Derek Pain: I’m sticking with two: Shares in Booker and Essenden aren’t done yet

I am sticking with Booker, the cash and carry chain.

Of course I am dismayed by the collapse in the share price but last week’s trading bulletin was nowhere near as poor as some in the City anticipated.

In July, I wondered whether I should dump the shares. They had fallen from a 176.5p peak in March to around 130p. Stock market worries that the price war among supemarkets, and their excursions into convenience stores, would have an impact on Booker’s mainly corner-shop customers did the damage. And to pile on the agony, the German Metro group, with unfortunate timing, decided to sell its 9.9 per cent stake a few weeks ago, driving the shares even lower to 115p.

The No Pain, No Gain portfolio acquired the shares at 24.5p, so there remains plenty in the profits bag. It’s true, Booker’s growth has slowed, but the trading statement suggests the group and its customers are surviving the supermarket onslaught far better than expected.

The headline figure says that in the last quarter sales rose by a miserable 0.1 per cent. But stripping out the Makro division, acquired from Metro two years ago, they were up 1.8 per cent. For the half year, Booker sales rose 2.4 per cent but the Makro drag pulled the group gain back to 1.9 per cent.

The Makro reorganisation is largely responsible for much softer sales as some items it sold have been discontinued. Indeed, Makro stocked a more extensive range than Booker, which is keen to make the two operations more compatible. Charles Wilson, Booker’s chief executive and architect of the group’s growth, says integration is “on track”.

As I write, the shares are around 128p. They have moved ahead since the trading update and could in time regain some of their old buoyancy. But I am not holding my breath for a new high to be achieved.

Shares in Essenden, the tenpin bowling chain, are, like Booker’s, well below their year’s peak. They are around 64p compared with just above 100p earlier this year. But the portfolio is still handsomely in profit, having picked up shares at 24p.

Much of the share price fall relates to exchanging loan notes for shares. As a result, many shares came on to what is a narrow market. The loan note switch also devastated profits, with a pre-tax loss of £7.5m at the half year compared with a £1.3m profit. But the loss is technical, reflecting the difference between the value of loan notes and shares issued, plus associated costs.

Adjusted profits before tax emerge at £2m, a 13.1 per cent advance. And chief executive Nick Basing, the man behind the group’s revival, is happy to paint an encouraging picture, with six-month like-for-like sales up 6.1 per cent and in the first 37 weeks of the year an outstanding 9.2 per cent increase.

Essenden has been looking for a “transformational” deal. But any diversification has now been abandoned and it intends to develop tenpin bowling and related activities. I would not be surprised, though, if the group made a few modest takeover excursions.

Avation is also showing a profit, with the shares at 160.5p against an 83.5p buying price. It has taken on yet another new aircraft and leased it to an unnamed European airline, so widening its customer base again. Many of its aircraft are with an Australian airline but in recent times it has gained at least three new clients.

yourmoney@independent.co.uk