No Pain, No Gain: Good figures alone don't cut it in depressed times

As the credit crisis took its inevitable toll, the three once high-flying shares unceremoniously dumped from the No Pain, No Gain portfolio have, not surprisingly, failed to recapture any of their old sparkle. And the delivery of encouraging profits has again been contemptuously ignored by the stock market.

Last week I commented on the travails of Printing.com, the on-line printer. Its shares never enjoyed the stratospheric success once achieved by the glamour trio. With their fancy ratings it was apparent that once signs of stress and strain emerged, with many investors feeling compelled to unload microcaps, the threesome would be susceptible to some resounding hammer blows.

Goals Soccer Centres is now around 300p after once commanding 444p; Myhome International is a mere 17.5p following a 106p peak and the third, the Prezzo restaurant chain, bumps along near 40p after earlier touching 93.75p.

I have recaptured Myhome, the franchise group, but although GSC and Prezzo are trading well, despite crumbling consumer confidence, I have, for the time being, abandoned any intention of drawing them back into the portfolio.

My reservations about Prezzo have been underlined by its latest figures. They were, in one sense, hugely impressive. Year's turnover was up 29 per cent to £70.1m with headline pre-tax profits emerging at £10.6m, a 23 per cent increase. In its past year the group opened 32 restaurants and now runs a 130-strong chain with a further five in various stages of completion. And chief executive Jonathan Kaye declared: "We remain confident of another positive year for the company."

But there were cautionary elements on the other side of the menu. The year's dividend is up by a mere 14 per cent (against a 40 per cent increase last time) and the "true" profit is actually down – by £1m to £7.7m. The setback is due to a £3.2m provision to accommodate underperforming restaurants that may be sold.

Still, I must confess I have a soft spot for the shares. After all, the portfolio acquired them at the equivalent of 17.25p and sold at 60p. Not a bad day's work, I suggest. Although they are now on a much more realistic rating they could suffer further damage if the trading environment continues to deteriorate and the eating out habit is threatened. On normal considerations the shares could be worth buying. But these are far from normal times and I would hold fire for the time being. Prezzo has much to commend it but I feel little will be lost by adopting a wait-and-see approach.

GSC, running five-a-side football centres, underlined its strength with a 26 per cent sales increase last year and profits up 42 per cent to £7m. The dividend was increased by 58 per cent. Trading remains strong with at least six centres due to open this year. The group, which is trying its luck in the United States, could resist the impact of belt-tightening more, but the shares already reflect such a possibility.

I continue to like GSC. The portfolio scored a reasonable gain, buying at 125.5p and selling at 300p. The shares are no longer on a stratospheric rating but even so they still look awfully pricey. As I have pointed out, commendable figures make little impression in the depressed stock market we are now enduring. But such indifference will not last forever. Investors should wait for the chill winds that are paralysing much of the investment world to abate. And don't let the fear factor, as shares continue to wilt, force panic sales – unless, of course, cash is urgently needed.

Hargreaves Services is one of the portfolio's more active constituents. It has completed another deal – this time absorbing a company called AJS Contracts, which offers maintenance services to the power industry. Cost is £4.64m with £2.2m up front and the rest spread over two years. AJS produces year's profits around the £1m mark.

The transport-to-coal-mining group has made headway since it was recruited to the portfolio two years ago. Like many, its shares failed to hold their peak (645p) but at 521p are still showing a nice little gain from my 417p-buying price.

Earlier this year Hargreaves produced encouraging interim profits and hopes are running high that it will achieve year's profits of £17.1m against £9.6m last time.

cash@independent.co.uk