Derek Pain: Olympics security firm jumps ahead after sluggish start
No Pain, No Gain
Saturday 23 April 2011
City analysts have provided welcome – and unexpected – support for two constituents of the no pain, no gain portfolio. One, the security giant G4S, had experienced a rather sluggish time this year; the other, Hargreaves Services, a coal to transport group, had shown distinct signs of coming off the boil.
The sprawling UBS securities group provided the fillip for G4S. The shares were below 240p around the turn of the year and, in spite of satisfactory profits and a 10 per cent increase in the dividend, they had displayed at best hesitant progress; that is until the securities giant pronounced. Its decision to lift its target price to 330p inspired a jump to 275p, not far below the12-month high. G4S is never still for long. The stock market's biggest employer, with 625,000 workers on its books, has won the accolade of guarding next year's Olympic Games and has continued its seemingly endless pursuit of add-on acquisitions with the up to £10.2m take over of a surveillance and investigation business, Cotswold.
Hargreaves, after interim figures in February, raced ahead to a 985p peak. But profit taking and, I suspect, a feeling that the group had entered an uneventful period prompted the shares to drift to around 900p. Then the Arbuthnot securities house intervened. Its analysts lifted their target price by 50p to 1,200p, a level I still regard as undemanding. The price has not yet attained its former glory but the upgrade pushed it above 950p.
Arbuthnot has not included the proposed Tower Colliery development in South Wales in its calculations. Hargreaves, hoping it could produce up to seven million tonnes of coal over six years, had expected a planning decision to be forthcoming by last month. But it has had to curb its enthusiasm. The result of its application is now expected in the summer. Delay ndicating dismay? Arbuthnot doesn't appear to think so.
After the portfolio's misfortunes with Clarity Commerce Solutions (a profit warning) and Mears (bear raiders), which I discussed last week, the revival at G4S and Hargreaves comes as a relief.
The share performance of two other constituents making waves is also a welcome Easter bonus. Rivington Street Holdings, taken on board at 27.5p in November, is now 45.5p on the Plus fringe market. The deal-hungry group, with interests from fund management to quarrying, has unveiled heady interim profits.I have written about Rivington frequently in the past year and make no apologies for descending on it again. It is certainly a company on the move.
Underlying profits come out at £1.07m against £386,000. The "true" pre-tax figure, after stripping out amortisation and non- recurring charges, emerges at £398,000 up from £87,000. Chairman Jim Mellon and chief executive Tom Winnifrith are not indulging in forecasts but they point out that the group – paying a maiden interim dividend of 0.25p a share – normally enjoys more strength in its second six months than in its first.
One area where Rivington has performed particularly well is fund management. It has several funds and, I suspect, some additions lurking up its corporate sleeve. Although the group is outside the City's inner circle and therefore does not get the appreciation it deserves, its investment display has been outstanding. Funds under management reached £56.6m against £18.7m a year ago. Mr Mellon observes that "objective data" proves Rivington has "the best track record in the UK".
Capital Pub Co, recruited in January, is the other constituent spreading cheer around. In an upbeat trading bulletin it says revenue in the year ended March jumped 24 per cent compared with the previous year. It continues to expand its estate, in and around London, and with two pubs due to resume trading in the next few months after improvements and an acquisition on the verge of completion, Capital should be set for another rousing round this year. Recruited at 120p, the shares, as I write, approach 150p.
The pub chain intends to resume dividend payments. It forecasts a 2.1p a share payment, the level of its last dividend, paid in 2008. Chief executive Clive Watson says: "The time is right to resume paying ividends." Shareholders will agree.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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