Bumper pounds 10bn new issues for London market

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The Independent Online
Last year saw a bumper pounds 10.12bn of new issues on the London stock market, but this year could be trickier, according to a survey published yesterday. KPMG Corporate Finance is forecasting that there will be a rush of companies hoping to float in the next three months to beat the uncertainty caused by the general election.

Thereafter the flood is likely to be temporarily staunched by the political uncertainty surrounding the poll, while valuations could be hit by a correction on Wall Street, the accountants warn.

Last year's figure compares with just pounds 2.61bn in 1995, but just failed to beat the record pounds 10.14bn achieved in 1994. In all there were 119 new issues in 1996, up from 86 the previous year, but little more than half the 218 in 1994.

KPMG's Neil Austin says the rot set in in the autumn. "I think things had been simmering for a while and the trigger was the fall in the US market, which caused three floats to be pulled. If things had been going well, that wouldn't have had the same effect."

Flotations planned for the pub group Discovery Inns and the stockbroker Wise Speke and the sell-off of certain engineering businesses from Morgan Crucible were all cancelled or postponed during December.

"I think people had been going cool on new issues since the autumn and that coolness then turned to uncertainty, causing people to become more choosy."

But Mr Austin said the conditions remained ripe for the market. Companies would want to get in before the election, which has to be called before the summer. Also, institutions' cash piles have been boosted by recent takeovers. And the growth rates of the smaller companies' which dominate the new issues market will look attractive against lower rates from larger companies.

There is then likely to be a hiatus before the summer, with stronger activity picking up in the autumn, he forecasts, fuelled by the good economic outlook in the UK.

Overseas factors, particularly the level of the US market, could hit valuations, but should not result in issues being pulled, he expects.

The average value of flotations shot up to pounds 85m from pounds 30m last year, led by the likes of Orange, the mobile telephone group, British Energy, the nuclear generating group, and Railtrack, owner of Britain's railway tracks.

Separately, the Centre of Management buyout Research said that buyouts and buy-ins hit a record pounds 7.5bn during 1996, some pounds 51m more than in the previous record year of 1989. The latest figure is 39 per cent up on the 1995 buyout market.

Separately, Britain's buyout market reached a record pounds 7.5bn in 1996, up 39 per cent from last year, according to a study released on Monday.