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Vesuvius outperforms underlying markets

The metal flow specialist has been delivering on all fronts
March 1, 2019

It’s generally assumed that heavy industry is now the preserve of the emerging market economies, but there are homegrown enterprises that show it’s possible to compete by moving up the value chain. Take a company like Vesuvius (VSVS), a specialist in molten metal flow engineering, which provides services to capital-intensive steel and foundry industries across the globe.

IC TIP: Buy at 624p

Global steel production increased by 4.6 per cent in 2018, but Vesuvius has outstripped its end markets, posting a 10.7 per cent rise in constant currency revenue (excluding disposals and acquisitions), a 24.1 per cent hike in trading profit, complete with a 120 basis point increase in the underlying margin.

Profit at the core steel unit was up a third, a reflection of improved house-keeping in addition to increased commercial activity. Restructuring measures delivered £14m in cost savings, while a new programme, initiated this time last year, is expected to deliver annual savings of £22m for a one-off cash charge of £19.3m and £15m in capital expenditure. Strengthening cash generation enabled the group to pay down debt, bringing the net debt/cash profit multiple to 1.0 versus 1.3 at the end of 2017.

Bloomberg consensus gives cash profits of £256m for 2019, leading to EPS of 51.4p, rising to £273m and 55.8p in 2020.

VESUVIUS (VSVS)   
ORD PRICE:624pMARKET VALUE:£1.69bn
TOUCH:623-624p12-MONTH HIGH:663pLOW: 469p
DIVIDEND YIELD:3.2%PE RATIO:12
NET ASSET VALUE:412p*NET DEBT:21%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.4411136.816.1
20151.3277.417.616.3
20161.4079.417.316.6
20171.6897.113.418.0
20181.8015651.119.8
% change+7+61+281+10
Ex-div:18 Apr   
Payment:24 May   
*Includes intangible assets of £741m, or 273p a share.