Bottom Line: Ahead of the game

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BLUEBIRD TOYS is generating more cash than it knows what to do with, and must surely be attracting the acquisitive eyes of the big boys in the toy market.

Pre-tax profits in 1993 soared from pounds 1.5m to pounds 9.8m, surpassing all expectations and lifting the shares 90p to 833p.

Miniaturised Polly Pocket toy dolls and accessories sold in record numbers and there was strong worldwide demand for the new Mighty Max equivalent for boys. Sales of the Peter Pan range of classic toys such as Etch A Sketch, the Big Red Fun Bus and Play Stuff remained stable.

The company has clearly learnt from past mistakes. Stock levels are kept low, 80 per cent of its toys are sourced from the Far East and the high risk of once total exposure to the UK market has been spread across 60 countries.

Bluebird has also learnt how to dictate play by holding back on supply and changing the whole range of Polly Pocket and Mighty Max every year, which both serve to lengthen the products' lives.

Bluebird could make about pounds 12m in 1994, rating the shares, which are being sub-divided on a four-for-one basis, on a cheap p/e of 12. Since it will also see its gross cash rise from pounds 12m to pounds 20m, shareholders can expect a significant increase on the 16p (against 4.5p) dividend paid in 1993. A takeover cannot be ruled out.