Investment case

Peel Hunt is a leading specialist UK investment bank with more than 30 years of unbroken profitability and a consistent track record of investment and growth across its business. Each of its three divisions, Investment Banking, Research & Distribution and Execution & Trading, is a leading participant in its respective markets.

Each of Peel Hunt’s operating divisions supports the others in a collaborative business model. We believe that the increasing number of retained Investment Banking clients helps to support a growing volume of secondary trading which, in turn, helps to win further Investment Banking mandates. Research & Distribution provides insights to support both Investment Banking and Execution & Trading, which in turn provide insights to Research through corporate relationships and an understanding of the trading in client stocks, respectively. Investment Banking and Research & Distribution must agree before a new Investment Banking client is taken on by Peel Hunt. This is designed to ensure strong collaboration and alignment of the business areas within the Group, helping to better serve both Investment Banking and institutional clients.

We believe that the substantial investment required to compete effectively in our markets represents a significant barrier to entry to potential new competitors. Continuous investment in people and technology has given us a sustainable competitive advantage compared to our peers through our deep sector knowledge and differentiated technology capabilities, including a high degree of automation in the execution platform.

Our leading technology, mainly developed in-house, supports each of our divisions and gives us competitive advantage. Investment in technology has resulted in a number of proprietary technology offerings for our clients, including PHAT, a stable, scalable and robust execution and trading system which has been developed internally by Peel Hunt over more than ten years, with many bespoke features developed in close collaboration with clients. PHAT allows, inter alia, algorithmic institutional execution, automated on-exchange and RSP market-making, which we believe enables the Group to secure improved outcomes for its clients, including price improvements on LSE visible prices on 30 million trades in 2019 and 2020. The systems also include ARM, a model driven systematic trading engine with automatic position management; REX, a retail fund raising platform that supports Investment Banking’s ECM and DCM activities; and other internal tools such as automated conflict management and MiFID obligation management.

With multiple drivers of future growth Peel Hunt has enjoyed consistent steady growth across the business, growing revenue from £70 million in FY17 to £96 million in FY20 and £197 million in FY21, a year that benefited in particular from strong growth in Execution & Trading. Growth over the ten years from 2010 to 2020 has been driven by investment in people and technology, which has delivered a four-fold increase in retained Investment Banking clients, a three-fold increase in the number of research sectors where Peel Hunt was voted in the top three by II and a four-fold increase in its share of LSE trading volumes. Momentum continued into FY21 which saw strong growth in all parts of the business including a 14% increase in the number of FTSE 250 retained Investment Banking clients, an 8% increase in Research stock coverage, an 18% increase in the number of distribution accounts and a 75% increase in the value of stocks traded on our trading platform. We believe we are well-placed to continue increasing our market share in all areas of our business, to benefit from product and geographical expansion and from structural changes in retail investment markets.

We offer our clients a wide range of products and services through: (a) Investment Banking, which generated an average of approximately 43% of Peel Hunt’s revenues in the period from FY17 to FY21; (b) Research & Distribution, which generated an average of approximately 20% of Peel Hunt’s revenues in the period from FY17 to FY21; and (c) Execution & Trading, which generated an average of approximately 37% of Peel Hunt’s revenue in the period FY17 to FY21. With an unbroken record of profit generation over 30 years, Peel Hunt is also cash generative, returning over £121 million to investors over the last five years between FY17 to FY21.

Committed to the next phase of Peel Hunt’s growth, the senior management team rolled over between 80-90% of their investment in Peel Hunt (net after tax), showing their commitment to the next phase of Peel Hunt’s growth. Their shares will be locked up for four years, with 25% released each year.