Finance review 2025

Focused on execution

Sales

Q4 2025 sales by business

Sales in the fourth quarter were slightly stronger than anticipated. Q4 sales growth was strongest in Consumer Care, up 8.9% at constant currency, against a modest comparator. Sales were up 7.9% in Life Sciences at constant currency, also improving sequentially. By contrast, Industrial Specialties sales were down 18.6% compared with a particularly strong quarter in the prior year.

FY25 sales by business

Group sales increased to £1,699.4m (2024: £1,628.1m), up 4.4% or 6.6% at constant currency, in an uncertain trading environment impacted by geopolitical tensions, the imposition of US trade tariffs and foreign exchange volatility. Sales growth at constant currency comprised a 7.9% increase in Consumer Care, a 7.7% increase in Life Sciences and a 2.4% decrease in Industrial Specialties.

As part of the actions that we have taken throughout the year to increase utilisation at our shared production sites, we have been driving targeted sales of ingredients in Beauty Care, Crop Protection and Industrial Specialties. Alongside strong sales in Fragrances and Flavours (F&F) this resulted in a 9.6% increase in sales volumes. As a result of these actions, price/mix was 3.0% lower with adverse mix the larger component, comprising both adverse product and business mix. As anticipated, volume growth moderated in the second half of the year, and price/mix was less adverse than in the first half year, with like-for-like prices remaining largely consistent with the prior period.

FY25 sales and Q425 sales by region

Regional sales growth was led by EMEA, with full year sales up 9%, driven by good demand for Beauty and F&F ingredients in both Europe and the Middle East, and a recovery in demand from MNCs in Crop Protection, particularly in the first half year. Sales growth in the Americas improved in the second half year, supported by a recovery in Beauty demand, particularly in North America. Asia lagged other regions as exporters in pharma and industrial markets were adversely affected by the imposition of US trade tariffs.

Profit and margin

Following two years of raw material cost deflation in 2023 and 2024, average raw materials costs were stable in 2025. We expect a small reduction in the average cost of raw materials in the first quarter of 2026, but then for them to be broadly stable for the remainder of the year. People costs were up ~3%, principally reflecting inflationary salary rises. Both energy and freight costs, which represent around 2.5% of sales respectively, increased in the period, predominantly due to higher sales.

IFRS operating profit was £110.1m (2024: £227.5m). IFRS operating profit included a charge for adjusting items of £185.2m (2024: £52.2m), including a charge for amortisation of acquired intangibles of £35.7m (2024: £37.2m), and ongoing restructuring costs associated with business transformation of £26.3m (2024: £6.5m).

Impairment charges in 2025 totalled £107.3m (2024: £nil), including £44.6m associated with the decision to place the Lamar lipids facility in the USA on standby (meaning it is capable of start-up and production within three months) with an associated onerous contract provision of £15.9m. The decision minimises future costs and enables us to fulfil our commitments to the US Government, which provided the majority of the funding for the facility under its pandemic-preparedness programme. Lamar is one of four GMP facilities globally where we are able to produce pharma-grade lipids (two in the USA, and one each in the UK and South Korea), meaning we have ample capacity for future production. Whilst we expect sales of lipids for drug research to continue to grow, customer projects requiring production at significant scale are expected to take longer to materialise. Other impairment charges were a £28.7m charge related to the decision to cease investments into certain assets under construction following a detailed review of future capital expenditure projects, a £22.2m charge associated with the rationalisation of supply chain infrastructure, including ceasing operations at a leased distribution facility in the UK, and a £10.9m charge following the reallocation of R&D resources away from the development of two acquired technology assets. A number of other capacity optimisation projects are being considered as part of the transformation programme, where decisions that could be made in the future may result in a reassessment of the carrying value of certain assets.

Group adjusted EBITDA increased 5% to £396.6m (2024: £378.3m) at an adjusted EBITDA margin of 23.2% (2024: 23.3%.), Group adjusted operating profit was up 6% to £295.3m (2024: £279.7m) or 8% at constant currency, with encouraging sales growth augmented by improved profitability in Consumer Care and Life Sciences. Whilst Group adjusted operating margin remains significantly below its medium-term potential, it improved to 17.4% (2024: 17.2%) benefiting from improved asset utilisation at our 11 shared manufacturing sites, partly offset by adverse price/mix and foreign exchange.

Our transformation programme contributed gross benefits of £28m to operating profit in 2025 (at a cash cost of £26m taken as an exceptional item). Our target remains ~£100m of total annualised pre-tax benefits by the end of 2027 which annualises in full year 2028. Benefits delivered comprised ~£10m from optimising supply chain (versus a total opportunity of ~£65m) and ~£15m from simplifying our organisation (total opportunity: ~£35m), leaving ~£75m gross benefits to be realised 2026-28 at an additional cash cost of ~£55m over that period.

Net finance costs were £19.1m (2024: £19.7m). Profit before tax (on an IFRS basis) was £91.0m (2024: £207.8m) and adjusted profit before tax increased 6% to £276.2m (2024: £260.0m) or by 8% at constant currency to £282.0m. The effective tax rate on adjusted profit was 25.2% (2024: 23.0%) and the effective tax rate on IFRS profit was 28.9% (2024: 23.2%). We continue to expect an effective tax rate on adjusted profit of 26% in future years. IFRS basic earnings per share (EPS) were 44.4p (2024: 113.5p) and adjusted basic EPS were 146.2p (2024: 142.6p).

Currency impact

Sterling strengthened against the US Dollar, at US$1.32 (2024: US$1.28) and was broadly flat against the Euro, at €1.17 (2024: €1.18) but weakened against both the US Dollar and the Euro in the second half year meaning the impact of currency translation was less than we anticipated. Currency translation reduced full year sales by £35.4m, adjusted operating profit by £6.4m and adjusted profit before tax by £5.8m. This was driven by the strength of Sterling against the US Dollar and by the impact of changes in exchange rates for other smaller currencies including the effect of the application of IAS 29 (‘Financial Reporting in Hyperinflationary Economies’) to reporting in Argentina and Turkey. We estimate that the average annual currency translation impact on adjusted operating profit is £1m per Dollar cent movement per annum and £1m per Euro cent movement per annum. The US Dollar and the Euro together represent approximately 65% of the Group’s currency translation exposure with the impact from movements in smaller currencies broadly aligned with the impact from movements in the US Dollar.

Cash flow and balance sheet

¹Restated to include cash costs of exceptional items in free cash flow

Free cash flow (post exceptionals) reduced 5% to £161.6m (2024: £169.6m restated) with a working capital outflow of £7.7m compared with an inflow of £20.9m in 2024 driven by the settlement of a £48m COVID-19 receivable from 2023. £133.6m of free cash flow was generated in the second half of 2025 with lower capex and working capital. As part of transformation, we are targeting structural improvements to reduce working capital by ~£50m for full year 2028. This will be delivered by improving supplier terms and payments, standardising receivables terms and optimising collection, and realising inventory benefits under the modernising supply chain pillar of the programme.

Following a detailed review of in-flight and future investments, capital expenditure fell to £108.2m (2024: £137.9m), 6% of Group sales. We expect future capital expenditure to be ~6% of sales, in line with historic norms prior to the recent period of heightened investment, and that depreciation will increase by ~£10m in 2026 as the final recent investments come on stream.

Building on our record of consistent distribution to shareholders, the Board is proposing a one pence per share increase to the full year dividend to 111p (2024: 110p), despite the payout ratio of 76% being above our stated policy of 40-50% of adjusted earnings.

Closing net debt was £523.8m (2024: £532.3m), with the debt leverage ratio falling to 1.3x EBITDA (31 Dec 2024: 1.4x; 30 June 2025: 1.5x). As at 31 December 2025, the Group had committed funding in place of £1,066.6m, with undrawn long-term committed facilities of £400.9m and £172.8m in cash.

Our capital allocation framework is unchanged, but we are applying it with greater rigour to improve discipline over:

1. Organic investment to support growth

2. Ordinary dividends to shareholders representing 40-50% of adjusted earnings through the cycle, with the ordinary dividend at least maintained as we restore earnings and reduce the payout ratio from the current level

3. Small, selective technology acquisitions from the medium term as we focus on maximising returns from recent investments in the short term

4. Maintaining leverage in the 1-2x EBITDA range, providing opportunities for the return of excess capital to shareholders as we generate free cash flow.

Retirement benefits

The post-tax asset on retirement benefit plans at 31 December 2025, measured on an accounting valuation basis under IAS-19, was £85.5m (31 Dec 2024: £77.7m). Cash funding of the various plans is driven by the schemes’ ongoing actuarial valuations. The triennial actuarial valuation of the largest pension plan, the UK Croda Pension Scheme, was performed as at 30 September 2023 and indicated that the funding position of the scheme had significantly improved. The scheme was 120.6% funded on a technical provisions basis. Consequently, the cash cost of providing benefits has fallen and no deficit recovery plan is required.

Future financial framework

Our financial framework to full year 2028 reflects our confidence in delivering consistent sales growth, improving profitability, growing cash flows and improving returns on capital (all on a constant currency basis.)

Financial KPIs

Sales: Assuming current economic conditions continue, we expect to deliver consistent sales growth from our strengthened portfolio and are targeting an organic increase in sales of 3-6% CAGR over three years. We expect both higher sales volumes and positive price/mix to contribute to sales growth over the period. Expected organic growth rates (2026-28) by business are:

• Consumer Care: 3-6% CAGR
• Life Sciences: 4-7% CAGR
• Industrial Specialties: (3)-3% CAGR

Adjusted operating margin: We are enhancing profitability through the benefits driven by our transformation programme and growing sales. We are targeting a Group adjusted operating margin over 20% by full year 2028, compared with 17.4% in 2025. This is equivalent to an EBITDA margin over 25%, compared with 23.3% in 2025. We expect both growth and transformation savings to contribute to margin recovery.

Free cash flow: We expect to deliver growing, sustainable cashflows, driven by higher profits, lower working capital and low capital expenditure. In line with peers, our measure is the ratio of free cash flow to sales inclusive of exceptional cash costs. We expect to structurally reduce working capital by ~£50m for full year 2028 and capital expenditure to be around 6% of sales in the period. This, combined with higher profits, means we are targeting a free cash flow-to-sales ratio (post exceptionals) of over 12% for full year 2028, compared with 9.5% in 2025.

Building on our record of consistent distribution to shareholders, the Board is proposing a one pence per share increase to the full year dividend to 111p (2024: 110p), despite the payout ratio of 76% being above our stated policy of 40-50% of adjusted earnings.

Returns on Invested Capital: We are targeting a Return on Invested Capital (ROIC) of at least 10% by full year 2028, compared to 8.2% in 2025. To enhance comparability with peers, we now define ROIC as adjusted operating profit net of tax divided by average adjusted invested capital, where adjusted invested capital is net assets plus net debt minus the net pension asset. For further information see page 197.

Non-financial KPIs

Safe workplace: Our target is a Total Recordable Injury Rate of 0.3 by 2026. In 2025, TRIR increased to 0.61 (2024: 0.47) due to six of our manufacturing sites seeing an increased number of recordable incidents. Fortunately, the associated injuries were of low severity with limited lost time, but we are disappointed with the step back in performance and are committed to living safety as a value.

Innovation-led: Sales of New and Protected Products increased 5% at constant currency, with new ingredient sales up 10%, patented sales up 9%, but protected sales only up slightly as product mix was impacted by our targeted action to increase utilisation at shared manufacturing assets, particularly in Crop Protection and Industrial Specialties. NPP sales were 35% of total sales (2024: 35%). Our innovation metrics are currently being reviewed to ensure alignment with our new innovation framework. For 2026, and in line with the associated remuneration measure, we are targeting organic growth in NPP sales at least in line with total organic sales growth, to incentivise continued portfolio differentiation.

Focusing our sustainability strategy: Listening to our customers, we are adopting a more focused sustainability strategy to 2030, driving deeper impact across fewer corporate targets. These are reductions in GHG emissions (scopes 1, 2, 3, E&I, and FLAG (covering land-related upstream impacts)) and in water use impact at our operations in areas with high water risk. With most of our environmental (and social) risks embedded in our supply chain, we are also targeting >75% of raw materials from renewable carbon, and zero deforestation risks in our key bio-based supply chains. Our KPI is total scope 3 GHG emissions, where we are targeting a 26.3% reduction by 2030 from a 2022 baseline in line with our revalidated science-based targets. In 2025, scope 3 GHG emissions were 1,330,561 MTCO2e (2024: 1,190,132 MTCO2e), rising in the short term due to continued sales volume recovery but 6.4% lower than the 2022 baseline. We continue to be recognised as a sustainability leader in external rankings with a ’triple A’ rating from MSCI and ‘A-‘
from CDP in climate and water.

Satisfied customers: Our customer satisfaction KPI is a Net Promoter Score based on a comprehensive customer survey. In 2025, it improved to +43 (2024: +32), based on ~3,500 responses, with increases in all three businesses. Our longer term KPI for customer NPS is currently being developed. For 2026, and in line with the associated remuneration measure, we are targeting a further NPS increase for a subset of our larger customers, where the data is most robust, and will ensure that the sample size continues to be representative.

Engaged employees: Employee engagement is measured by a new tool. Our overall employee Net Promoter Score increased from +11 in March 2025, when the metric was introduced to +21 in December. We are targeting a score of +24 by 2028, ensuring that managers continue to prioritise engagement during a period of change for our employees as we deliver our transformation programme.

Stephen Oxley

Chief Financial Officer