No Pain, No Gain: DataCash's PIN adventure hasn't yet had its chips

Click to follow
The Independent Online

When I recruited DataCash to the No Pain, No Gain portfolio in April last year, I was intrigued by its chip-and-PIN potential. It seemed to me that the group's existing online payment operations should be increasingly lucrative, with the latest plastic revolution offering an exciting opportunity to tap into a new market.

When I recruited DataCash to the No Pain, No Gain portfolio in April last year, I was intrigued by its chip-and-PIN potential. It seemed to me that the group's existing online payment operations should be increasingly lucrative, with the latest plastic revolution offering an exciting opportunity to tap into a new market.

Well, DataCash has continued to prosper, but the chip-and-PIN adventure has so far failed to connect. Profits last year, before the usual raft of exceptional charges that feature in almost all results statements nowadays, jumped by 102 per cent to £1.5m.

However, the group is rather coy about its chip-and-PIN excursion. It seems that the hoped-for contracts have yet to materialise; indeed, not a single deal has been reported. But there is every chance it will still reap rich rewards from the new plastic payments system. I gather there are hopes that progress will be made this year.

So far, the chip-and-PIN revolution has yet to achieve the easy-payments environment, intended to make fraudulent transactions much more difficult, that its backers anticipated. Still, there is growing evidence that after a stuttering start, it is replacing the old signature procedure.

Even so, in my experience, quite a few retailers (including some top names) still cling to the old system. And it is clear that the new numbers game has not been helped by confusion among cardholders. Many of them, holding a handful of cards, are having great difficulty remembering the sudden array of PIN numbers they have collected. It is possible to change identification numbers, but I wonder how many have bothered. I certainly haven't.

Still, despite chip and PIN, the DataCash chairman David Bailey was upbeat at the group's shareholders' meeting. Trading was running comfortably ahead of last year and the company's bank balance had swollen to nearly £4m.

With its range of internet credit-card payment services attracting ever increasing transactions, the stock market expects profits this year to be about £2.5m with, perhaps, £3.5m next year. The group has joined the dividend list with a maiden payment of 0.5p a share, providing a tiny yield. Still, as DataCash continues to progress, dividends could be increased - quite substantially.

I am happy to retain the shares in the portfolio. They are now 124p, against my 77.5p buying price. I am, however, less pleased with Avon Rubber. Its shares have made insignificant headway since I descended on them nearly three years ago. I was captivated by its gas-mask activities, which seemed at the time to hold the possibility of rich rewards. Well, rather like DataCash's chip-and-PIN potential, Avon's respirators have yet to meet my expectations. Still, the group continues to harbour high hopes. Indeed, its aspirations would appear to be justified, with the American armed forces remaining its major customer.

Avon's interim figures were punctured by the MG Rover reverse and by restructuring costs. But the motor industry is stuck in low gear, and although it is winning business from its rivals, the group faces a long and hard road.

The year's profit forecasts are being cut, with the stockbroker Rowan Dartington going from £8m to £7.5m. The internet tipster Tom Winnifrith (t1ps.com) is encouraged by Avon's modest rating and rates the shares a strong hold. For the time being I am prepared to stick with them, but I suspect they may be given the old heave-ho in the not too distant future.

MacLellan, another of my underachievers, has also been hit by MG Rover - to the tune of £400,000. The rest of the support services group is said to be trading in line with expectations. The shares, held since 2001, are a fraction below my buying price and may have to be ditched.

There are better times for three other constituents that have commented on their trading activities. Stagecoach, the bus and train group, continues to make headway. Georgica, the ten-pin bowling enterprise, has scored impressive first-quarter profits. S&U, the finance group, reported that home-credit operations are trading ahead of last year and its car-hire purchase side is doing well.

There's no doubt that on the trading front S&U, with about 5 per cent of the home-credit business and just under that share of car financing, is an attractive stock. But I am a little worried by another of those industry probes so beloved by this government. The Competition Commission is investigating door-to-door lending and I would not, in the present political climate, be surprised if some draconian measures materialise, making life difficult for the likes of S&U, which ranks as my oldest surviving constituent.

I would be sorry to part company with the shares, but I may do so if I get the impression that Whitehall meddling will retard the group's progress.

Looking for credit card or current account deals? Search here

Comments