Derek Pain: Booker defies recession to carry on the fight

Derek Pain
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The Independent Online

Booker, the cash and carry chain, has emerged as a star of the no pain, no gain portfolio. As the nation suffered a deep and unrelenting recession, the shares have climbed from a starting point of 24.4p to top 42p this week.

True, they have been helped along by the recent rally, but their display also reflects a strong trading performance that must, at least to some extent, refute the belief that corner shops and village stores are meekly surrendering before the force of the supermarket onslaught.

Many of Booker's 400,000 customers are small shopkeepers. Others include publicans and restaurateurs – two categories that have been, supposedly, major casualties of the economic downturn.

In a trading update last week the group, which escaped the cold and often disastrous Icelandic embrace, reported interim like-for-like sales up 7.7 per cent (compared with a 1.1 per cent increase last time). Somewhat surprisingly, even tobacco sales were up – by 5.1 per cent. In addition, the group's debt is down to £4m against £28.9m.

Interim figures will appear next month and there are hopes that full year profits, expected in May, should come in at around £53m, up from £47.2m last year and £36.2m a year earlier. Not long ago, Booker was written off – said to be operating in a dying industry.

Another constituent, Lighthouse, a wealth management group, has fared less well. Although gross profit is higher, the interim pre-tax figure has slumped from £442,000 to £56,000. Still, the group is returning to the dividend list with a 0.2p-a-share distribution, which actually represents two payments – one is for last year, the other related to the half-year figures.

Amortisation charges have hit the pre-tax return, and with around £12m in the bank – and no debt – Lighthouse could, in more normal times, have expected a handsome interest contribution. But near-zero rates have put paid to any such benefit. Instead, it is just another example of the topsy-turvy world we now inhabit. The wealth group is being forced to suffer the same hardship many small savers, often pensioners, are experiencing in these straitened times.

The dividend, the promise of a "progressive" payment policy, and cautiously optimistic comments from the chairman, David Hickey, suggest the portfolio should retain the shares, despite their debilitating performance. I paid 17.5p and watched them hit 35p. As I write, the price is 10.25p.

I mentioned last week that Pubs'n'Bars, the small pub chain that joined the portfolio last year, had become even smaller. Its decision to put a subsidiary, Moorgate Taverns, into administration has reduced its estate to 94 outlets. The troubled group paid £9.3m (including debt) in shares for Moorgate nearly two years ago. The shares were priced at 29p for the deal.

It seems that Moorgate traded at a loss and the slump in pub values led to loan conditions being breached. Its chief executive, Mel Belligero, says the administration will save Pubs'n'Bars £150,000 in yearly interest charges.

As I have said before, Pubs'n'Bars is a problem share. This latest move is hardly calculated to improve shareholder sentiment. The temptation to sell the shares – now around 5p – is strong, but the portfolio has already endured so much pain from this misguided investment and the remaining cash pot is now so small that, on balance, there seems little point in bailing out. So I'm holding on, hoping Belligero and friends will eventually serve up a cheerful round.

My latest portfolio recruit, SnackTime, the snacks and chilled drinks vending machine business, was on the takeover trail only hours after I alighted on the shares, swallowing its main rival, MBM Business Systems, in a £1.5m cash transaction.

The acquisition should quickly become earnings enhancing. In the year to end March, MBM produced profits of £301,000. The merger lifts SnackTime to around 20,000 vending machine sites in this country and Eire, which has probably elevated it to market leader.

MBM operates through franchisees under the Snack in the Box framework. It was established 14 years ago.

SnackTime, now adding hot drinks to its vending range, is still hungry for deals. It is looking around in the UK and has its sights on Europe as well.

The portfolio picked up the shares at 119p and, following the MBM deal, the price rose to 125p.

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