No Pain, No Gain: If you held on to Mears, congratulations are due...
Saturday 21 January 2006
I am indebted to Bob Holt, a no-nonsense entrepreneur. His Mears support services group was one of the No Pain, No Gain portfolio's early constituents. The shares were sold at a handsome profit. But I was too hasty; the price has soared since I rashly cashed in.
It is now around 300p. I paid 23p, selling at 71.5p. The stock market is normally philosophical about such misadventures. It is never wrong to take a profit is an often-heard comment. Nevertheless my decision not to stick with Mears must be classified as an almighty clanger - one that cost the portfolio dear.
Since sacrificing Mears, which has just rolled out an encouraging trading statement, I alighted upon another Holt venture - Wyatt, a little online risk consultancy. Its shares have failed to cover themselves in glory and are in the red. Still, fearing an embarrassing repeat performance, I am hanging on - at least for now.
Holt, however, has not confined his endeavours to only two stock-market companies. He has other interests. One is Supporta, a group carving out an intriguing niche supplying a range of white-collar services to local authorities and other public bodies. In some ways it is very similar to Mears. It, too, services local authorities, although its core operation is blue-collar housing maintenance.
Even so, there are significant differences. Whereas Holt, once the chief executive of Tottenham Hotspur FC, is still at the forefront of Mears, he has taken a back seat at Supporta where John Jasper, a former Capita man, is in charge. He replaced Holt, now in a non-executive role, as chairman in August, 2004. And Supporta, unlike Mears, has emerged as a nimble footed acquirer. It has already put through a string of deals and more takeovers are expected.
It is a company in a hurry. Last month it paid £4.9m (with £2m more depending on profits) for a business called Independent Living Organisation. It offers home and live-in care for 22 local authorities and has an order book of £16m. Pre-tax profits hit £750,000 last year.
ILO will be lumped in with Supporta's care division, lifting the hours of home care it provides to above 30,000 a week. Still highly fragmented, the market is worth some £2bn a year and swelling at a rate of 6 per cent. The private sector share is 62 per cent and growing at 11 per cent.
The group has two other promising divisions. One provides payroll and support services, mainly to the health service; the other offers property design, planning and project management to the public sector.
Supporta, then called Staffing Ventures, arrived on the Alternative Investment Market (AIM) five years ago. It described itself as a seed-corn vehicle for new recruitment businesses. But this policy was abandoned under Holt's leadership and the drive into the public sector launched. It is an area well suited for the experienced Jasper.
The reshaping was quickly accomplished. Four recruitment operations were sold and two closed. The operating structure was streamlined from 35 companies to the three divisions.
As it has grown, Supporta has accumulated strong City support. Institutional investors hold around 85 per cent of its shares and their power will have increased following their take-up in the share placings which accompanied the ILO acquisition. The shares have had a healthy run in the past 18 months, although they are below the peak hit in the group's early days on AIM. The price is now 88p, giving a £54.7m capitalisation, against 37p in the summer of 2004.
Like so many up-and-coming concerns - Jasper describes it as aspiring "to be the supplier of choice in its chosen markets"- Supporta has yet to make real money. Last year it lost £870,000 at pre-tax level. In the first half of its current year the loss was £340,000. Both figures were heavily influenced by special charges, including the dreaded goodwill amortisation. Although exceptionals will again leave their mark, pre-tax profits could be achieved this year.
Supporta is some way from rewarding shareholders with dividends. But it is proceeding in the right direction, is adept at bedding down acquisitions and has established itself in its chosen fields.
It is the sort of company I would normally welcome into the portfolio. But with one Holt share still in residence and another ranking as a former constituent, I feel I should for once ignore the entrepreneur's influence and look elsewhere for recruits. Still Supporta is an interesting situation - one that will enrich supporters.
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