Victrex PLC cuts dividend 23% as profits fall but new year starts ‘solidly’

() reported a 29% decline in annual profits due to effect of the coronavirus pandemic but said there have been signs that sales declines had bottomed out in automotive, electronics and medical end markets.

The FTSE 250-listed polymer producer cut its dividend per share 23% to 46.14p as it said the business was in a “resilient financial position” with a “strong long-term growth pipeline”.

For the year to end-September 2020, volumes reduced 7% to 3,492 tonnes, leading to revenues falling 10% to £266mln.

Underlying profit before tax and exceptionals shrank to £75.5mln from £106.2mln the year before, which was worse than the market expected. Reported PBT fell 39% to £63.5mln reflecting severance costs from axing 100 staff.

In the early stages of the new financial year, Victrex said things have started “solidly”, with several end-markets seeing some incremental improvement, but overall performance subdued and some markets like aerospace and energy remaining challenging.

“We expect some softness to continue through the first half, versus the prior year, with the potential for uncertainty in order patterns.”

Furthermore, while the board has cut costs, profit margins will remain under pressure due to production being lower than sales and expected unwinding of inventory post-Brexit.

The board’s initial assumption is that to beat the past year 2021 will need the macroeconomic and end-market environment to improve.

Broker Peel Hunt said it was leaving its forecasts unchanged for adjusted PBT of £77mln on revenues £245.8mln but upgraded its recommendation from ‘hold’ to ‘buy’ and increased its target price from 1,850p to 2,450p.

“Whilst the short term remains uncertain and exact timing of recovery remains difficult to call, we believe that risk is now tilted to the upside.”