Fundraising across UK equity capital markets has remained relatively resilient in the face of challenging macro-economic and geopolitical headwinds, with the completion of several large IPOs and placings in H1 2019, and strong year-to-date gains by UK equity market indices.
According to the latest report from KPMG’s Capital Advisory Group, total funds raised in the UK in the first half of 2019 reached £19.2bn – a 5% fall when compared to the same period last year, but a rebound of 22% from the downturn in activity witnessed in the second half of 2018.
And while London’s IPO market appeared to suffer a particularly sluggish six months – with only 21 listings across the main market and AIM compared to 41 in H1 2018 – the total funds raised via IPO over the past six months held up somewhat better, increasing by 4% - reflecting a lower volume of larger deals.
Linda Main, head of KPMG’s Capital Markets Group in the UK, said: “The key drivers of what at first sight looks to be a subdued performance across UK equity capital markets appears to be the compounding presence of a number of factors – relatively low debt financing costs; the availability of private equity capital; forecasts of a slowdown in global trade; US-China trade tensions; the threat of late-cycle market corrections; and, closer to home, continued uncertainty around Brexit.
“However, recent dovish commentary around monetary policy in both the US and Europe has bolstered equity market confidence, providing a more stable platform for equity issuance in recent weeks and contributing to the relatively strong year-to-date gains in both UK and global equity market indices.”
KPMG’s report highlights other key indicators that suggest that, notwithstanding the wider market environment, investors remain committed to the UK equity capital markets.
For instance, fundraises via further issues totalled £14.8bn for H1 2019 - up 42% compared to the last six months of 2018 and down by only 7% year-on-year – suggesting that investors still have funds to deploy, albeit with a preference to follow their money.
Additionally, an increasing proportion of IPO fundraising has been committed to investment funds and suchlike, with £2.6bn raised over the past 18 months - representing 19% of total IPO funds raised during this period. KPMG’s Equity Capital Advisory Group believes this is indicative of the continued appeal to investors of equities which offer sustainable yields with lower risk, particularly in a low interest rate environment.
Marco Schwartz, head of KPMG’s Equity Capital Markets Advisory team, added: “The UK remained the centre of European equity issuance in the first half of the year, and we expect London to continue to attract both domestic and international companies seeking to raise capital. It is heartening to see continued investor appetite for growth companies, as exemplified by the successful completion of several high-profile and large IPOs over the past six months, including Network International, Trainline and Watches of Switzerland.
“Furthermore, the listing of Airtel Africa at the end of June is encouraging, signifying London’s continued appeal to international and emerging markets. This sentiment was reinforced earlier in the year by the listing of two UAE-based companies (Network International and Finablr) and by the first completion of the first transaction under the LSE-Shanghai connect programme (Huatai Securities). We expect to see further fundraises via this scheme in the second half of the year, and more generally, remain optimistic about the UK’s ability to attract IPO candidates based globally.”
For further information please contact:
Katy Broomhead, Corporate Communications
Tel: 0161 246 4623 / 07824 537963
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 16,300 partners and staff. The UK firm recorded a revenue of £2.338 billion in the year ended 30 September 2018. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.