TIDMVCT
RNS Number : 1594B
Victrex PLC
06 October 2020
6 October 2020
Victrex plc : Full year trading update
'End markets remain subdued into FY 2021'
Victrex plc, an innovative world leader in high performance
polymer solutions, today releases a trading update following the
end of its 2020 financial year on 30 September 2020.
At the close of the Group's FY 2020 financial year, trading
overall remains subdued, although some end markets have slightly
improved from trough levels. Aerospace and Energy volumes have
remained in line with the lows seen during Q3, with some limited
incremental improvement in Automotive and Medical monthly run
rates, although Value Added Resellers - which saw growth during Q3
- was softer during the fourth and final quarter.
Q4 and FY 2020 performance
Overall, Q4 Group sales volume was down 26% to 695 tonnes (Q4
2019: 940 tonnes), with Group revenue down 27% to GBP55.7m (Q4
2019: GBP76.2m), in line with expectations.
For FY 2020 as a whole, Group sales volume of 3,492 tonnes was
down 7% compared to the prior year (FY 2019: 3,751 tonnes), with
Group revenue of GBP266m down 10% (FY 2019: GBP294m).
Whilst top-line performance for FY 2020 was slightly ahead of
consensus expectations, our high fixed cost base and the
under-absorption of fixed costs due to lower production volumes
will mean an impact on margin, as previously communicated. During
Q4 we announced a cost saving plan that will partially mitigate
this, but notwithstanding this, the effect of lower production
versus sales volumes will continue through FY 2021 as volumes
remain low due to end market demand, inventory is gradually unwound
after Brexit and reflecting the planned debottlenecking programme,
with a proportion of capacity taken offline.
Mega-programme progress
Through its Polymer & Parts strategy, Victrex continues to
focus on delivering further milestones in its growth pipeline, as
well as exploring options to drive growth within the PAEK family of
polymers or related technologies.
Despite the current challenges in Aerospace, our TxV composite
parts facility in the US has secured repeat commercial orders which
reflect the benefit of our technology in being able to efficiently
manufacture strong and light-weight composite parts for a range of
applications. In Magma, work is progressing with TechnipFMC, as
part of the qualification programme in Brazil, with testing data
confirming PEEK as the preferred material of choice. Additional
projects including m-pipe jumper lines for Caltex Oil Tools in the
Gulf of Mexico and a successful deployment project in the North Sea
have also been supported. Whilst relatively small, both projects
continue to validate the performance and cost benefits of PEEK
based composite materials in a lower-oil price environment.
In Medical, with the Knee clinical trial in Italy having resumed
following a pause due to COVID-19, our partners are also
progressing registration to extend the trial, including in India,
as we seek to further validate the proposition.
Financial position and cost management
Our net cash position at 30 September 2020 was GBP67.4m, which
excludes GBP5.6m ring-fenced for our China manufacturing
subsidiary. The Group has an undrawn and committed RCF of GBP20m,
together with a GBP20m accordion facility.
As previously communicated, Victrex has been reviewing
additional cost actions and efficiencies to support profitability
in a lower production environment. As part of this programme, we
commenced consultation in Q4 which would reduce our employee base
by up to 100 roles, primarily through voluntary severance. The
majority of these roles are within UK polymer manufacturing and
will not impact the resources needed to deliver our long-term
growth programmes. Once fully concluded, we expect this programme
will partially mitigate the impact from under-absorbed fixed costs
and help to support margin in FY 2021 and beyond. As part of the
voluntary severance programme, we expect to incur an exceptional
charge of approximately GBP9.5m to be taken in the FY 2020
accounts. With exceptional items already incurred relating to our
China manufacturing investment in the first half, total exceptional
items for FY 2020 are expected to be in the order of GBP12m.
Dividends
The capital requirements for our UK debottlenecking and China
manufacturing subsidiary, as well as our usual ongoing maintenance
capital expenditure, are likely to be in excess of GBP50m in FY
2021. These requirements will be covered by our cash generation
and, in the light of a healthy net cash position, the Board expects
to reinstate a dividend for FY 2020.
Outlook
At the start of FY 2021, trading overall remains subdued,
although some end markets have slightly improved from trough
levels. Whilst COVID-19 headwinds continue to impact trading, our
focus continues to be on the safety, health and well-being of our
employees, delivering good customer service and managing our
costs.
In the immediate short term, we anticipate our end markets will
remain around the levels seen in Q4 and we will also see the
continuing effects on margin from lower production as inventories
are gradually unwound through FY 2021. H1 2021 is also likely to
see a tough comparative against the solid performance in H1 2020.
There is also the possibility of uncertainty from the Brexit
outcome, although our contingency plans with additional warehousing
and high inventories keep us in a good position to continue to
support our customers.
Overall, with sustainable products, our range of medium to long
term growth opportunities remain strong, our financial position is
robust and our cash generation capabilities offer the opportunity
of good medium term returns to shareholders.
Victrex will release its FY 2020 Preliminary results on
Wednesday 9 December 2020.
Victrex plc:
Andrew Hanson, Director of Investor Relations +44 (0) 01253
898121/07809 595831
Jakob Sigurdsson, Chief Executive +44 (0) 1253 897700
Richard Armitage, Chief Financial Officer +44 (0) 1253
897700
About Victrex:
Victrex is an innovative world leader in high performance
polymer solutions, focused on the strategic markets of automotive,
aerospace, energy (including manufacturing & engineering),
electronics and medical. Every day, millions of people use
sustainable products and applications, which contain our materials
- from smart phones, aeroplanes and cars to oil and gas operations
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, support environmental and societal
benefits and drive value for our shareholders. Find out more at
www.victrexplc.com
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