Derek Pain: Composter is down in the dumps but vet firm has legs

It's about time I reinforced the no pain, no gain portfolio. I have decided to recruit two contrasting shares – one down in the dumps, the other riding relatively high. They are both small caps that, I hope, will not be too troubled by the recessionary climate and could, with a little luck, emerge as valuable constituents.

TEG, a composting technology specialist, is the share that has seen better days. Animalcare supplies veterinary products and by comparison enjoys a near glamour rating. Their arrival takes the portfolio's membership to 15, away from the number this superstitious old timer finds rather uncomfortable. TEG shares stand, as I write, at just 8p, capitalising the company at £9.4m, and Animalcare is 171p, putting a £36.1m value on the business.

In the jargon of the stock market, TEG is what is known as a "speculative buy" – in other words a bit of a gamble. The shares were once around 150p and have fallen from 35p or so in the past year. They endured a nasty summertime knock when the company surprised with a 10p placing and open offer, raising £3.8m. I have long campaigned about a privileged few enjoying private placings with most shareholders left out in the cold. At least TEG offered all shareholders the chance to get involved and its open offer was heavily oversubscribed.

Contract delays seem to have been a factor in its decision to raise capital. Still, the group's outlook appears positive and I am prepared to take the view that in the current atmosphere, with small caps completely out of favour, the shares are over-sold.

Pre-tax profits for the current year are unlikely, although it has achieved such a milestone in the past. At the interim stage the pre-tax loss was doubled at £798,000 but operating profits of £2.3m, up 5 per cent, were achieved. In September its cash kitty hovered near £3.3m.

TEG gets much of its revenue from turning waste – from gardens and kitchens to animal byproducts – into compost. Such an activity has obvious merits, with many local authorities under pressure over landfill sites. TEG has also ventured into energy output, with one installation going into production, although it will not reach full capacity until later next year. Various other developments are in the pipeline.

Animalcare is by quite a few degrees in a stronger position. Its last accounts recorded pre-tax profits up 21 per cent at £3m, with the year's dividend lifted from 3p a share to 4p. And, with new products launched and planned, the group seems set to continue to prosper from the nation's love of cats, dogs and other pets. I have read that in the present financial climate some owners can no longer afford to provide the necessary care. There have even been stories of pets being harmed to allow the collection of insurance. But I believe we are still a nation that is prepared to go to extraordinary lengths to lavish expensive attention on household animals.

From my own experience I have witnessed in recent months two members of my family indulging their love of pets, and, at the same time adding to the income of vets and their suppliers. In addition to regular and costly checks, one spent nearly £400 on nursing a dog back to health after a snake bite; the other's unexpected vet bill is approaching £1,000 (and repairs are not yet complete) on the removal of a growth from a dog.

Animalcare arrived on the stock market in 2008 and its shares have risen from a low point near 60p. They are now on a fairly fancy – but by no means exotic – rating. I usually seek what I regard as under-valued shares, but on this occasion I feel justified descending on the veterinary group.

I have also toyed with the idea of adding another blue chip to the portfolio. Such an addition would add a little ballast. Wm Morrison, the supermarket chain, and Lamprell, an oil services business, are among those I have examined. I regard 16 as the ideal number for a modest portfolio, and on that premise could add another constituent. Of course, 16 is not a magical number. It is merely indicative and I have strayed from its embrace many times.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Guru Careers: Executive Assistant / PA

    £30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable