LIG targets acquisitions

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The Independent Online
London International Group said yesterday that it saw significant opportunities for further acquisitions in its core condom and industrial gloves markets which would ensure double-digit earnings growth over the next few years.

Nick Hodges, chief executive, said the group was considering opportunities in a range of countries, including China, the Middle East, Eastern Europe and South America, to be funded from the group's strong internal cash flow.

He said that LIG's full-year results, reported yesterday, showed the group had moved from recovery to "a new phase in its development". Strong growth in condoms and medical gloves helped LIG lift underlying full- year pre-tax profits by 36 per cent to pounds 36m on sales 11 per cent ahead to pounds 241m. The group's shares rose over 8 per cent to 169.5p.

However, analysts downgraded their profit forecasts for 1998 by around pounds 5m to pounds 47m, reflecting LIG's plans to increase spending on advertising, roll out Avanti, the group's new polyurethane condom, into Europe and sterling's strength.

Mr Hodges said that although the US condom market remained difficult, with customers loyal to the leading brand Trojan, which has a 60 per cent market share, LIG was continuing to promote its Durex brand "as a strong number two". This would involve re-branding its current six products under the Durex name. Analysts estimated the rebranding, the roll out of Avanti from the US into Europe and the upgrading of the Aladan examination glove facility, bought last year, would push capital expenditure up from pounds 16m this year to pounds 20m in 1998.

However, they said the group should benefit from cost savings from integrating the Aladan condom factory in Alabama with the group's existing site.

Sales of the group's condom business rose 7.2 per cent overall to pounds 130m, with sales in Asia Pacific, up 33 per cent, particularly strong. Though the condom market grew just 2 per cent world-wide, LIG achieved 7 per cent volume growth with prices rising 3.5 per cent. Sales of Avanti in the US continue to be held back by restrictions imposed by the Food and Drug Administration, which demands that the material is fully tested over two years. This means LIG can only sell Avanti to people with latex allergies in the US. Mr Hodges said there were no such restrictions in Europe.

Sales of medical gloves grew 16 per cent to pounds 89m, boosted by a pounds 21m contribution from the gloves business acquired with Aladan. Sales to hospitals in the US were "superb", said Mr Hodges.