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Numis working hard to diversify in volatile markets

The small-to-mid cap broker is growing sales despite more subdued market making activity
May 9, 2016

After a strong finish to 2015, the IPO market paused for breath in the volatile markets of early 2016. Given that, progress at Numis (NUM) is impressive. Revenue from corporate finance and capital raisings reached a record £34.4m during the six months to March - an increase of a third on the previous comparable period. The group is taking on more corporate broking and advisory work, adding 11 clients and bringing the number of companies for which it acts to 185, from 183 in September 2015.

IC TIP: Buy at 220p

The group raised £1.2bn in equity finance during the period, up slightly from £1.1bn in last year's first half. That equated to 8.6 per cent of the total equity raised on the London Stock Exchange, compared with 6.9 per cent of the equity raised over the whole of FY2015. Its work was split between 27 capital raisings and 10 IPOs, including Hostelworld and Ibstock.

Corporate advisory remains a big focus for Numis, despite the number of advisory roles completed being almost flat on last year. However, management is keen to expand its role advising on mergers and acquisitions. This is just as well because, while institutional commission and trading revenues increased 16 per cent to £17.9m, they are more uncertain. Market-making activity remained subdued due to more volatile markets, and the group will eventually have to face up to the (albeit delayed) implementation of the Markets in Financial Instruments Directive II, which requires the unbundling of research commission from managers' client fees.

NUMIS CORPORATION (NUM)

ORD PRICE:220pMARKET VALUE:£247m
TOUCH:215-220p12-MONTH HIGH:278pLOW: 191p
DIVIDEND YIELD:5.2%PE RATIO:9
NET ASSET VALUE:104pNET CASH:£72m

Half-year to 31 MarchTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201545.711.98.35.5
201656.816.812.25.5*
% change+24+41+47

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