Final Results - Year Ended 30 September 1999
Victrex PLC
8 December 1999
Victrex plc
Results announcement for the year ended 30 September 1999
* Pre-tax profit of £12.7 million (1998: £13.1 million), on
marginally reduced turnover;
* Earnings per share of 11.8p (1998: 12.1p);
* Final dividend increased 6% to 3.85p per share, making a total of
5.50p per share for the year (1998: 5.28p);
* Continued growth in Europe driven by automotive market; lower
sales in the US reflect short-term de-stocking and weakness in
certain industrial and transportation markets;
* Sales development pipeline increased; encouraging progress made
on medical and fuel cell applications;
* Key raw material supply secured since period end.
Chairman Peter Warry commented:-
'1999 was a year of two parts for Victrex. On the strategic front we made
major strides in securing our raw material supplies, increasing capacity
and developing the markets for our products, all of which cemented our
strong base for the future. However, despite a record year in Europe,
second half sales to the US were slow, yielding results for the year that
were less than we would have liked.
'Victrex enters the next millennium with unique technology, a strong
global market position and exciting growth opportunities on which we are
focussing our resources. Early signs suggest the trading environment is
beginning to turn in our favour, so improving the prospects for the
Group's growth.'
Enquiries
Victrex plc
David Hummel, Chief Executive 0171 357 9477 (8 December 1999)
David Tilston, Finance Director 01253 897700 (thereafter)
Hogarth Partnership Limited
Nick Denton / John Olsen 0171 357 9477
Victrex plc
Preliminary results statement for year to 30 September 1999
1999 was a year of two parts for Victrex. On the strategic front we made
major strides in securing our raw material supplies, increasing capacity
and developing the markets for our products, all of which cemented our
strong base for the future. However, despite a record year in Europe,
second half sales to the US were slow, yielding results for the year that
were less than we would have liked.
Results
Profit before interest and taxation at £13.2m (1998: £13.4m) benefited
from contribution from the new melt filtration facility but reflected
marginally reduced turnover of £46.4m (1998: £47.3m), higher overhead
costs from investment in the sales and marketing team and the impact of
adverse exchange rates which reduced profits by £0.6m compared to the
previous year. Operating margins were nevertheless in line with the
previous year.
Net interest costs increased to £0.4m (1998: £0.3m), reflecting higher
average debt levels.
Profit before tax for the year was £12.7m (1998: £13.1m) leading to
earnings per share of 11.8p (1998: 12.1p).
The Group's effective rate of taxation was reduced to 27.2% due to the
continuing UK investment programme.
Cashflow
Cashflow from operating activities for the year was £10.0m (1998: £11.0m).
Engineering to complete increased manufacturing capacity required an
extended plant shutdown during October and November 1999, and stocks were
increased prior to the year end to guarantee customer service over this
period and ahead of 1 January 2000.
Taxation payments increased to £4.2m (1998: £3.6m) due to the phasing in
of UK legislation accelerating such payments.
Capital expenditure payments fell to £4.7m (1998: £7.0m) as a number of
projects were completed.
Net debt at the year end stood at £8.1m (1998: £4.7m), representing net
balance sheet gearing of 29%. Victrex now has £40 million of committed
facilities to meet the completion payments to Laporte for their DFDPM
business. As a result of the transaction gearing is expected to increase
significantly and net interest cover is expected to fall but will
nonetheless remain at a comfortable level.
Dividend
In recognition of the strategic steps that have been made the board is
proposing a final dividend of 3.85p per ordinary share, an increase of 6%
over last year, making a total of 5.50p per ordinary share for the year
(1998:5.28p).
Operational review
Sales volumes were marginally below last year's level at 1,067 tonnes
(1998: 1,100 tonnes).
An estimated 40 tonnes of sales volume were generated from end users
commercialising new applications from the development pipeline. This was
offset by a decrease of approximately 70 tonnes of sales to our existing
customer base as a result of slower international demand in their sectors.
Overall Europe saw continued growth, with a 4% volume increase
consolidating a 34% increase the previous year. Sales to the automotive
sector were again very strong, up 28%, offsetting slightly weaker market
segments elsewhere.
USA sales volumes were down 11% compared to the previous financial year.
Sales to the key segments of industrial and transportation were lower due
to a combination of de-stocking and weakness in certain industrial and
transportation sectors. Set against this we are beginning to see sales to
the teletronics segment recover from last year's trough.
Sales to the Rest of the World were up 5%, with most of this improvement
being concentrated in second half sales to the teletronics sector in
Japan.
Average selling prices increased slightly on previous years due to the
full year effect of earlier price increases. This more than offset the
impact of worse currency rates.
Our capital investment has continued to plan. The engineering work to
increase the capacity of our existing plant has been completed since the
year end, and the melt filtration facility commissioned earlier in the
year made a useful contribution to profits, bringing in house a processing
step previously out-sourced to a contractor. The facility was completed
mid year and the benefits of this £3.7m investment were felt as costs were
reduced by £0.2m.
The recent announcement of our agreement with Laporte to purchase their
DFDPM business at Rotherham, and to form a joint venture for the
production of our key raw material, represents a major strategic
development. It secures a cost-effective long term supply of BDF and
thereby supports our future expansion opportunities.
The joint venture agreement will start on 1st January 2000 and will run
for a minimum of 7 years. The purchase of the DFDPM business and the new
agreement will supersede the current arrangements which would have expired
at the end of 2001.
The current plant capacity at Rotherham should be sufficient, with limited
additional investment, to supply the predicted capacity requirements of
Victrex's existing PEEK plant.
Development pipeline
Victrex measures future potential by the size of the development pipeline,
or mature annualised volume (MAV), which represents our best estimate of
the volume that could be generated by the applications we are currently
working on. If they all come to fruition, this figure now stands at
approximately 1,800 tonnes per annum of MAV.
Our European development pipeline is over 750 tonnes, 40% of the group
total. Significant opportunities exist in the transportation and medical
markets. Our strong position could not have been achieved without the
investment in our European team since 1996.
Since the formation of Victrex-MC, Inc. in 1997 we have seen the size of
the Japanese development pipeline increase six fold to over 600 tonnes,
one third of the group total. This rapid increase has supported our view
that PEEK was not being fully exploited in this market and further has
justified our strategic joint venture partnership with Mitsui Chemicals
Inc. In addition, we have continued to strengthen our representation in
the Asia Pacific region and expect to see a growing sales position in
Taiwan, South Korea and Singapore.
More recently we have recruited a number of new developers to our USA team
and have seen our pipeline there increase to almost 400 tonnes, almost
20% of the group total. All of the key market segments are showing growth
especially in areas of teletronics, transportation and medical. Additional
focus on personnel, key distribution channels and development partnerships
should continue to show sales and development results.
The launch of PEEK-OPTIMA LT has generated considerable interest from the
medical profession. As the stiffness of PEEK-OPTIMA LT can be tailored to
match that of human bone it is being considered as a potential upgrade to
current implant materials. Our first sales contracts in this area have
been signed and a number of new devices have entered clinical trials.
We referred in the interim statement to our encouraging progress in the
area of fuel cell technology. A number of our speciality grades are under
test for use as membrane material. Feedback continues to be positive and
commercial negotiations have been initiated.
In addition, Victrex has developed a highly efficient powder coating
process and is working with a number of international companies to
commercialise this new technology in areas of the teletronics and
industrial markets.
We are beginning to see enquiries from the food processing industry in the
USA following the FDA approval of PEEK. Last year PEK was launched
commercially as planned with initial interest in the automotive sector.
We have continued to re-direct staff to focus a greater proportion of our
resources on growth projects. In this way we are seeking to drive growth
as fast as possible whilst efficiently managing our cost base.
Year 2000
The Group has completed its plans for Year 2000 readiness and final
contingency plans have been put in place.
Outlook
Victrex enters the next millennium with unique technology, a strong global
market position and exciting growth opportunities on which we are
focussing our resources. Early signs suggest the trading environment is
beginning to turn in our favour, so improving the prospects for the
Group's growth.
Peter Warry
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
------------------------------------------------------------------------
1999 1998
Year ended 30 September 1999 Note £000 £000
------------------------------------------------------------------------
Turnover: Group and share of joint venture 48,735 49,037
Less: share of joint venture (2,330) (1,741)
------------------------------------------------------------------------
Turnover 2 46,405 47,296
Cost of sales (25,257) (26,594)
------------------------------------------------------------------------
Gross profit 21,148 20,702
Administrative expenses (8,029) (7,327)
------------------------------------------------------------------------
Group operating profit 13,119 13,375
Share of operating profit in joint venture 52 16
------------------------------------------------------------------------
Total operating profit 13,171 13,391
Interest receivable 70 117
Interest payable (512) (403)
------------------------------------------------------------------------
Profit on ordinary activities before taxation 12,729 13,105
Tax on profit on ordinary activities (3,462) (3,665)
------------------------------------------------------------------------
Profit on ordinary activities after taxation 9,267 9,440
Equity dividends paid and proposed (4,306) (4,141)
------------------------------------------------------------------------
Retained profit for the financial year 4,961 5,299
The Company 7,640 1,024
Group undertakings and joint venture (2,679) 4,275
------------------------------------------------------------------------
4,961 5,299
Earnings per ordinary share - basic 3 11.8p 12.1p
- diluted 11.8p 12.0p
------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
------------------------------------------------------------------------
1999 1998
For the year ended 30 September 1999 £000 £000
------------------------------------------------------------------------
Profit for the financial year 9,267 9,440
Exchange gain on consolidation 1 5
------------------------------------------------------------------------
Total recognised gains and losses relating to the 9,268 9,445
financial year
------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------
1999 1998
As at 30 September 1999 £000 £000
-------------------------------------------------------------------------
Fixed assets
Tangible assets 24,276 20,869
Investments 140 1
Investment in joint Share of gross assets 1,355 1,030
venture:
Share of gross liabilities (1,687) (1,034)
-------------------------------------------------------------------------
24,084 20,866
-------------------------------------------------------------------------
Current assets
Stocks 13,925 9,928
Debtors: amounts falling due within one year 6,700 7,247
Cash at bank and in hand - 1,021
-------------------------------------------------------------------------
20,625 18,196
Creditors: amounts falling due within one year (9,249) (10,428)
-------------------------------------------------------------------------
Net current assets 11,376 7,768
-------------------------------------------------------------------------
Total assets less current liabilities 35,460 28,634
Creditors: amounts falling due after more than one (7,400) (5,600)
year
-------------------------------------------------------------------------
Net assets 28,060 23,034
-------------------------------------------------------------------------
Capital and reserves
Called up share capital 785 784
Share premium account 10,155 10,092
Profit and loss account 17,120 12,158
-------------------------------------------------------------------------
Equity shareholders' funds 28,060 23,034
-------------------------------------------------------------------------
RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS
-------------------------------------------------------------------------
1999 1998
For the year ended 30 September 1999 £000 £000
-------------------------------------------------------------------------
Profit for the financial year 9,267 9,440
Dividends (4,306) (4,141)
-------------------------------------------------------------------------
Retained profit for the financial year 4,961 5,299
Exchange gain on consolidation 1 5
Issue of ordinary shares exercised under option 1 2
Premium on issue of ordinary shares under option 113 23
Share issue costs (50) (50)
-------------------------------------------------------------------------
Net addition to shareholders' funds 5,026 5,279
Opening shareholders' funds 23,034 17,755
Closing shareholders' funds 28,060 23,034
-------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT
-------------------------------------------------------------------------
1999 1998
For the year ended 30 September 1999 Note £000 £000
-------------------------------------------------------------------------
Net cash inflow from operating activities 4 10,046 11,027
-------------------------------------------------------------------------
Return on investments and servicing of finance
Interest received 70 117
Interest paid (508) (351)
-------------------------------------------------------------------------
Net cash outflow from returns on investment and (438) (234)
servicing of finance
-------------------------------------------------------------------------
Taxation - taxation paid (4,160) (3,559)
-------------------------------------------------------------------------
Net cash outflow from capital expenditure (4,678) (6,960)
- Purchase of tangible fixed assets
-------------------------------------------------------------------------
Net cash outflow from acquisitions - (59)
- Purchase of shares in joint venture
-------------------------------------------------------------------------
Equity dividends paid (4,129) (3,874)
-------------------------------------------------------------------------
Cash outflow before financing (3,359) (3,659)
-------------------------------------------------------------------------
Financing
Issue of ordinary share capital 1 25
Share purchase (139) -
Premium on issue of ordinary shares under 113 -
option
Debt due after one year - increase in long term 1,800 4,102
borrowing
-------------------------------------------------------------------------
Net cash inflow from financing 1,775 4,127
-------------------------------------------------------------------------
(Decrease)/increase in cash in the period (1,584) 468
-------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
1 Basis of preparation
The financial statements have been prepared on the basis of the
accounting policies set out in the Group's last Annual Report and
Accounts.
2 Analysis of turnover
Analysis of turnover by geographical market is as follows:
----------------------------------------------------------------------
1999 1998
£000 £000
----------------------------------------------------------------------
Europe 22,043 20,618
United States of America 20,626 23,144
Rest of World 3,736 3,534
----------------------------------------------------------------------
46,405 47,296
----------------------------------------------------------------------
3 Earnings per share
----------------------------------------------------------------------
1999 1998
p p
----------------------------------------------------------------------
Earnings per ordinary share - basic 11.8 12.1
- diluted 11.8 12.0
----------------------------------------------------------------------
Earnings per ordinary share is based on the Group's profit on ordinary
activities after taxation of £9,267,000 (1998 : £9,440,000).
The weighted average number of shares used in the calculation is :
- basic 78,453,630 (1998 : 78,294,885)
- diluted 78,577,969 (1998 : 78,824,760)
4 Reconciliation of operating profit to net cash flow
----------------------------------------------------------------------
1999 1998
£000 £000
----------------------------------------------------------------------
Operating profit 13,119 13,375
Depreciation charge 1,271 948
Increase in stocks (3,997) (942)
Increase in debtors (152) (1,107)
Decrease in creditors (532) (1,365)
Joint venture profit in stock elimination 337 118
----------------------------------------------------------------------
Net cash inflow 10,046 11,027
----------------------------------------------------------------------
5 Dividend
The proposed final dividend will be paid on 3 February 2000 to
ordinary shareholders on the share register at the close of business
on 24 December 1999. The Annual General Meeting of the Company will
be held on 27 January 2000 at Cazenove & Co, Conference Suite, 4
King's Arms Yard, London, EC2R 7AN.
6 Financial Statements
The above financial information does not comprise full financial
statements within the meaning of the Companies Act 1985. The results
for the years ended 30 September 1999 and 1998 have been extracted
from the full accounts of those periods. The auditors have given an
unqualified report on the accounts for both years. The accounts for
the year ended 30 September 1998 have been delivered to the Registrar
of Companies. The accounts for the year ended 30 September 1999 are
to be posted to shareholders on 17 December 1999 and will be available
from the Company's registered office at Victrex Technology Centre,
Hillhouse International, Thornton Cleveleys, Lancashire, FY5 4QD.
Latest directors dealings
- 15 minutes ago Carclo
- 32 minutes ago Schroder Japan Growth Fund
- 53 minutes ago Schroder Income Growth Fund
- 55 minutes ago CVC Income & Growth Limited NPV GBP
- 57 minutes ago Schroder Japan Growth Fund