Derek Pain: Findel's recovery from its dire days looks encouraging

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The Independent Online

The recovery at Findel, the home shopping and educational supply group, is showing no signs of running out of steam. The shares remain a rewarding investment for the no pain, no gain portfolio, although they have failed to distinguish themselves in the past few months.

In March the shares hit a year's high of 322p. They then slumped to 238p, prompting worries that the company had experienced problems. Doubts were dissipated once the full-year's figures were produced. Statutory pre-tax profits came in at £3.3m against £482,000. Sales reached £514.7m, up from £491.2m. Before exceptional charges the profit was £22m, compared with £11.8m. With prospects looking encouraging the shares, at the time of writing, are standing at 272p. The portfolio paid the equivalent of 142p.

In spite of its recent progress the group remains a recovery situation following a debt-fuelled acquisition spree that left it in need of urgent attention. Clearly its progress from the dire days of past years has, under chief executive Roger Siddle, been remarkable. Before problems surfaced the shares topped 1,200p. Then came a rapid deterioration. But the group now believes the first phase of the turnaround is complete and most observers expect further rehabilitation. There is even talk of a dividend appearing in the next few years.

Findel gets most of its income from Express Gifts, a mail order and online business. It achieved operating profits of £30.7m, a 40.6 per cent advance. The educational side pulled in profits of £4.1m, up an astonishing 415 per cent.

The two problem divisions are Kitbag and Kleeneze.

With the World Cup up and running Kitbag, an online sports retailer, should experience a dramatic increase in demand for football shirts and related items. It should at least sharply reduce the deficit this year and may even manage to chalk up a profit. The business has links with many major clubs in the UK and abroad.

The doorstep seller Kleeneze has found life difficult for some time and its performance suffered another blow with profits falling 34.4 per cent to £1.3m.

SnackTime, the worst-performing share in the portfolio, has sealed a deal with the Russian billionaire Boris Belotserkovsky. A newly formed UK company related to him has pumped £570,000 into the vending machine group at 15p a share. With his existing holding, the Russian now sits on 26.16 per cent of the loss-making SnackTime's capital.

Mr Belotserkovsky, who is joining the SnackTime board, is a determined fellow. Earlier this year, in partnership with Blair Jenkins, founder of SnackTime, he held takeover talks with the group. They were eventually discontinued, presumably because the sides could not agree on a price.

The Russian is already a power in the vending sector:his interests include Uvenco, the largest vending operator in the former Soviet Union. Linking with Uvenco should benefit the UK player, which has found the going hard in recent times and suffered a £8.25m loss in its last reported year.

The vending group, which must now look a possible takeover candidate, was recruited into the portfolio at 119p a share. The price, after the Russian link was known, was 12.5p, up 0.5p.

Avation, the aircraft leaser, has delivered the promised aircraft to Fiji Airways. It should already be contributing to profits. Many of the group's aircraft are leased to an Australian airline. The Fiji landing represents Avation's first link with that airline.

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