Housebuilder Miller Group considers IPO

Miller Group has fired the gun on a process that could lead to an initial public offering, with the UK’s biggest privately owned housebuilder appointing bankers to advise on its strategic options.

The developer is 55 per cent owned by GSO Capital, a subsidiary of Blackstone, and any IPO would be the latest in a string of private-equity backed floats as buyout groups seek to cash in on their investments amid rebounding confidence in IPO markets.

“We’re actively considering a number of options and one of those may be an IPO,” said Keith Miller, chief executive. “We’re now in a position to plan the next stage of the development of the business.”

Moelis & Co has been appointed as financial adviser to Miller. The investment bank declined to comment, as did Blackstone.

Other options under the strategic review include a sale to a trade buyer or to another private equity firm, or a deal with an institutional investor.

The news came as the housebuilder reported pre-tax profits for the 2013 calendar year up 58 per cent to £10.4m, with total completions up 12.1 per cent to 2,053 units.

Edinburgh-based Miller would also join a host of recent property flotations, including estate agent Foxtons and Crest Nicholson, the last housebuilder to float, whose shares have risen more than a third since listing in February.

The Financial Times reported on Thursday that Polypipe, a pipe manufacturer serving the housing industry, was set to announce its intention to float.

Cala, the rival Scottish developer that is owned by Legal & General and buyout group Patron Capital Partners, is also expanding rapidly as it moves towards a potential IPO, as is Countryside Properties.

After its sharpest downturn in decades, confidence has returned to the housebuilding industry thanks to the combination of a recovering UK economy and an improved mortgage market, fuelled by government-backed schemes such as Funding for Lending and Help to Buy.

The Bloomberg housebuilding index is up almost 70 per cent since the start of 2013, although some analysts feel the share prices of the current crop of listed entities have run their course – which may boost appetite for any new offer if it were at a discount to the sector.

Credit Suisse analysts last week published a note entitled, “As good as it gets: Time to take profits,” arguing that, for UK housebuilders, “current valuations already factor in substantial future growth in the next two years”.

Miller, which also has commercial property, construction and mining operations, was left lumbered with heavy debts in the downturn. It was among a crop of UK housebuilders to come under the control of the country’s banks – predominantly Lloyds Banking Group and Royal Bank of Scotland – in the financial crisis, before a 2012 restructuring brought in GSO as an investor.

RBS now owns 23 per cent of the company, while Lloyds holds about 9 per cent.

Analysts have argued that the company should sell off its small mining operation and lossmaking construction division to focus on its core housebuilding business.

“The purer it is, the easier it will be to sell to investors,” said Clyde Lewis, an analyst at Peel Hunt.