REG - Synthomer PLC - Final Results
28/03/2023 07:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230328:nRSb3881Ua&default-theme=true
RNS Number : 3881U Synthomer PLC 28 March 2023
Synthomer plc
Preliminary Results for the year ended 31 December 2022
Solid performance with strong strategic delivery in a challenging year
Full year ended 31 December 2022 2021 Constant currency(1)
Change
£m £m % %
Continuing operations(*)
Revenue 2,383.9 2,144.2 +11.2 +9.7
Functional Solutions (FS) 127.8 139.2 (8.2) (9.4)
Industrial Specialities (IS) 31.8 23.4 35.9 36.8
Adhesive Technologies (AT)** 39.5 - - -
Performance Elastomers (PE) 49.1 320.7 (84.7) (84.2)
Acrylate Monomers (AM) 21.7 35.3 (38.5) (39.1)
Corporate (20.7) (20.6)
EBITDA(2) 249.2 498.0 (50.0) (50.0)
EBITDA % of revenue 10.5% 23.2%
Underlying(3) operating profit (EBIT) 162.5 432.8 (62.5) (62.1)
Statutory operating (loss)/profit (EBIT) (20.5) 296.5 (106.9)
Results from continuing and discontinued operations*
Underlying(3) profit before tax 125.0 420.1 (70.2) (69.8)
Statutory (loss)/profit before tax (47.6) 283.9 (116.8)
Underlying(3) EPS (p) 20.6 75.2 (72.6)
Basic EPS (p) (7.0) 48.3 (114.5)
Free Cash Flow(4) 69.2 217.6 (68.2)
Net debt(5) 1,024.9 114.2
* The Laminates, Films and Coated Fabrics business sold on 28 February
2023, which generated revenue of £201.2m and EBITDA of £15.9m in 2022, is
classed as a discontinued operation throughout this announcement.
** Comprises the nine month contribution from the adhesive resins
acquisition which completed in April 2022.
Solid financial performance (Total Group revenue £2,585.1m, Total Group EBITDA £265.1m including discontinued operations) following exceptional 2021 results, amidst year-long nitrile latex destocking and deteriorating macroeconomic conditions during H2
− H1 growth in all divisions excluding Performance Elastomers; demand in
construction, coatings and adhesives end-markets progressively weakened over
Q3 and Q4
− Performance Elastomers saw significantly reduced demand for nitrile
butadiene rubber (NBR) due to extreme medical gloves inventories built up in
the COVID-19 pandemic
− Adhesive Technologies synergies on track; Q4 trading impacted by raw
material supply and asset reliability issues which are being resolved. These
issues, together with lower-than-expected capacity, result in £133.7m
non-cash goodwill impairment
Actions taken to reinforce financial resilience given current trading conditions and to support strategy
− £131.2m Free Cash Flow in H2 (compared with £(62.0)m outflow in H1),
supported by rigorous focus on costs, capital expenditure and working capital
actions to preserve cash
− On track to deliver £150-200m cash savings target by end 2023
− New $480m revolving credit facility signed in March 2023, with longer
duration and prudent covenant headroom reflecting current market uncertainties
− £1,024.9m net debt at end December 2022; reduced substantially after
year end with cash proceeds of Laminates, Films and Coated Fabrics sale
completed in February 2023
− Committed pro forma liquidity of c.£500m as at end February 2023,
including new revolving credit facility as well as the £450m UK Export
Finance facility and €200m receivables financing put in place during H2 2022
New strategy implemented to increase speciality weighting and focus on higher growth end-markets
− Divisions reorganised into Coatings & Construction Solutions
(CCS), Adhesive Solutions (AS) and Health & Protection and Performance
Materials (HPPM); effective 1 January 2023
− Targeting stronger organic growth through increased innovation,
sustainability and end-market focus, with margin enhancement from end-to-end
business excellence and streamlining manufacturing footprint
− More focused capital and resource allocation - differentiated steering
for base and speciality businesses reflected in capital expenditure, cost and
portfolio plans
− Take full advantage of Synthomer's enhanced global reach, product and
customer footprint following adhesive resins acquisition completed in April
2022 and other acquisitions in recent years
− Portfolio rationalisation underway, with c.£565m 2022 revenue in
non-core businesses remaining, following sale of Laminates, Films and Coated
Fabrics for net $267m proceeds
Good progress on innovation, sustainability and other non-financial targets:
− 36% reduction of scope 1 & 2 carbon footprint vs 2019; more
ambitious absolute decarbonisation targets set, aligned with 2015 Paris
agreement
− Internal carbon price set for all sustainability-related projects and
any significant capital projects; 80% of electricity from renewable sources
− Sustained focus on innovation - 20% of sales volume from new and
patented products; proportion of new products with enhanced sustainability
benefits increased to 50%
− Growing momentum in diversity, equality and inclusion - improving
gender balance at senior management and graduate intake levels
Current trading and outlook
Our year to date trading performance reflects the continuation of the
challenging macroeconomic conditions in the final quarter of 2022, with
subdued levels of demand across most of our end markets and geographies. We
expect to make progress in the second half of 2023 reflecting the benefits of
our operational and cost actions, supplemented by the anticipated start of an
improvement in market conditions, although visibility of this is currently
limited. As previously indicated, while underlying end-market demand for
medical gloves remains robust, we do not expect the unprecedented period of
destocking, and hence low NBR production levels, to abate before the end of
2023.
We have taken decisive actions to strengthen our business in the current
difficult environment and position ourselves for profitable growth as demand
recovers. We remain confident in our ability to execute Synthomer's refreshed
strategy and deliver the medium term targets we set out in October 2022, 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:
"Following an exceptional prior year and a robust first half, our overall
performance in 2022 was significantly affected by deteriorating macroeconomic
conditions during the second half and the prolonged destocking in nitrile
latex. The Group has been swift to respond. We are on track to save £150-200m
of cash by the end of this year, have rapidly executed the first successful
divestment from our non-core business portfolio and completed a refinancing
with our banks, strengthening the Group's financial platform. We are
implementing operational changes to strengthen delivery in our adhesives
business whilst executing our new strategy which will increase our focus on
the more speciality, higher growth end markets in our portfolio. This
strategy, together with the Group's larger global footprint and the depth and
breadth of our innovation and sustainability capabilities, means that we are
well-positioned to make progress toward our medium term profitable growth
targets."
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 9:00 British
Summer Time today at JP Morgan, 45 Victoria Embankment London. The meeting
will also be webcast at www.synthomer.com (http://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: 1.1.
Synthomer plc is a leading supplier of high-performance, specialty polymers
and ingredients for coatings, construction, adhesives, and healthcare end
markets. Headquartered in London, UK and listed there since 1971, we employ
around 5,000 employees across nearly 40 locations across Europe, USA and Asia.
With more than 6,000 customers and £2.4bn in 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 polymer
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 chemical formulations 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 have been recognized for our leadership in
sustainability by a number of authorities. 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
(https://isynthomer.sharepoint.com/teams/GroupFinanceTeam-GroupReporting/Shared%20Documents/Group%20Reporting/Year%20End%202022/Presentation/www.synthomer.com)
, @Synthomer_Group on Twitter or search for Synthomer on LinkedIn.
Chief Executive Officer's review
Focusing our business for future opportunities
In more challenging times it is more important than ever to be close to our
customers, to focus on the things we do best and to follow a clear strategy.
2022 has certainly seen its share of challenges for Synthomer, for our people
and our wider stakeholders. Following the unprecedented demand for nitrile
latex in 2020 and 2021, we have experienced a prolonged destocking of medical
gloves, which our customers manufacture from our nitrile butadiene latex
(NBR), resulting in far weaker levels of demand. The war in Ukraine, ongoing
COVID-19 disruption and broader recessionary pressures have all contributed to
economic volatility, including supply chain disruptions, sustained higher raw
material costs and energy price hikes. The cost-of-living crisis has affected
a number of our markets, with demand deteriorating over the course of the
second half of the year. And during the fourth quarter, the macroeconomic
environment also began to affect demand in our Adhesive Technology business,
alongside the additional impact of supply chain issues constraining access to
raw materials and site reliability challenges, which we are working to
resolve, as well as the impact of lower-than-expected capacity.
We are grateful to our people, who have continued to demonstrate real
commitment to deliver for our customers around the world throughout this
volatile period. The Total Group revenue of £2.6 billion and EBITDA of
£265.1 million delivered in 2022 was a solid performance given the challenges
we have faced. At the same time, and crucially for the future of Synthomer, we
have launched a refreshed strategy and reorganised our business - work that is
centred on becoming a truly global specialised chemical company, concentrated
on three attractive growth markets: coatings and construction, adhesives, and
health and protection. It gives us a clear pathway to emerge stronger and more
focused from these volatile times - and a platform from which to create
sustainable value for all our stakeholders.
Towards specialised, high-performance, high-growth markets
Our refreshed strategy and new structure make our business simpler, more
efficient and more sharply focused on areas where we add most value. It will
move us towards the more specialised, higher-performance, higher-growth
markets where we know we can win. We are becoming more end-market focused,
with sustainability and innovation at the centre of what we do. We are also
driving a Group-wide emphasis on making our execution bolder and faster
through business excellence.
Just as importantly, the new strategy renews our focus on organic growth and
portfolio management. Our business has expanded significantly through
acquisitions in recent years, giving us greater reach globally and
particularly in North America, opening up opportunities in attractive markets,
reinforcing our innovation capabilities and strengthening our leadership
positions. However, that expansion has also made our business more complex and
taken us into some non-core areas - perfectly strong and sound businesses in
themselves, but either more cyclical in nature or too small for us to generate
strong, consistent growth.
Following a full evaluation of our portfolio we are now allocating capital
more effectively, applying differentiated steering to invest in core areas
where it will have the most impact. We are also rationalising our portfolio
through the disposal of non-core businesses. We took an important step in this
process when we announced the sale of the Laminates, Films and Coated Fabrics
businesses in December 2022. This sale, which completed on 28 February 2023,
increases the speciality weighting of our overall portfolio and is margin
accretive in line with our strategy. The $267 million cash proceeds (including
$5 million payable in 2024) will also help strengthen our balance sheet and
support our drive to reduce our leverage to our medium-term target of between
1 and 2x net debt to EBITDA - another key strategic focus. Our CFO Lily Liu
describes this further on pages 7-8, alongside the work we are doing to
improve our working capital position and optimise our cost base.
Harnessing growth to sustainability
Our strategy aims to bring us closer to our customers, immersing us in their
markets so we can identify the trends driving demand and develop the solutions
to meet them.
Sustainability is one of the most important of these trends. Regulation is
driving the requirement for cleaner, more environmentally friendly solutions
and for renewable raw materials. As a market leader in water-based and
emission-reducing polymers, that creates a huge opportunity for Synthomer.
We have a long track record of helping our customers towards their own
sustainability goals. Our emission-reducing solutions and
lower-carbon-intensity operations all make a positive contribution towards
customers' Scope 3 carbon footprints. Our capabilities and products can help
our customers in multiple areas - whether that is replacing solvent-based
coatings with water-based alternatives, developing water-based polymers and
redispersible powders for construction customers, or innovating bio-based,
low-carbon-footprint and circular solutions for adhesives.
We are also making progress with our own sustainability objectives. Our Vision
2030 ESG programme is a long-term, embedded part of our business strategy - a
key part of ensuring we remain competitive, as well as the responsible
approach to doing business. We are committed to science-based targets to
navigate our decarbonisation, and are targeting 60% of our new products to
have sustainability benefits by 2030. We have already delivered a 36%
reduction in absolute Scope 1 and 2 emissions since 2019, and we are actively
working on reducing Scope 3. In 2022 we made our decarbonisation objectives
more ambitious and focused on absolute reductions rather than lower carbon
intensity, in alignment with the 2015 Paris Agreement. We hold the London
Stock Exchange Green Economy Mark, awarded to companies who earn more than 50%
of their revenue from products that contribute to environmental objectives.
This year we were upgraded from an 'A' to a 'AA' rating by MSCI, putting us in
the top quartile of ESG performance for the Specialty Chemicals sector.
Diversity and inclusion: at the heart of our strategy
The dynamism and resilience of any business is created by the people who work
there - and I strongly believe that diverse teams help create better ideas and
drive innovation in what and how we deliver.
Diversity and inclusion forms a critical pillar of our refreshed business
strategy, and has been a focus for me from my first day at Synthomer, because
it is vital to delivering value for all our stakeholders. We have made strong
progress this year, particularly in the leadership team, which has been
transformed by several appointments that have broadened the range of
backgrounds and experiences we can draw on, and which now contains more women
than ever before. Of course there is more we can do, and to ensure we maintain
our recent momentum in this area we have committed to achieving 40% gender
diversity across senior management by 2030 as a stepping stone to true gender
balance.
The evolution of our strategy does not mean a change in our values however -
among which our highest priority remains safety, health and environment (SHE).
We know that we have more to do on safety in particular. Our legacy businesses
have benefited over many years from our SHE programme and continue to perform
well. Our near-term objective is to ensure that newly acquired businesses are
aligned to Synthomer standards within a three-year cycle. That process is on
track at our former OMNOVA sites, which show good improvement since
acquisition; we are applying the same rigour to the adhesive resins sites
acquired in 2022.
Positioning Synthomer for profitable growth
The actions that we have taken will enable Synthomer to navigate the current
difficult environment and ensure that the Group is in a strong position to
make progress when macroeconomic conditions improve. Looking ahead, we will
continue to enhance our efficiency through asset optimisation and by improving
cost control and capacity management throughout the Group. In our new Coatings
& Construction Solutions division, our focus is on driving organic growth.
In Adhesive Solutions we will increase operational and supply chain
reliability, reprioritising capital expenditure to support debottlenecking and
broaden raw material supply while taking further steps to reduce working
capital to typical Group levels. We will also benefit from recent
organisational changes and the implementation of Synthomer's operational
excellence standards. Within Health & Protection and Performance
Materials, we will continue to strengthen our cost competitiveness and enhance
customer intimacy while reviewing opportunities to divest other non-core
businesses.
Synthomer is on a journey to become a global specialised chemical company
focused on three core end markets, with excellence embedded throughout our
business and a sharp focus on sustainable innovation. While we are
experiencing such a challenging point in the trading cycle for our key
markets, we will continue to focus on generating cash and strengthening our
balance sheet. But cycles move on, and I am confident that our strategy is the
right one - and that it will make us a trusted and responsible player in our
customers' value chains, meeting the needs of the end consumer through
sustainable innovation, so that we grow back stronger and continue to deliver
on our purpose of creating innovative and sustainable polymer solutions for
the benefit of customers and society.
Outlook
Our year to date trading performance reflects the continuation of the
challenging macroeconomic conditions in the final quarter of 2022, with
subdued levels of demand across most of our end markets and geographies. We
expect to make progress in the second half of 2023 reflecting the benefits of
our operational and cost actions, supplemented by the anticipated start of an
improvement in market conditions, although visibility of this is currently
limited. As previously indicated, while underlying end-market demand for
medical gloves remains robust, we do not expect the unprecedented period of
destocking, and hence low NBR production levels, to abate before the end of
2023.
We have taken decisive actions to strengthen our business in the current
difficult environment and position ourselves for profitable growth as demand
recovers. We remain confident in our ability to execute Synthomer's refreshed
strategy and deliver the medium term targets we set out in October 2022, 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
28 March 2023
Financial review - Chief Financial Officer introduction
Strengthening the balance sheet as a platform for delivering our strategy
The challenges Synthomer has had to address in 2022 have already been
described. What has been clear to me in my first few months at the Company is
that despite those headwinds, Synthomer has a strong underlying business, and
has the strategy, structure and people in place to emerge from the current
operating environment well positioned for future success. It is also clear
that in order to do that, we need a strong balance sheet - which continues to
be my top priority as CFO. So before discussing the details of our performance
this year I will start by outlining some of the actions we have taken to
improve our balance sheet and create the platform for the delivery of our
strategy.
Portfolio management to focus on core, speciality businesses
Our refreshed strategy is focused on attractive end markets where our
expertise in sustainable innovation will give us competitive advantage; it has
resulted in our reorganisation into three market-focused divisions and helped
us to identify the core and non-core, speciality and base chemical elements of
our portfolio.
While our portfolio management remains strategic rather than driven by cash
considerations, making the right divestments naturally improves our balance
sheet. In December 2022, we agreed the sale of our non-core Laminates, Films
and Coated Fabrics businesses for net cash proceeds of $267 million. The sale,
which completed in February 2023, increases the speciality weighting of our
overall portfolio in line with our strategy, and the proceeds have been used
to strengthen our financial position. We have identified other non-core
businesses which we are reviewing for potential disposal. In the future we
expect our portfolio management to include bolt-on acquisitions aligned to our
speciality focus - but only when the balance sheet allows it.
Our new divisional structure also enables differentiated steering in our
allocation of financial and operational resources, including capital
allocation. We intend to allocate c.75% of capital to our Coatings &
Construction Solutions and Adhesive Solutions divisions and c.25% to Health
& Protection and Performance Materials.
Delivering on working capital, headroom and costs
Given the deteriorating macroeconomic environment during the second half, we
decided to scale back capital expenditure in 2022 from c.£150 million to £91
million, and expect it to be modestly lower again in 2023. We are also
simplifying our organisation and scrutinising cost across the business to
drive further efficiencies. We also took the decision to suspend dividend
payments for a time while we focus on reducing leverage towards our medium
term target of between 1 and 2x net debt to EBITDA.
Our strong focus on cash flow in the second half resulted in the H1 free cash
outflow of £62.0 million reversing to a £131.2 million inflow in H2,
including a new receivables factoring programme. We will take a tactical
approach to working capital, and in particular there are further benefits to
be secured from improving the working capital position of the recently
acquired adhesive resins business. Overall we are targeting £150 to £200
million of cash savings relative to our previous plans by the end of 2023.
Meanwhile, in October 2022 we secured additional headroom when we reached
agreement with our banking syndicates to widen debt covenants and
significantly improved our financing structure by signing a five-year, £450
million facility with UK Export Finance. The UK Export Finance facility, 80%
guaranteed by the government, is designed to promote business success,
innovation and sustainability in the UK.
After the year end, the Group agreed a new $480 million revolving credit
facility which extends the duration of our financing and includes prudent
levels of covenant headroom given the current challenging market conditions.
Solid performance in a challenging year
Although we reorganised into three new divisions in January 2023, we are
reporting 2022 performance under the former divisional structure, which was in
place up to the end of 2022. The increasing headwinds we faced particularly as
the second half of the year went on are clearly reflected in these results,
which also suffer by comparison to the exceptional 2021 performance.
Nonetheless the solid performance of many of our operations supports my belief
that Synthomer is a fundamentally strong business with considerable value
creation opportunities ahead. This is a tribute to the work of teams
throughout the Group to meet our customers' needs in very challenging times.
Revenue for the continuing Group increased by 9.7% in constant currency, with
the contribution of the acquired adhesive resins business and an 8.4% benefit
from robust price/mix offsetting a 17.0% reduction in volume. EBITDA for the
continuing Group in 2022 was £249.2 million (2021: £498.0 million).
Functional Solutions EBITDA of £127.8 million (2021: £139.2 million) and
Industrial Specialities EBITDA of £31.8 million (2021: £23.4 million,
excluding the discontinued Laminates, Films and Coated Fabrics businesses)
both reflected relatively robust performances in the first half followed by a
progressively more challenging second half as the macroeconomic cycle turned
and reduced end-user demand. In the fourth quarter, these headwinds also began
to affect demand for Adhesive Technologies' products (EBITDA since 1 April
2022 acquisition: £39.5 million). The division also experienced a number of
reliability and supply chain issues which we are in the process of addressing,
as well as lower-than-expected capacity acquired. As a result we took a
£133.7 million non-cash impairment charge to write-off substantially all of
the adhesive resins acquisition goodwill. Performance Elastomers EBITDA was
£49.1 million - a significant reduction from its unprecedented performance of
£320.7 million in 2021, which was driven by pandemic-related medical glove
demand. The magnitude of the equally unusual destocking cycle that followed is
demonstrated by comparing the division's 2022 outturn with its pre-pandemic
2019 EBITDA of £96.3 million. Acrylate Monomers EBITDA of £21.7 million
(2021: £35.3 million) continues to normalise from the very strong levels
achieved in 2021 as a result of an extreme supply/demand imbalance in that
year.
Setting out our medium-term targets
We described our medium-term targets for the business as part of the strategy
refresh in October 2022. In line with the growth we anticipate in our markets,
we expect mid-single-digit growth over the cycle on a constant currency basis.
We aim to bring our EBITDA margin above 15%, driven by sustainable innovation
and better product mix, and supported by streamlining and simplifying our
manufacturing operations and supply chains. And over time we expect our
business to deliver return on invested capital (ROIC) in the mid-teens,
underpinned by our working capital and capital allocation discipline. While
strengthening our balance sheet remains my top priority, we are also
implementing the longer-term changes to our strategy and business which will
deliver against these targets and sustainably create value for our
shareholders and other stakeholders.
Lily Liu
Chief Financial Officer
28 March 2023
Financial review (continued)
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 net cash proceeds received at completion amounted to $262
million after transaction expenses and adjustments for working capital, debt
and debt-like items, with a further $5 million 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.
Special Items - continuing operations
Full year ended 31 December 2022 2021
£m £m
Amortisation of acquired intangibles (44.8) (30.1)
Impairment charge (133.7) -
Restructuring and site closure costs (19.2) (29.7)
Acquisition costs and related gains (6.5) (11.9)
Sale of business (0.3) (7.4)
Regulatory fine 21.5 (57.2)
Total impact on operating loss (183.0) (136.3)
Fair value gain on unhedged interest derivatives 25.1 6.2
Total impact on loss before taxation (157.9) (130.1)
Taxation Special Items 3.6 8.8
Taxation on Special Items 39.3 11.5
Total impact on loss for the year - continuing operations (115.0) (109.8)
The following items of income and expense have been reported as Special Items
- continuing operations:
Amortisation of acquired intangibles increased in 2022, reflecting the
amortisation on the customer lists, patents, trademarks and trade secrets
arising on the acquisition of Eastman's adhesive resins business. The fair
value of the intangible assets arising on the acquisition, amounting to
£273.2 million, are being amortised over a period of 8-20 years.
A £133.7 million non-cash impairment charge was taken in the year, relating
to the Adhesives Technologies division. This reflected reliability and supply
chain issues, which we are working to resolve, and lower-than-expected
capacity acquired, reducing the forecast earnings from the adhesive resins
acquisition used for impairment testing.
Restructuring and site closure costs in 2022 comprise a £9.3 million charge
in relation to the ongoing integration of the acquired adhesive resins
business into the Group, a £3.2 million charge in relation to closure of one
of the smaller sites in Malaysia; and a further £6.7 million in relation to
further demolition and site rationalisation costs, as well as costs in
relation to the strategy refresh and alignment of the business into its new
divisions effective in 2023.
Restructuring and site closure costs in 2021 comprised £13.2 million of
OMNOVA integration costs following its acquisition in 2020, an £11.6 million
charge to demolish and rationalise assets at a small number of sites to bring
them into line with our sustainability strategy, and a further £4.9 million
to complete the rationalisation of the Group's European Performance Materials
network.
Acquisition costs and related gains are for the acquisition of the adhesive
resins business and comprise £11.9 million of costs, mainly professional
adviser fees, offset by a £5.4 million gain on a foreign exchange derivative
entered into in October 2021 to hedge the acquisition price. Acquisition costs
in 2021 also related to the acquisition of adhesive resins.
In 2021 sale of business comprised a £7.1 million loss on the onerous
contract for the disposal of Synthomer's European Tyre Cord business in 2020.
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, Synthomer made a provision of £57.2 million. In 2022, the
Commission concluded its investigation, resulting in a fine of £38.5 million,
to be paid in Q3 2023, resulting in a credit to the P&L via Special Items
in 2022.
In July 2018 the Group entered into swap arrangements to fix euro interest
rates on the full value of the then €440 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 borrowings in the year.
Taxation Special Items comprised a prior period adjustment in relation to a
historical tax issue in Malaysia.
Taxation on Special Items is mainly deferred tax credits arising on the
amortisation of acquired intangibles and restructuring costs.
£14.9 million of Special Items - discontinued operations (2021: £5.8
million) were also recognised, including £6.1 million (2021: £6.1 million)
of amortisation of acquired intangibles, £0.3 million in restructuring and
site closure costs, and £8.3 million related to the costs, primarily
professional fees, incurred in conjunction with the sale of the Laminates,
Films and Coated Fabrics businesses to Surteco.
Finance costs
Full year ended 31 December 2022 2021
£m £m
Net interest payable 43.2 26.9
Net interest expense on defined benefit obligation 1.2 2.0
Interest element of lease payments 1.4 1.5
Underlying finance costs 45.8 30.4
Fair value gain on unhedged interest derivatives (25.1) (6.2)
Total finance costs 20.7 24.2
Underlying finance costs increased to £45.8 million (2021: £30.4 million)
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, which completed in April
2022, as well as higher base rates.
The Group's borrowings under the committed unsecured €460 million revolving
credit facility remained below the total of the related interest rate
derivative contracts and as a result the unhedged portion of the interest rate
derivatives resulted in a gain which was recognised in the income statement as
a Special Item.
Taxation
The Group's effective tax rate is affected by the tax impact of Special Items.
It is therefore helpful to consider the Underlying and Special Items tax
position separately:
− Underlying tax charge was £28.1 million (2021: £94.5 million),
representing an effective tax rate on Underlying profit before tax for the
year of 22.5% (2021: 22.5%), reflecting the geographical mix of profits.
− Taxation for Special Items was £42.7 million (2021: £20.6 million),
or an effective tax rate for Special Items of 24.7% (2021: 15.1%). The
increase was driven by deferred tax credits on the amortisation of acquired
intangibles and on the impairment of the goodwill relating to the adhesive
resins acquisition.
Non-controlling interest
The Group continues to hold 70% of Revertex (Malaysia) Sdn Bhd and its
subsidiaries. These entities form a relatively minor part of the Group, so the
impact on underlying performance from non-controlling interests is not
significant.
Earnings per share
Earnings per share is calculated based on the average number of shares in
issue during the year. The weighted average number of shares for 2022
increased to 467,311,000 (2021: 432,290,000).
Underlying earnings per share is 20.6 pence for the year, down from 75.2 pence
in 2021, reflecting the lower earnings relative to the prior year and higher
number of shares. The statutory earnings per share is (7.0) pence (2021: 48.3
pence).
Balance sheet
Net assets of the Group decreased by 0.2% to £1,031.0 million, mainly
reflecting the £33.0 million loss for the year, dividend payments of £99.5
million offset by gain of £99.1 million on translation of foreign currency.
Provisions
As a result of the regulatory fine provision unwind and other movements,
provisions have decreased to £54.0 million (2021: £103.2 million).
The closing balance includes £15.0 million in relation to the rationalisation
of sites around the Group, most notably in Marl and Villejust, £6.8 million
in relation to the onerous contract arising on the disposal of the European
Tyre Cord business, and £9.6 million to demolish assets at a small number of
sites.
In the year, two new provisions were recognised on acquisition of the adhesive
resins business from Eastman. £9.9 million was recognised in relation to
environmental remediation work required at the Jefferson and Middelburg sites,
and a further £9.9 million was recognised for the demolition and disposal of
unused equipment and vacant tanks at the Jefferson and Longview sites in order
to bring them in line with our ESG strategy.
During 2022, the European Commission concluded its investigation into styrene
monomer purchasing practices, and the final settlement amount of £38.5
million, to be paid in Q3 2023, was transferred to other payables.
Cash performance
The following table summarises the movement in net debt and is in the format
used by management:
Full year ended 31 December 2022 2021
£m £m
Underlying operating profit (excluding joint ventures) 169.5 448.3
Movement in working capital 19.1 (82.8)
Depreciation of property, plant and equipment 86.0 64.2
Amortisation of other intangible assets 7.9 7.1
Share-based payments charge 0.7 2.1
Capital expenditure (90.8) (82.2)
Business cash flow 192.4 356.7
Net interest paid (38.2) (27.6)
Tax paid (65.6) (86.4)
Pension funding (21.3) (27.0)
Dividends received from joint ventures 1.9 1.9
Free Cash Flow 69.2 217.6
Cash impact of restructuring and site closure costs (25.9) (17.8)
Cash impact of acquisition costs 1.7 (6.6)
Proceeds on sale of business 0.3 1.7
Purchase of business (759.6) -
Share issue proceeds - 203.1
Repayment of principal portion of lease liabilities (10.1) (9.7)
Dividends paid (99.5) (73.5)
Dividends paid to non-controlling interests - (0.5)
Foreign exchange and other movements (86.8) 33.7
Movement in net debt (910.7) 348.0
Closing net debt 1,024.9 114.2
At 31 December 2022, net debt was £1,024.9 million (2021: £114.2 million),
principally reflecting the additional borrowings drawn for the £759.6 million
acquisition of the adhesive resins business in April 2022.
Underlying operating profit reduced to £169.5 million reflecting the trading
performance described above. The net working capital increase of £128.0
million in the first half of the year was followed in the second half by a
release of £147.1 million. This was as a result of active inventory and
account management, lower activity levels, moderating raw materials pricing
and a factored receivables facility put in place in December 2022, described
below. Over the full year, £19.1 million was released from working capital.
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 factored receivables facilities in December 2022 for a
maximum aggregate amount of €200 million. Factored receivables assigned
under the facilities amounted to £82.7 million net at 31 December 2022. Under
the facilities, all the risks and rewards of ownership are transferred to the
assignees.
Depreciation and amortisation of other intangibles increased due to the
Adhesive Technologies non-current assets acquired. Capital expenditure was
£90.8 million (2021: £82.2 million), lower than the c.£150 million plans
outlined at the start of the financial year, reflecting the Group's actions to
optimise cash flow. The Group continues to invest principally in its Pathway
Programme systems transformation project, recurring SHE and sustenance
expenditure.
Interest paid increased to £38.2 million reflecting the adhesive resins
acquisition debt. Tax paid decreased to £65.6 million reflecting lower
operating profit, higher payments on account as a result of the high
profitability of the nitrile business in 2021 and settlement of a historical
tax case in H1 2022.
The cash impact of Special Items including restructuring and site closure
costs and acquisition costs and related gains was an outflow of £24.2
million.
Dividends paid increased, reflecting the 2021 final dividend paid in the
second half of 2022.
Our debt is denominated in euros and dollars. Both the euro and the dollar
strengthened significantly relative to sterling during 2022, leading to a
foreign exchange loss in net debt.
Retirement benefit plans
The Group's principal funded defined benefit pension schemes are in the UK and
the US and are both closed to new entrants and future accrual. The Group also
operates an unfunded defined benefit scheme in Germany and various other
defined contribution overseas retirement benefit arrangements.
The Group's net retirement obligation decreased by £49.0 million to £73.4
million at 31 December 2022 (31 December 2021: £122.4 million) and reflects
the market value of assets and the valuation of liabilities in accordance with
IAS 19, including an asset of £5.9 million for the UK scheme. This reduction
largely comprised £21.3 million of cash contributions and actuarial gains of
£34.1 million. This actuarial gain arose due to the £201.2 million impact of
changes in discount rates which was offset by £167.1 million reduction in the
expected return on plan assets.
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 2022 the Group experienced no overall currency translation impact effect on
EBITDA, with average FX rates against our three principal currencies of
€1.17, $1.24 and MYR 5.43 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.
Financing and liquidity
As at 31 December 2022, the Group had net debt of £1,024.9 million compared
to net debt of £114.2 million at 31 December 2021. As at 31 December 2022
committed borrowing facilities comprised a $260 million term loan, a $300
million term loan, a €460 million revolving credit facility, five-year
€520 million 3.875% senior loan notes and UK Export Finance (UKEF)
facilities of €288 million and $230 million. The Group's net debt: EBITDA
for the purposes of the leverage ratio covenant increased from 0.3x at 31
December 2021 to 3.7x at 31 December 2022 due primarily to the acquisition of
the adhesive resins business in 2022.
After year end, the Group agreed a new $480 million revolving credit facility
maturing 31 May 2025 and has repaid and cancelled the $260 million and $300
million term loans in part using the proceeds received from the sale of the
Laminates, Films and Coated Fabrics businesses. The new revolving credit
facility is 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 and 3.5x thereafter, and the UKEF covenant
has been aligned to these levels. The Group expects net financing costs of
approximately £65-70 million in 2023 as a result of the higher net debt and
other changes to the Group's financing arrangements.
Post-balance sheet events
− New $480 million revolving credit facility agreement signed 20 March
2023.
− Sale of Laminates, Films and Coated Fabrics to Surteco North America,
Inc. completed 28 February 2023.
Divisional review - continuing operations
On 1 January 2023, Synthomer reorganised into three new, market-focused
divisions. The following pages report on the performance of the five divisions
that were in place during the reporting year to 31 December 2022. See page 19
for a summary of the key segmental metrics for 2022 and 2021 under the new
structure.
Functional Solutions (FS)
Functional Solutions achieved a robust commercial performance in 2022,
although demand weakened and inflationary pressures increased over the course
of the year. Under our new divisional structure, the majority of Functional
Solutions moved to the new Coatings & Construction Solutions division,
with the adhesive dispersions business moving to the new Adhesives Solutions
division.
Full year ended 31 December 2022 2021 Change Constant currency(1)
£m £m % %
Safety (RCR) 0.44 0.37 18.9
Revenue 1,001.3 900.3 11.2 8.5
Volumes (ktes) 592.7 655.9 (9.6)
EBITDA 127.8 139.2 (8.2) (9.4)
EBITDA % of revenue 12.8% 15.5%
Operating profit (underlying performance) 101.1 111.1 (9.0) (10.0)
Operating profit - statutory 69.8 69.8 -
(1) Underlying Constant currency revenue and profit retranslate current
year results using the prior year's average exchange rates.
Safety
Functional Solutions achieved a recordable case rate of 0.44 in 2022. This was
higher than target, and we have specific programmes in place for those sites
which require additional support throughout 2023. Our zero harm initiative,
which is designed to strengthen our Safety, Health and Environment (SHE)
culture, was piloted at seven of our European sites throughout 2022. The
process safety event rate was 0.28, in line with 2021. Delivering a strong SHE
performance at all our sites will continue to be our top priority within our
new divisional structure.
Volumes
Functional Solutions achieved overall volumes of 592.7ktes in 2022, a
reduction of 10% from 2021. While overall volumes were strong in the first
half of the year, we saw some softening of demand and reduced volumes during
the second half of the year as macroeconomic conditions started to
deteriorate.
The reductions in coatings volumes were primarily due to softening demand in
Europe and the USA, COVID-19 lockdowns in Asia and our strategic reduction in
tolled volumes in the USA. The effects of COVID-19 in Asia also resulted in a
slight reduction in adhesives volumes, offset by a strong performance in the
USA.
Our Fibre Bonding business (previously Textiles), where volumes were flat year
on year, experienced good growth in hygiene and in USA construction-facing
applications. The Construction business was similarly strong in the USA, but
volumes were down overall because of lower volumes in Europe.
The Energy Solutions business, which has a large exposure to the oil and gas
industry, performed strongly throughout 2022 and delivered significant volume
growth compared to 2021.
Revenues and EBITDA
Functional Solutions delivered a resilient commercial performance in 2022,
with higher revenues, driven by increasing inflationary pressures and strong
margin management. The division delivered revenues of £1,001.3 million in
2022, an 11% increase on 2021. The division was able to pass on significant
increases in raw materials prices in most markets and regions, despite unit
material costs reaching record levels in some cases. Our focus on more
differentiated products and robust pricing management contributed to a solid
performance in most of our major businesses, particularly in the USA.
The Coatings business was most affected by the softening of demand during the
second half of the year, with the other businesses not experiencing as
significant an impact. The Energy Solutions business performed very strongly
throughout the year. This helped the division deliver an EBITDA of £127.8
million, an 8% decrease compared to the very strong performance of 2021.
Sustainability highlights
Sustainability is a critical value driver for Functional Solutions, with 45%
of our new products introduced in the last year having at least one defined
sustainability benefit. We have division-wide programmes aimed at delivering
energy efficiencies and, ultimately, decarbonisation. This includes delivering
decarbonisation plans at site level.
Progress against FY 2022 priorities
− Continued to pivot towards speciality products, moving away from
low-value-add tolling activities.
− 45% of new products launched had a net positive sustainability impact.
− Reduced complexity through the closure of the Quality Polymer site in
Malaysia, and continued rationalisation of our product portfolio.
− Stepped up efforts in commercial excellence to become a more
end-market focused organisation.
− Responded to market conditions by focusing on margin preservation and
working capital control in the face of substantial raw material cost
fluctuations and rapidly escalating energy costs.
Industrial Specialities (IS)
Industrial Specialities delivered a strong performance in the face of
inflationary pressures and weakening demand, growing EBITDA from the strong
2021 reporting period, and increasing revenues. Under our divisional
restructure in January 2023, the majority of Industrial Specialities moved to
our new Health & Protection and Performance Materials division. This
includes our Laminates & Films and Coated Fabrics businesses, which have
since been divested on 28 February 2023. The Speciality Additives and the
Powder Coatings businesses moved to our Coatings & Construction Solutions
division, and the Lithene business moved to Adhesives Solutions.
Continuing operations 2022 2021 Change Constant currency(1)
Full year ended 31 December
£m £m % %
Safety (RCR)(2) 0.31 0.40 (22.5)
Revenue 233.9 197.2 18.6 18.7
Volumes (ktes) 65.9 75.7 (12.9)
EBITDA 31.8 23.4 35.9 36.8
EBITDA % of revenue 13.6% 11.9%
Operating profit (underlying performance) 25.5 15.8 61.4 62.0
Operating profit - statutory 22.7 7.8 191.0
(1) Underlying Constant currency revenue and profit retranslate current
year results using the prior year's average exchange rates.
(2 ) IS and AM are combined for operational reasons.
Safety
Industrial Specialities achieved a recordable case rate of 0.31 in 2022,
demonstrating continued improvement in safety across the division. One site
graduated from our SHE 'supported site' status in Q1 2022, meaning that the
division had no remaining sites in the programme. Our chemicals sites
continued to achieve top quartile performance by industry standards in 2022.
Our process safety event rate was 0.16.
Volumes
Industrial Specialities achieved overall volumes of 65.9ktes in 2022, 13%
below 2021 volumes, a result of lower demand in our Speciality Additives and
Powder Coatings businesses.
Revenues and EBITDA
Despite the lower volumes, Industrial Specialities delivered a strong
commercial performance in 2022, with higher revenues than the prior year
driven by increasing inflationary pressures and the highly-specialised nature
of our products, which supported our focus on pricing and overall margin
management. This was particularly reflected in our Vinyl Polymers, Lithene and
William Blythe businesses, which all delivered very strong growth compared to
2021. Overall, the division achieved continuing revenues of £233.9 million in
2022, 19% up on 2021, and continuing EBITDA of £31.8 million in 2022, well
above the 2021 EBITDA of £23.4 million.
The Laminates, Films and Coated Fabrics businesses were divested on 28
February 2023. Laminates and Films experienced deteriorating macroeconomic
conditions during the second half of 2022, which led to reduced demand. The
Coated Fabrics business, however, performed robustly throughout 2022 as the
economy of Thailand recovered from the impact of COVID-19 and margins
benefited from falling resin prices and normalising freight costs.
Sustainability highlights
We continue to explore opportunities for business excellence, whether in the
areas of sustainability, logistics or operational efficiency. For example, at
our Sant Albano site (Italy), we have reduced water extraction by 30% by
reconfiguring our borehole management process. During H1 2022, our
Polybutadiene Lithene business also successfully delivered a de-bottlenecking
project at its Stallingborough plant (UK), which increased capacity.
Progress against FY 2022 priorities
− Further embedded SHE practices in our surfaces plants, and continued
to drive improved performance through strengthening SHE processes and
practices in the chemicals plants, evidenced by the improved safety
performance of the division during the year.
− Delivered further production capacity through debottlenecking projects
and operational efficiency, including the successful debottlenecking project
at our Stallingborough site.
− Ensured a continuous supply of raw materials to sites despite supply
chain challenges.
− Enhanced our customer services and logistics processes to ensure the
challenging logistical environment was efficiently and effectively handled.
Adhesive Technologies (AT)
We created the Adhesive Technologies division on 1 April 2022, following the
completion of Synthomer's acquisition of Eastman's adhesive resins business.
It operated as a division until 31 December 2022, when it became the core of
the new Adhesive Solutions division.
The integration proceeded to plan, with exit from almost all the Eastman
transition service agreements (TSAs) and supported systems at the end of
November 2022. Synergy delivery was also on target thanks to decisive early
action and rapid organisational redesign, and trading in the first two
quarters of ownership was in line with our expectations. However, in the
fourth quarter volume and EBITDA deteriorated due to a number of macro- and
company-specific factors, resulting in a non-cash impairment of the
acquisition goodwill.
9 months ended 31 December 2022
£m
Safety (RCR) 0.32
Revenue 391.3
Volumes (ktes) 138.5
EBITDA 39.5
EBITDA % of revenue 10.1%
Operating profit (underlying performance) 22.5
Operating profit - statutory (146.8)
Safety
Safety performance overall was in line with recent years of operation under
Eastman's ownership, with an improved recordable case rate of 0.32 (2021:
0.56) and a slightly reduced process safety event rate of 0.59; differences in
calculation methods mean that these figures are for guidance, rather than a
direct comparison.
Volumes
Adhesive Technologies delivered overall volumes of 138.5ktes in 2022. This is
a solid performance, but below the historical run rate of the business, a
result of some asset reliability and supply chain issues which we are
addressing, the impact of European gas prices and other feedstock cost
dynamics, and weaking end-market demand in the last quarter, as well as
lower-than-expected production capacity.
Revenues and EBITDA
Adhesive Technologies delivered revenues of £391.3 million and EBITDA of
£39.5 million during the period following acquisition in April 2022. Although
partially offset by delivery of the expected cost synergies, this performance
was lower than projected, principally in the fourth quarter of the year. A
£133.7 million non-cash impairment charge to write-off substantially all of
the adhesive resins acquisition goodwill was taken as a result.
Sustainability highlights
In the year we launched our high heat APO, Aerafin 230, which allows carmakers
to formulate hot melt laminating adhesives for automotive interior
applications, replacing reactive PUR adhesives. Aerafin-based adhesives
eliminate the use of isocyanate crosslinkers that have to be used with the
PUR, a substance that is increasingly regulated.
Also in the area of automotive sustainability, we developed a new modified
silane resin which helps a tyre-making customer improve wet and dry grip for
tyres while reducing rolling resistance, improving fuel efficiency.
We also launched a new platform technology enabling better recyclability and
reducing raw material volume in packaging.
Priorities and progress
The clear priority for the division and our people during the majority of 2022
was executing the integration. The timely exit from TSAs covering dozens of
business processes across all functions in November 2022 was an important
milestone, as was the integration of new people into Synthomer and building
relationships with our customers and suppliers. A critical priority going
forward is the stabilisation and optimisation of end-to-end supply chain
processes in the new Synthomer system environment and the broadening of
feedstock options which will help to increase production output in readiness
for returning market demand.
Performance Elastomers (PE)
Destocking of medical gloves and weakening demand in paper and carpet markets
in 2022 meant that volumes and revenues for Performance Elastomers were
substantially lower than the exceptional performance of 2021. The business
focused on positioning itself for the return of long-term demand, with
short-term actions concentrated on cost and margin improvement. Under our
divisional reorganisation of January 2023, the majority of Performance
Elastomers moved to the new Health & Protection and Performance Materials
division, with consumer-focused foams moving to Coatings & Construction
Solutions.
Full year ended 31 December 2022 2021 Change Constant currency(1)
£m £m % %
Safety (RCR) 0.19 0.11 72.7
Revenue 659.7 951.5 (30.7) (31.4)
Volumes (ktes) 645.3 844.2 (23.6)
EBITDA 49.1 320.7 (84.7) (84.2)
EBITDA % of revenue 7.4% 33.7%
Operating profit (underlying performance) 19.5 294.9 (93.4) (92.6)
Operating profit - statutory 17.6 286.9 (93.9)
(1 ) Underlying Constant currency revenue and profit retranslate
current year results using the prior year's average exchange rates.
Safety
Performance Elastomers achieved a recordable case rate of 0.19 in 2022, ahead
of the target of 0.21 and the division's rolling three-year case rate of 0.20.
The process safety event rate was 0.05 in 2022, an excellent achievement.
There were some notable SHE milestones delivered in 2022, including zero
accidents for the recently-commissioned NBR reactor in Pasir Gudang (Malaysia)
with more than 750,000 hours worked, 100% completion of all Safety Improvement
Plan actions across all sites in the division, a 60% reduction in the number
of losses of containment of flammable substances, and maintaining an internal
safety audit rate of double the targets. A fire at our Filago, Italy site in
September 2022 was swiftly contained and caused no injuries; we have studied
the incident and applied the lessons learned to other similar operations, in
accordance with our SHE framework.
Volumes
Performance Elastomers achieved overall volumes of 645.3ktes in 2022, a 24%
reduction on 2021.
The exceptional global demand for NBR gloves during the COVID-19 pandemic
resulted in a record performance for Performance Elastomers last year. We
reported at the interim stage that destocking of nitrile gloves meant that
demand had softened substantially, resulting in lower NBR volumes, revenues
and EBITDA compared to the exceptional performance of 2021. During the second
half of 2022 this destocking continued, with production volumes further
reduced. 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 destocking impact is not expected to abate before the end of
2023. Chinese glove manufacturers also raised output in 2022, putting
additional strain on glove prices and plant utilisation of glove producers in
Malaysia and elsewhere.
Volumes in our Paper, Carpet, Compounds and Foam businesses were also down, by
21%, against a strong comparative period.
Revenues and EBITDA
The division delivered revenues of £659.7 million in 2022, compared to
£951.5 million in 2021. It achieved EBITDA of £49.1 million in 2022, down
from the exceptional £320.7 million achieved in 2021.
As well as the impact of glove destocking on NBR demand described above, the
Performance Materials business also saw reduced demand from the middle of the
year onwards following downstream destocking, although cost-saving initiatives
helped to offset the revenue impact.
We believe that underlying demand for nitrile gloves will continue to grow
with broader applications in catering, entertainment, security and
health-related industries. The business is well-positioned to capture this
long-term opportunity.
Sustainability highlights
A high proportion of our new products have sustainability benefits, and we are
seeing good progress from our world-leading nitrile glove R&D centre in
Malaysia. Industrial trials of our new SyNovus™ Plus product have continued,
involving production runs on selected customer lines to demonstrate the
product's potential energy and carbon savings for customers. Trial results
demonstrate that with SyNovus™ Plus, glove-making customers can potentially
reduce their operating temperature by 20°C, which is equivalent to 2kg of
CO(2) emission per 1,000 pieces. The new product line also enables an
accelerator-free and sulfur-free formulation, reducing skin sensitivity for
users of the gloves and eliminating sulfur dioxide emissions when medical
gloves are required to be incinerated.
Progress against FY 2022 priorities
− The Pasir Gudang 60ktes plant was commissioned on time in Q1 2022.
− Trials of SyNovus™ Plus have continued with multiple potential
customers.
− Given the slowdown in the nitrile market, we have delayed investment
in further capacity while continuing to develop expansion plans (including
investment grant and tax support from national and local governments) to bring
on additional capacity when appropriate, as well as process and product
innovation initiatives.
Acrylate Monomers (AM)
Our Acrylate Monomers division achieved record revenues and strong volumes in
the face of significant headwinds including unprecedented energy cost
inflation and a weak economic environment in the second half of 2022. While
profitability decreased compared to the exceptional performance of 2021, it
compares favourably to prior years. Under our divisional restructure, Acrylate
Monomers moved to our new Health & Protection and Performance Materials
division in January 2023. Acrylate Monomers continues to operate from a single
site at Sokolov, Czech Republic.
Full year ended 31 December 2022 2021 Change Constant currency(1)
£m £m % %
Safety (RCR) 0.31 0.40 (22.5)
Revenue 97.7 95.2 2.6 2.5
Volumes (ktes) 50.8 55.9 (9.1)
EBITDA 21.7 35.3 (38.5) (39.1)
EBITDA % of revenue 22.2% 37.1%
Operating profit (underlying performance) 20.6 34.5 (40.3) (40.9)
Operating profit - statutory 20.6 29.3 (29.7)
(1) Underlying Constant currency revenue and profit retranslate current
year results using the prior year's average exchange rates.
(2 ) IS and AM are combined for operational reasons.
Safety
Acrylate Monomers achieved a recordable case rate of 0.31 in 2022 compared to
0.40 in 2021, thanks to continued progress on our injury rate reduction plan.
Disappointingly, there were three process safety events recorded in 2022. This
is a setback after the previous four years, which had seen steadily improving
process safety, with no process safety events in 2021. We remain committed to
our process safety improvement plan.
Volumes
Overall volumes were 50.8ktes in 2022, a slight reduction in volumes compared
to 2021 due to a change in product mix and planned maintenance outages on our
lines.
Revenues and EBITDA
Acrylate Monomers delivered a robust performance on revenues, slightly ahead
of the previous record in 2021. It achieved revenues of £97.7 million in
2022, a 2.6% increase on 2021, reflecting our consistent focus on product
portfolio. EBITDA of £21.7 million in 2022 compares to our 2021 EBITDA of
£35.3 million, reflecting the process of normalisation of unit margins in
2022 from the exceptional levels in 2021, which were driven by a number of
supply constraints affecting the market. Significant inflationary pressures
related to the war in Ukraine, particularly energy prices, were also a factor
in 2022, while additional supply from regions outside Europe reduced our
ability to maintain the strong unit margins of the prior year.
Sustainability highlights
A key element of our transformation programme at Sokolov was the closure of
the site's coal-fired power station in April 2022. This marked the end of
direct coal use in Synthomer, reinforcing our strong commitment to reducing
our carbon footprint. Sharply-escalating gas prices triggered by Russia's
invasion of Ukraine meant we needed to make a short-term switch to importing
steam from a local coal-powered station at times in 2022, but our long-term
commitment remains to a permanent move away from coal.
Our investment at the site will also reduce our site water requirements and
CO(2) emissions by approximately a quarter.
Progress against FY 2022 priorities
− Continued to strengthen SHE practices and processes to drive improved
performance at the plant.
− Continued to review potential options for new products, including
successful testing of more sustainable products produced at lab-scale with
several customers.
− We are also exploring collaboration with potential partners on
developing new bio-based products which would support our customers in
achieving their net zero aspirations.
Segmental analysis under new divisional structure in place from 1 January 2023 (unaudited)
Full year ended 31 December 2022, £m CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
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 performance) 94.1 44.5 50.6 (26.7) 162.5 8.7 171.2
Full year ended 31 December 2021, £m CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
Revenue 920.2 155.5 1,068.5 - 2,144.2 185.3 2,329.5
EBITDA 141.1 22.5 355.0 (20.6) 498.0 24.2 522.2
EBITDA % of revenue 15.3% 14.5% 33.2% 23.2% 13.1% 22.4%
Operating profit (underlying performance) 111.7 18.2 326.4 (23.5) 432.8 18.1 450.9
Consolidated income statement
for the year ended 31 December 2022
2022 2021
Underlying performance Special IFRS Underlying performance Special IFRS
£m
items
£m
£m
items
£m
£m
£m
Continuing operations
Revenue 2,383.9 - 2,383.9 2,144.2 - 2,144.2
Company and subsidiaries operating profit before Special Items 160.8 - 160.8 430.2 - 430.2
Amortisation of acquired intangibles - (44.8) (44.8) - (30.1) (30.1)
Restructuring and site closure costs - (19.2) (19.2) - (29.7) (29.7)
Acquisition costs and related gains - (6.5) (6.5) - (11.9) (11.9)
Sale of - (0.3) (0.3) - (7.4) (7.4)
business
Regulatory - 21.5 21.5 - (57.2) (57.2)
Fine
Impairment - (133.7) (133.7) - - -
charge
Company and subsidiaries operating profit 160.8 (183.0) (22.2) 430.2 (136.3) 293.9
Share of joint ventures 1.7 - 1.7 2.6 - 2.6
Operating profit/(loss) 162.5 (183.0) (20.5) 432.8 (136.3) 296.5
Interest payable (44.8) - (44.8) (27.9) - (27.9)
Interest receivable 1.6 - 1.6 1.0 - 1.0
Fair value gain on unhedged interest derivatives - 25.1 25.1 - 6.2 6.2
Net interest expense on defined benefit obligations (1.2) - (1.2) (2.0) - (2.0)
Interest element of lease payments (1.4) - (1.4) (1.5) - (1.5)
Finance costs (45.8) 25.1 (20.7) (30.4) 6.2 (24.2)
Profit/(loss) before taxation 116.7 (157.9) (41.2) 402.4 (130.1) 272.3
Taxation (27.6) 42.9 15.3 (93.6) 20.3 (73.3)
Profit/(loss) for the year from continuing operations 89.1 (115.0) (25.9) 308.8 (109.8) 199.0
Profit/(loss) for the year from discontinuing operations attributable to
equity holders of the parent
7.8 (14.9) (7.1) 16.8 (5.8) 11.0
Profit/(loss) for the year 96.9 (129.9) (33.0) 325.6 (115.6) 210.0
Profit attributable to non-controlling interests 0.5 (1.0) (0.5) 0.4 0.9 1.3
Profit/(loss) attributable to equity holders of the parent 96.4 (128.9) (32.5) 325.2 (116.5) 208.7
96.9 (129.9) (33.0) 325.6 (115.6) 210.0
Earnings per share
- Basic from continuing operations 19.0p (24.4)p (5.4)p 71.3p (25.6)p 45.7p
- Diluted from continuing operations 18.9p (24.3)p (5.4)p 71.1p (25.5)p 45.6p
- Basic 20.6p (27.6)p (7.0)p 75.2p (26.9)p 48.3p
- Diluted 20.6p (27.6)p (7.0)p 74.9p (26.8)p 48.1p
Consolidated statement of comprehensive income
for the year ended 31 December 2022
2022 2021
Equity holders of the parent Non-controlling interests Total Equity holders of the parent Non-controlling interests Total
£m £m £m £m £m £m
(Loss)/profit for the year (32.5) (0.5) (33.0) 208.7 1.3 210.0
Actuarial gains 34.1 - 34.1 66.8 - 66.8
Tax relating to components of other comprehensive income (11.6) - (11.6) (11.8) - (11.8)
Total items that will not be reclassified to profit or loss 22.5 - 22.5 55.0 - 55.0
Exchange differences on translation of foreign operations 95.9 0.8 96.7 2.8 (0.2) 2.6
Exchange differences recycled on sale of business - - - 0.3 - 0.3
Fair value gain on hedged interest derivatives 9.7 - 9.7 3.4 - 3.4
Gains on net investment hedges taken to equity 2.4 - 2.4 3.3 - 3.3
Total items that may be reclassified subsequently to profit or loss
108.0 0.8 108.8 9.8 (0.2) 9.6
Other comprehensive income/(expense) for the year 130.5 0.8 131.3 64.8 (0.2) 64.6
Total comprehensive income for the year 98.0 0.3 98.3 273.5 1.1 274.6
Consolidated statement of changes in equity
for the year ended 31 December 2022
Share capital Share premium Capital redemption reserve Hedging & translation reserve Retained earnings Total equity holdings of the parent Non-controlling interests Total Equity
£m £m £m £m £m £m £m £m
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 for the year - - - 108.0 (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 46.7 620.0 0.9 75.9 273.5 1,017.0 14.0 1,031.0
Capital redemption Hedging & translation reserve Total equity holdings of the parent
Share capital Share premium reserve £m Retained earnings £m Non-controlling Total Equity
£m £m £m £m interests £m
£m
42.5 421.1 0.9 (41.9) 192.4 615.0 13.1 628.1
At 1 January 2021
Profit for the year - - - - 208.7 208.7 1.3 210.0
Other comprehensive income for the year
- - - 9.8 55.0 64.8 (0.2) 64.6
Total comprehensive income for the year
- - - 9.8 263.7 273.5 1.1 274.6
Dividends - - - - (73.5) (73.5) (0.5) (74.0)
Issue of shares 4.2 198.9 - - - 203.1 - 203.1
Share-based payments - - - - 1.2 1.2 - 1.2
At 31 December 2021 46.7 620.0 0.9 (32.1) 383.8 1,019.3 13.7 1,033.0
Consolidated balance sheet
as at 31 December 2022
2022 2021
£m £m
Non-current assets
Goodwill 480.8 487.0
Acquired intangible 523.6 297.6
assets
Other intangible 60.9 46.4
assets
Property, plant and 753.6 508.3
equipment
Deferred tax 50.3 29.2
assets
Defined benefit 5.9 -
asset
Investment in joint 8.1 7.4
ventures
Total non-current assets 1,883.2 1,375.9
Current assets
Inventories 407.9 253.7
Trade and other 271.6 312.8
receivables
Current tax 34.3 -
assets
Cash and cash 227.7 505.3
equivalents
Derivative financial 26.7 3.2
instruments
Assets classified as held for 196.2 -
sale
Total current assets 1,164.4 1,075.0
Total assets 3,047.6 2,450.9
Current liabilities
Borrowings (18.5) -
Trade and other (460.8) (414.2)
payables
Lease (10.6) (8.8)
liabilities
Current tax (33.6) (45.2)
liabilities
Provisions for other liabilities and (13.7) (85.2)
charges
Derivative financial - (10.1)
instruments
Liabilities classified as held for (45.5) -
sale
Total current liabilities (582.7) (563.5)
Non-current liabilities
Borrowings (1,234.1) (619.5)
Trade and other payables (0.4) (2.3)
Lease liabilities (34.9) (34.7)
Deferred tax liabilities (44.9) (57.5)
Retirement benefit obligations (79.3) (122.4)
Provisions for other liabilities and charges (40.3) (18.0)
Total non-current liabilities (1,433.9) (854.4)
Total liabilities (2,016.6) (1,417.9)
Net assets 1,031.0 1,033.0
Equity
Share capital 46.7 46.7
Share premium 620.0 620.0
Capital redemption reserve 0.9 0.9
Hedging and translation reserve 75.9 (32.1)
Retained earnings 273.5 383.8
Equity attributable to equity holders of the parent 1,017.0 1,019.3
Non-controlling interests 14.0 13.7
Total equity 1,031.0 1,033.0
Consolidated cash flow statement
for the year ended 31 December 2022
2022 2021
£m £m £m £m
Operating
Cash generated from operations 237.7 387.5
- Interest received 1.6 1.0
- Interest paid (38.4) (27.1)
- Interest element of lease payments (1.4) (1.5)
Net interest paid (38.2) (27.6)
- UK corporation tax paid - -
- Overseas corporate tax paid (65.6) (86.4)
Total tax paid (65.6) (86.4)
Net cash inflow from operating activities 133.9 273.5
Investing
Dividends received from joint ventures 1.9 1.9
Purchase of property, plant and equipment and other intangible assets (90.8) (82.2)
Purchase of business (759.6) -
Proceeds from sale of business 0.3 1.7
Net cash outflow from investing activities (848.2) (78.6)
Financing
Dividends paid (99.5) (73.5)
Dividends paid to non-controlling interests - (0.5)
Proceeds on issue of shares - 203.1
Settlement of equity-settled share-based payments (1.5) (0.9)
Repayment of principal portion of lease liabilities (10.1) (9.7)
Repayment of borrowings (207.6) -
Proceeds of borrowings 733.2 -
Net cash inflow from financing activities 414.5 118.5
(Decrease)/increase in cash, cash equivalents and bank overdrafts during the (299.8) 313.4
year
Cash and cash equivalents and bank overdrafts at 1 January 505.3 191.3
Foreign exchange 3.7 0.6
Cash and cash equivalents and bank overdrafts at 31 December 209.2 505.3
See note 9 for further details of cash flows from discontinued operations
Notes to the consolidated financial statements
for the year ended 31 December 2022
1 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;
• 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:
2022 2021
£m
£m
Amortisation of acquired (44.8) (30.1)
intangibles
Restructuring and site closure costs (19.2) (29.7)
Acquisition costs and related gains (6.5) (11.9)
Sale of business (0.3) (7.4)
Regulatory Fine 21.5 (57.2)
Impairment charge (133.7) -
Total impact on operating loss (183.0) (136.3)
Finance costs
Fair value gain on unhedged interest derivatives 25.1 6.2
Total impact on profit before taxation (157.9) (130.1)
Taxation Special items 3.6 8.8
Taxation on Special items 39.3 11.5
Total impact on profit for the year - continuing operations (115.0) (109.8)
Discontinued Operations
Amortisation of acquired intangibles (6.1) (6.1)
Restructuring and site closure costs (0.3) -
Sale of business (8.3) -
Taxation on Special items (0.2) 0.3
Total impact on profit for the year - discontinued operations (14.9) (5.8)
Total impact on profit for the year (129.9) (115.6)
1 Special items (continued)
Amortisation of acquired intangibles increased in 2022, reflecting the
amortisation on the customer lists, patents, trademarks and trade secrets
arising on the acquisition of Eastman's Adhesive Resins business. The fair
value of the intangible assets arising on the acquisition, amounting to
£273.2 million, 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 2022 comprise:
• A £9.6 million charge in relation to the ongoing
integration of the acquired business into the newly formed Adhesive
Technologies division;
• A £3.2 million charge in relation to site closure of one of
the smaller sites in Malaysia;
• A further £6.7 million, in relation to further demolition
and site rationalisation costs, as well as costs in relation to the strategy
change and alignment of the business into its new divisions effective in 2023.
Restructuring and site closure costs in 2021 comprised £13.2 million of
OMNOVA integration costs following its acquisition in 2020, an £11.6 million
charge to demolish and rationalise assets at a small number of sites to bring
them into line with our ESG strategy, and a further £4.9 million to complete
the rationalisation of the Group's European Performance Materials network.
Acquisition costs and related gains are for the acquisition of Eastman's
Adhesive Resins business and comprise £11.9 million of costs, mainly
professional adviser fees, offset by a £5.4 million gain on a foreign
exchange derivative entered into in October 2021 to hedge the acquisition
price. Acquisition costs in 2021 also related to the acquisition of Eastman's
Adhesive Resins business.
Sale of business mainly related to the costs, primarily professional fees,
incurred in conjunction with the sale of the Laminates, Films and Coated
Fabrics business to Surteco. In the prior year the sale of business
principally comprised a further £7.1 million loss on the onerous contract for
the disposal of Synthomer's European Tyre Cord business in 2020.
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 £57.2 million was made. In 2022, the Commission
concluded its investigation, resulting in a fine of £38.5 million.
In July 2018 the Group entered into swap arrangements to fix euro interest
rates on the full value of the then €440 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.
A £133.7 million impairment charge was taken in the year, relating to the
Adhesives Technologies division. This was caused by reliability and supply
chain issues, demand weakness in key adhesives markets and lower than expected
delivered capacity.
Taxation Special Items related to historical tax issues in Malaysia.
Taxation on Special Items is mainly deferred tax credits arising on the
amortisation of acquired intangibles and restructuring and site closure costs.
2 Segmental analysis
The Group's Executive Committee, chaired by the Chief Executive Officer,
examines the Group's performance.
The Group's reportable segments are as follows:
Performance Elastomers
Performance Elastomers is focused on healthcare, carpet, paper and foam
markets through our Nitrile Butadiene Rubber latex (Nitrile latex) and Styrene
Butadiene Rubber latex and Elastomeric Modifiers businesses (Performance
Materials).
Functional Solutions
Functional Solutions is focused on coatings, construction, adhesives and
technical textiles markets through our acrylic and vinylic based dispersions
products.
Industrial Specialities
Industrial Specialities is focused on speciality chemical additives and
non-aqueous based chemistry for a broad range of applications from polymer
additives to emerging materials and technologies.
Acrylate Monomers
Acrylate Monomers is focused on the production of acrylate monomers which are
sold to external customers in European markets as well as our European
Functional Solutions dispersions business.
2 Segmental analysis (continued)
Adhesive Technologies
Adhesive Technologies is focused on tackifying resins and additives for
adhesive products, for uses in end markets such as packaging, hygiene and
high-performance tyre additives. The division was formed from the newly
acquired Adhesive Resins business purchased from Eastman.
With effect from 1 January 2023, the Group has implemented a new organisation
structure, comprising three operating segments.
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.
Continuing Operations Discontinued
Operations
2022 Performance Functional Industrial Acrylate Adhesive Corporate Total Industrial Total
Elastomers Solutions Specialities Monomers Technologies £m £m Specialities £m
£m £m £m £m £m
Revenue
Total revenue 659.7 1,001.3 233.9 116.0 391.3 - 2,402.2 201.2 2,603.4
Inter-segmental revenue - - - (18.3) - - (18.3) - (18.3)
659.7 1,001.3 233.9 97.7 391.3 - 2,383.9 201.2 2,585.1
EBITDA 49.1 127.8 31.8 21.7 39.5 (20.7) 249.2 15.9 265.1
Depreciation and amortisation (29.6) (26.7) (6.3) (1.1) (17.0) (6.0) (86.7) (7.2) (93.9)
Operating profit/(loss) before
Special Items 19.5 101.1 25.5 20.6 22.5 (26.7) 162.5 8.7 171.2
Special Items (1.9) (31.3) (2.8) - (169.3) 22.3 (183.0) (14.7) (197.7)
Operating profit/(loss) 17.6 69.8 22.7 20.6 (146.8) (4.4) (20.5) (6.0) (26.5)
Finance costs (21.1)
Loss before taxation (47.6)
Continuing Operations Discontinued
Operations
2021 Performance Functional Industrial Acrylate Adhesive Corporate Total Industrial Total
Elastomers Solutions Specialities Monomers Technologies £m £m Specialities £m
£m £m £m £m £m
Revenue
Total revenue 951.5 900.3 197.2 110.3 - - 2,159.3 185.3 2,344.6
Inter-segmental revenue - - - (15.1) - - (15.1) - (15.1)
951.5 900.3 197.2 95.2 - - 2,144.2 185.3 2,329.5
EBITDA 320.7 139.2 23.4 35.3 - (20.6) 498.0 24.2 522.2
Depreciation and amortisation (25.8) (28.1) (7.6) (0.8) - (2.9) (65.2) (6.1) (71.3)
Operating profit/(loss) before
Special Items 294.9 111.1 15.8 34.5 - (23.5) 432.8 18.1 450.9
Special Items (8.0) (41.3) (8.0) (5.2) - (73.8) (136.3) (6.1) (142.4)
Operating profit/(loss) 286.9 69.8 7.8 29.3 - (97.3) 296.5 12.0 308.5
Finance costs (24.6)
Profit before taxation 283.9
3 Reconciliation of operating (loss)/profit to cash generated from operations
Continuing and discontinued operations: 2022 2021
£m
£m
Operating (loss)/profit (26.5) 308.5
Less: share of profits of joint ventures (1.7) (2.6)
(28.2) 305.9
Adjustments for:
- Depreciation of property, plant and equipment 76.4 54.4
- Depreciation of right of use assets 9.6 9.8
- Amortisation of other intangibles 7.9 7.1
- Share-based payments 0.7 2.1
- Special Items 197.7 142.4
Cash impact of restructuring and site closure costs (25.9) (17.8)
Cash impact of acquisition costs and related gains 1.7 (6.6)
Pension funding in excess of service cost (21.3) (27.0)
Movement in working capital 19.1 (82.8)
Cash generated from operations 237.7 387.5
Reconciliation of movement in working capital
Increase in inventories (12.3) (87.7)
Decrease/(increase) in trade and other receivables 147.0 (64.8)
(Decrease)/increase in trade and other payables (115.6) 69.7
Movement in working capital 19.1 (82.8)
4 Dividends
2022 2021
Pence £m Pence £m
per share
per share
Interim dividend - - 8.7 36.9
Proposed final dividend - - 21.3 99.5
- - 30.0 136.4
As part of a covenant amendment process in October 2022, the Group suspended
dividend payments until the end of 2023.
This included the suspension of the interim dividend of 4.0p announced in 2022
that was due to be paid in November 2022.
2022 2021
Dividends paid £m £m
Interim dividend - 36.9
Prior year final dividend 99.5 36.6
99.5 73.5
5 Earnings per share
2022 2021
Underlying Special IFRS Underlying Special IFRS
performance Items performance Items
Profit / (loss) attributable to equity holders of the parent - continuing 88.6 (114.0) (25.4) 308.4 (110.7) 197.7
operations
£m
Profit / (loss) attributable to equity holders of the parent £m 96.4 (128.9) (32.5) 325.2 (116.5) 208.7
Number of shares
Weighted average number of ordinary shares - basic '000 467,311 432,290
Effect of dilutive potential ordinary shares '000 1,019 1,654
Weighted average number of ordinary shares - diluted '000 468,330 433,944
Earnings per share for profit from continuing operations
Basic earnings per share pence 19.0 (24.4) (5.4) 71.3 (25.6) 45.7
Diluted earnings per share pence 18.9 (24.3) (5.4) 71.1 (25.5) 45.6
Earnings per share for profit from discontinued operations
Basic earnings per share pence 1.6 (3.2) (1.6) 3.9 (1.3) 2.6
Diluted earnings per share pence 1.7 (3.3) (1.6) 3.8 (1.3) 2.5
Earnings per share for profit attributable to equity holders of the parent
Basic earnings per share pence 20.6 (27.6) (7.0) 75.2 (26.9) 48.3
Diluted earnings per share pence 20.6 (27.6) (7.0) 74.9 (26.8) 48.1
6 Finance costs
2022 2021
£m £m
Interest payable on bank loans and overdrafts 44.8 27.9
Less: interest receivable (1.6) (1.0)
Net interest expense on defined benefit obligations 1.2 2.0
Interest element of lease payments 1.4 1.5
Underlying finance costs 45.8 30.4
Fair value gain on unhedged interest derivatives (25.1) (6.2)
Total finance costs from continuing operations 20.7 24.2
Finance costs from discontinued operations 0.4 0.4
Total finance costs 21.1 24.6
7 Analysis of net debt
1 January Cash flows Exchange 31 December
2022 £m and other 2022
£m movements £m
£m
Bank overdrafts - (17.6) (0.9) (18.5)
Current liabilities - (17.6) (0.9) (18.5)
Bank loans (187.9) (525.6) (64.2) (777.7)
€520m 3.875% senior unsecured loan notes due 2025 (431.6) - (24.8) (456.4)
Non-current liabilities (619.5) (525.6) (89.0) (1,234.1)
Total borrowings (619.5) (543.2) (89.9) (1,252.6)
Cash and cash equivalents 505.3 (282.2) 4.6 227.7
Net debt (114.2) (825.4) (85.3) (1,024.9)
Capitalised debt costs which have been recognised as a reduction in borrowings
in the financial statements, amounted to £14.2 million at 31 December 2022
(31 December 2021: £9.9 million).
8 Acquisition
On 1 April 2022, the Group completed the acquisition of Eastman's Adhesive
Resins business for a total consideration of £779.1 million. The asset
identification and fair value allocation processes remain under review and
will be finalised by 31 March 2023. The amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are set out in the table
below:
Provisional £m
Identifiable intangible assets 273.2
Property, plant and equipment 264.5
Other non-current assets 6.2
Inventory 143.4
Trade and other receivables 94.0
Trade and other payables (88.6)
Lease liabilities (7.5)
Other non-current liabilities (31.0)
Provisional fair value of net assets acquired 654.2
Goodwill(1) 124.9
Total consideration 779.1
Satisfied by:
Cash 759.6
Deferred consideration 19.5
Total consideration transferred 779.1
Net cash outflow arising on acquisition:
Cash consideration 759.6
The goodwill arising on acquisition represented the premium the Group paid to
acquire the Adhesive Resins business from Eastman, to complement the existing
businesses and to strengthen Synthomer's presence in North America and Europe.
In the period from acquisition to 31 December 2022 the business contributed
£391.3 million to the Group's revenue, £39.5 million to the Group's EBITDA,
£22.5 million to the Group's Underlying operating profit and a loss of
£146.8 million to the Group's IFRS operating profit. If the acquisition had
been completed on the first day of the financial year the business would have
contributed £510.9 million to the Group's revenue, £60.0 million of the
Group's EBITDA, £38.8 million to the Group's Underlying operating profit and
a loss of £135.0 million to the Group's IFRS operating loss.
9 Discontinued operations
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 with net cash proceeds
of $262 million.
The associated assets and liabilities were consequently presented for sale in
the 2022 financial statements.
The Laminates, Films and Coated Fabrics businesses all form part of the
Industrial Specialities division.
Financial information in respect of the discontinued operation is set out
below:
The prior-year figures of the consolidated income statement and the
consolidated statement of cash flows have been restated in accordance with
IFRS 5 to report the discontinued operations separately from continuing
operations.
9 Discontinued operations (continued)
Financial performance and cash flow information
2022 2021
£m
£m
Revenue 201.2 185.3
EBITDA 15.9 24.2
Depreciation and amortisation - Underlying performance (7.2) (6.1)
Operating profit - Underlying performance 8.7 18.1
Special items (14.7) (6.1)
Operating (loss)/profit - IFRS (6.0) 12.0
Finance costs (0.4) (0.4)
(Loss)/profit before taxation (6.4) 11.6
Taxation (0.7) (0.6)
(Loss)/profit for the year (7.1) 11.0
Cash flows from discontinued operations
2022 2021
£m
£m
Net cash inflow from operating activities 5.6 5.2
Net cash outflow from investing activities (4.0) (3.1)
Assets and liabilities classified as held-for-sale
As of 31 December 2022, the disposal group was recognised at the lower of its
carrying amount and fair value less costs to sell, and comprised the following
main categories of assets and liabilities:
2022
£m
Non-current assets
Goodwill 43.5
Acquired intangible 44.4
assets
Other intangible 2.8
assets
Property, plant and 54.7
equipment
Deferred tax 1.1
assets
Total non-current assets 146.5
Current assets
Inventories 31.1
Trade and other receivables 18.6
Total current assets 49.7
Total assets 196.2
Current liabilities
Trade and other payables (22.8)
Lease liabilities (0.5)
Current tax liabilities (0.3)
Total current liabilities (23.6)
Non-current liabilities
Lease liabilities (2.2)
Deferred tax liabilities (18.1)
Retirement benefit (1.6)
obligations
Total non-current liabilities (21.9)
Total liabilities (45.5)
Net assets held for sale 150.7
10 Post-balance sheet events
Sale of business
On 28 February 2023, the Group completed the sale of its laminates, films and
coated fabrics businesses to Surteco North America, Inc. The net cash proceeds
received at completion amounted to $262m after transaction expenses and
adjustments for working capital, debt and debt-like items as described in the
circular issued to shareholders on 16 December 2022. A further $5m is payable
in cash on the thirteen month anniversary of completion.
Sufficient information is not currently available to disclose the profit on
the sale of the businesses.
Refinancing
On 21 March 2023 the Group refinanced its existing bank loan facilities,
signing a new $480m committed revolving credit facility which matures on 31
May 2025. All amounts outstanding on its existing $260 million term loan, $300
million term loan and €460 million revolving credit facility were
subsequently repaid and the facilities were cancelled. The financial covenant
for the new facility is that the net debt must be less than 6.0 times EBITDA
at 30 June 2023, less than 5 times EBITDA at December 2023, less than 4.25
times EBITDA at June 2024 and less than 3.5 times EBITDA at December 2024. The
financial covenants in the UK Export Finance facility have been aligned to
these levels.
11 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DDGDXRSDDGXRRecent news on Synthomer
See all newsREG - Synthomer PLC - Results of AGM
AnnouncementREG - Synthomer PLC - Trading Statement - Spring 2025
AnnouncementREG - Synthomer PLC - Holding(s) in Company
AnnouncementREG - Synthomer PLC - Director/PDMR Shareholding
AnnouncementREG - Synthomer PLC - Director/PDMR Shareholding
Announcement