Victrex picks up the pace

Demand for lightweight parts on new fuel efficient cars and aircraft meant Victrex (VCT) had a far better second half. The company sold 1,528 tonnes of its PEEK high performance plastic during the six months to end-September, 10 per cent more than during the first half. It also equalled last year's strong number which had benefited from product launches by consumer electronics customers. Moreover, and while visibility is notoriously short, we're told the order book for October is "reassuring".

In all, Victrex nudged full-year volumes up a fraction to 2,920 tonnes, driven by demand across its industrial and transport markets. The company's ultra-resistant material is found in components on the Boeing 787, which is currently ramping up production, and recently passed qualification for use on Airbus jets, too. A new £90m plant that will significantly increase capacity remains both on plan and on budget. There has been steady progress in emerging markets, too, and six-month sales at medical devices unit Invibio grew 6 per cent to £26.6m, which left full-year revenue there flat at £50.8m. This significantly reflected improving sales in the spine market during the second half, where revenue was 10 per cent ahead of the first half - helped by stabilising inventory levels.

Deutsche Bank says…

Buy. The trading update is reassuring but we expect little change to consensus forecasts ahead of further detail with the preliminary results on 10 December. Implied fourth-quarter volume of 756 tonnes was 2 per cent above our forecast and second-half revenue at Invibio was 5 per cent better than we expected. Trading on 16.9 times our 2014 earnings estimate of 92.71p, the shares may not look cheap on traditional multiples and growth has been sluggish - weak macro conditions and destocking in Invibio. But with a sector leading return on capital employed, and structural growth drivers intact, we maintain our buy recommendation - our price target stands at 1,825p.

N+1 Singer says…

Hold. Overall, this is a solid update and in line with our expectations but, as ever, the group has very little visibility at this stage over the likely volume outcome for the new financial year. A reassuring October suggests that a return to growth should be on the cards after a sluggish couple of years, but we expect the shares to require at least one good quarter under the belt before breaking free from the current trading range. We still expect full-year adjusted pre-tax profit of £91.6m for 2013 and adjusted EPS of 83.5p (2012: £94.5m/85.1p), rising to £101.6m and 938.p in 2014.