BBI develops and makes ‘rapid result’ diagnostic tests for the point of care market and more than merits its premium rating given its growth prospects.

Chief executive Julian Baines says the group’s expertise lies in its ‘non-invasive lateral flow’ tests that give quick and effective diagnosis at bedsides and doctor’s surgeries, negating the need for expensive and time-consuming lab analysis.

The group also boasts a fast-growing BBI Healthcare division that sells and distributes diabetes and healthcare related products. Revenues arise from four core areas within the research, development, and manufacture of tests, and notably include the making of ‘superior’ quality gold reagents used in diagnostic tests to indicate positive or negative results.

Interims to September illustrated a company in full flourish, with growth arising organically and from three acquisitions made during the half. The top line put on 57% at £4.4m – sales from continuing businesses were 39% healthier at £3.9m – and normalised pre-tax profits (adjusting for share-based payments and goodwill) came in at £884,000. All parts of the business enjoyed good organic growth, and gross margins crept up from 58% to 63%, buoyed by sales of higher margin Gold Reagent and GlucoGel products.

Outlining his plans for the second half, Baines predicted further growth at BBI Healthcare, which is now targeting the diabetic markets in the UK and overseas, and said he expects to snare more manufacturing contracts.

For the year, Howard Miller at Teather & Greenwood envisages 30% earnings growth to 6.5p, based on a profits push from £1.4m to £2.5m. Those numbers place BBI on a prospective p/e of 23 times, which isn’t too full a price to pay for the shares, trading on a sub-one times PEG ratio, and a March 2008 p/e of 11.2, predicated on profits surpassing £5m from £15.6m sales. Strong buy.

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