No Pain, No Gain: MyHome's demolition is a sad and expensive outcome

Many companies are facing acute difficulties, and the transatlantic mortgage bail-out will not have any near-term impact. The trading environment continues to deteriorate as the still-ferocious credit crunch exerts pressure. With their limited resources, small-caps are particularly vulnerable in such brutal conditions.

With sales and funding under attack, sympathy is in short supply and the weak perish. Mistakes are not tolerated in such a hostile climate and guilty firms are treated harshly.

The No Pain, No Gain portfolio has suffered acute embarrassment, with constituents feeling the bitter impact of the crunch. In some cases, mistakes have compounded their difficulties.

Last week's distressing suspension of shares of Myhome International, the franchise group, is the latest disaster to hit the portfolio. The credit crisis could be an influence, but there is little doubt that the company made some fundamental errors.

The portfolio descended on the group in July 2005 at 15.5p a share. It sold at 50p. In the meantime, the price hit 106p with Myhome, then attracting enthusiastic City support, successfully placing shares at 85p and 72p. The portfolio foolishly returned at 27p. Share trading was halted at 5p. Administrators quickly arrived.

Investors who followed the portfolio first time round were in the money, but any who ventured in at 27p face annihilation. I apologise for their financial discomfort. Overall, the portfolio escaped with a £6,000 profit.

A takeover spree and management losing focus at a crucial time seem to be largely responsible for the crash. But the part played by Lloyds TSB requires some explanation.

Last year, to help the rush to expand, the franchise group borrowed £8m from Lloyds. In July, to the accompaniment of a mildly encouraging trading statement, it emerged, to the surprise of many, that some banking restrictions had been broken and Lloyds wanted the loan reduced. Then, two weeks ago, it was said that a potential investor was in talks to replace the loan and take an equity stake. Last week came the bombshell. Lloyds demanded immediate repayment; it must have known Myhome hadn't a cat's chance in hell of complying.

Why did the bank act so controversially? On the surface, it seems to have destroyed any hope of recapturing its £8m. And a network of 900 franchisees is under pressure.

Myhome, specialising in residential cleaning, was started by Unilever, the food and soap behemoth. It sold to a rival operation run by Russell O'Connell. The group moved from Plus to AIM at the start of last year. Unilever retained a stake until last year, when it sold at, I understand, about 90p a share. But a string of famed serial investors were not so lucky. Nigel Wray, Bruce Rowan (who increased his holding in July), Stephen Hemsley and Mark Slater declared significant shareholdings. As the clouds darkened this powerful band, who had obviously found the group attractive in its go-go days, provided the best hope of survival. But, perhaps, Lloyds' demand killed any chance of a shareholder-led rescue and frightened the potential investor.

The fall of what was once a darling of the City is not a complete surprise. In recent months, warning signals, such as Lloyds' discontent, emerged. Before then, it seemed that although trading had slowed there was little to worry about. In March, new chairman Jon Pither suggested this year's results could be "significantly ahead" of last year's.

It is a spectacular crash. And it has, not surprisingly, created bad feeling in the City. One shareholder, the t1ps Fund, says it intends to contact the Government and the Financial Services Authority, questioning the conduct of O'Connell, Myhome's chief executive and former chairman.

As it put through five take-overs last year, it had little trouble, with its shares riding high, raising City cash. Yet with hindsight, it seems that the last deal, the £16m acquisition of the Chips-Away franchise, was a deal too far. Also, assimilating ChipsAway took too much management time. At 5p, Myhome was capitalised at £3.2m – making nonsense of the price paid for an admittedly successful business undertaking minor car repairs.

An expensive and unhappy end to what once seemed a remarkable franchise success story.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

    They fled war in Syria...

    ...only to get stuck and sidetracked in Hungary
    From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

    Title sequences: From The Prisoner to Mad Men

    Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
    Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

    Giorgio Armani Beauty's foundations

    Sumptuous fabrics meet luscious cosmetics for this elegant look
    From stowaways to Operation Stack: Life in a transcontinental lorry cab

    Life from the inside of a trucker's cab

    From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
    Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

    Kelis interview

    The singer and sauce-maker on cooking for Pharrell
    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea