TIDMVCT
RNS Number : 3159S
Victrex PLC
08 July 2020
8 July 2020
Victrex plc : Interim Management Statement
'Solid start but weaker end to Q3 as COVID headwinds impact
performance'
Victrex plc, an innovative world leader in high performance
polymer solutions, today releases its Interim Management Statement
for the third quarter (Q3) covering the period 1 April to 30 June
2020.
Whilst Q3 started solidly, Victrex saw a weaker end to the
quarter, as run-rates in May and June declined. On a year-to-date
basis, Group volumes are broadly in line with the prior year.
Margin was impacted during the quarter by the deferral of some
elective procedures affecting our higher margin Medical business,
as well as the under-absorption of fixed costs from lower
production volumes. We expect these effects will continue to impact
margin for the remainder of the second half.
Q3 and YTD performance
Overall, Q3 Group sales volume was down 12% to 805 tonnes (Q3
2019: 912 tonnes), with Group revenue down 18% to GBP58.8m (Q3
2019: GBP72.0m) reflecting mix as a key driver. On a year to date
basis, (to the end of Q3) Group sales volume of 2,797 tonnes is
broadly in line with the prior year (2019 YTD: 2,811 tonnes), with
YTD Group revenue of GBP210.3m down 3% (YTD 2019: GBP217.8m).
Following a broadly stable performance in April, the months of
May and June started to see the impact of COVID-19 related
headwinds, with Group volume and revenue being more than 20% lower
than the prior year. Aerospace, Automotive and Energy end-markets
experienced the greatest level of decline, with performance being
moderately weaker than market indicators. In Medical, the
anticipated deferral of elective procedures started to impact us
from April, with monthly revenue declines of up to 40% in this
division, although market indicators suggest procedure deferral
will gradually reverse. Pleasingly, the gradual return of some
elective surgeries in Asia and continued growth in non-Spine has
kept year-to-date Medical revenues ahead of the prior year in that
region.
Mega-programme progress
As part of its Polymer & Parts strategy, Victrex continues
to focus on delivering further milestones in its growth pipeline,
as well as exploring options to drive growth within the PAEK family
of polymers or related technologies. Whilst we are mindful that
COVID-19 may lead to some delays in achievement of milestones in
certain projects, and are monitoring developments closely, overall
our growth pipeline is progressing broadly as planned, with the
long-term value proposition for the use of PEEK remaining
strong.
In Magma, testing data points from Technip FMC have indicated
PEEK as the preferred material of choice for the demanding
conditions in Brazil. This follows Victrex manufacturing the 6-inch
PEEK liner pipe, as well as the supply of PEEK composite tape in
support of Technip FMC's qualification programme. Additional
opportunities outside of Brazil remain under discussion.
In Medical, the clinical trial for our Knee programme in Italy
has resumed, with the first patient implant expected around the end
of our financial year, with additional trials in Europe and Asia
being explored, to drive commercialisation. We continue to see good
opportunities in Asia, both in Spine and non-Spine, particularly in
CMF, Trauma and Arthroscopy.
Financial position and cost management
Our net cash position at 30 June 2020 was slightly ahead of our
expectations at GBP72m, which includes approximately GBP8m
ring-fenced for our China manufacturing subsidiary. The Group has
an undrawn and committed RCF of GBP20m, together with a GBP20m
accordion facility.
The Group is also reflecting the weaker demand Outlook through
the remainder of FY 2020 and into H1 2021, as well as the ongoing
impact of under-absorption of fixed costs, by reviewing additional
cost actions, to support profitability in a lower production
environment.
As previously communicated, we will assess macro and end market
conditions later in the year, and the Outlook for FY 2021, before
making a declaration on dividends for FY 2020.
Outlook
With an additional impact in our current and forward order book
from COVID-related headwinds, and with macro and end market
uncertainty, as previously communicated, we are unable to provide
detailed guidance on full year expectations.
With lower production levels reflecting weaker demand and
planned inventory reduction, and consequently the under-absorption
of fixed costs, together with a weaker mix, margin is anticipated
to be further impacted in the second half and into FY 2021. Whilst
market indicators may remain negative across many of our
end-markets as we move into our next financial year, we anticipate
being in a better position later in the year to assess the
Outlook.
Our focus continues to be on the safety, health and well-being
of our employees, delivering good customer service and managing our
costs. Whilst we have already carried out a number of cash
conservation measures, further actions are being considered should
there be a sustained downturn. Overall, with sustainable products,
our range of medium to long term growth opportunities remain
strong, our financial position is robust and our cash generation
capabilities offer the opportunity of good medium term returns to
shareholders.
Analyst & investor conference call
A conference call for analysts & investors will be held
today, 8 July, at 08.30am BST.
Dial in details: +44 (0) 3333 000804 PIN: 57293642#
Victrex plc:
Andrew Hanson, Director of Investor Relations & Communications +44 (0) 7809 595831
Jakob Sigurdsson, Chief Executive +44 (0) 1253 897700
Richard Armitage, Chief Financial Officer +44 (0) 1253
897700
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 smart phones,
aeroplanes and cars to oil and gas operations and medical devices.
With over 40 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
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END
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