Victrex
Victrex PLC (VCT) is a Lancashire-headquartered provider of high performance polymer solutions, with 98% of revenue from sales outside the UK. The company is focused on the markets of medical, electronics, energy, aerospace and automotive. The polymer solutions of the group are based around PAEK (polyaryletherketones) and PEEK (polyetheretherketone), which was developed typically as a metal replacement. The operations are differentiated in two operating segments: Industrial and Medical.

Financial Highlights (H1 FY 2019, in £m)

(Source: Company Filings)

Reflecting some de-stocking during the period and the weakness in Automotive and the associated impact on the Value Added Resellers segment, group sales volume of 1,899 tonnes declined by 16% compared to the prior year (H1 2018: 2,256 tonnes). Due to the weak trading performance and adverse currency impact, group revenue was £145.7m, down by 13% on the prior year (H1 2018: £166.6m), while it was down by 12% on a constant currency basis. Revenue declined by 9% and sales volume was down 10% if the effect of the large Consumer Electronics contract is excluded, which weighed heavily in the first half of 2018. With product mix being an important driver, pricing in the core business remained broadly stable and the Average Selling Price (ASP) of £76.7/kg was 4% better than the prior year. Gross profit declined by 18% to £87.4m, while gross margin was lower by 380bps, impacted by raw material and energy inflation, and weaker operating leverage. Group’s profit before tax of £50.2m was 21% down on the prior year and the underlying value was down by 17%, impacted by weaker trading, adverse currency, raw material and energy inflation. Basic earnings per share of 51.4p were 21% down and the interim dividend was flat at 13.42p/share.

Share Price Commentary

Daily Chart as at July-19-19, before the market closed (Source: Thomson Reuters)
 
On 19 July 2019, at the time of writing (before the market closed, GMT 9:10 am), VCT shares were trading at GBX 1,963, up by 0.93% against the previous day closing price. Stock's 52 weeks High and Low is GBX 3,320.01/GBX 1,937.00. The company's stock beta was 1.32, reflecting more volatility as compared to the benchmark index. Total outstanding market capitalisation was around £1.66 billion, with a dividend yield of 3.06 per cent.

Conclusion
A host of issues impacted the financials of the company in the first half, including weakness in the Automotive and Consumer Electronics market. However, the company reported that Automotive started to stabilise in the second quarter, coupled with an improving trend in Medical. The company signed a notable development alliance with Airbus and actions undertaken to reduce cost and improve manufacturing efficiency had started to take effect. The company anticipated cost inflation and currency to be broadly neutral in the second half, with an expectation of gradual improvement. A high cash generative business model, a healthy new product pipeline and strong structural growth opportunities place the company well for the medium to long term.

Keeping in mind the prospects of the company, we have given a “HOLD” recommendation at the closing price of GBX 1,944.00 (as on 18 July 2019).

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.