No Pain, No Gain: Myhome looks sure to ride the Stagecoach route

Has the stock market got its wires crossed over Myhome International? Judging by the way its shares have behaved the franchise group is deep in the doldrums. They have slumped spectacularly from 106p to a mere 15p in less than a year. Yet signals from the group's Esher (Surrey) headquarters indicate the shares could be among the most oversold in the smallcap community.

It is often foolish to bet against the market. So often it seems to get a whiff of disaster – or, indeed, achievement – long before any formal announcement. But it can also hopelessly misjudge a situation.

There are countless examples of shares being pushed to unjustified levels – highs and lows. The madcap dot.com boom that sent many into the stratosphere and the resultant excessive burn-out are classic examples. And what happens across the entire investment spectrum can be repeated on an individual basis.

Remember Stagecoach? I do. After the shares were recruited to the No Pain, No Gain portfolio at 80p, they slumped to a miserable 10p as a succession of doom-and-gloom stories frightened investors. I am not suggesting the bus and train group had not encountered serious problems. It had over expanded in the United States and was experiencing difficulties elsewhere. The fall, however, was a dramatic over-reaction.

With its problems containable, it was not long before recovery was underway. This year the shares hit 294.5p. Share buybacks, producing 81p a share, complicate the gain calculation. Even so, not a bad display for what was once regarded as a busted flush.

Myhome's fall from grace is even more brutal. I realise the decline has occurred at a time when the stock market has fallen out of love with smallcaps. Yet, its slide is much steeper than its compatriots.

True, profits did not hit expectations. Against hopes of £1.9m, the company produced £1.5m. In the previous year it made £734,000. And researcher Equity Development has cut this year's forecasts from £5.9m to £3.6m.

The unfulfilled profit expectations occurred as the group gorged on acquisitions. It started life as a franchised residential cleaning operation, supported by a sophisticated, highly expensive computer system developed by the Unilever foods to soaps behemoth. Russell O'Connell, Myhome's creator, had the bright idea of putting other franchised operations through the Unilever system. So it ventured into such areas as gardening, car valeting, plumbing and window cleaning.

It, perhaps, could be argued that Myhome bit off more than it could chew. Shares were tossed around like confetti. Certainly its last – and biggest – takeover, the £16m acquisition of ChipsAway, carrying out minor car repairs, was largely responsible for ED reducing current year predictions. The deal took longer than anticipated, prompting management to take its eye off the existing businesses in the first quarter. So interim results, due this month, could be rather subdued.

But there is every chance Myhome will reach the reduced year's forecast. Trading is going well, franchisees are being recruited at an encouraging rate, there has, as yet, been no impact from consumer spending cuts, overheads have been reduced and cross-selling the franchise offerings is underway. Chairman Jon Pither even tried – if unsuccessfully – to spread a little cheer at March's yearly meeting.

At 15p the group is valued at less than £10m – some £6m less than what it paid for the successful ChipsAway concern. And the shares, selling at not much more than three times this year's expected earnings, look as cheap as chips. Even if ED's forecast is not met – one researcher has a £2.5m estimate – the shares are still deep in the bargain basement.

Myhome's misfortune is a stark illustration of how brutal the market can be when one of its favourites disappoints. Issuing shares at 85p and 72p last year merely added to the disappointment of City followers.

O'Connell says the share price is a "blooming joke". He accepts responsibility. "I've got to take it on the chin; we were bad at communicating with the City," he said.

My guess is that Myhome will do a Stagecoach. The portfolio first climbed on board at 15.5p, selling at 50p. It returned at 27p. The subsequent performance has been as painful as catching a falling knife. Still, I am bloodied but unbowed. The portfolio is hanging on, hoping – eventually –for another profit.

PROMOTED VIDEO
Sport
Ray Whelan was arrested earlier this week
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
peopleJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Account Management Strategy Manager

    £38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice