Even though Abcam’s (ABC) half-year numbers were as expected, lower-than-expected guidance for the full year prompted a sharp de-rating in the stock on results day. Bosses now expect yearly revenue growth to be in line with the first half, while expectations for annual adjusted cash profit margins have moderated from 36 per cent to 35 per cent due to higher investments.
As analysts at Numis point out, fixed costs in the business “are rising to support longer-term growth” – which investors could probably stomach if top-line acceleration was keeping pace. But sales growth is currently falling slightly short of both management and market expectations, with slower-than-expected growth at the custom products and licensing division – known as Abcam Inside – proving particularly disappointing.
Chief executive Alan Hirzel calls this the “bear case”, arguing instead that the focus is to improve the quality of revenues over time, rather than simply the quantity. Mr Hirzel also prefers to look at gross margin expansion as an indicator of progress, and pointed to the 40 basis point increase to 70.2 per cent during the first half.
Brokerage Panmure Gordon still expects adjusted pre-tax profits of £80m for the year ending June 2019, giving EPS of 34p, up from £77.5m and 32.3p in FY2018.
| ABCAM (ABC) | ||||
| ORD PRICE: | 1,156p | MARKET VALUE: | £2.38bn | |
| TOUCH: | 1,153-1,157p | 12-MONTH HIGH: | 1,644p | LOW: 1,006p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 41 | |
| NET ASSET VALUE: | 179p* | NET CASH: | £83.2m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 113 | 32.8 | 15.8 | 3.42 |
| 2018 | 125 | 33.7 | 13.5 | 3.55 |
| % change | +11 | +3 | -15 | +4 |
| Ex-div: | 14 Mar | |||
| Payment: | 12 Apr | |||
| *Includes intangible assets of £231m, or 112p a share | ||||
