Fashion retailer Quiz and football centre operator Goals caused AIM-listed Scottish shares to significantly underperform the index during the first three months of 2019.
Wealth manager Brewin Dolphin found Scottish organisations on the main FTSE market ended March 9.68% higher than they finished 2018, compared with 8.25% across the FTSE All Share.
But companies in Scotland listed on the AIM were down 2.93% on average, against the AIM All Share index’s 6.78% gain.
All but one of the Scottish-based firms on the FTSE ended Q1 2019 higher: Macfarlane Group (+34.27%), Devro (+22.97%), Weir Group (+20.03%), and Stagecoach (+15.92%) were among the biggest gainers. John Menzies (-4.69%) was the only company’s shares which ended the quarter in the red.
Scotland’s AIM constituents were dragged down by troubles at 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% on the start of the year, while Goals’ shares lost -62.22% of their value before being suspended on March 27 2019.
Lansdowne Oil & Gas was the best performer, with a 45% gain, while Nucleus Financial and Indigovision also finished ahead 27.88% and 26.96% 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.
Goals Soccer suspends share trading after £12m accounting error
"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."
