Vindon Healthcare

SPECULATIVE BUY

22/09/2008 James Crux

Investors looking to back a small, though defensive, growth company with good earnings visibility might care to investigate Vindon Healthcare.

Chaired by Liam Ferguson, the company makes environmental control products – able to manage temperature, humidity and light – and provides drug storage facilities for pharmaceutical, life sciences and food sector clients.

The leader in this sector, Vindon’s defensive qualities arise from the need of ‘big pharma’ to continue developing new drugs irrespective of the economic cycle. Furthermore, storage trials can last for five years, meaning that Vindon offers investors highly visible revenues.

Recent interim results to June were strong, showing a 49% pre-tax profits increase to £828,000 on turnover lifted 21% to £2.55m, reflecting an ongoing focus on higher-margin services.

Aside from moving its Irish subsidiary into profit and making a low-key entry into the US market, the expanding Vindon has moved into a new state-of-the-art facility in Rochdale with double the manufacturing space and six times the storage capacity of its old premises. According to Ferguson, this leaves the company better placed to obtain more regulatory approvals and widen the range of drugs it can store, as well as enabling the company to build an on-site cryogenic storage facility there.

Vindon boasts committed revenues on storage and services contracts amounting to £796,000 for the second half-year, with £1.1m of revenue already secured for 2009. Forecasts for 2008 suggest a pre-tax profit increase from £1.43m to £1.69m, with earnings rising from 1.18p to 1.36p.

Trading on a prospective price-to-earnings ratio of 14.7, the shares aren’t especially cheap. Even so, we consider Vindon, which has hit the dividend trail, to be a minnow worth buying and stashing away.

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