‘Solid’ first half for Lancashire polymers group

Lancashire-based Victrex said it achieved a “solid” first half, in announcing its interim results this morning.

The Thornton Cleveleys polymers group, focused on the auto and aerospace industries, reported a three per cent increase in revenues for the six months to March 31, of £151.5m.

Pre-tax profits of £49.9m showed a one per cent fall, which was due to exceptional items of £2.1m, being merger and acquisition costs principally related to the group’s China subsidiary investment.

The group said it had net cash in the first half of £53.2m, including £9.2m of cash ring-fenced in the China subsidiary, and a committed and undrawn revolving credit facility of £20m, with a £20m accordion. It said it had planned for multiple scenarios in the current coronavirus situation.

Victrex said it has a strong inventory position, with a first half inventory of £95.1m, compared with £85.2m the previous year.

It reports a solid start to the second half, although it said there are emerging headwinds in the forward order book. It said discretionary costs have been constrained and cash conservation measures implemented, including the deferment of the interim dividend payment.

Chief executive Jakob Sigurdsson 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 fiscal year 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.”

He added: “Quarter three, 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.”

He said: “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.”