Jet2 joins AIM market exodus

A Jet2.com aircraft taxiing to departure from Innsbruck airport in Austria. Photo: Fabrizio Gandolfo/SOPA Images/LightRocket via Getty Images.

The migration of AIM stocks to the FTSE 250 index is set to include the growth market’s second most valuable company after Jet2  Ordinary Shares (LSE:JET2) today signalled plans to end its 20-year stay on the junior market.

The UK’s leading tour operator and third-largest airline is worth £2.8 billion, which is equivalent to the value of Taylor Wimpey (LSE:TW.) and Johnson Matthey (LSE:JMAT) within the top 30 of the FTSE 250.

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At a time when new listings are in short supply, Rosebank Industries  Ordinary Shares (LSE:ROSE), Gamma Communications (LSE:GAMA), GlobalData (LSE:DATA), CVS Group (LSE:CVSG) and GB Group (LSE:GBG) have all entered the FTSE 250 after stepping up from AIM.

Volex (LSE:VLX) is next in line after securing promotion in this month’s FTSE reshuffle, withSerica Energy (LSE:SQZ) another contender ahead of its intended move to the main market in the current quarter.

Jet2’s admission, which is expected to take place before the end of its March financial year, widens the gap between the £4 billion-valued Greatland Resources Ltd (LSE:GGP) and the rest of AIM.

The next biggest is HUTCHMED (China) Ltd (LSE:HCM), which is now worth £1.8 billion after its shares today surged on the back of a licensing deal with GSK (LSE:GSK) for a cancer therapy worth up to $1.3 billion (£960 million).

Other stocks in the AIM top 10 but with valuations below £1.5 billion include uranium company Yellow Cake  Ordinary Shares (LSE:YCA), SigmaRoc (LSE:SRC) and Fevertree Drinks (LSE:FEVR).

AIM top 10 by size

Source: ShareScope. Past performance is not a guide to future performance.

The AIM market is now down to about 600 companies with an estimated value of around £60 billion, which compares with a peak of 1,700 companies at the end of 2007.

Success stories over the 30 years of AIM have included Melrose Industries (LSE:MRO), UNITE Group (LSE:UTG) and former GVC company Entain (LSE:ENT) after they made the journey all the way to the FTSE 100 index.

Accountancy group UHY noted recently that 37% of last year’s 87 AIM delistings had been due to takeovers, as private equity funds and corporate buyers showed a willingness to pay more than institutional investors for these growth companies.

UHY chair Colin Wright said: “While that is a great compliment for AIM companies, the gradual erosion in the size of AIM is not helping it attract new listings.

“The takeover of many of AIM’s best companies makes AIM seem far less dynamic than it is. Perhaps it is time to consider whether it is too easy to take over a UK-listed company compared to other exchanges such as the NYSE or Nasdaq.”

The recent flow of companies electing to move from AIM follows efforts by the Financial Conduct Authority (FCA) to reduce the cost and regulatory burden of a main market listing.

In addition, companies are drawn by the ability to attract a wider pool of investors and the profile boost of inclusion in the FTSE UK index series.

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Jet2 acknowledged the “highly important” role played by AIM in supporting its development, having switched from the main market in August 2005 when the company was known as Dart Group and included aviation services and Fowler Welch distribution.

Philip Meeson, a five-time British aerobatics champion who still owns 15.9% of the company, oversaw the launch of the Jet2.com low-cost airline brand three years earlier in 2002.

The board of Jet2, which today met in Leeds for the company’s AGM, said the main market move was a “natural next step” to support the company’s future development and enhance its visibility with a broader range of UK and international institutional investors.

Revenues are growing at a compound annual rate of 19%, with more than 90% of the UK population now within a 90-minute drive of one of its 14 UK bases.

Jet2’s footprint includes the UK’s second-largest airport after it launched operations at Gatwick in March. Boosted by a stronger-than-expected package holiday mix, Jet2 said today it had increased the number of aircraft on sale from Gatwick next summer to seven.

The shares today rose 54.5p to 1,511.5p, leaving them 40% higher than in May, as Jet2 said it was encouraged by sustained levels of demand through the peak summer season.

Capacity for winter is 8% higher than a year ago at 5.9 million seats, with early indications pointing to similar trends to the summer as passengers continue to book closer to departure.

Jet2 added that its fuel and foreign exchange hedging positions also provided significant protection for the current financial period.