Final Results: 2014

Panmure Gordon & Co. plc, a leading independent institutional stockbroker and investment bank, today announces preliminary results for the year ended 31 December 2014.

24 March 224

PANMURE GORDON & CO. PLC

 

(“Panmure Gordon”, the “Group” or the “Company”)

 

Preliminary results for the year ended 31 December 2014

Panmure Gordon & Co. plc, a leading independent institutional stockbroker and investment bank, today announces preliminary results for the year ended 31 December 2014.

Financial highlights

  • 84% increase in profit before tax to £2.15m (2013: £1.17m)
  • 7.6% increase in net commission and fee income to £29.39m (2013: £27.32m)
  • 630% increase in basic earnings per share to 9.64p (2013: 1.32p)
  • Full year dividend of 2.5p per ordinary share (2013: nil)
  • Debt-free balance sheet

Operational highlights

  • Return to payment of dividends for first time since 2007 reflecting the Board’s confidence for the future
  • Helped to raise more than £0.8bn for our corporate clients
  • Continued investment in key people/teams to drive future profitability

Chief Executive Phillip Wale commented:

“We are delighted that the business is consolidating its strong position for growth following a successful turnaround period. Despite difficult markets in the second half of the year revenue growth has been encouraging. The return to paying a dividend for the first time since 2007, the onset of the financial crisis, is a clear sign that the strategy executed over the recent years is successful. We remain firmly focused on serving our corporate and institutional clients and aligning our resources to profitable opportunities.

“Since the start of 2015, we have gained further corporate client appointments, won further transaction mandates and executed four significant fund raises already. We are optimistic that recent improved activity will continue and are pleased to be working on a healthy pipeline of engagements.  Whilst difficult to forecast, equity capital markets are expected to remain receptive to high quality, sensibly priced transactions.  With the support of our major shareholder, QInvest, Panmure Gordon is well-positioned to build on the achievements of 2014 and create meaningful upside for shareholders.”

Enquiries:

Panmure Gordon
Ed Warner, Chairman 020 7886 2500
Phillip Wale, Chief Executive 020 7886 2500
Buchanan panmure@buchanan.uk.com
Mark Edwards/Helen Chan/Stephanie Watson 020 7466 5000
Grant Thornton Corporate Finance (Nominated Adviser)
Philip Secrett/Salmaan Khawaja/Jen Clarke 020 7383 5100

CHAIRMAN’S STATEMENT

 

I am very pleased to report a robust operating performance in 2014 delivering an 86% increase in operating profit for the Panmure Gordon business of £2.16m (2013: £1.16m), and a return to dividend payments to shareholders after a seven year hiatus following the global financial crisis. The Board is encouraged that despite continued challenging markets, the successful reinvigoration of the Company under new leadership in recent years has established a solid foundation for the future.

 

Panmure Gordon is focused on its principal business of providing both outstanding, independent advice to our UK-listed corporate clients and those seeking a listing on the London markets, and excellent execution services to our institutional clients founded on insightful, actionable, independent research.

 

The decision in 2012 to withdraw from the Group’s unsuccessful expansion into US investment banking is reflected in the absence of a discontinued business/operations charge for the first time in three years. More importantly, it has allowed management and staff to focus on building our core UK investment banking and stockbroking business.

 

At last year’s Annual General Meeting, shareholders voted in favour of a share capital reduction which was duly approved by the High Court. This, combined with operating profits for the year, has enabled the Company to resume the payment of dividends and the Board is now pleased to recommend a 2.5p dividend per ordinary share for the year, subject to shareholder approval. In future, it is our intention to pay a progressive dividend, subject to maintaining a prudent level of cover from profits.

 

Panmure Gordon’s reputation for integrity is built on its exceptional client-centric culture and its skill in connecting businesses with the capital that they need to thrive.  This culture is embodied in Panmure Gordon’s employees and on behalf of the Board I thank them for all their efforts in 2014, especially in supporting our clients in both good and challenging times.  Our improved results in 2014 are a testament to their success.

 

 

Ed Warner, OBE

Chairman

23 March 2015

 

 

 

Chief Executive’s review

 

I am happy to report the strong progress made in 2014 with significantly; increased operating profit from continuing operations of £2.16m (2013: £1.16m), driven by a 8% increase in net commission and fee income to £29.39m (2013: £27.32m), a much improved statutory profit after tax of £1.50m (2013:  £0.21m), a strong corporate client list with 123 clients at the year-end (2013: 130), and appropriately aligned costs.

 

The executive team is focused on further strengthening, broadening and growing the business and while financial and political shocks continue to challenge financial markets, we take a long-term view and are committed to building a more resilient business to withstand those shocks.

 

Panmure Gordon’s reputation for integrity, as spelt out in our statement of Values on page 4 of this report, helps us win and retain corporate clients – the lifeblood of our firm – and to attract talented people.  We have hired selectively in all departments to support growth, diversify earnings and drive profitability.  It is early stages for many of these new hires but we are excited by the progress achieved and the prospects for the future.

 

The firm and our clients benefited from markets which were more receptive to high quality transactions. This is reflected in a 14.4% uplift in corporate finance fee income to £20.70m (2013: £18.10m) from helping our clients raise in excess of £0.8bn (2013: £1.46bn) across 7 IPOs and 11 fundraisings. Achieving this result, despite the challenging markets that were faced in the second half of the year, is a testament to the stronger, more diverse and resilient business that is being built.

 

Panmure Gordon’s securities business, comprising institutional equity sales and trading and market making, as well as thought-leading independent research, is essential to our client service offering.  With an ever increasing, challenging regulatory environment, the commission paying market is being radically upset and a number of competitors have already experienced significant discomfort, some exiting completely. Panmure Gordon remains a full service integrated broker backed by independent research across a wide range of sectors and we are seeing institutions pay increasing attention to this as they face up to their own regulatory challenges.

 

While equity capital markets have been receptive to the many transactions on which the firm worked this year, the continued lack of volume in equity markets as well as volatile trading conditions resulted in a slight 4% decrease in net commission and trading income to £9.44m (2013: £9.80m).

 

Our institutional relationships are much valued. With hard work, strategic thinking and collaboration with our counterparts and affiliates in Qatar, Switzerland, Singapore, the US and India, we are well-placed to continue building revenue streams and executing superbly for our corporate and institutional clients.

 

 

 

Dividend

 

The Board is recommending a dividend of 2.5p per ordinary share (2013: nil). The dividend will be payable on 29May 2015 to all shareholders on the register at 4 May 2015, subject to shareholder approval.

 

Outlook

 

The hard work put in over the recent years has led to the stronger, broader based and more resilient business that we see today. Panmure Gordon is positioned to grow and we remain, as ever, firmly focused on serving our corporate and institutional clients and aligning our resources to profitable opportunities.

 

The return to paying dividends for the first time since 2007, the onset of the financial crisis, is a clear sign that the strategy executed over the recent years is successful and reflects our confidence in the future prospects for the business.

 

In 2015, we have gained further corporate client appointments, won further transaction mandates with four further significant fund raises executed already in the first quarter. We are pleased to be working on a healthy pipeline of engagements.  Whilst difficult to forecast, equity capital markets are expected to remain receptive to high quality, sensibly priced transactions.  With the support of our major shareholder, QInvest, Panmure Gordon is well positioned to build on the solid achievements of 2014.

 

 

 

Phillip Wale

Chief Executive

 

 

 

 

 

Key performance indicators

 

Financial

KPI Objective

Performance

Trend
Corporate finance and other fee income To add high quality corporate clients to our list which in turn generates retainer and fee income.

2014: £20.70m

2013: £18.10m

2012: £12.16m

2011: £9.77m

Significant growth over the 4 year period with a 24% uplift from 2011 to 2012, a 49% uplift from 2012 to 2013 and a 14% uplift from 2013 to 2014.
Net commission and trading income To maintain a steady level of commission and trading income.

2014: £9.44m

2013: £9.80m

2012: £9.07m

2011: £7.94m

A steady growth over the 3 year period from 2011 to 2013 with a 14% uplift from 2011 to 2012 and a 8% uplift from 2012 to 2013. The period from 2013 to 2014 saw a decline of 4% in difficult markets.
Basic earnings/(loss) per share on continuing operations To grow earnings per share for shareholders.

      2014:  9.64p

2013: 5.36p

2012: 0.21p

2011: (39.2)p

This has moved from a loss per share in 2011 to increasing annual earnings per share from 2012 to 2014.
Profit/(loss) on continuing operations To increase profit from continuing operations by increasing income while managing operating costs.

2014: £1.50m

2013: £0.83m

2012: £0.03m

2011: (£5.82m)

Over the 4 year period this has changed from a significant loss to an increasingly stable level of profit.

 

Operational

KPI Objective

Performance

Trend
Revenue per employee (£’000) To increase the level of revenue per employee, whilst keeping a stable number of employees.

2014: 263

2013: 237

2012: 210

2011: 168

This has grown over the period with a 24% increase from 2011 to 2012, a 14% increase from 2012 to 2013 and a 11% increase from 2013 to 2014.
Ratio of employee compensation to turnover To retain a high calibre and fairly rewarded team who generate increasing numbers revenue.  As the fee income grows this ratio should maintain a reducing trend.

2014: 59%

2013: 62%

2012: 67%

2011: 87%

There was a large reduction in the ratio of compensation to turnover from 2011 to 2012, followed by a more stable decrease from 2012 to 2013 and 2013 to 2014.

 

Number of corporate clients To grow our list of retained clients across a range of sectors in order to maximise retainer and transaction based income.

2014: 123

2013: 130

2012: 96

2011: 76

We consistently built our client list over recent years with a 26% increase from 2011 to 2012 and a 35% increase from 2012 to 2013. There has been a slight decline of 5% from 2013 to 2014 due to some companies exiting the market, some other corporate consolidations and a few losses to competitors.

 

 

Consolidated income statement

For the year ended 31 December 2014

 

2014

 

2013
£‘000

 

£‘000
Continuing operations
Commission and trading income

10,916

 

11,264

Commission and trading expense

(1,474)

 

(1,469)

 

Net commission and trading income

9,442

 

9,795

 

Corporate finance and other fee income

20,704

 

18,103

Loss on corporate investments

(755)

 

(580)

 

Net commission and fee income

29,391

 

27,318

 

Net loss on available for sale investments

(7)

 

(39)

 

Administrative costs1

(25,507)

 

(24,569)

 

Redundancy, restructuring and other non-recurring charges1

(1,216)

 

(1,209)

 

Operating profit before share-based payments

2,661

 

1,501

 

 

Share-based payments1

(500)

 

(349)

 

 

Operating profit

2,161

 

1,152

 

 

Financial income

1

 

34

Financial expense

(17)

 

(19)

 

Net financial (expense)/income

(16)

 

15

 

 

Profit before tax from continuing operations

2,145

 

1,167

 

Taxation

(646)

 

(335)

 

Profit from continuing operations

1,499

 

832

 

Discontinued operation

 

Loss on discontinued operation (net of tax)

 

(627)

 

Profit for the period attributable to the owners of

       the Company

1,499

 

205

 

Basic earnings per share from continuing operations

9.64p

 

5.36p

 

Diluted earnings per share from continuing operations

9.39p

 

5.28p

 

Basic earnings per share

9.64p

 

1.32p

 

Diluted earnings per share

9.39p

 

1.30p

 

1   Administrative expenses which total £27.2m (2013: £26.1m) have been presented separately here owing to their individual nature and size
Consolidated statement of comprehensive income & expense

For the year ended 31 December 2014

 

 

 

2014

 

2013

 

 

£‘000   £‘000

Profit for the period attributable to the owners of

       the Company

 

1,499

 

205

Total comprehensive income for the period

       attributable to the owners of the Company

 

1,499

 

205


Consolidated statement of financial position

As at 31 December 2014

 

2014

 

2013
 

 

£‘000

 

£‘000
Assets
Intangibles

 

13,201

13,201

Plant and equipment

 

2,047

2,011

Available for sale investments

 

8

Deferred tax asset

 

396

857

Other receivables

 

645

1,311

 

Total non-current assets

 

16,289

 

17,388

Securities held for trading

 

4,507

11,224

Trade and other receivables

 

20,821

29,894

Cash and cash equivalents

 

12,386

6,058

 

Total current assets

 

37,714

 

47,176

 

Current liabilities

 

Trade payables

 

(14,804)

(21,832)

Tax and social security

 

(857)

(823)

Corporation tax liabilities

 

(194)

(7)

Other payables

 

(2,688)

(4,582)

Securities held for trading

 

(1,275)

(4,891)

 

Total current liabilities

 

(19,818)

 

(32,135)

 

Net current assets

 

17,896

 

15,041

Deferred tax liability

 

(1,058)

(952)

 

Total non-current liabilities

 

(1,058)

 

(952)

 

Net assets

 

33,127

 

31,477

 

Equity

 

 

Issued share capital

 

622

6,187

Share premium account

 

36,740

Merger reserve

 

21,810

21,810

Other reserve

 

(7,790)

(7,441)

Retained earnings

18,485

(25,819)

 

 

 

 

 

Total equity

 

33,127

 

31,477

 

Approved by the board on 23 March 2015 and signed on its behalf by:

 

Philip Tansey

Chief Financial Officer

 

Consolidated statement of cash flow

 

 

 

 

 

 

Year ended

31 December 2014

 

Year ended

31 December 2013

   

£‘000

 

£‘000

Cash flows from operating activities
Profit after tax 1,499 205
Net financial expense/(income) 16 (15)
Depreciation and amortisation 353 295
Net loss on available for sale investments 7 39
Movement in securities held for trading 3,099 (3,527)
Decrease/(increase) in net amounts owed by market     counterparties 3,496 (3,286)
(Increase) in trade and other receivables (359) (408)
Decrease in trade payables and provisions (2,163) (668)
IFRS 2 share-based payment charges 500 349
Income tax expense 646 335
Net cash from operating activities   7,094 (6,681)
Cash flows from investing activities
Financial income received 1 34
Acquisition of plant and equipment (402) (623)
Proceeds from disposal of investments 1 125
Net cash from investing activities   (400) (464)
Cash flows from financing activities
Proceeds from the issue of share capital 35
Purchase of own shares for EBT (372) (532)
Financial expense (17) (19)
Repayment of EBT loan

23

128

Net cash from financing activities   (366) (388)
Net increase/(decrease) in cash and cash equivalents 6,328 (7,533)
Cash and cash equivalents at 1 January 6,058 13,591
Cash and cash equivalents at 31 December   12,386 6,058

 

 

Consolidated statement of changes in equity for the year ended 31 December 2014

 

£‘000

Issued share capital

Share premium

Merger reserve

Special reserve

Other reserve

Treasury shares

Retained earnings

Total

equity

At 1 January 2014 6,187 36,740 21,810 (7,441) (25,819) 31,477
 

Total comprehensive income

   for the period

               
Profit for the year

 

1,499

1,499
 

Other items recorded

   directly in equity

Share capital reduction (5,565) (36,740) 42,305
Share-based payments 500 500
Shares issued under employee    share plans
Shares transferred under employee share plans

Transfer of special reserve to

retained earnings

Purchase of own shares for

EBT

(372) (372)

Decrease in shares held by

EBT

23 23
At 31 December 2014 622 21,810 (7,790) 18,485 33,127

 

 

Consolidated statement of changes in equity for the year ended 31 December 2013

 

£‘000

Issued share capital

Share premium

Merger reserve

Special reserve

Other reserve

Treasury shares

Retained earnings

Total

equity

At 1 January 2013 6,183 36,709 21,810 9,595 (6,734) (303) (35,968) 31,292
 
Total comprehensive income    for the period                
Profit for the year 205 205
 
Other items recorded    directly in equity
Share-based payments 349 349
Shares issued under employee    share plans 4 31 35
Shares transferred under employee share plans (303) 303

Transfer of special reserve to

retained earnings

(9,595) 9,595
Purchase of own shares for    EBT (532) (532)
Decrease in shares held by    EBT 128 128
At 31 December 2013 6,187 36,740 21,810 (7,441) (25,819) 31,477

 

1       Segmental analysis

 

The Group reports its operating segments according to how the Group’s chief operating decision maker (“CODM”) allocates resources to each segment and assesses performance.  In this respect the Group’s CODM has been defined as the Group’s CEO.

 

In previous years the CODM has allocated resources across the Group based on results and performance in each geographic area of operation.  Following the disposal of the Group’s US business during 2012, the geographical division is now made between the UK and Swiss operations only.  In the segmental table below, the results of the Swiss office appear in the ‘Other’ column, together with the impact of the discontinued US operation.

 

Segmental analysis for the year ended 31 December 2014 and reconciliation to the statutory income statement is set out below:

 

 

UK

 

Other

 

Total

                       
 

2014

 

2013

 

2014

 

2013

 

2014

 

2013

  £‘000   £‘000   £‘000   £‘000   £‘000   £‘000
Net commission and trading   income 8,061 8,672 1,381 1,123 9,442 9,795
Corporate finance fee income 20,147 17,635 38 38 20,185 17,673

Loss on corporate

investments

(755) (580) (755) (580)
Wealth management and      other income 519 430 519 430
Net (loss)/gain on AFS        investments (7) (39) (7) (39)
Foreign exchange (loss)/gain (106) (17) (6) 6 (112) (11)
On-going administration costs (24,036) (23,200) (1,359) (1,358) (25,395) (24,558)
Segmental operating profit/      (loss) 3,823   2,901   54   (191)   3,877   2,710
                 
Redundancy and restructuring      charges (1,216) (1,209) (1,216) (1,209)
Share-based payment      charges (500) (349) (500) (349)
Operating profit/(loss) 2,107   1,343   54   (191)   2,161   1,152
                 
Net financial income/(expense) (16) 15 (16) 15
                 
Profit/(loss) before tax 2,091   1,358   54   (191)   2,145   1,167
                 
Income tax on continuing      operations (631) (335) (15) (646) (335)

Profit/(loss) on disposal of

discontinued operation

(627) (627)
                 
Profit/(loss) for period    attributable to the owners      of the Company 1,460   1,023   39   (818)   1,499   205

 

All revenue is from external customers.  There are no regular major customers that account for more than 10% of revenue.

 

 

 

 

UK

 

Other1

 

Total

                       
 

2014

 

2013

 

2014

 

2013

 

2014

 

2013

  £‘000   £‘000   £‘000   £‘000   £‘000   £‘000
     
Non-current assets (inc. goodwill) 16,289 17,388 16,289 17,388
Current assets 37,714 47,176 37,714 47,176
Current liabilities (19,804) (32,135) (19,804) (32,135)
Non-current liabilities (1,072) (952) (1,072) (952)
Capital expenditure (402) (623) (402) (623)

 

 

 

 

 

 

                       

1        The Swiss business operates as a representative office of the UK business and therefore shares assets with the UK business.

 

2       Staff costs

 

Group

Year ended

31 December 2014

 

Year ended

31 December 2013

 

£‘000

 

£‘000

Staff costs including Directors’ emoluments      
Wages and salaries

14,322

14,066

Social security costs

2,189

1,548

Pensions (defined contribution scheme)

952

955

Total

17,463

 

16,569

 

The Group operates a defined contribution pension scheme. At the balance sheet date the Group had no outstanding pension contribution liabilities. The charge for the period to 31 December 2014 was £0.96m (2013: £0.96m).

 

Actual number of persons, including Directors, employed by the Group as at 31 December 2014:

 

Group total 2014

 

UK 2014

 

Swiss 2014

 

Group total 2013

 

 

 

 

 

 

Institutional equities

54

51

3

43

Corporate finance

28

28

28

Investment funds

11

11

11

Other

37

34

3

42

Total

130

 

124

 

6

 

124

 

 

Average number of persons, including Directors, employed by the Group during the year was:

 

Group total 2014

 

UK 2014

 

Swiss 2014

 

Group total 2013

 

 

 

 

 

Institutional equities

49

46

3

48

Corporate finance

28

28

28

Investment funds

11

11

11

Other

37

34

3

41

Total

125

 

119

 

6

 

128

 

 

 

 

 

 

 

3       Income tax expense

 

The analysis of the total income tax credit/(expense) is as follows:

 

Year ended

31 December

2014

 

Year ended

31 December

2013

 

£‘000

 

£‘000

Analysis of tax credit/(charge) in period:

 

 

 

UK corporation tax at 21.5% (2013: 23.3%)
Current year tax credit/(charge)

(31)

Prior year adjustment

(6)

Other prior year adjustments

(20)

(28)

 

(51)

(34)

Deferred tax

 

 

 

      Prior year adjustments to deferred tax credit

67

8

      Current year deferred tax charge

(662)

(309)

(595)

(301)

 

 

Tax charge on profits on ordinary activities

(646)

(335)

 

 

Effective tax rate charge

30.1%

62.0%

 

 

Factors affecting tax charge:

 

 

 

 

Profit on ordinary activities after tax

1,499

205

Tax on continuing operations

646

358

Tax on discontinued operation

(23)

Profit on ordinary activities before tax

2,145

 

540

Profit on ordinary activities multiplied
      by rate of UK corporation tax at 21.5% (2013:23.3%)

(462)

(125)

 

 

Effects of:

 

 

      Expenses not deductible for tax purposes

(90)

(89)

      Tax losses not recognised from discontinued operation

(119)

      Differences relating to share schemes

(160)

(16)

      Effects of foreign tax

(15)

(21)

      Change in corporation tax rate

14

34

      Deemed goodwill on amortisation

106

106

      Goodwill on consolidation

(106)

(106)

      Adjustment to tax charge in respect of previous periods

67

1

Total tax charge on profits on ordinary activities

(646)

(335)

 

4       Earnings per share

 

Earnings per share (EPS) are calculated on a net basis using the profit on ordinary activities after taxation divided by the weighted average number of shares detailed below.

 

 

 

Year ended

Year ended

 

31 December

31 December

 

2014

2013

 

£‘000

 

£‘000

 

 

Profit from continuing operations after taxation (PAT)

 

1,499

832

 

 

 

Weighted average number of shares in issue

 

15,545,473

15,538,145

Fully diluted weighted average number of shares in issue

 

15,969,945

15,766,145

 

Basic earnings per share from continuing operations (based on PAT)

 

9.64p

5.36p

 

Diluted earnings per share from continuing operations (based on PAT)

 

                                                  9.39p

5.28p

 

 

 

 

 

Year ended

Year ended

 

31 December

31 December

 

2014

2013

 

£‘000

 

£‘000

 

 

Profit on ordinary activities after taxation

 

1,499

205

 

 

 

Weighted average number of shares in issue

 

15,545,473

15,538,145

Fully diluted weighted average number of shares in issue

 

15,969,945

15,766,145

 

Basic earnings per share (based on profit on ordinary activities after taxation)

 

9.64p

1.32p

 

Diluted earnings per share (based on profit on ordinary activities after taxation)

 

                 9.39p

1.30p

 

 

5     Discontinued operation

 

In June 2012 the Group completed the sale of its entire interest in ThinkEquity LLC to management.  Following that, ThinkEquity LLC and its 100% shareholder, ThinkEquity Holdings LLC, filed for protection under chapter 7 of the US bankruptcy code on 6 November 2012.  Subsequently, certain claims were asserted against Panmure Gordon for which provisions and charges were taken in both 2012 and 2013 and which have now been fully covered.  The Trustee of the bankrupt estate is now in the final stages of concluding the administration. It is not anticipated that any further claims or costs associated with ThinkEquity of any significance will develop in the future.

 

 

 

 

Results from discontinued operation  

As at

As at

 

31 December

31 December

 

2014

2013

Trading activities

 

£‘000

£’000

Revenue

 

Expenses

 

Results from operating activities

 

 

 

Results of trading activities

Discontinued operation

Fair value of net assets disposed of

Foreign currency translation reserve recycled to other comprehensive income

Other costs

(627)

Loss on disposal of discontinued operation

 

 

(627)

Loss for the year on discontinued operation

 

 

(627)

 

 

Cash flow from discontinued operation  

As at

As at

 

31 December

31 December

 

2014

2013

 

£‘000

£’000

Net cash from operating activities

 

Cash flows from investing activities

 

(1,367)

Net cash from financing activities

 

Net cash flow for the year

 

(1,367)

 

 

The financial information set out above does not constitute the Company’s statutory accounts for the year ended 31 December 2014, but is derived from those accounts.  The annual report and statutory accounts will be sent to shareholders and will be made available to the public from the Company’s website: www.panmure.com or, upon request, at the registered office of Panmure Gordon & Co. plc, One New Change, London EC4M 9AF.

 

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