Essentra plc - Further COVID-19 Update
ANNUAL GENERAL MEETING - FURTHER COVID-19 UPDATE
· Three priorities remain; employee physical and emotional wellbeing, continued high levels of customer support, cash conservation
· New fourth priority - building for our future - to ensure the Group is best placed to emerge from the pandemic successfully
· Groupwide performance not materially impacted by COVID-19 in Q1, but disruption to trading felt in April
· Most significant impact in Components, with underlying demand in Packaging and Filters robust
· All 71 manufacturing and distribution facilities are now operational
· Liquidity position and capital structure well placed to absorb an extended period of uncertainty
· Well positioned to respond effectively to the impacts of the pandemic and return to delivering growth over the medium to long term
Further to the announcement made on
The Company's main priority remains the safeguarding of our people - physically, emotionally and financially - whilst taking account of our global and local obligations. The steps taken by the Company have been underpinned with the principle of protecting jobs as much as possible during the period of uncertainty.
Physically, we have strict hygiene and protective safety measures in place across all of our facilities, extending the provision of PPE to employees' families in many vulnerable countries. We continue to see a decline in the number of employees absent from work for COVID-19 related reasons.
Emotionally, the Company has established virtual networks for those employees now home-based or those with specific challenges at this time. Our critical factory and warehouse employees in some high risk countries have been provided with alternative housing, whilst more globally employees have been given access to support networks and alternative working arrangements. The mental and emotional well-being of our people continues to be at the forefront of our planning, as the pandemic and future of our working places emerge.
Financially, we continue to support employees during periods of furlough where no government support is provided, in addition to providing isolation payments for those who would otherwise not be paid. We have also extended support to those working on an agency basis who have been significantly impacted by the pandemic. To help fund these initiatives, the Company's top 100 senior leaders, its Group Management Committee members and the Board have taken a voluntary reduction in remuneration. Some of the actions are in addition to the remuneration initiatives announced previously in relation to the executive management and the Board.
The Company is proud to be serving critical industries involved in the fight against COVID-19; the pharmaceutical industry in our Packaging division and the medical devices industry in our Components division.
As we previously reported, apart from any government-imposed closures, our supply chain continued to serve our customers largely unhindered. There have been a handful of instances of facility closures due to government lock downs since the pandemic began, however, the Company is pleased to report that across our global footprint, all manufacturing and distribution facilities are now operational, with relevant precautions in place such as appropriate social distancing measures and PPE.
The Company is working closely with its customers to respond quickly to their changing needs. Our world class service and quality metrics have been maintained despite any disruptions that have been caused by the pandemic.
Impact of COVID-19 on Current Trading
Trading in Q1 showed some limited impact from the pandemic, whilst the effects have been more profound in April. Nonetheless, the outcome for April was in line with where the Company expected it to be at the start of the month.
Trading in Q1
Group like-for-like (LFL) revenue declined 7% for the period.
Total Components LFL revenue was 5% down on the prior year period. This was reflective of the pandemic causing disruption in
In Packaging, LFL revenue was down 5% in the quarter. This reflects a tough prior year comparative - Q1 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
Total Filters divisional revenue was 12% down on the prior year period, of which the core Filters business was down by 10%. This performance was broadly in line with expectations for the first quarter, given three short term factors; namely, the effect of the pandemic being felt earlier in the period in
Trading in April and recent developments
Group like-for-like (LFL) revenue declined 17% in April.
In the Components division (which is more exposed to industrial cyclicality), April saw an accelerated slowdown in customer demand, particularly in
Underlying demand remained robust in both the Packaging and Filters divisions. As previously indicated in our announcement dated
The order book for Packaging is encouraging, and is higher than it was at the same point last year, on a LFL basis.
Filters continues to make progress on its strategic agenda, despite any restrictions caused by the pandemic. Namely, the commencement of our two 'gamechanger' outsourcing deals and the establishment of the China JV.
Financial Position and Priorities
The Company continues to maintain a strong balance sheet and liquidity position. In the announcement dated
The Company has successfully repaid a
The Company continues to proactively work on protecting its trading and cash flow position by assessing a number of mitigation levers within its control, such as discretionary spend and capex. This decisive cost action combined with the Company's strong liquidity position, leaves the Company well placed to weather these unprecedented trading conditions.
Building for the Future
The pandemic has changed the macro-environment, which has been uniquely impacted by the rapid and global spread of COVID-19. As the Company took early action to ensure continuity of service (where possible) whilst protecting employees, it has further strengthened its relationships with its customers.
The Company has implemented a working group to assess the key learnings from the pandemic, as well as looking into new opportunities that the Company could benefit from strategically, commercially and operationally. This work is to ensure that the Company is agile in adapting its offer to customers as the world emerges from the COVID-19 pandemic.
The Company anticipates inevitable continued disruption to its trading in the coming months and it is still too early to call out the full extent of the resulting impact on the full year financial performance - hence any guidance remains absent. The current expectation for May, subject to further adverse pandemic developments, is at least in line with the April performance.
Nonetheless, the Company also recognises that there is a risk of a second wave to the pandemic, which could adversely impact trading beyond Q2. The Company is in the process of putting together plans to mitigate against the impacts of such a risk.
The Company has a strong balance sheet with a liquidity position and capital structure that is well placed to absorb an extended period of uncertainty. Despite the current intense focus on addressing the immediate challenges, we continue to pursue the strategic initiatives that will drive our medium to long term growth, albeit at a revised pace.
The Company has created a dedicated COVID-19 section within its corporate website, where regular updates are being posted (please see https://www.essentraplc.com/about-us/covid-19-approach/groupwide-approach).
Following on from regulatory guidance from the FRC, regarding reporting timeframes in the current environment, the Company will announce its Interim results (originally planned for Friday
As reported in the FY 2019 results announcement,
Commenting on today's announcement,
"I am very pleased with how the Company has responded to this unprecedented situation. From the onset of the pandemic, we have focused our energies on our three main priorities; employee wellbeing, customer support, and cash conservation. The effectiveness of our response means that we are now also focusing on building for the future, our new fourth priority, to ensure we are best placed to come out of the pandemic successfully.
As an organisation we have taken rapid action to manage our costs, preserve cash and protect the Company's financial position - which has resulted in us remaining profitable and cash neutral even in these recent difficult times.
The fundamentals of our Company remain sound, and we will continue to take all necessary measures to ensure that the Company emerges from this unprecedented situation as an even stronger and better organisation.
I would like to take this opportunity to thank our employees - who have continued to perform above and beyond, despite the challenging circumstances we are all faced with. I would also like to thank management, who have voluntarily taken a cut in their renumeration in order to financially help others within the
Lucy Yank, Group Communications Director
Tel: +44 (0)1908 359100
Cautionary forward-looking statement
This announcement contains forward-looking statements based on current expectations and assumptions. Various known and unknown risks, uncertainties and other factors may cause actual results to differ from future results or developments expressed or implied from the forward-looking statements. Each forward-looking statement speaks only as of the date of this document. The Company accepts no obligation to revise or update these forward-looking statements publicly or adjust them to future events of developments, whether as a result of new information, future events or otherwise, except to the extent legally required.
The numbers quoted in this announcement are based on the Company's management accounts and have not been audited.
Notes to Editors
Headquartered in the
Essentra Components is a global market leading manufacturer and distributor of plastic injection moulded, vinyl dip moulded and metal items. Operating in 29 countries worldwide, 14 manufacturing facilities and 29 logistics centres serve more than 85,000 customers with a rapid supply of low cost but essential products for a variety of applications in industries such as equipment manufacturing, automotive, fabrication, electronics and construction. The division also includes the Reid Supply business, which provides a wide range of branded hardware supplies to a broad base of industrial customers, largely located in the US Mid-West.
Essentra Filters is the only global independent cigarette filter supplier. The seven worldwide locations, plus a dedicated Technology Centre supported by three regional development facilities, provide a flexible infrastructure strategically positioned to serve the tobacco sector. The business supplies a wide range of value-adding high quality innovative filters, packaging solutions to the roll your own segment and analytical laboratory services for ingredient measurement to the industry:
This information is provided by RNS, the news service of the
Quick facts: Essentra PLC
Market Cap: £832.83 m
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