No Pain, No Gain: A fool and his Profile are not so easily separated

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The Independent Online

Profile Media, the little publisher that has inflicted grave damage on the No pain, no gain portfolio, continues to live dan- gerously. The shares have little value - less than 0.5p - and it is impossible to ignore the dismal reality that the company is in a precarious position.

Profile Media, the little publisher that has inflicted grave damage on the No pain, no gain portfolio, continues to live dan- gerously. The shares have little value - less than 0.5p - and it is impossible to ignore the dismal reality that the company is in a precarious position.

But its management bravely refuses to let it lie down and die. Strenuous efforts are being made to keep it going and directors have staked some of their own money as loans - a relatively rare event when a listed company is tottering on the brink. The group has succeeded on a number of occasions in winning what can only be described as breathing space.

Last week, the acting chairman, David Ellingham, disclosed that Barclays Bank had agreed to extend a £3m loan until the end of this month. The facility had been due to close at the end of last month following earlier postponements.

It seems that Ellingham's hopes largely rest on the sale of Profile's US operations. Negotiations are at an "advanced stage". The American company was acquired for £16m (plus a hefty deferred consideration). Just how much Profile will wring from a US sale is unclear. But it is unlikely to enrich the struggling group and further cash, probably from shareholders, will no doubt be needed.

Once called London & Edinburgh Publishing, the group has still to produce results for the second half of last year. Yet another loss is expected. I am, of course, deeply unhappy about Profile. Not so much with the company's lamentable performance but with my own stupidity in sticking with the shares.

The portfolio descended on them at 38.5p. I had ample opportunities to sell at a realistic price, as it became obvious that an ambitious expansion programme had left it vulnerable to the subsequent trading downturn, when, post September 11, the US side suffered a debilitating reverse. Barclays, switching debt for equity, agreeing to the loan extensions and helping with asset sales, has encouraged Profile's survival. But crunch time cannot be delayed much longer. It is obviously in the dreaded last chance saloon.

Having foolishly held on while many other investors wisely retreated, albeit nursing losses, I feel I have little choice but to remain on board.

The loss the portfolio has endured is fully accounted for when its performance is calculated. With the shares deep in the twilight zone inhabited by fallen stars now past their sell by date the few pounds a sale would realise would offer little comfort. I may as well stick with Ellingham in the hope he and his team can pull off a miracle and get Profile, which produces controlled circulation publications including consumer magazines and sporting programmes, sparkling again.

The trials and tribulations at Profile are, thankfully, unknown at another portfolio constituent - Printing.com. It has recorded a 61 per cent profits advance to £1.5m and analyst Roger Hardman is looking for £2.45m this year and £3.43m next. Like DataCash, another portfolio constituent, the hi-tech printer has joined the dividend list with a 0.5p a share payment. Hardman expects 1.5p a share this year.

I first took an interest in Printing.com when its shares were traded on the fringe Ofex market. They moved to the Alternative Investment Market (Aim) last summer. When I alighted on them they were 30.5p; the price is now 51p. At least one influential commentator was rather disappointed by the group's performance. It was not strong enough, he opined, to justify the current share price. I disagree. Chief executive Tony Rafferty identified and exploited a revolutionary method of high street printing. Unlike its rivals, Printing.com shops do not print on the premises but transmit orders to its Manchester printing plant where the work is carried out and then delivered within a few days to the retailer.

The group now has approaching 130 outlets. They include company owned and franchised shops. By far the biggest retail spread, however, is made up of what are called bolt-on franchises where established printers offer the Printing.com service. A "significant wave" of new bolt-on agreements is said to be imminent. It also has international ambitions and has already set up shop in Dublin.

Rafferty has gone back to his early days to keep the domestic momentum going. He has launched what he calls "the guerrilla franchise".

Under this system a shop or printing works is not required. Instead, a business can be started from a small office or even a room at home. Rafferty knows from experience that such modest enterprises can be successful. After all, it was from a rented office, with just £5,000, that he started what has developed into an Aim company with a £22m capitalisation.

cash@independent.co.uk

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