View from City Road: LIG fails to clear the waters

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The Independent Online
London International Group has plenty of good reasons for keeping shtoom about what it is up to. Famously pilloried last year for tipping off a select group of analysts and investors that its profits would be lower than expected, it is keener than most to stay within the Stock Exchange's increasingly Stalinist rules on the release of information.

So why did it run the risk of letting something slip by summoning members of the Fourth Estate yesterday, only to tell them what they knew already - that LIG is in big trouble but trying to do something about it?

The answer must be that Nick Hodges, recently installed as chief executive, has been spooked by rumours that the vultures are closing in on LIG's troubled carcass. The message he wanted to hammer home was: 'Hang on in there, bankers and shareholders, and we'll deliver.'

Paradoxically, he only served to underline the murky depths of LIG's difficulties. Amid the Carpenteresque fog in which the company's finances are swathed, only highly unpleasant-looking shapes are discernible.

Photoprocessing, which LIG is trying to sell, looks as miserable a situation as ever. Having squandered up to pounds 70m since 1981 getting into an area it did not understand, LIG is discovering that getting out might be an almost equally expensive affair. Margins in photoprocessing are so thin and barriers to entry so low, that it's quite possible LIG will fail to do a deal at all.

That leaves the pounds 200m price tag the stock market attaches to LIG's core condoms and gloves business looking steep. LIG may have a very strong brand in Durex, but Far Eastern competition is growing.

Health and personal care products will turn over about pounds 250m this year - against pounds 140m from photoprocessing. But LIG's refusal to say how much is attributable to johnnies, and how much to the 'non-core' products it is getting rid of, such as its cough medicines, makes any sensible assessment of its value impossible. In such circumstances, some careless talk from the group might be welcome.