TIDMVCT
RNS Number : 6732I
Victrex PLC
06 December 2022
6 December 2022
Victrex plc - Preliminary Results 2022
'Record revenue & volume; solid underlying PBT growth,
despite cost headwinds & currency'
Victrex plc is an innovative world leader in high performance
polymer solutions, delivering sustainable products which enable
environmental and societal benefit. This announcement covers
preliminary (audited) results for the 12 months ended 30 September
2022.
FY 2022 FY 2021 % change % change
(reported) (constant
currency)(1)
Group sales volume 4,727 tonnes 4,373 tonnes +8% N/A
---------------- ------------- ------------ ---------------
Group revenue GBP341.0m GBP306.3m +11% +10%
---------------- ------------- ------------ ---------------
Gross profit GBP174.5m GBP165.3m +6% +10%
---------------- ------------- ------------ ---------------
Gross margin 51.2% 54.0% -280bps N/A
---------------- ------------- ------------ ---------------
Underlying PBT(1) GBP95.6m GBP91.7m +4% +12%
---------------- ------------- ------------ ---------------
Reported PBT GBP87.7m GBP92.5m -5% +2%
---------------- ------------- ------------ ---------------
Underlying EPS(1) 95.0p 83.4p +14% N/A
---------------- ------------- ------------ ---------------
EPS 87.6p 84.3p +4% N/A
---------------- ------------- ------------ ---------------
Dividend per share
(regular & special
dividends) 59.56p 109.56p -46% N/A
---------------- ------------- ------------ ---------------
Highlights:
-- Strong core growth; revenue up 11%, volume up 8% & better pricing
- Double-digit growth in Electronics, Energy & Industrial, Value Added Resellers (VAR)
- Aerospace improving; Semiconductor challenges impacting Automotive
- Continued progress in Medical, revenue +14%
- Improved pricing in H2 (H2 2022 ASP up 4% vs H1 & FY 2022 ASP up 3%)
-- Solid underlying PBT growth, up 4% & 12% in constant currency, offset by cost inflation
- Underlying profit before tax (PBT) up 4% at GBP95.6m & up 12% in constant currency
- Reported PBT GBP87.7m, reflecting year 1 ERP investment (exceptional items of GBP7.9m)
- Gross profit up 6% to GBP174.5m, despite significantly higher cost of manufacture
- Gross margin impacted by lag in inflation recovery & currency, despite efficiency gains
- Continuing action to mitigate inflation
-- Strong progress in 'mega-programme' growth pipeline
- Medical:
-- PEEK Knee clinical trial well progressed, 30 implants & 12 patients >12 months
-- New development relationship with top 5 Knee company Aesculap
-- First implants for In2Bones Trauma plates based on Victrex(TM) PEEK
- Industrial:
-- New business wins in E-mobility
-- 1st prototype parts in Aerospace Structures; potential for 10-fold PEEK content increase
-- Continuing support to TechnipFMC for Magma, with new scale-up facility in Brazil
-- Further progress on ESG: enabling environmental & societal benefit
- 100% renewable electricity at all UK sites
- Initial Scope 3 emissions assessment completed, with opportunities identified
- Sustainable products represent 48% of Group revenues(1)
-- Solid cash generation underpins growth investment & returns
- FY 2022 available cash(1) of GBP66.0m*, post-payment of FY 2021 special dividend
- Commissioning underway for new PEEK facility in China
- Final dividend of 46.14p/share, total FY 2022 dividends 59.56p/share
(1) Alternative performance measures and other internal metrics
are defined below
*excludes GBP2.8m of cash ring-fenced in the Group's Chinese
subsidiaries and includes GBP10.1m in 95-day notice deposit
accounts
Commenting on the Group's results, Jakob Sigurdsson, Chief
Executive of Victrex, said :
"This was a record year for revenue and volume. We delivered
good progress across the majority of our end-markets, new
application growth and improved pricing, as we continue to recover
cost inflation. It was also pleasing to see double-digit growth in
Medical. We are prioritising investment in this business, with the
intention of Medical contributing over one-third of Group revenues
in the longer term.
Underlying PBT up 4% and 12% in constant currency, offset by lag
in inflation recovery
"Victrex continues to face unprecedented energy and raw material
inflation, which we will help mitigate through price and
efficiency. Despite this, the Group delivered solid growth in
underlying PBT, which was up 4% and 12% in constant currency.
Higher year-on-year production also helped improve operating
efficiency.
Increasing commercialisation in mega-programme portfolio
"Looking towards our future growth, we made strong progress in
our mega-programmes. Thirty patients are now implanted with a PEEK
Knee as part of the clinical trial, including twelve post-12
months. We will also now be working with Aesculap, a top 5 Knee
company, in a collaboration which offers significant potential. In
Trauma, In2Bones saw patient surgeries using our PEEK composite
trauma plates. We also gained new E-mobility business and saw the
first sizeable structural parts exhibited by Airbus as part of the
Aerospace Structures programme. These offer the potential for a
10-fold increase in PEEK content for future aircraft.
Sustainable products enabling environmental & societal
benefit for customers and the planet
"Victrex is closely aligned to future megatrends and ESG is at
the heart of our business model. Our sustainable products represent
48% of revenues and enable environmental & societal benefits by
supporting CO2 reduction, energy efficiency and improved patient
outcomes.
Strong financial position
"With a strong financial position, we can support growth
investment, which is our priority, as well as attractive
shareholder returns. As part of these results, we will engage with
shareholders on a proposed update to our capital allocation
framework, specifically share buybacks and special dividends.
Outlook
"Several end-markets are yet to fully recover from the effects
of the pandemic and we continue to see good growth opportunities
across the Group. However, we are mindful of the uncertain
macro-economic outlook for 2023 and some signs that VAR volumes are
edging down slightly, to more normalised levels. This means the
opportunity to improve on last year's record Group volume is likely
to be challenging. We also face further and significant
year-on-year energy and raw material inflation, although additional
pricing actions are in progress, with a timing lag.
"Overall, we have seen a steady start to the year and are
focused on modest revenue and profit growth. This includes the
benefit from pricing, an improved sales mix and currency tailwinds.
We will also see further investment in our long-term growth
programmes, as they progress towards greater
commercialisation."
About Victrex:
Victrex is an innovative world leader in high performance
polymer solutions, focused on the strategic markets of automotive,
aerospace, energy & industrial, electronics and medical. Every
day, millions of people use products and applications which contain
our sustainable materials - from smartphones, aeroplanes and cars
to energy production 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, enable 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.
00am (GMT) this morning at JP Morgan, 1 John Carpenter Street,
London EC4Y 0JP. A conference call facility is available, to
register, please follow the link:
https://cossprereg.btci.com/prereg/key.process?key=P4CX3XD7P
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 & ESG +44 (0) 7809 595831
Ian Melling, 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 2022
'Record revenue & volume; solid underlying PBT growth
despite cost headwinds & currency'
Operating review
Strong growth in Group revenue, up 11%; a range of Sustainable
products
Group revenue was up 11% at GBP341.0m (FY 2021: GBP306.3m),
which was driven by a strong performance in most of our Industrial
end markets and further improvement in Medical.
In constant currency(1) Group revenue was 10% up on the prior
year.
Our measure of sustainable products, primarily for end markets
which enable environmental benefit (CO2 reduction), energy
efficiency and improving patient outcomes, was stable at 48% of
Group revenues (FY 2021: 49%) despite a drop in Automotive
revenues. Sustainable products are defined as those which offer a
quantifiable environmental or societal benefit. These are primarily
in Automotive, Aerospace (supporting CO2 reduction) and Medical,
with some applications in Energy and Industrial and Electronics
(e.g. wind energy applications, or those which support energy
efficiency), with Oil & Gas excluded, as is VAR currently.
FY sales volume up 8%
Group sales volume of 4,727 tonnes was 8% up on the prior year
(FY 2021: 4,373 tonnes), driven by a strong performance across a
number of end-markets, principally Electronics, Energy &
Industrial and VAR, offset by ongoing weakness in Automotive.
Q4 revenue & volume
Q4 revenue of GBP87.6m (Q4 2021: GBP74.4m) was 18% ahead of the
prior year, whilst Q4 sales volume of 1,140 tonnes saw 5% growth on
the prior year (Q4 2021: 1,085 tonnes). The stronger revenue
performance in the quarter reflects the benefit of price increases
and an improved sales mix, offset by some normalisation in VAR
volumes.
Strong growth in Industrial & further progress in
Medical
Our Industrial division reported revenues of GBP282.7m, 11% up
on the prior year (FY 2021: GBP255.2m) and 11% up in constant
currency, with growth being driven by Electronics, Energy &
Industrial and VAR. Within Transport, Automotive sales volume was
down 2%, as a result of the current challenges in Semiconductor
impacting the Automotive industry, although we note industry
forecasts suggesting car production rates will improve into 2023.
In Aerospace, we saw good revenue growth - volumes were up 2% -
thanks to an improved sales mix and greater commercialisation of
our composite business, including for next generation aircraft. We
also note recent build rate increases by both of the key aerospace
manufacturers, which should support continued improvement into FY
2023.
Medical revenues were GBP58.3m, up 14% on the prior year (FY
2021: GBP51.1m) and 9% ahead in constant currency(1) . We saw
strong growth (revenues +40%) in Asia, despite lockdowns during the
second half in China. Within Spine, which saw 2% growth in revenue,
we are also moving closer to US FDA submission for Porous PEEK
spinal cage, supported by our investment in Bond 3D. Our
PEEK-OPTIMA(TM) HA Enhanced product continues to see steady
commercial traction, with an increased range of applications beyond
Spine. Our non-Spine business also continues to see good growth,
particularly in Trauma, Cardio and Drug Delivery. Non-Spine now
represents 50% of Medical revenues (FY 2021: 45%).
ASP improvement in H2 2022, reflecting price increases and
currency
Our Average Selling Price (ASP) of GBP72.1/kg was up 3% compared
to FY 2021 (FY 2021: GBP70.0/kg), with H2 2022 ASP of GBP73.4/kg
being 4% ahead of the first half of 2022 (H1 2022: GBP70.7/kg), as
we saw the benefit of price increases to customers kicking in. We
also saw some benefit from currency at the revenue level in the
second half, as Sterling weakened. Sales mix in FY 2022 was similar
to the prior year, with the Industrial based end markets of
Electronics, Energy & Industrial and VAR driving much of the
growth.
In line with previous guidance, we expect to see the annualised
benefit of price increases during FY 2023, with additional
inflation recovery actions in progress, to reflect the
unprecedented further increases in energy and raw material
inflation, leading to a significantly higher cost of manufacture.
Price pass through reflected the additional costs borne by Victrex
alongside our investment in technical service and innovation,
whilst balancing long term customer relationships, particularly
customers who we have and continue to build a pipeline of
opportunities with. As a material solutions business, the necessity
of passing through non-structural costs led us to broaden the
mechanisms for passing through cost inflation, which includes
surcharge pricing. Whilst a typical timing lag occurs between price
increases being agreed and contract renewals, we will continue to
strengthen our options for passing through cost inflation.
Cost inflation for FY 2023, based on current energy and raw
material prices, could be at a similar year-on year level as FY
2022, at around GBP20m, although we welcome the benefit of the UK
Government's energy price cap for business, which will provide some
protection during the first half.
Core business application pipeline
Our core business application pipeline is a good indicator of
the health of our core business as we work with Original Equipment
Manufacturers (OEMs) and Tier 1 suppliers to develop new
applications for PEEK. Our Mature Annualised Revenue(1) (which
could occur only if all targets convert) within the core
application pipeline is GBP294 million (FY 2021: GBP325m), which
reflects conversion of previous pipeline targets, as well as some
refinement of the growth opportunities we are progressing.
Good progress in mega-programme milestones
FY 2022 saw us deliver a number of key milestones in our
portfolio of mega-programmes (seven mega-programmes in total) as we
progress towards greater commercialisation. Whilst individual
timelines remain subject to change, the long-term prospects in each
programme continue to be attractive and with the technical
proposition proven in each programme, our focus is on commercial
adoption. Highlights include good progress in PEEK Gears, prototype
revenue for our Aerospace Composites programme and ongoing revenues
in support of qualification pipes for TechnipFMC (Magma).
FY 2022 also saw particularly good progress in Medical, where
the PEEK Knee clinical trial saw strong progress, and we saw a
510(k) regulatory approval for PEEK composite Trauma plates in the
US and patient implants. In Aerospace, we saw the first large scale
PEEK demonstrator parts delivered as part of our Airbus development
programme; and in Automotive, we secured new business wins in
E-mobility.
Our PEEK Knee programme has now seen 30 patients having
implants, including 12 who have successfully passed the primary
end-point of 12-month clinical stage, with no remedial intervention
required. Together with our development partner Maxx Orthopaedics,
we are preparing for an additional trial site in the US. We will
also be working with Aesculap (a top 5 Knee company) in a
development programme to support the route to
commercialisation.
Knee remains potentially the most significant of our
mega-programmes, with an addressable market of approximately $1
billion, utilising PEEK over Cobalt Chrome.
Our Trauma pipeline continues to build, following the agreement
with US based In2Bones for composite plates and a 510(k) regulatory
approval within the US. We also secured our first Asia customer
product launch and are finalising development collaborations to
support launches in China. The first patient implants through our
In2Bones partnership for PEEK based trauma plates have now been
completed.
In our Aerospace Loaded Brackets programme, additional orders
for composite parts, reflecting mega-trends aligned to
light-weighting, CO2 reduction and faster processing, offer a good
mid-term opportunity, supported by ongoing recovery in this end
market.
We are also working on new partner collaborations via our US
composite parts facility, with Aerospace OEMs and Tier 1
companies.
In our 'Aerospace Structures' programme, which links to our
development alliance with Airbus as part of their Clean Sky II
programme, we are now delivering prototype revenue via the world's
first large scale PEEK test parts. Development and
commercialisation of thermoplastic composites in Aerospace
continues to offer a sizeable opportunity, across larger primary
and secondary Aerospace structures, such as wings and fuselage
parts. Aerospace Structures builds on Victrex's Aerospace Loaded
Brackets programme, with our AE (TM) 250 composites grade being
integral to both of these opportunities. A number of significant
demonstrator parts were exhibited during the year at the JEC
Composites show in Paris, including large engine housing
applications and wing ribs, all based on Victrex (TM) PEEK and our
AE (TM) 250 composite tape. These opportunities could materially
increase PEEK content in next generation aircraft - potentially
10-fold - which are planned for later this decade.
Within PEEK Gears, which now have several initial contracts 'on
the road' following a first supply agreement in 2018, we improved
on last year's milestone of delivering meaningful revenue of
>GBP1m. This year overall PEEK Gear revenue which includes both
parts manufactured by Victrex and polymer resin based PEEK gear
sales, totalled over GBP4m. A number of PEEK Gear programmes
involved manufacturing by our partners, but with the knowhow and
intellectual property ('IP') led by Victrex. PEEK Gears continue to
have application uses across both traditional internal combustion
engines (ICEs) and electric vehicles (EVs).
FY2022 saw us secure new business wins for our next generation
E-mobility programme and better than expected progress. This
mega-programme focuses on applications across electric vehicles, in
particular for high-voltage next generation programmes (800 volt
batteries and applications). Business wins include an Aptiv(TM)
film based opportunity. PEEK will be used in specific applications
where durability, heat resistance and light-weighting are all key.
We have also increased our development programmes as we move closer
to greater commercialisation. Our assessment of the potential PEEK
content per vehicle is more than 100g (from approximately 10g
today), as we focus on the high performance needs of next
generation electric vehicles.
As part of our Magma composite pipe programme for the energy
industry, TechnipFMC is seeking to accelerate the significant
opportunities for thermoplastic composite pipe in deepwater fields
in Brazil. Victrex continues 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
(TM) PEEK and our composite tape (Victrex supplies both the polymer
resin and composite tape and holds the intellectual property for
extrusion of the PEEK pipe) . TechnipFMC is currently focusing on
manufacturing scale up in Brazil, with a new pipe extrusion
facility in Brazil under construction, to support bid programmes
which have now been submitted and are awaiting outcomes. FY 2023
will see support for TechnipFMC's preparations and we expect to see
continued development revenues during the year as qualification
pipes progress - extruded by Victrex - through the supply
chain.
Innovation investment
Our culture of innovation and to support application
development, means we continue to invest behind our growth
programmes. R&D investment represented 5% of revenues(1) and at
GBP15.7m, was slightly above the prior year (FY 2021: GBP15.5m). Of
R&D investment focused on individual projects, approximately
89% of this is now aligned to programmes supporting sustainable
products. Going forward , we expect to focus primarily on our total
investment in sustainable products or programmes as a proportion of
total R&D investment (rather than project-based investment).
For FY 2023, we will see a modest investment in a New Product
Development (NPD) Centre in Leeds, UK, to support new roles and
capability as part of our Medical Acceleration programme.
Financial review
Gross profit 6% ahead despite higher cost of manufacture
Our Polymer & Parts strategy seeks to deliver continued
growth in our core polymer business, as well as drive an increasing
contribution from our mega-programmes (parts). We have the
opportunity to gain additional revenue and profit streams over the
medium to long term from selling a semi-finished or finished
component or part, despite the higher unit cost of manufacture and
slightly lower gross margin percentage in selected parts compared
to polymer.
Gross profit was 6% ahead at GBP174.5m (FY 2021: GBP165.3m),
offset by the higher overall cost of manufacture driven by higher
energy and raw material costs.
We made good progress during the year on operating efficiency
and asset utilisation, with production volume being much closer to
sales volume (compared to FY 2021 where sales volume saw a
significant drawdown of inventory). Under absorbed fixed costs
continue to reduce, with lower utilisation now being primarily in
our newer downstream manufacturing assets (parts), rather than our
main polymer plants.
Remain focused on gross margin improvement
Full year Group gross margin of 51.2% was lower than the prior
year (FY 2021: 54.0%), with good progress in operating efficiency
being offset by the unprecedented energy cost inflation, which
spiked in the second half. Progress in our gross margin, to above a
mid 50% level, was therefore impacted by the lag in recovery of
cost inflation through price increases, as well as other efficiency
programmes. Currency also impacted gross margin.
For the medium term, we remain focused on improving our gross
margin, with further opportunities to enhance operating efficiency
(primarily driven by asset utilisation). Key drivers of margin
improvement include the full benefit of our price recovery
programme, continued asset utilisation improvement - including
commercialisation of our China facilities, which will be an
incremental impact on margin in FY 2023 as we move through
commissioning - and sales mix. We are also mindful of the potential
costs associated with delivering our Sustainability goals. We
recently saw phase 1 of our UK debottlenecking programme completed,
which should support enhanced operating efficiency over the medium
term.
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
2022, a loss of GBP2.8m (FY 2021: gain of GBP4.9m) has been
recognised accordingly, largely from contracts where the deal rate
obtained (placed up to 12 months in advance in accordance with the
Group's hedging policy) was unfavourable to the average exchange
rate prevailing at the date of the related hedged transactions,
following the devaluation of Sterling during H2 2022.
Currency headwind
FY 2022 saw a currency headwind of approximately GBP7m at PBT
level, reflecting the strengthening of Sterling in the prior year
when hedging was put in place. At this early stage, currency for FY
2023 is tracking as a modest tailwind of GBP4m-GBP6m at PBT level,
driven by weaker Sterling against the US Dollar and Euro, although
we note ongoing volatility in currency markets.
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. With our hedging programme for FY 2023 largely
covered, at more than 80%, average contracted rates for FY 2023 are
1.30 against the US Dollar and 1.16 against the Euro. Current rates
imply a further modest tailwind in FY 2024.
Cost focus for operating overheads
Operating overheads(1) , which excludes exceptional items of
GBP7.9m, increased to GBP78.1m (FY 2021; GBP72.7m) primarily driven
by higher innovation investment, offset by a slightly lower bonus
pool compared to the prior year. Excluding exceptional items and
bonus, overheads increased by 12%.
Our Group All Employee Bonus Scheme is based on a budget-based
target, with a cap in place. Last year, we also introduced ESG
goals into Executive remuneration targets.
For FY 2023, with wage inflation and some targeted innovation
spend, we envisage at least a high single digit % increase in
operating overheads, with innovation investment including our NPD
facility in Leeds for Medical. We will also have incremental
year-on-year costs for our new China manufacturing investments
through the commissioning phase. From FY 2023, the Group's All
Employee Bonus & Share Schemes will start to - in the case of
long-term share programmes - reflect incentive targets put in place
from FY 2020, with subsequent good growth post the pandemic. Market
based share schemes issued prior to the pandemic have largely
failed to vest.
Underlying PBT up 4% and up 12% in constant currency, offset by
lag in cost inflation recovery
Reported PBT reduced by 5% reflecting exceptional items of
GBP7.9m (FY 2021: credit of GBP0.8m), representing the cost of
implementing a new ERP software system. In previous years these
costs would have been capitalised but are now expensed in line with
IFRIC guidance. The implementation will be completed in 2024, with
an anticipated total expensed cost of approximately GBP15m -
GBP20m. This will offer us greater digitalisation across functions,
supporting process efficiency and ongoing relationships with
customers and suppliers.
Underlying PBT of GBP95.6m was up 4% on the prior year (FY 2021:
GBP91.7m), offset by currency and the timing lag from inflation
recovery. Underlying PBT in constant currency was up 12%.
Earnings per share up 4%
Basic earnings per share (EPS) of 87.6p was 4% up on the prior
year (FY 2021: 84.3p per share), reflecting the impact of
exceptional items on reported PBT. Underlying EPS was up 14% at
95.0p (FY 2021: 83.4p).
Taxation
Victrex continues to benefit from the reduced tax rate on
profits taxed under the UK Government's Patent Box scheme, which
incentivises innovation and consequently highly skilled Research
& Development jobs within the UK. For FY 2022, the effective
tax rate was 13.9%, lower than the prior year (FY 2021: 21.3%),
which is primarily a result of the remeasurement of UK deferred tax
balances from 19% to 25% in FY 2021, reflecting the increase in the
substantively enacted UK Corporation Tax rate applicable from 1
April 2023. Taxation paid was GBP10.6m (FY 2021: GBP8.6m). 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%, subject to global taxation
developments, which continue to be monitored.
Strong balance sheet
With our strong balance sheet, we underpin our ability to invest
and support security of supply for customers. Net assets at 30
September 2022 totalled GBP490.6m (FY 2021: GBP511.7m).
Inventory increased on raw material build and cost inflation
With the significant sales inventory unwind during FY 2021, this
year has focused on ensuring raw material inventories reached
safety stock levels, to support security of supply for customers.
Total closing inventory was GBP86.8m (FY 2021: GBP70.3m), including
the impact of higher energy and raw material costs. In FY 2023
reflecting further recovery of raw material and finished goods
stocks, as well as inventory build to support us through shutdowns
associated with the UK debottlenecking programme, we anticipate a
total inventory position in excess of GBP100m. These items, in
addition to the higher unit cost of manufacture, are expected to be
the key drivers of inventory movement.
Pensions
Our UK Defined Benefit (DB) pension scheme closed to future
accrual in 2016. The investment strategy, like many companies, has
been to hedge interest and inflation risk using Liability Driven
Instruments ("LDIs"). As gilt yields have risen, the pension scheme
has faced cash calls from the LDI manager which have been met using
existing resources within the scheme. The scheme retains sufficient
liquid investments to be able to respond to further LDI cash
requirements should they be required, with management continuing to
work closely with the trustee. The use of LDI's as a hedge to
interest rate risk has worked effectively through to 30 September
2022, with the gross assets and liabilities of the scheme reducing
by approximately GBP30m each with the UK net asset increasing by
GBP0.7m to GBP14.9m. The medium-term target of reaching a buyout
position remains, and we expect to continue making an annual
voluntary contribution, where required, of GBP1m to the scheme to
support this goal.
Investment in capacity and growth
Growth investment remains the priority, with cash capital
investment of GBP45.5m (FY 2021: GBP41.9m), of which a significant
proportion was to support our China manufacturing investments,
which will provide additional capability to support customers in
China. For our UK assets, we also commenced a multi-year investment
to support efficiency improvement and gain incremental capacity. We
anticipate this will be approximately GBP15m in total, with year 1
now completed. Year 2 has now commenced and we anticipate a further
GBP10m spread over the next three financial years included within
the annual capital budget.
Following these investments, and subject to no material large
scale capacity investment for several years, our annual capital
expenditure guidance is based on approximately 8-10% of sales. This
also reflects some in-built investment to support process change
aligned to our ESG goals (for example being able to access
alternative fuels and adjustments needed to our manufacturing
process).
Capital expenditure for FY 2023 is expected to be similar to FY
2022, at approximately GBP45m-GBP50m.
Healthy cash generation
The Group's business model and focus on the high performance
materials area continues to support good cash generation. Cash
generated from operations was GBP90.7m (FY 2021: GBP135.5m), giving
an operating cash conversion(1) of 49% (FY 2021: 100%). Inventory
has increased compared to the prior year period, reflecting
recovery of inventory from much lower levels in the pandemic, as
previously communicated. In addition, trade and other receivables
have also increased due to a stronger sales performance in FY
2022.
Cash and other financial assets at 30 September 2022 was
GBP68.8m (FY 2021: GBP112.4m). This includes GBP2.8m ring-fenced in
our China subsidiaries (FY 2021: GBP12.5m) and other financial
assets of GBP10.1m, representing cash which was held on 95-day
deposit (FY 2021: GBP37.5m). In February 2022 we paid the 2021 full
year final dividend of 46.14p/share and a 50p/share special
dividend at a cash cost of GBP83.5m combined. For our China
manufacturing facilities, we also have a RMB400m borrowing facility
(GBP45m equivalent) in China in support of our investments there,
of which RMB123m (GBP15.7m at closing rates) was drawn down at 30
September 2022 (30 September 2021: n/a).
Dividends
Reflecting the Group's strong trading performance in FY 2022,
whilst balancing the uncertain macro-economic outlook over the
coming months, the Board is proposing a final dividend of
46.14p/share (FY 2021: 46.14p/share), giving total dividends for
the year of 59.56p/share. The closing available cash balance of
GBP66.0m was below the threshold to pay a special dividend.
Capital allocation update: special dividends & buybacks
Whilst growth investment remains the priority, we are engaging
with shareholders as part of this results cycle, to gauge opinion
on the opportunity for return options including share buybacks and
special dividends within our capital allocation policy. With
capital expenditure set to reduce after FY 2023, subject to no
additional opportunities to support growth, the medium-term
opportunity for incremental returns to shareholders remains
attractive.
Sustainability & ESG: enabling environmental & societal
benefit
As well as enabling environmental & societal benefit for our
customers through our products, we continue to receive good
feedback on our Sustainability & ESG strategy and 2030 carbon
net zero aspiration (Scope 1 & 2 emissions, based on 2019
manufacturing footprint). During the year we also completed an
initial Scope 3 inventory assessment, as well as a Lifecycle
Analysis for products which represent approximately two-thirds of
Group revenue. Our Lifecycle Analysis assessment - which reviews
our carbon footprint - indicates that our main grade of VICTREX(TM)
PEEK is more favourable than the industry average for PEEK
manufacturing's global warming potential (GWP).
Outlook
Several end-markets are yet to fully recover from the effects of
the pandemic and we continue to see good growth opportunities
across the Group. However, we are mindful of the uncertain
macro-economic outlook for 2023 and some signs that VAR volumes are
edging down slightly, to more normalised levels. This means the
opportunity to improve on last year's record Group volume is likely
to be challenging. We also face further and significant
year-on-year energy and raw material inflation this year, although
additional pricing actions are in progress, with a timing lag.
Overall, we have seen a steady start to the year and are focused
on modest revenue and profit growth. This includes the benefit from
pricing, an improved sales mix and currency tailwinds. We will also
see further investment in our long-term growth programmes, as they
progress towards greater commercialisation.
Jakob Sigurdsson
Chief Executive, 6 December 2022
(1) Alternative performance measures and other internal metrics
are defined below.
DIVISIONAL REVIEW
Industrial
12 Months 12
Months
Ended Ended %
30 Sept 30 Sept % Change
2022 2021 Change (constant
GBPm GBPm (reported) currency)
-------------- ---------- -------- ----------- ----------
Revenue 282.7 255.2 +11% +11%
Gross profit 124.8 119.7 +4% +10%
-------------- ---------- -------- ----------- ----------
Divisional performance is reported through Industrial and
Medical, although we continue to provide an end market-based
summary of our performance and growth opportunities. Within
Industrial, we have the end markets of Energy & Industrial,
Value Added Resellers (VAR), Transport (Automotive & Aerospace)
and Electronics.
The Chief Commercial Officer oversees the Industrial business,
including the Industrial based mega-programmes. A summary of all
the mega-programmes and the strong progress made during the year,
is covered earlier in this report.
The Industrial division saw record revenue of GBP282.7m (FY
2021: GBP255.2m), up 11% on the prior year, with double-digit
growth across Electronics, Energy & Industrial and VAR. Revenue
in constant currency was up 11%. Despite improved asset utilisation
and operating efficiency, a softer sales mix, the impact of foreign
currency exchange and unprecedented energy and raw material
inflation meant that gross margin was down 280bps to 44.1% (FY
2021: 46.9%).
Energy & Industrial
This segment is driven by volumes for oil & gas and new
energy applications, including renewables, and a wide range of
applications across General Industrial. Energy & Industrial saw
sales volume of 830 tonnes, which was up 9% on the prior year (FY
2021: 760 tonnes), with Energy up 19% overall, driven by global
activity levels and higher capital investment for exploration and
processing. Victrex(TM) PEEK has a long-standing track record of
durability and performance benefit in many demanding applications,
where the reliability of PEEK can mean less intervention or
downtime, thereby supporting efficiency of operation. More
recently, the introduction of cryogenic grades of PEEK - being able
to withstand extreme temperatures - has helped to further broaden
the portfolio, with new application opportunities in Liquefied
Natural Gas (LNG) and some assessment of applications in
Hydrogen.
General Industrial focuses on applications across fluid
handling, food contact materials and manufacturing robotics. PEEK's
unique combination of properties has enabled us to capitalise on
the application growth in this end market and metal replacement
opportunity, helping drive volume growth of 4% for the Industrial
proportion of Energy & Industrial, compared to the prior year.
Several applications in this area are also part of our Sustainable
Products.
Value Added Resellers (VAR)
VAR shows a similar alignment to our Industrial end-markets,
with the exception of Aerospace, where sales volumes are largely
direct to OEMs or tier suppliers. VAR is often a good barometer of
the general health of the supply chain, with VAR customers
processing high volumes of PEEK into stock shapes, or
compounds.
In FY 2021, VAR saw a strong recovery, as supply chains
restocked following the impact of the COVID-19 pandemic. Despite a
challenging comparative, VAR saw 12% growth in volume as several
end markets continued to improve. Sales volume was 2,122 tonnes (FY
2021: 1,900 tonnes), with the tailwind of good growth in end
markets including Electronics and Energy & Industrial
supporting VAR volume.
Transport (Automotive & Aerospace)
Victrex continues to have a strong alignment to the CO2
reduction megatrend, with our materials offering lightweighting,
durability, comfort, dielectrical properties and heat resistance.
As well as long standing core business within Automotive &
Aerospace across a range of application areas, we also made good
progress in our Transport related mega-programmes of PEEK Gears,
E-mobility, Aerospace Loaded Brackets and Aerospace Structures.
Automotive continued to suffer from the well-publicised shortage
of Semiconductor chips, with volume being down 2% compared to the
prior year. Latest market indicators suggest some improvement into
2023, including IHS which forecasts 3% growth in car production to
85m cars. Whilst Aerospace volume was only up 2%, we saw much
stronger revenue growth of 21%, driven by an improved sales mix as
Aptiv(TM) film made further progress. Long term trends remain
supportive, with OEM forecast build rates and the trend towards
faster processing and lightweight materials supporting increased
content of PEEK (Airbus forecasts 39,000 new or replacement planes
by 2040). Build rates have recently increased on models including
the Airbus A320neo and Boeing 737 Max, both of which have
Victrex(TM) PEEK content. We also note the recent indications of
COMAC's C919 production plan in China, where we have
qualifications.
Overall Transport sales volume fell by 1% to 913 tonnes (FY
2021: 926 tonnes), with Aerospace up 2% and Automotive down 2%.
Automotive
In Automotive, core applications include braking systems,
bushings & bearings and transmission equipment, with increasing
opportunities in electric vehicles, supporting a growing E-mobility
business.
Pleasingly, in PEEK Gears, we saw further progress in FY 2022.
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 typical PEEK Gear offers the potential of
approximately 20 grams per application.
Within the growing E-mobility sector, we saw new business wins
during the year, including those which utilise our Aptiv(TM) film.
Applications include wire coatings and e-motor applications, where
PEEK's inert nature, high strength, durability and ability to
process faster offer key performance benefits. Our focus remains on
the next generation of high-voltage (800 volt) vehicles, where the
stringent performance requirements make the choice of material even
more critical.
Aerospace
Aerospace volumes were up 2% reflecting some recovery in the
first half, with a softer second half as the supply chain was
restocked. Revenue was ahead, driven by sales mix and a greater
share from composite materials and applications using Aptiv(TM)
film. The opportunity in FY 2023 looks supportive based on industry
indicators, as recent build rate increases on key models containing
Victrex(TM) PEEK start to kick in and the industry continues to
recover from the effects of the pandemic.
With the lightweighting and CO2 reduction trend, long term
opportunities remain strong. Our Loaded Brackets and Aerospace
Structures mega-programmes both grew revenues over the period, with
Loaded Brackets exceeding GBP2m revenue for the full year as the
use of composites and differentiated products remain in demand. We
have also benefited from some retrofit opportunities for composite
parts, using our AE(TM) 250 low-melt PEEK grade, which supports
faster and simpler processing.
The ability to support CO2 reduction through PEEK materials
which are typically 60% lighter than metals also remains strong,
with our assessment that over 53 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.
Electronics
With a buoyant global Semiconductor sector, demand for materials
used in Semiconductor manufacturing was strong. Volumes grew 10% at
662 tonnes (FY 2021: 602 tonnes).
Victrex has a broad range of PEEK applications in this end
market, including Semiconductor, the internet of 5G applications,
cloud computing and core applications like CMP rings and other
extended application areas. Our Aptiv (TM) film business and small
space acoustic applications showed good growth this year and we
continue to see a positive outlook for this end market into FY
2023, albeit with absolute growth rates expected to be lower.
Home appliances has been an area of growth in recent years and
our impeller application business in high-end brands are also
performing well across a number of product areas, including vacuum
cleaners and hairdryers. These applications, with lighter materials
and enhanced durability, also offer the opportunity for improved
energy efficiency.
Regional trends & Ukraine/Russia exposure
With the lifting of many COVID-19 restrictions much later in the
US, we saw further strength in this region coming through in the
second half. Conversely, the impact of some further lockdowns in
China meant Asia-Pacific growth was lower. More recently, Europe
saw more volatility in the second half, though the strength of VAR
in Europe drove good growth for the year as a whole.
Overall by region. Europe was up 5%, at 2,554 tonnes (FY 2021:
2,432 tonnes), reflecting further improvement in VAR, with North
America up 18% at 952 tonnes (FY 2021: 807 tonnes), principally
driven by VAR and Energy & Industrial. Asia-Pacific was up 8%
at 1,221 tonnes (FY 2021: 1,134 tonnes), driven by continued growth
in Electronics and VAR.
Prior to the Ukraine conflict, Victrex had no active sales to
Ukraine, with Russia and Belarus sales negligible. Victrex has no
employees, assets or supply chain within these countries and no
direct raw material purchases.
Medical
12 Months 12
Months
Ended Ended %
30 Sep 30 Sep % Change
2022 2021 Change (constant
GBPm GBPm (reported) currency)
-------------- ---------- -------- ----------- ----------
Revenue 58.3 51.1 +14% +9%
Gross profit 49.7 45.6 +9% +10%
-------------- ---------- -------- ----------- ----------
Revenue in Medical was up 14% at GBP58.3m (FY 2021: GBP51.1m) as
elective surgeries returned in greater numbers.
In constant currency, Medical revenue was up 9%. Gross profit
was GBP49.7m (FY 2021: GBP45.6m) and gross margin was down slightly
at 85.2% (FY 2021: 89.2%) primarily reflecting a slightly adverse
sales mix as we saw faster growth in Non-Spine. Overall Medical
volume (implantable and non-implantable) was up 8%, driven by
implantable, with non-implantable slightly ahead, despite the
tougher year-on year comparison for business gained in COVID-19
related applications. Geographically, Asia-Pacific revenues were up
40% year on year, with Medical revenues in the US up 6% and Europe
up 11%.
The Chief Commercial Officer oversees the Medical business,
including the Medical based mega-programmes. A summary of all the
mega-programmes and the strong progress made during the year is
covered earlier in this report.
Medical strategy
Our Medical aspirations are for our solutions to treat a patient
every 15-20 seconds by 2027 (from approximately 25-30 seconds now)
and the Group is seeking to prioritise investment in Medical, with
the aim of driving an increased proportion of revenue from this
division over the next ten years, potentially up to one-third of
Group revenues.
During the year we commenced investment in a New Product
Development Centre of Excellence in Leeds, UK, part of our focus on
how we can drive adoption more meaningfully in this area. This is
located close to academia who we already have strong links with,
together with new partners. We already have Medical manufacturing
capability and innovation for our parts businesses - Trauma and
Knee - and this new Centre will work to scale up our opportunities.
Additionally, the benefit of our solutions lies in the data and we
are seeking to utilise this in an improved way with global medical
device manufacturers. This will be one of the key overhead
investment items in FY 2023, as we build additional capability and
skills in this area, with approximately 25 new roles. Whilst we
have made good progress in being able to address what Medical
device customers require, we will need to continue developing new
products to enable a full suite of solutions. An example is in Knee
where the PEEK Knee is progressing through a clinical trial, yet
opportunities within a cementless knee replacement are becoming
more in focus.
Spine and non-Spine
Whilst Spine remains 50% of divisional revenue and saw 2%
revenue growth, the importance of next generation Spine products
will be key in maintaining PEEK's position in this segment,
including the opportunity for Porous PEEK, where a spinal cage can
support bone-in growth as well as bone-on growth. Whilst we
continue to innovate and develop new products for Spine, usage of
3D printed titanium cages continues to rise, especially in the US.
Volume based procurement in China could also impact revenues in
Spine, which validates our goal of further growing our non-Spine
business.
We also continue to focus on non-Spine areas such as Cranio
Maxillo Facial (CMF), Arthroscopy & Sports Medicine and Drug
Delivery devices, as well as emerging or incremental opportunities
in Cardio, where PEEK is now used in applications within an
artificial heart. Non-Spine overall now represents 50% of
divisional revenues. 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, with annualised revenues being above GBP1m and good
opportunities globally, and in Asia particularly.
Mega-programmes
As noted elsewhere in this report, our PEEK Knee programme saw
significant progress, with a total of 30 implants as part of the
clinical trial. Twelve patients have successfully passed the 12
month follow up phase with no remedial requirements. As part of the
clinical trial with our partner Maxx Orthopaedics, trial sites are
now operating in Belgium, India and Italy, with a US trial site
also anticipated in FY 2023.
In Trauma, beyond our trauma mega-programme, our data shows good
indicators on the union rate for PEEK based plates compared to
metal plates (data on file, based on Trauma plates in high risk
patients). Our solutions for CMF continue to see strong growth,
particularly in Asia, with a well-regarded study showing better
brain function using PEEK in CMF plates compared to metal (2 5%
improved brain function based on paper by Zhang Q, Yuan Y, Li X, et
al, World Neurosurgeon 2018).
Alternative performance measures:
We use alternative performance measures (APMs) 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 2022 are GBP7.9m,
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
2022) weighted average spot rates to prior year (FY 2021)
transactions;
- 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;
- 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;
- 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; and
- 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;
Other internal metrics:
In addition to the APM's above there are a number of other
internal metrics, which are used by the Board in evaluating
performance, and are referenced in this report, but do not meet the
definition for an APM. The measures are as follows:
- 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;
- 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 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;
- Mature Annualised Revenue is a measure of new application
targets within our core business (excluding mega-programmes) and
would be realised only if all targets convert to commercial
revenues; and
- Sustainable revenues as a % of total revenues is calculated as
the % of revenue earned from sustainable products, which are
defined as those which offer a quantifiable environmental or
societal benefit. These are primarily in automotive and
aerospace
(supporting CO2 reduction) but also in energy and industrial and
electronics (e.g. wind energy applications, or those which
support energy efficiency) and medical, supporting better
patient outcomes.
Consolidated Income Statement
Year ended Year ended
30 September 30 September
2022 2021
Note GBPm GBPm
------------------------------------- ------- -------- ---------------------
Revenue 4 341.0 306.3
(Losses)/gains on foreign
currency net hedging (2.8) 4.9
Cost of sales (163.7) (145.9)
------------------------------------- ------- -------- ---------------------
Gross profit 4 174.5 165.3
Sales, marketing and administrative
expenses (86.0) (71.9)
------------------------------------- ------- -------- ---------------------
Operating profit before exceptional
items 96.4 92.6
Exceptional items 5 (7.9) 0.8
------------------------------------- ------- -------- ---------------------
Operating profit 88.5 93.4
Financial income 0.5 0.2
Finance costs (0.3) (0.2)
Share of loss of associate (1.0) (0.9)
Profit before tax and exceptional
items 95.6 91.7
Exceptional items 5 (7.9) 0.8
------------------------------------- ------- -------- ---------------------
Profit before tax 87.7 92.5
Income tax expense 6 (12.2) (19.7)
Profit for the period 75.5 72.8
Attributable to:
Owners of the Company 76.2 73.2
Non-controlling interests (0.7) (0.4)
Earnings per share
Basic 7 87.6p 84.3p
Diluted 7 87.3p 84.0p
------------------------------------- ------- -------- ---------------------
Dividends (pence per share)
Interim 13.42 13.42
Final 46.14 46.14
Special - 50.00
59.56 109.56
------------------------------------- ------- -------- ---------------------
A final dividend in respect of FY 2022 of 46.14p per ordinary
share has been recommended by the Directors for approval at the
Annual General Meeting on 10 February 2023.
Consolidated Statement of Comprehensive Income
Year ended Year ended
30 September 30 September
2022 2021
GBPm GBPm
-------------------------------------------- -------------- --------------
Profit for the period 75.5 72.8
--------------------------------------------- -------------- --------------
Items that will not be reclassified
to profit or loss
Defined benefit pension schemes'
actuarial gains 0.2 4.5
Income tax on items that will
not be reclassified to profit
or loss (0.1) (1.1)
0.1 3.4
Items that may be subsequently
reclassified to profit or
loss
Currency translation differences
for foreign operations 11.1 (2.0)
Effective portion of changes in
fair value of cash flow hedges (19.7) 5.7
Net change in fair value of cash
flow hedges
transferred to profit or loss 2.8 (4.9)
Income tax on items that may be
reclassified to profit or loss 3.2 (0.2)
(2.6) (1.4)
Total other comprehensive (expense)/income
for the period (2.5) 2.0
--------------------------------------------- -------------- --------------
Total comprehensive income for
the period 73.0 74.8
Total comprehensive income for
the period attributable to:
Owners of the Company 73.7 75.2
Non-controlling interests (0.7) (0.4)
--------------------------------------------- -------------- --------------
Consolidated Balance Sheet
30 September 30 September
2022 2021
Note GBPm GBPm
----------------------------------------- ------- ----------- ---------------
Assets
Non-current assets
Property, plant and equipment 347.2 305.7
Intangible assets 20.2 24.8
Investment in associated undertakings 8 10.4 11.4
Financial assets held at fair
value through profit and loss 8, 9 10.1 12.7
Deferred tax assets 7.2 8.9
Retirement benefit asset 14.9 14.2
----------------------------------------- ------- ----------- ---------------
410.0 377.7
----------------------------------------- ------- ----------- ---------------
Current assets
Inventories 86.8 70.3
Current income tax assets 7.9 2.9
Trade and other receivables 68.1 49.1
Derivative financial instruments 11 - 2.9
Other financial assets 12 10.1 37.5
Cash and cash equivalents 58.7 74.9
231.6 237.6
----------------------------------------- ------- ----------- ---------------
Total assets 641.6 615.3
----------------------------------------- ------- ----------- ---------------
Liabilities
Non-current liabilities
Deferred tax liabilities (34.3) (31.6)
Borrowings 10 (21.6) (5.9)
Long term lease liabilities (7.8) (8.2)
Retirement benefit obligations (2.7) (1.9)
(66.4) (47.6)
----------------------------------------- ------- ----------- ---------------
Current liabilities
Derivative financial instruments 11 (19.9) (1.9)
Borrowings 10 (0.9) -
Current income tax liabilities (2.3) (2.9)
Trade and other payables (59.7) (49.4)
Current lease liabilities (1.8) (1.8)
----------------------------------------- ------- ----------- ---------------
(84.6) (56.0)
----------------------------------------- ------- ----------- ---------------
Total liabilities (151.0) (103.6)
----------------------------------------- ------- ----------- ---------------
Net assets 490.6 511.7
----------------------------------------- ------- ----------- ---------------
Equity
Share capital 0.9 0.9
Share premium 61.5 61.1
Translation reserve 12.8 1.7
Hedging reserve (13.6) 0.1
Retained earnings 427.2 445.4
----------------------------------------- ------- ----------- ---------------
Equity attributable to owners
of the Company 488.8 509.2
Non Controlling Interest 13 1.8 2.5
----------------------------------------- ------- ----------- ---------------
Total equity 490.6 511.7
------------------------------------------ ------------------- ---------------
Consolidated Cash Flow Statement
Year ended Year ended
30 September 30 September
2022 2021
Note GBPm GBPm
-------------------------------------- ------- ------- --------------
Cash flows from operating
activities
Cash generated from operations 15 90.7 135.5
Interest received 0.3 0.2
Interest paid (0.4) -
Net income tax paid (10.6) (8.6)
-------------------------------------- ---------------- --------------
Net cash flow generated
from operating activities 80.0 127.1
-------------------------------------- ---------------- --------------
Cash flows from investing
activities
Acquisition of property,
plant and equipment and intangible
assets (45.5) (41.9)
Withdrawal/(deposit) of cash
invested for greater than
three months 27.4 (37.5)
Proceeds from disposal of 4.2 -
financial asset held at fair
value through profit and
loss
Loan to associated undertakings (2.3) (3.8)
Net cash flow used in investing
activities (16.2) (83.2)
-------------------------------------- ---------------- --------------
Cash flows from financing
activities
Proceeds from issue of ordinary
shares exercised under option 0.4 6.1
Repayment of lease liabilities (2.1) (1.8)
Loan received from non-controlling
interest - 5.6
Bank borrowings received 14.5 -
Dividends paid (95.2) (51.6)
-------------------------------------- ---------------- --------------
Net cash flow used in financing
activities (82.4) (41.7)
-------------------------------------- ---------------- --------------
Net (decrease)/ increase in
cash and cash equivalents (18.6) 2.2
Effect of exchange rate fluctuations
on cash held 2.4 (0.4)
Cash and cash equivalents
at beginning of period 74.9 73.1
-------------------------------------- ---------------- --------------
Cash and cash equivalents
at end of period 58.7 74.9
-------------------------------------- ---------------- --------------
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
2021 0.9 61.1 1.7 0.1 445.4 509.2 2.5 511.7
------------------ --------- --------- ------------ --------- ---------- ------------- ---------------- --------
Total
comprehensive
income for the
period
Profit for the
period
attributable to
the
parent - - - - 76.2 76.2 - 76.2
Profit for the
period
attributable to
non-controlling
interest - - - - - - (0.7) (0.7)
------------------ --------- --------- ------------ --------- ---------- ------------- ---------------- --------
Other
comprehensive
(expense)/income
Currency
translation
differences for
foreign
operations - - 11.1 - - 11.1 - 11.1
Effective portion
of
changes in fair
value
of cash flow
hedges - - - (19.7) - (19.7) - (19.7)
Net change in
fair value
of cash flow
hedges
transferred to
profit
or loss - - - 2.8 - 2.8 - 2.8
Defined benefit
pension
schemes'
actuarial gains - - - - 0.2 0.2 - 0.2
Tax on other
comprehensive
(expense)/income - - - 3.2 (0.1) 3.1 - 3.1
------------------ --------- --------- ------------ --------- ---------- ------------- ---------------- --------
Total other
comprehensive
(expense)/income
for
the period - - 11.1 (13.7) 0.1 (2.5) - (2.5)
Total
comprehensive
(expense)/income
for
the period - - 11.1 (13.7) 76.3 73.7 (0.7) 73.0
Contributions by
and
distributions to
owners
of the Company
Share options
exercised - 0.4 - - - 0.4 - 0.4
Equity-settled
share-based
payment
transactions - - - - 1.8 1.8 - 1.8
Tax on
equity-settled
share-based
payment
transactions - - - - (1.1) (1.1) - (1.1)
Dividends to
shareholders - - - - (95.2) (95.2) - (95.2)
------------------ --------- --------- ------------ --------- ---------- ------------- ---------------- --------
Equity at 30
September
2022 0.9 61.5 12.8 (13.6) 427.2 488.8 1.8 490.6
------------------ --------- --------- ------------ --------- ---------- ------------- ---------------- --------
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 public company, which is
limited by shares and is listed on the London Stock Exchange. This
Company is 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 2022 comprise the Company and its
subsidiaries (together referred to as the 'Group').
The consolidated financial statements were approved for issue by
the Board of Directors on 6 December 2022.
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 in
accordance with UK-adopted International Accounting Standards.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK--adopted International Accounting Standards in
its consolidated financial statements on 1 October 2021. This
change constitutes a change in accounting framework. However, there
is no impact on the recognition, measurement or disclosure in the
period as a result of the change in framework. 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 16 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 2022 and 30
September 2021 have been reported on by the auditors who issued an
unqualified opinion in respect of both years in the auditors'
reports for FY 2022 and FY 2021. Statutory accounts for the year
ended 30 September 2021 have been filed with the Registrar of
Companies. The statutory accounts for the year ended 30 September
2022, will be delivered to the Registrar of Companies within the
Companies House accounts filing guidance.
Climate change
In preparing the financial statements of the Group an assessment
of the impact of climate change has been made in line with the
requirements of TCFD and with specific consideration of the
disclosures made in the Sustainability report in the Annual Report
starting on page 44. This has specifically incorporated the impact
of the physical risks of climate change, transitional risks
including the potential impact of government and regulatory actions
as well as the Group's stated Net Zero 2030 (Scope 1 & 2
emissions) target. The potential impact has been considered in the
following areas:
- the key areas of judgement and estimation
- the expected useful lives of property, plant and equipment
- those areas which rely on future forecasts which have the
potential to be impacted by climate change:
o carrying value of non-current assets
o going concern
o viability
- the recoverability of deferred taxation assets
- the recoverability of inventory and trade receivables
The Directors recognise the inherent uncertainty in predicting
the impact of climate change and the actions which regulators and
governments, both domestic and overseas, will take in order to
achieve their various targets. However from the work undertaken to
date,
outlined in the Sustainability report, the Directors have
reached the overall conclusion that there has been no material
impact on the
financial statements for the current year from the potential
impact of climate change.
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 towards Net Zero (Scope
1 & 2 emissions) in 2030.
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.
The Company maintains a strong balance sheet providing assurance
to key stakeholders, including customers, suppliers and
employees.
The combined cash and other financial assets balance at 30
September 2022 was GBP68.8m, having reduced from GBP112.4m at 30
September 2021 following payment of the regular and special
dividends of GBP83.5m in February 2022. Of the GBP68.8m, GBP2.8m 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 GBP66.0m, approximately 80% is held in the UK where
the Company incurs the majority of its expenditure and 85% is held
in instant access accounts. The Group has drawn debt of GBP15.7m in
its Chinese subsidiaries (with a total facility of c.GBP45m
available until December 2026) and has unutilised UK banking
facilities of GBP40m through to October 2024, of which GBP20m is
committed and immediately available and GBP20m is available subject
to lender approval.
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, World
Semiconductor Trade Statistics semiconductor market forecasts for
Electronics through to 2024 and Needham and IQVIA forecasts for
Medical procedures.
The assessment of going concern included conducting scenario
analysis on the aforementioned forecast which, given current
economic forecasts, focused on the Group's ability to sustain a
period of falling demand, whether caused by a pandemic,
geo-political event(s) or other global economic challenges. In
assessing the severity of the scenario analysis, the scale of the
impact experienced during previous economic downturns has been
used, including the differing impacts on Industrial versus Medical
segments.
Using the IBP data and reference points from previous downturns
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 2024. The impact of climate change and the Group's Net Zero
2030 goal for its own operations (Scope 1 & 2 emissions) has
been considered as part of this assessment. Any impact on revenue
over the shorter going concern period, either positive or negative,
is likely to be insignificant, with the greater risk being that of
higher carbon taxes. The current elevated price of gas and
electricity included in the 24-month forecast, reflecting current
supply side uncertainty, and the government focus on limiting the
impact of the current economic slowdown means that additional
carbon taxes over the going concern period are considered unlikely,
and therefore no additional costs have been included in either the
base forecast or the scenarios noted below.
Scenario 1 - the global economy contracts with sales volumes
reducing by 30% from the level seen over the past 12 months, to
approximately 280 tonnes per month, from January 2023 for a period
of 6 months (to mirror the length of the most recent downturn in
2020) before a partial recovery to c.330 tonnes per month for the
remainder of the going concern period. Medical revenue remains
unchanged from the past 12 months run rate, with the economic
situation historically having minimal impact on this segment.
Scenario 2 - in line with scenario 1, c.280 tonnes per month
from January 2023, 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.3,300 tonnes, a level not seen
since 2013. Prior to COVID-19, the last recession was the financial
crisis in 2008 and 2009 which lasted approximately 12 months. In
this scenario Medical revenue is reduced by 10% during the second
six months to reflect a limited impact from a longer lasting
slowdown. 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 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 capital
investment over the next 12 months is approximately GBP50m 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 later into 2024, with the exception of
completing the manufacturing facilities in China which 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 2023 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 current economic uncertainty as a number of
global economies close to/in recession and the war in Ukraine
continues, 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 the date of this report. For this
reason, they continue to adopt the going concern basis for
preparing the financial statements.
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
2021 except for the application of relevant new standards and IFRIC
- Configuration or customisation costs in cloud computing
arrangements. None of the new standards have had a material impact
on the Group's consolidated result or financial position.
IFRIC - Configuration or customisation costs in cloud computing
arrangements
The Group has changed its accounting policy related to the
capitalisation of configuration and customisation costs in a cloud
computing (Software as a Service, 'SaaS') arrangement, with costs
now being expensed as incurred. This change is as a result of the
IFRS Interpretations Committee's agenda decision published in April
2021. The Group's accounting policy has historically been, where
the criteria within IAS 38 have been met, to capitalise costs
directly attributable to the implementation, including
configuration and customisation of cloud computing arrangements, as
intangible assets in the Balance sheet. Following the publication
of the above IFRIC agenda decision, current cloud computing
arrangements were identified and assessed to determine if the Group
has control of the software. For those arrangements where the group
does not have control of the developed software, the intangible
assets previously capitalised as at 1 October 2021 have been
derecognised. On the basis that the carrying value of these
intangibles is not material the criteria in IAS 8 to restate the
comparative financial statements has not been met and therefore the
intangibles have been expensed in the current financial year.
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
2022 2021
-------------------------------------------------- -------------------------------
Industrial Medical Group Industrial Medical Group
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- --------------- ------------------------ ------ ----------- -------- ------
Segment revenue 285.8 58.3 344.1 257.4 51.1 308.5
Internal revenue (3.1) - (3.1) (2.2) - (2.2)
------------------------ --------------- ------------------------ ------ ----------- -------- ------
Revenue from external
sales 282.7 58.3 341.0 255.2 51.1 306.3
------------------------ --------------- ------------------------ ------ ----------- -------- ------
Segment gross profit 124.8 49.7 174.5 119.7 45.6 165.3
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
2022 2021
GBPm GBPm
------------------------------------------- ------------------------------
Included within sales, marketing
and administrative expenses
Implementation of SaaS ERP system 7.9 -
Restructuring costs - (0.8)
------------------------------------ ------ ------------------------------
Exceptional items before tax 7.9 (0.8)
------------------------------------ ------ ------------------------------
Tax on exceptional items (1.5) -
------------------------------------ ------ ------------------------------
Exceptional items after tax 6.4 (0.8)
------------------------------------ ------ ------------------------------
Implementation of SaaS ERP system
The Group has commenced a multi-year implementation of a new
cloud-based ERP system. The Group forecasts to spend
approximately
GBP15m-GBP20m on the implementation, including process redesign,
customisation and configuration of the system, change management
and training, which will deliver benefits to both customer
interactions and internal business processes.
The IFRS Interpretations Committee issued its decision
clarifying how arrangements in respect of cloud based software as a
service (SaaS) systems should be accounted for. The new ERP system
does not meet the criteria for capitalisation (as the majority of
costs relating to past systems have) and therefore the cost is
being expensed rather than capitalised and amortised. Given the
size of the project and its impact on the reported profit-based
metrics, the fact the system is evergreen and thus this level and
nature of cost will not happen again, it meets the Group's criteria
to be presented as exceptional. The ERP system is expected to be
completed in 2024.
Restructuring costs
During FY 2020, the Group reviewed cost actions and efficiencies
required to support profitability in a lower production
environment. The credit in FY 2021 related to more favourable
settlements being reached on finalisation than assumed when making
the restructuring charge in FY 2020 when the Group commenced
consultation. These costs were treated as non-tax deductible in FY
2020 and the corresponding credit was treated as non--chargeable in
FY 2021 accordingly, which resulted in a credit in income tax
expenses for expenses not deductible for tax purposes in FY 2021
(see note 6).
The cash flow in the year associated with exceptional items was
a GBP5.6m outflow (FY 2021: GBP1.9m outflow).
6. Income tax expense
Year ended Year ended
30 September 30 September
2022 2021
GBPm GBPm
----------------------------------- -------------- --------------
UK corporation tax 9.0 10.4
Overseas tax 2.4 1.7
Deferred tax 1.7 7.5
Tax adjustments relating to prior
years (0.9) 0.1
Total tax expense in income
statement 12.2 19.7
----------------------------------- -------------- --------------
Effective tax rate 13.9% 21.3%
----------------------------------- -------------- --------------
Deferred tax assets/liabilities have been recognised at the rate
they are expected to reverse. For UK assets/liabilities this is 25%
for the majority of assets and liabilities (30 September 2021:
25%), being the UK tax rate effective from 1 April 2023, in
accordance with the Finance Bill 2021, which was substantively
enacted on 24 May 2021. The impact of remeasuring the deferred tax
assets and liabilities accordingly increased the tax charge in FY
2021 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
2022 2021
--------------------------------------- -------------- --------------
Earnings
per share - basic 87.6p 84.3p
- diluted 87.3p 84.0p
------------ -------------- --------------
Profit for the financial period
attributable to the owners of
the company (GBPm) 76.2 73.2
--------------------------------------- -------------- --------------
Weighted average number
of shares used - basic 86,897,353 86,704,789
- diluted 87,239,312 87,045,353
-------------------------- ----------- -------------- --------------
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's investment in the ordinary share capital of Bond at
30 September 2022 is EUR14.7m/GBP12.9m (24.5%) at cost (30
September 2021: same), with a carrying value of GBP10.4m (30
September 2021: GBP11.4m) which includes the impact of the Group's
share of losses since investment. 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.
In line with the agreed programme of further investments into
Bond by Victrex and another investor, LaLune, Bond has received
cash injections of EUR4.5m in the current financial year, of which
EUR2.7m /GBP2.3m was made by Victrex in the form of convertible
loans. The loans are convertible into ordinary shares of the
entity, at the Group's option, or are to be repaid by Bond on or
before the end of the five year
agreed term. Of the convertible loan balance of EUR7.4m /GBP6.6m
at 30 September 2022, EUR2.0m /GBP1.8m is interest free, EUR0.3m
/GBP0.2m is accruing interest at 3%, and the remainder is accruing
interest at a rate of 6% per annum. These convertible loans 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 2022 is GBP1.0m (FY
2021 loss of GBP0.9m).
9. Financial assets held at fair value through profit and
loss
At 30 Sept 2022, financial assets held at fair value through
profit and loss relate to:
- Investment in Surface Generation Limited at GBP3.5m (FY 2021: GBP3.5m)
- Convertible loans in Bond at GBP6.6m (FY 2021: GBP3.8m). See also note 8 above.
On 13 October 2021, the Group sold its investment in Magma
Global Limited to TechnipFMC. This investment was recognised as a
financial asset held at fair value through the profit and loss,
with a fair value of GBP5.4m at 30 September 2021. The Group
received cash of GBP4.2m at the point of disposal with GBP1.2m
deferred consideration received on 13 October 2022.
10. Borrowings
Year ended Year ended
30 September 30 September
2022 2021
GBPm GBPm
--------------------------------- -------------- --------------
Due within one year
Bank loans 0.9 -
Total due within one year 0.9 -
--------------------------------- -------------- --------------
Due after one year
Bank loans 14.8 -
Loan payable to Non-controlling
interest 6.8 5.9
--------------------------------- -------------- --------------
Total due after one year 21.6 5.9
--------------------------------- -------------- --------------
Bank loans are repayable in line with an agreed schedule up to
December 2026. Interest is charged at the five-year Loan Prime Rate
of People's Republic of China, which has been in the range of
4.3%-4.65% in the period between the initial draw-down and 30
September 2022.
The loan from the Non-Controlling Interest, Yingkou Xingfu
Chemical Co. Ltd ('YX'), is unsecured and is repayable on 30
September 2026 or such date as may be mutually agreed by YX and
Victrex Hong Kong Limited. Interest is charged at 4% per annum.
Interest payable on the loan payable is rolled up into the value of
the loan, until repayment occurs.
The purpose of both loans is the funding of capital expenditure
in China, with the interest payable on both capitalised as part of
that qualifying capital expenditure within Property, Plant and
Equipment. During the year, interest of GBP0.5m (GBP0.3m and
GBP0.2m respectively), has been capitalised accordingly.
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
2022 2021
--------------------- ------------------------ ----------------------
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
Current liabilities 197.5 (19.9) 106.9 (1.9)
---------------------- ---------- ------------ ---------- ----------
197.5 (19.9) 168.1 1.0
--------------------- ---------- ------------ ---------- ----------
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. Fair value losses on foreign
currency contracts of GBP2.8m has been recognised in the period (FY
2021 - gains of GBP4.9m).
12. Other financial assets
At 30 September 2022 the Group had GBP10.1m of cash on 95-day
deposit (30 September 2021: GBP37.5m). This is included in the
Available Cash metric (see APM's above).
13. Non-controlling interest
The non-controlling interest recognised relates to the Group's
subsidiary company, Panjin VYX High Performance Materials Co. Ltd
('PVYX'), where the Group continues to hold a 75% equity interest
with the remaining 25% held by Yingkou Xingfu Chemical Co. Ltd
('YX'). 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 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 also made loans to PVYX of
GBP5.6m during FY 2021. The loan is denominated in Chinese Renminbi
and had a sterling value of GBP6.8m at 30 September 2022, which
includes interest rolled up of GBP0.2m (see note 10), that was also
capitalised in the period as part of the qualifying capital
expenditure within Property, Plant and Equipment.
In the year to 30 September 2022 the subsidiary incurred a loss
of GBP2.9m (FY 2021: loss of GBP1.4m), of which GBP0.7m (FY 2021:
GBP0.4m) is attributable to the non-controlling interest. Total
non-controlling interest as at 30 September 2022 is GBP1.8m (FY
2021: GBP2.5m).
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
2022 2021
------------------ ------------------
Average Closing Average Closing
----------- ---- -------- -------- -------- --------
US Dollar 1.30 1.10 1.36 1.34
Euro 1.16 1.13 1.14 1.18
------------------ -------- -------- -------- --------
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
Year ended Year ended
30 September 30 September
2022 2021
GBPm GBPm
--------------------------------------------- --------------
Profit after tax for the year 75.5 72.8
Income tax expense 12.2 19.7
Share of loss of associate 1.0 0.9
Net financing income (0.2) -
Operating profit 88.5 93.4
Adjustments for:
Depreciation 19.0 18.5
Amortisation 2.6 3.4
Loss on disposal of non-current
assets 2.4 0.8
Equity-settled share-based payment
transactions 1.8 1.4
Losses/(gains) on derivatives
recognised in income statement
that have not yet settled 4.0 (0.5)
Gain on financial asset held
at fair value (0.3) (0.9)
(Increase)/decrease in inventories (13.4) 26.0
Increase in trade and other
receivables (16.9) (18.3)
Increase in trade and other
payables 2.8 11.9
Retirement benefit obligations
charge less contributions 0.2 (0.2)
------------------------------------- ------- --------------
Cash generated from operations 90.7 135.5
------------------------------------- ------- --------------
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 19 January 2023
Record date# 20 January 2023
AGM 10 February 2023
Payment of final dividend 17 February 2023
Announcement of half-year results May 2023
Payment of interim dividend June/July 2023
# 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
www.victrexplc.com
ir@victrex.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR EAEASEFPAFAA
(END) Dow Jones Newswires
December 06, 2022 02:00 ET (07:00 GMT)
Victrex (LSE:VCT)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Victrex (LSE:VCT)
Gráfica de Acción Histórica
De May 2023 a May 2024