Capital raising from UK-listed corporates fell very significantly in the first half of 2022 as concerns over growth and inflation were compounded by war in Ukraine and economic uncertainty, with the Consumer Staples sector seeing a significant drop from capital raising levels last year.
So far this year, Consumer Staples businesses, including Ocado Group, have raised £588m, which is down from the £903m raised in the first half of last year – a fall of just under 35%. Notably, it is a steeper fall when compared to the capital raised in the latter half of 2021, which stood at £981m.
Weakening market confidence has meant the number of large transactions has declined very significantly in comparison to figures from 2021. In the first half of the year, no companies raised more than £1 billion in a single transaction, while Ocado Group was the only corporate to raise more than £500 million, as it looks to expand its technology arm in the second half of this year – providing a much needed boost for the Consumer Staples sector.
However, consumer industries continue to be the most active sectors for capital market activity, with Consumer Discretionary businesses raised the most capital (£692m), followed by Consumer Staples (£588m) and Industrials (£373m).
Analysis of London Stock Exchange data on capital raising from investment bank Goodbody shows that in H1 2022, just £5.7bn in new capital was raised by UK listed companies, the slowest start to a year in nearly a decade. When excluding listed investment vehicles, this figure falls to £2.5bn.
The analysis demonstrates a marked shift from the last two years, where corporates adversely impacted by the pandemic turned to investors to shore up their balance sheets. Capital raising in the first six months of 2022 is less than 50% of that in the first half of 2021, and around a third of the amount raised in the first half of 2020.
Piers Coombs, Head of Goodbody’s London office, says: “Following the record pace of fundraising during the pandemic, there is a very different tone to Equity Capital Market activity so far this year. With such a sharp move in valuations across almost all sectors – the FTSE250 is down 19% so far this year – there is little momentum behind PLCs’ desire to raise new capital. For now, it’s all about honing strategy, starting buyback programmes if appropriate, and focusing on what management can control.”
“Those that are raising capital are mostly doing so on a needs must basis, and the prevailing macro uncertainty is not helping in providing supportive aftermarkets. That in turn is further impacting market confidence,” Coombs concludes.