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.

Start your day with The Independent, sign up for daily news emails
New Articles
tvChristmas special reviewed
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
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: 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 ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

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