Derek Pain: Disappointed and dismayed by setbacks

No Pain, No Gain

I am dismayed by the performance of G4S. The no pain, no gain portfolio recruited the world's biggest security group nearly three years ago. Since then the shares have suffered a trio of embarrassing setbacks.

When the portfolio descended on the stock it was apparent that security was becoming increasingly important in this uncertain world. There was, therefore, every chance that with manual guarding and the sort of sophisticated equipment that has become increasingly available there was every chance of a very profitable investment.

But G4S has let the side down. The first two share retreats were self-inflicted. And it is difficult to avoid the impression that the group cannot completely avoid some blame for the third – and latest – reverse.

The shares were doing well until the first calamity caused a collapse. An abortive £5.5bn takeover bid for ISS, a Danish-based catering and security group, did the damage. G4S was forced to abandon the ambitious acquisition because its own shareholders created such a fuss. Then came last year's Olympic fiasco, when the group failed to provide enough security personnel. So servicemen had to be called in to provide the necessary cover.

G4S has now added to the catalogue of woe by proffering a profits warning. Once again the shares have slumped. As I write they had crashed to 248p, but then moved to 256p. Before the latest onslaught the price was above 300p.

First-quarter profit margins have fallen 0.6 per cent, due to various influences. There does not seem much hope of a recovery in the current year. The question I am now confronted with is: does the group deserve to remain in the portfolio? After all, most leading shares have been in splendid form this year, yet the portfolio is out-of-pocket as it paid 264p a time.

Although many shareholders have obviously been dispirited by the profits warning, some City analysts seem prepared to stick with the shares. The investment house Canaccord Genuity is one. It is holding on to its buy recommendation, although cutting its target price to 300p from 325p.

G4S's role in emerging markets is one factor behind the analytical support from some quarters, but its role in the more developed world is often under pressure. More will be revealed next month, when G4S's management is due to meet City analysts and fund managers.

The price recovered from the first two disasters. Perhaps it will again, reinforcing the shares' "Indian rubber" tendency.

Another share causing anxiety is Avation, the aircraft leaser. It has unveiled a cash-raising exercise, selling new shares at 60p. Shareholders are being offered 0.0975 of a share for each one held. They can, if they wish, apply for extra shares should any become available. The offer, which is underwritten, will produce £2.5m. First reaction was to knock the shares down some 12p to 64p; they are now 66p.

I am surprised the group opted for an equity exercise. I was under the impression that the group was going to use debt to complete its scheduled aircraft deliveries to Virgin Australia. But although borrowings are part of the programme, it seems an equity contribution is required.

The portfolio cannot indulge. Under its rules of engagement investments must be restricted to £5,000. It is also worth repeating that dividends and dealing costs are excluded from my profit calculations.

Avation has been a disappointment. The shares arrived at 83.5p and I watched them fly to 120p. But a few developments have impacted on sentiment. The cash call has merely compounded what is clearly stock market disillusionment.

Still, Avation seems to be making progress. The stockbroker WH Ireland has forecast current year's profits of £7.2m, a sharp increase on the previous year.

Although the portfolio has more winners than losers and remains in profit, I am becoming increasingly disenchanted with my contingent of losers. G4S, Avation as well as Northern Petroleum are recent additions to the in-the-red brigade.

I feel sell action is needed. And I intend to be quite ruthless when it comes to adjusting the portfolio in the near future. I am a long-term investor and believe frequent and hasty share dumping is often regretted and merely enriches the stockbroking and market-making community. Shares do suffer bouts of depression from which they eventually recover.

yourmoney@independent.co.uk

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

Life and Style
A monstrous idea? Body transplants might no longer be science fiction
Science An Italian neurosurgeon believes so - and it's not quite as implausible as it sounds, says Steve Connor
Sport
Demba Ba (right) celebrates after Besiktas win on penalties
footballThere was no happy return to the Ataturk Stadium, where the Reds famously won Champions League
Arts and Entertainment
Natural beauty: Aidan Turner stars in the new series of Poldark
arts + ents
News
Mia Freedman, editorial director of the Mamamia website, reads out a tweet she was sent.
arts + ents
News
people
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
arts + ents...begging to differ, John Walsh can't even begin to number the ways
News
Image from a flyer at the CPAC event where Nigel Farage will be speaking
news
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

    Recruitment Genius: Telesales / Marketing Executive - B2B - OTE £25,000

    £17000 - £25000 per annum: Recruitment Genius: An opportunity to join this new...

    SThree: Trainee Recruitment Consultant

    £18000 - £21000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Recruitment Genius: Business Control Manager

    £36000 - £44000 per annum: Recruitment Genius: Encouraging more businesses to ...

    Day In a Page

    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?
    How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

    Time to play God

    Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
    MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

    MacGyver returns, but with a difference

    Handyman hero of classic 1980s TV series to be recast as a woman
    Tunnel renaissance: Why cities are hiding roads down in the ground

    Tunnel renaissance

    Why cities are hiding roads underground
    'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

    Boys to men

    The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
    Crufts 2015: Should foreign dogs be allowed to compete?

    Crufts 2015

    Should foreign dogs be allowed to compete?
    10 best projectors

    How to make your home cinema more cinematic: 10 best projectors

    Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
    Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

    Manchester City vs Barcelona player ratings

    Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
    Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

    Monaco: the making of Wenger

    Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
    Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

    Chris Gayle: The West Indies' enigma

    Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
    In Ukraine a dark world of hybrid warfare and murky loyalties prevails

    In Ukraine a dark world of hybrid warfare

    This war in the shadows has been going on since the fall of Mr Yanukovych
    'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

    Homage or plagiarism?

    'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
    Broadchurch ends as damp squib not even David Tennant can revive

    A damp squib not even David Tennant can revive

    Broadchurch, Series 2 finale, review
    A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

    Inside the mansion of Germany's 'Bishop of Bling'

    A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower