Weighing up the alternatives

Weighing up the alternatives

For investors looking for attractive returns and those looking to mitigate inheritance tax liabilities the Alternative Investment Market (AIM) is truly growing up. 

While Aim continues to be a market for small, relatively early stage businesses it is also attracting a growing number of more mature, highly profitable, family or founder controlled companies. The major shareholders of these mostly UK based businesses clearly view Aim as a good route to access the capital markets yet still retain an active interest in the business and enjoy the inheritance tax benefits of Business Property Relief. 

For many owner managers Aim also represents a viable alternative to the private equity exit route. Furthermore, shareholders need not give up the dividend income they are used to enjoying as many Aim companies, especially the older more mature businesses, now offer meaningful dividends. At a time when interest rates are close to zero, this is clearly compelling.

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Then for investors there can be 100 per cent relief form potential inheritance tax (IHT) if they invest in qualifying Aim shares, hold on to them for two years and still hold them at death.

Even the high growth stars of Aim are not the speculative early stage businesses that they once were. Fevertree Drinks is a prime example of this and has grown swiftly to be the world’s leading supplier of premium carbonated mixers for alcoholic spirits.

While it arrived on Aim in November 2014 in a blaze of glory and has seen its share price rise over seven times since, the Fevertree brand was launched way back in in 2005, nine years before its Aim arrival. The majority of its sales are derived from outside the UK and it is hugely profitable and cash generative. 

At the other end of the excitement scale, but no less interesting for tax planning investors, is Accrol Group Holdings, a leading independent tissue converter, manufacturing toilet rolls, kitchen rolls and facial tissues for retailers throughout the UK.

Accrol started back in 1993 with a 5,000 sq. ft. site in Accrington, Lancashire and since then the company has grown to become the leading supplier of tissue products to the UK discount market with revenue for the last full year ending 30 April 2016 of £118m and operating profit of £11.9m.

At IPO Accrol also committed to a progressive dividend policy with the intention of paying a total dividend equating to a 6 per cent yield at the IPO placing price for the financial year ending April 2017.  

In the world of retail Joules Group, the premium lifestyle brand, joined Aim in May 2016. The origins of the current business date back to 1989 when founder Tom Joule, who is still the largest shareholder, started selling clothing on the country shows and events circuit. The first Joules branded product was created in 1999 and the first Joules store opened in Market Harborough in 2000. For the year ending May 2016 Joules had sales of £131m and EBITDA of £13.5m.