Panmure Gordon : Interim Results - June 2016 Tue 27 Sep 2016

Tue 27 Sep 2016

Panmure Gordon & Co. plc

Interim results

London, 27 September 2016 - Panmure Gordon & Co. plc ('Panmure Gordon' or 'the Group'), a leading independent stockbroker and investment bank, today announces its results for the first half ended 30 June 2016.

Key points

• Growth of 14.0% in total net commission and fee income to £14.9m (H1 2015: £13.1m)
• Profit before non-recurring items and tax £1.7m (H1 2015: profit of £0.2m)
• Pre-tax profit of £0.3m (H1 2015: loss of £0.2m)
• Post-tax profit of £0.2m (H1 2015: loss of £0.2m)
• Earnings per share of 1.08p (H1 2015: loss per share of 1.09p)
• Strategic investment in PrimeXtend, a business focussed on the evolution of agency broker services Continued support and cooperation from Qinvest, including the granting of a £5m funding facility in February of which £3m has been drawn down

Patric Johnson, Chief Executive, commented:

'I am pleased to report a positive start to the year particularly bearing in mind the significant volatility in the market leading up to the European Referendum. Business activity in July and August has continued to be encouraging including the first post-referendum technology AIM market IPO in August. However, continued market volatility following the result of the Referendum poses significant challenges for the medium term.

Despite the market volatility however, we executed 29 transactions including nine M&A deals and five IPOs which maintains our position within the top brokers in the AIM space. Together with the realignment of the business along sector lines, we have removed a significant level of annualised costs and we continue to drive efficiencies within our model. Critical to the positive momentum in our business are our relationships with our institutional clients and our ability to distribute quality transactions. We are pleased to report that Panmure Gordon sponsored IPO activity since January 2015 has returned a net gain of just over 30% for such clients.

We remain committed to the longer term strategic realignment of the business with additional investments to diversify our income and continuing to invest in quality people who remain at the heart of our business. We do however remain conservative in our outlook for the remainder of 2016.'

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Chief Executive's Review

Significant changes made to Panmure Gordon's cost base and the reorganisation around sector teams are starting to bear fruit. The first half of the year witnessed some of the most significant political shocks of recent years during the run-up to, and then following, the June European Referendum vote. Market sentiment and volatility have been severely impacted, though the indications are that some level of stability is returning to the market. With this backdrop, I am therefore even more pleased to see a positive first half of the year. This positive start to the year is despite the significant charge for the restructuring in H1, including redundancy costs of £1.4m.

We have assisted clients raise over £600m across 29 transactions including four successful UK IPOs and one on AIM Italia. Corporate finance and related income rose by 34.4% to £10.1m (H1 2015: £7.5m) in what was a challenging, but busy, six months. Total net commission and fee income has increased by 14.0% in H1 2016 to £14.9m (H1 2015: £13.1m). Total commission and trading for H1 2016 for the core UK business also showed a net increase on a like-for-like basis, with a 5.3% increase in net commission and trading income at £5.1m (H1 2015: £4.8m) despite the trend in declining volumes across the main stock markets on a year-on-year basis continuing in 2016. Overall however, net commission and trading income has shown a net decrease of 9.1% to £5.2m (H1 2015: £5.7m) on account entirely of the closure of our Swiss office.

QInvest

Panmure Gordon continues to enjoy an excellent relationship with its major shareholder, Qinvest, and in March drew down £3m of the £5m financing facility that was made available to assist growth plans for the future whilst providing further liquidity for ongoing business.

PrimeXtend

In continuing our efforts to diversify our income whilst not altering the core DNA of our business and culture we were delighted to announce on 22 September that we exchanged contracts for an exciting strategic investment in a new company, PrimeXtend Limited. We will inject a maximum investment of £2m over a period of ten months, subject to the achievement of certain milestones, for an initial 49% shareholding. PrimeXtend will set up the necessary straight through processing infrastructure and, in close partnership with Panmure Gordon, develop new markets in agency broking of a variety of asset classes to a wide range of institutions that are currently suffering from a lack of liquidity and broker options in the market.

Switzerland

Panmure Gordon has operated in Switzerland since 2007 through a representative office in Nyon. Limited opportunities for growth coupled with the longer-term history of losses led to the decision to cease regulated activity in January and to close the office. The business was sold to a third party who committed to continuing the business with the same staff under their own regulatory licences and we wish them well for the future. The impact of the closure of the office on the results for H1 2016 is a cost of £0.2m.

Singapore

The Singapore office introduced a number of excellent clients that resulted in transactions executed in the London market. However, it was felt that a local presence with the attached costs would not be justified in the future and the decision was taken therefore to close the office and the local legal entity.

Outlook

We have recorded an encouraging start in the first six months of the year with the new sector based structure, designed to maximise the high standard of service to our clients, beginning to yield results. We have started to see the benefit from the operational efficiencies put in place and this will become more impactful as the year moves into the second half. We will continue to invest on a selective basis in both people and opportunities to further our client-centric business model, as well as seek other business prospects whilst remaining focussed on optimising the cost base within this evolving environment.

Markets are still digesting the full impact of the June European Referendum and as the eventual outcome becomes clearer so we should see further moves to a stabilising economy. We have begun the second half on a positive note with the first AIM market post-referendum technology IPO as well as a number of significant fund raises and advisory transactions already completed. Our pipeline of corporate transaction activity appears robust though, as ever, remains to be executed. We have a strong and supportive major shareholder in QInvest and a clear sector-focused team structure filled with excellent people that provide us with some reassurance when set against the continuing uncertainties of the second half. We remain conservative in our outlook for the remainder of the year.

Patric Johnson

To view the interim Results in full please click here.