Derek Pain: Down in the bowling alley, it's all about a strike for Essenden

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The Independent Online

Another constituent of the No Pain, No Gain portfolio is in takeover action. After brewer Greene King's almost completed swallowof the Spirit Pub Co, the much smaller Essenden is now in talks that could spell the end of its independence.

Last week I reported that the tenpin bowling chain was looking at its "strategic" options. Shortly after, it revealed that a "preliminary" approach had been received. The possible bidder is Harwood Capital, a wide-ranging investment group that has been a long- time supporter of the group and currently sits on 34.3 per cent of the capital.

Essenden shares, as I write, are around 82p, capitalising the group at £17.5m. If a bid materialises, I do not expect it to be hugely different from the present price. Last year, the shares were above 100p but that was a fluke reaction to a switch from loan notes to shares. I recruited Essenden in November 2012. It was, in effect, the second time I descended on the shares. It started life as Allied Leisure running bars, fast-food outlets and tenpin alleys. After a time it became Georgica, concentrating on snooker clubs and tenpin bowling. It was the Georgica incarnation that joined the portfolio, but when it split in two, I opted to sell, banking handsome profits.

When Essenden rejoined at 24p, it was, after a few bleak years, already in recovery mode with the shares up from 5p. In 2009, Nick Basing had been recruited as chief executive and had set about reviving the business. He dumped some properties and extended the scope of the bowling alleys, which are now regarded as entertainment centres. Adjusted pre-tax profits last year were up 59 per cent at £3.2m.

Besides Harwood, the possible bidder, another significant shareholder is Trefick, an investment vehicle run by veteran Jack Petchey.

I would not be surprised if Harwood's sudden attention prompts other leisure businesses to take a peek. There should be no shortage of parties prepared to consider such a revitalised group.

Mears, the support services group and the portfolio's longest inhabitant, has produced better than expected annual profits. At the pre-tax level they emerge at £29.7m, up from £21.7m. The dividend has increased by 14 per cent to 10p a share.

Once again, social housing, accounting for more than 80 per cent of trading, lifted profits, although revenue was lower. But margins improved. The homecare division managed similar profits to the previous year.

The shares, recruited in the summer of 2008 at 272p, are now around 465p. Last year they hit a peak, topping 540p. As a long-term investor, I am happy to hold the stock. Like Essenden, Mears has twice enjoyed the portfolio's attention. In the early days of my little exercise, it was a star performer, climbing from 23p to more than 80p. I sold because the stock market was in an uncertain mood and I was off on an extended holiday. I therefore thought it best to lock in profits.

Finally Avation, the aircraft leaser, has fixed up a $12m (£8m) pre-delivery payment with a European bank. It is the first time it has arranged such a deal.

The cash will go towards paying for two Airbuses, due to be leased to the Thomas Cook holiday group. Avation shares are around 154p against the portfolio's 83.5p buying price.

yourmoney@independent.co.uk

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