The Investment Column: Bespak investors can breathe easy

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The Independent Online
Peter Chambre has done a decent job at Bespak since moving over from Caradon to take the chief executive's post at the inhaler manufacturing group in May 1994. He has effectively cleared up the mess caused by an ill-fated contract with ML Laboratories and the mis-timed 1992 acquisition of Tenax, a US maker of plastic parts for medical devices. Yesterday's 46.5p jump in the shares to 527.5p on the back of better-than-expected half-year results to November is therefore well deserved.

The figures also show that he is capable of moving Bespak beyond the recovery phase to generate real growth, even if the 43 per cent jump in pre-tax profits to pounds 5.03m on turnover up just a tenth to pounds 39.4m reflected the benefits of some one-off factors.

The demise of the US patent over the ageing albuterol asthma treatment (better known as Glaxo Wellcome's Ventolin) led to the launch last January of three generic versions, all of which business Bespak won. Filling three new marketing pipelines, on top of those of existing customers Glaxo and Schering Plough, helped valve sales soar by 28 per cent to around pounds 15.4m in the half-year.

Meanwhile, sales continued to build around Glaxo's Acuhaler, the second- generation dry powder inhaler launched in Scandinavia in 1995.

Bespak's turnover in that product alone more than doubled from under pounds 2m to pounds 4.5m in the six months as the drugs giant rolled the product out across Europe.

Mr Chambre says about half the first-half profits growth came from higher volumes inflated by these developments and concedes that growth will slow from here on. Even so, Bespak can look forward to cashing in on the continuing 6 per cent growth in the US asthma inhaler market and has plenty else to look forward to.

The two-year restructuring of Tenax is nearly complete. The business should be back in profit in the second half, aided by the delayed launch of a new product. There should also be further benefits from sprucing up Bespak's manufacturing efficiency, which, with better customer service and lower costs, is said to have delivered the other half of the first- half profits rise.

Bespak's chances of picking up the manufacturing for the Acuhaler's US launch in 1998 have been improved by Glaxo's decision to raise its maximum order with the group from 10 million to 15 million units a year.

Its credibility is also enhanced by the announcement that Roger Mann, finance director at Siebe, is joining the board.

The only clouds are the switch to non-CFC propellants in inhalers, which could disrupt the market up to 2000, and the half-year collapse in profits in the relatively small personal care division. But even on a prospective p/e ratio of 18, assuming full-year profits of pounds 11m, the shares should have further to go.