Vindon Healthcare - Outperform - Finals - Vindon Healthcare news

Vindon Healthcare, through its operating subsidiary, Vindon Scientific, designs, manufactures and sells environmental control products to drug companies including Astra Zeneca, GlaxoSmithKline and Pfizer. An increasing proportion of its profits are derived from the provision of stability storage services to pharmaceutical R&D companies. Today’s prelims show continued growth in sales and profits. We expect demand for both Vindon’s equipment and services to continue to grow and are raising our FY07 forecasts and upgrading our recommendation to Outperform.

FY06 sales increased by 22% to £3.84m, ahead of our forecasts. PTP grew by an impressive 42% to £1.06m, in line with our forecasts.

The high level of order cover from the stability storage services contracts and sustained demand for Vindon’s equipment and services give us confidence to raise our FY07 sales estimate from £4.15m to £4.47m and our FY07 PTP estimate from £1.17m to £1.26m, giving annual PTP growth of 19%. We expect a similar (20%) level of profit growth in FY08, when we estimate sales of £5.22m generating PTP of £1.51m.

Demand for Vindon’s stability storage service is such that it has outgrown its site in Diggle, near to Oldham. Management intend to move all operations to larger premises in nearby Rochdale early in calendar 2008. This will give the potential to expand stability storage capacity by 600%. We are treating additional revenues associated with this move as upside.

Demand for Vindon’s products and services is likely to remain robust, its competitive position in the UK and Eire is strong and visibility of stability storage revenues is very high, indicating a P/E rating similar to other high quality engineering stocks such as Halma, Rotork and Spirax-Sarco. Our recent uplift in estimates justifies an upgrade in our recommendation from Market Perform to Outperform.

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