Michael Willome: Good morning, and welcome to our 2026 First Half Results Presentation. I'm here with Iain Torrens, who joined us in May as Interim CFO and who some of you will already know and Faisal Tabbah, Head of Investor Relations. And together, we look forward to answering your questions at the end. In terms of the agenda, I will provide an overview of our strong performance and the further strategic progress we made in the first half. Iain will then walk through the numbers in more detail before I come back to present the strategic actions we have been taking in line with our sustained efforts to become a more specialty focused business. Then at the end, we will discuss what we expect for the remainder of the year. So, let me begin with the highlights and the 5 headline points that frame our first half performance and the strategic context in which it was delivered. Against the backdrop of a market environment which remained complex to navigate, we delivered a first half performance that was ahead of expectations. Our revenue grew 5% in constant currency. EBITDA rose 13%. EBIT was up 36%, alongside gross margin expansion of nearly 200 basis points and EBITDA margin improvement of 80 basis points to a remarkable 10.1%. This is a strong set of numbers and reflects the compounding effect of the strategic and operational actions we have taken over the past few years and that we have continued to execute with determination and discipline. Our progress in the first half was primarily driven by consistent strategy delivery and self-help. Innovative new products and accessing new markets are an important part of our strategy. In the period, this included positive developments in intumescent coatings for data centers, additives for onshore oil and gas drilling, medical adhesives and non-woven fabrics. We have also focused on increasing our global reach, with good regional growth in China, the U.S. and the Middle East. All 3 divisions generated volume and revenue growth in the period. In addition to self-generated growth and ongoing cost savings, we also anticipated our performance would reflect some expected cost headwinds as we identified at the start of the year. Net of wage inflation and bonus normalization, all divisions increased EBITDA margins in the period. In all, but especially in difficult or uncertain times, it is important to have a strong business model. And from this perspective, we are increasingly well positioned. We have robust supply chains, world-class global procurement capabilities, a focused in-region for-region manufacturing footprint and differentiated specialty products with real pricing power. These underlying strengths of our business model put us in a robust position to continue to support our customers through a lower demand environment and through the recent dislocation in global chemicals value chains. And in some areas, most notably the NBR business, we experienced meaningful increases in activity during Q2 as some of our competitors found it challenging to fulfill supply commitments. These one-off gains, we are not currently forecasting to recur in H2. My fourth point, we continue to execute our strategy with consistency. Throughout all the geopolitical and market disruption and uncertainties, this remains our guide. Our successful debt refinancing in April has ensured we have a stable financial platform to continue to transform the business and the runway to execute our plans. As part of this, we made further progress in our program of non-core base chemicals divestments. In June, we announced the divestment of Acrylate Monomers, removing a capital-intensive and cyclical upstream base chemicals business that diluted margins and cash conversion. In addition, we have 3 further divestment projects underway to enhance our strategic specialty focus and capital efficiency or put simply, to reduce net debt. My final point before I turn over to Iain, we are today raising our outlook for the full year. With a strong first half driven mainly by recurring strategic progress and cost savings, which we expect to continue into the second half, we now expect to deliver a full-year 2026 performance ahead of current market expectations and well ahead of previous year. This and our ongoing cash discipline also supports our expectations of improved free cash flow delivery and faster deleveraging over the course of the year. I will return to discuss strategic progress and the outlook in more detail. But let me now hand over to Iain to walk you through the numbers.
Iain Torrens: Many thanks, Michael, and good morning. As Michael has already covered, the first half of 2026 has seen a strong performance by the group with our focus on specialty growth, the strength of our regional manufacturing model, an excellent procurement function, underpinning 13% EBITDA growth and an 80 basis point improvement in our EBITDA margin. Let me start on Slide 6 by reminding you that at the end of June, we agreed terms to sell the Acrylate Monomers business in the Czech Republic, with the transaction expected to close at the end of September. Therefore, in line with IFRS, this business has been treated as discontinued for the purposes of the H1 results, eliminating the prior year losses and increasing the half year '25 EBITDA comparator for the business to GBP 83.1 million. One of the key consequences of this change is that it masks the GBP 5 million improvement the team has delivered in that business. Including this improvement, EBITDA grew more than 20% in H1. It is testament to the skills of the team that we've been able to deliver a step change in the business' operational efficiency, enabling it to capture favorable market conditions and to get set up for the years ahead, where Synthomer will benefit from a share of any excess cash generation. Focusing on the continuing business, we saw revenues increase by 6.7% on a reported basis to GBP 954 million. On a constant currency basis, weakness in the euro and Malaysian ringgit and a stronger U.S. dollar relative to the pound led to 5.1% growth, with all 3 divisions ahead. Volumes increased across all 3 divisions, with overall volumes up 2.3% on the prior year, led by a strong performance in accessing long-term growth opportunities in CCS and the Health & Protection business, benefiting from its ability to support customers amid the market disruptions created by the Iranian conflict. The business as a whole was fast and bold in passing through increased raw material prices in Q2 to customers and together with the growth in the more specialist high-margin elements of our [Technical Difficulty] contributed to a further 2.8% to growth in revenue. In total, EBITDA for the continuing business has increased by GBP 14 million versus the prior period, which is after taking account of both wage inflation and the need to normalize our bonus accrual, as previously mentioned. We have attempted to break down the components of that growth. And whilst it is difficult to be precise, I would estimate that around GBP 8 million is recurring in nature, including the growth we've seen in some of our more specialist products like intumescent coatings used in data centers, energy solutions used in oil and gas drilling and the actions taken to manage costs. The remaining GBP 6 million, I would attribute more directly to the market disruption seen in Q2, which we are not currently forecasting will continue into H2. Going further down the income statement, EBIT increased by almost 42%, with depreciation down slightly. And after taking account of both the stronger performance by Acrylate Monomers and the higher finance costs, we saw total group PBT increased by GBP 11.4 million to GBP 12.7 million. Special items and operating profit were GBP 7 million higher in the period, reflecting a net cost of GBP 36.4 million. The movement principally reflecting a non-cash true-up of past pension service costs due to late retirees in our U.S. scheme. For the full year, I would expect that special items will be in the range of GBP 60 million to GBP 65 million, 2/3 of which relate to the amortization of acquired intangibles. EPS benefits from an H1 tax credit, which will largely reverse in the second half. And finally, net debt was GBP 671 million at the end of June, slightly better than we expected, which I will cover in more detail later in the presentation. Turning now to the divisions, starting with CCS on Slide 7. CCS saw robust earnings and growth in the period as a number of the long-term strategic and commercial initiatives contributed to our journey towards a more specialist product mix. Revenue for CCS was up GBP 8 million, representing headline growth of 7.5%, 5.8% on a constant currency basis. Volume grew 2.5% year-on-year, led by intumescent and other high-performance coatings used in data centers and other industrial applications, a strong performance by energy solutions and a return to growth in construction, particularly in Asia, while decorative coatings and consumer material volumes contracted slightly in the period. On a regional basis, both Asia and the U.S. performed strongly, reflecting recent management changes in the Americas. H1 saw the CCS gross margin continue to strengthen as the shift towards specialty products improved the portfolio price volume mix and steps were taken in late Q1 to proactively respond to market conditions to increase prices, optimize plant loadings and leverage central procurement services. These factors, together with continued focus on costs resulted in EBITDA increasing by 33% to GBP 46 million and the margin expanded by 220 basis points to 11.5%. Turning to the Adhesive Solutions division on Slide 8, which grew revenue by 2.6% in constant currency, as the combination of volumes increasing by 0.9% and the pass-through of higher raw material prices in Q2, was partially offset by an increased percentage of base chemicals in the mix. Geographically, we saw growth in all 3 regions, with Asia and China leading the pack, followed by the U.S., with packaging and tires, the leading end markets. Whilst overall market demand remained relatively subdued in the period, we are particularly pleased with the volume growth in our sustainability offerings and how the business is harnessing our China Innovation Center to drive domestic growth. Notwithstanding the intermittent reliability issues experienced during H1 at our facilities in Texas and the Netherlands, the business benefited in early Q2 from a number of Asian competitors temporarily implementing force majeure. As a result, the product mix in H1 is slightly more skewed than normal towards base products. The division continues to make further savings from the transformation initiated in 2023 and is on course to achieve GBP 40 million of annualized benefits by the end of this year, with the target remaining to achieve GBP 43 million plus. Taking account of these savings and the other progress on a constant currency basis, the EBITDA from AS increased by 4.5% year-on-year to GBP 36.7 million, with the margin expanded by 20 basis points to 12.1%. Turning to the third division, HPPM on Slide 9. On a continuing basis, the division as a whole delivered revenue of GBP 249 million in H1, up 11.7% on the prior year. As the Health & Protection business, in particular, benefited from its market-leading position during the recent supply side disruptions in Asia, with EBITDA for the division growing 13.7% on a reported basis to GBP 24.9 million, and the margin expanded by 20 basis points to 10%. Turning to the individual components of HPPM, the Health & Protection business and its combination of stand-alone manufacturing facilities in Malaysia and Italy, coupled with the group's global sourcing capabilities, proved to be uniquely placed to capitalize on recent market disruptions. Volume increased 13.5% year-on-year, with significant volatility in both raw materials and finished good pricing being a feature of both April and May. Looking forward, as prices have somewhat normalized, we are not currently forecasting for the performance seen in Q2 to continue into the second half. However, the Health & Protection leadership team continue to explore opportunities to exploit our market-leading capabilities in NBR manufacturing and support customers in the development of innovative thinner and reusable gloves. Conditions across the rest of the division's portfolio were more mixed. Volumes for the continuing Performance Materials businesses fell by 5% year-on-year, principally from weaker demand in certain foam products and specialty vinyl polymers, both partly also to do with conflict disruption. However, the combination of raw material prices and mix led to increased revenues overall, and we continue to focus intensively on process optimization and cost efficiency throughout this division. I want to turn next to the balance sheet, Slide 10. As reported at the year-end, we completed the refinancing of our core debt facility on the 30th of April and today have approximately GBP 680 million of bank and U.K. facilities, which mature in February 2029 and GBP 350 million of bonds that mature in July 2029. At the 30th of June, total borrowings against these facilities was GBP 874 million, with a net debt standing at GBP 671 million, which on a covenant basis resulted in leverage of 4.9x. As a reminder, under the terms of our new facilities, the year-end covenant requirement is now 6.25x and the first quarterly covenant on the 30th of September is higher than that. So, our headroom is significant, and we had nearly GBP 270 million in committed liquidity. As Michael mentioned, this gives us a robust financial platform and the runway to focus on completing our overall disposal program, which will help to reduce gross debt levels and support our medium-term target to bring the leverage back below 2x. As part of our capital structure, we use non-recourse receivable financing, often called factoring to both diversify our sources of finance and also reduce costs. At the prior year end, we benefited from a GBP 50 million one-off arrangement with KLK and also utilized around GBP 115 million of non-recourse facilities provided by banks. The KLK purchase arrangement was fully repaid in Q1. At 30 June, bank factoring was circa GBP 150 million. So overall, we reduced net factoring usage, which reduces our operating cash flow by GBP 15 million in the period. Turning finally to cash flow and our year-end expectations for leverage on Slide 11. As a result of significant increases in raw material prices and the normal seasonality in our business, the usual H1 net working capital outflow was higher than last year at GBP 90 million, partially offset by a reduction of 8% in inventory volumes since the year-end as we continue to manage our stock levels. As seen in previous years, this seasonal outflow will reverse in the second half, especially assuming raw material prices moderate as we have already started to see. CapEx in H1 was GBP 33.5 million. Of this, GBP 9 million relates to growth initiatives, GBP 5 million to the rollout of the penultimate wave of our ERP program and the balance is SHE and maintenance. For the full year, we continue to expect CapEx to be around GBP 70 million, significantly less than 2025. Finance costs for the first half were GBP 35.4 million. This was up GBP 5.3 million on the prior year, reflecting the higher average level of drawn debt, repayment of the bond stub in July 2025 and the increased interest costs within our new facility, where the weighted average cost of debt on a cash basis is now 50 basis points higher than H1 2025. For the full year, we now expect interest costs to edge up a little to around GBP 73 million to GBP 75 million in the income statement, but remain around the GBP 65 million level in terms of cash. As mentioned, the reduction in receivables financing use reduced our free cash flow in the period, whereas last year, it improved it. However, if we strip the receivables movements out, the underlying free cash flow in H1 '26 was GBP 66 million, only slightly higher than the GBP 57 million outflow in H1 '25, reflecting the higher raw material prices. Looking forward to year-end, taking the seasonal reversal in working capital, together with our other forecast assumptions for H2, we would expect to see the free cash flow for H2 significantly strengthen. On the same basis, excluding receivable financing movements, we now expect to be free cash flow positive for the year as a whole, an improvement on our expectations at the April results. Taking all of this together with the disposal of Acrylate Monomers, which involves a debt repayment of GBP 5 million to GBP 7 million, we would expect to reduce covenant leverage to between 4 and 4.35x by the year-end, which is also ahead of our expectations at the start of the year. With that, I will pass back to Michael to discuss our strategic progress. And at the end, we will open the lines for Q&A.
Michael Willome: I'm now going to take you through our strategic progress in the first half. But before I do, let me briefly remind you of the key elements of the strategy, which has guided and will continue to guide how we are transforming the business. All 5 pillars and 3 enablers on Slide 13 provide executable actions for us. And this is our strategic direction, another slide, which you will be familiar. All our plans are focused on progressively creating a business that is more specialty weighted, more geographically balanced and more streamlined. I will take you through each of our 3 divisions in turn to highlight the key actions we took in the first half in support of our strategy. So, let's start with CCS on Slide 15, our most specialty weighted division. The strategic opportunity in CCS is compelling. We have leading positions in solutions that enhance coatings applications, energy efficiency and waterproofing in all sorts of construction. A global network in high-performance technology platforms, sustainability and regulatory tailwinds, which underpin GDP plus growth and maybe most important, a healthy innovation pipeline. From that position of strength, CCS is working on an increasing range of profitable growth opportunities. In the first half, that focus translated into strengthening our presence in several high-growth subsegments. For example, our volumes in intumescent coatings doubled year-on-year, driven by demand from AI data centers and infrastructure projects, and we are working with a growing number of customers in battery storage, medical and filtration applications. We continue to improve the geographical balance of CCS through refreshed regional growth strategies, which means key account management for our top global customers and targeted marketing to new customers in North America, the Middle East and Asia. Our specialty focus, value selling discipline and pricing strategies ensured prompt pass-through of higher raw material costs to customers. Our portfolio improvements, we continue to embed a more end market focused and faster speed-to-market innovation strategy, and we are managing our manufacturing footprint through partnerships to localize production, increase efficiency and be closer to our customers. Ongoing cost optimization measures include annualizing and further adding to the benefits of the cost reduction program initiated in 2025, continuous capacity management, including temporary reallocation of people and assets and progressing further inventory management measures to enhance cash flow. Turning now to Adhesive Solutions. As a reminder, AS benefits from leading positions in EMEA and the Americas, deep and long-term customer relationships and a market-focused innovation pipeline with a strong sustainability angle. AS delivered a robust performance despite relatively subdued underlying market conditions, driven by growth in new sustainability-focused products such as specialty tapes and labels, including our new CLIMA-branded lower carbon footprint products benefiting from ISCC PLUS mass-balance certification. We have also made progress in new medical end markets, and we are winning additional business in China. Our China Innovation Center and local partnerships are helping to localize manufacturing, win additional customers and broaden our end-market exposure. Demand for some of AS-based chemical products in Europe and the U.S. also benefited from selective competitor capacity challenges during the second quarter. As I mentioned, our performance improvement program launched in 2023 has now delivered cumulative benefits of GBP 40 million since inception, massively improving the margins in this division, and we are targeting GBP 43 million or more going forward. The AS EBITDA margin of 12.1% in the first half compares with 5.4% at the time of the division's total transformation program launch 3 years ago, a transformation that speaks for itself. As Iain mentioned, volume growth in the period would have been higher, but for continued intermittent reliability issues in the Netherlands and the Longview facility in Texas shared with Eastman, both of which are expected to be resolved in the third quarter. In fact, we are back up and running in Middelburg, Netherlands as of last week. Let's look at HPPM now, our predominantly base chemicals division. The most significant business in HPPM remains our position as a market leader in the GBP 3 billion NBR market, with hygiene and emerging market megatrends supporting approximately 6% annual growth. Elsewhere, we are focused on selective attractive niches within Performance Materials, driven by strong customer relations, process innovation and emissions reduction. The performance of our Health & Protection business in the period was strongly correlated with competitors' dynamics. Our strong market position, manufacturing expertise and procurement capabilities meant that H&P volumes and pricing inflected significantly upwards, particularly in April and May as the Iran conflict disrupted competitors' value chains. Underlying glove demand growth remains robust, but pricing and margins across the industry continue to be volatile, reflecting the changes in the supply side environment since the pandemic. We continue to make longer-term progress through innovation in reusable gloves, more complex disposables and lower carbon materials. Our foam and specialty vinyl polymer businesses experienced reduced end-market demand during the second quarter, in particular, while paper and carpet markets in Europe proved relatively more resilient. We maintain a continued focus on cost savings and efficiencies, and we are making encouraging progress in selective innovation projects such as enhancing the circularity of the carpet value chain. As previously touched upon, we announced the divestment of our Acrylate Monomers business in June, our fourth transaction since the 2022 strategy review. Achieving this important goal, which removes the highly cyclical and capital-intensive upstream business from our portfolio was supported by the team's success in substantially reducing AM's losses from GBP 5 million last year H1 to almost breakeven this year. We will provide further updates on our ongoing broadened divestment program as it advances. Coming now to current trading and the outlook. As we have described, in H1, we delivered strong progress driven primarily by sustainable strategic growth and continued self-help initiatives. This has been led by new products and new markets and customers, a focus on innovation, deliberate steps to strengthen our market position and targeted cost actions. We achieved this despite a substantially more complex operating and commercial environment, a testament to the speed and agility of our teams, our in-region for-region manufacturing model, our world-class procurement capabilities and ability to pass through raw material price increases to customers. As Iain said, the majority of this was from the EBITDA progress we are making from strategic growth initiatives and self-help, approximately GBP 8 million net in H1 and which we expect to continue. The remainder was from Q2 activity uplifts, mainly in base chemical product areas, principally in Health & Protection that we are not currently forecasting will recur in the second half. So, combining the strong H1 outturn and a broadly similar level of recurring strategic and self-help progress as we saw in the first half to the second half, the result is an upgrade to our full-year outlook. This now sits slightly ahead of current market expectations for 2026. And as Iain took us through, our free cash flow expectations have also increased, and we expect to reduce leverage meaningfully by this year-end to between 4 and 4.35x, excluding any further divestments from 4.9x in June. So, bringing all this together, our ambition is to substantially and sustainably grow earnings in the medium term and the first half of 2026 has reinforced our confidence in achieving that objective. We are continuing to deliver the multi-year strategic transformation to improve the quality of our earnings and increase our operating leverage by focusing on higher-margin, more resilient specialty products in long-term attractive markets. This is the right strategy for us. We are encouraged by the new product growth and market developments achieved in the first half, with the business delivering its opportunities for sustained long-term growth in a tangible way. Of course, it was also helpful that our robust business model meant we saw some additional upside from the market disruption in Q2, but we do not count on this continuing in the outlook or in our plans. Instead, our upgraded outlook for full-year earnings and cash generation reflects the progress we are making against our strategic objectives and the operational discipline we have maintained throughout. Meanwhile, the recent refinancing and our ongoing portfolio rationalization plans provide further runway to reduce debt, which has been our most significant challenge over recent years. To wrap up, the opportunity to sustainably improve the earnings power of Synthomer is becoming increasingly clear. As ever, it rests on 3 reinforcing drivers: further self-help actions, our continued focus on innovation and strategic delivery and end-market growth. With that, we are now happy to take your questions.
Operator: [Operator Instructions] Our first question today is coming from Stephanie Vincent of Bank of America.
Stephanie Vincent: So, you talked about 3 further divestment projects. I just wanted to know if you'd be willing to disclose the impact in terms of reducing net debt. Do you actually think though that this is going to be deleveraging on to Synthomer's credit profile? And in terms of -- you said that in Adhesive Solutions that there were some reliability challenges in the Netherlands as well as your hosted site in Texas. Just wanting to know, is that going to be able to be recouped in the second half of 2026? And how much EBITDA impact or revenue impact do you think was achieved during this period, so we kind of know the impact of that? And that's it for me.
Michael Willome: Thank you very much, Stephanie. On your first question, the divestments, we have 4 processes right now underway. Number one is Acrylate Monomers, which we announced the signing. We are still fully on track to close it by the end of September -- 30th of September. So, this should be done, and that is not a deleveraging effect that is more a P&L effect because, as you know, we lost GBP 10 million last year. Then we have 2 processes in due diligence phase. So over the next coming few months, we hope that we can come to a signing. As I said, due diligence, these days, it's more complicated. It takes longer time to due diligence than in the old days, but it's a strict process. We are talking to several interested parties, and we are very confident that we have news in the next few months. Again, due diligence phase. One process, which we launched just recently, we expect non-binding offers in September of this year, and this will obviously then take a little bit longer. But also it's a formal process. We have very nice inbound interest, as I just saw this morning, and we will take it from there. Again, as I said, September non-binding offers. So altogether, our assumption is that we can get GBP 150 million to GBP 200 million of proceeds, which obviously would be a massive deleveraging effect. That's the number what we have said already a few months ago. And I think we have no reason to deviate from this number. So, take this GBP 150 million to GBP 200 million. If we are talking about deleveraging, I think it's also interesting to note and you can deleverage in 2 ways. Number one is the divestment I just explained. And number two is to sell chemicals, which produces EBITDA. We were last year even below GBP 140 million. Now, you take GBP 140 million, minus GBP 70 million interest, minus GBP 70 million CapEx, you don't have a lot to further deleverage. Now if this year, we go to, let's call it, GBP 165 million, you take GBP 70 million and GBP 70 million away, you have GBP 25 million left. Then for next year, you have less interest because you have a lower leverage. So, that could take another GBP 10 million down. You probably have GBP 10 million, GBP 20 million more EBITDA. And you have lower CapEx because on the CapEx situation, we had last year, we had GBP 86 million. This year, we have GBP 70 million. As Iain mentioned before, we have our ERP system that is phasing out. So, you can take there about GBP 10 million away. We have some CapEx dragger such as Acrylate Monomers, will be out of the books. So suddenly, this GBP 25 million, GBP 30 million becomes GBP 75 million, GBP 80 million. And then it becomes an interesting part to deleverage the company. I think these are the 2 levers what we have to deleverage. And so far, we were mainly focused on the divestments because, as I said, the EBITDA didn't leave too much of cash available, but I think this situation is changing. And I think we showed quite impressively in the first half how this can go and also how fast it can go. On your second question, AS reliability, it is unfortunate, but we did have some occurrences again. I mentioned Middelburg. Middelburg is up and running again, but we did lose probably something in the neighborhood of GBP 10 million on gross margin level, which we lost in the first half. You have to bear in mind as annoying it is for ourselves, especially, but these are big, big assets in Longview and in Middelburg. And these assets, they have a multiyear program to rectify and to change certain items. You talk here very granular, very, very simple mechanical things such as tubes. We are going to refurbish them. We are going to change them. That's what we did the last 2 years. That's why everything got much better last year. And this year, there was nothing else than these 2 events. But it did cost us money. As I said, it's fixed in Middelburg for sure. Also in Longview, we are on the right track. These are intermittent things. You cannot think this is not stopping the whole site. These are certain intermittent troubles in one plant, is 1 week out and then it comes back again. But again, it did cost us money. So as I always say, the problem of today is the upside of tomorrow. So I think for the second half, we are very confident that this will not reoccur again. Yes.
Stephanie Vincent: If I can just ask one more question about the phasing of volume increases and restocking with the Iran conflict. If we go back to March, April versus May, June, if the March, April sort of cadence continued, how much do you think just generally, volumes would have been up for your business? I'm just interested to see the restocking, destocking impact of all this volatility, if you see what I mean.
Michael Willome: I can start, Stephanie, maybe Iain would add a bit. I think it's less the volumes. You see that our growth was only 2.3%. So it's less the volumes, but the margin helped us. And as we said in the presentation, it was predominantly in the base chemical areas such as NBR as the most prominent one. So the margins there, if we can be very tangible on this, the margin in January and February was on NBR, especially, was $180 per ton, went up to $600 and is down now to $250 to $300. I think this gives you a pretty good feeling where we were, where the conflict at the peak when really our Korean, especially, competitors had a problem on the supply side, and now it's going down and we believe that this is for the foreseeable future now, kind of the proper level, this $180, $600, $250 to $300. I think this gives you a bit of an idea. Maybe one more thought on your previous question about Longview in Texas, the shared site with Eastman. We are implementing now as we speak, a little bit the new operating model there, which I think will help us a lot that we become more independent and we take certain functions such as engineering and other kind of less operating functions in the site, we will take in our hands. We change the business model. We do it ourselves rather than Eastman does it for us. I think this should be a very, very good situation going forward because logically, we have more interest, more capability. It's our business, and we should take more care of it rather than we kind of outsource it to Eastman. Nothing against Eastman. It's a great relationship that we have on the site. But I think if we have the faith, let's say, in our own hands, I think this should also improve the situation there.
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. So I think those more innovative, more specialty products really were some of the tailwinds that came through the business, and we expect to continue through the balance of this year. And we had a short period of time when some of our competitors were under force majeure, but that was a defined period of time, end of March into April. So again, I think we look at those as very time blocks and therefore, not necessarily ever going to extend through time.
Operator: We'll be taking questions now from Harry Philips of Peel Hunt.
Harry Philips: Three from myself, please. Just continuing on the Iran theme, just to be maybe unduly pessimistic. Is there a situation where that actually might get a reversal in the second half, and therefore, that GBP 6 million sort of nets out totally for the year, let alone no recurring feature through the balance of this year or into next year? The second is just on factoring where broadly speaking, your GBP 150 million. I'm guessing, given the sort of circumstances around the KLK situation back end of last year, that's sort of pretty much as far as you can go, albeit I know you've got a GBP 200 million facility, but is that as far as it goes and that sort of we get some back in the second half? And then finally, the scope for further restructuring sort of moving forward, if you like, as the sort of new Synthomer emerges. And then what sort of impact does that have around drop-throughs going forward? I mean I've got in mind sort of late '20 drop-through as we go forward and how that might progress, notwithstanding disposals, but again, as the sort of new Synthomer starts to mature.
Michael Willome: Yes. I think I take Harry your first question and your third one, and Iain probably takes the second one. On the Iran reversal, as a short answer, we don't think that this will reverse. I think the GBP 6 million are ours, and we will not give them away again. I think it is prudent for us not to plan for more, even though we all know that the situation in Iran is anything but resolved. I think supply chains kind of reorganized themselves a little bit. So it's probably not a big benefit. But if anything, in the second half, it's more a slight benefit rather than that we have to give it back. I go with the third question on restructuring. We said already in October 2022 that we are going to divest more than 1/3 of our business, that we want to become a clean, also with a different rating than a clean specialty chemicals company. We're about 60% through this, and we will get the last 3 divestments done, or actually the 2 of them that really cater for the base chemical situation. So we will get them done. We will definitely have some stranded costs, but these are stranded costs. They are not huge. You talk here about in single, early double-digit millions. After we have done 4 or 3 closed transactions, it's clear that we are pretty good in reducing stranded costs. So I wouldn't worry too much about the stranded cost. You will not eliminate them immediately. It will take you 1 or 2 years, but you will get them down to pretty much that it becomes a 0 effect. I think stranded costs should be under control. Also bearing in mind that the assets that we are selling, they're pretty much isolated. So you don't have a lot of internal agreements and white lines between plants and so on. These are stand-alone businesses. You see it now, Sokolov, that's one site in the Czech Republic and the other asset is the same that concerns another 3 assets, which are stand-alone assets. I think then if you go forward, the drop-through rate, or we call it operating leverage, is clearly, and you can see it in the results of this half year, is clearly more than 30%. So I think this is the attractive part because we took so much cost out in the past, and we increased our margin. And probably in the whole statement that you were reading this morning, the number I maybe like the best is that we had since 4 years an uplift in gross margin of 600%. And that's a totally different new world, and this shows you that we are really becoming specialty chemicals. So the dilution effect, if those diluters then are gone, I think is massive. And that's why also you can see that now we produced an EBITDA of 10.1%. 10.1%, I know some people in '22 when we presented the strategy at about 6% EBITDA, I said that we can go up to 15%, some people didn't believe it. But now you see a CCS division and an AS division. They are at 12%, 11.5% and 12.1% EBITDA. I think there's another 1.5% in there. So I think my 15% at the time suddenly become very realistic. And that will be then the profile of the Synthomer going forward. So I think everything -- that's why for us, operating leverage is so important. That's why last year's results were okay, but they were definitely not where we wanted them to be because we had 7% less volumes. And then operating leverage goes the wrong way around. Now this year, we have just a slight volume increase, but you see the drop-through rate, I think, is quite impressive. So I think that's how I see a bit the situation. I think it's also interesting that when we are then -- when the last 2 base chemical businesses are gone, you have a very clean situation how to run the company. And there is a lot of cost of complexity in our Pillar 4, the differentiated steering that costs you money in a way and it costs you efforts. And if you can focus and you can run a fully specialty model, you can reduce costs, you have less complexity, and you have more focus. I think that's the target, which gives you additional benefits then on top of the 30% operating leverage what we have right now. Iain, would you take the factoring?
Iain Torrens: Yes. On factoring, I think maybe it's worth standing back and just recapping how we think about it. So at the end of last year, we had GBP 165 million of total factoring, GBP 115 million from banks, GBP 50 million from KLK. And that KLK facility was repaid in the early part of the year. When we think about factoring, we think about it on the basis of diversifying the sources of funding available to the group and also cost. As you rightly say, there's a EUR 200 million facility available from our existing banks. There's no reason that, that couldn't be extended modestly. And if we look at the size of the receivable book we have, then we have headroom to factor more receivables should we decide to do that. But the most important bit, I think, is to look at what's the cost and also not to tie it up with the free cash flow numbers. And we've shown free cash flow numbers this time around, which exclude the impact of factoring. Now clearly, it's a -- as you reduce or increase factoring, it has an impact on the presented operating cash flow, and that was a GBP 15 million outflow in H1. So GBP 105 million of gross outflow at the free brings you down to ultimately GBP 80 million negative free cash flow. Take off the GBP 15 million that relates to reducing the receivable got you to GBP 66 million of free cash flow outflow in H1 and that's comparable to last year, so sort of up 15%. Does that answer the question on factoring?
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. And the most management-controlled item on net working capital is inventory and inventory is flat compared to last year in December. And actually, if you take it in days, it's significantly down. But I think we have a lot of room here to play on the cash flow, and I agree that face value of minus GBP 80 million outflow is not ideal. But I think if you put it a little bit more granular, including the factoring, including the net working capital, as I explained, the inventory piece, the payables piece, the receivables piece, I think you come into a totally different situation. And that's why we are also very much sure that we can produce free cash flow except the factoring moves in the second half and for the whole year. And at the end, it all ends up in something which you haven't heard from Synthomer in a long time that we are anticipating an year-end leverage between 4 and 4.35. I remind you that last year, we had a reported leverage of 4.75. And if you take the GBP 50 million from KLK away, it would have been 5.2. So within 1 year, leverage reduction from 5.2, like-for-like, to, if you go in the middle, 4.15, 4.2 of our range, I think that is rather significant. And that brings me then back to the point I made to Stephanie and then you make the calculation of significant EBITDA minus reduced interest, minus reduced CapEx and suddenly, you have a meaningful deleveraging effect from selling chemicals at the end of the day. I think this is a pretty nice path forward for us.
Operator: The next question will be coming from Kevin Fogarty of Deutsche Numis.
Kevin Fogarty: Actually, well done on the half. Good outturn. Just wondered if you could put a bit more clarity on CCS and just the sort of the impact of some of those specialist product areas you called out, particularly some of your data center applications, et cetera. Just sort of trying to help us kind of build what contribution they had, what the pricing differential might be. I guess, energy, we can see how much of the portfolio that is, but perhaps some of the other areas to just help us get comfortable with the contribution, I guess, they've made in the half. Just a second question in terms of exceptionals for the second half of the year. Given what you said in terms of your outlook, what you're likely to sort of get on with and portfolio transformation, et cetera, is there any number you could sort of help us with just in terms of likely exceptional run rate in H2?
Michael Willome: Yes. On the CCS, I can even answer the second one question. I think there are very limited exceptionals that we are planning. But Iain is looking into it. But I think it's pretty much neglectable. But on your CCS question, look, the data centers, we always had a very strong construction business. And this year in the first half is even better. That has basically 2 reasons. It's partially coatings, partially construction. It's in Asia, it is very strong and it's strong in the U.S. predominantly and that links a lot into the data centers. The data center applications are new for us because there's a huge boom in constructing this. I think we all -- if you look at market reports, this will go for another few years and we have a very good position there. The impact is significant. It definitely explains a portion of the delta, the positive delta in CCS division. And as I said, we expect this to continue going forward. These are very specialist applications and not every company can do it. I think a truly specialty chemical company like us, we put a lot of innovation behind it. We have close customer relations to those data center providers. I think that is something which, yes, makes us sure that it will continue for a while. But it's not only the data centers, that's the most prominent example in CCS, but then you can go to Consumer Care, which was lagging a little bit behind in the first half compared to the energy solutions business and coatings and construction. But there are new nonwoven applications for medical gowns and medical, how do you say, nonwoven fabrics that absorbs the blood. And that is something which is, again, it's an innovation project. It's something totally new. It's something we are working on. And you can imagine the medical sector is quite high margin. So these are true innovations in CCS. I would say this one is more kind of in the children's feet, but also this contributed to the H1 results. And then the one in terms of contribution somewhere in the middle in CCS, that's the onshore drilling. As you know, in our energy solutions business, the oil and gas drilling fluids is something that we know since many, many years, but we always develop, we try to innovate, we try to find new customers. And it's a bit of a breakthrough what we did now over the last, let's say, 12 months. We were always in these complicated deep sea rigs far out offshore. And now we found solutions. And again, that's true innovation and customer centricity. These are new customers. These are not the good old 3 big Halliburton, Baker Hughes, Schlumberger. These are new customers. They are focused on the U.S. and Canadian onshore drilling. So for us, it's new customers, it's new application, and it's true innovation work. And I think this is also something which is very, very encouraging, somewhere in the middle, as I mentioned, in terms of impact in the first half, but it's also something that is definitely sustainable because onshore drilling will go ahead. It's well established. And as opposed to in the past, we do have a solution for it, and we do have a customer base, a new one for it. I think these are 3 very interesting developments for sustainable growth and profitable growth, especially in CCS division. Iain, do we have anything more on exceptionals?
Iain Torrens: Yes. So exceptionals, first half was GBP 36.4 million. For the full year, GBP 60 million to GBP 65 million P&L impact from exceptionals. About 2/3 of that is amortization of intangibles, so noncash related. Cash outflow GBP 5 million to GBP 6 million in the first half. Second half, I would expect it's a little bit lower than that. So again, noncash items coming through on that exceptional or special items line.
Michael Willome: So on the operational exceptional it's very, very limited. It's -- the biggest portion is the amortization of acquired intangibles, which goes back obviously to the time when we made all this big acquisition and at the time of the purchase price allocation, it was allocated there. So it's a statutory item, but it's not -- yes, it's not an operational item in a way.
Operator: Next question will be from Angelina Glazova, calling from JPMorgan.
Angelina Glazova: Congratulations on good results for the first half. I have 3 questions, please. So firstly, your full year guidance seems to suggest that in the second half, the year-on-year improvement will mostly be driven by self-help measures and some growth initiatives similar to what we have seen in the first half without any one-off tailwinds that we had. And this brings me to 2 questions. So first of all, when you look at the month of July and maybe your current order book in Q3, is this the trend that you're already seeing in that there is some deceleration visible compared to the Q2 numbers? And then secondly, if we think a bit further forward from second half '26 to maybe an early look into 2027, how do you see the potential from the self-help measures and strategic growth initiatives contributing to 2027? Appreciate this might be a bit of an early stage, but if we take an early look, is this the magnitude comparable to what we have seen in '26 year-on-year? Or is it something somewhat smaller? And do you expect that the growth initiatives to become a more prominent driver as opposed to self-help measures? And my third question is just on CapEx. So you have confirmed the guidance this time of GBP 70 million for this year, which seems to be at around 3% to 4% as a percentage of sales. And you've also mentioned that this number could decrease somewhat just by virtue of divestments. But my question is whether you think that this is a sustainable level of CapEx for the medium term? And is this a level of CapEx that you think sets Synthomer up well to increase production as might be required if we have an improvement in the underlying environment? And is this the level of CapEx that can help minimize the reliability issues potentially in the future? And if you see the need for the CapEx to somewhat step up, then what is the level that you see as sustainable for the cycle?
Michael Willome: Yes. Thank you very much for your kind words at the beginning, Angelina. If I answer your question, I think July, we have seen as a reasonable month. That's why we are putting out the numbers we are putting out now, I think very much in line with our expectations. August will now be a lower month as every year in August because Europe is kind of on holidays. I think as of today, 4th of August, we are sure that's why we put up this guidance we are putting up. So actually, it looks pretty good, pretty reasonable. Order books are fine. We mention always the geopolitical uncertainty, which you don't know what kind of happens tomorrow. But also here, we have proven that when things happen and rather dramatic things happen like on the 28th of February, that we are really, as Iain mentioned, it, bold and fast to react to situations. I think I'm quite comfortable here that we are having a few good months ahead of us. Looking further into '27, it's probably not unreasonable to assume if you think that last year, we had GBP 137 million. This year, we are guiding now to the GBP 162 million a little bit plus. You take -- you can calculate it easily. You take the numbers, you take the GBP 6 million away, which we call a onetime benefit. We always said on revenue level, we have H1 of [indiscernible]. On EBITDA level it is more [indiscernible]. So I think this gives you very nice indications of where we think that we could land. So if you take then a progress of some GBP 25 million, I think, for 2027, and we really, as you say, it's a bit premature. But I think a similar step forward is definitely doable because, as I mentioned, a lot of those benefits that we put in are sustainable ones. So let's see how it goes. I don't commit to any number, we will see closer to the end of this year where we land. But definitely, our view is that we can make a good progress again. Then your CapEx question, I mentioned it, and I think it's a very good question. When is enough -- what is enough and when it's not enough anymore? We have a depreciation of GBP 96 million. This will go down with all the divestments already with Acrylate Monomers, which is a big site and a lot of investments went in over time. So this will go down. We guide now for GBP 70 million this year, and I'm absolutely convinced that with GBP 70 million, you can put quite some nice growth capital behind it. We have maybe GBP 35 million at the time, GBP 40 million we need for SHE and sustenance, which includes the reliability work on AS. Here, it is important. There is no option that we take now, let's say GBP 30 million and then we fix the AS site. It doesn't work like this because then you would have to shut down a site for 1 year to change everything. And obviously, we don't want to do that. So you cannot buy yourself out of the problem. And that's why we designed this multiyear program, especially in Middelburg and Longview again. And this will go on for another sometime, piece by piece until everything is done. And as I said, we had now for a long time, we had peace and quiet. Now in the first half, these 2 issues came up again, which we assume are rectified for the second half. But you still need some -- and these are low mid-single-digit millions, what you need going forward for the next probably 2 or 3 years until everything is really clean and the site is on the situation where you want. Important, I do not speak about safety. Safety, we do everything what is needed. I talk about reliability issues. So I believe that when you have then down a depreciation probably of GBP 90 million -- GBP 85 million, GBP 90 million, that with a GBP 70 million, you can actually do a very good job. I think that's a reasonable investment rate, which allows you to invest into growth as well. We are not in a situation that we need now a GBP 300 million, GBP 400 million new site to go into something bigger. But I think with growth CapEx of GBP 40 million, let's say GBP 40 million, I think you can achieve a lot of things. I remind you, the APO investment was $8 million, $9 million. The China Innovation Center was $8 million. The CMA, continuous monomer addition in Mogadore in the U.S. was some $4 million, $5 million, $6 million. So that's in our industry where you can meaningfully invest into growth. What I would exclude is that we have special projects. And if something comes up that requires a higher CapEx, one project where we need GBP 20 million, GBP 30 million, that would be out of this scope, and we will look at it, and we will make the usual non-emotional calculations. Where our payback? When do we get our money back? And that would not be included. So this could always happen that if we have the funds available that we would do a bigger project. If we get the proper payback, we can create proper returns on it. So I think that's a bit out of the system, but I wouldn't exclude it because we do have -- our divisions do have a lot of brilliant ideas and one day, one of these might land. But if you take those ones out, as I said, I think with CHF 70 million, like-for-like, we can invest nicely into the business, including into growth.
Operator: [Operator Instructions] We'll now go to Sebastian Bray of Berenberg.
Sebastian Bray: I'd have 2, please. The first is on nitrile markets. What happened in China that allowed the availability of raw material to improve so much and nitrile to come down? Because it's difficult to see where the country is getting the butadiene from to manufacture this. And any update on rumored potential divestment of this segment is welcome. And my second one is on receivables. The one-off factoring arrangement of GBP 50 million was repaid. But from what I can see, the total factoring utilization still stands at GBP 150 million. Why is this so high at the moment? Is it something to do about arbitraging the cost versus the revolving credit facility? And what do you think this will end up at by year-end? Will it stay at GBP 150 million, go up, or go down a bit?
Michael Willome: Yes. I'll take the first one. I think on NBR, the situation was really in -- yes, March, middle of March, started April and May, was a very pronounced situation because mainly not the Chinese, but the Korean competitors, they had a problem with raw material supply. What we also saw is that the Chinese, they are producing butadiene and they have the largest acrylonitrile supplier is a company very well known to us in China. Also, butadiene is available there, and I think they just rectified the issue. If we look at the level of problems in these 2 months, the Koreans were most affected with the lack of feedstock, then the Taiwanese, then the Japanese and then the Chinese because China, they have a lot of access to, let's say, other countries' feedstock and the Chinese, they have still a lot of coal to burn. So I think -- and the Chinese are very fast. And I think this all together resulted that it took them maybe 2 months, and they could -- they will get back into the game. There are NBR flows coming from China into Southeast Asia. Sometimes the quality is not there yet, but then customers might do some blending. We all know that when Chinese enter an industry, it takes them a while until the quality is on a top level, but it always at the end, after 1, 2, 3 years, they are on the top level. So I think going forward, we have to calculate NBR supply coming from us as market leader together with a Korean company. I think this will go on. I always say our NBR business, it's market-leading and has critical mass. I think that the Chinese NBR players, they will also play a role over time. There's no reason why they should not only be in gloves and not in NBR. Having said that, the big glove maker, Intco, is focusing on the gloves rather than of the NBR, but there are others that might take it over. So I think it's just always the same. There is a disruption in the market and then people find ways. It's like the water that flows always down somehow. So that's why the situation normalized again. But Sebastian, I think it is important to say my example that I made at the beginning, that the margins, and it's quite a good proxy for the whole business because the volumes do not have such swings. The margin is now somewhere clearly below the peak months in April and May, but it is still higher than end of last year and early this year. I think that's a situation which we think is going to go forward. You hint at the divestment comment. I can only say what I always say, NBR is a very well-managed, very good market-leading position-based business and our strategy is specialty strategy. So I think at one point it's clear what we are anticipating. And maybe the receivables question, Iain, if you would.
Iain Torrens: Yes. I guess on receivables, I'd start with the free cash flow impact. So if we ignore the receivables finance and the way we think about receivable finance is it's a different source of capital, and it's cheaper than going to the bond market and the bank market for the business today. So if we take out the GBP 15 million outflow in the first half, we're back to a free cash flow negative of GBP 66 million in H1. We've said today, we expect that to be positive by the end of the year. And part of that is seasonality, but a big part of it is what has happened in raw material prices. And they, of course, push up inventory in monetary terms. Underlying inventory was down by 8% on a volume basis. Michael referenced it as well in terms of inventory days. So underlying real action is being taken to manage working capital. The receivables in pound terms, again, increase because of that higher price being charged through to clients, and we get some benefit on the payable side. So net working capital increased in H1. When we look at factoring, of course, we're now factoring more valuable invoices, which in part contributes into the face value you're saying. Looking out to the year-end, we've given some guidance around leverage, and we've said between 4 and 4.35x. You put that together with a reduction in terms of improvement of free cash flow to break even for the year. I think that will guide you into the low 600s in terms of where we expect debt for the full year to land. Absolute amount of factoring at the end of the day comes down to the level of availability of invoices. We have a EUR 200 million line. And actually, does it make commercial sense to factor versus borrow under the bank facilities? And today, it makes commercial sense. So I would expect we continue to use that, but continue to talk about free cash flow excluding it, excluding that impact.
Sebastian Bray: That's helpful. So just to clarify, do we have, at the moment, a covenant net debt and a factoring amount and the factoring amount separate to that is the GBP 150 million. And the factoring amount is excluded from the free cash flow guidance, which is for roughly breakeven at the end of the year, but it might still go up for day-to-day trading reasons by the end of the year. Is that fair?
Iain Torrens: Yes. I mean, implicit in our free cash flow guidance is the guidance we're providing around EBITDA for the year and our assumptions, in particular around raw materials. So if raw material prices remain elevated, then arguably, that would be a positive to the business, but it could be a negative to working capital and therefore, of course, flow through into debt.
Michael Willome: But we foresee a positive free cash flow.
Iain Torrens: Our expectation is a positive free cash flow.
Michael Willome: Faisal?
Faisal Tabbah: No, all I was going to say is there is -- just in terms of the level of activity at year-end, there is just inherently less to factor at December than there would be at June in the volume sense, which may also have net-net a potential for reducing the overall absolute amount of factoring at that point. But again, it's hugely dependent on raw material prices at the time.
Operator: As we have no further audio questions at this time, I will turn the call back over to your hosts for any additional or closing remarks. Thank you.
Michael Willome: Okay.
Faisal Tabbah: Have anything else?
Michael Willome: No.
Faisal Tabbah: Thank you all very much.
Michael Willome: Thank you very much for your interest, everybody, and have a good day. Thank you.