Welsh companies hold their own – just

Rhys David reveals how a portfolio of Welsh shares has fared in the turbulent market of the past year

The value of shares can go down as well as up, financial advisers are trained to tell their clients. For anyone investing in the portfolio of 12 Welsh shares our index has been following over the past year this is certainly true. The lucky investor who bought shares in high technology company IQE, the Admiral Insurance Group, the oil exploration group Amerisur Resources, and the farm supplies and country retailer Wynnstay, would have been well rewarded. Indeed, they would have made a very healthy 65 per cent return on their original spend.

But the twelve shares we chose also included some very poor performers, including house builder Redrow, media group Boomerang Plus, marketing company Freshwater, and lighting specialist Enfis, whose shares are significantly behind the level a year ago before the stock market had begun its strong 2010 bounceback. Indeed, anyone investing £100 a year ago in Enfis would now be looking at a £77 loss.

The remaining four  – cake and bread maker Finsbury Food, gift wrap and stationery maker International Greetings, comparison site Moneysupermarket.com, and silicon chip processor Pure Wafer, have in the case of the first two seen slight declines in their share prices, while the latter two have seen modest rises, in every case of less than 10 per cent over the past year.

The net result is hardly a ringing endorsement of Welsh shares overall. An investment of £100 in each of our twelve companies (there was one substitution during the course of the year) would after a year have been turned into £1,238, a gain of roughly 3 per cent. This is probably better than could have been obtained from most building society accounts, given the current very low level of interest rates but hardly enough to encourage active investment in a portfolio of Welsh companies.

Indeed, over the same period the FTSE share index of the leading 100 companies by market capitalization rose by 10.7 per cent and the mid market index, the FTMC by 20.2 per cent. The FTSE Aim All Share Index of smaller companies, which is where the majority of companies on our index are quoted and therefore the best comparator, rose by a healthy 24.8 per cent.

The star performer within the index for much of the year was Amerisur Resources, which from its base in St. Mellons outside Cardiff, carries out exploration activity in South America. Earlier in 2010 its share price was running at more than double the figure when the index started. It has fallen back over recent months in line with the decline in the oil price but still stands roughly 50 per cent up over the year.

Its performance has been matched by Admiral, which saw its share price increase from 1,059p in November last year to 1,630p at the end of October. The company, Wales’s only representative in the FTSE index, now has more than nine brands in several countries, more than 1.5m vehicles insured, and employs more than 2,500 staff. It reported record first half profits of £126.9 million and a customer base up 23 per cent at 2.37 million. It is now planning to begin underwriting household insurance and will be moving into a new headquarters in central Cardiff.

Welsh Share Selection

(share code in brackets)


5 Nov 2009

No of shares Value

5 Nov 2009



3 Aug



Aug 3



End Oct 2010


End Oct  2010

+/- Aug 2001–end Oct 2010 +/-

Nov 2009-end Oct 2010

% %
Amerisur Resources (amer) 7.72 1290 100 15.5 199.95 11.5 148.35 -25.8 +48.9
Admiral (adm) 1059.0 9.4 100 1448 136.11 1630 153.22 +11.2 +53.9
Boomerang Plus (Boom) 95 105 100 65 68.25 51.75 54.34 -20.4 – 45
Enfis (enf) 53.00 190 100 10 19 12 22.80 +20 – 77.4
Freshwater* (fwuk) 547 16 87.52 5.25 28.72 -67 n/a
Finsbury Food (fif) 26 385 100 18 69.30 23.55 90.67 +30.8 – 9.4
Internat. Greetings


72.90 137 100 60 82.20 66.0 90.42 +10 – 9.4
IQE (iqe) 18.41 543 100 21.3 115.65 41.75 226.70 +96 + 226.8

Com ((mony)

77.65 129 100 70 90.30 83.60 107.84 +19.4 + 7.7
Pure Wafer (pur) 3.75 2666 100 4.5 119.97 4.09 109.03 -9.1 +  9.1
Redrow (rdw) 146.10 68 100 107.1 72.82 110.5 75.14 +3.1 – 24.3
Wynnstay (wyn) 225.30 44 100 256.82 113.00 297.5 130.90 +15.8 + 32
Welsh Ind Inv Trust* (wii) 215.00 46 100
Total Cost/Value 1,200 1,174.07 1,238.13 + 5.5 + 3.1
FTSE 5125 5258 5675 7.9 10.7
FTMC 9020 9948 10843 9.0 20.2
FTSE Aim All Share 652 685.68 814 18.6 24.8

*Freshwater replaced Welsh Industrial Investment Trust on May 4th following the latter’s winding-up.

The biggest gainer, however, has been specialist microchip manufacturer IQE, which, when the index was created, was trading at 18.41p. By end October the price of its shares had risen to 41.75p, an increase of 127 per cent. Last month the company announced that it would be buying Galaxy Compound Semiconductors for $14.15m, a purchase that would put it into a world leading position as a supplier of antimony-based infra-red materials. The company is planning to raise the finance for the acquisition from a £20.8 million share placing. In the half year to the end of June the company was able to report a 54 per cent increase in revenues and a 93 per cent increase in gross profits, and it said the second half had started well with strong demand across all products.

Wynnstay, which has acquired a number of similar businesses as well as branching out into the vibrant pet supplies market, has been rewarded with steady share price growth over the past year and now stands at just under 300p, a rise of nearly one third on the price at the beginning of November last year.

The biggest disappointment within the portfolio has been Enfis, a Swansea University spin-out that specializes in LED lighting displays. Despite winning some important contracts, including one from Guangzhou in China to put lights into a National Basketball Association stadium, the company has suffered a share price collapse from 53p a year ago, to only 12p at the end of October. The loss-making company reported an increase in orders in the first half of its current year and has been making cost reductions to try to reduce losses. Its chief executive admitted recently, however, that the company would probably fare better as part of a bigger group rather than as an independently quoted company.

Its travails have been mirrored by Freshwater, the media group, which was added to the portfolio in May, after one of the original constituents, Welsh Industrial Investment Trust announced it was delisting. Freshwater’s shares since then have declined by 67 per cent – from 16p to 5.25p – on expected falls in both revenues and profits. The company blames public sector cuts, particularly in the NHS, for the falls and plans to take itself off Aim later this month. Announcing its decision, management said Aim was no longer the appropriate vehicle for growth funding for a company of Freshwater’s size.

The other poor performer within the portfolio has been Boomerang Plus, where at present there are few signs of the shares mimicking its monicker with a swift return from the downward journey to 51.75p at end October – a drop of more than 40p over the year. Redrow, too, has had a poor year, not surprisingly given the pressure on house builders from the weak state of the housing market. Its share price stood at 110.5p, a fall of 36p on a year earlier. It has moved up marginally, however, over the past three months, reporting increases in both house selling prices and volumes.

For the other companies in the index it has been a tale of swings and roundabouts. After falling earlier in 2010 International Greetings is now back within a few pence of its 72.90 share price last November. The company has gained a boost from contracts with two leading supermarkets and from the success of the film Toy Story 3 whose images it licensed for use on its products. Finsbury Food seems to have to begun to weather the problems caused by consumers trading down from its more expensive cake ranges and has diversified into new gluten-free product ranges. Its shares at end-October were back up at 23.5p, a drop of just under 10 per cent on the figure a year ago on improved year end results.

Moneysupermarket.com, which trades in the highly competitive comparison website market, has also bounced back from earlier lows and is now trading at roughly 10 per cent higher than a year ago. Profits and revenue for the first half of its current year were both up on a year earlier. Pure Wafer is also up by a similar 10 per cent on November 2009. The Swansea company, which reclaims wafers for semiconductor manufacturers, made losses of $8m in the year to end June but has  undergone a financial restructuring and developed new solar products in the past few months. It is also benefiting from the withdrawal of some of its competitors from the market.

The lessons from the first year of the portfolio are that management and product quality are more important than the sector in which businesses operate. The businesses in the list from supposedly fast-growing sectors such as high technology have enjoyed mixed fortunes, as, too, have those in retailing and financial services. The representatives from the media and marketing sectors – areas of the economy where jobs growth is predicted to be strong in the future – have, perhaps surprisingly, generally fared poorly.

The case has frequently been made over recent years for the creation of a Welsh stock exchange that could provide new capital for Welsh businesses and obviate the need for a full London listing, the burden of which for some Welsh companies now seems to be too great. Whether there are more Welsh companies beyond the very small number currently quoted in London which would come forward, if such an exchange were created, and whether it would attract the liquidity necessary to finance small Welsh businesses is a question which remains to be answered.

Rhys David is a trustee of the IWA and writes on business and economic affairs

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