Derek Pain: Avation has taken off, others are below peak performance

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The Independent Online

Avation, the aircraft leasing group, continues to fly in the right direction. Although interim pre-tax profits are down the shares are still showing a reasonable gain for the No Pain, No Gain portfolio.

They were recruited at 83.5p four years ago. I thought of selling them when the price slumped to around 60p, but they have since topped 160p and even allowing for the marginal half-year setback are, as I write, 145.5p.

There is little doubt that growth will resume in the second six months. Lease income should increase and, among other factors, there is the signalled sale of two aircraft. The group now embraces a fleet of 29 and has just added Flybe to its widening client list. Europe's biggest regional airline has agreed to lease four aircraft this year and next. Avation has options on further aircraft that are currently in the books at nil value. Stockbroker WH Ireland has worked out that the group's options could represent a value of $38m (£24.6m).

Interim profits were a shade disappointing. They came out at around $7m against $7.9m, with currency adjustments and depreciation charges doing the damage. Revenue was up 13 per cent to $27.7m. In its last financial year, Avation produced profits of $16.6m, up from almost $14m.

Although the benchmark Footsie share index managed this week to exceed its old peak, my portfolio seems out of step with the stock market. A few constituents are within hailing distance of their record levels, others are merely showing comfortable gains or, in some cases, embarrassingly wide loses. The only constituent nearly hugging its highest ever price is Whitbread, the portfolio's heavyweight share, which topped 5,100p last month. The leisure group is now riding at less than 100p short of its record.

Even the portfolio's star performer, the Booker cash and carry chain, is more than 20p below its peak of 176.5p.

I suspect Booker would have joined the stock market's celebratory mood if the supermarket price "war" had not erupted. In fact the shares were residing at their best level on the very day that Morrisons announced its new cut-price regime.

Others quickly followed, and although the impact on the cash and carry chain has been marginal, the shares have failed to recapture their old exuberance. Even so, they have largely recovered from the 115p low hit last year.

Mears, the support services group, has also suffered and in spite of recent firmness is around 100p below its peak. A low-key trading statement prompted the retreat, and although the social housing and home care group has since been a little more buoyant, the shares have failed to make up the difference.

It is clear that the Footsie is no longer a reflection of the UK's commercial activities as it embraces a host of overseas and multinational constituents. In fact there have been occasional calls for a new index to be created, which would be more representative of home-grown talent. So far such an addition to the range of stock market indices has yet to appear.

The Footsie replaced, initially at 1,000 points, the still calculated FT30 index in 1984. When launched in 1935, FT30 was a much more accurate mirror of domestic endeavours than the current Footsie. But in those distant days, globalisation was not much of an influence, although some of the 1935 constituents had significant overseas interests.

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