The clothes brush loses its glamour

BY JAMES BETHELL

Betterware, whose shares took another hammering yesterday after it announced poor results, had everything a dazzling glamour stock should have.

First there was the concept: the company would sell essential domestic items that supermarkets disdained, such as clothes brushes and ladders to help spiders stuck in the bath tub. The low-cost force of 10,000 catalogue- carrying door-to-door salesmen would storm the country, Europe, the world.

Then there was the personality. Andrew Cohen, 51, is the hard-working, bubbly entrepreneur who, aged 18, started selling furniture covers for the soft-furnishing company run by his father, Stanley, and then bought Essex-based Betterware in 1983 from the receivers for £235,000.

From his dowdy Formica-clad office in an undistinguished industrial estate in Birmingham, Mr Cohen oversaw one of the most remarkable growth stories of the recession. The achievement won him a stream of accolades from investors.

When the company came to market in 1986 it was chaired by Walter Goldsmith, who spread the company's remarkable story with great skill and enthusiasm. Jim Slater, the investment guru, took an interest in the company and cited it as a prime example of a growth share in a chapter in his book, the Zulu Principle, ominously entitled, Making Extraordinary Profits From Ordinary Shares.

As City analysts and newspaper tipsters recommended the stock, its share price rocketed from a low of 7.8p in December 1986 to a high of 272p in July 1993. The market capitalisation increased from £20m to £214m in just two years.

Mr Cohen, whose family retained 65 per cent of the stock, relished the success, buying racehorses, generously donating large amounts to charity and investing £500,000 in the successful independently-financed British film, Leon The Pig Farmer. When he was nominated Coopers & Lybrand entrepreneur of the year his enthusiasm for promoting the firm cled him to encourage colleagues to register their vote. Mr Cohen won.

However, the family's ownership of the stock proved to be a stumbling block in the company's future.

With such a shallow public holding, the shares became increasingly over- heated. Mr Cohen's first attempt to reduce his holding faltered and led to a well-publicised row with his brokers, Smith New Court, who resigned and became bears of the stock.

The City was therefore stunned when Mr Cohen quietly returned to the City one morning in June 1993 and dumped 13.4 million shares worth £30m at 230p, reducing the family's holding from 63 per cent to 50.3 per cent. Analysts immediately made comparisons with Spring Ram where rapid growth ended as shareholders placed a big chunk of stock on the market.

Since then the shares have gone into free-fall as Mr Goldsmith has repeatedly fought waves of rumours about share-ramping and profits warnings.

Fears were raised that the simple selling concept has become confused by salesmen poaching on each other's patches. Last year three profits warnings arrived in five months.

Mr Cohen has tried to stem the flow of shareholders from his stock, poignantly buying shares himself and appointing new managerial skill, particularly in the form of Peter Hartley, the new finance director who came from Texas Homecare.

He has also focused on overseas expansion which he hopes will make up for slowing growth in the UK. But the firm has remained dogged by trouble at its Castle Vale distribution centre and falling credibility in the City. Yesterday's disappointing results has confirmed in the minds of sceptics that the company over-reached itself and that glamour stocks face a harsh reception in today's choppy markets.

Investment column, page 34