Download - Victrex - Half Yearly Results 2013
Half-yearly Results Front cover to be
provided by Design Portfolio
Introductions
2
Dave HummelChief Executive
Steve BarrowFinance Director
SIX MONTHS ENDED 31 MARCH 2013
Business Highlights
• Revenue and earnings per share ahead of last year
• Group gross margins maintained
• Continued investment in key growth programmes
• VICTREX PEEK capacity expansion on track
• Cash generation remains strong
• Interim dividend increased by 15%
SIX MONTHS ENDED 31 MARCH 2013 3
Resilience in challenging market conditions
Group Income Statement
Six months ended 31 March 2013 2012 Change
£m £m %
Revenue 106.4 105.6 1%
Gross profit 71.5 70.6 1%
Gross margin % 67.2% 66.8% 0.4 % pts
Overheads (26.1) (24.7) 6%
Interest 0.3 0.3 -
Profit before tax 45.7 46.2 (1%)
Earnings per share 41.7p 41.6p -
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• Continued investment in resources and key growth programmes
• Reduction in effective tax rate from 24% to 23%
Business Unit Income Statements
SIX MONTHS ENDED 31 MARCH 2013 5
Six months ended 31 March 2013 2012 Change 2013 2012 Change
£m £m % £m £m %
Revenue 82.2 80.1 3% 24.2 25.5 (5%)
Gross profit 50.0 47.9 4% 21.5 22.6 (5%)
Gross margin 60.8% 59.8% 1.0% pts 88.8% 88.6% 0.2% pts
Overheads (16.8) (15.3) 10% (7.5) (7.6) (1%)
Operating profit 33.2 32.6 2% 14.0 15.0 (7%)
VPS Invibio
Group Gross Margin
SIX MONTHS ENDED 31 MARCH 2013 6
• Strong ASP and GM%
- Favourable product mix
- Speciality products
• Full year GM% guidance in line with H2 2012 as expected
£ASP GM%
68.8%66.9% 66.8%
65.8%
67.2%
£75.2£75.7 £76.7
£74.8 £76.4
£30
£40
£50
£60
£70
£80
H1 2011 H2 2011 H1 2012 H2 2012 H1 201330%
40%
50%
60%
70%
80%£75.4 £75.7
Currency Update
Average exchange rates
2012H1
2012Year
2013H1
2013 Year *
Exchange rate sensitivity #
$/£ 1.59 1.59 1.57 1.57 £4.3m
€/£ 1.18 1.17 1.19 1.21 £3.6m
¥/£ 130 126 127 127 £0.7m
SIX MONTHS ENDED 31 MARCH 2013 7
* 2013 year estimates based on forecast sales volume, currency hedging already in place and spot exchange rates as at 30 April 2013
# Management estimate of impact on full year PBT from a 5% movement in full year average exchange rate
• The impact on 2012 profit before tax of applying these 2013 indicative exchange rates would be a reduction of £1m
Group Cash Flow Statement
SIX MONTHS ENDED 31 MARCH 2013 8
• Capital investment in PEEK and BDF capacity
• Indicative capital forecast:
2013: £40m 2014: £65m 2015: £40m
• 15% increase 2013 interim dividend (~ £9m)
Six months ended 31 March 2013 2012
£m £m
Operating profit 45.4 45.9
Increase in inventories (4.4) (6.3)
Increase in trade and other receivables (2.1) (3.8)
Decrease in trade and other payables (4.4) (8.6)
Depreciation 5.3 4.7
Other 1.3 (0.4)
Cash generated from operations 41.1 31.5
Tax paid (11.9) (13.7)
Capital expenditure (16.0) (12.1)
Dividends paid (23.9) (20.5)
Other financing activities 0.9 0.9
Net decrease in cash and cash equivalents (9.8) (13.9)
Group Balance Sheet
SIX MONTHS ENDED 31 MARCH 2013 9
• Planned inventory increase due to phasing of production campaigns
• RBO reflects increase in market expectation of long term inflation
31 March 30 September
2013 2012
£m £m
PPE and intangible assets 166.7 153.7
Inventories 53.7 48.6
Cash 74.3 83.9
Trade receivables and other assets 41.1 39.5
Retirement benefit obligations ('RBO') (9.7) (4.0)
Trade payables and other liabilities (52.1) (50.6)
Equity shareholders' funds 274.0 271.1
Victrex Polymer Solutions
SIX MONTHS ENDED 31 MARCH 2013 10
VPS Highlights
• Revenue growth
• Progress in speciality products
• Average selling price and gross margins strong
• Continued investment
11
Resilience in difficult global economic conditions
SIX MONTHS ENDED 31 MARCH 2013
552 t 40%
362 t 26%
310 t 23%
153 t 11%
710 t 52%
404 t 29%
263 t 19%
524 t 38%
380 t 27%
312 t 22%
176 t 13%
767 t 55%388 t
28%
237 t 17%
Group End Markets
12
H1 2013: 1,392 tonnes
+1%
H1 2012: 1,377 tonnes
By Region
EMEA+8%
EMEA
Asia-Pacific-10%
Asia-Pacific
Americas
Americas-4%
By IndustryMedical+15%
Electronics+1%
Transport+5%
Industrial-5%
Medical
Electronics
Transport
Industrial
SIX MONTHS ENDED 31 MARCH 2013
H1552
H1524
H2569
2012 2013
Sales Volume (tonnes)
VPS Market Highlights - Industrial
13
• Volume down 5% on H1 2012
• Oil and Gas:
– Reduced rig count towards end 2012
– Megatrends play to our products strengths
• Industrial machinery and equipment:
– Stable demand
1,121
SIX MONTHS ENDED 31 MARCH 2013
Ind
us
try s
tatu
s
Development Pipeline
Industrial (25%)• Deeper, hotter, higher pressure, more aggressive
• High oil price > $60-80/bbl drives exploration
• VICTREX PEEK proven track record
• Magma progress
Gro
wth
Dri
ve
rs
H1362
H1380
H2382
2012 2013
Sales Volume (tonnes)
VPS Market Highlights - Transport
14
744
SIX MONTHS ENDED 31 MARCH 2013
Auto• Hotter, higher pressure operating environments • Car production CAGR 4-5%, China premium market slowing• Displace incumbent materials to meet regulatory
performanceAero• Jet fuel cost increasing• Aircraft OEMs running huge order backlogs• VICTREX PEEK certified by all major OEMs and regulators • Up to 80% lighter than traditional aerospace materialsG
row
th D
rive
rs
Ind
us
try s
tatu
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Development Pipeline
Auto (36%)
Aero (15%)
• Volume up 5% on H1 2012
• Automotive: global demand maintained
• Aerospace: expanding global opportunities
• New application development
• Market penetration
Ind
us
try s
tatu
s
H1310
H1312
H2404
2012 2013
Sales Volume (tonnes)
VPS Market Highlights - Electronics
15
714
SIX MONTHS ENDED 31 MARCH 2013
Ind
us
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tatu
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Development Pipeline
Electronics (21%)
• Volume in line with H1 2012
• Consumer electronics growth:
– Cyclicality of new applications
– Opportunities for APTIV films
• Semiconductor manufacturing:
– Lower capital investment in Asia
Ind
us
try s
tatu
s
• Thinner, smaller, smarter devices
• Energy and thermal management challenges
• APTIV® films create design opportunities resulting from inherent durability
Gro
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163146
244
439
119
268 271
329
221
125
0
50
100
150
200
250
300
350
400
450
500
H1 2011 H2 2011 H1 2012 H2 2012 H1 2013
Mature annualised volume 'MAV' (tonnes)
New applications commercialised (number)
VPS - Development Pipeline
16
March 2013: 2,242 tonnes
Sept 2012: 2,212 tonnes
Electronics21%
Medical3%
Industrial25%
Transport51%
SIX MONTHS ENDED 31 MARCH 2013
• Strong and diversified pipeline
• Focus on impactful targets
• Strategic marketing to target increased market penetration
• Progress on key growth programmes
Automotive36%
Aerospace15%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2010 2011 2012 2013 (H1)
ton
nes
Pipeline average target size
Speciality Products
17SIX MONTHS ENDED 31 MARCH 2013
• Investment in downstream product forms to accelerate adoption and drive growth
• Strong H1 performance driven by APTIV film
• Targeting specific markets
• Developing process capability and new product solutions
• Future investment opportunities
Regional view Global market view
Asia-Pacific OptimisticAerospace
Consumer electronics
EMEAAmericas
NeutralAutomotiveOil and gas
Japan Cautious SemiconductorIndustrial machinery
VPS - Outlook
SIX MONTHS ENDED 31 MARCH 2013 18
Growth potential Optimistic Growth potential
Growth potentialConsumer confidence
NeutralGrowth potential
Consumer confidence
Growth challenge Cautious Investment confidence
Invibio® Biomaterial Solutions
19SIX MONTHS ENDED 31 MARCH 2013
Invibio Highlights
• Renewal of major US Spine contracts
• Growth in developing markets
• Further regulatory approvals in Asia
• Innovative new products launched in spine and dental
20
Progress despite challenging growth environment
SIX MONTHS ENDED 31 MARCH 2013
£16.7m65%
£7.1m28%
£1.7m7%
£19.8m77%
£3.0m12%
£2.7m11%
£18.2m75%
£3.1m13%
£2.9m12%
£15.3m63%
£7.1m29%
£1.8m8%
Invibio - Key Markets
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H1 2013: £24.2m
-5%
H1 2012: £25.5m
MarketGeographical
Asia-Pacific+6%
EMEA0%
Americas-8%
Asia-Pacific
EMEA
Americas
Spine-8%
Arthroscopy+4%
Target Markets+7%
Spine
Arthroscopy
Target Markets
H119.8
H118.2
H218.4
2012 2013
Revenue (£m)
Invibio Market Highlights - Spine
22
• PEEK-OPTIMA HA Enhanced – customer
evaluations and prototyping
• Growth opportunities in non-interbody (spinal rods)
• Regulatory progress in China, marketing initiatives
commenced
SIX MONTHS ENDED 31 MARCH 2013
38.2
• US procedures increasing but market value flat
• Fusion focus for spinal treatment
• Innovation to differentiate in fusion
• Growth rates of 25-35% projected for China and Brazil
Ind
us
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tatu
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Gro
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Early bone
apposition with
PEEK-OPTIMA® HA
Enhanced
Invibio – Regulatory Progress
SIX MONTHS ENDED 31 MARCH 2013 23
Country Regulatory challenge
PO Approvals Domestic customers
USA Medium 526 +300
China High 87 7
Brazil Medium 85 7
Japan Very High 15 2
• Global regulatory expertise
• Approvals in key developing
markets
• Approvals by Chinese
domestic customers
• CE marked devices for
European market
H15.7
H16.0
H26.6
2012 2013
Revenue (£m)
Invibio Market Highlights - Developing Markets
24SIX MONTHS ENDED 31 MARCH 2013
• Arthroscopy:
– 4% growth over prior year via strong share in shoulder market
• Dental:
– JUVORA™ regulatory approval and launch
– First clinical use and sales
• Trauma and Orthopaedics:
– Evaluation programmes underway with major customers
12.3
• Arthroscopy – Growing active ageing population
• Dentures – The Edentulous population is growing to almost 300 million
• Ortho/Trauma – Ageing population and obese population. Explosive growth expected in BIC
Gro
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Invibio - Market Focus
Application area and market focus
Wide market acceptance
Emerging acceptance
Market seeding
Indicative time to wide market acceptance (years)
Nonfusion
CMF
Arthro
Spine fusion lumbar
Pro
bab
ilit
y o
f w
idesp
read
ad
op
tio
n
TraumaRecondental
SF cervical
0 5 10
Hip, knee and
extremities
Focus on metal replacement in knees for cost and performance benefits. Proof of concept testing
Steady increase in devices using PEEK. Entered into joint development agreements with major industry players
25
Market focus on fusion
Introduction of JUVORA brand in for high value removable dentures
SIX MONTHS ENDED 31 MARCH 2013
Invibio Component Solutions
26SIX MONTHS ENDED 31 MARCH 2013
• Component based solutions to accelerate adoption and drive growth
• Focus on high incidence surgeries in which PEEK-OPTIMA offers clear benefits
• Provides opportunity to simplify spine supply chain
• Initial regulatory approval and revenues achieved for JUVORA and Trauma
• Focused on adoption through proven clinical benefits and patient preference
• Future investment opportunities
Regional view Global market view
Asia-Pacific OptimisticSpine (new)
Dentures
EMEA Neutral Arthroscopy
Americas Cautious Spine (core)
Invibio - Outlook
27SIX MONTHS ENDED 31 MARCH 2013
Growth potential Optimistic Growth potential
Growth challenge NeutralGrowth potential
New product introductions
Growth challengeInventory management
Cautious Growth challenge
Revenue Group Growth Story
28SIX MONTHS ENDED 31 MARCH 2013
2000 2009 2013 Future Vision
Victrex
VPS
Invibio
VPS
Invibio
VPS Speciality Products
VPS
VPS Speciality Products
Invibio
Invibio Component Solutions
Note: Chart not to scale
Growth
Focus
29SIX MONTHS ENDED 31 MARCH 2013
• Driving volume growth
• Expanding product offerings
• Maintaining key metrics
• Making choices
• Investing for growth
Disclaimer
Victrex's business and share price may be affected by a
number of risks, trends, factors and uncertainties, not all of
which are in our control.
Accordingly, actual results may differ materially from
anticipated results because of a variety of risk factors,
including: changes in exchange rates; changes in global,
political, economic, business, competitive and market forces;
changes in raw material pricing and availability; changes to
legislation and tax rates; future business combinations or
disposals; relations with customers and customer credit risk;
events affecting international security, including global health
issues and terrorism; changes in regulatory environment and
the outcome of litigation.
30SIX MONTHS ENDED 31 MARCH 2013