Synthomer revenue down in first half, guidance reinstated
By Josh White
Date: Thursday 06 Aug 2020
(Sharecast News) - Synthomer reported a 4% fall in underlying revenue at constant currency in its first half on Thursday, to £733.7m, with volumes at the polymer producer rising 1.5%, as it reinstated its guidance and intention to pay a final dividend.
The FTSE 250 company said its EBITDA was 0.5% higher on both a reported and a constant currency basis, to £100.2m, for the six months ended 30 June.
After depreciation, its operating profit was 8% weaker at constant currency, at £68.6m, while free cash flow was 384.5% higher at £56.2m.
Earnings per share slid 34.5% year-on-year, to 10.8p.
On an IFRS basis, operating profit was down 76.9% at £14.8m, while it swung to a loss before tax of £4.7m from a profit of £56.6m, and earnings per share swung to a loss of 3.1p from a positive 13p a year earlier.
Synthomer's net debt, post the acquisition of Omnova, reduced to £575.5m, with pro forma leverage steady at 2.5x.
The company said it had "significant" liquidity at around £500m, as it issued a five-year unsecured high yield bond at 3.875%, providing a long-term capital structure and eliminating the firm's bridge refinancing risk.
It said the integration of Omnova was ahead of schedule, with its synergy target increased to $40m.
Synthomer said it now expected a $20m run rate at the end of 2020, up from $15m, with the $40m run rate being achieved by the end of 2022, up from $30m.
The firm reinstated its 2020 guidance, explaining that assuming the recovery in demand continued, the second half was expected to return to "more normalised" group EBITDA levels.
It said it was expecting 2020 EBITDA to be "broadly in line" with the current market consensus of £211.3m, and was also expecting to pay a final dividend for the financial year.
"Geographic and end market diversity and product differentiation have underpinned Synthomer's resilient performance with our half year EBITDA in line with last year," said chairman Neil Johnson.
"Delivering these results whilst also making strong strategic progress is testament to the commitment, dedication and sheer hard work of our employees, and I would like to thank them all for their great contribution in these unprecedented times.
"Omnova has been swiftly integrated leading to a significant increase in our synergy forecast and we have also progressed the strategic review of our European SBR network and have now announced our intention to initiate consultations with employees in Oulu in Finland, and Marl in Germany."
Johnson said the firm had also taken "prudent actions" to protect liquidity, while further strengthening its balance sheet.
"We are encouraged by much improved trading in June and July and accordingly we have reinstated guidance and, subject to continued progress, expect to pay a 2020 final dividend."
At 0900 BST, shares in Synthomer were up 4.6% at 309p.
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