Yesterday's figures showing losses of pounds 14m turning into profits of pounds 16.9m in the year to 3 May overstates the extent of the recovery at the group. Underlying profits actually rose 58 per cent to pounds 8.7m, after stripping out a pounds 10.2m write back of a previous pounds 18.6m provision as a result of resolving the dispute over the near-disastrous inhaler contract entered into with ML Laboratories.
Even so, management are clearly producing the goods. In the UK, the launch of GlaxoWellcome's Accuhaler dry powder inhaler in early 1995 helped drive profits 22 per cent higher to pounds 7.6m. It is generating sales of pounds 5m for Bespak and manufacturing capacity is being expanded. Meanwhile, the valves business has returned to more normal levels after destocking in the previous year.
The once-troubled US business also seems to have turned the corner, with underlying profits quadrupling to pounds 1.2m, before restructuring charges. The Tenax North Carolina inhaler business saw sales rise 27 per cent. Bespak believes it has stabilised the fall off in sales of keyhole surgery products from Tenax Danbury in Connecticut after its main customer, US Surgical, saw its market share plummet.
The prospects for Bespak look brighter than they have for a while. As well as increased Accuhaler sales, it has Medeva's new generic salbutamol inhaler, Rhone-Poulenc Rorer's Ultrahaler (taken over with Fisons) and a couple of new products from ML to look forward to.
Profits of pounds 10m this year would put the shares, up 27p to 420p, on a forward price/earnings ratio of 16. Hold.