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Victrex warns of “much weaker” first half as it gets off to a slow start

There has been a slight improvement in January and February, but not enough to offset troubles in the prior few months
Victrex makes everything from plastic pipes to spinal implants

UK engineering group Victrex PLC (LON:VCT) expects a “much weaker” first-half performance this year after sales slumped in its opening quarter.

The FTSE 250 company, which makes everything from polymer pipes to spinal implants, saw revenue plunge 18% to £64.1mln (Q1 17: £78.7mln) in the three months ended 31 December.

READ: Victrex to rewards shareholders with £105mln special divi

A large contract in its consumer electronics business, which had a “sizeable” impact on last year’s first-quarter numbers, delivered nothing this time around, while the ongoing slowdown in its automotive division also dented the top line.

“Although Q1 is always the seasonally weakest quarter for Victrex, this quarter has been slightly weaker than anticipated, driven principally by the slowdown in Automotive, the associated impact on Value Added Resellers, and some de-stocking,” said chief executive Jakob Sigurdsson.

“Q1 also saw expected headwinds in Consumer Electronics, together with strong comparatives and adverse currency.”

He added: “Pleasingly, January and February saw some initial improvement, although, given our Q1 performance, the first half is expected to be much weaker overall, compared to the prior year.

“Our expectations for the second half are unchanged, with new projects and reduced headwinds supporting our assumptions.”

As analysts had feared

“Victrex 1Q sales today were pretty much in line with what we feared,” said analysts at City broker Liberum.

“We expect 2019 EBIT consensus to head back from ~£125mln to our bottom of range £121.5mln and now suspect 1H EBIT will be down more than 10%, having expected 8% previously.

“Readers will know we are fans of Victrex cashflow power, like its structural growth, but fear it has an above average cyclicality. It’s one to own for the medium term but for those fearful of a global hard landing there may be better opportunities to come.”

Liberum still has the stock as a ‘buy’ with a 2,700p price, comfortably ahead of the current share price, which is down 2.8% today to 2,280p.

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