Tom Ryder admits he had been “hoping and praying” the latest update from his sports supplements company Applied Nutrition would push the group’s languishing shares back above its flotation price. His prayers have been answered.

An upbeat trading statement on Tuesday from the Liverpool-based maker of protein powders and hydration products pumped up shares in Applied Nutrition by 11.9 per cent to 146¾p, surpassing the 140p-a-share level at which the company listed last October for the first time since February.

It is a fillip for Ryder, 41, not least because the ebullient Liverpudlian, who got into the fast-growing supplements industry as a side hustle at the age of 18 while working as a scaffolder, owns a 34 per cent stake in the company he runs. Yet it’s hardly a glowing endorsement of London’s troubled flotations market.

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The initial public offering of Applied Nutrition was hailed at the time as a much-needed boost for the City. A dearth in listings ever since the collapse of the last IPO boom in 2021 meant the debut of Applied Nutrition, which valued the company at £350 million, was one of the biggest flotations in London last year.

The fanfare didn’t last long, however. While the shares rose on their first day of trading, the IPO had nevertheless been priced towards the bottom end of the 136p to 160p range that the company had been targeting. After the stock peaked at almost 155p in January, it floundered, even though half-year revenues from the business in April were ahead of the guidance provided at the IPO.

A big concern for investors has been a question mark about the sustainability of Applied Nutrition’s industry-leading margins. Thanks to its focus on business-to-business distribution — selling its products to gyms, retailers or other specialists — and manufacturing in-house at its site in Merseyside, it was able to generate a gross margin of about 47 per cent in the first half.

True, Tuesday’s full-year trading update will have assuaged some of the market’s nervousness over whether Applied Nutrition can maintain its enviable physique. Revenues rose by a better than expected 24 per cent year-on-year to about £107 million, while adjusted earnings increased by about 19 per cent, implying an earnings before deductions margin of 28.9 per cent.

Analysts at Panmure Liberum, a stockbroker bullish on the stock, told clients that forecast-beating figures meant “the shares deserve to go much stronger”. “We have been saying for some time the market has this one wrong,” they added.

But, as the analysts have conceded, there are other aspects of Applied Nutrition’s business model that might give investors pause for thought. One is its dependence on its facility on the outskirts of Liverpool, while another is the “key man risk” represented by Ryder, its chief executive and the driving force behind the company. Its reliance on outside distributors is another potential risk.

Its shares may now be back above their IPO price, but Applied Nutrition’s long-term fitness is still a matter of debate. The stock’s lacklustre performance since the listing will also have done little to improve the health of London’s moribund market for flotations.

Growing pains

A paucity of IPOs is one problem facing Britain’s stock market, another is a string of quoted companies, including the gambling giant Flutter and the building materials supplier CRH, dropping London as their main listing venue in favour of New York in search of better valuations.

They might be joined one day by IWG, the serviced offices provider behind Regus, which has a US listing “on our mind” but not under active consideration, according to Mark Dixon, its founder and chief executive.

“We’re a growth company, the US market tends to reward growth more,” he said, as he lamented the “frustrating” stock market reaction to IWG’s half-year results on Tuesday.

While the business boasted six-month record revenues of $2.16 billion and a 6 per cent increase in adjusted profits to $262 million, its shares nevertheless dropped by 12.8 per cent. Investors were rattled by a warning from IWG that full-year profits would be “towards the lower end” of its $525 million to $565 million guidance range, which it attributed to its plan to further invest in its business. Hence Dixon’s claim that IWG was being “penalised” by the stock market for having “talked to more growth”.

Yet this is a company whose share price has effectively moved sideways since mid-2022, when the Covid crisis, which fuelled a boom in working for home, had receded.

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Although the pandemic is over, IWG is betting the trend towards flexible working is here to stay and is focusing on opening offices in small towns, suburbs and rural areas. The idea is that workers no longer want to undertake lengthy commutes to main offices in big cities and would rather work near home in smaller local sites. Companies seeking to cut costs will also opt for IWG’s services and save on expensive city leases.

However, some big employers, such as JPMorgan Chase and Amazon, have ordered their employees back into their offices full time. And if an employee who can work flexibly is going to travel to an office for part of the week, would they rather go to a central site where their efforts will be visible to all of their bosses and they can network, or a more local site where they might get less exposure to their managers?

Perhaps IWG’s share price in recent years reflects investor unease about its fundamental strategy. Dixon, 65, argues that the advent of video calls means that “times have moved on”. And it is true that since the pandemic, the world of work has changed. But has it shifted permanently in the direction that Dixon believes?

Ben Martin is Banking Editor of The Times. Alistair Osborne is away