Derek Pain: Cash-and-carry chain Booker shows star quality

No Pain, No Gain

Booker, the cash and carry chain, is undoubtedly the current star of the no pain, no gain portfolio. Last week's results sent the shares above 70p. The stockbroker Evolution expects them to hit 80p, and raises the intriguing possibility that one day they could become constituents of the Footsie, our leading share index, composed of London's top 100 shares.

Although at 70p capitalisation is approaching £1.1bn, Booker is still regarded in some quarters as something of a Cinderella company. Its business of operating warehouses which retailers visit to pick up their supplies puts it into a sort of no-man's land – not retailer, nor wholesaler – as far as the City is concerned. But the group deserves much wider attention than it has received, and its latest figures should ensure it wins a more dedicated following. Pre-tax profits in the year ended in March hit a peak of £71.4m, up from £57.2m, and the year's dividend is lifted 31 per cent to 1.67p a share. Sales rose 6.2 per cent to £3.6bn.

The out-turn beat most City forecasts. Indeed £71.4m is around the target many had predicted for the current year. Now there are thoughts that Booker should this year achieve about £77m, although that estimate could be revised upwards.

Booker has made a good start to the year, and expects to "continue to make progress". Of course it operates in a tough environment but then, I suspect, every company in the land is battling an unhelpful trading climate. Clearly its customers – mainly corner shops, caterers and publicans – are feeling the pinch. Yet more and more seem prepared to obtain some (or all) of their supplies from Booker as its few frills, low-cost establishments help them to combat inflationary influences. The group also operates delivery and internet services, targeting small traders as well as top names, that are winning increasing support.

The portfolio descended on Booker in January 2009 at 24.5p a share. Progress has been remarkable, and I would not attempt to dissuade any reader that followed its lead from at least top slicing. Indeed selling enough shares to provide a free ride would seem a sensible course. The portfolio cannot undertake such a manoeuvre as it is bound to invest £5,000 into each constituent. The only way it can realise a profit is to sell its entire holding, but I am not prepared to yield to such a temptation at this time. Although the portfolio is a buy and hold vehicle it is not, like any investor, averse to taking a profit. Witness such past sales as Prezzo and, first time round, Mears. However, with Booker already providing such a handsome reward, I feel there is a sufficient profit cushion to hang around and see what transpires. I am prepared to go along with Evolution's expectation that there is much more to come.

Another constituent, the brewer Marston's, rolled out an encouraging trading update. Its shares have not achieved the type of progress that Booker has attained. Still, we are in profit. Recruited at 95p in August 2009, as I write the shares are 110p, having reached 116p. I regard Marston's as a long-term constituent that will eventually prove to be highly rewarding. Dividends are not included in the portfolio's calculations but it is worth noting that the yield is above 5 per cent, a factor that should influence the shares in these low interest rate days.

The group, with such hand pump bitters as Brakspear, Pedigree and Ringwood and around 2,150 pubs, produced interim underlying pre-tax profits up from £27.8m to £29.2m. The "true" pre-tax figure, including exceptional items, was £35.6m (£26.3m). Interim dividend is an unchanged 2.1 pence a share.

In the first half year sales increased by 2.8 per cent, but over the first 32 weeks, which included Easter and Mother's Day as well as some summery weather, the group recorded a more heady advance. The brewing side did well; so did the group's managed pubs.

As with most other pub groups, tenanted and leased outlets lagged behind, recording only modest gains. In past years most brewers owned pubs. Not any more. In these stand-alone days many pubs are outside the beerage, although Marston's demonstrates the value of the old vertical integration – combining retailing with producing and wholesaling.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
scotland decidesIs a huge gamble on oil keeping First Minister up at night?
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
PROMOTED VIDEO
Arts and Entertainment
Lionel Messi in action for Barcelona
filmSo what makes the little man tick?
Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes the hobby look 'dysfunctional', they say
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Recruitment Consultant - Soho - IT, Pharma, Public Sector

    £20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week