The 10 Most Successful Companies on AIM

There are a large number of high quality smallcap companies listed on London's AIM market. Using Stockopedia's screening technology I've tried to identify the ten most successful companies on AIM today. I've used a number of metrics* to define 'most sucessful'.

By adjusting the market capitalisation demand, I whittled 1,100 AIM companies down to just 10. The winners (in order of descending market capitalisation) are:

• Abcam (LON:ABC)
• Nichols (LON:NICL)
• Majestic Wine (LON:MJW)
• RWS Holdings (LON:RWS)
• Brooks Macdonald (LON:BRK)
• First Derivatives (LON:FDP)
• Next Fifteen Communications (LON:NFC)
• Portmeirion (LON:PMP)
• Judges Scientific (LON:JDG)
• Mattioli Woods (LON:MTW)

I've picked out five of my favourites.

Portmeirion

You may be surprised to learn that a company specialising in tableware is one of the most successful companies in the UK today. Portmeirion has some fantastic assets: the ceramic brands Spode and Royal Worcester both date back to the late 18th century.

Chairman Dick Steele outlines the secrets of Portmeirion's success: "Our continuing investment in product development, our insistence on quality without compromise, our worldwide sales reach (75% of our sales come from outside the UK) and our prudent financial management. These factors all combine to deliver great brands."

Don't doubt the international stature of Portmeirion. Over 40% of sales are to the North American market. The company sells almost as much to South Korea as it does to the UK.

Portmeirion has never cut its dividend and has been paying out since 1988. EPS for 2012 is expected to be 8.1% higher than the 2011 figure and the dividend is forecast to rise 3.1%. That forecast dividend rise could prove conservative, the payout was raised 15% at the interim stage. Sales in the crucial H2 will determine the yield in 2013.

Judges Scientific

Judges Scientific is the holding company behind a collection of scientific instruments companies. The company has long had a strong private investor following who have been well rewarded: the shares have increased almost tenfold in the last five years.

CEO David Cicurel describes Judges' strategy thus: "Our strategy is to buy excellent companies, pay sensible multiples, repay debt and provide operating management an environment where they can thrive."

Frequently, companies have been purchased from private sellers approaching retirement. Judges' last acquisition was Global Digital Systems (GDS), a company involved in the design and manufacture of instruments for testing soils and rocks. Judges paid £7.7m GDS. Last year, GDS generated an operating profit of around £1.3m.

Judges' year-on-year success is finally getting noticed by the markets. It may not be too late to buy the shares, the company still trades at a discount to the kind of rating enjoyed by larger peers such as Renishaw.

Judges Scientific is expected to increase its shareholder dividend 50% this year, followed by another 10% rise the year after.

RWS Holdings

Expert translation services company RWS Holdings regularly pops up on statistical searches for successful companies.RWS has increased its dividend every year since flotation in 2003. Today, the company employs 350 people, most of whom are dedicated to RWS' patent translation operation. This field requires a double blessing of expertise: first in the application area and second the linguistic expertise. RWS is clearly capable of charging for this service, in 2012 the company reported a net profit of £12.7m on sales of £68.8m.

So what is behind RWS' success and where will further growth come from?"The key to RWS’ success has been its focus upon delivering the highest quality services to a sophisticated and demanding customer base" says Andrew Brode, RWS' Executive Chairman. "Future growth will be driven by the rapid globalisation of intellectual property protection and the services required to provide that protection."

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First Derivatives

Headquartered in Newry, First Derivatives is one of just a handful of London-listed companies from Northern Ireland. The company was founded by its CEO Brian Conlon. Today, Mr Conlon owns 46.5% of the shares in the company.

First Derivatives provides financial software products and expertise to investment banks, hedge funds and stock exchanges around the world. Its products are used by algorithmic trading desks and high-frequency traders.

The company recently announced its largest ever new software contract. This is a multi-year contract to provide market surveillance software to the Australian regulator. Australian press reports suggest that the customer was working with a £30.5m budget. That is two thirds of First Derivatives entire turnover during the 2012 financial year.

First Derivatives' success means that the company does not just pass my success criteria, it absolutely smashes through them. In the last five years, EPS has grown, on average, by 16.1% per annum. In that time, the dividend has been increased by an average of 17.4% a year. EPS for 2013 is expected to increase by 13.4%, followed by another 25.0% rise the year after.

Mattioli Woods

With a market capitalisation of £36m, finance firm Mattioli Woods is the smallest company to make my list. On the face of it, the company appears to be a smaller (and cheaper) alternative to Brooks Macdonald. Mattioli Woods administers over 2,900 SIPP schemes and provides a range of employee benefits and wealth management services. The company boasts £3.02bn of assets 'under advice and administration'. In the last five years, sales have grown from £9.0m to £20.5m. In that time, the company's dividend per share has been increased year-on-year from 2.55p to 5.55p.

The shares trade on just 9.0 times 2013 forecasts, falling to 7.9 times expected profits for 2014. That's the cheapest of any of the companies to make my top ten.

* My Success Criteria

• Dividend has been growing year-on-year for at least three years.
• Compound Annual Growth Rate of EPS (earnings per share) in last five years must be greater than 5%
• Compound Annual Growth Rate of DPS (dividend per share) in last five years must be greater than 5%
• Compound Annual Growth Rate of turnover in last five years must be greater than 5%
• Sales must have increased year-on-year for the last three years at least.
• Forecast EPS growth must be at least 5% this year.

By demanding a market capitalisation > £25m I hope to eliminate companies too small to trade in meaningful size. 

Putting all this into Stockopedia PRO gave the results above.