PMR.L Regulatory News (PMR)

14 Mar 2006 07:02

Panmure Gordon & Co. plc14 March 2006 PANMURE GORDON & CO. PLC ("PANMURE GORDON" OR THE "GROUP") Preliminary Results for the year end 31 December 2005 Panmure Gordon & Co. plc today announces preliminary results for the year ended31 December 2005. 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 • Successful integration of Panmure Gordon and Durlacher businesses in April • Results represent only eight months of the combined business • Revenue of £30m for the year, of which £22.9m earned in the second half • Adjusted operating profit of £5.5m (£5.3m in the second half) • Adjusted earnings of £6.1m (£5.7m in the second half) • Adjusted earnings per share of 13.55p (10.10p in the second half) • Gross cash of £21.1m at 31 December 2005 Commenting on the results, Tim Linacre, Panmure Gordon's Chief Executive, said: "2005 was a year of considerable change and I am pleased with the progress wehave made and continue to make". For further information, please contact Timothy Linacre, Chief ExecutivePanmure Gordon & Co. plc 0207 614 8300 David Rydell/Nick Lambert/Chris HamiltonBell Pottinger Corporate & Financial 0207 861 3232 CHAIRMAN'S STATEMENT Although Panmure Gordon has been a well known City of London firm since itsfoundation in 1876, in our present incarnation we are barely a year old. Thecompletion of the reverse into Durlacher Corporation was effected in April 2005and therefore this, our inaugural set of results, represents the eight months toDecember 2005 as a combined business. The firm's revenues grew to £30m for thefull year, of which £22.9m was earned in the second half. Operating profitbefore exceptional charges and FRS 20 option charges (adjusted operating profit)was £5.5m and adjusted earnings per share were 13.5p. At the half year wereported cash resources of £5.5m; by the end of December they were £21.1m. Sincecombining the businesses, we have raised £747m in initial and secondaryofferings. We deal with 450 institutional clients around the world in mid andsmall cap London listed equities; a year ago this number was 330. Operatingexpenses in the second half were below the run rate indicated in the documentpublished at the time of the Durlacher deal and we continue to seek and discoverways of making our firm more efficient. These are the bare bones of a satisfactory first year as a publicly listedbusiness. Our Chief Executive will expand on these results further in his reviewof the business. Panmure Gordon is a team game but it would be churlish not tosingle Tim Linacre out as the outstanding contributor to these results, hisperformance throughout the year has been terrific. I would like to comment now on outlook, our proposed strategy as a listedcompany and the formation of Panmure Capital. At the time of our interims I said that I thought the conditions for astockmarket business such as ours were fairly benign and so it has proved. UKlisted equities are, in our opinion, still relatively attractive both bycomparison to the valuations of other major stockmarkets, and by comparison toUK gilts. The supply/demand equation also seems benevolent; there has beenfurther reduction of big cap equity and continued issuance by smaller growthcompanies. We think these trends likely to persist for a while yet. Althoughthere have been some high profile disappointments in the smaller cap and AIMlisted market, by and large investors and issuers have had a satisfactory yearand market confidence remains robust. The new year has started encouragingly for us and our pipeline is better thanlast year, with all the usual issues as to visibility and execution risk. So wecontinue to view the current conditions as quite benign for our firm althoughwith two perennial caveats. Our competition is excellent and despite ourprogress good quality new business wins are always tough. We also have a veryhard won reputation for high calibre due diligence and careful dealing, and thiswill not be lost in pursuit of short term revenues. Unsurprisingly, we do not see our strategy as a listed company predicated on anever rising appetite amongst investors for small and mid cap London listedsecurities. The superior relative performance of these securities has flattenedout in recent months and there will continue to be periods, possibly some ofthem quite protracted, when new issue indigestion or a flagging of investorappetite will depress revenue growth. We do not see such conditions at themoment but we are thinking of how to prepare for them at some point in thefuture. We do not believe in diversifying Panmure Gordon too far from our coreskills of intermediating between investors and issuers, and the facilitation ofliquidity for both. We believe the Firm's employees and shareholders, many ofwhom are the same, support this view. This does not preclude us however fromseeking to grow revenue streams from complementary "stockmarket" businessactivities, and the first of these is Panmure Capital. As our recent announcement stated, Panmure Capital is a joint venture betweenPanmure Gordon and Bank of Scotland to supply pre-IPO equity finance usually asa co-investor, for companies for whom a listing is contemplated. We arefortunate to have found a partner of the calibre of Bank of Scotland in thisventure. We think it is a relatively unpopulated space in the funding chain,offers attractive returns, should not tie up capital for protracted periods andof course provides attractive IPO introductions for Panmure Gordon. It is earlydays but we are seeing a number of interesting opportunities and are close tomaking one or two investments. There have been some changes to the Board in recent months. We said goodbye toSimon and Julian Hirst, thanking them for their contributions to the successfulmerger. We welcome Charles Stonehill as Deputy Chairman. Although no doubt itwill have its challenges, 2006 promises to be another positive year to work inthe stockmarket and at Panmure Gordon. Richard WyattChairman13 March 2006 CHIEF EXECUTIVE'S REVIEW Introduction During the period under review Durlacher Corporation acquired Panmure Gordon &Co and subsequently changed its name to Panmure Gordon & Co. plc. Theacquisition was completed on 26 April 2005 and these results therefore includethe results for Durlacher for the period 1 January 2005 to 26 April 2005 and forthe combined business for the period 27 April 2005 to 31 December 2005. As reported in the Interim Report in August 2005 the businesses were integratedquickly with limited business interruption. Results The business had an exceptionally strong second half delivering a financialperformance ahead of our expectations. These results were achieved against aback-drop of a particularly strong new issues market and generally benign marketconditions. Revenue Revenue of £30.0m was earned in the year of which £22.9m was earned in thesecond half of the year. The business had a particularly strong last quarter. Costs At the time of the acquisition of Panmure Gordon, a cost target foradministrative expenses was set at not more than £21m per annum before bonusesand exceptional costs. This necessitated a significant reduction in the combinedheadcount and the elimination of duplicated costs. The target was achieved and,in the second half of the year such costs (before bonuses) were running at anannualised rate of £20.9m. We intend to keep a firm control on costs and have identified a number of areaswhere further savings are achievable while still permitting investment in thebusiness. Our intention is to continue to build a business that can survive indifficult markets and, as we have partially shown in the second half of 2005,can prosper in better markets. Underlying Operating Profit and Earnings In order to give a clearer and more consistent view of operating performancethan is contained in the statutory profit and loss account, we will in thisperiod and going forward, report both operating profit and earnings on anadjusted basis. This means excluding exceptional items (which in this periodrelate to the merger of the businesses and which we do not expect to recur) andalso non cash accounting requirements such as the FRS 20 option charges, whichwe believe distort the operating results and do not aid analysis and valuationof the business. 12 months to 6 months to 31 December 2005 31 December 2005 £000 £000Revenue 30,104 22,904Administrative expenses (includingbonuses) (24,556) (17,603) ----------- -----------Adjusted operating profit 5,458 5,301 Interest receivable 612 418 ----------- -----------Adjusted profit before tax 6,070 5,719Tax (16) (16) ----------- -----------Adjusted earnings (see note 5) 6,054 5,703 Adjusted earnings per share 13.55p 10.10p Weighted average number of shares inissue 44,688,195 56,484,262 The adjusted earnings reconcile to the loss on ordinary activities aftertaxation contained in the consolidated profit and loss account on page 6 asfollows: 12 months to 6 months to 31 December 31 December 2005 2005 £000 £000Adjusted earnings 6,054 5,703Less:FRS 20 charges deemed not exceptional (542) (172)FRS 20 charges deemed exceptional (7,112) (4,682)Other exceptional costs (2,714) -Prior year tax adjustments (380) (380) Add:Net income on termination of discontinuedactivities 242 404 (Loss)/profit on ordinary activities aftertaxation (4,452) 873 Corporate Finance We led, or were involved in, 15 flotations and 12 secondary offerings raising£843m for clients for the year as a whole. In Corporate Finance, as in all areas of the business, we have no desire to bethe largest purely for the sake of size. We seek to act for clients where theeconomic relationship is favourable and where we can provide the expected levelof service. The corporate client list has undergone significant change as wehave won new clients and parted company from others. We have an excellent list of some 91 corporate clients equally balanced betweencompanies listed on the main market and those listed on AIM. Our client listincludes two listed in the FTSE 100 and eight listed in the FTSE 250. Institutional Equities and Research We write research on more than 240 companies and investment trusts and are aregistered market maker in 490 stocks and provide liquidity in a further 430stocks. Our trading philosophy remains one of client facilitation rather thanproprietary trading. Our research now covers 14 sectors; aerospace and defence, electronic andelectrical equipment, financials, real-estate, food producers, household goods,industrial transportation, life sciences, media, oil and gas, retail, supportservices, technology and travel and leisure, as well as investment trusts. Panmure Capital We announced after the end of the year the creation of Panmure Capital, a jointventure between Panmure Gordon and Bank of Scotland targeting late stage pre-IPOfunding opportunities. The creation of this fund was the initiative of RichardWyatt, our Chairman. While it is early days, our initial experience hasconfirmed our view that there is a funding gap for smaller companies who seekequity over a relatively short period prior to flotation. Outlook Our institutional equities business has made a particularly strong start to 2006and Corporate Finance continues to build on the success of last year. We intendto remain selective about the type of business we seek to do. A fundamentalphilosophy of the management team is that the success of a corporate transactioncannot be measured by the size of the fee but by how you have met theaspirations of all parties. In this regard, we are particularly proud of theperformance of the companies that we have brought to the market. There is clearly some indigestion in the new issue market however we continue tosee high quality candidates for listing in London, both through Panmure Capitaland our general marketing efforts. Increasingly, the London Stock Exchange isbecoming the market of choice for international companies and I am pleased withthe way the firm has responded to this trend; we brought to market the two bestperforming flotations of Israeli companies on AIM in 2005, floated one of thefirst New Zealand technology companies to list in London, launched a CypriotLeisure & Property Company and floated a Bulgarian Property Fund. We arecontinuing to develop our international marketing effort, however we do not seeany pressing need to open overseas offices preferring relationships withlike-minded firms, such as our understanding with Unterberg Towbin in the UnitedStates. We also continue to benefit from our relationship with Lazard, whoremain a major stakeholder in the Company. We have an encouraging corporate pipeline, however, given the transactions weare currently working on, the Corporate Finance revenue will, as in 2005, beweighted significantly to the second half of the year. Development of the Business Since the acquisition of Panmure Gordon on 26 April 2005 a lot has beenachieved. I would like to play tribute to all my colleagues who worked to ensurethe transaction was a success and helped subsequently to produce such a strongsecond half performance. A lot more can still be achieved. The business, in its current form, is stillvery young. Our competitors are formidable and markets volatile. We do howeverbelieve that Panmure Gordon has the ability over the next years to become abroader and more inherently stable business through both organic growth andinitiatives, such as Panmure Capital, and through acquisition. We are pleased at how quickly the Panmure Gordon name and reputation have beenre-established in our market. Throughout Panmure Gordon's 130 year history,through various owners, 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. Timothy LinacreChief Executive13 March 2006 CONSOLIDATED PROFIT & LOSS ACCOUNTfor the year ended 31 December 2005 Restated Year ended 18 months 31 December 31 December 2005 2004 Notes £'000 £'000 ---------------------------- ------ ----------- ----------Turnover 1 31,606 15,574 Costs of sales 2 (1,592) (2,037)---------------------------- ------ ----------- ----------Gross profit 30,014 13,537---------------------------- ------ ----------- ----------Administrative expenses (24,556) (17,529) Operating profit/(loss) before FRS 20 optioncharges and exceptional items 5,458 (3,992) FRS 20 option charges deemed not exceptional (542) (528) Operating profit/(loss) before exceptionalitems 4,916 (4,520) Exceptional costs 3 (9,826) (2,704)---------------------------- ------ ----------- ---------- Total administrative expenses (34,924) (20,761)---------------------------- ------ ----------- ---------- Operating loss (4,910) (7,224) Profit on disposal of fixed asset investments - 111Net income on termination of discontinuedactivities 242 726Net interest receivable and similar items 612 442---------------------------- ------ ----------- ----------Loss on ordinary activities before taxation (4,056) (5,945) Taxation on loss on ordinary activities (396) (77)---------------------------- ------ ----------- ----------Loss on ordinary activities after taxation (4,452) (6,022)---------------------------- ------ ----------- ---------- Basic loss per ordinary share (see note 5) (9.96)p (38.51)p The Profit per ordinary share on continuing activities before exceptional itemsand FRS20 option charges is disclosed in note 5. CONSOLIDATED STATEMENT OF TOTAL RECOGNISEDGAINS AND LOSSESfor the year ended 31 December 2005 Restated Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000 Loss on ordinary activities after taxation (4,452) (6,022) ---------- ---------- Total recognised gains and losses (4,452) (6,022) ---------- Prior year adjustment in respect of adoption ofFRS 20 'share-based' payments (528) ---------- Total recognised losses since the pastannual report (4,980) ---------- CONSOLIDATED BALANCE SHEETAs at 31 December 2005 Group 31 December 31 December 2005 2004 £'000 £'000----------------------------- ------ ---------- ----------Fixed assetsIntangible assets 13,201 -Tangible assets 1,702 1,423----------------------------- ------ ---------- ----------Total fixed assets 14,903 1,423----------------------------- ------ ---------- ---------- Current assetsTrading Securities 8,114 2,712Debtors 42,759 8,055Cash at bank and in hand 21,070 8,557----------------------------- ------ ---------- ---------- 71,943 19,324 Creditors - amounts falling due within one year (48,065) (8,674)----------------------------- ------ ---------- ----------Net current assets 23,878 10,650----------------------------- ------ ---------- ---------- Total assets less current liabilities 38,781 12,073 Creditors - amounts falling due after one year - (69)Subordinated loan (3,000) -Provision for liabilities and charges (1,189) (1,544)----------------------------- ------ ---------- ----------Net assets 34,592 10,460----------------------------- ------ ---------- ---------- Share capital & reservesOrdinary shares 2,260 776Deferred shares - 28,330----------------------------- ------ ---------- ----------Called up share capital 2,260 29,106Share premium account 19 27,473Merger reserve 21,810 1,715Special reserve 9,595 -Other reserve (741) -Profit and loss account 1,649 (47,834)----------------------------- ------ ---------- ----------Equity Shareholders' funds 34,592 10,460----------------------------- ------ ---------- ---------- Approved by the Board on 13 March 2006 and signed on its behalf by: Timothy Linacre David LiddellChief Executive Finance Director CONSOLIDATED CASH FLOW Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000 Net cash inflow/(outflow) fromoperating activities 11,787 (4,506) Returns on investment andservicing of finance 635 477 Capital expenditure and financialinvestment (812) (1,329) Acquisitions and disposals 809 58 ---------- ----------Cash inflow/(outflow) beforefinancing 12,419 (5,300) FinancingProceeds of issue of ordinaryshare capital 94 11,566Decrease in short term loan - (750) ---------- ----------Net cash inflow from financingactivities 94 10,816 ---------- ----------Increase in cash 12,513 5,516 ---------- ---------- Reconciliation of cash inflow tomovement in net funds: Increase in cash for the period 12,513 5,516Decrease in short term loan - 750Subordinated debt acquired withsubsidiary (3,000) - ---------- ----------Change in net funds resultingfrom cash flows 9,513 6,266 Net funds 1 January 2005 / 1 July2003 8,557 2,291 ---------- ----------Net funds 31 December 2005 / 31December 2004 18,070 8,557 ---------- ---------- 1. TURNOVER ANALYSIS The following provides an analysis of turnover by major activity: Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000 Institutional Equities and othercommission 12,435 4,408Corporate Finance and other fees 19,171 11,166 ---------- ----------Total 31,606 15,574 ---------- ---------- A small proportion of turnover is attributable to non-UK markets. 2. COST OF SALES Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000 ---------- ----------Commission payable and settlement costs (1,592) (2,037) ---------- ---------- 3. ADMINISTRATION EXPENSES - EXCEPTIONAL EXPENSES Included within administration expenses are the following non-recurringexceptional expenses: Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000 Termination, redundancies and one-offresidual costs relating to realisationof investments (2,714) (1,362)Expensing of share options under FRS 20 (7,112) -Compensation in lieu of commission onshare issue - (392)Property costs - (950) ----------- -----------Total (9,826) (2,704) ----------- ----------- 4. STAFF COSTS Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000Staff costs including Directors emolumentsWages and salaries (14,855) (9,188)Social security costs (1,966) (1,152)Pensions (815) (189) ----------- -----------Total (17,636) (10,529) ----------- ----------- Average number of persons, including Directors, employed by the Group during theyear (2004: 18 months): 2005 2004 Institutional Equities 55 32Corporate Finance 25 15Other 31 31 -------- --------Total 111 78 -------- -------- As at December 31 2005, the number of persons, including Directors, employed bythe Group was: As at 31 December 2005Institutional Equities 66Corporate Finance 28Other 37 -----------Total 131 ----------- 5. EARNINGS PER SHARE The calculations of earnings per share are based on the following profits andnumbers of shares: Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000Loss attributable to ordinary shareholders:After exceptional expenses anddiscontinued activities (4,452) (6,022) Weighted average number of shares inissue 44,688,195 15,636,079 Basic loss per share (pence) (9.96) (38.51) FRS 14 requires presentation of diluted EPS when a company would be called uponto issue shares that would decrease net profit or increase net loss per share.For a loss-making company with outstanding options, net loss per share wouldonly be decreased by the exercise of these share options therefore no adjustmenthas been made to the weighted average number of shares in issue. Adjusted earnings per share Year ended 18 Months to 31 December 31 December 2005 2004 £'000 £'000-------------------------------- ----------- -----------Loss on ordinary activities aftertaxation (4,452) (6,022)Add back exceptional items 9,826 2,704FRS 20 charges not deemed exceptional 542 528Prior year tax under provision 380 77Less income on termination ofdiscontinued activities (242) (726) Profit/(loss) on continuing activities before exceptional items and FRS 20 charges and after ______ _______taxation 6,054 (3,439)-------------------------------- ----------- ----------- Analysed asOperating profit/(loss) before FRS 20option charges and exceptional items 5,458 (3,992)Profit on disposal of fixed assetinvestments - 111Interest receivable 612 442Taxation (16) - ______ _______ 6,054 (3,439)-------------------------------- ----------- ----------- Weighted average number of shares inissue 44,688,195 15,636,079 Adjusted earnings/(loss) per share(pence) 13.55 (21.99) This information is provided by RNS The company news service from the London Stock Exchange