Slide 1: Building for the future: 2020 Full Year Results
Building for the future 2020 Full Year Results—5t) March 2021 5 FE SESSENTRA
Slide 2: Full year 2020 highlights
• Group trading is recovering well with Q4 LFL -1% • Components – improving trend since onset of pandemic • Packaging – underlying market impacted in Q3, much improved in Q4 • Filters – underlying demand remained robust, returned to marginal growth in H2 • High customer satisfaction levels leading t
Slide 3: FY 2020 Safeguarding our people
FY 2020 SAFEGUARDING OUR PEOPLE Paul Forman —Chief Executive
Slide 4: Safeguarding our people: employee initiatives
• Employee survey: 91% participation with strong engagement • Asymptomatic COVID-19 testing: introduced to help protect our staff • Senior leadership: visibility and communication continues to be a focus • Make it Work awards: 536 nominations, almost double the previous year • Roll out of global EAP
Slide 5: Slide 5
Slide 6: Supporting our customers: OTIF and quality
• All 72 manufacturing and distribution sites fully operational since May • Gone above and beyond to support our customers - OTIF improved in Packaging and Filters, temporary drop in Q4 within Components - Annual customer survey in both Components and Packaging showed further improvement 100% On Tim
Slide 7: Dies
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Slide 8: Cash flow and liquidity
• Operating cash flow £76m, conversion 123% • Actions taken during the year in order to strengthen our finances: • Discretionary cost control • Reduction in Capex spend while selectively investing to support growth • Strong cash collection performance • Net debt to EBITDA ratio decreased to 1.8x, 1.
Slide 9: FY 2020 results impacted by pandemic
FY 2020 results impacted by pandemic: • Like-for-like (LFL) decline of 6.3% LFL Revenue Growth Trend • Improved LFL revenue trend in Q4 at -1.0% 0% -2% • Adjusted operating profit down 27.9% to £62.0m; adjusted operating margin -200bps to 6.9% (at constant FX) -4% -6% • Reported operating profit £21
Slide 10: Group financial results
FY 2020 FY 2019 Growth £m £m Actual FX Constant FX Revenue 896.5 974.1 -8.0% -6.8% Operating profit2 62.0 87.5 -29.1% -27.9% Operating margin2 6.9% 9.0% -210bps -200bps Profit before tax2 46.3 73.0 -36.6% -35.3% Earnings2 35.6 55.7 -36.1% -34.6% Earnings per share2 13.1 21.3 -38.5% -37.2% 1 Continui
Slide 11: Revenue by division and like-for-like
FY 2020 FY growth £m Constant FX Components 255.0 -8.5% Components like-for-like1 -10.1% Packaging 363.2 2.8% Packaging like-for-like2 -4.0% Filters 278.3 -5.6% Group 896.5 -6.8% Group – like-for-like3 -6.3% 1 At constant exchange rates, adjusted for the acquisition of Innovative Components 2 At con
Slide 12: Adjusted operating profit by division
FY 2020 Growth Margin £m Constant FX FY 2020 Components 45.5 -23.4% 17.8% Packaging 13.8 -9.6% 3.8% Filters 25.2 -29.2% 9.1% Central Services -22.5 Group 62.0 -27.9% 6.9% Group – like-for-like2 -28.4% 1 Adjusted to exclude intangible amortisation on acquired assets and adjusting items 2 Adjusted for
Slide 13: Earnings per share bridge
FY 2020 Growth £m Actual FX Constant FX Operating profit1 62.0 -29.1% -27.9% Net finance charge (15.7) Profit before tax1 46.3 -36.6% -35.3% Taxation1 (8.9) Underlying tax rate 19.2% Net income1 37.4 -36.1% -34.7% Minority interests 1.8 Earnings1 35.6 -36.1% -34.6% EPS1 13.1 -38.5% -37.2% EPS – dilu
Slide 14: Footprint review and restructuring savings
• Global footprint review resulted in proposed closure of certain sites in Components and Packaging, estimated cost of closures is c.£17m of which £12.7m has been recognised in 2020 • Packaging – closure of two manufacturing facilities (in UK and USA) as well as additional workforce rationalisation
Slide 15: Operating cash conversion
Operating cash conversion = 123% 1 2 3 1 2 1 1 1 1 1 Adjusted to exclude intangible amortisation and adjusting items 2 Being depreciation and amortisation of £40.2m, right-of-use asset depreciation of £12.0m and Share Option Expense / Other Movements of £0.6m 15
Slide 16: Net debt movement
£m As at 1 January 2020 284.4 FX 4.4 As at 31 December 2020 210.4 Change in net debt after FX (78.4) Of which: Dividends to minority interest 0.7 Free cash flow (56.9) Adjusting items 11.1 Acquisitions – net cash paid 41.2 Shares issued in Joint Venture (5.0) Shares issued (net of costs incurred) (9
Slide 17: ROIC
12.0 ROIC 9.2 9.2 8.0 6.7 % 4.0 0.0 PF 18 PF 19 FY 20 1 – Proforma 2018 and 2019 are adjusted to remove impact of businesses disposed during 2019 (Pipe Protection Technologies, Extrusion, Speciality Tapes and Card Solutions) 17
Slide 18: Dividend to be resumed
• Dividend to be resumed at 3.3p per share • Payment of proposed dividend (totalling £10m) reflects resilient trading performance, strong financial position and an encouraging outlook • To be funded in full from cash flows generated from the operations of the Company during 2020 • A progressive divi
Slide 19: Paul Forman – Chief Executive
Paul Forman – Executive
Slide 20: Components division update
• NPS up 4 points due to excellent customer service • Commenced operations at German hub warehouse • Strategic footprint initiatives announced • Actions taken to drive cross selling and enhance market share gains: • Enhanced e-commerce offering • Launch of CRM platform • Category driven customer int
Slide 21: Components digital and e-commerce progress
• 8 new websites launched, helping to drive 33,500+ web orders • Continual optimisation through agile 3 week release schedule • Partnership with Peak – informing commercial decision making • AI driven ‘product recommendations carousels’ to websites • D365 CE live across 38 sites – putting ‘hassle fr
Slide 22: Packaging division update
• Trading impacted by underlying market in Q3, improved in Q4 • Integration of 3C! acquisition in line with expectations • Annual customer survey result improved to 81% (2019: 79%) ahead of industry average score of 76% • Continued delivery of new business wins • Restructuring projects announced to
Slide 23: 3C! Packaging acquisition
• Based in North Carolina, 3C! has more than 35 years’ experience developing secondary packaging solutions for the pharmaceutical industry • Acquisition has added manufacturing capacity and service capability to Essentra Packaging’s already existing two site footprint in North Carolina, helping to e
Slide 24: COVID-19 vaccine packaging support
• Helped establish a supply chain to deal with rapidly increasing demand • Invested in additional capacity to support the customer both in Europe and the US • Supplier of bespoke packaging items to two of the leading manufacturers of the COVID-19 vaccine 24
Slide 25: Filters division update
Current market share estimated at 5% of c.£6bn total filters market (45% of 3rd party market); the only global independent provider of filters and related solutions to the tobacco industry • Progress made on strategic game changers: • Establishment of China JV • Successful delivery of outsourcing co
Slide 26: Sustainable product launches
3 new products launched that are intended to meet EU’s Single Use Plastics Directive initiatives for plastic-free and biodegradable solutions ECO Cavitec™ ECO Sensation™ ECO Cavitec Sensation™ Initiative through our network to develop an ISO standard for environmental testing of tobacco products to
Slide 27: Sustainability themes and environmental targets
• Good progress on innovative, more sustainable products across all Divisions • Group-wide materiality exercise identified priority sustainability topics, re-confirming our 4 sustainability Themes • Established 4 environmental KPIs and set stretching targets: • Sustainable materials: higher % recycl
Slide 28: Business transformation system roll-out
• Scoping, Analysis, Design and Development phases complete for finance Initial project & procurement for HQ/Components, plus Components sales, distribution & phases complete manufacturing • Core system & integration testing ongoing for Components in Spain, France & Germany • Core D365 processes liv
Slide 29: Growth levers and efficiency measures
Inorganic growth opportunities – M&A strategy embedded throughout the organisation Levers for organic growth: • Deliver best in class customer proposition • Enhanced digital offering • Capitalise on cross-selling opportunities • Continued innovative product development • Expand geographic reach Effi
Slide 30: Outlook
• Pandemic continues to contribute to an uncertain macro-economic environment, though the portfolio of end-markets served across the Group provides a degree of resilience against this uncertainty • No material direct impact to the Company anticipated from Brexit, though some supply chain disruptions
Slide 31: Questions & Answers
Questions & Answers ESSENTRA
Slide 32: Appendices
Appendices ESSENTRA
Slide 33: Adjusted to reported results
FY 2020 Growth £m Actual FX Constant FX Adjusted operating profit 62.0 -29.1% -27.9% Intangible amortisation (22.6) Adjusting items (17.7) Reported operating profit 21.7 -72.9% -72.0% Net finance charge (15.7) Profit before tax 6.0 -90.8% -90.5% Taxation credit 0.3 Underlying tax rate 19.2% Net inco
Slide 34: Exchange rates and FX impact
Year ended 31 December 2020 Average Closing US$/£ 1.29 1.37 Euro €/£ 1.13 1.12 Impact on FY2020 of a one cent increase in rate Adj Op. profit (£m) US$/£ (0.2) Euro €/£ (0.3) Year ended 31 December 2019 Average Closing US$/£ 1.28 1.32 Euro €/£ 1.14 1.18 34
Slide 35: Adjusting items
£m Restructuring projects 12.7 Acquisition integration and restructuring costs 0.5 Transaction costs relating to acquisitions and disposals of 5.7 businesses1 Other (1.2) Total charge from adjusting items 17.7 1 £0.3m gain relating to a VAT refund on the costs of a previous business disposal netted
Slide 36: Lost time injuries and days lost
Number of LTIs Total Days 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 2020 FY 2017 FY 2018 FY 2019 FY 2020 NOTES: Data covers sites owned by Essentra as at 31 December 2020 (2017, 2018 and 2019 figures restated accordingly). 36
Slide 37: Long-term environmental targets
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 landfill by 2030 (and preferably landfill sooner) (Group) Total waste volume (normalised) • 20% reduction b
Slide 38: Divisional market positions
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 supplier globally) secondary packagi
Slide 39: Disclaimer
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Slide 40: Building for the future
Building for the future ESSENTRA