5 December 2023
Victrex plc – Preliminary Results 2023
‘PBT in-line & record Medical revenues’
*New mid-term growth targets*
Victrex plc is an innovative world leader in high performance polymers, delivering sustainable products which enable environmental and societal benefit. This announcement covers preliminary results (audited) for the 12 months ended 30 September 2023.
| FY 2023 | FY 2022 | % change (reported) | % change(constant currency1) | |
| Group sales volume | 3,598 tonnes | 4,727 tonnes | -24% | N/A |
| Group revenue | £307.0m | £341.0m | -10% | -13% |
| Average selling price (ASP) | £85.3/kg | £72.1/kg | +18% | N/A |
| Gross profit | £162.6m | £174.5m | -7% | -10% |
| Gross margin | 53.0% | 51.2% | +180bps | N/A |
| Underlying profit before tax (PBT)1 | £80.0m | £95.6m | -16% | -18% |
| Reported PBT | £72.5m | £87.7m | -17% | -19% |
| Underlying EPS1 | 77.7p | 95.0p | -18% | N/A |
| EPS | 70.9p | 87.6p | -19% | N/A |
| Dividend per share | 59.56p | 59.56p | flat | N/A |
Highlights:
• PBT in-line# after challenging year
– Underlying PBT in-line at £80.0m; reported PBT £72.5m
– FY 2023 volume down 24%; Group revenue down 10%
· Significant weakness in Electronics, Energy & Industrial, VAR
· Record Medical revenues +12% & broad-based growth; strong Aerospace performance
· Robust cost discipline whilst prioritising Medical & innovation investment
• Strong average selling prices; improved gross margin
– ASP up 18%, driven by price increases (& mix/FX)
– FY 2023 gross margin up 180bps, offset by lower asset utilisation
• Well placed for macro-recovery, with new strategic growth targets
– Targeting mid-term revenue growth of 5-7% CAGR## based on core & new applications
– Upside potential to 8-10% CAGR driven by mega-programme commercialisation
– Targeting £25m-£35m of revenues from mega-programme portfolio in FY 2025
– Decarbonisation targets submitted to Science-based targets initiative (SBTi)
• Mega-programmes prioritised to drive enhanced commercialisation
– Investment prioritised in streamlined portfolio: Aerospace, E-mobility, Knee, Magma, Trauma
– Key milestones delivered in pathways to £10m revenue:
· E-mobility: £6m revenues, ahead of expectations & new customer collaborations
· Trauma plates: growing demand & broader customer opportunities
· Knee: clinical trial & top 5 OEM collaboration, 2-3 years to 1st sales
· Aerospace: broader customer portfolio for composite parts & revenues growing
· Magma: supporting TechnipFMC for Brazil scale up
• Strong balance sheet & opportunity for cashflow improvement
– FY 2023 available cash1 £30.1m (FY 2022: £66.0m) after major capex & higher inventory
– Well invested assets: new China facilities ready & UK facilities upgraded
– Inventory set to unwind from FY 2024 (FY 2023 inventory £134.5m vs FY 2022 £86.8m)
– Final dividend### maintained at 46.14p/share, reflecting confidence in future performance
1 Alternative performance measures are defined in note 16
#in line with revised June 2023 guidance of £80m-£85m underlying PBT
##revenue CAGR in 5 year period
###Proposed
Commenting on the Group’s preliminary results, Jakob Sigurdsson, Chief Executive of Victrex, said:
“After one of the most challenging years for the Chemical sector and for Victrex, the Group delivered in line with guidance#. Strong average selling prices, continued innovation, cost discipline and well invested assets demonstrate the strength of our Polymer & Parts strategy and business model. Record revenues in Medical – with a new goal for Medical to double in five years and contribute around one-third of revenues in less than 10 years – and growing opportunities in China, with our new facilities ready to start up, underpin our belief in the core and our mega-programmes.
Confidence in our strategy & new mid-term growth targets
“We have today set out new mid-term growth targets of 5-7% CAGR for revenue, with an opportunity for 8-10% as our mega-programmes further commercialise. PBT has the opportunity to grow faster than revenue, as operating leverage improves and overhead investment moderates. These targets reflect the opportunity from a macro-economic recovery and industry indicators across Automotive, Electronics and General Industrial, with the ability for our core business to grow faster than the wider market through new and differentiated applications. As our mega-programmes further commercialise, we see additional upside potential. Investment is now being prioritised around five key mega-programmes, offering substantial opportunity across Aerospace, E-mobility, Knee, Magma and Trauma. Several programmes are on the pathway to £10m revenues and we are targeting £25m-£35m of revenues from the mega-programme portfolio in FY 2025. With further long term upside in the Medical programmes particularly, the total portfolio opportunity remains broadly unchanged. Whilst Gears saw further growth to £6m revenue, it is well down the adoption pathway and enables us to prioritise investment elsewhere.
Further progress in mega-programme portfolio
“All of our mega-programmes met key technical or commercial milestones during the year. Our E-mobility platform, focused on electric vehicle applications, saw the strongest growth, ahead of expectations with £6m revenues, new customer collaborations and increasing penetration in major car brands.
“In Medical, we saw strong progress in Trauma and commercial revenue building towards £1m. In Knee, our collaboration with a top 5 Knee company in Aesculap (B Braun), and our partner Maxx in the clinical trial, as well as engagement with major customers, offers the potential for a commercial PEEK Knee in 2-3 years.
Outlook – a slow start but well placed for recovery & growth
“The Group is expecting good progress in revenue and PBT for FY 2024, subject to an improving macro-economic outlook. Volumes have the potential for double-digit growth although, at this early stage, we have yet to see signs of a macro recovery, with a slow start to our typically seasonally weak Q1. Consequently, growth is expected to be second half weighted, which is consistent with some end-market indicators pointing to improvement during 2024. Demand continues to be soft in Electronics, Energy & Industrial and VAR. Automotive and Aerospace remain positive, with Medical also expected to deliver full year growth.
“Input costs are tracking lower year-on-year, although the potential for energy volatility remains. Within operating overheads, we expect only limited increases, despite wage inflation and bonus accrual. However, the effect of lower asset utilisation and start-up costs in China will have some effect on our cost of manufacture and gross margin. In relation to currency, whilst spot rates imply a headwind, our hedging will offset this impact to PBT.
“Overall, the Group is well placed for recovery and growth. With a strong and diversified core business, increasing commercialisation in our mega-programmes, well invested assets and incremental capacity, and the opportunity for cashflow improvement, our investment proposition remains strong.”
About Victrex:
Victrex is an innovative world leader in high performance polymer solutions, focused on the strategic markets of automotive, aerospace, energy & industrial, electronics and medical. Every day, millions of people use products and applications which contain our sustainable materials – from smartphones, aeroplanes and cars to energy production and medical devices. With over 40 years’ experience, we develop world leading solutions in PEEK and PAEK based polymers, semi-finished and finished parts which shape future performance for our customers and our markets, enable environmental and societal benefits, and drive value for our shareholders. Find out more at www.victrexplc.com
A presentation for investors and analysts will be held at 9.00am (UK time) this morning via a dial-in facility, which can be accessed by registering on the following link:
The presentation will be available to download from 8.30am (GMT) today on Victrex’s website at www.victrexplc.com under the Investors/Reports & Presentations section.
Victrex plc:
| Andrew Hanson, Director of Investor Relations, Corporate Communications & ESG | +44 (0) 7809 595831 |
| Ian Melling, Chief Financial Officer | +44 (0) 1253 897700 |
| Jakob Sigurdsson, Chief Executive | +44 (0) 1253 897700 |