Essentra Plc · LSE:ESNT
Essentra — H1 2021 Earnings Presentation
33 slides from Essentra's earnings presentation, Jul 30, 2021
Slide 1: Building for the future
Building for the future 2021 Half Year Results – 30th July 2021
Slide 2: HY 2021: Agenda
HY 2021: AGENDA • Group Summary – Paul Forman • Financial Performance – Lily Liu • Divisional Performance & Initiatives – Paul Forman • Outlook and Reprise – Paul Forman 2
Slide 3: Encouraging H1 performance, with a positive full year outlook
Encouraging H1 performance, with a positive full year outlook, focused on delivering organic growth and accretive M&A • Well-positioned for sustained growth in all divisions with clear and successful strategies based on innovation, sustainability and strong customer partnerships • Trend of positive
Slide 4: HY 2021 Financial Performance
HY 2021 FINANCIAL PERFORMANCE Lily Liu – Chief Financial Officer
Slide 5: Financial Highlights
FINANCIAL HIGHLIGHTS Encouraging financial performance and position, provides firepower for strategic optionality • Like-for-like (LFL) H1 revenue growth: LFL Revenue Growth Trend • 7.5% vs H1 2020 15% • -1.9% vs H1 2019 (Q2 +2.5%) 10% • H1 2021 adjusted operating profit (vs H1 2020) up 34.0% to £35
Slide 6: Income Statement
INCOME STATEMENT HY 2021 HY 2020 Growth £m £m Actual FX Constant FX Revenue 474.9 448.4 5.9% 11.6% Operating profit1 35.7 29.0 23.1% 34.0% Operating margin1 7.5% 6.5% 100bps 130bps Profit before tax1 28.7 21.3 34.7% 50.8% Earnings2 23.2 16.3 42.3% 60.5% Earnings per share2 7.7p 6.2p 24.2% 39.9% 1 Ad
Slide 7: Revenue by Division
REVENUE BY DIVISION HY 2021 Growth vs Growth vs HY20 HY19 £m Constant FX Constant FX Components 148.4 20.3% 4.0% Packaging 187.0 4.6% 8.9% Packaging like-for-like1 -5.1% -8.3% Filters 139.5 12.8% 0.1% Group 2 474.9 11.6% 6.0% Group like-for-like1 7.5% -1.9% 1 At constant exchange rates, adjusted for
Slide 8: Operating Profit by Division
OPERATING PROFIT1 BY DIVISION Growth HY 2021 Margin (Reported) vs 2020 £m Constant HY 2021 HY 2020 HY 2019 FX Components2 27.0 17.3% 18.2% 18.4% 22.7% Packaging 9.6 102.1% 5.1% 2.6% 4.5% Filters3 11.5 18.2% 8.2% 8.1% 10.9% Central Services (12.4) Group 35.7 34.0% 7.5% 6.5% 9.5% 1 Adjusted to exclude
Slide 9: Income Statement (cont.)
INCOME STATEMENT (CONT.) HY 2021 Growth £m Actual FX Constant FX Operating profit1 35.7 23.1% 34.0% Net finance charge (7.0) Profit before tax1 28.7 Taxation1 (4.8) Underlying tax rate 16.7% Net income1 23.9 Minority interests 0.7 Earnings1 23.2 42.3% 60.5% EPS1 7.7p 24.2% 39.9% EPS – diluted1 7.7p
Slide 10: Cash Flow
CASH FLOW NWC investment supporting growth and supply chain Operating cash conversion = 63% Net debt ratio3 = 1.5x 1 2 3 1 2 1 1 1 1 1Adjusted to exclude intangible amortisation and adjusting items 2Being depreciation and amortisation of £19.6m, right-of-use asset depreciation of £5.8m and Share Opt
Slide 11: Net Debt Reconciliation
NET DEBT RECONCILIATION Net Debt to EBITDA decreased to 1.7x (1.5x pre IFRS16) £m As at 1 January 2021 210.4 FX (1.9) As at 30 June 2021 212.2 Change in net debt after FX 3.7 Of which: Free cash flow (4.7) Cash inflow in respect of adjusting items (0.9) Acquisitions – net cash paid 1.9 Capital contr
Slide 12: Returns
RETURNS Improvements in profitability see LTM ROIC increase ROIC 12.0 9.2 9.2 8.0 7.3 % 6.7 4.0 0.0 PF 18 PF 19 FY 20 LTM 21 Proforma 2018 and 2019 are adjusted to remove impact of businesses disposed during 2019 (Pipe Protection Technologies, Extrusion, Speciality Tapes and Card Solutions) 12
Slide 13: HY 2021 Divisional Performance & Initiatives
HY 2021 DIVISIONAL PERFORMANCE & INITIATIVES Paul Forman – Chief Executive
Slide 14: HY 2021: ESG Update
HY 2021: ESG UPDATE Our purpose is to responsibly provide the products and services our customers need to succeed 2018 ENVIRONMENTAL 2018 SOCIAL 2018 GOVERNANCE • Progress seen in reaching “class • We continue to proactively monitor • In addition to our well-established leading sustainability” the p
Slide 15: Components – Performance and Strategic Priorities
COMPONENTS – PERFORMANCE AND STRATEGIC PRIORITIES Strong revenue growth delivered against a backdrop of supply chain challenges • Actions taken to drive cross selling and deliver market share gains: Q2 21 HY 21 HY 20 HY19 • Enhanced e-commerce offering, use of AI Revenue £79m £148m £130m £145m* • Ca
Slide 16: Components: Hengzhu Acquisition
COMPONENTS: HENGZHU ACQUISITION A compelling acquisition in line with Essentra’s strategic and financial criteria • Hengzhu is an access hardware manufacturer and distributor in China operating from a single facility in Yichun, Jiangxi • Focused on market categories such as data centre storage equip
Slide 17: Components: Digital Transformation
COMPONENTS: DIGITAL TRANSFORMATION Improving our customer proposition and driving growth Enhancing the customer experience Using data to enhance commercial activities • Working with PEAK AI to deliver commercial insight through delivery of the Predictive Customer View • New promotional capabilities
Slide 18: Packaging – Performance and Strategic Priorities
PACKAGING – PERFORMANCE AND STRATEGIC PRIORITIES Good progress on margin expansion, notwithstanding underlying market challenges • Trading continued to be impacted by underlying market in H1 21 Q2 21 HY 21 HY 20 HY 19 although steady improvement in trade seen through Q2 Revenue £96m £187m £185m £177
Slide 19: Packaging – Sustainability
PACKAGING – SUSTAINABILITY Providing our customers with value added solutions that support their sustainability goals The Situation & Problem Our Solution: Re*flect Plastic Free Metpol Alternative • Traditional metpol lamination contains plastic, typically • Non-filmic transfer metallised product be
Slide 20: Filters – Performance and Strategic Priorities
FILTERS – PERFORMANCE AND STRATEGIC PRIORITIES Strong growth led by outsourcing contract volumes Q2 21 HY 21 HY 20 HY 19 Progress made on strategic game changers: Revenue £73m £140m £133m £151m* • China JV – production has commenced LFL growth vs 2020 15.5% 12.8% • Successful delivery of outsourcing
Slide 21: Filters: Developing Sustainable Solutions
FILTERS: DEVELOPING SUSTAINABLE SOLUTIONS Sustainable Solutions developed leveraging 90+ years of innovation expertise • Three new products intended to meet EU’s Single Use Plastics Directive initiatives for plastic-free and biodegradable solutions continue to gain momentum ECO Sensation™ • To date
Slide 22: Outlook and Reprise
OUTLOOK AND REPRISE Paul Forman – Chief Executive
Slide 23: FY 2021: Outlook
FY 2021: OUTLOOK A solid platform, driving profitable and cash generative growth An encouraging start Expect FY 2021 operating profit to be in to the year, but the line with the Board’s expectations pandemic related ▪ Components and Filters should see a continuation uncertainty remains in growth alb
Slide 24: HY 2021: Reprise
HY 2021: REPRISE Encouraging H1 performance, with a positive full year outlook, focused on delivering organic growth and accretive M&A • Well-positioned for sustained growth in all divisions with clear and successful strategies based on innovation, sustainability and strong customer partnerships • T
Slide 25: Questions & Answers
Questions & Answers 2021 Half Year Results – 30th July 2021
Slide 26: Appendices
Appendices 2021 Half Year Results – 30th July 2021
Slide 27: Income Statement – Reported basis
INCOME STATEMENT – Reported basis HY 2021 Growth £m Actual FX Constant FX Adjusted operating profit 35.7 23.1% 34.0% Intangible amortisation (11.1) Adjusting items 5.5 Reported operating profit 30.1 92.9% 118.2% Net finance charge (7.0) Profit before tax 23.1 192.4% 272.8% Taxation credit (2.5) Unde
Slide 28: Exchange Rates
EXCHANGE RATES Six months ended 30 June 2021 Average Closing US$/£ 1.39 1.38 Euro €/£ 1.15 1.17 Impact of a one cent increase in rate Adj Op. profit (£m) US$/£ (0.1) Euro €/£ (0.2) Six months ended 30 June 2020 Average Closing US$/£ 1.27 1.23 Euro €/£ 1.14 1.10 28
Slide 29: Adjusting Items
ADJUSTING ITEMS £m Transaction costs relating to acquisitions and disposals of (4.3) businesses1 Acquisition integration and restructuring costs2 0.2 Other3 (1.4) Total credit from adjusting items (5.5) 1 Driven by the release of provisions relating to prior business disposals, offset by costs of £0
Slide 30: Environmental KPIs and Targets
ENVIRONMENTAL KPI’S AND TARGETS These KPIs and targets are over and above existing safety-related KPIs Long-term Targets Scope 1&2 GHG • GHG emissions neutral by 2040 emissions (normalised) • 25% reduction by 2025 (vs. 2019 baseline) (Group) # sites at zero waste to • All sites at zero waste to land
Slide 31: Divisional Strategic Positioning
DIVISIONAL STRATEGIC POSITIONING Components Packaging Filters Market Position: largest global broad Market Position: one of two multi- Market Position: is the only global range supplier (in specific categories, continental suppliers of a full independent cigarette filter supplier typically top 5 sup
Slide 32: 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 33: Building for the future
Building for the future 2021 Half Year Results – 30th July 2021