UK mid-cap brokers, beset by everything from regulation to de-equitisation, have resilience engraved in their DNA. With war, inflation and rising interest rates in the frame, even they are struggling. After an eerily quiet first quarter for equity capital markets, Aim-listed Numis is now reckoning on revenues of £74mn for the first half, more than a third below the year-ago period.
The Panglossian read — which accords with brokers’ natural bias — is that deals are deferred rather than ditched. The sector today operates on diversified models. Numis is pumping up advisory and steering a few international, including Brazil’s Nubank, to market in the US. Peel Hunt, through whose hands approaching half of UK retail trading pass, inched ahead of revised analyst expectations and is now guiding for revenues of £131mn for the financial year to end-March.
Growth is still on the cards when it comes to expansion of client lists. Numis added net nine new names in the past year and Peel Hunt 13, excluding those lost due to delistings or other activity. Peers Liberum and Panmure Gordon did better still, with a net 14 and 17 additions respectively, according to data provider Adviser Rankings Ltd. Equally important to the bulls: money is out there, with private equity sitting on a mountain of dry powder.
Still, not all investors are quite so flush. Equity and fixed income funds are leaking outflows sparked by redemptions from jittery investors turning to cash. Valuations are even tumbling in the private world; witness US grocery unicorn Instacart which last month scythed its value by 40 per cent to $24bn (supposedly to benefit stock-owning employees).
The duo’s share prices have had a rocky time, particularly since Russia invaded Ukraine in February. Those of Peel Hunt have almost halved since it returned to the stock market six months ago. Numis is off by about a quarter over the same period; at 8.5 times forward earnings, it is trading at a premium to Peel Hunt’s multiple of 5.8 times. It is tempting to view the swoon as a buying opportunity. But ultimately these are a pair of brokers with strong UK franchises: any bet on them is a bet on UK plc.
