Core business strength offsets consumer electronics softness at Victrex

High-performance polymer solutions company Victrex has performed “well” since the end of the first half, it said on Tuesday, with cash generation continuing to be strong.

The FTSE 250 firm said in its third quarter management statement for the three months to 30 June that, although the second half sees a “tougher” volume comparative - particularly in the fourth quarter - its core business remained in “good growth”, with automotive, ex-consumer electronics and value added resellers being “notably strong” divisions.

As expected, the board said lower consumer electronics volumes in the third quarter than it did at the same time last year.

“In medical, the mature US spine market continues to be a challenge to short term-growth although Q3 performance was slightly ahead of the prior year in constant currency,” the Victrex board explained in its statement.

“Pleasingly, our differentiated and innovative ‘PEEK-OPTIMA HA Enhanced’ product - a premium and next generation offering which promotes bone-on growth - has now secured first meaningful revenues of over £1m and adoption rates are progressing.”

Overall, Victrex said third quarter group revenue was up 26% to £76.3m, with group sales volume up 6% to 1,022 tonnes.

Year-to-date group sales volume of 2,881 tonnes was 5% up on the prior year, with year-to-date group revenue of £207.3m up 17%.

The company said currency continued to support top-line revenues, with hedges placed at more favourable currency rates benefiting the firm during the second half year.

Victrex said the anticipated currency benefit for its 2017 financial year remained unchanged, and was expected to be weighted approximately one-third/two-thirds between the first and second half.

For 2018, the company was now over 60% covered for its currency hedging programme.

“In our growth pipeline, as well as meaningful revenue for ‘PEEK-OPTIMA HA Enhanced’, several 2017 milestones have now been delivered,” the board said.

“In automotive, in addition to our agreement to supply PEEK gears to a major European automotive manufacturer from 2018, we now have several new market-wide development programmes with global manufacturers.

“In aerospace, construction of our US manufacturing facility is progressing for our ‘TxV Aero Composites’ joint venture, following pre-qualification of our differentiated grades for loaded brackets last year.”

Victrex said it was also developing strategic alliances in the aerospace supply chain, as part of its focus on composite parts, to complement the joint-venture.

For the remainder of 2017, the company said consumer electronics volumes were now expected to be lower than previous guidance, although market-wide engagement programmes were said to be “progressing”, offering both volume and value opportunities for 2018, including for differentiated applications.

“Overall, our strong core business performance is more than offsetting lower consumer electronics and may now offer a degree of upside potential for the full year,” the board claimed.

“Victrex remains well placed for 2017 and we continue to be comfortable with current expectations.”

For the medium to longer term, Victrex said it remained in a “good position”, with a polymer and parts strategy to increase its differentiation, a “strong pipeline” of “potentially game-changing” projects, a focus on cost efficiency and a highly cash generative business model.