TIDMSYNT
RNS Number : 9736H
Synthomer PLC
06 August 2019
Synthomer plc
Interim Results for the six months ended 30 June 2019
Challenging H1 2019 environment but improved conditions and
additional H2 2019 capacity underpin Full Year outlook
Proposed acquisition of Omnova Solutions Inc announced 3 July
2019
Highlights Constant
Underlying performance(1) H1 2019 H1 2018(3) Reported currency(2)
GBPm GBPm % %
Revenue 762.7 833.8 (8.5) (8.6)
---------- ------------- --------- -------------
Volumes (ktes) 750.8 796.6 (5.7)
---------- ------------- --------- -------------
Operating profit 74.7 79.4 (5.9) (6.2)
---------- -------------
Performance Elastomers 41.0 43.2 (5.1) (5.8)
Functional Solutions 30.8 33.1 (6.9) (6.6)
Industrial Specialities 10.6 10.6 - -
Unallocated corporate expenses (7.7) (7.5) (2.7) (2.7)
---------- -------------
Profit before taxation 70.2 76.2 (7.9) (8.1)
EPS (p)(4) 16.5 17.1 (3.5)
DPS (p)(4) 4.0 3.7 8.1
IFRS Profit before taxation 56.6 86.2 (34.3)
IFRS EPS (p)(4) 13.0 19.2 (32.3)
1 - Underlying performance excludes Special Items. See note
3.
2 - Constant currency revenue and profit: these reflect current
year results translated at the prior year's average exchange
rates.
3 - Restated to reflect the new global organisational structure
announced in November 2018 and effective from 1 January 2019.
4 - Reflecting the adjustment to the number of issued shares
following the rights issue. See note 9.
H1 Highlights:
-- Strategic acquisition of Omnova for GBP654m announced on 3 July
-- Underlying operating profit 5.9% lower at GBP74.7m vs strong H1 2018:
-- Performance Elastomers benefitted from continued growth in
NBR Latex offset by weaker demand and lower margins in SBR
Latex
-- Functional Solutions experienced softer volumes but stronger unit margins
-- Industrial Specialities after a slow start to the year saw an
improving trend through H1 2019
-- Strong R&D: new products represent c. 21% of total sales volumes (H1 2018: 20%)
-- Underlying profit before tax and IFRS profit before tax GBP70.2m and GBP56.6m respectively
-- Effective tax rate reduced to 14.0% (H1 2018: 18.0%)
-- Underlying earnings per share down 3.5% at 16.5p per share
with IFRS earnings per share at 13.0p
-- Interim dividend 4.0p per share reflecting an 8.1% increase
-- Net debt GBP209.2m (31 December 2018: GBP214.0m). Leverage
unchanged at 1.2x (31 December 2018: 1.2x)
Commenting on the results, Neil Johnson, Chairman, said:
"Synthomer's performance in H1 2019 has been in line with
management's expectations and the prevailing market environment. Q1
2019 was impacted by the general economic downturn which resulted
in slower trading particularly in European SBR Latex and Functional
Solutions compared to a strong H1 2018 comparative. Q2 2019
returned to a normalised level marginally ahead of Q2 2018.
Synthomer has made strong operational progress during H1 2019.
New low-cost capacity has been successfully completed in both our
Performance Elastomers and Functional Solutions asset base. This
capacity will benefit the Group in H2 2019. Innovation continues to
underpin new product development with an improved level of new
products coming to market in the last 12 months.
We announced our proposed acquisition of Omnova Solutions Inc in
July. Omnova is a highly synergistic US based speciality chemicals
company which brings greater geographic diversity in our core
chemistries and markets.
The Group is confident of continued progress in H2 2019 when we
expect to benefit from improved market conditions and the
additional capacity coming to market. SBR Latex is expected to
remain challenging in Europe but offset by a robust performance in
our Nitriles business. As a result, the Board's expectations for
Group Full Year 2019 remain unchanged."
IFRS results for six months
ended 30 June 2019 30 June 2018
------------------------------
Special Special
Underlying(1) Items IFRS Underlying(1) Items IFRS
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 762.7 - 762.7 833.8 - 833.8
------------- ------- ------ ------------- ------- ------
Performance Elastomers 41.0 (1.7) 39.3 43.2 11.0 54.2
Functional Solutions 30.8 (2.0) 28.8 33.1 0.9 34.0
Industrial Specialities 10.6 (2.1) 8.5 10.6 (1.8) 8.8
Unallocated corporate expenses (7.7) (4.8) (12.5) (7.5) (0.1) (7.6)
------------- ------- ------ ------------- ------- ------
Operating profit 74.7 (10.6) 64.1 79.4 10.0 89.4
Finance costs (4.5) (3.0) (7.5) (3.2) - (3.2)
------------- ------- ------ ------------- ------- ------
Profit before taxation 70.2 (13.6) 56.6 76.2 10.0 86.2
------------- ------- ------ ------------- ------- ------
Taxation (9.8) 0.6 (9.2) (13.7) 2.3 (11.4)
------------- ------- ------ ------------- ------- ------
Profit for the period 60.4 (13.0) 47.4 62.5 12.3 74.8
------------- ------- ------ ------------- ------- ------
Profit attributable to non-controlling
interests 0.2 (0.2) - 0.1 4.7 4.8
Profit attributable to equity
holders of the parent 60.2 (12.8) 47.4 62.4 7.6 70.0
------------- ------- ------ ------------- ------- ------
60.4 (13.0) 47.4 62.5 12.3 74.8
------------- ------- ------ ------------- ------- ------
1 - Underlying performance excludes Special Items. See note
3.
Underlying performance
As more fully described in note 3, the Group's management uses
Underlying business performance to plan, control and assess the
Group performance. Underlying performance differs from the
statutory IFRS performance as Underlying performance excludes the
effect of Special Items, which are also detailed in note 3. The
Board's view is that Underlying performance provides additional
clarity for the Group's investors and so it is the primary focus of
the Group's narrative reporting. Where appropriate, IFRS
performance inclusive of Special Items is also described.
References to 'unit margin' and 'margin' are used in the commentary
on Underlying performance. Unit margin (or margin) is calculated on
selling price less variable raw material and logistics costs.
The table below bridges the H1 2018 operating profit to that for
the current period, showing Underlying performance, the impact of
acquisitions, the impact of the weakness of sterling on translation
and the effect of Special Items.
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialties expenses Total
Operating Profit GBPm GBPm GBPm GBPm GBPm
----------- ---------- ------------ ----------- -------
2018 - IFRS 54.2 34.0 8.8 (7.6) 89.4
Add/(deduct): 2018 - Special Items (11.0) (0.9) 1.8 0.1 (10.0)
----------- ---------- ------------ ----------- -------
2018 - Underlying performance 43.2 33.1 10.6 (7.5) 79.4
2019 - Underlying business change
at 2018 exchange rates (2.5) (2.2) - (0.2) (4.9)
2019 - Underlying performance
at 2018 exchange rates 40.7 30.9 10.6 (7.7) 74.5
% Increase/(decrease) at constant
currency (5.8)% (6.6)% - (2.7)% (6.2)%
2019 - Impact of 2019 exchange
rates 0.3 (0.1) - - 0.2
----------- ---------- ------------ ----------- -------
2019 - Underlying performance
at 2019 exchange rates 41.0 30.8 10.6 (7.7) 74.7
% Increase/(decrease) in Underlying (5.1)% (6.9)% - (2.7)% (5.9)%
Deduct: 2019 - Special Items (1.7) (2.0) (2.1) (4.8) (10.6)
----------- ---------- ------------ ----------- -------
2019 - IFRS 39.3 28.8 8.5 (12.5) 64.1
----------- ---------- ------------ ----------- -------
% Increase/(decrease) in IFRS (27.5)% (15.3)% (3.4)% (64.5)% (28.3)%
----------- ---------- ------------ ----------- -------
Cautionary statement
The purpose of this report is to provide information to the
members of the Company. It contains certain forward-looking
statements with respect to the operations, performance and
financial condition of the Group. By their nature, these statements
involve uncertainty since future events and circumstances can cause
results and 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 undertakes no obligation to update these
forward-looking statements. Nothing in this report should be
construed as a profit forecast.
ENQUIRIES:
Stephen Bennett, Chief Financial Officer Tel: 01279 436211
Tim Hughes, President, Corporate Development Tel: 01279 436211
Charles Armitstead, Teneo Tel: 07703 330269
The Company will host a meeting for analysts and investors at
09.00 today at Canaccord Genuity (88 Wood Street, London EC2V 7QR).
The presentation will be webcast on the Company's website
www.synthomer.com.
Chief Executive Officer's Review
The proposed GBP654m acquisition of Omnova, a US listed
speciality chemical company provides the ideal platform for
Synthomer to continue to deliver against its exciting sustainable
growth strategy. The acquisition will extend Synthomer's geographic
presence in core markets of the US and China making it a truly
global leader in water-based polymer solutions. Omnova has been a
Synthomer target for some years and the acquisition is a logical
and strategic fit with common chemistry, technology and markets.
The combination brings strong synergy potential which in turn
brings growth and additional shareholder value for the coming
years. The acquisition, which was approved by our shareholders on
31 July, remains subject to Omnova shareholder and regulatory
approvals and is expected to complete in late 2019/early 2020.
H1 2019 has undoubtedly been a challenging period for the global
chemicals industry driven by economic uncertainty and a slowdown in
key markets including the automotive and electronics industries.
Whilst Synthomer is a diversified speciality chemicals company
touching many industries without being over exposed to any
particular end-market, we are not immune to these market
conditions. The Company has performed admirably in H1 2019 versus a
strong comparative H1 2018, reporting Underlying operating profit
of GBP74.7m, marginally lower compared to GBP79.4m in H1 2018. This
predominantly reflected a weaker Q1 with Q2 performance
strengthening to finish marginally ahead of the Q2 2018
comparative. This gives us confidence going into H2 2019.
Since 2016, Synthomer has been investing extensively in its
sustainable growth agenda. This has seen a major expansion of our
Nitrile capacity in Malaysia which completed in Q4 2018 and further
capacity extensions in our core Functional Solutions assets in
Germany and the US. These subsequent investments were successfully
completed in Q2 2019 and will support further growth in H2 2019 and
beyond.
Innovation remains a cornerstone of the Synthomer strategy and
brings stable margins and barriers to entry from competition as we
work closely with our blue-chip customer base. Typical customer
relationships in these core markets are greater than 15 years and
such relationships are based around a solid R&D platform. H1
2019 saw our innovation KPI of sales volumes relating to new
products brought to market in the last 5 years reach a high of 21%.
Furthermore, we have broken ground on our new state-of-the-art
Asian Innovation Centre which is due to be completed in H1 2020. In
addition to innovation initiatives, we continue to practice our
proven Manufacturing Excellence toolkit to drive value through
improved efficiency and output in our asset base. This toolkit will
be used as a part of the integration of Omnova, and similarly best
practices currently operating in Omnova will likewise bring
benefits to Synthomer.
The new Global Organisation Structure announced in November 2018
has been successfully implemented from 1 January 2019. The
structure is enabling us to better serve our customers, drive
operational efficiencies and leverage our product portfolio
globally. The structure which will accommodate Omnova going forward
combines sales, marketing, research and production into dedicated
global business teams, whilst retaining strong regional focus.
H1 Results - Underlying performance
Group revenue was GBP762.7m (2018: GBP833.8m). This reduction
reflected a decrease in volumes in Performance Elastomers, with
weakness in our European SBR business, and Functional Solutions,
resulting from a slower start to the year in Europe, the sale of
51% of the Group's Dubai operations in June 2018 and the Malaysian
natural rubber and polyester resins production line closures in Q4
2018.
Underlying operating profit was 5.9% lower at GBP74.7m (2018:
GBP79.4m), or 5.4% lower including the impact of the sale of the
Group's 51% share of the Dubai operations (GBP0.4m) in 2018.
Finance costs increased to GBP4.5m (2018: GBP3.2m), mainly
reflecting the Euro interest rate fix transacted in July 2018
(GBP1.7m), lease liability interest arising on the adoption of IFRS
16 (GBP0.6m) offset by a reduction in pension interest costs
(GBP0.4m).
The effective tax rate reduced from 18.0% in H1 2018 to 14.0% in
H1 2019 principally as a result of the geographical mix of profits
and the recognition and utilisation of previously unrecognised
deferred tax assets.
Underlying earnings per share was down 3.5% at 16.5 pence per
share (2018: 17.1 pence per share).
H1 Results - IFRS performance
IFRS profit before tax was GBP56.6m relative to GBP86.2m in H1
2018. The IFRS profit before tax reflects the Underlying profit
before tax as adjusted for the Special Items set out in note 3.
Special Items in H1 2019 totalled a net charge of GBP13.6m,
compared to a net income of GBP10.0m in H1 2018. This GBP23.6m
movement was principally due to GBP20.5m of profits on disposal
from Malaysian land and operations in Leuna (Germany) and the sale
of 51% of the Group's Dubai operations in H1 2018.
Outlook
The Group is confident of continued progress in H2 2019 when we
expect to benefit from improved market conditions and the
additional capacity coming to market. SBR Latex is expected to
remain challenging in Europe but offset by a robust performance in
our Nitriles business. As a result, the Board's expectations for
Group Full Year 2019 remain unchanged.
Divisional - Underlying performance
Performance Elastomers
Constant
Underlying performance H1 2019 H1 2018(1) Reported currency
GBPm GBPm % %
-------- ----------- --------- ----------
Volumes (ktes) 425.7 444.2 (4.2)
Revenue 317.1 350.3 (9.5) (9.6)
EBITDA(2) 53.5 52.8 1.3 0.8
Operating profit - Underlying performance 41.0 43.2 (5.1) (5.8)
Operating profit - IFRS 39.3 54.2 (27.5)
1 - Restated to reflect the new global organisational structure
effective from 1 January 2019.
2 - The impact of the adoption of IFRS 16 on EBITDA is shown in
note 5.
Underlying operating profit in Performance Elastomers was
GBP2.2m lower at GBP41.0m (2018: GBP43.2m), a reduction of
5.1%.
Volumes reduced by 4.2% across the segment relative to a strong
2018, reflecting weaker demand in our European SBR markets and the
closure of our Malaysian natural rubber production line in late
2018. We saw improvements in our Nitrile volumes due to the
introduction of our new 90ktes Nitrile facility in Pasir Gudang
(Malaysia), which was commissioned in Q4 2018.
Our SBR business was impacted by reducing demand in the Europe,
most notable in the paper market. We saw all other end markets
including construction and specialist foams recover to more
normalised levels during H1 and we maintained our overall market
leading position in European SBR.
Nitrile margins improved against a strong comparative period,
partly as a result of the strengthening US$ relative to the
Malaysian Ringgit, whilst unit margins in SBR were lower. Overall,
with improved Nitrile product mix, unit margins were higher than
the comparative period.
Functional Solutions
Constant
Underlying performance H1 2019 H1 2018(1) Reported currency
GBPm GBPm % %
-------- ----------- --------- ----------
Volumes (ktes) 258.4 283.8 (8.9)(3)
Revenue 327.6 363.4 (9.9) (10.0)
EBITDA(2) 38.9 38.6 0.8 1.0
Operating profit - Underlying performance 30.8 33.1 (6.9) (6.6)
Operating profit - IFRS 28.8 34.0 (15.3)
1 - Restated to reflect the new global organisational structure
effective from 1 January 2019.
2 - The impact of the adoption of IFRS 16 on EBITDA is shown in
note 5.
3 - 5.0% reduction excluding prior year volumes relating to the
sale of 51% of Dubai operations in June 2018 and the closure of
polyester resins production line in Q4 2018.
Underlying operating profit in Functional Solutions was GBP30.8m
(2018: GBP33.1m), a reduction of 6.9%. The result was impacted by
the sale of 51% of the Group's Dubai operations sold in Q2 2018
(GBP0.4m) and the slower start to the year in Europe, offset in
part by improved unit margins across H1.
Volumes reduced by 5.0% against a strong comparative period,
excluding the volumes from our Dubai operations and the Malaysian
polyester resins production line closed in Q4 2018, reflecting the
slower start to 2019 across all end-use markets in Europe with the
exception of oil & gas which reported strong volume growth.
Underlying unit margins strengthened in construction, coatings,
adhesives and oil and gas markets relative to the prior year
period.
Our investment programme in Functional Solutions saw new
capacity completed in Worms (Germany) and Roebuck (USA) towards the
end of Q2. Both investments introduce low cost speciality acrylic
dispersions which in combination brings 48ktes of new capacity to
the network to support future growth.
Industrial Specialities
Constant
Underlying performance H1 2019 H1 2018(1) Reported currency
GBPm GBPm % %
-------- ----------- --------- ----------
Volumes (ktes) 66.7 68.6 (2.8)
Revenue 118.0 120.1 (1.7) (1.2)
EBITDA(2) 14.6 13.8 5.8 5.8
Operating profit - Underlying performance 10.6 10.6 - -
Operating profit - IFRS 8.5 8.8 (3.4)
1 - Restated to reflect the new global organisational structure
effective from 1 January 2019.
2 - The impact of the adoption of IFRS 16 on EBITDA is shown in
note 5.
Underlying operating profit in Industrial Specialities at
GBP10.6m was in line with 2018. Softer demand in Q1 affected
volumes but demand improved through the half year with unit margins
remaining strong.
Volumes were lower by 2.8% affected by reduced volumes in our
Speciality Additive and Lithene businesses mainly due to softer
automotive markets.
Unit margins strengthened in H1 with most of our specialist
businesses seeing improvements supported by a favourable mix from
higher margin businesses.
Special Items
H1 2019 H1 2018
GBPm GBPm
---------
Acquisition costs (4.8) (0.1)
Amortisation of acquired intangibles (4.5) (10.4)
Restructuring and site closure costs (1.3) -
Sale of businesses - 4.2
Sale of land - 16.3
Total impact on operating profit (10.6) 10.0
Fair value of unhedged interest rate derivatives (3.0) -
--------- --------
Total impact on profit before tax (13.6) 10.0
Taxation on Special Items 0.6 2.3
--------- --------
The following items of income and expense were reported as
Special Items and accordingly excluded from Underlying
performance:
-- Acquisition costs related to the proposed acquisition of
Omnova Solutions Inc. The 2018 costs related to the BASF
Pischelsdorf acquisition.
-- Amortisation of intangibles decreased during the period as
the customer-related intangibles from the 2011 PolymerLatex
acquisition reached the end of their amortisation period in
2018.
-- Restructuring costs comprised GBP0.6m in Malaysia from the
closure of the natural rubber and polyester resins production lines
announced in Q4 2018 and GBP0.7m in relation to the reorganisation
of the Group into global business segments from 1 January 2019.
-- Sale of businesses in 2018 related to the disposal of the
Leuna (Germany) site and the disposal of 51% of the Group's Dubai
operations.
-- Sale of land in 2018 related to the disposal of the final tranche of Malaysian land at Kluang.
-- In July 2018 the Group entered into swap arrangements to fix
Euro interest rates on the full value of the EUR440m committed
unsecured revolving credit facility. The fair value of unhedged
interest rate derivatives relates to the mark to market of the swap
at 30 June 2019 in excess of the Group's current borrowings.
Of the tax credit of GBP0.6m (2018: GBP2.3m), GBP0.6m (2018:
GBP2.5m) related to the notional tax credit on the intangibles
amortisation expense.
Taxation
The Group's Underlying tax rate at 14.0% (H1 2018: 18.0%, Full
Year 2018: 17%) was lower than the prior year due to the
geographical mix of profits and the recognition and the utilisation
of previously unrecognised deferred tax assets.
Cash performance and balance sheet items
The Group generated an operating cash flow of GBP36.5m (2018:
GBP22.7m). The GBP13.8m increase was due to an increase of GBP10.6m
in cash generated from operations (which includes a GBP3.4m benefit
from the implementation of IFRS 16), a GBP5.2m reduction in cash
tax paid offset by a GBP2.0m increase in interest on the Euro fixed
interest rate derivatives and GBP0.6m in relation to the interest
element of lease payments.
Working capital increased by GBP41.4m (2018: GBP52.4m) and
remains at approximately 10% of sales, with slightly higher
inventory levels attributable to preferentially priced deep-sea raw
material supplies, and some inventory build ahead of maintenance
shutdowns in July.
Cash tax decreased to GBP7.3m (2018: GBP12.5m) due to the
changes in the geographical mix of profits and timing of settlement
of tax liabilities.
Capital expenditure in the period was GBP28.4m (2018: GBP28.5m),
as the Group continued its investment in Worms and Roebuck, Pasir
Gudang JOB 6, the Asia Innovation Centre and regular recurring SHE
and sustenance expenditure.
After other operating, investing and financing flows, the cash,
cash equivalents and bank overdrafts increased by GBP19.3m (2018:
increase GBP29.5m).
The Group pension liability increased to GBP146.5m from
GBP132.5m at December 2018, reflecting an increase in the UK
liability of GBP2.9m and an increase in overseas liabilities of
GBP11.1m. The increase in liability in the period reflected the net
impact of a decrease in discount rates in Group's UK and German
defined benefit schemes, offset by asset returns.
At 30 June 2019 the Group's Leverage ratio was 1.2x, (31
December 2018: 1.2x) based on IFRS accounting standards at 31
December 2018 and on a basis consistent with covenant definitions
set out in the EUR440m committed unsecured revolving credit
facility.
Impact of IFRS 16
The Group adopted IFRS 16 Leases with effect from 1 January 2019
but has not restated comparatives for the 2018 reporting period, as
permitted under the specific transitional provisions in the
standard. The impact of the adoption of this accounting standard is
shown in the table below and detailed in note 18 to the financial
statements.
Before Impact
IFRS of IFRS Reported
16 16 Results
GBPm GBPm GBPm
------- ---------
EBITDA 95.7 4.0 99.7
Depreciation (21.3) (3.7) (25.0)
------- --------- ---------
Underlying operating profit 74.4 0.3 74.7
Underlying finance cost (3.9) (0.6) (4.5)
------- --------- ---------
Underlying profit before taxation 70.5 (0.3) 70.2
------- --------- ---------
Underlying EPS (pence) 16.6 (0.1) 16.5
Proposed acquisition of Omnova Solutions Inc
On 3 July 2019, the Group announced its intention to acquire the
entire share capital of Omnova for an enterprise value of GBP654m.
Omnova develops, manufactures and markets emulsion polymers,
speciality chemicals and decorative products. It provides
engineered surfaces for various commercial, industrial and
residential end uses. Omnova uses strategically-located
manufacturing and technical facilities, with 13 manufacturing
facilities in North America, Europe, and Asia to service a broad
customer base.
The Directors believe the acquisition represents an attractive
opportunity for Synthomer to strengthen its global position as a
major speciality chemicals company underpinned by significant
growth opportunities.
A fully underwritten 1 for 4 Rights Issue of 84,970,192 new
Synthomer shares at 240 pence per new Synthomer share was also
announced on the same day to partially fund the proposed
acquisition. The rights issue completed on 29 July raising gross
proceeds of GBP204m. The remainder of the funds for the proposed
acquisition will come from a fully underwritten refinancing of the
Group to take effect immediately before completion.
Dividend and capital management
The Board has declared an interim dividend of 4.0 pence per
share, equating to an effective increase in the half year dividend
of 8.1%, adjusting for the rights issue bonus factor in respect of
the 2018 interim dividend. This dividend is consistent with our
Group dividend policy where we remain committed to paying dividends
2.5x covered by the Underlying earnings per share.
Calum MacLean
Chief Executive Officer
6 August 2019
Consolidated income statement
for the six months ended 30 June 2019
Six months ended Six months ended
30 June 2019 30 June 2018
(unaudited) (unaudited)
---------------------------------- ---------------------------
Underlying Special Underlying Special
performance Items IFRS performance Items IFRS
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Revenue 762.7 - 762.7 833.8 - 833.8
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Company and subsidiaries before
Special Items 74.1 - 74.1 79.1 - 79.1
Restructuring and site closure
costs - (1.3) (1.3) - - -
Sale of businesses - - - - 4.2 4.2
Sale of land - - - - 16.3 16.3
Acquisition costs - (4.8) (4.8) - (0.1) (0.1)
Amortisation of acquired
intangibles - (4.5) (4.5) - (10.4) (10.4)
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Company and subsidiaries 74.1 (10.6) 63.5 79.1 10.0 89.1
Share of joint ventures 0.6 - 0.6 0.3 - 0.3
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Operating profit/(loss) 74.7 (10.6) 64.1 79.4 10.0 89.4
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Interest payable (3.1) - (3.1) (2.1) - (2.1)
Interest receivable 0.5 - 0.5 0.6 - 0.6
Fair value of unhedged interest
rate derivatives - (3.0) (3.0) - - -
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
(2.6) (3.0) (5.6) (1.5) - (1.5)
IAS 19 interest charge (1.3) - (1.3) (1.7) - (1.7)
Interest element of lease payments (0.6) - (0.6) - - -
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Finance costs (4.5) (3.0) (7.5) (3.2) - (3.2)
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Profit/(loss) before taxation 70.2 (13.6) 56.6 76.2 10.0 86.2
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Taxation (9.8) 0.6 (9.2) (13.7) 2.3 (11.4)
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Profit/(loss) for the period 60.4 (13.0) 47.4 62.5 12.3 74.8
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Profit/(loss) attributable to
non-controlling interests 0.2 (0.2) - 0.1 4.7 4.8
Profit/(loss) attributable to
equity holders of the parent 60.2 (12.8) 47.4 62.4 7.6 70.0
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
60.4 (13.0) 47.4 62.5 12.3 74.8
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
Earnings/(loss) per share(1)
Basic 16.5p (3.5)p 13.0p 17.1p 2.1p 19.2p
Diluted 16.4p (3.5)p 12.9p 17.0p 2.1p 19.1p
-------------------------------------- ------- ------ ---------------- ------------ ------- --------
1 - Earnings per share for the six months to 30 June 2019 and
the six months to 30 June 2018 restated for the rights issue which
completed on 29 July 2019. See note 9.
Year ended 31 December
2018
(audited)
------------------------------
Underlying Special
performance Items IFRS
GBPm GBPm GBPm
---------------------------------------- --- ------------ ------- -------
Revenue 1,618.9 - 1,618.9
--------------------------------------------- ------------ ------- -------
Company and subsidiaries before
Special Items 141.7 - 141.7
Restructuring and site closure
costs - (12.2) (12.2)
Sale of businesses - 3.8 3.8
Sale of land - 16.4 16.4
Acquisition costs - (0.5) (0.5)
Amortisation of acquired intangibles - (16.4) (16.4)
Aborted bond costs - (1.7) (1.7)
UK Guaranteed Minimum Pension
equalisation - (2.8) (2.8)
--------------------------------------------- ------------ ------- -------
Company and subsidiaries 141.7 (13.4) 128.3
Share of joint ventures 0.4 - 0.4
--------------------------------------------- ------------ ------- -------
Operating profit/(loss) 142.1 (13.4) 128.7
--------------------------------------------- ------------ ------- -------
Interest payable (4.9) - (4.9)
Interest receivable 1.1 - 1.1
Fair value of unhedged interest
rate derivatives - (1.4) (1.4)
--------------------------------------------- ------------ ------- -------
(3.8) (1.4) (5.2)
IAS 19 interest charge (3.2) - (3.2)
--------------------------------------------- ------------ ------- -------
Finance costs (7.0) (1.4) (8.4)
--------------------------------------------- ------------ ------- -------
Profit/(loss) before taxation 135.1 (14.8) 120.3
--------------------------------------------- ------------ ------- -------
Taxation (23.0) 6.0 (17.0)
--------------------------------------------- ------------ ------- -------
Profit/(loss) for the year 112.1 (8.8) 103.3
--------------------------------------------- ------------ ------- -------
Profit attributable to non-controlling
interests 0.5 3.0 3.5
Profit/(loss) attributable
to equity holders of the parent 111.6 (11.8) 99.8
--------------------------------------------- ------------ ------- -------
112.1 (8.8) 103.3
-------------------------------------------- ------------ ------- -------
Earnings/(loss) per share(1)
Basic 30.7p (3.3)p 27.4p
Diluted 30.5p (3.2)p 27.3p
--------------------------------------------- ------------ ------- -------
1 - Earnings per share for the year to 31 December 2018 restated
for the rights issue which completed on 29 July 2019. See note
9.
Consolidated statement of comprehensive income
for the six months ended 30 June 2019
Six months ended 30 Six months ended 30
June 2019 (unaudited) June 2018 (unaudited)
--------------------------------- --------------------------------
Equity Equity
holders holders
of the Non-controlling of the Non-controlling
parent interests Total parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- --------------- ------ -------- --------------- -----
Profit for the period 47.4 - 47.4 70.0 4.8 74.8
------------------------------------- -------- --------------- ------ -------- --------------- -----
Actuarial (losses)/gains on
pension schemes (21.1) - (21.1) 25.5 - 25.5
Tax relating to components of
other comprehensive income 4.3 - 4.3 1.6 - 1.6
------------------------------------- -------- --------------- ------ -------- --------------- -----
Total items that will not be
reclassified to profit or loss (16.8) - (16.8) 27.1 - 27.1
------------------------------------- -------- --------------- ------ -------- --------------- -----
Exchange differences on translation
of foreign operations 2.1 0.1 2.2 6.0 0.6 6.6
Exchange differences recycled
on sale of businesses - - - (0.4) - (0.4)
Fair value of hedged interest
rate derivatives (10.0) - (10.0) - - -
Gain/(loss) on net investment
hedge taken to equity (0.2) - (0.2) 0.7 - 0.7
------------------------------------- -------- --------------- ------ -------- --------------- -----
Total items that may be reclassified
subsequently to profit or loss (8.1) 0.1 (8.0) 6.3 0.6 6.9
------------------------------------- -------- --------------- ------ -------- --------------- -----
Other comprehensive (expense)/income
for the period (24.9) 0.1 (24.8) 33.4 0.6 34.0
------------------------------------- -------- --------------- ------ -------- --------------- -----
Total comprehensive income for
the period 22.5 0.1 22.6 103.4 5.4 108.8
------------------------------------- -------- --------------- ------ -------- --------------- -----
Year ended 31 December
2018 (audited)
--------------------------------
Equity
holders
of the Non-controlling
parent interests Total
GBPm GBPm GBPm
------------------------------------- -------- --------------- -----
Profit for the year 99.8 3.5 103.3
-------------------------------------- -------- --------------- -----
Actuarial gains on pension schemes 15.5 - 15.5
Tax relating to components of
other comprehensive income (2.3) - (2.3)
-------------------------------------- -------- --------------- -----
Total items that will not be
reclassified to profit or loss 13.2 - 13.2
-------------------------------------- -------- --------------- -----
Exchange differences on translation
of foreign operations 16.9 0.8 17.7
Exchange differences recycled
on sale of businesses (0.4) - (0.4)
Fair value of hedged interest
rate derivatives (3.9) - (3.9)
Losses on hedge of net investment
taken to equity (3.2) - (3.2)
-------------------------------------- -------- --------------- -----
Total items that may be reclassified
subsequently to profit or loss 9.4 0.8 10.2
-------------------------------------- -------- --------------- -----
Other comprehensive income for
the year 22.6 0.8 23.4
-------------------------------------- -------- --------------- -----
Total comprehensive income for
the year 122.4 4.3 126.7
-------------------------------------- -------- --------------- -----
Consolidated statement of changes in equity
for the six months ended 30 June 2019
Capital Hedging
Share Share redemption and translation Retained Non-controlling Total
capital premium reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
At 1 January 2019 34.0 230.5 0.9 6.4 192.1 463.9 21.1 485.0
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Profit for the period - - - - 47.4 47.4 - 47.4
Other comprehensive
(loss)/income
for the period - - - (8.1) (16.8) (24.9) 0.1 (24.8)
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Total comprehensive
(loss)/income
for the period - - - (8.1) 30.6 22.5 0.1 22.6
Share-based payments - - - - (1.0) (1.0) - (1.0)
Dividends payable - - - - (30.9) (30.9) - (30.9)
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
At 30 June 2019
(Unaudited) 34.0 230.5 0.9 (1.7) 190.8 454.5 21.2 475.7
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Capital Hedging
Share Share redemption and translation Retained Non-controlling Total
capital premium reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
At 1 January 2018 34.0 230.5 0.9 (3.0) 125.5 387.9 18.3 406.2
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Profit for the period - - - - 70.0 70.0 4.8 74.8
Other comprehensive
income
for the period - - - 6.3 27.1 33.4 0.6 34.0
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Total comprehensive
income
for the period - - - 6.3 97.1 103.4 5.4 108.8
Share-based payments - - - - (4.3) (4.3) - (4.3)
Dividends payable - - - - (28.9) (28.9) - (28.9)
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
At 30 June 2018
(Unaudited) 34.0 230.5 0.9 3.3 189.4 458.1 23.7 481.8
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Capital Hedging
Share Share redemption and translation Retained Non-controlling Total
capital premium reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
At 1 January 2018 34.0 230.5 0.9 (3.0) 125.5 387.9 18.3 406.2
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Profit for the period - - - - 99.8 99.8 3.5 103.3
Other comprehensive
income
for the period - - - 9.4 13.2 22.6 0.8 23.4
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Total comprehensive
income
for the period - - - 9.4 113.0 122.4 4.3 126.7
Share-based payments - - - - (3.9) (3.9) - (3.9)
Dividends paid - - - - (42.5) (42.5) (1.5) (44.0)
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
At 31 December 2018
(Audited) 34.0 230.5 0.9 6.4 192.1 463.9 21.1 485.0
---------------------- -------- -------- ----------- ---------------- --------- ------ --------------- -------
Consolidated balance sheet
as at 30 June 2019
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- -----------
Non-current assets
Goodwill 336.5 331.6 336.5
Acquired intangible assets 64.3 73.8 69.1
Other intangible assets 12.7 2.1 5.1
Property, plant and equipment 409.2 340.9 370.0
Deferred tax assets 29.2 25.7 23.4
Investment in joint ventures 7.8 9.0 8.6
-------------------------------------- ----------- ----------- -----------
Total non-current assets 859.7 783.1 812.7
-------------------------------------- ----------- ----------- -----------
Current assets
Inventories 143.2 127.3 141.9
Trade and other receivables 251.1 289.0 232.9
Cash and cash equivalents 98.7 98.4 96.9
-------------------------------------- ----------- ----------- -----------
Total current assets 493.0 514.7 471.7
-------------------------------------- ----------- ----------- -----------
Total assets 1,352.7 1,297.8 1,284.4
-------------------------------------- ----------- ----------- -----------
Current liabilities
Borrowings (52.9) (2.3) (70.1)
Trade and other payables (244.2) (286.6) (263.2)
Lease liabilities (8.1) - -
Current tax liabilities (40.9) (41.8) (38.3)
Dividends payable (30.9) (28.9) -
Provisions for other liabilities and
charges (8.2) (1.9) (9.4)
Derivatives at fair value (18.1) - (5.3)
-------------------------------------- ----------- ----------- -----------
Total current liabilities (403.3) (361.5) (386.3)
-------------------------------------- ----------- ----------- -----------
Non-current liabilities
Borrowings (255.0) (290.2) (240.8)
Trade and other payables (0.7) (0.6) (0.7)
Lease liabilities (34.2) - -
Deferred tax liabilities (35.1) (33.8) (34.3)
Post-retirement benefit obligations (146.5) (124.9) (132.5)
Provisions for other liabilities and
charges (2.2) (5.0) (4.8)
-------------------------------------- ----------- ----------- -----------
Total non-current liabilities (473.7) (454.5) (413.1)
-------------------------------------- ----------- ----------- -----------
Net assets 475.7 481.8 485.0
-------------------------------------- ----------- ----------- -----------
Equity
Share capital 34.0 34.0 34.0
Share premium 230.5 230.5 230.5
Capital redemption reserve 0.9 0.9 0.9
Hedging and translation reserve (1.7) 3.3 6.4
Retained earnings 190.8 189.4 192.1
-------------------------------------- ----------- ----------- -----------
Equity attributable to equity holders
of the parent 454.5 458.1 463.9
Non-controlling interests 21.2 23.7 21.1
-------------------------------------- ----------- ----------- -----------
Total equity 475.7 481.8 485.0
-------------------------------------- ----------- ----------- -----------
The interim financial statements were approved by the Board of
Directors and authorised for issue on 6 August 2019.
Consolidated cash flow statement
for the six months ended 30 June 2019
Six months Six months Year ended
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
--------------- --------------- ----------------
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------- ------ ------- ------ ------ ------
Operating
Cash generated from operations 47.7 37.1 124.9
Interest received 0.5 0.6 1.1
Interest paid (3.8) (2.5) (5.6)
Interest element of lease payments (0.6) - -
------------------------------------------- ------- ------ ------- ------ ------ ------
Net interest paid (3.9) (1.9) (4.5)
UK corporation tax paid - - -
Overseas corporate tax paid (7.3) (12.5) (23.0)
------------------------------------------- ------- ------ ------- ------ ------ ------
Total tax paid (7.3) (12.5) (23.0)
------------------------------------------- ------- ------ ------- ------ ------ ------
Net cash inflow from operating
activities 36.5 22.7 97.4
------------------------------------------- ------- ------ ------- ------ ------ ------
Investing
Dividends received from joint
ventures 1.3 0.5 1.1
Purchase of property, plant and
equipment (28.4) (28.5) (75.7)
Sale of property, plant and equipment 0.1 16.6 17.5
------------------------------------------- ------- ------ ------- ------ ------ ------
Net capital expenditure (28.3) (11.9) (58.2)
Purchase of business - (25.8) (25.8)
Proceeds from sale of businesses - 4.3 3.7
------------------------------------------- ------- ------ ------- ------ ------ ------
Net cash outflow from investing
activities (27.0) (32.9) (79.2)
------------------------------------------- ------- ------ ------- ------ ------ ------
Financing
Ordinary dividends paid - - (42.5)
Dividends paid to non-controlling
interests - - (1.5)
Settlement of equity-settled share-based
payments (1.8) (5.1) (5.4)
Principal element of lease payments (3.4) - -
Repayment of borrowings - (52.0) (63.5)
Proceeds of borrowings 15.0 96.8 103.9
------------------------------------------- ------- ------ ------- ------ ------ ------
Net cash inflow/(outflow) from
financing activities 9.8 39.7 (9.0)
------------------------------------------- ------- ------ ------- ------ ------ ------
Increase in cash and bank overdrafts
during the period 19.3 29.5 9.2
------------------------------------------- ------- ------ ------- ------ ------ ------
Comprising inflows to:
Cash and cash equivalents 1.3 7.7 5.6
Bank overdrafts 18.0 21.8 3.6
------------------------------------------- ------- ------ ------- ------ ------ ------
Increase in cash and bank overdrafts
during the period 19.3 29.5 9.2
------------------------------------------- ------- ------ ------- ------ ------ ------
Cash, cash equivalents and bank
overdrafts at 1 January 76.2 65.4 65.4
Foreign exchange and other movements (0.4) 1.2 1.6
------------------------------------------- ------- ------ ------- ------ ------ ------
Cash, cash equivalents and bank
overdrafts at period end 95.1 96.1 76.2
------------------------------------------- ------- ------ ------- ------ ------ ------
Reconciliation of net cash flow from operating activities to
movement in net debt for the six months ended 30 June 2019
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ ------------
Net cash inflow from operating activities 36.5 22.7 97.4
Add back: dividends received from joint
ventures 1.3 0.5 1.1
Less: net capital expenditure (28.3) (11.9) (58.2)
Less: net purchase of business - (21.5) (22.1)
-------------------------------------------- ------------ ------------ ------------
9.5 (10.2) 18.2
Ordinary dividends paid - - (42.5)
Dividends paid to non-controlling interests - - (1.5)
Settlement of equity-settled share-based
payments (1.8) (5.1) (5.4)
Principal element of lease payments (3.4) - -
Foreign exchange and other movements 0.5 1.7 (2.3)
-------------------------------------------- ------------ ------------ ------------
(Increase)/decrease in net debt 4.8 (13.6) (33.5)
-------------------------------------------- ------------ ------------ ------------
Notes to the interim financial statements
1. Basis of preparation
Synthomer plc is a public limited company incorporated and
domiciled in the United Kingdom under the Companies Act. The
Company is listed on the London Stock Exchange and the address of
the registered office is Temple Fields, Harlow, Essex, CM20
2BH.
These interim financial statements have been prepared in
accordance with applicable law, the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34 Interim
Financial Reporting, as adopted by the European Union.
These interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2018 were
approved by the Board of Directors on 4 March 2019 and delivered to
the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of
the Companies Act 2006.
The interim financial statements do not include all the notes of
the type normally included in annual financial statements.
Accordingly, this report is to be read in conjunction with the
Annual Report for the year ended 31 December 2018 and any public
announcements made by the Company during the interim reporting
period.
These interim financial statements have been reviewed, not
audited.
After making enquiries and taking account of reasonably possible
changes in trading performance, the Directors are satisfied that,
at the time of approving the interim financial statements for the
Group, it is appropriate to adopt the going concern basis.
2. Accounting policies
The annual financial statements of Synthomer plc are prepared in
accordance with IFRSs as adopted by the European Union and
applicable law. The same accounting policies and methods of
computations are followed in these financial statements as in the
most recent audited annual financial statements except as described
below.
The Group has changed its accounting policies as a result of
adopting IFRS 16 Leases and IFRIC 23 Uncertainty over Income Tax
Treatments.
The adoption of IFRIC 23 did not have a material impact on the
financial statements. The impact of the adoption of IFRS 16 is
disclosed in note 18.
3. Special Items
IFRS and Underlying performance
The IFRS profit measures show the performance of the Group as a
whole and as such include all sources of income and expense,
including both one-off items and those that do not relate to the
Group's ongoing businesses. To provide additional clarity on the
ongoing trading performance of the Group's businesses, management
uses "Underlying" performance as an alternative performance measure
to plan for, control and assess the performance of the segments.
Underlying performance differs from the IFRS measures as it
excludes Special Items.
Special Items
The definition of Special Items is shown in note 20 and has been
consistently applied. These 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 the 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.
Special Items comprise:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ------------
Special Items
Acquisition costs (4.8) (0.1) (0.5)
Amortisation of acquired intangibles (4.5) (10.4) (16.4)
Restructuring and site closure costs (1.3) - (12.2)
Sale of businesses - 4.2 3.8
Sale of land - 16.3 16.4
Aborted bond costs - - (1.7)
UK Guaranteed Minimum Pension equalisation - - (2.8)
---------------------------------------------- ---------- ---------- ------------
Operating loss (10.6) 10.0 (13.4)
---------------------------------------------- ---------- ---------- ------------
Fair value of unhedged interest rate
derivatives (3.0) - (1.4)
---------------------------------------------- ---------- ---------- ------------
Finance Costs (3.0) - (1.4)
---------------------------------------------- ---------- ---------- ------------
Loss before taxation (13.6) 10.0 (14.8)
---------------------------------------------- ---------- ---------- ------------
The following items of income and expense were reported as
Special Items and accordingly were excluded from Underlying
performance:
-- Acquisition costs related to the proposed acquisition of
Omnova Solutions Inc. The 2018 costs related to the BASF
Pischelsdorf acquisition.
-- Amortisation of intangibles decreased during the period as
the customer-related intangibles from the 2011 PolymerLatex
acquisition reached the end of their amortisation period in H1
2018.
-- Restructuring costs comprised GBP0.6m in Malaysia from the
closure of the natural rubber and polyester resins production lines
announced in Q4 2018 and GBP0.7m in relation to the reorganisation
of the Group into global business segments from 1 January 2019.
-- Sale of businesses in 2018 related to the disposal of the
Leuna (Germany) site and the disposal of 51% of the Group's Dubai
operations.
-- Sale of land in 2018 related to the disposal of the final
tranche of Malaysian land at Kluang.
-- Ahead of the Group's 2018 refinancing, a process was
undertaken to issue fixed rate unsecured senior notes. Despite a
strong response from investors, the Group decided not to complete
the transaction due to unfavourable market conditions.
-- A GBP2.8m actuarial adjustment was booked in H2 2018
following the UK High Court's ruling on equalisation of male and
female Guaranteed Minimum Pensions. This was treated as a pension
plan amendment, unrelated to Underlying performance of the
Group.
-- In July 2018 the Group entered into swap arrangements to fix
Euro interest rates on the full value of the EUR440m committed
unsecured revolving credit facility. The fair value of the unhedged
interest rate derivatives relates to the mark to market of the swap
at 30 June 2019 in excess of the Group's current borrowings.
4. Segmental analysis
The Group's Executive Committee, chaired by the Chief Executive
Officer, examines the Group's performance.
Following a review in 2018, a new Group structure was adopted
from 1 January 2019 to reflect the increasingly global nature of
the Group's operations. The new structure enables Synthomer to
better serve its customers, provide a global product offering and
to drive operational efficiencies. The three new reportable
segments are:
Performance Elastomers
Performance Elastomers is focused on healthcare, carpet, paper
and foam markets through our Nitrile Butadiene Rubber latex (NBR)
and Styrene Butadiene Rubber latex (SBR) products.
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.
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.
Reconciliation of Underlying Six months ended June 2019 (unaudited)
performance to IFRS
-----------------------------------------------------------
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialities expenses Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ----------- ---------- ------------- ----------- ------
Revenue 317.1 327.6 118.0 - 762.7
----------------------------------------- ----------- ---------- ------------- ----------- ------
Operating profit/(loss) including
share of joint ventures
Underlying performance 41.0 30.8 10.6 (7.7) 74.7
Special Items
Restructuring and site closure
costs (0.6) (0.4) (0.3) - (1.3)
Acquisition costs - - - (4.8) (4.8)
Amortisation of acquired intangibles (1.1) (1.6) (1.8) - (4.5)
----------------------------------------- ----------- ---------- ------------- ----------- ------
Total Special Items (1.7) (2.0) (2.1) (4.8) (10.6)
----------------------------------------- ----------- ---------- ------------- ----------- ------
IFRS 39.3 28.8 8.5 (12.5) 64.1
----------------------------------------- ----------- ---------- ------------- ----------- ------
Finance costs
Underlying finance costs (4.5)
Fair value of unhedged interest
rate derivatives (3.0)
----------------------------------------- ----------- ---------- ------------- ----------- ------
IFRS (7.5)
----------------------------------------- ----------- ---------- ------------- ----------- ------
Profit before taxation
Underlying performance 70.2
IFRS 56.6
----------------------------------------- ----------- ---------- ------------- ----------- ------
Reconciliation of Underlying performance Six months ended June 2018 (unaudited)
to IFRS (restated)(1)
-----------------------------------------------------------
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialities expenses Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ----------- ---------- ------------- ----------- ------
Revenue 350.3 363.4 120.1 - 833.8
Operating profit/(loss) including
share of joint ventures
Underlying performance 43.2 33.1 10.6 (7.5) 79.4
Special Items
Sale of businesses - 4.2 - - 4.2
Sale of land 16.3 - - - 16.3
Acquisition costs - - - (0.1) (0.1)
Amortisation of acquired intangibles (5.3) (3.3) (1.8) - (10.4)
----------------------------------------- ----------- ---------- ------------- ----------- ------
Total Special Items 11.0 0.9 (1.8) (0.1) 10.0
IFRS 54.2 34.0 8.8 (7.6) 89.4
----------------------------------------- ----------- ---------- ------------- ----------- ------
Finance costs
Underlying finance costs (3.2)
Fair value of unhedged interest -
rate derivatives
----------------------------------------- ----------- ---------- ------------- ----------- ------
IFRS (3.2)
----------------------------------------- ----------- ---------- ------------- ----------- ------
Profit before taxation
Underlying performance 76.2
----------------------------------------- ----------- ---------- ------------- ----------- ------
IFRS 86.2
----------------------------------------- ----------- ---------- ------------- ----------- ------
Reconciliation of Underlying performance Year ended December 2018 (unaudited)
to IFRS (restated)(1)
------------------------------------------------------------
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialities expenses Total
GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- ----------- ---------- ------------- ----------- -------
Revenue 704.5 680.1 234.3 - 1,618.9
---------------------------------------------- ----------- ---------- ------------- ----------- -------
Operating profit/(loss) including
share of joint ventures
Underlying performance 87.2 53.0 16.7 (14.8) 142.1
Special Items
Restructuring and site closure costs (11.3) (0.9) - - (12.2)
Sale of businesses - 3.8 - - 3.8
Sale of land 16.4 - - - 16.4
Acquisition costs - - - (0.5) (0.5)
Amortisation of acquired intangibles (7.6) (5.2) (3.6) - (16.4)
Aborted bond costs - - - (1.7) (1.7)
UK Guaranteed Minimum Pension equalisation - (0.3) (1.0) (1.5) (2.8)
---------------------------------------------- ----------- ---------- ------------- ----------- -------
Total Special Items (2.5) (2.6) (4.6) (3.7) (13.4)
---------------------------------------------- ----------- ---------- ------------- ----------- -------
IFRS 84.7 50.4 12.1 (18.5) 128.7
---------------------------------------------- ----------- ---------- ------------- ----------- -------
Finance costs
Underlying finance costs (7.0)
Fair value of unhedged interest
rate derivatives (1.4)
---------------------------------------------- ----------- ---------- ------------- ----------- -------
IFRS (8.4)
---------------------------------------------- ----------- ---------- ------------- ----------- -------
Profit before taxation
Underlying performance 135.1
---------------------------------------------- ----------- ---------- ------------- ----------- -------
IFRS 120.3
---------------------------------------------- ----------- ---------- ------------- ----------- -------
1 - Restated to reflect the new global organisational structure
effective from 1 January 2019.
5. EBITDA
The Group uses EBITDA as an alternative performance measure as
it provides an indication of the level of cash being generated by
the business from its trading activities in the period by
excluding, depreciation and amortisation charges, interest, tax and
Special Items. This is also the principal profit measure used for
the financial covenants in the Group's debt facilities.
The definition of EBITDA is shown in note 20.
Six months ended June 2019 (unaudited)
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialities expenses Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ---------- ------------- ----------- ------
EBITDA before adjusting for
IFRS 16 52.5 36.6 14.3 (7.7) 95.7
Impact of adoption of IFRS
16 (note 18) 1.0 2.3 0.3 0.4 4.0
------------------------------ ----------- ---------- ------------- ----------- ------
EBITDA after adjusting for
IFRS 16 53.5 38.9 14.6 (7.3) 99.7
Depreciation and amortisation (12.5) (8.1) (4.0) (0.4) (25.0)
------------------------------ ----------- ---------- ------------- ----------- ------
Operating profit - Underlying
performance 41.0 30.8 10.6 (7.7) 74.7
Special Items (1.7) (2.0) (2.1) (4.8) (10.6)
------------------------------ ----------- ---------- ------------- ----------- ------
Operating profit - IFRS 39.3 28.8 8.5 (12.5) 64.1
------------------------------ ----------- ---------- ------------- ----------- ------
Six months ended June 2018 (unaudited)
-----------------------------------------------------------
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialities expenses Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ---------- ------------- ----------- ------
EBITDA 52.8 38.6 13.8 (7.3) 97.9
Depreciation and amortisation (9.6) (5.5) (3.2) (0.2) (18.5)
------------------------------ ----------- ---------- ------------- ----------- ------
Operating profit - Underlying
performance 43.2 33.1 10.6 (7.5) 79.4
Special Items 11.0 0.9 (1.8) (0.1) 10.0
------------------------------ ----------- ---------- ------------- ----------- ------
Operating profit - IFRS 54.2 34.0 8.8 (7.6) 89.4
------------------------------ ----------- ---------- ------------- ----------- ------
Year ended December 2018 (unaudited)
-----------------------------------------------------------
Unallocated
Performance Functional Industrial corporate
Elastomers Solutions Specialities expenses Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ---------- ------------- ----------- ------
EBITDA 107.9 64.1 23.5 (14.5) 181.0
Depreciation and amortisation (20.7) (11.1) (6.8) (0.3) (38.9)
------------------------------ ----------- ---------- ------------- ----------- ------
Operating profit - Underlying
performance 87.2 53.0 16.7 (14.8) 142.1
Special Items (2.5) (2.6) (4.6) (3.7) (13.4)
------------------------------ ----------- ---------- ------------- ----------- ------
Operating profit - IFRS 84.7 50.4 12.1 (18.5) 128.7
------------------------------ ----------- ---------- ------------- ----------- ------
6. Reconciliation of profit from operations to cash generated
from operations
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------- ---------- ---------- ------------
Operating profit 64.1 89.4 128.7
Less: share of profit of joint ventures (0.6) (0.3) (0.4)
----------------------------------------- ---------- ---------- ------------
63.5 89.1 128.3
Adjustments for:
Depreciation 20.9 18.1 37.8
IFRS 16 depreciation 3.7 - -
Amortisation 0.4 0.4 1.1
Special Items 10.6 (10.0) 13.4
Share-based payments 0.7 0.8 1.5
Cash impact of restructuring and site
closure (2.1) (0.5) (3.3)
Cash impact of acquisition costs (0.1) (0.1) (0.5)
Cash impact of aborted bond costs - - (1.2)
IAS 19 Interest charge (1.3) (1.7) (3.2)
Pension funding in excess of IAS 19
charge (7.2) (6.6) (13.8)
Increase in inventories (1.1) (0.6) (13.5)
Increase in trade and other receivables (17.3) (62.4) (5.6)
Increase/(decrease) in trade and other
payables (23.0) 10.6 (16.1)
Cash generated from operations 47.7 37.1 124.9
----------------------------------------- ---------- ---------- ------------
7. Tax
Tax on the Underlying profit before taxation for the six month
period was charged at 14.0% (six months ended 30 June 2018: 18.0%;
year ended 31 December 2018: 17.0%), representing the best estimate
of the annual effective income tax rate expected for the full
year.
Inclusion of the best estimate for the tax charge on the Special
Items results in a tax rate of 16.3% (six months ended 30 June
2018: 13.2%; year ended 31 December 2018: 14.1%), on the IFRS
profit before taxation. The difference in the effective tax rate on
the Underlying profit before tax and the IFRS profit before tax
reflects the tax associated with the Special Items, some of which
are not taxable or subject to tax deductions.
In April 2019, the European Commission released its final
decision which concluded that, up until 31 December 2018, the Group
Financing Exemption in the UK Controlled Foreign Company
legislation partially represented State Aid. On 12 June 2019 the UK
Government appealed this decision and on 4 July 2019 Synthomer plc
filed an Annulment application to the EU General Court, in-line
with the approach of a number of other UK-based international
companies affected by the release of this final decision. Given the
significant level of uncertainty regarding the outcome of the
Government's and Synthomer plc's appeals, the Group has included
GBP4.8m in its calculation of the best estimate of the 2019 annual
effective income tax rate, reflecting the estimated potential
exposure, including GBP0.2m of interest. Synthomer plc expects to
be required to pay the alleged State Aid to HMRC in the year ending
31 December 2019.
8. Dividends
The interim dividend of 4.0 pence per ordinary share was
approved by the Board on 6 August 2019 and will be paid on 5
November 2019 to members on the register at the close of business
on 4 October 2019.
The final dividend of 9.1 pence per ordinary share in respect of
2018, which was approved by the AGM on 25 April 2019, was paid on 5
July 2019.
9. Earnings per share
Six months ended 30 Six months ended 30
June 2019 June 2018
------------------------------ ------------------------------
Underlying Special Underlying Special
performance Items IFRS performance Items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------ ------- ------- ------------ ------- -------
Earnings
Profit/(loss) attributable
to equity holders of the
parent 60.2 (12.8) 47.4 62.4 7.6 70.0
Number of shares(1) '000 '000
Weighted average number
of ordinary shares - basic 364,009 363,981
Weighted average number
of ordinary shares - diluted 366,114 366,244
Earnings per share(1)
Basic earnings per share 16.5p (3.5)p 13.0p 17.1p 2.1p 19.2p
Diluted earnings per share 16.4p (3.5)p 12.9p 17.0p 2.1p 19.1p
Year ended 31 December
2018
------------------------------
Underlying Special
performance Items Total
GBPm GBPm GBPm
------------------------------ ------------ ------- -------
Earnings
Profit/(loss) attributable
to equity holders of the
parent 111.6 (11.8) 99.8
Number of shares(1) '000
Weighted average number
of ordinary shares - basic 363,977
Weighted average number
of ordinary shares - diluted 365,914
Earnings per share(1)
Basic earnings per share 30.7p (3.3)p 27.4p
Diluted earnings per share 30.5p (3.2)p 27.3p
1 - The weighted average number of ordinary shares for the six
months to 30 June 2019, six months to 30 June 2018 and year to 31
December 2018, used in the calculation of earnings per share, have
been adjusted by multiplying by an adjustment factor of 1.0713 to
reflect the bonus element in the shares issued under the terms of
the rights issue which completed on 29 July 2019, prior to the date
of this report.
10. Financial instruments
The risks associated with the Group's financial instruments and
related polices are detailed in the 2018 Annual Report in note 23
to the financial statements. There have been no changes in the
risks and the management thereof since 31 December 2018.
Fair values have been obtained from the relevant institutions
where appropriate. Where market values are not available, fair
values of financial assets and financial liabilities have been
calculated by discounting expected future cash flow at prevailing
interest rates and by applying period end exchange rates. The
carrying amount of borrowings approximates to book value.
The fair value of the Group's financial instruments are measured
using inputs other than quoted prices that are directly or
indirectly observable (Level 2 as defined in IFRS 13).
There are no significant differences between the carrying value
and fair value of either financial assets or financial
liabilities.
11. Defined benefit schemes
The value of the defined benefit plan assets has been updated to
reflect their market value as at 30 June 2019. Actuarial gains or
losses are recognised in the Statement of Comprehensive Income in
accordance with the Group's accounting policy. The liabilities have
been updated to reflect the change in the discount rate and other
assumptions.
12. Analysis of net debt
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
--------------------------------------------------- ------- ------- -----------
Current borrowings
Bank overdrafts (3.6) (2.3) (20.7)
Bank loans - Unsecured EUR55m loan expiring 26
July 2019 (49.3) - (49.4)
--------------------------------------------------- ------- ------- -----------
(52.9) (2.3) (70.1)
Non-current borrowings
Bank loans - EUR440m committed unsecured revolving
credit facility expiring 23 July 2022 (256.8) (290.6) (242.6)
Capitalised debt costs 1.8 0.4 1.8
--------------------------------------------------- ------- ------- -----------
(255.0) (290.2) (240.8)
Total borrowings (307.9) (292.5) (310.9)
--------------------------------------------------- ------- ------- -----------
Cash and cash equivalents 98.7 98.4 96.9
Net debt (209.2) (194.1) (214.0)
--------------------------------------------------- ------- ------- -----------
Net debt is defined in the glossary of terms in note 20.
13. Capital commitments
The capital expenditure authorised but not provided for in the
interim financial statements as at 30 June 2019 was GBP11.4m (30
June 2018: GBP20.4m, 31 December 2018: GBP21.2m).
14. Contingent liabilities
As announced on 8 June 2018, the European Commission initiated
an investigation into practices relating to the purchase of Styrene
monomer by companies, including the Company, operating in the
European Economic Area. The Company has and will continue to fully
cooperate with the European Commission during its investigation. As
the investigation is ongoing and the European Commission does not
provide feedback on its work until the investigation is complete,
it is not possible to determine whether or not a liability exists
in relation to this matter.
15. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
included in this note. Other than the relationship with the UK
defined benefit pension scheme as disclosed in note 33 of the 2018
Annual Report, there were no other related party transactions
requiring disclosure.
Following the rights issue which completed on 29 July 2019,
Kuala Lumpur Kepong Berhad Group now holds 20.11% of the Company's
shares and is considered to be a related party from this date.
16. Post balance sheet events
On 3 July 2019, the Group announced its intention to acquire the
entire share capital of Omnova Solutions Inc for an enterprise
value of GBP654m. A 1 for 4 Rights Issue of 84,970,192 new
Synthomer shares at 240 pence per new Synthomer share was also
announced on the same day to partially fund the proposed
acquisition. The rights issue completed on 29 July raising gross
proceeds of GBP204m. The remainder of the funds for the proposed
acquisition will come from a fully underwritten refinancing of the
Group to take effect immediately before completion.
17. Seasonality
Historically, there has been no visible fixed pattern to
seasonality in H1 compared to H2 performance in the Group, but,
everything else being equal, because of the summer and Christmas
break periods in Europe, management would normally expect the first
half profits to be slightly stronger than the second half year. In
2019 due to the impact of new capacity additions and the softer Q1
2019 it is expected that H1/H2 seasonality will be more
balanced.
18. Changes in accounting policies
The Group has adopted IFRS 16 Leases with effect from 1 January
2019 but has not restated comparatives for the 2018 reporting
period, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- reliance on previous assessments on whether leases are onerous;
-- the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases;
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application; and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
Adjustments recognised on adoption of IFRS 16
The Group has a portfolio of leases mainly comprising land and
buildings, chemical storage tanks and vehicles. On adoption of IFRS
16, the Group recognised lease liabilities in relation to leases
which had previously been classified as operating leases under the
principles of IAS 17 Leases. These liabilities were measured at the
present value of the remaining lease payments, discounted using
each lessee's incremental borrowing rate as of 1 January 2019. The
weighted average incremental borrowing rate applied to the lease
liabilities in the balance sheet at initial adoption on 1 January
2019 was 2.49%.
Information in respect of the carrying value and interest
arising on lease liabilities is set out below:
Six months
ended 30
June 2019
Amounts recognised in the income statement GBPm
-------------------------------------------- -----------
Interest element of lease payments 0.6
-------------------------------------------- -----------
30 June
2019
Lease liabilities included in the balance sheet GBPm
------------------------------------------------- --------
Current 8.1
Non-current 34.2
------------------------------------------------- --------
Total 42.3
------------------------------------------------- --------
30 June
2019
Maturity analysis - contractual undiscounted cash flows GBPm
--------------------------------------------------------- --------
Less than one year 8.2
One to five years 23.8
More than five years 21.3
--------------------------------------------------------- --------
Total 53.3
--------------------------------------------------------- --------
The lease liability recognised on adoption of IFRS 16 was
GBP45.6m. Operating lease commitments under IAS 17 disclosed at 31
December 2018 were GBP30.4m, which approximates to GBP26.6m when
discounted at the incremental borrowing rate disclosed above. The
difference arises due to the different recognition criteria of IFRS
16 such as treatment of extension options and the inclusion of
liabilities for onerous leases, previously recorded within
provisions.
Right-of use assets were measured at the amount equal to the
lease liability, adjusted by the amount of any prepaid or accrued
lease payments relating to that lease recognised in the balance
sheet as at 31 December 2018. Onerous lease contracts required an
adjustment to the right-of-use assets at the date of initial
application.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
Right of use assets held under leasing Land and Plant and
arrangements under IFRS 16 buildings equipment Total
GBPm GBPm GBPm
--------------------------------------- ---------- ---------- -----
Cost
At 31 December 2018 - - -
Recognised on adoption of IFRS 16 18.2 24.6 42.8
At 1 January 2019 18.2 24.6 42.8
Additions - 0.2 0.2
--------------------------------------- ---------- ---------- -----
At 30 June 2019 18.2 24.8 43.0
--------------------------------------- ---------- ---------- -----
Depreciation
At 1 January 2019 - - -
Charge for the period 1.3 2.4 3.7
--------------------------------------- ---------- ---------- -----
At 30 June 2019 1.3 2.4 3.7
--------------------------------------- ---------- ---------- -----
Net book value
At 1 January 2019 18.2 24.6 42.8
--------------------------------------- ---------- ---------- -----
At 30 June 2019 16.9 22.4 39.3
--------------------------------------- ---------- ---------- -----
EBITDA, segment assets and segment liabilities for the six month
period ended and as at 30 June 2019 all increased as a result of
the change in accounting policy. The following segments were
affected by the change in policy:
Interest Increase Increase
Depreciation EBITDA charge in assets in liabilities
GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ------ -------- ---------- ---------------
Performance Elastomers 0.9 1.0 - 15.5 18.4
Functional Solutions 2.1 2.3 - 20.7 20.8
Industrial Specialities 0.3 0.3 - 2.4 2.4
Unallocated corporate expenses 0.4 0.4 0.6 0.7 0.7
------------------------------- ------------ ------ -------- ---------- ---------------
Total 3.7 4.0 0.6 39.3 42.3
------------------------------- ------------ ------ -------- ---------- ---------------
Earnings per share decreased by 0.1 pence per share for the six
months to 30 June 2019 as a result of the adoption of IFRS 16.
19. Risks and uncertainties
The Group faces a number of risks which, if they arise, could
affect its ability to achieve its strategic objectives. As with any
business, risk assessment and the implementation of mitigating
actions and controls are vital to successfully achieving the
Group's strategy. The Directors are responsible for determining the
nature of these risks and ensuring appropriate mitigating actions
are in place to manage them.
These principal risks are categorised into the following
types:
-- Strategic
-- Operational
-- Compliance
-- Financial
The Directors consider that the principal risks and
uncertainties which could have a material impact on the Group's
performance in the second half of the financial year remain the
same as those stated on pages 32 to 37 of 2018 Annual Report which
is available on our website
www.synthomer.com/investor-relations.
20. 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:
* Re-structure and site closure costs;
* Sale of a business of significant asset;
* Acquisition costs;
* Amortisation of acquired intangible assets;
* Impairment of non-current assets;
* Fair value adjustment - mark to market adjustments in
respect of cross currency and interest rate
derivatives used for hedging purposes where IAS 39
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 Underlying performance represents the statutory
performance of the Group under IFRS, excluding
Special Items.
------------------------------------------------------------------------
Net debt Net debt represents cash and cash equivalents less
short and long term borrowings, as adjusted for
the effect of related derivative instruments irrespective
of whether they qualify for hedge accounting, non-recourse
factoring arrangements, and the inclusion of financial
assets.
------------------------------------------------------------------------
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, net debt and
EBITDA exclude the impact of IFRS 16.
------------------------------------------------------------------------
Ktes Kilotonnes or 1,000 tonnes (metric).
------------------------------------------------------------------------
Responsibility statement
The Directors confirm that these interim financial statements
have been prepared in accordance with International Accounting
Standard 34, Interim Financial Reporting, as adopted by the
European Union.
The interim management report includes a fair review of the
information required by the Disclosure and Transparency Rules
paragraphs 4.2.7 R and DTR 4.2.8 R, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the 2018 Annual Report.
The Directors of Synthomer plc are listed in the 2018 Annual
Report and there have been no subsequent changes.
The Directors are responsible for the maintenance and integrity
of, amongst other things, the financial and corporate governance
information as provided on the Synthomer website. Legislation in
the United Kingdom governing the preparation and dissemination of
financial information may differ from legislation in other
jurisdictions.
On behalf of the Board of Directors
C G MacLean S G Bennett
Chief Executive Officer Chief Financial Officer
6 August 2019
INDEPENDENT REVIEW REPORT TO SYNTHOMER PLC
Report on the interim financial statements
Our conclusion
We have reviewed Synthomer plc's interim financial statements
(the "interim financial statements") in the Interim Results of
Synthomer plc for the six month period ended 30 June 2019. Based on
our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2019;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
are the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
6 August 2019
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 or visit www.rns.com.
END
IR PAMLTMBBMBBL
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