Bottom Line: Hard act to follow

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The Independent Online
INSPEC, the speciality chemicals company and stock market newcomer, is one of the few unequivocally successful flotations of the year.

Inspec makes chemicals for use in the production of things like high-specification paint and heat- resistant plastic. It was bought out from BP in 1992 and secured a full listing last March.

In its five-month life as a quoted company the shares have risen by 45 per cent, outperforming the average by 50 per cent.

Shares added 3p yesterday to close at 231p, in response to a better than expected 140 per cent jump in interim taxable profits, or an underlying rise of 30 per cent.

Most of the growth came from increased volumes, won as Inspec drew advantage from economic recovery in the UK and overseas.

Economies of scale enabled the company to widen the operating profit margin from 17 to 18 per cent. This is an enviable rate of return, but one that can only be maintained if Inspec continues to develop and explore new market opportunities.

Expectations are high. Assuming that Inspec makes pounds 11m pre- tax, the shares trade on a multiple to this year's earnings of 22 times. The dividend yield is 2.1 per cent.

The shares have done well to date but it is hard to see further short-term progress.