 7,112FRS 20 charges 214 542Goodwill amortisation 450 -Prior year tax (over)/under provision (405) 380Tax relief provided by exercise of shareoptions (828) -Income on termination of discontinuedactivities (84) (242) Profit on continuing activities before goodwillamortisation, FRS 20 option charges and exceptional ----------- -----------items, and after taxation 9,833 6,054------------------------------- ----------- ----------- Analysed asOperating profit before goodwill amortisation, FRS 20 option charges and exceptional items 11,579 5,458Interest receivable and similar items 1,336 612Underlying taxation (3,082) (16) ----------- ----------- 9,833 6,054------------------------------- ----------- ----------- Weighted average number of shares in issue 62,081,645 44,688,195 Diluted weighted average number of shares in issue 64,686,485 46,850,789 Adjusted earnings per share (pence) 15.83 13.55 Adjusted diluted earnings per share (pence) 15.20 12.92 This information is provided by RNS The company news service from the London Stock Exchange