Hi-Tec Sports runs into form: The Investment Column

For a company that seemed to be in continual crisis until a couple of years ago, Hi-Tec Sports appears to have finally got its act together. The sports shoe company which famously lost a finance director after just eight hours in the job in 1995, has been in and out of the red since then. But under Paul Harrison, chief executive, it now looks on more solid foundations.

Sales are static but the real growth has come from margins which have risen from 30.7 per cent to 32.7 per cent. This growth has boosted profits by one-third to pounds 1.2m in the six months to October. Margins have been driven by a shift in trends away from "commodity" white trainers where the markets are dominated by Reebok, Nike and Adidas to so-called "brown" shoes. These are the suede or soft-leather shoes used for hiking and rambling and which command much higher margins. More efficient production methods have also helped.

Hi-Tec is doing well in the US, where it is a strong brand name in brown shoes. Profits there trebled to pounds 1.5m on sales up by 11 per cent. The UK market was difficult in white trainers because Hi-Tec has to compete as a lower-priced alternative to Nike et al. Profits rose slightly, boosted again by the brown-shoe market.

The trouble spots for Hi-Tec have been continental Europe, where profits were ravaged by the strong pound and weak economies. And its rest-of-the- world division has also suffered, due in part to the financial turmoil in the Far East.

Looking ahead, Hi-Tec will have to start growing sales soon as the margin improvements cannot last forever. But there remains scope for growth, particularly in the US, where new management has been in place for only a year.

On Greig Middleton's full-year forecast of pounds 4m the shares - up a penny to 47.5p yesterday - trade on a forward rating of just 8. Hi-Tec operates in such a cut-throat market that dangers always lie in wait but there could be some upside.