Derek Pain: I've decided I'm looking on the Brightside
No Pain, No Gain
Saturday 11 August 2012
At long last I have added to the no pain, no gain portfolio. I had hoped to enlist two newcomers this week but at the last minute I was suddenly assailed by doubts about one of my intended recruits, prompting a hurried reappraisal. I have, however, decided to press ahead with the other addition, even though it lifts the strength of my little share exercise to "unlucky 13", and I am, as readers know, a superstitious old-timer.
So, braving the fates, I have alighted on Brightside, an insurance broking group capitalised at £84.4m with its AIM-traded shares standing at 18.5p. It has an enviable profits record and could join the dividend-paying fraternity next month when it is due to produce interim figures. Reporting on the first five months of the year in June it described trading as "robust".
The group covers a wide range of insurances and has established recent links with retailers Asda and Debenhams, although the main thrust is through the internet and call centres. Last year Brightside sold 440,000 vehicle policies, some 60 per cent online. The car insurance industry, I realise, faces a series of problems. Phantom whiplash claims and fake accidents seem to be too frequent occurrences. But the wet summer could be beneficial for brokers as it underlines the value of investing in a home policy.
Brightside seems particularly competent in weeding out unsuitable applicants. Many insurers have suffered, particularly through online trading. But the broker boasts about its screening system that may result in more than usual cancellations but "significantly" improves results.
In another guise it arrived on AIM in January 2007; it was then involved in debt management and insolvency. Many of its interests were sold and what remained of the quoted vehicle descended on an insurance broking business that is now 11 years old. The broker started with a count of four; today Brightside employs 860. "Small firms can prosper," commented chief executive Martyn Holman.
Profits for the full year are expected to emerge at around £17.8m with, perhaps, £19.5m next year. Last year's figure was £13.9m. The shares, like most financials in these days of mounting money problems, have experienced an eventful time. In the days when the group was reshaping, and before the full extent of the world's financial crisis became apparent, the price was about 50p. Since then it has twice fallen to around 10p although the shares have been as high as 28p in the past year.
I suppose adding any financial share to the portfolio in these tortuous times could raise a few eyebrows. But Brightside, as a broker is not subject to underwriting risks, looks to be on a roll and most vehicle owners regard insurance as essential, even if a growing underclass try to avoid the necessary expenditure. The shares appear undervalued and if Brightside joins the dividend list — and a maiden interim could be the start of a steady payments stream — they should gather more support.
The company I held back on recruiting is in the oil industry. I may yet enlist the shares but need more information before deciding.
Now to a former portfolio resident, Lighthouse, an accountancy and wealth management group. I was pleased to see that shareholders rejected the proposal to abandon AIM and leave the company in what can only be described as a sort of share wilderness. Shareholders representing 53 per cent of the votes cast came out against the delisting plan.
I fail to see why a company that has been on AIM for a dozen years and is still profitable and dividend paying should want to go off market. Such a move, which was not prompted by any financial necessity, was a blow to shareholders who had acquired their shares through the open-to-all avenue of the stock market. The cost and time that have to be devoted to AIM membership are onerous but the firm was aware of these conditions when it floated.
Chairman David Hickey accepted defeat with good grace. He said: "The business remains in good shape, both cash positive and debt free. Looking forward, the group will continue to comply with the AIM rules and the board will continue to respect shareholder preferences."
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