Derek Pain: Likely prospects in beers and Mears if Plus is saved by Icap
No Pain, No Gain
Saturday 26 May 2012
Many small shareholders and around 150 companies should be delighted that a saviour has materialised for the fringe Plus share market. Mind you, the rescue is not complete with a number of hurdles to be overcome.
Yet there is a distinct possibility that Plus, threatened with extinction in the next six months by its parent, Plus Markets Group, will take on yet another new lease of life.
The signalled rescuer is Icap, the world's biggest interdealer broker. It has a stock-market capitalisation of around £2.2bn and should have the muscle to give the fringe market the support it so desperately needs.
The emergence of Icap came as a surprise. After all PMG had been trying to do a deal over loss-making Plus since February.
With no apparent acceptable proposals received the company decided to wind down the little loss-making stock market.
A few days after PMG's decision was known it was revealed that Icap was prepared to pay a nominal £1 for the struggling share facility. PMG clings for the time being to a couple of operational strands and may become an investment company.
The Icap takeover is subject to PMG shareholder acceptance (there are some indications of opposition); regulatory approval and no "insolvency proceedings" commencing.
A succession of Plus constituents have attempted to reassure their shareholders that they were aware of the possible loss of their share listings.
First off the mark was family-controlled brewer Shepherd Neame, one of the market's biggest players and also one of the most actively traded.
Chief executive Jonathan Neame said he had been "considering a number of options to ensure shareholders have the ability to continue to trade shares with the appropriate level of transparency and disclosure". Perhaps AIM is in his sights? Other possibilities include the German-owned Jenkins matched-bargains market and ShareMark.
Icap, it is reported, plans a charm offensive to retain Plus constituents. I suspect most will be willing to stick with the fringe market. Indeed it could be argued that with Icap in command Plus prospects are at their brightest since the market was launched in the mid-1990s.
After all Icap, specialising in matching buyers and sellers, achieved profits of £354m in its last financial year and should be able to absorb the fringe market's losses that, surprisingly, are put as high as £1m in the first half of last year (the last figure available).
Besides an array of (hopefully) up-and-coming companies Plus has a number of established and successful constituents.
As well as Shepherd Neame, it embraces two other family-run brewers, Adnams and Daniel Thwaites, and Arsenal football club and Quercus, publisher of the highly successful Stieg Larsson novels.
The no-pain, no-gain portfolio has embraced around half-a-dozen Plus shares in its 13-year existence. They produced a mixed display with hits just outperforming misses. It now has no Plus representation with its last recruit Rivington Street Holdings, the financial and software conglomerate, turning out to be a bitter disappointment.
Three fully listed constituents have produced encouraging reports. Marston's, the brewer and pubs owner, rolled out interim profits up 14.7 per cent to £33.5m although after exceptional items the pre-tax profits emerged at £25.2m, down from £35.6m. The group, once again defying the bears of the drinks industry, said revenue was up 7.6 per cent and lifted its interim dividend by 5 per cent to 2.2p a share.
G4S, the security behemoth, achieved a 7.5 per cent revenue advance in the first three months of the year and made confident noises about growth over the full year. In a trading update the group, providing security for the Olympic Games, did say first-quarter profits were little changed as margins had narrowed. But it expects an improvement as the year progresses.
Support services group Mears, in a statement, talked about "solid trading". Its shares, around 263p as I write, have recovered to near the portfolio's buying level after approaching 200p. G4S and Marston's are showing modest gains.
All three constituents are dividend payers with the brewer offering a particularly attractive yield. Many shares suffered nasty hits in recent times but the dividend appeal of my threesome should stand them in good stead.
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