# Victrex plc Solid growth in H1, emerging COVID related headwinds in H2

- Link: https://www.directorstalkinterviews.com/victrex-plc-solid-growth-in-h1-emerging-covid-related-headwinds-in-h2/412820230
- Published: 2020-05-11T07:31:00+01:00
- Author: Giles Arbor

**Victrex plc** (LON:VCT), an innovative world leader in high performance polymer
solutions, today announced its interim results for the 6 months ended 31 March 2020.

|   | H1 2020 | H1 2019 | % change (reported) | % change(constant currency)^(1) | 
| Group sales volume |     1,992 tonnes | 1,899 tonnes | +5% | NA | 
| Group revenue | £151.5m | £145.7m | +4% | +3% | 
| Gross profit | £86.8m | £87.4m | -1% | -6% | 
| Gross margin | 57.3% | 60.0% | -270bps |   | 
| Underlying profit before tax (before exceptional items^(1)) | £52.0m | £52.4m | -1% | -11% | 
| Reported PBT | £49.9m | £50.2m | -1% | -11% | 
| Adjusted EPS | 50.0p | 53.7p | -7% |   | 
| Reported EPS | 47.6p | 51.4p | -7% |   | 
| Dividend per share (regular & special dividends) | – | 13.42p |         |   |

**COVID-19**

Since the onset of COVID-19 in Asia during January, the safety and well-being of
our employees has been the highest priority.  As the virus remains a consideration
across our global locations, we will continue to proactively support and look after
our employees, whilst maintaining strong service levels to our customers.

**Highlights**:

•     **Solid H1 with growth in Automotive & Medical; stable performance in Aerospace&
Electronics**

–    _H1 sales volume up 5%, offset by weakness in Energy_

–    _Q2 volume up 4% against tougher comparatives_

–    _Good progress in Medical, revenue up 6%; further growth in Asia and new applications_

–    _Underlying PBT stable at £52m; margin impacted by under-recovered overhead
from lower production, special grade campaigns and new parts programmes_

•     **‘Mega-programme’ pipeline remains strong**

–    _Continued progress in Aerospace composite parts, focused on FY20 meaningful
revenue_

–    _Double-digit growth in next generation PEEK-OPTIMA™ HA Enhanced Spine product_

–    _Good progress supporting Magma for TechnipFMC pre-qualification pipe_

•     **Investment tailored to new growth opportunities**

–    _Manufacturing subsidiary established to develop new PEEK facility in China_

–    _Acquired remaining equity in TxV Aero Composites from Tri-Mack  _

•     **Net cash and strong financial position**

–    _H1 net cash £53.2m*; operating cash conversion of 85%_

–    _Committed and undrawn RCF of £20m, with £20m accordion_

–    _Multiple downside scenarios planned for_

•     **Proactive actions taken to manage COVID-19 related challenge**

–    _Strong inventory position with H1 inventory £95.1m (H1 2019: £85.2m)_

–    _Solid start to H2, with emerging headwinds in forward order book _

–    _Discretionary costs constrained & cash conservation measures implemented:_

·      _Deferral of UK debottlenecking programme to FY 2021_

·      _Interim dividend deferred_

> **Jakob Sigurdsson, Chief Executive of Victrex, said: **“Overall, we delivered
> a solid first half which was in line with our expectations.  We saw good growth
> in Automotive and Medical, a stable performance in Aerospace, Electronics and 
> Value Added Resellers, offset by the weaker performance in Energy, as oil prices,
> rig count and activity levels reduced compared to the prior year.
> “Whilst the global demand picture remains highly uncertain, we will continue to
> position ourselves for the uptick, with further investments tailored to specific
> long-term growth opportunities.  These include our subsidiary in China which will
> underpin and support continued growth in that region.  As part of our cash conservation
> and cost reduction measures in light of COVID-19, our £15m debottlenecking investment
> in the UK has now been deferred to FY 2021. However, with lower production already
> planned for this financial year and some special grade campaigns and new parts
> programmes ahead of revenue in the first half, we will continue to see some impact
> on margin from under-recovered overhead.  We have continued to make progress in
> several of our downstream growth programmes, with our US facility now supplying
> commercial product into the Aerospace market and progress in the Magma Oil & Gas
> composite pipe opportunity.
> “Q3 to date has been broadly in line with our expectations, although we are now
> seeing emerging headwinds from COVID-19 in our forward order book, particularly
> in Aerospace and Automotive, with Energy already seeing very tough conditions.
> Geographically, some more normalised demand returning in Asia could prove supportive,
> although the demand outlook in Europe and the US is becoming more challenging.
> Our supply chains remain effective and our inventory levels are high as we continue
> to serve customers appropriately.  We have implemented a range of cash conservation
> measures, including deferring our debottlenecking programme and a decision on 
> our interim dividend, and alongside our net cash position and available facilities,
> our balance sheet remains strong.  As previously communicated, with significant
> macro and end market uncertainty, we are unable to provide detailed guidance on
> full year expectations.  We believe the proactive actions we are taking are appropriate
> to minimise disruption and on a long-term basis, our Polymer & Parts strategy 
> keeps us well placed to deliver our range of medium to long term growth opportunities.”

*includes £9.2m of cash ring-fenced in the China subsidiary

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