Croda 2020 Results
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Press Release 2 March 2021 Results for the year ended 31 December 2020 Strong strategic delivery built on resilient financial performance Croda International Plc (“Croda” or the “Group”), the company that uses smart science to create high performance ingredients and technologies that improve lives, announces its full year results for the year ended 31 December 2020. Highlights Full year ended 31 December % change % change 2 Adjusted1 results 2020 2019 reported rate constant rate Sales – Core Business3 £million 1,293.9 1,265.9 2.2% 2.3% Operating profit £million 319.6 339.7 (5.9)% (4.0)% Profit before tax (PBT) £million 300.6 322.1 (6.7)% (4.8)% Basic earnings per share (EPS) pence 175.5 185.0 (5.1)% n/a Return on sales4 % 23.0 24.7 (1.7)%pts n/a Free cash flow5 £million 176.9 201.7 (12.3)% n/a Reported results (IFRS) 2020 2019 % change Sales £million 1,390.3 1,377.7 0.9% Operating profit £million 290.0 319.9 (9.3)% Profit before tax (PBT) £million 269.5 302.3 (10.9)% Basic EPS pence 155.1 172.8 (10.2)% Ordinary dividend per share pence 91.0 90.0 1.1% Strong strategic delivery in 2020 • Delivering for all stakeholders through our response to COVID-19 o No employees furloughed or use of government liquidity; supported customers, suppliers, employees and communities o Dividends paid in full; 2020 full year dividend increased to 91.0p (52% of adjusted EPS) • Living our Purpose: Smart science to improve livesTM o Prioritising COVID-19 vaccines and drug delivery activities o Launched sustainability Commitment to be Climate, Land and People Positive by 2030 • Increasing contribution from life science and consumer markets o Accounting for over 80% of Group profit o Enhancing growth, reducing cyclicality and expanding market opportunities o Fast-growing Health Care platform • Accelerating strategic delivery with almost £1bn of organic and inorganic investments including Avanti and Iberchem acquisitions, part-funded by an equity placing raising gross proceeds of £627m Resilient financial performance • Limited adverse financial impact from COVID-19 due to commitment of employees, strength of product portfolio, global footprint, customer intimacy and flexible manufacturing base • Group underlying sales 2.7% lower; Core Business constant currency (CC) sales growth of 2.3% • Steady month-on-month sales improvement in the second half in COVID-impacted sectors; underlying Q4 sales in line with prior year in Personal Care and returned to growth in Performance Technologies • Limited decline in adjusted operating profit of 5.9% (-4.0% CC) • Robust free cash generation; leverage ratio of 1.8x EBITDA • IFRS profit before tax reduced to £269.5m (2019: £302.3m), including impact of acquisitions 1 Record year for Life Sciences; challenges in Personal Care and Performance Technologies • Outstanding performance in Life Sciences, with record sales and adjusted operating profit o Sales 14.6% higher (+14.8% CC), driven by growth in Health Care and Seed Enhancement o Adjusted operating profit up 20.8% (+25.4% CC) and return on sales improved to 32.2% (2019: 30.6%), through growth in high value-add niches o Acquisition of Avanti Polar Lipids; adds delivery technology to Croda’s patient health care, leverages scale-up synergy and opens up wide range of future mRNA and gene therapy drug and vaccine applications • Combining Personal Care, Home Care and Fragrances to create market-leading Consumer Care platform o Adverse impact from COVID lockdowns on consumer demand in ‘going out’ and prestige beauty channels o Personal Care sales 1.9% lower (-1.8% CC) and adjusted operating profit 15.8% lower (-15.3% CC), reflecting adverse business mix o Iberchem acquisition unlocks significant growth and synergy in customer cross-sell and emerging markets • Resilient sales in Performance Technologies but significant adverse profit impact o Sales 3.2% lower (-3.2% CC) and adjusted operating profit 22.2% lower (-21.3% CC), reflecting impact of higher operating leverage and adverse business mix Outlook While continued COVID-19 restrictions make the near-term outlook for elements of our Consumer Care and Performance Technologies sectors difficult to predict, 2020 sales exit rates were encouraging with consumer and industrial end markets showing signs of recovery. Life Sciences is expected to remain strong. The benefits of recovery, together with the full year impact of Avanti, Iberchem and our Pfizer-BioNTech COVID-19 vaccine contract, are expected to support profitable growth across the business. Through our Purpose, Smart science to improve livesTM, we will continue to increase the positive impact our products deliver for our customers and their consumers, whilst also reducing the negative impact our activities have on our fragile world. The combination of our differentiated business model, healthy innovation pipeline and recent investments is expected to underpin performance and generate value for all our stakeholders. Steve Foots, Chief Executive Officer, commented: “During a year in which we have all faced unprecedented challenges, the response and commitment of our employees to maintain business continuity and serve our customers has been outstanding. The strength and quality of Croda’s business model has been further tested and proven. Whilst customer demand in certain end markets has inevitably been impacted by the pandemic, Croda’s financial performance has been resilient. “Our strong financial platform has allowed us to make further progress positioning the business to focus on the fast growth markets of the future, capitalising on emerging trends in existing and adjacent markets. We have made significant investments to accelerate delivery of our strategy, notably the acquisitions of Avanti and Iberchem, so that life science and consumer markets now represent over 80% of Croda’s profit generation. “My proudest moment in more than 30 years at Croda came with our critical involvement with the Pfizer-BioNTech COVID-19 vaccine, a fantastic example of our Purpose, Smart science to improve lives™. I am more confident than ever that our recent acquisitions, relentless innovation and emphasis on sustainability will drive our future profitability.” Further information: An analyst presentation will be available via webcast at 0900 GMT on 2 March 2021 at www.croda.com/investors. To participate, please register in advance. Dial-in details are: +44 20 3936 2999; access code: 516866. For enquiries contact: Investors: David Bishop, Croda +44 7823 874428 Press: Charlie Armitstead, Teneo +44 7703 330269 2 Sector financial summaries and definitions: 2020 reported currency 2019 Year on year Constant currency Sales £m change change2 £m Personal Care 475.9 (1.9)% (1.8)% 485.2 Life Sciences 401.6 14.6% 14.8% 350.5 Performance Technologies 416.4 (3.2)% (3.2)% 430.2 Core Business 1,293.9 2.2% 2.3% 1,265.9 Industrial Chemicals 96.4 (13.8)% (13.4)% 111.8 Group 1,390.3 0.9% 1.1% 1,377.7 2020 reported currency 2019 Year on year Constant currency 2 Adjusted profit1 £m change change £m Personal Care 136.5 (15.8)% (15.3)% 162.1 Life Sciences 129.4 20.8% 25.4% 107.1 Performance Technologies 54.0 (22.2)% (21.3)% 69.4 Core Business 319.9 (5.5)% (3.7)% 338.6 Industrial Chemicals (0.3) n/a n/a 1.1 Operating profit 319.6 (5.9)% (4.0)% 339.7 Net interest (19.0) n/a n/a (17.6) Profit before tax 300.6 (6.7)% (4.8)% 322.1 First Second Full Half Half Year 2 2020 constant currency sales growth % % % Personal Care (9.5) 6.2 (1.8) Life Sciences (1.7) 33.2 14.8 Performance Technologies (5.6) (0.6) (3.2) Core Business (6.0) 11.3 2.3 Industrial Chemicals (17.8) (8.9) (13.4) Group (6.9) 9.6 1.1 Definitions 1Adjusted results are stated before exceptional items, acquisition costs 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 underlying 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. 2Reported currency results reflect current year performance translated at reported rates (actual average exchange rates). Constant currency results reflect current year performance for existing business translated at the prior year’s average exchange rates. For constant currency profit, translation is performed using the entity reporting currency. For constant currency sales, local currency rates 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. Constant currency results are reconciled to reported results in the Finance Review. Underlying sales and operating profit reflect constant currency values adjusted to exclude the impact of acquisitions. They are reconciled to reported results in the Finance Review. 3The Core Business comprises Personal Care, Life Sciences and Performance Technologies. 4Return on sales is adjusted operating profit divided by sales, at reported currency. 5Free cash flow is EBITDA less movements in working capital, net capital expenditure, payment of lease liabilities, non- cash pension expense, and interest and tax payments. Net debt comprises cash and cash equivalents (including bank overdrafts), current and non-current borrowings and lease liabilities.