AIM companies twice as ‘cash-rich’ as FTSE 100
AIM companies have come out of the recession twice as cash rich as FTSE 100 companies, according to research by accountancy group UHY Hacker Young.
The liquidity ratio of AIM companies emerged from the recession at 2.03, compared to just 0.97 for FTSE-100 companies. This means that AIM companies have twice as much cash than they need to meet their debts as at their last balance sheet date.
“It is extremely encouraging to see that AIM companies are emerging from the deepest recession for a generation with such a healthy cash position,” said Laurence Sacker, a partner at UHY Hacker Young.
“This challenges criticism from AIM detractors over the ability of small and medium sized companies to operate in difficult economic conditions. It shows that the AIM market is nowhere near as fragile as some have feared,” he added.
On average, AIM companies went into the recession with very strong cash balances. Their cash burn was lower than expected and they had the investor support to raise new capital when they needed it, said the research report.
There was also no shortage of secondary issues for AIM companies, which meant they were able to meet short term debts as well as investing for the long-term.
According to statistics from the London Stock Exchange, the total of secondary funds raised by AIM companies amounted to £2.4 billion in 2009 despite the AIM index reaching its trough that year.
“AIM underwent a natural process of consolidation whereby some of the weaker companies de-listed. As a result, the AIM market is much stronger now and this should continue to draw in institutional investors whilst attracting new listings,” said Sacker.
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