The Investment Column: Alexon

ALEXON, the women's clothing retailer, has been drifting along on the sector's undercard for years now, rarely catching the market's attention. But under John Osborn, the chief executive, the group has been gradually improving - its shares have rewarded loyal investors with a 10-fold rise since 1995.

The company surpassed itself with a triple whammy yesterday, unveiling a pounds 31.4m cash and shares offer for womenswear retailer Style Holdings - a pounds 13m deal to buy out the remaining half of the Dolcis shoe shops - and some cracking first-half results with profits up by 54 per cent to pounds 4.6m.

Take the Style Holdings deal first. The logic is that it takes Alexon into the menswear market. Alexon is principally a concessions business which operates brands such as Dash, Ann Harvey and Kaliko. Style Holdings is a smaller operation focused mainly on the 24-strong Envy chain of menswear stores and 174 suit concessions in Top Man and Fosters. The deal takes Alexon into the younger end of the market. Scope for cost-cutting is limited, Alexon's track record of improving smaller businesses bodes well.

Although like-for-like sales in the core business were flat in the period, this may not be a bad performance when other fashion retailers report. Dolcis remains loss-making but sales and margins are edging higher. For shareholders in Style, the takeover crystallises a good run with 150p in cash (a 16 per cent premium to the previous close) and a stake in Alexon going forward where it will benefit from being part of a larger group.

For Alexon investors, the company is now more broadly based with greater buying power. On full-year forecasts of pounds 19m excluding Style, the shares - down 1.5p at 197.5p - trade on a forward p/e of just 10. Alexon's management look set to continue to deliver and the shares are good value.