Essentra Plc · LSE:ESNT
Essentra — H1 2023 Earnings Presentation
39 slides from Essentra's earnings presentation, Aug 16, 2023
Slide 1: Essentra plc Half Year Results 2023
Essentra plc Half Year Results 2023 16 August 2023 y EvEssENTRA 1
Slide 2: Welcome and Overview
Welcome and Overview Scott Fawcett CEO Cc EJESSENTRA 2
Slide 3: Agenda
Agenda 1 H1 highlights 2 Financial performance 3 Strategic update 4 Outlook 5 Q&A yo EvEsseNTRA 3
Slide 4: H1 highlights
• • • • • • • • • 1 Before adjusting items and acquired intangible amortisation 2 Adjusted operating cash flow is net cash flow from operating activities, excluding income tax paid, pensions adjustments, and cash flows relating to adjusting items, less net capital expenditure 4
Slide 5: Financial Performance
Financial Performance Jack Clarke CFO rn EJESSENTRA 5
Slide 6: Financial summary
All numbers presented on a reported basis 1 Before adjusting items and acquired intangible amortisation 2 Adjusted operating cash flow is net cash flow from operating activities, excluding income tax paid, pensions adjustments, and cash flows relating to adjusting items, less net capital expenditure
Slide 7: Revenue bridge
Revenue bridge -5.5% reported, -7.1% constant currency * Disciplined pricing partly offsetting volume decline, demonstrating the benefits of our 3.3% +1.6% £166.3m hassle-free proposition +3.3% a ; * Volumes linked with wider market trends; 10.4) % (10.4)% strong H1 2022 comparatives * Wixroyd acqui
Slide 8: Profit and earnings
1 Prior year numbers re-presented on a continuing operations basis 2 Adjusted to exclude intangible amortisation of £5.7m and an adjusting items pre-tax charge of £7.0m along with associated tax impact 8
Slide 9: Adjusting items
1 Incurred in relation to defined benefit pension scheme charges which, following the outcome of the strategic review, no longer pertain to the continuing operations of the Group 2 £0.4m incurred in relation to the acquistion of the Wixroyd Group, acquired in December 2022. 9
Slide 10: Cash flow
1 Adjusted to exclude intangible amortisation and adjusting items 2 Being depreciation and amortisation of £6.9m, right-of-use asset depreciation of £2.7m, Share Option Expense of £0.7m offset by other movements (£1.3m) 3 Tax paid excludes the tax received on business acquisitions/disposals 10
Slide 11: Balance sheet and liquidity
• • • • 1 Group’s liquidity position defined as the headroom available under the banking facilities plus cash resources 2 As of 30 June 2023, the Rolling Credit Facility (“RCF”) is £10.0m drawn • 11
Slide 12: Capital allocation policy
Capital allocation policy A clear policy to support organic and acquisitive growth © ORGANIC GROWTH INNOVATION ACQUISITIONS ORDINARY DIVIDENDS Capital investment remains core to strategic growth Capex expected to be maintained between 4-5% of sales Sustainable new product development and proposition
Slide 13: Progressing towards our medium-term targets
Progressing towards our medium-term targets We remain focussed on what we can control, and have clear financial targets to deliver profitable growth Revenue Profitability Cashflow Leverage Returns Dividend O° o Sh ry Q 5° i oO Adjusted Cash Ox-1.0x ROIC Maintain Revenue CAGR Operating Conversion nea
Slide 14: Strategic Update
Strategic Update Scott Fawcett CEO Cc EJESSENTRA 14
Slide 15: Our vision is to be the world's leading responsible hassle-free supplier
Our vision is to be the world’s leading responsible hassle-free supplier of essential industrial components Clear strategy to High margin Market leader with a drive organic growth business with scope Strong returns and unique proposition and market share to expand through scale cash conversion in a
Slide 16: Our business is resilient
Our business is resilient Global footprint with breadth and depth of offer 50% 65 * Unique manufacturing and distribution business model * Wide range of product capabilities and end-customers, with © “ ° exposure to high growth markets i 10% 55 5 * Attractive cross-selling opportunities Q ow INI 2 S
Slide 17: Our business is diversified, we continue to focus on high-growth segments
Our business is diversified, we continue to focus on high-growth segments Revenue by end-market Revenue by channel Distributors H1 2022: 21% H1 2023: 19% End-users H1 2022: 79% H1 2023: 81% * 28% of revenue, across four end-market segments, is * Distributor channels represent 20% of our customer exp
Slide 18: 1 like-for-like revenue excludes the impacts of acquisitions and foreign exchange
• • Revenue and gross profit as reported • • • • Distributor channels have been excluded. 1 like-for-like revenue excludes the impacts of acquisitions and foreign exchange 18
Slide 19: 1 like-for-like revenue excludes the impacts of acquisitions and foreign exchange
• • • Revenue and gross profit as reported • • • Distributor channels have been excluded. 1 like-for-like revenue excludes the impacts of acquisitions and foreign exchange 19
Slide 20: 1 like-for-like revenue excludes the impacts of acquisitions and foreign exchange
• • Revenue and gross profit as reported • • • • Distributor channels have 1 like-for-like revenue excludes the impacts of acquisitions and foreign exchange been excluded. 20
Slide 21: Solar panel installation in Essentra Rayong, Thailand
• • • • • Solar panel installation in Essentra Rayong, Thailand 21
Slide 22: Clear strategy for growth & market share gains
CLEAR STRATEGY FOR GROWTH & MARKET SHARE GAINS We continue to invest in organic growth and strategic projects Manufacturing footprint * Mexico expansion project in Monterrey is now open and operations are commencing * The expansion will increase capacity, support future growth plans and enable near
Slide 23: Value enhancing M&A: Wixroyd acquisition
VALUE ENHANCING M&A Wixroyd acquisition unlocking cross-sell opportunities v Expanding capabilities in hardware components v Increasing manufacturing footprint v c.750 SKUS launched into Europe providing cross-sell opportunities Case Study * Essentra has won new business with existing customer, Inge
Slide 24: Active acquisition pipeline supports value-enhancing M&A
VALUE ENHANCING M&A Active acquisition pipeline supports value-enhancing M&A * We continue to apply a disciplined approach to deal rationale. Our focus remains on bolt-on acquisitions + Hundreds on radar * Targeting new product capabilities that can be cross-sold, including existing suppliers of sou
Slide 25: Central services costs
• • 1 In 2022, the Components business absorbed £20.7m of the £38.6m central services costs incurred in the year. 25
Slide 26: Outlook
Outlook yo EvEssENTRA 26
Slide 27: Outlook
aaa Outlook Our business model is fundamentally strong * Historical through-cycle operating margin resilience * Continue to maintain pricing and pro-active, disciplined cost management Confident in achieving the medium-term financial framework * Investing in the business whilst remaining mindful of
Slide 28: EvEssENTRA
yo EvEssENTRA 28
Slide 29: Essentra plc Half Year Results 2023
Essentra plc Half Year Results 2023 16 August 2023 x EvEssENTRA 29
Slide 30: Appendices
Appendices yo EvEssENTRA 30
Slide 31: Essentra key facts
13 80m 45,000+ 24 1bn manufacturing parts produced SKU’s distribution parts in stock sites per week centres 33 c.75k 1.8m 17k c.3,000 sales and service customers order lines orders shipped employees locations per year per week worldwide 31
Slide 32: Revenue by region, channel and offer type
Revenue by region Revenue by channel Revenue by offer type Custom, Asia, 14% Distributors, 8% 21% Standard, Configured, End 64% Europe & users, 28% ROW, 79% Americas, 51% 35% Customer count by customer Revenue by customer segment segment SME/ Consumers, 7% Sales, SME/ Consumers, 31% Sales, Larger SM
Slide 33: Multiple product expertise and a broad range of customer categories
Multiple product expertise and a broad range of customer categories Typical product CUSTOMER CATEGORY range to unlock target category customer CONSUMER MANUFACTURNG INDUSTRIAL MANUFACTURING SME saa © © @ 7) @ @ our full range. Auto Consumer Telecoms/ Con-agg Renewable EV charging Medical Other Indus
Slide 34: Income Statement - Reported basis
Income Statement - Reported basis H1 2023 H1 2022 £m £m Adjusted operating profit 23.0 15.1 Intangible amortisation (5.7) (5.0) Adjusting items Reported operating profit Net finance charge Profit / (loss) before tax Taxation (expense) /credit Net income/ (loss) Net loss from discontinued operations
Slide 35: Net funding surplus / (debt) reconciliation
Net funding surplus / (debt) reconciliation As of 1 January 2023: net funding 113.8 surplus Free cash flow 15.3 Shareholder capital return (106.0) Dividends (3.0) Adjusting items (15.0) Cash flow from discontinued (14.3) businesses including disposal costs FX including hedging derivatives 2.8 Lease
Slide 36: Exchange Rates
Exchange Rates User Impact on HY2023 of a one cent increase in Adjusted Op. profit rate movement (£m) USS/E (0.1) Euro €/£ (0.1) Half year ended 30 June 2022 Average Closing USS/E 1.29 1.21 Euro €/£ 1.18 1.16 yo EvEsseNTRA 36
Slide 37: ESG Framework
ESG Framework Planet Driving resource and energy efficiency, reducing emissions and embracing renewables Asafe, supportive work environment that champions equality and celebrates diversity Communities Working with suppliers to ensure ethical practices and contribute to equitable economies Volunteeri
Slide 38: Disclaimer: Important legal notice
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 re
Slide 39: Essentra plc Half Year Results 2023
Essentra plc Half Year Results 2023 16 August 2023 x EvEssENTRA 39