No Pain, No Gain: 'Having a little brewery must be one of the best jobs in the land'

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Falling in love with a share may seem preposterous but it is a fate that befalls many private investors (and I suspect some experienced fund managers). Very often it is a type of love-hate relationship based on the thought: "I've already lost a fortune on this damn thing, so I might as well stick with it." On other occasions an investor is enticed into a share – likes the company, thinks it has got some romantic appeal and even enjoys the part of the country in which it operates. When the end product has much to commend it, then the poor twerp is hooked and normal investment considerations are forgotten.

Falling in love with a share may seem preposterous but it is a fate that befalls many private investors (and I suspect some experienced fund managers). Very often it is a type of love-hate relationship based on the thought: "I've already lost a fortune on this damn thing, so I might as well stick with it." On other occasions an investor is enticed into a share – likes the company, thinks it has got some romantic appeal and even enjoys the part of the country in which it operates. When the end product has much to commend it, then the poor twerp is hooked and normal investment considerations are forgotten.

I have been investing in the stock market since the Fifties and, no, I have not made a great deal of money, but I have washed my face and can point to a reasonably successful record. Along the way, in the Seventies, I picked up a few shares in Jennings Brothers, a small Lakeland brewer. I paid (I think) the equivalent of 56p; they have over the years topped 400p and are now 168p after touching 125p in the foot-and-mouth outbreak which had such a devastating impact on Cumbria.

Even allowing for the dividend payments – each share has produced around 130p over the years – I cannot pretend the little brewer, with capitalisation of £18m, has been a rich investment. So why did I not sell when the shares were over 400p? At the time brewers enjoyed much more inflated values and Jennings was the subject of takeover rumours. But, inexplicably for a supposedly hard-nosed investor, I held on. It must surely be love.

Certainly I believe that running a little brewery, producing traditional English bitter in the beautiful Lakeland countryside, must be one of the best jobs in the land. I suppose my tiny shareholding keeps me in touch with an unreachable dream while I struggle with the reality of investment.

Last week I attended a City lunch to celebrate the brewer's 175th anniversary and some encouraging figures. Under the chief executive, Mike Clayton, Jennings has been reshaped and has narrowed its activities to brewing (no bottling, no deliveries) and owning tied pubs run by leaseholders. The group appears to be recovering after a flat few years. So a pre-tax profit of £2.6m against a £6.1m loss was clearly a cheering display.

Other figures, such as reduced debt and stronger assets, helped the celebratory mood but the dividend, although increased, is now less than it was a few years ago. For the current year, analyst Alan Millar of the stockbroker Arbuthnot Securities is looking for profits of £2.9m, putting the shares on 8.5 times prospective earnings.

The company now has 124 pubs and is seeking more after a decision to call time on its managed house division. Some managed pubs were sold, others transferred to leases.

One of the mysteries of the beerage is that Jennings has continued as an independent company, operating from its Cockermouth brewery. It survived the frantic takeover ferment that ended the existence of countless smaller players – unusually, without the protection of a large family shareholding. It has been a public company for many years with its shares freely traded.

Of course, it has had a few narrow squeaks. Maxwell Joseph, the legendary financier who created Grand Metropolitan, descended on Cumbria around 35 years ago with bids for Jennings and its near-neighbour, Workington Brewery. He captured Workington, but was given the heave-ho by Jennings' then 400 mostly small shareholders. It then had a brush with the secretive Samuel Smith brewery of Tadcaster.

Today Frederic Robinson, an unquoted family-controlled brewery based at Stockport, seems to have an insatiable thirst for the shares and has built a 15.5 per cent shareholding.

Mr Clayton believes Robinson regards its stake as an investment. I wonder. Its persistence suggests it has a more predatory agenda. Still, if it does bid it could well find that we Jennings shareholders like our distinctive Lakeland brew. Jennings, I suspect, could mount a strong defence. There is a smattering of institutional investors but the army of small shareholders is now 1,000 strong. Although it would start any battle in a strong position, Robinson may find that it is impossible to overcome what might be seen as rather stupid shareholder sentimentality.

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