Oliver Hemsley is barely out of the door, but even without its long-time boss and founder in the driving seat, Numis appears to have barely skipped a beat. The stockbroker’s revenues for the year to the end of September have hit a record, while its cash balance is close to £90 million, about £60 million more than it needs to be.
Only a few years ago, questions were being asked about the viability of small and mid-cap brokers and while many of Numis’s more illustrious rivals have fallen by the wayside (think Panmure Gordon), this is one that looks set to stay the course.
First things first: Brexit. While the vote to leave the European Union clearly is not something that might be expected to help a predominantly British-focused business like Numis, the referendum has not been all bad. Take Skyscanner: in January, Numis helped the British technology group to raise £128 million for international expansion; ten months later the discount travel site was handing over the keys to a Chinese buyer valuing it at £1.4 billion, a deal helped in part by the fall in the value of the pound as a consequence of the vote.
And Numis has plenty more tech start-ups on its books to keep it busy for years. The establishment 18 months ago of a venture broking desk means that the firm tracks 40-odd potential Skyscanners.
Of course, only a few of these might come off, but for brokers that often have been seen as fusty old businesses trying to claw a few more pounds out of the same old clients, Numis’s move to embrace the tech economy is paying dividends.
This is not to say that its more traditional businesses are not doing well. Commissions and trading revenues at £38.4 million were up £5 million year-on-year, while its corporate broking and advisory division reported a £10 million-plus jump in earnings to £74 million.
With City analysts paring back their coverage of their own business in recent years, there is little in the way of consensus forecasts for Numis. Indeed, the last research report on the company is more than a year old.
However, even without much in the way of industry research allowing a cross comparison, it is clear that Numis has emerged as one of the strongest players in its field.
The increase in the dividend and the potential expansion of the company’s share buyback programme underpin its valuation, with a healthy dividend yield of close to 5 per cent.
MY ADVICE Hold
WHY Scope for return of cash to shareholders
British American Tobacco
Donald Trump’s US election victory was not the ideal result for British American Tobacco, given that it had just announced a proposal to put $47 billion into an American company. Harbingers of doom immediately predicted that BAT’s offer to buy out the 57.8 per cent of Reynolds American that it does not already own would fall by the wayside amid a loss of confidence in the United States as a place to do business.
Such short-termism is not in BAT’s vocabulary, however. Its core product may shorten lives, but the maker of Dunhill and Lucky Strike cigarettes takes long-term considerations into account when it is making investments. It is, after all, 12 years since the group folded Brown & Williamson, its American subsidiary, into Reynolds in return for a 42.2 per cent stake, a move that provided BAT with a path to ultimate ownership of Reynolds.
The American group’s rejection of its opening gambit was hardly a surprise, but bearing in mind the strong ties between the two sides, a modest uplift should be enough to get the prize, giving BAT not only a leading position in the second-biggest profit pool after China but also providing a significant boost to its e-cigarette and vaping operations.
MY ADVICE Buy
WHY Reynolds takeover will enhance prospects
Joules
Adding more stores and more ranges was intended to give Joules some extra welly on the high street, and it appears to be paying off. Half-year revenue jumped by 16.2 per cent to £81.4 million, with sales rising as it opened more shops and expanded its range to include everything from boots and baby clothes to homewares and pet accessories.
It has been a solid six months, therefore, and a good start for a company that floated on AIM only in May. The retailer was started by Tom Joule, who initially sold his products on the “show circuit” at events such as the Badminton horse trials. Joules could have remained a cult brand among posh, horsey types, but under the management of Mr Joule and more recently Colin Porter, chief executive, it has had its eyes on bigger things.
Since Joules listed at a value of £140 million, its shares have risen by almost a quarter and the company is valued at £172 million at yesterday’s closing price of 197p, down 10½p but well above the 160p listing price. More growth is anticipated as it adds still further to its product range and store numbers. It is also making headway overseas through its wholesale channel, with American shoppers particularly keen on its “bursting with Britishness” products.
It is clear that Joules has done many of the hard yards when it comes to investing in its business, particularly in ecommerce. Now could be the time to invest as the group appears to be poised for a period where its bottom-line profits could grow more quickly than sales.
MY ADVICE Buy
WHY A broad appeal brand expanding here and abroad
And finally. . .
With Netflix saying that it will be investing heavily in unscripted reality TV and YouTube cutting into traditional television viewing, ITV could be at risk, especially as post-referendum ad revenues dwindle. At least, that’s the view of Neil Campling, head of global TMT research at Northern Trust Capital Markets. Throw in the likes of Amazon Prime, HBO Now and Hulu and Mr Campling reckons the shake-up in viewing consumption makes ITV’s reality and entertainment offering look particularly vulnerable.
