The Growth Company Awards 2010

Cautious optimism for London’s junior AIM stock market is the watchword among the winners of the tenth annual Growth Company Awards, says Robert Tyerman

Selected by an independent panel of judges drawn from finance, law, investment and the media and announced within the opulent surroundings of the Grocers’ Hall in the City of London, our Growth Company Awards served to remind the assembled AIM, PLUS and ShareMark community that excellence abounds in many quarters of the smaller company space.

Abcam clinches AIM gong
Cambridge-based bioscience specialist Abcam, whose share price has this year risen from a low of 586p to 1,259p, valuing the business at £426.6 million, walked away with the AIM Company of the Year award. The fast-growing Abcam, bossed by CEO Jonathan Milner, markets antibodies via its own online catalogue and is seeing buoyant demand for its products in the expanding protein detection and regulation markets.

Celebrated Suffolk brewer Adnams, which has been lifting beer sales and profits in a tough market, took the trophy for PLUS Company of the Year. During 2009, its sales edged up from £47.1 million to £51.3 million, sending operating profits up from £1.5 million to £3.2 million – more than doubled despite the recessionary backdrop – a performance that enabled the company to pay an unchanged final dividend of £1.22.

Optimism abounds
Neil Tulloch, head of corporate finance at AIM Broker of the Year Arbuthnot Securities, believes that after a series of false starts, new company flotations are set to make a comeback on AIM, which has ‘outperformed all the other indices since March 2009’. Commenting that competition from the London Stock Exchange’s new lightly regulated and lightly safeguarded ‘standard listing’ facility has yet to pass the test of its first new float, Tulloch argues that AIM’s relative illiquidity inevitably leads to volatile price movements. It will ‘outperform in good times and underperform in bad’.

Arbuthnot Securities, which returned strongly from losses to profits in the second half of 2009, is part of AIM-quoted Arbuthnot Banking Group and so knows the market from both sides. Another AIM counter is Brewin Dolphin, named AIM Adviser of the Year. Headed by executive chairman Jamie Matheson and with the redoubtable Mark Brady as managing director of corporate finance, Brewin Dolphin has seen an upturn in business of late and become the subject of renewed bid speculation.

A noble pursuit of value
Another award winner sensing a quickening of the market pace while remaining cautious about immediate prospects is Deryck Noble-Nesbitt, manager of Close Special Situations Fund, which carried off the prize for best Small Cap fund. Pointing to a spate of recent bids, from Kraft-Cadbury at home to Schlumberger-Smiths International in the USA, he contends that ‘people’s money has to go somewhere, and just now the alternatives to equities are not all that attractive’, though he sees upward pressure mounting on interest rates.

Noble-Nesbitt describes his approach as ‘pragmatic, value-driven and flexible’. He looks for growth potential and strong balance sheets and is less concerned with the quality of management teams than some of his peers: ‘You can have a good team in an overpriced company and a bad team in one that is far too cheap.’

Significantly, the biggest holdings in his Close Special Situations portfolio range from Nestor Healthcare, the £61.5 million social care provider, to UK coal producer ATH Resources and AIM-quoted mining play Titanium Resources. Other key holdings include renewable energy counter Ocean Power Technologies and insurance group Brit Insurance.

Monitoring management
William Horlick, investment chief at investment capital trust group Elderstreet, whose Elderstreet VCT won the award for Venture Capital Fund Manager of the Year for the second year running, adopts a proactive approach. He contends that ‘being close to businesses is really important’ for a naturally illiquid VCT, which has paid an average dividend of 4.17p over three years on its shares, now trading at 47.5p.

With ‘meaningful stakes’ in the ten companies comprising 80 per cent of its portfolio, Elderstreet keeps tabs on investee companies’ managements, which Horlick concedes ‘are not always particularly enamoured’ with this approach. Known for its interest in software companies but also in energy, manufacturing and media, the
£20 million trust has floated companies on AIM and helped them with bolt-on acquisitions.

An upbeat AIM follower is Francesca Raleigh, support services guru at broker Numis Securities, who won the title of Analyst of the Year. Having collected the same gong two years ago, she sees her sector as a ‘great space’, with many constituents poised to score from public sector outsourcing in a financially austere post-election environment.

Raleigh is currently particularly fond of May Gurney Integrated Services, Norwich-based provider of maintenance and placement services to public sector and regulated clients, energy services group Cape and leading patent translation and research concern RWS Holdings, headed by Vitesse Media director Andrew Brode.
   
‘Gamekeeper and poacher’
City and international law firm Eversheds, which serves 51 clients on AIM, came away with the prize for AIM Lawyer of the Year. The firm has acted in a string of AIM flotations in recent years, including legal and professional fees insurer Abbey Protection, institutional stockbroker Arden Partners and project manager and outsourcing concern Norcon.

Partner Chris Halliday, who leads Eversheds’ equity capital team and has a particular focus on mining and natural resources, says the firm can act for an AIM company itself or its broker or nominated adviser. ‘We are both gamekeeper and poacher’, he quips.

Noting that many AIM companies are still looking to shift to the Full List, Halliday points out that Eversheds is seeing more international companies, from Ukraine, India and South Africa, though he is concerned that some smaller and illiquid companies have ‘rotted on the vine’ after the recession-induced market slowdown. While some disappointed companies are considering going private, he says ‘there is lots of secondary fundraising afoot’.

Institutions may be more risk-averse than in the boom time, but, insists Halliday, ‘they are still keen to invest in the right businesses. We need to make sure that AIM is credible – as it is – to allow decent companies to raise money’.

Grant Thornton, named AIM Accountant of the Year for the second year running, has been involved with the market for 15 years. Auditor to 179 companies, representing 15 per cent of the market, the firm is also active as a nominated adviser and has helped 18 companies float on AIM in the past two years, with a combined market value of £2 billion, says audit partner Phil Crooks.

With a leading position in the market’s resources sector, Grant Thornton has been responsive to client companies’ needs during the recession, argues Crooks, who concedes that ‘the past 12 months have been challenging’. He notes that governance issues require significantly more attention than they did a few years ago and
says Grant Thornton’s international business is growing, especially with companies from South Asia and China.

‘Growth companies’ are the declared focus of Buchanan Communications, winner of the award for Financial Public Relations Company of the Year and boasting the most PR clients in the AIM 50 and 100 indices.

Senior partner Bobby Morse says AIM has been ‘a good hunting ground for entrepreneurial growth companies’. He adds that Buchanan, which helped with last year’s float of property group LXB, is active in a range of fields, including natural resources, healthcare biotech, engineering, retail and logistics, and that the company is looking to beef up its financial services capability. ‘We help entrepreneurs communicate in a language the market understands,’ he declares. ‘We get them to work closely with brokers and nominated advisers.’