Demerged Cookson tells tale of two halves

When FTSE 250 engineer Cookson last year demerged into two separate companies, the split was widely seen as an amicable divorce - a way to allow smaller electronics specialist Alent to thrive away from the overshadowing presence of the larger Vesuvius, a provider of ceramics to steelmakers.

Burdened with Cookson's hefty pension liabilities, Vesuvius was touted as the unwieldy tortoise to Alent's hare, given the smaller group's focus on providing electronic parts used in tablet devices, computers and smartphones.

However, the companies' recent interim results have been a tale of two halves, with Vesuvius seeing its shares turn skywards on forecast-beating numbers, while Alent fell back on Monday after experiencing setbacks in demand for consumer electronics.

Alent revenues in the first six months of 2013 fell from £362.4m to £348.8m year on year, while a drop in demand from a key customer and an earlier overstocking of copper used in circuitry dragged back pre-tax profit from £46.9m to £40.3m.

Diluted earnings per share declined from 13.6p to 10.5p, while the dividend edged up from 2.75p to 2.89p. Earnings before interest and tax of £44m missed City consensus forecasts by 6 per cent.

Conversely, Vesuvius last week overshot analysts' first-half operating profit forecasts, thanks to tight cost controls and a better than expected break-even performance at its division that makes solar crucible containers for melting silicon.

Vesuvius shares jumped as much as 13 per cent on Friday, while Alent's stock fell 2 per cent to 368.8p on Monday.

Steve Corbett, Alent chief executive, was keen to put a positive spin on his company's results, highlighting a likely seasonal jump in sales of consumer electronics later in the year.

"There is a lot of pent up demand for new [consumer] product launches. We are always a second-half weighted business, as demand grows in the run-up to Christmas," he said.

"The question is whether it will be a normal Christmas or a gang-buster Christmas."

Another reason for the split was to allow the separate management to focus on their specialities - something that both Mr Corbett and Francois Wanecq, his counterpart at Vesuvius, have been eager to exploit.

Mr Wanecq has responded by paring back Vesuvius' operations with the €56.8m sale of its precious metals processing division in May, and on Friday announced the sale of its construction and installation business in Canada for an unspecified but relatively small sum.

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"Vesuvius has above-average emerging market exposure, with potential upside forecast risk, and the latest restructuring plan may exceed expectations," said Peter Reilly, analyst at Deutsche Bank.

The divergent paths of Alent and Vesuvius can also be shown in their respective share prices since the December 19 split, with Alent's stock up about 20 per cent, while Vesuvius' shares have jumped by almost half.

Such share price increases have given credence to the original reason for the split - to allow both companies to be more accurately valued as individual entities.

Conversely, the share price increases may have deterred potential suitors from making a bid, which was the other reason behind the split.

First-half numbers aside, both Vesuvius and Alent are facing tough markets in the coming year.

Vesuvius suffers from a lack of forward visibility in its sales, and is highly sensitive to the cyclical steel and industrial sectors, which have been in the doldrums of late.

While Alent, with its exposure to consumer electronics companies such as Apple and Samsung, and its regular contracts to supply much of the world's solder used in circuit boards, sees its prospects hinged on the release of new electronic gadgets.

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