Derek Pain: Patsytems presents an attractive proposition
No Pain, No Gain
Saturday 20 February 2010
An Irish based company, said to be run from Italy, could be in a position to control the destiny of a constituent of the no pain, no gain portfolio. Patsystems, recruited last summer, and ION Trading operate in the rather esoteric worlds of computerised bond and derivative trading. Neither are dealers – they provide the sophisticated software.
Over the past five years or so ION has built a 29 per cent stake in Patsystems, often paying more than the share price. Yet contact between the two has been minimal. As part of their investment schedule David Webber, chief executive of Patsystems, and Martin Thorneycroft, its finance director, have been in touch with their biggest shareholder but the pesky question of that threatening shareholding has never been explored.
Does ION intend to bid or is it prepared to regard its interest as a "sound, long-term investment"? My guess is it will not be content forever to justify its holding on the grounds of dividend income and unrealised capital appreciation. It will eventually sell out or attempt to take full control.
The two are not strictly speaking direct rivals. ION is bond orientated; Patsystems' expertise embraces derivatives. So a deal would represent an expansion into a related territory for the Irish-based group.
ION, which is unquoted but has powerful private equity backing, has ventured along the takeover trail in recent years. One of its conquests was Rolfe & Nolan, a once-quoted business specialising in providing back office facilities for the futures and options markets.
If it should pursue Patsystems it could find itself bidding for a company based outside Britain; thinking about foreign tax shelters is not confined to behemoths like Diageo and Unilever. Little Patsystems, with a £43m capitalisation, has wondered about moving to, say, Hong Kong because, like its bigger contemporaries, it is concerned about this country's taxation pattern.
A survivor of the short-lived dotcom boom, Patsystems is prepared to make acquisitions. And it is in a position to expand with nearly £9m in the bank. Indeed it is looking around for suitable targets and I would not be surprised if it already has some in its sights.
The group is trading well. Adjusted pre-tax profits were up 7 per cent to £3.9m last year. The "true" pre-tax result more than doubled to £4.5m. Whatever figure you take it represents a remarkable performance for a business forced to endure the financial turmoil that followed the crash of Lehman Brothers.
Stockbroker Numis Securities expects this year's adjusted profits to emerge at £4.8m. The group has got off to a good 2010 start with chairman Richard Last talking about "a strong sales pipeline". The shares, as I write, are 24p, unchanged from the portfolio's buying price.
Another constituent, Hargreaves Services, the coal to transport group, has produced a sharp profits increase, despite a slump in turnover. Interim pre-tax profits emerged 20 per cent ahead at £14.7m. Yet revenue fell no less than 28.6 per cent to £211.6m. Lower commodity prices were responsible but, chief executive Gordon Banham says the group's business model insulates profits against such fluctuations.
Hargreaves encountered some problems on its coal mining side in the first half but it does not expect these difficulties to impact on second half profits.
The group, which is driving hard to increase its European operations, remains confident it will meet full-year expectations. The three stockbroker estimates I have seen point to an outturn ranging from £33.5m to near £34m. Last year it produced £26.2m.
My analytical threesome also seem convinced that further progress will be made. RBS Hoare Govett, which has been appointed joint stock broker with Brewin Dolphin, is shooting for £39.9m next year with Brewin on £40.5m. Panmure Gordon is looking for £39m.
Hargreaves, founded in 1994 with just 20 lorries, has enjoyed spectacular progress since it arrived on AIM at 243p in November 2005. By the time the portfolio descended on the shares 15 months later they were 417p. The price is now around 735p. With the arrival of heavyweight RBS and a capitalisation approaching £200m, Hargreaves could be contemplating a move from the junior AIM market to full listing.
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
- 1 Moscow voted the world's unfriendliest city
- 2 The excuses your boss is most likely to believe when you call in sick
- 3 I'm pansexual – here are the five biggest misconceptions about my sexuality
- 4 More than 11,000 Icelanders offer to house Syrian refugees to help European crisis
- 5 If these extraordinarily powerful images of a dead Syrian child washed up on a beach don’t change Europe’s attitude to refugees, what will?
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Senior British politicians tell David Cameron: When dead children are being washed up on beaches, it's time to act
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
If these extraordinarily powerful images of a dead Syrian child washed up on a beach don’t change Europe’s attitude to refugees, what will?
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£14000 - £16000 per annum: Recruitment Genius: This company was established in...
£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...
£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...
Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...
Day In a Page
The terraces of this two-bedroom penthouse apartment offer panoramic views that stretch over fifty miles from the cliffs of Beachy Head.
In the heart of the coastal village of Mumbles and moments from the pier, this five-bedroom Victorian terrace is set over three floors and retains many original features.
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
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.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
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.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
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.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
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.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
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.
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 six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.