Interactive Investor

Fintech firm CAB Payments joins queue for London IPO

8th June 2023 15:43

by Graeme Evans from interactive investor

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Despite fears that London can no longer attract big name companies to list here, another large business has just announced plans to float in the capital.

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Retail investors have another potential IPO to mull over after the fintech CAB Payments today followed WE Soda in announcing plans to join London’s main market.

Their intentions to float signal the end of a new listings drought that last year saw just two companies worth over £100 million brave the volatile market conditions.

That compared with the IPO boom year of 2021, when Auction Technology Group, Darktrace, Dr Martens and Deliveroo were those to list with varying degrees of success.

As well as WE Soda and CAB Payments, the past few weeks has seen acquisition vehicle Admiral raise $550 million by placing shares in Europe’s second-largest IPO this year.

Another recent newcomer is the GKN automotive and powder metallurgy business Dowlais Group (LSE:DWL), valued at £1.8 billion in the FTSE 250 after its demerger from Melrose Industries.

CAB Payments, a regulated provider of foreign exchange and cross-border payments with a focus on emerging markets, is reportedly set to be valued at more than £800 million should it go ahead with a float. Its former parent company, Crown Agents, was founded in 1833.

The selling shareholder is Helios Funds, which acquired the business in 2016 and has overseen a significant period of growth. Revenues were £110 million in 2022, with underlying earnings of £54.6 million and cash conversion of 92%.

Despite its rapid growth in transaction volumes, the group says it accounts for less than 1% of global annual flows into emerging markets. Its target market (currently $2.3 trillion in flows) is expected to grow at a rate of 4.2% a year up to 2027.

The company added: “There is a switch from regional and domestic banks to specialists as banks seek to exit a business line which is subscale and difficult for them.

“CAB Payments sits within a unique space within this market, combining the trust and compliance of the larger banks with the specialist know-how of the independent specialists, enabling it to capitalise on favourable structural shifts.”

Chief executive Bhairav Trivedi added that the move to list on the London market showed confidence in the UK as the “home for innovative and growing global businesses”.

Like WE Soda, CAB Payments is planning to make the offer of shares available to retail investors.

Yesterday, WE Soda confirmed it will float after reporting considerable interest from potential investors.

The company, whose facilities near Ankara in Turkey last year produced five million metric tonnes of soda ash and sodium bicarbonate, will be eligible for the FTSE 100 based on a projected valuation of more than £6.5 billion.

Writing in the Times newspaper today, its chief executive Alasdair Warren said London stood out as a listing destination for several reasons.

He said: “London is a market that understands extractive industries and speciality chemical businesses like ours, which are underpinned by unique financial and operating characteristics.”

Warren added that the company wanted to list on an exchange where sustainability would be fully understood and valued by investors.

He added: “London is an important global financial hub, able to attract the biggest and best investors from around the world.

“Having worked for almost 30 years in the City, I know first-hand that the prestige and profile associated with a London listing will help us unlock global business opportunities in the future.”

The company’s soda ash is found in a wide variety of industrial processes with no viable substitute, including the manufacture of products that play a vital role in everyday modern life such as flat glass, glass bottles and photovoltaic glass for solar panels.

It is also in the manufacture of lithium carbonate, which is used in electric vehicle batteries.

The company describes itself as one of the lowest cost producers of soda ash globally, boasting industry leading operating margins of about 60%. In 2022, WE Soda reported revenue of $1.8 billion and adjusted earnings of $838 million.

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