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Tech manufacturer e2v's self-help strategy is working

Greater customer engagement, innovation and careful cost management succeeded in delivering revenue and profit growth against a tricky trading backdrop
May 17, 2016

Listening to customers, investing in healthier markets and cutting costs where possible led to another resilient performance from e2v (e2v) in the year to 31 March. In a challenging economic environment, these relatively simple measures combined to deliver adjusted operating profit growth of 5 per cent to £42m.

IC TIP: Buy at 198p

The engineer's imaging unit once again led the charge. Robust demand for machine vision sensors, high-tech inspection cameras and the delivery of previously delayed space programmes drove divisional revenues up 17 per cent. This impressive growth, coupled with an improved operational performance and more favourable product mix, fed into the bottom line, triggering a 69 per cent rise in divisional adjusted operating profit to £16m.

Top-line growth elsewhere was harder to come by, as brisk appetite for the group's cancer-cell-destroying machines and high-speed data converters was offset by weaker defence and microprocessor markets. Fortunately, management's self-help measures ensured that these challenges were handled effectively. Thanks to good cost control and greater success selling higher-margin products, operating margins widened across all three of e2v's divisions.

Broker Investec upgraded its adjusted pre-tax profit forecasts, and now expects £46.1m in the year to March 2017, giving EPS of 14.8p (up from £40.8m and 14.4p in FY2016).

E2V TECHNOLOGIES (E2V)
ORD PRICE:195pMARKET VALUE:£426m
TOUCH:195-200p12-MONTH HIGH:268pLOW: 195p
DIVIDEND YIELD:2.7%PE RATIO:15
NET ASSET VALUE:91p*NET DEBT:11%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201223532.011.14.1
201320034.212.54.1
201421833.111.64.4
201522530.110.95.1
201623637.813.65.4
% change+5+26+25+6

Ex-div: 7 Jul

Payment: 2 Aug

*Includes intangible assets of £115m, or 53p a share