Derek Pain: Ten-pin bowling firm must start hitting the target

No Pain, No Gain

A few weeks ago this column contained the phrase "a serial destroyer of value". I'm afraid too many stock market companies, most of them small caps, justify such a brutal description. Often enticing plans encourage investors to pump hard-earned cash into ventures that conspicuously fail to deliver.

It would be grossly unfair to foist such a label on Essenden even if it has yet to produce any reward for shareholders. And I should add that although it has a new chairman and chief executive it is not the company mentioned in the earlier article.

Yet, not for the first time, the group, which in a former incarnation was a constituent of the no pain, no gain portfolio, has embarked on the recovery trail. Let's hope that after previous disappointments what is now the nation's largest player in the ten-pin bowling arena finally hits the target.

Nick Basing, 47, is the man recruited as chief executive to drive Essenden forward. He has a fine business record but his tenure, which commenced in August, has yet to inspire the stock market.

When I first encountered the group it was known as Allied Leisure and embraced a disarray of interests, ranging from fast-food outlets to pubs. It was not particularly successful.

Then, with powerful institutional support, Nick Oppenheim arrived. Through a previous venture he had established a reputation as a leisure entrepreneur. He had moved in on an ailing pub restaurant chain called Whitegate Leisure and transformed it into Northern Leisure, a discotheque group that attracted a £400m takeover from Luminar. In a few years a £100 investment had grown to £758.

But he found Allied, renamed Georgica, a more difficult assignment. Businesses were sold and added and it emerged as a ten-pin bowling and snooker club group. Some profits were achieved. But in the past two years losses were incurred.

The shares arrived in the portfolio at 87p in 2005. They were, perhaps rather luckily, sold two years later at 151p. I didn't anticipate the problems ahead. My sale followed plans to split the group into stand-alone ten-pin and snooker operations. Such demergers are against portfolio rules.

In the event the break-up was put on hold with the snooker clubs later sold. The ten-pin bowling business was offered around but in the harsh climate of the past few years buyers were reluctant to appear.

So Georgica became Essenden and the board revamped. Roy Macnamara took over as chairman, and the capital was divided into shares and loan notes. The shares are 19p and the notes, traded on Plus, are 37p.

Since his arrival Mr Basing has launched a number of initiatives, including introducing karaoke and improving food and drink offerings. Teaching customers how to bowl and cutting management layers are other developments. The group has 38 sites covering 1.2 million square feet which is to become a "portfolio of modern leisure retail attractions".

Mr Basing is best known for developing Paramount Restaurants, the Chez Gerard chain. He led a £15.2m takeover; the business was some years later sold for £107.5m. Paramount was also once a member of the portfolio. In an earlier existence it was a pub company that, in effect, gave up the ghost when Stock Exchange red tape blocked a takeover. I sold between the switch from pubs to restaurants, netting a 10p gain on a 15p outlay.

Since the new regime appeared, the shares have had a difficult time. What looked like institutional selling created a sharp tumble earlier this year. But Essenden retains some impressive major shareholders. North Atlantic Value Trust, which is related to the JO Hambro financial group, has 25.3 per cent of the capital and Trefick, the investment vehicle of the legendary investor Jack Petchey, aged 85, sits on 19.4 per cent. Other big names include Schroders (14.7 per cent) and Man Group (8.7 per cent).

With such heavyweight backing, Essenden should be a highly successful investment. Yet shareholders are nursing losses.

I suspect it is now in the last chance saloon. Mediocrity must be transformed into success. Mr Basing should have enough clout to ensure it achieves some top scores. And who knows? If he succeeds – and I think he will – the shares could return to the portfolio.