Smaller companies: Lowe tackles alternative sports

Between 1987 and 1994 Robert H. Lowe was a disaster for its luckless shareholders. But, in the stockmarket, amazingly often there is another chance. New management and new funding have been introduced and the company has recovered to the point where it has been able to pay a small dividend. Now it plans to use that recovery as a launch pad for acquisitions and a sustained period of growth.

The shares have already rebounded from a 1994 low of 7p to 22p. But that does not make it too late to buy. Even if nothing else happens, the prospective PE for the year to 31 October 1996 is 11.4 falling to 10 on expected earnings for 1996-97. Admittedly that reflects a low tax charge; but even on a notional full charge the rating would be in the low teens.

The game plan is to use the cash flow from a booming sportswear business to make acquisitions in packaging. A new managing director, 49-year-old Andrew Dalton, has been recruited to translate this plan into action. A first deal has already been done with good initial results; and the further opportunity should be substantial given that the UK packaging industry has annual turnover around pounds 9bn, much of it fragmented.

Recovery at Lowe began in 1992 when David Sebire was appointed chairman with a brief to rescue an effectively insolvent company. A share reconstruction refinanced the group while management disciplines were applied across the board. Most of the old textile interests were sold.

But among the businesses which were retained was one cracker supplying sportswear. Helped by all the excitement over Euro '96, sales of items like replica football kits, where the group is the market leader, have been soaring. The group manufactures for all the leading brands - its products kit out players for top teams such as Manchester United and Liverpool. Fast-changing requirements and short delivery times make it hard for overseas suppliers to compete.

The strategy for the sportswear division is to broaden the product offering into sports such as rugby, basketball and athletics to reduce what has been a heavy dependence on Adidas and football. There is scope for bolt- on acquisitions but cash generation is expected to run well ahead of investment requirements. Since the packaging side is also a healthy cash generator the group is well placed to do deals.

The first deal, with corrugated packaging specialist, Majoca, has produced a striking vote of confidence in the business because the vendors took the whole of their pounds 2.2m initial consideration in shares then valued at 15p. Latest interim figures included four months from Majoca which performed ahead of expectations contributing to a 79 per cent rise in first-half profits on sales up 93 per cent to pounds 13.7m. Earnings per share rose 44 per cent to 0.88p.

Majoca gives the group packaging sites in five locations. The plan is to create a national group capable of in-house design to supply specialist products with fast turnaround times. Further acquisitions could be of businesses, assets or even customer lists.

The other division which Dalton hopes to expand by acquisition is labels. A subsidiary, Nelsons, is the market leader in the supply of fabric labels to the bedding industry. It is also a supplier to other soft furnishing sectors with turnover around pounds 2m and premises in Manchester. Mainland Europe is seen as offering a growth opportunity.

Lastly there is the possibility of a deal to give the group a third leg in packaging. Detailed criteria for any deal include that it should be earnings enhancing with a minimum 25 per cent return on capital, 10 per cent profit margins and cash generative.

In the light of the interims, analysts who follow the group raised their current-year estimates from pounds 1.9m to pounds 2.1m with pounds 2.6m and earnings per share of 2.21p expected for next year. Shares which have fallen from a great height typically encounter steady selling as they make progress back up the hill. But if the group is even reasonably successful in its hunt for acquisitions and can continue to make progress with the existing businesses there should be plenty of scope for share price progress.

Voices
voices
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
News
newsHad asteroid hit earlier or later in history, the creatures might have survived, say scientists
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
PROMOTED VIDEO
Sport
Laura Trott with her gold
Commonwealth GamesJust 48 hours earlier cyclist was under the care of a doctor
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + entsFilmmaker posted a picture of Israeli actress Gal Gadot on Twitter
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried