No Pain, No Gain: 'Good news for the portfolio, but I did have to look for it'

It's a cheering sensation when a constituent of the no pain, no gain portfolio edges towards a new high. Burtonwood Brewery, running 450 pubs, is the object of my satisfaction. It recently rolled out a quality set of figures, accompanied by an increased dividend. And, what's more, it seems set for another heady round this year.

But the figures came with a warning; first impressions can be wrong. As the role of accountants has grown, and totting up numbers has become far more complicated (it all seemed so simple when I started in the Fifties) it is easy to be wrong-footed by headline performance. I was away from the City when I spotted the group's results on a TV screen (in a pub). They did not make impressive reading. And I had expected handsome figures.

True, turnover and dividend were up. But the two other important figures, pre-tax profits (often the accepted measure of a company's performance) and earnings per share, were as flat as yesterday's pint. Profits were off a staggering £2m at £5.6m. And the shares seemed to feel the profits draught.

But I could relax. It was another example of the danger of information shortfall when investing in a small company. The media does not have the space to go into details when presenting the results of a tiddler such as Burtonwood, with a stock market capitalisation of a mere £56m. Pre-tax figures were down, but what the condensed reports failed to mention was that underlying profits had, more in line with my expectations, risen 14.7 per cent to £9.3m. Accountancy one-offs, such as goodwill adjustments, property impairments and losses on property sales, had inflicted the pre-tax damage. They stemmed mostly from a deal last year when Burtonwood splashed out £16.9m buying 94 pub freeholds.

Once the true performance had been absorbed Burtonwood's shares quickly recovered from their hiccup and have since moved ahead, almost touching 270p. I recruited them at 185.5p. The shares have further strength left, particularly if the stock market continues to recover, but it would be foolish to regard them as high flyers. Unless a successful takeover bid materialises they will always represent a solid, rather than spectacular, investment. And the chances of a successful bid are not high. The Forshaws who started the business nearly 150 years ago still account, with associated families, for 45 per cent of the capital. But if bid action should break out, assets of just more than 400p a share would dominate proceedings.

Burtonwood embraces directly run, managed houses and pubs let to tenants. It also differs from most other pub companies by, as its name indicates, enjoying an involvement in brewing, with a 40 per cent interest in its original brewery. Last year, the brewing stake produced a £202,000 profit. Brewing, on which the group was founded, now borders on a fringe activity. As managing director Lynne D'Arcy says: "Our business is all about pubs and people."

The company plans to add to its estate in north-west England and north Wales. But sensibly, Burtonwood is not anxious to pay the fancy prices demanded by some vendors. Still, it should be a year of further progress: the stockbroker Seymour Pierce is looking for profits of £10m.

I am less enamoured by the latest report from another portfolio constituent, City of London Group (CLG). Again, pre-tax profits were down. The trouble was that the lower figure of £369,000 was swamped by write-downs to produce a £3.5m loss. The chairman, John Greenhalgh, had already announced a £2.6m charge on the group's technology involvement; a further £1.25m was set against the reduced value of investments.

CLG, a public relations and investment combine, was among the companies which ventured bravely into the new world of hi-tech. Like the rest, it caught an almighty cold. Two of its ventures have been mothballed and the third, Archive-it, is to be sold, or refinanced with CLG retaining some interest.

But Archive-it seems to be a long-term winner among the IT wreckage. Its e-mail archiving system is attracting clients and they could break even this year. But CLG, with 91 per cent of the capital, does not have the armoury to support the business in the manner it demands. It is unclear whether CLG will recoup its investment, or even make a profit, when it agrees a deal. The shares are 50p against my 117.5p buying price.