Synthomer Stock

Good morning, and welcome to our 2026 First Half Results Presentation. I'm here with Iain Torrens, who joined us in May as Interim CFO and who some of you will already know and Faisal Tabbah, Head of Investor Relations. And together, we look forward to answering your questions at the end.

In terms of the agenda, I will provide an overview of our strong performance and the further strategic progress we made in the first half. Iain will then walk through the numbers in more detail before I come back to present the strategic actions we have been taking in line with our sustained efforts to become a more specialty focused business. Then at the end, we will discuss what we expect for the remainder of the year.

So, let me begin with the highlights and the 5 headline points that frame our first half performance and the strategic context in which it was delivered. Against the backdrop of a market environment which remained complex to navigate, we delivered a first half performance that was ahead of expectations.

Our revenue grew 5% in constant currency. EBITDA rose 13%. EBIT was up 36%, alongside gross margin expansion of nearly 200 basis points and EBITDA margin improvement of 80 basis points to a remarkable 10.1%. This is a strong set of numbers and reflects the compounding effect of the strategic and operational actions we have taken over the past few years and that we have continued to execute with determination and discipline.

Our progress in the first half was primarily driven by consistent strategy delivery and self-help. Innovative new products and accessing new markets are an important part of our strategy. In the period, this included positive developments in intumescent coatings for data centers, additives for onshore oil and gas drilling, medical adhesives and non-woven fabrics. We have also focused on increasing our global reach, with good regional growth in China, the U.S. and the Middle East. All 3 divisions generated volume and revenue growth in the period.

In addition to self-generated growth and ongoing cost savings, we also anticipated our performance would reflect some expected cost headwinds as we identified at the start of the year. Net of wage inflation and bonus normalization, all divisions increased EBITDA margins in the period. In all, but especially in difficult or uncertain times, it is important to have a strong business model. And from this perspective, we are increasingly well positioned.

We have robust supply chains, world-class global procurement capabilities, a focused in-region for-region manufacturing footprint and differentiated specialty products with real pricing power. These underlying strengths of our business model put us in a robust position to continue to support our customers through a lower demand environment and through the recent dislocation in global chemicals value chains. And in some areas, most notably the NBR business, we experienced meaningful increases in activity during Q2 as some of our competitors found it challenging to fulfill supply commitments. These one-off gains, we are not currently forecasting to recur in H2.

My fourth point, we continue to execute our strategy with consistency. Throughout all the geopolitical and market disruption and uncertainties, this remains our guide. Our successful debt refinancing in April has ensured we have a stable financial platform to continue to transform the business and the runway to execute our plans. As part of this, we made further progress in our program of non-core base chemicals divestments.

In June, we announced the divestment of Acrylate Monomers, removing a capital-intensive and cyclical upstream base chemicals business that diluted margins and cash conversion. In addition, we have 3 further divestment projects underway to enhance our strategic specialty focus and capital efficiency or put simply, to reduce net debt.

My final point before I turn over to Iain, we are today raising our outlook for the full year. With a strong first half driven mainly by recurring strategic progress and cost savings, which we expect to continue into the second half, we now expect to deliver a full-year 2026 performance ahead of current market expectations and well ahead of previous year. This and our ongoing cash discipline also supports our expectations of improved free cash flow delivery and faster deleveraging over the course of the year.

I will return to discuss strategic progress and the outlook in more detail. But let me now hand over to Iain to walk you through the numbers.

Many thanks, Michael, and good morning.

As Michael has already covered, the first half of 2026 has seen a strong performance by the group with our focus on specialty growth, the strength of our regional manufacturing model, an excellent procurement function, underpinning 13% EBITDA growth and an 80 basis point improvement in our EBITDA margin.

Let me start on Slide 6 by reminding you that at the end of June, we agreed terms to sell the Acrylate Monomers business in the Czech Republic, with the transaction expected to close at the end of September. Therefore, in line with IFRS, this business has been treated as discontinued for the purposes of the H1 results, eliminating the prior year losses and increasing the half year '25 EBITDA comparator for the business to GBP 83.1 million.

One of the key consequences of this change is that it masks the GBP 5 million improvement the team has delivered in that business. Including this improvement, EBITDA grew more than 20% in H1. It is testament to the skills of the team that we've been able to deliver a step change in the business' operational efficiency, enabling it to capture favorable market conditions and to get set up for the years ahead, where Synthomer will benefit from a share of any excess cash generation.

Focusing on the continuing business, we saw revenues increase by 6.7% on a reported basis to GBP 954 million. On a constant currency basis, weakness in the euro and Malaysian ringgit and a stronger U.S. dollar relative to the pound led to 5.1% growth, with all 3 divisions ahead. Volumes increased across all 3 divisions, with overall volumes up 2.3% on the prior year, led by a strong performance in accessing long-term growth opportunities in CCS and the Health & Protection business, benefiting from its ability to support customers amid the market disruptions created by the Iranian conflict.

The business as a whole was fast and bold in passing through increased raw material prices in Q2 to customers and together with the growth in the more specialist high-margin elements of our [Technical Difficulty] contributed to a further 2.8% to growth in revenue. In total, EBITDA for the continuing business has increased by GBP 14 million versus the prior period, which is after taking account of both wage inflation and the need to normalize our bonus accrual, as previously mentioned.

We have attempted to break down the components of that growth. And whilst it is difficult to be precise, I would estimate that around GBP 8 million is recurring in nature, including the growth we've seen in some of our more specialist products like intumescent coatings used in data centers, energy solutions used in oil and gas drilling and the actions taken to manage costs. The remaining GBP 6 million, I would attribute more directly to the market disruption seen in Q2, which we are not currently forecasting will continue into H2.

Going further down the income statement, EBIT increased by almost 42%, with depreciation down slightly. And after taking account of both the stronger performance by Acrylate Monomers and the higher finance costs, we saw total group PBT increased by GBP 11.4 million to GBP 12.7 million. Special items and operating profit were GBP 7 million higher in the period, reflecting a net cost of GBP 36.4 million. The movement principally reflecting a non-cash true-up of past pension service costs due to late retirees in our U.S. scheme.

For the full year, I would expect that special items will be in the range of GBP 60 million to GBP 65 million, 2/3 of which relate to the amortization of acquired intangibles. EPS benefits from an H1 tax credit, which will largely reverse in the second half. And finally, net debt was GBP 671 million at the end of June, slightly better than we expected, which I will cover in more detail later in the presentation.

Turning now to the divisions, starting with CCS on Slide 7. CCS saw robust earnings and growth in the period as a number of the long-term strategic and commercial initiatives contributed to our journey towards a more specialist product mix. Revenue for CCS was up GBP 8 million, representing headline growth of 7.5%, 5.8% on a constant currency basis. Volume grew 2.5% year-on-year, led by intumescent and other high-performance coatings used in data centers and other industrial applications, a strong performance by energy solutions and a return to growth in construction, particularly in Asia, while decorative coatings and consumer material volumes contracted slightly in the period.

On a regional basis, both Asia and the U.S. performed strongly, reflecting recent management changes in the Americas. H1 saw the CCS gross margin continue to strengthen as the shift towards specialty products improved the portfolio price volume mix and steps were taken in late Q1 to proactively respond to market conditions to increase prices, optimize plant loadings and leverage central procurement services. These factors, together with continued focus on costs resulted in EBITDA increasing by 33% to GBP 46 million and the margin expanded by 220 basis points to 11.5%.

Turning to the Adhesive Solutions division on Slide 8, which grew revenue by 2.6% in constant currency, as the combination of volumes increasing by 0.9% and the pass-through of higher raw material prices in Q2, was partially offset by an increased percentage of base chemicals in the mix. Geographically, we saw growth in all 3 regions, with Asia and China leading the pack, followed by the U.S., with packaging and tires, the leading end markets.

Whilst overall market demand remained relatively subdued in the period, we are particularly pleased with the volume growth in our sustainability offerings and how the business is harnessing our China Innovation Center to drive domestic growth. Notwithstanding the intermittent reliability issues experienced during H1 at our facilities in Texas and the Netherlands, the business benefited in early Q2 from a number of Asian competitors temporarily implementing force majeure. As a result, the product mix in H1 is slightly more skewed than normal towards base products.

The division continues to make further savings from the transformation initiated in 2023 and is on course to achieve GBP 40 million of annualized benefits by the end of this year, with the target remaining to achieve GBP 43 million plus. Taking account of these savings and the other progress on a constant currency basis, the EBITDA from AS increased by 4.5% year-on-year to GBP 36.7 million, with the margin expanded by 20 basis points to 12.1%.

Turning to the third division, HPPM on Slide 9. On a continuing basis, the division as a whole delivered revenue of GBP 249 million in H1, up 11.7% on the prior year. As the Health & Protection business, in particular, benefited from its market-leading position during the recent supply side disruptions in Asia, with EBITDA for the division growing 13.7% on a reported basis to GBP 24.9 million, and the margin expanded by 20 basis points to 10%.

Turning to the individual components of HPPM, the Health & Protection business and its combination of stand-alone manufacturing facilities in Malaysia and Italy, coupled with the group's global sourcing capabilities, proved to be uniquely placed to capitalize on recent market disruptions. Volume increased 13.5% year-on-year, with significant volatility in both raw materials and finished good pricing being a feature of both April and May.

Looking forward, as prices have somewhat normalized, we are not currently forecasting for the performance seen in Q2 to continue into the second half. However, the Health & Protection leadership team continue to explore opportunities to exploit our market-leading capabilities in NBR manufacturing and support customers in the development of innovative thinner and reusable gloves. Conditions across the rest of the division's portfolio were more mixed.

Volumes for the continuing Performance Materials businesses fell by 5% year-on-year, principally from weaker demand in certain foam products and specialty vinyl polymers, both partly also to do with conflict disruption. However, the combination of raw material prices and mix led to increased revenues overall, and we continue to focus intensively on process optimization and cost efficiency throughout this division.

I want to turn next to the balance sheet, Slide 10. As reported at the year-end, we completed the refinancing of our core debt facility on the 30th of April and today have approximately GBP 680 million of bank and U.K. facilities, which mature in February 2029 and GBP 350 million of bonds that mature in July 2029. At the 30th of June, total borrowings against these facilities was GBP 874 million, with a net debt standing at GBP 671 million, which on a covenant basis resulted in leverage of 4.9x.

As a reminder, under the terms of our new facilities, the year-end covenant requirement is now 6.25x and the first quarterly covenant on the 30th of September is higher than that. So, our headroom is significant, and we had nearly GBP 270 million in committed liquidity. As Michael mentioned, this gives us a robust financial platform and the runway to focus on completing our overall disposal program, which will help to reduce gross debt levels and support our medium-term target to bring the leverage back below 2x.

As part of our capital structure, we use non-recourse receivable financing, often called factoring to both diversify our sources of finance and also reduce costs. At the prior year end, we benefited from a GBP 50 million one-off arrangement with KLK and also utilized around GBP 115 million of non-recourse facilities provided by banks. The KLK purchase arrangement was fully repaid in Q1. At 30 June, bank factoring was circa GBP 150 million. So overall, we reduced net factoring usage, which reduces our operating cash flow by GBP 15 million in the period.

Turning finally to cash flow and our year-end expectations for leverage on Slide 11. As a result of significant increases in raw material prices and the normal seasonality in our business, the usual H1 net working capital outflow was higher than last year at GBP 90 million, partially offset by a reduction of 8% in inventory volumes since the year-end as we continue to manage our stock levels.

As seen in previous years, this seasonal outflow will reverse in the second half, especially assuming raw material prices moderate as we have already started to see. CapEx in H1 was GBP 33.5 million. Of this, GBP 9 million relates to growth initiatives, GBP 5 million to the rollout of the penultimate wave of our ERP program and the balance is SHE and maintenance. For the full year, we continue to expect CapEx to be around GBP 70 million, significantly less than 2025.

Finance costs for the first half were GBP 35.4 million. This was up GBP 5.3 million on the prior year, reflecting the higher average level of drawn debt, repayment of the bond stub in July 2025 and the increased interest costs within our new facility, where the weighted average cost of debt on a cash basis is now 50 basis points higher than H1 2025.

For the full year, we now expect interest costs to edge up a little to around GBP 73 million to GBP 75 million in the income statement, but remain around the GBP 65 million level in terms of cash. As mentioned, the reduction in receivables financing use reduced our free cash flow in the period, whereas last year, it improved it. However, if we strip the receivables movements out, the underlying free cash flow in H1 '26 was GBP 66 million, only slightly higher than the GBP 57 million outflow in H1 '25, reflecting the higher raw material prices.

Looking forward to year-end, taking the seasonal reversal in working capital, together with our other forecast assumptions for H2, we would expect to see the free cash flow for H2 significantly strengthen. On the same basis, excluding receivable financing movements, we now expect to be free cash flow positive for the year as a whole, an improvement on our expectations at the April results.

Taking all of this together with the disposal of Acrylate Monomers, which involves a debt repayment of GBP 5 million to GBP 7 million, we would expect to reduce covenant leverage to between 4 and 4.35x by the year-end, which is also ahead of our expectations at the start of the year.

With that, I will pass back to Michael to discuss our strategic progress. And at the end, we will open the lines for Q&A.

I'm now going to take you through our strategic progress in the first half. But before I do, let me briefly remind you of the key elements of the strategy, which has guided and will continue to guide how we are transforming the business.

All 5 pillars and 3 enablers on Slide 13 provide executable actions for us. And this is our strategic direction, another slide, which you will be familiar. All our plans are focused on progressively creating a business that is more specialty weighted, more geographically balanced and more streamlined. I will take you through each of our 3 divisions in turn to highlight the key actions we took in the first half in support of our strategy.

So, let's start with CCS on Slide 15, our most specialty weighted division. The strategic opportunity in CCS is compelling. We have leading positions in solutions that enhance coatings applications, energy efficiency and waterproofing in all sorts of construction. A global network in high-performance technology platforms, sustainability and regulatory tailwinds, which underpin GDP plus growth and maybe most important, a healthy innovation pipeline.

From that position of strength, CCS is working on an increasing range of profitable growth opportunities. In the first half, that focus translated into strengthening our presence in several high-growth subsegments. For example, our volumes in intumescent coatings doubled year-on-year, driven by demand from AI data centers and infrastructure projects, and we are working with a growing number of customers in battery storage, medical and filtration applications.

We continue to improve the geographical balance of CCS through refreshed regional growth strategies, which means key account management for our top global customers and targeted marketing to new customers in North America, the Middle East and Asia. Our specialty focus, value selling discipline and pricing strategies ensured prompt pass-through of higher raw material costs to customers. Our portfolio improvements, we continue to embed a more end market focused and faster speed-to-market innovation strategy, and we are managing our manufacturing footprint through partnerships to localize production, increase efficiency and be closer to our customers.

Ongoing cost optimization measures include annualizing and further adding to the benefits of the cost reduction program initiated in 2025, continuous capacity management, including temporary reallocation of people and assets and progressing further inventory management measures to enhance cash flow.

Turning now to Adhesive Solutions. As a reminder, AS benefits from leading positions in EMEA and the Americas, deep and long-term customer relationships and a market-focused innovation pipeline with a strong sustainability angle. AS delivered a robust performance despite relatively subdued underlying market conditions, driven by growth in new sustainability-focused products such as specialty tapes and labels, including our new CLIMA-branded lower carbon footprint products benefiting from ISCC PLUS mass-balance certification.

We have also made progress in new medical end markets, and we are winning additional business in China. Our China Innovation Center and local partnerships are helping to localize manufacturing, win additional customers and broaden our end-market exposure. Demand for some of AS-based chemical products in Europe and the U.S. also benefited from selective competitor capacity challenges during the second quarter.

As I mentioned, our performance improvement program launched in 2023 has now delivered cumulative benefits of GBP 40 million since inception, massively improving the margins in this division, and we are targeting GBP 43 million or more going forward. The AS EBITDA margin of 12.1% in the first half compares with 5.4% at the time of the division's total transformation program launch 3 years ago, a transformation that speaks for itself.

As Iain mentioned, volume growth in the period would have been higher, but for continued intermittent reliability issues in the Netherlands and the Longview facility in Texas shared with Eastman, both of which are expected to be resolved in the third quarter. In fact, we are back up and running in Middelburg, Netherlands as of last week.

Let's look at HPPM now, our predominantly base chemicals division. The most significant business in HPPM remains our position as a market leader in the GBP 3 billion NBR market, with hygiene and emerging market megatrends supporting approximately 6% annual growth. Elsewhere, we are focused on selective attractive niches within Performance Materials, driven by strong customer relations, process innovation and emissions reduction.

The performance of our Health & Protection business in the period was strongly correlated with competitors' dynamics. Our strong market position, manufacturing expertise and procurement capabilities meant that H&P volumes and pricing inflected significantly upwards, particularly in April and May as the Iran conflict disrupted competitors' value chains. Underlying glove demand growth remains robust, but pricing and margins across the industry continue to be volatile, reflecting the changes in the supply side environment since the pandemic.

We continue to make longer-term progress through innovation in reusable gloves, more complex disposables and lower carbon materials. Our foam and specialty vinyl polymer businesses experienced reduced end-market demand during the second quarter, in particular, while paper and carpet markets in Europe proved relatively more resilient. We maintain a continued focus on cost savings and efficiencies, and we are making encouraging progress in selective innovation projects such as enhancing the circularity of the carpet value chain.

As previously touched upon, we announced the divestment of our Acrylate Monomers business in June, our fourth transaction since the 2022 strategy review. Achieving this important goal, which removes the highly cyclical and capital-intensive upstream business from our portfolio was supported by the team's success in substantially reducing AM's losses from GBP 5 million last year H1 to almost breakeven this year. We will provide further updates on our ongoing broadened divestment program as it advances.

Coming now to current trading and the outlook. As we have described, in H1, we delivered strong progress driven primarily by sustainable strategic growth and continued self-help initiatives. This has been led by new products and new markets and customers, a focus on innovation, deliberate steps to strengthen our market position and targeted cost actions. We achieved this despite a substantially more complex operating and commercial environment, a testament to the speed and agility of our teams, our in-region for-region manufacturing model, our world-class procurement capabilities and ability to pass through raw material price increases to customers.

As Iain said, the majority of this was from the EBITDA progress we are making from strategic growth initiatives and self-help, approximately GBP 8 million net in H1 and which we expect to continue. The remainder was from Q2 activity uplifts, mainly in base chemical product areas, principally in Health & Protection that we are not currently forecasting will recur in the second half. So, combining the strong H1 outturn and a broadly similar level of recurring strategic and self-help progress as we saw in the first half to the second half, the result is an upgrade to our full-year outlook.

This now sits slightly ahead of current market expectations for 2026. And as Iain took us through, our free cash flow expectations have also increased, and we expect to reduce leverage meaningfully by this year-end to between 4 and 4.35x, excluding any further divestments from 4.9x in June. So, bringing all this together, our ambition is to substantially and sustainably grow earnings in the medium term and the first half of 2026 has reinforced our confidence in achieving that objective.

We are continuing to deliver the multi-year strategic transformation to improve the quality of our earnings and increase our operating leverage by focusing on higher-margin, more resilient specialty products in long-term attractive markets. This is the right strategy for us. We are encouraged by the new product growth and market developments achieved in the first half, with the business delivering its opportunities for sustained long-term growth in a tangible way.

Of course, it was also helpful that our robust business model meant we saw some additional upside from the market disruption in Q2, but we do not count on this continuing in the outlook or in our plans. Instead, our upgraded outlook for full-year earnings and cash generation reflects the progress we are making against our strategic objectives and the operational discipline we have maintained throughout. Meanwhile, the recent refinancing and our ongoing portfolio rationalization plans provide further runway to reduce debt, which has been our most significant challenge over recent years.

To wrap up, the opportunity to sustainably improve the earnings power of Synthomer is becoming increasingly clear. As ever, it rests on 3 reinforcing drivers: further self-help actions, our continued focus on innovation and strategic delivery and end-market growth.

With that, we are now happy to take your questions.

[Operator Instructions] Our first question today is coming from Stephanie Vincent of Bank of America.

So, you talked about 3 further divestment projects. I just wanted to know if you'd be willing to disclose the impact in terms of reducing net debt. Do you actually think though that this is going to be deleveraging on to Synthomer's credit profile? And in terms of -- you said that in Adhesive Solutions that there were some reliability challenges in the Netherlands as well as your hosted site in Texas. Just wanting to know, is that going to be able to be recouped in the second half of 2026? And how much EBITDA impact or revenue impact do you think was achieved during this period, so we kind of know the impact of that? And that's it for me.

Thank you very much, Stephanie. On your first question, the divestments, we have 4 processes right now underway. Number one is Acrylate Monomers, which we announced the signing. We are still fully on track to close it by the end of September -- 30th of September. So, this should be done, and that is not a deleveraging effect that is more a P&L effect because, as you know, we lost GBP 10 million last year.

Then we have 2 processes in due diligence phase. So over the next coming few months, we hope that we can come to a signing. As I said, due diligence, these days, it's more complicated. It takes longer time to due diligence than in the old days, but it's a strict process. We are talking to several interested parties, and we are very confident that we have news in the next few months. Again, due diligence phase.

One process, which we launched just recently, we expect non-binding offers in September of this year, and this will obviously then take a little bit longer. But also it's a formal process. We have very nice inbound interest, as I just saw this morning, and we will take it from there. Again, as I said, September non-binding offers. So altogether, our assumption is that we can get GBP 150 million to GBP 200 million of proceeds, which obviously would be a massive deleveraging effect. That's the number what we have said already a few months ago. And I think we have no reason to deviate from this number. So, take this GBP 150 million to GBP 200 million.

If we are talking about deleveraging, I think it's also interesting to note and you can deleverage in 2 ways. Number one is the divestment I just explained. And number two is to sell chemicals, which produces EBITDA. We were last year even below GBP 140 million. Now, you take GBP 140 million, minus GBP 70 million interest, minus GBP 70 million CapEx, you don't have a lot to further deleverage.

Now if this year, we go to, let's call it, GBP 165 million, you take GBP 70 million and GBP 70 million away, you have GBP 25 million left. Then for next year, you have less interest because you have a lower leverage. So, that could take another GBP 10 million down. You probably have GBP 10 million, GBP 20 million more EBITDA. And you have lower CapEx because on the CapEx situation, we had last year, we had GBP 86 million. This year, we have GBP 70 million.

As Iain mentioned before, we have our ERP system that is phasing out. So, you can take there about GBP 10 million away. We have some CapEx dragger such as Acrylate Monomers, will be out of the books. So suddenly, this GBP 25 million, GBP 30 million becomes GBP 75 million, GBP 80 million. And then it becomes an interesting part to deleverage the company. I think these are the 2 levers what we have to deleverage. And so far, we were mainly focused on the divestments because, as I said, the EBITDA didn't leave too much of cash available, but I think this situation is changing. And I think we showed quite impressively in the first half how this can go and also how fast it can go.

On your second question, AS reliability, it is unfortunate, but we did have some occurrences again. I mentioned Middelburg. Middelburg is up and running again, but we did lose probably something in the neighborhood of GBP 10 million on gross margin level, which we lost in the first half. You have to bear in mind as annoying it is for ourselves, especially, but these are big, big assets in Longview and in Middelburg.

And these assets, they have a multiyear program to rectify and to change certain items. You talk here very granular, very, very simple mechanical things such as tubes. We are going to refurbish them. We are going to change them. That's what we did the last 2 years. That's why everything got much better last year. And this year, there was nothing else than these 2 events. But it did cost us money. As I said, it's fixed in Middelburg for sure. Also in Longview, we are on the right track. These are intermittent things. You cannot think this is not stopping the whole site. These are certain intermittent troubles in one plant, is 1 week out and then it comes back again. But again, it did cost us money.

So as I always say, the problem of today is the upside of tomorrow. So I think for the second half, we are very confident that this will not reoccur again. Yes.

If I can just ask one more question about the phasing of volume increases and restocking with the Iran conflict. If we go back to March, April versus May, June, if the March, April sort of cadence continued, how much do you think just generally, volumes would have been up for your business? I'm just interested to see the restocking, destocking impact of all this volatility, if you see what I mean.

I can start, Stephanie, maybe Iain would add a bit. I think it's less the volumes. You see that our growth was only 2.3%. So it's less the volumes, but the margin helped us. And as we said in the presentation, it was predominantly in the base chemical areas such as NBR as the most prominent one. So the margins there, if we can be very tangible on this, the margin in January and February was on NBR, especially, was $180 per ton, went up to $600 and is down now to $250 to $300. I think this gives you a pretty good feeling where we were, where the conflict at the peak when really our Korean, especially, competitors had a problem on the supply side, and now it's going down and we believe that this is for the foreseeable future now, kind of the proper level, this $180, $600, $250 to $300. I think this gives you a bit of an idea.

Maybe one more thought on your previous question about Longview in Texas, the shared site with Eastman. We are implementing now as we speak, a little bit the new operating model there, which I think will help us a lot that we become more independent and we take certain functions such as engineering and other kind of less operating functions in the site, we will take in our hands. We change the business model.

We do it ourselves rather than Eastman does it for us. I think this should be a very, very good situation going forward because logically, we have more interest, more capability. It's our business, and we should take more care of it rather than we kind of outsource it to Eastman. Nothing against Eastman. It's a great relationship that we have on the site. But I think if we have the faith, let's say, in our own hands, I think this should also improve the situation there.

The only thing I would add to that is I think if you look where the growth came from, particularly in CCS, it was in the coatings, specialty coatings, which weren't really driven by what happened in Iran and also the energy products. So I think those more innovative, more specialty products really were some of the tailwinds that came through the business, and we expect to continue through the balance of this year.

And we had a short period of time when some of our competitors were under force majeure, but that was a defined period of time, end of March into April. So again, I think we look at those as very time blocks and therefore, not necessarily ever going to extend through time.

We'll be taking questions now from Harry Philips of Peel Hunt.

Three from myself, please. Just continuing on the Iran theme, just to be maybe unduly pessimistic. Is there a situation where that actually might get a reversal in the second half, and therefore, that GBP 6 million sort of nets out totally for the year, let alone no recurring feature through the balance of this year or into next year?

The second is just on factoring where broadly speaking, your GBP 150 million. I'm guessing, given the sort of circumstances around the KLK situation back end of last year, that's sort of pretty much as far as you can go, albeit I know you've got a GBP 200 million facility, but is that as far as it goes and that sort of we get some back in the second half?

And then finally, the scope for further restructuring sort of moving forward, if you like, as the sort of new Synthomer emerges. And then what sort of impact does that have around drop-throughs going forward? I mean I've got in mind sort of late '20 drop-through as we go forward and how that might progress, notwithstanding disposals, but again, as the sort of new Synthomer starts to mature.

Yes. I think I take Harry your first question and your third one, and Iain probably takes the second one. On the Iran reversal, as a short answer, we don't think that this will reverse. I think the GBP 6 million are ours, and we will not give them away again.

I think it is prudent for us not to plan for more, even though we all know that the situation in Iran is anything but resolved. I think supply chains kind of reorganized themselves a little bit. So it's probably not a big benefit. But if anything, in the second half, it's more a slight benefit rather than that we have to give it back.

I go with the third question on restructuring. We said already in October 2022 that we are going to divest more than 1/3 of our business, that we want to become a clean, also with a different rating than a clean specialty chemicals company. We're about 60% through this, and we will get the last 3 divestments done, or actually the 2 of them that really cater for the base chemical situation. So we will get them done.

We will definitely have some stranded costs, but these are stranded costs. They are not huge. You talk here about in single, early double-digit millions. After we have done 4 or 3 closed transactions, it's clear that we are pretty good in reducing stranded costs. So I wouldn't worry too much about the stranded cost. You will not eliminate them immediately.

It will take you 1 or 2 years, but you will get them down to pretty much that it becomes a 0 effect. I think stranded costs should be under control. Also bearing in mind that the assets that we are selling, they're pretty much isolated. So you don't have a lot of internal agreements and white lines between plants and so on. These are stand-alone businesses. You see it now, Sokolov, that's one site in the Czech Republic and the other asset is the same that concerns another 3 assets, which are stand-alone assets.

I think then if you go forward, the drop-through rate, or we call it operating leverage, is clearly, and you can see it in the results of this half year, is clearly more than 30%.

So I think this is the attractive part because we took so much cost out in the past, and we increased our margin. And probably in the whole statement that you were reading this morning, the number I maybe like the best is that we had since 4 years an uplift in gross margin of 600%. And that's a totally different new world, and this shows you that we are really becoming specialty chemicals.

So the dilution effect, if those diluters then are gone, I think is massive. And that's why also you can see that now we produced an EBITDA of 10.1%. 10.1%, I know some people in '22 when we presented the strategy at about 6% EBITDA, I said that we can go up to 15%, some people didn't believe it.

But now you see a CCS division and an AS division. They are at 12%, 11.5% and 12.1% EBITDA. I think there's another 1.5% in there. So I think my 15% at the time suddenly become very realistic. And that will be then the profile of the Synthomer going forward.

So I think everything -- that's why for us, operating leverage is so important. That's why last year's results were okay, but they were definitely not where we wanted them to be because we had 7% less volumes. And then operating leverage goes the wrong way around. Now this year, we have just a slight volume increase, but you see the drop-through rate, I think, is quite impressive. So I think that's how I see a bit the situation.

I think it's also interesting that when we are then -- when the last 2 base chemical businesses are gone, you have a very clean situation how to run the company.

And there is a lot of cost of complexity in our Pillar 4, the differentiated steering that costs you money in a way and it costs you efforts. And if you can focus and you can run a fully specialty model, you can reduce costs, you have less complexity, and you have more focus. I think that's the target, which gives you additional benefits then on top of the 30% operating leverage what we have right now.

Iain, would you take the factoring?

Yes. On factoring, I think maybe it's worth standing back and just recapping how we think about it. So at the end of last year, we had GBP 165 million of total factoring, GBP 115 million from banks, GBP 50 million from KLK. And that KLK facility was repaid in the early part of the year.

When we think about factoring, we think about it on the basis of diversifying the sources of funding available to the group and also cost. As you rightly say, there's a EUR 200 million facility available from our existing banks. There's no reason that, that couldn't be extended modestly. And if we look at the size of the receivable book we have, then we have headroom to factor more receivables should we decide to do that.

But the most important bit, I think, is to look at what's the cost and also not to tie it up with the free cash flow numbers. And we've shown free cash flow numbers this time around, which exclude the impact of factoring. Now clearly, it's a -- as you reduce or increase factoring, it has an impact on the presented operating cash flow, and that was a GBP 15 million outflow in H1.

So GBP 105 million of gross outflow at the free brings you down to ultimately GBP 80 million negative free cash flow. Take off the GBP 15 million that relates to reducing the receivable got you to GBP 66 million of free cash flow outflow in H1 and that's comparable to last year, so sort of up 15%.

Does that answer the question on factoring?

In an environment where we have massively higher raw material costs, which obviously gives you much more receivables, you have more sales. We didn't do a lot of stretch in June compared to December. So that's an impact on the payables.

And the most management-controlled item on net working capital is inventory and inventory is flat compared to last year in December. And actually, if you take it in days, it's significantly down. But I think we have a lot of room here to play on the cash flow, and I agree that face value of minus GBP 80 million outflow is not ideal.

But I think if you put it a little bit more granular, including the factoring, including the net working capital, as I explained, the inventory piece, the payables piece, the receivables piece, I think you come into a totally different situation.

And that's why we are also very much sure that we can produce free cash flow except the factoring moves in the second half and for the whole year. And at the end, it all ends up in something which you haven't heard from Synthomer in a long time that we are anticipating an year-end leverage between 4 and 4.35. I remind you that last year, we had a reported leverage of 4.75. And if you take the GBP 50 million from KLK away, it would have been 5.2.

So within 1 year, leverage reduction from 5.2, like-for-like, to, if you go in the middle, 4.15, 4.2 of our range, I think that is rather significant.

And that brings me then back to the point I made to Stephanie and then you make the calculation of significant EBITDA minus reduced interest, minus reduced CapEx and suddenly, you have a meaningful deleveraging effect from selling chemicals at the end of the day. I think this is a pretty nice path forward for us.

The next question will be coming from Kevin Fogarty of Deutsche Numis.

Actually, well done on the half. Good outturn. Just wondered if you could put a bit more clarity on CCS and just the sort of the impact of some of those specialist product areas you called out, particularly some of your data center applications, et cetera. Just sort of trying to help us kind of build what contribution they had, what the pricing differential might be. I guess, energy, we can see how much of the portfolio that is, but perhaps some of the other areas to just help us get comfortable with the contribution, I guess, they've made in the half.

Just a second question in terms of exceptionals for the second half of the year. Given what you said in terms of your outlook, what you're likely to sort of get on with and portfolio transformation, et cetera, is there any number you could sort of help us with just in terms of likely exceptional run rate in H2?

Yes. On the CCS, I can even answer the second one question. I think there are very limited exceptionals that we are planning. But Iain is looking into it. But I think it's pretty much neglectable.

But on your CCS question, look, the data centers, we always had a very strong construction business. And this year in the first half is even better. That has basically 2 reasons. It's partially coatings, partially construction. It's in Asia, it is very strong and it's strong in the U.S. predominantly and that links a lot into the data centers.

The data center applications are new for us because there's a huge boom in constructing this. I think we all -- if you look at market reports, this will go for another few years and we have a very good position there. The impact is significant. It definitely explains a portion of the delta, the positive delta in CCS division. And as I said, we expect this to continue going forward.

These are very specialist applications and not every company can do it. I think a truly specialty chemical company like us, we put a lot of innovation behind it. We have close customer relations to those data center providers. I think that is something which, yes, makes us sure that it will continue for a while. But it's not only the data centers, that's the most prominent example in CCS, but then you can go to Consumer Care, which was lagging a little bit behind in the first half compared to the energy solutions business and coatings and construction. But there are new nonwoven applications for medical gowns and medical, how do you say, nonwoven fabrics that absorbs the blood. And that is something which is, again, it's an innovation project. It's something totally new. It's something we are working on.

And you can imagine the medical sector is quite high margin. So these are true innovations in CCS. I would say this one is more kind of in the children's feet, but also this contributed to the H1 results. And then the one in terms of contribution somewhere in the middle in CCS, that's the onshore drilling. As you know, in our energy solutions business, the oil and gas drilling fluids is something that we know since many, many years, but we always develop, we try to innovate, we try to find new customers. And it's a bit of a breakthrough what we did now over the last, let's say, 12 months. We were always in these complicated deep sea rigs far out offshore. And now we found solutions.

And again, that's true innovation and customer centricity. These are new customers. These are not the good old 3 big Halliburton, Baker Hughes, Schlumberger. These are new customers. They are focused on the U.S. and Canadian onshore drilling. So for us, it's new customers, it's new application, and it's true innovation work. And I think this is also something which is very, very encouraging, somewhere in the middle, as I mentioned, in terms of impact in the first half, but it's also something that is definitely sustainable because onshore drilling will go ahead. It's well established.

And as opposed to in the past, we do have a solution for it, and we do have a customer base, a new one for it.

I think these are 3 very interesting developments for sustainable growth and profitable growth, especially in CCS division.

Iain, do we have anything more on exceptionals?

Yes. So exceptionals, first half was GBP 36.4 million. For the full year, GBP 60 million to GBP 65 million P&L impact from exceptionals. About 2/3 of that is amortization of intangibles, so noncash related. Cash outflow GBP 5 million to GBP 6 million in the first half. Second half, I would expect it's a little bit lower than that. So again, noncash items coming through on that exceptional or special items line.

So on the operational exceptional it's very, very limited. It's -- the biggest portion is the amortization of acquired intangibles, which goes back obviously to the time when we made all this big acquisition and at the time of the purchase price allocation, it was allocated there. So it's a statutory item, but it's not -- yes, it's not an operational item in a way.

Next question will be from Angelina Glazova, calling from JPMorgan.

Congratulations on good results for the first half. I have 3 questions, please. So firstly, your full year guidance seems to suggest that in the second half, the year-on-year improvement will mostly be driven by self-help measures and some growth initiatives similar to what we have seen in the first half without any one-off tailwinds that we had. And this brings me to 2 questions.

So first of all, when you look at the month of July and maybe your current order book in Q3, is this the trend that you're already seeing in that there is some deceleration visible compared to the Q2 numbers?

And then secondly, if we think a bit further forward from second half '26 to maybe an early look into 2027, how do you see the potential from the self-help measures and strategic growth initiatives contributing to 2027?

Appreciate this might be a bit of an early stage, but if we take an early look, is this the magnitude comparable to what we have seen in '26 year-on-year? Or is it something somewhat smaller? And do you expect that the growth initiatives to become a more prominent driver as opposed to self-help measures?

And my third question is just on CapEx. So you have confirmed the guidance this time of GBP 70 million for this year, which seems to be at around 3% to 4% as a percentage of sales. And you've also mentioned that this number could decrease somewhat just by virtue of divestments.

But my question is whether you think that this is a sustainable level of CapEx for the medium term? And is this a level of CapEx that you think sets Synthomer up well to increase production as might be required if we have an improvement in the underlying environment? And is this the level of CapEx that can help minimize the reliability issues potentially in the future? And if you see the need for the CapEx to somewhat step up, then what is the level that you see as sustainable for the cycle?

Yes. Thank you very much for your kind words at the beginning, Angelina. If I answer your question, I think July, we have seen as a reasonable month. That's why we are putting out the numbers we are putting out now, I think very much in line with our expectations. August will now be a lower month as every year in August because Europe is kind of on holidays.

I think as of today, 4th of August, we are sure that's why we put up this guidance we are putting up. So actually, it looks pretty good, pretty reasonable. Order books are fine. We mention always the geopolitical uncertainty, which you don't know what kind of happens tomorrow.

But also here, we have proven that when things happen and rather dramatic things happen like on the 28th of February, that we are really, as Iain mentioned, it, bold and fast to react to situations. I think I'm quite comfortable here that we are having a few good months ahead of us.

Looking further into '27, it's probably not unreasonable to assume if you think that last year, we had GBP 137 million. This year, we are guiding now to the GBP 162 million a little bit plus. You take -- you can calculate it easily. You take the numbers, you take the GBP 6 million away, which we call a onetime benefit. We always said on revenue level, we have H1 of [indiscernible]. On EBITDA level it is more [indiscernible]. So I think this gives you very nice indications of where we think that we could land.

So if you take then a progress of some GBP 25 million, I think, for 2027, and we really, as you say, it's a bit premature. But I think a similar step forward is definitely doable because, as I mentioned, a lot of those benefits that we put in are sustainable ones. So let's see how it goes.

I don't commit to any number, we will see closer to the end of this year where we land. But definitely, our view is that we can make a good progress again.

Then your CapEx question, I mentioned it, and I think it's a very good question. When is enough -- what is enough and when it's not enough anymore? We have a depreciation of GBP 96 million. This will go down with all the divestments already with Acrylate Monomers, which is a big site and a lot of investments went in over time. So this will go down.

We guide now for GBP 70 million this year, and I'm absolutely convinced that with GBP 70 million, you can put quite some nice growth capital behind it. We have maybe GBP 35 million at the time, GBP 40 million we need for SHE and sustenance, which includes the reliability work on AS.

Here, it is important. There is no option that we take now, let's say GBP 30 million and then we fix the AS site. It doesn't work like this because then you would have to shut down a site for 1 year to change everything. And obviously, we don't want to do that. So you cannot buy yourself out of the problem. And that's why we designed this multiyear program, especially in Middelburg and Longview again. And this will go on for another sometime, piece by piece until everything is done.

And as I said, we had now for a long time, we had peace and quiet. Now in the first half, these 2 issues came up again, which we assume are rectified for the second half. But you still need some -- and these are low mid-single-digit millions, what you need going forward for the next probably 2 or 3 years until everything is really clean and the site is on the situation where you want.

Important, I do not speak about safety. Safety, we do everything what is needed. I talk about reliability issues. So I believe that when you have then down a depreciation probably of GBP 90 million -- GBP 85 million, GBP 90 million, that with a GBP 70 million, you can actually do a very good job. I think that's a reasonable investment rate, which allows you to invest into growth as well.

We are not in a situation that we need now a GBP 300 million, GBP 400 million new site to go into something bigger. But I think with growth CapEx of GBP 40 million, let's say GBP 40 million, I think you can achieve a lot of things. I remind you, the APO investment was $8 million, $9 million. The China Innovation Center was $8 million. The CMA, continuous monomer addition in Mogadore in the U.S. was some $4 million, $5 million, $6 million. So that's in our industry where you can meaningfully invest into growth.

What I would exclude is that we have special projects. And if something comes up that requires a higher CapEx, one project where we need GBP 20 million, GBP 30 million, that would be out of this scope, and we will look at it, and we will make the usual non-emotional calculations. Where our payback? When do we get our money back?

And that would not be included. So this could always happen that if we have the funds available that we would do a bigger project. If we get the proper payback, we can create proper returns on it. So I think that's a bit out of the system, but I wouldn't exclude it because we do have -- our divisions do have a lot of brilliant ideas and one day, one of these might land.

But if you take those ones out, as I said, I think with CHF 70 million, like-for-like, we can invest nicely into the business, including into growth.

[Operator Instructions] We'll now go to Sebastian Bray of Berenberg.

I'd have 2, please. The first is on nitrile markets. What happened in China that allowed the availability of raw material to improve so much and nitrile to come down? Because it's difficult to see where the country is getting the butadiene from to manufacture this. And any update on rumored potential divestment of this segment is welcome.

And my second one is on receivables. The one-off factoring arrangement of GBP 50 million was repaid. But from what I can see, the total factoring utilization still stands at GBP 150 million. Why is this so high at the moment? Is it something to do about arbitraging the cost versus the revolving credit facility? And what do you think this will end up at by year-end? Will it stay at GBP 150 million, go up, or go down a bit?

Yes. I'll take the first one. I think on NBR, the situation was really in -- yes, March, middle of March, started April and May, was a very pronounced situation because mainly not the Chinese, but the Korean competitors, they had a problem with raw material supply. What we also saw is that the Chinese, they are producing butadiene and they have the largest acrylonitrile supplier is a company very well known to us in China. Also, butadiene is available there, and I think they just rectified the issue.

If we look at the level of problems in these 2 months, the Koreans were most affected with the lack of feedstock, then the Taiwanese, then the Japanese and then the Chinese because China, they have a lot of access to, let's say, other countries' feedstock and the Chinese, they have still a lot of coal to burn. So I think -- and the Chinese are very fast.

And I think this all together resulted that it took them maybe 2 months, and they could -- they will get back into the game. There are NBR flows coming from China into Southeast Asia. Sometimes the quality is not there yet, but then customers might do some blending. We all know that when Chinese enter an industry, it takes them a while until the quality is on a top level, but it always at the end, after 1, 2, 3 years, they are on the top level.

So I think going forward, we have to calculate NBR supply coming from us as market leader together with a Korean company. I think this will go on. I always say our NBR business, it's market-leading and has critical mass. I think that the Chinese NBR players, they will also play a role over time.

There's no reason why they should not only be in gloves and not in NBR. Having said that, the big glove maker, Intco, is focusing on the gloves rather than of the NBR, but there are others that might take it over.

So I think it's just always the same. There is a disruption in the market and then people find ways. It's like the water that flows always down somehow. So that's why the situation normalized again. But Sebastian, I think it is important to say my example that I made at the beginning, that the margins, and it's quite a good proxy for the whole business because the volumes do not have such swings. The margin is now somewhere clearly below the peak months in April and May, but it is still higher than end of last year and early this year.

I think that's a situation which we think is going to go forward. You hint at the divestment comment. I can only say what I always say, NBR is a very well-managed, very good market-leading position-based business and our strategy is specialty strategy. So I think at one point it's clear what we are anticipating.

And maybe the receivables question, Iain, if you would.

Yes. I guess on receivables, I'd start with the free cash flow impact. So if we ignore the receivables finance and the way we think about receivable finance is it's a different source of capital, and it's cheaper than going to the bond market and the bank market for the business today. So if we take out the GBP 15 million outflow in the first half, we're back to a free cash flow negative of GBP 66 million in H1.

We've said today, we expect that to be positive by the end of the year. And part of that is seasonality, but a big part of it is what has happened in raw material prices. And they, of course, push up inventory in monetary terms. Underlying inventory was down by 8% on a volume basis. Michael referenced it as well in terms of inventory days.

So underlying real action is being taken to manage working capital. The receivables in pound terms, again, increase because of that higher price being charged through to clients, and we get some benefit on the payable side. So net working capital increased in H1. When we look at factoring, of course, we're now factoring more valuable invoices, which in part contributes into the face value you're saying.

Looking out to the year-end, we've given some guidance around leverage, and we've said between 4 and 4.35x. You put that together with a reduction in terms of improvement of free cash flow to break even for the year. I think that will guide you into the low 600s in terms of where we expect debt for the full year to land.

Absolute amount of factoring at the end of the day comes down to the level of availability of invoices. We have a EUR 200 million line. And actually, does it make commercial sense to factor versus borrow under the bank facilities? And today, it makes commercial sense. So I would expect we continue to use that, but continue to talk about free cash flow excluding it, excluding that impact.

That's helpful. So just to clarify, do we have, at the moment, a covenant net debt and a factoring amount and the factoring amount separate to that is the GBP 150 million. And the factoring amount is excluded from the free cash flow guidance, which is for roughly breakeven at the end of the year, but it might still go up for day-to-day trading reasons by the end of the year. Is that fair?

Yes. I mean, implicit in our free cash flow guidance is the guidance we're providing around EBITDA for the year and our assumptions, in particular around raw materials. So if raw material prices remain elevated, then arguably, that would be a positive to the business, but it could be a negative to working capital and therefore, of course, flow through into debt.

But we foresee a positive free cash flow.

Our expectation is a positive free cash flow.

Faisal?

No, all I was going to say is there is -- just in terms of the level of activity at year-end, there is just inherently less to factor at December than there would be at June in the volume sense, which may also have net-net a potential for reducing the overall absolute amount of factoring at that point. But again, it's hugely dependent on raw material prices at the time.

As we have no further audio questions at this time, I will turn the call back over to your hosts for any additional or closing remarks. Thank you.

Okay.

Have anything else?

No.

Thank you all very much.

Thank you very much for your interest, everybody, and have a good day. Thank you.

Good morning, and welcome to our 2025 full year results presentation. As usual, I'm here with Lily Liu, our CFO; and Faisal Tabbah, Head of Investor Relations. And together, we look forward to answering your questions at the end.

In terms of the agenda, I will provide an overview of our performance and the further strategic progress we made in 2025 despite an extended period of challenging market conditions. Lily will then walk through the 2025 numbers in more detail and update you on the balance sheet developments before I come back to present the actions we have been taking to deliver our strategy of focusing on differentiated specialty products for attractive end markets. Then at the end, we will discuss what we have seen in terms of trading since the start of 2026 and what we expect for the remainder of the year and beyond.

I have 5 points, starting with our performance in 2025 against the backdrop of a further year of lower end market demand and the additional challenge presented by the global tariff changes introduced during the second quarter, we delivered gross and EBITDA margin improvement and an overall trading performance fully in line with our January 29 winter trading statement. In the face of volatile market conditions, we continue to rigorously prioritize what is within our control, delivering robust cash, earnings and margin performance while continuing to focus, simplify and strengthen the business in accordance with our strategy.

Divisionally, we delivered a strong performance in our AS business, which continued to regain share and enhance margins through successful delivery of its reliability and performance improvement program and increasingly important new growth initiatives. In both CCS and HPPM, activity levels were generally lower, which resulted in negative operational leverage. However, we were able to partially offset the effect of this through additional self-help cost savings.

At the same time, we continue to focus on managing our financial position. The group delivered positive free cash flow for the year with a cash inflow in the second half as expected. And we were able to bring down our net debt year-on-year, reflecting our rigorous focus on profit and cash management.

Point 2, very important for all our stakeholders and our company. We have refinanced our bank facilities, extending the maturities from mid-2027 to Q1 2029. Together with the reset of our covenants over the whole period, this gives us stability and the runway into 2029. We can now fully focus on our business, our customers and execute our plans.

Point 3, we have had an encouraging start to 2026 trading. Q1 2026 trading was in line with our expectations and showed progress against Q1 2025 with clearly improving momentum through the quarter. And Q2 now started on a highly promising note. We expect a robust improvement in volumes and margins in the second quarter and potentially longer depending on developments. As I will come back to, we are not changing our overall view for 2026 for now, but the risks are to the upside as we sit here today.

Point 4, this improving trading momentum has 2 drivers. The foundation is enduring progress from our strategy. Product and business rationalization have further simplified our structure and focused our innovation, manufacturing excellence and expert service on the most attractive products for our customers and our bottom line, supported by our disciplined approach to capital allocation.

We have focused the business on end markets and customers where we believe the volume challenges of recent years were more cyclical than structural, and they are beginning to improve. We have invested carefully in key growth products like our APO line and in our innovation strategy. We have also created a number of commercial partnerships that leverage our capabilities without requiring capital investment. And our commercial strategy is now highly targeted on regions with the greatest opportunities for our business.

Many of our key attributes and the strategic efforts we have made over the past 3.5 years mean we are well positioned to deal with the profound disruption in the value chain since the start of the Iran conflict. And while the longer-term effects remain uncertain, the current volatility in the chemical sector has only served to reinforce the importance and benefits of our business model.

Improving operating leverage from efficiency, cost reductions and capital discipline, our streamlined in-region for-region manufacturing strategy, global procurement excellence and above all, our increasing focus on specialty businesses where we have comprehensive relationships true differentiation and hence, pricing power. It is these factors which we have focused on for the last 3 difficult years, which are allowing us to capitalize on the trading momentum that we are seeing now.

And my fifth point, we will stick to our strategy and maintain our discipline to ensure that we deliver the substantial further value creation available. We will continue the divestment program. William Blythe was divested in the first half of last year, our third divestment since 2022. And our half year results, we announced we are broadening our divestment program in order to accelerate deleveraging and focus our portfolio further.

We currently have our formal -- 4 formal divestment processes underway, and we will always keep the wider business portfolio under review for further opportunities. We continue to extensively review our operating and capital expenditures to identify additional savings opportunities and improve our efficiency.

Overall, we achieved GBP 30 million of operating cost savings during the year through our various self-help plans, and we now expect to deliver a further GBP 20 million to GBP 25 million in incremental gross benefits in 2026. And we will maintain our ambition to make the business more specialty focused, the key driver of the fact that our group gross margin has increased by a massive 500 basis points over the last 4 years to over 40% in the last quarter, demonstrating the substantial improvement in our operating leverage to increasing volumes. Gross margin will remain a focus in 2026 as it positions us very well for further volume recovery in our core markets.

I'll come back in a moment to talk further about some of the actions we are taking in the current year, but let me now hand over to Lily to run through the numbers in more detail.

Many thanks, Michael, and good morning all. As Michael already mentioned, 2025 was a challenging year for the industry and for Synthomer. Against that backdrop, we performed well in delivering strategic steps and further enhancing our margins by self-help actions. In this section, I'll focus on our actual '25 results, including the cash flow and also provide an update on our refinancing project.

Starting with the financial summary. My first remark before any line details is that despite the revenue reduction of nearly GBP 200 million year-on-year due to market conditions our EBITDA dropped by GBP 6.5 million. Thanks to our focused efforts and delivery on self-help actions. Group revenue for continuing business was 9.9% lower on constant currency at GBP 1.74 billion. Volume was down 7.2% from lower end-market demand following tariff changes and the ongoing competition from Asian companies in base chemical areas, a situation that since the Iran war has changed significantly, as Michael alluded to already.

Our EBITDA reduced by 4.5% on constant currency to GBP 137 million, which resulted into an EBITDA margin expansion of 40 bps versus 2024 to 7.8%. This was supported by GBP 30 million of cost efficiency programs and reliability improvements as well as lower bonus accrual comparing to 2024.

Continuing business underlying operating profit was GBP 37.6 million for the year, a reduction of 21%. Underlying finance costs increased by 6.5% with the higher coupon from new bond partially offset by lower base rates. I'll come to refinancing and expected interest cost in a minute. We continue to guide underlying group effective tax rate around 25%. For 2025, our ETR is significantly outside of this normal range due to a onetime adjustment on deferred tax assets in the U.S. and U.K. as well as geographical mix of profits and loss.

Discontinued operations, being William Blythe business, contributed EBITDA of GBP 3.6 million up to its divestment in May 2025. The total group continued and discontinued had underlying loss per share of 37.2p versus 2.5p loss from 2024. About half of the EPS deterioration was due to the aforementioned derecognition of U.S. and U.K. tax losses, which the company can access to in the future.

Special items comprised mostly intangible amortization, impairment charge and restructuring and site closure costs in the period. As always, we have included a schedule for special items in the appendix.

Our net debt of GBP 575 million was GBP 22 million lower than financial year 2024 and GBP 63 million lower than at the half year of 2025, thanks to good cash management and our leverage was 4.7x, well within the covenant.

Now turning to each of the divisions. In CCS revenue was GBP 699 million, down 11.6% in constant currency from 2024. Volume was down 6.8%, reflecting tariff induced demand uncertainty and comparing to a relatively strong prior period, which included a reasonable coating season. But the biggest driver was lower oil and gas drilling activity, which resulted to smaller orders from our oilfield service customers in the high-margin energy solutions segment.

We have seen some improvement in construction business in Europe, which was particularly challenged in 2024, but this was not enough to offset the muted activities elsewhere, particularly in the U.S. The energy solutions slowdown was also reflected in the price/mix reduction of 4.8% for the period. As a result, EBITDA reduced to GBP 64 million or down 25% in constant currency with an EBITDA margin of 9.2%. This reflects the negative operating leverage and the mix effect of a strong prior year energy solutions result. In response, we have taken decisive steps on cost reduction. CCS bears a substantial share of group overall cost base. The total savings delivered in the year was GBP 13 million with further benefit expected in 2026.

The turnaround of our Adhesive Solutions division continued with pace. The EBITDA increased by 39.5% in constant currency versus 2024, raising EBITDA margin by 350 bps to 11.6%. A reminder that in 2023, the margin of this business was around 5%. So in 2 years, we more than doubled the EBITDA and EBITDA margin.

Revenue was 1.5% lower in constant currency, in line with 1.2% volume reduction. This was partly driven by the shutdown and site reliability issue in a third-party managed site that we have talked about previously, although this is now improving. Our overall improved reliability and cost competitiveness have enabled AS to regain resilience in the period of market volatility with business delivering around GBP 11 million operational efficiency and cost savings in 2025, again more to come in 2026.

Finally, Health & Protection and Performance Material division. Revenue was down 16.5% in constant currency reflecting a 10.4% volume reduction [ and first of all ] lower raw material price. Within Health & Protection NBR volume fell by 17.3%.

Beginning of the year, we saw muted customer demand reflecting some prebuying in 2024 in the supply chain prior to the change of U.S. PPE tariffs in January 2025. Volume began to improve in Q4 2025. Margin per tonne in H&P benefited from mix effect as demand for our higher-margin reusable products was more robust than disposables in the year, but this continued to be lower than the pre-COVID levels. The Iran war has a positive effect on the margin. We received further income from U.S. technology partner, where we support their efforts in building a new U.S. NBR plant, including for a new package built and delivered in the period.

The Performance Materials side of the division reflects volatile market conditions for these businesses, especially the monomers business. Process optimization and cost efficiency initiatives has driven performance improvements. We continue to focus on our efforts on enhancing capacity utilization and efficiency within the division. EBITDA was GBP 24 million with a margin of 5.2%. In the year, we disposed William Blythe and ended operations at our Ningbo site in China with further divestment program progressing as Michael already mentioned.

Now to cash flow. We delivered positive free cash flow as targeted in 2025 even after adjusting for the onetime KLK receivables purchasing. Closing net debt of GBP 575 million, reduction of GBP 22 million from 2024. Now our expectation for 2026 at this stage is also broadly neutral free cash flow once the GBP 50 million receivable purchasing unwind is accounted for. Now in reality, this was already completed by early March.

Our net working capital, excluding receivable financing was broadly flat in 2025, and we had an inflow of GBP 77 million from higher utilization of receivable financing facility and GBP 50 million receivable purchasing agreement. We expect the euro seasonal working capital outflow in H1 2026, which is likely to be slightly higher than before given the Iran conflict effect on raw material costs, but also the euro seasonal inflow in H2 2026, supported by further structural inventory reduction programs.

CapEx remains disciplined with full year spend of GBP 86 million, in line with prior year and our CapEx to depreciation ratio remains below 1x. In 2026, we have further focus on our capital spending program and expect to spend around GBP 50 million less than prior year, a figure that still includes a few carefully selected growth projects. Full year cash tax was neutral and benefit from prior year refunds in H1 2025. And pension costs in excess of P&L are significantly lower than last year as guided. Now the deferred U.K. deficit reduction payment was made in 2024.

Regarding our core debt facilities, the remaining EUR 150 million amount of 2025 bond was repaid in July 2025. We refinanced our RCF and UKEF facilities, extended the maturity of both facilities to the end of February 2029. Security and guarantee package is provided by certain group companies.

Coming to covenant and liquidity with the refinance, we gained further covenant support in line with macro uncertainty and we agreed to provide quarterly covenant testing on leverage and the minimum liquidity covenant. Our liquidity remains healthy for the group. I'm expecting the P&L interest cost to be around GBP 70 million in 2026, reflecting the refinancing deal. Cash interest costs lower by mid-single digit millions. Net debt to EBITDA was 4.7x at the year-end on the covenant definition basis, which mainly adjust for IFRS 16 and is therefore about 0.4 to 0.5x higher than using the headline net debt to EBITDA figures.

Now let me reiterate that our key priority is to reduce our leverage towards 1 to 2x medium-term target level through a combination of increased EBITDA, continued cash generation focus, supplemented with proceeds from divestment. The Board has confirmed that dividend will remain suspended until our leverage is below 2.5x.

Now in summary, in 2025, we made strategic operational and financial progress against the backdrop of challenging and uncertain macro environment. We continue focus on our self-help actions capitalized on the current market condition since the Iran war and balancing this with selective investment guided by our strategy.

Let me stop here and hand back to Michael to update you on strategic initiatives and outlook. After Michael's remark, we'll come back to take questions.

Thank you very much Lily. I would like to begin this section by reiterating the key elements of the strategy, which has and will continue to guide how we are transforming the business. All size [indiscernible] execute the action for us. The period since we launched this strategy late 2022 has not been the easiest environment to demonstrate progress. But our actions are showing a positive effect on the quality of our portfolio.

I mentioned our significant and continuous gross margin improvement and together with all the work we have done on the operating and overhead costs, we have increased the operational leverage in the business substantially, resulting in a drop-through rate from revenue down to EBITDA of 30% or more. As market conditions change, we will stick to the core tenets of these plans, which have served us well. This slide will also be familiar illustrating the direction of our strategic evolution in creating a more specialty, more geographically balanced and a more streamlined Synthomer.

Now let me briefly take you through each of the 3 divisions to highlight the key actions we took in support of our strategy. CCS is our most specialty weighted division. And as Lily has described, it experienced a challenging demand environment in 2025, mainly in energy solutions and construction. We continue to further align the activities of the division with its strategic and markets -- end-markets during the year. That meant continuing to improve the geographical balance of CCS with strategic key account management for our top global customers and targeted marketing to new customers in North America, the Middle East and Asia, including China. It meant strengthening the division's position in high-growth subsegments, including adapting our product portfolios for market areas where we see growth opportunities, such as battery technology and solutions that support data center construction. In line with our focus on value selling and optimizing our product mix, we launched a new CRM system, which I believe to be best-in-class and introduced new pricing strategies.

As part of our ongoing portfolio improvements, our innovation process becoming more end market focused to enable us to get products to market quicker. We made selective investments in our manufacturing capability in the U.S. to increase its flexibility and enable the localization of products previously only made and imported from Europe. And we enhanced our coatings capacity in the Middle East to support long-term growth opportunities in the region.

In response to market conditions, CCS stepped up a range of efficiency measures during the year. This included a cost reduction program to mitigate the slowdown in end market demand. We accelerated and reprioritized a number of asset optimization projects and other cost and capacity management activities during the year, including temporarily idling excess capacity, reducing shift patterns and undertaking a broader review of operating costs, including headcount. The division is also implementing a number of inventory management measures to enhance cash flow. We expect our 2026 performance to benefit from these projects in addition to the significant market-driven volume and margin opportunities we witnessed since February 2026.

Turning now to Adhesive Solutions. The division has continued to build on the dedicated performance improvement program launched in 2023, which has transformed the adhesive resin business acquired by Synthomer in 2022. The program has enabled improvements in reliability for customers and achieved GBP 35 million in cumulative benefits to date by reducing costs and improving end-to-end operations from supplier network improvement to production site efficiency and delivery logistics. The program continues to find further opportunities expanded again to target a total of at least GBP 40 million in cumulative benefits by the end of 2026.

As Lily has already touched upon, the success of the program is now clearly evident in the division's EBITDA margins, which have more than doubled to 11.6% last year versus 5.4% on launch in 2023. Our reliability efforts are now primarily focused on the Longview, Texas facility shared with Eastman.

Following the upgrade to increase the specialty APO capacity, this represents a key growth opportunity for 2026 and the years ahead. We will also continue to pursue further opportunities to reduce working capital intensity and optimize our supplier network for key raw materials. At the same time, we continue to regain market share through greater reliability, competitiveness and strong customer centricity.

We are increasingly leveraging our global production network and multiyear relationships with blue-chip customers to grow our specialty exposure, which accounts now for 60% of divisional revenue. In the first half, we announced a novel whole-value-chain partnership and supply agreement with Henkel. The year also saw the successful launch of CLIMA branded products, which deliver at least a 20% cradle-to-gate reduction in certified product carbon footprint. In the more volatile and competitive European base chemical product areas, we remain focused on enhancing cost competitiveness and reliability and leveraging partnerships and volumes.

Finally, turning to HPPM. Much of HPPM division has base chemicals characteristics. So our differentiated steering approach focuses on improving cost efficiency across the value chains while enhancing our overall value proposition to customers through selective investment in process and product innovation.

Our Health & Protection business continues to focus on opportunities to leverage our position as a global market leader in NBR manufacturing with significant technology and manufacturing expertise. We also continue to support our U.S. partner with further technology licensing and manufacturing expertise as it developed onshore U.S. capacity for nitrile latex and glove manufacture. We are exploring other potential partnership opportunities for this business globally that require little or no capital investment.

In 2025, we established a partnership with Neste and PCS to manufacture bio-based nitrile latex for the glove industry. We also continue to develop new products that aid reusability, weight reduction and high performance for customers in this market.

In Performance Materials, we signed a partnership with Lummus Technology to license Synthomer's proprietary acrylic acid esters technology, which will now reach a broader market through the Lummus platform. We also undertook further product rationalization and consolidated an old manufacturing site in China during the year. And in advancing the strategic transformation of the portfolio, we completed the divestment of William Blythe, a noncore inorganic chemistry business. This transaction further reduces the complexity of our site portfolio and enables a greater focus of capital, time and other resources. During the year, we broadened the scope of our noncore divestment portfolio to accelerate the group's deleveraging and simplify the business portfolio further.

Turning now to 2026 trading and outlook. Overall trading in the first quarter of 2026 was in line with our expectations and ahead of prior year with much improved CCS and stable AS performances offsetting a slower start in parts of the HPPM division. Encouragingly, all businesses had improving momentum through the quarter. But since the start of the Iran conflict, we have experienced substantial changes in our operating and commercial environment, both up and downstream.

As I mentioned at the start, our focus over the last years on improving on speed and agility, a streamlined in-region, for-region manufacturing footprint and stronger procurement capabilities mean we are well positioned to significantly capitalize on the market opportunities available. We are passing through the significant increases in raw material costs and to a lesser degree in energy in substantial pricing adjustments, while volumes in many areas are increasing due to disruption to the global manufacturing and distribution networks of competitors, particularly those based in Asia.

With little backward integration, we have always had to be agile in our sourcing strategies and our global procurement and supply chains have now reached a level which I call market-leading. As a result, we are expecting robustly positive period-on-period volume and margin development in the second quarter of the year and potentially thereafter based on our latest trading data.

Clearly, the geopolitical and market context remains highly volatile and the potential impact of prolonged disruption on end market demand is uncertain. We are therefore making no changes to our 2026 outlook at this stage. Overall, we expect to make year-on-year progress driven primarily by our self-help actions. Specifically, we anticipate that full year contributions from our cost reduction programs and product investments made in AS and CCS during 2025, ongoing margin progress in our specialty businesses, Health & Protection volume and margin improvements will partially offset by wage inflation and normalization of bonus accrual in the year. At the same time, the longer the trading conditions experienced in Q2 persist, the greater the upside risks to our expectations.

So in summary, we continue to stick to our strategy to transform this business to our specialty. Now more than ever, this is the right strategy for our portfolio. Through the last 4 years of subdued sector demand, coupled with the additional debt from the Eastman Adhesives acquisition, our balance sheet has been one of our biggest challenges. Alongside making the portfolio more focused and resilient, our broadened divestment program will help to reduce our leverage. Meanwhile, we continue to work positively with our finance providers to ensure the runway to deliver our plans. Most importantly, we have begun to see some evidence that underlying specialty end market demand is improving. Our increased operating leverage to volumes in these markets is in the end, the key driver of our earnings ambitions and hence, the value creation opportunity in this company.

In the broader context, as negative as the Iran conflict is for this world in general, it does represent a positive catalyst for us with our increased margins, reduced cost base, regional production footprint and best-in-class procurement. It will take 6 to 12 months after a potential end to the conflict until global supply chains are back to normal, and it is interesting to see that many customers are reevaluating their global networks, especially their Asian supply exposure. Anyway, we continue to be bold and fast, execute our strategy, capture the opportunity and mitigate all the related challenges.

In summary, we have made a progress by sticking to our strategy, and we will remain focused on delivering it with the same focus and operational discipline going forward because there is scope for substantial value creation.

Now just before we take your questions, you will have seen we have made another announcement this morning. Lily has accepted the role of CFO at Umicore in Brussels, Belgium. We have been fortunate in being able to bring on board Iain Torrens, most recently interim CFO and then CEO of Wood Group as her interim replacement while we take the time to identify Lily's permanent successor.

I have very much enjoyed working with Lily since she joined Synthomer in summer 2022. She has made a significant contribution, particularly in helping to steer the business through a very challenging period for the chemical sector. I thank Lily for all the hard and successful work, her professionalism and her friendship to me and the team. On behalf of the Board, Executive Committee and all of Synthomer, I wish Lily every success in her new role.

I also look forward to working with Iain, who is a seasoned CFO with strong capital market experience, which will be very relevant what remains a critical period for Synthomer.

Thank you, Michael. Very kind of you saying that. It has been a real pleasure for me to work with you and the rest of the team. Together, we delivered a lot in the last 3 or 4 years. I have no doubt the stronger Synthomer will be able to capitalize on the huge opportunity in front of it.

Now with that, Michael, Faisal and myself are here happy to take your questions.

[Operator Instructions] We'll take our first question from Sebastian Bray from Berenberg.

I have 2, please. The first is on the situation in nitrile latex because it looks like shortages at Asian peers are going to lead to a situation of fly-up margins. Can you talk about why EBITDA in this business couldn't double or travel temporarily based upon this?

And my second question -- sorry to go back there, I think there was an interruption from incoming calls, sorry about that. So the first question is, given the shortages at Asian peers for nitrile and the fact that spot prices have shot up, why couldn't EBITDA in that area double or triple this year? And would it potentially be a good opportunity to exit the business at a stage of fly-up margins where the valuation is likely to do better?

My second question is on April trading. There have been mixed messages from sector peers about whether this has improved or stepped -- has continued to improve or stepped down on the volume sense. Can you give any commentary around this?

And if I might squeeze a third one in. The inflow from receivables factoring in '25 and its effect on net debt, am I right in saying that the GBP 75 million to GBP 80 million is effectively added back to the net debt on a covenant basis for '26 because it's been repaid?

Thank you very much, Sebastian. I think I take the first 2, Lily take the third one.

Yes.

I think your assumptions on NBR could be actually quite right. We have enough raw materials. Other people are struggling. We know this. Like you mentioned, we do not have any shortages on NBR production. We had at the very beginning, but then we are covered. So I would say it's a very positive situation we are having right now. Could margins double or triple? Why not? Let's see. It's definitely looking very good right now after this business was breakeven or slightly positive. So I think we are for now in a very good position. It also clearly shows that we do have a leading position, and we have critical mass. So I think the whole Malaysian chain, as we will call it, our customers and ourselves is in a much, much better position than before. I even think this is going to last longer because I think a lot of the end-market consumers, they will think about such events. And probably they will -- I mentioned a little bit in my speech, they will probably think about a more balanced approach of their supply situation. So I think this is even a lasting benefit. But indeed, Sebastian, it looks very good.

What do we do with the business in the future? I think this we are always evaluating. It is a base chemicals business, as we always mentioned, it sits in HPPM division. So I think, yes, I don't want to go further, but as always, when the business improves the performance, it is more interesting for potentially better [ onus ].

Your second question on April, and I'm here, I don't know, maybe more optimistic than what you have said about the sector, but we do indeed see very strong margins and volumes pretty much across the whole portfolio, meaning on the specialty side, but also on the base side is predominantly against, of course, Asian suppliers. But in this world, you have so many interlinked supply chains. So even in high-end specialty chemicals delivered in Europe or in the U.S., you might have an intermediate from Asia in there. And so far, as I mentioned, I think really we have a really world-class procurement, which works extremely aligned with the 3 divisions. I think we can capitalize on this quite nicely. So I think the problem is that we don't have visibility enough in H2 because we don't know how this conflict ends, how the world shapes out. But if you ask specifically about April, it does look very good in terms of margins and in terms of volumes and in terms of all 3 divisions.

Very good. I take over on the third question, Sebastian. Yes, the question about receivables financing. Look, the -- what we said is we expect cash flow -- free cash flow neutral for this year after adjusting for the GBP 50 million onetime KLK receivables purchasing that was done in December 2025. So that's what we said.

So when I look at the free cash flow statement for '26, there is effectively a GBP 50 million outflow for repayment of receivables financing. Is that right?

That's correct. I mean everything being equal, that would be correct.

KLK, we kind of neutralize back to neutral free cash flow and we neutralized the GBP 50 million KLK.

So just to clarify, the free cash flow leaving aside the KLK -- so imagine KLK was not happening and the receivables were not being repaid, the free cash flow would be 0 breakeven.

Yes.

Okay. Understood. That's helpful. And Lily, all the best for your time at Umicore, I look forward to seeing you there as well.

Thank you so much, Sebastian.

As you know, Sebastian, last year, we also said neutral and at the end, it was much better. So I think there are always opportunities. Thank you, Sebastian. You stick with me and Synthomer.

We are now taking our next question from Harry Philips from Peel Hunt.

Three from myself, please. Just on the cost savings in the current, I'm assuming that the sort of comments around Texas are a part of it. But is there a sort of easy breakdown of how the cost savings will appear across the 3 businesses?

The second question is just on sort of raw material put-throughs and what that does to the revenue line. And I'm guessing if you want to put through, just dilute margins in the short term, just reflecting that sort of simple math. And then lastly, probably one you won't want to answer, but I'll ask nonetheless, is just in terms of divestments, horrible sort of timetable you might have in your thinking around that. I appreciate, obviously, you can't entirely control it. But given we've got this additional visibility around the refi into '29 and the sort of market conditions that are currently prevailing, it sort of seems that activity in that process might quicken up further still.

Yes. Shall I -- do you do the cost?

Yes, I'll take the first, maybe partly second.

Okay.

And you talk about the last. So Harry, cost savings, it's coming from 3 divisions and also central functions. Michael mentioned procurement is part of -- that's also part of -- key part of the cost saving and self-help actions. We always say CCS bears more of the cost base in the group. So we expect more from CCS, but the other 2 divisions are also contributing significantly together with the functions.

On the raw material price impact on revenue and margin, mathematically, you would say if we simply just pass on the raw material price increase, added to revenue, of course, that would dilute the gross margin. However, we are having good commercial teams. We have long-term customer relationships. On the up, we're passing on, but we're probably passing on proportion to the value creation in the situation. So I'm expecting us to be able to mitigate that. And the opposite side, when material price come down, we manage to hold on to the margin. Michael?

Yes. On the revenue side, clearly, raw materials are massively up, sometimes 2x, 3x up. So obviously, our revenues go up. And as Lily pointed out or we all pointed out before, I think there is room for margin improvement in such a situation on the way up, as you can see it right now, and maybe there's even the bigger opportunity on the way down when the raw materials are going down. We see a certain stabilization of raw materials. They went steeply up after end of February. We see now a certain stabilization. And let's see how this whole develops over the time. But right now, it's reasonably -- I think if you are bold and fast at the beginning, it's a reasonably comfortable position to be in right now.

Your third question on the divestments. We announced a broadened program in August of last year. And I think if you look into the whole market situation, everybody, it takes 12 to 18 months until you have a divestment done. It's just the market conditions right now, maybe to change a bit because I think the chemical sector generally is increasing over the last 3, 4 months. We have 4 processes running. I think one of them, we can hopefully conclude rather sooner than later. We have 2 processes, I would say, in the next few months. And we have one process that will go into H2. Again, as always, it needs two to tango. We are not making bad deals in our company. I always say there are 2 things of relevance to make a deal. One is the valuation, the money you get. And the other one is the [ SPA ], the terms and conditions that do not bring you in a critical situation 2 or 3 years down the road. I think that's the schedule. There are active projects, and you will hear for us, hopefully, in the near future.

We now move to our next question from Stephanie Vincent from Bank of America.

I just had a couple of questions on the new revolver as well as the U.K Export Finance facility. Just want to know, I guess who the new issuer is. You did say it was the subsidiary of Synthomer, so like the issuer of the bond. So just wanted to know what the changes were there? And also if you are willing to disclose -- if you are able to disclose it what your view is on the new guarantor coverage under the 2029 note that remain in place.

And then my next question is just a little bit of housekeeping on the cash flow. I know that you gave a good overview but just want to know just your boarder view on the cash taxes in 2025?

So we have --

I'll start with UKEF. I think UKEF is a --

No, you're good. Yes.

-- it really was extremely helpful in this complex refinancing project that we went through over the last few months. And yes, I just think it's a very -- we had a very good cooperation there, a lot of support from UKEF. I think that it's an excellent institution to promote the purpose of UKEF, which is really manufacturing and exporting from the U.K. We are very grateful to UKEF.

Indeed. And also, I would comment on the rest of the lenders in the lending group. We have had good constructive discussions with them in the last weeks and months. We have put a very detailed and good disclosure in the [ RNS ] already. And I think Faisal is in the finance section, isn't it there. So we put in the structure, the covenant, et cetera, et cetera, et cetera, and the changes there. So it is a subsidiary within Synthomer plc this time around that was taking the new financing package. And I suspect cash tax for this year won't be neutral or won't be positive, but we are expecting probably high single-digit cash tax outflow this year.

Okay. And also just in -- if I can throw in another question just about some of the news articles that we've seen in the U.K. press, et cetera. I know you've gotten the UKEF facilities. But just any sort of additional support that you could see from European government directly or indirectly to your business, things like antidumping that have had an impact or could have an impact this year or next year?

Yes. That's a good question. We are -- as you know, the European Union, in particular, is not always as fast as you would like them to be. But we are part of several of those, I almost call it, projects. And within the next few months, we should get some news. I think the European Commission in the meantime realize that something has to be done. And I don't want to be as blunt as Jim Ratcliffe, but it is a big problem. The energy, the regulation, the disadvantages what we have against Asian, in particular, Chinese suppliers is substantial. And I see movement in Brussels. I see movement. So we are actively -- sometimes we are front runners -- sometimes we are joining a team, but I do expect positive news in several of our businesses within the next few months coming from Brussels. And this would, of course, sometimes totally change the economics of business. But as always, we try to live without those things. We take them if they happen, but we always position our business that we don't need it. But it would fundamentally change some of our businesses. Of course, the most challenged ones could be, yes, severe positive impact if this goes through in the next 3, 4, 5 months.

We'll take our next question from Kevin Fogarty from Deutsche Bank.

Just 2, if I could. One, I guess, is on the trading side. I guess, are you seeing anything -- I appreciate it's difficult, visibility is low. But I guess given the momentum you've seen, are you sort of seeing anything to make you feel that there's the sort of competitive advantage, you offer or rather than just a kind of short-term pull forward that you might be experiencing? I know some companies have talked about the latter. So just anything you might be seeing to sort of give you confidence that there's some sustainability around this and perhaps it is playing to that kind of structural advantage you offer?

And I guess sort of secondly, just if we sort of come back to your free cash flow guidance, obviously, kind of the implication is it sort of positive before the factor repurchasing. And if we sort of think about the bridge to kind of unchanged expectations for this year, now the kind of higher interest costs, albeit I appreciate the sort of cash interest costs will be lower than P&L. CapEx will be a bit lower than 2025, but nevertheless, sort of still remaining substantial. And there's risks, I guess, in terms of working capital in a high raw material price environment. Are there any sort of factors we should be thinking about to kind of support that kind of free cash flow outlook that we haven't sort of thought about? I appreciate there's going to be kind of restructuring costs, et cetera, perhaps this year, but anything you would sort of focus our attention on to fill in the gaps?

Thank you, Kevin. Lily will take the second question, but I start with the top of every cash flow is EBITDA. And I think here, we have a good potential, and that's what it all starts. Lily will comment further about net working capital and CapEx.

On your trading question, I really do believe that we have a competitive advantage in the current situation. We work now for 3.5 years on reducing cost on increasing margin. I mentioned this 500 bps up over the last 4 years is very substantial. We have our regional footprint, which not all competitors have. So we can really produce 90% plus in the region for the region. And as I have mentioned, we have now a world-class procurement aligned with the divisions.

I think these 4 factors, in addition that I believe we reacted really on the opportunity on 28th of February, we acted bold and fast. And I believe this gives us our strategic positioning, as I mentioned, footprint, businesses we are in, end-markets we are serving, competitors we are having, I think we do have a competitive advantage even against some European or American peers, definitely against Asian peers who simply struggle to procure feedstock. It's particularly problematic, as I would see it in Taiwan, in Japan and in Korea, which are big, big intermediates and raw material suppliers or end-products, but it's also in China. I was a little bit surprised that China is struggling as much as it is struggling. But it probably has to do that China is lacking certain intermediates. And that's why we have several competitors in China under force majeure, and that is obviously for us a pretty interesting situation.

Yes, Kevin, on your second question -- sorry, have you finished?

Yes. No, that's great. Yes.

All right. On your second question about free cash flow. Look, 2 things on the focus side, I would draw your attention to, one of which we talk about, which is CapEx. We're expecting 2026 CapEx to be around GBP 50 million lower than what we have spent in 2025. And second factor I also alluded to is inventory reduction, right? And that structural reduction we have done in the past, and we continue to look at it now. Offsetting that is raw material price movement or raw steel price going up at the moment. But we also said we expect EBITDA to grow from 2025 level. And Michael also mentioned from an outlook perspective, we probably see upside risk on EBITDA this year versus what we said before. So those factors together, coming back to my previous point, adjusting out for the unwind of KLK's receivable purchasing, we're expecting broadly free cash flow neutral. But you have to add it back that amount when it comes to net debt forecast for the end of 2026.

Just to add to that, just the complete clarity on the receivables factoring point. It's almost best to think of the net debt at the year-end of GBP 575 million as being GBP 625 million as the starting point once you adjust for the receivables factoring and then build your sort of free cash flow assumptions from there.

I will just add one more point because it's important. Our covenant levels are reset as part of the refinance package throughout the tenure, and that is consistent with how we look at the business, both from a cash flow perspective and also business plan perspective. Clearly--

Sure. And I guess --

We mentioned.

Okay. So given the kind of refi and the covenants --

Yes.

Presumably kind of factoring is off the table now for 2026 or not?

We always say the receivable purchasing that we've done December 2025 with KLK, that's a onetime transaction.

To be clear, we do retain our GBP 200 million committed factoring facility going forward, and we do anticipate continuing to use that as required.

Sure, sure. But I guess sort of the kind of one-off nature that you did in 2025, that should be a kind of nonrepeat by nature.

Exactly. The GBP 50 million is a one-off. Yes.

We now take our next question from [ James Carty ] from Barclays.

I just wanted to understand a little bit better on the liquidity test, which you referenced in terms of the new covenants, which are governed by the RCF and U.K. facilities. Can you expand on what the liquidity tests are there?

So it's quite customary in the situation. It's a monthly liquidity test. So it's -- there's a minimum liquidity test that we test monthly throughout the refi period. And again, I go back to the point, we have been through this carefully with our very detailed cash flow forecast, and we see very healthy liquidity headroom throughout the period.

And the requirements are actually even more favorable than before. I think that's important to mention.

Yes.

And then just to make sure I've understood, on the sort of phasing for free cash flow for this year. So we should expect a sort of more pronounced free cash flow outflow in H1 on account of the movement in raw material prices, I guess. And did you say that you had already repaid the GBP 50 million temporary receivables facility already or that was expected to sort of materialize over the course of the year? I don't know if I caught that correctly.

Yes. We said that was unwind already early part of March this year. So that's second part of your question. And yes, we are expecting the normal sort of seasonality when it comes to working capital this year. So you would expect us to see -- you would expect to see free cash flow difference between H1 and H2 as we always do.

We also have opportunities on net working capital savings, especially on inventories in some areas, and that is offsetting partially the increased raw materials.

Our next question comes from Angelina Glazova from JPMorgan.

I think I just have one follow-up left at this point, which is on order books and current trends. So obviously, it's difficult to quantify the extent of the potential upside from the Middle East situation. But if you look between the segments of Synthomer, and we've already had a bit of a detailed discussion on nitrile latex. But if you look at Coatings and Construction Solutions and Adhesive Solutions, where would you say do you see more upside and more momentum in your order books, at least as of April so far?

Yes. I think, like I said, it's pretty broad-based. We touched a lot upon NBR. I think that's a particularly positive situation. We see it as well in CCS division. We see it in AS division where you have a lot of Asian competitors, especially in China on the hydrocarbon side. So there, we have clear advantages. And yes, it's definitely double-digit volume gains. As I mentioned, the margins up. So it's pretty broad-based through all the divisions. There are a few businesses that are much less affected positively, like maybe our acrylate monomers business or even there, there is a certain upside, but this will benefit less from the situation. But the major areas of our business, NBR, CCS division broadly, especially construction coatings looks very good right now. Construction better. I mentioned energy solutions, higher oil price, always higher drilling activity, good for us. I mentioned AS division. So generally, it's a pretty broad-based situation.

But I also would like to mention, Angelina, it's not only the Iran situation. I really believe that the strategic points, and I mentioned the 4 elements of cost margin, regional footprint, procurement, what we have worked on over 3, 4 years, I think this is coming into -- coming very nicely into play. So it's not only a blip now of Iran and 3 months later, it goes back to normal, I would say, I really see this to a certain extent, sustainable. I call it sometimes is an operational benefit right now because we do have manufacturing, we do have feedstock others might have less. But I believe there's also this kind of psychological advantage that customers are rethinking how do they procure in 2027. And I can give you some life examples of large customers, the discussion with them about the 2027 contract is different than it was before. And before was eagerness to save every cent you can save and take everything from China and the tone of those discussions has significantly changed. So I believe that -- and nobody knows, but I believe that this could be a sustainable advantage for us. Of course, what goes against it at one point, if this conflict drags on and on, that we have a demand destruction via inflation. I think that's a bit of the balance that we can see. But I believe, really, as I said, operational advantage and kind of psychological advantage should give us a nice, I mentioned, 9 months operational and then a further maybe 12 months on the structure of how customers procure their input.

This is great. Thank you very much for the color. Really congratulations and best of luck in your new role.

Thank you.

Our next question comes from Sanjay Bhagwani from Citi.

Very comprehensive presentation and the details. I just have 2 questions left. My first one is on the disposals. I think you already alluded to there are 4 active processes right now. Are you able to help us with some sort of sizing of the magnitude of this -- the business being intended to dispose. So some sort of like scale, like sales, what sort of sales this business have or the EBITDA? That's my first question, and I'll just follow up with the next one after this.

Yes. I didn't understand at the beginning, you are from Citibank, right?

Yes, that's right.

Okay. On your divestment question, the magnitude, I think we sometimes talk about GBP 150 million to GBP 200 million again, depending -- there's a wide range of what happens. But this could be a range that we would be looking at. EBITDA levels are reasonably low. So you don't need to deduct too much because that's the reason why we are selling or trying to sell those businesses. There might be one business that has a little bit a different structure, which is a more profitable business, but a smaller business where we would get higher values. But 3 out of the 4 processes are traditionally low EBITDA businesses, reasonably big volumes. So you have to deal with the stranded costs. I think if you take some GBP 150 million to GBP 200 million for all together, it's probably not a bad first shot.

And that's GBP 150 million to GBP 200 million of sales. Is that correct?

No. Proceeds. Proceeds.

Proceeds. Okay.

That's proceeds. It will be of sales like when we announced the strategy in 2022, we said that we have ready for divestment noncore about a little bit more than 1/3 of our business. And about a bit more than half of this is done and the other half in terms of revenue is still to come. But as I said, they are predominantly not very profitable businesses.

That's very helpful. And sorry to come back on the net debt and the cash flow guidance again. So I think Faisal already clarified that starting point here is GBP 625 million for the net debt. Now if I have to think of first half, I do understand that there is an upside risk to the EBITDA and H1 is tend to be seasonally higher EBITDA as well. And whereas working capital could be a negative headwind. CapEx are lower, as you alluded to it. So if you have to put it all together on the H1, let's say, if you have to think of this GBP 625 million as a reference point for the net debt, how do you see this evolving for H1 and then for the full year?

I would expect full year to be consistent or better than the adjusted year-end 2025 number. And I would expect normal seasonality to apply here that H1 net debt will be higher than year-end.

Higher than GBP 625 million. Is that correct?

Yes.

Probably worth also saying in relation to the seasonality of the net debt, a couple of points under the new transaction, the new refinancing. The next covenant test for us is the first quarterly test in September this year. We don't have a June testing date under the new arrangement. That's effectively been waived. And the quarterly testing has been very, very carefully sculpted to reflect the cash flow profile of the business, which has been analyzed in a huge amount of detail as part of this refinancing by the banks and by ourselves so that it's sculpted to match our expected cash flow profiles over the course of the year.

There are no more questions from the conference call. I'd like to hand back to the room for webcast questions. Please go ahead.

Thank you. So we -- quite a few webcast questions today, several of which we've answered in detail, but I'll try and wrap up a few others that are still slightly outstanding together a little bit.

Assuming the war ends in the next few weeks, how long do you think the tight markets in Europe could last before Asian imports return? And could you comment on whether you see any demand areas where the environment has cyclically improved?

Yes. I think, like I said, I believe if the conflict ends from that moment, it could take 9 months until everything is kind of back to normal, whatever normal is. A lot of ships are on the totally wrong place in this world right now. The supply chains are truly disrupted. This is not just a little delay of matters. So I believe -- and it's interesting that Jim Fitterling from Dow, he's also kind of hinted that like 9 months. I think this is really not a bad assumption. So the advantage, as I called it, the operational advantage, I believe, is 9 months. This is not a matter of 1 or 2 months to come back.

If I look at cyclical improvements now, leave alone the Iran situation. I think coatings after many years now or several years of no coating season, we do see a coating season right now. I do see the U.S. improving. I do see the NBR business improving except for the Iran situation. I do see construction improving. I think there are quite a few sectors which is -- again, there are 2 aspects. One is the market one, the cyclical that comes to an end and is favorable. So these are the markets I would mention. And on the other side is the Iran situation. So I think coatings, construction, NBR are probably good examples where the cyclicality would finally in our favor.

I think in addition, our energy solutions business, if you recall, that has been through a significant downturn, but we believe that's temporary. It will come back, and that's a higher-margin business for us.

Yes. And there is a close link between oil price and drilling. And yes, the more drilling, the better for us.

And then several questions along the same themes. The designation of the unrestricted subsidiaries under the bond effectively means that those move outside of the bond guarantee to some degree in favor of the RCF and UKEF, what businesses do those subsidiaries tie back to, to the extent we can say? And is there any way of sizing those?

Sure. Look, the [indiscernible] is wrap most of our -- currently most of U.S.A. operations, and that's carefully selected, give us the strategic optionality for the business, and that's part of the security package. It's all permitted in the indenture for 2029. If you want to look at the size of that operation, if you go back to our 2024 annual report, the segmental analysis on geography and indeed, our to be published annual report today, the numbers are quite similar. The revenue is around sort of 25%. I think I said around 40%.

Yes. And I think, if you take this a bit in a holistic view, I think this refinancing deal, which was a complex one, but we have concluded it now. I think at the end of the day, this is beneficial for all stakeholders because it gives us stability. It gives us runway into 2029 to focus on the divestments, to focus on the business, to focus on the customers. And at the end, that means that our trading is better. It means that our balance sheet gets better and at the end, that is good for everybody. What is important is also what Lily said that this whole transaction is fully in line with the permissions in the bond indenture. So yes, I think these are important statements.

Very good. One other query. Can you say anything about the -- any further progression on the margin on the extended bank facilities?

Yes. Look, the -- I think we have put in a number in the trading statement. I think we say about P&L cost this year around -- or interest cost this year around GBP 70 million. I also mentioned the cash interest cost around mid-single-digit millions lower. But it's a comprehensive deal, I would say.

I think it's a good deal for us. And if you look at cash interest, you probably take [ GBP 3 million, GBP 4 million ] more for this year and GBP 7 million, GBP 8 million more for next year.

Very good. And then I think the last question basically is, do you have any comments on how you intend to address the bonds in 2029 following today's transaction?

Yes. I would just go back to start with to reiterate what Michael just said, the deal we have completed today is a very good deal. It gives us the stability, the runway to execute our divestment and also transform the business into a higher-margin specialty businesses. It gives us liquidity, give us the relaxed covenant and much needed maturity, a much extended maturity. 2029 refi, look, we always do our refi 12, 18 months ahead of maturity. We'll do that again this time around. And with the transformed business with us being able to delever the balance sheet, we truly believe we'll be in a good position to do the refi when it comes.

Very good. I think we've covered the key areas on the webcast as well.

Thank you.

Thank you very much.

Thank you very much. Have a good day.

Good day.