Derek Pain: Grape expectations for English Wines Group

No Pain, No Gain

Patience, bundles of it, is often a necessity in the investment game. There is always a danger that a long-term involvement can stretch to such a distant horizon that there is a strong temptation to cut and run.

But such a defeatist attitude has little to commend it, providing, that is, that the company involved retains the ability to deliver – if rather later than originally expected.

English Wines Group, the No Pain, No Gain portfolio's only Plus representative, is an example. Its latest set of profits are, quite frankly, disappointing. But the company, the only British wine producer with a public share presence, is continuing to make headway. And with appreciation of English-produced grape wines (as opposed to fruit wines) growing there is every chance that EWG's shares will eventually mature into a rewarding investment.

The portfolio descended on them more than two years ago at 20p a time. They fermented happily to 26p but were then caught in the small-cap retreat and now reside, rather forlornly, at 14.5p. Pre-tax profits have emerged at £106,000 against £158,000. Two fairly unresponsive summers have taken their toll. So, I suspect, have various recessionary influences. Consequently the group suffered a 6 per cent turnover decline. To some extent the fall was off-set by higher prices. As chairman Paul Brett observed, the trading pattern was "unfortunate at a time of increasing demand" for EWG's highly regarded Chapel Down wines.

Still, positive signs abound. More and more land is being switched to viniculture and various aspects of production have been improved. An up-market restaurant at EWG's vineyard in Tenterden, Kent, seems to be doing well and an impressive range of leading restaurants and stores stock Chapel Down wines. A first-ever shipment recently went to Hong Kong.

I think it is also significant that directors account for some 70 per cent of the capital. Indeed, they have added to their stakes in the past year. Nigel Wray, the serial investor, is a major shareholder.

It is clear that EWG is taking rather longer to blossom than I anticipated. But I intend to be patient. Internet tipster Tom Winnifrith reckons revenue could double in a few years and is looking for operating profits of some £1.2m in 2011.

The group's figures offer another example of the twisted impact of the new-fangled accountancy rules. Because of share options the profits I have mentioned are well over the top. After accommodating these non-cash items the declared profit is reduced to £35,000 and the previous year's figure to £86,000. Yet another example of the bizarre accounting requirements now in force.

EWG is the third Plus share recruited to the portfolio. Printing.com, which graduated to AIM, is showing a small gain but Myhome International is best forgotten. In a bid to enlist more constituents I have looked at a number of Plus shares and I would not be surprised if EWG's isolation is eventually ended.

From a speculative miniature to the portfolio's biggest constituent – the hospitality giant Whitbread. The year's "true" profits came in at £199m, up from £135m. There must be concern over the continuing softening of trading at the Premier Inn chain, largely the result of more upmarket hotels cutting their charges. But the other two legs of the group, the restaurants division and the Costa Coffee chain, are trading "positively" and could largely offset any Premier setback. City profit forecasts for the current year are around £181m.

Another constituent, Mears, the social housing and domiciliary care group, has produced an encouraging update. Chairman Bob Holt says trading remains strong. In the past two months contracts worth £100m have been signed and forward orders stand at £1.6bn. Some 92 per cent of this year's expected revenue is now in the bag. With its customer base largely composed of local authorities and other public bodies, Holt believes the group is "substantially immune to bad debts".

Both Whitbread and Mears are, unhappily, below my buying prices. I cannot, however, see any point in selling at this stage. Indeed, as the stock market recovers I would expect them to narrow the gap. They are well-run companies with the ability and resources to counter the recession and have much to commend them to the buy-and-hold investor.

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

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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Tax Manager / Accountant

    £35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

    Ashdown Group: Contracts Executive - City of London

    £35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

    Recruitment Genius: Call Centre Debt Collector - Multiple Roles

    £21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Day In a Page

    Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

    Uganda's giants are flourishing once again

    After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
    The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

    After 350 years, the riddle of Britain's exploding fleet is finally solved

    Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
    Airbus has patented a jet that could fly from London to New York in one hour

    Airbus has patented a jet that could fly from London to New York in one hour

    The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
    10 best sun creams for kids

    10 best sun creams for kids

    Protect delicate and sensitive skin with products specially formulated for little ones
    Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

    Tate Sensorium

    New exhibition at Tate Britain invites art lovers to taste, smell and hear art
    Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

    Nice guy Finn is making up for lost time – and quickly

    He was man-of-the-match in the third Test following his recall to the England side
    Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

    Remember Ashton Agar?

    The No 11 that nearly toppled England
    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks