Bottom Line: LIG still faces uphill battle

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The Independent Online
YOU WOULD have to be very brave to buy shares just now in London International Group, even after the company has finally bitten the bullet on ColourCare.

Photoprocessing and condoms never had any synergy. The decision to diversify the Durex manufacturer into the holiday snaps business was an opportunistic move that went horribly wrong.

The new management has been right to recognise that the only course of action was to get out of the ColourCare business as quickly and cheaply as it could.

The disposal of almost all of ColourCare is very costly, but it means LIG can now concentrate on its core gloves and condoms business and begin work on its devastated finances.

But from here it will still be an uphill battle. LIG acknowledges that the condoms and examination gloves market has become a low growth, low cost, high volume sales business where the competition from rubber-producing countries such as Malaysia is stiffer by the day.

The group sees its salvation in strong brand names such as Durex - especially important in emerging markets like Eastern Europe - and high-tech surgeons' gloves that are beyond the competence of low cost producers.

With debts estimated at pounds 160m- pounds 200m and net assets that will be almost wiped out by this year's losses, LIG's balance sheet looks very sick. The refinancing expected next month - probably a two-for-three rights issue at about pounds 1 a share to raise pounds 100m - will barely be enough to put it back on its feet.

For all but the most risk-tolerant investors the shares at 116p are still to be shunned.

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