Slide 1: Investor Presentation: Half Year 2018 Results
INVESTOR PRESENTATION Half Year 2018 Results 03 AUGUST 2018
Slide 2: Agenda
AGENDA 1. HY 2018 Overview - Paul Forman 2. Financial & Performance Review – HY 2018 - Stefan Schellinger 3. Stability Update - Paul Forman 4. Strategy Progress & FY 2018 Outlook - Paul Forman 4. Q&A © 2013 ESSENTRA PLC 2
Slide 3: HY 2018 Overview
HY 2018 OVERVIEW Paul Forman Chief Executive © 2013 ESSENTRA PLC
Slide 4: HY 2018: Summary
HY 2018: SUMMARY • Strategic momentum • Stability increased • Revenue and profit growth restored
Slide 5: HY 2018: Summary
HY 2018: SUMMARY • Profit growth from a stable revenue base restored for the first time since 2015 – Revenue unchanged on a like-for-like basis • +1.3%, adjusting for the closure of the Newport IP5 cartons site at the end of 2017 – Adjusted operating profit up 4.7% (at constant FX) to £43.5m; adjust
Slide 6: Return to Revenue Growth
RETURN TO REVENUE GROWTH … OUR REVENUE1 TRENDS Group LFL revenue growth % Packaging LFL revenue growth % 2 0 +1.3% +0.1% -1.0% 0 -2 -2 -4 -4.8% -4 -6 -3.9% -6 -8 -9.0% -9.2% -8 -7.5% -10 -10 -12 -12.1% -10.6% -12 -14 H1'16 H2'16 H1'17 H2'17 H1'18* H1'16 H2'16 H1'17 H2'17 H1'18* 1 Like-for-like 6 *Ad
Slide 7: ... and Profit Growth
… AND PROFIT GROWTH OUR PROFIT TRENDS Group – adj. operating profit growth* Group – adj. operating margin % % 10 14 +4.7% 12.9% 0 12 11.1% 10 -10 8.5% 8.2% 8.2% 8 -15.8% -20 -17.8% 6 -30 4 -35.1% -40 2 -39.0% -50 0 H1'16 H2'16 H1'17 H2'17 H1'18 H1'16 H2'16 H1'17 H2'17 H1'18 Net debt / 2.2 2.3 1.6 1.
Slide 8: Financial & Performance Review – HY 2018
FINANCIAL & PERFORMANCE REVIEW – HY 2018 Stefan Schellinger Group Finance Director © 2013 ESSENTRA PLC
Slide 9: Income Statement – Summary
INCOME STATEMENT – SUMMARY1 HY 18 HY 17 Growth £m £m Actual Constant FX FX C: +19% P: -6% Revenue 513.1 522.6 -1.8% +1.7% F:-3% SC: +1% Operating profit2 43.5 42.8 +1.6% +4.7% 3 out of 4 Operating margin 8.5% 8.2% +30bps +30bps divisions with OM uplift Profit before tax2 38.3 37.3 +2.7% +6.2% Higher
Slide 10: Revenue by Division
REVENUE BY DIVISION HY 18 HY growth £m Constant FX Components 139.6 +18.8% Broad-based growth across all geographic regions Like-for-like1 +9.6% Sequential improvement, Europe Packaging 170.2 -5.9% & Asia +ve in H1 (ex-Bristol / Newport) Packaging ex-Newport IP5 and Bristol -1.0% Typical pipeline vo
Slide 11: Components
COMPONENTS HY 2018 REVENUE: £139.6M, LFL +9.6%. OM +50BPS • Continued broad-based result across geographies – Underpinned by SME focus, refined product and service proposition and improved customer experience • Strong growth maintained in access hardware … – Supported by investment in new equipment
Slide 12: Packaging
PACKAGING HY 2018 REVENUE: £170.2M, LFL -4.7%. OM +50BPS • Sequential improvement in rate of underlying revenue decline – Return to u / l growth in Europe & Asia in HY 2018 (ex- Bristol / Newport cartons) • Encouraging business wins, supported by ongoing stability in key service and quality metrics
Slide 13: Filters
FILTERS HY 2018 REVENUE: £125.8M, LFL -2.5%. OM +20BPS • Modest LFL revenue decline consistent with timing of projects vs HY 2017, typical of industry project volatility and in line with FY stable outlook • Continued product innovation, to address industry trends – Growth in filters offering visual
Slide 14: Specialist Components
SPECIALIST COMPONENTS HY 2018 REVENUE: £80.8M, LFL +0.8%. OM -190BPS • Six businesses benefiting from new divisional structure and greater focus • Good growth in Pipe Protection Technologies – Benefiting from continued oil price strength and increase in North American rig-count … – … but rate of imp
Slide 15: Operating Profit by Division
1 OPERATING PROFIT BY DIVISION HY 18 Growth Margin Margin £m Constant HY 18 HY 17 FX Volume gearing Components 31.6 +21.4% 22.6% 22.1% benefit + operational improvements Packaging 1.6 +76.4% 0.9% 0.4% OP margin starting to improve Productivity and Filters 15.3 -0.9% 12.2% 12.0% efficiency gains Mix
Slide 16: Income Statement – Continued
INCOME STATEMENT – CONTINUED HY 18 Growth £m Actual Constant FX FX Operating profit1 43.5 +1.6% +4.7% Lower IAS 19 Net finance charge (5.2) pension finance cost Profit before tax1 38.3 +2.7% +6.2% Taxation (7.7) Tax rate - Underlying tax rate 20.0% maintained Net income1 30.6 +2.7% +6.3% Increased m
Slide 17: Exceptional & Other Adjusting Items
EXCEPTIONAL & OTHER ADJUSTING ITEMS £m (Gains) / losses and transaction costs from business 1.5 acquisitions and disposals Acquisition integration and restructuring costs 0.2 Costs relating to the strategic review 2.5 Other1 2.1 Total Group 6.3 1 Other exceptional items relate to restructuring in th
Slide 18: Cash Flow - Continuing Operations
CASH FLOW - CONTINUING OPERATIONS £m 70.0 Operating Cash Conversion = 84% 19.6 2 (3.5) (HY 2017 = 71%) (23.2) 60.0 50.0 43.5 40.0 36.4 (9.2) 30.0 (4.6) 22.6 20.0 10.0 0.0 Operating Non-cash Working Net capex Operating Tax Interest paid Free 1 1 profit items capital cash flow cash flow 1 1 Adjusted t
Slide 19: Net Debt Reconciliation
NET DEBT RECONCILIATION £m As at 1 January 2018 210.6 FX 3.1 As at 30 June 2018 238.7 Change in net debt after FX 25.0 Of which: Free cash flow (22.6) Dividends 37.7 Prior & current period spend on Exceptionals & other adjusting items 10.3 strategic review, restructuring & Other (0.4) M&A 25.0 Net d
Slide 20: Dividend
DIVIDEND 8.0 6.3 6.3 6.3 6.3 6.0 5.7 Pence 4.0 2.0 0.0 HY14 HY15 HY16 HY17 HY18 Interim dividend held unchanged 20
Slide 21: Stability Update
STABILITY UPDATE Paul Forman Chief Executive © 2013 ESSENTRA PLC
Slide 22: Our Stability Agenda
OUR STABILITY AGENDA RECAP Our people • HSE • Employee engagement Our customers • Service • Quality Our processes • IT Our finances Continuing to make meaningful improvements, while restoring Essentra to profitable growth 22
Slide 23: Growing While Staying Stable: HSE
GROWING WHILE STAYING STABLE … HSE Cumulative Lost Time Incidents, 2016-2018 YTD 80 70 60 50 2016 40 2017 30 2018 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec >50% reduction in YTD LTIs 23
Slide 24: Growing While Staying Stable: Employee Engagement
GROWING WHILE STAYING STABLE … EMPLOYEE ENGAGEMENT • Launch of the Diversity & Inclusion Steering Committee in January - Chaired by Managing Director - Components and sponsored by Chief Executive - Adoption of vision, goals and strategy • Launch of employee intranet - Accessing about 50% employees -
Slide 25: Growing While Staying Stable: Delivery On Time In Full
GROWING WHILE STAYING STABLE … OUR DELIVERY (ON TIME IN FULL) Note: Europe stable; Packaging - Global Americas Filters improving 100.0% 100.0% 98.0% 95.9% 95.9% 95.2% 95.0% 92.9% 95.0% 92.7% 90.0% 90.0% 85.0% 85.0% 80.0% 80.0% FY16 FY17 H118 FY16 FY17 H118 Components Note: Specialist Components Note
Slide 26: Growing While Staying Stable: Quality
GROWING WHILE STAYING STABLE … OUR QUALITY (INCIDENT RATE) Packaging - Global Filters (complaints per billion rods) Note: 120 120 Significant 100 reduction in 100 100 critical quality 100 complaints 80 75 80 58 60 60 60 40 40 34 20 20 0 0 FY16 FY17 H118 FY16 FY17 H118 Note: 4 of 6 SC Specialist Comp
Slide 27: Ongoing Activity & Next Steps – Operations
GROWING WHILE STAYING STABLE … ONGOING ACTIVITY & NEXT STEPS – OPERATIONS • Continued roll-out of ten-point HSE plan at each site, plus safety leadership training • Launch of new safety & environment reporting system • Roll out of improved processes and standard operating procedures • Launch & roll-
Slide 28: Growing While Staying Stable: IT
GROWING WHILE STAYING STABLE … IT IT Technical solutions • Move increasingly to cloud services • Increase network bandwidth to provide more capacity and reliability • Continue investment in cyber security • Create global service teams to ensure consistency • Clarify roles and responsibilities • Repo
Slide 29: IT Major Incident Rate
GROWING WHILE STAYING STABLE … IT MAJOR INCIDENT RATE 120% Baseline July 2017 100% 80% 60% 40% 60% reduction in 12 months 20% 0% Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 IT stability & upgrade programme are having a +ve impact 29
Slide 30: Strategy Progress & FY 2018 Outlook
STRATEGY PROGRESS & FY 2018 OUTLOOK Paul Forman Chief Executive © 2013 ESSENTRA PLC
Slide 31: Components
COMPONENTS © 2013 ESSENTRA PLC
Slide 32: Initiatives to Deliver Hassle Free Service Proposition
A SERIES OF INITIATIVES TO DELIVER OUR PROPOSITION OF HASSLE FREE SERVICE • Proposition – Wide range of products available from stock – Expert advice and technical support – Easy to deal with • Hassle free customer experience – Recruitment of Customer Experience lead – H2 pilots planned to improve c
Slide 33: Upgrading Our Digital Capability
UPGRADING OUR DIGITAL CAPABILITY • Significant investment project for 2018 - Total capex of £4.6m • Four-phase programme progressing in line with plan • 31 new sites in total, replacing current 45 websites • First launch in Q4 2018 - Further roll-out during 2019 – 2020 A critical tool in providing a
Slide 34: Micro Plastics – Update
MICRO PLASTICS – UPDATE • People - HSE improvements delivered - Above Essentra average engagement measured in first pulse survey • Commercial - Launch of Micro Plastics full product range to Essentra Components customer base underway and on target ▪ 9,000 products to be launched - Launch of full Ess
Slide 35: Hertila – Platform for Growth
HERTILA – PLATFORM FOR GROWTH • Consistent with strategic objective in Components • A leading manufacturer and distributor of caps and plugs – Offers a complementary range of products • Adds further exposure to complementary customers and attractive end markets – Including automotive, mining, coatin
Slide 36: Packaging
PACKAGING © 2013 ESSENTRA PLC
Slide 37: Initiatives to Create a Stable Organisation
INITIATIVES TO CREATE A STABLE ORGANSATION Target Status • Single global packaging division focused on healthcare Structure and beauty, plus cross-selling to tobacco customers • New divisional, European and Americas leadership People teams fully embedded Management • S&OP and other key processes emb
Slide 38: Revenue Growth Opportunities
REVENUE GROWTH OPPORTUNITIES Target Status Quality / service • Customer relationships normalised perception • Viewed as a good quality supplier • Clear Essentra proposition Key accounts • Key Account Mgmt. structure and account teams in place • Design Hub established as key differentiator Value-add
Slide 39: Margin Growth Opportunities
MARGIN GROWTH OPPORTUNITIES Target Status Pricing • Standard cost models – internal and competitor benchmarks • Standardised role of customer service Service levels • Management of customer contracts • 80%+ of sales supplied from equipment rated cost competitive New investment vs industry benchmarks
Slide 40: Design Hub – A Differentiator
DESIGN HUB – A DIFFERENTIATOR Design services Manufacturing efficiency support Design-led approach Packaging analysis & strategy to problem Samples & visuals to support solving customer decision making 40
Slide 41: Commercial Momentum Is Building
COMMERCIAL MOMENTUM IS BUILDING Closing order book Book to build* (£m) (indexed: June 2017 = 100) 110 180 1.02x 105 +8% 175 100 170 95 90 165 June 2017 June 2018 YTD revenue YTD orders Momentum reflected in order book growth and order intake NOTE: Like-for-like, excluding Newport IP5 and Bristol 41
Slide 42: Filters
FILTERS © 2013 ESSENTRA PLC
Slide 43: Optimising the "As-Is"
OPTIMISING THE “AS-IS” OUR ROLE AS AN INNOVATOR Suppliers Essentra Customers (Raw materials & equipment) How do our suppliers look at What we want to be? How do our customers look at Essentra? Essentra? • Technical experts on filters • Technical experts on filters • The filter and fibre specialists
Slide 44: The Opportunity in China
THE OPPORTUNITY IN CHINA China volumes in bn sticks, 2016 -2% -2% Others 780 780 653 653 575 653 523 523 455 455 400 400 2.443 2.260 880 880 840 840 955 930 930 Others 1.643 1.240 1.000 990 990 Gr 3 1.000 ✓ c. 7% growth 410 410 430 430 320 350 350 300 300 430 Gr 2 280 280 Grade 2 300 ✓ Almost all sp
Slide 45: "Game Changers" - Update
“GAME CHANGERS” - UPDATE • Customers open to, and engaging in discussions regarding further outsourcing options Outsourcing • Increasing success on HNB filters - Continued HNB component supply to one MNC Next Generation - Active discussions with a number of other MNCs - Launch with one Chinese indep
Slide 46: Specialist Components
SPECIALIST COMPONENTS © 2013 ESSENTRA PLC
Slide 47: Strategy Update
STRATEGY UPDATE To be covered after the break! 47
Slide 48: FY 2018 Considerations / Outlook
FY 2018 CONSIDERATIONS / OUTLOOK © 2013 ESSENTRA PLC
Slide 49: 2018 Considerations / Outlook
2018 CONSIDERATIONS / OUTLOOK • Yoy broad-based growth and sustained margin in Components – Continued focus on building a consistent and “hassle free” proposition – Measured investment to support strategic development – Further progress on Micro Plastics and successful integration of Hertila – NB: H
Slide 50: Q&A
Q&A © 2013 ESSENTRA PLC
Slide 51: Appendices
APPENDICES © 2013 ESSENTRA PLC
Slide 52: Income Statement – Reported Basis
INCOME STATEMENT – REPORTED BASIS1 HY 18 Growth Actual Constant £m FX FX Adjusted operating profit 43.5 +1.6% +4.7% Intangible amortisation (11.2) Exceptional & other adjusting items (6.3) Reported operating profit 26.0 +4.4% +7.6% Net finance charge (5.2) Profit before tax 20.8 +7.2% +11.4% Taxatio
Slide 53: Exchange Rates
EXCHANGE RATES Six months ended 30 June 2018 Average Closing US $/£ 1.36 1.32 Euro €/£ 1.13 1.13 Impact of a one cent change Op. Profit (£m) US $/£ 0.1 Euro €/£ 0.2 Six months ended 30 June 2017 Average Closing US $/£ 1.27 1.30 Euro €/£ 1.16 1.14 53
Slide 54: 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 55: Investor Presentation: Half Year 2018 Results
INVESTOR PRESENTATION Half Year 2018 Results 03 AUGUST 2018