Victrex - Half Yearly Results 2013
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Victrex - Half Yearly Results 2013

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    Victrex - Half Yearly Results 2013 Victrex - Half Yearly Results 2013 Presentation Transcript

    • Half-yearly Results Front cover to be provided by Design Portfolio
    • Introductions Dave Hummel Chief Executive SIX MONTHS ENDED 31 MARCH 2013 Steve Barrow Finance Director 2
    • Business Highlights Resilience in challenging market conditions • 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
    • Group Income Statement Six months ended 31 March 2013 £m 2012 £m 106.4 105.6 1% Gross profit 71.5 70.6 1% Gross margin % 67.2% 66.8% 0.4 % pts Revenue Change % (26.1) 0.3 (24.7) 0.3 Profit before tax 45.7 46.2 (1%) Earnings per share 41.7p 41.6p - Overheads Interest 6% - • Continued investment in resources and key growth programmes • Reduction in effective tax rate from 24% to 23% SIX MONTHS ENDED 31 MARCH 2013 4
    • Business Unit Income Statements VPS 2013 2012 £m £m Revenue 82.2 Gross profit Gross margin Invibio Six months ended 31 March Overheads Operating profit SIX MONTHS ENDED 31 MARCH 2013 2013 2012 % £m £m % 80.1 3% 24.2 25.5 (5%) 50.0 47.9 4% 21.5 22.6 (5%) 60.8% 59.8% 1.0% pts 88.8% 88.6% 0.2% pts Change Change (16.8) (15.3) 10% (7.5) (7.6) (1%) 33.2 32.6 2% 14.0 15.0 (7%) 5
    • Group Gross Margin £ASP GM% £75.4 £80 £75.2 £75.7 £75.7 80% £76.7 £76.4 £74.8 £70 70% • Strong ASP and GM% - Favourable product mix £60 £50 60% 68.8% 66.9% 66.8% 67.2% 50% 65.8% £40 40% £30 30% H1 2011 H2 2011 SIX MONTHS ENDED 31 MARCH 2013 H1 2012 H2 2012 H1 2013 6 - Speciality products • Full year GM% guidance in line with H2 2012 as expected
    • Currency Update Average exchange rates 2012 H1 2012 Year 2013 H1 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 • The impact on 2012 profit before tax of applying these 2013 indicative exchange rates would be a reduction of £1m * 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 SIX MONTHS ENDED 31 MARCH 2013 7
    • Group Cash Flow Statement Six months ended 31 March Operating profit Increase in inventories Increase in trade and other receivables Decrease in trade and other payables Depreciation Other Cash generated from operations Tax paid Capital expenditure Dividends paid Other financing activities Net decrease in cash and cash equivalents • 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 8 2013 £m 45.4 (4.4) (2.1) (4.4) 5.3 1.3 41.1 (11.9) (16.0) (23.9) 0.9 (9.8) 2012 £m 45.9 (6.3) (3.8) (8.6) 4.7 (0.4) 31.5 (13.7) (12.1) (20.5) 0.9 (13.9)
    • Group Balance Sheet 31 March 2013 £m 166.7 53.7 74.3 41.1 (9.7) (52.1) 274.0 PPE and intangible assets Inventories Cash Trade receivables and other assets Retirement benefit obligations ('RBO') Trade payables and other liabilities Equity shareholders' funds • Planned inventory increase due to phasing of production campaigns • RBO reflects increase in market expectation of long term inflation SIX MONTHS ENDED 31 MARCH 2013 9 30 September 2012 £m 153.7 48.6 83.9 39.5 (4.0) (50.6) 271.1
    • Victrex Polymer Solutions SIX MONTHS ENDED 31 MARCH 2013 10
    • VPS Highlights Resilience in difficult global economic conditions • Revenue growth • Progress in speciality products • Average selling price and gross margins strong • Continued investment SIX MONTHS ENDED 31 MARCH 2013 11
    • Group End Markets By Industry By Region H1 2013: 1,392 tonnes Medical +15% Asia-Pacific -10% +1% EMEA +8% 176 t 13% 237 t 17% Americas -4% 388 t 28% Electronics +1% 767 t 55% Industrial -5% 524 t 38% 312 t 22% 380 t 27% Transport +5% Medical Asia-Pacific H1 2012: 1,377 tonnes EMEA 153 t 11% 263 t 19% Electronics 710 t 52% 552 t 40% 310 t 23% 404 t 29% Americas SIX MONTHS ENDED 31 MARCH 2013 362 t 26% 12 Transport Industrial
    • Growth Drivers VPS Market Highlights - Industrial Development Pipeline • Deeper, hotter, higher pressure, more aggressive Industrial (25%) • High oil price > $60-80/bbl drives exploration • VICTREX PEEK proven track record • Magma progress 1,121 H2 569 H1 552 H1 524 2012 Industry status Sales Volume (tonnes) • 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: 2013 SIX MONTHS ENDED 31 MARCH 2013 – Stable demand 13
    • Growth Drivers VPS Market Highlights - Transport Auto • Hotter, higher pressure operating environments • Car production CAGR 4-5%, China premium market slowing • Displace incumbent materials to meet regulatory performance Aero • 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 materials Development Pipeline Auto (36%) Aero (15%) 744 H2 382 H1 362 H1 380 2012 Industry status Industry status Sales Volume (tonnes) • Volume up 5% on H1 2012 • Automotive: global demand maintained • Aerospace: expanding global opportunities • New application development • Market penetration 2013 SIX MONTHS ENDED 31 MARCH 2013 14
    • Growth Drivers VPS Market Highlights - Electronics Development Pipeline • Thinner, smaller, smarter devices Electronics (21%) • Energy and thermal management challenges • APTIV® films create design opportunities resulting from inherent durability 714 H2 404 H1 310 H1 312 2012 Industry status Industry status Sales Volume (tonnes) • Volume in line with H1 2012 • Consumer electronics growth: – Cyclicality of new applications – Opportunities for APTIV films • Semiconductor manufacturing: 2013 SIX MONTHS ENDED 31 MARCH 2013 – Lower capital investment in Asia 15
    • VPS - Development Pipeline March 2013: 2,242 tonnes Medical 3% 500 439 450 Sept 2012: 2,212 tonnes 400 329 350 Electronics 21% 300 268 271 244 250 Automotive 36% 200 221 163 146 150 Transport 51% Industrial 25% 119125 100 50 Aerospace 15% 0 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 Matu re an nualised vo lume 'MAV' (tonnes) New applications commercialised (nu mber) 1.4 1.2 • tonnes Strategic marketing to target increased market penetration • 0.6 Focus on impactful targets • 0.8 Strong and diversified pipeline • 1.0 Progress on key growth programmes 0.4 0.2 0.0 2010 2011 2012 2013 (H1) Pipeline average target size SIX MONTHS ENDED 31 MARCH 2013 16
    • Speciality Products • 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 SIX MONTHS ENDED 31 MARCH 2013 17
    • VPS - Outlook Regional view Global market view Asia-Pacific Optimistic Aerospace Consumer electronics EMEA Americas Neutral Automotive Oil and gas Japan Cautious Semiconductor Industrial machinery Growth potential Optimistic Growth potential Growth potential Consumer confidence Neutral Growth potential Consumer confidence Growth challenge Cautious Investment confidence SIX MONTHS ENDED 31 MARCH 2013 18
    • Invibio® Biomaterial Solutions SIX MONTHS ENDED 31 MARCH 2013 19
    • Invibio Highlights Progress despite challenging growth environment • Renewal of major US Spine contracts • Growth in developing markets • Further regulatory approvals in Asia • Innovative new products launched in spine and dental SIX MONTHS ENDED 31 MARCH 2013 20
    • Invibio - Key Markets Geographical Market Asia-Pacific +6% Target Markets +7% £1.8m 8% H1 2013: £24.2m £2.9m 12% -5% EMEA 0% Arthroscopy +4% £7.1m 29% £3.1m 13% Spine -8% £15.3m 63% £18.2m 75% Americas -8% Target Markets Asia-Pacific £1.7m 7% H1 2012: £25.5m Arthroscopy EMEA £7.1m 28% £3.0m 12% Spine £16.7m 65% £19.8m 77% Americas SIX MONTHS ENDED 31 MARCH 2013 £2.7m 11% 21
    • Growth Drivers Invibio Market Highlights - Spine • US procedures increasing but market value flat Early bone apposition with PEEK-OPTIMA® HA Enhanced • Fusion focus for spinal treatment • Innovation to differentiate in fusion • Growth rates of 25-35% projected for China and Brazil 38.2 H2 18.4 H1 19.8 H1 18.2 2012 Industry status Revenue (£m) • PEEK-OPTIMA HA Enhanced – customer evaluations and prototyping • Growth opportunities in non-interbody (spinal rods) • Regulatory progress in China, marketing initiatives 2013 SIX MONTHS ENDED 31 MARCH 2013 commenced 22
    • Invibio – Regulatory Progress • Global regulatory expertise • Approvals in key developing markets • Approvals by Chinese domestic customers • CE marked devices for Country Regulatory challenge PO Approvals Domestic customers USA Medium 526 +300 China High 87 7 Brazil Medium 85 7 Japan Very High 15 2 SIX MONTHS ENDED 31 MARCH 2013 23 European market
    • Growth Drivers Invibio Market Highlights - Developing Markets • 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 • Arthroscopy: 12.3 H2 6.6 H1 5.7 H1 6.0 2012 Industry status Revenue (£m) – 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: 2013 SIX MONTHS ENDED 31 MARCH 2013 – Evaluation programmes underway with major customers 24
    • Invibio - Market Focus Application area and market focus Wide market acceptance Probability of widespread adoption Spine fusion lumbar Emerging acceptance Market seeding SF cervical Introduction of JUVORA brand in for high value removable dentures CMF Arthro Recon dental Non fusion Market focus on fusion Hip, knee and extremities Trauma 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 0 5 10 Indicative time to wide market acceptance (years) SIX MONTHS ENDED 31 MARCH 2013 25
    • Invibio Component Solutions • 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 SIX MONTHS ENDED 31 MARCH 2013 26
    • Invibio - Outlook Regional view Global market view Asia-Pacific Optimistic Spine (new) Dentures EMEA Neutral Arthroscopy Americas Cautious Spine (core) Growth potential Optimistic Growth potential Growth challenge Neutral Growth potential New product introductions Growth challenge Inventory management Cautious Growth challenge SIX MONTHS ENDED 31 MARCH 2013 27
    • Group Growth Story Revenue 2000 2009 2013 Future Vision VPS VPS VPS Invibio Victrex Invibio VPS Speciality Products Note: Chart not to scale SIX MONTHS ENDED 31 MARCH 2013 28 VPS Speciality Products Invibio Invibio Component Solutions
    • Growth Focus • Driving volume growth • Expanding product offerings • Maintaining key metrics • Making choices • Investing for growth SIX MONTHS ENDED 31 MARCH 2013 29
    • 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. SIX MONTHS ENDED 31 MARCH 2013 30