Polymer specialist suffers first half setback, and prepares for Brexit
Lancashire-based Victrex, which makes world-leading polymers for the car and aerospace industries, has seen sales and pre-tax profits for the first half decline.
The Thornton Cleveleys group said the results were in line with expectations and were mainly due to automotive, the associated impact on value added resellers, the expected headwinds in consumer electronics, together with the impact of adverse currency, cost inflation and investment phasing.
Turnover for the six months to March 31, came in at £145.7m, 13% down from £166.6m the previous year.
Pre-tax profits fell 21% from £63.3m last year to £50.2m. However, the interim dividend has been maintained at 13.42p per share.
Victrex said during the second quarter auto stabilised, and there was good progress in its ‘mega-programmes’ and a new alliance with aircraft giant Airbus.
Regarding the rumbling Brexit negotiations, Victrex said it has previously indicated that the principal risk is a sustained period when the group may not be able to import certain raw materials or export finished goods through Customs, which could curtail sales if regional inventory levels were depleted.
As part of its contingency plans, additional warehousing for finished goods stock has now been secured in mainland Europe (Germany) and China with a minimum of eight weeks of finished goods stock held outside the UK.
It said: “Our German warehouse has been operational since February 2019, with capability to supply European customers.
“We have also secured additional raw material stocks. Group inventories will exceed £85m through FY19 as a consequence (FY 2018: £69.3m).”
Chief executive, Jakob Sigurdsson, said: “As expected, Victrex saw a much weaker first half year, driven principally by automotive, the associated impact on value added resellers, the expected headwinds in consumer electronics, together with the impact of adverse currency, cost inflation and investment phasing.
“Our second quarter showed some signs of improvement, with automotive starting to stabilise.
“We also saw a continuation of the improving trend in medical, where revenues were ahead for the first half, including growth in our HA-Enhanced product.
“Actions taken to improve manufacturing efficiency and reduce cost also started to take effect.”
He added: “In our mega-programmes, we continue to deliver positive milestones, with our second major PEEK (Polyether ether ketone) Gears project.
“We also signed a notable development alliance with Airbus for the ‘Clean Sky 2’ programme, supporting the long-term development of composite solutions for the aerospace industry.”
He said: “Looking towards the second half, headwinds in the form of currency and cost inflation will be broadly neutral, and incremental operating investment will be limited. We will also benefit from no bonus accrual.
“However, with some of our key industrial markets remaining weak, our base assumption is that any improvement would be gradual and back-end weighted.
“Overall, our expectations are that it will now be challenging to achieve year-on-year growth in the second half, compared to the prior year period.
“We remain well placed for the medium to long-term, with strong structural growth opportunities, a healthy new product pipeline and a highly cash generative business model.”