Derek Pain: 'It's about time for revamped Distil to start raising spirits'

The group has a pretty dismal record but under experienced drinks executive Don Goulding, it has been reshaped and is starting to make progress

Spirited interim results from Distil confirm that the little drinks company should be added to the No Pain, No Gain portfolio.

Its recruitment is something of a gamble, but nothing is certain when investing in the stock market. Indeed, recent events on the AIM market, where Distil shares are traded, have created considerable alarm and tarnished the junior market's image.

I have followed the drinks marketing group for some time. It is no fly-by-night and has been around for years. True, I cannot recall it ever making a profit but at 0.9p a share (capitalising the company at less than £4m) it is, I believe, worth some speculative attention.

The group, once known as Blavod Extreme Spirits, has a pretty dismal record. But under experienced drinks executive Don Goulding, it has been reshaped and is starting to make progress, which the share price has so far failed to reflect.

The group is still in the red. Yet, in the half year to the end of September, revenue was up a commendable 89 per cent and the loss narrowed from £198,000 to £90,000. In this country a spiced rum called RedLeg seems to be the group's flag waver. A major supermarket has installed it in 700 of its branches.

Other brands include Blackwoods Gin, which should benefit from the move to craft tipples in this country, and Distil has high hopes for its progress in the US market. RedLeg is also destined for America.

The fly in the ointment seems to be Blavod Black Vodka, once the main product. It has been hit by setbacks in Eastern Europe, a sobering experience the portfolio has already encountered following the problems facing a former constituent, Stock Spirits.

Stock's shares were doing well before it became apparent that higher vodka taxes in Poland and price cutting in the region had eaten into profits. So Stock shares collapsed and the portfolio sold, suffering a substantial loss.

Distil operates in an exceedingly tough market but Mr Goulding expects the "encouraging" first-half progress to continue into the remainder of the year. I suppose it would be too optimistic to expect the group to actually achieve profits this year but I am convinced that the business could become a forceful player in this highly competitive industry.

Among the shareholders are Howard Raymond, the son of the former "King of Soho", Paul Raymond, who has a 10.4 per cent interest. And after the interim figures, funds related to the stockbroker Brewin Dolphin increased stakes to 6.2 per cent. Regular readers will know I am a superstitious old sod, and the enlistment of Distil brings the portfolio's strength to "unlucky 13". I am, therefore, aiming to recruit another share as soon as possible. Perhaps I will venture forth again on AIM. Despite all the talk of it being a "casino" – reinforced by recent occurrences – the junior market features some intriguing small caps. Since its launch 10 years ago, about 3,600 companies have joined. Not all have covered themselves in glory. But AIM can still claim to be the most successful growth-share market in the world.

With many, often untested small caps, there are obviously going to be casualties. But there have also been many successes. Perhaps the authorities should tighten some aspects of membership, but by and large AIM serves a useful purpose. Even so, investors should, as always, tread with caution.