Derek Pain: 'Food, glorious food is marred by weak spirits in Poland'

Booker and Patisserie have provided the ingredients for healthy share performances but Stock Spirits remains in the doldrums

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The Independent Online

Food, in varying forms, is the dominant feature for the No Pain, No Gain portfolio this week. Two constituents – Booker and Patisserie – have provided the ingredients for some healthy share performances by unveiling remarkably good fortunes.

First, Patisserie, the cake and casual dining chain recruited earlier this year. I must admit that hesitation over its inclusion cost the portfolio money. After examining the company, I concluded that as the shares had risen from a 170p flotation level to around 240p, I should look elsewhere.

Eventually I saw the error of my ways and, with possible newcomers then in short supply, descended on the group, somewhat reluctantly, at 285.75p. It was, I believe, the highest-rated share I had ever bought and quite clearly that was much more than I wanted to pay.

But you can't keep a good share down. Last week Patisserie baked impressive half-year figures and restated its intention to pay a maiden dividend with the full-year results. And the shares, which had slipped below my buying price, jumped to almost 320p.

So the portfolio is modestly back in the money. But I think the shares have further to go, even if they are still sporting a fancy rating.

With half-year revenue plus 22.2 per cent, pre-tax profits emerged at £7m, against £4.8m previously, and chairman Luke Johnson reported that the group, which operates under the Patisserie Valerie name, was well placed to enjoy a successful second half.

Mike Dennis at stockbroker Cantor Fitzgerald believes Patisserie has "huge potential" and has increased his year's forecast by 5 per cent to £14.85m. He reiterates his buy recommendation.

Booker, the cash-and-carry chain, also rolled out splendid figures. But it was a £40m cash takeover deal that captured the headlines: it is buying the Londis and Budgens brands. Londis supplies more than 1,600 independent retailers, which should fit in with Booker's existing Premier chain of 3,082 shops, and Budgens is a 167-strong franchise business.

The deal accompanied another rousing set of results. Sales rose 1.5 per cent to £4.8bn and pre-tax profits were 14 per cent higher at £138.8m.

Although the portfolio does not account for any dividend income, shareholders collected a 3.66p total dividend, up 14 per cent; the 3.5p special payment was repeated and could even stretch into the 2016 distribution.

Chief executive Charles Wilson said that although the food industry "remains very competitive", sales in the first seven weeks of its financial year were ahead of the same period last year.

The group's shares sit around 170p, a few pence below their all-time high. The portfolio paid 24.5p when it descended on the stock early in 2009. Since its inclusion, Booker has shown itself to be highly efficient and has twice ventured along the takeover trail. Besides the Londis/Budgens deal, it splashed out nearly £140m in cash and shares three years ago for the German-owned Makro cash-and-carry warehouses.

But into every portfolio a little rain must fall. Stock Spirits, recruited last year, remains in the doldrums. The East and Central European spirits producer says difficulties in Poland, its major market, could lead to "weak overall results" for the first half – although there is a good chance that trading will improve in the second half.

Enlisted at 278.75p, the shares are down to 192p. I have put a stop-loss figure of 180p on them.

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