Scots shares outperform the FTSE in first quarter

Scottish shares on the FTSE outperformed the wider market during the first three months of 2019 but their AIM-listed counterparts significantly underperformed the index, according to analysis from Brewin Dolphin. 

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

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

All but one of the Scottish-based constituents of the FTSE ended Q1 2019 higher, with Macfarlane Group (+34.27%), Devro (+22.97%), Weir Group (+20.03%) and Stagecoach (+15.92%) among the biggest gainers.

John Menzies (-4.69%) was the only Scottish stock which ended the quarter in the red.

Scotland’s AIM constituents were dragged down by troubles at Glasgow fashion retailer Quiz, which announced a review of its business after another profit warning in March, and “accounting errors” at East Kilbride-based Goals Soccer Centres.

Quiz’s shares were down 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 AIM 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.

“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.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.