Jul 13, 2024 · 35 min
FCA listing overhaul tests London’s appeal to growth companies
IC026 Investor Insights: FCA rules affecting listed companies, Small Cap News & Investing Ideas
The episode connects UK policy, interest rates and company-level execution to the prospects for London-listed smaller businesses.
- 1Stronger UK growth could delay Bank of England rate cuts, keeping financing conditions tighter for businesses and investors.
- 2New FCA listing rules may improve London’s competitiveness while weakening shareholder safeguards and increasing governance risks.
- 3The company review contrasts scalable growth stories with turnarounds where valuation, funding and execution remain decisive.
Don't miss
The hosts examine Rosebank Industries’ strong investor response despite having completed no acquisition, then test the strategy against higher borrowing costs.
The brief
The hosts open with Hostelworld’s 9% net-bookings increase and falling direct-marketing costs, arguing that better customer-acquisition economics could unlock substantial margin expansion.
Stronger UK growth may push back an imminent Bank of England rate cut, while the FCA’s listing overhaul raises a sharper question: can London attract companies without sacrificing governance?
The company tour spans Jet2’s profitable expansion, DP Poland’s funded store rollout, and Loungers’ hospitality model, weighing growth against cyclicality, property economics and execution risk.
Time Out’s curated marketplaces and Hostelworld’s social-travel platform offer differentiated growth ideas, but both face questions about losses, customer economics and the durability of their models.
Science in Sport’s cash raise and management reset lead into Rosebank Industries, where a Melrose-style buy-improve-sell strategy has attracted investors before completing an acquisition.
Taken together, the discussion argues that smaller-company investing now demands more than a compelling story: funding discipline, valuation and operational delivery matter just as much.
What was said on this episode
38 statements · 26 positive · 10 negative · 2 neutral
Hostelworld net bookings increased 9%.
“net bookings were up by 9%”
Listen at 0:08
Lower customer-acquisition spending could significantly expand Hostelworld’s margins.
“If it can crack that and spend less and less, obviously the margin expansion is terrific.”
Listen at 0:41
Stronger UK growth may make the Bank of England less willing to cut rates.
“the Bank of England now is perhaps a bit reluctant to cut interest rates”
Listen at 1:55
UK interest rates are unlikely to fall more than roughly one percentage point.
“they're not going to alter too much from around these levels either. What are we going to lose? A percent tops?”
Listen at 2:30
The new listing rules will give founders more control over listed companies.
“this will give them more control”
Listen at 4:02
The UK needs policies encouraging more stock-market listings.
“we need to encourage more listings”
Listen at 4:19
The FCA has warned that greater listing-rule flexibility could increase governance risks.
“The regulator has warned that this is the case.”
Listen at 4:50
The new listing rules may attract unsuitable businesses rather than genuine entrepreneurs.
“I'm not convinced.”
Listen at 5:41
More flexible UK listing rules may not attract companies seeking better valuations.
“I don't think that's necessarily the case.”
Listen at 5:56
Investors should independently research companies before investing under the new rules.
“you do your work, you do your research, you check it out”
Listen at 7:24
National Wealth Fund investment should benefit smaller infrastructure suppliers.
“there's going to be a dropdown surely into the smaller end, the niche providers, the picks and shovels.”
Listen at 7:56
Carlsberg’s increased offer for Britvic is likely to succeed.
“it looks like that's going to go through now.”
Listen at 9:02
Jet2 appears cheaply valued based on its current rating.
“on paper, the rating looks— this business looks really cheap.”
Listen at 10:22
Jet2 trades below eight times forward earnings.
“It's trading at a sub-8 times P/E multiple for the next year.”
Listen at 10:26
Jet2’s new Airbus aircraft should improve operating and fuel efficiency.
“they're much more fuel efficient, so more efficient to run.”
Listen at 10:42
Jet2’s service quality, reputation, and employee retention support its prospects.
“I think it bodes very well for this business.”
Listen at 12:22
Jet2’s market positioning and pricing are attractive despite sector cyclicality.
“I think their positioning and their price point is great.”
Listen at 13:40
Holiday demand is likely to remain resilient relative to other discretionary spending.
“Everybody wants to go on holiday.”
Listen at 13:42
DP Poland may eventually become profitable and generate positive returns.
“Maybe it'll start turning a profit and demonstrate that things through actual positive financial returns.”
Listen at 15:52
DP Poland has generated positive operating cash flow.
“Operating cash flow has been positive.”
Listen at 16:04
Loungers benefits from cheap, available high-street properties.
“they're able to go in and have— there's loads of property available”
Listen at 19:19
An economic downturn would hurt Loungers.
“It's cyclical as well, isn't it? We have a downturn in the economy, they're going to suffer.”
Listen at 20:01
Roadside dining concepts such as Little Chef have suffered from weak customer demand.
“not many people are stopping off at these places now, which was why Little Chef went bust several times.”
Listen at 20:23
Time Out Group needs to become profitable to validate its concept.
“I'd love to see this business actually start turning a profit”
Listen at 21:34
Time Out Group has accumulated £167 million in losses.
“The balance sheet reveals cumulative losses to date of £167 million.”
Listen at 21:48
Hostelworld is an attractive business.
“I think it's a great little business.”
Listen at 23:52
Hostelworld’s customer-acquisition costs are declining.
“the cost of acquiring customers is falling”
Listen at 24:43
Hostelworld has repaid its debt and now has minimal net debt.
“It's paid off all its debt now. Its net debt's peanuts”
Listen at 25:20
Hostelworld’s future cash flow is expected to be strong.
“cash flow is going to be really strong. It's going to be great.”
Listen at 26:24
Science in Sport’s management should cut marketing spending and prioritize profitability.
“they need to reduce their marketing spend, reduce certain types of customers, and focus on profitability.”
Listen at 27:19
Science in Sport’s incentive plan requires a 300% market-capitalization increase over three years.
“if they perform this new management growth scheme, if it delivers a 300% increase in the market capitalization”
Listen at 28:08
Science in Sport’s management incentive scheme is relatively reasonable.
“I don't think it's the worst kind of scheme I've seen.”
Listen at 29:26
Science in Sport may be too narrowly positioned to build substantial brand value.
“Is it too niche? Is science in sport a bit too niche?”
Listen at 30:34
Rosebank Industries aims to replicate Melrose’s buy-improve-sell strategy.
“they're trying to repeat this Melrose product in Rosebank Industries.”
Listen at 32:05
Rosebank Industries’ shares nearly doubled on its first trading day.
“the shares in the day almost doubled to 4.”
Listen at 32:20
Rosebank Industries is expected to announce acquisition deals within months.
“they're going to be returning to the stock market and announcing some deals over the next few months.”
Listen at 32:50
Financing acquisitions is more expensive for Rosebank than during Melrose’s low-rate era.
“Money's more expensive now.”
Listen at 33:15
Rosebank may struggle to replicate Melrose’s past success in a different rate environment.
“Very few seem to repeat successes.”
Listen at 33:30
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
Featuring
Bank of England
Domino's
Melrose IndustriesListen to the full episode and explore every guest, topic, and moment on PodLume.