Q4 AIM Market Overview

Mark Robinson, Companies Editor – Investors Chronicle
28 October 2019

The advisory complex, along with the wider economy, continues to be hamstrung by external political events. Indexing giant MSCI recently highlighted the prospect of investors clawing back billions through a bounce in equity values and retracement in the dollar/sterling exchange rate assuming a positive outcome in the ongoing Brexit negotiations.

At the time of writing UK and European Union officials are locked in negotiations trying to sort out a trade settlement that would be acceptable to both parties. However, even if they find enough common ground to go forward with what they consider an equitable arrangement, it would still require approval by both the UK and European Parliaments – a distant prospect.

The number of initial public offerings in the UK has fallen away dramatically, a reflection of reduced risk appetite as companies are effectively being asked to second-guess the outcome of the drawn-out political negotiations.

It’s a nightmare from a risk management perspective, so it’s not surprising to learn that the amount of capital raised on the London Stock Exchange has reduced markedly through the year, mirrored by the fact that by the end of September new issuances had reached one-third of their overall level for 2018 – and it’s not as if that was a vintage year.

Admittedly, the UK isn’t alone. The number of new admissions across Europe has fallen to its lowest level in a decade, or in five-years in terms of deal value. Confidence has faltered through 2019, but there are also structural issues at play. We are seeing a swing away from actively managed funds – those which typically would include recently listed stocks within their portfolios - in favour of index trackers, while a hefty increase in private equity-backed investments has meant that more start-ups aren’t being brought to market during their high-growth phase.

Even if we accept that the global economy is beginning to cool, or that changing investment patterns are reducing incentives to go public, it would be safe to assume that a political element is having an outsized effect on stock market activity.

Politics aside, the other chief development for the advisory complex through 2019 centres on the audit industry, or the ways in which it should be reformed in the wake of several high-profile fails in recent times. The final report of the Competition and Markets Authority (CMA) was released in April and it seems probable that most of the large audit firms will voluntarily separate their audit divisions from the consultancy divisions ahead of any new legislation. The timetable for this change is difficult to estimate and we know that some firms are opposed to the main CMA recommendations on the grounds that they wouldn’t automatically guarantee an increase in quality, even though it might appear that systems had become more robust.

There certainly wasn’t wholesale change on display in the audit space over the last quarter, though a net brace, including a new mandate from IG Design Group, was enough to propel PricewaterhouseCoopers (PwC) into the outright lead in the AIM 100 rankings. BDO stretched further ahead of the field in our AIM auditor rankings for the quarter. A handful of gains contrasts with the experience of its nearest challengers, all of which experienced a contraction in numbers through the period. No absence of activity in the broad Industrials sector, where Grant Thornton has taken a share of the lead due to a fall-away in numbers by BDO. Nexia Smith & Williamson joined Mazars and PKF Littlejohn in seventh place, moving above two members of the ‘Big Four’ - Deloitte and EY - in the process. RSM has moved into outright third in the Technology rankings after electronic payments specialist Bango came on board.

Within the stockbroking rankings, Cenkos Securities has taken a share of the lead in the Industrials rankings. It now shares top billing with finnCap on the back of new mandates from Velocity Composites and Brickability Group. Numis Securities has secured the outright lead in the Financials table after hitherto leader Liberum Capital shed three constituents through the period.

Activity in the financial PR rankings was confined to just a few sectors, as Alma PR and Yellow Jersey PR was drawn into a share of second place in the new Consumer Discretionary & Consumer Staples rankings, as numbers for Newgate Communications contracted markedly. Camarco has secured the outright lead in the Energy sector following its appointment by Block Energy PLC, as Vigo Communications drops down into the silver medal position. IFC Advisory has taken the lead in the Industrials rankings at the expense of FTI Consulting. Camarco has moved into a share of third place, while the changing of the guard also had beneficial effects for Hudson Sandler and Newgate Communications.

The situation was similar within the nominated adviser rankings for the quarter, as Beaumont Cornish has taken outright second in the Basic Materials sector at the expense of Strand Hanson which has moved back into third place. Allenby Capital and Grant Thornton have been elevated into a share of fifth place alongside Numis Securities. The Consumer Discretionary & Consumer Staples sector now has a new joint frontrunner as Allenby Capital has moved alongside N+1 Singer. Meanwhile, Cenkos Securities has surged into the lead in the Industrials rankings through a handful of new client mandates.

Within the legal fraternity serving AIM, Gowling WLG has taken a share of the lead in the AIM 100 alongside CMS, after the latter law firm shed an index constituent through the period, while Norton Rose Fulbright moved up to joint third place. Pinsent Masons is into the outright lead in the Consumer Discretionary & Consumer Staples sector after Osborne Clarke shed three clients through the quarter. And Mills & Reeve made good headway in both the Industrials and Technology sectors.