TIDMSYNT
RNS Number : 6466L
Synthomer PLC
07 September 2023
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Synthomer plc
Interim results for the six months ended 30 June 2023
Resilient performance given subdued demand environment
Constant
Six months ended 30 June H1 2023 H1 2022 Change currency(1)
----------------------------------------- ------- ------- -------- ------------
GBPm GBPm % %
Continuing operations(*)
Revenue 1,075.3 1,228.3 (12.5) (14.7)
------- ------- -------- ------------
Coatings & Construction Solutions
(CCS) 55.1 80.3 (31.4) (33.4)
Adhesive Solutions (AS)** 15.6 34.5 (54.8) (55.7)
Health & Protection and Performance
Materials (HPPM) 11.3 59.2 (80.9) (78.4)
Corporate (10.0) (11.2) (10.7) (11.6)
------- ------- -------- ------------
EBITDA(2) 72.0 162.8 (55.8) (56.0)
EBITDA % of revenue 6.7% 13.3%
Underlying(3) operating profit
(EBIT) 23.4 125.3 (81.3) (80.6)
------- ------- -------- ------------
Statutory operating (loss)/profit
(EBIT) (8.8) 113.8
------- -------
Results from continuing and discontinued
operations*
Underlying(3) (loss)/profit before
tax (6.7) 114.7
------- -------
Statutory profit before tax 16. 7 115.5
------- -------
Underlying(3) EPS (p) (1.1) 19.0
------- -------
Basic EPS (p) (2. 6 ) 18.3
------- -------
Free Cash Flow(4) 18.8 (62.0)
------- -------
Net debt(5) 795.8 992.8
----------------------------------------- ------- ------- -------- ------------
* The Laminates, Films and Coated Fabrics business sold on 28
February 2023, which contributed revenue of GBP28.0m and EBITDA of
GBP2.5m in H1 2023 (FY 2022: GBP201.2m and GBP15.9m respectively),
is classed as a discontinued operation throughout this
announcement.
** H1 2022 included a three month contribution from the adhesive
resins acquisition which completed in April 2022.
Speciality businesses drive a resilient trading performance,
given the subdued macro demand environment
- Robust pricing and strong focus on margins mitigate impact of
substantially lower volumes vs H1 2022, driven by destocking,
subdued end-market demand and increased competition in some base
chemical products
- Volume improvement relative to Q4 2022 in all divisions, led
by Coatings & Construction Solutions
- Q2 2023 continuing EBITDA stronger than Q1 2023
Further decisive actions to preserve cash and manage debt,
foundations to be strengthened with proposed GBP276m rights issue
announced separately today and revolving credit facility extension
to July 2027
- $268.5m of cash proceeds from divestment of Laminates, Films and Coated Fabrics businesses
- GBP150-200m cash management programme underway across the Group
- Operational reliability improvement programme in Adhesive
Solutions ongoing, with further savings identified in addition to
acquisition synergies; together with other cost savings, Group on
track for c.GBP20m in self-help initiatives in H2 2023
- Net debt GBP795.8m (FY 2022: GBP1,024.9m) as at 30 June 2023,
with net debt:EBITDA on a leverage covenant basis of 5.5 times and
committed liquidity of more than GBP400m
- Proposed GBP276m fully underwritten rights issue announced
separately to support reduction in leverage and allow greater focus
on delivering speciality solutions strategy
- $400m revolving credit facility (RCF) extension to July 2027
inter-conditional with rights issue
Progress on strategic evolution to become a more focused,
resilient, higher quality speciality chemicals business
- All divisions making good progress against key priorities
- Improved speciality portfolio weighting, better balanced
geographical footprint and more streamlined with 7 sites divested
or to close (half of target) in less than 12 months
Continued progress on innovation and sustainability
objectives
- Near-term greenhouse gas (GHG) emissions reduction targets
approved by the Science Based Targets initiative (SBTi)
- Innovation, sustainability prioritisation approach updated and
supply chain management projects underway to assist transition to a
low carbon future
Current trading and outlook
Trading in July and August was similar to H1 2023, with limited
visibility and subdued volumes given challenging macro conditions.
The Group's outlook for the remainder of 2023 provided in July is
reiterated: the Board does not anticipate a material recovery in
customer demand before the end of the current year. However, we
anticipate c.GBP20m in self-help measures to be delivered mainly in
H2. Overall the Group remains confident of making sequential
progress in the second half relative to the first.
The Group continues to take decisive action to strengthen our
business so that it is positioned for profitable growth when demand
does begin to recover. Through our near-term actions, end market
volume recovery (which alone has the potential to improve Group
EBITDA by more than GBP100m over time) and execution of our
strategy, we believe the Group's medium term earnings power is more
than double the GBP158m of continuing EBITDA generated over the
year to the end June 2023. Reducing leverage further towards 1-2x
target range by end of 2024 remains a key priority. Overall we
remain confident in the Group's ability to deliver the medium-term
targets set out last October, which were mid-single-digit growth in
constant currency over the cycle, EBITDA margins above 15% and
mid-teens return on invested capital.
Commenting, Synthomer CEO Michael Willome said:
"Whilst these results reflect the difficult demand environment
across most of our end markets and geographies, we are encouraged
by areas of significant progress. In particular, our Coatings &
Construction Solutions division saw promising EBITDA growth versus
the second half of 2022, and many of our speciality businesses
grew, testament to our strategy to increase our focus and
investment on these parts of the portfolio. All divisions have made
progress against their strategic priorities as we continue to
reposition Synthomer to deliver on its medium term ambitions,
supported by anticipated volume recovery in the coming years.
The proposed rights issue will allow us to reduce our leverage
towards our medium term target and increase our focus on strategic
execution to drive long term value. We are confident that
Synthomer's medium-term earnings power is more than double our
EBITDA performance over the last twelve months, driven by improved
market conditions, operational and commercial excellence and our
ongoing strategic evolution to become a true speciality chemicals
business."
Further information:
Investors: Faisal Tabbah, Vice President Investor Relations Tel: +44 (0) 1279 775 306
Media: Charles Armitstead, Teneo Tel: +44 (0) 7703 330 269
The Company will host a meeting for analysts and investors at
9:00am BST today at the Royal Society of Chemistry, Burlington
House, Piccadilly, London W1J 0BA. The meeting will also be webcast
at www.synthomer.com , please follow links to the financial
calendar on the investor relations page to register.
Notes
(1.) Constant currency revenue and profit measures retranslate
current year results using the prior year's average exchange
rates.
(2.) Operating profit before depreciation, amortisation and Special Items.
(3.) Underlying performance excludes Special Items unless otherwise stated.
(4.) 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.
(5.) Cash and cash equivalents together with short and long-term borrowings.
Legal Entity Identifier (LEI): 213800EHT3TI1KPQQJ56.
Classification as per DTR 6 Annex 1R: 1.2.
Synthomer plc is a leading supplier of high-performance,
speciality polymers and ingredients for coatings, construction,
adhesives, and healthcare end markets. Headquartered in London, UK
and listed there since 1971, we employ around 4,400 employees
across nearly 40 locations across Europe, USA and Asia. With more
than 6,000 customers and GBP2.4bn in continuing revenue in 2022,
our three divisions are aligned to our end markets which play an
important role in global megatrends including urbanisation, climate
change, and economic and demographic shifts. In Coatings &
Construction Solutions, our tailored solutions enhance the
sustainability and performance of a range of products such as
architectural and masonry coatings, mortar modification, fibre
bonding, waterproofing and flooring, while our energy solutions
promote drilling stability in the challenging operating
environments of the oil and gas industry. Adhesive Solutions is a
leading supplier of products that bond, modify and compatibilise
surfaces and components for a range of end markets including tapes
and labels, packaging, hygiene, tyres and plastics. 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 for a range of niche applications. 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 hubs in the UK,
Germany, Malaysia and Ohio, USA we collaborate closely with our
customers to develop new products tailored to their needs while
also minimising environmental impact. We are working to embed
sustainability in everything we do; we have reduced our scope 1 and
2 carbon footprint by one third since 2019, and 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.
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 , @Synthomer_Group on Twitter or
search for Synthomer on LinkedIn.
CHIEF EXECUTIVE OFFICER'S REVIEW
Resilient trading performance given the macro environment
As disclosed in our July update, Synthomer's performance during
the first half was broadly consistent with our expectations at the
time of the Group's Full Year results in March. Challenging
macroeconomic conditions continued to affect demand across most of
our end-markets and geographies throughout the period, exacerbated
by prolonged customer destocking and increased competition in some
of our base chemical product ranges. Whilst this unprecedented
environment meant Group volumes were substantially lower than the
first half of 2022, they have stabilised overall relative to the
second half of the year, and robust pricing as raw material prices
moderate and our strong focus on margins helped to mitigate the
impact. This was especially evident in Coatings & Construction
Solutions as well as the other speciality, higher growth areas of
our business, which are proving to be the most resilient and
benefiting from our differentiated focus and investment. Continuing
Group revenues were GBP1,075.3m (H1 2022: GBP1,228.3m, H2 2022:
GBP1,155.6m) with Continuing Group EBITDA at GBP72.0m (H1 2022:
GBP162.8m, H2 2022: GBP86.4m) whilst total Group earnings per share
was (1.1p) (H1 2022: 19.0p, H2 2022: 1.6p).
Stronger foundations for sustainable future growth
We have continued to take decisive actions to successfully
manage debt and preserve cash, with reductions in capital
expenditure, working capital and costs across the Group. The
divestment of our Laminates, Films and Coated Fabrics businesses
which forms part of our strategy to increase the speciality
weighting of our portfolio to c.70% of Group revenues in due
course, was completed in February. The transaction realised $268.5m
of cash proceeds after transaction expenses (including $3.2m
received in July 2023 and a further $5m receivable in 2024) which
have been used to reduce leverage. As at 30 June 2023, net debt was
GBP795.8m (December 2022: GBP1,024.9m), with net debt: EBITDA on a
covenant basis of 5.5 times and committed liquidity of more than
GBP400m.
After careful evaluation, we have separately announced today a
fully underwritten rights issue to raise gross proceeds of
approximately GBP276 million. It will support reduction in our
leverage and provide stronger foundations to focus on delivering
our strategy and long term value creation in addition to short term
cash preservation, as well as reducing the downside risks from
near-term macroeconomic uncertainty for all stakeholders. By
providing stronger foundations, the rights issue will ensure that
Synthomer is well-positioned to deliver on its medium term
ambitions in the coming years. The Board believes that the earnings
power of the Group is more than double our last twelve month
EBITDA, which will be driven by a combination of end-market
recovery, operational and commercial execution and strategic
delivery, further supporting our medium term growth, margin and
returns targets. We have also signed an RCF amendment
inter-conditional with the rights issue, which adjusts its amount
to $400m and its maturity to July 2027. The rights issue will
increase covenant headroom and strategic and financial flexibility,
resulting in a pro forma reduction in the covenant net debt based
on EBITDA ratio from 5.5x to 3.8x as at 30 June 2023. Reducing
leverage further towards our 1-2x target range by the end of 2024
remains a key priority. This will be supported by further
divestment proceeds and earnings power more than doubling over the
medium-term through continued cost control, volume recovery and
strategic delivery.
The rights issue (and a related capital reorganisation) is
conditional on, among other things, the passing of a number of
resolutions by shareholders at a general meeting, which is
scheduled to take place at 12:30 p.m. on 25 September 2023. Our
largest shareholder, Kuala Lumpur Kepong Bhd, with 26.9% of the
issued share capital, has irrevocably committed to take up their
full rights and to vote in favour of all of the resolutions at the
meeting.
All divisions making good progress against key priorities
In the period we have continued to make good progress against
the strategy we announced in October 2022. Our ambition is to
become a more focused, more resilient, higher quality speciality
chemicals platform in the medium term, with growth driven by our
strong market positions in speciality areas that are aligned to
long term growth megatrends and where we believe we can win. To
achieve this, the business was reorganised at the start of 2023, to
focus on three attractive end markets: coatings and construction,
adhesives, and health and protection. Encouragingly, all divisions
have continued to make good progress against their key strategic
priorities during the first half.
In Construction & Coatings Solutions, H1 EBITDA was GBP55.1m
(H1 2022: GBP80.3m), significantly ahead of the GBP40.5m we
delivered in H2 2022, with Q2 improving over Q1 including some
seasonal benefit, largely driven by the speciality portfolio with a
progressive improvement in Coatings and Energy Solutions in
particular. Pricing retention was good given the reduction in raw
material costs. Strong cost control helped to offset higher energy
costs and lower capacity utilisation and we have initiatives
underway to further enhance our efficiency and simplify production,
such as the closure of a small Texas production site in the second
half. We are strengthening our organic growth capability by
aligning the division to our end-markets and improving the
geographical balance whilst continuing to invest in innovation and
our customer proposition.
In Adhesive Solutions, H1 EBITDA declined to GBP15.6m (H1 2022:
GBP34.5m, H2 2022: GBP32.7m) because of the weak demand amplified
by destocking as well as reliability issues. We saw more resilient
pricing and volumes from our speciality products in the division
relative to base products, which are experiencing greater
competition. Whilst most raw material costs began to moderate this
was offset by supply chain disruption and low reliability at some
sites, as well as higher energy costs. We have expanded several of
the original acquisition synergy workstreams with a dedicated
'self-help' programme under the new management team targeting
improved operational reliability and cost efficiency. Within these
programmes, we are also continuing to capture revenue synergies
following our acquisition of this business last year as well as
leveraging our range of leading positions in speciality adhesives
in US and Europe. We have also reprioritised capital expenditure to
broaden raw material supply as well as to expand capacity in
certain high growth areas, notably in amorphous polyolefins
(APOs).
In Heath & Protection and Performance Materials, EBITDA was
significantly lower at GBP11.3m (H1 2022: GBP59.2m, H2 2022:
GBP22.7m), largely reflecting the prolonged oversupply situation
that has followed the exceptional period of demand for medical
gloves during the COVID-19 pandemic. Whilst the underlying demand
for medical gloves continues to be robust, with stock levels
remaining high and additional capacity added to the market during
the pandemic we do not expect current low production levels of
Nitrile Butadiene Latex (NBR) to abate before the end of 2023. As a
result, we have announced plans to close our Kluang facility in
Malaysia and transfer its production to other plants. Our
Performance Materials businesses are also experiencing lower
volumes due to the end market environment and have seen some
pressure on pricing as raw material prices started to moderate. We
have increased our focus on cost efficiency and process
optimisation to mitigate this.
Our non-core portfolio rationalisation programme continued to
progress during the period. Two divestment processes are currently
underway, and our project to separate SBR for coatings and
construction from our paper and carpet operations is progressing
well.
Innovation and sustainability underpinnings
In July, Synthomer's near-term greenhouse gas (GHG) emissions
reduction targets were approved by the Science Based Targets
initiative (SBTi). The targets covering GHG emissions from
Synthomer's operations (Scopes 1 and 2) are consistent with levels
required to meet the goals of the Paris Agreement to keep warming
to 1.5degC, according to the SBTi. Synthomer's target for GHG
emissions from its value chain (Scope 3) also meet the SBTi's
criteria for ambitious value chain goals, meaning they are in line
with current best practice. (Synthomer has committed to the
reduction of absolute Scope 1 and 2 GHG emissions by 46.2%, and
absolute scope 3 GHG emissions by 27.5%, by 2030 from a 2019 base
year). In the period we have also reviewed and updated our
innovation, sustainability and prioritisation scoring criteria to
align with our deepening understanding of the sustainability risks
and opportunities across our business, and begun a number of
projects focused on our supply chain to assist our transition to a
low carbon future. I am pleased to report that our new and
protected products metric increased in the period to 21.5% and
remains above our long-term target of at least 20% of sales.
Strengthening our executive team
On 1 May 2023, Stephan Lynen joined Synthomer as President of
our Adhesive Solutions division and a member of the Executive
Leadership. Stephan has more than 25 years of leadership experience
in the chemical industry, principally at Clariant, the global
speciality chemicals company, where he became Chief Financial
Officer in April 2020 having previously led several of its
businesses, including its Additives unit for almost four years.
Outlook
Trading in July and August was similar to H1 2023, with limited
visibility and subdued volumes given challenging macro conditions.
The Group's outlook for the remainder of 2023 provided in July is
reiterated: the Board does not anticipate a material recovery in
customer demand before the end of the current year. However, we
anticipate c.GBP20m in self-help measures to be delivered mainly in
H2. Overall the Group remains confident of making sequential
progress in the second half relative to the first.
The Group continues to take decisive action to strengthen our
business so that it is positioned for profitable growth when demand
does begin to recover. Through our near-term actions, end market
volume recovery (which alone has the potential to improve Group
EBITDA by more than GBP100m over time) and execution of our
strategy, we believe the Group's medium-term earnings power is more
than double the GBP158m of continuing EBITDA generated over the
year to the end June 2023. Reducing leverage further towards 1-2x
target range by end of 2024 remains a key priority. Overall we
remain confident in the Group's ability to deliver the medium-term
targets set out last October, which were mid-single-digit growth in
constant currency over the cycle, EBITDA margins above 15% and
mid-teens return on invested capital.
Michael Willome
Chief Executive Officer
DIVISIONAL REVIEW - CONTINUING OPERATIONS
Coatings & Construction Solutions (CCS)
CCS is achieving robust pricing and margins, with improved
trading performance over the period compared with the second half
of 2022 despite cautious customer buying behaviour, with Q2
improving over Q1 including some seasonal benefit, largely driven
by the speciality portfolio. In line with our strategy, CCS
recently implemented several actions to broaden geographic and
customer penetration which will strengthen organic growth and
increase market share over time, while enhancing margins.
Under our new divisional structure implemented from 1 January
2023, CCS comprises the majority of the former Functional Solutions
division, the Speciality Additives and Powder Coatings businesses
from the Industrial Specialities division as well as the
consumer-focused Foams business from the Performance Elastomers
division.
Constant
Six months ended 30 June H1 2023 H1 2022 Change currency(1)
------------------------------ ------- ------- ------ ------------
GBPm GBPm % %
Revenue 451.6 548.9 (17.7) (20.9)
Volumes (ktes) 280.6 343.5 (18.3)
EBITDA 55.1 80.3 (31.4) (33.4)
EBITDA % of revenue 12.2% 14.6%
Operating profit - underlying 41.5 66.8 (37.9) (39.7)
Operating profit - statutory 27.4 51.7 (47.0)
------------------------------ ------- ------- ------ ------------
(1) Underlying constant currency revenue and profit retranslate
current year results using the prior year's average exchange
rates.
Performance
Divisional revenue decreased by 20.9% in constant currency to
GBP451.6m (H1 2022: GBP548.9m, H2 2022: GBP447.2m), principally
driven by an 18.3% reduction in volume compared with the strong H1
2022 period. This reflects more cautious buying behaviour from our
customers due to relatively subdued end-user demand. This has been
particularly noticeable in our Construction and Consumer Materials
markets in the period, with Coatings more robust and Energy
Solutions continuing to enjoy strong end-user demand growth.
Compared with the second half of 2022, sequential volumes have
improved modestly and margins improved as a result of good pricing
retention given the period-on-period reductions in raw material
input prices. Together with strong cost control, this significantly
mitigated the impact of lower revenues and higher energy costs as
hedges rolled off on the EBITDA performance of GBP55.1m (H1 2022:
GBP80.3m, H2 2022: GBP40.5m) in the period.
Strategy
In line with the new corporate strategy, CCS is focusing on
strengthening organic growth capacity through a number of steps
which increase its alignment with strategic end market
opportunities. For example, the commercial teams have been
reorganised to ensure key account management of top global
customers and a stronger emphasis on marketing to new regional
players. These initiatives will enable penetration into North
American, Middle Eastern and Asian markets, building on our strong
market positions in European markets. In the period we also began a
modest investment to enhance coatings capacity in the Middle
East.
Greater alignment with customers is also driving efforts to
enhance the differentiation and hence the resilience and margin
opportunity of the CCS product portfolio, in particular by
innovating to enhance the sustainability benefits or other pillars
of the value proposition for our customers. For example, in Energy
Solutions we are working towards deploying our leading wellhead
management technologies for carbon capture and storage (CCS)
applications.
We also progressing a number of asset optimisation projects,
improving cost control and capacity management through our
Synthomer excellence programmes. For example, a modification of one
of our speciality additives processes at our site in Ghent
dramatically reduced catalyst use through a modest increase in
cycle time, resulting in substantial raw material and energy
efficiencies as well as carbon emissions savings. Shortly after the
period end, we announced plans to exit a small production site in
Texas.
Adhesive Solutions (AS)
The performance of AS in the period continues to reflect the
lower volume environment as well as the previously disclosed
operational reliability and supply chain challenges in the adhesive
resins business, acquired from Eastman on 1 April 2022. We expect
our reliability and performance improvement measures to have a
positive impact in the second half of the year, despite continued
demand weakness.
Under our new divisional structure, the core of AS comprises the
adhesive resins business acquired in 2022, together with adhesive
dispersions and Lithene businesses which were previously part of
Synthomer's portfolio in Functional Solutions and Industrial
Solutions respectively.
Constant
Six months ended 30 June H1 2023 H1 2022(1) Change currency(2)
------------------------------ ------- ---------- ------ ------------
GBPm GBPm % %
Revenue 310.0 223.8 +38.5 +36.1
Volumes (ktes) 125.6 96.5 +30.2
EBITDA 15.6 34.5 (54.8) (55.7)
EBITDA % of revenue 5.0% 15.4%
Operating profit - underlying 1.4 27.2 (94.9) (94.5)
Operating (loss)/profit -
statutory (12.3) 17.3 n/m
------------------------------ ------- ---------- ------ ------------
(1) H1 2022 included a three month contribution from the adhesive resins acquisition.
(2) Underlying constant currency revenue and profit retranslate
current year results using the prior year's average exchange
rates.
Performance
Divisional revenue was GBP310.0m (H1 2022: GBP223.8m, H2 2022:
GBP349.1m) an increase of 36.1% in constant currency compared with
the prior year period, reflecting the inclusion of the adhesive
resins acquisition for the whole period compared with for one
quarter in the 2022 comparative period. On a like-for-like basis,
volumes were approximately 1.6% lower than in H2 2022, reflecting
some stabilisation of the subdued demand environment amplified by
customer destocking and challenges fulfilling customer orders due
to the previously disclosed reliability issues. Within the
division, speciality products including Lithene, amorphous
polyolefins (APOs) and pure monomer resins (PMR) were more
resilient in both volume and pricing terms, while more base
chemical products particularly for the tapes, labels, packaging and
plastics markets experienced increased global competition in the
period, affecting volume and price.
Divisional EBITDA of GBP15.6m (H1 2022: GBP34.5m, H2 2022:
GBP32.7m) principally reflects higher energy costs, the supply
chain and reliability challenges in the acquired adhesive resins
business, as well as the volume and pricing effects noted above,
partially mitigated by moderating raw material prices.
Strategy
The core priority of the division is improving operational
reliability and cost efficiency of the acquired adhesive resins
operations. A performance improvement project team has been put in
place under the leadership of the new divisional president who
joined in May. The goal is to drive rapid progress in procurement,
supply chain and logistics reliability, as well as to improve cost
efficiency, net working capital and data management. Having
executed most of the synergy actions identified with the
acquisition, the team continues to work on further 'self-help'
actions which are expected to be implemented over the next twelve
months as part of the division's performance improvement
programme.
The division is also implementing the new corporate strategy
alongside the performance improvement programme. Relationship
management, and hence opportunities to capture revenue synergies,
have been reorganised over the combined legacy Synthomer and
adhesive resins customer base. The division has also recently
committed to expand our speciality amorphous polyolefins capacity
in North America to support growth in this region.
Health & Protection and Performance Materials (HPPM)
In HPPM, the challenging medical glove market dynamics which
followed the unprecedented activity during the pandemic continue.
In line with previous indications, we do not expect low nitrile
butadiene rubber (NBR) production levels to abate before the end of
2023. We continue to focus on capacity management and cost
control.
Under our new divisional structure, HPPM consists of the
majority of the former Performance Elastomers and Industrial
Specialities divisions as well as the Acrylate Monomers business.
This included our Laminates & Films and Coated Fabrics
businesses, which were subsequently divested on 28 February
2023.
Six months ended 30 June Constant
(continuing) H1 2023 H1 2022 Change currency(1)
-------------------------- ------- ------- ------ ------------
GBPm GBPm % %
Revenue 313.7 455.6 (31.1) (32.2)
Volumes (ktes) 276.9 385.1 (28.1)
EBITDA 11.3 59.2 (80.9) (78.4)
EBITDA % of revenue 3.6% 13.0%
Operating (loss)/profit -
underlying (5.8) 45.1 n/m n/m
Operating (loss)/profit -
statutory (6.9) 44.2 n/m
-------------------------- ------- ------- ------ ------------
(1) Underlying constant currency revenue and profit retranslate
current year results using the prior year's average exchange
rates.
Performance
Divisional revenue was GBP313.7m (H1 2022: GBP455.6m, H2 2022:
GBP359.3m), principally driven by a 28.1% reduction in volume
compared with the exceptional H1 2022 period.
The exceptional global demand for NBR to manufacture gloves at
the height of the COVID-19 pandemic has given way since mid-2022 to
a substantial period of destocking and oversupply for our Health
& Protection business. In addition, Chinese glove manufacturers
also raised output in 2022, putting additional strain on glove
prices and plant utilisation of glove producers in Malaysia and
elsewhere. Combined these factors resulted in a 31.4% decline in
NBR volumes compared with the prior period. While underlying
end-customer demand for medical gloves remains similar to pre-COVID
levels and we see favourable growth trends in the medium term, the
current overhang between capacity and demand for NBR is not
expected to abate before the end of 2023. Sequentially, volumes
show indications of stabilising, with H1 2023 NBR volumes only 6.0%
lower than H2 2022.
Volumes in our Performance Materials portfolio, including for
paper, carpet, acrylic monomers, antioxidants and compounds were
also down by 26.3% against H1 2023. This was driven in large part
by lower demand exacerbated by destocking, with these businesses
experiencing greater pricing pressure as raw material prices
moderate than the more speciality parts of the Group portfolio.
Again the trend has moderated sequentially with volumes in
Performance Materials recording only a (1.7)% decline against H2
2022.
As a predominantly base chemicals division, the effect of lower
volumes on HPPM earnings was significant, with divisional EBITDA
reducing to GBP11.3m (H1 2022: GBP59.2m, H2 2022: GBP22.7m) in the
period.
Strategy
In Health & Protection, our focus under the new strategy has
been on improving cost efficiency across our value chain and
enhancing our overall value proposition to customers. As part of
this effort we have increased our investment in customer intimacy.
This has assisted us in monitoring demand and market flows at a
challenging point in the cycle, but more importantly in optimising
our alignment with key customers' needs. This supports our goals to
strengthen overall cost competitiveness for the Malaysia supply
chain while also delivering process innovation to lower energy
consumption and carbon footprint for our customers and ourselves.
We have also increased our focus on building relationships with
potential new customers, including in the USA and China. Our NBR
plant utilisation rates have improved modestly compared with the
last quarter of 2022, and we aim to improve this further through
plans announced in August 2023 to decommission our Kluang, Malaysia
facility, which will reduced our NBR capacity by approximately 20%.
We are working closely with customers to smoothly transfer grades
to our other plants.
Over the last year we have also revised our innovation and
capital expenditure plans across the division, in accordance with
our differentiated steering strategic pillar, to focus on our most
differentiated products or opportunities, such as the thinner glove
materials, bio-based acrylate monomers or to support opportunities
in other niches, such as materials with novel properties for 3D
printing.
Our non-core portfolio rationalisation programme continued to
progress during the period. Two divestment processes are currently
underway, and our project to separate SBR for coatings and
construction from our paper and carpet operations is progressing
well.
Safety
The Group delivered a strong safety performance in the period
based on key industry lagging indicators, with both the Recordable
Case Rate (RCR) and Process safety event rate (PSER) ahead of our
targets and prior year levels. However the health and safety of our
employees is a key priority and there is always more to do to
improve our processes and preparedness. An important programme in
the period has been further developing our use of leading
indicators, including near-miss reporting, across the Group. Both
lagging and leading data are used to track and analyse for trends
and are a key feed into our SHE improvement plans.
Our work to align our new sites with our standards over a
three-year cycle continues to make progress. For example, in the
last twelve months all former OMNOVA and Eastman sites have
completed their integration into our database tools for accident
and incident reporting, as well as the electronic management of
change system.
Six months ended 30 June (continuing) H1 2023 H1 2022 Change
--------------------------------------- ------- ------- ----------
RCR per 100,000 hours for employees Absolute
and contractors
CCS 0.20 0.38 (0.18)
AS(1) 0.30 0.00 +0.30
HPPM 0.00 0.10 (0.10)
--------------------------------------- ------- ------- ----------
Continuing Group 0.13 0.22 (0.09)
--------------------------------------- ------- ------- ----------
PSER per 100,000 hours for employees Absolute
and contractors
CCS 0.10 0.14 (0.04)
AS(1) 0.14 0.27 (0.13)
HPPM 0.05 0.10 (0.05)
--------------------------------------- ------- ------- ----------
Continuing Group 0.09 0.13 (0.04)
--------------------------------------- ------- ------- ----------
(1) H1 2022 data for AS reflects the April-June period which
included the acquired Adhesive Solutions business.
FINANCIAL REVIEW
Group revenue, EBITDA and operating profit - continuing
operations
Revenue for the continuing Group of GBP1,075.3m (H1 2022:
GBP1,228.3m) decreased by 14.7% in constant currency compared with
the prior year period, with the contribution of the acquired
adhesive resins business and a small benefit from robust price/mix
partially offsetting a 17.2% reduction in volume compared with the
first half of 2022. This was driven by destocking, subdued levels
of demand across most of our end markets and increased competition
in some of our base chemical product ranges. Sequentially however,
Group volumes modestly increased by 2.2% relative to the second
half of the year. EBITDA for the continuing Group was GBP72.0m (H1
2022: GBP162.8m) in the period, with robust pricing and a strong
focus on margins partially mitigating the challenging volume
environment. Depreciation and amortisation in the period increased
to GBP48.6m (H1 2022: GBP37.5m), reflecting the non-current assets
acquired in the adhesive resins acquisition, resulting in
underlying operating profit for the continuing Group of GBP23.4m
(H1 2022: GBP125.3m).
Six months ended 30 June Continuing Total
2023, GBPm CCS AS HPPM Corp. operations Dis-continued Group
-------------------------- ----- ------ ----- ------ ----------- ------------- -------
Revenue 451.6 310.0 313.7 - 1,075.3 28.0 1,103.3
EBITDA 55.1 15.6 11.3 (10.0) 72.0 2.5 74.5
EBITDA % of revenue 12.2% 5.0% 3.6% 6.7% 8.9% 6.8%
Operating profit/(loss)
- underlying 41.5 1.4 (5.8) (13.7) 23.4 2.5 25.9
Operating profit/(loss)
- statutory 27.4 (12.3) (6.9) (17.0) (8.8) 64.5 55.7
-------------------------- ----- ------ ----- ------ ----------- ------------- -------
Six months ended 30 June Continuing Total
2022, GBPm CCS AS HPPM Corp. operations Dis-continued Group
------------------------------ ----- ----- ----- ------ ----------- ------------- -------
Revenue 548.9 223.8 455.6 - 1,228.3 106.1 1,334.4
EBITDA 80.3 34.5 59.2 (11.2) 162.8 10.3 173.1
EBITDA % of revenue 14.6% 15.4% 13.0% 13.3% 9.7% 13.0%
Operating profit - underlying 66.8 27.2 45.1 (13.8) 125.3 6.7 132.0
Operating profit - statutory 51.7 17.3 44.2 0.6 113.8 3.2 117.0
------------------------------ ----- ----- ----- ------ ----------- ------------- -------
Full year ended 31 December Continuing Total
2022, GBPm CCS AS HPPM Corp. operations Dis-continued Group
------------------------------ ----- ------- ----- ------ ----------- ------------- -------
Revenue 996.1 572.9 814.9 - 2,383.9 201.2 2,585.1
EBITDA 120.8 67.2 81.9 (20.7) 249.2 15.9 265.1
EBITDA % of revenue 12.1% 11.7% 10.1% 10.5% 7.9% 10.3%
Operating profit - underlying 94.1 44.5 50.6 (26.7) 162.5 8.7 171.2
Operating profit - statutory 62.8 (126.1) 47.2 (4.4) (20.5) (6.0) (26.5)
------------------------------ ----- ------- ----- ------ ----------- ------------- -------
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 2023 H1 2022 FY 2022
----------------------------------------- ------- ------- -------
GBPm GBPm GBPm
Amortisation of acquired intangibles (24.3) (19.5) (44.8)
Restructuring and site closure costs (6.6) (4.5) (19.2)
Acquisition costs and related gains (1.3) (6.5) (6.5)
Sale of business - 0.3 (0.3)
Regulatory fine - release of provision - 18.7 21.5
Impairment charge - - (133.7)
Total impact on operating loss/profit (32.2) (11.5) (183.0)
Fair value movement on unhedged interest
rate derivatives (1.8) 15.8 25.1
Loss on extinguishment of financing
facilities (4.6) - -
Total impact on loss/profit before
taxation (38.6) 4.3 (157.9)
Taxation Special Items - - 3.6
Taxation on Special Items (4.9) (4.6) 39.3
----------------------------------------- ------- ------- -------
Total impact on loss/profit for
the period - continuing operations (43.5) (0.3) (115.0)
----------------------------------------- ------- ------- -------
Amortisation of acquired intangibles increased in H1 2023,
reflecting amortisation of the customer lists, patents, trademarks
and trade secrets that arose on the acquisition of the adhesive
resins business. The intangible assets arising on the acquisition
are being amortised over a period of 8-20 years mainly dependent on
the characteristics of the customer relationships.
Restructuring and site closure costs in H1 2023 comprise a
GBP2.4m charge in relation to the ongoing integration of the
acquired adhesive resins business, and a further GBP4.2m in
relation to enacting the new strategy and realignment of the
business into its new divisions effective 1 January 2023.
Acquisition costs and related gains of GBP1.3m in H1 2023 relate
to the adhesive resins acquisition.
In July 2018 the Group entered into swap arrangements to fix
euro interest rates on the full value of the then EUR440m committed
unsecured revolving credit facility. The fair value movement of the
unhedged interest rate derivatives relates to the movement in the
mark-to-market of the swap in excess of the Group's current
borrowings.
In March 2023 the Group successfully refinanced its existing
bank loan facilities. All amounts outstanding on the existing
$260million term loan, $300 million term loan and EUR460 million
revolving credit facility were subsequently repaid and the
facilities were cancelled. All capitalised debt issue costs
relating to these term loans and facilities were written off
leading to a loss on extinguishment of GBP4.6 million.
Taxation on Special Items mainly relates to the amortisation of
acquired intangibles.
Discontinued operations
On 28 February 2023, the Group completed the sale of its
Laminates, Films and Coated Fabrics businesses to Surteco North
America, Inc. following satisfaction of the conditions to the
transaction announced on 13 December 2022. The final cash proceeds
received at completion amounted to $260.3m after transaction
expenses, with $3.2m received in July 2023 and a further $5m
receivable in cash on the 13-month anniversary of completion. The
net cash proceeds have been used to reduce the Group's debt. The
Laminates, Films and Coated Fabrics businesses are reported as
discontinued operations in these results.
In the period GBP36.3m of Special Items - discontinued
operations (H1 2022: GBP(3.5)m) were recognised, comprising a
GBP62.0m gain on the sale of the Laminates Films and Coated Fabrics
businesses, and GBP(25.7)m in charges, primarily relating to the
utilisation of acquired US tax attributes and the current tax
charge on the disposal of the Laminates, Films and Coated Fabrics
businesses.
Finance costs
Six months ended 30 June H1 2023 H1 2022 FY 2022
----------------------------------------- ------- ------- -------
GBPm GBPm GBPm
Net interest payable (30.8) (15.8) (43.2)
Net interest expense on defined benefit
obligation (1.1) (0.8) (1.2)
Interest element of lease payments (0.7) (0.7) (1.4)
----------------------------------------- ------- ------- -------
Finance costs - underlying (32.6) (17.3) (45.8)
Fair value movement on unhedged interest
rate derivatives (1.8) 15.8 25.1
Loss on extinguishment of financing
facilities (4.6) - -
Finance costs - statutory (39.0) (1.5) (20.7)
----------------------------------------- ------- ------- -------
Underlying finance costs increased to GBP(32.6)m (H1 2022:
GBP(17.3)m) 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 rise in the net interest payable
mainly reflects the additional debt utilised to finance the
adhesive resins acquisition as well as higher base rates. The Group
recognised as Special Items a total of GBP6.4m in finance costs
relating to interest rate derivative contracts and extinguishment
of financing facilities, as described above.
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.
Taxation
The Group's underlying effective tax rate for H1 2023 was 22.0%
(H1 2022: 22.5%; FY 2022: 22.5%), representing the best estimate of
the annual effective corporate income tax rate expected for FY
2023. We estimate the rate by applying the expected corporate
income tax rate for each tax jurisdiction in which we operate.
Earnings per share
Earnings per share is calculated based on the average number of
shares in issue during the year. The weighted average number of
shares for H1 2023 was 467,241,000 (H1 2022: 467,314,000).
Underlying earnings per share is (1.1) pence for the period,
down from 19.0 pence in H1 2022, reflecting the lower earnings
relative to the prior period. The statutory earnings per share is
(2.6) pence (H1 2022: 18.3 pence).
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 2023 the Group experienced a translation headwind of
GBP1.4m on EBITDA, with average FX rates against our three
principal currencies of EUR1.1414, $1.2336 and MYR 5.4969 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 2023 H1 2022 FY 2022
--------------------------------------- --------- ------- ---------
GBPm GBPm GBPm
Opening net debt (1,024.9) (114.2) (114.2)
Underlying operating profit (excluding
joint ventures) 25.2 131.4 169.5
Movement in working capital 11.9 (128.0) 19.1
Depreciation of property, plant and
equipment 44.8 37.5 86.0
Amortisation of other intangible
assets 3.8 3.6 7.9
Share-based payments charge 1.1 1.1 0.7
Capital expenditure (33.9) (33.2) (90.8)
--------------------------------------- --------- ------- ---------
Business cash flow 52.9 12.4 192.4
Net interest paid (24.7) (13.9) (38.2)
Tax paid (4.5) (49.3) (65.6)
Pension funding (5.7) (11.5) (21.3)
Dividends received from joint ventures 0.8 0.3 1.9
--------------------------------------- --------- ------- ---------
Free Cash Flow 18.8 (62.0) 69.2
Cash impact of restructuring and
site closure costs (10.8) (10.4) (25.9)
Cash impact of acquisition costs (4.4) 2.1 1.7
Cash impact of mark to market 12.1 - -
Proceeds on sale of business 206.1 0.3 0.3
Purchase of business (8.3) (759.6) (759.6)
Repayment of principal portion of
lease liabilities (5.8) (4.7) (10.1)
Dividends paid - - (99.5)
Foreign exchange and other movements 21.4 (44.3) (86.8)
--------------------------------------- --------- ------- ---------
Movement in net debt 229.1 (878.6) (910.7)
--------------------------------------- --------- ------- ---------
Closing net debt (795.8) (992.8) (1,024.9)
--------------------------------------- --------- ------- ---------
Underlying operating profit in the period reduced to GBP25.2m
reflecting the trading performance described above. The net working
capital inflow of GBP11.9m in the first half of the year was as a
result of the receivables financing facility, active inventory and
account management and moderating raw materials pricing, partially
offset by seasonality and activity levels.
In order to manage the significant increase in working capital
requirements over the last year and optimise cash generation, the
Group put in place two-year, non-recourse receivables financing
facilities in December 2022 for a maximum aggregate amount of
EUR200m. Factored receivables assigned under the facilities
amounted to GBP139.2m net at 30 June 2023 (31 December 2022:
GBP82.7m net). Under the facilities, the risks and rewards of
ownership are transferred to the assignees. The tenor of the
facility was subsequently extended to 31 May 2025.
Depreciation and amortisation of other intangibles increased due
to the adhesive resins non-current assets acquired. Capital
expenditure was GBP33.9m (H1 2022: GBP33.2m), principally for the
Pathway Programme systems transformation project, recurring SHE and
sustenance expenditure. The Group continues to anticipate
c.GBP75-85m in capital expenditure for FY 2023.
Interest paid increased to GBP24.7m reflecting the adhesive
resins acquisition debt and higher base rates. Net tax paid
decreased to GBP4.5m reflecting lower payments on account due to
reduced operating profit and refunds of prior year overpaid
taxes.
The cash impact of Special Items including restructuring and
site closure costs and acquisition costs and related gains was an
outflow of GBP(23.5)m.
Group debt is denominated in sterling, euros and dollars. Both
the euro and the dollar weakened relative to sterling during H1
2023, leading to a foreign exchange gain in net debt.
Financing and liquidity
At 30 June 2023, net debt was GBP795.8m (FY 2022: GBP1,024.9m),
with the reduction principally reflecting proceeds received from
the divestment of the Laminates, Films and Coated Fabrics
businesses. As at 30 June 2023 committed borrowing facilities
principally comprised: a $480m RCF (maturing in May 2025),
five-year EUR520m 3.875% senior loan notes (maturing July 2025) and
UK Export Finance (UKEF) facilities of EUR288m and $230m (maturing
in October 2027). At 30 June 2023, the UKEF facilities were fully
drawn and GBP130.0m was drawn under the RCF. The Group's net debt:
EBITDA for the purposes of the leverage ratio covenant increased
from 3.7x at 31 December 2022 to 5.5x at 30 June 2023, due
primarily to lower EBITDA over the preceding twelve month period,
partially offset by lower net debt, as described elsewhere.
On 5 September 2023, the Group entered into an RCF amendment and
extension agreement, which is subject to and conditional upon the
successful outcome of the rights issue. If effective, the agreement
will reduce the RCF commitment to $400m and extend the maturity
date to 31 July 2027, amongst other matters.
The new RCF and the UKEF facilities are subject to one leverage
ratio covenant. For prudence in light of current market conditions,
this has been set at 6x in June 2023, 5x in December 2023, 4.25x in
June 2024, 3.5x in December 2024, 3.5x in June 2025 and 3.25x
thereafter. The Group expects net financing costs of approximately
GBP60-65m in FY 2023 as a result of the higher net debt and other
changes to the Group's financing arrangements, reducing to
approximately GBP45-50m in 2024 assuming the rights issue is
successfully completed.
The Group's pro forma committed liquidity at 30 June 2023,
including the net impact of both the rights issue of GBP276m less
fees and the reduction of the RCF to $400m, is in excess of
GBP640m.
Balance sheet
Net assets of the Group decreased by 7% to GBP963.3m, mainly
reflecting the GBP12.4m loss for the period and a loss of GBP54.3m
on translation of foreign currency.
Provisions
The Group provisions balance decreased to GBP46.9m compared with
a balance of GBP54.0m as at 31 December 2022, mainly reflecting
cash utilisation of GBP5.6m in the period, most notably in relation
to the Marl and Villejust site rationalisation.
During 2022, the European Commission concluded its investigation
into styrene monomer purchasing practices, and the final settlement
amount of GBP38.5m was transferred to other payables. Subsequently
the Group has concluded an agreement with the EU to pay the
settlement amount in January 2024.
Going Concern
As described in Note 1, the Group has undertaken a detailed
going concern assessment of the Group. The downside scenario,
outlining the impact of a severe but plausible adverse case,
results in a breach of the Group's existing debt covenants within
12 months of approval of the interim financial statements. The key
mitigating action represents the rights issue, and the Directors
are confident that the proceeds from the rights issue alone are
sufficient to avoid the forecast debt covenants breach in the
downside scenario. This means that the outcome of the shareholder
vote on 25 September 2023, and the successful completion of the
Rights Issue, represents a material uncertainty within the Group's
going concern basis of preparation. This material uncertainty is
referenced in the external auditors' Independent Review Report on
page 31. Notwithstanding the material uncertainty explained above,
the Directors have formed the judgment that it is appropriate to
prepare the interim financial statements on the
going concern basis.
Consolidated income statement
for the six months ended 30 June 2023
30 June 2023 (unaudited) 30 June 2022 (unaudited)
------------------------------ ---------------------------------
Underlying Special Underlying Special
performance items IFRS performance items IFRS
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- ------------- ------- ------- ------------ ------- ---------
Continuing operations
Revenue 1,075.3 - 1,075.3 1,228.3 - 1,228.3
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
Company and subsidiaries operating
profit before Special Items 22.7 - 22.7 124.7 - 124.7
Amortisation of acquired intangibles - (24.3) (24.3) - (19.5) (19.5)
Restructuring and site closure
costs - (6.6) (6.6) - (4.5) (4.5)
Acquisition costs and related
gains - (1.3) (1.3) - (6.5) (6.5)
Sale of business - - - - 0.3 0.3
Regulatory Fine - release of
provision - - - - 18.7 18.7
Company and subsidiaries operating
profit 22.7 (32.2) (9.5) 124.7 (11.5) 113.2
Share of joint ventures 0.7 - 0.7 0.6 - 0.6
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
Operating profit/(loss) 23.4 (32.2) (8.8) 125.3 (11.5) 113.8
----------------------------------------- ------------- ------- -------
Interest payable (35.8) - (35.8) (16.1) - (16.1)
Interest receivable 5.0 - 5.0 0.3 - 0.3
Fair value (loss)/gain on unhedged
interest rate derivatives - (1.8) (1.8) - 15.8 15.8
Loss on extinguishment of financing
facilities - (4.6) (4.6) - - -
Net interest expense on defined
benefit obligations (1.1) - (1.1) (0.8) - (0.8)
Interest element of lease payments (0.7) - (0.7) (0.7) - (0.7)
Finance costs (32.6) (6.4) (39.0) (17.3) 15.8 (1.5)
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
(Loss)/profit before taxation (9.2) (38.6) (47.8) 108.0 4.3 112.3
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
Taxation 1.5 (4.9) (3.4) (25.7) (4.6) (30.3)
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
(Loss)/profit for the period
from continuing operations (7.7) (43.5) (51.2) 82.3 (0.3) 82.0
Profit/(loss) for the period
from discontinued operations
attributable to the equity
holders of the parent 2.5 36.3 38.8 6.6 (3.5) 3.1
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
(Loss)/profit for the period (5.2) (7.2) (12.4) 88.9 (3.8) 85.1
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
(Loss)/profit attributable
to non-controlling interests (0.1) (0.2) (0.3) 0.3 (0.6) (0.3)
(Loss)/profit attributable
to equity holders of the parent (5.1) (7.0) (12.1) 88.6 (3.2) 85.4
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
(5.2) (7.2) (12.4) 88.9 (3.8) 85.1
---------------------------------------- ------------- ------- ------- ------------ ------- ---------
Earnings per share
- Basic from continuing operations (1.6)p (9.3)p (10.9)p 17.5p 0.1p 17.6p
- Diluted from continuing operations (1.6)p (9.3)p (10.9)p 17.5p - 17.5p
- Basic (1.1)p (1.5)p (2.6)p 19.0p (0.7)p 18.3p
- Diluted (1.1)p (1.5)p (2.6)p 18.9p (0.7)p 18.2p
----------------------------------------- ------------- ------- ------- ------------ ------- ---------
Consolidated income statement
for the six months ended 30 June 2023 (continued)
Year ended 31 December
2022 (audited)
--------------------------------
Underlying Special
performance items IFRS
GBPm GBPm GBPm
------------------------------------- ------------ ------- ---------
Continuing operations
Revenue 2,383.9 - 2,383.9
-------------------------------------- ------------ ------- ---------
Company and subsidiaries operating
profit before Special Items 160.8 - 160.8
Amortisation of acquired intangibles - (44.8) (44.8)
Restructuring and site closure
costs - (19.2) (19.2)
Acquisition costs and related
gains - (6.5) (6.5)
Sale of business - (0.3) (0.3)
Regulatory Fine - release of
provision - 21.5 21.5
Impairment charge - (133.7) (133.7)
-------------------------------------- ------------ ------- ---------
Company and subsidiaries operating
profit 160.8 (183.0) (22.2)
Share of joint ventures 1.7 - 1.7
-------------------------------------- ------------ ------- ---------
Operating profit/(loss) 162.5 (183.0) (20.5)
-------------------------------------- ------------ ------- ---------
Interest payable (44.8) - (44.8)
Interest receivable 1.6 - 1.6
Fair value gain on unhedged
interest rate derivatives - 25.1 25.1
Net interest expense on defined
benefit obligations (1.2) - (1.2)
Interest element of lease payments (1.4) - (1.4)
Finance costs (45.8) 25.1 (20.7)
-------------------------------------- ------------ ------- ---------
Profit/(loss) before taxation 116.7 (157.9) (41.2)
-------------------------------------- ------------ ------- ---------
Taxation (27.6) 42.9 15.3
-------------------------------------- ------------ ------- ---------
Profit/(loss) for the year
from continuing operations 89.1 (115.0) (25.9)
Profit/(loss) for the year
from discontinued operations
attributable to the equity
holders of the parent 7.8 (14.9) (7.1)
-------------------------------------- ------------ ------- ---------
Profit/(loss) for the year 96.9 (129.9) (33.0)
-------------------------------------- ------------ ------- ---------
Profit/(loss) attributable
to non-controlling interests 0.5 (1.0) (0.5)
Profit/(loss) attributable
to equity holders of the parent 96.4 (128.9) (32.5)
-------------------------------------- ------------ ------- ---------
96.9 (129.9) (33.0)
------------------------------------- ------------ ------- ---------
Earnings per share
- Basic from continuing operations 19.0p (24.4)p (5.4)p
- Diluted from continuing operations 18.9p (24.3)p (5.4)p
- Basic 20.6p (27.6)p (7.0)p
- Diluted 20.6p (27.6)p (7.0)p
-------------------------------------- ------------ ------- ---------
Consolidated statement of comprehensive income
for the six months ended 30 June 2023
30 June 2023 (unaudited) 30 June 2022 (unaudited)
--------------------------------- ---------------------------------
Equity Equity
holders holders
of the Non-controlling of the Non-controlling
parent interests Total parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- --------------- ------ -------- --------------- ------
(Loss)/profit for the period (12.1) (0.3) (12.4) 85.4 (0.3) 85.1
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Actuarial gains 3.3 - 3.3 46.8 - 46.8
Tax relating to components
of other comprehensive income (0.7) - (0.7) (10.5) - (10.5)
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Total items that will not
be reclassified to profit or
loss 2.6 - 2.6 36.3 - 36.3
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Exchange differences on translation
of foreign operations (53.5) (0.8) (54.3) 68.0 0.8 68.8
Exchange differences recycled
on sale of business (0.5) - (0.5) - - -
Fair value (loss) / gain on
hedged interest derivatives (0.1) - (0.1) 4.0 - 4.0
Gains on net investment hedges
taken to equity (2.2) - (2.2) 6.5 - 6.5
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Total items that may be reclassified
subsequently to profit or loss (56.3) (0.8) (57.1) 78.5 0.8 79.3
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Other comprehensive (expense)
/ income for the period (53.7) (0.8) (54.5) 114.8 0.8 115.6
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Total comprehensive (expense)/
income for the period (65.8) (1.1) (66.9) 200.2 0.5 200.7
-------------------------------------- -------- --------------- ------ -------- --------------- ------
Year ended 31 December
2022 (audited)
---------------------------------
Equity
holders
of the Non-controlling
parent interests Total
GBPm GBPm GBPm
------------------------------------- -------- --------------- ------
Loss for the year (32.5) (0.5) (33.0)
-------------------------------------------- -------- --------------- ------
Actuarial gains 34.1 - 34.1
Tax relating to components
of other comprehensive income (11.6) - (11.6)
-------------------------------------------- -------- --------------- ------
Total items that will not
be reclassified to profit or
loss 22.5 - 22.5
-------------------------------------------- -------- --------------- ------
Exchange differences on translation
of foreign operations 95.9 0.8 96.7
Fair value gain on hedged interest
derivatives 9.7 - 9.7
Gains on net investment hedges
taken to equity 2.4 - 2.4
-------------------------------------------- -------- --------------- ------
Total items that may be reclassified
subsequently to profit or loss 108.0 0.8 108.8
-------------------------------------------- -------- --------------- ------
Other comprehensive income
for the year 130.5 0.8 131.3
-------------------------------------------- -------- --------------- ------
Total comprehensive income
for the year 98.0 0.3 98.3
-------------------------------------------- -------- --------------- ------
Consolidated statement of changes in equity
for the six months ended 30 June 2023
Total
Hedging equity
Capital & holdings
Share Share redemption translation Retained of the Non-controlling Total
capital premium reserve reserve earnings parent interests Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- --------- ------------ ------------- ---------- ---------- ----------------- ---------------
At 1 January
2023 46.7 620.0 0.9 75.9 273.5 1,017.0 14.0 1,031.0
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
expense 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
----------------- --------- --------- ------------ ------------- ---------- ---------- ----------------- ---------------
Total
Hedging equity
Capital & holdings
Share Share redemption translation Retained of the Non-controlling Total
capital premium reserve reserve earnings parent interests Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ -----------
At 1 January
2022 46.7 620.0 0.9 (32.1) 383.8 1,019.3 13.7 1,033.0
Profit / (loss)
for the period - - - - 85.4 85.4 (0.3) 85.1
Other
comprehensive
income for the
period - - - 78.5 36.3 114.8 0.8 115.6
----------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ -----------
Total
comprehensive
income for the
period - - - 78.5 121.7 200.2 0.5 200.7
Dividends - - - - (99.5) (99.5) - (99.5)
Share-based
payments - - - - 0.1 0.1 - 0.1
----------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ -----------
At 30 June 2022 1 ,
(unaudited) 46.7 620.0 0.9 46.4 406.1 120.1 14.2 1 , 134.3
----------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ -----------
Total
Hedging equity
Capital & holdings
Share Share redemption translation Retained of the Non-controlling Total
capital premium reserve reserve earnings parent interests Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ ---------
At 1 January
2022 46.7 620.0 0.9 (32.1) 383.8 1,019.3 13.7 1,033.0
Loss for the
year - - - - (32.5) (32.5) (0.5) (33.0)
Other
comprehensive
income for the
year - - - 108.0 22.5 130.5 0.8 131.3
----------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ ---------
Total
comprehensive
income /
(expense) 108
for the year - - - .0 (10.0) 98.0 0.3 98.3
Dividends - - - - (99.5) (99.5) - (99.5)
Share-based
payments - - - - (0.8) (0.8) - (0.8)
----------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ ---------
At 31 December
2022
(audited) 46.7 620.0 0.9 75.9 273.5 1,017.0 14.0 1,031.0
----------------- ---------- ---------- ------------ ------------- ----------- ---------- ------------------ ---------
Consolidated balance sheet
as at 30 June 2023
30 June 30 June 2022 31 December
2023 (unaudited) (unaudited) 2022 (audited)
----------------- -------------------- -----------------
GBPm GBPm GBPm
--------------------------------- ----------------- -------------------- -----------------
Non-current assets
Goodwill 464.5 662.1 480.8
Acquired intangible assets 476.6 560.1 523.6
Other intangible assets 66.7 54.1 60.9
Property, plant and equipment 722.0 763.9 753.6
Deferred tax assets 25.0 21.2 50.3
Defined benefit asset 11.5 14.2 5.9
Investment in joint ventures 7.6 7.9 8.1
---------------------------------- ----------------- -------------------- -----------------
Total non-current assets 1,773.9 2 , 083.5 1,883.2
---------------------------------- ----------------- -------------------- -----------------
Current assets
Inventories 374.5 508.2 407.9
Trade and other receivables 262.7 548.0 271.6
Current tax assets 26.4 - 34.3
Cash and cash equivalents 232.9 262.5 227.7
Derivative financial instruments 11.4 13.4 26.7
Assets classified as held for
sale - - 196.2
---------------------------------- ----------------- -------------------- -----------------
Total current assets 907.9 1 , 332.1 1,164.4
---------------------------------- ----------------- -------------------- -----------------
Total assets 2,681.8 3,415.6 3,047.6
---------------------------------- ----------------- -------------------- -----------------
Current liabilities
Borrowings (33.9) (22.3) (18.5)
Trade and other payables (442.9) (618.2) (460.8)
Lease liabilities (11.1) (9.6) (10.6)
Current tax liabilities (24.7) (24.0) (33.6)
Dividends payable - (99.5) -
Provisions for other liabilities
and charges (15.2) (59.6) (13.7)
Liabilities classified as held
for sale - - (45.5)
Total current liabilities (527.8) (833.2) (582.7)
---------------------------------- ----------------- -------------------- -----------------
Non-current liabilities
Borrowings (994.8) (1,233.0) (1,234.1)
Trade and other payables (0.4) (1.0) (0.4)
Lease liabilities (47.0) (38.2) (34.9)
Deferred tax liabilities (42.7) (74.3) (44.9)
Retirement benefit obligations (74.1) (83.4) (79.3)
Provisions for other liabilities
and charges (31.7) (18.2) (40.3)
---------------------------------- ----------------- -------------------- -----------------
Total non-current liabilities (1,190.7) (1,448.1) (1,433.9)
---------------------------------- ----------------- -------------------- -----------------
( 2,281.3
Total liabilities (1,718.5) ) (2,016.6)
---------------------------------- ----------------- -------------------- -----------------
Net assets 963.3 1 , 134.3 1,031.0
---------------------------------- ----------------- -------------------- -----------------
Equity
Share capital 46.7 46.7 46.7
Share premium 620.0 620.0 620.0
Capital redemption reserve 0.9 0.9 0.9
Hedging and translation reserve 19.6 46.4 75.9
Retained earnings 263.2 406.1 273.5
---------------------------------- ----------------- -------------------- -----------------
Equity attributable to equity
holders of the parent 950.4 1 , 120.1 1,017.0
Non-controlling interests 12.9 14.2 14.0
---------------------------------- ----------------- -------------------- -----------------
Total equity 963.3 1 , 134.3 1,031.0
---------------------------------- ----------------- -------------------- -----------------
Consolidated cash flow statement
for the six months ended 30 June 2023
Six months ended Six months ended Year ended 31
30 June 2023 30 June 2022 December 2022
(unaudited) (unaudited) (audited)
------------------ ------------------ ----------------
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- -------- -------- -------- ------- -------
Operating
Cash generated from operations
(Note 5) 78.0 25.8 237.7
- Interest received 5.0 0.3 1.6
- Interest paid (29.0) (13.5) (38.4)
- Interest element of lease
payments (0.7) (0.7) (1.4)
Net interest paid (24.7) (13.9) (38.2)
- UK corporation tax paid (3.0) - -
- Overseas corporate tax
paid (1.5) (49.3) (65.6)
Total tax paid (4.5) (49.3) (65.6)
---------------------------------- -------- -------- -------- -------- ------- -------
Net cash inflow/(outflow)
from operating activities 48.8 (37.4) 133.9
---------------------------------- -------- -------- -------- -------- ------- -------
Investing
Dividends received from
joint ventures 0.8 0.3 1.9
Purchase of property, plant
and equipment and other
intangible assets (33.9) (33.2) (90.8)
Purchase of business (8.3) (759.6) (759.6)
Net proceeds from sale
of business (Note 11) 206.1 0.3 0.3
---------------------------------- -------- -------- -------- -------- ------- -------
Net cash inflow/(outflow)
from investing activities 164.7 (792.2) (848.2)
---------------------------------- -------- -------- -------- -------- ------- -------
Financing
Dividends paid - - (99.5)
Settlement of equity-settled
share-based payments (0.3) (1.0) (1.5)
Repayment of principal
portion of lease liabilities (5.8) (4.7) (10.1)
Repayment of borrowings (556.3) (13.2) (207.6)
Proceeds of borrowings 345.4 564.9 733.2
Net cash (outflow)/inflow
from financing activities (217.0) 546.0 414.5
---------------------------------- -------- -------- -------- -------- ------- -------
Decrease in cash, cash
equivalents and bank overdrafts
during the period (3.5) (283.6) (299.8)
---------------------------------- -------- -------- -------- -------- ------- -------
Cash and cash equivalents
and bank overdrafts at
1 January 209.2 505.3 505.3
Foreign exchange (6.7) 18.5 3.7
---------------------------------- -------- -------- -------- -------- ------- -------
Cash and cash equivalents
and bank overdrafts at
period end 199.0 240.2 209.2
---------------------------------- -------- -------- -------- -------- ------- -------
See note 11 for further details of cash flows from discontinued
operations
Notes to the consolidated financial statements
for the six months ended 30 June 2023
1 Basis of preparation
Synthomer plc is a public company limited by shares 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 2023 have been prepared on the basis of the
policies set out in the 2022 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 2022 were approved by the Board of Directors
on 28 March 2023 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
During the period, the Group has undertaken a detailed going
concern assessment, reviewing the current and projected financial
position of the Group, including current assets and liabilities,
debt maturity profile, future commitments and forecast cash flows.
The downside scenario, outlining the impact of a severe but
plausible adverse case, results in a breach of the Group's existing
debt covenants within 12 months of approval of the interim
financial statements. In such a scenario, the lenders under the
Revolving Credit Facility and the UKEF Facilities would have the
right to demand immediate repayment of all amounts due under such
debt instruments (together approximately GBP558 million as at 30
June 2023), and any such demand would trigger the right of
bondholders under the Notes to similarly demand immediate repayment
(the amount borrowed under the Notes being approximately GBP447
million as at 30 June 2023, and total borrowings under the
Revolving Credit Facility, the UKEF Facilities and the Notes as at
30 June 2023 therefore being approximately GBP1,005 million). The
Group would be unlikely to obtain the funds necessary to repay such
amounts if they became immediately due and payable upon the demand
of the lenders following a covenant breach.
The key mitigating action relates to the proposed equity raise,
by way of a rights issue, to raise proceeds of GBP276 million (the
"Rights Issue"). The Directors are of the view that the equity
raise is fully committed and underwritten, taking into account
irrevocable undertakings entered into with, among others, Kuala
Lumpur Kepong Berhad, and the underwriting agreement entered into
with J.P. Morgan Cazenove, Morgan Stanley & Co. International
plc, Goldman Sachs International and Citigroup Global Markets
Limited. The Rights Issue is subject to shareholder approval on 25
September 2023 and, if successfully completed, the Rights Issue
will significantly strengthen the Group's financial position.
The Directors are confident that, for going concern purposes,
the proceeds from the Rights Issue alone are sufficient to avoid
the forecast debt covenants breach in the severe but plausible
adverse case for 12 months from the date of approval of these
financial statements, after inclusion of mitigating actions within
the Directors' control. This means that it is the outcome of the
shareholder vote, and the successful completion of the Rights Issue
that represents the material uncertainty within the Group's going
concern basis of preparation.
The Directors do not expect the assumptions in the severe but
plausible adverse case to materialise. Nonetheless, there is a
material uncertainty in respect of the outcome of the shareholder
vote on the Rights Issue. If the shareholders do not vote in favour
of the Rights Issue or the Rights Issue does not successfully
complete, the trading conditions envisaged in the severe but
plausible adverse case eventuate and the Group is unable to
successfully undertake alternative mitigating actions, the Group
would breach its debt covenants within 12 months of approval of
these financial statements. These conditions indicate a material
uncertainty that may cast significant doubt about the Group's
ability to continue as a going concern. This material uncertainty
is referenced in the external auditors' Independent Review Report
on page 31.
Notwithstanding the material uncertainty explained above, taking
account of all the factors explained in this statement, the
Directors have formed the judgement that it is appropriate to
prepare the interim financial statements on the going concern
basis. The interim financial statements therefore do not include
the adjustments that would result if the Group were unable to
continue as a going concern.
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 2023 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 2022 Annual Report. Estimates and underlying
assumptions are reviewed on an ongoing basis and at 30 June 2023
there were no material 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 2023, 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 Six months Year ended
ended June ended June 31 December
2023 (unaudited) 2022 (unaudited) 2022 (audited)
GBPm GBPm GBPm
------------------------------------------------- ----------------- ----------------- ---------------
Continuing Operations
Amortisation of acquired intangibles (24.3) (19.5) (44.8)
Restructuring and site closure costs (6.6) (4.5) (19.2)
Acquisition costs and related gains (1.3) (6.5) (6.5)
Sale of business - 0.3 (0.3)
Regulatory Fine - release of provision - 18.7 21.5
Impairment charge - - (133.7)
------------------------------------------------- ----------------- ----------------- ---------------
Total impact on operating loss (32.2) (11.5) (183.0)
------------------------------------------------- ----------------- ----------------- ---------------
Finance costs
Fair value gain on unhedged interest derivatives (1.8) 15.8 25.1
Loss on extinguishment of financing facilities (4.6) - -
------------------------------------------------- ----------------- ----------------- ---------------
Total impact on profit before taxation (38.6) 4.3 (157.9)
------------------------------------------------- ----------------- ----------------- ---------------
Taxation Special Items - - 3.6
Taxation on Special Items (4.9) (4.6) 39.3
------------------------------------------------- ----------------- ----------------- ---------------
Total impact on profit for the period
- continuing operations (43.5) (0.3) (115.0)
------------------------------------------------- ----------------- ----------------- ---------------
3 Special items (continued)
Six months Six months Year ended
ended June ended June 31 December
2023 (unaudited) 2022 (unaudited) 2022 (audited)
GBPm GBPm GBPm
Discontinued Operations
Amortisation of acquired intangibles - (3.2) (6.1)
Restructuring and site closure costs - (0.3) (0.3)
Sale of business 62.0 - (8.3)
Taxation on Special Items (25.7) - (0.2)
-------------------------------------- ----------------- ----------------- ---------------
Total impact on profit for the period
- discontinued operations 36.3 (3.5) (14.9)
-------------------------------------- ----------------- ----------------- ---------------
Total impact on profit for the period (7.2) (3.8) (129.9)
-------------------------------------- ----------------- ----------------- ---------------
Amortisation of acquired intangibles increased in 2023,
reflecting the full year effect of the amortisation on the customer
lists, patents, trademarks and trade secrets that arose on the
acquisition of Eastman's Adhesive Resins business. The intangible
assets arising on the acquisition are being amortised over a period
of 8-20 years mainly dependent on the characteristics of the
customer relationships.
Restructuring and site closure costs in 2023 comprise:
-- A GBP2.4 million charge in relation to the ongoing
integration of the Adhesive Resins business acquired from Eastman
in 2022;
-- A further GBP4.2 million, in relation to enacting the new the
strategy and the alignment of the business into its new divisions
effective in 2023.
Restructuring and site closure costs in 2022 comprised GBP1.3
million integration costs for the Adhesive Resins business, GBP2.2
million in relation to a site closure in Malaysia and further
GBP1.3 million in relation to the planning and implementation of
the Group-wide strategic review.
Acquisition costs and related gains of GBP1.3 million are for
the acquisition of Eastman's Adhesive Resins business. Acquisition
costs in 2022 also related to the acquisition of Eastman's Adhesive
Resins business and included GBP7.0 million of costs, mainly
professional advisor fees contingent on completion and the GBP4.9
million impact of unwinding the fair value adjustment on
acquisition of inventory, offset by a GBP5.4 million gain on the
foreign exchange derivative entered into in October 2021 to hedge
the acquisition price.
Sale of business represents the gain recognised on the sale of
the Laminates Films and Coated Fabrics business to Surteco, which
completed on 28 February 2023. In the prior year the sale of
business principally comprised to professional fees incurred in
relation to the sale.
During 2018, the European Commission initiated an investigation
into styrene monomer purchasing practices of a number of companies,
including Synthomer, operating in the European Economic Area. The
Company has fully cooperated with the Commission throughout the
investigation. In 2021, based on the information available and the
resulting assessment of the expected outcome of the investigation,
a provision of GBP57.2 million was made. In 2022, the Commission
concluded its investigation, resulting in a fine of GBP38.5
million.
In July 2018 the Group entered into swap arrangements to fix
euro interest rates on the full value of the then EUR440 million
committed unsecured revolving credit facility. The fair value
movement of the unhedged interest rate derivatives relates to the
movement in the mark-to-market of the swap in excess of the Group's
current borrowings.
In March 2023 the Group successfully refinanced its existing
bank loan facilities. All amounts outstanding on the existing
$260million term loan, $300 million term loan and EUR460 million
revolving credit facility were subsequently repaid and the
facilities were cancelled. All capitalised debt issue costs
relating to these term loans and facilities were written off
leading to a loss on extinguishment of GBP4.6 million.
A GBP133.7 million impairment charge was taken in 2022, relating
to the former Adhesives Technologies division. This was caused by
reliability and supply chain issues, demand weakness in key
adhesives markets and lower than expected delivered capacity.
The GBP4.9 million tax charge for continuing operations mainly
relates to deferred tax debits in relation to the amortisation of
acquired intangibles. The GBP25.7 million tax charge for
discontinuing operations primarily relates to the utilisation of
acquired US tax attributes and the current tax charge on the
disposal of the Laminates, Films and Coated Fabrics business.
4 Segmental analysis
The Group's Executive Committee, chaired by the Chief Executive
Officer, examines the Group's performance.
As part of the strategy refresh announced in October 2022, we
have changed the way we do business so we are closer to consumers,
more embedded in our customers' markets, and better able to deliver
the sustainable innovations that will drive our success. As of 1
January 2023 we have three new, market-focused divisions with
strong commercial positions and global reach:
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 2023 (unaudited)
------------------------ ----------------------------------------------------------------------------------------
Continuing Operations Discontinued Total
Operations
------------------------ ----------------------------------------------------------------- ------------ -------
Health
Coatings & Protection
& Construction Adhesive and Performance
Solutions Solutions Materials Corporate Total Total
2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Revenue
Total revenue 451.6 310.0 319.9 - 1,081.5 28.0 1,109.5
Inter-segmental
revenue - - (6.2) - (6.2) - (6.2)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
451.6 310.0 313.7 - 1,075.3 28.0 1,103.3
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
EBITDA 55.1 15.6 11.3 (10.0) 72.0 2.5 74.5
Depreciation and
amortisation (13.6) (14.2) (17.1) (3.7) (48.6) - (48.6)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Operating profit/(loss)
before 41.5 1.4 (5.8) (13.7) 23.4 2.5 25.9
Special Items
Special Items (14.1) (13.7) (1.1) (3.3) (32.2) 62.0 29.8
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Operating profit/(loss) 27.4 (12.3) (6.9) (17.0) (8.8) 64.5 55.7
Finance costs (39.0)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Profit before taxation 16.7
4 Segmental analysis (continued)
Six months ended 30 June 2022 (unaudited)
------------------------ ----------------------------------------------------------------------------------------
Continuing Operations Discontinued Total
Operations
------------------------ ----------------------------------------------------------------- ------------ -------
Health
Coatings & Protection
& Construction Adhesive and Performance
Solutions Solutions Materials Corporate Total Total
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Revenue
Total revenue 548.9 223.8 465.2 - 1,237.9 106.1 1,344.0
Inter-segmental
revenue - - (9.6) - (9.6) - (9.6)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
548.9 223.8 455.6 - 1,228.3 106.1 1,334.4
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
EBITDA 80.3 34.5 59.2 (11.2) 162.8 10.3 173.1
Depreciation and
amortisation (13.5) (7.3) (14.1) (2.6) (37.5) (3.6) (41.1)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Operating profit/(loss)
before 66.8 27.2 45.1 (13.8) 125.3 6.7 132.0
Special Items
Special Items (15.1) (9.9) (0.9) 14.4 (11.5) (3.5) (15.0)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Operating profit 51.7 17.3 44.2 0.6 113.8 3.2 117.0
Finance costs (1.5)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Profit before taxation 115.5
Year ended 31 December 2022 (unaudited)
------------------------ ----------------------------------------------------------------------------------------
Continuing Operations Discontinued Total
Operations
------------------------ ----------------------------------------------------------------- ------------ -------
Health
Coatings & Protection
& Construction Adhesive and Performance
Solutions Solutions Materials Corporate Total Total
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Revenue
Total revenue 996.1 572.9 831.3 - 2,400.3 201.2 2,601.5
Inter-segmental
revenue - - (16.4) - (16.4) - (16.4)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
996.1 572.9 814.9 - 2,383.9 201.2 2,585.1
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
EBITDA 120.8 67.2 81.9 (20.7) 249.2 15.9 265.1
Depreciation and
amortisation (26.7) (22.7) (31.3) (6.0) (86.7) (7.2) (93.9)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Operating profit/(loss)
before 94.1 44.5 50.6 (26.7) 162.5 8.7 171.2
Special Items
Special Items (31.3) (170.6) (3.4) 22.3 (183.0) (14.7) (197.7)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Operating profit/(loss) 62.8 (126.1) 47.2 (4.4) (20.5) (6.0) (26.5)
Finance costs (21.1)
------------------------ --------------- ---------- ---------------- --------- ------- ------------ -------
Loss before taxation (47.6)
5 Reconciliation of operating profit/(loss) to cash generated
from operations
Year ended
Six months Six months 31
ended 30 ended 30 December
June June 2022
2023 2022 (audited)
(unaudited) (unaudited) GBPm
Continuing and discontinued operations: GBPm GBPm
------------------------------------------------------ -------------- ------------ ----------
Operating profit /(loss) 55.7 117.0 (26.5)
Less: share of profits of joint ventures (0.7) (0.6) (1.7)
------------------------------------------------------ -------------- ------------ ----------
55.0 116.4 (28.2)
------------------------------------------------------ -------------- ------------ ----------
Adjustments for:
- Depreciation of property, plant and equipment 39.2 33.1 76.4
- Depreciation of right of use assets 5.6 4.4 9.6
- Amortisation of other intangibles 3.8 3.6 7.9
- Share-based payments 1.1 1.1 0.7
- Special Items (29.8) 15.0 197.7
Cash impact of restructuring and site closure
costs (10.8) (10.4) (25.9)
Cash impact of acquisition costs and related
gains (4.4) 2.1 1.7
Cash impact of settlement of interest rate derivative
contracts 12.1 - -
Pension funding in excess of service cost (5.7) (11.5) (21.3)
(Increase)/decrease in inventories 13.7 (71.0) (12.3)
Decrease/(increase) in trade and other receivables 1.6 (151.1) 147.0
(Decrease)/increase in trade and other payables (3.4) 94.1 (115.6)
------------------------------------------------------ -------------- ------------ ----------
Cash generated from operations 78.0 25.8 237.7
------------------------------------------------------ -------------- ------------ ----------
6 Taxation
The Group's Underlying effective tax rate for H1 2023 was 22.0%
(H1 2022: 22.5%; FY 2022: 22.5%), representing the best estimate of
the annual effective corporate income tax rate we expect for the
full year. We estimate the rate by applying the expected corporate
income tax rate for each tax jurisdiction in which we operate.
The effective tax rate is stable, although there is a
substantially different geographical profit mix compared to the
prior year. The total tax charge in Special Items was GBP30.6
million (H1 2022: GBP4.6 million tax credit; FY 2022: GBP42.7
million tax credit). The GBP4.9 million tax charge for continuing
operations mainly relates to deferred tax debits in relation to the
amortisation of acquired intangibles. The GBP25.7 million tax
charge for discontinuing operations primarily relates to the
utilisation of acquired US tax attributes and the current tax
charge on the disposal of the Laminates, Films and Coated Fabrics
business.
On 20 June 2023, Finance (No.2) Act 2023 was substantively
enacted in the UK, introducing a global minimum effective tax rate
of 15%. The legislation implements a domestic top-up tax and a
multinational top-up tax, effective for accounting periods starting
on or after 31 December 2023. The Group is reviewing this new
legislation to understand any potential impact. The Group has
applied the exception under the IAS 12 amendment regarding
recognising and disclosing information about deferred tax assets
and liabilities related to top-up income taxes.
7 Dividends
As part of a covenant amendment process in October 2022, the
Group suspended dividend payments.
8 Earnings per share
Six months ended Six months ended 30
30 June 2023 June 2022
(unaudited) (unaudited)
------------------------------ -------------------------------
Underlying Special Underlying Special
performance Items IFRS performance Items IFRS
------------------------------ ------ ------------ ------- ------- ------------ ------- --------
Profit/(loss) attributable
to equity holders of the
parent
* continuing GBPm (7.6) (43.3) (50.9) 82.0 0.3 82.3
* total GBPm (5.1) (7.0) (12.1) 88.6 (3.2) 85.4
------------------------------ ------ ------------ ------- ------- ------------ ------- --------
Number of shares
Weighted average number
of ordinary shares - basic '000 467,241 467,314
Effect of dilutive potential
ordinary shares '000 1,613 1 , 744
------------------------------ ------ ------------ ------- ------- ------------ ------- --------
Weighted average number
of ordinary shares - diluted '000 468,854 4 69,058
------------------------------ ------ ------------ ------- ------- ------------ ------- --------
Earnings per share for
profit from continuing
operations
Basic earnings per share pence (1.6) (9.3) (10.9) 17.5 0.1 17.6
Diluted earnings per share pence (1.6) (9.3) (10.9) 17.5 - 17.5
Earnings per share for
profit from discontinued
operations
Basic earnings per share pence 0.5 7.8 8.3 1.5 (0.8) 0.7
Diluted earnings per share pence 0.5 7.8 8.3 1.4 (0.7) 0.7
Earnings per share for
profit attributable to
equity holders of the parent
Basic earnings per share pence (1.1) (1.5) (2.6) 19.0 (0.7) 18.3
Diluted earnings per share pence (1.1) (1.5) (2.6) 18.9 (0.7) 18.2
------------------------------ ------ ------------ ------- ------- ------------ ------- --------
Year ended 31 December
2022
(audited)
---------------------------------
Underlying Special
performance Items IFRS
------------------------------ ------ ------------ ------- -------
Profit/(loss) attributable
to equity holders of the
parent
* continuing GBPm 88.6 (114.0) (25.4)
* total GBPm 96.4 (128.9) (32.5)
------------------------------ ------ ------------ ------- -------
Number of shares
Weighted average number
of ordinary shares - basic '000 467,311
Effect of dilutive potential
ordinary shares '000 1,019
------------------------------ ------ ------------ ------- -------
Weighted average number
of ordinary shares - diluted '000 468,330
------------------------------ ------ ------------ ------- -------
Earnings per share for
profit from continuing
operations
Basic earnings per share pence 19.0 (24.4) (5.4)
Diluted earnings per share pence 18.9 (24.3) (5.4)
Earnings per share for
profit from discontinued
operations
Basic earnings per share pence 1.6 (3.2) (1.6)
Diluted earnings per share pence 1.7 (3.3) (1.6)
Earnings per share for
profit attributable to
equity holders of the parent
Basic earnings per share pence 20.6 (27.6) (7.0)
Diluted earnings per share pence 20.6 (27.6) (7.0)
------------------------------ ------ ------------ ------- -------
9 Analysis of net debt
31 December
30 June 30 June 2022
2023 2022 (audited)
(unaudited) (unaudited) GBPm
GBPm GBPm
------------------------------------- ------------- ------------ -----------
Bank overdrafts (33.9) (22.3) (18.5)
------------------------------------- ------------- ------------ -----------
Current liabilities (33.9) (22.3) (18.5)
------------------------------------- ------------- ------------ -----------
Bank loans (551.1) (790.2) (777.7)
EUR520m 3.875% senior unsecured loan
notes due 2025 (443.7) (442.8) (456.4)
------------------------------------- ------------- ------------ -----------
Non-current liabilities (994.8) (1,233.0) (1,234.1)
------------------------------------- ------------- ------------ -----------
Total borrowings (1,028.7) (1,255.3) (1,252.6)
------------------------------------- ------------- ------------ -----------
Cash and cash equivalents 232.9 262.5 227.7
------------------------------------- ------------- ------------ -----------
Net Debt (795.8) (992.8) (1,024.9)
------------------------------------- ------------- ------------ -----------
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 GBP10.2 million at 30 June
2023 (30 June 2022: GBP10.4 million 31 December 2022: GBP14.2
million).
10 Defined Benefit Schemes
We have updated the value of the defined benefit plan assets to
reflect their market value as at 30 June 2023. 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 GBP10.8 million to GBP62.6 million, which
includes an asset of GBP11.5 million for the UK scheme. This
GBP10.8 million reduction largely comprised GBP6.0 million of cash
contributions and actuarial gains of GBP3.3 million.
11 Sale of Business
On 13 December 2022, the Group announced that it had entered
into an agreement to sell its Laminates, Films and Coated Fabrics
businesses to Surteco North America, Inc. The UK Financial Conduct
Authority approved the transaction on 16 December 2022. Shareholder
approval was subsequently obtained on 11 January 2023 and the
transaction completed on 28 February 2023.
A summary of the proceeds and disposed assets during the period
is set out below:
Total
GBPm
Consideration
Cash consideration 226.1
Deferred consideration 6.6
Total 232.7
------------------------------ ------
Net assets sold:
Goodwill 43.8
Intangible assets 43.0
Property Plant and equipment 57.6
Inventory 31.4
Cash and cash equivalents 12.4
Trade and other receivables 25.5
Trade and other payables (43.0)
Total 170.7
------------------------------ ------
Transaction costs expensed
in the period (0.5)
Reclassification of foreign
currency translation reserve 0.5
Tax expense on sale (25.7)
------------------------------ ------
Gain on sale after tax 36.3
------------------------------ ------
Total
GBPm
Net cash inflow in the
period from sale of business
Cash consideration in the
period 226.1
Transaction costs paid in
the period (7.6)
------------------------------ ------
Cash consideration after
transaction costs 218.5
Cash outflow with business (12.4)
------------------------------ ------
Net proceeds from disposal
of business 206.1
------------------------------ ------
Including prior period transaction costs and deferred
consideration, the total proceeds are GBP232.7m ($280.0m) and the
total transaction costs are GBP9.0m ($11.5m), giving a total
proceeds after transaction costs of GBP223.8m ($268.5m).
11 Sale of business (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 prior-year figures in the consolidated income statement have
been restated in accordance with IFRS 5 to report the discontinued
operations separately from continuing operations.
The Laminates, Films and Coated Fabrics businesses all formed
part of the Health & Protection and Performance Materials
division.
Six months
Six months ended ended Year ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------- ------------------------------------------- ------------ -------------
Revenue 28.0 106.1 201.2
-------------------------------- ------------------------------------------- ------------ -------------
EBITDA 2.5 10.3 15.9
-------------------------------- ------------------------------------------- ------------ -------------
Depreciation and amortisation
- Underlying performance - (3.6) (7.2)
-------------------------------- ------------------------------------------- ------------ -------------
Operating profit - Underlying
performance 2.5 6.7 8.7
-------------------------------- ------------------------------------------- ------------ -------------
Special Items 62.0 (3.5) (14.7)
-------------------------------- ------------------------------------------- ------------ -------------
Operating profit / (loss)
- IFRS 64.5 3.2 (6.0)
-------------------------------- ------------------------------------------- ------------ -------------
Finance costs - - (0.4)
-------------------------------- ------------------------------------------- ------------ -------------
Profit / (loss) before taxation 64.5 3.2 (6.4)
-------------------------------- ------------------------------------------- ------------ -------------
Taxation (25.7) (0.1) (0.7)
-------------------------------- ------------------------------------------- ------------ -------------
Profit/(loss) for the period 38.8 3.1 (7.1)
-------------------------------- ------------------------------------------- ------------ -------------
Cash flows from discontinued operations
Six months Year ended
Six months ended ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (unaudited)
GBPm GBPm GBPm
---------------------------- ------------------------------------------- ------------ -------------
Net cash (outflow) / inflow
from operating activities (2.8) 3.3 5.6
Net cash inflow / (outflow)
from investing activities 206.1 (1.5) (4.0)
---------------------------- ------------------------------------------- ------------ -------------
12 Capital commitments
The capital expenditure authorised but not provided for in the
interim financial statements as at 30 June 2023 was GBP25.4
million (30 June 2022: GBP19.0 million; 31 December 2022:
GBP32.6 million).
13 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated. Other than the relationships
with defined benefit pension schemes as disclosed in note 29 of the
2022 Annual Report, there were no other related party transactions
requiring disclosure.
Kuala Lumpur Kepong Berhad Group holds 26.87% of the Company's
shares and is considered to be a related party.
14 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.
15 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.
15 Risks and uncertainties (continued)
These principal risks are categorised into the following
types:
-- Strategic
-- Operational
-- Compliance
-- Financial
These risks are detailed on pages 78 to 83 of the 2022 Annual
Report which is available on our website at
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.
16 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;
* 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.
Statement of Directors' responsibilities
The Directors confirm that these condensed interim financial
statements have been prepared in accordance with UK adopted IAS 34
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a
fair review of the information required by the DTR 4.2.7 R and DTR
4.2.8 R, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the 2022 Annual Report.
The Directors of Synthomer plc are listed in the Synthomer plc
annual report for 31 December 2022 with the exception of the
following changes:
-- Brendan Connolly retired from the Board at the end of the AGM on 16 May 2023
-- Martina Flöel was appointed as Independent Non-Executive Director on 1 September 2023
A list of current directors is maintained on the Synthomer plc
website: www.synthomer.com .
The Directors are responsible for the maintenance and integrity
of, amongst other things, the financial and corporate governance
information as provided on the Synthomer website. Legislation in
the United Kingdom governing the preparation and dissemination of
financial information may differ from legislation in other
jurisdictions.
On behalf of the Board of Directors
M Willome L Liu
Chief Executive Officer Chief Financial Officer
7 September 2023
Independent review report to Synthomer plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Synthomer plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
interim results for the six months ended 30 June 2023 of Synthomer
plc for the six month period ended 30 June 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2023;
-- the consolidated income statement and the consolidated
statement of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
for the six months ended 30 June 2023 of Synthomer plc have been
prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results for the six months ended 30 June 2023 and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial
statements.
Material uncertainty related to going concern
In forming our conclusion on the interim financial statements,
which is not modified, we have considered the adequacy of the
disclosure made in note 1 to the interim financial statements
concerning the group's ability to continue as a going concern. The
group's going concern severe but plausible adverse scenario,
results in a breach of the group's existing debt covenants within
12 months of approval of the interim financial statements. In such
a scenario, the lenders would be able to demand immediate repayment
of the senior loan notes in full, and the group would be unable to
satisfy this obligation based on its forecasted liquidity. The key
mitigating action relates to the proposed equity raise, by way of a
rights issue and capital reorganisation. The right issue is subject
to shareholders approval subsequent to the publication of the
interim results. Therefore there is an uncertainty in respect of
the outcome of the shareholder vote on the rights issue and capital
reorganisation. If unsuccessful, the trading conditions envisaged
in the severe but plausible adverse scenario, would result in the
group breaching its debt covenants within 12 months of approval of
the interim financial statements. These conditions, along with the
other matters explained in note 1 to the interim financial
statements, indicate the existence of a material uncertainty which
may cast significant doubt about the group's ability to continue as
a going concern. The interim financial statements do not include
the adjustments that would result if the group were unable to
continue as a going concern.
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
applied the going concern basis of accounting in the preparation of
the interim financial statements.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results for the six months ended 30 June 2023,
including the interim financial statements, is the responsibility
of, and has been approved by the directors. The directors are
responsible for preparing the interim results for the six months
ended 30 June 2023 in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the interim results for the six
months ended 30 June 2023, including the interim financial
statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results for the six months
ended 30 June 2023 based on our review. Our conclusion is based on
procedures that are less extensive than audit procedures, as
described in the Basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Watford
7 September 2023
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September 07, 2023 02:00 ET (06:00 GMT)
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