No Pain No Gain: Acquisition fever proves that it pays to be patient

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.

cash@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power