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.
Will your credit card rewards be scrapped following new EU rules on charges?
What would happen if you put a statistician in a casino with £1m?
Simon Read: 'The fight must go on over equality on expat pensions'
More people are switching current accounts – but what do the figures mean?
Pension freedoms: How to deal with cold calls from scammers
- 2 Why this father didn’t hide his daughter’s heroin overdose in her obituary
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 The most powerful passports in the world
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...
Day In a Page
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
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
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
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms