Derek Pain: Laggards putting the brakes on portfolio

No Pain, No Gain

The no pain, no gain portfolio has failed to keep up with the stock market over the past three months. It has made modest headway but lagged behind the powerful surge in share prices.

I am disappointed with so little progress. With shares recently within hailing distance of their peak I had hoped my little collection would at least approach its record high of a near-£150,000 gain. Instead the profit is, at the time of writing, a little above £108,000.

Although some constituents have advanced since my last quarterly review, a few, such as Avation, Northern Petroleum and, of course, the lamentable G4S, have combined to reduce the overall gain.

Once again Booker, the cash-and-carry chain, emerges as the portfolio leader. The shares have advanced 38p since my last update and are way ahead of the pack, having reached 131p against a 24.5p buying price. Last week's results kept the pot boiling. In its last year sales rose 3.5 per cent to £4bn with pre-tax profits emerging at £101.4m against an adjusted £89.7m. The year's dividend is lifted 15 per cent to 2.63p a share. The group was firing on all fronts with sales to caterers up 6.2 per cent and shopkeeper turnover advancing 2 per cent. In addition, delivered sales rose 9.5 per cent and internet trade by 10.9 per cent.

The Makro cash-and-carry business which cost Booker £140m is not included in the figures as, after a Competition Commission probe, the acquisition was not completed until the current year.

Chief executive Charles Wilson believes Makro will help lift the enlarged group's sales to some £6bn a year and declares: "The real merits of the transaction will appear in the next few years". Meanwhile, trading in the first seven weeks of the present year was ahead of the same period last year.

Overseas investments – confined to India – now embrace 12,000 customers with four branches. Two more centres are to open this year.

Essenden is another constituent with a trading report. At last week's shareholder meeting, the chief executive, Nick Basing, revealed that the tenpin bowling group's recovery continues and trading "remained encouraging". In the first 20 weeks of the current year, like-for-like sales were up 1.8 per cent and by the end of next month Essenden should be debt-free with the exception of the 24.4m loan notes (now 36p each) traded on the fringe ISDX share market. The shares are 30.5p against 24p when enlisted.

Avation, one of the portfolio stocks in the red, has successfully completed a £2.5m cash call which was 160 per cent over-subscribed.

Chairman Jeff Chatfield observes: "We were genuinely surprised with the level of overwhelming appetite by shareholders for this open offer." Explaining the need for an extra £2.5m share investment which came as a jolt to some followers, including me, Mr Chatfield said: "Equity issuance in the aircraft finance industry is essential in order to attempt to maintain sensible gearing levels."

The group's shares were recruited at 83.5p and went on to top 120p. Disappointing profits, plus the cash-raising exercise, have reduced the price to 64p.

Although they've been in the red for a long time, I am hopeful that shares of TEG, the green-technology group, will soon be in profit. The portfolio paid 8p a share and, under its rules, was unable to subscribe for more when the group, which develops and operates organic waste composting and energy plants, required a cash injection. The issue was at 3p; the share price is now 6.25p.

TEG has announced that in a year it reached what it called a "composting landmark", having recycled more than one million tonnes of waste through its nine sites.

Chief executive Mick Fishwick commented: "The operational side of our business continues to progress strongly."

The portfolio still has too many losers and I hope to redress the balance. I am out of action for the next four weeks, but if some of the laggards fail to offer at least a little encouragement I will probably axe them on my return.

Whitbread – in spite of a chorus of sell comments when it rolled out figures – and Booker remain my star performers. Whitbread recently topped 2,900p.

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