Growth capital business a key focus for long-term strategy at Numis, says co-CEO
City broker Numis this morning reported its full year revenue swelled nearly 40 per to hit £215.6m, as a buoyant IPO market coupled with stabilised markets and rising deal fees helped the firm deliver its second record annual revenue performance in a row.
Profit before tax doubled in the year to September 30, which Numis credited to the operational streamlining of its business, which saw operating margin rise to 31.6 per cent, up from 24.4 per cent a year earlier.
Despite the record results, shares in the broker slumped as much as 1.8 per cent this morning, following the group’s warning that its execution of its capital markets pipeline, including IPOs, in the first half of the current financial year could be dented by “greater uncertainty”, as supply chain challenges and inflation fears weigh on investor sentiment towards the UK.
While Numis charted growth in all areas of its business, it said its investment portfolio gains “were largely attributable to two of our holdings,” UK life sciences darling Oxford Nanopore, which it’s backed since 2011, and its investment in cybersecurity firm Wiz Inc during the year.
Numis acted as a bookrunner on Oxford Nanopore’s blockbuster IPO in September, in which its share surged as much as 45 per cent, giving it a market cap of almost £5bn, in the best-ever London market debut for a company of its size.
Net assets also grew in the period, up 18.5 per cent to £186.7m, and while the broker’s number of corporate clients shrank from 188 a year earlier to 182, their average market cap rose 27 per cent to £1.4bn. Numis works with 57 companies in the FTSE 250 and nine FTSE 100 companies.
Numis’ investment banking revenue surged more than 50 per cent to a record £154.9m, up from £101.7m in 2020, which had benefitted from considerable equity issuance volumes relating to Covid.
While the broker said IPO and M&A deal volumes were only slight up on the previous year, its gains were largely driven by an increase in average deal fees, which it said had more than doubled from their pre-pandemic levels in 2019, thanks to “working with larger corporate clients on larger transactions and earning a greater share of the fee pool.”
Meanwhile, the broker’s capital markets performance jumped 45 per cent to £111.5m, up from £77m a year earlier, which Numis said was driven by a recovery in IPO volumes from their pandemic pause.
Numis also underlined significant growth in its private market activities with the growth capital solutions unit of its business (GCB), as well as renewed focus on international deals post-Brexit.
“Our growth capital business is a key focus for our long term strategy, and it’s been performing very well raising capital for companies on a global scale, with many based outside of the UK,” co-chief executive Alex Ham told City PM.
“We see very good potential for growth within the GCB, especially where high growth firms are seeing the value of having an intermediary that can make sure they reach all the possible investors, while they have several VC firms vying to pitch themselves.”
Numis’ GCB business has delivered annual revenue growth of 44 per cent over the three years since its launch, and already accounts for around 15 per cent of investment banking income.
In the last 12 months, the broker has raised $4bn for tech success stories Klarn, Getir and Cazoo as they scale – including a £250m raise for the latter last October.
Advisory activities recorded the biggest uptick in revenue, jumping 177 per cent to £30.9m from £11.1, thanks again to an uptick in M&A activity after the worst of Covid.
“Advisory had a particularly strong year, as we started to emerge from lockdowns and confidence around the board table meant M&A picked up,” co-chief executive Ross Mitchinson told City PM.
“We’re confident in this unit’s performance over the next year, as we’ve invested in people there and see it as a big growth area – particularly internationally in the EU and US, but also across all sectors.”
Staff costs, which hit £99m in the year, suggest Numis brokers are reaping the rewards from these deals – that translates to a £320,000 average salary for its 319 employees.
Numis declined to comment on its engagement with the FCA after it self-referred itself to the watchdog last month when one of its employees circulated a bold memo suggesting that ecommerce group THG had “irregularities in accounting”.