A special dividend of 50p per share accompanied news of buoyant sales to the consumer electronics sector as Victrex (VCT) delivered its full-year results - sending the shares up 7 per cent. Given the lower-margin nature of the consumer electronics business, however, heavy involvement in piecing together the latest iPhone has eaten away at the plastic specialist's very high margins. Management also cited higher manufacturing costs in the first half and currency headwinds of £2.3m as reasons for a 2 percentage point drop in the group gross margin to 64.6 per cent.
Yet chief executive David Hummel is confident these two problems will recede. He says significant investments have been made to stop high manufacturing costs eroding operating profits. For example, research and development expenditure was up almost 8 per cent to £15.7m to help tackle this long-term problem. Mr Hummel also notes that positive trading momentum and the strengthening of the US dollar should help the currency headwinds ease in the current financial year.
JPMorgan Cazenove reckons lower manufacturing costs will save Victrex between £4m and £5m. The broker upgraded its adjusted pre-tax profit forecast for 2014-15 by 7 per cent to £103m, giving EPS of 96.4p.
| VICTREX (VCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,026p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 2,025-2,029p | 12-MONTH HIGH: | 2,042p | 1,536p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 415p | NET CASH: | £89.6m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 190 | 74.9 | 65.1 | 25.0* |
| 2011 | 216 | 94.2 | 85.3 | 32.5 |
| 2012 | 220 | 94.5 | 85.7 | 37.4 |
| 2013 | 222 | 94.6 | 86.5 | 43.0 |
| 2014 | 253 | 102.7 | 94.6 | 45.2* |
| % change | +14 | +9 | +9 | +10 |
Ex-div: 5 Feb Payment: 20 Feb *Excludes special dividends of 50p a share | ||||
