Smaller Companies: Boxmore set to wrap up acquisition

SHARES in Boxmore International, the packaging group based in Northern Ireland, are set for a strong run in the next few weeks.

It is thought that the company, featured here on several occasions, is poised for a big acquisition.

Boxmore's management under Harold Ennis, chairman, has long wanted to augment the group's steady organic growth with a substantial purchase, either in Britain or Continental Europe.

Industry sources suggest that it is close to agreement over the acquisition of a UK carton packaging manufacturer with annual turnover of about pounds 5m.

The expected purchase is aimed at boosting the share of Boxmore's cartons business from 30 to 40 per cent of group turnover, with the balance accounted for by Boxmore's plastic containers business.

The container arm has grown at a faster rate due to growing acceptance of advanced plastic materials - such as PET and HDPE - for consumer products ranging from fizzy drinks and milk to lubricants and household chemicals. But the group wants to develop both types, partly as a safeguard against any unexpected changes to environmental laws that could affect the packaging industry.

News of the acquisition talks follows several key orders won by the company in recent weeks. Although they are worth about pounds 4m a year, the contracts are long-term and are from blue-chip customers including ICI, the chemicals group, Procter & Gamble, the detergents and cosmetics multinational, and Abbott Laboratories, the drugs company.

Increasingly, big companies are cutting down on the number of their packaging suppliers by entering into long-term 'partnering' relationships with a selected few.

Thanks to modern plant and some patented technology, Boxmore's growing involvement with such clients should open up further growth opportunities.

City analysts believe that 1993 was another year of strong organic growth for the company, with about pounds 10m spent on expanding capacity across its operations.

Its French factory, believed to have returned to profits, is working round the clock despite a doubling of production capacity during last year.

Not surprisingly, there is a growing belief that Boxmore will report better-than-expected results for 1993. Credit Lyonnais Laing, the company's broker, is forecasting an increase in taxable profits from pounds 3.6m to pounds 4.2m, with earnings per share up to 14.4p against 13.1p.

Despite the high capital spend, the group is also expected to have closed the year with surplus cash - which could help to fund the deal.

This year, the market is looking for pre-tax profits of about pounds 5m, rating the shares, at 259p on Friday, on 15 times earnings.

The company has an unbroken earnings growth record stretching back 10 years, while the shares have outperformed the market since flotation five years ago.

Although the shares have given up some of their gains on profit-taking, they are still good value.