TIDMCRDA
RNS Number : 0264H
Croda International PLC
25 July 2023
Press Release
25 July 2023
Results for the six months ended 30 June 2023
Continued investment and strategic progress despite a
challenging environment
Croda International Plc ("Croda" or the "Group") announces its
half year results for the six months ended 30 June 2023.
Highlights
Statutory results
(IFRS) Adjusted results Pro forma estimates(*)
Half year ended 30 2022 Pro forma
June 2023 2022 change 2023 2022 change pro forma change
Sales (GBPm) 880.9 1,127.3 (21.9)% 880.9 1,127.3 (21.9)% 936 (6)%
Operating profit (GBPm) 130.2 288.6 (54.9)% 175.8 300.4 (41.5)% 261 (33)%
Operating margin (%) 20.0 26.6 (6.6)ppts 28 (8)ppts
Profit before tax (GBPm) 128.7 636.5 (79.8)% 174.3 288.8 (39.6)% 256 (32)%
Basic earnings per
share (p) 63.1 389.6 (83.8)% 92.9 155.2 (40.1)%
Ordinary dividend per
share (p) 47.0 47.0 0%
Free cash flow (GBPm) 76.4 21.1 262.1%
Net debt (GBPm) 349.3 331.3 (5.4)%
========================= ===== ======= ======= ===== ======= ========= ============ ==========
Pro forma H122 estimated results(*) have been adjusted for the
divestment of the majority of Performance Technologies and
Industrial Specialities
(PTIC) on 30 June 2022
Group performance in line with revised June 2023 expectations;
full year 2023 guidance reaffirmed
-- Pro forma sales down 6% as customers reduce inventory levels
in consumer, crop, and industrial markets
o Flat sales in Consumer Care, against a strong prior period
o Sales up 8% in Life Sciences, excluding $62m prior period
Covid-19 lipid sales
o Sales fell 20% in Industrial Specialties, after adjusting for
the PTIC divestment in the prior period
-- GBP128.7m IFRS profit before tax (H122: GBP636.5m); prior
period benefiting from GBP360.6m divestment profit
-- Adjusted profit before tax GBP174.3m (H122 pro forma (pf): GBP256m)
o 20.0% operating margin (H122 pf: 28%), impacted by lower
volumes and phasing of Covid-19 lipid sales
o Temporary cost measures introduced to protect
profitability
-- Improved free cash flow; lower working capital outflow more
than offsetting lower profit and higher capex
-- Interim dividend maintained at 47.0p (H122: 47.0p),
reflecting confidence in future performance
Sector performance benefiting from diversification across seven
growth businesses
-- Continued sequential improvement in Consumer Care with sales volumes up 8% vs H222
o Sales of new and protected products (NPP) remain strong at 40%
of total sales (H122: 40%)
o Sales up slightly in Beauty Actives with positive mix; volume
improvement strongest in Beauty Care
o 20% sales growth in F&F; driving synergies and
Croda-enabled growth
-- Continued progress across Life Sciences
o Good sales growth in Seed Enhancement and Pharma, excluding
prior period Covid-19 lipid sales
o Crop Protection grew sales but experienced rapid destocking in
Q2
o Covid-19 lipid shipments still expected in Q4; supporting
growing pipeline of other nucleic acid drugs
-- Lower Industrial Specialities sales and operating margin
reflecting destocking and reduced demand
Continued investment and strategic progress
-- Leveraging strong balance sheet to invest in fast-growing niches
o Investing in innovation in Asia with new R&D labs in
Shanghai, China and Hyderabad, India
o Partnering to access critical technology and scaling up
Pharma; new capacity on-stream in 2025
o Completed KRW350bn (cGBP232m) Solus Biotech acquisition on 4
July 2023, adding biotech-derived actives
-- 'Doing the basics brilliantly' programme to drive ongoing efficiencies
o Improving employee productivity and responsiveness by
simplifying operating processes
o Continuing to enhance customer experience with new online
order portal and self-serve data
2023 2022
Sales GBPm Price/mix Volume Currency Change GBPm
========================== ===== ========= ======= ======== ======= =======
Consumer Care 455.6 10.2% (13.7)% 3.7% 0.2% 454.9
Life Sciences 303.2 (2.6)% (8.8)% 3.4% (8.0)% 329.7
Industrial Specialties 122.1 (0.4)% (65.0)% 1.0% (64.4)% 342.7
========================== ===== ========= ======= ======== ======= =======
Group 880.9 15.3% (40.0)% 2.7% (21.9)% 1,127.3
========================== ===== ========= ======= ======== ======= =======
Estimated pro forma sales
========================== ===== ========= ======= ======== ======= =======
Group 881 15% (40)% 3% (22)% 1,127
========================== ===== ========= ======= ======== ======= =======
Pro forma adjustment (191)
========================== ===== ========= ======= ======== ======= =======
Group (pro forma) 881 9% (18)% 3% (6)% 936
========================== ===== ========= ======= ======== ======= =======
Constant
currency Currency
2023 change impact 2022
Adjusted profit GBPm GBPm GBPm GBPm Change
======================= ===== ========= ======== ====== =======
Consumer Care 95.2 (28.0) 2.1 121.1 (21.4)%
Life Sciences 72.3 (47.9) 1.4 118.8 (39.1)%
Industrial Specialties 8.3 (52.0) (0.2) 60.5 (86.3)%
======================= ===== ========= ======== ====== =======
Operating profit 175.8 (127.9) 3.3 300.4 (41.5)%
Net interest (1.5) (11.6) 87.1%
======================= ===== ========= ======== ====== =======
Profit before tax 174.3 288.8 (39.6)%
======================= ===== ========= ======== ====== =======
2023 2022
Estimated pro forma profit GBPm GBPm Change
============================== ===== ====== ======
Operating profit 176 300 (42)%
Pro forma adjustment - (39)
Operating profit (pro forma) 176 261 (33)%
Net interest (2) (5) 60%
============================== ===== ====== ======
Profit before tax (pro forma) 174 256 (32)%
============================== ===== ====== ======
Steve Foots, Chief Executive Officer, commented:
"The speed and scale of the post-Covid stocking and subsequent
destocking has been unprecedented, leading to a decline in first
half sales volume and also impacting profit margin. Despite this
difficult market backdrop, it is testament to the strength of the
Croda business that Consumer Care delivered sequential improvement
on the second half of 2022, driven by customer demand for
innovation and sustainability. Excluding the impact of Covid-19
lipid sales in the prior period, we also saw growth across all
areas of Life Sciences. With continued low visibility, we are
taking some actions to protect profitability ahead of conditions
returning to normal, while continuing to leverage our strong
balance sheet to invest in future growth. The confidence we have in
Croda's strategy is undiminished and the opportunities ahead remain
very exciting for our business."
Outlook
With customer destocking in Consumer Care, Crop Protection and
Industrial Specialities continuing into the second half of the
year, we continue to expect full year 2023 Group adjusted profit
before tax to be between GBP370m and GBP400m. We will leverage our
strong balance sheet to sustain ongoing investment in our
repositioned portfolio, focused on fast-growing niches, to create
significant future value.
Further information:
An analyst presentation will be available via webcast at 0900
BST on 25 July 2023 at www.croda.com /investors.
For enquiries contact:
Investors: David Bishop, Croda +44 7823 874428
Press: Charlie Armitstead, Teneo +44 7703 330269
Notes:
All comparisons are with the 2022 first half year, unless
otherwise stated.
Alternative Performance Measures (APMs): We use a number of APMs
to assist in presenting information in this statement. We use such
measures consistently at the half year and full year, and reconcile
them as appropriate. Whilst the Board believes the APMs used
provide a meaningful basis upon which to analyse the Group's
financial performance and position, which is helpful to the reader,
it notes that APMs have certain limitations, including the
exclusion of significant recurring items, and may not be directly
comparable with similarly titled measures presented by other
companies.
The measures used in this statement include:
-- Constant currency results: these reflect current year performance for existing business translated
at the prior year's average exchange rates. Constant currency results are the primary measure
used by management to monitor the performance of overseas business units, since they remove
the impact of currency translation into Sterling, the Group's reporting currency, over which
those overseas units have no control. Constant currency results are similarly useful to shareholders
in understanding the performance of the Group excluding the impact of movements in currency
translation over which the Group has no control. Constant currency results are reconciled
to reported results in the review of financial performance below. The APMs are calculated
as follows:
a For constant currency profit, translation is performed using the entity reporting currency;
b For constant currency sales, local currency sales are translated into the most relevant functional
currency of the destination country of sale (for example, sales in Latin America are primarily
made in US dollars, which is therefore used as the functional currency). Sales in functional
currency are then translated into Sterling using the prior year's average rates for the corresponding
period;
-- Pro forma results: these reflect the current year performance measured against H1 2022 adjusted
for the estimated impact of the divestment of the majority of Performance Technologies and
Industrial Specialities on 30 June 2022. Given the divested business did not meet the requirements
for classification as a discontinued operation, the first half of 2022 included the full PTIC
business and the second half year only included the retained business. The Board believes
that the pro forma information assists shareholders by providing a meaningful basis upon which
to analyse business performance and make year-on-year comparisons. Pro forma analysis is used
by management for budgeting and reporting purposes including the internal assessment of operating
performance across the Group. In the first half of 2022, it is estimated that the divested
operations contributed revenue of GBP191m, adjusted operating profit of GBP39m and adjusted
profit before tax of GBP33m. Pro forma results are presented on a rounded basis due to the
estimated nature of the measures. The level of estimation risk in arriving at the pro forma
numbers is not considered material for the Group. Pro forma adjustments only impact Industrial
Specialities and the Group, with no changes to Consumer Care or Life Sciences;
-- Adjusted results: these are stated before exceptional items (as disclosed in the review of
financial performance below) and amortisation of intangible assets arising on acquisition,
and tax thereon. The Board believes that the adjusted presentation (and the columnar format
adopted for the Group income statement) assists shareholders by providing a meaningful basis
upon which to analyse business performance and make year-on-year comparisons. The same measures
are used by management for planning, budgeting and reporting purposes and for the internal
assessment of operating performance across the Group. The adjusted presentation is adopted
on a consistent basis for each half year and full year results;
-- Operating margin or return on sales: this is adjusted operating profit divided by sales, at
reported currency. Management uses the measure to assess the profitability of each sector
and the Group, as part of its drive to grow profit by more than sales value, in turn by more
than sales volume, as set out in the Chief Executive's Review;
-- Return on invested capital (ROIC): this is adjusted operating profit after tax divided by
the average adjusted invested capital. Adjusted invested capital represents net assets adjusted
for net debt, earlier goodwill written off to reserves and accumulated amortisation of acquired
intangible assets. Calculations and reconciliations are provided in the five year record of
the Group's Annual Report. The Board believes that ROIC is a key measure of efficient capital
allocation, in line with its policy set, with its aim being to maintain a ROIC of two to three
times the cost of capital over the cycle, and that it is useful to shareholders in assessing
the superior returns delivered by the Group and the impact of deploying more capital to grow
future returns faster;
-- Net debt: comprises cash and cash equivalents (including bank overdrafts), current and non-current
borrowings and lease liabilities. Management uses this measure to monitor debt funding levels
and compliance with the Group's funding covenants which also use this measure. It believes
that net debt is a helpful additional measure for shareholders in assessing the risk to equity
holders and the capacity to invest more capital in the business;
-- Leverage ratio: this is the ratio of net debt to Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA) adjusted to include EBITDA from acquisitions or disposals in the
last 12 month period. EBITDA is adjusted operating profit plus depreciation and amortisation.
Calculations and reconciliations are provided in the five year record of the Group's Annual
Report. The Board monitors the leverage ratio against the Group's debt funding covenants and
overall appetite for funding risk, in approving capital expenditure and acquisitions. It believes
that the APM is a helpful additional measure for shareholders in assessing the risk to equity
holders and the capacity to invest more capital in the business;
-- Free cash flow: comprises EBITDA less movements in working capital, net capital expenditure,
payment of lease liabilities, non-cash pension expense, and interest and tax payments. The
Board uses free cash flow to monitor the Group's overall cash generation capability, to assess
the ability of the Company to pay dividends and to finance future expansion, and, as such,
it believes this is useful to shareholders in their assessment of the Group's performance.
-- New and Protected Products (NPP): these are products which are protected by virtue of being
either newly launched, protected by intellectual property or by unique quality characteristics.
NPP is used by management to measure and assess the level of innovation across the Group .
Croda International Plc
Group Performance
We use a number of APMs to assist in presenting information in
this statement which are defined on page 3. Pro forma H122
estimated results have been adjusted for the divestment of the
majority of Performance Technologies and Industrial Chemicals
(PTIC) on 30 June 2022.
Group performance impacted by market conditions; continued
strategic progress
As previously disclosed, Croda's first half year performance was
negatively impacted by a challenging environment with customers
reducing their ingredient inventories in consumer care, crop and
industrial end markets in most developed regions of the world.
While it is normal for customer inventory levels to fluctuate, we
have not previously seen the speed and scale of the rapid stocking
that followed Covid-19 and subsequent destocking first experienced
in North America a year ago.
Adjusting for the divestment of the majority of the Performance
Technologies and Industrial Chemicals (PTIC) business on 30 June
2022, Group sales fell by 6% on a pro forma basis to GBP880.9m
(H122 pro forma (pf): GBP936m). Pro forma constant currency sales
fell by 9%, with price/mix 9% higher and volume 18% lower, with
favourable foreign exchange rates adding 3%. Profit before tax (on
an IFRS basis) was GBP128.7m (H122: GBP636.5m), the prior period
having benefited from a profit of GBP360.6m on the divestment of
the majority of PTIC. Adjusted profit before tax fell to GBP174.3m
(H122 pf: GBP256m) as Group operating margin of 20.0% (H122 pf:
28%) was negatively impacted by the reduction in volumes, and the
phasing of high-margin lipid sales to our principal vaccine
customers due in the second half of 2023.
In this environment, we have implemented some temporary cost
measures to protect profitability. This is supported by our
existing 'doing the basics brilliantly' programme which aims to
drive ongoing efficiencies. We are currently improving employee
productivity and responsiveness by simplifying operating processes,
and continuing to enhance customer experience with a new online
order portal and self-serve data.
Our innovation pipelines remain robust, with customers
continuing to invest in new product development. Across Consumer
Care, sales of new and protected products (NPP) remain strong at
40% of total sales (H122: 40%). In Life Sciences, our focus on
empowering biologics delivery is a key strategic driver of
medium-term growth in both Pharma and Crop Care.
In Consumer Care, customers remain committed to sustainability
and innovation, driving continued demand for Croda's R&D-led
approach. Fastest growth is coming from sustainable ingredients
including mineral sunscreens and sustainable hair care ingredients.
The completion of the acquisition of Solus Biotech at the beginning
of July added further fermentation-derived active ingredients into
our portfolio, notably ceramides. Consumer Care has the deepest
formulation science expertise and the broadest portfolio in the
industry, with over 15,000 customer/product combinations in Beauty
Actives and more than 23,000 combinations in Beauty Care. In
addition, there are emerging opportunities for growth across Asia
particularly for premium products. Our Fragrances and Flavours
(F&F) business grew sales by 20%, reflecting its agile, cost
competitive model and focus on emerging markets.
In Life Sciences, the move to biologics is the major technology
trend with new mRNA vaccines expected to come to the market in the
next two years, helping to drive accelerated growth in our Pharma
business from 2025. Through execution of our strategy, we have
established an industry-leading position in empowering biologics
delivery, acquiring and entering partnerships with businesses with
critical knowledge and technology, then building scale through
capital expenditure in partnership with national governments, with
new capacity due on stream in 2025. This approach has ensured our
Pharma business has excellent competitive positioning focused on
segments with the highest innovation needs and a broad, well
diversified portfolio.
Across Consumer Care and Life Sciences, we are continuing to
invest in our refocused portfolio to drive profitable growth, with
disciplined returns metrics and a focus on improved cash
generation. Organic capital expenditure was GBP76.1m (H122:
GBP61.8m), and free cash flow improved to GBP76.4m (H122: GBP21.1m)
with a lower working capital outflow of GBP9.7m (H122: GBP183.8m
outflow) more than offsetting lower EBITDA and higher capital
expenditure, the prior period having seen a significant increase in
working capital due to inflation in raw materials and other
costs.
Sector summary
Consumer Care - continued destocking; sequential performance
improvement
In Consumer Care, first half performance improved sequentially
compared with the second half of last year with volumes up 8%.
However, customers have continued to reduce inventory levels and
this industry trend continues to negatively impact volumes which
were down 14% compared with the same period last year. Price/mix
was up 10%, of which price increases implemented in 2022
contributed approximately six percentage points of the improvement,
and improved mix, particularly in Beauty Actives, contributed
approximately four percentage points. Positive price/mix and
favourable foreign exchange rates, which added 4% in the first half
year, meant sales were flat at GBP455.6m (H122: GBP454.9m).
IFRS operating profit was GBP79.2m (H122: GBP110.9m) and
adjusted operating profit was GBP95.2m (H122: GBP121.1m). Consumer
Care operating profit margin was 20.9% (H122: 26.6%), a small
improvement on the second half of 2022 (18.9%) but below the first
half of 2022 due to negative operating leverage from lower
volumes.
Fragrances and Flavours (F&F) delivered 20% sales growth, or
16% at constant currency, benefiting from its emerging market
exposure and agile, cost competitive positioning. F&F sales
were up in all established regions, with the Middle East
particularly strong. Delivery of sales synergies from the Iberchem
acquisition continues, including a new multi-million pound a year
sales opportunity to supply fragrances to a multinational company
for premium hand wash products manufactured in regions where
Iberchem has local production.
Other than F&F, the balance of Consumer Care experienced
similar trends with favourable price/mix offsetting weaker volumes
resulting in flat sales but at lower margins. Volume recovery has
been strongest in Beauty Care albeit from a lower base.
Encouragingly sales were up slightly in Beauty Actives as positive
mix helped offset weaker volumes due to strong sales of Sederma's
industry-leading portfolio of premium active ingredients.
The sequential improvement continued throughout the period with
sales volumes in June higher than the monthly average for the first
half year. Importantly, customers are continuing to invest in new
product development and demand for innovation remains strong with
continued strong sales of new and protected products.
Life Sciences - growth across all areas excluding prior period
Covid-19 lipid sales
Life Sciences sales fell 8% to GBP303.2m (H122: GBP329.7m), the
prior period having benefited from $62m of lipid sales to our
principal vaccine customers. Excluding this impact, sales increased
8%, comprising good sales growth in Pharma and Seed Enhancement,
and more modest sales growth in Crop Protection. On a reported
basis, price/mix decreased by 2%, while volume was 9% lower and
currency translation added 3%.
IFRS operating profit was GBP63.6m (H122: GBP118.2m) and
adjusted operating profit was GBP72.3m (H122: GBP118.8m). Life
Sciences' operating profit margin of 23.8% (H122 36.0%) was
negatively impacted by adverse mix including lower sales for
Covid-19 applications in the Pharma business, which accounted for
approximately eight percentage points of the margin decline, with
negative operating leverage principally in Crop Protection
accounting for approximately four percentage points.
The Pharma business delivered 8% sales growth, excluding prior
period lipid sales to our principal vaccine customers. With
applications spanning commercialised patented and generic drugs and
vaccines, clinical trials and drug discovery, the business has a
broad, well-diversified portfolio. Due to this attractive
positioning, we have only seen a limited impact on performance from
destocking and funding constraints for early-stage biotech
businesses that are reported to have affected other companies. The
Protein/Small Molecule Delivery platform performed well and will
benefit from the addition of phospholipids from the Solus Biotech
acquisition. Adjuvant Systems supports both commercialised vaccines
and those in development; it will benefit from two new adjuvant
partnerships agreed during the period. Our Nucleic Acid Delivery
pipeline continues to develop well with Croda supporting more than
half of nucleic acid drugs in clinical trials that specify a lipid
delivery system. Shipments of lipid systems to our principal Covid
vaccine customers are expected to occur as planned in the final
quarter of 2023 benefiting sector operating profit margin in the
second half year.
Following an exceptional 2022, when Crop Protection delivered
both strong double-digit percentage volume growth and price/mix,
the business started the year with good momentum, delivering
positive volumes and flat pricing in the first quarter on a
sequential basis. It began to experience rapid customer destocking
in the second quarter, which was a factor originally expected to
materialise more gradually later in the year, with volumes down
more than 30% compared with Q1. Overall, the business grew sales in
the half, with price increases and a favourable foreign exchange
rate more than offsetting negative volume.
In the Seed Enhancement business, which is approximately one
third of the size of Crop Protection, a significant proportion of
sales are derived from providing enhancement services for vegetable
seeds. As such, the business only sees a limited impact from
stocking cycles and delivered an 18% sales increase in the first
half year, driven by strong structural growth trends.
Industrial Specialties - performance reflecting destocking and
lower global demand
With the divestment of the majority of Croda's Performance
Technologies and Industrial Chemicals (PTIC) business on 30 June
2022, the retained industrials business, including the SIPO joint
venture in China, has become the Industrial Specialties sector.
Although the sector is not a priority for capital allocation and
strategic growth, it plays an important role in our manufacturing
model, supporting the Consumer Care and Life Sciences sectors on
shared sites and operating a medium-term supply contract to the new
owner of the divested business. The first half of 2022 included the
full PTIC business and the second half year only the retained
business. It is estimated that, had the divestment occurred at the
start of 2022, sales in H122 would have been GBP191m lower at
GBP152m and H122 adjusted operating profit would have been GBP39m
lower at GBP22m. On this basis, sales fell 20% in the first half of
this year to GBP122.1m principally due to lower volumes, reflecting
destocking and weak industrial demand globally, and adjusted
operating profit fell 62% to GBP8.3m as negative operating leverage
compounded the impact of lower volumes. The impact of these adverse
market conditions on the SIPO joint venture in China resulted in a
goodwill impairment charge of GBP20.8m. Including the impairment
charge, the reported IFRS loss was GBP12.6m (H122: GBP59.5m
profit), with the prior period including the full contribution from
the divested business.
Regional summary
Latin America grew sales in the period, driven by continued
strength in Pharma, good momentum in Crop Protection and some
recovery in Consumer Care volumes. Asia was negatively impacted by
weak industrial demand but Consumer Care sales in the region grew
high single digit percentage, reflecting Croda's strong
positioning. North America remains weak, with Consumer Care
impacted by destocking and some reduction in end-consumer demand.
Whilst first half year Consumer Care sales and volumes in North
America have remained significantly below the same period last
year, order volumes in the region have improved progressively from
the beginning of the year. Performance in Europe is tracking
broadly in line with the Group, with the region beginning to see
some destocking by Crop Protection customers in the period as well
as Consumer Care.
Delivering our strategy
Strategy overview - leadership in sustainability and
innovation
We combine leadership in sustainability with market-leading
innovation with the objective of delivering profit growth ahead of
sales growth, ahead of volume growth.
In line with our Purpose of using Smart science to improve
lives(TM) , we enable customers to realise their sustainability
ambitions through the application of our innovation and the
creation of sustainable ingredients. We are reinforcing our
sustainability leadership by reducing the adverse impact of our
operations, by replacing fossil-based ingredients with bio-based
materials, reducing emissions, promoting biodiversity and ensuring
our sourcing activities make a positive contribution to communities
in our supply chains. Our sustainability leadership delivers
benefits that are increasingly valued by our customers; for
example, we are introducing a 'Scope 3 Index' of carbon footprint
data for our ingredients incorporating the benefit of
decarbonisation to 2030.
Innovation is at the heart of what we do, creating new market
and technology niches. We have stepped up our rate of innovation
through more external partnerships, for example with Amyris and BSI
for sustainable vaccine adjuvants, and a focus on 'big bet'
projects. This will support higher growth, improved mix and better
margin as we become a more knowledge-intensive company, capturing
more intellectual property. Even in the unprecedented market
conditions that we have seen in the first half year, customers are
continuing to invest in new product development, drawing on Croda's
deep scientific expertise and application-focused innovation.
The foundation of our innovation model is internal R&D
investment, applying the expertise of our scientists at our global
innovation centres to meet customer needs. This is complemented by
our open innovation network, providing access to universities and
SMEs to help develop new intellectual property. We also invest
externally in disruptive technologies, the benefits of which can be
seen in recent product launches, such as the launch of an
encapsulated retinol by our Beauty Actives business that leveraged
expertise in encapsulation to improve efficacy.
Our 'big bet' projects are reinforcing our leadership in
formulation science and harnessing the potential of biotech,
alongside our conventional chemical technologies. We are sharing
our expertise in chemistry, biotechnology and formulation science
with customers through our new Formulation Academies.
Over the last three years, through the acquisitions and
divestment we have made, we have successfully realigned our
portfolio with faster growing niches in life science and consumer
markets. We are implementing six strategic priorities to ensure our
refocused portfolio delivers consistent top and bottom-line
growth.
Six strategic priorities to deliver consistent top and
bottom-line growth
Alongside our sector strategies of (1.) 'strengthening to grow'
Consumer Care and (2.) 'expanding to grow' Life Sciences, we are
(3.) scaling biotech, (4.) exploring acquisition opportunities to
supplement organic capital deployment, (5.) investing in fast
growth in Asia, and (6.) improving our customer and employee
experience through our 'doing the basics brilliantly'
programme.
Scaling biotech will transform our approach to sustainability,
particularly in reducing customer Scope 3 carbon emissions.
Projects are underway to develop bio-based fragrance ingredients,
prioritising aroma chemicals which are used in a high proportion of
our fragrance references. Our Beauty Care business is adding
biotech-derived surfactants to our existing ECO range, and Beauty
Actives is launching novel anti-ageing actives developed through
collaboration between our biotech and high throughput screening
centres in the UK, France and Canada. This is one example of how
Croda is reinforcing its leadership in biotechnology, established
over more than a decade in plant cell cultures and fermentation,
and now being enhanced by investment in processing for scale up,
biocatalysis and synthetic biology.
We are supplementing our organic investment with acquisitions,
where our global scouting network identifies potential adjacent
technology opportunities in Consumer Care and Life Sciences. On 4
July 2023, we completed the Solus Biotech acquisition in South
Korea, which adds fermentation-derived active ingredients (notably
ceramides), a new biotech hub and establishes a new manufacturing
facility for Croda in North Asia. We will drive rapid sales growth
by leveraging Croda's global selling network and formulation
science expertise.
There are significant emerging opportunities for Croda across
Asia particularly in consumer care and pharmaceutical markets. We
are driving fast growth in Asia, by investing in innovation and
sales resource plus selective expansion in manufacturing.
Our 'doing the basics brilliantly' programme is improving our
customer experience and employee productivity through a combination
of customer insights, digital technology, new data architectures,
and enhanced manufacturing capability. In addition to the temporary
cost measures introduced to protect profitability as destocking
continues, the programme is driving efficiencies within our
well-established customer-centric model including a new online
ordering portal complemented by more self-serve data for customers,
and simplifying operating processes to improve employee
productivity.
Sector strategies to deliver consistent growth and even stronger
margins
We are 'strengthening to grow' Consumer Care to be the most
innovative, sustainable and responsive solution provider globally.
Even in the current trading environment, demand for innovation
remains strong, particularly for differentiated active ingredients.
The fastest growth is coming from sustainable ingredients such as
mineral sunscreens and sustainable hair care ingredients, and we
are continuing to enhance our portfolio by adding more
fermentation-derived ingredients and high-performance replacements
for fossil-based products. Similarly, we are broadening our
unrivalled ability to substantiate ingredient claims to include
product carbon footprint data, incorporating the impact of
decarbonisation to 2030. Finally, the continued fragmentation of
consumer markets plays to our strengths as we partner with
customers large and small globally enabling smaller customers to
partner with us to launch their products quickly.
The move to biologics is the key structural driver of growth in
both pharmaceutical and agriculture markets over the next decade,
and our strategy is to 'expand to grow' Life Sciences to empower
biologics delivery. In agriculture, this move will enable greater
targeting of actives and reduced biodiversity impact. In this
market we are positioned as an innovation partner for delivery
systems, creating new systems for the delivery of biopesticides and
meeting the sustainability challenges of conventional pesticide
delivery. In pharma markets, the move from chemical to biological
active pharmaceutical ingredients is already underway and we have
developed a portfolio focused on segments with the highest
development and innovation needs. As a result, our pharma portfolio
has a well-diversified risk profile and opportunity set, which we
are expanding through new technologies from our own innovation
pipeline and via partnerships. The competitive positioning of our
pharma business is extremely strong, providing delivery systems
that are critical to next-generation drugs and with excellent
customer relationship spanning drug discovery through to commercial
supply.
Leveraging our balance sheet strength to invest in the
business
Last year's divestment of the majority of our industrials
business strengthened our balance sheet, giving us greater
optionality to invest in growth opportunities in the consumer care
and life sciences markets. All investments are subject to
disciplined returns metrics and are considered alongside our
commitment to continued strong cash generation. Our priority is
organic capital expenditure, supplemented by targeted acquisitions,
in line with our preferred approach where we acquire and enter
partnerships with businesses with critical knowledge and technology
then build scale through organic investment.
The first half year saw investment in capital expenditure of
GBP76.1m (2022: GBP61.8m). This investment included new Consumer
Care laboratory capabilities in Shanghai, China and a new
application centre in Hyderabad to support growing demand for
protein and small molecule delivery from pharma customers in India.
With our Pharma business a top priority for capital allocation, we
are also continuing to expand R&D capabilities for adjuvant
systems in Denmark and for nucleic acid delivery at Alabaster in
the USA.
In addition to investments that help deliver the carbon
reduction roadmaps that we have put in place for all sites, we are
selectively expanding our manufacturing capability in Asia,
including starting construction of a new surfactants plant in
Dahej, India, and early-stage investment in a combined Beauty
Actives and F&F manufacturing facility in Guangzhou to grow
domestic sales in China. Over the period 2021 to 2024, we are also
investing an extra GBP175m to scale up Pharma production,
particularly to meet forecast market demand for new nucleic acid
drugs which are widely expected to come to the market from 2025.
GBP12m was invested in the programme in the first half year and
over GBP100m invested to date. Alongside our investment, the US and
UK Governments are co-investing up to an additional GBP75m,
recognising the importance of new generation delivery systems to
future drug discovery. We have historically invested 6-8% sales on
capex. Heightened levels of capex are expected to continue through
2025 as the Pharma facilities are built, alongside the investments
in Asia mentioned above to support our Consumer Care businesses in
this important market.
We supplement our organic investment plan with selective
acquisitions to add adjacent and complementary technologies. On 4
July 2023, we completed the acquisition of Solus Biotech, a global
leader in premium, biotechnology-derived beauty actives, from Solus
Advanced Materials for a total consideration of KRW350bn
(approximately GBP232m) funded from cash and debt facilities.
Employing 95 people in South Korea, the business generated
approximately KRW43bn (c.GBP28m) of sales in 2022. The acquisition
has excellent alignment with our strategic priorities, expanding
our Asian manufacturing capability, adding a new biotechnology
R&D hub in the region, and providing our Beauty Actives and
Pharma businesses with access to Solus' existing biotech-derived
ceramide and phospholipid technologies, and its emerging
capabilities in natural retinol. Separately, we also signed two new
licensing agreements with Amyris and BSI during the first half year
to develop a sustainable supply chain for vaccine adjuvants.
Capital allocation will be in line with our stated policy which
is to:
1. Reinvest for growth - investment in organic capital expenditure to drive shareholder value
creation through new capacity, product innovation and expansion in attractive geographic markets
to drive sales and profit growth;
2. Provide regular returns to shareholders - pay a regular dividend to shareholders, representing
40 to 50% of adjusted earnings over the business cycle;
3. Acquire disruptive technologies - to supplement organic growth, we are targeting a number
of exciting technology acquisitions in existing and adjacent markets, with a focus on strengthening
our Consumer Care business and expanding in Life Sciences; and
4. Maintain an appropriate balance sheet and return excess capital - maintain an appropriate
balance sheet to meet future investment and trading requirements, targeting a leverage ratio
of 1 to 2x over the medium-term cycle. We consider returning excess capital to shareholders
when leverage falls below our target range and sufficient capital is available to meet our
investment opportunities.
The Board maintained the interim ordinary dividend at 47.0p
(2022: 47.0p) reflecting its confidence in Croda's future
performance. Debt leverage increased to 0.7x (31 December 2022:
0.5x) before completion of the Solus acquisition which closed after
the period end, or 1.1x including payment of the acquisition
consideration. The Board will monitor the Group's ongoing capital
requirements, alongside any surplus capital, in line with our
policy.
Outlook
With customer destocking in Consumer Care, Crop Protection and
Industrial Specialities continuing into the second half year, we
continue to expect full year 2023 Group adjusted profit before tax
to be between GBP370m and GBP400m. We will leverage our strong
balance sheet to sustain ongoing investment in our repositioned
portfolio, focused on fast-growing niches, to create significant
future value.
Non-financial Performance
Delivering our sustainability commitment
Our sustainability strategy is built on 23 UN SDG targets
grouped around the themes of climate, nature and society,
supporting our commitment to be Climate, Land and People Positive
by 2030.
To be Climate Positive, the use of our ingredients will enable
consumers to avoid more carbon than is associated with our
operations and supply chain. Our industry-leading carbon emission
reduction targets will ensure we contribute to limiting the global
temperature rise to no more than 1.5degC above pre-industrial
levels. In line with our verified science-based target (SBT), we
will reduce operational greenhouse gas emissions by 46.2% between
2018 and 2030. In the first half year our scope 1 and 2 emissions
were 56,184 tonnes CO2e (H122: 65,229 tonnes CO2e), with reductions
tracking in line with our SBT. We are focused on implementing our
externally validated decarbonisation roadmaps for every Croda
location, supported by a higher internal carbon price of
GBP124/tonne (previously GBP55/tonne) to ensure investment
decisions align with our sustainability ambitions. We have also
continued our focus on upstream supply chains, with key suppliers
representing 24% of raw material volume publicly committed to SBTi
carbon reduction targets.
To be Land Positive, we are committed to saving more land
through the use of our crop protection, biostimulant and seed
enhancement technologies, than is used to grow our bio-based raw
materials, by at least a factor of two. We have an intermediate
target to save a minimum of 80,000 hectares a year more in 2024
than in 2019. In the first half year we saved 25,449 hectares more
than in the first half of 2019. We are expanding the scope of our
Land Positive Commitment to consider biodiversity and ecosystem
impacts, with the aim of adopting science-based targets for nature
and aspiring to become Net Nature Positive by 2030. Our current
focus is on understanding our impacts and dependencies on nature as
a foundation for achieving this commitment.
Our People Positive objective covers both our communities and
our people. We focus on using our smart science to improve lives
globally, and the Croda Foundation has committed GBP3.3m in 28
grants across 20 countries since it was registered as a charity in
2021. The People Positive KPI is our Purpose and Sustainability
Commitment (PSC) score generated from an all-employee survey which
rose 3% to 63% in the recent survey. With a target to achieve
gender balance in Croda leadership roles by 2030, we have
maintained a gender balanced Board and increased the number of
women in leadership roles to 40.2% (H122: 38.2%).
The Fundamentals element of our Commitment represents the 2030
license to operate for a multinational company such as Croda.
Reflecting our absolute commitment to be a safe company for our
communities and our employees, we have set a stronger safety target
to reduce our Total Recordable Incident Rate ("TRIR") to 0.3 by
2025, requiring us to more than halve our 2022 rate. The current
rate is 0.83 (H122: 0.77), excluding Covid-19 cases. Recorded
occupational safety incidents saw a slight increase mainly driven
by slips and trips. Significant training is underway across all
sectors and locations globally, in line with our commitment to
safety as a value.
Our sustainability targets have been updated for the divestment
of the majority of PTIC.
Driving innovation
Growth of new and protected product (NPP) sales is our principal
established measure for innovation with NPP sales defined as sales
protected by virtue of being newly launched, protected by
intellectual property or by unique quality characteristics.
NPP as a proportion of total sales was 33% (H122: 33%), as the
benefit of the divestment of the majority of PTIC was offset by the
absence of Covid-19 lipid sales in the first half year. By sector,
NPP as a proportion of total sales was 40% in Consumer Care (H122:
40%), reflecting continued customer demand for innovation, and 31%
in Life Sciences (H122: 43%) due to the Covid-19 lipid sales
impact.
NPP growth is a key performance indicator that is used for
remuneration. In the first half year, Group NPP sales fell by 3%,
excluding Covid-19 lipid sales from the prior period.
Our innovation strategy combines our own R&D with external
technology investments and partnerships to augment Croda's
innovation centres globally. We continue to work with over 500
academic and SME partners, on more than 100 innovation
projects.
Financial Performance
Currency translation
Sterling continued to strengthen sequentially but remained
weaker than the same period last year against both the US Dollar,
at US$1.234 (H122: US$1.301) and against the Euro, at EUR1.141
(H122: EUR1.189). Currency translation benefited sales by GBP31.4m
and adjusted operating profit by GBP3.3m. Transactional currency
impact is correlated with translation, given that the UK and EU are
meaningful centres of production for the Group, with the weakness
of both Sterling and the Euro against the US Dollar having a net
positive impact.
Impact of PTIC divestment
The Group successfully completed the divestment of the majority
of the Performance Technologies and Industrial Chemicals (PTIC)
business on 30 June 2022, with the retained industrials business,
including the SIPO joint venture in China, becoming the Industrial
Specialties (IS) sector. Given the divested business did not meet
the requirements for classification as a discontinued operation,
the first half of 2022 included the full PTIC business and the
second half year only the retained business. It is estimated that,
had the divestment occurred at the start of 2022, sales in H122
would have been GBP191m lower at GBP152m and H122 adjusted
operating profit would have been GBP39m lower at GBP22m. Pro forma
H122 results have been adjusted for the divestment. On this basis,
IS sales fell 20% to GBP122.1m and adjusted operating profit fell
62% to GBP8.3m.
Sales
2023 2022
Sales GBPm Price/mix Volume Currency Change GBPm
========================== ===== ========= ======= ======== ======= =======
Consumer Care 455.6 10.2% (13.7)% 3.7% 0.2% 454.9
Life Sciences 303.2 (2.6)% (8.8)% 3.4% (8.0)% 329.7
Industrial Specialties 122.1 (0.4)% (65.0)% 1.0% (64.4)% 342.7
========================== ===== ========= ======= ======== ======= =======
Group 880.9 15.3% (40.0)% 2.7% (21.9)% 1,127.3
========================== ===== ========= ======= ======== ======= =======
Estimated pro forma sales
========================== ===== ========= ======= ======== ======= =======
Group 881 15% (40)% 3% (22)% 1,127
========================== ===== ========= ======= ======== ======= =======
Pro forma adjustment (191)
========================== ===== ========= ======= ======== ======= =======
Group (pro forma) 881 9% (18)% 3% (6)% 936
========================== ===== ========= ======= ======== ======= =======
Reported sales were down 21.9% to GBP880.9m (H122: GBP1,127.3m).
On a pro forma basis they were down 6%, or by 9% at constant
currency. Within this, price/mix improved by 9%, principally
reflecting the annualisation impact of price increases in 2022 to
recover inflation in raw material and other input costs. Group
volumes reduced by 18% pro forma, with continued customer
destocking across consumer, crop and industrial markets having a
significant impact. While volumes remain significantly lower than
the first half of 2022, they have improved versus the second half
of 2022 when destocking was most intense.
Profit and margin
2023 2022
=================================== ============================== ==============================
IFRS Adjustments Adjusted IFRS Adjustments Adjusted
GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ======= =========== ======== ======= =========== ========
Sales 880.9 - 880.9 1,127.3 - 1,127.3
Cost of sales (498.4) - (498.4) (591.3) - (591.3)
=================================== ======= =========== ======== ======= =========== ========
Gross profit 382.5 - 382.5 536.0 - 536.0
Operating costs (252.3) (45.6) (206.7) (247.4) (11.8) (235.6)
=================================== ======= =========== ======== ======= =========== ========
Operating profit 130.2 (45.6) 175.8 288.6 (11.8) 300.4
Gain on business disposal - - - 360.6 360.6 -
Net interest charge (1.5) - (1.5) (12.7) (1.1) (11.6)
----------------------------------- ------- ----------- -------- ------- ----------- --------
Profit before tax 128.7 (45.6) 174.3 636.5 347.7 288.8
Tax (40.3) 4.0 (44.3) (90.1) (20.7) (69.4)
=================================== ======= =========== ======== ======= =========== ========
Profit after tax 88.4 (41.6) 130.0 546.4 327.0 219.4
=================================== ======= =========== ======== ======= =========== ========
2023 2022
=================================== ============================== ==============================
IFRS Adjustments Adjusted IFRS Adjustments Adjusted
Operating profit/(loss) GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ======= =========== ======== ======= =========== ========
Consumer Care 79.2 (16.0) 95.2 110.9 (10.2) 121.1
Life Sciences 63.6 (8.7) 72.3 118.2 (0.6) 118.8
Industrial Specialties (12.6) (20.9) 8.3 59.5 (1.0) 60.5
=================================== ======= =========== ======== ======= =========== ========
Group 130.2 (45.6) 175.8 288.6 (11.8) 300.4
=================================== ======= =========== -------- ======= =========== --------
Constant
currency Currency
2023 change impact 2022
Adjusted profit GBPm GBPm GBPm GBPm Change
================================ ===== ========= ======== ====== =======
Consumer Care 95.2 (28.0) 2.1 121.1 (21.4)%
Life Sciences 72.3 (47.9) 1.4 118.8 (39.1)%
Industrial Specialties 8.3 (52.0) (0.2) 60.5 (86.3)%
================================ ===== ========= ======== ====== =======
Operating profit 175.8 (127.9) 3.3 300.4 (41.5)%
Net interest (1.5) (11.6) 87.1%
================================ ===== ========= ======== ====== =======
Profit before tax 174.3 288.8 (39.6)%
================================ ===== ========= ======== ====== =======
2023 2022
Estimated pro forma profit GBPm GBPm Change
================================ ===== ========= ========
Operating profit 176 300 (42)%
Pro forma adjustment - (39) -
Operating profit (pro forma) 176 261 (33)%
Net interest (2) (5) 60%
================================ ===== ========= ========
Profit before tax (pro forma) 174 256 (32)%
================================ ===== ========= ========
IFRS operating profit was GBP130.2m (H122: GBP288.6m) and profit
before tax GBP128.7m (H122: GBP636.5m). IFRS profit before tax
included a charge for adjusting items of GBP45.6m (H122: GBP12.9m),
including a goodwill impairment of GBP20.8m to the carrying value
of the Chinese SIPO joint venture in Industrial Specialties, a
charge for amortisation of acquired intangible assets of GBP17.1m
(H122: GBP17.3m) and acquisition costs of GBP7.7m. Exceptional
items in the prior half year also included a profit on the PTIC
divestment of GBP360.6m, a gain on contingent consideration of
GBP5.5m and interest on discount unwind of contingent consideration
GBP1.1m.
Group adjusted operating profit reduced by 33% on a pro forma
basis to GBP175.8m (H122 pf: GBP261m), with an operating margin of
20.0% (H122 pf: 28%). With a large reduction in volumes in the
first half year, the biggest impact on margin was operating
leverage, with reduced fixed overhead coverage accounting for a
reduction in operating margin of around five percentage points.
Adverse mix, principally due to the absence of Covid-19 lipid sales
in the first half year, also had an impact, reducing operating
margin by around four percentage points.
There were a number of non-trading impacts that benefited the
adjusted operating margin by just over one percentage point. The
lower variable remuneration charge benefited all sector margins by
just under one percentage point and Consumer Care also saw a
benefit from release of accruals for an earn out associated with
the Iberchem acquisition. Following the PTIC divestment, associated
dis-synergy costs that were previously allocated to the divested
business have been reallocated across the Consumer Care and Life
Sciences sectors. This benefited Industrial Specialties but reduced
the operating margin in Consumer Care and Life Sciences by just
under one percentage point respectively.
Net finance costs were minimal in the period due to the proceeds
from the PTIC divestment and pension interest income, with adjusted
profit before tax of GBP174.3m (H122: GBP288.8m). The effective tax
rate on adjusted profit was 25.4% (H122: 24.0%). The effective tax
rate on IFRS profit was higher at 31.3% (H122: 14.2%) as the
exceptional costs were mainly capital in nature and therefore not
tax deductible. The prior period effective tax rate on IFRS profit
was significantly lower as the Group utilised eligible corporate
tax exemptions on its profit from the PTIC divestment. There were
no significant adjustments between the Group's expected and
reported adjusted tax charge based on its accounting profit. IFRS
basic earnings per share (EPS) were 63.1p (H122: 389.6p) and
adjusted basic EPS were 92.9p (H122: 155.2p).
Free cash flow
2023 2022
Cash flow GBPm GBPm
===================================================== ====== =======
Adjusted operating profit 175.8 300.4
Depreciation and amortisation 43.4 43.5
===================================================== ====== =======
EBITDA 219.2 343.9
Working capital (9.7) (183.8)
Net capital expenditure (76.1) (61.8)
Payment of lease liabilities (8.0) (8.8)
Non-cash pension expense (1.7) 5.0
Interest & tax (47.3) (73.4)
===================================================== ====== =======
Free cash flow 76.4 21.1
Dividends (85.1) (78.8)
Acquisitions (11.2) (14.2)
Business disposal net of cash in disposed businesses (4.4) 613.4
Other cash movements (42.4) (22.1)
===================================================== ====== =======
Net cash flow (66.7) 519.4
===================================================== ====== =======
Net movement in borrowings 150.7 154.3
Net movement in cash and cash equivalents 84.0 673.7
===================================================== ====== =======
Free cash flow improved to GBP76.4m (H122: GBP21.1m), with lower
EBITDA and an increase in capital expenditure more than offset by a
reduced working capital outflow of GBP9.7m. This follows a
significant increase in working capital in the first half of 2022
of GBP183.8m, principally due to inflation in raw materials and
other costs.
As at 30 June 2023, the Group had committed funding in place of
GBP1,050.7m, with undrawn long-term committed facilities of
GBP367.7m and GBP379.5m in cash. With net debt of GBP349.3m as at
30 June 2023, net leverage was 0.7x EBITDA, below our medium-term
target range of one to two times EBITDA.
Completion of Solus Biotech acquisition
Post period end, the acquisition of Solus Biotech was completed
for a total consideration of KRW350bn (approximately GBP232m) on a
debt-free, cash-free basis, with the acquisition funded through
existing cash and debt facilities. Following payment of the
acquisition consideration, net leverage increased to 1.1x.
Retirement benefits
The post-tax asset on retirement benefit plans at 30 June 2023,
measured on an accounting valuation basis under IAS19, was broadly
flat at GBP72.0m (31 December 2022: GBP75.2m). Cash funding of the
various plans is driven by the schemes' ongoing actuarial
valuations. The triennial actuarial valuation of the largest
pension plan, the UK Croda Pension Scheme, was performed as at 30
September 2020 and indicated that the scheme was 101% funded on a
technical provisions basis. Consequently, no deficit recovery plan
is required. An updated actuarial triennial valuation will be
performed later this year.
Sector Performance
Consumer Care - continued destocking; sequential performance
improvement
As previously disclosed, Consumer Care performance was
negatively impacted by a challenging environment, with customers
reducing their ingredient inventories in most developed regions of
the world. While it is normal for customer inventory levels to
fluctuate, we have not previously seen the speed and scale of the
rapid stocking that followed Covid-19 and subsequent destocking
first experienced in North America a year ago.
First half performance improved compared with the second half of
last year with volumes up 8%. However, customers have continued to
reduce inventory levels and this industry destocking trend
continues to negatively impact volumes which were down 14% compared
with the same period last year. Price/mix was up 10%, comprising an
estimated 4% benefit from mix and 6% benefit from price mainly due
to increases implemented in 2022. Positive price/mix and favourable
foreign exchange rates, which added 4% in the first half year,
meant sales were flat at GBP455.6m (H122: GBP454.9m). Other than
Fragrances and Flavours (F&F), the three business units in
Consumer Care experienced similar trends with strong price/mix
offsetting weaker volumes resulting in flat sales but at lower
margins.
IFRS operating profit was GBP79.2m (H122: GBP110.9m) and
adjusted operating profit was GBP95.2m (H122: GBP121.1m). Consumer
Care operating profit margin was 20.9% (H122: 26.6%), a small
improvement on the second half of 2022 (18.9%) but below the first
half of 2022 due to negative operating leverage from lower
volumes.
The sequential improvement continued throughout the period with
sales volumes in June higher than the monthly average for the first
half year. Importantly, customers are continuing to invest in new
product development and demand for innovation remains strong with
sales of new and protected products (NPP) reflecting this continued
demand at 40% (H122: 40%) of total sector sales.
Consumer Care comprises four business units. Beauty Actives
(c20% of sector sales) has the largest actives portfolio in the
industry across over 15,000 customer/product combinations. The
strategy is to scale our market leadership by adding innovative
technologies and reinforcing our unrivalled substantiation of
ingredient claims. Sales were broadly flat in Beauty Actives as
positive mix, estimated at 13%, alongside 4% price benefit helped
offset weaker volumes (down 19%). Positive mix was driven by strong
sales of Sederma's premium active ingredients particularly to China
where Sederma sales grew over 30%. The business supported new
customer products with peptides for the new Boots No7 Future Renew
range and for a new Deciem product that repairs scars caused by
acne. Our ingredients are increasingly derived from biotechnology
with new launches including an active that fades age spots caused
by the sun, and anti-ageing and anti-dandruff actives derived from
marine biotechnology. The acquisition of Solus Biotech at the
beginning of July added further biotech-derived active ingredients
into our portfolio, notably ceramides. We will drive rapid sales
growth of Solus ingredients by leveraging Croda's global selling
network and formulation science expertise.
Beauty Care (c50% of sector sales) delivers differentiated
ingredients for skin, hair and solar care across over 23,000
customer/product combinations. The strategy is to strengthen Beauty
Care with sustainable ingredients, smaller franchises to provide
greater focus and by positioning the business as a go-to-market
partner for customers large and small. Volume recovery has been
stronger in Beauty Care than in Beauty Actives and Home Care,
albeit from a lower base. Already a sustainability leader, the
business is adding further high-performance replacements for
fossil-based products, such as biotech-derived surfactants to
reinforce a number one position in sustainable surfactants. In hair
care, our focus is on biodegradable hair care ingredients and
non-animal alternatives for hair conditioning. In sun protection we
specialise in mineral sunscreens that deliver superior SPF
protection, are 'reef safe' and appear clear on the skin. The
continued fragmentation of beauty care markets plays to our
strengths as we partner with customers large and small enabling
them to launch their products quickly. We are leveraging this
position as go-to-market partner through Formulation Academies
where we share our expertise with customers and at our innovation
centres globally where we offer to co-create customer products. We
are also broadening our unrivalled ability to substantiate
ingredient claims to include product carbon footprint data,
incorporating the impact of decarbonisation to 2030.
F&F (c25% of sector sales) is the preeminent emerging market
provider, with near-global reach and innovative technologies that
meet smaller customers' needs. The strategy is to drive integration
synergies in F&F by expanding Croda's presence in emerging
markets and providing Iberchem with access to Croda's developed
market presence, while supporting one-stop-shop formulations and
developing more sustainable fragrances. F&F is fulfilling its
role in the portfolio, growing sales by 20% comprising an estimated
9% benefit from volume and 7% benefit from price/mix as the
business leveraged its emerging market exposure and agile, cost
competitive positioning. F&F sales growth was across all
established regions with the Middle East particularly strong.
Delivery of sales synergies from the Iberchem acquisition also
continues to make good progress including a new multi-million pound
a year sales opportunity to supply fragrances to a multinational
company for premium hand wash products in regions where Iberchem
has local production. Projects are also underway to develop
bio-based fragrance ingredients, prioritising aroma chemicals which
are used in a high proportion of our
fragrance references.
Home Care (c5% of sector sales) is focused on bringing Croda's
ingredients to selective premium home care markets. This is
delivered through two technology platforms which provide improved
efficacy and sustainability: fabric care, with proteins that
increase the lifetime of clothes; and household care, with
sustainable alternatives to fossil-based surfactants. Sales fell in
Home Care where volumes were weakest, but price/mix was positive
with sales of sustainable surfactants and fabric care proteins
performing best.
We are continuing to invest to drive fast growth in Asia where
investment has included a new innovation centre for Consumer Care
customers in Shanghai, a new surfactants production site in Dahej,
India, and initial capital expenditure for a combined Beauty
Actives/F&F facility in Guangzhou, China, which will provide
four times the current capacity and is due to commission in
2025.
Life Sciences - growth across all areas excluding prior period
Covid-19 lipid sales
Life Sciences serves customers in agriculture and pharmaceutical
sectors across three businesses: Crop Protection, which grew sales
but experienced significant destocking in the second quarter, as
well as Seed Enhancement and Pharma where the growth drivers
remained strong.
Sales fell 8% to GBP303.2m (H122: GBP329.7m), the prior period
having benefited from $62m of lipid sales to our principal vaccine
customers. Excluding this impact, sales increased 8%, comprising
good sales growth in Pharma and Seed Enhancement, and more modest
sales growth in Crop Protection. On a reported basis, price/mix
decreased by 2%, while volume was 9% lower and currency translation
added 3%. Sales of new and protected products (NPP) as a percentage
of total sector sales fell to 31% (H122: 43%), reflecting the
absence of Covid-19 lipid sales. Shipments of lipid systems to our
principal Covid vaccine customers are expected to occur as planned
in the final quarter of 2023 benefitting NPP and sector operating
profit margin in the second half year.
IFRS operating profit was GBP63.6m (H122: GBP118.2m) and
adjusted operating profit was GBP72.3m (H122: GBP118.8m). Life
Sciences' operating profit margin of 23.8% (H122 36.0%) was
negatively impacted by adverse mix including lower sales for
Covid-19 applications in the Pharma business, which accounted for
approximately eight percentage points of the margin decline, with
negative operating leverage principally in Crop Protection
accounting for approximately four percentage points.
Life Sciences comprise three businesses. Crop Protection (c35%
of sector sales) is positioned as innovation partner to major crop
science companies, and an increasing number of smaller customers,
offering ingredients that improve performance and delivery of crop
formulations. Our strategy is to enable customers to meet the
sustainability challenges of conventional pesticide delivery and
help accelerate the move to biopesticides that will enable greater
targeting of actives and reduced biodiversity impact. Following an
exceptional 2022, when Crop Protection delivered both strong
double-digit percentage volume growth and price/mix, the business
started the year with good momentum, delivering positive volumes
and flat pricing in the first quarter on a sequential basis. It
began to experience rapid customer destocking in the second
quarter, which was a factor originally expected to materialise more
gradually later in the year, with volumes down more than 30 per
cent and price down mid-single digits compared with Q1. Overall,
the business grew sales by 5% in the half year, with a 13% benefit
from price/mix increases and favourable foreign exchange rates
which added 4% more than offsetting a 12% fall in volume.
Seed Enhancement (c10% of sector sales ) leverages our
leadership in seed coating systems to improve germination,
stimulate healthy development of seeds and increase crop yield.
With a significant proportion of sales derived from providing
enhancement services for vegetable seeds, the business only sees a
limited impact from stocking cycles and delivered an excellent 18%
sales increase in the first half year, driven by strong structural
growth trends. Our strategy is to be the leader in sustainable
solutions for field and vegetable crops, and our microplastic-free
seed coatings have already delivered more than GBP1m sales of a
multi-million pound opportunity.
In pharmaceutical markets, the move from chemical to biological
active pharmaceutical ingredients is already underway and our
Pharma business (c55% of sector sales) targets leadership in
biologics drug delivery. We have established an industry-leading
position in empowering biologics delivery, acquiring and partnering
with businesses with critical knowledge and technology then
building scale through organic investment. This approach has
ensured the business has excellent competitive positioning focused
on segments with the highest innovation needs and with customers
spanning drug discovery through to commercial supply. It delivered
8% sales growth, excluding prior period lipid sales to our
principal vaccine customers. With its broad portfolio and
diversified risk profile, we only saw a limited impact on
performance from destocking and funding constraints for early-stage
biotech businesses that are reported to have affected other
companies. We are making rapid progress expanding the business,
adding new technologies from our own innovation pipeline and
partnerships, and scaling operations to support breakout
growth.
Our Pharma business comprises three platforms:
-- Protein/Small Molecule Delivery has an established record of
providing excipients for delivery of complex small molecule,
protein and monoclonal antibody (mAb) drugs. Through the Solus
Biotech acquisition, we have added phospholipids to its portfolio
for drug delivery and intravenous nutrition. In line with our
strategy, we have also expanded into bioprocessing aids, a target
adjacency, launching Virodex as an aid for biopharma manufacturing
and a superior alternative to a product from another company that
is now banned in Europe.
-- Adjuvant Systems is the leading independent supplier of
adjuvants which are used as immune response boosters for vaccines.
Our strategy is to accelerate use of innovative adjuvant systems
which are essential to the development of future preventative and
therapeutic vaccines. We have expanded our adjuvants portfolio
through the launch of a new lipid-based adjuvant developed in-house
and already sampled into 70 vaccine projects, and through licensing
agreements for reliable, sustainable alternatives for adjuvant
systems that are essential to many current and future vaccines.
-- Nucleic Acid Delivery was created as a result of our 2020
acquisition of Avanti which brought an unmatched portfolio of over
3,000 R&D customer relationships, and a diverse range of lipids
and similar components for nucleic acid delivery. Clinicals trials
of nucleic acid-based drugs have increased rapidly over the last
twelve months, with pharma industry pipelines growing by more than
six times for mRNA vaccines for infectious diseases, over seven
times for cancer vaccines and one and a half times for gene editing
where the volumes of genetic material and delivery systems required
are much higher. Croda is supporting more than half of the clinical
programmes that specify lipid delivery systems. New mRNA vaccines
are expected to come to the market in the next two years, helping
to drive accelerated growth in our Pharma business from 2025.
We are continuing to invest in line with our stated Pharma
investment programme with GBP12m spent in the period and over
GBP100m invested to date. In June 2023, we opened a new laboratory
in Hyderabad, India to meet growing demand for small molecule and
protein delivery and 'broke ground' at Lamar, USA as part of our
partnership with the US Government, where new capacity is due on
stream in 2025.
Industrial Specialties - performance reflecting destocking and
lower global demand
On 30 June 2022, Croda divested the majority of the Performance
Technologies and Industrial Chemicals (PTIC) business to Cargill
Inc. The retained industrials business, including the SIPO joint
venture in China, has become the Industrial Specialties (IS)
sector.
Although the sector is not a priority for capital allocation and
strategic growth, IS plays an important role in our manufacturing
model, supporting the Consumer Care and Life Sciences sectors on
shared sites and operating a medium-term supply contract to the new
owner of the divested business.
The first half of 2022 included the full PTIC business and the
second half year only included the retained business. It is
estimated that, had the divestment occurred at the start of 2022,
sales in H122 would have been GBP191m lower at GBP152m and H122
adjusted operating profit would have been GBP39m lower at GBP22m.
On this basis, sales fell 20% in the first half of this year to
GBP122.1m principally due to lower volumes, reflecting destocking
and weak industrial demand globally, and adjusted operating profit
fell 62% to GBP8.3m as negative operating leverage compounded the
impact of lower volumes. The impact of these adverse market
conditions on the SIPO joint venture in China are expected to
continue over the medium term and have resulted in an impairment
charge of GBP20.8m on goodwill. Including the impairment charge,
the reported IFRS loss was GBP12.6m (H122: GBP59.5m profit), with
the prior period including the full contribution from the divested
business.
Other Matters
Principal risks
The principal risks and uncertainties facing the Group were set
out on pages 52 to 58 of the Group's financial statements for the
year ended 31 December 2022. There have been no changes in the
Group's principal risks and uncertainties, risk management
processes or policies since the year end. The Group's principal
risks as reported in the financial statements for the year ended 31
December 2022 were revenue generation; product and technology
innovation and protection; digital technology innovation;
delivering sustainable solutions - Climate and Land Positive;
management of business change; our people - culture, wellbeing,
talent development and retention; product quality; loss of
significant manufacturing site; ethics and compliance; and security
of business information and networks. Within revenue generation
risk, we reported that this risk increased in likelihood and impact
during 2022 as greater geopolitical instability, rising inflation
and slowing economic growth increased uncertainty. Whilst customer
destocking is the principal driver of lower volumes in Consumer
Care, there is a continued risk that performance will be affected
by reduced end-consumer demand which could impact our ability to
deliver short-term growth in consumer-facing markets.
Statement of Directors' Responsibilities
The Directors confirm that this condensed interim financial
information has been prepared in accordance with IAS 34 as adopted
for use in the UK and that the interim management report includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8,
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 last Annual Report.
The Directors of Croda International Plc at 30 June 2023 were as
follows (a list of current Directors is maintained on the Croda
website: www.croda.com ):
Anita Frew (Chair)
Steve Foots (Group Chief Executive)
Roberto Cirillo
Jacqui Ferguson
Chris Good
Professor Keith Layden
Louisa Burdett
John Ramsay
Julie Kim
Nawal Ouzren
By order of the Board
Steve Foots Louisa Burdett
Group Chief Executive Chief Financial Officer
Independent Review Report to Croda International Plc
Conclusion
We have been engaged by Croda International Plc ("the Company")
to review the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2023
which comprises the Group Condensed Interim Income Statement, Group
Condensed Interim Statement of Comprehensive Income, Group
Condensed Interim Balance Sheet, Group Condensed Interim Statement
of Changes in Equity, Group Condensed Interim Statement of Cash
Flows and the related explanatory notes. Based on our review,
nothing has come to our attention that causes us to believe that
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not
prepared, in all material respects, in accordance with IAS 34
Interim Financial Reporting as adopted for use in the UK and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. 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. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements. 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention that causes us to believe that the Directors have
inappropriately adopted the going concern basis of accounting, or
that the Directors have identified material uncertainties relating
to going concern that have not been appropriately disclosed. This
conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA. As disclosed in note 1, the annual financial
statements of the Group are prepared in accordance with UK-adopted
international accounting standards. The Directors are responsible
for preparing the condensed set of financial statements included in
the half-yearly financial report in accordance with IAS 34 as
adopted for use in the UK. In preparing the condensed set of
financial statements, the Directors are responsible for assessing
the Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Ian Griffiths
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
24 July 2023
Croda International Plc
Interim announcement of trading results for the six months ended
30 June 2023
Group Condensed Interim Income Statement
First half 2023 First half 2022 Full year 2022
Reported Reported Reported
Adjusted Adjustments Total Adjusted Adjustments Total Adjusted Adjustments Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Revenue 2 880.9 - 880.9 1,127.3 - 1,127.3 2,089.3 - 2,089.3
Cost of sales (498.4) - (498.4) (591.3) - (591.3) (1,103.7) - (1,103.7)
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Gross profit 382.5 - 382.5 536.0 - 536.0 985.6 - 985.6
Operating costs (206.7) (45.6) (252.3) (235.6) (11.8) (247.4) (470.5) (70.4) (540.9)
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Operating profit 2 175.8 (45.6) 130.2 300.4 (11.8) 288.6 515.1 (70.4) 444.7
Gain on business
disposal - - - - 360.6 360.6 - 356.0 356.0
Financial costs 3 (6.5) - (6.5) (12.4) (1.1) (13.5) (24.1) (1.7) (25.8)
Financial income 3 5.0 - 5.0 0.8 - 0.8 5.1 - 5.1
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Profit before
tax 174.3 (45.6) 128.7 288.8 347.7 636.5 496.1 283.9 780.0
Tax (44.3) 4.0 (40.3) (69.4) (20.7) (90.1) (112.9) (13.8) (126.7)
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Profit after tax
for
the period 130.0 (41.6) 88.4 219.4 327.0 546.4 383.2 270.1 653.3
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Attributable to:
Non-controlling
interests 0.3 - 0.3 2.9 - 2.9 4.0 - 4.0
Owners of the
parent 129.7 (41.6) 88.1 216.5 327.0 543.5 379.2 270.1 649.3
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
130.0 (41.6) 88.4 219.4 327.0 546.4 383.2 270.1 653.3
================ ==== ======== =========== ======== ======== =========== ======== ========= =========== =========
Adjustments relate to exceptional items, amortisation of
intangible assets arising on acquisition and the tax thereon.
Details are disclosed in note 2.
Pence Pence Pence
Pence Reported Pence Reported Pence Reported
Adjusted Total Adjusted Total Adjusted Total
=============================== ========= ========= ========= ========= ========= =========
Earnings per 10.61p ordinary
share
Basic 92.9 63.1 155.2 389.6 272.0 465.8
Diluted 92.8 63.0 154.9 388.8 271.4 464.8
Ordinary dividends paid in the
period
Interim 4 - - 47.0
Final 4 61.0 56.5 56.5
=============================== ========= ========= ========= ========= ========= =========
Group Condensed Interim Statement of Comprehensive Income
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
========================================================= ====== ====== ======
Profit after tax for the period 88.4 546.4 653.3
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently
to profit or loss:
Remeasurements of post-retirement benefit obligations (10.9) 99.3 88.9
Tax on items that will not be reclassified 2.8 (24.9) (22.4)
========================================================= ====== ====== ======
(8.1) 74.4 66.5
========================================================= ====== ====== ======
Items that have been or may be reclassified subsequently
to profit or loss:
Currency translation (69.8) 87.8 104.2
Reclassification of currency translation - (14.8) (14.8)
Cash flow hedging (20.8) 2.8 2.8
Reclassification of cash flow hedging - (6.5) (6.5)
Reclassification of cost of hedging reserve - 6.0 6.0
Tax on items that may be reclassified - (0.4) (0.4)
========================================================= ====== ====== ======
(90.6) 74.9 91.3
========================================================= ====== ====== ======
Other comprehensive (expense)/income for the period (98.7) 149.3 157.8
========================================================= ====== ====== ======
Total comprehensive (expense)/income for the period (10.3) 695.7 811.1
========================================================= ====== ====== ======
Attributable to:
Non-controlling interests (0.8) 3.5 4.4
Owners of the parent (9.5) 692.2 806.7
========================================================= ====== ====== ======
(10.3) 695.7 811.1
========================================================= ====== ====== ======
Arising from:
Continuing operations (10.3) 695.7 811.1
========================================================= ====== ====== ======
Group Condensed Interim Balance Sheet
At At
30 June 31 December
2023 2022
Note GBPm GBPm
============================================ ==== ======== ============
Assets
Non-current assets
Intangible assets 5 1,188.1 1,253.2
Property, plant and equipment 6 969.5 964.5
Right of use assets 89.3 96.9
Investments 3.3 3.4
Deferred tax assets 9.0 10.3
Retirement benefit assets 8 117.0 123.2
============================================ ==== ======== ============
2,376.2 2,451.5
============================================ ==== ======== ============
Current assets
Inventories 419.5 464.0
Trade and other receivables 365.3 375.8
Cash and cash equivalents 379.5 320.6
============================================ ==== ======== ============
1,164.3 1,160.4
============================================ ==== ======== ============
Liabilities
Current liabilities
Trade and other payables (260.6) (320.0)
Borrowings and other financial liabilities (39.7) (121.9)
Lease liabilities (12.7) (12.9)
Provisions (5.3) (6.1)
Current tax liabilities (18.1) (26.9)
============================================ ==== ======== ============
(336.4) (487.8)
============================================ ==== ======== ============
Net current assets 827.9 672.6
============================================ ==== ======== ============
Non-current liabilities
Borrowings and other financial liabilities (603.7) (401.8)
Lease liabilities (72.7) (79.2)
Other payables (1.1) (4.5)
Retirement benefit liabilities 8 (23.0) (23.1)
Provisions (12.1) (11.5)
Deferred tax liabilities (164.0) (172.9)
============================================ ==== ======== ============
(876.6) (693.0)
============================================ ==== ======== ============
Net assets 2,327.5 2,431.1
============================================ ==== ======== ============
Equity attributable to owners of the parent 2,312.8 2,415.6
Non-controlling interests in equity 14.7 15.5
============================================ ==== ======== ============
Total equity 2,327.5 2,431.1
============================================ ==== ======== ============
Group Condensed Interim Statement of Changes in Equity
Share Non-
Share premium Other Retained controlling Total
capital account reserves earnings interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm
========================================== ==== ======== ======== ========= ========= ============ =======
At 1 January 2022 16.2 707.7 (43.8) 1,073.0 12.8 1,765.9
Profit after tax for the period - - - 543.5 2.9 546.4
Other comprehensive income for
the period - - 74.3 74.4 0.6 149.3
========================================== ==== ======== ======== ========= ========= ============ =======
Total comprehensive income for
the period - - 74.3 617.9 3.5 695.7
========================================== ==== ======== ======== ========= ========= ============ =======
Transactions with owners:
Dividends on equity shares 4 - - - (7 8.8) - (78.8)
Share-based payments - - - 3.5 - 3.5
Transactions in own shares - - - (10.6) - (10.6)
========================================== ==== ======== ======== ========= ========= ============ =======
Total transactions with owners - - - (85.9) - (85.9)
========================================== ==== ======== ======== ========= ========= ============ =======
Changes in ownership interests:
Acquisition of an NCI - - - 0.3 (1.7) (1.4)
========================================== ==== ======== ======== ========= ========= ============ =======
Total changes in ownership interests - - - 0.3 (1.7) (1.4)
========================================== ==== ======== ======== ========= ========= ============ =======
Preference share capital reclassification (1.1) - - - - (1.1)
========================================== ==== ======== ======== ========= ========= ============ =======
Total equity at 30 June 2022 15.1 707.7 30.5 1,605.3 14.6 2,373.2
========================================== ==== ======== ======== ========= ========= ============ =======
At 1 January 2023 15.1 707.7 47.1 1,645.7 15.5 2,431.1
Profit after tax for the period - - - 88.1 0.3 88.4
Other comprehensive expense
for the period - - (89.5) (8.1) (1.1) (98.7)
========================================== ==== ======== ======== ========= ========= ============ =======
Total comprehensive (expense)/income
for the period - - (89.5) 80.0 (0.8) (10.3)
========================================== ==== ======== ======== ========= ========= ============ =======
Transactions with owners:
Dividends on equity shares 4 - - - (85.1) - (85.1)
Share-based payments - - - 1.6 - 1.6
Transactions in own shares - - - (9.8) - (9.8)
========================================== ==== ======== ======== ========= ========= ============ =======
Total transactions with owners - - - (93.3) - (93.3)
========================================== ==== ======== ======== ========= ========= ============ =======
Total equity at 30 June 2023 15.1 707.7 (42.4) 1,632.4 14.7 2,327.5
========================================== ==== ======== ======== ========= ========= ============ =======
Other reserves include the Capital Redemption Reserve of GBP0.9m
(30 June 2022: GBP0.9m), the Hedging Reserve of GBP(20.8)m (30 June
2022: GBPnil) and the Translation Reserve of GBP(22.5)m (30 June
2022: GBP29.6m).
Group Condensed Interim Statement of Cash Flows
2023 2022 2022
First First Full
half half year
Note GBPm GBPm GBPm
========================================================= ==== ======= ======= =======
Cash generated by operations
Operating profit 130.2 288.6 444.7
Adjustments for:
Depreciation and amortisation 60.5 60.8 120.7
Fair value movement on contingent consideration - (5.5) (6.1)
Impairments of intangible assets and property,
plant and equipment 21.8 - 42.2
(Profit)/loss on disposal and write-offs of intangible
assets and property, plant and equipment (0.5) (0.1) 0.2
Net provisions (released)/charged (0.2) - 1.6
Share-based payments (3.6) (10.4) (11.0)
Non-cash pension expense (1.7) 5.0 4.5
Cash paid against operating provisions (0.3) (0.5) (0.8)
Movement in inventories 30.4 (67.6) (98.1)
Movement in receivables 0.5 (140.3) (43.3)
Movement in payables (40.6) 24.1 7.6
Cash generated by operations 196.5 154.1 462.2
Interest paid (7.9) (11.5) (23.2)
Tax paid (44.4) (62.7) (130.8)
========================================================= ==== ======= ======= =======
Net cash generated from operating activities 144.2 79.9 308.2
========================================================= ==== ======= ======= =======
Cash flows from investing activities
Payment of contingent consideration (7.2) (12.8) (13.7)
Purchase of property, plant and equipment (81.8) (60.9) (141.2)
Receipt of government grant 6.5 - 6.1
Purchase of other intangible assets (5.8) (2.8) (11.2)
Proceeds from sale of property, plant and equipment 1.0 1.9 1.7
Proceeds from business disposal, net of cash in
disposed business - 613.4 583.6
Tax paid on business disposals (4.4) - (4.6)
Settlement of derivatives (20.8) - -
Cash paid against non-operating provisions (0.5) (0.5) (1.2)
Interest received 5.0 0.8 5.1
========================================================= ==== ======= ======= =======
Net cash (used)/generated from investing activities (108.0) 539.1 424.6
========================================================= ==== ======= ======= =======
Cash flows from financing activities
New borrowings 215.7 207.4 232.6
Repayment of borrowings (65.0) (53.1) (614.4)
Payment of lease liabilities (8.0) (8.8) (17.4)
Acquisition of non-controlling interest - (1.4) (1.4)
Net transactions in own shares (9.8) (10.6) (7.3)
Dividends paid to equity shareholders 4 (85.1) (78.8) (144.4)
Net cash generated/(used) from financing activities 47.8 54.7 (552.3)
========================================================= ==== ======= ======= =======
Net movement in cash and cash equivalents 84.0 673.7 180.5
Cash and cash equivalents brought forward 281.6 94.3 94.3
Exchange differences (6.9) 6.2 6.8
========================================================= ==== ======= ======= =======
Cash and cash equivalents carried forward 358.7 774.2 281.6
========================================================= ==== ======= ======= =======
Cash and cash equivalents carried forward comprise:
Cash at bank and in hand 379.5 786.4 320.6
Bank overdrafts (20.8) (12.2) (39.0)
========================================================= ==== ======= ======= =======
358.7 774.2 281.6
========================================================= ==== ======= ======= =======
A reconciliation of the cash flows above to the movements in net
debt is shown in note 7.
Notes to the Interim Financial Statements
1. a. General information
The Company is a public limited company (Plc) incorporated and
domiciled in the UK. The address of its registered office is Cowick
Hall, Snaith, Goole, East Yorkshire DN14 9AA. The Company is listed
on the London Stock Exchange. This consolidated interim report was
approved for issue on 24 July 2023. The financial information
included in this interim financial report for the six months ended
30 June 2023 does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006 and is unaudited. The
comparative information for the six months ended 30 June 2022 is
also unaudited. The comparative figures for the year ended 31
December 2022 have been extracted from the Group's financial
statements, as filed with the Registrar of Companies, on which the
auditors gave an unqualified opinion, did not contain an emphasis
of matter paragraph and did not make a statement under section 498
of the Companies Act 2006. These Group condensed interim financial
statements have been reviewed, not audited.
b. Basis of preparation
This consolidated interim financial report for the six months
ended 30 June 2023 has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted for use in the UK.
Tax charged within the six months ended 30 June 2023 has been
calculated by applying the effective rate of tax which is expected
to apply, on a jurisdiction by jurisdiction basis, to the Group for
the period ending 31 December 2023 using rates substantively
enacted by 30 June 2023 as required by IAS 34 'Interim Financial
Reporting'.
The annual financial statements of the Group for the year ended
31 December 2023 will be prepared in accordance with UK-adopted
international accounting standards. As required by the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority,
the condensed set of financial statements has been prepared
applying the accounting policies and presentation that were applied
in the preparation of the Company's published consolidated
financial statements for the year ended 31 December 2022, which
were prepared in accordance with the requirements of the Companies
Act 2006 ("Adopted IFRSs") and prepared in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
Going concern basis
The condensed consolidated financial statements have been
prepared on a going concern basis which the Directors believe to be
appropriate for the following reasons:
At 30 June 2023 the Group had GBP1,050.7m of committed debt
facilities available from its banking group, USPP bondholders and
lease providers, with principal maturities between 2026 and 2030,
of which GBP367.7m (30 June 2022: GBP263.4m) was undrawn, together
with cash balances of GBP379.5m (30 June 2022: GBP786.4m).
The Directors have reviewed the liquidity and covenant
forecasts, which included the impact of the Solus acquisition, for
the Group's going concern assessment period covering at least 12
months from the date of approval of the condensed consolidated
financial statements. Based on these forecasts, the Group continues
to have significant liquidity headroom and strong financial
covenant headroom under its debt facilities.
A reverse stress testing scenario has been performed which
assesses that adjusted operating profit would need to fall by
approximately 80% to trigger an event of default as at 31 December
2024, before consideration of available actions to conserve cash.
The Directors do not consider this a plausible scenario. The
Directors are therefore satisfied that the Group has sufficient
resources to continue in operation for a period of not less than 12
months from the date of approval of the condensed consolidated
financial statements. Accordingly, the condensed consolidated
financial statements have been prepared on a going concern
basis.
c. Accounting policies
The accounting policies applied in these interim financial
statements are the same as those applied in the Group's financial
statements for the year ended 31 December 2022.
A number of new standards are effective from 1 January 2023 but
they do not have a material effect on the Group's financial
statements.
2. Segmental information
The Group's sales, marketing and research activities are
organised into three global market sectors, being Consumer Care,
Life Sciences and Industrial Specialties. These are the segments
for which summary management information is presented to the
Group's Executive Committee, which is deemed to be the Group's
Chief Operating Decision Maker. Following the divestment of the
majority of the Performance Technologies and Industrial Chemicals
business in 2022, the retained business now forms a new Industrial
Specialties sector. Accordingly, the Group has combined the
previously reported segment information for the six months ended 30
June 2022 for both Performance Technologies and Industrial
Chemicals and shown as Industrial Specialties. This is aligned with
the information that is regularly reported to the Group's Executive
Committee.
There is no material trade between segments. Segmental results
include items directly attributable to a specific segment as well
as those that can be allocated on a reasonable basis. There are no
significant seasonal variations which impact the split of revenue
between the first and second half of the financial year.
Adjustments
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
========================================================= ====== ====== ======
Exceptional items - operating profit
Business acquisition costs (7.7) - -
Goodwill impairment (20.8) - (34.6)
Property, plant and equipment impairment - - (7.6)
Fair value movement on contingent consideration - 5.5 6.1
Exceptional items - financial costs
Unwind of discount on contingent consideration - (1.1) (1.7)
Gain on business disposal - 360.6 356.0
========================================================= ====== ====== ======
Exceptional items (28.5) 365.0 318.2
Amortisation of intangible assets arising on acquisition (17.1) (17.3) (34.3)
========================================================= ====== ====== ======
Total adjustments (45.6) 347.7 283.9
========================================================= ====== ====== ======
The exceptional items in the current year relate to a goodwill
impairment to the carrying value of the Chinese SIPO joint venture
in Industrial Specialties and acquisition costs. The goodwill
impairment and acquisition costs have been presented as exceptional
due to their size and one-off nature. The exceptional items in the
prior half year related to the gain on the PTIC divestment,
associated business disposal costs and discount unwind and fair
value adjustment both in respect of contingent consideration. The
adjustments to operating profit relate to our segments as follows:
Consumer Care GBP16.0m (30 June 2022: GBP10.2m), Life Sciences
GBP8.7m (30 June 2022: GBP0.6m) and Industrial Specialties GBP20.9m
(30 June 2022: GBP1.0m).
Restated
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
=============================================================== ====== ======== =======
Income statement
Revenue
Consumer Care 455.6 454.9 897.8
Life Sciences 303.2 329.7 682.3
Industrial Specialties 122.1 342.7 509.2
=============================================================== ====== ======== =======
Total Group revenue 880.9 1,127.3 2,089.3
=============================================================== ====== ======== =======
Adjusted operating profit
Consumer Care 95.2 121.1 204.7
Life Sciences 72.3 118.8 229.4
Industrial Specialties 8.3 60.5 81.0
=============================================================== ====== ======== =======
Total Group operating profit (before exceptional items
and amortisation of intangible assets arising on acquisition) 175.8 300.4 515.1
Exceptional items and amortisation of intangible assets
arising on acquisition (45.6) (11.8) (70.4)
=============================================================== ====== ======== =======
Total Group operating profit 130.2 288.6 444.7
=============================================================== ====== ======== =======
In the following table, revenue has been disaggregated by sector
and destination. This is the primary management information that is
presented to the Group's Executive Committee.
Reported
Europe North Latin Asia Total
GBPm America America GBPm GBPm
GBPm GBPm
============================ ======== ========= ========= ====== ========
Revenue
First half 2023
Consumer Care 196.7 99.0 44.3 115.6 455.6
Life Sciences 107.9 92.1 50.4 52.8 303.2
Industrial Specialties 46.7 20.8 5.5 49.1 122.1
============================ ======== ========= ========= ====== ========
Total Group revenue 351.3 211.9 100.2 217.5 880.9
============================ ======== ========= ========= ====== ========
Revenue
First half 2022 (Restated)
Consumer Care 182.4 123.1 43.8 105.6 454.9
Life Sciences 137.5 93.4 41.7 57.1 329.7
Industrial Specialties 162.7 69.7 14.4 95.9 342.7
============================ ======== ========= ========= ====== ========
Total Group revenue 482.6 286.2 99.9 258.6 1,127.3
============================ ======== ========= ========= ====== ========
3. Net financial costs
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
============================================================= ====== ====== ======
Financial costs
Interest payable on borrowings (4.7) (9.8) (17.4)
Interest on lease liabilities (1.2) (1.2) (2.5)
Other bank loans and overdrafts (0.6) (1.4) (2.9)
Other interest costs - - (1.2)
Unwind of discount on contingent consideration (exceptional) - (1.1) (1.7)
Preference share dividend - - (0.1)
============================================================= ====== ====== ======
(6.5) (13.5) (25.8)
============================================================= ====== ====== ======
Financial income
Bank interest receivable and similar income 2.3 0.6 2.7
Net interest on post-retirement benefits 2.7 0.2 2.4
============================================================= ====== ====== ======
5.0 0.8 5.1
============================================================= ====== ====== ======
Net financial costs (1.5) (12.7) (20.7)
============================================================= ====== ====== ======
4. Dividends
2023 2022 2022
Pence First First Full
per half half year
share GBPm GBPm GBPm
================================== ====== ====== ====== =====
Ordinary
2021 final, paid June 2022 56.5 - 78.8 78.8
2022 interim, paid October 2022 47.0 - - 65.6
2022 final, paid May 2023 61.0 85.1 - -
================================== ====== ====== ======
85.1 78.8 144.4
================================== ====== ====== ====== =====
An interim dividend in respect of 2023 of 47.0p per share,
amounting to a total dividend of GBP65.6m, was declared by the
Directors at their meeting on 20 July 2023. This interim report
does not reflect the 2023 interim dividend payable. The dividend
will be paid on 3 October 2023 to shareholders registered on 1
September 2023.
5. Intangible assets
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
===================================================== ======= ======= =======
Opening net book amount 1,253.2 1,271.6 1,271.6
Exchange differences (31.6) 36.7 62.6
Additions 5.8 2.8 11.0
Disposals and write offs (0.1) (20.0) (20.5)
Reclassifications from property, plant and equipment 0.4 0.2 0.4
Amortisation charge for the period (18.8) (18.7) (37.3)
Impairments (20.8) - (34.6)
Closing net book amount 1,188.1 1,272.6 1,253.2
===================================================== ======= ======= =======
6. Property, plant and equipment
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
======================================= ====== ======= =======
Opening net book amount 964.5 988.1 988.1
Exchange differences (34.2) 57.1 72.3
Additions 75.3 61.0 135.9
Disposals and write offs (0.4) (154.8) (155.2)
Reclassifications to intangible assets (0.4) (0.2) (0.4)
Depreciation charge for the period (34.3) (34.8) (68.6)
Impairments (1.0) - (7.6)
======================================= ====== ======= =======
Closing net book amount 969.5 916.4 964.5
======================================= ====== ======= =======
During the period the Group received government grant funding of
GBP6.5m (FY 2022: GBP6.1m) relating to the US cGMP scale up and UK
Pharma production capacity expansion projects. Grant income is
deducted from the cost of the associated asset within the additions
line above.
7. Reconciliation to net debt
2023 2022 2022
First First Full
half half year
GBPm GBPm GBPm
=========================================================== ======= ======= =======
Net movement in cash and cash equivalents 84.0 673.7 180.5
Net movement in borrowings and other financial liabilities (142.7) (145.5) 399.2
=========================================================== ======= ======= =======
Change in net debt from cash flows (58.7) 528.2 579.7
Non-cash movement in lease liabilities (4.4) (5.2) (13.4)
Non-cash preference shares reclassification - (1.1) (1.1)
Exchange differences 9.0 (30.0) (37.2)
=========================================================== ======= ======= =======
(54.1) 491.9 528.0
Net debt brought forward (295.2) (823.2) (823.2)
=========================================================== ======= ======= =======
Net debt carried forward (349.3) (331.3) (295.2)
=========================================================== ======= ======= =======
8. Critical accounting judgements and key sources of estimation
uncertainty
The Group's significant accounting policies under UK-adopted
international accounting standards have been set by management with
the approval of the Audit Committee. The application of these
policies requires estimates and assumptions to be made concerning
the future and judgements to be made on the applicability of
policies to particular situations. Estimates and judgements are
continually evaluated and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Under UK-adopted international accounting standards an estimate
or judgement may be considered critical if it involves matters that
are highly uncertain or where different estimation methods could
reasonably have been used, or if changes in the estimate that would
have a material impact on the Group's results are likely to occur
from period to period.
The critical accounting judgement required when preparing the
Group's accounts is as follows:
Hedge accounting
On the 6 February 2023 the Group agreed to acquire Solus Biotech
Co Ltd ('Solus') for a total consideration of KRW350bn, a highly
probable future business combination (hedged item). In line with
the Group's currency risk management strategy, the currency
exposure for the Group, which has a Sterling functional and
presentational currency, was manged through the execution of a deal
contingent foreign exchange forward contract (hedging instrument).
This instrument was designated as a cash flow hedge and therefore
hedge accounting was applied in the Group's consolidated financial
statements.
The application of hedge accounting for a deal contingent
instrument requires significant judgement to determine whether the
underlying transaction was highly probable, which is a requirement
for the initial application of hedge accounting. The Group's
assessment that the underlying transaction was highly probable, and
therefore hedge accounting can be applied, is a key judgement. The
primary consideration in forming this conclusion was in relation to
the required regulatory approval, which was considered highly
probable to be achieved based on an assessment of internal and
external evidence. This judgement, and the subsequent application
of hedge accounting, resulted in a GBP20.8m FX loss being deferred
in other comprehensive income, rather than being recognised in the
income statement. During the period, a hedge ineffectiveness loss
of GBP3.1m was recognised in the income statement within
administration expenses and reported as an exceptional item as part
of business acquisition costs. The forward contract was settled
during the period resulting in a cash outflow of GBP20.8m.
The critical accounting estimates and assumptions required when
preparing the Group's accounts are as follows:
Post-retirement benefits
The Group's principal retirement benefit schemes are of the
defined benefit type. Recognition of the liabilities under these
schemes and the valuation of assets held to fund these liabilities
require a number of significant assumptions to be made, relating to
key financial market indicators such as inflation and expectations
on future salary growth and asset returns. These assumptions are
made by the Group in conjunction with the schemes' actuaries and
the Directors are of the view that any estimation should be
appropriate and in line with consensus opinion.
The majority of the remeasurement gain in the period relates to
the Group's UK pension scheme primarily due to a reduction in the
value of the scheme's assets, partly offset by a rise in corporate
bond yields increasing the discount rate to 5.2% (31 December 2022:
4.8%). The majority of the Group's retirement benefit asset relates
to the Group's UK pension scheme. The UK pension scheme is open to
future accrual and therefore the surplus is recognised on the basis
that this could be recovered through a reduction in future service
contributions.
2023
First 2022
half Full year
GBPm GBPm
======================================= ======= ==========
Opening net retirement benefit surplus 100.1 7.9
Current service cost (4.8) (16.2)
Net interest cost 2.7 2.4
Employer contributions 6.5 11.5
Benefits paid - 0.2
Past service cost - 3.9
Remeasurements (10.9) 88.9
Business disposal - 1.5
Exchange movement 0.4 -
======================================= ======= ==========
Closing net retirement benefit surplus 94.0 100.1
======================================= ======= ==========
Total market value of assets 933.1 969.3
Present value of scheme liabilities (828.5) (858.4)
======================================= ======= ==========
Net pension plan asset 104.6 110.9
Post-employment medical benefits (10.6) (10.8)
======================================= ======= ==========
Net retirement benefit surplus 94.0 100.1
======================================= ======= ==========
Analysed in the balance sheet as:
Retirement benefit assets 117.0 123.2
Retirement benefit liabilities (23.0) (23.1)
======================================= ======= ==========
Net retirement benefit surplus 94.0 100.1
======================================= ======= ==========
Goodwill impairment
Management are required to undertake an annual test for
impairment of indefinite lived assets such as goodwill. At 30 June
2023, management have performed an assessment for potential
impairment triggers across the Group's Cash Generating Units
('CGUs') and Operating Segments and no material impairment
indicators were identified, with the exception of Sipo.
The Group tests annually, or more frequently if impairment
indicators are identified, whether goodwill has suffered any
impairment by comparing the carrying value of the underlying CGUs
to their recoverable amount calculated by detailed value in use
calculations. These value in use calculations require the use of
estimates to enable the calculation of the net present value of
cash flow projections of the relevant CGU. The critical assumptions
are as follows:
-- Terminal value growth in EBITDA (calculated as operating
profit before depreciation and amortisation) - set for each CGU
with reference to the long-term growth rate for the market and
territory in which the CGU operates but not exceeding the Group's
long-term average growth rate, estimated at 3%.
-- Selection of appropriate market participant real post-tax
discount rates to reflect the specific nature of the CGU.
-- Specific risk adjusted, real term cash flow projections
including key assumptions on revenue growth and operating margins
over a 5 year period.
An impairment of GBP20.8m was recorded in relation to goodwill
arising on the acquisition of Sipo, a CGU with a carrying value at
30 June 2023 of GBP62.8m including goodwill (pre-impairment). This
impairment principally reflected the decline in the profitability
of the business in the period driven by adverse external market
conditions, impacting both demand and pricing, which are expected
to continue over the medium term. The assumptions underpinning the
cash flow projection used in the value in use calculation reflect
management's most recent forecast combined with an appropriate view
of past experience, specifically that operating margins will
improve in the medium to long term and sales growth targets will be
achieved resulting in approximately 4.2% (2022: 4.0%) compound
average growth rates ('CAGR') at a sales level and 6.5% (2022:
4.0%) EBITDA CAGR over the period.
The key assumptions considered by the Directors in assessing the
recoverable amount of Sipo were the EBITDA CAGR, pre-tax discount
rate and long-term growth rate. The recoverable amount, and
therefore level of impairment charge, is predominantly dependent
upon judgements used in arriving at these key assumptions. Although
it is not management's current expectation, the impact on the
recoverable amount when applying a reasonably possible change in
these assumptions would be as follows:
Increase Decrease
Assumption Sensitivity GBPm GBPm
================================= ========== =========== ======== ========
Incremental increase/(decrease)
in recoverable amount
Change in pre-tax discount rate
by: 12.3% 1.0% (5.3) 4.7
Change in long-term growth rates
by: 3.0% 1.0% 2.1 (2.4)
Change in EBITDA compound annual
growth rate by: 6.5% 5.0% 8.2 (10.5)
================================= ========== =========== ======== ========
The above sensitivity analyses are based on a change in an
assumption whilst holding all other assumptions constant. In
practice, some of the assumptions may be correlated.
9. Financial instruments
Financial risk factors
The Group's activities expose it to a variety of financial
risks; currency risk, interest rate risk, liquidity risk, and
credit risk. The Group's overall risk management strategy is
approved by the Board and implemented and reviewed by the Risk
Management Committee. Detailed financial risk management is then
delegated to the Group Finance department which has a specific
policy manual that sets out guidelines to manage financial risk.
Regular reports are received from all sectors and regional
operating units to enable prompt identification of financial risks
so that appropriate action may be taken. In the management
definition of capital the Group includes ordinary and preference
share capital and net debt.
The condensed interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's financial statements for the year ended 31
December 2022. There have been no changes in the Group's risk
management processes or policies since the year end.
Financial instruments measured at fair value use the following
hierarchy;
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2)
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
(level 3).
All of the Group's financial instruments are classed as level 2
with the exception of contingent consideration and other
investments, which are classed as level 3.
Fair values
For financial instruments with a remaining life of greater than
one-year, fair values are based on cash flows discounted at
prevailing interest rates. Accordingly, the fair value of cash
deposits and short-term borrowings approximates to the book value
due to the short maturity of these instruments. The same applies to
trade and other receivables and payables (excluding contingent
consideration which is discounted using a risk-adjusted discount
rate). Where there are no readily available market values to
determine fair values, cash flows relating to the various
instruments have been discounted at prevailing interest and
exchange rates to give an estimate of fair value.
Prior to 2016, the Group did not typically utilise complex
financial instruments and accordingly the only element of Group
borrowings where fair value differed from book value was the
US$100m fixed rate ten year note that was issued in 2010. In
January 2020 the existing US$100m fixed rate ten-year note matured
and was repaid, this was replaced with a new US$100m fixed rate
ten-year note (27 January 2020). On 27 June 2016, the Group issued
GBP100m and EUR100m of fixed rate notes of which GBP30m and EUR30m
were repaid in June 2023. On 6 June 2019, the Group issued a
further GBP65m, EUR50m and US$60m of fixed rate notes.
The table below details a comparison of the Group's financial
assets and liabilities where book values and fair values
differ.
Book value Fair value
First First Book value Fair value
half half Full year Full year
2023 2023 2022 2022
GBPm GBPm GBPm GBPm
====================================== ========== ========== ========== ==========
US$100m 3.75% fixed rate 10 year note (79.3) (71.4) (83.0) (74.4)
EUR30m 1.08% fixed rate 7 year note - - (26.5) (26.3)
EUR70m 1.43% fixed rate 10 year note (60.3) (56.3) (61.9) (57.8)
GBP30m 2.54% fixed rate 7 year note - - (30.0) (29.7)
GBP70m 2.80% fixed rate 10 year note (70.0) (62.8) (70.0) (64.8)
EUR50m 1.18% fixed rate 8 year note (43.1) (39.2) (44.2) (40.1)
GBP65m 2.46% fixed rate 8 year note (65.0) (56.3) (65.0) (58.1)
US$60m 3.70% fixed rate 10 year note (47.6) (43.3) (49.8) (45.4)
====================================== ========== ========== ========== ==========
10. Related party transactions
The Group has no related party transactions in the first six
months of the year, with the exception of remuneration paid to key
management and Directors.
11. Post balance sheet events
On 4 July 2023 the Group successfully completed the acquisition
of 100% share capital of Solus Biotech Co Ltd 'Solus', a global
leader in premium, biotechnology-derived active ingredients for
beauty care (Consumer Care sector) and pharmaceuticals (Life
Sciences sector) employing 95 people in South Korea. The business
was acquired for a total consideration of KRW350bn (approximately
GBP232m) on a debt-free, cash-free basis. The acquisition provides
access to Solus' existing biotech-derived ceramide and phospholipid
technologies, and its emerging capabilities in natural retinol.
This acquisition will significantly strengthen Croda's Beauty
Actives portfolio and increases its exposure to targeted prestige
segments. Located in South Korea, Solus expands Croda's Asian
manufacturing capability and will create a new biotechnology
R&D hub in the region. The business generated approximately
KRW43bn (approximately GBP28m) of sales in 2022.
The initial accounting for the business combination is
incomplete given the proximity of the acquisition date to the
authorisation of these financial statements and therefore
disclosures regarding goodwill, fair value of assets and
liabilities acquired along with current period revenue and profit
have not been provided.
Acquisition-related costs of GBP7.7m, predominantly in respect
of Solus, have been charged to administration expenses in the
income statement for the period ended 30 June 2023 and reported as
an exceptional item.
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END
IR FLFFADTISFIV
(END) Dow Jones Newswires
July 25, 2023 02:00 ET (06:00 GMT)
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