Croda International Plc (LON:CRDA) has announced its half year results for the six months ended 30 June 2021. This announcement contains inside information.
Highlights
| Half year ended 30 June | Statutory results (IFRS) 2021 | Statutory results (IFRS) 2020 | Statutory results (IFRS) change | Adjusted results 2021 | Adjusted results 2020 | Adjusted results change | Adjusted results change constant currency |
| Sales (£m) | 934.0 | 672.9 | 38.8% | 934.0 | 672.9 | 38.8% | 46.9% |
| Operating profit (£m) | 218.5 | 154.0 | 41.9% | 242.1 | 161.6 | 49.8% | 58.7% |
| Return on sales (%) | 25.9 | 24.0 | 190bps | ||||
| Profit before tax (£m) | 204.1 | 144.9 | 40.9% | 229.5 | 152.5 | 50.5% | 59.5% |
| Basic earnings per share (p) | 110.0 | 84.1 | 30.8% | 124.0 | 88.8 | 39.6% | 48.0% |
| Ordinary dividend per share (p) | 43.5 | 39.5 | 10.1% | ||||
| Free cash flow (£m) | 42.7 | 80.2 | (46.8)% |
Record performance driven by accelerated strategic implementation
· Excellent underlying growth across all sectors
o Underlying sales up 27% on 2020, including successful raw material price recovery
o Sales now well above 2019 levels, up over 10% in underlying terms (before the benefit of lipid systems†)
o Strong Consumer Care and Performance Technologies performances, driven by end consumer recovery, customer inventory build and demand for sustainable solutions
o Benefitting from significant capital investment over last 12 months, together with increased innovation
· Successful delivery from recent acquisitions opening up new fast growth markets
o Iberchem profit performance in line with plan; Avanti significantly ahead
o Integration and synergy delivery on track; additional bolt-on acquisitions completed in Consumer Care
· Continued success in building Life Sciences platform
o Outstanding Health Care performance – continued sales growth of vaccine adjuvants and speciality excipients, supplemented by over US$100m of lipid system sales for COVID-19 applications
o Organic growth and acquisition resulting in near doubling of adjusted operating profit
o Over £40m invested in Health Care capacity expansion this half year, reinforcing leading niche positions
Excellent first half financial results
· Reported sales up 39%, driven by organic growth and acquisitions
· Improving margin driving excellent profit growth
o Return on sales up 190 basis points – Life Sciences performance supported by progress in Consumer Care and Performance Technologies
o Record adjusted profit before tax at £229.5m, up over 50% on 2020 and 35% on 2019
o IFRS profit before tax up over 40% to £204.1m (2020: £144.9m)
· Leverage reduced to 1.7x EBITDA, despite increased capital investment and demand-driven working capital build
· Interim ordinary dividend up 10% to 43.5p, continuing an unbroken trend of increasing returns over nearly 30 years
Sector performance*
Half year ended 30 June
Sales | 2021£m | Price/mix | Volume | Acquisition | Currency | Change | 2020 Restated £m |
| Consumer Care | 367.0 | 7.6% | 10.8% | 37.8% | (10.0)% | 46.2% | 251.1* |
| Life Sciences | 290.4 | 41.6% | 5.8% | 22.7% | (8.6)% | 61.5% | 179.8* |
| Performance Technologies | 223.7 | 3.1% | 17.5% | – | (5.9)% | 14.7% | 195.0* |
| Industrial Chemicals | 52.9 | 2.8% | 15.2% | – | (5.4)% | 12.6% | 47.0 |
| Group | 934.0 | 13.5% | 13.3% | 20.1% | (8.1)% | 38.8% | 672.9 |
Underlying sales growth (excluding lipid systems) | Half yearchange2021 vs. 2019 |
| Consumer Care | 10.2% |
| Life Sciences | 14.5% |
| Performance Technologies | 10.6% |
| Industrial Chemicals | (2.7)% |
| Group | 10.4% |
This table compares sales against the first half of 2019 to remove the disruption to the first half of 2020 caused by the COVID-19 pandemic. Lipid systems have been excluded to give a more informative comparator to 2019, given the sales arising from COVID-19 contracts secured since 2019
Half year ended 30 June
Adjusted profit | 2021£m | Underlying growth£m | Acquisition impact£m | Currency impact£m | 2020restated£m | Change |
| Consumer Care | 90.4 | 7.8 | 14.2 | (5.3) | 73.7* | 22.7% |
| Life Sciences | 114.2 | 40.6 | 23.4 | (7.6) | 57.8* | 97.6% |
| Performance Technologies | 34.8 | 6.5 | – | (1.2) | 29.5* | 18.0% |
| Industrial Chemicals | 2.7 | 2.3 | – | (0.2) | 0.6 | 350.0% |
| Operating profit | 242.1 | 57.2 | 37.6 | (14.3) | 161.6 | 49.8% |
| Net interest | (12.6) | (9.1) | (38.5)% | |||
| Profit before tax | 229.5 | 152.5 | 50.5% |
*indicates that sector results for half year 2020 have been restated to reflect the Group’s new reporting structure
All sectors delivering strong growth:
· Outstanding performance in Life Sciences, growing sales by over 60% and improving return on sales to 39.3% (2020*: 32.1%), reflecting continued growth in higher value add niches
· Strong improvement in Consumer Care performance, growing sales by 46% and adjusted operating profit by almost £17m, driven by:
o Significant progress in Personal Care, including improved mix through recovery in Beauty Actives
o Successful integration of Iberchem acquisition, supplemented by Parfex acquisition in fine fragrances
o Acquisition of Alban Muller, boosting natural ingredient portfolio in Beauty Actives
· Demand recovery in Performance Technologies, growing sales by 15% and improving return on sales to 15.6%, significant progress on second half year 2020 return on sales of 10.9%*
Outlook
The first half year has seen a strong performance across the Group, reflecting the global recovery in demand, the accelerated implementation of our strategic priorities and increased investment.
We expect underlying growth across all sectors to continue in the second half year, driven by consumer demand, whilst the customer restocking seen in the first half is expected to moderate. Together with the benefit of recent acquisitions opening up new fast growth markets, we expect continued strong demand for lipid systems and are increasing guidance for sales this year to at least US$200m.
We now expect 2021 full year adjusted profit before tax to be significantly ahead of current expectations. Subject to there being no material change in current market conditions, we expect a similar phasing of profit between the first and second half periods as seen in previous years.
Demand for COVID-19 solution ingredients remains uncertain beyond the short term and the current level of sales could moderate; however, we expect to see an ongoing expansion in the range of applications for lipid systems in vaccines and therapeutic drugs over the medium term. Across the wider Group, the combination of our differentiated business model, healthy innovation pipeline and recent investment is expected to underpin performance and continue to generate increased value for all our stakeholders.
Steve Foots, Chief Executive Officer, commented:
“Our record first half performance reflects the impact of our strategic acceleration and investments, supported by improving customer demand across all regions and sectors. This has been delivered through excellent growth in our existing businesses, successful delivery from our recent acquisitions and continued success in building our Life Sciences platform. With the strategic review of our Performance Technologies business well underway, we continue our transition to becoming a pure play consumer facing ingredients company.
“I am excited by Croda International’s increasing opportunities in emerging technology platforms and faster growth markets, where demand for sustainable solutions will drive our progress going forward. We are investing in organic and inorganic expansion, continuing our relentless innovation and focusing on sustainability across everything we do. This is creating new avenues for future growth, delivering significant value for our shareholders.”
