Derek Pain: Rivington Street is an attractive candidate for expanding portfolio

No Pain, No Gain
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The Independent Online

I have for some time been toying with the idea of adding another Plus share to the no pain, no gain portfolio. It already embraces two and I feel a hat-trick of constituents from the fringe market would add a further splash of excitement.

Sixteen is, I believe, the ideal strength for a small investors' buy and hold portfolio. Currently my little exercise consists of 15 shares - besides the two Plus members, eight are on AIM with the remainder fully listed.

It could be argued that I should have recruited more top flight shares. Or ventured overseas, even dabbling in the so-called emerging markets that are beloved by many fund managers.

But domestic small caps, with their volatile reputation, have provided some exciting rides since the portfolio first appeared in 1999. It has admittedly also enjoyed some Footsie successes . What, however, is often overlooked is that blue chips are also capable of springing some wounding surprises. BP is merely the latest to oblige.

I make no apology for my devotion to small caps residing on Plus and Aim as well as the batch that are fully listed. So, perhaps, it is not so surprising that I turned to the fringe market when searching for my 16 th share.

My favoured candidate is Rivington Street Holdings, a financial group run by former city hack Tom Winnifrith. But two influences have created hesitation. One is the problems facing Plus Markets Group, owner of Plus; the other is Rivington's uninspiring share performance.

There is little doubt that the shares should be higher. The company is trading well and is highly ambitious. Pre-tax profits for the current year should, I believe, emerge at around £1.3m, against £300,000. Not a bad performance for a company capitalised at £12.1m.

There are reasons for expecting the shares, around 30p against a 12 month high of 42.5p and low of 22.5p, to advance. One likely buyer is Mr Winnifrith. He has just under 30 per cent of the capital. I hear he has asked for permission to increase his holding above the 30 per cent mark. He is seeking dispensation from the City rule that such a manoeuvre automatically provokes a full bid. Rivington also plans to buy back more shares.

The group clinched two deals this week and has another three in the pipeline. It has extended its fund management operation by taking over the running of three investment schemes handling £2m of funds. A 25 per cent interest in an embryonic on-line real time chart business has also been acquired. But, despite this double success, Mr. Winnifrith is less confident of achieving the other three acquisitions. He believes one should materialise but worries about the other two. Indeed on his website he expresses anger about the lack of commitment displayed by some of those involved in the negotiations. One key participant apparently disappeared at a crucial time for a game of polo.

Born out of the internet tip sheet Rivington now embraces a wide range of financial operations, including offering corporate services to AIM and Plus constituents, public relations and the Master Investor conference and exhibition. It also takes in stockbroker JP Jenkins which runs a market in shares of unquoted companies.

Already this year the group has acquired two market research companies from AIM-listed IQ Holdings and has almost completed the acquisition of two financial software businesses.

The market research transaction involved shares but the software duo, acquired from another AIM company, Corero, cost just £1and the assumption of £2.12m of debt. It looks a good deal as the acquisitions are set to produce profits of around £300,000/£400,000 a year compared to interest of £160,000 on most of the debt.

Last month Rivington decamped to the Isle of Man. Ahead of the change of domicile the renown serial investor Jim Mellon became chairman.

Rivington would make an ideal addition to the portfolio. I may recruit the shares in the next few months. But the problems at PMG are a worry. Andthere seems to be an overhang at Rivington. It should soon be eliminated, particularly if Mr Winnifrith gets the clearance he seeks.

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