Numis Corporation Plc
Numis Corporation Plc
Numis Corporation Plc
The London Stock Exchange Building
The London Stock Exchange Building
The London Stock Exchange Building
10 Paternoster Square
10 Paternoster Square
10 Paternoster Square
London EC4M 7LT
London EC4M 7LT
London EC4M 7LT
+44 (0)20 7260 1000
+44 (0)20 7260 1000
+44 (0)20 7260 1000
mail@numiscorp.com
mail@numiscorp.com
mail@numiscorp.com
www.numiscorp.com
www.numiscorp.com
www.numiscorp.com
i
i
i
N
N
N
u
u
u
m
m
m
s
s
s
C
C
C
o
o
o
r
r
r
p
p
p
o
o
o
r
r
r
a
a
a
t
t
t
i
i
i
o
o
o
n
n
n
P
P
P
c
c
c
2
2
2
0
0
0
1
1
1
0
0
0
A
A
A
n
n
n
n
n
n
u
u
u
a
a
a
l
l
l
l
l
l
R
e
p
o
r
t
R
R
e
e
p
p
o
o
r
r
t
t
&
A
c
c
o
u
n
t
s
&
&
A
A
c
c
c
c
o
o
u
u
n
n
t
t
s
s
2010
2010
2010
Annual Report & Accounts
Annual Report & Accounts
Annual Report & Accounts
A leading independent, investment banking
and stockbroking group. Offering a full range
of research, execution, corporate broking and
corporate finance services to companies
quoted in the UK and their investors.
Overview
Financial Highlights
Our Business
Chairman’s Statement
Chief Executive’s Statement
Strategy
Business Review
Research
Execution
Corporate Broking and Investor Relations
Corporate Finance
Case Studies
Financial Review
01
02
05
07
09
10
12
14
16
18
20
Governance
Board & Committees
Board of Directors
Risk Management
Remuneration
Directors’ Responsibilities
Directors’ Report
Independent Auditors’ Report
22
23
24
25
27
28
30
Financial Statements
Consolidated Income Statement
32
Consolidated Statement of Comprehensive Income 33
34
Consolidated Balance Sheet
35
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
36
Holding Company Balance Sheet
37
38
Holding Company Statement of Changes in Equity
Notes to the Financial Statements
39
Notice of AGM
72
75
Explanatory Notes to the Notice of AGM
Five Year Summary
78
Information for Shareholders
80
Numis Annual Report & Accounts 2010
01
£51.9m
£7.9m
£0.2m
6.6p
0.1p
£106.7m
£58.2m
8.00p
Financial Highlights
Revenue
2009 £47.5m
Adjusted profit before tax*
2009 £4.2m
Statutory profit before tax
2009 loss £10.5m
Adjusted basic earnings per share
2009 3.2p
Statutory basic loss per share
2009 8.4p
Net assets
2009 £113.8m
Cash and collateral balances
2009 £77.8m
Total dividend per share
2009 8.00p
* See reconciliation on page 20.
02
Numis Annual Report & Accounts 2010
Our Business
Our integrated approach and emphasis on
harnessing the combined expertise of the firm to
the benefit of our clients is key to our success.
Structured to deliver exceptional service to our clients
Corporate Finance
Corporate
Broking & Investor
Relations
l
l
a
W
e
s
e
n
h
C
i
king
n
a
B
t
n
e
m
t
s
e
v
n
I
Numis
S
e
c
u
r
i
t
ie
s
l
l
a
W
e
s
e
n
h
C
i
Research
Execution
Research
Execution
Corporate Broking
& Investor Relations
Corporate Finance
Through the recruitment
of highly ranked specialist
teams and the development
and training of talented
individuals, we are able to
provide in-depth sector
coverage. Our research
is recognised by fund
managers and corporates
alike as among the best.
Our research attracts
institutional clients, builds
relationships with them
and thereby enables us to
offer superior distribution
to our corporate clients.
Our Sales and Trading
team offer strong
distribution capabilities in
London, Europe and the
United States of America.
Working together they
combine their strengths
to deliver a substantial
resource to our
institutional clients who
require best execution to
capture the value of our
research and trading
ideas. Our execution
team delivers market
leading execution in over
400 stocks via a selection
of trading venues and
liquidity providers.
Our dedicated Corporate
Broking team bridges the
transactional and advisory
services of our Corporate
Finance department and
the placing power of our
Institutional Sales and
Trading teams. Our
brokers provide ongoing
advice to our corporate
clients on market
conditions and perceptions,
and deal with all aspects
of investor relations
including institutional road
show presentations to
existing and potential
shareholders.
The success of our
Corporate Finance team
springs from its ability to
understand our clients’
businesses, to know what
they are looking for and
where to locate it. Our
Corporate Finance team
operates an industry-
focused approach in
sectors covered by our
highly rated research
teams. We have a talented
and growing group
bolstered by recent senior
appointments from major
investment banks and
provide a full range of
services including advice
in relation to M&A, public
bids, IPOs, secondary
fundraisings, convertible
securities and private equity.
Numis Annual Report & Accounts 2010
03
Operational Highlights
Corporate client base increased to
(September 2009: 122)
with average market cap £278m
Number of FTSE 250 brokerships
up from 16 a year ago
Number of FTSE 100 brokerships
won first FTSE100 client
Funds raised during the year up 67%
(2009: £787m) through 25 transactions
IPOs during the year raised
(2009: nil) through 6 transactions
Institutional commission and trading revenue up
Despite lower market volumes and
fierce competition
Non-compensation costs reduced by
14% reduction versus 2008 levels
133
26
1
£1,315m
£713m
5%
7%
Thomson Reuters Extel 2010 survey results
Number 1 UK Mid Cap Corporate Broker
Number 1 UK Mid Cap Trading & Execution
Number 1 UK Mid Cap Corporate Access
Number 1 UK Small Cap Trading & Execution
Number 3 UK ALL Cap Leading Brokerage Firm
04
Numis Annual Report & Accounts 2010
“ We have a strong
balance sheet, excellent
people and a high quality
client base.“
Sir David Arculus. Chairman
Numis Annual Report & Accounts 2010
05
Chairman’s Statement
I am pleased to report that despite the renewed
macro-economic uncertainties which returned
during the second half, the strength of our
franchise enabled the Group to deliver an
improved performance.
Top-ranked sector specialist analysts, powerful international
distribution and sector aligned corporate broking and
advisory expertise continue to be the bedrock of our
franchise. Our robust financial position and commitment to
the UK equity capital markets have enabled us to increase
our corporate client base significantly whilst maintaining
a broad spread across small and mid cap companies.
These factors together with clarity of purpose continue to
differentiate us from larger banks.
On the macro-economic front, the UK Government made
a significant step forward in their 2010 spending review
by putting in place a program of public expenditure cuts
together with the prioritisation of spending requirements
going forward. Although this went some way to address
the long term structural issues of the UK’s finances, there
is clearly a need for other countries to implement similar
measures before such economic uncertainties give way to
renewed and sustained confidence in the equity markets.
In my report last year I said that there was a need to create
a more level fiscal playing field between debt and equity
financing for corporates and in particular address the
competitive advantages enjoyed by the big banks, many of
whom have relied on Government support and linked their
provision of corporate loans with equity mandates.
Despite the broader economic challenges and need for
proportionality in the UK’s changing regulatory framework,
I firmly believe that Numis remains well positioned to deliver
outstanding quality of service to both corporate and institutional
clients and am pleased to note the addition of a further 13
corporate clients during the first two months of the year.
In spite of little progress being achieved by policy makers in
this regard, there would appear to be a growing recognition
among companies of the benefits of having one large bank
and one more nimble firm as their joint broker or adviser.
Numis has been able to take advantage of this and, as a
result of our depth of sector expertise and fund raising
capabilities, we grew our presence in the FTSE 250 space
and significantly increased our fund raising activity.
This year we celebrated Numis’ 10 year anniversary and
with it, a decade of achievements made under the able
leadership of Oliver Hemsley. The next 10 years will be
no less challenging and we look forward to meeting those
challenges to ensure the future success of the Group.
I would like to close by thanking all at Numis for the immense
amount of hard work that all my colleagues have put into
enabling us to emerge from the events of the global
financial crisis with a strong forward momentum.
Sir David Arculus
Chairman
17 December 2010
06
Numis Annual Report & Accounts 2010
£51.9m
“ Revenues up 9% in the face
of lower market volumes
and increasing economic
uncertainties. A promising
pipeline of corporate activity,
however conditions remain
challenging“
Numis Annual Report & Accounts 2010
07
Chief Executive’s Statement
Our focus on the core elements of our business
has enabled us to build our franchise even through
the most difficult market conditions.
We are pleased to report that the business has
delivered an improved performance for the year ended
30 September 2010 generating operating revenue of
£51.9m (2009: £47.5m) and adjusted profit before tax
of £7.9m (2009: £4.2m).
Having made sure that the firm was well positioned to
weather the global financial crisis, we are pleased to
report a stronger set of results, a 67% increase in equity
funds raised to £1,315m, an increase in FTSE 250
corporate clients to 26 (from 16 a year ago) and continued
strengthening of our franchise with the introduction
of debt issuance and secondary market capability,
the appointment of a head of corporate finance and
additional sector specialists in corporate finance.
In addition, our combined institutional commission and
trading result held up extremely well in the face of lower
volumes and competition from electronic trading.
Our investment portfolio (the results of which are reported
through the other operating income/(loss) line of the
income statement) has stabilised. During 2009, fair value
losses of £8.0m were recorded, the majority of which
occurred in October and November 2008. However,
2010 has seen fair value losses of £0.6m combined with
dividend receipts of £0.7m and net cash realisation of
£0.7m. The portfolio is valued at £20.3m (September
2009: £21.7m) the majority of which comprises holdings
in quoted companies.
Having made significant progress on cost reduction
initiatives we are now seeing the benefit in our cost base.
Non compensation costs are 7% down on 2009 and 14%
down on 2008 and we continue to examine further
opportunities to improve our performance in this area
and reduce the on-going cost of our operating platform.
Staff costs have been maintained at 2009 levels.
Our revenue performance was impacted by the difficult
market conditions prevailing in the second half following
the declining confidence created by the UK government
elections, the coalition budget and Euro-zone sovereign
debt concerns. These conditions led to volatile markets,
declining volumes and a marked slow down in the total of
all equity fund raising on the LSE with equity funds raised
on AIM and the Main Market combined totalling £16.4bn
during the second half compared to £25.6bn during the
first half.
Our balance sheet remains robust with cash and cash
collateral balances totalling £58.2m (September 2009:
£77.8m) while net assets have reduced to £106.7m
(September 2009: £113.8m). Cash outflows during the
year primarily reflect the purchase of shares into the
Group’s Employee Benefit Trust and the re-balancing
of our interim dividend. The combined impact of these
actions together with the payment of the 2009 final
dividend resulted in cash outflows of £22.0m.
Corporate Finance & Corporate Broking
We are particularly pleased to report that our clients
raised a total of £1,315m (2009: £787m) through
25 transactions (2009: 18). This has been achieved
despite equity capital raising across all LSE markets
being 53% lower than the same 12 month period last
year. We continue to attract high quality corporate
clients with a further 29 new clients added bringing
the total number for whom we act to 133 companies
having an average market capitalisation of £278m.
We now represent 26 FTSE250 clients and one
FTSE100 company.
The offering to our corporate clients includes access to
worldwide institutional investors, but also to a network of
over 1,500 private client fund managers which provides
alternative sources of liquidity and investor interaction.
External recognition of our dedicated corporate broking
team was achieved in the 2010 Thomson Reuters Extel
survey in which Numis was voted #1 in both UK Mid Cap
Corporate Broking and UK Small Cap Corporate Access.
“ Our people are
exceptional and dedicated
to serving our clients”
08
Numis Annual Report & Accounts 2010
Chief Executive’s Statement
continued
Research & Execution
Our research and execution services are recognised as
being exceptional and have enabled us to maintain an
increased market share throughout the year. Numis has
been voted Leading Brokerage Firm or runner up in the
Thomson Reuters Extel survey (for UK companies of up
to £1bn market capitalisation) in each of the last 4 years.
In particular, our research teams were ranked in the top
three in five of the sectors that we cover. Our highly rated
analysts produce research on over 400 companies and
we have a recognised capability in fifteen sectors.
External recognition was achieved for the third year
running as Numis was ranked number one for FTSE250
Best Recommendations by StarMine.
Our execution services, across an increasing range of
‘lit’ and ‘dark’ trading venues, continue to make a major
contribution to the development of our reputation, the
resilience of our institutional commissions and the
sustained improvements in market share, particularly in
FTSE 250 stocks. Indeed, our trading and execution
services were voted #1 for both UK Small Cap and UK
Mid Cap in the 2010 Thomson Reuters Extel survey.
Sales & Trading is an increasingly competitive area with
pressure on commission levels for trades in liquid stocks
from electronic trading. However, our clients have a
strong demand for well-researched ideas combined with
high quality execution and we believe our platform is well
placed to improve performance for our 450+ active
institutional clients across the UK, Europe and the USA.
Our US office continues to provide an excellent service
arranging road shows in the USA for FTSE250
companies. This is an increasingly important and
valuable service as US investors represent a growing
proportion of the FTSE250 share registers.
Dividend and Scrip Alternative
In view of our robust cash position, the fact that our
core business remains profitable and the strength of our
franchise, the Board has proposed a final dividend of
4.00p per share (2009: 5.50p) which maintains the total
distribution for 2010 at 8.00p per share (2009: 8.00p).
The dividend will be payable on 18 February 2011 to all
shareholders on the register at 10 December 2010.
Shareholders will be offered the option to receive shares
instead of a cash dividend, the details of which will be
explained in a circular to accompany our Annual Report,
which will be circulated to all shareholders on 5 January 2011.
Litigation
As noted in our market announcement on 31 August
2010, Numis was served notice of a legal claim in relation
to a private placing in 2007 in respect of Rock Well
Petroleum Inc. After taking legal advice, the directors
remain of the opinion that the allegations are entirely
spurious and unfounded and are defending the claim
vigorously. Consequently there is no provision in the
financial information for future costs associated with
or emanating from this claim.
Board Appointment
As announced on 1 December 2010, Simon Denyer
joins the Board in the role of Group Finance Director.
Simon has been the Finance Director of the trading
entity Numis Securities Limited for over 3 years and has
been Acting Group Finance Director since January 2009.
Outlook
The renewed turmoil in the Eurozone continues to cast
a shadow over equity markets and until this recedes
activity levels are likely to remain subdued in both
secondary trading and primary fundraising.
Against this background, we are encouraged that in the
first two months of the new financial year our commission
and trading revenue is marginally ahead of last year’s run
rate. In addition, we have won 13 new corporate clients in
just two months and have a promising pipeline of primary
and secondary corporate activity. However, until a line is
drawn under the debt crisis in Europe, translating this
potential into profit remains challenging. In the meantime,
we will continue to invest in our franchise within an overall
framework of strong cost control and maintaining a
robust balance sheet.
Ultimately, it is the strength of our franchise, and the
ability to provide high quality unconflicted advice to our
growing client base that provides the platform for future
success.
Oliver Hemsley
Chief Executive
17 December 2010
Numis Annual Report & Accounts 2010
09
Strategy
Our overarching objective is to retain our
position as one of the leading independent
investment banking and stockbroking
businesses in the UK.
Focus
Focusing on the UK market, where Numis
has a clear competitive advantage in its core
integrated business
Putting clients’ interests first
Providing high quality research and the best
execution for institutional and corporate clients
Partnership
Offering a collegial culture with an emphasis on
harnessing the combined expertise of the firm
Selective
Discipline
Attracting highly capable and motivated
professionals looking for an opportunity to
serve clients without latent conflicts
Offering the opportunity to make a tangible
difference and participate in the direction and
profit of the business
Adding research, distribution and client
service capability to profitable sectors so that
the business continues to strengthen its offer
and is able to serve more clients
Building non-UK distribution and alternative
execution capability to improve service to clients
Adding origination capacity to win more
high quality corporate clients, bringing
more exceptional investment opportunities to
institutional clients and leveraging our
secondary distribution platform
Making disciplined operational improvements
and maintaining a prudent risk management culture
Actively evaluating and managing financial and
non-financial risks
Continuing to manage our finances conservatively by
retaining appropriate levels of liquidity while operating
a sustainable dividend policy
10
Numis Annual Report & Accounts 2010
Research
High quality research is at the heart of Numis’
business. It creates trust-based relationships
with our institutional customers that are further
strengthened by our execution service.
Through the recruitment of highly ranked specialist
teams and the development and training of talented
individuals, we are able to provide extensive coverage
of mid cap and smaller companies, delivering valuable
insights for our institutional clients and attracting high
quality corporates. Numis analysts also cover over 40
FTSE100 stocks where this provides industry insights
and perspectives on valuation.
We provide stock analysis coverage on over 400
companies by 35 recognised leading analysts organised
into 15 key sectors. Our analysts are much in demand
for commentary and provide value-added services to
all sectors by orchestrating high profile conferences and
international roadshows.
A noted feature of our output are the large and definitive
sector books that are regularly published. These are
in-depth analyses of the different sectors that examine
long-term themes and the way that they interact with
individual companies. These valuable reference works
are long shelf-life products that stand out from the more
ephemeral competition.
Our research is recognised by fund managers and
corporates alike as among the best. We are particularly
pleased that, for the fifth year running, Numis achieved
exceptional recognition this year in the Thomson Reuters
Extel industry-wide survey, being ranked in the top three
in five of the sectors covered. Of the 14 research sectors
surveyed Numis was ranked 1st in three: Construction,
Leisure and Gaming and Technology and was ranked
2nd in the Financial sector and the Media sector.
Further external recognition was achieved for the third
year running as Numis was ranked number one for
FTSE250 Best Recommendations by StarMine
“ Authoritative research
is fundamental to
generating awareness
and interest”
Numis Annual Report & Accounts 2010
11
Unconflicted
Research is one of the
most valuable tools in
the decision making
process. At Numis we
understand the value of
objectivity, the clarity of
perspective it can bring
and its role in the
development of sound,
long-term strategies.
Being unconflicted is
the cornerstone of our
research capability
– clean and clear,
unbiased facts
generating telling
insights in increasingly
complex and complicated
markets. Fundamental
understanding you
can trust.
12
Numis Annual Report & Accounts 2010
Execution
We provide high quality execution services to
our institutional clients. Numis is committed
to providing liquidity in its corporate stocks
and our focus remains on client facilitation.
Numis provides active execution services in 548 stocks
(2009: 435) of which 347 are listed on the main market
(2009: 260). Importantly, Numis has the leading market
share in 89 (2009: 73) stocks across these markets and
is a top three service provider in a further 88 stocks
(2009: 72).
The continued investment in our sales and trading
platform has enabled Numis to respond to client and
regulator demand for demonstrable best execution
across multiple venues and liquidity pools with the use
of smart order routing and has enabled the application
of algorithmic trading to accelerate executions.
Working alongside Numis’ traders are teams of
experienced salesmen and sales-traders who provide
a strong distribution capability in London, Europe and
the USA by maintaining a close relationship with over
500 institutional clients. External recognition of our
capabilities in this area was achieved in the 2010
Thomson Reuters Extel survey in which our team was
ranked first for both UK Small Cap and UK Mid Cap
Trading and Execution whereas our sales team was
ranked second for UK Small Cap Sales.
Numis has been successfully building its market share in
FTSE250 and Small Cap stocks which has enabled it to
deliver resilient levels of secondary revenue. This enabled
us to grow combined institutional commissions and
trading revenues by 5% even in the face of lower market
volumes and leakage to electronic trading.
The platform also delivers high quality electronic links
to our institutional clients, streamlined straight-through
processing from the front office through the middle
office and settlements operations to the integrated
back office financial systems. This has simultaneously
reduced unit costs – which have been driven down still
further by the application of comprehensive settlement
netting and enhanced processing.
We continue to make use of Fidessa’s Managed Enterprise
service which gives us dedicated development and
service staff inside Fidessa, who can respond rapidly
to our client service and other service development
priorities. When combined with Numis’ small in-house
IT team, who have a strong culture of innovation for and
service delivery to Numis’ clients and revenue generators,
this collaborative relationship continues to bring service
innovation and customisation to our platform to the
ultimate benefit of our clients.
“ Largest and best known
UK small and mid-cap
sales team in London”
Numis Annual Report & Accounts 2010
13
Committed
Numis has always aimed
to deliver high levels of
technical ability married
to superior client service.
This is especially evident
when you look at the
development of our sales
and trading platform.
Client and regulator
demand have driven
the development of our
platform ensuring robust
systems that are readily
customisable to meet
our clients’ requirements.
14
Numis Annual Report & Accounts 2010
Corporate Broking & Investor Relations
We have an ability to bring the right people
together at the right time, to provide quality links
between investors and companies on every level,
with rewarding outcomes for all concerned.
Our dedicated Corporate Broking team bridges the
transactional and advisory services of our Corporate
Finance department and the placing power of our
Institutional Sales and Sales Trading teams. Our brokers
provide ongoing advice to our corporate clients on market
conditions and perceptions, and deal with all aspects of
investor relations including institutional road show
presentations to existing and potential shareholders.
The team has a wealth of experience in serving a wide
range of clients in broking, fund raising and corporate
finance issues. Our aim is to ensure that every company
we look after is given the best possible advice and access
to the London equity markets.
This has helped us attract high quality corporate clients
with a further 29 new clients added during the year
bringing the total number for whom we act to 133
companies having an average market capitalisation
of £278m. We now represent 26 FTSE250 clients and
one FTSE100 company.
External recognition of our dedicated corporate broking
team was achieved in the 2010 Thomson Reuters Extel
survey in which Numis was voted first in both UK Mid Cap
Corporate Broking and UK Small Cap Corporate Access.
The offering to our corporate clients also includes access
to worldwide institutional investors, but also to a network
of over 1,500 private client fund managers which provides
alternative sources of liquidity and investor interaction.
Finally, Numis’ Investor Relations team provides the link
between companies, existing shareholders and potential
investors. Our Investor Relations service allows the
investment community to gain a greater understanding
of a Company’s business, it’s governance, financial
performance and prospects and in turn, the company
to gain feedback from the investor audience.
Average market cap £m
Number of Corporate Clients
300
200
100
FY06
FY07
FY08
FY09
FY10
n Average market cap of our corporate client base
Total
140
120
100
80
60
40
20
FTSE 250
30
25
20
15
10
5
FY06
FY07
FY08
FY09
FY10
n Corporate client base (Number of companies)
n FTSE 250 corporate clients
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
15
05
Credibility
Our credibility comes
through a combination
of talented people working
in an environment that
openly encourages
an entrepreneurial but
collegial culture. We seek
the building of knowledge
and experience to best
inform the advice we
give our clients.
We continue to ensure
that our integrity and
credibility remain beyond
question through the
careful application of
best practice at every
level in the organisation.
16
Numis Annual Report & Accounts 2010
Corporate Finance
The success of our Corporate Finance team
springs from its ability to understand our clients’
businesses, to know what they are looking for and
where to locate it.
Our Corporate Finance team operates an industry-
focused approach in sectors covered by our highly rated
research teams. We have a talented and growing group
bolstered by recent senior appointments from major
investment banks. We provide a full range of services
including advice in relation to M&A, public bids, IPOs,
secondary fundraisings, convertible securities and
private equity.
Numis has a strong track record of IPOs on London’s
main market and AIM and completed 6 IPOs during
2010 raising equity funds totalling £713m. Total funds
raised for corporate clients was up 67% to £1,315m
(2009: £787m) through 25 transactions (2009: 18) which
was an impressive performance against the backdrop of
equity capital raising across all LSE markets being 53%
lower than the same 12 month period last year.
We continue to assist our existing clients in achieving
their objectives with a significant proportion of our
corporate deals in the year coming from secondary
issues and M&A activity for existing clients. We also
number several overseas companies among our clients
and expect to bring more to the London market in
the future.
This list is backed by an innovative approach to the
challenges facing our clients. We believe in building
solid, long-term relationships with our clients, nurturing
confidence. Our track record reflects the quality of these
relationships and their ability to deliver original and telling
solutions.
The key to our success in Equity Capital Markets lies
in our placing power. Time and again the skills of our
research people combine with our expertise in execution
to deliver impressive results.
We are constantly researching interesting, high quality
companies to bring to the attention of institutional
investors. And, thanks to our growing list of successes,
companies wanting to list in London look to us for
advice and guidance.
“ Proven track record with
reputation for considered
and independent advice”
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
17
05
Expertise
The depth of our
expertise is evident in
our track record. Look
closely and you will see
that this record generates
from a culture built on
long-term relationships
with our clients coupled
with innovative thought
and an ability to deliver.
Intelligent judgement
driven by a deep
understanding of our
clients’ businesses
enables Numis to deliver
original and telling
solutions.
18
Numis Annual Report & Accounts 2010
Case Studies
Our contribution to our clients’ successes and the
track record of our corporate client service teams
continues to attract high quality corporate clients.
Numis’ involvement in our client success includes:
Better Capital Limited
Fund launch and flotation on AIM
Numis acted as nominated adviser
and broker
Provident Financial plc
£25m 7 per cent. 10-year retail
corporate bond due 2020
Numis acted as sole manager
Provident Financial plc
Provident Financial plc (the “Company”)
offers home credit, credit cards and
direct repayment loans to sub-prime
consumers and is currently a member
of the FTSE 250 Index with a Fitch BBB
credit rating.
The retail bond was marketed solely to
retail investors through Hargreaves
Lansdown and can be held in Individual
Savings Accounts. The instrument was
launched in April 2010 is traded on the
London Stock Exchange’s new Order
book for Retail Bonds (ORB).
Better Capital Limited
Better Capital Limited (the “Company”)
is a quoted closed-ended investment
company with the investment objective of
investing in distressed businesses in the
UK and Ireland. Investments are sourced
and executed by an experienced
turnaround team led by Jon Moulton.
Numis acted as nominated adviser and
broker when the Company was launched
on AIM raising gross proceeds of £142m
via a placing with institutional investors
at £1.00 per share in December 2009.
The Company completed a further
capital raising in July 2010 raising £67m
through a firm placing and placing and
open offer at £1.05 per share. The capital
raising was combined with a move from
AIM to the Main Market of the LSE in
order to enhance liquidity in the Company’s
shares and the Company’s profile within
the investment community. Numis acted
as sponsor, nominated adviser, broker
and joint placing agent on this transaction.
RSM Tenon Group PLC
£40m placing and acquisition of RSM
Bentley Jennison for up to £76m and
move from AIM to the Official List
Numis acted as nominated adviser
and joint broker to the Company on
the placing and acquisition of RSM
Bentley Jennison; and sole sponsor
and broker on the migration to the
Official List
RSM Tenon Group PLC
RSM Tenon Group PLC (the “Company”)
is the seventh largest accountancy and
business advisory firm in the UK.
The Company provides a broad range
of services, including: audit, taxation
and advisory, turnaround and corporate
recovery, internal audit and risk
management, financial management
and specialist taxation, to businesses
from entrepreneurs and owner managed
businesses to large corporations and
public sector organisations.
In December 2009, the Company raised
£40m via a cash placing, to part fund the
acquisition of RSM Bentley Jennison. The
equity issue was priced at 45p per share,
representing a discount of 9.5% to the
pre-announcement share price.
In May 2010, the Company moved from
AIM to the Official List. The Company had
grown significantly since its admission to
AIM in March 2000 and its directors believe
that a listing on the Official List is the
most appropriate platform for continued
growth. The Company moved into the
FTSE Small Cap and FTSE All Share
indices in September 2010.
Numis Annual Report & Accounts 2010
19
Jupiter Fund Management PLC
IPO on the Main Market of the LSE
raising proceeds of £254m comprising
£220m of new money and £34m by
way of a secondary offering (with a
greenshoe over-allotment option of
an additional £22m)
Numis acted as co-lead manager
for the IPO and was subsequently
appointed joint broker to the Company
Jupiter Fund Management PLC
Jupiter Fund Management PLC (the
“Company”) is a leading investment
management business with focus on
generating investment out-performance
across its range of investment capabilities,
which include UK, European and emerging
markets equities, specialist equities (such
as financial sector equities) and fund of
funds products; it is currently a member
of the FTSE 250 index.
The Company launched its IPO in June
2010 with a price range of 150p to 210p.
Following a two week marketing period,
the IPO priced at 165p representing a
market cap of £755m and an EV of
£860m.
Jupiter was priced at a discount to its
closest UK peers at the time of IPO. Post
IPO the discount to its peers has been
significantly eroded and Jupiter’s shares
have performed strongly, making the
Company’s IPO one of the most
successful new listings of 2010.
Betfair Group PLC
Numis acted as co-lead manager for
the Betfair IPO to the Main Market of
the LSE in October 2010
The offer raised gross proceeds of
£234m for a number of existing
shareholders; no new shares were
issued
International Public Partnerships
Numis was appointed as sole broker
and financial adviser in July 2009
£89m raised through a Firm Placing,
Open Offer and Offer for Subscription.
Numis acted as sponsor, financial
adviser and broker
International Public Partnerships
International Public Partnerships (the
“Company”) is a limited liability Guernsey
incorporated authorised closed-ended
investment company. The Company offers
shareholders an exposure to investments
in infrastructure assets, particularly those
with a public or social character such as
those developed by public bodies under
private finance initiative or public private
partnership procurement.
The Company expects to deploy the
proceeds from the capital raising into
further investments and, to the extent not
used for such investments, in repayment
of the Company’s existing debt facilities.
Betfair Group PLC
Betfair Group PLC (“Betfair” or the
“Company”) is the world’s largest
international online sports betting provider
and the world’s biggest betting community,
offering a broad range of sports betting,
poker and games products to more than
3 million registered customers.
Launched in 2000, Betfair pioneered
online person-to-person sports betting
by developing a market place which
allows customers to bet at odds sought
by themselves or offered by other
customers and thereby eliminates the
need for a traditional bookmaker.
The motivation for the IPO was to generate
liquidity and provide see through pricing
for Betfair’s 600+ shareholders. The
majority of the shares offered came from
a group of 14 major investors who
accounted for 75 per cent. of the
Company’s fully diluted share capital.
The Company announced that the IPO
would price in a range of £11 to £14 per
share implying a market capitalisation of
£1.16bn to £1.48bn. Demand for the deal
was exceptionally strong and the deal
eventually priced just above the middle of
the range at £13 per share. At this price,
the market capitalisation of the Company
upon listing was £1.39bn, which is sufficiently
large to be included in the FTSE 250 at
the next index review in December 2010.
20
Numis Annual Report & Accounts 2010
Financial Review
Our strong capital base and prudent approach
to risk management and cost control enables
Numis to continue to invest in the long-term
future of the business.
Adjusted Profit Performance
The adjusted profit before tax measure specifically
excludes gains and losses arising from our investment
portfolio, gains arising from an associate holding (in prior
years) and the accounting charges associated with
awards made under the Group’s employee share
scheme arrangements. Management believe that this
provides a truer reflection of the performance of the
underlying operating business and has therefore
highlighted these financial measures within their annual
report. It also allows for a greater degree of comparability
with our peer group which exclude similar items in the
measurement of underlying performance as well as
providing the analyst community with benchmarks
of the Group’s underlying performance.
which totalled £1,315m, up 67% (2009: £787m).
Furthermore, we have increased our income from retainer
fees payable by our corporate clients by 5% to £4.8m
(2008: £4.6m) as we have won new corporate brokerships.
Following corporate client additions subsequent to the
year end our annualised retainer fee income has increased
further and now stands at £5.2m.
Our recurring income, comprising that derived from
institutional commission and trading, corporate retainers
and net interest and similar income has remained broadly
unchanged at £32.0m (2009: £32.6m) and covers 94%
(2009: 99%) of our continuing expense base before
discretionary performance-related pay and share
scheme related charges.
The table below reconciles the statutory measures of
profit/(loss) before tax, profit/(loss) after tax and earnings/
(loss) per share to the adjusted measures used by
management in their assessment of the underlying
performance of the business and demonstrates the 87%
increase in adjusted profit before tax to £7.9m which was
principally due to the improved revenue performance
coupled with reductions in non-compensation costs
Revenue
Revenues of £51.9m (2009: £47.5m) were impacted by
the volatility and economic uncertainties prevailing in the
second half but overall were up 9% on 2009. Combined
institutional commission and trading revenues grew
by 5% to £26.5m (2009: £25.2m) despite lower market
volumes and the continuing threat posed by electronic
trading. Primary revenue, that is corporate finance
advisory fees and commission from fund raising activities,
was up 16% to £20.6m (2009: £17.8m) and reflects the
significant increase in funds raised for corporate clients
Costs
Our total administrative expense has been impacted by
share scheme related charges of £7.7m (2009: £6.9m).
These charges arise from the combined impact of all
historic unvested awards and are not reflective of the
cash charge. Furthermore, although such charges
persist throughout the vesting period of the underlying
awards, their impact is not evenly distributed across that
vesting period. The underlying expense base excluding
share scheme related charges has decreased by 3%
from £46.0m to £44.7m which largely reflects the reduction
in non-compensation related costs.
Compensation related costs excluding share scheme
related charges account for 59% (2009: 57%) of the
expense base and have remained broadly unchanged
at £26.4m (2009: £26.3m). This reflects the fact that
headcount also remained broadly unchanged with
average staff numbers of 189 (2009: 186).
Statutory group profit/(loss) before tax
Items not included within adjusted profit before tax:
Other operating (income)/loss
Share scheme charge
National insurance provisions related to share scheme awards
Adjusted group profit before tax
Statutory group taxation
Tax impact of adjustments
Adjusted group taxation
Adjusted group profit after tax
Basic weighted average number of shares, number
Adjusted basic earnings per share, pence
2010
£’000
175
(59)
7,313
427
7,856
(276)
(754)
(1,030)
2009
£’000
(10,519)
7,846
6,208
660
4,195
1,870
(2,733)
(863)
6,826
3,332
102,770,978 102,539,193
3.2p
6.6p
Numis Annual Report & Accounts 2010
21
Costs: % compensation versus
non compensation
100
80
60
40
20
0
43
41
57
59
FY09
FY10
n Non compensation
n Compensation
(figures exclude share scheme charges)
Non-compensation related costs account for 41%
(2009: 43%) of the expense base and have been reduced
by £1.5m (7%). This decrease has been achieved through
a variety of cost saving initiatives across all cost categories
and we continue to seek out new initiatives to further
reduce the efficiency of our operational platform.
Financial Position
Our prudent approach to risk management and retention
of liquid resources has helped to ensure that we continue
to maintain a strong capital position. As at 30 September
2010 our Pillar I regulatory financial resource requirement
was £18.1m (2009: £20.8m) including £9.2m (2009: £10.6m)
of operational capital requirement. Total regulatory capital
as at 30 September 2010 amounted to £75.9m (2009:
£89.2m) giving a solvency ratio of 418% (2009: 429%).
Our balance sheet has remained broadly unchanged,
albeit with a slight reduction driven by the dividend.
Net assets as at 30 September 2010 totalled £106.7m
(2009: £113.8m) of which 52% is held as cash and cash
equivalents (2009: 65%).
Delivery of Value
Our focus on high quality clients and high calibre staff
has enabled us to deliver resilient revenues, operating
cash flows and distributions to shareholders. This year
has been challenging but our underlying performance
remains profitable and enabled us to deliver further
value to our shareholders by way of a maintained total
dividend of 8.00p after 10 years of successive growth.
Revenue, £m
Adjusted profit before tax, £m
Adjusted basic earnings per share, pence
Statutory (loss) / profit after tax, £m
Operating cash inflow / (outflow), £m
Dividend per share, pence
Dividend distribution, £m
2010
51.9
7.9
6.6
(0.1)
2.7
8.00
10.1
2009
47.5
4.2
3.2
(8.6)
20.7
8.00
7.9
2008
50.7
8.4
5.7
14.8
(12.3)
7.50
7.7
2007
85.7
39.1
27.7
27.6
26.0
7.00
5.9
2006
72.0
34.8
24.7
25.5
36.2
5.00
3.8
22
Numis Annual Report & Accounts 2010
Board & Committees
A number of appropriately constituted committees
ensure the principals of good governance and
challenge are in place.
Corporate Governance Policy
AIM companies are not required to comply with the
Combined Code 2006 (Principles of good governance
and code of best practice) adopted by the London Stock
Exchange but the directors have chosen to make these
disclosures to provide useful corporate governance
information.
The Board
The Board of Numis Corporation Plc, chaired by
Sir David Arculus , meets 8 times a year and at other
times as necessary, to discuss a formal schedule of
matters specifically reserved for its decision including
major strategic and operational issues of the Group.
It reviews trading performance, business strategy,
investment and divestment opportunities and any
other matters of significance to the Group.
Remuneration Committee
The Remuneration chaired by Tom Bartlam, comprises
the Non-executive Directors of the Company. It determines
salary levels, discretionary bonuses and the terms and
conditions of service of the executive directors together
any associated equity awards. The Remuneration
Committee also reviews the compensation decisions
made in respect of all other senior executives and bonus
distribution policy in respect of the rest of the firm.
Audit and Risk Committee
The Audit and Risk Committee is chaired by Geoffrey
Vero and comprises the Non-executive Directors of the
Company. The Audit meets at least 4 times a year and is
responsible for the overall risk framework and internal
control environment, reviews external financial reporting
and monitors the framework for compliance with relevant
laws and regulations. Other directors, members of staff
and the external and internal auditors are invited to attend
these meetings as appropriate. The Committee reports
to the Board on the Company’s full and half year results,
having examined the accounting policies on which
they are based and ensured compliance with relevant
accounting standards. In addition, it reviews the scope
and results of the external and internal audit, its cost
effectiveness and the independence and objectivity of
the auditors.
Nominations Committee
The Company’s Nominations Committee is chaired by
Sir David Arculus and comprises the Non-executive
Directors and Oliver Hemsley.
Management Committee
The Management Committee, chaired by Oliver Hemsley,
deals with the implementation of business strategy and
day-to-day operational matters. It meets weekly to discuss
the core activities of the Group, current performance,
progress on management initiatives and corporate
compliance matters.
Financial Risk Committee
The Financial Risk Committee, chaired by the Group’s risk
manager, meets weekly to discuss and to manage the
market, credit, liquidity and related operational risks of the
Group, including amongst other financial risks the market
risk of the Group’s trading book and investment portfolio.
The Financial Risk Committee makes recommendations
on Risk Policy which sets various limits at individual stock
and overall trading book level as well as being responsible
for the review and approval of counterparty limits.
New Business Committee
The New Business Committee, chaired by Oliver Hemsley,
is responsible for exercising senior management oversight
of all issues in relation to Numis entering into new corporate
client relationships, underlying transactions on behalf of
corporate clients and reviewing or terminating relationships
with corporate clients. It has responsibility for assessing
the impact on Numis of all such matters and in doing so
gives due consideration to the reputational, regulatory,
execution and commercial risks attached.
Risk Committee
In addition to the New Business Committee, further
approval is required by a Risk Committee prior to the
launch of a fund raising, issue of a public document which
contains Numis’ name or in the case of a transaction
giving rise to significant unusual concerns of significant
financial or reputational risk to the firm.
Internal Control
The Board is responsible for maintaining the Group’s risk
framework and system of internal control and for reviewing
its effectiveness. The system of internal control is designed
to manage rather than eliminate the risk of failure to
achieve business objectives, as such it can provide only
reasonable but not absolute assurance against material
misstatement or loss. The Group’s system of internal
control has been actively managed throughout the year.
The Group has a number of committees with formal
terms of reference and a Compliance department
responsible for the Group’s adherence to the rules of the
Financial Services Authority and other relevant regulators.
In addition, the Group has a fully independent Internal
Audit function in order to provide further assurances over
the adequacy and effectiveness of the systems of internal
control throughout the business and ensure that the
Group’s approach to continuous improvement is
maintained at the high standards.
Numis Annual Report & Accounts 2010
23
Board of Directors
Our overarching objective is to retain our position
as one of the leading independent investment
banking and stockbroking businesses in the UK.
Sir David Arculus
Sir David Arculus is the Non-executive Chairman of
Numis. David brings a wealth of experience to Numis
having spent 24 years at EMAP, the last eight as Group
Managing Director leaving EMAP in 1997. Outside the
media sector he was Non- executive Director of Severn
Trent plc from 1996, serving as Chairman from 1998 to
2004. David held a range of further Non-executive
positions including, Barclays Bank plc from 1997 to 2006
and in 2006 as Chairman of O2 was responsible with the
management team for the sale of O2 to Telefonica of
Spain. David was Chairman of the British Government’s
Better Regulation Task Force from 2002 to 2006 where
he reported to the Prime Minister and was instrumental
in reducing burdens on business. David is a director of
Pearson plc, Telefonica and Aldermore Bank plc and
also serves as Chairman of a number of private equity
sovereign wealth backed companies.
Oliver Hemsley
Oliver Hemsley is Chief Executive Officer of Numis and is
responsible for its strategic development as well as the
day to day management of the main trading entity, Numis
Securities Limited, for which Oliver is Chairman and CEO.
Oliver started Numis in the early 1990’s and has been
fundamental in building the franchise which now represents
one of the largest and more successful independent
British stockbroking firms. Prior to founding Numis,
Oliver worked as a marine underwriter at Lloyd’s for the
Brockbank Group.
Oliver is married with three children and lives in London
and Dorset.
Lorna Tilbian
Lorna Tilbian is an Executive Director and has worked as
a Media Analyst in the City for over a quarter of a century
with a distinguished track record. She joined Numis in
2001 after stints at Sheppards (1984-88), SG Warburg
(Director, 1988-95) and WestLB Panmure (Executive
Director, 1995-2001). Lorna appears in the Global Power
List 2010 and Campaign’s The A List 2011 as well as
being a Finalist for CityAM Analyst of the Year (2010) and
being listed by the Evening Standard as one of London’s
1000 Most Influential People 2010. Lorna has been a
Non-Executive Director of Jupiter Primadona Growth
Trust since 2001.
Tom Bartlam
Tom Bartlam is a Non-executive Director of Numis and
is a chartered accountant. Prior to his retirement in 2005
Tom was Managing Director of Intermediate Capital Group
Plc (ICG), which he co-founded in 1989. Tom Bartlam is
Chairman of both Pantheon International Participations
Plc and Polar Capital Holdings Plc.
Gerald Corbett
Gerald Corbett is a Non-executive Director of Numis.
Gerald is Chairman of Britvic Plc, Moneysupermarket.
com Plc and the Royal National Institute of the Deaf.
Gerald started his career at Boston Consulting Group,
before holding a succession of financial roles at Dixons,
Redland and Grand Metropolitan and was formerly
Chairman of SSL International Plc, Woolworths Group
Plc and CEO of Railtrack Group Plc.
Geoffrey Vero
Geoffrey Vero is a Non-executive Director of Numis, and
is a chartered accountant with a distinguished career in
the private equity industry. Geoffrey was an Investment
Director of ABN Amro Private Equity, Lazard Development
Capital and previously held senior positions at Diners
Club and Savills. Geoffrey Vero is Chairman of both
Albion Development VCT Plc and EPE Special Opportunities
Plc, and was formerly a Non-executive Director of Crown
Place VCT Plc.
Simon Denyer
Simon Denyer is an Executive Director and is Group
Finance Director of Numis. Simon is a chartered
accountant having spent five years with Pricewaterhouse
before moving to the banking arm of Schroder’s Plc
where he spent five years performing a number of
finance and risk roles. Simon then moved to Citigroup
where he spent a further six years in the investment
banking arm before joining Numis in 2006. Simon
formally joined the Board in the role of Group Finance
Director on 1 December 2010 having been the Finance
Director of the trading entity Numis Securities Limited
for over 3 years and had been Acting Group Finance
Director since January 2009.
24
Numis Annual Report & Accounts 2010
Risk Management
The Board is responsible for determining Numis’
risk appetite and for ensuring that Numis’ risk
framework and management processes are
appropriate and operating effectively.
The management of risk is embedded in our culture and it
is the responsibility of each employee to ensure that this
culture is built into our working practices. Specifically,
day-to-day management of risk is delegated by the Board
to senior executives across the firm, through appropriate
committees, systems and controls. Whilst encouraging an
entrepreneurial and commercial culture that is focused on
generating value for our clients, the Board actively seeks
to ensure all relevant risk exposures are managed and
mitigated. Note 29 describes how the Board receives input
from other key committees and the framework employed
by the Group to manage the risks faced in the normal
course of business. In financial terms, the Board’s policy
is to hold regulatory capital that, at a minimum, meets
our most conservative interpretation of the Capital
Requirements Directive (CRD) with the addition of stress
test measures to determine additional capital requirements
available for use should adverse circumstances materialise
that are outside the firm’s normal and direct control.
Major Risks and Controls:
People risk
Retaining, attracting and developing key staff, including,
in particular, significant current and future income
generators, is essential to the long-term health and
growth of the business. The Board has therefore
sustained particular focus on its remuneration strategies,
including considering the appropriate allocation and mix
of cash and share based schemes, and has maintained
structured performance-based staff evaluations. The
nature of the share based schemes and their deferral
characteristics are described in note 25. Additionally, the
on-boarding, retention and growth of our people remain
at the top of the Board’s agenda.
Reputational risk
Whilst entrepreneurial staff are always encouraged to
develop new clients and streams of income, all new
business is subject to a rigorous appraisal process
supervised by the New Business Committee. For all
activities, this discriminates strongly in favour of high
quality clients. Numis places great emphasis on
employing and adding highly experienced senior staff
who are very closely engaged with clients. To aid the
application of best practice, regulatory compliance and
consistency, Numis management continues to make
use of standardised operating procedures. Finally, the
Board sets the tone by demanding a strong ethical and
professional culture as the only acceptable standard for
the firm.
Strategic risk
The Board recognises that continued improvement in
the way in which our strategy is executed is key to our
long-term success. In particular, the management team
are subject to healthy challenge from the Board on
the firm’s strategic direction, execution of strategy and
the implementation of agreed initiatives. This includes
significant focus on the risks that threaten the achievement
of the firm’s strategy as well as those that present the
greatest opportunity. The existing, strong corporate
governance structure ensures that the Board has sufficient,
well articulated, consistent and timely information to enable
the necessary decisions and choices to be made and
the right level of assurance obtained.
Regulatory & legal risk
The Board’s policy is to encourage an intense focus by
top management on the long-term, sustainable success
of the business. This specifically includes robust corporate
governance, avoiding the likelihood of litigation and compliance
with the relevant regulatory and legal requirements for the
jurisdictions in which Numis operates. A strong culture of
regulatory and legal compliance permeates the firm and
there is a demonstrated track record of transparency and
strong relations with the key regulatory bodies. The Board
monitors and supports this through open channels of
communication and demonstrable action.
Financial risk
Financial risks are discussed in more detail in note 29
and include the main market, credit, concentration and
liquidity risks. The Basle II, CRD and VaR measures are
utilised and compared with Board approved limits.
These are calculated daily by the Finance team and
are published to senior management and, ultimately,
to the Board.
Other operational risk
We aim to be able to sustain operations and client service,
with minimum of disruption, with a combination of business
continuity planning, duplicated infrastructure, strong supplier
relations and remote facilities. Continuously evolving
control standards and robust corporate governance are
applied by suitably trained and supervised individuals, and
senior management are actively involved in identifying
and analysing all operational risks to find the most effective
and efficient means to mitigate and manage them.
Numis Annual Report & Accounts 2010
25
Remuneration
The Board delegates to the Remuneration
Committee the determination of the executive
directors’ remuneration.
The Remuneration Committee is responsible for setting
the remuneration policy for executive directors and other
senior executives in the business. Additionally the
Remuneration Committee reviews the recommendations
made by the executive directors for all other employees.
Remuneration Policy
The Remuneration Committee believes strongly that total
remuneration should take into account the competition
for talent in an industry where successful people are
rewarded and mobile. The Company compensates
employees through both fixed and variable compensation.
Fixed compensation comprises mostly base salaries and
the Committee reviews these as part of the overall total
remuneration review. The policy for variable compensation
is to recognise corporate performance and individual
achievement of objectives through a discretionary bonus.
The discretionary bonus pool is established by the
Committee each financial year with reference to the
adjusted profit before tax. Discretionary bonus awards are
delivered in two main forms: a cash bonus and a deferred
bonus. The deferral is mandatory and is delivered via
various share incentive schemes. The executive directors
and other senior executives assess individual performance
through clearly defined objectives and a structured process
of review and feedback. In particular, the overall (fixed and
variable) remuneration by individual is determined with
regard to the performance of the individual, performance
of the area or function of the business in which the
individual works or for which the individual is responsible,
the profitability of the Group and levels of reward for
comparable roles in the external market.
Executive directors may also receive 7% of base salary
contribution to a defined contribution pension saving
scheme. In addition, they are entitled to insured death in
service benefits of four times their base salary.
Remuneration for the Year*
The share incentive scheme awards shown in the
remuneration table at the foot of the page reflect awards
proposed, but not yet granted, as part of the 2010 annual
remuneration process. The total amounts for directors’
remuneration and other benefits were as follows:
Emoluments
Money purchase contributions
2010
£’000
924
14
938
2009
£’000
1,481
17
1,498
One executive director (2009: 2) is a member of a money
purchase scheme, a form of defined contribution scheme.
Contributions paid by the Group in respect of that director
are shown above.
Directors’ Share Options*
The Company no longer makes share option awards.
There are no outstanding, unexercised options to acquire
ordinary shares in the Company granted to or held by the
directors as at 30 September 2010.
The constituent parts of directors’ remuneration during the year are detailed below*:
Base
Salary
Share Incentive
Scheme
Awards
Bonus
Total
2010
£’000
Total
2009
£’000
Benefits
225
200
-
100
50
50
50
-
-
675
-
-
-
-
-
-
-
-
-
-
-
205
-
-
-
-
-
-
-
205
43
15
-
-
-
-
-
-
-
58
268
420
-
100
50
50
50
-
-
938
583
420
305
41
20
44
44
11
30
1,498
Executive Directors
Oliver Hemsley
Lorna Tilbian
Bill Trent (note 1)
Non-executive Directors
Sir David Arculus (note 2)
Gerald Corbett (note 2)
Tom Bartlam
Geoffrey Vero
Declan Kelly (note 3)
Michael Spencer (note 4)
Notes
1 resigned 31 December 2008
2 appointed 5 May 2009
3 resigned 16 February 2009
4 resigned 5 May 2009
26
Numis Annual Report & Accounts 2010
Remuneration
continued
Directors’ Interests under Share Incentive Schemes*
The Company has share incentive schemes through
which discretionary share based awards may be made.
The schemes fall into two categories; Long Term
Incentive Plans (LTIP) and Restricted Stock Units (RSU)
the nature of which are described fully in note 25.
The number of LTIP matching shares to which directors
are prospectively entitled under LTIP awards granted, but
not yet vested, are as follows:
Lorna Tilbian
2010
No.
70,800
2009
No.
70,800
None of the directors serving at 30 September 2010 are
prospectively entitled to RSU awards which have been
granted but not yet vested.
*These parts of the remuneration report are audited.
Numis Annual Report & Accounts 2010
27
Directors’ Responsibilities
The directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulations.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the company and the group and enable them to ensure
that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding
the assets of the company and the group and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the group and parent company
financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law the directors
must not approve the financial statements unless they
are satisfied that they give a true and fair view of the
state of affairs of the group and the company and of the
profit or loss of the group for that period. In preparing
these financial statements, the directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• state whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the company will continue in business.
Statutory group profit/(loss) before tax
Items not included within adjusted profit/(loss) before tax:
Other operating (income)/loss
Share scheme charge
National insurance provisions related to share scheme awards
Adjusted group profit before tax
Statutory Group taxation
Tax impact of adjustments
Adjusted group taxation
Adjusted group profit after tax
Basic weighted average number of shares, number
Adjusted basic earnings per share, pence
2010
£’000
175
(59)
7,313
427
7,856
(276)
(754)
(1,030)
2009
£’000
(10,519)
7,846
6,208
660
4,195
1,870
(2,733)
(863)
6,826
3,332
102,770,978 102,539,193
3.2p
6.6p
28
Numis Annual Report & Accounts 2010
Directors’ Report
The directors present their report on the affairs of the
Group, together with the financial statements and auditors’
report, for the year ended 30 September 2010.
Principal Activity
The principal activity of the Group is to provide integrated
investment banking services. This activity encompasses
research, institutional sales, market making, corporate
broking and corporate finance. The Group has one
principal operating subsidiary, Numis Securities Limited,
which is authorised and regulated by the Financial Services
Authority and is a member firm of the London Stock
Exchange. During 2003 Numis Securities Limited established
a subsidiary in the United States of America, Numis Securities
Inc, which is registered with the SEC and a member of the
National Association of Securities Dealers, Inc.
Review of the Business, Future Developments and
Key Performance Indicators
A review of the Group’s business, an indication of likely
future developments and the Group’s key performance
indicators (KPIs) are contained in the Chief Executive’s
statement and Business Review. The Group’s KPIs
include, but are not limited to, adjusted profit before tax,
corporate client base, aggregate funds raised for clients
and non-compensation cost management.
Post Balance Sheet Events
Details of post balance sheet events are set out in note 30
to the financial statements.
Results and Dividends
The results of the Group for the year are set out in the
consolidated income statement on page 32. The Directors
propose to pay a final dividend of 4.00p per share (2008:
5.50p) which, together with the interim dividend of 4.00p
per share already declared and paid, makes a total for the
year ended 30 September 2010 of 8.00p per share (2009:
8.00p). Subject to approval at the annual general meeting
the final dividend will be paid on 18 February 2011 to
shareholders on the register on 10 December 2010.
Directors and their Interests
Since the last Annual Report the following changes in the
composition of the Board have taken place:
•
Simon Denyer was appointed Executive Director of
Numis on 1 December 2010. He will serve as Group
Finance Director in addition to Company Secretary.
The directors serving during the year ended 30 September
2010 and their interests in the ordinary shares of 5p each
(“ordinary shares”) of the Company, excluding share
incentive scheme awards made but not yet vested
(details shown on page 26), were as follows:
30 September
2010
ordinary shares
No.
13,799,865
4,540,088
66,753
nil
25,000
20,000
OA Hemsley
L Tilbian
Sir David Arculus *
Gerald Corbett *
TH Bartlam *
GO Vero *
* Non-executive director
30 September
2009
ordinary shares
No.
13,799,865
4,281,392
65,000
nil
25,000
20,000
There have been no changes in the interests of the
serving directors in ordinary shares and options over
ordinary shares during the period 30 September 2010
to 17 December 2010.
Substantial Shareholders
Except for the directors’ interests noted on page 26, the
directors are aware of the following who are interested in
3% or more of the Company as at 30 September 2010
as follows:
Registered holding
No. of ordinary shares
% of issued
share capital
15,814,890
Halifax EES Nominees
International Limited
BlackRock Investment
Management (UK) Limited 11,006,672
7,500,000
Mr DJ Poutney
7,376,426
Mr EPH Farquhar
Majedie Asset
Management Limited
Citigroup Global Markets
UK Equity Limited
Halifax EES Trustees
International Limited
7,000,000
1,865,073
3,467,051
14.14%
9.84%
6.70%
6.61%
6.28%
3.11%
1.67%
Numis Annual Report & Accounts 2010
29
Risk Management
The major business risks to which Numis is exposed
along with the controls in place to minimise these risks
are described within the Risk Management review on
page 24. The financial risks faced by the Group are
further described in note 29 to the financial statements.
By order of the Board
S Denyer
Company Secretary
17 December 2010
Numis Corporation Plc
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Auditors
A resolution to reappoint PricewaterhouseCoopers LLP
will be placed before the Annual General Meeting of the
Company on 1 February 2011.
Directors’ statement as to disclosure of information to
auditors
The directors who were members of the Board at the time
of approving the directors’ report are listed on page 19.
Having made enquiries of fellow directors and of the
Company’s auditors, each of these directors confirms that:
•
•
to the best of each director’s knowledge and belief,
there is no information relevant to the preparation of
their report of which the Company’s auditors are
unaware; and
each director has taken all the steps a director might
reasonably be expected to have taken to be aware
of relevant audit information and to establish that the
Company’s auditors are aware of that information.
Indemnification of Directors
Qualifying third party indemnity provisions (as defined by
section 234 of the Companies Act 2006) were in force
during the course of the year ended 30 September 2010
for the benefit of the then Directors and, at the date of this
report, are in force for the benefit of the Directors in relation
to certain losses and liabilities which they may incur in
connection with their duties, powers or office.
Trade Receivables
The Group does not extend credit terms to its clients.
On average the Group’s clients have taken 3 days to
settle (2009: 3 days).
Trade Payables Payment Policy
The Group agrees terms and conditions for its goods or
services with suppliers. Payment is then made based on
these terms and conditions, subject to the agreed terms
and conditions being met by the supplier. On average the
Group has taken 29 days (2009: 21 days) to pay suppliers
during the past financial year.
Charitable Donations
During the year, the Group made charitable donations of
£950 to UK charities (2009: £nil).
Employment Policy
The Group’s employment policies are based on a
commitment to equal opportunities from the selection
and recruitment process through to training, development,
appraisal and promotion.
30
Numis Annual Report & Accounts 2010
Independent Auditors’ Report to the
Members of Numis Corporation Plc
We have audited the group and holding company
financial statements (the ‘‘financial statements’’) of
Numis Corporation Plc for the year ended 30 September
2010 which comprise the consolidated balance sheet,
consolidated statement of comprehensive income,
consolidated income statement, consolidated statement
of changes in equity, consolidated cash flow statement,
holding company balance sheet, holding company
statement of changes in equity, and the related notes.
The financial reporting framework that has been applied
in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the holding company
financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s
and holding company’s circumstances and have been
consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates
made by the directors; and the overall presentation of
the financial statements.
Opinion on financial statements
In our opinion:
Respective responsibilities of directors and
auditors
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit
the financial statements in accordance with applicable
law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
•
•
•
•
the financial statements give a true and fair view
of the state of the group’s and of the holding
company’s affairs as at 30 September 2010 and
of the group’s loss and cash flows for the year
then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;
the holding company financial statements have
been properly prepared in accordance with IFRSs
as adopted by the European Union and as applied
in accordance with the provisions of the Companies
Act 2006; and
the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
Statutory group profit/(loss) before tax
Items not included within adjusted profit/(loss) before tax:
Other operating (income)/loss
Share scheme charge
National insurance provisions related to share scheme awards
Adjusted group profit before tax
Statutory Group taxation
Tax impact of adjustments
Adjusted group taxation
Adjusted group profit after tax
Basic weighted average number of shares, number
Adjusted basic earnings per share, pence
2010
£’000
175
(59)
7,313
427
7,856
(276)
(754)
(1,030)
2009
£’000
(10,519)
7,846
6,208
660
4,195
1,870
(2,733)
(863)
6,826
3,332
102,770,978 102,539,193
3.2p
6.6p
Numis Annual Report & Accounts 2010
31
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion the information given in the Directors’
Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
•
•
•
adequate accounting records have not been kept
by the holding company, or returns adequate for
our audit have not been received from branches not
visited by us; or
the holding company financial statements are not
in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Duncan McNab
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
17 December 2010
32
32
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Consolidated Income Statement
Continuing operations
Revenue
Other operating income/(loss)
Total revenue
Administrative expenses
Operating loss
Loss on disposal of subsidiary
Finance income
Finance costs
Profit/(loss) before tax
Taxation
Loss after tax
Attributable to:
Equity holders of the parent
Loss per share
Basic
Diluted
Dividends for the year
The notes on pages 39 to 71 form an integral part of these financial statements.
Notes
2010
£’000
2009
£’000
5
6
7
10
11
12
26
26
13
51,940
47,533
59
51,999
(52,473)
(474)
–
673
(24)
175
(7,846)
39,687
(52,915)
(13,228)
(138)
2,901
(54)
(10,519)
(276)
1,870
(101)
(8,649)
(101)
(8,649)
(0.1p)
(0.1p)
(8.4p)
(8.4p)
(10,104)
(7,855)
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
33
33
33
33
Consolidated Statement of Comprehensive Income
Loss for the period
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive expense for the year, net of tax, attributable to
equity holders of the parent
The notes on pages 39 to 71 form an integral part of these financial statements.
2010
£’000
2009
£’000
(101)
(8,649)
12
12
62
62
(89)
(8,587)
34
34
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Consolidated Balance Sheet
Non current assets
Property, plant and equipment
Intangible assets
Derivative financial instruments
Deferred tax
Current assets
Trade and other receivables
Trading investments
Stock borrowing collateral
Derivative financial instruments
Current income tax
Cash and cash equivalents
Current liabilities
Trade and other payables
Financial liabilities
Stock lending collateral
Provisions
Current income tax
Net current assets
Non current liabilities
Provisions
Net assets
Equity
Share capital
Share premium account
Capital reserve
Retained profits
Notes
2010
£’000
2009
£’000
14
15
17
18
19
20
17
21
22
23
2,125
68
262
2,799
5,254
235,337
36,574
5,106
809
–
55,370
333,196
(219,193)
(6,692)
(5,069)
(263)
(174)
(231,391)
2,509
146
645
2,782
6,082
165,341
32,994
5,759
2,002
463
74,266
280,825
(159,872)
(5,192)
(6,900)
(580)
–
(172,544)
101,805
108,281
23
(349)
(546)
106,710
113,817
24
5,593
30,106
9,977
61,034
5,557
28,971
6,742
72,547
Equity attributable to equity holders of the parent
106,710
113,817
The notes on pages 39 to 71 form an integral part of these financial statements.
Signed on behalf of the Board on 17 December 2010
OA Hemsley
Chief Executive
Numis Corporation Plc
Registration No.2375296
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
35
35
Consolidated Statement of Changes in Equity
Share
Capital
£’000
Share
Premium
£’000
Capital
Reserve
£’000
Retained
Profits
£’000
Total
£’000
Attributable to equity holders of the parent at
1 October 2009
New shares issued
Dividends paid
Movement in respect of employee share plans
Deferred tax related to share based payments
Total comprehensive income/(expense) for the period
Other
Attributable to equity holders of the parent
at 30 September 2010
Attributable to equity holders of the parent at
1 October 2008
New shares issued
Dividends paid
Movement in respect of employee share plans
Deferred tax related to share based payments
Total comprehensive income/(expense) for the period
Other
Attributable to equity holders of the parent
at 30 September 2009
5,557
28,971
6,742
72,547
113,817
36
1,135
–
3,223
12
–
(10,104)
(1,200)
(180)
(101)
72
1,171
(10,104)
2,023
(180)
(89)
72
5,593
30,106
9,977
61,034
106,710
5,378
24,719
1,503
86,814
118,414
179
4,252
–
5,177
62
–
(7,855)
1,289
936
(8,649)
12
4,431
(7,855)
6,466
936
(8,587)
12
5,557
28,971
6,742
72,547
113,817
The notes on pages 39 to 71 form an integral part of these financial statements.
36
36
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Consolidated Statement of Cash Flows
Cash from operating activities
Interest paid
Taxation refunded
Net cash from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of subsidiary
Interest received
Net cash from investing activities
Financing activities
Purchases of own shares
Dividends paid
Net cash used in financing activities
Net movement in cash and cash equivalents
Opening cash and cash equivalents
Net movement in cash and cash equivalents
Exchange movements
Closing cash and cash equivalents
The notes on pages 39 to 71 form an integral part of these financial statements.
Notes
27
2010
£’000
2,723
(24)
164
2,863
(122)
(26)
–
614
466
2009
£’000
20,653
(54)
643
21,242
(191)
(33)
7
875
658
(13,058)
(8,933)
(21,991)
(2,533)
(6,924)
(9,457)
(18,662)
12,443
74,266
(18,662)
(234)
59,899
12,443
1,924
55,370
74,266
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
37
37
Holding Company Balance Sheet
Notes
2010
£’000
2009
£’000
16
17
19
20
17
22
24
15,202
262
15,464
20,916
18,639
809
40,364
8,525
645
9,170
13,312
18,508
2,002
33,822
(2,473)
(2,473)
(2,027)
(2,027)
37,891
31,795
53,355
40,965
5,593
30,106
9,746
7,910
53,355
5,557
28,971
6,523
(86)
40,965
Non current assets
Investment in subsidiary undertakings
Derivative financial instruments
Current assets
Trade and other receivables
Trading investments
Derivative financial instruments
Current liabilities
Trade and other payables
Net current assets
Net assets
Equity
Share capital
Share premium account
Capital reserve
Retained profits
Equity attributable to equity holders of the Company
The notes on pages 39 to 71 form an integral part of these financial statements.
Signed on behalf of the Board on 17 December 2010
OA Hemsley
Chief Executive
38
38
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Holding Company Statement
of Changes in Equity
Attributable to equity holders of the Company
at 1 October 2009
New shares issued
Dividends paid
Movement in respect of employee share plans
Total comprehensive income for the period
Attributable to equity holders of the
Company at 30 September 2010
Attributable to equity holders of the Company
at 1 October 2008
New shares issued
Dividends paid
Movement in respect of employee share plans
Total comprehensive expense for the period
Attributable to equity holders of the
Company at 30 September 2009
Share
Capital
£’000
Share
Premium
£’000
Capital
Reserve
£’000
Retained
Profits
£’000
Total
£’000
5,557
28,971
6,523
(86)
40,965
36
1,135
–
3,223
–
(10,104)
3,456
14,644
1,171
(10,104)
6,679
14,644
5,593
30,106
9,746
7,910
53,355
5,378
24,719
1,346
15,077
46,520
179
4,252
–
5,177
–
(7,855)
–
(7,308)
4,431
(7,855)
5,177
(7,308)
5,557
28,971
6,523
(86)
40,965
The notes on pages 39 to 71 form an integral part of these financial statements.
The Company had no cash or cash equivalent balances as at 30 September 2008, 30 September 2009 or 30 September
2010. Similarly there were no movements in cash or cash equivalents during the year ended 30 September 2009 or the year
ended 30 September 2010. Therefore no cash flow statement is presented for the Company.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
39
39
39
Notes to the Financial Statements
1. Accounting policies
The principal accounting policies applied in the
preparation of the annual report and financial statements
of the Group and the Company are described below.
These policies have been consistently applied to the
years presented.
(a) Basis of preparation
The Group and the Company financial statements have
been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European
Union (EU) and in accordance with International Financial
Reporting Interpretations Committee (IFRIC)
interpretations and the Companies Act 2006 applicable
to companies reporting under IFRS. These financial
statements have been prepared under the historical cost
convention as modified by revaluation of financial assets,
liabilities and derivative contracts.
In publishing the Company financial statements together
with those of the Group, the Company has taken
advantage of the exemption in s408 of the Companies
Act 2006 not to present its individual income statement
and related notes.
New standards and amendments to existing standards
that have been adopted by the Group in the year ended
30 September 2010
During the year ended 30 September 2010, the Group
adopted the following new standards and amendments
to standards:
IAS 1 (revised) ‘Presentation of Financial Statements’: the
adoption of the revised standard has no effect on the
results reported in the Group’s consolidated financial
statements, however it does result in certain
presentation changes. All items of income and
expenditure are now presented in two primary
statements, the ‘Income Statement’ and the ‘Statement
of Comprehensive Income’. Some items that were
recognised directly in equity are now recognised in the
statement of comprehensive income.
IFRS 8 ‘Operating Segments’ requires operating
segments to be identified on the same basis as that
used for internal management reporting with regard to
components of the Group that are regularly reviewed by
the chief operating decision maker to allocate resources
to segments and to assess their performance. The chief
operating decision maker is the Group’s Chief Executive.
The Group is managed as an integrated investment
banking business and although there are different
revenue types the nature of the Group’s activities is
considered to be subject to the same and/or similar
economic characteristics. Consequently the Group is
managed as a single business unit, namely investment
banking, and the adoption of this standard has not
resulted in a change to the operating segment previously
reported under IAS 14 “Segment Reporting”. IFRS 8 also
requires entity-wide disclosures relating to revenues
earned by geographical location and certain non-current
assets attributable to the Group’s country of domicile
and foreign countries.
IFRS 7 (revised) ‘Financial Instruments: Disclosure’
increases the disclosure requirements around fair value
measurement and liquidity risk. In particular the
amendment requires tables of fair value measurement
disclosing the source of inputs using a three level fair
value hierarchy, and reconciliation of the movement
between opening and closing balances of level 3
financial instruments (which are those measured at fair
value using a valuation technique with significant
unobservable inputs).
IFRS 2 (amendment) ‘Share-based payment clarifies that
vesting conditions are service conditions and
performance conditions only. Other features of share
based payments are not vesting conditions. This
amendment has not had a significant impact on the
Group and the Company’s financial statements.
Standards, amendments and interpretations to existing
standards that are not yet effective and have not been
early adopted by the Group
IFRS 5 (amendment), ‘Non-current assets held for sale
and discontinued operations’, clarifies that all of a
subsidiary’s assets and liabilities as held for resale if a
partial disposal will result in loss of control. This is not
expected to have a significant impact on the Group and
the Company’s financial statements.
IAS 38 (amendment), ‘Intangible assets’, defines a
prepayment as being recognised only if payment has
been made in advance of receiving the right to goods or
receipt of services. This is not expected to have a
significant impact on the Group and the Company’s
financial statements.
IAS 1 (amendment), ‘Presentation of financial statements’
clarifies that the potential settlement of a liability by the
issue of equity is not relevant to its classification as
current or non-current. This is not expected to have a
significant impact on the Group and the Company’s
financial statements.
IFRS 2 (amendments), ‘Group cash-settled share based
payment transaction’ incorporates IFRIC 8 and IFRIC 11
and expands on the guidance given in IFRIC 11 to
40
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
1. Accounting policies (continued)
address the classification of group arrangements that
were not covered by that interpretation. This is not
expected to have a significant impact on the Group and
the Company’s financial statements.
(b) Basis of consolidation
The Group’s financial statements consolidate the
financial statements of the Company and all its
subsidiary undertakings. The results of subsidiaries
acquired are consolidated from the date on which
control passed. Acquisitions are accounted for under the
purchase method. Goodwill represents any excess of
the fair value of the consideration given over the fair value
of the identifiable assets and liabilities acquired. If the fair
value of the consideration is less than the fair value of
identifiable assets and liabilities acquired, the difference
is recognised directly in the income statement.
Leasehold improvements are depreciated on a straight
line basis over the term of the lease or estimated useful
economic life whichever is the shorter.
(f) Intangible assets
Acquired computer software licences are capitalised
where it is probable that future economic benefits that
are attributable to the asset will flow to the Company or
Group and the cost of the assets can be reliably
measured. Software is stated at cost, including those
costs incurred to bring to use the specific software, less
amortisation and provisions for impairment, if any. Costs
are amortised on a straight line basis over the estimated
useful life of the software, being 3 years on average.
Costs associated with maintaining or developing the
software are recognised as an expense when incurred.
(c) Revenue recognition
(g) Impairment of assets
Revenue is recognised to the extent that it is probable
that the economic benefits associated with the
transaction will flow into the Group. Revenue comprises
institutional commissions, net trading gains or losses,
corporate broking retainers, deal fees, placing
commissions and investment income. Institutional
commissions are recognised on trade dates. Net trading
gains or losses are the realised and unrealised profits
and losses from market making long and short positions
on a trade date basis. Investment income is the realised
and unrealised profits and losses from securities held
outside of the market making portfolio on a trade date
basis. Corporate retainers are recognised as the related
services are rendered. Deal fees and placing commissions
are only recognised once there is an absolute
contractual entitlement for Numis to receive them.
(d) Segment reporting
The Group is managed as an integrated investment
banking business and although there are different
revenue types the nature of Group’s activities is
considered to be subject to the same and/or similar
economic characteristics. Consequently the Group is
managed as a single business unit, namely investment
banking.
The carrying value of property, plant and equipment and
intangibles is reviewed for impairment when events or
changes in circumstance indicate the carrying value may
be impaired. If such an indication exists, the recoverable
amount of the asset is estimated in order to determine
the extent of impairment loss.
(h) Financial assets and liabilities
Trading investments and financial liabilities represent
market making positions and other investments held for
resale in the near term and are stated at fair value. Gains
and losses arising from the changes in fair value are
taken to the income statement.
For trading investments and financial liabilities which are
quoted in active markets, fair values are determined by
reference to the current quoted bid/offer price, with
financial assets marked at the bid price and financial
liabilities marked at the offer price. Where independent
prices are not available, fair values are determined using
valuation techniques with reference to observable
market data. These may include comparison to similar
instruments where observable prices exist, discounted
cash flow analysis and other valuation techniques
commonly used by market participants.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any impairment losses.
Depreciation is provided for on a straight line basis at the
following rates:
Loans and receivables are non-derivative financial
instruments which have a fixed or easily determinable
value. They are recognised at cost less any impairment
in their value and are included in trade and other
receivables.
Office and computer equipment
Motor vehicles
Furniture and fittings
3 years
4 years
5 years
The Group makes an assessment at each balance sheet
date as to whether there is any objective evidence of
impairment, being any circumstance where an adverse
Numis Annual Report & Accounts 2010
41
1. Accounting policies (continued)
impact on estimated future cash flows of the financial
asset or group of assets can be reliably estimated.
taxable profit will be available against which the
deductible temporary differences can be utilised.
(i) Derivatives
(k) Stock borrowing / lending collateral
The Group utilises forward exchange contracts to
manage the exchange risk on actual transactions related
to amounts receivable, denominated in a currency other
than the functional currency of the business. The Group
has not sought to apply the hedging requirements of IAS
39.
The Group’s forward exchange contracts do not subject
the Group to risk from exchange rate movements
because the gains and losses on such contracts offset
losses and gains, respectively, on the underlying foreign
currency transactions to which they relate. The forward
contracts and related amounts receivable are recorded
at fair value at each period end. Fair value is calculated
using the settlement rates prevailing at the period end.
All gains and losses resulting from the settlement of the
contracts are recorded within Finance Income/Costs in
the income statement.
The Group does not enter into forward exchange
contracts for the purpose of hedging future anticipated
transactions.
Equity options and warrants are initially accounted for
and measured at fair value on the date the Company or
Group becomes a party to the contractual provisions of
the derivative contract and subsequently measured at
fair value. The gain or loss on re-measurement is taken
to the income statement within net trading income. Fair
values are obtained from quoted prices prevailing in
active markets, including recent market transactions and
valuation techniques including discounted cash flow
models and option pricing models as appropriate. All
derivatives are included in assets when their fair value is
positive and liabilities when their fair value is negative.
(j) Deferred tax
Deferred tax is provided in full, using the liability method,
on all taxable and deductible temporary differences at
the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on
tax rates that have been enacted or substantively
enacted at the balance sheet date. Deferred tax assets
are recognised to the extent that it is probable that future
The Group enters stock borrowing and lending
arrangements with certain institutions which are entered
into on a collateralised basis with securities or cash
advanced or received as collateral. Under such
arrangements a security is purchased or sold with a
commitment to return it at a future date at an agreed
price. The securities purchased are not recognised on
the balance sheet whereas the securities sold remain on
the balance sheet with the transaction treated as a
secured loan made for the purchase or sale price. Where
cash has been used to effect the purchase or sale, an
asset or liability is recorded on the balance sheet as
stock borrowing or lending collateral at the amount of
cash collateral advanced or received.
Where trading investments have been pledged as
security these remain within trading investments and the
value of security pledged disclosed separately except in
the case of short-term highly liquid assets with an original
maturity of 3 months or less, which are reported within
cash and cash equivalents with the value of security
pledged disclosed separately.
(l) Trade and other receivables
Trade and other receivables are stated at their
contractual value as reduced by appropriate allowances
for estimated irrecoverable amounts. Client, broker and
other counterparty balances represent unsettled sold
securities transactions and are recognised on a trade
date basis. All such balances are shown gross.
(m) Trade and other payables
Trade and other payables are stated at their contractual
value. The Group accrues for all goods and services
consumed but as yet unbilled at amounts representing
management’s best estimate of fair value. Client, broker
and other counterparty balances represent unsettled
purchased securities transactions and are recognised on
a trade date basis. All balances are shown gross.
(n) Cash and cash equivalents
Cash and cash equivalents includes cash in hand,
deposits held at call with banks and other short-term
highly liquid investments with an original maturity of 3
months or less.
(o) Provisions
Provisions are recognised for present obligations arising
as a consequence of past events where it is probable
that a transfer of economic benefit will be necessary to
42
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
1. Accounting policies (continued)
settle the obligation and it can be reliably estimated.
Provisions believed to relate to periods greater than 12
months are discounted to the net present value using an
effective discount rate that reliably calculates the present
value of the future obligation.
Contingent liabilities are possible obligations whose
existence will be confirmed only by uncertain future
events or present obligations where the transfer of
economic benefit is uncertain or cannot be reliably
measured. Contingent liabilities are not recognised in the
financial statements; however they are disclosed unless
their likely occurrence is remote.
(p) Clients’ deposits
All money held on behalf of clients has been excluded
from the balances of cash and cash equivalents and
amounts due to clients, brokers and other
counterparties. Client money is not held directly, but is
placed on deposit in segregated designated accounts
with a bank. The amounts held on behalf of clients at the
balance sheet date are included in Note 21.
(q) Pension costs
The Group has a Group Personal Pension Plan and
death in service benefits that are available to full-time
employees of the Group over the age of 18 who have
served the Group for at least 3 months. The plan is a
defined contribution scheme and costs of the scheme
are charged to the income statement in the year in which
they arise.
(r) Operating leases
Rentals under operating leases are charged to the
income statement on a straight-line basis over the lease
term even if the payments are not made on such a basis.
Lease incentive received are recognised in the income
statement as an integral part of the total lease expense.
(s) Foreign currencies
In individual entities, transactions denominated in foreign
currencies are translated into the functional currency at
the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary
assets and liabilities that are denominated in foreign
currencies are retranslated at rates prevailing on the
balance sheet date. Exchange differences are taken to
the income statement, except for exchange differences
arising on non-monetary assets and liabilities where the
changes in fair value are taken directly to reserves. Non-
monetary assets and liabilities carried at fair value that
are denominated in foreign currencies are translated at
the rates prevailing at the date when the fair value was
determined.
On consolidation, the results of overseas businesses are
translated into the presentational currency of the Group
at the average exchange rates for the period where
these approximate to the rate at the date of transaction.
Assets and liabilities of overseas businesses are
translated into the presentational currency of the Group
at the exchange rate prevailing at the balance sheet
date. Exchange differences arising are classified as a
separate component within equity. Cumulative
translation differences arising after the transition to IFRS
are taken to the income statement on disposal of the net
investment.
(t) Taxation
Taxation on the profit for the year comprises both current
and deferred tax as well as adjustments in respect of
prior years. Taxation is charged or credited to the
income statement, except when it relates to items
charged or credited directly to equity, in which case the
tax is also included within equity. Current tax is the
expected tax payable on the taxable income for the
period, using tax rates enacted, or substantially enacted
by the balance sheet date.
(u) Employee share ownership plans
The Group has a number of Employee Share Ownership
Plans (ESOP), as set out in note 25, which provide a
mechanism for the Board to award employees of the
Group share-based payments on a discretionary basis.
Employee Benefit Trusts established by the Company
acquire ordinary shares in the Company to be held on
trust for the benefit of, and ultimately distributed to,
employees either on the exercise of share options or
other remuneration arrangements.
In the case of equity settled awards, the cost of share
awards made under employee share ownership plans,
as measured by the fair value of awards at the date of
granting, are taken to the income statement over the
vesting period (if any), and disclosed under staff costs
with a corresponding increase in equity.
In the case of cash settled awards, the cost of share
awards made under employee share ownership plans,
as measured by the fair value of awards at the date of
granting, are taken to the income statement over the
vesting period with a corresponding increase in
provisions representing the cash obligation. At each
subsequent accounting date the fair value of the
obligation is re-assessed with reference to the underlying
share price and the provision adjusted accordingly.
On consolidation, the cost of shares acquired by the
Employee Benefit Trusts is deducted as an adjustment
to equity. Gains and losses arising on Employee Benefit
Numis Annual Report & Accounts 2010
43
1. Accounting policies (continued)
Trust related transactions are taken directly to equity.
No expense is recognised in respect of option awards
granted before 7 November 2002 or which have vested
before 1 October 2005.
(x) Investment in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provision for impairment.
(v) Dividends
Dividends payable are recognised when the dividend is
paid or approved by shareholders.
Where the Company makes equity settled awards for the
benefit of its subsidiaries, the value of such awards is
treated as an additional cost of investment in these
subsidiaries.
(w) Critical accounting estimates and judgements
The preparation of financial statements in conformity
with generally accepted accounting principles requires
the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of
revenues and expenses during the reporting period.
Although these estimates are based on management’s
best knowledge of the amount, event or actions, actual
results ultimately may differ from those of estimates. The
estimates and assumptions that have a significant effect
on the carrying amounts of assets and liabilities are set
out below:
Valuation of financial assets where there is no quoted
price
Such assets principally comprise minority holdings in
unquoted securities and are valued with reference to
financial information available at the time of original
investment updated to reflect all relevant changes to that
information as at the reporting date. This determination
requires significant judgement in determining changes in
fair value since the last valuation date. In making this
judgement the Group evaluates among other factors
recent offerings or transaction prices, changes in the
business outlook affecting a particular investment since
purchase, performance of the underlying business
against original projections, valuations of similar quoted
companies and relevant industry valuation techniques,
for example, discounted cashflow or market approach.
Valuation of quoted financial assets where there is no
active market
Quoted investments held by the Group may not always
be actively traded in financial markets. In such cases the
Group applies appropriate valuation techniques to
determine fair value.
In practice this has resulted in certain holdings having
been discounted from the most recent price, to reflect
illiquidity in the market.
In addition to the above accounting policies the following
relate specifically to the Company:
44
44
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
2. Adjusted profit measures
The following table reconciles the statutory measures of profit/(loss) before tax, profit/(loss) after tax and earnings/(loss) per
share to the adjusted measures used by management in their assessment of the underlying performance of the business:
Statutory group profit/(loss) before tax
Items not included within adjusted profit before tax:
Other operating (income)/loss
Share scheme charge
National Insurance provisions related to share scheme awards
Adjusted group profit before tax
Statutory group taxation
Tax impact of adjustments
Adjusted group taxation
Adjusted group profit after tax
Basic weighted average number of shares, number
Adjusted earnings per share, pence
3. Profit of the parent company
2010
£’000
2009
£’000
175
(10,519)
(59)
7,313
427
7,856
(276)
(754)
(1,030)
7,846
6,208
660
4,195
1,870
(2,733)
(863)
6,826
3,332
2010
2009
102,770,978 102,539,193
3.2p
6.6p
As provided by Section 408 Companies Act 2006, the income statement of the parent company is not presented as part of
these financial statements. The parent company’s profit after tax for the financial year amounted to £14,644,000 (2009: loss
£7,308,000).
4. Segmental information
Geographical information
The Group is managed as an integrated investment banking business and although there are different revenue types
(which are separately disclosed in note 5) the nature of Group’s activities is considered to be subject to the same and/or
similar economic characteristics. Consequently the Group is managed as a single business unit, namely investment
banking.
The Group earns its revenue in the following geographical locations:
United Kingdom
United States
Rest of World
There are no customers which account for more than 10% of revenues.
2010
£’000
46,573
5,367
–
51,940
2009
£’000
42,347
5,322
(136)
47,533
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
45
45
4. Segmental information (continued)
The following is an analysis of the carrying amount of non-current assets (excluding financial instruments and deferred tax
assets) by the geographical area in which the assets are located:
United Kingdom
United States
Rest of World
2010
£’000
1,814
379
–
2,193
2009
£’000
2,185
470
–
2,655
Other information
In addition, the analysis below sets out the revenue performance and net asset split between our core investment banking
& broking business and the small number of equity holdings which constitute our investment portfolio.
Net institutional income
Total corporate transaction revenues
Corporate retainers
Revenue from investment banking & broking (see note 5)
Investment activity net gains/(losses)
Contribution from investing activities
Total
Net assets
Investment banking & broking
Investing activities
Cash and cash equivalents
Total net assets
5. Revenue
Net trading gains
Institutional commissions
Net institutional income
Corporate retainers
Deal fees
Placing commissions
2010
£’000
26,478
20,640
4,822
51,940
59
59
2009
£’000
25,191
17,759
4,583
47,533
(7,846)
(7,846)
51,999
39,687
31,019
20,321
55,370
106,710
17,818
21,733
74,266
113,817
2010
£’000
3,418
23,060
26,478
4,822
4,793
15,847
51,940
2009
£’000
1,716
23,475
25,191
4,583
5,422
12,337
47,533
46
46
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
6. Other operating income/(loss)
Investment income/(losses)
Other
2010
£’000
68
(9)
59
2009
£’000
(7,790)
(56)
(7,846)
Investment income/(losses) represents gains and losses made on trading investments which are held outside of the market
making portfolio. These are referred to as the Group’s investment portfolio.
7. Loss on disposal of subsidiary
Sale proceeds
Share of net assets disposed of
Disposal expenses (comprising charges)
2010
£’000
–
–
–
–
2009
£’000
7
(138)
(7)
(138)
The loss on disposal of subsidiary in 2009 relates to the sale of the Group’s interest in Numis Caspian Limited LLP. This
wholly owned subsidiary was created under the laws of the Republic of Kazakhstan and officially registered with the local
authorities in September 2006. The company was formed to take advantage of perceived business opportunities arising in
Kazakhstan at that time, however these did not materialise to the extent originally envisaged. As a result the Group
disposed of its entire interest during 2009. The activities of the subsidiary have not been treated as discontinued operations
under IFRS 5 as they did not represent a separate major line of business or geographical area of operation.
8. Operating loss
Operating loss is stated after charging:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease costs
Staff costs (see note 9)
Auditors’ remuneration
PricewaterhouseCoopers LLP
– Audit fee for Company’s accounts and Annual Report
– Year end audit services to the Subsidiaries of the Company
– Tax services
– Regulatory services
2010
£’000
511
104
1,737
34,157
48
265
54
35
2009
£’000
838
177
1,782
33,139
51
303
31
211
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
47
47
9. Staff costs
Particulars of employees (including executive directors) are as shown below.
Employee costs during the year amounted to:
Wages and salaries
Social security costs
Compensation for loss of office
Other pension costs (see note 28d)
Share based payments
2010
£’000
22,431
3,216
257
940
7,313
34,157
2009
£’000
22,323
3,435
230
943
6,208
33,139
The share based payment award costs shown above include an amount of £7,019,000 (2009: £5,177,000) in respect of
share-based payment transactions which are accounted for as equity-settled awards. The share based payment charge
arises from the combined impact of all historic unvested awards.
Number of staff employed:
Monthly average for the year
Professional
Administration
At the year end
Details of directors’ emoluments are presented in the Remuneration Report on page 25.
10. Finance income
Interest receivable and similar income
Net foreign exchange gains
11. Finance costs
Interest payable
2010
Number
2009
Number
136
53
189
191
137
49
186
182
2010
£’000
614
59
673
2010
£’000
24
24
2009
£’000
1,041
1,860
2,901
2009
£’000
54
54
48
48
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
12. Taxation
The tax charge is based on the profit for the year and comprises:
Current tax
Corporation tax at 28% (2009: 28%)
Corporation tax under/(over) provided in previous year
Total current tax
Deferred tax
Origination and reversal of timing differences (see note 18)
Changes in tax rate
Total tax charge/(credit)
Factors affecting the tax charge for the year:
Profit/(loss) before tax
Profit before tax multiplied by the standard rate of UK corporation tax
Effects of:
Expenses not deductible for tax purposes
Non taxable income
Losses available for utilisation but not recognised
Permanent differences in respect of share based payments
Corporation tax under/(over) provided in previous year
Recognition of deferred tax balances
Total tax charge/(credit)
13. Dividends
Final dividend for year ended 30 September 2008 (5.00p)
Interim dividend for year ended 30 September 2009 (2.50p)
Final dividend for year ended 30 September 2009 (5.50p)
Interim dividend for year ended 30 September 2010 (4.00p)
Distribution to equity holders of the parent
2010
£’000
2009
£’000
237
235
472
(246)
50
276
2010
£’000
175
49
183
(639)
258
155
235
35
276
2010
£’000
5,828
4,276
10,104
–
(24)
(24)
(1,846)
–
(1,870)
2009
£’000
(10,519)
(2,945)
243
(351)
1,743
601
(24)
(1,137)
(1,870)
2009
£’000
5,212
2,643
7,855
Dividends declared on shares held by the EBT that have not been purchased by or vested in employees are waived under
the terms of the employee share ownership plan arrangements.
On 30 November 2010 the Board proposed a final dividend of 4.00p per share for the year ended 30 September 2010.
This has not been recognised as a liability of the Group at the year end as it has not yet been approved by the
shareholders. Based on the number of shares in issue at the year end the total amount payable would be £4,094,000.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
49
49
14. Property, plant and equipment
Group
The movement during the year and the prior year was as follows:
Cost
At 1 October 2009
Additions
Impairment
Disposals
Exchange adjustment
At 30 September 2010
Depreciation
At 1 October 2009
Charge for the year
Disposals
Exchange adjustment
At 30 September 2010
Net book value
At 1 October 2009
At 30 September 2010
Cost
At 1 October 2008
Additions
Impairment
Disposals
Exchange adjustment
At 30 September 2009
Depreciation
At 1 October 2008
Charge for the year
Disposals
Exchange adjustment
At 30 September 2009
Net book value
At 1 October 2008
At 30 September 2009
Furniture and
Leasehold
fittings improvements
£’000
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
952
7
–
–
1
960
681
95
–
–
776
271
184
2,272
–
–
–
3
2,275
370
165
–
–
535
1,902
1,740
2,654
115
–
–
2
2,771
2,338
244
–
1
2,583
316
188
164
–
–
–
–
164
144
7
–
–
151
20
13
Furniture and
Leasehold
fittings improvements
£’000
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
921
15
–
–
16
952
554
126
–
1
681
367
271
2,193
51
(5)
–
33
2,272
207
162
–
1
370
1,986
1,902
2,505
125
–
–
24
2,654
1,846
484
–
8
2,338
659
316
143
–
–
–
21
164
69
66
–
9
144
74
20
Total
£’000
6,042
122
–
–
6
6,170
3,533
511
–
1
4,045
2,509
2,125
Total
£’000
5,762
191
(5)
–
94
6,042
2,676
838
–
19
3,533
3,086
2,509
50
50
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
15. Intangible assets
Group
The movement during the year and the prior year was as follows:
Cost
At 1 October
Additions
At 30 September
Amortisation
At 1 October
Charge for the year
At 30 September
Net book value
At 1 October
At 30 September
16. Investment in subsidiary undertakings
a) Holding company investment in subsidiaries
As at 1 October
Additions (see below)
Disposals
As at 30 September
2010
Purchased
Software
£’000
2009
Purchased
Software
£’000
1,149
26
1,175
1,003
104
1,107
146
68
2010
£’000
8,525
6,677
–
15,202
1,116
33
1,149
826
177
1,003
290
146
2009
£’000
3,348
5,178
(1)
8,525
Additions reflect the accounting treatment required by IFRS 2 in relation to awards made under the Group’s share plans
which are accounted for as equity-settled share transactions and relate to employees in subsidiaries. The disposal in 2009
relates to the sale of the Group’s interest in Numis Caspian Limited LLP, details of which are set out in note 7.
b) Subsidiaries
The Group beneficially owns the issued share capital of the following companies:
Subsidiary
Numis Securities Limited
Numis Securities Inc*
Numis Nominees (Client) Limited**
Numis Nominees (NSI) Limited*
Numis Nominees Limited*
Country of incorporation
United Kingdom
United States of America
United Kingdom
United Kingdom
United Kingdom
Principal activity
Financial services
Financial services
Dormant
Dormant
Dormant
Group shareholding
100%
100%
100%
100%
100%
* Held through a subsidiary
** Formerly Numis Private Equity Limited
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
51
51
17. Derivative financial instruments
Group
At 1 October 2009
Additions
Exercise
Revaluation to fair value in the year recognised in the income statement
At 30 September 2010
Included in current assets – unlisted
Included in non-current assets – unlisted
Holding company
At 1 October 2009
Exercise
Revaluation to fair value in the year recognised in the income statement
At 30 September 2010
Included in current assets – unlisted
Included in non-current assets – unlisted
£’000
2,647
–
(1,489)
(87)
1,071
2009
£’000
2,002
645
2,647
£’000
2,647
(1,489)
(87)
1,071
2009
£’000
2,002
645
2,647
2010
£’000
809
262
1,071
2010
£’000
809
262
1,071
The Group and the Company hold equity options and warrants over certain securities. Although the options and warrants
themselves are not generally listed the underlying securities may be listed or otherwise. In the information presented above the
unlisted distinction relates to the underlying security. As at 30 September 2010 the fair value of options over listed securities
was £nil (2009: £nil). As at 30 September 2010 the fair value of outstanding foreign exchange contracts was £nil (2009: £nil).
18. Deferred tax
Group
The movement in the deferred tax balance is as follows:
At 1 October
Amounts credited to the income statement
Amounts recognised on share based payments – equity
At 30 September
2010
£000
2,782
196
(179)
2,799
2009
£000
–
1,846
936
2,782
52
52
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
18. Deferred tax (continued)
1 October 2009
(Charged)/credited to income statement
Recognised in equity
30 September 2010
Capital Share scheme
allowances arrangements
£’000
2,382
200
(179)
2,403
£’000
372
(12)
–
360
Other
£’000
28
8
–
36
Total
£’000
2,782
196
(179)
2,799
As at 30 September 2010 deferred tax assets totalling £2,799,000 (2009: £2,782,000) have been recognised by the Group
reflecting managements’ confidence that there will be sufficient levels of future taxable gains against which the deferred tax
asset can be utilised.
Holding company
A deferred tax asset of £1,532,570 (2009: £1,391,000) relating to unrelieved trading losses incurred by the Company has
not been recognised as there is insufficient supportable evidence that there will be taxable gains made by the Company in
the future against which the deferred tax asset could be utilised.
19. Trade and other receivables
The following amounts are included within trade and other receivables:
Group
Due from clients, brokers and other counterparties (excluding corporate finance receivables)
Loans to employees
Other debtors, including corporate finance receivables
Prepayments and accrued income
2010
£’000
2009
£’000
208,217
18,043
6,575
2,502
235,337
144,682
11,245
7,106
2,308
165,341
Trade and other receivables are stated net of impairment adjustments totalling £170,000 (2009: £448,000). The movement
in impairment provision during the year comprised £288,000 for utilisation of provisions and £10,000 charge to the income
statement through administrative expenses. Loans to employees principally arise from arrangements under the Group’s
share schemes.
Holding company
Amounts due from subsidiaries
Other debtors
2010
£’000
2009
£’000
18,589
2,327
20,916
11,233
2,079
13,312
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
53
53
20. Trading investments
Group
Listed on the LSE main market
Listed on AIM
Listed overseas
Unlisted UK investments
2010
£’000
2009
£’000
6,984
23,683
1,473
4,434
36,574
7,236
20,899
1,345
3,514
32,994
As at 30 September 2010 £5,069,000 (2009: £6,900,000) of trading investments were pledged to certain institutions under
stock lending arrangements.
Holding company
Listed on AIM
Unlisted UK investments
21. Cash and cash equivalents
Group
Cash and cash equivalents included in current assets
2010
£’000
2009
£’000
14,443
4,196
18,639
15,107
3,401
18,508
2010
£000
2009
£000
55,370
74,266
Cash and cash equivalents comprise cash in hand and deposits held at call with banks and other institutions and short-
term highly liquid investments having an original maturity of less than three months.
The balances exclude interest-bearing deposits of clients’ monies placed by the Group with banks on an agency basis. All
such deposits are designated by the banks as clients’ funds and are not available to the banks to satisfy any liability the
Group may have with them at that time. The balance at 30 September 2010 held on deposit for private clients was £89,883
(2009: £82,859). Similarly cash held in segregated bank accounts in respect of other client monies amounted to £nil (2009:
£2.3m).
22. Trade and other payables
Group
Amounts due to clients, brokers and other counterparties
VAT
Social security and PAYE
Sundry creditors
Accruals
Holding company
Amounts due to subsidiaries
2010
£’000
2009
£’000
205,041
89
1,398
1,407
11,258
219,193
145,271
116
1,403
1,798
11,284
159,872
2,473
2,027
54
54
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
23. Provisions
The movements in provisions during the year and during the prior year were as follows:
Group
At 1 October 2009
Recognised in the income statement
Recognised in equity in respect of vested share awards
At 30 September 2010
At 1 October 2008
Recognised in the income statement
Recognised in equity in respect of vested share awards
At 30 September 2009
Included in current liabilities
Included in non-current liabilities
LTIP
£’000
1,126
108
(622)
612
LTIP
£’000
691
969
(534)
1,126
2009
£’000
580
546
1,126
2010
£’000
263
349
612
The provision relates to the cash settled element of the Groups’ share scheme arrangements, and is determined with
reference to all the unvested awards that are expected to vest (taking into account managements’ estimates regarding
fulfilment of vesting conditions) and the year end share price. The weighted average life of the non current portion of the
liability is 1.41 years (2009: 1.91 years). Amounts recognised in equity relate to awards which vested in the year.
24. Share capital
Authorised
140,000,000 (2009: 140,000,000) 5p ordinary shares
Allotted, issued and fully paid
111,869,340 (2009: 111,132,079) 5p ordinary shares
2010
£’000
2009
£’000
7,000
7,000
5,593
5,557
During the year 737,261 ordinary shares were issued for a total consideration £1,171,867 of which £1,135,004 has been
included as share premium. Shares issued during the year were in respect of scrip dividend elections. Share issuances
made during the year in respect of the ESOP totalled nil (2009: 2,800,000).
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
55
55
24. Share capital (continued)
Movements in the number of outstanding share options during the year and their weighted average exercise prices are as
follows:
At 1 October
Exercised
At 30 September
2010
2009
Average
exercise
Average
exercise
price (pence Outstanding
options
1,286,025
(25,000)
1,261,025
per share)
31.97
50.50
31.61
price (pence Outstanding
options
1,816,025
(530,000)
1,286,025
per share)
38.72
55.10
31.97
The date range over which the above options may be exercised is set out in the table below. The overall weighted average
life of the remaining options is 4.35 years (2009: 1.72 years).
At 30 September 2010 the following options granted to directors and employees to acquire ordinary shares in the
Company were outstanding:
Grant date
15 May 2001
8 August 2002
Number of options
outstanding
1,136,025
125,000
Exercise price
30.0p
46.2p
Earliest
exercise date
15 May 2005
8 August 2005
Latest
exercise date
15 May 2015
8 August 2012
On 1 June 2010 the exercise date for the options granted on 15 May 2001 was extended from 15 May 2011 to 15 May
2015. In accordance with IFRS 2 ‘Share Based Payments’ and the treatment required for modifications of this nature, any
uplift in fair value between the original instrument and the modified instrument , as measured on the date of modification,
would be expensed immediately. There was no uplift in fair value as at the modification date and consequently no additional
expense has been recorded.
In accordance with IFRS 1 ‘First-time adoption of International Financial Reporting Standards’, the Company and Group
has chosen not to apply IFRS 2 ‘Share Based Payments’ (“IFRS 2”) to share options granted before 7 November 2002 that
had not vested by 1 October 2005. Consequently there is no requirement to provide fair values for the outstanding options.
25. Employee share schemes
The Company has established employee benefit trusts in respect of the Group share schemes which are funded by the
Group and have the power to acquire shares from the Company or in the open market to meet the Group’s future
obligations under these schemes. As at 30 September 2010 the trusts owned 9,517,681 ordinary 5p shares in the
Company (2009: 7,592,503) with a market value of £12.6m as at 30 September 2010 (2009: £13.4m).
At 1 October
Acquired during the year
Shares vested in employees
Shares used to satisfy issuances during the year
Shares used to satisfy option exercises
At 30 September
2010
Number
of shares
2009
Number
of shares
7,592,503
9,285,088
(3,687,698)
(3,647,212)
(25,000)
9,517,681
7,275,524
5,014,692
(834,205)
(3,333,508)
(530,000)
7,592,503
At 30 September 2010 the number of shares held by the trusts in respect of awards made to, but not yet vested in,
employees totalled 9,342,863 (2009: 6,510,969). During the year further awards of 4,278,725 shares (2009: 13,093,447
shares) were granted at a weighted average share price of 140.5p (2009: 113.1p). The weighted average market price on
grant date for all awards made during the year was 143.2p (2009: 126.8p).
56
56
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
25. Employee share schemes (continued)
A description of the Groups’ share schemes and their operation is set out below:
Long Term Incentive Plan (LTIP) 2003 Scheme
The Board approved this plan on 28 April 2003 and it was approved by shareholders on 5 June 2003.
Eligibility
Any Director of the Company, or a Group company, and any employee of the Company, or a Group company, may be
invited to participate in the plan.
Nature of plan
The scheme provides a framework by which employees are awarded a free share in exchange for their purchasing a stake
in the Company.
The free, or “matching”, shares replicate the number of shares purchased by the participant. Both the purchased and
matching shares are held in trust by the Trustee, HBOS EES Trustees International Limited, for five years, after which time
the participant has full entitlement if they continue to be employed by the Group at that date.
On vesting, the matching shares are sold by the Trustee and the proceeds passed to the participant. The purchased
shares are transferred into the personal ownership of the participant.
US Restrictive Stock Plan (USRSP) 2003 Scheme
The Board approved this plan on 28 April 2003 and it was approved by shareholders on 5 June 2003.
Eligibility
Any Director or employee of Numis Securities Incorporated (NSI), the wholly owned subsidiary of Numis Securities Limited
(NSL), itself a wholly owned subsidiary of Numis Corporation Plc, may be invited to participate in the plan.
Nature of plan
The mechanics of the scheme are the same as the LTIP 2003 scheme. Differences arise in treatment of awards under
differing tax jurisdictions.
Long Term Incentive Plan (LTIP) 2008 Scheme
The Board approved this plan on 4 December 2007 and it was approved by shareholders on 29 January 2008.
Eligibility
Any Director of the Company, or a Group company, and any employee of the Company, or a Group company, may be
invited to participate in the plan.
Nature of plan
The scheme is similar to the 2003 LTIP scheme. The concept of the Company awarding free shares to match the shares
purchased by the participant at the award date remains the same. However, this scheme is administered by a different
Trustee, HBOS EES Nominees International Limited, and maintained within a separate Trust company. The vesting
conditions too are different; under this scheme, shares vest in three equal tranches at the end of the third, fourth and fifth
anniversaries of the award date if the participant continues to be employed by the Group at these dates.
On vesting, the matching and purchased shares are transferred into the personal ownership of the participant.
US Restrictive Stock Plan (USRSP) 2008 Scheme
The Board approved this plan on 4 December 2007 and it was approved by shareholders on 29 January 2008.
Eligibility
Any Director or employee of Numis Securities Incorporated (NSI), the wholly owned subsidiary of Numis Securities Limited
(NSL), itself a wholly owned subsidiary of Numis Corporation Plc, may be invited to participate in the plan.
Nature of plan
The scheme operates in the same way as the LTIP 2008 scheme. Differences arise in treatment of awards under differing
tax jurisdictions.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
57
57
25. Employee share schemes (continued)
Restricted Stock Unit (RSU) 2008 Plan
The Board approved this plan on 4 December 2007 and it was approved by shareholders on 29 January 2008.
Eligibility
Any Director of the Company, or a Group company, and any employee of the Company, or a Group company, may be
invited to participate in the plan.
Nature of plan
This scheme is open to both UK and US directors and employees and operates as a deferred bonus payment in the form
of shares. Awards vest in the hands of the participant in three equal tranches at the end of the first, second and third
anniversaries following the award date if they continue to be employed by the Group on those dates.
The movement in award shares for each share incentive award scheme is detailed in the tables below:
LTIP 2003 USRSP 2003
Number
of shares
Number
of shares
LTIP 2008 USRSP 2008
Number
of shares
Number
of shares
RSU 2008
Number
of shares
Total
Number
of shares
1,030,701
–
(380,021)
(54,877)
181,465
11,912
–
–
3,778,039
3,522,212
–
(210,842)
1,112,918
198,073
–
–
9,916,324
546,528
(3,307,677)
(463,043)
16,019,447
4,278,725
(3,687,698)
(728,762)
595,803
193,377
7,089,409
1,310,991
6,692,132
15,881,712
LTIP 2003 USRSP 2003
Number
of shares
Number
of shares
LTIP 2008 USRSP 2008
Number
of shares
Number
of shares
RSU 2008
Number
of shares
Total
Number
of shares
1,916,600
–
(401,527)
(484,372)
188,200
10,839
(10,504)
(7,070)
727,150
3,333,508
(71,994)
(210,625)
1,052,291
60,627
–
–
1,001,857
9,688,473
(350,179)
(423,827)
4,886,098
13,093,447
(834,204)
(1,125,894)
1,030,701
181,465
3,778,039
1,112,918
9,916,324
16,019,447
Award shares at
1 October 2009
New awards
Vesting of awards
Forfeiture of awards
Award shares at
30 September 2010
Award shares at
1 October 2008
New awards
Vesting of awards
Forfeiture of awards
Award shares at
30 September 2009
Option Schemes
A number of historic option schemes remain open which were formulated between 1993 and 2001. However, no awards
have been made since August 2002. As at 30 September 2010 there were 1,261,025 unexercised options outstanding
(2009: 1,286,025) details of which are shown in note 24.
26. Loss per share
Group
Basic loss per share is calculated on a loss after tax of £101,000 (2009: loss £8,649,000) and 102,770,978 (2009:
102,539,193) ordinary shares being the weighted average number of ordinary shares in issue during the year. Diluted
loss per share takes account of contingently issuable shares arising from share scheme award arrangements where their
impact would be dilutive. In accordance with IAS 33, potential ordinary shares are only considered dilutive when their
conversion would decrease the profit per share or increase the loss per share from continuing operations attributable to the
equity holders. Therefore shares that may be considered dilutive while positive earnings are being reported may not be
dilutive while losses are incurred.
58
58
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
26. Loss per share (continued)
The calculations exclude shares held by the Employee Benefit Trust on behalf of the Group.
Weighted average number of ordinary shares in issue during the year – basic
Dilutive effect of share awards
Diluted number of ordinary shares
2010
Number
Thousands
2009
Number
Thousands
102,771
7,992
110,763
102,539
3,518
106,057
There were no potential ordinary shares whose conversion would have resulted in an increase in the basic loss per share.
The table above shows the diluted number of ordinary shares that would have been appropriate if the Group had reported
a profit after tax in both 2010 and 2009.
27. Consolidated cash flow statement
Group
Reconciliation of operating loss to net cash from operating activities:
Operating loss
Impairment of property, plant and equipment
Depreciation charges on property, plant and equipment
Amortisation charges on intangible assets
Share scheme charge
(Increase)/decrease in current asset trading investments
(Increase)/decrease in trade and other receivables
Net movement in stock borrowing/lending collateral
Increase/(decrease) in trade and other payables
Decrease in derivatives
Other non-cash movements
Net cash from operating activities
Holding company
2010
£000
(474)
–
511
104
7,313
(3,580)
(62,184)
(1,178)
60,567
1,576
68
2,723
2009
£000
(13,228)
5
838
177
6,208
3,142
62,979
1,233
(42,652)
2,159
(208)
20,653
The Company does not hold any cash balances, and cash based transactions are effected on its behalf by Numis
Securities Limited, a wholly owned subsidiary. The operating profit of the Company includes losses on investments of
£185,000 (2009: losses of £8,163,000) and investing activity related dividend income of £772,000 (2009: £866,000) that
passed through intercompany accounts. The issuance of shares during the year did not involve any cash flows.
28. Guarantees and other financial commitments
a) Capital commitments
Amounts contracted for but not provided in the accounts amounted to £nil for the Group (2009: £nil).
b) Contingent liabilities
In the ordinary course of business, the Group has given letters of indemnity in respect of lost certified stock transfers and
share certificates. No claims have been received in relation to the year ended 30 September 2010 (2009: nil). The
contingent liability arising thereon cannot be quantified, although the directors do not believe that any material liability will
arise under these indemnities.
The Company currently has in place an unlimited guarantee to the Company’s bankers, Barclays Bank plc for the debts of
Numis Securities Limited. As at 30 September 2010 the company did not have any indebtedness to Barclays Bank plc
(2009: nil).
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
59
59
28. Guarantees and other financial commitments (continued)
The Company has given a guarantee to Pershing LLC for any indebtedness of Numis Securities Inc., an indirect wholly
owned subsidiary of the Company. Pershing LLC provides securities clearing and settlement services to Numis Securities
Inc. for some of its broker activities. As at 30 September 2010 that company did not have any indebtedness to Pershing
LLC (2009: Nil).
c) Operating leases
At 30 September 2010 the Group had annual commitments under non-cancellable operating leases of £1,737,000 (2009:
£1,734,000). The total future aggregate minimum lease payments are as follows:
Within one year
In two to five years
After five years
Property
2010
£’000
Property
2009
£’000
–
–
20,332
20,332
–
–
22,280
22,280
d) Pension arrangements
The pension cost charge for the year was £940,000 (2009: £943,000).
A defined contribution Group Personal Pension Plan has been in operation since 6 April 1997 for all full-time employees of
the Group over the age of 18 who have served the Group for at least 3 months. The Group Personal Pension Plan is
funded through monthly contributions. The Group contributes 7% of members’ salaries with members contributing at least
2.5% of their salary. Employees who join the Group Personal Pension Plan are eligible for death-in-service benefits.
29. Financial instruments and risk management
Group
Risk Management
The Group places great weight on the effective management of exposures to market, credit, liquidity and operational risk
and our risk management policies and framework are specifically designed to identify, monitor and manage such
exposures to ensure that the operating activities of the Group are managed within the risk parameters set out by the Plc
Board (the Board).
The Group’s risk management framework is specifically designed to incorporate all material risks to which the Group is or
may be exposed. The Board is responsible for supervision of the risk management framework, approval of risk
management policies and setting the overall risk appetite of the Group. All risk management functions ultimately report to
the Board. The Board receive regular risk management reporting which provides an assessment of the exposures across
the Group together with more detailed reports on market, credit and liquidity risk amongst others.
Risk exposures are monitored, controlled and overseen by separate but complementary committees which consist of
senior management from revenue generating areas, compliance and finance. Management oversight and segregation of
duties are fundamental to the risk management framework.
The Audit & Risk Committee is responsible for the evaluation and maintenance of the Group’s control framework and
ensuring that policies are in place and operating effectively to identify, assess, monitor and control risk throughout the
Group. The Audit & Risk Committee similarly receive risk updates which detail the Group’s exposure to market, credit,
liquidity, and operational risks. Controls and policies are reviewed and challenged to ensure their effectiveness and to
reflect changes in requirements and best practice.
The Risk Oversight Committee is responsible for exercising senior level oversight of all risk-related issues (both financial and
non-financial). It has specific responsibility for the in-depth assessment and reporting of all material risks faced by the
Group including the selection and scoring of the risks, the implementation of appropriate key risk indicators and controls
designed to provide risk mitigation.
60
60
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
29. Financial instruments and risk management (continued)
The Financial Risk Committee is responsible for ensuring that the day-to-day operating activities are managed within the
financial risk appetite and controls framework approved by the Board and the Audit & Risk Committee and has delegated
responsibility for preparing the risk management policies for review and approval by the Board and the Audit & Risk
Committee. The Financial Risk Committee reviews the detailed components of market, credit and liquidity risk exposures
of the business to ensure that such risks are monitored and assessed appropriately. The Committee met 51 times during
the year. As a minimum, the Financial Risk Committee reviews:
• market risk exposures associated with our equity and derivative positions
•
•
•
•
•
•
trading book and individual stock Value-at-Risk (VaR) and positions versus limits and resulting breaches
performance of the trading book overall and at individual stock level
credit risk exposures to trading counterparties and deposit-taking counterparties
liquidity and concentration risk of the cash and cash equivalent assets
currency risk exposures of foreign currency denominated deposits
capital resources of the Group compared to the Capital Requirements Directive Pillar I capital requirement and
additional internal economic capital measures
•
client asset requirements and resources.
The Finance department has day-to-day responsibility for monitoring and reporting risk exposures within the Group and
escalation of issues to senior management. In addition to daily reporting of market, credit and liquidity risk key indicators to
senior management, automated intraday reporting is in place for credit exposures and associated credit limit breaches
(hourly) and individual stock VaR limit breaches (continuously). Finally, our trading system has real-time trading book, stock
and VaR limit alerts to flag individual stock holdings and trading book positions which are approaching their predefined
limit.
Independent assurance of the suitability and effectiveness of the Group’s risk management framework and controls is
provided to the Audit & Risk Committee by the utilisation of an outsourced, independent Internal Audit function.
Financial Instruments
The Group’s financial instruments comprise trading investments, financial liabilities, cash and cash equivalent balances,
derivative financial instruments and various items such as trade receivables and trade payables that arise from the normal
course of business.
Trading investments and financial liabilities are long and short positions respectively held as a result of market making
activities in listed investments and holdings in unlisted investments. These investments are predominantly equity securities.
Trading investments and financial liabilities are held at fair value, in accordance with the accounting policy provided in
Note 1(h).
Derivative financial instruments comprise equity options and warrants over listed and unlisted securities and may also
include foreign exchange contracts used to hedge known transactional exposures arising from normal operational
activities. Derivative financial instruments are held at fair value in accordance with the accounting policy provided in
Note 1(i).
Sterling and foreign currency cash balances are invested in the Group’s approved banks and other short term highly liquid
instruments which satisfy the Group’s credit risk policies.
As at 30 September 2010 the Group had no undrawn committed borrowing facilities (2009: nil).
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
61
61
29. Financial instruments and risk management (continued)
Market Risk-Equity Risk
The Group is affected by conditions in the financial markets and the wider economy through its holdings of equity
investments arising through the normal course of its market making, trading and investing activities. Equity risk arises from
the exposures of these holdings to changes in prices and volatilities of equity prices. An adverse movement in the fair value
of our holdings has consequences for the capital resources of the Group and therefore it is important for management to
understand the potential impact of such movements.
The Group utilises a VaR model to measure market risk. The model uses a “Historical Simulation” approach which shocks
market risk positions by the actual daily market moves observed during a rolling 256 business day window. The sum of the
simulated returns for each of the 256 days is calculated and the VaR is defined as being the 3rd worst loss during this period.
This approach is an accepted industry standard and gives the Group an understanding of the market risks being taken.
VaR limits are set at both individual stock level and portfolio level and are approved by the Board. Such limits are
incorporated into the Group’s front office trading system so that real time monitoring of VaR exposures is available to both
front office staff and relevant risk management staff. On a daily basis the Finance department compute the Historical
Simulation VaR risk measure based on the end of day portfolio of holdings. The results are reported to senior management
at the end of each day against limits and any resulting breaches. Similarly the risk measures are also compared to the daily
revenue performance and our capital resources. In addition there are absolute position limits.
Hence equity risk exposure is managed through the use of individual stock position and trading book limits, such limits
being established for long, short and gross positions coupled with the measurement of equity market risk through the use
of Historical Simulation VaR.
The table below shows the highest, lowest, and average total long, short, gross, and net position in listed securities during
the year, together with positions at year end.
Highest position
Lowest position
Average position
As at 30 September 2010
Highest position
Lowest position
Average position
As at 30 September 2009
Long
£’000
40,235
29,725
34,614
32,140
Long
£’000
30,348
21,894
26,087
29,479
Short
£’000
(14,764)
(4,625)
(7,778)
(6,692)
Short
£’000
(10,512)
(1,376)
(5,369)
(5,192)
The table below shows the highest, lowest, average and year end equity VaR.
Highest VaR
Lowest VaR
Average VaR
As at 30 September
Gross
£’000
51,063
34,773
42,392
38,832
Gross
£’000
40,860
23,270
31,456
34,672
2010
£’000
1,182
267
423
427
2010
Net
£’000
31,663
21,536
26,836
25,448
2009
Net
£’000
24,287
18,538
20,717
24,287
2009
£’000
781
373
608
373
In addition the Group holds positions totalling £5,505,000 (2009: £6,161,000) in unlisted securities. These are reported to
senior management together with positions in listed securities on a daily basis.
The Group’s equity holdings comprise trading investments, financial liabilities and derivative financial instruments.
62
62
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
29. Financial instruments and risk management (continued)
Trading investments
Equity risk on the trading investments held within the market making book is the day to day responsibility of the Head of
Trading, whose decision making is independently monitored. Trading investments held outside the market making activities
are monitored by the Risk Manager, CEO, Finance Director and senior management.
Equity risk is managed through a combination of cash investment limits on the entire trading book coupled with VaR limits
set at individual stock level and portfolio level. These limits are approved by the Board, the Audit & Risk Committee, and the
Financial Risk Committee, and monitored and reported by the Finance department daily. Breaches of the stock and
portfolio limits are initially flagged in real time on the trading platform and monitored by the traders and the Finance
department. Breaches are either addressed by the traders or, if they are unable to take corrective action, will be discussed
with the Finance department and reported to senior management as part of the usual end of day reporting mechanism.
Breaches are also summarised weekly and presented to the Financial Risk Committee along with reasons for the breaches
and corrective action required to bring them within limits.
Sensitivity analysis based on a 10% increase/decrease in underlying equity prices on the trading investments held at the
year end indicates that the impact of such a movement would be to increase/decrease respectively profit in the income
statement by £3,657,000 (2009: £3,299,000).
Financial liabilities
Financial liabilities comprise short positions in quoted stocks arising through the normal course of business in facilitating
client order flow. Equity risk on financial liabilities is the day to day responsibility of the Head of Trading. Exposures of this
nature are monitored in exactly the same way as trading investments above as these positions form part of the trading
book. A sensitivity analysis based on a 10% increase/decrease in underlying equity prices on the financial liabilities held at
the year end indicates that the impact of such a movement would be to decrease/increase respectively profit in the income
statement by £669,000 (2009: £519,000).
Derivatives financial instruments
Derivative financial instruments comprise equity options and warrants over listed and unlisted securities and are
predominantly received by the Group as non-cash consideration for advisory and other services. This category may also
include foreign exchange contracts used to hedge known transactional exposures arising from normal operational
activities.
Equity risk arising on derivatives is the day-to-day responsibility of the Head of Trading. Exposures are measured using the
Group’s VaR methodology and reported to senior management daily along with a detailed inventory of options and warrant
holdings which are either in-the-money or close to being in-the-money. As at 30 September 2010, none of the quoted
derivatives were in-the-money and the VaR was £nil.
A 10% increase/decrease in underlying equity prices of the derivative financial instruments held at the year end indicates
that the impact of such a movement on the profit in the income statement would be an increase of £107,000 (2009:
£339,000) and decrease of £107,000 (2009: £265,000) respectively.
Market Risk-Currency Risk
Currency risk arises from the exposure to changes in foreign exchange spot and forward prices and volatilities of foreign
exchange rates. The Group is exposed to the risk that the Sterling value of the assets, liabilities or profit and loss could
change as a result of foreign exchange rate movements.
There are three sources of currency risk to which the Group may be exposed. Firstly, foreign currency denominated
financial assets and liabilities arising as a result of trading in foreign securities, secondly, foreign currency financial assets
and liabilities as a result of foreign currency denominated corporate finance fees, supplier payments or Treasury activities
and finally foreign currency denominated investments in subsidiaries of the Group. The Finance department is responsible
for monitoring the Group’s currency exposures which are reported to senior management daily.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
63
63
29. Financial instruments and risk management (continued)
Currency risk is measured using a similar VaR methodology as that used for the Group’s measurement of equity risk. The
table below shows the highest, lowest and average foreign currency VaR for 2010 compared against 2009 figures.
Highest VaR
Lowest VaR
Average VaR
As at 30 September
2010
£’000
247
51
108
83
2009
£’000
701
147
366
194
The Group’s net assets by currency as at 30 September 2010 were as follows:
2010
Sterling equivalent
2009
Sterling equivalent
Sterling
£’000
94,263
102,334
Euro
£’000
Canadian $
£’000
2,967
2,572
451
279
US $
£’000
8,516
8,268
Other
£’000
Total
£’000
513
106,710
364
113,817
The Group hedges all significant transactional currency exposures arising from trading activities using spot or forward
foreign exchange contracts. Derivative financial instruments held to manage such currency exposure as at 30 September
2010 had a fair value of £nil (2009 £nil). The Group does not hedge future anticipated transactions. Currency exposure to
foreign currency denominated corporate finance receivables and supplier payables is not considered material.
The table below shows the impact on the Group’s results of a 10 cent movement in the US$ and Euro in terms of
transactional and translational exposures.
10 cent increase (strengthening £):
Profit before tax
Equity
10 cent decrease (weakening £):
Profit before tax
Equity
US $
£’000
(238)
(292)
Euro
£’000
(235)
(235)
Total
£’000
(473)
(527)
US $
£’000
270
331
Euro
£’000
279
279
Total
£’000
549
610
Market Risk-Interest Rate Risk
Interest rate risk arises as a result of changes to the yield curve and the volatilities of interest rates.
The Group’s interest bearing assets are predominantly held in cash or cash equivalents. Excess cash funds may be
invested in Gilts, held on short term floating rate terms or placed on overnight or short-term deposit. Investment of excess
funds into cash equivalent instruments may occur from time-to-time depending on the management’s view of yields on
offer, liquidity requirements, and credit risk considerations. The Group does not use any derivatives to hedge interest rate
risk and has no external debt (2009: £nil).
64
64
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
29. Financial instruments and risk management (continued)
The table below shows the interest rate profile of the Group’s cash and cash equivalent investments and, while not interest
bearing, also shows the Group’s exposure to listed equity investments as these have an indirect sensitivity to significant
changes and volatility of interest rates.
Cash
and cash
equivalents
£’000
47,443
5,907
1,176
424
420
55,370
Listed
equity
investments
£’000
22,853
2,224
354
17
–
25,448
–
55,370
2010
Total
£’000
70,296
8,131
1,530
441
420
80,818
Listed
equity
investments
£’000
22,649
968
671
–
–
24,288
Cash
and cash
equivalents
£’000
67,377
4,573
1,254
586
476
74,266
–
74,266
2009
Total
£’000
90,026
5,541
1,925
586
476
98,554
Currency
Sterling
US Dollars
Euro
Canadian Dollars
Other
At 30 September
Fixed Rate
Floating Rate
In addition to the above, cash collateral balances of £2,811,000 (2009: £3,500,000) and net stock borrowing/(lending)
balances of £37,000 (2009: (£1,141,000)) are subject to daily floating rate interest.
A sensitivity analysis based on a 100 basis point increase/decrease to prevailing market rates of interest as at
30 September 2010 indicates that the impact of such a movement on the profit in the income statement and equity
would be a decrease of £nil (2009: £nil) and increase of £nil (2009: £nil) respectively. This reflects the fact that the
Group has no material exposures to fair value movements arising from changes in the market rate of interest as at
30 September 2010 or 2009.
Fair value estimation
Effective 1 October 2009, the Group adopted the amendment to IFRS 7 for the financial instruments that are measured on
the balance sheet at fair value. This requires disclosure of fair value measurements by level based on the following fair value
measurement hierarchy:
•
•
Level 1: Quoted prices unadjusted in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly as prices or indirectly derived from prices; and
•
Level 3: Inputs for the asset or liability which are not based on observable market data.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
65
65
29. Financial instruments and risk management (continued)
Group
Non current assets
Derivative financial instruments
Current assets
Trading investments
Derivative financial instruments
Total assets
Current liabilities
Financial liabilities
Total liabilities
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
–
–
262
262
32,140
–
32,140
32,140
(6,692)
(6,692)
–
–
–
–
–
–
4,434
809
5,243
5,505
36,574
809
37,383
37,645
–
–
(6,692)
(6,692)
There were no transfers between Level 1 and Level 2 during the year.
Movements in financial assets categorised as Level 3 during the year were:
At 1 October 2009
Transfers in
Additions
Total losses included in other operating income in the income statement
At 30 September 2010
£’000
6,161
425
125
(1,206)
5,505
Transfers in to Level 3 of £425,000 relate to two equity positions (previously included in Level 1 and listed on the London
Stock Exchange) both of which were delisted during the year and therefore have no observable market data from which
their fair value can be estimated. The two issuers subsequently experienced severe financial difficulties and therefore the
fair value assigned at delisting was written off in full subsequent to the transfer.
Holding company
Non current assets
Derivative financial instruments
Current assets
Trading investments
Derivative financial instruments
Total assets
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
–
–
262
262
14,443
–
14,443
14,443
–
–
–
–
4,196
809
5,005
5,267
18,639
809
19,448
19,710
There were no transfers between Level 1 and Level 2 during the year.
Movements in financial assets categorised as Level 3 during the year were:
At 1 October 2009
Total losses included in other operating income in the income statement
At 30 September 2010
£’000
6,048
(781)
5,267
66
66
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
29. Financial instruments and risk management (continued)
Group
Credit Risk-Counterparty Risk
Credit risk is the potential loss that the Group would incur if a counterparty fails to settle its contractual obligations or there
is a failure of a deposit taking institution. Credit risk exposure therefore arises as a result of trading, investing, and financing
activities. The primary source of credit risk faced by the Group is that arising from the settlement of equity trades carried
out in the normal course of business.
The credit risk on a particular equity trade receivable is measured by reference to the original amount owed to the Group
less any partial payments less any collateral to which the Group is entitled. For example, in accordance with the delivery
versus payment principle, the potential exposure at default sustained by the Group would not be the amount of the
outstanding receivable balance, but rather the amount representing commission due to the Group and any residual
exposure from market risk on the underlying equity after a sell-out (or buy-in) has been carried out.
An internal stress test is employed in order to measure the credit risk exposure faced by the Group. This is a historical
20-day VaR methodology based on both the severe stock market movements during 2008-09 and a conservative
judgment of the likelihood of counterparty default. This assessment is applied to the end of day equity trade receivable and
payable balances and the results are reported to senior management on a daily basis.
Credit risk exposures are also managed by the use of individual counterparty limits applied initially on the categorisation of
the counterparty (for example, hedge fund, long only fund, broker, etc.) and assessed further according to the results of an
external credit rating and/or relevant financial indicators and/or news flow. From time to time certain counterparties may be
placed on an internal watch list in reaction to adverse news flow or market sentiment. The Finance department prepares a
summary daily report for senior management which indentifies the top 40 individual counterparty exposures measured
against their limits, the major stock positions which make up the exposure and a list of the largest failing trades. This
reporting incorporates the Sterling equivalent gross inward, outward and net cash flow exposure. Finally, automated hourly
intra-day reporting of all gross inward, outward and net cash flow exposures by individual counterparty against assigned
limits is monitored by the Finance department to ensure appropriate escalation and mitigation action is taken.
Trade receivables relating to fees due on the Group’s corporate finance and advisory activities are monitored on a weekly
basis.
The current framework for the reporting and monitoring of credit risk has proved to be a robust control during recent
periods of market volatility and credit related issues impacting the market in general. The Group has not sustained any
credit risk default losses and has achieved a substantial reduction in its stress test measurement through active
management and reduction of credit exposures when appropriate. Where possible, the Group seeks to enter into netting
arrangements with counterparties that permit the offset of receivables and payables.
Cash and cash equivalents are held in Gilts or with large UK based commercial clearing banks with credit ratings at or
above AA-Fitch investment grade. Credit exposures may be further reduced by diversification of deposits across a number
of institutions.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
67
67
29. Financial instruments and risk management (continued)
The Group’s financial assets are analysed by their ageing in the table below and represent the maximum exposure to credit
risk at 30 September 2010 of balance sheet financial instruments before taking account of any collateral held or other credit
enhancements.
As at 30
September 2010
(£’000)
Derivative financial
instruments
Trade and other
receivables
Trading investments
Stock borrowing
collateral
Cash and cash
equivalents
As at 30
September 2009
(£’000)
Derivative financial
instruments
Trade and other
receivables
Trading investments
Stock borrowing
collateral
Cash and cash
equivalents
Overdue not impaired
Not
Overdue
0 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
Over 1
year
Impaired
Total
1,071
–
224,387
36,574
8,764
–
5,106
–
55,370
322,508
–
8,764
–
17
–
–
–
17
–
12
–
–
–
12
–
–
–
–
–
–
30
–
–
–
30
–
1,071
170
–
233,380
36,574
–
5,106
–
170
55,370
331,501
Overdue not impaired
Not
Overdue
0 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
Over 1
year
Impaired
Total
2,647
–
155,843
32,944
7,502
–
5,759
–
74,266
271,459
–
7,502
–
5
–
–
–
5
–
102
–
–
–
102
–
7
–
–
–
7
–
12
–
–
–
12
–
2,647
448
–
163,919
32,944
–
5,759
–
448
74,266
279,535
68
68
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
29. Financial instruments and risk management (continued)
Credit Risk-Concentration Risk
Concentration risk is the risk arising from exposures to groups of connected parties, counterparties in the same sector, or
counterparties undertaking the same activity. Concentration risk arises, in particular, with respect to the Group’s exposures
to unsettled securities trades. These exposures are monitored intra day on an hourly basis using the credit risk exposure
reports and process outlined above. In addition, as orders are taken, system-generated warnings are given of any
counterparties likely to grow above £5m in size.
As at 30 September 2010 the exposure to the following categories of counterparty was as follows: brokers £119.6m
(2009: £74.3m), long only funds £77.9m (2009: £49.8m), hedge funds £3.0m (2009: £9.8m) and other £7.7m (2009: £10.8m).
Concentration of credit risk to a particular counterparty or issuer may also arise from deposits placed with commercial
banks, investments in cash equivalents and as a result of normal trading activity through Central Counterparties, such as
the London Clearing House. The credit quality of these counterparties is kept under review by management. Concentration
of trading investments by market is disclosed in note 20. There are no significant concentration risks arising in any other
class of financial asset as at 30 September 2010 (2009: £nil).
Liquidity Risk
Liquidity risk is the risk that funds are either not available to service day-to-day funding requirements or are only available at
a high cost or need to be arranged at a time when market conditions are unfavourable and consequently the terms are
onerous. Liquidity is of vital importance to the Group to enable it to continue operating in even the most adverse
circumstances.
The Group assesses its liquidity position on a daily basis and computes the impact of various stress tests to determine how
liquidity could be impacted under a range of different scenarios. The Group currently maintains substantial excess liquidity
so that it can be confident of being able to settle transactions and continue operations even in the most difficult foreseeable
circumstances.
The Group’s financial liabilities are expected to mature in the following periods:
As at 30 September 2010 (£’000):
Trade and other payables
Financial liabilities
Stock lending collateral
Provisions
As at 30 September 2009 (£’000):
Trade and other payables
Financial liabilities
Stock lending collateral
Provisions
Less than
3 months
215,326
6,692
5,069
263
227,350
3 months to
1 year
645
–
–
–
645
1 to 5 years Over 5 years
–
–
–
–
–
514
–
–
349
863
Total
216,485
6,692
5,069
612
228,858
Less than
3 months
155,940
5,192
6,900
580
168,612
3 months to
1 year
433
–
–
–
433
1 to 5 years Over 5 years
–
–
–
–
–
425
–
–
546
971
Total
156,798
5,192
6,900
1,126
170,016
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
69
69
29. Financial instruments and risk management (continued)
Capital Risk
The Group manages its capital resources on the basis of regulatory capital requirements under Pillar 1 and its own
assessment of capital required to support all material risks throughout the business (Pillar 2). The Group manages its
regulatory capital through an Internal Capital Adequacy Assessment Process (known as the ICAAP) in accordance with
guidelines and rules implemented by the Financial Services Authority (FSA). Under this process the Group is satisfied that
there is either sufficient capital to absorb potential losses or that there are mitigating controls in place which make the
likelihood of the risk occurring remote.
Both the minimum regulatory capital requirement and the Pillar 2 assessment are compared with total available regulatory
capital on a daily basis and monitored by the Finance department. The excess capital resources, under both
measurements, are reported to the Financial Risk Committee daily and to the Audit & Risk Committee and the Board at
each time they meet.
On 30 September 2010, the UK regulated entity had £78m (2009: £89m) of regulatory capital resources, which is
comfortably in excess of both its regulatory capital requirement (Pillar 1) and the internally measured capital requirement
(Pillar 2).
For Pillar 1 capital, the Group has adopted the standardised approach to credit risk and market risk and the basic indicator
approach for operational risk. Compliance with FSA capital related regulatory requirements was maintained throughout
the year.
Operational Risk
Operational risk is the risk of loss arising from short-comings or failures in internal processes, people or systems, or from
external events. Operational risk can also be impacted by factors such as the loss of key staff, the quality of execution of
client business, the maintenance of performance management controls, and a major infrastructural failure and/or terrorist
event.
The Group takes steps to identify and avoid or mitigate operational risk wherever possible. Continuously evolving control
standards are applied by suitably trained and supervised individuals and senior management is actively involved in
identifying and analysing operational risks to find the most effective and efficient means to mitigate and manage them.
Enhancements to staff training programmes and Internal Audits occur throughout the year.
Valuation techniques
The fair value of certain financial assets has been determined using valuation techniques as described in accounting policy
note 1(w). The combined fair value of such financial assets as at 30 September 2010 was £5,505,000 (2009: £6,161,000)
and the movement in fair value recognised in the income statement during the year amounted to a £1,206,000 loss (2009:
£5,266,000 loss).
There is no material difference between the book values and the fair values of the Group’s financial assets and liabilities.
Holding company
The risk management processes for the Company are aligned with those of the Group as a whole and fully integrated into
the risk management framework, processes and reporting outlined in ‘Risk Management’ within the Governance section
on page 24 and in the Group section of this note starting on page 59. The Company’s specific risk exposures are explained
below:
Equity risk
The Company is exposed to equity risk on its trading investments, derivative financial instruments and investments in
subsidiaries. Trading investments comprise holdings in quoted and unquoted securities whereas derivative financial
instruments comprise solely of warrants over unquoted securities.
In addition to risk measures reported on the Group’s equity-based holdings as a whole, a sensitivity analysis based on a
10% increase/decrease in the underlying equity prices on the aggregate trading investments and derivative financial
instruments held at the year end has been performed and indicates that the impact of such a movement would be to
increase/decrease respectively profit in the income statement by £1,197,000 (2009: £2,116,000).
70
70
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Notes to the Financial Statements
29. Financial instruments and risk management (continued)
Currency risk
The Company has no material exposure to transactional or translational foreign currency risk as it rarely undertakes
transactions in currencies other than Sterling and consequently rarely has financial assets or liabilities denominated in
currencies other than Sterling.
Interest rate risk
The Company has no material exposure to interest rate risk as it has limited interest bearing assets and liabilities.
Credit risk
The Company has exposure to credit risk from its normal activities where there is a risk that a counterparty will be unable to
pay in full amounts when due. The Company’s counterparties are primarily its subsidiaries or employees of the Group and
therefore there is no external credit risk exposure.
Liquidity risk
The Company has no cash and cash equivalent balances. The management of the Group’s ability to meet its obligations as
they fall due is set out in the Group section of this note on page 68. The Company manages its liquidity risk by utilising
surplus liquidity within the Group through transactions which pass through intercompany accounts when it is required to
meet current liabilities.
Fair value of financial instruments
There is no material difference between the book values and fair values of the Company’s financial assets and liabilities
30. Post balance sheet events
a) Final dividend
A final dividend of 4.00p per share (2009: 5.50p) was proposed by the directors at their meeting on 30 November 2010.
These financial statements do not reflect this dividend payable.
31. Related party transactions
Group
a) Intra-group trading
Transactions or balances between Group entities have been eliminated on consolidation and, in accordance with IAS 24,
are not disclosed in this note.
b) Key management compensation
The compensation paid to key management is set out below. Key management has been determined as the executive
management teams of the Group operating subsidiaries, who are also directors of those subsidiaries:
Salaries and short term employment benefits
Post-employment benefits
Share based payments
The above amounts include those paid to directors of the holding company.
2010
£’000
2,309
53
1,801
4,163
2009
£’000
3,044
219
1,499
4,762
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
71
71
31. Related party transactions (continued)
c) Share scheme loans
Under the terms of the Group’s share scheme arrangements, participants may be offered a loan in order to fund their
purchased shares. The loans outstanding to key management as at 30 September 2010 amounted to £1,806,000 (2009:
£1,740,000). Such loans are made at market rates and the amounts outstanding are secured by shares held within the
Employee Benefit Trusts and will be settled in cash. No guarantees have been given or received and no expense for bad or
doubtful debts has been recognised in the year in respect of amounts owed.
d) Dealings with Directors
During the year, Urless Farm, a company controlled by Mr and Mrs O Hemsley charged the Group £nil (2009: £27,000) in
respect of services provided.
Holding company
a) Transactions between related parties
Details of transactions between the Company and its subsidiaries, which are related parties of the Company, are set out below:
Amounts owed to the Company from subsidiaries are disclosed in note 19 and amounts owed by the Company to
subsidiaries are disclosed in note 22. All such balances are non-interest bearing.
b) Key management compensation
The compensation paid to key management is set out below.
Salaries and short term employment benefits
Post-employment benefits
Share based payments
2010
£’000
720
14
23
757
2009
£’000
1,482
17
(86)
1,413
Details of the remuneration of each director, including the highest paid director, can be found within the Remuneration
report on page 25. The compensation in the above table has been paid and recognised by a subsidiary of the holding
company.
72
Numis Annual Report & Accounts 2010
Notice of Annual General Meeting 2011
Please see the explanatory notes attached to this notice.
NOTICE is hereby given that the Annual General Meeting of Numis Corporation Plc (the “Company”) will be held at The
London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT on Tuesday 1 February 2011, at 11.00 a.m. to
consider and, if thought fit, pass the following resolutions, of which resolutions 1 to 7 and resolution 10 will be proposed as
ordinary resolutions and resolutions 8 and 9 will be proposed as special resolutions:
1. To receive and adopt the Company’s annual accounts for the financial year ended 30 September 2010, together with
the directors’ report and auditors’ report for such year.
2. To declare a final dividend for the year ended 30 September 2010 of 4p per ordinary share payable on 18 February
2011 to shareholders on the register at the close of business on 10 December 2010.
3. To reappoint as a director Mr Oliver Hemsley, who is retiring by rotation in accordance with the Company’s Articles of
Association and, being eligible, offers himself for election.
4. To reappoint as a director Mr Tom Bartlam, who is retiring by rotation in accordance with the Company’s Articles of
Association and, being eligible, offers himself for election.
5. To reappoint as a director Mr Simon Denyer, who was appointed to the Board of the Company since the last Annual
General Meeting and, being eligible, offers himself for election.
6. To reappoint PricewaterhouseCoopers LLP as auditors, to hold office from the conclusion of this meeting until the
conclusion of the next Annual General Meeting of the Company at which accounts are laid and to authorise the
directors to fix their remuneration.
Ordinary resolution – authority to allot relevant securities
7.
That:
(i)
a)
b)
The directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006
(“the Act”) to exercise all the powers of the Company to allot shares in the Company and to grant rights to
subscribe for, or to convert any security into, shares in the Company (“Relevant Securities”), up to a maximum
aggregate nominal amount equal to £1,862,624.50 (equivalent to 37,252,490 shares), provided that:
this authority shall expire at the conclusion of the next Annual General Meeting of the Company or (if earlier)
unless previously revoked, varied or renewed by the Company in a general meeting;
the Company shall be entitled to make, prior to the expiry of such authority, any offer or agreement which would
or might require Relevant Securities to be allotted after the expiry of this authority and the directors may allot
Relevant Securities pursuant to such offer or agreement as if this authority had not expired; and
c) all prior authorities to allot Relevant Securities be revoked but without prejudice to any allotment of Relevant
Securities already made thereunder.
Special resolution – disapplication of statutory pre-emption rights
8. That, subject to and conditional upon the passing of resolution 7 set out in the notice of this meeting, the directors be
generally empowered pursuant to sections 570 and 573 of the Act to allot equity securities (as defined in section 560
of the Act) for cash pursuant to the authority conferred by the said resolution 7, as if section 561(1) of the Act did not
apply to any such allotment, provided that this power shall be limited to:
a)
the allotment of equity securities in connection with an issue by way of rights (including, without limitation, under
a rights issue, open offer or similar arrangement) in favour of ordinary shareholders on the register on a date
fixed by the directors in proportion (as nearly as may be practicable) to the respective numbers of ordinary
shares held by them on that date, but subject to such exclusions and/or other arrangements as the directors
may deem necessary or expedient to deal with fractional entitlements or any legal, regulatory or practical
difficulties under the laws of any territory, or the requirements of any regulatory body or stock exchange, or as
regards shares in uncertificated form; and
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
73
73
73
b)
the allotment (otherwise than pursuant to sub-paragraph a) above) of equity securities having an aggregate
nominal amount not exceeding £279,673.35 (equivalent to 5,593,467 shares),
and this power shall expire at the conclusion of the next Annual General Meeting of the Company or (if earlier), unless
previously revoked, varied or renewed, save that the Company may before such expiry make an offer or agreement
which would or might require equity securities to be allotted after such expiry and the directors may allot equity
securities in pursuance of such offer or agreement as if the power conferred hereby had not expired.
Special resolution – authority to purchase Company’s own shares
9. That the Company be generally authorised pursuant to section 701 of the Act to make market purchases (within the
meaning of section 693(4) of the Act) of ordinary shares of 5p each in the capital of the Company on such terms and
in such manner as the directors shall determine, provided that:
a)
the maximum number of ordinary shares hereby authorised to be purchased is limited to an aggregate of
11,186,934 shares (equivalent to £559,346.70);
b)
the minimum price, exclusive of any expenses, which may be paid for each ordinary share is 5p;
c)
the maximum price, exclusive of any expenses, which may be paid for each ordinary share is an amount equal
to 105 per cent. of the average of the middle market quotations for an ordinary share of the Company as derived
from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on
which such share is contracted to be purchased;
d)
this authority shall expire at the conclusion of the next Annual General Meeting of the Company or (if earlier),
unless previously revoked, varied or renewed; and
e)
the Company may make a contract to purchase ordinary shares under this authority prior to the expiry of this
authority which will or may be executed wholly or partly after the expiry of such authority, and may make a
purchase of ordinary shares pursuant to any such contract as if such authority had not expired.
Ordinary resolution – authority to amend and implement revised rules of the employee share incentive plans of the
Company - the Numis Corporation Plc Long Term Incentive Plan, the Numis Corporation Plc Restricted Stock Unit Plan
and the Numis Corporation Plc (Revised) Long Term Incentive Plan (2008) (the “Relevant Schemes”)
10. That the directors be generally and unconditionally authorised to amend those provisions in each of the Relevant
Schemes which limit the aggregate number of shares which can be made subject to awards under the Relevant
Schemes when aggregated with awards made under any other share incentive schemes which have been approved
by the Company in general meeting to 20% of the issued ordinary share capital of the Company in any ten year period
(the “dilution limits”), so as to exclude from the dilution limits (to the extent not already excluded):
a) any awards which are satisfied using shares bought in the market by the Company’s Employee Benefit Trust or
by any other third party;
b) any awards which have lapsed, been cancelled, surrendered or renounced or otherwise become incapable of
being exercised or vesting; and
c) any option or other right which has been or is to be satisfied by treasury shares unless then current guidelines
issued by the Association of British Insurers require such shares to be taken into account.
By order of the Board
Simon Denyer
Group Finance Director & Company Secretary
17 December 2010
Registered Office
10 Paternoster Square
London EC4M 7LT
74
Numis Annual Report & Accounts 2010
Notice of Annual General Meeting 2011
Notes:
Right to appoint a proxy
Members of the Company are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and
vote at a meeting of the Company. A proxy does not need to be a member of the Company. A member may appoint more
than one proxy in relation to a meeting provided that each proxy is appointed to exercise the rights attached to a different
share or shares held by that member.
A proxy form which may be used to make such appointment and give proxy directions accompanies this notice. If you do
not receive a proxy form and believe that you should have one, or if you require additional proxy forms in order to appoint
more than one proxy, please contact the Company’s registrar, Computershare Investor Services PLC, on 0870 707 1203.
Procedure for appointing a proxy
To be valid, the proxy form must be received by post or (during normal business hours only) by hand at the office of the
Company’s registrar, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, no later
than 30 January 2011 at 11.00 a.m. (or, in the case of any adjournment, not later than 48 hours before the time fixed for the
adjourned meeting). It should be accompanied by the power of attorney or other authority (if any) under which it is signed or
a notarially certified copy of such power or authority.
The return of a completed proxy form will not preclude a member from attending the Annual General Meeting and voting in
person if he or she wishes to do so.
Record date
To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company
of the votes they may cast), members must be registered in the register of members of the Company as at 11.00 a.m. on
30 January 2011 or, in the event of any adjournment, 48 hours before the time of the adjourned meeting). Changes to the
register of members after the relevant deadline will be disregarded in determining the right of any person to attend and vote
at the meeting.
Corporate representatives
Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all
of its powers as a member provided that they do not do so in relation to the same shares.
Communications
Members who have general enquiries about the meeting should use the following means of communication. No other
means of communication will be accepted. You may:
call our members’ helpline on 0870 707 1203 or
write to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
75
75
75
Explanatory Notes to the
Notice of Annual General Meeting 2011
In the following notes, references to the “current” issued share capital of the Company are to the 111,869,340 issued
ordinary shares of 5p each in the capital of the Company in issue as at the close of business on 3 January 2011 (being the
latest practicable date before the publication of this document).
Resolution 1 – Report and accounts
The directors are required to present the accounts for the year ended 30 September 2010 to the meeting.
Resolution 2 – Declaration of final dividend
A final dividend can only be paid if it is recommended by the directors and approved by the shareholders at a general
meeting. The directors propose that a final dividend of 4p per ordinary share be paid on 18 February 2011 to ordinary
shareholders who are on the register at the close of business on 10 December 2010. Shareholders are being offered the
option to receive new ordinary shares as an alternative to cash in respect of this dividend.
Resolutions 3, 4 and 5 – Reappointment of directors
The Articles of Association of the Company require the nearest number to one third of the directors to retire at each Annual
General Meeting. In addition, any director who has been appointed since the last Annual General Meeting must retire and
may offer him or herself for re-election and such directors are not counted in calculating the number of directors to retire by
rotation.
Resolution 6 – Reappointment of auditors
The Company is required to appoint auditors at each Annual General Meeting to hold office until the next such meeting at
which accounts are presented. The resolution proposes the reappointment of the Company’s existing auditors,
PricewaterhouseCoopers LLP, and authorises the directors to agree their remuneration.
Resolution 7 – Authority to allot relevant securities
The Company requires the flexibility to allot shares from time to time and with effect from 1 October 2009, the Companies
Act 2006 (the “Act”) abolished the requirement for a company to have an authorised share capital. The directors will still be
limited as to the number of shares they can at any time allot because allotment authority continues to be required under the
Companies Act 2006, save in respect of employee share schemes.
The directors’ existing authority to allot “relevant securities” (including ordinary shares and/or rights to subscribe for or
convert into ordinary shares), which was granted (pursuant to section 80 of the Companies Act 1985) at the Annual General
Meeting held on 2 February 2010, will expire at the end of this year’s Annual General Meeting. Accordingly, paragraph (i)
of resolution 7 would renew and increase this authority (until the next Annual General Meeting or unless such authority is
revoked or renewed prior to such time) by authorising the directors (pursuant to section 551 of the Act) to allot relevant
securities up to an aggregate nominal amount equal to approximately one third of the current issued share capital of the
Company. Save in respect of the issue of new ordinary shares pursuant to the Company’s share incentive schemes or as a
result of scrip dividends, the directors currently have no plans to allot relevant securities, but the directors believe it to be in
the interests of the Company for the Board to be granted this authority, to enable the Board to take advantage of
appropriate opportunities which may arise in the future.
Resolution 8 – Disapplication of statutory pre-emption rights
This resolution seeks to disapply the pre-emption rights provisions of section 561 of the Act in respect of the allotment of
equity securities for cash pursuant to rights issues and other pre-emptive issues, and in respect of other issues of equity
securities for cash up to an aggregate nominal value of £279,673.35 (5,593,467 shares), being an amount equal to
approximately 5 per cent. of the current issued share capital of the Company. If given, this power will expire at the same
time as the authority referred to in resolution 7. The directors consider this power desirable due to the flexibility afforded by
it. Save in respect of the issue of new ordinary shares pursuant to the Company’s share incentive schemes, the directors
have no present intention of issuing any equity securities for cash pursuant to this disapplication.
Resolution 9 – Authority to purchase Company’s own shares
The Articles of Association of the Company provide that the Company may from time to time purchase its own shares
subject to statutory requirements. Such purchases must be authorised by the shareholders at a general meeting. This
resolution seeks to grant the directors authority (until the next Annual General Meeting or (if earlier), unless such authority
is revoked or renewed prior to such time) to make market purchases of the Company’s own ordinary shares, up to a
maximum of 11,186,934 shares, being an amount equal to approximately 10 per cent. of the current issued share capital of
the Company. The maximum price payable would be an amount equal to 105 per cent. of the average of the middle market
quotations for an ordinary share of the Company for the five business days immediately preceding the date of purchase
and the minimum price would be the nominal value of 5p per share. Although the directors have no current intention to
76
Numis Annual Report & Accounts 2010
Explanatory Notes to the
Notice of Annual General Meeting 2011
make such purchases, they consider that it is in the best interests of the Company and its shareholders to keep the ability
to make market purchases of the Company’s own shares in appropriate circumstances, without the cost and delay of a
general meeting. The authority would only be exercised if the directors believe the purchase would enhance earnings per
share and be in the best interests of shareholders generally. The Company may hold in treasury any of its own shares that
it purchases in accordance with the authority conferred by this resolution. This would give the Company the ability to re-issue
treasury shares quickly and cost-effectively and would provide the Company with greater flexibility in the management of
its capital base.
Resolution 10 - Authority to amend and implement revised rules of the employee share incentive plans of the Company -
the Numis Corporation Plc Long Term Incentive Plan, the Numis Corporation Plc Restricted Stock Unit Plan and the Numis
Corporation Plc (Revised) Long Term Incentive Plan 2008 (the “Relevant Schemes”)
The Rules of the Relevant Schemes currently provide that awards under each of the Relevant Schemes, together with
awards made under any other share incentive schemes which have been approved by the Company in general meeting,
may not be granted over an aggregate of more than 20 per cent of the Company’s issued ordinary share capital within any
ten year period.
Unusually, this limit does not distinguish between awards which are to be satisfied by new issue shares and awards which
are to be satisfied by shares which have been purchased in the market by the Company’s Employee Benefit Trust (“EBT”).
Only issues of new shares dilute existing shareholders’ shareholdings – market purchases by the EBT do not (as they do
not affect the overall number of shares). The directors consider that it is in the Company’s best interests to amend the rules
of the Relevant Schemes so that the 20 per cent limit only restricts the use of new issue shares in satisfaction of awards,
and does not restrict the use of shares bought in the market by the EBT. If the limit remains as drafted, the directors believe
that it will have a negative effect on the Company’s ability to operate the Relevant Schemes in a manner the directors
consider effective to recruit and retain employees.
Documents available for inspection
There will be available for inspection at the registered office of the Company during normal business hours on any weekday
(excluding Saturdays, Sundays and public holidays), and for at least 15 minutes prior to and during the Annual General
Meeting, copies of:
(1)
the service contract of each executive director and the letter of appointment of each non-executive director;
(2)
the Articles of Association of the Company; and
(3)
revised rules of the:
Numis Corporation Plc Long Term Incentive Plan;
Numis Corporation Plc Restricted Stock Unit Plan; and the
Numis Corporation Plc (Revised) Long Term Incentive Plan 2008
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
77
77
77
Left blank for your notes
78
Numis Annual Report & Accounts 2010
Five Year Summary
Revenue and Adjusted PBT
Adjusted EPS Performance
Dividend Performance
Revenue £m
APBT £m
Pence per share
Pence per share
90
80
70
60
50
40
30
20
10
45
40
35
30
25
20
15
10
5
30
25
20
15
10
5
9
8
7
6
5
4
3
2
1
06
07
08
09
10
06
07
08
09
10
06
07
08
09
10
Revenue
Adjusted PBT
Adjusted EPS
Dividend per share
-31.2% -28.1% 12.5%
Annual compound fall in adjusted
profit before tax over 5 years
reflecting the decline in primary
revenues as equity fund raising
activity across the market have
curtailed due to economic
uncertainties.
Annual compound fall in adjusted
EPS over 5 years reflecting the
challenging markets but also an
improved performance in 2010.
Annual compound growth in total
dividend per share over 5 years
reflecting our progressive dividend
policy and strong balance sheet
which has enabled us to maintain our
dividend after 10 consecutive years
of growth.
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
Numis Annual Report & Accounts 2010
79
79
79
Cost Ratio and Revenue per Head
Non Deal Related Revenue
Revenue per head
£’000
Cost/Revenue
%
Non deal related
revenue £m
Corporate Client Base and Average
Market Cap
No. of corporate
clients
Average market
cap £m
600
500
400
300
200
100
100
90
80
70
60
50
40
30
20
10
40
35
30
25
20
15
10
5
140
120
100
80
40
20
300
250
200
150
100
50
06
07
08
09
10
06
07
08
09
10
06
07
08
09
10
Revenue per head
Cost / Revenue %
Non deal related revenue
Corporate client base
Average market cap
-13.8% 10.5% 15.9%
Annual compound decline in revenue
per head over 5 years reflecting
challenging market conditions but
our willingness to invest in high
calibre staff.
Annual compound growth in non
deal revenue over 5 years reflecting
the resilient performance of
institutional commission, increased
market share and growth in
corporate clients.
Annual compound growth in average
market capitalisation of our corporate
client base over 5 years reflecting the
growing quality of our client base and
our success in winning FTSE 250
brokerships which now total 26.
80
Numis Annual Report & Accounts 2010
Information for Shareholders
Financial Calendar
December
Year end results announced
January
Annual report issued
February
Final dividend paid
May
July
Half year results announced and half year report issued
Interim dividend paid
Company Registration Number and Country of Incorporation
2375296, England & Wales
Registered Office
10 Paternoster Square
London
EC4M 7LT
Nominated Broker
Numis Securities Ltd
10 Paternoster Square
London
EC4M 7LT
Nominated Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Registrar
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditors
PricewaterhouseCoopers LLP
Hay’s Galleria
1 Hays Lane
London
SE1 2RD
Bankers
Barclays Bank plc
Level 28, 1 Churchill Place
London
E14 5HP
Numis Corporation Plc
10 Paternoster Square, London EC4M 7LT
mail@numiscorp.com www.numiscorp.com
A leading independent, investment banking
A leading independent, investment banking
and stockbroking group. Offering a full range
and stockbroking group. Offering a full range
of research, execution, corporate broking and
of research, execution, corporate broking and
corporate finance services to companies
corporate finance services to companies
quoted in the UK and their investors.
quoted in the UK and their investors.
Overview
Financial Highlights
Our Business
Overview
Financial Highlights
Our Business
Chairman’s Statement
Chairman’s Statement
Chief Executive’s Statement
Chief Executive’s Statement
Strategy
Strategy
Business Review
Business Review
Research
Research
Execution
Execution
Governance
Governance
Board & Committees
Board & Committees
Board of Directors
Board of Directors
01
02
01
02
05
05
Risk Management
Risk Management
07
07
Remuneration
Remuneration
09
09
Directors’ Responsibilities
Directors’ Responsibilities
Directors’ Report
Directors’ Report
Independent Auditors’ Report
Independent Auditors’ Report
10
10
12
12
Financial Statements
Financial Statements
Corporate Broking and Investor Relations
Corporate Broking and Investor Relations
14
14
Consolidated Income Statement
Consolidated Income Statement
22
23
22
23
24
24
25
25
27
27
28
28
30
30
32
32
Corporate Finance
Corporate Finance
Case Studies
Case Studies
Financial Review
Financial Review
16
16
Consolidated Statement of Comprehensive Income 33
Consolidated Statement of Comprehensive Income 33
18
18
Consolidated Balance Sheet
Consolidated Balance Sheet
20
20
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Holding Company Balance Sheet
Holding Company Balance Sheet
34
34
35
35
36
36
37
37
Holding Company Statement of Changes in Equity
Holding Company Statement of Changes in Equity
38
38
Notes to the Financial Statements
Notes to the Financial Statements
Notice of AGM
Notice of AGM
39
39
72
72
Designed and produced by www.bestandco.com
Designed and produced by www.bestandco.com
Numis Corporation Plc
Numis Corporation Plc
Numis Corporation Plc
The London Stock Exchange Building
The London Stock Exchange Building
The London Stock Exchange Building
10 Paternoster Square
10 Paternoster Square
10 Paternoster Square
London EC4M 7LT
London EC4M 7LT
London EC4M 7LT
+44 (0)20 7260 1000
+44 (0)20 7260 1000
+44 (0)20 7260 1000
mail@numiscorp.com
mail@numiscorp.com
mail@numiscorp.com
www.numiscorp.com
www.numiscorp.com
www.numiscorp.com
i
i
i
N
N
N
u
u
u
m
m
m
s
s
s
C
C
C
o
o
o
r
r
r
p
p
p
o
o
o
r
r
r
a
a
a
t
t
t
i
i
i
o
o
o
n
n
n
P
P
P
c
c
c
2
2
2
0
0
0
1
1
1
0
0
0
A
A
A
n
n
n
n
n
n
u
u
u
a
a
a
l
l
l
l
l
l
R
e
p
o
r
t
R
R
e
e
p
p
o
o
r
r
t
t
&
A
c
c
o
u
n
t
s
&
&
A
A
c
c
c
c
o
o
u
u
n
n
t
t
s
s
2010
2010
2010
Annual Report & Accounts
Annual Report & Accounts
Annual Report & Accounts