The Investment column: Bensons bags a return to profit

Sadly, Bensons Crisps' record as an innovator in the snack market has not been matched by its financial performance. The tiny Lancashire- based company has won fame beyond its size for such classics as hedgehog- flavoured and jacket crisps, many of which have been copied by its deeper- pocketed bretheren. Such novelties did not prevent the group coming to the brink of collapse in 1994 after being hammered in a supermarket price war. But after a pounds 4.6m rescue cash call at 16p a share two years ago, new management has wrestled the group on to an even keel.

Yesterday's return to the black after two years of losses only served to underline the transformation. Pre-tax profits leapt to a record pounds 2.03m in the year to November, up from losses of pounds 747,000, producing earnings per share of 4p. The final dividend of 0.75p makes a 1p total for the year, the first year since 1993 that shareholders have been blessed with any payment.

The good news prompted a 5p rise in the shares to 40.5p yesterday, their best level for over two years.

The figures reflect a rationalisation of the group's production facilities, which are now concentrated on a new pounds 6.5m plant in Kirkham, near Preston. The resulting increased production efficiencies helped the pounds 1.61m increase in turnover to pounds 32.8m flow through to operating profits, which soared from pounds 928,000 to pounds 2.54m. The comparison was helped by a pounds 933,000 provision for a loss on a business sold, while interest charges fell. There should be more of that after gearing tumbled from 64 to 16 per cent during the year.

The key question for Bensons, with just 6.5 per cent of the crisps market, is whether it can avoid the pitfalls of the past. Its Dandy and Beano crisps, joined last year by Spiderman extruded snacks, have continued to do well and it is cranking up a new line at Kirkham to take control of all its tortilla corn chip production. That should add another string to its own-label portfolio, which already covers 59 per cent of its crisp sales.

House brokers Peel Hunt reckon profits will rise to pounds 2.4m this year, putting the shares on a forward multiple of 10. Reasonable value.