Synthomer (SYNT) H1 2024 earnings summary

Executive summary

• H1 2024 results were in line with expectations, with revenue, EBITDA, and EPS growth driven by volume recovery, self-help measures, and stable trading, though no broad-based end-market demand recovery has occurred.

• Strategic transformation toward specialty products continues, with 55% of revenues now from specialties and 69% of new products offering sustainability benefits.

• Market share gains in Adhesive Solutions and volume recovery in NBR and Health & Protection contributed to improved activity levels.

• Manufacturing footprint reduced from 43 to 32 sites in under two years, with ongoing divestment of non-core businesses.

• Free Cash Flow was negative in H1 due to seasonal working capital and EC fine, but full-year FCF is expected to be positive.

Financial highlights

• Revenue rose 3.5% year-over-year in constant currency to £1,051.1m, with group volume up 10.7%, mainly from Adhesive Solutions and Health & Protection.

• EBITDA increased 7.6% to £76.0m (margin 7.2%); underlying operating profit up 18.7% to £29.0m.

• Underlying EPS was 1.3p, up from a loss in H1 2023; net debt at June end was £560.6m, up from £499.7m at year-end.

• Net debt/EBITDA at 4.7x, within covenant limits; committed liquidity exceeds £500m.

• Free Cash Flow was negative £31.2m in H1, mainly due to EC fine and working capital outflow.

Outlook and guidance

• 2024 outlook reiterated: modest earnings progress and at least modestly positive Free Cash Flow expected, even without broad-based demand recovery.

• Performance improvement and procurement savings programs to support earnings, partially offset by higher operating costs.

• Medium-term targets: mid-single-digit % revenue growth, mid-teens EBITDA margin, ROIC 15%+, and leverage 1-2x net debt/EBITDA.

• Full-year net finance cost expected at £60–65m, rising to £65–70m in 2025.

• No evidence of weakening demand in key markets; stable trading conditions expected.