Shares in City stockbroker Numis Corporation (NUM:AIM) popped as much as 7% to a 12-month high of 419p after the firm published strong first half results driven by higher investment banking and trading revenues.

GAINS ACROSS THE BOARD

For the six months to the end of March, the company posted an 83% increase in revenues to a record £115.4 million with investment banking fees more than doubling to £82 million.

The volume and value of new listings has ballooned in the last six months, alongside a sharp increase in merger and acquisition activity as companies exit the pandemic with strong balance sheets and expansion plans, all of which helped lift advisory revenues.

Meanwhile, income from its equities business climbed 27% as it gained market share with institutional customers and booked ‘consistently strong’ trading gains.

The firm also cited improved investor sentiment and the recovery in financial markets – the FTSE 100 rallied 14% over the period – as helping its results.

JUMP IN PROFITABILITY

Even more impressive is the increase in profitability, with underlying operating earnings rising 325% to £38.8 million, showing how operationally geared the business is to increased client activity.

Thanks to the jump in revenues without a corresponding increase in underlying costs, the firm’s operating margin more than doubled from 14.5% to 33.6% of revenues, while average revenues per employee leapt from £449,000 to £804,000 on an annualized basis.

While there may be some short-term uncertainties over the economy and the direction of the markets, ‘the business has great momentum and the (deal) pipeline is strong’, said joint chief executives Alex Ham and Ross Mitchinson.

CASHING IN

The Numis results also generated a positive reaction in the shares of smaller AIM-listed rival Cenkos Securities (CNKS:AIM), which gained 2.3% to 83.4p, while shares in finnCap (FCAP:AIM) added 1.2% to 44p.

Cenkos posted a sharp increase in revenues and earnings for the year to December, with underlying profits almost trebling to £4 million thanks to a strong performance in investments banking, and also said it had a ‘healthy business pipeline’ for this year.

finnCap, which has already posted results for the year to the end of March, said its second half performance was ‘materially ahead‘ of forecasts thanks to the highest ever level of deal fees in the third quarter and a stronger than expected fourth quarter thanks to equity fundraisings, new listings and mergers and acquisitions.

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Issue Date: 07 May 2021