Eyecare promises rose-tinted future

Investors are beginning to realise that an exciting future looms for spectacle manufacturer Eyecare Products, at 46p. Interest has been slow to build because the main factories are located in France, the biggest shareholder is American and the chief executive, Andre Cohen, though British by birth, has spent much of his life abroad. But as understanding grows of just how good prospects are, the shares should move smartly higher.

The aim is to "become one of the top eyewear companies by the end of the decade", says Mr Cohen, talking of operating margins of 20 per cent by then. Even on last year's turnover of pounds 61m that implies operating profits of pounds 12m against a market capitalisation of pounds 40m. But such progress will only be made if turnover also rises sharply.

Mr Cohen has added incentive because of option schemes giving him a major interest in how the shares perform. In total, he has options over 3.25 million shares at prices ranging from 30p up to pounds l expiring in 2001.

The recovery in the fortunes of then cosmetics minnow Kitty Little, as Eyecare was previously known, began earlier in the 1990s when a US importer of eyewear products, BEC Group (formerly known as Benson), acquired a stake with the idea of building up an eyewear business in the fragmented European market. Before their arrival the shares had dropped from 120p to 4p. Kitty Little had a range of interests including importing and supplying sunglasses and spectacle frames and supplying other items such as pot- pourri. The non-eyeglass interests were sold and the group transformed by the purchase of a struggling French manufacturer of spectacle frames, Group L'Amey. Mr Cohen was recruited to knock the enlarged group into shape.

Latest results show good progress being made with a turnaround at pre- tax level from a pounds 3.3m loss for calendar 1994, including exceptional losses of pounds 2.6m, to a profit to pounds 3.2m for 1995. In part, the improved performance reflected a much stronger balance sheet. L'Amey, France's largest manufacturer of optical frames and glasses, was acquired for pounds 8.9m but was funded by a share placing to raise pounds 18.4m. Additional funding was needed to cope with the heavy indebtedness of the French business at a time when recession in continental Europe was driving down sales.

There is still ample scope for improvement. Operating margins in 1995 were less than 5 per cent yet Mr Cohen believes he can quadruple that figure on a medium-term view. Specifically, he has a target gross margin of 60 per cent against the current figure of 54 per cent and is looking to cut operating expenses to 40 per cent of sales against some 50 per cent in the latest figures. That includes a further target of lifting the marketing budget from 5 or 6 to nearer 8 per cent of sales, implying a spectacular improvement in overhead recovery.

Part of the strategy involves traditional business housekeeping - more automation and improved logistics. These are important for spectacle frame manufacturers given that opticians require a fast service in supplying a vast range of sizes and shapes.

The group is also taking other initiatives to boost sales. Mr Cohen believes that for the foreseeable future it will be right to source the more expensive branded frames in France. These include Lunette L'Amey, the group's midpriced own-label brand. But a cheaper own label, Visions, is also being launched, initially in the US and sourced in the Far East from dedicated factories in Korea and China. Since 60 per cent of L'Amey's sales are outside France this additional production flexibility holds great promise for the future.

Stockbrokers' forecasts see these initiatives and a strategy of hedging against currency risk taking profits to pounds 3.6m this year and pounds 5m in 1997. That would leave the prospective p/e ratio on a notional full tax charge to around 12. But those numbers could be beaten if the group is successful in its acquisition plans.

Improved international distribution and more brands are the key to boosting sales. At present, L'Amey has licences for Nina Ricci, Lacoste, Ted Lapidus and Chevignon, a well-known brand in France, in addition to its two main own-label brands. Mr Cohen hopes to add to that portfolio either by launching new brands for fashion groups that do not yet have a spectacles business or by acquiring rights (if necessary buying licence-holding companies) to existing brands. Investors buying now could be in for an exciting ride.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Alexis Sanchez missed a penalty before scoring the opening goal with a header at the back post
footballArsenal vs QPR match report
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Arts and Entertainment
Madonna is not in Twitter's good books after describing her album leak as 'artistic rape and terrorism'
music14 more 'Rebel Heart' tracks leaked including Pharrell Williams collaboration
Rooney celebrates with striker-partner Radamel Falcao after the pair combine to put United ahead
footballManchester United vs Newcastle match report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all