Adare Printing Group plans to sell its 12.4 per cent stake in British labels manufacturer Ferguson and has announced an 8 per cent increase in pre-tax profit to £17.1 million (#26.3 million) in the year ended April 30th, 1999. It stands to make a good capital gain from the transaction.

Adare bought the five million shares in Ferguson at an average of 46p sterling per share and hoped to buy one of Ferguson's divisions. However, this was sold to a Norwegian company. Adare was not prepared to pay what was sought. The value of the investment, including the receipt of a 20p dividend, is now around £1.2 million more than what it paid. Even if Adare does not sell its stake, it should make a profit of more than £1 million when Ferguson sells its other businesses, said Adare's finance director, Mr Peter Lynch. This should be completed by October, he added.

Adare has decided to reposition its businesses to provide more specialised and print-on-demand products. "This has led Adare to consider that the future lies less with large production facilities full of offset presses, but more with smaller, entrepreneurial enterprises that provide leading edge, technology-driven services and solutions," said chairman Mr Nelson Loane. "This is the way forward and companies servicing our market will have to sensibly embrace this method of doing business or be broken by it," he added.

With this in mind, Adare has decided "not to progress several opportunities to acquire large-scale, more mature, product and manufacturing-based businesses this year", he added.

Mr Lynch said acquisitions in future would be more numerous but smaller in scale. They would be earnings neutral or dilutive at the time of acquisition, said Mr Loane, as there will be a good deal of goodwill or intangible assets.

While Adare is continuing negotiations with a number of companies, no deal is imminent. But it is in a strong financial position with gearing of around 25 per cent. This would fall to some 16 per cent when its investment in Ferguson is liquidated. The latest results show a 3 per cent rise in turnover to £168.9 million and a 9 per cent increase in earnings per share from 74.61p to 81.23p. A final dividend of 7.7281p has been declared, making a total of 13.1081p, representing a 15 per cent increase on the previous year.

Adare said the volume of sales growth was modest last year. Protaprint is growing at 10 per cent per annum and has introduced a £2.3 million development programme. Kalamazoo Security Print "had a very successful year". Lexicon Marketing Services had an "excellent year". The group's two label printing operations recorded "margins well ahead of the average for the sector".