StockMarketWire.com - Plastics manufacturer Victrex warned that its annual revenue would slide 10% and that it was planning to cut 100 jobs, though it also said it was planning to reinstate its dividend, citing a healthy cash position.

Revenue for the year through September was expected to fall to £266 million, down from £294 million year-on-year, including a 27% slump in the fourth quarter.

Victrex had been hurt by lower demand in the aerospace and energy sectors, which were both hit hard by the Covid-19 pandemic.

'At the close of the group's 2020 financial year, trading overall remains subdued, although some end markets have slightly improved from trough levels,' the company said.

Victrex added that although its revenue performance was slightly ahead of consensus expectations, its high fixed cost base meant margins had eroded.

As part of its cost management plans, the company had commenced consultations with employees that would see its headcount fall by up to 100, primarily through voluntary severance.

A related exceptional charge of £9.5 million would be taken in the 2020 financial year accounts, bringing total exceptional items for the year to around £12 million.

'The capital requirements for our UK debottlenecking and China manufacturing subsidiary, as well as our usual ongoing maintenance capital expenditure, are likely to be in excess of £50 million in the 2021 financial year,' Victrex said.

'These requirements will be covered by our cash generation and, in the light of a healthy net cash position, the board expects to reinstate a dividend for the 2020 financial year.'

Turning to its short-term outlook, Victrex said it anticipated its end markets would remain around the levels seen in the fourth quarter, with a continuing impact on margins.

The first half of the current financial year also would come up against a tough comparative.

'There is also the possibility of uncertainty from the Brexit outcome, although our contingency plans with additional warehousing and high inventories keep us in a good position to continue to support our customers,' Victrex said.

'Overall, with sustainable products, our range of medium to long term growth opportunities remain strong, our financial position is robust and our cash generation capabilities offer the opportunity of good medium term returns to shareholders.'



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