“In 2022, as we scaled up for accelerated growth, we faced significant challenges. We have taken comprehensive measures to ensure improved delivery performance. In addition, we are working with customers to further optimize our commercial relationships. We are making good progress in the search for our new CEO, who will have the opportunity of leading PolyPeptide into a future with significant structural growth opportunities."
2022, a challenging year
As we reflect on the past year, we must acknowledge that 2022 did not meet our expectations for growth. We invested in the expansion of our workforce to scale up the organization, but faced a range of challenges both external and internal, which resulted in a significant decline in profitability. PolyPeptide was impacted by rising input costs and wage inflation and, particularly in the second half of 2022, by the technical and manufacturing process problems that hindered our performance. As a result, revenue for the year was down by 0.4% to EUR 281.0 million, and our adjusted EBITDA declined by 56.2% to EUR 38.7 million, highlighting the need for us to take comprehensive measures to address these challenges.
Focus on operational excellence
These measures include the strengthening of our workforce capabilities to instill technical proficiency, operational best practice and rigor, and also to provide improved onboarding and training to new employees. We are highly focused on ensuring quality and restoring our delivery performance by taking steps to minimize the risk from unforeseen technical failures, and have launched an internal program to strengthen operational procedures and controls across the business. In addition, we continue to implement our pricing measures, which have been launched to mitigate inflationary pressure. While I fully expect that these efforts will generate significant benefits and position PolyPeptide for long-term success, these changes will take time to fully implement and to achieve their intended results.
Positioning for growth
I have great confidence in the structural growth opportunities in the peptides market and we are continuing to experience strong demand from customers. With volume requirements for certain projects reaching unprecedented levels, a robust commercial and operational set-up will be critical. We are therefore exploring opportunities to work with our customers and suppliers more closely along the value chain. Furthermore, we aim to further standardize and integrate processes to strengthen our operational resilience across our manufacturing presence in different geographies. This remains a complex undertaking, but in the longer term will simplify cross-site product collaboration, allow further flexibility for customers, and mitigate risk.
Dividend and financial guidance for 2023
With the significant drop in profitability in 2022 and the ongoing efforts needed to restore revenue growth and profitability, we will not be proposing the payment of a dividend to our shareholders at the annual General Meeting on 12 April 2023 (“AGM 2023”).
An improvement in profitability in 2023 largely depends on the Group’s ability to achieve revenue growth. With the time required until the remediation measures yield results, we expect revenue for the first half of 2023 to be comparable with the previous year, with profitability significantly lower. A marked recovery in revenue and profitability is expected thereafter in the second half. For the full year of 2023, we currently expect high single- digit percentage revenue growth versus 2022, with an adjusted EBITDA margin in the mid-teens. Capital expenditure is planned to be around 10% of revenue, lower compared to 2022 (29.5% of revenue) and reflecting the planned completion of our accelerated capital deployment for growth launched in 2021.
We aim to provide an update of our mid-term outlook with the announcement of results for the first half of 2023 on 15 August 2023.
CEO search and new Board member
Following Mr De Vré’s resignation at the end of January 2023, PolyPeptide is currently conducting a CEO search, and we are committed to identifying a candidate who has the leadership skills and relevant experience to drive our growth and expansion plans. We have established a comprehensive search process with the support of a leading executive search firm to ensure a rigorous and thorough selection process.
Our Board of Directors is critical to our success, and we are committed to ensuring that it comprises individuals who possess the skills, experience and expertise necessary to guide our company into the future. To this end, I am pleased to announce that Dorothee A. Deuring (Austrian, 1968) will be nominated as a new member of the Board of Directors at the AGM 2023, who will further strengthen diversity and independence within the Board.
On behalf of the rest of the Board, I would like to thank our shareholders, as well as all other stakeholders, for their continuing support during this challenging year and for their trust in PolyPeptide moving forward. In particular, I would like to also thank our employees for their contribution in making PolyPeptide a trusted long-term partner. Their continued commitment is at the heart of our ability to deliver on our rich agenda and to turn our growth plans into success.