Vectura (VEC) has undergone a disconcerting number of identity changes since its acquisition of SkyePharma in 2016. The most recent strategy update – to focus on partnered projects and medical development services – is already having an impact on the numbers. In the first half of 2019, group research and development costs fell 10 per cent to £24.5m, which helped more than halve operating losses and boost adjusted cash profits by 11 per cent to £25m.
The lower-risk strategy reduces the need for excessive cash reserves, meaning management has decided to return £60m to shareholders via a special dividend and share buyback scheme. Investors deserve a little reward after a turbulent few years under the tenure of former chief executive James Ward-Lilley. The board is now hunting for a replacement leader who will be responsible for keeping the group focused.
The question for investors now is whether partnered drug and device development can generate the same excitement as in-house medicine innovation. Revenue growth in the first half of the year was almost entirely driven by the in-market sales of partnered product Flutiform. The successful launch of another of the group’s six partnered projects could catalyse a leap in revenues, but this is dependent on a successful clinical trial. For now, consensus estimates are for adjusted annual earnings per share of 4.42p, compared with 3.91p in 2018.
| VECTURA (VEC) | ||||
| ORD PRICE: | 82p | MARKET VALUE: | £547m | |
| TOUCH: | 82-82.3p | 12-MONTH HIGH: | 90p | 66p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | na | |
| NET ASSET VALUE: | 72p* | NET CASH: | £98m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 79.9 | -29.9 | -3.5 | nil |
| 2019 | 91.7 | -13.4 | -2.0 | 6** |
| % change | +15 | - | - | - |
| Ex-div: | 10 Oct | |||
| Payment: | 25 Oct | |||
| *Includes intangible assets of £386m, or 58p a share | ||||
| **Special dividend | ||||
