ESSENTRA PLC This announcement is made in the context of the increasingly uncertain macro-environment, which has been uniquely impacted by the rapid and global spread of COVID-19.
People
The Company's immediate priority is the health and safety of its people. We have been taking every possible step to reduce the risk of infection across our sites and are working closely with local authorities to ensure the continued safety and wellbeing of our people, as the situation develops.
The Company has implemented responsible working practices for the current environment and has established appropriate governance and communication structures to enable focussed decision making. We have already seen an exceptional response from our employees, even in locked down countries, and we are extremely grateful for their outstanding commitment. This feature, allied to our inherent strategic strengths, provides a good platform to manage through this uncertain period.
Customers
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.
Apart from government-imposed closures, our supply chain continues to serve our customers. Although, the Company currently has a handful of manufacturing and distribution facility shut-downs, due to local government requirements, the vast majority of sites continue to operate as normal. We are working with customers and suppliers by enacting appropriate business continuity plans to mitigate the impact of any potential disruption
Impact of COVID-19 on Current Trading
As previously indicated in our year end 2019 results announcement, there has been some limited impact on trading from COVID-19 in the first two months of the year; most notably in the China Filters business and to a lesser extent in the China Components business. The Company is pleased to update that in very recent weeks, demand in
In the Components division (which is our one division that has some degree of exposure to industrial cyclicality), over the course of the past week, we have noted a high single digit slowdown in customer demand, particularly in
In the Packaging and Filters divisions, customer feedback would suggest that there is not a significant risk to underlying medium to longer term demand, but rather the greater risk lies on the supply chain side and in relation to individual country temporary legislation. However, we have not seen any significant impact to date.
Financial Position and Priorities
The Company continues to maintain a strong balance sheet and has recently completed the refinancing of an
Net debt on
The Company has undertaken extensive scenario testing, factoring in a variety of potential outcomes, which indicate that the Company has sufficient liquidity to absorb an extended period of uncertainty.
The Company has no bank or refinancing events until
The Company is working proactively to protect its trading and cash flow position by assessing a number of mitigation levers within its control, such as the reduction of discretionary capex and net working capital across the business. The Company is also implementing a reduction in discretionary spend, namely: Hiring has been frozen and the use of overtime and contractors is being significantly reduced
Marketing budgets have been significantly scaled back and refocused
Government support is being applied for globally where appropriate to support the costs of employees
Other potential cost saving levers are being actively reviewed.
Dividend
Notwithstanding the generally robust trading position and our healthy balance sheet, the macro economic environment is one of extreme uncertainty. Therefore, the Board has concluded that all reasonable steps should be taken to conserve cash and, accordingly, has decided to cancel the 2019 final dividend. As a result, final dividend payment will not be presented as a resolution at the forthcoming Annual General Meeting. The Board will continue to closely monitor the development of COVID-19, its impact on the Company's people and businesses, and assess the dividend policy in due course.
Outlook
The Company anticipates inevitable disruption to its trading in the coming months and it is too early to call out the full extent of the resulting impact on the full year financial performance; the Company remains a financially sound business 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 are driving our medium to long term growth, albeit it at a revised pace.
Contact:
Tel: +44 (0)1908 359100
About
Headquartered in the
Essentra Components
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
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:
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