ESSENTRA
PLC
("Essentra", the "Group" or
the "Company")
RESULTS FOR THE HALF YEAR
ENDED 30 JUNE 2024
Return to growth in
the second quarter. FY24 expectations unchanged.
Results at a glance
|
|
H1 2024
£m
|
H1 2023
£m
|
Change Constant
FX
|
Change Actual
FX
|
|
Revenue
|
159.7
|
166.3
|
+1.5%
|
(4.0)%
|
|
Adjusted1 operating
profit
|
21.8
|
23.0
|
+7.6%
|
(5.2)%
|
|
Adjusted1 operating
margin
|
13.7%
|
13.8%
|
+80bps
|
(10)bps
|
|
Net financing costs
|
(4.1)
|
-
|
-
|
-
|
|
Adjusted1 pre-tax
profit
|
17.7
|
23.0
|
(14.0)%
|
(23.0)%
|
|
Adjusted1 basic
earnings per share
|
4.6p
|
5.9p
|
(13.3)%
|
(22.0)%
|
|
Adjusted1 net cash flow
from operating activities
|
17.5
|
20.5
|
(2.8)%
|
(14.6)%
|
|
Reported operating
profit
|
8.1
|
10.3
|
+4.2%
|
(21.4)%
|
|
Reported pre-tax profit
|
4.0
|
10.3
|
(50.7)%
|
(61.2)%
|
|
Reported net profit
|
2.5
|
7.7
|
(54.7)%
|
(67.5)%
|
|
Reported profit per
share
|
0.9p
|
2.6p
|
-
|
(65.4)%
|
|
Dividend per share
|
1.25p
|
1.20p
|
-
|
+4.2%
|
|
Reported net cash inflow from
operating activities2
|
14.5
|
8.9
|
-
|
62.9%
|
|
Free cash
flow2
|
12.5
|
15.3
|
-
|
(18.3)%
|
|
Net debt / (funding
surplus)4
|
59.7
|
(12.9)
|
-
|
-
|
|
Net debt / (funding surplus) to
adjusted EBITDA3,4
|
1.1x
|
(0.3)x
|
-
|
-
|
Numbers reported on a continuing operations
basis
Financial performance
· Revenue of £159.7m (H1 2023: £166.3m), 1.5% growth on a
constant currency basis, 4.0% decline on a reported
basis
· Sequential quarterly improvement in revenue year to date,
with the business returning to year-on-year growth in Q2 on a
like-for-like5 ("LFL") basis
· Gross margin expansion to 46.4% (H1 2023: 43.9%)
· Adjusted1 operating profit £21.8m (H1 2023:
£23.0m), representing 7.6% growth on a constant currency basis,
with adjusted operating margins of 13.7% (H1 2023:
13.8%)
·
Central corporate costs in
line with the c.£13m annual run rate previously guided
·
Adjusted1 basic
earnings per share of 4.6p (H1 2023: 5.9p)
·
Adjusted1 net cash
flow from operating activities of £17.5m; conversion of 80.3% (H1
2023: 89.1%)
·
Reported net cash inflow from
operating activities of £14.5m (H1 2023: £8.9m)
· Net debt of £59.7m excluding IFRS16 lease liabilities of
£29.4m, representing leverage of 1.1x adjusted EBITDA3
on a pre-IFRS16 basis (1.4x on a post-IFRS16 basis)
·
Progressive interim ordinary dividend of 1.25p
per share, in line with the Company's previously stated
policy
· Rolling Credit Facility ("RCF") extension secured with the
same terms through to July 2029, ensuring long-term
funding
Market performance
· End-market recovery remains mixed, although sales per working
day trends across the Group's three trading regions improved
through the first half, with gross margin expansion
year-on-year
·
EMEA saw a stable LFL5 performance,
with lower levels of recovery in line with external indicators.
Total growth for EMEA, including BMP TAPPI was 6.9% on a constant
currency basis
·
The Americas region reported
6.9% constant currency decline in H1, although saw pace of decline
ease in Q2 to 4.9% benefiting from stability across distributor
end-market channels
· APAC reported 1.8% constant currency growth. Whilst the
domestic China market remains soft, the export market is improving,
supported by the growth of access hardware sales and new customer
projects
Outlook
· Board expectations for FY 2024 adjusted1 operating
profit remain unchanged and are aligned with market
expectations6
·
In H1 the Group delivered
gross margin and operating profit margin expansion on a constant
currency basis in mixed end-market conditions
· Essentra is well positioned with a right-sized cost base and
robust operations to deliver operating leverage as market growth
returns
·
Further modest improvements in
volumes in the second half of the year are anticipated, underpinned
by ongoing recovery of demand in our end-markets
· The acquisition pipeline remains active and Management
continue to assess a number of opportunities, whilst maintaining a
disciplined approach to allocating capital for growth
· Essentra remains focused on enhancing its hassle-free
customer proposition, delivering strong profit margins, and
continues to invest in growth initiatives
Commenting on the Half Year results, Scott Fawcett, Chief
Executive, said:
"We are encouraged by the sequential momentum through the
first half of 2024, and in particular sales and volume trends
returning to year-on-year growth in Q2, while recognising that
market sentiment remains mixed by region with modest levels of
recovery to date. In the period, the Group delivered financial
performance in line with Board expectations, including gross margin
expansion to 46.4% and operating margins of 13.7%, reflecting
Essentra's resilient track record through the cycle and
demonstrating the strength of our differentiated business model. We
are also pleased with the performance and contribution so far of
BMP TAPPI, which we acquired in October 2023.
In light of the mixed macro environment, the business
continues to maintain a balanced approach to cost control, driving
further operational efficiencies, whilst also investing
appropriately in value-enhancing growth initiatives that will
support long-term value creation.
Management remains confident in making further progress in
2024 towards Essentra's medium-term targets. We expect to see
further modest improvements in volume in the second half of the
year, and as such, FY 2024 expectations are
unchanged."
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 Interim Financial
Statements.
2 A reconciliation of free
cash flow and net cash inflow from operating activities is set out
in the Financial Review section.
3 Adjusted EBITDA is defined
as operating profit before depreciation (and other amounts written
off property, plant and equipment), share option expense,
amortisation of acquired intangible assets and adjusting
items. Net debt
to adjusted EBITDA including lease liabilities is 1.4x (H1 2023:
0.2x).
4 Presented on a last twelve
months basis excluding lease liabilities. £89.1m (H1 2023: £8.3m)
when including lease liabilities.
5 On a constant currency
basis, excluding the acquisition of BMP TAPPI, completed October
2023.
6 Company compiled market
expectations for 2024 adjusted operating profit are between £48.5m
and £50.6m.
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 30 July 2024 at the offices
of Peel Hunt, 100 Liverpool Street, London EC2M 2AT.
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
LEI:
5493007MOZNA03BVNE96
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.
The Group delivered revenues of
£159.7m in H1 2024, an improvement of 1.5% on a constant currency
basis. Like-for-like ("LFL") revenues reduced by 2.2% year-on-year,
offset by a positive contribution to revenue of 3.7% from the
acquisition of BMP s.r.l ("BMP TAPPI"), which completed in October
2023. The business saw an adverse FX movement in the period of
5.5%, resulting in a reported revenue decline of 4.0% compared to
the previous year.
On a constant currency basis,
compared to the prior year, Q1 saw LFL revenues decline by 4.6%
improving to year-on-year growth of 0.7% in Q2 on an adjusted
trading day basis. Whilst performance year-on-year was partly
supported by easing comparatives, the Group saw LFL Q2 2024 sales
on an adjusted trading day basis increase by 2.7% compared to Q1
2024 and improve by 4.4% compared to H2 2023.
Consistent with the AGM trading
update shared in May 2024, momentum was sustained through the first
half of 2024, albeit at a modest pace. EMEA achieved a stable
performance, with lower levels of recovery in line with external
indicators. Softer conditions remain in West Europe, particularly
in Germany, offset by notable areas of strength in East Europe and
Turkey, supporting the result of the region as a whole. The
Americas region saw previous destocking trends ease and stabilise
within distributor end-market channels, whilst in the APAC region
although the domestic market in China remains weak, export sales to
the rest of APAC are improving, supported by the growth of access
hardware sales and new customer projects.
The Group experienced reduced
levels of input price inflation through the first half, including
for raw materials. Combined with proactive procurement activities,
this led to more focused customer price increases with the overall
pricing benefit for the Group returning to normalised levels in H1.
The Group anticipates this focused and selective approach to
customer price increases to continue through the second
half.
Gross margins in H1 were strong at
46.4% (H1 2023: 43.9%),
with all three regions reporting margin
expansion. The business continues to focus on controlling costs and
driving operational efficiencies, further supported by procurement
focus, driving additional margin accretion.
The Group achieved adjusted
operating profits of £21.8m (H1 2023:
£23.0m) with adjusted operating margins of 13.7% (H1 2023: 13.8%).
All three regions continue to balance a disciplined approach to
cost management with investment in organic growth opportunities.
Central corporate costs totalling £6.5m (H1 2023: £6.2m) remain in
line with the £13.0m annual run rate previously guided.
In H1 2024, the Group generated
£17.5m of adjusted operating cashflow with operating cash
conversion of 80.3% (H1 2023: 89.1%). The business saw a lower cash
conversion in the period, as it utilised additional working capital
to build inventory within the standard product offer enabling an
improvement in our "hassle-free" service to our customers. The
Group will continue to review its standard product offer through H2
2024 to further reduce lead times and improve product availability
for customers, positioning Essentra well to take market share as
volumes return.
Group strategy and medium-term targets.
Essentra is 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, generates high margins and has scope to
expand through scale and operational effectiveness. Given strong
returns and cash conversion, the business is able to further drive
growth through value enhancing M&A. To date Essentra has
executed and integrated eleven acquisitions in the previous
thirteen years. The M&A pipeline remains active and Management
continues to assess a number of opportunities, whilst maintaining a
disciplined approach to allocating capital for growth.
The medium-term ambition of the
business, as set out at the November 2022 capital markets event,
remains 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 model with continued focus
on working capital management and a strong balance sheet
·
A clear capital framework to drive further
shareholder returns.
Providing a "hassle-free" customer experience.
The Group is committed to delivering a
"hassle-free" customer proposition and our two closely linked
on-time-in-full ("OTIF") performance and Customer Satisfaction KPIs
continue to show good progress. Monthly post-purchase questionnaire
metrics indicate an excellent and progressive improvement
year-on-year, ahead of the annual customer survey which is expected
to take place in H2 2024. Improvements continue to be made to our
OTIF performance with the June exit rate ahead of the 2023 average
of 82.2%. Whilst EMEA saw an initial small period of disruption in
Q1 2024 after the new ERP platform was deployed in East Europe,
OTIF rates have improved to normalised levels in the region through
Q2 2024. It is expected that OTIF service levels for the Group as a
whole will continue to progress towards the 95% target through H2
2024.
Ordinary dividend. The Board
has declared a 2024 interim dividend of 1.25 pence per share (2023
interim: 1.20p). The interim dividend is in line
with the Board's commitment to a progressive dividend policy
maintaining full year dividend cover in the order of three times
adjusted earnings.
The interim dividend will be paid
on 25 October 2024 to shareholders on the share register at the
record date, being 20 September 2024. The ex-dividend date will be
19 September 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 4 October 2024.
Share buyback programme. The
£60.0m share buyback programme announced in February 2023,
following the completion of the disposals of the Filters and
Packaging businesses, continues. As outlined at the FY 2023 results
in March 2024, the execution of the programme will be flexible and
is dependent on the Group's capital allocation opportunities and
priorities, notably acquisitions. It is anticipated that the
buyback programme will extend beyond the current financial
year.
Since the launch of the programme
to 30 June 2024, a total of 15.16m shares have been purchased, at
an average purchase price of 178.3 pence per share, totalling
£27.0m. As at 30 June 2024, the programme was c.45% complete. Of
the shares purchased, 4.14m were transferred into treasury, and
11.02m have subsequently been cancelled, which represented 3.6% of
the issued share capital of the Company (excluding treasury shares)
when the programme commenced.
Board changes. As previously
announced, Steve Good joined the Board as independent non-executive
director and chair designate effective from 1 July 2024. Paul
Lester will stand down as chair and from the Board on 1 November
2024 after nine years, and in accordance with Provision 19 of the
2018 UK Corporate Governance Code.
Outlook. Group trading in H1
2024 saw a sequential quarterly improvement in revenue, with the
business returning to year-on-year growth in Q2 on a like-for-like
basis, delivering gross margin and operating margin expansion on a
constant currency basis. Management is encouraged by positive new
order intake and sales momentum within the first six months of
2024, albeit at a modest pace. Further modest improvements in
volumes in the second half of the year are anticipated, underpinned
by ongoing recovery of demand in our end-markets. The Group is well
positioned with a right-sized cost base and robust and agile
operations to deliver operating leverage as volumes continue to
return, and as such expectations for FY 2024 are
unchanged.
Essentra's global manufacturing
and distribution footprint, market-leading positions and focus on
delivering excellent customer service will support ongoing organic
growth and profitability. The Group remains focused on enhancing
its hassle-free customer proposition, delivering strong profit
margins, and continues to invest in value-enhancing growth
initiatives. Management remains confident that Essentra's robust
and differentiated business model will support further progress
towards its medium-term targets.
EMEA
|
|
H1 2024
£m
|
% growth
Constant
FX
|
% growth
Actual FX
|
|
Revenue
|
89.4
|
6.9
|
(0.4)
|
|
Gross profit
|
47.2
|
11.8
|
4.4
|
|
Gross margin
|
52.8%
|
230bps
|
250bps
|
Revenue for the half year was
£89.4m, a 6.9% increase on a constant currency basis, compared to
the prior year. The region benefitted from the acquisition of BMP
TAPPI in October 2023 contributing 7.0% to growth year-on-year,
with the LFL business stable compared to the prior year. The first
quarter saw a LFL constant currency revenue decline of 3.1%
improving to 3.7% growth in Q2, compared to the prior year period
on a trading day adjusted basis. Although comparatives to the prior
year started to ease through Q2 there is sequential 2024 momentum,
with +1.1% LFL growth in sales per working day in Q2 2024 compared
to Q1 2024.
End-market conditions in EMEA
remain mixed, with a continuation of trends as detailed at the 2024
AGM trading update in May 2024. Western Europe, and Germany in
particular, have experienced market softening in line with wider
industrial trends and indicators. Whilst the business in Turkey has
some exposure to the European market, it has sustained stronger
momentum due to reduced exposure to cyclical markets and
benefitting instead from the growth of electrification end-market
trends within data communications and power generation.
BMP TAPPI, acquired in October
2023 is performing in line with expectations and integration is on
track. 1,100 standard products from their extensive range of
protective caps and plugs have been launched into the Essentra
range as part of a phased approach, with inventory held in the two
regional distribution hubs and sales and product specialists across
Europe leading commercial activities. The sales opportunity
pipeline is building, with early cross-sell success within a number
of our end-markets, including specialist vehicles and construction
agriculture across the existing Essentra customer base within the
EMEA region.
The ERP programme deployment
across Eastern Europe in January 2024 has concluded successfully,
with limited levels of disruption and business operations returned
to normalised levels in Q2. Progress in 2024 remains focused on
further implementation in European markets in a measured manner,
with Germany, Austria and Benelux region expected to deploy in H2
2024, and the remaining European sites expected to deploy in 2025.
The costs to date in 2024 are on track, and anticipated to be
c.£10m for the year (FY 2023: £10.8m), in line with guidance
previously shared.
Gross margins remained strong at
52.8% for the half year (H1 2023: 50.3%), an improvement of 230bps
on a constant currency basis, and ahead of FY 2023 reported gross
margin of 51.2%. The region will continue to adjust capacity at
regional manufacturing and distribution facilities to meet demand,
balancing costs to realise operational efficiencies whilst
monitoring changes to end-market conditions.
AMERICAS
|
|
H1 2024
£m
|
% growth
Constant
FX
|
% growth
Actual FX
|
|
Revenue
|
51.3
|
(6.9)
|
(9.4)
|
|
Gross profit
|
19.5
|
(5.0)
|
(7.1)
|
|
Gross margin
|
38.0%
|
80bps
|
90bps
|
Revenue for the half year was
£51.3m, a reduction of 6.9% on a constant currency basis compared
to the prior year. Whilst the region has reported year-on-year
revenue decline in the first half, the wider customer industrial
environment stabilised at the start of 2024, and distributor
volumes normalised with destocking trends easing. Americas saw
first quarter constant currency revenue declines of 8.7%, improving
to 4.9% decline in Q2 on a trading day adjusted basis. Whilst H1
2023 was comparatively strong, trends in the current year are
encouraging with sales per working day trending 2.6% higher in Q2
2024 compared to Q1 2024.
The sequential improvements in
revenue through 2024 have been led by an increasing opportunity
pipeline and levels of customer activity, with a focus on new
customer acquisition including more targeted customer and industry
marketing campaigns. A selective approach to sales price increases
has been taken in H1 as the market recovers, with a second tranche
of price increases planned, anticipated to bring benefits in
H2.
The region is continuing to focus
on driving new business across the customer base within end-markets
such as industrial electronics and production machinery that have
higher levels of growth and cross-sell opportunities.
The region remains focused on
inventory availability, optimising the distribution network, and
has further invested in the stocking of the standard product offer
through H1 as a continuation of the activities that commenced in H2
2023. Improvements to the "hassle-free" customer proposition have
been recognised through the sustained improvement in post-purchase
customer surveys scores in the period.
Americas delivered half year gross
margins of 38.0% (H1 2023: 37.1%), an 80bps improvement on a
constant currency basis and marginally ahead of FY 2023 reported
gross margin of 37.9%. A proactive approach to cost management has
been maintained as volumes show signs of normalising with further
recovery of margin anticipated through H2, with selective pricing
activity, and improved operational leverage.
APAC
|
|
H1 2024
£m
|
% growth
Constant
FX
|
% growth
Actual FX
|
|
Revenue
|
19.0
|
1.8
|
(4.5)
|
|
Gross profit
|
7.4
|
15.8
|
8.8
|
|
Gross margin
|
38.9%
|
470bps
|
470bps
|
The APAC region delivered revenue
of £19.0m in H1 2024, an improvement of 1.8% on a constant currency
basis compared to the prior year. On a constant currency basis, the
first quarter performance was 0.8% ahead of the prior year on a
trading day adjusted basis, improving to year-on-year growth of
3.5% in Q2 with sales per working day trends improving 8.9%
sequentially between Q1 2024 and Q2 2024.
Aligned with previous trading
updates, performance continues to be driven by the market dynamics
in China (c.69% of APAC revenue; c.8.3% of Group revenue), which
has seen soft domestic market demand sustained. Momentum is
building within the export market and the rest of the APAC region,
supported by a pipeline of commercial opportunities including the
access hardware product range. This is anticipated to bring
additional growth through H2, focused on higher growth end-markets,
including renewable energy, telecommunications, and power
networks.
The APAC commercial and
operational footprint review has continued in 2024, ensuring the
region aligned for future growth opportunities. Dip moulding
manufacturing capabilities across Essentra have been expanded, with
new machine capital investment in Ningbo, China. The new dip
moulding machinery will service existing demand in the APAC region,
securing supply and enhancing the product range, attracting new
commercial opportunities to the region. The business has also taken
the decision to relocate the regional office headquarters in
Singapore to the existing office in Malaysia. The current
distribution arrangements in Singapore will remain.
Through H1, the region has
successfully controlled costs, balancing investment in future
growth and footprint, whilst driving operational efficiencies with
improved leverage. The region delivered half year gross margin of
38.9% (H1 2023: 34.2%) 470bps improvement a constant currency basis
and ahead of FY 2023 reported gross margin of 35.6%.
Following approval of Essentra's
near- and long-term science-based emissions reduction targets
including verification of Essentra's net-zero science-based target
by 2050 by the Science Based Targets initiative ("SBTi") in
February 2024, the Group published its first Climate Transition
Plan in May 2024, which received 97.6% approval from shareholders
at the 2024 AGM, outlining the Company's emissions reduction
targets, goals and focus areas for implementation of its climate
strategy. The Group is pleased with the continued significant
progress in sustainability in 2024 to date, and is committed to
regular reporting on progress in this area.
Essentra has been making good
progress in decarbonising its global footprint, focusing on
renewable energy tariffs and energy saving initiatives across the
manufacturing footprint. Emissions intensity for scope one and two
has seen a decrease of 15% compared to FY 2023 and 50% since our
2019 baseline. Renewable electricity is 60% of total electricity
usage, an increase of 16% compared to FY 2023.
An additional five sites across
Essentra's global footprint are on track to achieve zero waste to
landfill in 2024 bringing the expected total for 2024 to 19 sites
(FY 2023: 14 sites).
The percentage of materials from
sustainable sources across our
manufactured polymer ranges reduced marginally to 19% in H1,
compared to the 2023 year-end metric of 21%, which is partly due to
adding BMP TAPPI products into the Essentra range as well as
increased demand across the standard range for specific products
which have not yet transitioned to recycled or biopolymers. As part
of integration activities and further development of the product
offer, we look forward to continuing our progress in obtaining
materials from sustainable sources across our manufactured polymer
range.
The Centre of Excellence continues
to drive the development of new and more sustainable products, and
in 2024, following a series of successful trials, has accelerated
the development of new bioplastic materials to create more
sustainable product ranges. Since operations commenced, 19 trials
have been completed using 14 different materials across nine
individual products.
Essentra continues to innovate and
develop relationships with its customers to identify new commercial
opportunities. So far in 2024 the Group has recognised a number of
new commercial business wins based on sustainability criteria
across all three regions, including customers from HVAC, industrial
trucks and general industrial end-markets.
Constant currency, like-for-like,
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 14-15
and 19-20 of the Essentra plc Annual Report 2023.
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
--------
|
|
|
H1 2024
|
H1 2023
|
H1 2024
|
H1 2023
|
|
US$:£
|
1.27
|
1.23
|
1.26
|
1.27
|
|
€:£
|
1.17
|
1.14
|
1.18
|
1.17
|
Re-translating at H1 2024 average
exchange rates decreases the prior year revenue by £8.8m, decreases
prior year gross profit by £4.0m and decreases prior year operating
profit by £2.7m.
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 H1 2024 LFL
results are adjusted for the acquisition of BMP TAPPI on 26 October
2023.
Discontinued operations. Discontinued operations recognised a £1.2m post-tax loss (H1
2023: £0.8m post-tax loss), as reported in the Condensed
Consolidated Interim Income Statement. Refer to Note 12 in the
Condensed Consolidated Interim 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 H1 2024, amortisation of acquired intangible assets was
£5.9m (H1 2023: £5.7m), and there was a pre-tax charge for
adjusting items of £7.8m (H1 2023: £7.0m). In line with previous
guidance, current year adjusting items include £4.8m major software
as a service ("SaaS") development expenditure; and £0.8m relating
to legacy pension scheme costs. £0.4m was incurred relating to the
acquisition of BMP TAPPI and Wixroyd, £0.7m of restructuring
activities were incurred and £1.2m relating to historic indemnity
claims. Further details on adjusting items are shown in Note 3 to
the Condensed Consolidated Interim 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.
Net finance expense. Net
finance expense of £4.1m compared to £nil in the prior year period.
The prior year period had elevated levels of interest income due to
the cash proceeds held at the start of 2023 following the disposal
of the Filters and Packaging businesses, prior to a special
dividend being paid in April 2023.
Tax. The effective tax on
underlying profit before tax (before adjusting items and
amortisation of acquired intangible assets) was 25.7% (H1 2023:
23.5%). The underlying effective tax rate for H1 2024 is within the
forecast tax rate range of 24% to 26%. Consistent with the
disclosure of tax rates at FY 2023 results, 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 in addition to increases in
corporation tax rates in overseas entities.
Adjusted operating cash flow from continuing
operations. Adjusted operating cash
flow from continuing operations of £17.5m equating to an operating
cash conversion of 80.3% at the half year (H1 2023: 89.1%). Free
cash flow was £12.5m (H1 2023: £15.3m).
|
|
H1 2024
|
H1 2023
|
|
|
£m
|
£m
|
|
Adjusted operating profit
|
21.8
|
23.0
|
|
Depreciation and amortisation of
non-acquired intangible assets
|
6.0
|
6.9
|
|
Right-of-use asset
depreciation
|
3.0
|
2.7
|
|
Share option expense
/ other movements
|
0.9
|
(0.6)
|
|
Change in working
capital
|
(9.9)
|
(6.7)
|
|
Net capital expenditure
|
(4.3)
|
(4.8)
|
|
Adjusted operating cash flow from continuing
operations
|
17.5
|
20.5
|
|
Tax1
|
(1.1)
|
(1.4)
|
|
Cash outflow in
respect of adjusting items1,2
|
(6.2)
|
(15.0)
|
|
Add back: net capital
expenditure
|
4.3
|
4.8
|
|
Net cash inflow from operating
activities3
|
14.5
|
8.9
|
|
|
|
|
|
Adjusted operating cash flow from continuing
operations
|
17.5
|
20.5
|
|
Tax1
|
(1.1)
|
(1.4)
|
|
Net interest
paid
|
(3.9)
|
(3.8)
|
|
Free cash flow
|
12.5
|
15.3
|
1 Tax paid in 2023 excludes
the tax paid in relation to adjusting items and discontinued
operations. This is included within the cash outflow in respect of
adjusting items and discontinued operations.
2 Pension contribution of
£0.5m in H1 2024 for legacy pension schemes has been included
within cash outflow in respect of adjusting items (H1 2023:
£2.5m).
3 Statutory cash flows from
operating activities can be found in the Condensed Consolidated
Interim Financial Statements.
Net debt. Net debt at the end
of the period was £89.1m compared to a net debt of £62.5m at 31
December 2023 (excluding lease liabilities of £29.4m). The overall
increase in net debt in the first six months of 2024 was driven by
the anticipated one off completion accounts payment associated with
the sale of the Filters business in the period totalling £24.8m.
This has been partly offset by operating cash conversion of 80.3%,
and free cash flow of £12.5m in the period.
The Group's financial ratios
remain within the 0.5x - 1.5x target range. Net debt to adjusted
EBITDA pre-IFRS16 lease liabilities was 1.1x (net debt to adjusted
EBITDA including IFRS16 lease liabilities: 1.4x).
|
|
2024
|
|
|
£m
|
|
Net debt as at 1 January 2024
|
62.5
|
|
Free cash
flow
|
(12.5)
|
|
Cash outflow from
discontinued businesses including disposal costs
|
25.8
|
|
Cash outflow in
respect of adjusting items
|
6.2
|
|
Share
buyback
|
3.1
|
|
Acquisitions less
cash acquired
|
1.9
|
|
Lease liability
movements
|
1.6
|
|
Movement in loan
hedging derivatives
|
(0.4)
|
|
Foreign
exchange
|
0.9
|
|
Net debt as at 30 June 2024
|
89.1
|
Banking and refinancing facilities.
One of the main sources of funding for the
Company is a Revolving Credit Facility ("RCF") provided by a group
of six banks totalling £200.0m, which as of December 2023, was set
to mature in October 2026. As at 30 June 2024, £32.6m was
drawn.
In July 2024 the Company agreed to
extend the facility for five years from date of signing and will
now mature in July 2029. By evaluating options and refinancing the
RCF ahead of the original maturity date, the Company has been able
to maintain the existing covenants and secure favourable pricing
terms. The extended maturity date provides
the Company with a longer-term financing solution and offers
greater stability as well as reducing the need for frequent
refinancing activities, providing greater liquidity to support our
operational and strategic initiatives. The new facility is based on
the same terms and size and is provided by a group of five banks,
including four from the original RCF facility.
The Company retains $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
|
July 2029
|
|
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.
2024 Half Year Risk Disclosure
The Board has established and
maintains an effective risk management and internal control
framework designed to manage the delivery of the Company's
strategic objectives. The Risk Assurance team, independent of
management, enables and facilitates the risk management process
across the Company, acts as the custodian of the Company's risk
framework and supports risk management activities.
The Board considers the nature and
extent of the Principal Risks it is prepared to take in achieving
its strategic objectives - its risk appetite - annually, by
evaluating these risks against a three-point scale from
"risk-averse" to "risk-neutral" to "risk-tolerant". This informs
the development and focus of mitigating actions for each of the
Principal Risks with a particular focus on risks that are assessed
to be outside the agreed appetite.
At a strategic level, our risk
management objectives are to:
·
Identify the Company's material 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 appetite in line with the agreed appetite
·
Ensure that growth plans are properly supported
by an effective risk management framework
·
Help management teams to improve the control and
co-ordination of risk-taking across the Company.
The Group Executive Committee
("GEC") has responsibility for the day-to-day coordination and
management of risk activities throughout the Company. These
responsibilities focus on appropriate identification, evaluation,
mitigation and management of all key business risks and ensure
that, where necessary, adequate controls are in place and are
monitored. In addition, the GEC considers the Company's risk
appetite, makes recommendations to the Board on appetite levels and
the level of mitigation necessary to remain within them.
As an important part of fulfilling
its responsibilities the Board receives regular reporting from the
Chief Executive in relation to opportunities, risks and exposures
to enable the Board to challenge and review the GEC's risk
management approach.
The regional and functional
leadership teams undertake regular reviews during the course of the
year and engage in facilitated discussions with Risk Assurance to
consider the risk environment for their particular functional or
geographic area of responsibility, and how these could affect the
delivery of the Company's strategic objectives.
The Audit and Risk Committee
("ARC"), with assistance from Risk Assurance, oversees compliance
with risk management processes and the adequacy of risk management
activities related to the Company's operations.
During the period, the Board has
considered the Principal and Emerging Risks, as disclosed on pages
65-73 of our 2023 Annual Reports and Accounts, in the context of
the objectives noted above and across four risk categories:
strategic risks, external risks, operational risks and disruptive
risks. These risks, updated to reflect changes since our 2023
Annual Report and Accounts, are summarised as follows. The Company
remains confident that the mitigations already in place are
sufficient to manage these risks within the previously agreed risk
appetite.
Strategic risks
· Macro-economic and geopolitical environment - delivering
successfully through the economic cycle and continuing geopolitical
events (including elections in many of our end-markets during
2024)
·
Environment - our impact on the environment
(including single use plastics) and climate change
· Digital transformation - the delivery of our Business Process
Redesign programme, our eCommerce platforms and the integrity and
fidelity of our data
· Leadership talent and capability - our ability to attract,
retain, develop and motivate the talent we need to be
successful
·
M&A execution and integration - our ability
to successfully deliver on our inorganic growth plans
External risks
· Governance - ensuring legal and regulatory compliance across
the broad range of jurisdictions in which we operate
·
Cyber events - the impact of a cyber security
breach or data breach
Operational risks
·
Execution of strategic plan - our ability to
deliver on our operational and commercial improvement plans to
drive organic growth
·
Health and safety performance - ensuring the
physical and emotional wellbeing of our people and the potential
impact of significant safety events on our workforce and the
communities in which we operate
Disruptive risks
·
Operational and supply chain disruption - the
impact of disruptive events, including in relation to supply chain
ethics, across our broad operational footprint and diverse supply
chains
Emerging risks
· Regulatory change - compliance with changes in the regulatory
environment which is complicated by the geographical breadth of the
Company's operations
·
Artificial Intelligence ("AI") - consideration of
the various risks and opportunities associated with this emerging
technology and how it might affect our business and
end-markets
·
'China Plus One ("C+1") - the potential need to
implement a portfolio of strategic initiatives to meet our growth
commitments
The following Principal Risk has been retired since the
publication of our 2023 Annual Report and Accounts as exposure
levels have reduced and it is managed within other Principal
Risks:
·
Social - the
impact of our business on our stakeholders and the societies in
which we operate
|
Condensed consolidated income statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
|
Six
months
|
Year
|
|
|
|
ended
|
ended
|
ended
|
|
|
|
|
Note
|
30 Jun
2024
|
30 Jun
2023
|
31 Dec
2023
|
|
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
2
|
159.7
|
166.3
|
316.3
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
2
|
74.1
|
73.0
|
141.8
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit1
|
|
8.1
|
10.3
|
10.9
|
|
|
|
Finance income
|
|
1.4
|
6.9
|
11.0
|
|
|
|
Finance expense
|
|
(5.5)
|
(6.9)
|
(13.5)
|
|
|
|
Profit before tax
|
|
4.0
|
10.3
|
8.4
|
|
|
|
Income tax charge
|
|
(1.5)
|
(2.6)
|
(2.6)
|
|
|
|
Profit for the period from continuing
operations
|
|
2.5
|
7.7
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations
|
12
|
(1.2)
|
(0.8)
|
(0.4)
|
|
|
|
Profit for the period
|
|
1.3
|
6.9
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
Equity holders of Essentra
plc
|
|
1.3
|
6.9
|
5.4
|
|
|
|
Profit for the period
|
|
1.3
|
6.9
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to equity holders of Essentra
plc:
|
|
|
|
|
|
|
|
Basic
|
5
|
0.5p
|
2.3p
|
1.8p
|
|
|
|
Diluted
|
5
|
0.5p
|
2.3p
|
1.8p
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from continuing operations attributable to
equity holders of Essentra plc:
|
|
|
|
|
|
|
|
Basic
|
5
|
0.9p
|
2.6p
|
2.0p
|
|
|
|
Diluted
|
5
|
0.9p
|
2.6p
|
2.0p
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted profit measure: continuing
operations
|
|
|
|
|
|
|
|
Operating profit
|
|
8.1
|
10.3
|
10.9
|
|
|
|
Amortisation of acquired intangible
assets
|
|
5.9
|
5.7
|
11.3
|
|
|
|
Adjusting items
|
3
|
7.8
|
7.0
|
21.0
|
|
|
|
Adjusting operating profit2
|
|
21.8
|
23.0
|
43.2
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
1
|
Includes impairment credit on
trade receivables of £0.3m (six months ended 30 June 2023: £0.3m
charge)
|
|
2
|
See note 3 for further details
of the adjusted profit measure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
|
Six
months
|
Year
|
|
|
|
|
|
ended
|
ended
|
ended
|
|
|
|
|
|
|
|
30 Jun
2024
|
30
Jun
2023
|
31 Dec
2023
|
|
|
|
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
Profit for the period
|
|
|
1.3
|
6.9
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(expense):
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to profit or loss in
subsequent periods:
|
|
|
|
|
|
|
|
|
|
Remeasurement of defined benefit
pension schemes
|
|
|
7.5
|
1.4
|
(1.3)
|
|
|
|
|
Deferred tax (charge)/credit on
remeasurement of defined benefit pension schemes
|
|
|
(1.9)
|
(0.4)
|
0.3
|
|
|
|
|
|
|
|
5.6
|
1.0
|
(1.0)
|
|
|
|
|
Items that may be reclassified subsequently 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
|
|
|
(0.2)
|
2.3
|
2.4
|
|
|
|
|
Ineffective portion of changes in
fair value of cash flow hedges transferred to the income
statement
|
|
|
-
|
0.1
|
-
|
|
|
|
|
Effective portion of changes in
fair value of cash flow hedges
|
|
|
0.2
|
(0.6)
|
(1.8)
|
|
|
|
|
Foreign exchange translation
differences:
|
|
|
|
|
|
|
|
|
|
Attributable to equity
holders of Essentra plc:
|
|
|
|
|
|
|
|
|
|
Arising on translation of foreign
operations
|
|
|
(5.1)
|
(18.9)
|
(19.4)
|
|
|
|
|
Arising on effective net investment
hedges
|
|
|
0.2
|
1.0
|
0.7
|
|
|
|
|
Income tax
(expense)/credit
|
|
|
(0.6)
|
(1.4)
|
0.6
|
|
|
|
|
|
|
|
(5.5)
|
(17.5)
|
(17.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive credit/(expense) for the period,
net of tax
|
|
|
0.1
|
(16.5)
|
(18.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive credit/(expense) for the
period
|
|
|
1.4
|
(9.6)
|
(13.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
Equity holders of Essentra
plc
|
|
|
1.4
|
(9.6)
|
(13.1)
|
|
|
|
|
Total comprehensive credit/(expense) for the
period
|
|
|
1.4
|
(9.6)
|
(13.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
2.6
|
(8.8)
|
(12.7)
|
|
|
|
|
Discontinued operations
|
|
|
(1.2)
|
(0.8)
|
(0.4)
|
|
|
|
|
Total comprehensive credit/(expense) for the
period
|
|
|
1.4
|
(9.6)
|
(13.1)
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated
balance sheet
|
|
|
|
|
Note
|
30 Jun
2024
|
30 Jun
2023
|
31 Dec
2023
|
|
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
6
|
67.2
|
60.0
|
68.1
|
|
|
|
Lease right-of-use asset
|
7
|
24.9
|
18.5
|
27.9
|
|
|
|
Investment properties
|
6
|
3.3
|
7.0
|
3.3
|
|
|
|
Intangible assets
|
8
|
210.9
|
187.5
|
215.0
|
|
|
|
Long-term receivables
|
|
9.8
|
18.2
|
10.1
|
|
|
|
Derivative assets
|
15
|
4.6
|
6.9
|
4.2
|
|
|
|
Deferred tax assets
|
|
10.6
|
9.8
|
12.2
|
|
|
|
Retirement benefit
assets
|
9
|
11.1
|
9.5
|
7.9
|
|
|
|
Total non-current assets
|
|
342.4
|
317.4
|
348.7
|
|
|
|
Inventories
|
|
66.6
|
59.2
|
64.7
|
|
|
|
Income tax receivable
|
|
1.0
|
-
|
1.4
|
|
|
|
Trade and other
receivables
|
|
73.3
|
68.8
|
61.5
|
|
|
|
Derivative assets
|
15
|
-
|
0.6
|
-
|
|
|
|
Cash and cash
equivalents
|
10
|
49.3
|
96.3
|
59.7
|
|
|
|
Total current assets
|
|
190.2
|
224.9
|
187.3
|
|
|
|
Total assets
|
|
532.6
|
542.3
|
536.0
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Issued share capital
|
14
|
72.9
|
74.6
|
73.3
|
|
|
|
Merger relief reserve
|
|
-
|
385.2
|
-
|
|
|
|
Capital redemption
reserve
|
14
|
2.8
|
1.1
|
2.4
|
|
|
|
Other reserve
|
|
(132.8)
|
(132.8)
|
(132.8)
|
|
|
|
Cash flow hedging and cost of
hedging reserve
|
|
(0.2)
|
1.0
|
(0.2)
|
|
|
|
Translation reserve
|
|
(76.0)
|
(71.7)
|
(70.5)
|
|
|
|
Retained earnings
|
|
408.9
|
26.2
|
401.0
|
|
|
|
Attributable to equity holders of Essentra
plc
|
|
275.6
|
283.6
|
273.2
|
|
|
|
Total equity
|
|
275.6
|
283.6
|
273.2
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Interest bearing loans and
borrowings
|
10
|
113.6
|
90.3
|
95.5
|
|
|
|
Lease liabilities
|
10
|
22.2
|
16.7
|
23.8
|
|
|
|
Retirement benefit
obligations
|
9
|
13.7
|
16.3
|
17.5
|
|
|
|
Provisions
|
|
-
|
0.7
|
0.2
|
|
|
|
Deferred tax liabilities
|
|
10.8
|
6.8
|
12.4
|
|
|
|
Total non-current liabilities
|
|
160.3
|
130.8
|
149.4
|
|
|
|
Lease liabilities
|
10
|
7.2
|
4.5
|
7.1
|
|
|
|
Derivative liabilities
|
|
-
|
0.5
|
-
|
|
|
|
Income tax payable
|
|
14.0
|
15.7
|
12.0
|
|
|
|
Trade and other payables
|
|
66.0
|
68.6
|
60.7
|
|
|
|
Other financial
liabilities
|
|
3.0
|
32.1
|
28.0
|
|
|
|
Provisions
|
|
6.5
|
6.5
|
5.6
|
|
|
|
Total current liabilities
|
|
96.7
|
127.9
|
113.4
|
|
|
|
Total liabilities
|
|
257.0
|
258.7
|
262.8
|
|
|
|
Total equity and liabilities
|
|
532.6
|
542.3
|
536.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of cash
flows
|
|
|
|
|
|
Six months
ended
|
Six
months ended
|
Year
ended
|
|
|
|
|
|
30 Jun
2024
|
30
Jun
2023
|
31 Dec
2023
|
|
|
|
|
Note
|
£m
|
£m
|
£m
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
Profit/(loss) for the period
from:
|
|
|
|
|
|
|
|
Continuing operations
|
|
2.5
|
7.7
|
5.8
|
|
|
|
Discontinued operations
|
|
(1.2)
|
(0.8)
|
(0.4)
|
|
|
|
Profit for the period
|
|
1.3
|
6.9
|
5.4
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
Income tax
expense/(credit)
|
|
1.2
|
2.4
|
(1.1)
|
|
|
|
Net finance expense
|
|
4.1
|
-
|
2.5
|
|
|
|
Intangible amortisation
|
|
6.7
|
6.5
|
14.2
|
|
|
|
Adjusting items
|
|
7.8
|
7.0
|
13.9
|
|
|
|
Loss on business disposals
including cost of disposals
|
|
1.5
|
-
|
3.7
|
|
|
|
Depreciation of property, plant and
equipment
|
|
5.2
|
6.1
|
11.1
|
|
|
|
Lease right-of-use asset
depreciation
|
|
3.0
|
2.7
|
5.9
|
|
|
|
Impairment of fixed
assets
|
|
-
|
-
|
7.1
|
|
|
|
Share option expense
|
|
0.9
|
0.7
|
1.4
|
|
|
|
Hedging activities and other
movements
|
|
-
|
(0.6)
|
(0.5)
|
|
|
|
(Increase)/decrease in
inventories
|
|
(3.4)
|
2.7
|
(3.1)
|
|
|
|
(Increase)/decrease in trade and
other receivables
|
|
(12.8)
|
(6.8)
|
10.0
|
|
|
|
Increase/(decrease) in trade and
other payables
|
|
6.4
|
(2.7)
|
(10.1)
|
|
|
|
Cash outflow in respect of
adjusting items
|
3
|
(6.2)
|
(15.0)
|
(23.6)
|
|
|
|
Movement in provisions
|
|
(1.1)
|
(1.1)
|
(2.8)
|
|
|
|
Movement due to
hyperinflation
|
|
-
|
(0.7)
|
-
|
|
|
|
Cash inflow from operating activities
|
|
14.6
|
8.1
|
34.0
|
|
|
|
Income tax paid
|
|
(1.1)
|
(1.9)
|
(4.5)
|
|
|
|
Net cash inflow from operating activities
|
|
13.5
|
6.2
|
29.5
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
Interest received
|
|
0.3
|
2.0
|
3.5
|
|
|
|
Acquisition of property, plant and
equipment
|
|
(3.8)
|
(4.4)
|
(12.4)
|
|
|
|
Payments for non-acquired
intangible assets
|
|
(0.5)
|
(0.4)
|
(0.8)
|
|
|
|
Acquisition of businesses net of
cash acquired
|
|
(1.9)
|
-
|
(33.3)
|
|
|
|
Cash outflow from costs on business
disposals
|
|
(24.8)
|
(11.6)
|
(17.8)
|
|
|
|
Net cash outflow from investing activities
|
|
(30.7)
|
(14.4)
|
(60.8)
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
Interest paid
|
|
(4.2)
|
(5.8)
|
(9.9)
|
|
|
|
Dividends paid to equity
holders
|
|
-
|
(92.8)
|
(96.3)
|
|
|
|
Repayments of loans
|
|
(12.2)
|
(204.7)
|
(254.9)
|
|
|
|
Proceeds from long-term
loans
|
|
30.0
|
10.0
|
61.8
|
|
|
|
Lease liability principal
payments
|
|
(2.6)
|
(2.8)
|
(5.4)
|
|
|
|
Purchase of own shares
|
|
(3.1)
|
(16.2)
|
(24.0)
|
|
|
|
Net cash inflow/(outflow) from financing
activities
|
|
7.9
|
(312.3)
|
(328.7)
|
|
|
|
Net decrease in cash and cash equivalents
|
|
(9.3)
|
(320.5)
|
(360.0)
|
|
|
|
Net cash and cash equivalents at the beginning of the
period
|
|
59.7
|
421.4
|
421.4
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
(9.3)
|
(320.5)
|
(360.0)
|
|
|
|
Net effect of currency translation
on cash and cash equivalents
|
|
(1.1)
|
(4.6)
|
(1.7)
|
|
|
|
Net cash and cash equivalents at the end of the
period
|
10
|
49.3
|
96.3
|
59.7
|
|
|
|
|
|
|
|
|
1. Basis of preparation
Essentra plc is a public company
limited by shares that is incorporated and domiciled in England and
Wales (registration no 05444653). The address of its registered
office is Langford Locks, Kidlington, Oxford, OX5 1HX, United
Kingdom. The Company's ordinary shares are publicly traded on the
London Stock Exchange. For the purpose of the Condensed
Consolidated Interim Financial Statements, "Essentra" or the
"Group" means Essentra plc and its subsidiaries. References to the
'Company' mean Essentra plc.
The Group's principal activities
are focused on the manufacture and distribution of a comprehensive
range of components, used in diverse industrial applications and
end-markets.
The condensed consolidated interim
financial statements of the Essentra plc Group have been prepared
in accordance with UK-adopted International Accounting Standards
and with the requirements of the Companies Act 2006 as applicable
to companies reporting under those standards.
Except as described below, the
accounting policies applied in these condensed consolidated interim
financial statements are the same as those applied in the Group's
consolidated financial statements as at and for the year ended 31
December 2023 which comply with applicable law and UK-adopted
international accounting standards and also in accordance with
UK-adopted IAS 34 Interim Financial Reporting and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. The financial statements have been
reviewed, not audited.
The financial reporting framework
that has been applied in the preparation of the full annual
financial statements of the Group is applicable law and UK-adopted
international accounting standards.
The interim report does not
include all the notes of the type normally included in an annual
financial report. Accordingly, this report is to be read in
conjunction with the Annual Report for the year ended 31 December
2023, which has been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards, and any public announcements made by Essentra plc during
the interim reporting period.
The preparation of the condensed
consolidated interim financial statements requires management to
make estimates and assumptions that affect the reporting amounts of
revenues, expenses, assets and liabilities for the six months
period ended 30 June 2024. If in the future such estimates and
assumptions, which are based on management's best judgement at the
date of the condensed consolidated interim financial statements,
deviate from the actual circumstances, the original estimates and
assumptions will be modified as appropriate in the period in which
the circumstances change.
The comparative figures for the
financial year ended 31 December 2023 are not the Company's
statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to the
Registrar of Companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under Section 498(2) or (3) of the Companies Act 2006. The Group's
audited consolidated financial statements for the year ended 31
December 2023 are available at the Company's website
(www.essentraplc.com)
or upon request from the Company's registered office.
Income tax expense is recognised
based upon the best estimate of the weighted average income tax
rate on profit before tax expected for the full financial year,
taking into account the weighted average rate for each
jurisdiction.
The Group's foreign operations in
Turkey, whose functional currency is the Turkish Lira, were
designated as hyperinflationary during the year ended 31 December
2023. Over the six months to 30 June 2024 the Turkish economy
continued to be designated as hyperinflationary, and therefore the
Group has continued to apply hyperinflationary accounting to its
Turkish operations for the reporting period ended 30 June 2024. The
price index used to apply IAS 29 is the Turkish Consumer Price
Index. At 30 June 2024 the price index was 2,319.29 (31 December
2023: 1,860.90, 30 June 2023: 1,351.59, 31 December 2022:
1,128.45).
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.
The accounting policies used in
the presentation of the condensed consolidated interim financial
statements are detailed below. These policies have been
consistently applied to all periods presented.
In preparing these condensed
consolidated interim 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. During the first half of 2024, Management
considered the potential effects of climate related changes in its
assessment of going concern, in preparing the Group's future cash
flow forecasts and in its assessment of the residual values of
property, plant and equipment and have determined that there is no
material impact on these condensed consolidated interim financial
statement items.
Pronouncements
The Group
adopted the following new pronouncements during the period to 30
June 2024, which did not have a material impact on the Group's
condensed consolidated interim 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.
Going concern
At 30 June 2024, the Group's
financing arrangements amounted to £281m, comprising United States
Private Placement ("USPP") of US$102.5m (£81.4m), with a range of
expiry dates from July 2028 to July 2033, and a multi-currency
revolving credit facility ("RCF") of £200m (expiring in October
2026). In July 2024 Essentra extended its
syndicated multi-currency £200m revolving credit facilities to a
revised maturity date of July 2029.
At 30 June 2024, £167.4m of the
RCF facility was undrawn. The facility is subject to two covenants,
which are tested semi-annually: net debt to EBITDA (leverage) and
EBITA to net finance charges (interest cover). 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 performance and considering the existing banking
facilities, including the available liquidity, have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for up to 18 months following the date of
approval of the condensed consolidated interim 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 reasonably plausible changes in macroeconomic conditions
and is considered to represent a severe but plausible scenario. The
results of this scenario show that there is sufficient liquidity in
the business for a period of up to 18 months from the date of
approval of these financial statements, and do not indicate any
covenant breach during the test period. The downside scenario
assumes a period of supressed trading performance, with recovery
deferred to the latter part of 2025. The financial impact of the
downside scenario in 2024 and 2025 is to reduce adjusted operating
profits by 23% and 37% respectively compared to the Group's
strategic plan.
The overall level of liquidity
(defined as available undrawn borrowing facility plus cash and cash
equivalents) at 30 June 2024 was £216.7m, which is after share
buybacks of £27m (of a total planned £60m under the buyback
programme). 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. Based
on these scenarios and taking into consideration the risks detailed
in note 19 of the Annual Report for 2023, 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 interim financial statements.
Further information on the Group's
borrowing facilities, cash resources and other financial
instruments can be found in notes 10 and 15 to the condensed
consolidated interim financial statements.
Critical Accounting Judgements and
Estimates
The preparation of the condensed
consolidated interim financial statements requires the Directors
and management to make judgements and estimates in respect of
certain items where the choice of accounting policy and assumptions
applied in determining the judgement or estimate could materially
affect the Group's financial position, results, or cash flows at
the reporting date.
Management regularly reviews the
critical accounting judgements that significantly impact the
amounts recognised in the condensed consolidated interim financial
statements and the critical accounting estimates that due to their
significant estimation uncertainty, may give rise to a material
adjustment in the next financial reporting period.
Although the determination of
accounting estimates is based on management's best estimate
considering its 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 and
revisions to accounting estimates are recognised in the period in
which the estimate is revised and future periods if the revision
affects both current and future reporting periods.
The Group's critical accounting
judgements and estimates are detailed below.
Accounting Judgements
Adjusting
items
Adjusting items are separately
presented from other items of financial performance as this enables
management to reflect the underlying performance of the continuing
operations of the Group. Judgement is required to determine whether
such items of financial performance should be included within
adjusting items by virtue of their nature, size or incidence. The
Group's accounting policy concerning adjusting items is detailed
under alternative performance measures on page 158 of the
Essentra Annual Report 2023.
Adjusting items of £7.8m (six
months ended 30 June 2023: £7.0m) have been reported in continuing
operations including £1.2m of costs incurred relating to
acquisitions, disposals and restructuring of the continuing
business following the sale of the Filters and Packaging
businesses, £1.2m provided for an historic indemnity claim, and
£4.8m has been incurred in relation to the customisation and
configuration costs of significant "software as a service" ("SaaS")
arrangements which, in management's judgement, constitute material
one-off charges to upgrade the Group's technical capabilities and
meets the Group's policy for being categorised as adjusting
items.
A complete analysis of the amounts
included in adjusting items is detailed in note 3.
"Software as a service" ("SaaS")
arrangements
The recognition of customisation and configuration costs (which are
included within adjusting items) relating to SaaS arrangements
involves a number of key judgements:
· whether a software arrangement is a SaaS arrangement:
management considers the fact pattern of the software arrangement
carefully to identify SaaS arrangements, distinguishing from other
arrangements such as "platform as a service" or "infrastructure as
a service";
· whether any cost incurred in customisation and configuration
results in additional code from which the Group has the power to
obtain the future economic benefits and restricts other third
parties' access to those benefits: management considered whether
the code can be used in or transferred to another computing
arrangement;
· whether the customisation and configuration service provided
by the SaaS provider is distinct from the regular SaaS
arrangement: management considers factors such as whether the
Group can benefit from the service separately from the other
elements of deliverables from the SaaS provider;
· whether a third-party providing customisation and
configuration services is in effect a subcontractor of the SaaS
provider: management considers factors such as the nature of the
contractual and working relationship between the SaaS provider and
the third party, the obligations of the third party who has the
primary responsibility for the services that it
provides.
Leases and lease right-of-use
assets
A key judgement in determining the
right-of-use asset and lease liability is establishing whether it
is reasonably certain that an option to extend the lease will
be exercised. Distinguishing whether a lease will be extended or
otherwise could have a material impact on the value of the
right-of-use assets and lease liabilities recognised on the balance
sheet, but may not have a material impact on the income
statement.
In determining the lease term,
management considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise
a termination option. Extension options (or periods after
termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not
terminated).
The assessment is reviewed if a
significant event or a significant change in circumstances occurs
which affects this assessment and that is within the control of the
lessee.
Recognition of Retirement benefit
assets
A key judgement when recognising a
retirement benefit asset is whether the Company has an
unconditional right to a refund on such a surplus. A retirement
benefit asset of £11.1m (31 December 2023: £7.9m) has been
recognised on the Group's European pension surplus because it was
judged that the trustees cannot use trustee's discretionary power
to use this surplus to augment member benefits.
Accounting Estimates
Measurement of contingent consideration
During 2022 the Group recognised a
net loss of £16.6m on the disposal of the Filters business. The
value of the loss is subject to finalisation of the deferred
contingent consideration receivable which requires judgement. The
maximum potential undiscounted deferred contingent consideration
amount that the Group could receive is £20.0m. Deferred
consideration is structured as an earn-out in two tranches of up to
£10.0m with each tranche contingent upon the Filters business
achieving certain contractual profit performance targets in its
financial years ending 31 December 2023 and 31 December 2024
(the 'earn-out years'), respectively.
Management has determined the fair
value of contingent consideration receivable as at 30 June 2024
with reference to the valuation performed as at 31 December 2023,
which was valued with the assistance of an external valuation
specialist, using an option pricing model which applied prudent
assumptions to risk-free cash flows in each of the earn-out years.
For valuation purposes, as inputs into the model are intended to be
risk-neutral, profit forecasts for the earn-out years were
discounted to neutralise forecast risk by applying a risk-adjusted
rate to expected cash flows based on an industry specific and
geographically derived weighted average cost of capital. The
resulting risk-adjusted profit for each earn-out year was modelled
against the respective contractually agreed profit performance
target with the calculated earn-out achieved discounted to present
value by applying a rate that reflects counterparty credit risk and
the timing of future cash flows.
At 30 June 2024, deferred
contingent consideration receivable with a fair value of £19.3m (31
December 2023: £19.0m) has been recognised in the condensed
consolidated interim financial statements (refer to note 15),
of which £10.0m (31 December 2023: £9.7m) has been recognised
within trade and other receivables, and £9.3m (31 December 2023:
£9.3m) as a long-term receivable.
The actual earn-out receivable
when the contingent consideration is finalised may differ from the
fair value estimated at 30 June 2024 as a result of reasonable
changes to assumptions applied, although based on information
available at the reporting date, the range of possible future
outcomes is not expected to lead to a final settlement that differs
materially to the amounts recognised in these condensed
consolidated interim financial statements.
Any future movements in fair
value of the deferred contingent consideration when remeasured at
subsequent reporting period end dates will be taken through the
consolidated income statement and recognised as part of the
result from discontinued operations.
Taxation
Liabilities for tax contingencies
require management judgements and estimates in respect of tax
audit issues and exposures in each of the jurisdictions in
which the Group operates. Management is also required to make an
estimate of the current tax liability together with an assessment
of the temporary differences which arise as a consequence of
different accounting and tax treatments. Where management concludes
a tax position is uncertain, a current tax liability is held for
anticipated taxes that are considered probable based on the
information available.
Key judgement areas for the Group
include the pricing of intercompany goods and services as well
as the tax consequences arising from restructuring operations.
Management may engage with professional advisors in making their
assessment and, if appropriate, will liaise with the relevant
taxation authorities to resolve the matter. The tax liability is
reassessed in each period to reflect management's best estimate in
light of information available. If the final outcome of these
matters differs to the liability held in the financial statements,
the difference may materially impact the income tax charge/(credit)
in the period the matter is concluded.
At 30 June 2024, included in the
tax payable is a liability of £3.9m (31 December 2023: £4.0m)
for transfer pricing matters and £5.8m (31 December 2023: £5.8m)
for other uncertain tax positions. Adjustments for current year
transactions and foreign exchange movements of £0.1m account for
the movement in the period. Of the £10.5m recognised at the end of
the reporting period, a possible range of outcomes could
potentially see between £4.0m and £4.8m resolved by the end of the
current financial year as a result of expiring statute of
limitations and completion of tax audits.
The Group has recognised a net
deferred tax asset of £5.7m (31 December 2023: £5.7m) in the UK.
The assessed range of possible future outcomes in the next
financial year could potentially lead to a decrease in the deferred
tax asset of up to £1.9m or an increase of up to £4.0m,
notwithstanding that the Group has unrecognised UK tax losses which
could be utilised as information on the sustainable long term UK
profitability position becomes available.
Retirement benefit
obligations
At 30 June 2024, the net
retirement benefit liability was £2.6m (31 December 2023: £9.6m
liability) including a retirement benefit asset of £11.1m (31
December 2023: £7.9m) and a retirement benefit liability of £13.7m
(31 December 2023: £17.5m). The measurement of defined benefit
obligations requires the application of judgement in relation to
the key assumptions used, particularly in determining the
discount rate, inflation rate, and mortality rates.
In consultation with Essentra's
actuaries, management determines the point within the range of
possible outcomes for those assumptions applied at the balance
sheet date that most appropriately reflects Essentra's
circumstances. Small changes to these assumptions can have a
material impact on the valuation and therefore reported
amounts. Consequently, the Group performs a sensitivity analysis
for the key assumptions applied in determining post-employment
costs and liabilities, as detailed in note 18 of the Essentra
Annual Report 2023.
Provision for contractual
obligations
The provision for contractual
obligations represents amounts that the Group may be liable to pay
arising from the disposal of the Packaging and Filters
businesses.
At 30 June 2024, provisions for
contractual obligations amounted to £3.2m (31 December 2023:
£3.4m), representing the Group's estimate of ongoing obligations
due to each of the buyers under the respective Share Purchase
Agreements.
The assessed range of possible
future outcomes in the next financial year could potentially lead
to a decrease in the provision of up to £1.0m or an increase of up
to £nil.
Business combinations and
intangible assets
IFRS 3 Business Combinations
requires the identification of acquired intangible assets as part
of a business combination. The methods used to value such
intangible assets require the use of estimates and judgements such
as customer attrition, cash flow generation from the existing
relationships with customers and returns on other assets. Future
results are impacted by the amortisation periods adopted and
changes to the estimated useful lives would result in different
effects on the income statement and balance sheet.
Goodwill is not amortised but is
tested annually for impairment, along with the finite-lived
intangible assets and other assets of the Group's cash-generating
units. Tests for impairment are based on discounted cash flows and
assumptions (including discount rates, timing and growth prospects)
which are inherently subjective. An estimate is also required in
identifying the events which indicate potential impairment, and in
assessing fair value of individual assets when allocating an
impairment loss in a cash-generating unit or groups of cash
generating units. The Group performs various sensitivity analyses
in respect of the tests for impairment and recognises impairments
when required. For the half year a review of indicators of
impairment was performed, with no indicators identified. The
critical estimates made for the year ended 31 December 2023 are
reproduced in note 8 to these condensed
consolidated interim financial statements.
The useful lives of the Group's
finite-lived intangible assets are reviewed following the tests for
impairment annually.
Estimate of inventory
obsolescence
Inventories represent a material
proportion of the Group's net assets. At 30 June 2024, the Group
had £66.6m (31 December 2023: £64.7m) of inventories on the balance
sheet. The Group estimates the net realisable value of inventories
in order to determine the value of any provision required. These
estimations are based on recent experience and knowledge of the
products held in inventory estimations, include any impact of
obsolescence including that related to regulatory changes including
climate change, are made in relation to the number of years of
sales of each product and the value recoverable from those
inventories.
The Group undertakes periodic
reviews of inventory levels and quality, and following those
reviews provides for all inventory that is considered obsolete.
Furthermore, the Group provides in full for unsold or slow-moving
inventory.
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.
|
|
|
|
Six months ended 30 June
2024
|
|
|
|
|
EMEA
|
Americas
|
APAC
|
Unallocated operating
expenses2
|
Continuing
operations
|
Discontinued
operations
|
Total
|
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External revenue
|
89.4
|
51.3
|
19.0
|
-
|
159.7
|
-
|
159.7
|
|
|
|
Gross profit
|
47.2
|
19.5
|
7.4
|
-
|
74.1
|
-
|
74.1
|
|
|
|
Adjusted operating
profit/(loss)
before corporate costs
|
29.3
|
8.8
|
1.9
|
(11.7)
|
28.3
|
-
|
28.3
|
|
|
|
Central corporate
costs1
|
|
|
|
|
(6.5)
|
-
|
(6.5)
|
|
|
|
Adjusted operating profit
|
|
|
|
|
21.8
|
-
|
21.8
|
|
|
|
Amortisation and impairment of
acquired intangible assets
|
|
|
|
|
(5.9)
|
-
|
(5.9)
|
|
|
|
Adjusting items
|
|
|
|
|
(7.8)
|
-
|
(7.8)
|
|
|
|
Operating profit
|
|
|
|
|
8.1
|
-
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
261.4
|
122.9
|
35.6
|
112.7
|
532.6
|
-
|
532.6
|
|
|
|
Total Liabilities
|
(46.6)
|
(26.7)
|
(9.6)
|
(174.1)
|
(257.0)
|
-
|
(257.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 30 June
2023
|
|
|
|
|
EMEA
|
Americas
|
APAC
|
Unallocated operating
expenses2
|
Continuing
operations
|
Discontinued
operations
|
Total
|
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External revenue
|
89.8
|
56.6
|
19.9
|
-
|
166.3
|
-
|
166.3
|
|
|
|
Gross profit
|
45.2
|
21.0
|
6.8
|
-
|
73.0
|
-
|
73.0
|
|
|
|
Adjusted operating
profit/(loss)
before corporate costs
|
27.6
|
9.8
|
1.6
|
(9.8)
|
29.2
|
(1.0)
|
28.2
|
|
|
|
Central corporate
costs1
|
|
|
|
|
(6.2)
|
-
|
(6.2)
|
|
|
|
Adjusted operating profit/(loss)
|
|
|
|
|
23.0
|
(1.0)
|
22.0
|
|
|
|
Amortisation and impairment of
acquired intangible assets
|
|
|
|
|
(5.7)
|
-
|
(5.7)
|
|
|
|
Adjusting items
|
|
|
|
|
(7.0)
|
-
|
(7.0)
|
|
|
|
Operating profit/(loss)
|
|
|
|
|
10.3
|
(1.0)
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
213.7
|
119.1
|
39.8
|
169.7
|
542.3
|
-
|
542.3
|
|
|
|
Total Liabilities
|
(41.1)
|
(20.6)
|
(13.3)
|
(183.7)
|
(258.7)
|
-
|
(258.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
1
|
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.
|
|
|
2
|
Unallocated operating
expenses include operating expenses relating to the regions that
are managed at a total trading level rather than by individual
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3. Adjusting items from continuing
operations
|
|
|
|
|
|
Six months
|
Six
months
|
Year
|
|
|
|
ended
|
ended
|
ended
|
|
|
|
|
|
30 Jun
2024
|
30
Jun
2023
|
31 Dec
2023
|
|
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Costs relating to restructuring
following business disposals1
|
|
0.7
|
0.9
|
1.3
|
|
|
|
(Gains)/losses and transaction
costs relating to acquisitions of businesses2
|
|
(0.1)
|
0.4
|
(1.0)
|
|
|
|
Acquisition integration and
restructuring costs3
|
|
0.5
|
-
|
-
|
|
|
|
Customisation and configuration
costs of significant software as a service ("SaaS")
arrangements4
|
|
4.8
|
4.9
|
10.8
|
|
|
|
Defined benefit pension scheme
charges5
|
|
0.8
|
0.8
|
1.8
|
|
|
|
Impairment of non-current
assets6
|
|
-
|
-
|
7.1
|
|
|
|
Other7
|
|
1.1
|
-
|
1.0
|
|
|
|
Adjusting items
|
|
7.8
|
7.0
|
21.0
|
|
|
|
Tax
|
|
(1.6)
|
(1.5)
|
(4.3)
|
|
|
|
Adjusting items after tax
|
|
6.2
|
5.5
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash flows from adjusting
items:
|
|
|
|
|
|
|
|
Adjusting items
|
|
7.8
|
7.0
|
21.0
|
|
|
|
Non-cash charge in adjusting
items
|
|
(0.8)
|
(0.8)
|
(5.9)
|
|
|
|
Cash outflow on pension
contributions
|
|
0.5
|
2.5
|
1.9
|
|
|
|
Utilisation of prior year and
acquired accruals and provisions
|
|
(1.3)
|
6.3
|
6.6
|
|
|
|
Cash outflow from adjusting items
|
|
6.2
|
15.0
|
23.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) and charges relating to the Group's legacy defined
benefit pension schemes, as adjusting items. Operating profit
before adjusting items and acquired intangible amortisation is
called adjusted operating profit, which forms the primary basis of
management's review and assessment of operational performance of
the Group's businesses.
|
|
|
Notes:
|
|
|
|
1
|
Costs of £0.7m in relation to
restructuring activities to right-size the continuing operations of
the business following the disposal of the Filters and Packaging
businesses, including £0.6m relating to the closure of the
Singapore service office, predominantly associated with the
disposed Filters business (six months ended 30 June 2023:
£0.9m).
|
|
|
2
|
Comprises a credit of £0.1m
relating to the acquisition of Wixroyd Group, acquired in December
2022 (six months ended 30 June 2023: £0.4m).
|
|
|
3
|
Relating to integration costs
of £0.5m following the acquisition of Wixroyd Group and the
acquisition of BMP TAPPI (six months ended 30 June 2023:
£nil).
|
|
|
4
|
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 period, costs of £4.8m (six
months ended 30 June 2023: £4.9m) 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.
|
|
|
5
|
Costs of £0.8m (six months
ended 30 June 2023: £0.8m) were incurred in relation to defined
benefit pension scheme charges which, following the outcome of the
strategic review, no longer pertain to the continuing operations of
the Group.
|
|
|
6
|
Costs of £7.1m for the six
months ended 31 December 2023 included an 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.
|
|
|
7
|
Costs include £1.2m related to
a provision for a historic indemnity claim (six months ended 30
June 2023: £nil) and £0.1m of provision releases.
|
|
|
|
|
|
|
|
|
|
|
4. Taxation
The taxation charges for the
continuing operations for the six months ended 30 June 2024 and 30
June 2023 are based on the expected effective tax rate for the full
year, including the impact of prior period tax
adjustments. The enacted tax rates and forecast profits of the
jurisdictions the Group operate in determines this effective tax
rate. The taxation charges for the discontinued operations are
based on the results for the period applying the relevant tax rates
by jurisdiction.
The effective tax rate on
underlying profit before tax (before adjusting items and
amortisation of acquired intangible assets) was 25.7% (six months
ended 30 June 2023 : 23.5%). The underlying effective tax rate for
H1 2024 is within the continuing operations 2024 forecast tax rate
range of 24% to 26%.
|
5. Earnings per share
|
|
|
|
|
|
Six months
ended
|
Six
months ended
|
Year
ended
|
|
|
|
|
|
30 Jun
2024
|
30
Jun
2023
|
31 Dec
2023
|
|
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
Earnings from continuing operations
|
|
|
|
|
|
|
|
Profit attributable to equity
holders of the Company
|
|
2.5
|
7.7
|
5.8
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortisation of acquired
intangible assets
|
|
5.9
|
5.7
|
11.3
|
|
|
|
Tax on amortisation of acquired
intangible assets
|
|
(1.4)
|
(1.3)
|
(2.7)
|
|
|
|
Adjusting items
|
|
7.8
|
7.0
|
21.0
|
|
|
|
Tax relief on adjusting
items
|
|
(1.6)
|
(1.5)
|
(4.3)
|
|
|
|
Adjusted earnings attributable to equity holders of the
Company1
|
|
13.2
|
17.6
|
31.1
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations
|
|
|
|
|
|
|
|
Earnings attributable to equity
holders of Essentra plc
|
|
(1.2)
|
(0.8)
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
Basic weighted average ordinary
shares outstanding (million)1
|
|
287.4
|
298.5
|
294.6
|
|
|
|
Dilutive effect of employee share
option plans (million)
|
|
2.5
|
1.9
|
2.4
|
|
|
|
Diluted weighted average ordinary
shares (million)
|
|
289.9
|
300.4
|
297.0
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from continuing operations
(pence)
|
|
|
|
|
|
|
|
Basic earnings per share from
continuing operations
|
|
0.9p
|
2.6p
|
2.0p
|
|
|
|
Adjustment
|
|
3.7p
|
3.3p
|
8.6p
|
|
|
|
Basic adjusted earnings per share
from continuing operations
|
|
4.6p
|
5.9p
|
10.6p
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share from
continuing operations
|
|
0.9p
|
2.6p
|
2.0p
|
|
|
|
Adjustment
|
|
3.7p
|
3.3p
|
8.5p
|
|
|
|
Diluted adjusted earnings per
share from continuing operations
|
|
4.6p
|
5.9p
|
10.5p
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share from discontinued operations
(pence)
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
(0.4)p
|
(0.3)p
|
(0.2)p
|
|
|
|
Diluted earnings per
share
|
|
(0.4)p
|
(0.3)p
|
(0.2)p
|
|
|
|
|
|
|
|
|
|
|
|
Total Earnings per share attributable to equity holders of
the Company (pence)
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
0.5p
|
2.3p
|
1.8p
|
|
|
|
Diluted earnings per
share
|
|
0.5p
|
2.3p
|
1.8p
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
1
|
Adjusted earnings per share
from continuing operations is provided to reflect the underlying
performance of the Group. The basic weighted average number of
ordinary shares in issue excludes shares held in treasury and
shares held by an employee benefit trust.
|
|
|
|
|
|
|
|
|
|
6. Property, plant and equipment and Investment
properties
|
|
|
|
|
|
|
|
|
|
|
During the period, the additions
of land and buildings, plant and machinery and fixtures, fittings
and equipment amounted to £4.2m (six months ended 30 June 2023:
£4.3m; year ended 31 December 2023: £12.4m) and there was a
decrease of £nil (six months ended 30 June 2023: decrease of £3.3m;
year ended 31 December 2023: decrease of £1.6m) in net book value
due to foreign exchange movements which includes the impact from
the application of IAS 29.
|
|
|
|
|
|
|
|
|
|
|
Land and buildings, plant and
machinery and fixtures, fittings and equipment with a net book
value of £nil (six months ended 30 June 2023: £0.1m; year ended 31
December 2023: £0.1m) were disposed of for proceeds of £nil (six
months ended 30 June 2023: £nil; year ended 31 December 2023:
£nil).
|
|
|
Contractual commitments to
purchase property, plant and equipment amounted to £nil at 30 June
2024 (31 December 2023: £0.3m).
The investment property had a
market value of £3.3m at 31 December 2023 and 30 June 2024. The
valuation was performed for the year ended 31 December 2023 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.
|
|
7. Lease right-of-use asset
The Group's non-current assets
include right-of-use assets from asset leasing
arrangements. Depreciation is charged to the income statement
to depreciate the right-of-use asset from the lease commencement
date to the earlier of the end of the useful life of the
right-of-use asset and the end of the lease term.
During the period, additions to
right-of-use assets amounted to £1.6m (six months ended 30 June
2023: £1.9m; year ended 31 December 2023: £14.1m) and the
depreciation of right-of-use assets amounted to £3.0m (six months
ended 30 June 2023: £2.7m; year ended 31 December 2023:
£5.9m).
During the period the right-of-use
assets net book value reduced by £1.4m (six months ended 30 June
2023: decrease of £1.2m; year ended 31 December 2023: decrease of
£1.0m) due to foreign exchange movements.
At 30 June 2024 contractual
commitments to lease property, plant and equipment, where leases
have not yet commenced, amounted to £nil per year over a 20 year
period (30 June 2023: £0.7m; 31 December 2023: £nil).
|
8. Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
During the period, the additions
of intangible assets (not through acquisitions) amounted to £0.5m
(six months ended 30 June 2023: £0.4m; year ended 31 December 2023:
£0.8m) and there was an intangible net book value increase of £2.1m
(six months ended 30 June 2023: decrease of £12.4m; year ended 31
December 2023: decrease of £8.2m) due to foreign exchange movements
which includes the impact from the application of IAS
29.
|
|
|
Included within intangibles were
goodwill assets of £145.8m (six months ended 30 June 2023: £126.5m;
year ended 31 December 2023: £144.4m) and there was a goodwill net
book value increase of £1.2m (six months ended 30 June 2023:
decrease of £8.4m; year ended 31 December 2023: decrease of £5.7m)
due to foreign exchange movements which
includes the impact from the application of IAS 29.
|
|
|
Included in the gross carrying
amount of goodwill assets as at 1 January 2024 was £148.6m and the
accumulated losses were £4.2m. As at 30 June 2024 the gross
carrying amount was £150.0m and the accumulated losses were
£4.2m.
|
|
|
The cash generating units
("CGU's") are primarily the manufacturing and distribution sites,
at which impairment of intangible assets (excluding goodwill) and
property, plant and equipment would be performed.
The three geographical segments:
EMEA, Americas and APAC, represented by groups of CGU's (the
manufacturing and distribution sites), are considered to represent
the lowest level within the Group at which goodwill is monitored
for internal management purposes.
An impairment review was performed
for the year to 31 December 2023, as disclosed in Note 8 to the
Essentra plc Annual Report 2023. Management have performed a review
of impairment indicators for the six months to 30 June 2024. No
indicators of impairment have been identified.
The impairment tests for goodwill
and intangible assets performed for the year to 31 December 2023
were based on the Board approved business plan (the "Plan") and
then were risk-adjusted for impairment testing purposes. Cash flow
projections were over five years using 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 Plan are set out below and relate to the
year ended 31 December 2023.
|
Region
|
Average
annual growth rate
over five year
Forecast
period
|
Terminal
growth rate
from
2028
onwards
|
Improvement in average operating profit after allocation of
corporate costs over five year forecast 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 were discounted using a post-tax discount rate based upon
Essentra's estimated post-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. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Retirement benefit obligations
|
|
|
|
Movement in pension net (liabilities)/assets during the
period
|
|
|
|
|
Six months
|
|
Six
months
|
Year
|
|
|
|
ended
|
|
ended
|
ended
|
|
|
|
|
|
30 Jun
2024
|
|
30 Jun
2023
|
31 Dec
2023
|
|
|
|
|
|
£m
|
|
£m
|
£m
|
|
|
|
Movements
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
(9.6)
|
|
(10.6)
|
(10.6)
|
|
|
|
Current service cost and
administrative expense
|
|
(0.8)
|
|
(0.8)
|
(1.9)
|
|
|
|
Employer contributions
|
|
0.5
|
|
2.5
|
3.8
|
|
|
|
(Reduction)/increase on plan
assets excluding amounts in net finance income
|
|
(4.6)
|
|
(3.1)
|
2.3
|
|
|
|
Actuarial gains/(losses) arising
from changes in financial assumptions
|
|
12.0
|
|
5.8
|
(3.9)
|
|
|
|
Actuarial gains arising from
change in demographic assumptions
|
|
-
|
|
-
|
0.6
|
|
|
|
Actuarial gains/(losses) arising
from experience adjustment
|
|
0.1
|
|
(1.2)
|
(0.3)
|
|
|
|
Net finance cost
|
|
(0.1)
|
|
(0.3)
|
(0.3)
|
|
|
|
Currency translation
|
|
(0.1)
|
|
0.9
|
0.9
|
|
|
|
Business combinations
|
|
-
|
|
-
|
(0.2)
|
|
|
|
End of period
|
|
(2.6)
|
|
(6.8)
|
(9.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net pension obligation of
£2.6m (31 December 2023: £9.6m) includes retirement benefit assets
of £11.1m (31 December 2023: £7.9m) and retirement benefit
obligations of £13.7m (31 December 2023: £17.5m).
The assets and liabilities of the
principal defined benefit schemes were reviewed by independent
qualified actuaries as at 30 June 2024. The assets of the schemes
have been updated to the balance sheet date to take account of the
investment returns achieved by the schemes and the contributions
made during the period. The liabilities of the schemes at the
balance sheet date have been updated to reflect the latest discount
rates and other assumptions as well as benefit payments. The
principal assumptions used by the independent qualified actuaries
were as follows:
|
|
|
Europe
|
|
|
|
|
|
30 Jun
2024
|
31
Dec
2023
|
30
Jun
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate of increase in
pensions
|
|
|
|
|
|
|
|
|
At RPI capped
at 5%
|
|
|
3.0%
|
2.9%
|
3.1%
|
|
|
|
At CPI capped
at 5%
|
|
|
2.7%
|
2.6%
|
2.8%
|
|
|
|
At CPI minimum
3%, capped at 5%
|
|
|
3.4%
|
3.4%
|
3.3%
|
|
|
|
At CPI capped
at 2.5%
|
|
|
2.0%
|
2.0%
|
2.2%
|
|
|
|
Discount rate
|
|
|
5.2%
|
4.6%
|
5.2%
|
|
|
|
Inflation rate - RPI
|
|
|
3.1%
|
3.0%
|
3.2%
|
|
|
|
Inflation rate - CPI
|
|
|
2.7%
|
2.6%
|
2.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
|
|
|
30 Jun
2024
|
31
Dec
2023
|
30
Jun
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.3%
|
4.8%
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Analysis of net debt
|
|
|
|
|
|
|
|
|
|
|
|
|
30 Jun
2024
|
31 Dec
2023
|
|
|
|
|
|
£m
|
£m
|
|
|
|
Cash at bank and in hand
|
|
49.3
|
59.7
|
|
|
|
Cash and cash equivalents in the statement of cash
flows
|
|
49.3
|
59.7
|
|
|
|
Derivative financial instruments
hedging private placement loans
|
|
4.6
|
4.2
|
|
|
|
Debt due within one year
|
|
-
|
-
|
|
|
|
Debt due after one year
|
|
(113.6)
|
(95.5)
|
|
|
|
Lease liabilities due within one
year
|
|
(7.2)
|
(7.1)
|
|
|
|
Lease liabilities due after one
year
|
|
(22.2)
|
(23.8)
|
|
|
|
Debt from net financing activities
|
|
(138.4)
|
(122.2)
|
|
|
|
Net debt
|
|
(89.1)
|
(62.5)
|
|
|
|
|
|
|
|
|
|
Lease liabilities are measured at
the present value of future lease payments, including variable
lease payments and the exercise price of purchase options where it
is reasonably certain that the option will be exercised, discounted
using the interest rate implicit in the lease, if readily
determinable, or alternatively the lessee's incremental borrowing
rate.
|
|
At 30 June 2024, the Group's
committed facilities primarily comprised a series of US Private
Placement Loan Notes from various financial institutions totalling
US$102.5m and a syndicated multi-currency revolving credit facility
of £200m from its banks. At 30 June 2024, the available bank
facilities totalled £200m (31 December 2023: £200m) of which £32.6m
(31 December 2023: £15.2m) was drawn down and £167.4m (31 December
2023: £184.8m) was undrawn.
|
|
11. 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
Group'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. All the
Earnout criteria were met during the year
ended 31 December 2023, based on which the maximum amount was
recognised.
|
|
|
|
|
|
|
|
|
|
|
|
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 addition to a deferred
earn-out consideration which was settled in full during the
period.
|
|
|
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 £nil (31 December 2023:
£1.2m) remains payable to the vendor.
|
|
|
|
|
|
|
|
|
|
|
12. 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'). Expenses and income relating to the Packaging
business and the Filters business have been classified as
discontinued operations.
|
|
|
Income statement analysis of
discontinued operations:
|
|
|
|
|
|
Six months
|
Six
months
|
Year
|
|
|
|
|
ended
|
ended
|
ended
|
|
|
|
|
|
30 Jun
2024
|
30
Jun
2023
|
31
Dec
2023
|
|
|
|
Total discontinued operations
|
|
£m
|
£m
|
£m
|
|
|
|
Operating loss and loss before
tax1
|
|
-
|
(1.0)
|
(0.4)
|
|
|
|
Income tax credit
|
|
0.3
|
0.2
|
3.7
|
|
|
|
Profit/(loss) for the period after tax
|
|
0.3
|
(0.8)
|
3.3
|
|
|
|
Loss on disposal of discontinued
operations before tax2
|
|
(1.5)
|
-
|
(3.7)
|
|
|
|
Total loss for the period from discontinued
operations
|
|
(1.2)
|
(0.8)
|
(0.4)
|
|
|
Notes:
|
|
|
1
|
For the six months ended 30
June 2024 the operating loss from discontinued operations includes
gross income of £nil and costs of £nil.
|
|
|
2
|
For the six months ended 30
June 2024, the loss on disposal of discontinued operations before
tax relates includes a £1.8m increase in estimated deferred
consideration payable, and a £0.3m credit for the increase in
deferred contingent consideration receivable. For the year ended 31
December 2023 refer to page 202 of the 2023 Essentra plc Annual
Report for the calculation of the loss on disposal of discontinued
operations before tax of £3.7m.
|
|
|
|
|
|
|
|
|
|
|
The results from discontinued
operations are attributable entirely to the equity holders of
Essentra plc. The earnings per share of discontinued operations are
disclosed in note 5.
|
|
|
|
|
|
|
|
|
|
Cash flows of discontinued
operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
|
Six
months
|
Year
|
|
|
|
|
ended
|
ended
|
ended
|
|
|
|
|
|
30 Jun
2024
|
30
Jun
2023
|
31 Dec
2023
|
|
|
|
Total discontinued operations
|
|
£m
|
£m
|
£m
|
|
|
|
Net cash outflow from operating
activities
|
|
(1.0)
|
(2.7)
|
(3.8)
|
|
|
|
Net cash outflow from investing
activities
|
|
(24.8)
|
(11.6)
|
(17.8)
|
|
|
|
Decrease in cash and cash equivalents
|
|
(25.8)
|
(14.3)
|
(21.6)
|
|
|
13. Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share
|
|
|
|
Total
|
|
|
|
|
Six months
|
Six
months
|
Year
|
|
Six months
|
Six
months
|
Year
|
|
|
|
|
ended
|
ended
|
ended
|
|
ended
|
ended
|
ended
|
|
|
|
|
30 Jun
2024
|
30 Jun
2023
|
31 Dec
2023
|
|
30 Jun
2024
|
30 Jun
2023
|
31 Dec
2023
|
|
|
|
|
p
|
p
|
p
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 interim:
|
|
|
|
|
|
|
|
|
|
|
paid 27 October 2023
|
-
|
1.20
|
1.20
|
|
-
|
3.5
|
3.5
|
|
|
|
2023 final:
|
|
|
|
|
|
|
|
|
|
|
paid 5 July 2024
|
-
|
-
|
2.40
|
|
-
|
-
|
7.0
|
|
|
|
2024 interim:
|
|
|
|
|
|
|
|
|
|
|
payable 25 October 2024
|
1.25
|
-
|
-
|
|
3.6
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the table above, each dividend
is shown in the period that it is attributable to. The interim
dividend for 2024 of 1.25p per 25p ordinary share will be paid on
25 October 2024 to equity holders on the register at the record
date, being 20 September 2024. The estimated amount to be paid of
£3.6m has not been included as a liability in these
accounts.
|
14. Issued Share Capital
During the period 1,792,914 (six
months ended 30 June 2023: 8,371,017) 25p Ordinary Shares
("shares") were purchased by the
Company for total cash consideration of
£3.0m (six months ended 30 June 2023: £16.2m) at a weighted average
price of 169.8 pence per share, of which 1,769,914 shares with an
aggregate nominal value of £0.4m were cancelled, and £0.4m
transferred from issued share capital to the capital redemption
reserve.
As at 30 June 2024 the number of
shares in issue was 291,597,301 (31 December 2023: 293,367,215) of
which 3,627,057 (31 December 2023: 5,039,265) were held in
treasury.
|
15. Financial instruments
|
|
|
|
|
|
|
|
|
|
Essentra held the following
financial instruments at fair value at 30 June 2024. There have
been no transfers between levels of the fair value hierarchy and
there are no non-recurring fair value
measurements.
|
|
|
|
|
30 Jun
2024
|
31 Dec
2023
|
|
|
|
|
|
£m
|
£m
|
|
|
|
Level 2 of fair value hierarchy
|
|
|
|
|
|
|
Derivative
assets1
|
|
4.6
|
4.2
|
|
|
|
|
|
|
|
|
|
|
Level 3 of fair value hierarchy4
|
|
|
|
|
|
|
Other financial
assets2
|
|
19.3
|
19.0
|
|
|
|
Other current financial
liabilities3
|
|
(3.0)
|
(28.0)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
20.9
|
(4.8)
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
1
|
Fair values of forward
foreign exchange contracts, including options, and cross currency
interest rate swaps have been calculated at period-end forward
exchange rates compared to contracted rates using observable market
data from third party financial institutions.
|
|
2
|
Includes deferred contingent
consideration receivable amounting to £19.3m (31 December 2023:
£19.0m) following the disposal of the Filters business. The
consideration, which is structured as an earn-out, has been
partially classified as a long-term receivable. The fair value has
been determined at the balance sheet date based upon 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.
|
|
3
|
Other current financial
liabilities include £nil (31 December 2023: £23.0m) which
represents management's best estimate of the expected settlement
payable by the Group through the respective completion accounts
mechanisms linked to the Filters business disposal. 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 £3.0m (31 December 2023: £5.0m)
in respect of acquisitions.
|
|
4
|
During the six months ended
30 June 2024, a fair value charge of £1.4m (six months ended 30
June 2023: credit of £7.1m ) was recognised in respect of financial
instruments at level 3 fair value hierarchy, and £26.7m (six months
ended 30 June 2023: £nil) was settled in cash. No other fair value
gains or losses were recorded in profit or loss and other
comprehensive income.
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Essentra had US dollar denominated
borrowings which it designated as hedges of its net investments in
subsidiary undertakings, upon which exchange losses of £0.1m (six
months ended 30 June 2023: £1.0m gains) were recognised in other
comprehensive income. Essentra also had Euro denominated borrowings
which it designated as hedges of its net investments in subsidiary
undertakings, upon which exchange gains of £0.3m (six months ended
30 June 2023: £nil) were recognised in other comprehensive
income.
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At 30 June 2024, the carrying
amount of the US Private Placement Loan Notes was £81.0m with a
fair value of £66.0m. At 31 December 2023, the carrying amount of
the US Private Placement Loan Notes was £80.3m with a fair value of
£70.0m. For all other financial instruments, including GBP
denominated loans of £25m (31 December 2023: £nil) and Euro
denominated loans of £7.6m (31 December 2023: £15.2m), the fair
value approximates to the carrying amount.
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16. Post balance sheet events
In July 2024, Essentra extended
its syndicated multi-currency £200m revolving credit facilities to
a revised maturity date of July 2029. By
evaluating options and refinancing the RCF ahead of the original
maturity date, the Company has been able to maintain the existing
covenants and secure favourable pricing terms. The new facility is
based on the same terms and size and is provided by a group of five
banks, including four from the original RCF facility.
17. Related parties
During the period, the Company
paid £22,819 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.
There have been no changes in the
related party transactions described in the 2023 Annual Report that
have had a material effect on the financial position or performance
in the six months ended 30 June 2024.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our
knowledge:
·
the condensed set of financial statements has
been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting';
·
the interim management report includes a fair
review of the information required by the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority:
a) DTR 4.2.7R of the
Disclosure and Transparency Rules, being an indication of important
events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the
Disclosure and Transparency Rules, being related party transactions
that have taken place in the first six months of the current
financial year and that have materially affected the financial
position or performance of the entity during that period; and any
changes in the related party transactions described in the last
Annual Report that could do so.
The Directors are responsible for
the maintenance and integrity of the corporate and financial
information included on the Company's website. Legislation in the
UK governing the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
Scott Fawcett
Jack
Clarke
Chief Executive
Chief Financial
Officer
29 July 2024