Victrex declares dividend even as interim profit declines

Polymer maker Victrex posted a decline in interim profit on Monday as the medical division was a drag on revenue, but declared a dividend.

In the six months to the end of March 2021, pre-tax profit fell 7% to £46.6m, with revenue down 0.4% to £150.9m. Victrex pointed to a weaker sales mix as elective surgeries take time to return, pushing revenue in the medical division down 16% from the same period a year ago to £24.9m. 2020 had been a particularly strong period for the medical unit, prior to Covid-19 related lockdowns.

However, group sales volumes rose 5% during the period to 2,087 tonnes despite a strong performance in the prior year period, amid improving end markets and thanks to strong growth in Electronics. In addition, Victrex declared a dividend of 13.4p a share, having not paid one a year earlier due to the pandemic, taking it back to pre-Covid levels.

Chief executive Jakob Sigurdsson said: "Profits were in line with our expectations as mix - reflecting a strong Medical performance last year - inventory unwind and under-recovery of fixed costs, and accrual for the group’s All Employee Bonus scheme offset our performance.

"Although our Brexit inventory is now unwinding, which will impact recovery of fixed costs as production remains low, our £10m cost saving programme will sustainably improve our long-term operating leverage by the end of FY 2021. We also note gross margin improvement from the low point of H2 2020."

At 0808 BST, the shares were up 4.4% at 2,468.00p.

Broker Peel Hunt, which reiterated its 'buy' recommendation on the stock, said: "The mix is currently weighted to lower gross margin revenue streams that have been performing strongly, such as electronics, value-added resellers and other Industrial - which all grew double-digit margins - but higher-margin Medical is also now starting to pick up, as elective procedures return.

"With the outlook continuing to improve in nearly all end markets, we are comfortable upgrading our forecasts from the low end of the range closer to consensus. We are therefore increasing our FY21E adjusted profit before tax by 5% to £81m, and FY22E by 9% to £94m."

Peel Hunt also lifted its price target to 2,600p from 2,450p.