Derek Pain: Patience pays off as Mears emerges from the wilderness years
No Pain, No Gain
Friday 23 August 2013
It has taken quite a time but Mears, the support services group, is at last justifying its re-inclusion in the "no pain, no gain" portfolio.
I descended, for the second time, on the shares in March 2008 at 272p a pop. On a number of occasions since, I have experienced acute discomfort as the price failed to display the sort of action I had anticipated. At times the shares hovered around the 200p mark and seemed destined to go much lower.
But patience is a virtue in the investment world. Last week the shares briefly hit 436p and, as I write, they are around the 415p mark. The price has made dramatic headway since April and the shares are now selling at some 15 times forecast earnings. It would, therefore, be unwise to expect such progress to continue as they have probably caught up with events. But the stock market is about anticipation and Mears is clearly rolling along nicely. There must be every chance that the shares will go on to hit new peaks.
I have no present intention of selling. The portfolio is a buy-and-hold exercise and all the signs are that the group is now benefiting from previous developments.
Two takeovers have contributed to the new, more flamboyant Mears. Last year the social housing and home-care group acquired Morrison Facilities Services. It had decided that the struggling business would fit nicely into its operations. In April came the second acquisition, a Scottish care firm called ILS.
Last week Mears announced the result of its modest shopping spree along with its half-year figures. Morrison's social housing operations have been integrated far more quickly than originally expected and are on the verge of contributing to profits. And ILS, which did not arrive until late in the half year, has given it more clout in home care. Social housing revenue surged 76 per cent; home care's improvement was a more subdued 8 per cent.
The outcome was a top-notch profit performance at halfway. The underlying figure was a record £15.5m, although at the pre-tax level the returns were not impressive. In fact, the pre-tax figure slumped from £10.3m to just under £4m. Costs associated with Morrison did most of the damage.
Stockbroker Canaccord Genuity expects the full year's profits to be £36.7m and is looking for £42.4m in the following year. And it rates the shares a buy with a 490p target price. Investec also believes the shares are worth buying, although its target price is a less flattering 440p.
Mears, which is paying an increased interim dividend of 2.5p a share, has already contributed towards the portfolio's coffers. It had been an early recruit at 23p a share. I subsequently sold at 84p.
I also intend to stay with Whitbread, the leisure group, although I note that stockbroker Panmure Gordon has joined the ranks of those advocating that the shares should be sold. The broker had hitherto rated the shares a hold but now appears to feel that Whitbread's Premier Inn budget hotel operation, and its Costa Coffee chain, will reach saturation in this country sooner than many expect.
Findel, the home shopping and education supplies group, is one of my last recruits, arriving in November last year. The shares have enjoyed a good run and I see that stockbroker Oriel Securities has a 260p target on them. They are currently around the 218p level compared with the equivalent of the 142p paid by the portfolio.
Finally to Brightside, the insurance group, where extra time to produce a bid has been granted to a possible predator, Markerstudy. The deadline is now the 10th of next month. Brightside shares hover around 27p, the proposed offer price.
I am still seeking to add to the portfolio. Many observers believe that the stock market is looking cheap. However, I am finding it difficult to latch on to the type of bargain that appeals to me.
Last week I mentioned that Conviviality Retail looked interesting. But the shares have moved ahead quite rapidly and do not now look the bargain they did when the Bargain Booze chain floated at 100p a time.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens