A lack of stock market flotations has left stockbroker and corporate adviser Numis (NUM:AIM) looking ill.
IPOs (initial public offerings) are normally a good source of fee income for brokers and advisers, so a quiet period for new market entrants is a key reason why Numis’ half-year pre-tax profit is 38% lower than a year ago at £10.5m.
The company only helped on two IPOs in the first half of 2017 compared to 10 at the same time last year.
Its corporate broking and advisory revenues are down 26% year-on-year to £29m.
Numis’s founder and former chief executive Oliver Hemsley is stepping down from the board with immediate effect, although will remain with the company in an advisory capacity for 12 months.
The market does not react well to the news as Numis’s share is price down by 5.6% to 262.75p. However it is worth noting the company saw higher transaction volumes in non-primary activity and its equities revenue rose 31% to £23.4m.
There are also signs that despite a slow first half of the year, activity is picking up and the firm expects to meet market expectations at year end.
Alex Ham and Ross Mitchinson, co-chief executives of Numis, say the second half of the year has started well, with the completion of 10 fundraises generating fees of over £10m. The pair say equities revenue continues to run at the high levels seen in the first half of the year.
Regulatory barrage
Numis, along with other brokerages, faces strong headwinds in the immediate future. The firms are dealing with falling commission rates and also European regulation which will impact the way the companies work.
Under the updated Markets in Financial Instruments Directive (MiFID II) due to come into force in January 2018, the way equity research is paid for is to be changed.
Under MiFID II, payment for research can no longer be bundled with other services and paid for using execution commission, as this would be considered an inducement.
But Numis has a well-respected group of analysts and the company has had time to prepare for the directive so may not be overly encumbered by MiFID II.
The firm is maintaining its interim dividend at 5.5p.
