Essentra (LSE:ESNT) — Annual General Meeting

0:02 Good afternoon and welcome to the ESNTRA PLC Annual General Meeting. Throughout this recorded meeting, attendees will be on listen only mode. Questions can be submitted any time by the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and publish responses where appropriate to do so. I'd now like to hand you over to Paul Lester, Chair. Good afternoon.

0:29 Welcome, everybody, to ESSENTRA's twenty twenty four Annual General Meeting. I'm Paul Lester, the Chairman of the Board. And I'm joined today by Scott, the CEO Mary, who is the SID and Audit and Risk Chair and over here, we have Kath, who is an ND, but will be taking over the Remco at some point. Doopsy Jack, CFO. I'll be saying a few words about you, Jack, because you're retiring in inverted commas. We've also got Ralph, who's ESG chair and currently the REMCO chair for a few more minutes. And Emma, who's our company secretary. Adrian, sitting there, is based in The USA.

1:19 And Ralph is well, actually, you're based all over the place, aren't you? You live in Italy. You visit Germany on a regular basis, and you look after Asia for us in terms of the voice of the employee. So we're a pretty international business, and we've got a very international board. So the format for today's meeting, and you probably realized we are broadcasting it, and I think that's the way that a lot of AGMs in the future will go.

1:49 I will we're going to ask Scott to give a few an update on the business at one point when the meeting sort of concludes. Before going any further, however, I have turned over to my colleague, Chris, who you're going to do the fire and safety, which you've just done, which it says on my notes you're about to do now.

2:10 Yeah. Can you do it again, Chris? Where are we at?

2:16 Emma, I'm handing over to you because you're going to do some housekeeping. Thank you, Paul. Firstly, you will be aware that this meeting is also being broadcast, so we have shareholders who are accessing this AGM online. However, those shareholders cannot vote online, and they and we cannot hear them.

2:34 With regard to the resolutions, voting will be taken on a poll to reflect the number of shares held by each shareholder of the company. More than 50% of votes in favor are required for resolutions one to 19 to be passed and 75% of votes in favor are required for resolutions 20 to 23. If there are shareholders present who have already submitted a proxy form, which appoints the chair to vote on their behalf and they do not wish to change their vote, then Paul will vote as you have instructed him. Shareholders or nominated proxies present who have not yet voted will have been given a poll card when registering for the meeting. The poll card could be found on the reverse of the attendance card. If you are unable to locate your poll card or require assistance in completing the card, please raise your hand and one of the staff from Computershare, our registrars, will help you.

3:28 Please note that all poll cards need to be completed and signed and placed in the back poll box, which is with our registrar by the door. Please note that if you do not sign your poll card, it will be treated as invalid.

3:47 There are no hands raised at present. The figures that we will refer to during the meeting are provisional figures taken from the record of proxy votes cast by 1PM on Tuesday, May 21. We will confirm the final figures for the result of the poll later today and will announce this to the stock exchange as soon as possible. I now hand back to you, Paul. Thanks, Emma. Before I go through the formal business, I think it's worth saying to Scott and your team and employees and other stakeholders what a good job you guys have done setting up now ESNTRA as a components business. So we've just finished our first year.

4:32 And I think it's gone we've had some challenges because of the markets, but I think they've done a superb job. And going back to you, Jack, thank you. This is the second time Jack has tried to retire. I had him on a Board for a short period of time for an IPO, and that was his change from a CFO with Marshall's onto the board. Then funny enough, Marshall's bought the business. Remember that? And I said, Jack, would you throw your hat in the ring to be the CFO here because we want an experienced CFO because we've got a new CEO who hasn't got the PLC experience. So thank you, Jack, for doing that. And you're allowed to go now. Not quite now. Well, Jack will do a handover to a new CFO, which we would hope to announce in the immediate future short term.

5:28 Well down the track on that. And Jack will do a full handover. And then when you've all decided that, that's been done, then that will go off. And he's not retiring 100%, but you're packing up as the CFO. So thanks very much, Jack. Other changes to the Board. As I mentioned, Cass, you're going to take over the REMCO from

5:52 Ralph and Ralph did a great job, I have to say, as the REMCO because she was thrown into it because the previous REMCO Chair decided to go back for executive career and left as an ED. And thanks, Ralph. Great job.

6:11 Oh, and I'm leaving as well. It's been well, I've enjoyed every minute of it. And hopefully, up till November 1, I'll be doing a handover to Steve Good, which we announced today, I think, this morning. And the good news is the share price didn't zoom up because that would have been a bit embarrassing, really. But let's see what happens for the rest of the day. But it's been a great time, and I've enjoyed every minute of it even though we've had some tough challenges. I mean, I need to go through them. They're all the obvious things, but it's been great. You'll have seen, by the way, Steve's CV. He's got good experience of similar businesses to this, which is why Steve was taken on as chair. We wanted somebody with manufacture well, obviously, experience, ex CEO, PLC experience, and involved in manufacturing distribution because that's what this business is. So it's actually quite hard to find somebody with all those credentials, isn't it, Mary? But you did a great job, and Mary headed up that search. So what a Mary.

7:24 The resolutions, I propose that we take them in groups because otherwise, we'll be here all day if I go through everyone. So some I will go through individually, but we will put those up for approval. And, Mary, you will have to do one of those regarding my own position. Yep. If that's okay. So and I do need to stick to the script for this because I can't miss anything out. The following ordinary resolutions, once 19, are proposed as ordinary resolutions, require a simple majority of over 50% to be passed. Resolution one, to receive and adopt the annual report and accounts for the year ended 12/31/2023 has been passed by ninety nine point nine nine percent votes.

8:15 Are we putting them on the screen, are we? Yes. Okay. Two-six approval of the Remuneration Committee's Chair letter and the annual report on remuneration for the year ended 2023. This is past 99.6%.

8:36 Resolution three has approved the remuneration policy as detailed in the annual report and accounts. This has passed by 92.79%. Resolution four seeks the approval of the final dividend of 2.4p ordinary share. Not surprisingly, this has been passed by 99.99%. Everybody wants the dividend. Resolution five to approve the Climate Transition Action Plan as set out in the annual report and accounts passed by 97.6%. So we're going to group Resolution six to 13, which is the re election of all the directors.

9:24 But I hand over to Mary now because I can't prove myself. Thank you very much, Paul. Resolution 11 is the re election of our Chair, Paul Lester. This resolution has been passed by 99.2% votes. The full results are shown on the slide. And I will now pass back to Paul. Thanks, Barry. Resolution six to 13 have passed by over 94% of votes for each resolution. Resolution 14 is to appoint PLC as auditors to the end of the next annual next general meeting. This is passed by 99.76%. We have PLC here today in form of Kate, is the partner that looks after her, does a great job.

10:11 Resolution 15 authorizes directors to agree PWC's remuneration, and this was still trying to negotiate it down, of course, has passed by 99.98% of votes. Resolution 16 is to adopt the ESNTRA PLC share save plan for 2024. This has been passed by 99.99%. Resolution 17, adopt the ESNTRA long term incentive plan. This has been passed by 95.22%. 18, to adopt the ESNTRA 2024 Deferred Bonus Plan. This has been passed by 99.77%. They should all be popping up on the screen, by the way.

10:58 19, authorized the Board to allot shares in the company and has been passed by 94.42%. So that's all the ordinary resolutions. And now we move to resolutions 20 to 23. These are different because they need a majority of 75%, which you will see in a minute. They'll comfortably pass up. Resolutions twenty and twenty one require Resolution 19 to have been passed. So as Resolution 19 has been passed, I propose Resolutions twenty and twenty one together. 20 is similar to previous shares and seeks authority to supply preemption on the allotment of shares for up to an aggregate amount of 10%. This resolution was passed by 93.3% votes.

11:48 Resolution 21 gives the company flexibility to make non preemptive issues of shares in connection with acquisition of the capital investments. This is sought for 10% of the share capital and is in addition to that sought in Resolution 20. We certainly have no intention to exercise these powers, but believe it's important that ESNTRA has the flexibility that this provides in order to pursue its growth strategy. Resolution 21 has been passed by 91.54%. 22 seeks authority to buy back the company's own shares up to 10% of the share capital. And as shareholders, be aware, this was launched a while a while ago. So we have been buying back shares, and this is to make sure we can have the ability to continue to do that.

12:40 This has been passed by 99.77%. 23 allows a general meeting to be called on a not less than fourteen days notice and has passed 91.08%. It doesn't mean to say everyone is going to be done in that time scale. That's only if we have to do something in an emergency. I know some of the shareholders didn't like the speed of that, but it's not something we would do on a normal basis. So that completes all today's formal business, and I declare that all resolutions will pass by over 90%, which is good. So Scott, you're gonna give us a update of how the business is doing. Our and S was announced this morning, but you're gonna give a bit more color. A little bit color to that. Thank you, Paul. So as Paul said, it's been a challenging market environment since we launched the new ESSENTRA at the start of last year.

13:31 Industrial production generally has been in negative territory throughout that period. The good news is we are starting to see what feel like some green shoots of recovery, and we can see that both in our order intake and sales per day rates, which have stepped up by about 5% since the end of last year. So that's giving us some encouragement. It's not giving us joy and celebration at this point in time, but certainly more signs of encouragement than discouragement, which is which is great. And overall, our sales on a like for like basis actually fell by 5% through quarter one. We did have the benefit of the acquisition of the Italian business BNP Tappy that we acquired in November last year. So that has offset that minus five by a plus 3.8. So the the total group declined sales by 1.2% as a result of that poor market. But I say encouraged by the the underlying trends that we're seeing. The trends are a little bit different by region. The America is probably the one with the clearest trend of improvements and and the the greatest step up in terms of those orders and sales rates.

14:34 And, again, that correlates very well what we see from external indicators such as the the Purchasing Manager Index, which is an external indicator which we tend to correlate quite well with. APAC is stable currently. Within APAC, China is around two thirds of our APAC region. And from China, domestically, we're not really seeing much signs of recovery, but we are seeing good signs of growth from Asia sell from China selling into the rest of Asia. So we're seeing a pickup in export demand from China to the rest of Asia, which is also encouraging.

15:07 And then in Europe, again, as with the European Purchasing Manager Index, it's quite a mixed performance. There are some poor areas. Germany is undoubtedly the poorest performing industrial economy right now, and that is coming through our own sales and order performance. But there are some bright spots as well. Eastern Europe in particular is a bright spot perhaps benefiting from some migration of production out of Germany to Eastern Europe, Poland being the strongest of all markets I think for us. And our Turkish business continues to be resilient and continues to be a standout performer both the buoyancy in the Turkish economy, but also the product line that we make in Turkey is really the star product area for us as well. So that continues to be a good point and a good platform for us to grow through the year.

15:56 So with some early signs of encouragement, we're not yet at the point of releasing cost into the organization. So cost control remains very tightly managed, which means our margins remain very strong as we demonstrated through last year. So we'll continue to be very disciplined in terms of investing in the business. We are investing, but in a controlled fashion until we see much stronger signs of recovery, which we do expect to come. We do expect the second half to continue to improve as interest rates start to fall. It's likely that sentiment will improve. Our customers' demand will improve as well. So, are expecting that improvement through H2 and an ability to continue to invest even further in the business. But we'll be very disciplined from a cost management point of view until those signals are even stronger than they are today.

16:44 We are continuing some investment though. It's not as if we're cutting any investment out of the organization. We have continued to add stock to the business through the first four months of the year. So, our service metrics are continuing to go from strength to strength. Our net promoter score last month was the highest it's ever been, for example. So customer satisfaction is is in a really good place, which will be a great strength for us as the market recovers that will really give us some opportunity to take share in a growing market. So with all that together, we continue to remain confident that we can deliver the board's expectations for the year and also deliver in line with those midterm targets that we have of doubling the size of the organization over the next four to five years and tripling the operating profit that is associated with that growth.

17:30 So not an easy macro environment, but it's a great business, very resilient, early signs of recovery, good levels of margin, and setting ourselves very well up for a market recovery, which we are expecting to see as we trade through the year. Back to you, Paul. Thanks, Scott. We'll now take any questions from shareholders that they may have. And Tim, you're gonna find out if we have any questions that have come through. Not so far. Okay. Anybody want to raise any questions? I've just had one come through. Hello. I am writing the capacity of both the private investor and representative of the engagement deal.

18:15 The constructive is Hello, I am writing in the capacity of both a private investor and representative of the Engagement Appeal, the constructivist organization looking to align companies and individual investors on inclusive engagement and financial literacy? I just wish to commend the chair, the board, the company sector and everyone at ESSENTRA for the progressiveness that you show. Those are the sort of questions we want. You very much. That in. We are a big supporter, by the way, of that that appeal, which opens it up to the person in the street, you know, who can buy shares and get information because we tend to focus on the large shareholders.

19:13 And this opens up everybody so that they can eventually take part in AGMs or access the directors much easier than they've done in the past. It's something you're pioneering, isn't it, Emma? So, yeah, it's a good way forward. Chair, there is a second part to that statement. Oh, right. Yeah. So engaged every week for the last eight weeks with your knowledgeable deputy company secretary You make a list of them. On this occasion, I'm not. Knowledgeable Deputy Company Secretary on Investor Engagement Best Practice with your brilliant company secretary for the last eighteen months on global governance and IR best practice and with your amazing chair who has given his time selflessly on matters related particularly to the S of ESG is all exemplary.

20:08 Thank you. Congrats as well to Dupsy Abiola for being nominee for twenty twenty four NED Awards. Please, please, please continue to do what you are doing. We need more companies like you. And and I have to say, Emma and Tim are doing a great job, you know, making sure the shareholders are fully briefed at whoever they are. That's the whole point. Okey dokey. If there's no more, Tim, have you got any more about yourself? Or Plenty, chairman. Okay. Right. So and we've got Mike. Can I just point to you as an ex employee just to say thank you for coming? Mike Mike was a toolmaker in this very room when this used to be the tool room and lives local. And I think we're gonna give you a quick tour of the factory as as well. So, yeah, fantastic for you to coming back.

21:06 You've left thirty years ago, was it? Yeah. It was obviously. Yeah. Yeah. Alright. Can I just ask a question? Yeah. How do you see your performance? What are your strengths going in against economies like China, India, Turkey even is is a that seems to be a dominant area with regards to plastics? Shall I have a go at that first, Scott? And you can correct me. Well, we operate. We've got two factories in China. We've got a factory in Turkey. We're spread pretty much around the world because we need to be close. We want to be in those economies, and that's the easiest way there. We do move components around as well from different through different borders.

21:55 We want to be close to the customer because we have to do a quick delivery, to put it mildly. I mean, Brexit was bloody hard work because that put a lot of bureaucracy back in shipping stuff from here into and vice versa into Europe. But, But, yeah, we we do chase the big economies, and and we are located in all the big economies. I think that's why we look at it. Yeah. I mean, it it's a it's a ever increasingly uncertain world. So So, generally, the business needs to be set up with flexibility and contingency and we benefit from that. We have manufacturing in all three regions. We have warehouses close to customers within three days of most of global economies. So having the ability to continue to serve customers despite global disruption is really important. So I think as we go forward, we probably have 20% to 30% of our goods today, which ship inter regionally that will start to reduce and we'll see an increase in the sort of more regional manufacturing and near shoring. So it's really important that we have that strength close to customers in all three regions because the world is a complicated place and unlikely to get much simpler in the foreseeable future, but it's a benefit and strength to ESNTRA because of the global network that we've created.

23:12 Thanks, Scott. Are you happy with the answer, Mike? If there's no more questions, Tim, I'll bring the AGM to a close, and we can all get stuck into the sandwiches at the back. Thank you very much. Thank you. Thank you. Thank you. On behalf of the Board of Centro PLC, I'd like to thank you for attending today's Annual General Meeting, and good afternoon to you all.