The drag on revenues from scarce market-wide primary equity issuance was substantially mitigated by progress in most other areas, reflecting the breadth and strength of the franchise that has been built. Numis is positive on H2 revenues and expects a pick-up in IPO activity. Less positively, cost pressure is greater than we had expected and prospectively from the implementation of MiFID II. Strategically, Numis Corp (LON:NUM) looks well placed to navigate industry change, has successfully completed a major succession in leadership, and continues to offer absolute and relative value.
First half results (to 31 March 2017)
Numis ran two IPOs in H117 versus 10 in the prior year period, but made progress in secondary commissions, trading, secondary issuance and corporate retainers. Still, revenues fell 8%, although an increased contribution (£1.4m vs £0.2m in H116) from the strategic investment portfolio limited the total income decline to 5%. Costs were similar to H216, but rose compared with H116, taking the cost to income ratio up by 10 percentage points to 81%. Some of the cost pressure is likely to prove structural as MiFID II implementation approaches. Pre-tax profits declined to £10.5m (H116: £16.8m) with fully diluted EPS of 7.6p (11.6p). DPS was unchanged at 5.5p but share repurchases substantially increased. The assumption of higher costs reduces our FY17-18 EPS estimates by 5-6%.
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