TIDMESNT
RNS Number : 3739E
Essentra plc
07 July 2021
ESSENTRA PLC
HY 2021 PRE-CLOSE TRADING UPDATE
Summary
-- Well positioned to continue the rebound from Covid-19 ("the
pandemic"), focused on delivering organic growth, cost reduction
initiatives and accretive M&A
-- Strong Q2 2021 Group performance, revenue increased 13.6% on
prior year (7.4% growth in H1), on a like-for-like (LFL) (1)
basis
-- Components continued with its trend of improving growth, with LFL Q2 revenue up by c.38% (2)
-- Packaging had another tough period in Q2 with a LFL revenue
decline of 4.8% due to underlying market conditions, though there
was steady improvement as the period progressed. Strategic
initiatives projects delivered to support margin improvement
-- Filters' strong start to the year continued, with revenue growth of 15.4% in Q2
-- Price increases in Components and Packaging in H2 to offset inflationary pressures
Current trading and outlook
Our four priorities remain; employee physical and emotional
wellbeing, continued high levels of customer support, cash
conservation, and building for our future.
The trend of positive quarterly momentum has continued with LFL
growth in Q2 2021 of 13.6% (7.4% growth in H1), albeit the prior
year comparison is inevitably skewed due to the impact of the
pandemic taking its full grip from April last year. Compared to Q2
2019, Q2 2021 is up by 2.4% on a LFL basis. Although the pandemic
continues to cause some uncertainty in the macro-economic
environment, recent order book trends remain positive across the
Group.
The Components division delivered a strong performance in Q2
2021, with LFL revenue per working day up c.38% (up c.7% vs. Q2
2019), as end markets continued to improve and our commercial
initiatives continued to deliver benefit. Components has delivered
this growth despite supply chain challenges, which are beginning to
improve as we continue to drive proactive remediation actions. The
business is facing some inflationary input cost pressures, which we
are looking to offset with price increases in H2. We continue to
invest in our Business Process Redesign (BPR) programme and have
now gone live with our first operational site in Spain. The
recently announced acquisition of Jiangxi Hengzhu Electrical
Cabinet Lock Co., Ltd is on track to complete in Q3 2021. Based on
recent order book data we expect continued positive momentum in
H2.
The Packaging division saw a Q2 2021 LFL revenue decline of 4.8%
(reported +4.9%), as prescriptions and elective surgery volumes
continued to be impacted by lockdowns. The prior year comparative
was tough as volumes were boosted by enhanced 'over the counter'
trade due to the pandemic. It should be noted though that there was
a steady improvement in trade as Q2 progressed. Whilst input costs
have increased in H1, we are now implementing pricing actions to
mitigate these effects. Cost reduction initiatives, in particular
the recent closure of our Portsmouth (UK) and Moorestown (USA)
sites, continue to support margin improvement. We maintain our
target exit rate of delivering an 8-10% margin, in line with the
industry average, by the end of 2021 (barring any major unforeseen
macro-economic events or extended lockdowns). Recent order book
trends have been improving and we continue to believe the market
will return to moderate growth in H2 2021 as global healthcare
systems catch up on the significant backlog of prescriptions and
elective surgeries.
The Filters division continued its strong start to the year,
with Q2 2021 revenue growth of 15.4% (+3.3% vs. Q2 2019). This
strong performance has mainly been driven by outsourcing contracts
delivering volumes in line with expectations. In terms of progress
with the division's other 'game changers':
-- The China JV successfully commenced production in June; and
-- Our range of proprietary eco-products (3) are attracting
increased interest. The number of projects underway has
significantly grown and a market trial with a large customer in
Europe should begin imminently (the first batch of product has
recently been delivered to the customer).
Filters' revenue is expected to continue growing, but the growth
rate may moderate as the comparatives become tougher.
Issuance of Medium and Long Term Debt
The Company has agreed the issue of US $250 million of medium
and long-dated private placement debt. The issue comprises US $80
million notes due 2028, US $85 million notes due 2031, and US $85
million notes due 2033.
The covenants on the notes are in line with those on the
Company's existing private placement notes and its bank revolving
credit facility.
The proceeds will be used for general corporate purposes and to
repay shorter-dated bank debt (with net debt level maintained),
thereby diversifying the Company's source of debt finance and
lengthening its maturity profile. Some of the proceeds are intended
to be swapped into Sterling, in accordance with the Group's hedging
policies.
Update on the pandemic
The Company continues to proactively monitor the pandemic on a
country by country basis, and is taking steps to ensure the safety
of our people. In particular in our Asian facilities, we are
carrying out proactive testing, providing assistance to employees
and their families in isolation, as well as arranging medical and
emotional support to those affected.
The Company is also assisting customers with BCP solutions to
ensure access to essential products required for production
needs.
Commenting on today's results, Paul Forman, Chief Executive,
said:
"I am extremely pleased with the strong start to the year that
we have delivered. We continue to focus on organic growth and cost
initiatives to drive profitability. Whilst we remain mindful of
external pressures including ongoing cost inflation, we have been
quick to adjust pricing in Components and Packaging to protect
margins.
We have an excellent base from which to drive responsible,
profitable and cash generative growth in each of the divisions.
The issuance of our private placement debt provides us with
optimal long term funding. The strength of our balance sheet,
liquidity position and capital structure means we are well
positioned to pursue attractive bolt-on acquisition
opportunities."
Notes
(1) Excludes the impact of acquisitions, disposals and foreign
exchange
(2) Adjusting for one more trading day during Q2 2021
(3) ECO Cavitec, ECO Sensation, and ECO Cavitec Sensation
Enquiries
Essentra plc Tulchan Communications LLP
Aamir Mohiuddin, Investor Relations Martin Robinson
Director Olivia Peters
Lucy Yank, Group Communications Hollie Ralston
Director Tel: +44 (0)20 7353 4200
Tel: +44 (0)1908 359100
Notes to Editors
About Essentra plc
Essentra plc is a FTSE 250 company and a leading global provider
of essential components and solutions. Organised into three global
divisions, Essentra focuses on the light manufacture and
distribution of high volume, enabling components which serve
customers in a wide variety of end-markets and geographies.
Headquartered in the United Kingdom, Essentra's global network
extends to 34 countries and includes 7,065 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.
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