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BRINGING TRANSFORMATIONAL & SUSTAINABLE SOLUTIONS
THAT ADDRESS WORLD MATERIAL CHALLENGESEVERY DAY
VICTREX PLC
ANNUAL REPORT 2023
ENABLING
ENVIRONMENTAL &
SOCIETAL BENEFITS
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.
WE BRING TRANSFORMATIONAL &
SUSTAINABLE SOLUTIONS THAT
ADDRESS WORLD MATERIAL
CHALLENGES EVERY DAY
Strategicreport
1 Highlights
2 Victrex at a glance
6 Chair’s statement
8 Our investment case
10 Our markets and megatrends
12 Our business model
14 Strategy
16 Overview of strategy
18 Strategy and key performance indicators
20 Stakeholder engagement
24 Financial review
28 Operating review
32 Risk
39 Going concern and viability statement
42 Sustainability report
Corporategovernance
68 Introduction from the Chair
70 Board of Directors
72 Statement of corporate governance
86 Nominations Committee report
90 Audit Committee report
98 Corporate Responsibility Committee
report
100 Directors’ remuneration report
124 Directors’ report – other
statutoryinformation
128 Statement of Directors’ responsibilities
in respect of the Annual Report and
the financial statements
129 Independent auditors’ report to the
members of Victrex plc
Financial statements
136 Consolidated income statement
137 Consolidated statement
ofcomprehensiveincome
138 Balance sheets
139 Cash flow statements
140 Consolidated statement
ofchangesinequity
141 Company statement
ofchangesinequity
142 Notes to the financial statements
Shareholder information
183 Five-year financial summary and
Cautionary note regarding
forward-looking statements
184 Notice of Annual GeneralMeeting
188 Explanatory notes
192 Financial calendar
193 Advisors
Highlights:
PBT in line* after challenging year
u
Underlying PBT in line at £80.0m; reported PBT £72.5m
u
FY 2023 volume down 24%; Group revenue down 10%
u
Significant weakness in Electronics, Energy & Industrial and VAR
u
Record Medical revenues, +12% & broad-based growth; strong
Aerospaceperformance
u
Robust cost discipline whilst prioritising Medical & innovation investment
Strong average selling prices; improved gross margin
u
ASP up 18%, driven by price increases (& mix and FX)
u
FY 2023 gross margin up 180bps, offset by lower asset utilisation
Well placed for macro-recovery, with new strategic growth targets
u
Targeting mid-term revenue growth of 5–7% CAGR** based on core business
& new applications
u
Upside potential to 810% CAGR driven by mega-programme commercialisation
u
Targeting £25m–£35m of revenues from mega-programme portfolio in FY 2025
u
Decarbonisation targets submitted to Science Based Targets initiative (‘SBTi’)
Mega-programmes prioritised to drive enhanced commercialisation
u
Investment prioritised in streamlined portfolio: Aerospace, E-mobility, Knee, Magma and Trauma
u
Key milestones delivered in pathways to £10m revenue:
u
E-mobility: £6m revenues, ahead of expectations & new customer collaborations
u
Trauma plates: growing demand & broader customer opportunities
u
Knee: clinical trial & top five OEM collaboration; two to three years to first sales
u
Aerospace: broader customer portfolio for composite parts & revenues growing
u
Magma: supporting TechnipFMC for Brazil scale-up
Strong balance sheet & opportunity for cash flow improvement
u
FY 2023 available cash
1
of £30.1m (FY 2022: £66.0m) after major capex & higher inventory
u
Well-invested assets: new China facilities ready & UK facilities upgraded
u
Inventory set to unwind from FY 2024 (FY 2023: £134.5m vs FY 2022: £86.8m)
u
Final dividend*** maintained at 46.14p/share, reflecting confidence in future performance
Group sales volume
tonnes
3,598 -24%
Group revenue
£m
307.0 -10%
Underlying profit
before tax
1
£m
80.0 -16%
Financial highlights
22
21
92.5
23
72.5
87.7
22
21
84.3
23
70.9
87.6
22
21
50.00
23
59.56
59.56
22
21
4,373
23 3,598
4,727
22
21
306.3
23 307.0
341.0
22
21
91.7
23 80.0
95.6
Regular dividend Special dividend
Dividend per share p
(regular & special dividends)
59.56 flat
Reported earnings
pershare p
70.9 -19%
Reported profit
beforetax £m
72.5 -17%
PBT in line* after challenging year; record
Medical revenues & new growth targets
59.56
1 Alternative performance measures are defined in note 25.
* In line with revised June 2023 guidance of £80m£85m underlying PBT.
** Revenue (5 yr CAGR). Opportunity for PBT to grow faster with improved operating leverage.
*** Proposed.
STRATEGIC REPORT
1
Annual Report 2023 Victrex plc
Victrex at a glance
OUR
STRATEGIC
ROADMAP
Enhance inclusion and diversity,
supportlocal communities and
inspire STEM-based careers
Read more on page 44
Maximise resource efficiency
acrossthe value chain
Read more on page 44
Our sustainable products
provideclear environmental
andsocietal benefits
Read more on page 44
CULTURE
Safety,
sustainability &
accountability
Innovation
Service for
customers
Delivering
with speed
A SUSTAINABLE BUSINESS
PEOPLE PLANET PRODUCTS
VALUES BEHAVIOURS
STRATEGIC IMPERATIVES
PURPOSE
To bring
transformational
and sustainable
solutions that address
world material challenges
every day
Read more on page 6
STRATEGIC IMPERATIVES
Passion
Innovation
Performance
Read more on page 65
Drive
Differentiate
Create and deliver
Underpin
Read more
on page 15
Driving results
Working together
Doing the right thing
Continuously improving
Focusing on our customers
Read more on page 82
STRATEGIC REPORT
Victrex plc Annual Report 2023
2
BRINGING TRANSFORMATIONAL
&SUSTAINABLE SOLUTIONS
Victrex’s strategy is based on Polymer & Parts and our purpose is to bring transformational
and sustainable solutions which address the worlds 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, typically replacing metal with
alighter, durable and sustainable alternative. Through a developing and differentiated
portfolio of product forms and parts, we seek to grow new revenue streams, enabling
environmental and societal benefit for our customers.
Victrex solutions are found across a range of applications and end markets.
1,000+
employees
globally
55%
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 55%
ofGrouprevenues in FY 2023.
## The Group targets 56% 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.
of sales invested
inR&D
##
c.5%6%
Aerospace
20,000+
aircraft flying with Victrexsolutions
Automotive
500m+
VICTREX™ PEEK based applications in use
Electronics
4bn+
mobile devices using Aptiv™ film
Energy & Industrial
75m+
VICTREX™ PEEK seal rings in use today
Energy & Industrial
100m+
machines operate using Victrex solutions
Medical
15m+
implanted medical devices using
VICTREX™PEEK to date
STRATEGIC REPORT
3
Annual Report 2023 Victrex plc
HOW OUR PRODUCTS ENABLE
ENVIRONMENTAL & 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 2023 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 based onpaperby Zhang Q, Yuan Y, Li X, et al, World Neurosurgeon 2018.
**** Data on file, refers to Trauma outcomes in high risk patients using PEEK carbon fibre trauma plates vs metal.
Automotive
80,000 tonnes
80,000 tonne annual CO
2
saving
in Europe for selected applications*
Aerospace
CO
2
saving
Our annual sales to Aerospace
support CO
2
savings c3x Victrex’s
annual Scope 1 & 2 emissions**
Medical
25% improved
brain function
Using PEEK-OPTIMA
TM
Natural
in CMF skull plates vsmetal***
Enhanced
unionrate
Using carbon fibre PEEK trauma plate
vs 85% union rate for steel plates****
Electronics
3040% lighter
PEEK is approximately 3040% lighter than some
metals and supports improved energy efficiency
inhomeappliance devices
Victrex at a glance continued
STRATEGIC REPORT
Victrex plc Annual Report 2023
4
Today 2050
Decarbonisation plan & options
PEOPLE, PLANET & PRODUCTS
Our decarbonisation roadmap is aligned to the Science Based Targets initiative (‘SBTi’),
witha Net Zero goal by 2050 across Scope 1, 2 & 3 emissions (subject to SBTi validation),
andan interim goal by 2032.
SBTi interim target
(2032)
SBTi Net Zero
(2050)
Our progress:
Planet: how we manage our resources
55%
reduction in hazardous waste per £m revenue
since 2013
17%
CO
2
intensity (CO
2
/kg of PEEK produced)
reduction since2013
Our future goals:
Planet: how we manage our resources
100%
goal for renewable electricity globally*
* Where the market exists by 2024 (currently 90%).
2050
Net Zero emissions by 2050; SBTi targets submitted
aligned to the Paris Agreement
Sustainability report Pages 42 to 66
Assess alternative
technologies/
sustainable chemistry
Electrification or alternative fuels for manufacturing
Renewable electricity
Continuous Improvement programmes
STRATEGIC REPORT
5
Annual Report 2023 Victrex plc
Overview
This has been my first full financial year
as Chair. Our strong purpose, innovative
culture and strong balance sheet have
helped Victrex to remain resilient through
the challenging macro-economic conditions
in FY 2023.
A clear purpose
Our purpose is to bring transformational
andsustainable solutions to the performance
challenges faced by our customers, and
our products come with environmental,
technical or medical benefits. Sustainable
product revenues grew this year, which
includes applications in the Aerospace or
Automotive industries, with lighter, more
durable and faster to process materials
supporting CO
2
reduction; in Electronics
and Energy to support energy efficiency;
orin Medical, supporting patient outcomes.
In each, we have a key role to enable
environmental and societal benefits, which
will drive value for all of ourstakeholders.
Safety – fundamental to
everything we do
With manufacturing, technical and support
facilities globally to support our customers,
we have a zero accidents, zero incidents goal
across our business. I am pleased to report
that our safety culture remains strong.
We continue to align to US Occupational
Safety & Health (‘OSHA’) based metrics,
with our recordable injury frequency rate
A CLEAR STRATEGY:
FOCUSED ON DELIVERY
Chair’s statement
(‘RIFR’) at 0.2 (FY2022:0.2) and better
than the industry averageof1.3. Alongside
Victrex’s UK polymer manufacturing
facilities, our new PEEK facility in China
successfully produced first product and is
commercially ready tosupport first sales in
FY 2024. Wherever we operate, we have
anunwavering focus on safety.
A unique strategy
Our ‘Polymer & Parts’ 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. The addressable
market opportunity for our polymers is
atleast 10 times our current sales volume.
Across Sustainable Solutions, beyond
products benefiting from a global economic
recovery, we seek to translate application
growth and develop adjacent opportunities,
particularly in metal replacement. In Medical,
we have the scope to extend our position
through broader applications, with the
opportunity for Medical to become around
a third of revenues within the next decade,
changing the shape of the Group.
Differentiation
Our unique strategy is focused on a
core polymer business, complemented
by our parts business to adopt new and
potentially game-changing applications
(our‘mega-programmes’) – typically where
there is end demand but no supply chain
exists. Victrex’s history is built on innovation,
Dr Vivienne Cox DBE
Chair
With our technology aligned
to powerful megatrends such
as carbon reduction and
improving patient outcomes,
Victrex’s products enable
environmental and societal
benefit for our customers.
We have a clear strategy, and
remain well positioned to
drive substantial growth from
these opportunities over the
coming years.
Dr Vivienne Cox DBE
Chair
Bringing transformational & sustainable
solutions which address the world’s
material challenges, every day
Our purpose
Sustainable product revenues by 2030
>70%
(from 55% in FY 2023)
by applying our know-how and expertise
tohelp develop new application uses for
ourPEEK and PAEK materials.
‘Polymer & Parts’ differentiates us from
competitors, which largely focus on a
portfolio of materials other than PEEK.
Technically, our polymers are developed
by adifferentiated manufacturing process.
As well as expanding our range of
polymer grades, product forms or parts,
many of which are protected by patents
or know-how, this enables us to be the
STRATEGIC REPORT
Victrex plc Annual Report 2023
6
number1 PEEK and PAEK experts. We will
continue to invest around 56% of sales
every year to support R&D investment,
principally in application development, but
also exploring sustainable chemistry for
the future.
Core business &
mega-programme targets
Our strategic plan targetscore business
growth of at least 5–7% (revenue CAGR)
over the medium term, with an opportunity
towards 8–10% growth as differentiated
applications and the ‘mega-programmes’
see increasing commercialisation. PBThas
the opportunity to grow faster than revenue
as operating leverage improves and overhead
investment moderates. During the year,
investment in our ‘mega-programme’
portfolio was prioritised. This prioritisation
ofthe game-changing programmes of
Aerospace Composites, E-mobility, Magma
(composite pipe for the energy industry),
Trauma plates and Knee comes ata time
when the opportunity of £10m revenues
inseveral mega-programmes is moving
closer. Auto Gears saw further growth and
has been integrated within the core business
as it builds adoption and further commercial
revenue. We are also targeting £25m£35m
of revenues from the mega-programme
portfolio in FY 2025.
Sustainability & ESG
People, Planet & Products is our focus and
the environmental & societal benefits of
Victrex
TM
PEEK have helped us to continue
growing our portfolio of sustainable
products, which this year reached 55%
of revenues. Further detail is in our
Sustainability report on pages 42 to 66.
The decarbonisation agenda continues
apace and whilst we face hurdles from
access to alternative fuels or technologies,
orgrid capacity, we have set out a revised
decarbonisation goal which is aligned to the
Science Based Targets initiative (‘SBTi’). This
is focused on a goal of Net Zero across all
scopes by 2050 (including an interim target
by 2032), and we expect to communicate
our short and long-term goals in 2024,
post-review by SBTi. We continue to lobby
for support to progress our
decarbonisation agenda.
In our People agenda, we actively engage with
communities wherever we operate, typically
with significant employee volunteering.
Anew Biodiversity partnership was created
this year in the UK with Lancashire Wildlife
Trust, focusing on industry and nature
in harmony. In our Science, Technology,
Engineering & Maths (‘STEM’) programme,
we saw the first STEM ambassadors in
China, a recognition of how we support
employees of the future.
Results
Victrex was not alone in seeing a
challenging macro-economic environment.
Results were in line with expectations, with
revenue declining 10% to £307.0m (FY
2022: £341.0m) and profit before tax (‘PBT’)
down 17% to £72.5m (FY 2022: £87.7m).
Pleasingly, recovery of energy and raw
material inflation was strong, with average
selling prices, including the benefit of sales
mix and currency, up 18%. Whilst we have
yet to see a notable upturn in demand, we
remain well positioned for a global recovery
in several industries.
Strong balance sheet
The Group retains a strong balance sheet,
with available cash of £30.1m, offering
security of supply to our customers and
flexibility to invest. Our cash-generative
business model enables us to invest in
our growth, as well as offer attractive
shareholder returns. Capital expenditure
has been elevated since FY 2020 as we
invested in our new China facilities and
inUK asset improvement. Whilst we have
allocated investment towards our ESG
anddecarbonisation goals over the coming
years, our cash flows are set to improve as
we realise the fruits of ourinvestments.
Shareholder returns
&capitalallocation
With a well-invested asset base and cash
flows set to see an upturn, the opportunity
for incremental shareholder returns is set
to improve. Following engagement with
shareholders, we confirmed that share
buybacks are now part of our options to
return cash. Our capital allocation policy
continues to focus on quality growth first
and foremost. We will look to progressively
increase our regular dividend in line with
earnings, once dividend cover returns close
to 2x. Special dividends remain an option
based on a minimum 50p/share, with share
buybacks able to be utilised for smaller
cash returns, typically up to £25m. Despite
the challenging year, we maintained the
FY 2023 regular dividend (total dividends
59.56p/share).
Governance & the Board
We pride ourselves on strong governance
across the Group. We saw the first full
year of our newly formed Corporate
Responsibility Committee (‘CRC’) and a full
summary of this Committee’s activities is
shown on pages 98 and 99.
We are focused on further progress on our
Diversity, Equity & Inclusion (‘DE&I’) journey.
With a target for 40% of the leadership
group to be female by 2030, we stayed at
19% during the year and have identified
further actions to build on this progress.
Onthe Board, we have a talented and diverse
team, with 50% of Directors being female.
In September, Dr Martin Court, our Chief
Commercial Officer, stepped down from
the Board after 10 years of service. We are
grateful to Martin for his strong contribution
and wish him well in his retirement. We
will not be directly replacing this role at
Board level, with a reorganisation to have
two Managing Directors for Sustainable
Solutions and Medical respectively, one
ofwhom is an internal promotion.
People, stakeholders, values
&culture
During a challenging macro-economic
environment, it is important that we
recognise and thank each and every one of
Victrex’s employees for their resilience and
contribution. We also continue to support
employees by investing in training, as well
asflexible working and other policies.
Victrex has a strong track record of
ensuringwe engage with stakeholders
across our global locations, from customers,
to investors, to suppliers and, of course,
tolocal communities wherever we operate.
Employee volunteering remains embedded
in our culture, with 3,895 employee hours
supporting local communities this year
(FY2022: 4,784 hours). In our DE&I agenda,
we have a number of employee forums
to drive progress, with further detail on
page 55 of the Sustainability report. Our
Non-executive Director for Workforce
Engagement, Brendan Connolly, has
continued to engage with employees across
our global locations and a summary of this is
shown on pages 84 and 85. With our values
of Passion, Innovation and Performance
and our highly innovative culture, our focus
remains very clearly ondelivery.
Outlook
Overall, the Group is well placed for recovery
and growth. With a strong and diversified
core business, increasing commercialisation
in our mega-programmes, well invested
assets and incremental capacity, and the
opportunity for cash flow improvement,
ourinvestment proposition remains strong.
Dr Vivienne Cox DBE
Chair
5 December 2023
STRATEGIC REPORT
7
Annual Report 2023 Victrex plc
Our investment case
OUR LONG-TERM
GROWTHCREDENTIALS
By enabling environmental & societal benefits for our customers and the planet,
we arealigned to global megatrends, which in turn support our long-term
growth opportunities, underpinned by our strong financial position.
An innovative world leader:
building the PEEK/PAEK market
Read more online www.victrexplc.com
Strong pipeline of medium to
long-termgrowth opportunities
Mega-programmes Page 9 Our markets and megatrends Pages 10 and 11
Proportion of total R&D investment on
dedicated sustainable products or programmes
Highly cash-generative
businessmodel
Our business model Pages 12 and 13 Financial review Pages 24 to 31
Sector leading returns
Sustainable product goals
Sustainability report Pages 42 to 66
No.1
PEEK expert
>70%
Group revenue from sustainable products with
environmental and societal benefits by 2030 (from
55% today)
5
mega-programmes
40%
total R&D expenditure (including labour) tosupport
sustainable products as a proportion oftheGroup’s
total R&D expenditure
2
£30.1m
available cash
1
c.19%
Five-year average return on capital employed(‘ROCE’)
1
1 Alternative performance measures are defined in note 25.
2 This metric was updated in FY2023, with the previous metric based on project-based R&D investment to support
sustainableproducts as a proportion of project-based R&D investment, which is 92% in the current year (FY 2022: 89%).
STRATEGIC REPORT
Victrex plc Annual Report 2023
8
DELIVERING OUR GROWTHOPPORTUNITIES:
CORE BUSINESS AND ‘MEGA-PROGRAMMES
Victrex
TM
PEEK & PAEK
polymers:technology with
auniquecombination of
properties tounderpin
ourgrowthopportunities
Victrex
TM
PEEK’s success has been applying
the benefits of this technology to new
and ever growing applications, across a
number of industries. Our core polymer
business remains the bulk of our revenues
(the remainder as product forms, e.g.film,
composite tape or parts), with PEEK found
inmany mission-critical applications,
replacing metal and helping to enable
environmental and societal benefits.
Our core business offers the potential
of at least mid-single digit top-line
growth over the medium term, and
an addressable market more than 10x
current volumes. Thiscould be enhanced
towards double-digit growth over the
medium to long term, aided by new and
differentiated applications, and increasing
commercialisation in our game-changing
mega-programmes’. We are mindful of
execution risk and delivery of our strategy,
particularly reflecting the ‘disruptive’ nature
of our mega-programmes. The future
success of Victrex will be built on applying
our unique technology, and its benefits,
to a focused and growing portfolio of
applications, supported by our wellinvested
assets andgrowingcapabilities.
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
Mega-programmes*
Our five game-changing mega-programmes offer the potential of at least £50m revenue in their peak sales year. This year we chose to
prioritise investment in five specific programmes, with a goal of reaching £25m£35m of revenues from the portfolio in 2025 (from £11m
now). Three programmes – E-mobility, Trauma and Magma – are moving closer to inflection points, with major customers also investing,
technical proof delivered and the drive to greater commercialisation, with £10m of annual revenue closing in.
Mega-programme Magma (composite pipe)
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 (£1–£2m) Commercial (£6m) Commercial (<£1m) Commercial (c.£3m) Development (<£1m)
2. Annual
milestones
TechnipFMC new
Brazil pipe facility
Additional EV
business wins
In2Bones roll-out &
Paragon manufacturing
scale-up; >3,000
plates supplied
1st large scale
demonstrator parts
(Airbus Clean Sky 2)
46 patient implants, 10
past 2-year clinical phase;
Aesculap collaboration
3. Next milestones
Petrobras
bid outcomes
Enhanced
wire coating
adoption (FY2024)
Meeting initial demand,
customer launches and
revenue build (FY2024)
Qualifications
broadened to other
OEMs (ongoing)
Post-clinical phase
towards commercialisation
(FY2025)
4. Investment
requirements
Limited –
TechnipFMC
investing
Limited – Victrex
XPI
TM
patented
grade established
Modest – further
product development
investment
Limited – investment
through supply chain
Modest – further
industrialisation scale-up
5. Timeline to
£10mrevenue**
2–3 years ~2 years 2–3 years 2–3 years >3 years (based
on appropriate
regulatory pathway)
* Mega-programmes defined as offering at least £50m of revenue in peak sales year.
** Estimated.
STRATEGIC REPORT
9
Annual Report 2023 Victrex plc
Our markets and megatrends
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
39,000
Source: Airbus.
new passenger and freight
aircraft by 2040
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
10g 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 10g 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.
u
Majority of existing ICE applications translate across EVs (braking, powertrain and gears).
Electronics
30bn+
Source: Statista.
connected devicesby2030
(double current levels)
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; Semiconductor, mobile devices and home appliances.
u
Strong capability of PEEK in durability and thermal management.
u
Metal replacement supporting energy efficiency of devices and applications.
Energy &
Industrial
1%
Source: IEA.
global increase every year in
annual energy needs by 2040
Energy transition
u
Increasing demand for and depletion
of existing resources drive exploration
into uncharted territory, as well as the
energytransition and opportunities
inrenewable energy.
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 General Industrial, including food, robotics and opportunity
forPEEK following PFAS regulations.
MEDICAL
Medical
1520
seconds
Vision to treat a patient with Invibio
solutions every 15–20 seconds by 2027
(Victrex internal aspiration – from
current 2530 seconds)
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.
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
Opportunity for Medical revenues to become >30% of the Group by 2032.
STRATEGIC REPORT
Victrex plc Annual Report 2023
10
Visit www.victrexplc.com to seehow we are
shaping future performance in our markets
End markets Market opportunity Megatrends Increasing penetration of PEEK
SUSTAINABLE SOLUTIONS
Aerospace
39,000
Source: Airbus.
new passenger and freight
aircraft by 2040
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
10g 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 10g 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.
u
Majority of existing ICE applications translate across EVs (braking, powertrain and gears).
Electronics
30bn+
Source: Statista.
connected devicesby2030
(double current levels)
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; Semiconductor, mobile devices and home appliances.
u
Strong capability of PEEK in durability and thermal management.
u
Metal replacement supporting energy efficiency of devices and applications.
Energy &
Industrial
1%
Source: IEA.
global increase every year in
annual energy needs by 2040
Energy transition
u
Increasing demand for and depletion
of existing resources drive exploration
into uncharted territory, as well as the
energytransition and opportunities
inrenewable energy.
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 General Industrial, including food, robotics and opportunity
forPEEK following PFAS regulations.
MEDICAL
Medical
1520
seconds
Vision to treat a patient with Invibio
solutions every 15–20 seconds by 2027
(Victrex internal aspiration – from
current 2530 seconds)
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.
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
Opportunity for Medical revenues to become >30% of the Group by 2032.
STRATEGIC REPORT
11
Annual Report 2023 Victrex plc
Our business model
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.
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
strategy, and decarbonisation goals across all scopes, weseek to
minimise our use of resources, with the opportunity to utilise process
change or alternative fuels to support alignment to Net Zero emissions
by 2050 (goal subject to SBTi validation; 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.56% of revenue, and we
work withacademia and partners to bring new and enhanced
products toour customers and our end markets.
What we do
HOW WE CREATE VALUE
FROM OUR POLYMER
&PARTS STRATEGY
UN Sustainable Development Goals (‘SDGs’)
A SUSTAINABLE BUSINESS
WITHSUSTAINABLE PRODUCTS
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.
STRATEGIC REPORT
Victrex plc Annual Report 2023
12
How we create value
4. Manufacturing differentiation
Our Polymer & Parts strategy and unique
manufacturing process (Type 1 PEEK) differentiate
us from competitors, with >200 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 1,000 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
5. Capital, cost and cash generation
Our strong financial profile enables us to invest
(capex or M&A) in support of our Polymer & Parts
strategy. Cost efficiency and productivity is key, as
we focus on operating efficiency, supporting margin
and returns. With high value products, we seek to
retain a strong financial position. generating cash to
support further investment and shareholder returns.
6. Sales, marketing and
technical service
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 adoption of our materials.
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 20 and 21
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strong retention rate.
Read more on pages 20 and 21
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 8, 24 to 31
For communities
Engagement with our local communities
enables us to partner on a wide range
of social responsibility programmes.
Read more on pages 54 to 57
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 64 to 65
STRATEGIC REPORT
13
Annual Report 2023 Victrex plc
Strategy
NO.1 PEEK EXPERTS:
BRINGING TRANSFORMATIONAL
& SUSTAINABLE SOLUTIONS
Enabling environmental and societal benefit through Polymer & Parts
Underpin
u
Safety, health
andwellbeing
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
u
No.1 manufacturing capacity
ofc8,000 tonnes (UK
nameplatecapacity)
u
Enhance cost efficiency
u
Sustainability & productivity
Differentiate through
innovation
u
Commercialise application
development pipeline (MAR)
u
Invent and develop
newgrades
u
Increasedifferentiation &
support 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
revenues
u
Drive adoption with OEMs
and Key Opinion Leaders
(Medical)
u
Increase Medical contribution
STRATEGIC REPORT
Victrex plc Annual Report 2023
14
Strategic highlights in 2023
u
PBT in-line (with revised guidance) after challenging year, sales volume down 24%
u
55% of Group revenue from sustainable products which enable environmental
&societal benefits
u
Record Medical revenues, up 12% and broader application areas
u
Strong average selling prices, with ASP up 18%
Strategic highlights in 2023
u
6% of sales invested in R&D including 40% of total R&D supporting sustainable
products & programmes
u
First demonstrator structural parts for Airbus Clean Sky 2 programme
u
Collaboration with TechnipFMC for scale up of their Brazil facility forcomposite
pipe programme
Strategic highlights in 2023
u
New business wins in E-mobility & strategic partnership, driving revenues to £6m
u
Trauma plate demand exceeding expectations, closing on £1m revenue
u
Strong progress in PEEK Knee programme, 46 patients implanted, 10 post-two years
and collaboration with Aesculap (top five Knee company)
u
New China PEEK manufacturing facility ready, first sales in 2024
Strategic highlights in 2023
u
Strong safety performance: OSHA recordable injury rate 0.2 (85% lower than OSHA
industry average of 1.3)
u
3,895 employee hours supporting local communities and first STEM
ambassadors in China
u
19% of females in leadership roles and enhanced DE&I agenda
STRATEGIC PROGRESS
Drive
Core business
Differentiate
Through innovation
Create & Deliver
Future value
Underpin
Through safety, sustainability andcapability
1
2
3
4
STRATEGIC REPORT
15
Annual Report 2023 Victrex plc
DRIVE CORE BUSINESS GROWTH
u
Core growth of at least 5–7% CAGR over the
mid-term (revenue CAGR in five-year period)
MEGA-PROGRAMME UPSIDE
u
Upside opportunity to 810% CAGR driven
byincreasingmega-programme revenues
MEGA-PROGRAMME PORTFOLIO
u
Goal for total mega-programme revenues
tobe£25m£35min FY 2025
INCREASE MEDICAL REVENUES
u
Further broaden Medical revenues to be
>30% of Group revenues by 2032
OPERATING LEVERAGE
u
improving operating leverage supports
PBT growing faster than revenue
Growth targets
EVOLVING OUR STRATEGY:
A RETURN TO GROWTH
Overview of strategy
Jakob Sigurdsson
Chief Executive Officer
Target for mid-term growth
57%
revenue CAGR for core business
(upside to 8–10% CAGR with
increasing mega-programme
contribution; PBT upside potential,
with improved operating leverage)
Mega-programme revenues
£2535m
target for mega-programme
portfolio revenues in FY 2025
Dear shareholders,
After a very challenging period since 2020, and one of the toughest
periods on record for the entire chemical industry in 2023, we have
stayed the course and continued to invest. With an expected upturn
in the macro-economic environment set to benefit our mid-term
performance, your business remains well positioned to drive value
for all of our stakeholders. Our investments are already starting
to be realised, particularly in our mega-programme portfolio
of five potentially game-changing growth projects, all enabling
environmental and societal benefit. We also made very good
progress this year in price increases to reflect additional energy
andraw material costs. We go into the new financial year with
strong pricing, reflecting the value created through Victrex™ PEEK.
Strategic goals
Our strategy is to drive sustainable growth, catalyse adoption
and create value through Polymer & Parts – a strong core
polymer business, with a portfolio of game-changing ‘parts’
(ourmega-programmes). Sustainability is at the heart of our
business model, with lighter, faster to process materials that can
offer environmental or societal benefits, for example supporting
CO
2
reduction in Aerospace and Automotive; improving durability
and energy efficiency in Electronics; providing performance benefits
in Energy &Industrial; and supporting better patient outcomes
in Medical.
Delivering our strategy: new growth targets
Our new growth targets reflect a return to good mid-term growth
in our core business, with a reorganised structure to drive progress
in our opportunities, through Managing Directors for Sustainable
Solutions (formerly Industrial) and Medical, which follows the
retirement of Dr Martin Court, our Chief Commercial Officer.
The re-positioning of Industrial to Sustainable Solutions has been
driven by how we are increasingly demonstrating the technical,
environmental or societal benefits our products bring to customers.
STRATEGIC REPORT
Victrex plc Annual Report 2023
16
Complementing our core business progress
and new differentiated applications will
be execution on our mega-programme
portfolio. We have streamlined our portfolio
to focus on five game-changing projects
(see page 9), several of which are closing
oninflection points. Gears saw good growth
this year but is now overseen through our
core business as adoption grows.
Capital allocation policy
&shareholderreturns
Our capital allocation policy is primed
tocontinue investing for growthfirst and
foremost. Alongside this, growth will create
attractive opportunities for shareholders,
withthe ability to return excesscashvia
special dividends or share buybacks.
u
Investment for growth:
u
Capital expenditure of c.810% of sales
u
Periodic capacity expansion to
underpin market growth
u
M&A and other collaborations:
u
Investment in capability,
know-how or technology
tounderpinmega-programmes
u
Investment for potential
complementary technologies
u
Regular dividends:
u
Cash-generative business model –
supporting regular dividend
u
Progressive dividend policy: grow in
line with EPS (oncedividend cover is c.2x)
u
Special dividends and share buybacks:
u
Special dividends if no other uses
forcash (50p/share minimum)
u
Option of share buybacks for modest
cash balance (upto£25m buyback)
Strategic progress
Whilst recent years have seen material
investment into our business, whether in
assets, capability, know-how, or to drive
commercial adoption, this investment phase
is set to moderate, with an anticipated
improvement in cash flows, more modest
overhead investment and strong cost
discipline. This will support top and
bottom-line growth, building on good core
business progress and mega-programmes
starting to move closer towards £10m
revenues individually, particularly in
E-mobility, Trauma and Magma:
u
evolved Sustainable Solutions & Medical
structure to focus on growth;
u
streamlining of mega-programme
portfolio: prioritising investment in
five game-changing programmes
where there is a pathway to sizeable
commercial adoption;
u
key milestones delivered in Magma
(TechnipFMC investing in new Brazil
composite pipe facility); Trauma (scale-up
of Trauma plate partnerships and growth
ahead of expectations); and E-mobility
platform (new business on major car
brands and £6m revenue in FY2023); and
u
new China PEEK facility ready to support
first sales in FY 2024.
Overall, our Polymer & Parts journey is
aboutcatalysing adoption of PEEK/PAEK
andrelated technology, and capturing
increased value from each application
opportunity. We remain mindful of
execution risk and the adoption pathway,
whilst ensuring we have the capability and
protection through intellectual property (‘IP’)
– whether that be patents or know-how –
to deliver our strategy, and offering atotal
solution to ourcustomers.
Differentiation
Our differentiation comes in several forms.
Firstly, we have a unique strategy. Secondly,
we have a differentiated manufacturing
process, with a unique Type 1 PEEK,
complemented by a broader range of
polymer grades such as Type 2 product
(e.g.for China). Our backward integration
into key monomers also enhances this
differentiation. Thirdly, our innovation
spend, at c.56% of sales every year, is well
ahead of many competitors, as we invest
behind our core, our differentiated products
and our mega-programmes, all of which
drive sustainable revenue growth. Technical
service for customers and product lead
times also offer an advantage.
Sustainability: People, Planet
&Products
We focus our Sustainability & ESG strategy
around three pillars: People, Planet &
Products. Victrex™ PEEK has favourable
indicators for its lower carbon footprint
versus the industry average and compared
to many metals, following our lifecycle
analysis work completed last year. During
the year, despite several metrics being
adverse, we made further progress in
our Planet agenda (resource efficiency).
Wesubmitted targets to SBTi – theScience
Based Targets initiative – which includes
a decarbonisation roadmap of our assets
to reduce gas usage and CO
2
emissions,
covering Scope 1, 2 & 3, though we retain
some reliance on governmental directives
(e.g. electrical grid capacity) and technology
to deliver progress.
Safety and values
Fundamental to our success today and
in thefuture 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 three
years has seen an 83% reduction in our
recordable injury frequency rate (‘RIFR’)
to0.2 in FY 2023 (industry average 1.3
based on US OSHAstandard).
An innovative culture
Service for customers and delivering
withspeed and a sense of urgency are key
pillars in commercialising our future growth
opportunities. Diversity, Equity & Inclusion
(‘DE&I’) is also a key focus for us, with
long-term goals across this area. A number
of DE&I forums help ensure we listen to and
support employees, with our Engagement
Survey this year showing an engagement
score of 74% (up 5% from FY 2022).
Overall, Victrex has a long-standing culture
built on innovation and collaboration. This
drives disruptive change to create new
markets and sustainable revenue streams.
Our innovative culture is a key part of
our unique strategy and, together with
our values of Passion, Innovation and
Performance, provides a strong proposition
now, and into the future.
Jakob Sigurdsson
Chief Executive Officer
5 December 2023
The Group is well positioned for the coming years and the
opportunity to grow at double-digit rates overall, including
the mega-programmes. With anexpected upturn in the
macro-economic environment, well-invested assets and an
innovative global team, wewill drive value for ourcustomers,
investors and widerstakeholders.
Jakob Sigurdsson
Chief Executive Officer
STRATEGIC REPORT
17
Annual Report 2023 Victrex plc
Strategy and key performance indicators
How we performed in FY 2023
u
Results in line (revised guidance) after
challenging year
u
Volumes down 24%
u
Record Medical revenues
u
Strong average selling prices, up 18%
Focus for FY 2024
u
Return to growth (revenue & PBT)
u
Well placed for global recovery
u
First revenues from new China
PEEKfacilities
u
Focus on mid-term
marginimprovement
Link to risks
3 7 8
How we performed in FY 2023
u
Continued R&D investment at 6%
of revenue
u
New product sales of 7% of revenues
Focus for FY 2024
u
Grow new product sales above 7%
ofrevenues
u
Progress PEEK Knee clinical trial
towards commercialisation phase
u
Collaboration with TechnipFMC in
support of scale-up for their new
Brazil manufacturing facility
Link to risks
6 7
Revenue change %
-10%
R&D spend £m
£18.6m
6% of Group revenue
Definition
The year on year percentage change
in total revenue for the Group, in
live 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
The total Research & Development
spend that the Group has incurred.
Why it’s important
Research & Development spend
at56% of sales underpins ourability
to innovate into new applications,
supporting our futuregrowth.
Return on sales
1
%
26%
New products as a
% ofGroup sales %
7%
Definition
Profit before tax and exceptionals
asapercentage of total sales.
Why it’s important
Return on sales assesses the overall
profitability of the Group. The
measure reflects our discipline in
seeking growth opportunities which
maintain our sector leading returns.
Definition
Proportion of Group sales generated from
products that were introduced over the
past seven years (metric updated in FY
2023, with the prior year metric based on
new products not sold before FY 2014).
Why it’s important
New product sales (Vitality Index)
isa measure of how successful we
are in driving adoption of our new
product pipeline. This metric includes
new product grades and some
mega-programmes.
Drive core business
Differentiate through innovation
(10)
20
15
2119
11
(10)
22 23
(10)
36
20
30
2119
28
26
22 23
28
4
20
4
2119
6
7
22 23
5
18.0
20
15.5
2119
15.7
18.6
22 23
16.7
1 Alternative performance measures are defined in note 25.
STRATEGIC REPORT
Victrex plc Annual Report 2023
18
How we performed in FY 2023
u
Strong progress in E-mobility
programme; revenues of £6m
u
Aerospace composite structural
partsin demonstrator models;
multipleOEM collaborations
u
New China PEEK manufacturing
facilities ready to support first sales
u
Earnings per share
(reported) down 19%
Focus for FY 2024
u
Further grow E-mobility revenues
u
Progress Trauma revenues and
broaden customer scale-up
u
PEEK Knee collaborations across
multiple customers
u
Grow earnings per share
Link to risks
7 8
How we performed in FY 2023
u
0.2 OSHA recordable injury frequency
rate (85% lower than OSHA industry
average of 1.3)
u
Strong community and STEM agenda;
new Biodiversity partnership
u
100% of electricity sourced from
renewables for UK sites, 90% globally
Focus for FY 2024
u
Zero accidents and zero incidents
culture, building on existing progress
u
Start to execute on SBTidecarbonisation
plan across all scopes
u
Further grow sustainable product
revenues (target 70% by 2030 vs
55% in FY 2023)
Link to risks
1 2 4 5 6
Pipeline
mega-programmes
5
OSHA recordable
injuryrate
0.2
Definition
Number of pipeline projects offering
>£50m annual revenue potential in
peak sales years as communicated
from FY 2015 onwards.
Why it’s important
Our new product pipeline is key
todifferentiating our business,
andsupporting new revenue and
marginstreams.
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 2020.
Reported earnings
per share p
70.9p
Hours worked in
the community
3,895
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 social responsibility strategy is
keyto giving something back to the
communities where we operate, and
to supporting our talent strategy in
recruiting the employees of tomorrow.
Create & deliver future value
Underpin through safety, sustainability and capability
Principal risks
Pages 34 to 38
Key to KPIs
Financial KPI Non-financial KPI
Remuneration
Linked to Long Term Incentive
Plan (’LTIP) objectives
Linked to bonus
objectives
107.2
20
84.3
2119
87.6
70.9
22 23
62.6
7
20
7
2119
7
5
22 23
7
1.0
20
0.7
2119
0.2
0.2
22 23
1.3
20
2,570
2119
4,784
3,559
3,895
22 23
1,000+
STRATEGIC REPORT
19
Annual Report 2023 Victrex plc
Stakeholder engagement
KEY STAKEHOLDERS ANDHOWWEENGAGE
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
Zero accidents & zero incidents safety campaigns
andemployee survey
u
Global staff briefings (quarterly), CEO Awards,
DE&Igroups, eg 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
u
Improving safety performance since FY 2020, 83% lower RIFR rate
u
37 Professional Development Awards & 57 CEO Awards; 56 employees
on Victrex apprenticeships
u
Progression of DE&I workshops and forums, including Gender
Engagement Network & Strategic Inclusion 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
Global activity plan for Non-executive Director for Workforce Engagement
Customers
u
Solutions-driven culture
u
Sustainable products supporting CO
2
reduction
u
Quality and regulatory support
u
Technical service offering
u
Collaboration across the supply chain
u
Price increases delivered to reflect cost inflation
u
China manufacturing to underpin new revenues
u
New Sustainable Solutions and Medical commercial
structures
u
Direct Sales and On Demand teams
u
Quality and Regulatory teams
u
Supply and development contracts
u
Through sales teams and at VMT level asappropriate
u
Record Medical revenues and new application growth
u
2% increase in Mature Annualised Revenue opportunity for core business
u
Good progress on inflation recovery, ASP up 18%
u
Investment in Medical acceleration and China
u
Further development collaborations in Automotive, Aerospace
and Medical
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, 180+ meetings hosted (virtualand
face to face)
u
Access to investors in UK, US, Canada and Europe
u
Engagement through major investor conferences
u
Diversification of investor base: North American shareholding now c30%
u
Access to ethical investment funds 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
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 partnership
u
STEM Ambassadors, schools and colleges
u
Local employment & Business in the Community
u
90% of electricity from renewable sources & 100% for all UK sites
(including our own solar generation)
u
Maintained positive scoring across ESG benchmarks e.g. EcoVadis Gold,
MSCI ‘A’rating, FTSERussell Green Revenues Index & Apple Clean
EnergySupplierprogramme
u
Submission of SBTi target aligned to Net Zero across all scopes
of emissions
u
Global volunteering including 3,895 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, eg Environment Agency
u
Certified bodies and trade organisations
u
Cross-industry collaborations
u
Environment Agency and NGOs
u
Maintained strong SHE performance including OSHA recordable
injuryrate at 0.2 (industry average 1.3)
u
New polymer grades and materials assessed through collaboration
with academia
u
3D printing alliances and government funded projects
u
Hazardous waste 55% lower since 2013 per unit of revenue
Why we engage
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 Carbon Net
Zero aspiration by 2050 across all 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. 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.
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 AGM, site
visits or investor conferences. Reflecting
our increasingly diverse shareholder base
(with approaching 50% of share ownership
outside the UK, including nearly one third
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.
STRATEGIC REPORT
Victrex plc Annual Report 2023
20
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
Zero accidents & zero incidents safety campaigns
andemployee survey
u
Global staff briefings (quarterly), CEO Awards,
DE&Igroups, eg 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
u
Improving safety performance since FY 2020, 83% lower RIFR rate
u
37 Professional Development Awards & 57 CEO Awards; 56 employees
on Victrex apprenticeships
u
Progression of DE&I workshops and forums, including Gender
Engagement Network & Strategic Inclusion 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
Global activity plan for Non-executive Director for Workforce Engagement
Customers
u
Solutions-driven culture
u
Sustainable products supporting CO
2
reduction
u
Quality and regulatory support
u
Technical service offering
u
Collaboration across the supply chain
u
Price increases delivered to reflect cost inflation
u
China manufacturing to underpin new revenues
u
New Sustainable Solutions and Medical commercial
structures
u
Direct Sales and On Demand teams
u
Quality and Regulatory teams
u
Supply and development contracts
u
Through sales teams and at VMT level asappropriate
u
Record Medical revenues and new application growth
u
2% increase in Mature Annualised Revenue opportunity for core business
u
Good progress on inflation recovery, ASP up 18%
u
Investment in Medical acceleration and China
u
Further development collaborations in Automotive, Aerospace
and Medical
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, 180+ meetings hosted (virtualand
face to face)
u
Access to investors in UK, US, Canada and Europe
u
Engagement through major investor conferences
u
Diversification of investor base: North American shareholding now c30%
u
Access to ethical investment funds 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
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 partnership
u
STEM Ambassadors, schools and colleges
u
Local employment & Business in the Community
u
90% of electricity from renewable sources & 100% for all UK sites
(including our own solar generation)
u
Maintained positive scoring across ESG benchmarks e.g. EcoVadis Gold,
MSCI ‘A’rating, FTSERussell Green Revenues Index & Apple Clean
EnergySupplierprogramme
u
Submission of SBTi target aligned to Net Zero across all scopes
of emissions
u
Global volunteering including 3,895 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, eg Environment Agency
u
Certified bodies and trade organisations
u
Cross-industry collaborations
u
Environment Agency and NGOs
u
Maintained strong SHE performance including OSHA recordable
injuryrate at 0.2 (industry average 1.3)
u
New polymer grades and materials assessed through collaboration
with academia
u
3D printing alliances and government funded projects
u
Hazardous waste 55% lower since 2013 per unit of revenue
Strategy and KPIs
Pages 18 and 19
Key to strategy
Drive core business
Differentiate through
innovation
Create and deliver
futurevalue
Underpin through
safety,sustainability
andcapability
STRATEGIC REPORT
21
Annual Report 2023 Victrex plc
Stakeholder engagement continued
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
2023, 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 72 to 83;
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
84 and 85;
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 42;
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 83 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 72 to 83
of the Corporate governance report. The
matters we have discussed and debated
during the year are set out on pages 79 to
82 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 of the Companies Act
2006 in their decision making.
HOW THE BOARD CONSIDERS &
ENGAGESWITH STAKEHOLDERS
Doubling down on growth
During FY 2023 (and effective from FY 2024), the Board
considered key internal and external stakeholders as part of
reorganising our structure, to reflect the retirement of our
ChiefCommercial Officer.
With our business areas of Sustainable Solutions and Medical,
we created two distinct Managing Director roles, one externally
recruited and one internally promoted, enabling us to double
down on growth, whilst reflecting the shared resources required
from other functions (for example R&D).
The goal is to continue operating as One Victrex, but to ensure
that we have accountability and licence to deliver growth and
can allocate resources at business area level. This sets us up to
ensure that we can focus on growth first and foremost, whilst
tightly managing resources and costs. It also reflects our goal
of growing the proportion of Medical revenues as part of the
Group over the longer term, further unleashing our Medical
business as the application portfolio across Spine and non-Spine
broadens our opportunities.
Board consideration included:
u
the opportunity for internal development as our Chief
Commercial Officer retired, ensuring that we maximised
ourtalent pool and succession planning;
u
the balance of resources required to effectively support
and drive growth from our two business areas. This was
particularly relevant for Medical, which we are seeking to
become a greater share of Group revenues and ensuring
it is set up to deliver on the broader range of growth
opportunities we have been progressing;
u
recognition of our external stakeholders and the rationale for
two distinct leadership teams at business area level – and the
rationale for key stakeholders including customers, suppliers
and investors;
u
ensuring an effective search process for a Managing Director,
Sustainable Solutions. Whilst not a Board level role, an internal
and external search was conducted, with the external
appointment of Michael Koch, a former CEO of Mitsubishi
Chemicals Advanced Materials; and
u
overall, the evolution of our business areas as Sustainable
Solutions and Medical give a clear licence to drive and
execute our growth programmes, to allocate appropriate
resources and to manage costs in support of growing sales
and ultimatelyimproving profitability and margin.
STRATEGIC REPORT
Victrex plc Annual Report 2023
22
Sustainability:
alternative fuels
& technologies
Playing our
partthrough
decarbonisation
With growing ESG credentials – as recognised by
ESG rating agencies such as MSCI, FTSE Russell’s
Green Revenues Index, or being part of Apple’s
Clean Energy Supplier programme – our focus
across the three ESG pillars of People, Planet &
Products is well developed.
Whilst our positive impact on society through
our sustainable products is clear, for example
in supporting CO
2
reduction or improving
patient outcomes, our Planet agenda (resource
efficiency) – how we manage our resources
across our global footprint – has been a topic at
the top of the Board’s agenda. Through FY2023,
the Board has spent significant time on our
decarbonisation strategy. With a Science Based
Targets initiative (‘SBTi’) commitment, the Board’s
assessment included:
u
whether our commitment to submitting a
decarbonisation plan aligned to an SBTi target
remained relevant to all of our key stakeholders;
u
consideration of the increased capital,
increased operating costs and CO
2
saving
returned through our suite of options,
balancing investment with ongoing
profitability improvement;
u
consideration of the impact and benefits
toourstakeholders, for example, for
customers,in demonstrating our credentials
and aspiration for ‘the greenest PEEK’; for
investors, balancing decarbonisation with
profitability; and for suppliers, to develop
greater alignment of their decarbonisation
plans with ours (particularly relevant for
Scope3emissions;
u
timing of key investments, including whether
deferring investment until new technology or
access to alternative fuels such as hydrogen
may become available; and
u
the Board also considered the need to lobby
for greater access to alternative fuels and
collaborate in exploring alternative chemistry,
including joining with other stakeholders in
the UK and elsewhere, establishing links with
MPs and local government officials.
After consideration for all stakeholders, a plan
and targets were submitted at the end of our
financial year to SBTi for validation. We expect to
communicate more fully on the decarbonisation
roadmap and options in FY 2024 once SBTi has
reviewed the specific detail. These targets are
across all scopes (1, 2 & 3) and in line with the
Paris Agreement for Net Zero emissions in 2050.
STRATEGIC REPORT
23
Annual Report 2023 Victrex plc
Financial review
PROFITS IN LINE &
RECORD MEDICAL REVENUES
Ian Melling
Chief Financial Officer
Group revenue
£307.0m
-10% vs FY 2022
Underlying profit before tax
£80.0m
-16% vs FY 2022 (in line with
revisedguidance)
Operating review
Volume and revenue down, despite
record Medical performance
With a continuing challenging trading
environment during the second half, full
year Group sales volume of 3,598 tonnes
was 24% down on the prior year (FY 2022:
4,727 tonnes). In line with similar declines
seen across the Chemical sector, the Group
delivered full year revenue of £307.0m,
which was down 10% (FY 2022: £341.0m).
In constant currency
1
Group revenue was
13% down on the prior year.
H2 2023 volume and revenue
Trading in the final quarter (Q4) remained
similar to Q3, resulting in a H2 2023 sales
volume of 1,657 tonnes (H2 2022: 2,463
tonnes), with H2 2023 revenue of £144.8m
down 20% (H2 2022 revenue: £180.9m).
With the weaker macro-economic
environment impacting several end markets,
our FY 2023 result was achieved through
a combination of a strong focus on pricing
and cost discipline, including minimising
discretionary spend and deferral of certain
recruitment. Investment was sustained in
our priority areas of Medical and innovation
to support differentiated applications or
mega-programme commercialisation.
Divisional performance
Despite weakness across several end
markets in our Sustainable Solutions
(formerly Industrial) area, primarily
Electronics, Energy & Industrial, and our
Value Added Resellers (‘VAR’), we saw
a good performance in Aerospace, with
volumes up 20% as build rates increase,
together with new application growth.
VAR was the weakest area, with volumes
down 39%, driven by destocking and weak
demand. Whilst Automotive volume was
stable (and up in revenue terms), we note
that 2024 market indicators support the
opportunity for growth, with car sales set to
increase by 1–3% (‘S&P, November 2023).
Revenue in Sustainable Solutions was down
14% at £241.8m (FY 2022: £282.7m).
Medical revenues of £65.2m were a record
and increased by 12% compared to the
prior year (FY 2022: £58.3m), driven by
broad-based application growth. Across
our core business of Spine, Arthroscopy
andCranio-maxillo facial (‘CMF’), we
continue to see good growth opportunities,
with support from increasing penetration
in Cardio, Orthopaedics and Drug Delivery.
Our non-Spine area represents the most
significant growth opportunity, as PEEK’s
inert nature and strong biocompatibility
drive increased application usage. Revenues
in Medical are now 46% Spine and 54%
non-Spine. Growth was broad based
by region, with Asia driving the highest
revenue growth of 31%.
Strong ASP driven by pricing & sales mix
FY 2023 saw good progress in recovering
the significant energy and raw material
inflation seen over the past two years.
Average selling prices (‘ASP’) increased by
18% to £85.3/kg, driven by price increases,
The Group is well placed
andisexpecting to deliver
good revenue and profit
growth in FY 2024, subject to
a macro-economic recovery.
Ian Melling
Chief Financial Officer
sales mix and currency. The overwhelming
majority of price increases were achieved via
structural price increases. For FY 2024, we
anticipate average selling prices will remain
comfortably in excess of £80/kg. This reflects
some expected recovery in end markets
within Sustainable Solutions, which will
result in a slightly less favourable sales mix.
Sales from new products now7%
Our measure of sales from new products
increased to 7% of Group revenue (FY 2022:
6%). From FY 2023, this metric was based
on new products and grades (including
some mega-programmes) introduced over
the past seven years, rather than from
FY2014. Recent examples of new product
grades include Victrex XPI™ polymer for
E-mobility and Victrex PC101™, a medical
grade for use in drug delivery devices.
Going forward, our priority will be on
measuring our newly introduced goal of
mega-programme portfolio revenues.
1 Alternative performance measures are defined in note 25.
STRATEGIC REPORT
Victrex plc Annual Report 2023
24
Mega-programme highlights: investment
prioritised & streamlined portfolio
With several programmes on their journey
towards £10m revenue per annum
(Aerospace, E-mobility, Magma and
Trauma), we have chosen to prioritise
investment in five key programmes to
enhance strategic progress. This also ensures
that we measure appropriate investment,
resource and capability in orderto improve
our returns.
PEEK Gears continues to see good growth
and opportunities across ICE and EV
platforms, but as the focus is now on
progressing adoption, it will no longer
be defined as a mega-programme as we
prioritise investment in E-mobility and
elsewhere. PEEK Gears delivered growth
to £6m revenue this year (vs over £4m
in FY 2022). Having successfully seeded
the market, it also reflects that the route
to market is via both parts manufacture
and polymer resin-based sales, where a
third-party manufacturer would build the
final component, based on Victrex design,
development and know-how. As a result
there has been no significant change in the
overall portfolio value, with several mega-
programmes offering revenue potential
of significantly more than £50m per year
(e.g. Knee).
Key highlights in our mega-programme
portfolio include:
Our E-mobility mega-programme platform
isbased on specific electric vehicle
applications and drove the most growth
ofallmega-programmes during the year,
with business wins specifically focused on
wire coating and other applications. This
programme delivered revenue of £6m this
year, with better than expected progress as
our materials supported major car brands.
This mega-programme includes Victrex XPI™
grade, which enables coatings of tightly
wound electric wires for existing and
primarilynext generation high voltage
vehicles (800volt batteries and applications),
where higher performance is required.
Compared to previous enamel coatings,
Victrex XPI™ is extruded onto the copper
andrequires less energy in the process,
supporting 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 10g today). We are
collaborating with multiple customers, and
signed a strategic collaboration agreement
with Well Ascent, a major wire coating
manufacturer, supplying into European, Asian
and US car manufacturers, including existing
Chinese models. Continued growth in
E-mobility is expected during FY 2024,
withthe potential for £10m revenue within
two years.
In our Magma composite pipe programme
for the energy industry, we saw close
collaboration with TechnipFMC and a team
from the end customer in Brazil, including
detailed technical and commercial meetings
hosted at our UK facilities. The primary focus
is supporting TechnipFMC to accelerate the
significant opportunities for thermoplastic
composite pipe in deepwater oil & gas fields
in Brazil, with lightweighting, durability, a
reduced carbon footprint during installation,
and ease of manufacturing being key
parts of the proposition. Multiple field
opportunities are being targeted in Brazil,
requiring alternative solutions to existing
performance issues with metal-based pipes.
PEEK based Hybrid Flexible Pipe (‘HFP’)
is seen by TechnipFMC as the most cost
effective riser solution, with TechnipFMC
constructing a new pipe extrusion facility in
Brazil, incorporating Victrex’s pipe extrusion
know-how. We continue to await outcomes
on existing bids by TechnipFMC, utilising
this technology, which offers the potential
for a step-up in volume from 2025. This
programme offers good mid-term potential
towards £10m annual revenues, with the
next key milestone being bid outcomes.
In Trauma, we saw a significant step-up
in demand post-FDA approval and launch,
with revenues building towards £1m this
year, and further expected growth in the
coming years. This was primarily driven
by our partnership with In2Bones (part of
CONMED) and other customers for PEEK
composite Trauma plates, supporting
fracture fixation, including in foot and ankle
plates. Over 3,000 Victrex manufactured
trauma plates were supplied for implants.
Studies show an enhanced union rate using
PEEK composites rather than titanium-based
plates. Victrex manufactures the PEEK
composite-based trauma plates in house,
or via our partner, Paragon Medical, which
will toll manufacture in China, supporting a
growing customer base in the US, Asia and
globally. This programme has the potential
for double-digit revenues within the next
two to three years.
In our Aerospace Composites programme,
which combines the programmes for smaller
composite parts, larger structural parts
and interior applications, we are advancing
qualifications with OEMs, including Airbus and
Boeing, and tier companies as thermoplastic
composites based on PEEK are validated
and qualified. Major structural parts include
for wings, engine housing and fuselage.
The potential PEEK content per plane is at
least 10 times current levels, with large scale
demonstrator parts being exhibited and
advancing through qualification programmes.
We have also broadened the number of
customers we are working with as part of
this programme, beyond the Airbus Clean
Sky 2 programme, reflecting the significant
opportunity for light weight and easily
processed PEEK composite materials. In both
structural and smaller composite-based parts,
our AE™250 composite tape is integral to
these opportunities. Smaller
composite parts
currently being used on aircraft
include for use
in seat pans and door brackets. Revenue for
these programmes inFY 2023 was nearly
£3m, with the potential opportunity to
increase to £10m inthe next two to three
years, with good long-termprospects.
In our PEEK Knee programme, we saw
particularly strong progress. We are working
with Maxx Orthopaedics, our partner in
the clinical trial across Belgium, India and
Italy, as well as Aesculap (part of B Braun),
a top 5 global knee company. We also have
interest in the progress of PEEK Knee from
other top 10 organisations. 46 patients
to date have been implanted with a PEEK
Knee, including ten patients who passed
the two-year stage with no intervention,
which is particularly encouraging. Both of
these companies, supported by our Medical
business, are focusing on the route to
early commercialisation. Our offering has
also expanded beyond a cemented PEEK
Knee implant, to include cementless and
tibia options, which enables us to offer a
broader suite of customer solutions. The
next milestone is targeted as commencing
a US clinical trial during FY 2024. Early
assessment suggests the opportunity of
first sales within two to three years, subject
to the appropriate regulatory pathway.
PEEK Knee remains the largest of our
mega-programme opportunities by annual
revenuepotential.
Innovation investment
Our new innovation investment during
FY2023 was primarily supporting our
Medical Acceleration programme. This
includes an investment in our New Product
Development (‘NPD’) Centre in Leeds, UK,
to support new roles and capability. R&D
investment was higher this year at £18.6m
(FY 2022: £15.7m), representing 6% of
revenues on afull year basis, with the higher
percentage reflecting incremental investment
and lower revenues. Our total R&D
investment in dedicated sustainable products
or programmes as a proportion of total R&D
investment increased to 40% (FY2022: 35%),
which reflects our broad portfolio of
sustainable programmes. This metric has
been updated from prior disclosures, which
measured project-based (non-labour) R&D
spend in sustainable programmes (92% for
FY 2023 vs 89% for FY 2022), rather than
total R&D spend. A level of 40% of total R&D
investment in dedicated sustainable products
or programmes underlines our focus in this area.
Financial review
Gross profit down 7%
Gross profit was down 7% at £162.6m
(FY2022: £174.5m), primarily driven by
lower sales. Energy costs eased, yet raw
materials remained relatively high. We also
incurred some under-absorbed fixed costs
(totalling approximately £3m) as a result
of lower production volumes compared
to FY2022 (production volumes 9%
lower). ForFY 2024, we anticipate some
modest benefit from lower input costs,
offset by start-up and under-utilised asset
costs in China (including costs moving
from overheads to COGs) and lower asset
utilisation (UK and China), as we start
to gradually unwind inventory from its
high level.
STRATEGIC REPORT
25
Annual Report 2023 Victrex plc
Financial review continued
Financial review continued
Gross margin slightly ahead
Full year Group gross margin of 53.0% was
180 basis points (‘bps’) ahead of FY2022
(FY2022: 51.2%), supported by improved
pricing and a favourable sales mix. Second
half Group gross margin of 52.4% was
slightly below the first half, impacted by
lower asset utilisation and the corresponding
impact on under-absorbed fixed costs.
Theimpact from losses on forward hedging
contracts was also higher than the prior year.
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 2024, we
anticipate Group gross margin will be slightly
lower than the prior year, reflecting start-up
costs in China and lower asset utilisation
as we start to unwind inventory over the
next two years. Currency also impacts
gross margin.
Gains & losses on foreign currency
nethedging
Fair value gains and losses on foreign
currency contracts in FY 2023 were a loss
of £7.6m (FY 2022: loss of £2.8m), largely
from contracts where the deal rate obtained
in advance was unfavourable to the average
exchange rate prevailing at the date of the
related hedged transactions, following the
devaluation of Sterling from mid H2 2022.
The corresponding spot rate benefit is
largely seen in the revenue line.
Currency tailwind in FY 2023
FY 2023 saw a currency tailwind of
approximately £3m at profit before tax (‘PBT’)
level, with most of this coming in the first
half, prior to Sterling recovering. At this early
stage, spot rates show currency for FY 2024
tracking as a modest headwind. This is prior
to the impact of hedging, with gains and
losses on foreign currency net of hedging
tracking as a small gain. We are mindful
of unhedged currencies – predominantly
in Asia – which are 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. Our hedging policy is kept under
review, for duration of hedging, level of cover
and specific currencies. 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 12-month period.
Operating overheads
1
up 5%;
H2overheads down 14%
Operating overheads, which exclude
exceptional items of £7.5m, increased to
£81.9m (FY 2022: £78.1m) driven primarily
by higher innovation spend (R&D is now
separately disclosed on the face of the
income statement), with targeted R&D
investment commencing last year, primarily
to support Medical acceleration. We also
saw wage inflation and targeted cost of
living payments to support global employees
at certain grades.
We also incurred costs to support the
commercial ramp-up for our new China
PEEK facilities. This facility will underpin
further commercial growth in this region
over the coming years, driven by new
polymer grades to meet existing and
new demand. Following commissioning
and production of first PEEK, we will
start to ramp up and support revenues
inearly 2024.
Pleasingly, second half operating overheads
were down 14% compared to H1 2023 (and
down 9% vs H2 2022), which reflects strong
cost discipline and the impact of no accrual
for bonus, as profits fell.
Going forward, our intention is to ensure
investment remains targeted and to deliver
an appropriate return. Operating overheads
are therefore expected to show only limited
increases for FY 2024, including the effect
of wage inflation and bonus accrual.
Underlying PBT down on weaker
trading environment
Underlying PBT of £80.0m was in line with
our revised guidance and down 16% on the
prior year (FY 2022: £95.6m).
Reported PBT reduced by 17% to £72.5m (FY
2022: £87.7m). This reflects exceptional items
of £7.5m (FY2022: £7.9m), representing the
cost of implementing a new ERP software
system, the majority of which hasbeen
incurred. The implementation will be
substantially completed during 2024.
Earnings per share down 19%
Basic earnings per share (‘EPS’) of 70.9p
was 19% down on the prior year (FY 2022:
87.6p per share), reflecting the decline in
PBT. Underlying EPS was down 18% at
77.7p (FY2022: 95.0p).
Taxation
Victrex continued to benefit from the
reduced tax rate on profits taxed under the
UK Government’s Patent Box scheme, which
incentivises innovation and consequently
highly skilled Research & Development
jobs within the UK. Net taxation paid was
£2.0m (FY 2022: tax paid of £10.6m),
with the effective tax rate of 15.9% (FY
2022: 13.9%) being slightly higher due to
the increase in UK corporation tax and a
lower proportion of profits being eligible
for the patent box rate. Our mid-term
guidance for an effective tax rate has
slightly increased to approximately 13–17%,
primarily reflecting the increase in the UK
Corporation tax rate from 19% to 25% from
1 April 2023. We continue to monitor global
taxationdevelopments.
Strong balance sheet
With a range of global customers across our
end markets, customers recognise and value
our strong balance sheet, and our ability
to invest and support security of supply.
Net assets at 30 September 2023 totalled
£501.0m (FY 2022: £490.6m).
Return on capital employed (ROCE) and
return on sales (ROS) are focus areas for
the Group. After a period of investment in
people, capability and assets, we have the
opportunity to improve operating leverage.
Return on sales is a specific KPI we are
seeking to improve, having reduced to
26%in FY 2023 (FY 2022: 28%).
Inventory higher due to softer demand;
opportunity for unwind
For FY 2023, we were required to rebuild
rawmaterial inventories to safety stock
levels, to support security of supply for
customers. Several raw materials had run
below or close to safety stock levels during
the pandemic, with supply chains impacted.
During the year, we also built inventory
to reflect planned engineering work in
H1 2024, which is required as part of our
UK Asset Improvement programme and
assetshutdowns.
With the weaker trading environment
persisting during the second half, total closing
inventory was higher than expectations at
£134.5m (FY 2022: £86.8m), which also
includes the impact of higher energy and raw
material costs. Upon completion of our UK
Asset Improvement programme in early 2024,
we have the opportunity to start unwinding
inventory over the next 1 - 2 years.
First PEEK in China; commercial
ramp-upinFY2024
With commissioning concluding, including
the successful production of first PEEK prior
to commercial start-up, we will be ramping
up production from early 2024. The China
facility, PVYX, will enable us to broaden
our portfolio of PEEK grades, including a
new Elementary type 2 PEEK grade, as well
as target a number of key end-markets,
particularly Automotive, Electronics and
VAR. Close collaboration with customers
continues, in support of their own growth
plans in China. We also invested in some
additional capability within China to support
customers, for example in compounding.
With a strong sales and supply chain team,
our technical centre in Shanghai, and
our new manufacturing assets, we are
underpinning our future growth.
Capital expenditure set to reduce
Growth investment remains the priority,
with cash capital investment during the year
of £38.5m (FY 2022: £45.5m), of which a
significant proportion was to support our
China manufacturing investments. A large
proportion of the China investment was
funded through utilisation of the Group’s
China banking facilities.
STRATEGIC REPORT
Victrex plc Annual Report 2023
26
Other investments included our UK Asset
Improvement programme (we anticipate
this will be approximately £15m in total,
with some spend already completed
and a further £5m in FY 2024). This UK
investment will support increased capacity
due to batch sizes and faster cycle times,
offering a total nameplate capacity in excess
of 8,000 tonnes (approximately 1,000
tonnes of additional capacity gained from
this investment). This supports growth
for the years ahead and is particularly
key in engagement with major OEMs for
high volume opportunities in Aerospace,
Automotive and the Magma programme.
After conclusion of these investments,
weseea limited need for sizeable polymer
capacity in the medium term, which will drive
lower capital expenditure. Overall capital
expenditure for FY 2024 is expected to
be approximately £30m–£35m, or 810%
of revenues. Over the medium term, this
will include increased ESG related capital
investment in our manufacturing facilities,
to support decarbonisation. Current ESG
related capital expenditure remains small and
is primarily for our continuous improvement
(‘CI’) activities. Our increased capacity is
expected to enhance asset efficiency.
Cash flow
Cash generated from operations was £42.9m
(FY 2022: £90.7m), giving an operating
cash conversion
1
of 18% (FY 2022: 49%).
This was driven by the weaker trading
environment and increased inventory. We
expect to see an improvement on operating
cash conversion in FY 2024.
Cash and other financial assets at
30September 2023 was £33.5m (FY2022:
£68.8m). This lower cash position reflects
weaker demand and high capital expenditure
for completion of our China manufacturing
investments. It also includes £3.4m ring-fenced
in our China subsidiaries (FY 2022: £2.8m)
and other financial assets of £0.1m,
representing cash which was held in deposit
accounts greater than three months in
duration (FY2022: £10.1m).
With utilisation of the Group’s China bank
facilities – put in place during the investment
phase in new China manufacturing assets
– borrowings (current and non-current)
at 30 September 2023 were £39.7m
(FY2022: £22.5m).
In Bond 3D, which is making good progress
in porous PEEK spinal cages for medical,
with regulatory approval planned in FY
2024, we committed a further £2.9m in
convertible loan notes during the year. This
takes the total carrying value of assets in
Bond 3D to £18.8m (FY 2022: £17.0m).
Further investment is required to complete
the development phase and fund through
to cash break-even, with the Bond board
targeting new investors during 2024.
In February 2023 we paid the 2022 full
year final dividend of 46.14p/share at a
cash cost of £40.1m and in July 2023 paid
the interim dividend of 13.42p/share at a
cash cost of £11.7m. After the year end,
theGroup renewed its UK banking facilities,
increasing the level of facilities to £60m
(£40m committed and £20m accordion), to
reflect higher inventory and provide support
against the softer trading environment.
Thefacility expires in October 2026.
Dividends
Despite the weaker trading environment
during the year, the Board is proposing
to maintain the final dividend at 46.14p/
share (FY 2022: 46.14p/share), which
reflects the Group being well placed for
a macro-economic recovery. Underlying
dividend cover
1
was 1.3x (FY 2022: 1.6x).
The Group intends to grow the regular
dividend in line with earnings growth once
dividend cover returns closer to 2x.
Capital allocation; share buybacks a
consideration, alongside special dividends
Whilst growth investment remains
the focus for the Group, we note the
income attractions of Victrex, with a
cash-generative business model. We
continue toreview a number of potential
investment opportunities, particularly in
Medical as we see significant opportunities
to enhance ourportfolio.
Following engagement with shareholders
during the year, share buybacks are now
included as anoption for future shareholder
returns, alongside special dividends, within
our capital allocation policy. Reflecting
the liquidity of Victrex shares, any future
buyback programme is likely to require
a lower cash level than that required for
special dividends. Current cash resources
would not support a sufficient buyback
programme at this time, although we note
the prospect of improving cash flows as
capital expenditure reduces and inventory
levels come down.
Mid-term growth targets
Our new mid-term core growth targets
5–7% CAGR on revenue in the five-year
period of our strategic plan. This is broadly
inline with our performance on sales volume
since 2015 (excluding Consumer Electronics).
These targets reflect the opportunity from
amacro-economic recovery in our core
business, with the ability to grow faster
thanthe wider market through new and
differentiated applications, including growth
in China. Asour mega-programmes further
increase their commercialisation, whilst
noting growth rates will be influenced by
thetiming of milestones and the adoption
pathway, we see upside potential towards
double-digit growth (810%). With improved
operating leverage and more modest
investment expected, PBT has the
opportunity to grow faster than revenue.
We are also targeting £25m-£35m of
revenues from mega-programmes in FY 2025
(current mega-programme revenues of £11m,
which excludes £6m of Gears revenue).
Outlook – a slow start but well
placed for recovery & growth
The Group is expecting good progress in
revenue and PBT for FY 2024, subject to
an improving macro-economic outlook.
Volumes have the potential for double-digit
growth although, at this early stage, we
have yet to see signs of a macro recovery,
with a slow start to our typically seasonally
weak Q1. Consequently, growth is expected
to be second half weighted, which is
consistent with some end-market indicators
pointing to improvement during 2024.
Demand continues to be soft in Electronics,
Energy & Industrial and VAR. Automotive
and Aerospace remain positive, with Medical
also expected to deliver full year growth.
Input costs are tracking lower year on year,
although the potential for energy volatility
remains. Within operating overheads, we
expect only limited increases, despite wage
inflation and bonus accrual. However, the
effect of lower asset utilisation and start-up
costs in China will have some effect on
our cost of manufacture and gross margin.
Inrelation to currency, whilst spot rates imply
a headwind, our hedging will offset this
impact to PBT.
Overall, the Group is well placed for recovery
and growth. With a strong and diversified
core business, increasing commercialisation
in our mega-programmes, well-invested
assets and incremental capacity, and the
opportunity for cash flow improvement,
ourinvestment proposition remains strong.
1 Alternative performance measures are defined in note 17.
2 Other internal metrics are defined below.
‘China for China’: part of our team in China, supporting new PEEK
manufacturing facilities dedicated to growth in China
STRATEGIC REPORT
27
Annual Report 2023 Victrex plc
Operating review
SUSTAINABLE
SOLUTIONS
Victrex’s divisional performance is reported
through Sustainable Solutions (formerly
Industrial) and Medical. The re-positioning
of Industrial to Sustainable Solutions has
been driven by how we are increasingly
demonstrating the technical, environmental
or societal benefits our products bring
tocustomers.
The Group continues to provide an end-
market based summary of its performance
and growth opportunities. Within Sustainable
Solutions end markets, we have Electronics,
Energy & Industrial, Value Added Resellers
(‘VAR’) and Transport (Automotive
&Aerospace).
Core business application pipeline
Despite a challenging macro-economic
environment, we continue to build our core
business growth pipeline, to support PEEK’s
use in a range of applications, driven by its
lightweighting, durability, chemical and heat
resistance, or other properties.
Mature Annualised Revenues (‘MAR’),
which reflect the pipeline of incremental
opportunities in the core business, was
robust at £300m (FY 2022: £294m). This
number assumes all targets are converted.
Automotive and Medical opportunities
Sustainable Solutions revenue
£241.8m
-14% vs FY 2022, -17%* vs FY 2022
Sustainable Solutions gross profit
£110.5m
-11% vs FY 2022, -14%* vs FY 2022
* Constant currency.
showed the highest year on year growth,
reflecting the broader range of applications
within these end markets.
Weaker end markets driving
revenue down 14%
The Sustainable Solutions division saw
revenue of £241.8m (FY 2022: £282.7m),
down 14% on the prior year, with a decline
across Electronics, Energy & Industrial and
VAR, as these end markets remained weak.
Performance in Transport (Aerospace &
Automotive) was positive, driven primarily
by Aerospace as plane build rates recover.
Automotive volumes were stable, as supply
chains continued to impact growth, though
revenue was 9% ahead.
Sustainable Solutions revenue in constant
currency was down 17%. With improved
pricing and a more favourable sales mix,
gross margin was upby 160bps to 45.7%
(FY 2022: 44.1%).
E-mobility saw significant growth in FY 2023
12 months
ended 30
September
2023
£m
12 months
ended 30
September
2022
£m
%
change
(reported)
%
change
(constant
currency)
Revenue 241.8 282.7 -14% -17%
Gross profit 110.5 124.8 -11% -14%
Michael Koch (left) and John Devine
are the leaders of Sustainable
Solutions and Medical respectively
STRATEGIC REPORT
Victrex plc Annual Report 2023
28
Energy & Industrial
Energy & Industrial sees materials used
ina range of applications where Victrex
TM
PEEK has a long-standing track record of
durability and performance benefit in many
demanding Oil & Gas applications. Sales
volume of 639 tonnes was down 23%
on the prior year (FY 2022: 830 tonnes),
reflecting the weaker performance in this
area, which is currently a challenging end-
market. Industrial (which makes up more
than half of this segment) is driven by global
activity levels and capital goods equipment,
which was weaker during the period.
Elsewhere in the new energy space, we
continue to assess applications in Hydrogen,
where PEEK’s inert nature and durability
could have a strong play. In Wind, we have
gained business on wind energy applications
supporting durability in harsh environments.
Energy volumes overall were down 19%.
Value Added Resellers (‘VAR’)
Victrex has significant business through
VAR, much of which is specified by end
users. 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 is often a good barometer of
the general health of the supply chain, with
VAR customers processing high volumes of
PEEK into stock shapes, or compounds.
After a strong period of growth and a
strong comparative, VAR saw a particularly
challenging year, leading to a 39%
decline in VAR volumes, to 1,304 tonnes
(FY2022: 2,122 tonnes). Destocking was
a key contributor in VAR volumes falling
significantly this year, as supply chains
adjusted to weaker demand, continuing
the volatility in order patterns seen since
the start of the pandemic. Although
visibility remains low, we are well placed
for when the global economic environment
improves, with VAR typically seeing a strong
bounce back as demand improves and
restockingcommences.
Transport (Automotive
&Aerospace)
Our Transport area builds on both legacy
applications and new applications with
the use of composites or new innovative
materials in electric vehicles. We continue
to have a strong alignment to the CO
2
reduction megatrend, with our materials
offering lightweighting, durability, comfort,
dielectric properties and heat resistance.
As well as long-standing core business
within Automotive & Aerospace across a
range of application areas, we also made
good progress in our Transport related
mega-programmes of E-mobility and
Aerospace Composites.
Overall Transport sales volume was up 4%
to 950 tonnes (FY 2022: 913 tonnes), with
Aerospace up 20% and Automotive flat
(Automotive revenue up 9%).
Automotive
Market indicators support a return to
modest car production growth in 2024, with
S&P forecasting a 1–3% increase in global
production in 2024 (S&P, October 2023).
Core applications include braking systems,
bushings & bearings and transmission
equipment, with increasing opportunities
and new business wins in electric vehicles,
supporting a growing E-mobility business.
Translation across internal combustion
engine (‘ICE’) to electric vehicles (‘EVs’)
remains a net benefit opportunity, with
current PEEK content averaging around
10g per car. Our assessment of the EV
opportunity is now for a long-term potential
per electric vehicle of over 200g, with
several application areas.
We also gained some new gear business
inthe e-bike market during the year, which
is expected to grow.
Aerospace
Aerospace volumes were up 20%, reflecting
the benefit of plane build increasing during
the year and new application growth.
Application growth includes in Aptiv
TM
film and also our AE
TM
250 PEEK grade
(and use as composite tape). Emerging
areas of business include the potential
from PEEK’s inert characteristics within
fuel systems, including sustainable fuels.
Our mega-programmes in Aerospace
were consolidated into one programme
of Aerospace Composites to simplify and
focus resources. Aerospace Composites
supports smaller and larger structural parts
for Airbus, Boeing and tier companies, with
qualifications well advanced, existing parts
on planes and larger demonstrator parts
being exhibited by major customers, ahead
of commercial adoption.
FY 2023 also saw applications with COMAC
start to yield growing revenue. Whilst relatively
small at this stage (based on plane build of
approximately two planes per month) we note
the planned ramp-up of production over the
coming years.
The mid-term outlook for Aerospace is good.
We continue to consider future plane build
forecasts, with our assessment that over
53 million tonnes of CO
2
could be saved
over the next 15 years if all new single aisle
planes were produced with over 50% PEEK
composite content.
Electronics
2023 was a tough year for the global
Semiconductor market and Consumer
Electronics. Volumes into Semiconductor
typically make up close to half of our
Electronics exposure. Total Electronics
volumes were down 23% at 513 tonnes
(FY2022: 662 tonnes), though we
note industry forecasts suggesting an
improvement in 2024 for Semiconductor
of11.8% (WSTS, October 2023).
Victrex has historic business in this end
market, for core applications like CMP
rings (for Semiconductor) as well as new
applications utilising PEEK, including
Semiconductor, 5G and cloud computing
and other extended application areas.
Our Aptiv
TM
film business and small
space acoustic applications remain well
positioned, though consumer devices
was an area significantly impacted by
theglobal downturn.
Home appliances has been an area
of growth in recent years and our
impeller application business in high end
brands continues to offer good growth
opportunities. These applications, with
lighter materials and enhanced durability,
also offer the opportunity for improved
energy efficiency.
Regional trends
With a more challenging global
macro-economic environment, regional
performance in Europe and North America
was adversely affected, with North America
being the most impacted.
Overall by region, Europe was down 25%,
at 1,903 tonnes (FY 2022: 2,554 tonnes),
driven by declines in VAR and Energy
&Industrial primarily. North America
was down 32% at 650 tonnes (FY 2022:
952 tonnes), principally driven by Energy
&Industrial. Asia-Pacific was down 14%
at1,045 tonnes (FY 2022: 1,221 tonnes),
aswesaw declines in Electronics and VAR.
Whilst the macro-economic
downturn impacted several
end markets this year, despite
strong growth in Aerospace,
our broader range of
applications supports good
mid-term growth prospects.
STRATEGIC REPORT
29
Annual Report 2023 Victrex plc
Operating review continued
MEDICAL
Medical revenue
£65.2m
+12% vs FY 2022; +7%* vs FY 2022
Medical gross profit
£52.1m
+5% vs FY 2022; +2%* vs FY 2022
* Constant currency.
Record revenues, broader
application uses and a demand
for metal alternatives make
uswell placed to drive further
growth in the core Medical
business, alongside our
Medical mega-programmes.
Our goal is for approximately
one third of Group revenues to
come from Medical in 10years.
Our PEEK composite Trauma plates demonstrate strong clinical evidence
Our strategy of Polymer & Parts includes a
goal of increasing the proportion of Medical
revenues for the Group to above one-third
of revenues by 2032 from a baseline year
of FY2022 (FY 2023 had Medical share of
Group revenue at 21% vs FY 2022 at 17%).
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 date, over 15 million
patients have PEEK implanted devices.
Medical saw a record performance in
FY2023, driven by further recovery of
elective surgeries post-pandemic, and new
application growth. Revenue in Medical
was up 12% at £65.2m (FY 2022: £58.3m).
In constant currency, Medical revenue
was up 7%.
Gross profit was £52.1m (FY 2022: £49.7m)
and gross margin was slightly lower at 79.9%
(FY 2022: 85.2%) primarily reflecting sales
mix and the higher growth in non-Spine.
Wecontinue to see faster growth in
non-Spine as we purposely target emerging
12 months
ended 30
September
2023
£m
12 months
ended 30
September
2022
£m
%
change
(reported)
%
change
(constant
currency)
Revenue 65.2 58.3 +12% +7%
Gross profit 52 .1 49.7 +5% +2%
STRATEGIC REPORT
Victrex plc Annual Report 2023
30
PEEK Knee now has major global Knee companies collaborating with us
or developing application areas in Cardio,
Drug Delivery and Active Implantables.
Geographically, Asia-Pacific revenues were
up 31% year on year, with Medical revenues
in the US up 4% and Europe up 9%.
Medical strategy
Our Medical aspirations are for our solutions
to treat a patient every 15–20 seconds by
2027 (from approximately 25–30 seconds
now) and the Group is prioritising targeted
investment in Medical, including a New
Product Development Centre of Excellence
in Leeds, UK, which opened during the year.
This facility will support customer scale-up in
Trauma and Knee, aligned to majormedical
device companies, as well as working
closely with academia. It was one of the key
overhead investment items in FY2023, as we
build additional capability and skills in this
area, with approximately 25new rolesinitially.
Our Medical manufacturing capability is
already strong in driving innovation for our
parts businesses. As we focus on scale-up,
we have established a manufacturing partner
for Trauma plates, Paragon Medical (Paragon),
in China, whilst retaining the design and
development know-how. Paragon, who
are contracted by many of the major global
medical device companies, will help us to
meet the initial excess demand. Our customer
base is growing in this area, with additional
development agreements now in place.
Spine and non-Spine
Non-Spine offers the highest growth
area for our business over the medium
term. Several application areas have seen
good growth, including Arthroscopy and
Cranio-maxillo facial (‘CMF’). CMF also
offers us an opportunity through 3D printed
parts, with new product grades introduced,
drivinggrowth of 38% this year.
Current revenue split shows 46% of
segmental revenue from Spine and 54% from
non-Spine. Next generation Spine products
will be key in maintaining PEEK’s position in
this segment, including the opportunity for
Porous PEEK, where a spinal cage can support
bone-in growth as well as bone-on growth.
A US 510k submission is targeted during
FY 2024. Whilst we continue to innovate
and develop new products for Spine, partly
through our associate investment in Bond 3D,
usage of 3D printed titanium cages continues,
largely in the US. PEEK, within spinal fusion,
remains strong in Asia and Europe. In China,
we are mindful of both the opportunities
and risks from the emerging volume-based
procurement (‘VBP’) approach, The first VBP
cycle for Spine occurred during FY 2023
with the cycle for some other applications
expected during FY 2024 Our differentiated
PEEK-OPTIMA™ HA Enhanced product
(‘POHAE’) – to drive next generation Spine
procedures – is one part of our strategy,
alongside the introduction of Porous PEEK,
togrow our Medical business, with annualised
revenues being approximately £2m and good
opportunities globally, and in Asia particularly.
Other non-Spine applications include
Cardio.More than 250,000 patients have
now benefited from PEEK being used in heart
pumps, containing implantable grade PEEK.
We also introduced a new pharmaceutical
grade, PC-101, for use in drug delivery
devicesand pharmaceutical contact.
Ian Melling
Chief Financial Officer
5 December 2023
STRATEGIC REPORT
31
Annual Report 2023 Victrex plc
Risk
RISK MANAGEMENT
1
Risk agenda
Why do we undertake riskmanagement?
Risk objectives
The Board is responsible for determining the Company’s risk
appetite in delivering Victrex’s strategy as set out on pages 14
and 15. 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
downstream into semi-finished and finished products and further
expands geographically, building demand for new products,
alongside growing the core business.
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 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 areas and functional teams are responsible for the
day to day management and reporting of risks. They identify risks
including new and emerging issues, escalating where required and
ensuring risks are managed appropriately. The causes and potential
consequences of each risk are recorded in risk registers. Each risk
is evaluated based on its likelihood of occurrence and severity
of impact on strategy, profit, regulatory compliance, reputation
and/or people. Risks are evaluated at both a gross and net level.
This approach allows the consistent identification and evaluation
of risks and identifies the 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 management is embedded in Victrex’s culture, ensuring
thatweassessrisksaspart of delivering our strategy.
STRATEGIC REPORT
Victrex plc Annual Report 2023
32
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 further controls, 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 profile ensures that risk reduction
activity is captured and managed, with oversight provided by the
Risk and Compliance team.
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 are 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 and 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 processes within the
business. A comprehensive ‘audit universe’ assessment defines
the range of potential audit activities and the internal audit
plan provides the schedule of audit work that covers specific
risks, core processes (cyclical), key programmes and geographic
regions. Both are approved by the Audit Committee, at
least annually;
u
the Victrex Management Team (‘VMT’) Risk Management
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 Risk & Compliance. The VMT Risk
Management Committee comprises: the Executive Directors
(CEO and CFO), Chief Operating Officer, Managing Directors
of the Medical and Sustainable Solutions businesses, Group
HRDirector, General Counsel & Company Secretary and Director
of Risk & Compliance. Risk management subcommittees and
Warranty Committees provide further governance for specific
business areas or programmes where they are deemed necessary;
for example, Transport (Automotive and Aerospace) and Medical
are covered due to current business activity. These meetings
and associated risks feed into both the bi-monthly Risk and
Compliance meeting and the Executive Risk Management
Committee (at least half yearly) via their respective Chairs,
whoare VMT Risk Management 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 and Internal Audit. The group comprises the CEO, CFO,
Managing Directors and COO alongside a number of other
senior leaders;
u
as appropriate, significant incidents, issues and new risks are
reported into the Board via the relevant Executive Director; and
u
risk management is also an integral aspect of Group
function governance, including through the Safety, Health
and Environment Steering and Quality Steering Committees
(bothmeeting quarterly), and the ESG Steering Group, which
meets twice a year.
Emerging risks
The Board has identified and assessed emerging risks 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 energy prices, supply chains and end markets
resulting from tension and conflict in the Middle East; and
u
increasing 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 – has been evaluated as an area to be closely monitored;
u
new legal and regulatory aspects – resulting from the changing
business footprint, complexity and evolving regulatory
environment; 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.
Climate-related risks and opportunities
We support the recommendations of the Task Force on
Climate-related Financial Disclosures (‘TCFD’) and have continued
tomake progress over the last year assessing and reviewing
ourclimate-related risks and opportunities (see pages 49 to 53).
Duetothe longer-term nature of climate-related risks it has not
been considered to be a principal risk in its own right at this time.
There are, however, clear links to existing principal risks such as
supply chain and strategy execution. As such, climate-related risks
and opportunities have been a key feature of the FY 2023 strategic
planning process and will continue to be reviewed and developed
bythe Corporate Responsibility Committee.
STRATEGIC REPORT
33
Annual Report 2023 Victrex plc
Risk continued
MANAGING OUR RISKS
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, protecting our assets from
potential physical threats such as flooding and ensuring future
business sustainability as we transition to a low-carbon economy
arefundamental objectives.
Mitigation
Safety, Health and Environment (‘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.
We have SHE improvement plans & KPIs that are reviewed on
a monthly basis. A quarterly SHE Steering Committee provides
oversight and governance for the Group SHE performance, progress
with plans and 2nd line assurance activity.
Where issues are identified or events occur, these are investigated
to determine root causes and are acted on accordingly to prevent
re-occurrence. SHE management software in place across all global
assets further supports this.
Our current SHE statistics are showing good progress with a clear
reduction in recordable injury frequency rate (‘RIFR’) below target.
Additional detail of the SHE performance and progress made in the
year is contained in the Sustainability report on page 63.
Process safety has continued to be a key area of focus in FY 2023.
Wepartner with external specialists to provide additional independent
assessment and assurance of relevant plants and processes and have
put plans in place for updates and improvements identified.
Change
No change
Viability statement links
Risk considered
Risk focused on in sensitivity analysis
1
Risk heatmap
1. Safety, Health and Environment
2. Recruitment and retention of the right people
3. Supply chain
4. Network and IT systems & 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
Key to strategy
Drive
Differentiate
Create and deliver
Underpin
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 Groups performance.
STRATEGIC REPORT
Victrex plc Annual Report 2023
34
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.
In addition, 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
Digitalisation of recruitment and applying a future-skills perspective
have been embedded via related tools, processes and the graduate
programme. Our recruitment process has been streamlined to enable
faster pace of change and more flexibility. We also have a targeted
approach to learning and development programmes across all levels
– investing in people as an attraction and retention tool. This has
been enhanced in the year through new and improved e-learning
resources and capabilities. We have succession plans in place for
key roles and develop our future leaders, as well as bringing in
newtalent from the outside where required.
We have well-established Diversity, Equity & Inclusion, and
flexible working policies and have set targets and action plans
to ensure wecontinually increase the sense of belonging across
our workforce. We regard this as a commitment to make full use
of the talents and resources available. Active employee forums
are in place for each region, further supported by our German
works council and UK trade union representation at Hillhouse and
Rotherham. An employee survey is conducted every two years with
both corporate and functional plans established to drive continual
improvement. We alsooperate targeted pulse surveys to measure
in-year improvements. Continued high engagement scores indicate
theeffectiveness of the mitigation measures in this area.
Our annual voluntary employee turnover (8.7%) provides a healthy
balance of introducing new talent whilst retaining key knowledge
and skills, given our average tenure of 7.2 years. Improvements made
in our recruitment and development processes, noted above, have
led to a reduction in this risk in FY 2023.
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.
Increases in demand are anticipated by and consistent supply is
maintained through a robust integrated business planning (‘IBP’)
process for which we have been awarded Class A Standard.
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, particularly those associated
with energy availability and energy related cost impacts including
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.
We have increased the number of suppliers across several key raw
materials, stabilised logistics costs (and availability) and increased
inventory levels, which have resulted in a reduction in this risk
in FY 2023.
Change
Decreased
Change
Decreased
Viability statement links
Risk considered
Viability statement links
Risk considered
Risk focused on in sensitivity analysis
2 3
Key to strategy
Drive Differentiate
Create and
deliver
Underpin
STRATEGIC REPORT
35
Annual Report 2023 Victrex plc
Network and IT systems & 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 attack could result in the theft, manipulation or
destruction of confidential and sensitive information and severely
disrupt business operations.
Significant failure or interruption to our IT systems or services could
lead to business process disruption.
The increase in 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 the National Institute of Science and
Technology (‘NIST’), 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’).
Core networks have been improved to introduce a global Software
Defined LAN and WAN.
Independent external experts are regularly engaged to conduct
assessments, including penetration testing, cyber health and
awareness along with ongoing certification to Cyber Essentials
Plus. We also have a Global Incident Response plan, supported by
third-party experts, for crisis response within both IT and Operational
Technology (‘OT’) networks.
Our recently expanded internal Security Operations Centre and team
provide round the clock detection and response capabilities.
We continuously review the latest threats and trends to ensure our
protection is current and effective. To support this we have enhanced
awareness across all users in the business by implementing both
additional mandatory training and a culture monitoring platform
in FY 2023. In addition, we 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 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
includes agreed specifications and manufacturing to defined standards
and processes. In addition, the Group maintains appropriate levels of
product liability insurance.
A robust Management of Change process is used to ensure
that supply and quality are consistent and any change in use is
appropriately validated.
We have product regulatory control procedures and governance
arrangements. Our Regulatory and Product Stewardship team
ensures we have specialists covering all key markets including China.
Change
No change
Change
No change
Viability statement links
Risk considered
Viability statement links
Risk considered
Risk focused on in sensitivity analysis
Risk continued
Key to strategy
Drive Differentiate
Create and
deliver
Underpin
54
STRATEGIC REPORT
Victrex plc Annual Report 2023
36
Legal and regulatory compliance,
ethicsand contracts
Strategy execution
Primary link to strategy Link to climate change Primary link to strategy Link to climate change
Risk area and description
We are required to adhere to all applicable laws, regulations
andethical standards including those covering:
u
anti-bribery and corruption;
u
exports and sanctions;
u
competition;
u
data protection; and
u
human rights, modern slavery and labour.
Increasingly, geo-political factors pose additional complexities to
navigate in several areas including export controls and sanctions.
Any failure to comply with contractual commitments and ethical and
regulatory compliance standards has the potential to result in loss
of earnings, civil or criminal legal exposure, or reputational damage,
and could affect our ability to achieve the business strategy.
Our future opportunities in a number of markets, and activity in new
geographies, for example, China bring new regulatory challenges
and contractual requirements to meet.
Risk area and description
Our future business growth is dependent on the effective
implementation of our strategy.
This risk considers the potential failure to execute the strategy
effectively and generate value. Key elements include: maintaining
the health of our core business, driving growth in China through
our new assets, generating innovation-based growth including
our mega-programmes, the increasing importance of parts and
forms in addition to polymer, andprotecting andmanaging
intellectual property.
Successfully managing the climate-related risks (and opportunities)
summarised in the TCFD section (pages 51 to 53), including the
end market risks associated with internal combustion engine
transportation and Oil & Gas, remains fundamental to the
successfulexecution of the business strategy.
Mitigation
Compliance policies, procedures and training are in place for key
regulatory compliance risks.
Our Code of Conduct is in place, which is regularly reviewed, and
mandatory training is provided. Over the last year these areas have
been reviewed and refreshed. Compliance is monitored and reported
to the Executive Risk Management Committee.
We continue to use internal and external subject matter experts
tosupport risk identification, set standards and policies and provide
advice and training. Over the last year an external party has been
engaged to review and advise on our risk and legal framework
acrossthe business.
Commercial contracts and our pricing strategy are reviewed by our
Legal and Product Management teams.
As our business activities expand, for instance into China, appropriate
policies and procedures are being put in place to manage the
associated regulatory requirements.
We have a dedicated Regulatory team in place which has been
further strengthened over the last year, including additional
resource in China.
Mitigation
The Group has a well-established and clear business strategy which is
subject to a robust annual Board review process to ensure its continued
effectiveness. The Board also monitors progress in implementing
the
strategy at each Board meeting and is given specific updates from
individual
programmes and business units throughout the year, which
have included Medical acceleration plans and developments in China
during FY 2023.
Annual objectives (which support the execution of the business
strategy) are cascaded throughout all levels of the business. The Victrex
Management Team (‘VMT’) monitors progress through a monthly
performance review process.
Growing our business in China to utilise new assets, driving volumes
through other investments and effective pricing policies in a dynamic
and competitive environment are key activities.
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.
We monitor technological changes to materials and potential challenges
for PEEK and PAEK polymers by developing new grades with differing
properties, as well as creating new markets for PEEK/PAEK polymers.
As our intellectual property (‘IP’) is critical to the delivery of our strategy,
robust protective controls are in place, supported by our dedicated IP
team. Specific emphasis is placed on our approach to IP management
in Transport applications and China, as we continue to accelerate our
activity in the region.
Change
No change
Change
No change
Viability statement links
Risk considered
Risk focused on in sensitivity analysis
Viability statement links
Risk considered
Risk focused on in sensitivity analysis
6 7
STRATEGIC REPORT
37
Annual Report 2023 Victrex plc
Geo-political and macro-economic
environment
Primary link to strategy Link to climate change
Risk area and description
We serve over 40 countries globally, operating in numerous
geographies across a range of markets which can be affected by
political and/or economic changes or uncertainties.
Risks related to the geo-political and macro-economic conditions
have remained high over the year, primarily as a result of the ongoing
war in Ukraine and China’s economic outlook, but more recently
with the conflict in the Middle East.
International tensions with China may also create additional
challenges in doing business there.
Uncertainty in the global economic outlook including; inflation,
potential changes in carbon taxation, energy prices and impacts
oninterest rates and exchange rates have the potential to affect
ourprofitability.
The volatile external environment has the potential to impact a number
of other principal risks and the delivery of our strategic objectives.
Due to the factors noted above this risk has increased in FY 2023.
Mitigation
A key mitigation is close monitoring of the geo-political and
macro-economic conditions and reacting accordingly through
the business strategy process. In FY 2023, the Board has received
updates from external experts to provide independent context
tothis risk.
Our range of markets and geographic spread help to mitigate
political and economic change. Threats from low cost (regional)
competitors are being addressed through our strategy in China.
Development of PEEK production capability in China has continued
and remains on track for sales in FY 2024.
Uncertainty in supply chains is being addressed by accelerating
supply resilience activity around dual/multiple sourcing of key raw
materials, where there has been good progress made in the last year.
Maintaining our UK production of key raw materials ensures we are
not solely reliant on international routes.
Reducing the impact of potential regional changes to carbon-based
taxation is being mitigated through the business carbon reduction
plan, which includes transitioning to greener energy and targeting
manufacturing processes to reduce absolute energy usage.
We use foreign exchange hedging to delay the impact of changes
in exchange rates. We also conduct horizon scanning and scenario
analysis to inform our plans, considering the longer-term options
to address geo-political and macro-economic factors as part of
thestrategic review process.
Change
Increased
Viability statement links
Risk considered
Risk focused on in sensitivity analysis
Risk continued
8
Key to strategy
Drive Differentiate
Create and
deliver
Underpin
STRATEGIC REPORT
Victrex plc Annual Report 2023
38
Going concern and viability statement
Going concern
The Directors have performed a robust
going concern assessment including a
detailed review of the business’ 24-month
rolling forecast and consideration of the
principal risks faced by the Group and the
Company, as detailed on pages 32 to 38.
This assessment has paid particular attention
to current trading results and the impact of
the current global economic challenges on
the aforementioned forecasts.
The Company maintains a strong
balance sheet providing assurance to
key stakeholders, including customers,
suppliers and employees. The combined
cash and other financial assets balance at
30 September 2023 was £33.5m, having
reduced from £68.8m at 30 September
2022 following payment of the regular
dividends of £40.1m in February 2023
and £11.7m in June 2023 and a strategic
increase in the level of inventory held. Of
the £33.5m, £3.4m is held in the Group’s
subsidiaries in China for the sole purpose
of funding the construction of our new
manufacturing facilities. Of the remaining
£30.1m, approximately 70% is held in the
UK, on instant access, where the Company
incurs the majority of its expenditure. The
Group has drawn debt of £31.6m in its
Chinese subsidiaries (with a total facility of
c.£34.2m available until December 2026)
and has unutilised UK banking facilities,
renewed and extended in October 2023,
of £60m through to October 2026, of
which £40m is committed and immediately
available and £20m is available subject to
lender approval.
The 24-month forecast is derived from the
Company’s Integrated Business Planning
(‘IBP’) process which runs monthly. Each
area of the business provides forecasts
which consider a number of external
data sources, triangulating with customer
conversations, trends in market and
country indices as well as forward-looking
industry forecasts, for example forecast
aircraft build rates from the two major
manufacturers for Aerospace, rig count
and purchasing manager indices for E&I,
World Semiconductor Trade Statistics
semiconductor market forecasts for
Electronics, and Needham and IQVIA
forecasts for Medical procedures.
The assessment of going concern included
conducting scenario analysis on the
aforementioned forecast which, given
current economic forecasts and sales
trends through the financial year ended
30September 2023, where volumes
dropped 24% year on year and 33% in
the second half, exacerbated by rapid
customer destocking, focused on the
Group’s ability to sustain a further period
of suppressed demand. In assessing the
severity of the scenario analysis the scale
and longevity of the impact experienced
during previous economic downturns have
been considered, including the differing
impacts on the Sustainable Solutions versus
Medicalsegments.
Using the IBP data and reference points
from previous downturns management
has created two scenarios to model the
continuing effect of lower demand at
regional/market level and aggregated
levels on the Companys profits and cash
generation through to December 2024
with consideration also given to the six
months beyond this. The impact of climate
change and the Group’s Net Zero 2050 goal
(Scope 1, 2 & 3) are considered as part of
the aforementioned IBP process, from both
a revenue and cost perspective, with the
anticipated impact (assessed as insignificant
over the shorter-term going concern period)
incorporated in the forecasts. As a result
the scenario testing noted below does not
incorporate any additional sensitivity specific
to climate change.
During the second half of FY 2023 the
drop in sales to a quarterly run rate of
c.830 tonnes reflected the continuation
ofthe contraction in demand in the global
economy, which started in the first quarter
of FY 2023, and also the rapid destocking
by customers as they managed their
inventory and had extended shutdowns.
This level of demand is not inconsistent
with that seen during COVID-19 with Q2
and Q4 for 2020 at similar levels and Q3
lower due to global lockdowns. Other than
in the current economic cycle and during
COVID-19 demand has not been at this level
during the past decade. With customers
now largely destocked the Board believes
the low point of the economic cycle has
been reached and, whilst there are limited
signs of a return to growth, demand has
stabilised. As a result the key downside risk
is that of an extended period of subdued
demand. The current downturn has been
running for 12 months, already longer than
the previous downturns during COVID-19
and the financial crisis, but with no clear
signs of recovery, the Board has considered
the impact of reduced demand, in line
with the lowest quarter of the previous
year, Q3, for a further 6 months (scenario
1) and a further 12 months (scenario 2). As
noted above, the lower cash balance at 30
September 2023 is, apart from lower sales
volumes, attributable to an increase in the
level of inventory held. Current forecasts
assume a gradual reduction in inventory
across FY 2024 and FY 2025 with inventory
providing the opportunity to benefit from
market recovery. The scenarios modelled
assume that a more aggressive inventory
unwind approach is taken to mitigate
the ongoing lower cash generation from
subdued volumes.
Scenario 1 – the global economy remains
subdued through the first half of FY 2024
with demand in line with the low point in
FY 2023, quarter 3, before a slow recovery
in the second half of FY 2024. The demand
then increases modestly through the second
half to c.1,900 tonnes before further
modest growth for the remainder of the
going concern period. Medical revenue
remains in line with that seen during the
past 12 months’ run rate, with the economic
situation historically having minimal impact
on this segment, in line with the experience
of the past 12 months. Inventory is reduced
in line with sales.
Scenario 2 – in line with scenario 1
through the first half of FY 2024, with this
lower demand continuing for a further
12 months, i.e. throughout the going
concern period, taking the total period of
lower demand to in excess of 24 months,
well above the duration of any previous
downturn experienced by the Company.
This would give an annual volume below
c.3,300 tonnes, a level not seen since 2013.
In this scenario Medical revenue is reduced
by 10% during the second six months to
reflect a limited impact from a longer lasting
slowdown. With the period of prolonged
lower demand, a more aggressive unwind
of the inventory balance has been assumed.
Inventory is reduced in line with sales. The
Group considers scenario 2 to be a severe
but plausible scenario.
Commercial sales from the new PEEK
manufacturing facility in China are expected
in early 2024, a consequence of which is that
the entity will require additional funding to
see it through to net cash generation. In
concluding on the going concern position,
ithas been assumed that Victrex will provide
the additional funds in full, which the Board
considers to be the worst case scenario.
Before any mitigating actions the sensitised
cash flows show the Company has significantly
reduced cash headroom, which would require
use of the committed facility during the
going concern period. The level of facility
drawn down is higher in Scenario 2 but in
neither scenario is the committed facility
fully drawn, nor drawn for the whole year.
With cash levels lower than has historically
been the case for Victrex, the Company has
identified a number of mitigating actions
which are readily available to increase
theheadroom.
These include:
u
use of committed facility – £40m could
be drawn at short notice. Conversations
with our banking partners indicate that
the £20m uncommitted accordion could
also be readily accessed. The covenants
of the facility have been successfully
tested under each of the scenarios;
STRATEGIC REPORT
39
Annual Report 2023 Victrex plc
Going concern and viability statement continued
Going concern continued
u
deferral of capital expenditure – the base
case capital investment over the next
12 months is lower than recent years at
approximately £30£35m, with major
projects completed in China and the UK.
This could be reduced significantly by
limiting expenditure to essential projects,
deferring all other projects laterinto
2025 or beyond;
u
reduction in discretionary overheads –
costs would be limited to prioritise and
support customer related activity;
u
reduction in inventory levels – inventory
has been increased to provide additional
security during plant shutdowns and to
provide sufficient inventory to respond to
a rapid economic recovery. The scenarios
noted above include an acceleration
of the inventory unwind but a more
aggressive approach could be taken to
provide additional cash resources; and
u
deferral/cancellation of dividends – the
Board considers the cash position and
interests of all stakeholders before
recommending payment of a dividend.
Adividend has been proposed for
payment in February 2024 of c.£40m
and in the past an interim dividend of
c.£12m has been paid in June, giving
acombined annual outflow of c.£52m.
Reverse stress testing was performed to
identify the level that sales would need to
drop by in order for the Group to run out
of cash by the end of the going concern
assessment period. Sales volumes would
need to consistently drop materially below
the low point in scenario 2 which is not
considered plausible.
As a result of this detailed assessment
and with reference to the Company’s
strong balance sheet, existing committed
facilities and the cash preserving levers at the
Company’s disposal, but also acknowledging
the current economic uncertainty with a
number of global economies close to/in
recession, the war in Ukraine continuing and
tensions in the Middle East, the Board has
concluded that the Company has sufficient
liquidity to meet its obligations when they
fall due for a period of at least 12 months
after the date of this report. For this reason,
they continue to adopt the going concern
basis for preparing the financial statements.
Viability statement
1. Assessment of prospects
The Directors have assessed the Group’s
longer-term prospects, primarily with
reference to the results of the Board-
approved five-year strategic plan. This
is driven by the Group’s business model
(detailed on pages 12 and 13) and strategy
(detailed on pages 14 and 15), which are
fundamental to understanding the future
direction of the business, while factoring
in the Group’s principal risks (detailed
on pages 34 to 38) and the potential
opportunities and risks of climate change
(detailed on pages 49 to 53). The Directors
continue to consider the ongoing challenges
to the global economy, including the impact
on each market and geography which the
Group serves, and the uncertainty this
creates, particularly in the early years of
the strategic plan. The Directors have also
considered the Group’s ability to generate
cash and maintain a strong financial
position throughout the economic cycle,
including the level of available cash at
30September 2023.
The strategic planning process is undertaken
annually, and includes analyses of profit
performance (including our core business
and new product pipeline and ‘mega-
programmes’), cash flow, investment
programmes (including manufacturing
capacity increases and our acquisition
pipeline) and returns to shareholders.
Completion of the strategic plan is a
Group-wide process engaging employees
throughout the business, including all senior
management in their respective areas. The
strategy was reviewed and approved by
the Board in May 2023 (covering the five
years to September 2028). The strategy
is built market by market and geography
by geography recognising the differing
dynamics in each whilst also considering
the longer-term impact of the Company
achieving our goal of Net Zero across all
scopes by 2050 combined with the wider
global ambition to reduce carbon usage. The
Company also operates a shorter-term rolling
24-month forecast, predicated on the IBP
process, which forms the basis for the 2024
budget and key operational decisions over
this shorter time frame. The first two years
of the strategy have been realigned to the
rolling forecast, taking account of changes to
the economic outlook since the strategy was
finalised in May 2023. The subsequent three
years of the strategy have been reviewed and
updated where the revisions to the first two
years are expected to have a consequential
impact, either positive or negative.
The Board considers five years to be an
appropriate time horizon for our strategic
plan, being the period over which the
Group actively focuses on its development
pipeline and resulting capital investment
programme. As part of our longer-term
considerations, to support capacity planning
and assessment of projects which will take
longer to reach meaningful revenue, the
Group does prepare forecasts for a period
of more than five years; however, a period
greater than five years is considered too
long for the strategic plan given the inherent
uncertainties involved.
2. Viability period
The Directors have assessed the viability
of the Group over the five-year period to
September 2028, being the period covered by
the Group’s Board-approved strategic plan.
3. Assessment of viability
To make their assessment of viability, the
Directors have tested a number of additional
scenarios on the base case position of the
five-year strategic plan. These scenarios
encompass key trading assumptions
combined with the potential impact of
crystallisation of one or more of the principal
risks over the five-year period. Whilst each
of the principal risks has a potential impact,
the scenario analysis has been focused
on those considered to have the most
significant financial impact, primarily on the
revenue growth of the Group. The risks have
been assessed for their potential impact on
the Group’s business model, future trading
and funding structure.
The continuing progress in the mega-
programmes is forecast to have a material
impact on the Company’s revenue over the
strategic period with a target of £25£35m
revenue in 2025. The business case behind
each of these programmes remains
robust, and in most cases is enhanced
by the global ambition to reduce carbon
emissions, and increase adoption of and
need for solutions from the Medical industry.
Progress continues to be made across the
mega-programmes with milestones being
achieved as outlined in the Strategic report
on pages 9 and 25. Timing of milestone
achievement and the resulting impact on
revenue growth remains the key variable
across the mega-programme portfolio which
the Directors have incorporated into scenario
3 described opposite.
The impact on the strategy of both the
Company achieving its goal of Net Zero
across all scopes by 2050 and the wider
economy achieving Net Zero carbon over
a long period continues to be understood
and assessed. The physical risks and
transitional opportunities and risks have
been considered in detail as described
in the Sustainability report starting on
page 42. The physical risks presented by
climate change are not expected to have
amaterial impact on the Company’s ability
to manufacture product over the strategy
period and therefore no sensitivity has
been performed. At the revenue level the
transitional opportunities are considered to
outweigh the risks over both the short and
longer time horizons, supporting continued
growth in Company revenues, albeit the
impact of this is only likely to be material
outside of the five-year strategy window.
The primary transitional risk relates to
carbon pricing and the likely levers used by
regulators and governments to drive down
use of carbon – taxation and levies.
STRATEGIC REPORT
Victrex plc Annual Report 2023
40
The Company’s manufacturing and supply chain does use significant gas, electricity and water whilst also generating hazardous waste.
Work is ongoing to reduce the use of carbon in the manufacturing process, both through using green sources but also redesigning the
chemical process to reduce the overall energy requirement and waste generation. Acknowledging the risk regarding the decarbonisation
of the manufacturing process, primarily in respect of timing, an increased cost of operation from taxation and levies has been assumed in
scenario5, with annual manufacturing costs increasing by £20mp.a, increasing annually by inflation, from 2025. The Company would seek
to recover this cost from customers butfor the purpose of the scenario analysis a worst case position of no recovery has been assumed.
The downside scenarios applied to the strategic plan are as follows:
Scenario modelled Link to principal risk
1. General competitive pressure in the marketplace resulting in a decrease of Sustainable Solutions
and Medical revenue for both core and mega-programmes. Annual volume reduction between
5% and 10% in each year of the strategy.
Geo-political and
macro-economic environment
Strategy execution
2. Mega-programmes not achieving all milestones set or investment/adoption is delayed,
forexample, by economic conditions, therefore delaying the time to meaningful revenue.
Anaverage of two years, delay to revenue growth versus the base case.
Geo-political and
macro-economic environment
Strategy execution
3. An extended period of economic contraction (in line with scenario 2 for going concern)
resulting in lower sales in 2024 and 2025 before returning to strategy growth rates thereafter.
Annual volume reduction between 6% and 22% in each year of the strategy.
Geo-political and
macro-economic environment
Strategy execution
4. A natural or other event impairing key manufacturing assets resulting in supply disruption for
c.two years, with associated reputational damage. Annual volume reduction from FY 2026 of
25% for two years followed by 10%.
Supply chain
5. Increase to direct cost base potentially arising from:
a. additional regulatory compliance, environmental or otherwise;
b. increase in duty and tariffs;
c. product liability issues;
d. increased cost of manufacturing in a lower carbon way;
e. the transitional risks of moving to a lower carbon economy – increases in tax/levies on
utility or waste usage; or
f. increase in raw material and/or other input prices.
Operating costs increase by £20mp.a., increasing annually by inflation, over the base case from
FY 2025 onwards in each year of the strategy.
Legal and regulatory compliance,
ethics and contracts
Safety, Health and Environment
Product liability
6. All of the above*, with an associated reduction in the overhead cost base and capital
expenditure. Annual volume reduction between 16% and 49% in each year of the strategy
(averaging 34% over the five years).
* Where two or more scenarios impact the same revenue stream in the same period the lower outcome is taken.
The scenarios tested were carefully considered by the Directors, factoring in the potential impact, the probability of occurrence and the
effectiveness of the mitigating actions. In addition, whilst considered implausible, a combined scenario (scenario 6) was also tested, which
contained an aggregation of all scenarios considered.
Further to the risk mitigation plans, the Group’s two distinct segments, both with diverse geographic markets, assist in reducing the risk of
regional economic challenges and sector specific issues. This diversity has been evidenced through the recent economic cycles, during the
COVID-19 period (2020), the recovery from COVID-19 (2021–2022) and the recent contraction through 2023, with Medical and Sustainable
Solutions following very different profiles, as well as Europe, US and China moving at different rates and in different directions across the
respective periods. The strategy of partnering closely with customers to develop the right applications and our existing and growing list
ofspecified products are also important mitigants.
The mitigation assessment also considered the Group’s ability to manage its cost base, reduce working capital and raise new finance
andthe possibility of delaying capital programmes and/or restricting shareholder returns over the viability period if required. Having moved
through a period of higher capital expenditure, focused on growth in China and also the UK manufacturing base, the programme over
thenext few years is at a lower rate and offers increased flexibility. The Group’s current debt facilities, in the UK and China, are due for
renewal during the viability period in 2026. The Group currently expects to be able to renew both of these facilities.
The results of this stress testing showed that the Group would be able to remain solvent and maintain liquidity over the assessment period.
The Group is profitable under all scenarios, including scenario 6. The lowest cash balance was in scenario 6, in which the month-end
cash balance remains positive albeit at a level where the RCF facility (available until October 2026 with covenant compliance tested under
scenario 6) will be required to manage monthly working capital flows. Due to the severity and implausibility of scenario 6 and an outcome
that may require limited use of the RCF facility this is considered akin to a reverse stress test.
4. Viability statement
Based on the results of this detailed analysis the Directors have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the five-year period to September 2028. This is predicated on the assumption that
an unforeseen event outside of the Group’s control (for example, an event of nature or terror) does not inhibit the Companys ability to
manufacture for a sustained period and that the current debt facilities are renewed in the normal course of business at the end of their
respective terms in 2026.
STRATEGIC REPORT
41
Annual Report 2023 Victrex plc
Victrex plc Annual Report 2023
42
STRATEGIC REPORT
SUSTAINABILITY REPORT
Through our purpose to bring
transformational & sustainable
solutions which address world
material challenges, it is clear that
Victrex has a well-established role
toenable environmental & societal
benefits for our customers and the
planet. Our products support the
lightweighting trend and
consequently CO
2
reduction in
Aerospace and Automotive, energy
efficiency in Electronics and Energy
&Industrial and the delivery of
clinical benefits in the Medical
industry (see page 43).
Our sustainability & ESG strategy
seeks to build on these credentials
through our ‘People, Planet &
Products’ goals.
43 People, Planet & Products
45 Our Sustainability Progress
46 Our Sustainability Vision and Goals
48 Our Achievements and Accreditations
in FY 2023
49 Task Force On Climate-Related Financial
Disclosures (‘TCFD’)
54 People (Social Responsibility)
58 Planet (Resource Efficiency)
63 Safety, Health and Environment
64 Products (Sustainable Solutions)
65 Our Code of Conduct – Doing the Right Thing
66 Non-financial and sustainability
informationstatement
PEOPLE, PLANET & PRODUCTS
Automotive
Aerospace
Electronics
Medical
Energy &
Industrial
* Data on file.
** IATA carbon reduction and climate change 2018, based on replacing
10kg of metal with PEEK and associated CO
2
reduction.
Aerospace
3040%
lighter (vs metals)
Applications using Victrex
TM
PEEK polymer typically
offer 3040% weight
reduction compared to
metal used in Aerospace*
Our annual PEEK sales
to Aerospace alone help
support annual CO
2
savings
c3x 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 10g average for
existing ICE cars)
Electronics
40%
lighter (vs metals)
Home appliances, smart
devices and machines
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*.
CO
2
reduction
Clinical
benefit
This year we further assessed our sustainable
product revenues, to ensure that we fully
capture our products serving applications
insustainable end markets, or applications
which offer a more sustainable outcome
compared to incumbent materials.
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 2023, our sustainable
products made up 55% of our revenues (FY 2022: 48%)
STRATEGIC REPORT
43
Annual Report 2023 Victrex plc
Sustainability report continued
Jakob Sigurdsson
Chief Executive Officer
Through our clear purpose,
everyone at Victrex aspires to
enable environmental & societal
benefits for our customers and the
planet. We continue to make good
progress on our People, Planet
&Products based sustainability
&ESG agenda, with particular
emphasis this year on our
decarbonisation roadmap.
With well-established 2030 sustainability &
ESG goals across each of our People, Planet
& Products based pillars (social responsibility,
resource efficiency and sustainable solutions),
Victrex’s credentials as a sustainable business
are strong. During FY 2023, governance and
oversight of our short and long-term goals was
also enhanced through the first full year for our
Corporate Responsibility Committee (‘CRC’),
with further details on the activities of this
Committee on pages 98 and 99.
Our People, Planet & Products pillars are also
aligned to the UN Sustainable Development
Goals 2030, with a summary of progress
shownon pages 46 and 47, including long-term
progress since our original Sustainability Vision
started in 2013 (superseded by our 2030 Goals):
People (social responsibility): Safety, health
and wellbeing goals come at the top of our
agenda, as we seek to achieve a culture with
zero accidents and zero incidents. Our mid-
term progress on recordable injury frequency
rates is strong, with an 83% reduction in
the last three years. Our recordable injury
frequency rate in FY 2023 of 0.2 was
85% below the industry average (OSHA
average 1.3).
In our Diversity, Equity & Inclusion (‘DE&I’)
agenda, we have positively enabled good
progress, with a number of employee
forums such as our Gender Engagement
Network (‘GEN’). We have a clear target of
40% of females in leadership roles by 2030,
with FY2023 at 19%, and an expectation
of a gradual upward increase over the
coming years. Outside of Victrex, our social
responsibility agenda continues to evolve.
Our long-standing focus on supporting
the next generation of talent via Science,
Technology, Engineering and Mathematics
(‘STEM’) learning in UK schools has seen
a greater globalisation of this programme,
with our first STEM ambassador in China
during the year. Apprenticeships at Victrex
are also a key part of our development
for the future, with 56 apprentices in our
business this year. Ourremarkable efforts
in community volunteering never cease to
amaze me and wecommitted 3,895 hours
to local communities in FY 2023, with our
cumulative target of 10,000 hours by 2030
now exceeded. We expect to formulate a new
target in FY 2024.
Biodiversity is a new area that we have focused
on. Our pilot project in the UK involves our
employees driving collaboration between
industry and nature where we operate.
Planet (resource efficiency): We made good
progress in our decarbonisation roadmap
during the year, including submitting short and
long-term goals to the Science Based Targets
initiative (‘SBTi’), aligned to Net Zero by 2050
and an interim target by 2032. Post-review
by SBTi, we expect to communicate the detail
of these targets – covering Scope 1, 2 & 3
emissions – during FY 2024, with annualised
reductions equating to over 4% (subject to
SBTi review). A number of decarbonisation
programmes are already underway, with
capital investment to support alternative
fuels or processes already built into our
ESGcapital plans, which will step up over
the coming years. Whilst electrification of
our assets is a primary focus, we continue to
explore hydrogen or other sources, as well
asthe potential of sustainable chemistry.
OurContinuous Improvement (‘CI’) programme
also aims to ‘self-help’ through considering
options such as air source heat pumps and
increased solar. Delivering our SBTi targets
will rely on access to sufficient renewable
electricity, alternative fuels, a decarbonised
grid system, and electrical capacity around
our sites.
Several metrics were adverse this year, as we
saw the inclusion of our China facilities in
GHG and other metrics, as well as the impact
from our UK Asset Improvement programme
(carbon intensity against PEEK produced was
14% higher, but 4% lower excluding China).
Pleasingly, we remain at 100% renewable
electricity in the UK and 90% globally.
Longer-term, we have seen progress in the
areas of carbon intensity and waste intensity,
with a 17% and 55% reduction since 2013
respectively. Our credentials are also supported
by our recent Lifecycle Analysis (LCA), which
showed Victrex™ PEEK is more favourable
than the current industry value for PEEK
manufacturing’s global warming potential,
based on Sphera materials data. Further LCAs
are planned for 80% of the portfolio.
Products (sustainable solutions): With a
favourable sales mix in FY 2023 – reflecting
good growth in Aerospace and Medical,
and a lower proportion of energy and VAR
revenues – our sustainable product revenues
grew to 55% (FY 2022: 48%). We are also in
the process of considering VAR volumes and
whether these can be tracked, and assessed as
having a quantifiable environmental or societal
benefit for relevant end markets. Sustainable
product revenues also include Medical, where
over 15 million implanted devices, to date, are
using PEEK-OPTIMA™ as a replacement for
metal, offering clinical benefit in a broader
range of applications. Recycling and the
circularity opportunities for our products is
also an area we are focusing on. More detail
on the environmental and societal benefits
ourproducts can bring is shown on page 64.
Delivering our goals
With our People, Planet & Products goals well-
established and strong governance through our
Corporate Responsibility Committee, together
with accreditations from the likes of EcoVadis,
an Arating from MSCI and continuation within
the FTSE Russell Green Revenues Index, we see
the opportunity to make a genuine difference
to society in the coming years.
As Chief Executive Officer, it is hugely
rewarding to see the motivation from our
employees to enable environmental & societal
benefit through our products, to play our part
in social responsibility, and to commit to an
active decarbonisation programme, which
weanticipate being able to share more on
during FY 2024, once reviewed by SBTi.
We look forward to sharing further progress
over the coming years.
Jakob Sigurdsson
Chief Executive Officer
5 December 2023
STRATEGIC REPORT
Victrex plc Annual Report 2023
44
STRATEGIC REPORT
45
Annual Report 2023 Victrex plc
OUR SUSTAINABILITY PROGRESS
Our People, Planet & Products ESG strategy continues to yield
goodresults, with sustained progress since our original goals
wereset out in 2013.
PEOPLE
Social
responsibility
STEM
58
global STEM ambassadors
Community
3,895
employee volunteering hours
Diversity
19%
of females in leadership roles
PLANET
Resource
efficiency
Energy
100%
renewable electricity in the UK
(90% globally)
Waste
55%
reduction in hazardous
wasteproduced since2013
(tonnes/£m revenue)
Emissions
17%
reduction in carbon intensity
since2013 (Scope 1 & 2
CO
2
emissions per tonne
ofPEEKproduced)
PRODUCTS
Sustainable
solutions
Sustainable revenues
55%
sustainable product revenues
Innovation
>200
patents filed or pending
>53m tonnes
potential CO
2
saving per year from future aircraft using
PEEK composites vs metal (based on 50% of the aircraft)
Sustainability report continued
SDGs Sustainability pillars
PEOPLE
Social responsibility
Further inspire our employees
andcommunities to positively
impactsustainability
Æ Read more onpage 54
PLANET
Resource efficiency
Decarbonisation and focus
onminimising resources
(energy,waste, and water)
Æ Read more onpage 58
PRODUCTS
Sustainable solutions
Our sustainable products support
CO
2
reduction and clinical benefit
in Medical, as well as offering
recyclability potential
Æ Read more onpage 64
OUR SUSTAINABILITY VISION AND GOALS
Our Sustainability Vision is aligned to both SBTi and the UN Sustainable Development Goals
(‘SDGs’), which are shown below. The majority of our goals are focused on a 2030 timeline,
with our decarbonisation roadmap aligned to 2050 (Net Zero), as well as an interim target
by2032 (targets to be fully communicated in FY 2024, post-SBTi review):
STRATEGIC REPORT
Victrex plc Annual Report 2023
46
u
Increase % of revenue
from sustainable products
(driving CO
2
reduction
&patientoutcomes)
u
Increase recycling rates
of PEEK/PAEK in the
supplychain
u
Exceed 70% of Group
revenue from sustainable
products with environmental
and societal benefits by 2030
(and exceed 50% by 2025)
u
Establish Victrex’s role in
supporting circularity
u
Increase in revenue from
our sustainable products
with positive environmental
and societal benefits to 55%
(FY2022: 48%)
u
Developed partnerships
in the supply chain
to facilitate recycling
opportunities
u
Deliver zero accidents
andzero incidents culture
u
Grow global
STEMprogramme
u
Increase community
activity across our
globallocations
u
Focus on supporting
genderDiversity, Equity
&Inclusion (‘DE&I’)
u
Improved safety metrics,
based on the OSHA
reportingstandard
u
STEM ambassadors in
every region by 2030
u
Commit >500 employee
hours to global community
activity annually by 2030
u
Embed DE&I globally;
Females in Leadership roles
at 40% by 2030
u
Continued low recordable
injury rate (0.2 vs FY 2022: 0.2)
u
First STEM ambassador
in China and 58 global
ambassadors
u
3,895 employee
volunteeringhours; first
Biodiversity partnership
u
19% of Females in
Leadershiproles
u
Decarbonisation plan
(Carbon Net Zero for
Scope 1, 2 & 3 emissions)
in line with the SBTi 1.5°C
emissions scenarios
1
u
Sustained reduction
in resources through
improved productivity
and asset efficiency:
carbon intensity, waste &
water intensity
u
Victrex using 100%
renewable electricity
by2024
2
u
Commitment to a
science-based target
u
100% renewable electricity
in the UK, 90% globally
u
SBTi targets and plan
submitted across all scopes
u
Decarbonisation roadmap
and options prepared for
primary manufacturing
facilities (dependent on access
& availability of alternative
fuelsand technologies)
Our key imperatives:
u
Net Zero (Scope 1, 2 & 3) emissions in line with 1.5°C emissions
scenarios of SBTi by 2050*
u
Increase revenues from our sustainable products which bring
environmental and societal benefits
u
Minimise resources (energy, waste, and water) used in our
ownoperations
u
Enhance our Diversity, Equity & Inclusion (‘DE&I’) agenda
Goals 2023 progress
* Subject to review and validation by SBTi (interim target by 2032).
Æ Read more on pages 43 to 66
Milestone targets
1 Scope 1, 2 & 3 emissions and science-based target. Goal based on 2022 manufacturing footprint and data.
2 For all countries where the market exists.
STRATEGIC REPORT
47
Annual Report 2023 Victrex plc
Sustainability report continued
OUR ACHIEVEMENTS AND
ACCREDITATIONSIN FY 2023
FTSE Russell – Part of FTSE Russell Green Revenues Index
– over 30% of Victrex revenues defined as coming from
sustainable products.
EcoVadis – EcoVadis is one of the leading organisations
assessing the sustainability strategies of global companies.
InFY 2023, Victrex was again awarded a Gold rating,
meaning we are in the top 6% of companies assessed,
outofmore than 4,000 companies.
Sedex Member – Committed to an ethical and sustainable
supply chain.
MSCI – MSCI is one of the leading organisations ranking
listed companies for their sustainability performance.
Wemaintained our A rating in 2023.
Community focus – Victrex has long-standing partnerships
with the Science Industry Partnership, supporting the
engineers and scientists of tomorrow; STEM learning,
as part of our global STEM programme, supporting
careers in Science, Technology, Engineering & Maths; and
Business in the Community, where we support a range
of local activities in the UK, with 3,895 employee hours
committedtovolunteering in FY 2023 alone.
Financial Times Climate Leaders – Victrex was named
bythe Financial Times as one of Europe’s climate leaders,
oneof only 400 European companies selected from around
4,000 companies.
CDP – Victrex has seen consistent improvement from the
Carbon Disclosure Project (‘CDP’), with a slight decrease in
our ranking to C, but evidence of progress since our original
D score in 2013.
Apple Clean Energy Supplier
programme – We have been
accredited by Apple on its Clean Energy
Supplier programme, with 100%
renewable electricity supply in the
UK and a goal to have 100% globally
by 202.
1 For all countries where the market exists.
STRATEGIC REPORT
Victrex plc Annual Report 2023
48
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (‘TCFD’)
Overview
The Task Force on Climate-related Financial Disclosures (‘TCFD’)
continues to provide a useful framework for the Company to assess
its climate change approach against, and supports a full breadth of
consideration which has been supplemented by external support
with the appropriate expertise to challenge and provide guidance
inevolving the strategy and approach to climate change.
In line with our products credentials to enable positive environmental
and societal benefits through our products, Victrex also recognises
the impact we have from our use of resources, i.e. energy, waste
and water. Sustainability is firmly embedded in Victrex’s purpose –
bringing transformational & sustainable solutions which address the
world’s material challenges. Our products seek to bring technical
or environmental benefits, for example supporting CO
2
reduction
in Aerospace & Automotive, or improving energy efficiency in
Electronics and Energy & Industrial end markets. This is underpinned
by targeting our innovation investment in Research & Development.
As outlined on page 44 our Net Zero target has progressed during
the year to now include all scopes by 2050. Our target, in line with the
1.5°C emissions scenarios of SBTi, also recognises the environmental
impact of our manufacturing processes which create CO
2
emissions,
utilise water and generate waste. Our near and long-term SBTi
targets will be based upon data from the SBTi target setting tool
and will form the basis for our Net Zero targets once our plans are
approved. Our CO
2
metrics are included on pages 59 to 62 with
our path to lower emissions included on page 61. We continue to
research new technology aimed at minimising use of resources and
significantly reducing our own operational carbonfootprint.
We seek to exceed 50% of Group revenue from products with
positive environmental and societal benefits by 2025 and exceed
70% by 2030 (FY 2023: 55% which reflects weaker industrial
end-markets and is expected to reduce closer to 50% in FY 2024).
Our commitment is clear to support a lower carbon economy
and provide greater societal benefits to an increasing proportion
of the population (through our materials supplied into Medical
applications). In delivering our targets we are working closely
with customers and collaborating with companies that share our
ambitions and goals.
As plans to deliver our Net Zero target continue to evolve, management
receives regular input from multiple stakeholders, as we keep our
approach under review, supported by the Corporate Responsibility
Committee. Engagement in our climate change strategy has
been particularly strong amongst our employees, with not only
commitment to supporting current workstreams but increasing
levels of idea generation coming from all areas of the business,
including energy saving, recycling and waste reduction.
Statement on TCFD
We set out below our climate-related financial disclosures. These
comply with LR 9.8.6R by incorporating climate-related financial
disclosures consistent with the TCFD recommendations, specifically
under the four TCFD pillars and eleven recommendations. Whilst
consistent with the recommendations, we note that the level of
granularity provided will increase during FY 2024 following the
SBTi review as the Company further matures and embeds its
climate change processes, approach and KPIs, to track progress
against targets. This will include an indication of the financial
investment required, in support of the decarbonisation roadmap
aligned to SBTi.
The table below is presented to demonstrate consistency and
signpost where the specific disclosures are included in the Annual
Report where they are not within this section. It also sets out the
progress made during the year and future actions the Company is
taking which will support more detailed disclosure in future years.
In making the above statement of compliance the Board has
considered materiality and whether the incorporated disclosures
provide sufficient detail to enable stakeholders to assess the Group’s
exposure to and approach to addressing climate-related issues. This
includes an assessment of the level of exposure the Group has to
climate-related risks and opportunities considering our products and
manufacturing processes. Specifically on the financial disclosures
incorporated in the financial statements (see note 1 for details)
a materiality level consistent with that used for other financial
statement disclosures, and with the level used by the external
auditors, has been used, which for the current year is £4.0m.
The Board has considered the TCFD additional guidance (2021 TCFD
Annex) in preparing the disclosures, including the sector specific
guidance for Materials and Buildings, which is the sector relevant
to the Company, as a chemical manufacturer. The Company has
included the sector specific disclosures, principally the potential
impacts of stricter constraints on emissions and the related impact
on costs as well as the opportunities for its products to reduce
carbon emissions, with a specific metric (and target) included to
measure this. The emphasis of the additional guidance is to provide
more granular and explicit disclosures which as stated above is
aligned with the Company’s objectives for future years. Victrex is
a member of the Chemical industry Association which is planning
to issue sector guidance on SBTi and climate change targets during
2024. This guidance will be incorporated into the Group’s targets
aiding consistency and comparability across the sector.
The Board is supported by the Audit Committee in assessing the level
of consistency of disclosure with the requirements of TCFD. Further
details on the role of the Audit Committee are included on page 90.
Oversight and governance of ESG risks &
opportunities (including TCFD & climate change)
The Board reviews and approves the Group’s ESG and SBTi goals and has
oversight of how these will be embedded and reported, whilstensuring
sustainability remains at the core of our purpose and strategy
Victrex Board
The CRC oversees the Group’s conduct regarding its corporate societal
obligations and commitments. This includes overseeing and reviewing the
development and execution of the ESG and sustainability strategy and
commitments including progress towards targets. Further details on the
activities of the CRC are included on pages 98 and 99
Corporate Responsibility Committee (‘CRC’)
Head of Sustainability & ESG
1. People 2. Planet
3. Products 4. ESG Governance
Sustainability workstreams
The VMT embeds sustainability strategy target reviews into the regular
performance reviews they undertake with their respective teams
Victrex Management Team (VMT’)
STRATEGIC REPORT
49
Annual Report 2023 Victrex plc
Sustainability report continued
Summary of key focus areas
Recommendation Consistency and 2023 actions Future actions
Further details
(where relevant)
Governance
a. Describe the
Board’soversight of
climate-related risks
andopportunities
The Victrex Board is responsible for reviewing and guiding
strategy, with sustainability embedded into our purpose and
our Polymer & Parts strategy. Board oversight is led by the
Corporate Responsibility Committee (‘CRC), which was
established during FY 2022, meets quarterly, and is chaired
by a Non-executive Director. The CRC reviews progress
against the ESG and sustainability goals and action plans
todeliver these. It also assesses ongoing environmental
performance against key performance indicators. The CRC
has overseen the process for identifying and assessing risks
and opportunities associated with climate change. The Chair
of the CRC provides the Board with an update at each
Board meeting.
The Board and the Corporate
Responsibility Committee will
continue to challenge how the
proposed ESG and sustainability
goals and plans are embedded,
whilst ensuring sustainability
remainsat the core of our purpose,
values, and strategy.
The key performance
indicators and
milestone targets are
shown on page 47.
Further information
on the roles and
responsibilities of the
Board and CRC is
included on page 77
and pages 98 and 99
respectively.
The Board members
experience of climate
change is included in
their biographies on
pages 70 and 71.
b. Describe management’s
role in assessing and
managing climate-related
risks and opportunities
The VMT (chaired by the CEO) is responsible for reviewing
and guiding major plans of action to achieve the sustainability
strategy, including required capital investment and investment
in R&D supporting sustainable products.
During FY 2023, the VMT has embedded ESG and
sustainability strategy target reviews into the regular
performance reviews they undertake with their
respective teams.
The VMT will review and propose
necessary actions in support of our
ESG and sustainability goals, for
example options towards our SBTi
goals, which include alternative low
carbon fuels and processes (whilst
noting access to and availability of
alternative technologies is required).
Strategy
a. Describe the climate
related risks and
opportunities the
organisation has
identified over the short,
medium, and long term
Climate change related risks and opportunities have been
identified and regularly reviewed throughout FY 2023. These
risk and opportunities include those involving our products
and solutions benefiting society (for example in quantified
weight saving and CO
2
reduction in Aerospace & Automotive),
the cost of carbon intensity through taxation from our
operations and the potential increase in the cost of energy.
Victrex has used the TCFD framework of six risks and five
opportunities along with the related examples to support
theidentification process, of which four risks and two
opportunities are considered to be most impactful and
aredisclosed below.
Climate-related risks and
opportunities will continue to be
reviewed on a regular basis by
theCRC. Further locations, those
which are smaller and have a
muchlower impact on current and
medium-term revenue growth, will
be assessed for physical risks when
their revenue becomes material to
the strategy period, with updates
made to existing assessments and
mitigation plans as information
and climate change modelling
become more sophisticated.
Risks and
opportunities, both
physical and
transitional, are
presented on
pages 51 to 53.
b. Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy and
financial planning
The potential climate-related benefits that our products offer
present a strong business opportunity, which is considered to
outweigh the climate-related risks from markets which will be
adversely impacted by climate change. The benefits that our
products bring are detailed in Products (Sustainable solutions)
on page 64. Climate-related risks, both physical and
transitional, are primarily assessed in the context of our own
manufacturing operations.
External assurance was gained on Scope 1 & 2 emissions for
FY 2022, with limited assurance being given on Scope 3 from
FY 2023 onwards.
The impact assessment of the
identified risks and opportunities
will be refreshed as part of the
annual strategy review during each
future financial year with the aim
of maturing our models continuously.
Assurance across all scopes
usingan external provider
(SLRConsulting) to work
towardscarbon budgeting.
The impact of risks
and opportunities
ispresented on
pages 52 and 53.
Examples of the
benefits our products
bring in reducing CO
2
emissions and
therefore supporting
the mitigation of
climate change risk
are included
on page 64.
Emissions reporting
is detailed in the
Resource efficiency
section on
pages 58 to 62.
c. Describe the resilience
ofthe organisation’s
strategy, taking into
consideration different
climate-related scenarios,
including awell below
2°C or lower scenario
The Group believes that its Polymer & Parts strategy is resilient
in a well below 2°C or lower scenario, primarily through:
u
the Group’s existing products, along with its mega-
programmes in Transport, support applications aimed
at reducing carbon dioxide emissions and therefore
assist current and future customers meeting their own
requirements to reduce emissions in a well below 2ºC
orlower scenario; and
u
the strategy of the Group includes a clear goal to
decarbonise the manufacturing process as part of
achieving Net Zero (noting access to technology). This
will mitigate the impact of the Group’s manufacturing
processes on climate change and mitigate against the
likely tightening of regulatory/government restrictions and
taxes to drive down the use of carbon emitting processes.
Challenge the manufacturing
process and chemistry to lower the
overall energy usage, water usage
and waste generation. Complete
the assessment of the most climate
sensitive and cost effective source
of green energy to meet the future
manufacturing requirements,
replacing gas and non-green
electricity currently used.
See pages
5, 58 to 62.
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Victrex plc Annual Report 2023
50
Recommendation Consistency and 2023 actions Future actions
Further details
(where relevant)
Risk management
a. Describe the
organisation’s processes
for identifying and
assessing climate-
related risks
During 2022 we conducted an initial climate-related risk
assessment using external specialist support. This included a
risk assessment workshop comprising senior management
from across the business to review climate-related risk over
the short, medium, and long-term horizons. This exercise
considered both the climate-related physical and transition
risks under three climate scenarios and the actions that could
be taken to mitigate them. A summary of the most significant
climate-related risks is included on pages 51 to 53.
Climate risks have been part of our overall Corporate Risk
Management process during 2023 and will continue to be
going forward. Each risk is thoroughly evaluated based on
the likelihood of occurrence and severity of impact.
Continue to monitor and review
climate-related risks through the
Corporate Risk Management
process. In addition, the CRC will
provide oversight to the newly
established climate-related risks
including action plans and
progress made.
The risk
management
processis described
on pages 32 and 33.
b & c. Describe the
organisation’s processes
for managing climate-
related risks, and how
these are integrated into
the organisation’s overall
risk management
The CRC oversees sustainability workstreams, which includes
climate-related risks. Climate-related risks are integrated into
and managed alongside our corporate risk processes and
principal risk profile. Each risk has a designated risk owner
who is responsible for reviewing and monitoring the risk
andproviding the necessary oversight for the implementation
and maintenance of appropriate mitigations.
Our corporate risk framework (page 32) provides details of
the processes used to assess and manage all risk types,
including climate-related risks. We have a well-established
risk impact rating methodology which we have used to
complete qualitative assessments of our transitional and
physical climate-related risks.
Further develop the response plans
for each significant climate-related
risk and its interaction with the
options to Net Zero and monitor
progress through the CRC.
Fully establish assurance of key
controls and actions related to the
newly defined climate-related risks.
The building blocks
to Net Zero are
included on page 61.
See pages 52 and 53
for the strategic
response and
resilience against
thespecifically
identified risks.
Metrics & targets
a. Disclose the metrics used
by the organisation to
assess climate-related
risks and opportunities in
line with its strategy and
risk management process
The climate-related metrics are proposed by management
and agreed by the CRC. This includes the development of
milestone targets on the path to Net Zero (Scope 1, 2 & 3
emissions aligned to SBTi).
Further refinement of metrics
including setting of interim
milestone targets to monitor
progress towards reductions to
Scopes 1, 2 & 3 in line with SBTi
1.5°C emissions scenarios.
Victrex metrics are
set out on page 61.
Targets for these
metrics are being
developed in line
with our SBTi
submission for
publication
in FY 2024.
b. Disclose Scope 1, Scope2
& Scope 3 greenhouse
gas (‘GHG’) emissions and
the related risks
We calculate and track Scope 1, 2 & 3 (Scope 3 categories
where relevant – see page 62) GHG emissions, including our
absolute carbon emissions, and measures of carbon intensity
according to the GHG Protocol Corporate Standard.
We submitted our plan to SBTi for
validation in September 2023 with
options covering reductions to
Scopes 1, 2 & 3 in line with its
1.5°C emissions scenarios.
Emissions disclosed
on pages 58 to 62.
c. Describe the targets used
by the organisation to
manage climate-related
risks and opportunities
and performance
against targets
We have established longer-term goals with associated
near-term milestone targets related to climate change, which
includes our aspiration of Carbon Net Zero aligned to SBTi.
Interim goals include our target of increasing our sustainable
products to over 70% of revenues by 2030 (from more than
50% in FY 2023).
As set out in the Directors remuneration report, a proportion
of executive remuneration will be assessed against
challenging carbon reduction targets.
We have submitted our plan to
SBTi for validation to start the
process of science-based targets
inline with the global accord to
minimise global warming to 1.5°C.
Climate-related
metrics and targets
are set out on page
60 for emissions.
The initial revenue
metric is included
on page 47.
Executive targets
detailed are set out
on pages 111 to 123.
Climate-related risks and opportunities
As noted above the Group has been through a detailed process to identify climate-related risks and opportunities. As required by TCFD
thishasincluded the two major climate-related risk categories and their six subcategories along with the five major categories of opportunity.
Analysis has been undertaken against each of the subcategories to identify the key risk/opportunity relevant to the Group, the financial impact
ofthat and the likelihood of them arising both across a range of timelines and transition climate scenarios. The time horizons and climate scenarios
used for the transitional risk assessment are detailed below with those used for physical risks included on page 53. Different climate scenarios
andtime horizons have been used to best represent the different drivers behind transitional and physical risks and opportunities.
Time horizons: They have also been assessed through multiple transition climate scenarios:
Short
term
Longer
term
Medium
term
Considered up
to 3 years
Between 3
and 10 years
More than
10 years
1
Accelerated Net
Zero 2050 scenario
(aligned to 1.5°C)
3
Current policies
scenario
(aligned to 3°C)
2
Mid case scenario
(aligned to 2°C)
Global Net Zero target
achieved by 2050 in line
withthe aim of the Paris
Agreement. This would
require swift and decisive
action regarding both
governments andbusinesses.
Achieve global Net Zero by
2080, requiring a progressive
ramp in policy interventions
compared with today.
Global Net Zero not achieved
by 2100, reflecting lack
ofco-ordinated global
commitments with limited
policy interventions.
The analysis is split into transitional and physical risks and opportunities and detailed on pages 52 and 53.
STRATEGIC REPORT
51
Annual Report 2023 Victrex plc
Sustainability report continued
Transition-related risks and opportunities
The Group undertook a detailed exercise to identify transition risks and opportunities for consideration. Those considered to have the
largest impact are included in the table below. For some risks and opportunities, the time frame of impact spans multiple time horizons;
where this is the case two time frames are shown to illustrate this with the impact expected to increase as the time horizon increases.
Climate-related
risk/opportunity Impact
Temperature
scenario
Time frame
ofimpact
Strategic response
andresilience
Policy
Risk: The Group’s energy
usage is disclosed on pages
59 to 61. Increasing the
pricing of carbon emissions
isa key lever for governments
and regulators to reduce the
use of hydrocarbon-based
energy sources.
Link to principal risks:
Strategy execution
Current sources of energy, gas and
electricity could increase in cost
significantly as the government
drives a move away from
hydrocarbons to green energy
sources, with alternative sources
ofgreen energy more expensive.
Anillustrative impact for financial
modelling purposes has been
madeas outlined below.
Accelerated/
Mid/Current
Medium
Mediumlong
Reducing the impact of carbon-based
taxes is being mitigated by both the
switch to greener energy and the
chemistry of the manufacturing
process to reduce absolute energy
usage. The Group’s strategy for
reducing carbon emissions is aligned
to SBTi and outlined on page 61.
Theapproval of new capital projects
includes consideration of the source
ofenergy and an assessment and
access to green energy options.
Policy, market, and technology
Risk: A proportion of the
Group’s sales go into
industries expected to decline
due to climate change (driven
by both government policy
and consumer behaviours),
including Oil & Gas and
internal combustion
engine-based transportation.
Link to principal risks:
Strategy execution/
Geo-political and macro-
economic environment
Declining sales and profits as
demand falls for the Company’s
products. Approximately 21% of
sales currently go into Oil & Gas and
ICE related Automotive applications.
Accelerated/
Mid/Current
Mediumlong
Long
Whilst Oil & Gas and ICE-based
transportation is expected to reduce
significantly over time, this is likely
tovary by geography and take many
decades. PEEK has a continuing role
to play in making both industries
reduce their carbon footprint in
theintervening period.
Opportunity: PEEK’s
properties play favourably
ina low carbon world
(seepages 43 and 45
providing opportunities
togrow sales significantly
asthe world decarbonises
and governments introduce
policies and regulations.
Delivery of the Group’s growth
programmes, which underpin
carbon reduction, including
lightweighting of aircraft,
electrification of vehicles and
increased use of semiconductors,
will lead to significant revenue and
profit growth and cash generation.
Accelerated/
Mid/Current
Medium
Mediumlong
The Company continues to invest
heavily in its mega-programmes
supporting lower carbon transportation,
but also has applications in green
energy and electronics which support
improved energy efficiency. Within
Automotive, for example, the
decrease in the ICE business is
expected to be slower than the
increase in the EV business and will
therefore provide an increased net
benefit over the medium-term
horizon. Success in this area is aligned
to our target of growing revenue
from sustainable products.
Reputation
Risk: Key stakeholders,
including investors and
employees, become
disenfranchised with the
Group’s failure to deliver
itsNet Zero target.
Link to principal risks:
Recruitment and retention
ofthe right people
Reduced interest from investors will
adversely impact the Company’s
share price and make raising capital
more difficult.
Not being able to retain and
attracttalent will adversely
impactthe Group’s ability to
deliverthe strategy.
Accelerated/
Mid/Current
Short–medium The Company has established an
ambition to become Net Zero across
Scopes 1, 2 & 3 in line with SBTi 1.5°C
emissions scenarios. Demonstrating
progress against these milestones will
retain the interest of key stakeholders.
Opportunity: Achieving
NetZero presents an
attractive proposition for
keystakeholders, including
customers, investors, and
employees, with increasing
interest in being associated
with ambitious companies
delivering their commitments
on climate change.
Increasing interest from ESG funds
may boost the Company’s share
price and could provide greater
access to capital, with financial
institutions also providing more
attractive access to capital for
companies with green credentials.
Attracting and retaining talent will
support delivery of the Company’s
strategic growth ambitions.
Accelerated/
Mid/Current
Short–medium Victrex has grown its position
amongst several dedicated ESG funds
(UK & global). It has also broadened
its position in several external
networks or industry forums as
anadvocate of decarbonising.
The Group has sought external
accreditation for its approach to
climate change (e.g. MSCI) providing
key stakeholders with assurance of
itscommitments to Net Zero.
STRATEGIC REPORT
Victrex plc Annual Report 2023
52
The overall financial impact of the risks and opportunities in this section has been assessed. From a revenue perspective it has been
concluded that climate change presents a net opportunity for the Company, with PEEK and its current and future applications playing
strongly across several end markets where reductions in carbon emissions are a key driver for innovation. For financial planning and
scenariomodelling a cautious revenue neutral position has been assumed.
The primary adverse financial impact will come from higher carbon pricing, should the Company fail to identify a cost effective
green energy solution to replace gas as its primary source. The Board remains confident that this will not be the case but the cost of
implementing and running greener energy, based on current usage, can only be an estimate at this stage. The target is to mitigate any
increase through improvements in the manufacturing process which facilitate operating at lower temperatures and producing less waste;
however, this remains at early stages with cost increases likely to arise before the mitigation benefit. As a result, the Group has assumed
a financial downside from carbon pricing (covering both the potentially higher cost of green energy, and the cost of carbon taxes if this
fails). Anassumed additional cost of £20mp.a. (from 2025), increasing annually with inflation, has been included in sensitised financial
forecasts,including the models used for impairment testing and the viability assessment, to address this risk.
Physical risks
The Group has assessed the climate-related physical risks, both acute and chronic. The primary physical risk is that of increased severity
andfrequency of extreme weather events:
Climate-related risk Impact Risk Potential financial impact
Physical: acute and chronic
Increased frequency and severity
ofextreme weather events.
u
Disruption to production
processes and/or loss
ofinventory.
u
Loss of assets.
u
Harm to employees.
u
Loss of reputation for ability
tosupply on time in full.
u
Employee welfare could be
impacted by extreme weather
ranging from impact of
flooding through to heatwaves
and droughts making working
conditions harmful.
u
Increases in the frequency
andseverity of flooding
events could result in damage
to production assets or loss
ofinventory.
u
Loss of production resulting
in loss of revenue (short
term and/or long term) due
to being unable to supply
with customers seeking
morereliable alternatives.
u
Cost of repairing/replacing
assets not covered by insurance.
u
Increased cost of unavailability
of insurance.
The Group’s primary operational manufacturing assets are in the UK, with commissioning concluding in China on additional capacity which
will be fully operational in early 2024. The Group has a network of regional warehouses, all of which are leased, which affords the flexibility
of being able to readily relocate these within a short time frame where elevated risks exist or emerge over time.
The Company’s ability to supply its customers has been and remains a key business priority. A key mitigation of this risk is the level of
inventory, with targeted levels of three to four months’ cover at each warehouse. This level is kept under review depending on the risks
to global supply chains and the phasing of extended plant maintenance shutdowns at any point in time as well as the volatility in demand
profiles. The risk to supply from climate change is incorporated into this consideration, but at current target levels of inventory, a temporary
loss of production due to extreme weather events could be absorbed without losing the ability to supply customers.
Physical risk climate scenario analysis modelling
Climate scenario analysis (‘CSA) was completed within FY 2022 on the Group’s primary operational manufacturing sites, defined as those
critical to the sustainability of our current revenue streams and those which will deliver most of the growth over our strategic planning horizon,
five years. Three sites met the criteria for inclusion in the initial assessment, all based in the United Kingdom. The information assisted our
understanding of the potential impact of climate change on the future of our business which in turn will support the evolution of our strategy.
The CSA was carried out using a standard methodology in line with TCFD guidance by third-party advisors to assess the exposure to the physical
risk noted above. In total nine hazard types were assessed, including flood, wind, precipitation, and drought, up to 2100 in 10-year increments.
The modelling has been based on three IPCC climate change scenarios with a baseline of 2020. The scenarios are detailed in the 2022 Annual
Report, based on Shared Socio-environment Pathways (‘SSP’) ranging from SSP 1-2.6 to SSP 5-8.5.
The conclusion from the analysis of these three sites is that there was no material financial impact from the physical risks arising from climate
change through the short-term time horizon, mid-term time horizon (2041–2060) nor well into the long-term time horizon (2081–2100) (under
any of the temperature scenarios), neither directly in the working conditions for our employees nor the operational cost of the business nor the
cost of insuring the Group’s key assets. The analysis highlights several factors for the Company to consider in expanding, replacing and protecting
its assets and providing a safe working environment for its employees at these sites. The incorporation of these into the future plans of the
business will be monitored by the CRC. The hazard types and levels remain consistent within those disclosed in the FY 2022 Annual Report.
An updated analysis based on the 2023 strategy update, confirmed that the three sites identified in 2022 remain the most impactful
over the next five years. Further work is scheduled to widen the scope of this analysis to other manufacturing sites, as they become
moresignificant, and through the supply chain to our strategic suppliers, focusing on suppliers in markets with limited participants.
Financial statement impact
The impact on the financial statements for the year ended 30 September 2023 of the aforementioned risks and opportunities from climate
change has been detailed in the notes to the financial statements (see note 1 for further details).
STRATEGIC REPORT
53
Annual Report 2023 Victrex plc
Sustainability report continued
Safety, health and wellbeing activities take place
globally, keeping SHE as our highest priority
Victrex formed a Biodiversity partnership this
year to help industry and nature work in harmony
Safety, Health and Wellbeing
The safety, health and wellbeing of our
employees continues to be our highest
priority and fundamental to everything
wedo at Victrex.
This year we changed our annual Global SHE
Week, to quarterly Focus on SHE sessions,
allowing for more allocated time for our
colleagues to spend on SHE related activities
including Health & Wellbeing. This year we
have run a number of workshops which
include Lifestyle Management, Movement
Matters, Financial Wellbeing and Managing
Menopause. We had 441 colleagues attend
workshops. Notably our team in Shanghai
was able to hold its first in-person SHE event
since the COVID-19 pandemic and this was
well received by our colleagues.
We continue to build digital resources and
toolkits accessible year-round for all our
employees which included articles focused
on a variety of topics including grief,
mental health, digital wellbeing, surviving
long-term illnesses and women’s health,
some of which shared personal stories
from our employees, which led to valued
conversations and collaboration across all
our sites.
During the year we started our podcast
series with a group of colleagues to discuss
the topic of bereavement, at the request
of one of our colleagues who had recently
suffered a loss. We had a great response
from colleagues wanting to get involved
andsupport their colleague.
We continued to celebrate international days
and events and in November we celebrated
our month of supporting men, along with
celebrating our month of supporting women
in March. In these months we provided a
number of activities, articles and learning
to support our colleagues. In March 2023
for example, we held a dance-a-thon where
colleagues gathered and raised money for
Fylde Coast Women’s Aid.
PEOPLE (SOCIAL RESPONSIBILITY)
Our social responsibility pillar focuses on inspiring our employees
and communities to positively impact on our three priority areas:
u
Safety, Health and Wellbeing;
u
Diversity, Equity & Inclusion; and
u
Community and employee volunteering.
Employee assistance programme
We continue to provide occupational
health, private medical and employee
assistance programme (‘EAP’) services to
all our employees. This year, in the UK, we
launched an employee assistance app with
our EAP provider, to allow our colleagues
to have help and advice at their fingertips.
We also saw the return of UK on-site health
checks from our private medical provider,
supporting our employees with tailored
health enhancing advice.
We are committed to improving employee
wellbeing and engagement with a healthier
and more inclusive culture and aim to
continue building on the foundations
from this year to ensure improvement
in the safety, health and wellbeing of all
ouremployees.
STRATEGIC REPORT
Victrex plc Annual Report 2023
54
IN 1993
60
IN 2023
1,109
Permanent employees
(as at year end)
IN 2023
Make 654
Develop, market
and sell 249
Support 214
TOTAL: 1,117
IN 2022
Make 586
Develop, market
and sell 230
Support 188
TOTAL: 1,004
Average number of people
employed during theyear,
bycategory
Participation in employee
share schemes
2023 2022 2021 2020 2019
85% 77% 89% 90% 93%
Note: Based on eligible employee population.
85%
Diversity, Equity & Inclusion
We are fully focused on our target of
achieving 40% of females in our leadership
group by 2030 through promotions and
targeted development solutions.
Our second diversity data collection exercise
saw an increase in employees responding to
the questionnaire giving us further insight
into our employee base. This continues to
inform our activities throughout the year
ensuring the correct alignment.
Ongoing work with our applicant tracking
system continues to help us interrogate
who is applying for jobs at Victrex and
who is being employed. This has enabled
a more focused approach to recruitment
ensuring a greater diversity of candidates
are applying for jobs. A number of initiatives
have been introduced to support in this area
including using gender decoding software
for advertisements, using more diverse
job boards and a greater emphasis on
facilitating flexible working.
We continue to give full and fair consideration
in our recruitment and selection process to
any applicant with a disability. For disabled
persons employed by Victrex, be that upon
commencement or who become disabled
during their employment, Victrex is committed
to ensuring equality of opportunity for
training, career development and promotion
opportunities. We are registered with the UK
government’s ‘Disability Confident’ scheme
and demonstrate this commitment globally.
This year we have established a new
employee resourcing group – the ‘Enable’
network with a focus on supporting
employees with disabilities. Activities this
year have included carrying out an audit
of workplace premises from an inclusion
perspective to identify what changes could
be made to enhance our inclusiveness
and highlighting all the accessibility tools
available to all colleagues across Victrex.
Our rebrand last year to Diversity, Equity
& Inclusion is embedding well. Focused
workshops on understanding equity helped
further embed the DE&I messages with
good attendance. Our mid-year Employee
Experience Pulse Survey further highlighted
our progression on our diversity journey
with an increase of 4% to show that
81% ofemployees believe that Victrex
appreciates individual differences.
Progress in FY 2023
u
Facilitated delivery of workshops on
understanding: equity (129 attendees),
allyship (62), bias (37) and specifically for
managers – creating an inclusive culture
(53). Delivered information sessions for
manufacturing-based employees in the
UK. Over 400 employees engaged and
participated in facilitated DE&I sessions.
u
In addition, 726 employees have
completed our Introduction to Diversity,
Equity & Inclusion e-learning.
u
Our employee resourcing groups
continue to grow with 140 people
involved in our gender engagement
networks and 30 people involved in the
Enable group. Our Race4equality group
continues to develop, now encompassing
the US and the UK.
u
23 guest speakers on diversity included:
u
Vivienne Cox – a view from the Chair;
u
Sarah Furness – Fly Higher –
leadership and resilience;
u
Darren Edwards – Disability and
Thriving in the face of adversity; and
u
Rachel Yankey – redefining the game:
A lioness’ Call to End Racism in Football.
u
Creation of DE&I toolkits to support
managers having conversations
arounddiversity.
u
Successful piloting of a Reverse
Mentoring programme.
u
Ongoing development of the DE&I library
including resources on generational
differences, accessibility in the workplace
and Pride.
u
Promoted several global awareness
days including Movember, International
Women’s Day, ‘Pride Month’ and the
Invictus Games.
u
Outreach work at Blackpool Sixth Form
with a focus on LGBTQ+.
Employee breakdown
At the end of FY 2023:
u
56% of our Board were male and44%
were female.
u
33% of our senior managers were female**.
u
In the grouping of senior managers
andtheir direct reports***, 69% were
male and 31% were female.
u
Of the rest of our employees 75%
weremale and 25% were female.
As at 30 September 2023:
Male Female
Grand
total
Board of Directors* 5 4 9
Senior managers** 4 2 6
Senior managers
anddirect reports*** 33 15 48
Rest of employees 796 265 1,061
Grand total
permanent
employees (incl.
Executive Directors) 829 280 1,109
* Board of Directors includes Martin Court
as at 30 September 2023.
** VMT members excluding the Executive
Directors. VMT members are listed on page 81.
*** VMT members including Executive Directors
and direct reports.
9%
Voluntary employee turnover
2023 2022 2021 2020 2019
9% 8% 7% 4% 5%
STRATEGIC REPORT
55
Annual Report 2023 Victrex plc
Sustainability report continued
PEOPLE (SOCIAL RESPONSIBILITY) continued
Learning & development
Our digitalisation of learning continues, with
an increasing number of blended learning
solutions being developed.
We continue to focus on the development
of our managers and our newly launched
‘Management for Success’ programme has
seen a total manager participation of 565,
across the 10 modules.
The focus on safety training continues with
a further 65 employees completing their
IOSH accredited qualification.
In FY 2023 we had 56 (45 male: 11 female)
employees on apprenticeship programmes
including 15 employees (12M:3F) completing
their qualifications. 19 employees (13M:6F)
started professional qualifications
in FY2023 and 9 people completed
professional qualifications (5M:4F).
Employees across Victrex completed 23,523
hours of learning in FY 2023.
Recognition
We continue to be proud of our recognition
programmes, celebrating the achievements
of our employees through ‘instant’ and
‘functional’ awards, our Above & Beyond
Awards, our annual CEO Awards which
recognise the global talent and innovation
across Victrex, and our Professional
Development Awards celebrating those
employees completing further education
togain a qualification.
In FY 2023, there were 493 Above &
Beyond Awards, 109 Functional Excellence
Awards, 57 CEO Awards and 37 Professional
Development Awards.
Involvement
u
We continue to offer a range of
communication channels, both formal
and informal, allowing us to ensure
that our employees remain informed
of business updates and two-way
discussions take place.
u
Operating a hybrid approach to our
virtual quarterly staff briefings this year,
with both face to face and virtual, to
support our flexible working ethos.
These sessions allow our employees
to ‘stay in touch’ with our leadership
team and hear about business updates
and also give the opportunity to
askquestions.
u
Brendan Connolly, our Non-executive
Director for Workforce Engagement,
has been meeting with our employees
globally to listen to employee voice,
explore views and drive employee
engagement. We have had excellent
feedback from our employees on the
interactions. His fourth annual report
canbe found on pages 84 and 85.
u
Following our 2023 Employee Experience
Pulse Survey we continue to be focused
on reviewing the results and creating
and delivering action plans to drive
improvements. Over 70% of our
colleagues have been involved in creating
and delivering onimprovement action
plans for their teams. We saw a 5%
increase inoverallengagement to 74%.
u
Our quarterly regional Employee Forums
continue to give our employees an
opportunity to feed back on broader
employee experience and provide an
employee view to planned business
initiatives and projects.
Gender pay in Victrex
For Victrex, Diversity, Equity & Inclusion
(‘DE&I’) are all central to our sustainability
& ESG strategy, with targets specifically
focused on measuring the effectiveness of
interventions to support female progression
within our organisation. Our Corporate
Responsibility Committee chaired by a
Non-executive Director continues to increase
the focus and rigour on our efforts to drive
change in the DE&I agenda (see page 98 for
Corporate Responsibility Committee report).
Gender diversity and pay
We continue to report and publish our
statutory gender pay and bonus gap
each year, in line with the guidance
introduced in the Gender Pay Regulations
in 2017. Inaddition, we look for trends and
indicators ofour successful implementation
of targeted initiatives or identify new
opportunities to support bridging the
gap over time. Victrex continues to meet
the standards of the Minimum Wage and
National Living Wage where these apply.
The full Gender Pay Report is
available on our Victrex plc website at
www.victrexplc.com.
For gender pay gap reporting purposes,
we took our ‘snapshot’ of Victrex
Manufacturing Limited at 5 April 2023 and
have outlined the headline statistics and
analysis in this section. We have then set out
a summary of the key improvement actions
we have been taking and the positive
trends emerging since we started our
reporting in 2017.
Snapshot headlines for 2023
u
There were 733 relevant people
employed on full pay (in Victrex
Manufacturing Limited).
u
78% were male and 22% were female.
u
The percentage of female employees
overall has increased from 17% in 2017
to 22% in 2023.
u
The percentage of female employees
inthe upper middle quartile increased
from 6.15% in 2017 to 17.03% in 2023.
u
The percentage of female employees in
the upper quartile has increased from
17.83% in 2017 to 22.40% in 2023.
u
The median gender pay gap has reduced
from 13.49% in 2017 to 6.42% in 2023.
u
93.80% of males were paid a bonus,
compared with 91.57% of females.
u
The proportion of male vs female
employees in each of our pay bands was
split as follows:
u
Lower quartile – 65.43% male vs
34.57% female.
u
Lower middle quartile – 86.67% male
vs 13.33% female.
u
Upper middle quartile – 82.97% male
vs 17.03% female.
u
Upper quartile – 77.60% male vs
22.40% female.
Summary
We are committed to taking sustainable,
positive, and proactive actions to close
the gender pay gap through focused
interventions. We are actively reviewing,
defining and developing initiatives to
accelerate our progress towards our
targets to become a more gender balanced
organisation by 2030.
We have made steady incremental progress
over the past six reporting years, reducing
the pay gap and increasing our female
leadership and talent pipeline at apprentice
level; however, we remain focused to do
even better.
Over time, we are confident that the actions
and initiatives we put in place, alongside our
other inclusive policies, will have an impact
on the balance of male vs female employees
at all levels in the organisation and support
our sustainability goals.
STRATEGIC REPORT
Victrex plc Annual Report 2023
56
Community &
employeevolunteering
Victrex seeks to inspire the next generation of
talent, with a growing Science, Technology,
Engineering & Maths (‘STEM’) programme,
and community partnerships, both in the
UKand globally.
Primary education
Inspiring the next generation is our driving
force behind our STEM outreach, and it’s
pivotal that we start inspiring children
at a young age. Much of our outreach
historically has been aimed at ages 11–18,
but this year, we connected with several
primary schools in the Blackpool, Fylde, and
Wyre area to bring STEM careers into their
schools. A key relationship has been built
with Larkholme Primary School, through
which we have connected with 125 children
aged 7–11 across two activities, as well as
funding an outdoor learning space that
promotes STEM and everyday life skills as
part of the curriculum. Without the funding,
the children would have had limited outdoor
time due to weather for the next two years.
Throughout FY 2023 we have continued to
support the communities where we operate,
through partnership and consultation in
our relationships with SIP, Business in
the Community (‘BITC’), Blackpool Pride
of Place, Career Ready, Royal Society of
Chemistry, Careers & Enterprise Company,
and Speakers for Schools to offer meaningful
impact where it is needed most. Our global
network of social responsibility ambassadors
is strong.
Lab interns & STEM
In FY 2023, we welcomed our first Victrex
STEM ambassador in China who engaged
a local university chemistry course and
supported three interns in the laboratory
at our AITC Shanghai technical centre. The
students experienced lab testing and other
daily tasks, learning from Victrex employees.
This programme was a great success,
and we intend to welcome more interns
next year.
Biodiversity
Biodiversity is a growing theme for many of
our stakeholders, in ensuring that industry
and nature can co-operate collaboratively.
With clear links to the communities where
we operate, we became members of The
Wildlife Trust for Lancashire, Manchester,
and North Merseyside in the UK, our
first Biodiversity partnership. A group of
employees took part in a volunteer day at
the Lunt Meadows Reserve in the UK, to
help conserve the venue for wildlife. As part
of our new membership, we plan to support
many more events in the coming years and
are considering how we could broaden
these activities to other sites.
Special educational needs
(‘SEN)inclusion
Through the development of our new
Enable network, supporting people with
disabilities, we identified that we needed to
connect with young aspiring people at local
special educational schools in Blackpool to
include them directly in our STEM outreach.
We connected with three local SEN schools,
running STEM workshops, and we are now
in conversations about work experience, and
further engagement opportunities.
Gender workshops
As part of the global celebrations for
International Women’s Day, Victrex was
invited to support at the Fylde Coast
International Women’s Day event at
Blackpool Sixth Form College in the UK.
Several employees attended on the day to
deliver workshops about women in STEM
togirls aged 1315 from around the UK.
Charitable donations
Our global, employee-led charity and
community teams have continued to support
the local communities where we work
throughout FY 2023. Our key focus has
been social mobility, global donation drives,
and a wide range of other community-led
initiatives aimed at giving back.
Victrex has supported a range of
charitable donations totalling £82,331
(FY2022: £81,811).
Responsible taxation policy
The Group is committed to managing its
tax affairs in a responsible and transparent
manner, as outlined in our Tax Strategy
(www.victrexplc.com), with the Group
acknowledging its corporate responsibility
in this area. The profit-based corporation
tax charge for the year was £8.0m
(FY2022: £11.4m), with a total tax charge,
incorporating deferred tax, of £11.5m
(FY 2022: £12.2m) giving an effective tax
rate of 15.9% (FY 2022: 13.9%). Taxation
paid during FY 2023 was £2.0m (FY 2022:
£10.6m), in relation to profit-based taxes,
which was below the corporation tax charge
reflecting a repayment of tax from previous
years. The Group’s mid-term guidance for
the effective tax rate is 13%–17% compared
to the current (25%) UK corporation tax rate
and the global minimum rate of 15% due
to take effect for applicable multinational
enterprise groups from FY 2025 (albeit
the Group currently does not meet the
group revenue threshold of €750m). The
discount to the standard UK rate, which
the government has increased to offset
the increase in the UK corporation tax
rate, is due to the specific UK government
reliefs, including Research & Development
expenditure credit, Patent Box and, from
time to time, enhanced capital allowances,
available to UK companies which invest
heavily in Research & Development, create
highly skilled innovation jobs and develop
unique value-generating intellectual property
(‘IP’). Victrex’s strategy of investing in, and
patenting the output of,innovative and
sustainable products andprocesses allows
the Group to benefit from these reliefs.
The Group currently manufactures the
majority of finished goods in the UK, which
are then sold to Group companies in other
jurisdictions which serve their respective
customers. The prices levied between
Group companies, and resulting profits
in each jurisdiction, are governed by the
Group’s global transfer pricing policy, which
is basedon the arm’s length principle and
setin compliance with OECD principles with
regular benchmarking undertaken using
external advisors.
It is noted that the total tax contribution
for the Group is significantly higher than
the profit-related taxes alone. The total
tax contribution for the Group includes
employee-based taxes, customs duties
and elements of unrecoverable VAT, in
addition to taxes collected on behalf
ofthegovernment, including VAT and
taxesborne by the Group’s employees.
Group policies
Victrex annually reviews its key employment
policies, several of which are shown on
www.victrexplc.com. The Group, through its
Code of Conduct programme, also targets a
100% completion rate by employee training
covering SHE training, the Code of Conduct
(Ethics), IT Acceptable Use and other linked
topics. A list of the key policies relating to
our employees can be found on page 66.
STRATEGIC REPORT
57
Annual Report 2023 Victrex plc
Sustainability report continued
Resource efficiency
Beyond our products playing a role in
society, or having recyclability potential
in applications, we also have clear goals
to improve our resource efficiency,
including reductions in energy, waste,
and water usage. Several metrics were
adverse compared to the prior year
(largely down to our new China facilities
being commissioned, and the UK Asset
Improvement programme, with significant
engineering work at UK facilities). Energy
and water usage will continue, in the short
term, to be driven by production volumes,
with lower year on year production in FY
2023 compared to the prior year. Our total
carbon intensity (Scope 1 & 2 emissions/
tonnes of PEEK manufactured) has shown a
14% increase this year, although pleasingly,
our carbon intensity (excluding China) was
down 4% vs FY 2022.
In context, long-term carbon intensity has
reduced by 17% (8.52 in FY 2023 vs 10.24
in FY 2013), primarily driven by operating
efficiency and an increase in renewable
electricity, which benefits our Scope 2
emissions, and Continuous Improvement
(‘CI’) projects. Our priorities remain the
efficient use of energy and water and
waste minimisation. Hazardous waste
perunit of revenue has decreased by
55%since FY 2013.
Principal environmental impacts
The Group’s main environmental impacts
are set out in the charts on page 59 and
are different from the Group’s overall
greenhouse gas (‘GHG’) emissions
(onpages60 to 62).
We report data per unit of revenue and
per tonne of PEEK produced, to best align
our indicators with our Polymer & Parts
strategy as we move downstream into more
specialised manufacturing with a varied
product mix, along with absolute data to
demonstrate our total impact. Over recent
years, targeted improvement programmes
have resulted in lower energy and water
efficiencies per unit of plant output.
Environmental indicators have benefited
from lower sales volumes.
Our GHG report (updated in line with the
UK government’s new policy on Streamlined
Energy and Carbon Reporting (‘SECR’))
includes our corporate CO
2
emissions by
emission type (Scope 1 emissions generated
by the direct combustion of gas; Scope 2
emissions from purchased electricity and
steam; total energy used; and Scope 3
emissions indirect from other sources).
Absolute emissions data is reported
along with Scope 1 & 2 emissions per
unit revenue.
Assessment & measurement
We have submitted our decarbonisation
and emissions reduction plan to SBTi and
we have a long-standing participation in
theCarbon Disclosure Project (‘CDP’), which
benchmarks global companies and has
recognised our efforts in this area. MSCI,
one of the leading ESG rating agencies, FTSE
Russell and EcoVadis are other organisations
that assess our performance (see page 48).
This year we introduced the Sphera ESG
reporting software to ensure all ESG and
sustainability-related reporting is contained
PLANET (RESOURCE EFFICIENCY)
UK employees active in the community
within a central platform. This has been
used for the first time to generate the data
for FY 2023.
Sustainability & ESG compliance
Working with global regulatory authorities,
we make sure that the best available
techniques to protect the environment
are adopted. Our UK chemical production
plants are regulated under Environmental
Permitting Regulations and, as such,
are subject to regulatory review by the
UK Environment Agency. We carry out
extensive routine monitoring in line with our
environmental permits, to proactively ensure
our plants are well controlled with zero
notifiable permit breaches during the year.
During the year we successfully retained
our ISO 14001:2015 certification for the
environmental management system on
all our UK polymer manufacturing plants,
melt filtration, compounding, film, tape,
pipe, dispersion, and innovation plants,
validating our high level of commitment
to environmental improvement. Victrex
has an effective system for reporting and
investigating incidents and near misses with
zero reportable environmental incidents
within the period.
Through our Head of Sustainability & ESG,
Victrex is continuing to monitor future
regulatory development requirements, e.g.
the Taskforce on Nature-related Financial
Disclosures (‘TNFD’), and the Carbon Border
Adjustment Mechanism (‘CBAM’) to assess
both impact and opportunities.
UK Emissions Trading Scheme
(‘UK ETS’)
The combustion of permitted fuels at
our main UK Hillhouse production site is
enabled through our Greenhouse Gas Permit
under the UK ETS scheme. Verification of
emissions was undertaken via a registered
third party and a submission made to the
Competent Authority (UK Environment
Agency) in April 2023. Victrex plans to
reduce its costs under UK ETS during 2024
by proving the efficiency of its boiler plant
equipment and thereby being granted free
allowances under the New Entrants Reserve
(‘NER’) element of the scheme. These
allowances will be back-dated to the point
at which the Company joined the scheme in
August 2021. As part of our decarbonisation
roadmap, we have also fully assessed the
option to electrify our boilers, supporting
our reduction in emissions over the coming
years, subject to sufficient electrical grid
capacity in the UK.
STRATEGIC REPORT
Victrex plc Annual Report 2023
58
Energy use
Our primary energy use is reported from
all global Victrex locations with usage data
based on meter readings and/or invoices.
Although the Group saw lower production
volumes vs FY 2022, absolute energy use
and primary energy per unit of revenue
increased due to improved reporting, and
commissioning of our China operations,
which will be fully operational
within FY 2024.
Excluding China, primary energy usage
(inGJ) was 4% lower vs FY 2022.
* Includes data from all global locations.
FY 2022 energy data restated following
improvements in basis of calculations.
Water
All of our current main manufacturing
assets within the UK and US are located
within areas of low or very low water
stress***. In FY 2023 we completed our
first full Carbon Disclosure Project (‘CDP’)
water disclosure submission and note
that, despite commissioning our China
operations, our water usage is broadly
flat compared to FY 2022 principally
because of operational improvements to
our processes and a focus on water and
resource efficiency. During FY 2023, water
usage per unit revenue increased 11%,
solely due to reduced revenue and new
usage within our China operations.
Water (UK assets) is taken in primarily from
mains sources and returned via utility providers
or as effluent, with cooling and process water
being the main drivers. We expect to assess
the opportunities for increased reuse of water,
noting that water intensity has improved
overthe medium term.
*** UK Environment Agency Flood Risk
Assessment; Rhode Island Statewide
Planning and Grantsburg Site 2021
Insurance Risk Assessment.
Waste
Victrex has made good progress in
wastemanagement over recent years.
Overa 10-year period starting in FY2013,
Victrex saw a 55% decrease inhazardous
waste produced per £m of revenue.
Wework closely with licensed waste service
providers to ensure that waste isrecycled,
or otherwise reused, or disposed of
withminimal environmental impact.
Our manufacturing assets, used to produce
PEEK, provide us and our customers with
security of supply; however, using our own
ingredients and raw materials means that
we do produce some hazardous waste
dueto the nature of our processes. This is
primarily in our monomer production assets
within the UK (Rotherham and Seal Sands).
We are currently assessing options that
could reduce this type of waste within our
process, including exploring sustainable
chemistry, and have committed a proportion
of our Research & Development investment
towards this, noting the long-term nature
of such assessments.
During FY 2023, waste disposed to landfill increased due to our UK Asset Improvement
programme and large-scale maintenance. We have completed a full zero waste to landfill
exercise and are working with our waste suppliers to identify areas of improvement.
Primary energy
Thousands GJ**
Primary energy per tonne
(‘PEEK’) produced GJ/tonne
Water usage
Thousands m
3
Hazardous waste produced
Tonnes
Hazardous waste disposed to
landfill (after treatment) Tonnes
Primary energy per unit revenue
Thousands GJ/£m**
Water usage per unit revenue
Thousands m
3
/£m
Hazardous waste produced per unit
revenue Tonnesm
Hazardous waste disposed to
landfill (after treatment) per unit
revenue Tonnesm
2023
2023
2022
2022
2021
2021
2020
2020
2019
2019
929*
0.22*
839*
0.18*
684
0.20
657
0.24
794
0.18
2023
2022
2021
2020
2019
606
607
467
396
499
2023
2022
2021
2020
2019
29,562
27,678
11,914
27,430
30,311
2023
2022
2021
2020
2019
3.0*
2.5*
2.2
2.5
2.7
2023
2022
2021
2020
2019
2.0
1.8
1.5
1.5
1.7
2023
2022
2021
2020
2019
96
81
39
103
103
2023
2022
2021
2020
2019
21
15
12
15
1
2023
2022
2021
2020
2019
0.07
0.04
0.05
0.05
0.00
STRATEGIC REPORT
59
Annual Report 2023 Victrex plc
Victrex’s GHG emissions based on FY 2023
Tonnes of CO
2
e equivalent 2023 from PEEK manufacture and downstream products.
Sustainability report continued
PLANET (RESOURCE EFFICIENCY) continued
Greenhouse gas (‘GHG’) emissions
Our GHG report has been completed
following guidance within the UK
government regulations on Streamlined
Energy & Carbon Reporting (‘SECR’)
policyguidance.
Emissions have been calculated based on
the GHG Protocol Corporate Standard with
all emissions reported being within FY
2023. We include emissions from global
assets (owned and leased), which include
our manufacturing plants, technical
centres, and offices. No material Scope
1 or Scope 2 emissions are omitted, and
national and regional emissions conversion
factors have been used.
Our operations in China – ready to support
sales during FY 2024 – are included within
our greenhouse gas (‘GHG’) emissions
reporting data. We are working to assess
China’s decarbonisation options, as the
facilities ramp-up in FY 2024.
In FY 2023 we conducted a thorough
analysis of the following indirect value
chain emissions (Scope 3) identified as
relevant to Victrex globally:
Category 1. Purchased goods and services.
Category 2. Capital goods.
Category 3. Fuel and energy-related activities.
Category 4. Upstream transportation
anddistribution.
Category 5. Waste generated
inoperations.
Category 6. Business travel.
Category 7. Employee commuting.
Category 15. Investments.
The remaining seven Scope 3 categories
are either not applicable or not material.
Note: Victrex produce and sell an intermediate
product with many potential downstream
applications, each of which has a different
GHG emissions profile, and are hence unable to
reasonably estimate the downstream emissions
associated with the various end uses of the
intermediate products. This is in line with section
6.4 of the Scope 3 GHG Protocol standard.
Our GHG emissions are calculated primarily
from gas combustion, electricity and steam
use across all of our global locations. Emissions
from downstream manufacturing facilities in the
US and the UK are included but are relatively
immaterial, as are the emissions from our
overseas technical facilities and offices, versus
production activities.
Despite good progress on our long-term carbon
intensity measurement (down 17% vs 2013),
which is based on Scope 1 & 2 emissions/tonnes
of PEEK manufactured, the FY 2023 intensity
increased by 14% vs FY 2022, even after lower
production volumes. This reflects an increase in
energy use in our new China facilities during the
commissioning phase. This impacted our Scope
2 emissions as China operates on primarily non-
renewable electricity currently. Scope 1 emissions
were lower, driven by plant shutdowns as part of
the UK Asset Improvement programme.
Excluding China facilities, our carbon intensity
was 4% lower than FY 2022.
SCOPE 2
#
Indirect emissions resulting from
electricity and steam purchased
(location-based method) Tonnes CO
2
e
INTENSITY MEASUREMENT
SCOPE 1 & 2
Tonnes CO
2
e/tonnes of
PEEKmanufactured
SCOPE 1
#
Direct emissions resulting from
combustion of fuels Tonnes CO
2
e
SCOPE 3
#
Other indirect emissions across eight
categories as listed above Tonnes CO
2
e
Scope 1: 17%
Scope 2: 12%
Scope 3: 71%
* Scope 1, 2 & 3 emissions data restated following external assurance review of Scope 1 & 2 by SLR Consulting on a limited assurance basis to ISAE 3000 standard.
** Scope 3 emissions for FY 2019 were the baseline for our full Scope 3 assessment covering the eight relevant categories to Victrex. FY 2023 Scope 3 emissions have
been calculated on the same basis. The other years have been reported on as part of prior year disclosures based on a more limited number of Scope 3 categories
and are not shown here to minimise an inaccurate comparison. Future Scope 3 disclosures will now cover the full eight categories relevant to Victrex.
2023
2022
2021
2020
2019
20,958
24,374*
20,161
18,241
23,820
2023
2022
2021
2020
2019
86,577
91,237*
79,747**
2023
2022
2021
2020
2019
14,712
10,015*
8,293
9,212
11,065
2023
2022
2021
2020
2019
8.52
7.4 6*
8.13
9.87
8.06
Previously disclosed (limited categories)
Previously disclosed (limited categories)
Scope 1
Scope 3
Scope 2
STRATEGIC REPORT
Victrex plc Annual Report 2023
60
Global GHG emissions andenergy use data
#
2023 2022
Scope 1/tCO
2
e
#
Global 20,958 24,374
UK 20,654 24,172
Global (excluding UK) 304 202
Scope 2 (location based)/tCO
2
e
#
Global 14,712 10,015
UK 8,691 8,492
Global (excluding UK) 6,021 1,522
Scope 2 (market based)/tCO
2
e
#
Global 5,772 2,353
UK 801 830
Global (excluding UK) 4,971 1,523
Gross Scope 1 & Scope 2
(locationbased)/tCO
2
e
#
Global 35,670 34,388
UK 29,345 32,664
Global (excluding UK) 6,325 1,724
Energy consumption/kWh
#*
Global 164,717 170,085
UK 147,569 166,182
Global (excluding UK) 17,14 8 3,903
Intensity ratio/tCO
2
e
Gross Scope 1 & Scope 2/tonnes
ofPEEKmanufactured
Global – Scope 2 (location based) 8.52 7.46
Global – Scope 2 (market based) 6.39 5.80
Methodology
Based on GHG Protocol Corporate Standard
NOx (oxides of nitrogen reporting)
Our manufacturing operations emit well below our environmental
permit’s threshold levels of 100 tonnes per annum.
In FY 2023, 9 tonnes of NOx (expressed as NO
2
) were generated
from our principal manufacturing sites directly in the manufacture
of PEEK. This was lower than the prior year (FY 2022: 11 tonnes) and
is calculated using monitoring data and assumptions around plant
availability and actual operational periods.
SLR Scope 1,2 and 3 GHG assurance statement
SLR Consulting has undertaken limited assurance of Victrex’s
greenhouse gas (GHG) emissions (Scope 1, 2 & 3), for the 2023
reporting year (1 October 2022 – 30 September 2023), against the
WRI / WBCSD ‘GHG Protocol Corporate Accounting and Reporting
Standard, 2015 revised edition, and the GHG Protocol ‘Corporate
Value Chain (Scope 3) Accounting and Reporting Standard.
(Seepages 60 to 62).
This engagement was performed in accordance with the
International Standard on Assurance Engagement (ISAE) 3000
(Assurance Engagements other than Audits or Reviews of Historical
Financial Information) and the relevant subject-matter specific ISAE
for GHG data (ISAE 3410, Assurance Engagements on Greenhouse
Gas Statements).
SLR has complied with the requirements for independence,
professional ethics and quality control as stipulated by ISAE 3000
(2020) Requirement 3a and 3b.
# Metrics on pages 60 and 61 covered by limited assurance, provided by SLR
Consulting Limited (FY 2022 and FY 2023 only). Scope 1, 2 & 3 emissions
FY 2022 data restated following this external assurance review.
* Energy consumption/kWh for 2023 of 164,717 comprises Scope 1 106,340
(UK: 105,006 and Global (excluding UK) 1,334) and Scope 2 58,377
(UK: 42,563 and Global (excluding UK) 15,814). Energy consumption/
kWh for 2022 of 170,085 comprises Scope 1 122,155 (UK: 121,697 and
Global (excluding UK) 458) and Scope 2 47,930 (UK: 44,485 and Global
(excluding UK) 3,445).
Based on the scope of the work and assurance procedures
performed, nothing has come to our attention that causes us to
believe that the Scope 1, 2 & Scope 3 categories 1-7 and 15 GHG
emission calculations for financial year 2023 is not prepared, in all
material respects, in accordance with WRI/WBCSD GHG Protocol
Corporate Accounting and Reporting Standard 2015 revised edition.
SBTi & our decarbonisation roadmap
Aligning with SBTi and Net Zero 2050
As part of our commitment to decarbonisation, and to build on our
strong ESG credentials, Victrex submitted our SBTi plan and targets
for validation in September 2023 with options covering reductions
to Scopes 1, 2 & 3 in line with its 1.5°C emissions reduction
scenarios. Victrex
TM
PEEK already has a favourable global warming
potential (‘GWP’) compared with the available industry data for
PEEK manufacture (see page 64), and a decarbonisation roadmap,
with options, underpins our commitment.
Our alignment to SBTi follows our original commitment in FY 2021,
with a clearer assessment of our Scope 3 impacts.
As a consequence, our original 2030 goal of Net Zero in Scope
1 & 2 emissions will be updated to a target out to 2050 for Net
Zero emissions across all scopes, with a new Scope 3 goal also
included. This will include an interim target by 2032, with emissions
reduction equating to over 4% per year on an annualised basis
across the three scopes, whilst noting that full disclosure of targets
will be made in FY 2024, post-review by SBTi. These goals underpin
our aspiration to have a clear differentiator in our products –
asevidenced by our favourable lifecycle analysis data – and in
decarbonising our operations over the coming years. We retain
options in how we deliver our decarbonisation, whilst also having
reliance on governmental directives (e.g. electrical grid capacity) or
technology (alternative fuel availability and sustainable chemistry).
There are several options under consideration for us, including:
u
electrification of production equipment;
u
use of alternative fuels to generate steam for process heating;
u
increased use of wind, solar and heat pumps;
u
continuous improvement activities; and
u
carbon capture – we are currently engaged with academia
to evaluate.
Capital investment to support decarbonisation
The capital required in our capital expenditure plans to support
alternative fuel use or process technology (whilst noting the
increased operating expense of alternative fuels) is now built
intomid-term capex guidance at 8-10% of revenue per year.
Wehave also assessed the potential carbon tax implications
foranon-decarbonised scenario.
Carbon offsetting
Whilst Victrex will consider the opportunities from carbon offsetting,
we currently view this as a very small part of achieving our goals.
Continuous Improvement (‘CI’) programmes & productivity
Continuous Improvement has played a growing part in assessing
opportunities across our resource efficiency in areas that haven’t already
been implemented. These include in recycling, energy usage, waste,
and water. Several improvement programmes have already delivered
ongoing benefits, helping to save CO
2
during FY 2023 by:
u
increasing polymer powder batch size;
u
improving polymer batch cycle times; and
u
increasing production line speed.
STRATEGIC REPORT
61
Annual Report 2023 Victrex plc
Sustainability report continued
PLANET (RESOURCE EFFICIENCY) continued
Scope 3 emissions and goals
In FY 2023, we completed a Scope
3 assessment across eight categories
identified as relevant to Victrex, with a 5%
reduction compared to FY 2022.
Our Scope 3 emissions are the result
of activities from assets not owned or
controlled by the reporting organisation,
but that the organisation indirectly impacts
in its value chain. These include all sources
not within an organisation’s Scope 1 & 2
boundary, with Victrex’s Scope 3 emissions
representing 71% of our total emissions.
The result of this assessment identified
our FY 2023 Scope 3 of 86,577 tCO
2
e,
giving a total FY 2023 carbon footprint
figure, Scopes 1, 2 & 3, of 122,247 tCO
2
e
(FY2022: 125,626 tCO
2
e).
Total carbon intensity
The Victrex carbon intensity figure
accounts for the total carbon produced
from making all commercial products,
i.e. all manufacturing assets, back-office
functional operations, waste produced,
procurement of goods and services.
To calculate this for Victrex we use
thefollowing method:
Victrex total carbon footprint (Scope 1,
2 & 3) ÷ total PEEK production to give
an enterprise total. FY 2023 accounts for
29kg** CO
2
e per kg of PEEK, a marginal
increase vs FY 2022 (27kg*). NOTE: 8.5kg
CO
2
per kg of PEEK based on Scope 1
& 2 only.
* Restated due to external assurance of
FY2022 Scope 1 and 2 data.
** Figure not related to our individual product
life cycle assessment data.
Scope 3 opportunities
As part of our recent SBTi submission, we
submitted a Scope 3 target, which will be
fully disclosed post-SBTi review in FY 2024.
Our purchased goods and supplies,
and capital projects categories both
decreased in FY 2023 due to lower spend
as a result of our UK Asset Improvement
programme and plant shutdowns.
Wenote business travel and employee
commuting have increased, reflecting
post-pandemic working.
Our main areas of focus are to reduce
ourScope 3 emissions for SBTi targets:
u
prioritisation of key supplier partners
– a significant number of key suppliers
are already aligned to SBTi or have
publicly stated GHG reduction targets;
u
energy reduction in manufacturing;
u
fuel switching – replace natural gas with
electricity (renewably sourced/long-term
impact of grid emissions reduction);
u
reduce airfreight & switch to lower
impact transport; and
u
encourage greener methods of
employee commuting.
Category 1: 76% – purchased goods
andservices.
Other categories: 24% – capital
goods, fuel & energy (not in Scope 1 & 2),
upstream transportation, waste generation,
business travel, employee commuting
andinvestments.
SCOPE 3 EMISSIONS BASED
ON FY 2023:
SBTi & our decarbonisation roadmap continued
Continuous Improvement (‘CI’) programmes & productivity
continued
This focus on productivity also helped to increase nameplate
capacity in our production assets. Together with our UK Asset
Improvement project, we anticipate nameplate capacity will increase
to over 8,000 tonnes per year (c.9,500 tonnes including China),
supporting core business growth and our mega-programmes.
Our CI team is also assessing opportunities to support our
decarbonisation roadmap, particularly in areas like increasing our
own solar PV generation, the opportunity in air source heat pumps,
and incentivised electric car chargers at a number of our sites.
Renewable electricity
Our goal is to use 100% renewable electricity across all our global
sites by the end of 2024 (where the market exists). Currently, 100%
of electricity purchased for our UK sites is from renewable sources,
with 90% globally, though the cost of sourcing renewable electricity
is only set to increase.
REACH
Victrex Manufacturing Ltd remains fully compliant to REACH
and is committed to ensuring compliance for all its current and
future products. UK REACH (S.I. 2020 No. 1577) is a regulatory
requirement for the chemical industry and was refined post-the
Brexit agreement. Victrex has registered all required substances
manufactured in (or which it imports into) the UK and works closely
with suppliers to ensure key materials that support its supply chain
are registered. Victrex continues to work with suppliers to ensure
all raw materials will be supported and Victrex’s manufacturing
processes are not affected, which is essential both for Victrex and
for our customers who are focusing on long-term demand.
If any chemicals used by Victrex to manufacture its products
become ‘chemicals of concern’, i.e. are officially listed within the
UK REACH regulation under ‘Substances of Very High Concern’
(‘SVHC’), or listed in UK REACH Annex XVII ‘The Restricted List,
or listed in UK REACH Annex XIV ‘The Authorisation List, and
accompanying conditions are met, Victrex would seek to phase
out affected products in line with sunset clauses or reformulate
toensure we maintain our compliance to UK REACH.
Supply chain and energy sourcing
The impact of challenges in the global supply chain became even
more paramount in FY 2023, with globalisation and concerns
from customers around energy sourcing, and destocking in several
industries. Victrex continually seeks to ensure it has robust securityof
supply for customers and invests accordingly.
The majority of BDF – one of the key monomers used to manufacture
PEEK – is manufactured in our own operations within the UK. The
remainder is sourced internationally through several contractual sources
in Asia. Victrex has strong security of supply for all other raw materials
utilised in the production of PEEK. Currently, our rawmaterial sourcing
other than BDF is primarily from Europe, withAsia and the US also
hosting our strategic suppliers.
For energy supply, most of our production is in the UK, so we
procure energy on UK-based contracts (primarily gas and electricity
used in our heating processes). Whilst UK energy costs have reduced
from their peak, raw material prices remain high. We will also focus
on energy and raw material costs for our China manufacturing, once
this facility is fully commercially operational.
Other
categories
Category 1
STRATEGIC REPORT
Victrex plc Annual Report 2023
62
SAFETY, HEALTH AND ENVIRONMENT
Recordable injury frequency rate (Global) FY 2023 FY 2022 FY 2021
Total number of recordable injuries 3 4 6
Total hours (employee and contractor) 2,996,604 3,854,016 1,690,374
Frequency rate 0.2 0.2 0.7
OSHA benchmark 1.3 1.4 1.9
Frequency rate = total number of recordable injuries x 200,000/total number of hours worked
(employee and contractor).
Lost time injury frequency rate FY 2023 FY 2022 FY 2021
Total number of lost time injuries 2 2 4
Frequency rate 0.1 0.1 0.5
Total hours (employee and contractor) 2,996,604 3,854,016 1,690,374
OSHA benchmark 0.5 0.8 0.6
Frequency rate = total number of lost time injuries x 200,000/total number of hours worked
(employee and contractor).
China
Our new China manufacturing subsidiary in Panjin (‘PVYX’) has recorded over 2 million
hours (employees and contractors) since the project commenced, with no recordable injuries
in FY 2023. Data on performance during construction is shown below:
PVYX (employees & contractors) FY 2023
Hours worked 247,156
Recordable injuries 0
Total RIFR 0
Reportable environmental incidents 0
High potential incidents 1
Occupational Safety, Health,
andEnvironment (‘SHE’)
The occupational safety and health of all
our employees, along with contractors and
visitors to our sites, remains the highest
priority for Victrex and is fundamental to
everything we do.
This year we have seen improvements in
ouroverall lagging SHE indicators. Our
OSHA injury rate reduced by 83% in the
last three years to 0.2 reportable injuries
per200k hours. In our high hazard facilities,
our site safety improvements are recognised
by favourable comments from the UK HSE
regulator with no outstanding actions
remaining. In the last two years we have
focused on updating our SHE management
systems and integrating requirements
from external process safety frameworks
supported by detailed audit guides and
expertise from a leading consultant firm for
process safety with an improving maturity
score and endorsed action plan. All areas
now have a simple SHE KPI dashboard,
supported by an online SHE database tool,
and have a safety improvement plan for
both people and process safety.
FY 2023 saw the continuation of our zero
incidents and zero accidents SHE culture
improvement programme and we have:
u
introduced a rolling Tier 1 self-
assessment tool to identify gaps and
drive continuous improvement in SHE;
u
implemented a Tier 2 audit programme
for compliance aligned to ISO 45001;
u
implemented our Occupational Health
and Hygiene model and completed a
baseline assessment; and
u
completed the second process safety
external assurance, against our top
priority SHEMS at our high hazard sites.
SHE KPIs
The culture and behavioural safety across
areas is improving with the increased
reporting of safety observations, near
misses and the timely reporting of incidents
and accidents. Our commitment to SHE
continuous improvement through SHE
investigations and escalation is increasing,
identifying actions to drive down accidents
and incidents.
Am I taking care? Is it safe? Am I doing
theright thing? Because for every one
ofusSafety Starts with Me.
STRATEGIC REPORT
63
Annual Report 2023 Victrex plc
Sustainability report continued
Favourable lifecycle analysis
Our own internal assessment, validated by
KPMG last year, suggests Victrex
TM
PEEK,
with its own upstream UK integrated
monomers and the fact we are using 90%
global renewable electricity in our own
operations, shows a favourable sustainability
profile against the industry average for PEEK
production, based on GaBi materials data.
Lifecycle Analysis (‘LCA’) is the process of
measuring the environmental impact of a
product or service throughout its lifecycle
– from cradle to gate. Following on from
the successful completion of our first
LCA, which identified that the total global
warming potential for Victrex
TM
PEEK is
13kg CO
2
e/kg of PEEK (GaBi industry data
PEEK 15.6kg/CO
2
e/kg), we have successfully
implemented the Sphera GaBi LCA software
and lifecycle assessment tool to enable us
to develop a standard approach for the
collation of LCA data and complete LCAs
internally to ISO 14040/44 standards.
We have identified the products that
account for 80% of sales and volume
and created a plan to complete Lifecycle
Analysis on them by the end of FY 2026,
ensuring that our wider portfolio products
are covered.
The process involves measuring the impacts
of each part of the process such as energy
used in production or additional processing,
and in inbound logistics. This helps us
compare between products, materials and
methods used, providing useful information
by which to make decisions that could help
the environment and an understanding
of our total carbon footprint for us and
the carbon footprint of our products for
ourcustomers.
Overall, the LCA enables us to consider
future opportunities for further
environmental improvement, including:
u
reduce supplier impacts – gather
suppliers’ LCA data and identify suppliers
with lower impacts;
u
recycle raw materials – explore increased
recycling options;
u
explore alternative materials – use LCA
data to identify high impact materials
forreplacement; and
u
target CO
2
reductions – reduce natural
gas usage and waste streams.
PRODUCTS (SUSTAINABLE SOLUTIONS)
Sustainable solutions: accelerating CO
2
reduction through
innovative composite thermoplastic polymers, forms, and parts
Environmental benefits
Victrex’s goal to grow application areas
that positively support carbon reduction
and bring societal benefits to 70% of
revenue by 2030.
For decades Aerospace has been a key
end-market for Victrex. Today over 20,000
planes rely on Victrex
TM
PEEK applications,
including thermal acoustic blankets,
brackets, and pipes. Typically used as an
alternative to metal, PEEK delivers against
key engineering requirements as well as
offering significant weight reduction of
30-40% when compared with typical metal
alternatives, critical to supporting aviation
carbon emission reduction and improving
the aircraft buyto-fly ratio. These savings
are significant compared to our own Scope
1 & 2 emissions. The weight reduction
by using just 10kg of PEEK inAerospace
replacing 10kg of metal helps save around
three timesthe CO
2
compared to our own
Scope1 & 2 emissions (FY 2023: 34,123
tonnes of CO
2
from Scope1 & 2 emissions).
Game-changing technology
In 2015 Victrex developed and introduced
Victrex AE™ 250 based on its new LMPAEK™
polymer that offers the light weighting
and performance attributes, plus enhanced
processing, that enables manufacturing
flexibility for thermoplastic composites.
Combined with advanced manufacturing
processes such as hybrid over-moulding
technology and automated fibre placement,
the LMPAEK™ technology has been a
game-changer in enabling Aerospace
manufacturers to successfully produce
largescale primary and secondary structural
parts such as airplane fuselage, and wings
that are fatigue and damage tolerant.
Thisprocessing technology supports
the industry need for faster processing
times, which is achievable with LMPAEK
TM
composites in minutes when compared
withaluminium or thermoset alternatives.
Another benefit of these LMPAEK
TM
thermoplastics is the lower environmental
impact versus similar alternative materials
atlifecycle stages beyond use. In production
customers produce less waste in processing
than with metals and lower disposal rates
than thermosets, due to the recyclable
properties of LMPAEK
TM
thermoplastics.
From concept to commercialisation
Victrex AE™ 250 technology is showing
indications of successful disruption within
the industry. Earlier this year the first
approval for uni-directional (‘UD’) tape
was provided by the National Center for
Advanced Materials Performance (‘NCAMP’)
for use in Aerospace. NCAMP works with
industry partners to qualify and publish
material systems so manufacturers can
achieve quicker, cost effective qualification.
Victrex continues as an alliance partner
in the ‘Clean Sky 2’ European research
programme supporting break-through
technologies and the next generation of
more environmentally friendly aircraft.
Airbus and others recently exhibited sizeable
structural composite parts manufactured
from our materials, offering the potential
of a 10x content increase in future aircraft,
driving weight and CO
2
reduction benefits.
With post-pandemic build rates now
increasing, Victrex AE™ 250 materials
provide a real opportunity to support the
Aerospace industry in the reduction of
carbon emissions throughout their lifecycle,
from process to use and recycle as well as
faster processing and ultimately producing
more sustainable planes.
STRATEGIC REPORT
Victrex plc Annual Report 2023
64
Our values of Passion, Innovation and
Performance underpin the way we do
business and treat one another. Our Code
of Conduct sets the foundations of how
we act personally, with others and in our
communities. Our continued success as
a business rests on maintaining these
principles and ensuring we strive to always
do the right thing. You can read more about
our Code of Conduct on our website at
www.victrexplc.com.
All our employees and Board members
are responsible for following our
Code ofConduct and its supporting
policies. Allemployees are required to
complete Code of Conduct e-learning
on commencement of employment and
annual e-learning thereafter. In September
2023 the completion rate was 96% on a
rolling annual basis. Additional training on
specific supporting policies is undertaken
byrelevantemployees.
We encourage employees and our
stakeholders to speak up if they have
concerns that our Code of Conduct or its
supporting policies are not being followed
and our Global Whistleblowing Policy sets
out how to do this.
Sustainability at the heart
Whilst our products enable environmental
and societal benefits, we also recognise
that some of our operations can impact
on the safety and wellbeing of our people
and those in the communities around us.
This is reflected in a principal risk on page
34. Our Safety, Health and Environment
(‘SHE’) Policy promotes our continuous
improvement in this area.
Our employees
Our employees are a valued asset to us, and
we continue to seek to retain and develop
our teams as well as recruiting talent when
opportunities arise, and this too is reflected
as a principal risk on page 35. Ensuring
we recognise the positive contribution of
a diverse workforce and hold ourselves
to account for delivering it is paramount.
Our policies and procedures are reviewed
from time to time to ensure they remain fit
for purpose and continue to enhance our
employee experience, whilst also serving to
support recruitment processes to ensure we
attract the highest quality talent possible.
Our employees can easily access
employment policies and key work-related
information through one click into our HR
intranet site, including our Group Diversity,
Inclusion & Equal Opportunities Policy and
our Global Flexible Working Policy.
OUR CODE OF CONDUCT – DOING THE RIGHT THING
Our Gender Pay Gap Report was published
this year, details of which can be found on
www.victrexplc.com. In cases where the
National Minimum Wage or National Living
Wage applies within the UK, the Company
complies in full with its obligations and
meets both conditions.
Respect for human rights
We recognise the importance of treating
the people around us, and those we may
impact, with respect but also acknowledge
there are practices globally that seek to
threaten human rights. Victrex does not
tolerate these practices.
In relation to our supply chain activities,
wehave focused policies on Modern
Slavery, Conflict Minerals and Anti-bribery
&Corruption. Before any vendor can
become an approved supplier to Victrex,
they must pass through our due diligence
process which involves:
u
site-specific audits where appropriate;
u
detailed responses to a robust on-boarding
process that examines all relevant areas
of the business operation, with special
focus on issues pertinent to legislation
and CSR factors; and
u
acknowledgement and acceptance of the
Victrex Supplier Standards Handbook.
The process is cyclical, to ensure the
appropriate focus is maintained on those
vendors deemed as strategically important
or as high risk to Victrex.
Our Modern slavery statement is available
on www.victrexplc.com reaffirming our
policy commitment and our ongoing actions
in this area.
Compliance including
anti-bribery and corruption
Our Code of Conduct includes our
commitment to being open and honest
andfollowing all relevant laws and
regulations. This is supported by underlying
policies and processes including with respect
to Anti-bribery & Corruption, Financial
Crime, Gifts & Hospitality, Share Dealing
(Market Abuse), Data Protection, Data
Retention & Disposal, Competition Law and
Export Controls & Sanction Compliance, and
is reflected in our principal risks on page 37.
Our policies and procedures are published
on the Company’s intranet on a dedicated
Group Policies page. Our focus on Doing the
Right Thing extends beyond the letter of the
law to ensure we act ethically and openly,
treating others fairly and how we would
want to be treated. The desired outcome of
our Code of Conduct, including the policies
and procedures which underpin it, is to
ensure we act responsibly in all our dealings
and foster a sustainable business.
Victrex is committed to a zero-tolerance
position on bribery, made explicit through
our anti-bribery and corruption policy and
supporting policies and procedures on gifts
and hospitality, sponsorship and donations,
and interactions with politically exposed
persons and healthcare professionals.
Wemaintain a manual for the management
of anti-bribery and corruption risk including
a three lines of defence controls assessment
and an action plan for implementation
of further enhancements to existing
measures. The risk of bribery and corruption
is considered a key aspect of the ethics
and regulatory compliance principal risk
on page 37 and several mitigations are in
placewhich are reviewed at least annually.
The Company conducts enhanced due
diligence on individuals or organisations
where there is a perceived or actual
increased risk of bribery (for example, where
the Company isengaging with a politically
exposed person), or where the Company
is conducting due diligence for a potential
joint venture or acquisition. Our mandatory
Code of Conduct training includes a section
on anti bribery and corruption matters.
Wekeep our training materials under
regular review and specific e-learning
modules for anti bribery and corruption,
gifts and hospitality and conflict of interest,
are supplemented by face-to-face or virtual
training from time to time. We continue
to ensure appropriate anti-bribery and
corruption clauses are included in relevant
contracts. The Company maintains a
register of employee interests (where there
are actual or possible conflicts of interest)
and a record of gifts and hospitality given
and received above certain thresholds in
the form of a Giving & Receiving Register.
Areview of the Companys anti-bribery
and corruption arrangements is featured
on the Board’s programme of business
and the internal audit review programme
includes a periodic review of the adequacy
of the Company’s procedures in relation to
anti-bribery controls and procedures.
We operate a Global Data Protection Policy
(and a suite of supporting procedures and
arrangements) to support compliance with
applicable data protection legislation in the
regions in which we do business. Employees
who handle personal data continue to be
required to complete mandatory annual
training and as of September 2023 we
had a completion rate of 95% on a rolling
annual basis.
STRATEGIC REPORT
65
Annual Report 2023 Victrex plc
Sustainability report continued
Non-financial and sustainability information statement
This section of the Strategic report constitutes Victrex plcs non-financial information statement, produced to comply with the Companies
Act 2006. The below table, and information it refers to, is intended to help stakeholders understand our position on key non-financial
matters, and where the relevant information is located in this report.
Reporting requirement Material policies and standards that govern our approach
Key risks relating to these matters
(pages 34 to 38)
Read more
Sustainability &
environmental
u
Safety, Health and Environment
(‘SHE’) Policy
u
Environmental Policy (ISO system)
u
Sustainability Policy
u
Code of Conduct*
u
Safety, Health and
Environment
u
Legal and regulatory
compliance, ethics
and contracts
u
Task Force on Climate-related Financial
Disclosures and Companies Act 2006
s414CB2A(A-H) “climate related
disclosures”, pages 49 to 53
u
Sustainability report – resource efficiency,
pages 58 to 62 and safety, health &
environment, page 63
u
Corporate Responsibility Committee
report, page 98 and 99
Employees
u
Group Diversity, Inclusion & Equal
Opportunities Policy
u
Disciplinary Policy & Procedure
u
Grievance Policy & Procedure
u
Global Flexible Working Policy
u
Employee Handbook
u
Global Whistleblowing Policy
u
Share Dealing Code
u
Code of Conduct
u
Prevention of Bullying & Harassment Policy
u
Recruitment and
retention ofthe
right people
u
Legal and regulatory
compliance, ethics
and contracts
u
Sustainability report – Our Code of
Conduct, page 65
u
Sustainability report – People
(SocialResponsibility), pages 54 to 57
u
Gender pay in Victrex, page 56
Respect for
humanrights
u
Modern Slavery & Human Trafficking Policy
u
Modern slavery statement*
u
Conflict minerals statement*
u
Global Data Protection Policy
u
Global Document Retention
&Disposal Policy
u
Code of Conduct*
u
Legal and regulatory
compliance, ethics
and contracts
u
Sustainability report – Our Code of
Conduct, page 65
u
Modern slavery, human trafficking
and conflict minerals statements –
seewww.victrexplc.com
Social matters
u
Sustainability Policy
u
Code of Conduct*
u
Recruitment and
retention ofthe
right people
u
Our sustainability vision & goals,
pages 46 and 47
u
Sustainability report – People
(SocialResponsibility), pages 54 to 57
u
Our Stakeholders, pages20 and 21
Anti-corruption
and anti-bribery
u
Anti-bribery & Corruption Policy
u
Fraud Policy
u
Conflict of Interests Policy
u
Gifts & Hospitality Policy
u
Sponsorship & Donations Policy
u
Financial Crime Policy
u
Policy on Interaction with
HealthcareProfessionals
u
Procedure on Interaction with
PoliticallyExposed People
u
Export Controls & Sanctions Policy
u
Competition & Anti-trust Policy
u
Code of Conduct*
u
Legal and regulatory
compliance, ethics
andcontracts
u
Sustainability report – Our Code of
Conduct, page 65
Description of the
business model
u
All principal risks
u
Business model, pages 12 and 13
Non-financial
key performance
indicators
u
All principal risks
u
Non-financial key performance indicators,
pages 18 and 19
* These policies are published on www.victrexplc.com, along with being available to employees via the Group intranet. All other policies listed are available
toemployees via the Group intranet.
STRATEGIC REPORT
Victrex plc Annual Report 2023
66
CORPORATE
GOVERNANCE
68 Introduction from the Chair
70 Board of Directors
72 Statement of corporate governance
86 Nominations Committee report
90 Audit Committee report
98 Corporate Responsibility Committee report
100 Directors’ remuneration report
124 Directors’ report – other statutoryinformation
128 Statement of Directors’ responsibilities in respect
ofthe Annual Report and financial statements
129 Independent auditors’ report to the members
ofVictrex plc
CORPORATE GOVERNANCE
Annual Report 2023 Victrex plc
67
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
68
FY 2023 highlights
u
Navigating the Group through an
uncertain macro‑economic outlook
u
Continuing to invest tosupport the
acceleration ofMedical opportunities
u
Monitoring progress of
Chinainvestments
u
Further development of our ESG agenda
and submission of SBTi plan
FY 2024 focus areas
u
Further broadening of the application
areas in our core business and execution
on our opportunities
u
Continuing focus on commercialisation
of our mega‑programmes
u
Progressing our decarbonisation agenda
u
Overseeing the embedding of
organisational changes following
the establishment of our Sustainable
Solutions and Medical business areas
u
Monitoring progress in our Diversity,
Equity & Inclusion programme
INTRODUCTION FROM THE CHAIR
Introduction from the Chair
Dear shareholders,
After completing my first full financial
year as Chair, I remain greatly encouraged
by how the Company, our Board and
our employees have worked together to
navigate the challenging macroeconomic
environment in several of our end markets.
This bodes well for delivering our strategy.
Victrex’s innovative culture, our purpose
to bring transformational and sustainable
solutions that address world material
challenges every day, and our clear ‘Polymer
& Parts’ strategy continue to put us in
agood position, supported by long‑term
megatrends across the industries we serve.
Æ An overview of our results can be
found onpages 24 to 31.
Stakeholders
Stakeholder interests are at the centre of
our decision making as we strive to meet
our purpose and strategic aims. Our Section
172 statement is set out on pages 20 to
23. Details of the Group’s stakeholders
and Board engagement channels can be
found on page 83. The annual report from
our Non‑executive Director for Workforce
Engagement, Brendan Connolly, can be
found on pages 84 and 85. During the
year the Board visited our European base
in Germany and our manufacturing site
at Rotherham enabling further valuable
opportunities to engage directly with a
number of the Group’s employees through
site tours, presentations and informal
interactions. During the Boards visit to
Europe we also met with a number of key
strategic customers and gained an enhanced
understanding of their priorities.
Victrex’s culture is built on innovation.
TheBoard routinely monitors culture
and ensures that it is aligned to the
Group’s purpose, values and strategy.
The Board received insights from the
Employee Experience ‘pulse survey’ which
was conducted during the year. More
information can be located on page 55.
Sustainability
Our employees can take great pride in the
fact our products come with environmental,
technical or medical benefits. As such, we
are aligned to strong megatrends to support
our future growth. Victrex plays a key role to
enable environmental and societal benefits
in the industries we serve, which will drive
value for all of our stakeholders.
Our sustainability & ESG strategy focuses
onthree pillars: People, Planet & Products.
We made good progress across a number
of our sustainability & ESG goals this year,
including growing our sustainable product
revenues to 55% (FY 2022: 48%), as well
as employee volunteering and support
for the next generation through STEM
activities. Further detail can be found on
pages44 to 47.
The first full year of our Corporate
Responsibility (‘CR’) Committee ensured
that we further sharpened our focus on
I remain greatly encouraged
byhow the Company, our Board
and our employees have worked
together to navigate the
challenging macro-economic
environment in several of our
endmarkets. This bodes well
fordelivering our strategy.
Dr Vivienne Cox DBE
Chair
CORPORATE GOVERNANCE
69
Annual Report 2023 Victrex plc
submit a target for ethnic diversity inour
leadership population during December 2023
(post‑the Company’s preliminary results
announcement) and we will publish this
inour FY 2024 Annual Report.
Our Board Diversity & Inclusion Policy can
be found on page 88. Appointments to
our Board and Committees are made on
merit with regard to skills, background
and experience and overall Board balance
and composition, with diversity being an
important consideration. Please see the
report from our Nominations Committee
on page 86 which includes gender and
ethnicity disclosures under the FCA Listing
Rules on page 89.
As well as Brendan Connolly’s programme
of activities as Non‑executive Director for
Workforce Engagement, I led a session
on the theme of DE&I attended by over
60 employees. Through such activities,
and a programme of events and initiatives
during the year, details of which are set out
on page 55, the Board demonstrates our
commitment to DE&I.
Board evaluation
An external Board evaluation was conducted
in the summer of 2023, and this provided
valuable insights on the operation of our
Board and Committees and what the Board
does well, as well as identifying areas for
focus going forward. More information
on the external evaluation process and
outcomes, as well as progress on the focus
areas identified in FY 2022, can be found on
pages 81 and 82.
Annual General Meeting
During the year I met with a number of
our major shareholders. We look forward
to welcoming our broader shareholders
at our Annual General Meeting (‘AGM’)
in February 2024. Please see page 124
formore information. Whether or not you
propose to attend the AGM in person,
you are encouraged to vote on each of the
resolutions set out in the Notice of Annual
General Meeting by appointing a proxy
to act on your behalf. You are strongly
encouraged to appoint the Chair of the
meeting as your proxy. This will ensure that
your vote will be counted if you (or any
other proxy you may otherwise choose to
appoint) are not able to attend the AGM
for any reason. If you appoint the Chair of
the meeting as proxy, the Chair will vote
in accordance with your instructions. If
the Chair is given discretion as to how to
vote, they will vote in favour of each of the
resolutions in the Notice of Annual General
Meeting. All proposed resolutions in the
Notice of Annual General Meeting will be
put to the vote on a poll.
If you have any questions for the Board on
the business of the AGM, please send them
in advance of the AGM to ir@victrex.com.
We will aim to respond to all questions as
quickly as possible. A summary and key
themes of the questions and answers will be
posted on our website, www.victrexplc.com,
on the morning of the AGM.
Dr Vivienne Cox DBE
Chair
5 December 2023
decarbonisation. The CR Committee and
the Board spent significant time during
the year reviewing our decarbonisation
roadmap, which culminated in our plan
and targets being submitted to the Science
Based Targets initiative (‘SBTi’) at the end
of the year.
Diversity
Victrex supports diversity in its widest sense.
Our CR Committee monitors progress
against our Diversity, Equity & Inclusion
(‘DE&I’) goals at an enterprise level as well
as supporting initiatives, and this is an area
where the Board continues to support and
challenge. As at 30 September 2023 we
have 44% female representation on our
Board and two of our senior Board positions
(as defined in the FCA Listing Rules) are held
by women. Accordingly we are compliant
with, and exceed, the FCA Listing Rules
gender targets at Board level.
Below the Board, as at 30 September 2023,
we have two women on our Victrex
Management Team (‘VMT’) which means
we have 22% female representation at
senior management level. As at 30
September 2023 15 of the 48 people who
comprise senior management (VMT) and
their direct reports were women (31%
female representation at this level).
Adescription of the VMT, its members and
the key below Board meetings which
support the Chief Executive Officer is set out
on pages 80 and 81. Details of our progress
in meeting our gender target for our
leadership population are set out on page
44. In line with the Parker Review, wewill
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
70
Board of Directors
All Directors listed below were Directors throughout FY 2023.
Dr Vivienne Cox DBE
Chair
N
Qualifications: MA (Hons)
Nationality: British
Appointed to the Board:
December2021, Chair February 2022
Independent: Yes
Skills and experience: Vivienne has a
wealth of experience in executive and
nonexecutive roles over more than
40years, with a particular focus on
sustainability, innovation and alternative
energy. Vivienne was appointed
Commander of the Order of the British
Empire (‘CBE’) in 2016 for services to
the economy and sustainability and was
made a Dame Commander of the Order
of the British Empire (‘DBE’) in the 2022
New Year Honours List for services to
sustainability, diversity and inclusion in
business. Vivienne holds an MA (Honours)
in chemistry from Oxford University, an
MBA from INSEAD and honorary
doctorates from the University of Hull
and the University ofHertfordshire.
Previous roles: Vivienne’s previous
nonexecutive roles include serving on
theboards of Eurotunnel plc, BG
Groupplc and Rio Tinto plc, as senior
independent director of Pearson plc,
aschair of Vallourec SA and as the
leadnonexecutive director for the
UKDepartment for International
Development. Shealso chaired
ClimateChange Capital, a private
assetmanagement and advisory group
developing solutions for climate change
and resource depletion. She has also
previously served as a non‑executive
director of GSK, as well as GSK’s
workforce engagement director,
andStena AB in Sweden.
Other significant appointments:
Vivienne is currently a non‑executive
director of Haleon plc and Venterra
Group plc (a non‑listed company), chair
of the Rosalind Franklin Institute and
deputy chair of the Saïd Business
School in Oxford.
Specific contribution to the
Company’s long-term success:
Vivienne’s extensive board,
corporate governance and sector
experience, as well as her
leadership in and passion for
sustainability and diversity matters,
enables strong leadership of
theBoard.
Dr Ros Rivaz
Senior Independent Director
A N R C
Qualifications: BSc (Hons) Honorary DSC
Nationality: British
Appointed to the Board: May 2020
Independent: Yes
Skills and experience: Ros holds a
Bachelor of Science (Honours) degree
inchemistry and an honorary doctorate
from Southampton University, and has
deep international experience in the
areas of supply chain management,
logistics, manufacturing, IT,
procurement and systems in the
engineering, manufacturing and
chemicals industries.
Previous roles: Ros’ executive career
spans nearly 30 years. She held senior
executive roles at Exxon, Tate & Lyle,
ICI, Diageo and Premier Foods. Ros
served as global chief operating officer
for Smith & Nephew from 2011 to
2014. She was non‑executive director
at ConvaTec plc, RPC Group plc,
Boparan Holdings Limited, Rexam plc
and CEVA LogisticsAG and has also
previously served as chair of the
Nuclear Decommissioning Authority
and asanon‑executive director of the
Ministry of Defence Equipment
andSupportboard.
Other significant appointments: Ros
is currently senior independent director,
employee engagement director and
chair of the remuneration committee
ofComputacenter plc and is lead
independent director of Aperam SA.
Ros was appointed chair designate at
privately owned Anglian Water with
effect from 22 November 2023 and
willbecome chair in the New Year.
Specific contribution to the
Company’s long-term success:
Ros’ strong track record as both a
nonexecutive and executive across
a range of listed companies,
particularly in the medical industry,
is instrumental in driving growth
and supporting the Chair in her role
as Senior Independent Director.
Jakob Sigurdsson
Executive Director –
ChiefExecutive Officer
Ian Melling
Executive Director –
ChiefFinancial Officer
Qualifications: BSc MBA
Nationality: Icelandic
Appointed to the Board:
October2017
Independent: No
Skills and experience: Jakob holds a
BSc in chemistry from the University of
Iceland and an MBA from Northwestern
University in the US. His executive
responsibilities have spanned
marketing, supply chain, business
development, strategy and M&A,
withparticular emphasis on growth
innew ordeveloping markets.
Previous roles: Jakob has more
than20 years’ experience in large
multinational companies, both listed
and private, including nine years with
Rohm & Haas (now part of Dow Chemical)
in the US. He was chief executive at
Alfesca, Promens and ViS.
Other significant appointments:
Non‑executive director of Coats
Groupplc.
Specific contribution to the
Company’s long-term success:
Jakob brings his diverse and
international background in
chemicals coupled with wider
business, executive and non
executive experience to inspire and
lead the Group.
Qualifications: MChem FCA
Nationality: British
Appointed to the Board: July 2022
Independent: No
Skills and experience: Ian is a
Chartered Accountant and holds a first
class Master’s degree in chemistry from
Oxford University in the UK.
Previous roles: Most recently Ian
heldthe role of senior vicepresident,
corporate finance and R&D for Smith
&Nephew plc, the medical technology
company, having served as interim chief
financial officer during 2020. Ian has
worked in a number of senior finance
roles in the UK and internationally for
Smith & Nephew, including those with
divisional and functional responsibility,
having joined the group in 2006.
Hewas senior vice‑president, group
finance for five years until October 2021.
Ianstarted his career and qualified as a
Chartered Accountant at Deloitte LLP.
Other significant appointments: Ian
is a member of the UK Endorsement
BoardPreparer Advisory Group.
Specific contribution to the
Company’s long-term success:
Iancontributes his significant
financial experience as well as his
background in the medical device
sector which is relevant to the
Company’s growth plans.
CORPORATE GOVERNANCE
71
Annual Report 2023 Victrex plc
Key to Committees
Brendan Connolly
Non-executive Director
A N R
Audit
A
Nominations
N
Corporate Responsibility
C
Remuneration
R
Committee Chair
Jane Toogood
Non-executive Director
A N R C
Janet Ashdown
Non-executive Director
A N R C
Qualifications: MA (Hons)
Nationality: British
Appointed to the Board:
September2015
Independent: Yes
Skills and experience: A senior
executive in the energy transition space,
Jane has a wealth of experience across
a number of business management, senior
commercial and business development
roles within the global chemicals
industry and with a focus on sustainable
solutions. Jane holds an MA in natural
sciences (chemistry) from Oxford
University and is a Fellow of the Royal
Society of Chemistry.
Previous roles: Until recently Jane
wasthe chief executive of Catalyst
Technologies at Johnson Matthey Plc,
having previously led the precious
metals division. Jane has held senior
roles at Borealis, ICI and Uniqema and
asa non‑executive director for the NHS.
Jane recently served as the UK Hydrogen
Champion and her report to the UK
Government was published in March 2023.
Other significant appointments:
Jane is the Co‑ Chair of the UK
Hydrogen Delivery Council.
Specific contribution to the
Company’s long-term success:
Jane brings strategic and industry
expertise and insights drawing on
her extensive international
experience across multiple sectors,
embracing technologies, materials,
chemistry and sustainability. Jane
has led significant business
transformation and growth
programmes to meet future market
demands including
decarbonisation, the energy
transition and deployment of
hydrogen and circularity.
Qualifications: BSc (Hons)
Nationality: British
Appointed to the Board:
February2018
Independent: Yes
Skills and experience: Janet has over
30 years’ experience in the international
energy sector working across the value
chain from customer facing through to
manufacturing in increasingly senior
roles with an additional 10+ years as
anonexecutive director.
Previous roles: Janet had a
distinguished career working for BP plc for
30 years where her last role was head of
the UK Fuels Business Unit. She was CEO
of Harvest Energy, an international private
equity backed business, from 2010 to
2012. She was previously non‑executive
director at SIG plc, Coventry Building
Society and Marshalls plc.
Other significant appointments:
Janet is a non‑executive director, chair
of the remuneration committee and
chair of the corporate sustainability
committee of RHI Magnesita NV, senior
independent director and chair of the
environment, health & safety, security
& cyber committee of the Nuclear
Decommissioning Authority and
non‑executive director of Stolt‑Nielsen
Norway AS.
Specific contribution to the
Company’s long-term success:
Janet has extensive international
executive and non‑executive
experience. She has experience of
chairing remuneration committees
across different sectors for over six
years and hasnow been chairing
sustainability committees for three to
four years.
Qualifications: BSc
Nationality: British
Appointed to the Board:
February2018
Independent: Yes
Skills and expertise: Brendan has over
35 years’ experience in the international
oil and gas industry serving in a number
of senior executive roles.
Previous roles: Until 2013, Brendan
was a senior executive at Intertek
Group plc and had previously been
CEOof Moody International (acquired
by Intertek in 2011). Prior to Moody,
Brendan was managing director of
AtosOrigin UK and spent more than
25years of his career with Schlumberger
in senior international roles over
threecontinents and until May 2023
Brendan was senior independent
directorand chair of the remuneration
committee of Synthomer plc.
Other significant appointments:
Brendan is a non‑executive director
ofPepco Group N.V. and also an
independent director on the board
ofApplus Services, S.A. as well as a
member of its environment, social
andgovernance committee and the
appointments and compensations
committee. Brendan is also onone
private equity board.
Specific contribution to the
Company’s long-term success:
With extensive executive and
non‑executive experience, Brendan
brings operational, commercial and
strategic expertise and insights; his
role as the designated Non
executive Director for Workforce
Engagement enhances the Board’s
understanding of the views of
employees and the culture of
theCompany.
CORPORATE GOVERNANCE
David Thomas
Non-executive Director
A N R C
Qualifications: MA FCA
Nationality: British
Appointed to the Board: May 2018
Independent: Yes
Skills and experience: David has
deepexperience in a broad range
offinance activities within listed
companies as both a senior executive
and anauditprofessional.
Previous roles: David was CFO
atInvensys plc from 2011 until his
retirement in2014, having held senior
roles across the business since 2002.
Prior to joining Invensys, he was a
senior partner at Ernst & Young
specialising in long‑term industrial
contracting businesses and was a
member of the Auditing Standards
Board. Until May 2023 he was interim
chair of Dialight plc as well as chair of
the nomination committee, having
previously served as senior independent
director and chair of theaudit committee.
Other significant appointments:
None.
Specific contribution to the
Company’s long-term success:
Davidcontributes his expertise in
finance and his understanding of
the investment community and
regulators as both a Board member
and Chair of the Audit Committee,
as well as his industry knowledge to
enhance the risk lens for Board
decision making.
Dr Martin Court (retired from the Board 30 September 2023)
Executive Director – Chief Commercial Officer
Qualifications: BSc (Eng) PhD
Nationality: British
Appointed to the Board: April 2015
Retired from the Board: 30 September 2023
Jane Brisley
Company Secretary
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
72
Statement of corporate governance
This section contains details of how we have applied the principles of the 2018 UK Corporate Governance Code (the ‘Code’). The Code can
be found on www.frc.org.uk. For the year ended 30 September 2023, we are pleased to report that we have applied the principles and
complied with all provisions of the Code.
1. Board leadership and Company purpose
A. Role of the Board
The Board performs its role to promote the long‑term sustainable success of the Company and
isconsidered to be effective in its approach. An explanation of how the Board operates can be
found on pages 77 to 79.
For a description of the business
model and a description
of strategy, please see
pages 12 to 15.
B. Purpose, values, strategy and culture
The Board endorses the Company’s purpose which informs our strategy, our values and our culture
and inspires our people. The Board reviews workforce culture and employee engagement through
a range of touchpoints throughout the year. We have developed and maintain a dashboard of
cultural indicators which is reviewed formally by the Board twice each year, with any actions to
address any areas of concern being monitored more frequently. The Audit Committee reviews the
results of internal audits which provide insights into the culture of the Group and individual areas
of the business. Following a detailed review of culture which included consideration of the Group’s
values, the behavioural framework and employee insights from our Nonexecutive Director with
designated responsibility for workforce engagement, in conjunction with the annual review of
purpose and strategy undertaken, the Board confirmed the alignment between purpose, strategy,
values and desired culture.
For more information on our
purpose, strategy, values and
culture, please see page 2.
C. Resources andcontrols
The Board ensures that the necessary resources are in place for the Company to meet its objectives
and measures performance against them. The Board has a framework of controls which enables
risk to be assessed and managed. The Executive Risk Management Committee manages risks and
establishes and monitors controls in place.
For more information about
the risks faced by the Company
and the associated governance
framework, see pages 32 to 38.
See the Audit Committee
report on pages 95 and 96 for
information about controls.
D. Engagement with shareholders and stakeholders
Victrex has multiple stakeholders who are all important to our business. We are aware that our
actions and decisions impact our stakeholders and the communities in which we operate. The
Board regularly reviews and considers our key stakeholder relationships, including how we engage
with them and whether any enhancements can be made. The Board maintains regular direct and
indirect engagement with shareholders and other key stakeholders. Where engagement is not
direct, it takes place via feedback from individual Directors and members of management.
The relevance of each stakeholder group will depend on the particular matter requiring Board
decision; we also have regard to any other key factors including the interests or requirements
of applicable regulators. All decisions we make will unfortunately not benefit all stakeholders;
by taking a consistent approach to decision making and being guided by our purpose and our
strategicaims, we hope that our decisions are understandable.
The matters we have discussed and debated during the year are set out on pages 79 and 80.
For more information about
shareholder engagement, please
see page 83 of this section and
page 101 of the Remuneration
Committee report.
For more information about
engagement with other stakeholders
including the annual report from
our Non‑executive Director with
designated responsibility for
Workforce Engagement, please see
pages 84 and 85. Our Section 172
statement is contained on pages 20
to 23 of the Strategic report.
CORPORATE GOVERNANCE
73
Annual Report 2023 Victrex plc
1. Board leadership and Company purpose continued
E. Workforce policies and practices
Our Code of Conduct sets out the standards of behaviour we expect from everyone at Victrex and
those who work with us. We encourage people to raise any matters of concern through our Global
Whistleblowing Policy, where genuine concerns may be reported and investigated without reprisals
for whistleblowers.
The Group operates an independently provided confidential reporting telephone helpline for
employees to raise any matters of concern. Alternatively, such matters could be raised with the line
manager, the HR business partner or, as detailed in the Global Whistleblowing Policy, the Director
of Risk & Compliance, the Group HR Director or the Chair of the Audit Committee. Employees
can remain anonymous if they wish. All concerns are investigated fully, regardless of how they
are raised.
During the year, the Board was kept fully apprised of the number of cases. The Board was also
informed about how cases were being investigated and remedial actions taken. Relevant employees
undertake periodic specialist training in order to conduct investigations of cases of whistleblowing.
The Group operates an Anti‑bribery & Corruption Policy to prevent bribery being committed on
its behalf. All employees must follow it and there are processes in place to monitor compliance.
As part of the programme, employees are required to comply with the Group’s Gifts & Hospitality
Policy. This permits employees to give and accept proportionate and reasonable hospitality for
legitimate business purposes only. Our suppliers must comply with our Supplier Code of Conduct
which explains we will not tolerate corruption, bribery or anticompetitive actions and expect
suppliers to comply with applicable laws.
A copy of the Group’s Anti‑bribery & Corruption Policy is available on request.
For more information about this
and our approach to ethics and
compliance, please see page 65.
Conflicts of interest
The Board has a formal system in place to declare an actual or potential conflict of interest.
Astatement of Directors’ interests in Company shares is set out on page 118.
Please see page 125 for
furtherinformation.
2. Division of responsibilities
F. Role of the Chair
Our Senior Independent Director, Ros Rivaz, led the annual performance review of our Chair,
Vivienne Cox. The outcome of that process found Vivienne to be an effective Chair, which was
also supported by feedback gained during the external Board performance evaluation conducted
in FY 2023.
For more information, see pages
82 and 89.
G. Composition andresponsibilities
As at 30 September 2023, our Board was comprised of nine members: the Chair, five independent
Non‑executive Directors (one of whom is Senior Independent Director) and three Executive Directors.
Our Chair was independent on appointment. All Non‑executive Directors have less than nine years’
service. Martin Court stepped down as a Director with effect from 30 September 2023, resulting in
our Board having eight members thereafter.
Details of the distinct roles and responsibilities of the Chair, the Senior Independent Director and
the Chief Executive Officer are summarised on page 77, with full details set out on our website.
Information about our individual
Directors is set out on pages 70 and
71. Details about our Board and its
Committees are set out on page 77.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
74
Statement of corporate governance continued
2. Division of responsibilities continued
H. Role of the Non-executive Director
The role of the Non‑executive Director is to provide constructive challenge and strategic guidance,
offer specialist advice and hold management to account. The results of the externally facilitated
Board and Committee performance review supported this. At the end of most Board meetings,
the Chair holds a meeting without the Executive Directors present to provide feedback on papers
presented, and consider and discuss any matters that have arisen during the meeting. The Chairs
of the Audit and Remuneration Committees also hold regular meetings without the Executive
Directors and management present.
Independence of Non‑executive Directors is reviewed against the circumstances which are likely to
impair, or could appear to impair, a Non‑executive Director’s independence as set out in the Code.
Following assessment, no circumstances were identified which are likely to impair, or could appear
to impair their independence and therefore all of the Company’s Nonexecutive Directors are
considered independent. The Chair was considered independent on appointment. A chart showing
the independence of theNonexecutive Directors is contained on page 78.
It is vital that Directors have sufficient time to devote to and fulfil their duties. Non‑executive
Directors are expected to devote the time needed to fulfil the role and manage their diaries
accordingly although the Company’s historical practice has been to specify an expected time
commitment range in their letter of appointment. The Board is satisfied that none of its Directors
are overcommitted and unable to fulfil their duties to Victrex. Each individuals circumstances
are different, as is their ability to take on the responsibilities of a Non‑executive Director role. If a
Director was unable to attend meetings on a regular basis, or was not preparing for or contributing
appropriately to Board discussions, the Chair would be responsible for discussing the matter with
them and agreeing a course of action. The Nominations Committee also reviewed the time required
from each Nonexecutive Director and any other significant commitments of the Chair. The 2023
review found the Non‑executive Directors’ time commitments to be sufficient to discharge their
responsibilities effectively.
Prior to the Board approving a Board member taking on any new external appointment or
significant commitment, the Board member is required to confirm sufficient time remains available
to discharge their responsibilities to Victrex.
A summary of the roles and
responsibilities of the Chair and the
Nonexecutive Directors (including
that of the Senior Independent
Director) is contained on page 77.
Other significant appointments
of each individual Director are
included in the Board biographies
on pages 70 and 71.
For more information on meeting
attendance in FY 2023, please
see page 78.
I. Effective and efficient Board function
The General Counsel & Company Secretary supports the Board to ensure that it has the policies,
processes, information, time and resources it needs in order to function effectively and efficiently.
All Directors have access to the advice of the General Counsel & Company Secretary, as well as
independent advice at the Companys expense.
Appropriate levels of insurance cover are obtained for all Directors and Officers of the Company.
Further information on Directors’
indemnities and insurance cover
is given in the Directors’ report
on page 125.
3. Composition, succession and evaluation
J. Board succession planning
The Nominations Committee leads the process for Board appointments, and ensures plans are in
place for orderly succession to both the Board and senior management positions. It also oversees
the development of a diverse pipeline for succession. The Committee also recommends candidates
for appointment. It operates a formal, rigorous and transparent procedure which focuses on
finding the right candidate having regard to the strategic aims of the Company, desired skills and
experience, with due regard for promoting diversity. There are written succession plans in place for
the Executive Directors, Non‑executive Directors and senior management which are reviewed by
the Committee. The Board maintains a Diversity & Inclusion Policy. Each Director seeks re‑election
on an annual basis at the Annual General Meeting.
The activities of the Nominations
Committee are set out in the
report on pages 86 to 89. The
Board’s Diversity & Inclusion Policy
is set out on page 88 and on
our website.
Details of the specific reasons
why the contribution of each
individual Director is and continues
to be important to the Company’s
long‑term sustainable success are
set out in the Director biographies
on pages 70 and 71, as well
as in the notes accompanying
the resolutions to re‑elect
each Director.
CORPORATE GOVERNANCE
75
Annual Report 2023 Victrex plc
3. Composition, succession and evaluation continued
K. Skills, experience, knowledge and refreshment
Using a Board skills matrix, the Nominations Committee ensures that the combination of skills,
experience and knowledge on the Board and its Committees is relevant to assisting the Company
in delivering its purpose and strategic aims, as well as sufficient to discharge their governance
andoversight responsibilities.
For more details on the skills and
experience of the Board, see the
individual Director biographies on
pages 70 and 71, and page 87 of
theNominations Committee report.
L. Board evaluation
In FY 2023 an external Board and Committee performance review took place. Details of the
process, outcomes and focus areas for FY 2024, together with progress on actions identified in
FY2022, are set out on pages 81 and 82.
For more information on the Board
and Committee evaluation, please
see pages 81 and 82.
Induction and Board development
The Group has in place a comprehensive induction programme for newly appointed Directors
which is capable of being personalised according to that individual’s proposed role, skills and
experience. The induction programme was reviewed and updated during the year.
Board Directors regularly receive updates to improve their knowledge and understanding about the
business and are encouraged to identify any knowledge or skills gaps they would like to address.
During the year, the Board has received legal and governance briefings from the General Counsel
&Company Secretary, Addleshaw Goddard (update on UK Market Abuse Regulation including case
studies), Korn Ferry (remuneration) and PwC (corporate reporting update), as well as a briefing on
geopolitical risks from an external speaker.
The Board conducted a visit to the Group’s European base in Germany in October 2022 which
included employee interactions and presentations, as well as several in‑person customer meetings,
providing the Board with valuable direct stakeholder interactions. In March 2023, the Board
conducted a visit to the Group’s Rotherham manufacturing site.
See page 87 for a description
oftheinduction programme.
4. Audit, risk and internal control
M. Independence and effectiveness of internal and external audit
The Audit Committee meets composition requirements set out in the Code as it comprises five
Non‑executive Directors, the Chair is not a member, at least one member has recent and relevant
financial experience and the Committee as a whole has competence relevant to the sector in
which the Company operates. The Audit Committee assesses and assures the Board of the
independence and effectiveness of the Group’s internal audit function and the external auditors,
PwC. The Audit Committee operates a policy for non‑audit services which PwC are permitted
to conduct.
An explanation of how the
AuditCommittee has assessed the
effectiveness of the external audit
process can be found on page 97.
Further information on the work
of the Audit Committee, internal
audit and the external auditors,
PwC, is set out on pages 90 to 97.
N. Fair, balanced andunderstandable assessment
The Audit Committee reviews financial and narrative statements set out in the Group’s annual
and half‑year results and reports its findings and makes recommendations to the Board. The
entire Board considers the recommendations of the Audit Committee, representations made by
management and the views of internal audit and the external auditors. This process is applied
so that the Board can satisfy itself on the integrity of financial and narrative statements and to
determine whether, when taken together, they represent a fair, balanced and understandable
assessment of the Company’s position and performance, business model and strategy. During
the year, the decision has been taken to add two additional meetings to the Audit Committee’s
programme of business going forwards to provide enhanced opportunities for spreading
its workload.
See pages 94 and 95 for a
description of the significant
issues that the Audit Committee
considered in relation to the
financial statements and how these
were addressed, having regard to
the matters communicated to it by
the externalaudit team.
Please see page 128 for the
statement that the Directors
consider that the Annual Report
and Accounts, taken as a whole, is
fair, balanced and understandable
and provides information necessary
for shareholders to assess the
Company’s financial position
andperformance.
The going concern statement is set
out on page 39.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
76
4. Audit, risk and internal control continued
O. Risk management and internal controls
The Audit Committee monitors the internal control framework and receives regular reports on its
effectiveness, reporting its findings to the Board. At least twice in each year, the Board reviews
the principal and emerging risks which apply to the Group to ensure that they remain up to date.
The Board also reviews the controls and mitigations in place (including financial, operational and
compliance controls) to manage those risks to ensure that they are aligned to the risk appetite
determined appropriate by the Board to achieve the long‑term strategic aims of the Group.
For further information, see the risk
descriptions on pages 34 to 38,
and the Audit Committee report
on page 95.
5. Remuneration
P. Remuneration policy and practices
The Remuneration Committee is responsible for determining remuneration policies and practices
which support the strategy and promote the long‑term sustainable success of the Company.
When setting executive pay, the Committee takes into account workforce remuneration and
related policies as well as the alignment of incentives and rewards with culture. The Remuneration
Committee meets composition requirements set out in the Code as it comprises five Non‑executive
Directors, the Chair is not a member and the Committee Chair has served on a remuneration
committee for longer than 12 months. The remuneration of Non‑executive Directors is determined
by the Board, reflecting the time commitment and responsibilities of the individual roles.
The Company’s remuneration advisor is Korn Ferry. Details of the engagement are contained
on page 111.
The work of the Remuneration
Committee is summarised
onpages100 and 101.
Please see pages 103 to 110 for
details of remuneration policy.
Q. Executive remuneration
The executive remuneration policy was renewed at the 2023 AGM. The Remuneration Committee
considered that the remuneration policy continues to align with corporate governance best practice
which enables the attraction and retention of executive talent to achieve the Group’s strategic
aims and to promote the delivery of the long‑term sustainable strategy. No Director is involved
indeciding their own remuneration outcome.
Future policy table and notes,
performance scenario charts
and remuneration obligations in
service contracts are set out on
pages103 and 110.
Please see the Directors’
remuneration report for policy
implementation (pages 102 and
111 to 123), remuneration paid to
service advisors (page 111), single
total figure tables (page 112), Chief
Executive Officer total remuneration
(page 120), CEO pay ratio (page
121), alignment of Directors’
remuneration (including pension
contributions) with the workforce’s
(pages 101 and 102) and relative
importance of spend on pay (page
121). Please see the Remuneration
Committee report for Directors’
shareholdings (page 118) and
variable pay awarded in the year
(page 116).
R. Judgement anddiscretion
The Remuneration Committee determines remuneration outcomes for Directors and senior
management and in doing so exercises independent judgement and discretion when authorising
remuneration outcomes, taking account of Company and individual performance, as well as wider
circumstances. Details of the Committee’s discretionary powers, specifically relating to malus
and clawback, bonuses and LTIPs, can be found in the remuneration policy from page 107. The
Committee did not use discretion in relation to adjusting incentive outcomes for FY 2023.
For more information on
remuneration outcomes, please
see the Directors’ remuneration
report from page 111.
Statement of corporate governance continued
CORPORATE GOVERNANCE
77
Annual Report 2023 Victrex plc
Leadership – our governance framework as at 30 September 2023
Key responsibilities:
u
Day to day running of the Group
u
Recommending to the Board and implementing agreed strategy
u
Executing Board decisions
Matters not reserved for Board decision are delegated to the CEO
Key responsibilities:
u
Acting as secretary to the Board and its Committees
u
Keeping the Board up to date on all legislative, regulatory and
governance matters
u
Reviewing the efficacy of and compliance with Board procedures
u
Facilitating information flows between management and the Board
Key responsibilities:
u
Performing designated executive responsibilities
u
Discharging duties in respect of the Group as a whole
* Martin Court stepped down from the Board with effect from
30September 2023.
Key responsibilities:
u
Providing entrepreneurial leadership
u
Setting the Company’s purpose and strategic aims
u
Being collectively responsible and accountable to shareholders for the
long‑term sustainable success of the Group and for the responsible
operation of the Group in delivering its strategic objectives
u
Ensuring the interests of all stakeholders are taken into account
u
Ensuring that the necessary financial and human resources are
inplace for the Company to meet its objectives
u
Ensuring a sound system of risk management and internal controls
which enables risk to be assessed and managed is in place
u
Reviewing management performance and the operating and
financial performance of the Group
u
Setting the Company’s culture, values and behaviours
u
Ensuring good corporate governance
How the Company generates value for shareholders and other stakeholders
and contributes to wider society is set out on pages 6 to 17
* Two Executive Directors with effect from 1 October 2023.
Key responsibilities:
u
Leading the Board
u
Creating the right Board dynamic
u
Ensuring Board effectiveness, including contribution and challenge
from all Directors
u
Ensuring effective engagement with shareholders
Key responsibilities:
u
Acting as a sounding board to the Chair
u
Serving as an intermediary for other Directors when necessary
u
Being available to meet with shareholders should they have anyconcerns,
where contact through the normal channels may beinappropriate
u
Leading the review of the Chair’s performance
u
Deputising for the Chair if the Chair is unable to fulfil her duties
Key responsibilities:
u
Exercising independent and objective judgement in decision making
u
Scrutinising and constructively challenging senior management
Chief Executive Officer: Jakob Sigurdsson
General Counsel & Company Secretary: Jane Brisley
Executive Directors*: Jakob Sigurdsson, Ian Melling
Chair: Vivienne Cox
Senior Independent Director: Ros Rivaz
Independent Non-executive Directors: Janet Ashdown,
Brendan Connolly, Ros Rivaz, David Thomas, Jane Toogood
Board: one Chair (independent on appointment), five independent Non-executive Directors, three* Executive Directors
Role:
u
Assisting the Board in its oversight of financial reporting, internal controls
and risk management
u
Managing the relationship with the Group’s external auditors
See the Audit Committee report from page 90 for more information
Role:
u
Setting remuneration policy for Executive Directors, senior
management and the Chair
u
Determining the application of remuneration policy
See the Directors’ remuneration report from page 100 for more information
Role:
u
Overseeing the Company’s conduct with regards to its corporate
societal obligations and commitments
u
Overseeing and reviewing the development and execution of the
Company’s sustainability strategy and commitments including progress
towards targets
Role:
u
Reviewing Board structure, size, composition and succession planning
u
Overseeing senior management succession
See the Nominations Committee report from page 86 for more information
Role:
u
Ensuring timely and accurate disclosure of information to comply with
applicable laws and regulations where it is impractical for the Board
(orany other Board Committee with delegated responsibility)
u
Making disclosures on behalf of the Board
u
Taking advice from the Company’s broker, external auditors and legal
advisors, on the form and content of any disclosure under consideration
Chair: Vivienne Cox, David Thomas, Jakob Sigurdsson or Ian Melling
(inthat order)
Quorum: Two of Vivienne Cox, David Thomas, Jakob Sigurdsson
andIan Melling
Audit Committee members:
fiveindependent Non-executive Directors
Remuneration Committee members:
fiveindependentNon-executive Directors
Corporate Responsibility Committee members:
aminimumofthree Non-executive Directors
Nominations Committee members:
Board Chair and five independent Non-executive Directors
Disclosure Committee members: wholeBoard
Board Committees
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
78
Statement of corporate governance continued
Attendance at meetings
The Directors’ attendance record at the Annual General Meeting (‘AGM’) and scheduled Board and Committee meetings for the year
ended 30 September 2023 is set out below. Attendance is shown as the number of scheduled meetings attended out of the number
thateach Director was eligible to attend. Only in exceptional circumstances would a Director not attend a Board or Committee meeting.
AGM Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Corporate
Responsibility
Committee
Number of meetings 1 8 4 4 3 3
Chair
V Cox 8/8 3/3
Executive Directors
J O Sigurdsson 8/8
M L Court
1
6/8
I C Melling 8/8
Non-executive Directors
J E Ashdown 8/8 4/4 4/4 3/3 3/3
B W D Connolly
2
8/8 3/4 4/4 3/3
D Thomas 8/8 4/4 4/4 3/3 3/3
J E Toogood 8/8 4/4 4/4 3/3 3/3
R Rivaz 8/8 4/4 4/4 3/3 3/3
Notes
1 Martin Court was unable to attend two Board meetings due to external commitments and provided input on papers and insights in advance.
2 Brendan Connolly was unable to attend one Audit Committee meeting due to an urgent external matter arising at short notice.
Executive Directors may be invited to attend Committee meetings – please see the Committee reports for further information.
A summary of Board activity in FY 2023 and strategic outcomes is on pages 79 and 80. In undertaking these activities, the Board
considers its legal duties and the interests of principal impacted stakeholders. The Section 172 statement is located on pages 20 to 23.
Diversity
Our Board believes that diversity is
important for Board effectiveness and
recognises the value of diversity in its widest
sense. Broadening the diversity of the Board
and senior management will continue to be
a focus area. Female representation on the
Board was 44% during FY 2023 and as at
the date of this Annual Report is 50%.
The current ethnic composition of our
Board is 100% White, with a breakdown
of nationalities provided above. Led by the
Nomination Committee we aim to make
progress in achieving the Parker Review
recommendation and FCA Listing Rule
target of having at least one Director from
a minority ethnic background during our
financial year commencing 1October 2023.
Further details, including the mandatory
FCA Listing Rules disclosures in relation to
gender and ethnic representation and our
Board Diversity & Inclusion Policy, can be
found in the Nominations Committee report
on pages 86 to 89. Details of the Group’s
Diversity, Inclusion & Equal Opportunities
Policy can be found on page 65.
Female Chair 1
Female Senior Independent Director
1
Male Executive Directors 2
Male Nonexecutive Directors 2
Other female Non‑executive Directors 2
Roles and gender
Icelandic 1
British 7
Nationality
As at the date of this Annual Report
Chair and Non-executive
Director tenure
36 years
7–9 years
Up to 3 years
66%
17%
17%
Independence
Independent
NEDs
5
Chair 1
CORPORATE GOVERNANCE
79
Annual Report 2023 Victrex plc
SUMMARY OF BOARD ACTIVITY IN FY 2023 STRATEGIC OUTCOMES
Strategy
u
Held the annual strategy review at which the Group’s strategy was reviewed in detail
u
Reviewed and approved the Group’s purpose and strategy
u
Reviewed performance against strategy
u
Reviewed the Group’s innovation portfolio
u
Reviewed corporate development activities
u
Conducted deep dives into strategic business unit and key functional strategies
u
Met with a number of key customers as part of the Board visit to Europe. The Board
received a presentation from TechnipFMC, to further develop the relationship as it
progresses its industrialisation and scale‑up in Brazil
u
Reviewed and approved changes in the organisational structure
u
Reviewed and approved key contracts
u
Approved SBTi submission
u
Received regular updates on progress of establishment of manufacturing capability in China
u
Strategy updated to reflect five‑year
financial plan
u
Reviewed sustainability agenda and
approved submission to SBTi
u
Creation of Sustainable Solutions and
Medical business areas, with Managing
Directors appointed for each, to support
delivery of the Group’s strategy
u
Approved customer and other third
party contracts to support progression
of the Group’s strategy
u
Further development of key customer
relationships and understanding of
customer priorities
Financial, operations and risk
u
Reviewed operational performance
u
Approved the budget and monitored financial performance
u
Reviewed and approved the half and full‑year results and associated announcements
u
Reviewed and approved the going concern and viability statement
u
Reviewed and approved the Group’s 2023/24 UK tax strategy
u
Reviewed and approved the Group’s treasury policies
u
Reviewed and debated the risk profile of the Group, and in particular the principal risks
and risk appetite agreed programme of periodic risk deep dives
u
Received updates on significant IT project (a new ERP system)
u
Reviewed the effectiveness of the risk management and internal control systems including
bribery prevention arrangements and Group whistleblowing policies and processes
u
Reviewed annual insurance arrangements and received a briefing from the Group’s
insurance brokers
u
Reviewed and approved changes to the Group’s corporate structure and director and
officer appointments to subsidiary boards
u
Received external briefing on geopolitical risk
u
Ongoing monitoring of operational
andfinancial performance
u
Reviewed principal risks and agreed
aprogramme of risk deep dives
u
Approval of the interim and final dividend
Shareholder relations
u
Received regular updates and discussed feedback from roadshows, presentations and
meetings between the Chief Executive Officer, the Chief Financial Officer and/or the
Director of Investor Relations, Corporate Communications & ESG and other engagement
with large investors, prospective investors and analysts
u
Enhanced engagement and clear
understanding of investor views
Leadership and employees
u
Reviewed health and safety activities, considered health and safety incidents impacting
employees and contractors and maintained focus on embedding an enhanced health
andsafety culture
u
Reviewed and discussed Executive Director and senior management succession plans
andmonitored progress on key aspects of talent and development plans, identifying
general management and functional leadership potential, and developing our employee
value proposition and aspiration for a diverse workforce
u
Considered outcomes of the 2023 Employee Experience ‘Pulse’ Survey
u
Reviewed the Board Diversity & Inclusion Policy
u
Considered reports on workforce engagement from Brendan Connolly as the
Non‑executive Director with designated responsibility for Workforce Engagement
u
Reviewed dashboard of workforce composition and conditions
u
Met with employees at a number of the Group’s locations
u
Monitored culture using a combination of formal and informal methods including
adashboard of cultural indicators
u
Reviewed whistleblowing arrangements
u
Conducted annual review of stakeholder engagement arrangements
u
Continued prioritisation of health
andsafety matters
u
Monitoring alignment of culture with
ourpurpose, values and strategy
u
Enhanced insight into employee
engagement, views of our employees
and related actions
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
80
Statement of corporate governance continued
SUMMARY OF BOARD ACTIVITY IN FY 2023 STRATEGIC OUTCOMES
Governance
u
Reviewed the governance framework and the Terms of Reference for each Board
Committee and received post‑meeting reports from the Chairs of each Committee
summarising discussions, decisions and actions
u
Reviewed periodic updates on developments in corporate governance and best practice
u
Received training on the UK Market Abuse Regulation
u
Implemented actions from the FY 2022 evaluation of Board performance and agreed
theapproach for the FY 2023 external evaluation of Board performance
u
Determined independence of the Nonexecutive Directors
u
Reviewed the performance of the external auditors and recommendation
forre‑appointment
u
Reviewed the Modern Slavery Policy and approved the FY 2023 Modern slavery
andhuman trafficking statement
u
Reviewed and approved updates to key compliance policies
u
FY 2024 action plan agreed
following2023 Board and Committee
external performanceevaluation
u
Approval of Modern slavery and
human trafficking statement
Below Board support for
theChief Executive Officer to
discharge his responsibilities
The Victrex Management Team (‘VMT’)
Representing all business functions,
individual members of the VMT advise
the Chief Executive Officer and the other
Executive Directors of the interests of all
the Group’s principal stakeholders and
how they are likely to be impacted by
how Victrex operates. They do this during
VMT meetings which are chaired by the
Chief Executive Officer and typically
held at least once a month or when
they participate in other management
meetings or Committees which have been
established to assist the Chief Executive
Officer in the operational management
of the business – more information is set
out below. The VMT works to nurture the
culture, maximise employee engagement,
support the business in delivering profitable
growth, ensure consistent and appropriate
communications both internally and
externally, and drive faster execution of
business and functional activities and
plans which rely on cross‑functional
dependencies. More details on the members
of the VMT and their individual roles and
responsibilities are set out on page 81.
A number of meetings are in operation to
support the Chief Executive Officer to run
the business of the Group on a day to day
basis. Key meetings are described below.
Victrex Performance Day: Each month,
the Chief Financial Officer chairs the
Performance Day which reviews operational
business performance covering supply,
demand, financial and business unit
performance. This meeting is attended by
the Executive Directors, the Chief Operating
Officer and MDs, with other VMT members
and senior leaders attending relevant
sessions based on their area of responsibility.
Executive Risk Management Meeting:
At least twice each year, the Chief
Financial Officer chairs the Executive Risk
Management Meeting which reviews the
Group’s corporate and emerging risks,
associated mitigations and controls. This
meeting is attended by the Executive
Directors, the Chief Operating Officer, the
General Counsel & Company Secretary, the
Group HR Director and the Director of Risk
& Compliance.
VMT Risk & Compliance Meeting:
Meeting six times each year, the Chief
Financial Officer chairs the Executive Risk
& Compliance Meeting which reviews legal
compliance matters, internal audit matters,
IT security matters, and performance in
SHE, quality and regulatory matters. This
meeting is attended by the VMT and the
Director of Risk & Compliance. The Group
Head of SHE, Internal Audit Manager, R&D
Director, Head of Regulatory Affairs and
Product Stewardship and Group Head of IT
& Security participate in relevant sessions.
Industry‑based risk committees meet at least
twice a year.
The SHE Steering Committee meets
quarterly and is chaired by the Chief
Operating Officer. A description of how
riskmanagement is conducted by the Group
canbe found in the Strategic report on
pages 32 and 33.
Currency Committee: The Board has
ultimate responsibility for the annual
approval of the Treasury and Cash
Management Policy and continues to be
supported in its work by the management‑
led Currency Committee. The Currency
Committee is chaired by the Chief Financial
Officer and meets monthly to manage the
application of the policy. Attendees include
the Chief Executive Officer. Further details
on this policy and the activities of the
Currency Committee are included in note16
to the financial statements.
Innovation Portfolio Review: Meeting
quarterly and chaired by the Marketing
Director, the Innovation Portfolio Review
Meeting reviews and manages the balance
of the innovation portfolio, as well as
ensuring the appropriate and effective
allocation of resources to projects. This
meeting is attended by the Executive
Directors, the Chief Operating Officer
and those in senior positions in R&D and
marketing with other subject matter experts
attending as necessary.
Portfolio Steering Committee: Meeting
six times each year, the Portfolio Steering
Committee oversees the selection,
prioritisation, resourcing and delivery of
our mega‑programmes. This meeting is
attended by SBU Directors responsible for
their specific end market performance and
mega‑programme projects, the Marketing
Director, the R&D Director, the Director
of Global Manufacturing and the Sales
Director, as well as other subject matter
experts attending as necessary.
IP Committee: The IP Committee meets
quarterly and manages the Group’s IP
portfolio. It is chaired by the Intellectual
Property Director and attended by the
Marketing Director, the R&D Director, the
Chief Financial Officer, the Chief Scientist
and the Group’s Intellectual Property team,
as well as those in senior positions in R&D.
CORPORATE GOVERNANCE
81
Annual Report 2023 Victrex plc
VMT MEMBERS (AS AT THE DATE OF THIS ANNUAL REPORT), ROLES AND RESPONSIBILITIES
Jakob Sigurdsson
1
Chief Executive Officer
(see page 77)
Ian Melling
1
Chief Financial Officer
u
Responsible for financial control
u
Leads the Finance, IT, Legal and IP teams
Andrew Hanson
1
Director of Investor Relations,
CorporateCommunications & ESG
u
Investor relations, internal communications
and corporatecommunications
u
Leads the Communications and ESG teams
Jane Brisley
2
General Counsel & Company Secretary
u
Legal, governance and company
secretarial matters
u
Leads the Legal, Company Secretariat
andExecutive PA teams
Jeff Versterre
1
Chief Operating Officer
u
Responsible for overall performance and
development of the integrated supply chain
u
Leads the Procurement, SHE and Supply
Chain teams
Jilly Atherton
2
Group HR Director
u
People strategy
u
Leads the Human Resources and
BusinessAdministration teams
John Devine
1
MD, Medical
u
Responsible for performance
of Medical
Michael Koch
1
MD, Sustainable Solutions
u
Responsible for performance of
Sustainable Solutions (Electronics,
Energy & Industrial, Transport
and VAR SBUs)
1 Male.
2 Female.
Martin Court (Chief Commercial Officer) was a member of the VMT during FY 2023.
The VMT is treated as senior management for the purposes of the Code. The VMT (excluding the Executive Directors) is treated as senior
managers for the purposes of section 414C(8) of the Companies Act 2006. Only the Executive Directors aretreated as key management
personnel for the purposes of IAS 24.
Performance evaluation
Our Board evaluation was conducted
externally this year by an independent third
party, EquityCulture Ltd, a firm which has
no other connection with the Company
or individual Directors. EquityCulture was
appointed after a review of independent
advisors in the field of formal Board
evaluations which was led by the Chair and
General Counsel & Company Secretary.
David Mensley and Alison Crowther‑Smith
of EquityCulture conducted the external
evaluation of the Board in FY 2019. Each
Board member and the General Counsel &
Company Secretary were interviewed to
review and assess the performance of the
Board and itsCommittees.
The Board performance review process
was led by the Chair, with the support of
EquityCulture and the General Counsel
&Company Secretary, and entailed:
u
the review and agreement of an agenda
of questions to be used at meetings
with each Board member with the
inputs from the Board Chair and each
Committee Chair;
u
one‑toone meetings with each Board
member and EquityCulture;
u
preparation of a report by EquityCulture;
u
discussions on the Board evaluation
outcomes and recommendations with
the Chair;
u
consideration of the relevant sections of
the report for each Committee;
u
discussion of the results of the evaluation
by EquityCulture with the Board as a
whole; and
u
the Board identifying and agreeing areas
for improvement.
During the interviews, five broad topic
areas were considered, and EquityCulture
ensured that pre‑defined constituent
elements of each topic were covered
to ensure consistency in the evaluation
process. The topic areas covered included
Board meetings, people matters including
succession planning, strategy, and risk.
Committee effectiveness was also assessed
in accordance with Code requirements.
The interviews were confidential, open
and honest. Results were compiled on
an unattributed basis and reported to
the Board by the evaluator. The overall
outcomes of the evaluation indicated that
the Board is performing well and is both
well led and well supported, and members
enjoy being part of it.
Following the Boards discussion of the
outcome of the FY 2023 Board evaluation,
an action plan was agreed with actions in
the following areas:
Topic Action/recommendation
Non‑executive director succession planning Ensure smooth transition plan for refreshment of the Board in light of future departures of
Non‑executive Directors, particularly given three Nonexecutive Directors were appointed
during the same calendar year.
Board papers and presentations Build on the improvements to papers and presentations made to date to drive
additionalimprovements.
Board and Committee resources Factoring in the size of the Group and focus on operational efficiencies, consider
opportunities for targeted enhancements to the level of management resource, for example
in support of the Corporate Responsibility Committee which was established in FY 2022.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
82
Performance evaluation continued
During the year, the Board has also reviewed progress made in relation to the actions identified from the internal Board evaluation
conducted in FY 2022.
Topic Action/recommendation Progress
Board papers and presentations Continue evolution of materials submitted tothe
Board to support focus and efficiency.
Notable improvements during the year. This
has been identified as an area for further focus.
Papers are provided in good time for review prior
to meetings.
Engagement Review opportunities for engagement outside
offormal meetings and build onopportunities
tomeetwith employees.
There are regular meetings between the Chair and
CEO, with these also now established for the Chair
and CFO. Board members have had numerous
direct engagement opportunities with a number of
employees during the year through site visits and
Board presentations.
Strategy Build on the strategy decision‑making processand
maintain focus on strategic mattersanddeployment.
Good progress during the year with continued focus
on this topic.
Review of the Chair’s performance
Dr Ros Rivaz, as the Senior Independent
Director and in discussion with the other
Non‑executive Directors, led a separate
appraisal of the Chairs performance
which took into consideration both the
Executive and Nonexecutive Directors’
views. Vivienne’s leadership of the Board
was considered effective. Further, during
FY2023 the Non‑executives met without
the Chair present.
Review of the individual
Directors’performance
The Chair reviewed the individual
performance and effectiveness of each
Director. Each of the Directors was
found to be effective in discharging their
responsibilities and to be making a valuable
and effective contribution to the Board.
In addition to the formal evaluation, the
Non‑executive members of the Board met
at various times during the year without the
Executive Directors present.
All Directors will be subject to annual
re‑election at the AGM in February 2024.
The Board recommends that shareholders
vote in favour of those standing at the
forthcoming AGM, as they will be doing in
respect of their individual shareholdings.
The papers accompanying the resolutions
to elect each Director contain the
specific reasons why their contribution
is, and continues to be, important to the
Company’s long‑term sustainable success.
Company purpose, values,
strategy and culture
The Board has established the Company’s
purpose, values and strategy and monitors
Company culture to ensure that these
are aligned.
Culture
Values Behaviours
Strategy
Purpose
u
Our purpose is to bring transformational
and sustainable solutions that address
world material challenges every day.
u
Our strategy is to drive core business and
create and deliver future value through
Polymer & Parts. We will do this by
innovating in high performance polymer
solutions to focus on our key strategic
markets of Automotive, Aerospace,
Energy & Industrial, Electronics and
Medical. This is with the aim of shaping
future performance for our customers
and creating long‑term value for our
shareholders, enabled by differentiation
through innovation and underpinned by
safety, sustainability and capability.
u
Our long‑term values of Passion,
Innovation and Performance shape our
culture and drive responsible business
conduct in line with our Code of
Conduct. You can find more on our Code
of Conduct on page 65.
u
Our entire workforce (including our
Executive Directors) is reviewed against
our core behaviours of driving results,
working together, doing the right thing,
continuously improving and focusing on
our customers.
u
Through its annual programme of
business, receiving reports from Brendan
Connolly, our Nonexecutive Director
responsible for Workforce Engagement,
and meeting with employees, the Board
gains an insight into the culture of
Victrex. A formal review of corporate
culture is conducted by the Board twice
a year, using the dashboard of cultural
indicators which has been developed.
Our cultural dashboard has a behavioural
focus tracking cultural insights in the
following areas:
Safety
Employee engagement,
inclusion anddiversity
Doing the right thing Service for customers
Innovation
Sustainable
businesspractices
The Board retains the power to take
decisions which affect the future
developments and business prospects of the
Group and the authority and responsibility
for planning, directing and controlling the
activities of the Group. Where the matter
has not been reserved for Board decision,
it is delegated to the Chief Executive
Officer. The Group operates a Group
Authorities Manual & Matrix which sets
out the delegation of operational decision
making authorities for certain management
roles operating at different levels of
theorganisation.
The operational management of our
business is delegated by the Board to
the Chief Executive Officer who uses
several teams, meetings and below
Board Committees to assist him in this
responsibility. Further details are set out
onpages 80 and 81.
Statement of corporate governance continued
CORPORATE GOVERNANCE
83
Annual Report 2023 Victrex plc
Stakeholder engagement
It is important to the Board that we develop strong and positive relationships with our employees, customers, suppliers and investors,
aswell as government and regulators. We also strive to make a positive contribution to the environment and local communities in which
we operate. A summary of how we engage is set out on pages 20 and 21. The Board conducts a formal review of the Group’s stakeholder
engagement programme annually, considering other touch points throughout the year. Details of how the Board is informed about stakeholder
engagement are outlined below. Our Section 172 statement is set out on pages 20 to 23 and outlines examples of how the Board has
considered the interests of stakeholders in decision making during the year.
Employees Attracting and retaining a skilled, talented, experienced and engaged workforce is key to supporting the Group in
achieving our strategy. The Board promotes effective engagement with the Group’s workforce and this is supported by a
range of direct and indirect engagement activities. The Board programme of business typically schedules visits to one or
more of the Group’s sites. This year, the Board visited the Group’s operations in Germany and Rotherham, and the Senior
Independent Director visited the Group’s facility in Leeds. Board dinners with senior management have taken place
periodically. Further, the Chief Executive Officer and Chief Financial Officer met with employees in all our Asia‑Pacific
locations, and the Chief Financial Officer visited all our locations in the US, during FY 2023. The Board reviews the results
of engagement surveys and receives regular ‘people’ updates throughout the year. The Group has operated a range
of measures to facilitate workforce engagement including works councils, employee forums, staff briefings, regular
communications from the Chief Executive Officer and anonymous communication channels. The Board has continued to
enhance its engagement with the workforce through the role of Brendan Connolly as the Nonexecutive Director with
designated responsibility for Workforce Engagement. Brendan’s fourth annual report in this capacity is set out on pages
84 and 85.
Customers The Board engages with customers indirectly through the Executive Directors who provide information about key
customer relationships. The Board receives information on key customer interactions and regularly reviews information
onhow the Group is performing for its customers including delivery ‘on time in full’ metrics and product quality statistics.
During the year, Board members met with a number of key customers as part of the Board’s visit to our European base
in Germany. The Board received a presentation from TechnipFMC for the second consecutive year to further develop the
relationship as it progresses its industrialisation and scale‑up plans in Brazil. Material customer contracts are reviewed and
approved. Since the year end Board members have held meetings with several key customers in the AsiaPacific region as
part of the Board’s FY 2023 ‘virtual’ site visit.
Suppliers Information about key suppliers is provided to the Board by the Executive Directors when relevant to Board deliberations.
The Board is committed to fair treatment and payment of suppliers and the Company is a signatory to the governments
Prompt Payment Code. The Board reviews proposed updates to the Group’s Modern Slavery & Human Trafficking Policy
as well as approving the Group’s Modern slavery and human trafficking statement, which can be found on our website,
www.victrexplc.com. From time to time material supplier contracts are also reviewed and approved.
Investors The Board receives monthly reports on investor engagement and sentiment, prepared by the Company’s Investor
Relations team which frequently interacts with key analysts and investors and prospective investors. The Chief Executive
Officer, the Chief Financial Officer and the Director of Investor Relations, Corporate Communications & ESG regularly
meet shareholders, prospective shareholders and analysts. This year, over 175 virtual meetings or calls were hosted with
institutional investors or prospective investors. Two major UK roadshows were held and there was one major US and
Canadian roadshow and one virtual roadshow in Europe. Three investor conferences were attended by our Director
of Investor Relations, Corporate Communications & ESG with two selected ‘Company Overview’ Q&A sessions with
North American prospective investors. A number of site visits were also hosted, to enable a clearer understanding of the
Group’s strategy and growth prospects. The Chair hosted engagements with three major shareholders as well as meeting
other shareholders through the Annual General Meeting and financial results presentations. Both the Chair and Senior
Independent Director remain available for engagement with shareholders. The Board receives reports from sector analysts
to ensure that it maintains an understanding of investor priorities. The Board attends the Annual General Meeting so as
to be available to answer any questions that may arise from investors. The Board believes that appropriate steps have
been taken during the year so that all members of the Board and, in particular, the Nonexecutive Directors, have an
understanding of the views of major shareholders.
Communities
and
environment
The Board recognises its impact on local communities and its responsibility to the environment and society as a whole.
The Group has a busy engagement programme with local communities which is described on page 57. The Board
receives information on key community activities. The Corporate Responsibility Committee enables enhanced focus
on ESG matters including monitoring of the Companys standing with key stakeholder groups. See page 98 for the
Corporate Responsibility Committee report for more information.
Government
and
regulators
The Board engages directly and indirectly with a wide range of government bodies and regulators. The Health and Safety
Executive and the Environment Agency monitor compliance by the Group’s UK sites with environmental, health and safety
legislation. The Board receives regular updates on safety, health and environmental performance and material interaction
with regulators. The Board engages directly and indirectly with a wide range of government bodies and regulators.
Board engagement is primarily through the Chief Operating Officer and our Global SHE Lead to reflect our SHE focus,
environmental reporting and activities aligned to our sustainability agenda. Governmental and NGO interactions occur
typically through the Chemical Industry Association (of which we are an active member) via the Chief Executive Officer,
with relevant functions taking the lead in responding to UK government consultations and submissions of relevant
data. From time to time the Group receives some government funding associated with its innovation and Research
&Development agenda.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
84
Workforce engagement report
– hearing the employee voice
Brendan Connolly was appointed the
designated Non‑executive Director for
Workforce Engagement (the ‘Workforce
Engagement NED’) with effect from
1October 2019. This statement summarises
the activity undertaken during FY 2023.
Objectives and role
The Workforce Engagement NED is
responsible for the following matters
to support the Directors’ collective
responsibility to consider a wide range
ofstakeholder perspectives when arriving
atBoard decisions:
u
understand the concerns of the
workforce and articulate those views
and concerns in Board meetings on
anongoing basis;
u
ensure that the Board, and particularly
the Executive Directors, take appropriate
steps to evaluate the impact of proposals
and developments on the workforce;
u
where relevant and appropriate, provide
feedback to the workforce on Board
decisions and direction during the
engagement process;
u
primarily use existing engagement
mechanisms, including the employee
survey, quarterly staff briefings, works
council meetings, union meetings, regional
forums and Q&A sessions, togather the
relevant feedback from theworkforce;
u
ensure that feedback is obtained
from all levels of the workforce in
multiplelocations;
u
organise bespoke events for additional
feedback where required; and
u
solicit employee views about executive
remuneration and share feedback obtained
with the RemunerationCommittee.
The Workforce Engagement NED is not
expected to take on responsibilities that are
those of an Executive Director or of the HR
team or act as a proxy for those teams.
Highlights during FY 2023
The focus of the Workforce Engagement
NED on regular dialogue with the workforce
through a variety of means, including
face‑to‑face meetings and site visits, has
continued in FY 2023. Other Non‑executive
Directors have also been involved in
engagement activities including a session
focused on Diversity, Equity & Inclusion led
by our Board Chair, and a visit to our Leeds
facility by our Senior Independent Director.
Progress has been made in areas previously
identified for improvement, such as having
an effective feedback loop in place to
demonstrate that matters raised through
the Workforce Engagement NED role are
considered and acted on where appropriate.
This is an area for further focus in FY 2024.
The Workforce Engagement NED reports to
the Board on matters raised by employees.
Relevant Board papers contain a workforce
impact statement to ensure that the
interests of our employees are a central
consideration in Board decision making.
In FY 2023, the Workforce Engagement NED
held or participated in a number of sessions
with groups of employees through face‑to‑
face and virtual meetings across a variety
of forums:
u
An Audience with Brendan Connolly
held in person at our UK head office
with virtual attendance from other
locations, covering topics such as
executive remuneration, and open for
questions from all employees including
on topics such as wellbeing and strategy.
Over 280 employees attended this, over
two sessions;
u
a Strategic Inclusion Group* meeting;
u
a UK Gender Engagement Network
(‘GEN’)* meeting; and
u
an Enable Group* meeting.
* Please see page 55 for more information on the
role and purpose of these groups.
During my fourth year as the designated
Non-executive Director for Workforce
Engagement it has been pleasing to see
the progress made on topics raised in
previous years, and to continue the open
and constructive dialogue with our
employees in a variety of locations and
forums. The passion and interest of our
people is clear, andIwould like to
thankeveryone fortheir continued
engagement.
Brendan Connolly
Workforce Engagement NED
Statement of corporate governance continued
CORPORATE GOVERNANCE
85
Annual Report 2023 Victrex plc
Examples of topics raised or discussed
during FY 2023 are set out below:
u
Wellbeing & Safety: A suggestion
wasraised to explore how Victrex
handles mental health matters and if
the right tools are in place. Safety was
considered to be improving overall with
a call for a refresh of the safety ‘golden
rules’. These topics are being addressed
by our SHE leadership.
u
Diversity, Equity & Inclusion: There
was recognition that having a clarity of
strategy and outcomes was important.
The new Enable Network is off to a good
start and there were calls to enhance
visible support and engagement from
leadership. The feedback was that
progress is being made in general.
u
ESG: Matters raised included why the
focus is on carbon for external reporting
purposes, and initiating customer‑facing
meetings on ESG. There were calls for
more internal communication on our ESG
goals and status.
In summary, no major negative themes
arose during the year and there were many
positives. The GEN forums have matured
and continue to develop plans and training
to ensure focus on diversity and inclusion.
Clear passion was demonstrated by
employees on ESG matters.
Key focus areas for FY 2024 include
continuing to involve other Non‑executive
Directors in employee engagement
initiatives where practical, arranging a
presentation by our Enable Group and
UK GEN to the Corporate Responsibility
Committee as part of our Diversity, Equity &
Inclusion agenda, and continuing to attend
a cross‑section of employee forums and
bodies to gather feedback and to build on
the understanding of the topics which are
important to our employees.
Relations with shareholders
Annual General Meetings
The Annual General Meeting (‘AGM’) is an
important part of effective communication
with shareholders. The forthcoming AGM
will be held at 11am on 9 February 2024.
All shareholders will have the opportunity
to ask questions at the AGM. The Chairs
of the Audit, Nominations, Remuneration
and Corporate Responsibility Committees
will be available to answer questions at
that meeting. The details of the 2024
AGM are summarised in the Chair’s
introduction on page 69 and in the Notice
of Annual General Meeting from page 184.
If there are any queries, please contact
cosec@victrex.com.
The Notice of Annual General Meeting,
together with an explanation of the
resolutions to be considered, is set out
on pages 184 to 191 and sent out in a
circular to shareholders. Proxy votes lodged
on each resolution will be announced at
the AGM, published on the Companys
website and announced via the Regulatory
Information Service.
Outcome of the February 2023
AnnualGeneral Meeting
At the 2023 Annual General Meeting,
votes were cast in relation to approximately
84.85% of the issued share capital. All
22resolutions were passed by the required
majority. Votes were cast in favour of
the re‑appointment (or, in the case of
IanMelling, appointment) of the following
Board Directors as follows:
u
Vivienne Cox: 87.91%
u
Jane Toogood: 98.48%
u
Janet Ashdown: 98.27%
u
Brendan Connolly: 96.68%
u
David Thomas: 98.33%
u
Ros Rivaz: 90.43%
u
Jakob Sigurdsson: 99.91%
u
Martin Court: 99.97%
u
Ian Melling: 98.28%
Share capital
Details of the Company’s share capital,
including the rights and obligations attached
to the shares, are set out in the Directors’
report on page 126.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
86
NOMINATIONS COMMITTEE REPORT
Main responsibilities ofCommittee
u
Leading the process for Board appointments and making
recommendations to the Board about proposed appointments
totheBoard, including the Company Secretary
u
Evaluating the skills, experience and knowledge of the Board
u
Overseeing the development of a diverse pipeline for succession
toBoard and senior management positions
Terms of Reference for the Nominations Committee can be found
onwww.victrexplc.com.
Committee meetings in FY 2023
The Committee held three
scheduled meetings during FY 2023
and has a programme of business
reflecting its Terms of Reference.
Committee member
Meeting
attendance
V Cox (Chair) 3/3
J E Ashdown 3/3
B W D Connolly 3/3
D Thomas 3/3
J E Toogood 3/3
R Rivaz 3/3
Secretary: Jane Brisley
Other attendees:
u
the Chief Executive Officer is not
a member of the Committee but
is invited to attend; and
u
the Group HR Director regularly
attends meetings.
All members of the Committee
are independent, thus fulfilling
the Corporate Governance Code
requirement that a majority of
members of the Nominations
Committee should be independent
Nonexecutive Directors.
The Chair would not chair or
otherwise participate in the
Committee when it is dealing with
the appointment of her successor.
No Director would participate in
the Committee when it is dealing
with the appointment of his or
hersuccessor.
The Chairs other significant
commitments are set out in her
biography on page 70.
Dr Vivienne Cox DBE
Chair
FY 2023 highlights
u
Continued focus on Diversity & Inclusion
at Board and senior management level
u
Reviewing successionplanning and
overseeing changes in the composition
of the Victrex Management Team
u
Overseeing an externally facilitatedBoard
and Committeeevaluation exercise
FY 2024 focus areas
u
Succession planning for our
Non‑executive Directors in order to
facilitate a smooth and orderly refresh
indue course
u
Progress plans to achieve the target
of having at least one Director from
aminority ethnicbackground
Nominations Committee report
CORPORATE GOVERNANCE
87
Annual Report 2023 Victrex plc
The Committee’s agenda
inFY 2023
The Committee’s principal activities
during the year, and up to the date of
approval of this Annual Report, were
as follows:
u
Board and senior
managementcomposition;
u
overseeing changes to senior
management. Details of the
composition of the Victrex
Management Team are set out
onpage 81;
u
Board and senior management
succession planning;
u
talent management framework
andpipeline development;
u
approval of the Nominations
Committee report in the Annual
Report and Accounts;
u
reviewing the refreshed Director
induction policy;
u
reviewing the Board skills matrix;
u
reviewing the Board Diversity &
Inclusion Policy for approval by
theBoard; and
u
reviewing the Committee Terms
of Reference and the Committee’s
annual programme of business.
Dear shareholders,
On behalf of the Nominations Committee,
Iam pleased to present its report for the
year ended 30 September 2023.
During the year the Committee has
reviewed succession planning at Board
and senior management level, overseeing
several changes to the senior team as
MartinCourt stepped down from the Board
on 30 September 2023. Two new business
areas have been created – Medical and
Sustainable Solutions – and the Managing
Director for each business area is a member
of the Victrex Management Team (VMT’).
Please see page 22 for more information.
The Committee has reviewed the
framework for talent planning, including
the talent matrix, and also considered a new
programme for senior leadership which uses
360° feedback to identify strengths and
areas for development.
Victrex is committed to diversity in the
workforce, inclusive practices and equality
of opportunity for all employees. In
compliance with the FCA Listing Rules,
please see page 89 for information on Board
and executive management gender and
ethnicity. The Board meets, and exceeds,
the FCA target of having at least 40%
female representation on the Board and
in having at least one of the senior board
positions held by a woman. The Committee
is currently engaged in a recruitment
process aimed at achieving the Parker
Review recommendation and FCA Listing
Rules target of having at least one Board
member from a minority ethnic background
during FY 2024.
While the Nominations Committee looks
at diversity within the Board and approves
the Board Diversity & Inclusion Policy, which
can be found on page 88, our Corporate
Responsibility (‘CR’) Committee oversees the
focus on Diversity, Equity & Inclusion (‘DE&I’)
in the wider workforce. This includes how
we are performing against our targets. You
can read more about DE&I on page 55.
The FY 2023 Board and Committee
evaluation was externally facilitated by
EquityCulture Ltd and I am pleased to say
this was a very positive exercise with strong
engagement from our Board members.
Further details can be found on page 81.
The Nominations Committee approved this
report on its work.
Dr Vivienne Cox DBE
Chair of the Nominations Committee
5 December 2023
Succession planning
During the year, the Committee reviewed
the succession plans for the Board and
senior management over the short and
medium term, as well as contingency plans
for emergency situations. The Committee
aims to ensure that the Board and senior
management have the appropriate balance
of skills and experience to support the
Group’s strategic objectives.
The Board uses a succession planning
toolkit which includes consideration of
diversity and skills to help assess the Board’s
composition and identify any opportunities
for enhancement. Our skills matrix was
reviewed in FY 2023 and supports there
being a broad balance of skills, experience
and knowledge on the Board, with
particular strength in chemicals, strategic
direction setting, M&A, risk management
and compliance, and balanced experience
across functional disciplines.
The Committee holds regular Board
succession planning discussions, to
ensure that we balance skills, experience,
knowledge, diversity and independence and
take into account Directors’ tenure and the
evolving needs of the business. The tenure
of Non‑executive Directors is set out on
page 78. Succession planning for our
Non‑executive Directors will be a
particularfocus area for FY 2024.
Board appointments
The succession planning process allows us
toassess the need to refresh the Board.
Any new Directors appointed by the
Board must be elected at the next AGM
to continue in office. All existing Directors
retire by rotation every year.
Board induction, development
and business engagement
A formal induction programme is in place
for new Board members and is tailored as
appropriate depending on role, skills and
experience. This has been reviewed and
updated during FY 2023. Our induction
programme allows new Directors to meet
members of senior management, business
and functional leaders, and high potential
talent as well as external auditors, brokers
and advisors. New Directors also visit
operations and sites to understand the
manufacturing and production process and
meet operations staff. They have access to
Board and Committee papers, undertake
relevant training, and receive briefings on
pertinent matters.
All Directors are encouraged to keep up to
date with relevant legal and governance
matters, best practice and evolving areas of
risk. The Board receives training and updates
on relevant topics as appropriate and
Directors are supported to undertake any
other professional development identified
asnecessary or desirable.
VMT members, other senior leaders and
those designated as talent are invited,
as appropriate, to deliver presentations
at Board meetings on their areas of
responsibility. It is the Companys usual
policy for all Directors to attend the AGM.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
88
Board Diversity &
InclusionPolicy
The Company acknowledges the value
of diversity in its widest sense (age,
gender, ethnicity, sexual orientation,
disability and socioeconomic background
as well as educational and professional
backgrounds) and its contribution
towards effective Board and Committee
operations and decisions.
The Group operates a Group Diversity,
Inclusion & Equal Opportunities Policy
which is reviewed each year and
providesthe framework for productive
working relationships.
Taking account of its changing strategic
needs, the Board will ensure:
1. it and its Committees have the
appropriate balance, composition
and mix of skills, experience,
independence and knowledge to
ensure their continued effectiveness,
having regard to regulatory diversity
targets and external guidance
ondiversity;
2. a pipeline is maintained promoting
diversity for succession to the Board
and senior management positions;
3. only executive search consultants
which have signed up to the voluntary
code of conduct for executive search
firms on gender diversity on corporate
boards are engaged when seeking
appointments to the Board so that
the selection processes provide access
to a diverse range of candidates;
4. appointments to the Board are made
on the basis of merit, with regard
forsuitability for the role, Board
balance and composition and the
required mix of skills, background
and experience – with diversity in
its widest sense as described above
being an important consideration;
5. policies adopted by the Group
promote diversity in the
broadest sense;
6. adequate and appropriate
disclosure of:
a. this policy and diversity initiatives
the Group has in place and the
steps it is taking to promote
diversity at Board level and
across the Company including
adescription of progress made;
b. the composition and structure
ofthe Board and its Committees;
c. whether the Company has met
regulatory diversity targets on
acomply or explain basis, and
theBoard’s approach to such
data collection;
d. external reporting requirements
including: (i) the ethnic
background and gender identity
or sex of the Board and executive
management; and (ii) the gender
balance of those in senior
management and their direct
reports; and
e. the process for appointments
tothe Board; and
7. this policy is reviewed from time
totime to monitor progress being
made to assess its effectiveness.
Board diversity – gender
(as at 30 September 2023)
Female 44%
Male 56%
Nominations Committee report continued
Board diversity
The Company acknowledges the value of
diversity in its broadest sense, believing that
different perspectives help generate broader
debate and better decisions. Our Board
Diversity & Inclusion Policy is set out in the
box on this page. This policy was updated
in FY 2022 to expand its scope to our key
Board Committees. Following review in
FY2023 the policy was endorsed. Our policy
reflects diversity broadly, including gender,
social and ethnic backgrounds, and cognitive
and personal strengths. The Board and the
Committee seek to encourage applications
from a diverse rangeof candidates, subject
to theselectioncriteriabeing met.
The Board has not set express gender,
ethnic or other related diversity quotas
or measurable objectives for the Board’s
composition. The Board will continue to
consider the various diversity factors set out
in the UK Corporate Governance Code, the
FCA Listing Rules, and the recommendations
of the FTSE Women Leaders Review and the
Parker Review.
The current ethnic composition of our
Board is 100% White, with a breakdown
of nationalities provided on page 78. The
Nominations Committee has a recruitment
process underway aimed at achieving the
Parker Review recommendation and FCA
Listing Rule target of having at least one
Board member from a minority ethnic
background during FY 2024.
The Board strives to broaden the diversity of
the Board and senior management pipelines.
As at 30 September 2023, we have four
women on our Board, representing 44%
(FY 2022 44%). For the purposes of the
UK Corporate Governance Code, as at 30
September 2023 two members of senior
management are women (representing
22%) and 31% of senior management and
their direct reports are women (33 men,
15 women). Senior management is defined
as the VMT; please see page 81 for a list of
members of the VMT.
For further details on diversity and inclusion
across Victrex, including our Group Diversity,
Inclusion & Equal Opportunities Policy, see
pages 55 and 65.
CORPORATE GOVERNANCE
89
Annual Report 2023 Victrex plc
Board and executive management diversity data disclosures
As required by FCA Listing Rule 9.8.6R(9), below is the Company’s compliance statement regarding Board diversity targets as at
30September 2023, being the selected reference date used for the purposes of LR 9.8.6R(9)(a).
Target Position as at 30 September 2023
At least 40% of the individuals on the Board arewomen Victrex is compliant with this target as 44% of the Board are women.
At least one of the senior Board positions
1
is held by a woman Victrex is compliant with this target as both the Chair and Senior
Independent Director positions are held by women.
At least one individual onthe Board of Directors is from a minority
ethnicbackground
2
Victrex was not compliant with this target. Please see the further
information in the section headed ‘Board diversity’ above.
In accordance with LR 9.8.6R(10), set out below is the data on the gender identity and ethnic background of the Board and the VMT
(including the Executive Directors and the Company Secretary) which is the cohort designated by the Company as executive management
for the purposes of the FCA Listing Rules.
Gender identity or sex as at 30 September 2023
3
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board
1
Number in
executive
management
Percentage of
executive
management
Men 5 66% 2 7 78%
Women 4 44% 2 2 22%
Not specified/prefer not to say 0 0% 0 0 0%
Ethnicity representation as at 30 September 2023
3
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board
1
Number in
executive
management
Percentage of
executive
management
White British or other White (including minority
Whitegroups)
9 100% 4 9 100%
Mixed/multiple ethnic groups 0 0% 0 0 0%
Asian/Asian British 0 0% 0 0 0%
Black/African/Caribbean/Black British 0 0% 0 0 0%
Other ethnic group, including Arab 0 0% 0 0 0%
Not specified/prefer not to say 0 0% 0 0 0%
1 Senior Board positions are the Chief Executive Officer, Chief Financial
Officer, Senior Independent Director and Chair.
2 Minority ethnic background is defined as from one of the
followingcategories:
u
Asian/Asian British;
u
Black/African/Caribbean/Black British;
u
mixed/multiple ethnic groups; and
u
other ethnic groups, including Arab.
3 Martin Court stepped down from the Board as at 30 September 2023
and is included in the above information. Following Dr Court’s departure
from the Board, and as the date of this report our Board consists of eight
Directors, of which four are women (50%) and four are men (50%). For
executive management, of the resulting eight members of the VMT,
six are men (75%) and two are women (25%). Ethnicity representation
remainsunchanged.
Data for the above disclosures has been collected by questionnaire and/or
directly from the relevant individuals.
Board, Committee and individual Director effectiveness
The Board and its Committees carry out a formal review of effectiveness each year. An external performance review was conducted in
FY2023 by EquityCulture Ltd. Details of process, outcomes and focus areas for FY 2024, together with progress on actions identified in
FY2022, are set out on pages 81 and 82.
The reviews of the Audit, Nominations and Remuneration Committees confirmed that these Committees continue to provide effective
support to the Board. The Corporate Responsibility Committee was within the scope of the evaluation and was considered to be a hugely
welcome addition to our governance framework.
Each Director receives a formal performance review process. The Chair led the review of each Non‑executive Director. The annual
performance review of the Chair is led by the Senior Independent Director, Dr Ros Rivaz. The Nominations Committee reviewed the
performance of the Executive Directors. These reviews confirmed that each Director continues to make a valuable personal contribution
to the Board. Individual contributions are summarised in the biographies on pages 70 and 71. All Non‑executive Directors are considered
to have sufficient time to perform their duties at the Company. Where an Executive Director has an external appointment, the time
commitment involved is kept under review and the Board is satisfied the Executive Directors devote sufficient time to discharging their
responsibilities to the Company. Details of individual Executive Director appointments are included in the biographies on page 70.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
90
Main responsibilities
ofCommittee
u
Reviewing financial statements
and announcements relating to
the financial performance of the
Company, including reporting to
the Board on the significant issues
considered by the Committee in
relation to the financial statements,
how these were addressed, and
whether the financial statements are
fair, balanced and understandable
u
Reviewing the scope and results
of the annual external audit and
reporting to the Board on the
effectiveness of the audit process
and how the independence and
objectivity of the auditors have
beensafeguarded
u
Reviewing the scope, remit and
effectiveness of the internal
audit function and the Group’s
internal control and risk
management systems
u
Reviewing significant legal and
regulatory matters
u
Reviewing matters associated
with the appointment, terms,
remuneration, independence,
objectivity and effectiveness of the
external audit process and reviewing
the scope and results of the audit
u
Reporting to the Board on how
the Committee has discharged
itsresponsibilities
Terms of Reference for the Audit
Committee can be found on
www.victrexplc.com.
Committee meetings in FY 2023
The Committee met four times
during FY 2023 and has a
programme of business reflecting
the Committee’s Terms of
Reference.
Committee member
Meeting
attendance
D Thomas (Committee
Chair) 4/4
J E Ashdown 4/4
B W D Connolly 3/4
J E Toogood 4/4
R Rivaz 4/4
Secretary: Jane Brisley
The following other attendees
regularly attend meetings:
u
the Chair and Executive Directors;
u
the Director of Risk & Compliance;
u
the Finance Director;
u
the Group Financial
Controller; and
u
representatives from the
externalauditors, PwC.
Other members of the management
team may also be asked to attend
meetings for discussion on specific
issues. The Committee also
meets with the external auditors
at least twice each year without
management being present.
The Chair meets with members of
the executive and management
teams and PwC outside of formal
Committee meetings to discuss
matters which fall within the
Committee’s Terms of Reference.
These have included a meeting
with the Finance Director,
GroupFinancial Controller, Director
of Risk & Compliance and Head
of Internal Audit in addition to
meetings with the General Counsel
& Company Secretary as part of
reviewing relevant matters and
forward planning on the business
ofthe Committee.
The Committee is authorised
to seek outside legal or other
independent professional advice
as it sees fit but has not done so
during the year.
The qualifications of Committee
members are outlined in the
Directors’ biographies on pages
70 and 71. The members of the
Committee are all independent
Non‑executive Directors. The Board
is satisfied that the Committee as
a whole has competence relevant
to the sectors in which the Group
operates and its members have
an appropriate level of experience
in corporate and financial matters
and are financially literate. The
effectiveness of the Committee in
fulfilling its remit was considered
as part of the most recent
evaluation of performance which
was externally facilitated by
EquityCulture Ltd in summer 2023
and subsequently reported to
the Board. The Committee Chair
is a member of the Institute of
Chartered Accountants of England
and Wales. He previously served as
chief financial officer of Invensys
plc. Prior to this, he was a senior
partner at Ernst & Young and is a
former member of the Auditing
Practices Board. The Board is
satisfied that he has recent and
relevant financial experience as
required by the Code.
David Thomas
Chair
Audit Committee report
AUDIT COMMITTEE REPORT
FY 2023 highlights
u
Completion of efficient and effective
transition of PwC audit partner
u
Reviewing the assessment of the
Company’s compliance with the
FRC Minimum Standard for Audit
Committees and building this into the
Audit Committee’s annual programme
of business, including increasing the
number of meetings in the annual cycle
u
Further focus on enhanced reporting
requirements of the Task Force on
Climate‑related Financial Disclosures
(‘TCFD’), including appropriate linkage
between sections of the Annual Report
CORPORATE GOVERNANCE
91
Annual Report 2023 Victrex plc
The Committee’s agenda in FY 2023
The Committee’s principal activities during the year, in addition to those noted in
the FY 2023 highlights, and up to the date of approval of this Annual Report, were
as follows:
u
negotiated and agreed PwC’s engagement letter and the statutory audit fee for the
year ended 30 September 2023;
u
reviewed the results of the Committee’s assessment of the effectiveness of the FY
2022 external audit along with receiving a presentation from PwC on the proposals
for their programme to enhance audit quality;
u
reviewed PwC’s proposed audit strategy and plan for the FY 2023 statutory audit,
including the level of materiality applied by PwC and the final audit report from
PwC on the financial statements detailing their key findings from the FY 2023 audit;
u
confirmed the independence of the external auditors and recommended to the
Board the re‑appointment of PwC as the external auditors at the upcoming AGM;
u
reviewed the basis of preparation of the financial statements as a going
concern (prior to making a recommendation to the Board) as set out in the
accounting policies;
u
reviewed and discussed reports on the financial statements and considered
management’s significant accounting judgements and key areas of estimation
uncertainty and the policies being applied, and how the statutory audit contributed
to the integrity of the financial reporting;
u
reviewed the long‑term viability statement, prior to making a recommendation to
the Board;
u
reviewed the FY 2023 Annual Report and recommended to the Board that it
complied with the Code principle to be ‘fair, balanced and understandable’;
u
reviewed other market disclosures made, including the quarterly IMS and June
Trading Update;
u
approved the strategic internal audit planning approach and reviewed reports on
the work of the internal audit function from the Director of Risk & Compliance;
u
considered the findings brought to the Committee’s attention by internal audit and
satisfied itself that management has resolved or is in the process of resolving any
outstanding issues or concerns;
u
reviewed and approved the internal audit plan and approach for FY 2024;
u
reviewed the effectiveness of the risk management and internal control systems
prior to making a recommendation to the Board;
u
reviewed the Group’s linkage between the identification of risk and the control
environment, including the formal evaluation of the lines of defence conducted by
the business and the processes for testing the second line of defence;
u
reviewed the conclusions of the Committee’s annual evaluation. It was concluded
that the Committee continued to be effective; and
u
reviewed the Committee’s terms of reference and programme of business, including
establishing two additional meetings in the Committee’s annual cycle.
Dear shareholders,
I am pleased to present the report of
the Audit Committee for the year ended
30 September 2023. The Directors’
responsibility statement in respect of the
Annual Report can be found on page 128.
Following the mandatory PwC partner
rotation, I supported the smooth and
efficient transition of Graham Parsons to
the role of lead audit partner, succeeding
Ian Morrison for our financial year
ended 30September 2023. This process
commenced through the final stages of the
prior year audit, supported by continuity
across the rest of the engagement
management team at PwC. The Committee
remains mindful of the CMA requirement
to undertake an audit tender at least every
10 years. With the audit market continuing
to change at a rapid pace in response
to resourcing challenges and regulatory
expectations the Committee has determined
that a tender in the next 12 months
would not be in the Company’s nor its
shareholders’ best interests, but continues
to review this on a regular basis.
Following a review of the Committee
calendar two additional meetings have been
introduced into the annual cycle, in February
and June. The meetings have been included
to ensure timely updates for the Committee
throughout the financial year along with
supporting the Board in its review of the
quarter one and three Interim Management
Statements (‘IMS’). The timing of the review
was such that only the additional June
meeting took place in FY 2023.
u
Maintaining focus on the ERP
implementation project and
opportunities for automation of the
Company’s control environment to
further drive efficiencies
u
Continued focus on inventory valuation
as input costs remain volatile which,
combined with the overall increase in
thevolume of inventory held, increases
the sensitivity of judgements and
estimates made in this area
u
Monitoring of the work carried out by
management to support the carrying
value of assets associated with the
Company’s investment in Bond 3D
HighPerformance Technology BV which
resulted in the reclassification of these
assets to a critical judgement and key
source of estimation uncertainty during
FY 2023
u
Monitoring developments resulting
from the Department for Business,
Energy and Industrial Strategy (‘BEIS’)
‘Restoring trust in audit and corporate
governance’agenda
FY 2024 focus areas
u
With the Company’s new ERP system
due to go live during 2024, ongoing
monitoring of the robustness of
implementation plans, testing, training
and cutover to ensure robust financial
records are maintained along with an
appropriate audit trail. PwC’s approach
to auditing the transition will also
bereviewed
u
Continued monitoring of the financial
reporting and audit of the critical
judgements, and key sources of
estimation uncertainty, including
specifically the valuation of inventory
and the carrying value of Bond 3D High
Performance Technology BV assets
u
Supporting the evolution of the interplay
between the activities of the Audit
Committee and the Corporate Responsibility
Committee regarding the continued
enhancement of climate changerelated
disclosure and assurance thereof
u
Continuing to monitor and effectively
respond to developments in the
governance agenda, including
the changes to the Corporate
GovernanceCode
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
92
The focus of the internal audit and
assurance activities during the year has
been across key strategic and emerging
risks, core financial and operational
controls and regional compliance and
control frameworks. Group internal
audit (‘GIA) methodologies have been
enhanced in FY 2023 in order to improve
the planning processes and better capture
the overall level of assurance provided and
management responses. Assessments of
culture have also now been embedded in all
audits in order to provide a more consistent
insight to the Audit Committee, throughout
the delivery of the GIA plan.
The Committee has reflected upon the
FRC Guidance on Audit Committees
and was satisfied that the principles
concerning internal audit are reflected
in the responsibilities and activity of the
GIA function. In addition, an External
Quality Assessment covering GIA has been
conducted in FY 2023, which provided
further reassurances over the maturity
oftheprocesses and practices in place.
During FY 2023 the Committee has
maintained its focus on the robustness of
financial forecasts used by management in
assessing going concern, viability and the
carrying value of assets and the associated
disclosures. The Committee has challenged
management’s assumptions and judgements
made in the preparation of the forecasts,
their correlation with outputs from the
Integrated Business Planning process used
to run the business and the potential range
of outcomes under scenario and sensitivity
analysis. The Committee also challenged
management’s assumptions on the potential
impact of climate change on the longer
term forecasts used in assessing the carrying
value of assets and viability.
As continued progress is made in the
Company’s new ERP system implementation,
scheduled for go live during 2024, the
Committee has supported management in
ensuring the appropriate governance is in
place around the project and advantage is
taken of the opportunity to automate and
improve the control environment, which will
position the Company well in advance of the
anticipated changes from the BEIS proposals
on corporate governance. This has included
supporting an internal audit review of the
project performance along with discussion
and input from PwC.
The UK Corporate Governance Code calls
for the Board to ‘present a fair, balanced
and understandable assessment of the
Company’s position and prospects’.
The Board asks the Audit Committee to
advise on whether the Annual Report,
when taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
The Committee undertakes this role through
independent review of the Annual Report,
discussions with management, including
assessment of alternative performance
measures against the regulatory guidance,
consideration of FRC Thematic Review
findings and reporting from PwC. As well
as the Annual Report, the Committee
also considers other market disclosures to
support the Board in providing fair and
balanced reporting; this includes the Interim
Report, Prelim Reports, IMS and, in the
current year, the Trading Update made in
June 2023.
The Committee receives regular reports
from management covering the key
areas ofestimation and judgement
underpinning the financial statements.
The Committee’s role is to ensure that
management’s disclosures reflect the
supporting information or challenge them
to explain and justify their interpretation.
The Committee is supported in this role by
the external auditors, which, in the course
of the statutory audit, review the accounting
records kept by the Company totest
whether information is being recorded
inline with agreed accounting practices.
The external auditors present their findings
to the shareholders and their report is set
out in the Independent auditors’ report. The
Committee reports its findings and makes
recommendations to the Board accordingly.
The Committee is responsible for
ensuring that the relationship between
the Committee, the external auditors
and management is appropriate. The
external auditors must be independent
of the Company. Information on how the
Committee assesses the independence of
the external auditors is set out in the Audit
Committee report.
Following the publication of the FRC’s Audit
Quality Inspection Reports for 2023, it is
pleasing to see PwC continue to obtain
strong results across their FTSE 350 audits.
The Committee challenged PwC on their
response to the three key findings noted
in the FRC’s Quality Inspection Report
(revenue testing, impairment assessments
and the audit of cash and cash flow
statements) and evidenced the increase
in level of work performed in these areas
compared to previous years. Through the
Committee’s programme to monitor audit
quality and effectiveness, evidence has
been seen over recent years that PwC are
committed to addressing the findings,
with significant increases in the level of
substantive testing across most areas of the
audit, including the aforementioned key
findings. This work, along with increased
regulatory pressure and new auditing
standards, is the primary driver behind the
significant annual fee increases since 2019.
The fee of £716,000 represents an in‑year
increase of 25% and an increase of 275%
since 2019. TheCommittee continues to
challenge PwCon the efficiency of the
audit approach and opportunities to work
more closely together and reviewed further
evidence ofthe enhancements and specific
reporting from PwC at the final Committee
meeting as part of the overall assessment of
auditoreffectiveness.
We continue to be committed to providing
meaningful disclosure of the Committee’s
activities as well as ensuring the Committee’s
agenda is kept under review and that
wemaintain an awareness of relevant
developments. The Committee has
undertaken an assessment of its activities
against the FRC’s Minimum Standard for
Audit Committees which was issued in
May2023. Pleasingly the Committee
metthe standard required, with minor
improvements noted in the documentation
of discussions which take place at Committee
meetings which have been successfully
implemented ahead of the Committee’s final
assessment. Details ofthe annual evaluation
process of the Committee’s performance
can be found inthe Corporate
governance report.
The Audit Committee approved this report
on its work.
I will be available to answer any questions
in relation to this Audit Committee report
before the Annual General Meeting. Please
email your queries to ir@victrex.com.
David Thomas
Chair of the Audit Committee
5 December 2023
Audit Committee report continued
CORPORATE GOVERNANCE
93
Annual Report 2023 Victrex plc
How did the Committee assess
whether the Annual Report,
taken as a whole, is fair,
balanced and understandable
and provides the information
necessary for shareholders to
assess the Company’s financial
position and performance,
business model and strategy?
The Committee made this assessment by:
u
reviewing key messages proposed for the
Annual Report to ensure reporting meets
the requirement to be fair, balanced and
understandable;
u
reviewing copies of the Annual Report
at various stages during the drafting
process to ensure the key messages
werebeing followed and were
aligned with the Company’s position,
performance and strategy being pursued
and that the narrative sections of the
Annual Report were consistent with
thefinancial statements;
u
ensuring that all key events and issues
which had been reported to the Board
inthe executive Board reports during the
year had been appropriately referenced
or reflected within the Annual Report;
u
reviewing how alternative performance
measures were used in the Annual
Report, ensuring completeness and
accuracy of definitions, consistency of
use, relevance to users of the Annual
Report and balance with statutory
metrics; and
u
considering reports produced by both
management and the external auditors on
principal matters and judgements in areas
underpinning the financial statements.
External auditor independence
u
Written assurances were received from
the external auditors that all partners
and staff involved with the audit are
independent of any links to Victrex.
u
PwC confirmed all partners and
staff complied with their ethics and
independence policies and procedures
which are fully consistent with the
FRC’sEthical Standard.
u
PwC are required to disclose at the
planning stage of the audit any
significant relationships and matters
that may reasonably be thought to
have an impact on their objectivity
and independence and that of the
lead partner and audit team – no such
matters were disclosed.
u
PwC operate a policy requiring the
change in lead audit partner every
fiveyears, with other senior audit
staffrotating at regular intervals.
Havingobserved the final audit in
FY2022 as part of the knowledge
transfer plan, Graham Parsons took over
this role for FY 2023 and the Committee
oversaw an effective transition process.
u
The Committee is responsible for
maintaining an appropriate policy on
non‑audit services and associated fees
that are paid to PwC.
To further safeguard the independence
and objectivity of the external auditors,
non‑audit services provided by the external
auditors are considered and where
appropriate authorised by the Committee
in accordance with a non‑audit services
policy. The policy is outlined in an appendix
to the Committee’s Terms of Reference,
which are published on our investor website
– www.victrexplc.com. This policy limits the
amount and type of services undertaken
by our auditors. Our auditors will not be
asked to carry out non‑audit work with the
exception of a half‑year review (should it be
required) and regulatory and bank required
reporting. When awarding non‑audit work
to PwC, the Committee is cognisant of
the FRC Revised Ethical Standard 2019,
paragraph 4.15, including the limit on
non‑audit fees of 70% of the audit fee
based on a rolling three‑year average.
Non‑audit fees for the year ended
30September 2023 were £nil representing
0%of the audit fee (2022: £nil representing
0% of the audit fee). No further non‑audit
fees are expected to be incurred with PwC
due to their revised general approach to not
provide such services to listed audit clients
along with the Committee’s desire not to
create potential independence issues.
Over a three‑year rolling period, the level
of non‑audit fees has averaged 3% of the
audit fee. The non‑audit fees related to the
interim review fee in FY 2021, which since
FY 2022 has been discontinued.
Taking into account our findings in relation
to the effectiveness of the audit process and
in relation to the independence of PwC, the
Committee is satisfied that PwC continue
to be independent and free from conflicting
interests with the Group.
External auditor re-appointment
and fees
We last undertook a formal tender process
in compliance with the CMA Order 2014
for statutory audit services in 2017.
PwC commenced their appointment as
auditors and presented their first report
to shareholders for the year ended
30September 2018. Graham Parsons
has completed his first year as lead audit
partner. The next formal tender process,
incompliance with the CMA Order 2014,
isrequired ahead of the 2028 audit
with PwC having completed 10 years as
the Group’s auditors in the year ended
30September 2027. The Group has no
current plans to perform a formal tender in
advance of this, a decision which is reviewed
annually by the Audit Committee following
the review of auditor effectiveness.
The annual increases in the PwC audit
fee have continued into FY 2023 with a
fee of £723,000 agreed, an increase from
£577,000 in FY 2022 (which included
additional costs proposed after the
signing of the 2022 Annual Report of
£70,000). The fee has increased from
£191,000 in FY 2019, an increase of 275%
despite the composition and size of the
Group remaining broadly consistent and
management working with PwC to identify
efficiencies. The increases have been
attributed to factors including significant
new auditing standards, regulatory changes
and responses to AQRT findings, additional
investment in training and technology,
investment in improved risk and quality
management and the impact of inflation
ina competitive job market.
The Committee recognises the changing
regulatory environment and the unfortunate
consequence that companies, such as
Victrex, are ultimately paying the price
for the profession overlaying significant
levels of substantive testing across all areas
of the audit, including those which are
considered low risk, with minimal perceived
additional benefit for the key stakeholders.
The Company continues to explore ways of
mitigating elements of the increase through
audit efficiency and smarter audit scoping.
The Committee recommended to the Board
that PwC be proposed for re‑appointment
at the forthcoming AGM in February 2024.
There are no contractual obligations that
restrict the Committee’s choice of external
auditors, the recommendation is free from
third‑party influence and no auditor liability
agreement, in accordance with sections
534538 of the Companies Act 2006,
hasbeen entered into.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
94
Financial reporting
The primary role of the Committee in relation
to financial reporting is to review with both
management and the external auditors, and
report to the Board the appropriateness of,
the annual and half‑year financial statements,
considering amongst other matters:
Clarity of the disclosures and
compliance with financial reporting
standards and relevant financial and
governance reporting requirements
Areas in which significant
judgements and estimation have
been applied, including discussions
on such matters undertaken with
the external auditors
Whether the Annual Report, taken
as a whole, is fair, balanced and
understandable and provides
the information necessary
for shareholders to assess the
Company’s performance, business
model and strategy. The statement
incorporating the conclusion of this
assessment is included on page 128
Any correspondence from regulators
in relation to our financial reporting
In addition to the above, the Committee
supports the Board in completing its
assessment of the adoption of the going
concern basis of preparing the financial
statements. In addition, as part of the
Committee’s responsibility to provide advice
to the Board on the long‑term viability
statement, the Committee performed a
robust review of the process and underlying
assessment of the Group’s longer‑term
prospects made by management, including:
u
the review period and its alignment with
the Group’s five‑year strategic plan;
u
the assessment of the prospects of the
Group after consideration of the Group’s
principal risks, current financial position,
available banking facilities and ability to
generate cash;
u
the modelling of the financial impact
of additional key scenarios which
encompass the potential impact of
crystallisation of one or more of the
principal risks;
u
the consideration of the impact
of climate change on the Group’s
strategic plan; and
u
ensuring transparent disclosures in the
Annual Report as to why the viability
period selected was appropriate, including
what the key scenarios tested were and
how the analysis was performed.
As a result of that review, the Committee
was satisfied that the approach adopted
was appropriate. The viability statement for
the FY 2023 financial year was prepared
on a consistent basis with that reported in
previous years and is on pages 39 to 41.
Significant issues considered by
the Committee in relation to the
financial statements and how
these were addressed
In the preparation and final approval of
the financial statements, the Committee
discussed with management the key sources
of estimation and critical accounting
judgements outlined in note 1. The
significant areas of focus considered and
assessed by the Committee in relation to
the FY 2023 financial statements and how
these have been addressed are set out
below. In concluding that these represented
the primary areas of judgement, or a high
degree of estimation, the Audit Committee
considered reports by management which
referenced both quantitative and qualitative
judgement factors across each significant
account balance, assessing the impact on
the user of the financial statements.
During the year the Committee took the
decision to elevate the risk in respect of the
carrying value of the investment in associate
and the fair value of convertible loans, both
relating to the Group’s interest in Bond 3D
High Performance Technology BV (‘Bond’)
to a ‘critical judgement and key source of
estimation uncertainty’. These two areas
were considered ‘other areas of judgement
and sources of estimation uncertainty’
in the preparation of the Group’s 2022
Annual Report.
Inventory valuation and UK defined benefit
accounting, detailed on page 144, remain
critical judgements and key sources of
estimation uncertainty. Other than these
three areas, the primary focus is on those
areas of accounting which rely on the use of
future financial forecasts which inherently
involve higher levels of judgement and
estimation. This includes the carrying value
of both tangible and intangible assets and
the going concern and viability assessments.
The Audit Committee’s work on viability
andgoing concern is detailed above with
the disclosure included on pages 39 to 41.
The annual impairment review performed
on the Company’s tangible and intangible
assets is also reviewed by the Audit
Committee, including the level of sensitivity
analysis performed, which in the current
year considered the impact of inflation and
the longer‑term impact of climate change
and the Company’s revised decarbonisation
goal of Net Zero carbon across all scopes
by 2050. In the cases of both the carrying
value of assets and going concern, the level
of headroom remained at a level where,
even under sensitivity, reasonable changes
to the key sources of estimation would not
cause a different outcome with the reverse
sensitivity scenario analysis performed
considered beyond plausible. PwC’s report
to the Committee came to the same conclusion
.
The classification of costs as exceptional
is inherently a judgemental area and one
where the Audit Committee also supports
the Remuneration Committee in making an
assessment of the treatment of exceptional
costs for executive remuneration purposes.
In the prior year the Committee concluded
that it was appropriate to disclose the cost
of the new ERP multi‑year implementation
as exceptional. The Audit Committee
assessed this treatment, considered
management’s rationale and also received
input from PwC in reaching the conclusion
that the treatment as exceptional was
appropriate. The project will run from
FY 2022 to FY 2024. The Committee will
continue to monitor this position along
with the level and nature of costs over the
duration of the project. No other costs were
disclosed as exceptional during the year.
The Committee considered the clarity
of disclosure in the Annual Report and
discussed with PwC the consistency of such
treatment with the approach adopted by
other companies.
The areas of inventory valuation, UK defined
benefit pension accounting and the carrying
value of assets held in Bond (investment in
associate and the fair value of convertible
loan notes) are areas of higher audit risk
and, accordingly, PwC were asked to focus
on and report to the Committee on, and the
Audit Committee discussed and assessed,
these judgements and estimates. During the
meeting of the Committee which considered
the draft of the Annual Report, the matters
raised by PwC in their report were discussed
with management, including how such
analysis related to management’s own
assessment and the appropriateness of the
form of disclosure provided by the Company
in the Annual Report. In particular, the
Committee considered the following
recurring matters:
u
Valuation of inventory: the Committee
reviews the nature of the costs absorbed
into inventory, the level of production
over which these costs are absorbed, the
variances, including in respect of material
usage and purchase price, between
standard cost and actual cost, and the
reasons for movements in inventory value
period to period. The past two financial
years have seen significant fluctuations
in raw material and energy costs along
with general inflationary increases across
other key inputs. These fluctuations have
resulted in higher than usual variances
to standard cost which management
has assessed and incorporated into the
Audit Committee report continued
CORPORATE GOVERNANCE
95
Annual Report 2023 Victrex plc
value of inventory to reflect the actual
cost of production. The Committee
has reviewed the variances absorbed
into inventory valuation resulting from
the cost movements, assessing this for
reasonableness, supported by the testing
and reporting provided by PwC. The
level of production over which costs
were absorbed is judgemental with the
higher of actual production and ‘normal’
production to be used. Production levels
have fluctuated considerably over the
past five years, particularly during the
COVID19 impacted years of FY 2020
and FY 2021 and the rapid recovery
during FY 2022. In assessing the level
considered ‘normal’ this has been
taken into account. This judgement
was reviewed by the Committee,
with input from PwC, including an
assessment of the level of sensitivity
with the estimation. The basis for and
level of provisioning, including for aged,
obsolete and non‑conforming product
which is judgemental or requires a high
degree of estimation, are presented
to the Committee by management.
Management produced analysis showing
the ageing profiles of inventory and
analysed inventory movements over the
past 12 months providing the Committee
with sufficient information to challenge
judgements and reach a conclusion on
the level of provisioning. After discussion
with management, and review of
reporting from PwC, the Committee
concluded that the valuation of
inventory and level of provisioning were
reasonable. The impact of changes in the
key areas of estimation on inventory is
included in note 13.
u
UK defined benefit pension
accounting: the valuation of the UK
defined benefit scheme obligation is
dependent on a number of assumptions
that are inherently judgemental or
require a high level of estimation.
Following the closure of the scheme
on 31 March 2016, judgement on
future salary growth rates ceased,
but judgement over future interest
and inflation rates, together with the
estimation of mortality rates, remains,
with sensitivities of +/‑1% having a
material impact on the value of scheme
liabilities and therefore the balance
recognised on the Group balance sheet.
The Audit Committee assesses these
judgements and estimates, based on
reports received from management
and the Group’s actuarial advisors. The
Committee also considered the opinions
made and benchmark provided by PwC.
u
It was also noted by the Committee that
the Company’s approach to funding the
scheme has been stable with a track
record of making voluntary contributions
of approximately £1m each financial year
as the scheme worked towards self‑
sufficiency. The sensitivity of the scheme
valuation to interest rate and inflation
assumptions is disclosed in note 17.
u
Carrying value of investment in
associate in Bond and fair value of
convertible loan notes due from
Bond: whilst the basis for assessing
the carrying values of the respective
instruments is different, with the
investment in associate held at cost
less post‑acquisition losses subject to
impairment, whereas the convertible
loan notes are held at fair value through
profit and loss, given the relative
immaturity of Bond, both assessments
are hinged on the future success of the
business. The future success of Bond
relies on key milestones being met in the
development, regulatory approval and
commercialisation of the technology,
along with provision of further funding,
all of which are inherently uncertain
and therefore require significant
judgement and estimation in reaching
a conclusion. In the absence of an
arm’s length transaction in the equity
of Bond and a lack of other observable
market inputs the assessment is based
on future forecasts for the business
with the application of a number of
scenarios to provide a range of potential
outcomes which are used to both assess
for indicators of impairment of the
associate and to determine the range
of fair values for the convertible loan
notes. In making this assessment the
Committee considers papers prepared by
management, incorporating the status
of milestones, regulatory approval and
status of funding, along with the work
undertaken by PwC. Further details of
the valuation of the assets held in Bond
are included in note 11 along with the
sensitivity of the asset values to the key
areas of estimation.
To aid the conduct of reviews, the
Committee considers reports from the
ChiefFinancial Officer, the Finance Director
and Group Financial Controller and also
reports from the external auditors on the
outcomes of their annual audit.
Risk management systems
andinternalcontrols
The main features of the Group’s internal
controls and risk management systems are
summarised below:
Risk management
The Audit Committee has responsibility for
reviewing the risk management systems
and effectiveness of these systems. The
responsibilities and processes in respect of
risk management are described separately
on pages 32 to 38 and page 76. The
Committee receives updates and reports
from the Director of Risk & Compliance on
key activities relating to the Group’s risk
management systems and processes at every
meeting. These are then reported to the
Board, as appropriate. The Group designs
its risk management activities in order to
eliminate risk wherever possible, mitigating
residual risk where practicable to within
tolerance, to achieve its strategic objectives.
The Chief Financial Officer has executive
responsibility for risk management and is
supported in this role by the Director of Risk
& Compliance and his team. The Director
of Risk & Compliance manages a series of
risk management committees across the
business which feed into the Executive Risk
Management Committee formed by the
Executive Directors, the Chief Operating
Officer, the Managing Directors, the
Group HR Director, the General Counsel
&Company Secretary and the Director
ofRisk & Compliance.
They meet biannually and review the
principal risks of the Company, emerging
risks, the governance processes and their
effectiveness. This review then feeds into
the information and assurance processes of
the Audit Committee and into the Board’s
assessment of risk exposures and the
strategies to manage these risks. The Board
has conducted a robust assessment ofthe
principal and emerging risks facing the
Group. Details of the Group’s principal risks,
the procedures in place to identify emerging
risks and an explanation as to how they are
being managed and mitigated are contained
on pages 32 to 38.
Over the last year, the Committee has
overseen the development of climate‑
related risks and opportunities, ensuring
that they are aligned to the requirements
of TCFD and considered in the context of
the principal business risks. Members of the
Audit Committee are also members of the
Corporate Responsibility Committee (‘CRC’),
which supports consistency between
climate related and financial disclosure
and discussion on the level of assurance
obtained over climate‑related reporting.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
96
Risk management systems
andinternalcontrols continued
Risk management continued
During FY 2023 the Committee continued
to review the Group’s linkage between
the identification of risk and the control
environment, including the formal
evaluation of the lines of defence conducted
by the business and the processes for testing
the second line of defence.
Internalcontrols
The Committee also reviews the Group’s
internal control systems and their
effectiveness, and receives updates on the
findings of the internal audits investigations
at every meeting, prior to reporting any
significant matters to the Board. Internal
control systems are part of our business as
usual activities and are documented in the
Group Authorities Manual/Matrix, which
covers financial, operational and compliance
controls and processes. Internal control
systems are the responsibility of the Chief
Financial Officer.
Confirmation that the controls and processes
are being adhered to throughout the
business is the responsibility of managers
but is continually tested by the work of the
internal audit team as part of its annual plan
of work which the Committee approves
each year as well as aspects being tested
byother internal assurance providers.
The internal audit function
The internal audit function is a key element
of the Group’s corporate governance
framework. The purpose of internal audit
is to enhance and protect organisational
value by providing risk‑based and objective
assurance, advice and insight to the Audit
Committee, the Board and management.
In addition to reviewing the design and
operational effectiveness of controls
in managing risks, the internal audit
function also considers, where relevant,
the risk and control culture/environment,
efficiency of controls, compliance with
law/regulations, internal policies and also
controls to support the safeguarding of
Company assets. The internal audit function
monitors the implementation of agreed
audit actions to verify its completion and
routinely reports the status at each Audit
Committee meeting.
A three to five‑year audit planning approach
has been applied that has identified key
areas requiring periodic assurance which
is focused around financial controls and
compliance of key policies. In addition,
an audit planning assessment exercise is
undertaken annually that identifies further
areas requiring assurance that are aligned to
strategic risks and/or projects. This approach
results in the development of a risk‑based
annual internal audit plan that is endorsed,
managed and approved by the Audit Committee.
The purpose, scope and authority of internal
audit are defined within its charter which is
approved annually by the Audit Committee.
The inhouse team is supplemented by
additional resource and skills sourced from
external providers, based on specialism
or workload. The Committee keeps the
relationship with external providers under
review to ensure the independence of the
internal audit function is maintained.
Assessing the effectiveness of the
internal audit function
The annual internal audit plan for the
internal audit function is considered and
approved each year by the Committee.
In reviewing the proposed plan, the
Committee gives consideration to the
Group’s strategic priorities and specific
initiatives which are being undertaken,
which could impact the business and also
the findings and actions arising from the
assessment of the Group’s risk register.
Thereafter, together with findings from
audits which are presented at each
meeting, the Committee considers the
appropriateness of the internal audit plan
and the resourcing of the function to
enable it to deliver it. Where appropriate to
the nature of the work being undertaken,
reviews are supported by other independent
assurance providers.
The Director of Risk & Compliance has
responsibility for internal audit and
independently reports to the Chair of the
Audit Committee in relation to internal
control matters. In addition to attendance
by invitation at meetings of the Committee,
the Director of Risk & Compliance has met
with the Chair of the Audit Committee on
a number of occasions to consider findings
from internal audit and other matters
relating to the internal audit function.
The effectiveness of the internal audit
function’s work is continually monitored:
u
ongoing audit reports are received;
u
scopes of audits are received by the Chair
of the Audit Committee;
u
Committee interaction with the Director
of Risk & Compliance;
u
internal audit, led by the Director of Risk
& Compliance, reports functionally to the
Chief Financial Officer. The Director of
Risk & Compliance attends all scheduled
meetings of the Audit Committee and
has the opportunity to raise any matters
with the members of the Committee
without the presence of management.
He is also in regular contact with the
Chair of the Committee outside of the
Committee meetings;
u
progress against the internal audit plan
isreviewed at each meeting; and
u
External Quality Assessment are
performed on a regular basis with
theresults reviewed and discussed
bytheCommittee, including the
monitoring of the implementation
ofrecommended improvements.
Audit Committee report continued
CORPORATE GOVERNANCE
97
Annual Report 2023 Victrex plc
Effectiveness and quality of the external audit
The Committee actively considers the effectiveness and quality of the external audit process on an ongoing basis.
Following the process outlined below, the Committee assessed the effectiveness of the external audit and concluded that the external
audit process and services provided by PwC were satisfactory and effective.
PwC present key findings from the FRC’s Audit Quality Inspection Report for PwC and planned actions.
The Committee discusses and agrees at the planning stage the draft list of specific risks to audit effectiveness and
quality (specific audit quality risks).
PwC report against audit scope and subsequent meetings provide the Committee with an opportunity to monitor
progress and raise questions.
The Committee assesses audit planning work in respect of specific audit quality risks and ensures that matters of key
interest (including those listed as significant issues above) are addressed in the audit plan.
PwC report on specific audit quality risks applicable to Victrex and how these have been addressed at the planning
and final stages of the audit.
The Committee discusses both internally and with PwC the extent to which PwC have demonstrated professional scepticism
and challenged management’s assumptions through the audit process, particularly in areas of estimation and judgement.
All Committee members, key members of management, and those who regularly provide input into the Audit Committee
or have regular feedback with the external auditors are asked for feedback on how well PwC performed the year-end audit.
Feedback and conclusions are discussed, along with the conclusion and transparency of reporting regarding specific
audit risks and issues, with an overall conclusion on audit effectiveness and quality reached. Any opportunities for
improvement are brought to the attention of the external auditors.
The FRC’s Audit Quality Inspection Report for PwC, published in July 2023, showed that PwC’s responses to previous
reviews continue to make a positive impact on the results, with the FRC recognising the improvements which had
been made whilst also noting there was still work to do. The Committee has engaged with PwC during each year of
their appointment to discuss PwC’s response to weaknesses identified by the FRC in general, but particularly those
relevant to the Company’s audit. The Committee seeks evidence in the final audit report of the work performed by
PwC on those areas relevant to the Company’s audit, probing the audit team on the level of professional scepticism
they have demonstrated and the level of challenge they have given management. Due to the time lag between the
FRC issuing findings to PwC for response and the publication of the report, evidence of PwC’s revised approach has
been evident across the recent audits. The Committee, as a matter of course, does seek full explanation of work
undertaken in the more judgemental aspects of the accounts.
Private meetings are held at most Committee meetings between the Audit Committee and representatives from the external
auditors without management being present in order to encourage open and transparent feedback by both parties.
The Committee assesses final audit work and reporting along with the overall conclusion reached regarding specific
audit quality risks and the significant audit issues (as outlined above).
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
98
CORPORATE RESPONSIBILITY
COMMITTEEREPORT
Main responsibilities ofCommittee
u
Oversee the Companys conduct with regards to its corporate societal
obligations and commitments
u
Support and challenge the development and execution of the
Company’ssustainability strategy and commitments including
progresstowardstargets
Full Terms of Reference can be found at www.victrexplc.com.
Committee meetings in FY 2023
The Committee held three
scheduled meetings during FY 2023
and has a programme of business
reflecting its Terms of Reference.
Committee member
Meeting
attendance
J E Toogood (Chair) 3/3
J Ashdown 3/3
R Rivaz 3/3
D Thomas 3/3
Secretary: Jane Brisley
Other attendees:
u
the Company Chair, CEO, CFO
and Workforce Engagement
NED are not members of the
Committee but are invited
toattend;
u
the Director of Investor
Relations, Corporate
Communications & ESG, Chief
Operating Officer and Group
HR Director regularly attend
meetings; and
u
other employees, based on the
programme of business, may be
invited to attend.
Jane Toogood
Chair of Corporate
Responsibility Committee
FY 2023 highlights
u
Overseeing the evolution and progress
ofthe Corporate Responsibility
Committee during itsfirstfull year
u
Progressing our decarbonisation
roadmap and enhanced Net Zero targets
submitted to SBTi (across Scope 1, 2 & 3),
in line with our commitment
u
Constructively challenging progress
in our Diversity, Equity & Inclusion
(‘DE&I’) agenda, and approving metrics
tomeasure employee wellbeing
u
Progressing the definition for our
portfolio of sustainable products,
asthese help to drive future growth
FY 2024 focus areas
u
Broaden the focus of our DE&I agenda,
specifically for our talent pipeline
u
Build on our positive lifecycle analysis
(‘LCA’) for Victrex™ PEEK through a
roadmap of additional LCAs to support
customer solutions
u
Progressing our circularity and
recyclingopportunities in the
supplychain, to differentiate and
supportcustomer choices
u
Drive further progress in our
decarbonisation journey
Dear shareholders,
On behalf of the Corporate Responsibility
Committee, I am pleased to present its
inaugural report, for the year ended
30September 2023.
Newly formed during FY 2022, the
Committee has focused its first full year on
the oversight of existing sustainability & ESG
targets, while also ensuring that our future
goals and targets are realistic and ambitious,
across our three pillars of ‘People, Planet &
Products’. Monitoring progress in achieving
our goals and targets (which are set out
on pages 46 and 47) will be central to the
Committee’s purpose going forward.
Victrex has long‑standing sustainability &
ESG credentials through how our products
enable environmental and societal benefit,
for example in supporting CO
2
reduction in
the Aerospace and Automotive industries, or
through patient outcomes in Medical. More
information on these benefits can be found
on page 43. The Committee’s oversight
on all of our key sustainability & ESG
programmes ensures that climate change
and our response to that is right at the heart
of the Board’s agenda. The Committee also
ensured that appropriate assurance was in
place for key metrics such as the Group’s
greenhouse gas emissions (‘GHG’).
Corporate Responsibility Committee report
CORPORATE GOVERNANCE
99
Annual Report 2023 Victrex plc
The Committee’s agenda
inFY 2023
The Committee’s principal activities,
upto the date of approval of the
Annual Report, were as follows:
u
Oversight and assessment of
our sustainability & ESG goals
andactivities
u
Reviewing our environmental
performance and ongoing measures
u
Preparation and awareness of
alignment with key disclosure
requirements, particularly TCFD
andfuture disclosures
u
Ensuring appropriate governance
across our People, Planet & Products
pillars, including implementing
assurance for our Scope 1 & 2
emissions, and limited assurance
forScope 3 emissions
u
Progressing our Science Based
Targets initiative (‘SBTi’)
submission, including a costed
decarbonisationroadmap
u
Reviewing the definition of our
portfolio of sustainable products
u
Overseeing progress against DE&I
goals and activities to positively
influence diversity
u
Reviewing the Committee’s
Terms ofReference and annual
programme of business
People
Social responsibility
In our People agenda, the Committee
reviewed the Group’s Diversity, Equity &
Inclusion goals and activities to positively
influence the diversity of the organisation.
Victrex has a target goal for 40% of females
in leadership roles by 2030, which currently
sits at 19% (FY 2022: 19%). With a pipeline
of talent identified, and through working
with our Employee Representative Groups,
including our Gender Engagement Network
(‘GEN’), we expect to show further progress
in FY 2024 and beyond. The Committee also
expects to consider other potential goals in
this area to support our DE&I agenda.
The Committee also met with female
employees within our Integrated Supply
Chain (‘ISC’) team, to understand the impact
of the Group’s activities in this area.
Social responsibility activities are focused
on supporting the next generation of
talent, through our Science, Technology,
Engineering and Maths (‘STEM’) activities.
The Committee reviewed progress
towards a greater globalisation of our
STEM programme, with our first STEM
ambassador in China this year, and an
increase in STEM ambassadors to 60.
Elsewhere, the Committee reviewed the
good progress in employee volunteering
activities, including a new Biodiversity
partnership. This pilot programme is an
opportunity to broaden across other sites,
ensuring that industry and nature operate in
harmony. With our community volunteering
hours continuing to exceed targets, the
Committee expects to review and set a
newgoal during FY 2024.
Since the year end, the Committee
proactively considered the Parker Review’s
call for companies to set a target for ethnic
diversity below Board (‘exco and exco1
level). Following submission of our target
in December 2023 (post‑the Company’s
preliminary results announcement) we will
publish this in our FY 2024 Annual Report.
Wellbeing activities are a key topic for
the Committee, particularly with a more
normalised ‘post‑pandemic’ business.
Weassess feedback on wellbeing as part of
the engagement survey and ‘pulse surveys’
with employees, further details of which are
shown on pages 54 to 57. The Committee
also adopted metrics to measure wellbeing
which will be monitored going forward.
Ensuring we promote how our employees
support our societal obligations was an
area the Committee focused on. All Victrex
employees are required to participate in
annual training on principles contained in
the Code of Conduct, a summary of which
is shown on page 65.
Planet
Resource efficiency
The Committee monitors the Group’s
environmental performance at each
meeting, with particular focus on energy,
water, waste and carbon intensity. Good
progress has been made on long‑term waste
management since our original sustainability
goals set out in 2013. We note that our
carbon intensity per tonne of PEEK produced
has reduced by 17% over the past 10 years.
Further detail is shown on pages 58 to 62.
The key focus area during the year for the
Committee was the Group’s discussions
on SBTi and fulfilling our original goal to
submit a sciencebased target as part of our
decarbonisation plans. Against the backdrop
of an uncertain energy environment and
the significant cost of decarbonisation,
together with the reliance on available
technology, alternative fuels or external
factors (for example, electrical grid capacity),
consideration was given to ensuring the
SBTi route remained appropriate for all of
our stakeholders. An assessment of peers
and competitors was also considered,
thereby ensuring that remaining aligned
to SBTi, and building on our positive ESG
credentials, would support the Group and
its stakeholders over the years ahead. Our
SBTi targets, which align to Net Zero 2050
across Scope 1, 2 & 3, with an interim target
in 2032, are now being reviewed by SBTi,
with the fully assessed targets set to be
shared in FY 2024.
Products
Sustainable solutions
The Group has a target to reach 70%
of revenues from sustainable products
by 2030, with an interim target of 50%
by 2025. Sustainable products are those
defined as having a quantifiable or societal
benefit. The Committee noted the positive
progress during FY 2023, which saw 55% of
revenues from sustainable products, whilst
noting the favourable sales mix driving this.
A focus area is to consider how we may be
able to assess sustainable revenues from the
VAR segment, where we have limited insight
on end market destination.
The Committee continues to assess how
Victrex can play a greater role in the circular
economy. Our sustainability goals indicate
we will seek to increase recycling rates in
the supply chain. Victrex’s role will be to
facilitate the demand for recycling through
existing channels – primarily processors.
Governance and assurance
The Committee agreed the need for
assurance on the Group’s GHG emissions,
for Scope 1 & 2. On Scope 3, assurance
is provided on alimited basis, noting
this is in line with current practice. The
Committee supported the approach by
management of engaging a third‑party
provider, SLR Consulting, commencing
forFY2023reporting.
The Committee supported management’s
approach not to seek external assurance on
other matters in the Sustainability report,
such as number of volunteering hours and
numbers of STEM ambassadors. This is in
line with current practice but will be kept
under review.
Victrex’s modern slavery policy and
statement is also an area the Committee
reviews, before it is proposed to the Board.
Our statement can be located on the
Group’s website atwww.victrexplc.com.
The Committee was within the scope of the
external performance evaluation exercise
conducted in FY 2023 by EquityCulture
Ltd. The overall conclusion was that the
Committee is a hugely welcome addition to
the Company’s ESG & corporate governance
framework and is off to a great start.
Jane Toogood
Chair of Corporate
ResponsibilityCommittee
5 December 2023
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
100
DIRECTORS’ REMUNERATION REPORT
Main responsibilities ofCommittee
u
Designing and determining the remuneration for the Company Chair,
Executive Directors and senior management
u
Reviewing workforce remuneration and related policies
u
Exercising judgement when determining remuneration awards
Terms of Reference for the Remuneration Committee can be found on
www.victrexplc.com.
Committee meetings in FY 2023
The Committee met four times during
FY 2023 and has a programme of
business reflecting the Committee’s
Terms of Reference.
Committee member
Meeting
attendance
J E Ashdown (Chair) 4/4
B W D Connolly 4/4
D Thomas 4/4
J E Toogood 4/4
R Rivaz 4/4
Secretary: Jane Brisley
Other attendees:
u
the Company Chair and the
CEO are not members of the
Committee but are invited
to attend;
u
the Group HR Director regularly
attends meetings;
u
representatives from the
Committee’s remuneration
advisors, Korn Ferry, regularly
attend meetings;
u
the Director of Investor
Relations, Corporate
Communications & ESG is an
occasional attendee based
on engagement matters with
shareholders; and
u
the CFO is an occasional
attendee to represent financial
matters such as target setting.
No attendee participates in the
Committee when it deals with their
own remuneration.
Janet Ashdown
Chair
FY 2023 highlights
u
Oversaw the implementation of the
remuneration policy
u
Engaged with the wider workforce on
the alignment between executive pay
and the wider workforce
u
Reviewed formulaic incentive outcomes
and considered whether they were
aligned to Company performance over
the short and long term
u
Oversaw the review of the operation
ofshare plans across the Company
u
Reviewed and approved salaries for
the Executive Directors and the senior
leadership team
u
Considered and approved the Directors’
remuneration report
FY 2024 priorities
u
Oversee the implementation of the policy
u
Set incentive plan performance targets
for the upcoming year
Dear shareholders,
On behalf of the Remuneration Committee
(the ‘Committee’) I am pleased to introduce
the Directors’ remuneration report for the
year ended 30 September 2023. This report
is divided into three sections: my statement,
a summary of the Directors’ remuneration
policy put to shareholders at the 2023
Annual General Meeting and our annual
report on remuneration for the year ended
30 September 2023.
Background
In one of the toughest years for the wider
Chemical industry and for Victrex, the
Group saw declines against most of its
performance metrics. Sales volume was
down 24% as several endmarkets saw a
downturn and customer destocking took
hold. Underlying profit before tax of £80.0m
was in‑line with our revised guidance. Whilst
our available cash was lower at £30.1m, our
balance sheet remains strong, supporting
investment for growth. Going forward,
we expect cash flow to improve as capital
expenditure reduces, following a period of
investment in people, capability, and assets.
Directors’ remuneration report
CORPORATE GOVERNANCE
101
Annual Report 2023 Victrex plc
2023 remuneration outcomes
Annual bonus
The FY 2023 annual bonus was based on
PBIT preexceptional items (60%), strategic
(30%) and personal (10%) objectives. If the
threshold PBIT target was not met, then
no payment would be made under any
element. The Committee retained the ability
to adjust the outcome if it did not reflect the
wider performance of the business.
As detailed in the Strategic report, FY 2023
was a year in which the Company operated
in a softer macroeconomic environment
with industrial destocking taking place
across several end markets. Given this
market context, and our incentive plan
targets having been set with reference to
the record results we delivered in FY2022,
we did not achieve thethreshold level
of profitability above which bonuses
are payable and so no bonuses were
payable for the year under review. This
was notwithstanding making strong
strategic progress against our non‑financial
milestones within our ‘megaprogrammes’.
For example, we delivered strong growth in
E‑mobility, achieving annual revenues well
ahead of the targets set at the start of the
year and we made good progress in medical
with our PEEK composite Trauma plates,
serving growing demand in the US and
Asia. Our strong and diverse core business,
allied to the growing commercialisation in
our mega‑programmes, provides a strong
platform for delivering in FY 2024.
The Committee did consider whether it
was appropriate to use its discretion to
adjust the formula‑based bonus assessment
but noting both the financial and non‑
financial achievements delivered in the
context of thecurrent challenging external
environment it concluded that the bonus
was a fair reflection of overall performance
and so it was not deemed appropriate
to adjust the bonus outcome. As part of
approving bonuses, the Committee also
considered the bonuses payable to all
employees. All Group employees were
eligible to receive bonuses with the same
financial targets applying to all participants.
Therefore, calculating bonus outcomes
based on the formulaic outcome was
consistent with the approach taken across
the Group.
LTIP
The FY 2021 long‑term incentive awards are
eligible to vest based on performance from
1 October 2020 to 30 September 2023.
Performance was based on cumulative EPS
(75%) and TSR performance VS FTSE250
excluding investment trusts (25%).
Notwithstanding robust performance over
the first two years of the performance
period, the challenging external market
context in place throughout FY 2023
contributed to neither the threshold TSR
orEPS performance targets being met and
so the award did not vest.
After reviewing the relationship between
performance and reward for FY 2023, the
Committee did not consider it appropriate
to use any discretion in relation to adjusting
the formulaic incentive outcomes.
The Committee is comfortable that actions
taken on pay during the year across the
Company were appropriate and balanced
the interests of all stakeholders and that the
remuneration policy operated as intended.
Board changes
Dr Martin Court retired from the Board
on30 September 2023. Martin remained
with the Company until 31 December 2023,
in order to support a smooth transition.
Martin was eligible to receive salary, pension
and benefits during the period of his
employment and, in line with the annual
and long‑term incentive plan rules, was
treated as a good leaver in relation to his
retirement. Martin is required to retain
all of his shareholding for two years
post‑the cessation of his employment as
the threshold of 200% of salary was not
met (inaccordance with the shareholding
guidelines under the remuneration policy).
Other considerations
duringtheyear
Wider workforce context
During the year the Committee had
oversight of the reward and compensation
packages that operate across the Company,
which are considered competitive.
Victrex’spay and culture is aligned across
the business, and we offer a competitive
remuneration package to our employees.
All employees are eligible for an annual
bonus; high achievers may also receive
additional awards for excellence and all
new joiners receive share options after
successful probation. In addition, the LTIP
is cascaded below the Board in a consistent
manner. During the year the Committee
alsoreviewed the CEO pay ratio.
In FY 2023 the pay ratio has decreased
significantly, predominantly due to the
annual bonus and LTIP not meeting their
performance criteria. In addition, targeted
cost of living payments in FY 2023, to
support global employees at certain
grades, has had a positive impact on the
pay ratio. The remuneration policy and its
implementation are considered appropriate
as it aligns with pay across the business and
the resulting ratios are considered to be
consistent with our wider pay, reward and
progression policies for employees.
The Committee’s agenda
inFY 2023
Our principal activities during the year,
and up to the date of approval of this
Annual Report, were as follows:
u
ensuring the successful
implementation of the Directors’
remuneration policy;
u
assessing FY 2023 bonus and
FY2021 LTIP outturns;
u
agreeing the Executive Directors’
and senior management FY 2024
remuneration packages;
u
agreeing the retirement
terms of Martin Court,
ChiefCommercial Officer;
u
considering remuneration across
the Company and the cascade
ofincentives; and
u
preparing the Directors’
remuneration report.
Wider workforce engagement
Brendan Connolly, who is the designated
Non‑executive Director for Workforce
Engagement and is a member of the
Committee, enables employees to provide
feedback on remuneration during the
various engagement mechanisms he
undertakes that includes attendance
at several forums. Brendan shares our
approach to executive remuneration, and
how it aligns with wider workforce and
Company strategy and invites comments
and questions. The views he receives on
remuneration (including executive and wider
employee remuneration) are then fed back
to the Committee and the wider Board as
part of his membership of the Committee
and his wider workforce engagement role.
The executive remuneration policy and its
implementation were not raised as material
issues during the year.
Shareholder engagement
The Committee consults with its larger
shareholders on executive pay matters,
where considered appropriate. Ahead of
the 2023 AGM the Committee engaged
with the Company’s major shareholders and
the leading shareholder advisory bodies in
relation to the 2023 Directors’ remuneration
policy. We were grateful for the feedback
we received during the consultation process
and with the policy proposed aligned
with general institutional investor best
practice expectations, we received over
95% support. On behalf of the Committee,
Iamalways happy to make myself available
to shareholders to discuss any concerns or
feedback they may have.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
102
Implementation of policy
in2024
The Committee considered how
remuneration should be implemented for
FY 2024. Part of this process was reviewing
current practice against both market and
best practice, our Group reward principles
and pay ratios. The outcome of the review
was that our current overall approach
remains appropriate with greater weighting
and total remuneration opportunity for
senior management, reflecting their roles
and responsibilities. The key decisions taken
for FY 2024 included:
Base salary: During the year the
Committee reviewed the salary increases
for the wider workforce taking into
account high inflation and the increase
in cost of living. As a result of the review,
the wider workforce received an average
increase of 4.5%.
With regard to the Chief Executive Officer,
having considered both his market positioning
and institutional investor guidance which
continues to encourage restraint in increases
to Executive Directors in a relatively high
payinflation environment, the Committee
approved an increase of 3.5% with effect
from 1 October 2023.
In relation to the Chief Financial Officer,
atthe time of his appointment in June 2022,
he was appointed on a base salary at material
discount to the former CFO given it was
hisfirst PLC executive director position.
TheCommittee resolved at that time to
reconsider his base salary subject to his
performance and increased experience in
post within 24 months of his appointment.
Accordingly, the Committee reviewed
hisbase salary at the end of FY 2023.
Thetiming of this review was considered
appropriate in light of: (i) the Committee’s
and wider Board’s view that he is operating
as a fully experienced and high performing
Chief Financial Officer; (ii) the fact that the
scope of his role has expanded since his
appointment as a result of the retirement
from the Board of the Chief Commercial
Officer with effect from 30 September
2023; and (iii) his additional experience
asaPLC chief financial officer. With regard
to the scope of his role, it has increased to
include a number of additional commercial
activities including responsibility for
managing the Company’s intellectual
property function, which in the context of
the increasing importance of the Company’s
megaprogrammes is a key priority. Having
had regard to each of these factors, the
Committee approved an exceptional increase
of 9.1% of salary in addition to the 3.5%
increase awarded to the Chief Executive
Officer. The total increase to his salary was
set to align it with that of the previous
ChiefFinancial Officer allowing for the
cost‑of‑living related increases he would
have received in each of the past two years
but for his resignation. This increase is
considered to be a one‑off repositioning
ofhis salary to better reflect his current role
and experience, with future increases
expected to be limited to cost of living
related adjustments. The Committee did
consider whether the increase should be
phased over two years but concluded that,
in light of the additional responsibilities
thatthe role now encompasses, single
stepincrease was more appropriate to
immediately recognise the role that the
individual is fulfilling and strike an
appropriate relativity with the Chief
Executive Officer.
Pension: Executive Directors are eligible
fora pension contribution of 14% of salary
(in line with the UK employee population).
Annual bonus: In line with the bonus
operated in FY 2023, the annual bonus
will be subject to financial, strategic and
personal objectives. Of the total bonus,
60% is earned against financial targets with
40% earned against non‑financial targets.
The financial targets are set as a challenging
range of profit targets derived from the
Company’s budget with the strategic and
personal targets linked to the Company’s
incremental progress in delivering against
its ‘mega‑programmes’ aswell as improving
internal operational and safety performance.
Similar to the approach taken in FY 2023,
the non‑financial targets will be subject
to an underpin equal to the threshold
profit target. Half of any bonus paid will
be deferred into shares for three years.
The Committee retains the ability toadjust
bonus outcomes in the event that there is a
perceived disconnect between performance
and reward.
Long-term incentives: In line with
the approach for FY 2023, the FY 2024
performance targets will include a
challenging range of EPS growth targets,
arelative total shareholder return condition
and ESG targets.
The EPS targets, determining vesting of
60% of the award, will require growth
of between 8% and 15% p.a. over the
three years ending 30 September 2026.
The annual rate of growth required by the
targets has been increased vis‑a‑via the
targets set for FY 2023 (being 5% and
12% p.a.) in recognition of the FY 2023
EPS achieved, which is the base point from
which performance will be measured,
current internal planning, external market
expectations for the Company and current
economic conditions. Overall, the range
of EPS targets is considered similarly
challenging to the range set for the FY 2023
awards. The TSR portion, to determine the
vesting of 30% of the award, will again
compare Victrexs relative TSR performance
over the period against the FTSE 250
Index constituents less investment trusts.
The remaining 10% of the LTIP will be
assessed against a challenging range of
carbon reduction targets. With regards to
the carbon reduction targets, these are
measured on emissions per tonne of PEEK
produced, based on current production
facilities, and require a reduction of
between 5.3% p.a. and 11.2% p.a.
Thetargets have been set to be consistent
with the Company’s stated 2030 goals.
TheCommittee is retaining discretion to
restate the carbon reduction targets in
the event that there was a change to the
Group’s current manufacturing strategy
(e.g. to internalise or outsource part of
the current production processes). Any
restatement would be made on the basis
that it did not materially increase or reduce
the inherent stretch in the targets.
With regard to the quantum of FY 2024
awards, the Committee intends to make
awards at the normal policy levels at 175%
of salary for the Chief Executive Officer
and 150% of salary for the Chief Financial
Officer. TheCommittee will undertake a
final review of the targets and quantum
prior to grant and will include a provision
in the awards that enables the Committee
to reduce vesting based on the formulaic
outcomes ifit considers there to have
been a perceived windfall gain and/or a
perceived disconnect between performance
and reward.
Non-executive Board fees: An increase
of 4.5% to the NED base fee was approved
by the Board, in line with the increase for
the wider workforce. The Remuneration
Committee anticipated an increase of 3.5%
for the Chair (in line with the increase
for the CEO); however, the Chair waived
this increase.
The whole Directors’ remuneration report
(excluding Policy) is subject to the advisory
vote. I hope it is clear from the way we are
proposing to apply policy in FY 2024 that
we continue to take account of the feedback
of our shareholders and we look forward
to receiving your support for the Directors’
remuneration report at the upcoming
Annual General Meeting. I will be available
to answer any questions before the Annual
General Meeting. Please email your queries
to ir@victrex.com.
Janet Ashdown
Chair of the Remuneration Committee
5 December 2023
Directors’ remuneration report continued
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Annual Report 2023 Victrex plc
Directors’ remuneration policy
This part of the Directors’ remuneration report sets out a summary of the remuneration policy approved by shareholders at our 2023 AGM
and effective from 10 February 2023. The full remuneration policy is available in the 2022 Annual Report on our website.
When implementing the remuneration policy, the Remuneration Committee considered the six factors listed under Provision 40 of the
UKCorporate Governance Code:
Clarity – the remuneration policy is transparent, and the implementation of the policy is disclosed in straightforward, concise terms
toshareholders.
Simplicity – remuneration structures are simple and market typical, whilst at the same time incorporating the necessary structural features
to ensure a strong alignment to performance, strategy and minimising the risk of rewarding failure.
Risk – the remuneration policy has been shaped to discourage inappropriate risk taking as remuneration is focused on long‑term success
through the LTIP and the Deferred Bonus Scheme (‘DBS’). Awards under the remuneration policy are subject to malus and clawback provisions.
The performance conditions are reviewed annually to ensure that they remain suitable and do not incentivise risk taking. To avoid conflicts
of interest, Committee members are required to disclose any conflicts or potential conflicts ahead of Committee meetings. No Executive
Director or other member of management is present when their own remuneration is under discussion.
Predictability – examples of the caps under the remuneration policy are illustrated in the scenario charts.
Proportionality – the link between each element of policy and Company strategy is noted in the table below. Variable pay is subject
toacombination of financial and non‑financial measures that are linked to Company strategy.
Alignment to culture – the Remuneration Committee reviews workforce composition and remuneration across the Group every year and
takes them into account when reviewing the implementation of the policy. Where possible, in support of our performance culture, we align
remuneration across the Group; for example, all employees are eligible for an annual bonus and all new joiners receive share options after
successful probation.
Directors’ remuneration policy table
The table below and the accompanying notes describe the remuneration policy for Executive Directors.
Element of
remuneration
Purpose and link
to strategy Operation Maximum Performance target
Base salary
To provide
competitive and
fixedremuneration.
To attract and retain
executives of the
calibre required to
deliver the Company’s
strategy and enhance
earnings over
thelong term.
The basic salary for each Executive
Director is normally reviewed annually
(effective 1 October) taking into account
individual performance and the Group’s
financial circumstances, as well as pay
for all employees in the Group and the
external market.
Increases in salary above those of the
general workforce should only take
place infrequently, for example where
there has been a material increase in role
responsibility, size of the Company or
movement in the external market.
On recruitment or promotion to
Executive Director, the Committee will
take into account previous remuneration
and pay levels for comparable companies
which may lead to salary being set at
a higher or lower level than for the
previous incumbent.
Executive Directors will normally
receive a salary increase
(expressed as a percentage
of salary) up to the level of
increase awarded to the
general workforce. There is
noprescribed maximum.
Where the Committee has set
the salary of a new Executive
Director at a discount to the
market level initially, a series
of planned increases may
be implemented over the
following few years to bring
the salary to the appropriate
market position, subject to
individualperformance.
Current salary levels are
shown in the annual report on
remuneration on page 122.
None.
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104
Element of
remuneration
Purpose and link
to strategy Operation Maximum Performance target
Benefits
To provide market‑
consistent benefits,
including insured
benefits to support
the individual and
their family during
periods of ill health,
or in the event of
accidents or death.
This is consistent
with a culture of
safety, sustainability
andcapability.
Car allowances
to facilitate
effective travel.
Benefit provision includes the following
benefits and allowances:
u
health benefits;
u
car allowance;
u
relocation assistance;
u
life assurance;
u
group income protection;
u
all‑employee share schemes (e.g.
opportunity to join the SIP or SAYE);
u
travel;
u
communication costs; and
u
any reasonable business related
expenses can be reimbursed (and any
tax thereon met if determined to be a
taxable benefit).
Executive Directors will be eligible for
any other benefits or allowances which
are introduced for the wider workforce
on broadly similar terms and additional
benefits or allowances might be provided
from time to time if the Committee decides
payment of such benefits is appropriate
and in line with market practice.
There is no defined
maximum as the costs
of benefits can vary
year on year.
Not applicable.
Pension
To attract and
retainhigh calibre
Executive Directors.
To provide a level
of benefits that
allow for personal
retirement planning.
Executive Directors are offered the
choice of:
u
a Company contribution into a
defined contribution pension scheme;
u
a cash allowance in lieu of pension; or
u
a combination of a Company
contribution into a defined
contribution pension scheme
andacash allowance.
The maximum Company
pension contribution for
anExecutive Director will
belimited to that available to
the wider workforce which is
currently 14% of base salary.
Not applicable.
Directors’ remuneration policy continued
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Annual Report 2023 Victrex plc
Element of
remuneration
Purpose and link
to strategy Operation Maximum Performance target
Bonus
To incentivise
performance against
personal objectives
and selected financial
and operational
KPIs which are
directly linked to
business strategy.
Deferral of part
ofbonus into
sharesaligns
theinterests of
Executive Directors
and shareholders.
A maximum of 50% of bonus paid in
cash with 50% of the bonus deferred
into Company shares under the
Deferred Bonus Scheme (‘DBS’) for
aperiod of at least three years. With
regards to the treatment of awards on
cessation of employment, details are
on page 109.
DBS shares accrue dividend equivalents.
Not pensionable.
Bonus and DBS awards are subject to
‘malus’ and/or ‘clawback’ provisions
(forup to two years following: (i) the
payment of a cash bonus; or (ii) in the
case of a DBS award, the end of the
relevant deferral period) in exceptional
circumstances, including material
misstatement of the Company’s audited
financial results; an error in the relevant
financial information that led to the
bonus or DBS award being greater than
it otherwise would have been; personal
misconduct; serious reputational
damage; insolvency; or a failure of
riskmanagement.
Maximum award of up
to 150% of salary for the
CEO and 125% for other
Executive Directors.
At least 50% of the bonus will be
based on financial and operational
performance. The remainder of
the bonus will be based on the
achievement of other non‑financial
objectives such as personal objectives.
Targets and weightings are set by
reference to the Company’s financial
and operating plans and the current
targets and weightings are shown
on page 113.
Bonus outcomes are subject to the
Committee being satisfied that the
Company’s performance on the
measures is consistent with underlying
business performance and individual
contribution. The Committee will
exercise discretion on bonus outcomes
if it deems necessary.
Where financial targets are set,
up to 20% of the relevant part of
the bonus becomes payable at the
threshold performance level rising on
a graduated scale to the maximum
performance level where 100%
of the relevant part of the bonus
becomes payable. Where non‑
financial targets are set (e.g. strategic
and/or personal targets) itmay
not be practicable to set a preset
percentage of the relevant part of the
bonus that becomes payable at the
threshold performance level (i.e.the
testing of non‑financial targets may
be binary for the relevant part of
the bonus).
Victrex Long
Term
Incentive Plan
2019 (‘LTIP’)
Designed to align the
strategic objective of
delivering sustainable
earnings growth
over the longer term
with the interests
ofshareholders.
Awards under the LTIP are rights to
receive Company shares, subject to
certain performance conditions.
Each award is measured over at least a
three‑year performance period.
An additional holding period applies
after the end of the three‑year
performance period so that the total
vesting and holding period is at least
five years.
Shares subject to awards may accrue
dividend equivalents.
LTIP awards are subject to ‘malus’
and/or ‘clawback’ provisions (for up
to a year following the end of the
relevant holding period) in exceptional
circumstances, including material
misstatement of the Company’s
audited financial results; an error in
the relevant financial information that
led to the award being greater than it
otherwise would have been; personal
misconduct; serious reputational
damage; insolvency; or a failure of
riskmanagement.
The normal maximum award
level will be up to 175% of
salary p.a. in respect of the
CEO and 150% for other
Executive Directors.
The overall policy limit is
200% of salary. It is not
anticipated that awards
above the normal level
will be made to current
Executive Directors and
anysuch increase on an
ongoing basis will be subject
to priorconsultation with
majorshareholders.
Awards will be subject to a
combination of long‑term measures
which are aligned to the shareholder
experience and may include financial
metrics (such as EPS), shareholder
value metrics (such as TSR), and
ESG or strategic measures. At least
half of the award will be subject to
financial and/or shareholder return
measures. The Committee will have
discretion to set different measures
and weightings for awards in future
years to best support the strategy of
the business at that time.
Normally, below threshold
performance, 0% will vest.
Where practicable, no more than
25% of maximum will vest at
threshold performance, increasing
pro‑rata to 100% vesting for
maximumperformance.
Any vesting is also subject to the
Committee being satisfied that
the Company’s performance on
the measures is consistent with
underlying business performance
and individual contribution. The
Committee will exercise discretion on
LTIP outcomes ifit deems necessary.
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Element of
remuneration
Purpose and link
to strategy Operation Maximum Performance target
Share
ownership
guidelines
To increase
alignment between
Executive Directors
and shareholders
includingfor a period
post‑employment.
Awards made under the DBS on a
net of tax basis shall count towards
the share ownership guideline and
Executive Directors are required to
retain 50% of the net of tax vested
LTIPshares until the guideline is met.
The requirement to hold shares for
a period post‑employment shall be
implemented by contractual means.
Minimum of 200% of salary.
Executive Directors will
also be required to retain
shares equivalent to the
lower of 200% of salary or
their actual shareholding
at the time employment
ceases. The shares must be
held for two years with the
Committee having discretion
to allow half of the shares to
be released after one year.
Not applicable.
Non-executive
Directors’ fees
and benefits
(Determined by
theBoard)
To attract Non
executive Directors
with a broad range
of experience and
skills to oversee the
development and
implementation of
our strategy.
Reflects anticipated
time commitments
and responsibilities
ofeach role.
Reflects fees paidand
benefits provided by
comparator companies.
The remuneration policy for the
Non‑executive Directors (with the
exception of the Chair) is set by a
separate Committee of the Board.
Thepolicy for the Chair is determined
bythe Committee (of which the Chair
isnot a member).
Fees are paid in cash and are reviewed
annually considering the salary increase
for the general workforce and the
Executive Directors, and the level of fees
paid by companies of a similar size and
complexity. Any changes are normally
effective from 1 October.
Additional fees are paid in relation
toextra responsibilities undertaken,
such as chairing certain Board
subcommittees, and to the Senior
Independent Non‑executive Director
and the Nonexecutive Director with
designated responsibility for
WorkforceEngagement.
Non‑executive Directors may be eligible
for such cash and noncash benefits as
the Company deems appropriate from
time to time.
In exceptional circumstances, if there is
a temporary yet material increase in the
time commitments for Non‑executive
Directors, the Board may pay extra fees
on a prorata basis to recognise the
additional workload.
No eligibility for bonuses, Long Term
Incentive Plans (‘LTIPs’), pension
schemes, healthcare arrangements or
employee share schemes.
The Company pays any reasonable
expenses that a Nonexecutive Director
incurs in carrying out their duties as a
Director, including travel, hospitality
related and other modest benefits and
any tax liabilities thereon, and the
provision of advice relating to any such
tax liabilities, if appropriate.
There is no prescribed
maximum other than the
Company’s Articles of
Association containing a limit
on the fees that can be paid
to Non‑executive Directors.
The Board is guided by
the general increase in the
market for Nonexecutive
Director roles and for
the broader employee
population but on occasion
may need to recognise, for
example, an increase in the
scale, scope or responsibility
of the role.
Current fee levels are set out
on page 123.
Not applicable.
Non‑executive Directors do
not participate in variable pay
arrangements and do not receive
retirement benefits.
Directors’ remuneration report continued
Directors’ remuneration policy continued
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Annual Report 2023 Victrex plc
Additional notes to the
policytable
Annual bonus and long-term incentives
The Committee will operate the Companys
incentive plans according to their respective
rules as approved by shareholders and
consistent with normal market practice,
the Listing Rules and HMRC rules where
relevant. These include making awards
and setting performance criteria each year,
dealing with leavers and adjustments to
awards and performance criteria following
acquisitions, disposals and changes inshare
capital and taking account of the impact of
other merger and acquisition activity.
With regards to performance measures
for variable pay, these are set with
reference to Victrex’s strategy and align
the senior executives’ interests with
those of shareholders. The annual bonus
plan performance metrics include a mix
of financial targets and non‑financial
objectives, reflecting the key annual
priorities of the Company. The financial
metrics determine at least half the
bonus and typically include a measure
of profitability (e.g. PBIT) alongside a
combination of key strategic and wider
non‑financial targets (e.g. progress with
our mega‑programmes). For FY 2024 the
performance measures are 60% PBIT (pre
exceptional items), 30% strategic targets
and 10% personal targets. The long‑term
incentive plan performance metrics relate
to creating long‑term sustainable returns
and typically include measures of long‑term
profitable growth (e.g. EPS) and shareholder
returns (e.g. TSR), along with sustainability
and/or strategic targets (e.g. carbon
reduction). For FY 2024, the performance
measures are 60% EPS growth, 30% TSR
and 10% carbon reduction targets (set as a
measure of emissions intensity).
The Committee retains discretion within
policy to set different performance criteria
and/or alter weightings for the annual
bonus plan and long‑term incentives in line
with the Company’s strategic priorities,
pay dividend equivalents on vested shares
under the long‑term incentives up to the
date those shares can first reasonably be
exercised and, in exceptional circumstances,
under the rules of the LTIPs adjust
performance conditions to ensure that
the awards fulfil their original purposes
(for example, if a measure is no longer
available). Performance targets are set based
on a range of expected outcomes, taking
into account both internal and external
expectations of performance. Targets
are set to be challenging yet realistic. All
assessments of performance are ultimately
subject to the Committee’s judgement.
Any discretion exercised, and the rationale,
will be disclosed in the annual report on
remuneration.
Legacy scheme and awards
All historical awards that were granted
under any current or previous share schemes
operated by the Company and remain
outstanding remain eligible to vest based on
their original award terms.
Recovery provisions
As outlined in the policy table the
Committee has the power to operate
‘malus’ and/or ‘clawback’ provisions in
exceptional circumstances, including
material misstatement of the Company’s
audited financial results; an error in the
relevant financial information that led to
a bonus, DBS or LTIP award being greater
than it otherwise would have been; personal
misconduct; serious reputational damage;
afailure of risk management; or insolvency.
Discretion
The Remuneration Committee can
exercise discretion in a number of areas
when operating the Company’s incentive
schemes, in line with the relevant rules of
the schemes. These include (but are not
limited to):
u
the choice of participants;
u
the size of awards in any year (subject
to the limits set out in the Directors’
remuneration policy table);
u
the extent of payments or vesting in
light of the achievement of the relevant
performance conditions;
u
the determination of good or bad leavers
and the treatment of outstanding awards
(subject to the provisions of the scheme
rules and the remuneration policy
provisions); and
u
the treatment of outstanding awards in
the event of a change of control.
In addition, if events occur which cause
the Remuneration Committee to conclude
that any performance condition is no
longer appropriate, that condition may
be substituted, varied or waived as is
considered reasonable in the circumstances
in order to produce a fairer measure of
performance that is not materially less
difficult to satisfy.
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Illustrations of the application of remuneration policy
Total remuneration (£000)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Chief Executive Officer Chief Financial Officer
16%
16%
31%
39% 33%
29%
38%
32%
26%
33% 28%
24%
31%
26%
100% 43% 28% 23%
100%
47%
31%
26%
£824k
£1,899k
Below target Target Maximum
£2,975k
£489k
£1,042k
£1,595k
£3,554k
£1,896k
Max. + 50% share
price appreciation
Below target Target Maximum Max. + 50% share
price appreciation
Fixed pay
LTIP + 50% share price appreciation
LTIP
Annual bonus
Notes on the scenario methodology:
u
The above charts give an illustrative value of the remuneration package for each of the Executive Directors in the upcoming year.
u
Minimum is the base salary and pension contribution for FY 2024 plus the value of benefits as disclosed in the FY 2023 single figure table.
u
On target is the aforementioned minimum plus an assumed 50% pay‑out of the annual bonus opportunity and 50% vesting of LTIP awards to be made
in FY 2024.
u
Maximum is the aforementioned minimum with an assumed 100% pay‑out of the annual bonus opportunity and full vesting of LTIP awards to be made
in FY 2024.
u
Maximum + share price assumption shows maximum plus 50% share price appreciation on the shares subject to vested LTIP awards to be made
in FY 2024.
External directorships
The Company accepts that its Executive Directors may be invited to become non‑executive directors of other companies outside the
Company and exposure to such non‑executive duties can broaden experience and knowledge, which would be of benefit to the Company.
Any external appointments are subject to Board approval (which would not be given if the proposed appointment was with a competing
company, would lead to a material conflict of interest or could have a detrimental effect on a Director’s performance). Whether any related
fees are retained by the individual or are remitted to the Company will be considered on a caseby‑case basis.
Service contracts and letters of appointment
Each of the Executive Directors’ service contracts are terminable by either the employing company or the Director on 12 months’ notice.
The Chair and other Non‑executive Directors have letters of appointment rather than service contracts. Their appointments may be
terminated without compensation at any time, subject to a three‑month notice period. All Non‑executive Directors are subject to
re‑election at each Annual General Meeting.
Directors’ remuneration report continued
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Annual Report 2023 Victrex plc
The table below summarises the notice periods for each Director as well as the date of appointment and current contract/letter of appointment.
Date of
appointment
Date of current
contract/letter
of appointment
Notice from
the Company
Notice from
the individual
Unexpired period
of service contract/
letter of appointment
Executive Directors
J O Sigurdsson 01/10/2017 19/04/2017 12 months 12 months Rolling contract
I C Melling 29/06/2022 04/04/2022 12 months 12 months Rolling contract
Non-executive Directors
V Cox 01/12/2021 17/09/2021 3 months 3 months Rolling contract
J E Ashdown 09/02/2018 18/12/2017 3 months 3 months Rolling contract
B W D Connolly 09/02/2018 18/12/2017 3 months 3 months Rolling contract
D Thomas 14/05/2018 11/05 /2018 3 months 3 months Rolling contract
J E Toogood 01/09/2015 30/07/2015 3 months 3 months Rolling contract
R Rivaz 01/05/2020 24/03/2020 3 months 3 months Rolling contract
M L Court stepped down from the Board on 30 September 2023.
Copies of Executive Directors’ service contracts and Nonexecutive Directors’ letters of appointment are available for inspection on request;
please contact the General Counsel & Company Secretary on cosec@victrex.com.
Policy on payment for loss of office
The circumstances of termination, the relevant individual’s performance and an individual’s duty and opportunity to mitigate losses are
considered in every case. Our policy is to stop or reduce compensatory payments to former Executive Directors to the extent that they
receive remuneration from other employment during the compensation period. A robust line on reducing compensation is applied and
payments to departing employees may be phased to mitigate loss. Our policy is shown in the table below:
Provision Summary terms
Compensation
for loss of office
u
An Executive Director’s service contract may be terminated without notice and without any further payment or
compensation, except for sums earned up to the date of termination, on the occurrence of certain contractually
specified events such as gross misconduct.
u
No termination payment if full notice is worked.
u
Otherwise, a payment in respect of the period of notice not worked of basic salary, plus pension and benefits for
that period.
u
The termination payment will be paid in monthly instalments over what would have been the period of notice
not worked. This will be reduced by the value of any salary, pension contribution and benefits earned in new paid
employment in that period.
Treatment of
annual bonus
ontermination
u
A time prorated bonus may be payable for the period of active service; however, there is no automatic entitlement
topayments under the bonus scheme. Any payment (e.g. for a good leaver) is at the discretion of the Committee
andissubject to recovery and withholding provisions as detailed in the policy table.
u
Performance targets would apply in all circumstances.
Treatment of
deferred bonus
ontermination
u
Determined based on the DBS rules. Full details are available on request.
u
Deferred bonuses are subject to recovery and withholding provisions as detailed in the policy table.
u
The default treatment for good leavers is that any unvested awards will vest with no time prorating applying. Awards
will normally vest at the normal vesting date unless the Committee decides they will vest on cessation of employment.
Awards to ‘bad leavers’ lapse on cessation of employment.
Treatment of
unvested
long‑term
incentives on
termination
u
Determined based on the relevant plan rules. Full details are available on request.
u
Normally, any unvested awards will lapse on date of cessation of employment (if that occurs during the performance
period) unless, in certain prescribed circumstances such as death, disability, mutually agreed retirement or other
circumstances at the discretion of the Committee, ‘good leaver’ status is applied. In these circumstances, awards vest
on a time pro‑rated basis subject to the satisfaction of relevant performance criteria, with the balance of awards lapsing.
The Committee retains the discretion not to time pro‑rate if it is inappropriate to do so in particular circumstances. The
Committee will consider the individual’s performance and the reasons for their departure when determining whether
‘good leaver’ status can be applied. Awards will normally vest at the normal vesting date unless the Committee decides
that they will vest on the date of cessation of employment.
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Directors’ remuneration policy continued
Approach to recruitment remuneration
The remuneration package for a new Executive Director will be set in accordance with the terms of the Company’s approved remuneration
policy in force at the time of appointment and the Committee shall seek to recruit within the parameters of approved policy and on the
principle that recruitment remuneration shall be no more than is necessary to secure the services of a preferred candidate.
Base salary
Base salary levels for new Executive Directors will be set in accordance with the policy, considering the experience of the individual
recruited. Where appropriate, the Committee has the flexibility to set the salary of a new appointee at a discount to the market level
initially, with a series of planned increases implemented over the following years to bring the salary to the appropriate market position,
subject to individual performance in the role.
Maximum level of variable pay
The maximum level of variable pay which may be awarded to a new Executive Director will be 350% of salary (i.e. 150% annual bonus plus
200% LTIP award). These limits will be separate to the value of any buy‑out arrangement which may be necessary to secure the services of
a preferred candidate.
In the case of an internal appointment, any variable pay element awarded in respect of the prior role would be allowed to pay out
according to its terms, underlying as relevant to take into account the appointment. In addition, any other previously awarded entitlements
would continue, and be disclosed in the next annual report on remuneration.
Annual bonus performance conditions
Where a new Director is appointed part way through a financial year, the Committee may set different annual bonus measures and targets
for the new Executive Director from those used for other Executive Directors (for the initial part year only).
Buy-out awards
The Committee may offer additional cash and/or share‑based elements (on a one‑time basis or ongoing) when it considers these to be in
the best interests of the Company (and therefore shareholders). Any such payments would be limited to a reasonable estimate of value of
remuneration lost when leaving the former employer and would reflect the delivery mechanism (i.e. cash and/or share based), time horizons
and whether performance requirements are attached to that remuneration.
Relocation and incidental expenses
The Committee may agree that the Company will meet certain relocation and/or incidental expenses as may be necessary to recruit a
preferred candidate and as deemed appropriate by the Committee.
Appointment of Non-executive Directors
For the appointment of a new Chair or Nonexecutive Director, the fee arrangement would be set in accordance with the approved
remuneration policy in force at that time. Non‑executive Directors’ fees are set by a separate Committee of the Board; the Chair’s fees are
set by the Committee.
Outplacement services, reimbursement of legal costs and any other incidental expenses may be provided where appropriate. Any statutory
entitlements or compromise claims in connection with a termination of employment would be paid as necessary. Outstanding savings/
shares under allemployee share plans would be transferred in accordance with the terms of the plans as approved by HMRC.
Change of control
On a change of control, Executive Directors’ incentive awards will be treated in accordance with the rules of the relevant plans. In summary:
u
bonus payments will consider the extent to which the performance measures have been satisfied between the start of the performance
period and the date of the change of control, and the value will normally be prorated to reflect the same period;
u
deferred bonuses will generally vest on the date of a change of control, unless the Committee permits (or requires) awards to roll over
into equivalent shares in the acquirer; and
u
LTIP awards will generally vest on the date of a change of control, taking into account the extent to which any performance condition
has been satisfied at that point. Time pro‑rating will normally apply unless the Committee determines otherwise.
Directors’ remuneration report continued
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Annual Report 2023 Victrex plc
Annual report on remuneration
Members of the Committee during the year
The role of the Committee is to determine and recommend to the Board a fair and responsible remuneration framework for the Company’s
Chair and Executive Directors. The members of the Committee (all of whom were independent Non‑executive Directors) during the year
under review were as follows:
u
Janet Ashdown (Remuneration Committee Chair);
u
Ros Rivaz;
u
Jane Toogood;
u
Brendan Connolly; and
u
David Thomas.
Biographical information on the Committee members, details of attendance at the Committee’s meetings and activities during the year are
set out on pages 70, 71 and 78. The purpose, roles and responsibilities are thereby included in this section of the report by reference.
External advisor
Korn Ferry provided independent advice to the Committee during FY 2023 having been appointed by the Committee following a competitive
tender process in 2020.
Korn Ferry provided advice on market practice updates and benchmarking and supported management with undertakings such as
producing the Directors’ remuneration report to the extent this did not impact the independence of its advice. The fees paid to Korn Ferry for
providing advice to the Committee in relation to Directors’ remuneration were £50,000, which included fixed fees for planned undertakings
and ad hoc support on a time and expense basis. Korn Ferry provided other human capital related services during the year to a separate
part of the business, but these services were carried out by a team separate to the remuneration advisory team. As a result, the Committee
is satisfied that the advice received was objective and independent. Korn Ferry is a member of the Remuneration Consultants Group
and abides by the voluntary code of conduct of that body, which is designed to ensure objective and independent advice is given to
remuneration committees.
Annual General Meeting voting outcomes
The following table summarises the details of votes cast for and against the Directors’ remuneration policy and the Directors’ remuneration
report at the 2023 AGM, along with the number of votes withheld. The Committee will continue to consider the views of, and feedback
from, shareholders when determining and reporting on remuneration arrangements.
Voting outcome Votes for Votes against Votes withheld
Directors’ remuneration report 2023 AGM 69,059,541 (97.66%) 1,655,476 (2.34%) 3,108,995
Directors’ remuneration policy 2023 AGM 70,116,683 (95.55%) 3,268,026 (4.45%) 439,303
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
112
Annual report on remuneration continued
Implementation of the Directors’ remuneration policy for the year ended 30 September 2023
A summary of how the Directors’ remuneration policy was applied for the year ended 30 September 2023 is set out below.
Remuneration received by Directors for the year ended 30 September 2023 (audited)
Salary
and fees
1
£
Taxable
benefits
2
£
Pension
3
£
Total
fixed pay
£
Annual
bonus
4
£
Long‑term
incentives
5
£
Total
variable pay
£
Total
£
J O Sigurdsson
2023 639,600 69,060 89,544 798,204 798,204
2022 615,000 68,000 130,740 813,740 579,754 43,752 * 623,506 1,437,24 6
I C Melling
2023 357,000 31,062 49,980 438,042 438,042
2022 80,096 8,034 12,606 100,736 63,371 63,371 164,107
M L Court
2023 335,966 31,096 47,035 414,097 414,097
2022 323,044 30,000 57,751 410,795 259,834 20, 545 * 280,379 691,174
V Cox
2023 280,000 280,000 280,000
2022 214,292 214,292 214,292
J E Ashdown
2023 64,560 64,560 64,560
2022 62,500 62,500 62,500
B W D Connolly
2023 62,560 62,560 62,560
2022 60,500 60,500 60,500
D Thomas
2023 64,560 64,560 64,560
2022 62,500 62,500 62,500
J E Toogood
2023 64,560 64,560 64,560
2022 56,083 56,083 56,083
R Rivaz
2023 63,060 63,060 63,060
2022 61,000 61,000 61,000
* The December 2019 and February 2020 LTIP vested for J Sigurdsson and M L Court on 11 December 2022 at a closing share price of £15.92 and on
12February2023 at a closing share price of £18.90. At the time of the 2022 Annual Report the LTIP figure used was based upon the average share price
during the three‑month period to 30 September 2022 (£17.93); therefore the published figure last year was J O Sigurdsson £47,334 and M L Court £22,109.
Directors’ remuneration report continued
CORPORATE GOVERNANCE
113
Annual Report 2023 Victrex plc
Notes and additional information (audited)
1. Salary and fees
Jane Toogood was appointed Chair of the Corporate Responsibility Committee with effect from 1 May 2022 and fees were prorated
for FY 2022.
In FY 2022 the salary and fees for Ian Melling and Vivienne Cox were pro‑rated due to both joining during FY 2022.
2. Taxable benefits
All Executive Directors are eligible for a company car allowance up to £21,000, membership to a private medical scheme covering
themselves and their immediate families and an allowance of up to £22,000 in relation to tax services, communication and other
benefits.The Chief Executive Officer also continues to receive a location allowance that is limited to £25,000.
3. Pensions
Executive Directors participate in a defined contribution pension scheme scheme in line with HMRC limits (£10,000) and receive the balance
between these limits and the maximum Company contribution of 14%, which is aligned to the wider workforce, as a cash supplement.
Allsupplements are subject to statutory deductions as appropriate.
Three of the Directors accrued pension benefits during the year under defined contribution schemes (FY 2022: two). None of the Directors
is accruing pension benefits under defined benefit schemes (FY 2022: none).
4. Annual bonus payments
The FY 2023 annual bonus was subject to a stretching Group underlying profit before interest and tax (‘PBIT’) target (60% weighting),
performance against shared strategic (30% weighting), and individual personal (10% weighting) performance objectives. No payment is
made on any element of bonus (including strategic and personal) if the underlying PBIT threshold is not met.
The maximum annual bonus opportunity for the CEO is 150% of salary and 125% of salary for the other Executive Directors.
The performance against measures to 30 September 2023 is set out in the tables below.
Threshold Target Stretch Outcome (% of maximum)
Measure Weighting
20% of
maximum
50% of
maximum
100% of
maximum
Ac tua l re sult * J O Sigurdsson I C Melling M L Court
Financial
Underlying PBIT 60% £93.4m £98.3m £103.2m £79.4m 0% 0% 0%
Strategic and
personal objectives
Strategic objectives 30% See below 0% 0% 0%
Personal objectives 10% See below 0% 0% 0%
Total 0% 0% 0%
* See APM 11, note 25 for Underlying PBIT calculation.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
114
Executive Directors were set a number of stretching strategic and personal performance objectives for FY 2023, which account for 40%
of total annual bonus opportunity. The Committee assesses performance against those objectives using a combination of quantitative and
qualitative information. A summary of the strategic objectives for the Executive Directors collectively and of the personal objectives along
with key performance highlights is shown below.
Strategic objectives Weighting Overview Performance target and assessment by Committee
Achievement
(% of max.)
Drive core business
12.5%
Deliver above
market growth
and manage
pricing in
high cost
environment
Target: Revenue of at least £365m.
Performance: £307m.
Target: Price cumulative increase at budgeted volumes of £20.0m.
Performance: £21.4m.
Outcome: Below target on revenue and above target on price increases, so
overall target performance.
50%
12.5%
Deliver the
supply and
cost plans
Target: Manufacturing productivity increased between 2% and 4% (or greater).
Performance: Productivity increased by 3.8%.
Outcome: Between target and maximum performance.
75%
Differentiate through
innovation
25%
Commercial
traction
in mega‑
programmes
milestones to
deliver forecast
Target: Establish commercial traction in targeted mega‑programmes and, in
aggregate, deliver forecasted revenue and path to £10m.
Performance: Varied progress across mega‑programmes with aggregate revenue
target exceeded at £11m.
Outcome: Target performance.
50%
Underpinning through
safety,sustainability
andcapability
12.5%
Progress
operations
in China
Target: Completion and commissioning of new production facilities.
Performance: Commissioning of targeted assets complete apart from PVYXfinishing.
Outcome: Target performance.
50%
12.5%
Deliver
developments
in the supply
chain and
enhance
capabilities
Target: Develop new and enhanced capabilities.
Performance: Progress ranged from ahead of internal plans to at or below.
Outcome: Target performance.
50%
Safety, sustainability
andcapability
25%
Achieve
sustainability
milestones
Target: Recordable injury frequency below 0.45 and deliver key elements of ESG
milestone plan including initial product lifecycle analysis.
Performance: Recordable injury frequency of 0.20 for FY 2023 and solid SHE
performance with strengthening culture.
Outcome: Between target and maximum performance.
75%
Total 100% 59%
Personal objectives Weighting Performance target and assessment by Committee
Achievement
(% of max.)
Jakob Sigurdsson
Drive core business
25%
Target: 1. Drive growth and improvement in core businesses with reference to revenue, gross margin,
productivity and price/surcharge increases. 2. Deliver second source of monomer.
Performance: Above target improvements in manufacturing processes with improved gross margin
at 53.0% and productivity gains with monomer achievement outstanding.
Outcome: Between target and maximum performance.
70%
Differentiate through
innovation
Mega‑programmes
25%
Target: Customer programmes in Knee and Trauma milestones on plan and establish a new UK centre.
Performance: Majority of programmes progressing well.
Outcome: Between target and maximum performance.
80%
Create and deliver
futurevalue
M&A, succession planning,
talentbuild
25%
Target: Develop up to three specific initiatives (covering both process and execution).
Performance: Initiatives developed in line with Board plans.
Outcome: Target performance.
50%
Underpinning through
safety,sustainability and
capable organisation
DE&IProgramme and
organisational change
25%
Target: Improve female representation vs FY 2022 and progress at least 10 targeted broader DE&I initiatives.
Performance: Very good performance on focused interventions. Female representation increased to
26% and Leadership Advancement Programme completed on time for top 60 leaders.
Outcome: Between target and maximum performance.
80%
Total 100% 70%
Directors’ remuneration report continued
Annual report on remuneration continued
Implementation of the Directors’ remuneration policy for the year ended 30 September 2023 continued
Notes and additional information (audited) continued
4. Annual bonus payments continued
CORPORATE GOVERNANCE
115
Annual Report 2023 Victrex plc
Personal objectives Weighting Performance target and assessment by Committee
Achievement
(% of max.)
Ian Melling
Drive core business
Budgetingexercise
20%
Target: Complete zerobased budgeting exercise and identify at least £1m savings.
Performance: £2m savings, including structural improvements.
Outcome: Maximum performance.
100%
Differentiate
throughinnovation
Organisationaldevelopment
20%
Target: Restructure IT & digital leadership.
Performance: Restructured IT, culminating in the promotion of internal candidate to lead IT role.
Outcome: Between target and maximum performance.
75%
Create and deliver
futurevalue
Corporatedevelopment activities
20%
Target: Support up to two initiatives in M&A process and product development areas.
Performance: Initiatives developed in line with Board plans.
Outcome: Target performance.
50%
Underpinning through
safety,sustainability
andcapability
Drivedevelopments in ESG
20%
Target: Develop carbon reduction roadmap with actions to deliver 2030 greenhouse gases
targets. Develop capital allocation framework.
Performance: Capital allocation programme agreed and rolled out. Plan in place and agreed
with CRC for auditing of ESG data going forward. SBTi targets submitted with Board approval.
Outcome: Between target and maximum performance.
75%
20%
Target: Deliver 3 digital tool milestones.
Performance: D365 milestones delivered, including successful roll out of D365 for PVYX.
Outcome: Target performance.
50%
Total 100% 70%
Personal objectives Weighting Performance target and assessment by Committee
Achievement
(% of max.)
Martin Court
Drive core business
Margin improvement
25%
Target: Gross margin of at least 52%.
Performance: 53.0% gross margin achieved.
Outcome: Between target and maximum performance.
90%
Differentiate
throughinnovation
Enhance mega‑programmes
12.5%
Target: Customer programmes in Knee and Trauma milestones on plan and establish a new
UK centre.
Performance: Majority of programmes progressing in line with Board plans.
Outcome: Between target and maximum performance.
80%
12.5%
Target: Deliver substantive revenue from H1D projects and enhanced adoption rate.
Performance: Achieved traction on H1D and portfolio streamlining, in line with Board plans.
Outcome: Target performance.
50%
Create and deliver
futurevalue
Develop sustainability milestones
25%
Target: Develop options to facilitate journey to Net Zero by 2030.
Performance: Options developed in line with Board plans.
Outcome: Target performance.
50%
Underpinning through
safety,sustainability
andcapability
Organisational capacity
forchange
25%
Target: Enhance culture and change management capability.
Performance: Learning and development programme successfully delivered for Europe
(excluding UK), with focus on Victrex behavioural framework, in particular regarding mindset
and working with ambiguity.
Outcome: Target performance.
50%
Total 100% 64%
The above reflects a full summary of the targets set and achievements delivered within the bounds of commercial confidentiality.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
116
Based on performance to 30 September 2023, with the underlying PBIT threshold not having been met and so no bonus eligible to be paid
under the strategic or personal element of the bonus, the outcome for Executive Directors during the year is shown below.
Measure
Annual bonus outcome
% of maximum % of salary
Bonus outcome
(£)
J O Sigurdsson 0% 0% _
I C Melling 0% 0% _
M L Court 0% 0% _
5. Vesting of LTIP awards
The LTIP awards granted on 14 December 2020 were based on performance to the year ended 30 September 2023. The performance
targets for these awards and actual performance against those targets were as follows:
Metric Weighting
Vesting at threshold
(% of max)
Threshold
target
Stretch
target
2
Actual % vesting
Underlying EPS growth over three years 75% 20% 89.25p
(5% p.a.)
109.8p
(12.5% p.a.)
77.7p
(1.1% p.a.)
0%
Total shareholder return vs. FTSE 250 Index
(excluding investment trusts)
1
25% 25% Median Upper quartile Below
median
0%
Total 100% Total vesting 0%
1 TSR measured over three financial years with a threemonth average at the start and end of the performance period.
2 If the stretch target is achieved 100% of the element vests. Straight line vesting applies between the threshold and the stretch target.
The Committee is comfortable that the formulaic outcome of the FY 2021 award is appropriate considering overall business performance
and wider market share price volatility.
The vesting details for the Executive Directors are therefore as follows:
Executive Grant date Vest date
Number
of shares
at grant
Number
of shares
to vest
Number
of shares
to lapse
Dividend
equivalent
on shares
to vest
£
Estimated
value
£
J O Sigurdsson 14 December 2020 14 December 2023 45,792 45,792
M L Court 14 December 2020 14 December 2023 22,080 22,080
Long-term incentives granted during the year (audited)
On 12 December 2022, the following LTIPs were granted to Executive Directors:
Executive Type of award Basis of award
Average share
price used
at grant
1
Number of shares
over which award
was granted
Face value
of award
% of face value
that would vest
at threshold
performance
Vesting
determined by
performance over
J O Sigurdsson Nil‑cost option 175% of salary £16.19 69,135 £1,119,296 21.5% Three financial
years to
30 September
2025
I C Melling Nil‑cost option 150% of salary £16.19 33,075 £535,484 21.5%
M L Court Nil‑cost option 150% of salary £16.19 31,127 £503,946 21.5%
1 The grant share price is the midmarket price quoted over a threeday average on 7, 8 and 9 December 2022 in accordance with the Plan rules.
An additional holding period applies after the end of the three‑year performance period so that the total vesting and holding period is at
least five years.
The LTIP was awarded as nil‑cost options with an exercise price of £nil. There is no change in the approach to the exercise price or date.
Directors’ remuneration report continued
Annual report on remuneration continued
Implementation of the Directors’ remuneration policy for the year ended 30 September 2023 continued
Notes and additional information (audited) continued
4. Annual bonus payments continued
CORPORATE GOVERNANCE
117
Annual Report 2023 Victrex plc
The award is subject to the performance conditions set out below:
Performance measure Weighting
Payment at
threshold Threshold Maximum
Underlying EPS (compound annual growth over three years) 60% 20% 5% p.a. 12% p.a.
Relative TSR vs FTSE 250 (excluding investment trusts) 30% 25% Median Upper quartile
Reduction in market‑based Scope 1 & 2 emissions
(per tonne PEEK produced) FY 2025 compared to FY 2022 10% 20% ‑3.4% p.a. 9.1% p.a.
Deferred shares granted in the year to 30 September 2023 (audited)
Awards of deferred bonus shares over the Companys shares were granted to Executive Directors on 12 December 2022 as shown below.
The deferred share awards are based on 50% of the bonus awarded for the year to 30 September 2022. No further performance conditions
apply and vesting of the awards is subject to continued employment at the date of vesting in three years’ time.
Executive Type
3
Number of
shares granted
1
Face value of the
award at grant date Grant date Vest date
J O Sigurdsson Nil‑cost options 17,9 04 £289,866 12 December 2022 12 December 2025
I C Melling
2
Nil‑cost options 1,957 £31,684 12 December 2022 12 December 2025
M L Court Nil‑cost options 8,024 £129,909 12 December 2022 12 December 2025
1 The share price at date of grant is £16.19 and is the mid‑market price quoted over a three‑day average on 7, 8 and 9 December 2022 in accordance with the
Plan rules. The closing share price on the date of grant was £15.92.
2 Ian Melling’s bonus had pro‑ration applied from his date of appointment of 29 June 2022.
3 There is no change in the approach to the exercise price or date.
Sharesave options granted during the year (audited)
During the year the Executive Directors received an award under the Company’s Save as You Earn Scheme (‘SAYE’). The details are set
out below.
Name
Number of options
granted
1
Exercise price
1
Face value at grant
2
% of award vesting
at threshold
Date on which
exercisable
J O Sigurdsson 2,152 £13.94 £29,990 n/a 1 April 2028
I C Melling 1,291 £13.94 £17,991 n/a 1 April 2026
M L Court 645 £13.94 £8,989 n/a 1 April 2026
1 The exercise price represents a 20% discount to the average price used to determine the number of shares comprising the award which was the share price
on 11 January 2023 of £17.42.
2 The number of shares included in the award was determined based on the expected monthly saving up to a maximum of £500 per month, over a 36 or
60‑month period.
Payments for loss of office and to past Directors (audited)
Dr Martin Court stepped down from the Board on 30 September 2023. Martin is due to remain with the Company until 31 December 2023,
in order to support a smooth transition. Martin received his base salary, pension and benefits during the year. The value received under
each element is set out in the single figure table. Martin did not receive any payment in lieu of notice.
Dr Martin Court will be treated as a good leaver in accordance with Victrex’s approved remuneration policy. As the FY 2023 bonus did not
trigger a payment there will be no bonus paid or deferred for the period to 30 September 2023. Martin will not be eligible for a bonus in
FY2024. Outstanding deferred bonus share awards will vest on their normal vesting date.
With regards to outstanding share awards granted under the Long Term Incentive Plan (‘LTIP’), he was granted options over 22,080 shares
on 14 December 2020, 19,676 shares on 10 December 2021 and 31,127 shares on 12 December 2022. Of the options granted in 2020, nil
will vest (as disclosed on page 116). The remaining awards will remain eligible to vest in line with their normal vesting dates subject to a
pro‑rata reduction for the period of time in employment and subject to the achievement of the relevant performance criteria.
Dr Martin Court is required to retain all of his shareholding upon cessation for two years as the threshold of 200% of salary in accordance
with the shareholding guidelines under the remuneration policy was not met.
All payments have been made within the terms of the termination policy as set out in the remuneration policy.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
118
Annual report on remuneration continued
Statement of Directors’ shareholdings and share interests (audited)
During employment, Executive Directors are required to build and maintain a shareholding equivalent to 200% of their base salary.
Executive Directors are required to retain 50% of the net of tax value of any vested LTIP shares until the guideline is met. The table
below summarises each Director’s current shareholding, and share awards subject to performance conditions, and whether or not the
shareholding requirement has been met.
Director
Beneficially
owned at
1 October
2022
Beneficially
owned at
30 September
2023
1
Nil‑cost options
Total
Total for
shareholding
guidelines
Shareholding
as a % of
salary at
30 September
2023
2
With performance
condition
Without performance
condition
Unvested
(LTIP)
Vested but
unexercised
(LTIP)
Unvested
(DBS/SAYE)
Vested but
unexercised
(DBS/SAYE)
J O Sigurdsson 22,000 38,844 158,629 2,366 35,897 235,736 58,705 132%
M L Court 22,613 25,150 72,883 1,106 16,669 450 116,258 33,941 145%
I C Melling 1,000 2,000 33,075 3,248 38,323 3,076 12%
V Cox 1,304 n/a n/a
B W D Connolly 850 850 n/a n/a
J E Ashdown 1,039 n/a n/a
D Thomas n/a n/a
J E Toogood 500 500 n/a n/a
R Rivaz n/a n/a
1 The table above includes the holdings of persons connected with each of the Directors. The holdings stated represent shares beneficially held.
2 The shareholding as a percentage shown above is based on the average share price during September 2023 of £14.39.
There are no unvested scheme interests in the form of shares.
There have been no other changes in the Directors’ shareholdings and share interests up to the date of this report.
LTIP awards are nil‑cost options. Vested but unexercised LTIPs are not subject to performance conditions as they are out of the performance
period. The unvested LTIPs are subject to EPS and TSR performance conditions, and an ESG measure also applying to options granted from
2021. Outstanding deferred bonus share awards are nil‑cost options which are not subject to performance conditions. Outstanding share
awards under all‑employee share plans relate to the options issued under the Save As You Earn Scheme; none of this type of option are
subject to performance conditions. The details of outstanding scheme interests are included in the table above.
The aggregate gain for Martin Court in the year from the exercise of awards granted under the LTIP was £36,060 based on the share price
on the date of exercise of £15.89. The gain for Jakob Sigurdsson in the year of exercise of awards granted under the LTIP and DBS was
£146,289 based on the share price on the date of exercise of £15.73.
Directors’ remuneration report continued
CORPORATE GOVERNANCE
119
Annual Report 2023 Victrex plc
Details of outstanding scheme interest (audited)
The table below sets out details of outstanding share awards held by Executive Directors. The table shows changes in the options
heldbyeach Director, taking into account grants made, options which have lapsed and any options exercised. The closing position
at30September 2023 is shown in bold.
Plan Grant date
Exercise
price
No. of
share
awards at
1 October
2022
Granted
during
the year
Vested
during
the year
Exercised
during
the year
Lapsed/
cancelled
during
the year
No. of
share
awards
at 30
September
2023
End of
performance
period
Date
from which
exercisable Expiry date
J O Sigurdsson
LTIP
08/12/2017 nil 4,890 4,890 30/09/2020 08/12/2022 08/12/2027
11/12 /2019 nil 29,327 1,972 27,355 1,972 30/09/2022 11/12 /2024 11/12 / 2029
12/02/2020 nil 5,865 394 5,471 394 30/09/2022 12/02/2025 12/02/2030
14/12/2020 nil 45,792 45,792 30/09/2023 14/12/2025 14/12/2030
10/12/2021 nil 43,702 43,702 30/09/2024 10/12/2026 10/12/2031
12/12/2022 nil 69,135 69,135 30/09/2025 12/12/2027 12/12/2032
Total 129,576 69,135 2,366 4,890 32,826 160,995
SAYE
01/04/2019 £19.20 937 937 n/a 01/04/2022 30/09/2022
01/04/2022 £18.91 951 951 n/a 01/04/2025 30/09/2025
01/04/2023 £13.94 2,152 2,152 n/a 01/04/2028 30/09/2028
Total 1,888 2,152 1,888 2,152
Deferred
shares
10/12/2018 nil 4,410 4,410 n/a 10/12/2021 10/12/2026
10/12/2021 nil 15,841 15,841 n/a 10/12/2024 10/12/2029
12/12/2022 nil 17,9 04 17,904 n/a 12/12/2025 12/12/2030
Total 20,251 17,904 4,410 33,745
M L Court
LTIP
08/12/2017 nil 2,269 2,269 30/09/2020 08/12/2022 08/12/2027
11/12 /2019 nil 13,172 885 12,287 885 30/09/2022 11/12/2024 11/12 /2029
12/02/2020 nil 3,293 221 3,072 221 30/09/2022 12/02/2025 12/02/2030
14/12/2020 nil 22,080 22,080 30/09/2023 14/12/2025 14/12/2030
10/12/2021 nil 19,676 19,676 30/09/2024 10/12/2026 10/12/2031
12/12/2022 nil 31,127 31,127 30/09/2025 12/12/2027 12/12/2032
Total 60,490 31,127 1,106 2,269 15,359 73,989
SAYE
01/04/2020 £19.97 450 450 450 n/a 01/04/2023 30/09/2023
01/04/2021 £19.60 459 459 n/a 01/04/2024 30/09/2024
01/04/2023 £13.94 645 645 n/a 01/04/2026 30/09/2026
Total 909 645 450 1,554
Deferred
shares
10/12/2021 nil 7,541 7,541 n/a 10/12/2024 10/12/2029
12/12/2022 nil 8,024 8,024 n/a 12/12/2025 12/12/2030
Total 7,5 41 8,024 15,565
I C Melling
LTIP 12/12/2022 nil 33,075 33,075 30/09/2025 12/12/2027 12/12/2032
Total 33,075 33,075
SAYE 01/04/2023 £13.94 1,291 1,291 n/a 01/04/2026 30/09/2026
Total 1,291 1,291
Deferred
shares 12/12/2022 nil 1,957 1,957 n/a 12/12/2025 12/12/2030
Total 1,957 1,957
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
120
Annual report on remuneration continued
Total shareholder return graph
The following graph shows the cumulative total shareholder return of the Company over the last 10 financial years relative to the
FTSE250Index. The FTSE 250 Index has been selected for consistency as it is the Index against which the Company’s total shareholder
return is measured for the purposes of the LTIP. In addition, the Company is a constituent of the Index. TSR is a measure of the
returns thata company has provided for its shareholders, reflecting share price movements and assuming reinvestment of dividends.
Dataisaveraged over three months at the end of each financial year.
£0
£50
£100
£150
£200
£250
30
September
2013
30
September
2014
30
September
2015
30
September
2016
30
September
2017
30
September
2018
30
September
2019
30
September
2020
30
September
2021
30
September
2022
30
September
2023
Value of hypothetical £100 investment
Victrex
FTSE 250
£163
£135
Source: DataStream Return Index.
CEO total remuneration
The total remuneration figures for the Chief Executive Officer during each of the last 10 financial years are shown in the table below.
Thetotal remuneration figure includes the annual bonus based on that year’s performance and LTIP awards based on threeyear
performance periods ending in the relevant year. The annual bonus pay‑out and LTIP vesting level as a percentage of the maximum
opportunity are also shown for each of these years.
Year ended
30September 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Name J O
Sigurdsson
J O
Sigurdsson
J O
Sigurdsson
J O
Sigurdsson
J O
Sigurdsson
J O
Sigurdsson
D R
Hummel
D R
Hummel
D R
Hummel
D R
Hummel
Total
remuneration £798,204 £1,437,246 £1,526,756 £888,780 £763,672 £1,071,351
£1,462,274
£6 68,211 £735,103 £832,147
Annual bonus
(% of maximum) 0% 62.9% 93.3% 0% 0% 65% 77.6% 0% 22.5% 53.1%
LTIP vesting
(% of maximum) 0% 6.73% 0% 19.8% n/a
1
n/a
1
22.1% 0% 0% 0%
1 Jakob Sigurdsson was appointed as CEO on 1 October 2017. His first tranche of LTIPs was eligible to vest in 2020.
Directors’ remuneration report continued
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121
Annual Report 2023 Victrex plc
Annual percentage change in Director and employee remuneration
The table below shows the percentage change in the Directors’ salary, benefits and annual bonus over the last four financial years,
compared to employee average.
Average percentage change
2022–2023
Average percentage change
2021–2022
Average percentage change
2020–2021
Average percentage change
2019–2020
1
Salary
Taxable
benefits
Annual
bonus Salary
Taxable
benefits
Annual
bonus Salary
Taxable
benefits
Annual
bonus Salary
Taxable
benefits
Annual
bonus
J O Sigurdsson 4.00% 1.60% (100.0)% 10.30% (5.40)% (25.70)% 0.00% (24.50)% 100.00% 2.30% (8.10)% 0.00%
I C Melling
2
n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
M L Court 4.00% 3.50% (100.0)% 3.00% 80.00% (30.10)% 0.00% 0.50% 100.00% 5.00% 1.60% 0.00%
Dr V Cox
2
n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
J E Ashdown 3.30% n/a n/a 4.20% n/a n/a 0.00% n/a n/a 3.40% n/a n/a
B W D Connolly 3.40% n/a n/a 4.30% n/a n/a 0.00% n/a n/a 20.80% n/a n/a
D Thomas 3.30% n/a n/a 4.20% n/a n/a 0.00% n/a n/a 3.40% n/a n/a
J E Toogood
3
15.10% n/a n/a 12.20% n/a n/a 0.00% n/a n/a 4.20% n/a n/a
R Rivaz 3.40% n/a n/a 4.30% n/a n/a 140.00% n/a n/a n/a n/a n/a
Employee
average 3.66% (5.00)% (100.0)% (0.40)% (11.04)% (43.10)% (2.93)% (2.02)% 100.00% 1.78% 7.56% 0.00%
1 Explanations for large increases in prior years are provided in the previous Annual Reports.
2 I C Melling and Dr V Cox both received pro‑rated salary and fees in FY 2022; therefore percentage change is not representative.
3 J E Toogood’s additional Chair fees in FY 2022 were pro‑rated from May 2022.
As the Parent Company does not have any employees, the employee average is based on global employees. Changes to the employee
average percentage change for salary and taxable benefits are due to changes in employee population, rather than due to any change
in approach.
Relative importance of spend on pay
The following table shows the Company’s actual spend on pay (for all employees) relative to dividends:
2023
£m
2022
£m % change
Staff costs 78.4 72.3 8%
Dividends
1
51.8 51.8 0%
1 FY 2023 includes a proposed final regular dividend of 46.14p.
The dividend figures relate to amounts payable in respect of the relevant financial year.
CEO pay ratio
Below we have calculated our UK CEO pay ratio comparing the CEO single total figure of remuneration to the equivalent pay for the
lower,median and upper quartile UK employees (calculated on a full‑time equivalent basis). The ratios have been calculated in accordance
with the Companies (Miscellaneous Reporting) Regulations 2018 which first formally applied to Victrex from the financial year beginning
1October 2019.
CEO pay ratio
Financial year Calculation methodology 25th percentile pay ratio
50th percentile (median) pay ratio
75th percentile pay ratio
2023 Option A 17:1 15:1 12:1
2022 Option A 32:1 27:1 22:1
2021 Option A 33:1 28:1 23:1
2020 Option A 20:1 18:1 14:1
2019 Option A 18:1 16:1 13:1
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
122
Annual report on remuneration continued
CEO pay ratio continued
Victrex reports against Option A as this option is considered to be the most statistically robust. The ratios are based on total pay and benefits as
well as short‑term and long‑term incentives applicable for the financial year 1 October 2022 to 30 September 2023. The reference employees at
the 25th, 50th and 75th percentile have been determined by reference to the last day of the financial year, 30 September 2023, and all items of
remuneration for employees have been calculated on the same basis as the single figure for the CEO.
The regulations require the total pay and benefits and the salary component of total pay and benefits to be set out as follows:
Base salary
Total pay
and benefits
CEO remuneration £639,600 £798,204
25th percentile employee £39,000 £47,80 4
50th percentile employee £46,552 £54,269
75th percentile employee £58,557 £66,755
Our principles for pay setting and progression in our wider workforce are the same as for our executives – total reward being sufficiently
competitive to attract and retain high calibre individuals without over paying and providing the opportunity for individual development and
career progression. The pay ratios reflect how remuneration arrangements differ as accountability increases for more senior roles within the
organisation and in particular the ratios reflect the weighting towards long‑term value creation and alignment with shareholder interests
for the CEO.
The pay ratio has decreased significantly since 2022. This is predominantly due to the annual bonus and LTIP not meeting their performance
criteria. A similar impact can be seen in years 2019 and 2020, when the bonus did not meet threshold performance, resulting in lower pay
ratio figures. In addition, targeted cost of living payments in FY 2023, to support global employees at certain grades, has had a positive
impact on the pay ratio.
We are satisfied that the median pay ratio reported this year is consistent with our wider pay, reward and progression policies for
employees. The median reference employee has the opportunity for annual pay increases, annual performance payments and career
progression and development opportunities.
Implementation of policy in FY 2024
The section below sets out the implementation of the remuneration policy in FY 2024 which has been set in line with the remuneration
policy to be put to shareholders at the 2024 AGM. There are no significant changes in the implementation of the policy proposed
in FY 2024.
Salaries and fees
Executive Directors
During the year the Committee reviewed the salary increases for the wider workforce taking into account high inflation and the increase
incost of living. As a result of the review, the wider workforce received an average increase of 4.5%.
With regard to the Chief Executive Officer, having considered both his market positioning and institutional investor guidance which
continues to encourage restraint in increases to Executive Directors in a relatively high pay inflation environment, the Committee
approvedan increase of3.5% with effect from 1 October 2023.
In relation to the Chief Financial Officer, at the time of his appointment in June 2022, he was appointed on a base salary at a material
discount to the former CFO given it was his first PLC Executive Director position. During the year, the Committee conducted a review of
his base salary based on his performance and increased experience. Based on the outcome of the review, the Committee approved an
exceptional increase of 9.1% of salary in addition to the 3.5% increase awarded to the Chief Executive Officer. Further details are set out
inthe Chair’s letter on pages 100 to 102.
2024 2023 % increase
J O Sigurdsson £661,990 £639,600 3.5%
I C Melling £402,000 £357,000 12.6%
Directors’ remuneration report continued
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123
Annual Report 2023 Victrex plc
Non-executive Directors
The Company’s approach to Nonexecutive Directors’ remuneration is set by the Board, with account taken of the time and responsibility
involved in each role, including, where applicable, the chairing of Board Committees.
An increase of 4.5% to the NED base fee was approved by the Board, in line with the increase for the wider workforce. The Remuneration
Committee anticipated an increase of 3.5% for the Chair (in line with the increase for the CEO); however, the Chair waived this increase.
The additional fees payable to the Senior Independent Director and Committee Chairs were adjusted to better reflect current market rates
and the time commitment of the roles.
The table below shows the fees for the Board with effect from 1 October 2023.
Position 2024 2023 % increase
Chair
1
£280,000 £280,000 0%
Base fee £55,970 £53,560 4.5%
Senior Independent Director £10,500 £9,500 11%
Workforce Engagement Director £9,500 £9,000 6%
Audit Committee Chair £11,500 £11,000 5%
Remuneration Committee Chair £11,500 £11,000 5%
Corporate Responsibility Committee Chair £11,500 £11,000 5%
1 V Cox waived her proposed fee increase of 3.5% (£9,800) for FY 2024.
Annual bonus
For FY 2024 the maximum annual bonus will be 150% of salary for the Chief Executive Officer and 125% of basic salary for the
ChiefFinancial Officer. Half of any bonus earned will be deferred into shares for three years.
Targets will be a combination of PBIT (weighted at 60%), strategic objectives (weighted at 30%) and an executive’s personal performance
(weighted at 10%). Profit targets for FY 2024 will be based on PBIT (preexceptional items) with the Committee retaining discretion to
determine the impact of any exceptional items on the testing of the targets, to ensure performance outcomes are a fair reflection of
underlying business performance. Similar to previous years, the non‑financial targets will be subject to an underpin equal to the threshold
profit target. The Committee retains the ability to adjust bonus outcomes in the event that there is a perceived disconnect between
performance and reward.
The Company believes that this combination of financial, strategic and personal performance objectives reflects the strategic focus on PBIT
while maintaining a measurement of progression against strategic milestones and personal contribution across key operational goals for the
business. The Committee will continue to run a thorough annual review of strategic and personal objectives to ensure they are measurable,
robust and aligned with overall Groupwide objectives. The Committee considers certain aspects of the performance targets for the annual
bonus to be commercially sensitive and, as such, they will be disclosed either at the end of the performance period or when they are no
longer commercially sensitive.
Long-term incentives
The Committee intends to make LTIP awards at 175% of salary for the CEO and 150% of salary for the CFO.
The extent to which the LTIP awards will vest will be determined by the performance measures listed below.
Targets
Performance measure Weighting Payment at threshold Threshold Maximum
EPS (compound annual growth over three years) 60% 20% 8% 15%
Relative TSR vs FTSE 250 (excluding investment trusts) 30% 25% Median Upper quartile
Reduction in market‑based Scope 1 & 2 emissions
(pertonnePEEKproduced) 10% 20% ‑5.3% p.a. 11.2% p.a.
The Committee retains discretion to adjust vesting outcomes (e.g. if TSR vesting is not considered aligned with the underlying financial
performance of the Company or EPS vesting outcomes are impacted by relevant events such as material acquisitions or divestments or
material changes in corporation tax rates). Any such discretion would be used to ensure that the performance targets fulfil their original
intent and were not more or less challenging than intended when set but for the relevant events in the performance period. Furthermore,
as set out in the Directors’ remuneration policy, awards are granted subject to malus and clawback provisions.
The Committee will undertake a final review of the targets and quantum prior to grant and will include a provision in the awards that
enables the Committee to reduce vesting based on the formulaic outcomes if it considers there to have been a perceived windfall gain
and/or a perceived disconnect between performance and reward.
This Directors’ remuneration report was approved by the Board on 4 December 2023 and is signed on its behalf by:
Janet Ashdown
Chair of the Remuneration Committee
5 December 2023
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
124
Annual General
Meeting
The Notice of the 2024 Annual General Meeting of the Company (‘AGM’) and explanatory notes are set outon
pages 184 to 191. The AGM will be held on Friday 9 February 2024 at 11am at the offices of J.P. Morgan Cazenove,
1JohnCarpenter Street, London EC4Y 0JP.
Whether or not they propose to attend the AGM in person, all shareholders are encouraged to vote on each of
theresolutions set out in the Notice of AGM by appointing a proxy to act on their behalf. Shareholders are strongly
encouraged to appoint the Chair of the meeting as their proxy. This will ensure that the appointing shareholder’s
vote will be counted if ultimately they are (or any other proxy they might otherwise choose to appoint is) not able
toattend the AGM for any reason. If a shareholder appoints the Chair of the meeting as proxy, the Chair will vote in
accordance with the shareholder’s instructions. If the Chair is given discretion as to how to vote, he or she will vote
in favour of each of the resolutions in the Notice of AGM. All proposed resolutions in the Notice of AGM will, once
again, be put to the vote on a poll.
If shareholders have any questions for the Board on the business of the meeting, please send them in advance of the
AGM to ir@victrex.com. We will aim to respond to all questions as quickly as possible. A summary and key themes
of the questions and answers will be posted on our website, www.victrexplc.com, on the morning of the AGM.
Results and dividends
Group profit before tax for the year was £72.5m (FY 2022: £87.7m).
The Directors recommend the payment of a final dividend of 46.14p per ordinary share that, subject to shareholder
approval at the AGM on 9 February 2024, will be paid on 23 February 2024 to all shareholders on the register of
members as at 6pm on 26 January 2024. Together with the interim dividend paid in July 2023 this makes a total
regular dividend of 59.56p per ordinary share for the year (FY 2022: 59.56p per ordinary share).
The Company has established Employee Benefit Trusts (‘EBTs’) in connection with the obligation to satisfy future
share awards under certain employee share incentive schemes. The trustees of the EBTs have waived their rights
toreceive dividends on those ordinary shares of the Company held in the EBTs. Such waivers represent less than
1%of the total dividend payable on the Company’s ordinary shares. There are no other arrangements in place
under which a shareholder has waived or agreed to waive any dividends.
Important events since
30 September 2023
There have been no important events affecting the Company or any member of the Group since 30 September 2023.
Financial instruments
Information on the Group’s financial risk management objectives and policies and its exposure to credit risk, liquidity
risk, interest rate risk and foreign currency risk can be found in note 16 to the financial statements. Such information
is incorporated into this Directors’ report by reference and is deemed to form part of this Directors’ report.
Directors
The Directors of the Company and their biographical details are set out on pages 70 and 71.
Directors’ interests in
the Company’s shares
The interests of the Directors of the Company and their connected persons at 30 September 2023 in the issued share
capital of the Company (or other financial instruments) which have been notified to the Company in accordance with
the Market Abuse Regulation are set out in the Directors’ remuneration report on page 118. The biographies of all
Directors serving at the date of this Annual Report are shown on pages 70 and 71. Details of Directors’ interests in
shares are provided in the Directors’ remuneration report on pages 118 and 119.
The Directors’ report required under the Companies Act 2006 comprises this Directors’ report (pages 124 to 127), the Corporate
governance report (pages 67 to 134) and the Sustainability report set out in the Strategic report (pages 42 to 66). The management
report required under Disclosure Guidance and Transparency Rule 4.1.8R comprises the Strategic report (pages 1 to 66) and this Directors’
report. This Directors’ report meets the requirements of the corporate governance statement required under Disclosure Guidance and
Transparency Rule 7.2. Aspermitted by legislation, some of the matters required to be included in the Directors’ report have been included
in the Strategic report bycross‑reference.
Directors’ report – other statutory information
CORPORATE GOVERNANCE
125
Annual Report 2023 Victrex plc
Major interests
inshares
The following information has been disclosed to the Company on request pursuant to the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules and is published on a Regulatory Information Service and
on the Company’s website. The following has been received, in accordance with DTR 5, from holders of notifiable
interests in the Company’s issued share capital as at 15 November 2023:
Holding %
FIL Limited 6.893.672 7.92
Sprucegrove Investment Management (CA) 6,798,757 7.81
The Vanguard Group Inc (US) 6,238,620 7.17
Norges Bank Investment Management 5,591,308 6.43
BlackRock Inc 5,305,028 6.10
Ameriprise/Threadneedle 5,041,606 5.79
Franklin Resources Inc 3,681,566 4.22
Schroders Plc 3,575,643 4.11
Brown Capital Management Inc (US) 3,520,719 4.05
Evenlode Investment Management Ltd (UK) 3,158,120 3.63
Baillie Gifford & Co Ltd (SC) 2,659,959 3.06
Royal London Asset Management Ltd 2,644,048 3.04
The positions stated above represent the holdings in shares either in their own right or on behalf of third parties and may
not represent the total voting rights (or authority to vote) as at 15 November 2023. The information provided above
was correct at the date of notification. However, these holdings may have changed since the Company was notified.
Appointment
andreplacement
ofDirectors
The Companys Articles of Association (the ‘Articles’) provide that the Company may by ordinary resolution at
ageneral meeting appoint any person to act as a Director, provided that notice is given of the resolution identifying
the proposed person by name and, if he or she has not been recommended by the Board, that the Company receives
written confirmation (within the time frame specified in the Articles) of that person’s willingness to act as Director.
The Articles also empower the Board to appoint as a Director any person who is willing to act as such.
The maximum possible number of Directors under the Articles is 12, unless the Company decides otherwise by
ordinary resolution. The Articles provide that the Company may by special resolution, or by ordinary resolution of
which special notice is given, remove any Director before the expiration of his or her period of office. The Articles
also set out specific circumstances in which a Director shall vacate office.
The Articles require that at each Annual General Meeting any Director who was appointed after the previous
Annual General Meeting must be proposed for election by the shareholders. Additionally, any other Director who
has not been elected or re‑elected at one of the previous two Annual General Meetings must be proposed for
reelection by the shareholders. The Articles also allow the Board to select any other Director to be proposed for
reelection. In each case, the rules apply to Directors who were acting as Directors on a specific date selected by the
Board. This is a date not more than 14 days before, and no later than, the date of the Notice of AGM. Notwithstanding
the provisions of the Articles, it is the Companys current practice that all Directors stand for election or reelection
onan annual basis in compliance with the provisions of the UK Corporate Governance Code.
The Articles are available on the Company’s website (www.victrexplc.com).
Directors’ indemnities
and insurance
The Company has in place qualifying third party indemnities in favour of all of its Directors under Deeds of
Indemnity (‘Deeds’). The Deeds were in force during the year ended 30 September 2023 and remain in force as
at the date of approval of the financial statements. The Deeds are available for inspection during normal business
hours on Monday to Friday (excluding public holidays) at the Company’s registered office. An appointment can
be made with the General Counsel & Company Secretary to review the Deeds. Please contact cosec@victrex.com.
The Company has appropriate directors’ and officers’ liability insurance cover in place in respect of legal action
brought against the Directors.
Conflict of
interestduties
Procedures are in place to ensure compliance with the Directors’ conflict of interest duties set out in the Companies
Act 2006. The Company has complied with these procedures during the year and the Board believes that these
procedures operate effectively. During the year, details of any new conflicts or potential conflict matters were
submitted to the Board for consideration and, where appropriate, these were approved. Authorised conflict or
potential conflict matters will continue to be reviewed by the Board at least on an annual basis.
Principal activity
The Company is a public limited company, incorporated in England, registration number 2793780. The principal
activity of the Company is that of a holding company. The principal activity of the Group is the manufacture and
sale of high performance polymers.
Branches
The Company does not have any branches outside the UK. Victrex Manufacturing Limited is a subsidiary of the
Company and has a branch in Korea. Victrex Europa GmbH is a subsidiary of the Company and has a branch in France.
Information set out in
the Strategic report
Certain information required to be included in the Directors’ report has been set out in the Strategic report.
TheStrategic report required by the Companies Act 2006 can be found on pages 1 to 66. The report sets out
thebusiness model (pages 12 and 13), strategy (pages 14 and 15) and likely future developments (pages 1 to 66).
Itcontains a review of the business and describes the development and performance of the Group’s business during
the financial year and the position at the end of the financial year. It also contains a description of the principal risks
and uncertainties facing the Group (pages 32 to 38). Such information is incorporated into this report by reference
and is deemed to form part of this Directors’ report.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
126
Employee and
otherstakeholder
engagement
Details of the Company’s arrangements for engaging with employees and actions taken during the year can be
found on pages 54 to 57 of the Strategic report and page 83 of the Corporate governance report. Details of the
arrangements in place under which employees can raise any matter of concern are set out on page 65. Disclosures
relating to the Group’s human rights and anti‑bribery policies are contained on page 65. The Group’s non‑financial
and sustainability information statement is set out on page 66. Details of employee involvement in Company
performance through share scheme participation can be found on page 55. Details of how the Directors have
engaged with employees and how the Directors have had regard to employee interests and the effect of that
regard on the principal decisions taken by the Company during the financial year can be found in the Section 172
statement on pages 20 to 22. These are deemed to form part of this Directors’ report.
A summary of how the Company has engaged with suppliers, customers and other third parties can be found on
pages 20 to 21 and 83. Details of how the Directors have had regard to the need to foster the Company’s business
relationships with suppliers, customers and others, and the effect of that regard on the principal decisions taken by
the Company during the financial year, are contained in the Section 172(1) statement on pages 20 to 22. Further
information on our payment practices with suppliers can be found on the government’s reporting portal. In addition,
during the year, we have continued to be a signatory to the Prompt Payment Code for suppliers. Further details
canbe found on page 83. These are deemed to form part of this Directors’ report.
Political donations
No contributions were made to political parties during the year ended 30 September 2023 (FY 2022: £nil).
Employment policies
The Group’s policies as regards the employment of disabled persons including those who have become disabled during
their employment with the Group, and a description of actions the Group has taken to encourage greater employee
involvement in the business, are set out on page 55. Such information is incorporated into this Directors’ report by
reference and is deemed to form part of this Directors’ report. Read more about the Group’s diversity on pages 56 and 57.
Environmental matters
Information on our greenhouse gas emissions energy consumption and energy efficiency actions required to be
disclosed by the Companies Act 2006 (Strategic report and Directors’ report) Regulations 2013, Schedule 7 of the
Large and Medium‑sized Companies and Groups (Accounts and Reports) Regulations 2008/410 and our TCFD
reporting is set out in the Sustainability report on pages 49 to 53. Such information is incorporated into this report
by reference and is deemed to form part of this Directors’ report.
Research &
Development
Our innovative culture is reflected in high Research & Development investment (of approximately 56% of
revenue), with the majority of this being on development, as we seek to move our programmes faster towards greater
commercialisation. The Group’s spend on Research & Development is disclosed in note 10 to the financial statements.
Such information is incorporated into this report by reference and is deemed to form part of this Directors’ report.
Share capital
The Company has a single class of shares in the form of ordinary shares with a nominal value of 1p per share whichhave
a Premium Listing on the London Stock Exchange and trade as part of the FTSE 250 Index under thesymbol VCT. Details
of the Company’s share capital and reserves for own shares are given in note 22 to the financial statements. During
the year 23,348 shares were issued in respect of options exercised under employee share schemes. Details of these
schemes are summarised in note 21 to the financial statements. The information innotes 21 and 22 to the financial
statements is incorporated into this Directors’ report by reference and is deemed to form part of this Directors’ report.
Rights and obligations
attaching to shares
The rights and obligations attaching to shares are set out in full in the Companys Articles of Association which
areavailable on the Company’s website (www.victrexplc.com). The holders of ordinary shares are entitled to receive
dividends when declared, to receive the Company’s Annual Report, to attend and speak at general meetings of the
Company, to appoint proxies and to exercise voting rights.
There are no restrictions on transfer or limitations on the holding of ordinary shares and no requirements to obtain prior
approval to any transfer except where the Company has exercised its right to suspend their voting rights, withhold a
dividend or prohibit their transfer following failure by the member or any other person appearing to be interested in the
shares to provide the Company with information requested under section 793 of the Companies Act 2006. The Directors
may, in certain limited circumstances, also refuse to register the transfer of a share in certified form. This includes where
the instrument of transfer does not comply with the specific requirements of the Articles of Association, where the
shares are not fully paid up or where the transfer is in favour of more than four joint transferees. The Directors may also
refuse to register the transfer of an uncertificated share if it is in favour of more than four persons jointly or if any other
circumstances apply in respect of which refusal to register a share transfer is permitted or required by the Uncertificated
Securities Regulations 2001. No shares carry any special rights with regard to control of the Company and there are no
restrictions on voting rights except that a shareholder has no right to vote in respect of a share unless all sums due in
respect of that share are fully paid and except also where the Company suspends voting rights as referred to above in
the event of nondisclosure of an interest as permitted by the Articles of Association. There are no known agreements
between holders of securities that may result in restrictions on the transfer of securities or on voting rights and no
known arrangements under which financial rightsare held by a person other than the holder of the shares.
Shares acquired by employees under employee share schemes rank equally with the other shares in issue and have
no special rights.
Own shares held
As at the date of this Annual Report, the Company does not hold any shares as treasury shares. Details of the
Company’s share capital are given in note 22 to the financial statements. A summary of the Directors’ powers
in relation to buying back shares is set out in the paragraph entitled ‘Powers of the Directors in relation to share
capital. As part of routine resolutions which are proposed to shareholders, the Directors will be seeking to renew
the authority allowing the Company to purchase its own shares, which is set out in Resolution 18 of the Notice of
AGM, which can be found on page 185.
No market purchases of the Companys own shares were made during the year ended 30 September 2023 or from
1 October 2023 up to the date on which this Annual Report was approved.
A total of 75,847 ordinary shares are held by the Employee Benefit Trusts in order to satisfy the exercise of
options by Directors under the Companys 2019 Long Term Incentive Plans (‘LTIPs’) and the 2017 Deferred Bonus
Plan. Noshares were purchased by the Employee Benefit Trusts in the financial year to 30 September 2023.
TheDirectorsand certain participating employees are beneficiaries of the Employee Benefit Trusts.
Directors’ report – other statutory information continued
CORPORATE GOVERNANCE
127
Annual Report 2023 Victrex plc
Related party
transactions
During the year ended 30 September 2023, the Company did not have any material transactions or transactions of an
unusual nature with, and did not make loans to, related parties in which any Director has or had a material interest.
Details of related party transactions are given in note 23 to the financial statements.
Nominees, financial
assistance and liens
During the year ended 30 September 2023, no shares in the Company were acquired by the Company’s nominee
orby a person with financial assistance from the Company, in either case where the Company has a beneficial interest
in the shares (and no person acquired shares in the Company in any previous financial year in its capacity as the
Company’s nominee or with financial assistance from the Company). Furthermore, the Company did not obtain
orhold a lien or other charge over its own shares.
Change of control
There are no significant agreements that take effect, alter or terminate on change of control of the Company following
a takeover. None of the Directors’ or employees’ service contracts contain provisions providing for compensation
for loss of office or employment that occurs because of a takeover bid. The rules of the Company’s employee share
plans set out the consequences of a change in control of the Company on participants’ rights under the plans.
Generally, such rights will vest and become exercisable on a change of control subject to a separate determination
as to the satisfaction of performance conditions.
Amendment of Articles
ofAssociation
The Companys Articles of Association may only be amended by special resolution of the Company at a general
meeting of its shareholders.
Powers of the
Directorsinrelation
toshare capital
The powers of the Directors are determined by the Company’s Articles of Association, UK legislation including the
Companies Act 2006 and any directions given by the Company in general meeting.
The Directors were granted authority at the 2023 Annual General Meeting to allot shares in the Company or to
grant rights to subscribe for, or to convert any securities into, shares in the Company: (i) up to a maximum aggregate
nominal amount representing approximately one third of the issued share capital (as at the last practicable date
before the publication of the 2023 Notice of AGM) in any circumstances; and (ii) up to a further maximum aggregate
nominal amount representing approximately one third of the issued share capital in connection with a rights issue
only. This authority is due to expire at the 2024 Annual General Meeting when shareholders will be invited to grant
asimilar allotment authority.
The Directors were also empowered at the 2023 Annual General Meeting to make non‑preemptive issues for cash:
(i) up to a maximum aggregate nominal amount representing approximately 5% of the issued share capital (as at
the last practicable date before the publication of the 2023 Notice of AGM); and (ii) up to a maximum aggregate
nominal amount representing approximately 5% of the issued share capital for use only in connection with acquisitions
and specified capital investments. These powers are due to expire at the 2024 Annual General Meeting and
shareholders will be asked to grant similar powers.
The Directors also sought authority at the 2023 Annual General Meeting to repurchase shares in the capital of the
Company up to a maximum aggregate number of ordinary shares representing approximately 10% of the issued
share capital (as at the last practicable date before the publication of the 2023 Notice of AGM). This authority is
alsodue to expire at the 2024 AGM and shareholders will be asked to grant a similar share repurchase authority.
Notice required for
shareholder meetings
On the basis of a resolution passed at the 2023 Annual General Meeting, the Company is currently able to call
general meetings (other than an Annual General Meeting) on at least 14 days’ notice. The Company would like to
preserve this ability and Resolution 19 seeks approval to do so. The approval will be effective until the Companys
next Annual General Meeting, when it is intended that a similar resolution will be proposed. The Company will
offeran electronic voting facility for a general meeting called on 14 days’ notice.
Information required
byLR 9.8.4R
There is no information required to be disclosed under LR 9.8.4R save in respect of allotments of equity securities
for cash and dividend waivers, which can be found on page 126 of this Annual Report.
Disclosure
ofinformation
toauditors
The Directors in office at the date of approval of this report each confirm that, so far as they are aware, there is no
relevant audit information of which the Company’s auditors are unaware and that they have taken all the steps that
they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish
that the Company’s auditors are aware of that information.
Auditors
An Ordinary Resolution will be put before the 2024 Annual General Meeting to re‑appoint PricewaterhouseCoopers
LLP as external auditors for the 2024 financial year.
The Directors’ report was approved by the Board and signed on its behalf by:
Ian Melling
Chief Financial Officer
5 December 2023
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
128
The Directors are responsible for preparing
the Annual Report 2023 and the financial
statements in accordance with applicable
law and regulation.
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors have prepared
the Group and the Company financial
statements in accordance with UK‑adopted
international accounting standards.
Under company law, Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs of the Group and
Company and of the profit or loss of the
Group for that period. In preparing the
financial statements, the Directors are
required to:
u
select suitable accounting policies and
then apply them consistently;
u
state whether applicable UK‑adopted
international accounting standards have
been followed, subject to any material
departures disclosed and explained in the
financial statements;
u
make judgements and accounting
estimates that are reasonable and
prudent; and
u
prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are also responsible for
keeping adequate accounting records that
are sufficient to show and explain the
Group’s and Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group and
Company and enable them to ensure that
the financial statements and the Directors
remuneration report comply with the
Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual
Report 2023 and Accounts, taken as a
whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Group’s and
Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed below:
u
Vivienne Cox, Chair;
u
Jakob Sigurdsson,
ChiefExecutive Officer;
u
Ian Melling, Chief Financial Officer;
u
Janet Ashdown, Non‑executive Director;
u
Brendan Connolly,
Non‑executiveDirector;
u
Ros Rivaz, Non‑executive Director;
u
David Thomas,
Non‑executiveDirector; and
u
Jane Toogood, Non‑executive Director,
confirm that, to the best of their knowledge:
u
the Group and Company financial
statements, which have been prepared
in accordance with UK‑adopted
international accounting standards,
give a true and fair view of the assets,
liabilities and financial position of the
Group and Company, and of the profit of
the Group; and
u
the Strategic report includes a fair review
of the development and performance
of the business and the position of the
Group and Company, together with a
description of the principal risks and
uncertainties that it faces.
In the case of each Director in office at the
date the Directors’ report is approved:
u
so far as the Director is aware, there is
no relevant audit information of which
the Group’s and Company’s auditors are
unaware; and
u
they have taken all the steps that they
ought to have taken as a Director in order
to make themselves aware of any relevant
audit information and to establish that
the Group’s and Company’s auditors are
aware of that information.
This Responsibility statement was approved
by the Board on 4 December 2023 and is
signed on its behalf by;
Ian Melling
Chief Financial Officer
5 December 2023
Statement of Directors’ responsibilities in respect
of the Annual Report and the financial statements
CORPORATE GOVERNANCE
129
Annual Report 2023 Victrex plc
Independent auditors’ report to the members of Victrex plc
Report on the audit of the
financial statements
Opinion
In our opinion, Victrex plc’s Group financial
statements and Company financial
statements (the ‘financial statements’):
u
give a true and fair view of the state
of the Group’s and of the Company’s
affairs as at 30 September 2023 and
of the Group’s profit and the Group’s
and Companys cash flows for the year
then ended;
u
have been properly prepared in
accordance with UK‑adopted
international accounting standards as
applied in accordance with the provisions
of the Companies Act 2006; and
u
have been prepared in accordance
with the requirements of the
Companies Act 2006.
We have audited the financial statements,
included within the Annual Report 2023
(the ‘Annual Report’), which comprise: the
Group and Company Balance sheets as
at 30September 2023; the Consolidated
income statement, the Consolidated
statement of comprehensive income, the
Group and Company Cash flow statements,
and the Consolidated statement of changes
in equity and the Company statement of
changes in equity for the year then ended;
and the notes to the financial statements,
which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting
to the Audit Committee.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (‘ISAs (UK)’) and applicable law. Our
responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for
the audit of the financial statements section
of our report. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we
declare that non‑audit services prohibited
by the FRC’s Ethical Standard were
not provided.
We have provided no non‑audit services to
the Company or its controlled undertakings
in the period under audit.
Our audit approach
Overview
Audit scope
u
Our audit focused on those entities
with the most significant contribution
to the Group’s profit before tax and
exceptional items. Of the Group’s 27
reporting units, we identified five, which
in our view, required an audit of their
complete financial information for Group
reporting purposes. These were Victrex
Manufacturing Limited, Invibio Limited,
Victrex Europa GmbH, Victrex plc and
consolidation journals.
u
Another three reporting units were
subject to audit procedures over specific
balances and transactions, due to their
contribution towards specific financial
statement line items. Revenue and
financial assets at amortised cost were in
scope for Invibio Inc. Revenue and trade
receivables were in scope for Victrex
USA Inc. Property, plant and equipment,
accruals and bank loans were in scope
for Panjin VYX High Performance
Materials Co., Ltd.
u
All audits were performed by the
Group engagement team with the
exception of Victrex Europa GmbH,
which was audited by a PwC component
audit team.
u
The components within the scope of our
work, and work performed centrally by
the Group team, accounted for 78% of
Group revenue and 86% of Group profit
before tax and exceptional items.
Key audit matters
u
Valuation of the UK defined benefit
pension scheme (Group).
u
Valuation of inventories (Group).
u
Risk of impairment of investments
insubsidiaries and amounts owed by
Group undertakings (parent).
Materiality
u
Overall Group materiality: £4.0m (2022:
£4.8m) based on 5% of profit before tax
and exceptional items.
u
Overall Company materiality: £1.4m
(2022: £1.5m) based on 0.5% of
total assets capped due to the Group
materiality allocation.
u
Performance materiality: £3.0m
(2022: £3.6m) (Group) and £1.1m
(2022:£1.1m)(Company).
The scope of our audit
As part of designing our audit, we
determined materiality and assessed
the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that,
in the auditors’ professional judgement,
were of most significance in the audit of the
financial statements of the current period
and include the most significant assessed
risks of material misstatement (whether or
not due to fraud) identified by the auditors,
including those which had the greatest
effect on: the overall audit strategy; the
allocation of resources in the audit; and
directing the efforts of the engagement
team. These matters, and any comments
we make on the results of our procedures
thereon, were addressed in the context of
our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters.
This is not a complete list of all risks
identified by our audit.
The key audit matters below are consistent
with last year.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
130
Report on the audit of the financial statements continued
Our audit approach continued
Key audit matters continued
Key audit matter How our audit addressed the key audit matter
Valuation of the UK defined benefit pension scheme (Group)
Refer to page 95 of the Audit Committee report and Note 17 within
the Notes to the financial statements of the Annual Report 2023.
The measurement of the net defined benefit asset (£9.7m net surplus at 30
September 2023, (2022: £14.9m net surplus)) requires the application of an
actuarial valuation method, the attribution of benefits to periods of service,
and the use of significant actuarial assumptions including in particular the
discount rate, inflation rates and the average life expectancy of members.
Small changes in the assumptions used could have a significant effect on
the financial position of the Group. The present value of the defined benefit
obligation is deducted from the fair value of any plan assets in determining
the net surplus.
To assess the appropriateness of the valuation of the UK defined benefit
pension scheme, we performed the following:
u
we evaluated, with the support of our own actuarial experts, the
key assumptions applied to calculate the year end defined benefit
obligation. These procedures included assessing the methodology,
consistency of approach with the prior period and comparison to
acceptable ranges, which are developed using externally derived market
data and internally developed benchmarks;
u
we considered the adequacy of the Group’s disclosures in respect of the
sensitivity of the surplus to changes in the assumptions;
u
we assessed the appropriateness of the recognition of the net UK
surplus in line with accounting standards; and
u
we obtained the pension scheme administrators Type 2 report to test
operating effectiveness of administrator controls over completeness
and accuracy of member data. The total number of members as at the
year end was also obtained to assess any material movements since the
date of the triennial valuation.
Based on the results of our testing, we found the assumptions made in
the valuation of the UK defined benefit pension scheme to be within an
acceptable range. We also consider the disclosures made in the financial
statements to be appropriate.
Valuation of inventories (Group)
Refer to pages 94 and 95 of the Audit Committee report and Note
13 within the Notes to the financial statements of the Annual
Report 2023.
A number of estimates are involved in arriving at the valuation of
inventories. At 30 September 2023 inventories amounted to £134.5m
(2022: £86.8m).
A standard costing process is adopted to value work in progress and
finished goods. This process includes an assessment of the extent to which
actual production levels are within a normal range and the level of variations
between actual and standard costs capitalised into inventory at each
period end.
In addition, inventory provisions are recorded based on specific policies,
taking into account batch ageing, quality, and future sales expectations
based on forecast sales rates. Judgements are made with regards to the
categorisation of stock as non‑conforming, slow moving or obsolete, and
therefore whether items should be considered for provision. Estimation
is then involved in arriving at the provision percentage to apply to these
identified items such that inventory is carried at the lower of cost or net
realisable value.
To assess the appropriateness of the valuation of inventories, we performed
the following:
u
we reviewed the assessment of normal levels of production for
standard costing purposes by comparing actual and budgeted levels
ofproduction over the past five years;
u
we understood and tested the application of Group’s policy for
capitalisation of cost variances;
u
we tested the cost of inventories, through tracing a sample of
standard costs to bills of material and raw material inputs to source
documentation. We understood management’s approach to
overhead allocation and tested the reasonableness of costs absorbed
versusexpensed;
u
for a sample of inventory items we evaluated the appropriateness of
management’s categorisation of inventories as non‑conforming, slow
moving or obsolete to supporting evidence;
u
we performed lookback procedures on the provision at the prior
yearend and compared the level of inventory write‑offs and utilisation
during the current period in order to assess the reasonableness of the
estimated provision percentages applied by management;
u
we tested a sample of post‑year‑end sales in order to obtain
evidencethat inventory items are held at the lower of cost or net
realisable value; and
u
we attended yearend and cycle inventory counts to gain an
understanding of management’s processes over the identification
ofnonconforming, slow moving or obsolete items.
Based on our audit work, we found estimates made in the valuation
ofinventory to be acceptable. We also consider the disclosures made
inthefinancial statements to be appropriate.
Independent auditors’ report to the members of Victrex plc continued
CORPORATE GOVERNANCE
131
Annual Report 2023 Victrex plc
Key audit matter How our audit addressed the key audit matter
Risk of impairment of investments in subsidiaries and amounts owed
by Group undertakings (parent)
Refer to Note 11 and Note 14 within the Notes to the financial
statements of the Annual Report 2023.
The Company has investments in subsidiaries of £131.9m (2022: £131.9m)
and amounts owed by Group undertakings of £141.0m (2022: £191.9m).
Given the magnitude of both of these balances we considered there to be a
risk that the performance of the subsidiary undertakings is not sufficient to
support the carrying value and the assets may be impaired.
Management have considered both of these balances for impairment and
concluded that no impairments are required.
In assessing the appropriateness of valuation of investment in subsidiaries
and amounts owed by Group undertakings we have performed the
following procedures:
u
we obtained a schedule of investments in subsidiaries and ensured this
is reconciled to the financial statements;
u
we performed a review of the performance and net assets of each
material subsidiary against the carrying value of the investments; and
u
we compared the overall carrying value of the investments to the
Group’s market capitalisation and also our review of the discounted
cash flow models prepared for the purposes of testing overall Group
goodwill for impairment.
u
we performed a reconciliation of the amounts owed by Group
undertakings and ensured this agrees with the counterparty;
u
we have obtained management’s intercompany recoverability model
and assessed whether the methods applied were consistent with IFRS9.
We checked the calculations within the model and agreed the figures
included to the relevant financial information included in the Group
consolidation schedules;
u
we evaluated management’s assessment of the recoverability of
amounts owed by Group undertakings including assessing the ability
ofother Group companies to settle the intercompany balances; and
u
we also assessed the adequacy of the disclosure provided in
the Company financial statements in relation to the relevant
accountingstandards.
Based on the above procedures we concluded that there were no
triggers that would indicate the Directors were required to perform a full
impairment test of the carrying value of the investments in subsidiaries.
We found no exceptions as a result of our procedures and consider the
recoverability of amounts owed by Group undertakings to be appropriate.
How we tailored the audit scope
We tailored the scope of our audit to
ensure that we performed enough work
to be able to give an opinion on the
financial statements as a whole, taking into
account the structure of the Group and
the Company, the accounting processes
and controls, and the industry in which
they operate.
The Group is organised into 27 reporting
components and the Group financial
statements are a consolidation of these
reporting components. The reporting
units vary in size. We identified five units
that required a full scope audit of their
financial information due to either their
size or risk characteristics. These were
Victrex Manufacturing Limited, Invibio
Limited, Victrex Europa GmbH, Victrex
plc and consolidation journals. Another
three reporting units were subject to audit
procedures over specific balances and
transactions, due to their contribution
towards specific financial statement line
items. Revenue and financial assets at
amortised cost were in scope for Invibio Inc.
Revenue and trade receivables were in scope
for Victrex USA Inc. Property, plant and
equipment, accruals and bank loans were
in scope for Panjin VYX High Performance
Materials Co., Ltd. Our audit scope was
determined by considering the significance
of each component’s contribution to profit
before tax and exceptional items, and
individual financial statement line items,
with specific consideration to obtaining
sufficient coverage over significant risks. On
the remaining 19 components we performed
analytical procedures to respond to any
potential risks of material misstatement to
the group financial statements.
All audit work was performed by the
Group team, with the exception of one
component audit which was performed
by a PwC component audit team. The
Group audit team supervised the direction
and execution of the audit procedures
performed by the component team. Our
involvement in their audit process included
the review of their reporting and supporting
working papers. The Group audit team also
attended planning and clearance meetings
during the audit cycle. Together with the
additional procedures performed at Group
level, this gave us the evidence required
for our opinion on the financial statements
as a whole.
The Group engagement team also
performed the audit of the Company.
The impact of climate risk on our audit
We made enquiries of management to
understand the process they have adopted
to assess the extent of the potential impact
of climate risk on the Group’s financial
statements, including their commitments
made to achieving Net Zero carbon
emissions for Scope 1, 2 & 3 by 2050. The
key areas of the financial statements where
management evaluated that climate risk
has a potential impact are set out in note
1 – Basis of preparation – Climate change
in the notes to the financial statements.
The Directors have reached the overall
conclusion that there has been no material
impact on the financial statements for the
current year from the potential impact of
climate change.
We used our knowledge of the Group, to
challenge managements assessment. We
particularly considered how climate risk
would impact the assumptions made in the
forecasts prepared by management used in
their impairment analyses, going concern
and viability. We also considered the
consistency of the disclosures in relation to
climate change (including thedisclosures in
the Task Force on Climate‑related Financial
Disclosures (‘TCFD’) section) within the
Annual Report with the financial statements
and our knowledge obtained from
our audit.
Our procedures did not identify any material
impact in the context of our audit of the
financial statements as a whole, or on
our key audit matters for the year ended
30September 2023.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
132
Report on the audit of the financial statements continued
Our audit approach continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall materiality
£4.0m (2022: £4.8m). £1.4m (2022: £1.5m).
How we determined it
5% of profit before tax and exceptional items. 0.5% of total assets capped due to the Group
materialityallocation.
Rationale for
benchmark applied
Based on the benchmarks used in the Annual Report 2023,
profit before tax and exceptional items is in our view the primary
measure used by the shareholders in assessing the performance
of the Group, and is a generally accepted auditing benchmark.
We believe that total assets is the primary measure used
by the shareholders in assessing the performance of the
entity, and is a generally accepted auditing benchmark
for non‑trading companies.
For each component in the scope of our
Group audit, we allocated a materiality that
is less than our overall Group materiality.
The range of materiality allocated across
components was between £0.4m and
£3.6m. Certain components were audited to
a local statutory audit materiality that was
also less than our overall Group materiality.
We use performance materiality to reduce
to an appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds overall
materiality. Specifically, we use performance
materiality in determining the scope of
our audit and the nature and extent of
our testing of account balances, classes of
transactions and disclosures, for example in
determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall
materiality, amounting to £3.0m (2022:
£3.6m) for the Group financial statements
and £1.1m (2022: £1.1m) for the Company
financial statements.
In determining the performance materiality,
we considered a number of factors – the
history of misstatements, risk assessment
and aggregation risk and the effectiveness
of controls – and concluded that an amount
at the upper end of our normal range
wasappropriate.
We agreed with the Audit Committee that
we would report to them misstatements
identified during our audit above £0.2m
(Group audit) (2022: £0.2m) and £0.1m
(Company audit) (2022: £0.1m) as well
as misstatements below those amounts
that, in our view, warranted reporting for
qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment
of the Group’s and the Company’s ability to
continue to adopt the going concern basis
of accounting included:
u
we obtained from management their
latest assessments that support the
Board’s conclusions with respect to the
going concern basis of preparation for
the financial statements;
u
we evaluated managements 24
month forecast and downside
scenarios (Scenario 1 and Scenario
2) and challenged the adequacy and
appropriateness of the underlying
assumptions;
u
we reviewed management accounts for
the financial period to date and checked
that these were consistent with the
starting point of management’s scenarios
and supported the key assumptions
included in the assessments;
u
we evaluated the historical accuracy
of the budgeting process to assess the
reliability of the data;
u
we challenged management with
regardsto the impact of climate change
and how this has been taken into
account in the forecasts;
u
we received financing agreements
to understand bank covenants and
performed covenant calculations under
Scenario 2;
u
we tested the mathematical integrity
ofmanagement’s going concern
forecastmodels; and
u
we reviewed the disclosures made
inrespect of going concern included
inthefinancial statements.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or conditions
that, individually or collectively, may cast
significant doubt on the Group’s and the
Company’s ability to continue as a going
concern for a period of at least 12 months
from when the financial statements are
authorised for issue.
In auditing the financial statements, we
have concluded that the directors’ use of
the going concern basis of accounting in
the preparation of the financial statements
isappropriate.
However, because not all future events or
conditions can be predicted, this conclusion
is not a guarantee as to the Group’s and
the Company’s ability to continue as a
going concern.
In relation to the directors’ reporting on
how they have applied the UK Corporate
Governance Code, we have nothing material
to add or draw attention to in relation to
the directors’ statement in the financial
statements about whether the directors
considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report.
Independent auditors’ report to the members of Victrex plc continued
CORPORATE GOVERNANCE
133
Annual Report 2023 Victrex plc
Reporting on other information
The other information comprises all of the
information in the Annual Report other
than the financial statements and our
auditors’ report thereon. The directors are
responsible for the other information, which
includes reporting based on the Task Force
on Climate‑related Financial Disclosures
(‘TCFD’) recommendations. Our opinion on
the financial statements does not cover the
other information and, accordingly, we do
not express an audit opinion or, except to
the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial
statements, our responsibility is to read
the other information and, in doing so,
consider whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the audit, or otherwise appears to be
materially misstated. If we identify an
apparent material inconsistency or material
misstatement, we are required to perform
procedures to conclude whether there is
a material misstatement of the financial
statements or a material misstatement of
the other information. If, based on the work
we have performed, we conclude that there
is a material misstatement of this other
information, we are required to report that
fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic report and
Directors’ report, we also considered
whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course
of the audit, the Companies Act 2006
requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work
undertaken in the course of the audit, the
information given in the Strategic report
and Directors’ report for the year ended
30 September 2023 is consistent with
the financial statements and has been
prepared in accordance with applicable
legalrequirements.
In light of the knowledge and
understanding of the Group and Company
and their environment obtained in the
course of the audit, we did not identify
any material misstatements in the Strategic
report and Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’
remuneration report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the
directors’ statements in relation to going
concern, longer‑term viability and that part
of the corporate governance statement
relating to the Company’s compliance
with the provisions of the UK Corporate
Governance Code specified for our review.
Our additional responsibilities with respect
to the corporate governance statement
as other information are described in the
Reporting on other information section of
this report.
Based on the work undertaken as part of
our audit, we have concluded that each of
the following elements of the corporate
governance statement is materially
consistent with the financial statements and
our knowledge obtained during the audit,
and we have nothing material to add or
draw attention to in relation to:
u
the directors’ confirmation that they
have carried out a robust assessment of
the emerging and principal risks;
u
the disclosures in the Annual Report
that describe those principal risks, what
procedures are in place to identify
emerging risks and an explanation
of how these are being managed
ormitigated;
u
the directors’ statement in the financial
statements about whether they
considered it appropriate to adopt the
going concern basis of accounting in
preparing them, and their identification
of any material uncertainties to the
Group’s and Company’s ability to
continue to do so over a period of
at least 12 months from the date of
approval of the financial statements;
u
the directors’ explanation as to
their assessment of the Group’s and
Company’s prospects, the period this
assessment covers and why the period is
appropriate; and
u
the directors’ statement as to whether
they have a reasonable expectation that
the Company will be able to continue in
operation and meet its liabilities as they
fall due over the period of its assessment,
including any related disclosures drawing
attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement
regarding the longer‑term viability of the
Group and Company was substantially less
in scope than an audit and only consisted
of making inquiries and considering
the directors’ process supporting their
statement; checking that the statement is
in alignment with the relevant provisions
of the UK Corporate Governance Code;
and considering whether the statement is
consistent with the financial statements and
our knowledge and understanding of the
Group and Company and their environment
obtained in the course of the audit.
In addition, based on the work undertaken
as part of our audit, we have concluded
that each of the following elements of
the corporate governance statement is
materially consistent with the financial
statements and our knowledge obtained
during the audit:
u
the directors’ statement that they
consider the Annual Report, taken
as a whole, is fair, balanced and
understandable, and provides the
information necessary for the members
to assess the Group’s and Company’s
position, performance, business model
and strategy;
u
the section of the Annual Report that
describes the review of effectiveness of
risk management and internal control
systems; and
u
the section of the Annual Report
describing the work of the
AuditCommittee.
We have nothing to report in respect of our
responsibility to report when the directors’
statement relating to the Company’s
compliance with the Code does not properly
disclose a departure from a relevant
provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors
forthefinancial statements
As explained more fully in the Statement
of Directors’ responsibilities, the directors
are responsible for the preparation of the
financial statements in accordance with
the applicable framework and for being
satisfied that they give a true and fair
view. The directors are also responsible
for such internal control as they determine
is necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
CORPORATE GOVERNANCE
Victrex plc Annual Report 2023
134
Report on the audit of the
financial statements continued
Responsibilities for the financial
statements and the audit continued
Responsibilities of the members for
thefinancial statements continued
In preparing the financial statements, the
directors are responsible for assessing
the Group’s and the Company’s ability
tocontinue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the directors
either intend to liquidate the Group or the
Company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit
ofthe financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable
assurance is a high level of assurance, but is
not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect
a material misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually
or in the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis of
these financial statements.
Irregularities, including fraud, are instances
of noncompliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above,
todetect material misstatements in respect
of irregularities, including fraud. The extent
to which our procedures are capable of
detecting irregularities, including fraud,
isdetailed below.
Based on our understanding of the Group
and industry, we identified that the
principal risks of noncompliance with
laws and regulations related to medical
devices regulations and REACH regulations
(Registration, Evaluation, Authorisation and
Restriction of Chemicals), and we considered
the extent to which noncompliance might
have a material effect on the financial
statements. We also considered those laws
and regulations that have a direct impact
on the financial statements such as the
Companies Act 2006 and tax legislation.
We evaluated management’s incentives and
opportunities for fraudulent manipulation of
the financial statements (including the risk
of override of controls), and determined that
the principal risks were related to posting
journal entries to manipulate revenue and
financial performance, and management
bias within accounting estimates and
judgements. The Group engagement
team shared this risk assessment with
thecomponent auditors so that they could
include appropriate audit procedures in
response to such risks in their work.
Audit procedures performed by the Group
engagement team and/or component
auditors included:
u
challenging assumptions and judgements
made by management in their significant
accounting estimates, in particular
around the valuation of inventories and
the valuation of the UK defined benefit
pension scheme;
u
identifying and testing journal entries, in
particular any journal entries posted with
unusual account combinations;
u
discussions with the Audit Committee,
management, internal audit and the in‑
house legal team including consideration
of known or suspected instances of non‑
compliance with laws and regulation or
fraud; and
u
reviewing minutes of meetings of those
charged with governance throughout the
year and post‑year end to identify any
one off or unusual transactions.
There are inherent limitations in the audit
procedures described above. We are less
likely to become aware of instances of
noncompliance with laws and regulations
that are not closely related to events and
transactions reflected in the financial
statements. Also, the risk of not detecting
a material misstatement due to fraud is
higher than the risk of not detecting one
resulting from error, as fraud may involve
deliberate concealment by, for example,
forgery or intentional misrepresentations,
orthroughcollusion.
Our audit testing might include testing
complete populations of certain transactions
and balances, possibly using data auditing
techniques. However, it typically involves
selecting a limited number of items for
testing, rather than testing complete
populations. We will often seek to target
particular items for testing based on their
size or risk characteristics. In other cases, we
will use audit sampling to enable us to draw
a conclusion about the population from
which the sample is selected.
A further description of our responsibilities
for the audit of the financial statements
is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, accept or assume
responsibility for any other purpose or to
any other person to whom this report is
shown or into whose hands it may come
save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006 exception
reporting
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
u
we have not obtained all the information
and explanations we require for
our audit; or
u
adequate accounting records have
not been kept by the Company, or
returns adequate for our audit have
not been received from branches not
visited by us; or
u
certain disclosures of directors’
remuneration specified by law are
not made; or
u
the Company financial statements and
the part of the Directors’ remuneration
report to be audited are not in
agreement with the accounting records
and returns.
We have no exceptions to report arising
from this responsibility.
Appointment
Following the recommendation of the
Audit Committee, we were appointed
by the members on 9 February 2018 to
audit the financial statements for the year
ended 30September 2018 and subsequent
financial periods. The period of total
uninterrupted engagement is six years,
covering the years ended 30 September
2018 to 30 September 2023.
Other matter
As required by the Financial Conduct
Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these financial
statements form part of the ESEF‑prepared
annual financial report filed on the National
Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’).
This auditors’ report provides no assurance
over whether the annual financial report has
been prepared using the single electronic
format specified in the ESEF RTS.
Graham Parsons (Senior
StatutoryAuditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and
StatutoryAuditors
Manchester
5 December 2023
Independent auditors’ report to the members of Victrex plc continued
135
Annual Report 2023 Victrex plc
FINANCIAL STATEMENTS
FINANCIAL
STATEMENTS
136 Consolidated income statement
137 Consolidated statement ofcomprehensiveincome
138 Balance sheets
139 Cash flow statements
140 Consolidated statement ofchangesinequity
141 Company statement ofchangesinequity
142 Notes to the financial statements
SHAREHOLDER
INFORMATION
183 Five-year financial summary and Cautionary note
regarding forward-looking statements
184 Notice of Annual GeneralMeeting
188 Explanatory notes
192 Financial calendar
193 Advisors
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
136
2023 2022
Note £m £m
Revenue 2 3 0 7. 0 3 41. 0
Losses on foreign currency net hedging (7. 6) (2.8)
Cost of sales 3 (1 3 6 . 8) (16 3. 7)
Gross profit 16 2 .6 174 . 5
Sales, marketing and administrative expenses 3 (70 .8) (70.3)
Research and development expenses 3 (1 8 . 6) (15 . 7)
Operating profit before exceptional items 8 0.7 9 6.4
Exceptional items 3 (7. 5) ( 7. 9)
Operating profit 73. 2 8 8.5
Finance income 6 1. 3 0.5
Finance costs 6 (0.7) (0.3)
Share of loss of associate 11 (1 . 3) (1. 0)
Profit before tax and exceptional items 80.0 95.6
Exceptional items 3 (7. 5) ( 7. 9)
Profit before tax 72. 5 8 7. 7
Income tax expense 7 (11. 5) (12 . 2)
Profit for the financial year 61. 0 75.5
Profit/(loss) for the year attributable to:
– Owners of the Company 61. 7 76 . 2
– Non-controlling interests 11 (0.7) (0 .7)
Earnings per share
Basic 8 70.9p 8 7. 6p
Diluted 8 70. 5p 87 .3p
Dividend per ordinary share
Interim 22 13 . 4 2p 13 . 4 2p
Final 22 4 6 .14p 4 6 .1 4p
22 59. 56p 59.56p
A final dividend in respect of FY 2023 of 46.14p per ordinary share has been recommended by the Directors for approval at the Annual
General Meeting on 9 February 2024.
Consolidated income statement
for the year ended 30 September
FINANCIAL STATEMENTS
137
Annual Report 2023 Victrex plc
2023 2022
Note £m £m
Profit for the financial year 61. 0 75.5
Items that will not be reclassified to profit or loss
Defined benefit pension schemes’ actuarial (losses)/gains 17 (6 .9) 0. 2
Income tax on items that will not be reclassified to profit or loss 7 1. 4 (0 .1)
(5 .5) 0 .1
Items that may be reclassified subsequently to profit or loss
Currency translation differences for foreign operations (10 . 0) 11. 1
Effective portion of changes in fair value of cash flow hedges 10.0 (19 .7)
Net change in fair value of cash flow hedges transferred to profit or loss 7. 6 2.8
Income tax on items that may be reclassified to profit or loss 7 (3. 4) 3. 2
4.2 (2.6)
Total other comprehensive expense for the year (1. 3) (2. 5)
Total comprehensive income for the year 59.7 73. 0
Total comprehensive income/(expense) for the year attributable to:
– Owners of the Company 6 0.4 7 3.7
– Non-controlling interests (0.7) (0.7)
Consolidated statement of comprehensive income
for the year ended 30 September
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
138
Balance sheets
as at 30 September
Group Company
2023 2022 2023 2022
Note £m £m £m £m
Assets
Non-current assets
Property, plant and equipment 9 3 51. 2 3 4 7. 2
Intangible assets 10 18 .7 20. 2
Investment in subsidiaries 11 131.9 131.9
Investment in associated undertakings 11 9 .1 10 . 4
Financial assets held at fair value through profit and loss 11 13 . 2 1 0 .1
Financial assets at amortised cost 16 0.6
Deferred tax assets 12 5.6 7. 2
Retirement benefit asset 17 9.7 14 . 9
4 0 8 .1 41 0 . 0 131.9 131.9
Current assets
Inventories 13 13 4 . 5 8 6.8
Current income tax assets 1. 3 7. 9
Trade and other receivables 14 4 7. 2 6 8.1 141.0 191.9
Derivative financial instruments 16 2 .0
Other financial assets 16 0 .1 1 0 .1
Cash and cash equivalents 16 33. 4 5 8 .7 0.1 0.3
218 . 5 2 31. 6 141.1 192.2
Total assets 626.6 6 41. 6 273.0 324.1
Liabilities
Non-current liabilities
Deferred tax liabilities 12 (3 4.0) (34 .3)
Long-term lease liabilities 19 (8 .9) (7. 8)
Borrowings 15 (34 .5) (21. 6)
Retirement benefit obligation 17 (2 .5) (2.7)
(79.9) (66.4)
Current liabilities
Derivative financial instruments 16 (1. 8) (1 9.9)
Borrowings 15 (5 .2) (0.9)
Current income tax liabilities (3.0) (2.3)
Trade and other payables 18 (3 4 .1) (59 .7) (0.1) (0.1)
Current lease liabilities 19 (1 . 6) (1. 8)
(45. 7) (8 4 .6) (0.1) (0.1)
Total liabilities (12 5 . 6) (151. 0) (0.1) (0.1)
Net assets 5 01. 0 49 0.6 272.9 324.0
Equity
Share capital 22 0.9 0.9 0.9 0.9
Share premium 22 61. 9 61. 5 61.9 61.5
Translation reserve 22 2.8 12 . 8
Hedging reserve 22 0.6 (13 . 6)
Retained earnings
1
22 432 .8 4 2 7. 2 210.1 261.6
Equity attributable to owners of the Company 49 9.0 4 88.8 272.9 324.0
Non-controlling interest 2.0 1. 8
Total equity 5 01. 0 49 0.6 272.9 324.0
1 The loss for the financial year dealt with in the financial statements of the Company is £0.8m, which includes dividends from subsidiaries of £nil (FY 2022:
profit of £132.4m, which includes dividends from subsidiaries of £132.8m).
These financial statements of Victrex plc on pages 136 to 182, registered number 2793780, were approved by the Board of Directors on
5December 2023 and were signed on its behalf by:
Jakob Sigurdsson Ian Melling
Chief Executive Officer Chief Financial Officer
FINANCIAL STATEMENTS
139
Annual Report 2023 Victrex plc
Group Company
2023 2022 2023 2022
Note £m £m £m £m
Profit/(loss) for the financial year 61. 0 75 .5 (0.8) 132.4
Income tax expense 7 11 . 5 12 . 2
Finance income (1. 3) (0.5)
Finance costs 0.7 0.3
Share of loss of associate 1.3 1. 0
Dividends received from subsidiaries (132.8)
Operating profit/(loss) 73. 2 8 8.5 (0.8) (0.4)
Adjustments for:
Depreciation 9 19 . 8 19 . 0
Amortisation 10 1. 7 2.6
Loss on disposal of non-current assets
Gain on early termination of long-term lease liabilities
9, 10
19
0.3
(0. 2)
2.4
Equity-settled share-based payment transactions 21 1 .1 1. 8 1.1 1.8
(Gains)/losses on derivatives recognised in income statement that have not yet settled 16 (2 .5) 4.0
Losses/(gains) on financial assets held at fair value 11 0. 2 (0 .3)
Increase in inventories (50 .7) (13 . 4)
Decrease/(increase) in receivables 16 . 4 (16 . 9) 50.9 (39.2)
(Decrease)/increase in payables (1 4 . 6) 2.8 0.1
Retirement benefit obligations charge less contributions (1 . 8) 0. 2
Cash generated from/(used in) operations 4 2.9 9 0 .7 51.2 (37.7)
Interest received 1.0 0.3
Interest paid (0 . 2) (0. 4)
Net income tax paid (2 .0) (10.6)
Net cash flow generated from/(used in) operating activities 41 .7 80.0 51.2 (37.7)
Cash flows (used in)/generated from investing activities
Acquisition of property, plant and equipment and intangible assets 9, 10 (3 8. 5) (45.5)
Proceeds from disposal of financial asset held at fair value through profit and loss 4. 2
Withdrawal of cash invested for greater than three months 16 10. 0 2 7. 4
Dividends received 132.8
Other loans granted 16 (0 .9)
Loans to associated undertakings 11 (2 .9) (2. 3)
Net cash flow (used in)/generated from investing activities (3 2.3) (16 . 2) 132.8
Cash flows used in financing activities
Proceeds from issue of ordinary shares exercised under option 22 0. 4 0.4 0.4 0.4
Repayment of lease liabilities 19 (2 .1) (2 .1)
Transactions with non-controlling interest 11 2.6
Bank borrowings received 15, 16 19 .0 14 . 5
Bank borrowings repaid 15 (0.9)
Interest on bank borrowings paid 15 (0.9)
Dividends paid 22 (51 . 8) (95. 2) (51.8) (95.2)
Net cash flow used in financing activities (33.7) (8 2.4) (51.4) (94.8)
Net (decrease)/increase in cash and cash equivalents (24.3) (18 . 6) (0.2) 0.3
Effect of exchange rate fluctuations on cash held (1. 0) 2. 4
Cash and cash equivalents at beginning of year 58 .7 74 . 9 0.3
Cash and cash equivalents at end of year 33. 4 5 8 .7 0.1 0.3
Cash flow statements
for the year ended 30 September
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
140
Consolidated statement of changes in equity
Total
attributable Non-
Share Share Translation Hedging Retained to owners of controlling
capital premium reserve reserve earnings the Company interest Total
Note £m £m £m £m £m £m £m £m
Equity at 1 October 2021 0 .9 6 1 .1 1. 7 0 .1 4 45.4 5 09. 2 2. 5 511 . 7
Total comprehensive income/(expense) for the year
Profit for the year attributable to owners of the Company 76. 2 76 . 2 76 .2
Loss for the year attributable to non-controlling interest (0 .7) (0 .7)
Other comprehensive income/(expense)
Currency translation differences for foreign operations 11 .1 11 .1 11 .1
Effective portion of changes in fair value of
cash flow hedges (19. 7) (19 .7) (19 .7)
Net change in fair value of cash flow hedges
transferred to profit or loss 2. 8 2. 8 2. 8
Defined benefit pension schemes’ actuarial gains 17 0.2 0.2 0. 2
Tax on other comprehensive expense/(income) 7 3. 2 (0 .1) 3 .1 3 .1
Total other comprehensive income/(expense)
forthe year 11 .1 (13 .7) 0 .1 (2.5) (2.5)
Total comprehensive income/(expense) for the year 11 .1 (13 .7) 76. 3 73 .7 (0.7) 73.0
Contributions by and distributions to owners
ofthe Company
Share options exercised 22 0. 4 0.4 0. 4
Equity-settled share-based payment transactions 21 1. 8 1. 8 1. 8
Tax on equity-settled share-based payments 7 (1.1) (1 .1) (1 .1)
Dividends to shareholders 22 (95.2) (95.2) (95.2)
Equity at 30 September 2022 0.9 61. 5 12 . 8 (13 . 6) 4 2 7. 2 48 8.8 1. 8 49 0.6
Total comprehensive income/(expense) for the year
Profit for the year attributable to owners of the Company 61. 7 61. 7 61 .7
Loss for the year attributable to non-controlling interest (0 .7) (0.7)
Other comprehensive (expense)/income
Currency translation differences for foreign operations (1 0 . 0) (1 0 . 0) (10 . 0)
Effective portion of changes in fair value of
cash flow hedges 10 .0 10. 0 10. 0
Net change in fair value of cash flow hedges
transferred to profit or loss 7. 6 7. 6 7. 6
Defined benefit pension schemes’ actuarial losses 17 (6.9) (6.9) (6 .9)
Tax on other comprehensive (income)/expense 7 (3. 4) 1. 4 (2 .0) (2 .0)
Total other comprehensive (expense)/income for
the year (1 0 . 0) 14 . 2 (5 .5) (1. 3) (1 . 3)
Total comprehensive (expense)/income for the year (1 0 . 0) 14 . 2 56.2 60.4 (0.7) 59.7
Contributions by and distributions to owners of
the Company
Share options exercised 22 0. 4 0.4 0.4
Contributions of equity from non-controlling interest 11 0.9 0.9
Equity-settled share-based payment transactions 21 1 .1 1 .1 1 .1
Tax on equity-settled share-based payment
transactions 7 0 .1 0 .1 0 .1
Dividends to shareholders 22 (51. 8) (51 . 8) (51 . 8)
Equity at 30 September 2023 0.9 61. 9 2.8 0.6 432. 8 49 9.0 2 .0 5 01. 0
FINANCIAL STATEMENTS
141
Annual Report 2023 Victrex plc
Company statement of changes in equity
Share Share Retained
capital premium earnings Total
Note £m £m £m £m
Equity at 1 October 2021 0.9 61.1 222.6 284.6
Total comprehensive income for the year
Profit for the year (including dividends from subsidiaries of £132.8m) 132.4 132.4
Contributions by and distributions to owners of the Company
Share options exercised 22 0.4 0.4
Equity-settled share-based payment transactions 21 1.8 1.8
Dividends to shareholders 22 (95.2) (95.2)
Equity at 30 September 2022 0.9 61.5 261.6 324.0
Total comprehensive expense for the year
Loss for the year (0.8) (0.8)
Contributions by and distributions to owners of the Company
Share options exercised 22 0.4 0.4
Equity-settled share-based payment transactions 21 1.1 1.1
Dividends to shareholders 22 (51.8) (51.8)
Equity at 30 September 2023 0.9 61.9 210.1 272.9
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
142
1. Basis of preparation
General information
Victrex plc (the ‘Company’) is a public company, which is limited by shares and is listed on the London Stock Exchange. The Company is
incorporated and domiciled in England in the United Kingdom. The address of its registered office is Victrex Technology Centre, Hillhouse
International, Thornton Cleveleys, Lancashire FY5 4QD, United Kingdom.
The consolidated financial statements of the Company for the year ended 30 September 2023 comprise the Company and its subsidiaries
(together referred to as the ‘Group’).
These consolidated financial statements have been approved for issue by the Board of Directors on 5 December 2023.
Basis of preparation and statement of compliance
Both the consolidated and Company financial statements have been prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and in accordance with UK-adopted International Accounting Standards. The
financial statements have been prepared under the historical cost basis except for derivative financial instruments, defined benefit pension
scheme assets and financial assets held at fair value through profit and loss, which are measured at their fair value.
The Group’s business activities, together with factors likely to affect its future development, performance and position, are set out in the
Strategic report on pages 1 to 66. In addition, note 16 on financial risk management details the Group’s exposure to a variety of financial
risks, including currency and credit risk.
On publishing the Company financial statements here together with the consolidated financial statements, the Company is taking
advantage of section 408 of the Companies Act 2006 not to present its individual income statement and related notes that form part of the
approved financial statements.
Unless a change has been required by adoption of new standards, the accounting policies set out in these notes have been applied
consistently to all periods presented in these consolidated and Company financial statements.
The accounting policies have been consistently applied by Group entities.
Climate change
In preparing the financial statements of the Group an assessment of the potential impact of climate change has been made in line with the
requirements of the Task Force on Climate-related Financial Disclosures (‘TCFD’) and with specific consideration of the disclosures made in the
Sustainability report starting on page 42. This has specifically incorporated the impact of the physical risks of climate change and transitional risks
including the potential impact of government and regulatory actions as well as the Group’s stated Net Zero targets. The potential impact has been
considered in the following areas:
u
the key areas of judgement and sources of estimation – see below;
u
the expected useful lives of property, plant and equipment;
u
those areas which rely on future forecasts which have the potential to be impacted by climate change:
u
carrying value of non-current assets;
u
going concern; and
u
viability;
u
the recoverability of deferred taxation assets; and
u
the recoverability of inventory and trade receivables.
The specific considerations have been included in the corresponding financial statement notes below.
The Directors recognise the inherent uncertainty in predicting the impact of climate change and the actions which regulators and
governments, both domestic and overseas, will take in order to achieve their various targets. However, from the work undertaken to
date, outlined in the Sustainability report, the Directors have reached the overall conclusion that there has been no material impact on
the financial statements for the current year from the potential impact of climate change.
The specific considerations in respect to the viability of the Group are included in the viability statement on pages 40 and 41.
The Group’s analysis on the impact of climate change continues to evolve as more clarity on timings and targets emerges, with Victrex
committed to reducing its carbon impact towards Net Zero across all scopes by 2050.
Going concern
The Directors have performed a robust going concern assessment including a detailed review of the business’ 24-month rolling forecast and
consideration of the principal risks faced by the Group and the Company, as detailed on pages 32 to 38. This assessment has paid particular
attention to current trading results and the impact of the current global economic challenges on the aforementioned forecasts.
The Company maintains a strong balance sheet providing assurance to key stakeholders, including customers, suppliers and employees.
The combined cash and other financial assets balance at 30 September 2023 was £33.5m, having reduced from £68.8m at 30 September
2022 following payment of the regular dividends of £40.1m in February 2023 and £11.7m in June 2023 and a strategic increase in the level
of inventory held. Of the £33.5m, £3.4m is held in the Group’s subsidiaries in China for the sole purpose of funding the construction of our
new manufacturing facilities. Of the remaining £30.1m, approximately 70% is held in the UK, on instant access, where the Company incurs
the majority of its expenditure. The Group has drawn debt of £31.6m in its Chinese subsidiaries (with a total facility of c.£34.2m available
until December 2026) and has unutilised UK banking facilities, renewed and extended in October 2023, of £60m through to October 2026,
of which £40m is committed and immediately available and £20m is available subject to lender approval.
Notes to the financial statements
FINANCIAL STATEMENTS
143
Annual Report 2023 Victrex plc
1. Basis of preparation continued
Going concern continued
The 24-month forecast is derived from the Company’s Integrated Business Planning (‘IBP’) process which runs monthly. Each area of
the business provides forecasts which consider a number of external data sources, triangulating with customer conversations, trends in
market and country indices as well as forward-looking industry forecasts, for example forecast aircraft build rates from the two major
manufacturers for Aerospace, rig count and purchasing manager indices for E&I, World Semiconductor Trade Statistics semiconductor
market forecasts for Electronics and Needham and IQVIA forecasts for Medical procedures.
The assessment of going concern included conducting scenario analysis on the aforementioned forecast which, given current economic
forecasts and sales trends through the financial year ended 30 September 2023, where volumes dropped 24% year on year and 33% in the
second half, exacerbated by rapid customer destocking, focused on the Group’s ability to sustain a further period of suppressed demand. In
assessing the severity of the scenario analysis the scale and longevity of the impact experienced during previous economic downturns have
been considered, including the differing impacts on the Sustainable Solutions versus Medical segments.
Using the IBP data and reference points from previous downturns management has created two scenarios to model the continuing effect
of lower demand at regional/market level and aggregated levels on the Company’s profits and cash generation through to December 2024
with consideration also given to the six months beyond this. The impact of climate change and the Group’s Net Zero 2050 goal (Scope 1,
2 & 3) are considered as part of the aforementioned IBP process, from both a revenue and cost perspective, with the anticipated impact
(assessed as insignificant over the shorter-term going concern period) incorporated in the forecasts. As a result the scenario testing noted
below does not incorporate any additional sensitivity specific to climate change.
During the second half of FY 2023 the drop in sales to a quarterly run rate of c.830 tonnes reflected the continuation of the contraction in
demand in the global economy, which started in the first quarter of FY 2023, and also the rapid destocking by customers as they managed
their inventory and had extended shutdowns. This level of demand is not inconsistent with that seen during COVID-19 with Q2 and Q4
for 2020 at similar levels and Q3 lower due to global lockdowns. Other than in the current economic cycle and during COVID-19 demand
has not been at this level during the past decade. With customers now largely destocked the Board believes the low point of the economic
cycle has been reached and, whilst there are limited signs of a return to growth, demand has stabilised. As a result the key downside risk is
that of an extended period of subdued demand. The current downturn has been running for 12 months, already longer than the previous
downturns during COVID-19 and the financial crisis, but with no clear signs of recovery, the Board has considered the impact of reduced
demand, in line with the lowest quarter of the previous year, Q3, for a further 6 months (scenario 1) and a further 12 months (scenario 2).
As noted above, the lower cash balance at 30 September 2023 is, apart from lower sales volumes, attributable to an increase in the level
of inventory held. Current forecasts assume a gradual reduction in inventory across FY 2024 and FY 2025 with inventory providing the
opportunity to benefit from market recovery. The scenarios modelled assume that a more aggressive inventory unwind approach is taken
to mitigate the ongoing lower cash generation from subdued volumes.
Scenario 1 – the global economy remains subdued through the first half of FY 2024 with demand in line with the low point in FY 2023,
quarter 3, before a slow recovery in the second half of FY 2024. The demand then increases modestly through the second half to c.1,900
tonnes before further modest growth for the remainder of the going concern period. Medical revenue remains in line with that seen during
the past 12 months’ run rate, with the economic situation historically having minimal impact on this segment, in line with the experience of
the past 12 months. Inventory is reduced in line with sales.
Scenario 2 – in line with scenario 1 through the first half of FY 2024, with this lower demand continuing for a further 12 months, i.e.
throughout the going concern period, taking the total period of lower demand to in excess of 24 months, well above the duration of any
previous downturn experienced by the Company. This would give an annual volume below c.3,300 tonnes, a level not seen since 2013. In
this scenario Medical revenue is reduced by 10% during the second six months to reflect a limited impact from a longer lasting slowdown.
With the period of prolonged lower demand, a more aggressive unwind of the inventory balance has been assumed. Inventory is reduced
in line with sales. The Group considers scenario 2 to be a severe but plausible scenario.
Commercial sales from the new PEEK manufacturing facility in China are expected in early 2024, a consequence of which is that the entity
will require additional funding to see it through to net cash generation. In concluding on the going concern position, it has been assumed
that Victrex will provide the additional funds in full, which the Board considers to be the worst case scenario.
Before any mitigating actions the sensitised cash flows show the Company has significantly reduced cash headroom, which would require
use of the committed facility during the going concern period. The level of facility drawn down is higher in Scenario 2 but in neither
scenario is the committed facility fully drawn, nor drawn for the whole year. With cash levels lower than has historically been the case for
Victrex, the Company has identified a number of mitigating actions which are readily available to increase the headroom. These include:
u
use of committed facility – £40m could be drawn at short notice. Conversations with our banking partners indicate that the £20m uncommitted
accordion could also be readily accessed. The covenants of the facility have been successfully tested under each of the scenarios;
u
deferral of capital expenditure – the base case capital investment over the next 12 months is lower than recent years at approximately
£30-£35m with major projects completed in China and the UK. This could be reduced significantly by limiting expenditure to essential
projects, deferring all other projects later into 2025 or beyond;
u
reduction in discretionary overheads – costs would be limited to prioritise and support customer related activity;
u
reduction in inventory levels – inventory has been increased to provide additional security during plant shutdowns and to provide
sufficient inventory to respond to a rapid economic recovery. The scenarios noted above include an acceleration of the inventory unwind
but a more aggressive approach could be taken to provide additional cash resources; and
u
deferral/cancellation of dividends – the Board considers the cash position and interests of all stakeholders before recommending
payment of a dividend. A dividend has been proposed for payment in February 2024 of c.£40m and in the past an interim dividend of
c.£12m has been paid in June, giving a combined annual outflow of c.£52m.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
144
Notes to the financial statements conti nued
1. Basis of preparation continued
Going concern continued
Reverse stress testing was performed to identify the level that sales would need to drop by in order for the Group to run out of cash by the
end of the going concern assessment period. Sales volumes would need to consistently drop materially below the low point in scenario 2,
which is not considered plausible.
As a result of this detailed assessment and with reference to the Company’s strong balance sheet, existing committed facilities and the cash
preserving levers at the Company’s disposal, but also acknowledging the current economic uncertainty with a number of global economies
close to/in recession, the war in Ukraine continuing and tensions in the Middle East, the Board has concluded that the Company has
sufficient liquidity to meet its obligations when they fall due for a period of at least 12 months after the date of this report. For this reason,
they continue to adopt the going concern basis for preparing the financial statements.
Critical judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with UK-adopted international accounting standards requires management to
make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income
and expenses.
The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances. These estimates and assumptions form the basis for making judgements about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis including formal consideration by the Audit Committee. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
revision and future periods if the revision affects both current and future periods.
Judgements made in applying accounting policies
Other than judgements involving the use of estimates, the Directors do not consider there are any judgements made in applying the Group’s
significant accounting policies which would have a material impact on the amounts recognised in the financial statements within the next 12 months.
Sources of estimation uncertainty
The Group uses estimates and assumptions in applying the critical accounting policies to value balances and transactions recorded in the financial
statements. The estimates and assumptions that, if revised, would have a significant risk of a material impact on the valuation of assets and liabilities
within the next financial year, and therefore classified as critical, are retirement benefits (see note 17), the valuation of inventory (see note 13) and
the carrying value of the investment in associate and fair value of convertible loan notes (see note 11) held in Bond 3D High Performance Technology
BV (‘Bond’). The latter two were disclosed as ‘other areas of judgement and sources of estimation uncertainty’ in the FY 2022 Annual Report. At
31 March 2023 the Directors reassessed this resulting in the reclassification to ‘critical judgements and key sources of estimation uncertainty. This
conclusion was reached in the knowledge that further investment was required to support Bond through to net cash generation, the economic
environment had tightened the financing market for early stage businesses, there were delays to the delivery of the key milestones and current
funding was only sufficient to sustain Bond through to mid-FY 2024. The Directors therefore concluded there was an increased risk of a material
change to the carrying values of both the investment in associate and convertible loans in the next 12 months.
The critical judgements and key sources of estimation uncertainty that the Directors have considered in the process of applying the Group’s
accounting policies and that have the most significant effect on the amounts recognised in the financial statements are included within the
relevant notes. Critical judgements and key sources of estimation uncertainty can be identified throughout the notes by the following symbol .
Management has discussed these with the Audit Committee. These should be read in conjunction with the significant accounting policies provided
in the notes to the financial statements.
The consideration of critical judgements and key sources of estimation uncertainty includes consideration of the potential impact of climate
change on the financial statements. The areas considered and the conclusions made can be identified throughout the financial statements by the
symbol . None of the areas of estimation uncertainty considered had a significant risk of material adjustment in the next 12 months as a result
of climate change, although it is noted that there could be a more significant impact over the medium and longer-term time frames.
Other areas of judgement and sources of estimation uncertainty
The financial statements include other areas of judgement and sources of estimation uncertainty which do not meet the above definition of critical
either due to the level of risk or the time frame of the potential impact, however apply to the measurement of certain material assets and liabilities.
These include the useful economic lives and residual value of property, plant and equipment and the recognition of deferred taxation balances for
which there is uncertainty over the longer term.
New accounting standards and amendments to existing standards
New standards and amendments to existing standards were effective for the financial year ended 30 September 2023, which included:
u
Amendments to IAS 1 – Practice Statement 2 and IAS 8 – Distinguish Between Changes in Accounting Policies and Accounting Estimates;
u
Amendment to IAS 12 – Deferred Tax Related to Assets and Liabilities arising from a Single Transaction;
u
IFRS 17 – Insurance Contracts – Replacement of IFRS 4; and
u
Amendment to IAS 12 – International Tax Reform – Pillar Two Model Rules.
None of these have had a material impact on the consolidated or Company result or financial position.
FINANCIAL STATEMENTS
145
Annual Report 2023 Victrex plc
1. Basis of preparation continued
New accounting standards and amendments to existing standards continued
Standards effective from 1 October 2023 onwards
A number of standards, amendments and interpretations have been issued and endorsed by the UK but are not yet effective or have been
issued but not endorsed by the UK and, accordingly, the Group has not yet adopted them. These include:
u
Amendment to IFRS 16 – Leases on Sale and Leaseback;
u
Amendment to IAS 1 – Non-Current Liabilities with Covenants;
u
Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements; and
u
Amendments to IAS 21 – Lack of Exchangeability.
None of these are expected to have a material impact on the Group’s consolidated result or financial position.
2. Segment reporting
The Group complies with IFRS 8 – Operating Segments, which requires operating segments to be identified and reported upon that are
consistent with the level at which results are regularly reviewed by the entitys chief operating decision maker (‘CODM’). The CODM for
the Group is the Victrex plc Board. Information on the business units is the primary basis of information reported to the Victrex plc Board.
The performance of the business units is assessed based on segmental gross profit. Management of sales, marketing and administration,
and research and development functions servicing both business units is consolidated and reported at a Group level. Segmental balance
sheets are not produced; instead the CODM reviews the balance sheet at a Group level which provides the necessary level of detail to
make an informed assessment of the financial position of the Group on which to base key business decisions.
The Group’s business is strategically organised as two business units (operating segments): Sustainable Solutions (formerly Industrial), which focuses
on our Energy & Industrial, VAR, Automotive, Aerospace and Electronics markets, and Medical, which focuses on providing specialist solutions for
medical device manufacturers.
Year ended 30 September 2023 Year ended 30 September 2022
Sustainable Sustainable
Solutions Medical Group Solutions Medical Group
£m £m £m £m £m £m
Segment revenue 250.3 65.2 315.5 285.8 58.3 344.1
Internal revenue (8.5) (8.5) (3.1) (3.1)
Revenue from external sales 241.8 65.2 307.0 282.7 58.3 341.0
Segment gross profit 110.5 52.1 162.6 124.8 49.7 174.5
Impact of climate change
The CODM for the Group monitors climate change metrics, primarily the revenue from sustainable products, on a six-monthly
basis. However, the primary basis for reviewing financial performance over all time horizons, from monthly to annually, remains
at the operating segment level. It is noted that products sold into sustainable applications are primarily the same as products sold
into non-sustainable applications. It is only the end application which differentiates them. As a result it is not anticipated that any
change will be required in the segmental reporting as a result of the Group’s focus on sustainable applications.
Transactions between segments are conducted at arm’s length.
Revenue recognition
Revenue in both segments comprises the amounts receivable for the sale of goods, net of value added tax, rebates and discounts
and after eliminating sales within the Group. Revenue from the sale of goods is recognised when all performance obligations are met,
which is when the goods are dispatched or delivered in line with Incoterms. Victrex receives Medical Unit Payments (‘MUPs’) from
a number of medical customers. MUPs are deferred payments contingent on the customer selling its final component to the end user.
Revenue from MUPs is a form of variable consideration where all performance obligations have been met when the material is sold by
the Group. The initial value of the MUP recognised is based on management’s best estimate of the value that will flow to the Group
only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur
when the uncertainty associated with the variable consideration is subsequently resolved. This will be adjusted as appropriate, with
a final adjustment being made in the period the final declaration is made. The value of MUPs recognised but not invoiced is included
in prepayments and accrued income. See note 14.
No revenue is recognised if there is significant uncertainty regarding recovery of the consideration due or associated costs.
The Group has taken advantage of the expedient allowed in IFRS 15 (121b) not to disclose information about its remaining performance
obligations because the Group only recognises revenue on the satisfaction of performance obligations.
Information about products
The Group derives its revenue from the sale of high performance thermoplastic polymers.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
146
Notes to the financial statements conti nued
2. Segment reporting continued
Information about geographical areas
The Group’s country of domicile is the United Kingdom.
1) Revenue from external sales
The following is an analysis of revenue from external sales based on the customer’s location.
Revenue from external sales
Sustainable Sustainable
Solutions Medical 2023 Solutions Medical 2022
£m £m £m £m £m £m
United Kingdom 4.2 4.2 4.3 4.3
Europe, the Middle East and Africa (‘EMEA) 111.2 16.4 127.6 129.1 15.2 144.3
Americas 52.7 30.0 82.7 65.8 28.7 94.5
Asia-Pacific 73.7 18.8 92.5 83.5 14.4 97.9
241.8 65.2 307.0 282.7 58.3 341.0
Revenue from external customers based in Germany was £73.2m (2022: £90.1m), the US was £75.7m (2022: £87.6m) and China was
£45.5m (2022: £40.3m). The revenue from any individual country, with the exception of Germany, the US and China, is not more than 10%
of the Group’s total revenue in either the current or prior year.
2) Non-current assets
The following is an analysis of the carrying value of non-current assets by the geographical area in which the assets are located. Non-
current assets include property, plant and equipment, intangible assets, and investments in associates. It does not include retirement
benefit assets, deferred tax assets and financial instruments.
2023 2022
£m £m
United Kingdom 253.8 257.8
China 91.3 85.3
Other 33.9 34.7
379.0 377.8
Non-current assets held in any individual country, with the exception of the United Kingdom and China, is not more than 10% of the
Group’s total non-current assets (FY 2022: same).
Information about major customers
In the current year no customers contributed more than 10% to Group revenue (FY 2022: one customer within our Sustainable Solutions
segment contributed more than 10% to Group revenue).
3. Operating profit
Detailed below are the key amounts recognised in arriving at our operating profit:
2023 2022
Note £m £m
Research and development expenses 10 18.6 15.7
Staff costs 5 78.4 72.3
Depreciation of property, plant and equipment 9 19.8 19.0
Loss on disposal of non-current assets 9, 10 0.3 2.4
Amortisation of intangibles 10 1.7 2.6
Trade receivables impairment allowance during the year 16 1.3 1.4
Reversal of trade receivables impairment allowance 16 (1.9) (1.0)
Inventory written down during the year 13 3.1 3.2
Reversal of previously written down inventory 13 (2.7) (2.5)
Fees payable to auditors 4 0.8 0.5
Exchange differences recognised in the Consolidated income statement, except for those arising on financial instruments measured at fair
value through profit or loss in accordance with IFRS 9, are a loss of £0.6m (FY 2022: gain of £2.2m).
FINANCIAL STATEMENTS
147
Annual Report 2023 Victrex plc
3. Operating profit continued
Exceptional items
Exceptional items are those which are, in aggregate, material in size and/or unusual or infrequent in nature.
Exceptional items were as follows:
2023 2022
£m £m
Included within sales, marketing and administrative expenses:
Implementation of SaaS ERP system 7.5 7.9
Exceptional items before tax 7.5 7.9
Tax on exceptional items (1.7) (1.5)
Exceptional items after tax 5.8 6.4
Implementation of SaaS ERP system
During FY 2022 the Group commenced a multi-year implementation of a new cloud-based ERP system. The implementation, which includes
process redesign, customisation and configuration of the system, change management and training, will deliver benefits to both customer
interactions and internal business processes.
The new ERP system does not meet the criteria for capitalisation (as the majority of costs relating to past systems have), in line with the IFRS
Interpretations Committee’s decision clarifying how arrangements in respect of cloud-based Software as a Service (‘SaaS’) systems should
be accounted for. Accordingly, the cost is expensed rather than capitalised and amortised. Given the size of the project and its impact on
the reported profit-based metrics, the fact the system is evergreen and thus this level and nature of cost will not happen again, it meets the
Group’s criteria to be presented as exceptional. The ERP system is expected to be substantially complete in 2024.
The cash flow in the year associated with exceptional items was a £7.6m outflow (FY 2022: £5.6m outflow).
4. Fees payable to auditors
Auditors’ remuneration was as follows:
2023 2022
£000 £000
Audit services relating to:
– Victrex plc and Group consolidation* 330 172
– The Company’s subsidiaries, pursuant to legislation 463 335
793 507
* In relation to FY 2022 year-end reporting, PwC charged an additional audit fee of £70,000 which was billed in 2023. Given the timing of the agreement
of this fee, the amount was not included within the audit fee disclosed for FY 2022 of £507,000. It has been added to the FY 2023 fee of £723,000,
increasing the total amount disclosed to £793,000.
Non-audit fees for FY 2023 were £nil (FY 2022: £nil).
5. Staff costs
2023 2022
Note £m £m
Wages and salaries 65.0 59.7
Social security costs 6.7 5.8
Defined contribution pension schemes 17 6.7 5.8
Defined benefit pension schemes 17 (0.7) (0.3)
Equity-settled share-based payment transactions 21 0.7 1.3
78.4 72.3
Detailed disclosures that form part of these financial statements are given in the Directors’ remuneration report on pages 100 to 123.
The monthly average number of people employed by the Group during the year, analysed by category, was as follows:
2023 2022
Number Number
Make 654 586
Develop, market and sell 249 230
Support 214 188
1,117 1,004
There are no people employed by the Company (FY 2022: same).
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
148
Notes to the financial statements conti nued
6. Finance income and costs
2023 2022
£m £m
Finance income/(costs):
– Interest received 1.3 0.5
– Interest payable and similar charges (0.2) (0.1)
– Other finance costs (0.3)
– Interest on lease liabilities (0.2) (0.2)
0.6 0.2
In addition, the Group has incurred interest costs of £1.2m (FY 2022: £0.5m) on bank loans and loans payable to the non-controlling
interest funding the construction of property, plant and equipment in China, which have been capitalised within the associated cost of the
qualifying property, plant and equipment (see note 9).
7. Income tax expense
Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised in the income statement except
to the extent that it relates to items recognised directly in other comprehensive income or equity as appropriate.
Current tax is the expected tax payable on the taxable income for the current and prior years, using tax rates (and tax laws) enacted
or substantively enacted at the balance sheet date. The Group is subject to income tax in numerous jurisdictions. Estimates are required
in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain because it may be unclear how tax law applies to a particular transaction or circumstance. Where the
Group determines that it is more likely than not that the tax authorities would accept the position taken in the tax return, amounts are
recognised in the financial statements on that basis. Where the amount of tax payable or recoverable is uncertain, the Group recognises
a liability or asset based on either the Group’s judgement of the most likely outcome or, where there is a wide range of possible
outcomes, the expected value.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for tax purposes. The following temporary differences are not provided
for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affects neither accounting nor taxable
profit; and differences relating to investments in subsidiaries except to the extent that they will probably reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable, within a reasonable time frame (typically a period of up to
five years), that future taxable profits will be available against which the asset can be utilised. The probability assessment takes into
account the legislation in each jurisdiction, including any restrictions in place, on a company by company basis, including consideration
of the ability to relieve losses between Group companies in the same country and jurisdiction. The availability of taxable temporary
differences (i.e. deferred tax liabilities) relating to the same tax jurisdiction and company, which are expected to reverse over a similar
time frame, is also taken into account when assessing the recognition of any deferred tax asset. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realised. The assessment over the recoverability of deferred tax
assets is reviewed at each reporting date. Where forward-looking forecasts are used to assess the recognition of a deferred tax balance,
forecasts consistent with those used for other assessments within the Annual Report (including going concern, impairment and viability)
are used, but disaggregated to a level appropriate for tax to be assessed, either by company or by tax jurisdiction.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities
and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
2023 2022
Note £m £m
Current tax
UK corporation tax on profits for the year 5.5 9.0
Overseas tax on profits for the year 2.5 2.4
8.0 11.4
Deferred tax
Origination and reversal of temporary differences 12 3.2 1.7
Tax adjustments relating to prior years:
– Current tax 1.0 (2.6)
– Deferred tax (0.7) 1.7
Total tax expense in income statement 11.5 12.2
FINANCIAL STATEMENTS
149
Annual Report 2023 Victrex plc
7. Income tax expense continued
Reconciliation of standard and effective tax rate
2023 2022
% £m % £m
Profit before tax 72.5 87.7
Tax expense at UK corporation tax rate 22.0 16.0 19.0 16.7
Effects of:
– (Income)/expenses not deductible for tax purposes (1.0) 1.3
– Higher rates of tax on overseas earnings 0.7 0.7
– UK tax incentives for capital expenditure and other allowances (0.5) (1.2)
– Foreign deferred tax 0.1
– Tax adjustments relating to prior years 0.3 (0.9)
– Share of loss of associate 0.3 0.2
– Difference in rates between deferred tax and corporation tax 0.5 0.9
– Deferred tax on losses not recognised 0.9 0.9
– Deferred tax on unremitted earnings 0.3 0.1
– Patent Box deduction (6.1) (6.5)
Effective tax rate and total tax expense 15.9 11.5 13.9 12.2
The UK corporation tax rate changed from 19% to 25% after 1 April 2023, meaning the rate applicable to the UK companies for the year
ended 30 September 2023 is a blended rate of 22%.
Deferred tax assets/liabilities have been recognised at the rate they are expected to reverse. For UK assets/liabilities this is 25% of the assets
and liabilities (30 September 2022: 25% for the majority), being the UK tax rate effective from 1 April 2023, in accordance with the Finance
Bill 2021, which was substantively enacted on 24 May 2021. For overseas assets/liabilities the corresponding overseas tax rate has been applied.
Tax components of other comprehensive (expense)/income
2023 2022
£m £m
Tax on items that will not be reclassified to the income statement:
Deferred tax credit/(charge) on defined benefits pension schemes’ actuarial result 1.4 (0.1)
Tax on items that have or may be subsequently reclassified to the income statement:
Current tax (charge)/credit on changes in fair value of cash flow hedges (3.4) 3.2
(2.0) 3.1
Current tax (charge)/credit (3.4) 3.2
Deferred tax credit/(charge) 1.4 (0.1)
(2.0) 3.1
Tax components of items recognised directly in equity
2023 2022
£m £m
Tax (credit)/charge on equity-settled share-based payment transactions (0.1) 1.1
(0.1) 1.1
8. Earnings per share
Basic earnings per share is based on the Group’s profit attributable to ordinary shareholders and a weighted average number of ordinary
shares outstanding during the year, excluding own shares held (see note 22). Diluted earnings per share is calculated by adjusting the
weighted average number of shares used for the calculation of basic earnings per share as increased by the dilutive effect of potential
ordinary shares. Dilutive shares arise from employee share option schemes where the exercise price is less than the average market price
of the Company’s ordinary shares during the year. Where the option price is above the average market price, the option is not dilutive and is
excluded from the diluted earnings per share calculation.
2023 2022
Earnings per share – basic 70.9p 87.6p
– diluted 70.5p 87.3p
Profit for the financial year attributable to the owners of the Company £61.7m £76.2m
Weighted average number of shares used: Number Number
– Issued ordinary shares at beginning of year 86,995,029 86,968,573
– Effect of own shares held (75,847) (87,903)
– Effect of shares issued during the year 18,005 16,683
Basic weighted average number of shares 86,937,187 86,897,353
Effect of share options 559,222 341,959
Diluted weighted average number of shares 87,496,409 87,239,312
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
150
Notes to the financial statements conti nued
9. Property, plant and equipment
Owned assets
All owned items of property, plant and equipment are stated at historical cost less accumulated depreciation and provision for impairment.
The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of overheads.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other
repairs and maintenance costs are charged to the income statement during the financial year in which they are incurred.
Borrowing costs relating to the construction of qualifying property, plant and equipment are capitalised, at the actual cost incurred where
the funds are borrowed specifically to fund the construction project. All other finance costs are expensed as incurred.
Depreciation
Depreciation is charged to the income statement on a straight line basis over the estimated useful economic lives as follows:
Buildings 25–50 years
Plant and machinery 10–30 years
Fixtures, fittings, tools and equipment 5–10 years
Computers and motor vehicles 2–5 years
Freehold land is not depreciated.
The residual values and useful lives of assets are reviewed annually for continued appropriateness and indications of impairment and adjusted
if appropriate.
Depreciation on assets classified as in the course of construction commences when the assets are ready for their intended use and transferred
from assets in course of construction into the relevant asset category.
Profits and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement.
Impact of climate change
The impact of climate change on property, plant and equipment is primarily a result of physical risks, for example increasing
severity of flooding or high winds which could impact the useful economic life of the asset. The maximum useful life of assets
is 50 years, relating to office buildings, with primary plant assets being depreciated over 30 years. The latest date for an asset
to be fully depreciated is 2062, with the latest date for manufacturing assets currently under construction expected to be 2054.
Based on the site by site climate change impact assessments performed to date, it is not anticipated that any physical risks would
materially impact the Group’s assets to the extent that their current carrying value or remaining useful economic lives would
be reduced.
Assets which may be impacted by proactive actions to reduce carbon emissions, for example gas powered boilers, or by
potential regulations to curb carbon emissions are being assessed as the path to Net Zero is planned in detail and regulators
provide more transparency on their potential approach. Based on the planning work performed to date, for example replacing
gas as the heat source with hydrogen, biogas or green electricity, and the infancy of the regulatory approach, there is not
expected to be a material impact on the remaining useful economic lives, or the carrying value, of the assets held by the Group.
The Company has minimal asset value in market/application specific property, plant and equipment where there is expected to
be a material drop in demand due to climate change.
Right of use (‘ROU’) assets
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are
recognised as a ROU asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
At the lease commencement date a ROU asset is measured at cost comprising the following: the amount of the initial measurement of
the lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct
costs; and restoration costs to return the asset to its original condition.
The ROU asset is depreciated over the shorter of the asset’s useful economic life and the lease term on a straight line basis. If ownership
of the ROU asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation
is calculated using the estimated useful economic life of the asset.
Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and
non-lease components based on their relative stand-alone prices. However, for leases of retail estate for which the Company is a lessee
and for which it has major leases, it has elected not to separate lease and non-lease components and instead accounts for these as a
single lease component.
FINANCIAL STATEMENTS
151
Annual Report 2023 Victrex plc
9. Property, plant and equipment continued
Land and
buildings
£m
Plant and
machinery
£m
Computers
and motor
vehicles
£m
Fixtures,
fittings,
tools and
equipment
£m
Right
of use
assets
£m
Assets in
course of
construction
£m
Total
£m
Cost
At 1 October 2021 63.2 343.1 5.9 3.9 13.1 58.0 487.2
Exchange differences 1.2 2.9 0.1 0.1 6.3 10.6
Additions 3.9 0.2 1.6 45.6 51.3
Disposals (0.8) (1.2) (2.0)
Reclassification 0.2 3.4 0.6 0.1 (4.3)
At 30 September 2022 64.6 352.5 6.8 4.1 13.5 105.6 5 47.1
Exchange differences (0.9) (1.8) (0.1) (0.2) (7. 8) (10.8)
Additions 0.2 0.1 3.0 30.5 33.8
Disposals (0.3) (3.2) (3.5)
Reclassification 4.1 28.2 2.5 0.1 (34.9)
At 30 September 2023 67.8 378.8 9.3 4.0 13.3 93.4 566.6
Accumulated depreciation
At 1 October 2021 16.6 155.5 2.4 3.6 3.4 181.5
Exchange differences 0.4 0.7 0.1 1.2
Disposals (0.6) (1.2) (1.8)
Depreciation charge 2.0 13.8 1.0 0.1 2.1 19.0
At 30 September 2022 19.0 169.4 3.5 3.7 4.3 199.9
Exchange differences (0.2) (0.6) (0.1) (0.2) (1.1)
Disposals (0.2) (3.0) (3.2)
Depreciation charge 2.2 14.3 1.2 0.1 2.0 19.8
At 30 September 2023 21.0 182.9 4.6 3.6 3.3 215.4
Carrying amounts
At 30 September 2023 46.8 195.9 4.7 0.4 10.0 93.4 351.2
At 30 September 2022 45.6 183.1 3.3 0.4 9.2 105.6 347.2
At 30 September 2021 46.6 187.6 3.5 0.3 9.7 58.0 305.7
£1.2m (FY 2022: £0.5m) of additions within assets in the course of construction relate to borrowing costs capitalised; see note 15 for
further details.
Reclassification relates to the movement from assets in the course of construction to the relevant asset category when the assets are ready
for their intended use. Details of significant projects reclassified are included in the Financial review.
The fair value of property, plant and equipment is not materially different to its carrying value.
The Company has no property, plant or equipment.
At 30 September 2023 and 30 September 2022, the Group leased a small number of assets, principally land and buildings:
Land and Motor
buildings vehicles Total
£m £m £m
Right of use assets
Balance at 1 October 2021 9.4 0.3 9.7
Additions 1.5 0.1 1.6
Depreciation charge (1.9) (0.2) (2.1)
Balance at 30 September 2022 9.0 0.2 9.2
Additions 2.7 0.3 3.0
Depreciation charge (1.8) (0.2) (2.0)
Disposal (0.2) (0.2)
Balance at 30 September 2023 9.7 0.3 10.0
The information in respect of the lease liabilities associated with the right of use assets is disclosed in note 19.
Land and building right of use assets are primarily leases to support manufacturing capability.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
152
Notes to the financial statements conti nued
10. Intangible assets
Goodwill
Goodwill arising on the acquisition of businesses is allocated, at acquisition, to the cash-generating units (‘CGUs’) that are expected to
benefit from that business combination.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment.
Any impairment provisions that arose during impairment testing would not be reversed.
In respect of acquisitions prior to 1 October 2004, goodwill is included on the basis of its deemed cost, which represents the net
amount recorded previously under UK GAAP. In respect of acquisitions that have occurred since 1 October 2004, goodwill represents
the difference between the cost of the acquisition and the fair value of the assets, liabilities and contingent liabilities acquired.
Goodwill is tested annually for impairment by reference to the estimated future cash flows of the relevant CGU, discounted to their
present value using risk-adjusted discount factors to give its value in use. A CGU is the smallest identifiable asset group that generates
cash flows that are largely independent from other assets and groups.
Impairment losses are recognised if the carrying amount of the CGU to which goodwill has been allocated exceeds its recoverable
value (the higher of value in use and fair value less costs to sell) and are recognised in the income statement.
Other intangible assets
Other intangible assets are stated at cost less accumulated amortisation and any provisions for impairment. The cost of an internally
generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of
operating in the manner intended by management. The cost of intangible assets acquired in a material business combination is the fair
value as at the date of acquisition. Other intangible assets are assessed for impairment only when there is an indication that they might
be impaired. The estimated useful economic life and amortisation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a prospective basis.
Intangible assets not yet ready for use are not amortised but are subject to annual impairment reviews.
Amortisation
Amortisation is charged to sales, marketing and administrative expenses in the income statement over the estimated useful economic
lives as follows:
Computer software 3–7 years straight line
Customer relationships 10 years systematic
Brand name 5 years systematic
Know-how 10 years straight line
Amortisation on assets classified as in the course of construction commences when the assets are ready for their intended use, the point
at which they are reclassified from assets in course of construction, on the same basis as other assets of that class.
FINANCIAL STATEMENTS
153
Annual Report 2023 Victrex plc
10. Intangible assets continued
Assets in
Computer Customer course of
Goodwill software relationships Brand name Know-how construction Total
£m £m £m £m £m £m £m
Cost
At 1 October 2021 14.3 18.3 1.7 0.7 3.2 0.8 39.0
Additions 0.1 0.1 0.2
Disposals (1.8) (0.8) (2.6)
Reclassification 0.1 (0.1)
At 30 September 2022 14.3 16.7 1.7 0.7 3.2 36.6
Additions 0.2 0.2
Reclassification 0.2 (0.2)
At 30 September 2023 14.3 16.9 1.7 0.7 3.2 36.8
Accumulated amortisation
At 1 October 2021 11.5 1.7 0.7 0.3 14.2
Amortisation charge 2.3 0.3 2.6
Disposals (0.4) (0.4)
At 30 September 2022 13.4 1.7 0.7 0.6 16.4
Amortisation charge 1.3 0.4 1.7
At 30 September 2023 14.7 1.7 0.7 1.0 18.1
Carrying amounts
At 30 September 2023 14.3 2.2 2.2 18.7
At 30 September 2022 14.3 3.3 2.6 20.2
At 30 September 2021 14.3 6.8 2.9 0.8 24.8
Computer software is an internally generated intangible asset. The average remaining useful life is two years (FY 2022: three years).
The Group has know-how in respect of the hybrid overmoulding technology for brackets. The remaining useful life of the know-how is
seven years (FY 2022: eight years).
Goodwill recognised is assessed for impairment against discounted future pre-taxation cash flow projections for the relevant CGU (value
in use model). Management has prepared cash flow projections for a five-year period derived from the business’ 24-month forecast and
the five-year strategy. These forecasts are the same ones used for both the going concern and viability reviews. Further details are included
on pages 39 to 41. These forecasts include assumptions around volumes and sales prices, costs of manufacture, operating costs, working
capital movements and capital expenditure. In measuring these assumptions, the Directors have taken into account:
u
expected demand in the markets and geographies within which the Group operates, including industry trends and external market forecasts;
u
operating profits, based on historical experience of operating margins including changes to the price of raw material and utility costs and
production volumes;
u
the timing and cost of major capital projects;
u
cash conversion, based on historical rates; and
u
the impact of climate change (see below).
Impact of climate change
The impact of climate change on the carrying value of goodwill has been considered. The majority of the goodwill relates to
the acquisition of the monomer supply chain. As with all manufacturing areas the monomer supply chain is being assessed
for its impact on the path to Net Zero with the potential for decarbonising and reducing water usage and waste. The impact
of this on the processes associated with the goodwill is not yet known, but current forecasts used for the consideration of
impairment, see below, underpin the carrying value at 30 September 2023. This position will continue to be monitored as the
approach to decarbonisation of the monomer supply chain is developed to support the Group’s path to Net Zero.
Climate change will potentially impact the future forecasts of the Group which are used for the aforementioned impairment
review. The overall impact on the revenue of the Group is assessed as positive, with the majority of the growth programmes
supporting carbon reduction in end markets, which will more than offset the adverse impact from reductions anticipated to be
seen, for example, in Oil & Gas and internal combustion engine related applications. The primary adverse impact is expected
to be seen in carbon pricing and the cost of using greener energy sources. To reflect this in the impairment review an amount
of £20m per annum (growing by inflation) from 2025 has been included in the scenarios used for the sensitivity analysis
supporting the impairment review. Further detail of this is included in the Sustainability report starting on page 42.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
154
Notes to the financial statements conti nued
10. Intangible assets continued
The sensitivity analysis performed as part of the viability assessment on the CGUs of the Group demonstrated a sufficient level of headroom
as noted below; therefore, no specific adjustments or impairments have been made.
The Group has two CGUs, Sustainable Solutions (formerly Industrial) and Medical, which are the smallest identifiable independent groups of
assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Where assets and
costs are shared between the two CGUs a reasonable apportionment of these are made for the purpose of the impairment calculation.
Goodwill is split between the two CGUs: Sustainable Solutions £12.8m (30 September 2022: £12.8m) and Medical £1.5m (30 September
2022: £1.5m).
The goodwill and other intangible assets that relate to the Sustainable Solutions CGU include Kleiss Gears Inc., Zyex Limited and TxV which
have been fully integrated. These businesses are employed to generate revenue across all Sustainable Solutions geographies and markets.
The long-term average growth rate used was 2.0% (FY 2022: 2.0%) which reflects the long-term inflation rates in the main territories
within which the Group operates and the risk-adjusted pre-tax discount rate was 10.7% (FY 2022: 9.1%). The impairment test results in
more than 100% headroom in the base scenario (FY 2022: more than 100% headroom). In addition a number of sensitivities have been
performed including increasing the discount rate by 20%, removing both the growth through the strategy period and the terminal growth
rate and the aforementioned potential impact of climate change, with the results indicating that a reasonably possible change in key
assumptions would not result in an impairment of goodwill or other intangibles.
Research & Development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding,
is recognised within the income statement as an expense as incurred.
Development expenditure is recognised in the income statement as an expense as incurred unless it meets all the criteria to be
capitalised under IAS 38 – Intangible Assets, including technical feasibility of completing the asset, intention to complete, probability
of future economic benefits, the availability of resources to complete and the ability to reliably measure expenditure attributed to
the development.
Research & Development expenditure of £18.6m (FY 2022: £15.7m) was expensed to the income statement in the year within sales,
marketing and administrative expenses. No development expenditure was capitalised (FY 2022: £nil) as the Directors consider there is
insufficient evidence available that the criteria have been met for the reasons noted below.
The Group has the intention and resources to complete the projects being undertaken, along with the ability to accurately measure
attributable expenditure. Therefore whilst these criteria are met, the assessment of the technical feasibility and future economic benefits is
more difficult.
For Medical-based development projects there are strict regulatory approvals which are required to be obtained before a new product
can be brought to market. Prior to these approvals a varying degree of clinical trials need to be undertaken, many of which are multi-year
in length. The vast majority of development expenditure is incurred up to the point of regulatory approval; however, the outcome cannot
be considered probable until approval is obtained. Without approval the Group or its customers cannot sell a medical product. Even with
regulatory approval, market adoption remains uncertain and therefore the criteria for capitalisation is rarely met.
Sustainable Solutions-based development projects typically do not have the same strict regulatory approvals; however, they are often
subject to rigorous qualification and testing programmes, often over a sustained period of time. Examples of this include wear testing
within Automotive, Aerospace and Energy & Industrial. Potential customers are also often testing multiple solutions at the same time with
a view to selecting one following the testing/qualification programme. As a result it is only when a successful outcome to the testing/
qualification programmes is achieved that technical feasibility is reached and market adoption becomes the key assessment. At this point,
whilst market adoption risk remains, the vast majority of development expenditure has been incurred and expensed.
11. Interests in other entities
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the investee and can affect those returns through its power over the investee. This can be determined either by
the Group’s ownership percentage, or by the terms of the shareholder agreement. Where there is deemed to be an ability to affect the
return, investments are consolidated from the date that ability commences until the date that it ceases.
The acquisition method is used to account for business combinations. Goodwill represents the difference between the acquisition date
fair value of the consideration transferred, the amount of any non-controlling interests in the acquiree and the net of the acquisition date
fair values of the identifiable assets acquired, including intangibles, and liabilities assumed, including contingent liabilities as required by
IFRS 3. If this difference is negative, the amount is recognised directly in the Consolidated income statement.
A non-controlling interest is the proportion of net assets of the subsidiary entity owned by shareholders external to the Group. The value
of non-controlling interests at the acquisition date is measured as the non-controlling interests’ proportionate share of net assets of the
acquiree or at fair value. The choice of measurement basis is determined on an acquisition-by-acquisition basis as permitted by IFRS 3.
Financial derivatives in place over the remaining equity of an entity are taken into account when calculating the proportionate share of
the non-controlling interest.
Any contingent consideration is measured at fair value at the date of acquisition. Subsequent changes to the fair value of contingent
consideration are recognised in the Consolidated income statement.
FINANCIAL STATEMENTS
155
Annual Report 2023 Victrex plc
11. Interests in other entities continued
Basis of consolidation continued
Subsidiaries continued
Costs related to the acquisition, other than those associated with the issue of debt, that the Group incurs in connection with a
business combination are expensed as incurred.
Non-controlling interests in the net assets of consolidated subsidiaries are distinguished from the equity attributable to holders of the
Parent. The value of non-controlling interests comprises the value of non-controlling interests on the date control commences adjusted
for the non-controlling interests’ share of any subsequent changes in equity.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less any impairment in the value of the investment.
Investment in associated undertakings
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint
arrangement. Significant influence is the power to participate in the financial and operating policy decisions of the investee but where
the Group does not have control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of
accounting. Investments in associates are carried in the balance sheet at cost as adjusted for post-acquisition changes in the Group’s
share of the net assets of the associate, less any impairment in the value of the investment. Any goodwill recognised on acquisition
is included in the carrying values of the investment. Impairment is recognised when there is objective evidence that a loss event
(or events) has arisen which adversely impacts the future cash flows from the net investment and therefore provides evidence of
impairment. Objective evidence includes observable data about the associate that comes to the Group’s attention covering the loss
events described in IAS 28 Investments in Associates and Joint Ventures paragraphs 41A to 41C. Where objective evidence exists an
impairment test is performed whereby the carrying value of the investment is compared to the recoverable amount (higher of value in
use and fair value less costs to sell).
The Group’s share of the post-tax profits/(losses) of associates is included in the Consolidated income statement. If the Group’s
share of losses in an associate equals or exceeds its investment in the associate, the Group does not recognise further losses, unless
it has incurred legal or constructive obligations to do so or made payments on behalf of the associate. Unrealised gains arising from
transactions with associates are eliminated to the extent of the Group’s interest in the entity.
Interests in joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject
to joint control. Joint arrangements are either joint operations or joint ventures.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control have the rights to the assets, and obligations for
the liabilities, relating to the arrangement or other facts and circumstances indicate that this is the case. The Group’s share of assets,
liabilities, revenue, expenses and cash flows are combined with the equivalent items in the financial statements on a line-by-line basis.
Transactions eliminated on consolidation
Intragroup balances and transactions, and any unrealised gains and losses or income and expenses arising from intragroup transactions
are eliminated in preparing the consolidated financial statements.
Financial assets held at fair value through profit and loss
Financial assets held at fair value through profit and loss comprise investments in unquoted companies and convertible loans made
to associated undertakings. Investments in unquoted companies are initially carried at fair value, where neither control nor significant
influence is held. The initial fair value is deemed to be cost where transactions are at arm’s length. They are remeasured at subsequent
reporting dates to fair value with any changes recognised directly in the income statement.
Financial assets that are compound financial instruments from the holder’s perspective are accounted for under IFRS 9. Under IFRS
9 financial assets are held at either amortised cost, fair value through other comprehensive income (‘FVTOCI’) or fair value through
profit and loss (‘FVTPL’). In making the assessment the Company’s business model and the contractual terms are assessed against
the conditions in IFRS 9. Where the conditions for holding an asset at amortised cost are not met and where no election is made
to measure at FVTOCI, FVTPL is the default.
At initial recognition financial assets are measured at fair value. This is assumed to be the transaction price unless there is evidence
to the contrary.
All transaction costs related to financial instruments designated as at fair value through profit and loss are expensed as incurred.
Investments in unquoted companies and convertible loans are classified as Level 3 in the financial hierarchy because there are no
observable market inputs. For these assets unobservable inputs are used to measure the range of fair values, using an income
approach to convert future cash flows into present values. Inputs into the valuation model include both Group forecasts and forecasts
from the investee, with consideration given to performance against technical and commercial milestones. Where there is insufficient
information to determine fair value or there is a wide range of possible fair value measures, and cost represents the best estimate in
that range, then, as permitted by IFRS 9, cost will continue to be used as a proxy for fair value. Cost will not be used as a proxy if, at
the balance sheet date, there is an identified change in value, which could be illustrated by significant performance variations to plan
or the value implied by subsequent funding rounds or other equity transactions.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
156
Notes to the financial statements conti nued
11. Interests in other entities continued
Group
Material subsidiaries and non-controlling interest (‘NCI’)
Panjin VYX High Performance Materials Co., Ltd (‘PVYX’) is a limited liability company set up for the purpose of the manufacture of
PAEK polymer powder and granules, based in mainland China. The Group continues to hold a 75% equity interest with the remaining
25% held by Liaoning Xingfu New Material Co., Ltd. (‘LX’), whose company name has changed from Yingkou Xingfu Chemical Co., Ltd
during FY 2023. Consistent with prior years, with 75% of the voting equity and the majority of appointments on the board, the Group
is considered to have control of PVYX and therefore it is accounted for as a subsidiary. The income statement and balance sheet of PVYX
are fully consolidated with the share owned by LX represented by a non-controlling interest.
During the current year LX made further cash injections in to PVYX, totalling RMB 22.5m (£2.6m), split as RMB 15m (£1.7m) in the form of
loans and further equity investment of RMB 7.5m (£0.9m).
In the year to 30 September 2023 the subsidiary incurred a loss of £2.6m (FY 2022: loss of £2.9m), of which £0.7m (FY 2022: £0.7m)
is attributable to the non-controlling interest. Total non-controlling interest as at 30 September 2023 is £2.0m (FY 2022: £1.8m).
At 30 September 2023 the subsidiary had aggregate capital and reserves of £8.2m (30 September 2022: £10.9m).
Investments in associates and financial assets held at fair value through profit and loss
Investment in
associates
Financial assets
held at fair
value through
profit and loss Total
£m £m £m
Surface Generation Limited 3.5 3.5
Bond 3D High Performance Technology BV 10.4 6.6 17.0
At 1 October 2022 10.4 10.1 20.5
Group’s share of loss of Bond 3D High Performance Technology BV (1.3) (1.3)
Convertible loans issued to Bond 3D High Performance Technology BV 2.9 2.9
Interest on loans issued to Bond 3D High Performance Technology BV 0.4 0.4
Loss on financial assets held at fair value recognised in profit and loss – exchange differences (0.2) (0.2)
At 30 September 2023 9.1 13.2 22.3
Surface Generation Limited 3.5 3.5
Bond 3D High Performance Technology BV 9.1 9.7 18.8
At 30 September 2023 9.1 13.2 22.3
Bond 3D High Performance Technology BV (‘Bond’)
Bond is a company incorporated in the Netherlands, developing unique, protectable 3D printing (Additive Manufacturing) processes which
are capable of producing high strength parts from existing grades of PEEK and PAEK polymers. The investment offers the potential of
utilising this technology to help accelerate the market adoption of 3D printed PEEK parts, with particular emphasis on the Medical market.
The total carrying value of assets held with Bond as at 30 September 2023 is £18.8m (30 September 2022: £17.0m), comprising investment
in associate of £9.1m (30 September 2022: £10.4m) and convertible loan notes of £9.7m (30 September 2022: £6.6m).
Investment in associate
The Group’s investment in the ordinary share capital of Bond at 30 September 2023 is €14.7m/£12.8m (24.5%) at cost (30 September
2022: same), with a carrying value of £9.1m (30 September 2022: £10.4m) which includes the impact of the Group’s share of losses since
investment. Bond’s share capital consists solely of ordinary shares. For the year to 30 September 2023 Bond made a loss of £5.3m of which
the Group’s share of Bond’s losses was £1.3m (30 September 2022: Bond loss of £4.0m, Group’s share £1.0m). At 30 September 2023 Bond
had aggregate capital and reserves of £3.8m (30 September 2022 - £9.1m). As the Group is considered to have significant influence, but
not control, in Bond, the investment continues to be accounted for as an associate using the equity method with the investment being held
at cost less post-acquisition losses and subject to impairment.
Convertible loan notes (‘CLAs’) due from Bond
The Group has also been providing regular cash injections to Bond in the form of CLAs. The CLAs are convertible into ordinary shares
of Bond, at the Group’s option, or are to be repaid by Bond on or before the end of the five-year agreed term. The majority of the CLAs
accrue interest which is accumulated into the value of the CLA and attracts the same conversion rights as the principal. The CLAs have
preferential treatment to the ordinary equity in an exit scenario.
The convertible loan notes due from Bond as at 30 September 2023 are as follows:
Interest
rate Principal
As at
1 October
2022
Interest
accrued
CLA
drawdown
Currency
movement
As at
30 September
2023
Convertible loan note agreements % €m €m €m €m €m €m
CLA 1 3.0 0.3 0.3 0.3
2020 CLA n/a 2.0 2.0 2.0
2021 CLA 6.0 6.7 5.1 0.4 1.9 7.4
2023 CLA 6.0 3.1 1.5 1.5
Total (m) 7.4 0.4 3.4 11.2
Total (£m) 6.6 0.4 2.9 (0.2) 9.7
FINANCIAL STATEMENTS
157
Annual Report 2023 Victrex plc
11. Interests in other entities continued
Group continued
Under the 2023 CLA a further €1.6m will be advanced to Bond, subject to the satisfactory completion of pre-determined milestones, which
are expected to be completed during FY 2024.
If all the CLAs are fully converted to equity, including the accumulated interest, Victrex’s ownership interest will increase to 45.5%.
The CLAs in Bond do not meet the criteria to be classified as amortised cost nor FVTOCI, as the cash flows are not solely payments of
principal and interest due to the existence of conversion rights and are therefore classified as FVTPL. The transaction value is considered
materially equal to the fair value of the convertible loan for initial recognition.
In the absence of an arm’s length transaction in the equity of Bond there remains a lack of observable market inputs for subsequent fair
value assessments which results in the instrument continuing to be classified as Level 3 (see note 16). No gains or losses on the valuation
of the CLAs have been recognised in the year (FY 2022: same). The use of unobservable inputs in measuring fair value is disclosed below.
Critical judgements and key sources of estimation uncertainty in relation to the carrying value of investment in associate
in Bond and fair value of convertible loan notes due from Bond
The carrying value of investment in associate in Bond and the fair value of convertible loan notes due from Bond (together the ‘assets in
Bond’) both require the use of judgement and estimates. While the basis of measurement for each is different, as noted above, given the
relative immaturity of Bond, both assessments are dependent on the delivery of the company’s strategy and the inherent uncertainties therein.
The clearest evidence of carrying value of the assets in Bond would be an arm’s length transaction in the equity of Bond; however, due
to the market conditions and the Bond board’s decision to obtain additional funding from existing shareholders until the perceived risk
in the company has reduced following delivery of key milestones, no such evidence exists.
In the absence of this evidence and a lack of other observable market inputs the assessment is based on the future forecasts for the
business with the application of a number of scenarios to provide a range of potential outcomes which are used to both assess for
indicators of impairment of the associate and to determine the range of fair values for the convertible loan notes. In making this
assessment the status of each of the key milestones identified as driving the business valuation has been considered. Assumptions on the
discount rate have also been considered in determining the business valuation range.
The delivery of the strategy relies on key milestones being met in the optimisation of the technology, regulatory approval being obtained
from the relevant medical authority for the resulting products and successful commercialisation. The CLA 2023 funding is sufficient to
fund the business through to mid-FY 2024 at which point additional funding is required to deliver the strategy. Work on delivering these
milestones was in progress at the 30 September 2023, with the outcome not necessarily being clear until early in 2024, or later for the
successful commercialisation. The current funding market for early stage technology companies remains difficult, and therefore assessing
the fair value of Bond, along with any impact on the carrying value of Victrex’s investment, requires significant judgement and estimation.
Using the Bond strategic plan and forecast, the board of Bond has developed a business valuation based on discounting future cash
flows. The valuation takes into account the risks in the delivery of the plan and includes a number of unobservable input assumptions
that market participants would use when valuing the business, including, for example, the total addressable market, level of market
penetration achievable and industry growth rates.
Management has assessed a range of possible outcomes around the Bond business valuation by varying key inputs, which will have the
largest impact on the valuation over the next 12 months, including a delay to achieving the technology optimisation required to make
the products commercially viable and a delay to obtaining regulatory approval, a delay to the growth in sales forecast, an increase in the
discount rate applied and a reduction in the assumed terminal growth rate. A range of potential outcomes is illustrated below noting that
additional funding is required by mid FY 2024 across all scenarios:
u
Scenario 1 – The strategy is delivered in full which based on the strategic forecasts would value the business in excess of the current
carrying value resulting in an increase in the fair value of the convertible loan notes.
u
Scenario 2 – The strategy is delivered, but with a two-year delay and the discount rate increased from 12% to 14%. This two-year
delay covers milestone delivery delays and sensitivity of the unobservable market inputs noted above. In this scenario the valuation is
materially in line with the current carrying value of the assets in Bond.
u
Scenario 3 – Bond is able to gain additional funding but, due to delays in executing its strategy or other factors, the valuation of the
company is such that existing shareholders are significantly diluted or exit at a loss. The protections associated with the convertible
loan notes, which have preference on exit over equity, mean that this balance is recoverable at carrying value (£9.7m) but an
impairment of the investment in associate of up to £9.1m is required.
u
Scenario 4 – The technology is superseded and does not make it to market or further external funding cannot be obtained and the
existing shareholders decide not to continue funding, which, with minimal saleable assets, would result in the assets in Bond having
little or no value, incurring a write down for the Company of up to £18.8m, considered the worst case outcome.
The analysis performed by the Board illustrates a wide range of potential outcomes, which is not uncommon given the relative immaturity
of Bond and its current stage of development. It is likely to be a longer time period, in the absence of an arm’s length equity transaction,
before the range of outcomes can be reduced to such an extent that a fair value which is different to the initial fair value can be
established with a sufficient degree of reliability. Therefore, cost is considered to be the best estimate of fair value, sitting within the
range of possible outcomes, in line with the criteria of IFRS 9 – Financial Instruments.
In undertaking the above analysis, the Directors have considered whether there is any objective evidence that a loss event (or events),
which would trigger the requirement to perform an impairment review, as detailed in IAS 28 – Investments in Associates and Joint
Ventures, exists at 30 September 2023. The Directors have concluded that the challenges facing Bond (for example delays, further
funding requirements, etc.) are typical of experiences in early stage technology companies and therefore the requirement to perform
an impairment review has not been triggered. The investment has therefore not been tested for impairment.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
158
Notes to the financial statements conti nued
11. Interests in other entities continued
Group continued
Bond 3D High Performance Technology BV (‘Bond’) continued
Impact of climate change
The impact of climate change on the Medical market (primary focus of Bond) is expected to be limited, with the applications
providing proven clinical benefits to patients in a low carbon way. The use of 3D printed PEEK being developed by Bond will
only serve to reduce carbon usage through a lower level of waste in the manufacturing process and therefore climate change
is not expected to have a negative impact on the carrying value of assets associated with Bond, including the associate
investment and the convertible loans.
Company
Investment in
subsidiaries
£m
Cost and carrying value
At 1 October 2022 and at 30 September 2023 131.9
The Company has considered impairment of its investment in subsidiaries. The results of the impairment tests described in note 10 have
been used in this consideration. Given the results of those tests, the Directors do not consider that the carrying value of the Company’s
investment in subsidiaries has been impaired.
The following is a full list of the Company’s interests:
Company number Company status Registered office address
Wholly owned subsidiary undertakings
Victrex Manufacturing Limited
1
2845018 Trading entity Victrex Technology Centre,
Hillhouse International,
Thornton Cleveleys,
Lancashire FY5 4QD, UK
Invibio Limited
1
4088050 Trading entity
Invibio Knees Limited 8149440 Trading entity
Invibio Device Component
Manufacturing Limited
8861250 Trading entity
Juvora Limited 8149439 Trading entity
Victrex Trading Limited
2
4956435 Dormant
Zyex Limited 2890014 Dormant
Victrex USA Holdings Inc.
1
Intermediate holding company 300 Conshohocken State Road, Suite 120,
West Conshohocken, PA 19428, USA
Victrex USA Inc. Trading entity
Invibio Inc. Trading entity
Invibio Device Components
Manufacturing Inc.
Trading entity
Victrex Europa GmbH
1
Trading entity Langgasse 16, 65719 Hofheim, Germany
Victrex Japan, Inc.
1
Trading entity Mita Kokusai Building Annex, 1-4-28 Mita,
Minato-ku, Tokyo, 108/0073, Japan
Victrex High Performance Materials
(Shanghai) Co., Ltd
Trading entity Victrex Asian Innovation & Technology Centre,
Part B Building G, No. 1688, Zhuanxing Road,
Xinzhuang Industry Park, Shanghai, 201108, China
Invibio (Beijing) Trading Co., Limited Trading entity Room 7108, Building 7, Second Lane 5, The South of
Xiang Jun, Chao Yang District, Beijing, 100020, China
Kleiss Gears, Inc. Trading entity 390 Industrial Avenue, Grantsburg, WI 54840, USA
TxV Aerospace Composites LLC Trading entity 55 Broadcommon Road, Bristol,
Rhode Island, RI 02809, USA
Victrex Hong Kong Limited Trading entity Level 54, Hopewell Centre 183,
Queen’s Road East, Hong Kong
Subsidiary undertaking with non-controlling interests
Panjin VYX High Performance
Materials Co., Ltd
Trading entity Room 501–23, Technology Mansion, Qingyu Road East,
Zhifang Street North, Liaodong Bay New District, Panjin,
Liaoning Province, China
Associate
Bond 3D High Performance
Technology BV
Trading entity Institutenweg 50, 7521 PK,
Enschede, Netherlands
FINANCIAL STATEMENTS
159
Annual Report 2023 Victrex plc
Joint operation
Aghoco 1491 Limited
3
10523749 Trading entity Victrex Technology Centre, Hillhouse International,
Thornton Cleveleys, Lancashire FY5 4QD, UK
Investment
Surface Generation Limited 4379384 Trading entity 7 Brackenbury Court, Lyndon Barns,
Edith Weston Road, Lyndon, Oakham LE15 8TW, UK
1 Directly held by Victrex plc.
2 An application is currently in progress to dissolve Victrex Trading Limited.
3 On 13 December 2016, the Group, via its subsidiary Victrex Manufacturing Limited, incorporated Aghoco 1491 Limited with AGC Chemicals Europe
Limited. Aghoco 1491 Limited is a joint arrangement in which the Group holds equal ownership and rights over the entity. The purpose of Aghoco 1491
Limited is to build, operate and maintain an electrical substation (cost of c.£3m) for both parties’ own use to ensure continuity of electrical supply. Due to
the terms of the joint arrangement, Aghoco 1491 Limited meets the criteria to be accounted for as a joint operation.
The following companies, which were all dormant, wholly owned subsidiary undertakings in FY 2022, were dissolved on 20 June 2023:
Company name Company number Company status as at 30 September 2023 Company status as at 30 September 2022
Victrex Trustee Limited
1
3075501 Dissolved Dormant
Victrex USA Holdings Limited
1
7752971 Dissolved Dormant
Zyex Group Limited 2839512 Dissolved Dormant
Zyex Reclaim Limited 289 0011 Dissolved Dormant
Annual reports and accounts are filed with Companies House for all UK dormant companies.
All subsidiaries are wholly owned, with the exception of Panjin VYX High Performance Materials Co., Ltd (‘PVYX’), and are involved in the
principal activities of the Group.
In the opinion of the Directors the recoverable amount of investments in and amounts due from the Company’s subsidiary undertakings are
at least the carrying value at which they are stated in the balance sheet.
12. Deferred tax assets and liabilities
As at 30 September 2023
Property, Set-off of
plant and Employee Unremitted deferred tax
equipment benefits Inventories earnings Other Total balances * Net
£m £m £m £m £m £m £m £m
Deferred tax assets 1.5 7.0 1.2 9.7 (4.1) 5.6
Deferred tax liabilities (34.7) (2.4) (1.0) (38.1) 4.1 (34.0)
Net deferred tax (liabilities)/assets (34.7) (0.9) 7.0 (1.0) 1.2 (28.4) (28.4)
As at 30 September 2022
Property, Set-off of
plant and Employee Unremitted deferred tax
equipment benefits Inventories earnings Other Total balances * Net
£m £m £m £m £m £m £m £m
Deferred tax assets 1.5 6.1 1.6 9.2 (2.0) 7.2
Deferred tax liabilities (32.0) (3.7) (0.6) (36.3) 2.0 (34.3)
Net deferred tax (liabilities)/assets (32.0) (2.2) 6.1 (0.6) 1.6 (27.1) (27.1)
* The Group has applied the tax consolidation legislation, in accordance with IAS 12, whereby deferred tax assets and liabilities recognised on consolidation
have been allocated to the tax jurisdictions where they arise, resulting in an offset within deferred tax assets and deferred tax liabilities in the balance sheet.
11. Interests in other entities continued
Company continued
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
160
Notes to the financial statements conti nued
Property,
plant and Employee Unremitted
equipment benefits Inventories earnings Other Total
Note £m £m £m £m £m £m
Movement in net provision
At 1 October 2021 (27.4) (1.5) 5.5 (0.5) 1.2 (22.7)
Exchange differences 0.2 0.2
Prior period adjustment (1.7) (1.7)
Recognised in income statement 7 (2.9) 0.5 0.6 (0.1) 0.2 (1.7)
Recognised in other comprehensive income (0.1) (0.1)
Recognised directly in equity (1.1) (1.1)
At 30 September 2022 (32.0) (2.2) 6.1 (0.6) 1.6 (27.1)
Exchange differences (0.1) (0.2) (0.3)
Prior period adjustment 0.7 0.7
Recognised in income statement 7 (3.4) (0.2) 0.9 (0.3) (0.2) (3.2)
Recognised in other comprehensive income 1.4 1.4
Recognised directly in equity 0.1 0.1
At 30 September 2023 (34.7) (0.9) 7.0 (1.0) 1.2 (28.4)
Of the net deferred tax liability of £28.4m (30 September 2022: £27.1m), a £3.9m net asset (30 September 2022: £4.5m net asset) is
expected to be recovered no more than 12 months after the balance sheet date, and a £32.3m net liability (30 September 2022: £31.6m
net liability) is expected to be settled more than 12 months after the balance sheet date.
Deferred tax liabilities of £1.0m (30 September 2022: £0.6m) have been recognised for the withholding tax and other taxes that would be
payable on the unremitted earnings of £19.4m of the EU subsidiary, as the Group no longer benefits from the EU Parent Subsidiary Directive
on dividends. It is likely that future amounts will be remitted as a dividend rather than being permanently reinvested.
Outside the EU no deferred tax liabilities have been recognised (30 September 2022: £nil) for the withholding tax and other taxes, as such
amounts are permanently reinvested, and the Group can control the timing of any dividends. Unremitted earnings from non-EU subsidiaries
totalled £55.6m at 30 September 2023 (30 September 2022: £54.2m).
Impact of climate change
Deferred tax assets are recognised to the extent that it is probable that future taxable profits are generated against which to
utilise the carried forward tax losses and other timing differences. The majority of the deferred tax assets relates to profit in
inventory generated when the UK manufacturing entities sell products to overseas subsidiaries who distribute the products
to the end customer. The targeted inventory levels at overseas locations is set at approximately three to four months, a time
period considered to be too short to be impacted by climate change. The short time period between 30 September 2023
and the expected external sale of the aforementioned inventory makes the realisation of the deferred tax asset probable,
supporting its recognition at the end of the year.
Unrecognised deferred tax assets
In the USA, the Group has unrelieved net operating losses arising in the year ended 30 September 2023 of £0.2m (FY 2022: £nil). The potential
deferred tax asset on the cumulative unrelieved tax losses of £8.6m in the USA amounts to £2.2m (FY 2022: £1.6m), which have accumulated
from the early stage losses resulting from the readiness investment in Kleiss Gears Inc. and TxV Aerospace Composites LLC. As the companies
continue to drive market adoption of their respective products further losses are expected in the short term with the time to profitability
remaining uncertain. As a result it is not considered probable that the losses will be utilised over a reasonable time frame.
In addition, the Group has unrelieved net operating losses arising in the year ended 30 September 2023 of £2.6m (FY 2022: £2.9m), which
relate to the early stage losses in Panjin VYX High Performance Materials Co., Ltd. Total cumulative losses are £6.8m (FY22 £4.6m) and the
potential deferred tax asset on these losses amounts to £1.7m (FY 2022: £1.1m). The Company is in the final stages of commissioning with
manufacturing for commercial sale due to commence shortly. Given the early stage in the commercialisation of the new polymer grades being
manufactured there is inherent uncertainty over the time period to profitability, and therefore utilisation of the losses means that recovery
within a reasonable time frame is not probable.
13. Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle
and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. The cost
of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads
(allocated based on the higher of actual and normal production levels). Cost is calculated using the standard cost method. Net realisable
value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
In calculating the estimated selling price a number of factors are taken into account, including the age of the inventory, customer order
profiles, the quality status, alternative routes to market and options to reprocess. Where the net realisable value is below the cost of the
inventory a provision is made to write down the inventory to the net realisable value which is expensed to the profit and loss account.
If subsequently the value realised from the inventory is above the net realisable value the provision is written back to the profit and
loss account.
12. Deferred tax assets and liabilities continued
FINANCIAL STATEMENTS
161
Annual Report 2023 Victrex plc
Critical judgements and key sources of estimation uncertainty in relation to valuation of inventories
The carrying value of inventory, comprising raw materials, work in progress and finished goods totalling £134.5m, requires the use of
estimates and judgement. The Group absorbs directly attributable costs over the higher of actual production and normal production to
avoid absorbing more overheads than incurred in periods of high production or absorbing excess overheads in periods of low production.
Judgement is required when assessing the level of normal production to compare with the actual production in determining the rate at
which to absorb the directly attributable costs. This judgement considers historical production levels and budgeted production, as well
as the relationship between production and sales when concluding on the appropriate level over which to absorb production costs.
The primary estimate is in respect of the level of variations, including material usage and purchase price variances, between actual and
standard cost absorbed into inventory at each period end. Management uses its detailed experience in the process of forming its view
on the adjustments required to record inventory at cost. Management has assessed the range of possible outcomes which might result
from a change in assumptions and has determined this to be from a £12.8m increase in inventory to a £2.0m reduction in inventory
at 30 September 2023, a larger range than in previous periods due to increase volatility in input costs, and therefore could result in
a material adjustment to the carrying value of inventory within the next 12 months.
Inventory provisions are put in place for slow moving and potentially obsolete inventory as well as damaged and/or out of specification
product where cost is considered to be higher than net realisable value. The level of provisioning is an estimate, with judgement required
on ageing, customer order profiles, alternative routes to market and the option to reprocess. The estimation of the range of possible
outcomes is an increase in the value of inventory of £1.6m to a decrease of £2.1m and is therefore not considered to materially impact the
carry value of inventory within the next 12 months.
Impact of climate change
The impact of climate change on consumer behaviour may affect the demand for the Group’s products, resulting in
obsolescence or reduced demand, thus reducing the net realisable value. The Group targets carrying approximately three
to four months of inventory at any point in time, a time frame over which the impact of climate change on consumer
behaviour is not expected to impact. The majority of the Group’s core products serve multiple applications in multiple markets
further reducing the risk of material obsolete inventory over the longer term with each SKU’s inventory holding levels and
manufacturing plan regularly reviewed against forecast demand over the next 24 months.
2023 2022
As at 30 September £m £m
Raw materials and consumables 33.7 16.7
Work in progress 30.9 13.7
Finished goods 69.9 56.4
134.5 86.8
The amount of inventory expensed in the year is £122.1m (FY 2022: £147.1m).
During the year the Group wrote down inventory by £3.1m (FY 2022: £3.2m) and reversed previously written down inventory by £2.7m
(FY 2022: £2.5m) resulting in a net decrease in the overall inventory write down charge in the year of £0.6m (FY 2022: increase of £0.7m).
The Group continues to focus on driving down aged and non-conforming product by working with suppliers and customers, reworking
and repackaging product to realise value from this inventory.
14. Trade and other receivables
Trade receivables are amounts due from customers for goods sold in the ordinary course of business.
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
using the effective interest method less any impairment losses. The carrying amount of these balances approximates to fair value due to
the short maturity of amounts receivable.
Allowances are calculated by reference to credit losses expected to be incurred over the lifetime of the receivable using the simplified
approach, as described in note 16.
Group Company
2023 2022 2023 2022
As at 30 September £m £m £m £m
Trade receivables 35.5 39.3
Amounts owed by Group undertakings 141.0 191.9
Prepayments and accrued income 7.6 20.1
Sales taxes recoverable 2.4 5.6
Other receivables 1.7 3.1
47. 2 68.1 141.0 191.9
Amounts owed by Group undertakings are interest free, unsecured and repayable on demand. These balances have been considered for
impairment and no credit losses are expected on these balances.
13. Inventories continued
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
162
Notes to the financial statements conti nued
14. Trade and other receivables continued
The value of MUPs recognised but not invoiced is included in prepayments and accrued income. The value at 30 September 2023 was £0.9m
(30 September 2022: £1.8m). No credit loss has been recognised in respect of the MUPs balance at 30 September 2023 (30 September 2022: £nil).
No credit losses are expected on the sales taxes recoverable balance due to the financial strength of the counterparties.
15. Borrowings
Borrowings are recognised initially at fair value, which equals the proceeds received less attributable transaction costs. Following the
initial recognition, borrowings are subsequently held at amortised cost.
2023 2022
As at 30 September £m £m
Due within one year
Bank loans 5.2 0.9
Total due within one year 5.2 0.9
Due after one year
Bank loans 26.4 14.8
Loan payable to non-controlling interest 8.1 6.8
Total due after one year 34.5 21.6
Bank loans
RMB 44m (£5.1m) of the amount due within one year relates to the working capital facility in China, which comprises RMB 50m of the Group’s
total facility of RMB 300m, the remaining RMB 250m relates to the capital expenditure facility. Each drawdown under the working capital
facility is required to be repaid at least annually, after which the balance can be redrawn. Interest is charged at the one-year Loan Prime Rate of
the People’s Bank of China +50bps and is charged to the income statement, included within finance costs. The remaining RMB 232m (£26.5m,
30 September 2022: £15.7m), relating to the capital expenditure facility, is repayable in line with an agreed schedule up to December 2026, of
which £0.1m (30 September 2022: £0.9m) is repayable within one year. Interest is charged at the five-year Loan Prime Rate of the People’s Bank
of China, which has been in the range of 4.2% – 4.3% in the year ended 30 September 2023. The purpose of the loan is funding the construction
of a manufacturing facility in China, with the interest payable capitalised as part of qualifying capital expenditure within property, plant and
equipment. During the year, interest of £0.9m (FY 2022: £0.3m) has been capitalised accordingly.
Loan payable to non-controlling interest
The Group’s loan payable to the non-controlling interest is interest bearing at 4% per annum. Interest payable on the shareholder loan is rolled up
into the value of the loan, until repayment occurs. The purpose of the shareholder loan is funding the construction of a manufacturing facility in
China, with the interest payable capitalised as part of qualifying capital expenditure within property, plant and equipment.
During the year, in line with the shareholder loan agreement, a loan of RMB 15m (£1.7m) was received from the non-controlling interest in Panjin
VYX High Performance Materials Co., Ltd, Liaoning Xingfu New Material Co., Ltd. (‘LX). This is the second and final instalment, with the first
instalment of RMB 50m (£5.6m) being received in FY 2021. Both instalments are unsecured and denominated in Chinese Renminbi (‘RMB’), and
had a combined Sterling value (including rolled up interest and the impact of foreign currency movements between the date the loan was received
and the balance sheet date) of £8.1m at 30 September 2023 (30 September 2022: £6.8m).
The first instalment is repayable on 30 September 2026, with the second instalment repayable on 30 September 2027, or such date as may be
mutually agreed by the shareholders, LX and Victrex Hong Kong Limited. During the year, the total interest cost of £0.3m was capitalised into
assets under construction (30 September 2022: £0.2m).
16. Financial instruments and risk management
Derivative financial instruments and hedging activities
Derivative financial instruments are primarily used by the Group to manage its exposure to changes in foreign exchange rates relating to overseas
sales and purchases. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes.
The Group hedges a proportion of its net forecast sales, purchases and expenses which are denominated in a foreign currency (cash flow hedge)
using forward exchange contracts. The Board is responsible for setting the hedging policy which is detailed overleaf. The policy is reviewed and
approved annually by the Board. Hedging is only applied for the most significant currency exposures which is reviewed annually alongside the
policy. During FY 2023 the currencies hedged were US Dollars and Euro (FY 2022: same).
At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items including whether
or not a net position is being hedged. A conclusion is reached as to whether the transaction qualifies as a cash flow hedge. Details on hedge
documentation are shown below.
FINANCIAL STATEMENTS
163
Annual Report 2023 Victrex plc
16. Financial instruments and risk management continued
Cash flow hedges
As permitted by IFRS 9 B.6.6.1, the Group designates overall net positions as hedged items when:
u
transactions are managed as net positions for risk management purposes;
u
the hedges are for foreign currency risks; and
u
the initial hedge designation and documentation set out how the items within the net position will affect the income statement.
The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are effective in offsetting changes in cash flows of hedged items.
These foreign exchange contracts are initially recognised at fair value, with most having maturities of less than one year after the balance sheet date.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable
forecast transaction, the effective portion of changes in fair value is recognised in equity via the Consolidated statement of comprehensive
income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement, through sales, marketing and
administrative expenses.
The recognition of any cumulative gain or loss existing in equity is aligned to the timing of the hedged transaction impacting the income statement
and is classified as follows:
u
hedging of a net position – the cumulative gain or loss transferred from equity is separately presented on the face of the income statement
within gains/(losses) on foreign currency net hedging. Subsequent revaluations prior to settlement date are included in sales, marketing and
administrative expenses; and
u
other cash flow hedges – cumulative gain or loss existing in equity at the time when the forecast transaction occurs is recognised in the
income statement in the corresponding line that the hedged item goes through being revenue, cost of sales or sales, marketing and
administrative expenses.
When a forecast transaction is no longer expected to occur, and therefore does not meet the criteria for cash flow hedge accounting,
the cumulative gain or loss that was reported in equity is immediately transferred to the income statement, through sales, marketing and
administrative expenses.
Hedge documentation and effectiveness testing
The documentation includes identification of the hedging item(s), the nature of the risk being hedged and how the Group will assess whether the
hedging relationship meets the hedge effectiveness requirements.
Hedge effectiveness is a qualitative assessment of effectiveness performed in accordance with IFRS 9. A hedging relationship qualifies for hedge
accounting if it meets all the following effectiveness requirements:
u
there is an economic relationship between the hedged item and the hedging instrument;
u
the effect of the credit risk does not dominate the value changes that result from the economic relationship; and
u
the hedge ratio of the hedging relationship is the same as that used for risk management purposes.
For financial instruments not designated in hedge accounting relationships or that do not meet the criteria for hedge accounting, the gain or loss
on remeasurement to fair value is recognised immediately in the income statement through sales, marketing and administrative expenses.
Group
Currency risk
Currently, the Group exports in excess of 98% of sales from the UK and also imports raw materials from overseas.
Currency risk is managed by the Currency Committee, which is chaired by the Chief Financial Officer and comprises the Chief Executive
Officer and senior finance executives. It meets monthly to review and manage the Group’s currency hedging activities, in line with the
hedging policy approved by the Board.
The Group’s hedging policy is to defer the impact on profits of currency movements by hedging:
u
a minimum of 80% and a maximum of 100% of projected transaction exposures arising from trading in the forthcoming six-month
period; and
u
a minimum of 75% and a maximum of 100% of projected transaction exposures arising in the following six-month period.
Profitability can vary due to the impact of fluctuating exchange rates on the unhedged portion of the transaction exposures and from
revised forecasts of future trading, which can lead to an adjustment of currency cover in place.
In addition, the Group includes a number of foreign subsidiaries. As a result of these factors, the Group’s financial statements are exposed
to currency fluctuations. The currencies giving rise to this translation risk are primarily US Dollar and Euro.
Sensitivity analysis
The impact of a 5% strengthening in the average Sterling/US Dollar and Sterling/Euro rates reduces profit for 2023 by £2.7m and £4.2m
(FY 2022: £4.8m and £6.0m) respectively. The impact of a 5% strengthening in the average Sterling/US Dollar and Sterling/Euro rates
reduces equity for 2023 by £0.7m and £0.8m (FY 2022: £2.2m and £1.1m) respectively.
In accordance with IFRS 9, the fair value of gains and losses recognised on cash flow hedges is recognised in the Consolidated income
statement as part of gross profit.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
164
Notes to the financial statements conti nued
16. Financial instruments and risk management continued
Group continued
Sensitivity analysis continued
The notional contract amount, carrying amount and fair value of the Group’s forward exchange contracts and swaps are as follows:
As at 30 September 2023 As at 30 September 2022
Notional Carrying Notional Carrying
contract amount and contract amount and
amount fair value amount fair value
£m £m £m £m
Current assets 105.5 2.0
Current liabilities 86.7 (1.8) 197.5 (19.9)
192.2 0.2 197.5 (19.9)
The fair values have been calculated by applying (where relevant), for equivalent maturity profiles, the rate at which forward currency
contracts with the same principal amounts could be acquired at the balance sheet date. These are categorised as Level 2 within the fair
value hierarchy under IFRS 7.
The following table indicates the periods in which cash flows associated with the maturity date of the forward foreign exchange contracts
for which hedge accounting is applied are expected to occur:
As at 30 September 2023 As at 30 September 2022
Expected Expected
cash 6 months 6 to 12 12 to 18 cash 6 months 6 to 12 12 to 18
flows or less months months flows or less months months
£m £m £m £m £m £m £m £m
Forward exchange contracts:
– Assets 105.5 48.1 49.7 7.7
– Liabilities 86.7 30.9 39.2 16.6 197.5 85.8 90.1 21.6
192.2 79.0 88.9 24.3 197.5 85.8 90.1 21.6
The average exchange rates on open forward currency contracts are:
US Dollar 1.23 1.24 1.22 1.34 1.29 1.27
Euro 1.13 1.13 1.13 1.17 1.16 1.15
Gains and losses deferred in the hedging reserve in equity on forward foreign exchange contracts at 30 September 2023 will be recognised
in the income statement during the period in which the hedged forecast transaction affects the income statement, which is typically one
to two months prior to the cash flow occurring. At 30 September 2023, there are a number of hedged foreign currency transactions which
are expected to occur at various dates during the next 12 months. During the year, losses of £0.6m (FY 2022: losses of £3.1m) relating to
unsettled forward exchange contracts on the balance sheet at 30 September 2023 were released to the income statement.
Gains and losses recognised in the income statement on contracts which are yet to settle are adjusted as a non-cash movement on the
cash flow statement. This equated to a gain of £2.5m in the year (FY 2022: loss of £4.0m).
There was no hedge ineffectiveness during the year (FY 2022: nil). The hedge ratio is 1:1 in all instances.
Credit risk
The Group manages exposure to credit risk at many levels ranging from Executive Director approval being required for the credit limits of
larger customers, to the use of letters of credit and cash in advance where appropriate. Internal procedures require regular consideration
of credit ratings, both internally for lower value customers and recognised credit reference agencies for higher value customers, payment
history, aged items and proactive debt collection. All customers are assigned a credit limit which is subject to annual review. Consideration
is given to significant adverse changes in business, financial and economic conditions that may cause a significant change in the ability
of customers to meet their obligations. Any adverse data relating to these factors is considered in determining whether there has been a
significant increase in credit risk of a financial asset on an ongoing basis throughout each reporting period. Regardless of the analysis, an
increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.
The Group has applied the simplified approach to measuring expected credit losses, which requires lifetime expected losses to be
recognised from initial recognition for trade receivables. Lifetime expected credit losses for trade receivables are calculated based on
historical loss rates and adjusted where necessary for relevant forward-looking estimates. Trade receivables have been grouped for this
analysis based on shared credit risk characteristics, including the segment and country/region in which the customer operates. The model,
which considers macro-economic information, has been applied to the Group’s two segments differently. For trade receivables in the
Sustainable Solutions sector, a different loss rate has been applied to the USA and Japan compared to the remainder of the segment’s
geographical markets. In the Medical sector, a single higher rate of allowance has been used to reflect the higher risk of default of the
customer base.
The Group’s payment terms typically range from 30 to 60 days depending on geography. Trade receivables are specifically impaired and
considered in default when the amount is in dispute, when customers are believed to be in financial difficulty, or if any other reason exists
which implies that there is doubt over the recoverability of the debt. They are written off when there is no reasonable expectation of
recovery, based on an estimate of the financial position of the customer.
FINANCIAL STATEMENTS
165
Annual Report 2023 Victrex plc
16. Financial instruments and risk management continued
Group continued
Credit risk continued
Impact of climate change
Climate change will impact the Group’s customers in different ways and over different time horizons. Whilst the overall impact
of climate change on the Group’s revenue is anticipated to be positive, there will be markets/sectors which are adversely
impacted. This is not anticipated to have an adverse impact in the short-term assessment of recoverability, i.e. over the life of
the receivables on the balance sheet at 30 September 2023. The ageing of trade receivables is shown below with 84% not yet
due of which the vast majority will be cleared within 60 days of the year end. The Group monitors the ageing and profile of
the receivables on a regular basis, including the regular use of external credit rating agencies, and updates the expected credit
loss model assumptions if evidence of changing trends or risk profiles emerges.
Trade receivables, being ‘held to collect’ assets, can be analysed as follows:
2023 2022
As at 30 September £m £m
Amounts not past due 30.5 36.0
Amounts past due:
– Less than 30 days 4.6 2.3
– 30 to 60 days 0.6 0.9
– More than 60 days 0.3 1.2
Total past due 5.5 4.4
Lifetime expected credit losses (0.5) (1.1)
Amounts specifically impaired 0.1 0.1
Specific allowances for bad and doubtful debts (0.1) (0.1)
Carrying amount of impaired receivables
Trade receivables net of allowances 35.5 39.3
Movements in the allowance for impairments were:
2023 2022
£m £m
At beginning of year 1.2 0.8
Charge in the year 1.3 1.4
Release of allowance (1.9) (1.0)
At end of year 0.6 1.2
The range of expected credit loss (‘ECL’) allowance is as follows:
Less than 30 to 60 60 to 90 More than
30 days days days 90 days
Current past due past due past due past due Total
£m £m £m £m £m £m
2023
% allowance 0%0.3% 0.5%–1.5% 20%50% 50%60% 75%–100%
Trade receivables 30.5 4.6 0.6 0.1 0.3 36.1
Allowance (inclusive of specific
impairments) (0.1) (0.1) (0.1) (0.1) (0.2) (0.6)
35.5
2022
% allowance 0%0.3% 0.5%–1.5% 20%50% 50%60% 75%–100%
Trade receivables 36.0 2.3 0.9 0.6 0.7 40.5
Allowance (inclusive of specific
impairments) (0.1) (0.1) (0.2) (0.3) (0.5) (1.2)
39.3
The credit risk in respect of cash and cash equivalents, other financial assets and derivative financial instruments is limited because the
counterparties with significant balances are established international banks whose credit ratings are monitored on an ongoing basis. These
balances are therefore considered to have low credit risk on initial recognition.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
166
Notes to the financial statements conti nued
16. Financial instruments and risk management continued
Group continued
Credit risk continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and other short-term deposits with original maturities typically of three
months or less. The cash and cash equivalents disclosed in the Group balance sheet and in the Group cash flow statement include £3.4m
ring-fenced in the Group’s Chinese subsidiaries, which is committed to capital expansion (FY 2022: £2.8m) and therefore is not available
for general use by the other entities within the Group.
Other financial assets
Cash invested in term or notice deposits with original maturities greater than three months in duration does not meet the criteria to be
classified as cash and cash equivalents. Accordingly, these deposits have been presented within other financial assets and are carried at
amortised cost in accordance with IFRS 9.
Financial assets held at amortised costs
Financial assets held at amortised cost consists of loans receivable. The loan receivable’s initial fair value is the present value of the future
repayments, discounted using a market rate of interest for an arms length loan, when the loan is granted interest free. As the loans
receivable are held for collection of contractual cash flows, where cash flows represent solely payments of principle and effective interest,
they are measured at amortised cost in accordance with IFRS 9. Both the initial discount between the fair value and loan value, and the
subsequent unwind of the discount is included within finance (costs)/income in the income statement.
As at 30 September 2023, the maximum exposure with a single bank for deposits (cash and cash equivalents and other financial assets) was
£19.8m (30 September 2022: £26.3m) for the Group. As at 30 September 2023, the largest mark to market exposure for gains on forward
foreign exchange contracts to a single bank was £0.9m (30 September 2022: £nil). The amounts on deposit at the year end represent the
Group’s maximum exposure to credit risk on cash and deposits.
Liquidity risk
The Group’s objective in terms of funding capacity is to ensure that it always has sufficient short-term and long-term funding available,
either in the form of the Group’s cash resources or committed bank facilities. The Group has sufficient funds available to meet its current
funding requirements for both revenue and capital expenditure. In order to further manage liquidity risk to an acceptable level, the
Group had a UK bank facility of £40m (£20m committed and £20m accordion) at the year end, which was all undrawn at the year end
date. Subsequent to the year end, the Group has renewed its bank facility, increasing the facility to £60m (£40m committed and £20m
accordion), which expires in October 2026.
Both the previous and renewed facility contains covenant measures that are tested biannually. They consist of:
u
leverage, being the ratio of Group consolidated net debt to Group consolidated profit before interest, tax, depreciation and
amortisation; and
u
interest cover, being the ratio of Group consolidated profit before interest and tax to the Group consolidated net interest.
In addition to the UK bank facility, the Group has an RMB loan facility in PVYX, details of which are included in note 15.
As at 30 September 2023, the Group had a cash and cash equivalents balance of £33.4m (30 September 2022: £58.7m). In addition to
this, the Group had cash held on 95-day notice deposit accounts of £0.1m (30 September 2022: £10.1m). The maximum deposit length
utilised by the Group when cash is invested both during the year ended 30 September 2023 and up to the date of this report is 95 days
(FY 2022: 95 days).
Financial assets held at amortised cost
The loans receivable granted in the current year are secured, non-interest bearing with an agreed term of 12 years, with repayments
commencing from FY 2029. The loans receivable have been discounted to present value, with this discount charge included in finance costs
in the income statement, matching against where the interest is being unwound over the term of the loan.
The credit risk in relation to the loans receivable is deemed to be low after consideration of the risk of default; the debtor is considered to
have capacity to meet the contractual cash flow obligations per the contract.
Price risk
The Group’s products contain a number of key raw materials and its operations require energy, notably electricity and natural gas. Any
increase or volatility in prices and any significant decrease in the availability of raw materials or energy could affect the Group’s results.
Victrex strives to obtain the best prices and uses contractual means to benefit where appropriate and possible. The Group has a significant
degree of influence over its supply chain which enables it to effectively manage the risk in this area.
Capital management
The Group defines the capital that it manages as the Group’s total equity. The Group’s policy for managing capital is to maintain a strong
balance sheet with the objective of maintaining customer, supplier and investor confidence in the business and to ensure that the Group
has sufficient resources to be able to invest in future development and growth of the business.
FINANCIAL STATEMENTS
167
Annual Report 2023 Victrex plc
16. Financial instruments and risk management continued
Financial assets held at amortised cost continued
Capital management continued
Following engagement with shareholders during FY 2023, share buybacks are now included as an option for future shareholder returns,
alongside special dividends, within our capital allocation policy. The Board does not expect to make share repurchases during 2024, based
on current cash resources and ongoing investment in the business. To ensure the Board has the necessary flexibility, there is a resolution
proposed at each AGM to authorise the Company to make one or more market purchases of its ordinary shares up to a maximum number
of shares equal to 10% of its issued ordinary share capital as at the date of the Notice of Annual General Meeting.
The Group’s capital and equity ratio is as follows:
2023 2022
As at 30 September £m £m
Total equity 501.0 490.6
Total assets 626.6 641.6
Equity ratio 80% 76%
Financial instruments
Summary of categories of financial assets and liabilities
Carrying amount and fair value
As at 30 September Note Classification under IFRS 9
2023
£m
2022
£m
Financial assets
Forward exchange contracts used for hedging (derivative instruments) Fair value –
hedging instrument
2.0
Unquoted investments 11 FVTPL 3.5 3.5
Other financial assets held at fair value FVTPL 9.7 6.6
Other financial assets held at amortised cost Amortised cost 0.7 10.1
Trade and other receivables 14 Amortised cost 37.2 42.4
Cash and cash equivalents Amortised cost 33.4 58.7
Financial liabilities
Forward exchange contracts used for hedging (derivative instruments) Fair value –
hedging instrument
(1.8) (19.9)
Borrowings – due within one year 15 Amortised cost (5.2) (0.9)
Borrowings – due after one year 15 Amortised cost (34.5) (21.6)
Trade and other payables 18 Other financial liabilities (34 .1) (59.7)
Financial assets and liabilities held at fair value
Fair value is determined using the fair value hierarchy which takes into account the availability of input data into the fair value calculation,
with levels going from Level 1 (quoted market prices available) through to Level 3 (unobservable inputs) with more assumptions inherent
in the fair value calculation of Level 3 assets. Where observable inputs are not available then another valuation technique is used, such
as an income approach or market approach.
All financial assets and liabilities measured at fair value are categorised as Level 2 within the fair value hierarchy, with the exception of investments
in unquoted companies and other financial assets held at fair value which are categorised as Level 3. See note 11 for further details. The maturity
profiles of the derivative instruments in designated hedge accounting relationships and trade receivables are given on pages 164 and 165
respectively. Information on the maturity of the financial liabilities is included both within this note and within note 15. For trade and other
payables there are no amounts due after one year, the majority falling due in 30 days or less. All fair value measurements are recurring.
Reconciliation of movement in net funds/(debt)
Net funds/(debt) consists of cash and cash equivalents together with other financial assets, long-term and short-term loans and finance
lease liabilities.
Note
As at
1 October
2022
£m
Cash flow
£m
Exchange and
other non-cash
movements
£m
Movement in
loans
£m
As at
30 September
2023
£m
Cash and cash equivalents 16 58.7 (24.3) (1.0) 33.4
Other financial assets 16 10.1 (10.0) 0.1
Borrowings – due within one year 15, 16 (0.9) 0.9 (0.1) (5.1) (5.2)
Borrowings – due after one year 15, 16 (21.6) 0.9 1.8 (15.6) (34.5)
Lease liabilities 19 (9.6) 2.1 (3.0) (10.5)
Net funds/(debt) 36.7 (30.4) (2.3) (20.7) (16.7)
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
168
Notes to the financial statements conti nued
Note
As at
1 October
2021
£m
Cash flow
£m
Exchange and
other non-cash
movements*
£m
Movement in
loans
£m
As at
30 September
2022
£m
Cash and cash equivalents 16 74.9 (18.6) 2.4 58.7
Other financial assets 16 37.5 (27.4) 10.1
Borrowings – due within one year 15, 16 (0.9) (0.9)
Borrowings – due after one year 15, 16 (5.9) 0.3 (2.3) (13.7) (21.6)
Lease liabilities 19 (10.0) 2.1 (1.7) (9.6)
Net funds 96.5 (43.6) (1.6) (14.6) 36.7
* The only other non-cash movement relates to lease liabilities, see note 19.
Company
The only receivables of the Company are amounts owed by subsidiary undertakings. These are carried at amortised cost subsequent to
initial recognition.
There are no future expected credit losses on amounts owed by subsidiary undertakings.
17. Retirement benefits
Employee benefits
Defined contribution pension schemes
Obligations for contributions to defined contribution pension schemes are recognised as an expense in the income statement as incurred.
Defined benefit pension schemes
The Group’s asset and obligation in respect of defined benefit pension schemes recognised in the balance sheet is the present value
of the future benefits that employees have earned in return for their service in the current and prior periods, less the fair value of plan
assets. The defined benefit asset and obligation are calculated by independent actuaries using the projected unit credit method. The
present value of the defined benefit asset and obligation is determined by discounting the estimated future cash outflows using interest
rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and have terms to maturity
approximating to the terms of the related pension liability.
When the calculation results in a benefit to the Group, the recognised asset is the present value of economic benefits available in the
form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply. An economic benefit is available to the
Group if it is realisable during the life of the plan or on settlement of the plan liabilities. When the benefits of a plan are improved,
the portion of the increased benefit relating to past service by employees is recognised in profit or loss on a straight line basis over
the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised in
profit or loss.
Actuarial gains and losses are immediately recognised in full through the Consolidated statement of comprehensive income.
Critical judgements and key sources of estimation uncertainty in relation to pension scheme valuation
The valuation of pension scheme assets and liabilities are calculated in accordance with Group policy. The valuations are prepared by
independent qualified actuaries, but significant estimates are required in relation to the assumptions for pension increases, inflation, the
discount rate applied and member longevity, which underpin the valuations. Information about the assumptions relating to retirement
benefit assets and obligations and also the sensitivity of the pension asset and liability to movements in these assumptions is presented
below. The sensitivity shows that a change in the estimation assumptions could result in a material change in the carrying value of the
scheme assets and liabilities within the next 12 months.
Impact of climate change
The impact of climate change has been discussed with the UK pension trustee. Whilst not an income statement impacting change,
a movement in the net defined benefit pension balance would potentially impact long-term cash flows if further contributions
were required or a lower surplus were returned to the Company on satisfaction of all outstanding liabilities. The potential impact
of climate change would most likely be seen in the value of scheme assets if they were not appropriately managed.
At 30 September 2023 the scheme does not hold any equities or growth funds with the funds held at 30 September 2022 sold
during the year. At 30 September 2022, approximately 30% of its scheme assets were in equities and growth funds spread across
a number of funds, each of which was tasked with maximising return within an appropriate risk framework. The pension trustees,
with the support of the Company, continue to develop their own ESG policy which is likely to result in an ESG linked investment
strategy for when equity and growth assets are held by the scheme. This will align to the Company’s strategy and also ensure that
investments are not ‘stuck’ in declining equities thus risking under performance. As a result, the Directors have concluded that no
climate-related risk adjustment is required at 30 September 2023.
16. Financial instruments and risk management continued
Reconciliation of movement in net funds/(debt) continued
FINANCIAL STATEMENTS
169
Annual Report 2023 Victrex plc
17. Retirement benefits continued
Employee benefits continued
The Group operates a number of pension schemes for its employees throughout the world. Outside the UK and Germany, the Company
operates defined contribution pension schemes. Each scheme operates under the regulatory environment of the jurisdiction in which it
is located.
Victrex Pension Fund (UK)
The principal scheme operated by the Group is a funded UK pension scheme, which is subject to the statutory funding objective under
the Pensions Act 2004, in which employees of UK subsidiary undertakings participate. The scheme has two sections. One section provides
benefits on a defined benefit basis with benefits related to final pensionable pay. The defined benefit section was closed to new members
from 31 December 2001. From this date new employees have been invited to join the second section that provides benefits on a defined
contribution basis. The defined benefit scheme closed to future accrual on 31 March 2016, with employees in the scheme eligible to join
the defined contribution scheme.
The latest triennial valuation was performed to 31 March 2022 and showed a scheme surplus of £16.8m. The surplus position means the Group
has no current obligation to make further contributions to the scheme, although this may change following future valuations. The Group made
additional contributions of £1.0m during the years ended 30 September 2022 and 2023 as part of an ongoing programme with the trustees
to work towards self-sufficiency. The Group remains committed to working towards self-sufficiency and intends to continue to make voluntary
contributions where appropriate.
The current investment strategy was agreed with the trustees following the latest triennial valuation and focused on working towards self-
sufficiency with the assets increasingly matched to the nature and term of the liabilities. This included reducing the exposure to equities and
increasing the use of liability-driven investments to better manage the scheme’s exposure to interest rate risk. By 30 September 2023 all
growth assets have been transferred to liability-driven investments. The investment strategy is reviewed on a regular basis with the trustees
and scheme advisors.
The defined contribution scheme is open to all UK employees with the Group making contributions at a level which varies with the
percentage of salary the employee contributes. The total expense for the defined contribution scheme is included in ‘staff costs’ within the
income statement line where the employee operates. The expense for the year ended 30 September 2023 was £6.7m (FY 2022: £5.8m).
Victrex Europa GmbH Pension Fund (Germany)
The Group operates another defined benefit scheme in Germany for the benefit of one, now retired, employee. Due to the small size of
this scheme, the disclosure has historically been combined with that of the UK defined benefit scheme. During the financial year ended
30 September 2021, the insurance policies which comprise the assets of the scheme started to mature. At that point, under German law,
having received permission from the beneficiary, the Group elected to assume the benefit of these assets for use in the business and leave
the scheme unfunded – making the pension payments from the Group’s cash flow. As a result the net liability of the scheme increased,
and increased further during the year ended 30 September 2022, as the last remaining assets were transferred to the Group. Following
the decision to transfer the assets to the Group, which increased the net liability, the German scheme has been separately disclosed from
FY 2021 onwards.
Risks associated with the defined benefit scheme
Investment risk
The scheme has the option to hold investments in asset classes, such as equities, which have volatile market values, and while these
assets are expected to provide real returns over the long term, the short-term volatility can cause additional funding to be required if a
deficit emerges.
Interest rate risk
The scheme’s liabilities are assessed using market yields on high quality corporate bonds to discount the liabilities. As the scheme holds
assets such as equities, the value of the assets and liabilities may not move in the same way, although this is mitigated to some extent by
the scheme’s liability-driven investment holdings which, although not based on changes in corporate bonds, would be expected to move
in a similar way to the liabilities.
Inflation risk
A significant proportion of the benefits under the scheme are linked to inflation. Although the scheme’s assets are expected to provide
a good hedge against inflation over the long term, in particular through the scheme’s liability-driven investment holdings, movements
in the short term could lead to deficits emerging.
Longevity risk
In the event that members live longer than assumed, an additional deficit will emerge in the scheme, as the present value of the defined
benefit liabilities is calculated with regards to a best estimate of the mortality of plan members.
Where the IAS 19 valuation shows scheme assets in excess of scheme liabilities, an asset is recognised based on the fact that under the
terms of the Trust Deed agreement, the sponsoring company is entitled to any assets that remain in the scheme after the settlement of
all pension liabilities. There are no restrictions on the current realisability of the surplus.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
170
Notes to the financial statements conti nued
17. Retirement benefits continued
Risks associated with the defined benefit scheme continued
Longevity risk continued
IAS 19 disclosures relating to defined benefits are as follows:
Principal actuarial assumptions
As at 30 September 2023 – UK Scheme 2023 – German Scheme 2022 – UK Scheme 2022 – German Scheme
Discount rate 5.40% 3.75% 5.05% 3.72%
RPI inflation 3.55% n/a 3.80% n/a
CPI inflation 2.95% 2.30% 3.20% 2.00%
Future pension increases 3.40% n/a 3.50% n/a
Mortality tables:
– Male 92% of S3PMA 100% of RT2018G 92% of S3PMA 100% of RT2018G
– Female 95% of S3PFA n/a 95% of S3PFA n/a
Mortality improvements:
– Model CMI 2022 RT2018G CMI 2021 RT2018G
– Long-term rate of improvement 1.25% Individual 1.25% Individual
– Initial addition 0.25% Individual 0.25% Individual
Life expectancy from age 62 of current
pensioners:
– Male 25.3 yrs
1
23.5 yrs
1
25.4 yrs
2
23.4 yrs
2
– Female 27.6 yrs
1
n/a 27.7 yrs
2
n/a
Life expectancy from age 62 of active
and deferred members:
– Male 26.5 yrs
3
26 .0 y rs
3
26.6 yrs
4
25.8 yrs
4
– Female 28 . 8 y rs
3
n/a 28.9 yrs
4
n/a
1 Life expectancy from age 62 for members aged 62 in 2023.
2 Life expectancy from age 62 for members aged 62 in 2022.
3 Life expectancy from age 62 for members aged 45 in 2023.
4 Life expectancy from age 62 for members aged 45 in 2022.
The average duration of the benefit obligation at the end of the reporting period is 15 years (FY 2022: 17 years).
Significant actuarial assumptions for the determination of the defined benefit surplus are discount rate and inflation rate. The sensitivity
analysis below has been determined based on reasonably possible changes in the assumptions occurring at the end of the reporting period
assuming that all other assumptions are held constant:
UK Scheme – reduction in fund
surplus as at 30 September
Change in assumption
2023
£m
2022
£m
Reduce discount rate by 1% p.a. 7.6 8.6
Increase inflation expectations by 1% p.a. 5.0 5.8
Increase life expectancy by one year 1.3 1.3
Inter-relationships between the assumptions, especially between discount rate and expected inflation rates, are expected to exist in
practice. The above analysis does not take the effect of these inter-relationships into account.
Amounts recognised in the balance sheet
2023 2022
As at 30 September £m £m
Retirement benefit assets
UK Scheme 9.7 14.9
Total retirement benefit assets 9.7 14.9
Retirement benefit liabilities
German Scheme (2.5) (2.7)
Total retirement benefit liabilities (2.5) (2.7)
FINANCIAL STATEMENTS
171
Annual Report 2023 Victrex plc
17. Retirement benefits continued
UK Scheme/Combined Scheme disclosures
UK Scheme Combined Schemes
2023 2022 2021 2020 2019
As at 30 September £m £m £m £m £m
Present value of funded obligations (45.7) (49.2) (81.1) (88.2) (85.8)
Fair value of scheme’s/schemes’ assets 55.4 64.1 95.3 95.7 94.9
Net asset before deferred taxation 9.7 14.9 14.2 7.5 9.1
Related deferred taxation liability (2.4) (3.7) (3.6) (1.4) (1.5)
Net asset after deferred taxation 7.3 11.2 10.6 6.1 7.6
Change in assumptions and experience adjustments arising
on scheme’s/schemes’ liabilities 3.4 30.8 (0.4) (2.2) (14.8)
Experience adjustments arising on scheme’s/schemes’ assets (10.4) (31.4) 4.1 (0.8) 8.9
Changes in the present value of the funded obligation
UK Scheme
2023 2022
£m £m
Defined benefit obligation at beginning of year (49.2) (81.1)
Interest cost (2.4) (1.6)
Actuarial gains 3.4 30.8
Benefits paid 2.5 2.7
Defined benefit obligation at end of year (45.7) (49.2)
Changes in the fair value of the scheme assets
UK Scheme
2023 2022
£m £m
Fair value of scheme assets at beginning of year 64.1 95.3
Interest income on assets 3.2 1.9
Return on assets excluding interest (10.4) (31.4)
Contributions by employer 1.0 1.0
Benefits paid (2.5) (2.7)
Fair value of scheme assets at end of year 55.4 64.1
Major categories of scheme assets
UK Scheme UK Scheme
2023
Quoted
2023
Unquoted
2023
Total
2022
Quoted
2022
Unquoted
2022
Total
As at 30 September £m £m £m £m £m £m
UK equities 0.3 0.3
Non-UK equities 9.0 9.0
Diversified growth and absolute return funds
1
10.3 10.3
Liability-driven investments
2
40.5 40.5 19.7 19.7
Debt instruments 1.2 12.6 13.8 5.8 16.9 22.7
Cash in transit 1.9 1.9
Cash 1.1 1.1 0.2 0.2
Fair value of scheme assets at end of year 42.8 12.6 55.4 27.6 36.5 64.1
1 Diversified growth and absolute return funds are funds that invest in a wide variety of asset classes in order to deliver real capital appreciation over the
medium to long term, typically aiming for a certain level of absolute return.
2 Liability-driven investments are a portfolio of assets that are linked to the drivers of movements in pension liabilities such as inflation and interest rates.
These are assets designed to deliver geared movements in the underlying liabilities as they reflect changes to inflation and interest rates.
Quoted assets are those with a quoted price in an active market. Unquoted assets are those which do not have a daily market price and are
valued by investment managers, except for the insurance policies which are valued at surrender price.
The Group does not hold any of its own transferable financial instruments as plan assets and the plan assets do not contain any properties
that are occupied by the Group.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
172
Notes to the financial statements conti nued
17. Retirement benefits continued
Amounts recognised in the income statement
UK Scheme
2023 2022
Note £m £m
Interest on liabilities (2.4) (1.6)
Interest income on assets 3.2 1.9
Total income 0.8 0.3
Interest on liabilities – German Scheme (see below) (0.1)
Total income included in ‘staff costs’ 5 0.7 0.3
The total income included in ‘staff costs’ is included within sales, marketing and administrative expenses.
Gross amounts of actuarial gains and losses recognised in the Consolidated statement of comprehensive income
UK Scheme
2023 2022
£m £m
UK Scheme at beginning of year 3.1 3.7
Loss in year (7.0) (0.6)
Cumulative amount at end of year (3.9) 3.1
Up to and including the year ending 30 September 2020 the cumulative amount of actuarial gains and losses on the UK and German
schemes were presented on a combined basis and totalled a loss of £16.3m. Obtaining a historical split of this balance between this
schemes was not practical and therefore, from 1 October 2021, following the presentation of these schemes gross, the individual
cumulative effects were restarted from £nil. The cumulative aggregate amount of actuarial gains and losses on the UK and German
schemes at 30 September 2023 was a loss of £20.4m (30 September 2022: loss of £13.5m).
Actuarial gains and losses arising from changes in demographic and financial assumptions
UK Scheme
2023 2022
£m £m
Changes in demographic assumptions 1.1 0.3
Changes in financial assumptions 3.5 34.1
Experience losses on liabilities (1.2) (3.6)
Total actuarial gains on scheme liabilities 3.4 30.8
Return on assets excluding interest (10.4) (31.4)
Total actuarial losses (7.0) (0.6)
German Scheme disclosures
German Scheme
2023 2022
As at 30 September £m £m
Present value of funded obligations (2.5) (2.7)
Net liability before deferred taxation (2.5) (2.7)
Related deferred taxation asset 0.4 0.7
Net liability after deferred taxation (2.1) (2.0)
Change in assumptions and experience adjustments arising on scheme’s liabilities 0.1 0.8
Changes in the present value of the funded obligation
German Scheme
2023 2022
£m £m
Obligations at beginning of year (2.7) (3.5)
Exchange gain/(loss) on opening obligations 0.1 (0.1)
Interest cost (0.1)
Actuarial gains 0.1 0.8
Benefits paid 0.1 0.1
Defined benefit obligation at end of year (2.5) (2.7)
FINANCIAL STATEMENTS
173
Annual Report 2023 Victrex plc
17. Retirement benefits continued
Changes in the fair value of the scheme assets
German Scheme
2023 2022
£m £m
Assets at beginning of year 1.6
Exchange gain on opening assets 0.1
Benefits paid (0.1)
Assets distributed to employer (1.6)
Fair value of scheme assets at end of year
Prior to maturity, the scheme assets were all held as unquoted insurance policies.
The total expense included in ‘staff costs’ in respect of the German Scheme were £0.1m (FY 2022: less than £0.1m), which is included
within sales, marketing and administrative expenses.
The gross amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income in respect of the
scheme was a gain of £0.1m.
German Scheme
2023 2022
£m £m
German Scheme at the beginning of the year 1.6 0.8
Movement in year 0.1 0.8
Cumulative amount at end of year 1.7 1.6
Actuarial gains and losses arising from changes in demographic and financial assumptions
German Scheme
2023 2022
£m £m
Changes in demographic assumptions
Changes in financial assumptions (0.1) 0.8
Experience gains on liabilities 0.2
Total actuarial gains on scheme liabilities 0.1 0.8
18. Trade and other payables
Trade payables are obligations to pay for goods acquired in the ordinary course of business from suppliers.
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using
the effective interest method.
Group Company
2023 2022 2023 2022
As at 30 September £m £m £m £m
Trade payables 7.6 7.3
Accruals 22.2 40.1 0.1 0.1
Other 4.3 12.3
34.1 59.7 0.1 0.1
The fair value of trade and other payables approximates to their carrying value.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
174
Notes to the financial statements conti nued
19. Lease liabilities
Lease liabilities
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made.
The Group has elected not to recognise ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less
and those leases of low-value assets. Payments associated with short-term leases and leases of low-value assets are recognised on a
straight line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less that do not
contain a purchase option. Low-value assets mainly comprise office equipment.
Lease liabilities are initially measured at their present value, which includes the following lease payments: fixed payments (including in-
substance fixed payments), less any lease incentives receivable; variable lease payments that are based on an index or a rate (using the
index or rate in place at transition); amounts expected to be payable by the Group under residual value guarantees; the exercise price of
a purchase option if the Group is reasonably certain to exercise that option; payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option; and payments to be made under reasonably certain extension options. Lease liabilities and
the corresponding right of use asset are subsequently remeasured where there is a change in future lease payments resulting from a rent
review or change in index or rate.
The lease payments are discounted using the Group’s incremental borrowing rate. Each lease payment is allocated between the principal
and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the lease liability for each period.
Lease liabilities recognised at 30 September are as follows:
£m
Lease liabilities
Balance at 1 October 2021 10.0
Additions 1.5
Payments (2.1)
Interest on lease liabilities 0.2
Balance at 30 September 2022 9.6
Additions 3.0
Payments (2.1)
Interest on lease liabilities 0.2
Disposals (0.2)
Balance at 30 September 2023 10.5
The maturity of these lease liabilities at 30 September is as follows:
2023
£m
2022
£m
Due within one year 1.6 1.8
Due between two and five years 5.0 3.3
Due after five years 3.9 4.5
Total 10.5 9.6
20. Contingent liabilities
Contingent liabilities
Contingent liabilities are potential future cash outflows, where the likelihood of payment is considered more than remote but is not
considered probable or cannot be measured reliably.
At 30 September 2023, the Group had no contingent liabilities (30 September 2022: none).
The Company guarantees the RMB loan facility in PVYX (see note 15).
In addition the Company has a guarantee in favour of Barclays Bank PLC (the ‘bank’) to cover any liabilities due to the bank by the Company
and its fellow UK subsidiaries up to a maximum value of £12m (30 September 2022: same).
FINANCIAL STATEMENTS
175
Annual Report 2023 Victrex plc
21. Share-based payments
Share-based payment transactions and employee share ownership trusts (‘ESOT’)
The fair value of the employee services received in exchange for the grant of the options is recognised as an expense with a
corresponding increase in equity. Share-based payment transactions are recharged from the Company to those subsidiaries benefiting
from the service of the employees to whom options are granted.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding
the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of
options that are expected to vest and include employee service periods and performance targets which are not related to the Company’s
share price, such as earnings per share growth. The fair value of the options is measured by the Black-Scholes or Stochastic model,
taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date, the entity revises
its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original
estimates, if any, in the income statement and a corresponding adjustment to equity over the remaining vesting period.
Any failure to meet market conditions, which include performance targets such as share price or total shareholder return, would not
result in a reversal of original estimates in the income statement and any remaining charges would be accelerated.
The proceeds received, net of any directly attributable costs, are credited to share capital (nominal value) and share premium when the
options are exercised.
The Group and Company provide finance to the ESOT to purchase Company shares in the open market. Costs of running the ESOT
are charged to the income statement. The cost of shares held by the ESOT is deducted in arriving at equity until they are exercised
by employees.
All share-based payment costs are recharged to the trading entities.
All options are settled by the physical delivery of shares. The terms and conditions of all the grants are as follows:
Victrex 2015 Executive Share Option Plan (‘ESOP’)
All employees are eligible to participate. All ESOP options are exercisable from the date of vesting to the 10-year anniversary of the grant
date. The Remuneration Committee currently excludes Executive Directors from participating in this plan. Option awards are based on a
percentage of basic salary, not exceeding 100% of salary in each financial year. The exercise price of the options is equal to the market price
of the shares on the date of grant. ESOP options are conditional on the employee completing three years’ service (the vesting period) and
achieving the performance condition(s), if applicable. The level of awards vesting will vary depending on EPS growth.
In order for awards issued prior to December 2020 to reach the threshold level of vesting, the EPS growth of the Group must exceed
2% per annum with some awards requiring this growth to be above the Retail Price Index. For awards over 33% of salary, the threshold
increases to 3%, and then to 4% for awards over 66% of salary. Straight line vesting will occur to the extent that EPS growth falls between
these annual EPS growth targets.
For awards issued in December 2020 and May 2021, where awards granted are at less than 50% of salary, to reach the threshold level of
vesting, the EPS growth of the Group must exceed 5.8% per annum. Shares will vest up to 100% on a straight line basis if the EPS grows by
9.9% over the three-year period. For awards granted at 50% of salary, EPS must be at least 89.25p per ordinary share in the final financial
year of the performance period to vest at 20%. Vesting will increase to a maximum vesting of 100% at 100.0p per share in FY 2023, with
the options vesting on a straight line basis between these targets.
For awards issued in December 2021 and May 2022, where awards granted are at less than 50% of salary, to reach the threshold level of
vesting, the EPS growth of the Group must exceed 5% per annum. Shares will vest up to 100% on a straight line basis if the EPS grows by
10.0% over the three-year period. For awards over 33% of salary, the threshold increases to 7.5% EPS growth. For awards granted at 50%
of salary, EPS must be at least 96.5p per ordinary share in the final financial year of the performance period to vest at 20%. Vesting will
increase to a maximum vesting of 100% at 111.0p per share in FY 2024, with the options vesting on a straight line basis between these targets.
For awards issued on or after December 2022, options with an aggregate exercise price of up to 33% of participants salary become
exercisable if EPS growth is not less than 2% per year, and these will vest on a straight line basis up to those with an aggregate exercise
price of 100% of the participant’s salary with EPS growth of 4% or more per year.
Victrex 2015 Sharesave Plan
UK resident employees and full-time Directors of the Company or any designated participating subsidiary are eligible to participate. The
exercise price of the granted Sharesave Plan options is equal to the market price of the ordinary shares less 20% on the date of grant.
Victrex 2015 Employee Stock Purchase Plan
US-based employees (including Executive Directors) are eligible to participate. The price payable for each ordinary share shall be a price
determined by the Board, and it shall not be less than 85% of the lower of the market value of an ordinary share on the date of grant or the
date of purchase.
Awards may be granted over a number of ordinary shares determined by the amount employees have saved by the end of a one-year
savings period.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
176
Notes to the financial statements continued
21. Share-based payments continued
Victrex 2019 Long Term Incentive Plan
Each year Executive Directors, and senior executives by invitation, are eligible to be awarded options to acquire, at no cost, market
purchased ordinary shares in the Company up to a maximum equivalent of 175% of basic salary. In exceptional circumstances, such as
recruitment or retention, this limit is increased to 200% of an employee’s annual basic salary.
Details of the 2019 LTIP can be found within the Directors’ remuneration report on page 105.
Victrex 2017 Deferred Bonus Scheme (‘DBS’)
Adopted by the Remuneration Committee on 9 October 2017, this plan requires Executive Directors to defer up to a maximum of 100%
of their earned bonus into shares for three years.
Number and weighted average exercise prices of share options
ESOP Sharesave Plan Stock Purchase Plan LTIP DBS
Weighted Weighted Weighted Weighted Weighted
average average average average average
exercise Number exercise Number exercise Number exercise Number exercise Number
price of options price of options price of options price of options price of options
Outstanding at
1 October 2021 2,137p 908,840 1,942p 278,874 nil p 321,111 nil p 9,647
Granted during the year 2,369p 239,359 1,891p 113,785 2,153p 8,059 nil p 152,161 nil p 23,382
Forfeited during the year 2,212p (272,910) 1,939p (21,204) nil p (131,995) nil p
Cancelled during the year 1,962p (21,939) nil p nil p
Exercised during the year 1,771p (9,559) 1,648p (8,838) 2,153p (8,059) nil p (14,550) nil p (5,237)
Outstanding at
30 September 2022 2,182p 865,730 1,932p 340,678 nil p 326,727 nil p 27,792
Granted during the year 1,596p 328,221 1,394p 374,055 1,490p 11,328 nil p 365,932 nil p 27,885
Forfeited during the year 2,079p (257,085) 1,857p (195,423) nil p (85,613) nil p
Cancelled during the year 1,814p (93,277) nil p nil p
Exercised during the year 1,573p (12,020) 1,490p (11,328) nil p (7,311) nil p (4,410)
Outstanding at
30 September 2023 1,965p 924,846 1,520p 426,033 nil p 599,735 nil p 51,267
Range of exercise prices
2023 1,496p–2,730p 1,394p2,164p nil p n/a
2022 1,502p2,730p 1,891p2,164p nil p n/a
Weighted average
contractual life (years)
2023 7.0 3.2 0.4 8.6 6.8
2022 6.9 1.9 0.4 8.3 6.8
Exercisable at end of year
2023 1,938p 249,014 2,015p 30,430 nil p 3,472
2022 1,920p 285,286 1,920p 95,022 nil p 7,159
During the year, the weighted average share price at the date of exercise was 1,704p for ESOPs (FY 2022: 2,069p) and was not applicable
for the Sharesave Plan as no Sharesave Plan options were exercised in FY 2023 (FY 2022: 1,784p). Details of the LTIP and DBS exercises are
included in the Directors’ remuneration report on page 119.
Fair value of share options and assumptions
Fair value of share options and weighted average assumptions
As at 30 September 2023 As at 30 September 2022
Stock Stock
Sharesave Purchase Sharesave Purchase
ESOP Plan Plan LTIP DBS ESOP Plan Plan LTIP DBS
Fair value at
measurement date 370p 552p 165p 1,550p 1,826p 388p 478p 144p 1,899p 2,272p
Share price at grant 1,972p 1,968p 1,753p 1,910p 1,996p 2,188p 2,225p 1,948p 2,358p 2,444p
Exercise price 1,964p 1,520p n/a nil p n/a 2,181p 1,932p n/a nil p n/a
Expected volatility 30% 29% 25% 28% n/a 29% 28% 22% 28% n/a
Expected dividends 2.8% 3.0% 3.4% 3.2% 3.1% 2.5% 2.6% 3.1% 2.6% 2.4%
Risk-free interest
rate 1.6% 2.6% 2.6% 2.0% n/a 0.5% 0.8% 0.3% 0.3% n/a
Option life 10 years 3.6 years 1 year 10 years 8 years 10 years 3 years 1 year 10 years 8 years
FINANCIAL STATEMENTS
177
Annual Report 2023 Victrex plc
21. Share-based payments continued
Fair value of share options and weighted average assumptions continued
The Company uses the Black-Scholes model for calculating the fair value of the share options where there are no market-based
performance conditions. Where there are market-based performance conditions a stochastic model is used.
The expected volatility is based on historical volatility over the period prior to grant equal to the expected term.
All share options are granted under a service condition and, for ESOP and LTIP, a non-market condition (‘EPS’). Such conditions are not
taken into account in the grant date fair value measurement of services received. In addition, the LTIP has a market condition (‘TSR’) and
for the LTIPs issued from FY 2022, a further non-market condition for ESG, which is taken into account in the grant date measurement of
fair value.
Staff costs – equity-settled share-based payment transactions
2023 2022
Note £m £m
ESOP (0.2) (0.5)
Sharesave Plan 0.6 0.3
LTIP and Deferred Bonus Scheme 0.3 1.5
Total equity-settled share-based payment transactions recognised in staff costs 5 0.7 1.3
Reclassified from trade and other payables 0.4 0.5
Amount recognised directly in equity 1.1 1.8
22. Share capital and reserves
Share capital
2023 2022
Number £m Number £m
Allotted, called up and fully paid shares of 1p each
Ordinary shares
At 1 October 2022 and 1 October 2021 86,995,029 0.9 86,968,573 0.9
Issued for cash 23,348 26,456
At 30 September 2023 and 30 September 2022 87,018,377 0.9 86,995,029 0.9
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per ordinary share
at meetings of the Company.
Share premium
During the year 23,348 (FY 2022: 26,456) shares were issued for cash, resulting in an increase in share premium of £0.4m (FY 2022: £0.4m).
Retained earnings
Retained earnings have been reduced by the reserve for own shares, which consists of the cost of shares of Victrex plc held by employee
trusts, and are administered by independent trustees. The total number of shares held in trust as at 30 September 2023 was 75,847
(30 September 2022: 87,903). Distribution of shares from the trusts is at the discretion of the trustees. Dividends attaching to these shares
have been waived.
Translation reserve
The translation reserve comprises all foreign exchange differences, since 1 October 2004 (as permitted by IFRS 1), arising from the
translation of the financial statements of foreign operations, adjusted for exchange differences arising on intragroup monetary items,
that, in substance, form part of the entity’s net investment in a foreign operation.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related
to forecast hedged transactions.
Dividends to shareholders
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
the dividends are approved.
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
178
22. Share capital and reserves continued
Dividends to shareholders continued
2023 2022
£m £m
Year ended 30 September 2021
– Final dividend paid February 2022 at 46.14p per ordinary share 40.0
– Special dividend paid February 2022 at 50.00p per ordinary share 43.5
Year ended 30 September 2022
– Interim dividend paid June 2022 at 13.42p per ordinary share 11.7
– Final dividend paid February 2023 at 46.14p per ordinary share 40.1
Year ended 30 September 2023
– Interim dividend paid June 2023 at 13.42p per ordinary share 11.7
51.8 95.2
A final dividend in respect of 2023 of £40.1m (46.14p per ordinary share) has been recommended by the Directors for approval at the
Annual General Meeting in February 2024. These financial statements do not reflect this dividend.
23. Related party transactions
Identity of related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and so are only
disclosed for the Company’s financial statements.
Company
2023 2022
£m £m
Trading transactions with subsidiaries
Administrative expenses paid on Company’s behalf by subsidiaries 0.7 0.4
Financing transactions with subsidiaries
Dividends received from subsidiaries 132.8
Cash transfers received from subsidiaries 56.0 144.5
Cash transfers made to subsidiaries 4.8 191.9
Amounts receivable from subsidiaries are disclosed in note 14.
The Group’s retirement benefit plans are related parties and the Group’s and Companys transactions with them are disclosed in note 17.
Details of transactions during the year relating to the Company’s investments in subsidiaries can be found in note 11.
Bond 3D High Performance Technology BV (‘Bond’), in which the Group has a 24.5% shareholding (FY 2022: 24.5%), is an associated
company. The Group’s transactions with Bond in the year comprise Bond being engaged to provide technical services of £34,000 for the
Group (FY 2022: none), the additional tranches of convertible loans made to Bond, and the share of loss recognised as set out in note 11.
There was no sale of material to Bond in the current year (FY 2022: £33,000).
Transactions with key management personnel
The key management of the Group and Company are those people having authority and responsibility for planning, directing and
controlling the activities of the Group and consist of the Board of Directors.
Compensation of key management personnel is shown in the table below:
2023 2022
£m £m
Short-term employment benefits 2.0 2.5
Post-employment benefits 0.2 0.2
Share-based payment benefits 0.5
2.2 3.2
More detailed information concerning Directors’ remuneration, including non-cash benefits and contributions to post-employment defined
benefit plans, is given in the Directors’ remuneration report on pages 100 to 123.
Directors of the Company control 0.08% of the voting shares of the Company, details of which are given on page 118.
Details of Directors’ indemnities are given on page 125.
Notes to the financial statements continued
FINANCIAL STATEMENTS
179
Annual Report 2023 Victrex plc
24. Exchange rates
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operated (the ‘functional currency’). The consolidated financial statements are presented in Sterling,
which is the Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing on the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation to balance sheet date
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when
deferred in equity as qualifying cash flow hedges. In addition, where an exchange difference arises on an intragroup monetary item that, in
substance, forms part of the entity’s net investment in a foreign operation, these differences are recognised in other comprehensive income
in the consolidated financial statements and accumulated in equity until the disposal of the foreign operation.
Group companies
The results and financial position of all the Group entities (none of which have the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
u
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
u
income and expenses for each income statement are translated at weighted average exchange rates; and
u
all resulting exchange differences, from 1 October 2004, are recognised as a separate component of equity.
The most significant Sterling exchange rates used in the financial statements under the Group’s accounting policies are:
2023 2022
Average spot Closing Average spot Closing
US Dollar 1.16 1.22 1.30 1.10
Euro 1.14 1.16 1.16 1.13
The average exchange rates in the above table are the weighted average spot rates applied to foreign currency transactions, excluding the
impact of foreign currency contracts. Any gains and losses on foreign currency contracts, where net hedging has been applied for cash flow
hedges, have been separately disclosed in the income statement as required, in accordance with IFRS 9.
25. Alternative performance measures
This section includes a reconciliation of certain alternative performance measures (‘APMs’) to the most directly reconcilable line items in
the financial statements. The presentation of APMs should not be considered in isolation or as a substitute for related financial measures
prepared in accordance with IFRS. The APMs presented in this report may differ from similarly titled measures used by other companies.
Where one APM is derived from another APM, a cross-reference to the relevant APM has been included, which then provides the reconciliation
to the most directly reconcilable line items. APM1 to APM 11 below have been calculated on a consistent basis to prior year with the exception
of APM 8 ROCE, this change is explained below. One additional APM, underlying PBIT (APM 11), has been included in the current year.
APM 1 Operating profit before exceptional items (referred to as underlying operating profit) is based on operating profit before the
impact of exceptional items. This metric is used by the Board to assess the underlying performance of the business excluding
items that are, in aggregate, material in size and/or unusual or infrequent in nature. Exceptional items for FY 2023 is a charge
of £7.5m (FY 2022: charge of £7.9m) relating to the implementation of the SaaS ERP system (FY 2022: same), further details of
which are disclosed in note 3.
2023 2022
£m £m
Operating profit 73.2 88.5
Exceptional items 7.5 7.9
Underlying operating profit 80.7 96.4
APM 2 Profit before exceptional items and tax (referred to as underlying profit before tax) is based on profit before tax (‘PBT’) before
the impact of exceptional items. This metric is used by the Board to assess the underlying performance of the business excluding
items that are, in aggregate, material in size and/or unusual or infrequent in nature. Exceptional items for FY 2023 is a charge
of £7.5m (FY 2022: charge of £7.9m) relating to the implementation of the SaaS ERP system (FY 2022: same), further details of
which are disclosed in note 3.
2023 2022
£m £m
Profit before tax 72.5 87.7
Exceptional items 7.5 7.9
Underlying profit before tax 80.0 95.6
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
180
Notes to the financial statements conti nued
25. Alternative performance measures continued
APM 3 Constant currency metrics are used by the Board to assess the year on year underlying performance of the business excluding
the impact of foreign currency rates, which by nature can be volatile. Constant currency metrics are reached by applying current
year (FY 2023) weighted average spot rates to prior year (FY 2022) transactions. Gains and losses on foreign currency net
hedging are shown separately in the income statement and are excluded from the constant currency calculation.
2023 2022
Group £m £m % change
Revenue 307.0 341.0 -10%
Impact of FX retranslation 10.5
Revenue at constant currency 307.0 351.5 -13%
2023 2022
Sustainable Solutions £m £m % change
Revenue 241.8 282.7 -14%
Impact of FX retranslation 8.1
Revenue at constant currency 241.8 290.8 -17%
2023 2022
Medical £m £m % change
Revenue 65.2 58.3 12%
Impact of FX retranslation 2.4
Revenue at constant currency 65.2 60.7 7%
APM 4 Operating cash conversion is used by the Board to assess the business’ ability to convert underlying operating profit to cash
effectively, excluding the impact of financing activities and non-capital expenditure related investing activities. Operating cash
conversion is underlying operating profit, depreciation and amortisation, working capital movements and capital expenditure/
underlying operating profit.
2023 2022
£m £m
Underlying operating profit (APM 1) 80.7 96.4
Depreciation, amortisation and loss on disposal* 21.6 24.0
Change in working capital (48.9) (27.5)
Capital expenditure (38.5) (45.5)
Operating cash flow 14.9 47.4
Operating cash conversion 18% 49%
* Excludes impact of loss on disposal of right of use assets.
APM 5 Available cash is used to enable the Board to understand the true cash position of the business when determining the use
of cash under the capital allocation policy. Available cash is cash and cash equivalents plus other financial assets (cash invested
in term deposits greater than three months in duration) less cash ring-fenced in the Group’s Chinese subsidiaries which is
committed to capital expansion and therefore not available to the wider Group. This is calculated as:
2023 2022
£m £m
Cash and cash equivalents 33.4 58.7
Cash ring-fenced in Chinese subsidiaries (3.4) (2.8)
Other financial assets 0.1 10.1
Available cash 30.1 66.0
APM 6 Underlying EPS is earnings per share based on profit after tax but before exceptional items divided by the weighted average
number of shares in issue. This metric is used by the Board to assess the underlying performance of the business excluding items
that are, in aggregate, material in size and/or unusual or infrequent in nature.
2023 2022
£m £m
Profit after tax attributable to owners of the Company 61.7 76.2
Exceptional items 7.5 7.9
Tax on exceptional items (1.7) (1.5)
Profit after tax before exceptional items net of tax 67.5 82.6
Weighted average number of shares 86,937,187 86, 897,353
Underlying EPS (p) 77.7 95.0
FINANCIAL STATEMENTS
181
Annual Report 2023 Victrex plc
25. Alternative performance measures continued
APM 7 Underlying dividend cover is used by the Board to measure the affordability and sustainability of the regular dividend.
Underlying dividend cover is underlying earnings per share/total dividend per share. This excludes special dividends.
2023 2022
p p
Underlying earnings per share (APM 6) 77.7 95.0
Total dividend per share 59.56 59.56
Underlying dividend cover (times) 1.3 1.6
APM 8 Return on capital employed (‘ROCE’) is used by the Board to assess the return on investment at a Group level. ROCE is profit
after tax before exceptional items net of tax, finance costs and finance income (‘ROCE adjusted profit’)/average adjusted net
assets. Adjusted net assets is total equity attributable to shareholders at the year end excluding cash and cash equivalents, other
financial assets, retirement benefit asset/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)/2. The method of calculating ROCE has been changed from FY
2022, with the comparative restated on a consistent basis. The change has been made following a review by the Board with the
revised methodology considered to better reflect long-term value creation.
2023 2022
£m £m
Profit after tax attributable to owners of the Company 61.7 76.2
Exceptional items 7.5 7.9
Tax on exceptional items (1.7) (1.5)
Finance income (1.3) (0.5)
Finance costs 0.7 0.3
ROCE adjusted profit 66.9 82.4
Net assets 501.0 490.6
Cash and cash equivalents (33.4) (58.7)
Other financial assets (0.1) (10.1)
Retirement benefit asset (9.7) (14.9)
Retirement benefit obligations 2.5 2.7
Borrowings 39.7 22.5
Adjusted net assets 500.0 432.1
Average adjusted net assets 466.1 412.5
ROCE 14% 20%
APM 9 Return on sales is used by the Board to assess the overall profitability of the Group. It measures underlying profit before
taxation as a percentage of revenue.
2023 2022
£m £m
Underlying profit before tax (APM 2) 80.0 95.6
Revenue 307.0 341.0
Return on sales % 26% 28%
APM 10 Operating overheads is made up of sales, marketing and administrative expenses, and research and development expenses,
before exceptional items. This metric is used by the Board to assess the underlying movement in overheads of the business
excluding items that are, in aggregate, material in size and/or unusual or infrequent in nature.
2023 2022
£m £m
Sales, marketing and administrative expenses 70.8 70.3
Exceptional items (7.5) (7.9)
Research and development expenses 18.6 15.7
Operating overheads 81.9 78.1
FINANCIAL STATEMENTS
Victrex plc Annual Report 2023
182
Notes to the financial statements continued
25. Alternative performance measures continued
APM 11 Underlying PBIT is used by the Group as the financial measure on which the Executive Director’s performance is assessed for the
annual bonus targets as set out in the Directors’ remuneration report starting on page 100 and therefore has been included as an
APM in FY 2023. This metric removes the impact of finance income and costs from the underlying profit before tax metric (APM 2).
2023 2022
£m £m
Underlying profit before tax (APM 2) 80.0 95.6
Finance income (1.3) (0.5)
Finance costs 0.7 0.3
Underlying PBIT 79.4 95.4
26. Commitments
Capital expenditure authorised and contracted for which has not been provided for in the financial statements amounted to £14.4m
(30 September 2022: £16.4m) in the Group and £nil (30 September 2022: £nil) in the Company.
At 30 September 2023, the Group and another investor in Bond, have an agreed programme of further investments under the 2023
Convertible loan agreement during FY 2024, of which the Group’s share is €1.6m, subject to Bond achieving pre-determined development
milestones. See note 11.
SHAREHOLDER INFORMATION
183
Annual Report 2023 Victrex plc
SHAREHOLDER INFORMATION
Five-year financial summary
for the year ended 30 September and as at 30 September
This Annual Report may contain forward-looking statements that may or may not prove accurate. Although it is believed that the
expectations reflected in these statements are based on reasonable assumptions, such statements involve risk and uncertainty. There
are a number of factors, many of which are outside the control of Victrex plc and its subsidiaries (’Victrex’), which could cause actual
outcomes and results to be materially different from those anticipated. All written or oral forward-looking statements attributed to Victrex
are qualified by this caution. Victrex does not undertake any obligation to update or revise any forward-looking statements to reflect any
change in circumstances or in its expectations. The information in this Annual Report is believed to be accurate at the date of its preparation
but no warranty, guarantee or representation as to its accuracy or completeness is made. Nothing in this Annual Report shouldbe construed
as a profit forecast.
Cautionary note regarding forward-looking statements
2019 2020 2021 2022 2023
£m £m £m £m £m
Results
Revenue 294.0 266.0 306.3 341.0 307.0
Profit before tax 104.7 63.5 92.5 87.7 72.5
Balance sheet
Property, plant, equipment and intangible assets 288.2 300.1 330.5 367.4 369.9
Investments and other non current financial assets 16.2 20.3 24.1 20.5 22.9
Inventories 92.2 98.5 70.3 86.8 134.5
Net cash 72.5 73.1 74.9 58.7 33.4
Other financial assets 0.3 37.5 10.1 0.1
Trade receivables and other assets 57.7 50.0 63.8 83.2 56.1
Retirement benefit asset 9.1 7.5 14.2 14.9 9.7
Retirement benefit obligation (1.9) (2.7) (2.5)
Borrowings (5.9) (22.5) (39.7)
Trade payables and other liabilities (74.6) (68.5) (95.8) (125.8) (83.4)
Equity shareholders’ funds 461.6 481.0 511.7 490.6 501.0
Cash flow
Net cash flow from operating activities 80.1 69.4 127.1 80.0 41.7
Capital expenditure (22.7) (24.9) (41.9) (45.5) (38.5)
Withdrawal/(deposit) of cash invested for greater than three months 72.9 0.3 (37.5) 27.4 10.0
Other investing activities (11.8) (4.9) (3.8) 1.9 (3.8)
Transactions with non-controlling interest 5.6 2.6
Net bank borrowings received 14.5 17.2
Dividends and other financing items (118.1) (38.7) (47.3) (96.9) (53.5)
Net increase/(decrease) in cash and cash equivalents 0.4 1.2 2.2 (18.6) (24.3)
Ratios
Earnings per ordinary share – basic 107.2p 62.6p 84.3p 87.6p 70.9p
Full-year dividend per ordinary share 59.56p 46.14p 59.56p 59.56p 59.56p
Special dividend per ordinary share 50.00p
Return on capital employed (‘ROCE’)* 26% 17% 18% 20% 14%
Sales volume
Tonnes 3,751 3,492 4,373 4,727 3,598
* ROCE calculation has been revised in FY 2023, with comparatives restated (see note 25).
SHAREHOLDER INFORMATION
Victrex plc Annual Report 2023
184
Notice of Annual General Meeting
Notice is hereby given that the 31st Annual General Meeting (‘AGM’) of the members of Victrex plc (the ‘Company’) will be held at 11am on
Friday 9 February 2024, at the offices of J.P. Morgan Cazenove, 1 John Carpenter Street, London EC4Y 0JP, to transact the business set out
below. Resolutions 1 to 15 will be proposed as Ordinary Resolutions and Resolutions 16 to 19 will be proposed as Special Resolutions.
Ordinary Resolutions
1. To receive the Company’s audited financial statements and the Auditors’ and Directors’ reports for the year ended 30 September 2023.
2. To approve the Directors’ remuneration report (other than the part containing the Directors’ remuneration policy) in the form set out
in the Annual Report and Accounts for the year ended 30 September 2023.
3. To declare a final dividend of 46.14p per ordinary share in respect of the year ended 30 September 2023.
4. To re-elect Vivienne Cox as a Director of the Company.
5. To re-elect Jane Toogood as a Director of the Company.
6. To re-elect Janet Ashdown as a Director of the Company.
7. To re-elect Brendan Connolly as a Director of the Company.
8. To re-elect David Thomas as a Director of the Company.
9. To re-elect Ros Rivaz as a Director of the Company.
10. To re-elect Jakob Sigurdsson as a Director of the Company.
11. To re-elect Ian Melling as a Director of the Company.
12. To re-appoint PricewaterhouseCoopers LLP as auditors of the Company until the conclusion of the next AGM of the Company at which
accounts are laid before the meeting.
13. To authorise the Audit Committee, acting for and on behalf of the Board, to set the auditors’ remuneration.
14. That, in accordance with sections 366 and 367 of the Companies Act 2006, the Company and all companies that are subsidiaries
of the Company at any time during the period for which this resolution has effect are authorised, in aggregate, during the period
beginning with the date of the passing of this resolution and ending on the conclusion of the next AGM of the Company (unless such
authority is previously renewed, varied or revoked by the Company in a general meeting), to:
a) make political donations to political parties and/or independent election candidates not exceeding £12,500 in total;
b) make political donations to political organisations other than political parties not exceeding £12,500 in total; and
c) incur political expenditure not exceeding £12,500 in total,
provided that the authorised sums referred to in paragraphs (a), (b) and (c) above may be comprised of one or more amounts in
different currencies which, for the purposes of calculating that authorised sum, shall be converted into Pounds Sterling at such rate as
the Board in its absolute discretion may determine to be appropriate.
For the purposes of this resolution the terms ‘political donation’, ‘political parties’, ‘independent election candidates’, ‘political
organisations’ and ‘political expenditure’ shall have the meanings given by sections 363 to 365 of the Companies Act 2006.
15. That the Directors are generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 to exercise
all the powers of the Company to allot shares in the Company and to grant rights to subscribe for, or to convert any security into,
shares in the Company:
a) up to an aggregate nominal amount of £290,061 (such amount to be reduced by the aggregate nominal amount of any equity
securities allotted or rights granted under paragraph (b) below in excess of such sum); and
b) comprising equity securities (as defined in section 560(1) of the Companies Act 2006), up to an aggregate nominal amount of
£580,122 (such amount to be reduced by the aggregate nominal amount of shares allotted or rights granted under paragraph (a)
above) in connection with a rights issue (as defined in the Listing Rules published by the Financial Conduct Authority):
i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
ii) to holders of other equity securities or as required by the rights of those securities as the Directors otherwise consider necessary,
and so that the Directors may impose any limits or restrictions and make any arrangements which they consider necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under
the laws of, any territory or the requirement of any regulatory body or stock exchange or any other matter, provided that this
authority shall expire at the close of business on 31 March 2025 or, if earlier, at the conclusion of the Companys next AGM, save
that the Company may make any offers and enter into agreements before such expiry which would, or might, require shares to be
allotted or rights to be granted after the authority expires and the Directors may allot shares or grant rights under any such offer
or agreement as if the authority had not expired. All authorities vested in the Directors on the date of this Notice of AGM to allot
shares or to grant rights that remain unexercised at the commencement of this meeting are revoked.
SHAREHOLDER INFORMATION
185
Annual Report 2023 Victrex plc
Special Resolutions
16. That, conditional upon Resolution 15 in this Notice of AGM being passed, the Directors are empowered to allot equity securities (asdefined
in section 560(1) of the Companies Act 2006) for cash under the authority given by that resolution (or by way of a sale of treasury shares),
as if section 561 of the Companies Act 2006 did not apply to such allotment or sale, provided that such power is limited to:
a) the allotment of equity securities and/or sale of treasury shares in connection with an offer of, or invitation to apply for, equity
securities (but in the case of the authority granted under paragraph (b) of Resolution 15, by way of a rights issue only):
i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
ii) to holders of other equity securities, as required by the rights of those securities, or as the Directors otherwise
considernecessary,
and so that the Directors may impose any limits or restrictions and make any arrangements which they consider necessary or
appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under
the laws of, any territory or the requirement of any regulatory body or stock exchange or any other matter; and
b) the allotment of equity securities and/or sale of treasury shares (otherwise than under paragraph (a) above) up to a maximum
aggregate nominal amount of £43,509.
Such power shall expire on the revocation or expiry (unless renewed) of the authority conferred on the Directors by Resolution 15 in
this Notice of AGM, save that the Company may make offers, and enter into agreements, before such expiry which would, or might,
require equity securities to be allotted (and/or treasury shares to be sold) after the power expires and the Directors may allot equity
securities (and/or sell treasury shares) under any such offer or agreement as if the power had not expired.
17. That, conditional upon Resolution 15 in this Notice of AGM being passed and in addition to the power contained in Resolution 16,
the Directors are empowered to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the
authority given by Resolution 15 (or by way of a sale of treasury shares), as if section 561 of the Companies Act 2006 did not apply to
such allotment or sale, provided that such power is:
a) limited to the allotment of equity securities and/or sale of treasury shares up to a maximum aggregate nominal amount of
£43,509; and
b) used only for the purposes of financing (or refinancing, if the power is to be used within 12 months after the date of the original
transaction) a transaction which the Directors determine to be either an acquisition or a specified capital investment of a kind
contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption
Group prior to the date of this Notice of AGM.
Such power shall expire on the revocation or expiry (unless renewed) of the authority conferred on the Directors by Resolution 15 in
this Notice of AGM, save that the Company may make offers, and enter into agreements, before such expiry, which would, or might,
require equity securities to be allotted (and/or treasury shares to be sold) after the power expires and the Directors may allot equity
securities (and/or sell treasury shares) under any such offer or agreement as if the power had not expired.
18. That the Company is authorised generally and unconditionally pursuant to section 701 of the Companies Act 2006 to make one or
more market purchases (as defined in section 693(4) of the Companies Act 2006) of its ordinary shares in the capital of the Company
(‘Ordinary Shares’), provided that:
a) the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is 8,701,837;
b) the maximum price (exclusive of expenses) which may be paid for an Ordinary Share shall be an amount equal to the higher of:
i) 5% above the average market value of an Ordinary Share for the five business days immediately preceding the day on which
that Ordinary Share is contracted to be purchased; and
ii) the higher of the price of the last independent trade and the highest current independent bid for an Ordinary Share on the
trading venue where the purchase is carried out at the relevant time;
c) the minimum price (exclusive of expenses) which may be paid for an Ordinary Share is its nominal value; and
d) such authority shall expire at the close of business on 31 March 2025 or, if earlier, at the conclusion of the Companys next AGM,
but so that the Company may before such authority expires enter into a contract under which a purchase of Ordinary Shares
may be completed or executed wholly or partly after the authority expires and the Company may purchase Ordinary Shares in
pursuance of such contract as if the authority had not expired.
19. That a general meeting of the Company, other than an AGM, may be called on not less than 14 clear days’ notice.
By order of the Board
Jane Brisley
Company Secretary
5 December 2023
Registered office:
Victrex Technology Centre
Hillhouse International
Thornton Cleveleys
Lancashire FY5 4QD
Registered in England and Wales 2793780
SHAREHOLDER INFORMATION
Victrex plc Annual Report 2023
186
Notes
1. A member who is entitled to attend and vote at the AGM is entitled to appoint another person, or two or more persons in respect
ofdifferent shares held by him/her, as his/her proxy to exercise all or any of his/her rights to attend, speak and vote at the meeting.
Aproxy need not be a member of the Company.
2. To be entitled to attend and vote at the AGM (and for the purposes of determining the number of votes that may be cast), a member
must be registered in the Register of Members of the Company as the holder of ordinary shares at 6.30pm (UK time) on Wednesday
7 February 2024 (or, in the event of any adjournment, at 6.30pm (UK time) on the day two business days prior to the adjourned
meeting). Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person
to attend and vote at the AGM.
3. A member wishing to attend and vote at the AGM in person should arrive prior to the time fixed for its commencement. A member that
is a corporation can only attend and vote at the meeting in person through one or more representatives appointed in accordance with
section 323 of the Companies Act 2006. Any such representative should bring to the meeting written evidence of his or her appointment,
such as a certified copy of a board resolution of, or a letter from, the corporation concerned confirming the appointment. Any member
wishing to vote at the AGM without attending in person or (in the case of a corporation) through its duly appointed representative must
appoint a proxy to do so.
4. A hard copy form of proxy (‘Form of Proxy’) which may be used to appoint a proxy and give instructions accompanies this Notice.
To be valid, a Form of Proxy must be delivered to the Companys Registrars, Equiniti, at Aspect House, Spencer Road, Lancing, West
Sussex BN99 6DA, so as to be received by no later than 11am (UK time) on Wednesday 7 February 2024. Alternatively, members may
appoint a proxy online by following the instructions in note 5 below. Members who hold their shares in uncertificated form may also
use ‘the CREST voting service’ to appoint a proxy electronically as explained in notes 6 to 8 below. The return of a completed Form of
Proxy, an electronic proxy appointment instruction or any CREST Proxy Instruction will not prevent a member attending the AGM and
voting in person if he/she wishes to do so. Any power of attorney or other authority under which an appointment of proxy is signed
or authenticated (a copy certified in accordance with the Powers of Attorney Act 1971 (as amended) of that power or authority) must,
unless previously registered with the Company, be received at the relevant address specified in these notes for receipt of such proxy
appointment by the latest time indicated for receipt of such proxy appointment.
5. Members who prefer to register the appointment of their proxy electronically via the internet can do so through Equinitis website
at www.sharevote.co.uk. Full details of the procedure are given on the website. The Voting ID, Task ID and Shareholder Reference
Number printed on the Form of Proxy will be required in order to use this electronic proxy appointment system. Alternatively, members
who have already registered with Equiniti’s online portfolio service, Shareview, can appoint their proxy electronically by logging on
to their portfolio at www.shareview.co.uk and clicking on the ‘Vote Online’ link. The on-screen instructions give details of how to
complete and submit a proxy appointment. To be a valid proxy appointment, the members electronic message confirming the details
of the appointment completed in accordance with the relevant instructions must be transmitted so as to be received by no later than
11am (UK time) on Wednesday 7 February 2024.
6. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using
the procedures described in the CREST Manual available via www.euroclear.com. CREST personal members or other CREST sponsored
members, and those CREST members who have appointed (a) service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
7. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘CREST
Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & International Limited’s specifications, and
must contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it
constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order
to be valid, be transmitted so as to be received by the issuer’s agent, Equiniti (ID RA19), by 11am (UK time) on Wednesday 7 February
2024. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the
CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed
byCREST.
8. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & International
Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will,
therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or,
if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that
his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by
means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or
voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST
system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of
the Uncertificated Securities Regulations 2001 (as amended).
Notice of Annual General Meeting continued
SHAREHOLDER INFORMATION
187
Annual Report 2023 Victrex plc
Notes continued
9. Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy
information rights (a ‘Nominated Person’) may, under an agreement between him/her and the member by whom he/she was
nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no
such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions
to the member as to the exercise of voting rights.
The statement of the rights of members in relation to the appointment of proxies in note 1 above does not apply to Nominated
Persons. Such rights can only be exercised by members of the Company.
10. As at 27 November 2023 (being the latest practicable date prior to the publication of this document) the Company’s issued share
capital consisted of 87,018,377 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 27
November 2023 were 87,018,377. There were no shares in treasury as at that date.
11. Under section 527 of the Companies Act 2006, members meeting the threshold requirements set out in that section have the right to
require the Company to publish on a website a statement setting out any matter relating to:
a) the audit of the Company’s financial statements (including the Auditors’ report and the conduct of the audit) that are to be laid
before the AGM; or
b) any circumstance connected with auditors of the Company ceasing to hold office since the previous meeting at which annual
reports were laid in accordance with section 437 of the Companies Act 2006.
The Company may not require the members requesting any such website publication to pay its expenses in complying with sections
527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the
Companies Act 2006, it must forward the statement to the Company’s auditors not later than the time when it makes the statement
available on the website. The business which may be dealt with at the AGM includes any statement that the Company has been
required under section 527 of the Companies Act 2006 to publish on a website.
12. Each member attending the AGM has the right to ask questions relating to the business of the meeting which, in accordance with
section 319A of the Companies Act 2006 and subject to some exceptions, the Company must cause to be answered. Members who
wish to ask questions relating to the business of the meeting can also do so by sending them in advance of the meeting to ir@victrex.com.
13. A copy of this Notice, and other information required by section 311A of the Companies Act 2006, can be found at www.victrexplc.com.
14. All resolutions in this Notice will be put to vote on a poll at the AGM, as permitted by the Company’s Articles of Association. On a poll,
each member has one vote for every share held, which results in a more accurate reflection of the view of members.
15. Personal data provided by members at or in relation to the AGM (including, for example, names, contact details, votes and
Shareholder Reference Numbers) will be processed in line with the Companys privacy policy, which can be accessed here:
www.victrex.com/en/privacy-policy.
16. Except as provided above, members who have general queries about the meeting should email the General Counsel & Company
Secretary at cosec@victrex.com or ir@victrex.com (no other methods of communication will be accepted). A member may not use any
electronic address provided in either this Notice of AGM or any related documents (including the Form of Proxy) to communicate with
the Company for any purpose other than those expressly stated.
SHAREHOLDER INFORMATION
Victrex plc Annual Report 2023
188
Explanatory notes
Resolution 1 – Annual Report and Accounts
The Companies Act 2006 requires the directors of a public company to lay its annual report and accounts before the company in general
meeting. The Annual Report and Accounts comprises the audited financial statements, the Auditors’ report, the Strategic report, the
Directors’ report and the Directors’ remuneration report. In accordance with best practice, the Company proposes a resolution on its
Annual Report and Accounts for the year ended 30 September 2023 (the ‘Annual Report 2023’). This Ordinary Resolution will provide
members with the opportunity to ask questions on the contents of the Annual Report 2023.
Resolution 2 – Approval of the Directors’ remuneration report
In accordance with the Companies Act 2006, the Company proposes an Ordinary Resolution to approve the Directors’ remuneration report
for the financial year ended 30 September 2023. The Directors’ remuneration report is set out on pages 100 to 123 of the Annual Report
2023 and, for the purposes of this resolution, does not include the parts of the Directors’ remuneration report containing the Directors’
remuneration policy which is set out on pages 103 to 106 . The vote on this resolution is advisory only and the Directors’ entitlement to
remuneration is not conditional on it being passed.
The Companies Act 2006 requires that the Directors’ remuneration policy must be put to members for approval whenever a new policy,
or an amendment to an existing approved policy, is proposed. The Directors’ remuneration policy must in any event be put to members
for approval at least every three years. The Company is not proposing any changes to the Directors’ remuneration policy approved at the
Annual General Meeting held in 2023.
Resolution 3 – Declaration of final dividend
A final dividend of 46.14p per ordinary share has been recommended by the Directors for the year ended 30 September 2023. In accordance
with the requirements of HM Revenue & Customs, all dividends are declared and paid net of income tax at the standard rate. If approved, the
final dividend will be paid on 23 February 2024 to shareholders on the register at the close of business on 26 January 2024.
Resolutions 4 to 11 – Re-election of Directors
Resolutions 4 to 11 relate to the re-election of the Companys Directors.
In accordance with the provisions of the UK Corporate Governance Code and as permitted by the Companys Articles of Association,
theBoard has decided that all of the Company’s Directors as at the date of this Notice will seek re-election by shareholders.
Subject to her successful re-election, Jane Toogood will continue to serve on the Board as an independent non-executive Director andwill
complete nine years’ service on the Board part way through her tenure, having first been appointed to the Board with effect from1September
2015. The Board recognises that, in view of the characteristics of independence set out in the UK Corporate Governance Code, the length
of service is an important factor when considering a Non-executive Director’s independence. The Board considers Jane tocontinue to be
independent, but anticipates that this will be the final time that she stands for re-election by shareholders.
The Chair confirms that, following formal evaluation (as referred to on page 81 of the Annual Report 2023), each Director continues to contribute
effectively to the Board and to demonstrate commitment to the role (including commitment of time for Board and Board Committee meetings).
The biographical details, skills and experience of each Director are set out below:
Dr Vivienne Cox DBE, Non-executive Chair
Vivienne Cox was appointed to the Board on 1 December 2021, becoming Chair on 11 February 2022, and has a wealth of experience
inexecutive and non-executive roles over more than 40 years, with a particular focus on sustainability, innovation and alternative energy.
Vivienne was appointed Commander of the Order of the British Empire (‘CBE’) in 2016 for services to the economy and sustainability and
was made a Dame Commander of the Order of the British Empire (‘DBE’) in the 2022 New Year Honours List for services to sustainability,
diversity and inclusion in business. Vivienne holds an MA (Honours) in chemistry from Oxford University, an MBA from INSEAD and
honorary doctorates from the University of Hull and the University of Hertfordshire.
Vivienne’s previous non-executive roles include serving on the boards of Eurotunnel plc, BG Group plc and Rio Tinto plc, as senior
independent director of Pearson plc, as chair of Vallourec SA and as the lead non-executive director for the UK Department for International
Development. She also chaired Climate Change Capital, a private asset management and advisory group developing solutions for climate
change and resource depletion. She has also previously served as a non-executive director of GSK, as well as GSK’s workforce engagement
director, and Stena AB in Sweden.
Vivienne is currently a non-executive director of Haleon plc and Venterra Group plc (a non-listed company), chair of the Rosalind Franklin
Institute and deputy chair of the Saïd Business School in Oxford. Vivienne’s extensive board, corporate governance and sector experience,
as well as her leadership in and passion for sustainability and diversity matters, enables strong leadership of the Board.
Ms Jane Toogood, Non-executive Director
Jane Toogood was appointed to the Board in September 2015. A senior executive in the energy transition space, Jane has a wealth of
experience across a number of business management, senior commercial and business development roles within the global chemical
industry and with a focus on sustainable solutions. Jane holds a MA in natural sciences (chemistry) from Oxford University and is a Fellow
ofthe Royal Society of Chemistry.
Until recently Jane was the chief executive of Catalyst Technologies at Johnson Matthey Plc, having previously led the precious metals
division. Jane has held senior roles at Borealis, ICI and Uniqema and as a non-executive director for the NHS. Jane recently served as the
UKHydrogen Champion and her report to the UK Government was published in March 2023.
Jane is the Co-Chair of the UK Hydrogen Delivery Council.
She brings strategic and industry expertise and insights drawing on her extensive international experience across multiple sectors. Jane
is a current senior executive leading growth and transformation in a portfolio of businesses to meet future market demands including
decarbonisation, the energy transition and deployment of hydrogen and circularity.
SHAREHOLDER INFORMATION
189
Annual Report 2023 Victrex plc
Resolutions 4 to 11 – Re-election of Directors continued
Ms Janet Ashdown, Non-executive Director
Janet Ashdown was appointed to the Board as a Non-executive Director in February 2018.
She has over 30 years’ experience in the international energy sector working across the value chain from customer facing through to
manufacturing in increasingly senior roles with an additional 10+ years as a non-executive director.
Janet had a distinguished career working for BP plc for 30 years where her last role was head of the UK fuels business unit. She was CEO
of Harvest Energy, an international private equity backed business, from 2010 to 2012. She was non-executive director at SIG Plc, Coventry
Building Society and Marshalls plc.
Janet is a non-executive director, chair of the remuneration committee and chair of the sustainability committee of RHI Magnesita NV, is
senior independent director and chair of the environment, heath & safety, security & cyber committee of the Nuclear Decommissioning
Authority and is also a non-executive director of Stolt-Nielsen Norway AS.
Janet contributes her extensive international executive and non-executive experience having served on remuneration committees across
different sectors for over 10 years and being a chair for five years.
Mr Brendan Connolly, Non-executive Director
Brendan Connolly was appointed to the Board as a Non-executive Director in February 2018.
Brendan has over 35 years’ experience in the international oil & gas industry serving in a number of senior executive roles. Until June 2013,
Brendan was a senior executive at Intertek Group plc and had previously been chief executive officer of Moody International (acquired
by Intertek in 2011). Prior to Moody, he was managing director of Atos Origin UK, and spent more than 25 years of his career with
Schlumberger in senior international roles over three continents and until May 2023 he was senior independent director and chair of the
remuneration committee of Synthomer plc.
Brendan is a non-executive director of Pepco Group N.V. and also an independent director on the board of Applus Services, S.A. as well
as a member of its environment, social and governance committee and the appointments and compensations committee. He is also on a
private equity board.
With extensive executive and non-executive experience, Brendan brings operational, commercial and strategic expertise and insights; his
role as the designated Non-executive Director for Workforce Engagement enhances the Board’s understanding of the views of employees
and the culture of the Company.
Mr David Thomas, Non-executive Director
David Thomas was appointed to the Board in May 2018 and chairs the Audit Committee.
David was chief financial officer at Invensys plc from 2011 until his retirement in 2014, having held senior roles across the business since
2002. Prior to joining Invensys, he was a senior partner at Ernst & Young, specialising in long-term industrial contracting businesses, and
is a former member of the Auditing Practices Board. Until May 2023 he was interim chair of Dialight plc as well as chair of the nomination
committee, having previously served as senior independent director and chair of the audit committee.
David contributes his expertise in finance and his understanding of the investment community and regulators as both a Board member and
Chair of the Audit Committee, as well as his industry knowledge to enhance the risk lens for Board decision making.
Dr Ros Rivaz, Senior Independent Director
Ros Rivaz was appointed as a Non-executive Director and the Senior Independent Director with effect from 1 May 2020.
Ros holds a Bachelor of Science (Honours) degree in chemistry and an honorary doctorate from Southampton University and has
deep international experience in the areas of supply chain management, logistics, manufacturing, IT, procurement and systems in the
engineering, manufacturing and chemicals industries. Ros’ executive career spans nearly 30 years. She held senior executive roles at
Exxon, Tate & Lyle, ICI, Diageo and Premier Foods. Ros served as global chief operating officer for Smith & Nephew from 2011 to 2014.
Ros was non-executive director at ConvaTec plc, RPC Group plc, Boparan Holdings Limited, Rexam plc and CEVA Logistics AG and has also
previously served as chair of the Nuclear Decommissioning Authority and as a non-executive director of the Ministry of Defence Equipment
and Support board.
Ros is currently senior independent director, employee engagement director and chair of the remuneration committee of Computacenter plc
and is lead independent director of Aperam SA. Ros was recently appointed chair designate at privately owned Anglian Water and will become
chair in the New Year. Ros’ strong track record as both a non-executive and executive across a range of listed companies, particularly in the
medical industry, is instrumental in driving growth and supporting the Chair in her role as Senior Independent Director.
Mr Jakob Sigurdsson, Chief Executive Officer
Jakob Sigurdsson was appointed to the Board in October 2017 and is the Company’s Chief Executive Officer. Jakob has more than 20 years’
experience in large multinational companies, both listed and private, including nine years with Rohm & Haas (now part of Dow Chemical) in
the US. He was chief executive at Alfesca, Promens and ViS.
Jakob holds a BSc in chemistry from the University of Iceland and a MBA from Northwestern University in the US. His executive
responsibilities have spanned marketing, supply chain, business development, strategy and M&A, with particular emphasis on growth in
new or developing markets. Jakob is non-executive director of Coats Group plc. Jakob brings his diverse and international background in
chemicals coupled with wider business, executive and non-executive experience to inspire and lead the Group.
Mr Ian Melling, Chief Financial Officer
Ian Melling was appointed to the Board with effect from 4 July 2022 and is the Chief Financial Officer.
Ian is a Chartered Accountant and holds a first class master’s degree in chemistry from Oxford University in the UK. Most recently Ian held
the role of senior vice-president, corporate finance and R&D for Smith & Nephew plc, the medical technology company, having served as
interim chief financial officer during 2020.
SHAREHOLDER INFORMATION
Victrex plc Annual Report 2023
190
Resolutions 4 to 11 – Re-election of Directors continued
Mr Ian Melling, Chief Financial Officer continued
Ian has worked in a number of senior finance roles in the UK and internationally for Smith&Nephew, including those with divisional and
functional responsibility, having joined the Group in 2006. He was senior vice-president group finance for five years until October 2021. Ian started
his career and qualified as a Chartered Accountant at Deloitte LLP. Ianis a member of the UK Endorsement Board Preparer AdvisoryGroup.
Ian contributes his significant financial experience as well as his background in the medical device sector which is relevant to the Company’s
growth plans.
Resolutions 12 and 13 – Re-appointment and remuneration of the auditors
At each meeting at which the Annual Report and Accounts are laid, the Company is required under the Companies Act 2006 to appoint
auditors to serve until the next such meeting. PricewaterhouseCoopers LLP (‘PwC’) have indicated their willingness to continue as the
Company’s auditors. The Audit Committee has recommended to the Board, and the Board now proposes to shareholders, that PwC be
re-appointed. The Audit Committee has confirmed to the Board that its recommendation is free from third-party influence and that no
restrictive contractual provisions have been imposed on the Company limiting its choice of auditors. Resolution 12, therefore, proposes
PwC’s re-appointment as auditors to hold office until the Company’s next AGM at which its accounts are laid before shareholders.
Resolution 13 authorises the Audit Committee to set the auditors’ remuneration. Under the Competition and Markets Authority’s Statutory
Audit Services Order, the Audit Committee has specific responsibility for negotiating and agreeing the statutory audit fee for and on
behalf of the Board. Details of the remuneration paid to the auditors during the last financial year and details of how the effectiveness
andindependence of the auditors are monitored and assessed can be found on pages 147 and 90 to 97 of the Annual Report 2023.
Resolution 14 – Political donations and expenditure
Subject to limited exceptions, Part 14 of the Companies Act 2006 imposes restrictions on companies making political donations to any
political party or other political organisation or to any independent election candidate or incurring political expenditure unless they have
been authorised to do so at a general meeting.
It has always been the Company’s policy that it does not make political donations nor incur political expenditure either directly or through
any subsidiary. This remains the case. Nevertheless, the Companies Act 2006 includes broad and ambiguous definitions of the terms
‘political donations’ and ‘political expenditure’ which may apply to some normal business activities which would not generally be considered
to be political in nature.
As in previous years, the Board considers that it would be prudent to obtain shareholder approval to make donations to political parties,
political organisations and independent election candidates and to incur political expenditure up to the limit specified in the resolution. As is
common practice among many UK public companies, this authority is sought as a precautionary measure to guard against any inadvertent
breach of the statutory restrictions by the Company or its subsidiaries. The Board confirms that it has no intention of making any political
donations, incurring political expenditure nor entering into party political activities.
Resolution 15 – Authority to allot shares
The Directors currently have a general authority to allot shares or grant rights to subscribe for or to convert any securities into shares in
the Company. This authority is, however, due to expire at the conclusion of the AGM. Accordingly, the Board would like to seek a new
authority to provide the Directors with the flexibility to allot new shares and grant rights up until the Company’s next AGM within the limits
prescribed by the Investment Association.
The Investment Association’s Share Capital Management Guidelines (revised in February 2023) state that the Association’s members will
regard as routine any proposal at a general meeting to seek a general authority to allot an amount up to two thirds of the existing share
capital, provided that any amount in excess of one third of the existing share capital is applied to fully pre-emptive offers only. Under the
previous iteration of the Investment Association’s Guidelines, such excess was limited to fully pre-emptive rights issues only. The Board has
considered the change in the Association’s Guidelines during the year and has concluded that, for the time being, it is in the best interests
of the Company and its shareholders to continue to seek an allotment authority similar in scope as that sought in previous years.
Accordingly, the proposed authority in Resolution 15 will allow the Directors to allot ordinary shares in the Company (‘Ordinary Shares’)
or grant rights to subscribe for or convert any securities into Ordinary Shares in any circumstances up to a maximum nominal amount of
£290,061, being approximately, but not exceeding, one third of the issued share capital as at 27 November 2023 (the latest practicable date
before the publication of this document). In addition, it will allow the Directors to allot (or grant rights over) new Ordinary Shares, in the
case of a rights issue only, up to an additional maximum nominal amount of £580,122, being approximately, but not exceeding, one third of
the Company’s existing issued share capital.
The Directors have no current intention of exercising this authority; however, the Board considers it prudent to maintain the flexibility that
it provides to enable the Directors to respond to any appropriate opportunities that may arise. If passed, this authority will expire at the
close of business on 31 March 2025 or, if earlier, at the conclusion of the Companys next AGM. The Company held no treasury shares as
at27November 2023.
Resolutions 16 and 17 – Powers to allot a limited number of shares other than to existingshareholders
Under the Companies Act 2006, when shares are issued for cash, they normally have to be offered first to existing shareholders in
proportion to their current shareholding. Section 570 of the Companies Act 2006, however, permits the disapplication of such pre-emption
rights. Resolutions 16 and 17 seek the disapplication of statutory pre-emption rights in specific circumstances.
In November 2022, the Pre-Emption Group revised its Statement of Principles on the Disapplication of Pre-Emption Rights. The revised
Principles make a number of changes designed to improve capital raising processes for publicly traded companies by, among other matters,
increasing the ‘routine’ disapplication thresholds and introducing new supplemental disapplication thresholds.
Explanatory notes continued
SHAREHOLDER INFORMATION
191
Annual Report 2023 Victrex plc
Resolutions 16 and 17 – Powers to allot a limited number of shares other than to existing
shareholders continued
The Principles now provide that a company may seek power to issue, on a non-pre-emptive basis, shares for cash in any one year
representing: (i) no more than 10% (previously 5%) of the company’s issued Ordinary Share capital for use in any circumstances; and (ii) no
more than an additional 10% (previously 5%) of the companys issued Ordinary Share capital provided that such additional power is only
used in connection with an acquisition or specified capital investment which is announced contemporaneously with the issue, or which has
taken place in the preceding 12-month period (previously 6 months) and is disclosed in the announcement of the issue.
The Principles also provide that, in both cases (i) and (ii) outlined above, a company may now seek a further power to issue, on a non-pre-
emptive basis, shares for cash representing no more than 2% of the company’s issued Ordinary Share capital for the purposes of making
a‘follow-on’ offer (being an offer of a kind contemplated by the Principles) to certain retail investors and existing shareholders.
The Board has carefully considered the increased and supplemental thresholds available under the revised Principles, and has concluded
that, for the time being, it is in the best interests of the Company and its shareholders to continue to seek disapplication powers similar
inboth scope and level to those sought by the Company in previous years.
Accordingly, Resolution 16 is proposed as a special resolution. If this resolution is passed, it will enable the Directors to allot shares (and/or
sell treasury shares) for cash free from statutory pre-emption rights: (i) in connection with a rights issue, open offer or other pre-emptive
offer; and (ii) otherwise than in connection with any such offer, up to a maximum nominal amount of £43,509. This amount represents
approximately 5% of the issued Ordinary Share capital as at 27 November 2023 (being the latest practicable date before the publication
of this document). This resolution will permit the Directors to allot shares (and/or sell shares out of treasury) for cash on a non-pre-emptive
basis, up to the specified 5% level, in any circumstances (whether or not in connection with an acquisition or specified capital investment).
Resolution 17 is in addition to Resolution 16 and will also be proposed as a special resolution in line with best practice. If this resolution is
passed, it will enable the Directors to allot shares (and/or sell shares out of treasury) for cash free from statutory pre-emption rights up to
a further maximum nominal amount of £43,509. This amount also represents approximately 5% of the issued Ordinary Share capital. The
Board shall use the power conferred by this resolution only in connection with either an acquisition or a specified capital investment which
is announced contemporaneously with the issue, or which has taken place in the preceding 12-month period (previously 6 months) and is
disclosed in the announcement of the issue.
The Directors have no current intention of exercising these powers if granted, but believe that it is in the best interests of the Company and
its shareholders to have the flexibility, in the circumstances outlined, to allot shares and/or to sell treasury shares for cash free from statutory
pre-emption rights. The Board confirms that, in exercising these powers, it will follow the shareholder protections and features set out in
Part 2B of the Principles.
Resolution 18 – Authority to purchase own shares
In certain circumstances, it might be advantageous to the Company to purchase its own shares. Resolution 18 will be proposed as a special
resolution. If passed, it will authorise the Company to make market purchases of its own Ordinary Shares up until the close of business on
31 March 2025 or, if earlier, the conclusion of the Companys next AGM, subject to specific conditions relating to price and volume.
The proposed resolution specifies the maximum number of shares which may be acquired (approximately 10% of the Company’s issued
Ordinary Share capital as at 27 November 2023 (the latest practicable date before the publication of this document)) and the maximum
andminimum prices at which shares may be bought.
The Directors intend to use the authority only if, in light of market conditions prevailing at the time, they believe that the effect of such
purchase would result in an increase in earnings per share and would be in the best interests of the Company and its shareholders generally.
Other investment opportunities, appropriate gearing levels and the overall position of the Company will be taken into account in reaching
such a decision. Any shares purchased in this way will either be cancelled and the number of shares in issue will be reduced accordingly, or
be held as treasury shares depending on which course of action is considered by the Directors to be in the best interests of the shareholders
at that time. Shares held as treasury shares can in the future be cancelled, resold or used to provide shares for employee share schemes.
TheCompany did not have any Ordinary Shares in treasury as at 27 November 2023.
As at 27 November 2023, options over a total of 1,276,051 Ordinary Shares were outstanding and not exercised. That number of Ordinary
Shares represented 1.47% of the Company’s issued Ordinary Share capital at 27 November 2023. It would represent 1.63% of the issued
Ordinary Share capital at that date if the authority to buy the Company’s own shares now being sought by Resolution 18 were to be fully used.
Resolution 19 – Authority to hold general meetings (other than Annual General Meetings)
on14cleardays’ notice
This Special Resolution renews an authority given at last year’s AGM and is required as a result of section 307A of the Companies Act
2006. The Company is currently able to call general meetings (other than an AGM) on not less than 14 clear days’ notice and would like
to maintain this ability. In order to do so, the Company’s shareholders must approve the calling of such meetings on not less than 14 clear
days’ notice. Resolution 19 seeks such approval. If given, the approval will be effective until the Company’s next AGM, when it is intended
that a similar resolution will be proposed.
The shorter notice period would not be used as a matter of routine for such meetings, but only where the flexibility is merited by the
business of the meeting and is thought to be to the advantage of shareholders as a whole.
Recommendation
The Directors consider that all the proposed resolutions set out in the Notice of AGM are in the best interests of the Company and of its
shareholders as a whole and they unanimously recommend that you vote in favour of them, as they intend to do so in respect of their own
shares (save in respect of those matters in which they are interested).
SHAREHOLDER INFORMATION
Victrex plc Annual Report 2023
192
Financial calendar
Ex-dividend date 25 January 2024
Record date
1
26 January 2024
AGM 9 February 2024
Payment of final dividend 23 February 2024
Announcement of 2023 half-yearly results May 2024
Payment of interim dividend June/July 2024
1 The date by which shareholders must be recorded on the share register to receive the dividend.
SHAREHOLDER INFORMATION
Victrex plc’s commitment to environmental issues is reflected
in this Annual Report, which has been printed on Arena Extra
White Smooth, an FSC
®
certified material. This document was
printed by Park Communications using its environmental print
technology, which minimises the impact of printing on the
environment, with 99% of dry waste diverted from landfill.
Both the printer and the paper mill are registered to ISO 14001.
Annual Report 2023 Victrex plc
193
This is the Annual Report of Victrex plc for the year ended 30 September 2023.
This Annual Report has been sent to shareholders who have elected to receive
a copy. A Notice of the AGM to be held on 9 February 2024 is also included
within the report commencing on page 184.
In this Annual Report, references to ‘Victrex, ‘the Group’, ‘the Company, ‘we’
and ‘our’ are to Victrex plc and its subsidiaries and lines of business, or any of
them as the context may require.
References to the years 2023/FY 2023, 2022/FY 2022, 2021/FY 2021 and
2020/FY 2020 are to the financial years ended 30 September 2023 (for 2023),
30 September 2022 (for 2022), 30 September 2021 (for 2021) and 30
September 2020 (for 2020). Unless otherwise stated, all non-financial statistics
are at 30 September 2023.
This Annual Report contains forward-looking statements with respect to
theGroup’s financial condition, operating results and business strategy, plans
andobjectives.
Please see the discussion of our principal risks and uncertainties in the sections
entitled ‘Risk management’ and ‘Principal risks’, and the section entitled
‘Cautionary note regarding forward-looking statements’.
This Annual Report contains references to Victrex’s website. These references
are for convenience only – we are not incorporating by reference any
information posted on www.victrexplc.com.
This Annual Report has been drawn up and presented in accordance with and
in reliance upon applicable English company law and the liabilities of the
Directors in connection with this report shall be subject to the limitations and
restrictions provided by such law.
The Directors’ report – Strategic report has been prepared to inform the
Company’s shareholders and help them assess how the Directors have
performed their duty to promote the success of the Company for the benefit
ofthe Company’s shareholders as a whole. It should not be relied upon by
anyone, including the Company’s shareholders, for any other reason. The
Directors’ report – Strategic report contains a fair review of the business of the
Group and a description of the principal risks and uncertainties that the Group
faces. As a consequence, the Directors’ report – Strategic report only focuses
on material issues and facts.
This Annual Report does not constitute an invitation to underwrite, subscribe
for, or otherwise acquire or dispose of any Victrex plc shares.
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Hardman Square
Manchester
M3 3EB
Broker and financial advisor
J.P. Morgan Cazenove
25 Bank Street
Floor 27
Canary Wharf
London
E14 5JP
Lawyers
Addleshaw Goddard LLP
One St Peter’s Square
Manchester
M2 3DE
Bankers
Barclays Bank PLC
3 Hardman Street
Manchester
M3 3AX
HSBC UK Bank PLC
St Peter’s Square
Manchester
M1 4PB
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
BN99 6DA
Visit www.victrexplc.com or scan with your
QRcodereadertovisitour Group website.
Advisors
CBP022200
Victrex plc
Victrex Technology Centre
Hillhouse International
Thornton Cleveleys
Lancashire
FY5 4QD
United Kingdom
Tel: +44 (0) 1253 897700
Fax: +44 (0) 1253 897701
Web: www.victrexplc.com