Scots IPO market to slow as UK faces ‘promising’ 2018

● Stable investor confidence and smaller firms driving strong nationwide outlook

Scotland’s initial public offering (IPO) market has seen increased activity over the last 18 months, but is expected to continue its recent slowdown over the rest of this year, according to the latest issue of EY’S IPO Eye published today.

The report found that the London market enjoyed a “steady” start to 2018 despite volatility and further pricing pressures, raising about £1.3 billion altogether via 16 listings.

EY also said the dominance of financial services “confirms that London continues to hold its position as a global financial centre despite political uncertainty”.

London’s main market saw nine IPOS, raising a combined £1.15bn, while seven flotations on the Alternative Investment Market (Aim) raised £149 million. Collectively there was a 38 per cent year-on-year drop in deal numbers, while proceeds rose by 6 per cent. Only one of the main market IPOS being backed by private equity meant that total proceeds were restricted, the report found.

Financial services accounted for 11 of the 16 flotations and about half of proceeds. Looking ahead, EY said the influx of cross-border IPOS, which comprised about a quarter of listings and 58 per cent of proceeds in 2017, is likely to continue as firms look to capitalise on pre-brexit calm.

Miketimmins,ey’sipoleader in Scotland, said: “Although the market may remain lowkey overall, the UK IPO pipeline is currently still looking strong for small main market listings and Aim listings.”

He predicted that some of the delayed flotations from this quarter will come on stream in the second quarter, and activity will peak in the third for such companies. “There are some signs of more listings from larger companies anticipating more significant deal sizes, but this part of the market is very much waiting for a first-mover to lead the way.”

Timmins also turned his attention to IPOS north of the Border, flagging “enhanced” activity in the last 18 months, although this has slowed in recent months. And the recent acquisition of Edinburgh-based accounting software specialist Freeagent has taken one of the recent additions back off the market in a short period of time, he added. “This activity is fuelling greater interest in IPO options in many boardrooms but we are likely to see a quieter period here in the remainder of 2018.”

It was revealed last week that Freeagent has been bought by Royal Bank of Scotland in a £53m deal, after joining Aim in late 2016 in a move raising £10.7m. Other Scottish IPOS include housebuilder Springfield Properties listing on Aim in October, raising £25m.

Timmins said the outlook for 2018 Uk-wide looks to be “promising” driven by robust equity markets and “sound” corporate earnings.

He added: “Despite expected interest-rate hikes later this year and uncertainty around potential trade policies, steady investor confidence is encouraging a healthy pipeline across sectors and markets.”