AIM Industry Report 2017/18

60 61 This section takes a look at the current market of AIM- based tax-advantaged offers. The analysis is based on data obtained from the MICAP platform and is correct as of October 2017. Our intention here is to give advisers data on key investment metrics – such as costs, minimum subscription and target returns – so that they have a reference point when reviewing the market for BR investments and can understand the levels of returns to expect and at what prices. We start by giving some clarification on the terminology we will use: OFFER STATUS OPEN OFFERS AIM offers that are raising money at October 2017 2016/17 OFFERS AIM offers that launched in the 2016/17 tax year (April 2016 – March 2017) HISTORICAL OFFERS AIM offers that launched before April 2016 INVESTMENT STRATEGY GROWTH Investment into trading companies for long term capital growth GROWTH & INCOME Investment into trading companies for long term capital growth and income INVESTMENT SECTOR GENERAL ENTERPRISE Providing general products and services, or an investment with no sector bias INVESTMENT TYPE ALTERNATIVE INVESTMENT FUND A collective investment undertaking which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, but does not require authorisation pursuant to the UCITS directive. Whoever is responsible for arranging the investment must complete an appropriateness test on the investor DISCRETIONARY PORTFOLIO SERVICE Investors contract with an investment manager who will invest their funds on their behalf. The FCA Authorised Manager must complete a suitability test on each holding and have permission to manage investments PRODUCT TYPE EIS Enterprise Investment Scheme (EIS) is a government- backed investment scheme that is designed to help smaller trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in these companies BR Business Relief (previously Business Property Relief) reduces the value of a business or its assets when working out how much Inheritance Tax has to be paid VCT A Venture Capital Trust is a company, broadly similar to an investment trust, which subscribes for shares in, or lends money to, small unquoted companies. A range of tax reliefs are offered to VCT investors to compensate the risks associated with this type of investment. TERMINOLOGY WHAT ARE WE TALKING ABOUT? QUANTITATIVE ANALYSIS MARKET COMPARISONS AIM MARKET COMPOSITION In terms of the number of companies quoted on AIM, no single sector dominates the market, but the most popular sectors are Mining, Software and Computer Services, and General Financial. There are no major movers since September 2016 when the same sectors made up the top 5. The ‘Other’ statistic refers to companies who made up less than 1% each of the AIM market. The sectors making up this category are Aerospace and Defence, Automobiles and Parts, Banks, Beverages, Electricity, Fixed Line Telecommunications, Food and Drug Retailers, Forestry and Paper, Gas, Water and Multiutilities, General Industrials, Industrial Transportation, Leisure Goods, Life Insurance, Mobile Telecommunications, Non-equity Investment Instruments, Non- life Insurance, Oil Equipment and Services, Personal Goods and Real Estate Investment Trusts. This is an indication of the wide range of businesses that join AIM. EARNINGS PER SHARE (EPS) In considering the AIM 100, we have analysed the EPS of its constituents, relying on data from digitallook.com on 18 December 2017. EPS is a performance measure that breaks down how much money the company is making in profits per every outstanding share of stock. Importantly, this means that EPS shows how much money the company is making for its shareholders, not only due to changes in profit, but also after all the effects of issuance of new shares (this is especially important when the growth comes as a result of acquisition). In general, the higher the EPS is, the more money shares of stock will be worth because investors are willing to pay more for higher profits. Nevertheless, it is worth bearing in mind, that Basic EPS does not factor in the dilutive effect of the issue of additional securities such as stock options and warrants, not to mention new public share issues in the company, which could increase the total number of shares outstanding in the market. A comparison of the FTSE AIM 100 and the FTSE 100 shows that the FTSE 100 has a much higher maximum EPS of 467.80p. This is over four times higher than the AIM 100 maximum of 115.80p. This supports the theory that younger companies, with fewer resources and possibly less management experience, are not as capable of exploiting their opportunities. Additionally, and perhaps not surprisingly, the AIM 100 demonstrates a lower average and median EPS, likely as a result of being dragged down by a number AIM MARKET COMPOSITION BY SECTOR SOURCE: LSE AIM STATISTICS SEPTEMBER 2017 OTHER TRAVEL & LEISURE TECHNOLOGY HARDWARE & EQUIPMENT SUPPORT SERVICES SOFTWARE & COMPUTER SERVICES REAL ESTATE INVESTMENT & SERVICES PHARMACEUTICALS & BIOTECHNOLOGY OIL & GAS PRODUCERS MINING MEDIA INDUSTRIAL METALS INDUSTRIAL ENGINEERING HOUSEHOLD GOODS HEALTH CARE EQUIPMENT & SERVICES GENERAL RETAILERS GENERAL FINANCIAL FOOD PRODUCERS EQUITY INVESTMENT INSTRUMENTS ELECTRONIC & ELECTRICAL EQUIPMENT CONSTRUCTION & MATERIALS CHEMICALS ALTERNATIVE ENERGY 0% 2% 6% 8% 10% 12% 4%