Derek Pain: After a spate of profit warnings, I have to move to shore things up

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The Independent Online

Although shares, as measured by the FTSE index, have performed quite well and could even reach a new high before the year's end, the No Pain, No Gain portfolio has suffered a few hiccups.

I have written about the flow of profit warnings that has hit so many shares. Until recently, the portfolio had escaped such humiliation. But in the past month it has experienced two such retreats as Stock Spirits and then Mears surprised with exceedingly downbeat trading statements.

Thankfully a few constituents have made headway. Avation, the aircraft leaser, is around its all-time high and Booker, the cash and carry chain, has partially recovered from City scepticism over its ability to prosper during the supermarket price war.

And Spirit Pub Co could still be the subject of takeover action, although last week's Commons vote on pub ownership could present problems for Greene King, the frontrunner, and C&C, the Irish cider and beer group that has still to declare its hand.

Clearly the deluge of profit warnings has influenced the performance of many shares. Indeed it is surprising that the stock market is still positioning itself to break through its all-time peak. If so many companies had not suffered setbacks and the international scene was less demanding, there is little doubt that London would have followed New York's run of new highs.

The portfolio needs recruits and I have descended on a company called Fulham Shore, a restaurant business being developed by David Page and Nabil Mankarious, famed for their successful expansion and sale of the ubiquitous Pizza Express chain.

After almost two years on the fringe ISDX share market, the company last month graduated to the Stock Exchange's junior market, AIM. The shares have been recruited at 9.5p, a price capitalising the enterprise at £21.1m.

Fulham's AIM debut followed the £13.9m takeover of Real Greek, a seven-strong restaurant chain that produced after-tax profits in its latest year of £800,000. As the name implies, its eateries provide eastern Mediterranean dishes and fit in with the group's first venture, a single restaurant offering Italian food.

Coinciding with the Greek acquisition, financed mostly with shares, was a cash-raising share sale, pulling in around £1.6m.

Mr Page has made no secret of his desire to expand the Greek chain – he says it could grow to around 40 branches – and is scouting for other restaurants to swallow.

The takeover and the cash-raising exercise were executed at a price of 6p a share.

I have followed Fulham since it first appeared on ISDX. Initially it was a shell operation; then came the Italian investment. I was several times tempted to acquire the shares but the portfolio has experienced mixed fortunes on the fringe market that was launched in the mid-90s by stockbroker John Jenkins and originally called OFEX; then it became Plus before being acquired by the inter-dealer broker Icap and renamed ISDX.

The investment in Fulham lifts the portfolio's strength to a round dozen. I am still on the look-out for candidates on the main market, as well as AIM and ISDX, although I have decided, at least for the time being, to ignore the AIM-traded C/Dialogues, the mobile messenger group I mentioned last month. I have a number of possible candidates in my sights and should be able to report more additions in the not-too-distant future.

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