Enforced US budget cuts this month reflected the wide-ranging impact that so-called sequestration legislation there will have on all types of government spending. It isn't just defence budgets feeling the heat - funding cuts for research, with cuts of more than 5 per cent, are expected this year. That leaves companies like medical protein supplier Abcam (ABC), which generates at least 40 per cent of its sales from the US research market, in an awkward position.
Abcam benefited from the first full contribution from its Epitomics acquisition, which offset some of the pressure from the threat of budget cuts over the year. However, although underlying sales growth of 12 per cent was respectable, the geographic breakdown showed that US revenue growth of 6 per cent to £22.8m was well behind its normal mid-teen range - which was due to researchers holding off from spending their budgets until the situation became clearer. Now that cuts are certain, management expects the US market to become even more challenging. However, there were some bright spots for Abcam - it seems to be gaining a greater share of a fragmented market, for instance, and a revenue increase in the Pacific region of 27 per cent to £5.9m was mainly due to increased Chinese research.
Broker Peel Hunt forecasts pre-tax profits for 2013 of £45.9m, giving EPS of 17.3p (from £39m and EPS 15.6p in 2012).
ABCAM (ABC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 438p | MARKET VALUE: | £870m | |
| TOUCH: | 437-438p | 12-MONTH HIGH: | 439p | LOW: 332p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 78p* | NET CASH: | £24.4m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 44.7 | 17.2 | 7.09 | 1.69 |
| 2012 | 57.3 | 20.0 | 7.68 | 1.94 |
| % change | +28 | +16 | +8 | +15 |
Ex-div: 20 Mar Payment: 19 Apr *Includes intangible assets of £116m, or 58p a share | ||||
