Cheap, if not always cheerful

SMALLER COMPANIES

The advertising sector has its giants, writes Richard Phillips, and it has its minnows. Lopex falls slightly in between - no callow youth this, it has been around the London advertising scene for donkey's years. So if you are looking for a start-up in the media world, Lopex is not it.

A market capitalisation of pounds 20m means it is small beer when set against the Cordiants and WPPs of that world. Nevertheless, Lopex, too, has had its international ambitions, and recently boasted a spread of businesses in eight countries and 42 separate subsidiaries. Sadly, the policy did little for investors, who have seen the shares mark time at a range between 10p and 37p over the last five years.

Profits, too, have been on a bumpy ride, from a loss of pounds 370,000 in 1992, to a pounds 500,000 profit in 1993, only to see another loss in 1994, of pounds 890,000 - swiftly followed by a pounds 1.46m profit in 1995. At least, it could be argued, the trend would seem that, if losses increase, so too do profits, over time.

Sensibly, the company has taken the decision to abandon its overseas efforts and instead concentrate on the UK and Ireland, with the thrust of its enterprise concentrated on public relations, direct marketing, and recruitment advertising.

While this may bring more discipline into the company, its track record is such that few should hold out any high hopes for it as a long-term investment.

On a more immediate timescale, however, the shares may offer some value. While full-year profits for 1996 rose about 50 per cent to pounds 3.4m, exceptional charges and discontinued activities suffered a loss of pounds 1.49m. However, these charges should be the last to dog Lopex for a while, which means that if 1997 profits hit pounds 3.67m, as brokers expect, then the forward rating is a mere nine - cheap, compared to its more expensively-rated peers.

Likewise, it has been hard at work restoring its balance sheet. Debts of pounds 12m a few years ago have been converted into cash at hand of pounds 4m-plus; shareholders' funds stand at a reassuring pounds 3.7m.

If only Lopex can keep its act together for a year or so, then the share price could be in for a shot at breaking out of its historic range.

If you are tempted to buy, however, remember this is a share where the best advice is to always be willing to take profits when they become available - and be ready to sell at the drop of a hat.