Essentra Regulatory News (ESNT)

ESSENTRA PLC(the "Company")

A leading global provider of essential components and solutions

RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2018

GROWTH RESTORED, RECOVERY ON TRACK, STRATEGY BEING DELIVERED

Summary:

· Full year results continue HY 2018 return to first growth in profit and margin from a stable revenue base since 2015.

− Revenue unchanged on a like-for-like1 basis (+1.4%, adjusting for the closure of the Newport IP5 cartons site at the end of 2017).

o Continued robust result in Components, despite underlying market softness in Q4.

o Return to growth for the Packaging division in H2, with an accelerating trend.

o Modest decline in Filters and Specialist Components.

− Adjusted operating profit2, 4 up 9.1% (at constant FX) to £91m, with improving momentum in H2.

− Reported operating profit4 of £47m compares to £6m in FY 2017.

− Adjusted basic EPS2, 4 higher by 2.3% (at constant FX) at 23.1p.

o Significant increase in minority interest, due to growth in Filters' joint ventures.

o Reported basic EPS of 9.3p compares to 43.7p in FY 2017.

· Net debt of £240m (31 December 2017: £211m); increase primarily due to dividend payments and cash exceptional & other adjusting items.

− Net debt to EBITDA of 1.8x (31 December 2017: 1.7x).

− Strong operating cash conversion3, 4 of c. 85% (FY 2017: c. 95%).

o Balance sheet further strengthened by disposal of Pipe Protection Technologies in January 2019, notwithstanding continued planned investment in Packaging and IT.

· Full year dividend unchanged at 20.7p per share.

· Continued good progress on all key operating metrics of the stability programme: new Executive team now fully in place.

· Stable outlook - value levers primarily in Essentra's control, in addition to defensive qualities in Packaging and Filters especially.

Results at a glance:

1 Excludes the impact of acquisitions, disposals and foreign exchange

2 Before amortisation of acquired intangible assets and exceptional and other adjusting items

3 Operating cash conversion is defined as adjusted operating cash flow divided by adjusted operating profit

4 Continuing operations, excluding Porous Technologies, in light of the divestment on 6 March 2017

5 Net income is defined as profit after tax, before minority interests6 FY 2017 net income and basic earnings per share reflect the exceptional gain on the divestment of Porous Technologies

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

"At our HY 2018 results, when we reported profit growth from a stable revenue base for the first time in three years, I stated my firm conviction that we had turned a corner. We have maintained this strategic momentum during H2 - importantly, with our Packaging division returning to growth as anticipated, underpinned by continuing improvement in our customer relationships - and I am confident that we have restored Essentra to a position where future revenue and profit growth can be sustained.

Underpinning this improvement has been further progress in all aspects of our stability programme, from our key service and quality metrics to our IT systems. Importantly, we are seeing tangible evidence of the positive cultural shift which has been implemented, with a material uplift in our employee engagement to levels which are in line with global and manufacturing benchmarks as well as significant gains in our health and safety performance.

Of course, there is more for us still to do. However, I am proud of the great strides we have taken in FY 2018 versus our stated change plan to restore sustainable growth, and have every faith in our ability to deliver further improvement and achieve success together as a team."

Heading into 2019, the macro economic environment is uncertain. However, while our Components division - and elements of Specialist Components - are more exposed to industrial segments with a certain degree of cyclicality, much of our Group serves end-markets which are non-cyclical in nature.

Accordingly, as we continue to drive the agenda and deliver the stated objectives for each of our divisions, we expect to make further strategic progress in 2019.

Unless otherwise stated, the FY 2018 results and narrative contained herein reflect the performance of the Essentra Group on a continuing operations basis (ie, excluding Porous Technologies, which was divested on 6 March 2017).

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 2018 were:

Re-translating at FY 2018 average exchange rates decreases the prior year revenue and adjusted operating profit by £21.3m 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 2018 LFL results are adjusted for the divestment of the Bristol consumer packaging site on 5 June 2017, the acquisition of Micro Plastics on 12 December 2017, the acquisition of Nolato Hertila ("Hertila") on 5 July 2018 and the divestment of the trade and assets of the Swiftbrook paper merchant business on 3 September 2018.

Adjusted basis. The term "adjusted" excludes the impact of amortisation of acquired intangible assets and exceptional and other adjusting items, less any associated tax impact. In FY 2018, amortisation of acquired intangible assets was £22.7m (FY 2017: £22.9m), and there was an exceptional pre-tax charge of £20.8m (FY 2017: £56.2m) mainly relating to costs associated with the afore-mentioned acquisitions / disposals and with the strategic review of the Company, as well as rationalisation of the site footprint, simplification of the organisational structure and the departure of certain senior management during the year. Further details on exceptional and other adjusting items are shown in note 2 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 page 21 of the 2017 Annual Report.

Cash flow. Adjusted operating cash flow is presented to exclude the impact of tax, exceptional and other adjusting items, interest and other items not impacting operating profit. Net capital expenditure is included in this measure as management regards investment in operational assets as integral to the underlying cash generation capability of the Company.

FY 2018 revenue decreased 0.2% (increased 1.9% at constant FX) to £1,025.6m, with LFL growth of 0.2% (+1.4%, adjusting for the closure of the Newport IP5 cartons site at the end of 2017). The underlying result reflected a continued robust performance in Components and a return to growth in Packaging in H2, partially offset by a modest like-for-like decline in Filters and Specialist Components.

On an adjusted basis, operating profit was ahead 7.2% (9.1% at constant FX) at £90.7m. The 60bps uplift in the margin (50bps at constant FX) to 8.8% was driven by the sequential improvement in revenue performance in Packaging and further operational efficiency gains in Filters, mitigated by measured investment in Components to underpin future revenue growth opportunities and a less profitable revenue and segment mix in Specialist Components.

Including amortisation of acquired intangible assets of £22.7m and an exceptional pre-tax charge of £20.8m - mainly relating to costs associated with acquisitions / disposals and with the strategic review of the Company, as well as rationalisation of the site footprint, simplification of the organisational structure and the departure of certain senior management during the year- operating profit as reported was £47.2m (2017: £5.5m).

Net finance expense was slightly above the prior year at £10.9m (FY 2017: £10.4m), due to a higher average net debt position. The effective tax rate on underlying profit before tax (before exceptional & other adjusting items) was lower at 19.5% (FY 2017: 20.0%).

On an adjusted basis, net income of £64.2m was up 8.4% (6.0% at constant FX) and basic earnings per share increased by 4.5% (2.3% at constant FX) to 23.1p. On a total reported basis, net income of £28.1m and earnings per share of 9.3p compared to £115.8m and 43.7p respectively in FY 2017, as a result of the exceptional gain resulting from the disposal of Porous Technologies in FY 2017.

Adjusted operating cash flow was 3.5% lower than the previous year at £77.2m (FY 2017: £80.0m) largely due to the increase in adjusted operating profit (after adding back share option expense / other non-cash movements), being offset by an uplift in net capital expenditure: this equated to operating cash conversion of 85.1% (FY 2017: 94.6%). Adjusted free cash flow of £50.2m compared to £56.4m in FY 2017, a decrease of 11.0%.

With effect from 1 January 2018, the Company is now organised into four divisions. A restatement of the FY 2017 revenue and adjusted operating profit on this basis is set out in note 1 to the Consolidated Financial Statements.

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 increased 14.8% to £271.1m. Adjusting for the acquisition of Micro Plastics on 12 December 2017 and Hertila on 5 July 2018, like-for-like growth was 5.9%.

This strong performance reflected good progress across a number of key strategic objectives, with refinement of the product offer and service proposition and improved customer experience supporting a broad-based result across geographic markets and customer size - notwithstanding Industrial Production levels declining throughout the course of the year, particularly in H2.

The range of access hardware maintained its very strong growth, boosted by the launch of new lock, hinge and handle solutions and underpinned by investment in additional injection moulding equipment and a new painting environment at the two facilities in Istanbul, Turkey. Cable management solutions and the general protection range of caps and plugs also performed well, while components aimed at the consumer electronics sector supported the result in Asia. In addition - and reinforcing the division's strength in its core ranges - over 1,500 new products were introduced globally through our websites and catalogues, particularly in the specialist fastener and hardware segments.

Consistent with the division's strategic objective of providing customers with a "hassle-free" experience and reliable and timely delivery, a number of commercial and operational projects were initiated during the year. Supported by a selective investment in talent, these included the upgrading of digital capability - with a new online platform scheduled for initial launch in Q1 2019 - as well as ongoing customer service improvement and product training programmes. In addition, significant progress was made in ensuring that operational processes for both products and customers are in place and are standardised. As a result, not only was there a material uplift in On Time In Full delivery but also a meaningful reduction in waste levels, with further Continuous Improvement initiatives being launched towards the end of the year to drive additional benefits in 2019. Thanks to these combined initiatives, the Net Promoter Score - which is the key metric to measure overall customer satisfaction levels - improved further, and reflected a particularly good uplift in the US.

Both the recently-acquired Micro Plastics, US and Hertila, Sweden businesses performed in line with expectations and the respective integrations have progressed well. In the case of the former, the cross-selling of Essentra products in Mexico and of Micro Plastics' components to Essentra's US customer base rolled out during the second half of the year, with Europe / Asia scheduled for early 2019. Regarding the latter, the cross-selling of Essentra products to Hertila's c. 1,000 customers is on track for the first half of 2019, and has also allowed the transfer of certain equipment between Sweden and the Spanish facility in Barcelona, thus providing greater flexibility in the manufacturing footprint in Continental Europe. At the same time, considerable time was invested in rebuilding our pipeline of potential transactions, to ensure the division is well-placed to continue realising its strategic objective of complementing organic growth with value-creating acquisitions should the opportunities arise.

Adjusted operating profit increased 13.2% to £60.0m, equating to a margin of 22.1%. This 30bps decline reflected the continued measured investment in divisional capabilities and the dilutive impact of recently acquired businesses which currently have a margin below the Components' average, which were partially mitigated by the robust top line performance as well as ongoing operational efficiency initiatives.

Packaging

* Adjusted basis

Revenue decreased 1.5% to £342.3m. Excluding the divestment of the Bristol consumer packaging facility on 5 June 2017 and the trade and assets of Swiftbrook, Ireland on 3 September 2018, like-for-like revenue was -0.5% lower (+3.2% adjusting for both disposals and the closure of the Newport IP5 cartons site at the end of 2017).

As anticipated, the revenue trend improved progressively over the course of the year. The Europe & Asia region returned to underlying growth during Q2 (ie, excluding divestments and Newport IP5), shortly followed by the Americas in Q3, with the entire division delivering a very encouraging performance during H2 and thus entering 2019 on a solid footing. This inflection point for the division reflects the continuing focus on key service and quality metrics which have been maintained at least at industry average levels throughout 2018, as well as a further strengthening and deepening of the dialogue with customers as to how the business can collaborate to help them meet a range of needs and business objectives.

Further underpinning these enhanced customer relationships has been the establishment of a clear Key Account Management structure during the year, as well as the embedding of new global and regional leadership teams. In addition, the division continued to develop its product pipeline to ensure that customers are well-placed to meet such industry trends as patient adherence and evolving legislative requirements regarding the tracking, tracing and authenticating of products through the supply chain. As a result, progress was made not only in terms of building on the global framework agreements with certain international blue-chip healthcare companies which were signed towards the end of the prior year, but also in securing a number of encouraging new business wins over the course of 2018.

To support the ongoing improvement in both commercial and operational effectiveness, there was significant investment across the site footprint in machine upgrades in order to continue to rebuild capabilities. This included new folding equipment, gluing lines, carton presses featuring the latest colour management technology, cut-and-crease machines and additional digital carton and label printing capability. Continuing to leverage the capabilities of the Design Hub in providing value-added solutions, a second facility was established in Moorestown, US, to better serve customers in the Americas. Taken in aggregate, this incremental investment will not only help to realise the division's objective of being the leading provider of secondary packaging in terms of quality management, but also to make continual improvement in manufacturing lead times as customers require even greater agility from their suppliers.

Underscoring the strategic focus on the health & personal care end-markets, further site footprint rationalisation was undertaken during the year. In July 2018, the divestment of the trade and assets of Swiftbrook was announced, a paper merchant based in Dublin, that serves customers in end-markets such as office supplies, commercial print and pharmaceutical. Then in September, the intended closure of the commercial print / consumer packaging site in Largo, US., as well as a consultation process at the commercial print facility in Kilmarnock, UK were announced. Having confirmed the proposal at Kilmarnock, both this and the Largo site closed at the end of 2018.

Adjusted operating profit of £5.4m compared to an adjusted operating loss of £1.8m in FY 2017 and equated to a margin of 1.6%. This was largely driven by the closure of the loss-making Newport IP5 facility and the receipt of an additional £1.2m of insurance proceeds in respect of hurricane-related disruption to the Puerto Rico sites in 2017, boosted by price increases to offset higher raw material costs and a modest volume gearing effect as revenue returned to growth. On a like-for-like basis, the margin was 1.6% (1.6%, adjusting for both divestments and Newport IP5). 

Filters

* Adjusted basis

Revenue decreased 2.9% to £260.0m, with good progress with independent customers (notably in China, India and the Middle East) being offset by the volatile nature of projects which is characteristic of the tobacco industry. In addition, further progress was made in discussions regarding each of the potential "game changers" which were identified in the 2017 strategic review of the division - namely, further outsourcing, a joint venture in China and Next Generation Products ("NGP").

Continuing to build on its track record of successful innovation and the acknowledged capabilities of the business, a number of new products were launched during the year to meet the evolving requirements of our customers. In the combustibles segment, further products were developed to meet the ongoing trend for combining flavour capsules in filters which also offer visual differentiation, building on the division's extensive know-how in both technologies. The business in China also maintained its strong growth, driven by ongoing demand for Superslim and shaped filters as the consumer trend for increasingly complex and smaller diameter products continues to increase. In addition, the result in both the joint ventures in India and Dubai were driven by a strong performance for capsule products.

Consistent with the strategic objective of further upgrading the division's innovative capabilities, a series of customer and supplier workshops were held, which have resulted in a number of strategic development projects already being launched. In particular, the matter of degradability and littering of cigarette butts has again come to the forefront as a key regulatory and consumer concern where, given Essentra's existing Paper, Ochre and Bi Tech products and more dispersible plug wrap, there is significant experience which the business can bring to bear in assisting customers meet these important evolving requirements.

Beyond traditional combustible filters, progress in NGP was encouraging during the year. Although currently a relatively modest contributor to divisional revenue and operating profit, the business successfully piloted a number of Heat Not Burn ("HNB") solutions with Chinese and other Asian independent customers, as well as continued to work with various multinationals to advance their respective potential - or next phase - HNB offers. With customers increasingly focusing their research and development beyond traditional combustible filters, the division has likewise shifted its innovation efforts into these emerging - but fast-growing - new technologies, to ensure that the business continues to expand its knowledge and capabilities to meet their needs.

The Scientific Services unit continued to perform well, further building on its extensive experience and expanded range of accredited testing methods. During the year, the testing of Heat Not Burn products was added to the existing analytical laboratory services, to ensure the delivery of high-quality analysis which remains at the forefront of industry trends and regulatory requirements in this growing segment.

Adjusted operating profit increased 1.5% to £34.8m, with the 60bps uplift in the margin to 13.4% driven by further significant efficiency improvements and productivity gains.

Specialist Components

* Adjusted basis

Revenue decreased 0.8% to £159.1m, largely due to ongoing weakness in Tear Tapes where a strategic improvement plan has been implemented.

Pipe Protection Technologies delivered good growth - albeit at a significantly reduced rate of improvement compared to FY 2017 - and benefited for much of the year from the strength in the oil price and increase in the North American rig count, with the consequent impact on drilling activity and demand from the pipe mills, oil & gas service companies and pipe processors.

A modest increase in Industrial Supply was supported by the expansion of core product lines and the introduction of new branded ranges, with site automation initiatives additionally improving operational efficiency.

The performance in Speciality Tapes reflected specific customer-related softness in the retail POP and appliance segments, which offset a stable result for tapes used in industrial end-markets.

Revenue in Extrusion was broadly unchanged versus the prior year. The business made further progress with its complex, technical profiles which are used in the water purification process and in the construction industry for swimming pool covers. However, this was offset by a weakening in the retail POP and furniture segments. 

The result in Card Solutions reflected the consolidation of business in the university and healthcare sectors, as well as successfully developing ID solutions for major sporting events and some of the largest English Premier League football clubs.

The decline in Tear Tapes was driven by lower end-market volumes, as well as reduced demand for certain value-added consumer / tobacco lines in Asia and Europe and macro economic weakness in Latin America.

Having created the Specialist Components division with effect from 1 January 2018, a strategy development programme was initiated with the aim of providing a well-defined and objective assessment of the current status of each of the six business activities, together with their future potential. Presented at the time of the interim results on 3 August 2018, the output of this six-month review has been clear strategies for each of our businesses, which provides a data-driven view of how we intend to drive future growth and of the respective commercial and operational opportunities available, as the Company seeks to maximise the value-creation potential of these diverse activities.

Reflective of the portfolio assessment which continues to be undertaken across the entire Essentra Group, in September a consultation process at our Nottingham, UK site was announced regarding the production of Speciality Tapes and, having confirmed our proposal, production ceased at the end of 2018. Neither the Tear Tapes business based at Nottingham, nor the vast majority of Speciality Tapes activities which are located in the US, were affected by this decision. Then shortly after the year end, on 14 January 2019, the divestment of our PPT business was announced to certain wholly-owned subsidiaries of National Oilwell Varco, Inc. ("NOV") for a transaction value of US$48.0m, free of cash and debt. Given the historically volatile industry exposure and limited addressable market from an Essentra perspective, this disposal therefore represents not only good value for the Company's shareholders but also provides the PPT business with a strong platform for future successful growth under the strategic ownership of NOV.

Adjusted operating profit was 10.9% lower at £12.2m, equating to a margin of 7.7%. This 80bps decline was driven by the revenue decline in Tear Tapes, which offset margin progression in the other five businesses.

Net finance expense. Net finance expense of £10.9m was slightly above the prior year period, and is broken down as follows:

Positive numbers represent net finance expense, negative numbers reflect net finance income

Tax. The effective tax rate on underlying profit before tax (before exceptional and other adjusting items and amortisation of acquired intangible assets) was 19.5% (FY 2017: 20.0%).

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 a reduction in accounts receivable. The average net working capital / revenue ratio was 13.7% (FY 2017: 14.9%, at constant FX).

Cash flow. Adjusted operating cash flow is presented to exclude the impact of tax, exceptional and other adjusting items, interest and other items not impacting operating profit. Net capital expenditure is included in this measure as management regards investment in operational assets as integral to the underlying cash generation capability of the Company. In FY 2018, net capital expenditure excludes £8.3m of exceptional property, plant and equipment ("PP&E") disposal proceeds realised during site closures.

Adjusted operating cash flow was £2.8m lower than the prior year period, at £77.2m largely due to the increase in adjusted operating profit (after adding back share option expense / other non-cash movements), being offset by a £14.9m uplift in net capital expenditure. Adjusted free cash flow of £50.2m compared to £56.4m in FY 2017.

In FY 2018, there was a £14.5m net increase in cash and cash equivalents (FY 2017: net decrease of £7.7m).

Net debt. Net debt at the end of the period was £240.1m, a £29.5m increase from 1 January 2018, primarily due to dividend payments and cash exceptional & other adjusting items.

The Company's financial ratios remain strong. The ratio of net debt to EBITDA as at 31 December 2018 was 1.8x (31 December 2017: 1.7x) and interest cover was 9.0x (31 December 2017: 9.0x).

Balance sheet. At the end of 2018, the Company had shareholders' funds attributable to Essentra equity holders of £592.6m (2017: £612.3m). Net debt was £240.1m (2017: £210.6m) and total invested capital in the business was £943.7m (2017: £979.4m).

This finances non-current assets (excluding assets held for resale) of £853.3m (2017: £868.1m), of which £282.2m (2017: £283.1m) is tangible fixed assets, the remainder being intangible assets, deferred tax assets, retirement benefit assets and long-term receivables. The Company has net working capital of £121.8m (2017: £124.4m), current provisions of £5.3m (2017: £4.8m) and long-term liabilities other than borrowings of £106.2m (2017: £105.4m).

Pensions. As at 31 December 2018, the Company's IAS 19 net pension liability was £13.9m (FY 2017: £13.4m). The net liability has been calculated after updating the asset values and certain assumptions as at 31 December 2018.

Dividends. The Board of Directors recommends a final dividend of 14.4 pence per 25 pence ordinary share (2017: 14.4 pence). The final dividend will be paid on 3 June 2019 to equity holders on the share register on 26 April 2019: the ex-dividend date will be 25 April 2019. 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 2019.

Board changes. Following the Company's Annual General Meeting on 19 April 2018, Terry Twigger retired from the Board. Further to Terry's retirement, Tommy Breen was appointed as Senior Independent Non-Executive Director and Mary Reilly assumed the role of Chairman of the Audit & Risk Committee.

On 30 May 2018, the Board announced the appointment of Lily Liu to the Board of Essentra with effect from 15 November 2018, to succeed Stefan Schellinger as Chief Financial Officer. Stefan retired from the Board on 15 November 2018 and left the Company on 30 November 2018.

On 1 March 2019, the Board announces the appointment of Nicki Demby as a Non-Executive Director and Remuneration Committee Chairman Designate, with effect from 1 June 2019. After six years, Lorraine Trainer has advised the Board of her intention to step down as a Non-Executive Director and Chairman of the Remuneration Committee following the Company's 2020 Annual General Meeting, and will work closely with Nicki in the meantime to ensure a smooth transition of responsibilities.

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. The treasury function is subject to periodic independent reviews by the Group Assurance department. 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 2018, Essentra's US dollar-denominated assets were approximately 36% hedged by its US dollar-denominated borrowings, while its euro-denominated assets were approximately 30% 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.

With significant business operations in the UK and across the European Union, Essentra has conducted a thorough review of Brexit risks across ten areas, including the movement of goods across borders, currency effects and employees. The key issues identified in this review were the flow of materials and finished goods across EU - UK borders (in both directions), further to which the Company has been working on an active programme of initiatives over the last twelve months to mitigate both short- and medium-term risks.

While there is still uncertainty as to when and under what circumstances the UK will exit the EU, the Company is assuming a worst case scenario for its planning processes and has taken various actions, such as changing supply routings, as well as building of stocks of finished goods and relevant raw materials to mitigate against short-term supply chain disruption, and ensuring that logistics providers have the required status and processes in place to facilitate smooth customs handling.

With effect from 1 January 2019, the Company has initiated a Business Process Redesign ("BPR") programme, which is expected to run for five years and will ultimately support the strategic growth agenda, enhance process efficiency and improve business controls. Starting with the Components division and the Finance and Procurement functions, this phased programme will focus on both business model redesign and ERP investment. Further details on cost and benefits associated with the BPR programme will be provided at the time of Essentra's HY 2019 results.

Heading into 2019, the macro economic environment is uncertain. However, while our Components division - and elements of Specialist Components - are more exposed to industrial segments with a certain degree of cyclicality, much of our Group serves end-markets which are non-cyclical in nature.

Accordingly, as we continue to drive the agenda and deliver the stated objectives for each of our divisions, we expect to make further strategic progress in 2019.

Enquiries

Presentation

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

There will be a presentation for analysts and investors at 08:30 (UK time, registration from 08:00), which will be held at The Auditorium, Deutsche Bank, Winchester House, 1 Great Winchester Street, London, EC2N 2DB.

There are three options for participating in the presentation:

· Attend in person

· View a live webcast of the presentation at http://www.essentraplc.com/en/investors/company-information/webcasts-and-presentations

· Dial in to the live webcast of the presentation, using the following details:

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.

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 four divisions from the start of 2018 - reflecting the Company's strategic review - 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.

Essentra Components

Essentra Components is a global market leading manufacturer and distributor of plastic injection moulded, vinyl dip moulded and metal items. Operating in 28 countries worldwide, ten manufacturing facilities and 26 logistics centres serve more than 85,000 customers with a rapid supply of low cost but essential products for a variety of applications in industries such as equipment manufacturing, automotive, fabrication, electronics and construction.

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 22 facilities across four geographic regions. The division's innovative products include cartons, leaflets, self-adhesive labels and printed foils used in blister packs, which help customers to meet the rapidly-changing requirements of these end-markets and can also be combined with Essentra's authentication solutions to help the fight against counterfeiting.

Essentra Filters

Essentra Filters is the only global independent cigarette filter supplier. The seven worldwide locations, including a dedicated Technology Centre supported by three regional development facilities, provide a flexible infrastructure strategically positioned to serve the tobacco sector. The business supplies a wide range of value-adding high quality innovative filters, packaging solutions to the roll your own segment and analytical laboratory services for ingredient measurement to the industry: Essentra's offering also includes e-cigarette and Heat Not Burn solutions to the rapidly evolving market for Next Generation Products.

Essentra Specialist Components

Essentra Specialist Components comprises the Company's five smaller businesses. These activities largely have strong positions in the markets in which they operate, although they have little overlap with each other or with Essentra's larger three global divisions.

The Extrusion business is a leading custom profile extruder located in The Netherlands which offers a complete design and production service. One of the first companies to extrude plastics, Essentra is now one of Europe's most advanced suppliers of co-extrusion and tri-extrusion to all branches of industry.

The Speciality Tapes business has expertise in coating multiple adhesive systems in numerous technologies, with approximately 1,200 tape products stocked for same-day shipping predominantly for retail point of purchase, appliance and industrial applications.

The Tear Tapes business is globally recognised as the leading manufacturer and supplier of pressure-sensitive tear tapes, which are largely used in the tobacco, food and drink and specialist packaging sectors.

The Industrial Supply business provides a wide range of branded hardware supplies to a broad base of industrial customers, largely located in the US Mid-West.

The Card Solutions business is a leading European provider of ID card printers, systems and accessories to direct and trade customers.

Headquartered in the United Kingdom, Essentra's global network extends to 33 countries and includes c. 8,000 employees, c. 45 principal manufacturing facilities, c. 30 sales & distribution operations and 4 research & development centres. For further information, please visit www.essentraplc.com.

1. Basis of preparation

The financial information set out in this document does not constitute statutory accounts for Essentra plc for the year ended 31 December 2018 but is extracted from the 2018 Annual Report.

The Annual Report for 2018 will be delivered to the Registrar of Companies in due course. The auditors' report on those accounts was unqualified and neither drew attention to any matters by way of emphasis nor contained a statement under either section 498(2) of Companies Act 2006 (accounting records or returns inadequate or accounts not agreeing with records and returns), or sec on 498(3) of Companies Act 2006 (failure to obtain necessary information and explanations).

The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union ("EU") in accordance with EU law (IAS Regulation EC 1606/2002) ("adopted IFRS") and International Financial Reporting Standards as issued by the International Accounting Standards Board, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements are prepared under the historical cost convention except for derivatives which are stated at fair value and retirement benefit obligations which are valued in accordance with IAS 19 Employee Benefits.

The preparation of financial that conform with adopted IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

For the purposes of these financial statements "Essentra" or "the Group" means Essentra plc ("the Company") and its subsidiaries.

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.

On 25 August 2016, Essentra entered into a sale and purchase agreement with Filtration Group to dispose of the Group's entire operations in Porous Technologies. The transaction completed on 6 March 2017. The results of Porous Technologies were presented as results from a discontinued operation in the consolidated income statement for the year ended 31 December 2017.

On 14 January 2019, Essentra divested of its Pipe Protection Technologies business ("PPT") to certain wholly-owned subsidiaries of National Oilwell Varco, Inc. As the transaction occurred after the 2018 financial year end, the assets and liabilities of the business have been disclosed in the consolidated balance sheet as at 31 December 2018 as a disposal group held for sale. Results from the business for the year ended 31 December 2018, and the comparative year, are presented in continuing operations.

Changes in accounting policies

The Group has adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments from 1 January 2018. The adoption of these standards does not have a material effect on the Group's financial statements, as disclosed in the Group's 2017 consolidated financial statements. There is no quantitative impact of adopting IFRS 15. The quantitative impact of IFRS 9 on the Group's retained earnings at 1 January relating to an increase in provision for trade receivables is £2.7m (£2.3m net of deferred tax).

Other than these, the accounting policies and presentation in this set of financial statements are consistent with those applied in prior years.

2. Segment analysis

In accordance with IFRS 8, Essentra has determined its operating segments based upon the information reported to the Group Management Committee. With effect from 1 January 2018, Essentra has implemented a new organisational structure, comprising four divisions. The scope of central services remains the same.

The operating segments are as follows:

Components is a global market leading manufacturer and distributor of plastic injection moulded, vinyl dip moulded and metal items.

Packaging is one of only two multi-continental suppliers of a full secondary packaging range to the health and personal care sectors.

Filters is the only global independent supplier of innovative cigarette filters and related solutions to the tobacco industry.

Specialist Components is a new division, created with effect from 1 January 2018 further to the Company's strategic review, and comprises the following six smaller businesses of Essentra:

· The Extrusion business is a leading custom profile extruder located in the Netherlands which offers a complete design and production service.

· The Pipe Protection Technologies business specialises in the manufacture of high performance innovative products from commodity resins to engineering-grade thermoplastics and polymer alloys for use in the oil & gas industry.

· The Speciality Tapes business has expertise in coating multiple adhesive systems in numerous technologies, and its products range from foam, magnetic, finger lift and acrylic high bond tapes to hook and loop and non-skid foam.

· The Tear Tapes business is globally recognised as the leading manufacturer and supplier of pressure-sensitive tear tapes, which are largely used in the tobacco, food & drink and specialist packaging sectors.

· The Industrial Supply business provides a wide range of branded hardware supplies to a broad base of industrial customers, largely located in the US mid-west.

· The Card Solutions business is a leading European provider of ID card printers, systems and accessories to direct and trade customers.

On 25 August 2016, Essentra entered into a sale and purchase agreement with Filtration Group to dispose of the Group's entire operations in Porous Technologies. The transaction completed on 6 March 2017. The results of Porous Technologies were presented as results from a discontinued operation in the consolidated income statement for the year ended 31 December 2017.

No finance income or expense related to discontinued operations, and the income tax expense related to discontinued operations amounted to £nil (2017: £24.9m).

The adjusted operating profit/loss presented for each operating segment includes the effect of allocation of certain functional costs such as finance, human resources, legal and IT, as well as costs relating to management of the divisions on an internal management methodology. Therefore the adjusted operating profit for year ended 31 December 2017 presented below of £84.9m differs from the amount presented as operating profit before intangible amortisation and exceptional and other adjusting items of £84.6m as a result of £0.3m of costs allocated to Porous Technologies under the internal management methodology.

2. Segment analysis continued