2021 appears to be seeing a strong start for the London IPO market as some new issues were announced following the recent signing of the UK-EU trade agreement late last year.
2020 was a slightly more subdued year for IPOs in the London market. The Hut Group was the most famous year to hit when it launched in September with a premium from its asking price of 500p and a valuation of £ 5 billion.
Since then, with sales of just over £ 1.1 billion in 2019, THG Holdings has grown in strength, up 24.5% year over year. THG's main strength is the THG Ingenuity technology and operations platform, which is used by major blue-chip corporate brands such as Nestle, Procter and Gamble, and Johnson and Johnson for their e-commerce activities. It's also an online retail store that operates brands like Lookfantastic.com and ESPA, a luxury skin and body care company.
Over the past few weeks we've heard from the likes of Moonpig Group and Dr. Martens heard they plan to float for the next few weeks.
The past twelve months have been a boon for online retailers, and Moonpig Group, the maker of online digital greeting cards, has seen a surge in popularity due to various bans and restrictions. This growth in business appears to have led to the realization that additional capital is likely to be required to expand.
Moonpig is expected to make 25% of its share capital available for listing if the company is listed on the London Stock Exchange with a valuation in the order of £ 1 billion or more.
The latest reports show that revenue for the end of last year rose to £ 173.1 million as of April 30, an increase of 44%. It is obvious that the income for this year should be significantly higher.
Even taking into account the fact that Moonpig is likely doing well from its recent move to online, a £ 1bn valuation seems a little optimistic, and that's for the good, especially when you look at Paperchase that went under management is and Card Factory, which while having a large presence on the high street, both work in a similar space.
Card Factory has a market capitalization of £ 140 million and had sales of £ 451.5 million and a pre-tax profit of £ 65.2 million for the last full fiscal year ended January 31, 2020.
In the most recent update of H1 trading, the effects of Covid lockdowns and various restrictions were felt more clearly as revenue fell almost in half from £ 195.6m last year to £ 100.5m of the worst impact, although that was still insufficient to prevent a £ 22.2m loss.
The company is currently in talks with its banks after seeing another loss of revenue in December that resulted in a loss of over 30% of its trading days this fiscal year. That loss for the year is expected to be around £ 10m, partly due to a 137% increase in like-for-like sales on its online channel.
Nonetheless, the poor performance in this sector, which traditionally has a very low margin, suggests a difficult trading environment, even without the added cost of a large footprint on the main drag.
Card Factory went public in May 2014 and was listed at 225 pence. While stocks did well up to 400p for a year or two, traffic has declined in one direction since hitting a low of 22p in late March last year before bouncing back to current levels.
2014 was a decent year for UK IPOs, with Patisserie Valerie, Poundland, Pets at Home, Just Eat and AO World spinning out of their traps. Of those five there are only three left, with Just Eat being acquired by Takeaway.com, while Pets at Home and AO World were still under water until last year at their 245p and 285p IPO ratings, respectively. For the latter two, the pandemic has turbo-charged their valuations, with AO World seeing its share price drop to 48p at one point less than a year ago. Now both companies have stock prices over 400p.
Another IPO that will arouse great interest in the coming weeks is the shoe and boot manufacturer Dr. Martens considering bringing his brand to market for public listing.
Once a staple of the 1970s punk and skinhead scene, the cult brand is also considering a float in February after much of its business is done online.
Private equity group Permira, which bought the brand in 2013, is said to be looking at options to sell it. The company is expected to be valued at nearly £ 1 billion.
This also seems a little optimistic, as sales jumped 18% to £ 318.2m in the last six months to the end of September last year as more consumers opted to buy their shoes online – a good one Percentage of high street retail that was managed by Clarks shoes late last year. In its last full fiscal year, which ended in March 2020, sales were £ 672 million.
While the Clarks business was bailed out with a £ 100 million rescue plan led by LionRock Capital, the main reason behind the decline was a weak online presence, which this new deal will hopefully address.
It is certainly true that the DM brand, as it was called colloquially in the 1960s and 1970s, has retained its decades of resilience, but the durability of boots seems to have decreased in recent years.
The hope is that these issues have been addressed while the motivations behind the sale need to be addressed as well, almost a year after Permira diversified the deal and paid £ 1.3 billion for coaching brand Golden Goose in late February 2020.
The recent private equity sales have left publicly traded companies heavily indebted, which has subsequently proven too burdensome to be scaled back, leading to the later failure of the aforementioned deal. Recently, for example, these have been Debenhams and the AA.
Let's hope these new IPOs turn out to be the first of many for the London market this year. However, their success is likely to depend more on realistic valuation than on economic recovery later this year.