TIDMESNT
RNS Number : 7934H
Essentra plc
27 March 2020
ESSENTRA PLC
COVID-19 Update
Summary
-- 3 priorities; employee physical and emotional wellbeing,
continued high levels of customer support, cash conservation
-- Groupwide performance not materially impacted in first two
months by COVID-19 but disruption to trading anticipated in the
coming months
-- Underlying demand in Packaging and Filters currently remains
robust, but Components saw some weakening in the week commencing
16th March with an accelerated trend expected
-- Liquidity position and capital structure well placed to
absorb an extended period of uncertainty
-- In light of the need for prudent cash management, the Board
has decided to cancel the 2019 final dividend. Other cash actions
include reductions in capex, net working capital and discretionary
costs.
-- Well positioned to respond effectively to the impacts of the
pandemic and return to driving growth over the medium to long
term
Essentra PLC (the 'Company'), a leading global provider of
essential components and solutions, today issues an update on the
impact of the COVID-19 virus on the business. This announcement is
made in the context of the increasingly uncertain
macro-environment, which has been uniquely impacted by the rapid
and global spread of COVID-19.
People
The Company's immediate priority is the health and safety of its
people. We have been taking every possible step to reduce the risk
of infection across our sites and are working closely with local
authorities to ensure the continued safety and wellbeing of our
people, as the situation develops.
The Company has implemented responsible working practices for
the current environment and has established appropriate governance
and communication structures to enable focussed decision making. We
have already seen an exceptional response from our employees, even
in locked down countries, and we are extremely grateful for their
outstanding commitment. This feature, allied to our inherent
strategic strengths, provides a good platform to manage through
this uncertain period.
Customers
The Company is proud to be serving critical industries involved
in the fight against COVID-19; the pharmaceutical industry in our
Packaging division and the medical devices industry in our
Components division.
Apart from government-imposed closures, our supply chain
continues to serve our customers. Although, the Company currently
has a handful of manufacturing and distribution facility
shut-downs, due to local government requirements, the vast majority
of sites continue to operate as normal. We are working with
customers and suppliers by enacting appropriate business continuity
plans to mitigate the impact of any potential disruption
Impact of COVID-19 on Current Trading
As previously indicated in our year end 2019 results
announcement, there has been some limited impact on trading from
COVID-19 in the first two months of the year; most notably in the
China Filters business and to a lesser extent in the China
Components business. The Company is pleased to update that in very
recent weeks, demand in China has returned back to more normalised
levels.
In the Components division (which is our one division that has
some degree of exposure to industrial cyclicality), over the course
of the past week, we have noted a high single digit slowdown in
customer demand, particularly in Europe and the US, as the
epicentre for the outbreak shifts from East to West. The most
recent indications however, are that this is an accelerating trend
as customers reduce activity materially. Conversely, Asia trading
is broadly in line with expectations.
In the Packaging and Filters divisions, customer feedback would
suggest that there is not a significant risk to underlying medium
to longer term demand, but rather the greater risk lies on the
supply chain side and in relation to individual country temporary
legislation. However, we have not seen any significant impact to
date.
Financial Position and Priorities
The Company continues to maintain a strong balance sheet and has
recently completed the refinancing of an $80m USPP facility in
February 2020. We currently have available liquidity of cGBP225m,
which is made of undrawn committed bank facilities of cGBP100m
(from a group of eight international blue-chip banks), along with
cash on hand across the Company of c.GBP125m.
Net debt on 31 December 2019 (IFRS16 unadjusted) was GBP234m,
with a ratio of net debt to EBITDA at just under 2x versus a
banking covenant threshold of 3x.
The Company has undertaken extensive scenario testing, factoring
in a variety of potential outcomes, which indicate that the Company
has sufficient liquidity to absorb an extended period of
uncertainty.
The Company has no bank or refinancing events until October
2021. In addition, we are exploring the newly announced Covid
Corporate Financing Facility (CCFF) from the Bank of England.
The Company is working proactively to protect its trading and
cash flow position by assessing a number of mitigation levers
within its control, such as the reduction of discretionary capex
and net working capital across the business. The Company is also
implementing a reduction in discretionary spend, namely:
-- Hiring has been frozen and the use of overtime and contractors is being significantly reduced
-- Marketing budgets have been significantly scaled back and refocused
-- Government support is being applied for globally where
appropriate to support the costs of employees
Other potential cost saving levers are being actively
reviewed.
Dividend
Notwithstanding the generally robust trading position and our
healthy balance sheet, the macro economic environment is one of
extreme uncertainty. Therefore, the Board has concluded that all
reasonable steps should be taken to conserve cash and, accordingly,
has decided to cancel the 2019 final dividend. As a result, final
dividend payment will not be presented as a resolution at the
forthcoming Annual General Meeting. The Board will continue to
closely monitor the development of COVID-19, its impact on the
Company's people and businesses, and assess the dividend policy in
due course.
Outlook
The Company anticipates inevitable disruption to its trading in
the coming months and it is too early to call out the full extent
of the resulting impact on the full year financial performance; the
Company remains a financially sound business with a liquidity
position and capital structure that is well placed to absorb an
extended period of uncertainty. Despite the current intense focus
on addressing the immediate challenges, we continue to pursue the
strategic initiatives that are driving our medium to long term
growth, albeit it at a revised pace.
MAR Statement
This announcement contains inside information.
Enquiries
Essentra plc Tulchan Communications LLP
Aamir Mohiuddin, Investor Relations Martin Robinson
Director Sophia Martin-Pavlou
Lucy Yank, Group Communications Olivia Peters
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 7,552 employees, 50 principal
manufacturing facilities, 34 sales & distribution operations
and 4 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 29 countries worldwide, 14 manufacturing
facilities and 29 logistics centres serve more than 85,000
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 24 facilities across four 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. The seven worldwide locations, plus a dedicated
Technology Centre supported by three regional development
facilities, provide 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 now 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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END
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