Preliminary Results 2016

For immediate release 4 April 2017

Panmure Gordon & Co. plc

("Panmure Gordon" or the "Group")

Preliminary Results for the year ended 31 December 2016

Panmure Gordon (AIM: PMR), the independent institutional stockbroker and investment bank, today announces its preliminary results for the year ended 31 December 2016.

Key Points

· Full year return to profit; consolidated profit after tax for the year of £1.1m (2015 loss of £16.7m)

· Increase of 41% in corporate finance and other fee income to £18.0m (2015: £12.8m)

· Increase of 22% in net commission and fee income to £28m (2015: £23m)

· Assisted clients in raising over £0.7bn in the year.

· Investment of £2m in new business technology enabled prime services platform, PrimeXtend Limited

· Cash at 31 December 2016 of £9.4m (2015: £5.0m)

· On-going cost control resulting in administrative costs down 7.9% to £24.4m (2015: £26.5m)

· Proposed recommended offer for the Company as announced on 17 March 2017 by Ellsworthy Limited, which in turn is controlled by QInvest LLC and Atlas Merchant Capital LLC

Chief Executive Patric Johnson commented:

"2016 was a year of consolidation and focus for the core business as we continued implementing our sector based corporate driven model accompanied by our unwavering commitment to quality in everything that we do. We have returned four successive quarters of profitability, made a significant strategic investment, re-established our US broker dealer and concentrated on ensuring we match our service expectations with our clients' requirements.

"The 2017 macro landscape continues to be challenging. That said, the year has started positively for the firm. The first quarter has seen us execute nine transactions including advising on two M&A mandates. Commission and trading income continues to perform in line with our expectations and the pipeline, as discussed in January, is progressing well. As such we remain confident for the year ahead.

"We are excited about the recent offer for the issued share capital of the firm as announced on Friday 17 March 2017, and the prospect of Atlas Merchant Capital joining our existing long-term supportive shareholder QInvest as part of Ellsworthy Limited."

The full audited Report and Accounts for the year ended 31 December 2016 will, today, be made available on the Company's website (www.panmure.com) and will be sent to shareholders in due course

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

-Ends-

Enquiries:

Panmure Gordon

Patric Johnson, Chief Executive 020 7886 2500

Buchanan (Financial PR) 020 7466 5000

Bobby Morse/Stephanie Watson [email protected]

Grant Thornton UK LLP (Nominated Adviser)

Philip Secrett/Salmaan Khawaja/Jamie Barklem/Harrison Clarke 020 7383 5100

CHAIRMAN'S STATEMENT

I am pleased to present my first statement since assuming the role of Chairman in May 2016.

In the ten months since my appointment I have had the chance to witness at first hand the quality of service that Panmure Gordon represents, the excellent staff that work for the Company and impressively, the good feedback from clients both institutional and corporate. Panmure Gordon has, deservedly, a well-respected brand, but at a time of great challenge and change needs to deploy renewed energy and innovation to succeed in one of the most competitive landscapes I have seen the City of London face in the last 35 years.

Panmure Gordon has progressed steadily since the appointment of Patric Johnson as Chief Executive in February 2016. The business has been re-focussed on a sector based corporate driven model, costs have been reduced accordingly and we have continued to benefit from the financial support of our major shareholder, Qinvest. Indeed the latter provided a financing facility of £5m in February 2016 of which £3m was drawn down in March 2016 and that has allowed us to invest in PrimeXtend, an exciting opportunity that I am glad to report is on track with its original plan.

2016 has been a challenging year, yet the Company raised over £0.7bn for our clients and I am glad to report that revenue earned as a result has helped bring the Company back into profit. Since the year end, costs have continued to be removed from the business and the strategic focus continues to be sharpened which allows us to look towards the future positively, whilst acknowledging the many challenges and uncertainties that remain.

The year end date of 31 December saw the departure of Anthony Cann after over nine years of excellent service as a Non-Executive Director to the Company and we are all thankful for his counsel and guidance over that time. Also, since the year end, Philip Tansey has retired after almost exactly six years as our Chief Financial Officer and we thank him for all his work over that time and wish him all the best in his future endeavours.

The announcement on 17 March 2017 regarding the proposed offer for the issued share capital of Panmure Gordon, by Ellsworthy Limited, a company owned and controlled by QInvest LLC and a subsidiary of a fund managed by Atlas Merchant Capital LLC, opens an exciting chapter for the Company, that subject to the court-sanctioned scheme being approved, will provide a stronger framework with better access to additional capital on which to continue to grow the business, enabling us to better support our client needs, both corporate and institutional.

As such, I am confident that Panmure Gordon, with the support of its current long term investor, QInvest, and potentially the additional support of Atlas Merchant Capital, will continue to be well positioned to execute on its strategy for the future whilst remaining sufficiently able to respond to any challenges as and when they present themselves.

Andrew Adcock

Chairman

4 April 2017

CHIEF EXECUTIVE'S REVIEW

Macro review

UK equities returned 17% in local currency terms in 2016, their best year since 2010. A revival in commodity prices, an acceleration in global growth and an expectation of reflation and higher US interest rates pushed financials stocks forward during Q4 in particular. By contrast returns in US Dollar terms (-2.7%: 2016) were held back by the sharp devaluation in Sterling, particularly since the UK's EU referendum.

The London equity market remained open for new business throughout the year barring China-related growth concerns in February and Brexit related worries during the summer. Over the course of 2016 the London market raised £25.9bn in IPO funds, up from £24.9bn in 2015.

Looking ahead into 2017, much hinges on the policy-induced reflation plans from the new US administration as well as the evolution of political events in Europe. The disruption of global systems from digitalisation and globalisation continues apace which should ensure over the near term that inflation and interest rates remain below their historic averages.

Overview

With a challenging macro-economic environment following the UK referendum and the US presidential elections, 2016 was a year of consolidation and focus for the core business as we continued implementing our sector based corporate driven model accompanied by our unwavering commitment to quality in everything that we do. We have returned four successive quarters of profitability, made a significant strategic investments and concentrated on ensuring we match our service expectations with our clients' requirements.

It has been pleasing to see the steady progress made in our corporate driven approach whilst reinforcing our commitment to both corporate and institutional clients. All sections of the business have performed positively and it is noteworthy to report the increase of 22% of net income to £28m (2015: £23m) despite the reduction in headcount to 109 at year-end (2015: 122).

Net commission and trading income declined by 10% to £9.5m (2015: £10.5m). However, this was entirely on account of the closure of our Swiss representative office which contributed only one month of activity in 2016. On a standalone basis, UK net commission and trading income has increased by 1.1% to £9.4m (2015: £9.3m) which is an excellent achievement when set against the year-on-year declines in volume and commission in advance of the well-publicised changes in the regulatory landscape represented by MiFiD II.

Corporate finance and other income increased in 2016 by a solid 41% to £18.0m (2015: £12.8m) which reflects an equally impressive spread of engagements including five IPOs, twelve M&A transactions and a total of forty four fee generating deals and advisory engagements across all of our seven key business areas.

Costs have been trimmed to reflect the specialisation and focus around key business lines and, whilst there is still more that we can do, it is pleasing to report that administrative costs have declined by 7.9% to £24.4m (2015: £26.5m) over the year. Fixed employment costs, the major constituent of total administrative costs, have significantly declined over the course of 2016 reflecting the effective management of total headcount.

Dividend

The Board is not recommending the payment of a dividend (2015: nil per ordinary share).

Investment in PrimeXtend

On 21 September 2016 the Group committed to a strategic investment in a newly incorporated company, PrimeXtend Limited ("PrimeXtend"), a business at the convergence of risk management and technology focused on global execution and prime services. The Group has committed to an all-cash investment of £2m as part of a staged payment plan. Payments totalling £1.1m were made in 2016, in accordance with this plan. PrimeXtend will operate under an appointed representative agreement with Panmure Gordon (UK) Limited, and operate from our London offices.

The investment allows PrimeXtend to deploy an integrated global execution and prime services business operating alongside Panmure Gordon. PrimeXtend provides a full service, single entry point to global markets including multi-product execution and a full range of prime financing solutions across asset classes. The platform, which was built in response to the evolving financial market ecosystem, combines leading edge risk management practices and state-of-the-art automated trade processing systems and operational protocols to service international, mid-market institutional investors.

I am pleased to report that the set-up of PrimeXtend's technology infrastructure is fully complete and that client uptake has progressed well. PrimeXtend is well on track to achieve the financial forecasts agreed at the time of the investment.

Overseas offices

On 29 January 2016 conduct by the Group of regulated business from the Nyon, Switzerland location ceased and the office was closed. A number of closure expenses were incurred as a result of this action resulting in a net loss impact of £0.2m on the results for 2016. Furthermore, our Singapore office, which introduced companies from that region that wished to access the London markets to our London corporate broking teams, was closed in May 2016 with a net loss impact of £0.1m on the results for 2016.

US Broker Dealer

2016 saw us re-establish our US presence, Panmure Gordon Securities Limited, a US FINRA registered broker dealer has been incorporated and will further strengthen our commitment to service our corporate client base directly with US investors.

QInvest

We are fortunate to have as a key shareholder, QInvest, who is supportive of our business, strategy and our management. Their granting of financing to enhance our financial strength and liquidity has allowed us to accelerate our plans for the near future.

Offer for the Company

On 17 March 2017 the Company and the Board of Directors announced the recommended acquisition of the Company by Ellsworthy Limited ("BidCo") a private company limited by shares incorporated on 31 January 2017 for the purpose of implementing the acquisition. BidCo is a company owned and controlled by our supportive major shareholder QInvest and a third party investor, Atlas Merchant Capital LLC ("Atlas"). The acquisition is intended to be effected by means of a scheme of arrangement under Part 26 of the Companies Act. Under the terms of the proposed acquisition, each shareholder will be entitled to receive £1.00 in cash for each share held and as such the Board agreed to recommend it. The acquisition will be conditional on, amongst other things, the approval by a majority of shareholders and the FCA.

2017 Outlook

2017 has started positively for the firm despite the continued challenges faced by all areas of the financial services industry. Volatility spikes and a continued decline in trading volumes across the market, coupled with the backdrop of United Kingdom's exit from Europe will ensure that the coming two years will remain challenging. However I am pleased to report that we have started the year well and the first quarter has seen the business execute nine transactions including advising on two M&A mandates. Commission and trading income continues to perform in line with our expectations and the pipeline, as announced in January, is progressing well as we continue to win new mandates; as such we remain confident for the year ahead.

Patric Johnson

Chief Executive

4 April 2017

KEY PERFORMANCE INDICATORS

Financial

Operational

Consolidated income statement

For the year ended 31 December 2016

1 Administrative expenses which total £26.4m (2014: £41.9m) have been presented separately here owing to their individual nature and size

Consolidated statement of comprehensive income & expense

For the year ended 31 December 2016

The Group had no other comprehensive income for the period.

Consolidated statement of financial position

As at 31 December 2016

Approved by the board on 4 April 2016 and signed on its behalf by:

Patric Johnson

Chief Executive Officer

Consolidated statement of cash flow

Consolidated statement of changes in equity for the year ended 31 December 2016

Consolidated statement of changes in equity for the year ended 31 December 2015

1 Basis of preparation 

The financial information set out in the financial statements contained within this announcement does not constitute the groups statutory accounts for the years ended 31 December 2016 and 2015. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course. The auditor has reported on both sets of accounts; their reports were (i) unqualified, (ii) did not include any reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2 Segmental analysis

The Group reports its operating segments according to how the Group's chief operating decision maker ("CODM") allocates resources to each segment and assesses performance. In this respect the Group's CODM has been defined as the Group's CEO.

In the segmental table below, the principal operating segments have been identified as the Institutional Equities and the Corporate Broking divisions supported by a central group managing the administrative functions of the Group. In previous years, this table has been presented on a geographic basis. However, since the closure of the Swiss office in January 2016, this is no longer meaningful. The results of the Swiss office are included with those of the Institutional Equities' segment. 

Segmental analysis for the year ended 31 December 2016 and reconciliation to the statutory income statement is set out below:

All revenue is from external customers. There are no regular major customers that account for more than 10% of revenue.  

PrimeXtend

The contribution of PrimeXtend's business for the period ended December 2016 has been included within the Central segment. As the business develops in 2017 it will become a more significant contributor to the Group and the intention is that it will be run as a separate operating segment and disclosed as such in the financial statements for the period ended December 2017.

Switzerland

The business previously conducted by the representative office of Quaker Securities related entirely to institutional equities and has been incorporated into the Institutional Equities principal operating segment. Switzerland, which was a separate geographic segment in 2015, recorded the following results in the year ended December 2016 (£'000): Net revenue of £78, directly attributable costs of £292, tax of £6 resulting in a post-tax loss for the year of £220. For 2015 in £000 the net revenue was £1,264, direct costs were £1,314, tax was £24 resulting in a post-tax loss for the year of £74.

1 The Swiss business operated as a representative office of the UK business until 31 January 2016 when it ceased regulated business in Switzerland.

3 Staff costs

The 2015 staff costs comparative has been restated to correct an error in the prior year reported balance.

The Group operates a defined contribution pension scheme. At the balance sheet date the Group had no outstanding pension contribution liabilities. The charge for the period to 31 December 2016 was £0.8m (2015: £1.1m).

Actual number of persons, including Directors, employed by the Group as at 31 December 2016:

Average number of persons, including Directors, employed by the Group during the year was:

* The UK total included 1 headcount in Singapore until 31 May 2016

Directors' emoluments

Emoluments paid to Directors were as follows:

Three Directors accrued benefits during the year under the Group's defined contribution pension scheme.

The Directors are reimbursed all reasonable expenses incurred solely in relation to their duties as a Director.

4 Income tax expense

The analysis of the total income tax (charge) / credit is as follows:

The UK corporation tax rate reduced from 20% to 19% on 1 April 2017. It has also been announced that the corporation tax rate will reduce to 17% from April 2019. Deferred tax has been recognised at the blended rate of 18%.

5 Earnings per share

Earnings per share ("EPS") are calculated on a net basis using the profit on ordinary activities after taxation divided by the weighted average number of shares detailed below.

6 Acquisition of PrimeXtend

On 21 September 2016 the Group committed to a strategic investment in a newly incorporated company, PrimeXtend Limited ("PrimeXtend"), a business focussed on the evolution of agency broker services. The Group will make an all-cash investment of up to a maximum of £2m over a period of ten months, subject to the satisfaction of certain performance milestones, for an initial 49% shareholding with the balance retained by Xtend Group Limited. PrimeXtend will operate under an appointed representative agreement with Panmure Gordon (UK) Limited. As at 31 December 2016, consideration of £1.144m had been paid, and £0.856m remained payable subject to the satisfaction of those conditions. A further £0.623m was paid subsequent to year-end.

The Group results consolidate the results of PrimeXtend, reflecting the control, rights and influence the Group holds.

PrimeXtend is a start-up and the fair value of assets and liabilities at the time of acquisition were Nil. Nor were any intangible assets acquired on acquisition. The goodwill arising on acquisition is £1.020m which equates to the non-controlling interest established on acquisition. The goodwill essentially represents intangibles such as know-how and client contacts which are not capable of being recognised under IAS 38.

PrimeXtend made a loss in the period of £0.390m of which the group's share was £0.191m. Given PrimeXtend is a start-up, the result of PrimeXtend had it been acquired on 1 January 2016 is not meaningful. Transaction costs of £0.1m have been included in operating expenses for the year ended 31 December 2016.

The investment value represents the goodwill created on acquisition of the investment by the Group in 2016 including future committed and contingent remaining tranches of cash injections.