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Philip Quigley looks at the feel-good factor among
UK-based AIM-listed companies.
The appetite for further fundraising and acquisitions among
UK-based AIM companies remains undiminished by the economic
difficulties of the past couple of years, according to our latest
annual survey of AIM company decision-makers.
Most of the 120 companies surveyed believe that AIM is meeting
their needs as an effective growth market and are happy where they
are – although two-thirds think the number of companies
listed on the market will continue to fall.
Business confidence
Our poll reflects more than eight in ten (83%) of respondents
were positive about the outlook for their own business in the year
ahead. Only 3% of respondents are negative in their outlook, which
is a large improvement from two years ago when 21% were not
confident about the coming year.
Just under two-thirds (65%) of our AIM companies say trading has
improved over the last year, and a slightly higher number (67%)
said they expected trading to improve over the next year.
Acquisition aspirations
Two-thirds (67%) of respondents are considering making an
acquisition, slightly down on last year; however, AIM-listed
companies appear to be accelerating plans for potential
acquisitions, and there appears to be more confidence in completing
acquisitions in the near term compared to last year.
22% anticipate making an acquisition within the next six months,
up from 18% last year, and more than a quarter (26%) said they
would make an acquisition within 12 months (up from 22%).
Fundraising plans
More than two-thirds (68%) of AIM companies in the survey said
they plan further fundraising. Of these, 42% plan on further
fundraising within the next 12 months.
Attitudes to further fundraising have remained remarkably stable
over the past three years, demonstrating AIM's resilience as a
market for growth companies during challenging economic
conditions.
Of those looking to raise capital, 35% anticipate raising less
than £5m, and 31% between £5m and £20m, with one
in ten looking at major transformational fundraising in the
£20m to £50m or above category.
Further analysis of anticipated fundraising relative to market
capitalisation reveals the extent of anticipated 'top-up'
or emergency funding on the one hand and transformational deals,
most likely acquisitions, on the other.
Just over half (56%) of the smallest companies in the survey
(those with market capitalisation of less than £5m) that are
looking to raise funds, plan to raise less than £5m. However,
20% have ambitious plans to raise sums equal to or well above their
market cap.
For the largest companies in the survey (those with market cap
above £50m) the number expecting to raise more than their
market value is lower, at around 8%, with 30% looking to raise
between £20m and £50m.
Clearly there is a wide range of funding requirements, and still
an element of fire-fighting. Many AIM companies are not
particularly cash-rich, given the nature of their operations and
pressure from investors, so it's not surprising that large
numbers of respondents seem to be indicating their intention to
raise relatively modest amounts, most likely for working capital
purposes or organic expansion, or perhaps to pay for deferred
consideration for previous acquisitions.
Nonetheless, significant numbers indicate that they are looking
for substantial sums relative to their market cap that we would
expect to be used to fund transformational deals.
The intent is clearly there for growth companies to act as we
might expect and reflects rising levels of confidence. This is
encouraging for AIM, which appears to be doing what it's
supposed to do as a growth market.
About the survey
These results come from the fifth annual Smith & Williamson
survey of UK-based, AIM-listed companies conducted at the end of
2010. 120 companies took part, representing 10% of AIM-listed
companies operating in the UK and a wide range of market
capitalisation values, length of time on AIM and proportion of
shares in public hands. Participants were primarily FDs, CEOs,
directors or similar.
Survey highlights
83% of respondents are positive about the outlook for their
business " 67% expect trading to improve in the year
ahead
22% anticipate making an acquisition in next six months
42% anticipate further fundraising in the coming year
58% of firms say AIM has been good for their company
66% expect the number of AIM companies to continue to fall
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