ESSENTRA PLC
("Essentra", the "Group" or the "Company")
RESULTS FOR THE FULL YEAR
ENDED 31 DECEMBER 2023
A resilient FY 2023
performance, progressing towards medium-term
targets
Financial highlights
|
2023
£m
|
20222 £m
|
change Actual
FX
|
change Constant
FX
|
Revenue
|
316.3
|
337.9
|
-6.4%
|
-4.4%
|
Adjusted1 operating
profit
|
43.2
|
25.1
|
+72.1%
|
+85.3%
|
Adjusted1 operating
margin
|
13.7%
|
7.4%
|
+630bps
|
+660bps
|
Adjusted1 pre-tax
profit
|
40.7
|
7.3
|
>100%
|
>100%
|
Adjusted1 basic
earnings per share
|
10.6p
|
1.9p
|
>100%
|
>100%
|
Adjusted1 net cash flow
from operating activities
|
48.2
|
20.2
|
>100%
|
>100%
|
Reported operating profit /
(loss)
|
10.9
|
(11.3)
|
-
|
-
|
Reported pre-tax profit /
(loss)
|
8.4
|
(29.1)
|
-
|
-
|
Reported net profit /
(loss)
|
5.8
|
(31.1)
|
-
|
-
|
Reported profit / (loss) per
share
|
2.0p
|
(10.3)p
|
-
|
-
|
Dividend per share
|
3.6p
|
3.3p
|
+9.1%
|
-
|
Reported net cash inflow from
operating activities3
|
33.3
|
4.3
|
>100%
|
>100%
|
Free cash
flow3
|
37.3
|
5.7
|
>100%
|
>100%
|
Net debt / (funding
surplus)4
|
62.5
|
(113.8)
|
-
|
-
|
Net debt / (funding surplus) to
adjusted EBITDA4,5
|
1.0x
|
(2.3)x
|
-
|
-
|
Presented on a continuing operations
basis
Financial and operational resilience
· FY
2023 adjusted1 operating profit in line with
expectations
· Revenue of £316.3m (2022: £337.9m); 4.4% decline at constant
currency
· Adjusted1 operating profit increased to £43.2m
(2022: £25.1m)
· Adjusted1 operating margin expansion to 13.7%
(2022: 7.4%)
· Strong pricing sustained, offsetting inflation
· Pro-active approach to cost management across the
Group
· Central corporate costs re-sized, in line with the c.£13m run
rate previously guided
· Strategically aligned bolt-on acquisition of BMP TAPPI,
completed in October 2023, demonstrating continued momentum of
Essentra's inorganic strategy
Strong balance sheet and cash generation, enabling investment
in growth
· Excellent adjusted1 net cash flow from operating
activities of £48.2m; conversion of 111.6% (2022: 80.5%)
· Reported net cash inflow from operating activities of £33.3m
(2022: £4.3m)
· Net
debt of £62.5m, representing leverage of 1.0x adjusted
EBITDA4 (incl. IFRS 16 lease liabilities of
£30.9m)
· Healthy bolt-on acquisition pipeline; Management remains
disciplined in the current environment
· Delivering on the commitment to return £150m to shareholders.
£89.8m special dividend paid in April 2023, and 40% of the £60m
share buyback programme completed as of 31 December 2023
· Recommended
final ordinary dividend of 2.4p per share, resulting in a full year
dividend of 3.6p per share, representing dividend cover in the order of 3.0x earnings
Confidence in delivering medium-term
guidance
· 2024
performance to date is in line with expectations
· Essentra remains focussed on enhancing its hassle-free
customer proposition, delivering strong profit margins and cash
conversion, and continues to invest in growth initiatives, whilst
delivering on its sustainability goals
· The
business is well positioned for when volume growth returns to
normalised levels. Management anticipates 2024 performance will be
weighted towards a recovery in the second half
· The
Group remains confident of making further progress towards its
medium-term targets in 2024
1 On a continuing operations
basis, before amortisation of acquired intangible assets and
adjusting items. Further details can be found in Note 3 of the
Condensed Consolidated Financial Statements.
2 Prior year has been re-presented to remove the disposed
Packaging and Filters businesses. See Note 1 to the Condensed
Consolidated Financial Statements.
3 A reconciliation of free
cash flow and net cash inflow from operating is set out in the
Financial Review section.
4 Adjusted EBITDA is defined
as operating profit before depreciation (and other amounts written
off property, plant and equipment), share option expense,
intangible amortisation and adjusting items.
5 Presented including lease
liabilities.
Commenting on the Full Year results, Scott Fawcett, Chief
Executive, said:
"2023 saw the delivery of Essentra's first year as a
pure-play components business. The Group navigated challenges
within the external demand environment, and achieved a resilient
financial and operational performance. These results demonstrate
the strength of our business model, our agile approach to
operations and pro-active cost control, whilst making strategic
progress, highlighting the strength of our people in managing the
business through economic cycles.
The Group is making progress towards its medium-term targets.
In 2023, we delivered good margin progression, organic and M&A
investment and right-sized the corporate cost base. Our cash
conversion is in excess of 100%, and the balance sheet remains
strong. We continue to focus on our hassle-free service for our
customers, and continue to demonstrate the link between employee
engagement and customer satisfaction. Our NPS score increased by 6
points to 40, and I am very pleased to see employee engagement at
industry leading levels of 82%.
The business has taken steps in 2023 to ensure it is well
positioned to benefit from a recovery in our end-markets.
Trading to date is in line with our expectations, and is showing
greater stability. We have seen momentum in new order intake
trends, and anticipate an improvement in volumes in the second half
of the year. Management remain confident in making further progress
towards our medium-term targets in 2024."
Enquiries
Essentra plc
Jack Clarke, Chief Financial
Officer
Claire Goodman, Investor Relations
Manager
Emma Reid, Company
Secretary
Tel: +44 (0)1908 359100
|
|
Presentation
A copy of these results is
available on www.essentraplc.com
There will be a presentation to
analysts and investors starting at 09:00am (UK time,
registration from 08:30am) on Tuesday 19 March 2024 at Deutsche
Numis, 45 Gresham St, London EC2V 7BF.
There are two options for
participating in the event:
1. To attend in
person, please e-mail your details to investorrelations@essentra.com
2. To join the live webcast of the presentation, please pre-register
at http://www.essentraplc.com/en/investors/company-information/webcasts-and-presentations
A recording of the webcast will be
made available on the Company's website later in the
day.
Notes to Editors
About Essentra plc
Essentra plc is a FTSE 250 company
and a leading global provider of essential components and
solutions, focusing on the manufacture and distribution of plastic
injection moulded, vinyl dip moulded and metal items.
Headquartered in the United
Kingdom, Essentra's global network extends to 28 countries
worldwide and includes c.3,000 employees, 14 manufacturing
facilities, 24 distribution centres and 33 sales & service
centres serving c.69,000 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, medical and renewable energy.
For further information, please
visit www.essentraplc.com
Cautionary forward-looking
statement
These results contain
forward-looking statements based on current expectations and
assumptions. Various known and unknown risks, uncertainties and
other factors may cause actual results to differ from future
results or developments expressed or implied from the
forward-looking statements. Each forward-looking statement speaks
only as of the date of this document. The Company accepts no
obligation to revise or update these forward-looking statements
publicly or adjust them to future events of developments, whether
as a result of new information, future events or otherwise, except
to the extent legally required.
A
resilient performance.
The Group delivered revenues of
£316.3m in 2023, a reduction of 6.4% compared to the previous year
(4.4% decline on a constant currency basis). Organic sales reduced
by 8.2% year on year reflecting wider macro-environment trends,
partly offset from a contribution to revenue of 3.8% from the
acquisitions of the Wixroyd Group ("Wixroyd") and BMP s.r.l ("BMP
TAPPI").
In its first year as a pure-play
Components business, Essentra demonstrated financial resilience.
Adjusted operating margins significantly expanded to 13.7% (2022:
7.4%) and adjusted operating profit grew to £43.2m, from £25.1m in
2022. Strong pricing delivery through the year enabled the business
to offset cost inflation and mitigate a portion of the volume
reductions driven by the wider macro-environment.
The Group completed a review of
corporate costs during the year, and successfully right-sized the
central and corporate functional costs. £11.6m of central corporate
costs were recognised in the period compared to £23.1m in the
previous year and the ongoing run rate cost is in line with
guidance of c.£13m. A one-off cost of £1.3m was incurred relating
to the restructuring of the business and has been reported within
adjusting items.
In 2023 the Group responded to
changes in the macro-environment by adjusting capacity to match
demand and maintaining its agile approach to operations and costs,
demonstrating the strength of its unique business proposition.
Essentra's global manufacturing and distribution footprint provides
the flexibility to adjust demand where appropriate, and the Group
remains well positioned for when volume growth returns to
normalised levels.
The Group is extremely pleased
that the focus on improving the service to its customers is
reflected in the 2023 On Time In Full ("OTIF") metric which
increased to 82.2% (2022: 78.2%) and the 2023 Net Promoter Score
("NPS") which increased to 40 (2022: 34). Closely linked to
customer satisfaction, employee engagement remains above benchmark
levels at 82% (2022: 83%).
In 2023, Essentra maintained
momentum with its inorganic strategy. Following the successful
acquisition and integration of Wixroyd in December 2022, Essentra
announced the completion of the acquisition of BMP TAPPI in October
2023. BMP TAPPI is a complementary and strategically aligned
bolt-on acquisition that will strengthen and enhance the Group's
existing core product range, further expand the Group's
manufacturing footprint in Europe, and deliver attractive cost and
revenue synergies. This acquisition demonstrates Essentra's
disciplined approach to deal rationale with focus
on bolt-on acquisitions, targeting new product
capabilities that can be cross-sold, including existing suppliers of sourced products.
We continue to actively monitor
the bolt-on
acquisition pipeline, and Management remain disciplined in the
current environment.
The balance sheet remains strong
and is supported by excellent cash flow of £48.2m equating to
conversion of 111.6% (2022: 80.5%). Adjusted EBITDA to net debt
leverage of 1.0x including IFRS 16 lease liabilities is within the
previously guided medium-term target range of 0x - 1.5x, and
Essentra remains well positioned to support future organic growth
opportunities and drive further value-enhancing investment with
bolt-on M&A.
Group strategy and medium-term targets.
Essentra continues to be well
positioned, with a unique business model in a highly fragmented
market combining manufacturing and distribution, enabling breadth
and depth of product offer alongside a hassle-free customer
offering. The business is diversified, with a high margin and scope
to expand through scale and operational effectiveness. With strong
returns, and cash conversion, the business is able to further drive
growth through value enhancing M&A and has a disciplined
approach to acquisitions, integrating eleven acquisitions in the
previous thirteen years.
In November 2022, Management
presented a clear strategy to drive organic growth and market share
gains. The ambition of the business is to double the revenue and
triple operating profits in the medium-term, with clear metrics to
achieve our strategy, supported by:
· A
clear strategy to drive market share gains, supported by a leading
market position in a highly fragmented market
· Margin expansion from scale, operating efficiencies, and
pricing initiatives
· A highly
cash generative business with continued focus on working capital
management and a strong balance sheet
· A
clear capital framework to drive further shareholder
returns.
In 2023, the Group demonstrated
progress towards this strategy, and the medium-term target set. The
medium-term financial targets are:
Metric
|
Medium-Term Target
|
FY23 Actual
|
Organic revenue
|
>5% CAGR
|
-8.2%
|
Inorganic revenue
|
>5% CAGR
|
+3.8%
|
Adjusted operating
margin
|
c.18%
|
13.7%
|
Operating cash
conversion
|
>85%
|
111.6%
|
Net debt to adjusted
EBITDA
|
0x - 1.5x
|
1.0x
|
ROIC
|
>15.0%
|
12.4%
|
Dividend
|
Maintain dividend cover in the
order of 3.0x earnings
|
3.6p 2.9x cover
|
ERP implementation progress. The business continues to roll out the ERP programme and
Management focus is on fully implementing in Europe, which is our
largest region. In January 2024 the new ERP was deployed across all
five Eastern European operations, including the distribution hub in
Lodz, Poland. This latest implementation benefitted from the
learnings of previous roll outs, and the existing live sites were
able to benefit from operational improvements. Progress in
2024 will focus on further implementation in European markets in a
measured manner, shaped to capture benefits efficiently. The costs
in 2023 were £10.8m and in 2024 will be c.£10m. This more measured
approach over a longer time period will provide greater delivery
assurance and same projected benefits.
Board Changes. As announced
separately today, Jack Clarke has informed the Board of his
decision to retire as Chief Financial Officer and Executive
Director of the Company. Jack joined Essentra in April 2022 and
during his tenure has completed the strategic reviews and
transitional arrangements that led to the successful sale of the
Company's Packaging and Filters businesses, and the subsequent
launch of Essentra as a pure-play components business. Jack will
continue in his role until a successor is in place to ensure a
smooth transfer of responsibilities.
Strengthened Group Executive team. Following its first year as a pure-play components business,
the Group has made changes in 2024 to the Group Executive Committee
("GEC") to support the continued progress towards its medium-term
targets.
Richard Sederman has been
appointed as APAC Managing Director, effective from January 2024.
Richard has worked with Essentra for more than 20 years and has
been pivotal in the Components division acquisitions, including the
recent acquisitions of BMP TAPPI and Wixroyd in EMEA, as well as
the acquisition of Henzghu in China, and supported the integration
of the Abric security seals business in 2014. Chris Brooks has been
appointed as President of the Americas effective from February
2024. Chris was previously President of X-Rite, a former Danaher
operating company, and brings a wealth of experience with a diverse
industrial manufacturing background. He has more than 20 years of
experience as a general manager of global operations and holds
various functional enterprise expertise.
Shareholder returns. The
Board announced a £60m share buyback programme in February 2023,
funded through the residual net transaction proceeds from the
disposals of its Filters and Packaging businesses, which completed
in Q4 2022. During 2023, a total of 13.36m shares were purchased,
at an average purchase price of 179.5 pence per share, totalling
£24.0m. As at 31 December 2023, the programme was c.40% complete.
Of the shares purchased, 4.14m were transferred into treasury, and
9.22m have subsequently been cancelled, which represented 3.1% of
the issued share capital of the Company (excluding treasury shares)
when the programme commenced.
The Board remains committed to the
share buyback programme. The finalisation of the programme will be
flexible and is dependent on the Group's capital allocation
opportunities and priorities, notably acquisitions. It is now
anticipated that the buyback will remain in place beyond the
current financial year.
As previously announced, and
financed through the net proceeds arising from the disposal of the
Filters and Packaging businesses, on 27 April 2023, the Company
paid a special dividend of £89.8m to shareholders, representing
approximately 29.8 pence per ordinary share.
Ordinary Dividend.
The Board of Directors is recommending a final
ordinary dividend of 2.4p per share, resulting in a 9% increase in
total dividend for FY 2023 to 3.6p (2022: 1.0p final; 3.3p total).
The full year dividend is in line with the Board's commitment to a
progressive dividend policy, maintaining dividend cover in the
order of three times earnings.
The final dividend will be paid on
5 July 2024 to shareholders on the share register at the record
date, being 17 May 2024. The ex-dividend date will be 16 May 2024.
Essentra operates a Dividend Re-Investment Programme ("DRIP"),
details of which are available from the Company's Registrars,
Computershare Investor Services PLC. The final date for DRIP
elections will be 14 June 2024.
Outlook
Trading at the start of 2024 is in
line with expectations. The business is seeing greater stability
and is encouraged by orderbook momentum in all three regions. The
business has taken steps in 2023 to ensure it is well positioned in
2024 to benefit from a recovery in our end-markets, with a
right-sized cost base and robust operations to deliver operating
leverage. Management anticipate performance to be second half
weighted given the short-term market environment.
Whilst EMEA is seeing a soft
macro-economic environment as previously guided and
a strong Q1 2023 comparative performance, quarter
on quarter trends continue to improve sequentially. The Americas
region is seeing a more notable improvement in trading performance,
consistent with the trend seen towards the end of Q4 2023
and distributor destocking behaviour is
stabilising. APAC continues to recover at a gradual
pace.
Management remains confident that
Essentra's robust and differentiated business model will support
further progress towards its medium-term targets in 2024. It's
global manufacturing and distribution footprint, market-leading
positions and focus on delivering excellent customer service will
support ongoing organic growth and profitability, whilst the
continued strength of the balance sheet will drive investment in
value enhancing growth initiatives, and disciplined bolt-on
M&A.
Regional Review
EMEA
|
2023
£m
|
% growth
Actual FX
|
% growth
Constant
FX
|
Revenue
|
170.8
|
+2.3
|
+4.8
|
Gross profit
|
87.5
|
+3.6
|
+5.3
|
Gross margin
|
51.2%
|
+60bps
|
+20bps
|
Revenue for the full year was
£170.8m, a 4.8% increase on a constant currency basis, compared to
the prior year. EMEA reported a broadly flat revenue performance in
the first half, with a 0.1% decline on a constant currency basis
compared to H1 2022. Whilst there has been evidence of softening
market trends since the end of Q2 2023, in line with the wider
macro-economic environment, comparatives eased through the second
half reporting 10.9% growth compared to H2 2022. On a LFL basis,
after adjusting for the acquisition of Wixroyd and BMP TAPPI, the
region reported a decline of 2.9%.
Western Europe and Germany in
particular saw lower volumes in line with wider industrial
production trends, whilst Turkey and Middle East and North Africa
have continued their growth trajectory. Eastern Europe including
the Nordics region remained robust. EMEA as a whole continues to
invest in high growth markets, with particular focus on operations
in Turkey. The electrification end-market trends continued to gain
momentum, benefiting access hardware product categories. Power
generators, data servers and renewable energy remain the fastest
growing markets.
The region benefitted from two
acquisitions in a thirteen-month period. Wixroyd, acquired in
December 2022, performed in line with Management expectations, with
cross-sell building traction in Europe. Integration plans for BMP
TAPPI, acquired in October 2023, are on track and will further
strengthen Essentra's product portfolio, enhancing the Group's
manufacturing footprint in Europe.
Enhancing customer service
remained a focus throughout the year, and the region has placed
greater emphasis on stock availability. The region is pleased to
see an NPS improvement of 4 points to 40, and an OTIF improvement
of 120bps to 83.5% year on year.
Gross margins remained strong at
51.2% for the full year. The region as a whole remained dynamic by
adjusting capacity at regional manufacturing and distribution
facilities to meet demand, improving operational efficiency. Whilst
energy prices and labour costs remained high throughout the year,
customer pricing offset inflation and pro-active cost control
supported the mitigation of volume declines.
AMERICAS
|
2023
£m
|
% growth
Actual FX
|
% growth
Constant
FX
|
Revenue
|
106.2
|
-13.9
|
-13.4
|
Gross profit
|
40.3
|
-14.6
|
-13.4
|
Gross margin
|
37.9%
|
-30bps
|
-10bps
|
Revenue for the full year was
£106.2m, a 13.4% reduction on a constant currency basis compared to
the prior year. As described at the half year and in recent trading
updates, distributors experienced destocking in the first six
months of the year, which led to a 12.6% decline in H1 on a
constant currency basis. Throughout H2 the region focused on the
normalisation of distributor volumes, and whilst H2 saw a decline
of 14.4% on a constant currency basis, the general industrial
environment showed signs of stability in Q4 with some customers
returning to normalised levels of ordering patterns at the end of
the year.
Whilst electronics industries
continued to be subdued, automotive demand remained stable in the
second half, as supply chains recovered from previous component
shortages. The region continued to focus on driving new business
across the customer base, including cross-sell and new customer
acquisition. The region is encouraged by new customer growth within
the seals product range, with re-negotiated contracts maintaining
positive momentum into 2024.
The region expanded its
operational footprint in 2023. Near-shoring opportunities were
accelerated, enabled by the opening of the manufacturing facility
in Monterrey, Mexico which commenced operations in H2, building
manufacturing presence to support wider growth plans, and bringing
production closer to customer demand. The region also invested in
manufacturing capabilities in Brazil, with new dip-moulding
machinery that will service customer demand in South America,
improving Essentra's presence in the region.
Americas delivered improvements
that increased service to our customers throughout the year. The
2023 NPS scores improved by 12 points to 47, and the region
recorded a marked improvement in OTIF to 75.8% (2022: 65.6%).
Improvements to our customer hassle-free proposition have been
supported by an investment in inventory levels of standard parts
and enhanced sample availability.
A proactive and controlled
approach to cost management was taken throughout the year partly
offsetting sales volume declines. Gross margins reduced by 30bps to
37.9% as slower market conditions have resulted in reduced
operational leverage in 2023.
APAC
|
2023
£m
|
% growth
Actual FX
|
% growth
Constant
FX
|
Revenue
|
39.3
|
-17.3
|
-13.1
|
Gross profit
|
14.0
|
-15.2
|
-11.1
|
Gross margin
|
35.6%
|
+90bps
|
+90bps
|
The APAC region delivered revenue
of £39.3m in 2023, a reduction of 13.1% on a constant currency
basis compared to the prior year. In keeping with the previous
trading updates, performance was driven by the market dynamics in
China (c.68% of APAC revenue; c.8.5% of Group revenue) with gradual
recovery initially seen from the end of the first quarter of 2023.
First half reported sales saw a decline of 18.3% which improved to
a year on year decline of 7.0% in the second half.
There continues to be increased
levels of customers interest in product categories that support
faster growing industries and infrastructure development. The
region continues to invest in these high growth markets including
renewable energy, telecommunication and data networks. In 2023, the
region reviewed its commercial and operational footprint, including
the investment in countries outside of China. In Q2 2023 the
distribution centre and operations in Perth, Australia, were moved
to the existing facility in Sydney. In June, Essentra entered the
Vietnamese market, establishing a commercial presence.
The APAC region has placed greater
emphasis on improving inventory availability, and achieved a
reduction in lead times to better meet the needs of customers. The
region saw an improvement in NPS in 2023, with an increase of 8
points in China to 51 and an increase of 23 in the Rest of
Asia.
In 2021, Essentra acquired Jiangxi
Hengzhu Electrical Cabinet Lock Co. Ltd ("Hengzhu"). Given previous
pandemic related restrictions in China, 2023 was the first year
following the acquisition that integration activities could be
accelerated. The focus in 2023 was on investing in upgrades to
manufacturing equipment, ensuring there was a safe operating
environment, and exploring opportunities to develop the access
hardware product range across the rest of Asia.
The region remained focussed on
cost management and operational efficiency in 2023 to deliver
robust profit margins as markets gradually recovered. Full year
gross margin of 35.6% saw a 90bps improvement compared to
2022.
Sustainability progress and refreshed targets.
In 2023, the Company delivered significant
progress across the areas of environment, social and governance
("ESG"). Essentra's ESG strategy, launched in 2022, is set out
against five pillars: our planet, our components, our customers,
our culture and our communities. These pillars are aligned to the
UN sustainable development goals, with nine goals having a direct
link to how Essentra operates.
The Science Based Targets
initiative ("SBTi") approved Essentra's near- and long-term
science-based emissions reduction targets including verification of
Essentra's net-zero science-based target by 2050, a key milestone
in the Company's sustainability strategy as previously announced on
21 February 2024. Essentra has committed to an overall Net-Zero
Target to reach net-zero greenhouse gas emissions across the value
chain by 2050. In the near-term, Essentra commits to reducing
absolute scope 1 and 2 GHG emissions by 50% by 2030 from a 2019
base year. Essentra also commits to reducing scope 3 GHG emissions
from purchased goods and services and upstream transportation and
distribution by 55% per GBP of value added by 2030 from a 2022 base
year. In the long-term, Essentra commits to reduce absolute scope 1
and 2 GHG emissions by 90% by 2040 from a 2019 base year. Essentra
also commits to reduce absolute scope 3 emissions by 90% by 2050
from a 2022 base year.
The Group is making good progress
against these targets. Since 2019, total scope 1 and 2 CO2e
emissions have reduced by 38%, and when indexed to revenue,
emissions intensity has declined by 41% as we continue to
transition to renewable electricity and focus on energy management
programmes. Renewable electricity is now 44% of total electricity
usage, an increase of 13% compared to 2022. 2023 saw our first
on-site solar project begin generating power in Thailand, followed
by our second site in China at the end of the year. In 2023, our
scope 3 near-term emissions intensity has reduced by 30% compared
to the 2022 baseline.
Essentra continues to make
progress towards its goal of having all sites achieve zero waste to
landfill status by 2030. 14 sites across Essentra's global
footprint achieved zero waste to landfill (2022: 12 sites), and 94%
of waste is now diverted from landfill (2022: 76%).
The use of post-consumer recycled
content materials has also increased positively. 21% of materials
are now obtained from sustainable sources across our manufactured
polymer ranges, two years ahead of our target of meeting 20% by
2025. Essentra continues to innovate and build relationships with
its customers to recognise further opportunities, and in 2023
launched a Centre of Excellence to accelerate the testing of
recycled and bio based materials, with the extended target of
reaching 50% of materials from sustainable sources by 2030 across
our manufactured polymer ranges as well as the additional target of
ensuring 100% of packaging is reusable, recyclable or compostable
by 2030. We continue to increase the number of products introduced
with sustainability criteria, and now have 7,981 products across
our ranges that have sustainability attributes, of which 750 were
introduced in 2023.
Constant currency, Like-for-like
("LFL") and adjusted measures are provided to reflect the
underlying financial performance of Essentra. For further details
on the performance metrics used by Essentra, please refer to pages
20-21 and 36-37 of the 2022 Annual Report.
Constant foreign exchange rates. The constant exchange rate basis adjusts the comparative to
exclude the effect of currency movements, to show the underlying
performance of the Company. The principal exchange rates for
Essentra were:
|
-------- Average
--------
|
-------- Closing
--------
|
|
2023
|
2022
|
2023
|
2022
|
US$:£
|
1.25
|
1.24
|
1.27
|
1.20
|
€:£
|
1.15
|
1.17
|
1.15
|
1.13
|
Re-translating the full year 2022
actual results at 2023 average exchange rates reduces the prior
year revenue by c.£7m and reduces prior year operating profit by
c.£2m.
Like-for-like ("LFL"). The
term "like-for-like" describes the performance of the continuing
business on a comparable basis, adjusting for the impact of
acquisitions, disposals and foreign exchange. The 2023 LFL results
are adjusted for the acquisition of Wixroyd on 1 December 2022, and
the acquisition of BMP TAPPI on 26 October 2023. The 2022 results
have been adjusted for the completion of the Packaging business
disposal previously announced on 3 October 2022 and the completion
of the Filters business disposal previously announced on 5 December
2022.
Discontinued Operations. Discontinued operations recognised a £0.4m post-tax loss
(2022: £152.7m loss), as reported in the Condensed Consolidated
Income Statement. Refer to Note 17 in the Condensed Consolidated
Financial Statements for further information.
Adjusted basis. The term
"adjusted" excludes the impact of amortisation of acquired
intangible assets and adjusting items, less any associated tax
impact. In 2023, amortisation of acquired intangible assets was
£11.3m (2022: £10.4m), and there was a pre-tax charge for adjusting
items of £21.0m (2022: £26.0m). 2023 adjusting items include £10.8m
customisation and configuration costs of significant
'software-as-a-service' ("SaaS") arrangements in line with previous guidance. A net credit of £1.0m has
been incurred for gains/losses and transaction costs relating to
acquisitions of businesses and £3.4m cost has been incurred
relating to impairment of non-current assets held in
China.
Also reported within adjusting
items are £7.8m of costs related to legacy items within the Group
including £1.3m restructuring activities following the disposal of
Filters and Packaging divisions, £0.2m of costs associated with the
capital reduction completed in 2023, and recurring costs of £1.8m
relating to legacy pension schemes. In addition £3.7m has been
reported relating to a write-down of investment property to market
value and £0.8m in respect of indemnity provisions raised for
claims. Further details on adjusting items are shown in Note 3 to
the Condensed Consolidated Financial Statements.
Adjusted operating cash flow. Adjusted operating cash flow is net cash flow from operating
activities, excluding income tax paid, contributions to legacy
pension schemes and cash flows relating to adjusting items, less
net capital expenditure. It is a measure of the underlying cash
generation of the business. Net capital expenditure is included in
this measure as Management regard investment in operational assets
(tangible and intangible) as integral to the underlying cash
generation capability of the Company.
A full reconciliation of the
Group's adjusted profit measures can be found in Note 20 to the
Condensed Consolidated Financial Statements.
IAS 29: Turkey Hyperinflation. International Accounting Standard ("IAS") 29, Financial Reporting in Hyperinflationary
Economies, has been applied to the Components business in
Turkey. There has been more than a 100% increase in the Consumer
Price Index in Turkey between 2019 and 2023. For the year ended 31
December 2023 a monetary gain of £1.3m (2022: £3.2m gain) was
included within net finance expense, and an increase in net assets
in the year of £0.7m (2022: £18m increase) has been recognised as a
result of IAS 29.
Net finance expense. Net
finance expense of £2.5m compared to £17.8m in the prior year
period. The reduction in net finance expense is led by the
previously communicated changes to the Company's main sources of
funding after the strategic review process. In January 2023 the
Group reduced the US private placement ("USPP") debt, using a
portion of the disposal proceeds to repay $247m of the $350m USPP
notes initially held contributing to a £9.9m reduction in interest
on loans and overdrafts £6.0m (2022: £15.9m).
Tax. The effective tax on
underlying profit before tax (before adjusting items and
amortisation of acquired intangible assets) was 23.6% (2022:
21.5%). The underlying effective tax rate for 2023 is within the
forecast tax rate range of 23% to 25%. Consistent with the
disclosure of tax rates at FY 2022, this increased tax rate
compared to the prior year is primarily driven by the previously
announced increase of the UK corporation tax rate from 19% to 25%
with effect from 1 April 2023. The overall
tax position for the Group has reported a net tax credit as a
result of prior year adjustments related to discontinued
operations.
Net working capital. Net
working capital is defined as Inventories plus Trade and other
receivables less Trade and other payables, adjusted to exclude
deferred contingent consideration payable, interest accruals and
capital payables ("Adjustments").
|
2023
|
2022
|
|
£m
|
£m
|
Inventories
|
64.7
|
65.0
|
Trade and other
receivables
|
61.5
|
66.4
|
Trade and other
payables
|
(60.7)
|
(91.5)
|
Adjustments
|
(7.7)
|
4.3
|
Net working capital
|
57.8
|
44.2
|
The increase in net working
capital is predominately due to a reduction in Trade and other
payables as a result of re-sizing the cost base in the current
year, as well as £9.1m included in the prior year associated with
the cost of disposals. This is partly offset by a reduction in
receivables, as well as inventory rebalancing, after an initial
inventory build in the prior year period. Adjustments include
deferred contingent consideration receivable, accruals for interest
and capital expenditure payable.
Adjusted operating cash flow from continuing
operations. Adjusted operating cash
flow from continuing operations of £48.2m equated to an operating
cash conversion of 111.6% (2022: 80.5%). Free cash flow increased
year on year to £37.3m (2022: £5.7m).
|
2023
|
2022
|
|
£m
|
£m
|
Adjusted operating profit
|
43.2
|
25.1
|
Depreciation and amortisation of
non-acquired intangible assets
|
14.0
|
16.6
|
Right-of-use asset
depreciation
|
5.9
|
5.6
|
Share option expense
/ other movements
|
0.9
|
(0.1)
|
Change in working
capital
|
(2.6)
|
(14.2)
|
Net capital expenditure (excluding
disposal proceeds relating to adjusting items)
|
(13.2)
|
(12.8)
|
Adjusted operating cash flow from continuing
operations
|
48.2
|
20.2
|
Tax1
|
(4.5)
|
1.7
|
Cash outflow in
respect of adjusting items1,2
|
(23.6)
|
(30.4)
|
Add back: net capital
expenditure
|
13.2
|
12.8
|
Net cash inflow from operating
activities3
|
33.3
|
4.3
|
|
|
|
Adjusted operating cash flow from continuing
operations
|
48.2
|
20.2
|
Tax1
|
(4.5)
|
1.7
|
Net interest
paid
|
(6.4)
|
(16.2)
|
Free cash flow
|
37.3
|
5.7
|
1 In 2022 tax paid excludes
the tax paid/received in relation to adjusting items and
discontinued operations. In 2022 this is included within the cash
outflow in respect of adjusting items and discontinued
operations.
2 Pension contribution of
£3.7m in 2023 for legacy pension schemes has been included within
cash outflow in respect of adjusting items (2022:
£0.7m).
3 Statutory cash flows from
operating activities can be found in the Condensed Consolidated
Financial Statements.
Net funding surplus / debt. Net debt at the end of the period was £62.5m compared to a
net funding surplus of £113.8m at 31 December 2022 (including lease
liabilities). The overall increase in net debt was mainly driven by
shareholder capital returns previously communicated at the FY 2022
results, offset by free cash flow generated in the period less cash
paid for the acquisition of BMP TAPPI.
The Group's financial ratios
remain healthy. Net debt to adjusted EBITDA including lease
liabilities was 1.0x (2022: net funding surplus of 2.3x on a
continuing basis). The ratio of net debt to adjusted EBITDA
excluding lease liabilities was 0.5x (2022: net funding surplus
3.3x on a continuing basis).
|
2023
|
|
£m
|
Net funding surplus as at 1 January 2023
|
(113.8)
|
Free cash
flow
|
(37.3)
|
Cash flow from
discontinued businesses including disposal costs
|
21.6
|
Cash outflow in
respect of adjusting items
|
23.6
|
Special dividend to
equity holders
|
89.8
|
Ordinary dividend to
equity holders
|
6.5
|
Share
buyback
|
24.0
|
Acquisitions less
cash acquired
|
33.3
|
Lease liability
movements
|
14.0
|
Movement in loan
hedging derivatives
|
0.3
|
Foreign
exchange
|
0.5
|
Net debt as at 31 December 2023
|
62.5
|
Banking facilities. One of
the main sources of funding for the Company is a Revolving Credit
Facility ("RCF") provided by a group of six highly rated banks
totalling £200.0m. As at 31 December 2023, £15.2m was drawn. The
Company also holds $102.5m of long dated US Private Placement debt
("USPP") at an average coupon rate of 3.8%.
Type
|
Amount
|
Interest Rate
|
Maturity
|
RCF
|
£200.00m
|
Floating
|
October 2026
|
USPP
|
$32.80m
|
3.62%
|
July 2028
|
USPP
|
$34.85m
|
3.91%
|
July 2031
|
USPP
|
$34.85m
|
4.00%
|
July 2033
|
Treasury policy and controls. Essentra has a centralised treasury function to manage
funding, liquidity and exposure to interest rate and foreign
exchange risk. Treasury policies are approved by the Board and
cover the nature of the exposure to be hedged, the types of
derivatives that may be employed and the criteria for investing and
borrowing cash. The Company intends to use derivatives to manage
foreign currency and interest rate risk arising from underlying
business activities. Whilst some transactions may be of a more
speculative nature, they are in place with a view to manage
exchange rate risk only. Underlying policy assumptions and
activities are reviewed by the Treasury Committee. Controls over
exposure changes and transaction authenticity are in place, and
dealings are restricted to those banks with the relevant
combination of geographical presence, expertise and suitable credit
rating.
Foreign exchange risk. The
majority of Essentra's net assets are in currencies other than
sterling. The Company's normal policy is to reduce the translation
exposure and the resulting impact on shareholders' funds through
measures such as borrowing in those currencies in which the Group
has significant net assets. The majority of Essentra's transactions
are carried out in the functional currencies of its operations, and
therefore transaction exposure is limited. However, where such
exposure does occur, Essentra uses derivatives to hedge its
exposure to movements in the exchange rates on its highly probable
forecast foreign currency sales and purchases over a period of up
to 18 months.
2023 FULL YEAR RISK
DISCLOSURE
The Company has established a risk
and internal control framework designed to manage the delivery of
its strategic objectives. The objectives of this framework are
to:
· identify the Company's Principal and Emerging Risks and
appropriate mitigating actions
· formulate the risk appetite and ensure that our business profile and plans are consistent with
it
· develop plans to bring any exposures that are outside agreed
appetite in line with it
· ensure that growth plans are properly supported by an
effective risk management process
· help
management teams to improve the control and co-ordination of
risk-taking across the Company.
The risk framework, along with the
Company's Principal and Emerging risks,
will be described in detail in the "Risk
Management Report" section of the Company's Annual Report and
Accounts for the year ended 31 December 2023, available on 28 March
2024 on the Company website: www.essentraplc.com
Condensed Consolidated Financial
Statements
Condensed Consolidated Income
Statement
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Revenue
|
2
|
316.3
|
337.9
|
|
|
|
|
Gross profit
|
2
|
141.8
|
148.2
|
|
|
|
|
Operating profit/(loss)1
|
2
|
10.9
|
(11.3)
|
Finance income
|
4
|
11.0
|
7.1
|
Finance expense
|
4
|
(13.5)
|
(24.9)
|
Profit/(loss) before tax
|
|
8.4
|
(29.1)
|
Income tax expense
|
|
(2.6)
|
(2.0)
|
Profit/(loss) for the year from
continuing operations
|
|
5.8
|
(31.1)
|
|
|
|
|
Loss from discontinued
operations
|
17
|
(0.4)
|
(152.7)
|
Profit/(loss) for the
year
|
|
5.4
|
(183.8)
|
|
|
|
|
Attributable to:
|
|
|
|
Equity holders of Essentra
plc
|
|
5.4
|
(188.0)
|
Non-controlling interests
|
|
-
|
4.2
|
Profit/(loss) for the
year
|
|
5.4
|
(183.8)
|
Earnings per share attributable to
equity holders of Essentra plc:
|
|
|
|
Basic
|
5
|
1.8p
|
(62.4)p
|
Diluted
|
5
|
1.8p
|
(62.4)p
|
|
|
|
|
Earnings per share from continuing
operations attributable to equity holders of Essentra
plc:
|
|
|
|
Basic
|
5
|
2.0p
|
(10.3)p
|
Diluted
|
5
|
2.0p
|
(10.3)p
|
|
Adjusted profit measure:
continuing operations
|
Note
|
2023
£m
|
2022
£m
|
|
|
Operating profit/(loss)
|
|
10.9
|
(11.3)
|
|
|
Amortisation of acquired
intangible assets
|
2
|
11.3
|
10.4
|
|
|
Adjusting items
|
3
|
21.0
|
26.0
|
|
|
Adjusted operating
profit2
|
|
43.2
|
25.1
|
|
Notes:
1.
Includes impairment charge on trade receivables of £0.4m (2022:
£0.8m).
2. See
Note 20 for further details of the adjusted profit
measure.
Condensed Consolidated Statement of
Comprehensive Income
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Profit/(loss) for the
year
|
|
5.4
|
(183.8)
|
|
|
|
|
Other comprehensive
(expense)/income:
|
|
|
|
Items that will not be
reclassified to profit or loss in subsequent periods:
|
|
|
|
Remeasurement of defined benefit
pension schemes
|
12
|
(1.3)
|
(20.5)
|
Deferred tax on remeasurement of
defined benefit pension schemes
|
|
0.3
|
5.1
|
|
|
(1.0)
|
(15.4)
|
Items that may be reclassified to
profit or loss in subsequent periods:
|
|
|
|
Effective portion of changes in fair
value of cash flow hedges:
|
|
|
|
Net change in fair value of cash
flow hedges transferred to the income statement
|
|
2.4
|
(16.4)
|
Ineffective portion of changes in
fair value of cash flow hedges transferred to the income
statement
|
|
-
|
1.0
|
Effective portion of changes in
fair value of cash flow hedges
|
|
(1.8)
|
16.1
|
Foreign exchange translation
differences:
|
|
|
|
Attributable to equity holders of
Essentra plc:
|
|
|
|
Arising on translation of foreign
operations
|
|
(19.4)
|
54.6
|
Recycling of foreign currency
translation reserve
|
|
-
|
(38.7)
|
Arising on effective net investment
hedges
|
|
0.7
|
(21.7)
|
Net income tax credit
|
|
0.6
|
0.9
|
Attributable to non-controlling
interests
|
|
-
|
(0.1)
|
|
|
(17.5)
|
(4.3)
|
|
|
|
|
Total other comprehensive expense
for the year, net of tax
|
|
(18.5)
|
(19.7)
|
|
|
|
|
Total comprehensive expense for the
year
|
|
(13.1)
|
(203.5)
|
|
|
|
|
Attributable to:
|
|
|
|
Equity holders of Essentra
plc
|
|
(13.1)
|
(207.6)
|
Non-controlling interests
|
|
-
|
4.1
|
Total comprehensive expense for the
year
|
|
(13.1)
|
(203.5)
|
|
|
|
|
Attributable to:
|
|
|
|
Continuing operations
|
|
(12.7)
|
(12.1)
|
Discontinued operations
|
|
(0.4)
|
(191.4)
|
Total comprehensive expense for the
year
|
|
(13.1)
|
(203.5)
|
Condensed Consolidated Balance
Sheet
At 31 December 2023
|
Note
|
31 December
2023
£m
|
31 December
2022
£m
|
Assets
|
|
|
|
Property, plant and
equipment
|
6
|
68.1
|
65.2
|
Lease right-of-use asset
|
8
|
27.9
|
21.0
|
Investment properties
|
6
|
3.3
|
7.0
|
Intangible assets
|
7
|
215.0
|
206.6
|
Long-term receivables
|
|
10.1
|
11.6
|
Derivative assets
|
|
4.2
|
8.3
|
Deferred tax assets
|
|
12.2
|
11.7
|
Retirement benefit assets
|
12
|
7.9
|
7.9
|
Total non-current assets
|
|
348.7
|
339.3
|
Inventories
|
9
|
64.7
|
65.0
|
Income tax receivable
|
|
1.4
|
1.1
|
Trade and other
receivables
|
10
|
61.5
|
66.4
|
Derivative assets
|
|
-
|
0.2
|
Cash and cash equivalents
|
|
59.7
|
421.4
|
Total current assets
|
|
187.3
|
554.1
|
Total assets
|
|
536.0
|
893.4
|
Equity
|
|
|
|
Issued share capital
|
14
|
73.3
|
75.6
|
Merger reserve
|
14
|
-
|
385.2
|
Capital redemption
reserve
|
14
|
2.4
|
0.1
|
Other reserve
|
|
(132.8)
|
(132.8)
|
Cash flow hedging reserve
|
|
(0.2)
|
(0.8)
|
Translation reserve
|
|
(70.5)
|
(52.4)
|
Retained earnings
|
|
401.0
|
129.2
|
Attributable to equity holders of
Essentra plc
|
|
273.2
|
404.1
|
|
|
|
|
Total equity
|
|
273.2
|
404.1
|
Liabilities
|
|
|
|
Interest bearing loans and
borrowings
|
|
95.5
|
85.0
|
Lease liabilities
|
|
23.8
|
18.0
|
Retirement benefit
obligations
|
|
17.5
|
18.5
|
Provisions
|
|
0.2
|
1.1
|
Other financial
liabilities
|
|
-
|
2.4
|
Deferred tax liabilities
|
|
12.4
|
7.6
|
Total non-current
liabilities
|
|
149.4
|
132.6
|
Interest bearing loans and
borrowings
|
|
-
|
208.0
|
Lease liabilities
|
|
7.1
|
4.9
|
Derivative liabilities
|
|
-
|
1.3
|
Income tax payable
|
|
12.0
|
16.2
|
Trade and other payables
|
11
|
60.7
|
91.5
|
Other financial
liabilities
|
|
28.0
|
24.1
|
Provisions
|
|
5.6
|
10.7
|
Total current liabilities
|
|
113.4
|
356.7
|
Total liabilities
|
|
262.8
|
489.3
|
Total equity and
liabilities
|
|
536.0
|
893.4
|
Condensed Consolidated Statement of Changes
in Equity
For the year ended 31 December
2023
|
|
|
|
|
|
|
|
|
|
2023
|
|
Note
|
Issued
capital
£m
|
Merger
reserve
£m
|
Capital
redemption
reserve
£m
|
Other
reserve
£m
|
Cash flow
hedging and
cost of
hedging
reserves
£m
|
Translation
reserve
£m
|
Retained
earnings
£m
|
Non-
controlling
interests
£m
|
Total
equity
£m
|
At 1 January 2023
|
|
75.6
|
385.2
|
0.1
|
(132.8)
|
(0.8)
|
(52.4)
|
129.2
|
-
|
404.1
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
5.4
|
-
|
5.4
|
Other comprehensive
(expense)/income
|
|
-
|
-
|
-
|
-
|
0.6
|
(18.1)
|
(1.0)
|
-
|
(18.5)
|
Total comprehensive (expense)/income
for the year
|
|
-
|
-
|
-
|
-
|
0.6
|
(18.1)
|
4.4
|
-
|
(13.1)
|
Share option expense
|
|
-
|
-
|
-
|
-
|
-
|
-
|
1.4
|
-
|
1.4
|
Tax relating to share-based
incentives
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.3)
|
-
|
(0.3)
|
Net impact of
hyperinflation1
|
|
-
|
-
|
-
|
-
|
-
|
-
|
1.4
|
-
|
1.4
|
Purchase of own shares
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(24.0)
|
-
|
(24.0)
|
Cancellation of shares
|
|
(2.3)
|
-
|
2.3
|
-
|
-
|
-
|
-
|
-
|
-
|
Reduction of capital
|
|
-
|
(385.2)
|
-
|
-
|
-
|
-
|
385.2
|
-
|
-
|
Dividends paid
|
18
|
-
|
-
|
-
|
-
|
-
|
-
|
(96.3)
|
-
|
(96.3)
|
At 31 December 2023
|
|
73.3
|
-
|
2.4
|
(132.8)
|
(0.2)
|
(70.5)
|
401.0
|
-
|
273.2
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
Note
|
Issued
capital
£m
|
Merger
reserve
£m
|
Capital
redemption
reserve
£m
|
Other
reserve
£m
|
Cash flow
hedging and
cost of
hedging
reserves
£m
|
Translation
reserve
£m
|
Retained
earnings
£m
|
Non-
controlling
interests
£m
|
Total
equity
£m
|
At 1 January 2022
|
|
75.6
|
385.2
|
0.1
|
(132.8)
|
(1.5)
|
(47.5)
|
333.6
|
16.2
|
628.9
|
Loss for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(188.0)
|
4.2
|
(183.8)
|
Other comprehensive
(expense)/income
|
|
-
|
-
|
-
|
-
|
0.7
|
(4.9)
|
(15.4)
|
(0.1)
|
(19.7)
|
Total comprehensive (expense)/income
for the year
|
|
-
|
-
|
-
|
-
|
0.7
|
(4.9)
|
(203.4)
|
4.1
|
(203.5)
|
Recycling of non-controlling
interest
|
17
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(18.4)
|
(18.4)
|
Share option expense
|
|
-
|
-
|
-
|
-
|
-
|
-
|
3.1
|
-
|
3.1
|
Tax relating to share-based
incentives
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.6)
|
-
|
(0.6)
|
Net impact of
hyperinflation1
|
|
-
|
-
|
-
|
-
|
-
|
-
|
15.5
|
-
|
15.5
|
Dividends paid
|
18
|
-
|
-
|
-
|
-
|
-
|
-
|
(19.0)
|
(1.9)
|
(20.9)
|
At 31 December 2022
|
|
75.6
|
385.2
|
0.1
|
(132.8)
|
(0.8)
|
(52.4)
|
129.2
|
-
|
404.1
|
Condensed
Consolidated Statement of Cash Flows
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Operating activities
|
|
|
|
Profit/(loss) for the year
from:
|
|
|
|
Continuing operations
|
|
5.8
|
(31.1)
|
Discontinued operations
|
|
(0.4)
|
(152.7)
|
Profit/(loss) for the
year
|
|
5.4
|
(183.8)
|
Adjustments for:
|
|
|
|
Income tax credit
|
|
(1.1)
|
(2.0)
|
Net finance expense
|
4
|
2.5
|
18.4
|
Intangible amortisation
|
7
|
14.2
|
19.6
|
Adjusting items
|
3
|
13.9
|
26.0
|
Loss on business
disposals
|
17
|
3.7
|
19.0
|
Impairment of acquired intangible
assets on discontinued operations
|
|
-
|
182.7
|
Depreciation of property, plant and
equipment
|
6
|
11.1
|
29.5
|
Lease right-of-use asset
depreciation
|
8
|
5.9
|
10.1
|
Loss on disposal of right of use
asset
|
|
-
|
0.2
|
Loss on disposal of fixed
assets
|
|
-
|
0.3
|
Impairment of fixed
assets
|
3
|
7.1
|
0.5
|
Share option expense
|
|
1.4
|
2.6
|
Hedging activities and other
movements
|
|
(0.5)
|
0.8
|
Increase in inventories
|
|
(3.1)
|
(27.4)
|
Decrease/(increase) in trade and
other receivables
|
|
10.0
|
(35.5)
|
(Decrease)/increase in trade and
other payables
|
|
(10.1)
|
41.2
|
Cash outflow in respect of adjusting
items
|
20
|
(23.6)
|
(23.7)
|
Movement in provisions
|
|
(2.8)
|
1.0
|
Adjustment for pension
contributions
|
|
-
|
0.2
|
Movement due to
hyperinflation
|
|
-
|
(3.2)
|
Cash inflow from operating
activities
|
|
34.0
|
76.5
|
Income tax paid
|
|
(4.5)
|
(12.5)
|
Net cash inflow from operating
activities
|
|
29.5
|
64.0
|
Investing activities
|
|
|
|
Interest received
|
|
3.5
|
2.3
|
Acquisition of property, plant and
equipment3
|
|
(12.4)
|
(39.7)
|
Proceeds from sale of property,
plant and equipment
|
|
-
|
0.5
|
Payments for intangible
assets
|
|
(0.8)
|
(1.0)
|
Acquisition of businesses net of
cash acquired1
|
16
|
(33.3)
|
(27.9)
|
Proceeds from sale of businesses
net of cash disposed2
|
17
|
-
|
416.9
|
Cash outflow from cost of business
disposals
|
17
|
(17.8)
|
(31.5)
|
Net cash (outflow)/inflow from
investing activities
|
|
(60.8)
|
319.6
|
Financing activities
|
|
|
|
Interest paid
|
|
(9.9)
|
(19.5)
|
Dividends paid to equity
holders
|
18
|
(96.3)
|
(19.0)
|
Dividends paid to non-controlling
interests
|
|
-
|
(1.9)
|
Repayment of short-term
loans
|
|
(208.0)
|
-
|
Repayments of long-term
loans
|
|
(46.9)
|
(124.2)
|
Proceeds from long-term
loans
|
|
61.8
|
65.0
|
Proceeds from early settlement of
derivative contracts
|
|
-
|
6.5
|
Lease liability principal
repayments
|
|
(5.4)
|
(11.5)
|
Purchase of own shares
|
|
(24.0)
|
-
|
Net cash outflow from financing
activities
|
|
(328.7)
|
(104.6)
|
Net (decrease)/increase in cash and
cash equivalents
|
|
(360.0)
|
279.0
|
|
|
|
|
Net cash and cash equivalents at the
beginning of the year
|
|
421.4
|
136.3
|
Net (decrease)/increase in cash and
cash equivalents
|
|
(360.0)
|
279.0
|
Net effect of currency translation
on cash and cash equivalents
|
|
(1.7)
|
6.1
|
Net cash and cash equivalents at the
end of the year
|
15
|
59.7
|
421.4
|
Notes:
1.
Acquisition of businesses is net of cash acquired of £5.3m (2022:
£3.5m). See Note 16.
2. In
2022 proceeds from sale of businesses is net of cash disposed
of £45.7m. See Note 17.
3.
Acquisition of property, plant and equipment includes capex accrual
movements of £nil (2022: £0.4m).
Notes to the Condensed Consolidated Financial
Statements
1. Basis of
preparation
The financial information set out
in this document does not constitute statutory accounts for
Essentra plc for the year ended 31 December 2023 but is extracted
from the 2023 Annual Report.
The Annual Report for 2023 will be
delivered to the Registrar of Companies in due course. The
auditors' report on those accounts are unqualified and neither drew
attention to any matters by way of emphasis nor contained a
statement under either section 498(2) of Companies Act 2006
(accounting records or returns inadequate or accounts not agreeing
with records and returns), or section 483(2) on 498(3) of Companies
Act 2006 (failure to obtain necessary information
and explanations).
The Group's condensed consolidated
financial statements for the year ended 31 December 2023 have been
prepared in accordance with UK-adopted International Accounting
Standards and comply with the requirements of the Companies Act
2006.
These condensed consolidated
financial statements are prepared under the historical cost
convention unless otherwise stated. The preparation of financial
statements that conform with adopted IFRS requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of income and expense during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates.
The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised and future periods if relevant. For the
purposes of these financial statements "Essentra" or "the Group"
means Essentra plc (the "Company") and its subsidiaries.
The principal accounting policies
used in the preparation of the condensed consolidated financial
statements for the year ended 31 December 2023 are detailed below.
These policies, except those set out below under the heading
'Changes in accounting policies' adopted during the year, have been
consistently applied to all periods presented.
In preparing the condensed
consolidated financial statements, management have taken into
account the potential effects of climate changes, including medium-
to longer-term transitional risks resulting from the relative
uncertainty created by the global shift towards a more sustainable,
net-zero economy, which include regulatory, geopolitical and social
pressures that may impact the operations of the business in future.
Management have considered the potential effects of climate related
changes in its assessment of going concern, and longer term
viability of the business, in preparing the Group's future cash
flow forecasts underpinning impairment testing, and in its
assessment of the residual values of property, plant and equipment.
Management have determined that, other than the expected capital
expenditure due to the future spend on machine replacement and
efficiency upgrades factored into the Group's cash flow forecasts,
there is no material impact on these financial
statements.
Going concern
The Directors have prepared the
condensed consolidated financial statements for the year ended
31 December 2023 on a going concern basis. In adopting the
going concern basis, the Directors have considered the Group's
balance sheet position, forecast earnings and cash flows for a
period of 18 months from the date of approval of these condensed
consolidated financial statements.
At 31 December 2023, the Group's
external financing arrangements amounted to £280.7m, comprising
United States Private Placement Loan Notes ("USPP") of US$102.5m
(with a range of expiry dates from July 2028 to July 2033) and a
multi-currency revolving credit facility ("RCF") of £200.0m
(expiring in October 2026).
£15.2m was drawn under the RCF as
at 31 December 2023, with the available undrawn balance amounting
to £184.8m. The facility is subject to two covenants, which are
tested semi-annually: net debt to EBITDA (leverage) and EBITA to
net finance charges. Despite the significant economic and
operational challenges in the recent years, the Group has not
sought to change either of the two covenants. The Directors believe
that the Group is well placed to manage its business risks
and, after making enquiries including a review of forecasts
and predictions, taking account of reasonably possible changes in
trading performances and considering the existing borrowing
facilities, including the available liquidity, have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the next 18 months following the date of
approval of the financial statements, and no breaches of covenants
are expected.
As part of the going concern
assessment, the Board has considered a downside scenario that
includes severe, but reasonably plausible changes in macro-economic
conditions. The results of this scenario show that there is
sufficient liquidity in the business for a period of 18 months
from the date of approval of these financial statements, and does
not indicate any covenant breach during the test period. The
downside scenario assumes a period of prolonged revenue decline in
2024, and subsequently delays in market recovery to 2025.
The downside scenario also assumes a higher inflationary cost
environment, the impacts of which are not fully offset by price
increases and also includes transition risks associated with a
"middle of the road scenario" without the inclusion of any
opportunities from the climate change quantitative analysis. The
financial impact of the severe but plausible downside scenario in
2024 and 2025 is a reduction in adjusted operating profits by 24.5%
and 19.0%, respectively, compared to the Group strategic
plan.
The overall level of liquidity
(defined as available undrawn borrowing facility plus cash and cash
equivalent) at 31 December 2023 was £244.5m. Adjusting for share
repurchases of £36.0m under the remainder of the buyback programme
of £60.0m, this still leaves overall liquidity at £208.5m. Capital
expenditure, sales and general overhead, and working capital will
continue to be managed closely to ensure sufficient
liquidity.
The scenarios do not indicate a
material uncertainty which may cast significant doubt over the
Company's and Group's ability to continue as a going concern. The
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future, and accordingly, have adopted the going concern
basis in preparing the condensed consolidated financial statements.
This disclosure has been prepared in accordance with the Financial
Reporting Council's UK Corporate Governance Code.
Changes in accounting
policies
Other pronouncements
The Group adopted the following
new pronouncements during 2023, which did not have a material
impact on the Group's financial statements:
· Amendments to IAS 12 - Deferred Tax Related
to Assets and Liabilities Arising from a
Single Transaction;
· Amendments to IAS1 - Disclosure of
Accounting Policies; and
· Amendments to IAS 8 - Definition of
Accounting Estimates.
The following standards and
amendments, issued before 31 December 2023 with an
effective date on or after 1 January 2024, have not been early
adopted by the Group, they do not have a material impact
on the Group's financial statements:
· Amendment to IFRS 16 - Leases on sale and
leaseback;
· Amendment to IAS 1 - Non-current
liabilities with covenants;
· Amendment to IAS 7 and IFRS 7 - Supplier
finance;
· Amendments to IAS 21 - Lack of
Exchangeability.
2. Segment
analysis
The Group has determined its
operating segments based upon the information reported to the Board
of Directors ("Board"), which is the Group's Chief Operating
Decision Maker. Segment information is reported on a
geographical basis consistent with the basis upon which the Group
manages its operations, allocates resources, and assesses
performance. Central corporate costs include executive and
non-executive management, investor relations, corporate
development, corporate reward, governance, risk and assurance,
group finance, tax, treasury and related information
technology costs.
Following the disposal of the
Packaging and Filters businesses during the year ended 31 December
2022, the Group has changed the way its information is reported to
the Board. Previously performance was reported on a divisional
basis. Performance is now managed on a geographical basis with
Gross profit introduced as an additional segment profit measure.
Central corporate costs (previously disclosed as Central Services)
now exclude certain costs that are now regarded as attributable to
the operating segments.
|
2023
|
|
EMEA
£m
|
Americas
£m
|
APAC
£m
|
Unallocated
items1
£m
|
Continuing
operations
£m
|
Discontinued
operations3
£m
|
Total
£m
|
Income statement
information
|
|
|
|
|
|
|
|
External revenue
|
170.8
|
106.2
|
39.3
|
-
|
316.3
|
-
|
316.3
|
Gross profit
|
87.5
|
40.3
|
14.0
|
-
|
141.8
|
-
|
141.8
|
Adjusted operating profit/(loss)
before corporate costs
|
53.9
|
19.5
|
3.5
|
(22.1)
|
54.8
|
(0.4)
|
54.4
|
Central corporate costs2
|
|
|
|
(11.6)
|
(11.6)
|
-
|
(11.6)
|
Adjusted operating
profit/(loss)
|
53.9
|
19.5
|
3.5
|
(33.7)
|
43.2
|
(0.4)
|
42.8
|
Amortisation of acquired intangible
assets
|
(4.0)
|
(5.5)
|
(1.8)
|
-
|
(11.3)
|
-
|
(11.3)
|
Adjusting items
|
0.8
|
(1.5)
|
(3.4)
|
(16.9)
|
(21.0)
|
-
|
(21.0)
|
Operating profit/(loss)
|
50.7
|
12.5
|
(1.7)
|
(50.6)
|
10.9
|
(0.4)
|
10.5
|
|
|
|
|
|
|
|
|
Balance sheet information
|
|
|
|
|
|
|
|
Segment assets
|
110.8
|
70.2
|
25.8
|
28.8
|
235.6
|
-
|
235.6
|
Intangible assets
|
147.0
|
53.3
|
9.0
|
5.7
|
215.0
|
-
|
215.0
|
Unallocated items 4
|
|
|
|
85.4
|
85.4
|
-
|
85.4
|
Total assets
|
257.8
|
123.5
|
34.8
|
119.9
|
536.0
|
-
|
536.0
|
|
|
|
|
|
|
-
|
|
Segment liabilities
|
44.2
|
27.9
|
7.7
|
45.6
|
125.4
|
-
|
125.4
|
Unallocated items 4
|
|
|
|
137.4
|
137.4
|
-
|
137.4
|
Total liabilities
|
44.2
|
27.9
|
7.7
|
183.0
|
262.8
|
-
|
262.8
|
|
|
|
|
|
|
|
|
Other segment information
|
|
|
|
|
|
|
|
Capital expenditure (cash
spend)
|
3.7
|
6.3
|
1.7
|
1.5
|
13.2
|
-
|
13.2
|
Depreciation of plant, property and
equipment
|
4.3
|
2.8
|
1.9
|
2.1
|
11.1
|
-
|
11.1
|
Average number of
employees
|
1,180
|
727
|
950
|
194
|
3,051
|
-
|
3,051
|
|
(re-presented)
2022
|
|
EMEA
£m
|
Americas
£m
|
APAC
£m
|
Unallocated
items1
£m
|
Continuing
operations
£m
|
Discontinued
operations3
£m
|
Total
£m
|
Income statement
information
|
|
|
|
|
|
|
|
External revenue
|
167.0
|
123.4
|
47.5
|
-
|
337.9
|
653.9
|
991.8
|
Gross profit
|
84.5
|
47.2
|
16.5
|
-
|
148.2
|
116.9
|
265.1
|
Adjusted operating profit/(loss)
before corporate costs
|
51.3
|
25.3
|
5.8
|
(20.5)
|
61.9
|
38.4
|
100.3
|
Central corporate costs2
|
|
|
|
(23.1)
|
(23.1)
|
-
|
(23.1)
|
Adjusted operating profit/(loss)
after allocation of central costs to discontinued
operations5
|
51.3
|
25.3
|
5.8
|
(43.6)
|
38.8
|
38.4
|
77.2
|
Operating expenses allocated to
discontinued operations
|
-
|
-
|
-
|
(13.7)
|
(13.7)
|
13.7
|
-
|
Adjusted operating
profit/(loss)
|
51.3
|
25.3
|
5.8
|
(57.3)
|
25.1
|
52.1
|
77.2
|
Amortisation and impairment of
acquired intangible assets
|
(2.6)
|
(5.9)
|
(1.9)
|
-
|
(10.4)
|
(189.2)
|
(199.6)
|
Adjusting items
|
(1.4)
|
(0.5)
|
-
|
(24.1)
|
(26.0)
|
-
|
(26.0)
|
Operating profit/(loss)
|
47.3
|
18.9
|
3.9
|
(81.4)
|
(11.3)
|
(137.1)
|
(148.4)
|
|
|
|
|
|
|
|
|
Balance sheet information
|
|
|
|
|
|
|
|
Segment assets
|
103.0
|
63.3
|
32.9
|
37.0
|
236.2
|
-
|
236.2
|
Intangible assets
|
122.7
|
61.9
|
14.3
|
7.7
|
206.6
|
-
|
206.6
|
Unallocated items4
|
|
|
|
450.6
|
450.6
|
-
|
450.6
|
Total assets
|
225.7
|
125.2
|
47.2
|
495.3
|
893.4
|
-
|
893.4
|
|
|
|
|
|
|
-
|
|
Segment liabilities
|
40.9
|
18.7
|
15.9
|
77.2
|
152.7
|
-
|
152.7
|
Unallocated items4
|
|
|
|
336.6
|
336.6
|
-
|
336.6
|
Total liabilities
|
40.9
|
18.7
|
15.9
|
413.8
|
489.3
|
-
|
489.3
|
|
|
|
|
|
|
|
|
Other segment information
|
|
|
|
|
|
|
|
Capital expenditure (cash
spend)
|
5.5
|
3.4
|
2.1
|
2.5
|
13.5
|
27.5
|
41.0
|
Depreciation of plant, property and
equipment
|
3.6
|
2.8
|
2.1
|
5.4
|
13.9
|
15.6
|
29.5
|
Average number of
employees
|
1,211
|
821
|
1,011
|
305
|
3,348
|
4,067
|
7,415
|
Notes:
1.
Unallocated items include operating expenses related to the regions
that are managed at a total trading level rather than by individual
segment. Assets, liabilities and employees also managed at a total
trading level are presented within Unallocated operating expenses.
Segment assets of £28.8m (2022: £37.0m) includes investment
property of £3.3m (2022: £7.0m).
2.
Central corporate costs (previously disclosed as Central Services)
include executive and non-executive management, investor relations,
corporate development, governance, risk and assurance, group
finance, tax, treasury, and related information technology costs.
The comparative numbers have been re-presented to exclude certain
costs that, following the completion of the strategic review, are
now regarded as attributable to the operating segments. The effect
of this change is to reallocate £1.8m of costs previously included
within Central Services in 2022, to Operating
expenses.
3.
Operating loss from discontinued operations (see Note 17) excludes
the loss on disposal of £3.7m (2022: £19.0m).
4. The
unallocated assets relate to income and deferred tax assets,
retirement benefit assets, derivatives, other financial assets and
cash and cash equivalents. The unallocated liabilities relate to
interest bearing loans and borrowings, retirement benefit
obligations, derivatives, deferred tax liabilities and income tax
payable. Intersegment transactions are carried out on an
arm's-length basis.
5.
Adjusted operating profit of £38.8m in 2022 includes costs that
would have otherwise been allocated to the Packaging and Filters
businesses had those businesses not been disposed. Had those
additional costs been adjusted for the adjusted operating profit
would have been £43.0m.
On a continuing basis, no customer
accounted for more than 10% of revenue in either 2023 or
2022. Non-current assets in the UK (the Company's country of
domicile) total £93.6m (2022: £91.1m), with the other significant
location being the USA with £106.2m (2022: £114.2m). Total
Group net finance expense of £2.5m (2022: £18.4m) and total Group
income tax credit of £1.1m (2022: £2.0m) cannot be meaningfully
allocated by segment. The Group revenue does not include any
variable consideration which is constrained.
Disaggregation of
revenue
% of Total Continuing External
Revenue
|
2023
|
2022
|
Revenue by channel
|
|
|
|
|
|
|
|
End users
|
|
|
|
|
|
78%
|
79%
|
Distributors
|
|
|
|
|
|
22%
|
21%
|
|
|
|
|
|
|
|
|
Revenue by offer type
|
|
|
|
|
|
|
|
Standard
|
|
|
|
|
|
63%
|
64%
|
Configured
|
|
|
|
|
|
31%
|
28%
|
Custom
|
|
|
|
|
|
6%
|
8%
|
|
|
|
|
|
|
|
|
Revenue by customer
segment
|
|
|
|
|
|
|
|
Industrial manufacturers
|
|
|
|
|
|
71%
|
72%
|
Large consumer
manufacturers
|
|
|
|
|
|
20%
|
21%
|
SME consumers
|
|
|
|
|
|
9%
|
7%
|
Revenue by geographical
location
External revenue presented in the
table below, on a continuing basis, by location of the Group
operation where the sales originated.
|
|
|
|
|
|
2023
£m
|
2022
£m
|
UK (country of domicile)
|
|
|
|
|
|
30.2
|
22.1
|
US
|
|
|
|
|
|
94.6
|
111.1
|
China
|
|
|
|
|
|
26.9
|
32.6
|
Turkey
|
|
|
|
|
|
23.6
|
21.6
|
Germany
|
|
|
|
|
|
22.4
|
23.7
|
Italy
|
|
|
|
|
|
14.8
|
14.4
|
France
|
|
|
|
|
|
15.1
|
17.4
|
The Netherlands
|
|
|
|
|
|
13.8
|
14.7
|
Spain
|
|
|
|
|
|
12.3
|
12.3
|
Poland
|
|
|
|
|
|
10.9
|
10.7
|
Rest of World
|
|
|
|
|
|
51.7
|
57.3
|
Total continuing Group
|
316.3
|
337.9
|
|
|
|
|
|
|
|
|
|
3. Adjusting items from
continuing operations
Adjusting items are separately
presented from other items by virtue of their nature, size and/or
incidence. They are identified separately in order for the reader
to obtain a clearer understanding of the underlying results of the
ongoing Group's operations, by excluding items which, in
management's view, do not form part of the Group's underlying
operating results, such as gains, losses or costs arising from
business acquisition and disposal activities, significant
restructuring and closure costs, and costs of major Software as a
Service projects, items which are non-recurring or one-off in
nature (such as the costs of fundamental strategic review and
reorganisation), one-off impairments of non-current assets and
charges relating to the Group's legacy defined benefit pension
schemes, and the related tax effect.
|
|
2023
£m
|
2022
£m
|
Costs relating to restructuring
following disposals of businesses1
|
|
1.3
|
10.4
|
(Gains)/losses and transaction costs
relating to acquisitions of businesses2
|
|
(1.0)
|
0.3
|
Acquisition integration and
restructuring costs
|
|
-
|
0.2
|
Customisation and configuration
costs of significant software as a service ("SaaS")
arrangements3
|
|
10.8
|
12.4
|
Defined benefit pension scheme
charges4
|
|
1.8
|
2.0
|
Impairment of non-current
assets5
|
|
7.1
|
-
|
Other6
|
|
1.0
|
0.7
|
Adjusting items before
tax
|
|
21.0
|
26.0
|
Tax
|
|
(4.3)
|
2.8
|
Adjusting items after tax
|
|
16.7
|
28.8
|
|
|
2023
£m
|
2022
£m
|
Reconciliation of cash flows from
adjusting items:
|
|
|
|
Adjusting items
|
|
21.0
|
26.0
|
Non-cash charge in adjusting
items
|
|
(5.9)
|
(2.0)
|
Pension contribution
adjustment
|
|
1.9
|
-
|
Utilisation of prior year and
acquired accruals and provisions
|
|
6.6
|
(0.3)
|
Cash outflow from adjusting
items
|
|
23.6
|
23.7
|
Notes:
1. Costs
of £1.3m (2022: £9.9m), in relation to major restructuring
activities to "right size" the continuing operations of the
business following the disposal of the Filters and Packaging
businesses; a charge of £nil (2022: £0.5m) in relation to the
acceleration of share options in respect of certain senior
management employees leaving the business following the completion
of the strategic review.
2. A
credit of £1.0m (2022: £0.3m charge) relating to acquisitions, of
which £0.6m cost relates to the acquisition of BMP TAPPI in October
2023, and a £1.6m credit (2022: £0.3m charge) relating to the
acquisition of Wixroyd Group, acquired in December 2022, comprising
costs of £0.6m and a credit of £2.2m for the reduction in
contingent consideration payable.
3. Costs
of significant SaaS arrangements which, in the view of management,
represents investment in upgrading the Group's technological
capability, were expensed as adjusting items in accordance with the
Group's accounting policies. In the current year, costs of £10.8m
(2022: £12.4m) were attributable to major SaaS projects and relate
primarily to the costs of implementing a new cloud-based enterprise
resource planning (ERP) system within the Group.
4. Costs
of £1.8m (2022: £2.0m) were incurred in relation to defined benefit
pension scheme charges which, following the outcome of the
strategic review in 2022, no longer pertain to the continuing
operations of the Group.
5.
Includes impairment loss of £3.7m relating to a write-down of
investment property to market value and a £3.4m impairment loss in
relation to non-current assets held within the APAC
segment.
6. Costs
of £0.2m for professional fees relating to the capital reduction
completed during 2023 and £0.8m provision relating to a historic
indemnity claim. 2022 comprises a £0.6m write-down of centrally
held IT assets following completion of the strategic review and
£0.6m costs of restructuring activities within the continuing
European and Americas businesses, offset by a £0.5m credit relating
to adjustments to the carrying value of lease right-of-use
assets.
4. Net finance expense from
continuing operations
|
Note
|
2023
£m
|
2022
£m
|
Finance income
|
|
|
|
Bank deposits
|
|
3.5
|
1.4
|
Other finance income1
|
|
7.0
|
5.1
|
Net interest on pension scheme
assets
|
12
|
0.5
|
0.6
|
Total finance income
|
|
11.0
|
7.1
|
Finance expense
|
|
|
|
Interest on loans and
overdrafts
|
|
(6.0)
|
(15.9)
|
Amortisation of bank facility
fees
|
|
-
|
(4.7)
|
Other finance expense2
|
|
(4.9)
|
(2.2)
|
Net interest on pension scheme
liabilities
|
12
|
(0.8)
|
(0.6)
|
Interest on leases
|
8
|
(1.8)
|
(1.5)
|
Total finance expense
|
|
(13.5)
|
(24.9)
|
Net finance expense
|
|
(2.5)
|
(17.8)
|
Notes:
1.
Included within Other finance income is £5.7m (2022: £1.8m)
relating to exchange gains on cash, borrowings and leases and £1.3m
(2022: £3.2m) relating to monetary gains on Hyperinflationary
economies.
2.
Included within Other finance expense is £2.3m (2022: £0.9m)
relating to loss on derivative financial instruments, £nil (2022:
£0.8m) of hedge ineffectiveness, and £2.6m (2022: £0.3m) relating
to exchange losses on cash, borrowings and leases.
5. Earnings per
share
|
Note
|
2023
£m
|
2022
£m
|
Earnings from continuing
operations
|
|
|
|
Profit/(loss) attributable to equity
holders of the Company
|
|
5.8
|
(31.1)
|
Adjustments:
|
|
|
|
Amortisation of acquired intangible
assets
|
|
11.3
|
10.4
|
Tax on amortisation of acquired
intangible assets
|
|
(2.7)
|
(2.4)
|
Adjusting items
|
3
|
21.0
|
26.0
|
Tax relief on adjustments
|
3
|
(4.3)
|
2.8
|
Adjusted earnings attributable to
equity holders of the Company1
|
|
31.1
|
5.7
|
|
|
|
|
Earnings from discontinued
operations
|
|
|
|
Earnings attributable to equity
holders of Essentra plc
|
|
(0.4)
|
(156.9)
|
Notes:
1.
Adjusted earnings per share from continuing operations is provided
to reflect the underlying performance of the
Group.
|
2023
|
2022
|
Weighted average number of
shares
|
|
|
Basic weighted average number of
ordinary shares outstanding (million)1
|
294.6
|
301.1
|
Dilutive effect of employee share
option plans (million)
|
2.4
|
2.0
|
Diluted weighted average number of
ordinary shares (million)
|
297.0
|
303.1
|
|
|
|
Earnings per share from continuing
operations (pence)
|
|
|
Basic earnings per share from
continuing operations
|
2.0p
|
(10.3)p
|
Adjustment
|
8.6p
|
12.2p
|
Basic adjusted earnings per share
from continuing operations
|
10.6p
|
1.9p
|
|
|
|
Diluted earnings per share from
continuing operations
|
2.0p
|
(10.3)p
|
Adjustment
|
8.5p
|
12.2p
|
Diluted adjusted earnings per share
from continuing operations
|
10.5p
|
1.9p
|
|
|
|
Earnings per share from discontinued
operations (pence)
|
|
|
Basic earnings per share
|
(0.2)p
|
(52.1)p
|
Diluted earnings per
share
|
(0.2)p
|
(52.1)p
|
|
|
|
Total Earnings per share
attributable to equity holders of the Company (pence)
|
|
|
Basic earnings per share
|
1.8p
|
(62.4)p
|
Diluted earnings per
share
|
1.8p
|
(62.4)p
|
Notes:
1. The
basic weighted average number of ordinary shares in issue excludes
shares held in treasury and shares held by the employee benefit
trust.
6. Investment Properties,
Property, plant and equipment
|
|
2023
|
|
|
|
|
2023
|
|
Note
|
Total
Investment properties5
£m
|
|
Land and
buildings
£m
|
Plant and
machinery
£m
|
Fixtures, fittings
and equipment
£m
|
Total
Property,
plant and equipment
£m
|
Cost
|
|
|
|
|
|
|
|
Beginning of year
|
|
7.0
|
|
37.7
|
125.6
|
72.0
|
235.3
|
Acquisitions8
|
16
|
-
|
|
-
|
4.2
|
-
|
4.2
|
Additions
|
|
-
|
|
1.3
|
7.0
|
4.1
|
12.4
|
Disposals
|
|
-
|
|
(0.1)
|
(14.1)
|
(7.4)
|
(21.6)
|
Currency translation3
|
|
-
|
|
0.1
|
(4.6)
|
(0.2)
|
(4.7)
|
End of year
|
|
7.0
|
|
39.0
|
118.1
|
68.5
|
225.6
|
Accumulated depreciation and
impairment
|
|
|
|
|
|
|
|
Beginning of year
|
|
-
|
|
14.2
|
95.7
|
60.2
|
170.1
|
Charge in period6
|
|
-
|
|
1.6
|
5.6
|
3.9
|
11.1
|
Disposals
|
|
-
|
|
(0.1)
|
(14.1)
|
(7.3)
|
(21.5)
|
Impairment4,5
|
|
3.7
|
|
-
|
0.9
|
-
|
0.9
|
Currency translation3
|
|
-
|
|
0.7
|
(3.6)
|
(0.2)
|
(3.1)
|
End of year
|
|
3.7
|
|
16.4
|
84.5
|
56.6
|
157.5
|
|
|
|
|
|
|
|
|
Net book value at end of
year1
|
|
3.3
|
|
22.6
|
33.6
|
11.9
|
68.1
|
|
|
2022
|
|
|
|
|
2022
|
|
|
Total
Investment
properties5
£m
|
|
Land and
buildings
£m
|
Plant and
machinery
£m
|
Fixtures, fittings
and equipment
£m
|
Total
£m
|
Cost
|
|
|
|
|
|
|
|
Beginning of year
|
|
-
|
|
79.4
|
386.5
|
78.9
|
544.8
|
Acquisitions
|
|
-
|
|
0.5
|
0.7
|
0.2
|
1.4
|
Additions
|
|
-
|
|
2.5
|
33.1
|
4.0
|
39.6
|
Disposals
|
|
-
|
|
(0.7)
|
(9.4)
|
-
|
(10.1)
|
Business Disposals
|
|
-
|
|
(43.5)
|
(324.5)
|
(14.4)
|
(382.4)
|
Transfers7
|
|
7.0
|
|
(7.0)
|
-
|
-
|
(7.0)
|
Currency translation3
|
|
-
|
|
6.5
|
39.2
|
3.3
|
49.0
|
End of year
|
|
7.0
|
|
37.7
|
125.6
|
72.0
|
235.3
|
Accumulated depreciation and
impairment
|
|
|
|
|
|
|
|
Beginning of year
|
|
-
|
|
18.0
|
223.7
|
48.8
|
290.5
|
Charge in period6
|
|
-
|
|
2.8
|
18.5
|
8.2
|
29.5
|
Disposals
|
|
-
|
|
(0.7)
|
(8.7)
|
-
|
(9.4)
|
Business Disposals
|
|
-
|
|
(9.0)
|
(161.2)
|
(0.1)
|
(170.3)
|
Impairment4
|
|
-
|
|
-
|
0.1
|
0.4
|
0.5
|
Currency translation3
|
|
-
|
|
3.1
|
23.3
|
2.9
|
29.3
|
End of year
|
|
-
|
|
14.2
|
95.7
|
60.2
|
170.1
|
|
|
|
|
|
|
|
|
Net book value at end of
year1
|
|
7.0
|
|
23.5
|
29.9
|
11.8
|
65.2
|
Notes:
1.
Included within land and buildings, plant and machinery and
fixtures, fittings and equipment are assets in the course of
construction of £2.3m (2022: £0.3m) which were not depreciated
during the year.
2.
Contractual commitments to purchase property, plant and equipment
amounted to £0.3m at 31 December 2023 (2022:
£0.3m).
3.
Currency translation movement for the year includes a £1.8m
increase (2022: £3.2m increase) in respect of adjustments for
hyperinflation.
4.
Property, plant and equipment with a net book value of £2.9m (2022:
£0.6m) was impaired by £0.9m (2022: £0.6m) to a recoverable amount
of £nil (2022: £nil), which represented fair value less cost to
sell. £0.9m (2022: £0.6m) of this impairment has been charged to
adjusting items (see Note 3).
5. As at
31 December 2023, the fair value of the investment property was
£3.3m and as consequence, a reduction of £3.7m has been recorded as
an expense to adjusting items (see Note 3).
6.
Included within the depreciation charge for the period is £11.1m
(2022: £13.9m) relating to continuing operations.
7.
During the year to 31 December 2022, land and buildings with a net
book value of £7.0m, were reclassified as investment properties.
The transfer follows the disposal of the Filters business which
held a pre-existing property lease arrangement with the continuing
Group. At the date of disposal of the Filters business on 3
December 2022, the continuing Group ceased owner-occupation.
Following its assessment of the remaining useful economic life
associated to investment properties at the balance sheet date, the
Group is depreciating the building element of the long-term
leasehold owned investment property at 2% on a straight-line
basis.
8.
Acquisitions in 2023 include £4.0m relating to the acquisition of
BMP TAPPI, and £0.2m final purchase price allocation adjustment
relating to the acquisition of Wixroyd Group.
Investment property
valuation
The property has a market value of
£3.3m and is valued based on a level 3 of fair value hierarchy. The
valuation was performed by an independent valuer who holds a
recognised and relevant professional qualification and has recent
experience in the location and category of the investment property.
The valuation took into account the contractual terms of the
current tenant, who has occupation until 2027 with an option to
extend until 2032 with an estimated amount for typical market rent
based on a 5 year term. The valuation applies a market yield of 7%
until 2027 and 10% beyond 2027. The valuation takes into account,
among other factors, marketability, demand, energy performance,
rating assessment, size, location and condition.
No amounts were received in
respect of rental income during the year.
7. Intangible
assets
|
|
|
|
2023
|
|
Goodwill
£m
|
Customer
relationships6
£m
|
Other intangible
assets1,2
£m
|
Total
£m
|
Cost
|
|
|
|
|
Beginning of year
|
140.1
|
159.3
|
24.8
|
324.2
|
Acquisitions8 (Note 16)
|
14.5
|
16.9
|
0.8
|
32.2
|
Additions
|
-
|
-
|
0.8
|
0.8
|
Disposals
|
-
|
-
|
(1.0)
|
(1.0)
|
Currency
translation7
|
(6.0)
|
(6.9)
|
(0.8)
|
(13.7)
|
End of year
|
148.6
|
169.3
|
24.6
|
342.5
|
Amortisation and
impairment
|
|
|
|
|
Beginning of year
|
4.5
|
99.1
|
14.0
|
117.6
|
Charge for the year3
|
-
|
10.7
|
3.5
|
14.2
|
Impairment5
|
-
|
2.2
|
-
|
2.2
|
Disposal
|
-
|
-
|
(1.0)
|
(1.0)
|
Currency translation7
|
(0.3)
|
(4.6)
|
(0.6)
|
(5.5)
|
End of year
|
4.2
|
107.4
|
15.9
|
127.5
|
|
|
|
|
|
Net book value at end of
year
|
144.4
|
61.9
|
8.7
|
215.0
|
|
|
|
|
2022
|
|
Goodwill
£m
|
Customer
relationships6
£m
|
Other intangible
assets1,2
£m
|
Total
£m
|
Cost
|
|
|
|
|
Beginning of year
|
354.9
|
423.2
|
26.4
|
804.5
|
Acquisitions
|
20.7
|
8.2
|
0.6
|
29.5
|
Additions
|
-
|
-
|
1.0
|
1.0
|
Disposals
|
-
|
-
|
(1.4)
|
(1.4)
|
Business disposals4
|
(271.9)
|
(319.2)
|
(2.7)
|
(593.8)
|
Currency translation7
|
36.4
|
47.1
|
0.9
|
84.4
|
End of year
|
140.1
|
159.3
|
24.8
|
324.2
|
Amortisation and
impairment
|
|
|
|
|
Beginning of year
|
27.9
|
280.9
|
12.2
|
321.0
|
Charge for the year3
|
-
|
16.6
|
3.0
|
19.6
|
Business disposals4
|
(214.6)
|
(228.0)
|
(1.1)
|
(443.7)
|
Impairment5
|
181.6
|
1.1
|
-
|
182.7
|
Disposal
|
-
|
-
|
(0.8)
|
(0.8)
|
Currency translation7
|
9.6
|
28.5
|
0.7
|
38.8
|
End of year
|
4.5
|
99.1
|
14.0
|
117.6
|
|
|
|
|
|
Net book value at end of
year
|
135.6
|
60.2
|
10.8
|
206.6
|
Notes:
1. Other
intangible assets principally comprise trade names acquired with
Reid Supply, developed technology acquired with Richco, order
backlog, software development and e-Commerce development costs.
Salary costs of £nil (2022: £0.2m) were capitalised as part of
other intangible assets during the year.
2.
Included within other intangible assets at 31 December 2023, are
assets in the course of construction of £0.8m (2022: £nil) which
were not amortised during the year.
3.
Amortisation charged on other intangible assets (which includes
e-Commerce development and software development costs not acquired
through a business combination), is included within operating
profit before amortisation of acquired intangibles and adjusting
items. Amortisation charged on customer relationships acquired in a
business combination is excluded from the Group's adjusted
operating profit measure. Included within the amortisation charge
for the period is £14.2m (2022: £13.1m) relating to continuing
operations.
4. The
Group disposed of the Packaging business and the Filters business
during the year to 31 December 2022. The goodwill disposed was
£35.6m and £21.7m, respectively.
5. In
2023 an impairment charge of £2.2m relates to the Hengzhu CGU. In
2022, an impairment charge of £181.6m was recognised following the
Group's impairment assessment in respect of the carrying value of
goodwill allocated to the Packaging business prior to its disposal.
An impairment charge of £1.1m was also recognised relating to
intangible assets held in India following an impairment review
triggered by the divestment of the Packaging business. These
impairment charges have been included within the result from
discontinued operations for the year ended 31 December 2022.
6. The
weighted average remaining useful lives of customer relationships
and other intangible assets at the end of the year were 8.5 years
and 3.9 years (2022: 5.8 years and 4.3 years), respectively.
7.
Currency translation movement for the year includes a £1.1m
increase (2022: £13.9m increase) in respect of adjustments for
hyperinflation.
8.
Acquisitions includes goodwill of £15.0m and customer
relationships and other intangibles of £17.7m relating to the
acquisition of BMP TAPPI, less an adjustment of £0.5m relating to
the finalisation of the purchase price allocation relating to the
acquisition of Wixroyd Group in 2022 (see Note
16).
9.
Included within other intangible cost is £16.4m (2022:
£16.7m) that was internally generated with a accumulated
amortisation of £10.2m (2022: £8.4m). Internally generated
additions amounted to £0.8m (2022: £0.7m) and amortisation £2.9m
(2022: £2.7m).
Essentra tests intangible assets
annually for impairment, or more frequently if there are
indications of impairment. A discounted cash flow analysis is
computed to compare the discounted estimated future operating cash
flows to the net carrying value of the goodwill and other
intangible and tangible assets for each cash generating unit or
group of cash generating units as appropriate. Following an
impairment assessment of the carrying value of goodwill held by the
Group's operations performed by management at 31 December 2023, no
impairment of goodwill was required to be recognised on the Group's
continuing operations.
Goodwill is allocated to groups of
cash generating units, being the operating segments, as
follows:
Goodwill1
|
|
|
|
2023
£m
|
EMEA
|
|
|
|
109.3
|
Americas
|
|
|
|
35.1
|
|
|
|
|
144.4
|
Notes:
1.
Following the disposal of the Packaging and Filters businesses in
2022, the only goodwill remaining was for the Components division
which is now monitored by geographical operating segment (EMEA,
Americas and APAC).
Customer relationships and other
intangible assets are allocated to the businesses to which they
relate, as follows:
Business
|
|
|
2023
£m
|
2022
£m
|
Businesses of former Moss and
Skiffy
|
|
|
7.2
|
8.3
|
Businesses of former
Richco
|
|
|
9.0
|
13.4
|
Business of former Mesan
|
|
|
0.4
|
0.9
|
Business of former Abric
|
|
|
4.3
|
5.9
|
Business of former Micro Plastics,
Inc
|
|
|
3.2
|
3.8
|
Industrial Supply
|
|
|
0.3
|
0.7
|
Innovative Components
|
|
|
5.5
|
6.6
|
Hengzhu
|
|
|
4.8
|
8.3
|
Wixroyd
|
|
|
7.9
|
8.8
|
BMP TAPPI
|
|
|
17.4
|
-
|
e-Commerce development
costs
|
|
|
4.9
|
5.9
|
Other businesses
|
|
|
2.9
|
3.7
|
Components Sweden
|
|
|
1.9
|
2.5
|
Software and development
costs
|
|
|
0.9
|
2.2
|
|
|
|
70.6
|
71.0
|
Management have reviewed the
cash-generating-units ("CGUs") across the Group, and
have concluded that the CGUs for the remaining Components
business continue to be primarily the manufacturing and
distribution sites.
The individual CGUs were assessed
for impairment and due to the underlying economic environment
impacting the APAC region, there was an indicator of impairment
within the CGU impacting Hengzhu. As a consequence an
impairment charge of £3.4m was recognised on net assets within APAC
of £28.9m, comprising customer relationship intangibles (£2.2m),
property, plant and equipment (£0.9m), and right of use assets
(£0.3m).
Following the disposal of the
Packaging and Filters businesses, the goodwill associated with
those operating segments was also disposed. The remaining
goodwill, previously allocated to the Components segment, has now
been reallocated to the newly created geographical segments: EMEA,
Americas and APAC. The allocation was made by calculating the
notional goodwill for each CGU by deducting its identifiable net
assets from its recoverable amount and allocating the goodwill to
each CGU in the ratio: CGU notional goodwill to total notional
goodwill of the three geographical segments. These new
operating segments, represented by groups of
cash-generating-units (the manufacturing and distribution sites),
are considered to represent the lowest level within the
Group at which goodwill is monitored for internal management
purposes.
The impairment tests for goodwill
and intangible assets (and in the case of Hengzhu, other
non-current assets) are based first on the Board approved business
plan (the "Plan") and then have been risk-adjusted for impairment
testing purposes. The recoverable amount of each CGU (and Groups of
CGUs) was determined by performing a value-in-use calculation
taking into account the wider market conditions and revenue growth
projections within the industry the Group operates in. The
risk-adjusted cash flow projections are over five years based on
the approved annual budget for the first year and subsequent years
based on the Group Strategic Plan. The key assumptions in the cash
flow projections for the risk-adjusted Plan are set out
below.
Region
|
Average annual growth
rate over five-year
forecast period
|
Terminal
growth rate
from 2028 onwards
|
Improvement in
average operating
profit over
five-year period
|
Pre-tax
discount rate
|
Groups of
cash-generating-units:
|
EMEA
|
6.2%
|
3.1%
|
620 bps
|
16.9%
|
AMERICAS
|
5.8%
|
2.2%
|
770 bps
|
15.3%
|
|
|
|
|
|
Cash-generating-unit
assumptions:
|
HENGZHU (individual CGU)
|
6.0%
|
2.0%
|
600 bps
|
14.1%
|
Operating margin is primarily
based upon the historical levels achieved, adjusted by targets set
for revenue expansion and cost control and reduction within the
Plan period. The values assigned to these assumptions represent
management's assessment of market condition and scope for cost
and profitability improvement, taking into account realisable
synergies resulting from integration activities. The estimated cash
flows are discounted using a pre-tax discount rate based upon
Essentra's estimated pre-tax weighted average cost of capital by
operating segment.
For the Hengzhu CGU the recoverable
amount remaining is sensitive to reasonably possible changes in the
underlying cash flows and key assumptions. After taking into
account the £3.4m impairment, and based upon the assumptions above,
the recoverable amount aligns to its carrying value. Management
considered the following reasonably possible changes in the key
assumptions, in the context of the macro-economic conditions in
China, and the associated impact on the impairment assessment, in
relation to the Hengzhu CGU:
Sensitivities impacting Hengzhu
CGU
|
|
|
|
Impairment
£m
|
50 bps increase in pre-tax discount
rate
|
|
|
|
0.5
|
100 bps reduction in terminal growth
rate
|
|
|
|
0.4
|
100 bps reduction in each year's
growth rate
|
|
|
|
0.1
|
100 bps reduction in operating
profit margin in the terminal year
|
|
|
|
0.9
|
No sensitivities are presented for
the Group's other CGUs or the other two Groups of CGUs (being
Americas and EMEA geographical segments) given no reasonably
possible changes in inputs would lead to an impairment, there being
significant headroom between their carrying amounts and respective
recoverable amounts.
8. Lease right-of-use
assets
|
|
|
|
2023
|
|
Land and
buildings
£m
|
Plant and
machinery
£m
|
Fixtures, fittings
and equipment
£m
|
Total
£m
|
Cost
|
|
|
|
|
Beginning of year
|
40.3
|
2.9
|
0.2
|
43.4
|
Additions, extensions and
surrenders
|
12.3
|
1.8
|
-
|
14.1
|
Terminations
|
(2.2)
|
(1.6)
|
(0.1)
|
(3.9)
|
Currency
translation4
|
(1.6)
|
0.1
|
-
|
(1.5)
|
End of year
|
48.8
|
3.2
|
0.1
|
52.1
|
Accumulated depreciation and
impairment
|
|
|
|
|
Beginning of year
|
20.4
|
1.9
|
0.1
|
22.4
|
Charge for the year3
|
4.9
|
0.9
|
0.1
|
5.9
|
Impairment5
|
-
|
0.3
|
-
|
0.3
|
Terminations
|
(2.2)
|
(1.6)
|
(0.1)
|
(3.9)
|
Currency translation4
|
(0.6)
|
0.1
|
-
|
(0.5)
|
End of year
|
22.5
|
1.6
|
0.1
|
24.2
|
|
|
|
|
|
Net book value at end of
year
|
26.3
|
1.6
|
-
|
27.9
|
|
|
|
|
2022
|
|
Land and
buildings
£m
|
Plant and
machinery
£m
|
Fixtures, fittings
and equipment
£m
|
Total
£m
|
Cost
|
|
|
|
|
Beginning of year
|
100.5
|
13.4
|
0.4
|
114.3
|
Additions, extensions and
surrenders
|
7.6
|
2.7
|
-
|
10.3
|
Terminations
|
(6.9)
|
(1.5)
|
(0.1)
|
(8.5)
|
Business disposals
|
(71.2)
|
(12.4)
|
(0.2)
|
(83.8)
|
Currency translation4
|
10.3
|
0.7
|
0.1
|
11.1
|
End of year
|
40.3
|
2.9
|
0.2
|
43.4
|
Accumulated depreciation and
impairment
|
|
|
|
|
Beginning of year
|
56.6
|
7.0
|
0.3
|
63.9
|
Charge for the year3
|
7.4
|
2.5
|
0.2
|
10.1
|
Terminations
|
(6.7)
|
(1.3)
|
(0.1)
|
(8.1)
|
Disposal of businesses
|
(40.4)
|
(6.8)
|
(0.2)
|
(47.4)
|
Impairment write back1
|
(0.6)
|
-
|
-
|
(0.6)
|
Currency translation4
|
4.1
|
0.5
|
(0.1)
|
4.5
|
End of year
|
20.4
|
1.9
|
0.1
|
22.4
|
|
|
|
|
|
Net book value at end of
year
|
19.9
|
1.0
|
0.1
|
21.0
|
Notes:
1. During
the year, an impairment write back of £nil (2022: £0.6m) was
recognised in adjusting items (refer to Note 3). The assets were
uplifted to their recoverable amount, which represented their fair
value.
2.
Contractual commitments to lease property, plant and
equipment amounted to £nil at 31 December 2023 (2022:
£nil).
3.
Depreciation charge of £5.9m (2022: £10.1m) in the year includes an
amount of £5.9m (2022: £5.6m) relating to continuing operations and
£nil (2022: £4.5m) relating to discontinued
operations.
4.
Currency translation as at 31 December 2023 includes net book value
movement of £0.2m decrease (2022: £2.7m increase) in respect of
adjustments for hyperinflation.
5. During
the year, an impairment of £0.3m was recognised in adjusting items
(refer to Note 3). The assets were written down to their
recoverable amount.
The income statement includes the
following amounts relating to leases:
On continuing
operations
|
Notes
|
2023
£m
|
2022
£m
|
Lease right-of-use asset
depreciation
|
20
|
5.9
|
5.6
|
Interest expense (included in
finance costs)1
|
4
|
1.8
|
1.5
|
Exchange losses (included in finance
costs)
|
4
|
2.2
|
1.2
|
Expense relating to short-term
leases (included in cost of goods sold and administrative
expenses)2
|
|
-
|
0.1
|
Expense relating to leases of
low-value assets that not shown above as short-term leases
(included in operating expenses)
|
|
0.1
|
0.1
|
|
|
10.0
|
8.5
|
Notes:
1. For
the year ended 31 December 2023, the weighted average lessee's
incremental borrowing rate applied to lease liabilities was 8.6%
(2022: 7.1%).
2. The
short-term leases expense for the year ending 31 December 2024 is
not expected to be materially different to the expense disclosed
above.
The total cash outflow for leases
and analysis of movements in lease liabilities are included in Note
15.
9.
Inventories
|
|
2023
£m
|
2022
£m
|
Raw materials and
consumables
|
|
7.7
|
10.6
|
Work-in-progress
|
|
6.0
|
4.3
|
Finished goods and goods held for
resale
|
|
51.0
|
50.1
|
Total
|
|
64.7
|
65.0
|
Notes:
1.
Following the disposal of its Packaging and Filters businesses in
2022, and based upon the most recent reliable information, the
Group has updated the inputs into its inventory provisioning
calculations in order to ensure that inventories continue to be
measured at the lower of cost and net realisable value. The impact
on inventory provisioning resulted in a £4.3m increase in
inventories and a resultant credit to gross
profit.
2.
Inventories with a total value of £nil (2022: £nil) were
written down in the year.
10. Trade and other
receivables
|
|
2023
£m
|
2022
£m
|
Trade receivables
|
|
43.5
|
45.3
|
Other receivables1
|
|
14.7
|
17.7
|
Prepayments and accrued
income
|
|
3.3
|
3.4
|
Total
|
|
61.5
|
66.4
|
Notes:
1. Other
receivables includes £9.7m (2022: £nil) of contingent consideration
for an earnout receivable (following the disposal of the Filters
business in 2022).
11. Trade and other
payables
|
|
2023
£m
|
2022
£m
|
Trade payables
|
|
23.8
|
31.9
|
Other tax and social security
contributions
|
|
5.4
|
9.5
|
Other payables
|
|
3.4
|
7.9
|
Accruals
|
|
28.1
|
42.2
|
Total
|
|
60.7
|
91.5
|
12. Employee
benefits
Post-employment
benefits
The Group operates a number of
defined benefit and defined contribution pension schemes around the
world, the latter covering many of its employees. The Group also
has a number of other post-employment obligations in certain
countries, some of which are required under
local law.
The defined benefit plans are
administered by boards of trustees and the assets are held
independently from Essentra. The boards of trustees comprise member
nominated trustees, employer nominated trustees and independent
advisory trustees. The articles of the plans prohibit a majority on
the boards to be established by either the member or employer
nominated trustees.
Pension costs of the defined
benefit schemes are assessed in accordance with the advice
of independent professionally qualified actuaries. Full
triennial actuarial valuations were carried out on the principal
European defined benefit schemes as at 5 April 2021 and annual
actuarial valuations are performed on the principal US defined
benefit schemes. The assets and liabilities of the defined benefit
schemes have been updated to the balance sheet date from the most
recently completed actuarial valuations taking account of the
investment returns achieved by the schemes and the level of
contributions.
In June 2023, the UK High Court
(Virgin Media Limited v NTL Pension Trustees II Limited) ruled that
certain historical amendments for contracted out defined benefit
schemes were invalid if they were not accompanied by the correct
actuarial confirmation. The judgment is subject to appeal. The
Trustee and Group are monitoring developments and will consider if
there are any implications for the UK Pension Fund, if the ruling
is upheld.
The principal European defined
benefit schemes entitle remaining members to a pension calculated
on 1.25% or 2% of their capped final pensionable pay multiplied by
the number of pensionable years of service. Some members have
historical entitlements to accrual rates of 1.67%-1.9% and 3% for
certain tranches of their service. The principal US defined benefit
schemes entitle certain former participating employees to annuity
benefits equal to 50% of final average pensionable salary, reduced
for years of service less than 30, and other participating
employees to annuity benefits equal to $49 per month for each year
of service.
The amounts included in the
condensed consolidated financial statements on a total group basis
(including discontinued operations) are as follows:
|
2023
£m
|
2022
£m
|
Amounts expensed against operating
profit
|
|
|
Defined contribution
schemes
|
2.7
|
7.0
|
Defined benefit schemes - current
service cost
|
1.8
|
2.0
|
Defined benefit schemes -
curtailment gain
|
-
|
-
|
Other post-employment
obligations
|
0.1
|
0.4
|
Total operating expense
|
4.6
|
9.4
|
|
|
|
Amounts included as finance
(income)/expense
|
|
|
Net interest on defined benefit
scheme assets1
|
(0.5)
|
(0.6)
|
Net interest on defined benefit
scheme liabilities2
|
0.8
|
0.7
|
Net finance expense
|
0.3
|
0.1
|
Amounts recognised in the
consolidated statement of comprehensive income
|
Return on defined benefit scheme
assets excluding amounts in net finance income
|
(2.3)
|
108.5
|
Impact of changes in assumptions and
experience to the present value of defined benefit scheme
liabilities
|
3.6
|
(88.0)
|
Remeasurement losses of defined
benefit schemes
|
1.3
|
20.5
|
Notes:
1. Net
interest income on defined benefit scheme assets on a continuing
basis (Note 4) was £0.5m (2022: £0.6m).
2. Net
interest expense on defined benefit scheme liabilities on a
continuing basis (Note 4) was £0.8m (2022: £0.6m).
During the year, the Group
incurred service cost expenses totalling £1.8m (2022: £2.0m)
which, in management's judgement, are not considered to be part of
the Group's ongoing operations. As such, these expenses have been
classified as adjusting items and have been presented separately
(see Note 3).
During 2015, the principal defined
benefit pension schemes in the UK and the US were closed to
future accrual. Following the closure of the Group's principal
defined benefit pension schemes to future accruals, the
schemes are funded by the Group's subsidiaries and employees
are not required to make any further contribution. The funding of
these schemes is based on separate actuarial valuations for funding
purposes for which the assumptions may differ from those used in
the valuation for IAS 19 Employee Benefits
purposes.
In April 2022, the Company,
Essentra Components Limited and Essentra Pension Trustees Limited
(the trustee of the UK Essentra Pension Plan) entered into a
flexible apportionment agreement ("FAA") subject to UK legislation
such that Essentra Packaging and Security Limited (a former
participating employer and Group subsidiary disposed of as part of
the Packaging business), and Essentra Filter Products Limited
and Essentra Pte Limited (both former participating employers
and Group subsidiaries disposed of as part of the
Filters business) transferred all defined benefit pension
liabilities to Essentra Components Limited, a continuing
participating employer of the UK Essentra Pension Plan.
In consideration for the trustee
entering into the FAA, it was agreed that Essentra Components
Limited pay the following amounts into the Essentra section of the
UK Essentra Pension Plan: (i) £0.7m (this was paid during 2022);
(ii) £1.3m payable upon completion of the divestiture of the
Packaging business in the year of disposal which was paid in 2023,
and make further cash payments of £0.6m in each of the six years
after the year of divestiture; and (iii) £1.3m payable upon
completion of the divestiture of the Filters business in the year
of disposal which was paid in 2023, and make further payments
of £0.6m in each of the six years after the year of
divestiture.
The Group's contributions to its
defined benefit pension schemes are determined in consultation with
trustees, taking into consideration actuarial advice, investment
conditions and other local conditions and practices. The outcome of
these consultations can impact the timing of future cash
flows. Contributions payable by the Group to its defined benefit
pension schemes during the year to 31 December 2023 amounted to
£nil (2022: £nil) to its US schemes and £3.8m (2022: £0.7m) in
respect of the Group's European schemes. In 2024, the Group expects
to make defined benefit contributions of $2.4m to its US schemes
and £0.7m in respect of the Group's European schemes.
During the year, the Group's total
contributions to defined contribution schemes amounted to £2.7m
(2022: £7.0m). Contributions on continuing operations of £2.7m
(2022: £2.9m) were paid in 2023. A similar amount is expected to be
payable during the ending 31 December 2024.
The principal assumptions used by
the independent qualified actuaries for the purposes of IAS 19 are
as follows:
|
2023
|
|
2022
|
|
Europe
|
|
US
|
|
Europe
|
|
US
|
Increase in salaries
(pre-2010)1
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
Increase in salaries
(post-2010)1
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
Increase in
pensions1
|
|
|
|
|
|
|
|
at RPI capped at 5%
|
2.9%
|
|
n/a
|
|
3.0%
|
|
n/a
|
at CPI capped at 5%
|
2.6%
|
|
n/a
|
|
2.7%
|
|
n/a
|
at CPI minimum 3%, capped at
5%
|
3.4%
|
|
n/a
|
|
3.3%
|
|
n/a
|
at CPI capped at 2.5%
|
2.0%
|
|
n/a
|
|
2.2%
|
|
n/a
|
Discount rate
|
4.6%
|
|
4.8%
|
|
4.8%
|
|
5.0%
|
Inflation rate -
RPI2
|
3.0%
|
|
n/a
|
|
3.1%
|
|
n/a
|
Inflation rate -
CPI2
|
2.6%
|
|
n/a
|
|
2.7%
|
|
n/a
|
Notes:
1. For
service prior to April 2010, pension at retirement is linked to
salary at retirement. For service after April 2010, pension is
linked to salary at April 2010 with annual increases capped at
3%.
2.
During 2021, the Group changed its methodology and assumptions
relating to inflation applied to the UK defined benefit pension
scheme (included within Europe) pertaining to the Retail Prices
Index ("RPI") and the Consumer Prices Index (CPI). This follows the
government's announcement in November 2020 that RPI inflation will
be aligned with CPIH inflation (CPI plus housing) from 2030. As
such, the actuary derived the inflation assumption based on a
'term-based' curve approach, by weighing the Scheme's projected
cash flows with the gilt-based RPI curve.
3. Due
to the timescale covered, the assumptions applied may not be borne
out in practice.
The life expectancy assumptions
(in number of years) used to estimate defined benefit pension
obligations at the year-end are as follows:
|
|
|
2023
|
|
|
|
2022
|
|
Europe
|
|
US
|
|
Europe
|
|
US
|
Male retiring today at age
65
|
22.4
|
|
20.7
|
|
22.0
|
|
20.5
|
Female retiring today at age
65
|
24.8
|
|
22.6
|
|
24.4
|
|
22.5
|
Male retiring in 20 years at age
65
|
23.7
|
|
22.2
|
|
23.3
|
|
22.1
|
Female retiring in 20 years at age
65
|
26.2
|
|
24.1
|
|
25.9
|
|
24.0
|
The allocation of assets between
different classes of investment is reviewed regularly and is
a key factor in the trustees' investment policies. The
allocation of assets is arrived at taking into consideration
current market conditions and trends, the size of potential returns
relative to investment risk and the extent to which asset
realisation needs to match liability maturity. There are risks
underlying these considerations. If asset returns fall below the
returns required for scheme assets to match the present value of
scheme liabilities, a scheme deficit results. Persistent deficits
represent an obligation the Group has to settle through increased
cash contributions. If asset maturities are not properly matched
with liability maturities, there is also the risk that the Group
could be required to make unplanned short-term cash contributions
to resolve resulting liquidity issues. Scheme assets are invested
by the trustees in asset classes and markets that are
considered to be reasonably liquid, so through this matching
liquidity risk is considered to be sufficiently
mitigated.
Movement in fair value of
post-employment obligations recognised during the year
|
|
2023
|
|
|
2022
|
|
Defined benefit
pension schemes
|
Other1
£m
|
Total
£m
|
|
Defined benefit
pension schemes
|
Other1
£m
|
Total
£m
|
Assets
£m
|
Liabilities
£m
|
|
Assets
£m
|
Liabilities
£m
|
Beginning of year
|
198.3
|
(208.7)
|
(0.2)
|
(10.6)
|
|
305.9
|
(293.1)
|
(3.8)
|
9.0
|
Current service cost and
administrative expense2
|
(1.8)
|
-
|
(0.1)
|
(1.9)
|
|
(1.8)
|
(0.2)
|
(0.4)
|
(2.4)
|
Employer contributions
|
3.7
|
0.1
|
-
|
3.8
|
|
0.7
|
0.2
|
-
|
0.9
|
Return on plan assets excluding
amounts in net finance income3
|
2.3
|
-
|
-
|
2.3
|
|
(108.5)
|
-
|
-
|
(108.5)
|
Actuarial (losses)/gains arising
from change in financial assumptions
|
-
|
(3.9)
|
-
|
(3.9)
|
|
-
|
95.5
|
-
|
95.5
|
Actuarial gains/(losses) arising
from change in demographic assumptions
|
-
|
0.6
|
-
|
0.6
|
|
-
|
(1.9)
|
-
|
(1.9)
|
Actuarial losses arising from
experience adjustment
|
-
|
(0.3)
|
-
|
(0.3)
|
|
-
|
(5.6)
|
-
|
(5.6)
|
Finance income/(expense)
|
9.3
|
(9.6)
|
-
|
(0.3)
|
|
6.3
|
(6.3)
|
(0.1)
|
(0.1)
|
Benefits paid
|
(11.4)
|
11.4
|
-
|
-
|
|
(11.5)
|
11.5
|
-
|
-
|
Currency translation
|
(2.9)
|
3.8
|
-
|
0.9
|
|
7.2
|
(9.4)
|
(0.1)
|
(2.3)
|
Business
combinations4
|
-
|
(0.2)
|
-
|
(0.2)
|
|
-
|
0.6
|
4.2
|
4.8
|
End of year
|
197.5
|
(206.8)
|
(0.3)
|
(9.6)
|
|
198.3
|
(208.7)
|
(0.2)
|
(10.6)
|
Defined benefit schemes - net
retirement benefit assets/(obligations)
|
|
(9.3)
|
|
|
|
|
(10.4)
|
|
|
Notes:
1.
Included within the other category above are other
post-employment obligations outside of Europe and the US which are
required under local law.
2.
During the period, the Group incurred administrative expenses
totalling £1.8m (2022: £2.0m) which, in management's judgement, are
not considered to be part of the Group's ongoing operations. As
such, these expenses have been classified as adjusting items and
have been presented separately (see Note 3).
3. For
2022, included within reduction on plan assets is an actuarial loss
of £10.8m relating to an investment decision to purchase a bulk
purchase annuity ("buy-in") contract. A premium of £38.2m was paid
to purchase buy-in to insure against liabilities within the UK
defined benefits scheme. The loss represented the difference
between the premium paid and the estimated present value of the
obligations and was included within other comprehensive
income.
4. In
2023 £0.2m pension obligation relates to BMP TAPPI
acquisition. In 2022 the Group disposed of the Packaging
business and the Filters business. The participating employers in
the UK Essentra Pension Plan of the divested businesses transferred
their defined benefit pension liabilities to Essentra Components
Limited as part of the FAA executed in April 2022.
Sensitivity
For the significant assumptions
used in determining defined benefit costs and liabilities, the
following sensitivity analysis gives the estimate of the impact on
the measurement of the scheme liabilities.
|
|
|
|
|
(Increase)/decrease in schemes net
liabilities as at 31 December 2023
|
|
|
|
|
|
Europe
£m
|
US
£m
|
Total
£m
|
3.0% decrease in the discount
rate
|
|
|
|
|
(74.3)
|
(31.3)
|
(105.6)
|
3.0% increase in the rate of
inflation
|
|
|
|
|
(23.2)
|
n/a
|
(23.2)
|
1.0% increase in rate of
salary/pension increases
|
|
|
|
|
n/a
|
n/a
|
n/a
|
1 year increase in life
expectancy
|
|
|
|
|
(4.4)
|
(1.9)
|
(6.3)
|
1 year decrease in life
expectancy
|
|
|
|
|
5.2
|
1.9
|
7.1
|
3.0% increase in the discount
rate
|
|
|
|
|
39.9
|
18.6
|
58.5
|
1.0% decrease in rate of
salary/pension increases
|
|
|
|
|
n/a
|
n/a
|
n/a
|
3.0% decrease in the rate of
inflation
|
|
|
|
|
16.5
|
n/a
|
16.5
|
13. Financial risk
management
Total financial assets and
liabilities
The table below sets out
Essentra's accounting categories and fair value for each class of
financial asset and liability.
|
|
|
2023
|
|
|
|
2022
|
|
Fair
value
£m
|
Amortised cost
£m
|
Total carrying value
£m
|
|
Fair
value
£m
|
Amortised cost
£m
|
Total
carrying value
£m
|
Trade and other
receivables2
|
-
|
48.5
|
48.5
|
|
-
|
63.0
|
63.0
|
Cash and cash equivalents
|
-
|
59.7
|
59.7
|
|
-
|
421.4
|
421.4
|
Interest bearing loans and
borrowings3
|
-
|
(95.5)
|
(95.5)
|
|
-
|
(293.0)
|
(293.0)
|
Lease liabilities
|
-
|
(30.9)
|
(30.9)
|
|
-
|
(22.9)
|
(22.9)
|
Trade and other payables
|
-
|
(55.3)
|
(55.3)
|
|
-
|
(82.0)
|
(82.0)
|
Level 2 of fair value
hierarchy
Derivative assets5
|
4.2
|
-
|
4.2
|
|
8.5
|
-
|
8.5
|
Derivative
liabilities5
|
-
|
-
|
-
|
|
(1.3)
|
-
|
(1.3)
|
Level 3 of fair value
hierarchy
Other financial assets6
|
19.0
|
|
19.0
|
|
11.6
|
-
|
11.6
|
Other non-current financial
liabilities4
|
-
|
-
|
-
|
|
(2.4)
|
-
|
(2.4)
|
Other current financial
liabilities7
|
(28.0)
|
-
|
(28.0)
|
|
(24.1)
|
-
|
(24.1)
|
Total Group (including discontinued
operations in 2022)
|
(4.8)
|
(73.5)
|
(78.3)
|
|
(7.7)
|
86.5
|
78.8
|
Notes:
1.
Financial assets and liabilities held at amortised cost mostly have
short terms to maturity. For this reason, their carrying amounts at
the reporting date approximate the fair values.
2. Total
trade and other receivables carried at £61.5m (2022: £66.4m)
include prepayments of £3.3m (2022: £3.4m) which are not financial
assets and are therefore excluded from the above analysis and £9.7m
included within level 3 of fair value hierarchy other financial
assets.
3.
Included within interest bearing loans and borrowings are $103m
(2022: $350m) US Private Placement Loan Notes. The Loan Notes are
held at amortised cost with a carrying value of £80.3m (2022:
£293.0m). The Group estimates that the total fair value of the Loan
Notes at 31 December 2023 is £70.0m (2022: £277.7m). Unsecured bank
loans amounting to £15.2m (2022: £nil), included within interest
bearing loans and borrowings, incur interest at floating rates and
as a result their carrying amounts also approximate their fair
values at the reporting date.
4.
Included within other non-current financial liabilities (classified
as level 3 in the fair value hierarchy), is an amount of £nil
(2022: £2.4m) representing deferred consideration payable in
respect of acquisitions (2022: £2.4m).
5. Fair
values of forward foreign exchange contracts and cross currency
interest rate swaps have been calculated at year end forward
exchange rates compared to contracted rates using observable market
data from third party financial institutions.
6. Other
financial assets includes deferred contingent consideration
receivable amounting to £19.0m (2022: £10.6m) following the
disposal of the Filters business, £9.3m of which is due greater
than 1 year and £9.7m due less than 1 year. The
consideration, which is structured as an earn-out, has been
classified as a long-term receivable in the condensed consolidated
financial statements. The fair value has been determined at the
balance sheet date based on management's best estimate of the
Filters business achieving future performance targets to which the
earn-out is linked with forecast earnings being a critical
unobservable input into the fair value measurement. Management have
assessed and concluded that for 2022 any difference in fair value
between completion date (the date at which the valuation was
carried out) and 31 December 2022 would have been
immaterial.
7. Other
current financial liabilities include £23.0m (2022: £18.0m) which
represents management's best estimate of the combined expected
settlement payable by the Group through the respective completion
accounts mechanisms linked to both the Filters business and
Packaging business disposals. The amount recognised is based on the
facts and circumstances that were present and known at the balance
sheet date. Other current financial liabilities also include
deferred contingent consideration of £5.0m (2022: £6.1m) in
respect of acquisitions.
8.
During the year, a fair value loss of £nil (2022: £nil) was
recognised in respect of financial instruments at level 3 fair
value hierarchy, and £nil (2022: £nil) was settled in cash. No
other fair value gains or losses were recorded in profit or loss
and other comprehensive income.
14. Issued share
capital
|
|
2023
£m
|
2022
£m
|
Issued, authorised and fully paid
ordinary shares of 25p (2022: 25p) each:
|
|
|
|
Beginning of year
|
|
75.6
|
75.6
|
Cancellation of shares of 9,223,493
shares of 25p each:
|
|
(2.3)
|
-
|
End of year
|
|
73.3
|
75.6
|
|
|
|
|
Number of ordinary shares in
issue
|
|
|
|
Beginning of year
|
|
302,590,708
|
302,590,708
|
Cancellation of shares
|
|
(9,223,493)
|
-
|
End of year
|
|
293,367,215
|
302,590,708
|
|
|
|
|
|
Purchase and cancellation of own
shares
During the year, 13,364,814 (2022:
nil) 25p Ordinary Shares ("shares") were purchased by
the Company for total cash consideration of £24.0m (2022:
£nil) at a weighted average price of 179.5 pence per share, of
which 9,223,493 shares with an aggregate nominal value
of £2.3m were cancelled, and £2.3m transferred from issued
share capital to the capital redemption reserve.
At 31 December 2023, the Company
held 5,039,265 (2022: 897,944) of its own shares with a nominal
value of £1.3m (2022: £0.2m) in treasury. This represents 1.7%
(2022: 0.3%) of the number of ordinary shares in issue.
Capital reduction
The capital reduction, comprising
the merger reserve, was approved by shareholders at a General
Meeting held on 14 November 2023. In connection with the
capitalisation of the merger reserve, resolutions authorising the
Directors to allot one new B ordinary share (the "Capital
Reduction Share"), and to subsequently cancel the Capital Reduction
Share were passed at the General Meeting. On 4 December 2023, the
amount of £385,219,535 standing to the credit of the merger reserve
of the Company was capitalised and applied in paying up in full at
par one Capital Reduction Share with a nominal value of
£385,219,535. On 14 December 2023, Essentra announced that the
capital reduction had become effective following the confirmation
by the Court approval on 5 December 2023 and the registration
of the Court order with the Registrar of Companies on 7
December 2023.
15. Analysis of net
debt
|
|
1 January
2023
£m
|
Cash flow
£m
|
Business
disposals
£m
|
Business
acquisitions
£m
|
Lease
additions
£m
|
Exchange
movements
£m
|
Non-cash
movements1,2,4
£m
|
31 December
2023
£m
|
Cash at bank and in hand
|
|
421.4
|
(308.9)
|
(17.8)
|
(33.3)
|
-
|
(1.7)
|
-
|
59.7
|
Cash and cash equivalents in the
statement of cash flows
|
|
421.4
|
(308.9)
|
(17.8)
|
(33.3)
|
-
|
(1.7)
|
-
|
59.7
|
Derivative financial instruments
hedging private placement loans
|
|
8.3
|
(0.3)
|
-
|
-
|
-
|
(3.8)
|
-
|
4.2
|
Debt due within one year
|
|
(208.0)
|
208.0
|
-
|
-
|
-
|
-
|
-
|
-
|
Debt due after one year
|
|
(85.0)
|
(14.9)
|
-
|
-
|
-
|
4.4
|
-
|
(95.5)
|
Lease liabilities due within one
year3
|
|
(4.9)
|
7.2
|
-
|
-
|
(2.0)
|
-
|
(7.4)
|
(7.1)
|
Lease liabilities due after one
year3
|
|
(18.0)
|
-
|
-
|
-
|
(12.0)
|
0.6
|
5.6
|
(23.8)
|
Debt from financing
activities
|
|
(307.6)
|
200.0
|
-
|
-
|
(14.0)
|
1.2
|
(1.8)
|
(122.2)
|
Net (debt)/funding
surplus
|
|
113.8
|
(108.9)
|
(17.8)
|
(33.3)
|
(14.0)
|
(0.5)
|
(1.8)
|
(62.5)
|
|
|
1 January
2022
£m
|
Cash flow
£m
|
Business
disposals
£m
|
Business
acquisitions
£m
|
Lease
additions
£m
|
Exchange
movements
£m
|
Non-cash
movements1,2,4
£m
|
31 December
2022
£m
|
Cash at bank and in
hand
|
|
123.9
|
(115.7)
|
434.9
|
(27.9)
|
-
|
6.2
|
-
|
421.4
|
Short-term deposits and
investments
|
|
12.4
|
5.7
|
(18.0)
|
-
|
-
|
(0.1)
|
-
|
-
|
Cash and cash equivalents in the
statement of cash flows
|
|
136.3
|
(110.0)
|
416.9
|
(27.9)
|
-
|
6.1
|
-
|
421.4
|
Derivative financial instruments
hedging private placement loans
|
|
-
|
(6.5)
|
-
|
-
|
-
|
13.4
|
1.4
|
8.3
|
Debt due within one year
|
|
-
|
-
|
-
|
-
|
-
|
(1.2)
|
(206.8)
|
(208.0)
|
Debt due after one year
|
|
(313.3)
|
59.2
|
-
|
-
|
-
|
(31.2)
|
200.3
|
(85.0)
|
Lease liabilities due within one
year3
|
|
(11.6)
|
14.3
|
7.5
|
-
|
(2.9)
|
(0.9)
|
(11.3)
|
(4.9)
|
Lease liabilities due after one
year3
|
|
(46.1)
|
-
|
30.1
|
-
|
(7.4)
|
(3.3)
|
8.7
|
(18.0)
|
Debt from financing
activities
|
|
(371.0)
|
67.0
|
37.6
|
-
|
(10.3)
|
(23.2)
|
(7.7)
|
(307.6)
|
Net (debt)/funding
surplus
|
|
(234.7)
|
(43.0)
|
454.5
|
(27.9)
|
(10.3)
|
(17.1)
|
(7.7)
|
113.8
|
Notes:
1. The
non-cash movements in debt due after one year represents the
amortisation and write down of prepaid facility fees of £nil (2022:
£4.8m amortisation of prepaid facility fees) and the revaluation of
loan to fair value of £nil (2022: £1.7m). In the year ended 31
December 2022 loans of £185.0m were reallocated to debt due within
one year following an agreement to repay on demand in January
2023.
2. The
net non-cash movements in lease liabilities represents lease
surrenders of £nil (2022: £0.2m) due to renegotiated lease terms,
offset by interest on leases of £1.8m (2022
£2.8m).
3.
During the year, £5.6m (2022: £8.7m) of lease liabilities moved
from due after one year to due within one year.
4.
Included within non-cash movements for derivative financial
instruments hedging private placement loans is outflow of £2.3m
(2022: £1.4m inflow) relating to the fair value movements on cross
currency interest rate swaps.
The net cash outflow relating to
lease liabilities for low value, short term and variable lease
payments was £0.1m (2022: £0.2m, see Note 8).
16. Acquisitions
Acquisition of BMP s.r.l ("BMP
TAPPI")
On 26 October 2023, Essentra
acquired 100% of the equity interests of BMP TAPPI, a global
provider of essential components and solutions, to strengthen the
Essentra's product portfolio, unlock further cross-selling
opportunities, and to enhance the Group's manufacturing footprint
in Europe. The Group acquired BMP TAPPI for an initial cash
consideration of €39.5m (£34.3m), up to €3.5m (£3.0m) deferred
contingent consideration, and €0.7m (£0.6m) adjustment for net
working capital and financial position. The deferred contingent
consideration is conditional on achieving certain performance
criteria over a two-year period commencing 1 January
2023.
On acquisition, the assets and
liabilities of the business acquired were adjusted to reflect their
fair value to Essentra. The most significant fair value adjustment
arising on the acquisition of BMP TAPPI related to the
attribution of fair value to the acquired customer relationships
intangible asset. In determining the fair value of the intangible
asset, the Group used an external valuation specialist whose
assessment considered forecast cash flows from BMP TAPPI's customer
contracts, expected attrition rates based on an analysis of
historic customer sales data, and the application of an appropriate
discount rate specific to the customer relationship asset. The
resulting analysis indicated a provisional fair value for the
customer relationships asset of £16.9m, with a corresponding
provisional deferred tax liability in relation to the intangible
asset of £4.8m.
Under IFRS 3 Business Combinations, the fair value of assets and
liabilities must be finalised within a 12-month "measurement
period" from the date of acquisition. At the reporting
date, the purchase price allocation and fair value adjustments
are provisional. The acquired business contributed revenues of
£1.8m and net profit of £nil to the Group for the period from 26
October to 31 December 2023 and these results are included within
these condensed consolidated financial statements. Had the
acquisition completed on 1 January 2023, the contribution to the
Group's revenue and operating profit would have been £12.5m and
£2.5m higher, respectively.
Acquisition-related costs of £0.6m
are included within adjusting items in the consolidated income
statement (see Note 3) and in operating cash flows in the
consolidated statement of cash flows.
The Group's provisional assessment
of the fair value of assets and liabilities recognised as part of
the acquisition of BMP TAPPI are detailed below:
|
|
|
|
|
Provisional fair value
£m
|
Intangible assets1
|
|
|
|
|
17.7
|
Property, plant and
equipment
|
|
|
|
|
4.0
|
Inventories
|
|
|
|
|
0.2
|
Trade and other
receivables
|
|
|
|
|
3.2
|
Cash and cash
equivalents
|
|
|
|
|
5.3
|
Trade and other
payables
|
|
|
|
|
(2.0)
|
Retirement benefit
obligations
|
|
|
|
|
(0.2)
|
Corporation tax payable
|
|
|
|
|
(0.4)
|
Deferred tax
liabilities
|
|
|
|
|
(4.9)
|
Net identifiable assets
acquired
|
|
|
|
|
22.9
|
Goodwill2
|
|
|
|
|
15.0
|
Total consideration
|
|
|
|
|
37.9
|
|
|
|
|
|
|
Cash consideration
|
|
|
|
|
34.3
|
Deferred consideration3
|
|
|
|
|
3.6
|
Total consideration
|
|
|
|
|
37.9
|
Notes:
1.
Intangible assets comprise customer relationships of £16.9m and
other intangible assets of £0.8m.
2.
Goodwill recognised of £15.0m represents the expected operating and
financial synergies, and the value of the assembled workforce
acquired. Goodwill is not deductible for tax
purposes.
3.
Deferred consideration includes £3.0m of deferred contingent
consideration and £0.6m of adjustments to the purchase price for
net financial capital and financial position.
Acquisition of Wixroyd
Group
On 1 December 2022, Essentra
acquired 100% of the equity interests of Wixroyd Holdings Limited
(the "Wixroyd Group"), a leading UK supplier of industrial parts
for the engineering sector for an initial consideration of £31.4m.
The consideration payable for the Wixroyd Group comprised an
initial cash consideration of £31.4m and up to £7.0m deferred
contingent consideration. The deferred earn-out consideration was
conditional on achieving certain performance criteria for the 12
month period commencing 1 January 2023.
During 2023, Essentra reassessed
the fair value adjustments and made changes to property, plant and
equipment, inventories and tax. The impact of this on goodwill is a
decrease of £0.5m. The process of allocating the purchase price,
including the split between goodwill and intangible assets and fair
value adjustments, has been concluded. Accordingly, the purchase
price allocation presented in these financial statements is now
final.
On finalisation of the trading
performance over 2023, a reduction in the fair value of deferred
contingent consideration payable was recognised resulting in a
credit of £2.2m (2022: £nil) being recognised in the income
statement for the year. Furthermore, a payment of £0.2m in relation
to the resolution of an uncertain tax position was made to the
vendor during the year. As a result, the deferred consideration
recognised for Wixroyd at 31 December 2023 was £0.2m (2022:
£2.6m).
Acquisition of Hengzhu
On 2 August 2021, Essentra
acquired the trade and assets of Jiangxi Hengzhu Electrical Cabinet
Lock Co., Ltd ("Hengzhu"), an access hardware manufacturer and
distributor in China via a newly incorporated entity, Essentra
Hengzhu Precision Components Co Ltd, which acquired 100% of the
business for ¥103m (approximately £11.8m). Essentra had subscribed
and paid up 73% of the issued share capital of Essentra Hengzhu
Precision Components Co Ltd with the remaining 27% stake subject to
put and call options exercisable 6 months after issuance of the
subsidiary's audit report for 2022. The remaining 27% stake did not
confer any shareholder right (including, entitlement to dividends
and right to transfer to other parties) to the vendor shareholder.
Therefore, it was concluded that the amount payable under the put
option of £4.7m, as of 31 December 2022, in substance represented
deferred consideration and was accounted for as a financial
liability as at 31 December 2022. No non-controlling interest was
recognised in respect of this acquisition. During the year ended 31
December 2023, the remaining amount due under the put option was
paid in full leaving a balance of £nil (2022: £4.7m) in respect of
deferred consideration relating to this
acquisition.
Acquisition of Micro
Plastics
On 12 December 2017, Essentra
acquired 100% of the share capital of Micro Plastics, Inc.
The transaction was settled with cash consideration of £19.7m
and deferred consideration of £3.7m, of which £1.2m (31
December 2022: £1.3m) remains payable to the
vendor.
17. Discontinued
operations
Disposal of Packaging and Filters
businesses
On 1 October 2022, the Group
completed its sale of ESNT Packaging & Securing Solutions
Limited and Essentra Packaging US Inc and their respective
subsidiary companies (together the 'Packaging business'). On 3
December 2022, the Group also completed the sale of Essentra Filter
Holdings Limited and its respective subsidiary companies (the
'Filters business'). Financial information relating to these
discontinued operations is set out below. On 28 September 2022, the
Group also completed the sale of its Packaging business in India
for cash consideration of £1.1m.
Income statement analysis of
discontinued operations
Total discontinued
operations
|
|
|
|
2023
£m
|
2022
£m
|
Revenue
|
|
|
|
-
|
653.9
|
Operating loss1
|
|
|
|
(0.4)
|
(137.1)
|
Finance income
|
|
|
|
-
|
1.5
|
Finance expense
|
|
|
|
-
|
(2.1)
|
Loss before tax on discontinued
activities
|
|
|
|
(0.4)
|
(137.7)
|
Loss before tax on
disposal2
|
|
|
|
(3.7)
|
(19.0)
|
Total loss before tax on
discontinued operations
|
|
|
|
(4.1)
|
(156.7)
|
Income tax credit
|
|
|
|
3.7
|
4.0
|
Total loss for the year from
discontinued operations
|
|
|
|
(0.4)
|
(152.7)
|
Notes:
1.
For the year ended 31 December 2023 the operating loss from
discontinued operations includes gross income of £5.5m and costs of
£5.9m.
2. For
the year ended 31 December 2023, the loss on disposal of
discontinued operations includes a charge of £3.7m based upon the
Group's latest estimate of amounts due to the respective purchasers
of the Packaging and Filters businesses. For the year ended 31
December 2022 refer to page 180 of the 2022 Essentra plc Annual
Report for the calculation of the loss on disposal of discontinued
operations of £19.0m.
The results from discontinued
operations are attributable entirely to the equity holders of
Essentra plc. The results for the year ended 31 December 2023
include profit after tax attributable to non-controlling interests
of £nil (2022: £4.2m). The earnings per share of discontinued
operations are disclosed in Note 5.
Cash flows of discontinued
operations
Total discontinued
operations
|
|
|
|
2023
£m
|
2022
£m
|
Net cash (outflow)/inflow from
operating activities
|
|
|
|
(3.8)
|
59.7
|
Net cash (outflow)/inflow from
investing activities1
|
|
|
|
(17.8)
|
358.8
|
Net cash outflow from financing
activities
|
|
|
|
-
|
(10.3)
|
Net (decrease)/increase in cash and
cash equivalents
|
|
|
|
(21.6)
|
408.2
|
Notes:
1.
Included within investing activities in 2023 is £5.3m for
settlement of deferred consideration on the disposal of the
Packaging business and £12.5m (2022: £31.5m) on cash outflow from
costs of business disposal. In 2022, proceeds from the disposal of
businesses of £462.6m, net of cash disposed of £45.7m was
£416.9m.
18. Dividends
|
|
Per
share
|
|
|
Total
|
|
2023
p
|
2022
p
|
|
2023
£m
|
2022
£m
|
2022 interim: paid 28 October
2022
|
|
2.3
|
|
|
6.9
|
2022 special dividend: paid 27 April
20231
|
|
29.8
|
|
|
89.8
|
2022 proposed final: paid 30 June
2023
|
|
1.0
|
|
|
3.0
|
2023 interim: paid 27 October
2023
|
1.2
|
|
|
3.5
|
|
2023 proposed final: payable 5 July
20242
|
2.4
|
|
|
7.0
|
|
Notes:
1. The
special dividend paid on 27 April 2023 amounted to £89.8m, and
therefore this figure has been re-presented
2.
Subject to approval at the Annual General Meeting on 23 May
2024, the proposed final dividend for the year ended 31 December
2023 will be paid on 5 July 2024 to shareholders on the register of
the Company on 17 May 2024. The ordinary shares will be quoted
ex-dividend on 16 May 2024.
19. Related
parties
During the year, the Company paid
£47,937, and granted 6,364 SAYE share options to the wife of Scott
Fawcett, CEO of Essentra plc, in respect of her employment by the
Group. Scott's wife was employed by the Group prior to his
appointment as a director of Essentra plc on 1 January
2023.
ITC Essentra Limited was 50% owned
by the Group until its disposal on 3 December 2022. Until that
date, its results were fully consolidated within the Group's
results as it was deemed Essentra had control up to the date of
disposal by virtue of its having control of the board. At the
date of disposal, the entity had gross assets of £34.0m and gross
liabilities of £14.6m. Operating profit for the period to disposal
was £6.9m and cash decreased by £0.5m.
China Tobacco Essentra (Xiamen)
Filters Co., Ltd was 49% owned by the Group until its disposal on 3
December 2022. Until that date, its results were fully consolidated
within the Group's results as it was deemed Essentra had control up
to the date of disposal by virtue of its having control of the
board. As the date of disposal, the entity had gross assets of
£30.0m and gross liabilities of £12.7m. Operating profit for the
period to disposal was £2.4m and cash decreased by
£0.9m.
20. Adjusted performance
measures
The Group presents alternative
performance measures, including adjusted operating profit, adjusted
operating profit after allocation of central costs, adjusted
operating cash flow and adjusted earnings per share, which are
not defined or specified in accordance with UK adopted
International Financial Reporting Standards. These non-GAAP
measures enable management to reflect the underlying performance of
the continuing operations of the Group and provides investors with
a more meaningful comparison of how the business is managed and
measured on a periodic basis.
The adjusted performance measures
presented below cannot be derived directly from the Group's
condensed consolidated financial statements, and therefore a
reconciliation of the adjusted performance measure to the most
directly comparable reported measure in accordance with UK
adopted International Financial Reporting Standards has been
provided.
Reconciliation to the Group's
adjusted profit measures
Continuing operations
|
|
2023
£m
|
2022
£m
|
Operating profit/(loss)
|
Reported statutory
measure
|
10.9
|
(11.3)
|
Amortisation of acquired intangible
assets
|
|
11.3
|
10.4
|
Adjusting items
|
Note 3
|
21.0
|
26.0
|
Adjusted operating profit
|
Adjusted performance
measure
|
43.2
|
25.1
|
Finance income
|
Note 4
|
11.0
|
7.1
|
Finance expenses
|
Note 4
|
(13.5)
|
(24.9)
|
Adjusted profit before income
tax
|
Adjusted performance
measure
|
40.7
|
7.3
|
Tax on adjusted profit
|
|
(9.6)
|
(1.6)
|
Adjusted net income
|
Adjusted performance
measure
|
31.1
|
5.7
|
Reconciliation of reported
statutory measures to the Group's segment analysis
|
|
|
|
|
|
|
|
|
2023
|
|
|
EMEA
£m
|
Americas
£m
|
APAC
£m
|
Unallocated operating
expenses
£m
|
Central corporate costs
£m
|
Continuing operations
£m
|
Discontinued
operations3
£m
|
Total
£m
|
Operating profit/(loss)
|
Reported statutory
measure
|
50.7
|
12.5
|
(1.7)
|
(39.0)
|
(11.6)
|
10.9
|
(0.4)
|
10.5
|
Adjusting items
|
Note 3
|
(0.8)
|
1.5
|
3.4
|
16.9
|
-
|
21.0
|
-
|
21.0
|
Amortisation of acquired intangible
assets
|
|
4.0
|
5.5
|
1.8
|
-
|
-
|
11.3
|
-
|
11.3
|
Adjusted operating
profit/(loss)
|
Adjusted performance
measure
|
53.9
|
19.5
|
3.5
|
(22.1)
|
(11.6)
|
43.2
|
(0.4)
|
42.8
|
|
|
|
|
|
|
|
|
|
20221
|
|
|
EMEA
£m
|
Americas
£m
|
APAC
£m
|
Unallocated operating
expenses2
£m
|
Central corporate costs
£m
|
Continuing operations
£m
|
Discontinued
operations3
£m
|
Total
£m
|
Operating profit/(loss)
|
Reported statutory
measure
|
47.3
|
18.9
|
3.9
|
(58.3)
|
(23.1)
|
(11.3)
|
(137.1)
|
(148.4)
|
Adjusting items
|
Note 3
|
1.4
|
0.5
|
-
|
24.1
|
-
|
26.0
|
-
|
26.0
|
Amortisation of acquired intangible
assets
|
|
2.6
|
5.9
|
1.9
|
-
|
-
|
10.4
|
189.2
|
199.6
|
Adjusted operating
profit/(loss)
|
Adjusted performance
measure
|
51.3
|
25.3
|
5.8
|
(34.2)
|
(23.1)
|
25.1
|
52.1
|
77.2
|
Notes:
1.
Following the disposal of the Packaging and Filters businesses
during the year ended 31 December 2022, the Group has changed its
segment analysis from a divisional to a geographical basis, and
therefore this note has been re-presented.
2.
Includes £13.7m of operating expenses that were allocated
previously to discontinued operations.
3.
Discontinued operations includes £nil (2022: £6.5m) of intangible
amortisation and £nil (2022: £182.7m) relating to
impairments.
Net (debt)/funding
surplus
Net (debt)/funding surplus is
defined as cash and cash equivalents (including short-term liquid
investments) and derivatives against hedging placement loans, net
of lease liabilities and interest bearing loans and borrowings. It
is a measure that provides additional information on the Group's
financial position.
|
|
2023
£m
|
2022
£m
|
Cash and cash equivalents
|
Reported statutory
measure
|
59.7
|
421.4
|
Debt liabilities
|
|
(95.5)
|
(293.0)
|
Lease liabilities
|
Note 13
|
(30.9)
|
(22.9)
|
Derivative financial instruments
hedging placement loans
|
|
4.2
|
8.3
|
Net (debt)/funding
surplus
|
Adjusted performance
measure
|
(62.5)
|
113.8
|
Reconciliation to the Group's
adjusted operating cash flow measure
Adjusted operating cash flow from
continuing operations is presented to exclude the impact of tax,
adjusting items, interest and other items not impacting operating
profit. Net capital expenditure is included in this measure as
management regards investment in operational assets (tangible and
intangible) as integral to the underlying cash generation
capability of the Group, except amounts relating to adjusting
items.
|
|
2023
£m
|
2022
£m
|
Net cash inflow from operating
activities
|
Reported statutory
measure
|
29.5
|
64.0
|
Adjusted for: net cash
inflow/(outflow) from
discontinued operations
|
Note 17
|
3.8
|
(59.7)
|
Operating net cash inflow from
continuing activities
|
|
33.3
|
4.3
|
Cash outflow from adjusting
items
|
Note 3
|
23.6
|
23.7
|
Net tax paid on continuing
operations
|
|
4.5
|
5.0
|
Net capex expenditure on continuing
operations
|
Note 2
|
(13.2)
|
(12.8)
|
Adjusted operating cash inflow from
continuing operations
|
Adjusted performance
measure
|
48.2
|
20.2
|
|
|
2023
£m
|
2022
£m
|
Adjusting operating profit from
continuing operations
|
Adjusted performance
measure
|
43.2
|
25.1
|
Depreciation of property, plant
and equipment
|
|
11.1
|
13.9
|
Lease right-of-use asset
depreciation
|
|
5.9
|
5.6
|
Amortisation of non-acquired
intangible assets
|
|
2.9
|
2.7
|
Share option expense
|
|
1.4
|
1.4
|
Other non-cash items1
|
|
(0.5)
|
(1.5)
|
Working capital
movements
|
|
(2.6)
|
(14.2)
|
Net capital expenditure
|
|
(13.2)
|
(12.8)
|
Adjusted operating cash inflow from
continuing operations
|
Adjusted performance
measure
|
48.2
|
20.2
|
|
|
|
|
Reconciliation of cash flows from
adjusting items:
|
|
|
|
Adjusting items
|
Note 3
|
21.0
|
26.0
|
Non-cash expenses/credits in
adjusting items2
|
Note 3
|
(5.9)
|
(2.0)
|
Adjustment for pension
contributions
|
Note 3
|
1.9
|
-
|
Cash outflow on adjusting items
recognised in the year
|
Adjusted performance
measure
|
17.0
|
24.0
|
Utilisation of prior year end
acquired accruals and provisions
|
Note 3
|
6.6
|
(0.3)
|
Cash outflow from adjusting
items
|
Adjusted performance
measure
|
23.6
|
23.7
|
Notes:
1. Other
non-cash items comprise impairment of fixed assets £nil (2022:
£0.5m), outflow from hedging activities and other movements £0.5m
(2022: £1.1m outflow), movement in provisions £nil (2022: £0.1m)
less movement due to hyperinflation £nil (2022
£3.2m).
2.
Non-cash expenses/credits in adjusting items includes £3.7m (2022:
£nil) investment property impairment, £3.4m (2022: £nil) impairment
of non-current assets following impairment review less £1.3m (2022:
add £2.0m) other non-cash movements in adjusting
items.
21. Cautionary
forward-looking statements
This Report contains
forward-looking statements based on current expectations and
assumptions. Various known and unknown risks, uncertainties and
other factors may cause actual results to differ from any future
results or developments expressed or implied from the
forward-looking statements. Each forward-looking statement speaks
only as of the date of this document. The Company accepts no
obligation to publicly revise or update these forward-looking
statements or adjust them to future events or developments, whether
as a result of new information, future events or otherwise, except to the extent legally
required.