No Pain, Go Gain: Change AIM, and you may still score a bull's-eye
Saturday 14 June 2008
Is the AIM game over? I think not, but there is no doubt that the Stock Exchange's junior market is facing an exceedingly testing time.
The Alternative Investment Market has been an outstanding success since its rather subdued launch in 1995. It has captured companies from around the world, defying bitter American criticism likening it to a casino – but it has also hosted the inevitable spectacular disasters. During its existence, it has attracted an astonishing 2,900 companies. Its current strength is about 1,665. It boasted it was "the growth market of the world".
But in the past year or so, the AIM story has looked increasingly fragile. The rush to join has dwindled to not much more than a trickle. And many of its small-cap shares have endured torrid times. Trading in them is often thin. Not surprisingly, questions are being asked about its future.
The credit crisis has sent many investors running for cover. They have unloaded small-caps in a scramble to put their cash into what they regard as more secure havens, such as blue chips.
But the travails of mortgage banks Bradford & Bingley and Northern Rock demonstrate that big is not necessarily beautiful. Blue-chip disasters are not a recent phenomenon; remember GEC and Polly Peck? It is not only the disenchantment of private investors – the main supporters of AIM (and, indeed most micro-caps) – that is creating problems. Institutional investors, never very keen on the lower reaches of the stock market, are now largely ignoring AIM shares. The fall in values that has occurred since last summer has dramatically reduced capitalisations. Many companies are now valued at less than £20m, even £10m. For example, Myhome International, a No Pain, No Gain portfolio constituent, was once priced at around £50m; now it is worth just £11.3m.
Clearly, few institutional investors are going to look at companies with such low valuations. And even when good – perhaps outstanding – profits are achieved there is unlikely to be much positive share-price reaction. Too few investors, big and small, seem interested.
The casino jibe prompted the Stock Exchange – quite rightly – to intensify the regulatory requirements, a move that has led to higher running costs for AIM companies. Deep Sea Leisure, a former portfolio constituent, last month exited the junior market, citing yearly costs of £60,000 and the demands AIM made on executive time as some of the reasons for its departure.
And more companies are expected to leave. Executives are growing increasingly exasperated by the way their shares are treated. The internet tipster Tom Winnifrith believes that around a third of the present contingent could leave the market – by going private or seeking to be taken over, or moving to the fringe Plus market where regulations are less onerous and costs are lower. The JP Jenkins unlisted market could also capture a few disaffected AIM companies. It is probably significant that Paul "the plumber" Davidson descended on Plus with his new listed enterprise, Fluid Leader. It enjoyed a spectacular debut.
With the flow of new entrants much reduced, and many existing constituents disenchanted, the Stock Exchange may be forced to reshape what has been an outstanding creation. Meanwhile, possible takeover bids offer investors their most rewarding option. The collapse in valuations must increase the chances of corporate activity.
The lack of investor interest in AIM stocks was underlined this week by the reception given to Printing.com's results. The shares were 75p in 2005. They hardly stirred when profits came in 5.7 per cent higher at £2.42m and the year's dividend lifted by 20 per cent to 3p a share. The group has now launched in France and has eyes on Australia. Cash is £3.5m.
Chief executive Tony Rafferty is "cautiously optimistic" and intent on maintaining a progressive dividend policy. Stockbroker Brewin Dolphin expects £2.7m this year (down from £2.9m) and points out that the historic dividend yield is now 7.6 per cent.
I accept that Printing. com's profits performance is, compared to some, rather pedestrian but I would have expected rather more enthusiasm than a short-lived 0.5p advance to 40.5p – not much above the year's low.
The yield is higher than many savings accounts and the dividend policy underlines the group's strength. Even in these days, with many AIM investors on strike, the shares deserve more support.
Independent Partners: See how much you could save by switching credit cards. Compare now
arts + entsThere were towering ideas, some scintillating performances and revelatory grooves... our writers pick out their personal highlights
elephant appealThe first 23 lots in our charity auction have now gone. But there are 22 more still up for grabs
elephant appealPrince William signs up for our charity appeal
peoplePrepare to be entranced by worms as the molecular biologist gets ready to give the Royal Institution science lectures
elephant appealSo says man jailed for cutting off dead elephant's tusks
booksWe examine the best titles for teens
voicesPeople moan that Christmas is too commercial, the spirit lost. But it is a time to over-indulge, and always has been, says DJ Taylor
scienceResearchers teach border collie to understand sentences using more than 1,000 words
booksA Christmas story in six parts
travelWill high-value tourism help the workshops of this Renaissance city?
food + drinkA trifle without custard? Surely not! Nonsense – and here’s three to finish your festive meal that prove it
Geoffrey Macnab does not like the comedian's big screen debut
- 1 Tim Sherwood challenges Daniel Levy to set out vision for Tottenham Hotspur’s future
- 2 French pub fined €9,000 after customers returned empties to bar - because it's 'undeclared labour'
- 3 Sun will 'flip upside down' within weeks, says Nasa
- 4 #Teamnigella: It’s the only side to be on
- 5 Christmas comes early: Justin Bieber is 'retiring from music'
Tom Daley ‘is gay because his father died’ says UK evangelist
Iain Duncan Smith leaves Commons food banks debate early
David Cameron takes his biggest gamble yet as he gets tough on Europe over immigration
Kiss and yell: Italian protester charged with sexual assault after kissing riot police officer
Anachronistic and iniquitous, grammar schools are a blot on the British education system
Top PR exec Justine Sacco under fire for sending racist tweet before flying to Africa
- < Previous
- Next >
iJobs Money & Business
£59999 - £80001 per annum + Benefits: Pro-Recruitment Group: A Top 10 firm in ...
£50000 - £75000 per annum + benefits + bonus: Harrington Starr: Project Manage...
£60000 - £90000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£Negotiable: Citifocus: High calibre individual with institutional client serv...
Day In a Page
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.