Essentra Plc · LSE:ESNT
Essentra — H1 2020 Earnings Presentation
44 slides from Essentra's earnings presentation, Aug 28, 2020
Slide 1: HY 2020 Results
Investor Presentation HY 2020 RESULTS 28th AUGUST 2020
Slide 2: HY 2020: Agenda
HY 2020: AGENDA Clear focus on four key areas identified to support the business through impact of Covid-19 pandemic (‘the pandemic’ from hereon in) • Group summary – Paul Forman • Safeguarding our people – Paul Forman • Supporting our customers – Paul Forman • Managing our cashflow – Lily Liu • Bui
Slide 3: HY 2020: Summary
HY 2020: SUMMARY Resilient performance through HY with improving revenue and order trends across all three global divisions in Q2 • Trading trends in all three divisions improving through Q2 • Pandemic had significant impact on underlying markets in which Components operates, but revenue and order i
Slide 4: HY 2020: Outlook
HY 2020: OUTLOOK Resilience of portfolio continues to be demonstrated • H1 2020: LFL revenue decline of only 8.5% with operating margin maintained at 6.5%; each month in Q2 remained profitable and cash generative • To continue focus on four pillars with an increased emphasis on ‘Building for the Fut
Slide 5: HY 2020 Safeguarding Our People
HY 2020 SAFEGUARDING OUR PEOPLE Paul Forman – Chief Executive 5
Slide 6: HY 2020: Safeguarding Our Colleagues' Wellbeing
HY 2020: SAFEGUARDING OUR COLLEAGUES’ WELLBEING The physical, emotional and financial wellbeing of our people continues to be at the forefront of our planning, as the pandemic and future of our working places emerge PHYSICAL EMOTIONAL FINANCIAL • Strict hygiene and protective • Globally employees ha
Slide 7: HY 2020: Safeguarding Our People
HY 2020: SAFEGUARDING OUR PEOPLE Consistently high levels of confidence and support from Essentra’s top c.100 global leaders • Weekly CEO video message to all employees How much leaders feel that Essentra is taking the right actions • Video messages from certain PLC board members 4.0 3.5 • Weekly le
Slide 8: HY 2020: Safeguarding Our People
HY 2020: SAFEGUARDING OUR PEOPLE Our HSE (Lost Time Incidents and Total Hours Lost) Number of LTIs Total Hours Lost 70 1600 60 1400 1200 50 1000 40 800 30 600 20 400 10 200 0 0 FY 2017 FY 2018 FY 2019 LTM 2020 FY 2017 FY 2018 FY 2019 LTM 2020 NOTES: Data covers sites owned by Essentra as at 31 Decem
Slide 9: HY 2020: Supporting Our Communities
HY 2020: SUPPORTING OUR COMMUNITIES Not only proud to be serving critical industries involved in the fight against COVID-19 but also innovating to support the wider community At our Packaging site in Barcelona, a Cutting Manager - with the full support of the site head - worked out a way to use our
Slide 10: HY 2020 Supporting Our Customers
HY 2020 SUPPORTING OUR CUSTOMERS Paul Forman – Chief Executive 10
Slide 11: HY 2020: Supporting Our Customers
HY 2020: SUPPORTING OUR CUSTOMERS World class operational metrics maintained despite pandemic • Operational performance maintained across all three divisions throughout HY, all of our 71 manufacturing and distribution sites have been fully operational since May • Across all divisions we have strived
Slide 12: HY 2020: Supporting Our Customers
HY 2020: SUPPORTING OUR CUSTOMERS World class operational metrics maintained despite pandemic – Quality Incident Rate (base year = 100) Components Packaging 100 100 80 80 60 60 40 40 20 20 0 0 2016 2017 2018 2019 HY2020 2019 HY2020 Filters (Excl Tear Tapes) Tear Tapes 100 120 80 115 110 60 105 40 10
Slide 13: HY 2020: Supporting Our Customers
HY 2020: SUPPORTING OUR CUSTOMERS Excellent levels of customer service and support have given rise to commercial opportunities Customer testimonials Business wins • Components: Penlon: “In a race against time, • Components Essentra Components gave us a seamless, • Growth in medical devices product h
Slide 14: Components
COMPONENTS HY 2020 revenue: £129.7m, LFL -12.8%, OM 18.4% • Continued rollout of new website, benefit of improved digital proposition has been seen during H1 through increased traffic. First stages of cross sell functionality have gone live on the website, and further developments are in progress •
Slide 15: Packaging
PACKAGING HY 2020 revenue: £185.3m, LFL -3.0%, OM 2.6% • Division delivered YOY growth in May & June • Pharma demand has remained robust throughout HY, market in the beauty segment has been challenging • Commercial and operational capabilities demonstrated that have been key in securing $5m new busi
Slide 16: Filters
FILTERS HY 2020 revenue: £133.4m, LFL -11.2%, OM 8.1% • Division returned to YOY growth in June, with underlying demand robust throughout the HY with extended site shutdowns experienced due to government enforced lockdowns in India and Paraguay • Measures taken to minimise impact on production capab
Slide 17: HY 2020 Managing Our Cash Flow
HY 2020 MANAGING OUR CASH FLOW Lily Liu – Chief Financial Officer 17
Slide 18: HY 2020: Managing Our Cashflow
HY 2020: MANAGING OUR CASHFLOW Proactive and responsible actions taken have ensured that strong liquidity position has been maintained and improved • Underlying liquidity1 maintained at or above £229m throughout and was £261m at the HY • No furlough support taken from UK government • Operating cash
Slide 19: HY 2020: Managing Our Cashflow
HY 2020: MANAGING OUR CASHFLOW Resilient performance through HY with improving revenue and order trends across all three global divisions in Q2 • HY 2020 results impacted by pandemic: • Like-for-like (LFL) decline of 8.5% • Adjusted operating profit down 40.0% to £29.0m; adjusted operating margin -3
Slide 20: HY 2020: Managing Our Cashflow
HY 2020: MANAGING OUR CASHFLOW Business generated positive operating cashflow throughout Q2 ensuring a reduced net debt and increased underlying liquidity over the period Operating Cash Flow £m Net Debt £m 20 306 304 15 302 300 10 298 5 296 294 0 292 Apr May Jun Apr May Jun Underlying Liquidity £m •
Slide 21: Income Statement
INCOME STATEMENT1 Like-for-like revenue declined 8.5%; 300bps margin contraction HY 2020 HY 2019 Growth £m £m Actual FX Constant FX Revenue 448.4 506.6 -11.5% -11.7% Operating profit2 29.0 48.3 -40.0% -40.0% Operating margin2 6.5% 9.5% -300bps -300bps Profit before tax2 21.3 41.3 -48.4% -48.5% Earni
Slide 22: Revenue by Division
REVENUE BY DIVISION HY 2020 HY growth £m Constant FX Components 129.7 -10.2% Components like-for-like1 -12.8% Packaging 185.3 3.9% Packaging like-for-like2 -3.0% Filters (Incl TT) 133.4 -11.2% Specialist Components - -100% Eliminations - Group 448.4 -11.7% Group – like-for-like3 -8.5% 1 At constant
Slide 23: Operating Profit by Division
OPERATING PROFIT1 BY DIVISION HY 2020 Growth Margin £m Constant FX HY 2020 Components 23.9 -26.4% 18.4% Packaging 4.9 -38.7% 2.6% Filters 10.8 -34.9% 8.1% Specialist Components - -100% - Central Services (10.6) - - Group 29.0 -40.0% 6.5% Group – like-for-like2 -37.9% 1 Adjusted to exclude intangible
Slide 24: Income Statement (Cont.)
INCOME STATEMENT (CONT.) HY 2020 Growth £m Actual FX Constant FX Operating profit1 29.0 -40.0% -40.0% Net finance charge (7.7) Profit before tax1 21.3 -48.4% -48.5% Taxation1 (4.1) Underlying tax rate 19.2% Net income1 17.2 -48.0% -48.4% Minority interests (0.9) Earnings1 16.3 -48.1% -48.5% EPS1 6.2
Slide 25: Exceptional Items
EXCEPTIONAL ITEMS £m External professional costs associated with certain corporate 3.5 development activities which are still in progress1 Release of excess provision net of external advisory costs in (1.2) relation to review of compliance of certain group companies’ export activities with US laws O
Slide 26: Cash Flow
CASH FLOW Operating cash conversion = 76% £m 1 3 2 2 1 1 1 1 1 1 Adjusted to exclude intangible amortisation and exceptional and other adjusting items 2 Being depreciation of £19.8m, right-of-use asset depreciation of £6.2m and Share Option Expense / Other Movements of -£0.5m 26
Slide 27: Net Debt Reconciliation
NET DEBT RECONCILIATION Free cash flow offset by FX and increased lease liabilities. Closing Net Debt / EBITDA 2.5x £m As at 1 January 2020 284.4 FX 12.5 As at 30 June 2020 297.0 Change in net debt after FX 0.1 Of which: Dividends - Free cash flow (11.5) Exceptional & other adjusting items (net of e
Slide 28: Return on Invested Capital
RETURN ON INVESTED CAPITAL Decline in LTM ROIC driven by impact of Covid-19 12.0 10.8 9.2 9.3 8.6 8.0 7.4 % 4.0 0.0 FY 16 FY 17 PF 18* 1 PF 19* 1 PF LTM 20*1 1 – Proforma 2018, 2019 and LTM 2020 are adjusted to remove impact of businesses disposed during 2019 (PPT, Extrusion, Speciality Tapes and Ca
Slide 29: Building for the Future
BUILDING FOR THE FUTURE Paul Forman – Chief Executive 29
Slide 30: HY 2020: Building for the Future
HY 2020: BUILDING FOR THE FUTURE We have engaged our leadership team to develop a new purpose and set of values that reflect the changing landscape 30
Slide 31: Essentra's Sustainability Journey
Essentra’s Sustainability Journey What are we doing? Revised Purpose, Values & Goals Four Sustainability Themes Comments • Sustainability both an opportunity and a challenge for Essentra Responsible • Developing new, more sustainable Resource Usage materials & products for our customers Energy & Cli
Slide 32: New Environmental KPIs and Targets
New Environmental KPIs and Targets New Environmental KPIs and targets – over and above existing safety-related KPIs Long-term Targets Examples of Activity (So Far) Scope 1&2 GHG • Ongoing programme of energy audits, leading to • GHG emissions neutral by 2040 emissions specific energy efficiency proj
Slide 33: Responsible Resource Usage
Responsible Resource Usage Divisions developing new, more sustainable products • Trials progressing well to incorporate recycled content in some LDPE products Components • Working with several customers to incorporate recycled content and biodegradable additives • Working with customers to substitut
Slide 34: Building for the Future – BPR Update
BUILDING FOR THE FUTURE – BPR UPDATE BPR Programme has ‘gone live’ in head office for Finance & Procurement, Components planned in 2021 Process Transformation to Create New Capabilities & Benefits Rationale Key Activities • Addressing critical issues with current • Finance and Procurement systems: p
Slide 35: Components – Divisional Priorities
COMPONENTS – DIVISIONAL PRIORITIES COMPONENTS Trading Outlook A global market-leading manufacturer • Continued steady recovery through H2 and distributor of a comprehensive range of components, used in diverse • Operating margins remaining resilient and improving from Q2 industrial applications and
Slide 36: Packaging – Divisional Priorities
PACKAGING – DIVISIONAL PRIORITIES PACKAGING Trading Outlook Multi-continental supplier of a full • Continued YOY revenue growth in H2 2020 range of secondary packaging to the pharmaceutical, personal care and • Laying the foundation for 200bps operating margin improvement in beauty sectors 2021; mar
Slide 37: Filters – Divisional Priorities
FILTERS – DIVISIONAL PRIORITIES FILTERS Trading Outlook The only global independent provider • Continued YOY revenue growth expected in H2 2020 of filters and related solutions to the tobacco industry • Underlying demand remaining stable • Further progress on game changers – China JV, outsourcing an
Slide 38: HY 2020: Outlook
HY 2020: OUTLOOK Resilience of portfolio continues to be demonstrated • H1 2020: LFL revenue decline of only 8.5% with operating margin maintained at 6.5%; each month in Q2 remained profitable and cash generative • To continue focus on four pillars with an increased emphasis on ‘Building for the Fut
Slide 39: Q&A
Q&A 39
Slide 40: Appendices
APPENDICES 40
Slide 41: Income Statement
INCOME STATEMENT Reported basis HY 2020 Growth £m Actual FX Constant FX Adjusted operating profit 29.0 -40.0% -40.0% Intangible amortisation (10.9) Exceptional operating items (2.5) Reported operating profit 15.6 -74.0% -73.5% Net finance charge (7.7) Profit before tax 7.9 -85.1% -84.8% Taxation (0.
Slide 42: Exchange Rates
EXCHANGE RATES Six months ended 30 June 2020 Average Closing US$/£ 1.27 1.23 Euro €/£ 1.14 1.10 Impact of a one cent reduction in rate Op. profit (£m) US$/£ 0.1 Euro €/£ 0.2 Six months ended 30 June 2019 Average Closing US$/£ 1.29 1.27 Euro €/£ 1.14 1.12 42
Slide 43: Disclaimer
DISCLAIMER Important legal notice THIS DOCUMENT IS STRICTLY CONFIDENTIAL TO THE RECIPIENT AND HAS BEEN SUBMITTED TO YOU SOLELY FOR YOUR INFORMATION. THE RECIPIENT MAY NOT REPRODUCE OR REDISTRIBUTE ANY PART OF THIS DOCUMENT TO ANY PERSON IN ANY FORM. THIS DOCUMENT AND THE PRESENTATION TO WHICH IT REL
Slide 44: HY 2020 Results
Investor Presentation HY 2020 RESULTS 28th AUGUST 2020