The Investment Column: Pound deflates LIG's growth

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The Independent Online
London International, the condom and Marigold gloves maker, has managed to keep the pledge its chief executive, Nick Hodges, made to shareholders at the end of last year to achieve double-digit earnings growth.

However, it only made it by the skin of its teeth. Pre-tax profits for the six months rose 13.7 per cent to pounds 10.8m, but earnings per share were up just 10.4 per cent .

LIG's growth has been held back by the strong pound, which depressed profits by pounds 300,000. Heavy capital investment involved in creating the new super-thin Avanti condom and costs associated with the phasing out of its production of powdered examination gloves in the US in favour of powder-free alternatives also hindered the group's progress.

Sales were actually down a touch in sterling terms to pounds 155.6m but costs were sharply down, allowing operating margins to rise from 7.9 per cent of sales to 8.9 per cent.

The performance of the condom and glove business remains encouraging with sales up 7 per cent to pounds 119.1m despite the currency hit.

However the jury is still out on the success of Avanti. Initial sales are going well but it is unlikely to make a significant impact on profits in the short term.

There is also a question mark hanging over the health and beauty business which continued to decline. LIG will probably be forced to dispose of some of the worst performers in the division to get profits moving in the right direction again.

Analysts are still forecasting full-year profits of around pounds 41m, which on yesterday's price of 156p, down 1.5p on the day, puts the group on a prospective multiple of 19.

Given concerns over health and beauty and sterling that looks expensive. High enough.