Interim Results
Victrex PLC
05 June 2007
5 June 2007
Victrex plc
Results announcement for the six months ended 31 March 2007
• Volume up 16% to 1,286 tonnes (2006: 1,113 tonnes)
• Revenue up 13% to £66.4m (2006: £58.7m)
• Profit before tax up 18% to £27.1m (2006: £23.1m)
• Earnings per share up 20% to 23.1p (2006: 19.3p)
• Interim dividend per share up 12% to 4.7p (2006: 4.2p)
Chairman Peter Warry commented:
'I am pleased to report further excellent progress in the first half of 2007.
Victrex has delivered record sales, profits and commercialised applications.
Although we are seeing a slight softening in semiconductor demand, we still
expect overall sales volume for the second half to be broadly in line with the
first half. We are pleased with the progress we have made in the first half and
remain confident in our ability to realise the underlying growth potential of
the business.'
Enquiries
Victrex plc
David Hummel, Chief Executive 0207 357 9477 (5 June 2007)
Michael Peacock, Finance Director 01253 897700 (thereafter)
Hogarth Partnership Limited
Nick Denton / Barnaby Fry 0207 357 9477
REPORT TO SHAREHOLDERS
on the interim results for the six months ended 31 March 2007
I am pleased to report further excellent progress in the first half of 2007.
Victrex has delivered record sales, profits and commercialised applications.
Results
Revenue was £66.4m (H1 2006: £58.7m), an increase of 13% on the first six months
of last year.
Gross profit was £42.3m (H1 2006: £36.8m), representing a gross margin of 63.7%
(H1 2006: 62.7%). Sales, marketing and administrative expenses increased by 11%
to £15.8m compared with the first half of last year (£14.2m) reflecting ongoing
investment in application development and sales and marketing resources.
Profit before tax grew by 18% to £27.1m (H1 2006: £23.1m). Compared with the
first half of 2006, as expected, exchange rates have had an adverse impact of
£0.7m on profit principally due to a weaker Euro and Japanese Yen.
Earnings per share were up 20% at 23.1p (H1 2006: 19.3p).
Markets
Continued sales growth has been achieved, resulting in first half sales volume
of 1,286 tonnes, 16% up on the previous first half of 1,113 tonnes and 5% ahead
of last year's record second half (1,226 tonnes).
Transport sales volume was 334 tonnes, up 10% on last year's second half of 305
tonnes, mainly due to increased commercial aerospace sales, principally in the
US. We also delivered increased automotive sales in both the US and Japan and
sustained automotive sales at the same level as last year's second half in
Europe.
Industrial sales volume was 439 tonnes, up 6% on last year's second half of 414
tonnes with continued strong demand from oil and gas customers and European
demand for industrial applications.
Electronics volume was 353 tonnes, up 3% on last year's second half of 344
tonnes. This was principally due to increased semiconductor sales to
Asia-Pacific partially offset by weaker sales in the US. Consumer electronics
sales were maintained at similar levels to the previous second half.
Regionally, Asia-Pacific sales have regained momentum at 241 tonnes, up 15% on
the second half of last year (210 tonnes). This was mainly due to growth in
transport and electronics.
As previously reported, on 30 March 2007, we acquired from Mitsui Chemicals, Inc
their 49% shareholding in Victrex-MC, Inc, our Japanese joint venture, which is
responsible for VICTREX PEEK sales in Japan. As a result, Victrex-MC, Inc became
a wholly owned subsidiary with effect from that date and was renamed Victrex
Japan, Inc.
European sales saw continued growth to 656 tonnes, 3% up on last year's strong
second half (640 tonnes), principally due to increased demand from industrial
applications.
United States volume continued to grow with volume of 389 tonnes, 3% ahead of
last year's second half of 376 tonnes, as a result of increased aerospace and
automotive demand.
Invibio(R), our biomaterials business, generated record first half revenue of
£9.5m, an increase of 20% over the second half of last year (£7.8m) and 25% over
the first half (£7.6m). Since the start of the new financial year Invibio has
entered into 22 additional PEEK-OPTIMA(R) polymer long-term supply assurance
agreements with implantable medical device manufacturers. We have also completed
construction of our new Invibio Global Technology Centre in the UK.
Development pipeline
Our continued success in new application development is demonstrated by the
record level of commercialised applications. During the first half we
commercialised 316 new VICTREX PEEK applications with an estimated mature
annualised volume ('MAV') of 266 tonnes compared with 277 commercialised
applications with an estimated MAV of 135 tonnes in the second half of 2006. The
development pipeline contained 2,015 developments (September 2006: 1,764) with
an estimated MAV of 2,762 tonnes (September 2006: 2,754) if all of the
developments were successfully commercialised.
Supply chain and capital expenditure
Total tangible fixed asset additions for the period amounted to £19.2m (H1 2006:
£6.9m). The majority of these related to the ongoing construction of the second
VICTREX PEEK polymer powder plant, which remains on schedule with completion
expected in October. The estimated capital cost of this plant has increased by
10% from our original estimate of £29m to approximately £32m.
The uprate of the BDF supply chain to support this additional polymer capacity
has now commenced. The estimated capital cost of the BDF uprate remains around
£23m with completion expected in autumn 2008.
We have also completed construction of our new film manufacturing facility and
have now formally launched a range of film products under the APTIVTM brand
name.
We now expect total capital expenditure for the current year to be approximately
£40m compared with our previous estimate of £35m.
Cash flow
Cash flow from operations was £23.0m (H1 2006: £23.4m) as the impact of improved
trading was offset by increased working capital, principally trade and other
receivables. This increase was mainly due to a temporary deferral of remittances
from Victrex-MC, Inc to accumulate cash in the joint venture pending a
distribution of reserves to shareholders. Capital expenditure cash payments
amounted to £22.4m (H1 2006: £6.6m).
Taxation paid was £5.9m (H1 2006: £6.5m) and the effective tax rate decreased to
31.0% (H1 2006: 32.5%).
At 31 March 2007, the Group had net cash of £9.8m compared with £26.9m as at
30 September 2006.
Dividend
An interim dividend of 4.7p per share, representing an increase of 12% over last
year's interim dividend, will be paid on 31 July 2007 to all shareholders on the
register at the close of business on 29 June 2007.
Outlook
Currency impact
As previously reported, trading results for 2007 are being adversely impacted by
the strengthening of Sterling against our key trading currencies (Euro, US
Dollar and Yen) compared with 2006. Based on our forecast sales volume, currency
hedging already in place and spot exchange rates as at 25 May 2007, we currently
estimate the following average exchange rates will apply for the second half of
2007:
+----------+-------------+-----------------+-----------------+----------------+
| | Year to| Six months to| Six months to| Year to|
+----------+-------------+-----------------+-----------------+----------------+
| | 30 September| 31 March| 30 September| 30 September|
+----------+-------------+-----------------+-----------------+----------------+
| | 2006| 2007| 2007| 2007|
+----------+-------------+-----------------+-----------------+----------------+
| | Actual| Actual| Estimate| Estimate|
+----------+-------------+-----------------+-----------------+----------------+
|US Dollar | 1.82| 1.81| 1.91| 1.86|
+----------+-------------+-----------------+-----------------+----------------+
|Euro | 1.43| 1.46| 1.45| 1.46|
+----------+-------------+-----------------+-----------------+----------------+
|Yen | 188| 195| 211| 204|
+----------+-------------+-----------------+-----------------+----------------+
As can be seen from the above table, and in line with our previous expectations,
we continue to forecast a further adverse impact in the second half from a
weaker US Dollar and Japanese Yen. By way of illustration, if the current
estimated second half rates had applied in the first half of the current year,
this would have had an adverse impact of £1.2m on profits for the first half.
Trading
Although we are seeing a slight softening in semiconductor demand, we still
expect overall sales volume for the second half to be broadly in line with the
first half. We are pleased with the progress we have made in the first half and
remain confident in our ability to realise the underlying growth potential of
the business.
Peter Warry
Chairman
4 June 2007
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
six months six months year ended
ended ended
31 March 2007 31 March 2006 30 September
2006
Note £000 £000 £000 £000 £000 £000
Revenue 2 66,418 58,730 122,516
Cost of sales (24,097) (21,935) (46,708)
--------------------- ----- ------- ------- ------- ------- ------- -------
Gross profit 42,321 36,795 75,808
Sales, marketing and
administrative
expenses (15,782) (14,170) (30,743)
--------------------- ----- ------- ------- ------- ------- ------- -------
Operating profit 2 26,539 22,625 45,065
Financial income 433 267 688
------- ------- -------
Financial expenses (36) (44) (88)
------- ------- -------
------- ------- -------
Net financing income 397 223 600
Share of profit of
Japanese joint venture 9 196 242 474
--------------------- ----- ------- ------- ------- ------- ------- -------
Profit before tax 27,132 23,090 46,139
Income tax expense 3 (8,411) (7,510) (14,303)
--------------------- ----- ------- ------- ------- ------- ------- -------
Profit for the period
attributable to equity
shareholders of the
parent 18,721 15,580 31,836
--------------------- ----- ------- ------- ------- ------- ------- -------
--------------------- ----- ------- ------- ------- ------- ------- -------
Earnings per share
Basic 4 23.1p 19.3p 39.4p
Diluted 4 22.8p 19.1p 38.9p
--------------------- ----- ------- ------- ------- ------- ------- -------
Dividends
Year ended 30
September 2005
final dividend paid
March 2006 at 9.3p per
share - 7,494 7,494
Year ended 30
September 2006
interim dividend paid
July 2006 at 4.2p per
share - - 3,402
final dividend paid
March 2007 at 10.2p
per share 8,255 - -
----- ------- ------- ------- ------- ------- -------
6 8,255 7,494 10,896
--------------------- ----- ------- ------- ------- ------- ------- -------
An interim dividend of 4.7p per share will be paid on 31 July 2007 to
shareholders on the register at the close of business on 29 June 2007. In
accordance with International Financial Reporting Standards ('IFRS') this
dividend will be recognised in the period in which it is approved.
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
31 March 2007 31 March 2006 30 September
2006
Note £000 £000 £000
Assets
Non-current assets
Property, plant and
equipment 100,643 68,369 84,009
Intangible assets 11,788 9,710 9,404
Investment in Japanese
joint venture 9 - 132 370
Deferred tax assets 7,108 6,010 7,201
---------------------- ----- ------------ ------------ ------------
119,539 84,221 100,984
---------------------- ----- ------------ ------------ ------------
Current assets
Inventories 25,003 21,637 22,969
Current income tax
assets 565 434 774
Trade and other
receivables 16,469 13,892 12,139
Derivative financial
instruments 2,280 654 2,776
Cash and cash
equivalents 11,948 19,121 26,860
---------------------- ----- ------------ ------------ ------------
56,265 55,738 65,518
---------------------- ----- ------------ ------------ ------------
Total assets 175,804 139,959 166,502
---------------------- ----- ------------ ------------ ------------
Liabilities
Non-current liabilities
Deferred tax
liabilities (13,671) (10,673) (12,385)
Retirement benefit
obligations (10,710) (9,322) (12,159)
---------------------- ----- ------------ ------------ ------------
(24,381) (19,995) (24,544)
---------------------- ----- ------------ ------------ ------------
Current liabilities
Derivative financial
instruments (408) (1,449) (244)
Short-term borrowings (2,155) - -
Current income tax
liabilities (9,345) (7,274) (7,549)
Trade and other
payables (15,279) (11,659) (20,714)
---------------------- ----- ------------ ------------ ------------
(27,187) (20,382) (28,507)
---------------------- ----- ------------ ------------ ------------
Total liabilities (51,568) (40,377) (53,051)
---------------------- ----- ------------ ------------ ------------
Net assets 124,236 99,582 113,451
---------------------- ----- ------------ ------------ ------------
Equity
Share capital 820 816 817
Share premium account 17,196 16,076 16,549
Translation reserve (530) 177 (229)
Hedging reserve 630 (676) 1,325
Retained earnings 106,120 83,189 94,989
---------------------- ----- ------------ ------------ ------------
Total equity 6 124,236 99,582 113,451
---------------------- ----- ------------ ------------ ------------
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 2007 31 March 2006 2006
Note £000 £000 £000
Cash flows from operating
activities
Cash generated from
operations 7 23,001 23,441 54,791
Interest and similar
charges paid (280) (4) (20)
Interest received 433 267 688
Tax paid (5,944) (6,511) (12,357)
------------------------ ----- ---------- ------------ ------------
Net cash flow from
operating activities 17,210 17,193 43,102
------------------------ ----- ---------- ------------ ------------
Cash flows from investing
activities
Acquisition of
property, plant and
equipment (22,359) (6,635) (21,470)
Purchase of business
including acquisition
costs 9 (1,036) - -
Dividends received - 113 112
------------------------ ----- ---------- ------------ ------------
Net cash flow from
investing activities (23,395) (6,522) (21,358)
------------------------ ----- ---------- ------------ ------------
Cash flows from financing
activities
Issue of ordinary
shares exercised under
option 3 4 5
Premium on issue of
ordinary shares
exercised under option 647 833 1,306
Purchase of own shares
held (821) (767) (767)
Dividends paid (8,255) (7,494) (10,896)
------------------------ ----- ---------- ------------ ------------
Net cash flow from
financing activities (8,426) (7,424) (10,352)
------------------------ ----- ---------- ------------ ------------
Net (decrease)/increase
in cash and cash
equivalents (14,611) 3,247 11,392
Exchange differences on
net investment
translation of
foreign operations (301) 127 (279)
Cash and cash
equivalents at
beginning of period 26,860 15,747 15,747
------------------------ ----- ---------- ------------ ------------
Cash and cash
equivalents at end of
period 11,948 19,121 26,860
------------------------ ----- ---------- ------------ ------------
Components of net cash
Unaudited Unaudited Audited
31 March 2007 31 March 2006 30 September
2006
Note £000 £000 £000
Cash and cash
equivalents 11,948 19,121 26,860
Short-term borrowings (2,155) - -
------------------------ ----- ---------- ------------ ------------
Net cash 8 9,793 19,121 26,860
------------------------ ----- ---------- ------------ ------------
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 September
31 March 2007 31 March 2006 2006
£000 £000 £000
Changes in fair value of
cash flow hedges (3,887) (1,195) 299
Net change in fair value
of cash flow hedges
transferred to income
statement 2,894 291 1,366
Exchange differences on
net investment translation
of foreign operations (301) 127 (279)
Actuarial gains/(losses)
on defined benefit plans 1,887 (1,323) (4,050)
Tax on items taken
directly to or transferred
from equity (786) 768 1,262
------------------------------- ----------- ---------- -----------
Net expense recognised
directly in equity (193) (1,332) (1,402)
Profit for the period 18,721 15,580 31,836
------------------------------- ----------- ---------- -----------
Total recognised income
and expense for the period
attributable to equity
shareholders of the parent 18,528 14,248 30,434
------------------------------- ----------- ---------- -----------
NOTES TO THE INTERIM REPORT
1 Basis of preparation
Victrex plc (the 'Company') is a limited liability company incorporated and
domiciled in the United Kingdom. The address of the registered office is Victrex
Technology Centre, Hillhouse International, Thornton Cleveleys, Lancashire, FY5
4QD, United Kingdom.
The consolidated financial statements of the Company for the half year ended 31
March 2007 comprise the Company and its subsidiaries (together referred to as
the 'Group') and the Group's interest in the Japanese joint venture, which
became a wholly owned subsidiary with effect from 30 March 2007 (see note 9).
Prior to this date the Japanese joint venture was accounted for on the equity
accounting basis in accordance with IAS 31 Interests in Joint Ventures. After
this date it was accounted for as a wholly owned subsidiary in accordance with
IFRS 3 Business Combinations.
The Company is listed on the London Stock Exchange.
These consolidated financial statements have been approved for issue by the
Board of Directors on 4 June 2007.
The interim results have been prepared on the basis of the accounting policies
set out in the Group's last Annual Report and Accounts. The financial
information for the year ended 30 September 2006 has been extracted from the
statutory accounts, which have been filed with the Registrar of Companies. The
auditor's report on these accounts was unqualified.
2 Segment reporting
Primary geographical segments
Results
Unaudited Unaudited
six months ended 31 March 2007 six months ended 31 March 2006
Europe USA Asia-Pacific Group Europe USA Asia-Pacific Group
£000 £000 £000 £000 £000 £000 £000 £000
Total segment
sales 34,384 38,570 10,312 83,266 31,281 33,679 8,448 73,408
Less
inter-segment
sales (71) (16,316) (461) (16,848) - (14,678) - (14,678)
------ ------ ------ ------ ------ ------ ------ ------
Revenue from
external 34,313 22,254 9,851 66,418 31,281 19,001 8,448 58,730
sales ------ ------ ------ ------ ------ ------ ------ ------
Segment
operating
profit 15,876 9,112 3,196 28,184 14,795 6,843 2,712 24,350
Unallocated
central costs (1,645) (1,725)
------ ------
Operating
profit 26,539 22,625
Net financing
income 397 223
Share of
profit of
Japanese
joint 196 242
venture ------ ------
Profit before
tax 27,132 23,090
Income tax
expense (8,411) (7,510)
------ ------
Profit for
the period
attributable
to equity
shareholders
of the parent 18,721 15,580
------ ------
Audited
year ended 30 September 2006
Europe USA Asia-Pacific Group
£000 £000 £000 £000
Total segment sales 65,076 70,452 17,789 153,317
Less inter-segment sales (158) (29,974) (669) (30,801)
------ ------ ------ ------
Revenue from external sales 64,918 40,478 17,120 122,516
------ ------ ------ ------
Segment operating profit 29,753 14,670 4,754 49,177
Unallocated central costs (4,112)
------
Operating profit 45,065
Net financing income 600
Share of profit of Japanese
joint venture 474
------
Profit before tax 46,139
Income tax expense (14,303)
------
Profit for the year
attributable to equity
shareholders of the parent 31,836
------
Other information
Unaudited Unaudited
six months ended 31 March 2007 six months ended 31 March 2006
Europe USA Asia-Pacific Group Europe USA Asia-Pacific Group
£000 £000 £000 £000 £000 £000 £000 £000
Segment 155,514 10,235 10,055 175,804 127,081 9,438 3,440 139,959
assets
Segment
liabilities 39,498 8,871 3,199 51,568 31,307 9,070 - 40,377
Capital
expenditure 19,090 12 80 19,182 6,499 42 382 6,923
Depreciation 2,506 13 64 2,583 2,334 31 - 2,365
Amortisation 305 - - 305 305 - - 305
Audited
year ended 30 September 2006
Europe USA Asia-Pacific Group
£000 £000 £000 £000
Segment assets 152,341 8,788 5,373 166,502
Segment liabilities 43,418 9,482 151 53,051
Capital expenditure 23,637 33 1,365 25,035
Depreciation 4,772 30 34 4,836
Amortisation 611 - - 611
3 Taxation
Taxation of profit before tax in respect of the half year ended 31 March 2007
has been provided at the estimated effective rates chargeable for the full year
in the respective jurisdiction.
+------------------------+----------------+-------------------+----------------+
| | Unaudited| Unaudited| Audited|
| | | | |
+------------------------+----------------+-------------------+----------------+
| | six months| six months| year ended|
| | ended| ended| |
+------------------------+----------------+-------------------+----------------+
| | 31 March 2007| 31 March 2006| 30 September|
| | | | 2006|
+------------------------+----------------+-------------------+----------------+
| | £000| £000| £000|
| | | | |
+------------------------+----------------+-------------------+----------------+
|UK corporation taxation | 6,631| 6,507| 11,262|
| | | | |
+------------------------+----------------+-------------------+----------------+
|Overseas taxation | 904| 999| 2,022|
+------------------------+----------------+-------------------+----------------+
|Deferred taxation | 876| 4| 1,019|
| | -----------| ----------| -----------|
+------------------------+----------------+-------------------+----------------+
| | 8,411| 7,510| 14,303|
| | -----------| ----------| -----------|
+------------------------+----------------+-------------------+----------------+
On 21 March 2007, it was announced that the standard rate of UK corporation tax
was to be changed to 28% and revised capital allowance legislation impacting on
the calculation of the deferred tax liability of the Group will be introduced
for taxable periods arising on or after 1 April 2008. For the purpose of the
accounts to 31 March 2007, the standard rate of UK corporation tax (30%) and
capital allowance legislation applicable to taxable periods prior to 31 March
2008 has been applied on the basis of legislation enacted at 31 March 2007.
4 Earnings per share
+-----------------------------------+--------------+--------------+------------+
| | Unaudited| Unaudited| Audited|
| | | | |
+-----------------------------------+--------------+--------------+------------+
| | six months| six months| year ended|
| | ended| ended| |
+-----------------------------------+--------------+--------------+------------+
| | 31 March 2007| 31 March 2006|30 September|
| | | | 2006|
+----------------------+------------+--------------+--------------+------------+
|Earnings per share |- Basic | 23.1p| 19.3p| 39.4p|
| | | | | |
+----------------------+------------+--------------+--------------+------------+
| |- Diluted | 22.8p| 19.1p| 38.9p|
| | | | | |
+----------------------+------------+--------------+--------------+------------+
|Profit for the financial | | | |
|period | £18,721,000| £15,580,000| £31,836,000|
| | | | |
+-----------------------------------+--------------+--------------+------------+
|Weighted average number of shares | | | |
|used: | | | |
| | | | |
+----------------------+------------+--------------+--------------+------------+
| |- Basic | 81,032,703| 80,586,195| 80,773,463|
| | | | | |
+----------------------+------------+--------------+--------------+------------+
| |- Diluted | 81,960,307| 81,702,637| 81,838,184|
+----------------------+------------+--------------+--------------+------------+
5 Exchange rates
The most significant Sterling exchange rates used in the accounts under the
Group's accounting policies are:
Unaudited Unaudited Audited
six months six months year ended
ended ended
31 March 2007 31 March 2006 30 September
2006
Average Closing Average Closing Average Closing
US Dollar 1.81 1.96 1.83 1.73 1.82 1.87
Euro 1.46 1.47 1.42 1.43 1.43 1.47
Yen 195 232 189 205 188 221
6 Changes in equity
+--------------------------+---------------+------------------+----------------+
| | Unaudited| Unaudited| Audited|
| | | | |
+--------------------------+---------------+------------------+----------------+
| | six months| six months| year ended|
| | ended| ended| |
+--------------------------+---------------+------------------+----------------+
| | 31 March 2007| 31 March 2006| 30 September|
| | | | 2006|
+--------------------------+---------------+------------------+----------------+
| | £000| £000| £000|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Equity at beginning of | | | |
|period | 113,451| 92,247| 92,247|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Total recognised income | | | |
|and expense | 18,528| 14,248| 30,434|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Share options exercised | 650| 837| 1,311|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Equity-settled share-based| | | |
|payment transactions | 683| 511| 1,122|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Purchase of own shares | | | |
|held | (821)| (767)| (767)|
+--------------------------+---------------+------------------+----------------+
|Dividends to shareholders | (8,255)| (7,494)| (10,896)|
| | -----------| ----------| -----------|
+--------------------------+---------------+------------------+----------------+
|Equity at end of period | 124,236| 99,582| 113,451|
| | -----------| ----------| -----------|
+--------------------------+---------------+------------------+----------------+
7 Reconciliation of profit to cash generated from operations
+--------------------------+---------------+------------------+----------------+
| | Unaudited| Unaudited| Audited|
| | | | |
+--------------------------+---------------+------------------+----------------+
| | six months| six months| year ended|
| | ended| ended| |
+--------------------------+---------------+------------------+----------------+
| | 31 March 2007| 31 March 2006| 30 September|
| | | | 2006|
+--------------------------+---------------+------------------+----------------+
| | £000| £000| £000|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Profit after tax for the | | | |
|period | 18,721| 15,580| 31,836|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Income tax expense | 8,411| 7,510| 14,303|
+--------------------------+---------------+------------------+----------------+
|Share of profit of | | | |
|Japanese joint venture | (196)| (242)| (474)|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Net financing income | (397)| (223)| (600)|
| | ---------| ---------| -----------|
+--------------------------+---------------+------------------+----------------+
|Operating profit | 26,539| 22,625| 45,065|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Adjustments for: | | | |
| | | | |
+--------------------------+---------------+------------------+----------------+
|Depreciation | 2,583| 2,365| 4,836|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Amortisation | 305| 305| 611|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Decrease/(increase) in | | | |
|inventories | 90| (1,698)| (3,030)|
| | | | |
+--------------------------+---------------+------------------+----------------+
|(Increase)/decrease in | | | |
|trade and other | | | |
|receivables | (5,092)| (1,080)| 675|
| | | | |
+--------------------------+---------------+------------------+----------------+
|(Decrease)/increase in | | | |
|trade and other payables | (2,486)| (156)| 5,595|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Equity-settled share-based| | | |
|payment transactions | 683| 511| 1,122|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Japanese joint venture | | | |
|profit in stock adjustment| 269| 64| 59|
| | | | |
+--------------------------+---------------+------------------+----------------+
|Changes in fair value of | | | |
|derivative financial | | | |
|instruments | (334)| 318| (440)|
+--------------------------+---------------+------------------+----------------+
|Retirement benefit | | | |
|obligations charge less | | | |
|contributions | 444| 187| 298|
| | ---------| ---------| -----------|
+--------------------------+---------------+------------------+----------------+
|Cash generated from | | | |
|operations | 23,001| 23,441| 54,791|
| | ---------| ---------| -----------|
+--------------------------+---------------+------------------+----------------+
8 Reconciliation of net cash flow to movements in net cash
+------------------------------+------+--------------+--------------+------------+
| | Note| Unaudited| Unaudited| Audited|
| | | | | |
+------------------------------+------+--------------+--------------+------------+
| | | six months| six months| year ended|
| | | ended| ended| |
+------------------------------+------+--------------+--------------+------------+
| | | 31 March 2007| 31 March 2006|30 September|
| | | | | 2006|
+------------------------------+------+--------------+--------------+------------+
| | | £000| £000| £000|
| | | | | |
+------------------------------+------+--------------+--------------+------------+
|(Decrease)/increase in | | | | |
|cash and cash | | | | |
|equivalents in period | | (14,611)| 3,247| 11,392|
| | | | | |
+------------------------------+------+--------------+--------------+------------+
|Exchange differences on | | | | |
|net investment | | | | |
|translation of foreign | | | | |
|operations | | (301)| 127| (279)|
| | | | | |
+------------------------------+------+--------------+--------------+------------+
|Short term borrowings | | | | |
|acquired | 9| (2,155)| -| -|
| | -----| ---------| ---------| -----------|
+------------------------------+------+--------------+--------------+------------+
|Movement in net cash in | | | | |
|period | | (17,067)| 3,374| 11,113|
+------------------------------+------+--------------+--------------+------------+
|Net cash at beginning | | | | |
|of period | | 26,860| 15,747| 15,747|
| | -----| ---------| ---------| -----------|
+------------------------------+------+--------------+--------------+------------+
|Net cash at end of | | | | |
|period | | 9,793| 19,121| 26,860|
| | -----| ---------| ---------| -----------|
+------------------------------+------+--------------+--------------+------------+
| | |
+------------------------------+-------------------------------------------------+
9 Acquisition of subsidiary
On 30 March 2007 Victrex plc acquired from Mitsui Chemicals, Inc their 49%
shareholding in Victrex-MC, Inc, the Group's Japanese joint venture, which is
responsible for VICTREX PEEK sales in Japan. As a result, Victrex-MC, Inc became
a wholly owned subsidiary with effect from that date and was renamed Victrex
Japan, Inc.
Net assets acquired were as follows:
+-----------------+------------------+--------------------+--------------------+
| | Book value of| Fair value| Fair value|
| | 49% share| adjustment| |
| | acquired| | |
+-----------------+------------------+--------------------+--------------------+
| | £000| £000| £000|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Property, | | | |
|plant and | | | |
|equipment | 35| -| 35|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Deferred tax | | | |
|assets | -| 282| 282|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Inventories | 1,981| (940)| 1,041|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Trade and | | | |
|other | | | |
|receivables | 1,138| -| 1,138|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Cash and cash | | | |
|equivalents | 651| -| 651|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Short-term | | | |
|borrowings | (1,056)| -| (1,056)|
| | | | |
+-----------------+------------------+--------------------+--------------------+
|Trade and | | | |
|other payables | (2,365)| -| (2,365)|
| | -----------| -----------| -----------|
+-----------------+------------------+--------------------+--------------------+
|Net | | | |
|identifiable | | | |
|assets/(liabil | | | |
|ities) | 384| (658)| (274)|
| | -----------| -----------| |
+-----------------+------------------+--------------------+--------------------+
|Goodwill on | | | |
|acquisition | | | 2,688|
| | | | -----------|
+-----------------+------------------+--------------------+--------------------+
| | -----------|
|Total purchase | |
|price | |
|comprising | |
|consideration | |
|of £2,310,000 | |
|and legal fees | |
|of £104,000 | 2,414|
+-----------------+------------------+--------------------+--------------------+
|Less total | | | |
|cash acquired | | | (1,328)|
+-----------------+------------------+--------------------+--------------------+
|Less accrued | | | |
|legal fees | | | (50)|
| | | | -----------|
+-----------------+------------------+--------------------+--------------------+
|Net cash | | | |
|outflow on | | | |
|acquisition | | | 1,036|
| | | | -----------|
+-----------------+------------------+--------------------+--------------------+
The fair value adjustment represents the elimination of profit in stock, and the
related deferred tax asset, on the stock acquired as part of the transaction.
There were no significant identifiable intangible assets acquired as part of the
transaction and hence the difference between consideration and the fair value of
net assets acquired has been designated as goodwill. The carrying value is
justified based on the net present value of future cash flows from our business
in Japan.
INDEPENDENT REVIEW REPORT BY KPMG AUDIT Plc TO VICTREX plc
Introduction
We have been engaged by the Company to review the financial information set out
on pages 4 to 13 and we have read the other information contained in the Interim
Report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of and has been approved by the Directors. The Directors are
responsible for preparing the Interim Report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2007.
KPMG Audit Plc
Chartered Accountants
Manchester
4 June 2007
SHAREHOLDER INFORMATION
Copies of this Interim Report will be sent to all shareholders and will be
available from the Registered Office detailed below.
+--------------------------------------------+---------------------------------+
|Financial Calendar | |
|-------------------- | ----------------------------|
| | |
+--------------------------------------------+---------------------------------+
|Ex-dividend date for interim dividend | 27 June 2007|
| | |
+--------------------------------------------+---------------------------------+
|Record date for interim dividend | 29 June 2007|
| | |
+--------------------------------------------+---------------------------------+
|Payment of interim dividend | 31 July 2007|
| | |
+--------------------------------------------+---------------------------------+
|2007 year end | 30 September|
| | 2007|
+--------------------------------------------+---------------------------------+
|Announcement of 2007 full year results | December 2007|
| | |
+--------------------------------------------+---------------------------------+
|Annual General Meeting | February 2008|
| | |
+--------------------------------------------+---------------------------------+
|Payment of final dividend | March 2008|
|-------------------- | ----------------------------|
+--------------------------------------------+---------------------------------+
Company Secretary
M W Peacock
Victrex plc
Registered in England
Number 2793780
Registered Office:
Victrex Technology Centre
Hillhouse International
Thornton Cleveleys
Lancashire FY5 4QD
United Kingdom
FORWARD-LOOKING STATEMENTS
Sections of this Interim Report contain forward-looking statements, including
statements relating to: future demand and markets for the Group's products and
services; research and development relating to new products and services; and
liquidity and capital resources. These forward-looking statements involve risks
and uncertainties, because they relate to events that may or may not occur in
the future. Accordingly, actual results may differ materially from anticipated
results because of a variety of risk factors, including: changes in interest and
exchange rates; changes in global, political, economic, business, competitive
and market forces; 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; changes in regulatory environment, and the outcome of litigation.
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