No Pain No Gain: Acquisition fever proves that it pays to be patient
Saturday 08 April 2006
For the second time in little more than a year, a takeover bidder is stalking MacLellan, the support services group that has been a constituent of the No Pain, No Gain portfolio since 2001.
The shares were 65.5p when I alighted on them; they are now around 112p. They are probably fairly rated on trading grounds, but with a predator hovering, there's a chance they'll move higher.
The prospect of corporate action emerged while I was holidaying in Lanzarote. An apparent leak forced John Foley, the chief executive, to reveal "an indicative approach".
A few days earlier, he had justified his supporters' faith by producing splendid figures. At the pre-tax level, the year's profits were up a staggering 244 per cent to just over £5m.
As I have said on several occasions, MacLellan's profile has suffered from rafts of special charges distorting its results. It has been highly acquisitive and the resultant exceptional costs and inevitable goodwill amortisation damaged the "true" pre-tax figure.
Goodwill influences have again made an impact; they amounted to £3.8m. In the previous year, goodwill and special charges emerged at £5.3m, shredding the pre-tax to a mundane £1.5m. Still, many in the stock market don't mind a pre-tax figure plus the goodwill consideration.
The combined £8.8m out-turn should grow to £10.2m this year. However, for the dwindling band of purists, a "true" pre-tax of £6.6m is expected.
The year's dividend is increased to 1.25p and the comments accompanying the figures strike a confident tone. The group provides 60 different services (including cleaning and security) to more than 1,000 customers. It operates at some 3,500 locations, including Stamford Bridge, the home of Chelsea Football Club.
With debt cut from £14.1m to £8.2m and nearly £30m of banking facilities, MacLellan, if left to its own devices, is likely to resume its takeover adventures. Bob Morton, the chairman, appears keen to expand.
But Messrs Morton and Foley may not remain in control. If they surrender they will, I am convinced, demand generous terms.
Last year's takeover talks are thought to have foundered on price. It is believed the bidder, rumoured to be Spice Holdings (another support services group), was prepared to offer, probably through a share exchange, around 80p a share. The Morton-Foley duo insisted nothing short of 100p would suffice. The stance was clearly justified.
Whether Spice has returned and is prepared to offer more is not clear. Another contender is the much bigger MITIE support services group, but it could have its hands full after lashing out £74.8m for Rentokil Initial's security business.
The corporate activity at MacLellan, plus its strong trading, underlines that patience often pays off. On occasions, it seemed the shares were destined to stay on the investment community's unloved and unwanted list. But hanging on has proved worthwhile, even if the latest talks break down.
In my absence another portfolio member, Georgica, was rumoured to have attracted a predator. The shares jumped to 140p but fell back when it said it could not account for the sudden strength other than recognition of the bowling-to-snooker group's "intrinsic merits". They are now 128p, against an 87p buying price.
It is no secret that Georgica, which has this week reported rather mixed quarterly trading, wouldn't mind being a takeover target. Indeed, it seems likely it will indulge in the splits - selling its two divisions - if a bidder fails to materialise.
Last year, the portfolio was enriched by three takeovers - Allied Domecq, the wine and spirit giant, fell to Pernod Ricard of France; Burtonwood, a pubs chain, was swallowed by Wolverhampton & Dudley Breweries; and cider-maker Merrydown yielded to an unquoted drinks group.
With MacLellan in the firing line, Georgica subject to speculation and the stock market in something of a takeover ferment, it could be that the portfolio will be a hive of bid activity again this year. I remain convinced that Scottish & Newcastle Breweries, one of its two Footsie stocks, is a strong candidate for some form of corporate interest.
Only a little while ago Anheuser-Busch, the world's biggest brewer, was said to be looking enviously at Britain's last remaining major beer group.
Still, even without a bid, Scottish shares are frothing nicely and the portfolio remains happy to stick with the producer of Fosters and John Smith's.
Money roundup video: It's getting harder to sort out a mortgage
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Is it really that bad in the bond market?
Five Questions On: GB Energy's new tariff
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
- 2 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 Amber Peat: Body found in search for missing 13-year-old who ran away after argument with her parents
- 4 Gay teenager 'forced to have sex with his own mother' to 'cure' his homosexuality, campaigners in India say
- 5 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...
Day In a Page
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool