FinnCap confirms its record £32m revenue on ‘exceptionally busy’ M&A market
Shares in FinnCap closed 1.4 per cent higher today, after the AIM-listed tech and life sciences small cap broker confirmed the first half bumper revenue hike it had teased last month.
Earnings jumped 55 per cent to a record £32m, and the firm stuck to the full-year revenue guidance it upgraded in October to between £45m and £50m.
As a result, the firm upped its dividend forecast for this year and now expects to pay out a total of 1.75p per share.
Underlying profits surged 67per cent to £7.2m, pushing the dividend for the current period up 20 per cent to 60p per share, to be paid out to shareholders in January.
Its record revenue was buoyed by what the firm described as “an exceptionally busy M&A market”, and the company enjoyed a 75 per cent surge in deal and advisory fees to £24.8m.
Broken down, the firm posted a huge 286 per cent uptick in revenues to £16.2m from its M&A arm Cavendish, which it acquired at the end of 2018 in a bid to diversify its revenue streams – a strategy that CEO Sam Smith told City PM was “all starting to pay off.”
“Strategically we always knew it was right, and it’s absolutely been working for us in terms of servicing clients and broadening our spread of revenue,” Smith says.
“Businesses always have their own offering, and Cavendish was extremely good at selling to entrepreneurs. Now we’ve brought it into the group, it has all these other services to offer, like debt advice and private equity, which are starting to pay off. Now we want to work on becoming more sector specialist.”
FinnCap said it completed 39 transactions in the six months to 30 September, including £250m raised through fourteen public market placings and the £20m IPO of climate tech Eneraqua, which is due to start trading next Monday.
But Smith is already seeing the market “soften for IPOs,” she tells City PM.
“It all opened up post-pandemic and became an option for companies to consider, and if they’re coming to market for the right reason, it’s a huge source of growth capital.
“But fund managers need to be more discerning when it starts getting frothy – it’s slightly overheated and we’ll see numbers fall. The market will work out what levels of profit were exceptional to the pandemic, and what the long-term trends will be,” she adds.
The broker also said it had advised on thirteen private market transactions with an aggregate value of around £1bn in the period, four public acquisitions with a combined value of around £500m, and completed six new debt refinancings, raising around £250m.
As M&A activity reached new record highs globally, FinnCap observed the sector hotspots for deals among its clients in the busy year past, as well as its pipeline going forward.
“Deals that we worked on were not dominated by one space and were broad, but tech certainly accounts for much of the public market activity as well as M&A,” Smith says.
“Consumer and business services have been busy, and we’ve started to see movement in sustainability too, as more companies come to market.
“Our pipeline of deals expected to complete in H2 remains good and our revenue guidance remains unchanged from our October upgrade,” she added.