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AIM listed companies hold firm in recession

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26th Aug 2009
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A study by accounting and financial services group Smith & Williamson has revealed that 6% of AIM listed firms maintained their ‘going concern’ status in year end accounts up to 31 December 2008, compared to 4% of similar sized companies on the full list.

The research compared accounts from 83 AIM listed firms to a sample of 46 comparably sized companies on the full list filing for the same period.

“AIM is often viewed as a junior market for smaller, fast-growing companies and is considered to be less tightly regulated and less prestigious”, said Kirsty Smith, a director at Smith & Williamson’s Assurance and Business Services department.

“Despite this, the vast majority of AIM listed companies clearly have planned well and worked hard to ensure that they have good management systems in place and sufficient resources to continue as a going concern”.

Recession is not to blame
Unsurprisingly, all of the ‘going concern’ issues – both from the AIM and full listed companies – related to uncertainty over future financing. However, this wasn’t a new problem – 60% of AIM companies whose 2008 reports included an emphasis of matter paragraph in relation to going concern also had a similar paragraph in their 2007 financial statements.

“This suggests that the current economic conditions may not be the sole cause of these companies’ continued problems”, argued Smith.

Adequate resources

Some 64% of AIM listed companies stated that they had ‘adequate resources’ for the year ahead (compared to 72% of firms on the full list). Future finance was secure for 34% of AIM listed firms, who said they could access funding from various sources, while 28% of those on the full list also made the same claim.

“The results indicate that Aim-listed companies have reacted quickly and efficiently to the current economic crisis, tightening their belts to maintain sufficient resources”, commented John Cowie, head of AIM at Smith & Williamson.

“There is evidence of strong banking relationships…in a lot of cases the company and the auditors are assured that there will be future financing available”, he added.

 

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