Small Talk: End is nigh for AIM's 'nasty little businesses'

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The Independent Online

Every walk of life has a stalwart whose opinion should be sought in a time of crisis. One who can claim such a status in the Alternative Investment Market (Aim) is Robin Boyle, managing director of Athelney Trust, which invests in small-cap stocks and until last August was listed on Aim, having been one of the original companies to list on the market when it was established in 1996.

Mr Boyle is disappointed with what has happened to the market he champions: "There are an awful lot of unpleasant and nasty little businesses that have been launched on Aim," he says. "I am very disappointed by the quality of the companies on the market at the moment."

Mr Boyle reckons that the "deadwood", which came to the market to cash in on the explosive growth of Aim in the years before the crash, will largely be leaving the public markets this year, and then it is up to investors like him to pick up the good stocks. "There are still some excellent businesses to look at. I recently bought into companies like Interior Services Group [the Aim-listed company that fits out offices and retailers], which has lots of cash on its balance sheet and a huge order book."

One thing that is not helping matters, argues Mr Boyle, is the Government's policy on tackling the current problems: "There are so many things that need doing to repair the banking system and aid the sick economy, yet Messrs Brown and Darling are thrashing around doing this, that and the other. I very much doubt their nostrums will work. For a start, I would reverse the 2.5 per cent cut in VAT, which is a criminal waste of £12bn, and use that money to cut Employers' National Insurance Contributions, which is a direct tax on employment."

Whether these suggestions will directly help the Aim market remains to be seen, but Mr Boyle certainly thinks that the next three months at least will be "awful".

Aukett Fitzroy Robinson Group

The Aim-listed firm of architects Aukett Fitzroy Robinson made a full-year profit in 2008, which is not to be sniffed at for a group that depends on the health of the shaky construction sector. Everything that should have been up was; revenues jumped by14 per cent, pre-tax profit was up a more modest 1 per cent, but most important for investors, the group said that it was increasing the dividend by 5 per cent.

The reason for the decent performance is pretty simple – it is doing less and less of its work in the UK. With a plethora of offices in Eastern Europe and the Persian Gulf, more than 50 per cent of the £22.6m of revenues came from overseas.

The firm may find construction in these alternative markets beginning to falter in the coming months as the emerging markets catch the cold that has waylaid the UK – indeed even a cursory look at Dubai will show that its property market has started to struggle. The group will be hoping that it has the geographic diversity and enough public sector work to keep it going through what promises to be a tough 2009 for builders.

Henderson Morley

Dogs, and sometimes cats, are said to be man's best friend, which is why people spend hundreds or thousands of pounds each year on vet bills. Aim-listed Henderson Morley, the veterinarian biotech group, understand the value of this market, especially in the United States, where the group is collaborating on research with "a US-based centre of excellence for companion animal cancer".

Much like humans, dogs and cats can expect to live longer than ever today, as a result of improved diets and better understanding of their health needs. The consequence, however, is that animals are more prone to conditions associated with old age, including cancers. Of the 74 million dogs and cats in the United States, 4 million each year are diagnosed with cancer. The Henderson Morley research centre will initially concentrate on melanomas and lymphomas, which form a third of all cancers in dogs.

The group's shares are largely held by individuals, and are illiquid as a result: last week's news about the research centre caused barely a ripple. If the centre produces results, and Henderson Morley is able to tap what is a hugely lucrative market, you can be sure that the stock will fly.