Aim is always likely to experience a sharp decline in an economic downturn. John Cowie discusses the relative performance of media sub-sectors.
It will be no surprise to anyone that Aim has performed badly over the past few months. Indeed, the FTSE Aim All-Share Index has suffered a much sharper decline in the last 12 months (down 58%) than that of the Main Market (the FTSE All- Share is down a 'mere' 40% as we go to press).
This is exactly what economists would expect in a downturn from a market that seeks to attract growth businesses: the beta of their constituent companies ought, on average, to be greater than one. In other words, they should demonstrate higher volatility than a basket of 'normal' (for which read larger, established company) shares. To put it another way, in the good times, Aim should outperform the Main Market, rewarding greater risk with greater return. In the bad times, it should fall more sharply than the Main Market.
Clearly, some industry sectors perform better or worse overall than others in a downturn. In this issue of Quoted Business, we examine the media sector in some detail and compare its recent performance with the index as a whole.
The Aim media sector, like Aim as a whole, has fallen by 58% in the last year. Within the sector, the only three subsectors which have fared slightly better than this average are media agencies, showing a 35% decline in the last 12 months, broadcasting and entertainment (43%) and publishing (45%). Rays of hope within the overall gloom are online market research houses Research Now and Toluna, whose share prices have risen by 16.4% and 9.6% respectively in the last year. Both sit within the media agencies sub-sector. The only company of the 12 in the publishing sub-sector to have bucked the overall downward trend is international business-to-business (B2B) media company SPG Media Group, which recorded share price growth of 2.9%.
In fact, out of the 66 Aim companies in the media sector, the companies mentioned above are the only 3 which have grown over the last 12 months.
So, what does the near and long-term future hold for media companies on Aim? For answers, we turned to a number of media figures to find out what the big challenges are now, what the issues are for the future and how positive they are about the sector generally. Are there strategic lessons to be learned and deployed over the coming months in the various media sub-sectors?
To set the scene, Smith & Williamson's Andrew Wilkes, a media specialist and a director in our Corporate Tax division, explains the recent performance of media stocks and gives his view on the outlook, opportunities and threats ahead for the sector.
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