Derek Pain: Bowling chain is on a roll with growth plan

No Pain, No Gain

The recovery at Essenden has been remarkable. Five years ago it suffered a £43.6m loss. The comparable performance last year was a £1.3m profit. And Nick Basing, who as chief executive has masterminded the 10-pin bowling chain's renaissance, indicates that the group could eventually emerge as a powerful force in the leisure industry.

"At its full-year results check-up the company, having served over 3.7 million visitors, has been given a clean bill of health across all measures," he reports. "Essenden needs to continue its intense programme of getting fitter and stronger," he says, adding that the intention is to put through a "transformational" leisure acquisition so the skills and wide experience of the management can be utilised.

Mr Basing, who used to run the Chez Gerard and Bertorelli restaurant businesses, declares that the first leg of the revival is now over and the directors believe the group, despite the nation's economic difficulties, can "sustain a prosperous future".

Clearly the group has endured a difficult time since, as Georgica, it was born out of an operation called Allied Leisure around the turn of the century. AL had a spread of interests but Georgica decided to concentrate on 10-pin bowling and snooker. The snooker side was sold around the time that Essenden itself was created to become a 10-pin bowler.

At the statutory pre-tax level the group was still loss-making – albeit a modest deficit – but I would expect the bowling operation to produce "true" profits this year whether or not Mr Basing's envisaged takeover occurs.

The no pain, no gain portfolio acquired the shares in November at 24p. The price is, as I write, around 31p. Essenden is, in effect, a second time around constituent. It was a portfolio member when the group was known as Georgica. Before troubles took hold the shares were sold, netting a handsome profit.

Another portfolio leisure constituent, the Spirit Pub Company, with 1,200 outlets, has rolled out interim profits that helped to reverse a share decline. The price before the figures fell to 55p, but once they were released it rallied to around 65p, against the 42p paid by the portfolio. Mind you, the profits were not outstanding, as the influence of the cold, bleak winter impacted. Still, they were better than anticipated.

At the statutory pre-tax level the figure fell to £12.7m, but allowing for £7.3m of exceptional charges the return was up 3 per cent at £20m. The half-time dividend is increased to 0.68p a share.

Last time an interim of 0.65p was followed by a 1.3p final.

Spirit embraces such pub brands as Fayre & Square and the oldest chain of them all, Chef & Brewer. The managed pubs increased sales by 1.4 per cent, but income from its leased and tenanted estate was down 2.9 per cent, although the chief executive, Mike Tye, said the performance was "stabilising".

He added: "We are well placed to perform strongly during our key summer trading period, and we remain confident of delivering our full-year expectations".

Two other constituents have attracted attention. Booker, the cash and carry chain, has won a higher share target from the Goldman Sachs investment giant. The US group has placed a 135p price tag, up from 121p.

Booker, which has now received formal clearance from the Competition Commission for its £140m takeover of the rival Makro warehouses, is due to report full-year figures this month. The shares are 118p; the portfolio paid 24.5p.

The other constituent requiring my attention is Avation, the aircraft leasing group. It has acquired another Airbus A320-200, bringing its commercial passenger fleet to 21. Five of them are Airbus A320-200 models. The newcomer is being leased to an Australian airline for 61 months.

The build-up of Avation's operations has been impressive. Jeff Chatfield, the chairman, says the average age of its fleet is now 8.7 years as it reduces interest in aircraft that are no longer produced. The group's shares have, however, been a disappointment; they are priced at 76.5p compared with the 83.5p the portfolio paid in January 2011. The stockbroker WH Ireland forecasts profits of £7.2m this year, a performance that, if achieved, would suggest the shares are undervalued. The broker has a 140p target.

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