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Victrex in PEEK condition

The niche plastics-maker has reported rising margins and strong sales to consumer electronics customers
May 19, 2015

As mobile devices become thinner and smarter, more consumer electronics companies are depending on high performance polymers like PEEK, produced by Victrex (VCT). Demand from these was more than enough to offset a 9 per cent decline in revenues from the group's oil and gas business, which has suffered from depressed investment in global energy markets.

IC TIP: Hold at 2059p

Unfortunately, growing consumer electronics volumes and a lower contribution from the higher-priced Invibio medical business conspired to lower the group's average selling price by about 16 per cent. Sales in Invibio fell 4 per cent as the US trend towards medical consolidation affected order patterns from several larger customers.

Higher volumes and manufacturing efficiencies were enough to drive a 90 basis points increase in gross margins to 64.9 per cent. But that effect is expected to reverse in the second half as the group shells out on expanding its capacity by developing new plants. Capital investment will be approximately £45m for the full year, though management expect that to fall to between £25m and £30m in 2016-17. Research spending, meanwhile, will remain at about 5 per cent of sales.

Broker N+1 Singer forecasts full-year adjusted pre-tax profit of £103.6m, giving EPS of 95.5p (2014-15: £102.7m/94.3p).

VICTREX (VCT)
ORD PRICE:2,059pMARKET VALUE:£1.8bn
TOUCH:2,056-2,060p12-MONTH HIGH:2,147pLOW: 1,499p
DIVIDEND YIELD:2.2%PE RATIO:21
NET ASSET VALUE:382pNET CASH:£42.2m

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201412048.945.111.39
201513053.949.811.73
% change+9+10+10+3

Ex-div:11 Jun

Payment:30 Jun