Half Year Trading Update

Peel Hunt, a leading UK investment bank, today issues a trading update in respect of the six-month period ended 30 September 2023.

Throughout the first half we have continued to support our clients in navigating the prolonged period of adverse market conditions that has persisted since the end of 2021. In line with market expectations, Group revenue for the period is expected to be approximately £42.4m, an increase of approximately 3.2% year on year.

Our strong balance sheet provides financial resilience for the Group and allows us to take a long-term view to build our business for the benefit of all our stakeholders. During the period, this long-term view has allowed us to make progress against our strategic priorities and strengthen our position as the UK's leading independent investment bank for mid-cap and growth companies.

Update on business divisions

Investment Banking

We were pleased to act as joint bookrunner to FinTech business CAB Payments on its IPO and associated equity raise of £335m, making it the largest UK IPO of the year so far. Whilst revenues in Investment Banking were significantly ahead of the same period last year, overall deal activity has remained subdued.

We further cemented our leading position in the FinTech sector by being appointed as sole financial adviser to the newly launched FinTech Growth Fund. The FinTech Growth Fund, which has been welcomed by the UK Government, has been established in response to the Kalifa Review that identified a £2bn FinTech growth funding gap in the UK. The fund is the first specialist investment fund of its kind with plans to raise up to £1bn to invest in growth-stage UK FinTech companies. This represents a significant opportunity, with the UK being a highly attractive FinTech hub1.

More broadly, our diversification strategy is progressing well. We acted as financial adviser on several UK public M&A transactions in the period, both buyside and sellside, and expanded our pipeline of Private Capital Markets and Debt Advisory transactions. In addition, we won 9 high-quality mid-cap and growth companies as corporate clients and now act as an adviser to 154 companies of which 38 are in the FTSE 350. The aggregate market capitalisation of our corporate clients has increased by 4.6% year on year, to approximately £96bn.

Execution Services

Underlying trading has been resilient despite lower market volumes, with trading in Fixed Income, Investment Companies and ETFs contributing to revenues that remain above pre-Covid levels. We continue to focus on adding incremental liquidity and driving efficiencies.

Research and Distribution

Our Research team has focused on delivering differentiated and highly relevant mid-cap and growth company research to our institutional clients. Following further initiations in the period we now provide insightful analysis on over 200 FTSE 350 companies.

Institutional Electronic Trading revenues have more than doubled year on year and we have continued to invest in talent, with key senior hires having joined the firm during H1.

Strategic progress

REX continues to win mandates for equity raises from third party banks, brokers and financial advisers and we are hopeful of receiving regulatory approval for RetailBook to operate as a standalone entity in the coming months. Our plans to fully reinstate our European distribution capability are progressing well and we are pleased to announce that our Copenhagen office, which is now staffed, will be operational shortly.

Operating costs and resilience

Whilst there has been a focus on costs during the period, this has been against headwinds of inflationary cost increases, particularly in service provider and technology costs, with interest rate rises impacting our debt facilities. As a result, costs have increased broadly in line with inflation over the period. We reduced our long-term debt by £6m in June, partly mitigating some of the expected interest cost increases. Long term debt now stands at £15m, down from a peak of £30m in September 2021. We continue our long-standing relationship with Lloyd's, having renewed our £30m RCF in September for another year. The RCF provides additional liquidity for the business as and when needed and is currently undrawn.

Changes to regulatory landscape

We welcome the progress of the current reform agenda to encourage investment into UK public and private capital markets and reverse the structural trend of de-equitisation. To ensure that reforms deliver the desired impact for UK plc and our clients, we continue to be an active participant in discussions, and in particular welcome the debate over ISA and pensions reforms to encourage investment in UK listed companies. We encourage all stakeholders to make rapid progress on the reform agenda.

Outlook

Whilst exact timing of recovery cannot be predicted, there are encouraging signs that interest rate rises are bringing inflation under control, and we may be nearing the end of the current tightening cycle. We have the balance sheet strength and regulatory capital to weather the remainder of this cyclical downturn and are well positioned to benefit from the strength of our platform and considerable operational gearing as market conditions normalise.

Peel Hunt will announce half year results for the six-month period ended 30 September 2023 on 5 December 2023.