Buyout in the pipeline for hose company

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The Independent Online
THE ANNOUNCEMENT yesterday of a proposed management buyout by chief executive David Codling sent Hozelock shares soaring to a five-month high.

In a statement, the company said that "an approach has been received from a financial institution which is considering an offer to be led by David Codling, the chief executive of Hozelock".

Mr Codling, whose backing is believed to come from a venture capital company, led a management buyout of the company from Ropner Group in the early 1990s, floating the business shortly afterwards.

The company reported disappointing year-end figures last week, which showed that their pre-tax profit had fallen by 31 per cent to pounds 4.7m.

Hozelock blamed the "exceptional weather and currency situation of the past two years, and the tougher international environment" for the losses.

The strength of sterling cost the company up to pounds 1m, according to a statement, with hose and attachment sales suffering from one of the wettest summers on record.

It is not yet known what size the eventual offer will be. Analysts say it is very difficult to value Hozelock because of influence of unpredictable British summer weather on the company's performance. This makes its cash flows extremely volatile, and a base level of earnings almost impossible to ascertain.

One analyst, who declined to be named, said that the company had an excellent brand name and institutional investors would expect at least 300p per Hozelock share.

"Mr Codling has given the market ample time to value the company correctly, and obviously feels that the share price slump of recent months is an ideal time to take Hozelock back into private ownership," the analyst said. Mr Codling was unavailable for comment yesterday.

At the close of trading, Hozelock shares had risen by 51p, or 21 per cent, to 292.5p.