Numis profits suffer on London float famine
Broker Numis suffered a 64% fall in half-year profits after a “total drop-off” in stock market listings and a share sale flop for its client Kier.
In a sign of the steep decline in stock market activity before the 29 March Brexit deadline, revenues generated from raising funds through its investment bank arm between September and March fell by a quarter to £39 million.
That reflects the dearth of floats in London, with just 15 debuts in the period well down on the average of 50. Co-chief executive Alex Ham said: “There’s been a total drop off in transaction activity. It’s been a tough few months because of the complete lack of equity issuance but we think that will come back”.
Total group profits fell 64% to £7.1 million. The interim dividend is 5.5p. In a rare underwriting disaster, Numis was also forced to absorb a £3.1 million loss on Kier’s £264 million emergency rights issue in December after investors shunned the rescue.
The company — along with HSBC, Citi, Peel Hunt and Santander — was left holding the stock after only 38% took up the fundraiser. Numis had to sell at around 360p but was saddled with the shares at 409p. The five underwriters collectively lost about £15 million on the trade by some estimates.
The Kier debacle sent trading revenue to just £400,000 from £4.6 million last year. “Some of the trading losses were offset by an investment banking fee to do the deal,” said co-chief executive Ross Mitchinson. “We have to take it on the chin. These things happen. We do a lot of underwriting and you won’t get them all right.”
The last time brokers suffered such a large loss was with Alliance and Leicester around a decade ago.
