Investment Column: Potency drug perks up BTP

VIAGARA, THE potency drug that is sweeping the US, may work wonders for the libidos of middle-aged men. But it's also had a remarkable effect on the shares of BTP, the fine chemicals group. They've risen by over a third since the beginning of April, and hardened another 6.5p to 535.5p yesterday.

So what happens when the hype dies down? The answer should be very little. Viagara might fill newspaper columns but you won't find it in many BTP company documents, because it's actually a small part of the business. BTP is involved in part of the bio-science manufacturing process but is also a supplier to seven other drugs. It also produces everything from chemicals for preserving leather to safety equipment for building sites.

Yesterday BTP produced profits, before tax and exceptionals, of pounds 53.2m, up 10 per cent. The headline figure was held back as the company took a charge on the cost of business disposals. Big increases on biocides and fine chemicals boosted the figures, although the strong pound and South-east Asian woes constrained growth.

Chief executive Steve Hannam makes clear that further acquisitions are in the pipeline. Or else BTP may go the way of Courtaulds and Allied Colloids and fall to a foreign bidder. Analysts reckon the company will make profits of around pounds 62.5m this year, putting the shares on a forward multiple of 20 times. That's high, but there is plenty of life left in this inflated stock. Buy.

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