ESSENTRA PLC
("Essentra" or the "Company")

A leading global provider of essential components and solutions

RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2021

Strong trading performance with accelerated growth in Q4. Strategic reviews are progressing in line with expectations with focus on becoming a pure play Components business

Summary:

·    The strategic reviews of both the Filters and Packaging divisions are progressing in line with expectations

·   FY 2021 results displayed a strong performance with operating profit within the range of analyst forecasts, demonstrating Essentra's strong market positions, clear market share gain strategy and agile operations:

·    Revenue increase of 8.4% on a like-for-like¹ ("LFL") basis

·    Adjusted^2,3 operating profit up 46.5% (at constant FX) to £83.9m

·    Reported³ operating profit of £49.7m versus £11.6m in 2020

·    Adjusted^2,3 basic EPS 54.6% higher (at constant FX) at 18.2p

·    Reported³ basic EPS of 8.9p compares to 1.2p loss in 2020

·    Adjusted^2,3 operating cash flow £64.5m in 2021 (2020: £86.7m)

·    Strong performance across the Group for the FY:

·   Components delivered a strong trading performance with revenue +21.7% on a LFL constant currency basis. Successful navigation of ongoing supply chain disruptions and mitigation of inflationary cost increases, whilst satisfying accelerated demand, resulted in operating profit increasing to £56.9m with 100bps margin expansion to 18.9% on a constant currency basis

·    Packaging revenue declined 3.6% on a LFL constant currency basis due to the ongoing impact of the pandemic on prescription and elective surgery volumes. Operating profit reached £15.4m with 40bps margin expansion to 4.2% on a constant currency basis. A Q4 margin of 7.9% was achieved as a result of uplifted trading performance and timing related one-off benefits. Strong customer relationships and signs of market recovery have resulted in encouraging order book trends

·  Filters sales grew 12.9% on a constant currency basis underpinned by growing volumes of outsourced contract business wins. There has been an increased commercial interest in proprietary ECO and Tobacco Heating Products ("THP"). Operating profit increased to £28.2m with margin expanding 50bps to 9.5% on a constant currency basis

·    Accelerated revenue growth seen in all three divisions in Q4 on a LFL basis. Continued momentum seen in early 2022 with sales on a YTD basis continuing to grow compared to the same period last year

·    Stability of our balance sheet has provided optionality to invest in capex, M&A activity and working capital requirements

·   Net debt of £234.7m (2020: £210.4m), with net debt to EBITDA at 1.7x (2020: 1.8x) and 1.5x excluding lease liabilities (unchanged from 2020)

·    Given the Group's continued strong performance and financial position, the Board has recommended a final dividend of 4.0p per share, making a total dividend distribution for the year of 6.0p (2020: 3.3p), aligned with our progressive dividend policy

·   A non-cash change to the Group's accounting policy driven by IFRIC relating to the de-recognition of certain software assets from the balance sheet totals £11.8m in 2021 and £16.9m relating to 2020 and prior years

^{1 Excludes the impact of acquisitions and foreign exchange}

^{2 Before amortisation of acquired intangible assets and adjusting items. Further details can be found in Alternative Performance Measures section}

^{3 Prior year restatement required for the adoption of IFRIC agenda decision on cloud-based software arrangements. See note 1 to the Consolidated Financial Statements}

Results at a glance:

^{1 Before amortisation of acquired intangible assets and adjusting items. Further details can be found in Alternative Performance Measures section}

^{2 Net income is defined as profit / (loss) after tax, before non-controlling interests
3 A reconciliation of free cash flow is set out in the Financial Review}

^{4 Prior year restatement required for the adoption of IFRIC agenda decision on cloud-based software arrangements. See note 1 to the Consolidated Financial Statements}

Statutory to Adjusted Reconciliation:

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

^{2 Prior year restatement required for the adoption of IFRIC agenda decision on cloud-based software arrangements. See note 1 to the Consolidated Financial Statements}

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

"2021 saw the start of a new and transformational chapter in Essentra's journey; we have set out a clear direction for the Company to become a pure play Components business over time and announced strategic reviews of the Filters and Packaging divisions, thereby ensuring we create three strong stand-alone global businesses. I believe this next chapter will present even more positive opportunities for our businesses and our people.

While the strategic announcements dominated the focus of the organisation as the year drew to a close, 2021 as a whole was also a year of continued business investment, strategic delivery and strong financial performance.

Despite the challenges arising from the pandemic and supply chain headwinds, we have seen an improving revenue trend throughout the year, which has continued into the start of 2022 with all three global divisions well-positioned for growth with strong order books.

Essentra has no significant operations or employees in Ukraine or Russia and our sales to these markets are de minimis in the context of the Group. All sales to Russia have been suspended and will continue to be suspended until further notice.

Our thoughts are with everyone whose lives have been affected by these appalling events. We are doing all we can to extend support to affected colleagues and providing support to the humanitarian relief effort."

In Q3 2021, Essentra set out its strategic goal to become a pure play Components business, maximising shareholder value and the potential of each business.

Over the last few years, Essentra has simplified its portfolio into three global businesses, each with leading market positions and a clear purpose and strategy. These businesses all have strong prospects and the potential to deliver compelling returns for investors, but are at different stages of their development and have limited synergies.

The strategic reviews of the Filters and Packaging divisions, previously announced by the Board, are running in parallel and are progressing in line with expectations.

The Board remains focused on maximising shareholder value and will provide further updates as appropriate.

In 2021, the Group made continued progress towards achieving sustainability goals in all divisions, working towards the goal of "class-leading sustainability" we set out in 2020.

In Components, we have increased the use of post-consumer recycled content materials to 8.5% from c.2% in 2020 (target of 20% in 2025); in Packaging we continue to introduce alternative materials and 96% of our paper and board material come from sustainably managed sources; in Filters, we continue the development and commercialisation of our ECO range.

The Group also saw further reduction of normalised Greenhouse Gas emissions to 18.4% below the 2019 baseline, well on track for our target of 25% reduction by 2025.

The number of zero waste to landfill manufacturing sites increased to 22 sites this year, with the aim of certifying all sites by 2030. We saw waste volumes decline by 10.9% in 2021, targeting 20% reduction by 2030, compared to the 2019 baseline. The reductions in 2021 have been achieved as a result of improved tracking of waste and continuous improvement projects on sites.

Further details regarding our sustainability strategy will be published within our 2021 Annual Report.

Essentra has no significant operations or infrastructure in Russia or Ukraine and no employees in either country. Sales to these markets are around 2% of total revenue. All sales to Russia have been suspended and will continue to be suspended until further notice.

The Company is supporting the humanitarian relief effort in Ukraine with fundraising and other events happening across our businesses. Essentra has made a donation of £100,000 to the Disasters Emergency Committee ("DEC") Ukraine Appeal.

The Company's thoughts are with the Ukrainian people at this incredibly difficult time and our hopes are for peace to be restored as swiftly as possible.

Essentra has made a strong start to the year, with sales and order book ahead of 2021. Whilst the external environment remains challenging due to global supply chain disruptions and continued impact of cost inflation, the Group has demonstrated its ability to manage these challenges in the past, and will continue to implement pricing actions alongside local cost mitigation activities.

We expect Components to grow from market share gains through enhanced digital customer experience and cross-selling activities, as well as from continued underlying market recovery; Packaging to return to historic levels of growth as prescriptions and elective surgery volumes recover; and Filters should see strong growth enabled by the ramp up of China JV and outsourcing contracts.

It is worth noting that the recent GBP appreciation, particularly against USD, EUR and TRY continues to cause a translational exchange headwind.

During 2021 the Group has changed its accounting policy related to the capitalisation of certain software costs. This change follows the IFRS Interpretation Committee's agenda decision published in April 2021 and relates to the capitalisation of costs of configuring or customising application software under "Software as a Service" ("SaaS") arrangements.

Due to the level of spend incurred in relation to these arrangements, the Group's accounting policy has been reviewed retrospectively to align with the IFRIC guidance recently issued in relation to cost of configuring and customising SaaS arrangements previously capitalised.

This change in accounting policy led to adjustments amounting to a reduction in assets of £16.9m and £6.9m recognised in the 31 December 2020 and 1 January 2020 balance sheets respectively.

Customisation and configuration costs for SaaS arrangements of £11.8m and £10.5m were charged to operating expenses for 2021 and 2020 respectively. Of these, £11.8m (2021) and £10.4m (2020) relate to major SaaS arrangements and are therefore presented within adjusting items with regards to the Group's adjusted operating profit.

See note 1 to the Consolidated Financial Statements for further details.

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 were:

Re-translating at FY 2021 average exchange rates decreases the prior year revenue and adjusted operating profit by £43.8m and £5.0m 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 2021 LFL results are adjusted for acquisition of 3C! Packaging, Inc. on 17 September 2020, the acquisition of Jiangxi Hengzhu Electrical Cabinet Lock Co., Ltd ("Hengzhu") on 2 August 2021 and the commencement of production in the China Joint venture in July 2021.

Additionally, when 2021 LFL performance is compared against 2019, then the following are also adjusted for: the acquisition of the Innovative Components business on 26 June 2019, the acquisition of Nekicesa Packaging on 6 September 2019, 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 2021, amortisation of acquired intangible assets was £22.4m (2020: £22.6m), and there was a pre-tax charge for adjusting items of £11.8m (2020: £28.1m). In the current year, a charge for adjusting items of £11.8m is driven by major software as a service ("SaaS") development expenditure; £2.8m from strategic initiatives that have resulted in the proposed closure of certain sites in 2021 (net of gain on disposal of fixed assets), as well as corporate projects, and £2.0m on acquisition related transaction and integration costs. This was offset by a release of provisions and deferred considerations from previous acquisitions and disposals of £4.8m. 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 27 to 30 of the 2020 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.

The FY 2021 result for the Group was strong with an accelerated Q4 performance notwithstanding the macroeconomic uncertainty and global supply chain disruptions. Overall, FY 2021 revenue increased by 7.0% (12.6% at constant exchange) to £959.7m, whilst on a LFL constant currency basis, revenue increased by 8.4% (1.4% vs 2019).

On an adjusted basis, operating profit was up 34.7% (46.5% at constant FX) at £83.9m, which has been driven by a recovery in trading volumes and also demonstrates the effective mitigation of supply chain disruption and cost inflation through focused pricing activities, as well as cost saving programmes. Adjusted operating margin improved by 180 bps (200bps at constant FX) to 8.7% and is also now slightly ahead of 2019 levels.

Including amortisation of acquired intangible assets of £22.4m and a pre-tax charge from adjusting items of £11.8m, operating profit as reported was £49.7m (2020: £11.6m).

Net finance expense was above the prior year at £16.5m (2020: £15.7m), this was mainly driven by an increase in interest charged on net debt and leases. The effective tax rate on underlying profit before tax (before adjusting items) was 16.6% (2020: 19.1%).  The reduction in the tax rate is driven by a one-off tax credit from the revaluation of UK deferred tax assets as a result of the increase in UK corporate income tax. The underlying effective tax rate for the Group without this credit is 19.7%, which is within our forecast tax rate range of 19% to 20%.

On an adjusted basis, net income of £56.2m was up 49.1% (65.9% at constant FX) and adjusted basic earnings per share increased to 18.2p. On a total reported basis, net income of £28.3m and basic earnings per share of 8.9p compared to net loss of £1.5m and loss per share of 1.2p respectively in 2020.

Adjusted operating cash flow was £64.5m (2020: £86.7m), equating to a cash conversion of 77% compared to 139% in 2020. This includes an outflow of net working capital for the year of £29.9m (2020: £6.2m inflow). The increase in net working capital to £129.7m (2020: £108.1m) was predominately due to higher inventory and receivables levels, supporting growth and increased trading volumes as well as helping with our mitigation of supply chain disruption. Our average net working capital to sales ratio improved by 140bps to 12.8% when compared to 2020 and 2019 levels.

Summary growth in revenue by Division

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

Components

^{1 Before amortisation of acquired intangible assets and adjusting items.}

Revenue for the year increased by 24.7% to £301.7m. Adjusting for the acquisition of Hengzhu, LFL revenue was +21.7%. The division has seen a strong quarterly trading performance recovery during the course of the year and has been trading consistently ahead of 2019 pre-pandemic revenue levels from Q2 onwards.

The division has continued to rebound with the positive momentum seen in the first half of 2021 continuing through to H2 despite tougher comparatives. The business has recorded LFL revenue per trading day adjusted growth of 28.5% in Q3 and 18.7% in Q4. When compared to Q3 and Q4 of 2019, current year trading is up 14.2% and 14.9% respectively on a LFL revenue per trading day adjusted basis.

Consistent with the commitment to providing customers with a "hassle-free" experience, the division has continued progress on its digital journey. After the Asia roll out of the new digital platform in H1, three further countries are now live, with Turkey and Thailand to follow in 2022, completing the global roll out of the new digital platform (Europe and North America went live in prior years). The platform provides the division with the ability to promote an expanding range of products from both organic and acquisition activities, with improved cross selling functionality. Further developments have taken place in H2 such as advanced intelligence functionality using digital data to enhance personalisation and digital effectiveness. We continue to see success in our category management approach using global category expertise rather than a regionally bound approach.

As highlighted during the half year results, the growth in Components has been delivered against a backdrop of supply chain challenges which has continued into H2 where further disruption and inflationary headwinds have been faced. These supply chain challenges have been compounded by a strong rebound in demand seen in the market alongside labour availability and inflation headwinds in the US.

Given the impact on customer service caused by supply chain disruption, we were disappointed but not surprised that our net promoter score ("NPS") fell to 23. However, our sales growth rate indicates the strength of underlying market and our ability to gain market share even in challenging times. Our backlog, which peaked in August 2021, has shown substantial improvement over the last six months as we continue to drive service improvements.

In response to increased inflationary pressures (materials, labour and freight), and to protect our margins, the business implemented a second tranche of price increases in Q3. In 2022, the division will continue to monitor supply chain headwinds and drive proactive remediation actions.

We have successfully taken steps to streamline our operational footprint with the closure of two manufacturing sites in the US, and one in Europe, previously identified in 2020, which will deliver overall improvements in cost to serve.

The Components division has made solid progress towards meeting sustainability targets in 2021. We have made strong advances towards achieving the target of using 20% recycled or renewable polymer raw materials by 2025, finishing the year with a Q4 run rate of recycled material consumption of c.10% of total material. Our investment in research and development across this field continues to be a key area of focus and will enable further implementation of projects to deliver our 2022 goals.

We have continued to invest in our BPR programme during the year, which has not been without its challenges. After going live with our first operational site in Spain in July, we have conducted a review of activity and lessons learnt through implementation as well as enhancing resources for the project, with a new structure in place at the end of 2021. We now have a solid foundation to progress the roll out in 2022.

Adjusted operating profit increased by 31.2% to £56.9m, equating to a margin of 18.9% (2020: 17.8%). The 100bps improvement (at constant currency) reflects the improved trading volumes throughout the year, tempered by inflationary input cost pressures which we were able to mitigate through price increases in the second half of the year.

Packaging

^{1 Before amortisation of acquired intangible assets and adjusting items.}

Revenue increased 3.8% to £362.4m. On a LFL, constant currency basis the revenue decline was 3.6% for the year. 3C! Packaging which was acquired in September 2020 contributed £34.3m revenue in 2021.

Throughout 2021, healthcare market demand has continued to be impacted by the pandemic, especially for certain segments (cold and flu treatments, hospitals and over-the-counter). The ramp up of COVID-19 vaccines and anti-viral treatments have marginally offset lower overall demand and we started to see improvements to our order books through H2. We are proud to have continued to support several customers in supplying critical COVID-19 treatments and vaccines across the year.

The US healthcare market started to recover from Q2 whilst the European market, due to further headwinds of new variants and continued lockdowns, did not start to show an improvement until the end of Q3. Recovery within both markets was reflected in Q4, with LFL growth of +2.1% as activity picked up, providing signs of optimism of market demand recovery and reflecting labour stabilisation and retention in the US.

Throughout 2021, we have continued to provide our customers with a reliable service for their critical products and customer relationships have strengthened further. We were delighted to receive positive feedback from our customers, including a COVID-19 supplier award from our largest UK pharmaceutical customer.

We have made significant progress with our sustainability credentials, with more than half of our manufacturing sites now classified as zero waste to landfill and 96% of paper and board material used is now from FSC or PEFC certified suppliers. Sustainability has risen up our customers' agenda significantly and we are collaborating with them on a pipeline of sustainable product innovations. Our Re*flect alternative to metalised polyester board ("METPOL") is a great example of delivering an innovative product to support our customers' sustainability goals, and we have been able to grow a sustainable innovative product offering through ClearCode technology (acquired from 3C! Packaging). The Packaging division was recognised for its approach to sustainability at the 2021 Pro Carton awards, receiving a Gold in the Carton Excellence awards for its cosmetics carton for an exclusive online skincare brand in Q3.

Strategic cost reduction initiatives, in particular the closure of our Portsmouth (UK) and Moorestown (USA) sites in H1, have supported margin improvement through the year, and when market recovery enables us to benefit from operational leverage we are confident in our ability to see margins improve. In response to input cost increases in H1, pricing actions were implemented through the second half of the year. Our Q4 margin exit rate of 7.9%, has been delivered with support of self-help actions, and timing related benefit alongside signs of market recovery, and we continue our journey towards achieving industry standard margins.

Adjusted operating profit increased 17.6% to £15.4m, equating to a margin of 4.2% (40bps constant currency improvement). This was largely driven by the continued delivery of savings originating from gross margin initiatives, procurement and organisational changes made in the prior year, offset by lower sales volumes.

Filters

^{1 Before amortisation of acquired intangible assets and adjusting items.}

Total Filters divisional revenue was 12.9% up on the prior year, of which the core Filters business (excluding Tapes business) was up by 14.2%.

The second half of 2021 continued to gain momentum versus 2020 despite tougher quarterly comparatives. Q3 was up by 2.8% and Q4 22.7% on a constant currency basis. Accelerated growth has been driven by increased sales into the Chinese market, a number of outsourcing contract business wins and the increase in sales of capsule filters. Sales price increases have also supported in protecting against cost inflation (raw materials and freight).

In relation to the division's 'game changers', the previously announced outsourcing contracts are now operating with full production volumes being achieved. Significant investments into driving outsourcing contracts has led to tangible results, including securing two multi-year outsourcing contracts with two Multi-National Companies ("MNCs"). Our pipeline of outsourcing contract opportunities built in 2021 should continue to deliver growth in 2022 and have been achieved across the range of our customer base (MNC, Monopoly and Independents), primarily for manufacture in EMEA and Asia.

The China JV continues to provide a great platform to capture opportunities available in the world's largest tobacco market which is also shifting towards speciality products. Production volumes have ramped up through H2 and annualised exit rate is on track with expectation.

We continue to focus on innovation, and our pipeline of ECO and next generation products ("NGP"). There are c.52 ongoing projects with major tobacco customers on sustainable filter products including two projects in commercial production phase. The division remains uniquely positioned to be a key global player in the outsourced filter market using strong technological knowledge and we remain pleased with the increased levels of interest the market is showing towards these new products. As previously reported in December 2020 the division 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. Three further patents have been filed for the products to extend our ECO range and both ECO Flute and ECO Active have been launched commercially. 

The Tapes business has continued to develop its key account management structure, growing a deeper understanding of customer needs, and supporting development of relevant value propositions.

Despite disruptions that have been faced through the year the division as a whole has maintained world class service and quality metrics, further deepening customer relationships, driving productivity and efficient use of materials.

Adjusted operating profit increased 20.3% to £28.2m, equating to an operating margin of 9.5% (50bps improvement at constant currency). This was largely driven by the volume gearing effect from the revenue increase and mix of outsourcing contracts, netted off against costs incurred for the set up for the China JV.

Net finance expense.  Net finance expense of £16.5m was £0.8m above the prior year period, and is broken down as follows:

Tax.  The effective tax rate on underlying profit before tax (before adjusting items and amortisation of acquired intangible assets) was 16.6% (2020: 19.1%). As disclosed at the HY, this reduced tax rate is primarily driven by a one-off non-cash benefit on the remeasurement of deferred tax assets as a result of the enacted change in UK corporate tax rates. The underlying effective tax rate for the Group without this credit is 19.7%, which is within the Group's forecast tax rate range of 19% to 20%.

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 increase in net working capital was predominately due to higher inventory and receivables levels, which were driven by enhanced trading volumes combined with a build of inventory, to mitigate supply chain disruption and support sales growth.

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 26% lower than the previous year at £64.5m (2020: £86.7m), which equated to an operating cash conversion of 77% in the year (2020: 139%). Free cash flow was £36.7m compared to £67.3m in 2020. In addition to working capital movements, the decrease in free cash flow was also due to payments of pension contributions that were previously deferred, as well as an increase in tax payments in 2021 following an increase in Group profits.

In 2021, there was a £2.5m net increase in cash and cash equivalents to £136.3m (2020: increase of £65.3m to £135.8m).

^{1 Restated for the adoption of IFRIC agenda decision on cloud-based software arrangements. See note 1 of the Consolidated Financial Statements}

^{2 Tax paid excludes the tax paid/received in relation to adjusting items.  This is included within the cash outflow in respect of adjusting items}

Net debt.  Net debt at the end of the period was £234.7m, a £24.3m increase from 1 January 2021 (including lease liabilities). The overall increase was mainly driven by free cash flow generated, being netted off against cash paid for the acquisition of Hengzhu. In 2021 we also resumed dividend payments resulting in a cash outflow of £16.0m.

The Group's financial ratios remain healthy. The ratio of net debt to EBITDA including lease liabilities was 1.7x (31 December 2020: 1.8x). Net debt to EBITDA excluding lease liabilities was 1.5x (31 December 2020: 1.5x). Interest cover was 5.3x (31 December 2020: 4.2x). 

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 end of 2020 was set to mature in November 2022. Subsequently in January 2021, we agreed an extension to the majority of the existing facility based on new terms with six of the eight banks (totalling £225.0m), maturing in November 2023. In October 2021 we completed the total refinancing of our RCF, with the same banking group and a new five-year term, expiring in October 2026 for a commitment of £275m.

In addition to the above, in July the Company 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. As indicated at the half year, the proceeds have been used to repay GBP and Euro debt drawn under our RCF, thereby diversifying the Company's source of debt finance and lengthening its maturity profile.

Pensions.  As at 31 December 2021, the Company's IAS 19 net pension net surplus was £9.0m (2020: net liability of £23.9m). This reduction in the liability is mainly a result of an actuarial gain (driven by an increased discount rate) being netted off against a negative return of plan assets.

Dividends.  In keeping with the Company's progressive dividend policy, the Board of Directors recommends a final dividend of 4.0 pence per 25 pence ordinary share (FY 2020: 3.3p). The final dividend will be paid on 1 June 2022 to equity holders on the share register on 22 April 2022: the ex-dividend date will be 21 April 2022. 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 11 May 2022.

Board changes. As planned and previously communicated, Tommy Breen retired as a Non-Executive Director and Senior Independent Director with effect from the conclusion of the Annual General Meeting ("AGM"), held on Thursday 21 May 2021. Mary Reilly became Senior Independent Director upon Tommy's retirement, adding to her already existing role as Chair of the Audit & Risk Committee and Board Employee Champion.

Nicki Demby has advised the Board that she will be retiring from her role as Remuneration Committee Chair and Non-Executive Director with effect following the Company's 2022 AGM on 19 May 2022. Nicki joined the Board in 2019 and has made a significant contribution, in particular her focus and expertise when dealing with remuneration has provided the Board the assurance needed. Ralf Wunderlich has been appointed as Remuneration Committee Chair, providing continuing scrutiny and oversight of reward and remuneration during this time of change, adding to his existing role as Sustainability Committee Chair.

Adrian Peace was appointed as a Non-Executive Director with effect from 28 June 2021. Adrian is also a Board Employee Champion for the North American region. Adrian brings extensive experience in US and Global markets having operated in a range of businesses including light and heavy manufacturing, distribution and services sectors. Between Mary Reilly, Ralf Wunderlich and Adrian Peace our Board Employee Champions are now able to better cover our global footprint.

Dupsy Abiola was appointed as Essentra's first Board Trainee, Non-Executive Director on 29 July 2021. The purpose of the role is to help to develop a wider pool of candidates for Board positions. This appointment has been a success, and Dupsy has agreed to become a Non-Executive Director and will stand for election at the 2022 AGM on 19 May 2022. Given the success of the Board Trainee position, the Board intend to continue the scheme following the conclusion of the strategic reviews.

In November 2021, the Company announced that Lily Liu informed the Board that she would leave the Company to take up a new role as Chief Financial Officer with Synthomer plc and that a search for her successor, as Chief Financial Officer for the Essentra Components business, had commenced. On 14 March 2022, the Board has separately announced that Jack Clarke will join the Board as Chief Financial Officer Designate with effect from 4 April 2022 and stand for election at the 2022 AGM on 19 May 2022. The Board is delighted to have recruited Jack to succeed Lily and they will work closely together during the coming months to ensure a smooth transition. Lily will remain focused on the strategic reviews and her leaving date will be announced separately. Jack brings extensive experience having previously been the CFO of Marshalls plc from 2014 until 2021. Prior to Marshalls plc, Jack was CFO of AMEC E&I from 2010 to 2014.

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. At 31 December 2021, Essentra's US dollar-denominated assets were approximately 53% hedged by its US dollar-denominated borrowings, while Essentra's euro loan was repaid in the year and so the euro denominated assets were no longer hedged by any 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.

The Board advises that it has agreed the extension of Nicholas Stevenson's tenure as the Company's audit engagement leader for a sixth and final year in 2022.

Pursuant to the Financial Reporting Council's Ethical Section 3 to safeguard audit quality, audit engagement partners for public companies are required to rotate after five years. Both the Audit and Risk Committee ("ARC") and PwC believe that the extension of Nicholas Stevenson's tenure as audit engagement leader is acceptable due to the exceptional arrangements that the strategic reviews present. Ethical Standard 3 allows for this period to be extended by a further two years with shareholder notification.

PwC have put in place additional safeguards to ensure that any threat to independence arising from his familiarity with the audit and the Company are sufficiently safeguarded. The ARC reviewed these arrangements and agreed they were satisfied that the additional arrangements provided robust checks and maintained the integrity of the audit.

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.

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 8,327 employees, 47 principal manufacturing facilities, 28 sales & distribution operations and two 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, 13 manufacturing facilities and 23 sales & distribution centres serve more than 79,000 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 23 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. Currently headquartered in Singapore, the division has 12 sites across nine countries, including two innovation centres, providing 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, e-commerce, food and beverage and specialist packaging sectors.