REG - Synthomer PLC - Interim results
13/08/2024 07:00
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RNS Number : 1580A Synthomer PLC 13 August 2024
Synthomer plc
Interim results for the six months ended 30 June 2024
Continued strategic and operational progress
Six months ended 30 June H1 2024 H1 2023 Constant currency(1)
Change
£m £m % %
Continuing operations(2)
Revenue 1,051.1 1,047.2 +0.4% +3.5%
Coatings & Construction Solutions (CCS) 53.0 54.9 (3.5)% (0.9)%
Adhesive Solutions (AS) 21.9 15.6 +40.4% +42.9%
Health & Protection and Performance Materials (HPPM) 14.8 12.3 +20.3% +24.4%
Corporate (13.7) (10.0)
EBITDA(3) 76.0 72.8 +4.4% +7.6%
EBITDA margin (%) 7.2% 7.0%
Underlying(4) operating profit (EBIT) 29.0 25.1 +15.5% +18.7%
Statutory operating profit/(loss) (EBIT) (2.2) (7.1)
Results from continuing and discontinued operations(2)
Underlying(4) profit/(loss) before tax 2.5 (6.7)
Statutory (loss)/profit before tax (33.2) 16.7
Underlying(4) EPS* (p) 1.3 (8.0)
Basic EPS* (p) (18.8) (19.0)
Free Cash Flow(5) (31.2) 18.8
Net debt(6) 560.6 795.8
* H1 2023 adjusted for 20 to 1 share consolidation and rights issue
adjustment factor of 2.715.
· H1 trading in line with expectations, with revenue, earnings and
underlying EPS progression
· Activity levels continued to incrementally improve in the period
− CCS remained stable and resilient while AS and HPPM divisions
recovered some of the substantial volume declines experienced in 2023;
specialities across the Group continued to outperform base products
− Activity levels and capacity utilisation increasing, but still
significantly below pre-pandemic levels
− Revenue +3.5% in constant currency despite pass-through of lower raw
material prices vs H1 2023
· EBITDA and margin progress principally from self-help actions
− Gross profit improved, reflecting benefits of our speciality strategy
and higher capacity utilisation
− £13m benefits from cost savings and reliability improvement
programmes in period, partially offset by previously-disclosed operating cost
increases
· On track for positive Free Cash Flow for full year; debt maturities
extended
− Net debt increased in period as expected, reflecting EC settlement and
net working capital movements (driven by seasonality and higher raw material
prices since the start of the period)
− Net debt: EBITDA ratio of 4.7x well within covenant requirements; more
than £500m of committed liquidity
− €350m bond refinancing completed, next major debt maturity in 2027
· Strategic transformation towards higher margin, more resilient
speciality solutions progressing well
− Compounds divestment completed in April, further focusing Group and
reducing site complexity; other non-core divestments and partnership
opportunities progressing
− Continuing to shift resource allocation towards areas of greatest
future opportunity
− Clear evidence the Group is becoming more end-customer focused,
innovative and sustainability-led
· Recent trading remains in line with expectations; 2024 outlook
reiterated
− Volumes in a number of businesses continue to improve from
historically low levels, but no evidence of sustained end-market demand
improvement at this stage
− As previously indicated, expect some earnings progress (on a
continuing Group basis) and to be at least modestly Free Cash Flow positive in
2024, even absent broad-based macroeconomic demand improvement
Commenting, Synthomer CEO Michael Willome said:
"While we remain cautiously encouraged by trading in some end markets since
the start of the year, evidence of a broad-based recovery in demand remains
limited. Despite this, we have made earnings progress by delivering on our
cost and operational efficiency programmes, and we continue to strengthen our
strategic positioning for the future by focusing on our speciality businesses,
creatively managing our resources and enhancing our operating leverage."
A webcast presentation for analysts and investors will take place at 10:00am
BST today, accessible via our website at www.synthomer.com
(http://www.synthomer.com) or on https://brrmedia.news/SYNT_IR_24
(https://brrmedia.news/SYNT_IR_24) . This will also be available for playback
after the event.
Further information:
Investors: Faisal Tabbah, Vice President Investor Relations Tel: +44 (0) 1279 775 306
Media: Nick Hasell, FTI Consulting Tel: +44 (0) 203 727 1340
Notes
(1.) Constant currency revenue and profit measures retranslate current
year results using the prior year's average exchange rates.
(2.) Laminates, Films and Coated Fabrics, North America Paper and Carpet
and the Compounds business, which combined contributed revenue of £9.8m and
EBITDA of £2.6m in H1 2024 (H1 2023: £56.2m and £1.7m respectively), are
classed as discontinued operations throughout this announcement.
(3.) Operating profit before depreciation, amortisation and Special
Items.
(4.) Underlying performance excludes Special Items unless otherwise
stated.
(5) Free Cash Flow is defined as the movement in net debt before
financing activities, foreign exchange and the cash impact of Special Items,
asset disposals and business combinations.
(6.) Cash and cash equivalents together with short and long-term
borrowings.
(7.) Operating Cash Flow is defined as Total Group EBITDA plus/minus net
working capital movement less capital expenditure.
Legal Entity Identifier (LEI): 213800EHT3TI1KPQQJ56. Classification as per DTR
6 Annex 1R: 1.2.
Synthomer plc is a leading supplier of high-performance, highly specialised
polymers and ingredients that play vital roles in key sectors such as
coatings, construction, adhesives, and health and protection - growing markets
that serve billions of end users worldwide. Headquartered in London, UK and
listed there since 1971, we employ c.4,200 employees across our five
innovation centres of excellence and more than 30 manufacturing sites across
Europe, North America, Middle East and Asia. With more than 6,000 blue-chip
customers and £2.0bn in continuing revenue in 2023, our business is built
around three divisions, serving customers in attractive end markets where
demand is driven by global megatrends including urbanisation, demographic
change, climate change and sustainability, and shifting economic power. In
Coatings & Construction Solutions, our specialist polymers enhance the
sustainability and performance of a wide range of coatings and construction
products. We serve customers in applications including architectural and
masonry coatings, mortar modification, waterproofing and flooring, fibre
bonding, and energy solutions. In Adhesive Solutions our products help our
customers bond, modify and compatibilise surfaces and components for
applications including tapes and labels, packaging, hygiene, tyres and plastic
modification, improving permeability, strength, elasticity, damping,
dispersion and grip. In Health & Protection and Performance Materials we
are a world-leading supplier of water-based polymers for medical gloves, and a
major European manufacturer of high-performance binders, foams and other
products serving customers in a range of end markets. Our purpose is creating
innovative and sustainable solutions for the benefit of customers and society.
Around 20% of our sales volumes are from new and patent protected products. At
our innovation centres of excellence in the UK, China, Germany, Malaysia and
Ohio, USA we collaborate closely with our customers to develop new products
and enhance existing ones tailored to their needs, with an increasing range of
sustainability benefits. Our 2030 decarbonisation targets have been approved
by the Science Based Targets initiative as being in line with what the latest
climate science says is necessary to meet the goals of the Paris Agreement,
and since 2021 we have held the London Stock Exchange Green Economy Mark,
which recognises green technology businesses making a significant contribution
to a more sustainable, low-carbon economy. Find us at www.synthomer.com
(http://www.synthomer.com) or search for Synthomer on LinkedIn.
CHIEF EXECUTIVE OFFICER'S REVIEW
Trading in the first half of 2024 was in line with expectations, with
underlying earnings progress driven mainly by our self-help activities as
demand conditions in our end markets have only incrementally improved during
the period. While clear evidence of a sustained recovery remains limited, we
continue to reposition the organisation to deliver our medium-term strategic
and financial ambitions as we aim to become a more focused, more specialised
and more global chemicals solutions provider.
Earnings progress driven mainly by self-help
We are encouraged by the Group's progress, with continuing Group revenue and
EBITDA increasing by 3.5% and 7.6% respectively in constant currency. Market
conditions across the Group were mixed, with a 10.7% increase in volume driven
by a recovery of some of the substantial declines experienced in 2023, with
our speciality businesses continuing to outperform base products. Our focus
remains on staying close to our customers in a volatile market environment,
while ensuring we are well-placed for recovery.
In addition to some operating leverage gains, our underlying financial
performance benefitted from further progress on our 'self-help' initiatives.
As anticipated, these actions to reduce cost and complexity, to improve site
reliability (especially of the acquired adhesive resins businesses), and to
optimise our procurement and production costs were partially offset by some
increases in other operating costs, mainly due to wage inflation and
normalisation of bonus accrual in the year.
As our most speciality focused division, Coatings & Construction Solutions
(CCS) has been the most resilient over recent periods. Despite limited
improvement in overall activity levels in its end markets and a 2.1% revenue
reduction in constant currency, our ongoing focus on enhancing our speciality
offering for customers drove improved gross profitability, meaning that,
despite the higher operating costs previously flagged in the period, the
division was able to modestly increase EBITDA margin to 12.3% on the prior
year period (H1 2023: 12.1%). CCS generated £53.0m of EBITDA (H1 2023:
£54.9m) in the seasonally more significant half of the financial year, 0.9%
lower than in H1 2023 in constant currency.
Our Adhesive Solutions (AS) division has made good progress with its
performance improvement programme, delivering £8m in benefits during the
period through improving efficiency and reliability. Although still some way
short of our long-term ambitions, Divisional EBITDA was substantially improved
at £21.9m (H1 2023: £15.6m), an EBITDA margin of 7.1% (H1 2023: 5.0%) for
the period. Activity levels improved in the period, with market share gains
particularly in the base products that had been under significant pressure
from global competitors during the second half of 2023. Volumes and especially
unit margins also improved in the speciality portion of AS' portfolio (c.60%
of divisional revenue) in the period.
Meanwhile, nitrile butadiene latex (NBR) volumes in our Heath & Protection
and Performance Materials (HPPM) division continued to improve from their
post-pandemic lows, underpinned by the hygiene growth megatrend for
end-customer medical glove use, albeit at what remain historically low unit
margins. In our Performance Materials portfolio, which includes a number of
businesses assessed as non-core to the wider Group strategy, volumes also
began to improve in the period. As a predominantly base chemicals division,
HPPM's gross profit is highly sensitive to volumes. Divisional EBITDA
increased to £14.8m (H1 2023: £12.3m) and EBITDA margin improved to 4.7%
compared with the prior year period (H1 2023: 4.3%).
On track for positive Free Cash Flow for full year; debt maturities extended
Net debt of £560.6m (H1 2023: £795.8m, FY 2023: £499.7m) was in line with
our expectations, partly reflecting payment of the EC fine settlement amount
of £39.1m in January as previously described, partially offset by the £20.6m
net cash inflow from the Compounds divestment in April. Our Free Cash Flow
performance in the period was consistent with our expectations, recognising
that raw material prices and activity levels - and hence net working capital -
were all higher at the end of June 2024 than in December 2023 (in part due to
seasonal variations). These were partially offset by inflows from the
receivables financing facilities and active inventory management during the
period.
As a result, the Group's net debt: EBITDA for the purposes of the leverage
ratio covenant increased from 4.2x at 31 December 2023 to 4.7x at 30 June
2024, well within the required covenant of not more than 6.0x.
Alongside our operational focus on cash, the balance sheet has also been
strengthened further. In April, we successfully tendered for €370m of our
bonds due 2025, reducing gross debt and extending maturities by issuing
€350m of bonds due 2029. Our next significant debt maturity is now in 2027.
Speciality solutions strategy progressing well
We continue to deliver a number of initiatives to support our strategic
transformation towards higher margin, more resilient speciality solutions
business areas, with allocation of our resources shifting towards our greatest
opportunities for our future value creation.
Portfolio management
In April we completed the divestment of our non-core latex compounding
business for an EV/standalone trailing EBITDA multiple of 6x and a profit on
disposal before the recycling of translation reserves of £1.4m. The
divestment included two manufacturing sites in the Netherlands and one in
Egypt. Together with other site rationalisations and divestments, our site
footprint has reduced from 43 to 32 in two years.
We have a number of other non-core divestments underway which continue to
progress, including of our SBR business for European paper and carpet markets.
We also continue to explore potential partnership opportunities which would
allow us to leverage our intellectual property, technology and manufacturing
expertise in certain product areas to grow earnings with no or very limited
upfront investment.
While our main focus remains on furthering our non-core divestment programme,
we continue to identify and track potential accretive bolt-on acquisition
opportunities in strategically attractive end markets and geographies for the
future, when our financial circumstances allow.
Innovation and sustainability
Innovation, particularly aligned to our sustainability agenda, remains a
priority for the Group. In July our technical teams moved into our new China
Innovation Centre (CIC) in the Shanghai Chemical Industry Park. Construction
of the CIC was completed in six months, and later this year we expect to
commission a synthesis lab, further enhancing the CIC's value to our
businesses. The CIC will augment our local innovation capabilities and
strengthen our customer reach in the globally significant Chinese market.
We continue to focus on the development of more sustainable products both as a
commercial proposition and as integral to our purpose as an organisation. In
the period we made good progress towards launching several products with
bio-based feedstocks such as a new emulsion polymer platform for coatings in
CCS, and adhesives that support debonding for a more circular economy in AS.
These are supported by achieving ISCC PLUS certification at seven of our key
sites in the period, enabling us to offer a mass balance approach for
bio-based and circular raw materials as part of our role at the centre of our
value chains.
Our industry-leading Product Sustainability Scorecard continues to guide our
innovation strategy - with 69% of new products launched over the last twelve
months having defined sustainability benefits - and has received industry
recognition, most recently at the UK's Chemical Industry Awards. In April we
were named as one of Europe's Climate Leaders by the Financial Times in
partnership with data provider Statista. More recently we retained our silver
rating in EcoVadis' annual sustainability assessment, which is only awarded to
the top-performing 15% of all companies assessed, and with an advanced rating
for carbon management.
Meanwhile we were very encouraged by an overall nine-point improvement in our
annual Net Promotor Score survey of our customers completed in March 2024.
Detailed survey data by business line is being used by our teams to further
improve our product offering and enhance the experience of our customers
globally.
2024 outlook
Trading since the start of the year has been in line with expectations,
reflecting some volume recovery in a number of businesses from historically
low levels, but no sustained broad-based end-market demand improvement as yet.
Activity levels and capacity utilisation across the Group remain significantly
below pre-pandemic levels. As previously indicated the Group therefore
continues to focus on delivering our speciality solutions strategy, including
portfolio management, alongside our activities to maintain robust cash flow.
For the remainder of the year, we expect to make continued progress with our
previously announced actions to reduce cost and complexity and to improve
reliability. In the remainder of the year we will also begin to benefit from
the procurement and production cost optimisation programmes that were
initiated in the first half, and which are expected to deliver £30-40m in
annual savings by the end of 2025. As previously indicated, our earnings
progress this year is being partially offset by some increases in operating
costs, mainly due to wage inflation and normalisation of bonus accrual,
compared with 2023. As a result, we continue to expect to make some earnings
progress (on a continuing Group basis adjusting for the divested Compounds
business) and be at least modestly Free Cash Flow positive in 2024, even
absent a broad-based macroeconomic demand improvement.
We remain confident in our ambition to more than double Synthomer's recent
earnings over the medium term, through a combination of our near-term
self-help actions, end-market volume recovery and strategic delivery.
Michael Willome
Chief Executive Officer
13 August 2024
DIVISIONAL REVIEW - CONTINUING OPERATIONS
Coatings & Construction Solutions (CCS)
Our most speciality-weighted division, CCS continues to demonstrate the
resilience and growth potential that reflects its focus on delivering customer
solutions that are supported by the sustained alignment of people, capital and
strategy.
Six months ended 30 June H1 2024 H1 2023 Change Constant currency(1)
£m £m % %
Revenue 430.4 452.0 (4.8)% (2.1)%
Volumes (ktes) 271.8 270.0 +0.7%
EBITDA 53.0 54.9 (3.5)% (0.9)%
EBITDA % of revenue 12.3% 12.1%
Operating profit - underlying 40.6 41.7 (2.6)% -
Operating profit - statutory 31.0 27.6 +12.3%
(1) Underlying constant currency revenue and profit retranslate current
year results using the prior year's average exchange rates.
Performance
Divisional revenue decreased by 2.1% in constant currency to £430.4m (H1
2023: £452.0m), with a 0.7% increase in volume compared with H1 2023, offset
by lower pricing. The volume growth principally reflects modestly improved
buying behaviour from our customers, particularly in the first quarter,
reflecting some tactical restocking and market share gains in coatings as we
focus on organic growth geographically.
Activity levels in our coatings and consumer end markets have been more robust
while construction activity was disappointing in the period, as expected. Our
activities for energy end markets continue to deliver strong levels of growth.
Geographically, market conditions were relatively undifferentiated in the
period.
While reduced raw material costs compared with H1 2023 were reflected in
pricing, the division was successful in improving unit margins, reflecting our
focus on the speciality nature of our offering for customers. Improved mix and
robust cost control produced an encouraging level of operating leverage at the
gross profit level, although this was mitigated as expected at the EBITDA
level by other operating cost increases compared with the prior period. CCS
nevertheless generated £53.0m of EBITDA (H1 2023: £54.9m) in the period,
increasing EBITDA margin to 12.3% (H1 2023: 12.1%).
CCS is typically the most seasonally weighted of our divisions, although in
2024 we expect this effect to be partially mitigated by our continued focus on
delivering cost actions which are weighted to the second half in the division.
Strategy
CCS continues to focus on enhancing its organic growth capability, including
by extending our leading market positions in niche European markets to other
markets globally. We are doing this through a more end-market aligned
approach, with key account management and a growing focus on value selling,
both to our global customers as well as regional leaders in our target
markets, particularly in the USA and Middle East.
In the period we have undertaken an intensive review of our approach to
innovation, exploring in particular opportunities to become more end-market
focused and accelerate time to market. We are also reweighting our efforts,
with a particular focus on sustainability, to enhance the differentiation and
margin opportunity of our predominantly speciality product portfolio.
All our plans are supported by, and integrated with, our asset optimisation
projects and other cost control and capacity management activities. For
example, our plans to exit our Fitchburg, Massachusetts site continue to
progress at pace with production ceasing in July, ahead of schedule. By
reorganising our production activities we aim to improve asset utilisation
rates while reducing complexity. As part of these activities we are also
making modest new investments to further our strategic focus on organic
growth, including by improving the manufacturing flexibility of our key
facilities. In the period, we successfully commissioned a small investment
which enhances our coatings capacity to support growth in the Middle East.
With the recent commissioning of the Group's new innovation centre in Shanghai
we are also increasing our focus on growing our customer base in China.
Adhesive Solutions (AS)
We are encouraged by the ongoing progress we are making to improve our cost
competitiveness and increase the reliability performance of our business,
allowing us to regain market share and deliver improving profits and margins
as activity levels modestly recover from Q4 2023 lows.
Six months ended 30 June H1 2024 H1 2023 Change Constant currency(1)
£m £m % %
Revenue 308.7 310.0 (0.4)% +2.2%
Volumes (ktes) 140.3 125.6 +11.7%
EBITDA 21.9 15.6 +40.4% +42.9%
EBITDA % of revenue 7.1% 5.0%
Operating profit - underlying 5.2 1.4 +271.4% +271.4%
Operating loss - statutory (8.6) (12.3) (30.1)%
(1) Underlying constant currency revenue and profit retranslate current
year results using the prior year's average exchange rates.
Performance
Divisional revenue was £308.7m (H1 2023: £310.0m), an increase of 2.2% in
constant currency. Volumes significantly improved, with certain base products
regaining market share having been under significant pressure from global
competitors during the second half of 2023, and encouraging margin improvement
in a number of speciality areas. Volume growth was also supported by some
short-term customer restocking at the start of the year. The more muted
revenue growth in constant currency reflected the pass-through of lower raw
material costs compared with H1 2023.
Within the division, speciality products (such as rosins, amorphous
polyolefins (APOs) and polybutadiene polymers) performed well, particularly in
unit margin terms, reflecting their greater differentiation for customers,
while in our more base chemical products (particularly hydrocarbon resins for
the tapes, labels, packaging and plastics markets) we achieved improved gross
profit contribution from higher volumes as noted, benefitting from greater
reliability and our improved cost position.
Divisional EBITDA was substantially higher than the prior year at £21.9m (H1
2023: £15.6m) with EBITDA margin of 7.1% (H1 2023: 5.0%) for the period. This
was largely due to the return to volume growth and the performance improvement
programme that was put in place in July 2023 by the new divisional management
team, which delivered £8m in benefits in H1 2024, although these were
partially offset by other operating cost increases as previously disclosed.
Strategy
The immediate focus of the AS division remains on the delivery of the
performance improvement programme to increase operational reliability and cost
efficiency of the acquired adhesive resins operations. Good progress has been
made in operations, with monitoring systems in place to identify yield and
other production efficiency opportunities, and taskforces on-site at our main
facilities in the US and the Netherlands to unlock them. More recently we have
focused on end-to-end supply optimisation including planning, procurement and
logistical enhancements. We continue to target total run rate savings in
excess of £25m in 2025 from the programme. The division has also successfully
reduced inventory by c.£4m in the period.
In addition to the performance improvement programme, we are increasingly
focused on the longer-term development of the AS division, building on our
leading positions in a range of speciality adhesive applications and our
long-term embedded relationships with many high-quality customers in
attractive end markets. Our differentiated strategy also recognises that
around 40% of revenues are generated from more volatile and competitive base
products. The majority of our investment for future growth is intended to
build on the strengths of our speciality portfolio, with for example
investments in the period to increase our APO capacity at our Texas facility.
We also continue to strengthen customer relationship management and build our
portfolio of innovation projects, many of which will benefit from
sustainability considerations. Our customers showed increasing interest in
collaborating with us in this area during the period and, having now put in
place ISCC PLUS certification of our major manufacturing sites, we are
well-placed to partner with them to create more sustainable value chains.
Meanwhile in the base product areas, we continue to enhance cost
competitiveness and reliability, with good progress for example in our project
to strengthen our supply chain for hydrocarbon resin production in Europe
during the period.
Health & Protection and Performance Materials (HPPM)
Heath & Protection volumes continue to recover from historically low
levels, with signs of improved unit margins towards the end of the second
quarter. Compounds was successfully divested in April and our plans for our
other Performance Materials businesses are progressing.
Six months ended 30 June (continuing)(1) H1 2024 H1 2023 Change Constant currency(2)
£m £m % %
Revenue 312.0 285.2 +9.4% +13.8%
Volumes (ktes) 302.5 249.7 +21.1%
EBITDA 14.8 12.3 +20.3% +24.4%
EBITDA % of revenue 4.7% 4.3%
Operating profit/(loss) - underlying 1.2 (4.3) n/m n/m
Operating loss - statutory (4.3) (5.4) (20.4)%
(1) North America Paper and Carpet and the Compounds business have been
reclassified as discontinued operations.
(2 ) Underlying constant currency revenue and profit retranslate
current year results using the prior year's average exchange rates.
Continuing divisional performance
Divisional revenue was £312.0m (H1 2023: £285.2m), driven by a 21.1%
increase in volume, partially offset by lower prices compared with H1 2023
reflecting lower raw materials costs.
Volumes for NBR in Heath & Protection improved by 36.5% compared to H1
2023 as the post-pandemic imbalance between supply and demand reduced, driven
mainly by continued underlying hygiene demand growth megatrend. However, for
context, volumes have only now recovered to 2017 levels. Unit margins and
pricing remain low by historical standards but began to improve slightly in
the second quarter.
In our Performance Materials portfolio volumes increased by 11.6%, with some
businesses benefitting from the disruption to supply chains into Europe from
Asian markets in the early part of the year.
As predominantly base chemicals businesses, the division remains highly
operationally leveraged to volumes and capacity utilisation, and in aggregate
has experienced a significant improvement in profitability at the gross profit
level over the period. Performance also benefitted from our self-help cost
activities (including the mothballing of our facility in Kluang, Malaysia
which completed in the period as planned), partially offset by the other
operating cost increases described elsewhere. Divisional EBITDA nonetheless
increased to £14.8m (H1 2023: £12.3m), an EBITDA margin of 4.7% (H1 2023:
4.3%).
Strategy
Recognising much of the division has base chemicals characteristics, our
differentiated steering approach to our core Health & Protection business
is to focus on improving cost efficiency across our value chain while
enhancing our overall value proposition to our customers through selective
investment in process and product innovation and sustainability. We have also
invested in enhancing our understanding of our end-markets and customers, and
recently redesignated our Speciality vinyl polymers business as core following
a review of its market opportunities.
Given Health & Protection's strengths as a global market leader in NBR
manufacturing with significant technology and manufacturing expertise, we are
actively exploring a number of potential partnership opportunities to capture
growth and value from this business with little or no capital investment. The
division's growth potential is also expected to benefit from Synthomer's new
China Innovation Centre in Shanghai, which was formally opened as planned in
July.
At the end of April 2024 we completed the divestment of our latex compounding
operations to Matco Latex Services BV, reducing our manufacturing site
footprint by 3 sites (two in the Netherlands and one in Egypt), as described
elsewhere.
Our other non-core portfolio rationalisation activities continued to progress
during the period, including the process to divest the SBR business for
European paper and carpet markets.
Safety
We continue to be proud of our safety performance while recognising that there
is always more to do, in particular to complete the process of bringing more
recently acquired sites up to the standards of safety achieved elsewhere in
the portfolio.
The Recordable Case Rate (RCR) for the Group as a whole remains top quartile
for our industry, with two divisions achieving no recordable injuries to
employees and contractors during the period. This reflects the hard work being
undertaken throughout the Group to continuously embed and strengthen the
safety systems and tools we have in place.
Meanwhile, our Process Safety Event Rate (PSER) was slightly higher than the
very strong 2023 performance and more in line with 2022 levels. The primary
causes of our process safety events are asset integrity issues and human error
which together account for 75% of the events. The former are being addressed
through our ongoing capital expenditure programmes, while we have a human
factor analysis programme in place to address the latter.
We continue to monitor and evolve our approach to drive safety performance
improvements, focusing on reducing both our headline 'lagging' indicators RCR
and PSER but also increasingly on a number of 'leading' indicators. In the
period we have introduced two new leading indicators around major accident
hazard barrier effectiveness checks and on internal and external incident
learning.
Longer-term trends continue to clearly demonstrate that the longer sites are
part of Synthomer and our SHE (safety, health and environment) management
system, the better their performance.
H1 2024 H1 2023 Change
Six months ended 30 June (continuing)
RCR per 100,000 hours for employees and contractors Absolute
CCS 0.29 0.20 +0.09
AS - 0.30 (0.30)
HPPM - - -
Continuing Group 0.13 0.13 -
PSER per 100,000 hours for employees and contractors Absolute
CCS 0.19 0.10 +0.09
AS 0.69 0.14 +0.55
HPPM 0.12 0.06 +0.06
Continuing Group 0.24 0.09 +0.15
FINANCIAL REVIEW
Group revenue, EBITDA and operating profit - continuing operations
Revenue for the continuing Group of £1,051.1m (H1 2023: £1,047.2m) increased
by 3.5% in constant currency. This principally reflects an 10.7% increase in
volume driven by a recovery of some of the substantial volume declines
experienced in 2023, offset by pass-through of lower raw material input prices
relative to the prior year period.
EBITDA for the continuing Group was £76.0m (H1 2023: £72.8m), benefitting
from our self-help cost actions and operating leverage, partially offset by
increases in operating costs as expected, mainly due to wage inflation and
normalisation of bonus accrual. Corporate costs increased to £13.7m in the
period (H1 2022: £10.0m), mainly due to wage inflation, bonus accrual, timing
of operating expenditures and higher expenditure in relation to implementing
our sustainability objectives. Depreciation and amortisation was £47.0m (H1
2023: £47.7m), resulting in underlying operating profit for the continuing
Group of £29.0m (H1 2023: £25.1m).
On a statutory basis, including the Special Items excluded from underlying
measures (see below), this resulted in an operating loss for the continuing
Group of £(2.2)m (H1 2023: £(7.1)m).
CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
Six months ended 30 June 2024, £m
Revenue 430.4 308.7 312.0 - 1,051.1 9.7 1,060.8
EBITDA 53.0 21.9 14.8 (13.7) 76.0 2.6 78.6
EBITDA % of revenue 12.3% 7.1% 4.7% 7.2% 7.4%
Operating profit/(loss) - underlying 40.6 5.2 1.2 (18.0) 29.0 2.4 31.4
Operating profit/(loss) - statutory 31.0 (8.6) (4.3) (20.3) (2.2) (0.8) (3.0)
Six months ended 30 June 2023, £m CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
Revenue 452.0 310.0 285.2 - 1,047.2 56.1 1,103.3
EBITDA 54.9 15.6 12.3 (10.0) 72.8 1.7 74.5
EBITDA % of revenue 12.1% 5.0% 4.3% 7.0% 6.8%
Operating profit - underlying 41.7 1.4 (4.3) (13.7) 25.1 0.8 25.9
Operating profit - statutory 27.6 (12.3) (5.4) (17.0) (7.1) 62.8 55.7
Full year ended 31 December 2023, £m CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
Revenue 820.2 581.7 538.7 - 1,940.6 80.6 2,021.2
EBITDA 100.1 31.2 26.3 (20.2) 137.4 1.7 139.1
EBITDA % of revenue 12.2% 5.4% 4.9% 7.1% 6.9%
Operating profit - underlying 74.3 (7.5) (6.0) (27.4) 33.4 0.4 33.8
Operating profit - statutory 42.1 (32.7) (15.3) (33.6) (39.5) 57.2 17.7
Special Items - continuing operations
The following items of income and expense have been reported as Special Items
- continuing operations and have been excluded from EBITDA and other
underlying metrics:
Six months ended 30 June H1 2024 H1 2023 FY 2023
£m £m £m
Amortisation of acquired intangibles (22.8) (24.3) (49.3)
Restructuring and site closure costs (6.7) (6.6) (14.7)
Acquisition costs and related gains (1.2) (1.3) (2.0)
Sale of businesses (0.5) - (0.1)
Impairment charge - - (5.6)
Regulatory fine - - (0.7)
Abortive bond costs - - (0.5)
Total impact on operating profit - continuing operations (31.2) (32.2) (72.9)
Fair value movement on unhedged interest rate derivatives - (1.8) (1.8)
Loss on extinguishment of financing facilities (1.3) (4.6) (4.7)
Total impact on loss/profit before taxation - continuing operations (32.5) (38.6) (79.4)
Taxation Special Items - - (1.7)
Taxation on Special Items 3.0 (4.9) 4.5
Total impact on loss/profit for the period - continuing operations (29.5) (43.5) (76.6)
Amortisation of acquired intangibles reflects the amortisation on the customer
lists, patents, trademarks and trade secrets that arose on historic
acquisitions, including the 2022 acquisition of the adhesive resins business.
The intangible assets arising on the acquisition are amortised over a period
of 8-20 years.
Restructuring and site closure costs in H1 2024 mainly comprised a £1.6m
charge in relation to site rationalisation activity in Malaysia, £1.2m costs
in relation to the ongoing integration of the acquired adhesive resins
business, £1.2m in relation to the onerous contract arising from the earlier
divestment of the European tyre cord business, and £2.8m in relation to
enacting the new strategy and the alignment of the business into its new
divisions.
Acquisition costs of £1.2m relate to the acquisition of the adhesive resins
business.
Sale of businesses costs of £0.5m comprise costs incurred associated with
potential future divestments.
The Taxation on Special Items for continuing operations in H1 2024 was a tax
credit of £3.0m mainly relating to deferred tax arising on the amortisation
of acquired tax intangibles.
Discontinued operations
On 30 April 2024, the Group completed the divestment of its latex compounding
operations ('the Compounds business') to Matco Latex Services BV, resulting in
a net cash inflow of £20.6m. The profit on disposal before the recycling of
translation reserves was £1.4m. The Compounds business is reported as a
discontinued operation in these results. In accordance with IFRS 5,
discontinued revenues have been reduced by £5.7m, representing the revenue
earned to the date of sale by the continuing operations from inter-company
sales to the Compounds business. Continuing revenues have been increased by
the same amount.
In the period, £2.8m of net losses were recognised in relation to Special
Items - discontinued operations (H1 2023: £36.4m gain), comprising the profit
on disposal of £1.4m noted above and £(4.4)m of translation losses recycled
from reserves on the disposal, as well as £0.2m of gains related to other
previous disposals offset by £(0.4)m of costs in relation to the closure of
the North America Paper & Carpet business.
Finance costs
Six months ended 30 June H1 2024 H1 2023 FY 2023
£m £m £m
Interest payable (33.8) (35.8) (70.6)
Interest receivable 6.8 5.0 10.2
Net interest expense on defined benefit obligation (0.9) (1.1) (2.7)
Interest element of lease payments (1.0) (0.7) (1.8)
Finance costs - underlying (28.9) (32.6) (64.9)
Fair value movement on unhedged interest rate derivatives - (1.8) (1.8)
Loss on extinguishment of financing facilities (1.3) (4.6) (4.7)
Finance costs - statutory (30.2) (39.0) (71.4)
Underlying finance costs decreased to £28.9m (H1 2023: £32.6m) and comprise
interest on the Group's financing facilities, interest rate swaps,
amortisation of associated debt costs and IAS 19 pension interest costs in
respect of our defined benefit pension schemes. The reduction in net interest
payable mainly reflects increased interest receivable following receipt of the
proceeds of the rights issue and lower gross debt, offset by increased bond
interest as a result of the bond refinancing (see below).
The Group recognised as Special Items a total of £1.3m in finance costs
relating to the write-off of previous issue costs on extinguishment of
financing facilities, as a result of the bond refinancing.
Taxation
The Group has calculated its best estimate of the annual effective corporate
income tax rate we expect for the full year, resulting in an underlying tax
charge of £0.2m for continuing operations for H1 2024. As in the prior year
the estimated tax rate is very dependent on the level of underlying profit or
loss and the geographical mix of that profit or loss. Therefore, there is some
fluctuation in the effective tax rate applied when comparing the relative
periods (H1 2024: 200.0%, H1 2023: 22.0%).
Non-controlling interest
The Group continues to hold 70% of Revertex (Malaysia) Sdn Bhd and its
subsidiaries. These entities form a relatively minor part of the Group, so the
impact on underlying performance from non-controlling interests is not
significant.
Earnings per share
Earnings per share is calculated based on the weighted average number of
shares in issue during the year. The weighted average number of shares for H1
2024 was 163.5m (H1 2023: 63.4m on a comparable basis), reflecting the 20 to 1
share consolidation and the issuance of new shares at a discount under the
rights issue in October 2023. As at 13 August 2024, the Company had 163.6m
shares in issue.
Underlying earnings per share is 1.3 pence for the year, up from (8.0) pence
in H1 2023 on a comparable basis, reflecting the improved earnings. The
statutory earnings per share is (18.8) pence (H1 2023: (19.0) pence on a
comparable basis).
Currency
The Group presents its consolidated financial statements in sterling and
conducts business in many currencies. As a result, it is subject to foreign
currency risk due to exchange rate movements, which affect the Group's
translation of the results and underlying net assets of its operations. To
manage this risk, the Group uses foreign currency borrowings, forward
contracts and currency swaps to hedge non-sterling net assets, which are
predominantly denominated in euros, US dollars and Malaysian ringgits.
In H1 2024 the Group experienced a translation headwind of £2.3m on EBITDA,
with average FX rates against our three principal currencies of €1.17, $1.28
and MYR 5.99 to the pound.
Given the global nature of our customer and supplier base, the impact of
transactional foreign exchange can be very different from translational
foreign exchange. We are able to partially mitigate the transaction impact by
matching supply and administrative cost currencies with sales currencies. To
reduce volatility which might affect the Group's cash or income statement, the
Group hedges net currency transaction exposures at the point of confirmed
order, using forward foreign exchange contracts. The Group's policy is, where
practicable, to hedge all exposures on monetary assets and liabilities.
Cash performance
The following table summarises the movement in net debt and is in the format
used by management:
Six months ended 30 June H1 2024 H1 2023 FY 2023
£m £m £m
Opening net debt (499.7) (1,024.9) (1,024.9)
Underlying operating profit (excluding joint ventures) 30.5 25.2 32.4
Movement in working capital (28.9) 11.9 80.6
Depreciation of property, plant and equipment 41.9 44.8 96.5
Amortisation of other intangible assets 5.3 3.8 8.8
Capital expenditure (38.2) (33.9) (84.0)
Operating Cash Flow(1) 10.6 51.8 134.3
Net interest paid (26.1) (24.7) (54.3)
Tax received/(paid) (6.9) (4.5) 9.3
Pension funding (9.8) (5.7) (7.3)
Adjustment for share-based payments charge 0.8 1.1 1.8
Dividends received from joint ventures 0.2 0.8 1.9
Free Cash Flow (31.2) 18.8 85.7
Cash impact of settlement of interest rate derivative contracts - 12.1 12.1
Cash impact of restructuring and site closure costs (10.4) (10.8) (28.0)
Cash impact of acquisition costs (0.9) (4.4) (1.9)
Payment of EC fine settlement amount (39.1) - -
Proceeds on sale of business 24.3 206.1 208.2
Purchase of adhesive resins business - (8.3) (18.4)
Rights issue (costs)/proceeds (4.7) - 265.5
Repayment of principal portion of lease liabilities (6.7) (5.8) (12.4)
Dividends paid - - -
Foreign exchange and other movements 7.8 21.4 14.4
Movement in net debt (60.9) 229.1 525.2
Closing net debt (560.6) (795.8) (499.7)
(1 ) Operating Cash Flow is defined as Total Group EBITDA
plus/minus net working capital movement less capital expenditure.
Underlying operating profit increased to £30.5m reflecting the trading
performance described above. The net working capital outflow of £28.9m was a
result of increasing activity levels (in part due to seasonal variations
between December and June) and higher raw materials prices since the previous
year end, offset by inflows from the receivables financing facilities and
active inventory management.
In December 2022, the Group put in place two-year, non-recourse receivables
financing facilities for a maximum committed amount of €200m. Factored
receivables assigned under the facilities amounted to £128.0m net at 30 June
2024 (30 June 2023: £ 139.2m net, 31 December 2023: £110.6m net). Under the
facilities, the risks and rewards of ownership are transferred to the
assignees. The duration of the committed facilities has been extended to 31
January 2027.
Depreciation reduced reflecting the capital expenditure profile, whilst
amortisation of other intangibles increased due to the Pathway business
transformation programme. Capital expenditure was £38.2m (H1 2023: £33.9m),
principally for Pathway and recurring SHE and sustenance expenditure. The
Group continues to anticipate broadly similar levels of capital expenditure to
FY 2023 in FY 2024.
Net interest paid increased to £26.1m (H1 2023: £24.7m) reflecting increased
and rephased bond interest costs, offset by increased interest receipts from
cash raised in the October 2023 rights issue.
Net tax paid was £6.9m (H1 2023: £4.5m) reflecting tax payments on account
made in the year.
The cash impact of Special Items including restructuring and site closure
costs and acquisition costs was an outflow of £11.3m.
Group debt is denominated in euros and dollars. Both the euro and the dollar
weakened relative to sterling during H1 2024, leading to a foreign exchange
gain in net debt.
Financing and liquidity
At 30 June 2024, net debt was £560.6m (30 June 2023: £795.8m, 31 December
2023: £499.7m). The increase since the year end principally reflects
settlement of the EC fine in January, the divestment proceeds of the Compounds
business and the Free Cash Flow movements noted above.
In April, we successfully tendered for €370m of our bonds due 2025 reducing
gross debt and extending maturities by issuing €350m of bonds due 2029.
As at 30 June 2024, committed borrowing facilities principally comprised: a
€300m RCF maturing in July 2027, €350m of five-year 7.375% senior
unsecured loan notes maturing May 2029, the remaining €150m outstanding of
five-year 3.875% senior unsecured loan notes maturing July 2025 and the UK
Export Finance (UKEF) facilities of €288m and $230m both maturing October
2027. At 30 June 2024, the RCF was undrawn and the UKEF facilities were fully
drawn. The Group's net debt: EBITDA for the purposes of the leverage ratio
covenant increased from 4.2x at 31 December 2023 to 4.7x at 30 June 2024,
principally due to the higher net debt at the period end, as described
elsewhere.
The RCF and the UKEF facilities are subject to one leverage ratio covenant.
For prudence, the Group agreed in March 2024 to extend the period of temporary
covenant relaxation to ensure that appropriate headroom was maintained.
Accordingly, the net debt: EBITDA ratios required under the covenant have been
set at not more than 6.0x in June 2024, 5.75x in December 2024, 5.0x in June
2025 and 4.75x in December 2025. Reducing leverage further towards our 1-2x
medium-term target range remains a key priority for the Group.
The Group expects net financing costs of c.£60-65m in 2024 and c.£65-70m in
2025 as a result of higher interest rates, the recent bond refinancing and
other changes to the Group's financing arrangements. The Group's committed
liquidity at 30 June 2024 was in excess of £500m.
Balance sheet
Net assets of the Group decreased by 1.9% to £1,140.2m at 30 June 2024,
mainly reflecting the loss in the period.
Provisions
The Group provisions balance decreased to £37.6m compared with a balance of
£41.5m as at 31 December 2023, mainly reflecting cash utilisation of £4.8m
in the period, most notably in relation to onerous contracts and restructuring
and site rationalisation activities.
Retirement benefit plans
The Group's principal funded defined benefit pension schemes are in the UK and
the USA and are both closed to new entrants and future accrual. The Group also
operates an unfunded defined benefit scheme in Germany and various other
defined contribution overseas retirement benefit arrangements.
The Group's net retirement obligation decreased by £14.0m to £50.7m at 30
June 2024 (30 June 2023: £62.6m, 31 December 2023: £64.7m), and reflects the
market value of assets and the valuation of liabilities in accordance with IAS
19, including an asset of £22.2m for the UK scheme. This reduction largely
comprised £9.8m of cash contributions and actuarial gains of £3.7m. During
2024 the Group is committed to making c.£19m in contributions to the UK
scheme, a portion of which was deferred from 2023 as agreed with the pension
trustees.
Consolidated income statement
for the six months ended 30 June 2024
30 June 2024 (unaudited) 30 June 2023 (unaudited)
Underlying performance Special IFRS Underlying performance Special IFRS
£m
Items
£m
£m
Items
£m
£m
£m
Continuing operations 1,051.1 - 1,051.1
Revenue 1,047.2 - 1,047.2
Company and subsidiaries operating profit before Special Items 28.1 - 28.1 24.3 - 24.3
Amortisation of acquired - (22.8) (22.8) - (24.3) (24.3)
intangibles
Restructuring and site closure - (6.7) (6.7) - (6.6) (6.6)
costs
Acquisition costs and related - (1.2) (1.2) - (1.3) (1.3)
gains
Sale of - (0.5) (0.5) - - -
businesses
Regulatory Fine - - - - - -
Abortive bond costs - - - - - -
Impairment - - - - - -
charge
Company and subsidiaries operating profit 28.1 (31.2) (3.1) 24.4 (32.2) (7.8)
Share of joint ventures 0.9 - 0.9 0.7 - 0.7
Operating profit / (loss) 29.0 (31.2) (2.2) 25.1 (32.2) (7.1)
Interest payable (33.8) - (33.8) (35.8) - (35.8)
Interest receivable 6.8 - 6.8 5.0 - 5.0
Fair value (loss) / gain on unhedged interest rate derivatives - - - - (1.8) (1.8)
Loss on extinguishment of financing facilities - (1.3) (1.3) - (4.6) (4.6)
Net interest expense on defined benefit obligations (0.9) - (0.9) (1.1) - (1.1)
Interest element of lease payments (1.0) - (1.0) (0.7) - (0.7)
Finance costs (28.9) (1.3) (30.2) (32.6) (6.4) (39.0)
Profit / (Loss) before taxation 0.1 (32.5) (32.4) (7.5) (38.6) (46.1)
Taxation (0.2) 3.0 2.8 2.2 (4.9) (2.7)
(Loss) / profit for the period from continuing operations (0.1) (29.5) (29.6) (5.3) (43.5) (48.8)
Profit / (loss) for the period from discontinued operations attributable to 1.8 (3.2) (1.4) 0.1 36.3 36.4
the equity holders of the parent
(Loss) / profit for the period 1.7 (32.7) (31.0) (5.2) (7.2) (12.4)
(Loss) / profit attributable to non-controlling interests (0.4) 0.1 (0.3) (0.1) (0.2) (0.3)
(Loss) / profit attributable to equity holders of the parent 2.1 (32.8) (30.7) (5.1) (7.0) (12.1)
1.7 (32.7) (31.0) (5.2) (7.2) (12.4)
Earnings per share
- Basic from continuing operations (0.1)p (18.0)p (18.1)p (8.4)p (68.5)p (76.9)p
- Diluted from continuing operations (0.1)p (18.0)p (18.1)p (8.4)p (68.5)p (76.9)p
- Basic 1.3p (20.1)p (18.8)p (8.0)p (11.0)p (19.0)p
- Diluted 1.3p (20.1)p (18.8)p (8.0)p (11.0)p (19.0)p
Consolidated income statement
for the six months ended 30 June 2024 (continued)
Year ended 31 December 2023 (audited)
Underlying performance Special IFRS
£m
Items
£m
£m
Continuing operations
Revenue 1,940.6 - 1,940.6
Company and subsidiaries operating profit before Special Items 32.0 - 32.0
Amortisation of acquired - (49.3) (49.3)
intangibles
Restructuring and site closure - (14.7) (14.7)
costs
Acquisition costs and related - (2.0) (2.0)
gains
Sale of - (0.1) (0.1)
businesses
Regulatory Fine - (0.7) (0.7)
Abortive bond costs - (0.5) (0.5)
Impairment - (5.6) (5.6)
charge
Company and subsidiaries operating profit 32.0 (72.9) (40.9)
Share of joint ventures 1.4 - 1.4
Operating profit / (loss) 33.4 (72.9) (39.5)
Interest payable (70.6) - (70.6)
Interest receivable 10.2 - 10.2
Fair value gain on unhedged interest rate derivatives - (1.8) (1.8)
Loss on extinguishment of financing facilities (4.7) (4.7)
Net interest expense on defined benefit obligations (2.7) - (2.7)
Interest element of lease payments (1.8) - (1.8)
Finance costs (64.9) (6.5) (71.4)
Profit / (loss) before taxation (31.5) (79.4) (110.9)
Taxation 3.5 2.8 6.3
Profit / (loss) for the year from continuing operations (28.0) (76.6) (104.6)
Profit / (loss) for the year from discontinued operations attributable to the (1.6) 39.4 37.8
equity holders of the parent
(Loss) for the year (29.6) (37.2) (66.8)
Profit / (loss) attributable to non-controlling interests 0.4 (0.2) 0.2
Profit / (loss) attributable to equity holders of the parent (30.0) (37.0) (67.0)
(29.6) (37.2) (66.8)
Earnings per share
- Basic from continuing operations (33.4)p (89.4)p (122.8)p
- Diluted from continuing operations (33.4)p (89.4)p (122.8)p
- Basic (35.3)p (43.2)p (78.5)p
- Diluted (35.3)p (43.2)p (78.5)p
Consolidated statement of comprehensive income
for the six months ended 30 June 2024
30 June 2024 (unaudited) 30 June 2023 (unaudited)
Equity holders of the parent Non-controlling interests Total Equity holders of the parent Non-controlling interests Total
£m £m £m £m £m £m
(Loss) / profit for the period (30.7) (0.3) (31.0) (12.1) (0.3) (12.4)
Actuarial gains 3.5 - 3.5 3.3 - 3.3
Tax relating to components of other comprehensive income 1.9 - 1.9 (0.7) - (0.7)
Total items that will not be reclassified to profit or loss 5.4 - 5.4 2.6 - 2.6
Exchange differences on translation of foreign operations (8.1) (0.7) (8.8) (53.5) (0.8) (54.3)
Exchange differences recycled on sale of business 4.4 - 4.4 (0.5) - (0.5)
Fair value gain / (loss) on hedged interest derivatives 1.2 - 1.2 (0.1) - (0.1)
Gain / (loss) on net investment hedges taken to equity 5.7 - 5.7 (2.2) - (2.2)
Total items that may be reclassified subsequently to profit or loss 3.2 (0.7) 2.5 (56.3) (0.8) (57.1)
Other comprehensive (expense) / income for the period 8.6 (0.7) 7.9 (53.7) (0.8) (54.5)
Total comprehensive (expense) / income for the period (22.1) (1.0) (23.1) (65.8) (1.1) (66.9)
Year ended 31 December 2023 (audited)
Equity holders of the parent Non-controlling interests Total
£m £m £m
(Loss) / gain for the year (67.0) 0.2 (66.8)
Actuarial gains 2.9 - 2.9
Tax relating to components of other comprehensive income (1.0) - (1.0)
Total items that will not be reclassified to profit or loss 1.9 - 1.9
Exchange differences on translation of foreign operations (58.3) (0.8) (59.1)
Exchange differences recycled on sale of business (0.5) - (0.5)
Fair value gain on hedged interest derivatives (7.7) - (7.7)
Gains on net investment hedges taken to equity 1.0 - 1.0
Total items that may be reclassified subsequently to profit or loss (65.5) (0.8) (66.3)
Other comprehensive expense for the year (63.6) (0.8) (64.4)
Total comprehensive expense for the year (130.6) (0.6) (131.2)
Consolidated statement of changes in equity
for the six months ended 30 June 2024
Share Share Capital redemption reserve Hedging & translation reserve Retained earnings Total equity holdings of Non-controlling interests Total Equity
capital premium £m £m £m the parent £m £m
£m £m £m
At 1 January 2024 1.6 925.9 0.9 10.4 209.8 1,148.6 13.4 1,162.0
Loss for the period - - - - (30.7) (30.7) (0.3) (31.0)
Other comprehensive (expense) / income for the period - - - 3.2 5.4 8.6 (0.7) 7.9
Total comprehensive expense for the period - - - 3.2 (25.3) (22.1) (1.0) (23.1)
Share-based payments - - - - 1.3 1.3 - 1.3
At 30 June 2024 (unaudited) 1.6 925.9 0.9 13.6 185.8 1,127.8 12.4 1,140.2
Capital redemption Hedging & translation reserve Total equity holdings of
Share Share reserve £m Retained earnings the parent Non-controlling Total Equity
capital premium £m £m £m interests £m
£m £m £m
46.7 620.0 0.9 75.9 273.5 1,017.0 14.0 1,031.0
At 1 January 2023
Loss for the period - - - - (12.1) (12.1) (0.3) (12.4)
Other comprehensive (expense) / income for the period - - - (56.3) 2.6 (53.7) (0.8) (54.5)
Total comprehensive income for the period - - - (56.3) (9.5) (65.8) (1.1) (66.9)
Share-based payments - - - - (0.8) (0.8) - (0.8)
At 30 June 2023 (unaudited) 46.7 620.0 0.9 19.6 263.2 950.4 12.9 963.3
Capital redemption Hedging & translation reserve Total equity holdings of
Share Share reserve £m Retained earnings the parent Non-controlling Total Equity
capital premium £m £m £m interests £m
£m £m £m
46.7 620.0 0.9 75.9 273.5 1,017.0 14.0 1,031.0
At 1 January 2023
Loss for the year - - - - (67.0) (67.0) 0.2 (66.8)
Other comprehensive income for the year - - - (65.5) 1.9 (63.6) (0.8) (64.4)
Total comprehensive income / (expense) for the year - - - (65.5) (65.1) (130.6) (0.6) (131.2)
Share consolidation (46.5) 46.5 - - - - - -
Issue of shares 1.4 259.4 - - - 260.8 - 260.8
Share-based payments - - - - 1.4 1.4 - 1.4
At 31 December 2023 (audited) 1.6 925.9 0.9 10.4 209.8 1,148.6 13.4 1,162.0
Consolidated balance sheet
as at 30 June 2024
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£m £m £m
Non-current assets
Goodwill 454.9 464.5 465.7
Acquired intangible 429.1 476.6 452.5
assets
Other intangible 70.4 66.7 71.1
assets
Property, plant and 680.5 722.0 705.7
equipment
Deferred tax 46.7 25.0 36.8
assets
Defined benefit 22.2 11.5 16.5
asset
Investment in joint 7.7 7.6 7.5
ventures
Total non-current assets 1,711.5 1,773.9 1,755.8
Current assets
Inventories 342.7 374.5 344.1
Trade and other 271.7 262.7 213.0
receivables
Current tax 5.2 26.4 8.8
assets
Cash and cash 273.3 232.9 371.3
equivalents
Derivative financial 6.1 11.4 12.2
instruments
Assets classified as held for 5.5 - 1.5
sale
Total current assets 904.5 907.9 950.9
Total assets 2,616.0 2,681.8 2,706.7
Current liabilities
Borrowings (0.4) (33.9) (0.7)
Trade and other (424.1) (442.9) (431.3)
payables
Lease (12.5) (11.1) (13.8)
liabilities
Current tax liabilities (25.9) (24.7) (28.0)
Provisions for other liabilities and charges (11.2) (15.2) (11.9)
Derivative financial instruments (2.0) - (2.4)
Total current liabilities (476.1) (527.8) (488.1)
Non-current liabilities
Borrowings (833.5) (994.8) (870.3)
Trade and other payables (0.2) (0.4) (0.2)
Lease liabilities (36.3) (47.0) (41.5)
Deferred tax liabilities (30.4) (42.7) (33.8)
Retirement benefit obligations (72.9) (74.1) (81.2)
Provisions for other liabilities and charges (26.4) (31.7) (29.6)
Total non-current liabilities (999.7) (1,190.7) (1,056.6)
Total liabilities (1,475.8) (1,718.5) (1,544.7)
Net assets 1,140.2 963.3 1,162.0
Equity
Share capital 1.6 46.7 1.6
Share premium 925.9 620.0 925.9
Capital redemption reserve 0.9 0.9 0.9
Hedging and translation reserve 13.6 19.6 10.4
Retained earnings 185.8 263.2 209.8
Equity attributable to equity holders of the parent 1,127.8 950.4 1,148.6
Non-controlling interests 12.4 12.9 13.4
Total equity 1,140.2 963.3 1,162.0
Consolidated cash flow statement
for the six months ended 30 June 2024
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£m £m £m
Operating
Cash generated from operations (Note 5) (10.6) 78.0 195.0
- Interest received 6.8 5.0 10.2
- Interest paid (31.9) (29.0) (62.7)
- Interest element of lease payments (1.0) (0.7) (1.8)
Net interest paid (26.1) (24.7) (54.3)
- UK corporation tax paid - (3.0) (2.9)
- Overseas corporate tax paid (6.9) (1.5) 12.2
Total tax paid (6.9) (4.5) 9.3
Net cash inflow / (outflow) from operating activities (43.6) 48.8 150.0
Investing
Dividends received from joint ventures 0.2 0.8 1.9
Purchase of property, plant and equipment and other intangible assets (38.2) (33.9) (84.0)
Purchase of business - (8.3) (18.4)
Proceeds from sale of businesses 24.3 206.1 208.2
Net cash inflow / (outflow) from investing activities (13.7) 164.7 107.7
Financing
Dividends paid to non-controlling interests (0.2) - -
Proceeds on issue of shares (4.7) - 265.5
Settlement of equity-settled share-based payments (0.1) (0.3) (0.4)
Repayment of principal portion of lease liabilities (6.7) (5.8) (12.4)
Repayment of borrowings (315.9) (556.3) (892.0)
Proceeds of borrowings 298.8 345.4 548.4
Net cash (outflow) from financing activities (28.8) (217.0) (90.9)
Increase/ (Decrease) in cash, cash equivalents and bank overdrafts during the (86.1) (3.5) 166.8
period
Cash and cash equivalents and bank overdrafts at 1 January 370.6 209.2 209.2
Foreign exchange (11.6) (6.7) (5.4)
Cash and cash equivalents and bank overdrafts at period end 272.9 199.0 370.6
See note 10 for further details of cash flows from discontinued operations
Notes to the consolidated financial statements
for the six months ended 30 June 2024
1 Basis of preparation
Synthomer plc is a public company limited company incorporated in the United
Kingdom and registered in England under the Companies Act. The Company is
listed on the London Stock Exchange and the address of the registered office
is Temple Fields, Harlow, Essex CM20 2BH. These interim financial statements
for the six month period ended 30 June 2024 have been prepared on the basis of
the policies set out in the 2023 annual financial statements and in accordance
with UK adopted International Accounting Standard 34 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the UK's Financial Conduct Authority. These interim financial statements do
not comprise statutory accounts within the meaning of section 434 of the
Companies Act 2006 and do not include all the notes normally included in
annual financial statements. Statutory accounts for the year ended 31 December
2023 were approved by the Board of Directors on 12 March 2024 and delivered to
the Registrar of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under section 498 of the Companies Act 2006.
These interim financial statements have been reviewed, not audited.
Going concern
The Group meets its day-to-day working capital requirements through its bank
facilities. The current economic conditions continue to create uncertainty,
particularly over the level of demand for the Group's products. The Group's
forecasts and projections take account of reasonably possible changes in
trading performance and a severe but plausible downside scenario has been
prepared, linked to our principal risks. Various mitigating actions have been
identified so that, should such a scenario crystallise, the Group could take
action quickly to significantly reduce costs and cash outflows as demonstrated
during the course of the COVID-19 pandemic in 2020.
As at 30 June 2024, the consolidated balance sheet reflects a net asset
position of £1,140m and the liquidity of the Group had headroom of more than
£500m of cash and undrawn committed facilities. The earliest maturity date of
our facilities is July 2025. Debt leverage covenant limits for the term loans
and revolving credit facility are set at a ratio of 6.0x at 30 June 2024,
reducing to 5.75x at 31 December 2024, 5.00x at June 2025, 4.75x at 31
December 2025, 3.50x at June 2026 and 3.25x thereafter. At the half year, the
net debt position was £560.6m and our covenant ratio was 4.7x. The Group
continues to deliver on reducing net debt and strengthening the balance sheet.
Our severe but plausible downside scenario, offset by mitigation actions as
required, does not indicate a debt leverage covenant break on any of the dates
through to September 2025. Having considered the outcome of these assessments,
the Directors have, at the time of approving the interim report and financial
statements, a reasonable expectation that the Company and the Group will have
adequate resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of accounting in
preparing the financial statements.
Goodwill and acquired intangible assets
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill might be impaired. In the six months to 30 June
2024 no such indications were identified.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting date that may have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are set out in the 2023 Annual Report. Estimates and
underlying assumptions are reviewed on an ongoing basis and at 30 June 2024
there were no changes to existing estimates and assumptions and no new sources
of estimation uncertainty were identified.
2. Accounting policies
The annual financial statements of Synthomer plc are prepared in accordance
with UK-adopted International Accounting Standards and the requirements of the
Companies Act 2006. The same accounting policies and methods of computations
are followed in these financial statements as in the most recent audited
annual financial statements. Effective from 1 January 2024, no updates to
IFRSs have been made that would affect the Group.
3 Special Items
IFRS and Underlying performance
The IFRS profit measures show the performance of the Group as a whole and as
such include all sources of income and expense, including both one-off items
and those that do not relate to the Group's ongoing businesses. To provide
additional clarity on the ongoing trading performance of the Group's
businesses, management uses 'Underlying' performance as an Alternative
Performance Measure to plan for, control and assess the performance of the
segments. Underlying performance differs from the IFRS measures as it excludes
Special Items.
Special Items
Special Items are disclosed separately in order to provide a clearer
indication of the Group's Underlying performance.
Special Items are either irregular, and therefore including them in the
assessment of a segment's performance would lead to a distortion of trends, or
are technical adjustments which ensure the Group's financial statements are in
compliance with IFRS but do not reflect the operating performance of a segment
in the year, or both. An example of the latter is the amortisation of acquired
intangibles, which principally relates to acquired customer relationships. The
Group incurs costs, which are recognised as an expense in the income
statement, in maintaining these customer relationships. The Group considers
that the exclusion of the amortisation charge on acquired intangibles from
Underlying performance avoids the potential double counting of such costs and
therefore excludes it as a Special Item from Underlying performance.
The following are consistently disclosed separately as Special Items in order
to provide a clearer indication of the Group's Underlying performance:
• Restructuring and site closure costs;
• Sale of business or significant asset;
• Acquisition costs and related gains;
• Amortisation of acquired intangible assets;
• Impairment of non-current assets;
• Fair value adjustments in respect of derivative financial
instruments where hedge accounting is not applied;
• Items of income and expense that are considered material,
either by their size and / or nature;
• Tax impact of above items; and
• Settlement of prior period tax issues.
Special Items comprise:
Six months ended June 2024 (unaudited) Six months ended June 2023 (unaudited) Year ended 31 December 2023 (audited)
£m
£m
£m
Amortisation of acquired (22.8) (24.3) (49.3)
intangibles
Restructuring and site closure costs (6.7) (6.6) (14.7)
Acquisition costs and related gains (1.2) (1.3) (2.0)
Sale of businesses (0.5) - (0.1)
Regulatory Fine - - (0.7)
Abortive bond costs - - (0.5)
Impairment charge - - (5.6)
Total impact on operating loss (31.2) (32.2) (72.9)
Finance costs
Fair value gain on unhedged interest derivatives - (1.8) (1.8)
Loss on extinguishment of financing facilities (1.3) (4.6) (4.7)
Total impact on profit before taxation (32.5) (38.6) (79.4)
Taxation Special Items - - (1.7)
Taxation on Special Items 3.0 (4.9) 4.5
Total impact on profit for the period- continuing operations (29.5) (43.5) (76.6)
Discontinued Operations
Restructuring and site closure costs (0.4) - (3.7)
Sale of businesses (2.8) 62.0 61.3
Impairment charge - - (0.8)
Taxation on Special Items - (25.7) (17.4)
Total impact on profit for the period- discontinued operations (3.2) 36.3 39.4
Total impact on profit for the period (32.7) (7.2) (37.2)
3 Special Items (continued)
Amortisation of acquired intangibles reflects the amortisation on the customer
lists, patents, trademarks and trade secrets that arose on historic
acquisitions, including the 2022 acquisition of the adhesive resins business.
The intangible assets arising on the acquisition are amortised over a period
of 8-20 years.
Restructuring and site closure costs in 2024 comprise:
• A £1.6m charge in relation to site closure costs associated
with mothballing our NBR plant in Kluang, Malaysia;
• A £1.2m charge in relation to the ongoing integration of
the adhesive resins business acquired in 2022;
• A £1.2m charge in relation to the onerous contract arising
from the earlier divestment of the European tyre cord business
• A further £2.8m, in relation to enacting the new the
strategy and the alignment of the business into its new divisions.
Restructuring and site closure costs in 2023 comprised £2.4m integration
costs for the adhesive resins business and £4.2m in relation to enacting the
new the strategy and the alignment of the business into its new divisions
which became effective in 2023.
Acquisition costs and related gains of £1.2m are for the acquisition of the
adhesive resins business. Acquisition costs in 2023 also related to the
adhesive resins acquisition.
Sale of businesses (continuing operations) costs of £0.5m comprise costs
incurred associated with potential future divestments.
Sale of businesses (discontinued operations) represents the loss recognised on
the sale of the latex compounding ("Compounds") operations after recycling of
FX reserves, which completed on 30 April 2024. Refer to note 11 for further
details. In the prior year sale of businesses principally comprised of the
gain on sale of the Laminates, Films and Coated Fabrics business.
The tax on Special Items for continuing operations was £3.0m (H1 2023: £4.9m
tax credit; FY 2023: £4.6m tax credit). This mainly relates to deferred tax
arising on the amortisation of acquired tax intangibles.
4 Segmental analysis
The Group's Executive Committee, chaired by the Chief Executive Officer,
examines the Group's performance.
The Group's reportable segments are as follows:
Coatings & Construction Solutions (CCS)
Our specialist polymers enhance the sustainable performance of a wide range of
coatings and construction products. We work across architectural and masonry
coatings, mortar modification, waterproofing and flooring, fibre bonding, and
energy solutions.
Adhesive Solutions (AS)
Our adhesive solutions bond, modify and compatibilise surfaces and components
for products including tapes and labels, packaging, hygiene, tyres and plastic
modification, helping improve permeability, strength, elasticity, damping,
dispersion and grip.
Health & Protection and Performance Materials (HPPM)
We help enhance protection and performance in a wide range of industries
including medical glove manufacture, speciality paper, food packaging, carpet
and artificial turf, gel foam elastomers, and vinyl-coated seating fabrics.
The Group's Executive Committee is the chief operating decision maker and
primarily uses a measure of earnings before interest, tax, depreciation and
amortisation (EBITDA) to assess the performance of the operating segments. No
information is provided to the Group's Executive Committee at the segment
level concerning interest income, interest expense, income tax or other
material non-cash items.
No single customer accounts for more than 10% of the Group's revenue.
A segmental analysis of Underlying performance and Special Items is shown
below.
Six months ended 30 June 2024 (unaudited)
Continuing Operations Discontinued Operations Total
2024 Coatings & Construction Solutions Adhesive Health & Protection and Performance Materials Corporate Total £m Total
£m Solutions £m £m £m £m
£m
Revenue
Total revenue 430.4 308.7 313.7 - 1,052.8 9.7 1,062.5
Inter-segmental revenue - - (1.7) - (1.7) - (1.7)
430.4 308.7 312.0 - 1,051.1 9.7 1,060.8
EBITDA 53.0 21.9 14.8 (13.7) 76.0 2.6 78.6
Depreciation and amortisation (12.4) (16.7) (13.6) (4.3) (47.0) (0.2) (47.2)
Operating profit / (loss) before Special Items 40.6 5.2 1.2 (18.0) 29.0 2.4 31.4
Special Items (9.6) (13.8) (5.5) (2.3) (31.2) (3.2) (34.4)
Operating profit / (loss) 31.0 (8.6) (4.3) (20.3) (2.2) (0.8) (3.0)
Finance costs (30.2)
Profit/ (loss) before taxation (33.2)
4 Segmental analysis (continued)
Six months ended 30 June 2023 (unaudited)
Continuing Operations Discontinued Operations Total
2023 Coatings & Construction Solutions Adhesive Health & Protection and Performance Materials Corporate Total £m Total
£m Solutions £m £m £m £m
£m
Revenue
Total revenue 452.0 310.0 291.4 - 1,053.4 56.1 1,109.5
Inter-segmental revenue - - (6.2) - (6.2) - (6.2)
452.0 310.0 285.2 - 1,047.2 56.1 1,103.3
EBITDA 54.9 15.6 12.3 (10.0) 72.8 1.7 74.5
Depreciation and amortisation (13.2) (14.2) (16.6) (3.7) (47.7) (0.9) (48.6)
Operating profit / (loss) before Special Items 41.7 1.4 (4.3) (13.7) 25.1 0.8 25.9
Special Items (14.1) (13.7) (1.1) (3.3) (32.2) 62.0 29.8
Operating profit 27.6 (12.3) (5.4) (17.0) (7.1) 62.8 55.7
(39.0)
Finance costs
Profit/ (loss) before taxation 16.7
Year ended 31 December 2023 (audited)
Continuing Operations Discontinued Operations Total
2023 Coatings & Construction Solutions Adhesive Health & Protection and Performance Materials Corporate Total £m Total
£m Solutions £m £m £m £m
£m
Revenue
Total revenue 820.2 581.7 549.3 - 1,951.2 80.6 2,031.8
Inter-segmental revenue - - (10.6) - (10.6) - (10.6)
820.2 581.7 538.7 - 1,940.6 80.6 2,021.2
EBITDA 100.1 31.2 26.3 (20.2) 137.4 1.7 139.1
Depreciation and amortisation (25.8) (38.7) (32.3) (7.2) (104.0) (1.3) (105.3)
Operating profit / (loss) before Special Items 74.3 (7.5) (6.0) (27.4) 33.4 0.4 33.8
Special Items (32.2) (25.2) (9.3) (6.2) (72.9) 56.8 (16.1)
Operating profit / (loss) 42.1 (32.7) (15.3) (33.6) (39.5) 57.2 17.7
Finance costs (71.4)
Profit/ (loss) before taxation (53.7)
5 Reconciliation of operating profit / (loss) to cash generated from
operations
Continuing and discontinued operations: Six months Six months Year ended 31
ended 30 June ended 30 June December 2023
2024 2023 (audited)
(unaudited) (unaudited) £m
£m
£m
Operating (loss) / profit (3.0) 55.7 17.7
Less: share of profits of joint ventures (0.9) (0.7) (1.4)
(3.9) 55.0 16.3
Adjustments for:
- Depreciation of property, plant and equipment 35.8 39.2 85.0
- Depreciation of right of use assets 6.1 5.6 11.5
- Amortisation of other intangibles 5.3 3.8 8.8
- Share-based payments 0.8 1.1 1.8
- Special Items 34.4 (29.8) 16.1
Cash impact of restructuring and site closure costs (10.4) (10.8) (28.0)
Cash impact of acquisition costs and related gains (0.9) (4.4) (1.9)
Cash impact of settlement of interest rate derivative contracts - 12.1 12.1
Pension funding in excess of service cost (9.8) (5.7) (7.3)
(Increase) / decrease in inventories (8.1) 13.7 45.7
Decrease / (increase) in trade and other receivables (69.7) 1.6 52.7
(Decrease) / increase in trade and other payables 48.9 (3.4) (17.8)
Payment of EC fine settlement amount (39.1) - -
Cash generated from operations (10.6) 78.0 195.0
6 Taxation
The group has calculated its best estimate of the annual effective corporate
income tax rate we expect for the full year, resulting in a half year
underlying tax charge of £0.2m for continuing operations. We estimate the
rate by applying the expected corporate income tax rates for each tax
jurisdiction in which we operate. As in the prior year the estimated tax rate
is very dependent on the level of underlying profit or loss and the
geographical mix of that profit or loss. Therefore, there is some fluctuation
in the effective tax rate applied when comparing the relative periods: H1 2024
200.0%, H1 2023: 22.0%; FY 2023: 5.9%.
The tax on Special Items for continuing operations was £3.0m (H1 2023: £4.9m
tax credit; FY 2023: £4.6m tax credit). This mainly relates to deferred tax
arising on the amortisation of acquired tax intangibles.
The group is within the scope of the OECD Pillar Two model rules. Pillar Two
legislation was enacted in the United Kingdom, the jurisdiction in which the
parent company is incorporated, and is effective from 1 January 2024. The
group applies the IAS 12 exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two income taxes.
Under the legislation, the group is liable to pay a top-up tax for the
difference between its GloBE effective tax rate per jurisdiction and the 15%
minimum rate. The group has estimated weighted average effective tax rates
that exceed 15% in all jurisdictions in which it operates and therefore does
not expect to be subject to the global minimum top-up tax in the year ending
31 December 2024.
7 Earnings per share
Six months ended 30 June 2024 Six months ended 30 June 2023
(unaudited) (unaudited)
Underlying Special IFRS Underlying Special IFRS
performance Items performance Items
Profit / (loss) attributable to equity holders of the parent
- continuing £m (0.1) (29.5) (29.6) (5.3) (43.5) (48.8)
- total £m 2.7 (32.8) (30.7) (5.1) (7.0) (12.1)
Number of shares
Weighted average number of ordinary shares - basic '000 163,474 63,433
Effect of dilutive potential ordinary shares '000 852 202
Weighted average number of ordinary shares - diluted '000 164,326 63,635
Earnings per share for profit from continuing operations
Basic earnings per share pence (0.1) (18.0) (18.1) (8.4) (68.5) (76.9)
Diluted earnings per share pence (0.1) (18.0) (18.1) (8.4) (68.5) (76.9)
Earnings per share for profit from discontinued operations
Basic earnings per share pence 1.3 (2.0) (0.7) 0.4 57.5 57.9
Diluted earnings per share pence 1.3 (2.0) (0.7) 0.4 57.5 57.9
Earnings per share for profit attributable to equity holders of the parent
Basic earnings per share pence 1.3 (20.1) (18.8) (8.0) (11.0) (19.0)
Diluted earnings per share pence 1.3 (20.1) (18.8) (8.0) (11.0) (19.0)
Year ended 31 December 2023
(audited)
Underlying Special IFRS
performance Items
Profit / (loss) attributable to equity holders of the parent
- continuing £m (28.4) (76.4) (104.8)
- total £m (30.0) (37.0) (67.0)
Number of shares
Weighted average number of ordinary shares - basic '000 85,382
Effect of dilutive potential ordinary shares '000 251
Weighted average number of ordinary shares - diluted '000 85,633
Earnings per share for profit from continuing operations
Basic earnings per share pence (33.4) (89.4) (122.8)
Diluted earnings per share pence (33.4) (89.4) (122.8)
Earnings per share for profit from discontinued operations
Basic earnings per share pence (1.9) 46.2 44.3
Diluted earnings per share pence (1.9) 46.2 44.3
Earnings per share for profit attributable to equity holders of the parent
Basic earnings per share pence (35.3) (43.2) (78.5)
Diluted earnings per share pence (35.3) (43.2) (78.5)
8 Analysis of net debt
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£m £m £m
Bank overdrafts (0.4) (33.9) (0.7)
Current liabilities (0.4) (33.9) (0.7)
Bank loans (416.0) (551.1) (421.9)
€520m 3.875% senior unsecured loan notes due 2025 (126.7) (443.7) (448.4)
€350m 7.375% senior unsecured loan notes due 2029 (290.8) - -
Non-current liabilities (833.5) (994.8) (870.3)
Total borrowings (833.9) (1,028.7) (871.0)
Cash and cash equivalents 273.3 232.9 371.3
Net Debt (560.6) (795.8) (499.7)
Net debt is defined in the glossary of terms. Capitalised debt costs which
have been recognised as a reduction in borrowings in the financial statements,
amounted to £15.7m at 30 June 2024 (30 June 2023: £10.2m, 31 December 2023:
£10.5m).
9 Defined benefit schemes
We have updated the value of the defined benefit plan assets to reflect their
market value as at 30 June 2024. Actuarial gains or losses are recognised in
the Consolidated Statement of Comprehensive Income in accordance with the
Group's accounting policy. We have updated the liabilities to reflect the
change in the discount rate and other assumptions. The Group's net pension
liability decreased by £14.0m to £50.7m, which includes an asset of £22.2m
for the UK scheme. This £14.0m reduction largely comprised £9.8m of cash
contributions and actuarial gains of £3.7m.
10 Discontinued operations
On 30 April 2024, the Group sold its Compounds business to Matco Latex
Services BV.
A summary of the proceeds and disposed assets is set out below:
Total
£m
Consideration
Cash Consideration 24.5
Total 24.5
Net assets sold:
Goodwill 7.5
Property Plant and equipment 5.4
Inventory 5.5
Cash and cash equivalents 3.4
Trade and other receivables 7.3
Trade and other payables (7.4)
Total 21.7
Transaction costs in the period (1.4)
Gain on sale before recycling of translation reserve and tax 1.4
Reclassification of foreign currency translation reserve (4.4)
Tax expense on sale -
Gain on sale after recycling of translation reserve and tax (3.0)
Total
£m
Cash Inflow of sale of business
Cash Consideration 24.5
Transaction costs paid in the period (0.5)
Cash consideration after transaction costs 24.0
Cash outflow with business (3.4)
Total 20.6
Including prior period transaction costs, the total proceeds were £24.5m
(€28.6m) and the total transaction costs were £1.5m (€1.8m), giving total
proceeds after transaction costs of £23.0m (€26.8m).
10 Discontinued operations (continued)
Financial performance and cash flow information
Financial information in respect of the discontinued operation during the
period and the impact of the transaction is set out below:
The Compounds businesses formed part of the Health & Protection and
Performance Materials division.
Six months ended 30 June 2024 (unaudited) Six months ended 30 June 2023 (unaudited)
Compounds Laminates, Films and Coated Fabrics NA Paper and Carpet Total Compounds Laminates, Films and Coated Fabrics NA Paper and Carpet Total
£m £m £m £m £m £m £m £m
Revenue 9.8 - - 9.8 15.5 28.0 12.7 56.2
EBITDA 2.6 - - 2.6 2.9 2.5 (3.7) 1.7
Depreciation and amortisation - Underlying performance (0.2) - - (0.2) (0.2) - (0.7) (0.9)
Operating Profit / (loss) - Underlying performance 2.4 - - 2.4 2.7 2.5 (4.4) 0.8
Special Items (3.0) 0.2 (0.4) (3.2) - 62.0 - 62.0
Operating Profit / (loss) - IFRS (0.6) 0.2 (0.4) (0.8) 2.7 64.5 (4.4) 62.8
Financial costs - - - - - - - -
Profit / (loss) before taxation (0.6) 0.2 (0.4) (0.8) 2.7 64.5 (4.4) 62.8
Taxation (0.6) - - (0.6) (0.7) (25.7) - (26.4)
Profit / (loss) for the period (1.2) 0.2 (0.4) (1.4) 2.0 38.8 (4.4) 36.4
Year ended 31 December 2023 (audited)
Compounds Laminates, Films and Coated Fabrics NA Paper and Carpet Total
£m £m £m £m
Revenue 30.3 28.0 22.3 80.6
EBITDA 4.7 2.5 (5.5) 1.7
Depreciation and amortisation - Underlying performance (0.4) - (0.9) (1.3)
Operating Profit / (loss) - Underlying performance 4.3 2.5 (6.4) 0.4
Special Items (0.2) 61.5 (4.5) 56.8
Operating Profit / (loss) - IFRS 4.1 64.0 (10.9) 57.2
Financial costs - - - -
Profit / (loss) before taxation 4.1 64.0 (10.9) 57.2
Taxation (1.8) (17.6) - (19.4)
Profit / (loss) for the period 2.3 46.4 (10.9) 37.8
The prior-year comparatives of the consolidated income statement and the
consolidated statement of cash flows have been adjusted in accordance with
IFRS 5 to report the discontinued operations separately from continuing
operations.
10 Discontinued operations (continued)
Cash flows from discontinued operations
Six months ended 30 June 2024 (unaudited) Six months ended 30 June 2023 (unaudited)
Compounds Laminates, Films and Coated Fabrics NA Paper and Carpet Total Compounds Laminates, Films and Coated Fabrics NA Paper and Carpet Total
£m £m £m £m £m £m £m £m
Net cash (outflow) / inflow from operating activities (3.6) - (0.4) (4.0) 3.1 (2.8) (4.4) (4.1)
Net cash (outflow) / inflow from investing activities 18.5 (0.1) - 18.4 (0.1) 206.1 - 206.0
Year ended 30 December 2023 (audited)
Compounds Laminates, Films and Coated Fabrics NA Paper and Carpet Total
£m £m £m £m
Net cash (outflow) / inflow from operating activities 7.5 (0.1) (7.8) (0.4)
Net cash (outflow) / inflow from investing activities (0.6) 208.2 - 207.6
11 Capital commitments
The capital expenditure authorised but not provided for in the interim
financial statements as at 30 June 2024 was £15.7m (30 June 2023: £25.4m; 31
December 2023: £8.8m).
12 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not included in this
note. Other than the relationships with defined benefit pension schemes as
disclosed in note 29 of the 2023 Annual Report, there were no other related
party transactions requiring disclosure.
Kuala Lumpur Kepong Berhad holds 27% of the Company's shares and is considered
to be a related party.
13 Seasonality
Historically, there has been no visible fixed pattern to seasonality in H1
compared to H2 performance in the Group, but the seasonality of the business
is more significantly impacted by macroeconomic conditions which remain
uncertain.
14 Risks and uncertainties
The Group faces a number of risks which, if they arise, could affect our
ability to achieve our strategic objectives. As with any business, risk
assessment and the implementation of mitigating actions and controls are vital
to successfully achieving the strategy. The Directors are responsible for
determining the nature of these risks and ensuring appropriate mitigating
actions are in place to manage them.
These principal risks are categorised into the following types:
• Strategic
• Operational
• Compliance
• Financial
These risks are detailed on pages 48 to 55 of the 2023 Annual Report which is
available on our website at www.synthomer.com/investor-relations
(http://www.synthomer.com/investor-relations) .
The Directors continuously monitor the Group's risk environment and have not
identified any significant new or emerging risks or uncertainties which would
have a material impact on the Group's performance in the remaining part of the
year.
We continue to mitigate these risks by following, at a minimum, any government
mandated health and safety requirements at our sites, by ensuring that we have
multiple sources of raw materials, and by maintaining a diverse customer base.
15 Glossary of terms
EBITDA EBITDA is calculated as operating profit from continuing operations before
depreciation, amortisation and Special Items.
Operating profit Operating profit represents profit from continuing activities before finance
costs and taxation.
Special Items Special Items are irregular items, whose inclusion could lead to a distortion
of trends, or technical adjustments which ensure the Group's financial
statements are in compliance with IFRS, but do not reflect the operating
performance of the segment in the year, or both.
These include the following, inter alia, which are disclosed separately as
Special Items in order to provide a clearer indication of the Group's
Underlying performance:
· Restructure and site closure costs;
· Sale of a business or significant asset;
· Acquisition costs and related gains;
· Amortisation of acquired intangible assets;
· Impairment of non-current assets;
· Fair value adjustments in respect of derivative financial
instruments where hedge accounting is not applied;
· Items of income and expense that are considered material,
either by their size and / or nature;
· Tax impact of above items; and
· Settlement of prior period tax issues.
Underlying performance This represents the statutory performance of the Group under IFRS, excluding
Special Items.
Free Cash Flow The movement in net debt before financing activities, foreign exchange and the
cash impact of Special Items, asset disposals and business combinations.
Net debt Net debt represents cash and cash equivalents less short- and long-term
borrowings.
Leverage Net debt divided by EBITDA.
The Group's financial covenants are calculated using the accounting standards
adopted by the Group at 31 December 2018 and accordingly, leverage excludes
the impact of IFRS 16 Leases.
Ktes Kilotonnes or 1,000 tonnes (metric).
Important notice
This announcement contains 'forward-looking statements' which includes all
statements other than statements of historical fact, including, without
limitation, those regarding the Group's financial position, business strategy,
plans and objectives of management for future operations, or any statements
preceded by, followed by or that include the words "targets", "believes",
"expects", "aims", "intends", "will", "may", "anticipates", "would, "could" or
similar expressions or negatives thereof. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors
beyond the Group's control that could cause the actual results, performance or
achievements of the Group to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous assumptions
regarding the Group's present and future business strategies and the
environment in which the Group will operate in the future. These
forward-looking statements speak only as at the date of this announcement.
None of the Group or its Affiliates undertakes or is under any duty to update
this announcement or to correct any inaccuracies in any such information which
may become apparent or to provide you with any additional information, other
than any requirements that the Group may have under applicable law or the
Listing Rules, the Prospectus Rules, the Disclosure Guidance and Transparency
Rules or MAR. To the fullest extent permissible by law, such persons disclaim
all and any responsibility or liability, whether arising in tort, contract or
otherwise, which they might otherwise have in respect of this announcement.
The information in this announcement is subject to change without notice.
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