TIDMESNT
RNS Number : 9979K
Essentra plc
08 January 2021
ESSENTRA PLC
PRE-CLOSE TRADING UPDATE
Summary
-- Four priorities remain; employee physical and emotional
wellbeing, continued high levels of customer support, cash
conservation, and building for our future
-- On a like for like basis (LFL), Group Q4 revenue is -1.1% on
the prior year, maintaining the trend of steady quarterly
improvement since the nadir in Q2 of -9.8%. The Company expects to
deliver FY20 operating profit in line with the consensus of
analysts' forecasts (1)
-- Improved LFL revenue trends seen through Q2 and Q3 have been maintained in Q4 for Components
-- A reduction in elective surgeries and prescription levels,
first seen in Q3, continued but overall the Packaging division had
a much improved Q4
-- The Filters division faced certain logistical challenges in
Asia, derived from regional shipping container shortages, that
resulted in a tougher Q4
-- Essentra has a strong balance sheet and liquidity levels of cGBP285m
-- Strategic initiatives continue to be implemented, helping to
underpin the profitability potential of the Company
Essentra plc ('the Company') today provides a pre-close trading
update for the year ending 31 December 2020.
Trading performance
Since the onset of COVID-19, as the year has progressed, Group
revenue on a LFL basis has shown steady improvement - going from
-9.8% in Q2, to -6.7% in Q3 and finally improving to -1.1% in Q4
(which equates to -3.9% for H2). As a result, the Company is
expecting to deliver a total FY20 operating profit number in line
with the consensus of analysts' forecasts(1) .
The Components division is recovering well. Q2 revenue was -20%
LFL on the prior year period, improving to -13.9% in Q3 and -0.4%
in Q4. Overall for H2, Components was 7.2% down on a LFL basis.
Recent order book trends are demonstrating continued steady
progress across all regions. Our enhanced online offer continues to
differentiate us, whilst our new state-of-the-art German warehouse
has recently become operational, providing an enhanced logistical
platform from which to drive the European Components business. The
division has recently conducted its annual customer survey and is
very pleased to report that despite all of the challenges faced in
2020 due to the impact of COVID-19, our customers have rated us
with a net promoter score (NPS) of 45 points - which is a 4 point
improvement on the prior year.
As reported previously, the Packaging division has seen softness
in certain end markets owing to a reduction in the levels of
prescriptions and elective surgeries through lockdown periods. This
trend has continued in Q4, with a LFL decline of 1.3% (though much
improved on the -8.5% seen in Q3), meaning that H2 has closed 4.9%
below prior year on a LFL basis. However, recent order book trends
have been somewhat improving, as the pharmaceutical and beauty
markets start to slowly recover and we build on strong customer
relationships. The division continues to play its part in
supporting the healthcare industry in its fight against COVID-19,
helping to produce secondary packaging for anti-viral and vaccine
products, and has recently been honoured with the coveted award of
UK Packaging Company of the Year, as adjudicated by Packaging News.
The integration of 3C! into the division continues to progress well
and is in line with our expectations.
The Filters division had a tougher end to the year, recording a
1.5% decline in Q4, which was driven by certain logistical
challenges in shipping product in Asia derived from regional
container shortages. In H2, the overall division revenue grew by
0.2%, whilst the core Filters business (i.e. excluding Tear Tapes)
revenue grew by 0.7%. Full production has been reached for the
previously announced outsourcing contract wins, the China JV
remains on track to commence production towards the end of Q2 2021,
and the division's innovation capability continues to deliver a
strong pipeline of further projects, whilst maintaining a focus on
NGP and sustainable/biodegradable product categories - for which
three proprietary products have been launched in recent times.
Balance sheet strength and liquidity
The Company maintains a strong balance sheet and delivered
positive cash generation in Q4 hence our overall liquidity position
at the end of December was cGBP285m.
The Company expects to close FY20 comfortably within its
targeted gearing range of between 1x to 2x (net debt/EBITDA),
providing the platform from which it can explore and drive further
strategic opportunities.
Strategic Initiatives
The Company has undertaken a detailed review of its global
footprint, which has resulted in the proposed closure of certain
sites in 2021, across the Components and Packaging divisions. The
exceptional cost related to these closures is estimated to be
cGBP17m. We expect to start generating savings in 2021, with annual
savings of cGBP13m from 2022 onwards, helping to underpin the
profitability potential of the Company. Further detail will be
provided in the Final Results statement.
Brexit
Now that the UK has exited the EU with a trade deal, the
Company's focus has shifted to ensuring the effective management of
the new arrangements. Overall, we continue not to foresee any
material direct impact to the Company from Brexit.
Notes
(1) Analyst operating profit (adjusted to exclude intangible
amortisation on acquired assets and exceptional operating items)
forecasts range from GBP59m-GBP63m
Enquiries
Essentra plc Tulchan Communications LLP
Aamir Mohiuddin, Investor Relations Martin Robinson
Director Sophia Martin-Pavlou
Lucy Yank, Group Communications Olivia Peters
Director Tel: +44 (0)20 7353 4200
Tel: +44 (0)1908 359100
Notes to Editors
About Essentra plc
Essentra plc is a FTSE 250 company and a leading global provider
of essential components and solutions. Organised into three global
divisions, Essentra focuses on the light manufacture and
distribution of high volume, enabling components which serve
customers in a wide variety of end-markets and geographies.
Headquartered in the United Kingdom, Essentra's global network
extends to 34 countries and includes 7,552 employees, 50 principal
manufacturing facilities, 34 sales & distribution operations
and 4 research & development centres. For further information,
please visit www.essentraplc.com .
Essentra Components
Essentra Components is a global market leading manufacturer and
distributor of plastic injection moulded, vinyl dip moulded and
metal items. Operating in 29 countries worldwide, 14 manufacturing
facilities and 29 logistics centres serve more than 85,000
customers with a rapid supply of low cost but essential products
for a variety of applications in industries such as equipment
manufacturing, automotive, fabrication, electronics and
construction. The division also includes the Reid Supply business,
which provides a wide range of branded hardware supplies to a broad
base of industrial customers, largely located in the US
Mid-West.
Essentra Packaging
Essentra Packaging is one of only two multicontinental suppliers
of a full secondary packaging range to the health and personal care
sectors, with 24 facilities across four geographic regions. The
division's innovative products include cartons, leaflets,
self-adhesive labels and printed foils used in blister packs, which
help customers to meet the rapidly-changing requirements of these
end-markets and can also be combined with Essentra's authentication
solutions to help the fight against counterfeiting.
Essentra Filters
Essentra Filters is the only global independent cigarette filter
supplier. The seven worldwide locations, plus a dedicated
Technology Centre supported by three regional development
facilities, provide a flexible infrastructure strategically
positioned to serve the tobacco sector. The business supplies a
wide range of value-adding high quality innovative filters,
packaging solutions to the roll your own segment and analytical
laboratory services for ingredient measurement to the industry:
Essentra's offering also includes Heat Not Burn and e-cigarette
solutions to the rapidly evolving market for Next Generation
Products. The division now also includes the Tear Tapes business,
which is globally recognised as the leading manufacturer and
supplier of pressure-sensitive tear tapes, that are largely used in
the tobacco, food and drink and specialist packaging sectors.
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