Victrex : 2021 Preliminary results

6 December 2021

Victrex plc - Preliminary Results 2021

'Solid & sustainable recovery: FY volumes +25%, strong cash generation & 50p/share special dividend'

Victrex plc is an innovative world leader in high performance polymer solutions, delivering sustainable products which support CO2 reduction and bring environmental and societal benefit in multiple end- markets. Today's announcement covers our preliminary results (audited) for the 12 months ended 30 September 2021.

		FY 2021	FY 2020	% change	% change
				(reported)	(constant
					currency)1
	Group sales volume	4,373 tonnes	3,492 tonnes	+25%	N/A
	Group revenue	£306.3m	£266.0m	+15%	+20%
	Gross profit	£165.3m	£142.4m	+16%	+20%
	Gross margin	54.0%	53.5%	+50bps	N/A
	Underlying PBT1	£91.7m	£75.5m	+21%	+30%
	Reported PBT	£92.5m	£63.5m	+46%	+60%
	Underlying EPS1	83.4p	75.3p	+11%
	EPS	84.3p	62.6p	+35%
	Dividend per share	109.56p	46.14p	+137%	N/A
	(regular & special
	dividends)
Highlights:

• Solid & sustainable recovery; FY volumes +25%
• • FY sales volume up 25% driven by improving end-markets
  • Double-digitYoY growth in Electronics, Energy & Industrial, VAR
  • Improvement in Automotive with volumes +18% despite Semiconductor challenges
  • Medical revenue up 3% as elective surgeries gradually return
  • 9% increase in new application targets
• Underlying PBT up 21% driven by strong volume growth & cost management
• • Underlying PBT up 21% at £91.7m, reported PBT up 46% at £92.5m
  • Gross margin stable at 54.0% despite weaker sales mix, FX and inventory unwind
• Further progress in 'mega-programme' growth pipeline & additional milestones
• • Strong validation of PEEK technology through sale of Magma interest to TechnipFMC; opportunities in traditional & new energy including hydrogen transportation
  • Good progress in PEEK Knee clinical trial; 10 patients now implanted
  • Meaningful revenue of c£1m in PEEK Gears
  • Mega-programmepotential for E-mobility, with 50% increase in development programmes
  • Good progress in Trauma joint developments
• Strong cash generation underpinning investment & returns; 50p special dividend
• • FY 2021 available cash1 of £99.9m** underpinning c£40m capex; further investment focused on China in FY 2022
  • Operating cash conversion1 100%
  • Civil construction progressing on plan for new PEEK facility in China; commissioning in 2022
  • Post-Brexitinventory unwind benefiting cashflow; total inventory down £28m to £70m
  • Dividends returned to pre-COVID-19 levels & special dividend of 50p/share

1

• Further enhanced ESG strategy; products bringing environmental & societal benefit
• • Signatory to Science Based Target initiative (SBTi), reflecting 2030 net zero goal***
  • New ESG criteria added to Executive remuneration

1 Alternative performance measures are defined on page 16

**excludes £12.5m of cash ring-fenced in the Group's Chinese subsidiaries and includes £37.5m in 95-day notice deposit accounts

*** Scope 1&2 emissions

Jakob Sigurdsson, Chief Executive of Victrex, said: "Victrex delivered a solid and sustainable recovery during FY 2021, following the impact we saw from the pandemic in FY 2020. We saw strong volume growth in several end-markets and strong cash generation, supporting investment and shareholder returns.

"Automotive, Electronics and Value Added Resellers (VAR) were our standout end markets, with new application growth in our core business and notable milestones in our mega-programmes. These include TechnipFMC acquiring our equity in Magma as they prepare for scale up in Brazil, validating the technology for use in both traditional and new energy opportunities; good progress in the PEEK Knee clinical trial, with ten patients implanted to date; meaningful revenue in our PEEK Gears mega-programme; and a 50% increase in the number of development programmes for E-mobility, which is now a mega-programme.

"FY 2021 saw a continued strong focus on the health, safety and well-being of our employees - with 80% of our global regions now seeing a return to site, backed by our Global Flexible Working Policy - as we navigated our business through the pandemic. We again delivered strong service levels for customers, with sustainable products which bring environmental and societal benefits, as reflected in our long-term ESG goals.

"With strong cash generation underpinning investment and shareholder returns, we are pleased to declare dividends back to pre-COVID-19 levels, alongside a special dividend for shareholders of 50p/share.

Outlook

"For FY 2022, at this early stage, our assumptions are for year-on-year progress in full year sales volumes, with several end-markets expected to see further recovery, including in Medical, which will support our sales mix. In addition to a sizeable currency headwind, like most industrial companies, we are facing increased raw material and energy costs, which will impact us particularly in the first half, although mitigation plans are progressing. We will increase our investment in innovation and will start to incur commissioning costs in relation to our new China facility, although better asset utilisation should support our margin. Overall, we plan to deliver year-on-year growth in FY 2022.

"With an attractive portfolio of short, medium and long term growth opportunities, a strong ESG agenda, including alignment to global megatrends and sustainable products which help CO2 reduction and support environmental and societal benefit, and a highly cash generative business model, the Group remains well placed for the medium to long-term."

About Victrex:

Victrex is an innovative world leader in high performance polymer solutions, focused on the strategic markets of automotive, aerospace, energy (including manufacturing & engineering), electronics and medical. Every day, millions of people use products and applications which contain our sustainable materials - from smartphones, aeroplanes and cars to oil and gas operations and medical devices. With over 40 years' experience, we develop world leading solutions in PEEK and PAEK based polymers, semi-finished and finished parts which shape future performance for our customers and our markets, provide environmental and societal benefits, and drive value for our shareholders. Find out more at www.victrexplc.com

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A presentation for investors and analysts will be held at 9.30am (GMT) this morning via a conference call facility. To register, dial [phone] and participant pin 91122185# Audio playback is available by dialling [phone] and participant pin 425015823# . The presentation will be available to download from 8.30am (GMT) today on Victrex's website at www.victrexplc.comunder the Investors/Reports & Presentations section.

Victrex plc:

Andrew Hanson, Director of Investor Relations & Corporate Communications [phone]

Richard Armitage, Chief Financial Officer [phone]

Jakob Sigurdsson, Chief Executive [phone]

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Preliminary results statement for the 12 months ended 30 September 2021

'Solid & sustainable recovery: FY volumes +25%, strong cash generation & 50p/share special dividend' Group financial results

FY sales volume up 25%

Group sales volume of 4,373 tonnes was 25% up on the prior year (FY 2020: 3,492 tonnes), reflecting a solid and sustainable recovery across most end-markets, principally driven by Automotive, Electronics and Value

Added Resellers (VAR). We also enjoyed double-digit volume growth within Energy & Industrial, with Industrial reflecting new applications and the strength of the global recovery. VAR also benefited from some level of restocking through the year, as global economies reopened, although we do not anticipate a repeat of this during FY 2022. In the more challenging end market of Aerospace, H2 2021 volumes grew 8% on H1

2021, although full year volumes remained 20% lower than the prior year, reflecting a strong performance in Aerospace prior to the initial impact from COVID-19.

H2 2021 sales volume of 2,287 tonnes was 52% ahead of H2 2020 (H2 2020: 1,500 tonnes) and 10% ahead

sequentially, compared to the first half. As anticipated, our final quarter remained strong but was slightly lower than prior quarters due to the restocking impact being seen earlier in our financial year.

Good growth in new application targets

We saw a 9% increase in our target application pipeline.

Group revenue up 15%, with gradual Medical recovery

Group revenue was £306.3m, up 15% on the prior year (FY 2020: £266.0m), reflecting a strong performance in most Industrial end markets and a more gradual improvement in Medical, as elective surgeries take longer to return, following COVID-19 related lockdowns.

Group revenue in constant currency1 was 20% up on the prior year (FY 2020: £255.4m in constant currency).

ASP down 8% due to sales mix

Our Average Selling Price (ASP) of £70/kg was 8% lower than the prior year (FY 2020: £76/kg), principally reflecting a weaker sales mix and the faster growth in Industrial end markets compared to our Medical division. Currency also impacted us at the revenue level as Sterling strengthened. With Medical set to continue improving as surgery rates increase globally, offset by a sizeable currency headwind of approximately £8m- £11m, our expectations are that FY 2022 ASP will be slightly ahead of FY 2021.

Strong performance in Industrial; Medical improvement in H2 2021

Our Industrial division reported revenues of £255.2m, 18% up on the prior year (FY 2020: £216.3m), with Electronics remaining strong as homeworking and the demand for a range of smart devices supported use of

our materials, as well as a recovering Semiconductor sector. We also benefited from an improvement in VAR, with Automotive and Energy & Industrial also ahead compared to the prior year. As noted, Aerospace

improved in the second half vs the first half but remained lower than FY 2020 on a full year basis, primarily reflecting a strong H1 2020, prior to the impact of COVID-19 on trading within this end-market.

Medical revenues were £51.1m, up 3% on the prior year (FY 2020: £49.7m) and 9% ahead in constant currency1. We continued to see recovery in this end-market through the year, although we were still faced with a strong comparative from H1 2020, due to a strong Medical performance prior to COVID-19 related

lockdowns. Whilst surgery rates in China and parts of Asia returned to more normalised levels, surgeries in the US have not yet returned to pre-COVID-19 levels, although they are expected to continue improving

through FY 2022. We continue to benefit from growth in non-Spine through applications in Trauma, Arthroscopy and Cranio Maxillo Facial (CMF) applications, with non-Spine now representing 45% of Medical revenues.

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Gains & losses on foreign currency net hedging

Fair value gains and losses on foreign currency contracts, where net hedging is applied on cash flow hedges, are required to be separately disclosed on the face of the Income Statement. In FY 2021, a gain of £4.9m (FY 2020: loss of £1.5m) has been recognised accordingly, largely from USD contracts where the deal rate obtained (placed up to 12 months in advance in accordance with the Group's hedging policy) was favourable to the average exchange rate prevailing at the date of the related hedged transactions.

Gross margin stable

Group gross margin of 54.0% improved slightly compared to FY 2020 (FY 2020: 53.5%). We saw some improvement from increased PEEK production volumes and the benefit from our cost savings plan

announced in FY 2020, but these were offset by our monomer production, where we carried out a period of extended maintenance. A weaker sales mix - as our Medical business was slower to recover from the impact of COVID-19 than Industrial - a small degree of price erosion, and an increase in supply chain costs also held back margin.

With Brexit contingency inventories now unwound, we anticipate that FY 2022 will see production volume

more aligned to sales volume, as well as an improved sales mix. This should result in a recovery in gross margin, although it will be offset by currency and commissioning costs associated with our new Chinese

facility, as well as raw material and energy inflation.

Inventory unwind

Inventory built up ahead of Brexit provided us with the ability to respond flexibly to customer demand and

maintain high service levels throughout the pandemic. With the significant inventory unwind during FY 2021, our closing inventory position of £70.3m (FY 2020: £98.5m) benefited cashflow. With some uncertainties in

global supply chains, we expect total inventory in FY 2022 to fluctuate between £70m and £80m as we build contingency stocks from time-to-time. With the commissioning of our China manufacturing subsidiary

expected during 2022, we also anticipate holding a slightly higher level of raw material inventory.

Cost savings drive reduced overheads, excluding bonus

Operating overheads1 excluding bonus were 2% lower, primarily reflecting the benefit of cost savings announced in FY 2020, partly offset by an increase in innovation investment. Operating overheads of £72.7m (FY 2020: £66.4m) were 9%ahead of the prior year, which includes the effect of the Group's All Employee Bonus Scheme. Including both the annual incentive and long-term incentive programmes, the year on year incremental reward totalled approximately £9m.

As communicated in FY 2020, the All Employee Bonus Scheme is no longer based primarily on profit growth, but is based on actual performance versus a budget-based target, with a cap in place. We envisage this will reduce the volatility of bonus payout year on year. Executives will also now be incentivised on targets linked to our ESG goals (from FY 2022), with further detail in our forthcoming Annual Report.

Our "front-end" functions of Sales, Marketing and R&D support existing business growth and our mega- programmes. With some investment in these areas deferred during FY 2020, we anticipate a modestly higher level of overhead investment in FY 2022, with accrual for the All Employee Bonus Scheme expected to be slightly lower. R&D investment of £15.5m (FY 2020: £16.7m) represented approximately 5% of revenues1. Of total R&D investment focused on individual projects, ,approximately 83% of this is aligned to programmes supporting sustainable products.

Underlying PBT up 21.5%

Underlying PBT of £91.7m was up 21.5% on the prior year (FY 2020: £75.5m), reflecting a strong operating

performance. ReportedPBT of £92.5m was up 45.7% on the prior year (FY 2020: £63.5m). Theexceptional credit in FY 2021 related to more favourable settlements than assumed, primarily in non-UK regions, when making the restructuring charge in FY 2020.

Earnings per share up 35%

Basic earnings per share of 84.3p was 34.7% up on the prior year (FY 2020: 62.6p per share) as a result of the exceptional items in FY 2020, partly offset by a higher tax charge. The effective tax rate was 21.3%, materially higher than the prior year (FY 2020: 14.6%) which is mainly due to the restatement of deferred tax balances in

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