Slide 1: FY 2019 Results
Investor Presentation FY 2019 RESULTS 28th FEBRUARY 2020
Slide 2: FY 2019 Summary & Performance Review
FY 2019 SUMMARY & PERFORMANCE REVIEW Paul Forman – Chief Executive 2
Slide 3: FY 2019: Summary
FY 2019: SUMMARY Group materially simplified, with all three global divisions well set for growth and robust performance in line with expectations • Successful conclusion to “chapter 2” with 4 disposals and creation of 3 global divisions • All divisions on track versus strategic milestones • Compone
Slide 4: FY 2019: Summary
FY 2019: SUMMARY Group materially simplified, with all three global divisions well set for growth and robust performance in line with expectations • FY 2019 results build on positive underlying momentum seen since inflection point of H2 2018 Like-for-like revenue decline of 0.7% +1.5% on an unde
Slide 5: Significant Portfolio Activity in FY 2019
SIGNIFICANT PORTFOLIO ACTIVITY IN FY 2019 14 January 11 June 27 November Divestment of Pipe Protection Divestment of Extrusion Joint Venture announcement Technologies (PPT) China Tobacco Essentra (Xiamen) Filters Co. 26 June Acquisition of Innovative Components JAN FEB MAR APR MAY JUN JUL AUG SEP OC
Slide 6: Continued Revenue Growth
CONTINUED REVENUE GROWTH Sustained revenue growth despite challenging trading environment Underlying Revenue1 roup Adjusted operating margin2 4% 12% 10.9% 1.4% 1.5% 10% 2% 0% 8% -2% -2.0% 6% -4% 4% -6% -8% 2% -10% -9.1% 0% FY '16 FY '17 FY '18 FY '16 FY '19 Underlying Revenue1 Pa ckag ing Adjusted o
Slide 7: Components
COMPONENTS FY 2019 revenue: £283.3m, LFL -0.6%. OM* -40bps • Core Components (excluding transfer of Reid) saw marginally positive revenue on a LFL basis with operating margin broadly maintained • Throughout a year of macroeconomic uncertainty, the business continued to deliver “hassle-free” service
Slide 8: Innovative Components
INNOVATIVE COMPONENTS An acquisition that strengthened our core product range and added further manufacturing capacity in the Americas • Headquartered in Chicago, USA, Innovative Components is a leading manufacturer and distributor of knobs, pins and handles in North America for a broad range of end
Slide 9: Filters
FILTERS FY 2019 revenue: £303.6m, LFL -1.1%. OM* +0bps • Core Filters division (excluding transfer of Tear Tapes business) revenue declined by 0.7% due to: • Impact on trade in China, driven by our lack of local manufacturing presence– which further underlies the importance of the creation of the JV
Slide 10: China Joint Venture
CHINA JOINT VENTURE Materially increases Essentra’s global addressable market • In November we announced the signing of an agreement to establish a new joint venture company in China, China Tobacco Essentra (Xiamen) Filters Co., Ltd • Essentra will hold a 49% shareholding in the JV with a number of
Slide 11: Packaging
PACKAGING FY 2019 revenue: £352.7m, Underlying +5.6%. OM* +280bps • 2019 was Packaging’s best financial and operational performance since 2015 • Underlying revenue +5.6% (ex-Kilmarnock / Largo) • Delivered target of mid single digit revenue growth (well above industry growth rates) and 200bps margin
Slide 12: Commercial Developments in Packaging
COMMERCIAL DEVELOPMENTS IN PACKAGING Building a global commercial function to enhance our customer engagement • Whilst traditionally managed locally, global customers are increasingly looking to coordinate their global secondary packaging spend to drive greater value from suppliers • In response, Es
Slide 13: Operational Developments in Packaging
OPERATIONAL DEVELOPMENTS IN PACKAGING Driving towards operational excellence • “Passion for the patient” within the business ensures focus and that quality matters, this is evidenced by Packaging Americas OEE % trend in incident rate reducing further during 2019 70% and continuing downward trend see
Slide 14: Packaging People Focus
PACKAGING PEOPLE FOCUS Building a motivated and engaged team • Team capability significantly enhanced in last 3 years (over 50% new hires in Regional and Divisional management team) Add a picture in here of some • Capability build focussed across enabling functions and of our people on shop floor Co
Slide 15: Nekicesa Packaging
NEKICESA PACKAGING • Nekicesa has more than 50 years’ experience developing secondary packaging solutions for the international pharmaceutical industry • With two well-invested facilities in Madrid, they are one of the leading converters of folding cartons in the Spanish market • The acquisition has
Slide 16: FY 2019 Financial Review
FY 2019 FINANCIAL REVIEW Lily Liu – Chief Financial Officer 16
Slide 17: Financial Highlights
FINANCIAL HIGHLIGHTS Robust profit delivery supported by a strong balance sheet • Underlying revenue growth of 1.5%1 with adjusted operating margin +20bps to 9.0% • Strong operating cash conversion of 82% • Net debt at 2.0x (after applying IFRS 16) • Refinancing put in place in February 2020 for $80
Slide 18: Income Statement
INCOME STATEMENT1 Underlying revenue grew 1.5%; 20bps margin expansion FY 2019 FY 2018 Growth £m £m Actual FX Constant FX Revenue 974.1 1,025.6 -5.0% -6.5% Operating profit2 87.5 90.7 -3.5% -5.4% Operating margin2 9.0% 8.8% +20bps +10bps Profit before tax2 73.0 79.8 -8.5% -10.5% Earnings2 55.7 60.4
Slide 19: Revenue by Division
REVENUE BY DIVISION FY 2019 FY growth £m Constant FX Components 283.3 +0.7% Components like-for-like1 -0.6% Packaging 352.7 +1.7% Packaging ex-Kilmarnock, Largo & Nekicesa +5.6% Filters (Incl TT) 303.6 -1.1% Specialist Components 35.2 -67.8% Eliminations (0.7) Group 974.1 -6.5% Group – like-for-like
Slide 20: Operating Profit by Division
OPERATING PROFIT1 BY DIVISION FY 2019 Growth Margin £m Constant FX FY 2019 Components 60.3 -1.1% 21.3% Packaging 15.1 +185.6% 4.3% Filters 36.2 -1.3% 11.9% Specialist Components 4.8 -57.5% 13.6% Central Services (28.9) Group 87.5 -5.4% 9.0% Group – underlying2 +2.0% 1 Adjusted to exclude intangible
Slide 21: Income Statement (cont.)
INCOME STATEMENT (CONT.) FY 2019 Growth £m Actual FX Constant FX Operating profit1 87.5 -3.5% -5.4% Net finance charge (14.5) Profit before tax1 73.0 -8.5% -10.5% Taxation (14.5) Underlying tax rate 19.9% Net income1 58.5 -8.9% -10.9% Minority interests (2.8) Earnings1 55.7 -7.8% -9.7% EPS1 21.3p -7
Slide 22: Exceptional & Other Adjusting Items
EXCEPTIONAL & OTHER ADJUSTING ITEMS £m Gains / (losses) and transaction costs from business acquisitions 15.9 and disposals Estimated financial penalties (2.3) External advisers Compliance investigation (3.6) Impairment losses of assets (1.6) Credits relating to the release of provisions with regard
Slide 23: Cash Flow
CASH FLOW 160.0 51.2 (10.3) Operating cash conversion = 82% 140.0 (56.6) 120.0 100.0 87.5 80.0 (16.5) 71.8 £m 60.0 (13.3) (1.3) 40.7 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 1 cash flow 1 1 Adjusted to exclude i
Slide 24: Net Debt Reconciliation
NET DEBT RECONCILIATION Net debt / EBITDA ratio reduced to 2.0x (1.9x pre-IFRS 16) £m As at 1 January 2019 (before applying IFRS 16) 240.1 IFRS 16 adjustment 59.4 FX (6.6) As at 31 December 2019 284.4 As at 31 December 2019 (before applying IFRS 16) 233.7 Change in net debt after FX (after applying
Slide 25: Return on Invested Capital
RETURN ON INVESTED CAPITAL Steady improvement in ROIC 12.0 10.8 9.2 9.3 8.6 8.0 % 4.0 0.0 FY 16 FY 17 PF 18* 1 PF 19*1 1 Proforma 2018 and 2019 are adjusted to remove impact of businesses disposed during 2019 (PPT, Extrusion, Speciality Tapes and Card Solutions) with a further adjustment made in 201
Slide 26: Enablers for Growth
ENABLERS FOR GROWTH Paul Forman – Chief Executive 26
Slide 27: Continued Growth from Stability: HSE
CONTINUED GROWTH FROM STABILITY Our HSE (Lost Time Incidents and Total Hours Lost) Number of LTI's 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 FY 2017 FY 2018 FY 2019 NOTE: Data covers sites owned by Essentra as at 31 December 2019 (2017 and
Slide 28: Continued Growth from Stability: Delivery
CONTINUED GROWTH FROM STABILITY Our delivery (On Time In Full) Components1 Filters2 95% 94.3% 100% 98.5% 98.5% 93% 92.4% 98% 91% 90.4% 96% 95.2% 89.8% 89% 94% 92.7% 87% 92% 85% 90% 2016 2017 2018 2019 2016 2017 2018 2019 Packaging 98% 96.6% 95.9% 95.6% 96% 94% 92.9% 92% 90% 2016 2017 2018 2019 NOTES
Slide 29: Continued Growth from Stability: Quality
CONTINUED GROWTH FROM STABILITY Our quality (incident rate) Components Filters 100 100 100 100 90 80 80 74 72 58 70 60 34 37 60 40 54 50 20 2016 2017 2018 2019 2016 2017 2018 2019 Packaging 100 100 90 80 74 70 59 60 53 50 2016 2017 2018 2019 NOTE: Indexed complaint rate – 2016 = 100 for Components,
Slide 30: Continued Growth from Stability: Systems
CONTINUED GROWTH FROM STABILITY Our systems (major incident rate) 100% 100% 80% 60% 46% 40% 20% 24% 0% 2017 2018 2019 Investment in IT infrastructure is having the desired impact 30
Slide 31: Enablers for Growth: Employee Engagement
ENABLERS FOR GROWTH Our employee engagement Employee Engagement Scores • Key areas worked on in 2019 80 IndustryAverage Focus on diversity and inclusion 75 70 Clarification of strategy and direction throughout our organisation 65 60 • New People strategy in place 55 Focus on employee lifecycle
Slide 32: Governance of Sustainability at Essentra
ENABLERS FOR GROWTH Governance of Sustainability at Essentra • Board Sustainability Committee meets quarterly chaired by Ralf Wunderlich responsible for advising and reviewing strategy, risk, opportunity management and performance of sustainability related topics 32
Slide 33: Reporting and Alignment to UN SDGs
ENABLERS FOR GROWTH Reporting and further strategy alignment to UN Sustainable Development Goals (SDGs) • Commitment to continuously improving environmental reporting by gaining external verification of 2019 environmental data giving a more accurate and reliable baseline and further assurance to ext
Slide 34: BPR Programme Underway
ENABLERS FOR GROWTH BPR Programme underway in Components, Finance & Procurement Process Transformation to Create New Capabilities & Benefits • Currently working in Components Rationale Division, plus Finance & Procurement Divisional-Phased • Addressing critical issues with current globally Approach
Slide 35: Longer Term Potential and Outlook
LONGER TERM POTENTIAL AND OUTLOOK Paul Forman – Chief Executive 35
Slide 36: Components: Milestones and 2020 Initiatives
COMPONENTS 2019 key milestones COMPONENTS A global market-leading manufacturer Digital platform roll-out and distributor of a comprehensive Continue to drive “hassle-free” proposition range of components, used in diverse industrial applications and end- Improved pricing discipline markets Incr
Slide 37: Filters: Milestones and 2020 Initiatives
FILTERS 2019 key milestones FILTERS Continued progress of three game changers The only global independent provider of filters and related solutions to the Leverage scientific know-how to add value for customers tobacco industry Enhance value proposition REVENUE Drive additional operational exc
Slide 38: Packaging: Milestones and 2020 Initiatives
PACKAGING 2019 key milestones PACKAGING Drive revenue growth and regain market share Multi-continental supplier of a full range of secondary packaging to the Further improve operational efficiency pharmaceutical, personal care and beauty sectors Leverage scale to improve procurement benefits I
Slide 39: 2020 Considerations / Outlook
2020 CONSIDERATIONS / OUTLOOK Well placed for growth in FY 2020 Foundations increasingly strong… • Leading market positions • Deepened customer franchise • Class leading operational performance • Increased employee engagement • M&A pipeline enhanced … but uncertain macro environment remains, exacerb
Slide 40: FY 2019: Reprise
FY 2019: REPRISE Group materially simplified, with all three global divisions well set for growth and robust performance in line with expectations • Successful conclusion to “chapter 2” with 4 disposals and creation of 3 global divisions • All divisions on track versus strategic milestones • Compone
Slide 41: Q&A
Q&A 41
Slide 42: Appendices
APPENDICES 42
Slide 43: Portfolio Simplification
PORTFOLIO SIMPLIFICATION Significant capital reallocation, with firepower for further potential acquisitions Rounded figures* Disposals Filters JV Acquisitions Gross proceeds / (outlay) £115m £(12)m £(43)m** Revenue £(105)m - £29m Trading profit £(15)m - £4m EPS (4)p 1p 1p *Rounded figures are based
Slide 44: Income Statement (Reported Basis)
INCOME STATEMENT Reported basis FY 2019 Growth £m Actual FX Constant FX Adjusted operating profit 87.5 -3.5% -5.4% Intangible amortisation (22.9) Exceptional operating items 15.4 Reported operating profit 80.0 +69.5% +66.2% Net finance charge (14.5) Profit before tax 65.5 +80.4% +76.1% Taxation (24.
Slide 45: Exchange Rates
EXCHANGE RATES Year ended 31 December 2019 Average Closing US$/£ 1.28 1.32 Euro €/£ 1.14 1.18 Impact of a one cent reduction in rate Op. profit (£m) US$/£ 0.3 Euro €/£ 0.4 Year ended 31 December 2018 Average Closing US$/£ 1.33 1.28 Euro €/£ 1.13 1.12 45
Slide 46: Impact of Applying IFRS 16 – FY 2019
IMPACT OF APPLYING IFRS 16 – FY 2019 Metric Impact Profit & Loss Account Adjusted EBITDA +£13.6m Adjusted operating profit +£2.3m Net finance cost +£2.1m Profit before tax / net income / EPS +£0.2m Balance sheet Net debt* +£50.7m Total assets* +£44.2m Total liabilities* -£48.6m Net equity* -£4.4m Ca
Slide 47: 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 48: FY 2019 Results
Investor Presentation FY 2019 RESULTS 28th FEBUARY 2020