Victrex Plc · LSE:VCT
Victrex — H1 2020 Earnings Presentation
33 slides from Victrex's earnings presentation, May 11, 2020
Slide 1: Victrex plc Interim results 11 May 2020
An innovative world leader in high performance polymer solutions Victrex plc Interim results 11 May 2020
Slide 2: Executive Directors and Forward Looking Statements
EXECUTIVE DIRECTORS Richard Armitage Jakob Sigurdsson Martin Court Chief Financial Officer Chief Executive Officer Chief Commercial Officer FORWARD LOOKING STATEMENTS Sections of this results presentation contain forward-looking statements, including statements relating to: future demand and markets
Slide 3: Solid growth in H1 – emerging COVID-related headwinds in H2
SOLID GROWTH IN H1 – EMERGING COVID-RELATED HEADWINDS IN H2
Slide 4: Proactive actions on COVID-19
PROACTIVE ACTIONS ON COVID-19 OUR PEOPLE OUR FINANCIAL POSITION Safety & well-being our highest priority Cash conservation measures implemented >80% of global employees homeworking UK debottlenecking capex deferred Recently re-opened China & Korea offices Bonus accrual removed Multiple global commun
Slide 5: Highlights
HIGHLIGHTS • SOLID H1: GROWTH IN AUTO & MEDICAL; STABLE PERFORMANCE IN AEROSPACE & ELECTRONICS – H1 sales volume up 5%, offset by weakness in Energy – Q2 volume up 4% against tougher comparatives – Good progress in Medical, revenue up 6% to £29.5m; further growth in Asia and new applications – Under
Slide 6: P&L
P&L Half year (6 months) ended 31 March Change (constant H1 2020 H1 2019 Change currency)1 £m £m % % Revenue 151.5 145.7 4% 3% Losses on foreign currency net hedging* (1.2) (2.9) 59% SOLID TRADING & FX BENEFIT Gross profit 86.8 87.4 -1% -6% Gross margin % 57.3% 60.0% -270bps • H1 2020 sales volume u
Slide 7: H1 2020 vs H1 2019 PBT bridge
H1 2020 vs H1 2019 PBT bridge… PBT STABLE: CORE GROWTH OFFSET BY FRONT-END INVESTMENT & UNDER-RECOVERED OVERHEAD • Under-recovered overhead from lower production vs sales, special grade campaigns, new parts programmes • Growth investment up £1m 7 CONFIDENTIAL
Slide 8: ASP & Margin
ASP & MARGIN Industrial growth delivers softer mix £/kg Average selling price Gross margin (ASP) (GM) % H1 2020 ASP £76/kg (down 1%) • Growth in Industrial • Underlying pricing broadly stable H1 2020 GM 57.3% (down 270bps) • Margin impacted by lower production & under-recovered overhead, special gra
Slide 9: Currency
CURRENCY H1 2020 H1 2019 H1 2019 Change FY20 tailwind… Reported Currency Constant As reported Exc Deals Constant 1 Impact currency currency 1 £m £m £m £m £m £m Revenue 151.5 (1.1) 150.4 145.7 145.7 3% Losses on foreign currency net hedging (1.2) 1.2 - (2.9) - Gross profit 86.8 (4.4) 82.3 87.4 90.3 -
Slide 10: Inventories
INVENTORIES Well positioned for COVID-19 • H1 2020 inventory £95.1m (H1 2019: £85.3m) • High buffer inventory across Europe, US, Asia Composite partssales • c3 months capability stock in place Additional Gears capacity Fibre capacity investment • UK raw material inventory built during H1 2020 • Defe
Slide 11: Capital Investment
CAPITAL INVESTMENT Underpin future growth Artists impression of China PEEK facility • China joint-venture on plan; construction commencing mid-2020 • £32m investment over three years; c£7m capex in FY 2020 • Underpinning China growth and customer opportunities • Deferral Composite ofcapability parts
Slide 12: Cash
CASH Highly cash generative business model 12 CONFIDENTIAL
Slide 13: Performance Update
PERFORMANCE MEDICAL MANUFACTURING & ENGINEERING UPDATE Every 35 seconds a patient is treated using Invibio PEEK OPTIMA™ solutions 100+ million AEROSPACE 9 million+ machines using Victrex solutions implanted devices 20,000+ aircraft have VICTREX solutions on-board ELECTRONICS Over 4 billion ENERGY mo
Slide 14: Industrial Update
INDUSTRIAL UPDATE AUTOMOTIVE: GOOD GROWTH IN EUROPE & JAPAN • H1 2020 Automotive +16%, benefiting from new applications, PFOA ban • Beta-testing for PEEK Gears, new EV opportunities progressing AEROSPACE: STRONG START, OFFSET BY 737 MAX HEADWIND • H1 2020 Aerospace flat, further progress in AETM250
Slide 15: Mega-Programme Update: Aerospace Loaded Brackets
MEGA-PROGRAMME UPDATE Aerospace Loaded Brackets… PROGRESS TOWARDS MEANINGFUL REVENUE - £3m investment to acquire remaining equity in US manufacturing facility - Composite New application areasparts basedcapability on differentiatedAdditional Gears capacity AETM250 ‘low-melt’ Fibre capacity PAEK & UD
Slide 16: Mega-Programme Update: Magma
MEGA-PROGRAMME UPDATE High corrosion resistance (CO2, H2S) 100x less permeable (vs non-PEEK) Magma High pressure/high temperature (Oil & Gas)… Manufacturing/installation cost benefits 60% lighter in water vs pure steel SUPPORTING MAGMA & TECHNIP FMC TOWARDS QUALIFICATION - Two M-pipe® based opportun
Slide 17: Mega-Programme Update: Magma
MEGA-PROGRAMME UPDATE Magma (Oil & Gas)… Initial Qualification Industrialisation Pilot pipe in testing operation GOOD PROGRESS YTD IN FY 2020 - 6” pipe extrusion to support TechnipFMC qualification programme - Industry standard (DNV) and several key milestones passed - Strong medium-term opportunity
Slide 18: Medical Update
MEDICAL UPDATE H1 MEDICAL +6% (+4% in constant currency) SPINE STABLE • H1 2020 Medical revenue +6% at £29.5m (H1 2019: £27.9m) • HA-Enhanced revenue +92%, focused on £2m FY opportunity • Continued Medical growth in Asia +10% • Progressing porous PEEK opportunity TRAUMA FURTHER COLLABORATIONS • Buil
Slide 19: Medical Update: PEEK-OPTIMA HA-Enhanced
MEDICAL UPDATE PEEK-OPTIMA™ HA-Enhanced… PEEK-OPTIMA™ HA Enhanced Porous PEEK (bone-on growth) (bone-in growth) FURTHER PROGRESS IN NEXT GENERATION SPINE PRODUCTS - Continued progress in HA-Enhanced, +92%, opportunity for >£2m revenue in FY 2020 - Supports bone-on growth and fusion rate; progress dr
Slide 20: Medical Update: Non-spine
MEDICAL UPDATE Non-spine… CMF Ventilators Other implantable FURTHER PROGRESS IN NON-SPINE - PEEK supporting higher brain function1 in Cranio-Maxillo Facial (CMF), double-digit revenue growth - Supporting several global companies in Ventilators and related equipment - Exploring other implantable and
Slide 21: Strong growth pipeline bubble chart
BUBBLE CHART Strong growth pipeline… Size of bubble = potential annual revenue in peak year: TODAY <£20m HA Enhanced £20-50m Aerospace Gears Magma Loaded Probability of success (indicative) Brackets Dental >£50m Trauma (all bubbles are indicative only) Aero Mobile Structures Knee Devices Position an
Slide 22: Pipeline Milestones
PIPELINE MILESTONES REVENUE PROGRAMMES H1 2020 MILESTONES FY 2020 FOCUS STATUS • Extrusion of qualification pipe in • Support manufacture of TechnipFMC MAGMA Meaningful (£1m+) support of TechnipFMC qualification pipe • On track for revenue growth • Two opportunities: HFP & CR • Double-digit revenue
Slide 23: Sustainability
SUSTAINABILITY Building on our strong proposition SUSTAINABLE RESOURCE SOCIAL SOLUTIONS EFFICIENCY RESPONSIBILITY Develop and deliver Maximise resource efficiency Inspire the next generation by sustainable polymer solutions across the value chain supporting science, that provide clear social and tec
Slide 24: Group Outlook
GROUP OUTLOOK H2 2020* ELECTRONICS MEDICAL AEROSPACE KEY OPTIMISTIC AUTOMOTIVE NEUTRAL ENERGY & OTHER INDUSTRIAL CAUTIOUS * Indicative outlook for our markets for H2 2020 CONFIDENTIAL 24
Slide 25: Summary
SUMMARY SUMMARY - Solid growth in H1 - Emerging COVID-related headwinds in H2 & uncertain Outlook - Proactive actions on COVID-19 & strong financial position - Strong medium term opportunities & further progress - Aerospace Loaded Brackets - Magma - PEEK-OPTIMA™ HA-Enhanced CONFIDENTIAL 25 25
Slide 26: Appendix
APPENDIX
Slide 27: Group End Markets
GROUP END MARKETS H1 20: 1,992 tonnes H1 19: 1,899 tonnes Volume by Region Volume by Industry Medical +2% Transport (Auto & Asia Europe Aero) +13% +3% +14% Value Added Resellers Electronics Americas -4% +0% +5% Energy & Other * Medical volume reflects both non-implantable and implantable volumes Ind
Slide 28: Medical: Key Markets
MEDICAL: KEY MARKETS H1 2020: £29.5m H1 2019: £27.9m Revenue by Region Revenue by Market Asia +10% Other markets Other +8% Medical markets +19% Spine Americas -1% EMEA +6% +3% 28 CONFIDENTIAL
Slide 29: Business Unit Income Statements
BUSINESS UNIT INCOME STATEMENTS Industrial Medical Change Change (constant (constant 2020 2019 Change currency)1 2020 2019 Change currency)1 £m £m % £m £m % Revenue 122.0 117.8 4% 3% 29.5 27.9 6% 4% Losses on foreign currency net hedging (0.7) (1.9) 61% (0.5) (1.0) -100% Gross profit 61.6 64.2 -4% -
Slide 30: Balance Sheet
BALANCE SHEET H1 2020 H1 2019 £m £m PPE and intangible assets 297.8 280.9 Financial assets held at FVTPL* and Investment in Associates 20.5 10.5 Inventories 95.1 85.3 Cash (available**) 53.2 49.4 Trade receivables and other assets 70.7 53.2 Retirement benefit asset 11.9 7.5 Lease liabilities (8.1) -
Slide 31: Future Use of Cash Priorities
FUTURE USE OF CASH PRIORITIES Investment for growth remains the priority CAPEX M&A / INVESTMENT REGULAR DIVIDENDS SPECIAL DIVIDENDS • Normalised capex c5- • Developing capability • Average growth c6% • Policy retained at 6% of sales • Further investments to over last 5 years c50% of net cash • Perio
Slide 32: Definitions
DEFINITIONS ALTERNATIVE PERFORMANCE MEASURES: 1) Constant currency metrics are reached by applying current year (FY 2020) weighted average spot rates to prior year (FY 2019) transactions. Gains and losses on foreign currency net hedging, are shown separately in the Income Statement and are excluded
Slide 33: Information & Contacts
PEEK INFORMATION & CONTACTS EXPERTS MANUFACTURING & ENGINEERING First to commercialise PEEK, with unmatched knowledge and experience Andrew Hanson Director of IR & AEROSPACE Corporate Communications ELECTRONICS POLYMER +44 (0) 1253 898121 MANUFACTURING [email protected] MEDICAL www.victrexplc.com Deliv