Synthomer’s (SYNT) first-half results missed analyst forecasts as a mixed trading spell for its performance elastomers (a polymer with elastic properties) brought sales and profits down for the period. Weak demand for the specialist plastics group’s styrene butadiene rubber (SBR) latex in Europe, as well as slow trading in its functional solutions segment, contributed to a difficult first quarter, although sales in the subsequent three months were in advance of the comparable period in 2018. Analysts at Credit Suisse had forecast group sales of £821m, around 8 per cent ahead of the group’s first-half performance. Conditions in the SBR market are expected to remain challenging, although this should be offset by gathering demand for nitriles (specialist organic compounds).
The group continued to build production capacity, a process that should be helped along by the £654m deal to acquire US-based Omnova. The acquisition, which was approved by shareholders last month, will add 13 assets, eight of which are in the US, a country where Synthomer has historically been asset-light.
Working capital rose by £41.4m and held at around 10 per cent of sales. “Typically we see an investment in working capital in H1,” said chief financial officer Stephen Bennett, “because the sales activities in May and June are higher than the sales activity in November and December.” Synthomer also boosts working capital in response to raw material price rises, although these were a bit lower than they were towards the end of last year’s first half, Mr Bennett added.
House broker Numis forecast full-year 2019 pre-tax profits of £141m and EPS of 32.4p, rising to £182.2m and 34.2p in 2020.
| SYNTHOMER (SYNT) | ||||
| ORD PRICE: | 283p | MARKET VALUE: | £1.2bn | |
| TOUCH: | 281-283p | 12-MONTH HIGH: | 542p | LOW: 280p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 107p* | NET DEBT: | 35%** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 834 | 86.2 | 19.2 | 3.7 |
| 2019 | 763 | 56.6 | 13.0 | 4.0 |
| % change | -9 | -34 | -32 | +8 |
| Ex-div: | 3 Oct | |||
| Payment: | 5 Nov | |||
| *Includes intangible assets of £414m, or 97p a share **Does not include lease liabilities of £42.3m | ||||
