The median trailing pre-money revenue multiple achieved by London Stock Exchange AIM-listed companies was 2.54 for the 18 companies that generated revenues > £1 million. The median trailing pre-money PE and EBITDA multiples achieved by London AIM-listed companies were 14.40 and 9.33, respectively, for the eight companies that earned profits > £2 million.
This post provides some insight into each of the 45 companies that listed on the London Stock Exchange's AIM; the industries and geographies in which they operate, their overall listing, financial and operating metrics and the outlook for London AIM IPOs.
Highlights
- London Stock Exchange AIM IPO activity holds steady - 45 listings on London's AIM during 2011 compared to 46 listings on London's AIM during 2010
- Companies completing London AIM IPOs during 2011 were smaller but stronger
- £560 million ($900 million) raised for London AIM IPOs in 2011 (£3.6 billion for secondary offerings)
- ‘Operating companies’ account for 84% of London AIM IPOs
- London Stock Exchange AIM IPO market remains selective and below trend (50 - 150) for the foreseeable future
- Given market conditions, prospective issuers should carefully consider:
- Suitability before embarking on the process of listing on London's AIM
- Key advisers, most notably London AIM Nominated Advisers (Nomads) and London AIM Nominated Brokers
- Average ‘operating company’ IPO on London's AIM raised £14 million ($22 million)
- 61% of London AIM IPOs raised between £3 million and £30 million ($5 million and $48 million)
- Average ‘operating company’ opening market capitalization upon listing on London's AIM of £41 million ($66 million)
- 74% of opening market caps upon listing on London's AIM between £10 and £150 million ($16 and $240 million)
- London Stock Exchange AIM IPO dilution of existing shareholders of ‘operating companies’ amounted to 30%
- Average and median share price return on London's AIM of +9% and -6% since IPO (median date 7/11/11)
- FTSE AIM All-Share Index fell 26% during 2011, 21% from 7/11/11 - 12/31/11
- Average post-IPO free float on London's AIM of 52%
- 18 of the 45 companies listing on the London Stock Exchange's AIM generated revenues > £1 million (range £1 million - £101 million)
- Median trailing pre-money revenue multiple of 2.54
- Those w/o significant revenues broadly in the natural resources space or financials
- 8 of the 45 companies listing on the London Stock Exchange's AIM earned profits > £1 million (range £2 million - £6 million)
- Median trailing pre-money PE and EBITDA multiples of 14.40 and 9.33
- Industry dispersion and insight into the 45 companies listing on London's AIM below
- Geographic dispersion and related commentary on the 45 companies listing on London's AIM also below
All Companies
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2008
|
38
|
918
|
24
|
2009
|
13
|
610*
|
47*
|
2010
|
46
|
1,017
|
22
|
2011
|
45
|
560
|
12
|
Total
|
142
|
3,105
|
22
|
* Includes two large London AIM IPOs focused on acquiring
distressed real estate and commercial businesses. If excluded, IPO funds raised on London's AIM drops to £248m.
‘Operating Companies’*
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2008
|
27
|
523
|
19
|
2009
|
3
|
16
|
5
|
2010
|
36
|
723
|
20
|
2011
|
38
|
516
|
14
|
Total
|
104
|
1,778
|
17
|
* Generally excludes SPACs, Investing Companies
and Investment and Real Estate Funds.
The key takeaway from comparing the tables above is that ‘operating
companies’ listing on the London Stock Exchange's AIM continued their return to London's AIM, accounting for 84% of the companies
and 92% of the gross funds raised on London's AIM. Generally
speaking, compared to 2010, the companies that completed IPOs on the London Stock Exchange's AIM during 2011 were
smaller and stronger and simply required less growth capital.
While the continuing return of ‘operating companies’ listing on London's AIM
is a positive sign, the London AIM IPO market remains below trend (50 - 150) and is
expected to remain so for the foreseeable future. Despite the relatively weak macroeconomic
situation, the Secondary Offering market on the London Stock Exchange's AIM has been booming with £3.6 billion
($5.8 billion) raised during 2011 as a result of attractive valuations for
companies listed on London's AIM that are ‘known quantities’. The
strength of the Secondary Offering market on London's AIM is a positive sign for London Stock Exchange AIM IPOs over the
medium to longer term as London AIM investors remain confident in the market; however, the
shifting of their risk profiles towards London AIM IPOs is sure to be gradual.
The types of ‘operating companies’ that completed IPOs on London's AIM during
2011 generally fell into two very distinct categories; those with revenue
traction and profits, or very close to profitability, and natural resource
plays (mining and oil and gas) at a very nascent stage. The latter all had owned or identifiable
assets, solid geological studies and exceptional management teams with
demonstrable track records of success.
The chart below provides the distribution of gross funds
raised from London Stock Exchange AIM IPOs during 2011. The sweet
spot for London AIM IPOs is between £3 million ($5 million) and £30 million ($48
million).
Of the aggregate gross funds raised, 90% was for the
companies listing on London's AIM and 10% was for selling shareholders which were present in seven of
the London Stock Exchange AIM IPOs, although, only five sold a meaningful stake. While the average amount of gross capital
raised on London's AIM was £12 million ($19 million), the median was £5 million ($8 million).
The equation in the next chart can be used to predict the
cost of a London AIM IPO with 88% confidence. The
26 data points represent the gross funds raised and associated costs for the
‘operating company’ listings on London's AIM that raised between £3 million ($5 million) and £60
million ($96 million). Since the average
‘operating company’ listing on the London Stock Exchange's AIM raised £14 million ($22 million), the expected cost
would be £1.48 million ($2.37 million) or 10.57% of the gross funds raised.
For the London AIM Market as a whole, the average and median offering costs
amounted to 20% and 13%, respectively, of the gross funds raised on London's AIM, however, the
average, in particular, is skewed by a number of relatively small London Stock Exchange AIM IPOs where
the fixed costs dominate.
The chart below provides the
distribution of opening market capitalizations upon listing on London's AIM. The average company’s opening market
capitalization upon listing on London's AIM was £36 million ($58 million) whereas the median was £17 million
($27 million). 69% of the companies
listing on London's AIM commanded opening market capitalizations that ranged from £10 million to £150
million ($16 million to $240 million).
The aggregate opening market capitalization upon listing on London's AIM of the 45
companies that completed IPOs on London's AIM during 2011 was £1.6 billion ($2.6 billion). The average and median post-IPO free float of
these companies on London's AIM was 52% and 54%, respectively.
The chart below highlights an
interesting, and what will likely be a permanent, shift in the market with
respect to the London Stock Exchange AIM IPO dilution of existing shareholders. There are two main reasons for this shift;
one regulatory and the other macroeconomic.
The regulatory reason is the London Stock Exchange’s codification of the London AIM Nominated Advisers (Nomads) Rules in 2007, which increased the scrutiny of prospective companies listing on London's AIM by London AIM Nominated Advisers (Nomads) since the London AIM Nominated Adviser (Nomad) vouches to the London Stock Exchange (LSE) as to a company’s
suitability for listing on London's AIM. The
macroeconomic reason is the global financial crisis, which has caused London Stock Exchange AIM investors
to become more risk adverse. Consequently,
the quality of the companies completing IPOs on London's AIM has increased and, as a
result, the London AIM IPO dilution of existing shareholders has decreased. The 30% - 35% dilution level appears to have
seen a step-change downward to the 25% - 30% range. 2009 is viewed as an anomaly given the lack
of activity.
For the London Stock Exchange's AIM as a whole, the average and median dilution of
existing shareholders was 37% and 33%, respectively. With respect to the ‘operating companies’ listing on London's AIM it
was 30% and 28%, respectively.
The final chart in this section provides the distribution of
share price returns since each of the 45 companies listed on the London Stock Exchange's AIM
through the end of 2011. It should be noted
that the median London AIM IPO date is July 11, 2011, therefore, the average and median returns
on London's AIM of +9% and -6%, respectively, only represent, on average, the last 173 days of
2011, the weakest part of the year for the overall market. As a point-of-reference, the FTSE AIM
All-Share Index fell 26% during 2011 and a staggering 21% from July 11, 2011
through the end of the year; therefore, the relative aftermarket performance of
the 45 London AIM IPOs has been quite strong.
London AIM Industry Dispersion
Companies listed on the London Stock Exchange's AIM are organized into 90 sub sectors which
feed into 40 sectors which feed into 10 super sectors. The only super sectors that were not
represented with IPOs on London's AIM during 2011 were Telecommunications and Utilities. The chart below provides a breakdown of the
eight super sectors in which one or more London Stock Exchange AIM IPOs occurred during 2011. Since the classifications can be deceptive,
the table below the chart provides some insight into the individual companies.
Basic Materials (12)
|
Mining E&P; gold (3), coal (1), iron ore (1),
fluorspar (1), potassium (1), phosphates and rare earth elements (1), iron
ore and manganese (1), gold, copper, iron ore and zinc (1), copper, uranium,
gold and silver (1) and one ‘greentech’ company that has developed
compostable and sustainably sourced materials for large format print
advertising
|
Oil & Gas /
Alternative Energy
(11)
|
E&P (7)
Oil Equipment and Services (2), one is an investment
company seeking to acquire and consolidate companies providing specialist
products and technologies to the E&P market and the other is a clean
water technology company with a system that permanently and immediately removes
free, emulsified and dissolved hydrocarbons from water
Alternative Fuels (2), one has technologies, processes and
engineering solutions focused on bioethanol and biobutanol and the other has
technologies for the breeding and genetic improvement of Jatropha, a
feedstock plantation and a biodiesel processing plant
|
Financials (6)
|
One intends to invest in companies with both digital media
and social networking capabilities, one provides an online, peer-to-peer
currency exchange platform and an online clearinghouse, allowing individuals and
businesses to trade currency, one intends to invest in the natural resources
sector, one is an established retail bank, one intends to invest in real
estate and one provides specialist insurance services to the commercial real
estate sector
|
Industrials (6)
|
One establishes partnerships with universities and
research institutions to assist with the spin-out and licensing of their
technologies, one has developed and is marketing mass spectrometry
instruments, one provides gas
infrastructure connection services, gas meter asset management services and
smart metering technology solutions, one is a manufacturer and distributor of
water purifying and dispensing systems, one invents, develops, manufactures
and markets advanced, technology-based products used to mark, track and
authenticate high value goods and one provides energy purchasing and energy
consultancy services to corporations
|
Healthcare (3)
|
One is a medical device company developing a range of
monitoring and diagnostics products for the measurement of blood gases,
electrolytes and drug levels at the patient’s bedside, one is a healthcare
provider co-owned by a partnership of doctors, nurses and healthcare
professionals and one intends to invest in the biotechnology and
biopharmaceutical sector
|
Consumer Services
(3)
|
One owns, develops and produces music festivals, one is an
athlete representation and sports marketing, management and events agency and
one is an online provider of conveyancing services to buyers and sellers of
residential property via a panel of third-party, licensed conveyancers and/or
lawyers
|
Technology (2)
|
One provides asset tracking and geospatial systems for
mission-critical businesses processes and goods and one provides
point-of-sale software to the postal industry
|
Consumer Goods (2)
|
Both are agricultural companies; one is fully-integrated,
producing, processing, distributing and retailing beef, chicken, pork, milk,
dairy products, eggs, edible oils, stock feed, flower and bread and has farming
operations that produce maize, soya beans and wheat and the other only has a
farming operation that produces oil seed, rape, potatoes, wheat, sugar beet
and maize
|
Revenue and income/loss figures for most of the companies
listed on London's AIM are not particularly meaningful given their early stage profiles. Of the 45 companies listing on London's AIM, 18 generated significant
revenues (i.e. > £1 million) during their most recent financial year with
the range being £1 million - £101 million ($2 million - $162 million). The average pre-money revenue multiple achieved on London's AIM was
3.24 and the median was 2.54. Of the 18
companies listing on the London Stock Exchange's AIM that generated significant revenues, 14 were profitable; six earned small
profits and eight earned significant profits (i.e. > £1 million) with the
range being £2 million - £6 million ($3 million - $10 million). The average pre-money PE and EBITDA multiples
achieved on London's AIM were 18.00 and 9.01, respectively, and the medians were 14.40 and 9.33.
None of the 12 basic materials companies listing on London's AIM generated significant revenues. Five of the 11 oil and gas / alternative energy companies listing on London's AIM generated significant revenues, of which, three were profitable and two earned significant profits. Two of the six financial companies listing on London's AIM generated significant revenues and earned significant profits. Four of the six industrial companies listing on the London Stock Exchange's AIM generated significant revenues and all four were profitable but only one earned a significant profit. One of the three healthcare companies listing on London's AIM generated significant revenues but none were profitable. Two of the three consumer services’ companies listing on London's AIM generated significant revenues, of which, one earned a significant profit. Both of the technology companies listing on the London Stock Exchange's AIM generated significant revenues and both were profitable but neither earned a significant profit. Both of the consumer goods companies listing on London's AIM generated significant revenues and earned significant profits.
Two of the 45 companies listing on London's AIM during
2011were, or became, dual listed at the time of the London AIM IPO; one had been listed
on Zambia’s Lusaka Stock Exchange since 2003 and the other completed a
simultaneous listing on the Enterprise Securities Market of the Irish Stock
Exchange. Since the Lusaka Stock
Exchange is not an ‘AIM Designated Market’, the company had to produce the typical
AIM Admission Document and could not utilize the ‘fast track route to London's AIM’.
Nine of the 45 companies listing on the London Stock Exchange's AIM during
2011 were previously listed on the PLUS Stock Exchange (the old OFEX) in the
U.K. and one of these companies completed a dual listing on the Enterprise
Securities Market of the Irish Stock Exchange shortly after its London AIM IPO. Two other unusual London AIM IPOs during 2011
include one company listing on London's AIM that was previously listed on the London Stock Exchange's AIM, was suspended and then delisted
as a result of the suspension lasting more than six months and one where an
established retail bank was spun off from a boutique investment bank.
Of the seven U.S. companies listed on London's AIM during 2011, two remained domiciled in the U.S. and the other five were either
already domiciled in, or re-domiciled into, the U.K. or Ireland. The two U.S. domiciled companies listing on London's AIM continue to
prepare their financial statements in accordance with U.S. GAAP, although they
could choose to report using IFRS, however, the five domiciled in the U.K. and
Ireland must prepare their financial statements in accordance with IFRS. In terms of reporting currencies, six of the
seven companies
listing on London's AIM use the USD, with the Ireland-domiciled company reporting in Euros given
its dual listing on the Enterprise Securities Market of the Irish Stock
Exchange shortly after its London Stock Exchange AIM IPO.
London AIM Geographic Dispersion (Main Place of Operation)
Unsurprisingly, the U.K. is the main place of operation for
more London AIM listed companies than any other country, region or continent. The U.K. is well represented in seven of the eight
super sectors on London's AIM. The only major
concentration of U.K.-company London Stock Exchange AIM IPOs was four in the industrials sector with the
other six super sectors each capturing one or two companies. Eight of the 14 U.K. companies listing on London's AIM generated
significant revenues, of which, five were profitable and two earned significant
profits.
Four of the seven U.S. companies listing on the London Stock Exchange's AIM were in the basic materials
(i.e. mining) and oil and gas sectors, although, one is actually a technology
company listed on London's AIM that cleans water generated from oil production and/or water used in the
petroleum refining process. This company
listed on London's AIM generated significant revenues and earned a small profit. The three mining and oil and gas companies
listed on London's AIM are very small and not really representative of these types of companies on
London's AIM. Two of the other three U.S. companies listed on London's AIM are in different sectors, both generated significant revenues and were
profitable, but only one earned a significant profit. The final U.S. company listed on London's AIM is a newly formed investment
company focused on the healthcare sector, specifically biotech.
Six of the seven African companies listing on London's AIM were in the basic materials sector
and the other one is an agricultural company, which generated significant
revenues and earned a significant profit.
All four South and Central American companies listing on the London Stock Exchange's AIM and all three South
Asian companies listing on London's AIM were in the basic materials and oil and gas sectors, with two
generating significant revenues but only one earned a significant profit.
The only other point of note is that both Southeast Asian
companies companies that listed on London's AIM are in the financial sector.
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