TIDMVCT
RNS Number : 8899N
Victrex PLC
14 May 2018
14 May 2018
Victrex plc - Interim Results 2018
'A record first half - full year on track'
Victrex plc, an innovative world leader in high performance
polymer solutions, today announces its interim results for the 6
months ended 31 March 2018.
H1 2018 H1 2017 % change
Group sales
volumes 2,256 tonnes 1,859 tonnes +21%
------------- ------------- --------------
Group revenue GBP166.6m GBP130.9m +27%
------------- ------------- --------------
Gross profit GBP106.3m GBP82.4m +29%
------------- ------------- --------------
Gross margin 63.8% 62.9% +90 bps
------------- ------------- --------------
Profit before
tax (PBT) GBP63.3m GBP50.1m +26%
------------- ------------- --------------
EPS 64.7p 46.4p +39%
------------- ------------- --------------
Dividend per
share 13.42p 12.20p +10%
------------- ------------- --------------
Highlights:
-- Continued broad based growth
- Group sales volumes up 21% driven by core growth & new applications
- Core volumes* (ex-Consumer Electronics) up 13%
- Group revenue up 27%, constant currency revenue* up 15%
- Strong performances in Automotive & Electronics, offset by Medical (in constant currency)
- Profit before tax (PBT) up 26%, supported by H1 currency weighting
-- Further milestones in new product pipeline
- Dental supply agreement to enhance market access
- First parts supplied for PEEK Gears mega-programme & further opportunities
- Magma on track for full year growth & new Brazil deep-water opportunity
- Commissioning of TxV Aero Composites facility in H2 2018
-- Strong cash generation supports investment & shareholder return
- Cash (available*) up 7% to GBP91.8m and operating cash conversion* of 106%
- Interim dividend up 10% to 13.42p/share
Jakob Sigurdsson, Chief Executive of Victrex, said: "This has
been a record first half, with broad based growth across our
Industrial markets, offset by weakness in Medical. I am also
pleased to report several milestones in our new product pipeline,
including a supply agreement in Dental to help gain greater market
access, the first parts for our Gears mega-programme and a
deployment for our Magma oil & gas programme, together with a
new long term opportunity offshore Brazil.
"After six months as CEO, it is clear that alongside having a
strong core polymer business, by moving further downstream through
our Polymer & Parts strategy we are further differentiating
Victrex in a competitive market. With strong cash generation, our
first priority is to continue investing to support future growth,
as well as reviewing partnership and acquisition opportunities.
Alongside our ability to invest, our cash generation continues to
offer the opportunity of attractive returns to shareholders, and we
expect to update on distribution options at the end of the
year.
"Looking towards the remainder of 2018, currency will be much
less of a tailwind compared to the first half and we are also
mindful of the currency headwind for 2019. Nevertheless, whilst
growth comparatives become tougher in the second half, our strong
momentum keeps us well on track for full year expectations."
* Alternative performance measures are marked with an asterisk
and defined on page 26.
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 products
and applications which contain our materials - from smartphones,
aeroplanes and cars to oil and gas operations and medical devices.
With over 35 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,
and drive value for our shareholders. Find out more at
www.victrexplc.com or follow us on LinkedIn and Twitter
@victrexir
A presentation for investors and analysts will be held at 9.30am
(BST) this morning at JP Morgan, 1 John Carpenter Street, London
EC4Y 0JP. A conference call facility will be available for analysts
and investors who are unable to attend the presentation. To
register, dial +44 (0) 3333 000804 and participant pin 30156761.
The presentation will be available to download from 9.00am (BST)
today on Victrex's website at www.victrexplc.com.
Enquiries:
Victrex plc:
Andrew Hanson, Director of Investor Relations & Corporate
Communications
+44 (0) 7809 595831
Richard Armitage, Group Finance Director
+44 (0) 1253 897700
Jakob Sigurdsson, Chief Executive
+44 (0) 1253 897700
Follow us on LinkedIn or Twitter @victrexir
Interim results statement for the 6 months ended 31 March
2018
'A record first half - full year on track'
Group financial results
Sales volume up 21%
Group sales volume of 2,256 tonnes was 21% ahead of the prior
year (H1 2017: 1,859 tonnes). This includes the first half
weighting from volumes supplied to the large Consumer Electronics
order. Excluding these volumes, core business volumes were over 13%
ahead.
Revenue up 27%, Constant currency revenue 15% ahead
Group revenue was GBP166.6m, 27% ahead of the prior year (H1
2017: GBP130.9m) supported by the strong first half weighting from
currency. Group revenue in constant currency was 15% ahead of the
prior year (H1 2017: GBP145.4m in constant currency), with a
slightly weaker sales mix, dampened by Medical and a higher
proportion of Consumer Electronics volumes in the first half,
compared to H1 2017. Sales from new products* (one of our strategic
KPIs) are anticipated to show further growth this year in absolute
terms, but, reflecting stronger growth in the core business, may be
similar to FY 2017 (4% of Group sales) in percentage terms. We
remain on track to deliver 10-20% of sales from new products or new
grades over the medium term, with the time taken for market
adoption being key.
Industrial strong, offset by Medical
Our Industrial division (VPS) reported revenues of GBP139.0m,
32% ahead of the prior year (H1 2017: GBP105.7m), supported by
currency. Market growth was broad based, with Automotive and
Electronics being the strongest performers. Energy and Value Added
Resellers - which is driven partly by indirect business into
industrial markets - remained in growth, with a positive
performance in Aerospace following a weaker 2017, although strong
volumes were slightly offset by price.
Medical (Invibio) revenues were GBP27.6m, 10% ahead of the prior
year (H1 2017: GBP25.2m), driven by currency. In constant currency,
Medical revenues were marginally down, reflecting our high exposure
to the US Spine market, which is mature and which is seeing some
continued growth in titanium expandable cage applications, as well
as 3D printed porous titanium cages. We also saw a slightly weaker
sales mix across the Medical business. Progress outside of the US,
overall, continues to be positive. Our next generation Spine
product, PEEK-OPTIMA(TM) HA Enhanced, was weaker in the first half,
although we anticipate making progress during the second half with
this premium product, as we focus on moving beyond last year's
"meaningful revenue" of GBP1m.
ASP ahead reflecting currency
Our Average Selling Price (ASP) of GBP73.8/kg was ahead of the
prior year (H1 2017: GBP70.4/kg), principally reflecting the
benefit of currency. Weaker Medical (in constant currency),
continued growth in our Value Added Resellers business and higher
first half volumes in Consumer Electronics led to a weaker mix. On
a full year basis, we now anticipate Group ASP will be similar to
FY 2017. This also reflects that the vast majority of the FY18
currency benefit is weighted to the first-half, with an anticipated
90:10 weighting.
Pricing, excluding the benefit of currency, in the core business
remains broadly stable, with product mix being an important driver.
Some competitive pressure remains however and our focus on
differentiation and value added semi-finished products, with a
higher price point, will be a key driver of mix over the coming
years. As communicated at our 2017 Preliminary Results, the Group
no longer discloses an "ex-Consumer Electronics" average selling
price reflecting that volumes this year - on a full year basis -
are unlikely to be materially different to 2017.
Robust gross margin
Group gross margin of 63.8% (H1 2017: 62.9%) was ahead of the
prior year, supported by favourable currency movements. Excluding
the impact of currency, gross margin was slightly offset by mix,
the year on year impact from our Zyex acquisition (semi-finished
products) - although such acquisitions offer better ASP
opportunities - some higher cost of sales, partly driven by some
continued air-freighting to meet demand and selected raw material
cost increases. On a full year reported basis, we anticipate that
group gross margin will remain stable, at a level similar to, or
slightly ahead of FY 2017.
As previously communicated, our strategy involves a transition
to a higher cost of manufacture - as we develop differentiated
polymers and new grades and products to support our mega-programmes
and semi-finished products. This will continue to be a feature of
our business model. However, our strategy also offers the
opportunity to capture a higher value share of each application
(rather than just the material share). Remaining focused on growing
absolute profits, rather than solely focusing on the gross margin
percentage, remains a priority for Victrex.
Profit before tax up 26% and EPS 39% ahead
Group profit before tax (PBT) of GBP63.3m was 26% up on the
prior year (H1 2017: GBP50.1m). PBT in constant currency was up
approximately 2%, reflecting higher investment in the business
during the first half and additional accrual for the Group's profit
linked bonus and LTIP schemes (reflecting market expectations of
higher profit growth in 2018 vs 2017).
Basic earnings per share of 64.7p was 39% ahead (H1 2017: 46.4p
per share), principally reflecting the associated benefit to the
Group's tax rate following Victrex filing patents to reflect its
unique chemistry and intellectual property (IP) which qualified for
the UK Government's Patent Box scheme. The comparative period,
which came before the Group's announcement on Patent Box in
September 2017, saw a tax rate of 20.8%, compared to a H1 2018 tax
rate of 12.3%.
Currency benefit heavily H1 weighted; headwind for FY 2019
Currency remains a benefit to the Group for FY 2018, with our
latest view suggesting a GBP10m+ benefit to profits based on our
planning forecast and currency hedging in place. The currency
tailwind will significantly reduce through the second half, with an
anticipated 90:10 weighting between the first and second half
year.
As a UK based exporter with a significant global revenue
exposure, Victrex hedges currency up to 12 months in advance. With
Sterling continuing to re-rate over recent months against some of
our selling currencies, the implied headwind to profit - based on
current rates - for FY 2019 is now expected to be over GBP10m,
reflecting approximately 35% of hedges in place.
Brexit
The Group continues to consider the potential impact of Brexit
on its business and has a team in place to consider various
contingencies, through the transition period and beyond. For now,
existing laws and trading arrangements are unchanged and it remains
business as usual. Activities and contingencies include focusing on
additional global warehousing to hold stock and the pursuit of
Authorised Economic Operator status - to "fast track" goods through
Customs. Victrex has trading companies globally, including Europe,
and remains focused on providing ongoing continuity to our
customers.
In the short term, Brexit has provided, and continues to
provide, a currency benefit. If sterling remains weak, this upside
could compensate for any additional tariffs. Based on our
assessment of the available information, the largest 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.
Efficiency & investment for growth
With strong top-line growth, our focus is ensuring that we can
meet demand from customers, particularly as we develop new polymer
grades and an increasing proportion of differentiated products. We
also remain focused, over the short to medium term, on improving
efficiency within our manufacturing operations.
Investment for growth reflects the need to drive adoption and
deliver the "burden of proof" for our newer semi-finished and
finished products. This investment is principally in the marketing
and technical functions, as well as in manufacturing capability - a
recent example includes our Polymer Innovation Centre - thereby
ensuring we can scale these new products to capture their market
potential.
Operating overheads were up 34% to GBP43.3m (H1 2017: GBP32.3m)
which reflects higher front-end investment, as well as a higher
accrual for the Group's profit growth linked bonus scheme and
LTIPs. Additionally, the first half-weighted growth this year has
also inflated the overall overhead growth. Excluding profit related
remuneration (bonus and share based payments) and the impact on
overheads from acquisitions, operating overheads in the first half
were approximately 11% higher than H1 2017.
Research & Development investment is measured on a full year
basis and is currently tracking at approximately 5% of Group
revenue. We anticipate R&D investment will remain similar to,
or slightly above this level, over the medium term.
Continued manufacturing investment to support downstream
strategy
Capital investment in the short to medium term remains focused
around our downstream manufacturing facilities, which support each
of our new product "mega programmes". For 2018, much of the focus
will be on our TxV Aero Composites joint-venture, where Victrex and
Tri-Mack Plastics will team up to manufacture, at scale,
differentiated Loaded Brackets for the Aerospace market. Our new US
manufacturing facility is expected to start commissioning during
the second half, supporting first orders for composite parts.
First half capital expenditure was GBP4.0m (H1 2017: GBP9.1m).
Overall, our guidance for Group capital expenditure this year is
for a similar level to FY 2017 (FY 2017: GBP17m) and our medium
term guidance of GBP25m-GBP35m is unchanged. However, if top-line
growth continues at a similar momentum as we are currently seeing,
new capital investment, or options for increasing our polymer
manufacturing capacity, would need to commence well before the end
of our current 5 year strategy period. This also reflects Victrex's
historic trend of investing ahead of demand, the potential from
high volume applications in Aerospace and Energy and the effective
capacity vs nameplate capacity in our manufacturing assets.
Further milestones in new product pipeline
In our core business, we continue to benefit from some new and
incremental applications, particularly in the Electronics segment,
which includes home appliance applications and business machines;
and in our Manufacturing & Engineering segment (which reports
under Energy & Other Industrial) which includes fluid handling
applications.
In our medium to longer term pipeline, we saw milestones
delivered in several of our mega-programmes of Dental, Victrex
Pipe/Magma, Trauma, Knee, Gears and Aerospace Loaded Brackets.
Gears saw the start of a first supply agreement to a major
European car manufacturer during the period. With multiple
development agreements in place with other car manufacturers, we
also anticipate other supply opportunities by the end of 2018.
Thanks to the capabilities we acquired through the Kleiss Gears
acquisition, we are able to design, develop and manufacture PEEK
based gears, although partnerships for manufacturing will be the
focus going forwards, ensuring Victrex retains the IP but limits
the capital required to scale up manufacturing.
Our Aerospace Loaded Brackets programme will see the
commissioning of our TxV Aero Composites manufacturing facility
during the second half. Our AE(TM) 250 composites are already
pre-qualified with the major aerospace manufacturers and we now
have the first prototype orders for composite parts, which are
focused on multiple applications for weight bearing structures.
In Energy, our Magma mega-programme secured a deployment of a
2.5km subsea flowline by Tullow Oil in West Africa during the
period. Together with other prototype orders, Magma is on track for
growth during 2018, with Victrex supplying the PEEK pipe and PEEK
composite tape as part of the finished m-pipe produced by Magma.
Looking further forward, we note the TechnipFMC announcement
relating to the potential use of m-pipe within the Libra field
development in Brazil.
Medical saw progress through a supply agreement with Straumann
Dental, which will help to enhance market access and improve the
global reach for our Invibio Dental product (Juvora(TM) ), building
on the product's strong record of clinical data and existing
European and US regulatory approvals. We anticipate our Dental
programme could reach meaningful revenue of over GBP1m by the end
of 2018 or early 2019.
Strong balance sheet
With a strong balance sheet, we are able to support growth
investment and provide security of supply to our customers. Net
assets at 31 March 2018 totalled GBP444.2m (31 March 2017:
GBP419.0m). Stock levels improved to GBP62.8m (H1 2017: GBP66.3m),
reflecting strong demand, partially offset by some stock build as
part of developing new polymer grades or for our
mega-programmes.
Continued strong cash generation
Cash generated from operations was GBP66.5m (H1 2017: GBP68.4m)
representing an operating cash conversion (cash generated from
operations / operating profit) of 106% (H1 2017: 137%). Net cash
(with no debt) at 31 March 2018 was GBP91.8m, (H1 2017: GBP86.0m),
based on available cash*, which includes cash held on deposit. The
movement since the 2017 financial year-end principally reflects the
payment of the 2017 final and special dividend in February. In
February 2018 we paid the 2017 final dividend of 41.60p per share.
Combined with the 2017 special dividend, these totalled GBP94.0m
(H1 2017 dividends paid: GBP30.0m).
Taxation
The effective tax rate for the first half was 12.3% (H1 2017:
20.8%). This reflects the associated benefit of a materially lower
UK tax rate, following Victrex filing patents as part of its unique
chemistry and IP. Victrex qualified under the UK Government's
Patent Box scheme, which incentivises Research & Development
investment in the UK. As previously communicated, the patents,
based on our unique chemistry, are expected to provide an
associated benefit to our tax rate, resulting in a normalised tax
rate of approximately 12% from 2018 for the duration of the
patents.
Dividends
Growth investment remains our top priority, whether that is
capital expenditure or M&A, joint ventures or partnerships. Our
capital allocation policy is to grow the regular dividend broadly
in line with earnings, whilst maintaining cover around 2x. After
this, and subject to no additional growth investment, Victrex will
return around 50% of the net cash balance to shareholders, via a
special dividend, subject to a 50p/share minimum level. The
threshold for payment of a special dividend is currently around
GBP85m of net cash.
With capital expenditure having reduced from historic levels,
and reflecting the post-tax benefit to earnings and cash from
Patent Box, the Board is assessing distribution options for future
shareholder returns, whilst noting that growth investment remains
the priority, including the potential requirement for investment in
new or additional polymer manufacturing capacity within the current
five-year strategy plan. Several options for future dividend
distribution are under consideration.
With the Group delivering a record first half and remaining well
on track for the full year - despite tougher growth comparatives
and a reduced currency benefit in the second half - the interim
dividend will increase by 10% to 13.42p/share (H1 2017:
12.20p/share). EPS benefited from the material reduction in the
Group's effective tax rate following Patent Box, which did not
benefit the prior year period.
Outlook
Looking towards the remainder of 2018, currency will be much
less of a tailwind compared to the first half and we are also
mindful of the currency headwind for 2019. Nevertheless, whilst
growth comparatives become tougher in the second half, our strong
momentum keeps us well on track for full year expectations.
Jakob Sigurdsson
Chief Executive
14 May 2018
DIVISIONAL REVIEW
Industrial
6 months 6
months
Ended ended
31 Mar 31 Mar
2018 2017
GBPm GBPm Change
-------------- --------- -------- -------
Revenue 139.0 105.7 32%
Gross profit 81.7 59.9 36%
-------------- --------- -------- -------
Victrex manages and reports its performance through the
Industrial (VPS) and Medical (Invibio) divisions although we
continue to provide a market based summary of our performance and
growth opportunities. The Industrial division includes the markets
of Aerospace, Automotive, Electronics, Energy & Other
Industrial (including Manufacturing & Engineering) and Value
Added Resellers.
Our Industrial business delivered revenue of GBP139.0m (H1 2017:
GBP105.7m), 32% ahead of the prior year, supported by currency.
Gross profit was up 36% on the prior year, with gross margin up at
58.8% (H1 2017: 56.7%), reflecting the benefit of currency, offset
by a slightly weaker Industrial mix, as growth in Value Added
Resellers continued, alongside a higher contribution from Consumer
Electronics. Industrial also saw some higher manufacturing costs
through input costs in selected raw materials, continued
air-freighting and some manufacturing inefficiencies.
Energy & Other Industrial
Energy & Other Industrial (which includes Manufacturing
& Engineering) reported sales volume of 334 tonnes, which was
25% ahead of the prior year (H1 2017: 267 tonnes), with Oil &
Gas up 15% overall. Victrex saw continued year on year improvement,
with onshore prospering, whilst the offshore sector has not yet
returned to activity levels seen earlier this decade. Our Magma oil
& gas mega programme is on track for growth during 2018, with
Victrex supplying the PEEK pipe and PEEK composite tape as part of
the finished m-pipe produced by Magma. Deployments in West Africa
this year will support growth, whilst a long term opportunity
offshore Brazil supports the Magma proposition.
The emerging Manufacturing & Engineering (M&E) area
continued to grow during the period, with new or incremental
applications in fluid handling, process systems and opportunities
in other areas being progressed.
Value Added Resellers
Value Added Resellers combines a mix of long term 'Channels'
business, where processors or compounders are using our PEEK
materials for part or component manufacturing specified by
end-users and OEMs, together with more variable demand requirements
as the "pull" from industrial markets using Victrex(TM) PEEK
continues to grow. Because of the fragmented nature of the
industrial supply chain, once PEEK has been specified by end-users,
full clarity on the exact route to market for all of our polymer
business is not always possible. Sales volume of 867 tonnes was 8%
ahead of last year (H1 2017: 802 tonnes), as processors and
industrial customers continued to benefit from the growth
opportunities within the high performance polymer market.
Transport
Megatrends of light-weighting, CO2 reduction, durability,
comfort and heat resistance continue to support the long term
outlook for transport markets. Sales volume increased 13% to 523
tonnes (H1 2017: 463 tonnes), primarily driven by the strong
performance in Automotive, with a steady year on year performance
in Aerospace.
Automotive
Automotive growth was particularly strong, with volumes up 12%.
Continued translations of core applications offer opportunities
across manufacturers, in braking systems, transmission and chassis
applications. Victrex(TM) PEEK is predominantly located within the
vehicle powertrain and with a long track- record here, our focus is
to increase the average volume to approximately 12 grams of PEEK
per vehicle over the medium term, compared to approximately 8 grams
today.
The potential from electric vehicles (EVs), whilst still
emerging, with slot-liners and other applications, remains
significant. PEEK's properties of durability, chemical, electrical
and heat resistance play well here. Whilst EV opportunities remain
at a very early stage, early indications suggest a potential for
over 100g per EV application and with more "value" rather than
simply "volume" business, we continue to work on several
differentiated products in this area.
Our Gears mega-programme saw the first parts supplied to a major
European car manufacturer, and we also have several development
agreements in place which we anticipate will lead to further parts
being supplied. PEEK gears based on Victrex(TM) HPG PEEK can offer
a 50% performance benefit compared to metal gears, as well as
contributing to the trend for CO2 reduction through weight &
inertia reduction, and quicker manufacturing compared to metal. We
remain focused on driving this mega-programme towards a meaningful
(GBP1m+) revenue stage during the 2018 / 2019 period. To help scale
this opportunity, we will partner with manufacturing companies to
support a wider roll-out and reduce development time, whilst
retaining the IP and development know-how. A PEEK Gear offers the
potential of approximately 20 grams per application.
Aerospace
After a decline in 2017, Aerospace saw a positive year on year
performance, with volumes increasing by 21%, although revenue
growth was much lower as pricing remained competitive. Translation
opportunities continue to exist for our products in brackets,
fasteners and other applications, although the market continues to
be competitive. We are positive for medium term growth prospects as
build rates and the use of composites and differentiated products
increase. Light-weighting and the ability to reduce manufacturing
cycle time by up to 40% is a key selling point for our PEEK and
PAEK polymers. Beyond this, our differentiated polymer grades, such
as our AE(TM) 250 (low-melt) version continue to progress,
alongside our focus on product forms such as film and parts such as
our Aerospace Loaded Brackets opportunity.
Electronics
Electronics remained a strong performer during the period. Total
volumes were up 85% to 432 tonnes (H1 2017: 233 tonnes), including
a first half weighting to volumes from the large Consumer
Electronics order, which we now expect to be similar to or slightly
higher than 2017 on a full year basis. Electronics volumes outside
of the large Consumer Electronics order were over 20% ahead. This
principally reflects the strength in Semiconductor, in Aptiv(TM)
film and emerging applications for Home Appliances and other
consumer related areas. In our development pipeline, we have now
increased the potential revenue opportunity for our 'Mobile
Devices' programme, reflecting some of our short to medium-term
prospects.
Regional trends
Regional trends remain important to Victrex. Europe was up 9%,
with 1,120 tonnes (H1 2017: 1,030 tonnes), reflecting the strength
in Transport, Value Added Resellers and Industrial markets.
Asia-Pacific was up 67% to 732 tonnes (H1 2017: 438 tonnes)
principally from Electronics, whilst US volumes were 3% ahead at
404 tonnes (H1 2017: 391 tonnes) principally reflecting the
stability in the Energy market.
Medical (Invibio)
6 6
months months
Ended ended
31 Mar 31 Mar
2018 2017
GBPm GBPm Change
-------------- -------- -------- -------
Revenue 27.6 25.2 10%
Gross profit 24.6 22.5 9%
-------------- -------- -------- -------
Medical (Invibio) revenue, including the benefit of currency,
was up 10% at GBP27.6m (H1 2017: GBP25.2m). In constant currency,
Invibio revenue was slightly down, principally reflecting the
maturity of the US Spine market, with the US accounting for nearly
two-thirds of our Medical revenue. Gross profit was GBP24.6m (H1
2017: GBP22.5m) and gross margin remained stable at 89.1% (H1 2017:
89.3%).
Outside of the US, revenue remains robust, with Asia-Pacific
growing by 9%, offset by a decline in Europe of 5%. Asia-Pacific
growth principally reflects some non-Spine areas such as Cranio
Maxio-Facial (CMF) and Arthroscopy, as sales mix within Medical
weakened.
Medical market overview
Whilst implantable PEEK retains a strong share in spinal
interbody fusion procedures, the lack of material growth in the
number of US spinal procedures, continued growth in titanium
expandable spinal cages, 3D printed porous titanium cages and some
downward pressure on pricing has led to revenue being muted in
recent years.
Our premium and differentiated PEEK-OPTIMA(TM) HA Enhanced
product is one part of our strategy to grow our medical business.
Having delivered over GBP1m of revenue in 2017, we are on track to
show some growth in this product on a full year basis, although we
saw a slightly weaker performance during the first half. Whilst it
will cannibalise some of our existing Spine product, the
opportunity for global translations is attractive.
On a medium term view, our vision for Medical solutions to treat
a patient every 15-20 seconds in 8-10 years is also based on growth
in non-US Spine and progress in our emerging mega-programmes of
Dental, Trauma and Knee.
Mega-programmes
In Dental, we signed a supply agreement with Straumann Dental,
one of the world's leading dental companies during the period,
which will help increase market penetration of our Invibio Dental
(Juvora(TM) ) branded products. The agreement will help to improve
global reach, building on the product's strong record of clinical
data and existing European and US regulatory approvals.
Our focus is on the prosthetic dental implant market, with the
Invibio Dental offering seeking to improve quality of life and
clinical outcomes for patients, and offering manufacturing
efficiency benefits. Our product also offers the potential for
milling a PEEK based disc up to three times faster than a Titanium
equivalent product.
Our Dental product was first commercialised in 2012, initially
through regional dental laboratories. It secured CE mark approval
in 2012, followed by initial US FDA approval in 2014, and a further
FDA approval in 2017 for use in prosthetic All on 4 implants.
Juvora(TM) was also granted a US patent in 2017. Whilst Dental
sales remain below the GBP1m meaningful revenue threshold, we
anticipate that with the Straumann agreement, and other potential
market access opportunities, we can realise meaningful revenue
within the next 12 months.
With our Trauma manufacturing facility in place, we have the
ability to meet initial demand. Our PEEK composite Trauma plates
offer the potential for 50 times better fatigue resistance compared
to a metal plate in the body. The awareness of composites as a
viable metal alternative is growing and we continue to work with
smaller innovative players through collaboration or development
agreements.
With 1 in 5 patients dissatisfied with their knee surgery,
typically using metal based solutions, patient demand for non-metal
based solutions offer significant potential in this $8 billion
global market. Our Knee proposition and partnership with Maxx
Orthopedics provides a good platform to support our long-term
aspirations. Our clinical trial, where all pre-clinical work was
completed in 2017, is ready to move towards patient recruitment,
which we envisage starting by the end of 2018. We now have a lead
investigator appointed and all clinical trial protocols agreed.
Condensed Consolidated Income Statement
Six months ended Six months Year ended
31 March 2018 ended 30 September
31 March 2017
2017
Note GBPm GBPm GBPm
------------------------------------- ----------------- ----------------------- ----------- --------------
Revenue 5 166.6 130.9 290.2
Cost of sales (60.3) (48.5) (106.4)
------------------------------------- ----------------- ----------------------- ----------- --------------
Gross profit 106.3 82.4 183.8
Sales, marketing and administrative
expenses 6 (43.3) (32.3) (72.7)
------------------------------------- ----------------- ----------------------- ----------- --------------
Operating profit 5 63.0 50.1 111.1
Financial income 0.3 0.1 0.3
Financial expenses - (0.1) (0.4)
------------------------------------- ----------------- ----------------------- ----------- --------------
Profit before tax 63.3 50.1 111.0
Income tax expense 7 (7.8) (10.4) (11.5)
------------------------------------- ----------------- ----------------------- ----------- --------------
Profit for the period attributable
to owners of the parent 55.5 39.7 99.5
-------------------------------------------------------- ----------------------- ----------- --------------
Earnings per share
Basic 8 64.7p 46.4p 116.4p
Diluted 8 64.4p 46.3p 116.2p
------------------------------------- ----------------- ----------------------- ----------- --------------
Dividends
Year ended 30 September 2016:
Final dividend paid February
2017 at 35.09p per share - 30.0 30.0
Year ended 30 September 2017:
Interim dividend paid July
2017 at 12.20p per share - - 10.4
Final dividend paid February 35.7 - -
2018 at 41.60p per share
Special dividend paid February 58.3 - -
2018 at 68.00p per share
------------------------------------- ----------------- ----------------------- ----------- --------------
94.0 30.0 40.4
------------------------------------- ----------------- ----------------------- ----------- --------------
An interim dividend of 13.42p per share will be paid on 29 June
2018 to shareholders on the register at the close of business on 8
June 2018. This dividend will be recognised in the period in which
it is approved.
Condensed Consolidated Statement of Comprehensive Income
Six months Six months Year ended
ended ended 30 September
31 March 2018 31 March 2017 2017
GBPm GBPm GBPm
-------------------------------------------- --------------- --------------- --------------
Profit for the period 55.5 39.7 99.5
-------------------------------------------- --------------- --------------- --------------
Items that will not be reclassified
to profit or loss
Defined benefit pension schemes'
actuarial gains 0.5 11.5 13.6
Income tax on items that will
not be reclassified to profit
or
loss (0.1) (2.0) (2.3)
-------------------------------------------- --------------- --------------- --------------
0.4 9.5 11.3
Items that may be subsequently
reclassified to profit or
loss
Currency translation differences
for foreign operations (1.3) 0.5 (1.5)
Effective portion of changes
in fair value of cash flow hedges 5.0 (4.0) 2.9
Net change in fair value of
cash flow hedges
transferred to profit or loss (4.3) 11.3 13.3
Income tax on items that may
be reclassified to profit or
loss (0.1) (1.7) (3.3)
(0.7) 6.1 11.4
Total other comprehensive (expense)/income
for the period (0.3) 15.6 22.7
Total comprehensive income for
the period
attributable to owners of the
parent 55.2 55.3 122.2
-------------------------------------------- --------------- --------------- --------------
Condensed Consolidated Balance Sheet
31 March 2018 31 March 2017 30 September
2017
Note GBPm GBPm GBPm
----------------------------- ----- -------------- -------------- -------------
Assets
Non-current assets
Property, plant and
equipment 254.7 257.3 258.6
Intangible assets 29.4 26.8 30.6
Investments 9 10.0 10.0 10.0
Deferred tax assets 5.7 6.3 5.6
Retirement benefit
asset 5.4 1.8 3.8
----------------------------- ----- -------------- -------------- -------------
305.2 302.2 308.6
----------------------------- ----- -------------- -------------- -------------
Current assets
Inventories 62.8 66.3 61.5
Current income tax
assets 1.2 6.5 2.4
Trade and other receivables 40.3 42.2 37.9
Derivative financial
instruments 10 7.6 1.7 7.6
Other financial assets 11 27.0 - -
Cash and cash equivalents 64.8 86.0 120.1
203.7 202.7 229.5
----------------------------- ----- -------------- -------------- -------------
Total assets 508.9 504.9 538.1
----------------------------- ----- -------------- -------------- -------------
Liabilities
Non-current liabilities
Deferred tax liabilities (18.9) (19.1) (18.4)
(18.9) (19.1) (18.4)
----------------------------- ----- -------------- -------------- -------------
Current liabilities
Derivative financial
instruments 10 (3.3) (11.3) (4.2)
Current income tax
liabilities (9.7) (15.1) (3.0)
Trade and other payables (32.8) (40.4) (34.1)
----------------------------- ----- -------------- -------------- -------------
(45.8) (66.8) (41.3)
----------------------------- ----- -------------- -------------- -------------
Total liabilities (64.7) (85.9) (59.7)
----------------------------- ----- -------------- -------------- -------------
Net assets 444.2 419.0 478.4
----------------------------- ----- -------------- -------------- -------------
Equity
Share capital 0.9 0.9 0.9
Share premium 46.0 41.4 43.0
Translation reserve 1.4 4.7 2.7
Hedging reserve 4.4 (3.4) 3.8
Retained earnings 391.5 375.4 428.0
----------------------------- ----- -------------- -------------- -------------
Total equity attributable
to owners of the parent 444.2 419.0 478.4
------------------------------------ -------------- -------------- -------------
Condensed Consolidated Cash Flow Statement
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2017
2018 2017
Note GBPm GBPm GBPm
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Cash flows from operating activities
Cash generated from operations 13 66.5 68.4 137.4
Net financing interest received 0.3 - -
Tax repayment / (paid) 0.9 (8.1) (19.8)
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Net cash flow from operating activities 67.7 60.3 117.6
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (4.4) (12.2) (16.7)
Cash invested in longer term deposits (27.0) - -
Cash consideration of acquisitions - - (9.9)
Cash acquired with acquisitions - - 0.9
Net cash flow from investing activities (31.4) (12.2) (25.7)
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Cash flows from financing activities
Premium on issue of ordinary shares exercised under option 3.0 3.6 5.2
Dividends paid (94.0) (30.0) (40.4)
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Net cash flow from financing activities (91.0) (26.4) (35.2)
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Net (decrease)/increase in cash and cash equivalents (54.7) 21.7 56.7
Effect of exchange rate fluctuations on cash held (0.6) 0.3 (0.6)
Cash and cash equivalents at beginning of period 120.1 64.0 64.0
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Cash and cash equivalents at end of period 64.8 86.0 120.1
-------------------------------------------------------------------- ----- ----------- ----------- --------------
Condensed Consolidated Statement of Changes in Equity
Share Share Translation Hedging Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Equity at 1 October 2017 0.9 43.0 2.7 3.8 428.0 478.4
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period
Profit - - - - 55.5 55.5
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Other comprehensive (expense)/income
Currency translation differences
for foreign operations - - (1.3) - - (1.3)
Effective portion of changes
in fair value of cash flow
hedges - - - 5.0 - 5.0
Net change in fair value
of cash flow hedges transferred
to profit or loss - - - (4.3) - (4.3)
Defined benefit pension schemes'
actuarial gains - - - - 0.5 0.5
Tax on other comprehensive
(expense)/income - - - (0.1) (0.1) (0.2)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Total other comprehensive
(expense)/income for the
period - - (1.3) 0.6 0.4 (0.3)
Total comprehensive (expense)/income
for the - - (1.3) 0.6 55.9 55.2
Period
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Contributions by and distributions
to owners of the Company
Share options exercised - 3.0 - - - 3.0
Equity-settled share-based
payment transactions - - - - 1.6 1.6
Dividends to shareholders - - - - (94.0) (94.0)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Equity at 31 March 2018 0.9 46.0 1.4 4.4 391.5 444.2
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Share Share Translation Hedging Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Equity at 1 October 2016 0.9 37.8 4.2 (9.2) 355.4 389.1
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period
Profit - - - - 39.7 39.7
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Other comprehensive income/(expense)
Currency translation differences
for foreign operations - - 0.5 - - 0.5
Effective portion of changes
in fair value of cash flow
hedges - - - (4.0) - (4.0)
Net change in fair value
of cash flow hedges transferred
to profit or loss - - - 11.3 - 11.3
Defined benefit pension schemes'
actuarial gains - - - - 11.5 11.5
Tax on other comprehensive
(expense)/income - - - (1.5) (2.2) (3.7)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Total other comprehensive
income for the period - - 0.5 5.8 9.3 15.6
Total comprehensive income
for the - - 0.5 5.8 49.0 55.3
period
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Contributions by and distributions
to owners of the Company
Share options exercised - 3.6 - - - 3.6
Equity-settled share-based
payment transactions - - - - 1.0 1.0
Dividends to shareholders - - - - (30.0) (30.0)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Equity at 31 March 2017 0.9 41.4 4.7 (3.4) 375.4 419.0
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Share Share Translation Hedging Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Equity at 1 October 2016 0.9 37.8 4.2 (9.2) 355.4 389.1
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period
Profit - - - - 99.5 99.5
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Other comprehensive (expense)/income
Currency translation differences
for foreign operations - - (1.5) - - (1.5)
Effective portion of changes
in fair value of cash flow
hedges - - - 2.9 - 2.9
Net change in fair value
of cash flow hedges transferred
to profit or loss - - - 13.3 - 13.3
Defined benefit pension schemes'
actuarial gains - - - - 13.6 13.6
Tax on other comprehensive
(expense)/income - - - (3.2) (2.4) (5.6)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Total other comprehensive
(expense)/income for the
period - - (1.5) 13.0 11.2 22.7
Total comprehensive (expense)/income
for the - - (1.5) 13.0 110.7 122.2
period
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Contributions by and distributions
to owners of the Company
Share options exercised - 5.2 - - - 5.2
Equity-settled share-based
payment transactions - - - - 2.3 2.3
Dividends to shareholders - - - - (40.4) (40.4)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Equity at 30 September 2017 0.9 43.0 2.7 3.8 428.0 478.4
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Notes to the Financial Report
1. Reporting entity
Victrex plc (the 'Company') is a limited liability company
incorporated and domiciled in the United Kingdom. The address of
the Registered Office is Victrex Technology Centre, Hillhouse
International, Thornton Cleveleys, Lancashire, FY5 4QD, United
Kingdom. The Company is listed on the London Stock Exchange.
This Half-yearly Financial Report is an interim management
report as required by DTR 4.2.3 of the Disclosure and Transparency
Rules of the UK Financial Conduct Authority.
These condensed consolidated interim financial statements as at
and for the six months ended 31 March 2018 comprise those of the
Company and its subsidiaries (together referred to as the
'Group').
The comparative figures for the financial year ended 30
September 2017 are extracted from the Company's statutory financial
statements for that year. Those financial statements have been
reported on by the Company's auditor, filed with the Registrar of
Companies and are available on request from the Company's
Registered Office or to download from www.victrexplc.com. The
auditor's report on those financial statements was unqualified, did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
did not contain any statement under sections 498 (2) or (3) of the
Companies Act 2006.
These condensed consolidated interim financial statements are
unaudited, but have been reviewed by PricewaterhouseCoopers LLP and
its report is set out on page 24-25. PricewaterhouseCoopers LLP
were appointed as auditor at the 2018 AGM in February 2018.
2. Statement of compliance
These condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
('IAS') 34 - Interim Financial Reporting as adopted by the European
Union. They do not include all of the information required for full
annual financial statements and should be read in conjunction with
the consolidated financial statements of the Group as at and for
the year ended 30 September 2017.
This Half-yearly Financial Report was approved by the Board of
Directors on 14 May 2018.
Risks and uncertainties
The principal risks and uncertainties which could impact the
Group's long-term performance remain those detailed on pages 24,
25, 26 and 103 of the Group's 2017 Annual Report and Financial
Statements, a copy of which is available on the Group's website,
www.victrexplc.com. No new risks have been identified. These risks
remain valid as regards their potential to impact the Group during
the second half of the current financial year. The Group has a
comprehensive system of risk management installed within all parts
of its business to mitigate these risks as far as is possible.
3. Significant accounting policies
The accounting policies applied by the Group in these condensed
consolidated interim financial statements are the same as those
applied in the Company's published consolidated financial
statements for the year ended 30 September 2017 except for the
application of relevant new standards.
A number of new standards and amendments to existing standards
are effective for the financial year ending 30 September 2018. None
of these have had a material impact and accordingly the 31 March
2017 and 30 September 2017 comparatives have not been restated.
A number of standards, amendments and interpretations have been
issued and endorsed by the EU but are not yet effective and,
accordingly, the Group has not yet adopted them. These include:
-- IFRS 9 - Financial Instruments: This standard is effective
for the financial year ending 30 September 2019. The Group is in
the process of assessing the impact of this standard, focused on
cash flow hedging for foreign exchange forward contracts. While not
expected to have a material impact on the Group's current
accounting treatment or hedging activities, IFRS 9 will result in a
presentational change on the face on the income statement with the
fair value gains and losses recognised on net cash flow hedges
being disclosed separately, rather than included within the line
item of the underlying hedged transaction.
-- IFRS 15 - Revenue from Contracts with Customers: This
standard is effective for the financial year ending 30 September
2019. Based on a preliminary review there is the potential for a
one-off acceleration of Medical revenue in relation to unit
payments, however if this does arise, it is not expected to be
material. For all other revenue streams, there will be no material
impact on the timing and recognition of revenue.
-- IFRS 16 - Leases: This standard is effective for the
financial year ending 30 September 2020. The effect on the reported
results and financial position of the Group is still being
evaluated with adoption of this standard likely to result in an
increase in gross assets and gross liabilities. The Group will make
an assessment of the full impact in due course, but based on the
current level of operating leases held by the Group, it is not
anticipated that the changes will have a material impact.
The cumulative impact of the adoption of all other standards, is
not expected to be significant.
Going concern
The Directors have performed a robust assessment, including
review of the forecast for the year ending September 2018 and
longer term strategic forecasts and plans, including consideration
of the principal risks faced by the Group and the company, as
detailed in the Group's Annual Report 2017. Following this review
the Directors are satisfied that the Company and the Group have
adequate resources to continue to operate and meet its liabilities
as they fall due for the foreseeable future, a period considered to
be at least 12 months from the date of signing these financial
statements. For this reason they continue to adopt the going
concern basis for preparing the interim financial statements.
4. Estimates
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those applied to the consolidated
financial statements as at and for the year ended 30 September 2017
as detailed on page 103 of the Group's Annual Report 2017.
5. Segment reporting
The Group's business is strategically organised as two business
units: Industrial, which focuses on our Transport, Electronics,
Energy & Other Industrial and Value Added Resellers markets;
and Medical, which focuses on providing specialist solutions for
medical device manufacturers.
Six months ended Six months ended Year ended 30 September
31 March 2018 31 March 2017 2017
------------------------------ ------------------------------ ------------------------------
Industrial Medical Group Industrial Medical Group Industrial Medical Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- -------- ------- ----------- -------- ------- ----------- -------- -------
Revenue from
external sales 139.0 27.6 166.6 105.7 25.2 130.9 236.3 53.9 290.2
-------------------- ----------- -------- ------- ----------- -------- ------- ----------- -------- -------
Segment gross
profit 81.7 24.6 106.3 59.9 22.5 82.4 135.5 48.3 183.8
Sales, marketing
and administrative
expenses (43.3) (32.3) (72.7)
-------------------- ----------- -------- ------- ----------- -------- ------- ----------- -------- -------
Operating profit 63.0 50.1 111.1
Net financing
income/(expense) 0.3 - (0.1)
-------------------- ----------- -------- ------- ----------- -------- ------- ----------- -------- -------
Profit before
tax 63.3 50.1 111.0
Income tax expense (7.8) (10.4) (11.5)
-------------------- ----------- -------- ------- ----------- -------- ------- ----------- -------- -------
Profit for the period
attributable to
owners of the parent 55.5 39.7 99.5
--------------------------------- -------- ------- ----------- -------- ------- ----------- -------- -------
6. Exceptional items
Six months Six months Year ended
ended ended 30 September
31 March 2018 31 March 2017 2017
GBPm GBPm GBPm
---------------------------------- ---------------- --------------- --------------
Included within Sales, marketing
and administrative expenses
Restructuring costs - (2.0) (2.0)
---------------------------------- ---------------- --------------- --------------
Exceptional items before tax - (2.0) (2.0)
---------------------------------- ---------------- --------------- --------------
Tax on exceptional items - 0.4 0.4
---------------------------------- ---------------- --------------- --------------
Exceptional items - (1.6) (1.6)
---------------------------------- ---------------- --------------- --------------
Prior year restructuring costs
Restructuring costs incurred in the prior periods related to a
reorganisation across a number of the group's manufacturing and
non-manufacturing locations.
7. Income tax expense
Taxation of profit before tax in respect of the six months ended
31 March 2018 has been provided at the estimated effective rates
chargeable for the full year in the respective jurisdiction.
Six months Six months Year ended
ended ended 30 September
31 March 2018 31 March 2017 2017
GBPm GBPm GBPm
--------------------------------------- --------------- --------------- --------------
UK corporation tax 6.6 8.5 7.7
Overseas tax 1.2 1.1 2.2
Deferred tax 0.6 0.4 0.7
Tax adjustments relating to prior
years (0.6) 0.4 0.9
--------------------------------------- --------------- --------------- --------------
Total tax expense in income statement 7.8 10.4 11.5
--------------------------------------- --------------- --------------- --------------
Effective tax rate 12.3% 20.8% 10.4%
--------------------------------------- --------------- --------------- --------------
The amount of deferred tax assets/liabilities have been
calculated based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet
date for the relevant territories. The majority of the deferred tax
asset/liabilities as at 31 March 2018 relate to the UK, for which
the UK tax rate of 17% is applied (31 March 2017: 17%, 30 September
2017: 17%).
8. Earnings per share
Six months Six months Year ended
ended ended 30 September
31 March 2018 31 March 2017 2017
--------------------------------------- --------------- --------------- --------------
Earnings
per share - basic 64.7p 46.4p 116.4p
- diluted 64.4p 46.3p 116.2p
------------ --------------- --------------- --------------
Profit for the financial period
(GBPm) 55.5 39.7 99.5
--------------------------------------- --------------- --------------- --------------
Weighted average number
of shares used - basic 85,732,071 85,422,476 85,505,917
- diluted 86,150,979 85,599,364 85,696,602
-------------------------- ----------- --------------- --------------- --------------
9. Investments
Following the capital contribution into Magma Global Limited by
Technip FMC, announced on 23 March 2018, GBP5.4m of the initial
investment will be redeemed during April 2018.
10. Derivative financial instruments
The notional contract amount, carrying amount and fair value of
the Group's forward exchange contracts are as follows:
As at 31 March As at 31 March As at 30 September
2018 2017 2017
--------------------- --------------------- --------------------- ----------------------
Notional Carrying Notional Carrying Notional Carrying
contract amount contract amount contract amount
amount and amount and amount and fair
fair fair value
value value
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ---------- --------- ---------- --------- ---------- ----------
Current assets 188.6 7.6 44.7 1.7 181.2 7.6
Current liabilities 12.9 (0.5) 140.2 (8.1) 18.0 (1.2)
---------------------- ---------- --------- ---------- --------- ---------- ----------
201.5 7.1 184.9 (6.4) 199.2 6.4
--------------------- ---------- --------- ---------- --------- ---------- ----------
The fair values have been calculated by applying (where
relevant), for equivalent maturity profiles, the rate at which
forward currency contracts with the same principal amounts could be
acquired on the balance sheet date. These are categorised as Level
2 within the fair value hierarchy under IFRS 7.
In addition to the above, GBP2.8m is included in current
liabilities in respect of the fair value of the derivative
instruments associated with TxV. These are categorised as Level 2
within the fair value hierarchy under IFRS 7.
11. Other financial assets
Six months Six months Year ended
ended ended 30 September
31 March 2018 31 March 2017 2017
GBPm GBPm GBPm
----------------------------- -------------------------------- --------------- --------------
Cash invested in longer term 27.0 - -
deposits
27.0 - -
----------------------------- -------------------------------- --------------- --------------
Cash invested in longer-term deposits does not meet the criteria
to be classified as cash and cash equivalents. Accordingly, these
deposits have been presented within Other financial assets and are
classified as Loans and Receivables in accordance with IAS 39.
12. Exchange rates
The most significant Sterling exchange rates used in the
financial statements under the Group's accounting policies are:
Six months ended Six months ended Year ended
31 March 2018 31 March 2017 30 September
2017
------------------- ------------------- ------------------
Average Closing Average Closing Average Closing
----------- --------- -------- --------- -------- -------- --------
US Dollar 1.26 1.42 1.41 1.25 1.37 1.34
Euro 1.13 1.14 1.28 1.15 1.23 1.14
Yen 143 151 158 141 150 151
----------- --------- -------- --------- -------- -------- --------
The average exchange rates in the above table take into account
the impact of gains and losses on foreign currency contracts. These
rates are referred to elsewhere in the Interim Results as the
effective rates for the period.
13. Reconciliation of profit to cash generated from operations
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2017
2018 2017 GBPm
GBPm GBPm
------------------------------------ ----------- ----------- --------------
Profit after tax for the period 55.5 39.7 99.5
Income tax expense 7.8 10.4 11.5
Net financing (income)/expense (0.3) - 0.1
Operating profit 63.0 50.1 111.1
Adjustments for:
Depreciation 7.6 7.3 15.3
Amortisation 1.4 0.8 2.3
Loss on disposal of non-current
assets 0.1 0.1 -
(Increase)/decrease in inventories (2.1) (3.7) 0.2
(Increase)/decrease in trade
and other receivables (3.4) 4.7 8.9
(Decrease)/increase in trade
and other payables (0.7) 9.5 5.6
Equity-settled share-based payment
transactions 1.6 0.9 2.3
Losses/(gains) on derivatives
recognised in income statement
that have not yet settled 0.1 (0.4) (7.5)
Retirement benefit obligations
charge less contributions (1.1) (0.9) (0.8)
------------------------------------ ----------- ----------- --------------
Cash generated from operations 66.5 68.4 137.4
------------------------------------ ----------- ----------- --------------
14. Related party transactions
The Group's related parties are as disclosed in the Annual
Report and Financial Statements 2017. There were no material
differences in related parties or related party transactions in the
six months ended 31 March 2018 except for transactions with key
management personnel. The most significant of these was on 8
December 2017, under the 2009 Long Term Incentive Plan ('LTIP'),
when 24,742, 11,678 and 11,480 share option awards were granted to
J O Sigurdsson, T J Cooper and M L Court respectively at an option
price of nil p per share when the market price was 2,481p per
share.
15. Subsequent events
On 6 April 2018, as part of the Group's medium term strategy to
transition its defined benefit pension scheme to a fully funded
position on a self-sufficiency basis, a GBP3.0m contribution was
made into the scheme.
Responsibility Statement of the Directors
The Directors confirm that these condensed consolidated interim
financial statements have been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
(i) an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(ii) material related party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Report.
During the period since the approval of the Victrex plc Annual
Report for the year ended 30 September 2017, there have been no
changes in the directorate.
The Directors of Victrex plc are detailed on our group website
www.victrexplc.com.
By order of the Board
Jakob Sigurdsson Richard Armitage
Chief Executive Chief Financial Officer
14 May 2018 14 May 2018
Forward-looking Statements
Sections of this Half-yearly Financial Report may contain
forward-looking statements, including statements relating to:
certain of the Group's plans and expectations relating to its
future performance, results, strategic initiatives and objectives,
future demand and markets for the Group's products and services;
research and development relating to new products and services; and
financial position, including its liquidity and capital resources.
These forward-looking statements are not guarantees of future
performance. By their nature, all forward looking statements
involve risks and uncertainties because they relate to events that
may or may not occur in the future, and are or may be beyond the
Group's control, including: changes in interest and exchange rates;
changes in global, political, economic, business, competitive and
market forces; changes in raw material pricing and availability;
changes to legislation and tax rates; future business combinations
or disposals; relations with customers and customer credit risk;
events affecting international security, including global health
issues and terrorism; the impact of, and changes in, legislation or
the regulatory environment (including tax); and the outcome of
litigation. Accordingly, the
Group's actual results and financial condition may differ
materially from those expressed or implied in any forward looking
statements. Forward-looking statements in this Half-yearly
Financial Report are current only as of the date on which such
statements are made. The Group undertakes no obligation to update
any forward-looking statements, save in respect of any requirement
under applicable law or regulation. Nothing in this press release
shall be construed as a profit forecast.
Independent review report to Victrex plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Victrex plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
Interim Results 2018 of Victrex plc for the 6 month period ended 31
March 2018. Based on our review, nothing has come to our attention
that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
the condensed consolidated balance sheet as at 31 March
2018;
the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
the condensed consolidated cash flow statement for the period
then ended;
the condensed consolidated statement of changes in equity for
the period then ended; and
the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results
2018 have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Results 2018, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Interim
Results 2018 in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Results 2018 based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Results 2018 and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Leeds
May 2018
a) The maintenance and integrity of the Victrex plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Shareholder Information
Victrex's Annual Reports and Half-yearly Financial Reports are
available on request from the Company's Registered Office or to
download from our corporate website, www.victrexplc.com.
Financial calendar
Ex-dividend date for interim dividend 7 June 2018
--------------
Record date for interim dividend# 8 June 2018
--------------
Payment of interim dividend 29 June 2018
--------------
2018 year end 30 September
2018
--------------
Announcement of 2017 full year December 2018
results
--------------
Annual General Meeting February 2019
--------------
Payment of final dividend February 2019
--------------
# The date by which shareholders must be recorded on the share
register to receive the dividend
Victrex plc
Registered in England
Number 2793780
Registered Office:
Victrex Technology Centre
Hillhouse International
Thornton Cleveleys
Lancashire FY5 4QD
United Kingdom
Tel: +44 (0) 1253 897700
Fax: +44 (0) 1253 897701
Web: www.victrexplc.com
*Alternative performance measures:
- Group metrics excluding Consumer Electronics are referred to
as core i.e. core volumes, core revenue and core business;
- Group revenue in constant currency which is reached by
applying current year (H1 2018) effective currency rates to prior
year (H1 2017) transactions;
- Available cash is cash and cash equivalents plus cash held on
deposit (> 3 months);Operating cash conversion (cash generated
from operations/operating profit);
- Sales from new products (sales from new grades sold from FY 2014 onwards); and
- Dividend cover (earnings per share/total dividend per share).
This excludes the special dividend.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FMGMKRFRGRZM
(END) Dow Jones Newswires
May 14, 2018 02:00 ET (06:00 GMT)
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