No Pain, No Gain: One I didn't sell too early, and which is on the up

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The Independent Online

It has been a long, often agonising four years but it seems that shares of Wyatt, one of the No Pain, No Gain portfolio's more recalcitrant investments, are at last coming in from the cold.

They were suspended last week at 22p. The company, it transpired, is near to clinching what could be a major deal which may, I believe, be regarded as transformational. These are early days and due diligence has still to be carried out. But the signs are that the take over will be completed within a few months.

Still, even if Wyatt's expansionary hopes are not fulfilled, the little group is at last doing very nicely. It has just recorded its first-ever profit. And its move into the black is unlikely to be a flash in the pan.

Operating profit emerged at £354,000, against a £542,000 loss, with a "pure" pre-tax return of £122,000 compared with a £687,000 deficit. Turnover soared from £1.2m to nearly £3m.

This is quite a turnaround, then. The shares climbed from 14p to 19p on the figures and then the takeover talk lifted them to 22p before trading was halted. The portfolio paid 27.5p in April 2003. Assuming the signalled deal goes through I would expect them to top 40p this year. Even without the acquisition, I believe that the shares have put their dark days behind them and should be capable of exceeding the portfolio's recruitment price. It's a far cry from those not-so-distant days when the on-line group slumped to a miserable 8p. True, trading in the shares was invariably thin. Indeed on occasions they slithered and slipped with, according to the www.advfn.com screen, not a solitary share changing hands. Whether the company had a future was a relevant question.

If I had adopted the traditional stop-loss approach I would have dumped the shares. But faith and patience are sometimes rewarded. My gut feeling was that Wyatt would eventually prosper. It is closely related to the management of Mears, the support services group that is one of AIM's success stories, although its shares have come under pressure lately following allegations of contract problems, which Mears rejects. Mears was one of the portfolio's early hits, more than trebling to 84p. But, it transpired, I sold far too early. The shares have since gone on to even greater things, reaching, at one time, 380p.

Wyatt has three divisions. Star of the show is PES, offering a range of tax and legal services. It has swung handsomely from loss to profit. And Risksmart, a risk-assessment group, is now trading close to break-even. Both are expected to make further strong headway with, perhaps, year's profits getting near £500,000. The third division, featuring a drug-testing kit, has yet to get off the ground. Wyatt has capped its expenditure and its United States partner is now funding the venture.

Myhome International, the ambitious franchise group that is now the portfolio's top performer, is still on the takeover trail. Its latest capture is Ferrum, an ironing, dry cleaning and laundry business with eight operators in this country and master franchises in Spain and New Zealand. Ferrum, which offers a van collection and delivery service, should blend with the group's other franchises which include residential cleaning, gardening and oven cleaning.

The chairman, Russell O'Connell, believes the latest addition is another step towards creating a complete range of residential services for the "cash rich, time poor" brigade. He is prepared to pay £4.8m in cash and shares. Initial outlay is £500,000; the rest depends on trading over the next three years.

Myhome's shares are, as I write, 103.5p against the portfolio's 15.5p buying price. Profit forecasts continue to look impressive.

In its latest review, Growth Equities and Company Research is predicting £1.92m this year and £4.1m next. It expects the shares to hit 120p before the year's end.

Finally Private & Commercial Finance, the hire-purchase group that joined the portfolio at 19.5p in January and is now 26p: after moving from losses to profits it has raised nearly £600,000 through a share-placing at 22p. The shares went to Aberdeen Holdings, which now has 22.5 per cent.

It seems that the increases in interest rates have not impaired trading. The chief executive, Tony Nelson, revealed that the once ailing group enjoyed a record run last month.

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