The Investment Column: Bespak is looking to the future

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The Independent Online
Peter Chambre, chief executive of Bespak, isn't wasting any time. Since joining the asthma inhaler and valve manufacturer in 1994, Mr Chambre has mopped up some nasty messes left by the old management, notably a potentially crippling contract with ML Laboratories, and has brought Tenax, the ill-judged US components acquisition, back to profit.

Satisfied that recovery is on track, Mr Chambre is now looking forward. Accompanying its full year results, the group announced a substantial investment programme over the next three years to boost its manufacturing capacity, prepare for the required change to ozone-friendly inhalers by the year 2000 and broaden into new drug delivery areas.

This will not be cheap. Mr Chambre expects to increase capital spending from the current pounds 5m to around pounds 13m in the current year and around pounds 10m in each of the next two years.

Research and development spending will also rise from the current 2.3 per cent of sales to around 4 per cent as the group investigates new areas of drug delivery such as intranasal devices.

However the money will be well spent. The group is already sole manufacturer of Glaxo's dry powder inhaler and will spend around half the extra capital increasing capacity in the UK to satisfy demand. The Glaxo contract helped

Bespak grew UK profits by 27 per cent to pounds 9.6m in the year to May. Total profits, excluding exceptionals, rose 26 per cent to pounds 11m.

The rest will go on new plant and equipment to help customers which use its inhaler valves in aerosol sprays to switch to ozone-friendly HFA propellants, something that will be compulsory by the year 2000.

While there will be a short-term cannibalisation of aerosol valve sales, the move will ensure Bespak retains its firm position in the inhaler valve market, particularly in the US, where the group already supplies all five companies selling generic asthma drugs.

Analysts have edged forward 1998 profit forecasts to around pounds 29.6m. On an unchanged share price of 587.5p, the group's shares are on a forward p/e ratio of 17. Still good value.