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Victrex Plc - Q3 Interim Management Statement

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Victrex plc Q3 Interim Management Statement

'Continued momentum and a strong Q3; some upside potential for FY 2021'

Victrex plc is an innovative world leader in high performance polymer solutions, delivering sustainable products which support CO2 reduction and bring environmental and societal benefit in multiple end-markets. Today's Interim Management Statement for Q3 covers the period 1 April 2021 to 30 June 2021.

Overall, the Group is seeing continued momentum in most end markets and delivered a strong quarter with volumes of 1,202 tonnes.  Whilst we are mindful of some restocking effect within our recent performance, particularly in the Value Added Resellers area, our order book remains robust for the final quarter, although the anticipated run rate may be slightly lower. Sales mix remains skewed towards our Industrial end markets although Medical is seeing an encouraging performance as some geographies see elective surgeries return in greater numbers.

For Q3 as a whole, Group revenue of £80.7m was 37% ahead of the prior year (Q3 2020: £58.8m), with Q3 Group sales volume of 1,202 tonnes being 49% ahead of the prior year (Q3 2020: 805 tonnes).  On a year-to-date (YTD) basis, Group sales volume of 3,289 tonnes is 18% ahead of the prior year (2020 YTD: 2,797 tonnes), with YTD Group revenue of £231.6m being 10% ahead of the prior year (2020 YTD: £210.3m) reflecting the COVID-19 related impact on all end markets in the prior year.

End market performance

Across our end-markets, trading continues to be strongest in our Electronics, Other Industrial and Value Added Reseller end markets.  Automotive and Energy have continued to see year on year improvement whilst Aerospace remains subdued. Medical continues to see a gradual improvement in procedures, both in Asia and the US.  Latest market indicators suggest the US will be back to pre-COVID surgery levels around the end of 2021.

Mega-programmes

Our growth pipeline of 'mega-programmes' remains strong and we remain fully focused on delivering specific milestones as we move closer to greater commercialisation. 

In our Knee programme, we are pleased to announce that our partner Maxx Orthopedics has signalled that the first human implant of a PEEK Knee has been completed. To date, five patients have received a PEEK Knee as part of the clinical trial sites in Italy, Belgium and India, and all have reached the 6-week clinical follow up stage with no issues reported. Clinical trials are to demonstrate the safety of the PEEK Knee, which involves the recruitment of 35 patients.  The expected duration of follow-up for each patient is up to two years and, following this initially encouraging update, we anticipate a further progress update in early 2022.

Financial position

Victrex retains a highly cash generative business model, with our cash position supporting the elevated capital expenditure this year, principally in the development of our new Panjin VYX facility in China, which is progressing towards commissioning in 2022.  We also reinstated the interim dividend at pre-COVID levels, which was paid to shareholders in June 2021.  Cash on 30 June 2021 was £88.3m, which excludes £10.6m cash ringfenced as part of our China manufacturing subsidiary.

COVID-19

We have sustained our proactive approach to managing the impact of COVID-19 with the safety, health and well-being of Victrex employees being our highest priority.  Our COVID-19 contingency plans remain in place and our supply chain has seen no material impact, enabling us to continue to meet our customers' needs in full.  Return to Site plans are in development although these remain mixed by geography, with over two-thirds of our global employees currently homeworking.  Beyond our UK business-critical teams involved in manufacturing and supply chain, Return to Site for our UK employees is expected in September. 

Outlook

Jakob Sigurdsson, Chief Executive of Victrex, said: "Following our positive first half performance, we have continued to see good momentum as the year progresses. Our order book for the final quarter is robust although with some benefit from restocking over recent months, we anticipate run rates may be slightly lower than Q3. Nevertheless, we are continuing to see a solid recovery from the impact of COVID-19 on our business. Reflecting the volume strength on a year to date basis, we now see the potential for some upside to current full year expectations, with our internal assumptions being closer to the upper end of market expectations.

"At this early stage looking towards FY 2022, many of our end markets are continuing to show good progress, although we note the growing impact from foreign currency headwinds next year, increasing raw material inflation, an anticipated uplift in innovation spend to support our long-term growth pipeline and some costs associated with commissioning our China manufacturing facility. These effects will weigh on our 2022 prospects, although we remain focused on growth.

"With sustainable products and a strong pipeline of growth opportunities, our Polymer & Parts strategy keeps us well positioned for the medium to long-term."

Victrex will report its Preliminary Results for 2021 on Monday 6th December 2021.