Derek Pain: Small caps are unloved in City but their day will come

No Pain, No Gain

It's been a busy few weeks at the no pain, no gain portfolio with four constituents reporting profits or corporate activity. In some respects my15-strong collection of shares has not performed too badly although, like I suspect most investors in these volatile stock market days, there is disappointment at the behaviour of some stocks.

Research suggests many shareholders expect to reap rewards in the next six months. A survey aimed at examining the attitude of "the everyday investor" concludes that 36 per cent of them are looking for a positive return. The research was carried out by one of Britain's major investors, Legal & General, the insurance giant. However, small caps, which dominate my portfolio, remain unloved in the City. But, I believe, their day will come. And we may not have to wait too long for them to return to favour.

The profit announcements amounted to a little and large display. The vending machine group SnackTime is capitalised at just £12.1m, whereas the brewer Marston's is valued at a rather more heady £543m. SnackTime reported half-time revenues up 162 per cent, although pre-tax profits were down from £201,000 to £111,000. The fall is not surprising following an intensive bout of acquisition-inspired restructuring. New contracts continue to be won, and the stockbroker Arbuthnot is looking for a year's out-turn of £1.4m.

Marston's, brewer of such hand pump beers as Pedigree and Brakspear and owning around 2,150 pubs, rolled out a 9.4 per cent underlying pre-tax profits advance to £80.4m. It is holding its year's dividend, putting the shares on a yield of around6 per cent. In the 12 months the group achieved revenue growth of 4.8 per cent, and in the first eight weeks of its current year made further progress.

Like others in the pub trade Marston's, where L&G has increased its holding to 4 per cent, is finding the eating out market particularly enticing. In the past five years it has built around 50 pub/restaurants and now aims to establish some 25a year.

Unfortunately, the takeover action has yet to provide much joy for the portfolio. Patsystems, a supplier of derivative software, is now, as I anticipated, in the sights of its biggest shareholder, ION Trading. Unfortunately the indicative priceis only 14p a share. The portfolio paid 24p.

To pile on the agony the collapse of MF Global could be more wounding than at first thought. The busted US broker owes £900,000, and uncertainty remains about how much of the MF-related business Patsystems will be able to salvage. In addition it felt the need to make provisions of up to £1.3m against clients that are feeling the financial pinch. The group reckons 2012 resultswill be significantly better thanthis year's.

Another round of corporate action has occurred at Plus-traded Rivington Street Holdings, with an on, off and then on again disposal. At first it agreed to sell its financial advice side, Rivington Street Corporate Finance, to another Plus-traded group, Webb Holdings, run by the small cap specialist Peter Webb. Then the deal was called off when Rivington received a higher offer. It transpired the second strike was an in-house affair. A company called Peterhouse Capital, where Peter Greensmith, a director of RSCF, is the main shareholder, put a £3m bid on the table. The £3m is being paid in stages, with most of it inthe form of an 8 per cent secured loan note.

Rivington, planning a move from the fringe Plus platform to the Stock Exchange's Aim market next year, believes its corporate operation may not keep up its impressive profit performance, and is happy to accept £3m for a business acquired for £681,000 five years ago. The corporate operation, representing a host of Plus and Aim companies, achieved profits of £344,000 in the six months to February.

The portfolio has one other Plus stock, NCI Vehicle Rescue, recruited nearly two years ago at 25.5p. The shares are now around the 30p mark. I have been wondering whether to retain them. The last trading report was a little disappointing and various indications from the industry are not too encouraging. Should the shares be dumped, and with Rivington's proposed elevation, the portfolio would be in danger of existing without a constituent from the fringe Plus market for the first time since its early days.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
Life and Style
A picture taken on February 11, 2014 at people walking at sunrise on the Trocadero Esplanade, also known as the Parvis des droits de l'homme (Parvis of Human Rights), in front of the Eiffel Tower in Paris.
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Trainee Consultant - Surrey/ South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Recruitment Genius: Client Services Assistant

    £18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    No postcode? No vote

    Floating voters

    How living on a houseboat meant I didn't officially 'exist'
    Louis Theroux's affable Englishman routine begins to wear thin

    By Reason of Insanity

    Louis Theroux's affable Englishman routine begins to wear thin
    Power dressing is back – but no shoulderpads!

    Power dressing is back

    But banish all thoughts of Eighties shoulderpads
    Spanish stone-age cave paintings 'under threat' after being re-opened to the public

    Spanish stone-age cave paintings in Altamira 'under threat'

    Caves were re-opened to the public
    'I was the bookies’ favourite to be first to leave the Cabinet'

    Vince Cable interview

    'I was the bookies’ favourite to be first to leave the Cabinet'
    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor