Wednesday, 8 July 2009

Touchstone confirms intent to delist from AIM

(By Philip Carnelley, Wed Jul 8, 9.15am) Repeating its statement in last month’s trading update (see Touchstone to join the AIM ‘Dearly Departed’), mid-market ERP implementor Touchstone confirmed in its prelims statement that it will put proposals to delist from AIM to shareholders “within four to six weeks.” We have long questioned the wisdom of small companies incurring the burdens of public listing, given that they rarely gain much liquidity from the market. Touchstone says: The Board believes that the costs and associated obligations of its AIM quotation are a considerable burden and that shareholders may be better served if the Group cancelled its AIM quotation.”

For the record, the company recorded revenue down 9%, to £28.5m, in its year to 31 March (see here), commenting that market conditions are ‘difficult.’ The company showed an operating loss of £349k, due to in part to depreciation, amortisation and reorganisation costs. Touchstone now derives 73% of revenue from implementing Microsoft’s Dynamics financial solutions, a proportion which is increasing and which underlines the ongoing consolidation in the small-business systems market.

Our prior comments about the cost to maintain a listing on public markets chimed with many readers. We reproduce below a response from Ric Williams who, until recently was a Corporate Finance partner at Deloitte:

“In your article you wrote that the annual cost of an AIM listing could be £200k when you lump in the fees for the hangers on. This feels to me to be on the low side. As well as the NED, Nomad and Broker fees, there will be incremental professional fees for both auditors and lawyers, the costs of printing and disseminating information to shareholders and the public and the IR costs of dealing with investors and potential investors. The impact of being public on executive remuneration is interesting and may also come with higher cash cost. In addition there is the management time spent dealing with the investor base. All in all, I would expect the costs to most likely be double your estimate; or at least £250-500k was the range that I told the clients I advised on over 25 IPOs over the past 4 years (mainly in 2005, 2006 and early 2007). On the positive side this is clearly lower than many other public markets, but with current illiquidity, is a public listing that desirable, regardless of the costs?”

Point well made, we would say.

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