UK companies cool on IPO plans as investor jitters grow

Several UK companies have halted plans to float on public markets as investors signal greater hesitancy while fears grow of a winter lockdown and inflationary cost pressures.

Hawksmoor, the London-based steak chain, has shelved its planned flotation, partly because of the broader uncertainty in the hospitality industry caused by shortages of labour and supply chain disruption. PureGym, the budget fitness company, is also reconsidering its intention to list, said people with knowledge of its plans.

Marley, a large British roof tiling supplier, on Tuesday said it was postponing its IPO, which would have valued the company at about £500m, because of “market volatility” — the same reason the energy investor Blackfinch Renewable Europe Income gave earlier this month. Fruugo, the online marketplace, has also put IPO plans on hold.

Will Beckett, founder of Hawksmoor, said the company had paused refinancing talks, including through an IPO, as he wanted to focus on building the business back after the pandemic, as well as reopening and launching new restaurants, including its first in New York.

He said there had been good interest from a number of potential cornerstone investors, and trading was above 2019 levels, but pointed to the “instability in the sector as a whole”. The chain had been working with Berenberg on the plans.

The number of companies going public in the UK in the first three quarters of this year has been the highest since 2014, raising £13.7bn in capital, although advisers said the demand for flotations from investors was slowing, given the glut of new issuance. Shares in trucker payments firm Eurowag fell sharply after it floated last week.

Companies, particularly in the hospitality sector, are also facing increasing pressures from a lack of staff given the departure of many EU workers in the pandemic and after Brexit, while costs are rising thanks to supply chain disruption and haulage costs.

But despite wavering investor sentiment, other companies are pushing ahead with stock market offerings.

Hostmore, owner of the American diner chain Fridays, revealed details of its plans to list on London’s main market in a prospectus on Friday.

The group — until last year known as TGI Fridays — will demerge from its parent company, the private equity firm Electra, and list next month with an estimated value of about £275m.

Robert Cook, former chief executive of Virgin Active, who took over Fridays in 2019, said the company had worked “tirelessly” to maintain its staffing level and had hedged its key meat and energy costs.

Since Cook arrived, the 35-year-old company has diversified into delivery, products to cook at home and launched cocktail bar brand 63rd+1st.

Hostmore also plans to buy and grow fledgling restaurant companies in need of capital.

It intends to list on November 2, three weeks after Tortilla, another casual dining chain, entered London’s Aim at a valuation of roughly £70m. The UK arm of fast-food chain Burger King, owned by private equity firm Bridgepoint, has said it plans to list in London in the spring.

Graeme Smith, managing director at the consultancy AlixPartners, said that this year, “getting [IPOs] away in late summer, early autumn was the sweet spot”.

“People are thinking [that as] we are getting a little close to winter, we might have problems in terms of further spikes in cases,” he added.

Russ Mould, investment director at AJ Bell, said: “With the FTSE 100 trading at an 18-month high you would have expected new market entrants to find it easy to win friends and raise capital, but it doesn’t seem to be the case.”

Mould said it was “partly down to the poor performance of a few high-profile deals in the past 12 months and perhaps a comment on the quality of some of the deals that are coming through”.

Additional reporting by Harry Dempsey