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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Synthomer Plc | LSE:SYNT | London | Ordinary Share | GB00BNTVWJ75 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -8.50 | -3.52% | 233.00 | 232.00 | 233.00 | 247.50 | 232.00 | 242.00 | 95,603 | 14:48:48 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Chemicals & Chem Preps, Nec | 2.02B | -67M | -0.4096 | -5.83 | 390.93M |
From Apr 2019 to Apr 2024
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
Hot Features
Premium
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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