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Victrex

Victrex's first quarter revenues jump, boosted by Brexit-driven slump in pound

Results were boosted by favourable foreign exchange rates, sales from its acquisition of Zyex and volumes for a large consumer electronics order

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Electronics was Victrex's best performing end-market in the quarter

Victrex PLC (LON:VCT) reported a 41% increase in first quarter revenue, as a strong performance in its industrial arm offset weak demand in the medical business.

The company, which makes specialist polymer products, said it made a strong start to the year with revenue rising to £78.7mln in the quarter from £55.7mln a year ago.

READ: Favourable currency movements help Victrex post strong growth in full year profits, revenue

Sales volumes grew 30% to 1,051 tonnes in the quarter, up from 810 tonnes last year, and the average selling price climbed 9% to US$75 per kg.

Shares rose 1% to 2,436p in morning trading.

Results were boosted by favourable foreign exchange rates, sales from its acquisition of Zyex and volumes for a large consumer electronics order.

Excluding these items, results were broadly flat on the previous year.

Electronics the best performing market

Victrex, whose thermoplastic polymers are used in smartphones, aeroplanes, cars, oil and gas platforms and medical devices, said it saw “good performances” across most end markets.

Electronics was its star performer while aerospace made a “steady start” and medical had a weaker end to the quarter.

Victrex said its pipeline of new products remains strong and it remains highly cash generative with no change to its financial position since September 30.

Foreign exchange tailwind could turn into a headwind

A slump in the pound since the Brexit vote is expected to support 2018 results but Victrex warned that it could create a headwind in 2019 as the positive impact begins to fade.

“If the strength in our industrial business continues to offset weakness in medical, it could offer a limited degree of upside potential to expectations, although it remains very early in the year and our underlying momentum is broadly unchanged from the second half of 2017,” said chief executive Jakob Sigurdsson.

"Our priorities for 2018 are to remain focused on driving growth, on cost efficiency and to show further progress in our Polymer & Parts strategy."

Liberum remains bullish 

Liberum left its rating at 'buy' and raised its target price to 2,825p from 2,770p. 

"As we flagged in our preview, Q1 revenues were flattered by the year's best FX rates, an easy comparison for Apple iPhone shipments and some modest M&A tailwinds," the broker said.

"However stripping this out, growth has remained very solid at a rate similar to 2H, i.e. 10-11% volume growth excluding the Apple contract, we estimate."

Liberum lifted its volume growth estimates for the year to 8% from 5%, resulting in its forecast for pre-tax profit rising to £128mln from £124.5mln. Its guidance for 2019 remains unchanged at £131mln despite the assumption of £9mln foreign exchange headwinds. 

Quick facts: Victrex

Price: £19.87

Market: LSE
Market Cap: £1.72 billion
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