No Pain, No Gain: MyHome's demolition is a sad and expensive outcome
Saturday 13 September 2008
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; request a free guide on NISAs from Hargreaves Lansdown
- 1 Disney heiress Abigail disowns her share of family profits in West Bank company
- 2 The secret report that helps Israel hide facts
- 3 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 4 Israel's propaganda machine is finally starting to misfire
- 5 HSBC closes bank accounts belonging to Muslim clients in the UK
The secret report that helps Israel hide facts
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...
£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...
£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...
£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
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