No Pain, No Gain Our Man's Portfolio: I see profit, so it's time we moved to a new Era

ERA, THE retail chain, is a splendid example of the stock market's walking wounded. In two horrendous years, the company lost pounds 24.5m and seemed destined for the corporate graveyard.

But new management and a much more focused policy have put the group on the recovery road. In its last financial year, profits emerged at pounds 264,000.

Richard Ratner, retail specialist at the company's stockbroker, Seymour Pierce, looks for a pounds 2.1m profit this year. If he is right the group, with a capitalisation of only pounds 12.2m, will have returned to the profit level it achieved in 1991.

Like so many strugglers Era has often flattered only to deceive and long- standing shareholders probably feel they have experienced too many false dawns to pay much attention to the current return to profits.

But this time round the company could really have something going for it. Indeed, with a little more luck, Era could be emerging as a growth retailer, something currently beyond the reach of the once-mighty Marks & Spencer.

The shares are cautiously acknowledging the group's change of fortune. They are around 9.5p, after reaching 10p, which compares with a low of 4p last year. Yet, despite more than doubling, they are but a mere shadow of their former price.

Ahead of the 1987 crash, when Era was a go-go company often on the takeover trail, they hit 150p. Since then, punctuated by a few short- lived rallies, the company has been a persistent despair.

I feel it is a reflection of Era's dreadful record over much of this decade that the market has not greeted the recovery with more warmth. After all, the retailer, with interests ranging from Beatties hobbies and toy shops to Tecno camera outlets, should have boomed in the spend- happy days that followed the ERM recession.

The foundation for the revival was laid two years ago when Postern Executive, a corporate recovery operation, moved in. New directors arrived and within months cut debts by selling Tecno for pounds 4m. Other bits and pieces departed and the group's retail activities are now concentrated on the Beatties chain of 60 shops. It also embraces Kohnstam, a wholesaler handling models and hobbies, and a furniture fittings distributor.

Beatties is behind the turnaround and carries most of the group's hopes of continuing headway. Beatties represented 80 per cent of last year's turnover and the Era chief executive, David Wood, is clearly intent on increasing its retail muscle.

Besides traditional models and hobbies it is a significant player in the world of computer and virtual reality games. This combination of the old and the new should have retail clout.

Sophisticated management control systems, costing pounds 1m, are being put in place and should be ready for the Christmas buying stampede when more than two-thirds of the group's sales are made. As well as reshaping its shops portfolio, selling the duds to open new branches, Era even offers an Internet exposure with its e-commerce website due in October.

The next set of figures, scheduled for September, are unlikely to create much interest. Era, because of its sales pattern, inevitably records a half-time loss and this year will be no exception to the general rule.

The long years of decline have left an uncomfortable legacy for the company. For example, the terms of a loan from Barclays at present preclude a dividend payment. Naturally, Postern's services were not provided free. And there were rich incentives to encourage the new board of directors. But I consider it would be churlish to begrudge them their relatively generous rewards if the comeback continues to move the firm onwards.

Era must rate as a somewhat speculative investment to take on . Not, perhaps, for the proverbial widows and orphans.But the shares have considerable potential to grow and should, in the long term, be a rewarding addition to the no pain, no gain portfolio selection.

For the rest of the portfolio, Allied Domecq and little Montana, the fledgling restaurant chain, are the two companies still providing the action. Allied's pub fiasco is well documented; talks at Montana continue.

Although its shares remain suspended at 257p the Montana chairman, Kevin Finch, has confirmed he is in negotiations with Hartford, the AIM-traded restaurant business where the artist Damien Hirst and the PR supremo Matthew Freud are the driving forces. Hartford runs one of London's trendiest restaurants, the Pharmacy in Notting Hill.

The two sides are said to be talking around a price of 350p, which would almost certainly be satisfied by Hartford shares. Montana would represent rather a big swallow for Hartford, but it would give the AIM company a wider and much-needed spread of restaurant interests.