Smaller Companies: A good case for buying Boxmore

UPBEAT comments from company bosses are a rarity these days. But while the stock market is gripped by economic gloom, little Boxmore International is bubbling with confidence.

'By any measure we've had a good half year,' Harold Ennis, the chairman, said on Friday.

This week the Belfast-based packaging group goes into purdah, so the market will have to wait until October for more news on its prospects, when it reports interim results to 30 June.

But Boxmore appears to be weathering a tough trading climate well, thanks to its strong management and quality of earnings. The shares have outperformed the market by 30 per cent this year, but have further to go.

Boxmore manufactures plastic containers for fizzy drinks suppliers and high quality packaging for pharmaceuticals. Both sectors are resistant to recession and also experiencing long-term growth.

The company has blue chip clients, including Coca-Cola and Pepsi, and drug companies like Abbott Laboratories and Sterling. Having big name customers has not only ensured steadily rising revenues but also a low level of bad debts - in the past 12 months just pounds 2,000.

Demand from Coca-Cola and Pepsi for the company's big plastic drums has been strong this year, thanks to a warm summer and rising drinks sales in Eastern Europe.

As both giants supply the entire European market with 'essences' from plants in Ireland, Boxmore is, in turn, enjoying buoyant sales.

Its pharmaceuticals division, meanwhile, is benefiting from new customers and contracts. Boxmore's carton manufacturing facilities are being expanded to cope with rising demand.

Mr Ennis believes success is due to modern production facilities and a high standard of service to customers. He says the company has won 'ship-to-line' status from seven drug companies, which means its products do not require inspection on delivery.

The Republic of Ireland and UK each account for 42 per cent of the group's turnover, with the balance from the Continent, where it has expanded through two modest deals that are now making a positive contribution.

By sector, about 48 per cent of its sales come from pharmaceuticals and 37 per cent from food and drinks.

Boxmore also has a strong balance sheet and is expected to close the year with pounds 2m net cash. The market is looking for pounds 3.4m taxable profits this year against pounds 3.1m in 1991.

However, Boxmore is likely to exceed these estimates comfortably. Assuming earnings of 13p, the shares, at 158p, imply a multiple of 12. A re-rating is overdue.