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VICTREX PLC
ANNUAL REPORT 2024
ENABLING
ENVIRONMENTAL
& SOCIETAL
BENEFITS
VICTREX PLC ANNUAL REPORT 2024
WE BRING TRANSFORMATIONAL
& SUSTAINABLE SOLUTIONS THAT
ADDRESS WORLD MATERIAL
CHALLENGES EVERY DAY
Victrex is an innovative world leader
in high performance polymer solutions,
focused on the strategic markets of
Automotive, Aerospace, Energy &
Industrial, Electronics and Medical. Every
day, millions of people rely on sustainable
products and applications which contain
our polymers and materials, from
smartphones, aeroplanes and
cars to energy production and
medical devices.
With over 40 years’ experience, we
develop world leading solutions in PEEK
and PAEK based polymers and selected
semi-finished and finished parts which
shape future performance for our
customers and markets, enable
environmental and societal benefits
and drive value for our shareholders.
Cover image courtesy of Airbus’ Clean Sky 2 programme (please see page 11).
About us
Strategicreport
1 Highlights
2 Victrex at a glance
6 Chair’s statement
8 Our investment case
12 Our markets and megatrends
14 Our business model
16 Our strategy
18 Overview of strategy
20 Strategy and key performance
indicators
22 Stakeholder engagement
26 Financial review
31 Operating review
36 Risk
43 Going concern and viability statement
46 Sustainability report
Corporategovernance
77 Introduction from the Chair
80 Board of Directors
82 Statement of corporate governance
96 Nominations Committee report
100 Audit Committee report
108 Corporate Responsibility
Committeereport
111 Directors’ remuneration report
134 Directors’ report – other
statutoryinformation
138 Statement of Directors’
responsibilities in respect of the
Annual Report and the financial
statements
139 Independent auditors’ report to
themembers of Victrex plc
Financial statements
146 Consolidated income statement
147 Consolidated statement
ofcomprehensiveincome
148 Balance sheets
149 Cash flow statements
150 Consolidated statement
ofchangesinequity
151 Company statement
ofchangesinequity
152 Notes to the financial statements
Shareholder information
199 Five-year financial summary and
Cautionary note regarding
forward-looking statements
200 Financial calendar and Advisors
First 1,000 tonne quarter since FY 2022; FY volumes up 4%
u
Q4 2024 Group volumes of 1,015 tonnes: up 3% vs Q3 and up 21% vs Q4 2023
u
FY 2024 Group volumes up 4% vs prior year after a soft H1:
u
Transport volumes up 8% (Aero +15%, Automotive +5%)
u
VAR volumes +14%; Electronics -12% and Energy & Industrial -5%
u
FY 2024 Group revenue down 5%, reflecting Medical destocking & FX
u
Medical revenues down 19% at £53.0m (flat H2 2024 vs H1 2024)
u
Robust like-for-like pricing with ASP at £78/kg, offset by sales mix & FX
Underlying PBT impacted by Medical, mix & lower asset utilisation;
strongcostcontrol
u
FY 2024 underlying PBT down 26% at £59.1m, driven by Medical sales and lower
assetutilisation as inventories reduced
u
FY 2024 reported PBT £23.4m after £35.7m in exceptional items, including Bond 3D
impairment of investment in associate and fair value loss on loans
u
FY 2024 gross margin 46.2% (FY 2023: 53.0%), recovery opportunity as asset
utilisationimproves
u
Self-help & Project Vista: support future profitability through Go to Market & sales
improvements
Strong cash conversion driven by lower capex & inventory unwind
u
FY 2024 net debt £21.1m, including cash of £29.3m (FY 2023: net debt of £16.7m
including cash & other financial assets of £33.5m) with RCF repaid
u
New China manufacturing facilities operational, concluding major capital
investmentphase
u
Good progress on inventory reduction: £19.4m YoY movement (FY 2024: £115.1m),
& further opportunity in FY 2025
u
Improved underlying operating cash conversion
1
of 114% (FY 2023: 18%)
u
Final dividend maintained at 46.14p/share
Key mega-programme milestones delivered, supporting mid-term growth targets
u
Aerospace Composites: further revenue growth
u
E-mobility: new customer collaborations
u
Knee: regulatory submission for approval in India & US clinical trial approved
u
Magma: continuing technical & commercial collaboration with TechnipFMC
&Petrobras
u
Trauma plates: strong revenue growth & broader customer base
u
Mid-term growth targets of 5–7% revenue CAGR
2
, with upside of 8–10%
CAGRasmega-programme contribution increases
1 Alternative performance measures are defined in note 25.
2 Revenue CAGR in five-year period. Targets communicated in December 2023.
FY VOLUMES UP 4%; SOLID START TO FY 2025
& FOCUSED ON GROWTH
Contents
Group sales volume
tonnes
3,731 +4%
Group revenue
£m
291.0 -5%
Underlying profit
before tax
1
£m
59.1 -26%
23
23
23
23
23
23
22
22
22
22
22
22
24
24
24
24
24
24
3,731
23.4
291.0
19.8
59.1
59.56
Dividend per share p
(regular)
59.56 (flat)
Reported earnings
pershare p
19.8 -72%
Reported profit
beforetax £m
23.4 -68%
72.5
87.7
70.9
87.6
59.56
59.56
3,598
4,727
307.0
341.0
80.0
95.6
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 1
OUR PURPOSE
To bring transformational
and sustainable
solutionsthat address
world material
challengesevery day
OUR VALUES
u
Passion
u
Innovation
u
Performance
A SUSTAINABLE BUSINESS
People
Support ourlocal
communities and inspire
STEM based careers.
Support our DE&I agenda.
Planet
Minimise our use
ofresources across
thevalue chain (carbon,
water & waste) and
support Biodiversity.
Products
Offer sustainable
productswhich provide
clear environmental
andsocietal benefits.
OUR CULTURE
Safety, sustainability
& accountability
Innovation Service for
customers
Delivering
withspeed
STRATEGIC IMPERATIVES
Drive
u Technical service & quality
u Cost efficiency & self-help
u Sustainability & productivity
Differentiate
u Application development
u How we serve our customers
u Innovation pipeline
Create and deliver
future value
u Increase revenue from product
forms, parts & mega-programmes
u Expand portfolio in composites
andMedical
Underpin
u Safety, quality, health & wellbeing
u Sustainability & talent
u Strong financial position
OUR STRATEGIC ROADMAP
Our strategic imperatives are based on how we Drive our core business; Differentiate through how we
serve our customers and utilise our application development expertise; and Create and deliver value for
our customers and stakeholders. We Underpin all of our strategic imperatives through a relentless focus
on safety, quality, health and wellbeing, through having a clear purpose as a sustainable business with
sustainable products, and through developing our talent, whilst maintaining a strong financial position.
OUR BEHAVIOURS
u
Driving results
u
Working together
u
Doing the right thing
u
Continuously
improving
u
Focusing on our
customers
Victrex at a glance
Sustainability report
Pages46 to 75
Sustainability report
Pages46 to 75
Read more on page 92
Sustainability report
Pages46 to 75
Read more on
pages16to21
2 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION2 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
1,100+
employees globally
100%
of our global electricity
fromrenewable sources
###
(where the market exists, see
page 66)
30–40%
average weight saving
usingVictrex
TM
PEEK
vs metal
52%
of revenues from
sustainable products
#
40+
countries served
Note: Source data available on request.
# Sustainable products are defined as those which offer quantifiable environmental or societal benefit. These are primarily in Automotive, Aerospace
(supporting CO
2
reduction) and Medical (supporting improved patient outcomes). Some applications are also in Energy & Industrial (e.g. wind and
renewable energy applications) and Electronics (supporting energy efficiency, e.g. home appliances). Volumes from Oil & Gas are excluded, as are
ValueAdded Resellers volumes currently, due to the lack of full clarity on exact end market destinations. Sustainable products represented 52%
ofGrouprevenues in FY 2024 (FY 2023: 55%).
## The Group targets 5–6% of Group revenues to be spent on R&D expenditure, being a leading indicator of the Group’s ability to innovate into new
applications, supporting future growth.
### For all countries where the market exists via either retail supply contracts or offset by certificated EACs. This applies to all future references to 100%
electricity from renewable sources throughout this report.
c.5%–6%
of sales invested
inR&D
##
BRINGING TRANSFORMATIONAL
&SUSTAINABLE SOLUTIONS
Our purpose is to bring transformational and sustainable solutions which address the world’s material
challenges. Through ourMedical and Sustainable Solutions business areas, we have a strong core
business based on PEEK polymer, which has formed Victrex’s business since 1993. Our products typically
replace metal with alighter, durable and more sustainable alternative. This in turn supports the
opportunity to underpin CO
2
reduction, enhance energy efficiency and provide clinical benefit in
applications which use our materials. Through a developing and differentiated portfolio of product
forms and parts (Polymer & Parts), we seek to grow new revenue streams, enabling environmental
andsocietal benefit for our customers.
OUR SOLUTIONS OUR BUSINESS
Aerospace
20,000+
aircraft flying with Victrexsolutions
Energy & Industrial
75m+
VICTREX™ PEEK seal rings in use today
100m+
machines operate using Victrex solutions
Automotive
500m+
VICTREX™ PEEK based applications in use
Electronics
4bn+
mobile devices using Aptiv™ film
Medical
15m+
implanted medical devices using
VICTREX™PEEK to date
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 3STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 3
Victrex plc | Annual Report 2024
OUR BUSINESS TODAY
Our products support a diverse range of applications andend markets (Groupvolume and revenue split
based on FY 2024).
Victrex at a glance continued
Transport
28% of Group volume
In Automotive we underpin applications
including ABS braking systems, powertrain,
bearings, fuel filter systems, transmission
and EV battery applications. In Aerospace,
we support mission-critical applications
likethermal acoustic blankets, brackets
&fasteners, as well as newer applications
incomposite parts.
Medical
4% of Group volume
Core applications include spinal fusion,
arthroscopy, dental, trauma, drug delivery,
cardio, CMF and active implantables, with
Knee and Trauma as our Medical mega-
programmes. Medical revenues are 60:40
Non-Spine and Spine.
Electronics
12% of Group volume
Electronics has long-standing applications
inSemiconductor, including CMP rings and
in the chip manufacturing process; whilst
insmart devices, Victrex has APTIV
TM
film
business supporting smart device speakers.
We also serve household appliances
including hairdryers and vacuumcleaners.
Spine
Energy & Industrial
16% of Group volume
In Energy, Victrex
TM
PEEK serves applications
in deep sea exploration equipment, as well
aspumps and valves. We have growing
business in wind & renewable energy.
Ourmaterials are also used in industrial
machinery, food & beverage processing
andeyeware.
Value Added Resellers (‘VAR’)
40% of Group volume
Our VAR customers process Victrex
TM
PEEK
to support a range of industries, typically
processing or compounding high volumes
ofour materials to support tier 1 and tier 2
customers, or OEMs.
V
Sustainable Solutions
82%
of revenues
Medical
18%
of revenues
4 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION4 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
HOW OUR PRODUCTS
ENABLEENVIRONMENTAL
ANDSOCIETALBENEFITS
Supporting CO
2
reduction, improving energy efficiency and better patient
outcomes arejustsome of the benefits our products bring, with over half
ofourrevenues nowcoming from sustainable products (FY 2024 data).
* Based on European annual mileage for passenger cars using selected applications including vacuum pumps.
** Based on 10kg of PEEK replacing metal: IATA carbon reduction & climate change 2018.
***
25% improved brain function using PEEK-OPTIMA
TM
Natural vs 11% in metal, based onpaperby Zhang Q, Yuan Y, Li X, et al, World Neurosurgeon 2018.
Automotive
80,000 tonnes
annual CO
2
saving in Europe
for selectedapplications*
Electronics
30–40%
PEEK is 30–40% lighter than some metals
and supports improved energy efficiency
inhomeappliance devices
Aerospace
c.3x CO
2
savings
annual sales to Aerospace customers
supportCO
2
savings approximately 3x Victrex’s
annualScope 1&2 emissions**
Medical
25%
improved brain function using
PEEK-OPTIMA™ Natural in CMF
skullplatesvsmetal***
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 5
Dr Vivienne Cox DBE
Chair
Overview
Despite a particularly tough period in several
of our end markets, driven by a substantial
inventory correction in the chemical industry,
we have stayed the course, which sets us up
well for the upturn. Our resilient workforce,
innovative culture and investments in
capability and assets have kept Victrex
wellpositioned through the recent
challenging macro-economic conditions,
which have impacted performance and
chemical industry valuations. Although the
outlook remains mixed, we are focused on
growth for theGroup in FY 2025.
Our purpose: aligned to growingglobal
megatrends
Victrex has a clear purpose to bring
transformational and sustainable solutions
to the performance challenges faced by our
customers. All of our products come with
environmental, technical or medical
benefits, across Aerospace and Automotive
industries, with lighter, more durable and
faster to process materials supporting CO
2
reduction; in Electronics and Energy &
Industrial to support energy efficiency; or
inMedical, supporting patient outcomes.
We play a keypart in supply chains, with
ourmaterials supporting ‘mission-critical’
applications today and being part of the
innovation programmes of tomorrow, across
several keyindustries. This alignment
supports our target to drive strong revenue
and profit growth over the medium to long
term. Further information is in the CEO’s
Review of Strategy on pages 18 and 19.
Safety: a Zero Accidents & Incidentsculture
We have a Zero Accidents, Zero Incidents
goal across our entire business. During the
year, we built on our strong safety record,
with our recordable injury frequency
rate(‘RIFR’) slightly improving to 0.18
(FY2023:0.22) and better than the OSHA
industry average (1.3). Beyond our main UK
manufacturing facilities and warehousing,
our global operations include polymer
manufacturing in China and some
downstream parts manufacturing in the
US.It is imperative for our employees, for
our culture and for the way we serve our
customers that we further build on our
safety performance over the coming years.
Self-help to drive Go to Market
effectiveness (Project Vista)
Our strategy is to be a world leader in
driving value creation through PEEK and
PAEK materials across our two business
areas of Sustainable Solutions and Medical.
Whilst our Polymer & Parts strategy remains
key, we are adapting through self-help
toensure that we have an even better
GotoMarket approach with customers,
supporting future profitability.
Firstly, we will enhance sales and R&D
effectiveness, as well as smarter
procurement, thereby creating sustainable
value for our customers. This will include a
more regional approach to how we focus
our Sales teams, rather than purely by end
market. Secondly, we will enhance the
speed and value creation of our business
development and technical service
processes, including greater digital solutions
to support customers. Balancing resources
across our Engine 1 (core business) and
Engine 2 (more differentiated business
including our mega-programmes) means we
will apply our resources and capability
where we can drive the greatestreturn.
Increasing our differentiation
With an addressable market for PEEK at
least five times current levels, it is imperative
that Victrex can further increase its
differentiation. Polymer & Parts already
differentiates usfrom competitors, who
largely focus onaportfolio of materials
other than PEEK. However, through a
rebalancing of resources, and our market
and application development know-how,
we will seek to drive a greater proportion
ofhigher value business.
Differentiation also comes in the form
ofourtechnical service for customers, and
ourunique manufacturing process, with
backward integration into key raw materials.
Our innovation strength has been built up
over many years and includes know-how or
patents. Investing around 5–6% of sales
every year to support R&D will keep
uswellplaced to continue innovating and
supporting the needs of our customers.
Delivering revenue & profit growth
Last year we set out our growth targets
through to FY 2028, with 5–7% revenue
CAGR and an opportunity of 8–10% CAGRas
our mega-programmes further commercialise.
The Board remains confident in delivering
against these targets once the challenging
macro-economic conditionssubside.
Our five large game-changing
mega-programmes of Aerospace
Composites, E-mobility, Knee, Magma
(composite pipe for the energy industry)
andTrauma continue to deliver key
milestones and increase commercialisation.
We have line ofsight towards £10m annual
revenues for some programmes, with
further detail shown onpage 27.
Sustainability & ESG: People,
Planet&Products
The environmental & societal benefits
ofVictrex™ PEEK products will continue to
increase in importance, as the need for CO
2
reduction, energy efficiency or improved
patient outcomes becomes more critical in
the coming years.
STAYING THE COURSE:
READY FOR THE UPTURN
Chair’s statement
6 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION6 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
The Board is also pleased to report that
wegained successful validation for our
decarbonisation targets this year, as part of
the Science Based Targets initiative (‘SBTi’).
We now move to the delivery phase,
withoptions to utilise alternative fuels or
processes available. Further detail is set
outin the Sustainability report on page 46.
Our People, Planet & Products pillars are
recognised by customers and investors and
have helped us gain strong accreditations
Victrex’s close alignment with
growing and powerful global
megatrends such ascarbon
reduction and improving
patient outcomes positions
uswell for the yearsahead.
Our purpose isto supply our
customers with products
which enable environmental
or societal benefits. Despite
atough period in several of
our end markets, we have
continued to invest in our
people, our assets and our
innovation strengths. We are
focused on growth for the
Group in FY 2025.
Dr Vivienne Cox DBE
Chair
Our
purpose
Bringing transformational &
sustainable solutions which
address world material challenges
every day
5–7%
revenue growth
(target for revenue CAGR
throughto FY 2028)
from a number of ESG rating agencies.
Ialsowant to thank the dedication of
ouremployees across our People agenda,
where we actively engage with communities
wherever we operate, including in Science,
Technology, Engineering & Maths (‘STEM’)
programmes and Biodiversity. Inspiring and
supporting the talent of the future is
embedded in Victrex’s culture.
Results
The challenging macro-economic
environment continued through FY 2024.
Underlying financial performance was in line
with expectations but was materially weaker
year on year, driven by trading, Medical
destocking and lower asset utilisation. This
resulted in underlying PBT of £59.1m (FY
2023: £80.0m), with reported PBT of £23.4m
(FY 2023: £72.5m), reflecting exceptional
items of £35.7m. We saw more encouraging
end market and macro-economic indicators
through the second half year, which supports
the opportunity of growth into FY2025,
though trading conditions remain mixed.
Further detail is set out in the Financial review
on pages 26 to 35.
Robust balance sheet
With a small net debt position, after
aperiod of high investment and weak
tradingconditions, we have the opportunity to
improve cash generation as trading improves
and investment moderates. Our highly
cash-generative business model enables us to
invest in our growth, as well asoffer attractive
shareholder returns. With completion of our
China manufacturing andUK asset upgrade,
capital expenditure will reduce to
approximately 8–10% ofrevenues.
Delivering for our shareholders
The Board is mindful that this has been
achallenging period for shareholders.
However, our clear strategy and enhanced
Go to Market approach – alongside a
macro-economic recovery – support the
opportunity of strong growth. Our asset
base is well invested and operating leverage
will start to improve from FY 2025 onwards.
With investment moderating, this offers the
opportunity for incremental shareholder
returns as cash flows improve. Share
buybacks and special dividends are options
we will consider to return cash. Further
details on our capital allocation policy can
be found onpage 28.
Governance & the Board
The Group continues to place a strong
emphasis on governance, as well as ensuring
the Board has the skills and experience to
support delivery of our strategy. During
theyear we were pleased to welcome
UrmiPrasad Richardson to the Board
asaNon-executive Director. Urmi brings
awealth of experience in innovation-led
businesses, including at Thermo Fisher
Scientific. Biographies of each Board
member can be found on pages 80 and 81.
Diversity, Equity & Inclusion
The Group continues to make good progress
in our Diversity, Equity & Inclusion (‘DE&I’)
journey. We now have 25% of our
leadership group comprising females, as
part of our females in leadership target of
40% by 2030. We also established further
employee resource groups (‘ERGs’) to reflect
the increasingly international nature of our
operations. Our Race, Ethnicity and Cultural
Heritage (‘REACH’) group was formed this
year, sponsored by a Victrex Management
Team (‘VMT’) leader, bringing a greater
diversity ofemployees together.
People, stakeholders, values & culture
The challenging macro-economic
environment over the past two years has
tested us all and it is important that we
recognise and thank each and every one of
Victrex’s employees for their resilience and
contribution. Training, flexible working and
supportive policies are areas we have
invested in to ensure that we continue
todevelop our employees.
I am pleased to report that our biannual
Employee Engagement Survey showed
animprovement, with engagement up 4%
to 73% compared to the last full survey.
Wewere also included in The Sunday Times
Best Places to Work for the first time.
Our Workforce Engagement Non-executive
Director, Brendan Connolly, has continued
to engage with employees across our global
locations and a summary of this is shown on
page 94. Overall, it is very clear to me that
through positive times and challenging
times, our values of Passion, Innovation and
Performance, and our culture of innovation,
remain firmly embedded across Victrex.
Outlook
The Group has seen a solid start to FY 2025
– ahead of the prior year – despite mixed
trading conditions. Our expectations for
profit growth are based on robust demand
continuing across the end markets of
Sustainable Solutions, together with Medical
improvement as we progress through 2025.
The timing of the upturn in Medical will be a
key factor in the scale of Group profit
growth, with cost control, self-help
measures, higher asset utilisation and lower
raw material costs helping to underpin profit
improvement.
Dr Vivienne Cox DBE
Chair
3 December 2024
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 7
OUR LONG-TERM
GROWTHCREDENTIALS
Through our core strengths of hunting for and developing new applications where
Victrex
TM
PEEK can play, we are able to catalyse new revenue streams and enable
environmental & societal benefits for our customers. Our products are aligned to
global megatrends, with a broad portfolio across our core business and our
mega-programmes. Our addressable market is estimated at 5x current levels –
underpinned by a robust financial position and an improving cash profile.
Our investment case
An innovative world leader:
buildingthe PEEK/PAEK market
No.1
PEEK expert
Sustainable product goals
>70%
Group revenue from sustainable products
with environmental and societal benefits
by2030 (from 52% today)
Proportion of project-based R&D
investment indedicated sustainable
products orprogrammes
88%
of project based R&D expenditure
supporting sustainable products or
programmes (as a proportion ofthe
Group’sallocated R&D expenditure
2
)
Strong pipeline of medium to
long-termgrowth opportunities
5
mega-programmes offering potentially
game-changing solutions for customers
Sector leading returns
16%
five-year average return on invested
capital(‘ROIC’)
1
Highly cash-generative
businessmodel
114%
underlying operating cash conversion
1
1 Alternative performance measures are defined in note 25.
2 Total R&D investment in sustainable products or programmes was 37% (FY 2023: 40%).
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Victrex plc | Annual Report 2024
AN INNOVATIVE CULTURE:
CHANGE-MAKERS
&MARKET-MAKERS
Victrex
TM
PEEK & PAEK polymers: technology with a unique combination of properties
As the pioneer of PEEK, Victrex has
astrongheritage. Our polymers and
materials are found in many ‘mission-critical’
applications and our track record over
several decades has been in ‘hunting’
fornew application uses, ensuring that
wecan demonstrate a performance
advantage over metal or other materials.
These include in aerospace applications
40,000 feet up, energy applications 10,000
feet below the sea or,increasingly, in a more
diverse range of medical devices: spine,
arthroscopy and cardio applications, with
orthopaedic applications like trauma seeing
revenue growth.
With differentiation through our Polymer
&Parts strategy, our unique manufacturing
processes and backward integration into
keyraw materials, and our ability to ‘make
markets’ and develop new applications,
Victrex is exposed to favourable megatrends
like CO
2
reduction, energy efficiency and
clinical outcomes.
Our leading position in application
development – protected through
know-how or patents – has helped enable
environmental, technical or societal benefits
for our customers over many years.
Our focus is to drive increased
differentiation through growing our
corebusiness, as well as delivering more
specialised grades, productforms or
parts,including our mega-programmes.
Growth targets
Revenue CAGR
5–7%
medium term
Potential for revenue CAGR
8–10%
medium term, with
greatercommercialisation of
ourmega-programmes
Mega-programme revenue goal
>£25m
by end of FY 2025
to 10,000
feet below
40,000
feet above the sea…
Victrex’s high performance
polymersarefound across
anumber ofend markets
&applications
Medical revenues
Double
by FY 2028 (from FY 2023 baseline)
Overall, the future success of Victrex willbebuilt on by
applying our unique technology to a focused and broader
portfolio of applications, supported by ourculture of
innovation, capability and wellinvested assets.
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Victrex plc | Annual Report 2024
Our investment case continued
Sustainability report on page 46
ALIGNED TO
GLOBALMEGATRENDS
u
PRODUCT GOALS: Within our own assessment of how our products bring a quantifiable
environmental and societal benefit, our target is to exceed 50% of revenues by 2025
and70%ofrevenues by 2030.
u
SUSTAINABLE PRODUCT REVENUES: In FY 2024, our sustainable products made up 52%
ofourrevenues (FY 2023: 55%).
* Data on file.
** IATA carbon reduction and climate change 2018, based on replacing 10kg
of metal with PEEK and associated CO
2
reduction.
Aerospace
30–40%
lighter (vs metals)
Applications using Victrex
TM
PEEK polymer typically
offer 30–40% weight
reduction compared to
metal used in Aerospace*
Our annual PEEK sales to
Aerospace alone help
support annual CO
2
savings
c.3x our own annual CO
2
footprint (based on Scope
1 & 2 emissions)**
Automotive
>200g
PEEK in EVs
Victrex
TM
PEEK has
along-standing history
inABS braking systems,
transmission and
otherapplications. Our
penetration in electric
vehicles (‘EVs’) is growing,
with the opportunity of
>200g per car (currently
~11g average for
existingICE cars)
Electronics
30–40%
lighter (vs metals)
Home appliances, smart
devices, Artificial Intelligence
applications and
semiconductors demand
greater energy efficiency,
supported by lightweight
and durable Victrex
TM
PEEK.
Atypical 40% weight saving
vs metals used in Electronics
supports the opportunity of
improved energyefficiency*
Energy & Industrial
Less
metal
Metal replacement in
energy applications,
including growing revenues
in renewable energy,
withopportunities in
hydrogen applications
Medical
Improved
patient outcomes
Higher union rates and
improved patient outcomes
have been achieved using
Victrex
TM
PEEK composite
Trauma plates, compared
to metal solutions*
Automotive
Aerospace
Electronics
Medical
Energy &
Industrial
CO
2
reduction
Clinical
benefit
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Victrex plc | Annual Report 2024
Mega-programme
Magma (composite pipe
for the energy industry)
E-mobility (electric
vehicleapplications)
Trauma plates
(compositetrauma plates
forpatient fractures)
Aerospace Composites &
Structures (the aeroplanes
of tomorrow)
PEEK Knee (alternative to
metal knee replacement)
1. Revenue phase Commercial c£1m Commercial c£5m Commercial >£1m Commercial c£3m Development <£1m
2. Annual
milestones
Supporting
finalisation of
qualification for
Brazil opportunity
New business or
platform build for
800V motors
Broader customer
wins & strong
revenue growth
>£1m
Finalisation of
qualification
programmes
Regulatory submission
(India); 57 patient
implants, 20past 2-year
clinical phase
3. Next milestones Petrobras bid
outcomes (via
TechnipFMC)
New 800V
platforms;
broader battery
applications
Revenue build &
additional customer
launches
Qualifications and
use cases for key
PEEK composite
applications
Potential for a
commercial PEEK Knee
in 2025/26 (subject to
regulatory pathway); US
clinical trial starting
4. Investment
requirements
Limited –
TechnipFMC
investing
Limited – Victrex
XPI
TM
patented
grade established
Modest – incremental
product development
investment
Limited – investment
through supply chain
Modest – further
development &
industrialisation scale-up
5. Timeline to
£10mrevenue
2
~3 years ~2 years 2–3 years ~2 years >3 years (based
onappropriate
regulatory pathway)
FOCUS ON: AEROSPACE COMPOSITES
Our Aerospace Composites mega-programme offers
the potential of up to 10x the PEEK content per plane
compared to today. Prior to new aerospace platforms
being delivered, we are now seeing composite based
parts being prepared for use cases in components like
engine housings, nacelles and other parts. The
rationale for these increasingly larger composite parts
is to drive lightweighting and CO
2
reduction, as well
as faster processing, which our materials support.
We also have significant intellectual property (‘IP’)
and know-how in this area, including in hybrid
moulding. Overall, to reduce plane order backlogs
and produce more aircraft per year, the trend is
verysupportive towards high performance materials
like Victrex™ PEEK or LMPAEK™ where we are
qualifying, or have already qualified, for a number
ofaerospaceprogrammes.
FOCUSED ON INCREASING
COMMERCIALISATION
INOURMEGA-PROGRAMMES
Our five game-changing mega-programmes
1
offer the potential of at least £50m revenue in their peak sales
year, with some (e.g. Knee) assessed as significantly more and with a revenue potential at least as large as
Victrex’s Group revenue today
2
. Revenue from our mega-programme portfolio is currently more than £10m,
with an opportunity to deliver significant growth over the next 12 months.
Mega-programmes aim to deliver new revenue streams and further differentiate Victrex, typically aligned
toeither supporting CO
2
reduction or improving clinical outcomes.
After a period of development, incubation and ‘push’ for our mega-programmes, we now have increasing ‘pull’
from major customers and OEMs like Airbus, TechnipFMC and key medical device customers, compared to recent
years. Milestones towards greater commercialisation are increasing, with major customers also investing their
money to support delivery of these mega-programmes (for example in regulatory submissions for PEEK Knee or
new manufacturing facilities for Magma or Aerospace Composites) and to solve their performance challenges.
1 Mega-programmes defined as offering at least £50m of revenue in peak sales year.
2 Estimated.
Airbus’ multi-functional fuselage demonstrator is a showcase for Victrex LMPAEK™ based composites, with a fuselage structure being
manufactured based on our materials (image courtesy of Airbus).
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Victrex plc | Annual Report 2024
SIZEABLE AND SUSTAINABLE
GROWTHOPPORTUNITIES
With long-term megatrends in our favour and sustainable products, we have a strong
anddiverse mix of growth opportunities across our key markets.
End markets Market opportunity Megatrends Increasing penetration of PEEK
SUSTAINABLE SOLUTIONS
Aerospace
42,000
new passenger and freight aircraft by 2043
Source: Airbus
Fly lighter
u
Lighter weight and CO
2
reduction trends
withmore efficient manufacturing using
PEEK, PAEK and composites mean fuel
saving– a strategic imperative for the
Aerospace industry.
u
Opportunities to support reduction
ofOEM backlogs through more
efficientprocessing.
10x PEEK & PAEK content opportunity
u
Commercialisation of lighter structural composite parts (wing and fuselage structures).
u
Part of Airbus Clean Sky 2 programme & other customer programmes.
u
Opportunity to move from c.500kg to >5 tonnes of PEEK per plane.
Automotive
>200g
potential PEEK/car on EV platforms (increase
from current 11g average over long term, based
on 800V electric vehicle)
CO
2
reduction, durability
andelectrification
u
Fuel efficiency, CO
2
reduction, safety
andreliability improvements resulting
from consumer and regulatory trends.
Transition from internal combustion
engines (‘ICE’) to electric vehicles (‘EVs’)
as electrification is mandated in
manyregions.
Increase PEEK content per vehicle in EVs
u
Moving from 11g average PEEK content in ICE cars to potential of >200g
per car (long-termopportunity, based on EV with dual motors).
u
Multiple opportunities in electric cars, bikes and green transport, with increasing
businesswins.
u
Majority of existing ICE applications translate across EVs
(braking, powertrain and gears).
Electronics
32bn+
connected devicesby2030
Source: Statista
Thinner, smaller, smarter
u
The need for instant access to
communication and information onthe
move is driving trends for mobile devices.
Energy efficiency and thermal management
u
Broadening range of applications: semiconductors, mobile devices and home appliances.
u
Artificial Intelligence (‘AI’) opportunities.
u
Strong capability of PEEK in durability andthermalmanagement.
u
Metal replacement supporting energy efficiency of devices and applications.
Energy & Industrial
28%
increase in global energy use by 2040
Source: IEA
Energy transition
u
Increasing demand for and depletion
ofexisting resources drive exploration
into extreme environments, as well as
the energytransition, increase
inrenewable energy and electric
vehicles/greater electrification.
u
More efficient manufacturing processes
create more data and connectivity
requirements in Industrial end markets.
Performance in traditional and new energy applications
u
Increasing penetration in renewable energy (e.g. wind applications)
and hydrogenopportunity.
u
Metal replacement in traditional energy; Magma composite pipe.
u
Drive new application areas in Industrial, including food, robotics
and opportunity forPEEK following PFAS regulations.
MEDICAL
Medical
7% CAGR
forecast for medical device industry revenue growth
2024–2029 (6.99% CAGR forecast by Mordor Intelligence)
Ageing global population
u
People are living longer and have a
strong desire to maintain their quality
oflife and activity levelsin their later
years, requiring better patient outcomes.
u
Greater demand for alternative and
non-metal solutions.
Supporting improved patient outcomes
u
Significant growth in Non-Spine, e.g. Trauma, CMF, Cardio and Knee.
u
Leveraging clinical data and component manufacturing capability
to drive PEEK adoption.
u
3D printed Porous PEEK approved to support greater bone in-growth.
Our markets and megatrends
12 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
End markets Market opportunity Megatrends Increasing penetration of PEEK
SUSTAINABLE SOLUTIONS
Aerospace
42,000
new passenger and freight aircraft by 2043
Source: Airbus
Fly lighter
u
Lighter weight and CO
2
reduction trends
withmore efficient manufacturing using
PEEK, PAEK and composites mean fuel
saving– a strategic imperative for the
Aerospace industry.
u
Opportunities to support reduction
ofOEM backlogs through more
efficientprocessing.
10x PEEK & PAEK content opportunity
u
Commercialisation of lighter structural composite parts (wing and fuselage structures).
u
Part of Airbus Clean Sky 2 programme & other customer programmes.
u
Opportunity to move from c.500kg to >5 tonnes of PEEK per plane.
Automotive
>200g
potential PEEK/car on EV platforms (increase
from current 11g average over long term, based
on 800V electric vehicle)
CO
2
reduction, durability
andelectrification
u
Fuel efficiency, CO
2
reduction, safety
andreliability improvements resulting
from consumer and regulatory trends.
Transition from internal combustion
engines (‘ICE’) to electric vehicles (‘EVs’)
as electrification is mandated in
manyregions.
Increase PEEK content per vehicle in EVs
u
Moving from 11g average PEEK content in ICE cars to potential of >200g
per car (long-termopportunity, based on EV with dual motors).
u
Multiple opportunities in electric cars, bikes and green transport, with increasing
businesswins.
u
Majority of existing ICE applications translate across EVs
(braking, powertrain and gears).
Electronics
32bn+
connected devicesby2030
Source: Statista
Thinner, smaller, smarter
u
The need for instant access to
communication and information onthe
move is driving trends for mobile devices.
Energy efficiency and thermal management
u
Broadening range of applications: semiconductors, mobile devices and home appliances.
u
Artificial Intelligence (‘AI’) opportunities.
u
Strong capability of PEEK in durability andthermalmanagement.
u
Metal replacement supporting energy efficiency of devices and applications.
Energy & Industrial
28%
increase in global energy use by 2040
Source: IEA
Energy transition
u
Increasing demand for and depletion
ofexisting resources drive exploration
into extreme environments, as well as
the energytransition, increase
inrenewable energy and electric
vehicles/greater electrification.
u
More efficient manufacturing processes
create more data and connectivity
requirements in Industrial end markets.
Performance in traditional and new energy applications
u
Increasing penetration in renewable energy (e.g. wind applications)
and hydrogenopportunity.
u
Metal replacement in traditional energy; Magma composite pipe.
u
Drive new application areas in Industrial, including food, robotics
and opportunity forPEEK following PFAS regulations.
MEDICAL
Medical
7% CAGR
forecast for medical device industry revenue growth
2024–2029 (6.99% CAGR forecast by Mordor Intelligence)
Ageing global population
u
People are living longer and have a
strong desire to maintain their quality
oflife and activity levelsin their later
years, requiring better patient outcomes.
u
Greater demand for alternative and
non-metal solutions.
Supporting improved patient outcomes
u
Significant growth in Non-Spine, e.g. Trauma, CMF, Cardio and Knee.
u
Leveraging clinical data and component manufacturing capability
to drive PEEK adoption.
u
3D printed Porous PEEK approved to support greater bone in-growth.
Visit
www.victrexplc.comto
seehow we are shaping
future performance in
ourmarkets
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 13
What we do
1. A sustainable business model
We enable environmental & societal benefits for our customers
andtheplanet. Oursustainable products offer a unique combination
ofproperties, supporting CO
2
reduction in Aerospace & Automotive
through lightweighting and faster processing, and with over 15 million
PEEK implants to date in medical devices, we also support improved
patient outcomes. With our People, Planet & Product based ESG pillars
and decarbonisation goals, weseek to minimise our use of resources,
with the opportunity to change our process or use alternative fuels
tosupport alignment to Net Zero emissions by 2050 (aligned to and
validated by SBTi), with an interim target by 2032.
2. Align to global megatrends
We identify megatrends such as CO
2
reduction or improved
patient outcomes, where our polymers can offer a performance
advantage vs metal or incumbent materials. We identify
andunderstand customer needs, targeting industries
andapplications with opportunities for significant growth
andattractive returns.
3. Innovation
Our culture is built on continual innovation, with a focus
solely onPEEK/PAEK and the high performance materials
area,beyondsimply manufacturing polymers. We have a high level
oftechnical capability, with investment in Research & Development
representingc.5–6% of revenue. We work withpartners to bring
newand enhanced products toour customers and ourend markets.
UN Sustainable Development Goals (‘SDGs’)
Our business model and sustainability strategy are aligned to the UN’s
Sustainable Development Goals 2030, including alignment to the Science
Based Targets initiative (‘SBTi’).
Key to strategy
Drive core business
Differentiate through innovation
Create and deliver futurevalue
Underpin through safety,
sustainability andcapability
Who we are
Victrex was formed in 1993 following a
management buy-out from ICI, with our main
PEEK & PAEK polymers having their roots in
the1970s when the product was developed.
Today, we partner with customers in 40 countries,
with a culture of innovation being part of
everything we do. Every day, millions of people
rely on applications which contain our sustainable
products and materials, from smartphones,
aeroplanes and cars to energy production
andmedical devices.
Shaping future performance
Our Polymer & Parts strategy sees usdevelop
andmanufacture a range of high performance
PAEK & PEEK polymers which offer sustainable
performance benefits, typically replacing metal in
applications, many of which are ‘mission critical’.
Our sustainable products offer benefits such as
lightweighting, recyclability, durability, chemical
resistance, faster processing and enhanced clinical
outcomes, with a focus on bringing environmental
& societal benefits in everything we do.
A SUSTAINABLE BUSINESS
WITHSUSTAINABLE PRODUCTS
Our business model
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Victrex plc | Annual Report 2024
What we do
5. Capital, cost and cash generation
Our strong financial profile enables us to invest
(capex or M&A) in support of our strategy.
Costefficiency and productivity are key, as we
focus on operating efficiency, supporting margin
and returns. With high value products, weseek to
retain a strong financial position. After a period of
high investment, we expect to see improving cash
generation, underpinningshareholder returns.
4. Manufacturing differentiation
Our Polymer & Parts strategy and unique
manufacturing process (Type 1 PEEK) differentiate
us from competitors, with >250 patents in place or
pending, and know-how helping us to manufacture
the widest range of PEEK grades, including Type 2
PEEK (UK & new China facilities). Safety is our highest
priority, with efficient and well invested assets.
We have invested in downstream manufacturing
capability, to make selected ‘parts’ within
Automotive, Aerospace, Energy & Industrial and
Medical, underpinning the opportunity for our
‘mega-programmes’, each of which offers the
potential of >£50m peak revenue opportunity.
Our people &capability
Over 1,100 talented
employees wake up every
day focusing on PEEK and
partnering with customers
to bring environmental
&societal benefits through
our sustainable products.
Our suppliers
& partners
We are the only PEEK
manufacturer with
upstream integration
intokey raw materials,
supporting security
of supply for customers.
Supported by How we create value
6. Sales, marketing and technical excellence
Our Sales & Technical Service teams ensure we can
support customers with validation and certification
in critical applications. We have strong regulatory
&quality teams, partnering with customers or
processors in development of new applications,
helping to drive PEEK adoption. Our Growth+ and
enhanced Go to Market approach includes regional
sales teams and increasing digital solutions.
For customers
By partnering with customers in the
development of new applications, we
bring superior products that deliver
long-term performance benefits vs
incumbent materials.
Read more on pages 22 and 23
For employees
Investing in skills, apprenticeships and
training brings significant opportunity
for development as part of our Polymer
& Parts strategy. Performance based
reward drives ahigh retention rate.
Read more on pages 22 and 23
For investors
Continued innovation and
deliveringperformance benefits for our
customers drive strong returns and
cash generation to invest and support
shareholder returns.
Read more on pages 22 and 23
For communities
Engagement with our local
communities enables us to partner on a
wide range of social responsibility and
environmental programmes.
Read more on pages 22 and 23
For society & the planet
Our purpose is to bring
transformational & sustainable
solutions, with products which
cansupport environmental
orsocietalbenefits.
Read more on pages 22 and 23
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Victrex plc | Annual Report 2024
HOW WE CREATE VALUE THROUGH
OURPOLYMER & PARTS STRATEGY
Underpin
u
Safety, health and
wellbeing, quality,
andself-help
u
Sustainable business
with sustainable
products
u
Talent strategy
u
Strong financial
position
Energy &
Industrial
Automotive Electronics Aerospace Medical
Drive core business
u
Focused on PEEK & PAEK:
technical service, quality,
Goto Market strategy
u
No.1 manufacturing capacity
ofc.8,000 tonnes (UK
nameplatecapacity)
u
Cost efficiency
u
Sustainability & productivity
Differentiate through innovation
u
Commercialise application
development pipeline
u
Develop newpolymer grades,
forms & parts
u
Increasedifferentiation
through mega-programme
commercialisation
Create and deliver…
u
Increase revenue from
product forms & parts
(semi-finished & finished)
u
Downstream manufacturing
u
Expand portfolio in
composites and Medical
…future value
u
Increase mega-programme
milestones and revenues
u
Drive adoption with OEMs
and Key Opinion Leaders
(Medical)
u
Increase Medical contribution
Our strategy
16 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION16 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
4
3
2
Strategic highlights in FY 2024
u
Sales volumes up 4%
u
First 1,000 tonne quarter since FY 2022 (Q4 FY 2024)
u
New China facility commercially operational (ramp-up in FY 2025)
u
52% of Group revenue from sustainable products which enable environmental
&societal benefits
Strategic highlights in FY 2024
u
6% of sales invested in R&D including 88% of project based R&D spend supporting
sustainable products & programmes
u
Supporting advanced qualification for TechnipFMC and scale-up in Brazil for
‘Magma’composite pipe programme
u
PEEK Knee regulatory submission (India), supporting commercial pathway
Strategic highlights in FY 2024
u
Growth in Trauma plate programme; >£1m revenue delivered
u
Qualification programmes advanced for Aerospace Composites with 10x PEEK
content opportunity per plane
u
US FDA approval for 3D printed Porous PEEK spinal cage (Medical)
Strategic highlights in FY 2024
u
Strong safety performance: OSHA recordable injury rate of 0.18, 86% lower than
OSHA industry average of 1.3
u
4,423 employee hours supporting local communities including STEM & Biodiversity
u
25% of females in leadership roles and enhanced DE&I agenda
u
100% renewable electricity for all Victrex’s global locations (where the market exists)
STRATEGIC PROGRESS
Drive
Core business
Differentiate
Through innovation
Create & deliver
Future value
Underpin
Through safety, sustainability andcapability
1
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Victrex plc | Annual Report 2024
Growth targets
Drive core business growth
Core growth of at least
5–7%CAGR over the mid term
(revenue CAGR in five-year period)
Mega-programme upside
Upside opportunity to 8–10%
CAGR driven by increasing
mega-programme revenues
Mega-programme portfolio
Goal for total mega-
programmerevenues to
be>£25m inFY2025
Increase Medical revenues
Further broaden Medical revenues
to be >30% of Group revenues
by2032
Overview of strategy
Jakob Sigurdsson
Chief Executive Officer
Dear shareholder,
A strong foundation
After investing through this challenging
period – in people, assets and capability –
we have a strong foundation for the future,
once global macro-economic conditions start
to improve on a more sustainable basis. We
are focused on growth in FY 2025 following
a particularly challenging period in FY 2023
and FY 2024. This includes a significant step
up in our mega-programmes. Milestones
include the opportunity for a commercial
PEEK Knee in the market, visibility for
Magma’s prospects in Brazil and a growing
number of Automotive platforms for our
E-mobility programme, supporting
electricvehicles.
For the medium to long term, global
megatrends support an increasing range
ofapplications for our products. We also
anticipate more content for Victrex
TM
PEEK
inplanes, cars, energy infrastructure and
medical devices, with Medical set to become
a bigger part of the Group over the years
ahead, helping to offset the impact of more
cyclical industries on our business.
Our three steps to recovery
After staying the course through some of
the most challenging times for our business
and the chemical industry, we have three
key focus areas which will support an upturn
in our financial performance:
1. Core business recovery: macro-economic
indicators, whilst mixed, point to more
encouraging signals for the Group in
some end-markets. Victrex’s clear
strengths in innovation and application
development enable us to broaden
where Victrex
TM
PEEK can deliver a
performance benefit for our customers.
Overall, we are focusing on growth
within our core business, aided by our
new manufacturing facilities and
customer support in China.
2. Transitional year for mega-
programmes: after a period of
development and incubation, we
nowhave increasing ‘pull’ from major
customers and OEMs like Airbus,
TechnipFMC and key medical device
customers. These customers have
increased their own investment in each
of these areas to solve performance
challenges, supporting all five mega-
programmes and their delivery against
key milestones. The road to adoption
and commercialisation is becoming
clearer, with progress in each programme
and substantial upside for Victrex
TM
PEEK
content, although timing on Magma and
regulatory pathways may hamper overall
progress. Examples include in E-mobility,
with a 20x content increase potential per
car, Aerospace Composites, with a 10x
content opportunity per plane, and the
Magma programme, where preparation
for deploying this game-changing
composite pipe solution to solve deep
sea energy challenges has moved closer.
Our Medical mega-programmes –
Trauma and Knee – are also moving
beyond development stage revenues,
with Trauma commercial revenue now
building and a regulatory submission
offering near-term prospects of a
commercial PEEK Knee in the market.
3. Improving cash flow: our major
investments in people, assets and
capability over recent years are now
complete, providing us with the strong
footing and foundations to deliver a
return on those investments.
A STRONG FOUNDATION:
READY FOR THE UPTURN
This in turn – with capital expenditure and
inventories reducing – will support improved
cash flow, with the opportunity for
enhanced returns to our shareholders, both
buybacks and special dividends (for further
details on our capital allocation policy, see
page 28).
18 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION18 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
Self-help: supporting future
profitability
As a product leader through Polymer &
Parts, we have enjoyed great success over
many years, with strong application
development skills, through new polymer
grades, product forms or semi-finished
parts. Our culture of innovation enables us
to work with major customers and major
brands to meet the performance challenges
of today andtomorrow.
Being a product leader is no longer enough.
After adapting our organisational structure
last year, we are focusing on how we
become more effective at serving our
customers (how we Go to Market and our
Project Vista programme) and being smarter
in procurement and operational excellence:
1. We will accelerate the growth engine:
u
enhancing our sales and R&D
effectiveness, including greater
digitalisation; and
u
operating a more regional approach
forour Resources and Sales teams.
2. We will enhance the speed and value
creation of business development
&technical service:
u
balancing customer facing resources
across our Engine 1 (core business) and
Engine 2 (more specialised business
including our mega-programmes); and
u
focusing our people and resources where
we can drive the greatest return.
Cost efficiency
Alongside our enhanced Go to Market
approach, we will maintain a rigorous
focuson cost discipline. With investments in
capability – for example increased know-how
in finished medical devices – largely
complete, we expect limited operating
overhead increases over the coming years.
Increased digitalisation drives greater
efficiency through the entire organisation,
offering further flexibility for our costbase.
Differentiation
Differentiation is driven by our unique
strategy, our differentiated manufacturing
process – with a unique Type 1 PEEK,
complemented by a broader range of
polymer grades such as Type 2 product – as
well as our security and availability of supply,
consistent quality and backward integration
into key monomers, and our application
development skills and technical service for
customers. As we see recovery in our core
business and an increasing contribution
from our mega-programmes, we expect to
further increase our differentiation against
competitors. This enables us to deliver a
premium value to reflect our offering and
long-term investment in application
development and R&D.
Underpin through safety, quality,
sustainability and capability
Safety
Fundamental to our success is the safety,
health and wellbeing of our employees.
Thisremains our highest priority. Wherever
employees are in our business, be it
manufacturing, R&D, warehousing or
support functions, or in our commercial
functions delivering for our customers, our
goal is for a Zero Accidents and Zero
Incidents culture.
Supporting our focus on SHE are our values
of Passion, Innovation and Performance.
Oursafety performance over the last four
years has seen a significant reduction in our
recordable injury frequency rate (‘RIFR’) to
0.18 in FY2024 (industry average 1.3 based
on US OSHA average).
Quality & sustainability
Further improving our quality culture across
the organisation is key, for example in Right
First Time and manufacturing effectiveness.
Sustainability remains at the heart of our
business model and a clear differentiator,
with lighter, faster to process materials
thatcan offer environmental or societal
benefits, for example supporting CO
2
reduction in Transport markets, energy
efficient devices, or supporting better
patient outcomes in Medical.
With Victrex™ PEEK having a lower global
warming potential than the industry average
(details shown on page 72), our drive to
further differentiate in this area includes our
decarbonisation commitment through SBTi.
People & capability
Investment in new capability over recent
years will support how we can deliver
withspeed and a sense of urgency for our
customers. Our culture of innovation remains
strong and is illustrated by Victrex being listed
in The Sunday Times Best Places to Work
2024. Diversity, Equity & Inclusion (‘DE&I’) is
also a key focus for us, with long-term goals
across this area and forums to ensure we
listen to and support employees. Driving
behaviours supports how we drive
performance and I want to thank the
resilience of our global team over the past
two years and know they remain engaged
and eager to accelerate our progress.
Summary – self-help & evolution to
realise ourpotential
Overall, through self-help and evolving our
strategy as a product leader, we seek to
develop and supply market leading products
which enable environmental, technical,
performance or societal benefits for our
customers. Through self-help, a macro-
economic recovery and a step up in our
mega-programmes, we can drive sustainable
growth, catalyse adoption and create value
through Polymer & Parts.
Moving beyond the challenges of the past
isimperative. Although trading conditions
remain mixed, with our strong foundations,
we are focusing on FY 2025 being a
transitional year towards our mid-term growth
targets and an attractive upward trajectory.
Jakob Sigurdsson
Chief Executive Officer
3 December 2024
As we move beyond a
challenging period for
Victrexand the wider
chemical industry, our clear
purpose, alignment to global
megatrends and investments
in people, assets and
innovation position us
wellfor the upturn, as we
look todeliver the significant
growth opportunities across
our portfolio.
Through self-help – both
costefficiency and how we
serve our customers – we are
evolving our Polymer & Parts
strategy to ensure that we
further differentiate and
adapt how we Go to Market.
Jakob Sigurdsson
Chief Executive Officer
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 19
How we performed in FY 2024
u
Sales volumes up 4%
u
Revenue growth down 5% reflecting
Medical destocking impact
u
Improved underlying operating cash
conversion of 114%
u
New China facility operational
Focus for FY 2025
u
Return to growth (revenue & PBT)
u
Ready for upturn and global recovery
u
Ramp-up of new China PEEKfacilities
u
Improved gross margin supported
bybetter asset utilisation
Link to risks
3
7
8
How we performed in FY 2024
u
Strong R&D investment at 6% of
revenue
u
Regulatory submission for PEEK
Knee(India), supporting
commercialpathway
Focus for FY 2025
u
Key milestones towards mega-
progamme commercialisation
u
Support US clinical trial for PEEK Knee
u
Prepare for TechnipFMC bid
outcomes for Brazil (Magma
programme) and commercialisation
Link to risks
6
7
Revenue change %
-5%
Underlying operating
cash conversion %
114%
R&D spend £m
£17.5m
6% of Group revenue
Definition
The year-on-year percentage change
in total revenue for the Group, in
reported currency.
Why it’s important
Revenue growth is the measure
chosen to reflect the structural growth
opportunities for PEEK across our
markets, with above-market growth
being the medium-term focus.
Definition
Underlying operating cash conversion
isunderlying operating cash flow as
apercentage of underlying operating
profit. Underlying operating cash flow
is underlying operating profit before
depreciation, amortisation and loss on
disposal, less capital expenditure,
adjusted for working capital movements.
Why it’s important
Used to assess the business’ ability
toconvert operating profit into cash
effectively. From FY 2025 underlying
operating cash conversion is a
metricwhich partly determines
bonusoutcomes.
Definition
The total Research & Development
spend that the Group has incurred.
Why it’s important
Research & Development spend
at5–6% of sales underpins ourability
to innovate into new applications,
supporting our futuregrowth.
Mega-programme
revenue £m
£10.2m
Definition
Value of Group sales generated
fromour five mega-programmes.
Why it’s important
Mega-programme revenue is a
measure of the adoption of our five
mega-programmes, after a period of
investment, development and initial
market adoption / commercialisation.
Drive core business
Differentiate through innovation
20
15
21
11
(10)
(5)
22 23 24
(10)
1 Alternative performance measures are defined in note 25.
Strategy and key performance indicators
15.5
15.7
18.6
17.5
16.7
20 21 22 23 24
6.3
11.1
10.2
22 23 24
100
49
114
101
20 21 22 23 24
18
20 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
Linked to Long Term Incentive
Plan (’LTIP’) objectives
How we performed in FY 2024
u
Advanced qualification for key
Aerospace Composites programme
u
Strong progress in Medical mega-
programmes (Trauma and Knee)
u
Earnings per share (reported)
down72%
Focus for FY 2025
u
Further grow E-mobility revenues
u
Broader customer and product base
in Trauma; accelerate revenues
u
Opportunity for first commercial
PEEKKnee
u
Grow earnings per share
Link to risks
7
8
How we performed in FY 2024
u
Lower recordable injury frequency
at0.18 (lower than OSHA industry
average of 1.3 and FY 2023 0.22)
u
100% of electricity sourced from
renewables for all Victrex’s sites
u
Validated decarbonisation targets
(SBTi)
Focus for FY 2025
u
Zero Accidents and Zero Incidents
culture, building on existing progress
u
Preferred options for SBTi
decarbonisation plan across all scopes
u
Continue to grow sustainable product
revenues (target 70% by 2030 vs
52% in FY 2024)
Link to risks
1
2
4
5
6
OSHA recordable
injuryrate
0.18
Definition
The US Occupational Safety and Health
Administration (‘OSHA’) is the industry
standard for recordable injuries. This is
basedon total number of recordable
injuriesx 200,000/total number of
hours worked (employee & contractor).
Why it’s important
A safe and sustainable business is the
highest priority for Victrex. Victrex
continues to be better than the industry
standard after adopting OSHA
reporting inFY 2019.
Return on invested
capital %
10%
Reported earnings
per share p
19.8p
Hours worked in
the community
4,423
Definition
ROIC is defined as profit after tax adjusted to
exclude exceptional items net of tax, finance
costs and finance income/average adjusted
netassets. Adjusted net assets is total equity
attributable to the shareholders atthe year
end excluding cash and cash equivalents,
other financial assets, retirement benefit asset,
retirement benefit obligations and borrowings.
Average adjusted net assets is adjusted net
assets at the start of the year plus adjusted net
assets at the end of the year, divided by two.
Why it’s important
Return on capital invested (‘ROIC’) measures
thereturn generated on capital invested by the
Group and provides a metric for long-term value
creation. The five-year average ROIC is 16%.
Definition
Profit after tax divided by the
basicweighted average number
ofshares. This includes the impact
ofexceptional items.
Why it’s important
Earnings per share measures the
overallprofitability of the Group
anddemonstrates how we convert
ourtop-line revenue opportunities into
profitable growth forourshareholders.
Definition
Total number of hours that Victrex
employees have volunteered in
community activities.
Why it’s important
Our People pillar within our ESG
strategy is keyto supporting the
communities where we operate (for
example in Biodiversity activities), and
supporting our talent strategy in
recruiting the employees of tomorrow
(for example through STEM activities).
Create & deliver future value
Underpin through safety, sustainability and capability
Key to KPIs
Financial KPI Non-financial KPI
Remuneration
Linked to bonus
objectives
Principal risks
Pages38to42
20
18
21
20
14
10
22 23
17
24
84.3
87.6
70.9
19.8
62.6
20 21 22 23 24
2,570
4,784
3,559
3,895
4,423
20 21 22 23 24
0.7
0.2
0.2
0.2
1.3
20 21 22 23 24
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 21
Stakeholder Focus areas How we engage Engagement outcomes
Employees
u
Safety focus
u
Innovative culture
u
Sustainability embedded in our businessmodel
u
Highly motivated and talented employees
u
High retention rate and appropriatereward
u
High level of share ownership
u
Diversity, Equity & Inclusion (‘DE&I’) agenda
u
Company performance
u
Zero Accidents & Zero Incidents safety campaigns
andemployee survey
u
Global staff briefings (quarterly), CEO Awards and
DE&Igroups, e.g. Gender Engagement Network
u
‘Ask Jakob’ and other intranet forums
u
Development and succession planning
u
Performance-based reward
u
All Employee Bonus and Share Ownership Schemes
u
Employee ‘voice’ through Workforce
EngagementDirector
u
Improving safety performance since FY 2019, 86% lower RIFR rate
u
20 Professional Development Awards & 70 CEO Awards; 48 employees
on Victrex apprenticeships
u
Further progress on DE&I with additional employee resource groups
established including new Race, Ethnicity and Cultural Heritage group
u
Annual Organisational Capability Review (‘OCR’) for talent
u
Wage inflation, bonus scheme and meeting Minimum and National
LivingWage in the UK
u
Employee Engagement Survey, with increase in engagement score to 73%
u
Awareness of Company performance, including external and macro-
economic factors impacting this
Customers
u
Solutions-driven culture
u
Enhanced Go to Market approach (Project Vista)
u
Sustainable products supporting CO
2
reduction
u
Quality and regulatory support
u
Technical service offering
u
Collaboration across the supply chain
u
China manufacturing to underpin new revenues
u
Sustainable Solutions and Medical commercial
structures
u
Enhanced Go to Market structure with increased
regional and digital solutions
u
Quality and Regulatory teams
u
Supply and development contracts
u
Through Sales teams and at VMT level asappropriate
u
Clear milestones in core business & mega-programme delivery
u
Enhanced solutions for customers
u
Strong development collaborations in Automotive, Aerospace and
Medical (Transport volumes +8% in FY 2024)
u
New China manufacturing facility ramping up to underpin future growth
u
Robust Average Selling Prices
Investors
u
Polymer &Parts strategy & delivery
u
ESG agenda and long-termgoals
u
Alignment with shareholder interests
u
Capital allocation policy and understanding
ofdividend/buyback preferences
u
Improvement in earnings and returns
u
Financial calendar events
u
Proactive investor relations function
u
ESG strategy feedback and enhanced materials
u
Global roadshows
u
AGM, site visits and conferences
u
Investor website
u
Face-to-face investor roadshows, 200+ meetings hosted (virtualand
faceto face)
u
Access to investors in the UK, the US, Canada and Europe
u
Engagement through major investor conferences or site visits
u
Diversification of investor base: North American shareholding now ~25%
u
Growth in ethical investment funds (ESG) and greater ESG dialogue
withshareholders
Suppliers
u
Security of supply
u
ESG and Scope 3 emissions
u
Global supply chain
u
Shorter lead times
u
Compliance and quality
u
Reliability and flexibility
u
Supply chain risk management
u
Regular supplier engagement programme (annually)
u
Handbook of standards and ethical audits
u
Business continuity planning
u
Payment on time, typically c.30 days
u
Increased oversight by Audit Committee for supplier
risk including human rights
u
Dual sourcing progressed
u
Improved performance of third-party manufacturers
u
Long-term agreements on raw materials
u
Agreed charter on supplier management framework
u
Robust risk management of critical suppliers
u
Increasing engagement and networking on decarbonisation opportunities
Communities
andenvironment
u
Sustainability agenda and focus areas
u
People: social responsibility
u
Planet: resource efficiency
u
Products: sustainable solutions
u
Positive dialogue toaddress sustainability in the
supply chain
u
Engagement with ESG and environmental analysts
u
Lifecycle Analysis and engagement with customers
u
Biodiversity partnerships
u
STEM Ambassadors, schools and colleges
u
Local employment & Business in the Community
u
100% of electricity from renewable sources (including our own solar
generation) across all global sites
u
Maintained positive scoring across ESG benchmarks, e.g. EcoVadis Silver,
MSCI ‘A’rating, FTSERussell Green Revenues Index & Apple Clean
EnergySupplierprogramme
u
Validation of SBTi target aligned to Net Zero across all scopes of emissions
u
Global volunteering including 4,423 employee hourscommitted
Regulators and
government
u
Safety agenda
u
Employee welfare & wellbeing
u
Product quality
u
Innovation
u
Sustainability agenda
u
Via industry regulators, e.g. HSE
u
Public health organisations, e.g. Environment Agency
u
Certified bodies and trade organisations
u
Cross-industry collaborations
u
NGOs and industry bodies
u
Further improved strong SHE performance including OSHA recordable
injuryrate at 0.18 (industry average 1.3)
u
New polymer grades and materials assessed through collaboration with
academia
u
3D printing alliances and government funded projects
u
Network with MPs and industry bodies to support decarbonisation
andother programmes
Why we engage
We place and consider the needs of all our
stakeholders – internal and external – high
on our daily agenda, listening to and
understanding the interests and concerns of
all our global stakeholder groups, as wellas
seeking todeliver sustainable value for them.
With sustainable products, we enable
environmental & societal benefits for our
stakeholders. This includes through the
technical or performance benefits of our
polymers and minimising resources through
our own operations. Our commitment to
stakeholders is reflectedin our Net Zero
aspiration by 2050 across all emission
scopes, aligned to SBTi, with an interim
target by 2032. As a sustainable business,
our purpose is to bring transformational
andsustainable solutions that address
worldmaterial challenges.
Stakeholder engagement is assessed every
year by the Board. This covers employees,
customers, investors, suppliers, regulators
and government, and our communities.
Forinvestors, we have a proactive annual
plan of engagement, through our financial
calendar activity, investor roadshows, our
Annual General Meeting, site visits or
investor conferences. Reflecting our
increasingly diverse shareholder base (with
over one quarter ofour shareholding in
North America), weactively engage with
investors in the UK,Europe, theUS and
Canada. We continue to be collaborative
with all stakeholder groups including
customers, investors, employees, suppliers
and regulators, listening to feedback and
being open tochange.
OURKEYSTAKEHOLDERS
Stakeholder engagement
22 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
Stakeholder Focus areas How we engage Engagement outcomes
Employees
u
Safety focus
u
Innovative culture
u
Sustainability embedded in our businessmodel
u
Highly motivated and talented employees
u
High retention rate and appropriatereward
u
High level of share ownership
u
Diversity, Equity & Inclusion (‘DE&I’) agenda
u
Company performance
u
Zero Accidents & Zero Incidents safety campaigns
andemployee survey
u
Global staff briefings (quarterly), CEO Awards and
DE&Igroups, e.g. Gender Engagement Network
u
‘Ask Jakob’ and other intranet forums
u
Development and succession planning
u
Performance-based reward
u
All Employee Bonus and Share Ownership Schemes
u
Employee ‘voice’ through Workforce
EngagementDirector
u
Improving safety performance since FY 2019, 86% lower RIFR rate
u
20 Professional Development Awards & 70 CEO Awards; 48 employees
on Victrex apprenticeships
u
Further progress on DE&I with additional employee resource groups
established including new Race, Ethnicity and Cultural Heritage group
u
Annual Organisational Capability Review (‘OCR’) for talent
u
Wage inflation, bonus scheme and meeting Minimum and National
LivingWage in the UK
u
Employee Engagement Survey, with increase in engagement score to 73%
u
Awareness of Company performance, including external and macro-
economic factors impacting this
Customers
u
Solutions-driven culture
u
Enhanced Go to Market approach (Project Vista)
u
Sustainable products supporting CO
2
reduction
u
Quality and regulatory support
u
Technical service offering
u
Collaboration across the supply chain
u
China manufacturing to underpin new revenues
u
Sustainable Solutions and Medical commercial
structures
u
Enhanced Go to Market structure with increased
regional and digital solutions
u
Quality and Regulatory teams
u
Supply and development contracts
u
Through Sales teams and at VMT level asappropriate
u
Clear milestones in core business & mega-programme delivery
u
Enhanced solutions for customers
u
Strong development collaborations in Automotive, Aerospace and
Medical (Transport volumes +8% in FY 2024)
u
New China manufacturing facility ramping up to underpin future growth
u
Robust Average Selling Prices
Investors
u
Polymer &Parts strategy & delivery
u
ESG agenda and long-termgoals
u
Alignment with shareholder interests
u
Capital allocation policy and understanding
ofdividend/buyback preferences
u
Improvement in earnings and returns
u
Financial calendar events
u
Proactive investor relations function
u
ESG strategy feedback and enhanced materials
u
Global roadshows
u
AGM, site visits and conferences
u
Investor website
u
Face-to-face investor roadshows, 200+ meetings hosted (virtualand
faceto face)
u
Access to investors in the UK, the US, Canada and Europe
u
Engagement through major investor conferences or site visits
u
Diversification of investor base: North American shareholding now ~25%
u
Growth in ethical investment funds (ESG) and greater ESG dialogue
withshareholders
Suppliers
u
Security of supply
u
ESG and Scope 3 emissions
u
Global supply chain
u
Shorter lead times
u
Compliance and quality
u
Reliability and flexibility
u
Supply chain risk management
u
Regular supplier engagement programme (annually)
u
Handbook of standards and ethical audits
u
Business continuity planning
u
Payment on time, typically c.30 days
u
Increased oversight by Audit Committee for supplier
risk including human rights
u
Dual sourcing progressed
u
Improved performance of third-party manufacturers
u
Long-term agreements on raw materials
u
Agreed charter on supplier management framework
u
Robust risk management of critical suppliers
u
Increasing engagement and networking on decarbonisation opportunities
Communities
andenvironment
u
Sustainability agenda and focus areas
u
People: social responsibility
u
Planet: resource efficiency
u
Products: sustainable solutions
u
Positive dialogue toaddress sustainability in the
supply chain
u
Engagement with ESG and environmental analysts
u
Lifecycle Analysis and engagement with customers
u
Biodiversity partnerships
u
STEM Ambassadors, schools and colleges
u
Local employment & Business in the Community
u
100% of electricity from renewable sources (including our own solar
generation) across all global sites
u
Maintained positive scoring across ESG benchmarks, e.g. EcoVadis Silver,
MSCI ‘A’rating, FTSERussell Green Revenues Index & Apple Clean
EnergySupplierprogramme
u
Validation of SBTi target aligned to Net Zero across all scopes of emissions
u
Global volunteering including 4,423 employee hourscommitted
Regulators and
government
u
Safety agenda
u
Employee welfare & wellbeing
u
Product quality
u
Innovation
u
Sustainability agenda
u
Via industry regulators, e.g. HSE
u
Public health organisations, e.g. Environment Agency
u
Certified bodies and trade organisations
u
Cross-industry collaborations
u
NGOs and industry bodies
u
Further improved strong SHE performance including OSHA recordable
injuryrate at 0.18 (industry average 1.3)
u
New polymer grades and materials assessed through collaboration with
academia
u
3D printing alliances and government funded projects
u
Network with MPs and industry bodies to support decarbonisation
andother programmes
Strategy and KPIs
Pages20 and 21
Key to strategy
Drive core business
Differentiate
through innovation
Create and deliver
futurevalue
Underpin through
safety, sustainability
andcapability
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 23
Statement by the Directors in
performance of their statutory duties
inaccordance with Section 172(1) of
theCompanies Act 2006
During the year ended 30 September 2024,
the Board of Victrex plc believes, as individuals
and collectively, that it has acted in a way it
considers, in good faith, would most likely
promote the success of the Company for
thebenefit of its stakeholders as a whole,
having regard, among other matters, to the:
u
likely long-term consequences of
anydecision, including financial &
reputational (further detail is shown
onpages 82 to 93);
u
interests of the Company’s employees:
monitoring how we engage with
employees is part of our Workforce
Engagement Non-executive Director role
(further detail is shown on pages 94
and95);
u
need to foster the Company’s
relationships with its customers, suppliers
and others;
u
impact of the Company’s operations on
the community and the environment
(engagement with local communities and
our focus on the environment are shown
in the Sustainability report starting on
page 46);
u
desirability of the Company maintaining
its reputation for high standards of
business conduct; and
u
need to act fairly as between members
of the Company.
The Board considers the interests of a range
of stakeholders impacted by our business
and recognises that valuable stakeholder
engagement underpins our ability to achieve
our purpose and strategic aims.
Key stakeholder relationships are regularly
reviewed, including how we engage with
them and whether any improvements can
be made. Further detail is on page 93 of the
Corporate governance report. The relevance
of each stakeholder group will depend on
the particular matter requiring Board
decision. All decisions we make may
unfortunately not always benefit all
stakeholders; by taking a consistent
approach and being guided by our purpose
and our strategic aims, we hope that our
decisions are understandable.
For details on how the Board operates and
makes decisions, please see pages 82 to 86
of the Corporate governance report. The
matters we have discussed and debated
during the year are set out on pages 89
and90 of the Corporate governance report.
To provide shareholders with a better
understanding of how we engage with
stakeholders, we provide selected examples
of how the Directors have had regard to the
interests of stakeholders and the matters set
out in Section 172(1) of the Companies Act
2006 in their decision making.
BOARD ENGAGEMENT & HOW WE
ENGAGE WITHOUR STAKEHOLDERS
Capital allocation – maximising our cash flow
following a period of high investment
Through a challenging period in the global chemical industry
–driven by ‘destocking’ and inventory correction as supply chains
normalised after the COVID-19 period – Victrex has continued to
invest in assets, in people and in capability. This ensures that
weare ready not only for a sustainable recovery in several end
markets, but in the more differentiated projects, to serve
ourcustomers.
Following capital investment in new manufacturing facilities
inChina, in an upgrade to our UK manufacturing, and in
capability atour New Product Development Centre in Leeds, UK
(serving medical device customers), we have concluded a period
of high investment. Throughout this period, we have, at the
same time, been pleased to maintain our dividend and add share
buybacks to our options for returning cash to shareholders,
alongside special dividends.
With capital expenditure now set to reduce from historic highs,
as well as cash inflow as we reduce our inventory position,
theopportunity for enhanced shareholder returns is clear over
the coming years.
Board consideration of our capital allocation includes:
u
assessing the Company’s liquidity position, monitoring
trading performance and trends and the cash requirement
based on certain scenarios;
u
assessment of our cash flow requirements through the five-year
strategy period, particularly in support of maintaining an
effective supply chain, ESG related capital expenditure
requirements or M&A opportunities to underpin growth;
u
with several end markets showing more encouraging
indicators, scenarios of enhanced shareholder returns have
been modelled, once an appropriate level of cash is available
totheGroup;
u
consideration of all stakeholders has been key, in particular
ensuring that we have flexibility to invest in support of
specific mega-programmes or other major growth projects
for customers (organic or M&A); and
u
consideration of our investors and the ability to support
enhanced returns, whether through increasing the regular
dividend (once dividend cover reaches 2x), share buybacks
orspecial dividends.
The Board also took account of the Group’s income fund
investors, who require an appropriate dividend yield to maintain
their shareholding.
A summary of our capital allocation policy can be found on
page28.
Stakeholder engagement continuedStakeholder engagement continued
24 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION24 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
Evolving our
strategy
How we Go to Market
Following a new organisational structure
implemented for FY 2024, with two distinct
Managing Director roles for Sustainable Solutions
and Medical, we took the opportunity during our
annual strategy review process to consider any
enhancements for how we Go to Market and
serve our customers (Project Vista).
Our product leadership strategy, through
Polymer& Parts, is a clear differentiator for
Victrex. We have long-standing experience and
excellence inapplication development – applying
our knowledge, innovation expertise and first
mover advantage on where PEEK can play and
where it has a right to win in the end markets
which we serve. This means ‘hunting’ for and
developing new opportunities where PEEK can
replace metal orother materials, bringing a
performance advantage for customers. Driving
value creation for our customers ultimately drives
value for our shareholders as we deliver the
significant growth opportunities that we
haveidentified.
The Board considered how we can further
enhance how we Go to Market and serve our
customers, as well as being operationally
excellent, including smarter procurement.
Board consideration included:
u
how we can accelerate the growth engine
through sales and R&D effectiveness;
u
our ability to enhance the speed and value
creation of business development and
technical service (including digitalisation
and a more regional sales structure);
u
consideration of key stakeholders, not just
customers in how we Go to Market, but the
opportunities and development of our
employees in delivering our strategy;
u
consideration of the expectations of our
investors, including delivery of our growth
opportunities, enhancing profitability and
theresources required to do so;
u
balancing our resources, including
howwemaximise our resources across
ourcore and more differentiated business
areas, to drive the greatest return; and
u
operational excellence, considering smarter
procurement to support our cost to serve.
Overall, an evolution of how we Go to Market
and balancing the customer facing resources and
inherent innovation strengths we have, together
with recovery in several of the end markets which
we serve, will support theopportunity for
delivering our strategy more effectively in the
years ahead.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 25
Victrex plc
| Annual Report 2024
Ian Melling
Chief Financial Officer
Financial review
Operating review
FY volumes up 4%, with sequential
volume & revenue improvement in Q4
Full year Group sales volume of 3,731tonnes
was 4% up on the prior year (FY2023:
3,598 tonnes), with an improvement during
the second half year driven by Sustainable
Solutions and the end markets of Electronics
and Value Added Resellers (‘VAR’).
Aerospace continued to see good growth.
Q4 Group sales volume of 1,015 tonnes was
3% up on Q3 and 21% up on the prior year
(Q4 2023: 839 tonnes). Q4 Group revenue of
£77.7m was 7% up on the prior year (Q42023:
£72.6m), despite Medical remaining soft.
Revenue down 5% reflecting softer
Medical performance and currency
Although the Group saw some improvement
in the second half year, our high margin
Medical business remained soft as customer
inventory corrections continued. This resulted
in full year revenue of £291.0m, a5% decline
compared to the prior year (FY2023: £307.0m).
H2 2024 revenue of £151.7m was 9% up on
H1 2024 (H1 2024: £139.3m).
Divisional performance
Full year revenue in Sustainable Solutions
was down 2% at £238.0m (FY2023:
£241.8m). With a softer start to the year,
Sustainable Solutions saw some
improvement during the second half.
H22024 revenue was up 11% compared to
the first half year, and up 12% compared to
the prior year (H2 2023 revenue: £112.1m).
After a record year in FY 2023, Medical
revenues continued to be impacted by
industry destocking. Most of the major
medical device customers reported high
inventory levels, despite growth in clinical
procedures. Medical revenues of £53.0m
were 19% down on the record performance
in the prior year (FY 2023: £65.2m), with
H2revenues being similar to H1.
Across our core Medical applications of
Spine, Arthroscopy and Cranio Maxillo-Facial
(‘CMF’), we continue to see good growth
opportunities once destocking headwinds
clear, with support from increasing
penetration in Cardio, Orthopaedics and
Drug Delivery. Full year revenues in Medical
were 40% Spine and 60% Non-Spine (FY
2023: 46% Spine and 54% Non-Spine), with
Spine more heavily impacted by destocking.
ASP in line with guidance; sales mix
driven by Medical softness
Average selling price (‘ASP’) was broadly in
line with our guidance at £78/kg, down 9%
on the prior year due to the impact of sales
mix, with weaker Medical and currency
moving adversely during the year. Like-for-
like pricing was robust across our end
markets, with the 5% reduction in constant
currency ASP driven by sales mix.
For FY 2025, at prevailing exchange rates,
and with Sustainable Solutions expected
toshow continuing improvement, average
selling prices are expected to be in the
£75/kg–£80/kg range. Upside from these
levels is dependent on the shape of a
Medical recovery.
Revenue from sustainable products
With strong megatrends like CO
2
reduction,
energy efficiency and clinical innovation
supporting the use of Victrex™ PEEK, our
materials support a range of applications
which are enabling environmental and
societal benefit for our customers. These
typically focus on Aerospace, Automotive
and Medical, with some applications in
Electronics (energy efficiency) also being
part of our measure of sustainable product
revenues. In FY 2024, 52% of our revenues
were based on sustainable products
(FY2023: 55%), with the growth in
Aerospace and Automotive being offset
bylower Medical revenues.
Revenue from sustainable products currently
excludes VAR, where the disparate nature of
end markets is challenging to track. Our
long-term goal is to increase sustainable
product revenues to over 70% of Group
revenues by the end of FY 2030.
Strong application development
capabilities
A core strength of Victrex, supporting our
product leadership based strategy, is in
application development, through working
with customers and partners to broaden the
use of PEEK. This is typically driven by its
lightweighting, durability, chemical and heat
resistance, or other properties. The success of
Victrex since its inception has been innovating
to bring new cases where Victrex™ PEEK can
replace metal or other materials, in turn
bringing a performance benefit to customers.
Whilst Group innovation targets are
primarily focused on our mega-programme
revenue goals, rather than sales from new
products as previously reported, we
continue to track our total business pipeline,
including our mega-programmes. Mature
Annualised Revenue (‘MAR’) is one of our
pipeline measures for the health of our
portfolio, with MAR at £352m (FY 2023:
£300m), driven by application opportunities
in Aerospace and Medical. This number
assumes all targets are converted.
Mega-programmes: significant step up
expected inFY 2025
In FY 2024, mega-programme revenues
totalled £10.2m (FY 2023: £11.1m), partly
reflecting a longer qualification phase for
the Magma programme in Brazil, and a
slight decline in E-mobility revenues. Despite
similar year-on-year revenues, the Group
delivered strong milestones including a
regulatory submission for PEEK Knee,
advancing qualifications for Aerospace
Composites and Trauma commercial
revenues growing strongly, beyond £1m.
CHALLENGING FY 2024 NAVIGATED:
SOLID START TO FY 2025 & FOCUSED
ON GROWTH
26 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION26 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
For FY 2025, all of our mega-programmes
are expected to see a significant step up
towards our portfolio revenue target of
£25m. However, the timing of Magma’s
opportunity in Brazil, together with the
normal regulatory pathway in Medical,
mayhamper our overall progress.
Strong progress in mega-programme
milestones; commercial progress
advancing
Our mega-programmes are defined as
potential game-changing projects in the end
markets we serve. Each mega-programme
offers revenue potential of at least (and in
some cases significantly more than) £50m
per year. Our PEEK Knee programme, for
example, is modelled as offering revenues
atleast the same size as the Group today.
The Group has prioritised investment in five
mega-programmes to enhance strategic
progress. This also ensures that we measure
appropriate investment (including R&D),
resource and capability in order to maximise
return on investment.
Key milestones in our mega-programme
portfolio include:
Aerospace Composites is a programme
combining applications in smaller composite
parts, larger structural parts and interior
applications. With some final qualifications
completed with OEMs for our LMPAEK™
grade, we expect to see increasing ‘use
cases’ supporting much larger applications
within future aircraft. An increasing
opportunity is in retrofit or ‘running
changes’ as existing models take advantage
of selected thermoplastic composite parts
todrive fuel efficiency and manufacturing
efficiency, for example in engine housings,
interior structures or other applications.
Major structural parts include for wings
andfuselage, with Victrex part of the Airbus
Clean Sky 2 and other programmes, which
seek to utilise PEEK and composite
structures to save weight and speed up
manufacturing time. The potential PEEK
content per plane is at least 10 times current
levels, with large-scale demonstrator parts
being exhibited prior to adoption. In both
structural and smaller composite based
parts, our AE™250 polymer and composite
The Group has seen a solid
start to FY 2025, despite
mixed trading conditions, and
we are focused on growth.
Ian Melling
Chief Financial Officer
tape is integral to these opportunities.
Revenue for this programme in FY 2024
increased to over £3m. We anticipate
further growth in FY 2025 as other
qualification programmes advance.
Within E-mobility, our materials are
seeking to address the higher performance
requirements from next generation batteries
(800V) used in electric vehicles. These
requirements include insulative properties,
heat and chemical resistance and mechanical
strength. A primary application is in wire
coatings where our Victrex XPI™ polymer
grades can replace enamels used in coatings,
avoiding harsh solvents and offering
performance benefits and efficiency. Victrex
XPI™ is extruded onto the copper and
requires less energy in the process,
compared to enamel, supporting customers
and their sustainability goals. With penetration
in battery applications and elsewhere in
electric vehicles, we assess the future potential
PEEK content per electric vehicle as over
200g (average content in existing internal
combustion engine car approximately 11g
today). This programme delivered revenue of
just over £5m in FY 2024, a slightly lower
level to the prior year as EV adoption faced
some headwinds during the year. With
additional business opportunities for FY
2025, we are anticipating a transitional year
for this programme, with milestones across
a range of Automotive brands, including
those in China, and opportunities in Europe
and the US.
Magma is our composite pipe programme
for the energy industry, offering a potential
game-changing solution, with lightweighting,
durability, a reduced carbon footprint for
installation and ease of manufacturing being
key parts of the proposition. Our materials
– Victrex™ PEEK polymer, composite tape
and pipe extrusion know-how – are
supporting the final qualification programme
and bid process by TechnipFMC in Brazil.
The focus is to deliver a performance benefit
and remedy existing steel based flexible pipe
issues in pre-salt deep water fields in the
offshore Brazil region.
Milestones during the year include final
testing and technical and commercial
preparation at our UK facilities. Victrex™
PEEK based Hybrid Flexible Pipe (‘HFP’) is
seen by TechnipFMC as the most cost
effective riser solution, with TechnipFMC
targeting scale-up from 2026 onwards.
Anumber of technical and commercial
meetings took place between Victrex,
TechnipFMC and Petrobras during the year.
Annual revenues in the Magma programme
remain around the £1m level currently,
reflecting the qualification phase. With 1km
of pipe containing approximately 8 tonnes
of PEEK, and an annual opportunity of
>100km of pipe, this remains a sizeable
opportunity for the Group.
In Trauma, revenue grew strongly in this
programme during FY 2024 to over £1m.
Victrex manufactures the PEEK composite
based Trauma plates in house, or via our
partner. With our product portfolio, we are
supporting a growing global customer base,
including the US and Asia. Beyond CONMED
(In2Bones), our main existing customer, we
have also added new customers in Asia.
Victrex’s PEEK composite Trauma plates
support fracture fixation, including in foot
and ankle plates. Studies show an enhanced
union rate using PEEK composites compared
to titanium based plates.
In our PEEK Knee programme, the
opportunity of a first commercial PEEK Knee
in the market is moving closer. Following a
regulatory submission in India, we await the
potential of moving into the commercial
phase during FY 2025. This follows strong
progress in the clinical trials in India and
Europe, with 57 patients being implanted
with a PEEK Knee, including 20 post the
two-year clinical phase. Maxx Orthopaedics
is our partner in the clinical trial across
Belgium, India and Italy. We are also
collaborating with Aesculap (part of B
Braun), a top five global knee company.
Interest has been growing in the progress
ofPEEK Knee from other top five players
and broader market participants, with
potential new collaborations.
Beyond regulatory submission, approval
bythe US Food & Drug Administration
(‘FDA’) was secured for a US clinical trial
tocommence in FY 2025, covering 120
patients. PEEK Knee would be an alternative
to existing implants, which primarily use
metal (cobalt chrome), with a proportion
ofcustomers impacted by metal intolerance
ordiscomfort. Our ability to leverage clinical
data with a broader range of customers also
supports the opportunity. Subject to a
positive approval in India, attention would
focus on regulatory submissions in Europe,
followed by the US.
Innovation investment
With our strategic goal to increase the
proportion of Medical revenues in our
portfolio – to reduce cyclicality and enhance
earnings stability – the focus of our
innovation investment over recent years
hasbeen in our Medical Acceleration
programme. Our New Product Development
(‘NPD’) Centre in Leeds, UK, saw some
limited incremental investment during the
year, with new roles and capability to
support customer scale-up in Trauma and
Knee. We expect to see continued modest
investment in this area during FY 2025.
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 27
Financial review continued
Operating review continued
Innovation investment continued
Group R&D investment represented 6% of
revenues in FY 2024, at £17.5m (FY 2023:
£18.6m), with 37% (FY 2023: 40%) of our
total innovation spend being prioritised
towards programmes which are based on
sustainable products – primarily those in
Automotive, Aerospace and Medical. Project
based R&D investment to support sustainable
programmes represented 88% of project
based total R&D spend (FY 2023: 92%).
Financial review
Gross profit down 17%
Gross profit was down 17% at £134.3m
(FY2023: £162.6m), primarily driven by
lower revenues and the impact of much
lower production rates in our manufacturing
assets. The adverse year-on-year impact
from under-absorbed fixed costs was
approximately £10m for FY 2024 (including
China impact), driven by nearly 1,000 tonnes
of lower production, as we unwound
inventory closer to target levels.
For FY 2025, we anticipate a year-on-year
improvement from higher production levels
and a benefit from lower material costs,
supporting an overall lower cost of
manufacture, despite the impact of China
start-up (including depreciation) and
continued inventory unwind.
Gross margin lower on sales mix and
reduced asset utilisation
Full year Group gross margin of 46.2% was
680 basis points (‘bps’) lower than last year
(FY 2023: 53.0%), as a continuing softer
medical performance impacted sales mix,
alongside lower asset utilisation. Second half
gross margin of 44.5% (H2 2023: 52.4%)
was impacted by Medical, after a strong
year in FY 2023, with some improvement
inSustainable Solutions. The strengthening
of Sterling in the second half also impacted
our margin.
We remain focused on a mid to high 50%
gross margin level over the medium term,
whilst noting that sales mix, asset utilisation
and the expected increase in parts
contribution to revenue will play a key role
over the coming years. For FY 2025, Group
gross margin is expected to improve to
around 50% as the final stage of our
inventory unwind is offset by improved
assetutilisation and some raw material
costbenefit. Gross margin progression is
expected to be weighted to the second half.
Gains & losses on foreign currency
nethedging
Fair value gains and losses on foreign
currency contracts in FY 2024 were a gain
of£5.2m (FY 2023: loss of £7.6m), arising
from contracts where the deal rate obtained
in advance was favourable to the average
exchange rate prevailing at the date of the
related hedged transactions. We continue
tohedge the net currency exposure, which
reflects the diversity of our customer base
across regions.
Currency adverse for FY 2025
With the strengthening of Sterling during
H2 2024, FY 2025 now sees a modest
currency headwind of approximately
£7m–£8m at PBT level, based on spot rates
and currency contracts in place at the date
of this report. Unhedged currencies –
predominantly in Asia – are also set to
increase in importance as we see growth
inChina and other parts of Asia over the
coming years. Recent devaluation in these
currencies has contributed to the spot rate
headwind in FY 2024 and the implied
headwind for FY 2025.
Our hedging policy is kept under review,
forthe duration of hedging, level of cover
and currencies covered. It requires that at
least 80% of our US Dollar and Euro forecast
cash flow exposure is hedged for the first six
months, then at least 75% for the second six
months of any rolling twelve-month period.
Underlying operating overheads
1
down
10%
Underlying operating overheads, which
exclude exceptional items of £14.5m,
decreased by 10% to £74.0m (FY 2023:
£81.9m) despite targeted innovation
investment and wage inflation. We
continued to deliver tight cost control,
including deferral of certain recruitment,
travel, and reductions in discretionary spend.
With the profit threshold to trigger
performance based reward as part of our
AllEmployee Bonus Scheme not being met,
no bonus was paid. Wage inflation reflected
our employee salaries increasing by an
average of 4.5%.
For FY 2025 and thereafter, our intention is
to ensure investment remains targeted and
to deliver an appropriate return. Underlying
operating overheads are therefore expected
to show only limited increases, excluding the
effect of wage inflation and bonus accrual.
This offers the opportunity for revenue and
PBT growth to be ahead of overhead
growth. For FY 2025, we have introduced
arevised All Employee Bonus Scheme –
tosupport retention and based on personal
and strategic objectives, profit before tax
and cash conversion measures – which no
longer requires a minimum level of profit to
trigger the non-profit measures. In FY 2025
we expect to accrue for bonus, based on
market expectations showing profit growth.
Net interest expense
With interest payments for our China loan
now expensed (rather than capitalised) and
RCF interest incurred, the netinterest
expense was £1.2m in FY 2024 (FY 2023:
net interest income of £0.6m). This is
expected tobe an expense of approximately
£2m inFY 2025, based on currently
prevailing interest rates.
Our capital allocation priorities
Capex
u Normalised capex
c.8–10% of sales
u Periodic capacity
investment
M&A/investment
u Investment to support
mega-programmes
u Investment to enhance
capability & IP
Regular dividends
u Progressive dividend
u Maintain cover around
c.2x EPS over the cycle
Special dividends
u Optionality to
returncash if no
additional investment
opportunities
u 50p/share minimum
Share buybacks
u Existing approval to
buyback 10% of shares
u Flexible buyback options
EXCESS CAPITAL
DISTRIBUTION OPTIONS
28 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
Underlying PBT down on Medical
&lower fixed cost recovery
Underlying PBT of £59.1m was down 26%
(FY 2023: £80.0m). This was driven by the
impact of Medical destocking and a much
higher impact from under-recovery of fixed
costs (approximately £10m higher in FY
2024 vs FY 2023), as our assets saw
materially lower production levels. The driver
for reduced asset utilisation was to unwind
inventory built during FY 2023 to support
our UK Asset Improvement programme
– which was completed in H1 2024. The UK
Asset Improvement programme provides us
with incremental capacity to support
large-scale volume programmes like
Aerospace Composites, E-mobility and
Magma, boosting UK nameplate capacity
toapproximately 8,000 tonnes.
Reported PBT & exceptional items
Reported PBT reduced by 68% to £23.4m
(FY2023: £72.5m). This reflects exceptional
items of £35.7m in total (FY 2023: £7.5m).
Thisincludes a non-cash impairment of
investment in associate (Bond 3D - supporting
3D printing capabilities in Spine (Medical)) of
£9.1m, fair value loss on loans due from Bond
3D of £11.9m and associated legal fees of
£0.2m, the cost of our business improvement
project, incorporating a new ERP software
system implementation (go live in H1 FY 2025)
of £9.9m, and an impairment relating to the
asset value of our downstream manufacturing
facilities in theUS, totalling £4.6m.
As previously communicated, in relation
toBond 3D, the new financial investment
required to complete the development
through to cash breakeven was not raised.
With no other options available, Bond 3D’s
trade and assets were sold for a nominal
value, leaving all amounts owed to Victrex
still outstanding. Accordingly, an exceptional
charge of £21.2m, included within Result of
associate in the income statement, has been
recognised, comprising the full impairment
of investment in associate of £9.1m,
reduction in fair value to £nil of the
convertible loan notes and bridging loan
(£11.9m) and associated legal fees of £0.2m.
The terms of sale include a clause entitling
certain existing Bond debt holders, including
Victrex, to participate in any upside of a
subsequent sale of the business within the
next five years. Due to the high level of
uncertainty around any future sale, no value
has been attributed to this provision.
Subsequent to the year end Bond 3D has
been liquidated.
Pleasingly, US FDA approval for the first
3Dprinted Porous PEEK spinal cage was
received in September 2024. This
development – which was one of the key
milestones from our original investment in
Bond 3D – furthers the opportunity of
bringing together PEEK-OPTIMA™ as a
material of choice in spinal fusion with the
processing benefits of 3D printing. This
milestone will enable us to collaborate with
the new owners of the Bond 3D technology.
For FY 2025, the majority of the final costs
of implementing our ERP system, and
associated business improvements, will be
incurred during the first half. These include
our Project Vista programme, to drive sales
excellence, improve our Go to Market
approach and increase digitalisation. These
costs, including final ERP costs, will be
treated as an exceptional item, with total
costs, including consultancy, expected to
bebetween £5m–£10m in the year.
Earnings per share down 72%
Basic earnings per share (‘EPS’) of 19.8p
was72% down on the prior year (FY 2023:
70.9p per share), reflecting the decline in
reported PBT, including the adverse effect of
exceptional items. Underlying EPS was down
33% at 51.7p (FY 2023: 77.7p).
Taxation
The total tax charge, incorporating deferred
tax, was £7.6m (FY 2023: £11.5m) giving an
effective tax rate of 32.5% (FY 2023: 15.9%),
with a current tax charge on profits for the
year of £2.0m (FY 2023: £8.0m). The effective
tax rate was materially higher than the prior
year and the mid-term guidance range due
to the impact of exceptional items, with the
impairment of associate investment (Bond
3D) and the impairment of downstream
manufacturing facilities in the US both being
non-tax deductible. Excluding the impact of
exceptional items, the underlying effective
tax rate was 22.2% (FY 2023: 16.5%) driven
by the increase in the UK corporation tax
rate, losses associated with the start-up of
our China facilities (where a deferred tax
asset has not been recognised), and a lower
proportion of profits being eligible for the
patent box rate.
Taxation paid during FY 2024 was £4.3m
(FY 2023: £2.0m) in relation to profit based
taxes, which were higher than the corporation
tax charge reflecting payments made on
account for the UK prior to the fair value
losses recognised in relation to the loans
due from Bond 3D.
Patent box incentivises innovation and
consequently highly skilled Research &
Development jobs within the UK. The
reduced tax rate on profits taxed under the
UK government’s Patent Box scheme
remains available to Victrex; however, the
profits which benefit from the lower Patent
Box rate are reduced at lower profit levels
and vice versa. Our mid-term guidance for
an effective tax rate is marginally higher
than previously communicated, at
approximately 14–18% (previously 13–17%).
In the FY 2025 period, the effective rate
may exceed the top end of the range, with
China and the proportion of UK profits
available for Patent Box being the key
drivers. We continue to monitor global
taxation developments and their impact on
the effective rate.
Robust balance sheet
Victrex values a strong balance sheet, as do
our global customers, providing us with the
ability to invest and support security
of supply.
Net assets at 30 September 2024 totalled
£461.6m (FY 2023: £501.0m).
ROIC
1
Return on Invested Capital (ROIC) is one
ofour strategic KPIs. We continue to enjoy
strong returns compared to the broader
Chemical sector, with our 5 year average
ROIC at 16%. However, ROIC fell in FY 2024
to 10% (FY 2023: 14%) reflecting the
weaker underlying PBT performance against
a strong balance sheet. With our investment
phase in assets and capability concluded, we
expect to see good mid-term improvement.
Good progress on inventory unwind;
ontrack for FY 2025 target
Following the pandemic, rebuilding raw
material inventories to safety stock levels
tosupport security of supply for customers
was a priority. This, combined with a build of
finished goods and work in progress during FY
2023 – to reflect inventory required for our UK
Asset Improvement programme and preparing
for an upturn in demand – resulted in an
inventory of £134.5m at 30 September 2023.
We commenced the unwind of this inventory
in FY 2024. Total closing inventory was
£115.1m, a reduction of £19.4m, reflecting
good progress towards our target of
approximately £100m by the end of FY 2025.
Whilst this goal of approximately £100m is
higher than historical levels, it reflects the
broader business and geographic portfolio,
including an increased range of polymer
grades, product forms and parts to serve
awider customer base. Despite further
inventory unwind in FY 2025, our planned
production levels will be higher, supporting
operating efficiency and gross margin.
1 Alternative performance measures are defined in note 25.
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 29
Financial review continued
Financial review continued
China facilities: commercial production
Our Victrex Panjin facilities commenced
commercial production towards the end of
FY 2024 and will gradually ramp up during
FY 2025. These facilities - which will supply
the domestic China region - will enable us
tobroaden our portfolio of PEEK grades,
including a new elementary type 2 PEEK
polymer grade. Group sales volumes in China
currently represent approximately 15% of
our portfolio, with Automotive, Electronics
and VAR end markets offering attractive
long-term opportunities, with both existing
and new customers. Close collaboration
with customers continues, in support of
their own growth plans in China. Alongside
our polymer manufacturing capabilities, we
also invested in compounding and additional
commercial capability in China. Operating
efficiency in these assets will improve over
the coming years, despite being a modest
headwind initially. In FY 2025 we are
expecting to see production levels of
100–200 tonnes within the Panjin facility.
Investment phase concluded;
capitalexpenditure reducing
After a period of major investment to ensure
we have the appropriate level of production
capacity to support core business growth
and high volume opportunities in our
mega-programmes, cash capital expenditure
during the year reduced to £32.6m (FY2023:
£38.5m). A significant proportion of this
investment was to support completion of
our China manufacturing assets and UK
Asset Improvement programme. A large
proportion of the China investment was
funded through utilisation of the Group’s
China banking facilities, with interest being
capitalised in H1 2024 and expensed in
H22024 as the facility became commercially
operational. In total since FY 2020, our
capacity investments in China have been
over £60m.
Following conclusion of these investments,
we see a very limited need for sizeable
polymer capacity for several years. Over
thecoming years, investment will include
increased ESG related capital spend in
ourmanufacturing facilities to support
decarbonisation. Current ESG related capital
expenditure remains relatively small and is
primarily for our Continuous Improvement
(‘CI’) activities. We may also see smaller-
scale capital investment in Medical, as key
programmes like Trauma and Knee scale up.
Overall capital expenditure guidance remains
atapproximately 8–10% of revenues.
Cash flow
Cash generated from operations was
significantly ahead of the prior year, at
£88.7m (FY 2023: £42.9m), reflecting the
improved working capital position. This
resulted in underlying operating cash
conversion
1
of 114% (FY 2023: 18%). With
ahighly cash-generative business model, we
expect to see a continuing improvement in
absolute cashgeneration. In June 2024 we
paid the 2024 interim dividend of 13.42p/
share at a value of £11.7m. Net debt at
30September 2024 was £21.1m (FY 2023:
£16.7m), including cash of £29.3m (FY 2023:
£33.5m, including other financial assets).
The Group utilised its UK RCF and China
bank facility borrowings – put in place for
the investment in new China manufacturing
assets – during the year. Borrowings including
lease liabilities at 30September 2024 were
£50.4m (FY 2023: £50.2m) with the RCF
fully repaid.
Repayment of RCF
The Group’s UK banking facilities were
undrawn at the end of FY 2024, following
aperiod of utilisation during the financial
year. These facilities comprise £60m (£40m
committed and £20m accordion), expiring
inOctober 2027.
Dividends
The Board has proposed to maintain the
final dividend at 46.14p/share (FY 2023:
46.14p/share), which reflects the anticipation
of better prospects in FY 2025. We intend
togrow the regular dividend in line with
earnings growth once underlying dividend
cover returns closer to 2.0x (FY 2024 underlying
dividend cover
1
: 0.9x (FY 2023: 1.3x)).
Capital allocation policy
Growth investment remains the focus forthe
Group. Share buybacks remain an option for
future shareholder returns, alongside special
dividends, within our capital allocation policy.
The prospects arepositive for improving cash
flows, and reducing net debt, as trading
improves, capital expenditure reduces
andinventory levels come down.
Culture of innovation and recognition
for Victrex in The Sunday Times Best
Places to Work 2024
Despite the challenging trading environment
over the past two years, the Group has
continued to invest in people, assets and
capability. As a reflection of our motivated,
innovative and engaged workforce, Victrex
was pleased to be recognised in The Sunday
Times Best Places to Work 2024 list, following
on from its Employee Engagement Survey.
Self-help: Go to Market & Project Vista
to support profitability
Through a challenging period for the
chemical industry, Victrex has sought to
ensure that ‘self-help’ measures remain
strong, including cost control. After adapting
our organisational structure last year, we
launched our Project Vista programme in
FY2024, underpinned by ournew ERP
system, to further enhance how we Go to
Market and serve our customers, thereby
supporting and enhancing profitability in
FY2025 andbeyond.
We are enhancing our sales mechanisms,
including operating a more regional approach
for our sales teams. This also includes the
opportunity for greater digitalisation.
Overall, we will seek to enhance the speed
and value creation of business development
and technical service – one of Victrex’s key
strengths and points of difference – as well
as focusing on smarter procurement.
Balancing customer facing resources across
our core business and more specialised
business (including our mega-programmes)
will mean that we can allocate our resources
where we can drive the greatest return.
Outlook – solid start despite mixed
trading conditions; focused on growth
The Group has seen a solid start to FY 2025
– ahead of the prior year – despite mixed
trading conditions. Our expectations for
profit growth are based on robust demand
continuing across the end markets of
Sustainable Solutions, together with Medical
improvement as we progress through 2025.
The timing of the upturn in Medical will be a
key factor in the scale of Group profit growth,
with cost control, self-help measures, higher
asset utilisation and lower raw material costs
helping to underpin profit improvement.
If current demand levels remain on track,
with some seasonality in our Q1, a run-rate
across the rest of the year similar to the FY
2024 exit rate – of around 1,000 tonnes per
quarter – offers the potential for at least
mid-single digit volume growth.
In summary, we have the opportunity to
deliver underlying PBT growth ahead of
volume growth, after the impact of currency,
which is now a £7m-£8m headwind to PBT
in FY 2025. For the medium to long term,
the Board’s confidence in delivering our
growth opportunities remains strong. We
have a diversified core business, increasing
mega-programme commercialisation, well
invested assets and the opportunity for
cashflow improvement.
Ian Melling
Chief Financial Officer
3 December 2024
1 Alternative performance measures are defined in note 25.
30 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
A BALANCED PORTFOLIO, ALIGNED TO
GLOBAL MEGATRENDS
Sustainable Solutions revenue
£238.0m
-2% vs FY 2023, +2%* vs FY 2023
Sustainable Solutions gross profit
£90.3m
-18% vs FY 2023, -18%* vs FY 2023
* Constant currency.
The Group reports divisional performance
through Victrex Sustainable Solutions and
Medical. An end market based summary of
our performance and growth opportunities
continues to be provided. Within Sustainable
Solutions end markets, we have Electronics,
Energy & Industrial, Transport (Automotive &
Aerospace) and Value Added Resellers (‘VAR’).
Summaries of the Group’s mega-programmes
and key milestones are covered earlier in
thisreport.
in this end market), Electronics sales volumes
grew 19% during the second half (vs H2
2023) and were also up 39% vs H1 2024.
However, after a soft first half, total Electronics
volumes for the full year were down 12% at
454 tonnes (FY 2023: 514 tonnes). The latest
industry forecasts continue to suggest an
improvement for Semiconductor, with WSTS
forecasting Semiconductor demand to
increase by 12.5% in 2025.
Within Electronics, core applications include
CMP rings (for Semiconductor), as well as
newer applications utilising PEEK, including
for Semiconductor, 5G, cloud computing and
other extended application areas. The
increased level of data usage in society, AI
and cloud-based services is supportive to
long-term growth in this end market, though
we are mindful of the short-term demand
cycle. Within our APTIV
TM
film business,
which supports small space acoustic
applications including in speaker diaphragms
and related components, we continue to see
good growth and opportunities to further
differentiate. These include much thinner
film, which we have developed through
ourcapability and know-how.
Victrex™ PEEK’s lighter materials and
enhanced durability have strong credentials
to continue supporting improved energy
efficiency in a range of Electronics
applications. Other key applications include
a range of home appliances, and areas
where energy efficiency, lightweighting
andmechanical strength are all key
requirements. Innovation in smart devices,
including flexible devices, is seeing increased
underpinning from Victrex™ PEEKsolutions.
Year
ended
30 September
2024
£m
Year
ended
30 September
2023
£m
%
change
(reported)
%
change
(constant
currency)
Revenue 238.0 241.8 -2% +2%
Gross profit 90.3 110.5 -18% -18%
SUSTAINABLE SOLUTIONS
Operating review
Improvement in H2 2024
After a soft start to the year, revenue in
Sustainable Solutions improved during the
second half, with H2 2024 revenue up 12%
at £125.1m (H2 2023: £112.1m). This was
supported by improvement in Electronics,
Energy & Industrial and VAR during the
second half (vs both H2 FY 2023 and H1 FY
2024), with continuing growth in Aerospace.
Automotive saw a softer second half year,
compared to some restocking benefit in the
first half.
Full year revenue was down 2% at £238.0m
(FY 2023: £241.8m), impacted by the soft
first half performance. Revenue in constant
currency was up 2%. Pricing remained
robust, although we saw the adverse impact
of VAR volumes influencing sales mix
through the year, particularly in the second
half. The impact of reduced asset utilisation
resulted in gross margin declining by 780bps
to 37.9% (FY 2023: 45.7%).
Electronics
With some improvement through the year
inthe Global Semiconductor market and
Consumer Electronics (which together make
up approximately two thirds of our exposure
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 31STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 31
Victrex plc | Annual Report 2024
Energy & Industrial (‘E&I’)
Energy & Industrial is built on Victrex™
PEEK’s long-standing track record of
durability and performance benefit in many
demanding Oil & Gas applications, where
lightweighting, durability and performance
are key. The trend of metal replacement in
demanding applications remains a key trend.
In recent years, E&I has also been
developing broader business across energy
applications. These include in wind energy
and some opportunities in hydrogen. We
now have a small but growing proportion
ofrevenue coming from wind and
renewable based applications. Sales volume
of 604 tonnes was down 5% on the prior
year (FY 2023: 639 tonnes), reflecting the
continuing weakness across General
Industrial (which makes up more than half
of this segment). Recent market indicators
(‘PMIs’) in Europe have remained below 50
during H2 2024 (source: Trading Economics),
with a slightly better picture in the US.
Other applications within this end market
include food processing equipment, where
Victrex™ PEEK’s inert properties prove
beneficial in metal replacement. We have
also commenced marketing Victrex™ PEEK
as a PFAS (Per- and Polyfluoroalkyl
chemicals) alternative. The safety concern
around PFAS has sparked global action.
Regulators across the UK, the EU and the US
are proposing to ban or restrict PFAS to only
a few critical uses. Manufacturers using
these products are looking to find safer
alternative materials, without compromising
product performance, with Victrex™ PEEK
well placed.
Transport (Automotive & Aerospace)
Victrex has a strong record of enabling
environmental and societal benefit through
its products. ‘Avoided emissions’ and CO
2
emissions reduction is a key megatrend,
with our materials offering lightweighting,
durability, dielectric properties and heat
resistance. A combination of legacy
applications and innovation into delivering
new requirements for our customers
positions us well for the coming years.
Wealso continue to make good progress in
our Transport related mega-programmes of
E-mobility and Aerospace Composites.
Overall Transport sales volume was up 8%
to 1,022 tonnes (FY 2023: 950 tonnes),
withAerospace up 15% and Automotive up
5%. This performance reflects continuing
increases in plane build as the Aerospace
industry recovers post-pandemic.
Automotive saw some restocking benefit in
the first half, with a softer performance in
H2 2024 as industry demand weakened.
Automotive
Victrex remains strong in core applications
like braking systems, bushings & bearings
and transmission equipment, the majority
ofwhich will transition between internal
combustion engine (‘ICE’) platforms and
electric vehicles (‘EVs’). Overall, translation
across ICE to EVs remains a net benefit
opportunity, with current PEEK content
averaging around 11g per car. Our
assessment of the EV opportunity is for a
long-term potential of over 200g per electric
vehicle, with several application areas.
Our E-mobility mega-programme was stable
this year, with FY 2025 set to see an uptick
in new platforms utilising PEEK, particularly
around larger and higher voltage batteries.
Applications include wire coatings, slot liners
and rotor sleeves, where the insulative
properties of Victrex™ PEEK suit the more
demanding performance requirements.
Opportunities are growing in both Europe
and Asia, with China a particular focus area.
PEEK Gears saw further growth, following a
positive performance in FY 2023. This reflects
growing business in both cars and e-bikes.
Victrex owns the know-how for manufacture
and is able to manufacture at facilities in the
US, or licence the manufacture within the
supply chain. With PEEK Gears now being
adopted, supply chain manufacturing is likely
to be the primary route for sales of this
application, following Victrex successfully
seeding the market.
Aerospace
Aerospace volumes were up 15%, reflecting
the benefit of plane build continuing to
increase. The latest indicators for long-term
plane build forecast 42,000 new or
replacement aircrafts by 2043 (source:
Airbus). With manufacturing speed and
efficiency a key driver, Victrex™ PEEK’s
offering to support faster cycle times in part
manufacture positions us well. We continue
to enjoy good application growth in Aptiv™
film and also our LMPAEK™ grade (and use
as composite tape).
In our mega-programmes, Aerospace
Composites supports both smaller and larger
structural parts for Airbus, Boeing and tier
companies, with qualifications well advanced,
and existing parts on planes and larger
demonstrator parts being exhibited by major
customers, ahead of commercial adoption.
Retrofit and ‘running change’ opportunities
for existing aircraft are supporting increased
activity in this area, beyond the potential
from future aircraft programmes.
This year we saw increased volumes with
COMAC in China, noting the planned
ramp-up of production for the C919 model
over the coming years. Victrex™ PEEK
supports a broad range of aircraft platforms,
with one of the highest production models
being the Boeing 737 MAX. Victrex™ PEEK
content here is over 100kg per plane and we
note the continuing industry focus,
following the FAA’s ruling on a production
cap. The potential of a small headwind in FY
2025 remains if the FAA’s ruling remains in
place. However, we also anticipate
incremental revenue from composite
development programmes, as well as the
COMAC business in China, which continues
to ramp up.
Overall, the mid-term outlook for Aerospace
remains positive. With our materials
supporting lightweighting, safety and
durability – as well as faster cycle times –
thePEEK content opportunity in composites
could be 10x current levels, with use cases
for larger structural parts set to become
clearer. Our collaborations include a range
of OEMs and tier manufacturers, including
on Airbus’ Clean Sky 2 programme, focused
on the wings and fuselage of tomorrow.
Operating review continued
After a soft start to the year,
revenue in Sustainable
Solutions improved during
the second half.
Pricing remained robust,
although the impact of
salesmix and lower asset
utilisation led to gross margin
declining during the year.
32 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
Value Added Resellers (‘VAR’)
VAR are long-standing business for Victrex,
where VAR process PEEK into stock shapes
or compounds, for onward sale into multiple
supply chains. End market alignment, whilst
difficult to fully track, supports a similar
alignment to our Sustainable Solutions end
markets, with the exception of Aerospace,
where sales volumes are largely direct to
OEMs or tier suppliers. VAR are often a
good barometer of the general health of the
supply chain and economic recovery, with
VAR customers processing high volumes
ofPEEK.
During the second half, we saw continued
progress in VAR demand, with H2 volumes
up 25% vs H1 2024. This resulted in full
yearVAR volumes increasing by 14% to
1,488tonnes (FY 2023: 1,304 tonnes).
Whilst visibility remains low for FY 2025,
wecontinue to be well placed for a
sustainable recovery.
Regional trends
At a regional level, the Group’s regional
performance in North America was most
adversely affected vs the prior year, driven
by continued softness in Energy & Industrial.
Europe saw the most improvement as VAR
drove a better H2 2024, with Asia-Pacific
slightly ahead.
Europe was up 8%, at 2,062 tonnes
(FY2023: 1,903 tonnes), driven by VAR
primarily. North America was down 6% at
612 tonnes (FY 2023: 650 tonnes), reflecting
Energy & Industrial, with Asia-Pacific up 1%
at 1,057 tonnes (FY 2023: 1,045tonnes).
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 33STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 33
Victrex plc | Annual Report 2024
Operating review continued
SUPPORTING CLINICAL
OUTCOMES FOR PATIENTS
Medical revenue
£53.0m
-19% vs FY 2023, -16%* vs FY 2023
Medical gross profit
£44.0m
-16% vs FY 2023, -17%* vs FY 2023
* Constant currency.
Medical strategy
Our Medical business is focused on further
broadening the applications we serve,
building on the strong track record for
PEEK-OPTIMA™ over more than 20 years.
To date, over 15 million patients have
PEEK-OPTIMA™ based implanted devices.
Anumber of key milestones were delivered
during the year that support our emerging
parts businesses, as well as our core
materials business. These include US FDA
approval for a 3D printed PEEK-OPTIMA™
based spinal cage.
Our Invibio brand is focused on material
sales and a broader range of solutions,
supported by our Polymer & Parts strategy,
through manufacturing Medical
components in the application areas of
Trauma and Knee. Our goal is to increase
the proportion of Medical revenues for the
Group, above 30% of revenues by 2032 (FY
2024 had Medical share of Group revenue
at 18%). As a high value segment, this end
market is seeing a broader range of
opportunities to meet patient and surgeon
requirements, as PEEK’s performance
supports improved patient outcomes.
To support these goals, recent targeted
investment in Medical has helped support
new customers in Trauma, as well as Knee.
Our New Product Development Centre in
Leeds is supporting customer scale-up in
Trauma and Knee, aligned to major medical
device companies, as well as working closely
with academia. This facility is dedicated
to‘parts’ programmes – the know-how,
intellectual property and associated
clinicaldata which underpin our expansion
in Medical.
Performance
Following a record performance in FY 2023,
our Medical business saw major customers
starting to reduce their inventories from
historically high levels. This has continued
through the second half, with Medical
revenues flat H2 2024 vs H1 2024, resulting
in a softer year-on-year performance.
Volume based procurement (‘VBP’) in China
also resulted in softer revenues within the
Asia-Pacific region. Full year revenue of
£53.0m was down 19% on the prior year
(FY2023: £65.2m). The Group expects to
see some improvement and a gradual easing
of destocking – given procedural growth
Year
ended
30 September
2024
£m
Year
ended
30 September
2023
£m
%
change
(reported)
%
change
(constant
currency)
Revenue 53.0 65.2 -19% -16%
Gross profit 44.0 52.1 -16% -17%
MEDICAL
Our PEEK composite Trauma plates demonstrate strong clinical evidence.
Our goal is to increase the
proportion of Medical
revenues to above 30% of
Group revenues by 2032.
Despite the destocking impact
within the medical device
industry this year, growth
opportunities remain strong,
with a number of key
milestones delivered as we
further diversify into new
application areas.
34 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION34 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024
remains healthy – during 2025, based
onongoing dialogue with customers.
Gross profit was £44.0m (FY 2023: £52.1m)
and gross margin was stable at 83.0% (FY
2023: 79.9%) primarily reflecting sales mix.
Geographically, Asia-Pacific revenues were
down 27% year on year, with Medical
revenues in the US down 18% and Europe
down 10%.
Progress on the Medical mega-programmes
is covered on page 27.
Spine and non-Spine
Non-Spine has seen good growth over recent
years and now forms 60% of our revenues
inthis division. Application areas include
Arthroscopy and Cranio Maxillo-Facial
(‘CMF’). CMF also offers us an opportunity
through 3D printed parts and saw continued
growth of 7% in FY 2024, driven by its
‘bespoke’ made to order nature.
Elsewhere, recent and growing application
areas include Cardio. PEEK-OPTIMA™ is
now used in heart pumps, as well as active
implantable devices and drug delivery
systems. PEEK’s strong track record and inert
nature support the broader range of
application uses.
With porous titanium taking some share
from PEEK over recent years, we have been
working on the opportunities in 3D printed
spinal cages. Next generation Spine
products will be key in maintaining PEEK’s
position in this segment and potentially
regaining share over time.
In September 2024, the US FDA approved
thefirst 3D printed Porous PEEK device in
themarket. The combination of Porous
PEEK-OPTIMA™ structures allows for
potential bone in-growth to achieve fixation,
while maintaining the inherent benefits of
PEEK-OPTIMA™ for imaging and bone-like
modulus. Whilst we continue to innovate and
develop new products for Spine, usage of 3D
printed titanium cages continues, largely in
the US. PEEK within spinal fusion remains
strong in Asia and Europe, where these
regions have seen less of an impact
fromtitanium.
Our New Product Development Centre in Leeds supports scale-up with customers for our
Trauma and Knee mega-programmes.
Application development across our Sustainable Solutions and Medical businesses remains
strong. Pictured: our Trauma plates recorded good growth to >£1m of revenue this year.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 35STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 35
Victrex plc | Annual Report 2024
RISK MANAGEMENT
Risk management is embedded in Victrex’s culture, ensuring that we
assess risks as part of delivering our strategy.
1
Risk agenda
Why do we undertake riskmanagement?
Risk objectives
Victrex undertakes risk management with the objective of
facilitating better decision making, resilience and sustainability
inorder to continually improve the performance of our business.
Thisisparticularly important as the business continues to move
intosemi-finished and finished products and further expands
geographically, building demand for our new products, alongside
growing the core business. The risk management framework
ensures risks are identified across the business, owned and
appropriately managed, and linked to principal risks so that impacts
on delivery of our strategy can be identified and managed.
The Board is responsible for reviewing the design and effectiveness
of the risk management systems, and for determining the
Company’s risk appetite in delivering Victrex’s strategy, which is set
out on pages 16 and 17. We have an established framework for risk
appetite classification which guides our approach to managing
principal risks. For example, our ‘very low’ appetite for risk in areas
such as Safety, Health and Environment (SHE), legal compliance and
cyber security means that the avoidance of risk and uncertainty is
akey objective, and when faced with multiple options, we will take
the lowest risk option. This is in contrast to our ‘open’ appetite
torisk in strategic growth aspects, meaning that we will consider
awider set of delivery options that balance the merits of both risk
and reward. We do not have a ‘high’ appetite for any of the
principal business risks.
We believe that Victrex is well placed to meet the demands of the
increasingly prominent ESG agenda but must also consider the risks
and costs associated with stricter emissions targets, lifecycle impacts
and other requirements.
Risk strategy
The Board is responsible for ensuring the effective operation of the
Group’s risk management framework and for ensuring risk management
activities are embedded in Victrex’s processes. The Board is also
responsible for ensuring that appropriate and proportionate
resources are allocated to risk management activities.
2
Risk assessment
How do we assess and record risks?
When assessing risk, management considers in detail:
u
external factors, including legal, regulatory and environmental,
social and governance (‘ESG’) factors arising from the
environment in which we operate; and
u
internal factors arising from the nature of our business, internal
controls and processes.
Analysis and recording of risks
Our business unit and functional team leaders are responsible for
the day to day management and reporting of risks. They identify
risks, including new and emerging issues, map these to the principal
risks, escalating where required, and ensure risks are managed
appropriately. The causes and potential consequences of each risk
are identified and documented. Each risk is evaluated based on its
likelihood of occurrence and severity of impact on strategy, profit,
regulatory compliance, reputation and/or people at both a gross and
net (after mitigation) level. An Enterprise Risk Management System
is operated across the business for the capture and reporting of risk,
to ensure consistency of approach in the identification and
evaluation of risks, current mitigations and any further activities
required to bring the risk to a tolerable level.
We operate a three lines of defence risk assurance model:
1st line of defence: The day to day operational risk management,
including the systems and processes established to ensure internal
controls are in place and effective.
2nd line of defence: Monitoring and compliance activities which
advise and oversee first-line controls and risk management
processes, primarily through Group functions that are at least one
step removed from first-line management.
3rd line of defence: Independent business assurance provided
byboth third parties and the Group Internal Audit team over the
first and second lines of defence.
2. Risk assessment 3. Risk response 4. Risk governance
1. Risk agenda
Risk
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Victrex plc | Annual Report 2024
3
Risk response
The risk registers and profiles are regularly reviewed to keep them
up to date and relevant to our strategy.
For each risk, we decide whether to eliminate the exposure, mitigate
it through appropriate controls or mitigating actions, transfer it
(e.g.through insurance) or tolerate any residual risk.
We continually challenge the efficiency and effectiveness of existing
internal controls and seek to continually improve our risk management
framework. The risk process ensures that risks are owned and risk
reduction activity is captured and managed through action plans
which aim to ensure risk taking remains within appetite. Oversight is
provided by the specialist Risk and Compliance team which has regular
reviews with management across the business. The risk management
framework was independently assessed by KPMG during 2024
against an established maturity matrix, with opportunities for
improvement captured in aContinuous Improvement Plan.
When a significant new risk arises where a response is required in
atimely manner, a dedicated working group is established to ensure
that robust oversight and management is applied and appropriate
mitigations implemented.
We use insurance as a mitigation tool in our response to several risks
and potential financial impacts that can result. We regularly review
and update the types and limits of our insurance coverage, ensuring that
they are aligned to external obligations, insurance product developments
and changes to our corporate risk profile. The insurance programme
and levels of cover are reviewed annually by the Board.
4
Risk governance
How do we evaluate and provide assurance
overour management of risks?
The following processes are in place to provide effective risk governance:
u
the Board is responsible for approving the risk management
policy and determining the nature and extent of the risks it is
willing to take in achieving its strategic objectives. The Board
considers the continued effectiveness of risk management
processes, controls and culture, changes to principal risks and
their management, and the quality of our public reporting
process. Twice yearly, the Board carries out a comprehensive
review of the principal risks;
u
the Audit Committee responsibilities include reviewing the Company’s
risk management systems to provide assurance of operational
effectiveness, compliance with laws, regulations and contracts;
u
the Risk & Compliance function supports the Audit Committee
inits review of the effectiveness of the system of internal control,
as do the external auditors on matters identified during the
course of their statutory audit work;
u
the Group’s Internal Audit function provides independent and
objective 3rd line assurance to the Victrex plc Audit Committee
on the adequacy and effectiveness of our risk management and key
internal control frameworks within the business. A comprehensive
‘audit universe’ assessment defines the range of potential audit
activities, including risk ratings based on current and historic
activity, and is maintained by the Audit function. The internal
audit plan provides the schedule of audit work that covers specific
risks, core processes (cyclical), key programmes and geographic
regions, which is approved annually by the Audit Committee;
u
the Executive Risk Committee, chaired by the Chief Financial
Officer, reviews the corporate risk register at least half yearly to
ensure it remains appropriate and effective. During the year
feedback from these reviews is provided directly to the Audit
Committee and the Board by the Director ofAudit & Risk. The
Executive Risk Committee comprises: the Executive Directors (CEO
and CFO), Managing Directors of the Medical and Sustainable
Solutions businesses, Group HR Director, General Counsel &
Company Secretary and Director of Audit & Risk. Risk management
subcommittees provide further governance for specific business
areas (such as Medical) or programmes (forexample the ERP system
replacement) where they are deemed necessary due to current
business activity. These meetings and associated risks feed into both
bi-monthly VMT Risk and Compliance meetings and the Executive
Risk Committee (at least half yearly) via their respective Chairs,
who are Executive Risk Committee members;
u
the Victrex bi-monthly Risk and Compliance review meeting
provides oversight for the risks, controls and assurance activity
across the business including Legal, Regulatory, SHE, Quality,
Security (including cyber) and Internal Audit. Membership comprises
the CEO, CFO, Managing Directors, Group HR Director and the
General Counsel & Company Secretary alongside a number of other
senior leaders from 2nd line risk management functions;
u
as appropriate, significant incidents, issues and new risks are
reported to the Board via the relevant Executive Director; and
u
risk management is an integral aspect of Group functional
governance, including through the SHE steering committee (which
meets quarterly), Quality product review meetings (monthly) and
the ESG steering group (which meets twice a year).
Emerging risks
The Board has identified and assessed emerging risks or areas of
increased focus as part of the established risk management and strategic
planning processes. The key emerging risk areas identified were:
u
further geo-political and macro-economic instability, including:
u
impacts on supply chains and end markets resulting from
increased tension and conflict in the Middle East; and
u
ongoing geo-political tensions, including those between
theUS and China, and associated import/export controls
andsanctions;
u
raw materials – including potential longer-term issues with their
continued availability, for example through climate-related
impacts or potential toxicity – have been evaluated as an area to
be closely monitored;
u
business resilience, which is increasingly a factor in external and
customer audits and which Victrex has given particular focus in
the last year;
u
new legal and regulatory aspects – resulting from the changing
business footprint, complex and evolving regulatory
environment, as well as a different focus from the new UK
government; and
u
future of end markets – redirecting focus and resources to
sustainable end markets and products with environmental &
societal benefits in line with global megatrends.
These emerging risks have been recorded and will be continually
monitored through the ongoing Corporate Risk Management
process so that their potential impact can be further understood
and mitigated. They will also be considered as an integral part of the
strategic planning process, aligned with Victrex’s risk appetite.
Climate-related risks and opportunities
We have further developed our climate-related risks and opportunities
(see pages 58 and 59), monitoring changes in regulation and legislation.
A focused risk assessment covering ESG risks is in place, with clear links
to existing principal risks such as Supply Chain and Strategy Execution
with oversight from the Corporate Responsibility Committee.
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 37
MANAGING OUR RISKS
The Group’s strategic objectives can only be achieved if certain risks are taken
andmanaged effectively. We have listed below the most significant risks that may
affect our business, although there are other risks that may occur and impact the
Group’s performance.
Key to strategy
Drive
Differentiate
Create and deliver value
Underpin
Risk heatmap
1. Safety, Health and Environment
2. Recruitment and retention of the right people
3. Supply chain
4. Network and IT systems & cyber security
5. Product liability
6. Legal and regulatory compliance, ethics
andcontracts
7. Strategy execution
8. Geo-political and macro-economic environment
Impact
Likelihood
2
1
3
5
6
84 7
Low
Low
High
High
Safety, Health andEnvironment
Primary link to strategy Link to climate change
Risk area and description
Delivery of our strategy is dependent on us conducting our business
safely. Given the nature of our various manufacturing facilities, a
significant operational disruption could adversely affect the safety
ofpeople on or close to our sites. Disruption could also impact our
ability to make and supply products.
The environment in which Victrex operates is subject to numerous
legislative and regulatory requirements. A failure to comply could
adversely impact the local environment, our employees, our
manufacturing capability, or the attractiveness of our business
orproducts to various stakeholders.
In addition, climate change poses a number of risks to the business.
Minimising our environmental impact and ensuring future business
sustainability as we transition to a low carbon economy are
fundamental objectives.
Mitigation
SHE remains our number one priority. We have policies and
procedures to manage our operations, protect the safety and
healthof our employees, contractors and visitors, and manage our
environmental responsibility by reducing emissions to continually
improve our resource efficiency.
During FY 2024 the SHE function has seen new leadership and has
been restructured to ensure adequate and specific focus on both
process safety management and occupational health and hygiene.
Our safety ‘Golden Rules’ continue to receive emphasis, and risk
assessment training has been refreshed.
Significant focus is placed on process safety hazards and control
procedures and we partner with external leaders to provide
additional independent assessment and assurance of relevant
plantsand processes. Any events or near misses that do occur
areinvestigated to determine root causes and appropriate actions
are taken to prevent reoccurrence.
SHE management software is in place across all global assets to
further support this and we have SHE improvement plans and KPIs
that are monitored and reviewed monthly, alongside a SHE steering
committee which provides oversight and governance. Additional
detail of SHE performance and progress made in the year is
contained in the Sustainability report on page 71.
Change
No change
Viability statement links
Risk considered
Risk modelled in sensitivity analysis
1
Risk continued
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Victrex plc | Annual Report 2024
Recruitment and retention
of the right people
Supply chain
Primary link to strategy Link to climate change Primary link to strategy Link to climate change
Risk area and description
Our success depends on our ability to recruit and retain the right
people. Victrex relies on the skills, knowledge, experience and
competence of our people in order to drive business growth
andsuccessfully execute our downstream strategy.
Due to the nature of our business, there is an inherent requirement
for highly skilled employees (for example in areas of polymer
chemistry, R&D and process engineering) and the specific end market
related competencies needed (for example in Medical and Aerospace
parts manufacturing).
Our ability to recruit and retain talent is affected by numerous factors
including: pay and benefits, culture, sustainability credentials, the
nature of the working environment, regional employment levels and
changing workforce behaviours. In the current recruitment market,
there is a far greater expectation for flexible working arrangements
and less dependency on location-based roles.
Risk area and description
Failure to maintain a secure supply of high quality products to our
customers globally could lead to loss of earnings and damage to
reputation. This could be caused by, for example, incapacity of our
production facilities, quality failure or restricted access to raw
material supplies or transport links potentially leading to insufficient
levels of inventory and/or manufacturing capacity.
Climate change poses several specific supply related risks to Victrex
and our suppliers, including potential asset or production disruptions
due to rising sea levels and increasingly harsh weather events or cost
impacts due to changes in carbon taxation and increased energy costs.
Mitigation
Enhancing workforce planning has been a key area of development,
alongside ensuring a fair and attractive benefits package.
Digitalisation of recruitment and applying a future-skills perspective
have been key focuses of activity in FY 2024. We have targeted
priority learning and development programmes across all levels and
improved our skills and competency frameworks, investing in people
as an attraction and retention tool.
We have succession plans in place for key roles and develop our
future leaders so that we are able to promote internally as a
retention lever, as well as bringing in new talent from the outside
where required.
We have enhanced our Diversity and Inclusion and our flexible
working policies over the last year and have responded to the voice
of our employee resource groups in making changes to ensure equity
for all. We regard this as a commitment to make full use of the
talents and resources available.
We have gained Disability Confident Level 2 accreditation which
recognises our fair approach in recruitment and talent management
practices, and continue to evolve and improve accessibility at all sites.
Mitigation
Our policy is to keep capacity ahead of demand by continually
investing in our supply chain so that our customers can be confident
that we can meet their requirements today and in the future.
We have a robust, Class A standard Integrated Business Planning
(‘IBP’) process in place through which changes in demand are
anticipated and consistent supply is maintained.
Strategic supplier sourcing, development and performance
management are our key mitigations for the quality and security
ofsupply of key raw materials. We have continued to focus on the
breadth and resilience of our supplier base in response to the current
and future uncertainties. In FY 2024, this has included a further
strategic increase in the number of suppliers of key materials, and
focused supplier assessments and audits.
We also consider alignment with our Modern Slavery policy and
human rights policies within our supplier review process.
In our own operations, we have reviewed the possible contingencies
for energy interruptions affecting our manufacturing sites, including
the use of alternative fuel sources.
Our UK manufacturing improvement plans have continued and will
be delivered over the coming years which will strengthen the security
of supply to our customers.
During FY 2024, we have focused on reviewing our business
resilience and response plans to ensure security and continuity
ofsupply.
Change
No change
Change
No change
Viability statement links
Risk considered
Viability statement links
Risk considered
Risk modelled in sensitivity analysis
2 3
Victrex plc | Annual Report 2024
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION 39
Risk continued
Network and IT systems & cyber security Product liability
Primary link to strategy Link to climate change Primary link to strategy Link to climate change
Risk area and description
Targeted cyber attacks could result in the theft, manipulation or
destruction of confidential and sensitive information and severely
disrupt business operations.
Significant failure of, or interruption to our IT systems or services
could lead to business process disruption.
The adoption of AI technologies, if used inappropriately, could
exacerbate risks around data creation and management including
accountability for data integrity, data protection and privacy, and
lossof IP.
The level of homeworking could lead to an increased risk of breach
or loss of key services.
Risk area and description
Selling into highly demanding end use applications and regulated
markets such as Medical and Aerospace means a failure to supply
inaccordance with the agreed specification has the potential to lead
to consumer harm or a potential product liability claim.
This could result in fines or damages being payable and could in turn
lead to a loss of business and reputational damage.
Mitigation
Victrex operates a Global Information Security Management System,
aligned to ISO 27001 and National Institute of Science and
Technology (‘NIST’) standards, to provide a multi-layered approach
tosecurity and control.
We have continued to make enhancements to the control framework
and layers of defence, including: using best of breed Extended
Detection and Response (‘XDR’) and Security Incident and Event
Management (‘SIEM’) technologies, along with next generation
firewalls and Network Access Control (‘NAC’), and a global software
defined LAN and WAN for our core network.
Independent external experts are regularly engaged to conduct
assessments, including penetration testing, cyber health and
awareness and ongoing certification to Cyber Essentials Plus.
DuringFY 2024 we gained Trusted Information Security Assessment
Exchange (‘TISAX’) accreditation. We have a global incident response
plan, supported by third-party experts, for crisis response within
both IT and OT networks.
Our internal Security Operations Centre and team provide round the
clock detection and response capabilities.
We continuously review the latest threats and trends in cyber and IT
security to ensure our protection is current and effective. To support
this we have enhanced cyber security awareness across the business
through mandatory training and a culture monitoring platform, which
are applicable to all users, and have conducted exercises to test our
resilience covering both our defences and response capabilities.
Mitigation
Robust regulatory standards and accredited quality management
systems are in place relevant to our markets, including Medical
Devices, Automotive and Aerospace.
As the business continues to move downstream into semi-finished
and finished products, we are dealing with increasingly onerous
andcomplex liabilities. As a result, we have established Risk and
Warranty Committees which provide additional governance over
ourkey programme activity in the Automotive and Aerospace sectors.
We continue to utilise external experts to support with complex
contract matters, where required. We use supply contract terms and
conditions to limit exposure, which include agreed specifications and
manufacturing to defined standards and processes. In addition, the
Group maintains appropriate levels of product liability insurance.
Quality performance is key to mitigating this risk and during FY 2024
specific focus has been given to our Quality teams, including a
restructuring to integrate the Quality Assurance function with the
Regulatory and Product Stewardship (‘RAPS’) team. The quality and
supplier 2nd line assurance programmes have been refreshed.
We have robust management of change processes inplace which
ensure that supply and quality are consistent and any change to our
systems or processes is appropriately validated.
Change
No change
Change
No change
Viability statement links
Risk considered
Viability statement links
Risk considered
Risk modelled in sensitivity analysis
54
40 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION
Victrex plc | Annual Report 2024