Derek Pain: Stick with Booker success story despite the Makro setback

No Pain, No Gain

Is trading at Booker, the cash-and-carry chain that is the star of the no-pain, no-gain portfolio, slowing down? Chief executive Charles Wilson has warned that the acquisition of rival business, Makro, could initially inhibit progress. But last week's update could imply growth in the original part of the operation had lost some momentum.

When a share is highly rated, as Booker undoubtedly is, any modest hiccup can create widespread disenchantment in the City. But the chain seems to have shrugged off any deep disappointment. The shares held up relatively well, just short, at the time of writing, of their all-time peak although stockbroker sell recommendations were heard. Shore Capital produced one of them. But even its target price was just a few pence below the then ruling level.

I am happy to retain Booker in the portfolio. After all the shares have soared from 24.5p to around the 130p mark since recruited in January 2009. And I think further advances are likely. Even if the shares hold around their current level they deserve to remain a constituent. As readers may recall I have placed a 100p sell price on the shares and all things being equal I am pleased to stick with such a decision. But I repeat my advice that any investor who followed the portfolio into the shares should think about selling, say, half their holding; thereby reaping a nice profit yet staying in, at no cost, for the ride.

Booker has made no secret that the struggling Makro operation could hinder its growth until the once-German-owned chain is fully integrated. There is evidence that Makro, for which Booker splashed £140m in cash and shares, is already proving a drag. Total group sales were up 13.6 per cent in the first quarter. However, like-for-like core Booker sales were ahead just 1 per cent, dented by a reduced tobacco showing with illegal imports and the ban on displays taking a toll.

Like-for-like Makro sales, included for part of the quarter following Competition Commission clearance in April, were down 6 per cent. Booker achieved a handsome pre-tax profit advance last year – to £101.4m – and I expect it to make further progress, despite Makro's unhelpful contribution, this year.

I am encouraged by the performance of Whitbread, the leisure group. A few months ago some stockbroker analysts were on the warpath, clamouring that the shares should be sold. Yet since then the shares have turned in a sterling display, crossing the 3,200p line and, as I write, hovering at 3,225p.

Analysts play a vital role in the stock market. However, some have a short-termism brief. After all they like to generate share trading, hopefully gaining business for their employers. I would never dismiss analyst comments. But for buy and hold investors, such as the portfolio, their observations quite often have little longer-term relevance.

Although the portfolio has a display of profitable investments, Animalcare, making veterinary medicines, is not one of them. The shares are around 141p against a 171p buying price. But I think my patience will be rewarded. A trading report for the past year says revenue was up 11 per cent. Three medicines were launched and a fourth received approval just before the year end. Other new products are on the launchpad. The animal identification division had a difficult time but results were "slightly ahead" of expectations. The group believes it should meet stock-market estimates that suggest a profit of around £2.8m.

Finally, I have said on many occasions that investors need a little luck .The portfolio had a helpful, if fairly minor, sprinkling of good fortune last week. My decision to unload the G4S security group was made just before the latest setback – problems over tagging contracts – became known. The shares were dumped at 228.3p against as low as 204p following the latest débâcle. Although approaching the bargain-basement level, many expect them to fall even further. A rights issue is rumoured. The group is certainly accident prone. The latest episode is the fourth time in recent years that G4S has suffered self-inflicted wounds. This could increase doubts about future Government contracts.

yourmoney@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
News
people And here is why...
News
peopleStella McCartney apologises over controversial Instagram picture
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
PROMOTED VIDEO
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsWelsh town changes its name, but can you spot the difference?
News
i100
Sport
footballLatest scores and Twitter updates
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    Day In a Page

    Italian couples fake UK divorce scam on an ‘industrial scale’

    Welcome to Maidenhead, the divorce capital of... Italy

    A look at the the legal tourists who exploited our liberal dissolution rules
    Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

    Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

    The vintage series has often been criticised for racial stereotyping
    Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

    Llansanffraid is now Llansantffraid

    Welsh town changes its name, but can you spot the difference?
    Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

    Let there be light

    Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
    Great British Bake Off, semi-final, review: Richard remains the baker to beat

    Tensions rise in Bake Off's pastry week

    Richard remains the baker to beat as Chetna begins to flake
    Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

    A look to the future

    It's time travel fashion at Louis Vuitton in Paris
    The 10 best bedspreads

    The 10 best bedspreads

    Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
    Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

    The children orphaned by Ebola...

    ... then rejected by surviving relatives over fear of infection
    Pride: Are censors pandering to homophobia?

    Are censors pandering to homophobia?

    US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
    The magic of roundabouts

    Lords of the rings

    Just who are the Roundabout Appreciation Society?
    Why do we like making lists?

    Notes to self: Why do we like making lists?

    Well it was good enough for Ancient Egyptians and Picasso...
    Hong Kong protests: A good time to open a new restaurant?

    A good time to open a new restaurant in Hong Kong?

    As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
    Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

    Paris Fashion Week

    Lagerfeld leads a feminist riot on 'Boulevard Chanel'
    Bruce Chatwin's Wales: One of the finest one-day walks in Britain

    Simon Calder discovers Bruce Chatwin's Wales

    One of the finest one-day walks you could hope for - in Britain
    10 best children's nightwear

    10 best children's nightwear

    Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties