City broker FinnCap is putting its expansion plans on ice, cutting jobs and shrinking office space amid a brutal outlook for equity capital markets deals.
Revenue at the broker halved to £16.4m as a result of the slump in deals, according to its results for the half year to 30 September.
Like many City brokers, which have struggled in the wake of the second iteration of the Markets in Financial Instruments Directive — sweeping European regulation rolled out in 2018 — FinnCap has looked to move away from its traditional reliance on fees from offering broking services to UK Plc.
Rivals including Numis, Peel Hunt and Liberum have all also looked to offer more investment banking services in recent years, diversifying away from equity research and fees from stock market listings.
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However, FinnCap said in a statement that it is putting some of these investments on ice. Meanwhile, it has cut 15 jobs through voluntary and mandatory redundancies across all parts of the firm, it said in a statement.
“Expansion into advisory areas outside our key service areas has been de-prioritised” as a result of the slump in revenue, according to the statement, with the firm also slashing other fixed costs.
“It is likely that these adverse conditions will continue for some time and we have therefore taken appropriate steps to reduce our fixed operating cost base by managing discretionary spending and reducing headcount across all functions of the firm to align it with the opportunity we see ahead of us,” chief executive John Farrugia said in a statement.
FinnCap is also looking to sell off “surplus” office space and has identified further savings, the statement says.
FinnCap reported sharp declines in all parts of its business. The broker raised just £80m on stock markets in the half year ended 30 September, down from £250m from the same period a year earlier, the results show. It also advised on £430m worth of private M&A deals, a decline of 57%.
M&A deals for public companies also slumped at FinnCap, falling from £500m to £75m, and debt financing mandates raised £90m less at £160m.
UK equity capital markets fees have slipped to a 10-year low in 2022, while European ECM activity has slumped by 74% to $70.4bn so far this year, according to data provider Dealogic.
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