Derek Pain: It's 'penny dreadful' but Distil has put me in good spirits

Another of Derek Pain's six 2015 recruits is moving in the right direction

Derek Pain
Saturday 30 January 2016 03:39

Distil, the most recent addition to the No Pain, No Gain portfolio, enjoyed a merry Christmas – unlike so many other companies listed on the stock market.

In a further sign that the little drink group's restoration is gathering pace, chairman Don Goulding advised that sales advanced in the three months covering the festive season – and there are high hopes that the progress will continue.

The upbeat trading statement pushed the shares more than 10 per cent higher, although they remain in the "penny dreadful" category.

Even so, it is encouraging to record that another of my six 2015 recruits is moving in the right direction. Although four of my selection are, to varying degrees, down in the dumps, I remain hopeful that when the stock market recovers its equilibrium they will join in the fun.

Mr Goulding said Distil's sales were up over the festive period and that in the final three months of last year revenue surged by 71 per cent, with volumes up 31 per cent. The upturn was due to Distil concentrating on its own brands, including Red Leg rum, which enjoyed a strong take-up, and Blackwoods gin, which also advanced.

Plans are afoot to launch Red Leg – a spiced variety is now stocked by two domestic supermarket chains –in the United States.

It seems that only Blavod black vodka, once the star of Distil, let the side down. Sales fell in Eastern Europe, although the brand did better in the US.

I am familiar with the sales deterioration in Poland and surrounding lands through the portfolio's unsuccessful investment in Stock Spirits, sold at a loss.

Clearly Distil's progress, under the experienced drinks man Mr Goulding, is encouraging. However, as the old saying goes, there is many "a slip 'twixt cup and lip" and it would be wrong at this stage to get carried away. The company operates in a fiercely competitive business, dominated by giant, powerful groups, and Distil is capitalised at a mere £4.5m.

S&P Capital, which describes itself as a multinational financial information provider, has taken a shine to Booker, the cash-and-carry chain that is still the No Pain, No Gain portfolio's top investment.

The American firm regards the shares as a "strong buy" and has increased its target price from 159p to 195p. S&P Capital welcomed the £40m acquisition of the Budgens/Londis businesses, with 1,800 retail outlets, which will increase revenue growth at Booker.

In last week's column, I suggested that at times of stock market turbulence, long-term small investors should sit tight and not be panicked into selling. I stand by that advice but another side of the equation is to take cautious advantage of any disarray.

I have always said that the ideal strength of a small shareholder's portfolio is 15 or 16 shares. My portfolio is 15 strong, so my involvement in any further investments could be limited. Nevertheless, I will hunt around for bargains, even if it means dumping some existing shares – although, with a few exceptions, I am a reluctant seller.

Many long-term professional investors could currently be dipping cautious toes into the market. On the other hand, they may be holding back in view of the deluge of profit alerts and looming dividend restraint. After all, shares could be cheaper in the months ahead.

But as the highly successful American investor Warren Buffett said: "Be greedy when others are fearful."

It is a stance that many institutional investment managers are bound to support.

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