TIDMVCT
RNS Number : 5968U
Victrex PLC
06 December 2021
6 December 2021
Victrex plc - Preliminary Results 2021
'Solid & sustainable recovery: FY volumes +25%, strong cash
generation & 50p/share special dividend'
Victrex plc is an innovative world leader in high performance
polymer solutions, delivering sustainable products which support
CO2 reduction and bring environmental and societal benefit in
multiple end-markets. Today's announcement covers our preliminary
results (audited) for the 12 months ended 30 September 2021.
FY 2021 FY 2020 % change % change
(reported) (constant
currency)(1)
Group sales volume 4,373 tonnes 3,492 tonnes +25% N/A
---------------- ------------- ------------ ---------------
Group revenue GBP306.3m GBP266.0m +15% +20%
---------------- ------------- ------------ ---------------
Gross profit GBP165.3m GBP142.4m +16% +20%
---------------- ------------- ------------ ---------------
Gross margin 54.0% 53.5% +50bps N/A
---------------- ------------- ------------ ---------------
Underlying PBT
1 GBP91.7m GBP75.5m +21% +30%
---------------- ------------- ------------ ---------------
Reported PBT GBP92.5m GBP63.5m +46% +60%
---------------- ------------- ------------ ---------------
Underlying EPS(1) 83.4p 75.3p +11%
---------------- ------------- ------------ ---------------
EPS 84.3p 62.6p +35%
---------------- ------------- ------------ ---------------
Dividend per share
(regular & special
dividends) 109.56p 46.14p +137% N/A
---------------- ------------- ------------ ---------------
Highlights:
-- Solid & sustainable recovery; FY volumes +25%
- FY sales volume up 25% driven by improving end-markets
- Double-digit YoY growth in Electronics, Energy & Industrial, VAR
- Improvement in Automotive with volumes +18% despite Semiconductor challenges
- Medical revenue up 3% as elective surgeries gradually return
- 9% increase in new application targets
-- Underlying PBT up 21% driven by strong volume growth & cost management
- Underlying PBT up 21% at GBP91.7m, reported PBT up 46% at GBP92.5m
- Gross margin stable at 54.0% despite weaker sales mix, FX and inventory unwind
-- Further progress in 'mega-programme' growth pipeline & additional milestones
- Strong validation of PEEK technology through sale of Magma
interest to TechnipFMC; opportunities in traditional & new
energy including hydrogen transportation
- Good progress in PEEK Knee clinical trial; 10 patients now implanted
- Meaningful revenue of cGBP1m in PEEK Gears
- Mega-programme potential for E-mobility, with 50% increase in development programmes
- Good progress in Trauma joint developments
-- Strong cash generation underpinning investment & returns; 50p special dividend
- FY 2021 available cash(1) of GBP99.9m** underpinning cGBP40m
capex; further investment focused on China in FY 2022
- Operating cash conversion(1) 100%
- Civil construction progressing on plan for new PEEK facility in China; commissioning in 2022
- Post-Brexit inventory unwind benefiting cashflow; total inventory down GBP28m to GBP70m
- Dividends returned to pre-COVID-19 levels & special dividend of 50p/share
-- Further enhanced ESG strategy; products bringing environmental & societal benefit
- Signatory to Science Based Target initiative (SBTi), reflecting 2030 net zero goal***
- New ESG criteria added to Executive remuneration
1 Alternative performance measures are defined on page 16
**excludes GBP12.5m of cash ring-fenced in the Group's Chinese
subsidiaries and includes GBP37.5m in 95-day notice deposit
accounts
*** Scope 1&2 emissions
Jakob Sigurdsson, Chief Executive of Victrex, said: "Victrex
delivered a solid and sustainable recovery during FY 2021,
following the impact we saw from the pandemic in FY 2020. We saw
strong volume growth in several end-markets and strong cash
generation, supporting investment and shareholder returns.
"Automotive, Electronics and Value Added Resellers (VAR) were
our standout end markets, with new application growth in our core
business and notable milestones in our mega-programmes. These
include TechnipFMC acquiring our equity in Magma as they prepare
for scale up in Brazil, validating the technology for use in both
traditional and new energy opportunities; good progress in the PEEK
Knee clinical trial, with ten patients implanted to date;
meaningful revenue in our PEEK Gears mega-programme; and a 50%
increase in the number of development programmes for E-mobility,
which is now a mega-programme.
"FY 2021 saw a continued strong focus on the health, safety and
well-being of our employees - with 80% of our global regions now
seeing a return to site, backed by our Global Flexible Working
Policy - as we navigated our business through the pandemic. We
again delivered strong service levels for customers, with
sustainable products which bring environmental and societal
benefits, as reflected in our long-term ESG goals.
"With strong cash generation underpinning investment and
shareholder returns, we are pleased to declare dividends back to
pre-COVID-19 levels, alongside a special dividend for shareholders
of 50p/share.
Outlook
"For FY 2022, at this early stage, our assumptions are for
year-on-year progress in full year sales volumes, with several
end-markets expected to see further recovery, including in Medical,
which will support our sales mix. In addition to a sizeable
currency headwind, like most industrial companies, we are facing
increased raw material and energy costs, which will impact us
particularly in the first half, although mitigation plans are
progressing. We will increase our investment in innovation and will
start to incur commissioning costs in relation to our new China
facility, although better asset utilisation should support our
margin. Overall, we plan to deliver year-on-year growth in FY
2022.
"With an attractive portfolio of short, medium and long term
growth opportunities, a strong ESG agenda, including alignment to
global megatrends and sustainable products which help CO2 reduction
and support environmental and societal benefit, and a highly cash
generative business model, the Group remains well placed for the
medium to long-term."
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 sustainable materials - from
smartphones, 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, provide environmental and societal benefits, and
drive value for our shareholders. Find out more at
www.victrexplc.com
A presentation for investors and analysts will be held at 9.30am
(GMT) this morning via a conference call facility. To register,
dial +44 (0) 3333 000804 and participant pin 91122185# Audio
playback is available by dialling +44 (0) 3333 000819 and
participant pin 425015823# . The presentation will be available to
download from 8.30am (GMT) today on Victrex's website at
www.victrexplc.com under the Investors/Reports & Presentations
section.
Victrex plc:
Andrew Hanson, Director of Investor Relations & Corporate
Communications
+44 (0) 7809 595831
Richard Armitage, Chief Financial Officer
+44 (0) 1253 897700
Jakob Sigurdsson, Chief Executive
+44 (0) 1253 897700
Preliminary results statement for the 12 months ended 30
September 2021
'Solid & sustainable recovery: FY volumes +25%, strong cash
generation & 50p/share special dividend'
Group financial results
FY sales volume up 25%
Group sales volume of 4,373 tonnes was 25% up on the prior year
(FY 2020: 3,492 tonnes), reflecting a solid and sustainable
recovery across most end-markets, principally driven by Automotive,
Electronics and Value Added Resellers (VAR). We also enjoyed
double-digit volume growth within Energy & Industrial, with
Industrial reflecting new applications and the strength of the
global recovery. VAR also benefited from some level of restocking
through the year, as global economies reopened, although we do not
anticipate a repeat of this during FY 2022. In the more challenging
end market of Aerospace, H2 2021 volumes grew 8% on H1 2021,
although full year volumes remained 20% lower than the prior year,
reflecting a strong performance in Aerospace prior to the initial
impact from COVID-19.
H2 2021 sales volume of 2,287 tonnes was 52% ahead of H2 2020
(H2 2020: 1,500 tonnes) and 10% ahead sequentially, compared to the
first half. As anticipated, our final quarter remained strong but
was slightly lower than prior quarters due to the restocking impact
being seen earlier in our financial year.
Good growth in new application targets
We saw a 9% increase in our target application pipeline.
Group revenue up 15%, with gradual Medical recovery
Group revenue was GBP306.3m, up 15% on the prior year (FY 2020:
GBP266.0m), reflecting a strong performance in most Industrial end
markets and a more gradual improvement in Medical, as elective
surgeries take longer to return, following COVID-19 related
lockdowns.
Group revenue in constant currency(1) was 20% up on the prior
year (FY 2020: GBP255.4m in constant currency).
ASP down 8% due to sales mix
Our Average Selling Price (ASP) of GBP70/kg was 8% lower than
the prior year (FY 2020: GBP76/kg), principally reflecting a weaker
sales mix and the faster growth in Industrial end markets compared
to our Medical division. Currency also impacted us at the revenue
level as Sterling strengthened. With Medical set to continue
improving as surgery rates increase globally, offset by a sizeable
currency headwind of approximately GBP8m-GBP11m, our expectations
are that FY 2022 ASP will be slightly ahead of FY 2021.
Strong performance in Industrial; Medical improvement in H2
2021
Our Industrial division reported revenues of GBP255.2m, 18% up
on the prior year (FY 2020: GBP216.3m), with Electronics remaining
strong as homeworking and the demand for a range of smart devices
supported use of our materials, as well as a recovering
Semiconductor sector. We also benefited from an improvement in VAR,
with Automotive and Energy & Industrial also ahead compared to
the prior year. As noted, Aerospace improved in the second half vs
the first half but remained lower than FY 2020 on a full year
basis, primarily reflecting a strong H1 2020, prior to the impact
of COVID-19 on trading within this end-market.
Medical revenues were GBP51.1m, up 3% on the prior year (FY
2020: GBP49.7m) and 9% ahead in constant currency(1) . We continued
to see recovery in this end-market through the year, although we
were still faced with a strong comparative from H1 2020, due to a
strong Medical performance prior to COVID-19 related lockdowns.
Whilst surgery rates in China and parts of Asia returned to more
normalised levels, surgeries in the US have not yet returned to
pre-COVID-19 levels, although they are expected to continue
improving through FY 2022. We continue to benefit from growth in
non-Spine through applications in Trauma, Arthroscopy and Cranio
Maxillo Facial (CMF) applications, with non-Spine now representing
45% of Medical revenues.
Gains & losses on foreign currency net hedging
Fair value gains and losses on foreign currency contracts, where
net hedging is applied on cash flow hedges, are required to be
separately disclosed on the face of the Income Statement. In FY
2021, a gain of GBP4.9m (FY 2020: loss of GBP1.5m) has been
recognised accordingly, largely from USD contracts where the deal
rate obtained (placed up to 12 months in advance in accordance with
the Group's hedging policy) was favourable to the average exchange
rate prevailing at the date of the related hedged transactions.
Gross margin stable
Group gross margin of 54.0% improved slightly compared to FY
2020 (FY 2020: 53.5%). We saw some improvement from increased PEEK
production volumes and the benefit from our cost savings plan
announced in FY 2020, but these were offset by our monomer
production, where we carried out a period of extended maintenance.
A weaker sales mix - as our Medical business was slower to recover
from the impact of COVID-19 than Industrial - a small degree of
price erosion, and an increase in supply chain costs also held back
margin.
With Brexit contingency inventories now unwound, we anticipate
that FY 2022 will see production volume more aligned to sales
volume, as well as an improved sales mix. This should result in a
recovery in gross margin, although it will be offset by currency
and commissioning costs associated with our new Chinese facility,
as well as raw material and energy inflation.
Inventory unwind
Inventory built up ahead of Brexit provided us with the ability
to respond flexibly to customer demand and maintain high service
levels throughout the pandemic. With the significant inventory
unwind during FY 2021, our closing inventory position of GBP70.3m
(FY 2020: GBP98.5m) benefited cashflow. With some uncertainties in
global supply chains, we expect total inventory in FY 2022 to
fluctuate between GBP70m and GBP80m as we build contingency stocks
from time-to-time. With the commissioning of our China
manufacturing subsidiary expected during 2022, we also anticipate
holding a slightly higher level of raw material inventory.
Cost savings drive reduced overheads, excluding bonus
Operating overheads(1) excluding bonus were 2% lower, primarily
reflecting the benefit of cost savings announced in FY 2020, partly
offset by an increase in innovation investment. Operating overheads
of GBP72.7m (FY 2020: GBP66.4m) were 9% ahead of the prior year,
which includes the effect of the Group's All Employee Bonus Scheme.
Including both the annual incentive and long-term incentive
programmes, the year on year incremental reward totalled
approximately GBP9m.
As communicated in FY 2020, the All Employee Bonus Scheme is no
longer based primarily on profit growth, but is based on actual
performance versus a budget-based target, with a cap in place. We
envisage this will reduce the volatility of bonus payout year on
year. Executives will also now be incentivised on targets linked to
our ESG goals (from FY 2022), with further detail in our
forthcoming Annual Report.
Our "front-end" functions of Sales, Marketing and R&D
support existing business growth and our mega-programmes. With some
investment in these areas deferred during FY 2020, we anticipate a
modestly higher level of overhead investment in FY 2022, with
accrual for the All Employee Bonus Scheme expected to be slightly
lower. R&D investment of GBP15.5m (FY 2020: GBP16.7m)
represented approximately 5% of revenues(1) . Of total R&D
investment focused on individual projects, ,approximately 83% of
this is aligned to programmes supporting sustainable products.
Underlying PBT up 21.5%
Underlying PBT of GBP91.7m was up 21.5% on the prior year (FY
2020: GBP75.5m), reflecting a strong operating performance.
Reported PBT of GBP92.5m was up 45.7% on the prior year (FY 2020:
GBP63.5m). The exceptional credit in FY 2021 related to more
favourable settlements than assumed, primarily in non-UK regions,
when making the restructuring charge in FY 2020.
Earnings per share up 35%
Basic earnings per share of 84.3p was 34.7% up on the prior year
(FY 2020: 62.6p per share) as a result of the exceptional items in
FY 2020, partly offset by a higher tax charge. The effective tax
rate was 21.3%, materially higher than the prior year (FY 2020:
14.6%) which is mainly due to the restatement of deferred tax
balances in FY 2021 following the announcement the UK Corporation
tax rate would increase to 25% from April 2023. Whilst the UK
corporation tax rate is currently 19%, because of the availability
of the reduced rate on profits taxed under Patent Box, our mid-term
guidance at this stage remains for an effective tax rate of
approximately 12%-15%, although we continue to assess global
taxation developments which may see this rate slightly
increase.
Currency headwind
Currency was a modest headwind of GBP4m at PBT level, reflecting
the strengthening of Sterling since the end of FY 2020. With
Sterling having re-rated through FY 2021, the impact of which was
partially deferred by our hedging policy, we note the implications
for FY 2022, which is now approximately GBP8m-GBP11m headwind at
PBT level, with over 80% of hedging cover in place for US Dollar
and Euro exposure.
Our hedging policy seeks to substantially protect our cash flows
from currency volatility on a rolling twelve-month basis. The
policy requires that at least 80% of our US Dollar and Euro cash
flow exposure is hedged for the first six months, then at least 75%
for the second six months of any twelve-month period. The
implementation of the policy is overseen by an Executive Currency
Committee which approves all transactions and monitors the policy's
effectiveness.
Proactive actions on COVID-19
The health, safety and well-being of Victrex employees and
supporting our customers continued to be our highest priority
during FY 2021. Our COVID-19 committee, established at the start of
2020, remains in place, with a proactive approach despite a Return
to Site for approximately 80% of our global regions, supported by
our Global Flexible Working policy. Our approach has been focused
on several key areas:
People
A range of contingency plans were implemented, with a focus on
the health, safety and well-being of our people. We continue to
follow governmental or state guidance wherever we operate. Beyond
our UK and US manufacturing operations, approximately 80% of our
global regions have now seen a Return to Site, backed by our Global
Flexible Working Policy. Broadly, our UK, US, Europe, China and
Korea regions are back in office locations, with a flexible
approach. Our UK Return to Site commenced in October 2021, although
we continue to maintain some specific COVID-19 controls such as
face coverings and room occupancy levels.
Essential industry & serving customers
The UK government defined Chemicals as an essential industry
with essential workers, with Victrex also having a long-standing
history in supporting many critical and "life-sustaining"
applications for our customers, particularly in Medical. This meant
we continued to have a manufacturing, warehousing and quality
control presence throughout the pandemic. In the US, we continued
to operate on an ongoing modified basis, defined as being a
'life-sustaining' organisation in several states.
Despite supply chain challenges during FY 2021, we continued to
deliver strong service levels for our customers, although we did
incur some additional costs including air-freighting. Our service
levels for customers remained above 90%.
Dividends
With a highly cash generative business model, a solid recovery
and the benefit of inventory unwind on our cashflow, the Group
reinstated dividends back to pre-COVID-19 levels, following the
cancellation of the H1 2020 interim dividend.
Strong financial position
Overall, our financial position remains strong, including an
available cash position of GBP99.9m on 30 September 2021 and a
committed undrawn RCF of GBP20m, and a GBP20m accordion, to October
2024. We are in regular engagement with our banks, with options
available to access other capital, should this be required.
Brexit
Following implementation of the Brexit trade agreement on 31
January 2021, the Group saw no material impact on trade from the UK
to the EU, reflecting our proactive stock build and EU warehousing.
We continued to hold Brexit steering meetings for a period after
the Brexit trade agreement, to assess any immediate concerns
through the transition period. As noted earlier, supply chain and
logistics challenges were seen during FY 2021, although these did
not materially impact on service levels to our customers.
Investment in capacity and to support downstream strategy
Cash capital expenditure was GBP41.9m (FY 2020: GBP24.9m),
slightly lower than our guidance as some investment, principally
for our China manufacturing subsidiary, was phased into FY 2022. We
also expect to see a multi-year investment to support the
efficiency improvement of our UK manufacturing assets, a project
which was deferred during the pandemic. We anticipate this will be
approximately GBP15m, spread over the next four financial years and
built into the annual capital budget.
This investment in capacity is being developed in a more
tailored way than historic investments, with smaller increments
providing an overall return on investment similar to current Group
Return on Capital Employed (ROCE)(1) . Following these investments,
we do not anticipate any material large scale capacity investment
for several years.
Our China investment is progressing well, with commissioning
anticipated to be during 2022. With the challenge of managing some
of the engineering work remotely - due to COVID-19 restrictions on
in-country access - we have had to source additional regional
engineering support and other facilities at an increased cost. We
achieved over 500,000 hours without a recordable injury, with the
investment reflecting continued growth in China across end-markets,
and the opportunities we see to support our customers in country
and with a quality PEEK offering.
As a consequence of some capital being phased into FY 2022, we
now anticipate capital expenditure for the year could exceed
GBP60m. This also reflects some additional capability we are
planning to invest in, to support our growth opportunities in
China.
Mega-programme progress
To date, we have seen limited evidence of any material slowdown
in our overall growth portfolio of mega-programmes. Although
individual timelines remain subject to change, the long-term
prospects in each programme continue to be attractive. Our Knee
programme has been the key area where timing towards
commercialisation has been impacted by COVID-19, following the
pausing of the clinical trial last year, which subsequently
restarted with trial sites in India, Italy and Belgium. Pleasingly,
this programme has now moved forward with ten patients implanted in
India and Belgium, with no issues reported at the 6-month follow up
stage. We also envisage we may require less than the original plan
for 30 patients. Those patients now implanted will be progressing
through the trial over the next two years.
Our Aerospace Loaded Brackets programme - which successfully
secured over GBP1m of meaningful revenue in FY 2020 - increased
commercial revenues above GBP2m in FY 2021, despite this end market
remaining subdued. Although timing for some milestones has slipped
as a result of the impact of COVID-19, we continue to see good
long-term opportunities, with mega-trends aligned to
light-weighting, CO2 reduction and faster processing supporting the
use of our PEEK based composite materials. We also continue to
explore opportunities in eVTOL (Electric Vehicle Take-off and
Landing) which could support medium to long term growth.
In PEEK Gears, which now have several initial contracts 'on the
road' following a first supply agreement in 2018, we secured
meaningful revenue of approximately GBP1m in FY 2021. We also have
over 20 development programmes with tier 1 suppliers or OEMs
(Original Equipment Manufacturers). Gears continue to have
application uses across both traditional internal combustion
engines (ICEs) and electric vehicles (EVs) and we have recent
opportunities progressing in both the US and Asia.
Within 'Aerospace Structures' which links to our development
alliance with Airbus, we are now delivering prototype revenue via
large scale test parts. The alliance will support the development
and commercialisation of thermoplastic composites in Aerospace,
with a focus on both larger primary and secondary Aerospace
structures, such as wings and fuselage parts. A long term agreement
was also signed to support the use of our composite materials which
underpins the opportunity. Aerospace Structures remains incremental
to Victrex's Aerospace Loaded Brackets programme, with our AE (TM)
250 composites grade being integral to both of these
opportunities.
In our Magma composite pipe programme, our minority equity
interest in Magma Global Limited was sold to TechnipFMC in October
2021, with a gain of GBP0.9m from our initial investment of GBP10m
in 2016 (our initial shareholding was subsequently diluted in 2018
when TechnipFMC first acquired a shareholding). TechnipFMC is
seeking to accelerate the significant opportunities for
thermoplastic composite pipe, which is clear validation of the
technology that is based on Victrex PEEK polymer and Victrex's
composite tape. Victrex will continue to work in close
collaboration with TechnipFMC as a strategic supply partner, with
multi-year supply agreements in place and industry qualifications
based on Victrex PEEK. TechnipFMC has indicated its intention to
accelerate the use of this technology and scale up manufacturing in
Brazil as required, to support use in traditional energy
applications. It has also indicated the potential to further
develop the technology for use in carbon capture and storage, and
hydrogen transportation. Separately, Victrex has made a small
investment to form Enoflex, a combination and collaboration of
previous shareholders in Magma Global Limited, which seeks to
utilise this technology, based on Victrex PEEK, and broaden its use
for the 'energy transition'. This will include targeting a wider
number of industry players involved in hydrogen and other new
energy opportunities.
Pre-qualification work as part of TechnipFMC's bid programmes in
Brazilian oil & gas fields continue, based on the Hybrid
Flexible Pipe (HFP) model. We expect to see continued development
revenues as the 6 inch qualification pipe progresses - extruded by
Victrex - through the supply chain in the short term, with
TechnipFMC's significant commitment offering the potential for
revenues to begin stepping up over the medium term. The high
technical and subsea engineering requirements in Brazil and
elsewhere continue to support the proposition, including
light-weighting, durability, CO2 and chemical resistance.
Our E-mobility programme, which focuses on applications across
electric vehicles, in particular for high-voltage next generation
programmes, is expected to achieve commercial success over the
medium term. PEEK will be used in specific applications where
durability, heat resistance and light-weighting are all key. We saw
a 50% increase in development programmes, with FY 2022 and FY 2023
expected to see greater commercialisation. Our assessment of the
PEEK content per vehicle has also been increased to more than 100g
(from approximately 10g today), as we focus on the high performance
needs of next generation electric vehicles. E-mobility is now a
mega-programme.
In Medical, following good progress in our next generation
PEEK-OPTIMA(TM) HA Enhanced product for Spine during FY 2020 to
GBP2m, revenues were lower (but remained above GBP1m) due to the
challenges of lower elective surgeries and new product launches, as
a result of COVID-19. However, with elective surgeries expected to
gradually increase through FY 2022, we anticipate seeing some
improvement. During the year, we secured first US FDA approval for
this product in ankle wedge systems, complementing other extremity
applications such as hammertoe. We also continue to innovate within
Medical to secure revenues in non-Spine, which are now 45% of
Medical revenues. These include Cranio Maxilo Facial (CMF),
European regulatory approval for a total PEEK heart application and
sternal devices. We are also making good progress in our Porous
PEEK offering thanks to our investment in Bond 3D and the 3D
printing opportunities that offers.
Our Trauma pipeline continues to build, following the agreement
with US based In2Bones for composite plating, and we also secured
our first Asia customer product launch for FY 2022.
Our focus to grow our non-Spine business in Dental continues to
be slower than we anticipated, with COVID-19 disruption being
particularly notable in this end market. Whilst the technical
proposition remains strong, like other participants or competitors
in this market, we are focused on commercialisation through
partnerships or other vehicles. Clinical data, including infection
rates compared to metal prosthetics, remains positive.
Strategically, we have also reined back on resource commitments in
this area, to reflect the adoption challenge and prioritisation
elsewhere. Dental is now no longer a mega-programme but continues
to offer a sizeable revenue opportunity.
Strong balance sheet
Our strong balance sheet underpins our ability to invest and
support security of supply for customers. Net assets at 30
September 2021 totalled GBP511.7m (FY 2020: GBP481.0m). Inventories
reduced to GBP70.3m (FY 2020: GBP98.5m), which reflects sales
inventory being unwound at pace after Brexit. With the expected
commissioning of our China facility during FY 2022, our expectation
is that raw material inventory will increase, meaning total full
year inventory is expected to be slightly higher than FY 2021.
Robust cash generation
Cash generated from operations was GBP135.5m (FY 2020:
GBP86.6m), an operating cash conversion(1) of 100% (FY 2020: 101%).
Cash and other financial assets (with no debt) at 30 September 2021
was GBP112.4m (FY 2020: GBP73.1m). This includes GBP12.5m
ring-fenced in our China subsidiaries and other financial assets of
GBP37.5m, representing cash which was held on 95-day deposit at 30
September 2021, therefore the Group had GBP99.9m available cash(1)
as at the year-end date. In February 2021 we paid the 2020 full
year final dividend of 46.14p/share and following reinstatement of
the interim dividend, we paid the H1 2021 interim dividend of
13.42p/share in July 2021.
We are in the final stages of securing a RMB300m borrowing
facility (GBP34.5m equivalent translated at the FY 2021 year-end
rate of 8.7) in China in support of our investments there.
Taxation
The Group's effective tax rate reflects the associated benefit
from Victrex filing patents as part of its unique chemistry and IP,
through the UK government's 'Patent Box' scheme. The effective tax
rate was 21.3% (FY 2020: 14.6%), higher than the prior year period
to reflect the increase in the future UK Corporation Tax rate,
resulting in a one-off deferred tax charge in the region of GBP6.1m
which has increased the effective tax rate for FY 2021 by
approximately 7% points, and adversely impacts earning per share
for the financial year. Our anticipated effective tax rate in the
medium term is expected to be in the 12-15% range, although we
continue to assess tax policies which may see this rate slightly
increase.
This includes an allowance for the increase in the UK
corporation tax rate over the coming years and reflects our
continued use of the Patent Box scheme which promotes investment in
UK Research & Development and intellectual property (IP).
Dividends
With positive cash generation and a strong trading performance,
the Group has seen dividends return to pre-COVID-19 levels. We have
proposed a final dividend of 46.14p/share (FY 2020: final dividend
46.14p/share) taking the full year dividend to 59.56p (FY 2020:
46.14p) which reflects the expectation of growth in FY 2022,
despite the significant currency and inflation headwinds.
As a result of the Group's available cash(1) balance exceeding
the GBP85m threshold set out in our capital allocation policy for
additional returns to shareholders, we are also proposing a
50p/share special dividend.
Outlook
For FY 2022, at this early stage, our assumptions are for
year-on-year progress in full year sales volumes, with several
end-markets expected to see further recovery, including in Medical,
which will support our sales mix. In addition to a sizeable
currency headwind, like most industrial companies, we are facing
increased raw material and energy costs, which will impact us
particularly in the first half, although mitigation plans are
progressing. We will increase our investment in innovation, and
will start to incur commissioning costs in relation to our new
China facility, although better asset utilisation should support
our margin. Overall, we plan to deliver year-on-year growth in FY
2022.
With an attractive portfolio of short, medium and long term
growth opportunities, a strong ESG agenda, including alignment to
global megatrends and sustainable products which help CO2 reduction
and support environmental and societal benefit, and a highly cash
generative business model, the Group remains well placed for the
medium to long-term.
Jakob Sigurdsson
Chief Executive
6 December 2021
(1) Alternative performance measures are defined on page 16.
DIVISIONAL REVIEW
Industrial
12 months 12
months
Ended ended %
30 Sept 30 Sept % Change
2021 2020 Change (constant
GBPm GBPm (reported) currency)
-------------- ---------- -------- ----------- ----------
Revenue 255.2 216.3 +18% +22%
Gross profit 119.7 99.3 +21% +25%
-------------- ---------- -------- ----------- ----------
Group performance is reported through the Industrial and Medical
divisions although we continue to provide a market-based summary of
our performance and growth opportunities. The Industrial division
includes the markets of Energy & Industrial, Value Added
Resellers (VAR), Transport (Automotive & Aerospace) and
Electronics.
Our Industrial business delivered revenue of GBP255.2m (FY 2020:
GBP216.3m), 18% up on the prior year, reflecting a strong
performance across most end-markets, with Automotive, Electronics,
Energy & Industrial and VAR being the standout performers.
Revenue in constant currency was up 22%. Gross margin improved
slightly to 46.9% (FY 2020: 45.9%), primarily reflecting the impact
of higher production volumes. Electronics and VAR were the notable
drivers of growth, with volumes 33% and 39% ahead in these end
markets respectively, supported by an extension of applications
including for Semiconductor and 5G applications.
Energy & Industrial
Our Energy & Industrial segment includes volumes for oil
& gas and new energy applications, including renewables, and an
array of applications across General Industrial. These include in
food processing, machinery and robotics. Energy & Industrial
saw sales volume of 760 tonnes, which was up 22% on the prior year
(FY 2020: 622 tonnes), with Oil & Gas up 11% overall. H2 2021
saw an acceleration in this end market as activity levels started
to return. Our products continue to offer durability and
performance in many demanding applications including in both
exploration and processing, where the reliability of PEEK can mean
less intervention or downtime, thereby supporting efficiency of
operation.
Industrial focuses on new or incremental applications in fluid
handling, food contact materials and manufacturing equipment
applications, including the emerging opportunities in compressors
where metal replacement requirements are increasing. Application
growth in this end market helped drive volume growth of 47%
compared to the prior year.
Value Added Resellers (VAR)
Full clarity on the exact route to market for all of our polymer
business is not always possible, however, our analysis suggests
that VAR shows a similar alignment to our Industrial end-markets,
with the exception of Aerospace, where sales volumes and largely
direct to OEMs or tier suppliers.
PEEK materials are used for parts or component manufacturing
specified by end users and OEMs to processors and compounding
specialists, as the "pull" from Industrial markets using
Victrex(TM) PEEK continues to grow. VAR remains an important part
of our Industrial division and enjoyed strong growth this year as
societies emerged from the worst impact of the pandemic. Sales
volume of 1,900 tonnes was 39% up on the prior year (FY 2020: 1,368
tonnes), principally reflecting the macro-improvement, as well as
good growth in end markets such as Electronics, Automotive, Energy
& Industrial.
The VAR channel also typically sees greater levels of restocking
and destocking as processors or compounders typically reduce
inventories in higher value materials when end market demand drops
and do the opposite when it increases. Our second and third
quarters benefited from the restocking effect as societies began to
open up, with demand normalising in our final quarter. We do not
expect this restocking effect to repeat in FY 2022.
Transport (Automotive & Aerospace)
Emerging from the worst impact of COVID-19, structural
megatrends including lightweighting, CO2 reduction, durability,
comfort, electrification and heat resistance remain strong.
Following a strong performance for both Automotive &
Aerospace in H1 2020 (prior to the impact of COVID-19), Automotive
saw a good recovery as societies began to open up, whilst Aerospace
remained subdued, with most industry data suggesting a multi-year
recovery. Semiconductor shortages weighed on Automotive in the
second half, slightly slowing momentum, although we recorded growth
on a full year basis. In Aerospace, long term trends remain
supportive and we note that OEM forecast build rates have only
marginally reduced over the next 15-20 years (Airbus forecasts
39,000 new or replacement planes by 2040).
Overall Transport sales volume grew 8% to 926 tonnes (FY 2020:
858 tonnes), with Automotive volumes up 18% and Aerospace volumes
down 20%, reflecting the strong comparative for the first half of
FY 2020.
Automotive
Performance was strong through FY 2021, with some impact in the
second half from the Semiconductor chip shortage. Core applications
include braking systems, bushings & bearings and transmission
equipment, with increasing opportunities in electric vehicles
including impending e-mobility business.
In PEEK Gears, we delivered meaningful revenue of approximately
GBP1m for the first time in this mega-programme, with over 20
programmes we are seeking to commercialise over the next three
years. PEEK gears based on Victrex(TM) HPG PEEK can offer a 50%
performance and noise vibration and harshness (NVH) benefit
compared to metal gears, as well as contributing to the trend for
minimising CO2 emissions through weight & inertia reduction,
and quicker manufacturing compared to metal. A PEEK Gear offers the
potential of approximately 20 grams per application.
In E-mobility, our focus on next generation high-voltage
vehicles is expected to deliver initial revenues in FY 2022. PEEK
remains well placed for both internal combustion engines, hybrids
and electric vehicles (EVs).
Aerospace
Aerospace volumes were down 20%, reflecting the significant
impact on plane build through COVID-19. Whilst 2020 was recognised
as having the sharpest decline in aviation history with demand
(revenue passenger kilometres or RPKs) down by 66% on the prior
year, 2021 to date has seen some limited recovery as build rates
have recovered across several models.
Sequentially, Aerospace volumes were up 8% in the second half as
we progressed from trough levels, although we note the current
industry challenges and expected multi-year recovery.
Long term trends remain strong however. Our Loaded Brackets and
Aerospace Structures mega-programmes both grew revenues over the
year, with Loaded Brackets exceeding GBP2m revenue as the use of
composites and differentiated products remain in demand. These
include interior structural components, and we anticipate a
continuation of revenue build in both of these programmes,
reflecting their niche and differentiated offering.
Light-weighting, recyclability and the ability to reduce
manufacturing cycle time by up to 40% remains a key selling point
for our PEEK and PAEK polymers. The ability to support CO2
reduction through PEEK materials which are typically 60% lighter
than metals also remains strong, with our assessment that over 50
million tonnes of CO2 could be saved over the next 15 years if all
new single aisle planes were produced with over 50% PEEK composite
content. These attractions play to our Aerospace Structures
mega-programme, working with Airbus to support their Clean Sky 2
and Wing/Fuselage of Tomorrow programmes.
Electronics
Electronics volumes rebounded strongly, up 33% at 602 tonnes (FY
2020: 454 tonnes). With Asia being a key geography for much of this
end-market, the COVID-19 recovery in Asia and return to operations
for many countries in the region provided support, alongside
application growth.
Semiconductor chip demand - driven by internet of things, 5G
applications, cloud computing and Automotive - supported our
growth, with core applications like CMP rings and other extended
application areas growing, including a new PEEK nut application. We
also benefited from greater implementation of 5G alongside the
greater homeworking trend during the pandemic. This provided good
momentum for our Aptiv (TM) film business and small space acoustic
applications and we continue to see a positive outlook for this end
market into FY 2022.
Sales of home appliances and our impeller application business
in high-end brands are also performing well across a number of
product areas, including vacuum cleaners and hairdryers.
Regional trends
As Asian economies gradually opened up first, with a recovery
from COVID-19, sales volume in that region saw the greatest
improvement, with Asia-Pacific up 19% at 1,134 tonnes (FY 2020: 953
tonnes). Asia is now larger than the US as a geographic market,
reflected in our investments in China to support growth over the
coming years.
Europe was up 30%, with 2,432 tonnes (FY 2020: 1,876 tonnes),
reflecting improvement in Automotive and the strong performance in
VAR. US volumes were up 22% at 807 tonnes (FY 2020: 663 tonnes) as
Energy saw a steady recovery, although Aerospace remained
subdued.
Medical
12 months 12
months
Ended ended %
30 Sept 30 Sept % Change
2021 2020 Change (constant
GBPm GBPm (reported) currency)
-------------- ---------- -------- ----------- ----------
Revenue 51.1 49.7 +3% +9%
Gross profit 45.6 43.1 +6% +8%
-------------- ---------- -------- ----------- ----------
Revenue in Medical was up 3% at GBP51.1m (FY 2020: GBP49.7m) as
we saw a gradual but steady return to elective surgeries in most
regions, principally Asia-Pacific. The US - which represents 53% of
divisional revenues - remained slower in the return of patient
surgeries compared to Asia-Pacific, with the latest data indicating
the turn of the calendar year 2021/2022 will see surgery rates
return to pre-COVID-19 levels. This data supports our assumption of
an improved sales mix in FY 2022.
In constant currency, Medical revenue was up 9%. Gross profit
was GBP45.6m (FY 2020: GBP43.1m) and gross margin was up at 89.2%
(FY 2020: 86.7%) reflecting a slightly better sales mix within this
division. Overall Medical volume (implantable and non-implantable)
was down 3%, reflecting the demand for non-implantable business in
ventilators and related equipment during FY 2020.
In the prior year period, the strong comparative in H1 2020
should be noted, as the supply chain and a number of major
customers pre-bought product ahead of COVID-19 related lockdowns.
Geographically, Asia-Pacific revenues were up 10% year on year,
with Medical revenues in the US flat and Europe up 4%. Asia-Pacific
continues to reflect revenues in Spine, as new approvals are
secured, and non-Spine areas such as Cranio Maxillo-Facial (CMF),
Arthroscopy & Sports Medicine as well as emerging or
incremental opportunities in heart components. On a medium-term
view, we continue to target high single-digit million revenue from
each of our non-Spine areas, for example CMF, Cardio. Non-Spine
overall now represents 45% of divisional revenues.
Medical market overview
Spine is our historic end-market which, whilst it has become
more mature in recent years, is one we continue to diversify
through focusing on emerging geographies and new innovative
products. Our premium and differentiated PEEK-OPTIMA(TM) HA
Enhanced product (POHAE) - to drive next generation Spine
procedures - is one part of our strategy to grow our Medical
business. Following good growth during FY 2020, the decrease in
elective surgeries impacted revenues during H1 2021, although we
saw improvement in the second half. Full year revenues were lower]
than the GBP2m seen in the prior year. We are also innovating
within the application uses for PEEK-OPTIMA(TM) HA Enhanced, for
example in ankle wedge systems where we gained US FDA approval,
which complements other extremity applications such as
hammertoe.
Our Porous PEEK opportunity, where the benefit of bone-in growth
is added to bone-on growth for Spinal applications, is moving
forward on plan thanks to our Bond 3D investment, where our ability
to 3D print spinal cages will be important. Following successful
feasibility work, we entered into a joint development agreement
with a medical device customer to progress development of the first
FDA approved porous PEEK additive manufactured spinal cage, for
projected launch in 2022. A number of other customer discussions
are ongoing.
Progress in our non-Spine business continues to be impressive,
with non-Spine revenues now 45% of the division. A number of
emerging opportunities made good progress during FY 2021, these
include one of our customers gaining regulatory approval in Europe
(CE mark) for the first PEEK total artificial heart. We also saw
the first FDA approval of a PEEK based cervical disk and developed
new products in sternal applications. Cranio Maxillo Facial (CMF)
continues to be a growth opportunity and we saw 25% growth compared
to FY 2020.
Mega-programmes
In Knee, we saw positive progress through the year, with the
first patients implanted in India as part of the clinical trial and
a total of 10 implants now having successfully passed the 6 month
follow up phase. Clinical trials are now operating in Belgium,
India and Italy, although the European trials remain slower to
emerge from the impact of COVID-19 than the trial in India.
Although the Knee programme has shifted its timeline backwards by
approximately 12 months due to the impact of COVID-19, the long
term opportunity - in what is a $10 billion global market - remains
attractive. Further news flow is expected during FY 2022 and we
anticipate the trial sites will run for approximately two
years.
As previously communicated, the focus for our Invibio Dental
(Juvora(TM) ) branded products is for adoption to be driven by
partners and industry players - similar to other competitor
products - with Invibio continuing to support and build on existing
clinical data, including that through the Malo Clinic, which
further validates our Dental proposition. Adoption in this end
market has remained challenging, and our resources have been
tailored appropriately. Strategically, we are prioritising our
investment and resources in other programmes.
Our emphasis remains on the prosthetic dental market - frames,
bridges and partials - rather than the full jaw-based implant, with
the Invibio Dental offering focused on improving quality of life
and clinical outcomes for patients, whilst offering manufacturing
efficiency benefits.
In Trauma, we announced an agreement during the year with US
based In2Bones for composite plating in higher and lower
extremities and concluded our first Asia customer product launch
plan, scheduled for FY 2022.
Our PEEK composite Trauma plates offer the potential for 50
times better fatigue resistance compared to a metal plate, with
awareness of composites as a viable metal alternative growing.
Whilst we have the manufacturing capability to meet initial demand,
we may also choose to consider partnerships to support scale-up,
particularly for geographies in Asia-Pacific and China
specifically.
Alternative performance measures:
We use alternative performance measures to assist in presenting
information in an easily comparable, analysable and
comprehensible
form. The measures presented in this report are used by the
Board in evaluating performance. However, this additional
information presented is not required by IFRS or uniformly defined
by all companies. Certain measures are derived from amounts
calculated in accordance with IFRS but are not in isolation an
expressly permitted GAAP measure. The measures are as follows:
- Operating profit before exceptional items (referred to as
underlying operating profit) is based on operating before the
impact of exceptional items. This metric is used by the Board to
assess the underlying performance of the business excluding items
that are, in aggregate, material in size and / or unusual or
infrequent in nature. Exceptional items for FY 2021 are a credit of
GBP0.8m; details are disclosed in note 5;
- Profit before tax and exceptional items (referred to as
underlying profit before tax) is based on Profit before tax before
the impact of exceptional items. This metric is used by the Board
to assess the underlying performance of the business excluding
items that are, in aggregate, material in size and / or unusual or
infrequent in nature.
- Constant currency metrics are used by the Board to assess the
year on year underlying performance of the business excluding the
impact of foreign currency rates, which can by nature be volatile.
Constant currency metrics are reached by applying current year (FY
2021) weighted average spot rates to prior year (FY 2020)
transactions;
- Underlying EPS is earnings per share based on profit after tax
but before exceptional items divided by the weighted average number
of shares in issue. This metric is used by the Board to assess the
underlying performance of the business excluding items that are, in
aggregate, material in size and/or unusual or infrequent in
nature;
- Operating cash conversion is used by the Board to assess the
business's ability to convert operating profit to cash effectively,
excluding the impact of investing and financing activities.
Operating cash conversion is operating profit before exceptional
items adjusted for depreciation and amortisation, working capital
movements and capital expenditure / operating profit before
exceptional items;
- Available cash is used to enable the Board to understand the
true cash position of the business when determining the use of cash
under the capital allocation policy. Available cash is cash and
cash equivalents plus other financial assets (cash invested in term
deposits greater than three months in duration) less cash
ring-fenced in the Group's Chinese subsidiaries which is committed
to capital investment or additional capability and therefore not
available to the wider group;
- Research and development expenditure as a % of Group sales is
used by the Board because R&D spend is considered to be a
leading indicator of the Group's ability to innovate into new
applications, supporting future growth. The Group targets spend at
c5%-6% of Group revenues;
- Sales from New Products as a percentage of Group sales is used
by the Board to measure the success of driving adoption of the new
product pipeline. It measures Group sales generated from
mega-programmes, new differentiated polymers and other pipeline
products that were not sold before FY 2014 as a percentage of total
Group sales;
- Return on Capital Employed (ROCE) is used by the Board to
assess the return on investment at a Group level. ROCE is profit
after tax / total equity attributable to shareholders at the year
end;
- Operating overheads is made up of sales, marketing and
administrative expenses before exceptional items.; this metric is
used by the Board to assess the underlying performance of the
business excluding items that are, in aggregate, material in size
and/or unusual or infrequent in nature; and
- Research and Development spend on sustainable products is
calculated as the percentage of project-based R&D spend on
sustainable products or sustainable programmes. This metric, which
is new in FY 2021, is used by the Board to assess progress against
the sustainability strategy and vision of being Carbon Net Zero by
2030 (scope 1 & 2 emissions). Sustainable products are
currently defined as revenue from Aerospace, Automotive and Medical
end markets.
Consolidated Income Statement
Year ended Year ended
30 September 30 September
2021 2020
Note GBPm GBPm
------------------------------------- ------ -------- ------------------------
Revenue 4 306.3 266.0
Gains/(Losses) on foreign
currency net hedging 4.9 (1.5)
Cost of sales (145.9) (122.1)
------------------------------------- ------ -------- ------------------------
Gross profit 4 165.3 142.4
Sales, marketing and administrative
expenses - (71.9) (78.4)
------------------------------------- ------ -------- ------------------------
Operating profit before exceptional
items 92.6 76.0
Exceptional items 5 0.8 (12.0)
------------------------------------- ------ -------- ------------------------
Operating profit 4 93.4 64.0
Financial income 0.2 0.3
Finance costs (0.2) (0.3)
Share of loss of associate (0.9) (0.5)
Profit before tax and exceptional
items 91.7 75.5
Exceptional items 5 0.8 (12.0)
------------------------------------- ------ -------- ------------------------
Profit before tax 92.5 63.5
Income tax expense 6 (19.7) (9.3)
Profit for the period 72.8 54.2
Attributable to:
Owners of the Company 73.2 54.2
Non-controlling interests (0.4) -
Earnings per share
Basic 7 84.3p 62.6p
Diluted 7 84.0p 62.5p
------------------------------------- ------ -------- ------------------------
Dividends (pence per share)
Interim 13.42 -
Final 46.14 46.14
Special 50.00 -
109.56 46.14
------------------------------------- ------ -------- ------------------------
A final dividend in respect of 2021 of 46.14p and a special
dividend of 50.00p per ordinary share has been recommended by the
Directors
for approval at the Annual General Meeting on 11 February
2022.
Consolidated Statement of Comprehensive Income
Year ended Year ended
30 September 30 September
2021 2020
GBPm GBPm
------------------------------------- -------------- --------------
Profit for the period 72.8 54.2
------------------------------------- -------------- --------------
Items that will not be reclassified
to profit or loss
Defined benefit pension schemes'
actuarial losses 4.5 (3.0)
Income tax on items that will
not be reclassified to profit
or loss (1.1) 0.6
3.4 (2.4)
Items that may be subsequently
reclassified to profit or
loss
Currency translation differences
for foreign operations (2.0) (2.8)
Effective portion of changes in
fair value of cash flow hedges 5.7 3.7
Net change in fair value of cash
flow hedges
transferred to profit or loss (4.9) 1.5
Income tax on items that may be
reclassified to profit or loss (0.2) (1.0)
(1.4) 1.4
Total other comprehensive expense
for the period 2.0 (1.0)
------------------------------------- -------------- --------------
Total comprehensive income for
the period 74.8 53.2
Total comprehensive income for
the period attributable to:
Owners of the Company 75.2 53.2
Non-controlling interests (0.4) -
------------------------------------- -------------- --------------
Consolidated Balance Sheet
30 September 30 September
2021 2020
Note GBPm GBPm
----------------------------------------- ------------- ----------- ---------------
Assets
Non-current assets
Property, plant and equipment 305.7 273.7
Intangible assets 24.8 26.4
Investment in associated undertakings 8 11.4 12.3
Financial assets held at fair
value through profit and loss 8, 9 12.7 8.0
Deferred tax assets 8.9 10.7
Retirement benefit asset 10 14.2 7.5
----------------------------------------- ------------- ----------- ---------------
377.7 338.6
----------------------------------------- ------------- ----------- ---------------
Current assets
Inventories 70.3 98.5
Current income tax assets 2.9 4.3
Trade and other receivables 49.1 32.1
Derivative financial instruments 11 2.9 2.9
Other financial assets 12 37.5 -
Cash and cash equivalents 74.9 73.1
237.6 210.9
----------------------------------------- ------------- ----------- ---------------
Total assets 615.3 549.5
----------------------------------------- ------------- ----------- ---------------
Liabilities
Non-current liabilities
Deferred tax liabilities (31.6) (24.9)
Long term lease liabilities (8.2) (5.6)
Long term loans 13 (5.9) -
Retirement benefit obligations 10 (1.9) -
(47.6) (30.5)
----------------------------------------- ------------- ----------- ---------------
Current liabilities
Derivative financial instruments 11 (1.9) (3.3)
Current income tax liabilities (2.9) (2.7)
Trade and other payables (49.4) (30.5)
Current lease liabilities (1.8) (1.5)
----------------------------------------- ------------- ----------- ---------------
(56.0) (38.0)
----------------------------------------- ------------- ----------- ---------------
Total liabilities (103.6) (68.5)
----------------------------------------- ------------- ----------- ---------------
Net assets 511.7 481.0
----------------------------------------- ------------- ----------- ---------------
Equity
Share capital 0.9 0.9
Share premium 61.1 55.0
Translation reserve 1.7 3.7
Hedging reserve 0.1 (0.5)
Retained earnings 445.4 419.0
----------------------------------------- ------------- ----------- ---------------
Equity attributable to owners
of the Company 509.2 478.1
Non Controlling Interest 13 2.5 2.9
----------------------------------------- ------------- ----------- ---------------
Total equity 511.7 481.0
--------------------------------------------- ---------------------- ---------------
Consolidated Cash Flow Statement
Year ended Year ended
30 September 30 September
2021 2020
Note GBPm GBPm
-------------------------------------- ------- ------- --------------
Cash flows from operating
activities
Cash generated from operations 15 135.5 86.6
Interest received 0.2 0.3
Interest paid - (0.3)
Tax paid (8.6) (17.2)
-------------------------------------- ---------------- --------------
Net cash flow generated from
operating activities 127.1 69.4
-------------------------------------- ---------------- --------------
Cash flows from investing
activities
Acquisition of property,
plant and equipment and intangible
assets (41.9) (24.9)
(Increase)/decrease in other
financial assets (37.5) 0.3
Investment in subsidiary - (3.2)
Loan to associated undertakings (3.8) -
Cash consideration of acquisitions
of associated undertakings
and unquoted investments - (4.6)
Cash received from non-controlling
interest - 2.9
Net cash flow used in from
investing activities (83.2) (29.5)
-------------------------------------- ---------------- --------------
Cash flows from financing
activities
Proceeds from issue of ordinary
shares exercised under option 6.1 2.7
Repayment of lease liabilities (1.8) (1.5)
Loan received from non-controlling 5.6 -
interest
Dividends paid (51.6) (39.9)
-------------------------------------- ---------------- --------------
Net cash flow used in financing
activities (41.7) (38.7)
-------------------------------------- ---------------- --------------
Net increase in cash and cash
equivalents 2.2 1.2
Effect of exchange rate fluctuations
on cash held (0.4) (0.6)
Cash and cash equivalents
at beginning of period 73.1 72.5
-------------------------------------- ---------------- --------------
Cash and cash equivalents
at end of period 74.9 73.1
-------------------------------------- ---------------- --------------
Consolidated Statement of Changes in Equity
Share Share Translation Hedging Retained Total Non-controlling
capital premium reserve reserve earnings attributable interest Total
to owners
of parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- --------- ------------ --------- --------- ------------- ---------------- --------
Equity at 1
October
2019 0.9 52.3 6.5 (4.7) 406.6 461.6 - 461.6
------------------ -------- --------- ------------ --------- --------- ------------- ---------------- --------
Total
comprehensive
income for the
period
Profit for the
period - - - - 54.2 54.2 - 54.2
------------------ -------- --------- ------------ --------- --------- ------------- ---------------- --------
Other
comprehensive
(expense)/income
Currency
translation
differences for
foreign
operations - - (2.8) - - (2.8) - (2.8)
Effective portion
of
changes in fair
value
of cash flow
hedges - - - 3.7 - 3.7 - 3.7
Net change in
fair value
of cash flow
hedges
transferred to
profit
or loss - - - 1.5 - 1.5 - 1.5
Defined benefit
pension
schemes'
actuarial gains - - - - (3.0) (3.0) - (3.0)
Tax on other
comprehensive
(expense)/income - - - (1.0) 0.6 (0.4) - (0.4)
------------------ -------- --------- ------------ --------- --------- ------------- ---------------- --------
Total other
comprehensive
(expense)/income
for
the period - - (2.8) 4.2 (2.4) (1.0) - (1.0)
Total
comprehensive
(expense)/
income for
the period - - (2.8) 4.2 51.8 53.2 - 53.2
Contributions by
and
distributions to
owners
of the Company
Adjustment
arising from
inception of
non-controlling
interest - - - - - - 2.9 2.9
Share options
exercised - 2.7 - - - 2.7 - 2.7
Equity-settled
share-based
payment
transactions - - - - 0.5 0.5 - 0.5
Dividends to
shareholders - - - - (39.9) (39.9) - (39.9)
------------------ -------- --------- ------------ --------- --------- ------------- ---------------- --------
Equity at 30
September
2020 0.9 55.0 3.7 (0.5) 419.0 478.1 2.9 481.0
------------------ -------- --------- ------------ --------- --------- ------------- ---------------- --------
Share Share Translation Hedging Retained Total Non-controlling
capital premium reserve reserve earnings attributable interest Total
to owners
of parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- --------- ------------ --------- ---------- ----------------- ---------------- --------
Equity at 1
October
2020 0.9 55.0 3.7 (0.5) 419.0 478.1 2.9 481.0
------------------ --------- --------- ------------ --------- ---------- ----------------- ---------------- --------
Total
comprehensive
income for the
period
Profit for the
period
attributable to
the
parent - - - - 73.2 73.2 - 73.2
Profit for the
period
attributable to
non-controlling
interest - - - - - - (0.4) (0.4)
------------------ --------- --------- ------------ --------- ---------- ----------------- ---------------- --------
Other
comprehensive
(expense)/income
Currency
translation
differences for
foreign
operations - - (2.0) - - (2.0) - (2.0)
Effective portion
of
changes in fair
value
of cash flow
hedges - - - 5.7 - 5.7 - 5.7
Net change in
fair value
of cash flow
hedges
transferred to
profit
or loss - - - (4.9) - (4.9) - (4.9)
Defined benefit
pension
schemes'
actuarial gains - - - - 4.5 4.5 - 4.5
Tax on other
comprehensive
(expense)/income - - - (0.2) (1.1) (1.3) - (1.3)
------------------ --------- --------- ------------ --------- ---------- ----------------- ---------------- --------
Total other
comprehensive
(expense)/income
for
the period - - (2.0) 0.6 3.4 2.0 - 2.0
Total
comprehensive
(expense)/income
for
the period - - (2.0) 0.6 76.6 75.2 (0.4) 74.8
Contributions by
and
distributions to
owners
of the Company
Share options
exercised - 6.1 - - - 6.1 - 6.1
Equity-settled
share-based
payment
transactions - - - - 1.4 1.4 - 1.4
Dividends to
shareholders - - - - (51.6) (51.6) - (51.6)
------------------ --------- --------- ------------ --------- ---------- ----------------- ---------------- --------
Equity at 30
September
2021 0.9 61.1 1.7 0.1 445.4 509.2 2.5 511.7
------------------ --------- --------- ------------ --------- ---------- ----------------- ---------------- --------
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
its registered office is Victrex Technology Centre, Hillhouse
International, Thornton Cleveleys, Lancashire FY5 4QD, United
Kingdom.
The consolidated financial statements of the Company for the
year ended 30 September 2021 comprise the Company and its
subsidiaries (together referred to as the 'Group').
The Company is listed on the London Stock Exchange.
The consolidated financial statements were approved for issue by
the Board of Directors on 6 December 2021.
2. Basis of preparation
Both the consolidated and Company financial statements have been
prepared in accordance with international accounting standards
in
conformity with the requirements of the Companies Act 2006 and
the International Financial Reporting Standards adopted pursuant
to
Regulation (EC) No 1606/2002 as it applies in the European
Union. The financial statements have been prepared under the
historical cost
basis except for derivative financial instruments, defined
benefit pension scheme assets and financial assets held at fair
value through profit and loss, which are measured at their fair
value.
The Group's business activities, together with factors likely to
affect its future development, performance and position, are set
out in the
Annual Report. In addition, note 15 in the Financial Statements
on financial risk management details the Group's exposure to a
variety of financial risks, including currency and credit risk.
Statutory accounts for the year ended 30 September 2021 and 30
September 2020 have been reported on by the auditors who issued an
unqualified opinion in respect of both years and the auditors'
reports for FY 2021 and FY 2020. Statutory accounts for the year
ended 30 September 2020 have been filed with the Registrar of
Companies. The statutory accounts for the year ended 30 September
2021, will be delivered to the Registrar of Companies within the
Companies House accounts filing guidance.
Going Concern
The Directors have performed a robust going concern assessment
including a detailed review of the business' 24-month rolling
forecast and consideration of the principal risks faced by the
Group and the Company, as detailed in the Annual Report. This
assessment has paid particular attention to the impact of the
ongoing global economic challenges on the aforementioned
forecasts.
An update on the Group's proactive approach to managing the
challenges of COVID-19 is detailed in the Annual Report with the
specific impact of COVID-19 on the Company's going concern
assessment detailed below.
The Company has maintained a strong balance sheet throughout the
past two years despite seeing a significant impact from
COVID-19,
particularly during the second half of the year ended 30
September 2020. The combined cash and other financial assets
balance at 30
September 2021 was GBP112.4m, having increased from GBP79.6m at
31 March 2021. Of the GBP112.4m, GBP12.5m is held in the Group's
subsidiaries in China for the sole purpose of funding the
construction of our new manufacturing facilities. Of the remaining
GBP99.9m, approximately 90% is held in the UK, where the Company
incurs the majority of its expenditure. All funds are held either
in instant access or deposit accounts with less than 95 days
notice. The Group has no debt and has unutilised banking facilities
of GBP40m through to October 2024, of which GBP20m is committed and
immediately available and GBP20m is available subject to lender
approval.
COVID-19 had a material impact on second half performance of the
year ended 30 September 2020 with sales volumes down 19% on the
same period in 2019 and 25% down on the first half; revenue was
down 23% and 24% respectively. Quarter 4 was the weakest with
revenue in July 2020 the low point of the year and volume
averaging c.230 tonnes per month. Demand for the Company's products
has
recovered through the FY 2021 with the second half being the
strongest in the Company's history in volume terms. Full year
volumes are up 25% on FY 2020 and 52% up on the heavily COVID-19
impacted second half of 2020. As with the drop off in demand during
the second half of FY 2020 the timing and speed of recovery has
been felt differently across our markets and geographies.
The 24-month rolling forecast is derived from the Company's
Integrated Business Planning ('IBP') process which runs monthly.
Each area of the business provides revised forecasts which consider
a number of external data sources, triangulating with customer
conversations, trends in market and country indices, as well
forward-looking industry forecasts. For example, forecast aircraft
build rates from the two major manufacturers for Aerospace and
analysing IHS data for the Automotive market through previous
downturns, current trends and the latest 2022 and 2023
forecasts.
The assessment of going concern included conducting scenario
analysis on the aforementioned forecast which focused on one key
question: Is the recovery during 2021 and the increasing economic
confidence, derived from falling COVID-19 cases and the ongoing
vaccination programme, sustainable, or will either the recovery run
out of momentum in the face of further waves of new, vaccine
immune, variants of COVID-19 or will the global economy be pushed
back into contraction by supply chain issues, inflationary
pressures and labour shortages, etc?
The Company's manufacturing assets remain operational, as they
have done throughout the past 24 months, with revised
procedures
remaining in place to ensure social distancing is maintained
along with proactive measures to protect employees such as offering
the facility to conduct temperature checks each day before
commencing work. Non-manufacturing staff have continued to work
from home in the majority of our regions throughout FY 2021 as we
continue with a safety first approach. A carefully managed return
to site commenced in the UK in October 2021 in line with government
recommendations. Other regions have moved in line with local
government guidance.
Using the IBP data and the key question noted above, along with
consideration of the outputs from the longer-term viability
assessment
(noted below), management has created two scenarios to model the
effect of reductions to revenue at regional/market level and
aggregated levels on the Company's profits and cash generation
through to January 2023.
Scenario 1 - the global economy contracts again with sales
returning to the low levels seen in quarter 4 of FY 2020, at c.230
tonnes per
month, from March 2022 (i.e. the first period post payment of
the final and special dividends, therefore representing the cash
low point of the year) for a period of 6 months (to mirror the
length of the downturn in 2020) before a partial recovery to c280
tonnes per month for the remainder of the going concern period.
Scenario 2 - in line with scenario 1, c.230 tonnes per month
from March 2022, however, the economic contraction lasts for a full
12 months, i.e. throughout the going concern period. This would
give an annual volume of c.2,760 tonnes, a level not seen since the
financial crisis which impacted 2008 and 2009 (and lasted
approximately 12 months). The Group considers scenario 2 to be a
severe but plausible scenario.
Before any mitigating actions the sensitised cash flows show the
Company has significantly reduced cash headroom. Under scenario 2
there is minimal cash generation through the going concern period
and there is potential that the committed facility, for which the
covenants would be met, would be required to manage intra-month
cash flows. However, the Company has a number of mitigating actions
which are readily available in order to generate significant
headroom. These include:
- Use of committed facility - GBP20m could be drawn at short
notice. Conversations with our banking partner indicate that the
GBP20m accordion could also be readily accessed. The covenants of
the facility have been successfully tested under each of the
scenarios;
- Deferral of capital expenditure - the base case for financial
year 2022 includes significant capital investment (GBP60m+) as
major projects are completed in China and the UK. This could be
reduced significantly by limiting expenditure to essential
projects, deferring all other projects into 2023, with the
exception of completing the manufacturing facilities in China which
are committed and will continue as planned;
- Reduction in discretionary overheads - costs would be limited
to prioritise and support customer related activity; and
- Deferral/cancellation of dividends - the dividend payable in
June 2022 could be deferred or cancelled. The Company's intention
is to continue payment of dividends where cash reserves facilitate
but it remains a key lever in downside scenario mitigation.
Reverse stress testing was performed to identify the level that
sales would need to drop by in order for the Group to run out of
cash by the end of the going concern assessment period. Sales
volumes would need to consistently drop materially below the low
point in scenario 2 which is not considered plausible.
As a result of this detailed assessment and with reference to
the Company's strong balance sheet, existing committed facilities
and the cash preserving levers at the Company's disposal, but also
acknowledging the inherent economic uncertainty as the global
economy emerges from the COVID-19 pandemic and faces a number of
new challenges, the Board has concluded that the Company has
sufficient liquidity to meet its obligations when they fall due for
a period of at least 12 months after date of this report. For this
reason, it continues to adopt the going concern basis for preparing
the financial statements.
On publishing the Company financial statements here together
with the consolidated financial statements, the Company is taking
advantage of section 408 of the Companies Act 2006 not to present
its individual income statement and related notes that form part of
the approved financial statements.
Unless a change has been required by adoption of new standards,
the accounting policies set out in these notes have been applied
consistently to all periods presented in these consolidated
financial statements.
In preparing the financial statements of the Group we performed
an assessment of the impact of climate change, with reference to
the
disclosures made in the Sustainability report. There has been no
material impact on the financial statements for the current year
from the Group's assessment of the impact of climate change,
including estimates and judgements made, specifically in the
impairment and going concern analyses. The specific considerations
in respect to the viability of the Group are included in the
viability statement on pages 40 and 41. The Group's analysis on the
impact of climate change continues to evolve as more clarity on
timings and targets emerges, with Victrex committed to reducing its
carbon impact. A far more detailed assessment of the impact has
commenced ahead of our 2022 strategy review as we look to adopt the
TCFD requirements for the year ended 30 September 2022.
3. Significant accounting policies
The accounting policies applied by the Group in these financial
statements are the same as those applied in the Group's published
consolidated financial statements for the year ended 30 September
2020 except for the application of relevant new standards. None of
the new standards have had a material impact on the Group's
consolidated result or financial position.
4. Segment reporting
The Group's business is strategically organised as two business
units: Industrial, which focuses on our Energy & Industrial,
VAR, Automotive, Aerospace and Electronics markets; and Medical,
which focuses on providing specialist solutions for medical device
manufacturers.
Year ended 30 September Year ended 30 September
2021 2020
----------------------------------------- ----------------------------------
Industrial Medical Group Industrial Medical Group
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ---- -------------- ---------- ------- ----------- -------- ---------
Segment revenue 257.4 51.1 308.5 221.1 49.7 270.8
Internal revenue (2.2) - (2.2) (4.8) - (4.8)
------------------------------------------ -------------- ---------- ------- ----------- -------- ---------
Revenue from external
sales 255.2 51.1 306.3 216.3 49.7 266.0
------------------------------------------ -------------- ---------- ------- ----------- -------- ---------
Segment gross profit 119.7 45.6 165.3 99.3 43.1 142.4
Sales, marketing
and administrative
expenses (71.9) (78.4)
------------------------------------------ -------------- ---------- ------- ----------- -------- ---------
Operating profit
before exceptional
items 92.6 76.0
Exceptional items 0.8 (12.0)
------------------------------------------ -------------- ---------- ------- ----------- -------- ---------
Operating profit 93.4 64.0
Net financing income - -
Share of loss of associate (0.9) (0.5)
------------------------------------- --- -------------- ---------- ------- ----------- -------- ---------
Profit before tax
and exceptional items 91.7 75.5
Exceptional items 0.8 (12.0)
Profit before tax 92.5 63.5
Income tax expense (19.7) (9.3)
------------------------------------------ -------------- ---------- ------- ----------- -------- ---------
Profit for the period 72.8 54.2
Profit for the period attributable
to
Owners of the Company 73.2 54.2
Non-controlling interest (0.4) -
------------------------------------------ -------------- ---------- ------- ----------- -------- ---------
5. Exceptional items
Items that are, in aggregate, material in size and / or unusual
or infrequent in nature, are included within operating profit and
disclosed separately as exceptional items in the Consolidated
Income Statement.
The separate reporting of exceptional items, which are presented
as exceptional within the relevant category in the Consolidated
Income Statement, helps provide an indication of the underlying
performance of the Group.
Year ended Year ended
30 September 30 September
2021 2020
GBPm GBPm
------------------------------------------ ------------------------------
Included within sales, marketing
and administrative expenses
Restructuring costs (0.8) 9.8
Acquisition related costs - 2.2
----------------------------------- ------ ------------------------------
Exceptional items before tax (0.8) 12.0
----------------------------------- ------ ------------------------------
Tax on exceptional items - (1.1)
----------------------------------- ------ ------------------------------
Exceptional items (0.8) 10.9
----------------------------------- ------ ------------------------------
Acquisition and investment related costs
In the prior year, acquisition related costs comprised legal and
other non-recurring costs the Group incurred directly in the course
of
acquisition and investment activity. These costs were largely
non-deductible expenses for tax purposes.
Restructuring costs
During FY 2020, the Group reviewed cost actions and efficiencies
required to support profitability in a lower production
environment. As
part of this programme, the Group commenced consultation prior
to 30 September 2020 which reduced the Group's employee base by up
to 100 roles, primarily through voluntary severance.
The credit in FY 2021 relates to more favourable settlements
being reached than assumed when making the restructuring charge in
FY
2020. These costs were treated as non-tax deductible in FY 2020
and the corresponding credit will be non-chargeable in FY 2021.
The cash flow in the year associated with exceptional items was
GBP1.9m (FY 2020: GBP9.3m).
6. Income tax expense
Year ended Year ended
30 September 30 September
2021 2020
GBPm GBPm
--------------------------------------- -------------- --------------
UK corporation tax 10.4 7.7
Overseas tax 1.7 1.0
Deferred tax 7.5 2.8
Tax adjustments relating to prior
years 0.1 (2.2)
Total tax expense in income statement 19.7 9.3
--------------------------------------- -------------- --------------
Effective tax rate 21.3% 14.6%
--------------------------------------- -------------- --------------
In the Finance Bill 2021, the government announced that from 1
April 2023 the corporation tax rate would increase to 25%. This new
law was substantively enacted on 24 May 2021. As a consequence,
deferred tax assets/liabilities have been remeasured at the rate
they are now expected to reverse. For UK assets/liabilities this is
25% for the majority of assets and liabilities (30 September 2020:
19%), being the UK tax rate effective from 1 April 2023. This has
increased the tax charge for the period by GBP6.1m. For overseas
assets/ liabilities the corresponding overseas tax rate has been
applied.
7. Earnings per share
Year ended Year ended
30 September 30 September
2021 2020
--------------------------------------- -------------- --------------
Earnings
per share - basic 84.3p 62.6p
- diluted 84.0p 62.5p
------------ -------------- --------------
Profit for the financial period
attributable to the owners of
the company (GBPm) 73.2 54.2
--------------------------------------- -------------- --------------
Weighted average number
of shares used - basic 86,704,789 86,470,079
- diluted 87,045,353 86,630,437
-------------------------- ----------- -------------- --------------
8. Investment in associated undertakings
Bond 3D High Performance Technology BV ("Bond")
Bond is a company incorporated in the Netherlands, developing
unique, protectable 3D printing (additive manufacturing) processes
which are capable of producing high strength parts from existing
grades of PEEK and PAEK polymers. The investment offers the
potential of utilising this technology to help accelerate the
market adoption of 3D printed PEEK parts, with particular emphasis
on the Medical market.
The Group holds an investment of EUR14.7m/GBP12.9m (24.5%) in
Bond at 30 September 2021 (30 September 2020: same). As the Group
is considered to have significant influence in Bond the investment
continues to be accounted for as an associate, using the equity
method.
Further cash injections into Bond during the year have been in
the form of convertible loans; to a value of (EUR4.7m/GBP3.8m);
these are held as financial assets held at fair value through
profit and loss (see note 9 below).
The Group's share of the loss of Bond in FY 2021 is GBP0.9m (FY
2020 loss of GBP0.5m).
9. Financial assets held at fair value through profit and
loss
At 30 Sept 2021, financial assets held at fair value through
profit and loss relate to:
- Investment in Surface Generation Limited at GBP3.5m (FY 2020 GBP3.5m)
- Investment in Magma Global Limited at GBP5.4m (FY 2020
GBP4.5m). In October 2021 the Group sold its investment in Magma to
TechnipFMC and recognised a gain on the investment of GBP0.9m. A
transaction in the equity of an investment is a positive indication
of its fair value and accordingly has been used as the basis to
increase the fair value of the investment at 30 September 2021.
- Convertible loans in Bond at GBP3.8m. See also note 8 above.
10. Retirement benefits
During FY 2021, the Group separated the German defined benefit
pension scheme from the UK defined benefit pension scheme,
separately disclosing the net liability in the German pension
scheme on the balance sheet. In the past the German scheme has been
combined with the UK scheme due to its size. During the current
year the insurance policies which comprise the assets of the German
scheme started to mature. At this point, under German law, having
received permission from the beneficiary, the company can elect to
assume the benefit of these assets for use in the business and
leave the scheme unfunded - making the pension payments from
company cash flow. As a result the net liability of the scheme has
increased, and will continue to do so during the year ended 30
September 2022 as the remaining assets are transferred to the
company. Options will then be available to review buying out the
pension liability.
11. Derivative financial instruments
The notional contract amount, carrying amount and fair value of
the Group's forward exchange contracts are as follows:
As at 30 September As at 30 September
2021 2020
--------------------- ------------------------ ----------------------
Notional Carrying Notional Carrying
contract amount and contract amount
amount fair value amount and fair
value
GBPm GBPm GBPm GBPm
--------------------- ---------- ------------ ---------- ----------
Current assets 61.2 2.9 82.3 2.9
Current liabilities 106.9 (1.9) 81.8 (3.3)
---------------------- ---------- ------------ ---------- ----------
168.1 1.0 164.1 (0.4)
--------------------- ---------- ------------ ---------- ----------
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. Fair value gains on
foreign currency contracts of GBP4.9m has been recognised in the
period (FY2020 - losses of GBP1.5m).
12. Other financial assets
At 30 September 2021 the Group had GBP37.5m of cash on 95-day
deposit (30 September 2020: nil). This is included in the Available
Cash metric (see APM's above).
13. Non-controlling interest
During FY 2020 the Group established a new subsidiary company,
Panjin VYX High Performance Materials Co. Ltd ('PVYX').
PVYX is a limited liability company set up for the purpose of
the manufacture of PAEK polymer powder and granules, based in
mainland
China. The Group continues to hold a 75% equity interest with
the remaining 25% held by Yingkou Xingfu Chemical Co. Ltd
('YX').
Consistent with prior year, with 75% of the voting equity and
the majority of appointments on the board the Group is considered
to have control of PVYX and therefore it is accounted for as a
subsidiary. The income statement and balance sheet of PVYX are
fully consolidated with the share owned by YX represented by a
non-controlling interest.
The first tranche of investment of GBP8.6m in this company was
made by the Group via Victrex Hong Kong Limited, in March 2020.
During FY 2021, the Group has made further cash injections in to
PVYX, totalling GBP24.5m, split in the form of loans GBP22.0m and
further equity
investment of GBP2.5m. YX made a loan to PVYX of GBP5.6m during
the year. The loan is denominated in Chinese Renminbi and had a
sterling value of GBP5.9m at 30 September 2021.
To 30 September 2021 the subsidiary incurred a loss of GBP1.4m,
of which GBP0.4m is attributable to the non-controlling
interest.
No borrowing costs in relation to the long term loan were
capitalised during the period.
14. Exchange rates
The most significant Sterling exchange rates used in the
financial statements under the Group's accounting policies are:
Year ended Year ended
30 September 30 September
2021 2020
------------------ ------------------
Average Closing Average Closing
----------- ---- -------- -------- -------- --------
US Dollar 1.36 1.34 1.27 1.30
Euro 1.14 1.18 1.13 1.10
------------------ -------- -------- -------- --------
The average exchange rates in the above table are the weighted
average spot rates applied to foreign currency transactions,
excluding the impact of foreign currency contracts. Gains and
losses on foreign currency contracts, where net hedging has been
applied for cash flow hedges, are separately disclosed in the
income statement.
15. Reconciliation of profit to cash generated from operations
Audited Audited
Year ended Year ended
30 September 30 September
2021 2020
GBPm GBPm
--------------------------------------------- --------------
Profit after tax for the period 72.8 54.2
Income tax expense 19.7 9.3
Share of loss of associate 0.9 0.5
Net financing income - -
Operating profit 93.4 64.0
Adjustments for:
Depreciation 18.5 17.9
Amortisation 3.4 2.8
Loss on disposal of property
plant and equipment 0.8 0.2
Decrease/(increase) in inventories 26.0 (7.5)
(Increase)/decrease in trade
and other receivables (18.3) 11.7
Increase in trade and other
payables 11.9 0.6
Equity-settled share-based payment
transactions 1.4 0.5
Gains on derivatives recognised
in income statement that have
not yet settled (0.5) (2.2)
Gain on financial asset held (0.9) -
at fair value
Retirement benefit obligations
charge less contributions (0.2) (1.4)
------------------------------------- ------- --------------
Cash generated from operations 135.5 86.6
------------------------------------- ------- --------------
Forward-looking Statements
Sections of this 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
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.
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 27 January 2022
Record date# 28 January 2022
AGM 11 February 2022
Payment of final dividend 18 February 2022
Announcement of half-year results May 2022
Payment of interim dividend July 2022
# The date by which shareholders must be recorded on the share
register to receive the dividend
Victrex plc
Registered in England
Number 2793780
Tel: +44 (0) 1253 897700
Fax: +44 (0) 1253 897701
www.victrexplc.com
ir@victrex.com
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