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In this week’s Commercial Awareness update, we discuss London’s thriving IPO market, three companies to watch this week, Hinkley Point power station and how Innocent have become the fastest growing soft drinks company in Europe.
IPO market thriving
The second quarter marked a strong comeback for the Initial Public Offering (IPO) market in London, as the value of floats tripled compared to the previous year. IPOs from 18 companies in the three-month period raised £4.2 billion according to a report by big four professional services firm EY. The largest IPO was Allied Irish Bank, which raised £2.62 billion on an £11.8 billion valuation. Other firms that went public include haulage firm Eddie Stobart (valued at £572 million) and online mattress retailer Eve Sleep (valued at £140 million). Both of these companies have been floated on AIM – the London Stock Exchange’s international market for smaller growing companies.
There have been worries that companies would turn their backs on the London floatation market after the UK voted to leave the EU last June, and the months after Brexit were extremely quiet in the market. However, these latest figures suggest confidence is somewhat back in London as a financial centre. Brexit uncertainty might still impact on the market and some experts suggested the recent spike in activity is due to firms wanting to complete their floats well before March 2019 – the provisional date for Britain’s exit from the EU.
Questions to ask yourself… What are the advantages of floating on the London Stock Exchange? Will the General Election result lead to uncertainty in the IPO market?
Companies to watch this week
New to the Commercial Awareness update this week, we’ll be focusing on a few firms from a wide range of sectors who made the news in the last seven days.
This morning, EDF announced the cost estimation for the Hinkley Point nuclear plant is significantly higher than originally thought. The French company is the biggest investor in the first new nuclear power plant in Britain for years, and now believes it will cost a total of £19.6 billion - £1.5 billion more than expected. They have also suggested the development could take 15 months longer to complete, as they face continued delays.
This isn’t welcome news for the project, especially after a National Audit Office (NAO) report in June claimed it was a “risky and expensive project”. The NAO scrutinises public spending, ensuring the taxpayer gets value for money – find out more about them just here. There has been continued opposition to the project, which is one-third funded by the Chinese government, from many politicians to industry experts, and these spiralling costs look as if they could outweigh future output and employment benefits associated with the plant.
British engineering company Rolls-Royce has committed to protecting 7,000 jobs in the East Midlands, as they invest £150 million in the region. The investment will be put towards large engine maintenance and a repair facility, as well as Rolls-Royce’s sixth test bed in Derby (which tests commercial jet engines). The trade union, Unite, has been pushing the firm for investment and the safeguarding of jobs – in this latest deal it has committed to 7,000 jobs being fully protected for at least five years.
Earlier this year Rolls-Royce announced a record pre-tax loss of £4.6 billion, largely due to the fall in the value of sterling and settling a bribery scandal. There was widespread concern in the manufacturing industry that job losses would be imminent, so this is welcome news for British manufacturing.
Last week, GlaxoSmithKline (GSK) announced they will be investing in artificial intelligence (AI), with the aim of cutting time and expenditure in their new drug development. They have completed a £33 million deal with Scottish based start-up Exscientia, which has an AI enabled platform. GSK will utilise this to cut down the initial process of selecting molecules to take to further stages of trials. The technology can analyse huge amounts of data detailing the profile of each molecule and start creating sets of rules for those likely to lead to effective drugs. There are 10 target diseases Exscientia have been tasked with selecting molecules for drug trials.
This is just one example of big companies investing in AI to improve efficiency and gain an advantage over competitors. Amongst others, Spotify has been investing heavily in AI start-ups with the goal of improving its music recommendations and tailored advertising.
Questions to ask yourself… How could AI change the world of work in the next five years? Why were the government so keen to push ahead with Hinkley Point despite the questionable return on investment (ROI)?
Innocent becomes Britain’s largest juice makers
Smoothie makers Innocent has become the largest chilled juice makers in the UK and is now West Europe’s largest growing soft drink brand, overtaking Red Bull. Innocent is an excellent example of a British firm who has successfully expanded into Europe – over half its £304 million worth of sales came from overseas in 2016 after gaining a strong presence in the German and French markets. They also saw a return to profits, making £8.5 million last year, compared to a £700,000 loss in 2015.
Originally started by three Cambridge graduates, the firm is now in its 18th year and was bought by Coca-Cola back in 2013. A number of Innocent’s loyal customers reacted negatively to this takeover, but the smoothie maker has broadly stayed true to its brand values. They are instrumental in the Big Knit, which helps raise money for Age UK by donating 25p per bottle to the charity.
Question to ask yourself... What makes Innocent's brand stand out?