…By Henry George for TDPel Media.
Peel Hunt, a broker and investment bank, announced an annual loss and highlighted the closure of the London IPO market due to a lack of dealmaking.
The institution reported a loss of £1.5 million for the 12 months ending March 31, 2023, compared to a profit of over £41 million in the previous year.
This decline in profitability was attributed to a significant drop in equity capital market transactions, from 46 to 27.
The revenue also experienced a substantial decrease, falling from £131 million to £82.3 million, marking a decline of over 37%.
As a result, Peel Hunt will not be paying an annual dividend.
Challenging Year for UK Equity Markets Impacts Peel Hunt
Peel Hunt described the past year as “difficult” for the UK equity markets, specifically pointing out the low trading volumes, particularly in initial public offerings (IPOs).
The lack of companies going public on the stock exchange adversely affected the investment banking revenues of Peel Hunt, resulting in a decrease of £23.4 million from the previous year.
However, there are some positive indications, primarily in the area of mergers and acquisitions (M&A), which show a potential improvement in market activity.
Peel Hunt observed a “pick-up in market activity” in the fourth quarter, with new mandates and pipeline deals highlighting a higher emphasis on M&A within their investment bank.
Macroeconomic Challenges and Uncertainty
While Peel Hunt is cautiously optimistic about a potential recovery in capital markets, it acknowledges that the macroeconomic backdrop remains challenging.
Factors contributing to this challenging environment include the uncertainty caused by rising interest rates and political disruptions.
The ongoing conflict on European soil, combined with the negative consequences of the UK Government’s mini-budget, has led to a rapid increase in interest rates, reaching the highest level in 14 years.
Additionally, recent significant bank failures have had a detrimental impact on investor confidence and market volumes in the UK.
CEO’s Perspective and Share Performance
Steven Fine, the CEO of Peel Hunt, acknowledged the well-documented challenges faced by the financial services sector in the past year, which have affected market activity and investor sentiment across the industry.
Despite these difficulties, Peel Hunt noted that UK mid-cap valuations remain attractive and expressed tentative optimism about a potential recovery in capital markets.
However, the company remains cautious about the uncertain macroeconomic landscape.
Following the announcement, Peel Hunt’s shares experienced a decline of 2%, falling from 101p to 99p.