The AIM Dividend Monitor from Link Group suggests the total dividend payout from AIM companies will reach £1.22bn in 2022, which will be close to the record payout of £1.29 billion in 2019. Our assessment suggests that dividend payments may actually exceed this level.

Rising dividend yields

The strong rebound in dividend payments has coincided with a steep decline in the share prices of many AIM companies with the result that dividend yields of sizeable and well-established AIM companies have risen substantially, to levels not seen in the 18 years we have been managing AIM portfolios.

New AIM IHT Income Portfolio

We have been contemplating the launch of an income focused AIM IHT service for several months following discussion with advisers and clients. The quality of companies on AIM has improved considerably over recent years making this a far more viable AIM IHT planning solution than was previously the case.

Fundamental Asset Management’s new AIM IHT Income Portfolio will follow a fixed model, with equal investment in the shares of 30 Inheritance Tax qualifying AIM companies, well-diversified across sectors and industries. The current estimated forecast dividend yield from the portfolio is 5.25% (December 2022).

There is currently minimal cross-over with stocks in our long-running AIM IHT Growth portfolio. The average market capitalisation of stocks in the AIM IHT Income Portfolio is £269m compared with an average market capitalisation of £565m for the AIM IHT Growth portfolio.

Chris Boxall, co-founder of Fundamental comments:

“Up to now, our predominant focus when investing in AIM is on capital growth. However, our research has uncovered a large number of sizeable AIM companies, previously considered for their growth prospects, now offering compelling dividend yields. When we looked at this many years ago, higher-yielding AIM companies were firmly ex-growth and subscale, however, this is no-longer the case”.

The new Fundamental AIM IHT Income Portfolio is available on Fundamental’s own designated broker platform or via a range of IFA wrap platforms including Abrdn (formerly Standard Life) Wrap & Elevate, Fidelity Funds Network, Nucleus, Transact, M&G Wealth and others. It is available in both an ISA and General Investment Account.

You can find out more about our AIM IHT Income Portfolio in our webinar here and video interview here.

 

To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected]  or phone 01923 713 894.

In this video interview, Chris Boxall, co-founder of AIM specialist investment manager Fundamental Asset Management, discusses the opportunities for income investors in AIM IHT ISA portfolios.

With AIM companies set to pay out just over £1.2 billion in dividends in 2022 there are plenty of high yielding AIM stocks to choose from, although prospective investors need to be wary of certain factors as Chris highlights.

You can watch the interview by clicking the image above.

The interview coincides with the launch of Fundamental’s new AIM IHT Income Portfolio service which was also covered in a recent webinar here.

DIFFERENCES BETWEEN THE EXISTING AIM IHT GROWTH PORTFOLIO VS THE AIM IHT INCOME PORTFOLIO?

The existing AIM IHT Growth Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets. Fundamental has been managing this portfolio since inception in 2004.

The new AIM IHT Income Portfolio is designed for clients to still take advantage of the potential Inheritance Tax relief afforded by the AIM market and retain control of their assets, at the same time as providing a greater level of dividend income.

To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected]  or phone 01923 713 894.

In this video interview with Jeremy Naylor of IGTV, Chris Boxall, co-founder of AIM specialist investment manager Fundamental Asset Management, discusses the opportunities for income investors in AIM.

With AIM companies set to pay out just over £1.2 billion in dividends in 2022 there are plenty of high yielding AIM stocks to choose from, although prospective investors need to be wary of certain factors as Chris highlights.

You can watch the interview by clicking the image above.

Companies discussed include Gateley (GTLY), K3 Capital (K3C), MP Evans (MPE), Premier Miton (PMI) and Strix Group (KETL).

The interview coincides with the launch of Fundamental’s new AIM IHT Income Portfolio Service which was also covered in a recent webinar here.

 

Fundamental’s AIM IHT ISA and General portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

Fundamental now offers its standard AIM IHT Growth Portfolio, as well as its new AIM IHT Income Portfolio service.

All portfolios are managed by the same team of managers and researchers that have delivered exceptional returns since the firm’s founding in 2004.

You can find out more from the link here or by contacting [email protected] or calling 01923 713890.

AIM isn’t a market that’s generally considered for its dividend and income attractions, and we have always expressed caution on AIM companies paying out high dividends, when they should be putting their cash to better use.  However, the steep decline in share prices of many good-quality AIM companies has seen dividend yields soar to levels not seen since we started managing AIM IHT planning portfolios back in 2004 and the AIM of today is thankfully a far better market than it was back then.

With many AIM companies sitting on plenty of supportive cash, but their share prices languishing, these high yielders also have growth attractions.

We therefore thought it was an appropriate time to reassess the dividend and income potential of AIM companies for IHT planning purposes.

Join us for our webinar AIM IHT portfolios for INCOME? Is it worth it? on 25^th November at 3pm. We will discuss the benefits and potential pitfalls of investing in Inheritance Tax qualifying AIM companies for income generation and the potential yield available.

The webinar will cover a number of topics including:

• State of the AIM market
• The investable universe of big dividend paying AIM stocks
• Dividend yields and dividend cover
• Quality of AIM companies
• Interest rate considerations
• Fundamental Asset Management’s high yield AIM portfolio solution
• Sectors and industries.
• Portfolio management

 

Sign up to the webinar from the link here

 

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 18 years, from the link here.

To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected]  or phone 01923 713 894.

It has been a painful time for AIM investors across the board. Fundamental Asset Management portfolio managers have been giving their thoughts and insights into where the market is, how we got here and where it might be going. In addition, in a recent interview with Jeremy Naylor on IGTV, co-Managing Director Chris Boxall talks about specific stocks, the potential bargains and things to watch out for.

FUNDAMENTAL ASSET MANAGEMENT WEBINAR OCTOBER 2022

To view the new webinar please click on the following link – AIM: cheap for good reason or bargains to be snapped up? In the webinar, AIM in Q3 as well as Year To Date is reviewed, why we are where we are and what lies ahead.

IGTV INTERVIEW

For the interview with Jeremy Naylor click on Bargain hunting on AIM. In the interview, Jeremy Naylor of IGTV and Chris Boxall of Fundamental Asset Management, discusses potential bargains on AIM following recent falls.

AIM IHT PORTFOLIO

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 18 years, from the link here.

 

To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager Jonathan Bramall via email [email protected]  or phone 01923 713 894.

Global Markets Continue to Struggle

The outlook for global economies continues to look challenging, with high inflation and rising interest rates potentially tipping many countries into recession.

As a result, global stock markets, led as usual by the US, have been suffering for quite a while. Unfortunately AIM has not been immune to this, with the AIM index now down over 33% year to date.

The bear market since the summer of 2021 is one of the longest we have seen in our 30+ years in investment management. Even the financial crisis of 2008 did not last as long as this and we can only hope that we are somewhere near turning the corner.

Certainly, the recent updates from our core portfolio holdings have been largely positive, despite the challenges they face, although this has not been reflected in their share prices!

What do we do we do at the moment? 

As we have previously mentioned, with the market not reflecting the general positive performance of many of the companies in our portfolios, the simple answer is, we do very little, other than drill down into the many results and updates being reported by companies and keep a very close eye out for bargains.

During previous periods of excessive volatility we recommend clients ignore the manic movements of share prices and unless there is a need to sell, the best cause of action is to continue wait for things to turn around, knowing we are well invested when the turnaround occurs.

It is worth remembering that in February 2020, the AIM market fell 36% in a month but it finished the year up 20%. A similar recovery took place after the Financial Crisis of 2007/8. We expect something similar in the near future, with the AIM of today a far higher quality market than it was in 2008.

During periods like this, we consider long-term holders of small cap shares should view the stock market as effectively closed, unless they are looking to buy a potential bargain.

Potential light at the end of the long tunnel?

Despite all of the negative news, today the Office for National Statistics announced that rather than contract as their previous reading suggested, the UK economy grew in the second quarter of this year by 0.2%. Whether this is the start of things beginning to improve remains to be seen.

Upcoming webinar

The next Fundamental webinar on Wednesday 12^th October at 3 pm is called AIM: cheap for good reason or bargains to be snapped up? It will be on looking back at the last quarter and reviewing the outlook ahead; including a focus on how have companies really been performing vs their stock price? To register for the webinar and to be able to view it after the event, click here.

To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager Jonathan Bramall via email [email protected]  or phone 01923 713 894.

Is it time to be greedy when others are fearful?

It has been a painful time recently for AIM investors. In the upcoming Fundamental Asset Management webinar on Wednesday 12th October at 3pm we ask: AIM: cheap for good reason or bargains to be snapped up?

To register your spot and to be able to watch it after the event, please click here.

Fundamental’s portfolio managers Chris Boxall & Stephen Drabwell will be reviewing the last quarter as well as looking ahead to Q4.

AGENDA
– Q3 Review.
– What lies ahead for Q4.
– It has been a terrible time for AIM stocks; could now be the time to invest?
– Trading performance vs share price performance.
– Valuations.
– Impact of “mini budget”.
– Questions.

For more information about reducing Inheritance Tax using Business Relief (also known as Business Property Relief) click here.

To find out more about the benefits of investing in AIM shares for IHT planning purposes, please get in touch via email at [email protected] or phone 01923 713 894

UK chancellor Kwasi Kwarteng’s mini-Budget, ‘The Growth Plan 2022’, which is intended to give a much-needed boost to the British economy, should be good news for smaller growth companies, particularly those on AIM, although you wouldn’t believe it from the stock market’s initial reaction to the news!

Kwarteng announced a “new approach for a new era”, based on what he said were three pillars of supply-side reform, tax cuts and a responsible approach to public finances. The tax cuts announced are expected to cost £45bn by 2026-27 with the Financial Times commenting how they are even larger than the reductions in Nigel Lawson’s 1988 Budget and the biggest since 1972. Paul Johnson, director of the Institute for Fiscal Studies, said: “It’s half a century since we’ve seen tax cuts announced on this scale.”

Skipping through the cuts to personal tax, our focus here is on how the so-called Growth Plan 2022 might impact companies in our AIM portfolios.

Stamp duty cut

Effective immediately, buyers in England and Northern Ireland will pay no stamp duty on the first £250,000 of a property’s value — double the previous £125,000 threshold — and first-time buyers will pay no tax on the first £425,000, up from £300,000.

While the measures will probably do little to insulate buyers from the effects of rising interest rates or meaningfully boost first-time buyer numbers, they will help to underpin the construction of new homes in the UK and all those businesses supporting the housebuilding sector, of which there are several on AIM, one of which we covered in an earlier Blog here.

Corporation Tax rise is scrapped

The government has committed to cancel the increase in the main rate of Corporation Tax to 25% which was due to take effect from April 2023, keeping the rate at 19%. This is clearly excellent news for shareholders in all UK-based companies.

Tax Partner, Elliot Weston at Hogan Lovells, said: “Overseas investors looking to invest in UK assets do look at the headline rate of UK corporation tax when they model financial returns, so keeping it low can have a marketing benefit for the UK…”

To further support businesses to invest and grow, the government will also make permanent the temporary £1 million level of the Annual Investment Allowance (AIA), which was due to expire after 31 March 2023. This will support business investment, provide businesses with more stability and make tax simpler for any business investing between £200,000 and £1 million in plant and machinery. This means businesses can deduct 100% of the costs of qualifying plant and machinery up to £1 million in the first year.

Supporting EIS

The government is supporting companies to raise money and attract talent by increasing the generosity and availability of the Seed Enterprise Investment Scheme (SEIS) and Company Share Option Plan (CSOP). It also remains supportive of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) and sees the value of extending them in the future. Hopefully this will support an increase in the number of EIS qualifying issues on AIM, which have been few over recent years.

EIS was due to expire in April 2025 because of a European Union state aid ‘sunset clause’, resulting in investors to call for an extension. The scheme has provided £1.7bn a year to 3,755 companies and generous tax relief for investors. Kwarteng also announced a raising of the age limit on companies raising SEIS investment from two to three years.

VAT-free shopping for tourists

Tourists visiting the UK will be able to benefit from VAT-free shopping, providing a shot in the arm for the beleaguered UK retail sector.

Kwasi Kwarteng told the House of Commons: “Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit. So we have decided to introduce VAT-free shopping for overseas visitors.”

The Stock Market’s numerous retailers can rejoice!

Chancellor pledges overhaul of EU laws

Kwasi Kwarteng told MPs that the planning system for major infrastructure projects is “too slow and fragmented” as he pledged to speed it up.

The Chancellor said that “in the coming months, we will bring forward a new Bill to unpick the complex patchwork of planning restrictions and EU-derived laws that constrain our growth”.

Those businesses supporting major infrastructure projects, of which there are several on AIM, will clearly benefit.

But….government borrowing set to soar

The combined effect of a deteriorating economic outlook, the energy support package and the proposed tax cuts will see government borrowing increase by £411 billion over the course of the next five years, according to the Resolution Foundation.

The think tank said that “debt is on course to rise in every year reflecting the largest permanent loosening of fiscal policy on record”.

Torsten Bell, the Resolution Foundation’s chief executive, said: “This may not have been a Budget, but the Chancellor has certainly blown the budget with the biggest package of tax cuts announced since the ill-fated Barber Budget of 1972.”

Weak pound means opportunity

Despite the prospect of higher interest rates, the pound fell to $1.09 against the dollar, its lowest level since 1985. As we commented in our previous Blog here  the UK’s weak currency could offer a terrific opportunity for UK exporters.

There are plenty of these on AIM, with many having seen their share prices and valuations tumble over recent months, offering a compelling buying opportunity for patient investors, particularly with those with an eye on the Inheritance Tax planning benefits.

The weak pound and tumbling share prices also make UK listed companies more appealing to overseas buyers and there have been several offers and recommended bids for UK Technology companies over the summer, including two on AIM.

To find out more about the benefits of investing in AIM, please speak to our Business Development Manager Jonathan Bramall via email [email protected]  or phone 01923 713 894

Our Webinar here covered many of the key questions clients ask when considering investing in AIM shares for Inheritance Tax Planning purposes. You can watch a recorded version of the webinar from the link here.

This video presentation here also provides a brief introduction to the Fundamental AIM IHT portfolio service.

The pound is trading near its lowest level against the US dollar since 1985, a year which also saw Mikhail Gorbachev become the leader of the Soviet Union, Boris Becker become the youngest winner of the Wimbledon Men’s singles title and England win the Ashes.

The popular press is revelling in the current gloomy economic backdrop and while times are indeed challenging, notably from an energy and inflationary perspective, the UK’s weak currency could offer a terrific opportunity for UK exporters.

Thankfully there are plenty of these on AIM, with many having seen their share prices and valuations tumble over recent months, offering a compelling buying opportunity for patient investors, particularly with those with an eye on the Inheritance Tax planning benefits.

One of our long-term AIM portfolio holdings AB Dynamics has seen its shares fall substantially from 2021’s highs. With its headquarters in Bradford-on-Avon, near Bath, AB Dynamics is a manufacturer of advanced testing, simulation and measurement products for the global automotive sector – we covered this excellent company previously in a Blog here. AB Dynamics is a major beneficiary of the transition to electric vehicles, supporting nearly all the world’s car manufacturers. In 2021 over 90% of its revenue was derived from outside the UK, including 24% from North America and 50% from the Asia Pacific region. With its main manufacturing facilities in the UK, the weak pound could therefore be helpful to business.

AIM going cheap, especially for US buyers

The weak pound and tumbling share prices also make UK listed companies more appealing to overseas buyers and there have been several offers and recommended bids for UK Technology companies over the summer, including two on AIM.

This week brought news that GB Group, experts in digital location, identity verification and fraud software and one of our newer AIM portfolio holdings, is currently considering a possible cash offer from GTCR, a US-based private equity business.

Shares in GB Group hit a 5 year low in early July, despite not having had any operational issues and meeting the market’s expectations.

The share price of GB Group leaped in response to the latest news, but still remains well down on year highs, with many anticipating that rival bidders will emerge.

If share prices remain depressed, we anticipate that many other good quality UK listed AIM companies, will be snapped-up by cash rich overseas buyers.

As we commented in our previous Blog here, AIM’s well-established technology related companies, notably in the software arena, look particularly vulnerable to approaches, given their proven business models, cash generative attributes and largely debt-free balance sheets.

 

To find out more about the benefits of investing in AIM, please speak to our Business Development Manager Jonathan Bramall via email [email protected]  or phone 01923 713 894

 

Our Webinar here covered many of the key questions clients ask when considering investing in AIM shares for Inheritance Tax Planning purposes. You can watch a recorded version of the webinar from the link here.

This video presentation here also provides a brief introduction to the Fundamental AIM IHT portfolio service.

Since arriving on AIM in 2011 at 60p per share (currently 930p) and a market capitalisation of only £50m (currently £1.25 billion), Glasgow headquartered Smart Metering Systems (‘SMS’) has evolved into a fully integrated energy infrastructure company.

SMS is a long-term holding in Fundamental Asset Management’s AIM IHT portfolios.

The global energy market has changed rapidly over the last few months and the requirement for a low carbon, flexible and secure energy system has never been greater or more acute.  The core focus of SMS is to facilitate a lower cost, lower carbon energy future.

At the time of its arrival on AIM, SMS was primarily a provider of gas infrastructure connection services and gas meter asset management services. It had also developed advanced smart metering technology solutions. Fast forward to the present time and the enlarged group now provides total energy solutions for its customers, helping businesses and consumers use energy for the better, with the aim of achieving a greener and more sustainable energy system.

In addition to their core meter asset management business, SMS now independently develops, owns and operates Battery Energy Storage Systems (BESS) that serve a greener, resilient, and more flexible grid and independent Electric Vehicle (‘EV’) charging solutions.

Inflation proofed returns

A positive trading update for its first half to 30 June commented how the installation of smart meters continued to pick-up with 230,000 installed during the first half of 2022, and the average monthly installation rate rising to 40,000 meters. As a result, the Group’s total smart meter portfolio increased to 1.9 million meters, with the order pipeline c.2.42 million meters.

The Group’s growing portfolio of smart meters supports plenty of reliable, inflation proofed, Index Linked Annualised Recurring Revenue (‘ILARR’), to which an annual RPI adjustment of +4.3% was applied on 1 April 2022.

The UK smart meter rollout continues to present a significant opportunity to grow their ILARR, with Ofgem requiring energy suppliers to exchange at least 85% of all meters to smart by the end of 2025. Ofgem has also proposed mandatory settlement of energy on a half-hourly basis, which would significantly increase the market size for these services from c.300,000 electricity meters to over 26 million meters by 2026.

SMS’ first grid-scale battery site (Burwell, 50MW) commenced trading at the end of January 2022 and the site’s current performance is well ahead of expectations.

New developments

The Group’s new Solopower solution, which was launched in 2021, aims to radically reduce carbon emissions within the UK’s social housing stock using solar generation and battery storage. Pilot projects are being progressed in over 1,000 homes across the UK, as well as early-stage projects in the Republic of Ireland.

Sustainability

The SMS website highlights how their investment case is rooted in sustainability, with its Sustainability Report providing detailed disclosure on the practical steps being taken to progress Environmental, Social and Governance (ESG) responsibilities within their business strategy, culture, and everyday operations.

Their ‘net-zero by 2030’ target will see SMS drastically reduce their organisational carbon emissions to achieve a balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere.

Green Economy Mark

SMS carries the London Stock Exchange’s Green Economy Mark. This recognises London-listed companies and funds that derive more than 50% of their revenues from products and services that are contributing the environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy.

 

Inheritance Tax receipts hit another record

HMRC’s latest figures show that Inheritance Tax (IHT) receipts for April 2022 to July 2022 were £2.4 billion, that’s £0.3 billion higher than in the same period a year earlier.

The Office for Budget Responsibility (‘OBR’) forecasts that as many as 6.5 per cent of estates could be liable for Inheritance Tax by 2026 – 75 per cent more than the 3.7 per cent that the figures show for the latest financial year.

With the AIM market down substantially from 2021 highs, now could be a great time to consider investing in qualifying AIM shares as part of a sustainable Inheritance Tax plan.

To find out more about the benefits of investing in AIM for Inheritance Tax planning purposes, where sustainability is also a key consideration, please speak to our Business Development Manager Jonathan Bramall via email [email protected]  or phone 01923 713 894.

This video presentation here provides a brief introduction to the Fundamental AIM IHT portfolio service, while our webinar here reviews the second quarter of the year and discusses our ESG and PRI developments.

 

Fundamental Asset Management
www.fundamentalasset.com