Investment: BWI packages the value

IN THE words of the chief executive of BWI, Stewart Brown, the maker of packaging machinery has been like a swan over the past year - serene on the surface, but paddling furiously underneath.

Turnover in the year to the end of June was almost unchanged at pounds 89m and profits were flat at pounds 7.06m if exceptional charges of pounds 1.5m are added back to the previous year. But this masks higher profits at the pharmaceutical and general packaging and food packaging divisions, both of which have been restructured.

However, the division which makes machinery for bottling lines suffered a drop in orders and increased competition. Both US and UK businesses also had to cope with adverse currency swings which favoured competitors in Germany and Italy.

Since the year end the $55m (pounds 32m) net cost of buying RA Jones, a US family-owned business which produces carton-making machinery, has pushed gearing over 100 per cent and will add pounds 2.75m to interest costs in the current year. RA Jones made pounds 4m on sales of pounds 50m last year and is expected to be earnings-enhancing from the start. It needs no major spending and increases the range of products BWI can offer US customers, and BWI's expertise could expand its export sales.

In a recession, capital goods makers are inevitably high risk. However, provided the bottom does not drop out of the US economy, analysts are still expecting profits of pounds 9.5m in the current year. On a forward p/e ratio of less than five the shares, down 3p to 65.5p yesterday, look very cheap indeed.