Vectura (VEC) shares were marked down on the release of these results after City analysts warned that despite a "solid" performance in 2018, there is only a limited chance of continued earnings upgrades this year. Last year, better-than-expected cash profits of £39m were the result of a disciplined approach to research and development (R&D) expenditure. Costs landed at the bottom of the £55m-£65m guided range, leading to higher gross margins. Meanwhile, a strong year-end cash position followed a 31 per cent surge in cash generated from operations.
But management has conceded that continued growth this year from its 'core' product portfolio – which includes respiratory products Flutiform and Ultibro – could be offset by a fall in sales of Exparel, as exclusivity patents expire on the pain relief product. That said, in November Vectura signed a new partnership with generics giant Hikma (HIK) to develop cheaper versions of GSK’s (GSK) Ellipta drug portfolio, which could include up to five different inhalers.
Broker Panmure Gordon is considering changing its forecasts, but previously expected pre-tax profits of £91.2m in 2019, giving EPS of 4.7p, moving up to £95.9m and 6.6p in 2020.
VECTURA (VEC) | ||||
ORD PRICE: | 69.7p | MARKET VALUE: | £464m | |
TOUCH: | 69.5-70p | 12-MONTH HIGH: | 108p | LOW: 66p |
DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
NET ASSET VALUE: | 74p* | NET CASH: | £108m |
Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016** | 72.0 | -1.9 | 1.2 | nil |
Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016^ | 127 | -40.1 | -5.3 | nil |
2017 | 148 | -102 | -12.6 | nil |
2018 | 161 | -105 | -13.2 | nil |
% change | +8 | - | - | - |
Ex-div: | na | |||
Payment: | na | |||
*Includes intangible assets of £383m, or 58p a share **Pre-merger Vectura numbers ^Nine-month figures |