Victrex can't please everyone

Trading in the year to September was solid rather than spectacular. Strip out the impact of a weak euro and group revenue rose 8 per cent to £264m as volumes soared 19 per cent. Most of those gains were delivered in electronics, where Victrex's high-performance PEEK polymer solutions gained traction by transforming the latest smartphones and gadgets into thinner, more heat-absorbent devices. Transport sales volumes also increased substantially, driven by growing requirements in the automotive and aerospace sectors for lighter, resistant materials.

Thanks to Victrex's "balanced portfolio", these areas of strength offset difficulties elsewhere. Demand for the group's exploration-linked applications has come under pressure from the falling oil price, causing the division's volumes to plummet 22 per cent. Management remains confident that harder to extract reserves, higher pressure and more extreme temperatures will ensure that PEEK emerges as a key material in the upstream oil and gas industry, but acknowledges that a low oil price environment isn't ideal.

Chief executive David Hummel was also cautious on the US spinal implant market following consolidation that sent sales in the medical unit Invibio down 5 per cent to £51m. To counter this ongoing challenge, Mr Hummel is keen to broaden the group's implantable medical device range and tap into emerging regions. Victrex has already found some success in Asia and doubled early-stage revenue in the dental market.

Weaker sales of high-margin Invibio products, currency headwinds and lower-value consumer electronics turnover conspired to knock 12 per cent off the average selling price. A negative change in mix and costs arising from the construction of a third PEEK plant also saw gross margins tighten 80 basis points to 63.8 per cent.

Analysts at broker N+1 Singer expect adjusted EPS of 102p for the year to September 2016, up from 95.5p in FY2015. The broker also forecasts a 50p special dividend.