Victrex plc plans to reinstate dividend but cuts 100 jobs

() has said it expects to reinstate a dividend for the previous financial year “in the light of a healthy net cash position” but announced 100 job cuts to support profits.

The FTSE 250-listed chemicals producer said the roles will be lost through voluntary severance, as part of a cost-cutting programme which will bring with it an exceptional charge of £9mln.

READ: Victrex says still unsure about dividend but margins to remain weak

The capital requirements for the UK de-bottlenecking and its China manufacturing subsidiary, as well as usual ongoing maintenance capital expenditure, are likely to be over £50mln in financial year 202, Victrex said in an update

These requirements will be covered by cash generation, the company added.

In the year to September 30, 2020, Victrex said its sales volumes fell by 7% to 3,492 tonnes while revenue dropped 10% to £266mln.

The effect of lower production against sales volumes will continue through 2021 as volumes remain low due to end-market demand, as inventory is gradually unwound after Brexit and reflecting the planned debottlenecking programme, with a proportion of capacity taken offline, the group added.

The first half of 2021 will be measured against a strong comparative period in 2020, it noted.

As of September 30, 2020, Victrex had £67mln in the bank, excluding £5mln ring-fenced for the China manufacturing subsidiary. The group noted that it also has an undrawn and committed revolving credit facility of £20mln and a £20mln accordion facility.

“Aero/energy accounting for 20% of sales may be in longer market slumps whilst medical (1/4 of profits) may continue to see dull US conditions until spinal elective surgeries return,” Liberum said. 

“For this reason we see September 2021 profit before tax slightly down on a year earlier whilst the street predicts a small increase.”

Shares slipped 3% to 1,860p early on Tuesday.

–Adds analyst comment, shares–