The Victrex PLC Annual Accounts Accounting Essay

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With 30 years of experience and have professional production, modern technology and good customer services, VictrexPlc is quick to become a leading global manufacturers about high performance polyaryletherketone materials with distribution team that spans more than 30 countries on the world. With large scale, Victrex divides into two divisions: Victrex Polymer Solutions and Invibio Biomaterial Solutions. Besides, to increase competitive and give innovative applications to market, Victrex is also continuous create new applications by using Victrexpolyketone materials. This helps customers improve processing techniques and reduce overall costs, specially ensure the most comprehensive commitment to customers about providing specialized services. (VictrexPlc, 2012, About Victrex)

Strategy and Objectives

Corporate strategic intent of VictrexPlc is to achieve sustainable earnings growth for shareholders by:

Strategy 1 (S1): Focusing, through the Victrex Polymer Solutions and Invibio Biomaterial Solutions business units strategies, on maintaining the Group's leadership in developing and growing the market for polyketone based products.

Strategy 2 (S2): Maintaining the highest appropriate quality, efficiency, safety, health and environmental standards throughout the supply chain

Strategy 3 (S3): Providing a fulfilling and appropriately challenging environment for employees

Strategy 4 (S4): Seeking out and implementing, where appropriate, added value business opportunities (VictrexPlc, 2011, annual report and accounts)

SWOT analysis


The leading global manufacturer of high performance polyaryletherketones.

An excellent financial position with a healthy balance sheet and strong cash generation.

All Victrex's products are manufactured under ISO quality registration.

Weaknesses (internal factors)

The group manages exposure to credit risk at many levels. So, internal procedures require regular due consideration of credit rating, payment history, aged items and proactive debt collection.


Victrex continues its expansion into high growth markets such as India, Russia and Brazil.

Threats (external factors)

Change about price, raw materials and energy can affect the Group's result.

The Group's financial statements are exposed to currency fluctuations such as US Dollar, Euro and Yen


In order to investors feel interesting in investing 500,000 to company, the analysis the financial situation of Victrex is very important. To analyze and evaluate the financial performance of the company, this report will base on 4 types as below:

Profitability ratios

Victrex's ROCE showns a decline from 2007 to 2009, there was a sharp increase then in 2010 it recovered its ROCE and then again there was continue increase in 2011. This was due to the fact as resulting group profit before tax were up 26% whereas capital employed only increased by 2.58%. the company has good result of operating, investing nd financing decision. The company has full income with no debt in 2011.This proves that Victrex has used total assets more efficiently (1) and have been successful in raising net profit. When comparison with Croda International, it is apparent that, when the profits earned by the two companies are related to respective investment bases, Victrex achieved the better return on capital employed, so, might be regarded as the more successful in using capital efficiently to generate revenue. These tie in with S1 and S4 of Victrex Plc.

(1) The percentage of inventories increase = [(Inventories2011- Inventories2010)/ Inventories2010] Ã-100 = [(£45 - £ 34.5)/34.5] Ã- 100 = 30%

The operating profit margin from 2008 to 2009 decreased slightly due to the crisis of world economic had not yet been overcome in 2009. This influences the price of the sold units. When prices increase affect units that company can sell, which in turn influences the overall profit numbers as well as causes a significant decline in demand across all markets. However, from 2009 to 2011, operating profit margin of Victrex had a significantly increased. It brings effective and helps Victrex earn more gross profit on each sales dollar. So, it can prove that Victrex is doing financially better than Croda International.

Victrex Plc

Victrex Polymer Solutions

Invibio Biomaterial Solutions





























In 2009, turnover of Victrex go down seriously due to Victrex influence and impact strongly from economic downturn. This leads to purchasing properties involve a large amount of money as well as people push back their decisions to purchase any properties until the economy improve. However, from 2010 to 2011, Victrex's turnover was up 14% to a record of £215.8m (2010: £189.5m). This reflects that Victrex has a strong performance from both of business unit (2). Especially Victrex Polymer Solutions contributed significantly to revenue (3). The reason for this increase is due to Victrex continued investment in commercial and technical resources targeted at new application development with high number (4), improved customer support, new product development and strengthened end user focus. Specially, there is a strong rebound in demand across all major markets- especially in USA, Asia and Japan as well as improved effective exchange rates with the underlying year on year. These tie in with S1, S2 and S4 of the company.

(2) Victrex Polymer Solutions ('VPS'): first, enhancing more existing properties. Second, invest in a new technical centre in Tokyo. Third, apply technology facilities at UK Hillhouse site to further develop new products

Invibio Biomaterial Solutions ('Invibio'): first, enter into 55 additional long-term supply assurance agreements with implantable medical device manufacturers. Second, close partnerships with world research groups and key opinion leaders. Third, recruit application specific leaders and regulatory expertise from the medical device industry in the areas of spine, trauma.

(3) Revenue in 2011 was £166.1m (2010: £145.3m) representing an increase of 14% over 2010. Percentage of Victrex Polymer Solutions revenue account 77%

(4) The number of commercialised applications developed ( 539 in 2011 and 634 in 2010)

Long-term liquidity ratios

From 2009 to 2011, fixed assets turnover have been rise strongly- specially in 2011, fixed asset turnover increased by 0.78 times compared with in 2009. This is due to Victrex has effective board that can manage business effectively to create highest sales from investment as well as the company has been more effective using company's investment in net property, plant and equipment, however, in 2009, there are significant reduction. With the low ratio in 2009, it proves that Victrex has the problem in inefficient collection and obsolescence of inventory. Reason of this problem is Victrex affected by the crisis of world economic that lead to lesser people who will buy during the economic down turn and thus resulting in lesser profit for the company.

Short-term liquidity ratios

Current ratio of Victrex has shown a stable increase from 2007 to 2011 (1.2 times) due to the supply chain always has stable (5) as well as increase 61% of inventories (6) from 2007 to 2011. This lead to current assets increased by 125 %(7) to £143.2m ( 2007: £63.4m). Overall, Victrex has a positive working capital, the liquidity position of the company is good (8) and Victrex will be able to pay its current liabilities on time without facing difficulties. This shows Victrex has good financial health and it is identifying a good sign.

When we compare Victrex's current ratio with Croda International, Croda International's ratio is lower than Victrex Plc. This means that Victrex has the liquid resources are sufficient to cover the short-term payments than Croda International.

(5) Supply chain- Capacity: 4250 tonnes per annum

(6) This was calculated by: [(45- 27.9)/ 27.9] Ã- 100 = 61%

(7) This was calculated by: [(143.2 - 63.4)/ 63.4] Ã- 100 = 125 %

(8) The Group has sufficient funds available in order 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 has a committed bank facility of £40m, all of which was undrawn art the year end.

Investor ratios

Victrex's basis earnings per share have been a real increase from 2009 to 2011. This is good signal for company in economic recession. Basic earnings per share were up 293 %( 9) at 85.3p (2009: 21.7p) which reflects an improvement in the effective tax rate to 24.5% (2009: 28.0%). This is due to a further reduction in the UK corporation tax rate from 28% to 26% with effect from 1 April 2011, together with a UK tax refund following agreement of a number of period year computations with HM Revenue & Customs.

(VictrexPlc, 2011, annual report and accounts, pp 6-7)

(9) This was calculated by: [(85.3 - 21.7)/ 21.7] Ã- 100 = 293

Through comparison P/E ratio, Victrex have worse trend. From 2009 to 2011, Victrex's PE decreased heavily than Croda International. With the ratio is too low, it shows that the earnings per share are increased with difference due to which the market price of shares increased as a result of demand of shares. So, it shows that Victrex cannot expect from investors if the company does not pay some of its debts. With Croda International, from 2008 to 2010, it has a steady increase, then, it decrease not too much. This is a desirable ratio; therefore, this proves that Croda International has high growth opportunities, so, it will be evaluated high by investors.

With dividend yield, Victrex Plc's ratio is smaller than Croda International. However, with ratio is high in 2011 due to the significant drop in share prices, Victrex still proves good performance of the company (10). This show that Victrex has most likely to reinvest profit as well as expand company. This can create advantage about a sharp rise in share prices.

(10) An increase of 30% in the full year dividend in line with earnings growth, this is results in a final dividend of 24.5p (2010: 18.6p) per ordinary share making a total of 32.5p (2010: 25.0p) per ordinary share for the year

Conclusion on financial performance and the recommendation

In general, in economic situation as nowadays, Victrex can be influenced much from exchange on the market such as customers demand, risk about price/ financial management and others factor as well as impact of competitor activity, however, Victrex still proves successful in its business operation compared with competitors- especially Croda International. This is a fantastic financial to invest. It is due to turnover, ROCE and fixed asset turnover of Victrex achieved high ratio from 2009 to 2011 with 13.89%, 38.83% and 1.49 times respectively. Especially, current ratio achieve very high ratio with 3.17 times and experiences manageemnt. These prove that Victrex managed business; use capital effectively to create sales in this time as well as the liquidity ability is good and can pay current liabilities on time. With optimistic figure in the financial, this is quite safe to invest, so, Vixtrex will be potential company for investors to decide investment.

However, in my opinion, it is not enough to attract many strong investors in long-term as well as exist in this economic varies, so, Victrex needs to try to complete established strategic the best with specific and useful plan to suitable with objectives, vision and mission of the company. In addition, to increase internal force that can help Victrex maintain customers, adapt to change, gain competitive advantage, increase benefit of customer to provide the best solutions in the most difficult circumstances as well as make a difference compared with other competitors, it is seem necessary for Victrex to take action to set up some new strategic better or adjust exchange in strategic. Furthermore, Victrex also needs to interest in risk to find useful ways to solve and reduce it as low as possible. To have expectation from investors in the future, Victrex also should improve PE better.

Besides, it is also really necessary for Victrex Plc to use TQM (Total Quality Management) and PDCA cycle (Plan- Do- Act- Check cycle) to improve and increase effectiveness in operating process.


Through this part, it will help customer more understand about ways that Victrex communicates strategy as well as performs activities based on communicate information. From that, it will help customer to decide should they invest Victrex?

Overview of Victrex's performance

With above analysis, in 2011, Victrex achieved fixed successful. It shows through turnover, ROCE and fixed asset turnover increase strongly. With this successful, it proves that Victrex performed effective strategy.

However, in order to good communicate with investors, as Mark and Michael (2003), using suitable narrative report is considered very important. Narratives in corporate annual reports are more important than financial figures and that potential investors were more likely to read this section of the report (Henderson, 2004). According to Peter Yeoh (2010), narrative reporting was initially introduced as a best financial disclosure practice for large listed corporations to promote user- friendly financial reporting. It includes Chairman's report, CEO report and others report. However, the report that plays the most important role- that is chairman's report (Epstein and Pava, 1993). With these reports analysis, it will help to provide a comprehensive and optimistic view for investors to help them give decision exactly. In general, the Chairman's report of Victrex met fully the requirements of a narrative report.


Language is used to blur distinctions about the causes of poor performance, presenting the company in a positive light. If the reader wants to understand a narrative report, they must to base on language and content (Jameson, 2000). So, it can easily see that language play very important role that help reader can know clearly and quickly about Victrex's financial is bad or good performance. In chairman's report of Victrex Plc, the company mentioned to the increase of financial indicators such as:

Group profit before tax increased by 26% to a record of £94.2m on strong organic revenue growth of 14% to £215.8m

Basic earnings per share increased by 31% to 85.3p benefiting from a reduction in the effective tax rate.

In recognition of the group's record performance, strong cash position and continued confidence in the strength and potential of business, we are recommending an increase of 30% in the full year dividend in line with earnings growth.

(Victrex PLc, 2011, annual report, p. 6)

Language that Victrex use very brief and don't get lost with complicates sentences, so, readers can understand easily about financial information of Victrex in 2011. It is positive to prove successful of Victrex in current situation.

Beside, the Chairman's report also presents diversity at Board level as well as effectiveness of the Board- especially outlook of Victrex. These showed by clear language and understand. With two page of this report, it can help and support for the shareholders or investors very much in having a general view and understanding much more the financial situation of the company that performed in 2011. So, the reader will feel more security when they make a decision to invest more capital for Victrex Plc.


As stated by Courtis, J. K. (2004), at rhetoric, colour plays a role in emotional reaction. The use of colour in annual reports can draw attention to corporate attributes and stress particular aspects of corporate behavior. Colour can aid in the understandability of information by emphasizing and contrasting relationships.

Besides, colour can also help users of financial information to improve their resource allocation decision-making, especially in high time-constraint environments (Benbasat and Dexter, 1986). Research by Christ (1975) suggests colour may also decrease the search time needed in locating specific information. Furthermore, colour may improve the overall comprehensive of issues and understanding of a problem, while producing less eye strain and fatigue (Jeffrey and Beck, 1972). There are seven colours that are used to present corporate information to subjects such as: ivory, grey, green, purple, pink, blue and yellow. A study by Courtis (2004) demonstrates there will be some benefits as the company use colour in presenting its annual report. The colour can help the important information included in the company's annual report is highlighted and, therefore it is more convenient for user to use. Moreover, in order to help the company show its attributes and highlight its specific aspects of organization behaviour, the use of colour in annual reports may be necessary. It can be said that choosing the right dominant colour for brand is crucial. Besides, the use of colour also can stimulate the communicating between information presented in the company annual report and its users more easily.. In annual report, all colours are showed in logo, background, graph, title, photographs. With Victrex Plc's annual report in 2011- specifically in chairman's report, colour used to be blue for financial highlights, logo and summary of chairman' statement. This will be presented in table below:

Table 3.1 Table 3.2 22222.PNG333333.PNG

John Williams (2007) state that blue is perceived as trustworthy, dependable, and fiscally responsible and secure- especially popular colour with financial institutions, as its message of stability inspires trust. This shows that Victrex has the signal of safety and good news with a positive direction change and financial institution is stability trust. This shows clearly through annual report of Victrex with confident about an excellent financial position with a healthy balance sheet and strong cash generation as well as increase strongly of revenue and profit before tax. The resulting cash balance as at 30 September 2011 was £72.3m with no debt (2010: £77.3m and also no debt). This is positive sign that show that Victrex be able to avoid risks of fall into debt and more serious is bankruptcy. Group revenue was up 14% to a record of £215.8m (2010: £189.5) reflecting a strong performance from both of business units. Resulting Group profit before tax was a record of £94.2m, up 26% on 2010 (£74.9). With this colour, it helped Victrex to create a positive image among consumers and investors.


Graph is one of an effective communication tool as well as use the most useful to readers can understand easily annual report. "They are also a useful and flexible medium for explaining, interpreting and analyzing numerical facts. They permit the presentation of quantities data in a simple and effective manner, facilitate comparison of specific items and reveal trends and relationships. If properly constructed, graphics highlight and clarify significant trends. Improperly constructed graphics, on the other hand, can distort trends, mislead readers and adversely influence perceptions of corporate performance" (CICA, research report, 2008, p 41). Well-designed graphs make it easier to identify trends and relationships among variables (Tufte 1983, 1990, 1997; Vessey and Galletta, 1991). The utilization of graphs has been reported as an important means of communicating accounting information in the accounting sphere (Holmes, 1984). Recently, the utilization of graphs has become widespread (Beattie et al, 2008)

In 2011, with annual report of Victrex, graphics is used in Director's report when they shows comparison the value invested in between Victrex Plc with FTSE 250 Index on the same time by line chart and the rate of other factors by pie charts. According to cognitive fir theory (Vessey, 1991; Vessey and Galetta, 1991), graphs facilitate identification of trends and relationships. This explains why graphs are better than tables for decision tasks that involve combining information about multiple variables to make holistic evaluations (Tuttle and Kershaw, 1998). So, it is not surprising that Victrex can prove a large set of potential options and attract many investors. Besides, as stated by Amer (1991), appropriately prepared graph can be useful to decision makers when displaying trends or relationship in data. This will be showed as below:


Table 3.3


Table 3.4

With using colour graph to present financial data, according to Leivian (1980), it helped Victrex attract attention and memory of the readers recall ability is normally better than for numerical.

Besides, David (2001) report that users of annual reports and investors may spend only 15 minutes looking at a report during their decision making. Many investors look only at the annual report and only the narrative section of it (Fisher & Hu, 1989) and, furthermore, often look only at the financial graphs in making their decision (Zweig, 2000, p. 67). However, with chairmen's report, Victrex doesn't use graphics to present financial data as well as activity although there are quite a lot of ratio that analyzed and compared such as group profit before tax, basis earning per share, dividend. While other studies examine the relationship of good and bad financial performance to visual support, using EPS and profit before tax as financial indicators of performance, Beattie and Jones find that companies with "good performance" (1992a, 1992c) and "favourable performance" (1999a, 1999b) are significantly more likely to use financial graphs. With Victrex, it also doesn't have, so, this shows that Victrex was poor presentation. It makes users such as shareholders, customers or investors difficult to understand and collect meaning of financial data or activities of the company. Their time spend for analysis is so much but ineffective. This is weakness of annual report of Victrex Plc that the company should try to repair to make annual report clearly and easily understand by using graphics, especially the phase comparison and analysis.

Conclusion on evaluation of non-financial information

In summary, the using of graph, colour, and language is really useful for reader to understand easily and clearly about narrative report. In Victrex Plc's annual report, we can see that the company used quite successfully the colour and language. Look at annual report, reader and user can easily understand financial information of the company. However, Victrex still exist many limitation in using graphics. It doesn't really effective application. So, to help users and readers can understand easily financial data of the company through the years, Victrex needs to try much more in using graphics as well as improve better colour and language to achieve perfect as highest as possible of the annual report.