Bottom Line: Sound strategy

NOT only is Allied Textiles making its first foray into North America, but it has also been preparing the ground for a drive into Continental Europe.

For the time being it is spending a total of pounds 52m on Canadian concern Cleyn & Tinker and the US- based Carleton Woolen Mills while issuing pounds 27m in shares and forking out pounds 25m of cash.

Allied could have bought C&T and Carleton without recourse to the market but it has also identified several small companies on the Continent that it wants to buy as soon as recession lifts.

Like Allied itself, C&T and Carleton do not try to compete with the commodity textile producers of the Third World. So the group will spin, weave and dye for customers that demand product with high design input and short lead times.

Although Allied's expansionist ideas are not without risk, the strategy does appear to be sound. The enlarged Allied Textiles is on course to make pre-tax profits of pounds 17.4m this year. That puts the new shares, to be issued at 500p, on an attractive multiple of 13 times earnings per share.

With a prospective yield of 3 per cent shares bought in the market - up 17p yesterday at 568p - are not that much less of a bargain.