Derek Pain: Hawtin limbers up and gets back into trim

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The Independent Online

Some quoted operations have been around for ages, swinging between highs and lows but seemingly going nowhere very fast.

Hawtin is such a company. Today its 71-year-old chairman, Len Dovey, is to meet shareholders at the Copthorne Hotel, Cardiff. After a distressing year there are hopes the chairman will have some words of encouragement for the assembled gathering.

For in its 127th year Hawtin did not cover itself in glory. In fact it opened its millennium account with profits of only £448,000, compared with £1.6m in the previous 15 months. In 1996, when it was enjoying one of its more prosperous runs, profits hit £6.3m.

Yet Hawtin should, on the surface, be doing well. It makes and markets a wide range of leisure requirements, ranging from fitness equipment to sunbeds and wetsuits.

Most of its sporting activities seem to have done well. The company even seems to have overcome the impact of a fire at one of its big offshoots that makes such items as whirlpools and steam rooms.

But like many others it has been laid low by fashionwear. "Turmoil in the clothing sector, particularly on Britain's high streets," sent its Singlam Fabrics division into a substantial loss, the first in 15 years. Hawtin has sharply cut back its textile operations. There has also been boardroom turmoil with Phillip Dovey, chief executive for 18 years, resigning a few weeks after a profits warning. Just how quickly trading deteriorated is illustrated by the decision in March not to pay any final dividend. In November the company had merely talked about reducing its final payment.

So Hawtin is undergoing another reorganisation. It is planning to focus on its sporting operations, which, with a prevailing wind, should at least allow it to make progress. Long-time shareholders will be accustomed to setbacks. Back in the Sixties, I recall Hawtin, under the direction of the Hawtin family, making dental equipment. Next it became a City merchant bank ­ with disastrous results.

The Dovey family, with interests in garages and shipping, arrived after the banking debacle and set Hawtin on its sports and textiles route.

Its shares have mirrored Hawtin's colourful career. At the time of the move into banking ­ which, with brilliant timing, occurred just ahead of the Seventies banking crisis ­ they topped 50p. Then a long steep decline. But then, as profits rolled ahead in the Nineties, the price clambered back above 50p. Now it is back in the bargain basement level ­ 12.25p. I am not suggesting readers should rush to buy. But there is a lot of value in the group. It has top-class brands (and businesses) and assets are around 25p a share.

Those looking for an unloved share with recovery potential could feel Hawtin is worth a modest dabble. But I would hold back until it is known what Mr Dovey, a prominent figure in the South Wales business community, has to say today.

Last week, his investment company picked up 7.8 million shares at 10p. The seller was Amvescap, one of Hawtin's two institutional investors. The deal, bringing his stake to 18.5 per cent, is an indication of Dovey confidence but demonstrates Amvescap's disillusionment.

From a tiddler ­ capitalised at £7.7m ­ to a giant. BT is not as big as it once was but after its dramatic share slide is still worth more than £37bn. The heavily indebted telecoms giant is trying to resolve its problems with a record £5.9bn cash call, selling off bits and pieces and splitting itself into two.

Until the rights issue is completed I would expect the stock market to remain subdued. After all, such a mighty cash call is bound to dominate investment thinking.

Should the BT rights be taken up? The company has not endeared itself to shareholders by cutting out its final dividend ­ even Railtrack held its payment. Private shareholders, asked to pump in more cash but not collecting their dividend cheque, must be tempted to sell their rights. But if they can afford to take them up, I would, with reluctance, say they should do so.

BT has made wounding mistakes. And the Government has been far from helpful. But it now appears to be following a realistic strategy and once its overall debt is reduced the shares of the demerged companies should make headway.

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