Preliminary results

Panmure Gordon & Co. plc today announces preliminary results for the year ended 31 December 2009.

Financial highlights
– Underlying group performance improved in continuing difficult markets. Adjusted loss of £1.3m (2008: loss of £5.4m).
– Group revenue increased by 21% to £50.9m, 2008: £42.1m.
– A sharp pick-up in UK business which was profitable; US business not profitable given market disruption, though we are now seeing signs of improvement.
– Statutory loss of £11.1m includes non-cash provisions for share awards and an accelerated charge for a change of share option programme as well as provisions for a 3-year-old litigation in the US, break fees relating to the 2009 fundraising and restructuring and redundancy charges.

Operational progress
– QInvest subscription has provided financial strength and extended the Group’s geographic reach.
– The Group took advantage of market dislocation to make quality hires in both the UK and the US that improve our reach with both institutions and corporate clients.
– Group operational performance continues to be improved through tight cost controls and efficiencies.

UK business
– Investment banking revenue up by 79%.
– Revenue per employee up by 84%.
– Institutional equities revenue up by 38%.
– More than £750m raised for clients.
– Built a strong pipeline of deals for the second half of 2010.

US business
– Net commission and trading and investment banking revenue down 17% in dollar terms.
– Revenue per employee up 5% in dollar terms following restructuring.
– Involved in two of the most successful IPOs in 2009; new mandates on 10 IPOs which are expected to launch from the second quarter of 2010.
– The strongest pipeline of transactions for several years.

Well positioned for the future
– Financially strong.
– Market conditions improving in the US.
– Encouraging pipeline of transactions in both the US and the UK, weighted to second quarter and beyond.
– New senior recruits making an immediate contribution.
– QInvest relationship providing opportunities for improved international reach.

Tim Linacre, Chief Executive of Panmure Gordon, commented:

“The challenging economic conditions of 2009 have not fully dissipated, especially here in the UK which is subject to a great deal of economic and political uncertainty. By contrast, the US economy is showing signs of recovery.

In ThinkEquity we have restructured and invested in new talent. The business has won excellent investment banking mandates, most of which are executable over the remainder of the year.

Our business is financially robust and highly focused. In QInvest, we have a partner with whom we are exploring opportunities for improved international reach. Though commission levels remain under pressure, we have strong investment banking pipelines which will depend on markets being receptive to them; we do expect market conditions to continue to improve faster in the US than in the UK. In both markets we believe we can grow and further strengthen our business and that 2009 will be seen as a low point in capital markets activity in the US. There is now considerable upside to aim for.”

Enquiries:

Panmure Gordon
Nathaniel Webb, Group Communications & Investor Relations Director 020 7614 8333

Financial Dynamics 020 7831 3113
Billy Clegg 07977 578 153
Ed Gascoigne-Pees 07884 001 949

Grant Thornton Corporate Finance (NOMAD)
Gerry Beaney 020 7383 5100

Chairman’s statement

The underlying loss of £1.3m is the combination of two quite different performances.

In the UK, where we saw a sharp pick-up in revenues, our business was profitable despite the hostile markets and the disruption caused through the refinancing of the business in the second quarter of the year. Given the very strong headwinds the business faced, this was an encouraging performance.

In the US, market conditions were even more extreme and, despite substantially reducing costs, ThinkEquity suffered the same fate as almost all boutique investment banks and reported a trading loss. However, the US market is showing signs of recovery and the outlook for the US business is much better than it has been for several years.

In early 2009, the board took the view that in a world of volatile and hostile markets and given requirements for increased amounts of regulatory capital, it was appropriate to strengthen the firm’s balance sheet. We were delighted to welcome QInvest, Qatar’s largest investment bank, as a substantial shareholder in the Company.

The subscription by QInvest has strengthened the Group’s financial resources, expanded the firm’s geographic reach and, importantly, enabled us to recruit new hires who have been attracted by our improved market position and the opportunities open to us.

In the meantime, we have been focused on enhancing our core strengths. In the UK, we have a highly regarded and profitable business. Even in the difficult markets of 2009, Panmure Gordon was able to make money with much improved operational performance.

Integral to our future progress is our reputation – within the corporate client community, within the investor community and within and beyond the City. A reputation is hard won and easily lost and, in the difficult two years we have just experienced, there were plenty of potential pitfalls. Panmure Gordon has never been a ‘fair weather friend’ to its clients. In the most extraordinary markets in recent memory, we stood with them and, in doing so, we lived up to our motto “Integrity in investment banking since 1876”.

Our US business, ThinkEquity, was acquired in 2007, just prior to the market collapse. The continuing effect of the market dislocation was felt throughout 2009 and into this year. However, the US market now looks as though it is emerging faster from the recession than the UK. The firm’s value has been hidden by the depths of the global financial crisis but we are now seeing evidence of a return to the markets for which ThinkEquity was originally acquired. The pipeline of investment banking business in the US is building strongly and this, combined with the corrective action taken by management, means we are optimistic about the firm’s progress in 2010, especially in the second half, and in the years ahead.

While we remain cautious about the UK economy, we believe the US economy is showing improvement across a range of measures – from the recovery in the number of secondary and registered direct transactions, to the sharp decline in the key market volatility index and the earnings performance of US companies especially in sectors where ThinkEquity is active, such as technology. Commission levels, however, remain under pressure.

The reporting period can be characterised as one of fiscal consolidation and laying the foundations for long-term profitability. Following the placing by QInvest, we are financially robust; we have an excellent brand, an interesting geographical footprint and a strengthened management team. These factors will enable the group to continue to show improvement – just how much improvement will depend on the health of equity capital markets in the US and the UK.

On behalf of the board, I extend my thanks to the Group’s employees, whose hard work, dedication and loyalty in extraordinary markets have ensured we are in a position to exploit the opportunities that await us in the coming year.

Board changes
It has been my privilege to lead the board as interim Chairman following the resignation of Tony Caplin last year. Our search continues for a candidate who is the right fit for our business requirements, and aspirations. It is a search we are not rushing and, in the meantime, I am delighted to fill the role until my successor can be found.

Also during the year, we welcomed four non-executive directors from QInvest to the board: Shahzad Shahbaz, Rommie Bhutani, Nader Shenouda and Asar Mashkoor, all of whom have made a significant contribution. Along with the QInvest appointees, we also welcomed Ed Warner as a non-executive director. His many years of City experience and excellent contacts are already valued by me and his board colleagues.

Along with Tony’s departure, we also said farewell to Paul Gismondi. On behalf of the board, I wish to thank both Tony and Paul for their service and contribution.

And finally, I wish to thank David Liddell. David will leave to pursue interests outside Panmure Gordon following our preliminary results. He departs with our best wishes and our thanks for his contribution to the board and long service to the firm as its Chief Financial Officer.

Simon Heale
Chairman

23 March, 2010

Chief Executive’s review

Although throughout 2009 markets remained extremely challenging, we made significant steps to strengthen the Group in anticipation of a return to more benign markets. We restructured, reduced costs, strengthened our balance sheet and, as a consequence, ended the year in much better shape than when we entered it. This is reflected in the improved performance of the Group. The UK business was profitable, showing a sharp improvement on the previous year. Our US business was loss-making but is improving. In both markets, we faced conditions that were unparalleled in their hostility.

In the US, in particular, the extremely low levels of M&A activity or equity capital markets business meant that most US boutique investment banks lost money from operations and ThinkEquity could not overcome the headwinds. However, we believe those headwinds are turning.

On both sides of the Atlantic, our institutional equities teams battled against decreasing market volumes. Although equity markets have rallied, this has not been matched by an increase in trading volumes which are well down on this time last year. As a consequence, commission levels remain under pressure.

As the Chairman notes, we welcomed QInvest as a major shareholder. The bank has brought exceptional Middle East and emerging markets reach and we are very much looking forward to a long and fruitful association with the QInvest team. We are exploring options for profitable business cooperation, but we will ensure that any new action is carefully planned and prudently executed.

At a time when equity capital markets remained functionally closed, we still managed to help raise more than £750m for our UK corporate clients, much of it in the secondary markets. The funds were used by clients to see their businesses through very difficult times. In some instances, the funds kept businesses afloat and saved many thousands of direct and indirect jobs. When many people outside the City are questioning the role of bankers, we can reflect on the Company’s efforts to help businesses to survive, grow and prosper.

Group-wide, we used market dislocation in 2009 and the first part of this year to further strengthen the team, improving substantially the quality of our franchise. In the US we will now be able to broaden ThinkEquity’s offering and extend its institutional and corporate reach. The new talent we have hired in the US is also having an immediate impact on winning business. I am pleased with the direction of the investment banking pipeline, which is building well and is at its strongest level in recent years; we are mandated on 10 IPOs, five of which have been filed. Recent data across a range of measures, as the Chairman has noted, also indicates an improving economic outlook in the US. This bodes well for pipeline execution.

Just about all similar US institutions had an exceptionally difficult year; we were not alone. ThinkEquity’s performance is dependent on the health of equity capital markets. Against the economic backdrop and the steep decline in the number of IPOs last year, it is a sign of confidence in the firm that ThinkEquity is able to attract senior talent and also build a very healthy and active pipeline for 2010.

Dividend
The board has not recommended a dividend for this year, but it is the board’s intention to pay dividends as the firm returns to profitability.

Outlook
The challenging economic conditions of 2009 have not fully dissipated, especially here in the UK which is subject to a great deal of economic and political uncertainty. By contrast, the US economy is showing signs of recovery.

In ThinkEquity we have restructured and invested in new talent. The business has won excellent investment banking mandates, most of which are executable over the remainder of the year.

Our business is financially robust and highly focused. In QInvest, we have a partner with whom we are exploring opportunities for improved international reach. Though commission levels remain under pressure, we have strong investment banking pipelines which will depend on markets being receptive to them; we do expect market conditions to continue to improve faster in the US than in the UK. In both markets we believe we can grow and further strengthen our business and that 2009 will be seen as a low point in capital markets activity in the US. There is now considerable upside to aim for.

Tim Linacre
Chief Executive

23 March, 2010

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