The 50p special dividend says it all. Specialist plastics supplier Victrex had such an overwhelmingly strong year that management wants to return an extra £42m in cash to shareholders. With £77m of cash in the bank, no debt, and every sign that the recovery is continuing into the current reporting year, it can easily afford it.
Victrex makes high performance plastic components with a wide range of applications, from car and plane parts to medical implants. Volumes recovered sharply across the group’s industrial markets after a savage downturn in 2009, boosted by restocking. Meanwhile, the company’s smaller medical products division, Invibio, continued to steam ahead after strong growth throughout the recession. Overall, and in volume terms, the second half was a new record for the group.
The weakening pound also helped. Victrex makes its products near Blackpool but sells them abroad, so its revenues are in dollars and euros but its costs are in pounds. Excluding currency effects, revenues rose 47 per cent and pre-tax profits were up 53 per cent.
Citigroup expects pre-tax profits of £83.8m for 2011 and adjusted EPS of 73p (2010: £75m/65.1p).
|ORD PRICE:||1,327p||MARKET VALUE:||£1.11bn|
|TOUCH:||1,326-1,330p||12-MONTH HIGH:||1,355p||LOW: 773p|
|DIVIDEND YIELD:||1.9%||PE RATIO:||20|
|NET ASSET VALUE:||253p||NET CASH:||£77.3m|
|Year to 30 Sep||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 9 Feb
Payment: 25 Feb
*Excludes 50p a share special dividend
As an exporter with an almost monopolistic position in a highly specialised market, Victrex is in an enviable position to shrug-off growth concerns at home. But the restocking boost is probably over and the pound could well turn against the group this year. So, with the shares trading on a toppy-looking 18 times expected earnings, the good news looks well factored-in for now. Fairly priced.
Last IC view: High Enough, 936p, 25 May 2010