Is this the era of penny dreadfuls?

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The Independent Online

The danger of investing in an alleged recovery share has been underlined by the dismal performance of Era, the retailer.

The danger of investing in an alleged recovery share has been underlined by the dismal performance of Era, the retailer.

Last week I unceremoniously dumped the shares from the no pain, no gain portfolio as the group shocked its followers by revealing it intended to put its Beatties of London hobbies and toys retailing chain into administration.

The shares, tipped at 9.5p last summer, climbed to 14p shortly afterwards but subsequently slumped to 5p after a profits warning. They crashed to 2.5p on the signalled arrival of administrators and are now 3p.

Quite simply, the recovery I anticipated, although seemingly soundly based, proved to be an illusion. I feel we have suffered far too much pain in the wallet to justify hanging on hoping for better times.

The shares would appear to be ideal candidates for my walking wounded collection. In February I drew attention to the surprisingly strong display achieved by my three penny dreadfuls - Coburg, Ronson and Upton & Southern. Perhaps Era will be able to reap some benefit from being associated with the admittedly still struggling trio.

The shares need all the help they can get. Era, which sold off some Beatties outlets in October, said the chain's trading had continued to be difficult. The rest of the group, Kohnstan, a wholesaler selling models and kits, and Royston, distributing furniture fittings, is trading normally and appears to be profitable.

The hope is the group will achieve a reconstruction "which will put the company on a sound financial basis".

Era's bankers and the shop chain's major creditors are said to be supporting the proposed refinancing, which will include a company voluntary arrangement for Beatties.

But the debacle at Beatties should not be underestimated. The shops operation is by far the biggest part of the group, accounting for 80 per cent of sales, and hopes the long-time struggler had at last turned the corner were pinned on its performance.

If all had gone according to plan, Era should have reported profits around £2.1m for the year ending February against £264,000 in the previous year.As it is, another loss is inevitable.

I suppose Era, with a couple of trading subsidiaries, cannot be classified as a shell. And until the Beatties situation is resolved it is unlikely to attract the interest of the ever-active army of shell seekers.

Undoubtedly it has been shell hopes that have inspired much of the interest in Coburg, a tea and coffee merchant, and Ronson, the luxury goods group. Both are making progress but in often busy trading their shares have on occasions swirled ahead of the game. The companies have issued statements intended to take the speculative heat out of their shares.

Upton & Southern, a retailer which has moved into recruitment, has advanced further along the road to, hopefully, a bright new future.

Although Era has been a bitter disappointment, other no pain, no gain constituents have performed well, particularly Global, the food group.

It lifted pre-tax profits by 107 per cent to £6.9m last year and stockbroker West LB Panmure looks for £8m this year.

The group ranks as the largest producer of meat and pastry products for the catering industry; it also imports and exports meat.

Global, which last year took over the Sims foods group, is looking for further catering acquisitions.

It is highly borrowed but the intended sale of its forklift truck business should bring gearing down from about 200 per cent to 80 per cent or so. A 120-acre site in Goole is earmarked for sale next year and could generate up to £7m

The shares are 28.75p and look good value. They were tipped at 20p.

At Gowrings, the garages to Burger King group, chief executive Derek Coulson and finance director David Gray have increased their stakes. They took up options instead of - as so many directors do - cashing them in.

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