No Pain No Gain: A measure of certainty sets Booker free
Friday 22 March 2013
Takeover bureaucrats have killed or watered down many an ambitious deal. But it seems the Booker cash and carry chain is set to get the go-ahead for its £140m acquisition of the rival Makro business.
There was, in some quarters, considerable surprise that the deal was shunted into the sidings while its merits were examined by the Competition Commission. When merger mandarins get involved there is always the danger of various forms of interference, besides a complete block on any manoeuvre. Perhaps, then, it is not surprising that Booker’s shares have enjoyed an exuberant time since the move obtained provisional clearance.
The shares reached an all-time high and at the time of writing were around 124.5p. I suspect the Commission’s deliberations held back the shares, but even so they made progress during this year’s stock market advance. Still, the Makro clearance , which should be finalised next month, has given the shares fresh incentive.
There is, of course, a temptation to lock in profits. After all, Booker has admitted that the acquisition of the German-owned, loss-making Makro operation will take some time to contribute to earnings and could for a time even take the edge off its own profit performance. In addition, Booker shares are already highly rated.
So has Booker reached its own sell-by date? I suspect some will take that view and I would not be surprised if the shares, at least for a little while, surrender some of their exuberance. But, as with Whitbread – the other star performer in the no pain, no gain portfolio – I am hanging on. Some time ago I put a sell price of 80p on the shares. I am now lifting that figure to 100p although I will be surprised if I have to invoke a sell order. “Cut losses and let profits run” is an often heard stock market adage. The portfolio recruited Booker at 24.5p; so far the policy of keeping hold of the stock has paid off handsomely. It is a pity that I have, with some other shares, been far too slow to follow the first half of the old saying.
Two other constituents have occupied my attention. G4S, the security group that caught a cold at the London Olympics, has revealed the full extent of its suffering. After accounting for its now infamous staffing blunder, pre-tax profits dived from £257m to £175m. In 2010 the group turned in profits of £335m.
For the past two years the security group has endured exceptional charges. In 2011 it was £55m, the result of an abortive bid for ISS, a Danish catering and security business. Then last year came the Olympic charges – a cool £88m.
Still, the latest performance masks some decent growth. Turnover was comfortably higher, with developing markets making serious contributions. And the year’s dividend is lifted by 5 per cent. The shares have in recent times been trading above 300p; they are now around 298p against the 264p paid by the portfolio.
TEG is the other constituent on the front foot. Thanks to an impressive second-half performance, the organic waste handler managed to achieve year’s revenue of £22.4m against £17.9m, although gross profits only edged ahead to £4.6m.
But much more significant is that TEG’s pre-tax loss shrank from £8m to £1.3m and at the end of the year the cash pile stood at £3.7m (from £1.6m). At the half-way stage the group recorded a £1.8m pre-tax loss.
On a difficult day in the stock market the shares slipped a shade to 6.5p; the portfolio paid 8p. I had hoped these results would allow the group to escape from my collection of loss makers, but although TEG is clearly moving in the right direction it still has some way to go before the portfolio can actually benefit from its presence.
Patience is needed. The group has endured a difficult run as its share performance over the years adequately illustrates. After all, the shares hovered around 150p some years ago, and in 2009 they were still above 60p. If recent progress continues there is every chance that the shares will manage to join the winners.
There is unlikely to be a pre-tax profit this year, with the stockbroker N+1 Singer suggesting an adjusted figure of around £500,000 next time round. And of course, dividends remain a distant prospect.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
- 2 Christians: The world's most persecuted people
- 3 The secret report that helps Israel hide facts
- 4 Richard Dawkins says 'date rape is bad, stranger rape is worse' on Twitter
- 5 Danish TV reporter is all business up top, all party down below
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
- < Previous
- Next >
iJobs Money & Business
£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...
£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...
£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...
£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000