Wed 29 Sep 2010
Panmure Gordon reports 2010 first half results
Newly appointed Chairman, Ed Warner, commented:
“The first half results reflect the tough trading environment, however the Company looks to the second half with confidence as the US business improves, our UK client list continues to grow and our Asia Pacific and emerging markets growth strategy gains traction.
“A strong balance sheet, a respected brand, the backing of QInvest and an improved third quarter in the US, position the Group well for the future.”
• Total income was £17.1m in the first half of 2010, versus £28.4m for the same period last year.
• Adjusted operating loss of £3.2m compared to an adjusted operating profit of £0.5m for the same period last year, reflecting difficult market conditions.
• Statutory loss of £5.96m, compared to statutory loss of £3.65m for the same period last year.
• Exceptionally difficult market conditions with much reduced levels of commission income and a poor climate for investment banking transactions across the industry.
• Strong improvement in US business performance in third quarter reflecting the strengthening of our equities, research and investment banking teams, and an improved investment banking performance – with momentum expected to continue for the rest of the year.
• Encouraging performances in UK Thomson Reuters Extel 2010 survey and Group-wide Starmine survey, and institutional votes, give optimism for growth in commission.
• UK investment banking pipeline encouraging in spite of market conditions.
• 13 UK corporate clients won in the past 10 months with an increasing emphasis on companies that have exposure to emerging markets and growing economies.
• Joint Venture with Ambit Capital for the distribution of research and investment banking transactions. Ambit Capital is a fast-growing Indian investment bank in which QInvest, our largest shareholder, owns 25.1%.
• Edmond Warner appointed non-executive Chairman.
Tim Linacre, Group Chief Executive, commented:
“Given how tough market conditions were in the first half, there were a number of positives. In the UK, losses were contained, and client wins and increasing recognition of the strengths of our institutional equities business position us well for when markets improve.
In the US the first half was particularly difficult, but the strengthening of our institutional equities, research and investment banking teams, and a much improved performance across the firm in recent months, are very encouraging.
Panmure Gordon’s reputation for integrity and fair dealing is at the core of our Group and our international development strategy. With the support of QInvest, we see significant opportunities to leverage that reputation in our core markets and in emerging and fast-growing economies.”
Panmure Gordon & Co
Tim Linacre, Chief Executive +44 (0)20 7459 3600
Nathaniel Webb (Group Communications Manager) +44 (0)20 7614 8333
Ed Gascoigne-Pees +44 (0)20 7269 7132
Billy Clegg +44 (0)20 7269 7157
Grant Thornton Corporate Finance (NOMAD)
Gerry Beaney +44 (0)20 7383 5100
Chief Executive’s review
Throughout the first half of 2010 we took a number of steps further to strengthen the business. As expected, the period was exceptionally difficult given the continuing hostile market conditions. Low commission levels on both sides of the Atlantic and a poor climate for investment banking transactions made the first half particularly challenging.
However, we also forecast a bias in revenues towards the second half of the year. Improved revenues from our US business in the third quarter and its strong short and medium-term investment banking pipeline, combined with continuing high quality corporate client wins in the UK, provide grounds for optimism despite the economic outlook remaining uncertain.
Our international development strategy, and our relationship with QInvest, are both beginning to pay dividends and we expect this to intensify over the remainder of the year and into 2011.
Panmure Gordon is widely recognised as a leading corporate stockbroker and independent adviser with high levels of integrity. This is reflected in our strong corporate client list and it has been particularly encouraging in the past few months to see a significant number of new clients being won. In the past 10 months, Panmure Gordon has been appointed to 13 new clients and we currently have 65 listed corporate clients. We expect our client list to continue to grow over the remainder of this year.
One of the firm’s strengths is the regard in which our independent research is held, so it is pleasing to see the firm move sharply higher in this year’s Thomson Reuters Extel Small and Mid cap survey, in which institutional investors vote for the best quality research and sales teams. Two years ago, we were outside the top 15, last year we were 9th, and this year we were ranked 4th overall. We have also been pleased to see excellent Starmine results for several analysts across the Group. Equally, we have seen a marked improvement in institutional votes from our top institutional clients. Given the very low levels of institutional commission across the market, these have not yet translated into revenue though they give grounds for optimism looking forward.
In UK investment banking, despite the very difficult markets, we completed a number of deals for clients, though the transaction sizes were lower than in previous years. The investment banking pipeline is encouraging in spite of market conditions.
In the first half of the year, we saw a sharp drop in US investment banking revenues as transactions were cancelled or deferred into the second half. It is encouraging to see these transactions starting to be executed. There was also much reduced equity trading volumes, leading to lower commission, though again we have earned much improved levels of commission in recent weeks, despite continuing depressed market volumes.
We have begun to broaden ThinkEquity’s franchise to include the consumer sector. We have also strengthened significantly the equity sales, sales trading, research and investment banking teams. While it is early days, we are reaping clear benefits from these hires.
Since the end of H1, we have had an increase in the execution and closure of investment banking business, particularly in M&A and private placements. Despite continuing challenging markets, we anticipate a strengthening market for quality growth companies. Third quarter investment banking revenues are considerably higher than those of the first half.
ThinkEquity’s wealth management arm grew its fee-paying asset base by 5% for the first half of the year, while maintaining its assets on deposit at $600m, in a very difficult US market. With major indices down 7%, its ThinkTactical asset management product continued to post strong numbers, beating the S&P 500 through to the end of June by over 500 basis points. This return brings the product’s 5 ½ year audited track record to a gain of 58.47% versus a loss for the S&P 500 of 4.72%, positioning the firm to increase AUM substantially in the future.
Extending our geographic reach
Panmure Gordon has always been an international business. When the firm was founded in 1876 its first major client was the Imperial Government of China.
We acquired ThinkEquity to take advantage of the internationalisation of markets and last year we welcomed QInvest, Qatar’s largest investment bank, as a major shareholder. Our relationship with QInvest has already resulted in further commission from clients that it has introduced to us and we expect to see this continue.
Of our corporate client list, a significant number are based outside the UK with companies domiciled in Australasia, Asia, Africa, North America, the Middle East and Europe. We have been looking to build on this. During the reporting period, we entered into a joint venture arrangement with Ambit Group, a leading Indian investment bank, for mutual distribution of research and co-operation on investment banking transactions.
The Joint Venture with Ambit arose as a result of our relationship with QInvest, which took a 25% stake in Ambit at the start of the year. It is yet another benefit of having a strong, internationally focused shareholder as a strategic investor in our Company. In addition, QInvest continues to work towards a Middle East-based brokerage which will open new doors for our Company.
Our approach to international expansion is prudent: we are engaging with new markets in partnership with highly experienced in-market operators.
Market conditions remain tough. In the UK we have yet to see the full effect of the Government’s efforts to deal with the fiscal deficit. In the US, our expectations are for only modest economic growth.
However, we are beginning to see momentum build across the Group. The US investment banking business has had an improved third quarter and we expect this momentum to be maintained. We are mandated on a wide range of transactions for quality growth companies.
In the UK, the investment banking pipeline remains strong in spite of difficult market conditions.
We have a strong balance sheet and are well capitalised, with capital resources well in excess of regulatory capital requirements. We are once again winning high quality corporate clients and our increased focus on emerging markets, working in conjunction with QInvest, provides a strong platform for growth.
As announced separately today, Edmond Warner has been appointed as non-executive Chairman of the Board. Ed brings both industry knowledge and focus, and I am looking forward to working with him to drive the business over the coming years.
I am delighted that Simon Heale, who kindly assumed the role of interim Chairman last year, has agreed to remain on the Board as our first Senior Independent Director.
Group Chief Executive
29 September, 2010
For the full version of this announcement, visit www.panmure.com/InvestorRelations/ ReportAccounts.aspx