Flat operating profit, an expansion in net debt, and a frugal final dividend increase aren't normally the sources of a major stock rerating, but that is precisely what happened to engineer Vesuvius (VSVS) after investors flocked to buy the shares on the publication of its full-year results. Aside from a positive set of broker upgrades, the immediate 16 per cent appreciation in the molten metal flow specialist's market value was prompted by management's comments on stabilising end markets and even "early signs of improvement in 2017".
In the end, adjusted operating margins held firm at 9.5 per cent despite some contraction in the steel flow control, advanced refractories and foundry divisions, thanks to strong growth in the Asia Pacific region. Currency movements provided an additional, much-needed tailwind, adding a £13.1m trading benefit for the year and boosting the restructuring programme's cost savings to £27m for 2016. This has allowed Vesuvius to raise its annualised cost savings target by 17 per cent to £35m by the end of December.
Following these results, Numis analysts upgraded their full-year pre-tax profit and EPS forecasts to £136m and 33.4p, while 2018 estimates are now at £147m and 35.9p.
VESUVIUS (VSVS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 541p | MARKET VALUE: | £1.47bn | |
| TOUCH: | 540-541p | 12-MONTH HIGH: | 550p | LOW: 270p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 390p* | NET DEBT: | 29% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.55 | 17.0 | -7.0 | 14.30 |
| 2013 | 1.51 | 104 | 38.4 | 15.00 |
| 2014 | 1.44 | 111 | 36.8 | 16.10 |
| 2015 | 1.32 | 77.4 | 17.6 | 16.28 |
| 2016 | 1.40 | 79.4 | 17.3 | 16.55 |
| % change | +6 | +3 | -2 | +2 |
Ex-div: 6 Apr Payment: 19 May *Includes intangible assets of £782m, or 288p a share | ||||
