No Pain, No Gain: A Spanish solution for a superstitious saver

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The Independent Online

The No Pain, No Gain portfolio needs beefing up. My more hard-bitten readers will regard me as a superstitious old fool, but I have never been entirely at ease with the number 13. I am therefore on tenterhooks as, following the sad departure of Profile Media, the portfolio consists of what could be an unlucky number of constituents.

I have identified three possible recruits. About 10 days ago I decided to back one of them. I had intended to name the share last Saturday but at the 11th hour decided to write about Oil Quest. Unfortunately my delay in introducing La Tasca, which runs a chain of Spanish-style restaurants, has cost the portfolio some hard cash.

Last week my fellow columnist Sean O'Grady alighted on the shares. Was it wise, I wondered, for The Independent to offer such a rapid double helping of the stock? But we may have approached La Tasca from different directions. So, if anything, my faith in the shares should be strengthened. Mind you I am a little distressed that his attention lifted the price. When I decided to back La Tasca the shares stood at 128p; at time of writing they are 137.5p.

Still, such misfortunes are part and parcel of a share tipsters' life. Ideally I like to pounce on recruits around midway between their profit announcements when, with often little news-flow, shares are inclined to drift. Since the restaurant chain floated a year ago the price has reached 147.5p. It then fell back but gained some 20p to 142p on the back of December's interim figures. As interest evaporated shares weakened.

At the halfway stage the group's pre-tax profit was around £2.2m against £2.4m for the previous 12 months. It was possible to put an even more encouraging spin on the performance. Profits before goodwill amortisation jumped 92 per cent to £2.7m, and sales were up 18.5 per cent. Just to emphasise the growth story there is the distinction of a maiden dividend. For the full year, profits should emerge around £6m.

The group should end its current year with 64 restaurants. Most trade under the La Tasca banner although a handful are branded La Vinas. A venture into leisure parks with a bar and grill formula under the Sam & Maxie's name is planned.

My reservation about the group is that it has ventured overseas with outlets in the United States. I would have thought opportunities abounded on the home front and extended lines of communication could be unwise for such a young business.

Moreover, the shares are not in the bargain basement. They are selling at nearly 17 times prospective earnings. Still, I am comfortable with such a rating.

There are, of course, worries that the big-spending days are over and consumers are reining in their bills. Higher council taxes and soaring fuel costs are just two influences. Many retailers are already feeling the pinch, although there is plenty of evidence suggesting that the eating-out habit is, if anything, still growing.

In my younger days it was said that the working man would always need his pint of beer, so brewers were regarded as all-weather shares. Nowadays such thoughts have little relevance. There are not so many old-style working men still around, and quoted brewers have shrunk from around 60 in the 1950s to half a dozen. But, perhaps, the pint has been replaced by the meal. Nowadays white (and blue) collars are keeping restaurants (and food pubs) on their toes. Although the old fashioned pint is not so much in evidence other, higher margin drinks, are in demand.

I hope La Tasca will perform as well as the portfolio's existing restaurant constituent, Prezzo. Its shares were a bargain at 17.25p when I descended on them. They are now on a tasty rating at 64.5p. The 73-strong chain this week raised £7.5m at 60p a share in one of those cosy placings that exclude the small investor.

I realise such manoeuvres are much cheaper and quicker than cash-raising exercises that are open to all. But selective placings do not say much for shareholder democracy. The company sweetened the cash-raising exercise by saying that trading was in line with its expectations.

Finally, what should be my last comment on the dreaded Profile Media? The creditors' voluntary arrangement was voted down and the company has gone into administration. Its directors deserve applause for battling for so long. But they were responsible for the mess in the first place. The chances of the portfolio getting any cash back are now well below zero.

cash@independent.co.uk

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