Rotterdam, The Netherlands (27 February 2020) - IMCD N.V. (“IMCD” or “Company”), a leading distributor of speciality chemicals and food ingredients, today announces its full year 2019 results.
Highlights
• Revenue growth of 13% to EUR 2,689.6 million (+12% on a constant currency basis)
• Gross profit growth of 12% to EUR 599.3 million (+11% on a constant currency basis)
• Operating EBITA increased by 11% to EUR 224.8 million (+10% on a constant currency basis)
• Net result before amortisation and non-recurring items of EUR 156.2 million (2018: EUR 139.7 million)
• Cash earnings per share increased by 13% to EUR 2.85 (2018: EUR 2.53)
• Dividend proposal of EUR 0.90 in cash per share (2018: EUR 0.80)
Piet van der Slikke, CEO, commented: “Despite more challenging market conditions, the results of 2019 demonstrate consistent strong performance with exceptional cash generation. IMCD’s diversified business model showed itself resilient and we took important steps in the diligent execution of our long-term growth strategy. Through selective acquisitions we strengthened our global positions in pharmaceuticals, food and advanced materials, and we are excited about the recent addition of the attractive South Korean and Colombian markets to our geographical coverage. Entering the year of IMCD’s 25th anniversary in its present form, we feel proud of the success achieved and remain well positioned to deliver further growth to our business partners and stakeholders.’’

Key figures
EUR million 2019 2018 Change Change Fx adj. change
Revenue 2,689.6 2,379.1 310.5 13% 12%
Gross profit 599.3 536.1 63.2 12% 11%
Gross profit in % of revenue 22.3% 22.5% (0.2%)
Operating EBITA1 224.8 202.1 22.7 11% 10%
Operating EBITA in % of revenue 8.4% 8.5% (0.1%)
Conversion margin2 37.5% 37.7% (0.2%)
Net result before amortisation / non-recurring items 156.2 139.7 16.5 12% 11%
Free cash flow3 222.2 166.5 55.7 33%
Cash conversion margin4 97.4% 79.3% 18.1%
Net debt / Operating EBITDA ratio5 2.8 2.8 0.0
Earnings per share (weighted) 2.06 1.91 0.15 8% 7%
Cash earnings per share (weighted)6 2.85 2.53 0.32 13% 11%
Proposed dividend per share 0.90 0.80 0.10 13%
Number of full time employees end of period 2,991 2,799 192 7%

1 Result from operating activities before amortisation of intangibles and non-recurring items
2 Operating EBITA in percentage of Gross profit
3 Operating EBITDA excluding non-cash share-based payment expenses, less lease payments, plus/less changes in working capital, less capital expenditures
4 Free cash flow in percentage of Adjusted Operating EBITDA (Operating EBITDA plus non-cash share-based payment costs minus lease payments)
5
Including full year impact of acquisitions
6 Result for the year before amortisation (net of tax)

Revenue
Revenue increased by 13% from EUR 2,379.1 million in 2018 to EUR 2,689.6 million in 2019. The revenu growth is the balance of organic developments (-1%), the first-time inclusion of acquisitions (13%) and a positive impact of foreign currency exchange fluctuations (1%).
The overall organic revenue development was the balance of macroeconomic circumstances, further strengthening of the product portfolio by adding new supplier relationships, expanding relationships with existing suppliers and increasing customer penetration by adding new products and selling more products to existing and new customers.

Gross profit
Gross profit, defined as revenue less cost of materials and inbound logistics, was EUR 599.3 million in 2019, compared with EUR 536.1 million in 2018, an increase of 12%. The increase in gross profit was the balance of organic growth (1%), the first time inclusion of acquisitions (10%) and the positive impact of foreign currency exchange rate developments (1%).
Gross profit in % of revenue was 22.3% compared with 22.5% in 2018. Gross profit in % of revenue remained stable in the Americas at 19.7% and decreased in EMEA with 0.1%-point to 24.7% and in Asia-Pacific with 0.4%-point to 20.5%. Gross profit margins showed the ordinary level of differences in margins per region, margins per product and margins per product market combination. Differences between and within the regions are caused by local market circumstances, product mix variances, product availability, foreign currency fluctuations and the impact of newly acquired businesses.

Operating EBITA
Operating EBITA increased by EUR 22.7 million (11%), from EUR 202.1 million in 2018 to EUR 224.8 million in 2019. On a constant currency basis, the increase was 10%.
The growth in operating EBITA of 11% was a combination of organic growth, the first-time inclusion of acquisitions completed in 2018 and 2019, the impact of the initial application of the new lease accounting standard (IFRS 16) and the positive impact of foreign currency exchange differences (1%). The application of IFRS 16 had a positive impact on the operating EBITA of EUR 5.1 million.
Operating EBITA in % of revenue was 8.4% in 2019, compared with 8.5% in 2018. Both regions EMEA and Asia-Pacific showed lower EBITA margins of 0.7%-point, respectively 0.2%-point. Segment Americas showed an increase in EBITA margin of 0.4%-point.
In 2019, the conversion margin, defined as operating EBITA as a percentage of gross profit, was 37.5% compared with 37.7% in 2018. The operating EBITA and the conversion margin are negatively impacted by the first time inclusion of acquired companies with lower than IMCD's average EBITA margins.

Free cash flow
Free cash flow is defined as operating EBITDA excluding non-cash share-based payment expenses, less lease payments, plus or less changes in working capital, less capital expenditures. Free cash flow increased
by EUR 55.7 million from EUR 166.5 million in 2018 to EUR 222.2 million in 2019.
The cash conversion margin, defined as free cash flow as a percentage of Adjusted operating EBITDA (Operating EBITDA adjusted for non-cash share-based payments and lease payments) increased by 18.1%-point from 79.3% in 2018 to 97.4% in 2019.
The increase in conversion margin in 2019 is mainly the result of higher operating EBITDA in combination with less working capital investments. The investment in operational working capital in 2019, excluding additional working capital as a result of acquisitions completed, amounts to EUR 0.5 million, compared with EUR 39.1 million in 2018. In particular the investments in stock positions were considerably lower in 2019 compared with 2018. Managing working capital remains a permanent focus of management.
IMCD's asset light business model resulted in relatively low capital expenditure considering the size of the overall operations and amounted to EUR 5.4 million in 2019 compared with EUR 4.4 million in 2018. Capital expenditure was mainly related to investments in the ICT infrastructure, office furniture and technical, warehouse and office equipment.
In order to secure a leading position in the speciality chemicals distribution market, IMCD continues to invest in its ICT infrastructure. As part of IMCD's journey to become a truly digital company, in 2019 IMCD launched its B2B Customer Portal, a platform for IMCD's customers to handle their ongoing business with IMCD. We consider this digital platform as an important step to adapt to the omnichannel world.

Net debt and equity
IMCD aims to maintain a capital structure that offers flexibility and enables IMCD to cover its potential financial requirements and to execute its growth and acquisition strategy. As at the end of 2019, net debt was EUR 735.2 million, compared with EUR 610.7 million as at year-end 2018.
The increase in net debt is predominantly the balance of positive and healthy cash flows from operating activities set-off by cash outflows as a result of acquisition related payments of EUR 88.9 million and a dividend payment of EUR 42.1 million in 2019. The adoption of IFRS 16 resulted in additional net debt (lease liabilities) of EUR 74.8 million as at the end of 2019. Furthermore, net debt includes approximately EUR 38 million deferred and contingent considerations related to acquisitions made (31 December 2018: EUR 4 million).
As at the end of December 2019, the leverage ratio (net debt/operating EBITDA ratio including full year impact of acquisitions) was 2.8 times EBITDA (31 December 2018: 2.8). The actual leverage as at 31 December 2019, calculated on the basis of the definitions used in the IMCD loan documentation, was 2.6 times EBITDA (31 December 2018: 2.8). As at 31 December 2019, the actual leverage is well below the maximum leverage of 3.5 applicable to the 'Schuldschein Darlehen' and 3.75 applicable to the revolving credit facilities.
The interest cover, calculated based on the definitions used in the 'Schuldschein Dahrlehen' documentation, is 12.1 times EBITDA (31 December 2018: 13.0) which is well above the required minimum of 4.0 times EBITDA.

At 25 February 2019, IMCD successfully executed an option whereby the initial termination date of the syndicated EUR 400 million multi-currency revolving facility was extended by 1 year to 27 March 2024. All other conditions of the syndicated EUR 400 million multi-currency revolving facility remained the same.
The equity attributable to holders of ordinary shares increased by EUR 80.2 million from EUR 786.3 million as at 31 December 2018 to EUR 866.5 million as at 31 December 2019. The increase in total equity is the balance of the addition of the net profit for the year of EUR 108.0 million, other comprehensive income of EUR 12.8 million, dividend payments in cash of EUR 42.1 million and transactions related to the group's sharebased payment programme of EUR 1.5 million. The increase of equity resulted in a solid ratio at year-end whereby net equity covers 39.6% of the balance sheet total (31 December 2018: 40.3%).

Result for the year
Result for the year increased by EUR 7.9 million (+8%) from EUR 100.1 million in 2018 to EUR 108.0 million in 2019. Earnings per share increased by 8% from EUR 1.91 in 2018 to EUR 2.06 in 2019.
In 2019, net result before amortisation of intangible assets, net of tax and before non-recurring items was EUR 156.2 million compared with EUR 139.7 million in 2018, an increase of 12%. The main drivers of this increase were the higher operating EBITA partly offset by increased (recurring) financing costs and taks expenses.
Cash earnings per share, calculated as earnings before amortisation of intangible assets (net of tax) per share increased from EUR 2.53 in 2018 to EUR 2.85 in 2019 (+13%).

Dividend proposal
For the financial year 2019, a dividend of EUR 0.90 per share in cash will be proposed to the Annual General Meeting. Compared with 2018 this means an increase of EUR 0.10 per share or 13%. Approval at the Annual General Meeting would result in IMCD paying EUR 47.3 million or 32% of the net result 2019 adjusted for noncash amortisation charges, net of tax (2018: 32%)

IMCD full year 2019 results
Developments by operating segment
IMCD distinguishes the following operating segments:
• EMEA: all operating companies in Europe, Turkey and Africa
• Americas: all operating companies in the United States of America, Canada, Brazil, Puerto Rico, Chile, Argentina, Uruguay, Colombia and Mexico
• Asia-Pacific: all operating companies in Australia, New Zealand, India, China, Malaysia, Indonesia, Philippines, Thailand, Singapore, Vietnam, Japan and South Korea
• Holding companies: all non-operating companies, including the head office in Rotterdam and the regional offices in Singapore and New Jersey, US
The developments in 2019 by operating segments are as follows.

EMEA
EUR million 2019 2018 Change Change Fx adj. change
Revenue 1,314.6 1,240.8 73.8 6% 6%
Gross profit 325.4 308.1 17.2 6% 6%
Gross profit in % of revenue 24.7% 24.8% (0.1%)
Operating EBITA 126.3 127.8 (1.6) (1%) (1%)
Operating EBITA in % of revenue 9.6% 10.3% (0.7%)
Conversion margin 38.8% 41.5% (2.7%)

The EMEA region realised revenue growth of 6% in 2019, which is a combination of the organic revenu development (-4%) and the impact of the first time inclusion of acquisitions completed in 2018 and 2019 (10%).
In particular the more industrial part of the business in EMEA was affected by the challenging macroeconomic market circumstances. The 10% acquisition impact mainly relates to the acquisition of Velox (2018). The acquisition of DCS Pharma AG (DCS) in December 2019 had a limited impact on the results of EMEA.

In 2019 IMCD completed the commercial and organisational integration of the Velox organisation, acquired in 2018, into its existing organisation.
On 10 December 2019, IMCD acquired 90% of the outstanding shares of Basel (Switzerland) based pharmaceutical distributor DCS Pharma AG. The remaining 10% of the shares will be acquired as of 31 December 2021. DCS’ product portfolio covers a range of active pharmaceutical ingredients for the pharmaceutical and nutraceutical industries and operates in eight markets, including Spain, Italy, Germany, Mexico, and China. In 2018, DCS generated a consolidated revenue of CHF 68 million (EUR 59 million) with 64 employees.

Gross profit increased by 6%, from EUR 308.1 million in 2018 to EUR 325.4 million in 2019. This increase was the balance of organic gross profit development (-2%) and the first time inclusion of acquisitions (8%). Despite the more difficult market conditions in a number of countries in EMEA, IMCD successfully added new supplier relationships and further expanded its relationships with existing suppliers in new territories and with additional business lines. Organic revenue development further included the usual variations in the product and customer mix. Gross profit margin slightly decreased from 24.8% in 2018 to 24.7% in 2019.
IMCD continued to optimise its supply chain network in 2019, to enhance customer service levels and to reduce operating costs in the supply chain. System-to-system connectivity and process integration of the supply chain partners is crucial for achieving the optimisation.

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