Despite widespread uncertainty caused by the ongoing coronavirus pandemic, a significant number of AIM companies remain unaffected by COVID-19 and are planning for a post-pandemic future, with a small number actually upgrading their trading forecasts.
These are the key findings of the ‘COVID-19: Company Response Report’ by leading adviser and broker to ambitious growth companies, finnCap Group. The report outlines the developing corporate response to the ongoing COVID-19 pandemic among companies listed on AIM, the London Stock Exchange’s market for growth companies and largest such market in the world.
The research shows that of the two thirds of the AIM market’s constituent companies that have reported COVID-19 updates, 38% have reported no real impact on trading at all, while 7% of companies have forecast higher trading, with the balance either forecasting a fall in trading or suspending any forecasting for the time being.
This small number of companies that claim their trading prospects have improved, and are directly benefiting from coronavirus, are primarily made up of businesses in the fields of technology, life sciences and food production. Companies in these sectors have seen significantly increased demand for their products as lockdown scenarios have changed the way we live our lives in the short term and the health industry is rallying its resources to fight the virus.
Of the two thirds of AIM companies that have reported updates, 43% have announced cost reduction programmes, with a clear trend for cutting operational costs such as staff (either through redundancies and furloughing) and store closures. At the same time, companies are showing a clear desire to protect longer-term capital expenditure, with only one third so far announcing cuts to capex budgets for the financial year, in a clear sign that smaller listed UK companies are prioritising long-term growth once the crisis is over.
When it comes to boosting cash flow in order to improve operations, 32% of AIM companies that have reported on COVID-19 have cut or suspended dividend payments to shareholders, while 7% have already announced intentions to raise more equity, a figure that may rise the longer coronavirus continues to affect normal business operations.
Raymond Greaves, Head of Research, finnCap Group said, “It is very interesting to note that a significant number of AIM companies are either seeing minimal or positive effects on their prospects as a result of COVID-19. It’s worth noting too that they are seeking to protect their capex, which will underpin their long-term growth.
“This is encouraging as it shows that businesses are planning for a post-pandemic future and will be a key factor in how quickly and effectively the corporate sector and the economy will bounce back once the worst of the coronavirus crisis is over.”