An entrepreneur steps in to a sigh of relief

Derek Pain: No pain, no gain
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The Independent Online

It is not often City institutional investors gang up against the management of a company which, if down in the dumps, is still making profits and paying dividends.

It is not often City institutional investors gang up against the management of a company which, if down in the dumps, is still making profits and paying dividends.

Yet such a fate has befallen the directors of Allied Leisure, the tenpin bowling, snooker club and Burger King group.

Institutions owning more than 50 per cent of Allied's capital rushed to accept a share-exchange offer from an untested company called Georgica. The bidding company has little in the way of assets, has yet to trade and is unquoted, although it is applying for a presence on AIM, the junior share market.

But it does embrace an exceptional talent in the shape of Nick Oppenheim, a man with a sufficiently successful reputation in the leisure industry to win institutional hearts, as well as backing.

He is said to have made around £50m from the summer takeover of the Northern Leisure night club chain. He helped lift it from the brink of disaster to Britain's biggest night club group, valued at around £400m when it was acquired by Luminar, the Chicago Rock Café chain.

As Northern danced ahead, Allied stumbled and tripped. The stock market has trimmed its estimates for the year to last June following a surprise profits warning and is now looking for £8.3m with, perhaps, £13m this year.

Its discomfort has been compounded by a share consolidation, rarely a rewarding manoeuvre, particularly when things are going wrong. When Mr Oppenheim struck, the price was down to 92p. It had been 190p over the past year and four years ago nudged 300p.

The Oppenheim bid, with not a penny changing hands, is already a done deal. He has gone unconditional although his offer is still before other shareholders. It will be surprising if Allied heads do not roll as he introduces his own ideas.

To some extent, the Allied management can feel it has been harshly treated by institutional shareholders.

After all, the group, despite its setbacks, is still in far better shape than many others where managements continue to destroy shareholder value.

The Allied affair is a rare example of institutional displeasure surfacing and it should serve as a warning to wayward managements. In the Allied case, institutions had, in Mr Oppenheim, a ready-made talent to encourage into the boardroom. It is not often an experienced and successful entrepreneur can be found "resting" between jobs.

His presence clearly makes Allied shares look much more attractive. They are an interesting bet and I may introduce them into the no pain, no gain portfolio once the turmoil at the group subsides and Mr Oppenheim's plans become clear. Since he appeared the shares have been up to 122p. They are now 108.5p.

In the past week two portfolio constituents have been in action. Global, the food group, served up splendid interim profits - up 34 per cent to £3.3m - but the feast went a little cold when it became clear poor summer weather had cut into barbecue meat sales.

Although, I gather, some full-year profit estimates have been trimmed, analysts John Elston and Charles Hall at the company's stockbroker, WestLB Panmure, are sticking with their £8m forecast but reduced next year's estimate by £600,000 to £8.2m. Global has cut debt by £10m to £27.3m and remains hungry for expansion. It would be surprising if more acquisitions are not being cooked up.

Once the stock market had digested the barbecue impact, as well as evidence of margin pressure, Global's shares lost a results-inspired gain. They are now 24.75p, compared to my tip price of 20p.

Global is gently topping up by 5 per cent its interim dividend, but another constituent, the S&U finance group, is increasing its half-time payment by 20 per cent on profits which are 28 per cent higher at £3.2m. Its door-to-door credit side turned in improved figures but S&U's real attraction is its Advantage Finance business which offers motor finance.

From a standing start 15 months ago, it produced a £2.2m turnover and profits of £403,000. Chairman Derek Coombs expects Advantage to make further progress in the second half year. For the year, stockbroker Brewin Dolphin is looking for £7.5m, which would compare with a little over £6m.

S&U is a conservatively run company, much more lowly geared than its rivals, and its shares deserve a higher rating. They are 306p, only marginally up on my buying price.

Despite the disappointing performance, I am happy to retain the shares in my portfolio. And Global, too, keeps its place although it may have, for the time being, lost some of the profits sizzle.

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