As home to some of the highest growth stocks to be found in the UK market, we pay close attention to AIM. We believe companies such as ASOS and BooHoo, as well as drinks maker Fever-Tree have been the trail-blazers for the UK’s most disruptive, high growth businesses. They have shown that the entrepreneurial founders of these businesses have been fully justified in capitalising on the lower levels of bureaucracy and costs that AIM provides, as well taking advantage of the tax incentives that it provides. They have succeeded in executing spectacular growth[1] and attracted an international investor base that appreciates the stellar stories that have evolved. Our focus is on identifying the next generation of structural successes that have differentiated models, the ability to scale on low levels capital, as well as sizable addressable markets to capitalise on. With a universe on AIM of over 350 companies with a market capitalisation of over £50 million there is no shortage of opportunity for us to appraise
2018 has seen a substantial pick up in the volume of M&A activity. The FTSE 250 and SmallCap Indices have seen bids for companies such as Fenner, Fidessa and Laird. We are encouraged by this as it indicates that despite concerns over the state of the UK’s economy and ramifications of Brexit, both trade buyers and private equity are running the slide rule over UK assets.
Below are examples of growth companies from the LSE’s ‘junior market’ that are held within the portfolio. These companies are investing for growth, so earnings aren’t necessarily flowing through to the bottom line in the way that they are for more mature businesses.
Keyword Studios: This provider of a range of outsourced services to the computer games industry started out as small Dublin based firm but today has a presence in 20 countries. It has moved from being a supplier to a strategic partner for its clients, delivering a range of work from localisation to animation to many of the top games companies, including Microsoft, Sega, Nintendo and Ubisoft.
Quixant: A niche outsource player in the gaming platforms arena. The firm designs and manufactures the logic boxes that are in essence the brains of the gaming machines that can be found on the floors of the casinos in Vegas and Macau. The market is underpinned by the replacement market as machines are switched out every five or so years. Quixant’s offering allows the manufacturers of the machines to focus on what they’re best at – making the best games. They consequently are spared the challenges of dealing with increasingly onerous technical and regulatory challenges related to developing the logic box.
Joules: The distinctly British clothing and homewares company is working hard to drive brand recognition both at home and abroad and it has a growing presence both via wholesale, own store and internet channels. Domestically Joules has approximately 120 own stores and plans to increase this to 200. It is also rapidly expanding its presence in the US and Germany, which already represent over 10% of sales. We are encouraged that founder, Tom Joule, is still actively involved in the business as Creative Brand Officer and retains an equity interest of over 30%.
[1] Over the last three full financial years revenue growth for BooHoo has been 314%; ASOS 92% and Fever-Tree 390%
To watch the replay of a recent webcast with Dan Harlow, please click here
Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This communication does not constitute an offer to sell or buy any units in the Fund and should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any AXA investment service or product and is provided to you for information purposes only. The views expressed do not constitute investment advice and do not necessarily represent the views of any company within the AXA Investment Managers Group and may be subject to change without notice. Past performance is not a guide to future performance. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document, which provide full product details including investment charges and risks. Issued by AXA Investment Managers UK Ltd, registered in England No 01431068. The registered office address is 7 Newgate Street, London EC1A 7NX. AXA Investment Managers UK Ltd is authorised and regulated by the Financial Conduct Authority. Telephone calls may be recorded for quality assurance purposes. 21276 05/2018.
