Cavendish slides to loss despite consistent growth

One of the City’s newest investment banks has slashed its dividend after sliding into the red despite rapid growth.

Born out of the merger of Cenkos Securities and Finncap, which merged in September last year, Cavendish booked revenue of £48m for the year ended March 31, up nearly 50 per cent on the previous year.

 It said it had been appointed by 13 new quoted clients and executed over 120 transactions since the merger.

The UK-focussed bank said it had pruned £7m of residual costs from its merger and cut £4.9m from its staff bill.

But despite these cuts, overall employee costs swelled by 50 per cent during the year to £34.9m. That pushed the firm to a loss of £3.9m, which in turn forced it to cut its dividend from 1.15p to 0.25p per share.

Julian Morse and John Farrugia, Cavendish’s co-CEOs, said: “Since merging in September last year, our business has performed strongly with second half revenue of £35m, 80 per cent higher than first half on a combined basis. 

“The business has continued to operate well through the first quarter of the new financial year, demonstrating the strength of our diversified offering and broad client base, in  what remains a challenging market.”

Cavendish came to market during what has been a choppy period for British brokers and lenders as they have struggled to stem losses amid a sparse IPO market.

The conditions have led to a bout of consolidation among mid-sized investment banks like Cavendish.

In January, Liberum merged with Panmure Gordon to form Panmure Liberum, while in October last year, Deutsche Bank swooped in on Numis, snapping the City broker up for £410m. 

Despite the market backdrop, the juvenile bank said it remained bullish about its outlook. It said there were “many reasons to be positive”, about the state of UK markets, including a pick-up in IPO activity and the continuation of the healthy M&A market.

Morse and Farrugia added: “We believe Cavendish’s strong performance reflects our wide-ranging technical and sector expertise which enables us to tailor optimal solutions for our clients. 

“Through the merger we have created a platform which has been profitable in the second half and generated cash in a challenging market. We are therefore well positioned to capitalise on improving market conditions when they come. We continue to make strategic hires in a number of areas to strengthen our offering and explore wider opportunities to grow our business.”