In two to three weeks time the shareholders in Lamont Holdings, the Northern Ireland textiles company, will receive one of the biggest jolts of their lives. But they have been forewarned, so they should be sufficiently braced to face pretty grim interim results.
The results could add credence to a growing view that there is a general malaise over Northern Ireland's publicly-quoted companies. The string of misfortunes have been well documented. These include: Powerscreen which almost went under but following a partial recovery was taken over; Mackie International which has been almost totally dismembered; and even BCO Technologies, the Belfast electronics company, which last month announced losses of £1.7 million in the first half, though that company is really in a start-up mode. But all is not gloom; there are a number of profitable Northern Ireland companies, including Galen and Boxmore.
Lamont shareholders will want to know into what category their company fits and if it has a future. Up to now, the news has been negative. Reflecting its dismal performance, the shareholders have seen their shares collapse from 300p sterling in 1996 to 16.5p last month - they closed at 24.5p on Friday - when the company gave a further warning that losses "would substantially exceed market forecasts".
Lamont is in a very difficult market, facing intense competition, and this has been compounded by the strength of sterling. It is now considering the most effective way of making the group more market and customer focused and has warned that this may result in a number of structural changes in the future. Lamont now has a great opportunity to clear the decks following the recent board changes. Frank Cushnahan, chairman of Belfast Harbour Commissioners, is the new chairman, and Pierce Casey, the venture capitalist - he owns 15.8 per cent of the company with Ronald Wilson, managing director of Monaghan Mushrooms - has joined the board as a non-executive director.
If, as is likely, the board is to inflict pain, it would be better to put all the exceptional costs, including provisions for restructuring, into the first half. Also, it should consider disposing of businesses that are not considered core, and/or those which are a drag on the business. Lamont could then become a more focused operation.
Some parts of the group's business should have a reasonably good future. Bonded Fibre Fabric (BFF), the manufacturer of non-woven fabrics could be a core business, for example, because non-woven fabrics are growing by over 10 per cent per annum in Europe. Its linen business also must have a bright future; indeed this is a high quality area and is one which could appeal to Waterford Wedgwood. There are other areas that could be retained but a question mark must hang over the tufted carpet business which is in a highly competitive and notoriously cyclical area.
Lamont has invested fairly heavily in renewing plant which should, in time, reap some benefits. There have been initial teething problems. The investment led to difficulties in commissioning new machinery at its Moygashel and BFF operations which cost it more than £2 million last year. In addition, it paid out £1.2 million in redundancy payments.
The losses expected for this year have never been specified but they could well wipe out the combined profits generated in both 1997 (£7.5 million) and 1998 (£1.6 million). However, the group's shares had a high net asset backing of 152p in 1998. This could come down to about 120p this year, which would still give it substantial backing to the shares.
Lamont has the technical ability to effectively service large retail groups which need short, and fast, production runs. If it can refocus itself into the niche profitable areas it should quickly bounce into profits again in 1999. Another strength is the annual depreciation charge of some £7 million. That, ironically, is as much as the £7.4 million value placed on the company by the market and, if used wisely, could give it a needed extra boost.
Once the 1999 interim results are out of the way, the worst should be over for Lamont. However, as a textiles group, it will never be categorised as go-go.
