Stock Market Week: AIM's pounds 6.7bn success story continues

THREE YEARS ago the Alternative Investment Market was born with just ten constituents. Today it has more than 300, with a combined capitalisation of pounds 6.7bn.

AIM has experienced some difficult times, even feeling the need to tighten its regulatory regime. But for a young market specialising in accommodating the smaller, perhaps less disciplined, companies, it has been an outstanding success and is still attracting a steady flow of recruits.

AIM has come in for criticism from some quarters, in particular the advancing cost of membership, often above pounds 600,000 as increased regulation takes its toll, and the apparent failure of its shares to join the bull run.

But the FTSE AIM index rather understates the market's performance, because shares elevated to full listing drop out of the calculation, thereby robbing the index of its star performers.

However in the three months to 12 June the AIM index enjoyed something of a boom. At a time when the mid and small cap indices were out-running Footsie, AIM beat such stock market measurements as the all-share, fledgling and, indeed the small cap, indices.

But the seepage of constituents is a continuous process. Dawson Holdings, the newspaper and magazine distributor, has just moved to a full listing. An AIM founder, its shares moved from 49p to a 255p peak, ending last week at 176p.

A survey conducted by accountants Pannell Kerr Forster indicates most of the AIM chairmen and chief executives are quite happy with their lot. But 49 per cent felt AIM's image had declined in the past year, primarily due to problem companies, increased investor caution, removal of some tax reliefs and lack of liquidity.

The liquidity problem could be easing, with a handful of stockbrokers starting market making in smaller companies. Durlacher & Co., Raphael Zorn Hemsley and Williams de Broe are aiming to make markets. There is talk that other firms are ready to clamber on the jobbing bandwagon.

In the PKF survey 85 per cent said Aim had exceeded their expectations.

Best known of the AIM companies reporting this week is Majestic Wine, the expanding 70-strong wine warehouse chain, which arrived 18 months ago at 160p; the shares ended last week at 500p. Bill Myers at stockbroker Williams de Broe expects a champagne profits display of around pounds 3m, up from pounds 1.98m.

The retail reporting theme is continued by the major groups on the schedule. Asda, recently voted the top performing superstores chain, is expected to hit pounds 400m against pounds 353.7m. It is probably the most flirtatious Footsie constituent, having in recent times looked at moving into motorway services, merging with Kingfisher and taking over rivals Safeway.

The stock market is not entirely convinced the Kingfisher deal, or indeed the Safeway one, are completely dead and buried. Asda certainly looks like a company in need of a big deal, and in their respective ways, Kingfisher and Safeway make sense. Worries that Asda may indulge in a substantial acquisition which requires a heavy share issue has helped pull the shares from their peak.

Another retailer which has managed to get some recent corporate deals under its belt is the new-look Great Universal Stores.

Under chairman Lord Wolfson of Sunningdale, the once-reticent group has raided its famous cash pile and put through a series of deals; the last and probably most spectacular was the fiercely contested pounds 1.9bn takeover of Argos, the catalogue stores chain.

That acquisition will not make any contribution to the GUS figures due to be presented this week. They will not be impressive, with the market looking for a little-changed out turn of pounds 570m.

Carpetright may not have a particularly happy tale to relate. Its shares have been under intense pressure, falling from 573.5p last Autumn to 316p on Friday.

John Richards at BT Alex.Brown is looking for pounds 35m but believes the Easter washout experienced by most retailers could mean his estimate is pounds 2m too high. Last year Carpetright made pounds 32.1m.

Upmarket department store group Harvey Nichols should have recorded the sort of progress which would impress the smart set. Around pounds 14m is on the cards, up from pounds 12.1m.

Interim figures from Watson & Philip, the convenience shops chain, complete the retail roll-out. Some pounds 8m (pounds 6.7m) is expected.

First Leisure, still striving to sell its Blackpool operations such as the famous tower, should show benefits from its reshaping and is set for a 33 per cent interim jump to pounds 22m.