Slide 1: FY 2018 Results
Investor Presentation FY 2018 RESULTS 1ST MARCH 2019
Slide 2: Agenda
AGENDA 1. FY 2018 Summary & Performance Review - Paul Forman 2. FY 2018 Financial Review - Lily Liu 3. Stability Update - Paul Forman 4. Strategy / Growth Progress & FY 2019 Outlook - Paul Forman 5. Q&A 2
Slide 3: FY 2018 Summary & Performance Review
FY 2018 SUMMARY & PERFORMANCE REVIEW Paul Forman – Chief Executive 3
Slide 4: FY 2018: Summary
FY 2018: SUMMARY Growth restored, recovery on track, strategy being delivered • Return to growth for the first time since 2015 • Continued good progress on all key operating metrics in our stability programme • Packaging return to sales and profit growth accelerates in H2, and makes good progress in
Slide 5: FY 2018: Summary
FY 2018: SUMMARY Growth restored, recovery on track, strategy being delivered • Full year growth restored for the first time since 2015 ➢ Like-for-like growth of +0.2% ▪ +1.4% adjusting for the closure of the Newport IP5 cartons site at the end of 2017 ➢ Adjusted operating profit up 9.1% to £90.7m;
Slide 6: Return to Revenue Growth
RETURN TO REVENUE GROWTH … Our revenue1 trends Group LFL revenue growth Packaging underlying revenue growth 4 12 1.3 1.5 7.7 8 0.1 0 4 0 % -4 % -1.0 -3.9 -4 -4.8 -8 -8 -7.5 -9.0 -9.2 -12 -12.1 -10.6 -12 -16 H1 '16 H2 '16 H1 '17 H2 '17 H1 '18* H2 '18* H1 '16 H2 '16 H1 '17 H2 '17 H1 '18* H2 '18* 1 Lik
Slide 7: And Profit Growth
… AND PROFIT GROWTH Our profit trends Group – adj. operating profit growth* Group – adj. operating margin 20 14 13.4 12.9 10 4.7 12 11.1 0 10 9.2 8.2 8.2 8.5 -10 8 % % -20 -17.8 -15.8 6 -30 4 -40 -35.1 2 -39.0 -50 0 H1 '16 H2 '16 H1 '17 H2 '17 H1 '18 H2 '18 H1 '16 H2 '16 H1 '17 H2 '17 H1 '18 H2 '18
Slide 8: Components
COMPONENTS FY 2018 revenue: £271.1m, LFL +5.9%. OM* -30bps • Broad-based result across geographic markets and customer size • Strong growth maintained in access hardware … • … supported by cable management solutions and general protection range of caps and plugs Further investment in new, more effic
Slide 9: Packaging
PACKAGING FY 2018 revenue: £342.3m, LFL -0.5%. OM* +200bps • Return to u / l growth (ex-disposals / Newport IP5 cartons) for the entire division in H2, as anticipated • Encouraging business wins and continued improvement in customer dialogue • Ongoing product pipeline development, to meet Investment
Slide 10: Filters
FILTERS FY 2018 revenue: £260.0m, LFL -2.9%. OM* +60bps • Moderate LFL revenue decline, but with improving trend and good progress with independent customers • World-class operational excellence more successfully mitigating volume volatility Investment to add testing of Heat Not Burn products to Sci
Slide 11: Specialist Components
SPECIALIST COMPONENTS FY 2018 revenue: £159.1m, LFL -0.8%. OM* -80bps • Portfolio (ex-Tear Tapes) achieved +2.2% revenue growth • Modest increase in Industrial Supply • Result in Speciality Tapes reflects specific customer-related softness in retail POP and Appliances: stable result in Industrial •
Slide 12: FY 2018 Financial Review
FY 2018 FINANCIAL REVIEW Lily Liu – Chief Financial Officer 12
Slide 13: Income Statement
INCOME STATEMENT1 Summary FY 2018 FY 2017 Growth £m £m Actual FX Constant FX Revenue 1,025.6 1,027.3 -0.2% +1.9% Operating profit2 90.7 84.6 +7.2% +9.1% Operating margin2 8.8% 8.2% +60bps +50bps Profit before tax2 79.8 74.2 +7.5% +9.7% Earnings2 60.4 57.7 +4.7% +2.2% Earnings per share2 23.1p 22.1p
Slide 14: Revenue by Division
REVENUE BY DIVISION FY 2018 FY growth £m Constant FX Components 271.1 +14.8% Like-for-like1 +5.9% Packaging 342.3 -1.5% Packaging ex-Newport IP5, Bristol and Swiftbrook +3.2% Filters 260.0 -2.9% Specialist Components 159.1 -0.8% Eliminations (6.9) Group (continuing) 1,025.6 +1.9% Group (continuing)
Slide 15: Operating Profit by Division
OPERATING PROFIT1 BY DIVISION FY 2018 Growth Margin2 £m Constant FX FY 2018 FY 2017 Components 60.0 +13.2% 22.1% 22.4% Packaging 5.4 n/m 1.6% -0.4% Filters 34.8 +1.5% 13.4% 12.8% Specialist Components 12.2 -10.9% 7.7% 8.5% Central Services (21.7) Group 90.7 +9.1% 8.8% 8.3% Group – at actual FX 8.8%
Slide 16: Income Statement (cont.)
INCOME STATEMENT (CONT.) FY 2018 Growth £m Actual FX Constant FX Operating profit1 90.7 +7.2% +9.1% Net finance charge (10.9) Profit before tax1 79.8 +7.5% +9.7% Taxation (15.6) Underlying tax rate 19.5% Net income1 64.2 +8.4% +6.0% Minority interests (3.8) Earnings1 60.4 +4.7% +2.2% EPS1 23.1p +4.5
Slide 17: Exceptional & Other Adjusting Items
EXCEPTIONAL & OTHER ADJUSTING ITEMS £m (Gains) / losses and transaction costs from business 4.9 acquisitions and disposals Acquisition integration and restructuring costs 0.2 Costs relating to the strategic review 2.5 Costs relating to site closures 7.4 Other1 5.8 Total Group 20.8 1 Other exceptiona
Slide 18: Cash Flow – Continuing Operations
CASH FLOW – CONTINUING OPERATIONS 160.0 Operating cash conversion = 85% (60.2) (FY 2017 = 95%) 140.0 5.9 40.8 120.0 100.0 90.7 80.0 77.2 (16.5) £m (9.5) 60.0 50.2 (1.0) - 40.0 20.0 0.0 Operating profit 1 Non-cash Working capital Net capex 3 Operating Tax Interest paid Pensions Free items 2 cash flow
Slide 19: Net Debt Reconciliation
NET DEBT RECONCILIATION Net debt / EBITDA ratio of 1.8x £m As at 1 January 2018 210.6 FX 8.0 As at 31 December 2018 240.1 Change in net debt after FX 21.5 Of which: Dividends 54.2 Free cash flow (50.2) Exceptional & other adjusting items (net of exceptional PPE disposal proceeds) 12.5 Acquisitions &
Slide 20: Dividend
DIVIDEND Full year dividend held unchanged 21.0 20.7 20.7 20.7 20.7 20.0 pence 19.0 18.3 18.0 17.0 2014 2015 2016 2017 2018 20
Slide 21: Divestment of Pipe Protection Technologies
DIVESTMENT OF PIPE PROTECTION TECHNOLOGIES Good value for Essentra shareholders and a strong platform for future successful development for PPT • Divested on 14 January 2019 to certain wholly-owned subsidiaries of National Oilwell Varco, Inc. LIFTING BAILS • Transaction value of US$48.0m (c. £38m),
Slide 22: Brexit Planning
BREXIT PLANNING Latest view of worst case scenario • Thorough review of risks undertaken across ten areas • Key issues identified = flow of materials and finished goods across EU – UK borders (in both directions) • Active programme of initiatives over the last 12 months to mitigate both short- and m
Slide 23: IFRS 16 Leases Considerations
IFRS 16 LEASES CONSIDERATIONS Effective from 1 January 2019 • Eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee accounting model • During 2018, Essentra performed a detailed impact assessment of adopting IFRS 16 from 1 January 2019 •
Slide 24: Stability Update
STABILITY UPDATE Paul Forman – Chief Executive 24
Slide 25: Creating Growth from Stability
CREATING GROWTH FROM STABILITY Our stability agenda: recap 1. Our customers • Service • Quality 2. Our processes • IT 3. Our people • HSE • Employee engagement 4. Our finances 5. Sustaining stability through culture 25
Slide 26: Creating Growth from Stability: On Time In Full
CREATING GROWTH FROM STABILITY Our delivery (On Time In Full) Components Packaging 95% 100% 93% 92.4% 98% 95.9% 95.6% 91% 90.4% 96% 89.8% 89% 94% 92.9% 87% 92% 85% 90% 2016 2017 2018 2016 2017 2018 Filters Specialist Components 100% 95% 98.5% 98% 92.9% 93% 91.9% 96% 95.2% 91% 94% 89% 92.7% 92% 87% 9
Slide 27: Creating Growth from Stability: Quality
CREATING GROWTH FROM STABILITY Our quality (incident rate) Components Packaging 100 100 100 100 90 90 80 75 80 74 72 70 70 60 60 58 50 50 2016 2017 2018 2016 2017 2018 Filters Specialist Components 100 100 100 100 80 90 83 58 80 60 70 40 34 60 20 50 2016 2017 2018 2017 2018 NOTE: Indexed complaint r
Slide 28: Creating Growth from Stability: Systems
CREATING GROWTH FROM STABILITY Our systems (major incident rate) Ended 2018 at 23% vs Jan 2018 level 120% 100% 80% 60% 40% 20% 0% Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 28
Slide 29: Creating Growth from Stability: HSE
CREATING GROWTH FROM STABILITY Our HSE (cumulative Lost Time Incidents) 46% reduction in LTIs vs 2017 80 70 60 50 40 2016 2017 2018 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 29
Slide 30: Creating Growth from Stability: Our People
CREATING GROWTH FROM STABLITY Our people OUR STRENGTHS Group employee engagement score • Commitment to quality, customer service and 76 75 ethical / responsible business practices 74 • Employees feel safe, respected by their managers and fulfilled by their jobs 72 • Goal clarity and ability to colla
Slide 31: Creating Growth from Stability: Financial Stability
CREATING GROWTH FROM STABILITY Ensuring financial stability • Strong management commitment to net debt to EBITDA ratio of 1 – 2x • PPT disposal places the leverage ratio firmly in the mid-point of the targeted range • Active risk management approach and development of financial countermeasures • Rew
Slide 32: Sustaining Stability Through Culture
SUSTAINING STABILITY THROUGH CULTURE Our cultural architecture: what makes us? INTERNAL PURPOSE VALUES BEHAVIOURS BRAND 32
Slide 33: Our Purpose
SUSTAINING STABILITY THROUGH CULTURE Our purpose: what motivates us? To provide the parts, products and services our customers need to succeed as businesses. 33
Slide 34: Our Guiding Principles
SUSTAINING STABILITY THROUGH CULTURE Our guiding principles: what drives us? 34
Slide 35: Our Brand: Who Are We?
SUSTAINING STABILITY THROUGH CULTURE Our brand: who are we? • We are a manufacturer and distributor of components and solutions. We are a UK-based FTSE 250 company. We are present in 33 countries across six continents • But who are we? Our brand is more than a logo. It comes to life in the things we
Slide 36: Our Brand: We Make It Work
SUSTAINING STABILITY THROUGH CULTURE Our brand: we make it work 36
Slide 37: Strategy / Growth Progress & FY 2019 Outlook
STRATEGY / GROWTH PROGRESS & FY 2019 OUTLOOK Paul Forman – Chief Executive 37
Slide 38: What We Said – A Reminder
WHAT WE SAID – A REMINDER A strong strategic hand of cards, but a number of “self-inflicted wounds” OUR STRATEGIC STRENGTHS … … THE KEY CHALLENGES • Leadership or #2 positions in virtually all • Matrix structure businesses • Poor IT • Sustainable growth in many, but not all • Lack of strategy • Ofte
Slide 39: Progress vs Stated Objectives – Components
PROGRESS VS STATED OBJECTIVES - COMPONENTS An attractive and unique business model, but with opportunities for improvement Initial strategic assessment Optimised “As – Is” Expansion – organic / inorganic • Selling diverse range of “low cost / high • Refocus the business on clear • Create an M&A “rol
Slide 40: Progress vs Stated Objectives – Packaging
PROGRESS VS STATED OBJECTIVES - PACKAGING Strategically attractive, but with acquisition integration challenges Growth in core and margin Expansion Short term stability Initial strategic assessment improvement Organically / inorganically 2017-2018 2018-2019 2019-onwards • One of very few multi- • Ma
Slide 41: Progress vs Stated Objectives – Filters
PROGRESS VS STATED OBJECTIVES - FILTERS Well-positioned in a declining market, with additional potential medium to long-term “optionality” Initial strategic assessment Optimised “As –Is” Possible “game changers” • The filter is a key value added component • Increased segmentation based on • 3 possib
Slide 42: Business Process Redesign
BUSINESS PROCESS REDESIGN A phased programme to support the strategic agenda, enhance process efficiency and reduce risk • Anticipated five-year programme, focused on: ➢ Business process redesign ➢ ERP investment • Key to addressing the main outstanding “self-inflicted wound” and to supporting the s
Slide 43: Other Operational Efficiency Drivers
OTHER OPERATIONAL EFFICIENCY DRIVERS Opportunities to drive further operating margin improvement • Embed new HSE information management system and undertake Group-wide training • Continue to embed and refine Sales & Operations Planning processes • Continued equipment investments and upgrades, especi
Slide 44: 2019 Considerations / Outlook
2019 CONSIDERATIONS / OUTLOOK Further strategic progress in FY 2019 Strategy and progress are on track … • Components ➢ Continue to drive above-market organic growth through continued improvements in “hassle-free” customer proposition ➢ Further pursue value-enhancing bolt-on acquisitions • Packaging
Slide 45: FY 2018: Reprise
FY 2018: REPRISE Growth restored, recovery on track, strategy being delivered • Full year results continue HY 2018 return to first growth in profit and margin from a stable revenue base since 2015 • Continued good progress on all key operating metrics in our stability programme • Packaging return to
Slide 46: Q&A
Q&A 46
Slide 47: Appendices
APPENDICES 47
Slide 48: Income Statement: Reported Basis
INCOME STATEMENT1 Reported basis FY 2018 Growth £m Actual FX Constant FX Adjusted operating profit 90.7 +7.2% +9.1% Intangible amortisation (22.7) -0.9% +1.5% Exceptional operating items (20.8) -63.0% -63.0% Reported operating profit 47.2 n/m n/m Net finance charge (10.9) Profit before tax 36.3 n/m
Slide 49: Exchange Rates
EXCHANGE RATES Twelve months ended 31 December 2018 Average Closing US$/£ 1.33 1.28 Euro €/£ 1.13 1.12 Impact of a one cent reduction in rate Op. profit (£m) US$/£ 0.3 Euro €/£ 0.4 Twelve months ended 31 December 2017 Average Closing US$/£ 1.30 1.35 Euro €/£ 1.14 1.13 49
Slide 50: Disclaimer
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Slide 51: FY 2018 Results
Investor Presentation FY 2018 RESULTS 1ST MARCH 2019