Q2 2026 Synthomer PLC Earnings Call

August 4, 2026

Speaker #1: Good morning, and welcome to our 2026 first-half results presentation. I'm here with Ian Torrance, who joined us in May as interim CFO and whom some of you will already know, and Faisal Taba, Head of Investor Relations. Together, we look forward to answering your questions at the end.

Michael Willome: Good morning, and welcome to our 2026 H1 results presentation. I am 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 H1. 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. At the end, we will discuss what we expect for the remainder of the year.

Speaker #1: Regarding the agenda, I will provide an overview of our strong performance and the further strategic progress we made in the first half.

Speaker #1: Ian 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.

Speaker #1: 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 five headline points that frame our first-half performance and the strategic context in which it was delivered.

Michael Willome: Let me begin with the highlights and the five headline points that frame our H1 performance and the strategic context in which it was delivered. Against the backdrop of a market environment which remained complex to navigate, we delivered the H1 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 H1 was primarily driven by consistent strategy delivery and self-help.

Speaker #1: Against a complex backdrop that remains challenging to navigate, we delivered a first-half performance that was ahead of expectations. Our revenue grew 5% in constant currency, EBITDA rose 13%, and 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%.

Speaker #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.

Speaker #1: 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.

Michael Willome: 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 nonwoven fabrics. We have also focused on increasing our global reach with good regional growth in China, the US, and the Middle East. All three 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.

Speaker #1: In the period, this included positive developments in intermittent coatings for data centers, additives for onshore oil and gas drilling, medical adhesives, and non-woven fabrics.

Speaker #1: We have also focused on increasing our global reach, with strong regional growth in China, the U.S., and the Middle East. All three divisions generated volume and revenue growth in the period.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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 strong position to continue to support our customers through a lower demand environment and through the recent dislocation in global chemicals value chains.

Michael Willome: 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. 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.

Speaker #1: And in some areas, most notably the MBR business, we experienced meaningful increases in activity during Q2, as some of our competitors found it challenging to fulfill supply commitments.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Michael Willome: 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 three further divestment projects on the way 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 H1, driven mainly by recurring strategic progress and cost savings, which we expect to continue into the H2, we now expect to deliver a full-year 2026 performance ahead of current market expectations and well ahead of previous year.

Speaker #1: In addition, we have three further divestment projects underway to enhance our strategic specialty focus and capital efficiency, or, put simply, to reduce net debt.

Speaker #1: My final point before I turn over to Ian: 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 full year 2026 performance ahead of current market expectations, and well ahead of the previous year.

Speaker #1: 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.

Michael Willome: 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. Let me now hand over to Iain to walk you through the numbers.

Speaker #1: I will return to discuss strategic progress and the outlook in more detail. But let me now hand over to Ian to walk you through the numbers.

Speaker #2: 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, and excellent procurement function underpinning 13% EBITDA growth and an 80 basis point improvement in our EBITDA margin.

Iain Torrens: Many thanks, Michael, and good morning. As Michael has already covered, the H1 2026 has seen a strong performance by the group with our focus on specialty growth, the strength of our regional manufacturing model, and excellent procurement function underpinning 13% EBITDA growth on an 80 basis point improvement in our EBITDA margin. Let me start on slide six 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 H1 2025 EBITDA comparator for the business to GBP 83.1 million.

Speaker #2: Let me start on slide 6 by reminding you that at the end of June, we agreed terms to sell the Acrylet Monomers business in the Czech Republic.

Speaker #2: With the transaction expected to close at the end of September, and therefore, in line with IFRS, this business has been treated as discontinued for the purposes of the H1 results. This has limited the prior year losses and increased the half-year 2025 EBITDA comparator for the business to £83.1 million.

Speaker #2: One of the key consequences of this change is that it masks the £5 million improvement the team has delivered in that business. Including this improvement, EBITDA grew by more than 20% in H1.

Iain Torrens: One of the key consequences of this change is that it masks the GBP five 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's 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 US dollar relative to the pound led to 5.1% growth, with all three divisions ahead.

Speaker #2: It is a testament to the skills of the team that we’ve been able to deliver a step change in the business’s 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.

Speaker #2: Focusing on the continuing business, we saw revenues increase by 6.7% on a reported basis to £954 million. On a constant currency basis, weakness in the euro and Malaysian ringgit and a stronger US dollar relative to the pound led to 5.1% growth, with all three divisions ahead. Volumes increased across all three 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 and Protection business, benefiting from its ability to support customers amid the market disruptions created by the Iranian conflict.

Iain Torrens: Volumes increased across all three 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 Ukrainian 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 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.

Speaker #2: 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 specialized high-margin elements of our portfolio, contributed to a further 2.8% growth in revenue.

Speaker #2: In total, EBITDA for the continuing business has increased by £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.

Speaker #2: We have attempted to break down the components of that growth, and whilst it is difficult to be precise, I would estimate that around £8 million is recurring in nature, including the growth we've seen in some of our more specialized products like intumescent coatings, used in data centers, energy solutions used in oil and gas drilling, and the actions taken to manage costs.

Iain Torrens: 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. After taking account of both the stronger performance by Acrylate Monomers and the higher finance costs, we saw total group PBT increase by GBP 11.4 million to GBP 12.7 million.

Speaker #2: The remaining £6 million I would attribute more directly to the market disruptions seen in Q2, which we are not currently forecasting will continue into H2.

Speaker #2: 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 Acrylic Monomers and the higher finance costs, we saw total group PBT increase by £11.4 million, to £12.7 million.

Speaker #2: Special items and operating profit were $7 million higher in the period, reflecting a net cost of $36.4 million, the movement principally reflecting a non-cash trade-off of past pension service costs due to late retirees in our US scheme.

Iain Torrens: Special items in 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 US scheme. For the full year, I would expect that special items will be in the range GBP 60 to 65 million, two-thirds of which relate to the amortization of acquired intangibles. EPS benefits from an H1 tax credit, which will largely reverse in the H2. 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 divisions, starting with CCS in Slide seven.

Speaker #2: For the full year, I would expect that special items will be in the range of £60 to £65 million, two-thirds of which relate to the amortization of acquired intangibles.

Speaker #2: EPS benefits from an H1 tax credit, which will largely reverse in the second half. Finally, net debt was £671 million at the end of June, slightly better than we expected—which I will cover in more detail later in the presentation.

Speaker #2: Turning now to divisions, starting with CCS in slide 7. CCS saw robust earnings growth in the period, as a number of the long-term strategic and commercial initiatives contributed to our journey towards a more specialized product mix.

Iain Torrens: 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 US performed strongly, reflecting recent management changes in the Americas.

Speaker #2: Revenue for CCS was up £8 million, representing headline growth of 7.5%, or 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.

Speaker #2: 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.

Speaker #2: On a regional basis, both Asia and the US performed strongly, reflecting recent management changes in the Americas. H1 saw the CCS growth margin continue to strengthen.

Iain Torrens: 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 eight, 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 three regions, with Asia and China leading the pack, followed by the US, with packaging and tires the leading end markets.

Speaker #2: As the shift towards specialty products improved the portfolio price-volume mix, steps were taken in Q1 to proactively respond to market conditions and increase prices.

Speaker #2: Optimized plant loadings and leveraged central procurement services. These factors, together with continued focus on costs, resulted in EBITDA increasing by 33% to £46 million, and the margin expanded by 220 basis points to 11.5%.

Speaker #2: 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.

Speaker #2: Geographically, we saw growth in all three regions, with Asia and China leading the pack, followed by the US. Packaging and towers were the leading end markets.

Speaker #2: While overall market demand remained relatively subdued during 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.

Iain Torrens: 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 reliabilities 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.

Speaker #2: 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.

Speaker #2: 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 £40 million of annualized benefits by the end of this year, with the target remaining to achieve £43 million plus.

Speaker #2: 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 £36.7 million, with the margin expanding by 20 basis points to 12.1%.

Iain Torrens: 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 nine. 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%.

Speaker #2: Turning to the third division, HPPM, on slide 9. On a continuing basis, the division as a whole delivered revenue of £249 million in H1, up 11.7% on the prior year, as the Health and Protection business in particular benefited from its market-leading position during the recent supply-side disruptions in Asia. EBITDA for the division grew 13.7% on a reported basis to £24.9 million, and the margin expanded by 20 basis points to 10%.

Speaker #2: Turning to the individual components of HPPM, the Health and Protection business and its combination of standalone 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.

Iain Torrens: 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 H2. 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.

Speaker #2: Volume increased 13.5% year on year, with significant volatility in both raw materials and finished goods pricing being a feature of both April and May.

Speaker #2: Looking forward, as prices have somewhat normalized, we are not currently forecasting the performance seen in Q2 to continue into the second half. However, the Health and Protection leadership team continues to explore opportunities to exploit our market-leading capabilities in NBR manufacturing and to support customers in the development of innovative thinner and reusable gloves.

Speaker #2: 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 due to conflict disruption.

Iain Torrens: 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. 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 30 April, and today have approximately GBP 680 million of bank and UK facilities, which mature in February 2029, and EUR 350 million of bonds that mature in July 2029.

Speaker #2: 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.

Speaker #2: 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 £680 million of bank and UKIF facilities.

Speaker #2: Which mature in February 2029. And euros 350 million of bonds that mature in July 2029. At the 30th of June, total borrowings against these facilities was 874 million pounds, with a net debt standing at 671 million.

Iain Torrens: At 30 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 30 September is higher than that. 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 to reduce cost.

Speaker #2: 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 £270 million in committed liquidity.

Speaker #2: 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 leverage back below 2x.

Speaker #2: 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.

Speaker #2: At the prior year end, we benefited from a £50 million one-off arrangement with KLK, and also utilized around £115 million of non-recourse facilities provided by banks.

Iain Torrens: 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. 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.

Speaker #2: The KLK purchase arrangement was fully repaid in Q1. At 30 June, bank factoring was circa £150 million. So overall, we reduced net factoring usage, which reduces our operating cash flow by £15 million in the period.

Speaker #2: Turning finally to cash flow and our year-end expectations for leverage on slide 11, as a result of the 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 £90 million, partially offset by a reduction of 8% in inventory volumes since the year-end, as we continue to manage our stock levels.

Speaker #2: 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.

Iain Torrens: As seen in previous years, this seasonal outflow will reverse in H2, 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 H1 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 bonds 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.

Speaker #2: Capex in H1 was £33.5 million. Of this, £9 million relates to growth initiatives, £5 million to the rollout of the penultimate wave of our ERP program, and the balance is SHE and maintenance.

Speaker #2: For the full year, we continue to expect capex to be around £70 million, significantly less than 2025. Finance costs for the first half were £35.4 million; this was up £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.

Speaker #2: The weighted average cost of debt on a cash basis is now 50 basis points higher than in H1 2025. For the full year, we now expect interest costs to edge up a little, to around £73–75 million in the income statement, but to remain around the £65 million level in terms of cash.

Iain Torrens: For the full year, we now expect interest costs to edge up a little to around GBP 73 million to 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 2026 was GBP 66 million, only slightly higher than the GBP 57 million outflow in H1 2025. Reflecting the higher raw material prices. Looking forward for 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.

Speaker #2: 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 2026 was £66 million, only slightly higher than the £57 million outflow in H1 2025, reflecting the higher raw material prices.

Speaker #2: Looking forward to the year end, taking this seasonal reversal in the working capital together with our other forecast assumptions for H2, we would expect to see the free cash flow for H2 significantly strengthen.

Speaker #2: 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.

Iain Torrens: 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 dowry payment of GBP 5 million to 7 million, we would expect to reduce covenant leverage to between 4 and 4.35 times 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.

Speaker #2: Taking all of this together with the disposal of Accolade Monomers, which involves a diary payment of £5 to £7 million, we would expect to reduce covenant leverage to between 4 and 4.35 times by year-end, which is also ahead of our expectations at the start of the year.

Speaker #2: 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.

Speaker #1: 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.

Michael Willome: I'm now going to take you through our strategic progress in the first half. 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 five pillars and three enablers on slide 13 provide executable actions for us. 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 three divisions in turn to highlight the key actions we took in the first half in support of our strategy. Let's start with CCS on slide 15, our most specialty-weighted division. The strategic opportunity in CCS is compelling.

Speaker #1: All five pillars and three enablers on slide 13 provide executable actions for us. And this is our strategic direction, another slide which you will be familiar with.

Speaker #1: 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 three divisions in turn to highlight the key actions we took in the first half in support of our strategy.

Speaker #1: 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.

Michael Willome: 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. 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.

Speaker #1: 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.

Speaker #1: 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 sub-segments.

Speaker #1: For example, our volumes in industrial mescent 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.

Speaker #1: We continue to improve the geographical balance of CCS through refreshed regional growth strategies. This means key account management for our top global customers and targeted marketing to new customers in North America, the Middle East, and Asia.

Speaker #1: Our specialty focus, value selling disciplines, and pricing strategies ensured prompt pass-through of high raw material costs to customers. In our portfolio improvements, we continue to embed a more end-market focus and a 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.

Michael Willome: Our specialty focus, value-selling disciplines, and pricing strategies ensured prompt pass-through of high 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Michael Willome: 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 base chemical products in Europe and the US also benefited from selective competitor capacity challenges during the Q2. 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.

Speaker #1: 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.

Speaker #1: Demand for some of AS based chemical products in Europe and the US 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 40 million pounds since inception, massively improving the margins in this division, and we are targeting 43 million pounds or more going forward.

Speaker #1: The AS EBDA margin of 12.1% in the first half compares with 5.4% at the time of the division's total transformation program launch three years ago.

Michael Willome: The AS EBITDA margin of 12.1% in the H1 compares with 5.4% at the time of the division's total transformation program launch three 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 Q3. 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 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.

Speaker #1: A transformation that speaks for itself. As Ian 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.

Speaker #1: In fact, we are back up and running in Middleburg, Netherlands, as of last week. Let's look at HPPM now, our predominantly base chemicals division.

Speaker #1: The most significant business in HPPM remains our position as market leader in the £3 billion NBR market, with hygiene and emerging market mega trends supporting approximately 6% annual growth.

Speaker #1: 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 and Protection business in the period was strongly correlated with competitor dynamics.

Michael Willome: 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 Q2, in particular, while paper and carpet markets in Europe proved relatively more resilient.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Michael Willome: 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 a 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.

Speaker #1: As previously touched upon, we announced the divestment of our Acrylate Monomer business in June—our fourth transaction since the 2022 strategy review. Achieving this important goal, which removes a highly cyclical and capital-intensive upstream business from our portfolio, was supported by the team's success in substantially reducing AM's losses from £5 million in H1 last year to almost break even this year.

Speaker #1: We will provide further updates on our ongoing broadened divestment program as it advances. Coming now to current trading and the outlook: as we described in H1, we delivered strong progress driven primarily by sustainable strategic growth and continued self-help initiatives.

Speaker #1: 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.

Michael Willome: 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 H2.

Speaker #1: We achieved this despite a substantially more complex operating and commercial environment, a testament to the speed and agility of our teams, our four-region manufacturing model, our world-class procurement capabilities, and our ability to pass through raw material price increases to customers.

Speaker #1: As Ian said, the majority of this was from the EBITDA progress we are making from strategic growth initiatives and self-help—approximately £8 million net in H1—which we expect to continue.

Speaker #1: The remainder was from Q2 activity uplifts, mainly in base chemical product areas—principally in Health and Protection—that we are not currently forecasting will recur in the second half.

Speaker #1: 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.

Michael Willome: Combining the strong H1 outturn and a broadly similar level of recurring strategic and self-help progress as we saw in H1 to H2, the result is an upgrade to our full-year outlook. This now sits slightly ahead of current market expectations for 2026. 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 4.35 times, excluding any further divestments from 4.9 in June. Bringing all this together, our ambition is to substantially and sustainably grow earnings in the medium term, and H1 of 2026 has reinforced our confidence in achieving that objective.

Speaker #1: This now sits slightly ahead of current market expectations for 2026. And as Ian took us through, our free cash flow expectations have also increased, and we expect to reduce leverage meaningfully by this year-end to between 4.0 and 4.35 times, excluding any further divestments, from 4.9 in June.

Speaker #1: 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.

Speaker #1: 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.

Michael Willome: 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 H1, 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, 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.

Speaker #1: 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 on its opportunities for sustained long-term growth in a tangible way.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Michael Willome: 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 three 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

Speaker #1: To wrap up, the opportunity to sustainably improve the earnings power of Synthomer is becoming increasingly clear. As ever, it rests on three reinforcing drivers.

Speaker #1: 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.

Speaker #2: Thank you very much, sir. Ladies and gentlemen, if you'd like to ask an audio question, please press star one on your telephone keypad, and just make sure that your line is not muted.

Operator: Thank you very much, sir. Ladies and gentlemen, if you'd like to ask an audio question, please press *1 on your telephone keypad and just make sure that your line is not muted to allow your signal to reach our equipment. That's *1 for questions. Our very first question today is coming from Stephanie Vincent of Bank of America. Please go ahead.

Speaker #2: Allow your signal reacher equipment. Press star one for questions. Our very first question today is coming from Stephanie Vincent of Bank of America. Please go ahead.

Speaker #3: Hi, thank you very much for taking my question. So, you talked about three further divestment projects. I just wanted to know if you'd be willing to disclose the impact in terms of reducing net debt.

Stephanie Vincent: Hi. Thank you very much for taking my questions. You talk about three 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 to Synthomer's credit profile? 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 H2 2026? How much EBITDA impact or revenue impact do you think was achieved during this period so we kind of know the impact of that? That's it from me.

Speaker #3: Do you actually think, though, that this is going to be deleveraging to Synthomer's credit profile? And in terms of, you said that in Adhesive Solutions there were some reliability challenges.

Speaker #3: 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?

Speaker #3: And that's it from me.

Speaker #1: Thank you very much, Stephanie. On your first question, the divestment, you have four processes right now underway. Number one is Acrylate Monomers, which we announced the signing.

Michael Willome: Thank you very much, Stephanie. On your first question, the divestments, we have four 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 30 September. This should be done, that is not a deleveraging effect. That is more a P&L effect because, as you know, we lost GBP 10 million last year. We have two processes in due diligence phase. Over the next coming few months, we hope that we can come to a signing. As I said, due diligence, you know, these days it's more complicated. It takes longer time to do diligence than in the old days, but it's a strict process. We are talking to several interested parties, we are very confident that we have news in the next few months.

Speaker #1: 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 £10 million last year.

Speaker #1: Then we have two processes in the due diligence phase. So, over the next coming few months, we hope that we can come to a signing.

Speaker #1: As I said, due diligence—these days, it's more complicated. It takes a longer time to do due diligence than in the old days, but it's a strict process.

Speaker #1: 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.

Michael Willome: Again, due diligence phase. One process which we launched just recently, we expect non-binding offers in September of this year. This will obviously then take a little bit longer, it is also a formal process. We have very nice inbound interest, as I just saw this morning. We will take it from there. Again, as I said, September non-binding offers. Altogether, our assumption is that we can get GBP 150 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. I think we have no reason to deviate from this number. Just take this GBP 150 to GBP 200 million. If we are talking about deleveraging, I think it's also interesting to note. You can deleverage in two ways.

Speaker #1: 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.

Speaker #1: 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 for them.

Speaker #1: Again, as I said, September—non-binding offers. So, all together, our assumption is that we can get £150 to £200 million of proceeds, which obviously would be a massive deleveraging.

Speaker #1: In effect, that's the number we have mentioned already a few months ago, and I think we have no reason to deviate from this number.

Speaker #1: So, this take—this $150 to $200 million—if we are talking about deleveraging, I think it's also interesting to note that you can deleverage in two ways.

Speaker #1: Number one is the divestment I just explained, and number two is to sell chemicals, which produces EBITDA. We were last year even below $140 million.

Michael Willome: Number one is the divestment I just explained. Number two is to sell chemicals, which it 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 and GBP 70 away, you have GBP 25 million left. Then for next year, you have less interest because you have a lower leverage. That could take another GBP 10 million down. You probably have GBP 10 million, GBP 20 million more EBITDA. You have lower CapEx because in 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. You can take there about GBP 10 million away.

Speaker #1: Now, if you take $140 million minus $70 million interest minus $70 million capex, you don't have a lot to further deleverage. Now, if this year we go to, let's call it, $165 million, you take $70 million and $70 million away, you have $25 million left.

Speaker #1: Then for next year, you have less interest because you have lower leverage. So, that could take another $10 million down. You probably have $10 to $20 million more EBDA.

Speaker #1: And you have lower capex because, on the capex situation, we had last year, we had £86 million. This year, we have £70 million. As Ian mentioned before, we have our ERP system that is phasing out.

Speaker #1: So you can take there about $10 million away. We have some capex drag, such as Accruacryl monomers, which will be out of the books. So suddenly this $25–30 million becomes $75–80 million.

Michael Willome: We have some CapEx dragger, such as Acrylate Monomers will be out of the books. Suddenly this GBP 25 million, GBP 30 million becomes GBP 75 million, GBP 80 million. It then becomes an interesting part to deleverage the company. I think these are the two levers what we have to deleverage. So far we were mainly focused on the divestments because, as I said, the EBITDA didn't leave too much of cash available. I think this situation is changing. I think we showed quite impressively in H1 how this can go, also how fast it can go. On your second question, AS reliability, it is unfortunate. We did have some occurrences again. I mentioned Middelburg. Middelburg is up and running again. We did lose probably something in the neighborhood of EUR 10 million on gross margin level, which we lost in H1.

Speaker #1: And then it becomes an interesting part to deleverage the company. I think these are the two levers that we have to deleverage. And so far, we were mainly focused on the divestments because, as I said, EBDA didn't leave too much cash available.

Speaker #1: 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.

Speaker #1: On your second question, AS reliability, it is unfortunate but we did have some occurrences again. I mentioned Middleburg. Middleburg is up and running again, but we did lose probably something in the neighborhood of €10 million on a gross margin level, which we lost in the first half.

Speaker #1: You have to bear in mind, as annoying as it is for ourselves especially, but these are big, big assets in long view and in Middleburg.

Michael Willome: You have to bear in mind, as annoying it is for ourselves especially. These are big, big assets in Longview and in Middelburg. These assets, they have a multi-year program to rectify and to change certain items. You talk here very granular, 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 two years. That's why everything got much better last year. This year there was nothing else than these two events. 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. This is not stopping the whole site. These are certain intermittent troubles in one plant. It's one week out. It then comes back again.

Speaker #1: And these assets, they have a multi-year program to rectify and to change certain items. You talk here in a very granular, very, very simple mechanical way—things such as tubes.

Speaker #1: We are going to refurbish them. We are going to change them. That's what we did the last two years. That's why everything got much better last year.

Speaker #1: And this year, there was nothing else than these two events. But it did cost us money. As I said, it's fixed in Middleburg for sure.

Speaker #1: Also, in the long view, we are on the right track. These are intermittent things. You cannot think, you know, this is not stopping the whole site.

Speaker #1: There are certain intermittent troubles in one plant; it's out for one week and then it comes back again. But again, it did cost us money.

Michael Willome: Again, it did cost us money. As I always say, the problem of today is the upside of tomorrow. I think for H2, we are very confident that this will not reoccur again. Yeah.

Speaker #1: 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.

Speaker #1: Yeah.

Speaker #3: Okay, thank you very much. If I can just ask one more question about the phasing of volume increases and restocking with the Iran conflict?

Stephanie Vincent: Okay. Thank you very much. If I can just ask one more question about the phasing of volume increases and restocking with the Ukrainian 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've been up for your business? I am just interested to see the restocking, de-stocking impact of all this volatility, if you see what I mean.

Speaker #3: If we go back to March, April versus May, June—if the March, April sort of cadence had continued—how much do you think, just generally, volumes would have been up for your business?

Speaker #3: I'm just interested to see the restocking and de-stocking impact of all this volatility, if you see what I mean.

Speaker #1: I can start, Stephanie, and maybe Ian would add a bit. I think it's less about the volumes—you see that our growth was only 2.3%. So it's less about the volumes, but the margin helped us.

Michael Willome: I can start, Stephanie. Maybe Iain would add a bit. I think it is less the volumes. You see that our growth was only 2.3%. It is less the

Stephanie Vincent: Right

Michael Willome: volumes, the margin helped us. As we said in the presentation, it was predominantly the base chemical areas such as NBR as the most prominent one. The margins there, if we can be very tangible on this, the margin in January and February was on NBR, especially. It was GBP 180 per ton, went up to GBP 600 and is down now to GBP 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 is going down and we believe that this is for the foreseeable future now, kind of the proper level. This GBP 180, GBP 600, GBP 250 to 300. I think this gives you a bit of an idea.

Speaker #1: And as we said in the presentation, it was predominantly 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.

Speaker #1: Yeah, especially it 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 went really—our Korean, especially, competitors had a problem on the supply side.

Speaker #1: 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 to 50 to 300.

Speaker #1: 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.

Michael Willome: 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.

Speaker #1: We are implementing now, as we speak, a little bit of the new operating model there, which I think will help us a lot, so that we become more independent and we take certain functions, such as engineering and other kinds of less operating functions, into the site.

Speaker #1: We will take it into our hands; we change the business model, we do it ourselves rather than Eastman doing it for us. I think this should be a very, very good situation going forward because logically, we have more interest, more capability.

Speaker #1: It's our business, and we should take more care of it rather than 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.

Michael Willome: I think if we have the fate, let's say, in our own hands, I think this should also improve the situation there.

Speaker #2: I think the only thing—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.

Stephanie Vincent: That's great. Thank you very much.

Iain Torrens: 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. 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. 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. Again, I think we look at those as very time blocks and therefore not necessarily ever going to extend through time.

Speaker #2: 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 that to continue through the balance of this year.

Speaker #2: 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.

Speaker #2: So again, I think we look at those as very time-bound blocks, and therefore not necessarily ever going to extend through time.

Stephanie Vincent: Right. Thank you very much. I'll get in queue. Thank you.

Speaker #3: Right. Thank you very much. I'll get in the queue. Thank you.

Speaker #1: Thank you.

Speaker #4: Thank you for your questions, Stephanie. We'll be taking questions now from Harry Phillips of Keel Hunt. Please go ahead, your line is open.

Iain Torrens: Thank you.

Operator: Thank you very much for your questions there, Stephanie. We'll be taking questions now from Harry Philips of Peel Hunt. Please go ahead. Your line is open.

Speaker #2: Good morning, everyone. A brief 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 £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?

Harry Philips: Good morning, everyone. 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 H2 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, you're 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 H2?

Speaker #2: The second is just on factoring, where broadly speaking you're at £150 million. I'm guessing, given the circumstances around the KLK situation at the back end of last year, that's pretty much as far as you can go or be.

Speaker #2: I know you've got a £200 million facility, but is that as far as it goes, and do we get some back in the second half?

Speaker #2: And then finally, the scope for further restructuring sort of moving forward, if you like, as the sort of new sentiment emerges. And then what sort of impact does that have around drop throughs going forward?

Harry Philips: Finally, the scope for further restructuring, moving forward, if you like, as the new Synthomer emerges. What sort of impact does that have around drop-throughs going forward? I mean, I've got in mind late 2020 drop-through as we go forward and how that might progress notwithstanding disposals, but again, as the new Synthomer starts to mature.

Speaker #2: I mean, I've got in mind sort of late-20 drop-throughs as we go forward and how that might progress, notwithstanding disposals; but, again, as the sort of new sentiment starts to mature.

Speaker #1: Yeah, thank you. I think I'll take your first question and your third one, and Ian will probably take the second one. On the Iran reversal, I have a short answer.

Michael Willome: Thank you. I think I'd take, Harry, your first question and your third one, and Iain probably takes the second one. On the Iran reversal, I have 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. It's probably not a big benefit, but if anything in the H2, it's more a slight benefit rather than that we have to give it back. I go with the third question on restructuring.

Speaker #1: We don't think that this will reverse. I think this 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.

Speaker #1: I think supply chains kind of reorganize 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.

Speaker #1: I'll go with the third question on restructuring. You know, we already said in October 2022 that we are going to divest more than one third of our business, and that we want to become clean, also with a different rating, as a clean specialty chemicals company.

Michael Willome: We said already in October 2022 that we are going to divest more than one-third of our business, that we want to become a clean, also with a different rating than a clean, specialty chemicals company. We are about 60% through this, and we will get the last three divestments done. Actually, it's two of them that really cater for the base chemical situation. 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 four or three closed transactions, it's clear that we are pretty good in reducing stranded costs. I wouldn't worry too much about the stranded costs. You will not eliminate them immediately.

Speaker #1: We are about 60% through this, and we will get the last three divestments done—or actually, the two of them that really cater for the base chemical situation.

Speaker #1: So we will get them done. We will definitely have some stranded cost, but these are stranded costs—they are not huge. You talk here about in single, early double-digit millions.

Speaker #1: After we have done four or three closed transactions, it's clear that we are pretty good at reducing stranded costs. So I wouldn't worry too much about the stranded cost.

Speaker #1: You will not eliminate them immediately. It will take you one or two years, but you will get them down to pretty much where it becomes a zero effect.

Michael Willome: It will take you one or two years, but you will get them down to pretty much that it becomes a zero 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 standalone businesses. You see it now, Sokolov, that's one site in the Czech Republic, and the other assets is the same. That concerns another 3 assets, which are standalone assets. 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 here, is clearly more than 30%.

Speaker #1: I think stranded cost—that should be under control, also bearing in mind that the assets that we are selling are pretty much isolated. So you don’t have a lot of internal agreements and white lines between plants and so on.

Speaker #1: These are standalone businesses. You see it now—Sokolov, that's one site in the Czech Republic. And the other assets, it's the same. That concerns another three assets, which are, yeah, standalone assets.

Speaker #1: 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, clearly more than 30%.

Speaker #1: 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 that may be the best is that we had, since four years, an uplift in gross margin of 600%.

Michael Willome: I think this is the attractive part, because we took so much cost out in the past and we increased our margin. Probably in the whole statement that you were reading this morning, the number I maybe like the best is that we had since four years an uplift in gross margin of 600%. I mean, that's a totally different new world, and this shows you that we are really becoming specialty chemicals. The dilution effect, if those diluters then are gone, I think is massive. That's why also you can see that now we produce an EBITDA of 10.1%. 10.1%, I know some people in 2022 when we presented the strategy at about 6% EBITDA, and I said that we can go up to 15%, some people didn't believe it.

Speaker #1: I mean, 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.

Speaker #1: And that's why, also, you can see that now we produce an EBITDA of 10.1%—10.1%. I know some people, in '22, when we presented the strategy at about 6% EBITDA, and I said that we can go up to 15%.

Speaker #1: Some people didn't believe it. But now you see a CCS division and an AS division—there are 12%, 11.5%, and 12.1% EBITDA. I think there's another one and a half percent in there.

Michael Willome: Now you see a CCS division and an AS division, they are 12%, 11.5% and 12.1% EBITDA. I think there's another 1.5% in there. I think my 15% at the time suddenly become very realistic. That will be then the profile of the Synthomer going forward. 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. Then operating leverage goes the wrong way around. This year, we have just a slight volume increase, you see the drop-through rate I think is quite impressive. I think that's how I see a bit the situation.

Speaker #1: So I think my 15% at the time suddenly became very realistic. And that will then be the profile of Synthomer going forward. So I think that’s why, for us, operating leverage is so important.

Speaker #1: 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 volume. And then operating leverage goes the wrong way around.

Speaker #1: 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 of the situation.

Speaker #1: I think it's also interesting that when we are then—when the last two base chemical businesses are gone—you have a very clean situation, how to run the company.

Michael Willome: I think it's also interesting that when the last two base chemical businesses are gone, you have a very clean situation how to run the company. There is a lot of cost of complexity in our pillar four, the differentiated steering. That costs you money in a way, and it costs you efforts. 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?

Speaker #1: And there's a lot of cost and complexity in our pillar four, the differentiated steering. That costs you money in a way, and it costs you effort.

Speaker #1: 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.

Speaker #1: I think that's the target, which gives you additional benefits, then, on top of the 30% operating leverage that we have right now. Ian, would you take the factoring?

Speaker #2: Yeah, 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 £165 million of total factoring—£115 million from banks, £50 million from KLK—and that KLK facility was repaid in the early part of the year.

Iain Torrens: Yeah, on factoring. I think maybe it's worth standing back and just recapping how we think about it. At the end of last year, we had GBP 165 of total factoring, GBP 115 from banks, GBP 50 from KLK. 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. 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.

Speaker #2: 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 €200 million facility available from our existing banks.

Speaker #2: There's no reason 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.

Speaker #2: 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 round, which exclude the impact of factoring.

Iain Torrens: The most important bit, I think, is to look at what's it cost and also not to tie it up with the free cash flow numbers. We've shown free cash flow numbers this time round, which exclude the impact of factoring. Clearly, 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. GBP 105 million of gross outflow at the free brings you down to ultimately GBP -80 million 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 of factoring?

Speaker #2: Now, clearly, as you reduce or increase factoring, it has an impact on the presented operating cash flow. And that was a £15 million outflow in H1.

Speaker #2: So, 105 of gross outflow at the free brings you down to ultimately 80 negative free cash flow. Take off the 15 that relates to reducing the receivable, got you to 66 million of free cash flow outflow in H1.

Speaker #2: And that's comparable to last year, so sort of up 15%. Does that answer the question on factoring?

Speaker #1: 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.

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

Speaker #1: So that's an impact on the payables. And the most management-controlled item on net working capital is inventory. Inventory is flat compared to last year in December.

Speaker #1: And actually, if you take it in days, it's significantly down. So, I think we have a lot of room here to play on the cash flow.

Speaker #1: And I agree that a face value of minus 80 million outflow is not ideal. But I think if you put it a little bit more granularly, 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.

Speaker #1: And that's why we are also very much sure that we can produce free cash flow, except for the factoring moves in the second half and for the whole year.

Michael Willome: That's why we are also very much sure that we can produce free cash flow except the factoring moves in H2 and for the whole year. At the end, it all ends up in something which you haven't heard from Synthomer in a long time, that we are anticipating a year-end leverage between four 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. Within one 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.

Speaker #1: And at the end, it all ends up in something which you haven't heard from Synthomer in a long time, that we're anticipating a year-end leverage between 4 and 4.35.

Speaker #1: I remind you that last year we had a reported leverage of 4.75. And if you take the £50 million from KLK away, it would have been 5.2.

Speaker #1: So, within one 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.

Speaker #1: 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.

Michael Willome: That brings me then back to the point I made to Stephanie, you make that calculation of significant EBITDA minus reduced interest, minus reduced CapEx, 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.

Speaker #1: And suddenly, you have a meaningful deleveraging effect from selling chemicals at the end of the day. So, I think this is a pretty nice path forward for us.

Speaker #2: No, that's fabulous. Thank you very much indeed.

Harry Philips: No, that's fabulous. Thank you very much indeed.

Speaker #3: Thank you, sir. The next question will be coming from Kevin Forgerty of Deutsche News. Please go ahead, your line is now open, sir.

Operator: Thank you, sir. The next question will be coming from Kevin Fogarty of Deutsche Bank. Please go ahead. Your line's open, sir.

Speaker #4: Great, thanks very much. Thanks for taking my questions. Well done on the results, good outturn. Just wondered if you could put a bit more clarity on CCS and the impact of some of those specialist product areas you called out.

Kevin Fogarty: Great. Thanks very much. Thanks for taking my questions. Firstly, well done on H1. Good outturn. Just wondered if you could put a bit more clarity on CCS and just 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 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 H1.

Speaker #4: Particularly, sort of data center applications, et cetera. Just trying to help us build what contribution they had, what pricing differential might be.

Speaker #4: I guess energy, we can see how much the portfolio that is, but perhaps some of the other areas to just help us get comfortable with the contribution.

Speaker #4: I guess they've made it 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 the outlook, what you're likely to sort of get on with and portfolio transformation, et cetera.

Kevin Fogarty: Just a second question in terms of exceptionals for H2, 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 rates in H2?

Speaker #4: Is there any number you could sort of help us with, just in terms of likely exceptional run rates in H2?

Speaker #1: Yeah, on the CCS, I can even answer the second one question. I think there are very limited exceptionals that we are planning, but Ian is looking into it.

Michael Willome: Yeah. On the CCS, I can even answer the second question. I think there are very limited exceptionals that we are planning, Iain is

Kevin Fogarty: Yeah

Michael Willome: looking into it. I think it's pretty much negligible. On your CCS question, look, these data centers, we always had a very strong construction business, and this year in the H1 is even better. That has basically two reasons. It's partially coatings, partially construction. It's in Asia, it is very strong and is strong in the US 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, and 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 +delta in CCS division. As I said, we expect this to continue going forward.

Speaker #1: But I think you could; it's pretty much negligible. But on your CCS question, look, these data centers—we always had a very strong construction business.

Speaker #1: And this year, in the first half, is even better. That has basically two reasons: it's partially coatings, partially construction. It's in Asia—it is very strong—and it is strong in the US predominantly.

Speaker #1: And that links a lot into the data centers. The data center applications are new for us because there's a huge boom in construction in this area.

Speaker #1: And 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.

Speaker #1: The impact is significant. It definitely explains a portion of the delta—the positive delta—in the CCS division. And as I said, we expect this to continue going forward.

Speaker #1: These are very specialist applications, and not every company can do it. I think, as a truly specialty chemical company like us, we put a lot of innovation behind it.

Michael Willome: These are very specialist applications, 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, yeah, makes us sure that it will continue for a while. It's not only the data centers that's the most prominent example in CCS, then you can go to consumer care, which was lagging a little bit behind in the H1 compared to the energy solutions business and Coatings & Construction Solutions. There are new nonwoven applications for medical gowns and medical, how do you say, nonwoven fabrics that absorbs the blood. That is something which is, again, it's an innovation project. It's something totally new. It's something we are working on.

Speaker #1: We have close customer relations with those data center providers. I think that is something which, yeah, makes us sure that it will continue for a while.

Speaker #1: 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.

Speaker #1: But there are new non-woven applications for medical gowns and medical, how do you say, non-woven fabrics that absorb blood. And that is something which is, again, an innovation project.

Speaker #1: 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.

Michael Willome: You can imagine the medical sector is quite high margin. These are true innovations in CCS. I would say this one is more kind of in the children's feet, also this contributed to the H1 results. The one in terms of contribution somewhere in the middle in CCS, that's the onshore drilling. As you know, in our energy solution business, the oil and gas drilling fluids is something that we know since many, many years, we always develop, we try to innovate, we try to find new customers. 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. Now we found solutions, again, that's true innovation and customer centricity. These are new customers.

Speaker #1: I would say this one is more kind of in the children's feed, 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.

Speaker #1: As you know, in our energy solutions business, oil and gas drilling fluids is something that we have known for many, many years. But we always develop, we try to innovate, and we try to find new customers.

Speaker #1: 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.

Speaker #1: Offshore. And now we've found solutions. And again, that's true innovation and customer centricity. These are new customers. These are not the good old three big Hollywood and big, huge Schlumberger.

Michael Willome: These are not the good old three big Halliburton, Baker Hughes, Schlumberger. These are new customers. They are focused on the US and Canadian onshore drilling. For us, it's new customers, new application, and it's true innovation work. I think this is also something which is very, very encouraging. Somewhere in the middle, as I mentioned, in terms of impact in H1, but it's also something that is definitely sustainable because onshore drilling will go ahead. It's well established, and as opposite 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 three very interesting developments for sustainable growth and profitable growth, especially in CCS division. Iain, do we have anything more on exceptionals?

Speaker #1: These are new customers. They are focused on US and Canadian onshore drilling. So for us, it's new customers, it's a new application, and it's truly innovation work.

Speaker #1: 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.

Speaker #1: But it's also something that is definitely sustainable, because onshore drilling—well, go ahead—is well established. And, as opposed to in the past, we do have a solution for it, and we do have a customer base and a want for it.

Speaker #1: I think these are three very interesting developments for sustainable and profitable growth, especially in the CCS division. Ian, do we have anything more on exceptionals?

Speaker #2: Yeah, so exceptionals for the first half were £36.4 million. For the full year, that's £60 to £65 million P&L impact from exceptionals. About two-thirds of that is amortization of intangibles.

Iain Torrens: Yeah. Exceptionals H1 was GBP 36.4 million. For the full year, GBP 60 to 65 million P&L impact from exceptionals. About two-thirds of that is amortization of intangibles, so non-cash related. Cash outflow, GBP 5 to 6 million in H1. H2, I would expect it's a little bit lower than that. Again, non-cash items coming through on that exceptional or special items line.

Speaker #2: So, non-cash related. Cash outflow—five to six million in the first half. Second half, I would expect it's a little bit lower than that.

Speaker #2: So again, non-cash items coming through on that exceptional or special items line.

Speaker #1: So, on the operational exceptionals, very, very limited. The biggest portion is the amortization of acquired intangibles, which goes back, obviously, to the time when we made all these big acquisitions.

Michael Willome: On the operational.

Kevin Fogarty: That's helpful.

Michael Willome: it's very, very limited. The biggest portion is.

Kevin Fogarty: Yeah

Michael Willome: amortization of acquired intangibles, which goes back obviously to the time when we made all these big acquisition, and at the time of the purchase price allocation, it was allocated there. It's a statutory item, but it's not a, yeah, it's not an operational item in a way.

Speaker #1: And at the time of the purchase price allocation, it was allocated there. So, it's a statutory item, but it's not—yeah, it's not an operational item in a way.

Kevin Fogarty: Sure. Okay. No, that's very helpful. Thanks very much.

Speaker #4: So, okay, no, that's very helpful. Thanks very much.

Speaker #1: Thank you, Harry.

Michael Willome: Thank you, Harry.

Speaker #4: Thank you, sir. The next question will be from Angelina Vrzova, a colleague from JP Morgan. Please go ahead.

Operator: Thank you, sir. Next question will be from Angelina Razlova, calling from JP Morgan. Please go ahead.

Operator: Thank you, sir. Next question will be from Angelina Glazova, calling from JP Morgan. Please go ahead.

Speaker #5: Good morning. Thank you very much for taking my questions, and congratulations on the good results for the first half. I have three questions, please. 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.

Angelina Razlova: Good morning. Thank you very much for taking my questions, and congratulations on good results for the H1. I have three questions, please. Firstly, your full-year guidance seems to suggest that in the H2, 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 H1 without any one-off tailwinds that we had. This brings me to two questions. 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?

Angelina Glazova: Good morning. Thank you very much for taking my questions, and congratulations on good results for the H1. I have three questions, please. Firstly, your full-year guidance seems to suggest that in the H2, 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 H1 without any one-off tailwinds that we had. This brings me to two questions. 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?

Speaker #5: So, similar to what we have seen in the first half, without any one-off tailwinds that we had. And this brings me to two questions. First of all, when you look at the months 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?

Speaker #5: And then, secondly, if we think a bit further forward from the second half of '26, so maybe an early look into 2027, how do you see the potential from the self-help measures and strategic growth initiatives contributing to 2027?

Angelina Razlova: Secondly, if we think a bit further forward from H2 2026 and 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. If we take an early look, is this the magnitude comparable to what we have seen in 2026 year-on-year, or is it something somewhat smaller? Do you expect that the growth initiatives to become a more prominent driver as opposed to self-help measures? My third question is just on CapEx. You have confirmed the guidance this time of GBP 70 million for this year, which seems to be at around 3% to 4% of percentage sales. You have also mentioned that this number could decrease somewhat just by virtue of divestments.

Angelina Glazova: Secondly, if we think a bit further forward from H2 2026 and 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. If we take an early look, is this the magnitude comparable to what we have seen in 2026 year-on-year, or is it something somewhat smaller? Do you expect that the growth initiatives to become a more prominent driver as opposed to self-help measures? My third question is just on CapEx. You have confirmed the guidance this time of GBP 70 million for this year, which seems to be at around 3% to 4% of percentage sales. You have also mentioned that this number could decrease somewhat just by virtue of divestments.

Speaker #5: Appreciate this might be a bit of an early stage, but if we take an early look, is this magnitude comparable to what we have seen in ’26 year-on-year, or is it something somewhat smaller?

Speaker #5: And do you expect the growth initiatives to become a more prominent driver, as opposed to self-help measures? And my third question is just on CAPEX.

Speaker #5: So you have confirmed the guidance this time of $70 million for this year, which seems to be at around three to four percent as a percentage of sales.

Speaker #5: 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?

Angelina Razlova: My question is whether you think that this is a sustainable level of CapEx for the medium term. 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? Is this the level of CapEx that can help minimize the reliability issues potentially in the future? If you see the need for the CapEx to somewhat step up, what is the level that you see as sustainable for the cycle?

Angelina Glazova: My question is whether you think that this is a sustainable level of CapEx for the medium term. 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? Is this the level of CapEx that can help minimize the reliability issues potentially in the future? If you see the need for the CapEx to somewhat step up, what is the level that you see as sustainable for the cycle?

Speaker #5: 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?

Speaker #5: And is this a 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?

Speaker #1: Yeah, 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.

Michael Willome: Thank you very much for your kind words at the beginning, Angelina. If I answer your question, July, we have seen as a reasonable month. That is why we are putting out the numbers we are putting out now, 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. As of today, 4 August, we are sure that is why we put up this guidance we are putting up. Actually, it looks pretty good, pretty reasonable. Order books are fine. We always mention the geopolitical uncertainty, which you do not know what kind of happens tomorrow.

Speaker #1: 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.

Speaker #1: I think as of today, the fourth of August, we are sure. That's why we put up these guidance figures we are putting up. So, actually, it looks pretty good, pretty reasonable.

Speaker #1: Order books are fine. We mentioned 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 Ian mentioned, bold and fast to react to situations.

Michael Willome: Also here, we have proven that when things happen and rather dramatic things happen, like on 28 February, that we are really, as Iain mentioned it, bold and fast to react to situations. I am quite comfortable here that we are having a few good months ahead of us. Looking further into 2027, it is probably not unreasonable to assume, if you think that last year we had GBP 137 million, this we are guiding now to GBP 162 million, a little bit plus. You can calculate it easily. You take the numbers, you take GBP 6 million away, which we call a one-time benefit. We always said on revenue level we have H1 of 52/48. On the EBITDA level, it is more 55/45. This gives you very nice indications of where we think that we could land.

Speaker #1: 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 137, this week we are guiding now to the 162, a little bit plus.

Speaker #1: You can calculate it easily: you take the numbers, you take the six million away—which we call a one-time benefit. We always said, on the revenue level, we have H1 of $5,248.

Speaker #1: On EBITDA level, it's more like $554.5 million. 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 $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.

Michael Willome: If you take a progress of some GBP 25 million, for 2027, and we really, as you say, it is a bit premature, but a similar step forward is definitely doable because, as I mentioned, a lot of those benefits that we put in are sustainable ones. Let us see how it goes. I do not commit to any number, and we will see closer to the end of this year where we land. Definitely, our view is that we can make good progress again. Your CapEx questions, I mentioned it, and it is a very good question. When it is enough, what is enough and when it is 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 investment went in over time.

Speaker #1: So, let's see how it goes. I won't commit to any numbers, and we will see closer to the end of this year where we land.

Speaker #1: But definitely, our view is that we can make good progress again. Then, your CAPEX questions—I mentioned it, and I think it's a very good question.

Speaker #1: You know, when is enough? Yeah, what is enough, and when is it not enough anymore? We have a depreciation of £96 million. This will go down with all the divestments.

Speaker #1: Already with accurate Monomath, which is a big site, and a lot of investments went in over time. So this will go down. We guide now for £70 million this year, and I'm absolutely convinced that with £70 million, you can put quite some nice growth capital behind it.

Michael Willome: This will go down. We guide now for GBP 70 million this year, and I am 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 us say GBP 30 million, and then we fix the AS sites. It does not work like this. You would have to shut down a site for one year to change everything. Obviously, we do not want to do that. You cannot buy yourself out of the problem. That is why we designed this multi-year program, especially in Middelburg and Longview again, and this will go on for another some time, piece by piece, until everything is done.

Speaker #1: We have maybe $35 million at the time, $40 million. We need for SHE and sustenance, which includes the reliability work on AS. Here, this is important.

Speaker #1: You know, there's no option that we take now—let's say £30 million—and then we fix the AS sites. It doesn't work like this.

Speaker #1: Because then you would have to shut down a site for one year to change everything. And obviously, we don't want to do that. So you cannot buy yourself out of the problem.

Speaker #1: And that's why we designed this multi-year program, especially in Middleburg and Longview, again. This will go on for some time, piece by piece, until everything is done.

Speaker #1: And as I said, we have now, for a long time, had peace and quiet. Now, in the first half, these two issues came up again, which we assume are rectified for the second half.

Michael Willome: As I said, we had now for a long time, we had peace and quiet. In the H1, there are these two issues came up again, which we assume are rectified for the H2. You still need some, and these are low mid-single digit millions, what you need going forward for the next probably two or three 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. 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.

Speaker #1: But you still need some, and these are low to mid single-digit millions, what you need going forward for the next probably two or three years, until everything is really clean and the size is in the situation where you want.

Speaker #1: Importantly, I am not speaking about safety—safety, we do everything that is needed. I am talking about reliability issues. So I believe that when you then have a depreciation, probably of £85–90 million, that with £70 million, you can actually do a very good job.

Speaker #1: I think that's a reasonable investment rate, which allows you to invest into growth as well. We are not in a situation where we need a new $300 or $400 million site to go into something bigger.

Michael Willome: We are not in a situation that we need now a GBP 300 million to GBP 400 million new site to go into something bigger. I think with gross 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 $89 million. The China Innovation Center was $8 million. The CMA, continuous monomer addition in Mogadore in the US was some GBP 4 million, GBP 5 million, GBP 6 million. That's in our industry where you can meaningfully invest into growth. What I would exclude is that we have special project, and if something comes up that requires a higher CapEx, one project where we need GBP 20 million to GBP 30 million, that will be out of this scope and we will look at it and we will make the usual non-emotional calculations. Where is our payback? When do we get our money back?

Speaker #1: But I think with, yeah, with growth capex of $40 million—let’s say $40, yeah, $40 million—I think you can achieve a lot of things.

Speaker #1: I remind you, the APO investment was eight to nine million dollars, the China Innovation Center was eight million dollars, and the CMA continuous monomer addition in Mogador in the US was some four, five, six million.

Speaker #1: 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 £20–30 million—that would be out of this scope.

Speaker #1: And we will look at it, and we will make the usual, non-emotional calculations: where is our payback, when do we get our money back? And that would not be included.

Michael Willome: That would not be included. This could always happen, that if we have the funds available, that we will do a bigger project, if we get the proper payback, we can create proper returns on it. I think that's a bit out of the system, but I wouldn't exclude it because our divisions do have a lot of brilliant ideas, and one day one of these might land. If you take those ones out, as I said, I think with GBP 70 million like for like, we can invest nicely into the business, including into growth.

Speaker #1: So, this could always happen—that if we have the funds available, we would do a bigger project. If we get the proper payback, we can create proper returns on it.

Speaker #1: So I think that's a bit out of the system, but I wouldn't exclude it because our divisions do have a lot of brilliant ideas, and one day, one of them might land.

Speaker #1: But if you take those ones out, as I said, I think with £70 million, like for like, we can invest nicely into the business, including into growth.

Speaker #2: Thank you very much for your answers. They were very clear.

Angelina Razlova: Thank you very much for your answer. It's all very clear.

Angelina Glazova: Thank you very much for your answer. It's all very clear.

Operator: Thank you very much. Ladies and gentlemen, just once again, if you have any questions or follow-up questions, please press star one. We'll now go to Sebastian Bray of Berenberg. Please go ahead, sir.

Speaker #3: Thank you very much, man. Ladies and gentlemen, just once again, if you have any questions or follow-up questions, please press star one. I'm now going to Sebastian Bray, Alberberg. Please go ahead, sir.

Speaker #4: Hello, good morning, and thank you for taking my question. So, I'd have two, please. The first is on nitrile markets: what happened in China that allowed the availability of raw material to improve so much, and nitrile prices to come down?

Sebastian Bray: Hello, good morning. Thank you for taking my questions. I'd have two, 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. Any update on rumored potential divestment of this segment is welcome. 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? What do you think this will end up at by year-end? Will it stay at GBP 150, go up or go down a bit? Thank you.

Speaker #4: 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.

Speaker #4: And my second one is on receivables. The one-off factoring arrangement of $50 million was repaid, but from what I can see, the total factoring utilization still stands at $150 million.

Speaker #4: Why is this so high at the moment? Is it something to do with arbitraging the cost versus the revolving credit facility? And what do you think this will end up at by year-end?

Speaker #4: Will it stay at 150, go up, or go down a bit? Thank you.

Speaker #1: Yeah, I think the first one—I think on NBR the situation was really, in 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 materials supply.

Michael Willome: Yeah. I take the first one. I think on NBR, the situation was really in 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. They have the largest acrylonitrile supplier is a company very well known to us in China. Also, butadiene is available there. I think they just rectified the issue. If we look at the level of problems in these two months, the Koreans were most affected with the lack of feedstock, then the Taiwanese, then the Japanese, and then the Chinese. China, they have a lot of access to other countries' feedstock. The Chinese, they have still a lot of coal to burn. The Chinese are very fast.

Speaker #1: What we also saw is that the Chinese, they are producing butadiene, and they have the largest acrylonitrile supplier—a company very well known to us in China.

Speaker #1: Also, butadiene is available there, and I think they just rectified the issue. If we look at the level of problems in these two months, the Koreans were most affected with a lack of feedstock, then the Taiwanese, then the Japanese, and then the Chinese.

Speaker #1: Because China, they have a lot of access to, let's say, other countries' feedstock. And the Chinese, they still have a lot of coal to burn.

Speaker #1: So I think, and the Chinese are very fast. And I think this all together resulted in that it took them maybe two months, and they were back into the game.

Michael Willome: I think this all together resulted that it took them maybe two months and 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 one to three years, they are on the top level. 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 is market leading and has critical mass. I think that the Chinese NBR players, they will also play a role over time.

Speaker #1: There are MBR flows coming from China into East Asia in 2000. Sometimes, the quality is not there yet, but then customers might do some blending.

Speaker #1: We all know that when Chinese companies enter an industry, it takes them a while until the quality is at a top level, but it’s always the case that after one, two, three years, they are at a top level.

Speaker #1: 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.

Speaker #1: I always say our MBR business is market leading; it has critical mass. I think that the Chinese MBR players will also play a role over time.

Speaker #1: 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 on the NBR.

Michael Willome: 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 off the NBR, but there are those that might take it over. I think it's just always the same. There's a disruption in the market, and then people find ways. It's like the water that flows always down somehow. That's why this situation normalized again. 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.

Speaker #1: But there are others that might take it over. So I think it's just always the same. You know, there's a disruption in the market, and then people find ways.

Speaker #1: It's like the water that always flows downward somehow, so that's why this situation normalized again. But Sebastian, I think it is important to mention the example that I gave at the beginning.

Speaker #1: 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 at the end of last year and early this year.

Speaker #1: 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.

Michael Willome: I think that's the 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. I think at one point it's clear what we are anticipating. Maybe the receivables question, Ian, if you would

Speaker #1: NBR is a very well-managed, very good, market-leading position-based business, and our strategy is a specialty strategy. So I think at one point, it's clear what we are anticipating.

Speaker #1: And maybe the receivables question, Ian, if you would.

Speaker #4: Yeah, 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 receivables finance is, it's a different source of capital.

Iain Torrens: I guess on receivables, I'd start with the free cash flow impact. 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. If we take out the GBP 15 million outflow in H1, we're back to a free cash flow of GBP -66 million in H1. We've said today we expect that to be positive by the end of the year. Part of that is seasonality, but a big part of it is what's 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.

Speaker #4: And it's cheaper than going to the bond market and the bank market for the business today. So if we take out the $15 million outflow in the first half, we're back to a free cash flow negative of $66 million in H1.

Speaker #4: 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's 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.

Speaker #4: Michael referenced it as well in terms of inventory days, so there are underlying real actions being taken to manage working capital. The receivables in pound terms again increased because of that higher price being charged through to clients.

Iain Torrens: Underlying real action is being taken to manage working capital. The receivables in GBP terms, again, increased because of that higher price being charged through to clients and we get some benefit on the payable side. 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 4.35 times. You put that together with a reduction in terms of improving the free cash flow to break even for the year, I think that will guide you into the low GBP 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.

Speaker #4: 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 to the face value you're seeing.

Speaker #4: Looking out to the year-end, we've given some guidance around leverage, and we've said between 4 and 4.35 times. 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.

Speaker #4: The absolute amount of factoring at the end of the day comes down to the level of availability of invoices. We have a €200 million line.

Iain Torrens: We have a EUR 200 million line. Actually, does it make commercial sense to factor versus borrow under the bank facilities? Today, it makes commercial sense, I would expect we continue to use that, but continue to talk about free cash flow excluding that impact.

Speaker #4: 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.

Speaker #4: But continue to talk about free cash flow, excluding it, excluding that impact.

Speaker #3: 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 $150 million?

Sebastian Bray: That's helpful. Just to clarify, do we have at the moment a covenant net debt and a factoring amount? The factoring amount separate to that is EUR 150, and the factoring amount is excluded from the free cash flow guidance, which is for roughly break even 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?

Speaker #3: And the factoring amount is excluded from the free cash flow guidance, which is for roughly break-even at the end of the year, but it might still go up for day-to-day trading reasons by the end of the year.

Speaker #3: Is that fair or?

Speaker #4: Yeah, 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.

Iain Torrens: Yeah. 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. If raw material prices remain elevated, 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.

Speaker #4: So, if raw material prices remain elevated, then, arguably, that would be a positive for the business, but it could be a negative for working capital and therefore, of course, flow through into debt.

Speaker #1: But we foresee a positive free cash flow.

Michael Willome: We foresee a positive free cash flow.

Speaker #4: Our expectation is a positive free cash flow.

Iain Torrens: Our expectation is a positive free cash flow.

Speaker #3: That's helpful. Thank you for taking my questions.

Sebastian Bray: That's helpful. Thank you for taking my questions.

Michael Willome: Heather?

Speaker #1: 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 a volume sense, which may also have, net-net, a potential for reducing the overall absolute amount of factoring at that point.

Iain Torrens: No, all I was going to say is.

Sebastian Bray: Thanks

Iain Torrens: 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 potential for reducing the overall absolute amount of factoring at that point. Again, it's hugely dependent on raw material prices at the top.

Speaker #1: But again, it's hugely dependent on raw material prices at the time.

Sebastian Bray: That's helpful. Thank you.

Speaker #3: That's helpful. Thank you.

Speaker #1: Thank you, Sebastian.

Michael Willome: Thank you, Sebastian.

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

Speaker #2: Thanks, Sebastian. As we have no further audio questions at this time, I'll turn the call back over to your hosts for any additional or closing remarks.

Speaker #2: Thank you.

Speaker #1: Okay.

Michael Willome: Okay.

Speaker #4: Do we have anything else?

Iain Torrens: Do we have anything else?

Michael Willome: No.

Iain Torrens: Thank you very much.

Michael Willome: Thank you very much for your interest, everybody, and have a good day. Thank you. Bye.

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