Victrex plc (LON:VCT) is an innovative world leader in high performance polymers, delivering sustainable products which enable environmental and societal benefit. This announcement covers interim results (unaudited) for the 6 months ended 31 March 2024.
| H1 2024 | H1 2023 | % change (reported) | % change(constant currency1) | |
| Group sales volume | 1,737 tonnes | 1,941 tonnes | -11% | N/A |
| Group revenue | £139.3m | £162.2m | -14% | -10% |
| Average selling price (ASP) | £80.2/kg | £83.6/kg | -4% | flat |
| Gross profit | £66.8m | £86.7m | -23% | -23% |
| Gross margin | 48.0% | 53.5% | -550bps | N/A |
| Underlying profit before tax (PBT)1 | £28.0m | £42.5m | -34% | -40% |
| Reported PBT | £3.3m | £39.1m | -92% | -98% |
| Underlying EPS1 | 27.0p | 41.9p | -36% | N/A |
| EPS | 3.1p | 38.8p | -92% | N/A |
| Dividend per share | 13.42p | 13.42p | flat | N/A |
Highlights:
• H1 in line with guidance; sequential improvement in Q2
– H1 24 Group volumes down 11% vs solid H1 23
– Sequential improvement in Q2 (Group volumes up 31% vs Q1 24 & broadly flat vs Q2 23)
– H1 24 Group revenue down 14%:
· Strong Aerospace & Automotive growth (H1 volumes up 18% and 14% respectively)
· Q2 improvement in Electronics, Energy & Industrial, VARs (VARs up 44% Q2 vs Q1)
· Medical revenue down 19% on industry destocking
· ASP in line with guidance at £80/kg, despite softer Medical
• PBT offset by Medical, higher cost inventory & lower asset utilisation, despite reduced opex
– Gross margin of 48.0% reflects higher under-absorbed fixed costs as inventory unwinds
– Strong cost discipline; operating overheads1 down 13% & further opportunities
– Underlying PBT down 34% at £28.0m, driven by trading and lower asset utilisation
– Reported PBT £3.3m after £24.7m exceptional items:
· Bond 3D non-cash impairment £20.1m & ERP costs
• Focused on improved cashflow in H2, driven by demand recovery, lower capex & inventory unwind
– H1 2024 net debt £49.8m, including cash of £28.5m (H1 2023: net debt of £5.3m including cash & other financial assets of £38.4m) reflecting draw down of RCF for FY23 final dividend
– New China facilities operational in H2, concluding major capital investment phase
– Expecting further inventory reduction in H2 (H1 2024 inventory £126.7m)
– Improved operating cash conversion1 of 64% (H1 2023: -4%)
– Interim dividend 13.42p/share
• Mega-programme ramp-up progressing, supporting mid-term growth targets
· Aerospace Composites: on track for good growth
· E-mobility: new customer collaborations
· Knee: regulatory submission in 2024; new customer discussions
· Magma: technical & commercial collaboration with TechnipFMC & Petrobras
· Trauma plates: good progress & broader customer base
· Mid-term growth targets of 5-7% revenue CAGR#; upside to 8-10% CAGR as mega-programme contribution increases
1 Alternative performance measures are defined in note 14
#revenue CAGR in 5 year period, targets communicated in December 2023
Commenting on the Group’s interim results, Jakob Sigurdsson, Chief Executive of Victrex, said:
“Although the first half remained soft for Victrex – in line with our guidance – and the wider Chemical sector, we saw tangible signs of improvement in some end markets during Q2. Q2 Group volumes were broadly flat compared to the prior year and up 31% vs Q1. Profitability and margins were impacted by the high inventory levels and recent industry destocking amongst Medical device customers. Although Medical impacted sales mix, average selling prices were solid and in line with our guidance at £80/kg, despite currency. We also saw a headwind from much lower utilisation in our own assets, as inventory unwinds.
Expecting cashflow improvement
“With capex set to reduce – as our UK and China asset investments conclude – and further inventory unwind, we expect to see good mid-term cashflow improvement, supported by improving trading conditions.
Progress in mega-programme portfolio; reiterate mid-term growth targets
“Our mega-programmes continue to deliver key technical or commercial milestones. Aerospace Composites, beyond the mid-term opportunity from new plane models and larger PEEK parts, is seeing opportunities from retrofit projects, or running changes on existing models.
“Within Medical, our PEEK composite Trauma plates are on track to grow plate deliveries, and our potentially game-changing PEEK Knee programme is now targeting a regulatory submission during 2024. This reflects strong progress in the clinical trial and opportunities with other top 5 Knee companies. The strength of our innovation pipeline, and a macro-recovery, validates our mid-term growth targets of 5-7% revenue CAGR and an upside to 8-10% once mega-programmes increase their contribution.
Outlook – focused on H2 improvement; not expecting FY PBT progress
“Recent improvement in some end-markets underpins our focus on volume, revenue and profit growth during the second half, compared to H1 and also versus H2 2023. A continuation of current monthly run-rates – based on the H1 exit rate and Medical improvement – would support a slightly better PBT performance in H2 2024, compared to H2 2023. Further improvement, beyond these levels, relies on a faster rebound from recent Medical headwinds.
“On a full year basis, current run-rates support low-to-mid single digit volume growth. However, as previously communicated, we are not expecting PBT progress for the year as a whole. This reflects a lower first half, Medical destocking and the effect of reduced asset utilisation in our income statement. With our two-year inventory unwind, lower asset utilisation will continue into FY 2025, although the impact is likely to be slightly less than FY 2024. Pleasingly, cost discipline has remained strong and controllable expenses are sharply lower.
“If recent end-market improvement continues, growth prospects moving into FY 2025 look encouraging. We have confidence in our mid-to-long-term opportunities, with a diversified core business, increasing commercialisation in our mega-programmes, well invested assets, enhanced capability in our global team and the opportunity for cashflow improvement.”
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.
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:
Victrex Interim Results Meeting May 2024 Registration Page! (registrations.events)
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.
