Victrex (VCT) came home with a wet sail during the second half of its financial year through to September, but the polymer products group still recorded a 6 per cent decline in gross profit. Margins contracted by 90 basis points, as processed volumes reduced and pushed up unit manufacturing costs. The underlying problem, as flagged earlier this year, was a 30 per cent reduction in sales volumes at the consumer electronics segment. Disregard this effect, and core business volumes were up 9 per cent in the second half, although there are few signs that sales at the troubled business are likely to recover through the current year.
The travails of consumer electronics actually highlight the defensive qualities of the group's balanced portfolio; the former division's weakness was partially offset by strengthening performance in its transport markets, and more predictable trading patterns in the energy segment. That process of diversification continues as the group transitions away from polymer to higher-margin component markets. Construction work continues on the group's Polymer Innovation Centre, which will eventually enhance its development capabilities, while another £10m has been allocated for a strategic investment in Magma Global, its existing development partner for the Magma Oil & Gas programme - a collaboration focusing on commercial opportunities in flexible subsea pipes.
The group's average selling price was marginally ahead of the prior year at £63.80/kg, rising to £70/kg once consumer electronics and the impact of foreign currency translations are discounted. The group employs a hedging strategy, so the benefit of sterling's post-referendum decline was effectively delayed during the period under review, but will be more pronounced in the current year, with the potential benefit to profit expected to be slightly ahead of the existing £14m-£15m guidance.
Deutsche Bank sees pre-tax profit of £109m for the September 2017 year-end, leading to EPS of 102p (from £100m and 96.8p in FY2016).
| VICTREX (VCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,770p | MARKET VALUE: | £1.52bn | |
| TOUCH: | 1,770p-1,771p | 12-MONTH HIGH: | 1,914p | LOW: 1,294p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 455p | NET CASH: | £64m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 220 | 94.5 | 85.7 | 37.4 |
| 2013 | 222 | 94.6 | 86.5 | 43.0 |
| 2014 | 253 | 103 | 94.6 | 45.2* |
| 2015 | 264 | 106 | 98.1 | 46.8 |
| 2016 | 252 | 100 | 96.8 | 46.8 |
| % change | -4 | -6 | -1 | - |
Ex-div: 2 Feb Payment: 17 Feb *Excludes special dividend of 50p a share paid Feb 2015 | ||||
