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London's stock market enjoys a positive spell


Well, soon you will have the opportunity to do so, as Cabot Credit Management, the UK’s largest, has announced it plans to float on the stock market.

The IPO, which is expected to take place some time during November, will value the company – currently owned by the private equity firm JC Flowers and the US debt collection firm Encore Capital – at £1bn.
There had been a potential hold up to proceedings as Peter Crook, who had been lined up as chairman, had to step aside after having to resign as chief executive of Provident Financial, the doorstep lender, following a thumping profits warning from the company.
Instead, Cabot’s chairman will now be Andy Haste, the former chief executive of RSA, the insurer and also currently the chairman of Wonga, the short-term credit provider.
Ken Stannard, chief executive of the Kent-based company, said: “This is a very exciting episode in Cabot’s continued growth and development.
“As one of the largest players in Europe, it now feels right to be listing on the London Stock Exchange. We are faced with significant untapped growth potential.”

Image: Cabot has announced its intention to float
News that Cabot is coming to market – first reported by Sky News – confirms a very positive recent spell for the London stock market.
It is one of a number of companies that has recently announced plans for a flotation with others including Footasylum, the Rochdale-based fashion retailer founded 12 years ago by David Makin and John Wardle, the co-founders of JD Sports.
Sky News recently revealed that Amsterdam-based TMF – which provides tax, administration and legal services – is also planning to come to market.
So, too, is Bakkavor, the largest supplier of ready meals to Britain’s supermarkets, and TI Fluid Systems, a car parts supplier.
So all of a sudden, these are good times for the bankers and advisers who make a living bringing companies to market.
According to the business services firm PricewaterhouseCoopers, some £7.36bn was raised in flotations across Europe during the July-September quarter, up from £3.4bn in the same period last year.
That, of course, reflects a bounce back from the generally depressed conditions during the third quarter of 2016, when businesses and the City were still trying to work out what the consequences would be of the unexpected Brexit vote.
But it is striking nonetheless that, during the third quarter, London accounted for 36% of all new listings in Europe, with 27 companies listing on the London Stock Exchange, raising £2.7bn.
That was more than any other European bourse and was London’s busiest third quarter since 2011.
This confidence can be seen throughout the UK market.
The Alternative Investment Market (AIM), where the riskiest new issues tend to be floated, has seen more than £1.7bn raised during the first nine months of the year – up from just £1.1bn for the whole of 2016.

Image: Market conditions have been calm
The question is why conditions are suddenly quite good for flotations.

There appear to be a number of reasons.
The first and most obvious is the recent lack of volatility in markets.
Conditions have been relatively calm, with few of the large one-day gains or falls that have characterised the post-crisis years.
Instead, the FTSE 100 has drifted gently higher – hitting new records on a number of occasions.
Other markets elsewhere have also been regularly setting records – pointing to an environment in which investors are clearly happy to commit capital to IPOs.
That is an investment climate on which, if you are the owner of a business that you hope some day to float on the stock market, you do not want to miss out on.
A second factor is that a backlog of potential flotations had built up following the Brexit vote.
Companies were reluctant to come to market in an uncertain environment – particularly when it was not clear when the UK would actually leave the EU – but, with Article 50 now triggered and the UK’s exit date set in stone as just under 18 months away, there is a little more certainty around.
The risk of Jeremy Corbyn, who is seen as anti-business, in 10 Downing Street might put off some investors but – in theory anyway – there is not due to be another General Election for almost five years.
A third factor is the macroeconomic backdrop.
Growth has returned to the eurozone and, for companies doing business there, that is supporting earnings growth.
The UK economy is also growing at a modest but steady pace.
With interest rates still at ultra-low levels around the world, albeit potentially set to start rising gently in the UK, that makes equities an attractive alternative to buying bonds or leaving cash on deposit.
Money remains very cheap and there is enough of it sloshing about for investors to feel comfortable committing some of it to new issues.
How long these benign conditions remain place is open to question.

Image: The FTSE 100 has drifted gently higher, hitting new records on several occasions
Some people are concerned that stock market valuations are already stretched and, as we get closer to Brexit, investors will begin to get jittery if the terms of Britain’s departure from the EU remain clouded by uncertainty.
Moreover, should the US Federal Reserve or the Bank of England raise interest rates more rapidly than expected, that could also knock confidence.
But, for now, those who are looking to float companies on the stock market and the people who advise them are making hay while the sun shines.
Source: Sky

About Business Ideas UK

My name is Joel Bissitt. I have been an entrepreneur for 24 years and have run many small businesses across various sectors. For the last 10 years I have worked mainly within online media, franchising and small business start-ups. I am an author of various websites including Franchise UK https://www.franchise-uk.co.uk

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