October 2024

Given the potential reduction or removal of IHT relief on AIM-listed shares, do you foresee a shift in market sentiment or a potential slowdown in fundraising for smaller, growth-focused companies on AIM?

Blimey, a tough question straight off the bat, thanks Alma! There is currently no clarity on what the government is going to do with IHT relief on AIM stocks – unlike under the conservatives, the powers that be are being extremely tight lipped on future policy changes. However, the issue is that it is not just IHT that could change, it’s also Capital Gains Tax too, and a combination of the two overhanging the market, has led to a significant slowdown in activity on AIM. The AIM 100 Index YTD performance compared to the FTSE Small Cap (ex Investment Trusts) Index is now over 16%, and these indices have historically been highly correlated – not much correlation with a 16% under performance! So, it’s certainly having an impact already.

However, if IHT relief remains (and CGT increase isn’t too aggressive) I expect a huge recovery in share prices, as investors, who are currently sitting on their hands waiting for certainty, come flooding back in, especially as valuations are low and markets now expect interest rate cuts to return in November. If IHT relief does go, expect a lot of corporate activity, as some companies will look to move to the full list (some have already indicated they are looking at this: GAMA), companies with strong balance sheets start buying back even more stock, AIM stocks become M&A targets, and we have potential unwinds of AIM IHT portfolios into currently cash hording smaller company funds. Either way, it’s going to be more fun than the last month which has been a little tedious!

What should be the main priorities for management teams when navigating times of market turbulence?

The advice is always the same – concentrate on delivering your numbers and executing on your growth strategy and leave it to your advisers (who generally understand markets better) to worry about markets and how to ride the waves of turbulence. Share prices do move on negative sentiment and challenging conditions, but all of those moves pretty much pale into insignificance compared to a profit warning and missing your consensus expectations!

However, once you have the basics (profit and cash generation) covered, second is arming yourself with the right advisers who give you the best advice. In short hiring Singer Capital Markets and Alma Strategic! Slightly less tongue in cheek, it’s about employing advisors who can help you shape the most compelling investment story. Companies are great at talking about their businesses, but they need help to articulate the investment case that attracts the widest possible investor universe. Honing your investment case, making it resonate in a highly competitive market, pays off both in good times and bad times.

Outside of the budget, what are the key themes you are coming across in the market at the moment?

Outside of the budget, there is a lot going on. We have US elections only two weeks away, we have conflicts ongoing across the globe, we have China wrestling with a slowing economy, and closer to home, we have interest rate cuts anticipated for next month. All of these subjects drive change, be it threats or opportunities for the companies listed on the market. Be that oscillating freight costs, delays in shipments, increasing tariffs, more red tape, a roaring gold price or rapid changes in demand for your product or services. There is always something to talk about, and that’s what makes this job so interesting and rewarding.

What is the most interesting thing you’ve read / watched / listened to recently?

Well, without being too geeky, I love watching the videos of the Space X rocket launches and the returning booster jets, all being voiced over by the cheering and shouting of a room full of over-stimulated Space X fanboys and girls! Its compelling viewing. But also really important, as they are changing the dynamics of space exploration, reducing costs substantially and introducing new technologies that will benefit the world. It’s also fascinating how the strides of a North American company has boosted (pun intended) the outlook for a number of listed businesses, as the UK is actually really good at space technology and communication solutions. We are all connected now.

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Please note: The views and opinions expressed in this interview are those of the individual financial professional(s) and do not necessarily reflect the views or opinions of Alma Strategic. These insights are provided for informational purposes only and may not be relevant at the time of reading, as market conditions can change rapidly. The information provided should not be construed as investment advice or a recommendation to buy, sell, or hold any financial product or security. Individuals should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Alma Strategic disclaims any responsibility for the accuracy or completeness of the information provided in this interview.