Full-year results from the Human Screen

Consort Medical is a tale of two companies. It was Bespak, a manufacturer of drug delivery systems for pharmaceutical companies, inhalers mainly, until it acquired King Systems in 2005 and changed its name to embrace both product-lines.

Highlights

• Adjusted operating profit up 5%
• Return on tangible assets: 19.5%
• Adjusted net profit of ''15m compared to net cash flow of ''18.5 (''7m after net capital expenditure)
• Net debt up 12.5% at ''38m, 35% of tangible assets (''41.5m after pension deficit, operating lease commitments not disclosed in preliminary results)
• Per-share dividend unchanged

The Human Screen comments:

Consort Medical is a tale of two companies. It was Bespak, a manufacturer of drug delivery systems for pharmaceutical companies, inhalers mainly, until it acquired King Systems in 2005 and changed its name to embrace both product-lines.

King Systems manufactures airway management products for anaesthetists and emergency rooms, but Bespak earns twice the revenues and more than five times the operating profit of its ugly sister, which is in the final year of a restructuring programmed intended to improve manufacturing efficiency. Bespak has the growth opportunities earning high profit margins it aims to protect with new products like its Integrated Dose Counter, which has just been approved for use in the USA, and a cigarette shaped nicotine inhaler to be sold by Nicoventures, a subsidiary of British American Tobacco.

The Human Screen is predisposed to like Bespak because it’s established an Innovations Centre in his home town of Cambridge and he thinks the company is a potential stalwart. Increasing capital expenditure in recent years may well be realised in future profits generated from its retooled production facilities and new products, but with an unlevered post-tax earnings yield of 7% it looks as though the market’s already pricing in a recovery at King Systems, and growth at Bespak so there’s no obvious value in Consort.

More on Consort Medical

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HS+ (worth watching for improvement in fundamentals/price)