Livingstone Industrial Q2 Review & Outlook

The UK Industrial sector has had a roaring second quarter of 2018, with 127 deals completed, in line with the equally strong second quarter last year (126) and materially ahead of every quarter since.

In terms of average pricing, the greater sample size saw the average EBITDA multiple move back in line with the longer-term average of 8x-9x. Still very strong pricing by historical standards.

With UK economic growth picking up in the second quarter (0.4%), and the Q1 result upgraded from 0.1% to 0.2%, the wider economy continues to shrug off both the continuing political uncertainty and the ongoing bloodbath in certain areas of retail.

industry charts for q2 2018

Reduced volatility in the £ in recent weeks and the PMI remaining strong at over 54% indicate the climate remains broadly benign, reflected in a mild improvement in new orders and solid employment growth across manufacturing.

That said, a rising oil price, shortages in certain raw materials and the now very real prospect of tariff growth is impacting on input costs. Where possible this is being passed on to customers but we can see margins in certain areas being impacted over the next six months.

Within M&A, despite the high number of completions to date we continue to have a strong pipeline and there is little sign of a slowdown in the next quarter.

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