Last checked at 1 Dec 2008 07:00
For release at 7.00am Monday 1 December 2008
Victrex plc
Trading Update
As previously indicated, Victrex had planned to update the market on current trading at our preliminary results announcement for the year ended 30 September 2008 on 16 December 2008. However, given the deterioration in industry conditions in recent weeks, we have decided to provide the market with an early update on trading for October and November.
Current trading
Sales volume remained strong in October at 218 tonnes, in line with average run rates achieved for the year ended 30 September 2008 (annual sales volume - 2,626 tonnes). Sales volume continued at this level in the early part of November. However, we have since experienced a slowdown in orders as our customers have responded to the deteriorating global economic climate. Accordingly, November sales volume amounted to 118 tonnes.
In contrast to our VICTREX PEEK business, Invibio®, our biomaterials business, continued to move ahead in line with our expectations, with revenues for both October and November at higher levels than the average run rate we achieved in 2008 (annual sales revenue - £24.9m).
The Group remains in a strong financial position with a healthy balance sheet and good cash generation.
Outlook
Traditionally, December sales run at seasonally low levels as our customers look to their year end shutdowns. As a result we do not expect December sales volume to show an improvement over November. However, we believe that this current reduction in sales is, to some extent, caused by customers reducing inventories due to the uncertain global economic outlook. We anticipate having a clearer view of the likely level of ongoing demand for 2009 when we have seen January sales volume, which we will report on in February. However, based on the current trading environment, we consider it unlikely that sales in the remaining months will grow sufficiently for us to meet expected sales volume for the year to 30 September 2009.
Even though the current economic climate is clearly impacting sales in the short term, the underlying growth drivers remain in place across our end use markets and our development pipeline of potential new applications is strong. Accordingly, we remain committed to the key objective of growth through new application development. We will continue to generate new business in 2009 as we penetrate existing markets with new applications, pioneer innovative applications in new markets, and expand our geographic presence.
While still fully committed to driving forward the growth of the business, we are currently progressing a full review of our cost base in the light of current trading to ensure our resources are prioritised and focused on maximising volume from new business.
Currency impact and gross margin
As previously reported, trading results for 2009 will be positively affected by the weakening of Sterling against our key trading currencies. Based on our forecast sales volume, current hedging already in place and spot exchange rates as at 25 November 2008, we currently estimate the following average rates will apply:
| | Year to | Year to |
| | 30 September | 30 September |
| | 2008 | 2009 |
| | Actual | Estimate |
| US Dollar | 1.99* | 1.87 |
| Euro | 1.47* | 1.36 |
| Yen | 229* | 227 |
As a result of these improved rates, we expect to see a significant increase in effective sterling average selling price which will have a positive impact on revenues and profit. However, this will be partially offset by increased input costs, additional depreciation on our new plants and higher effective fixed costs per tonne as a result of reduced production and therefore we expect group gross margin to be similar to 2008 (64.9%*).
Balance sheet
As at 30 September 2008, the Group had cash of £23.5m* and no debt (2007: net cash - £13.7m). The Group has a committed bank facility of £40m, all of which was undrawn at the year end. This facility expires in September 2012. Accordingly, we are well placed to meet the future needs of the business.
Net assets at the year end amounted to £166.8m* (2007: £141.5m).
We have now successfully completed our major capital expenditure programme. Total fixed asset additions amounted to £24.2m* for the year ended 30 September 2008 (2007: £34.3m). We expect capital expenditure for 2009 to be approximately £10m, subject to phasing of projects. This will be funded from the Group's existing cash resources.
Results for the year ended 30 September 2008
Profit before tax was £55.0m*, 6% up on 2007 (£52.0m) and in line with market expectations. Basic earnings per share were up 6% at 47.8p* (2007: 44.9p).
As previously announced, the Company's preliminary results for the year ended 30 September 2008 will be announced on Tuesday, 16 December 2008.
\* These numbers are subject to audit.
-Ends-
For further information please contact:
Victrex plc 01253 897722
David Hummel, Chief Executive
Michael Peacock, Finance Director
Hogarth Partnership Limited 0207 357 9477
Nick Denton / Barnaby Fry
Victrex plc is an innovative world leader in high performance materials through the manufacture of VICTREX® PEEK™ polymer, a high performance, easy to process thermoplastic.
VICTREX PEEK has a unique combination of chemical, wear, electrical, hydrolysis and temperature resistance, as well as excellent dimensional, mechanical and chemical stability combined with inherent purity and low flammability.
End users specify VICTREX PEEK to reduce systems costs, improve part performance, exploit greater design freedom and create a differentiated application. VICTREX PEEK is used across a broad range of applications in diverse markets including transport, industrial, electronics and medical. Invibio®, Victrex's biomaterial business, provides specialised solutions for medical device manufacturers.
The Group's headquarters are in the UK where its manufacturing facilities are based. This is complemented by a global network of sales, distribution and technical centres that serve more than 30 countries worldwide.