Victrex plc (VCT) Earnings Call Transcript & Summary

So good morning and welcome to Victrex' full year results presentation for 2021. I'm Jakob Sigurdsson. And I'm joined here today by Richard Armitage, our CFO. Unfortunately, Martin Court, was subject [indiscernible] on a short notice so, unfortunately, will not be able to be with us on this occasion, but we certainly look forward to have him with us on the next possible opportunity. This is obviously our first face-to-face meeting for a long time, so it's great to see all of you in the room today. We also have a number of investors and analysts joining us by the phone, so we welcome them as well. Firstly, a couple of housekeeping points. The slide presentation will be on our website, www.victrexplc.com, and to the Investors tab and by a click on Reports & Presentations. We will call out the slides when we go through the presentations, the slides with -- to which we're speaking to. And secondly and most importantly, we'll have a Q&A at the end. And I will open that up to the room, first, and then to the audience on the phone. Finally, in line with COVID guidance, if I could ask any transitioning in and around the room is done wearing a face covering, we would greatly appreciate that. Turning to Slide 3 then and a key message. Key message is that we've seen a very solid and sustainable recovery as we emerge from the impact of COVID last year. Recovery has been good across a majority of end markets. And we think there is more to come actually, with Medical continuing to improve and Aerospace moving off the trough that we saw in 2021. Beyond our top line growth, we should also note the strong performance in cash generation with an operating cash conversion of around 100%, enabling us to underpin our growth investments and reinstate dividends back to pre-COVID levels. I will come back to these, both of these points. Indeed, behind the headline trading performance there are a number of actions that we have taken and to positive developments which position us very well for when all markets are firing on all cylinders. Move to Slide 4. Before we cover the headlines, I would like to briefly spell out on Slide 4 how proactive Victrex has been during COVID; and consequently how that enabled us to maintain a strong financial position and strong growth pipeline; as well as ensuring that health and safety and well-being of our people was always prioritized; and the mission that we had all along to ensure that we kept our customers with enough supply both throughout the early days of COVID, when there was quite a bit of pre buying, but most importantly during this sharp increase in demand that has happened in the later COVID era. For our people, we have -- currently have around 80% of our global employees return to site, backed by our global flexible working policy within the U.K., Europe, China and the U.S., having all returned to site, Japan still operating under a bit of constriction still. For our customers, we have always been part of many critical supply chains and will continue to be. Despite well-published challenges in supply chains and logistics this year, we maintained over 90% on-time and in-full deliveries throughout the cycle. Our customers value that indeed. And we ourselves look at our lead times, our quality and our technical service as a source of competitive advantage. Finally, safety remains our highest priority. And I am pleased to say that our recent -- recordable injury rate came down to -- by 45% this year. And we're working towards a 0 accident and 0 incident-based culture, and we're well underway on that journey. So if we move on to Page 5, the highlights: strong performance on the top line, with volumes up 25% to 4,373 tonnes and in fact only a stone throw away from our overall record from 2018 when we had around 4,400 tonnes, but remember also at that time we still had a large proportion in contribution from our contract with a large consumer electronics company. So a fantastic year for the top line development. This was driven by mainly Electronics, Energy and Industrial and Value Added Resellers and Automotive, all of them with double-digit growth; as well as some good application growth in core application pipeline, which is up now 9% for the year. 9% is referring to the mature annual revenues in the pipeline. At profit level, PBT was up 21% to GBP 91.7 million. And that is despite a weaker mix; a GBP 4 million currency headwind; and significant inventory unwind, meaning that we still had material impact from under-recovered overheads even if it was improved versus the prior year. I think this all gives you an idea of what this business can do once mix and under-absorption and cost headwinds abate. Now if we move to Slide 6 -- or sorry. We're on the market -- mega-programmes now, so still on Slide 5 actually. We've seen good progress coming out of the COVID impact. Once we knew the situation and realized the situation we're in, we had as a mission to make sure that we would emerge stronger from it than we were when we went into it. And I think we can substantiate that we indeed have done that. As it relates to the mega-programmes, we've seen good progress, as I said. Magma: TechnipFMC acquired Magma Global, the Magma Global business, in October, including Victrex' shareholding. This was a major investment by Technip, as they look to scale up the opportunity in Brazil, including replicating a pipe extrusion facility over there, along with laser welding. Remember that Magma pipe and hybrid pipe is based on Victrex PEEK and Victrex composite tape. And we will retain both supply and service agreements as well as the rights to the IP that have been developed around the pipe extrusion and the tape production in particular. On PEEK Knee, really great progress despite a slow start and an impact to the time line from COVID. We now have 10 patients implanted and no material issues reported to date. Very good progress on gears and e-mobility as well, with meaningful revenue from gears and an increase in collaboration agreements for the latter. Richard will cover the financial highlights shortly, but one area I do want to flag is the importance of ESG. We've added some additional targets to our 2030 goals this year and also signed up to the science-based target initiative and to low -- and a scientific measure of how we can measure our net 0 aspiration. I will come back and talk about that in more detail later on, but overall it emphasizes how ESG is embodied in our business and how our products are helping society in a variety of different ways. Now I'll hand it over to Richard for the financial highlights.

Thanks, Jakob. Good morning, everybody. So we're on Chart 6. Following a solid recovery in the first half of the year, for which we reported a 5% volume growth, further growth in the second half has given us a volume of 4,373 tonnes for the year, 25% up on 2020 and some 17% ahead of 2019. We've seen a strong performance from Automotive, Electronics and Energy and Industrial, with only Aerospace and Medical remaining below 2019 on a volume basis. Medical revenue improved progressively through the second half, giving confidence that we will return to pre-pandemic sales during 2022. We will note again that our sales through value-added resellers at about 1,900 tonnes did reflect a degree of supply chain restocking that is unlikely to repeat in '22. Reported revenue grew by 15% to GBP 306.3 million and by 20% on a constant currency basis, reflecting the faster recovery in industrial versus medical markets. Gross profit grew by 16% to GBP 165.3 million, also by 20% on a constant currency basis, reflecting a slight improvement in gross margin from 53.5% to 54%. Although we have seen some improvements in production volumes and we've benefited from our previously announced cost reduction program, we have seen some raw material inflation and higher freight costs that have, so far, offset this benefit. Overheads increased by GBP 6.8 million or 10%. Whilst we did see overhead savings of approximately GBP 5 million as a consequence of our cost reduction program, bonus accruals increased by nearly GBP 9 million. And the remaining increase can be accounted for by various growth-related investments. Our underlying profit before tax improved by 21%, and adjusted earnings per share by 11%. Our effective tax rate was 21.3%, inflated by a change in the U.K. deferred tax rate to 25%, which added 7 percentage points to the effective rate. There was also the unwind of our Brexit inventories which caused a slight increase. Without these changes, our effective rate would have been around 13.5%, which is in line with our expected range over time of between 12% and 15%. We expect to continue to be able to benefit from the lower rates available through the U.K. Patent Box scheme. We finished the year with GBP 112.4 million in cash, having delivered a strong operating cash flow performance. The Board is pleased to recommend a final dividend of 46p to bring the regular dividend back to pre-COVID levels; as well as a special dividend of 50p, to give a dividend for the year of 109.6p. Moving on to Chart 7, which presents a bridge from 2020 to 2021, we can see the benefit of the strong recovery in Industrial sales with growth of 24% compared with the delayed recovery in Medical where growth was 8%, which led to the weaker sales mix. We can also see the benefits of our cost reduction plan announced last year, which amounted to GBP 10 million. We did then start to see some inflation in material costs, also in freight costs. Roughly half related to material costs relating primarily to intermediates bought in China, and the other half to freight costs as we took a number of steps to ensure that we sustained our excellent customer service. The accrual for our employee bonus scheme increased by GBP 8.6 million. And we've also started to invest more heavily in growth initiatives, with an increase of GBP 3.6 million year-on-year, following a period of constrained expenditure in 2020. The currency impact on PBT amounted to GBP 3.9 million. Finally, it's worth highlighting again the impact of production volumes. We produced in the year about 3,500 tonnes of PEEK, an increase of 700 tonnes over FY '20. However, this remains below our historic production rates of between 4,000 and 4,500 tonnes, so the under-recovery was only partially reversed with a benefit of about GBP 3 million. We also carried out some extended maintenance at our BDF production facilities, which also delayed the full reversal of the previous under-recovery. We do expect all aspects of our production to return to pre-COVID levels during FY '22. Moving on to Chart 8. Our average selling price was GBP 70 a kilo, some 8% or GBP 6 a kilo lower than last year. Approximately GBP 2.50 of this was due to currency, and another GBP 2.50 can be attributed to mix. This was partly caused by the higher proportion of sales through the value-added resellers, which are at a slightly lower price than the Industrial average; and partly due to Medical sales which saw growth in some of the Asian markets versus continued weak demand for Spine. We also did see a small amount of underlying selling price erosion, which accounts for about GBP 1 a kilo. This was in Electronics but particularly in Value Added Resellers and was simply due to volume growth triggering certain volume discounts. Looking forward into FY '22, we would expect to see an improvement in average selling price of around GBP 2 to GBP 3 a kilo as mix improves but for this to be partially offset by currency to give a small improvement overall. And then moving on to Chart 9. I think the movement in gross margin probably warrants a bit more explanation. So the first part of this chart, this compares the full year margin of 60% in FY '19 with the same for FY '20 at 53.5%. You've seen this chart before. The principal causes were the under-recovery of manufacturing costs at 4%, inventory provisions at 1.3% and weaker sales mix at 1.8%. Currency had a positive impact of 2.6%. You can then see gross margin improving slightly to 54% in FY '21, but that's a substantial improvement when compared to the low point of 47.3% in the second half of FY '20. As noted, we're starting in this period to see the benefits of a pickup in production volumes, which together with the benefits of our savings plans increased gross margin by nearly 3 percentage points. This was then largely offset, firstly, by the slight erosion in selling prices I've just described but particularly the weaker mix, as Industrial recovered faster than Medical, and also by the impacts of the raw material costs and freight costs that I mentioned. As we started the new financial year, we have experienced further raw material inflation and significant utility cost inflation. We are in the process of taking steps that will seek to recover this in full but expect a short time lag which could impact margins slightly in our first half. As the year progresses, we would then expect to see a gross margin benefit from the impact of under-recovered manufacturing costs, which we would expect will largely reverse, as well as some improvement in mix, which together in isolation would give an improvement of circa 5 percentage points and would bring our gross margin close to our target of 60% by the end of the year. Unfortunately, we are also facing a currency headwind, the highest we have seen for over 5 years. And we will start to incur commissioning costs for our plant in China, which will have the effect of mostly offsetting the benefits I've just mentioned for FY '22. We're therefore expecting gross margin in FY '22 to be roughly in line with or slightly better than FY '21. For the longer term, our target remains a gross margin of close to 60%, aided by our China investment coming on stream, volume leverage and further efficiency improvements in our manufacturing assets. This outcome would be commensurate with getting back to a return on capital employed of close to 20%. Picking up on currency on Chart 10. As before, our presentation has the individual line items [ reported ] at weighted average spot rate. Then the gain or loss on forward contracts is shown as a separate line item within gross profit. Sterling strengthened substantially during this period, with the weighted average rate for the U.S. dollar moving from $1.27 to $1.36 and for the euro from $1.13 to $1.14 (sic) [ EUR 1.13 to EUR 1.14 ]. This led to a GBP 10 million headwind that was partly mitigated by currency hedging to get a net -- to give a net impact of GBP 5.4 million in the year. Our expectation for FY '22 is for a further headwind of approximately GBP 8 million to GBP 11 million, this time driven primarily by the euro rate moving from EUR 1.14 to EUR 1.18 but with a much lower hedging benefit. If I can move on to inventory on Chart 11. So as noted previously, we did move quickly to unwind our Brexit inventory. This is best demonstrated by the chart here comparing FY '21 closing inventory with FY '19, which clearly shows a reduction of GBP 16 million in finished goods. A small further reduction in finished goods may well be possible, but for now we wish to retain some additional flexibility in our supply chain. You can also see that our raw material inventory was lower than in FY '19. And this does reflect some tightness of supply in the last few months, which we're rectifying by increasing inventories for a number of key materials. We are therefore targeting inventory in the GBP 70 million to GBP 80 million range for FY '22 and probably beyond. We would like to note that our Brexit inventory served its purpose in supporting our customers and their supply chains and also helped us to maintain excellent customer service during COVID. We have, so far, avoided any material impacts from any other supply challenges. If I can talk about China. On Chart 12, you can see a picture of our joint venture facility about a month ago. The project is actually progressing to plan. And at this time, building and civil work was complete and the installation of services and equipment is progressing at pace. We're also building a highly capable team to run the business, and we've achieved in excess of 1 million safe working hours. The commercial opportunity in China continues to strengthen. Our business there remained stable through 2020. And we have returned quickly to double-digit growth this year, with our range of opportunities expanding. As we communicated last year, we do expect the costs of the project to increase, as we're still having to rely on local engineering resource during the period of COVID disruption rather than some of our U.K.-based teams. We've also noticed significant inflation emerging in locally sourced materials. Thinking about capital more broadly on Chart 13. We are making a number of other investments in commercially driven projects, in capability in support of our [ valued ] customers as well as elsewhere in the world in support of our mega-programmes. We have finalized a U.K. assets improvement plan that is intended to deliver the same target increase in U.K. PEEK capacity as our previous plans but by means of incremental projects that will be accommodated within each year's routine capital budget. We have also identified significant opportunities to develop our digital capabilities and are embarking on an upgrade program over the next 3 years. As a result and as previously noted, our capital expenditure is likely to amount to around GBP 100 million over FY '21 and FY '22, with GBP 60 million likely to fall in FY '22. In subsequent years and taking account of the U.K. plan and IT investments, we can expect normalized capital to reduce from these levels, but it is likely to be a little higher than previously expected, at around 8% to 10% of sales. This will also allow for additional expenditure on projects focused on reducing our scope 1 and scope 2 emissions. Finally, on Chart 14. We're pleased to report another good cash performance with operating cash conversion of 100% despite our relatively high capital expenditure, which was in line with expectations, at GBP 42 million. Our working capital improvement of GBP 19.6 million was principally driven by the inventory reduction of GBP 28 million, which was then partly offset by a net movement in trading receivables and payables and a substantial increase in VAT recoverable on our capital expenditure. Our tax outflow was relatively low at GBP 8.5 million, with no U.K. tax having been paid in the first half due to overpayments made in FY '20. As a reminder: We had made 6 quarterly payments in FY '20 as a consequence of changes to HMRC payments arrangements. We have reported a cash receipt of GBP 3.8 million under acquisitions, which is simply a capital contribution from our JV partner in China. Our net cash at the end of the period was GBP 112.4 million. It should be noted that this includes GBP 12.5 million ring-fenced in China, which leaves GBP 99.9 million available for the wider group. Thank you. And I will now hand back to Jakob.

Thanks, Richard. So I'd like to move now to the performance update and summary of how each of our areas have performed through this year. So if we start on Page 16 with Industrial; Automotive, 18% growth in volumes driven by both market recovery and new application growth. Most of our core applications continue to be translatable across the ICE and electric vehicles. So braking systems, bearings and bushings, powertrain as well as gears translate from one to the other. Total PEEK content per car, as we measure it, is around 10 grams per vehicle. And this is, by the way, our volumes divided by total cars produced. And some of us that know us for a longer time may remember that, a couple of years back, this was around 8 grams per vehicle. It's worth noting that we saw a good acceleration in volumes during the year, with a step down in Q4, though, when supply chain was restart, and also reflecting some of the well-published issues on semiconductor chips and how it affects the Automotive business in general. That said, our Q4 volumes were still up 19% on the prior year despite being down [ 15% ] sequentially versus Q3. Our exposure at Victrex is more on the premium cars, so we will [ keep the watch increased ] on the semicon challenges in this end market. And I think overall we probably grew at a little bit lower rate this year than expected at the beginning of the year, but there is still growth forecasted for the industry in the coming year, so I think we've got a reasonable belief in expecting that the Automotive segment will be growing into 2022 as well. Aerospace is down 20% year-on-year but 8% up in the second half versus the first half. This remains a tough market right now, but we're off the bottom, for sure. And we know that models such as the A320neo are picking up build rates, as are the 737 MAXs, though the 787 build rates haven't increased, as well documented. We continue to have a good spread across various models, and obviously the focus is to increase that on a long-term basis through our thermoplastic composites development programs. We're in excellent shape with the composites programs even if they may have slowed up slightly through the impact of COVID, but we see it on the progress with the OEMs and the emerging field of [ EV tolls ] that thermoplastic composites clearly have an exciting role to play in the future of plain built. These opportunities are with multiple OEMs and we've been involved in some very sizable prototype parts this year. And we're also seeing continuing revenue in our loaded brackets program, which generated around GBP 2 million in revenue this year. Moving on to Energy and Industrial. So whilst the rig count has increased since 2020 by [ about 20% ], we have seen a good growth in Energy, with volumes up 11%. Remember that our solutions play well for sealing applications with durability and chemical resistance, and high temperature ranges and resistance against those are needed in all kinds of processing equipment. And we're also focusing on renewable applications. In the Industrial part of this segment -- and remember that we put some dedicated resource behind this area several years ago. And it's paying rewards these days, with volumes up 30% and some good progress in developing new applications, and I will come to some of those in the next slide. Turning to Electronics. Volume is up 33%, supported by demand for new devices and some new applications that I will come on to separately. Remember that semicon remains the largest segment here. And we benefited from the growth there, which is expected to be around 17% in 2021 at overall market, according to IDC, versus 10% in the previous year's. And in summary, we are growing ahead of the market in this field. And finally, Value Added Resellers, very strong growth, with volumes up 39% over the year. We benefited from restocking probably in the second and the third financial quarter, with an expecting sort of normalizing in the fourth quarter, but this segment remains very important to our business. And whilst we cannot expect the same rate of growth next year, we might conclude that this market and this channel has probably reached a cruising altitude, with sort of more normal growth rates going forward. And the restocking effect that we believe is showing up in our accounts for the year obviously will not happen again next year. This segment is driven by stock shape companies and compounders, processors who take our material and are integral part of the supply chain; and often driven by customers who specify or qualify Victrex material specifically. If we now move on to Page 17, Slide 17. The key message here is that we have a very strong core business. And I often say that the importance of a core is sometimes underestimated when you talk about Victrex. It is very easy to become enamored and quite fond of the mega-programmes, as great as they are and as well as they're progressing, but we cannot forget that we've got a very strong and sustainable core and have been growing very nicely over the years. And just to put it in perspective: if you think about the fact that, in 2018, we had 4,400 tonnes of business and still some legacy business from the large consumer electronics contract included in that. And that basically contrasted to the fact that, since 2015, the large consumer electronics contract probably was 1,000 tonnes. That declined through the years of '16, '17 and '18, still allowing us to reach record levels in 2018. And it's that core that grew there in a variety of different applications that is now starting to grow again. And to that, we've added new applications. So the core around which the business evolves and grows is strong and has grown stronger during the period, and it's worth keeping that in mind. Our new application targets increased by 9% this year to around GBP 325 million in mature annualized revenue, and that is the revenue that we can secure if we deliver all targets in our core business. Like any pipeline, there will be some faster movers and some slower movers, but we are pleased with the progress we continue to make in developing new applications across a variety of end markets. This also is a testament to our relatively high R&D spend, which was around 5% of sales this year. A couple of examples to pull from the slide. So Automotive, beyond the gear parts that we are able to manufacture and which we secured meaningful revenue from, our design and development know-how is helping us to secure increased polymer sales for gears. And we expect this to grow going forward, working with our partners around the globe to actually make the parts even if we design them and manage the selling and scale-up phase. Industrial, remember that PEEK has very high durability and is also able to withstand hot and cold temperatures and still perform well, so we're seeing interesting opportunities in compressors and other applications in the food and drinks area. And these are some of the areas that we benefited from this year and should continue to do so going forward. We saw good growth of around 30% in this segment. Speaking ever so briefly on gears on Slide 18, a brief word to note that we did achieve meaningful revenue this year of over GBP 1 million. Remember the proposition for gears is based on reduction in noise, vibration and harshness of around 50% compared to metal. Processing speed is also able to be reduced by using PEEK versus steel or titanium, typically by 25%, as well as the noise and vibration benefit. Remember that PEEK also offers good durability and lightweighting. We continue to have a strong pipeline of programs, over 20 on the books right now and probably close to 4 or 5 programs on the road as we speak. And we're also getting some traction for polymer pull through, so gears where Victrex is involved in the design and development but the finish part may be made by somebody else. And we expect to see more progress here for the year ahead. If we move to Slide 19, on e-mobility. Firstly, a reminder that we do expect to see a good chunk of current applications translate to the next generation of electric vehicles, so braking systems, thrust washers, bearings and gears, of course, but the big prize is in new applications, which I will come on to shortly. We're pleased to say that our assessment this year has now seen the potential PEEK content increase to over 100 grams per car on average compared to less than 100 previously. And also keep in mind that our focus is on 800-volt opportunities where the heat tolerance and performance requirements are higher than for the currently sort of prevalent voltages that are dominating the market as we speak; and the technologies that are used to cover wires, as an example, in those lower-volt environments. If we move on to Slide 20. It shows examples of the properties which our products bring. Some of the main benefits of PEEK include less scrap but also lower carbon emission -- carbon intensity compared to enamel in the processing of some of the opportunities. One of the application areas is wire coatings. And remember in an EV you have a very tightly packed set of wires requiring durability, heat resistance, resistance against electrical currents and also dimensional stability because they are very often packed into very tight spaces. Whether it's polymer or film, our products have a good potential in these areas. Commercially we're expecting to see some good traction from build in -- build from FY '22. And we should also note that we've seen a very good increase in the development -- in the number of development collaborations this year spread geographically, mainly across Asia and Europe, so stay tuned to this area going forward. Turning to Slide 21, on Magma. This is now a real strategic play for TechnipFMC. As a reminder: TechnipFMC acquired all the equity in Magma Global, including Victrex' minority interest, back in October. This is now about TechnipFMC preparing for their scale-up in Brazil as they look to replicate a similar facility down there as Magma has had in Portsmouth and preparing for pipe extrusion and laser welding of UD tape onto the PEEK core. Remember this technology is both -- is based both on Victrex PEEK, including the core of the pipe as well as the UD tape, as I remembered -- as I mentioned; and has already -- and is already included in a number of industry qualifications such as one from DNV. The IP of pipe extrusion in terms of PEEK continues to reside with Victrex, obviously. It's a real milestone in our strategy to open up new markets and revenue streams. A key player like TechnipFMC, which has already invested significant capital, time and resource, is now entering a phase and gearing up for what they see as a very, very strong opportunity down in Brazil. Timing-wise, 2022, we'll see additional qualification work going on at Victrex and with our partners on the pipe programs, with 2020 through -- 2023 as a key year for development and towards the end of '23 for deployment. Remember that TechnipFMC has also spoken of the benefits of PEEK-based hybrid flexible pipes as addressing current limitations of existing flexible pipes, helping to reduce carbon footprint intensity through faster processing and easier offshore deployment and overall more cost-effective deployment when taking into account the overall deployment cost. Finally and importantly, we also know TechnipFMC's message of focusing on new energy opportunities with this technology as well. If we now turn on to Page 22 or Slide 22, an update on Medical. Revenue was up 3% to GBP 51.1 million. It's worth a reminder that, in the prior year, we had a very good first half before the impact of COVID, where there was indeed quite a bit of pre buying of material. So Medical is gradually improving. And the second half saw 8% growth in constant currency versus the first half of this financial year, but Medical didn't grow as fast as a number of Industrial end market, although we do see the opportunity for good growth in FY '22 as surgeries return in greater numbers. A few points I'd like to highlight from this slide. Firstly, all regions grew in constant currency, which is good news. Asia was the strongest of these, as expected, up 19%. I would also like to mention that our non-Spine business continued to grow very nicely, and this is now over 45% of divisional revenue. This is delivering on what we see -- on what we set out a number of years ago, to diversify beyond Spine, and we're seeing some good growth in a number of subsegments. To name a few: Trauma was up 26%. And we've signed a collaboration with In2Bones, which is going very well, for the -- for design of a large slate of plates for them. CMF, craniomaxillofacial, were also up 25%. And remember we talked about it before, about a clinical study showing better brain function. Using PEEK in surgeries rather than metal is obviously a key driver there. In cardio, really good emerging area for us, was up 30% in FY '21 and is now amounting to around GBP 5 million in revenue on its own. And in general, the inert nature and good biocompatibility of PEEK is helping us across all of these areas. Within Spine, whilst this is a more mature market for us now, we do see good opportunity with the next generation of PEEK in HA enhanced -- in the HA-enhanced product category. And this had been growing nicely pre COVID but slipped a little bit back during FY '21. We also have our eye on the third generation of products for this market, and as such, we have invested in Bond 3D to support our approvals for porous 3D-printed PEEK. And finally, on Dental, we are de-prioritizing this program given the adoption challenge. Adoption will be through partners or OEMs, enabling us to focus our resources on other programs. The clinical evidence in Dental still remains very strong; and indeed we did see growth across [ all areas ] of Dental, which was a 94% growth in revenue this year. And remember also that the MALO CLINIC data shows that -- peri-implantitis rates as less than 1% after 3 years with PEEK compared to more than 10% with titanium, so the clinical value proposition is clearly there. The economic incentive to use it is there, but it's a long supply chain with a very fragmented end market that we need to convince. And as such, we have decided to de-prioritize it, look at our options again when we see that report out from the 5-year data from the studies at the MALO CLINIC. On Medical strategy, on Page 22 -- 23. That's we talked about -- a number of years ago about needing to innovate in Spine, at the same time growing our non-Spine business; and we're certainly starting to see that coming through nicely. HA enhanced, as I mentioned before, we obviously saw a setback with COVID, but we do have an opportunity to see revenues increase there beyond the 2 million mark here once elective surgeries return on a more consistent basis. We're also looking to make progress with porous peak for Spine and are gearing up for approvals there in the next 12 to 24 months. On non-Spine, as I've already covered, we're growing double digit in many of these subsegments. I mentioned cardio, Trauma and CMF; and drug delivery too. And of course, we have our medical programs, our mega-programmes, Medical mega-programmes, in Trauma and Knee; and I will come on to Knee shortly. Overall, medical solutions are now in over 13 million patients globally and growing. Currently we're involved in helping treat patient roughly every 27 seconds. And we are looking to shorten that to every 15 to 20 seconds by 2027, which is predicated on delivering good mid-term growth for the Medical mega-programmes. Turning on to Slide 24 and Knee. As we indicated last year, COVID hit the clinical trial hard. It meant that the time line of this mega-programme slipped by about a year. However, we're seeing really good progress since April; and now have around 10 PEEK Knee implants, 6 in India and 4 in Belgium. After 6 months, Maxx Orthopedics, our partner, has not experienced any material issues with those patients, which is really good news. The trial is -- itself is -- remember it's a safety trial, so it will last for close to 2 years. The other good news is that we continue to get good interest from other knee players and partners. Finally, to put Knee in context: The total knee replacement market today is just around $10 billion globally. We think the opportunity in femoral knee is about 1 billion, and if we're able to translate what we've done in Spine, this is a significant opportunity for us. We have the manufacturing know-how, yes, and IP as well. And with the outcome of the clinical trial, we have the opportunity to move this forward nicely. Slide 25, on the bubble chart, a brief word on the main movers here; firstly, pleased to say that gears has delivered meaningful revenue this year and we expect this to build from here. Gears have applications across the combustion engines and electric vehicles, and the pipeline looks healthy. Secondly, on e-mobility, this is now a mega-programme, so we've upgraded the potential revenue opportunity here. We expect to see greater news flow on e-mobility through 2022 and beyond. And finally, on Dental, as we covered, this is no longer a mega-programme. And we've de-prioritized the resource here even though the clinical evidence remains strong, but as I said, we will reconsider our options once we see the report out from the 5-year results. Overall, very strong and diverse pipeline. On Slide 6, ever so briefly -- on Slide 26, on milestones. The bubble chart is not complete without an indication of the milestones that we're making and reaching. I don't intend to go through all of these, but we are trying to show investors here what are the steps towards greater commercialization. Even in programs like aerospace, we continued to make very good progress on technical milestones, similarly on Knee. We're building the technical viability of all our programs and have started the commercial journey, with some more advanced than others. Overall we're still optimistic that we can get several of these programs towards double-digit revenue in the short to medium term. On Slide 27, on our purpose. We have now sharpened our focus to ensure we can deliver transformational and sustainable solutions. What I want to remind all of you of is that Victrex has some really strong ESG credentials, in particular the positive benefit we bring to the environment and the society through clinical benefits. First, to date, we've helped to save over 2 million tonnes of CO2 since 2003 by replacing aluminum components on planes with PEEK. And if you consider that our scope 1 and 2 emissions in FY '21 were around 28,000 tonnes, our sales to Aerospace alone have saved around 90,000 tonnes of CO2, using the widely [ accepted ] calculation on how replacing aluminum with PEEK can save approximately 4 tonnes of CO2 for 10 kilograms of weight savings. So 3x CO2 basically is saved through our products versus our overall emissions. Secondly -- and that's just in Aerospace. Secondly, in auto, we've calculated about 80,000 tonnes of CO2 could be saved from selected application PEEK goes into such as vacuum pumps or thrust washers. This is based on typical 60% weight savings versus metal. Remember, though, it's not just about the weight savings. It's also about the combination of properties that PEEK brings such as durability, faster processing and the chemical resistance. Finally, remember in Medical our solutions are bringing clinical benefits. For example, in Trauma, the union rate of PEEK composite plates is significantly better than union rates compared to PEEK -- compared to titanium. In summary, we have great opportunity over the years ahead to increase the positive benefits we can bring to society and the environment through our products. Slide 28 -- oops. I'm not sure it's switching anymore. Anyway, we'll move to Slide 28, on ESG. We've added some additional ESG targets to those we set out last year, including our goal to be net 0 based on scope 1 and 2 emissions by 2020. You'll be able to read much more about that in our annual report due out in January, but to pick one out of these already: Sustainable products, we [ measure ] these as aerospace, automotive and medical. And we're looking to increase revenue to -- from environmentally friendly sustainable products to 70% by 2030 in these areas from around 50% typically today. We're already recognized by the likes of the FTSE Russell Green Revenues index for these, so it's a clear focus of ours to increase what we can do here. On the outlook, on Slide 29 -- let me see if I can move that forward...

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Yes. Anyway, computer is frozen, but we will manage. And the presentation is on the web -- no worries, yes. We'll continue.

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Yes, yes, no worries. So on the outlook. I look at it for FY '22. Firstly, we're optimistic on Electronics, on Medical and on Energy and Industrial. Electronics has continued opportunity for us. In Medical, we are expecting some tailwinds from surgeries returning, whilst in Energy and Industrial, the oil price remains supportive and industrial equipment continues to offer the opportunity for efficient manufacturing using materials like PEEK. On the Automotive side, overall we're focused on growth in auto for FY '22, but with the challenges of semiconductor chip shortages obviously looming, we're remaining neutral in this market at this stage. But I think the industry in general is expecting a moderate growth rate going into FY '22. On Aerospace, despite the growth in the second half and this end market being clearly off the bottom, it remains subdued. And we note that -- the general reception that aerospace will be a multiyear recovery, and we've certainly built that into our view of the future. Value Added Resellers, whilst it's not on the slide, we do note in our outlook statement that some of the restocking benefit we saw in FY '21 is unlikely to be repeated during the year. Wrapping all of that up and what it means. In summary, we're expecting focused growth -- we're expecting growth in FY '22. We're expecting some further recovery in end markets offset by stabilizing business in VAR -- or stabilizing demand in Value Added Resellers. Sales mix, this should improve, supported by Medical mainly and with Aerospace that has gone away from the trough, but we do have cost headwinds, for sure, including currency, raw materials, energy and some higher innovation spend that we've chosen to allow, yes, in total of around GBP 25 million gross. Although, on raw materials and energy, we do have mitigating plans progressing to recover a proportion of this. And we do expect asset utilization to improve in FY '22, to Richard's point, meaning negligible under-recovered overheads. Finally at last, a little bit on the state of the nation, so to speak. And I want to finish with more of a mid- to long-term thought. Mostly, not all, companies have had short-term challenges. And we certainly have them ourselves, but we are emerging strongly from COVID. Our culture is heavily linked to innovation. And we've increased the emphasis on delivering with speed and agility to complement the passion that we have for value generation through innovation, so we've got a great group of people and we're blessed with a great team [ on the pitch ]. Our asset base is expanding. And a new facility in China will be with us next year, and we'll be investing to upgrade and further improve our U.K. assets as we've done all along. On our customers side, they have noted how well we've served them through COVID, with high service levels and innovations brought into technical service as well to overcome some logistical challenges of delivering that in COVID -- in the COVID era. Our pipeline, as we've talked about through this presentation, it is strong. It is strong in the core, but we also have these attractive mega-programmes that are progressing well. Our challenge is to drive these opportunities faster, and we're gearing the organization up for that. And ESG, hopefully, you've heard how passionate we are on ESG because we have a great story to tell and our products are able to help make a difference to society and the environment. So that concludes my formal presentation, apart from the fact that I want to mention one point. Keep in mind also that our financial position remains very strong. We've got higher level of cash generation that support our investment plans and shareholder returns. And as Richard mentioned in his piece, we're proposing and the Board has approved a 50p per share special dividend for the year FY '21. So overall I think we've got a very strong investment case emerging from the challenges of the past couple of years stronger than we were when we entered those. So thank you all. And let's now turn over to questions from the room, first, and then to those on the call.

Henry Carver from Peel Hunt. Just one on the auto growth. I just wanted to understand...

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Sorry. [indiscernible] start again. No, it's okay. Henry Carver from Peel Hunt. Just that auto growth, so the 18%. I just wanted to understand. Are you saying that it was because of increased content per vehicle? Or is it because of the mix of cars that you're selling into and they were growing faster than the rest of the market, whatever? I just wanted to -- I mean obviously you're moving in the right direction, but I just wanted to understand that growth.

Yes. So there's a couple of things there, and you hit the highlights. It's both. So we're getting an increased penetration into existing applications, for sure. So sealings, bushings and bearings, thrust washers, actuators, gears. You name it. We're getting increased penetration into that, number one. And then the second piece that probably helps us as well compared to the market -- and that's the fact that we tend to be and have been disproportionately specced into the higher range of cars. So these are the 2 major factors that I will highlight.

It's Alex here from Barclays. Can I ask on Value Added Resellers, which has been very difficult to forecast over the last -- well, as long as you've reported it really? You did an average of 475 tonnes a quarter last year. Could you give us some idea of what you think is the normalized quarterly run rate for your VAR business as much as you can determine that?

It's very difficult to tell. Remember this is largely comprised, on one hand, of stock shapes. Producers take up PEEK, extrude it into sheets and rods that are then distributed to quite a long supply chain at times. And the end market for PEEK through this supply chain that I just described is mainly going into Electronics. It's going into what Germans called maschinenbau, so equipment manufacturing. It is going a little bit into Automotive and into Aerospace and into Energy. It's going into all of these different segments. They -- as well as these operate a high service model. And so in other words, they offer relatively short lead times to their customers, but there's a long chain from them down into the end application and to the OEMs. And it is our assessment, and we've spoken about it in previous conversations, that the supply chain downstream from them is probably -- or was pretty dry. When we came out of the [ mini ] recession in 2019, we started to see a recovery in the latter half of 2019 and a bit into 2020; and then COVID hit. So that chain was just about starting to consume materials again and COVID hit, so it was dry when the emergence from COVID started. So I think we're starting to fill the inventories down in that supply chain. We had a very strong second quarter and a third quarter. We saw a bit of a stabilizing sort of [ nivo ], if you wish, in the fourth quarter. And I think -- and I talk about it sort of as a cruising altitude. I think we're off the takeoff phase in that area. The takeoff is over. We're now sort of a -- probably a more normalized run rate going forward. The -- a second element of it is -- and I forgot to mention that. So I talk about stock shapes and dynamics there. And then the other element that is reported under our VARs is compounders. And these will be industrial companies that take our material; compound it with other materials, whether it's other polymers, whether it's glass fiber, whether it's carbon fiber and/or [ pigments ]; and then sell it onwards. And that's where you probably have a bigger proportion going into, on one hand, Automotive; and the second hand, Electronics. And the service models are not too dissimilar, though. In other words, the compounders usually operate with relatively short lead times. Now that being said, I think the lead time for delivery for all of these players that I'm referring to is actually increasing as we speak, so there still seems to be healthy demand. I think we were saying that cannot carry on at this rate for -- well, definitely not forever. And it's our base assumption that we're sort of reaching a cruising altitude in these end markets, which represent roughly 40% of our business.

Sorry. I was just going to say, carrying on from that, it sounds like you don't have a huge amount of visibility or conviction into where that chunk of volume will go because you said it's almost 45% of your volume last year. So how confident can you be in your group volumes if the biggest part of it, by far, is very difficult to model and can be very volatile quarter to quarter?

I think one of the learning points from COVID is one of the reasons we're growing stronger. I think our supply chains and our interactions with some of those larger customers in that area have grown a lot tighter. We had to manage with them through very, very difficult times and demand both when demand was falling off a cliff in the early stages and you were almost [ running ] weekly S&OP meetings to the point in time where it reversed and you were just seeing a very sharp takeoff. And that also provides challenges. And I think we've grown closer to them in terms of understanding their supply chains, and there's a mutual benefit in that. Also keep in mind that these industry players have been with Victrex ever since Victrex went public back in '93, and it -- the relationships actually predate that. So they've got their forecasts. I think we've got a good overall insight into their forecasts as well. We may take a little bit different view on macroeconomic drivers from time to time, but that's the nature of business, so we are saying we cannot expect this growth rate going on into perpetuity. There has to be a normalization. We're expecting there will be a normalization in the numbers that we build in for FY [indiscernible].

It's Maggie Schooley from Stifel. I was wondering if you could talk just a little bit about Enoflex; and tell us a bit about that and what type of applications that is, either storage or pipelines, or -- and when we might potentially see some interesting data points from there.

Right...

And then secondly -- sorry. When we talk about non-spinal Medical, can you just give us some overview about the growth rates of the other areas, for instance? Where are you seeing the fastest growth, be it cardio or other areas? And then beyond that, what other applications, be it hip or whatever, you think that this could [ potentially be used in ]?

Right, yes, happy to do that, Maggie. On Enoflex, so quite interesting. So Technip buys out Magma Global, with certain rights to certain applications. Enoflex is a smaller, again, startup leveraging the same technology as Magma had in terms of laser welding but is focused on other application areas sort of more going into alternative energy. So it's a startup again but at this stage with proven technology, to the extent that Technip actually has decided to buy it. So it's the entrepreneurs that established Magma established Enoflex. We rolled a part of our proceeds from the divestment in Magma into that venture. And that venture is focused on application areas that are out of scope of the Technip transaction, so quite an interesting area, I will say, yes, but I'm -- I think it's a bit premature to give any ideas of what it could yield in terms of scope but quite an exciting one.

[ And then ] hydrogen...

It could be related to hydrogen, yes. It could be. It could very much be related to hydrogen, so yes, quite an exciting area. And again for us this is -- underlines a significant milestone of Technip deciding to use their right to buy the entire equity in Magma. And so that means they've already committed significant resources to this on the back of what they've already seen about the performance and the benefits. And it also marks the start of an investment phase of scale-up close to the actual area of deployment, so it's a fabulous validation for us. And I think it proves our approach to take what may appear to be unusual steps to catalyze the adoption of PEEK, and on the back of that, we've developed IP in pipe extrusion. That is a part of the transaction. And we've developed capabilities to make UD tape, which is a building block for composites, which is now benefiting us not only in Energy but also in Trauma and in the Aerospace side. And so on the second piece, yes, you're right. We have been quite successful, I think, in diversifying our franchise in Medical so that we're not as dependent on Spine. And sure enough, the focus might have been more on the mega-programmes on the Medical side because they are incredibly exciting, yes, the Knee, the Trauma one in particular, and both of them getting the significant traction during the year, but on -- in parallel to that, we have been developing these areas, like Trauma. And when I speak about Trauma in that context, I'm speaking about CMF, for instance, craniomaxillofacial applications and the like. So that has exciting growth opportunities. And we haven't spoken much about heart in the past, but that's, as I said in my presentation, around GBP 5 million already, with emerging opportunities in drug delivery. And this is all sort of on the back of the same principles around PEEK and the human body being very biocompatible. And also a big benefit of PEEK versus metal is obviously the modularity of material compared to metals. The modularity of PEEK is more similar to the bone, which has all kinds of implications, in particular as it relates to Wolff's law of bone not retreating from something that is similar to it in terms of modulus. So should we allow the crowd on the phone to jump in? Let's do that if we can.

[Operator Instructions] The first question from the phones comes from Andrew Stott at UBS.

Yes. Jakob, Richard, it was just on the sort of mid-term volume ramp. So first of all, on China, when will you actually start first commissioning? So I think it said on a slide 80% of CapEx is done. I think it -- I think that's how I read it. So when will it actually start up? And how is the order book on the site? And which end markets in particular do you think that site will feed into? Or is it similar to Victrex as it stands today? So a few questions on China. And then on the U.K., obviously you had talked about a debottleneck. Is there any further thoughts around that?

Thanks, Andrew. So I'll cover off China. So the plan for starting production of products that could be salable is probably later in 2022, so commissioning activity will go on through 2022. We are just slightly cautious about the ramp, so we won't be precise about an absolute startup date yet just because of some ongoing challenges getting people into China, but you can expect that in late 2022. The order book is potentially looking very good. So we track potential leads, potential opportunities; and keep quite a precise record of what those are looking like. It's growing steadily, so we are confident that, by the time salable production is available, we will have customers and markets into which to sell that product. And I mean your question is well framed. I think the end market is broadly going to reflect the markets that we're present in, in China more broadly, so no specific end market for that product for the time being.

So a similar blend of Medical exposure, Richard, in the China and Asia area.

So let me qualify what I said then. So end markets in terms of Industrial. And so the plant will primarily supply Industrial for the foreseeable future. So yes. Sorry. End markets in terms of Industrial and not Medical for now.

And is there a plan to supply medical grade from China or not?

We'll come back to that in due course. I mean, at the moment, the medical grade is a particularly high specification grade made in the U.K. And we're very happy and able to carry on supplying that from the U.K. for the time being.

And then on debottlenecking, do you want to take that...

Yes, [ I can do it ]. So we previously referred to the debottlenecking plan, and in fact, where we've landed is in a way of just a better way of getting to the same outcome. So we talked about getting the effective capacity. That's not nameplate. That's effective capacity up to around 6,000 tonnes. We found a way to do that just actually by carrying out a number of incremental projects. From a capital perspective, those would be accommodated within our annual normalized capital spend. And in terms of sort of downtime that might impact overhead recovery, that becomes much less. So much more of an incremental approach, same outcome, lower CapEx and less impactful on the business. I did make the point that normalized CapEx is probably going to go up a bit. So we're thinking about 8% to 10% of sales once we're beyond FY '22. And that's also because we are putting in place a plan to bring down our scope 1 and scope 2 emissions, which also will require some degree of capital.

Okay. I'm sorry. Can I steal one more? This one is for Jakob. On Slide 17, you talked about how good the core of the business is. It was just a definition thing for me that -- when you talk about the pipeline of mature annualized revenue plus 9%, does that mean that, if all those projects fall through to revenue, they'll come through in the next 12 months? Or is it not about the next 12 months? It's more of a -- just a general medium term.

Yes. There's a quite -- there's a bell curve there in terms of distribution in time, with probably the average time being close to, I guess, 2.5 years, if we look at it, how long it takes to develop an application into a part, 2.5, maybe 3 years, but it's really encouraging to see that bell wave growing. And I think it is an encouragement in terms of how well our sales function, for instance, has been able to function during a period of not being able to visit, as an example. So that growth in the pipeline is, I think, impressive over this period, but it's definitely a weighted average in time. And we may realistically not be able to close all of them. We may have a certain hit rate, but I think it's a useful measure. And we've presented this over a number of years, but it's a useful measure in terms of how we're building our pipeline of opportunities around the core. So where we're getting existing -- or greater penetration into existing applications and/or smaller new applications that we're growing. And I think that is probably, I have to say, that -- one of the things that Victrex is very good at; and that is to identify opportunities where PEEK has the right to play, where it can replace metals in critical applications. They may be small, but I think the organization is good at finding them, nurturing them and turning them into business in a very disciplined way because we realize also that sometimes there are other polymers that can do the job. And if that's the case, these are opportunities that we don't seek to go after. So to see, again, this increase in the pipeline is an encouraging sign for us emerging out of COVID given all the constraints there have been on both sales activities and technical development activities.

Our next question comes from the line of Chetan Udeshi of JPMorgan.

Yes. A couple of questions. [ Again ] the first one is if I look at the second half '21 volumes versus first half. They seem to have gone up by almost 10%. And Richard, I heard you talk about the full year production volumes which also imply that second half volumes were up nicely in terms of production versus first half, so I'm a bit surprised that the gross margin hasn't really changed in second half versus first half. So can you maybe talk about the reasoning for that? Why did we not see any sort of operational leverage on gross margin in second half versus first half? And the -- maybe it's a related question in a way, but we've seen this raw material inflation, the supply chain challenges, freight, et cetera. It's been miserable already from sort of start of the year. And I'm curious why we're not seeing any evidence of sort of pricing uplift at Victrex to compensate that, at least in 2021 numbers. Even if I look at Q4 pricing, it doesn't seem like the prices underlying have changed at all. If anything, it's probably down slightly, so can you talk about the pricing strategy? And how much price uplift should we expect through the course of 2022 given the inflation in the system has only gone up significantly in the last couple of quarters?

Chetan, your question about half 2 versus half 1 is a good one. And then unfortunately, the answer is there is no single material cause of that. We did produce a little more. We did sell a little more. We've referenced, for instance, the fact that in our monomer production we did execute an extended maintenance period. And that was really just taking advantage of what was a quieter period to carry out some maintenance and extend the life of some assets, bringing a couple of new assets on stream. That's good news for the future because this will extend our capacity there a little bit but did result in a period of downtime and some under-recovery. We did see -- whilst we did see some recovery in Medical sales well into our fourth quarter, this is the period in which we've seen particularly strong sales in the VARs, so that has kept mix down. And then there was the emergence of some raw material inflation and also some freight costs. And we made a point about freight costs, that where there has been some disruption around the world to various freight routes, we've avoided those. We've maintained excellent customer service throughout. That has involved on occasion a little bit more freight costs. So nothing particularly material but all of that just leading to the second half being slightly lower than you might have expected. And then that sort of gets you into the second part of your question. So as we come into this year, initially raw material inflation was relatively low. Bear in mind through the cycle that our raw material bill is typically around 12% or 13% of sales, so it tends -- so that inflation tends not to have a particularly material impact, but it did pick up in October. We also then saw quite strong inflation in U.K. utility prices that many other companies have reported, again, from about mid-October, so you -- so actually the inflation story for us was -- has been relatively recent. Our intention is to recover that. We're in the process of doing that, but those price increases won't take effect until starting in the second quarter, so you can see there's a time lag effect there affecting the first part of the year.

But are you guys expecting to raise prices enough to cover the inflation in totality through maybe [indiscernible] or second quarter of your fiscal year? So I think it's calendar first quarter.

We are targeting recovery on a run rate basis, so I think the answer to your question is yes but probably not quite from the beginning of the first calendar quarter, but certainly sort of January, February time is when that will take effect.

And our next question comes from the line of Martin Evans at HSBC.

Yes. And following on really from Chetan on the outlook for this year. On Slide 30, you very helpfully list the opportunities and the challenges. You do talk about improved sales mix and so on. You referred to cost headwinds. And I think, Richard, you just hinted that there is a bit of a lag coming through to you for this year but also FX. You're targeting hedged losses [ that were up to ] GBP 11 million versus, I think, for the year just reported. Now just pulling all these pieces together on FX, raw materials, energy, the offset by VAR as well on the recovery in end markets, looking at consensus, firstly, this morning, I think it's around GBP 97 million, GBP 96 million, GBP 97 million, pretax for this year versus the GBP 92 million you just reported. So whilst there could be volume growth that you talk about in the coming year, is there a risk now that profit growth because of all these headwinds is basically nonexistent or even, in fact, PBT goes backwards?

Martin, I think -- I mean I think you're identifying the factors affecting our outlook correctly, that there are substantial headwinds. This year is going to take some managing, but we're still intending to deliver profit growth. We're cautious about that because, with reasonably sizable numbers floating around in terms of headwinds, as I said, we've got to manage it, but as I said, we'll still be expecting to deliver profit growth. And that comes from a little underlying volume growth; better production affecting overhead recovery, for instance; a little bit of an improvement in mix. So taking all that, [ in the round ], we should be positive.

We currently have one further question on the phone. [Operator Instructions] And that next question comes from the line of Rob Hales at Morningstar.

[ I had ] a couple on Medical. I think you mentioned mix in there and I just wanted to confirm. Is it the non-Spine stuff that's actually the higher-margin part of that business? [ So ] I think it grew more this year. And on your outlook for the recovery in surgical procedures, have you incorporated anything, any impact due to Omicron?

So on the mix in Medical. I think, when we were referring to Medical and mix, we're referring to the mix versus Industrial. And the Medical mix has recovered at a slower rate than the Industrial mix, by far, hence impacting the average selling prices. We have been factoring in the emergence of -- or reappearance of elective surgeries. And there has been a trend in that direction over the recent months. [ Full net ] potential negative impact of Omicron has not been factored in as of yet. I don't think we know enough about it. I think the world is waiting for data about the balance between infectiousness and the actual severity of the symptoms, and we are equally as much awaiting those as probably everybody else in the industry.

And we've had one further question come from the phones. That's from the line of Kevin Fogarty at Numis.

I just had one question really around e-mobility, and I just wondered if you could help us in terms of the kind of path to commercialization of the opportunities there. What might that look like on a sort of 12- to 18-month view just as we kind of roll forward? If you can help us just associate that and how that might look like, that would be helpful, please.

Yes. I think you could look at our story to unfold something like this. I think you might hear us talk about further contracts gained in the year to come. And I think you could start to see some [ pounds on paper ] as we head into '23 and specifically '24 and onwards. So [ expect us ] to talk about it on a qualitative progress in '22 and then quantitative progress on '23 and onwards.

Thank you. And there seems to be no further questions on the phones at this time.

So thank you, everybody, those that attended here in person and also those that attended on the phone. Hopefully, when we have the opportunity to meet next time, more of us will be in 3D, but it's great to see real people attending meetings again. So thanks, everybody. And I look forward to speaking to you soon.

Thanks, everyone.