The AIM market at 25: Successes, failures and new opportunities

Which companies flourished and floundered since 1995?

2020 alternative investment market generic 1 580x358
Investment Week speaks to portfolio managers about the AIM stocks, past and present, that stand out to them. 

Adrian Lowcock, head of personal investing at Willis Owen, said: "The AIM market has come a long way over the past quarter of a century, shedding its Wild West reputation to provide a springboard for promising companies to secure much needed capital to help them grow.

"While the AIM market has matured, it remains the home of many start-up, early stage companies which can attract speculative investors looking for the next big thing. 

"This can result in share prices being very volatile and potentially being pushed to extremely high levels which are unsustainable."
Asos screengrab 2020 580x358
The success stories
ASOS 
According to Lowcock: "ASOS floated on the AIM in October 2001 and since then has become one of the UK's greatest e-commerce success stories. Launching at 20p, ASOS' share price peaked at £71 before coming back down to about £30 – still a startling return for those who got in early. 

Boohoo
Dan Hanbury, manager of the ES R&M UK Equity Smaller Companies fund, said: "Management turned an old retail business model of long supply chains, bricks and mortar shops and advertising via traditional mediums on its head. They work with local suppliers in the Midlands and take advantage of new marketing models via social media influencers to ascertain which product lines will work, and then produce them."

Fever-Tree
Hanbury added: "A similar story applies to Fever-Tree, which approached the tonic water market, where Schweppes was really the only player, by marketing a more natural and aesthetically pleasing product to a more 'discerning' consumer. The company is now worth more than £2bn (having experienced a share price increase of 1,145% from IPO to end of May 2020) and is expanding into the US." 
Patiserie valerie 2020 1 580x358
Some of the failures
Patisserie Valerie
R&M's Hanbury said: "Once the darling of the AIM, [Patisserie Valerie] famously went to a value of zero in 2018. Understanding the AIM takes a degree of risk in order to gain the rewards. With a balanced portfolio of well-researched ideas, we hope to get more of the great news stories, and fewer of the bad ones."

Affinity Internet 
Lowcock said: "Affinity Internet floated near the heights of the dotcom boom, in April 1999, at £12.8m. The market cap peaked at £1.9bn two years later. But it went bust in 2003."

Langbar International 
Lowcock added: "Langbar International floated on the AIM in 2003 as a cash shell. Shares rose from just 10p initially to a peak of £10. However, the business collapsed when it could not confirm the existence of £370m it said it held in a Brazilian bank."
Lowcock adrian willis owen 2019 580x358
The opportunities 
Lowcock (pictured) said: "These days, there are a number of large, respected firms that are listed on AIM that have been wonderful investments for many investors. At a time when the FTSE 100 is so widely researched, it can be difficult to find a diamond in the rough. 

"That's where AIM comes in and, if investors do their homework, it can be a very profitable hunting ground." 
Harris philip 2016 580x358
Knights 
Knights Group has returned 106.3% since its June 2018 IPO and is 6.8% year to date. 

Phil Harris (pictured), manager of the UK Equity Growth Fund at EdenTree Investment Management: "Knights is a fast-growing, legal and professional services business run by an entrepreneurial management team. 

"One of the first law firms in the UK to move from the traditional partnership model to a corporate structure it focuses on secondary markets outside London. 

"Since the IPO it has made a number of successful acquisitions of traditional partnerships and has extracted considerable synergies as it has modernised them. 

"We expect this highly successful acquisition model to continue to drive strong growth."
Essensys screengrab 2020 580x358
Essensys 
The software firm is down 16.4% since its May 2019 IPO and is 25.6% year to date.

Harris said: "Essensys is the leading global provider of mission-critical software services to the high growth flexible workspace industry helping solve the complex operational challenges as operators grow and scale their operations. 

"In the post-lockdown world, space must become more flexible and adaptable and the workspace industry is thus likely to see substantial growth. Essensys is well placed to grow with its clients not just in the US and UK, but increasingly internationally."
Angling direct screengrab 2020 580x358
Angling Direct
Angling Direct is down 24.4% since its July 2017 IPO and is 32% year to date. 

Ken Wotton, lead manager of the LF Gresham House Multi Cap Income fund, said: "Angling Direct is the largest specialist retailer of fishing tackle and equipment in the UK. It is a multi-channel player operating out of 34 retail sites across the UK as well as a substantial online presence in the UK and continental Europe. 

"The company has a significant growth opportunity from incrementally growing its store estate and driving online penetration particularly in Europe. Although its store activity has been impacted by the Covid-19 lockdown, its online business has continued to trade strongly during this period. 

"A recently strengthened management team has the capability to drive significant long term growth in a relatively economically resilient retail category."
Mattioli ian mattioli woods 2019 580x358
Mattioli Woods
Mattioli Woods is up 424.7% since its November 2007 IPO and is down 8% year to date.

Gresham House's Wotton said: "Mattioli Woods – run by co-founder and CEO Ian Mattioli (pictured) – has been a long-term successful AIM market growth story. 

"It has evolved over a number of years from a pensions advisor and administrator focused on the SIPP market to a vertically integrated advisory led wealth manager. 

"Changes to the financial advice and wealth management market, driven from the Retail Distribution Review in 2012, directly benefited Mattioli's trusted advice led model and opened up a significant market opportunity for the business. 

"There are attractive structural growth drivers underpinning the wealth management sector driven by regulation as well as clear economies of scale that have been driving consolidation. The company has a high quality management team with a strong track record of organic growth and selectively executing accretive acquisitions. 

"The business has a high quality recurring revenue base which is relatively insulated to market movements in contrast to many of its peers and has a scalable platform to continue to deliver attractive growth for several years to come."
Worms video game team 17 c yuxuan wang flickr cc by nc nd 2 0 580x358
Team17 Group
The Wakefield-based video game developer and publisher is up 134.4% since its May 2018 IPO and 42.1% year to date.
 
According to AIM portfolio manager at Sarasin & Partners Hugo Wood: "The business, which is credited with the successful Worms franchise, is still run by one of the founders, who remains a significant shareholder.
 
"The video game market has enjoyed strong growth for several years. 
 
"The larger console-based games saw some disruption in 2018 thanks to the arrival of Fortnite and a new 'freemium' games category, but has now swiftly resumed its trajectory. Indie games are smaller, cheaper to develop, and are usually consumed through a PC platform such as Steam.
 
"This more entry-level segment of the market has been well adopted by consumers both before and during the Covid-19 pandemic, and is expected to continue to grow strongly for the foreseeable future, assisted by the launch of a number of video game streaming platforms. 
 
"Team17's development pipeline is at record levels, which will continue to drive revenue and margins in the coming years."

Photo: Yuxuan Wang/Flickr CC BY-NC-ND 2.0
Wotton ken livingbridge 2016 580x358
Fund picks
Chosen by Darius McDermott, managing director of FundCalibre

LF Gresham House UK Micro Cap
"This fund is run by a company that is itself listed on the AIM market. It has been managed by Ken Wotton (pictured) since its launch in 2009, with the support of the 50-strong specialist team at Gresham House. 68.8% of the portfolio is currently invested in AIM stocks. Since launch it has returned 348.1% compared with 100.9% for the FTSE AiM All-Share and 274.9% for the average peer."

Liontrust UK Micro Cap
"This fund applies the team's proven 'economic advantage' investment process to micro-caps. Investing in Britain's smallest businesses, the fund follows in the footsteps of the successful Elite Rated Liontrust UK Smaller Compani'es and Liontrust Special Situations funds. Some 80.5% of the fund is currently invested in AIM-listed companies and, since lunch in 2016, it has return 72.3% compared with 37.1% for the AIM index and 37.5% for the peer group."
Jourdan paul 2015 580x358
Fund picks (continued)
TB Amati UK Smaller Companies
"This fund has been managed by Dr Paul Jourdan (pictured) since 2000 but has had various names over the years, the latest being a result of Paul co-founding Amati Global Investors in January 2010. The portfolio of 65-70 companies focuses on structural growth businesses. Over the past 10 years it has returned 319.2% compared with 46.9% for the AIM index and 189.4% for the IA UK Smaller Companies average."

Unicorn UK Smaller Companies
"This is a very high conviction UK smaller companies fund with about 40 holdings. All companies must be profitable at the point of investment and the team looks for stocks with lasting competitive advantages, experienced management teams and strong balance sheets. Since taking on the fund in 2013, manager Simon Moon has returned 93.3% for investors compared with 86.1% for the sector average and 34.1% for the AIM index."
  • LinkedIn  
  • Share on Whatsapp
0 Comments

Today (19 June) marks 25 years of the London Stock Exchange's Alternative Investment Market (AIM), the world's most successful growth market.

Since its 1995 launch, the AIM has grown from ten companies valued at £82m to about 850 companies with a combined market cap of £104bn. 

FTSE reshuffle: Travel and aerospace firms punished by pandemic

In that time, more than 3,865 companies have raised in excess of £115bn on the AIM, with the average amount of money raised per company growing from £2.8m in the market's first five years to more than £21m.

The AIM has produced success stories and flops, and continues to offer under-the-radar growth opportunities. 

Marlborough's Chand Lall: Only the strongest companies can continue to pay dividends after Covid-19 shock

Here, Investment Week speaks to portfolio managers about the AIM stocks, past and present, that stand out to them.

  • LinkedIn  
  • Share on Whatsapp

More on Alternatives

Most read

blog comments powered by Disqus