Alexon recovers with style: The Investment Column

Shareholders in Alexon still have a long way to go before their shares get near the 430p peak reached five years ago, just after the women's clothing group spun off its manufacturing operations as Claremont Garments. But with another 7p rise to 175p yesterday, they are, at least, now moving in the right direction.

The credit for that should go to John Osborn, who arrived as chief executive in 1993 with a brief to stem the losses at Alexon's Dash brand and keep its bankers at bay. Figures showing pre-tax profits mushrooming from pounds 141,000 to pounds 3.03m in the 26 weeks to July show just how successful he has been. Having been forced by 69 per cent gearing to go cap in hand to bankers last year, he has all but wiped out debts and is confidently talking of paying off three years of accumulated preference dividends, a total of some pounds 4m, in March.

The early part of what is a classic recovery story came with overhead containment. Mr Osborn reckons central costs, as much as pounds 17m when he arrived, should be held below pounds 10m in 1996/97 for the third successive year. The focus has now shifted to top-line growth and, once again, Alexon is delivering in spades. Turnover up from pounds 47.8m to pounds 57.2m represented like-for-like sales growth of 16.5 per cent.

All five brands, ranging from Kaliko, the most recent, aimed at the over- 30s, to Eastex, catering for the elderly, chalked up double-figure percentage sales increases in the period. That is testimony not only to Alexon's sharp differentiation of its customer base, but also probably reflects the early fruits of a new design team installed last year.

Full-year profits of pounds 7.5m would put the shares on a forward p/e of 16. The boom on the high street and prodigious cash generation fully justify that rating.