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Victrex Plc - Preliminary Results 2020

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Victrex plc

Preliminary Results 2020

'Resilient financial position & strong long-term growth pipeline, despite COVID-19 headwinds'

Victrex plc, an innovative world leader in high performance polymer solutions, today announces its preliminary results (audited) for the 12 months ended 30 September 2020.

 

FY 2020

FY 2019

% change (reported)

% change

(constant currency)1

Group sales volume

  3,492 tonnes

3,751 tonnes

-7%

NA

Group revenue

£266.0m

£294.0m

-10%

  -10%

Gross profit

£142.4m

£176.3m

-19%

-23%

Gross margin

53.5%

60.0%

-650bps

  NA

Underlying profit before tax (before exceptional items1)

£75.5m

£106.2m

-29%

-34%

Reported PBT

£63.5m

£104.7m

-39%

-45%

Underlying EPS1

75.3p

108.9p

-31%

 

Reported EPS

62.6p

107.2p

-42%

 

Dividend per share (regular & special dividends)

46.14p

59.56p

  -23%

 


COVID-19

Victrex has been proactive since the onset of COVID-19 with the health, safety and well-being of our employees remaining our highest priority. We have continued our focus on the development of sustainable and environmental or socially beneficial products, as well as strong service levels to our customers and support for our communities, whilst also maintaining a strong financial position.

Highlights:

• FY impacted by significant COVID-19 headwinds in H2

-  FY sales volume down 7% & revenue down 10%, impacted by end-market weakness in H2

-  H2 revenue down 23%; subsequent signs of having bottomed out in Auto, Electronics and Medical, with incremental improvement

-  Medical revenue down 14%, with US remaining weak and Asia improving

-  Underlying PBT down 29% at £75.5m; continuing margin impact from under absorption of fixed costs

-  Reported PBT of £63.5m, reflecting £12.0m of exceptional items in FY 2020 driven by cost actions, with anticipated annualised savings of c£10m

• Long term 'mega-programme' pipeline remains strong; little evidence of slowdown

-  Meaningful revenue of £1m+ delivered for Aerospace Loaded Brackets programme

-  PEEK indicated as 'material of choice' by TechnipFMC for Magma oil & gas qualification programme

-  PEEK Knee clinical trial underway, with additional trial sites being prepared

-  New E-mobility growth programme gaining traction

• Investments underpin future growth opportunities

-  New PEEK manufacturing facility in China progressing, to stimulate growth

-  Further progress to enhance our Additive Manufacturing (3D printing) capability 

• Resilient financial position with cash and cost actions implemented

-  FY cash £73.1m*; operating cash conversion of 101%1

-  Committed and undrawn RCF of £20m, with £20m accordion

-  UK debottlenecking programme paused to reflect demand outlook

-  Strong inventory position (FY 2020: £98.5m) to manage Brexit transition

-  Reinstatement of dividends, with proposed final dividend of 46.14p/share

• Enhanced ESG strategy with carbon net zero focus

-  Launch of enhanced ESG strategy aligned to UN Sustainable Development Goals

-  Focused on delivering carbon net zero by 2030

-  Aspiration to increase sustainable products >50% of revenue mid-term

Jakob Sigurdsson, Chief Executive of Victrex, said: "After a solid first half, COVID-19 related headwinds had a material impact on our business during the second half, with significant end-market declines. This was compounded by the effects of much lower production, which led to under-absorbed fixed costs and an impact on margin.  Currently however, we are seeing a continued incremental improvement in demand from trough levels, particularly in Automotive, Electronics and Medical. Our new financial year has started solidly, although several end-markets, notably Aerospace and Energy, remain challenging.

"Our priorities continue to be the health, safety and well-being of our employees through COVID and our sustainable products and strong service levels for customers, with many of our materials being part of life-sustaining applications. Our supply chain and inventory, partly to manage the Brexit transition, remains effective and our financial position is resilient, with £73m of cash and additional available facilities.  Whilst we reduced discretionary spend and some capital programmes, including pausing our UK debottlenecking, which was scheduled to commence in FY 2021, investment to support our future growth continues, specifically our China manufacturing facility which is scheduled to be online in 2022. 

"With production volumes remaining low, cash conservation and cost management are key. Our cost actions, primarily through voluntary redundancy in the UK, will start to deliver both short-term and long-term benefits. Initially, in FY 2021, this will underpin rather than enhance profitability, reflecting current end-markets and our plan to unwind inventory post-Brexit, which will also strengthen our cashflow.  Growth investment remains our priority but with good cash generation following deferral of the interim dividend, the Board has proposed to reinstate dividends, with a final dividend of 46.14p/share to shareholders.

Outlook

"At this early stage, FY 2021 has started solidly. Whilst several end-markets are seeing some incremental improvement, overall performance remains subdued and we expect some softness to continue through the first half, versus the prior year, with the potential for uncertainty in order patterns.  Whilst we will start to benefit from the actions we have taken on costs, some impact on margin will remain due to production volume being lower than sales volume and inventory unwind post Brexit. Consequently, our initial assumptions are that delivering a performance which improves on FY 2020 will be contingent on a better macro and end market environment in the second half of our 2021 financial year."

"Despite the ongoing challenges of COVID-19, the Group remains resilient, with specific milestones delivered in our strong and diverse growth pipeline - which we are adding to - including meaningful revenues from Aerospace Loaded Brackets and good progress in Magma.  Overall, there is little evidence of slowdown and milestones across our mega-programmes are improving. We have also enhanced our ESG agenda, building on the role our sustainable products play in CO2 reduction, with a carbon net zero target by 2030 and alignment to UN Sustainable Development Goals.   On a long-term basis, our Polymer & Parts strategy keeps us well placed to deliver our range of medium to long term growth opportunities."