The Investment Column: API

API ISN'T the first company to say it is seeing signs of strengthening in weak markets. However, in the case of API, the cigarette packets to security bags group, its optimistic statements earlier in the year have turned out to be more than just pretty packaging.

API has successfully ridden out a downturn in its Asian, Russian and South American markets, even as the pound has failed to weaken. Despite falling tobacco and spirits packaging sales, group turnover increased by 8 per cent to pounds 177m last year, while pre-tax profits rose slightly to pounds 16m even after exceptional charges of pounds 1.5m.

The focus now is on beefing up the portfolio through acquisitions. The group has net cash of pounds 4m on the balance sheet and is in talks on a handful of deals.

On the downside, Mike Smith, chief executive, says that customers are upgrading their fancy security bags at a slower rate than expected, which is continuing to hold back profits growth. High raw material costs continue to inflict some pain.

Analysts expect pre-tax profits of pounds 20m and 42p per share in the full year, putting API shares, up 5p a 355p yesterday, on a forward price/earnings ratio of just eight. For a company that has survived this far and is exposed to continuing emerging market recovery, that's good value.