ESSENTRA PLC
(the "Company")

A leading global provider of essential components and solutions

RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2020

A resilient performance of improving revenue and order trends during the year, with all three global divisions well positioned for growth, and a resumption of dividends

Summary:

·    FY 2020 results displayed a resilient performance, notwithstanding the impacts of COVID-19 (the 'pandemic'), demonstrating Essentra's strong market positions, balanced portfolio and agile operations

o  Revenue decline of -6.3% on a like-for-like¹ (LFL) basis, with steady improvement each quarter following the immediate impact of the pandemic (-9.8% in Q2, -6.7% in Q3 and -1.0% in Q4)

o  Adjusted² operating profit down 27.9% (at constant FX) to £62.0m

§ Business disposals completed in 2019 accounted for £5.0m of the £24.0m decline, with the remainder driven predominantly by the effect of volume gearing and temporary manufacturing inefficiencies linked to the pandemic, partially offset by continued successful pricing management and cost control actions

o  Reported operating profit of £21.7m versus £80.0m in 2019; prior year included an overall adjusting items credit of £15.4m (mainly due to gains on business disposals), whilst 2020 has a total charge from adjusting items of £17.7m (mainly due to restructuring costs) 

o  Adjusted² basic EPS lower by 37.2% (at constant FX) at 13.1p (FY 2019: 21.3p)

o  Reported basic EPS of 1.7p compares to 14.7p in 2019

o  Adjusted² operating cash flow of £76.3m in 2020, giving a cash conversion³ of 123%

·    High customer satisfaction levels leading to deepened customer franchises

·    Well-positioned for growth across the Group:

o  Components most affected by the pandemic, but with a steady recovery in revenue and order trends throughout the year and further growth expected as end markets recover

o  Resilient performance in Packaging, with strategic initiatives in place to underpin further margin improvement

o  Filters made strong progress on game changers with the commencement of new outsourcing contracts, helping return the division to marginal growth in H2

·    Value enhancing acquisition of 3C! Packaging completed, with integration progressing well

·    A strengthened balance sheet, providing strategic optionality

o  Net debt of £210.4m (2019: £284.4m), with net debt / EBITDA at 1.8x (excluding lease liabilities, net debt / EBITDA ratio is 1.5x)

·    Given the Group's resilient performance, encouraging outlook and strong financial position, the Board recommends a resumption of dividend payments, with a FY 2020 final dividend of 3.3p per share. The dividend payment being proposed is to be funded in full from cash flows generated from the operations of the Company during 2020

¹ Excludes the impact of acquisitions, disposals and foreign exchange

² Before amortisation of acquired intangible assets and adjusting items

³ Cash conversion ratio being: adjusted operating cash flow / adjusted operating profit

Results at a glance:

¹ Before amortisation of acquired intangible assets and adjusting items

² Net income is defined as profit after tax, before minority interests
³ A reconciliation of free cash flow is set out in the Financial Review

Statutory to Adjusted Reconciliation:

¹ Adjusted operating profit, adjusted pre-tax profit and adjusted net income relate to total Group

² 2019 Adjusted figures are presented at constant FX rates

Commenting on today's results, Paul Forman, Chief Executive, said:

"2020 was an unprecedented year and, looking back, I am very proud of and thankful for the incredible energy, commitment and passion demonstrated by all of our employees in the face of great pressure.

Through the Company's agility, adaptability and resilience, we have delivered a full year operating profit result which is in line with the consensus of analysts' forecasts.

Cash generation has also been strong, improving our liquidity position, and the company took the decision not to partake in any employee-related UK government support. Our equity capital raise enabled us to acquire a 'strategic bullseye' in 3C! Packaging, whilst further strengthening our balance sheet and providing greater strategic optionality.

Given the Group's resilient performance, encouraging outlook and strong financial position, the Board recommends a resumption of dividend payments.

I believe we have ended the year a closer team with deeper customer relationships, a stronger balance sheet and a clearer picture of the future. The resilient platform that we have built has been proven through the depths of this pandemic and gives us a fantastic base from which to drive responsible, profitable and cash generative growth in each of the divisions in 2021 and beyond."

Heading into 2021, the pandemic continues to contribute to an uncertain macro-economic environment. The portfolio of end-markets served across the Group provides a degree of resilience against this uncertainty. Although we do not anticipate a material direct impact to the Company from Brexit, the potential for certain supply chain disruption - and we are witnessing this to a limited degree currently - remains a risk that we must monitor closely. Additionally, it should be noted that the recent GBP appreciation, most notably against USD and EURO, is causing a translation headwind in the year thus far.

On a constant currency basis, our underlying business continues to improve, and the divisional outlook for 2021 suggests that: Components should see (after a slower start to the year due to certain logistical challenges) a continuation in the improvement of LFL trends, with industrial production forecasts predicting a return to 2019 volumes; Packaging should see the market return to moderate growth in the second half of 2021, with global healthcare systems having to catch up on the significant backlog of prescriptions and elective surgeries; and Filters should see year-on-year growth driven in part by outsourcing contract volumes as well as commencement of the China JV.

As previously announced, the Company has undertaken a detailed review of its global footprint, which has resulted in the proposed closure of certain sites in 2021 across the Components and Packaging divisions. The total cost related to these closures is estimated to be c£17m (£12.7m of which has been booked in 2020). We expect to start generating savings from these actions in 2021, with annual savings of c£13m from 2022 onwards, helping to underpin the profitability potential of the Company.

Constant foreign exchange rates.  Movements in exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis ("constant FX") adjusts the comparative to exclude such movements, to show the underlying performance of the Company. The principal exchange rates for Essentra in FY 2020 were:

Re-translating at FY 2020 average exchange rates decreases the prior year revenue and adjusted operating profit by £12.3m and £1.5m respectively.

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 FY 2020 LFL results are adjusted for the acquisition of the Innovative Components business on 26 June 2019, the acquisition of Nekicesa Packaging on 6 September 2019, the acquisition of 3C! Packaging, Inc. on 17 September 2020, the divestment of the Pipe Protection Technologies business on 14 January 2019, the divestment of the Extrusion business on 11 June 2019, the divestment of the Speciality Tapes business on 28 June 2019 and finally the divestment of the Card Solutions business on 23 July 2019.

Adjusted basis.  The term "adjusted" excludes the impact of amortisation of acquired intangible assets and adjusting items, less any associated tax impact.  In FY 2020, amortisation of acquired intangible assets was £22.6m (2019: £22.9m), and there was a pre-tax charge for adjusting items of £17.7m (2019: credit of £15.4m). For the current year charge for adjusting items, £12.7m is driven by the previously announced strategic initiatives that have resulted in the proposed closure of certain sites in 2021, across the Components and Packaging divisions. The remainder is attributable to: £4.6m for external professional costs associated with certain corporate development activities, £1.6m for transaction and integration costs of acquisitions, and £0.2m of external advisory and consultancy costs in relation to the review of the compliance of certain group companies' export activities with US laws, as previously disclosed in the 2019 Annual Accounts. This is offset by a £1.4m release of excess provision held for potential penalties in relation to this activity. Further details on adjusting items are shown in note 3 to the Consolidated Financial Statements.

Constant FX, LFL and adjusted measures are provided to reflect the underlying financial performance of Essentra. For further details on the performance metrics used by Essentra, please refer to pages 16 to 19 of the 2019 Annual Report.

Adjusted operating cash flow. Adjusted operating cash flow is net cash flow from operating activities, excluding income tax paid, pensions adjustments, 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.

Considering the impact of the pandemic, the FY 2020 result for the Group was resilient. Overall, FY 2020 revenue decreased by 8.0% (-6.8% at constant exchange) to £896.5m, whilst on a LFL basis, revenue decreased by 6.3%. However, in order to fully understand LFL Group performance for the FY, progressive quarterly trading needs to be considered, as this gives more clarity on how, over time, the Company became increasingly proficient at dealing with the impacts and challenges of the pandemic. Q1 trading was largely unaffected by the pandemic, however with the advent of Q2 and the initial shock from the major global onset of COVID-19, the Company experienced its 'nadir' in trading performance during this second quarterly period. From thereon, as the year progressed, Group revenue on a LFL basis showed a steady improvement - going from -9.8% in Q2, to -6.7% in Q3 and finally further improving to -1.0% in Q4.

On an adjusted basis, operating profit was down 29.1% (-27.9% at constant FX) at £62.0m, which  was driven in part by the disposal of various businesses in the prior year (£5.0m of the £24.0m decline), but mainly by the volume gearing effect from the revenue decline, which was exacerbated by temporary manufacturing inefficiencies caused by pandemic related issues, partially being offset by continued successful pricing management and cost control actions. Adjusted operating margin dropped by 210bps (200bps at constant FX) to 6.9%.

Including amortisation of acquired intangible assets of £22.6m and a pre-tax charge from adjusting items of £17.7m, operating profit as reported was £21.7m (2019: £80.0m); prior year included an overall adjusting items credit of £15.4m (mainly due to gains on business disposals), whilst 2020 has a total charge from adjusting items of £17.7m (mainly due to restructuring costs).

Net finance expense was above the prior year at £15.7m (2019: £14.5m), this was mainly driven by adverse FX movements on property leases in Turkey and Hungary that are denominated in non-local currencies. The effective tax rate on underlying profit before tax (before adjusting items) was 19.2% (2019: 19.9%). This reduced tax rate is driven by a change in the geographical split of profits across the Company.

On an adjusted basis, net income of £37.4m was down 36.1% (34.7% at constant FX) and adjusted basic earnings per share decreased by 38.5% (37.2% at constant FX) to 13.1p. On a total reported basis, net income of £6.3m and earnings per share of 1.7p compared to £41.2m and 14.7p respectively in 2019.

Adjusted operating cash flow was 6% higher than the previous year at £76.3m (2019: £71.8m), this equated to an operating cash conversion of 123% in the year. Adjusted free cash flow of £56.9m compared to £40.7m in 2019. The increase in adjusted operating cash flow, despite the aforementioned lower level of profitability in the Group, was mainly due to a healthy cash inflow during the year of £6.2m from working capital movements which in the prior year accounted for a large outflow of cash of £10.3m (current year performance was the result of reduced trading volumes combined with a concerted effort from the company to implement a series of initiatives to adapt and optimise working capital levels, in light of the pandemic), combined with a targeted reduction in year-on-year capex spend of £11.9m. The increase in adjusted free cash flow was also driven by a year-on-year reduction in tax spend (excluding tax payments relating to adjusting items) of £9.0m, which in the main resulted from the aforementioned lower profitability levels in the year as well as a refund of tax in the US.

As previously advised, the Company had made a voluntary disclosure to the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), with regards to certain historical transactions by the Filters business dating as far back as 2015. On 16 July 2020, a Deferred Prosecution Agreement was entered into with the US Department of Justice and a fine of $666,543.88 paid to settle certain sanctions violations by the Filters business in Dubai. The Company has co-operated fully with the US authorities and, whilst cautioned by OFAC on the importance of a robust sanctions compliance programme, no further enforcement action is being taken. The Company maintains its focus on continuous improvement to drive the  effectiveness of its response to sanction regimes and other compliance requirements.

Summary growth in revenue by Division

The following review is given at constant exchange rates and on an adjusted basis, unless otherwise stated.

Components

*  Adjusted basis

Revenue for the year decreased by 8.5% to £255.0m. Adjusting for the acquisition of Innovative Components, LFL revenue was -10.1%. Within the Group, Components is the division which is most exposed to industrial cyclicality, hence it has been the most pandemic-affected out of all the divisions. However, it has seen the greatest level of quarterly trading performance recovery during the course of the year.

On a LFL basis, revenue was 5.3% down in Q1, which was reflective of the pandemic causing disruption in China earlier than in rest of the world and a soft end-market backdrop in the US. As we moved into Q2 and as the pandemic took a firm grip across the globe, we saw an accelerated slowdown in customer demand, with LFL revenue falling to -20.0% in the quarter. However, from then on, we have seen a steady recovery in the division's trading performance - Q3 improved to a level of -13.9%, whilst Q4 improved further to -0.3%.

Consistent with the commitment to providing customers with a "hassle-free" experience, along with reliable and timely delivery, further commercial and operational initiatives were progressed during the period.  Key among these was the continued roll out and enhancement of a new digital platform, a critical tool in upgrading the division's online presence. We are seeing increased levels of online customer activity, driven by new customer engagement, accelerating the 'shift to digital'. During the year, the European roll-out of the new digital platform was completed, with a view to taking this platform in to a number of our Asian markets in 2021 (North America went live in 2019). The new platform provides greater ease of navigation for customers, a better ability to compare products, and improved visibility in search engines such as Google. Moreover, this platform has given the division the stage on which to promote an expanding range of products that have both been organically introduced and added from acquisitions. Linked to this, and in terms of enhancements made to the digital platform during the year, the most important one was the introduction of cross sell functionality on the website. Further developments are in progress, including the use of artificial intelligence, and are being driven by an agile monthly improvements forum. In order to complement this increased functionality in our website, the division has carried out an extensive 'cross selling' training programme for sales staff, to drive even better knowledge and expertise of the division's full product portfolio.

Our new fully automated German warehouse commenced operations at the end of Q3 2020, providing an enhanced logistical platform from which to drive the European Components business.

In 2020 we decided to consolidate warehouse operations from three European warehouse sites into the aforementioned German warehouse. Furthermore, the closure of three manufacturing sites (one in Sweden and two in the US), as well as the exit of three smaller warehousing and distribution (express) sites in the US, have been announced. These actions will all take effect in 2021 and allow us to improve service for our customers, maximise the opportunities for automation and support anticipated growth for the division.

We have continued to invest in our BPR programme during the year and have launched a new CRM platform in 2020 which will be integrated with the new ERP platform (that we plan to roll-out across Europe in 2021).

The division has recently conducted its annual customer survey and is very pleased to report that despite all of the challenges faced in 2020 due to the impact of the pandemic, our customers have rated us with a net promoter score (NPS) of 45 points - which is a 4 point improvement on the prior year.

Adjusted operating profit decreased by 23.4% to £45.5m, equating to a margin of 17.8% (2019: 21.3%). This 350bps dilution reflected the aforementioned volume impact of a softer macro environment, which was exacerbated by temporary manufacturing inefficiencies caused by pandemic related issues, partially being offset by continued successful pricing management and cost control actions.

Packaging

*  Adjusted basis

Revenue increased 2.8% to £363.2m. On a LFL basis, the revenue decline was -4.0% for the year. However to better understand performance through the year, shifts in underlying demand caused by the impacts of the pandemic need to be taken into account.

In H1, despite the onset of the pandemic, underlying demand remained relatively robust. LFL performance in H1 was -3.0%. This was reflective of a tough prior year comparative - H1 2019 was bolstered by short term customer demand on the back of the new regulatory requirements as prescribed by the Falsified Medicines Directive, which took effect in Europe in early 2019. Additionally, the division was impacted by some pandemic induced supply chain performance issues and facility closures. These facility closures were rectified from May and the division delivered positive monthly revenue growth towards the end of H1. However, with the advent of H2, underlying demand saw softness in certain end markets owing to an impact from the reduction in the levels of prescriptions and elective surgeries through lockdown periods. Having said that, over the course of H2, there was a steady improvement in performance, as the pharmaceutical and beauty markets started to slowly recover; Q3 was -8.5%, this improved to -1.3% in Q4.

During the pandemic, the combination of maintained high levels of service, along with a clear key account management structure, has meant that dialogue with customers has continued to be further strengthened and deepened, with the division collaborating with its customers to help meet a range of needs and objectives during these unprecedented times. The division has been awarded more than US $5m (annualised) of new business as a result of its focus on supporting customers. Moreover, towards the end of the year, the division ran its annual customer survey, where it recorded a score of 8.1 out of 10, against last year's 7.9 and a Packaging industry average of 7.6.

The division is proud to have played a part in supporting the healthcare industry in its fight against the pandemic, helping to produce secondary packaging for anti-viral and vaccine products. In November, we received external recognition from a leading industry publication "Packaging News", with the award of UK Packaging Company of the Year. In a year of incredible challenge, this external recognition demonstrates the significant progress, agility, and resilience within the division.

A major highlight of the year was the acquisition of 3C! Packaging Inc. in September. The acquisition not only strengthened the division's position in pharmaceutical and healthcare packaging in core product areas, but also brought with it valuable new innovation with its serialisation technology.  Integration activities are progressing well, helped by the business culturally fitting in efficiently with the wider division, with delivery of early procurement synergies and growth pipeline opportunities being progressed.

In 2020 we proposed the closure of our manufacturing sites in Portsmouth, UK and Moorestown, US in 2021. These actions reflect the significant reduction in demand in some key areas and withdrawal of key customer production due to the pandemic, whilst also supporting supply chain optimisation.

Adjusted operating profit decreased 9.6% to £13.8m, equating to a margin of 3.8% (50 bps decline).  This was largely driven by the volume gearing effect from the revenue decline, which was exacerbated by temporary manufacturing inefficiencies caused by pandemic related issues. Netted off against these was the impact of continued successful pricing management and cost control actions.

Filters

*  Adjusted basis

Total Filters divisional revenue was 5.6% down on the prior year period, of which the core Filters business (division excluding Tear Tapes) was down by 4.9%. However, as with the other divisions, in order to better understand FY trading numbers, this must be looked at through the lens of more granular half-yearly performance.

H1 was 11.2% down for the overall division, as it quickly adapted itself to deal with the challenges presented by the outbreak. In particular, H1 was affected by two short-term factors; namely, the impact from government enforced facility closures in India and Paraguay (compounded by the fact that both of these territories have a unique route-to-market for tobacco products that were also closed), and the continued effect on prior period comparatives due to business disruption in the Middle East following the sanction compliance issues announced in our year end 2019 results.

As we moved into H2, the division returned to delivering marginal half-yearly growth, bolstered by the optimisation of production volumes for the previously announced outsourcing contract wins. In H2, the overall division recorded growth of 0.2%, whilst the core Filters business delivered growth of 0.7%. Growth in H2 would have been even better had it not been for certain logistical challenges towards the end of the period, in shipping product in Asia, derived from regional container shortages.

In relation to the division's game changers, as mentioned above, the two previously announced outsourcing contracts are now operational, with full production capacity being achieved on both of these. Additionally during the year, the division also won another outsourcing contract with an independent customer. The China JV remains on track to commence production towards the end of Q2 2021, providing a great platform to capture the many opportunities available in the world's largest tobacco market. We continue to build our pipeline of next generation products (NGP) opportunities - with one further patent application made, one proprietary product launch and joint developments ongoing with several partners. In regards to the development of biodegradable filters - as an innovation leader, the division is well placed to play a leading role. The division has projects ongoing in collaboration with customers and suppliers and this could create a number of opportunities in the medium to long-term. As previously reported, in December 2020 the division has launched three proprietary products (Eco Sensation, ECO Cavitec and ECO Cavitec Sensation), which are intended to meet EU Single Use Plastics Directive initiatives for plastic-free and biodegradable products.

During the period the division has continued to develop its cross-functional key account management structure, which will help to create a more in-depth understanding of customer needs, develop relevant value propositions and identify mutually beneficial strategic initiatives. This combined with the division's world class service and quality metrics having been maintained, despite any disruptions that have been caused by the pandemic, has further strengthened and deepened customer relationships.

Adjusted operating profit decreased 29.2% to £25.2m, equating to an operating margin of 9.1% (decline of 300 bps). This was largely driven by the volume gearing effect from the revenue decline and a mix effect from proportionally less new product introduction (NPI) projects. Additionally, temporary manufacturing inefficiencies caused by pandemic related issues also adversely impacted profits during the year.

Net finance expense.  Net finance expense of £15.7m was £1.2m above the prior year period, and is broken down as follows:

The increase in net other finance expenses was mainly driven by adverse FX movements on property leases in Turkey and Hungary that are denominated in non-local currencies.

Tax.  The effective tax rate on underlying profit before tax (before adjusting items and amortisation of acquired intangible assets) was 19.2% (2019: 19.9%). This reduced tax rate is driven by a change in the geographical split of profits across the Company.

Net working capital.  Net working capital is defined as Inventories plus Trade & Other Receivables less Trade & Other Payables, adjusted to exclude Deferred Consideration Receivable / Payable, Interest Accruals and Capital Payables ("Adjustments").

The decrease in net working capital was largely due to lower inventory and receivables levels, which were driven by the reduced trading volumes combined with a concerted effort by the company to implement a series of initiatives to adapt and optimise working capital levels, in light of the pandemic. These lower inventory and receivables were netted off by a decrease in trade and other payables. It should also be noted that an element of the year-on-year reduction in overall net working capital is attributable to FX impact.

Cash flow.  Adjusted operating cash flow is net cash flow from operating activities, excluding income tax paid, pensions adjustments, 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.

Adjusted operating cash flow was 6% higher than the previous year at £76.3m (2019: £71.8m), this equated to an operating cash conversion of 123% in the year (2019: 82%). Adjusted free cash flow was £56.9m compared to £40.7m in 2019. The increase in adjusted operating cash flow, despite the aforementioned lower level of profitability in the Group, was due to two key drivers; a healthy cash inflow of £6.2m from working capital movements that was mainly the outcome of reduced trading volumes combined with a series of working capital cash management initiatives that were put in place with the onset of the pandemic (in the prior year working capital movements accounted for a large outflow of cash of £10.3m), and secondly a targeted reduction in year-on-year capex spend of £11.9m. The increase in adjusted free cash flow was also driven by a year-on-year reduction in tax spend of £9.0m (which in the main resulted from the aforementioned lower profitability levels in the year as well as a refund of tax in the US).

In 2020, there was a £65.3m net increase in cash and cash equivalents to £135.8m (2019: increase of £5.1m to £70.4m).

* Tax paid excludes the tax paid on business disposals.  This is included within the cash outflow in respect of adjusting items

Net debt.  Net debt at the end of the period was £210.4m, a £74.0m decrease from 1 January 2020 (including lease liabilities). The overall decrease was mainly driven by a combination of the free cashflow generated during the year along with cash raised from the placement of new share capital in the Company, being netted off against cash paid for the acquisition of 3C! Packaging Inc. and an increase in lease liability movements (which are driven by a new lease for the aforementioned Components Germany warehouse project along with recently extended leases on our Components Turkey and Filters Hungary facilities).

* Excludes £5.0m cash received from the settlement of the promissory note as this already excluded part of net debt

The Company's financial ratios remain healthy. The ratio of net debt to EBITDA including lease liabilities was 1.8x (31 December 2019: 2.0x). Net debt to EBITDA excluding lease liabilities was 1.5x (31 December 2019: 1.9x). Interest cover was 4.2x (31 December 2019: 6.6x). 

Refinancing activities.  One of the main sources of funding for the Company is a Revolving Credit Facility (RCF) provided by a group of eight highly-rated banks, which as at the year end was set to mature in its entirety in November 2022. However, for a tranche involving five of the eight banks (worth £225m), we have recently agreed an extension to the facility based on new terms, which will now mature in November 2023. The Company continues to review its financing, including the lenders in the original tranche still set to mature in November 2022.

Fundraise.  On 18 September 2020, the Company successfully completed the placing and subscription of new ordinary shares in the Company. In aggregate, the Fundraise comprised of 38,461,538 new ordinary shares, raising net proceeds of £96.7m. This fundraise enabled the acquisition of 3C! Packaging, Inc. and helped reduce the Company's leverage ratio to within target range of 1x-2x, providing the platform for further strategic optionality.

Pensions.  As at 31 December 2020, the Company's IAS 19 net pension liability was £23.9m (2019: £17.4m). This increase in the liability is a result of an actuarial loss (driven by a reduction in discount rate) being netted off against a positive return of plan assets.

Board changes.  As reported in the HY 2020 results announcement, Lorraine Trainer stepped down as a Non-Executive Director and Chair of the Remuneration Committee, following the Company's 2020 Annual General Meeting on 21 May 2020. Lorraine has been replaced as Chair of the Remuneration Committee by Nicki Demby, who has been with the Company since 1 June 2019.

Tommy Breen will retire as a Non-Executive Director and Senior Independent Director with effect from the conclusion of the Annual General Meeting (AGM) to be held on Thursday 21 May 2021. Tommy leaves having served as a Non-Executive Director for six years and as Senior Independent Director. The Board are pleased to announce that Mary Reilly will become Senior Independent Director upon Tommy's retirement, subject to Mary's re-election at the AGM. Mary is also Chair of the Audit & Risk Committee and Board Employee Champion. The Nomination Committee has initiated a process to appoint a new Non-Executive Director.

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.  Essentra uses derivatives only to manage currency and interest rate risk arising from the underlying business activities. No transactions of a speculative nature are undertaken. 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.  As at 31 December 2020, Essentra's US dollar-denominated assets were approximately 27% hedged by its US dollar-denominated borrowings, while its euro-denominated assets were approximately 32% hedged by its euro-denominated borrowings.

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 forward foreign currency contracts to hedge its exposure to movements in exchange rates on its highly probable forecast foreign currency sales and purchases over a period of up to 18 months.

Management of principal risks.  The Board considers risk assessment, identification of mitigating actions and internal controls to be fundamental to achieving Essentra's strategic objectives. Our principal risks are detailed later in this document.

Earlier in the year, in light of the unprecedented uncertainty due to the pandemic, the Company announced that the Board had concluded that all reasonable steps should be taken to conserve cash and, accordingly, decided to cancel the 2019 final and 2020 interim dividend. The Board has since reviewed the overall dividend payment for this financial year and taking into consideration: the resilient financial performance of 2020, the Company's stronger balance sheet position, and the encouraging outlook, concluded that there should be resumption of a payment for the FY 2020 final dividend of 3.3p per share. The dividend payment being proposed is to be funded in full from cash flows generated from the operations of the Company during 2020. Going forwards, a progressive dividend policy will be adopted.

The final dividend will be paid on 1 June 2021 to equity holders on the share register on 23 April 2021: the ex-dividend date will be 22 April 2021. 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 10 May 2021.

Now that the UK has exited the EU with a trade deal, the Company's focus has shifted to ensuring effective management of new customs and delivery arrangements, in order to maintain customer service levels. Some supply chain disruptions have been noted thus far in Q1 2021 due to the additional administrative steps, particularly in the Components business. In response to these disruptions, certain product lead times have had to be extended. We are also currently experiencing additional costs and increased freight rates from the aforementioned additional administrative steps. We continue to foresee no material direct impact to the Company from Brexit, however the potential for certain supply chain disruption remains a risk that we must continue to monitor closely.

As previously advised, the Company is currently part way through a business process redesign project, supported by implementation of a new ERP system. This project will support the strategic growth agenda of the divisions, along with improving process efficiencies and business controls. We have now completed scoping and process design, along with development activity of the system, both for core finance & procurement processes, as well as sales, manufacturing & warehouse processes for the Components Division.

We went 'live' with HQ finance & procurement processes in July 2020 and we are now in User Acceptance/Business Readiness Testing for our first country launch in Spain in Q2 2021. This will be followed by the remaining European locations for Components.

Over the cycle, the tangible benefits of the BPR programme are estimated to offset the cost. With streamlined processes and modern technology, the Company expects to become a much more agile and nimble business.

Enquiries

Presentation

A copy of these results is available on www.essentraplc.com

The Full Year Results presentation to analysts and investors will start at 08:30 (UK time), and will be held virtually.

There are two options for participating in the event:

1)   View and listen in to a webcast of the presentation, which can be accessed at https://www.essentraplc.com/en/investors/company-information/webcasts-and-presentations

Please note that this option will not allow you to ask any questions - it will be listen only mode.

2)   If you wish to ask a question, or are unable to listen to the audio via the webcast, please dial in to the audio conference call using the details below:

A recording of the presentation will be made available on the website later in the day. A replay will additionally be available as follows:

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.

MAR Statement

This announcement contains inside information

Notes to Editors

About Essentra plc

Essentra plc is a FTSE 250 company and a leading global provider of essential components and solutions.  Organised into three global divisions, Essentra focuses on the light manufacture and distribution of high volume, enabling components which serve customers in a wide variety of end-markets and geographies.

Headquartered in the United Kingdom, Essentra's global network extends to 34 countries and includes 7,065 employees, 50 principal manufacturing facilities, 32 sales & distribution operations and 3 research & development centres. For further information, please visit www.essentraplc.com.

Essentra Components

Essentra Components is a global market leading manufacturer and distributor of plastic injection moulded, vinyl dip moulded and metal items.  Operating in 25 countries worldwide, 15 manufacturing facilities and 25 sales & distribution centres serve more than 82,000 customers with a rapid supply of low cost but essential products for a variety of applications in industries such as equipment manufacturing, automotive, fabrication, electronics and construction. The division also includes the Reid Supply business, which provides a wide range of branded hardware supplies to a broad base of industrial customers, largely located in the US Mid-West.

Essentra Packaging

Essentra Packaging is one of only two multicontinental suppliers of a full secondary packaging range to the health and personal care sectors, with 25 facilities across three geographic regions. The division's innovative products include cartons, leaflets, self-adhesive labels and printed foils used in blister packs, which help customers to meet the rapidly-changing requirements of these end-markets and can also be combined with Essentra's authentication solutions to help the fight against counterfeiting.

Essentra Filters

Essentra Filters is the only global independent cigarette filter supplier.  The twelve sites across nine countries, including three R&D centres, provide a flexible infrastructure strategically positioned to serve the tobacco sector. The business supplies a wide range of value-adding high quality innovative filters, packaging solutions to the roll your own segment and analytical laboratory services for ingredient measurement to the industry: Essentra's offering also includes Heat Not Burn and e-cigarette solutions to the rapidly evolving market for Next Generation Products. The division also includes the Tear Tapes business, which is globally recognised as the leading manufacturer and supplier of pressure-sensitive tear tapes, that are largely used in the tobacco, food and drink and specialist packaging sectors.