Results for the Full Year Ended 31 December 2024

ESSENTRA PLC

("Essentra", the "Group" or the "Company")

RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2024

FY24 performance in line with previous guidance and market expectations

Results at a glance

Numbers reported on a continuing operations basis

Highlights

Operational performance

Outlook

Commenting today, Scott Fawcett, Chief Executive, said:

"Essentra navigated challenging market conditions in 2024, yet remained focused on the elements within the Group's control. We delivered adjusted operating profit growth of 2.3% on a constant currency basis, maintained strong gross margins in excess of 45% and produced excellent operational cashflow in excess of 90%, all of which were in-line with the revised guidance provided in Q3 2024.

Despite volume reductions, each of our regions reported improved gross margin performances, realising operational efficiencies. Our agile approach to operations across our global footprint has supported the mitigation of volume decline and protected profitability in the short term, whilst providing optionality to respond to macroeconomic changes, ensuring we remain well-positioned to take advantage of market recoveries when they occur.

Customer satisfaction remains strong, as reflected in the annual Net Promotor Score ("NPS") survey, improving by three points to 43. Each region showed an improvement year-on-year reflecting the strengthening of our service proposition. The strength of our customer relationships means we are strategically placed to deliver further operational performance improvements as end-market conditions recover. Our people remain core to what we do, and we are pleased to have achieved an industry leading employee engagement score of 85% in 2024.

We are taking a cautious view on the timing of any material improvement in end-market conditions, and expect market recovery to vary by region. At this early stage in the year, results for FY2025 are anticipated to be in line with the Board's expectations. The business continues to maintain a balanced approach to cost control and is driving further operational efficiencies, whilst also investing appropriately in value-enhancing growth initiatives and assessing bolt-on growth opportunities that will support long-term value creation. Essentra's strong market positions, differentiated business model, and right-sized cost base ensure the Group is well-positioned to benefit from significant levels of operating leverage when markets recover."

Enquiries

1 On a continuing operations basis, before amortisation of acquired intangible assets and adjusting items. Further details can be found in Note 3 of the Condensed Consolidated Financial Statements.

2 A reconciliation of free cash flow and net cash inflow from operating activities is set out in the Financial Review section.

3 Adjusted EBITDA is defined as operating profit before depreciation (and other amounts written off property, plant and equipment), share option expense, amortisation of acquired intangible assets and adjusting items. Net debt to adjusted EBITDA including lease liabilities is 1.6x (2023: 1.0x).

4 Presented on a last twelve months basis excluding lease liabilities. £97.1m when including lease liabilities (2023: £62.5m)

5 On a constant currency basis, excluding the acquisition of BMP TAPPI, completed October 2023.

Presentation

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

There will be a presentation to analysts and investors starting at 08:30am (UK time, registration from 08:00am) on Wednesday 19 March 2025 at the offices of at Deutsche Numis, 45 Gresham St, London EC2V 7BF.

There are two options for participating in the event:

1. To attend in person, please e-mail your details to [email protected]

2.  To join the live webcast of the presentation, please pre-register at http://www.essentraplc.com/en/investors/company-information/webcasts-and-presentations

A recording of the webcast will be made available on the Company's website later in the day. 

Notes to Editors

About Essentra plc

Essentra plc is a leading global provider of essential components and solutions, focusing on the manufacture and distribution of plastic injection moulded, vinyl dip moulded and metal items.

Headquartered in the United Kingdom, Essentra's global network extends to 28 countries worldwide and includes c.3,000 employees, 14 manufacturing facilities, 26 distribution centres and 37 sales & service centres serving c.64,000 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, medical and renewable energy. For further information, please visit www.essentraplc.com

LEI: 5493007MOZNA03BVNE96

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 or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

The Group delivered revenues for the full year of £302.4m, representing growth of 0.3% on a constant currency basis. LFL sales reduced by 2.7% year-on-year, reflecting mixed end-market conditions, including a softening in EMEA in the latter part of the year, offset by a positive contribution to revenue of 3.0% from the acquisition of BMP s.r.l ("BMP TAPPI"). Foreign exchange impacted Group revenue by 4.7%, with reported Group revenue 4.4% below the prior year.

After initial momentum through H1, EMEA (including Turkey) saw a softening in trading conditions through the second half, with performance remaining closely correlated to manufacturing PMI metrics across the region, particularly in West Europe. Encouragingly, the Americas region saw conditions stabilise throughout the year, supported by distributor volume trends. Whilst year-on-year volumes have declined, the pace of decline eased through the second half. The APAC region delivered a steady improvement in performance throughout 2024, with year-on-year growth. The China export business, including access hardware products, continues to drive commercial business wins in faster growing end-markets across the rest of Asia and the Middle East.

The Group experienced reduced levels of input price inflation, including for raw materials. Combined with proactive procurement activities, this led to more focused customer price increases with the overall pricing benefit for the Group at a low level compared to previous high inflationary periods.

All three regions delivered margin expansion, despite operating within a challenging market backdrop. The Group reported full year gross margin of 45.3% (2023: 44.8%) supported by increased regional management focus towards driving manufacturing efficiencies, successfully controlling the cost base in line with production volumes at operational facilities, further supported by procurement activities. Essentra's global manufacturing and distribution footprint provides the flexibility to respond to changing demands where appropriate, and the Group remains well-positioned with sufficient capacity to benefit from increased operating leverage when volume growth returns to normalised levels.

Across the business, there is a balanced approach to cost management, and selective investment in organic growth opportunities. The Group achieved adjusted operating profits of £40.1m (2023: £43.2m) with adjusted operating margins of 13.3% (2023: 13.7%). Central corporate costs remain well-managed, and below the initial run-rate guidance, totalling £10.9m (2023: £11.6m).

The balance sheet remains strong and is supported by excellent adjusted operating cash flow of £36.4m equating to conversion of 90.8%, ahead of the guidance of 85%. Adjusted EBITDA to net debt leverage of 1.3x excluding IFRS 16 lease liabilities is within the previously guided medium-term target range of

Strategic progress and medium-term targets

Essentra made good strategic progress during the year, despite the challenging market backdrop, and continues to focus on enhancing technology, service, expert advice and product offer, whilst developing its people and entering new markets and geographies. A number of strategic opportunities are currently being pursued, including growing the access hardware business in each region by targeting growth markets such as energy transition and automation. Future growth and efficiencies continue to be supported by embedding enabling technology as seen through the deployment of the Microsoft Dynamics ERP platform to a further eight sites during the year, in addition to investing in a new connected planning platform to enhance our service proposition in each region.

Inorganic growth is a key element of the Group's strategy, whilst also maintaining capital allocation discipline. The Group has successfully delivered revenue and cost synergies from its recent acquisitions of BMP TAPPI in 2023 and Wixroyd in 2022, predominantly through cross-selling to our existing customers against a backdrop of softer trading conditions.

Essentra is well-positioned, with a unique business model in a highly fragmented market combining manufacturing and distribution, enabling breadth and depth of product offering alongside a "hassle-free" customer offering. The business is diversified, and generates high gross margins through the cycle, with the scope to expand through scale and operational effectiveness. Historically, the business has generated strong returns and cash conversion, and is able to further compound earnings through value enhancing M&A. The M&A pipeline remains active and Management continues to assess a number of opportunities, whilst maintaining a disciplined approach to allocating capital for growth.

The Group's global footprint extends to 28 countries worldwide with c.3,000 employees, providing optionality. Geographic presence has expanded through acquisition, enhancing end-market opportunities and increasing global flexibility. Management continues to optimise operations and review the Group's global footprint.

The medium-term ambition of the business, as set out at the November 2022 capital markets event is supported by:

Providing a "hassle-free" customer experience. The Group is committed to delivering a "hassle-free" customer proposition and our Customer Satisfaction KPIs continue to show good progress. The Group is extremely pleased that the focus on improving the service to its customers is reflected in the 2024 Net Promoter Score ("NPS") which increased by three points to 43 (2023: 40). All three regions saw an improvement in NPS. Closely linked to customer satisfaction, employee engagement remains above benchmark levels and improved to 85% (2023: 82%). On Time In Full ("OTIF") metric remained broadly stable at 81.7% (2023: 82.2%). EMEA saw small periods of disruption throughout the year as the new ERP system was deployed before returning to normalised levels, the Americas materially improved towards the Group average following its focus on improvements to operations including inventory availability, and APAC retained OTIF in excess of 95%.

Ordinary dividend. The Board of Directors is recommending a final ordinary dividend of 1.55p per share, resulting in a total dividend for FY of 2.8p (2023: 2.4p final; 3.6p total). The full year dividend maintains dividend cover in the order of three times adjusted earnings, in line with guidance. The final dividend will be paid on 3 July 2025 to shareholders on the share register at the record date, being 16 May 2025. The ex-dividend date will be 15 May 2025. 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 13 June 2025.

Share buyback programme. The share buyback programme announced in February 2023, following the completion of the disposals of the Filters and Packaging businesses remains in progress. The pace of deployment is dependent on the Group's capital allocation opportunities and priorities, and in particular the availability of earnings accretive M&A. It is anticipated that the buyback programme will extend beyond the current financial year.

Since the launch of the programme to 31 December 2024, a total of 16,387,728 shares have been purchased, at an average purchase price of 176.4 pence per share, totalling £28.9m. Of the shares purchased, 4,198,821 were transferred into treasury, and 12,188,907 have subsequently been cancelled, which represented 4.0% of the issued share capital of the Company (excluding treasury shares) when the programme commenced.

People. As previously announced, Rowan Baker was appointed to the Board as Chief Financial Officer with effect from 5 November 2024 to succeed Jack Clarke, who stepped down from the Board on 31 December 2024.

Furthermore, during 2024, the Group Executive Committee ("GEC") was strengthened to support agility within the busines and drive regional accountability. Chris Brooks joined the Company as Managing Director for the Americas region, and Richard Sederman was promoted internally to Managing Director for the APAC region, with the two appointments complementing the strength and experience of the existing European leadership team. Chris brings to Essentra a strong background in the global industrial sector, whilst Richard has played an active role in Essentra's M&A strategy, including living and working in Asia when leading the integration of a previous acquisition. These GEC roles are key positions within the Group's structure that will help to develop the service proposition, execute regional strategy and assist in the identification and strengthening of relationships within the acquisition pipeline. By operating on a regional basis, whilst embedding the values of being one team, the Group is well-positioned to respond to changes within the external demand environment.

Outlook. At this early stage in the year, results for FY 2025 are anticipated to be in line with the Board's expectations. The Group is taking a cautious view on the timing of any material improvement in end-market conditions in 2025 and anticipates that market recovery will vary by region. Whilst regional gross margins are expected to remain robust, the Group anticipates that the Americas and APAC proportion of Group revenue will increase due to their near-term growth outlooks, therefore having a dilutive impact on overall Group operating margin performance.

The business continues to maintain a balanced approach to cost control and is driving further operational efficiencies, whilst also investing appropriately in value-enhancing growth initiatives and assessing bolt-on growth opportunities that will support long-term value creation. Essentra's strong market positions, differentiated business model, and right-sized cost base ensure the Group is well-positioned to benefit from significant levels of operating leverage when markets return to normalised levels.

EMEA

Revenue for the year increased 1.5% on a constant currency basis to £163.3m, compared to the prior year. The region benefitted from the October 2023 acquisition of BMP TAPPI which contributed 5.7% to growth year-on-year, with the LFL business reporting an underlying 4.2% decline compared to the prior year.

As previously reported, trading conditions through the year were mixed, and remained closely correlated to the manufacturing purchasing manager index ("PMI"). Performance in H1 was broadly stable compared to 2023, reporting 0.1% LFL constant currency decline year-on-year. In H2 market conditions softened, reflective of wider industrial trends and indicators, reporting a 8.7% LFL constant currency decline.

The region continued to deliver strong gross margins of 51.4% (2023: 51.2%), adjusting capacity at regional manufacturing and distribution facilities to meet changes in demand, whilst placing a greater level of focus on internal manufacturing efficiencies and procurement savings to protect profitability.

End-markets particularly across Germany and France saw trading conditions weaken through H2. Performance into the latter part of the year was adversely impacted by the appreciation of the Turkish Lira, which led to more challenging trading conditions in Turkey, and pricing competitiveness for our customers' end-customer base when exporting into Europe. The markets with less exposure to industrial cycles, including energy, data centres and telecoms, remained resilient.

BMP TAPPI, acquired in October 2023, performed in line with expectations. Over 1,000 standard products from an extensive range of protective caps and plugs were launched into the Essentra range in H1 and additional inventory in the two EMEA distribution hubs is driving local commercial activities. The sales opportunity pipeline is building gradually, demonstrating commercial synergies, with cross-sell success across specialist vehicles and construction and agriculture end-markets.

Customer satisfaction remains strong as reflected in the annual NPS. The EMEA 2024 NPS improved by three points to 43 with progress seen across the region, reflecting the strengthening of our service proposition, enhanced complaint resolution and Essentra's broad range of products. Our people remain core to what we do, and we are pleased to have achieved an industry-leading employee engagement score of 83 in the 2024 Employee Survey (2023: 77).

The ERP programme was deployed in two tranches through 2024, first across Eastern Europe in January 2024, and then across Germany, Austria and Benelux in December 2024, and is now in operation at both our distribution hubs. With each deployment, the business builds efficiencies and improvements, and is therefore well-positioned to progress the programme of deployment in 2025. c.£9.0m Software as a Service ("SaaS") cost has been recognised as an adjusting item in 2024, in line with guidance, related to ERP deployment.

AMERICAS

Revenue for the year was £98.8m, a reduction of 3.9% on a constant currency basis compared to the prior year. Whilst the region reported year-on-year revenue decline, the wider customer industrial environment stabilised as the year progressed and distributor volumes normalised. H1 revenues declined 6.9% on a constant currency basis compared to 2023, with year-on-year performance recovering to a 0.5% decline in H2.

Gross margins expanded year-on-year to 38.5% (2023: 37.9%), as the region implemented a selective approach to sales price increases as rates of inflation slowed marginally from the prior year. To protect margins during the year, management's focus was on realignment of the cost base in line with demand, whilst delivering operational efficiencies and procurement initiatives, including raw materials. The region continues to improve manufacturing efficiencies and has sustained its rolling three-year process of updating and upgrading its injection moulding processing to electric. Whilst these machine replacement projects continue to deliver improvements in manufacturing productivity and reduction of waste, the upgrade also supports wider sustainability goals in reducing emissions.

Whilst overall the Americas region saw constrained demand across end-markets, the sectors that saw a more positive market backdrop in the year included industrial equipment, metal fabrication, pneumatics and industrial electronics. Through 2024, the commercial teams focused on increasing the opportunity pipeline and levels of customer activity with a focus on new customer acquisition, including more targeted customer and industry marketing campaigns. This resulted in the region regaining some customers lost during the post-COVID period, with sustained customer service and improvement in inventory holdings of faster moving, high-demand components. This was further reflected in the annual customer satisfaction survey, which reported a 2024 NPS improvement of three points to 49 in 2024 (2023: 46). Given the soft economic environment, it was encouraging to see employee engagement increase to 78 (2023: 77).

APAC

Revenue for the year improved by 7.0% on a constant currency basis to £40.3m, with sequential improvements throughout the year, quarter on quarter. H1 performance reported 1.8% growth on a constant currency basis compared to the prior year, improving to 12.1% growth in H2.

As seen in previous years, the performance in the APAC region continues to be driven by the market dynamics in China (c.71% of APAC revenue; c.9% of Group revenue), which has seen soft domestic market demand sustained. Whilst the wider electronics market across the region has been subdued through 2024, the business has been able to drive growth through responding with increased focus on a number of larger projects linked to faster-growing sectors, including telecommunications in India and Saudi Arabia, and more recently power storage and power delivery for electric vehicles. Further momentum has been built within the China export market to the rest of the APAC region, supported by a pipeline of commercial opportunities, including the access hardware product range which has supported additional growth through H2, with strong growth in the Middle East, South East Asia and Australia.

To ensure the region is well-placed to take advantage of future growth opportunities, the business took the decision in 2024 to relocate the regional office headquarters in Singapore to the existing office in Malaysia to drive further commercial effectiveness and enable the region to invest resources closer to end-customers in South East Asia.

Gross margins of 37.5% improved by 170bps on a constant currency basis. A low inflation environment, particularly in China, increased focus towards driving cost efficiencies in the year. The region successfully controlled the cost base, driving manufacturing efficiencies, whilst recognising the benefits of operating leverage from top line growth.

The region continues to invest in its operational capabilities. Dip moulding manufacturing capabilities have expanded, with new machine capital investment in Ningbo, China, helping to secure and enhance the product range and attract new commercial opportunities to the region. New machinery has also been added to Rayong, Thailand, to support the broadening of the product mix, enabling cost savings through insourcing, and to develop growth opportunities in South East Asia. The region's focus on the ability to in-source manufacturing for key projects, specifically within the renewable energy sector, has enabled new business wins with new internal capability.

Customer satisfaction scores in the annual NPS survey (China) saw a six point improvement to 57 (2023: 51). Investment in the standard product offer group and low levels of supply chain disruption have improved stock availability and reduced order fulfilment lead times to end-customers.

Following approval of Essentra's emissions reduction targets, including Essentra's target to reach net-zero by 2050, by the Science Based Targets initiative ("SBTi") in February 2024, the Group published its first Climate Transition Plan in May 2024, outlining its emissions reduction targets, goals and focus areas for implementation of its climate strategy. The plan received 97.6% approval from shareholders at the 2024 AGM. The Group is pleased with its continued significant progress in sustainability to date, and is committed to regular reporting on progress in this area.

Essentra has been making good progress in decarbonising its global footprint, focusing on renewable energy tariffs and energy saving initiatives across the manufacturing footprint. Emissions intensity for scope one and two has seen a decrease of 14% compared to FY 2023 and 50% since our 2019 baseline. Renewable electricity is 57% of total electricity usage, an increase of 13% compared to FY 2023.

An additional six sites across Essentra's global footprint have achieved zero waste to landfill in 2024 bringing the total to 20 sites (FY 2023: 14 sites).

The percentage of materials from sustainable sources across our manufactured polymer ranges reduced marginally to 18.4% (2023: 20.7%), which is partly due to adding BMP TAPPI products into the Essentra range as well as increased demand across the standard range for specific products which have not yet transitioned to recycled or bio-based polymers.

The Centre of Excellence continues to drive the development of new and more sustainable products. During 2024, 46 trials were completed across a variety of recycled materials and bioplastics. Essentra continues to innovate and develop relationships with its customers to identify new commercial opportunities. In 2024, the Group recognised a number of new commercial business wins based on sustainability criteria across all three regions, including customers from HVAC, industrial trucks and general industrial end-markets.

Constant currency, like-for-like, 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 Note 21 of the Condensed Consolidated Financial Statements.

Constant foreign exchange rates. The constant exchange rate basis adjusts the comparative to exclude the effect of currency movements, to show the underlying performance of the Company. The principal exchange rates for Essentra were:

Re-translating at 2024 average exchange rates decreases the prior year revenue by £14.9m, reduces prior year gross profit by £6.5m and reduces prior year operating profit by £4.1m.

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 2024 LFL results are adjusted for the acquisition of BMP TAPPI on 26 October 2023.

Discontinued operations. Discontinued operations recognised a £1.0m post-tax loss (2023: £0.4m post-tax loss), as reported in the Condensed Consolidated Income Statement. Refer to Note 17 in the Condensed Consolidated Financial Statements for further information.

Adjusted basis. The term "adjusted" excludes the impact of amortisation of acquired intangible assets and adjusting items, less any associated tax impact. In 2024, amortisation of acquired intangible assets was £11.5m (2023: £11.3m), and there was a pre-tax charge for adjusting items of £14.0m (2023: £21.0m). In line with previous guidance, current year adjusting items include £9.6m major software as a service ("SaaS") development expenditure; and £1.8m relating to legacy pension scheme costs. Other adjusting items include £1.0m relating to acquisitions, £1.5m of restructuring activities, £1.6m relating to historic indemnity claims and a net credit of £1.5m relating to an investment property. Further details on adjusting items are shown in Note 3 to the Condensed Consolidated Financial Statements.

Adjusted operating cash flow. Adjusted operating cash flow is net cash flow from operating activities, excluding income tax paid, contributions to legacy pension schemes 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.

Net finance expense. Net finance expense increased to £8.9m (2023: £2.5m) as a result of lower levels of finance income year-on-year. The start of 2023 saw an increase in finance income on the receipt of proceeds following the disposal of businesses in 2022, prior to the return of shareholder funds via a special dividend in April 2023. Finance expense in the period improved to £12.5m (2023: £13.5m).

Tax. The effective tax rate on underlying profit before tax (before adjusting items and amortisation of acquired intangible assets) was 11.5% (2023: 23.6%). The reduction in effective tax rate was a result of accounting for previously unrecognised deferred tax assets which resulted in the effective tax rate for 2024 below the previously guided forecast range. The medium-term guidance range remains unchanged (between 24% and 26%) and remains closely aligned to the tax rates applied in the majority of jurisdictions in which the Group operates.

Adjusted operating cash flow from continuing operations. Adjusted operating cash flow from continuing operations of £36.4m equating to an operating cash conversion of 90.8% (2023: 111.6%). Free cash flow was £22.5m (2023: £37.3m).

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

2 Pension contribution of £1.8m in 2024 for legacy pension schemes has been included within cash outflow in respect of adjusting items (2023: £3.7m).

3 Statutory cash flows from operating activities can be found in the Condensed Consolidated Financial Statements.

Net debt. Net debt at the end of the period was £68.2m compared to a net debt of £31.6m at 31 December 2023 (excluding lease liabilities of £28.9m). The overall increase in net debt was driven by the anticipated one-off completion accounts payment associated with the sale of the Filters business in the period, paid in H1, totalling £24.8m. This was partly offset by the receipt of the first of two £10m tranches of deferred consideration.

The Group's financial ratios remain within the 0.5x - 1.5x target range. Net debt to adjusted EBITDA pre-IFRS16 lease liabilities was 1.3x (net debt to adjusted EBITDA including IFRS16 lease liabilities: 1.6x).

Banking and refinancing facilities. One of the main sources of funding for the Company is a Revolving Credit Facility ("RCF") provided by a group of five highly rated banks totalling £200.0m. As at 31 December 2024, £26.1m was drawn on this facility.

As previously disclosed at the half year results, in July 2024 the Company agreed to extend the facility for a further five years maturing in July 2029. By evaluating options and refinancing the RCF ahead of the original maturity date, the Company has been able to maintain the existing covenants and secure favourable pricing terms. The extended maturity date provides the Company with a longer-term financing solution and offers greater stability as well as reducing the need for frequent refinancing activities, providing greater liquidity to support our operational and strategic growth initiatives. The new facility is based on the same terms and size and is provided by a group of five banks, including four from the original RCF facility.

The Company retains $102.5m of long dated US Private Placement debt ("USPP") at an average coupon rate of 3.8%.

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. The Company intends to use derivatives to manage foreign currency and interest rate risk arising from underlying business activities. Whilst some transactions may be of a more speculative nature, they are in place with a view to manage exchange rate risk only. 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. 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 derivatives to hedge its exposure to movements in the exchange rates on its highly probable forecast foreign currency sales and purchases over a period of up to 18 months.

The Company has established a risk and internal control framework designed to manage the delivery of its strategic objectives. The objectives of this framework are to:

· identify the Company's Principal and Emerging Risks and appropriate mitigating actions

· formulate the risk appetite and ensure that our business profile and plans are consistent with it

· develop plans to bring any exposures that are outside agreed appetite in line with it

· ensure that growth plans are properly supported by an effective risk management process

· help management teams to improve the control and co-ordination of risk-taking across the Company.

The risk framework, along with the Company's Principal and Emerging risks, will be described in detail in the "Risk Management Report" section of the Company's Annual Report and Accounts for the year ended 31 December 2024, available on 31 March 2025 on the Company website: www.essentraplc.com

Condensed Consolidated Income Statement

For the year ended 31 December 2024

Notes:

1. See note 21 for further details of the adjusted profit measure.

2. Adjusting items includes a credit on reversal of impairment of non-current assets of £1.8m (2023: £7.1m impairment).

Condensed Consolidated Statement of Comprehensive Income

For the year ended 31 December 2024

Condensed Consolidated Balance Sheet

At 31 December 2024

Condensed Consolidated Statement of Changes in Equity

For the year ended 31 December 2024

Notes:

1. The net impact on retained earnings as a result of the index-based adjustments in Turkey under IAS 29 Financial Reporting in Hyperinflationary Economies.

Condensed Consolidated Statement of Cash Flows

For the year ended 31 December 2024

Notes:

1. In 2023 acquisition of businesses is net of cash acquired of £5.3m. See note 16.

2. In 2024 net cash outflow from cost of business disposals includes £24.8m on the settlement of deferred consideration payable on the Filters business and £10.0m received for the settlement of deferred consideration receivable.

Notes to the Condensed Consolidated Financial Statements

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 2024 but is extracted from the 2024 Annual Report.

The Annual Report for 2024 will be delivered to the Registrar of Companies in due course. The auditors' report on those accounts are 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 section 483(2) on 498(3) of Companies Act 2006 (failure to obtain necessary information and explanations).

The Group's condensed consolidated financial statements for the year ended 31 December 2024 have been prepared in accordance with UK-adopted International Accounting Standards and comply with the requirements of the Companies Act 2006.

These condensed consolidated financial statements are prepared under the historical cost convention unless otherwise stated. The preparation of financial statements 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.

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

The principal accounting policies used in the preparation of the condensed consolidated financial statements for the year ended 31 December 2024 are detailed below. These policies, except those set out below under the heading 'Changes in accounting policies' adopted during the year, have been consistently applied to all periods presented.

In preparing the condensed consolidated financial statements, management have taken into account the potential effects of climate changes, including medium- to longer-term transitional risks resulting from the relative uncertainty created by the global shift towards a more sustainable, net-zero economy, which include regulatory, geopolitical and social pressures that may impact the operations of the business in future. Management have considered the potential effects of climate related changes in its assessment of going concern, and longer term viability of the business, in preparing the Group's future cash flow forecasts underpinning impairment testing, and in its assessment of the residual values of property, plant and equipment. Management have determined that, other than the expected capital expenditure due to the future spend on machine replacement and efficiency upgrades factored into the Group's cash flow forecasts, there is no material impact on these financial statements.

Going concern

The Directors have prepared the condensed consolidated financial statements for the year ended 31 December 2024 on a going concern basis. In adopting the going concern basis, the Directors have considered the Group's balance sheet position, forecast earnings and cash flows for a period of at least 15 months from the date of approval of these condensed consolidated financial statements.

At 31 December 2024, the Group's external financing arrangements amounted to £282.0m, comprising United States Private Placement Loan Notes (USPP) of US$102.5m (with a range of expiry dates from July 2028 to July 2033) and a multi-currency revolving credit facility (RCF) of £200.0m (expiring in July 2029).

£26.1m (2023: £15.2m) was drawn under the RCF as at 31 December 2024 with the available undrawn balance amounting to £173.9m (2023: £184.8m). The facility is subject to two covenants, which are tested semi-annually: net debt to EBITDA (leverage) and EBITA to net finance charges. Despite the significant economic and operational challenges in the recent years, the Group has not sought to change either of the two covenants. The Directors believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading performances and considering the existing borrowing facilities, including the available liquidity, have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least the next 15 months following the date of approval of the financial statements, and no breaches of covenants are expected.

As part of the going concern assessment, the Board has considered a downside scenario that includes severe, but reasonably plausible changes in macro-economic conditions. The results of this scenario show that there is sufficient liquidity in the business for a period of at least 15 months from the date of approval of these financial statements, and does not indicate any covenant breach during the test period. The downside scenario assumes a period of prolonged revenue decline in 2025, and subsequently delays in market recovery to 2026. The downside scenario also assumes a market environment in which the business cannot win market share, and incorporates the transition risks associated with a "middle of the road scenario" without the inclusion of any opportunities from the climate change quantitative analysis. These opportunities include reduced energy costs through the implementation of renewable energy and increased revenue from sales of components into renewable energy sectors.

The financial impact of the severe but plausible downside scenario in 2025 and 2026 is a reduction in adjusted operating profits by 13.5% and 11.6%, respectively, compared to the Group strategic plan.

The overall level of liquidity (defined as available undrawn borrowing facility plus cash and cash equivalent) at 31 December 2024 was £207.6m. Adjusting for share repurchases of £31.1m under the remainder of the buyback programme of £60.0m, this still leaves overall liquidity at £176.5m. Capital expenditure, sales and general overhead, and working capital will continue to be managed closely to ensure sufficient liquidity.

The scenarios do not indicate a material uncertainty which may cast significant doubt over the Company's and Group's ability to continue as a going concern. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, and accordingly, have adopted the going concern basis in preparing the condensed consolidated financial statements. This disclosure has been prepared in accordance with the Financial Reporting Council's UK Corporate Governance Code.

Changes in accounting policies

New pronouncements

The Group adopted the following new pronouncements during 2024, which did not have a material impact on the Group's financial statements:

· Amendment to IFRS 16 - Leases on sale and leaseback;

· Amendment to IAS 1 - Classification of Liabilities as Current or Non-current and Non-current liabilities with covenants;

· Amendment to IAS 7 and IFRS 7 - Supplier finance;

The following standards and amendments, with an effective date on or after 1 January 2025, have been published that are not mandatory for 31 December 2024 reporting periods and have not been early adopted by the Group where the option exists. These amendments are not expected to have a material impact on the entity in the current or future periods and on foreseeable future transactions.

· Amendments to IAS 21 - Lack of Exchangeability;

· Amendments to the Classification and Measurement of Financial Instruments - Amendments to IFRS 9 and IFRS 7;

· IFRS 18 - Presentation and Disclosure in Financial Statements;

· IFRS 19 - Subsidiaries without Public Accountability Disclosures.

Impact of Pillar two rules

The Organisation for Economic Cooperation and Development ("OECD") Global Anti-Base Erosion Model Rules (Pillar Two rules) were initially introduced by the OECD in December 2021 and adopted by the UK in Finance Act (no. 2) Act 2023. The rules came into effected for the Essentra Group in relation to the year ended 31 December 2024 and require the Group to pay a minimum level of tax across each of the territories in which it operates.

The Group has undertaken a detailed review of the enacted legislation and applied this to the results for the year. The result of this review is that no top up taxes are expected to be payable under Pillar Two in any jurisdiction in respect of the year ended 31 December 2024 as the Group is already paying more than the minimum level of tax required in each territory.

Whilst it is not expected that any top up taxes under Pillar Two will be required in future years, the Group will continue to monitor this.

Change in definition of adjusted earnings per share

Adjusted earnings per share is provided to reflect the underlying performance of the Group and excludes both adjusting items and the tax expense associated with those items. This definition has been amended to also exclude the effect of material movements in the Group's derecognition and recognition of deferred tax assets on tax losses where they are not driven by the underlying performance of the business. The prior year comparative has not been restated as the impact is not material. Had this been applied for the year ended 31 December 2023, adjusted earnings per share for that year would have been 11.3p (see note 5).

2. Segment analysis

The Group has determined its operating segments based upon the information reported to the Board of Directors (Board), which is the Group's Chief Operating Decision Maker. Segment information is reported on a geographical basis consistent with the basis upon which the Group manages its operations, allocates resources, and assesses performance. Central corporate costs include executive and non-executive management, investor relations, corporate development, corporate reward, governance, risk and assurance, group finance, tax, treasury and related information technology costs.

Central corporate costs exclude certain costs that are regarded as attributable to the operating segments.

Notes:

1. Unallocated items include operating expenses related to the regions that are managed at a total trading level rather than by individual segment. Assets, liabilities and employees also managed at a total trading level are presented within Unallocated items. Segment assets of £18.3m (2023: £28.8m) include investment property of £5.1m (2023: £3.3m) which in 2024 was transferred to assets held-for-sale.

2. Central corporate costs include executive and non-executive management, investor relations, corporate development, governance, risk and assurance, group finance, tax, treasury, and related information technology costs.

3. Operating loss from discontinued operations (see note 17) excludes the loss on disposal of £1.2m (2023: £3.7m).

4. The unallocated assets relate to income and deferred tax assets, retirement benefit assets, derivatives, other financial assets and cash and cash equivalents. The unallocated liabilities relate to interest bearing loans and borrowings, retirement benefit obligations, derivatives, deferred tax liabilities and income tax payable.

Intersegment transactions are carried out on an arm's-length basis.

On a continuing basis, no customer accounted for more than 10% of revenue in either 2024 or 2023. Non-current assets in the UK (the Company's country of domicile) totalled £74.4m (2023: £93.6m), with the other significant location being the USA with £95.2m (2023: £106.2m). Total Group net finance expense of £8.9m (2023: £2.5m) and total Group income tax credit of £6.1m (2023: £1.1m) cannot be meaningfully allocated by segment. The Group revenue does not include any variable consideration which is constrained.

Revenue by geographical location

External revenue presented in the table below, on a continuing basis, by location of the Group operation where the sales originated.

3. Adjusting items from continuing operations

Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence. They are identified separately in order for the reader to obtain a clearer understanding of the underlying results of the ongoing Group's operations, by excluding items which, in management's view, do not form part of the Group's underlying operating results, such as gains, losses or costs arising from business acquisition and disposal activities, significant restructuring and closure costs, and costs of major Software as a Service projects, items which are non-recurring or one-off in nature (such as the costs of fundamental strategic review and reorganisation), one-off impairments of non-current assets and charges relating to the Group's legacy defined benefit pension schemes, and the related tax effect.

Notes:

1. Costs of £1.5m (2023: £1.3m), in relation to major restructuring activities to "right size" the continuing operations of the business following the disposal of the Filters and Packaging businesses.

2. In 2023, a credit of £1.0m relating to acquisitions, of which £0.6m relates to the acquisition of BMP TAPPI in October 2023, and £1.6m relates to the acquisition of Wixroyd Group, acquired in December 2022.

3. Relating to integration costs of £1.0m following the acquisition of Wixroyd Group and the acquisition of BMP TAPPI (2023: £nil).

4. Costs of significant SaaS arrangements which, in the view of management, represents investment in upgrading the Group's technological capability, were expensed as adjusting items in accordance with the Group's accounting policies. In 2024 costs of £9.6m (2023: £10.8m) were attributable to major SaaS projects and relate primarily to the costs of implementing a new cloud-based enterprise resource planning (ERP) system within the Group.

5. Costs of £1.8m (2023: £1.8m) were incurred in relation to defined benefit pension scheme charges which, following the outcome of the strategic review in 2022, no longer pertain to the continuing operations of the Group.

6. Includes a credit of £1.8m (2023: £3.7m expense) for the reversal of impairment (2023: impairment) of investment property and a £nil (2023: £3.4m) impairment loss in relation to non-current assets held within the APAC segment.

7. In 2024 costs include an increase in a provision relating to historic indemnity claim of £1.6m (2023: £0.8m) and provisions relating to investment property activities of £0.3m. In 2023 costs of £0.2m for professional fees relating to the capital reduction completed during 2023.

4. Net finance expense from continuing operations

Notes:

1. Included within Other finance income is £0.5m (2023: £nil) relating to gains on derivative financial instruments, £0.8m (2023: £5.7m) relating to exchange gains on cash, borrowings and leases and £1.5m (2023: £1.3m) relating to monetary gains on Hyperinflationary economies.

2. Included within Other finance expense is £nil (2023: £2.3m) relating to loss on derivative financial instruments, and £2.6m (2023: £2.6m) relating to exchange losses on cash, borrowings and leases.

5. Earnings per share

Notes:

1. Adjusted earnings per share from continuing operations is provided to reflect the underlying performance of the Group.

2. Following a change in the definition of adjusted earnings per share, this reflects the derecognition and recognition of deferred tax assets on tax losses where there is a change in probability that the related tax benefits will be realised. The prior year comparative has not been restated as the impact is not material.

Notes:

1. The basic weighted average number of ordinary shares in issue excludes shares held in treasury and shares held by the employee benefit trust.

6. Investment Properties, Property, plant and equipment