Diesel-engine maker and reconditioner L Gardner is using its ever-higher-priced paper to build the company. Despite having about £3m in the kitty, the company has settled almost entirely in shares – close on one million of them – a £3.3m bill for the acquisitions it has made since last January.
City watchers believe Gardner is hoarding cash for a much bigger future acquisition.
The company would not comment, but it has made good use of its buoyant share price – 254p at the end of last week – to expand since it floated on the stock market 18 months ago at 125p.
Last December, Gardner raised £5.6m in a placing-and-open offer at 173p a share, partly to pay £1.73m cash up-front for its acquisition of component-maker Sloman Engineering.
But in January, Gardner settled its £500,000 purchase of agricultural equipment-maker Kaskad Engineering all in paper – 200,000 Gardner shares valued at £2 each.
In February, Gardner issued another 172,413 shares, valued at at 232p each, to settle the bulk of its £650,000 purchase of TA, the automotive component-maker.
Then last week, Gardner dished out another 584,793 shares, this time valued at 256p, for the lion’s share of the £2.4m for its latest buy – the engineering subcontractor ADA Manufacturing Services.
The total cash outlay to date on this trio has been less than £100,000.
Gardner’s house broker Teather & Greenwood has just upped its pre-tax profit forecast for the current year to August by £200,000 to £4.4m (£2.5m); and for 1998 by £600,000 to £5.7m.