Despite Aim Tax Relief Cuts, Index Still Supports Key Beneficiaries!
Your guide through the stock market maze, helping you navigate investment choices with confidence and clarity.
The stock market can be a wild ride, can’t it? Just take a look at the FTSE Aim All-Share Index, which has taken a nosedive of 38% over the past three years. High interest rates, sluggish economic growth, and geopolitical uncertainty have cast a shadow over investor confidence. But don’t lose hope just yet!
Sure, generating a positive return may feel like searching for a needle in a haystack. However, remember that this index more than doubled from its pandemic lows! While another surge may seem far-fetched amidst rising inflation, the outlook for many Aim-listed companies is brighter than you might think.
Inflation is expected to remain manageable, despite increased government spending. This could lead to gradual cuts in interest rates, which would boost GDP growth and create a better atmosphere for smaller businesses to thrive.
One business poised to gain from this shifting economic landscape is Gamma Communications. Last fiscal year, an impressive 79% of its sales came from the UK.
The latest half-year results reveal a 10% rise in revenue, with pre-tax profits climbing 16%. The company is on track to hit earnings-per-share at the higher end of market expectations, boasting a forward price-to-earnings ratio of 19.1—indicative of fair value given its financial trajectory.
The firm’s net cash position increased by nearly 5% in the first half of the year, reaching £142.9 million. This solid foundation paves the way for further acquisitions after successfully completing two purchases earlier this year. A robust financial position also translates to lower risk as monetary policy adjustments take time to influence economic growth.
While the share of recurring revenues dipped by one percentage point year-on-year, it still stands at a commendable 89%. This level supports financial stability and provides investors with clearer earnings visibility.
Gamma has been part of our portfolio since January 2018, delivering a staggering 153% capital gain, especially impressive compared to the 32% decline in the FTSE Aim All-Share index during that period. Although it’s considering a move to the main market, it remains a valuable holding for now.
