Victrex looks for long term cheer as half year profits drop

Victrex, the Lancashire-based global polymers business, has reported a dramatic drop in unaudited first half revenues and pre-tax profits.

The Blackpool-headquartered listed business told the stock market this morning (13 May 2024) that trading had picked up since it told the market in February that figures were likely to be down on last year. 

Turnover for the half year to 31 March 2024 fell to £139.3m, which was down 14% (H1 2023: £162.2m), with a less favourable sales mix (due to a softer performance in Medical) and a currency headwind at the revenue level.

Pre-tax profit for the half year dropped by 92% to £3.3m (H1 2023: £39.1m). The company said this reflects exceptional items of £24.7m (H1 2023: £3.4m), representing a non-cash impairment on Bond 3D investments (supporting 3D printing capabilities in Spine (Medical)) and the cost of implementing a new ERP software system (targeted for go live in Q1 FY 2025).

Its customers span the automotive, aerospace, energy & industrial, electronics and medical sectors.

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.

Sigurdsson said he was not expecting a short term improvement in profits or growth.

“On a full year basis, current run-rates support low-to-mid single digit volume growth. However, as previously communicated, we are not expecting profit before tax 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.

However, he said the long term outlook was encouraging.

“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.”