Float fever gets City pulse racing

LIKE buses, stock market flotations come all at once. You wait for ages and nothing arrives. Then suddenly, they roll round the corner three at a time.

In the past week alone, a trio of consumer heavyweights have unveiled plans to list on the London Stock Exchange.

HMV Media, which runs the HMV music and Waterstone's book stores, could sell its shares to the public as early as June. The value of the company, run by Alan Giles, is estimated at up to £1 billion. Burberry, the upmarket fashion chain whose adverts feature supermodel Kate Moss, also aims to float in June. The company, owned by retail group GUS, could raise as much as £375 million in a deal that would give it a stock market value of £1.5 billion.

And pub group Punch will raise as much as £250 million from its flotation this year. Punch, with 4,000 pubs, is likely to be worth about £800 million - though in this case only institutional investors rather than individuals will be allowed to buy the shares.

These three heavyweights join Yell, BT's former directories business, which is using Merrill Lynch, Goldman Sachs and JP Morgan to line up a £3 billion to £4 billion float later this year.

Credit Suisse First Boston is advising baker Ranks Hovis Mc-Dougall on a possible £1.5 billion flotation. Bookies chain William Hill is also looking at the idea.

And as Financial Mail discloses today, Homebase, the DIY chain bought from Sainsbury by Schroder Ventures little more than a year ago, has now lined up Schroder Salomon Smith Barney to test the stock market waters.

Everyone seems happy - especially the investment bankers who can pocket tens of millions of pounds in fees for helping a business come to the market.

So will 2002 really see a flotation boom? Should we believe the investment bankers who insist that companies are queueing up to float?

Some of the news about planned flotations is misleading. The value of a company may be given as a headline-grabbing £1 billion, but that may be its 'enterprise value' - the projected value of its shares plus its debt.

The company's stock market value - the aggregate of its shares - may be considerably less.

And it is no coincidence that so many of this year's mooted flotation involve retailers. After all, the High Street has experienced a spending boom on a scale not seen since the late Eighties.

If a retailer is to float at all, now is the time when sales are strong and profits are swollen as a result.

Even the Stock Exchange, which lives or dies on its ability to attract new companies, is advocating caution.

Tim Ward, in charge of marketing the Stock Exchange to prospective companies, told Financial Mail: 'There are encouraging signs from the flotation market, but it is too early to predict an upturn.' So far this year, just 24 companies worth £98.5 billion have successfully listed their shares on the market, according to figures from the Stock Exchange. At the same point last year, 32 companies had completed their floats.

That £ 98.5 billion sounds impressive, but £75.5 billion of this year's flotation total comes from last month's London listing of Japanese telecoms firm NTT DoCoMo, leaving the remaining £23 billion of market value shared among 23 other quoted companies.

No one seriously expects a repeat of the second half of 2000, for example, when, at the height of the technology market boom, 102 companies listed on the Stock Exchange. That was little short of the total for the whole of 1999 or 2001.

There are stirrings in the flotation market, certainly. But don't call it a boom just yet.