Equity Capital Markets Half Year Review

H1 2018

kpmg.com/uk/equitycapitalmarkets 1 Equity Capital Markets review – H1 2018 H1 2018: Equity Capital Markets review H1 2018 snapshot

The first half of 2018 ended strongly generating positive momentum in equity issuance especially in the UK where volumes were up. Overall, however, global ECM volumes were slightly lower versus H2 2017, continuing a trend seen since H1 2017

Overall, global equity issuance was slightly lower in H1 2018 versus H2 2017

Global Europe UK

Funds raised Funds raised Funds raised (£000m) (£000m) (£000m) 25 400 125 20

issuance 100 300 15 75 200 10 50 100 5 25 0 Total ECM 0 0 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 2016 2016 2017 2017 2018 2016 2016 2017 2017 2018 2016 2016 2017 2017 2018 IPOs Right Issues Placings

Germany and the UK lead European ECM in H1 Largest 3 European and UK IPOs

£20.1bn Siemens Healthineers AG £3.7bn highlights

DWS Group GmbH £19.2bn & Co. KGaA £1.2bn

Adyen BV

European ECM European ECM £4.4bn £834m

A very active half year for AIM IPOs beating H1 2017 and offsetting lower Main Market volumes Main Market AIM Funds raised Funds raised (£000m) No. deals (£000m) No. deals 41 IPOs 8 40 1.5 50 16% decrease on H1 2017 6 30 1.2 40 0.9 30 4 20 0.6 20 2 10 0.3 10 £4.3bn Funds Raised 0 0 0.0 0 H1 H2 H1 H2 H1 H1 H2 H1 H2 H1 44% decrease on H1 2017 2016 2016 2017 2017 2018 2016 2016 2017 2017 2018 Deal value Focus # Deals

IPO UK IPO Key sectors Strong aftermarket performance of UK IPOs in H1 2018 Financial Services Main Market AIM £1,409m raised (13 deals)

Technology £1,129m raised (9 deals) 27% 80% 38% 89%

Oil & Gas Average return post IPO of IPOs above Average return post IPO of IPOs above £935m raised (3 deals) (at 24 June 2018) offer price (at 24 June 2018) offer price

Source: Dealogic

Equity Capital Markets review – H1 2018 2 H1 2018: Global Global ECM: The big picture

A solid half for IPO activity, albeit with lighter follow-on equity raising by listed companies — The first half of 2018 saw a 20% reduction in global ECM Global issuance by value year-on-year, as political uncertainty prompted a return of volatility across financial markets. Funds raised (£000m) No. deals — Funds raised by IPOs were largely in-line with H1 2017 500 5,000 volumes; declining by only 1% globally year-on-year. 400 4,000 — This was supported by strong levels of IPO activity across US exchanges; with half yearly volumes being their highest since 300 3,000 H2 2014. 200 2,000 — The Hong Kong Stock Exchange was also very active in H1 100 1,000 2018 with 97 listings taking place, a year-on-year increase of 0 0 50%, with a 118% increase in funds raised. H1 H1 H1 H1 H1 2014 2015 2016 2017 2018 — Two of the five largest H1 2018 IPOs took place in the US (AXA Equitable Holdings, PagSeguro Digital), but the largest

IPOs Rights issues Placings # Deals IPO in the period was the £3.7bn Frankfurt listing of Siemens Healthineers AG. — Robust global IPO volumes were offset by reduced issuance in the form of placings, accelerated transactions and rights issues.

Europe — Following a strong first half in 2017, European ECM issuance declined 39% in H1 2018. Funds raised (£000m) No. deals — Most notably, equity raised via rights issues declined 66% 120 1,200 compared to H1 2017, a period which saw £22.7bn raised in 100 1,000 rights issues for several large European banks. Funds raised 80 800 via IPO transactions fell by 8% year-on-year. 60 600 — Frankfurt was the dominant exchange for European IPOs in 40 400 H1 2018 with £6.3bn raised, including the largest regional 20 200 IPOs in the period, Siemens Healthineers and DWS Group. 0 0 — The Stock Exchange continues to lead in terms of H1 H1 H1 H1 H1 2014 2015 2016 2017 2018 overall ECM volumes, thanks to a number of significant placings, most noticeably the UK Government’s £2.5bn disposal of a stake in RBS Group. IPOs Rights issues Placings # Deals

UK — Overall UK ECM issuance in the first half of 2018 declined by

Funds raised 20% year-on-year, despite an active start to the year. (£000m) No. deals — Interestingly, H1 2018 UK ECM volumes were 12% higher 50 500 than the second half of 2017, supported by increased fund 40 400 raisings by rights issue and follow-on transactions. 30 300 — Proceeds raised by IPOs fell by over 55% from H1 2017, 20 200 which included the £3bn Allied Irish Banks IPO. 10 100 — While equity raised via placings and accelerated transactions 0 0 declined by 6%, UK rights issue activity was strong, driven by H1 H1 H1 H1 H1 a handful of sizeable issues to fund M&A or strengthen 2014 2015 2016 2017 2018 company balance sheets. — Financial Services continues to be the most active industry IPOs Rights issues Placings # Deals sector for UK ECM issuance, with Technology companies also active in IPOs and primary issuance.

Global equity market indices remained robust in the first half of 2018, against a backdrop of supportive economic and corporate earnings data and elevated market volatility. Whilst overall equity issuance cooled somewhat in H1 2018 following high levels of activity seen across global equity markets in 2017, the global IPO market remained active with signs that momentum is set to continue into the second half of the year.

Marco Schwartz, Managing Director, Head of Equity Capital Markets Advisory UK

Source: Dealogic

3 Equity Capital Markets review – H1 2018 H1 2018 : Europe European equity market backdrop

Equity market indices recovered ground in Q2 following heightened volatility in Q1

Equity markets and volatility

Trump announces tariffs on Trump announces tariffs Mexico and EU, Canada keeps Eurozone ECB hold on Interest Rate Strained US-China relationships Positive economic data out data economic Positive US and Asia of Eurozone, UK triggers article 50 article UK triggers Election UK General BoE Interest Rate rise rise US bonds Yields on

20% 80 CBOE volatilityindex

10% 60 0 40 (10%)

(20%) 20 (30%) 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2018 % change since 1 Jan 2017 FTSE 100 DAX30 CAC40 Volatility

Total monthly European ECM deals

30 250 25 200 No. deals 20 150 15 100 10 5 50

Deal value (£000m) 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2018

Deal value # Deals

H1 2018 largest completed European ECM transactions

Top 3 IPOs Top 3 Rights Issues Top 3 Placings

Siemens Royal Bank of Healthineers AG £3,722m Bayer AG £5,304m Scotland Group £2,507m

DWS Group GmbH Group plc Covestro AG & Co. KGaA £1,165m £1,753m £1,919m

Adyen BV £834m plc £719m Covestro AG £1,602m

Source: Dealogic. Thomson Reuters Datastream

Equity Capital Markets review – H1 2018 4 5 Equity Capital Markets review – H1 2018 H1 2018: UK The UK ECM landscape

Half-on-half, lower Main Market IPO volumes, but continued momentum in AIM equity issuance

Main Market – All ECM Activity AIM – All ECM Activity

30 5

25 4 20 3 15 2 10 Funds raised (£000m) Funds raised (£000m) 5 1

0 0 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

IPOs Rights Issues Placings

The first half of 2018 saw robust fundraising activity overall on UK equity markets. London’s AIM market in particular supported strong levels of IPO and follow-on equity issuance for growth companies. Whilst on the Main Market IPO volumes declined year-on-year, there was increased equity raising via follow-ons, with high levels of M&A activity being one of the key drivers.

Linda Main, Partner, Head of UK Capital Markets Group

Largest completed UK ECM deals in H1 2018 Most Active UK Sectors in H1 2018

Royal Bank of Scotland Group plc £2,507m (Placing) Financial Services £6,004m raised (70 deals) Notable deals: Royal Bank of Scotland Group plc, Provident Financial, Standard Life Aberdeen plc, JTC plc, Urban Exposures plc, Burford Capital Ltd, Cineworld Group plc £1,753m (Rights issue) BioPharma Credit plc, Draper Esprit plc

Leisure Capita plc £719m (Rights issue) £2,072m raised (10 deals) Notable deals: Cineworld Group plc, GVC Holdings plc, Entertainment One Ltd, Gym Group, Ten Entertainment Group plc plc £603m (IPO) Technology £1,644m raised (41 deals) Avast plc £602m (IPO) Notable deals: Avast plc, Codemasters Group Holdings Ltd, IntegraFin Holdings Ltd, Ocada Group plc, Team17 Group plc, Learning Technologies Group plc, Blue Prism Group plc

Source: Dealogic

Equity Capital Markets review – H1 2018 6 H1 2018: UK UK IPO highlights

£4.3 billion –— IPO funds raised, implied 41 IPOs –— 16% decrease from H1 2017 market capitalisation of £12.6 billion

Key metrics Key sectors trending Financial Services Main Market AIM £1,409m raised (13 deals) Notable deals: JTC plc, Urban Exposures plc, Augmentum Fintech plc Number of deals 16 IPOs 25 IPOs Technology IPO funds raised £3,070 million £1,201 million £1,129m raised (9 deals) Notable deals: Avast plc, Codemasters Group Holdings Ltd, IntegraFin Holdings Ltd, Team17 Group plc, OnTheMarket plc Average IPO funds raised £192 million £48 million

Oil & Gas Average market £678 million £72 million capitalisation on IPO £935m raised (3 deals) Notable deals: Oil & Gas plc, Vivo Energy plc

Across the Main Market and AIM, a total of 41 companies successfully priced IPOs during the period raising £4.3bn. AIM enjoyed an active first half of the year, welcoming 25 new issuers compared to 18 in H1 2017. Conversely, the Main Market exhibited a slowing of momentum hosting 16 IPOs, down from 31 in H1 2017.

Technology and Financial Services were very active sectors for UK IPOs during the period, in part reflecting strong investor demand for growth companies. Interestingly, Oil & Gas was an active sector for the first time in a number of years, supported by a firmer oil price environment.

Linda Main, Partner, Head of UK Capital Markets Group

Aftermarket performance of H1 2018 UK IPOs Main Market AIM 27% 80% 38% 89%

Average return post IPO of IPOs above Average return post IPO of IPOs above (at 24 June 2018) offer price (at 24 June 2018) offer price

Aftermarket performance of H1 2018 UK IPOs (>£50m)

15 companies above IPO price 79% 47% 34% 22% 23% 13% 13% 13% 16% 1% 2% 2% 4% 6% 6% Avast plc Vivo Energy plc JPMorgan Multi- plc Asset Trust plc (10)% (5)% (17)% Urban JTC plc REIT plc & Gas plc SimplyBiz TruFin plc IntegraFin Odyssean Group Ltd Fintech plc Yew Grove Augmentum Holdings Ltd Exposure plc Energean Oil Codemasters Mind Gym plc Mind Gym Group Holding Growth Trust plc Growth Trust Baillie Gifford US Baillie Gifford Investment Trust Tekmar Group plc Tekmar Team17 Group plc 3 companies below IPO price Source: Dealogic

7 Equity Capital Markets review – H1 2018 H1 2018: UK UK Main Market and AIM IPO review

Main Market IPO activity (2012 to H1 2018) Main Market IPO activity (Last 18 months)

15,000 50 5,000 10

39 8 12,000 40 Number 4,000 8 7 33 7 Number 31 6 9,000 27 30 3,000 6

26 of 5 5 5 5 2323 IPOs

4 4 4 of 6,000 16 20 2,000 4 3 IPOs 14 15 3 3 Funds raised (£m) raised Funds 12 (£m) raised Funds 2 2 3,000 8 13 10 1,000 1 2 4 1 0 0 0 0

Jul-17 Oct-17 Apr-18 Apr-17 Jan-18 Jun-18 Jun-17 Jan-17 Feb-18 Mar-18 Feb-17 Mar-17 Nov-17 Dec-17 Aug-17 Sep-17 May-18 May-17 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018

Funds raised (£m) Number of IPOs Funds raised (£m) Number of IPOs

Source: Dealogic. Source: Dealogic.

Overall, Main Market IPO activity in the first half fell short of expectations going into 2018, with the number of transactions and equity raised declining year-on-year. Companies that successfully priced IPOs in the period have in general performed well in the aftermarket, recording average share price growth of 27%, comfortably ahead of index benchmarks.

With UK equity market conditions remaining supportive for issuance, we continue to believe that companies and shareholders considering a listing are likely to put plans into action sooner rather than later in the forthcoming months.

Rob Crowley, Director, UK Capital Markets Group

AIM Market IPO activity (2012 to H1 2018) AIM Market IPO activity (Last 18 months)

39 39 2,000 36 40 700 12 10

600 30 Number 10 1,500 30 25 500 Number 23 7 8 21

20 400 6 6 6 19 20 18 of 6 1,000 20 5 6 IPOs

6 15 of 300 4 5 10 3 4 IPOs Funds raised (£m) raised Funds 500 10 (£m) raised Funds 200 2 2 1 100 1 1 1 2 2 0 0 0 0

Jul-17 Apr-18 Oct-17 Apr-17 Jan-18 Jun-18 Jun-17 Jan-17 Feb-18 Mar-18 Mar-17 Feb-17 Nov-17 Dec-17 Aug-17 Sep-17 May-18 May-17 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H1 2012

Funds raised (£m) Number of IPOs Funds raised (£m) Number of IPOs

Source: Dealogic. Source: Dealogic.

London’s AIM enjoyed a strong first half of 2018, hosting a total of 25 IPOs. The average market value was £72m and seven issuers raised more than £50m at IPO, demonstrating the attraction of AIM as a listing venue for ambitious growth companies.

Interestingly, those companies that floated on AIM during the half have delivered an average aftermarket performance of 38%. Moreover, with the AIM All Share index as a whole recording a 4% gain in the period, it is clear to see why London’s AIM remains an attractive market for investors seeking exposure to growth companies.

Svetlana Marriott, Partner, UK Capital Markets Group

Source: Dealogic. Thomson Reuters Datastream

Equity Capital Markets review – H1 2018 8 Report Methodology Notes: Data contained in this report has been generated at 24 June 2018 and includes priced transactions only. In this document, UK includes LSE Main Market and Alternative Investment Market (AIM). Where report refers to “Placings”, this consists of accelerated transactions (including rights issue rump placings), bought deals, fully marketed follow-ons, cash placings, PIPE transactions, at-the-market transactions, top-up placement transactions, and registered direct offerings as per Dealogic classifications. Where the report refers to “Rights Issues” this consists of rights issues, open offers and other guaranteed preferential allocation transactions as per Dealogic classifications. Note that Dealogic data only captures Rights Issue deal volumes when the results of the rights issue are announced, post- trading of the rights. For individual rights issue transactions shown on pages 4 and 6, total deal value includes the value of the rump placing at the placing price. Where the report refers to “Global” IPOs that have priced in H1 2018, the Xiaomi transaction (priced 29 June 2018) has been included. For this transaction, the report includes the non-GBP expected deal value, which has been translated to GBP at the prevailing exchange rate at 24 June 2018. Where report refers to IPOs that have priced in H1 2017, the Allied Irish Bank transaction (23 Jun) and Polyus Gold OAO transaction (30 June) have been included. On p.1, for the chart headed “Germany and the UK lead European ECM in H1”, where IPOs are conducted on multiple exchanges, the entire value of the IPO has been credited to all relevant exchanges. Aggregate aftermarket performance across Main Market and IM IPOs has been calculated by taking a simple average of the percentage change between the offer price and prevailing closing share price as at 24 June 2018 over all IPOs that have been successfully admitted to trading in the period.

9 Equity Capital Markets review – H1 2018 H1 2018: Equity Capital Markets review KPMG Capital Advisory Group

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Equity Capital Markets review – H1 2018 10 Contact us

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Linda Main Svetlana Marriott Marco Schwartz Partner, Head of UK Capital Partner, UK Capital Markets Managing Director, Head of Equity Markets Group Group Capital Markets Advisory UK [email protected] [email protected] [email protected] +44 (0) 207 311 8574 +44 (0) 207 694 4041 +44 (0) 207 311 2975

Rob Crowley Helen McCourt Graham Hertrich Director, UK Capital Markets Director, UK Capital Markets Associate Director, Equity Group Group Capital Markets Advisory UK [email protected] [email protected] [email protected] +44 (0) 207 694 5813 +44 (0) 161 2464 908 +44 (0) 207 311 5114

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