Businesses listed on junoir stock markets AIM have come out of the recession twice as cash-rich as FTSE 100 companies, according to a national accountancy group.
A report by Hacker Young has revealed that AIM companies have twice as much cash than they need to meet their debts as at their last balance sheet date. Furthermore, the liquidity ratio of AIM companies emerging from the recession was at 2.03, compared to just 0.97 for FTSE 100 companies.
Laurence Sacker, corporate finance partner at Hacker Young said: “It is extremely encouraging to see that AIM companies are emerging from the deepest recession for a generation with such a healthy cash position.
“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.”
According to statistics from the London Stock Exchange, the total of secondary funds raised by AIM companies amounted to £2.4bn in 2009, despite the AIM index reaching its peak that year.
Sacker 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.
“There was concern that the credit crunch would drive more AIM companies to the wall than it actually did. The high level of liquidity of AIM companies will stand them in good stead, especially as bank lending is still very restricted.”
The re-shuffle AIM has gone through over the last couple of years has contributed to strengthening the market’s attraction to investors, according to the accountancy group.
Recent admissions to AIM include Copper Development Corporation, a mining and copper importer, which has joined the market after raising £40m to develop its copper mining project.
© Crimson Business Ltd. 2010