No Pain, No Gain: The rough and tumble of making a portfolio pay

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The Independent Online

A legal entanglement can be an expensive and wounding experience - even for the victor. Private & Commercial Finance Group, a little car hire purchase company, was awarded £4m against its courtroom adversary, National Insurance and Guarantee, in May - enough, you may think, to put the group, capitalised at only £5.7m, on easy street.

A legal entanglement can be an expensive and wounding experience - even for the victor. Private & Commercial Finance Group, a little car hire purchase company, was awarded £4m against its courtroom adversary, National Insurance and Guarantee, in May - enough, you may think, to put the group, capitalised at only £5.7m, on easy street.

But P&C is deep in the red and struggling to recapture its old momentum. The long, draining battle has left it a pale shadow of its former self. The company once enjoyed a strong investment following, with its shares comfortably topping 100p. Today they are 38p and the stockbroker Seymour Pierce expects a £1.4m loss this year, a far cry from the £1.3m profit achieved a couple of years ago.

It was P&C's involvement in the more rough-and-ready side of car-hire purchase - euphemistically known as the sub prime market - which led to its confrontation with National Insurance. The group, perhaps unwisely, entered this area some four years ago, paying National Insurance a policy premium of £500,000 a year. For three years, no problems; then claims began to escalate and National Insurance reacted.

Tony Nelson, P&C's chief executive, is bitter about the row. In an interview on the t1ps.com website he said: "We wasted 18 months chasing answers and detailed responses involving long schedules covering some 6,000 agreements, only to find we'd already answered them satisfactorily and they dropped all of them at the last minute."

The legal demands distracted the P&C team. The group also felt obliged to wind down its hire purchase book to accumulate the necessary cash should the case go against it. Other costs materialised, worsening the overall performance.

P&C is busily trying to rebuild trade. Such an exercise is not easy and the run-up to Christmas, often a low time for the car trade. But the general view seems to be that P&C is back on the right road. Next year, suggests Seymour Pierce, the group will be in the black with profits of about £560,000.

An as yet unknown influence in the P&C comeback is the performance of its first car supermarket, where besides collecting the retailers' wedge, it steers many of its customers onto its hire purchase books. The first Karma supermarket, near Watford in Hertfordshire, opened behind schedule (blame the legal struggle) at the end of September. The operation offers covered space for 140 vehicles with a fenced area capable of accommodating a further 90. Hopes for a rapid roll-out are no longer feasible and P&C expects to have only two more operating by the early part of 2006.

Although the legal tangle hit P&C harder than seemed likely, I believe it will eventually regain lost ground and the shares, still offering a dividend, look an interesting speculation. A few years ago, when P&C shares were around 60p, I pondered recruiting them to the No Pain, No Gain portfolio. In the event - wisely as it turned out - I did not.

Vitesse Media is another tiddler that has been on the fringe of claiming a portfolio spot. The arrival of Chris Ingram as a non-executive director and 13 per cent shareholder has re-awakened my interest.

Remember Mr Ingram? He founded the successful Tempus communication and marketing group with £10,000 in 1976, selling, in a shrewd £432m deal, to Sir Martin Sorrell's advertising and marketing behemoth, WPP, three years ago. Since then he has occupied much of his time with football - buying the stricken Non-League newspaper and bankrolling and being chairman of his local football club, Woking. He joins the serial investor Bob Morton on the Vitesse share register. The main shareholder is the chairman, Sara Williams. The company produces a print and internet business and investment publications. Its best-known venture is probably Growth Company Investor. Vitesse is also establishing itself as an events organiser. Mr Ingram's brief is advising on "growth strategy".

The group is looking around for acquisitions - it recently paid £50,000 for an events business - and, after a long time in the red, is moving into profit. Its interim figure was a mere £12,000 and, perhaps, profits of only £30,000 will be achieved over the full year. But the improvement should gather momentum with about £230,000 on the cards for next year. The shares arrived on Ofex four years ago at 50p a time. Then a year or so later the company moved to the Alternative Investment Market. Mr Ingram paid 24p a share for his stake. Current price is about 25p, capitalising the company at £3.3m.

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