Derek Pain: I'll stick by Mears despite its losses for eventual profits

No Pain, No Gain

Mears has responded in some style to the tribulations and uncertainties that have engulfed it in the past 15 months. Profits of the support services group were at least in line with expectations and there are high hopes it is recapturing its old, winning ways.

The shares started last year at around 325p. They slumped to near 240p on worries about its treatment of pension cash.

A partial rally was wiped out by a subsequent profits warning, albeit a fairly mild one that was due to the group's withdrawal from solar energy. Still, the price collapsed to not much above 200p, its lowest since 2009 – all a far cry from the 385p peak hit in earlier years when Mears could do no wrong.

As I write, the shares are above 250p, reflecting more encouraging prospects. However, sentiment was not helped when Bob Holt, chairman and founder, sold shares a few days after the figures. Most were option conversions.

He unloaded two million shares at 250p having acquired 1.5 million of them through options each priced at 1p. His current shareholding is zero, although he still has an options interest. In 2010, Mr Holt's pay fell from £960,000 to £465,000.

Mears was one of the no pain, no gain portfolio's early successes. It acquired shares at 23p, selling at a handsome profit. I was tempted back four years ago at 272p.

So far, then, a loss-making investment. However, last week's profits declaration covering 2011 and the rather more positive atmosphere encircling the shares has prompted me to stick with the stock. After all, the portfolio is a buy and hold investor, and not afraid to absorb losses if there is a reasonable prospect of eventually achieving profits.

Many regard long-term investors as rather passive people, prepared to put up with an inordinate degree of failure. I believe such an attitude is illusionary. Any investor should consider selling when the picture at a company changes adversely.

I'm not certain about the extent of changes at Rivington Street Holdings, my one and only share traded on the fringe Plus market. The share price, however, tells an alarming story. Since the summer it has fallen from above 50p to just 10.5p.

I warned a few weeks ago that I would ditch the shares if the deterioration continued. Well, on Thursday of last week, I decided enough was enough, and sold at 13p, losing a little over half the portfolio's £5,000 stake. I intend to continue monitoring the financial and software conglomerate because it seemed such a promising creation. I believe one of its problems is accountancy changes forced on it by the intended elevation to AIM.

The move upmarket was, it is said, instigated by some major shareholders. I wonder if they now regret prompting the AIM switch.

Back to Mears. Adjusted, pre-tax profits came out 9 per cent higher at £31.5m, with the two major divisions, social housing and home care, making progress. "True" pre-tax profit emerged at œ20.6m against £16.4m. Group revenue was also up – by 12 per cent to £589m and the dividend is hoisted 11 per cent.

There is no doubt that the group has performed well since it arrived as a quoted company – at 10p a share – towards the end of the last century. Indeed, it has a 16-year record of unbroken progress. And, according to the stockbroker Collins Stewart, mirroring I believe the present stock market attitude, the Mears success story should continue. The group is likely to win more social housing and domiciliary care contracts and is also on the takeover trail.

Collins analyst Julian Cater expects this year's adjusted profits to come out at £34m and hit £37.6m next. Target price is 325p. He expects a share re-rating, driven by the group winning new contracts.

Two other constituents are in the news. Northern Petroleum has attracted a 120p target price from analyst Emily Ashford at stockbroker FinnCap following indications of a bid for Wessex Exploration.

The possible offer, it seems, stems from Wessex's 1.25 per cent stake in an oilfield off South America. Northern Petroleum, around 90p, has a similar interest.

And Animalcare announced authorisation for a new veterinary medicinal product it is launching. The shares are now, at 173.5p, just above my buying price.

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?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Day In a Page

    John Palmer: 'Goldfinger' of British crime was murdered, say police

    Murder of the Brink’s-MAT mastermind

    'Goldfinger' of British crime's life ended in a blaze of bullets, say police
    Forget little green men - aliens will look like humans, says Cambridge University evolution expert

    Forget little green men

    Leading evolutionary biologist says aliens will look like humans
    The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

    The Real Stories of Migrant Britain

    An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
    Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

    Dying dream of Doctor Death

    Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
    UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

    39.8 degrees recorded on Tube

    There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
    Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

    Computerised cooking is coming

    From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
    Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

    Jessie Cave's feminist cartoons

    The Harry Potter star tells Alice Jones how a one-night stand changed her life
    Football Beyond Borders: Even the most distruptive pupils score at homework club

    Education: Football Beyond Borders

    Add football to an after-school homework club, and even the naughtiest boys can score
    10 best barbecue books

    Fire up the barbie: 10 best barbecue books

    We've got Bibles to get you grilling and smoking like a true south American pro
    Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

    Nick Bollettieri's Wimbledon Files

    Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
    Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

    ‘This is one of the best McLaren teams ever – we are going to do it’

    Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most