As foreshadowed, Victrex (VCT) bumped up the value of its inventory by 23 per cent after its September year-end, providing a temporary bulwark in the event of Brexit-linked disruption to the supply chain. Although totally justifiable given the ongoing political impasse, stockpiling does lock in capital with its effects amplified if revenue – and, by extension – cash flows come under pressure.
Logic dictates that buyers of the group’s innovative plastic products would have been prone to stockpiling for the same reason, but there was little sign of that at the half-year mark, with revenue down 12 per cent at constant currencies. Management blamed weakness in the automotive and consumer electronics divisions, which certainly ties in with wider trends in the economy. Medical sales provide a counterpoint, with sales ahead of the comparable point in 2018, aided by continued growth in its PEEK-OPTIMA HA-Enhanced product for use in spinal procedures.
When companies build inventory, it’s always a good idea to optimise payables and receivables. Given that the group’s trade receivables increased as a proportion of sales, while operating cash flow reduced as a proportion of profits, it has some housekeeping to do over the second half.
Consensus forecasts give cash profit of £139m in the year to September 2019, leading to adjusted earnings per share of 123p, rising to £147m and 130p in FY2020.
| VICTREX (VCT) | ||||
| ORD PRICE: | 2,132p | MARKET VALUE: | £1.84bn | |
| TOUCH: | 2,130-2,132p | 12-MONTH HIGH: | 3,314p | LOW: 2,061p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 490p | NET CASH: | £49.4m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 167 | 63.3 | 64.7 | 13.42 |
| 2019 | 146 | 50.2 | 51.4 | 13.42 |
| % change | -13 | -21 | -21 | - |
| Ex-div: | 6 Jun | |||
| Payment: | 28 Jun | |||
| NB: Dividend yield calculation does not include special dividend paid in Feb 2019 of 82.68p a share. | ||||
