Lopex to put balance sheet to rights

LOPEX, the troubled advertising agency, has launched a pounds 3.5m rights issue under pressure from media suppliers and clients who want the group to repair its balance sheet.

The one-for-one cash call at 17p a share will be partly supported by a newly set up employee trust, representing 100 staff who are owed pounds 1.2m in unpaid bonuses.

Lopex, best known for its Femidom female condom campaign, said customers and media suppliers were paying increasing attention to the creditworthiness of advertising agencies.

As a result, proceeds from the rights issue would be used to reduce debts and boost the group's shareholders' funds.

The unpaid bonuses are owed to to about 100 former and present staff of Purchasepoint, a marketing services subsidiary, and relate to previous years.

But they were held back as their payment would have imposed a considerable cash drain. But Purchasepoint's board agreed to set up a trust to participate in the fund-raising.

If the group's existing shareholders take up their rights, the trust will still subscribe for new shares in respect of the pounds 1.2m due.

Peter Thomas, chief executive, said: 'The purpose of setting up the trust is that we want to minimise the amount of rights issue money going out of the business. We are essentially turning the unpaid bonuses into shares.'

The company yesterday also estimated that it will report full- year taxable profits of at least pounds 200,000 for the year ended last December. The after-tax loss is put at pounds 50,000. The final dividend will be passed.

Lopex shares fell 1p to 24p.