Final Results

Victrex PLC 07 December 2004 7th December 2004 Victrex plc Results announcement for the year ended 30th September 2004 â€¢ Sales volume up 22% to 1,802 tonnes (2003: 1,481 tonnes) â€¢ Asia-Pacific volume up 50% to 291 tonnes (2003: 194 tonnes) â€¢ Turnover up 21% to Â£86.6m (2003: Â£71.5m) â€¢ Profit before taxation up 26% to Â£28.5m (2003: Â£22.6m) â€¢ Earnings per share up 25% to 23.9p (2003: 19.1p) â€¢ Final dividend of 6.2p making a total of 8.6p for the year, an increase of 15% Chairman Peter Warry commented: 'I am pleased to report a year of excellent progress at Victrex, with record sales and profits, further development of our supply chain, and continued success in developing new product applications and markets. Sales volume has remained strong across all of our markets since the year end. Provided this level of demand is sustained, particularly in the electronics segment, we expect first half volumes to be above the second half of last year, although gross margin will be impacted by the weaker US Dollar. We remain optimistic about the growth potential of the business.' Enquiries Victrex plc David Hummel, Chief Executive 0207 357 9477 (7th December 2004) Michael Peacock, Finance Director 01253 897700 (thereafter) Hogarth Partnership Limited Nick Denton / Barnaby Fry 0207 357 9477 Victrex plc Preliminary results statement for the year ended 30th September 2004 I am pleased to report a year of excellent progress at Victrex, with record sales and profits, further development of our supply chain, and continued success in developing new product applications and markets. RESULTS Turnover for the year was Â£86.6m (2003: Â£71.5m). Gross profit increased by 21.1% to Â£47.7m (2003: Â£39.4m) representing 55.1% of turnover (2003: 55.1%). Sales, marketing and administrative expenses increased to Â£19.9m (2003: Â£16.8m), primarily as a result of our ongoing investment programme in product development and marketing, together with increased staff bonuses and higher insurance costs. Profit before tax was Â£28.5m (2003: Â£22.6m) up 26.1% and basic earnings per share were up 25.1% at 23.9p (2003: 19.1p). Compared with the previous year, exchange rates have had an adverse impact of Â£0.9m on profit due to a weaker Dollar partially offset by a stronger Euro and Yen. The overall effective tax rate (including deferred tax) remained at 32.5%. CASH FLOW Cash flow from operating activities increased to Â£32.3m (2003: Â£26.1m) primarily as a result of improved trading. Capital expenditure payments amounted to Â£9.5m (2003: Â£6.5m) and were mainly related to the building of our own compounding facility and the capacity uprate of our melt filtration and granulation plant. Taxation paid was Â£6.1m (2003: Â£6.2m) as increased profits were more than offset by repayments received in respect of prior years and increased capital allowances claimed for the year. At the year end, the Group was ungeared with net cash of Â£17.0m (2003: Â£6.0m). The Group has a committed bank facility of Â£40m, all of which was undrawn at the year end. This facility expires in September 2008. DIVIDEND In recognition of this performance, the Directors have recommended a final dividend of 6.2p (2003: 5.3p) per ordinary share, making a total of 8.6p (2003: 7.5p) per ordinary share for the year, an increase of 15% over last year. This represents dividend cover of 2.8 times. INTERNATIONAL FINANCIAL REPORTING International Financial Reporting Standards ('IFRS') are due to become mandatory for all listed companies within the EU for accounting periods beginning on or after 1 January 2005. Accordingly, the Group's interim results and financial statements for the year to 30 September 2006 will be prepared in compliance with IFRS. Information regarding the main effects of IFRS implementation will be made available at the time of our next interim results announcement in June 2005. SALES Total sales volume increased by 21.7% to 1,802 tonnes (2003: 1,481 tonnes) with second half volume of 933 tonnes (2003: 738 tonnes) compared with 869 tonnes (2003: 743 tonnes) for the first half. Of our principal market segments, electronics sales volume was up 64.5% on 2003 at 578 tonnes which was principally due to a strong recovery in semiconductor sales and continued growth in consumer electronics applications which now represent around 40% of our total electronics sales. Second half sales of 290 tonnes were in line with the first half (288 tonnes). Transport sales volume was up 3.9% on 2003 at 503 tonnes as a result of increased automotive sales in the second half. Overall, transport volume (259 tonnes) in the second half was 6.5% up on the first half (244 tonnes). Industrial sales volume at 510 tonnes, showed an increase of 17.2% over the previous year mainly as a result of increased demand for industrial machinery and compressor applications in Europe. Second half sales of 278 tonnes were up 19.7% on the first half of 232 tonnes. Regionally, Asia-Pacific volume increased by 50.2% to a record level of 291 tonnes. This strong performance was the result of our ongoing commercial investment and increased electronics demand in this region. Second half sales volume (147 tonnes) was slightly ahead of the first half performance (144 tonnes). We believe this region offers the highest growth potential in the medium term and will continue investing to realise this. Europe achieved a record sales volume of 906 tonnes which was 14.5% up on 2003, with growth across all market segments. Second half volume (478 tonnes) was ahead of the strong first half performance (428 tonnes) due to increased demand in transport applications. United States volume increased by 22.0% to 605 tonnes, largely due to increased semiconductor demand. Sales volume for the second half (308 tonnes) was slightly ahead of the first half (297 tonnes). BUSINESS DEVELOPMENT The continuing growth strategy of Victrex is dependent on our ability to expand our market space based on products and platforms derived from our core polyketone technology. To succeed, we are developing new products and processes, further improving product quality and customer support, and expanding into new market areas. This year has seen the launch of a number of new products including VICTREX High Flow PEEK to enable customers to produce thin wall, intricate parts, VICTREX Ultra-High Purity PEEK to meet the increasing demands of the semiconductor industry and VICTREX PEEK-based coatings which offer superior performance over existing coating systems. We are also working on even higher temperature polymers, film grades, further advanced compounds and innovative processing technology. We have achieved further quality enhancements as part of our ongoing improvement programme, frequently driven by particular application requirements. We are also focusing on certain key market areas within our major segments. In transport, we are enabling automotive companies to reduce noise and weight by replacing metal in increasingly demanding gear wheel applications. In industrial compressors and machinery, we are helping to reduce downtime by developing Victrex PEEK based applications such as valve components, bearing and wear parts, and star gears. In electronics, the move towards lead-free solder is demanding very high temperature performance in board level components. Victrex PEEK is addressing this need in applications such as LEDs and batteries. Where appropriate, these programmes are supported by scientific studies and research projects with leading universities, and through the development of in-house capabilities such as our state of the art gear wheel test facility. During the year we commercialised 436 new applications (2003: 433) having an estimated mature annualised volume ('MAV') of 305 tonnes (2003: 470 tonnes). At the year end, the pipeline contained 1,431 developments (2003: 1,508) with an estimated MAV of 2,051 tonnes (2003: 2,081 tonnes) if all of the developments were successfully commercialised. Invibio(R) has continued to perform strongly with turnover amounting to Â£5.7m (2003: Â£3.2m). During the year we entered into 30 additional PEEK-OPTIMA(R) polymer long term supply assurance agreements with implantable medical device manufacturers. New market areas covered by these agreements include applications in the cardiovascular and dental markets. Invibio also launched PEEK-CLASSIXTM polymer during the year which is designed and manufactured for short-term blood and tissue contact for use in applications such as drug delivery and analytical equipment. SUPPLY CHAIN The supply chain can currently support 2,800 tonnes per annum of VICTREX PEEK polymer sales. While this is clearly sufficient for our near-term requirements, as previously announced, we have been reviewing the options for providing additional polymer capacity in the future. We have now completed our initial review and have concluded, in principle, that our next capacity expansion should comprise a new 1,000 tonnes per annum plant on our main UK site. We are currently carrying out the detailed design and costing process and expect to make the final decision to proceed during 2005. We have completed a previously announced uprate to increase capacity of our melt filtration plant from 900 to 1,800 tonnes per annum to support increased demand for our purified, granular product at a capital cost of Â£2.8m. As previously reported, we are bringing production of standard grades of our VICTREX PEEK compounds in-house and have constructed our own compounding facility at a cost of Â£4.5m in order to phase out toll manufacture in 2005. This will allow much greater control over this key manufacturing step, improve product quality and provide efficiency benefits. With regard to our raw material supply chain, as announced in June, we do not intend to extend our agreement with Degussa (under which they currently undertake the oxidation stage in the manufacture of BDF, our key raw material) beyond its expiry date of 31 December 2006. Accordingly, we are carrying out a detailed design and costing exercise for our own oxidation plant, the construction of which would be completed by late 2006. We are also discussing the alternative possibility of acquiring Degussa's oxidation plant and expect to make a final decision on the best route forward early in 2005. Taken together, the investments outlined above will enable us to consolidate strategic control of our supply chain and further improve product quality and customer service. Self-sufficiency in oxidation will give us even greater control of costs and quality in our raw material supply chain, while increased capacity and control over downstream elements of polymer production will allow us to work more closely with our customers and better meet their needs. OUTLOOK Sales volume has remained strong across all of our markets since the year end. Provided this level of demand is sustained, particularly in the electronics segment, we expect first half volumes to be above the second half of last year, although gross margin will be impacted by the weaker US Dollar. We remain optimistic about the growth potential of the business. Peter Warry Chairman 6 December 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT -------------------------------------------------------------------------------- 2004 2003 For the year ended 30 September Note Â£000 Â£000 -------------------------------------------------------------------------------- Turnover: Group and share of Japanese joint venture 93,497 76,616 Less: share of Japanese joint venture (6,921) (5,116) -------------------------------------------------------------------------------- Turnover 2 86,576 71,500 Cost of sales (38,915) (32,131) -------------------------------------------------------------------------------- Gross profit 47,661 39,369 Sales, marketing and administrative expenses (19,905) (16,841) -------------------------------------------------------------------------------- Group operating profit 27,756 22,528 Share of operating profit in Japanese joint venture 570 350 -------------------------------------------------------------------------------- Total operating profit 28,326 22,878 Interest receivable 271 107 Interest payable and other similar charges (138) (420) -------------------------------------------------------------------------------- Profit on ordinary activities before taxation 28,459 22,565 Taxation on profit on ordinary activities (9,249) (7,334) -------------------------------------------------------------------------------- Profit on ordinary activities after taxation 19,210 15,231 Equity dividends paid and proposed 7 (6,853) (5,989) -------------------------------------------------------------------------------- Retained profit for the financial year 12,357 9,242 -------------------------------------------------------------------------------- The Company 6,005 8,037 Group undertakings and joint ventures 6,352 1,205 -------------------------------------------------------------------------------- 12,357 9,242 -------------------------------------------------------------------------------- Earnings per ordinary share - Basic 3 23.9p 19.1p Diluted 3 23.7p 19.0p -------------------------------------------------------------------------------- The Group's turnover and operating profit arise from continuing operations in both the current and preceding year. There were no material differences between reported profits and historical cost profits on ordinary activities before taxation in either of the above financial years. CONSOLIDATED BALANCE SHEET ---------------------------------------------------------------------------------- 2004 Restated 2003 As at 30 September Â£000 Â£000 ---------------------------------------------------------------------------------- Fixed assets Intangible assets 6,677 7,949 Tangible assets 49,347 42,992 Investment in Japanese joint venture : share of gross assets 2,089 1,643 share of gross liabilities (1,800) (1,843) ---------------------------------------------------------------------------------- 56,313 50,741 ---------------------------------------------------------------------------------- Current assets Stocks 18,833 16,415 Debtors 10,578 9,369 Cash at bank and in hand 17,004 6,040 ---------------------------------------------------------------------------------- 46,415 31,824 Creditors: amounts falling due within one year (22,704) (16,169) ---------------------------------------------------------------------------------- Net current assets 23,711 15,655 ---------------------------------------------------------------------------------- Total assets less current liabilities 80,024 66,396 Provisions for liabilities and charges (6,070) (5,259) ---------------------------------------------------------------------------------- Net assets 73,954 61,137 ---------------------------------------------------------------------------------- Capital and reserves Called up share capital 805 802 Share premium account 13,383 12,743 Profit and loss account 59,766 47,592 ---------------------------------------------------------------------------------- Equity shareholders' funds 73,954 61,137 ---------------------------------------------------------------------------------- The prior period has been restated to reflect the adoption of UITF Abstract 38 Accounting for ESOP trusts and a revision of Abstract 17 Employee share schemes (see note 1). CONSOLIDATED CASH FLOW STATEMENT ------------------------------------------------------------------------------- 2004 2003 For the year ended 30 September Note Â£000 Â£000 ------------------------------------------------------------------------------- Net cash inflow from operating activities 4 32,336 26,104 ------------------------------------------------------------------------------- Return on investments and servicing of finance Interest received 273 107 Interest paid (36) (373) ------------------------------------------------------------------------------- Net cash inflow/(outflow) from returns on investment and servicing of finance 237 (266) ------------------------------------------------------------------------------- Taxation - Taxation paid (6,070) (6,243) ------------------------------------------------------------------------------- Net cash outflow from capital expenditure - Purchase of tangible fixed assets (9,468) (6,505) ------------------------------------------------------------------------------- Equity dividends paid (6,112) (5,615) ------------------------------------------------------------------------------- Net cash inflow before financing 10,923 7,475 ------------------------------------------------------------------------------- Financing Issue of ordinary shares exercised under option 3 6 Premium on issue of ordinary shares exercised under option 640 858 Purchase of own shares held (602) (640) Debt due after more than one year - decrease in long-term borrowing - (8,000) ------------------------------------------------------------------------------- Net cash inflow/(outflow) from financing 41 (7,776) ------------------------------------------------------------------------------- Increase/(decrease) in cash in the year 5 10,964 (301) ------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES ------------------------------------------------------------------------------- 2004 2003 For the year ended 30 September Â£000 Â£000 ------------------------------------------------------------------------------- Profit for the financial year 19,210 15,231 Exchange loss on consolidation (24) (14) ------------------------------------------------------------------------------- Total recognised gains and losses relating to the financial year 19,186 15,217 ------------------------------------------------------------------------------- RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS ------------------------------------------------------------------------------- 2004 Restated 2003 For the year ended 30 September Â£000 Â£000 ------------------------------------------------------------------------------- Profit for the financial year 19,210 15,231 Equity dividends paid and proposed (6,853) (5,989) ------------------------------------------------------------------------------- Retained profit for the financial year 12,357 9,242 Exchange loss on consolidation (24) (14) Issue of ordinary shares exercised under option 3 6 Premium on issue of ordinary shares exercised under option 640 858 Purchase of own shares held (602) (640) LTIP charge 443 321 ------------------------------------------------------------------------------- Net movement in shareholders' funds 12,817 9,773 Opening shareholders' funds 61,137 51,364 ------------------------------------------------------------------------------- Closing shareholders' funds 73,954 61,137 ------------------------------------------------------------------------------- Opening shareholders' funds were originally Â£61,849,000 before deducting the prior year adjustment of Â£712,000 (see note 1). NOTES TO THE ACCOUNTS 1 Basis of preparation With the exception of the adoption of UITF Abstract 38 Accounting for ESOP trusts and a revision of Abstract 17 Employee share schemes, the financial statements have been prepared on the basis of the accounting policies set out in the Group's last Annual Report and Accounts. UITF Abstract 38 Accounting for ESOP trusts and a revision of Abstract 17 Employee share schemes are effective for accounting periods ending on or after 22 June 2004. As a result the Group's own shares held by employee trusts, which are held at the lower of purchase cost or net realisable value and have previously been shown as tangible fixed asset investments, are now deducted in arriving at shareholders' funds. In addition, the charge for the LTIP scheme has been reclassified within shareholders' funds. There has been no profit and loss effect from this change. The net effect on shareholders' funds was a deduction of Â£712,000 (2003: Â£393,000). The Group has taken advantage of the exemption permitted by UITF 17 (revised 2003) and not applied it to Inland Revenue approved SAYE schemes. 2 Analysis of turnover An analysis of turnover by origin and customer location is as follows: ------------------------------------------------------------------------- 2004 2003 Â£000 Â£000 ------------------------------------------------------------------------- Europe 45,469 36,100 United States of America 28,799 26,547 Asia-Pacific 12,308 8,853 ------------------------------------------------------------------------- 86,576 71,500 ------------------------------------------------------------------------- 3 Earnings per share 2004 2003 ------------------------------------------------------------------------- Basic 23.9p 19.1p Diluted 23.7p 19.0p ------------------------------------------------------------------------- Earnings per ordinary share is based on the Group's profit on ordinary activities after taxation of Â£19,210,000 (2003: Â£15,231,000). The weighted average number of shares used in the calculation is: Basic 80,394,636 (2003: 79,861,763); Diluted 80,945,671 (2003: 80,152,779). 4 Reconciliation of operating profit to net cash inflow from operating activities --------------------------------------------------------------------------- 2004 2003 Â£000 Â£000 --------------------------------------------------------------------------- Operating profit 28,326 22,878 Depreciation and amortisation charge 4,860 4,329 --------------------------------------------------------------------------- Earnings before interest, taxation, depreciation and amortisation 33,186 27,207 Increase in stocks (2,418) (2,469) Increase in debtors (1,221) (1,142) Increase in creditors 3,130 2,540 LTIP charge 443 321 Japanese joint venture profit in stock elimination (190) 11 Share of operating profit in Japanese joint venture (570) (350) Effect of foreign exchange rate changes (24) (14) --------------------------------------------------------------------------- Net cash inflow from operating activities 32,336 26,104 --------------------------------------------------------------------------- 5 Reconciliation of net cash flow to movement in net cash --------------------------------------------------------------------------- 2004 2003 Â£000 Â£000 --------------------------------------------------------------------------- Increase/(decrease) in cash in year 10,964 (301) Cash outflow from decrease in debt - 8,000 --------------------------------------------------------------------------- Movement in net cash in year 10,964 7,699 Net cash/(debt) at beginning of year 6,040 (1,659) --------------------------------------------------------------------------- Net cash at end of year 17,004 6,040 --------------------------------------------------------------------------- 6 Exchange rates The Sterling exchange rates used in the accounts under the Group's accounting policies are: Average exchange rate Closing exchange rate 2004 2003 2004 2003 --------------------------------------------------------------------------- US Dollar 1.61 1.46 1.70 1.54 Euro 1.45 1.54 1.41 1.48 Yen 186 179 176 188 --------------------------------------------------------------------------- 7 Dividend and Annual General Meeting The proposed final dividend will be paid on 2 March 2005, to all shareholders on the register on 4 February 2005. The Annual General Meeting of the Company will be held on 8 February 2005, at The Great Eastern Hotel, Liverpool Street, London, EC2M 7QN. 8 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 2004 and 2003 have been extracted from the full accounts for those periods. The auditors have given an unqualified report on the accounts for both years. The accounts for the year ended 30 September 2003 have been delivered to the Registrar of Companies. The accounts for the year ended 30 September 2004 are to be posted to shareholders on 17 December 2004 and will be available from the Company's registered office at Victrex Technology Centre, Hillhouse International, Thornton Cleveleys, Lancashire, FY5 4QD. This information is provided by RNS The company news service from the London Stock Exchange

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