Croda International Plc

Good morning, everyone. It's great to be with those of you who've joined us in the room and a big welcome to those that are on the webcast as well. As ever, I'm going to go through some of the highlights before handing over to Jez to go through the results in more detail. I'll then come back to talk about the key trends driving the growth in Crota and explain how we're well positioned to respond and benefit to them as well. So let's get started then. So, you know, 2021 was a record year for the business, an excellent performance, demonstrating the benefits of executing our strategy with agility, speed and fast and challenging a fast moving environment. Investments and acquisitions have driven strong progress across all areas of the business. And that's leading to the best sales profits and margins that we've ever seen. significantly ahead of last year and well ahead of 2019. High inflation relating to raw materials, energy and logistics was a significant headwind, and we've leveraged our strong operating model and pricing capability to control a steep rise in costs, one of Crudda's unique advantages. Innovation is at the heart of what we do, you know that now, and it defines Crudda, so it's very pleasing to see that NPP growth is so strongly ahead this year. Acquisitions have boosted our growth too. Avanti has established our lipid system platform, which achieved $200 million of sales, primarily to our principal vaccine customers. And our F&F business, Ibekem, delivered an encouraging performance with integration on track to achieve the synergy potential we talked about when we acquired it. And we've also accelerated investment in the business to capitalise on the enormous opportunities that we see to drive future growth. So overall in the round, strong and agile execution of our strategy as well. In the space of 18 months, if you think about it, we've acquired Avanti and Ibercam, and we're in the process of selling the majority of our industrial business as well. So CRUD is looking very different. The shape's changing, and we're moving very much more towards a pure play consumer care and life sciences company. If you just look, turn it to the headline financials then. We delivered a very strong increase in both sales and profits. Adjusted sales grew 36%, reflecting excellent organic growth in the core business and the impact of acquisitions slightly offset by adverse currency. So you have big growth in the core plus acquisitions on top. Profits grew substantially too, a testament to our sustained focus on high-value, high-margin niche areas of the market. So adjusted earnings per share, 43% higher, underpinning the board's proposal to raise the full-year ordinary dividend by 10%, delivering 30 years of consecutive dividend increases. And finally, we grew organic capital investment by over 30% to nearly 160 million, which will drive forward our strategy to scale consumer health and crop care businesses, leading to a more consistent sales growth and even stronger profit margins in the years ahead. We're seeing strong structural growth too. If you cast your mind back, we're well ahead of pre-pandemic levels. 2019 is a tool we use. The results from the comparator for 2019 is a tool we use for management to look at real comparisons rather than last year. And it's great to see the graph in the top left. Great to see all the businesses showing double-digit underlying growth in each of the sectors. So the top right shows the reported operating profit up 38%. And below, you can see how EPS has progressed to be 35% higher. And there's also been a marked increase in NPP, as I mentioned earlier, increased from 28% to 37%. So as we become more and more a knowledge-intensive company, we commercialize people's knowledge, not metal capacity in our world. So underlying growth in 2021 was strong across the board. Whilst healthcare was a standout performer, crop protection in life sciences also had a good second half too, contributing to this 40% increase in sales of life sciences. Consumer care delivered a strong set of results as well, consistent throughout the year. We're seeing a resurgence in personal care. Performance technology strengthened in half too, driven by improved demand in its more cyclical end markets. And all regions also delivered impressive sales growth, with the consumer recovery strongest in North America. I mentioned inflation a moment ago, and this slide helps to illustrate both the challenge and our ability to successfully navigate it. 2021 saw the highest rise in raw material cost in a decade, up 17% on an underlying basis. Energy costs rose significantly, with freight also rising by 25%. You know, big headwinds of cost. You've seen that in the industry as well. Underlying sales volumes were very healthy. We're pleased about that. They grew 9%, reflecting very strong trading. But we fully recovered the impact of higher input costs, demonstrating the continued strength of Crota's operating model and alongside an improving product mix as well. So if you looked at the overall mix, up 17%. The consequence of strong demand and faster growth was record profit margins increasing to 24.8%. Our non-financial metrics are just as important as our financial results. And last year we became only the third chemical company in the world to have our 1.5 degree target verified by the Science Based Targets Initiative. Our objective is to be net zero by 2050 and to ensure that we're investing in our site decarbonisation roadmaps. Whilst the divestment of P-TIC will make us less carbon intensive, we will rebase our climate targets to maintain the challenges that we've set ourselves. We're also improving diversity and inclusion, achieving both targets of the Hampton, Alexander and Parker reviews at the start of this year. The proportion of women in leadership across the business now increased to 36% leadership positions. And we've established the Crota Foundation through which we're providing one million of funding annually. And this year we've given an additional two million pound on top to reflect the progress in healthcare, our healthcare business. And the first projects will help deliver vaccines to over 50 million people in India, Brazil and Uganda. So our sale of the majority of P-TIC, which was agreed in December, was a significant strategic step for the business for lots of reasons. And on completion, Crudder will become a more carbon-light business, but will also have more intellectual property as NPP sales in consumer care and life sciences are nearly half the total in the business. So our increased exposure to fast growth markets will translate to faster top-line growth and increased margins. and we will be more focused and in an even stronger position to drive consistent, superior returns in the future. So let me stop there, more from me in a moment, and hand over to Jez for more detail on the numbers. Thank you.

Thanks, Steve, and good morning, everybody. As Steve has said... 2021 has seen a record financial performance for the group. Sales were up 36% in reported currency at almost £1.9 billion and increased by 43% in constant currency. Sterling strength means that reported currency numbers are about seven points below the constant currency numbers. Adjusted operating profit increased by 47% to £469 million. With a better product mix and volume growth, return on sales increased by 180 basis points to 24.8%. Adjusted profit before tax was £445 million, up almost 50% on the prior year. The tax rate reduced to 21%, with a one-off benefit from settlement of a previous uncertain tax position. We expect to revert to around 25% tax rate from 2022. Adjusted earnings per share rose by 43% to 250 pence, with the proposed full-year dividend increase to 100 pence, up 10 pence per share, and 14% in cash terms following the IBKM funding for the equity. This is the 30th successive year of dividend growth, as Steve has said, and earnings cover is at the lower end of our range of 40% to 50% of adjusted earnings. So we're in a good place there. Free cash flow reduced by 13% to £154 million due to higher capital investment and working capital build, and I'll talk about that later. Adjusted profit items charged in the period totaled £34 million. This reflected an increased charge for intangible amortisation following the recent acquisitions. Exceptional items were netted to pretty close to zero. Profit before tax on an IFRS basis was up 53% to £412 million. The left-hand chart shows the sales bridge for 2021 versus 2020. Underlying sales, that's from the existing Kroda businesses pre-acquisitions, were up 26% in the year, of which price mix was plus 17% and volume was 9% higher. We're particularly pleased with the volume growth, as it demonstrates the strength of the existing business. Price mix includes the recovery of inflationary costs, but with a significant benefit as well from product mix, reflecting the growth of the high-value businesses, particularly in beauty actives and healthcare. The first year of acquisitions added 17% to group sales, giving the 43% increase in constant currency sales. Now the right hand chart shows the impact of lipid systems growth. As of the half year this has had a meaningful impact on the full year performance and it would be easy but incorrect to conclude that the overall record result has been driven solely by this. Of the total constant currency growth of 43%, 10 percentage points have come from Avanti and the lipid systems platform. 20 percentage points have been delivered from Crota's existing business, reflecting the strong growth in consumer care and the rest of life sciences, as well as performance technologies. And the acquisitions in consumer care added 13 percentage points of growth. So the growth is very broad-based. This sales growth has also been reflected in the profit bridge. The underlying business delivered £116 million of profit growth, we saw growth across all sectors and all businesses. We're now trading well ahead of pre-pandemic levels across the existing Crota business. Acquisitions are shown separately up to the first anniversary of their purchase. Profit from acquisitions added £58 million in 2021 and currency translation reduced overall reported profit by £25 million. Turning now to look at each sector and how it's contributed to the growth. Consumer care sales grew by 45% and adjusted operating profit was 29% higher. The lower profit growth here reflects the fact that Iberchem operates at a lower margin than the personal care business. And as a result of this dilution effect, return on sales overall for the sector was around 25%. The standout performer was again Life Sciences. Sales grew in 2021 by 46%. And with a stronger product mix, adjusted operating profit rose by two-thirds, with return on sales at 36%. Performance technologies saw a strong sales recovery, with sales up 18%, all organically driven. The benefits of greater volume and the operating leverage impact saw adjusted operating profit 32% higher, and return on sales of around 15%. Now looking at each of the three principal sectors in turn. 2021 saw the creation of the consumer care sector, comprising Kroda's leading personal care business in personal care, our growing home care business, and the Ibukim fragrance and flavours business. Personal care saw a strong rebound in sales in 2021, with underlying sales now 15% above the pre-pandemic level of 2019. Growth was strongest in the high-end IP-rich engine of beauty actives, including Soderma, with sales up by 29% on 2020. And after a challenging couple of years, the beauty care business saw a progressive improvement in demand for skincare, sun care, cosmetics and hair care, with sales 13% higher. The business is focused on sustainability-driven innovation, including products from the US ecoplant. After strong demand for hygiene products in 2020, home care sales growth slowed to 8%. Fabric care and eco products are the key drivers of growth here. The IBKM business is proving to be everything that we hoped it would be. The innovation in particular is very exciting. Integration is on track. and the first cross-selling synergies are being delivered. 2021 saw an encouraging performance, despite a combination of slower growth in COVID-impacted emerging markets and a lag in full inflation recovery. But our profit was in line with the acquisition plan. Looking at the bottom chart, with beauty active sales strong, product mix improved in consumer care. Price mix was 13% higher and volume was 5% up. Acquisitions added 35 percentage points to the sector. And the consumer sector is now well set to deliver our objective of mid-single-digit percentage sales growth before inflation recovery. Life science continues to develop into a business to rival Crota's long-held leadership in consumer care. With its focus on drug, vaccine and crop science delivery systems, the sector is growing sales through organic expansion and by leveraging acquired technologies. 2021 saw sales up 46% and adjusted operating profit up 67%. Within this, healthcare delivered outstanding performance with rapid expansion in all three patient healthcare platforms. Sales of vaccine adjuvants were up over 40% alongside specialty excipients. And meanwhile, the lipid systems platform saw sales of approximately 200 million US dollars for COVID-19 vaccines. Crop protection delivered double digit percentage growth year on year in what was a great year for agricultural demand globally. But growth in seed enhancement was more subdued due to slower markets in Europe and North America. The growth of healthcare and the top end of crop is driving a focus on value, not volume. Innovative products sell at much higher prices, and volumes are measured in kilos, not tonnes. As a result, price mix added 35 percentage points to sales growth, whilst volume rose by 6 percentage points. The broad-based sector growth can be seen in the chart on the right-hand side, with an overall contribution of 17 percentage points from Crowley's existing business, supported by 37 percentage points from the Aravanti acquisition and the broader lipid systems platform. Life Sciences is expected to see high single-digit growth in the medium term, excluding inflation recovery. In performance technologies, 2021 saw a continued improvement in sales, driven by recovery in high-end markets and sustainability-driven demand. Margins also improved due to a better business mix and operating leverage. Sales increased by 18%, equally split between price mix and volume. In December we reached agreement to sell just over three quarters of the combined performance technologies and industrial chemicals business or PTIC and there was no impact on the 2021 results from the divestment other than an exceptional charge for the advisory costs incurred during the year. However had the divestment occurred at the start of 2021 we estimate that sales in PTIC would have been around 360 million pounds lower And the impact on adjusted operating profit from the divestment, together with the resultant stranded costs in the business, would be just short of £60 million per annum. We're now working through the separation process and expect completion during the summer of 2022. We've already begun the redeployment of capital from the PTIC divestment. In 2021, we increased our capital spend to almost 160 million sterling. We're following our buy and build strategy of acquiring into exciting technology adjacencies like vaccine adjuvants and liquid systems at sensible multiples, and then expanding them organically through capital investment, which reduces the risk and avoids significant goodwill, thereby accelerating returns. In 2021, we invested 70 million pounds in healthcare, We also expanded our range of sustainable technologies in consumer care. And we began an investment in botanicals and fragrances as part of our fast-growth China strategy. The other key cash outflow in the year was the £100 million working capital build. This reflected an increase in raw material costs and selling prices, higher sales volume, and tactical increases in inventory to mitigate the global distribution challenges that we faced. similar to many other companies. The impact of higher values of working capital at a constant level of days cover added almost £70 million, as you can see in the right-hand chart, while the increase in contingency stock added a further £45 million. And this will reverse as price increases and distribution challenges normalise. As a result, free cash flow was £154 million, £23 million behind 2020. We're following our long-established capital allocation policy, which guides the way we deploy capital. Firstly, we're investing in organic growth, as you've seen, while increasing the ordinary dividend as part of our long-term commitment on returns to shareholders. We invested in acquisitions through Albon Muller and Parfex in consumer care. And closing leverage was 1.4 times EBITDA, well within our target range of one to two times. We'll continue to follow this policy, investing for the future, increasing the regular dividend and returning excess capital as and when this is identified. I'll now hand you back to Steve who will update you on our strategic priorities.

Thanks, many thanks, Jess. Right, a little bit more from me then on Crudder's strategy. And it's all about moving into faster growth markets. You know, you've heard this from me many times. We're focused on those markets that can value our innovation and through high margins are less cyclical as well as capital and carbon light. So we'll combine our leadership position in sustainability with our leadership position in innovation. You need them both to deliver profitable growth. And at that intersection, you get fast growth. So if you just look at our strategic priorities, we've done some of our best strategic thinking during the COVID-19 pandemic with the board and executive committee together, recently finalising our strategic plan for the next five years. And our priorities are shown on the outside of the rim of the circle. And in addition to expanding and strengthening our core sectors, we'll also scale biotechnology and invest to faster growth in China as well, where the personal care market, for example, is growing at 9% a year. We'll continue to look to acquire disruptive technologies as well along the way and also continue to what we call do the basics brilliantly and increase both our responsiveness to customers and engagement from our employees. So today, if you look about sustainability, consumers care more and more about it and their impact on the wider environment as well, too, in the brands that we sell to. Our customers want us to deliver novel, sustainable ingredients that are ethically sourced and produced from lower carbon manufacturing. And this is how we think about sustainability and the opportunity. So we're seeing a big shift from the pandemic. We're ramping up innovation, too, and it's our lifeblood, as you know. We've invested 50% more in R&D resource in the last year. undertaking bigger bets with more ambitious projects, and we'll roll some of these out with you through the calendar this year. So we've got about seven major projects that we're working on at the moment. And at the heart of our strategy is our purpose, smart science to improve lives, which will control and continue to guide the strategic choices that we make. Across the markets we see, we like trends and there are two mega technology trends which we think are the most important for us driving our future. The first is the demand for sustainable ingredients. As I mentioned earlier, consumers want more products from natural and ethically sourced ingredients and that's benefiting consumer as well as the crop business. And the second is the move towards biologics in crop care and pharmaceuticals, which offer transformational opportunities for Croda, which I'll come on to shortly. Big opportunities presenting themselves in biopesticides and biopharmaceuticals, which is really exciting for the group. And the way we look at CRODA now, and the way I want you to look at CRODA now, is we've got eight growth businesses supported by industrial specialties. And within consumer care, most of you are familiar with our personal care business, where we deliver thousands of products to thousands of customers. all of which with rich IP. We've got eight businesses like that now, run by dedicated management teams and their own forward-thinking, customer-led R&D capabilities. They're all supplying critical ingredients at low inclusion levels and often selling in test tube quantities rather than tanker loads, replicating the model we have in personal care for many years. So all eight businesses have excellent growth prospects, and we see... a great opportunity for each of them to deliver as a minimum one and a half times GDP. So, you know, if there's a takeout for the slide, you know, multiple opportunities for growth across multiple sectors. You know, 10 years ago, some investors would have invested in personal care as a priority. You know, take a look. You can invest in health care. You can invest in crop care. You can invest in fragrance and flavors. And you can invest in personal care as well. You can invest in all of them now. So turning to each of these areas in a bit more detail, you know, beauty actives is a really important business for Crota, and we're market leader in peptides, naturals and biotechnology, all of which are seeing higher growth than the average global beauty market. And we expect that to continue. Our genre-defining peptides, such as Metrixyl, are formulated into 80% of all new anti-aging products containing a peptide. We're also developing next-generation active ingredients, including peptides using synthetic biology. And 80% of our beauty actives R&D pipeline is green. We acquired Alvan Muller deliberately which develops innovative botanical ingredients such as anti-inflammatories made from pomegranate of all things. We've also introduced botanical ingredients into China as well and acquired land for a new facility which we expect to build in 2023. So a third of our active products as well are biotechnology-derived in revenue terms today, most well-known of which is Majestum for skin and neck lifting. Some of you might have tried that before. We've acquired Nautilus as well in 2018, a technology-rich marine biotechnology business which has recently launched Venusian, an active derived from marine microorganisms as well to repair sun damage. Soderma moving increasingly into sustainable ingredients, into faster growth. And we're winning, too, in sustainable ingredients in both beauty care and home care as well. We're the market leader in metal oxides on the left-hand side, use the sustainable mineral UV filters for sun creams, and have invested in Entecno, a partnership which has launched a range of high-protection mineral products. with additional non-whiting benefits, so positioning through partnership to meet sustainable ingredients. And in sustainable surfactants, we're displacing petrochemical competitors in formulations increasingly with our broad range of eco products. And in 2021, we secured a three-year contract with a major beauty brand covering six eco surfactants for high-end skin and hair care. the start of things to come. And in other areas, we're also seeing in sustainable surfactants legislation change through sulfation. You know, sulfate-free brands now are on the market everywhere. And we're getting the benefit of that through our ingredients, through clean beauty products, with sales doubling over the last four years. So, you know, we're starting to see this big shift materially improving the growth profile for our consumer care business. And in home care, it's just the same. But what you see there is a big move in the wash cycle to low-temperature washing. That's allowing us to provide active biopolymer ingredients. And we just signed some lucrative contracts with a big customer to improve their fabric conditioner range around the world that's been launched in 30 countries, you know, improving their brand. So lots of good opportunities coming through, and you're starting to see that in the numbers with consumer care. In fragrance and flavours, as Jez said, we're really happy with where we are. We're on track with the 48 million euros of annualised revenue synergies by 2025, and we're leveraging our combined sales network with 10 target countries identified and opportunities across customers of all sizes, including major brands, regional dynamos and indies. In Brazil, a new Iberchem business and R&D laboratory has been set up and established at an existing site there and is delivering its first sales too. So this year we also acquired Parfex again, sustainable ingredients, big shift there. They create fragrances principally for premium personal care and fine perfumery markets. And we're leveraging their products. natural raw material base to their portfolio, all part of the plan to capitalise on growth opportunities for Ecosur accredited products. We double sales of these product lines during the year. So turning next to crop, we've talked to you a lot about the traditional crop care market on the left-hand side of the slide. You know, a big market with compound annual growth of about 3%, You know, an existing partner to the major crop companies, we've also successfully increased our sales to medium size and small customers who now account actually for about 50% sales. So it's not just about the four or five big multinationals. You know, we've got a broad breadth to our programs now. But more exciting is the move to buy pesticides. You know, whilst it's currently a smaller market, it's growing rapidly. And we're now increasing our innovation for next generation delivery systems for microbials and RNA, things like that. Sustainability trends are driving seed enhancement too, where we have secured our first customers for seed treatments, seed coatings that are microplastic free. And we've recently opened an innovation centre in Brazil too there, a state-of-the-art facility, including formulation, microbiology and seed treatment laboratories. And keeping the best to last, let's talk about moving to biopharma in our patient health business. As you know, our drug delivery capability is founded on three world-class platforms, all of which meet the need for specialist delivery systems for biopharma applications and where we're seeing compelling opportunities for future growth. I'll talk more about the pipeline shortly. But just as a recap slide, growth in excipients is being driven by expansion in injectable drugs using biological active ingredients, which dominate new drug launches. The opportunity here is vast, extending to the newest biological drug innovations, such as monoclonal antibodies, say that after a few beers, more than 5,000 of which are currently in clinical trials. And our adjuvants provide the important accelerator to a range of new global vaccines. The market for prophylactic vaccines, say that after a few more years, has more than doubled in the last two years. And in addition, more than 1,500 clinical trials are currently underway for therapeutic vaccines. Lipid systems offer significant potential beyond COVID-19 as a preferred delivery system for the developing science of Nuclear acid therapeutics, you'll hear a lot more about that from CRODA. The mRNA market alone is expected to reach about $35 billion over the next 15 years, and 180 clinical trials are already underway for applications across preventative and therapeutic vaccines and therapeutic drugs. So we've got three world-class platforms, all of which are offering great opportunities for CRODA. so the pipeline then so turning to it it's getting bigger much bigger in 2021 we secured 130 new customers 250 new clinical and preclinical programs with our products we're involved in. And interestingly, two thirds of those programs are non-COVID-19 applications. We're not a one hit wonder in COVID. You have a look at the non-COVID growth profile for COVID in the next few years. Put that in your five year, 10 year spreadsheets. In terms of providing some colour on the variety of programmes, we can say that oncology programmes make up the majority of our specialty excipient pipeline, as well as immunosuppressants for diseases such as diabetes. In vaccine adjuvants, we're becoming more involved with the fight against WHO-listed diseases too, so we're now contributing in high-profile projects to combat 15 of those 24 priority diseases, including new projects for things like HIV and Ebola, And in Lipid Systems, we're involved with multiple projects and multiple customers. And we have relationships with over two-thirds of companies developing mRNA vaccines and drugs. So we're very well placed there to satisfy future growth. So these are terrific. And I think taking a big step back from this, Jez and myself would say, you know, these are the hallmarks of a terrific new broader business. Probably the most exciting thing I've seen in my career to date. And given the rapidly developing pipeline, it should come as no surprise that we're investing our money in it, putting our money where our mouth is, investing ahead of future growth to satisfy future growth as well. Our preferred approach is to adopt this buy and build model, securing new technology platforms like Avanti and the know-how that we get through that with modest acquisition spends and building site expansion around that. Their model was a good one, but it didn't capitalize on the big growth coming through the clinical programs. We think we can do that. So overall, we've invested more than £100 million in the last two years, including £70 million in 2021, with a similar amount committed in the future. So in specialty excipients, we've doubled capacity. In specialty excipients, we've doubled capacity in the US. We're also expanding in Asia, investing £15 million to increase our capacity there as well. And in adjuvants, you'll see we've doubled capacity at our site in Denmark as well. And for Lipid Systems, we've doubled the number of employees at Avanti with £35 million of investment to double capacity at their Alabama site. This has been complemented by £20 million of investment to create a new scale-up capability in the UK. These are already some of the highest returning investments in our portfolio and we're confident that this trend will continue. So in addition, we've also increased people numbers by 40%, which has sort of hit the life science margin you've seen in the second half of the year, but it's because of growth, future growth, and there's lots of it. So lots of progress, and all part of our plan is to build an unbeatable global drug delivery capability with three world-class technology platforms. It's not just lipid systems, it's not just vaccine adjuvants, it's specialty excipients are at three platforms. So finally... Coming to outlook, we expect to see continued underlying growth in the year ahead, driven by this robust consumer demand we're seeing. We expect that to continue. Raw material prices are increasing and growth investments are offsetting any further customer destocking. We're navigating inflation very well. And as guided to previously, we expect lipid systems to be at a similar level to 2021. And margins will remain strong due to an increased proportion of sales from higher value add solutions. So in summary, it's been an outstanding year for CRODA with strong financial and strategic progress. And we're well ahead of pre-pandemic levels and demonstrating our ability to navigate this high inflationary environment very well. We're more knowledgeable and a more intensive business as well with that, focused on higher growth, higher R&D, higher return markets, in a stronger position to deliver more consistent sales growth, stronger profit margins in the future. And it's an exciting time for Kroda. Of that, there is no doubt. And now Jez and I are very happy to take your questions from the floor and from the webcast. Thank you.