Victrex plc (VCT) Earnings Call Transcript

Good afternoon, everyone, and thank you for joining the Victrex Capital Markets event. Today, we'll set out how we'll unlock Victrex's significant potential and drive long-term sustainable profit growth. As many of you know, I joined in January because I was convinced this business has solid foundations, a differentiated product, a powerful brand and well-invested facilities. The main issue was clearly execution. As I said at the half year results, that view has been confirmed and I now see a clear path to materially improve performance. Over the past 9 months, we've moved at pace and made considerable progress as reflected in the trading update that we issued 2 weeks ago. So today, I'll start with introductions to the leadership team, then set out the dynamics of the global PEEK market and why Victrex is so well positioned. I'll also cover our distinct competitive advantages and why they give us a long-term right to win in this attractive growth market. I'll then explain the changes we're making to build a performance-focused culture and summarize the strategic framework that will unlock a significant improvement in financial performance. My colleagues will then go into detail on Victrex Performance Materials, which was formerly Sustainable Solutions, Victrex Medical and our operational transformation program, including the actions we're taking to drive improved performance. I'll then provide more detail on our updated financial guidance and capital allocation policy before wrapping up and moving into Q&A. Today's session will provide the detail and context around how we intend to unlock our potential and drive significant growth in profit and cash generation over the medium term. So what should you take away from today? Well, first, PEEK is a compelling high-margin growth market aligned to structural trends across multiple industries. And within it, Victrex is the clear market leader. Second, Victrex has a genuinely differentiated offering, not only our products, but also our vertically integrated manufacturing and value-added customer services. This creates a sustainable competitive advantage, enabling us to capture market share in a structurally growing market by focusing on applications where Victrex PEEK is differentiated while also creating new markets for PEEK that don't currently exist. Third, we're rapidly transforming the organization, culture and operating model to unlock a step-up in profit, cash generation and returns. This is already underway and delivering results. And I'll cover the implications for guidance and capital allocation later. Together, these strengths provide a clear path to sustainable shareholder value creation. And today, we'll spell out exactly how this will be delivered over the medium term. And I want to make this really clear upfront so we can draw a line under this. None of the guidance provided today requires any contributions from the so-called mega programs you'd have heard about in the past. So I'm delighted to be joined today by my members of my refreshed leadership team alongside other senior Victrex colleagues who you see in the polo shirts, who will be available during the breaks and at the drinks reception if you want to speak to them. As you know, we don't currently have a permanent CFO, so I'll be covering the financial sections today. Our Interim CFO, Chris Gilbert, raise your hand, and Finance Director, Mike Ward, are also here to address any more detailed financial questions you may have. Our business is split into 2 market-facing areas: Performance Materials and Medical. Andrew Ng, our Chief Commercial Officer, leads Performance Materials, while Daniel Diffenderfer is Managing Director of Medical. Both have joined recently and are already making a strong impact. We're also joined by Suranjan Ghosh, who leads operations and transformation across the group, and he's playing a vital role in driving our operational changes. So I'd like to start with a few points that explain why Victrex is so well positioned. First, we lead the global PEEK market with over 45% share by volume, built on a differentiated product proposition, trusted brand and a strong global presence. We invented PEEK, and we have 48 years' experience formulating it and applying it to real-world customer challenges. That expertise is supported by more than 200 patents in place or pending, reflecting the strength of our technology and our know-how. And Victrex is the only global PEEK manufacturer with vertically integrated manufacturing, including our own monomer precursor materials. This U.K. manufacturing base avoids potential Asian supply chain risk and for some geographies and sectors, provides a critical security of supply advantage. We also have market-leading applications engineering capability, translating PEEK's unique properties into practical solutions for demanding challenges. This is underpinned by state-of-the-art modeling and simulation in computational chemistry and physical performance. Finally, we are well invested with capacity to nearly double our current output without the need for additional CapEx. So as the market grows, this enables us to scale with customers while providing the security of supply that they need. So I'm now going to introduce our investment case, providing color around each of the 4 key messages for today's event. Starting with the fact that PEEK is a compelling growth market and that Victrex is the undisputed leader. PEEK or polyetheretherketone is a semi-crystalline polymer used in mission-critical settings, particularly high temperature or high wear environments requiring chemical compatibility, fatigue resistance and dimensional stability under load. A combination of physical, chemical and electrical properties make PEEK essential where performance is critical. Victrex offers PEEK polymers in over 450 grades supplied as powder, granules and compounds. These are sold directly to customers or they're processed into specialized forms, including thin films, fibers and filaments, composite tapes, coatings and tubes or pipes. To be clear, we do not produce PEEK-based finished parts to the market, except thermoplastic composites parts made in the U.S. for aerospace. Any other parts manufacturing is for prototyping and helping customers optimize their own processes despite the previously reported polymer top strategy. So with that cleared up, the polymer hierarchy is shown as a pyramid. Lower cost, higher-volume polymers sit at the bottom, while higher performance, higher cost, lower volume polymers sit at the top. And PEEK sits at the very top of this hierarchy within the ultra-high performance category. And this is reflected in pricing, which typically range from GBP 40 per kilo to over GBP 1,000 per kilo depending on the application with global volumes of around 9,000 tonnes per year. By comparison, other ultra-high-performance polymers are typically GBP 10 plus per kilogram and produced volumes -- produced volumes at orders of magnitude higher. Both price and volume reflect the nature of applications where PEEK is used, while pricing also reflects the production complexity. PEEK synthesis is difficult, and the manufacturing technology is hard to master and replicate. A new PEEK plant takes several years to build and commission, followed by a lengthy optimization process to deliver the consistency and quality that customers require. That know-how takes a long time to build, which is one reason why several newer Asian producers have yet to reach the required consistency and quality. PEEK is also much less exposed to cyclicality than commodity materials. It's sold for its unique performance properties in highly specific applications where it's often specified in and difficult to substitute. So why do engineers choose PEEK? PEEK combines physical, chemical and electrical properties in a way other materials rarely match. While alternatives may perform well in 1 or 2 areas, PEEK offers high mechanical strength, high temperature and best-in-class chemical, wear and fatigue resistance, making it essential where performance is critical. The left-hand graph shows this clearly. PEEK delivers high fatigue resistance, particularly at elevated temperatures versus other polymers. Fatigue resistance is the ability to withstand repeated loads without permanent deformation or failure, and that's vital in high-cycle applications such as EV motors and Aerospace structures. The right-hand graph highlights PEEK's strength in chemically exposed wear critical applications, such as bearings, reciprocating or rotary seals and robotics. PEEK also offers an excellent strength to weight ratio, low creep, long-term durability and a proven track record of biocompatibility, making it well suited to implantable medical applications. It's often used to replace metals where lightweighting matters and can reduce total manufacturing costs. So although PEEK is relatively expensive versus other polymers, material content typically only represents 5% to 10% of a part's manufactured cost while delivering significant value through performance, durability and its product life. PEEK is also PFAS-free, making it a potential replacement for materials used in higher-volume applications such as cookware and waterproofing should regulation require alternatives. In summary, PEEK is used in mission-critical applications where no other material meets the same combination of requirements. This technical differentiation supports strong customer value, meaningful pricing power and attractive margins. Victrex serves a broad range of high-value end markets with highly attractive structural growth characteristics across multiple geographies. This breadth gives us diversified revenue streams and provides resilience against short-term movements in individual markets. These markets are grouped into 2 areas. Performance Materials comprises Aerospace and Defense, automotive, electronics and energy and industrial, while medical covers both implantable and non-implantable materials. Across this portfolio, average selling prices vary significantly. Medical is the smallest segment by volume at around 4% of total volumes, but contributes around 20% of sales revenue, reflecting the higher value nature of these applications. Andrew and Daniel will give more specific examples of what we do in each market. But in short, we help customers solve complex engineering challenges with a highly differentiated product supported by leading applications engineering capability. Importantly, these markets are underpinned by strong fundamentals with regulatory and structural growth drivers supporting demand over the long-term. The PEEK market is forecast to grow at around 5% per annum by volume between 2025 and 2031, driven by 2 factors: underlying growth in our end markets and increased PEEK penetration in both existing and new applications. In 2025, the global PEEK market was around 8,600 tonnes, equivalent to roughly GBP 600 million of sales. By 2031, volumes are expected to reach around 11,000 tonnes with sales rising to approximately GBP 800 million. This growth provides strong support for the financial guidance that we'll discuss later. Importantly, market value is expected to grow slightly faster than volume as some of the fastest-growing sectors, including medical and aerospace, carry higher average selling prices. Beyond the underlying market growth, the other important driver is increased penetration, which I'll touch upon only briefly as Andrew and Daniel will cover the end market detail later. To summarize briefly, in medical, adoption is broadening across areas such as craniomaxillofacial and cardiovascular applications, where PEEK's bone-like stiffness profile, imaging benefits and clinical performance provide clear advantages over metals. In aerospace, PEEK is increasingly used in new applications from structural parts to interior components, where its lightweight, strong and cost-effective performance offers a compelling alternative to metal. In automotive, electrification is creating new opportunities as vehicles move from 400-volt to 800-volt architectures. In these higher-voltage applications, PEEK performs well where existing materials often reach their limits. In Energy & Industrial, demand is supported by more extreme operating environments, including high temperature, high pressure and corrosive conditions such as in oil and gas and through industrial automation. There may also be longer-term opportunities in emerging areas such as humanoid robotics, although we haven't included these in our analysis, given the very early stage of the technology and uncertainty around timing and end-use applications. So the key takeaway here is straightforward. PEEK is an attractive growth market. Victrex already holds a leading position, and we are over-indexed to the applications and end markets with the strongest forecast growth. So far, I've explained why PEEK is an attractive growth market. I now want to turn to why Victrex is exceptionally well positioned to capture that growth and why we believe our competitive advantage is sustainable. So some key facts on Victrex's competitive advantage. First, as already touched upon, we have a leading market share, supported by our differentiated product proposition, trusted brand and global reach. It's important to understand that not all PEEK is the same. Victrex PEEK has unique properties from our proprietary monomer manufacturing process. We use this platform to produce a broad range of grades, compounds and forms often tailored to specific customer applications. As a result, over 70% of our revenue is specified in with high barriers to entry. Customers trust Victrex for consistent quality, reliable lead times and deep technical support. That trust is reflected in long-standing customer relationships with tenure exceeding 10 years for the majority of our top customers. We are the only PEEK manufacturer with vertically integrated monomer manufacture. Core products are made in the U.K. with optional China manufacturing for the local market. This gives us greater control over quality, supply chain resilience and global customer flexibility. Importantly, our analysis shows around 90% of our revenue is structurally protected from Asian competition through complex product requirements, stringent qualification standards or customer security of supply needs. So Victrex PEEK is unique in that we're the only global supplier that produces what has previously been referred to as type 1 PEEK with everybody else producing type 2. From now on, let's make this really simple. There's Victrex PEEK and then there's everyone else's PEEK. The reason Victrex PEEK is different is due to our monomer manufacturing process. which is vertically integrated, made in the U.K. and unique to Victrex. This produces material properties that are distinct. So what does this mean in real applications? Well, touching on a few of the characteristics shown on the slide, PEEK -- Victrex PEEK delivers significantly better performance at high temperatures with 30% higher tensile strength and 100% higher compressive strength at 200 degrees C. In practice, that means double the load-bearing capacity so customers can use less material for the same application. It also has very long operating life, which is critical in sealing applications where products face extreme temperatures, high pressures and corrosive environments. Victrex PEEK has demonstrated twice the sealing lifetime compared to alternative PEEK, and we've supplied material for more than 75 million seals, delivering considerable operational cost savings versus alternative PEEK. Its higher crystallinity also improves manufacturability. Faster crystallization can increase throughput and production yields, reinforcing why customers should consider not just the material price, but total cost, quality, reliability and manufacturing performance. A good example where several of these properties come together is an oil and gas wellhead electrical connector. These mission-critical components transfer power, control and data signals between downhole equipment and surface systems, whilst maintaining the integrity of the well's primary pressure seal. They must operate reliably in some of the harshest environments, including pressures above 20,000 psi, temperatures above 200 degrees C, corrosive hydrocarbons, hydrogen sulfide exposure and continuous vibration. Victrex PEEK's performance across all these requirements enabled our customer to develop a highly reliable connector that meets or exceeds operational life requirements in one of the world's most severe operating environments. In addition to the unique properties of Victrex PEEK, a key differentiator is our ability to help customers engineer solutions to complex problems. While our customers are often experts in their particular fields, many are less familiar with designing and manufacturing in PEEK. Our applications engineers support product design, manufacturing optimization, testing and regulatory requirements, adding considerable customer value. Applications engineers are based globally and work closely with commercial colleagues, allowing us to support our customers locally. They're supported by local laboratories and U.K.-based technical teams, enabling outstanding customer service. We also use advanced digital tools to simulate both polymer chemistry and real-world applications from structural analysis of physical behavior to computational fluid dynamics and material flow in extrusion and injection molding. This helps customers optimize part design and the manufacturing process before committing to costly tooling or physical tests. So what does this mean in practice? The slide shows an aerospace interiors bracket used in aircraft overhead storage compartments. Using advanced finite element analysis and process flow modeling of stamp forming and overmolding, the composite bracket was optimized to outperform the original metal design in fatigue and shock loading while delivering significant weight savings. This gave the customer confidence that Victrex PEEK-based composites were suitable, manufacturable and valuable for the application, and we gained long-term business as a result. So to bring one of these to life, here's a short video from Ensinger, one of our largest and longest customers explaining how our close relationship helps them deliver value for their customers. [Presentation]

So a key part of our competitive advantage is the scale and capability of our operations, which gives us strategic flexibility in a rapidly changing market. We're a global business with manufacturing predominantly based in the U.K. despite generating less than 2% of sales here. In the U.K., we operate 5 manufacturing sites. We make our unique monomer in Rotherham and Seal Sands, which supplies our polymer and specialized forms business in Lancashire. We also operate a fibers manufacturing business in Gloucestershire and support the Magma program from a small operation in Portsmouth. So it's important to note that the vast majority of our manufacturing is non-Asia-based, meaning we've got security supply, particularly for protected or regulated markets. To support aerospace and defense customers, we operate a thermoplastics composite business in Rhode Island, giving us specialist capability closer to customers where local supply and technical collaboration matter most. In China, we operate a polymer plant in Panjin and a state-of-the-art compounding plant in Shanghai. This is in addition to our Asia technology center, all of which support our rapidly growing Chinese business. As many will know, we faced challenges with the Panjin plant, but we're committed to making this work, and Suranjan will explain the actions underway later in the presentation. These facilities allow us to support Chinese customers locally while we continue to supply U.K. manufactured Victrex PEEK into premium applications where its differentiated performance and quality are valued and growing. We also operate 8 warehousing centers close to customers, helping maximize availability and meet dynamic demand. And finally, and importantly, we have sales and support offices in strategic locations close to customers, including Germany, France, various locations in Asia Pacific and the U.S. This keeps us in the right time zone, speaking the right language and responding quickly, combining commercial teams with world-class applications engineers to deliver engineered solutions for our customers. Based on either volume or sales, Victrex is the world leader in PEEK. We're a premium brand with premium quality, deep technical capability and a global network. This gives us more than double the market share of the next nearest competitor and leading positions in the highest value sectors. There are 2 main non-Asia and Asia headquartered competitors shown as competitor 1 and competitor 2. Both supply a much broader polymer portfolio with PEEK only a small part of their business. And whilst they benefit from scale, they lack Victrex's focus and specialism in PEEK. Competitor 1 manufactures in the U.S. and India with capacity around 1/3 of Victrex. Competitor 2 is European, but its PEEK manufacturing is entirely China-based. There are 7 Chinese PEEK producers, but only competitor 3 and competitor 4 have credible scale and quality. The others remain relatively small, reflecting the difficulty of mastering complex PEEK synthesis and delivering consistent customer quality even many years after plant commissioning. And recent VAT increases on Chinese exports and punitive U.S. tariffs have also constrained their ability to compete outside China. Chinese players, particularly competitor 3, have grown strongly over the past 5 to 6 years, but it's mainly in lower performance or lower quality applications. Higher-value segments remain protected by tougher quality performance and certification requirements. As such, we estimate that we retain a 25% market share in China, broadly stable since 2019. Over the past 10 years, China sales have grown at 17% compound annual growth rate with acceleration this financial year entirely through U.K.-made product. This is an important proof point. Chinese customers import Victrex PEEK at premium prices because they value its distinctive properties and consistent quality. Much of China's announced capacity expansion is aimed at the nascent humanoid robotics sector. Based on our analysis, not all of this capacity is likely to emerge and many producers will continue to struggle with the complex PEEK synthesis. Competitor 3 has announced 10,000 tonnes of expansion. But as this includes the total of their monomer, polymer, forms and composites business, the actual additional PEEK polymer capacity is unclear and likely only a minority of the headline figure. Overall, Asian competitors remain largely contained to China and lower barrier segments. We remain vigilant, but our analysis shows their manufactured cost is not substantially below our current cost per kilogram, even before the operational transformation work that Suranjan will describe later. So standing back from the market dynamics, growth opportunities and competitive landscape, the key point is that Victrex is well positioned to benefit from attractive market conditions despite the much discussed potential Asian capacity expansion. First, Victrex has greater protection than the overall PEEK market. Around 90% of our portfolio has high or medium protection from Asian competition, reflecting our exposure to fast-growing high-value applications in medical, aerospace and defense, semiconductors and battery electric vehicles. Second, that protection is underpinned by high barriers to entry. These include strict regulation and demanding technical requirements, long development and testing cycles and established Western manufacturing capability. These barriers are particularly strong in medical and aerospace and defense and remain meaningful even in lower complexity applications. This is why higher-value segments remain better protected and why Victrex's exposure to the most demanding applications provides greater resilience than the broader market. So the key takeaway is that Victrex is over-indexed to the most attractive parts of the market with around 90% of our portfolio benefiting from high or medium protection from Asian competition. That gives us confidence in the resilience and growth potential of our portfolio. So in summary, we have deep PEEK expertise that's unmatched in the market and a differentiated unique version of PEEK. We have class-leading applications engineering, which unlocks customer value by providing solutions to real-world challenges and a world-class vertically integrated manufacturing capability with the capacity to grow without the need for additional CapEx. This is mostly located in non Asian supply chain to provide security supply. When combined this attributes, ensure we're seen as a trusted solution partner to our customers. Priortizing long-term relationships to drive real business outcomes. So, now I'm going to show you another short video summarizing our premium offering. [Presentation]

So I've told you that the market is growing and Victrex is well positioned to capitalize on that growth through a differentiated model. I'm now going to explain to you how we're going to do that through rapid organizational transformation. Let me start by highlighting some internal factors that have affected our past performance. So some of the more skeptical amongst you might be thinking if the market opportunity and Victrex's competitive advantages are so clear, why haven't we delivered in recent years? It's the obvious question. Well, the answer is execution. So let me explain. First, starting with commercial focus and capability. We have not driven sufficient top line growth over the past 7 to 8 years. Whilst we maintained share in Europe and China, we lost share in North America, where we lacked sufficient commercial capability. This is because despite the product and service differentiation I described earlier, our pricing discipline was not robust enough. We failed to increase prices adequately in certain markets and applications, reducing revenue and squeezing gross margin. At the same time, mix shifted towards lower priced but still highly valuable VARs business, while medical, our highest priced business, was flat and saw negative mix within its portfolio. Second, operating effectiveness. Headcount increased by around 50% from 2020, mostly in function -- support functions rather than direct value-adding functions. This created a large corporate center, limited local empowerment and insufficient focus on P&L performance. This resulted in bureaucracy, rigid processes and a much larger overhead base with limited accountability. And much of this resource was focused on longer-term projects, previously known as mega programs rather than nearer-term opportunities to improve financial performance. This added significant costs over many years without any corresponding return. Third, capital allocation and execution. We made investments that did not deliver the expected profit uplift, while depreciation charges flow through the P&L and further reduced earnings. We also invested in loss-making businesses that ultimately did not deliver. The China manufacturing plant is the clearest example. Since commissioning completed in May 2024, it's been a drag on gross margin with an GBP 8 million negative PBT impact in FY '25 and nearly 300 basis points drag on operating margin, and we'll cover next steps for this facility later. Overall, many of these impacts resulted from the choices the business made rather than external factors. That means they are largely within our control to address. This brings me to how we are changing Victrex's leadership, organization design and operating model. So we certainly haven't been waiting for this event to start taking action. We've moved quickly and completed much of the heavy lifting needed to position the business for FY '27 and beyond. This is already driving results as shown in our 9th of September trading update, which highlighted improved performance and upgraded FY '26 guidance. When I started in January, I commissioned a strategic review to understand what had gone wrong, where we were strong and where we needed to change. It became clear that many issues were internal and within our control. We used that work to then define target markets by geography and sector and to sharpen our win strategy. Following the issues with the manufacturing plant in China, we completed a full review of our China strategy against the backdrop of operational challenges and rapidly changing market conditions. We'll cover this in more detail during the individual presentations. As part of the same review, we reassessed each of the so-called mega programs, canceling or changing scope where needed to deliver nearer-term commercial outcomes. From February, I began reshaping the executive leadership team around the new organization design and the operating model. While some changes is still underway, the key commercial and operational leaders are now in place and here today. Please remember, they've only been here a couple of months, so be gentle with them today. This team is commercially led, focused on financial outcomes and rebalancing effort towards nearer-term opportunities while still pursuing longer-term potential. Since their appointment, Andrew and Daniel have been actively driving change through their organizations, visiting global sites and meeting as many customers as possible. They've also reviewed senior leadership capability and made several changes aligned to the new operating model. We've also designed a decentralized operating model with individual P&L owners. This will sharpen accountability, drive financial performance and reduce the size and cost of the corporate center. The work is complete and will go live next week, aligned to the start of our new financial year. The new team has also rationalized a very large project portfolio into a manageable set focused on commercial outcomes, eliminating OpEx and CapEx projects that were not aligned to our strategy. And on the profit improvement plan, we delivered the first phase by the end of Q3, removing around 10% of global roles, supporting our previously stated GBP 10 million annualized profit improvement commitment. We'll continue to review organization design and identify further savings. The program has also highlighted opportunities to rationalize our product supply, given that a relatively small number of products generate most of the profit. This will also be delivered during FY '27. In August, as part of this rationalization, we divested our Grantsburg parts manufacturing business in the U.S. Originally acquired in 2015 to support an automotive gears opportunity, it was no longer core as we focus on polymers and specialized forms and was also a drag on the P&L. We also announced the closure of our underutilized Philadelphia office. And going forward, we'll continue to rationalize all other loss-making sites. So in conclusion, we've moved quickly, but there's still more to do to drive the turnaround. The actions already taken, combined with our revised strategy, position us well to deliver a step change in financial performance. So moving forward, our execution will focus on 3 clear priorities driving near-term performance and positioning us for long-term growth. The first priority is to transform the business to build a customer and performance-focused culture that puts customer needs and financial performance at the center of everything that we do. We've already made strong progress, including appointing the new leadership team and establishing a new more agile, decentralized organization with clear P&L accountability. This may sound like an obvious thing to do, but it wasn't previously in place. We're also simplifying the operating model, removing internal barriers so the activity clearly supports either the customer or improved profit, cash and return on invested capital. R&D and product development will now be commercially led, shaped by customer needs and market trends, so we launch products with clear and a defined route to revenue. We'll continue to invest in innovation, but the focus is commercial outcomes, not background research. The second priority is profitable revenue growth as we refocus the organization on nearer-term, higher-value opportunities. In recent years, Victrex has been too focused on longer-term projects that have not delivered incremental revenue or profit, which has understandably frustrated shareholders. To reinforce this, we have introduced a 70/20/10 rule. 70% of resources will be focused on financial performance over the next 2 years, 20% on 2 to 5 years and 10% on opportunities beyond 5 years. This will help convert nearer-term opportunities into profit and cash. We will prioritize high-margin applications where Victrex PEEK is highly differentiated, already specified in and protected by a strong moat. In some markets, this includes geographic advantages where supply from outside the U.S. or the U.K. or EU is not viable. These areas support stronger pricing, higher margins and lower competitive risk. Growth will also come from stronger, deeper, more meaningful customer partnerships, where there's a clear benefit for both parties. We already have many examples, which you'll see later today, but this remains a major focus for our sales teams. Product development will follow exactly the same discipline. Everything we develop must drive incremental revenue at improved margins. The third priority is relentless efficiency and cost discipline. In recent years, the overhead base became too large, and we're now rightsizing costs. We've already taken a substantial first step through the profit improvement plan, but there's a lot more to do. And as part of our simplification, we're driving operational excellence and using digital tools and automation where possible to reduce costs and improve efficiency. We're also rationalizing the product range. We have over 450 products, but a relatively small proportion drives profitability. And we're applying the same discipline to projects and initiatives, reducing work streams, so resources focus on nearer-term financial outcomes. We're reviewing our operating footprint and have already exited loss-making locations or underutilized sites and are actively reviewing all other locations. Fundamentally, we will operate a capital-light model. Victrex has invested significantly in capability and capacity over the past decade. Now is the time to generate stronger returns from that investment and drive a material improvement in return on capital. So after explaining our compelling market, our strong competitive advantage and our strategic model to deliver the next phase of our growth, this delivers a clear path to enduring value creation. In conclusion, Victrex has a premium offering, a trusted position and a well-invested asset base. By combining those strengths with far sharper execution across the organization, we can unlock the true potential of the business and deliver a substantial step-up in operating profit and cash generation. The largest part of that improvement is within our control, focusing on the core business, commercial and operational discipline, strengthening gross margins and maximizing returns from our existing portfolio. I have great confidence in our ability to compound earnings growth and generate substantial free cash flow over the next 5 years. In the next part of the presentation, my colleagues will take you through the commercial, organizational and operational initiatives that they'll be leading and making -- and that they'll be delivering these improvements. And then towards the end, I'll put it all together for you by summarizing our updated financial guidance and capital allocation policy. So I'll now hand over to Andrew, and he'll take you through Victrex Performance Materials.

Thank you, James. Good afternoon. I'm Andrew, Chief Commercial Officer, leading Victrex Performance Materials or VPM, across our industrial and technology-focused activities. I joined earlier this year from AB Dynamics, where I was Group President and Chief Commercial Officer. Prior to this, I led the APAC business for Diploma, where accountability, customer intimacy and local decision-making were key to the decentralized operating model. Crucially, I've been a customer of Victrex, and I know what Victrex is capable of delivering. My focus here at Victrex is clear, building high-performance teams, scaling international operations and delivering disciplined commercial growth. It is indeed exciting for me to be here today presenting to all of you. So there are 3 things I would like to cover today. Firstly, we have strong foundations in VPM. Secondly, I will talk about the untapped potential that to date, Victrex has not converted. And thirdly, I will cover the VPM strategic priorities related to firm focus on profitable revenue growth and optimizing our global operations. Finally, I will share with many of you the actions that are already underway. So let's start with strong foundations. As outlined by James, VPM is not just a material supplier. We are a global leader in PEEK-based, high-performance polymer solutions for critical applications where failure just isn't an option. We have a strong material suite with about 450 different grades organized into 4 groups across our product family. Firstly, PEEK performance. This is designed for higher temperature applications, offering better PEEK stiffness and strength above 150 degrees C. Secondly, PEEK core. Now that's the original Victrex PEEK range, and it is widely recognized as the industry benchmark. It includes specialist formulations for PEEK wear, mechanical and electrical performance. Thirdly, PEEK process. These are our lower melting PEEK materials developed to be easier and faster to process than conventional PEEK. They are particularly relevant for extrusion, 3D printing and carbon fiber composites. And finally, PEEK volume. These materials are designed to provide a broader offering for customers looking for cost-effective and higher-volume solutions. Across these product families, we produce PEEK polymers as granules and powder, which are typically compounded into specialist forms such as films, tapes, fibers and tubes. Our performance materials solve demanding problems. So let me bring that to life for you. In aerospace and defense, we supply major civil aerospace customers with PEEK for applications such as brackets, hinges and interior components. Increasingly, we're also supplying customers with thermoplastic composite materials used for larger aircraft structural parts. Defense is still at an early stage for us, but the opportunity is developing. There is an increasing need for rapid innovation and cost-efficient manufacturing for unmanned aerial vehicles, UAVs, and PEEK is well placed to support both. In automotive, we supply PEEK components for both hybrid and EVs, such as slot liners and bushes. More importantly, PEEK coatings can replace traditional enamel on high-voltage wiring, which supports the move to the new 800-volt EV architectures. In electronics, our PEEK is used to produce high-performance components such as the impellers for vacuum cleaners and hair dryers. Victrex PEEK is also specified in mobile devices where our specialist product forms can make the difference. And in semicon manufacturing, PEEK has a variety of chips in the production process. These includes wafer carriers and CMP retaining rings. We have product samples displayed here today, so take a look a bit later. Finally, turning into Energy and Industrial. PEEK is used across a wide range of applications such as gears, compressor rings, seals, bushes, bearings and other low-friction components. In oil and gas, PEEK is particularly well suited for high-temperature and high-pressure applications in hostile chemical environments. This is particularly important as operators move towards deeper and harder to access reserves. I'll come back to this later and bring this to life through a case study. PEEK is critical across multiple end markets and applications. As James mentioned earlier, applications engineering is a critical part of VPM's strong foundations. This is particularly important in aerospace where we work as a trusted solutions partner, not just a material supplier. I recognize that some of these opportunities may be familiar. What is important today is the progress we are making towards commercialization. So let's talk about eVTOL, which stands for electric vertical takeoff and landing aircraft or air taxis. There are a range of exciting applications for PEEK from commercial air taxis to UAVs, as I mentioned, for defense. We have a highly differentiated business in Rhode Island, U.S.A. called TxV. Now TxV produces PEEK composites via unidirectional carbon fiber tape supplied from our U.K. operations. Victrex low melting PEEK is being used in load-bearing brackets, engine vanes, access panels, interiors and battery containment enclosures. So why does it matter? Well, Victrex thermoplastic PEEK can be molded in minutes compared to hours in an autoclave. And this is really important because it supports faster, more repeatable production and improved yields while enabling lighter structures and greater design flexibility. Our unique PEEK expertise and applications engineering are helping our customers to bring innovative solutions to the market. A clear example is our partnership with Daher, where Victrex composite PEEK is playing a critical role in the design and manufacture of its light aircraft. So, let's take a look at the short film illustrating this partnership. [Presentation]

So that provided a good overview of what Victrex offers. However, when I joined, it was clear that our strong foundations were getting held back. The organizational structure contained too many layers and overlapping responsibilities. Internal hurdles slowed decisions and diluted focus. Decision-making was just too centralized. This reduced our speed, our agility and our responsiveness to regional opportunities. Commercial rigor was also limited. Prioritization was insufficient and pricing discipline was not robust enough. We had a significant untapped potential. So addressing these internal issues and simplifying our operations will enable us to commercialize more of the opportunities within the business. Now to our favorite topic, pricing. This chart shows or highlights the clear pricing opportunity for Victrex. Pricing has simply not kept pace with inflation despite our premium quality and superior performance of our materials. This reflects insufficient pricing discipline and too much acceptance of our customer-led pricing. So in future, decisions will sit close to the revenue source, strengthening accountability and enabling us to price strategically for the actual value we deliver. So let's talk about that untapped potential. There are 3 growth drivers for VPM. We benefit from structural growth in selected end markets. We can increase in PEEK penetration with those markets as customers require lighter, stronger and more durable materials. Capturing the opportunity requires disciplined resource allocation and pricing that reflects the value we deliver. Given these drivers, we know that the strongest regional growth will be in Asia Pacific, ranging 7% to 8%. North America also presents a compelling opportunity, having historically been underresourced. But it's okay, we're already fixing that. This is a compelling growth opportunity going forward. So let me start with the structural dynamics in our priority markets and the opportunity for further PEEK penetration. As shown on the slide, growth across priority segments is driven by a combination of underlying market growth and increasing PEEK penetration. The opportunity differs by segment. We access these opportunities through complementary routes to market. We engage directly with the strategic customers on technically demanding applications. Our value-adding resellers extend that reach further. They broaden access to PEEK through parts prototyping and support volume growth in non-molded components. Over the next few slides, I will take you through each segment in turn, looking at the market drivers, penetration opportunity and how Victrex is positioned to capture that growth. So let's start with aerospace. In commercial aerospace, growth is getting driven by increased aircraft production as shown in these forecasts. This follows several years of delays in the delivery of all programs since 2020. These are opportunities for Victrex PEEK across both new generation wide-body and single-aisle aircraft. Importantly, Victrex PEEK is already specified on all aircraft types. So as customer capacity and production increases, that growth will benefit Victrex. We're already seeing this in our performance with good double-digit sales growth over the last 12 months. In addition to the underlying market growth, there is also increasing penetration of PEEK into new aircraft applications. These include larger structural parts and interior components. Lightweighting remains a key structural driver. Every kilogram removed reduces fuel burn, operating costs and lifetime emissions. PEEK is moving from smaller functional parts into larger, load-bearing and exterior applications. So ultimately, more PEEK will be required per aircraft. In addition, through injection molding, PEEK components can often be produced at lower cost and with less waste than machine parts. The Daher wing rib featured in the early video is a good example of this. It delivers low weight, low assembly costs and shorter production cycles. A further example is a door bracket. The PEEK-based solution is about 40% lighter, and it's significantly cheaper to manufacture. The opportunity also extends into primary structures, including the emergency exit door. pretty important. This is a single molded overwing component that reduces parts and assembly steps by up to about 90%. I mean that's massive. There are further opportunities in premium class seating where the potential is being assessed to switch from aluminum architecture to PEEK. For example, we estimate that the PEEK usage for business class seats on a new wide-body aircraft to reduce seat weight by about 20%. So in a standard configuration aircraft, that would equate to about 1 ton, 1 ton in weight savings. Imagine that. So together, build rate recovery and increasing PEEK penetration creates a compelling aerospace growth opportunity, more aircraft, more PEEK per aircraft and qualifications that support the defensible growth through the decade. And now on to automotive. In automotive, the shift is to EVs. There's a big push from 400 volts to 800-volt architectures. Let's hold on to that thought. PEEK has historically been used in smaller vehicle components such as seals and bearing cages. EVs now are in turn creating demand for larger performance critical insulation applications that must withstand high voltages, temperatures, long thermal life cycling and a good example of that is in the EV wiring. So traditional enamel coatings can break down at high voltages, whereas PEEK's unique properties makes it ideal for a solution for 800-volt architecture and beyond. EV production is expected to almost double over the next 5 years, 20 million vehicles to about 36 million. And at the same time, adoption of that 800-volt architecture is set to accelerate from 10% to 20% to well over 50% today. So why is that? Well, it's faster charging, and the demand is high, as we all know. We're already seeing this translate into material demand. One leading Chinese OEM uses around 10x more PEEK coating in vehicles built on 800-volt architecture compared to hybrid vehicles. This is a clear example of a strong growth driver in Asia Pacific, and this is why we're focused on this particular opportunity. AI. That's a hot topic for all of us today. But at Victrex, this is an opportunity for us because it's in the electronics sector. In electronics, fundamental drivers of growth include both the rapid increase in AI infrastructure and the increase in electronic devices. So both support an increase in semiconductor chip demand and an increase in fabrication facilities. This benefits Victrex. Within the semicon chip manufacturing process, we supply PEEK for the production of the CMP retaining rings. These rings hold wafers in place during the chip polishing phase. As chips become smaller and more advanced, they require more and more polishing. Therefore, the wear rate of the CMP rings will be higher. More gets used, more will be replaced. This is a multiplier effect for us and our resilient position has given qualified materials that are not easily substituted. Finally, turning to Energy and Industrial. Across this sector, we are seeing increasing demand for high-performance materials. Operating environments are becoming more extreme and applications are placing greater demands on reliability, durability and efficiency. Be it in oil and gas, industrial processing, automation, PEEK is increasingly being specified where traditional materials approach the performance limits. So many of you have heard us talk about Magma and flexible piping. And the opportunity continues to progress, but it's worth revisiting. But I've seen it. It's always there. At its core, this is about Victrex PEEK carbon fiber composite pipe operating in some amazing and most demanding offshore environments. At depths of nearly 2.5 kilometers, infrastructure faces extreme pressure, temperature and corrosive conditions. In these environments, -- the technology offers higher pressure capability. So corrosion resistance, reduced weight, improved fatigue life. However, technology alone is not enough. What makes the opportunity compelling is the collaboration across the value chain. So Victrex provides the proprietary PEEK and composite technology, Relax. TechnipFMC, our customer, provides a flexible piping. It engineers expertise. It deploys the solution to their end customer, Petrobras. Petrobras provides a real-world demand and qualification pathway. So this has been a long-term partnership, about 16 years. But Victrex and its partners have invested in developing and qualifying this technology, progressing it from concept to a qualified route to market. Petrobras, it accounts for nearly 60% of the global flexible piping demand, making Brazil's pre-salt reserves one of the most attractive uses of this technology. More importantly, this opportunity is not included in the guidance case or forecast that James will discuss later. It represents additional upside. As we have highlighted previously, the single application with a single customer has the potential to deliver revenue equivalent to about 10% of today's group revenue by 2031. This will be further opportunity beyond as the customer and geographic adoption expands. Speaking of geographies, China. China is an established and strategically important market for Victrex. We have a brilliant business in China. It has grown over 17% compound annual growth rate over the last 10 years. It is by far our clearest and strongest growth opportunity going forward. In China, our operations comprise of 3 elements: one, Asia Technology Center. This is based in Shanghai. It supports our customers across Asia Pacific from material selection and prototyping to tool design and simulation. Two, our Shanghai compounding plant enables tailored formulations to meet our customer needs in China. Three, our Panjin polymer plant produces type 2 polymer, which supports a volume-driven industrial business in China. Today, this remains a relatively minor proportion of our revenue. As James has shown, we have maintained strong double-digit market share since 2019. Importantly, our growth in China has been driven by our U.K. manufactured PEEK core, demonstrating Victrex retains a defensible premium position in the market. This is driven by applications where qualification, reliability, quality, performance and consistency, these are critical in some of the industries that we operate in, aerospace and electronics. New entrants have largely grown in the lower spec industrial applications. Our local competitions continue to commission new plants, okay. However, it will take many, many years to achieve the product consistency and quality that Victrex has. So this has enabled Victrex to compete effectively in China without diluting our premium offering. Our global customers are specifying Victrex products manufactured in China for the quality of our PEEK. However, as I mentioned, our polymer plant in Panjin, it has some headwinds. So let's address that. We will have a revised operating model, which will reduce the cost, improve the flexibility and support growth without any further capital investment. Suranjan will explain more about the next steps in his presentation. So the message for Victrex in China is clear. Market opportunity, that's very attractive. Our premium offering position, that remains defensible. Our facilities in Shanghai plus Panjin is pivotal to selective market segments for our growth in China. So to summarize, this matrix shows our focus areas across end applications and regions. The pluses on the matrix. It represents the focus areas that we want to be in the short and medium term. Now given our previous underrepresentation in North America, remember, I'm fixing that. We are fixing that. And in this region, this is now our #1 focus across all market segments. It is. Well, you know, I've done 3 trips in the last 4 months to the U.S. and here to visit all our customers and partners. We have an incredible opportunity here to pursue the new business opportunities at pace, and we will ensure it is fully resourced to drive revenue growth going forward. Some of my colleagues are actually here from the U.S. Within EMEA, we will have a particular focus on higher-margin Aerospace and Defense segments. There are also future opportunities for the rapid growth from the 800-volt architecture for the EVs. Remember, the demand for fast-charging EVs, that's real. In Asia Pacific, the EV market opportunity is automotive. And as previously mentioned, the CMP rings in the Electronics segment, that's very attractive for us. So we remain strong in a defensible position in other market segments where premium applications have the highest conversion potential. Execution will be focused, disciplined and customer-led. So as James set out, our priorities are clear: build a customer performance-focused culture, deliver profitable revenue growth and drive efficiency through cost optimization. For me, that starts with simplification. In VPM, we will simplify how we work. We will move decisions closer to the customers, focusing resources on opportunities with the strongest commercial return. It's okay. We are moving away from a model that has become too centralized, too complex. Regional P&Ls will strengthen accountability and give teams sharper ownership of customers, growth, profitability and execution. The second area is project rationalization. We are focusing R&D and commercial resource on fewer higher value opportunities with clear customer need, a defined route to revenue and attractive returns. The aim is a faster and more commercially disciplined business. A good example of this is how we are managing the value chain and product pipeline. When I joined, the pipeline responsibility was across four separate teams, four, industry, project management office, strategic portfolio and product portfolio. Each had a role, but priorities were not aligned and R&D interfaces overlapped. And then the decision making, well, it was just slow. We've brought that together into a streamlined product portfolio management team under one director. She's here too. I'll introduce her later. One team now manages the full product life cycle from early R&D and launch to mature product optimization, giving us one point of accountability for resources and priorities and the roadmap. The third area is regional empowerment. By moving decisions closer to customers, regional teams can respond faster to local needs. This will help give clear ownership of customers, pipelines, market priorities and financial performance and execution. Asia Pacific demonstrates this opportunity. It is new decentralized model, combines local sales and customer facing capability with the ATC, the Asia Technology Centre based in Shanghai. It has delivered growth well ahead of the wider group and it provides a blueprint of how we move forward. The divestment of Grantsburg, it's another example. We successfully seeded the PEEK gears market, but this parts based business is no longer our core. The divestment sharpens our focus on core operations where Victrex can create the greatest long-term value. So the direction is clear. The sharper commercial focus also changes how we allocate resources. We are shifting from spreading resources too widely to focusing them on where they can create the greatest value. New product opportunities will be governed by the sharper 70/20/10 discipline as outlined by James. Most effort will be directed to near term opportunities with a clear path to revenue. Our effort will be focused on opportunities capable of generating revenue within five years with the greatest emphasis on those that can deliver within two. Every project must demonstrate customer need, customer commitment, a credible route to revenue and an attractive return before resources are committed. This creates a more disciplined innovation model, less technology for tech's sake and more focus on what customers will specify, buy, and pay for. And in terms of existing product opportunities, we will also extract more value from the existing portfolio through stronger sales capability, pricing discipline, and more active commercialization of our operating assets. We will focus on the vital few products that drives the majority of the revenue and profit while actively managing the remainder that add capacity, cost and complexity without equivalent value. Sites such as Stonehouse Fibres, Magma Tubing in Portsmouth should not simply fulfill customer orders passively. They should be positioned and promoted as growth assets that can contribute directly to revenue. So in summary, our commercial efforts are focused on increased revenue, profit and cash with a focus on maximizing near-term opportunities and we're already making progress. I've been very busy. The changes I've described are already well underway and many are now complete. In terms of the regional structure, we've simplified the organization and clarified ownership across the board. Alongside this, changes to our sector leadership have created one point of accountability for the product roadmap, customer led priorities and resource allocation. I've also undertaken extensive customer visits across EMEA, the Americas and Asia Pacific. These have confirmed to me the strength of the Victrex brand and the value proposition. Customers consistently highlighted their trust in our product quality, technical expertise and security of supply. Finally, I've implemented a performance culture with clear P&L accountability. This has reduced duplication and align activity directly to commercial execution. We are now focused and we will not be distracted, but we have been very, very busy. In conclusion, I've been here before. Victrex has strong foundations. It has differentiated technology, trusted customer relationships, substantial manufacturing capability and talented, amazing people. The opportunity is to convert this consistent profitable growth, stronger returns and cash generation. We have simplified our business at pace, sharpen accountability, moving decisions closer to customers and focusing resources where they create the greatest value. I'm excited about the future of VPM. My team and I, we're ready to take on all the challenges and we know we have the right to win. So thank you and I'll look forward to the Q&A session.