London Stock Exchange
S100 Presentation – May 2010
IPOs in the current market
May 2010
Why the London Stock Exchange?
•
Choice: two routes for commercial companies to raise equity capital which are designed to
suit different types of companies and their needs:
Main Market
•
Capital: major global capital market with c. £600bn equity assets under management*
•
Liquidity: one of the world’s most active and liquid markets with a daily average traded value
of £4.8bn in the year-to-date
•
Profile: premium brand to further enhance your credibility and profile
Note: * represents data sourced from Ipreo as at 31 December 2009
3
Why do companies go public/quote on a
stock exchange?
Soft reasons
Employee
Commitment
Higher profile
Valuation & Public
market for company’s
shares
Hard reasons
Capital for growth
Capital for
acquisitions
Capital to
pay debts
4
Choice of markets
5
Choice of markets
Main Market
Supports the capital raising
activities of earlier stage
companies
Supports the capital raising
activities of more established
companies
Exchange regulated market
with NOMAD required at all
times
Regulated by the UKLA with a
listing sponsor required
1,253 companies
Note: figures sourced from London Stock Exchange statistics as at 30 April 2010
1,453 companies
6
AIM – Unique Regulatory Framework
AIM Regulation team
Regulate the Nomads and keep a close oversight of their operations
Nominated Advisers (NOMADs) – key roles:
Assess suitability of a company
Pre-vet the admission documents
Advise companies on the AIM Rules
AIM Companies
7
AIM – Key requirements
• Key Admission Requirements
–
Produce an Admission Document, approved by the Nomad
–
Nomad and Broker required at all times
–
No trading history record requirement
–
No minimum free float requirement
–
IFRS required for UK issuers
• Ongoing Requirements
–
Compliance with ‘AIM Rules for Companies’
–
Corporate Governance – best practice
• Eligibility for inclusion in the FTSE AIM Index Series
8
Main Market – Regulated by the UKLA
Regulation
The UK Listing Authority (UKLA) is responsible for admitting securities to the Official
List
Admission
The London Stock Exchange is responsible for admitting securities to trading
Listing
Securities become officially listed on the Main Market of the London Stock Exchange
9
Main Market – Premium vs Standard
Key differences
Potentially eligible for the FTSE UK Series
Premium Listing
(Shares)
Level of Disclosure
Standard Listing
(Shares)
Standard Listing
(GDRs)
•
Sponsor required
•
Unqualified 3 years of audited financials
•
Control of assets
•
Independent business
•
Sufficient working capital
•
Ongoing - Listing Rules & EU minimum
•
No Sponsor required
•
3 years audited financials (or such shorter
period since the issuer has been in operation
and can be qualified)
•
Working capital statement required, can be
qualified
•
Ongoing - EU minimum only
•
Same as Standard (Shares) except:
o
no working capital statement; and
o
ongoing – more basic EU minimum,
10
Capital raising activity
11
Capital raising activity
Further issues – AIM and Main Market
Main Market - Small Cap & Fledgling - 2007 to 2010 YTD
Totay money raised on AIM and the Main Market (£bn)
66
77
45
40
35
30
Basic Materials
Financial
Mining
25
Consumer Goods
Health Care
Technology
Consumer Services
Industrial
Telecommunications
20
15
AIM - 2007 to 2010 YTD
10
5
0
2000
2001
2002
New Issues - Main
2003
2004
2005
New Issues - AIM
2006
2007
Further Issues - Main
Note: figures sourced from London Stock Exchange statistics
2008
2009
2010
Further Issues - AIM
Basic Industries
Consumer Goods
Consumer Services
Financial
Health Care
Industrial
Mining
Oil & Gas
Technology
Telecommunications
Utilities
12
Main Market – capital raising activity
•
2009 saw a record £77bn raised on the Main Market including £76bn through
further issues including Lloyds (£13.5bn), HSBC (£12.9bn) & Rio Tinto (£7.3bn)
•
Total funds raised 2010 YTD: £4.2bn, £2bn raised via further issues
•
Prudential seeking to raise £14.5bn new record rights issue
Sector distribution - new & further Issue 2010 YTD
Consumer Goods
Consumer Services
Financial
Comparative Index Performance
Health Care
160
Mining
Oil & Gas
140
Technology
120
100
80
9
Distribution of mkt capt - new companies 2010 YTD
8
8
60
40
2007 - 2010 YTD
FTSE SMALL CAP
Index
FTSE Small Cap
FTSE Fledgling
FTSE FLEDGLING
DJIA
Hang Seng
DAX
02 Jan 2007
14 May 2010
Performance %
3925.8
2868.66
-26.93
No. of companies
7
6
5
5
4
3
3
2
2
2
4415.1
4219.37
-4.43
DJIA
12474.52
10590.83
-15.10
1
Hang Seng
20310.18
20145.43
-0.81
0
DAX
6691.32
6056.71
-9.48
1
1
0
0-2
2-5
5-10
10-25
1
0
25-50
50-100
100-250 250-500 500-1000
1000+
Money Raised (£m)
Note: index performance figures sourced from Bloomberg, all other figures sourced from London Stock Exchange statistics
13
AIM – capital raising activity
•
2009 saw £5.6bn raised including £4.8bn including five over £100m
•
Funds raised YTD 2010 £1.4bn, 753 further issues totalling £1.1bn
including five over £50m
Sector distribution - new & further issues 2010 YTD
•
Basic Industries
Construction
Aim companies have operations across the globe in 95 countries
Consumer Goods
Consumer Services
Financial
Health Care
Comparative Index Performance
Industrial
Mining
200
Oil & Gas
Technology
170
Telecommunications
140
110
80
50
Distribution of mkt cap - new companies 2010 YTD
8
7
20
7
AIM 50
AIM All share
Index
NYSE Alternext
Catalist
Deutsche Entry Standard
02 Jan 2007
14 May 2010
Performance %
FTSE AIM All Share
1060.7
707.8
-33.27
FTSE UK 50
5336.5
2712.19
-49.18
NYSE Alternext
1300.49
723.69
-44.35
FTSE SXG Catalist
154.12
127.45
-17.30
Deutsche Entry Standard
1105.41
620.19
-43.90
No. of companies
2007 - 2010 YTD
6
5
5
5
4
4
3
2
2
1
1
1
0
0
0-2
2-5
5-10
10-25
25-50
Money raised £m
Note: index performance figures sourced from Bloomberg, all other figures sourced from London Stock Exchange statistics
50-100
100-150
150-200
14
IPO activity – 2010 YTD
Date
Company
Market
Sector
Mkt cap
(£m)
Funds raised
(£m)
5,472
1,272
7- May-10
Essar Energy PLC
Main
Exploration & Production
7-May-10
Avangardco Investments Public Limited
Main
Food Producer and Processing
676
127
19-Apr-10
Fidelity China Special Situations PLC
Main
Equity Investment
460
460
30-Mar-10
EMIS Group plc
AIM
Healthcare
178
50
24-Mar-10
Metric Property Investments plc
Main
Property
175
175
24-Mar-10
CPP Group plc
Main
Nonlife Insurance
400
150
24-Mar-10
African Barrick Gold plc
Main
Gold Mining
2,325
581
24-Mar-10
SuperGroup Plc
Main
Fashion Retailers
395
125
22-Mar-10
CSF Group Plc
AIM
Software & Computer Services
88
28
17-Mar-10
Promethean World Plc
Main
General Retailers
400
114
09-Mar-10
Sherborne Investors Ltd
AIM
Equity Investment Instrument
105
105
04-Mar-10
Digital Barriers
AIM
Digital Security and Surveillance
25
20
26-Feb-10
Equatorial Palm Oil Plc
AIM
General Industrials
14
7
24-Feb-10
Scotgold Resources Limited
AIM
Gold Mining
5.4
0.7
15-Feb-10
Kea Petroleum
AIM
Oil & Gas
37
6
12-Feb-10
Oxford Nutrascience Group plc
AIM
Food Products
8.1
1.75
09-Feb-10
Horizon Acquisition Company plc
Main
Special Purpose Acquisition Company
400
400
Note: table highlights selected IPOs on the LSE 2010 YTD
15
Capital markets & volatility
• There is a close
historical correlation
between IPOs and
equity market volatility
Money raised on AIM and Main Market compared with the VIX Index
30,000
50
28,000
45
26,000
24,000
35
20,000
18,000
30
16,000
25
14,000
12,000
20
10,000
15
VIX Index (USD) - measure ment of volatility
• Investors have recently
shown appetite for
strong growth stories
where gearing is <2.5x
and proceeds are not
primarily being used for
debt repayment
22,000
Money raised on AIM & Main Market (£m)
• Equity market volatility
has returned to levels
which show support for
IPOs based on historic
trends
40
8,000
6,000
10
4,000
5
2,000
0
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2000
2001
2002
2003
2004
New issues
2005
Further issues
Note: money raised figures sourced from London Stock Exchange statistics & the VIX Index from Bloomberg
2006
2007
2008
2009
VIX
16
UK IPO cycle next to revive
UK IPO cycle poised to revive ?
40,000
7000
Issuance story
6500

IPO Market shut from H2
2008
35,000
6000


2003 – 2007 Bull market
–
Significant M+A boom
funded predominantly by
debt
–
Equity issuance to also
fund growth
2008 – 2009 New world order
–

Massive balance sheet
repair
Excluding mining and banks,
2008 -2009 issues at
2004/2005 levels
30,000
5500
25,000
5000
4500
20,000
4000
15,000
3500
10,000
3000
5,000
2500
0
2000
2001
2002
2003
Full IPO
2004
AIM IPO
2005
Full 2nd
2006
AIM 2nd
2007
2008
2009
Y/E FTSE
17
Valuation
Valuation – What Institutions look for:
Market growth potential
Strong competitive positioning
 Business should operate in a market with good visible growth over the medium
term
 Business should have a strong competitive position in order to capture at least its
share of the market growth
 Investors will also want comfort that this market position is sustainable and that
the barriers to entry / competition are sufficiently high
Strong trading record and
earnings visibility
 Business should be able to demonstrate a track record of revenue and profit
growth, as well as free cash flow generation and visibility of future profit growth
Proven business model
 There is a proven business model that generates attractive financial returns, as
well as a clear vision for the strategic development of the business through organic
or acquisition-led growth
Credible management team
and robust corporate
governance
Clear rationale for IPO
Market / free float
 Proven, high quality management team with a track record of operational and
strategic success
 Appropriate framework of corporate governance and systems and controls
 Purpose of the IPO must be clear so as to identify the use of IPO proceeds and / or
benefits of listing
 Credible investment proposition at fair value for incoming investors
 Index inclusion and weighting are driven by a combination of market cap and free
float
 A combination of the % of free float and absolute £ free float are important
 The choice of which market to list on is a variable
18
Contacts
Mark Fahy
Senior Manager – UK Small & Mid Cap Companies, Primary Markets
London Stock Exchange
T: 0161 935 8301
M: 07795 257 517
E: mfahy@londonstockexchange.com
19
Appendix
20
Choice of Markets
We offer four different routes to raise funds from the capital markets:
Main Market
•
•
•
•
Premium product
Established 1698
Listed and EU regulated market
£3.7 trillion combined market capitalisation, 1,453 companies
•
•
•
•
Growth market
Established 1995
Regulated by LSE, unlisted and non-EU regulated market
£64.5 billion combined market capitalisation, 1,253 companies
•
•
•
•
Specialist investment fund market for non-retail investors
Established 2007
EU regulated and unlisted market
£750 million combined market capitalisation*, 6 companies
•
•
•
•
Specialist market for non-equity securities, primarily debt
Established 2005
Listed, but non-EU regulated market
497 securities admitted
Note: all figures sourced from London Stock Exchange statistics, 30 April 2010
21
Main Market – Premium Listing requirements
• Key Admission Requirements
–
Produce a prospectus for approval by UKLA
–
Sponsor required (at admission only)
–
3yr trading record normally required, covering at least 75% of the business
–
Clean annual report covering at least 3 yrs
–
Min 25% of shares must be in public hands
• Ongoing Requirements
–
Compliance with the UKLA Listing Rules (e.g. class tests, related party rules, Model &
Combined Code)
–
Compliance with EU Directives (e.g. financial reporting, disclosure of >3% shareholdings)
• Eligibility for inclusion in the FTSE UK Index Series
22