Dyes group seeks pounds 24m to expand

YORKSHIRE CHEMICALS, the dyes and specialist chemicals group, is asking its shareholders for pounds 24.3m to finance an expansion programme that will increase capacity by up to 40 per cent.

The one-for-five rights issue, at 330p, came as the group's shares touched an all-time high of 401p - although they closed 1p lower at 400p yesterday. Phillip Lowe, chairman and managing director, said the cash call had been under consideration for 18 months and it was 'fortuitous' that it coincided with a strong share performance.

Yorkshire plans to spend pounds 25m over the next two years, pounds 16m of it this year, on plant and equipment, bringing the total capital spend to pounds 43m in five years. Without a rights issue, Mr Lowe estimates that borrowings would have reached between 40 and 50 per cent of net assets, compared with 21 per cent at the end of December.

The rights issue means that the group will end this year, and possibly next, with cash in the bank.

One of the key investments is in the group's dyestuff plant at Leeds, where pounds 4m has been spent in the first phase of a three-part programme to increase capacity by 40 per cent. A further pounds 3.7m will be spent this year on a drying plant.

It is also investing pounds 4m on upgrading a plant making chemicals for leather tanners, while in Australia it is spending pounds 5m creating a new factory to combine its existing five sites near Melbourne.

The group currently has to buy in chemicals to meet demand and the new capacity will enable it to boost margins by switching to in- house production.

The cash call came as the group announced an 8.3 per cent fall in profits to pounds 10.1m in the year to December, largely due to price competition caused by falling demand.

Mr Lowe said there was no clear sign of recovery in Britain and he was concerned about the prospects for Europe. But devaluation of sterling should be a 'major benefit'.