Deloitte report shows IPOs outperforming FTSE 100

Deloitte said that initial public offering (IPOs) that came to the market this year are typically performing at a significantly stronger rate than the leading 350 UK companies.

The new listings, which include York-based CPP, saw an average share price increase of 19.5 per cent, whilst the FTSE 100 moved up by 3.4 per cent and the FTSE 250 rose by 7.4 per cent over the same period.

Roger Esler, Deloitte's corporate finance and debt advisory partner in Leeds, said: "In real terms, what this means is that if you invested 1,000 in each IPO, it would be worth 13,145 today versus 11,341 if you invested in the FTSE 100, or 11,814 invested in the FTSE 250.

"This striking difference reflects that current appetite for new entrants is skewed towards growth and differentiated market propositions. Outperformance to more mature peers is therefore to be expected and is more aligned to the Small Cap indices of which many of our Yorkshire PLCs are a part. This trend, therefore, is favourable to businesses in our region."

The Deloitte report said that 2010 has been a tougher year than expected for IPOs, with only 11 trading companies coming to the main market.

"Those that have listed have been forced to cut back their valuations at the time of the IPO by wary investors. The result is that the post IPO share price performance is from a somewhat discounted base," said Mr Esler.

He added that businesses should review all their strategic options, as an IPO achieves something quite different to other forms of refinancing or exit.

Robert Seldon, transaction services partner at Deloitte's Leeds office, said: "The main challenge is still getting to market in the first place with concerns over business plans and the economic outlook making the capital markets pretty frosty to all but the hardiest looking for new offerings."

Deloitte expect to see a continuation of IPOs in the final two months of this year and into next year.

It believes that investors will continue to be choosey and very aggressive on valuations, which means that companies will have to accept that valuations will be subdued.

"On the flip side, that may mean further relative gains for investors," said Mr Seldon.

The 11 IPOs this year were York-based credit card and wallet protection firm CPP, Essar Energy, Supergroup, Jupiter Fund Management, Ocado, Metric Property Investments, Promethean World, Capital Drilling, Betfare Group, African Barrick Gold and AZ Electronic.

CPP, which raised 150m through its flotation on the London Stock Exchange in March, is eyeing further expansion.