Victrex shares jump on bumper cash return

Victrex
£20+136p
Questor says HOLD

Victrex [LON:VCT], the manufacturer of specialist lightweight polymers, announced a special dividend for investors yesterday, sending its shares soaring £1.36 or more than 7pc higher.

Back in September, the polymer specialist had flagged that sales were strong into the end of the year but the build-up in cash came as a welcome surprise.

The driving force behind the growth was a strong market in the automotive and aerospace sectors for the company’s Peek products, which are made from a new lightweight polymer resistant to temperature and chemicals. The material is being used to replace metal parts in aeroplanes such as the new Boeing 787, brake pads in cars, and components in smartphones and medical implants.

The FTSE 250-listed company said revenue was up 14pc to £252.6m, and pre-tax profits were up 9pc to £102.7m.

The business has two divisions: Victrex Polymer Solutions, which focuses on transport, industrial and the electronics market; and Invibio Biomaterials, which supplies medical device manufacturers. The polymers business reported volumes 22pc ahead of last year at 3,551 tonnes, while Invibio reported revenue up 5pc on last year.

David Hummel, chief executive, said: “Our 2015 financial year has started well and although currency headwinds remain considerable, we now anticipate being able to fully cover the FX impact.”

The strong performance was achieved by selling higher volumes of lower profit-margin products. So, the gross profit margin fell 200 basis points to 64.6pc from 66.6pc last year.

Mr Hummel said the company would pay a 45.15p full year dividend as well as a 50p special dividend, both of which are ex-dividend on February 4 and payable February 20.

The balance sheet was in a £89.6m net cash position at the year-end but this will fall by £43m following the payment of the special dividend.

The shares are currently rated on 20 times forecast earnings and pay a 2.8pc prospective dividend yield. Hold.