AIM Report 2019

Considerations for investment / Picking the stocks 30 31 PICKING THE STOCKS A RANGE OF INVESTMENT OUTCOMES FEVER TREE The drinks mixer company is perhaps one of AIM’s best-known success stories. Admitted to the exchange in November 2014, by the end of that year it was delivering earnings per share of 1.54p. By December 2018 that had risen to 53.38p. Its price reached an all-time high of 3,896p in September 2018 and the following month it was named Growth Business of the Year at the annual AIM Awards. Although the company suffered in the falls of Q4 2018, it did stage something of a recovery and by June 2019 was trading at around 1,500% of its original price when it listed in 2014. 33 “We’re not trying to operate a zero failure regime: companies will fail and that is the nature of markets and equity finance.” — MARCUS STUTTARD, HEAD OF UK PRIMARY MARKETS & AIM AT LONDON STOCK EXCHANGE XEROS TECHNOLOGY GROUP The experience of this firm, which specialises in laundry technology, is a cautionary reminder of how fortunes can change for firms on AIM. After years of strong performance since listing in March 2014, the company has suffered a series of falls in share price since the start of 2018. From an all- time high of 357.5p per share in April 2015, it was trading at 300p per share in December 2017, before suffering a continued decline that left it trading at 6.98p per share by 12 June 2019. Its struggles have not been pinned on any specific issues, and although it has been trading at a loss, that is not uncommon for companies on AIM. New contract wins in China announced in 2019 did little to raise its share price, while the fact that Neil Woodford had been a strong supporter is un- likely to bode well for its price in the short term at least. GAMMA COMMUNICATIONS Another winner at the 2018 AIM Awards, the communications firm has seen consistent long-term growth since arriving on AIM. Listing at a price of 205p per share in October 2014, by June 2019 it was trading around 400% higher, at around the 1,100p per share mark. It largely outperformed the rest of the AIM market and bounced back strongly after the slowdown of Q4 2018. Earnings per share (EPS) have risen steadily year-on-year, with the exception of 2016, and by December 2018 had grown by 24.18% since listing. The fact that EPS growth fell back by 5% at the end of 2016, compared to the previous year, is a reminder that AIM shares generally need to be viewed over the long term. IDE GROUP Perhaps underlining the uncertainty that surrounds technology companies, IDE Group had been trading comfortably around the 30-40p per share mark for a number of years, after listing on AIM in 2010. However, the provider of cloud and IT managed services has seen its fortunes fall dramatically in recent years. In September 2018, with its share price trading at around 3.5p per share, executive director Ian Smith unveiled its latest set of results, announcing: “Having been a director of numerous companies over the years, I can safely say these are the worst set of results I have ever had to provide commentary for and there is nothing positive to point to.” Unsurprisingly, the share price continues to struggle, and by June 2019 was trading below 1p per share. PERFORMANCE ( (5 YEARS) PERFORMANCE ( (5 YEARS) SOURCE: LONDON STOCK EXCHANGE SOURCE: LONDON STOCK EXCHANGE Sector: food & drink Sector: technology Sector: communications Sector: technology 4,032.53 3,226.03 2,419.52 1,613.01 806.51 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19 Jul 15 Jul 16 Jul 17 Jul 18 Jul 19 368.19 294.55 220.91 147.28 73.638 0 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19 Jul 15 Jul 16 Jul 17 Jul 18 Jul 19