Miller Homes pulls plug on £450m float

The proceeds of the flotation would have been used to pay down some of Miller's debts
The proceeds of the flotation would have been used to pay down some of Miller's debts
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HOUSEBUILDER Miller Homes has blamed turbulent market conditions for its cancelled flotation plans, although one City analyst suggested a disagreement over its valuation could have prompted today’s change of heart.

The Edinburgh-based firm’s parent had long been rumoured to be eyeing a float, and last month confirmed it was seeking a market debut for the homes division, which would have been valued at more than £450 million, propelling it into the FTSE 250.

However, less than two weeks after unveiling plans to raise about £140m through an initial public offering (IPO), Miller announced today that the move had been shelved.

In a statement to the London Stock Exchange, the firm said: “In light of the recent financial markets volatility, the shareholders of Miller Group have elected not to proceed at this time with a public offering of Miller Homes.

“The shareholders are excited to support Miller Homes in its next phase of growth as the company builds upon the momentum evidenced in its recent operational and financial results.”

The proceeds of the flotation would have been used to pay down some of Miller’s debts. Private equity shareholders including Blackstone and Royal Bank of Scotland were also expected to sell part of their stakes in the IPO, leaving a free float of at least 40 per cent. Shore Capital analyst Robin Hardy described the about-turn as a “shame” and said the IPO of Miller Homes would have seen a “new, smaller and hopefully faster-growing” business join the ranks of listed builders.

In August, Miller Group revealed a 189 per cent surge in half-year profits before interest and one-off items to £19.1m at its housebuilding arm, which is led by chief executive Chris Endsor. Earnings were helped by a “significant” improvement in margins and an increase in average selling prices, which rose 11.9 per cent to £198,000.

Hardy added: “Cynically, one might suspect resistance on the valuation although this looks to have drifted towards the bottom of the valuation range in any case at £450m.

“Even on my naturally more cautious way of valuing the house builders, I could see fair value at nearer £540m. If investors were perhaps suggesting that the valuation should begin with a ‘3’, then it’s not hard to see that existing shareholders would baulk.”

However, a source insisted that Miller had decided to shelve its planned flotation because conditions in the City were “not sufficiently settled”, and the firm had no urgent need to join the market.

The FTSE 250 has fallen about 5 per cent since the float plans were published on 23 September, and this week Nationwide reported the first month-on-month fall in house prices for more than a year. Concerns about US economic growth and the bombing campaign against Islamic State extremists in Iraq have caused further market jitters.

Miller “just felt that if they went for a full flotation process at this stage they couldn’t guarantee the outcome”, the insider said today.

“They will now put things on hold because they’ve got the support of the shareholders. As they were under no compulsion, there was no need to rush into it now.”

It is understood that Miller could re-visit its IPO plans when market conditions are more stable.