No Pain, No Gain: Georgica is finally showing signs of coming good

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The Independent Online

The shares joined the No Pain, No Gain portfolio in January. They are around 97p, modestly ahead of my 87p buying price.

But I am hopeful they will achieve much more robust headway. After all, before the present incumbents arrived the price had touched 300p.

The group, formerly known as Allied Leisure, has had a colourful career that has failed to produce much joy for shareholders.

Five years ago, hopes were running high when Nick Oppenheim, with powerful City backing, snatched control. He had an impressive pedigree and pumped a considerable amount of his own cash into his new adventure.

The Oppenheim team and its City supporters thought they were on to a sure-fire winner. The group would be quickly transformed and shareholders would benefit. It has turned out to be a much harder and longer slog.

Progress has been so mediocre that shareholders could be forgiven for wondering whether they would have been better off with the former management. Before descending on the group Oppenheim had achieved his reputation as a recovery entrepreneur by resurrecting a group called Northern Leisure.

It had started life as a pub/restaurant business called Whitegate Leisure but switched to nightclubs, even straying into France, with disastrous consequences. Oppenheim sorted it out. One of his first moves was to dispose of its French baggage. Subsequently Northern Leisure thrived. A bidder, in the shape of Luminar, duly appeared and the once near-bust group was sold for more than £400m.

According to one calculation produced around the time of the Georgica coup, Northern Leisure shareholders had since 1994 turned each £100 invested into £758. During the same period Allied Leisure shareholders had achieved a profit of just £3 for each £100 as it expanded through acquisitions. Among its captures was European Leisure, which had earlier taken over what had been the commercial arm of the Campaign for Real Ale, and Waterfall Holdings.

The Oppenheim presence and Allied Leisure's indifferent performance ensured there was little opposition to what was a reverse takeover. It was an all-share deal. In the first years of the new management, losses totting up to £36m were incurred as the group was reshaped with peripheral operations sold and uneconomical leases abandoned. Last year came the first sign that the new broom was sweeping up some profit when £2.9m was achieved over 12 months.

It was the belated signs that Georgica was at last getting its act together which prompted my decision to recruit the shares to the portfolio. Certainly the news flow since then has been encouraging.

Besides the profits upsurge the group has reorganised its banking facilities and raised £60m through loan notes.

The extra cash is earmarked for expanding and improving its bowling alleys and snooker clubs. Share buy backs are also on the agenda. I don't expect to reap quick rich rewards from my investment although it is pleasant enough to record, at this stage, a modest gain. I feel the group is at last on the verge of achieving substantial progress - and that should eventually be reflected in the share price.

Shares of DataCash, another portfolio constituent, have already recorded strong progress although the price slipped a little following interim results. Yet the company, an electronic payments provider, produced a 70 per cent profits advance to £1.14m. Admittedly the figures were adjusted to allow for mainly goodwill amortisation.

The group, which started paying dividends with last year's results, seems confident about prospects with the stock market shooting for £2.5m this year. With £4.4m in the bank and the cash pile increasing, it should be in a position to improve on last year's 0.5p per share dividend.

The portfolio recruited the shares at 77.5p in April last year. They are now around 134p.

I am happy to retain DataCash although I admit the company has yet to score the chip-and-pin credit card success I expected. Still these are early days.

The group's more established online payments service continues to prosper and there seems little doubt that prospects are encouraging. Any chip-and-pin success will be an added benefit.

cash@independent.co.uk

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