Derek Pain: Hero-to-zero RSH may have done too much, too soon
No Pain, No Gain
Saturday 02 June 2012
The catalogue of woe that has enveloped Rivington Street Holdings has, not surprisingly, had a devastating impact on the Plus-traded shares of the financial and software mini-conglomerate. In a near hero-to-zero performance the price has slumped from more than 50p to a mere 4p with one unhappy investor so anxious to get out that he sold 19,310 shares at just 2p each.
The no-pain, no-gain portfolio paid 27.5p a share for its holding. I congratulated myself as the shares nearly doubled but once again held on for too long as the stock declined, eventually unloading at 13p. At one time the group enjoyed a capitalisation of around £20m. Today its value is put at £1.8m.
What has gone so badly wrong? It is impossible for an outsider to appreciate the deepest ins and outs of a company. But it would seem that RSH grew too quickly through acquisitions and expensive start-ups and had to change its accounting policies to accommodate its ambition to move from Plus. In addition the still-to-be completed sale of its successful and highly rated corporate finance division seemed to question its clarity of purpose.
RSH is largely the creation of ex-City hack Tom Winnifrith. It started around the turn of the century with an internet share-tipping site and expanded into various other financial websites, as well as fund management, public relations, software activities and stockbroking. An interest was even acquired in a Newfoundland quarry. Mr Winnifrith, with around a 28 per cent stake, was, in effect, sidelined last year. He has now left the board although he has agreed a two-year contract that keeps him with the group. He complained bitterly about the demands of International Financial Reporting Standards, an accounting system RSH had to adopt for its intended move to AIM. He said at the time: "IFRS is cruel in that you must write down the carrying value of assets where you think a writedown may be prudent but cannot write up any values."
The net result was that a £2.7m impairment charge wiped out profits and left the group nursing a £260,000 loss last year. The company is also committed to deferred payments relating to acquisitions and felt obliged to raise £1m through a placing at 25p. It has since accepted a £750,000 loan from chairman Jim Mellon, an experienced businessman. Subsequent interim results to end-February revealed a £3.4m loss against a £954,000 profit. The group has already unloaded some of its operations and Mr Mellon says the changes put RSH "in better shape to return to a growth path in due course".
The departed Winnifrith, writing on T1ps.com, the website that started the group and is still part of it, told shareholders he shared their pain. "I apologise to those who have lost money backing RSH for mistakes I made; I cannot apologise for mistakes others made which it would be wrong for me to discuss."
From a former constituent to three current players: Booker, Animalcare and Hargreaves Services. The cash-and-carry chain continues to power ahead, producing year's pre-tax profits up 27 per cent at £90.8m with revenue 9.5 per cent higher at £3.9bn. The year's dividend is up from 1.67p to 2.28p a share. The group remains the star of the portfolio.
The two other constituents have let the side down. Hargreaves' shares, hitherto riding high, crashed when problems at its Maltby Colliery in Yorkshire were revealed. They will hit current year's profits by up to £16m although figures for the year just ended should escape.
And Animalcare, the veterinary group, issued a profit warning as identification microchip sales took a caning. Space prevents a detailed examination of these setbacks. Indeed coming after the Rivington escapade the portfolio has taken quite a bashing this year.
I will deal more fully with the portfolio's latest casualties next week. My intention is not to be panicked into any rash decisions. I am also keen to bolster the strength of my little share exercise with additions. After all the stock market, as the euro crisis drags on, has fallen from what I regarded as an unrealistically high level. It is often the time to buy when shares look a little depressed.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 'Not suppost to cry': 9-year-old lists the worst things about being a boy
- 3 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 4 Lana Del Rey rape video: Marilyn Manson denies involvement in shocking leaked footage
- 5 Kenya bus attack: Al-Shabaab militants kill 28 non-Muslims who failed to recite Koran
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
France 'blocks' Russian sailors from boarding a warship
Revealed: How the world gets rich – from privatising British public services
Myleene Klass: Ed Miliband 'strikes back' by comparing UK's need for Labour's mansion tax to Hear'Say track
iJobs Money & Business
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens