The Investment Column: Lowe kits up for expansion

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The Independent Online
When David Sebire became chairman of Robert Lowe, the Cheshire- based sportswear and packaging group, in 1992 he inherited a rag-bag of businesses. The company was in the unfortunate position of supplying baby clothes to Marks & Spencer, jeans to Wrangler and making Pierre Cardin ties under licence.

All these went in a big clear-out which included Babygro, Lowe's loss- making and biggest problem child. A financial restructuring followed and Lowe was left with two divisions - replica football kit manufacturing and packaging board products - that still sit uneasily with each other. It is hardly the ideal starting point but Mr Sebire is making a decent fist of it.

In the six months to April pre-tax profits rose 70 per cent to pounds 907,000 on almost doubled sales of pounds 13.7m. The turnover figure included a maiden pounds 2.7m contribution from Majoca, a corrugated packaging business, bought for an initial pounds 2.2m in December.

Lowe is the market leader in replica sports kits. But unlike Umbro, a rival sports shirt manufacturer, it is not marketed as a brand name and for obvious reasons. "Aim Lowe" lacks a certain ring. Clubs that wear Lowe's shirts include Liverpool and Newcastle, but it was the 1994 World Cup and Euro 96 that have been the real drivers behind the sportswear division's annualised sales doubling to pounds 17m in that period.

Packaging, however, is where Mr Sebire sees the greatest growth potential. It makes up 41 per cent of sales with Nelsons, a Manchester-based labels supplier for the likes of Silentnight and Slumberland, particularly benefiting from the improved housing market. Increased consumer spending in the run-up to an election would obviously help the division.

Lowe is keen to expand further in niche label markets such as cosmetics and toiletries though few good opportunities are left in higher-margin areas such as health care.

House broker Greig Middleton looks for pre-tax profits of pounds 2.1m, implying a p/e ratio of under 12 with the shares up 1.5p at 22.5p. Good value.