Since hitting a high at the beginning of September, when its valuation touched £150 billion, the AIM market has struggled to make any progress, with the latest discovery of a new Covid-19 variant also pushing stocks lower across the board.

Some of AIM’s larger and more richly valued companies have been particularly weak over recent months as investors have been tempted to lock in profits after a very strong bounce from the lows of 2020 and the realisation that the short term could still prove challenging. Indeed, having benefited from a relatively benign environment of government support and shareholder forgiveness over much of the pandemic, we have started to see a more normal reaction to profit warnings from investors, with some significant share price sell-offs. Even those reporting what appear to be excellent results (which thankfully applies to many of our portfolio holdings) have seen their shares slide, with investors demanding ever greater returns and growth from the richly valued.

We have been investing in AIM for Inheritance Tax planning purposes since 2004 and experienced numerous different market conditions over this period.

Stock markets occasionally need to take breather and AIM’s recent underperformance relative to the main UK stock market comes as no surprise to us following a period of exceptional outperformance in 2020 and the beginning of 2021.

At times like this, when share prices are tumbling, for no stock specific reason, it’s often tempting to start re-shuffling portfolios, manically trading in search of the next great potential opportunity. However, our experience over the past 17 years has suggested doing nothing is generally the best course of action.

We question the logic of selling out of a high-quality company with strong long-term growth prospects, to reinvest in a lesser business with more modest prospects, simply on marginal valuation grounds. Experience has shown that high-quality smaller companies are more highly valued for good reason and, unless there is a fundamental change in their long-term growth prospects, it’s worth sticking with them.

Nevertheless, we have sold out of one core holding in the period following a disappointing trading update and our reassessment of its long term potential.

Please have a look at some of our educational webinars, which can be found here and expand on our investing philosophy and the reality of investing in AIM for Inheritance Tax planning purposes, notably during turbulent stock markets.

Our webinar from August 2020 ‘All you need to know about investing in AIM for Inheritance tax’ covers the basics of our AIM IHT portfolios.

Of more relevance to the current market, our webinar from 30 September 2020 ‘The Truth about Risk in AIM’ clarifies how we manage risk.

If you would like to discuss our AIM IHT portfolios please call us on 01923 713890 or email [email protected]

London’s AIM market had a remarkable 2020, ending the year with its market value at an all-time high and with the AIM Index also significantly outperforming other UK main market indices. But what drove this remarkable performance in such a challenging year?

AIM (formerly known as the Alternative Investment Market) closed 2020 with 819 companies and a total stock market value of £131 billion. While there was a net decline of 44 companies from 2019, the overall market value was £16.9 billion higher. A lot of the strong performance came from companies qualifying for the popular Inheritance Tax planning reliefs.

The AIM index continues to be dominated by relatively few large companies, with AIM’s twenty largest companies valued at £45 billion, representing 34% of the total value of AIM. At the end of the year there were a record 24 AIM companies valued at more than £1 billion each, compared to only 16 at the end of 2019.

With its shares up 42% in 2020, ASOS closed the year as AIM’s largest company, valued at £4.8 billion, having assumed the crown from online fashion rival Boohoo Group, which came in second, valued at £4.35 billion, despite attracting criticism for poor working conditions at its suppliers and questionable corporate governance.

AIM’s Leisure Goods sector was another beneficiary of the pandemic seeing its value soar £3.7 billion to £7 billion, driven by strong trading from video gaming companies, three of which were valued at more than £1billion each at the year end, with Codemasters Group not far behind.

AIM subsequently lost Codemasters as it was acquired by US giant Electronic Arts. It’s a shame to see another fast-growing UK company acquired by an overseas rival, but this is very much the nature of AIM, with UK shareholders seemingly unwilling to back the longer-term growth opportunity. Codemasters was a constituent of our AIM Inheritance Tax portfolios.

Having attracted little attention for many years, many of AIM’s small healthcare companies were quick to develop tests for Covid-19, subsequently benefiting from explosive demand and share price growth.

The value of AIM’s Healthcare related companies, encompassing the sub-sectors of Medical Equipment and Services and Pharmaceuticals and Biotechnology, rose £5 billion in value to £17 billion.

There were big moves from anything involved in Covid-19 testing and vaccine development, with companies in these areas adding £1.6 billion of market value. The Healthcare sector also brought AIM’s top performer in the year in Novacyt, which received large orders from the UK’s Department of Health for its Covid-19 tests, helping to lift the shares over 6000% in the period.

With many countries (and notably Germany) getting behind hydrogen as an alternative to natural gas, there was growing interest in hydrogen-based energy, which is being pushed as a solution to fill the energy gap left from the impending closure of nuclear and coal-fired power stations.

AIM has several hydrogen fuel cell companies, whose shares soared over the course of the year, despite the challenges of the pandemic, adding £5.9 billion in market value to the Alternative Energy sector. Both ITM Power and Ceres Power closed the year valued at more than £2 billion each, with shares of the former up 600%.

AIM’s Technology sector consisting of 113 companies, encompassing the sub sectors of Software, Hardware and Telecommunications related activities, proved extremely resilient with its value rising £4 billion to £18 billion.

Our associates Investor’s Champion provided a review of AIM’s electrifying performance in 2020 in this update here.

AIM’s outperformance relative to the main UK market was driven by the latter having no exposure to video gaming and hydrogen fuel cells, two sectors seeing exceptional share price gains, and relatively little pure exposure to niche software, technology and online retail. The UK main market also continues to suffer from a distinct lack of growth!

The AIM of today consists of a far greater number of good quality businesses, many of which are delivering far more impressive growth than their peers on the main market and are also suitable for AIM Inheritance Tax portfolios.

As individuals own 25.1% of AIM companies, against just 11.3% of FTSE 100 companies, UK private investors will also have benefited very nicely from this outperformance and supported many fast growing UK businesses.

To benefit from the Inheritance Tax planning reliefs, individuals need to own the qualifying AIM shares directly in a segregated portfolio in their own name i.e. the tax benefit cannot be gained through investing via a collective/fund structure. In support of this, a growing number of financial advisors embrace AIM and AIM Inheritance Tax portfolios, which can also be accessed through a number of advisor wrap platforms.

We discuss AIM’s impressive performance in 2020 and potential themes to follow in 2021 in our Webinar here.  

Click the picture below to register for the session.

 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 16 years, from the link here.

We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.

An article in the Daily Telegraph’s popular Questor column commented on the encouraging evidence of AIM’s centre of gravity tilting away from the ‘get-the-founders-rich-quick outfits’ towards real, well-run businesses with bright prospects.

Telegraph subscribers can read the article here, alternatively, Yahoo! Finance has also kindly provided a free to read version here.

AIM’s fabulous performance in 2020 certainly suggests London’s growth market is indeed a very different proposition to the one we first started investing in for Inheritance Tax planning purposes back in 2004.

AIM ended 2020 with its market value at an all-time high of £131 billion. A record 24 AIM companies were valued at more than £1billion each at the year end and 246 AIM companies were valued at £100m or more, the majority of which were in the £100m – £250m valuation bracket.

After rising 10.1% in December, the AIM index finished 2020 up 20% for the year, an amazing achievement in the circumstances and significantly outperforming the main UK index of 100 stocks in the year, which fell 15%. Specialist research house Equity Development commented how this must be “the biggest one-year differential in AIM’s 26-year history”.

But this was not just a flash in the pan and over the 5 years to the end of December 2020, the AIM All share index has risen 60% whereas the main UK market is up only 11%. We acknowledge that this excludes dividend income, and the main UK market has yielded over 4% per annum over this period. However, as commented on by our associates Investor’s Champion in an article here, 2020 highlighted the fragility of dividends for highly geared companies on the main UK stock market, many of whom have been forced to cut or postpone dividend payments.

As individuals own 25.1% of AIM companies, against just 11.3% of FTSE 100 companies (source: “Ownership of UK shares, UK Government, January 2020”) UK private investors will have benefited very nicely from this outperformance.

It is also worth emphasising that to benefit from the Inheritance Tax planning reliefs, individuals need to own the qualifying AIM shares directly in a segregated portfolio in their own name i.e. the tax benefit cannot be gained through investing via a collective/fund structure. Fundamental Asset Management’s AIM portfolios can also be accessed through a number of adviser wrap platforms.  Our Document Library and Adviser Centre has a wealth of information on investing in AIM Inheritance Tax portfolios.

While it was a poor year for new issues/IPOs, with only 32 new entrants raising £486m, AIM saw a large number of secondary fund raises with a total of £5.27 billion raised, making 2020 the best year for secondary issues since 2010.

Not as illiquid as people think!

The average daily value of AIM shares traded also hit all-time highs at £326m, an increase of £91m per day on 2019. Trading volumes remained strong with c £83 billion of shares traded in the year as a whole compared to c£60 billion in 2019. Those are big numbers (for private investors at least!) and counter the argument that AIM shares are illiquid.

ASOS (LON:ASC) remained the largest company by market capitalisation with a year-end valuation of £4.8bn, ahead of online fashion rival Boohoo Group which was valued at £4.3bn.

Although there has been steep drop in the number of companies on AIM, from a peak of 1,694 in 2007 to only 819 at the end of 2020, the quality of companies is far higher.

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 16 years, from the link here.

The latest monthly AIM update from our associates Investor’s Champion highlights the continuing strong performance of AIM, with the total value of London’s growth market hitting an all-time high of £118 billion at the end of November.

November closed with 22 AIM companies valued at more than £1billion, three more than at the end of October and the most on record. The £billion brigade welcomed video game publisher Team17 Group and veterinary specialists CVS Group, both Fundamental AIM Inheritance Tax portfolio holdings.

The AIM index as a whole had another very strong month, rising 10.7% ending November up 9.6% for the year. That is a considerable achievement following the sharp falls in February as the pandemic impacted stock markets across the world.

What is all the more surprising about AIM’s continuing momentum is that it appears to counter the rotation to so-called ‘value’ stocks going on in other markets, reflected in the 12.3% rise in the month from the main UK index of 100 stocks, although this still remained 16.9% down for the year as a whole.

Despite AIM’s focus on younger, more rapidly growing companies and the seemingly stretched valuations for some AIM stocks, investors are evidently still prepared to pay up for the exciting growth prospects available on AIM, compared to the lower growth opportunities from many of the dinosaurs of the main UK stock market.

When investing in AIM for Inheritance Tax planning purposes we are drawn to the larger, more profitable and better-established AIM companies. This has seen our AIM Inheritance Tax portfolios miss out on the strong performance this year from some more speculative AIM stocks, notably in the area of healthcare and hydrogen fuel cells, however, we have still seen strong gains elsewhere.

Over the 5 years to date the AIM index has risen 47% (and our AIM Inheritance Tax portfolios are up even more) whereas the main UK market is up only 9.7%. We acknowledge that this excludes dividend income and the main UK market has yielded over 4% per annum over this period, however, 2020 has highlighted fragility of dividend payments for highly geared companies on the main UK stock market, many of whom have been forced to cut or postpone dividend payments.

It has been clear to us for a long time that many UK main market companies have failed to invest sufficiently in their businesses to support future growth, preferring instead to use available cash to pay dividends or support share buybacks. This is inherently wrong and has manifested in lacklustre growth and poor share price performance.

Many main market companies have the additional burden of needing to support large legacy pension commitments, which demand regular cash injections, something that does not apply to the vast majority of more youthful AIM companies.

Trading volumes on AIM also remained strong with £8.6billion of shares traded in November. This is a big number and counters the argument that AIM shares are illiquid!

Another £620m was raised in the month through secondary fund raises bringing the total for the year to £4.7billion. This compares to only £321m raised in the year to date through IPOs.  We only occasionally participate in IPOs across our AIM Inheritance Tax portfolios as we generally like to see companies prove themselves on public markets first, however, there are exceptions.

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 16 years, from the link here

Many are attracted to invest in AIM for the Inheritance Tax planning attractions yet are fearful of the perceived extra risk of investing in smaller quoted companies and the notion that they will have their money locked up in early stage businesses.

While the vast majority of AIM companies are smaller than their peers on the main market, there are now many large companies on AIM, with nineteen valued at more than £1 billion each at the end of October. AIM’s largest company ASOS, which is valued at more than £4 billion, would gain it entry to the FTSE100 index of the UK’s largest companies.

Our philosophy for investing in AIM for Inheritance Tax planning purposes is to stick to well-established, proven and profitable businesses, many of which are often run by their founders who continue to own significant equity stakes. Our AIM for Inheritance Tax portfolios include several companies that have been controlled by the same founding families for several generations.

In eschewing small, early stage ventures, with unproven business models and negligible revenue, we may miss out on the occasional star performer, however, experience has also shown that we also avoid the numerous failures.

Investing in early stage companies requires a large degree of patience. New concepts and technologies take many years, and often decades, to come to commercial fruition. AIM previously attracted many small early stage business, often in the healthcare sector, some of which have seen great success over the pandemic. Rather than raise new capital via a listing on AIM, early stage companies now have access to start-up capital through venture capital, private equity or crowd funding routes. This means that new arrivals to AIM in recent years have largely been better-established businesses, the majority of which are revenue generating and profitable.

The primary attraction for those investing in AIM for Inheritance Tax planning purposes is often the short 2 year qualifying period for assets to fall outside the estate, following the Business Relief rules. Accordingly, while investing in equities should always be viewed as a long-term exercise (5 year plus), the window of investment opportunity for Inheritance Tax planning is somewhat shorter than would normally be the case.

Our webinar ‘The truth about risk in AIM’, highlights the more pertinent risks associated with investing in AIM for Inheritance Tax planning purposes. You can watch the webinar from the link here.

Chris Boxall

Cofounder & Co-Managing Director

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 16 years, from the link here.

The popular press had previously alluded to the potential withdrawal of Inheritance Tax/Business Relief on AIM shares. With Chancellor Sunak scrapping his autumn Budget, as he focuses on matters of more immediate concern to the economic welfare of the country, any adverse tax changes for holders of AIM shares therefore appear to be off the table for the time being.

As we have suggested before, the Chancellor may be more inclined to extend tax reliefs for those supporting smaller companies in an effort to unlock the considerable savings held by the wealthier members of the population, which are effectively being eroded due to inflation and the derisory interest available on savings accounts.

The poor returns generated by the main UK stock market over the last decade and the significant outperformance of AIM portfolios over this period also suggests that investors would have been far better off investing in smaller, faster growing companies on AIM, than many of the aged dinosaurs of the main market.

Numerous small AIM pharmaceutical and biotech groups have been at the forefront of developing tests and vaccines in the battle against Covid-19. This has not been possible without the support of their shareholders, many of whom have been encouraged to invest with the added attraction of various tax reliefs.

Specialist research house, Equity Development, previously highlighted the huge benefits AIM brings to the UK economy and how the mild encouragement provided by the Inheritance Tax concession to those considering an IPO onto AIM is a very large multiple of the cost in tax foregone by HMRC.

Equity Development considers AIM companies contributed over £33bn Gross Value Added (GVA) directly – over 40% more per employee than the national average – and just as much indirectly to the UK economy since their direct GVA has increased by 35% in the last five years, more than twice as fast as the average. Not only are AIM companies more productive than average, their productivity is growing – at 11% pa, significantly faster than average.

A report by Grant Thornton on AIM’s first 25 years shows that small companies listed on AIM perform ‘better’ – generating more added value, more employment and far greater tax receipts for HMRC – than comparable “private” companies.

AIM’s superior growth has, in just the last five years, added £4.7bn pa to UK economy and more than £1bn per annum to HMRC. Rishi, take note!

Many investors and advisers are fearful of the perceived extra risk of investing in AIM. Our forthcoming webinar ‘The Truth about Risk on AIM’ will cover this and other misconceptions about AIM.  You can register for the event by visiting the link here.

Not only is AIM of huge benefit to the UK economy but AIM listed companies represent the primary source of growth for UK small cap investors, reflected in the significant outperformance of AIM for IHT managers, including Fundamental, over the past decade or more.

Since launch on 19 June 1995, AIM has supported nearly four-thousand growth companies in raising over £117bn, 61% of which has been through follow-on fundraisings. The equity fund raisings over the pandemic have seen investors plough £billions into UK companies, removing a further burden from the government.  For the eight months to the end of August AIM companies have raised £3.6 billion of follow-on capital.

We reiterate our suggestions that, for a limited period, the UK government should actually consider enhancing the tax incentives for investing in the newly issued shares of UK listed companies, whatever their size, whether on the main market or AIM. Now that’s a radical thought!

Chris Boxall

Cofounder & Co-Director

Please join the Fundamental team at our webinar ‘The Truth about Risk in AIM’.

Click the picture below to register..

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

The proposed acquisition of main market listed SDL (LON:SDL) by AIM quoted RWS Holdings (LON:RWS) is, in our opinion, a watershed moment for AIM, as an AIM company acquires a sizeable main market listed peer, but the combined group reamins on AIM.

RWS is one of the world’s leading language, intellectual property support services and localization providers. While those don’t sound like the most thrilling of activities RWS has delivered stunning results for shareholders over the years.

Chris Boxall discusses the deal in this video here.

Fundamental have been investors in RWS, whose headquarters is close to our own office, for about 14 years. Here is a brief history of its progress on AIM.

RWS arrived on AIM in October 2003 via a reverse into the previously named shell company Health Media Group.

The equivalent share price at the time was 22p and market capitalisation £45m. Fast forward nearly 17 years and the shares have risen nearly 2700% to 613p (they were as high as 767p this month), with the market capitalisation £1.8bn.

Through a mixture of organic, and more recently more acquisition led growth, RWS has developed into one of AIM’s largest companies.
RWS’s acquisition strategy really accelerated in 2013 with the acquisition of inovia Holdings, a leading provider of web-based international patent filing solutions.

It followed this in November 2015 with the sizeable acquisition of Corporate Translations for US$70m. CT was the world’s leading life sciences translation and linguistic validation providers.

February 2017 saw the acquisition of LUZ, a market leading Life Sciences language services provider based in San Francisco, for a cash consideration of US$82.5m. To support this meaningful acquisition, it raised gross proceeds of £40.0m at 330p per share.

In Nov 2017 it acquired Moravia, a leading provider of technology-enabled localisation services, for $320m. Localisation is the adaptation of content, software, websites, applications, marketing materials and audio/video for hundreds of languages and geographies. It requires the translation and customisation of clients’ content and platforms for cultural conventions, compliance with local regulations and consistency of brand style and tone.

For the half year ending 31 March 2020, Moravia represented 47% of RWS’ group revenue of £170m and 34% of the group’s operating profit.
Smaller acquisitions followed in 2019 and June 2020, culminating in this week’s deal to acquir main market peer SDL Group in a £700m all-share deal.

The combination of SDL and RWS will create the world’s leading language services and technology group with capabilities across a range of language services and IP services, combining the complementary strengths of RWS’ specialist technical translation and localisation capabilities with SDL’s software, machine translation and AI capabilities.

It will support an expanded blue chip customer base with limited overlap across its core markets, including 90 of the world’s top 100 brands by value, all the top 10 pharmaceutical companies globally, many of the major West Coast technology businesses, and approximately half of the top 20 patent filers worldwide.

The RWS name will be retained for the combined group which will continue to be headquartered in Chalfont St Peter and remain listed on AIM, which is good news for those holding shares in RWS for the Inheritance Tax planning attractions, including many of our clients.

The combination should put SDL’s technology to better use thereby enhancing margins, which in the case of SDL, have been somewhat ordinary – while the two businesses had similar revenues in 2019, RWS’s operating margins were more than double those of SDL. Pro forma FY2019 revenues are £732m and pro forma adjusted operating profit £116m, imply a combined operating margin of 15.8%.

What has been constant in RWS’ journey has been the presence of Chairman Andrew Brode, who retains a near 33% stake in the current business and to our knowledge has never sold a share. We are reassured that, with so much of his personal wealth at stake, Mr Brode would have thought long and hard about this deal. The Inheritance Tax planning attractions are no doubt an incentive for him to keep the group on AIM!

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

Despite their obvious appeal and relevance in our lives, many UK investors surprisingly have little direct exposure in their portfolios to leading US technology groups, preferring instead to invest via a collective investment scheme.

We find it surprising that while much of the UK population is happy to use Amazon, Google, Apple iPhones etc, it isn’t interested in owning some of these fantastic companies. That’s why our general bespoke portfolios, as well as our new Ultimate Stocks portfolio, holds shares in the companies discussed below.

The significant outperformance of the US stock market over the UK over virtually any time period you care to mention, suggests that as reluctant investors in the US market, UK investors are at a distinct disadvantage and destined to underperform. The main UK market is also lagging AIM over recent periods, which isn’t surprising given AIM’s abundance of growth opportunities compared to the many dinosaurs roaming on the UK main market.

Our long term general portfolio holding Microsoft opened results season with its quarterly results last week, reporting 13% growth in sales to $38 billion and profits of $11.2 billion, both ahead of expectations. Having closed the June quarter with $136 billion of cash it certainly has plenty of resources at its disposal, with video app TikTok rumoured to be a potential acquisition target.

Despite the closure of its stores around the world, portfolio holding Apple’s revenues for 4th quarter rose 11% to $59.7bn, a new record and significantly exceeding forecasts of a 3% decline. With a growing portfolio of excellent products and an attractive services business, Apple continues to look in great shape buoyed by a huge cash pile.

Google’s holding company Alphabet was the only one of the big tech titans to report declining numbers, although even these were better than revised expectations as many feared a more significant Covid related decline in advertising revenue.

The Ultimate Stocks portfolio, launched in conjunction with our associates Investors Champion, offers a simple and transparent route for UK investors to gain exposure to these and many other exciting companies.

Moving away from the US, it is great to be able to report positive news from plenty of our AIM holdings, many of whose services and products we also use and come across in our daily lives.

Jarvis Securities, the provider of stockbroking and financial administration services, recently issued fantastic interim results supporting a material increase in its dividend. Jarvis’ “Model B” outsourced arrangement is a great solution for small investment management firms and Fundamental is a client.

Gamma Communications, a provider of communications services to business markets in the UK and Europe, issued a very positive trading update with management now anticipating that full year will be ahead of estimates. With 93% of revenue recurring GAMA is in great shape and well-placed to continue to thrive. Fundamental uses Gamma’s horizon telephone system.

dotdigital, the leading ‘SaaS’ provider of marketing automation confirmed that the pandemic had a minimal impact. Having proved itself in the toughest of markets and with continuing momentum online supported by some fantastic partnerships, dotDigital appears to have an exciting future ahead. While we aren’t currently a client, we have always been impressed with its dotmailer email offering.

Satellite holding Property Franchise Group confirmed a strong performance across the half year as well as a return to growth in the final month of the period which has continued into July. EweMove, its hybrid online/physical sales and lettings brand, set new records for sales listings in June. Those considering a house move should considering using Ewemove.

CVS Group, one of the UK’s leading providers of veterinary services, provided a comprehensive assessment of business over the past few months. The soaring demand for pets over lockdown could offer a big post Covid-19 boost to CVS and the veterinary sector as a whole, and the difficulties experienced by small independent practices may also see an acceleration of the consolidation which could also benefit CVS. The market was clearly impressed, sending the shares up sharply.

Quartix, the supplier of vehicle tracking systems, announced impressive interim results highlighting the attraction of its long-term subscription-based model.

IG Design Group, one of the world’s leading designers and manufacturers of gift packaging, celebrations, stationery and Christmas crackers, reassured with its full year results. As a business serving over 210,000 stores for over 11,000 customers in over 80 countries, IG has a better picture than most of the market environment.

Commercial flooring manufacturer James Halstead’s primary concern was cash flow when the world went into lockdown. With trading conditions improving and the cash position robust they feel able to commit to a second interim dividend. All of us are likely to have walked on James Halstead’s Polyflor flooring at some time in our lives!

Smart Metering Systems, which installs and manages smart meters and carbon reduction assets, chose the perfect time to sell a portfolio of meter assets prior to the pandemic disrupting things. Its latest trading update confirmed that revenue and underlying profit would in line with expectations, reflecting the resilient nature of its business model and index linked recurring revenue.

Moving away from AIM, general portfolio holding Games Workshop, the fantasy games group which is also a constituent of the Ultimate Stocks portfolio, issued excellent results, despite the pandemic shutting down its business for 6 weeks. The extensive results statement is worth a read to gain a full understanding of this unusual high-performing business. The shares moved back to all-time highs and despite the valuation there could be plenty of growth potential in overseas markets.

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

Fundamental portfolios hold shares in Alphabet, Apple and Microsoft. For a full assessment of results from all the big technology groups please visit or associated Investor’s Champion site. Fundamental clients get free subscriber access to all premium content.

Since the start of lockdown the unemployment rate in the UK remains relatively unchanged. So far so good. However, scratch the surface and a far more worrying picture begins to emerge. Figures from the Office for National Statistics showed that UK company payrolls fell by 649,000 between March and June, a 16.7% fall. The reason for this is obvious, people have remained employed through the furlough scheme but are not on their company’s payroll. Many experts believe we will not see the full effect this could have until the scheme ends in October.

However, The Office for Budget Responsibility has recently published a report warning that unemployment was likely to rise to a record 12% by the end of this year, falling back to 10% in 2021, and we have already seen several high-profile companies let staff go.

Oasis and Warehouse made 1,800 jobs redundant in April after being bought out of administration in April and later sold to Boohoo Group in May. Luxury fashion and accessories brand Mulberry cut 470 UK job cuts in June, a quarter of its global workforce.

So what has been the Government’s response to this looming crisis? Well they have committed to paying a job retention bonus of £1,000 for each furloughed member of staff brought back. This is courtesy of Rishi Sunak’s summer economic plan outlined last week. But will it be enough?

Two businesses who could be affected in very different ways are Dart Group a (Fundamental AIM portfolio holding) and Young & Co.

Dart Group, the owner of Jet2 airline, announced in April that it had placed 80% of its workforce on furlough and asked them to take a 30% pay cut during this time. However, reducing the cost associated with staff has done little to outweigh the impact of a mass cancellation of flights and travel restrictions and the firm has seen an 11 per cent decline in profits in the year to March 31. Virgin Atlantic, Easy Jet and British Airways have all confirmed they will be making significant redundancies and Jet2 is expected to follow suit. Considering the long term impact the pandemic will have on the travel industry it remains to be seen if the retention bonus will have much impact here.

Young & Co, which owns 220 pubs around the UK, announced in March that it would not be paying its final dividend and would furlough the majority of its staff. However, as pubs begin to reopen and early reports suggest patrons are all too willing to absorb any risks for a good pint, Sunak’s plan may be just enough to keep the bar staff pulling pints.

These measures will work for some businesses and not others and time will tell if they will be enough to keep Britain working.

Derek McLay
Fundamental Asset Management

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

There is no doubt that Covid-19 has changed the way we view our future. Investors and financial advisers alike are looking for the answers and the way to move forward. One thing we do know is that the show will go on regardless, Covid or non-Covid.

In the headlines this week, Boohoo Group reacted to criticism over work conditions at one of its suppliers and Rishi Sunak announced measures to kerb unemployment as business begin to reopen.

Join me and Fundamental co-founders Chris Boxall and Stephen Drabwell on the 28 July for our webinar: ‘Post-Covid opportunities in AIM you should be paying attention to.’ , where we will be discussing this and more. Find out why Boohoo group has never had a place in Fundamental portfolios and where we see the future for the UK economy and AIM. Click here or on the image below to register.

Last week, Chris and Stephen presented at Intelligent Partnership’s AIM Showcase webinar event where we discussed our response to Covid-19, our AIM portfolio for IHT solution and our views on why you should invest in AIM for growth and not just for potential tax savings. You can watch the videos from the link here.

Lastly, it is sunny around the UK today and due to be this weekend also. Enjoy the reopening of pubs and beer gardens, take care and be safe.

Derek Mclay

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.