View from City Road: Swings and roundabouts

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ARE you sitting comfortably? Shareholders in Levercrest, which makes equipment for children's playgrounds, are being offered the chance to invest again, by way of a pounds 1.3m rights issue, in a company that has just announced more than doubled pre-tax losses of pounds 775,000. Once again there is no dividend.

Borrowings are pounds 1.17m - a trifling 39 times the company's pounds 30,000 net assets - and are in breach of its articles. Not only that, a couple of employees have allegedly been playing games with the company's stock and are now helping the local constabulary with their inquiries. This has left Levercrest another couple of hundred thousand poorer, although the directors say it is hard to be precise.

Finally, a new management team wants to expand out of the Levercrest shell through acquisitions in the engineering sector. Happy days are here again.

The 13-for-four rights issue - deeply discounted at 10p a share - is in fact already largely spoken for. A number of institutions are putting their money behind the new management team led by Ian Orrocks, a company doctor, which is why the shares fell by only 18p to 21p.

Leslie and Ann Cluer founded the business a decade ago and enjoyed eight years of uninterrupted growth until the company came to the USM in 1990. But then came the poll tax, prompting a downturn in spending on playgrounds.

The Cluers' 66 per cent holding will be diluted to 21 per cent. The new team will have 18 per cent and the company expects to move to a full listing, changing its name to Roxspur.

Mr Orrocks says he has been looking for a vehicle with which to absorb undervalued engineering businesses. But he also believes that Levercrest/Roxspur itself is a good recovery bet.

With a directive on safety standards in playgrounds expected from Brussels, the market for its rubber safety flooring product could bounce back.

Shareholders who invested at 108p probably feel they could have done with some rubber cushioning themselves. New investors at 10p must hope that what others lost on the swings they will gain on the roundabouts.

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