Best AIM companies named here
2nd October 2015 14:29
by Andrew Hore from interactive investor
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It is coming up to the time for the annual AIM Awards. They will be announced on 8 October at Old Billingsgate in London and, in addition to the normal awards, there are also plans to mark the 20th anniversary with an award for the best performer over 20 years.
Here is the awards shortlist:
It is always difficult to assess who will win the awards. Last year, the only award winner I managed to guess correctly was international company of the year, . Below is an assessment of who may win six of the main awards this year.
BEST USE OF AIM
2014 winner:
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• First Derivatives (FDP)
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Cakes and bread maker Finsbury Food acquired two companies that increased its exposure to the foodservice sector in the past year: bread and morning goods producer Fletchers and Johnstone's Just Desserts, which brings with it a customer base of national coffee shop chains. The acquisitions make Finsbury one of the largest speciality bakery businesses and the second largest packaged cake supplier.
Financial software supplier First Derivatives has been on AIM for more than 13 years, but last year was particularly significant because of the acquisition of a majority stake in big data software company Kx Systems, which took the company into new sectors. Technology sector focused Prelytix and Canada-based big data software firm Affinity Systems were subsequently acquired. First Derivatives has been growing organically and the new opportunities should add to this growth.
Information management software developer Ideagen acquired governance, risk and compliance software provider Gael last January and EIBS, which brought mobile expertise, just before the period covered by this year's awards. Gael helped to double the group's annualised revenues. The healthcare sector and additional requirements for compliance are driving demand for Ideagen's software.
A highly experienced management team took over a shell and turned it into property investor Palace Capital. Carefully chosen acquisitions with strong rental yields have helped to grow NAV and dividend payments.
Best guess: Finsbury Food
BEST TECHNOLOGY
2014 winner:
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Advanced Oncotherapy is a developer of proton therapy systems for cancer treatment, something that has been in the news in the past year or so. This technique enables the precise treatment of the tumour whereas radiotherapy treats the area where the tumours are. The technology was originally developed by the European nuclear research organisation CERN. Advanced Oncotherapy continues to make progress with technological development and partnerships with major healthcare technology players and it hopes to have its first system ready to treat patients in 2017.
Drug discovery company e-therapeutics has developed a platform that uses network analysis to identify what interventions are required in target cells/systems and the molecules that can deliver these interventions. The candidates are de-risked before the treatment is further developed. Data is due in the next few months for the trials for ETS2101 in the treatment of pancreatic and liver cancer. The company has £30 million in the balance sheet.
Smoke detectors and alarms supplier Sprue Aegis can be described as the most solid company on the shortlist. Sprue Aegis is a profitable business and the technology is not as revolutionary as the newer technologies being developed by the others on the table.
Xeros Technologies has developed a polymer bead cleaning system for commercial laundries and it has been expanding its geographic reach. Mark Nichols was recently appointed chief executive. Revenues remain modest.
Last year's winner, robotic exoskeleton developer REX Bionics has not performed well in share price terms in the past year as progress has been slower than hoped for. That is not a great shock for such an early stage technology business. However, REX's poor performance could make the judges more cautions this time. That said, REX's technology was highly publicised prior to the awards and that may be the key to this year's winner.
Best guess: Advanced Oncotherapy
ENTREPRENEUR OF THE YEAR
2014 winner: Edmund Truell,
• Brian Conlon/First Derivatives (FDP)
• Peter George/
• Teddy Sagi///
• Geoff Wilding/
Pharma services provider Clinigen is on three shortlists this year – the others are best transaction and company of the year - although in this case it is chief executive Peter George that is the focus. Clinigen, which was best newcomer in 2013, has certainly made enormous progress with the latest acquisition, Link Healthcare, widening the global scope of the drug supply business.
Prior to moving to AIM from the Main Market carpets and floorcoverings manufacturer Victoria had been at best a steady performer, but the arrival of Geoff Wilding has led to a much improved performance, a special dividend being paid in the summer of 2014 and then four acquisitions. The latest acquisition is carpet underlay manufacturer Interfloor for an enterprise value of £65m.
Software provider and consultancy First Derivatives has been on AIM since March 2002, which is much longer than any of the other candidates (although Victoria was on the Main Market for decades) and Brian Conlon has been the boss all of that time. In the year to February 2002 revenues were £1.78m and reported pre-tax profit was £612,000, while 13 years later revenues were £83.2m and underlying profit was around £11m.
Teddy Sagi is a busy man. Market Tech owns the main properties in Camden Market and joined AIM at the end of 2014. Digital advertising firm Crossrider and online payments services provider Safecharge also joined AIM last year.
It was always risky choosing Edmund Truell as last year's winner given that Tungsten was an early stage business and the share price subsequently slumped. The four on this year's shortlist generally run businesses that are profitable and have a much longer track record.
Best guess: Geoff Wilding
BEST NEWCOMER
2014 winner:
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Spirit mixer drinks brand Fevertree Drinks and Camden Market owner Market Tech are the two higher profile companies on the short list. Fevertree floated at 134p a share and the share price has more than trebled since then even though the original backers have sold stakes. The shares are fully valued at more than 40 times earnings expectations for this year.
The Market Tech share price is slightly higher than its 200p placing price but below the subsequent £201 million placing at 223p. It has consolidated its property ownership position in the Camden Market area and developed its e-commerce operations. Market Tech is trading at around breakeven.
Marshall Motor is one of the larger motor dealers in England and it also has a significant vehicle leasing business. There are further benefits to come from turning around past acquisitions and potential for more thanks to the strong relationship between Marshall and the car manufacturers.
Pensions administrator Curtis Banks is the most recent of the flotations on the list. In six years, the company has become the third largest full Self Invested Personal Pensions (SIPPs) provider in the UK. Changes to pensions regulations will provide additional scope to grow organically or via acquisition.
Safestyle was a relatively safe choice last year. The strong share price performance of Fevertree could swing the decision in its favour with the other three companies' share prices performing positively but less dramatically since flotation.
Best guess: Fevertree Drinks
INTERNATIONAL COMPANY OF THE YEAR
2014 winner: SQS Software Quality Systems (SQS)
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• Hutchison China Meditech (HCM)
• Somero Enterprises (SOM)
US-based concrete levelling machinery supplier Somero Enterprises Inc and Indian power producer OPG Power Ventures were on the shortlist last year and both have made further progress since then. Somero continues to grow its profit and revenues internationally and this looks set to continue. OPG's revenues were flat last year, but additional capacity means that generation output has grown by one-third in the three months to June 2015 compared with one year earlier but the tariff price has fallen by around 5%.
Hutchison China Medtech was up for this award back in 2010, while big data technology developer Fusionex has previously been on the shortlist for newcomer of the year. Hutchison is profitable thanks to its healthcare and consumer operations, enabling it to invest in drug development - it hopes to have 24 clinical trials up and running by the end of 2015. Fusionex's big data analytics product GIANT has been launched and it has secured more than 25 clients.
Best guess: Somero
COMPANY OF THE YEAR
2014 winner:
• Clinigen Group (CLIN)
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• Dart Group (DRTY)
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Floorcoverings supplier James Halstead and transport and logistics provider Dart were both previously fully listed before joining AIM, although they moved to the junior market in 2002 and 2005 respectively. Vet practices consolidator CVS has been on AIM for eight years and pharma services provider Clinigen for three.
James Halstead is the oldest company up for any award because it has been manufacturing floorcoverings for a century – and claims to have supplied 98% of the world - and it has also consistently increased its dividend for more than two decades on the back of strong cash generation.
Dart's travel (jet2holidays) and airline (jet2.com) operations have fuelled the growth of the business and these operations continue to exceed expectations. Jet2.com flies 239 routes predominantly to the Mediterranean, the Canary Islands and European cities.
It has not always been a smooth ride for CVS which failed to hit profit estimates early in its quoted career. Since then, the company's performance has been strong with revenues quadrupling to £167.3 million and both profit and underlying earnings per share growing over the past eight years.
Pharma services company Clinigen won the best newcomer award in 2013 and since floating has made acquisitions that mean that it is the global market leader in the supply of unlicensed medicines and medicines for clinical trials. Clinigen has also built up its portfolio of higher margin speciality pharmaceuticals.
Best guess: Clinigen
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