The City’s dealmaking drought meant the London IPO market was “effectively closed” according to broker and investment bank Peel Hunt today, as it swung to an annual loss.
With a lack of companies floating on the stock exchange, the broker and mini-investment bank revealed that the number of equity capital market transactions it worked on tumbled to 27 from 46 a year earlier.
That slowdown helped wipe out profits. The Liverpool Street institution reported a loss of £1.5 million for the 12 months to March 31 2023, down from a profit of over £41 million a year ago. Revenue slumped to £82.3 million from £131 million, down over 37%. It will not pay an annual dividend.
It said the year was “difficult” for UK equity markets, with very low volumes, especially around initial public offerings, when companies float on the stock exchange. Peel Hunt’s investment banking revenues dropped £23.4 million from £57.9 million a year ago.
There are some signs of an improvement, especially toward mergers and acquisitions rather than IPOs, with Peel Hunt pointing to “some pick-up in market activity” into the end of the fourth quarter, “with a number of new mandates and pipeline deals with a higher M&A weighting” in its investment bank.
It added: “With UK mid-cap valuations remaining attractive … [we] are seeing tentative signs of a pick-up in capital markets.”
Nonetheless, the company cautioned that “the macro-economic backdrop may remain challenging for some time.
Peel Hunt said that was in part due to uncertainty caused by rising interest rates, which followed political disruption. “The ongoing war on European soil combined with the fallout from the UK Government’s disastrous mini-budget have contributed to rapidly rising interest rates, which are now at their highest level for 14 years. This, together with the biggest bank failures since 2008, has weighed heavily on investor confidence and market volumes in the UK.”
Steven Fine, chief executive, added: “The challenges faced by the financial services sector in the past 12 months have been well documented, with the impact on market activity and investor sentiment felt across the industry.”
Its shares fell 2p to 99p, a loss of 2%
