REG - Synthomer PLC - Final Results
12/03/2024 07:15
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RNS Number : 4479G Synthomer PLC 12 March 2024
Synthomer plc
Preliminary Results for the year ended 31 December 2023
A challenging year, but decisive actions taken for longer-term growth
Year ended 31 December 2023 Restated Constant currency(1)
2022
Change
£m £m % %
Continuing operations(2)
Revenue 1,970.9 2,332.3 (15.5) (15.6)
Coatings & Construction Solutions (CCS) 100.1 120.8 (17.1) (17.3)
Adhesive Solutions (AS)(3) 31.2 67.2 (53.6) (54.3)
Health & Protection and Performance Materials (HPPM) 31.0 86.5 (64.2) (61.3)
Corporate (20.2) (20.7)
EBITDA(4) 142.1 253.8 (44.0) (43.3)
EBITDA margin (%) 7.2% 10.9%
Underlying(5) operating profit (EBIT) 37.7 169.5 (77.8) (77.1)
Statutory operating (loss)/profit (EBIT) (35.4) (13.5)
Results from continuing and discontinued operations(2)
Underlying(5) (loss)/profit before tax (27.2) 123.7
Statutory (loss) before tax (106.8) (34.2)
Underlying(5) EPS* (p) (35.1) 152.0
Basic EPS* (p) (78.5) (51.2)
Free Cash Flow(6) 85.7 69.2 +23.8
Net debt(7) 499.7 1,024.9 (51.2)
* 2023 EPS reflects weighted average number of consolidated shares in
issue during the year of 85.4m (latest number of shares following the October
2023 rights issue is 163.6m). 2022 adjusted for 20 to 1 share consolidation
and rights issue adjustment factor of 2.715.
· Challenging market environment, with prolonged demand weakness
exacerbated by destocking
− Revenue reduction driven by 9.9% reduction in volume and pass through
of lower raw material input prices
· Strategy is working, with greater margin resilience from specialty
businesses which are now the majority of revenue
− Further strategic divestment processes underway
· Significant management actions taken during 2023 to increase focus,
reduce cost and complexity
− Site footprint reduced to 36 (from 43 in October 2022), with further
rationalisation underway
− Adhesive Solutions supply chain and reliability issues improving, but
more to do in 2024
− £18m of cost savings delivered
− EBITDA margins in all divisions improved in H2 vs H1 2023
· Free Cash Flow increased to £85.7m (2022: £69.2m), with 97%
conversion of EBITDA into Operating Cash Flow(8)
· Net debt halved through rights issue, divestment proceeds and cash
generation
· Next stage of business excellence programme launched in 2024, focused
on procurement and production cost
− Targeting £30-40m in additional annualised cost reductions in
2024-2025
· Prudent covenant relaxation and strong liquidity provide space for
further deleveraging over time
− Covenant relaxation agreed with bank lenders and UK Export Finance in
March 2024
− Committed liquidity in excess of £450m as at 8 March 2024
· Current trading and 2024 outlook
− Trading since the start of 2024 has been cautiously encouraging,
supported by short-term restocking by customers, though evidence of
broad-based demand recovery remains limited
− Cost reduction actions will be partially offset by wage inflation and
normalisation of bonus accrual
− Expect some earnings progress and modest Free Cash Flow, even absent
macroeconomic improvement
Commenting, Synthomer CEO Michael Willome said:
"Despite a challenging year, we have taken decisive actions to position the
business well for the future. We remain focused on enhancing our strong
positions in key end-markets, optimising our portfolio and cost position, and
demonstrating the cash generative nature of our business. In the medium term,
we remain confident that Synthomer's earnings power is more than double recent
levels, through a combination of our near-term self-help actions, end market
recovery and delivery of our speciality solutions strategy."
The Company will host a meeting for analysts and investors at 9:00am GMT today
at the Royal Society of Chemistry, Burlington House, Piccadilly, London W1J
0BA. The meeting will also be webcast at via our website at www.synthomer.com
(http://www.synthomer.com) or on https://brrmedia.news/SYNT_FY23
(https://brrmedia.news/SYNT_FY23) . This will be available for playback after
the event.
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
Notes
(1.) Constant currency revenue and profit measures retranslate current
year results using the prior year's average exchange rates.
(2.) Laminates, Films and Coated Fabrics and North America Paper and
Carpet, which together contributed revenue of £50.3m and EBITDA of £(3.0)m
in 2023 (2022: £252.8m and £11.3m respectively), are classed as discontinued
operations throughout this announcement.
(3.) 2022 included a nine month contribution from the adhesive resins
acquisition which completed in April 2022.
(4. ) Operating profit before depreciation, amortisation and
Special Items.
(5.) Underlying performance excludes Special Items unless otherwise
stated.
(6.) 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.
(7. ) Cash and cash equivalents together with short and long-term
borrowings.
(8. ) Operating Cash Flow is defined as Total Group EBITDA
plus/minus net working capital movement less capital expenditure.
Legal Entity Identifier (LEI): 213800EHT3TI1KPQQJ56. Classification as per DTR
6 Annex 1R: 1.1.
Synthomer plc is a leading supplier of high-performance, highly specialised
polymers and ingredients that play vital roles in key sectors such as
coatings, construction, adhesives, and health and protection -- growing
markets that serve billions of end users worldwide. Headquartered in London,
UK and listed there since 1971, we employ c.4,200 employees across our 4
innovation centres of excellence more than 30 manufacturing sites across
Europe, North America and Asia. With more than 6,000 blue-chip customers and
£2.0bn in continuing revenue in 2023, our business is built around three
divisions, serving customers in attractive end markets where demand is driven
by global megatrends including urbanisation, demographic change, climate
change and sustainability, and shifting economic power. In Coatings &
Construction Solutions, our specialist polymers enhance the sustainability and
performance of a wide range of coatings and construction products. We serve
customers in applications including architectural and masonry coatings, mortar
modification, waterproofing and flooring, fibre bonding, and energy solutions.
In Adhesive Solutions our products help our customers bond, modify and
compatibilise surfaces and components for applications including tapes and
labels, packaging, hygiene, tyres and plastic modification, improving
permeability, strength, elasticity, damping, dispersion and grip. In Health
& Protection and Performance Materials we are a world-leading supplier of
water-based polymers for medical gloves, and a major European manufacturer of
high-performance binders, foams and other products serving customers in a
range of end markets. Our purpose is creating innovative and sustainable
solutions for the benefit of customers and society. Around 20% of our sales
volumes are from new and patent protected products. At our innovation centres
of excellence in the UK, Germany, Malaysia and Ohio, USA we collaborate
closely with our customers to develop new products and enhance existing ones
tailored to their needs, with an increasing range of sustainability benefits.
Our 2030 decarbonisation targets have been approved by the Science Based
Targets initiative as being in line with what the latest climate science says
is necessary to meet the goals of the Paris Agreement, and since 2021 we have
held the London Stock Exchange Green Economy Mark, which recognises green
technology businesses making a significant contribution to a more sustainable,
low-carbon economy. Find us at www.synthomer.com or search for Synthomer on
LinkedIn.
CHIEF EXECUTIVE OFFICER'S REVIEW
In one of the most difficult trading environments for the chemicals industry
in decades, the resilient performance of our speciality businesses has
reinforced our confidence that the strategy of focusing on our most
differentiated, speciality products for attractive end markets gives us strong
foundations for growth when demand recovers.
Delivering on our specialisation strategy
When we completed our strategy review in 2022, we set our direction firmly
towards greater specialisation in the belief that speciality products with
defined end-market benefits would be the greatest drivers of growth in the
medium to long term.
A year on, our industry is still in a prolonged period of suppressed demand,
which has been difficult for everyone at Synthomer and for all our
stakeholders. While this has meant that volumes remained subdued this year and
margins lower, we have improved our financial resilience and began to deliver
on our specialisation strategy.
Speciality businesses demonstrate greatest resilience
Given headwinds which included consumer demand weakness, supply chain
disruption, global price competition and continued destocking in some base
chemical markets, our business has delivered resilient results, with
continuing Group EBITDA of £142.1m (2022: £253.8m) from revenues of
£1,970.9m (2022: £2,332.3m).
The speciality businesses within our portfolio have been the strongest
performers in terms of margin and volume recovery, with Coatings &
Construction Solutions (CCS) in particular standing out, having delivered an
improved EBITDA margin of 12.3% (2022: 12.1%) despite year-on-year volume
declines of nearly 15%. Already our most speciality-focused division, CCS is
beginning to demonstrate the potential of a more strategic focus on end
customers coupled with outstanding execution; capabilities we are working to
deliver throughout the Group.
In the Adhesive Solutions (AS) division, our speciality products (c.55% of
divisional revenues) were similarly robust, reflecting their greater
differentiation for customers. However, our more base chemical products were
exposed to increased global competition in a lower demand environment. This,
alongside disruptions in supply chain and production, resulted in a
disappointing financial performance in 2023. Despite these challenges, I am
confident that we have the right team in place, led by Stephan Lynen who
joined Synthomer as President of the division in May 2023, and are executing a
robust plan to deliver a significant improvement in performance over time as
reliability and efficiency improves and end markets recover.
Meanwhile, nitrile butadiene latex (NBR) volumes in our Heath & Protection
and Performance Materials (HPPM) division started to recover towards the end
of the year as the post-pandemic overcapacity began to reduce, underpinned by
the long-term hygiene megatrend. In our Performance Materials portfolio, which
includes a number of businesses assessed as non-core to the wider Group
strategy, volumes stabilised in the second half compared to the first. As a
base chemicals division, HPPM is focused on customer intimacy and cost,
capacity utilisation, efficiency and sourcing excellence, and improved
divisional EBITDA margin by 90bps in H2 versus H1 2023.
Encouraging cash delivery
At year-end, net debt reduction was ahead of our expectations, and benefited
from strong cash delivery in the final quarter. Despite the substantial
contraction in business activity compared with prior year, in 2023 we were
able to increase Free Cash Flow to £85.7m (2022: £69.2m). Important
contributors to Free Cash Flow included £18.0m in cost reductions, £45.7m in
lower inventories driven by both structural changes in approach and lower raw
materials prices, and some other benefits. Our CFO Lily Liu sets out more
about our work in this area in the Financial review.
Alongside our operational focus on cash, the balance sheet has also been
strengthened with the proceeds of our strategic divestment programme and the
rights issue. We are grateful for the confidence shown by shareholders in
supporting our £276m rights issue completed in October 2023.
Overall, since the start of 2023, we have reduced net debt by half to £499.7m
(2022: £1,024.9m). The challenging market conditions required significant
focus in this area in the year, and we were able to deliver.
Focusing the business to be ready when demand returns
We have also been able to make significant progress across other aspects of
our strategy, laying the foundations for rapid growth when end market demand
recovers.
We have increased the speciality weighting of our portfolio to c.55% of
revenue, and a higher proportion of EBITDA currently. We have increased our
access to markets in the USA and Asia, improving our geographical and customer
reach. We continue to invest in our organic growth capability, including our
focus on value selling and the expansion of our customer innovation capacity
in China. And we have simplified our business, streamlining our manufacturing
footprint from 43 sites when the strategy was launched in October 2022 to 36
with another closure underway, through divestments or rationalisation, with
plans to go further.
While conditions remain challenging and leverage elevated, our capital
allocation decisions have naturally been focused on preserving cash, but we
have been able to make a few disciplined, carefully selected growth
investments which we believe will serve us well from a cost perspective or in
certain high-growth niches.
A key element of our strategy is portfolio management. Our main focus is on
furthering our non-core divestment programme, but alongside this we are
actively considering a number of low-capital growth opportunities, such as
potential partnerships. We are also identifying potential accretive bolt-on
acquisition opportunities in strategically attractive end markets and
geographies for the future, when our financial circumstances allow.
Innovation and sustainability - at the heart of our future growth
Innovation and sustainability support every pillar of Synthomer's strategy and
are key to value creation in the long term. Serving our customers' own
sustainability ambitions through innovative products with demonstrable
sustainability benefits is an important opportunity for organic growth.
Equally, applying a sustainability and innovation lens to our portfolio
management and operational improvements helps drive both our commercial
success and our purpose of creating specialist solutions for the benefit of
customers and society.
We are embedding a sustainability mindset across Synthomer, underpinned by our
Vision 2030 sustainability roadmap. This supports our response to both the
opportunities and the challenges we face in this area. For example, we are
building our innovation pipeline to support sustainable product development,
with 64% of new products this year launched with defined sustainability
benefits. In July 2023, our near-term greenhouse gas (GHG) emissions reduction
targets were approved by the Science Based Targets initiative (SBTi), and more
recently our CDP Climate score was upgraded from B to A-, which puts us in the
top quartile of chemicals companies under coverage.
Our work on diversity, equity and inclusion is also strengthening the
business, enabling greater diversity of thought while helping us recruit and
retain talented people. We have more to do, but we are seeing progress on
gender diversity in particular - this year, women held 30% of senior
management roles, compared to just 9% in 2019.
We are also making our business safer, with both of our key lagging safety
indicators improving significantly year-on-year - though we still have more
to do, in particular to complete the process of bringing our more recently
acquired sites up to the top quartile levels of safety performance achieved
elsewhere in the Group in 2023.
Focused, strengthened, and ready for growth
In summary, the market environment has been extraordinarily challenging for
our sector this year, resulting in financial results that are far from where
we would like them to be. However, it has also been a year of clear progress
towards the longer term ambitions of our strategy - progress we will continue
in 2024.
Outlook
Trading since the start of 2024 has been cautiously encouraging, supported in
part by short-term restocking by our customers. We do not yet have evidence of
a broad-based upswing in underlying end-market demand, but parts of our
business are beginning to build an improving volume trend.
In 2024, the Group will continue to focus on delivering our speciality
solutions strategy, including portfolio management, alongside our ongoing
activities to generate robust cash flow and successfully navigate through
current uncertainties in our markets. Reducing leverage further towards our
1-2x medium-term target range remains a key priority.
In addition to further progress with our previously announced actions to
reduce cost and complexity and to improve site reliability, we have commenced
procurement and production cost optimisation programmes which are expected to
deliver £30-40m in additional savings in 2024 and 2025. These actions will be
partially offset by some increases in operating costs, mainly due to wage
inflation and normalisation of bonus accrual. As a result, we expect to make
some earnings progress and be at least modestly Free Cash Flow positive in
2024, even if macroeconomic demand conditions do not improve.
We remain confident that Synthomer's medium-term earnings power is more than
double recent levels, through a combination of our near-term actions, end
market volume recovery and strategic delivery.
Michael Willome
Chief Executive Officer
12 March 2024
FINANCIAL REVIEW - CHIEF FINANCIAL OFFICER'S INTRODUCTION
I am pleased that our net debt has been more than halved through decisive
management action and the support of our shareholders during the year. It goes
without saying that a strong balance sheet is critical to our resilience
during times of subdued market activity - as well as the foundation for our
future success when our markets return to growth.
Strengthening our financial position for the future
In the face of ongoing suppressed demand in many of our markets which has
significantly affected our financial results compared with prior year, we have
nonetheless continued to deliver on strengthening our balance sheet and
improving our working capital position. We have also demonstrated good
performance in particular from the speciality businesses in our portfolio,
reinforcing our view that we have the strategy, structure and people in place
to emerge stronger from the current operating environment and positioned for
future success.
Preserving cash and reducing net debt
We ended the year with net debt of £499.7m compared to £1,024.9m at the end
of 2022, reflecting a number of decisive actions over the year to preserve
cash and reduce debt while ensuring we continued to focus on the shift to
increased specialisation that lies at the heart of Synthomer's strategy.
Every division and function played a part, with a Group-wide cost reductions
and cash management programmes that converted 97% of EBITDA into Operating
Cash Flow. We significantly reduced inventory levels particularly in the
adhesive resins business we acquired in 2022, with further opportunities in
2024, and benefitted from a £27.9m increase in use of our receivables
financing facility. We have also sharpened the focus of our innovation and
capital expenditure plans across the Group, in accordance with our
differentiated steering strategic pillar.
The divestment of our Laminates, Films and Coated Fabrics businesses,
announced in 2022 and completed in February 2023, brought £208m in net cash
proceeds this year while supporting our ongoing drive to increase the
speciality weighting of the Group. This non-core portfolio rationalisation
programme continues, with further divestment processes currently underway. We
have also streamlined our operations, with divestments and site
rationalisations reducing our sites from 43 in October 2022 to 36 at the end
of 2023 with a further site closure underway, significantly reducing the
complexity of the Group.
Notwithstanding these actions to preserve cash and reduce our net debt, Group
performance continued to face strong macroeconomic headwinds, and covenant
leverage at the half year remained elevated at 5.5x. Therefore, in order to
increase our focus on strategic delivery and long-term value creation in
addition to short-term cash preservation, we undertook a £276m fully
underwritten rights issue in October 2023. 92.6% of the rights were taken up,
reflecting strong support from our shareholders, with the subsequent rump
placing significantly over-subscribed.
We also took action to address our debt maturity profile. In September 2023,
Synthomer entered into an agreement with our lending banks to extend our
Revolving Credit Facility maturity date from 31 May 2025 to 31 July 2027 and
amend total commitments to $400m. After the year end, we agreed to extend the
period of covenant relaxation to ensure that we maintain appropriate headroom
while trading conditions remain subdued. We have also reduced the facility
size to €300m (currently undrawn). Our next significant maturity is our
€520m bond due in mid-2025, which we anticipate refinancing during the
course of 2024. Leverage on the covenant basis was 4.2x net debt to EBITDA at
year end, and we continue to target leverage within the 1-2x range over the
medium term, supported by our divestment programme, cash generative business
model and operating leverage. The Board has confirmed that dividends will
remain suspended at least until net debt: EBITDA is less than 3x.
Staying focused on the medium and long term
Significant uncertainties remain, but while we continue to address short-term
imperatives for the business in this environment, we are also focused on the
medium-term targets we set out as part of the strategy. In line with the
growth we expect in our markets when demand recovers, we anticipate
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
greater differentiation, and supported by further streamlining and simplifying
of our manufacturing operations and supply chains. Over time we expect our
business to deliver return on invested capital in the mid-teens.
Lily Liu
Chief Financial Officer
12 March 2024
FINANCIAL REVIEW
Group revenue, EBITDA and operating profit - continuing operations
Revenue for the continuing Group of £1,970.9m (2022: £2,332.3m) decreased by
15.5% in constant currency compared with the prior year. This principally
reflects a 9.9% reduction in volume, driven by subdued end-market demand and
increased regional competition in some base chemicals, as well as pass through
of lower raw material input prices. The rate of volume decline slowed in H2
2023 compared to H1 2023. EBITDA for the continuing Group was £142.1m (2022:
£253.8m), with robust pricing and a strong focus on cost partially mitigating
the challenging volume environment. Sequentially, EBITDA margin in all three
divisions improved in H2 2023 relative to H1 2023. Depreciation and
amortisation increased to £104.4m (2022: £84.3m), reflecting a full year of
the acquired adhesive resins business and a reprofiling of the depreciation
rate of those fixed assets under IAS 16, resulting in underlying operating
profit for the continuing Group of £37.7m (2022: £169.5m). On a statutory
basis, including the Special Items excluded from underlying measures (see page
7), this resulted in an operating loss for the continuing Group of £(35.4)m
(2022: £(13.5)m).
Full year ended 31 December 2023, £m CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
Revenue 815.5 581.7 573.7 - 1,970.9 50.3 2,021.2
EBITDA 100.1 31.2 31.0 (20.2) 142.1 (3.0) 139.1
EBITDA % of revenue 12.3% 5.4% 5.4% 7.2% (6.0)% 6.9%
Operating profit/(loss) - underlying 73.3 (7.5) (0.7) (27.4) 37.7 (3.9) 33.8
Operating profit/(loss) - statutory 41.1 (32.7) (10.2) (33.6) (35.4) 53.1 17.7
Full year ended 31 December 2022, £m CCS AS HPPM Corp. Continuing Dis-continued Total Group
operations
Revenue 996.1 572.9 763.3 - 2,332.3 252.8 2,585.1
EBITDA 120.8 67.2 86.5 (20.7) 253.8 11.3 265.1
EBITDA % of revenue 12.1% 11.7% 11.3% 10.9% 4.5% 10.3%
Operating profit - underlying 94.1 44.5 57.6 (26.7) 169.5 1.7 171.2
Operating profit - statutory 62.8 (126.1) 54.2 (4.4) (13.5) (13.0) (26.5)
Special Items - continuing operations
The following items of income and expense have been reported as Special Items
- continuing operations and have been excluded from EBITDA and other
underlying metrics:
Full year ended 31 December 2023 2022
£m £m
Amortisation of acquired intangibles (49.3) (44.8)
Restructuring and site closure costs (14.7) (19.2)
Impairment charge (5.6) (133.7)
Acquisition costs and related gains (2.0) (6.5)
Sale of business (0.3) (0.3)
Regulatory fine (0.7) 21.5
Abortive bond costs (0.5) -
Total impact on operating profit (73.1) (183.0)
Fair value movement on unhedged interest rate derivatives (1.8) 25.1
Loss on extinguishment of financing facilities (4.7) -
Total impact on loss/profit before taxation (79.6) (157.9)
Taxation Special Items (1.7) 3.6
Taxation on Special Items 4.5 39.3
Total impact on loss/profit for the period - continuing operations (76.8) (115.0)
Amortisation of acquired intangibles is the amortisation on the customer
lists, patents, trademarks and trade secrets arising on past acquisitions.
The fair value of the intangible assets arising on past acquisitions is being
amortised over periods of 5-20 years mainly dependent on the characteristics
of the customer relationships.
Restructuring and site closure costs in 2023 comprised a £3.3m charge in
relation to the ongoing integration of the acquired adhesive resins business,
£3.8m of costs related to the new strategy and realignment of the business
into its new divisions during 2023, £5.9m of costs for ongoing functional and
site rationalisation in the USA and Europe, as a result of the divisional
reorganisation and the sale of the Laminates, Films and Coated Fabrics
businesses, and a £1.7m charge in relation to demolition and site
rationalisation activity in Malaysia.
A £5.6m impairment charge was provided on the mothballing of the NBR plant in
Kluang, Malaysia.
Acquisition costs and related gains of £2.0m in 2023 include obligations to
the US pensions schemes arising from the adhesive resins acquisition in 2022.
In July 2018, the Group entered into swap arrangements to fix euro interest
rates on the full value of the then €440m committed unsecured revolving
credit facility. The fair value movement of the unhedged interest rate
derivatives relates to the movement in the mark-to-market of the swap in
excess of the Group's current borrowings.
In March 2023, the Group refinanced its bank loan facilities. All amounts
outstanding on two term loans of $260m and $300m and the RCF of €460m were
subsequently repaid and the facilities were cancelled, and a new RCF was
signed. All capitalised debt issue costs relating to the cancelled facilities
were written off, leading to a loss on extinguishment of £4.7m.
Continuing Taxation Special Items mainly relates to a movement in foreign
exchange on the uncertain tax provision for a historical tax issue in Malaysia
on the sale of plantation land.
Continuing Taxation on Special Items mainly relates to deferred tax credits
arising on the amortisation of acquired intangibles and restructuring and site
closure costs.
Discontinued operations
On 28 February 2023, the Group completed the sale of its Laminates, Films and
Coated Fabrics businesses to Surteco North America, Inc. following
satisfaction of the conditions to the transaction announced on 13 December
2022. The final cash proceeds received at completion amounted to $260.3m after
transaction expenses, with $3.2m received in July 2023 and a further $5m
receivable in cash 13 months after completion. The net cash proceeds were used
to reduce the Group's debt. The Laminates, Films and Coated Fabrics businesses
are reported as discontinued operations in these results.
On 29 September 2023, the Group announced its intention to shut down its North
America Paper and Carpet business before the end of 2023, as part of the
previously announced strategy to exit a number of non-core businesses,
including the paper and carpet businesses globally. The North America Paper
and Carpet business is reported as discontinued in these results. All
discontinued operations form part of the HPPM division.
In the year, £57.0m of Special Items - discontinued operations (2022:
£(14.9)m) were recognised, comprising a £61.5m gain on the sale of the
Laminates Films and Coated Fabrics businesses, partially offset by £(3.7)m in
restructuring and site closure costs and £(0.8)m in impairment charges
relating to the North America Paper and Carpet business.
Discontinued taxation on Special Items was £(17.5)m (2022: £0.2m),
principally relating to the utilisation of US tax losses against a US tax gain
on the sale of the Laminates, Films and Coated Fabrics businesses.
Finance costs
Full year ended 31 December 2023 2022
£m £m
Interest payable (70.6) (44.8)
Interest receivable 10.2 1.6
Net interest expense on defined benefit obligation (2.7) (1.2)
Interest element of lease payments (1.8) (1.4)
Finance costs - underlying (64.9) (45.8)
Fair value movement on unhedged interest rate derivatives (1.8) 25.1
Loss on extinguishment of financing facilities (4.7) -
Finance costs - statutory (71.4) (20.7)
Underlying finance costs increased to £64.9m (2022: £45.8m) 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 a full year of the additional debt utilised to finance
the adhesive resins acquisition as well as higher base rates, partially offset
by increased interest receivable following receipt of the proceeds of the
rights issue. The Group recognised as Special Items a total of £(6.5)m in
finance costs relating to interest rate derivative contracts and
extinguishment of financing facilities, as described above.
Taxation
The Group's underlying tax credit for continuing operations was £1.6m (2022:
£27.6m charge), representing an effective tax rate on the underlying loss
before tax of 5.9% (2022: 22.3% on underlying profit). The effective tax rate
is driven by the geographical mix of profits and an increase in deferred tax
assets held off balance sheet in relation to the UK, due to uncertainty
regarding their use in the foreseeable future. The Group is within the scope
of the OECD Pillar Two model rules which came into effect from 1 January 2024.
The Group is in the process of assessing its exposure to the Pillar Two
legislation but does not expect to be subject to the top-up tax in the normal
course of business.
Non-controlling interest
The Group continues to hold 70% of Revertex (Malaysia) Sdn Bhd and its
subsidiaries. These entities form a relatively minor part of the Group, so the
impact on underlying performance from non-controlling interests is not
significant.
Earnings per share
Earnings per share is calculated based on the weighted average number of
shares in issue during the year. The weighted average number of shares for
2023 was 85.4m (2022: 63.4m on a comparable basis), reflecting the 20 to 1
share consolidation and the issuance of new shares at a discount under the
rights issue in October 2023. As at 12 March 2024, the Company had 163.6m
shares in issue.
Underlying earnings per share is (35.1) pence for the year, down from 152.0
pence in 2022 on a comparable basis, reflecting the lower earnings and higher
number of shares. The statutory earnings per share is (78.5) pence, down from
(51.2) pence on a comparable basis in 2022.
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 2023 the Group experienced a translation headwind of £0.7m on EBITDA, with
average FX rates against our three principal currencies of €1.15, $1.24 and
MYR 5.67 to the pound.
Given the global nature of our customer and supplier base, the impact of
transactional foreign exchange can be very different from translational
foreign exchange. We are able to partially mitigate the transaction impact by
matching supply and administrative cost currencies with sales currencies. To
reduce volatility which might affect the Group's cash or income statement, the
Group hedges net currency transaction exposures at the point of confirmed
order, using forward foreign exchange contracts. The Group's policy is, where
practicable, to hedge all exposures on monetary assets and liabilities.
Cash performance
The following table summarises the movement in net debt and is in the format
used by management:
Full year ended 31 December 2023 2022
£m £m
Opening net debt (1,024.9) (114.2)
Underlying operating profit (excluding joint ventures) 32.4 169.5
Movement in working capital 80.6 19.1
Depreciation of property, plant and equipment 96.5 86.0
Amortisation of other intangible assets 8.8 7.9
Capital expenditure (84.0) (90.8)
Operating Cash Flow(1) 134.3 191.7
Net interest paid (54.3) (38.2)
Tax received/(paid) 9.3 (65.6)
Pension funding (7.3) (21.3)
Adjustment for share-based payments charge 1.8 0.7
Dividends received from joint ventures 1.9 1.9
Free Cash Flow 85.7 69.2
Cash impact of settlement of interest rate derivative contracts 12.1 -
Cash impact of restructuring and site closure costs (28.0) (25.9)
Cash impact of acquisition costs (1.9) 1.7
Proceeds on sale of business 208.2 0.3
Purchase of adhesive resins business (18.4) (759.6)
Rights issue proceeds 265.5 -
Repayment of principal portion of lease liabilities (12.4) (10.1)
Dividends paid - (99.5)
Foreign exchange and other movements 14.4 (86.8)
Movement in net debt 525.2 (910.7)
Closing net debt (499.7) (1,024.9)
(1)Operating Cash Flow is defined as Total Group EBITDA plus/minus net working
capital movement less capital expenditure.
Underlying operating profit reduced to £32.4m reflecting the trading
performance described above. The net working capital inflow of £80.6m was as
a result of the receivables financing facility, active inventory and account
management, moderating raw materials pricing and lower activity levels.
Inventories in the acquired adhesive resins business were reduced
significantly in the year, with further progress expected in FY 2024.
In December 2022, the Group put in place two-year, non-recourse receivables
financing facilities for a maximum committed amount of €200m. Factored
receivables assigned under the facilities amounted to £110.6m net at 31
December 2023 (2022: £82.7m net). Under the facilities, the risks and rewards
of ownership are transferred to the assignees. The duration of the committed
facilities were subsequently extended to 31 May 2025.
Depreciation and amortisation of other intangibles increased principally due
to the reprofiling of acquired fixed assets described above. Capital
expenditure was £84.0m (2022: £90.8m), principally for the Pathway business
transformation programme and recurring SHE and sustenance expenditure. The
Group anticipates similar levels of capital expenditure in FY 2024.
Net interest paid increased to £54.3m reflecting the adhesive resins
acquisition debt and higher base rates.
Net tax received was £9.3m, primarily reflecting the tax refunds the Group
received in the year relating to a 2022 tax overpayment which was required by
law, as a result of the profitability of the Health &Protection business
in 2021.
The cash impact of Special Items including restructuring and site closure
costs and acquisition costs was an outflow of £29.9m.
Group debt is denominated in sterling, euros and dollars. Both the euro and
the dollar weakened relative to sterling during 2023, leading to a foreign
exchange gain in net debt.
Financing and liquidity
At 31 December 2023, net debt was £499.7m (2022: £1,024.9m), with the
reduction principally reflecting the proceeds of the rights issue completed in
October 2023, divestment of the Laminates, Films and Coated Fabrics businesses
and Free Cash Flow in excess of 2022 levels.
As at 31 December 2023, committed borrowing facilities principally comprised:
a $400m RCF (maturing in July 2027), five-year €520m 3.875% senior unsecured
loan notes (maturing July 2025) and UK Export Finance (UKEF) facilities of
€288m and $230m (both maturing in October 2027). At 31 December 2023, the
RCF was undrawn and the UKEF facilities were fully drawn. The Group's net
debt: EBITDA for the purposes of the leverage ratio covenant increased from
3.7x at 31 December 2022 to 4.2x at 31 December 2023, due to lower EBITDA over
the preceding 12-month period, partially offset by lower net debt, as
described elsewhere.
The RCF and the UKEF facilities are subject to one leverage ratio covenant.
For prudence, the Group agreed in March 2024 to extend the period of temporary
covenant relaxation to ensure that appropriate headroom was maintained.
Accordingly, the net debt: EBITDA ratios required under the covenant have been
set at not more than 6.0x in June 2024 and 5.75x in December 2024, with ratios
of not more than 5.0x in June 2025 and 4.75x in December 2025 conditional on a
refinancing of the senior loan notes. In addition, the RCF amount was changed
from $400m to €300m.
The Group currently expects net financing costs of approximately £60-65m in
2024 as a result of higher interest rates and other changes to the Group's
financing arrangements. The Group's committed liquidity at 8 March 2024 was in
excess of £450m.
Balance sheet
Net assets of the Group increased by 13% to £1,162.0m at 31 December 2023,
mainly reflecting the issue of new shares partially offset by the £66.8m loss
for the year and a loss of £65.5m on translation of foreign currency.
Provisions
The Group provisions balance decreased to £41.5m compared with a balance of
£54.0m as at 31 December 2022, mainly reflecting cash utilisation of £11.2m
in the year, most notably in relation to restructuring and site
rationalisation activities.
Retirement benefit plans
The Group's principal funded defined benefit pension schemes are in the UK and
the USA and are both closed to new entrants and future accrual. The Group also
operates an unfunded defined benefit scheme in Germany and various other
defined contribution overseas retirement benefit arrangements.
The Group's net retirement obligation decreased by £8.7m to £64.7m at 31
December 2023 (31 December 2022: £73.4m), and reflects the market value of
assets and the valuation of liabilities in accordance with IAS 19, including
an asset of £16.5m for the UK scheme. This reduction largely comprised £5.2m
of cash contributions and actuarial gains of £2.9m. During 2024 the Group is
committed to making c.£19m in contributions to the UK scheme, a portion of
which was deferred from 2023.
Post-balance sheet events
During 2022, the European Commission concluded its investigation into styrene
monomer purchasing practices, and the final settlement amount of £38.5m was
transferred to other payables. The Group paid the settlement amount plus
interest in January 2024 as agreed with the EC.
In March 2024, the Group amended its RCF and UKEF arrangements, as described
elsewhere.
As part of the Group's previously announced non-core portfolio rationalisation
programme, there are three formal divestment processes underway for non-core
businesses in Europe, currently incorporated within the Health &
Protection and Performance Materials division. Given progress made since the
year end, the Directors now consider it is more likely than not that at least
one of these processes will lead to a divestment within the next 12 months.
DIVISIONAL REVIEW - CONTINUING OPERATIONS
Coatings & Construction Solutions (CCS)
Currently our most speciality-weighted division, CCS is already demonstrating
the resilience and growth potential that comes from a true focus on customer
needs supported by sustained alignment of people, capital, and strategy.
Full year ended 31 December 2023 2022 Change Constant currency(1)
£m £m % %
Revenue 815.5 996.1 (18.1) (19.0)
Volumes (ktes) 515.2 597.7 (13.8)
EBITDA 100.1 120.8 (17.1) (17.3)
EBITDA % of revenue 12.3% 12.1%
Operating profit - underlying 73.3 94.1 (22.1) (22.0)
Operating profit - statutory 41.1 62.8 (34.6)
(1) Underlying constant currency revenue and profit retranslate current
year results using the prior year's average exchange rates.
Performance
Divisional revenue decreased by 19.0% in constant currency to £815.5m (2022:
£996.1m), principally driven by a 13.8% reduction in volume compared with the
prior year. This principally reflects more cautious buying behaviour from our
customers given the subdued end-user demand environment.
Throughout the year, our coatings end markets have been more robust than
construction and consumer materials, while our activities for energy end
markets have enjoyed strong levels of growth. Geographically, market
conditions were stronger in our target growth regions of North America, Middle
East and Asia, with activity levels in Europe more muted.
While reduced raw material costs were reflected in pricing, the division has
been largely successful in retaining gross margin, reflecting the speciality
nature of our offering for customers. Despite the challenging demand
environment, robust cost control and a number of tactical initiatives enabled
CCS to increase EBITDA margin to 12.3% (2022: 12.1%) and generate £100.1m of
EBITDA (2022: £120.8m) in the year.
Typically the most seasonal division in the Group, volumes were sequentially
lower in H2 2023 than H1, as expected. Notwithstanding this, EBITDA margin was
higher in the second half compared with the first.
At the start of 2024, certain foam products were transferred from the CCS
division into Performance Materials, and tyre cord, elastomeric modifiers and
reinforcing resins products transferred in the other direction; the net
financial effect was not significant.
Strategy
While CCS already has leading market positions in several niches, particularly
in our historical home European markets, our strategy is focused on enhancing
our organic growth capability. We are doing this through a more end-market
aligned approach, key account management and a growing focus on value selling,
as well as building on our increased geographic reach, both with our existing
global customers and with regional leaders in our target markets. For example,
through a joined-up approach involving the CEO of the Group and divisional
management through to local technical and sales teams, we have developed an
increasingly strategic partnership with one such leader in the USA. In the
process we have multiplied the value of our sales with them several times over
during the last 18 months.
In the year we undertook a modest investment to enhance our coatings capacity
in the Middle East, and our sales in China should benefit from the Group's
investment in a new Innovation Centre in Shanghai.
We have also continued to align our innovation efforts with the needs of our
end markets, with a particular focus on sustainability, as a means to enhance
the differentiation and hence resilience and margin opportunity of our product
portfolio. In the year we have piloted a new bio-based emulsion polymer
platform for coatings, with customer sampling taking place in 2024.
We also continue to progress a number of asset optimisation projects and other
cost control and capacity management activities. We successfully completed our
exit from a small production site in Texas, and in November 2023 we announced
plans to close our Fitchburg, Massachusetts site by the end of 2024 following
a review of our manufacturing footprint strategy in the North American region.
By consolidating our production in the region we will improve asset
utilisation rates and reduce complexity, while enabling new investment to
advance our strategic focus on organic growth.
In 2024, the division's focus remains on organic growth, disciplined
investment in innovation and enhancing our customer proposition, and continued
optimisation of our manufacturing base to align with our strategic ambitions.
Adhesive Solutions (AS)
Despite substantial market and internal challenges, our AS division now has
the team and the plan in place to build on its strengths and fulfil its
potential, as reliability and efficiency improve and when end markets recover.
Full year ended 31 December 2023 2022(1) Change Constant currency(2)
£m £m % %
Revenue 581.7 572.9 1.5 1.0
Volumes (ktes) 247.2 224.2 10.3
EBITDA 31.2 67.2 (53.6) (54.3)
EBITDA % of revenue 5.4% 11.7%
Operating (loss)/profit - underlying (7.5) 44.5 n/m n/m
Operating (loss)/profit - statutory (32.7) (126.1) n/m
(1) 2022 included a nine month contribution from the adhesive resins
acquisition.
(2 ) Underlying constant currency revenue and profit retranslate
current year results using the prior year's average exchange rates.
Performance
Divisional revenue was £581.7m (2022: £572.9m), an increase of 1.0% in
constant currency. The inclusion of the adhesive resins acquisition for the
whole year (compared to three quarters in 2022) largely offset a 10.6%
like-for-like volume decline, driven by lower demand amplified by destocking,
challenges fulfilling customer orders due to previously disclosed reliability
and supply chain issues, and increased pressure from global competitors in
base products in the second half.
Within the division, speciality products (c.55% of divisional revenues) such
as pure monomer resins (PMR), polybutadiene polymers, amorphous polyolefins
(APOs) and rosins were more robust in both volume and pricing terms,
reflecting their greater differentiation for customers. However, our more base
chemical products - particularly hydrocarbon resins for the tapes, labels,
packaging and plastics markets in Europe and the USA - were more exposed to
increased global competition for lower demand this year.
In our speciality product portfolio, we were able largely to maintain or
increase margins. We also successfully delivered on the cost and reliability
actions planned for the year by the performance improvement programme that was
put in place in July 2023 by the new divisional management team. However, the
market challenges especially in our base products, together with disruptions
in supply chain and production, resulted in divisional EBITDA of £31.2m
(2022: £67.2m) and EBITDA margin of 5.4% (2022: 11.7%) for the year.
Comparing H2 2023 with the first half, the divisional volume declines began to
stabilise, and EBITDA margin improved by 71bps.
Strategy
The AS division has leading positions in a range of speciality adhesive
applications and long-term embedded relationships with many high-quality
customers in attractive end markets. It has shifted the weighting of the Group
towards North America through the recent adhesive resins acquisition, creating
opportunities for Synthomer as a whole. However, its performance in 2023 was
well below the division's long-term potential.
The immediate priority of our division is the execution of our performance
improvement programme to increase operational reliability and cost efficiency
of the acquired adhesive resins operations. The reliability initiatives focus
on end-to-end stabilisation in procurement, production, and supply chain. We
have made progress in improving logistics and supplier networks, and our focus
going forward is now primarily on improving the reliability of certain key
acquired sites. In terms of cost, the majority of the acquisition synergies
have now been delivered. The new performance improvement programme delivered
£5m in savings in 2023, and is currently targeting a total run rate in excess
of £25m by 2025 with significant progress expected in 2024. The division has
also successfully reduced inventory by more than £25m in the year, with
further reductions targeted in 2024.
In addition to the performance improvement programme, our divisional strategy
in 2024 and beyond recognises and addresses the differentiated performance of
the speciality and base parts of the division. The majority of our investment
for future growth is intended to build on the strengths of our speciality
portfolio to drive revenue synergies and organic growth. This includes
strengthening customer relationship management, innovation projects such as
the launch of new product grades for tyres for electric vehicle end markets,
and sustainability initiatives such as the ISCC PLUS certification of our
major manufacturing sites. To support this, we are also investing in a
disciplined way, including the ongoing expansion of our speciality amorphous
polyolefins capacity in North America.
In the base product areas, the focus is more on enhancing cost
competitiveness, such as our recent investment to bolster our supply chain,
increase reliability and improve the cost position for hydrocarbon resin
production in Europe.
Health & Protection and Performance Materials (HPPM)
Volumes in our Heath & Protection business have begun to recover gradually
from their post-pandemic trough, and we continue to drive forward our plans
for the Performance Materials portfolio.
Full year ended 31 December (continuing)(1) 2023 2022 Change Constant currency(2)
£m £m % %
Revenue 573.7 763.3 (24.8) (23.7)
Volumes (ktes) 544.2 629.0 (13.5)
EBITDA 31.0 86.5 (64.2) (61.3)
EBITDA % of revenue 5.4% 11.3%
Operating (loss)/profit - underlying (0.7) 57.6 n/m n/m
Operating (loss)/profit - statutory (10.2) 54.2 n/m
(1) Laminates, Film and Coated Fabrics and North America Paper and
Carpet have been reclassified as discontinued operations.
(2 ) Underlying constant currency revenue and profit retranslate
current year results using the prior year's average exchange rates.
Continuing divisional performance
Divisional revenue was £573.7m (2022: £763.3m), driven by a 13.5% reduction
in volume and significantly lower prices compared with the strong 2022.
The exceptional global demand for NBR to manufacture medical gloves at the
height of the COVID-19 pandemic gave way during 2022 to a prolonged period of
destocking and oversupply for our Health & Protection business. This,
combined with an increase in output from Chinese glove manufacturers, put
significant strain on pricing and plant utilisation throughout the value
chain. Together, these factors resulted in a 13.4% decline in NBR volumes
compared with the prior year. End-market demand growth for medical gloves
remains robust, underpinned by the long-term hygiene megatrend, and some NBR
and glove capacity has left the market (including from our decision in August
2023 to mothball our NBR facility in Kluang, Malaysia, which will reduce our
NBR capacity by approximately 20%). As a result, the current divergence
between capacity and demand for NBR is slowly abating, with volumes modestly
improving in Q3 and Q4 2023, albeit with low unit margins persisting.
In our Performance Materials portfolio, which includes a number of businesses
with niche leadership positions that have however been assessed as non-core
to the wider Group strategy, volumes were down by 13.5%. This was driven
principally by lower demand exacerbated by destocking. Many of these are base
businesses which have experienced greater unit margin pressure as raw material
prices moderate compared with the more speciality parts of the Group. Again
the trend moderated sequentially, with Performance Materials volumes
stabilising during the second half.
As a predominantly base chemicals division, the negative operating leverage
impact of lower volumes was significant, with divisional EBITDA reducing to
£31.0m (2022: £86.5m) and EBITDA margin to 5.4% (2022: 11.3%). Reflecting
our focus on cost, capacity utilisation and efficiency, divisional EBITDA
margin improved by 90bps in H2 2023 compared with H1 2023.
Strategy
As a market leader with critical mass and structurally growing end-markets,
Health & Protection is a core Synthomer business, albeit one with base
chemical characteristics. As such, in accordance with the differentiated
steering pillar of our strategy, our operational focus has been on improving
cost efficiency across our value chain and enhancing our overall value
proposition to our customers through selective investment in process and
product innovation and sustainability.
The transfer of product grades from Kluang to our other NBR plants is now
largely complete, improving our overall cost competitiveness and utilisation
rates. Focusing our Health & Protection production on our newer facilities
also lowers our energy consumption and the carbon footprint of our customers
and ourselves.
We also continue to increase our level of customer intimacy, enhancing our
understanding of demand and market flows and facilitating deeper relationships
with customers. We requalified with an important customer during the year, and
are exploring a number of new opportunities, including in the USA and China,
the latter to be supported by Synthomer's investment in our new China
Innovation Centre under construction in Shanghai. We have also revised our
innovation and capital expenditure plans to focus on our most differentiated
products or process opportunities, with positive take-up of our SyNovus Plus
product in Europe, for example.
Our non-core portfolio rationalisation programme continued to progress during
the year. We currently have three formal divestment processes underway,
including for the European SBR for paper and carpet business, which is
progressing to plan.
Safety
We achieved a much improved performance in 2023. Our Recordable Case Rate
(RCR) result represents a more than 50% year-on-year improvement and places
Synthomer in the top quartile for our industry. Meanwhile, our Process Safety
Event Rate (PSER) has stabilised year-on-year. Both metrics are testament to
the hard work of our employees, although we recognise there remains more to
do to, in particular to complete the process of bringing the more recently
acquired sites up to the standards of safety achieved elsewhere in the
portfolio.
Longer-term SHE trends clearly demonstrate that the longer sites are part of
Synthomer and our SHE management system, the better their performance.
As well as our two headline 'lagging' indicators, we are also increasingly
focused on a number of 'leading' indicators, such as permit to work,
management of change and SHE competency within our teams to help drive future
performance improvements. In 2023, we held three regional SHE conferences with
leading indicators as a headline topic.
In 2024, we will focus on process safety improvements for all our operational
teams and continue to develop our major accident hazard scenario barrier
checks.
Full year ended 31 December (continuing) 2023 2022 Change
RCR per 100,000 hours for employees and contractors Absolute
CCS 0.23 0.45 (0.22)
AS(1) 0.38 0.29 0.09
HPPM 0.03 0.18 (0.15)
Continuing Group 0.16 0.31 (0.15)
PSER per 100,000 hours for employees and contractors Absolute
CCS 0.13 0.28 (0.15)
AS(1) 0.63 0.54 0.09
HPPM 0.08 0.13 (0.05)
Continuing Group 0.18 0.24 (0.06)
(1) 2022 data for AS reflects the April-December period which included
the acquired adhesive resins business.
Forward-looking statements
Certain statements included or incorporated by reference within this document
may constitute 'forward-looking statements' with respect to the operations,
performance and financial condition of the Group. By their nature,
forward-looking statements involve uncertainty, since future events and
circumstances can cause results or developments to differ materially from
those anticipated. The forward-looking statements reflect knowledge and
information available at the date of preparation of this report and the
Company is under no obligation to update these forward-looking statements. No
statement in this document should be construed as a profit forecast.
Consolidated income statement
for the year ended 31 December 2023
2023 2022
Underlying performance Special items Underlying performance Special
£m £m IFRS £m items IFRS
£m £m £m
Continuing operations Revenue
1,970.9 - 1,970.9 2,332.3 - 2,332.3
Company and subsidiaries operating profit before Special Items 36.3 - 36.3 167.8 - 167.8
Amortisation of acquired intangibles - (49.3) (49.3) - (44.8) (44.8)
Restructuring and site closure costs - (14.7) (14.7) - (19.2) (19.2)
Acquisition costs and related losses - (2.0) (2.0) - (6.5) (6.5)
Sale of business - (0.3) (0.3) - (0.3) (0.3)
Regulatory fine - (0.7) (0.7) - 21.5 21.5
Abortive bond costs - (0.5) (0.5) - - -
Impairment charge - (5.6) (5.6) - (133.7) (133.7)
Company and subsidiaries operating profit/(loss) 36.3 (73.1) (36.8) 167.8 (183.0) (15.2)
Share of joint ventures 1.4 - 1.4 1.7 - 1.7
Operating profit/(loss) 37.7 (73.1) (35.4) 169.5 (183.0) (13.5)
Interest payable (70.6) - (70.6) (44.8) - (44.8)
Interest receivable 10.2 - 10.2 1.6 - 1.6
Fair value (loss)/gain on unhedged interest derivatives - (1.8) (1.8) - 25.1 25.1
Loss on extinguishment of financing facilities - (4.7) (4.7) - - -
Net interest expense on defined benefit obligations (2.7) - (2.7) (1.2) - (1.2)
Interest element of lease payments (1.8) - (1.8) (1.4) - (1.4)
Finance costs (64.9) (6.5) (71.4) (45.8) 25.1 (20.7)
(Loss)/profit before taxation (27.2) (79.6) (106.8) 123.7 (157.9) (34.2)
Taxation 1.7 2.8 4.5 (27.6) 42.9 15.3
(Loss)/profit for the year from continuing operations (25.5) (76.8) (102.3) 96.1 (115.0) (18.9)
(Loss)/profit for the year from discontinuing operations attributable to (4.1) 39.6 35.5 0.8 (14.9) (14.1)
equity holders of the parent
(Loss)/profit for the year (29.6) (37.2) (66.8) 96.9 (129.9) (33.0)
Profit/(loss) attributable to non-controlling interests 0.4 (0.2) 0.2 0.5 (1.0) (0.5)
(Loss)/profit attributable to equity holders of the parent (30.0) (37.0) (67.0) 96.4 (128.9) (32.5)
(29.6) (37.2) (66.8) 96.9 (129.9) (33.0)
Earnings per share
- Basic from continuing operations (30.3)p (89.7)p (120.0)p 150.7p (179.7)p (29.0)p
- Diluted from continuing operations (30.3)p (89.7)p (120.0)p 150.7p (179.7)p (29.0)p
- Basic (35.1)p (43.4)p (78.5)p 152.0p (203.2)p (51.2)p
- Diluted (35.1)p (43.4)p (78.5)p 152.0p (203.2)p (51.2)p
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023 2022
Equity holders of the parent Non-controlling Equity holders Non-controlling
£m interests Total of the parent interests Total
£m £m £m £m £m
(Loss)/profit for the year (67.0) 0.2 (66.8) (32.5) (0.5) (33.0)
Actuarial gains 2.9 - 2.9 34.1 - 34.1
Tax relating to components of other comprehensive income (1.0) - (1.0) (11.6) - (11.6)
Total items that will not be reclassified to profit or loss 1.9 - 1.9 22.5 - 22.5
Exchange differences on translation of foreign operations (58.3) (0.8) (59.1) 95.9 0.8 96.7
Exchange differences recycled on sale of business (0.5) - (0.5) - - -
Fair value (loss)/gain on hedged interest derivatives (7.7) - (7.7) 9.7 - 9.7
Gains on net investment hedges taken to equity 1.0 - 1.0 2.4 - 2.4
Total items that may be reclassified subsequently to profit or loss (65.5) (0.8) (66.3) 108.0 0.8 108.8
Total other comprehensive (expense)/income for the year (63.6) (0.8) (64.4) 130.5 0.8 131.3
Total comprehensive (expense)/income for the year (130.6) (0.6) (131.2) 98.0 0.3 98.3
Consolidated statement of changes in equity
for the year ended 31 December 2023
Share capital Share premium Capital redemption Hedging & translation reserve Retained earnings Total equity holdings of the parent Non- controlling interests Total equity
£m £m reserve £m £m £m £m £m
£m
At 1 January 2023 46.7 620.0 0.9 75.9 273.5 1,017.0 14.0 1,031.0
(Loss)/profit for the year - - - - (67.0) (67.0) 0.2 (66.8)
Other comprehensive (expense)/income for the year - - - (65.5) 1.9 (63.6) (0.8) (64.4)
Total comprehensive (expense) for the year - - - (65.5) (65.1) (130.6) (0.6) (131.2)
Dividends - - - - - - - -
Share consolidation (46.5) 46.5 - - - - - -
Issue of shares 1.4 259.4 - - - 260.8 - 260.8
Share-based payments - - - - 1.4 1.4 - 1.4
At 31 December 2023 1.6 925.9 0.9 10.4 209.8 1,148.6 13.4 1,162.0
Capital Hedging & translation reserve Total equity holdings of the parent Non- controlling interests
Share Share premium redemption £m Retained earnings £m £m Total equity
capital £m reserve £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
Consolidated balance sheet
as at 31 December 2023
2023 2022
£m £m
Non-current assets
Goodwill 465.7 480.8
Acquired intangible assets 452.5 523.6
Other intangible assets 71.1 60.9
Property, plant and equipment 705.7 753.6
Deferred tax assets 36.8 50.3
Defined benefit asset 16.5 5.9
Investment in joint ventures 7.5 8.1
Total non-current assets 1,755.8 1,883.2
Current assets
Inventories 344.1 407.9
Trade and other receivables 213.0 271.6
Current tax assets 8.8 34.3
Cash and cash equivalents 371.3 227.7
Derivative financial instruments 12.2 26.7
Assets classified as held for sale 1.5 196.2
Total current assets 950.9 1,164.4
Total assets 2,706.7 3,047.6
Current liabilities
Borrowings (0.7) (18.5)
Trade and other payables (431.3) (460.8)
Lease liabilities (13.8) (10.6)
Current tax liabilities (28.0) (33.6)
Provisions for other liabilities and charges (11.9) (13.7)
Derivative financial instruments (2.4) -
Liabilities classified as held for sale - (45.5)
Total current liabilities (488.1) (582.7)
Non-current liabilities
Borrowings (870.3) (1,234.1)
Trade and other payables (0.2) (0.4)
Lease liabilities (41.5) (34.9)
Deferred tax liabilities (33.8) (44.9)
Retirement benefit obligations (81.2) (79.3)
Provisions for other liabilities and charges (29.6) (40.3)
Total non-current liabilities (1,056.6) (1,433.9)
Total liabilities (1,544.7) (2,016.6)
Net assets 1,162.0 1,031.0
Equity
Share capital 1.6 46.7
Share premium 925.9 620.0
Capital redemption reserve 0.9 0.9
Hedging and translation reserve 10.4 75.9
Retained earnings 209.8 273.5
Equity attributable to equity owners of the parent 1,148.6 1,017.0
Non-controlling interests 13.4 14.0
Total equity 1,162.0 1,031.0
Consolidated cash flow statement
for the year ended 31 December 2023
2023 2022
£m £m £m £m
Operating
Cash generated from operations 195.0 237.7
- Interest received 10.2 1.6
- Interest paid (62.7) (38.4)
- Interest element of lease payments (1.8) (1.4)
Net interest paid (54.3) (38.2)
- UK corporation tax paid (2.9) -
- Overseas corporate tax received/(paid) 12.2 (65.6)
Total tax received/(paid) 9.3 (65.6)
Net cash inflow from operating activities 150.0 133.9
Investing
Dividends received from joint ventures 1.9 1.9
Purchase of property, plant and equipment and intangible assets (84.0) (90.8)
Acquisition of adhesive resins business (18.4) (759.6)
Proceeds from sale of business 208.2 0.3
Net cash inflow/(outflow) from investing activities 107.7 (848.2)
Financing
Dividends paid - (99.5)
Dividends paid to non-controlling interests - -
Proceeds on issue of shares 265.5 -
Settlement of equity-settled share-based payments (0.4) (1.5)
Repayment of principal portion of lease liabilities (12.4) (10.1)
Repayment of borrowings (892.0) (207.6)
Proceeds of borrowings 548.4 733.2
Net cash (outflow)/inflow from financing activities (90.9) 414.5
Increase/(decrease) in cash, cash equivalents and bank overdrafts during the
period
166.8 (299.8)
Cash and cash equivalents and bank overdrafts at 1 January 209.2 505.3
Foreign exchange (loss)/gain (5.4) 3.7
Cash, cash equivalents and bank overdrafts at 31 December 370.6 209.2
See note 8 for further details of cash flows from discontinued operations.
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
· Settlement of prior period tax issues.
Special Items comprise:
2023 2022
£m
£m
Amortisation of acquired intangibles (49.3) (44.8)
Restructuring and site closure costs (14.7) (19.2)
Impairment charge (5.6) (133.7)
Acquisition costs and related (losses)/gains (2.0) (6.5)
Sale of business (0.3) (0.3)
Regulatory fine (0.7) 21.5
Abortive bond costs (0.5) -
Total impact on operating loss (73.1) (183.0)
Finance costs
Fair value (loss)/gain on unhedged interest
derivatives (1.8) 25.1
Loss on extinguishment of financing facilities (4.7) -
Total impact on loss before taxation (79.6) (157.9)
Taxation Special items (1.7) 3.6
Taxation on Special items 4.5 39.3
Total impact on loss for the year - continuing operations (76.8) (115.0)
Discontinued Operations
Amortisation of acquired intangibles - (6.1)
Restructuring and site closure costs (3.7) (0.3)
Sale of business 61.5 (8.3)
Impairment charge (0.8) -
Taxation on Special Items (17.4) (0.2)
Total impact on profit/(loss) for the year - discontinued operations 39.6 (14.9)
Total impact on loss for the year (37.2) (129.9)
Amortisation of acquired intangibles is the amortisation on the customer
lists, patents, trademarks and trade secrets arising on past acquisitions. The
fair value of the intangible assets arising on past acquisitions are being
amortised over periods of 5-20 years mainly dependent on the characteristics
of the customer relationships.
1. Special items (continued)
Within continuing operations, Restructuring and site closure costs in 2023
comprised:
· A £3.3m charge in relation to the ongoing integration of the
acquired adhesive resins business into the Adhesive Solutions division
· £3.8m of costs in relation to the new strategy and realignment
of the business into its new divisions effective from 2023
· £5.9m of costs for ongoing functional and site rationalisation
in the USA and Europe, as a result of divisional realignment and the sale of
the Laminates, Films and Coated Fabrics business
· A £1.7m charge in relation to demolition and site
rationalisation activity in Malaysia.
Within discontinued operations, Restructuring and site closure costs of £3.3m
were incurred due to the closure of the North America Paper and Carpet
business that was announced in September 2023.
Restructuring and site closure costs in 2022 included charges to integrate the
adhesive resins business, site rationalisation costs in Malaysia and Europe,
and costs in relation to the strategy change and realignment of the business
into its new divisions.
Within continuing operations, a £5.6m impairment charge was provided on the
mothballing of the NBR plant in Malaysia. Within discontinued operations, a
£0.8m impairment charge was taken to discontinued items in the year, relating
to lease impairments in the discontinued North America Paper and Carpet
business. The impairment charge in 2022 related to the acquired adhesive
resins business.
Acquisition costs and related gains are for the acquisition of the adhesive
resins business from Eastman Chemical Company and include £1.9m of costs,
related to obligations to the USA pension schemes. Acquisition costs in 2022
also related to the acquisition of adhesive resins.
Sale of business mainly related to the proceeds net of any costs, primarily
professional fees, incurred in conjunction with the sale of the Laminates,
Films and Coated Fabrics businesses to Surteco.
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 £57.2m was made. In 2022, the Commission
concluded its investigation, resulting in a fine of £38.5m. In 2023, interest
of £0.7m on the settlement was due.
During the year, the Group commenced a process to issue fixed rate unsecured
loan notes, the Group later decided to issue new shares in a rights issue and
did not proceed with the issue of the loan notes. The costs of this process
are not reflective of underlying performance.
In July 2018, the Group entered into swap arrangements to fix euro interest
rates on the full value of the then €440m 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.
Continuing taxation Special Items related principally to the movement in
foreign exchange on the uncertain tax provision in relation to a historical
tax issue in Malaysia.
Continuing taxation on Special Items is mainly deferred tax credits arising on
the amortisation of acquired intangibles and restructuring and site closure
costs.
Discontinuing taxation on Special Items relates principally to the utilisation
of the USA tax losses against the USA tax on the sale of the Laminates, Films
and Coated Fabrics business.
2. Segmental analysis
The Group's Executive Committee, chaired by the Chief Executive Officer,
examines the Group's performance.
As part of the strategy refresh announced in October 2022, the Group has
changed the way it does business to be closer to consumers, more embedded in
customers' markets, and better able to deliver the sustainable innovations
that will drive success. As of 1 January 2023, the Group now has three new,
market-focused divisions with strong commercial positions and global reach.
The Group's reportable segments are as follows:
Coatings & Construction Solutions
Our specialist polymers enhance the sustainable performance of a wide range of
coatings and construction products. We work across architectural and masonry
coatings, mortar modification, waterproofing and flooring, fibre bonding, and
energy solutions.
Adhesive Solutions
Our adhesive solutions bond, modify and compatibilise surfaces and components
for products including tapes and labels, packaging, hygiene, tyres and plastic
modification, helping improve permeability, strength, elasticity, damping,
dispersion and grip.
Health & Protection and Performance Materials
We help enhance protection and performance in a wide range of industries
including medical glove manufacture, speciality paper, food packaging, carpet
and artificial turf, gel foam elastomers, and vinyl-coated seating fabrics.
The Group's Executive Committee is the chief operating decision maker and
primarily uses a measure of earnings before interest, tax, depreciation and
amortisation (EBITDA) to assess the performance of the operating segments. No
information is provided to the Group's Executive Committee at the segment
level concerning interest income, interest expense, income tax or other
material non-cash items.
No single customer accounts for more than 10% of the Group's revenue.
A segmental analysis of Underlying performance and Special Items is shown
below.
Continuing Operations Discontinued Operations
Health & Protection Health & Protection
and Performance Materials and Performance Materials
Coatings & Construction Solutions £m £m
2023 £m Adhesive Solutions
£m Corporate Total Total
£m £m £m
Revenue
Total revenue 815.5 581.7 584.3 - 1,981.5 50.3 2,031.8
Inter-segmental revenue - - (10.6) - (10.6) - (10.6)
815.5 581.7 573.7 - 1,970.9 50.3 2,021.2
EBITDA 100.1 31.2 31.0 (20.2) 142.1 (3.0) 139.1
Depreciation and amortisation (26.8) (38.7) (31.7) (7.2) (104.4) (0.9) (105.3)
Operating profit/(loss) before Special Items 73.3 (7.5) (0.7) (27.4) 37.7 (3.9) 33.8
Special Items (32.2) (25.2) (9.5) (6.2) (73.1) 57.0 (16.1)
Operating profit/(loss) 41.1 (32.7) (10.2) (33.6) (35.4) 53.1 17.7
Finance costs (71.4)
Loss before taxation (53.7)
2. Segmental analysis (continued)
Continuing Operations Discontinued Operations
Health & Health &
Protection Protection
Coatings & Construction Solutions and Performance Materials and Performance Materials
2022 £m Adhesive Solutions £m £m
£m Corporate Total Total
£m £m £m
Revenue
Total revenue 996.1 572.9 779.7 - 2,348.7 252.8 2,601.5
Inter-segmental revenue - - (16.4) - (16.4) - (16.4)
996.1 572.9 763.3 - 2,332.3 252.8 2,585.1
EBITDA 120.8 67.2 86.5 (20.7) 253.8 11.3 265.1
Depreciation and amortisation (26.7) (22.7) (28.9) (6.0) (84.3) (9.6) (93.9)
Operating profit/(loss) before Special Items 94.1 44.5 57.6 (26.7) 169.5 1.7 171.2
Special Items (31.3) (170.6) (3.4) 22.3 (183.0) (14.7) (197.7)
Operating profit/(loss) 62.8 (126.1) 54.2 (4.4) (13.5) (13.0) (26.5)
Finance costs (21.1)
Profit before taxation (47.6)
3. Reconciliation of operating profit/(loss) to cash generated from operations
2023 2022
£m £m
Operating profit/(loss) 17.7 (26.5)
Less: share of profits of joint ventures (1.4) (1.7)
Adjustments for: 16.3 (28.2)
- Depreciation of property, plant and equipment 85.0 76.4
- Depreciation of right of use assets 11.5 9.6
- Amortisation of other intangibles 8.8 7.9
- Share-based payments 1.8 0.7
- Special Items 16.1 197.7
Cash impact of settlement of interest rate derivative contracts 12.1 -
Cash impact of restructuring and site closure costs (28.0) (25.9)
Cash impact of acquisition costs and related gains (1.9) 1.7
Pension funding in excess of service cost (7.3) (21.3)
Movement in working capital 80.6 19.1
Cash generated from operations 195.0 237.7
Reconciliation of movement in working capital
Decrease/(increase) in inventories 45.7 (12.3)
Decrease in trade and other receivables 52.7 147.0
Decrease in trade and other payables (17.8) (115.6)
Movement in working capital 80.6 19.1
4. Dividends
2023 2022
Pence per share Pence
£m per share £m
Interim dividend - - - -
Proposed final dividend - - - -
- - - -
As part of a covenant amendment process in October 2022, the Group suspended
dividend payments. This included the suspension of the interim dividend of
4.0p announced in 2022 that was due to be paid in November 2022.
Dividends paid
2023 2022
£m £m
Interim dividend - -
Prior year final dividend - 99.5
- 99.5
5. Earnings per share
2023 2022
Underlying performance Special Items Underlying performance Special
IFRS Items IFRS
Earnings
(Loss)/profit attributable to equity holders of the parent - continuing £m (25.9) (76.6) (102.5) 95.6 (114.0) (18.4)
operations
(Loss)/profit attributable to equity holders of the parent £m (30.0) (37.0) (67.0) 96.4 (128.9) (32.5)
Number of shares
Weighted average number of ordinary shares - basic '000 85,382 63,441
Effect of dilutive potential ordinary shares '000 251 138
Weighted average number of ordinary shares - diluted '000 85,633 63,579
Earnings per share for (loss)/profit from continuing operations
Basic earnings per share pence (30.3) (89.7) (120.0) 150.7 (179.7) (29.0)
Diluted earnings per share pence (30.3) (89.7) (120.0) 150.7 (179.7) (29.0)
Earnings per share for (loss)/profit from discontinued operations
Basic earnings per share pence (4.8) 46.3 41.5 1.3 (23.5) (22.2)
Diluted earnings per share pence (4.8) 46.3 41.5 1.2 (23.4) (22.2)
Earnings per share for (loss)/profit attributable to equity holders
of the parent
Basic earnings per share pence (35.1) (43.4) (78.5) 152.0 (203.2) (51.2)
Diluted earnings per share pence (35.1) (43.4) (78.5) 152.0 (203.2) (51.2)
The weighted average number of ordinary shares for the year to 31 December
2022, used in the calculation of earnings per share, have been adjusted for
the 20 to 1 share consolidation which took place on 28 September 2023, and the
bonus element (factor of 2.715) of the additional shares issued under the
terms of the rights issue which completed on 13 October 2023.
6. Finance costs
2023 2022
£m £m
Interest payable on bank loans and overdrafts 70.6 44.8
Less: interest receivable (10.2) (1.6)
Net interest expense on defined benefit obligations 2.7 1.2
Interest element of lease payments 1.8 1.4
Underlying finance costs 64.9 45.8
Fair value loss/(gain) on unhedged interest derivatives 1.8 (25.1)
Loss on extinguishment of financing facilities 4.7 -
Total finance costs from continuing operations 71.4 20.7
Finance costs from discontinued operations - 0.4
Total finance costs 71.4 21.1
7. Analysis of net debt
1 January Exchange and other movements 31 December
2023 Cash flows £m 2023
£m £m £m
Bank overdrafts (18.5) 17.8 - (0.7)
Current Liabilities (18.5) 17.8 - (0.7)
Bank loans (777.7) 343.6 12.2 (421.9)
€520m 3.875% senior unsecured loan notes due 2025 (456.4) - 8.0 (448.4)
Non-current liabilities (1,234.1) 343.6 20.2 (870.3)
Total borrowings (1,252.6) 361.4 20.2 (871.0)
Cash and cash equivalents 227.7 149.0 (5.4) 371.3
Net debt (1,024.9) 510.4 14.8 (499.7)
Capitalised debt costs which have been recognised as a reduction in borrowings
in the financial statements, amounted to £10.5m at 31 December 2023 (31
December 2022: £14.2m).
8. 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 circular to
Shareholders on 16 December 2022. Shareholder approval was subsequently
obtained on 11 January 2023 with the transaction completing on 28 February
2023 with net cash proceeds of $262m. The gain on disposal was £61.5m ( see
note 4).
The associated assets and liabilities were consequently presented for sale in
the 2022 financial statements.
All discontinued operations form part of the Health & Protection and
Performance Materials division.
On 29 September 2023, it was announced that Synthomer intended to shut down
its North America Paper and Carpet business before the end of 2023, honouring
existing contractual commitments to customers until its exit. This falls as
part of the wider previously announced strategy to exit a number of non-core
businesses which includes the paper and carpet businesses globally.
Financial information in respect of the discontinued operation is set out
below:
Financial performance and cash flow information
2023 2022
Laminates Films and Coated Fabrics Laminates Films and Coated Fabrics
£m NA Paper and Carpet £m NA Paper and Carpet
£m Total £m Total
£m £m
Revenue 28.0 22.3 50.3 201.2 51.6 252.8
Expenses (25.5) (27.8) (53.3) (185.3) (56.2) (241.5)
EBITDA 2.5 (5.5) (3.0) 15.9 (4.6) 11.3
Depreciation and amortisation - Underlying performance - (0.9) (0.9) (7.2) (2.4) (9.6)
Operating profit - Underlying performance 2.5 (6.4) (3.9) 8.7 (7.0) 1.7
Special Items 61.5 (4.5) 57.0 (14.7) - (14.7)
Operating profit/(loss) - IFRS 64.0 (10.9) 53.1 (6.0) (7.0) (13.0)
Finance costs - - - (0.4) - (0.4)
Profit/(loss) before taxation 64.0 (10.9) 53.1 (6.4) (7.0) (13.4)
Taxation (17.6) - (17.6) (0.7) - (0.7)
Profit/(loss) for the year 46.4 (10.9) 35.5 (7.1) (7.0) (14.1)
Cash flows from discontinued operations
Net cash inflow from operating activities (0.1) (7.8) (7.9) 5.6 (4.6) 1.0
Net cash outflow from investing activities 208.2 - 208.2 (4.0) - (4.0)
The prior-year figures of the consolidated income statement and the
consolidated statement of cash flows have been adjusted in accordance with
IFRS 5 to report the discontinued operations separately from continuing
operations.
8. Discontinued operations (continued)
Assets and liabilities classified as held-for-sale
As of December 31 2022, the disposal group in relation to the Laminates, Films
and Coated Fabrics business was recognised at the lower of its carrying amount
and fair value less costs to sell, and comprised main categories of assets and
liabilities summarised below. In 2023, the assets held for sale as at the end
of December related to land and buildings at the Calhoun site, and within the
Desa Badhuri legal entity which was sold in January 2024.
2023 2022
£m £m
Non-current assets
Goodwill - 43.5
Acquired intangible assets - 44.4
Other intangible assets - 2.8
Property, plant and equipment 1.4 54.7
Deferred tax assets 0.1 1.1
Total non-current assets 1.5 146.5
Current assets
Inventories - 31.1
Trade and other receivables - 18.6
Total current assets - 49.7
Total assets 1.5 196.2
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 obligations - (1.6)
Total non-current liabilities - (21.9)
Total liabilities - (45.5)
Net assets held for sale 1.5 150.7
9. Post balance sheet events
During 2022, the European Commission concluded its investigation into styrene
monomer purchasing practices, and the final settlement amount of £38.5m was
transferred to other payables. The Group paid the settlement amount plus
interest in January 2024 as agreed with the EC.
On 6 March 2024, the Group agreed amendments with its banks to the financial
covenants on its RCF and UK Export Finance term loans. Under the new terms,
the net debt: EBITDA ratios required under the covenant have been set at not
more than 6.0x in June 2024 and 5.75x in December 2024, with ratios of not
more than 5.0x in June 2025 and 4.75x in December 2025 conditional on a
refinancing of the senior loan notes. In addition, the revolving credit
facility was reduced from $400m to €300m.
As part of the Group's previously announced non-core portfolio rationalisation
programme, there are three formal divestment processes underway for non-core
businesses in Europe, currently incorporated within the Health &
Protection and Performance Materials division. Given progress made since the
year end, the Directors now consider it is more likely than not that at least
one of these processes will lead to a divestment within the next 12 months.
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