Northern Ireland's only publicly quoted textiles group, Lamont Holdings, is not out of the woods yet. It is still incurring losses, but it appears to be getting there. The loss of £7 million sterling (€11 million) incurred in the first half of 1999 which drove the share price down 18 per cent to 22.5p on Friday is likely to be followed by a further £2 million loss in the second half.

Nevertheless, the plan is to return to profits in the new century. But with a market capitalisation of only £7 million, compared with £97.5 million at its height in 1996, can it really be treated seriously as a publicly quoted group? And with such a low market value, has it any realistic options?

There are four obvious options. To maximise shareholder value they need to be explored.

Firstly, if the management team considers it has a future, then Lamont would be an ideal vehicle for an MBO. Its shares have a net asset backing of 134p. While this will probably fall to 128p by the year end, the shares will still have an exceptionally strong asset backing. Lamont has net borrowings of £28 million, giving it a gearing of 69 per cent. However, it has a strong cash flow. Depreciation, for example, is running at an annual £7 million. Following the completion of a capital expenditure programme, in the first half of 1999, most of this, and the profits, would form part of the free cash flow. Therefore, payback time of any debt associated with an MBO would be short, provided the group remained profitable.

Secondly, it could sell off all the different parts of the group. Part of Lamont's strategy appears to be to sell off some of the parts. "I believe the group's existing sphere of activities is too diverse at this time," the chairman, Mr Frank Cushnahan, told shareholders in his interim statement. "Therefore Lamont would be better positioned if it concentrated on maximising potential in a smaller number of markets."

The group is fully conscious of the major structural changes that are taking place in the textile industry. Lamont has, and is seeing, fellow textile groups being decimated - some 1,023 job losses at Fruit of the Loom, the appointment of a receiver at Glendinning's, the closure of Saracen clothing factory, a subsidiary of Coats Viyella, with the loss of 500 jobs, and the announcement that Marks & Spencer is to terminate a 30 year supply agreement with William Baird which will hit Baird's two Northern Ireland plants and its 500 employees.

With the pressure from institutional shareholders on retail groups such as Marks & Spencer to perform better, there is an increasing reluctance by retail chains to hold stocks which can quickly become outdated by a fickle and fashion conscious public. The difficulties for Marks & Spencer will be amply demonstrated tomorrow when it announces grim interim results for the six months ended September with an expected 40 per cent plus cut in earnings per share due to an unseasonally warm September which hurt autumn and winter sales.

There is little future for mass production plants with high labour costs - instead, it is the niche player who can quickly produce short run speciality products, moving with the changing fashions, that will survive. This is in line with Lamont's stated strategy.

The third option is that Lamont could be taken over. Considering the low share price, and the substantial capital investment it has made and which has yet to bear fruit, it is technically in a vulnerable position. However, there have been no known suitors. And considering the vulnerability of the textile sector that is hardly surprising.

Lastly, Lamont could decide to lead the herd and spearhead a drive to rationalise the industry. That would be the most difficult option, taking time, patience and a brass neck (convincing target companies to accept shares). But with so many Northern Ireland textile companies tied to the UK trade by tradition, a radical structural change is needed. Lamont is aware that change is necessary. It is already getting the benefits from the capital investment programme and the diversification of its customer base. Profits should start to flow through next year. But shareholders will have to wait to see if it has the capability to squeeze enough out of its £40.5 million of net assets to justify its continued existence.