Adare Printing sees good acquisition opportunities and is in discussions with a number of interested parties. These could result in a "substantial step-up in scale to the activities of the group", the company said in an interim statement. Adare has made 15 acquisitions in the past six years. Now, coming out of a period of rationalisation, it is poised to embark on further takeovers. The group said it was "outward looking and acquisitive".
Last month, it acquired a 12.4 per cent stake in Ferguson, the British labels manufacturer, for £3 million sterling. Asked about bidding for the remaining equity, Adare's finance director, Mr Peter Lynch, said it "offers us opportunities" but Adare would wait for Ferguson's results, out next April, before making a decision.
Ferguson generates sales of £120 million and was making £9 million profits. However, analysts are projecting losses of £1 million to £2 million for this year. Its shares were trading at 38p before Adare acquired its stake, buying shares at an average of 46p. They are now trading at around 52p. Adare will be tempted to wait for the market price to reflect the results before making a move, particularly as the British labels sector is going through a tough time. Buying out the remaining shares could cost in excess of £30 million. The Adare interim statement, which showed a 22 per cent rise in pre-tax profit from £7.2 million to £8.8 million in the six months ended October 31st, 1998, says Ferguson "requires heavy operational management with sector expertise".
Adare is cautious about the future: "We are a good company in a tough sector. We would be cautious enough," said Mr Lynch.
The latest results showed a modest 5 per cent rise in sales from £75.6 million to £79.8 million. Profit margins widened from 9.6 per cent to 11.1 per cent. The company, said Mr Lynch, decided to go for margins rather than sales. And reflecting the better results, the interim dividend is being raised from 4.68p to 5.38p. Earnings per share grew by 13 per cent from 35.36p to 40.02p.
The interim results, he said, supported the group's concentration on value-added strategies such as direct mail, brands and more recently, facilities management. The gearing is now down to an acceptable level of 64 per cent, compared with 124 per cent a year earlier. This was achieved despite heavy cash outflows on the capital programme and the purchase of shares in Ferguson.
Having invested more than £17 million sterling in the past 18 months, Adare said it had substantially completed its current investment programme and there were now less than £0.5 million of new proposals in the pipeline. Interest is now covered more than 11 times and Adare "has cash (£10 million) and substantial unused facilities".
