Now in its tenth year, the Growth Company Awards celebrates what’s best on the junior stock markets.

Now in its tenth year, the Growth Company Awards celebrates what’s best on the junior stock markets.

Organised by M&A’s sister title Growth Company Investor and sponsored by share-trading platform Sharemark among others, the Growth Company Awards brought together the advisers and companies who appear to have made the right decisions during the past 12 months and are benefiting from a long-awaited upsurge in the capital markets.

Cambridge-based bioscience specialist Abcam (see March issue) is certainly delivering what the doctor ordered, winning AIM Company of the Year for its remarkable profits and growing revenue.

Likewise, celebrated Suffolk brewer Adnams could lift a glass after taking the gong for PLUS Company of the Year. It’s seen beer sales rise 9 per cent to £51.3 million and profits more than double to £3.2 million. Executive chairman Jonathan Adnams is understandably pleased with the company’s performance, especially given that the sector has suffered in the recession. ‘Over the last few years it has been very hard to grow beer volumes, but we are pleased to say that we pushed Adnams’ volumes forward by 4 per cent in the last year,’ he says.

Neil Tulloch, head of corporate finance at Arbuthnot Securities, which won the award for Broker of the Year, says that after a series of delays and false starts new company flotations are set to make a comeback on AIM, which he points out has ‘outperformed all the other indices since March 2009’.         

Arbuthnot recently raised nearly £25 million for North Sea exploration play Xcite Energy. The firm’s chief executive
Neil Kirton stresses the need for a hands-on approach when working with a company. ‘It’s important to spend time bringing companies before potential investors,’ he says.

Searching for value

Named AIM Adviser of the Year, Brewin Dolphin’s business dates back to the 18th century and it is now a major private client portfolio manager. 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 subject of renewed bid speculation. The company told the market recently its fee income had strongly accelerated in March after a slow February.

An award winner who senses a quickening of the market pace while remaining cautious about immediate prospects is Deryck Noble-Nesbitt, manager of Close Special Situations, which carried off the prize for Small Cap Fund of the Year. Pointing to a spate of recent bids at the larger end of the market, from Kraft acquiring Cadbury at home to oil services company Schlumberger snapping up Smiths International in the US, he contends ‘people’s money has to go somewhere and just now the alternatives to equities are not all that attractive’.

Noble-Nesbitt describes his approach as ‘pragmatic, value-driven and flexible’. He looks for growth potential and strong balance streets and is less concerned with the quality of management teams than some of his peers. ‘You can have a good team in an over-priced company and a bad team in one which is far too cheap,’ he points out.
Using a cash flow model, Noble-Nesbitt says he targets annual returns of 12.5 per cent for his portfolio, with no exit timetable in mind for individual companies. ‘If I think it is worth £1 and it is 50p I wait and, if it hits £1 I sell’.
Noble-Nesbitt says he’s not one to ‘phone up and shout’ at companies, but ‘I constantly reassess the position’. He insists it is essential not to ‘fall in love with particular shares and avoiding that is a big focus of mine’.

Monitoring management

William Horlick, investment chief at investment firm Elderstreet, which won the Venture Capital Fund Manager gong for the second year running, adopts a different approach. With ‘meaningful stakes’ in ten companies comprising 80 per cent of its portfolio, Elderstreet VCT keeps tabs on the management teams of investee managements, who Horlick concedes ‘are not always particularly enamoured’ with this approach. Known for its interest in software companies but also energy, manufacturing and media, the £20 million trust has floated companies on AIM and helped them with bolt-on acquisitions.

Horlick insists that the investment climate has changed for the better: ‘The head of one Elderstreet-backed company went round the City the other day to explain a recent deal and came back with £5.8 million.’

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.
Currently Raleigh is particularly fond of May Gurney, Norwich-based provider of maintenance and placement services to public sector and regulated clients, and energy services group Cape.

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 flotations on the market in recent years, including legal and professional fees insurer Abbey Protection, institutional stockbroker Arden Partners and agricultural feedstock specialist Landkom International.

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.

Halliday notes several interesting trends in the market. While many AIM companies are still looking to shift to the Full List, the firm is seeing more interest in London fundraisings from companies based in the Ukraine, India and South Africa. For firms already listed on AIM, Halliday remarks ‘there is lots of secondary fundraising afoot’, while some disappointed companies are considering going private.

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 AIM is credible to allow decent companies to raise money’.

Number crunchers

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 24 months, 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 ‘the last 12 months have been challenging’. He notes governance issues require significantly more attention than a few years ago and says Grant Thornton’s international business is growing, especially with companies from South Asia and China.

To see the full list of winners, click here
 
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Don’t rest on your laurels

Insufficient attention is given to the secondary markets when primary market flotations take place.
What’s needed is a shake-up in the corporate adviser community as they are motivated largely by the fees they make through primary issues. They regard the ongoing retainer as something of a stipend for which they don’t usually do a huge amount of work.

That’s a pretty universal story from many AIM-listed CEOs. When advisers conduct a primary float they try and get it done in the easiest possible way, which is by a placing. So they have chums at a certain institution and private client brokers that they use, and they will look to do repeat placings with those people.

The problem is that without a broad spread of shareholders after the issue, there isn’t a secondary market and the share price withers away on the vine. The only way of dealing with that is to make sure you have retail investors taking part in the primary issues, but to do that you have to factor in a certain amount of uncertainty about funds raised. This isn’t helped by the board of a company saying they have to raise an exact amount of money. They need to think about how demand is going to be created in the secondary markets.

Among the adviser community there is something of an informal cartel. They all get remarkably close in terms of fees when a company wants to float. It’s difficult for many management teams because often they don’t know how the City works and how finances are raised before a float. They take what’s said as true when they should do a lot more questioning at the front end.

Gavin Oldham is the CEO of Share plc, operator of the Sharemark platform

For more information about Sharemark, click here