Blackfriar: Small step maybe but AIM chiefs have cause to smile at last

THE Alternative Investment Market has not proved a happy hunting ground for many small firms in recent years.

More companies have left the junior stock market than have joined it. At the last count, there were 1,102 companies on the junior market, down from almost 1,700 in 2007.

Some claim it’s not helping them access funds, others argue the costs are too high for the perceived benefits, while some early-stage firms have simply failed.

But the Chancellor’s Autumn Statement finally gave AIM chief executives reason to smile yesterday.

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    The Government will consult on including shares traded on SME equity markets, such as AIM, in tax-free Individual Savings Accounts (ISAs).

    Tim Ward, chief executive of the Quoted Companies Alliance, said: “This measure could have a significant positive impact on liquidity and the ability of small and mid-size quoted companies to raise funds – ultimately helping them to grow and create jobs.”

    Consultancy PwC argues it is a missed opportunity. “Think how much more investment and growth could be generated if the Government were to lift the capital gains tax and stamp duty millstones from the AIM market,” said Leeds partner Katherine Bullock.

    But this is a step in the right direction and potentially opens up AIM to a whole range of new investors.

    Other possible initiatives could include a junior bond market, allowing small firms to bypass bank lending and access debt from investors on a tradeable market.

    Small companies need incentives to take the plunge and join AIM. Making their shares more attractive to investors is a key part of this.

    AT one point during the dotcom boom Leeds wireless technology firm Filtronic commanded a market value of $2.4bn.

    These days things are rather different – somewhere near the £34m mark.

    Filtronic has been on a remarkable journey since University of Leeds Professor David Rhodes founded it in his bedroom in 1977.

    It grew into a world-leading business, with operations in defence, radar and mobile phones, and facilities stretching from San Francisco to Saltaire.

    But the last few years have seen it shrink to a fraction of its former size, with businesses and property sold off and cash returned to investors. Revenues fell as low as £15.5m last year, when pre-tax losses hit £5.1m.

    But heritage counts for a lot when you’re dealing with some of the world’s largest telecoms and technology companies.

    “People like Ericsson, they come to us for things they can’t get elsewhere,” said new chief executive Alan Needle. “They still remember Filtronic. We still have a reputation and it’s trying to capitalise on that reputation.”

    The former managing director of Filtronic’s wireless infrastructure division was with the company for much of that journey.

    He rejoined the business with its acquisition of Leeds wireless firm Isotek in 2010 – the business which propelled Filtronic into the 4G mobile broadband revolution with its solutions to use valuable airwaves more efficiently.

    Now Mr Needle is looking at filters to prevent interference to TV signals from the 4G roll-out – something the Government has set aside £180m to solve.

    Mobile networks are creaking. Upgrading base stations cannot wait. Filtronic, with its wealth of experience and long-standing reputation, is well placed to capitalise on this. Blackfriar suspects its renaissance starts here.

    It looks like Tesco has finally given up on its ill-fated £1bn American dream.

    Tesco’s bid to take on Asda’s parent company Wal-Mart in its own back yard was a rash and costly mistake.

    Launched in the gung-ho days of 2007, the Fresh & Easy concept probably looked like a good idea.

    But the UK’s biggest retailer should have pulled out a long time ago. It has never made a profit and it lost £74m in the first half of this year.

    Tesco isn’t saying how much it will cost to pull out of the US, but the City believes it is making the right decision.

    Richard Curr, head of dealing at Prime Markets, says 2012 has been a watershed year for Tesco, starting with the infamous profit warning in January and consecutive quarters of poor like-for-like sales.

    The jury has been out over new chief executive Philip Clarke, but Mr Curr believes that December 5 may well go down as a turning point for Tesco strategy.

    Now the focus will be on the UK business. UK like-for-like sales are still suffering, although food has performed well.

    Perhaps the most important development is that Mr Clarke has taken definitive steps to turn the business around.

    At a time when Sainsbury’s Price Match promotion and Asda’s promise to be 10 per cent cheaper are keeping their shoppers loyal, the retailer that looks most at threat from a reinvigorated Tesco is Morrisons.