9 May 2023 Victrex plc – Interim Results 2023
‘Price, revenue & gross margin up; PBT lower on volumes, cost inflation & targeted investment’
Victrex plc is an innovative world leader in high performance polymer solutions, delivering sustainable products which enable environmental and societal benefit. This announcement covers interim results (unaudited) for the 6 months ended 31 March 2023.
| H1 2023 | H1 2022 | % change (reported) | % change(constant currency1) | |
| Group sales volume | 1,941 tonnes | 2,264 tonnes | -14% | N/A |
| Group revenue | £162.2m | £160.1m | +1% | -5% |
| Gross profit | £86.7m | £85.0m | +2% | -2% |
| Gross margin | 53.5% | 53.1% | +40bps | N/A |
| Underlying PBT1 | £42.5m | £48.2m | -12% | -15% |
| Reported PBT | £39.1m | £43.6m | -10% | -14% |
| Underlying EPS1 | 41.9p | 47.8p | -12% | N/A |
| EPS | 38.8p | 43.5p | -11% | N/A |
| Dividend per share | 13.42p | 13.42p | flat | N/A |
Highlights:
• Strong pricing performance, with revenue +1%, despite softer volumes
– H1 Group revenue up 1% at £162.2m (H1 2022: £160.1m), supported by FX
– Average selling prices (ASP) up 18% at £84/kg, delivered by strong pricing actions, mix & FX
– H1 Group sales volume down 14%; driven by macro weakness in Electronics, Energy & Industrial and Value Added Resellers (VAR), despite good growth in Aerospace & Automotive
– Record half in Medical; revenue up 17%, driven by new applications, mega-programmes, FX
• GM up to 53.5%; underlying PBT down on softer volumes, inflation & targeted investment
– Gross margin up 410 bps vs H2 2022 & up 40 bps vs H1 2022
– Underlying profit before tax (PBT) down 12% at £42.5m & down 15% in constant FX
– Reported PBT £39.1m
– Targeted investment in Medical acceleration & China start-up
• Growing ‘mega-programme’ commercialisation – sales from new products up to 7%2
– Medical:
· Trauma plates: exceeding demand, on track for c£1m revenue & new Asia partner
· PEEK Knee: strong progress in Maxx clinical trial, 35 patients implanted, 2 post two years; Aesculap (B Braun) collaboration in place
– Industrial:
· Further E-mobility business; on track for >£3m annualised revenues
· Supporting TechnipFMC for significant Brazil opportunity (Magma composite pipe)
• Cash generation underpinning investments; China commissioning on-plan
– H1 2023 available cash1 £34.4m, post-payment of FY 2022 dividend
– China facility commissioning; commercial start-up on plan for 2023
– Operating cashflow impacted by inventory, in line with guidance
– Interim dividend of 13.42p/share, in line with prior year
1 Alternative performance measures are defined in note 17
2 Other internal metrics are defined below
Commenting on the Group’s interim results, Jakob Sigurdsson, Chief Executive of Victrex, said:
“Our first half performance was driven by strong pricing, an improved sales mix and currency, with revenue up 1%, despite a softer macro-economic environment, resulting in weaker volumes, compared to a record FY 2022.
“Several end markets delivered good growth, including in Aerospace and Automotive, although this was not able to offset softness in Electronics, Energy & Industrial, and VAR. In Medical, we saw a record half yearly performance and our growth opportunities are increasing. Prioritising targeted investment in Medical is already delivering good results.
Price & margin ahead
“Average selling prices, at £84/kg, were ahead of our expectations as we recover energy & raw material cost inflation. This, together with energy costs being lower than our guidance, helped to improve Group gross margin to 53.5%, compared to the second half of FY 2022 at 49.4%. On a full year basis, we expect gross margin will now be ahead of expectations and the prior year.
PBT down 12% on softer volumes, cost inflation and targeted investment
“In line with our guidance of a double-digit increase in overhead investment to underpin growth programmes, alongside higher wage inflation and targeted cost of living support for employees, underlying profit before tax (PBT) was down 12%. Whilst we will remain cost focused through the remainder of the year, we have added targeted overhead investment, primarily to support Medical and several of our key mega-programmes as they move closer to inflection points and require investment for customer scale-up. We also saw additional people and start-up costs for our new China facility, ahead of commercial operations starting later this year.
Growing commercialisation in mega-programme portfolio
“Our mega-programme portfolio is making good progress in delivering additional milestones, with sales from new products – which includes our mega-programmes – tracking at 7% of revenue for the full year (FY 2022: 6% of revenue). During the first half, we saw further new business wins in E-mobility and the opportunity for over £3m revenue this year; additional revenues to support our Aerospace Structures programme and collaborations with several other OEMs now; excellent progress in Trauma, including a new China manufacturing partner and growth in the US, and anticipated commercial revenue above £1m this year; and the PEEK Knee trial moving towards the post clinical stage. We are also supporting TechnipFMC as they bid to use new composite pipe technology based on PEEK, in Brazilian oil & gas fields.
Outlook – well positioned for macro-economic recovery
“The Group has seen some improvement in monthly run-rates since the turn of the calendar year, though these remain variable by end market. Consequently, compared to a record FY 2022, full year volumes are still tracking to be down by a double-digit percentage. Victrex remains well positioned for when the macro-economic outlook turns more favourable in several Industrial end markets. Medical is expected to continue its strong performance.
“On a full year basis, pricing, sales mix, easing energy inflation and currency remain supportive. Gross margin is also expected to be modestly ahead of the prior year. Delivering a PBT performance in line with FY 2022 and current expectations assumes a step up in demand during the latter part of the second half, driven by macro-economic conditions. Victrex remains well placed for the medium to long term, with a strong core business, growing commercialisation in our mega-programmes, a highly cash generative business model, and strong ESG credentials.”