Bottom Line: Following Leng

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IN HIS first full year as chief executive of Low & Bonar, Jim Leng has invested a pounds 50m rights issue in two key packaging acquisitions and achieved impressive gains in productivity and margins.

Disposals of non-core subsidiaries and rationalisation of some other businesses saw margins jump last year from 8.8 to 10.3 per cent.

Higher profits - combined with pounds 11m earned from better management of working capital - also contributed to net cash inflow of pounds 25m and a sharp reduction in gearing.

On top of these achievements, the management has a clear picture of what it is aiming for. Packaging is the key area, accounting for nearly two-thirds of group sales.

Here the strategic challenge is to remain one of the dwindling number of suppliers to the big manufacturers.

Low & Bonar's acquisition of Kellogg's European packaging subsidiary last March not only tied it in as sole supplier to Kellogg for five years but also confirmed it as one of Britain's largest producers.

A second challenge is to move beyond basic cardboard and ink. The purchase of CMB Carton Systems in France last June took Low & Bonar into higher technology involving robot-run packaging lines.

The strategic logic has helped to allay fears aroused by the company's burst of deal-making last year.

On a prospective price/earnings ratio of 16, the shares are not dirt- cheap, but Mr Leng and his team have won a following that will provide long-term support.