The City does not have time for a lot of introspection, so it probably comes as no surprise that Numis, the Aim-listed broker and mid-sized investment bank with a market value of about £330 million, is not covered by any analysts.
This lack of professional commentary has done little to slow the company’s advance, though. In the past year the shares have risen by just under a third and on a five-year view have more than doubled. Go back to the 1996 market debut and you have a share price that in its early days looks like bitcoin’s trajectory today.
Yesterday, Numis reported record revenues at £130 million for its latest financial year, helped by commission and trading revenue hitting a record high of £44.8 million. Corporate broking and advisory also put in a record performance, reaching £85.3 million.
So what’s going so right for Numis? After all, you might think that with Brexit, timid investors and rising costs, these are hardly great days for the investment banking industry. At the larger end of the spectrum, this certainly looks to be true. The likes of Barclays are struggling to make money from their City divisions. But at the scale Numis is operating, it is a different story. Secondary trading volumes on the London Stock Exchange, that is the buying and selling of existing shares, are running 16 per cent ahead of the volumes at the same point in 2016, while equity fundraisings, where listed companies go out to investors for more money, are up 14 per cent year-on-year.
All of this is good news for Numis, which worked on seven market floats in the 12 months to the end of September, nearly 40 secondary fundraisings, 17 block trades and big share disposals and took 37 advisory mandates for various deals.
Good business has meant good bonuses. Variable pay per head rose by 29 per cent year-on-year, while salaries rose by 1 per cent. Overall, administrative expenses were up 14 per cent on 2016 at £95.4 million, meaning that profit and revenue growth still outpaced the increase in the cost of generating this performance.
Among the items in its expenses are non-compensation costs that largely amount to investment in the business’s technology infrastructure. However, this year’s bill of £26.4 million is likely to be raised by stiffer regulatory costs, particularly ahead of next month’s introduction of the Mifid II rules that have led to tens of billions of pounds in compliance spending across the financial industry. While this figure might not shrink too much, there is reason to believe that it may not get too much higher, either.
Investors appeared encouraged by this performance and nudged the share price 0.4 per cent up to 309p yesterday, sending it closer to the post-recession high of 328p of February 2014.
Looking forward, Numis has said that trends observed in its last financial year have continued into the next. Like everything in investment banking, where revenues can tend towards being lumpy and unpredictable, this is no guarantee, but the company has pointed to a solid pipeline of visible business.
Certainly, with equities trading close to record highs, these are the sort of market conditions in which you would expect to see continued equity issuance and corporate mergers and acquisitions.
More than a year on from the departure of Oliver Hemsley, its long-time chief executive, Numis appears to have thrived. Mr Hemsley had been the driving force behind the business and his exit (he retired from the board in May) was seen as a test for the broker; it’s one that, so far, it appears to have passed with flying colours.
Advice Buy
Why The business remains well set for growth despite challenges ahead
Mercia Technologies
Virtually every month Britain’s leading universities suck in significant dollops of private cash to help to spin out technology and life sciences research breakthroughs. So much of that money is concentrated in the “golden triangle” of research departments in Oxford, Cambridge and London, however, that good ideas from other universities can get overlooked.
That’s where Mercia Technologies comes in, managing funds that invest in spin-outs from 19 universities in the north, the Midlands and Scotland.
Some of its managed funds are backed with cash invested under the Enterprise Investment Scheme, which allows tax-efficient investment by individual investors in small unquoted companies and from regional development funds. Mercia also invests directly from its own balance sheet in the most promising of the start-ups in its portfolio.
Mercia’s shares have been on a fairly steady downward path since it floated its shares on Aim in December 2014 at 50p. However, given that the rule of thumb is for research to take 17 years from lab bench to shop shelf, it needs to be regarded as a long-term investment and yesterday there were signs that Mercia’s patient capital approach is paying off.
After it published solid half-year results, its shares rose by 3.6 per cent to 35¾p. In the six months that ended on September 30, the value of its portfolio grew by 24.4 per cent to £64.7 million. Funds under management rose from £220 million to £336.5 million, while the net asset value per share grew from 38.1p to 41.1p. Mercia turned a profit of £1.4 million, after £1.1 million in the same period last year.
It’s not just money in with Mercia. There’s been plenty of money out, too. In October it completed a cash realisation from one of its portfolio companies, Blue Prism Group, a robotics company that listed on Aim in March 2016. Mercia’s aggregate cash return on Blue Prism to date comes to £49.1 million, a return of 55 times on the original £900,000 invested. Mike Payton, chief executive, has other reasons to feel chipper. The chancellor has pledged to double the EIS limit and unlock £20 billion of new investment.
Advice Buy
Why Long-term potential for those with patience and a healthy risk appetite
