Channel surfing

The Channel Islands Stock Exchange is attracting attention from companies of all shapes and sizes, and for the right reasons. James Harris reports

The Channel Islands Stock Exchange is attracting attention from companies of all shapes and sizes, and for the right reasons. James Harris reports

The Channel Islands Stock Exchange is attracting attention from companies of all shapes and sizes, and for the right reasons. James Harris reports

Contrary to popular belief, the tax advantages for a CEO looking to list on the Channel Islands Stock Exchange (CISX) are modest. Joanna Huxtable, a tax director at accountancy firm Deloitte, says, ‘Most people don’t list [on the CISX] for tax reasons. Often it’s an exit strategy for investors who want to list on an exchange where the costs are kept to a minimum and the approach of the exchange is helpful and pragmatic.’

Though close to 3,400 securities are listed on the CISX, only 50 companies have made their home on the market, and the reasons for their decision are often those you would expect of any smaller quoted company. Ewan Lloyd-Baker, chief executive of niche engineering firm Southbank, which listed on the CISX in March 2006 and raised £5 million, observes, ‘We are registered and domiciled in the UK and we aren’t benefiting from any tax breaks.

‘To be honest, we were hoping to use the CISX like OFEX [now PLUS] was used – as a stepping stone to further liquidity, access to capital and potentially access to new markets.’

The right choice

Like any sensible newcomer to the market, Southbank considered several other exchanges, principally Dublin, Amsterdam and AIM, but the decision was clear: ‘If you look at the costs and timetable of listing on CISX compared with AIM, it’s a tenth of the price and it takes a third of the time. [With regard to Dublin and Amsterdam], we were more comfortable with the advisers on CISX. Many have offices in London, so it’s transparent and seamless. We might as well be doing business in the City.’

In the same month that it listed, the company acquired engineering concern Hayward Tyler for £13.1 million. ‘The company was part of 3i’s portfolio, so it was run as a private equity-backed business, rather than as a subsidiary of a plc,’ says Lloyd-Baker. Southbank changed the management team and established different ways of reporting ‘that were more appropriate to a plc’.

The deal was a success: ‘Our revenue has grown from £25 million in 2006 to the high 30s now. We have moved into sub-sea gas products and we have benefited from growth in the nuclear market as well as increased demand in India and China.’

Although Southbank was on the acquisition trail, market conditions have evidently altered: ‘The quality of opportunities changed. We’re not interested in distressed acquisitions. It also got to the point where if you could find any kind of debt, you were doing well.’

However Lloyd-Baker admits that the company would ‘consider making acquisitions in the next 12 months’, which is in no small part down to the CISX listing. He adds, ‘We have managed to leverage our listing. It has certainly helped discussions with external finance providers. Any deal in the future would be with the right institutional investor who could look to the long term and enable us to double or treble the size of the business.’

Another company that has accelerated its growth is Max Property Group, which listed on both the CISX and AIM in May this year and raised £220 million. ‘[While AIM] provides more liquidity, the CISX is not overly bureaucratic and it is credible with investors,’ says Sandy Gumm, chief operating officer of Prestbury Investments, which advises Max Property.

Public profile

Going public can give a company extra  credibility in the sector it operates in and among potential investors. Lloyd-Baker says, ‘The CISX is probably the largest stock exchange that no-one has heard about. However, the structure and process of listing encourages companies to behave as a plc without having to pay hundreds of thousands of pounds in adviser fees, of which you arguably never see the benefit. Listing adds an air of respectability.’

Max Property speedily executed its growth strategy after its dual listing: ‘We were surprised how quickly we found the right portfolio to acquire,’ states Gumm. Within weeks of going public, the company acquired a portfolio of 82 industrial properties across the UK out of receivership for £245 million.

Explains Gumm, ‘We are not burdened with any legacy assets, so we have a clean slate. We are looking to take advantage of the cycle, make acquisitions and then wind up and go away in seven to ten years.’  

The CISX remains, in many ways, a niche platform for companies, but with attractive exit options for investors and less bureaucracy than other exchanges, it may be worth a second look as the public markets start to recover.

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...