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.
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Survey highlights
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