High costs see Just Car decide to quit the AIM

CRASH repair group Just Car Clinics is to quit the AIM market, saying its costs are too high.

The move will raise questions about the future relevance of AIM for smaller companies as tough economic conditions hit their profits.

Goole-based Just Car, which carries out car repairs after accidents, said it will ask shareholders to support its decision to leave the AIM market in November to become an unquoted company.

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Chairman David Hickey told shareholders: “For some time your board has been of the view that the AIM-quoted status of the group has served little purpose, other than to provide an occasional market for shareholders wishing to deal.

“There are considerable costs and other disadvantages associated with being quoted which are out of proportion to the size of the group.”

In order to allow shareholders to continue to trade in the group’s shares, arrangements have been made with Brewin Dolphin to provide a matched bargain share dealing facility.

Smaller companies have become increasingly disillusioned with the AIM market.

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Chris Belsham, KPMG’s director for the North, said: “Smaller companies on AIM may have been there for a few years. They floated with a story, maybe they have not delivered on that story and they’ve fallen below the radar. They have little prospect of raising new equity.

“If they do something well, the share price doesn’t have an upward response and if they fail to do well, the share price is shattered.”

While the cost burden of being on AIM is not huge, a lot of management time is spent abiding by the rules.

“It can all become painful for no real benefit,” said Mr Belsham. “A lot of smaller companies would love to delist the business. They can do so if shareholders are happy to support the move, but you need 75 per cent agreement.”

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Since the recession several companies have opted to delist, most notably Leeds-based online search company Infoserve, which delisted earlier this year with the approval of major shareholder David Hood.

However if the shares are widely held it is more difficult.

“Some investors don’t want to hold shares in an unquoted company,” said Mr Belsham.

“I think we’ll see a steady trickle of companies delisting from AIM, but only when the shareholder dynamic supports it.”

Alternatives for companies with reluctant shareholders are to find a trade buyer or seek private equity.

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“If you’ve got a good story, private equity will take time to look at you,” said Mr Belsham.

He added that for small unlisted companies, AIM is not the place to go unless they are in specific markets such as biotech.

“Unless you’re a £75m market cap company post flotation, probably the best source of funding is private equity,” said Mr Belsham.

Just Car’s Mr Hickey said: “The perceived benefits of an AIM listing typically include access to equity capital markets, an enhanced corporate profile, a means to incentivise key staff and a mechanism to provide a market in the company’s shares.

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“However the board has reached the view that, after almost nine years as an AIM quoted company, the company is not receiving these benefits to any extent that would justify the costs and management time associated with maintaining its status as an AIM company.”

He added that the requirement to provide trading updates under AIM rules is potentially commercially disadvantageous in the current climate.

“The board therefore believes the company’s interests would be better served if it were to operate as an unquoted entity,” he said.

The move comes as the firm reported a sharp decline in half year profits.

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Underlying pre-tax profits fell from £600,000 to £200,000 in the six months to June 30 after high fuel prices and tough economic conditions deterred people from driving their cars. In addition, high insurance excess payments meant more customers delayed small repairs.

Turnover fell from £25.3m to £21.5m.

Mr Hickey said: “Underlying market conditions in 2011 have been challenging and this, together with exceptionally dry weather in the spring, resulted in decreases in both turnover and profit in the first six months of the year.”

Drivers tend to have fewer accidents when road conditions are dry.

The extra public holiday for the Royal Wedding also hit trading in the second quarter.

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In a bid to counteract the underlying market conditions, the group has extended its range of services, with tyre replacement, general vehicle maintenance and servicing made available.

Mr Hickey said: “While tough trading conditions persist, the board believes that Just Car Clinics, with a strong balance sheet and an experienced management team, is in a good position to continue to grow market share and continue to trade profitably.

“As and when volumes recover, the group should see substantial benefit.”

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