aTHE problems Sidlaw Group ran into a few years back were due in part to the company's far-sighted strategy of creating a pan-

European flexible packaging group.

When John Durston came in as chief executive in the autumn of 1996, the seeds of recovery were already planted.

That is underlined by the return on sales in the UK which is among the highest in Europe and, crucially, achieved on an increase in volume with a gain in market share, particularly in eight and 10-colour printing as the food manufacturers demand ever more complex decoration on packaging.

On the trading front, progress seem set fair for the next couple of years with pre-tax profits up from #3.1m to almost #8m this year and a further significant advance in 1998-1999.

Durston's objective is to make Sidlaw a much more significant industry player and push it up the rankings from seventh to perhaps third position.

He has a simple dilemma - acquire or be acquired - although he seems a little puzzled that a hostile approach was not made in the dark days when he was coming on board and the company was at its weakest.

The need for greater size is also driven by Sidlaw's need to protect itself against any possible bullying, or at least heavy pressure, from its major

customers.

This would help develop a more equal relationship like that of Marks & Spencer and Northern Foods.

The shares are trading at below 10 times likely current year earnings and are supported by a strong balance sheet.

If one believes that the euro-economies can increase growth to perhaps 3% over the next two years and that sterling may weaken further, then Sidlaw would be a prime beneficiary.

Shareholders over the years have had a miserable time but the foundations are securely in place for the restoration of wealth although it may take another year before that is borne out by the share price.