No Pain No Gain: It's not a sexy company - but the profits might be
Saturday 22 April 2006
I have added Hargreaves Services to the No Pain, No Gain portfolio. It is probably the most unglamorous company I have ever recruited. Although involved in the sweat and toil segment of the business world, it could blossom into a future star of the Alternative Investment Market (AIM). Indeed, the shares have already made remarkable progress. Floated at 243p in November, they are as I write around 417p.
It was in February, when the shares had already made dramatic headway, that I became aware of the company and its attractions. If I waited I hoped they would surrender some of their exuberance. They have, however, steadfastly refused to give much away, displaying unwelcome resilience. So, despite the obvious dangers of what is after all a fancy price, I have decided to join the party, paying, I feel, rather dearly for the privilege.
So what makes Hargreaves special? Well, it overcomes its lack of sex appeal by offering basic services that should prosper in the next decade or so. It spreads over bulk haulage (moving coal and other aggregates around the country); waste handling, industrial services and importing and producing coke.
These activities made interim profits of £3m (up from £1.2m) and stockbroker Brewin Dolphin is looking for an annual pre-tax figure of £6.6m. The shares are therefore trading at 21 times expected earnings.
Buying shares around the halfway point between the interim and final profit announcements is often a sound policy. If there has been a lack of information - and that is usually the case - the shares tend to drift lower as investment interest wanes. However, my patience with Hargreaves achieved little reward.
My hope is that I have not missed the party. I take some comfort from portfolio constituent Goals Soccer Centres, running five-a-side football venues. A year ago I paid a then peak price of 125.5p. The shares are now 230p.
Hargreaves is, however, light years removed from GSC. It started with 20 vehicles 12 years ago. Today it has 370 of those articulated and rigid tipper trucks, lugging their loads around the country. There are also some canal barges. Besides coal - Hargreaves is a major importer, mainly from Russia - and aggregates, it carries huge amounts of waste from council tips to landfill sites and sorting stations.
Although coal may never recapture its glory days, it is staging something of a revival. The escalating price of oil is helping. And it is worth remembering that there are still nearly a score of coal-fired power stations in the country, getting through some 51 million tons a year. True, coal is a low-margin business. But Hargreaves, by importing through two ports it runs and then taking on the distribution, is able to wring reasonable returns from a big-volume business.
The group enjoys the bonus of covering itself against the soaring cost of oil as it has taken on long-term contracts which allow higher distribution costs to be passed on to customers. It is, in many ways, a support services business - an area which has impressed the stock market. Witness the strength of Mears and other facilities groups. Indeed, its waste disposal operation has guaranteed orders of more than £200m.
Last year Hargreaves bought the UK's only independent coke producer, Monckton, for up to £12m. It was just in the black when the deal was clinched. Already, prospects have been transformed, with the group making a major contribution to this year's profits. I expect further deals. And Hargreaves could itself attract predators.
Prezzo, the restaurant chain, is one portfolio constituent that has justified my faith. Last week it produced year's profits of £6.4m against £4.1m and dutifully increased its shareholders' dividend helping. The portfolio paid the equivalent of 17.25p for its shares; they are now 66p.
It is, of course, tempting to take profits. But I intend to hold on for the time being. I would never be surprised to witness corporate action. After all, the Kaye family, the force behind Prezzo, has a rewarding record of successfully building restaurant businesses and then selling at a top price.
However, I would not attempt to deter any investor who followed the portfolio into the shares from bailing out and locking in what is after all a handsome profit. Certainly there is a strong argument for selling, say, half a shareholding, thereby establishing a profit and enjoying a free ride on the back of the remaining shares.
Compare with the Independent: See how much you could save by switching credit cards. Compare now
MPs warn that carbon bubble may hit savers
10 tips for taking out a personal loan
Stuck in a with-profits policy? How to bail out
How to start your own internet business
The whole truth about legal fees: Conveyancing can knock a big hole in home-buyers' finances. To get the best deal you must cross-examine solicitors about their charges, says Sue Fieldman
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Australian man Rod Sommerville reacts to bite from deadly snake by reaching for cold beer
- 3 Teacher shows sex tape featuring herself to pupils during class by mistake
- 4 David Cameron resorts to paying for Facebook fans because not enough people like him
- 5 Steve Irwin’s final words: Cameraman present at death opens up about deadly stingray attack for the first time
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
Exclusive: Impact of immigrants on British workers ‘negligible’
Vince Cable: Teachers 'know absolutely nothing' about the world of work
Ukraine crisis: Russia pledges to 'retaliate against sanctions' as Ukrainian president says Crimea vote will not be recognised
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£55000 - £70000 per annum + benefits: Pro-Recruitment Group: In-House Corporat...
£80000 - £100000 per annum + benefits: Pro-Recruitment Group: In-House Opportu...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
Day In a Page
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town