Five AIM growth shares for your ISA in 2025
Award-winning AIM writer Andrew Hore names the smaller companies with growth potential that investors might consider for ISA portfolios.
7th March 2025 15:45
by Andrew Hore from interactive investor
It’s getting near to the end of the tax year and anybody who has not used their full ISA allowance might consider how to invest any cash they have available. Here are five suggestions for growth-related AIM-quoted shares for ISAs.
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Likewise
Price: 19.5p
Floor-coverings distributor Likewise Group (LSE:LIKE) has been growing its revenues in a period where the underlying market is declining. Trading has been particularly strong since the end of the first half of 2024.
The management team of Likewise have predominantly come from fully listed floor-coverings distributor Headlam, which had a similar strategy in its earlier days and is the major player in the sector. Likewise chief executive Tony Brewer joined Headlam in 1991 and became chief executive in 2000. He left the company in 2016.
The plan at the time of the AIM flotation in August 2021 – at 25p/share - was to be a national distributor with revenues of more than £200 million and an operating margin of greater than 5%.
Likewise has been built up via acquisition, but acquisition activity has been put on hold in tougher consumer market times. Capital investment continues. The company has bought a freehold logistics centre near Plymouth for £1.2 million. This will help to serve south-west England.
In 2024, revenues grew 8% to £150.8 million. The market is estimated to have declined by around 10% last year. Likewise’s fourth-quarter revenues grew by 10% and in January 2025 they were 8% higher. Likewise requires 6% growth to meet the 2025 forecast revenues of £160 million.
This year, pre-tax profit could double to £4 million. The shares are trading on 18 times prospective 2025 earnings, falling to 14 in 2026. If the consumer market outlook improves, then growth could be more rapid. Buy for long-term market share and profit growth.
Concurrent Technologies
Price: 172p
Ruggedised plug-in cards and systems developer Concurrent Technologies (LSE:CNC) has always been good at developing intellectual property (IP), but not as good commercially. This has changed since chief executive Miles Adcock joined the company in June 2021.
He has focused on increasing the number and timeliness of new product launches each year and this is paying off. Concurrent Technologies also intends to move up the value chain by offering systems that combine many plug-in cards. Design wins mean that there is significant growth to come over 10 years or more and operational gearing will also help to improve margins.
The acquisition of US-based Philips Aerospace increases prospects for the company’s IP in the US market. US government and other customers like to buy products that are seen to be manufactured in the US.
There were 22 design wins during 2024, including 10 that could eventually be worth more than £1 million/year and they could generate £100 million over the life of the products. The 2024 revenues were £39.6 million.
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Management continues to spend heavily on new products, and this will hold back short-term profit, while increasing the longer-term potential. The 2024 pre-tax profit estimate is £5.2 million, rising to £6 million in 2025.
Net cash is expected to be £13.3 million at the end of 2024 and Concurrent could generate £4 million in cash each year after capital investment.
The share price, which is trading on 15 times potential 2025 earnings, has been on an upward trend for more than one year. Buy for the payback on IP investment.
XP Factory
Price: 12.5p
Escape rooms and bars operator XP Factory (LSE:XPF) is growing rapidly on the back of its two brands that have a combination of owner-operated and franchised sites in the UK and overseas. XP Factory is involved in the competitive socialising sector, which continues to grow strongly despite weak consumer confidence, and its brands are market leaders in their respective niches. The size of the opportunities is greater than management originally estimated.
The original business is immersive escape rooms operator Escape Hunt, while Boom Battle Bars offer drinks and games, such as Bavarian axe-throwing, augmented reality darts and golf. Boom Battle Bars franchises are being acquired by the company.
Management has refined its requirements for sites and some sites offer both brands. The focus for Boom Battle Bars is larger cities, while Escape Hunt works well in smaller towns. The range of escape room games is also expanding, which helps to differentiate Escape Hunt from smaller competitors. Up to 10 Escape Hunts and four Boom Battle Bars could be opened each year funded by cash generation and debt.
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The strategy is to generate revenues of £90 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of £13 million by 2027-28. In the year to March 2025, revenues of £68.4 million are forecast. The growth will be organic via new openings, enhanced by the performance of existing sites. Like-for-like growth was 5.5% in the first nine months of the financial year.
The opening of new sites holds back the reported profit, but the EBITDA is a good estimate of the operating cash generation.
There has been a sharp rebound in the share price since the recent capital markets day. Achieving the target in 2027-28 should generate pre-tax profit of £4.2 million, which puts the shares on seven times prospective 2027-28 earnings, but less than two times the likely cash generated. Buy for long-term growth.
Finseta
Price: 33p
Finseta (LSE:FIN) has been transformed from a technology-focused business that was leaking cash into a foreign exchange and multi-currency services provider. Non-core operations have been sold and the focus is direct, rather than third-party, business.
Finseta has used its technology to become a more efficient international payment services than its rivals. This is a scalable platform that benefits from operational gearing because overheads will grow much slower than revenues. Newer operations in Canada and the United Arab Emirates, plus the corporate cards offered via Mastercard, provide additional growth opportunities.
In its recent trading statement, Finseta says 2024 EBITDA will be £2 million compared to a forecast of £1.9 million. There was £2.2 million of cash generated from operating activities.
In 2025, pre-tax profit is forecast to rise from £1.3 million to £2.5 million as previous investment pays off. A further improvement to £4 million is expected in 2026. Net cash could rise to £7.7 million by the end of 2026. Finseta could use the cash on growing via acquisition or by taking on teams of people.
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The share price has generally been moving within a range in the past year, following a sharp recovery from its low. The shares are trading on less than 11 times prospective 2025 earnings, falling to seven in 2026. Once the growth in profit picks up and the cash generative abilities of the company are even clearer the share price will move to new levels. Buy.
Avingtrans
Price: 350p
Avingtrans (LSE:AVG) focus is buying underperforming engineering assets, improving their performance and then potentially selling them when they are making better return. These tend to be solid businesses that have fully developed products, where there is limited requirement for development spending.
Unusually, Avingtrans acquired a medical-imaging business which was developing new technology and required regulatory approval when it was developed.
Gaining US Food and Drug Administration (FDA) approval for the medical imaging product is the key to future profitability. Management believes that this approval can be obtained by the second half of this year, although there have been delays at the FDA. Potential customers are aware of the technology, but it could take time to build sales.
In the six months to November 2024, revenues improved from £65.2 million to £79 million, while underlying pre-tax profit edged up from £3.9 million to £4 million. The advanced engineering division improved profit to help offset the rising medical division loss.
The medical division will continue to hold back profit for the rest of this financial year and probably the whole of next year. There are orders to cover the majority of expected second-half revenues and the full year expectation is £161 million, while despite the higher interim figure pre-tax profit is forecast to decline from £7.3 million to £6.6 million. A lower medical division loss means that the pre-tax profit could rebound to £10.7 million in 2025-26.
The shares are trading on less than 14 times 2025-26 forecast earnings and that is before the upside from the medical imaging investment. The Ormandy heating, ventilation and air-conditioning business has been turned around and is a possible disposal candidate. Buying now will provide exposure to the long-term growth of the medical business and gains on potential engineering business disposals.
Andrew Hore is a freelance contributor and not a direct employee of interactive investor.
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