Derek Pain: Booker directors deserve reward for star performance

No Pain, no gain

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The Independent Online

I have on a number of occasions complained about excessive boardroom pay and perks. Particularly odious is when mediocrity or outright failure is condoned with inflated rewards. Yet success surely deserves appreciation. Unfortunately, it is not always given.

Such a churlish fate befell the directors of Booker, the star performer of the no pain, no gain portfolio. At the cash and carry group's summertime AGM some shareholders questioned the remuneration packages and at times the opposition commanded about 20 per cent of the votes. But, for once, the rebellion was misplaced as Booker emphasised again last week when it produced outstanding interim figures and seemed to indicate it was not too worried about the worsening economic climate.

When the present management arrived the group appeared to have much of its future already behind it. It had lost its share quote after being taken over at the turn of the century. But following a buyout, the newcomers engineered a stock market return via a reverse merger four years ago. Around that time the shares could be picked up for 15p or so. As I write, the price is 76.5p, capitalising the once fading group at approaching £1.2bn. The portfolio paid 24.5p a share.

Such a performance, I believe, deserves financial recognition. Just how long such a spectacular pace can be maintained must, of course, be debateable. But Booker clearly has its sights on expansion. It is still improving its chain of warehouses and has ventured into India, where it has two operations and a third on the stocks. Helped by a couple of acquisitions, it has expanded its delivery programme and I would not be surprised if further businesses are captured.

The half-time results, covering the 24 weeks to 9 September, showed sales up 8.5 per cent to £1.8bn and pre-tax profits hitting £45m, a 22 per cent increase. With cash in the bank of £58.7m (£10m at this time last year), the interim dividend is lifted 22.2 per cent to 0.33p a share. Trading in the second six months is so far running ahead of the corresponding period last year and, unless there is a dramatic slowdown, it is clear that last year's £71.4m profit will be comfortably exceeded.

We have enjoyed a spectacular run with Booker. Any reader who followed the portfolio into the stock should consider selling around half of their shares and enjoy a free ride with the remainder. The portfolio is unable to undertake such a manoeuvre.

Whereas Booker has provided a handsome return another constituent, SnackTime, the nation's third biggest vending machine group, is showing a worrying loss. Two years ago the portfolio paid 119p for shares, now worth some 65p. I suppose it could be argued that the portfolio arrived too early and should have waited until the group had become more established. It has, in the past two years, expanded by making two significant takeovers. In the present City and retailing climates it would be unwise to expect the shares to rapidly recover to their near 200p peak or, indeed, the portfolio's buying price.

Nevertheless, in a difficult market SnackTime seems to be ticking over reasonably well. In its first six months sales have grown and it has started to reap the benefits of a reorganisation and resultant cost savings. Twelve-month profits should emerge at around £1.5m with more than £2m likely next year.

Another constituent, Avation, the main market listed leasing group, now 105p against the 83.5p when recruited, has delivered its third aircraft to the Australian airline, Skywest. Under a deal between the two organisations, Avation, where Slater Investments has increased its stake to just above 5 per cent, is scheduled to supply a fleet of up to 18 new aircraft for Skywest to operate on behalf of another air service, Virgin Australia. Avation has a 51.8 per cent interest in another AIM aircraft leasing company, Capital Lease Aviation. It has six aircraft out on lease to various airlines and has just reported net profits of around £2.9m. The shares are 16.5p, pricing the company at £16.1m.

Skywest is also traded on AIM. Last week it achieved the distinction of being selected as the junior market's international company of the year. With its shares at 22p, it is valued at £44m.

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