M companies are surprisingly confident about their prospects, a PwC survey has found. Participants also thought the AIM market had emerged leaner and fitter as a result of the recent shake-out of companies exiting the exchange. However, with global economic conditions once again unceratin, we urge companies to consider developing scenarios to deal with the impact of a renewed recessionary period.
In the “Thriving on AIM” report, PwC found that the average target for revenue growth over the next 12 months is 24%, some way ahead of comparable surveys of FTSE 250 firms (average 12% target for growth) and private companies (average 18% target for growth). One in five AIM companies are looking to expand turnover by over 50% in the next year, against a backdrop of challenging market environment.
David Snell, AIM leader, PwC said:
“There are some encouraging signs regarding profitability but there is also a concern that AIM companies adopting aggressive growth strategies could be caught out by recent global macro-economic events and a possible recession. One notable finding is that AIM companies in our survey looking to new geographic markets as a source of growth see the US (28%) and the EU (24%) as their main focus. With recent Eurozone difficulties and continuing issues in the US economy, more AIM companies should consider emerging markets as potential markets for growth.”
Almost all of the companies in our survey recognise the importance of a strong growth story in winning over investors. Yet, most feel that maintaining effective investor relations is the toughest challenge they face.
Only:
- 28% believed that investors were looking for greater transparency
- 21% of respondents thought investors were looking for improved corporate governance
- 4% were of the opinion investors wanted more diversity on their board.
David Snell, AIM leader, PwC said,
“Smaller AIM companies are always going to be vulnerable to a withdrawal of investment in difficult economic conditions. But with markets this hostile, it is essential that all AIM companies continue to focus on effective market communication as well as maintaining the highest possible standards of governance and transparency.”
The survey also highlights the important role companies believe that government has to play in supporting AIM and helping to ensure it retains its leading position as a growth company market.
David Snell, AIM leader, PwC added:
“The government has an important role to play in supporting investment in AIM companies which are likely to be a key part of our economic recovery. AIM companies are calling for a simpler tax system, lower rates of corporate and employment taxes and greater investment incentives. They also recognise the importance of a skilled workforce and identify investment in education as a priority for government. The government’s recent commitments to alleviate the burden of export paperwork and local regulation in target export markets with the help of the UKTI is the type of initiative that these companies need.”
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