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Momentum builds at Victrex

RESULTS: A return to decent growth looks likely next year, but Victrex's shares already trade on a lofty multiple
December 10, 2013

Volumes, revenue and profit changed little at Victrex (VCT) in the year to end-September and - with such a short order book - predicting outcomes is difficult. Crucially, however, a sharp pick up in activity during the second half has continued into the new financial year and management is understandably optimistic.

IC TIP: Hold at 1654p

Indeed, sales volumes in the final six months of the period grew 10 per cent on the first half and second half pre-tax profit of £48.9m was slightly better than expected. Overall, operating profit at the core business - selling PEEK high performance plastic for parts fitted to jet planes, motor cars and electronic gadgets - was flat at £68.6m in the year. European volumes grew sharply and Japan recovered, too. Sales to automotive and aerospace customers grew again and demand for industrial machinery and equipment rose, off-setting weakness in oil & gas and electronics. Focusing on more lucrative applications slimmed down the pipeline of potential developments to 1,600, or 2,064 tonnes. But Victrex still needs extra capacity and a £90m plant which could increase output by two-thirds is on track to start up in 2015. Profit at the smaller medical devices unit Invibio was largely unchanged at £29.3m, although demand for metal–free dentures is rising fast.

Broker Morgan Stanley expects adjusted EPS of 91.3p for 2014, up from 86p in 2013.

VICTREX (VCT)

ORD PRICE:1,654pMARKET VALUE:£1.40bn
TOUCH:1,654-1,658p12-MONTH HIGH:1,791pLOW: 1,457p
DIVIDEND YIELD:2.6%PE RATIO:19
NET ASSET VALUE:370pNET CASH:£91.6m

Year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200910425.121.719.2
201019074.965.125.0*
201121694.285.332.5
201222094.585.737.4
201322294.686.543.0
% change+1-+1+15

Ex-div: 5 Feb

Payment: 21 Feb

*Excludes 50p a share special dividend