Best AIM companies of 2017

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Best AIM companies of 2017

There is less than a fortnight to the 2017 AIM awards and many of the usual suspects are up for awards along with a few new names. The focus is on the larger companies with seven out of the ten largest AIM companies on one or more shortlists.

This year's AIM Awards are being held in London on 12th October and the shortlist is available here (www.aim-awards.co.uk).

Best investor communication

Gift wrap and greetings products supplier IG Design Group (IGR) won this award in 1999 as International Greetings, and was one of the winners of the decade of excellence awards at the 10th anniversary awards, but the business has subsequently gone through tough times. New management has put things back on course and it is prospering again.

Touchstone Innovations (IVO), which is the subject of a bid from IP Group (IPO), is back on the list - although it was still known as Imperial Innovations last year and in 2015 when it won this award.

Former AIM companies of the year, life science tools retailer Abcam (ABC), healthcare IT provider EMIS (EMIS) and wine retailer Majestic Wine (WINE), are the others on the shortlist. Abcam is one of the most significant growth stories on AIM.

Best guess: Abcam

Best use of AIM

This is a year when there are a number of past winners up for awards. Another example is Ideagen (IDEA), which won best use of AIM in 2015. Ideagen has made a further four acquisitions in the past year. Identity verification services provider GB Group's (GBG) is back on the list for a second year running. Address validation and data services company Postcode Anywhere was acquired in the period and that further enhances GBG's leadership in its market.

Legal firm Gateley (GTLY) has made two small acquisitions in the two years on AIM, but it has also signed up 15 new partners, helped by its new status. Much bigger deals are likely to be in the future.

Ticketing and queuing technology supplier Accesso Technology (ACSO) has grown into a significant player in its markets having moved to AIM from Ofex (now NEX) early in the century. Last year, entertainment ticketing firm Ingresso and personalisation and data technology developer The Experience Engine were acquired.

Best guess: Accesso Technology

Global achievement award

This is a new award and the big guns, ASOS (ASC), boohoo.com (BOO), Fevertree Drinks (FEVR) and Gooch & Housego (GHH), are up for this one. Fevertree is likely to win something this year, but it is more likely to be AIM company of the year.

Online fashion retailer boohoo has had a renaissance over the past 18 months. The share price has moved back above the 50p flotation price and is still quadruple that level even after recent declines. Other retail brands, such as Nasty Gal, have been added to the group. Larger rival ASOS needs little introduction and it has won many AIM awards over the years.

Optical components and systems supplier Gooch & Housego deserves highlighting by the AIM awards. This is a truly international business with less than one-fifth of sales in the UK and a majority of sales in the Americas and Asia. Increasing research and development spending maintains Gooch's strong market position. Gooch would be a worthy winner, but one of the consumer businesses is more likely to win.

Best guess: ASOS

Best technology

First Derivatives (FDP) and IQE (IQE) are on other shortlists, with the latter up for AIM company of the year.

Summit Therapeutics (SUMM), which is also listed on Nasdaq, has been on AIM for well over a decade and, like many biotech and technology companies, it has been a long slog but a phase III trial for its C.difficile infection treatment is due to start in the first half of 2018. Duchenne muscular dystrophy drug Ezutromid has triggered a $22 million payment from Summit's partner, and news from its trial will be available early in 2018.

Blue Prism (PRSM) supplies software robots that are used to automate back office tasks, and the AIM flotation has enabled it to accelerate growth in the US. Blue Prism is losing money, but that is due to the additional investment needed to create a significant business in the US.

Best guess: Blue Prism

AIM transaction of the year

Unusually, there are six companies on this shortlist. Fibre optic infrastructure developer CityFibre Infrastructure (CITY) is on the list for the second year running having acquired Entanet in order to expand its wholesale fibre capability.

Horizon Discovery (HZD) acquired GE Healthcare Dharmacon, which moves Horizon towards becoming a leading company in gene manipulation and editing tools and services, as well as providing an e-commerce platform to sell existing products. SDX Energy (SDX) bought producing assets in Egypt and Morocco, while engineer Avingtrans (AVG) acquired the financially troubled AIM company Hayward Tyler (HAYT). Frontier Developments (FDEV) raised £17.7 million from a strategic investment by Tencent, which will help it to move into the Chinese market.

Animalcare (ANCR) has been transformed by the reverse takeover of Ecuphar with existing shareholders owning 37% of the enlarged group. The deal increases the number of vet medicines supplied by the group and brings with it a European distribution operation.

Best guess: Animalcare

AIM growth business of the year

Fevertree won the inaugural award last year and it is back on the shortlist, along with software supplier First Derivatives, musical instruments retailer Gear4Music (G4M) and video games services provider Keywords Studios (KWS).

First Derivatives pops up on shortlists every year but rarely wins anything. The financial software supplier and consultancy has grown steadily over more than a decade so, although it has done extremely well it has not had the eye catching short-term jumps in price that tend to get noticed. There have been acquisitions but the main growth has been organic.

Gear4Music has successfully expanded in Europe and is already one of the biggest retailers in what is a fragmented market.

Keywords is another company that has been unlucky not to be recognised more in the AIM awards. The rapid pace of acquisitions may have concerned some, but the strategy was always to be a consolidator of localisation, artwork and other services for the video games sector. Keywords has shown that it can secure good quality, earnings enhancing acquisitions.

Best guess: Keywords Studios

Innovative fundraising of the year

This is a puzzling shortlist which seems to reflect an award seeking suitable candidates. The exact reasons for the companies to be on the shortlist are not stated. It does appear that significant fundraising may be a more appropriate name for this new award.

Respiratory drugs developer Verona Pharma (VRP) raised £70 million via a global offering ahead of an ADS listing on Nasdaq. Not exactly innovative, because GW Pharmaceuticals (GWP) raised a lot more in a similar offering one year earlier and other AIM companies have done this to gain a Nasdaq listing.

Spend control software provider Proactis (PHD) made two significant acquisitions accompanied by fundraisings during the year. The most significant was the reverse takeover of Perfect Commerce, which was combined with a £70 million fundraising. Proactis is better suited to AIM transaction of the year or best use of AIM - it is probably a better candidate than any on that list.

Frontier Developments is also in the AIM transaction list (see above). It has managed to secure finance to move into the Chinese market.

Litigation funding provider Burford Capital (BUR) raised £175 million via an oversubscribed issue of bonds that will be traded on the Main Market. They yield 6% and are repayable in December 2026. Burford used $43.75 million to repay 2019 loan notes relating to the purchase of Gerchen Keller.

Best guess: Burford

International company of the year

The 2015 winner Hutchison China Meditech (HCM) is back on the shortlist. Regulatory change in China is helping to raise the standard of clinical data, and there are plans to launch new drug Fruquintinib next year.

Banknote and product authentication systems supplier Spectra Systems (SPSY) has been on AIM for six years, and the share price recently went back above the flotation price following approval in China for its smartphone authentication technology. A maiden dividend has been proposed.

Digital and mobile marketing services companies XLMedia (XLM) and Taptica (TAP) have both had to cope with fast changing markets, but they have generated cash and paid generous dividends. Taptica has been transformed from an online-focused media business to a predominantly mobile operation. Data collection and analysis is important to Taptica, helping margins to improve, and it has also grown internationally, including recent acquisitions in Japan and the US.

Best guess: Taptica

Best newcomer

Corporate foreign exchange services provider Alpha FX (AFX) is the best performing new AIM admission in 2017, while cosmetics supplier Warpaint London (W7L) joined AIM near to the end of 2016 and it has performed even better. Eddie Stobart Logistics (ESL) is still trading at around its issue price.

Share price performance may have an influence, but it is not the only factor in this award. Conferencing technology developer LoopUp (LOOP) has also enjoyed a strong share price if not as big a rise as Alpha and Warpaint.

LoopUp is growing strongly particularly in the US which accounts for 52% of revenues. Any losses of customers are more than made up for by existing customers adding more users. It is still early days but LoopUp made a pre-tax profit of £507,000 and R&D tax credits help the company to generate cash which nearly covers capitalised development costs. Target markets are mid-to-large businesses and professional services firms. More customers are being added in the second half.

Best guess: LoopUp

Entrepreneur of the year

Mahmud Kamani and Carol Kane of boohoo.com are jointly on the shortlist as are Samuel Bazini and Eoin Macleod of best newcomer contender Warpaint London. Brian Conlon of First Derivatives is on the shortlist for the second time in three years. Bob Falconer of communications services provider Gamma Communications (GAMA) is also on the shortlist. Gamma has been quoted for three years and Falconer has been chief executive for 13 years.

Mark Watkin Jones is boss of student accommodation developer Watkin Jones (WJG), which is branching out into the private rental development market having joined AIM last year.

Best guess: Mark Watkin Jones

AIM company of the year

Fevertree Drinks has been the darling of AIM for more than two years, so it is no surprise that it is on the AIM company of the year shortlist for a second year. Profit and cash generation are growing strongly and consistently beating expectations. Even after a dip in the share price the company remains highly valued.

Advanced wafer products supplier IQE has tended to be a cyclical business because of its dependence on smartphone customers, but photonics, infra-red and other applications are growing and this has offset weakness in smartphone-related demand.

This is a highly operationally geared business with good cash generation, although much of this cash is being reinvested in increasing capacity. IQE has been hit by profit-taking but the share price is still six times the level it was just over one year ago.

Patent translation services provider RWS (RWS) is the one company on the shortlist not up for another award. It has been transformed from a failed healthcare internet shell into one of the top ten AIM companies.

This is the third award that online fashion retailer boohoo.com has been shortlisted for.

Best guess: Fevertree

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.