Mixed start to the year for Scotland’s listed businesses

John Moore

The wealth manager found that Scottish organisations listed on the main market ended March 2019 9.68 per cent higher than they finished 2018, compared to 8.25 per cent across the FTSE All Share.

However, AIM-listed companies in Scotland were down -2.93 per cent on average, drifting from the AIM All Share index’s 6.78 per cent gain by a considerable margin.

All but one of the Scottish-based constituents of the FTSE ended Q1 2019 higher: Macfarlane Group (+34.27 per cent), Devro (+22.97 per cent), Weir Group (+20.03 per cent), and Stagecoach (+15.92 per cent) were among the biggest gainers. John Menzies (-4.69 per cent) was the only company’s shares which ended the quarter in the red.

Scotland’s AIM constituents were dragged down by troubles at fashion retailer Quiz, which announced a review of its business after another profit warning in March, and ‘accounting errors’ at Goals Soccer Centres. Quiz’s shares fell -50.60 per cent on the start of the year, while Goals’ shares lost -62.22 per cent of their value before being suspended on March 27th 2019.

Lansdowne Oil & Gas was the best performer, with a 45 per cent gain, while Nucleus Financial and Indigovision also finished ahead 27.88 per cent and 26.96 per cent respectively.

John Moore, senior investment manager at Brewin Dolphin, said: “The poor performance of the Scottish AIM-listed companies is partially a reflection of the broader index’s volatility. This market is driven principally by demand from inheritance tax-motivated investors and a general appetite for risk – small changes in supply and demand to either can have a disproportionate effect on its constituents. 

“Combined with the typically high level of senior management ownership, AIM-listed investments are relatively illiquid compared to the FTSE and prices often fall until new buyers come in. And, although investment sentiment has improved, new investor demand has tended to focus on larger, more international businesses. Of course, their underperformance can also, in part, be put down to specific issues at the likes of Quiz and Goals Soccer Centres.

“Equally, the continuing Brexit stalemate has weighed down on consumer sentiment and investors’ views of more domestic sectors, which tends to disproportionately impact on the more UK-focussed, AIM-listed companies. Meanwhile, the big multinational companies on the FTSE are more inclined to see a lift in their earnings if the pound is weak and there are signs of growth trends overseas, such as the signs of improvement in China. Generally, markets have had a good start to the year, despite the rigmarole of Britain’s departure from the EU – but the next quarter will undoubtedly present new challenges on that front.”