TIDMESNT
RNS Number : 2011Q
Essentra plc
26 October 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE UK VERSION OF THE MARKET ABUSE REGULATION (EU NO. 596/2014)
WHICH FORMS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018.
ESSENTRA PLC
A leading global provider of essential components and
solutions
STRATEGIC GOAL TO BECOME A PURE PLAY COMPONENTS BUSINESS AND Q3
2021 TRADING UPDATE
Summary
-- The Board has concluded that, in order to maximise
shareholder value and the growth potential of its three businesses,
Essentra should become a pure play global Components business over
time
-- As a first step the Board is reviewing the full range of
strategic options for the Filters business
-- Overall, a robust Q3 2021 performance, revenue increased 5.1% on a like-for-like (LFL) basis
-- Components - LFL day adjusted revenue growth of 28.5% in Q3 2021, 14.2% above Q3 2019
-- Packaging - LFL revenue declined 6.1% due to delays in the
recovery of elective surgeries and prescription levels
-- Filters - Revenue growth of 2.8% in Q3 2021 against a tough comparative
-- The Company is expecting to deliver FY21 adjusted operating
profit in the range of analysts' forecasts(1)
Essentra plc ('the Company' or 'the Group') today announces the
strategic goal to become a pure play Components business and its Q3
2021 trading update.
Strategic Update
Over the last few years, Essentra has simplified its portfolio
into three global businesses, each with leading market positions
and a clear purpose and strategy. These businesses all have strong
prospects and the potential to deliver compelling returns for
investors, but are at different stages of their development and
have limited synergies. The Board has therefore concluded that, in
order to maximise shareholder value and the potential of each of
its businesses, Essentra should become a pure play global
Components business over time. This will enable strategic focus and
an acceleration of organic and inorganic growth.
As a first step to realising this goal, the Board has decided to
review the full range of strategic options for the Filters
business. It is anticipated that the strategic review is likely to
conclude in Q2 2022 at the earliest. In the meantime, the Filters
division will continue to receive full support from the Group and
focus on sustaining its strong performance. The Filters division
has made significant progress over the last four years on the
delivery of all strategic "game changers" and now has attractive
long-term growth prospects.
Trading performance
Overall, the Group had a robust start to the second half of the
year, with Q3 2021 Group trading within the range of expectations.
The Company delivered LFL revenue growth of 5.1% for the period
(-2.2% LFL vs. Q3 2019) thanks to the strong performance in
Components and Filters, despite ongoing global supply chain
disruptions.
The Components division had a very strong performance in Q3
2021, with LFL revenue growth of c.28.5% compared to Q3 2020 after
adjusting for two less trading days (+14.2% vs. Q3 2019 on a LFL
day adjusted basis). This growth comes amid supply chain challenges
and inflationary input cost pressures. Price increases implemented
during the quarter have partially mitigated these cost pressures,
with further benefit expected in Q4. Integration of the recently
completed acquisition of Jiangxi Hengzhu Electrical Cabinet Lock
Co., Ltd is on track and we continue to improve our market leading
digital platform for customers, as well as the roll out of our ERP
system. We expect the strong year on year growth to continue in Q4,
albeit against tougher comparatives.
The Packaging division's revenue declined 6.1% on a LFL basis in
Q3 2021 (reported growth of +3.6%, LFL decline of 15.2% vs. 2019)
as prescriptions and elective surgery volumes continue to be
impacted by the pandemic. The division implemented pricing actions
in Q3. The slower than expected recovery in volumes coupled with
global supply chain challenges - the availability and cost of raw
materials and labour especially in the US, means the Q4 margin is
now expected to be slightly below 8%. However, we expect global
healthcare systems will continue to recover given pent-up demand, a
trend we are already seeing reflected in our current order levels,
especially in North America.
The Filters division had another positive quarter, with Q3 2021
revenue growth of 2.8% (+5.0% vs. Q3 2019), mainly driven by higher
volumes from outsourcing contracts, in line with expectations. As
expected, the rate of growth in Q3 has moderated as the
comparatives have become tougher.
The division made further progress with its 'game changers'. The
China JV has made a positive start with volumes increasing each
month and it has participated in a number of local supply tenders
with other tobacco companies under the State Tobacco Monopoly
Administration (STMA). Our range of proprietary eco-products
continue to attract increased interest and the Essentra innovation
team remains focused on delivering new products to market. During
the quarter, and in collaboration with a large MNC, trials have
been launched into four European markets using non-plastic
biodegradable filters. We are also working with another MNC to
launch a new product in Q1 2022. We expect Q4 growth in Filters to
accelerate from the levels seen in Q3, driven by the China JV and
further outsourcing wins.
Outlook
The Company has delivered a robust performance, whilst taking
actions to mitigate the global supply chain disruptions and ongoing
impacts from the global pandemic. Based on recent order book data,
we expect strong revenue growth in Components and Filters in Q4
(vs. both FY2020 and FY2019). Whilst the Packaging division has
been impacted by COVID-induced soft demand, rising material costs
and labour shortages, the business should start to benefit from the
recovery in global healthcare systems and pent-up demand for
prescriptions and elective surgeries, with the recent order book
showing early signs of improvement. Given these overall trends, the
Company is expecting to deliver a total FY21 adjusted operating
profit in the range of analysts' forecasts(1) .
Commenting on today's announcement Paul Forman, Chief Executive,
said : "Since I became CEO of Essentra, we have simplified the
Group, significantly improved underlying performance and focused on
our three market leading global businesses: Components, Packaging
and Filters. The improvements in operational efficiencies and the
strategic investments we have made mean our businesses are better
positioned for growth, albeit they are at different stages of their
development. We have concluded it is in the best interests of all
our stakeholders that Essentra becomes a pure play Components
business over time - reflecting the opportunity to build on its
growth strategy and accelerate investment in organic and inorganic
growth, leveraging its highly attractive financial model. As a
first step, the Board has decided to review the full range of
strategic options for the Filters business, a division which has
undergone a substantial transformation and delivered on its
strategic objectives over recent years but may have the opportunity
to maximise its potential under a different ownership/partnership
structure.
I am pleased with the third quarter performance overall.
Components has delivered strong revenue growth, Filters has good
momentum and Packaging continues to manage the difficult conditions
within its market. We continue to focus on organic growth and
efficiency initiatives to drive profitability, as well as
acquisition opportunities."
Conference call details
There will be a conference call for analysts and investors today
at 8.30am BST.
Participation No: +44 (0) 330 336 9434
Confirmation Code: 8751877
Notes
(1) Analyst operating profit (adjusted to exclude intangible
amortisation on acquired assets and exceptional operating items)
forecasts for FY21 range from GBP80.7m - GBP84.3m.
The person responsible for arranging the release of this
announcement on behalf of the Company is Jon Green, Company
Secretary of Essentra plc.
Enquiries
Essentra plc Tulchan Communications LLP
Lily Liu, Chief Financial Officer Olivia Peters
Lucy Yank, Group Communications Martin Robinson
Director Tel: +44 (0)20 7353 4200
Tel: +44 (0)1908 359100
Notes to Editors
About Essentra plc
Essentra plc is a FTSE 250 company and a leading global provider
of essential components and solutions. Organised into three global
divisions, Essentra focuses on the light manufacture and
distribution of high volume, enabling components which serve
customers in a wide variety of end-markets and geographies.
Headquartered in the United Kingdom, Essentra's global network
extends to 34 countries and includes 7,430 employees, 48 principal
manufacturing facilities, 30 sales & distribution operations
and 3 research & development centres. For further information,
please visit www.essentraplc.com.
Essentra Components
Essentra Components is a global market leading manufacturer and
distributor of plastic injection moulded, vinyl dip moulded and
metal items. Operating in 25 countries worldwide, 14 manufacturing
facilities and 23 sales & distribution centres serve more than
82,000 customers with a rapid supply of low cost but essential
products for a variety of applications in industries such as
equipment manufacturing, automotive, fabrication, electronics and
construction. The division also includes the Reid Supply business,
which provides a wide range of branded hardware supplies to a broad
base of industrial customers, largely located in the US
Mid-West.
Essentra Packaging
Essentra Packaging is one of only two multicontinental suppliers
of a full secondary packaging range to the health and personal care
sectors, with 23 facilities across three geographic regions. The
division's innovative products include cartons, leaflets,
self-adhesive labels and printed foils used in blister packs, which
help customers to meet the rapidly-changing requirements of these
end-markets and can also be combined with Essentra's authentication
solutions to help the fight against counterfeiting.
Essentra Filters
Essentra Filters is the only global independent cigarette filter
supplier. Currently headquartered in Singapore, the division has
thirteen sites across nine countries, including three innovation
centres, providing a flexible infrastructure strategically
positioned to serve the tobacco sector. The business supplies a
wide range of value-adding high quality innovative filters,
packaging solutions to the roll your own segment and analytical
laboratory services for ingredient measurement to the industry:
Essentra's offering also includes Heat Not Burn and e-cigarette
solutions to the rapidly evolving market for Next Generation
Products. The division also includes the Tear Tapes business, which
is globally recognised as the leading manufacturer and supplier of
pressure-sensitive tear tapes, that are largely used in the
tobacco, food and drink and specialist packaging sectors.
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