Building
for the
future
Annual Report 2020 – Financial Statements
Our purpose is to
responsibly provide
the products
and services our
customers need
to succeed.
Contents
Financial Statements
151 Consolidated Income
Statement
152 Consolidated Statement
of Comprehensive Income
153 Consolidated Balance
Sheet
154 Consolidated Statement
of Changes in Equity
155 Consolidated Statement
of Cash Flows
156 Accounting Policies
163 Critical Accounting
Judgements and
Estimates
165 Notes
200 Essentra plc Company
Balance Sheet
201 Essentra plc Company
Statement of Changes
in Equity
202 Essentra plc Company
Accounting Policies
204 Essentra plc Company
Notes
210 Independent auditors’
report to the members
of Essentra plc
A new strategic roadmap for 2020 and beyond
A winning, engaged and
empowered team
Class leading
sustainability
Growth through
innovation
“We have refreshed our
purpose, values and goals to
better reflect who we want
to be and where we are
going as an Essentra family.”
Paul Forman
Chief Executive
This is part two of our Annual
Report for the year ended
31 December. Part one consists
of our Strategic and Directors’
Reports and can be found on
our corporate website. When
reviewing the performance
and activities of Essentra plc
in 2020, both parts should be
read together.
Go to essentraplc.com/
investors
Annual Report 2020 – Strategic and Directors’ Reports Building for the future FFiinnaanncciiaall SSttaatteemmeennttss
CCoonnssoolliiddaatteedd IInnccoommee SSttaatteemmeenntt
FINANCIAL STATEMENTS 151
For the year ended 31 December 2020
Revenue
Operating profit
Finance income
Finance expense
Profit before tax
Income tax credit/(charge)
Profit for the year
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Profit for the year
Earnings per share attributable to equity holders of Essentra plc:
Basic
Diluted
Earnings per share from continuing operations attributable to equity holders of Essentra plc:
Basic
Diluted
Adjusted profit measure:
Operating profit
Amortisation of acquired intangible assets
Adjusting items
Adjusted operating profit
See note 28 for further details of the adjusted profit measure.
Note
2020
£m
2019
£m
1
3
3
4
6
6
6
6
2
896.5
974.1
21.7
1.9
(17.6)
6.0
0.3
6.3
4.5
1.8
6.3
1.7p
1.6p
1.7p
1.6p
£m
21.7
22.6
17.7
62.0
80.0
2.1
(16.6)
65.5
(24.3)
41.2
38.4
2.8
41.2
14.7p
14.5p
14.7p
14.5p
£m
80.0
22.9
(15.4)
87.5
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ESSENTRA PLC FINANCIAL REPORT 2020
11
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
152 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
CCoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff CCoommpprreehheennssiivvee IInnccoommee
For the year ended 31 December 2020
Profit for the year
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension schemes
Deferred tax income on remeasurement of defined benefit pension schemes
Items that may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges:
Net change in fair value of cash flow hedges transferred to the income statement
Effective portion of changes in fair value of cash flow hedges
Foreign exchange translation differences:
Attributable to equity holders of Essentra plc:
Arising on translation of foreign operations
Arising on effective net investment hedges
Income tax (expense)/income
Attributable to non-controlling interests
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Total comprehensive income for the year
Note
18
4,16
4
2020
£m
6.3
(6.7)
2.1
(4.6)
(0.5)
0.1
(9.3)
(3.3)
(0.5)
(0.5)
(14.0)
2019
£m
41.2
(4.9)
1.0
(3.9)
0.8
(0.6)
(42.9)
7.5
1.6
(0.6)
(34.2)
(18.6)
(38.1)
(12.3)
3.1
(13.6)
1.3
(12.3)
0.9
2.2
3.1
22
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
CCoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff CCoommpprreehheennssiivvee IInnccoommee
Profit for the year
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension schemes
Deferred tax income on remeasurement of defined benefit pension schemes
Items that may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges:
Net change in fair value of cash flow hedges transferred to the income statement
Effective portion of changes in fair value of cash flow hedges
Foreign exchange translation differences:
Attributable to equity holders of Essentra plc:
Arising on translation of foreign operations
Arising on effective net investment hedges
Income tax (expense)/income
Attributable to non-controlling interests
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Total comprehensive income for the year
Note
18
4,16
4
2020
£m
6.3
(6.7)
2.1
(4.6)
(0.5)
0.1
(9.3)
(3.3)
(0.5)
(0.5)
(14.0)
2019
£m
41.2
(4.9)
1.0
(3.9)
0.8
(0.6)
(42.9)
7.5
1.6
(0.6)
(34.2)
(18.6)
(38.1)
(12.3)
3.1
(13.6)
1.3
(12.3)
0.9
2.2
3.1
For the year ended 31 December 2020
At 31 December 2020
CCoonnssoolliiddaatteedd BBaallaannccee SShheeeett
Assets
Property, plant and equipment
Lease right-of-use asset
Intangible assets
Long-term receivables
Deferred tax assets
Retirement benefit assets
Total non-current assets
Inventories
Income tax receivable
Trade and other receivables
Derivative assets
Other financial assets
Cash and cash equivalents
Total current assets
Total assets
Equity
Issued share capital
Merger relief reserve
Capital redemption reserve
Other reserve
Cash flow hedging reserve
Translation reserve
Retained earnings
Attributable to equity holders of Essentra plc
Non-controlling interests
Total equity
Liabilities
Interest bearing loans and borrowings
Lease liabilities
Retirement benefit obligations
Provisions
Other financial liabilities
Other payables
Deferred tax liabilities
Total non-current liabilities
Interest bearing loans and borrowings
Lease liabilities
Derivative liabilities
Income tax payable
Trade and other payables
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
FINANCIAL STATEMENTS 153
31 December
2020
£m
31 December
2019
£m
Note
7
9
8
16
18
10
11, 19
15, 19
12, 19, 22
20
21
21
21
14, 19, 22
22
18
17
19
13, 19
16
14, 19, 22
22
15, 19
13, 19
17
263.0
52.7
518.8
4.7
16.8
12.6
868.6
102.6
3.7
154.2
0.3
---
135.8
396.6
1,265.2
75.6
385.2
0.1
(132.8)
(0.1)
(24.1)
313.9
617.8
13.3
631.1
285.2
49.1
36.5
8.0
1.2
2.2
45.5
427.7
---
11.9
0.5
33.1
155.4
5.5
206.4
634.1
276.0
43.4
486.3
5.6
13.6
16.9
841.8
113.1
7.0
166.9
0.8
6.2
70.4
364.4
1,206.2
66.0
298.1
0.1
(132.8)
0.3
(11.0)
312.4
533.1
7.7
540.8
249.0
39.3
34.3
6.0
3.4
---
45.3
377.3
60.7
11.4
0.3
37.9
174.5
3.3
288.1
665.4
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1,265.2
1,206.2
22
ESSENTRA PLC FINANCIAL REPORT 2020
The consolidated financial statements on pages 151 to 199 were approved by the Board of Directors on 5 March 2021 and were signed on its
behalf by:
Paul Forman
Chief Executive
Company registration no: 05444653
Lily Liu
Chief Financial Officer
ESSENTRA PLC FINANCIAL REPORT 2020
33
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
154 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
CCoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff CChhaannggeess iinn EEqquuiittyy
For the year ended 31 December 2020
Issued
capital
£m
Merger
relief
reserve
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Non-
controlling
interests
£m
2020
Total
equity
£m
540.8
6.3
(12.3)
96.7
5.0
0.1
1.2
0.3
(0.7)
631.1
2019
Total
equity
£m
604.2
(5.2)
599.0
41.2
(38.1)
66.0
298.1
0.1
(132.8)
0.3
(11.0)
312.4
(0.4)
(13.1)
4.5
(4.6)
7.7
1.8
(0.5)
(18.6)
---
9.6
---
87.1
---
---
(0.4)
(13.1)
(0.1)
1.3
75.6
385.2
0.1
(132.8)
(0.1)
(24.1)
313.9
0.1
1.2
0.3
---
5.0
---
---
---
(0.7)
13.3
Issued
capital
£m
Merger relief
reserve
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Cash flow
hedging
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Non-
controlling
interests
£m
66.0
298.1
0.1
(132.8)
0.1
22.8
0.2
(33.8)
338.3
(5.2)
333.1
38.4
(3.9)
11.6
---
11.6
2.8
(0.6)
---
---
---
---
0.2
(33.8)
34.5
2.2
3.1
66.0
298.1
0.1
(132.8)
0.3
(11.0)
(6.3)
0.4
4.4
0.5
(54.2)
312.4
(5.3)
(11.6)
---
---
---
(0.8)
7.7
0.4
4.4
0.5
(55.0)
540.8
At 1 January 2020
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Issue of share capital
Equity issue to non-controlling interest
Share options exercised
Share option expense
Tax relating to share-based incentives
Dividends paid
At 31 December 2020
Impact on adoption of IFRS 16
Restated total equity at the
beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Acquisition of non-controlling
interest
Share options exercised
Share option expense
Tax relating to share-based
incentives
Dividends paid
At 31 December 2019
At 1 January 2019
66.0
298.1
0.1
(132.8)
0.1
22.8
44
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
CCoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff CChhaannggeess iinn EEqquuiittyy
CCoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff CCaasshh FFlloowwss
For the year ended 31 December 2020
For the year ended 31 December 2020
FINANCIAL STATEMENTS 155
Issued
capital
£m
Merger
Capital
relief
redemption
reserve
£m
reserve
£m
Other
reserve
£m
Cash flow
reserve
£m
hedging
Translation
Retained
controlling
reserve
earnings
interests
£m
£m
66.0
298.1
0.1
(132.8)
0.3
(11.0)
312.4
(0.4)
(13.1)
(0.5)
(18.6)
---
9.6
---
87.1
---
---
(0.4)
(13.1)
(0.1)
1.3
At 1 January 2020
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Issue of share capital
Equity issue to non-controlling interest
Tax relating to share-based incentives
Share options exercised
Share option expense
Dividends paid
At 31 December 2020
Impact on adoption of IFRS 16
Restated total equity at the
beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
interest
Acquisition of non-controlling
Share options exercised
Share option expense
Tax relating to share-based
incentives
Dividends paid
75.6
385.2
0.1
(132.8)
(0.1)
(24.1)
313.9
At 1 January 2019
66.0
298.1
0.1
(132.8)
22.8
Issued
Merger relief
redemption
capital
£m
reserve
£m
Capital
reserve
£m
Other
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Non-
controlling
interests
Cash flow
hedging
reserve
£m
0.1
66.0
298.1
0.1
(132.8)
0.1
22.8
0.2
(33.8)
---
---
---
---
0.2
(33.8)
34.5
2.2
3.1
(5.3)
(11.6)
At 31 December 2019
66.0
298.1
0.1
(132.8)
0.3
(11.0)
2020
Total
equity
£m
540.8
6.3
(12.3)
96.7
5.0
0.1
1.2
0.3
(0.7)
631.1
2019
Total
equity
£m
604.2
(5.2)
599.0
41.2
(38.1)
0.4
4.4
0.5
(55.0)
540.8
Non-
£m
7.7
1.8
5.0
---
---
---
(0.7)
13.3
£m
11.6
---
11.6
2.8
(0.6)
---
---
---
(0.8)
7.7
4.5
(4.6)
0.1
1.2
0.3
---
338.3
(5.2)
333.1
38.4
(3.9)
(6.3)
0.4
4.4
0.5
(54.2)
312.4
Operating activities
Profit for the year
Adjustments for:
Income tax (credit)/expense
Net finance expense
Intangible amortisation
Adjusting items
Depreciation of property, plant and equipment
Lease right-of-use asset depreciation
Profit on lease termination
Impairment of fixed assets
Share option expense
Hedging activities and other movements
Decrease/(increase) in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Cash outflow in respect of adjusting items
Adjustment for pension contributions
Movement in provisions
Cash inflow from operating activities
Income tax paid
Net cash inflow from operating activities
Investing activities
Interest received
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangible assets
Acquisition of businesses net of cash acquired
Proceeds from sale of businesses net of cash disposed
Short-term investments
Net cash (outflow)/inflow from investing activities
Financing activities
Interest paid
Dividends paid to equity holders
Dividends paid to non-controlling interests
Acquisition of non-controlling interests
Repayments of short-term loans
Repayments of long-term loans
Proceeds from long-term loans
Lease liability principal repayments
Proceeds from equity issue
Costs incurred in equity issue
Proceeds from equity issue to non-controlling interests
Proceeds from sale of employee trust shares
Net cash inflow/(outflow) from financing activities
Net increase in cash and cash equivalents
Net cash and cash equivalents at the beginning of the year
Net increase in cash and cash equivalents
Net effect of currency translation on cash and cash equivalents
Net cash and cash equivalents at the end of the year
Note
4
3
2,8
2
7
9
5,18
23
22
22
12,22
2020
£m
6.3
(0.3)
15.7
25.2
17.7
37.6
12.0
(2.0)
0.1
1.2
1.3
9.6
14.9
(18.3)
(10.9)
0.9
---
111.0
(7.7)
103.3
1.9
(30.9)
0.4
(14.2)
(41.2)
5.0
0.6
(78.4)
(14.7)
---
(0.7)
---
---
(352.9)
318.8
(11.9)
100.0
(3.3)
5.0
0.1
40.4
65.3
70.4
65.3
0.1
135.8
44
ESSENTRA PLC FINANCIAL REPORT 2020
ESSENTRA PLC FINANCIAL REPORT 2020
2019
£m
41.2
24.3
14.5
23.8
(15.4)
35.5
11.3
---
0.5
3.9
0.4
(1.1)
7.3
(16.5)
(24.6)
(1.3)
(1.3)
102.5
(26.1)
76.4
1.3
(48.4)
2.6
(10.5)
(26.1)
113.7
(0.6)
32.0
(14.6)
(54.2)
(0.8)
(11.6)
(0.1)
(207.3)
197.3
(12.4)
---
---
---
0.4
(103.3)
5.1
66.2
5.1
(0.9)
70.4
55
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
156 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
AAccccoouunnttiinngg PPoolliicciieess
a. Basis of preparation
The consolidated financial statements have been prepared and approved by the Directors in accordance with International accounting standards
in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applied in the European Union.
The Company has elected to prepare its individual company financial statements in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (‘‘FRS 101’’); these are presented on pages 200 to 209.
The financial statements are prepared under the historical cost convention except for derivatives which are stated at fair value and retirement
benefit obligations which are valued in accordance with IAS 19 Employee Benefits.
The preparation of financial 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.
For the purposes of these financial statements ‘‘Essentra’’ or ‘‘the Group’’ means Essentra plc (‘‘the Company’’) and its subsidiaries.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised and future periods if relevant.
The accounting policies used in the preparation of these financial statements are detailed below. These policies have been consistently applied to all
periods presented.
Information regarding the financial position of the Group, its cash flows, liquidity position, and borrowing facilities are described in the Financial
Review on pages 45 to 47. In addition, note 19 to the financial statements includes the Group’s objectives, policies and processes for managing its
capital, its financial risk management objectives, details of its financial instruments and hedging activities and exposures to credit, market and
liquidity risk. Cash balances and borrowings are detailed in note 22.
At 31 December 2020, the Group’s financing arrangements amounted to £448.0m, comprising United States Private Placement (USPP) of
US$100.0m (with a range of expiry dates from November 2024 to April 2030) and a multi-currency revolving credit facility (RCF) of £375.0m (of
which £225.0m expires in November 2023 following extension agreed with lenders in January 2021, and the remaining amount in November 2022).
At 31 December 2020, £161.2m of the RCF facility was undrawn. 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 macroeconomic uncertainty, 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 notwithstanding the impact of current events such
as Brexit and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading
performances and considering the existing banking 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 12 months following the date of approval of the financial statements,
and no breaches of covenants are expected.
The uncertainty as to the future impact on the Group of the Covid-19 pandemic has been considered as part of the Group’s adoption of the going
concern basis, taking into account the experience during 2020 and the most recent circumstances. As at 31 December 2020 and as at the date of
approval of these financial statements, all of the Group’s manufacturing and distribution facilities are operational and have broadly resumed to
pre-pandemic levels of service. Across the Group, public health measures advised by governments are being followed in support of their efforts to
contain the spread of the virus, and the supply chain is being proactively managed as are operating costs and the timing of capital expenditure.
As part of the going concern assessment, the Board has also considered a downside scenario that reflects the current uncertainty in the global
economy and which management consider to be severe but plausible. The results of this scenario show that there is sufficient liquidity in the
business for a period of at least 12 months from the date of approval of these financial statements, and do not indicate any covenant breach
during the test period. The scenario includes assumption for similar extent of disruptions as seen in 2020. Set against this were mitigating actions
including tight management of capital expenditure, sales and general overhead, and working capital. Since the first Covid-19 external
announcement issued by the Company in May 2020, the Group has been cash generative and hence the liquidity position has further improved.
Overall liquidity (defined as available undrawn borrowing facility plus cash and cash equivalent excluding the amount attributable to non-
controlling interests) at the end of December was approximately £287m, which improved from approximately £260m at half-year, achieved by
diligent cash flow management in the Company.
The severe but plausible scenario does not indicate a material uncertainty which may cast significant doubt over the Company’s and Group’s ability
to continue as a going concern. Significant level of headroom remains in place with regard to liquidity and compliance with financial covenants.
Therefore, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Further information on the Group’s borrowing facilities, cash resources and other financial instruments can be found in notes 19 and 22 to the
financial statements.
The Directors have prepared plans and forecasts for a period of at least twelve months from the date of signing these financial statements. Based
on these, and taking into consideration the risks detailed in note 19, 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
consolidated financial statements. This disclosure has been prepared in accordance with the Financial Reporting Council’s UK Corporate
Governance Code.
In these financial statements, the Company has changed the layout of its consolidated income statement to present adjusted operating profit
measure below the income statement. In addition, the description previously used for adjusting items has been changed from ‘‘exceptional and
other adjusting items’’ to ‘‘adjusting items’’, whilst its scope and definition remains unchanged. Details of these items are provided in note 2.
66
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
AAccccoouunnttiinngg PPoolliicciieess
FINANCIAL STATEMENTS 157
a. Basis of preparation
a. Basis of preparation continued
The consolidated financial statements have been prepared and approved by the Directors in accordance with International accounting standards
in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation
Changes in accounting policies
The Group adopted the following new pronouncements during 2020, which did not have a material impact on the Group’s financial statement:
(EC) No 1606/2002 as it applied in the European Union.
Disclosure Framework (‘‘FRS 101’’); these are presented on pages 200 to 209.
The Company has elected to prepare its individual company financial statements in accordance with Financial Reporting Standard 101 Reduced
in IAS 1 about immaterial information
• Definition of Material (Amendments to IAS 1 and IAS 8), which clarifies when information is material and incorporate some of the guidance
The financial statements are prepared under the historical cost convention except for derivatives which are stated at fair value and retirement
benefit obligations which are valued in accordance with IAS 19 Employee Benefits.
• Definition of a Business (Amendments to IFRS 3), which provides guidance on whether activities and assets acquired are a business or merely a
group of assets, and confirms that a business must include inputs and a substantive process that together significantly contribute to the ability
to create outputs; furthermore, there has been a change to the definition of the ‘outputs’
The preparation of financial statements that conform with adopted IFRS requires the use of estimates and assumptions that affect the reported
• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7), which is issued as a first reaction to the potential effects the IBOR
amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting
reform could have on financial reporting
period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may ultimately differ
from those estimates.
For the purposes of these financial statements ‘‘Essentra’’ or ‘‘the Group’’ means Essentra plc (‘‘the Company’’) and its subsidiaries.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised and future periods if relevant.
The accounting policies used in the preparation of these financial statements are detailed below. These policies have been consistently applied to all
periods presented.
Information regarding the financial position of the Group, its cash flows, liquidity position, and borrowing facilities are described in the Financial
Review on pages 45 to 47. In addition, note 19 to the financial statements includes the Group’s objectives, policies and processes for managing its
capital, its financial risk management objectives, details of its financial instruments and hedging activities and exposures to credit, market and
liquidity risk. Cash balances and borrowings are detailed in note 22.
At 31 December 2020, the Group’s financing arrangements amounted to £448.0m, comprising United States Private Placement (USPP) of
US$100.0m (with a range of expiry dates from November 2024 to April 2030) and a multi-currency revolving credit facility (RCF) of £375.0m (of
which £225.0m expires in November 2023 following extension agreed with lenders in January 2021, and the remaining amount in November 2022).
At 31 December 2020, £161.2m of the RCF facility was undrawn. 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 macroeconomic uncertainty, 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 notwithstanding the impact of current events such
as Brexit and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading
performances and considering the existing banking 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 12 months following the date of approval of the financial statements,
and no breaches of covenants are expected.
The uncertainty as to the future impact on the Group of the Covid-19 pandemic has been considered as part of the Group’s adoption of the going
concern basis, taking into account the experience during 2020 and the most recent circumstances. As at 31 December 2020 and as at the date of
approval of these financial statements, all of the Group’s manufacturing and distribution facilities are operational and have broadly resumed to
pre-pandemic levels of service. Across the Group, public health measures advised by governments are being followed in support of their efforts to
contain the spread of the virus, and the supply chain is being proactively managed as are operating costs and the timing of capital expenditure.
As part of the going concern assessment, the Board has also considered a downside scenario that reflects the current uncertainty in the global
economy and which management consider to be severe but plausible. The results of this scenario show that there is sufficient liquidity in the
business for a period of at least 12 months from the date of approval of these financial statements, and do not indicate any covenant breach
during the test period. The scenario includes assumption for similar extent of disruptions as seen in 2020. Set against this were mitigating actions
including tight management of capital expenditure, sales and general overhead, and working capital. Since the first Covid-19 external
announcement issued by the Company in May 2020, the Group has been cash generative and hence the liquidity position has further improved.
Overall liquidity (defined as available undrawn borrowing facility plus cash and cash equivalent excluding the amount attributable to non-
controlling interests) at the end of December was approximately £287m, which improved from approximately £260m at half-year, achieved by
diligent cash flow management in the Company.
The severe but plausible scenario does not indicate a material uncertainty which may cast significant doubt over the Company’s and Group’s ability
to continue as a going concern. Significant level of headroom remains in place with regard to liquidity and compliance with financial covenants.
Therefore, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Further information on the Group’s borrowing facilities, cash resources and other financial instruments can be found in notes 19 and 22 to the
financial statements.
Governance Code.
The Directors have prepared plans and forecasts for a period of at least twelve months from the date of signing these financial statements. Based
on these, and taking into consideration the risks detailed in note 19, 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
consolidated financial statements. This disclosure has been prepared in accordance with the Financial Reporting Council’s UK Corporate
In these financial statements, the Company has changed the layout of its consolidated income statement to present adjusted operating profit
measure below the income statement. In addition, the description previously used for adjusting items has been changed from ‘‘exceptional and
other adjusting items’’ to ‘‘adjusting items’’, whilst its scope and definition remains unchanged. Details of these items are provided in note 2.
• Revised Conceptual Framework for Financial Reporting (Amendments to IFRS 9, IAS 39 and IFRS 7)
b. Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by Essentra. Control exists when Essentra is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in
the financial statements from the date that control commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expense arising from intragroup transactions are eliminated in preparing
the consolidated financial statements.
c. Foreign currency
Items included in the financial statements of the Group’s subsidiaries are measured using the currency of the primary economic environment in
which the subsidiary operates (‘‘functional currency’’). The consolidated financial statements are prepared in sterling (functional currency of the
parent company).
(i) Foreign currency transactions
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are translated into sterling at the exchange rate ruling at that date and recognised in the income
statement unless hedge accounting criteria apply (see policy for financial instruments).
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into sterling
at the exchange rate ruling at the balance sheet date. The revenues and expenses of foreign operations are translated into sterling at average
exchange rates.
(iii) Net investment in foreign operations
Exchange differences on retranslation at the closing rate of the opening balances of overseas entities are taken to other comprehensive income,
as are exchange differences arising on related foreign currency borrowings and derivatives designated as net investment hedges, to the extent
that they are effective. Other exchange differences are taken to the income statement. Differences arising prior to 1 January 2004 are included
in retained earnings.
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d. Financial instruments
Interest bearing loans and borrowings and other financial liabilities (excluding derivatives) are held at amortised cost, unless they are included
in a hedge accounting relationship. See note 15 for separate disclosure of hedge types.
Derivatives are measured initially at fair value. Subsequent measurement in the financial statements depends on the classification of the derivative
as follows:
(i) Fair value hedges
Where a derivative is used to hedge the foreign exchange exposure of a monetary asset or liability, any gain or loss on the derivative is recognised
in the income statement.
(ii) Cash flow hedges
Where a derivative is designated as a hedging instrument in a cash flow hedge, the change in fair value is recognised in other comprehensive
income to the extent that it is effective and any ineffective portion is recognised in the income statement. Where the underlying transaction results
in a financial asset, accumulated gains and losses are recognised in the income statement in the same period as the hedged item affects profit
or loss. Where the hedged item results in a non-financial asset the accumulated gains and losses previously recognised in other comprehensive
income are included in the initial carrying value of the asset.
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Accounting Policies continued
d. Financial instruments continued
(iii) Hedges of net investment in foreign operations
The gain or loss on an instrument used to hedge a net investment in a foreign operation that is deemed effective is recognised in other
comprehensive income. Any ineffective portion is recognised in the income statement.
(iv) Unhedged derivatives
The movements in the fair value of derivatives which are not designated as an effective hedge relationships are charged/credited to the
profit or loss.
e. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Previously revalued properties were
treated as being held at deemed cost upon transition to adopted IFRS.
Where parts of an item of property, plant and equipment or other assets have different useful lives, they are accounted for as separate items.
The carrying values of property, plant and equipment and other assets are periodically reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable.
Property, plant and equipment are depreciated over their estimated remaining useful lives on a straight line basis at the following annual rates:
Land and buildings --- Freehold land
Land and buildings --- Buildings
Plant and machinery
Fixtures, fittings and equipment
Not depreciated
2% or life of lease if shorter
7---20%
10---33%
The assets’ useful lives and residual values are reviewed, and adjusted if appropriate, at each balance sheet date.
f. Lease liabilities and lease right-of-use assets
Leases greater than 12 months in length, and those not of low-value, are recognised as a lease right-of-use asset with the associated future lease
payment terms recognised as a lease liability. The right-of-use assets and the associated lease liabilities are recognised by discounting the future
lease payments at the rate implicit to the lease or, if the rate implicit to the lease cannot be readily determined, at the relevant incremental
borrowing rate.
Determining the incremental borrowing rate incorporates three key elements: risk-free rate (reflecting specific country and currency), credit spread
(reflecting the specific risk for each subsidiary within the Group) and an asset class adjustment (reflecting the variation in risk between asset
categories).
The Group has leases of certain equipment (e.g. printing and photocopying machines) that are considered of low value. Rentals associated with
leases that are of low-value or less than 12 months in length are expensed to the income statement on a straight line basis. The associated lease
incentives are amortised in the income statement over the life of the lease.
(i) The Group’s leasing activities
The Group leases various properties, equipment and cars. Rental contracts are typically made for fixed periods of 1 to 20 years, but might have
extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.
Approximately 85% of the Group’s future lease obligations under IFRS 16 relate to property leases.
The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period. The right-of-use asset is depreciated over the shorter of the right-of-use asset's useful life and the lease term
on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
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Accounting Policies continued
d. Financial instruments continued
(iii) Hedges of net investment in foreign operations
(iv) Unhedged derivatives
profit or loss.
e. Property, plant and equipment
The gain or loss on an instrument used to hedge a net investment in a foreign operation that is deemed effective is recognised in other
comprehensive income. Any ineffective portion is recognised in the income statement.
The movements in the fair value of derivatives which are not designated as an effective hedge relationships are charged/credited to the
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Previously revalued properties were
treated as being held at deemed cost upon transition to adopted IFRS.
Where parts of an item of property, plant and equipment or other assets have different useful lives, they are accounted for as separate items.
The carrying values of property, plant and equipment and other assets are periodically reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable.
Property, plant and equipment are depreciated over their estimated remaining useful lives on a straight line basis at the following annual rates:
Land and buildings --- Freehold land
Land and buildings --- Buildings
Plant and machinery
Fixtures, fittings and equipment
Not depreciated
2% or life of lease if shorter
7---20%
10---33%
The assets’ useful lives and residual values are reviewed, and adjusted if appropriate, at each balance sheet date.
f. Lease liabilities and lease right-of-use assets
Leases greater than 12 months in length, and those not of low-value, are recognised as a lease right-of-use asset with the associated future lease
payment terms recognised as a lease liability. The right-of-use assets and the associated lease liabilities are recognised by discounting the future
lease payments at the rate implicit to the lease or, if the rate implicit to the lease cannot be readily determined, at the relevant incremental
Determining the incremental borrowing rate incorporates three key elements: risk-free rate (reflecting specific country and currency), credit spread
(reflecting the specific risk for each subsidiary within the Group) and an asset class adjustment (reflecting the variation in risk between asset
borrowing rate.
categories).
The Group has leases of certain equipment (e.g. printing and photocopying machines) that are considered of low value. Rentals associated with
leases that are of low-value or less than 12 months in length are expensed to the income statement on a straight line basis. The associated lease
incentives are amortised in the income statement over the life of the lease.
(i) The Group’s leasing activities
The Group leases various properties, equipment and cars. Rental contracts are typically made for fixed periods of 1 to 20 years, but might have
extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.
Approximately 85% of the Group’s future lease obligations under IFRS 16 relate to property leases.
The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period. The right-of-use asset is depreciated over the shorter of the right-of-use asset's useful life and the lease term
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
on a straight-line basis.
following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration costs.
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FINANCIAL STATEMENTS 159
f. Lease liabilities and lease right-of-use assets continued
(ii) Variable lease payments
The Group have certain assets which may include variable lease payments based on usage, although this is a small proportion of the Group’s
assets. These include vehicles, with variable lease payments based on mileage or equipment such as printers, of which the lease payments vary
based on their usage. The variable lease payments are not material for the Group.
Any future variable payment increase that requires either speculation or an estimate is not included. Future lease payments should then be applied
only when they are known, with no change to the discount rate.
(iii) Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group
and not by the respective lessor.
g. Intangible assets
(i) Goodwill
Goodwill is stated at cost less any impairment losses.
Acquisitions are accounted for using the purchase method. For acquisitions that have occurred since 1 January 2004, goodwill represents the
difference between the fair value of the assets given in consideration and the fair value of identifiable assets, liabilities and contingent liabilities
of the acquiree. For acquisitions made before 1 January 2004, goodwill is included on the basis of its deemed cost, which represents the amount
previously recorded under UK GAAP.
Since 1 January 2010, the Group has expensed costs attributable to acquisitions in the income statement. Given their one-off nature, these costs
are generally presented within exceptional and other adjusting items.
(ii) Research and development
Research costs are expensed to the income statement in the year in which they are incurred.
Development costs relating to new products are capitalised when the Group is able to demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the expenditure during
development.
(iii) Acquired intangible assets
An intangible asset acquired in a business combination is recognised at fair value to the extent it is probable that the expected future economic
benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. Intangible assets principally relate to customer
relationships, which are valued using discounted cash flows based on historical customer attrition rates, and developed technology, which is valued
using an income approach. The cost of intangible assets is amortised through the income statement on a straight line basis over their estimated
useful economic life.
(iv) Other intangible assets
Other intangible assets which are not acquired through a business combination (‘‘non-acquired intangible assets’’) are recognised at cost to the
extent it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured
reliably, and amortised on a straight line basis over their estimated useful economic life.
Intangibles are amortised over their estimated remaining useful lives on a straight line basis at the following annual rates:
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Goodwill
Customer relationships
Other intangibles --- research and development
Other intangibles --- development of e-commerce
Other intangibles --- software and software development
Not amortised
6-12%
7---20%
10---20%
10---20%
h. Impairment
All assets are reviewed regularly to determine whether there is any indication of impairment. Goodwill is tested for impairment annually.
An impairment loss is recognised whenever the carrying amount of a non-financial asset or the cash generating unit to which it belongs exceeds
its recoverable amount, being the greater of value in use and fair value less costs to sell, and is recognised in the income statement. Value in use
is estimated based on future cash flows discounted using a pre-tax discount rate based upon the Group’s weighted average cost of capital.
Financial assets were assessed for impairment using the expected credit loss model which requires expected credit losses and changes to expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition.
i. Inventories
Inventories are valued at the lower of cost and net realisable value. For work-in-progress and finished goods, cost includes an appropriate
proportion of labour cost and overheads.
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FFiinnaanncciiaall SSttaatteemmeennttss
Accounting Policies continued
j. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and fixed term investments whose maturities are three months or less from the date of
acquisition. Bank overdrafts repayable on demand form an integral part of Essentra’s cash management and are included as part of cash and
cash equivalents in the statement of cash flows.
k. Loans and borrowings
Loans and borrowings are initially measured at cost (which is equal to fair value at inception plus issuance cost) and are subsequently measured
at amortised cost using the effective interest method.
l. Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost, which is generally equivalent to recognition
at nominal value less impairment loss calculated using the expected loss model.
The Group applies the simplified model to recognise lifetime expected credit losses for its trade receivables and other receivables, including those
due in greater than 12 months, by making an accounting policy election. The expected loss rate estimated for each ageing period is as follows:
Current: 0.5%, Overdue 1-30 days: 1%, Overdue 31-60 days: 5%, Overdue 61-90 days: 10%, Overdue 91-180 days: 25%, Overdue 181-360 days:
50% and Overdue over 360 days: 100%.
m. Trade and other payables
Trade payables are non-interest bearing and are recognised initially at fair value and subsequently at amortised cost.
n. Income tax
Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except to the extent
that it relates to items recognised in equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year using the applicable tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in prior years. Deferred tax is provided, using the balance sheet liability method, on
temporary differences arising between the tax bases and the carrying amounts of assets and liabilities in the financial statements. The following
temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that they will not reverse in the
foreseeable future.
Deferred tax is determined using tax rates that are expected to apply when the related deferred tax asset or liability is settled, using the applicable
tax rates enacted or substantively enacted at the balance sheet dates.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against liabilities and when they
relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis.
o. Revenue
Revenue from the sale of goods is recognised in the income statement net of expected discounts, rebates, refunds, credits, price concessions
or other similar items, when the associated performance obligation has been satisfied, and control of the goods has been transferred
to the customer.
A significant part of the Group’s businesses sell goods on an ex-works basis, where the Group as seller makes its goods ready for collection at its
premises on an agreed upon sales date and the buyer incurs all transportation and handling costs and bears the risks for bringing the goods to their
chosen destination.
Where the Group operates non ex-works terms with customers, revenue is recognised when the control of the goods has been transferred to the
customer. These terms include consignment stock agreements, where revenue is recognised upon the customer removing goods from consignment
stock provided the relevant conditions for revenue recognition are met.
Each customer arrangement/contract is assessed to identify the performance obligations being provided to the customer. Where distinct
performance obligations are deemed to exist, an element of revenue is apportioned to that obligation.
p. Finance income and expense
Finance income and expense is recognised in the income statement as it accrues.
q. Segment reporting
A segment is identified on the basis of internal reports that are regularly reviewed by the Group Management Committee in order to allocate
resources to the segment and assess its performance.
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j. Cash and cash equivalents
r. Pensions
Cash and cash equivalents comprise cash balances and fixed term investments whose maturities are three months or less from the date of
acquisition. Bank overdrafts repayable on demand form an integral part of Essentra’s cash management and are included as part of cash and
(i) Defined contribution schemes
Obligations for contributions to defined contribution pension schemes are expensed to the income statement as incurred.
FINANCIAL STATEMENTS 161
(ii) Defined benefit schemes
The significant pension schemes in Europe and the US have been accounted for on a defined benefit basis.
The net obligations in respect of defined benefit pension schemes are calculated separately for each scheme by estimating the amount of future
benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present
value, and the fair value of any scheme assets is deducted. The discount rate is the yield at the balance sheet date on AA credit-rated bonds that
have maturity dates approximating to the terms of Essentra’s obligations. The calculation is performed by a qualified independent actuary using
the projected unit credit method. Net interest on defined benefit assets is presented within finance income, and net interest on defined benefit
liabilities is presented within finance expense.
Actuarial gains and losses that have arisen are recognised in full in the consolidated statement of comprehensive income.
The amounts charged to operating profit are the current service cost, past service cost (including curtailments) and gains and losses on settlement.
The value of a net pension asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from
the scheme.
s. Share-based payments
Essentra operates equity-settled, share-based incentive plans. A charge is made in the income statement based on the fair value of option awards
using the Monte Carlo or binomial valuation models and relevant quoted share price information with a corresponding increase in equity. The fair
value is measured at grant date and spread over the period between grant date and vesting date of the options. The amount recognised as an
expense will be adjusted to reflect the actual number of share options that vest with the exception of options that fail to vest because market
conditions are not met.
t. Adjusting items
Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence (considered for each operating segment).
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 the impact of 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 items which are non-recurring or
one-off in nature (such as the costs of fundamental strategic review and reorganisation). Operating profit before adjusting items and acquired
intangible amortisation is called adjusted operating profit, which forms the primary basis of management’s review and assessment of operational
performance of the Group’s businesses.
(i) Gains/losses and transaction costs relating to acquisitions and disposals of businesses
In 2020, Essentra acquired 3C! Packaging, Inc. (‘‘3C!’’), incurring one-off acquisition related costs (refer to note 23). Further one-off costs were
incurred as a result of acquisition of Nekicesa, Innovative Components, alongside professional fees associated with certain corporate development
activities. A one-off credit was received in respect of a VAT refund on the costs of a previous business disposal.
In 2019, Essentra disposed of the Pipe Protection Technologies, Speciality Tapes, Extrusion and Card Solutions businesses, incurring one-off gains
and losses on those transactions. Further one-off costs (such as professional fees) were incurred on the aforementioned disposals and as a result
of acquisitions of Nekicesa and Innovative Components (refer to note 23).
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(ii) Acquisition integration and restructuring costs
These relate to costs incurred on the integration of acquired businesses and restructuring associated with acquisitions.
(iii) Other adjusting items
In 2020, this represents restructuring activities within the Packaging division, comprising the closure of Portsmouth, UK and Moorestown,
USA; Components Europe, comprising the closure of the manufacturing facility in Åstorp, Sweden, and transfer to Barcelona, Spain, and closure
of warehousing capabilities in Northern Europe and transfer to Nettetal, Germany; and Components Americas, comprising the closure of
manufacturing sites in Schaumburg, Illinois, and Melbourne, Arkansas, with transfer of those activities to Flippin, Arkansas, and the closure
of warehousing facilities in Edison in New Jersey, Elgin in Illinois and Los Angeles in California. In addition professional fees have been incurred
as part of a strategic review of the Group’s operational structure and cost profile. This is offset by a credit arising on the release of excess provision
held for potential penalties in relation to the review of the compliance of certain group companies’ export activities with US laws as the Company
does not anticipate any significant enforcement action.
In 2019, this represented credits arising on the release of provisions for adjusting items previously created as a result of Packaging and Specialist
Components restructuring (releasing closure provisions relating to the following sites: Largo and Kilmarnock in Packaging and Speciality Tapes
Nottingham in Specialist Components), a credit has been recognised relating to the release of a lease liability, originally provided for as part of the
closure of the Newport Cartons business in 2017, partially offset by costs in relation to restructuring of the Group Finance function and Specialist
Components, and costs relating to the review, investigation and expected penalties relating to the compliance of certain group companies’ export
activities within U.S. laws.
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Accounting Policies continued
cash equivalents in the statement of cash flows.
k. Loans and borrowings
at amortised cost using the effective interest method.
l. Trade and other receivables
Loans and borrowings are initially measured at cost (which is equal to fair value at inception plus issuance cost) and are subsequently measured
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost, which is generally equivalent to recognition
at nominal value less impairment loss calculated using the expected loss model.
The Group applies the simplified model to recognise lifetime expected credit losses for its trade receivables and other receivables, including those
due in greater than 12 months, by making an accounting policy election. The expected loss rate estimated for each ageing period is as follows:
Current: 0.5%, Overdue 1-30 days: 1%, Overdue 31-60 days: 5%, Overdue 61-90 days: 10%, Overdue 91-180 days: 25%, Overdue 181-360 days:
50% and Overdue over 360 days: 100%.
m. Trade and other payables
n. Income tax
Trade payables are non-interest bearing and are recognised initially at fair value and subsequently at amortised cost.
Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except to the extent
that it relates to items recognised in equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year using the applicable tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in prior years. Deferred tax is provided, using the balance sheet liability method, on
temporary differences arising between the tax bases and the carrying amounts of assets and liabilities in the financial statements. The following
temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that they will not reverse in the
foreseeable future.
Deferred tax is determined using tax rates that are expected to apply when the related deferred tax asset or liability is settled, using the applicable
tax rates enacted or substantively enacted at the balance sheet dates.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against liabilities and when they
relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis.
o. Revenue
to the customer.
chosen destination.
Revenue from the sale of goods is recognised in the income statement net of expected discounts, rebates, refunds, credits, price concessions
or other similar items, when the associated performance obligation has been satisfied, and control of the goods has been transferred
A significant part of the Group’s businesses sell goods on an ex-works basis, where the Group as seller makes its goods ready for collection at its
premises on an agreed upon sales date and the buyer incurs all transportation and handling costs and bears the risks for bringing the goods to their
Where the Group operates non ex-works terms with customers, revenue is recognised when the control of the goods has been transferred to the
customer. These terms include consignment stock agreements, where revenue is recognised upon the customer removing goods from consignment
stock provided the relevant conditions for revenue recognition are met.
Each customer arrangement/contract is assessed to identify the performance obligations being provided to the customer. Where distinct
performance obligations are deemed to exist, an element of revenue is apportioned to that obligation.
p. Finance income and expense
Finance income and expense is recognised in the income statement as it accrues.
q. Segment reporting
A segment is identified on the basis of internal reports that are regularly reviewed by the Group Management Committee in order to allocate
resources to the segment and assess its performance.
1100
ESSENTRA PLC FINANCIAL REPORT 2020
ACCOUNTING POLICIES
ESSENTRA PLC FINANCIAL REPORT 2020
1111
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
162 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Accounting Policies continued
u. Investment in own shares
The shares held in the Essentra Employee Benefit Trust for the purpose of fulfilling obligations in respect of share option plans are treated as
belonging to the Company and are deducted from its retained earnings. The cost of shares held directly (treasury shares) are also deducted
from retained earnings.
v. Provisions
A provision is recognised when there is a probable legal or constructive obligation as a result of a past event and a reliable estimate can be made
of the outflow of resources that will be required to settle the obligation. The outflow is the present value of management’s best estimate of the
expenditure required to settle the present obligation at the balance sheet date.
w. Government grants
Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met,
usually on submission of a valid claim for payment. Government grants in respect of capital expenditure are included within the carrying amount
of the related property, plant and equipment, and are released to profit or loss on a straight line basis over the expected useful lives of the relevant
assets. Grants of a revenue nature are credited to profit or loss so as to match them with the expenditure to which they relate.
x. Net debt
Net debt is defined as cash and cash equivalents and short-term liquid investments, net of lease liabilities and interest bearing loans
and borrowings.
y. Dividends
Dividends are recognised as a liability in the period in which they are approved by the shareholders of the Company (final dividend) or paid
(interim dividend).
z. Assets and disposal groups held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their
carrying amount and fair value less costs to sell. Impairment losses on initial classification as held-for-sale and subsequent gains and losses on
remeasurement are recognised in profit or loss.
1122
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Accounting Policies continued
u. Investment in own shares
from retained earnings.
v. Provisions
w. Government grants
x. Net debt
and borrowings.
y. Dividends
(interim dividend).
The shares held in the Essentra Employee Benefit Trust for the purpose of fulfilling obligations in respect of share option plans are treated as
belonging to the Company and are deducted from its retained earnings. The cost of shares held directly (treasury shares) are also deducted
A provision is recognised when there is a probable legal or constructive obligation as a result of a past event and a reliable estimate can be made
of the outflow of resources that will be required to settle the obligation. The outflow is the present value of management’s best estimate of the
expenditure required to settle the present obligation at the balance sheet date.
Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met,
usually on submission of a valid claim for payment. Government grants in respect of capital expenditure are included within the carrying amount
of the related property, plant and equipment, and are released to profit or loss on a straight line basis over the expected useful lives of the relevant
assets. Grants of a revenue nature are credited to profit or loss so as to match them with the expenditure to which they relate.
Net debt is defined as cash and cash equivalents and short-term liquid investments, net of lease liabilities and interest bearing loans
Dividends are recognised as a liability in the period in which they are approved by the shareholders of the Company (final dividend) or paid
z. Assets and disposal groups held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their
carrying amount and fair value less costs to sell. Impairment losses on initial classification as held-for-sale and subsequent gains and losses on
remeasurement are recognised in profit or loss.
CCrriittiiccaall AAccccoouunnttiinngg JJuuddggeemmeennttss aanndd EEssttiimmaatteess
CCrriittiiccaall AAccccoouunnttiinngg JJuuddggeemmeennttss aanndd EEssttiimmaatteess
FINANCIAL STATEMENTS 163
The following provides information on those policies that management considers critical because of the level of judgement and estimation
The following provides information on those policies that management considers critical because of the level of judgement and estimation
required which often involves assumptions regarding future events which can vary from what is anticipated. The Directors believe that the
required which often involves assumptions regarding future events which can vary from what is anticipated. The Directors believe that the
financial statements reflect appropriate judgements and estimates and provide a true and fair view of Essentra’s performance and financial
financial statements reflect appropriate judgements and estimates and provide a true and fair view of Essentra’s performance and financial
position.
position.
Accounting Estimates
Accounting Estimates
(i) Business combinations and intangible assets
(i) Business combinations and intangible assets
IFRS 3 requires the identification of acquired intangible assets as part of a business combination. The methods used to value such intangible
IFRS 3 requires the identification of acquired intangible assets as part of a business combination. The methods used to value such intangible
assets require the use of estimates and judgements such as customer attrition, cash flow generation from the existing relationships with customers
assets require the use of estimates and judgements such as customer attrition, cash flow generation from the existing relationships with customers
and returns on other assets. Future results are impacted by the amortisation periods adopted and changes to the estimated useful lives would
and returns on other assets. Future results are impacted by the amortisation periods adopted and changes to the estimated useful lives would
result in different effects on the income statement and balance sheet.
result in different effects on the income statement and balance sheet.
Goodwill is not amortised but is tested annually for impairment, along with the finite-lived intangible assets and other assets of the Group’s
Goodwill is not amortised but is tested annually for impairment, along with the finite-lived intangible assets and other assets of the Group’s
cash generating units. During the period of uncertainty in 2020, management performed the impairment tests as at 30 June 2020 as well as
cash generating units. During the period of uncertainty in 2020, management performed the impairment tests as at 30 June 2020 as well as
31 December 2020. Tests for impairment are based on discounted cash flows and assumptions (including discount rates, timing and growth
31 December 2020. Tests for impairment are based on discounted cash flows and assumptions (including discount rates, timing and growth
prospects) which are inherently subjective. An estimate is also required in identifying the events which indicate potential impairment, and in
prospects) which are inherently subjective. An estimate is also required in identifying the events which indicate potential impairment, and in
assessing fair value of individual assets when allocating an impairment loss in a cash-generating unit or groups of cash-generating units.
assessing fair value of individual assets when allocating an impairment loss in a cash-generating unit or groups of cash-generating units.
The Group performs various sensitivity analyses in respect of the tests for impairment, as detailed in note 8.
The Group performs various sensitivity analyses in respect of the tests for impairment, as detailed in note 8.
The useful lives of the Group’s finite-lived intangible assets are reviewed following the tests for impairment annually.
The useful lives of the Group’s finite-lived intangible assets are reviewed following the tests for impairment annually.
Judgement may also be required in determining the fair value of other assets acquired and liabilities (including contingent liabilities) assumed.
Judgement may also be required in determining the fair value of other assets acquired and liabilities (including contingent liabilities) assumed.
In preparing the consolidated financial statements the Group has considered the impact that climate change may have on key accounting
In preparing the consolidated financial statements the Group has considered the impact that climate change may have on key accounting
judgements and estimates including asset useful economic lives and asset valuations and impairments. As set out on pages 36 to 41 of the
judgements and estimates including asset useful economic lives and asset valuations and impairments. As set out on pages 36 to 41 of the
Strategic Report, the Group continues to introduce initiatives designed to reduce the carbon emissions from its operations. As a result, the Group
Strategic Report, the Group continues to introduce initiatives designed to reduce the carbon emissions from its operations. As a result, the Group
considers the environmental assumptions embedded within the Group’s strategic business plan to support the key forward looking accounting
considers the environmental assumptions embedded within the Group’s strategic business plan to support the key forward looking accounting
judgements and estimates.
judgements and estimates.
(ii) Taxation
(ii) Taxation
Liabilities for tax contingencies require management judgements and estimates in respect of tax audit issues and exposures in each of the
Liabilities for tax contingencies require management judgements and estimates in respect of tax audit issues and exposures in each of the
jurisdictions in which it operates. Management is also required to make an estimate of the current tax liability together with an assessment of the
jurisdictions in which it operates. Management is also required to make an estimate of the current tax liability together with an assessment of the
temporary differences which arise as a consequence of different accounting and tax treatments. Where management conclude a tax position is
temporary differences which arise as a consequence of different accounting and tax treatments. Where management conclude a tax position is
uncertain, a current tax liability is held for anticipated taxes that are considered probable based on the information available.
uncertain, a current tax liability is held for anticipated taxes that are considered probable based on the information available.
Key judgement areas for the Group include the pricing of intercompany goods and services as well as the tax consequences arising from
Key judgement areas for the Group include the pricing of intercompany goods and services as well as the tax consequences arising from
restructuring operations. Included in the tax payable is a liability of £12.0m (2019: £15.3m) for transfer pricing matters and £20.2m (2019: £18.7m)
restructuring operations. Included in the tax payable is a liability of £12.0m (2019: £15.3m) for transfer pricing matters and £20.2m (2019: £18.7m)
for other uncertain tax positions. The movement is due to adjustments for current year transactions, foreign exchange movements, expiry of
for other uncertain tax positions. The movement is due to adjustments for current year transactions, foreign exchange movements, expiry of
statute of limitations following the passage of time and agreement reached with tax authorities on previous matters.
statute of limitations following the passage of time and agreement reached with tax authorities on previous matters.
Management may engage with professional advisors in making their assessment and, if appropriate, will liaise with the relevant taxation
Management may engage with professional advisors in making their assessment and, if appropriate, will liaise with the relevant taxation
authorities to resolve the matter. The tax liability is reassessed in each period to reflect Management's best estimate in light of information
authorities to resolve the matter. The tax liability is reassessed in each period to reflect Management's best estimate in light of information
available. If the final outcome of these matters differs to the liability held in the financial statements, the difference may impact the income tax
available. If the final outcome of these matters differs to the liability held in the financial statements, the difference may impact the income tax
charge/(credit) in the year the matter is concluded.
charge/(credit) in the year the matter is concluded.
In April 2019, the European Commission issued its decision in a state aid investigation into the Group Financing Exemption in the UK controlled
In April 2019, the European Commission issued its decision in a state aid investigation into the Group Financing Exemption in the UK controlled
foreign company rules. The European Commission found that part of the Group Financing Exemption, which was introduced in legislation by the
foreign company rules. The European Commission found that part of the Group Financing Exemption, which was introduced in legislation by the
UK Government in 2013, constitutes state aid. In common with other UK-based international companies whose arrangements were in line with
UK Government in 2013, constitutes state aid. In common with other UK-based international companies whose arrangements were in line with
UK CFC legislation Essentra was potentially affected by the ultimate outcome of this investigation with a potential tax liability of between £nil
UK CFC legislation Essentra was potentially affected by the ultimate outcome of this investigation with a potential tax liability of between £nil
and £16m.
and £16m.
In June 2019 the UK government and other UK-based international companies, including Essentra, appealed to the General Court of the European
In June 2019 the UK government and other UK-based international companies, including Essentra, appealed to the General Court of the European
Union against the decision. In the meantime, the UK Government is required to follow the decision as it stands and assess the impact on UK
Union against the decision. In the meantime, the UK Government is required to follow the decision as it stands and assess the impact on UK
companies and ultimately issue collection proceedings. Essentra responded to an information request from HMRC and on 22 February 2021
companies and ultimately issue collection proceedings. Essentra responded to an information request from HMRC and on 22 February 2021
received confirmation of HMRC's view that Essentra is not a beneficiary of EU state aid.
received confirmation of HMRC's view that Essentra is not a beneficiary of EU state aid.
(iii) Pensions
(iii) Pensions
Essentra accounts for its defined benefit pension schemes in accordance with IAS 19. The application of IAS 19 requires the exercise of judgement
Essentra accounts for its defined benefit pension schemes in accordance with IAS 19. The application of IAS 19 requires the exercise of judgement
in relation to the assumptions used, particularly in determining the discount rate, inflation rate assumption and mortality assumptions. For each
in relation to the assumptions used, particularly in determining the discount rate, inflation rate assumption and mortality assumptions. For each
assumption there is a range of possible outcomes (see note 18). In consultation with Essentra’s actuaries, management decides the point within
assumption there is a range of possible outcomes (see note 18). In consultation with Essentra’s actuaries, management decides the point within
those ranges that most appropriately reflects Essentra’s circumstances. Small changes to these assumptions can have a significant impact on
those ranges that most appropriately reflects Essentra’s circumstances. Small changes to these assumptions can have a significant impact on
valuations. The Group performs a sensitivity analysis for the significant assumptions used in determining post-employment costs and liabilities,
valuations. The Group performs a sensitivity analysis for the significant assumptions used in determining post-employment costs and liabilities,
as detailed in note 18.
as detailed in note 18.
I
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A
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A
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S
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E
M
T
E
E
M
N
E
T
N
S
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S
1122
ESSENTRA PLC FINANCIAL REPORT 2020
ACCOUNTING POLICIES
ACCOUNTING POLICIES
ESSENTRA PLC FINANCIAL REPORT 2020
ESSENTRA PLC FINANCIAL REPORT 2020
1133
1133
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
164 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Critical Accounting Judgements and Estimates continued
Accounting Judgements
(i) Adjusting items
Judgement is required to determine whether items should be included within adjusting items by virtue of their size or incidence. Details of the items
categorised as adjusting items are disclosed in note 2.
As restructuring and reorganisation costs are recognised (for instance with respect to site rationalisation initiatives), estimates are often involved in
relation to property-related costs (such as restoration and dilapidation costs, recoverable amount of lease right of use assets and potential sublet
income) and asset impairment charges (in assessing recoverable amount such as fair value from potential sale of assets). Where appropriate and
possible, management may engage with professional advisors in making these assessments.
(ii) Consolidation of a subsidiary
Judgement is required to establish whether control exists over an entity in which Essentra holds part of the share capital. Essentra has a 49%
shareholding in China Tobacco Essentra (Xiamen) Filters Co., Ltd which has been consolidated as a subsidiary within the consolidated interim
financial statements because management have assessed that Essentra has control over the entity to direct the relevant activities (including
approval of budgets and capital investments, and appointment of key management personnel) that significantly affect the entity's returns and
the ability to use its power to affect those returns, through a majority of membership in the entity's governing body (primarily the board of
directors). Subsidiaries are fully consolidated during the period which the Group holds control.
(iii) Leases and lease right-of-use assets
A key judgement in determining the right-of-use asset and lease liability is establishing whether it is reasonably certain that an option to extend the
lease will be exercised. Distinguishing whether a lease will be extended or otherwise could have a material impact on the value of the right-of-use
assets and lease liabilities recognised on the balance sheet, but may not have a material impact on the income statement.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease
is reasonably certain to be extended (or not terminated).
The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within
the control of the lessee.
1144
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Critical Accounting Judgements and Estimates continued
Accounting Judgements
(i) Adjusting items
Judgement is required to determine whether items should be included within adjusting items by virtue of their size or incidence. Details of the items
categorised as adjusting items are disclosed in note 2.
As restructuring and reorganisation costs are recognised (for instance with respect to site rationalisation initiatives), estimates are often involved in
relation to property-related costs (such as restoration and dilapidation costs, recoverable amount of lease right of use assets and potential sublet
possible, management may engage with professional advisors in making these assessments.
(ii) Consolidation of a subsidiary
Judgement is required to establish whether control exists over an entity in which Essentra holds part of the share capital. Essentra has a 49%
shareholding in China Tobacco Essentra (Xiamen) Filters Co., Ltd which has been consolidated as a subsidiary within the consolidated interim
financial statements because management have assessed that Essentra has control over the entity to direct the relevant activities (including
approval of budgets and capital investments, and appointment of key management personnel) that significantly affect the entity's returns and
the ability to use its power to affect those returns, through a majority of membership in the entity's governing body (primarily the board of
directors). Subsidiaries are fully consolidated during the period which the Group holds control.
(iii) Leases and lease right-of-use assets
A key judgement in determining the right-of-use asset and lease liability is establishing whether it is reasonably certain that an option to extend the
lease will be exercised. Distinguishing whether a lease will be extended or otherwise could have a material impact on the value of the right-of-use
assets and lease liabilities recognised on the balance sheet, but may not have a material impact on the income statement.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease
is reasonably certain to be extended (or not terminated).
The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within
the control of the lessee.
income) and asset impairment charges (in assessing recoverable amount such as fair value from potential sale of assets). Where appropriate and
Packaging is one of only two multi-continental suppliers of a full secondary packaging range to the health and personal care sectors.
FINANCIAL STATEMENTS 165
NNootteess
1. Segment analysis
In accordance with IFRS 8, Essentra has determined its operating segments based upon the information reported to the Group Management
Committee.
The operating segments are as follows:
Components is a global market leading manufacturer and distributor of plastic injection moulded, vinyl dip moulded and metal items.
Filters is the only global independent supplier of innovative cigarette filters and related solutions to the tobacco industry.
Specialist Components was dissolved in 2019, and for the purposes of the comparative information, it comprised the following smaller businesses
which were divested in 2019:
• The Extrusion business is a leading custom profile extruder located in the Netherlands which offers a complete design and production service.
• The Pipe Protection Technologies business specialises in the manufacture of high performance innovative products from commodity resins to
engineering-grade thermoplastics and polymer alloys for use in the oil & gas industry.
• The Speciality Tapes business has expertise in coating multiple adhesive systems in numerous technologies, and its products range from foam,
magnetic, finger lift and acrylic high bond tapes to hook and loop and non-skid foam.
• The Card Solutions business is a leading European provider of ID card printers, systems and accessories to direct and trade customers.
The adjusted operating profit/loss presented for each operating segment includes the effect of allocation of certain functional costs such as
finance, human resources, legal and IT, as well as costs relating to management of the divisions on an internal management methodology.
F
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1144
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
1155
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
Specialist
Components
£m
Eliminations
£m
Central
Services1
£m
2020
Total
£m
896.5
896.5
---
---
(22.5)
62.0
---
(4.8)
(27.3)
(22.6)
(17.7)
21.7
23.0
15.0
169.2
207.2
30.4
400.8
431.2
13.8
5.9
276
577.2
518.8
169.2
1,265.2
233.3
400.8
634.1
45.1
37.6
7,803
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
166 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
1. Segment analysis continued
External revenue
Total revenue
Operating profit/(loss) before intangible
amortisation and adjusting items
Amortisation of acquired intangible assets
Adjusting items
Operating profit/(loss)
Segment assets
Intangible assets
Unallocated items2
Total assets
Segment liabilities
Unallocated items2
Total liabilities
Other segment items
Capital expenditure (cash spend)
Depreciation
Average number of employees
Components
£m
Packaging
£m
255.0
255.0
363.2
363.2
Filters
£m
278.3
278.3
45.5
13.8
25.2
(8.9)
(4.7)
31.9
149.1
165.2
---
314.3
60.4
---
60.4
(13.6)
(9.1)
(8.9)
218.5
316.0
---
534.5
85.8
---
85.8
11.8
7.3
11.0
13.7
2,355
3,498
(0.1)
0.9
26.0
186.6
22.6
---
209.2
56.7
---
56.7
8.5
10.7
1,674
1166
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
External revenue
Total revenue
255.0
255.0
363.2
363.2
278.3
278.3
Components
Packaging
Filters
Components
Eliminations
£m
£m
£m
£m
£m
Specialist
45.5
13.8
25.2
(22.5)
62.0
Operating profit/(loss) before intangible
amortisation and adjusting items
Amortisation of acquired intangible assets
Adjusting items
Operating profit/(loss)
Segment assets
Intangible assets
Unallocated items2
Total assets
Segment liabilities
Unallocated items2
Total liabilities
Other segment items
Capital expenditure (cash spend)
Depreciation
Average number of employees
(8.9)
(4.7)
31.9
149.1
165.2
---
314.3
60.4
---
60.4
(13.6)
(9.1)
(8.9)
218.5
316.0
---
534.5
85.8
---
85.8
11.8
7.3
11.0
13.7
2,355
3,498
(0.1)
0.9
26.0
186.6
22.6
---
209.2
56.7
---
56.7
8.5
10.7
1,674
2020
Total
£m
896.5
896.5
Central
Services1
£m
---
---
---
(4.8)
(27.3)
(22.6)
(17.7)
21.7
23.0
15.0
169.2
207.2
30.4
400.8
431.2
13.8
5.9
276
577.2
518.8
169.2
1,265.2
233.3
400.8
634.1
45.1
37.6
7,803
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
1. Segment analysis continued
1. Segment analysis continued
FINANCIAL STATEMENTS 167
External revenue
Intersegment revenue
Total revenue
Operating profit/(loss) before intangible
amortisation and adjusting items
Amortisation of acquired intangible assets
Adjusting items
Operating profit/(loss)
Segment assets
Intangible assets
Unallocated items2
Total assets
Segment liabilities
Unallocated items2
Total liabilities
Other segment items
Capital expenditure (cash spend)
Depreciation
Average number of employees
Components
£m
Packaging
£m
283.1
0.2
283.3
60.3
(9.3)
(1.6)
49.4
164.1
171.1
---
335.2
54.1
---
54.1
14.1
7.4
2,409
352.7
---
352.7
15.1
(12.7)
7.4
9.8
218.9
283.6
---
502.5
89.2
---
89.2
13.5
12.0
3,251
Filters
£m
303.3
0.3
303.6
36.2
(0.1)
(9.2)
26.9
193.9
22.3
---
216.2
59.0
---
59.0
16.8
10.7
1,730
Specialist
Components
£m
Eliminations
£m
Central
Services1
£m
35.0
0.2
35.2
4.8
(0.8)
19.7
23.7
---
---
---
---
---
---
---
0.6
0.1
387
---
(0.7)
(0.7)
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
(28.9)
---
(0.9)
(29.8)
28.1
9.3
114.9
152.3
35.6
427.5
463.1
13.9
5.3
221
2019
Total
£m
974.1
---
974.1
87.5
(22.9)
15.4
80.0
605.0
486.3
114.9
1,206.2
237.9
427.5
665.4
58.9
35.5
7,998
1 Central Services includes executive and non-executive management, group finance, tax, treasury, legal, group assurance, human resources, information technology, corporate development, investor
relations and other services provided centrally to support the operating segments.
2 The unallocated assets relate to income and deferred tax assets, retirement benefit assets, derivatives, short-term investments, loan receivables 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.
Continuing operations' net finance expense of £15.7m (2019: £14.5m) and income tax credit of £0.3m (2019: expense of £24.3m) cannot be
meaningfully allocated by segment.
No customer accounted for more than 10% of revenue in either 2020 or 2019. Analysed by destination, revenue to Europe & Africa is £443.2m
(2019: £481.0m), revenue to Americas is £277.2m (2019: £296.4m) and revenue to Asia and Middle East is £176.1m (2019: £196.7m). Revenue
to the UK is £81.5m (2019: £97.2m), with other significant countries being the USA with revenue of £210.4m (2019: £221.0m), Ireland £49.5m
(2019: £50.9m) and Germany £48.9m (2019: £52.5m). Non-current assets in the UK total £167.9m (2019: £166.8m), with the other significant
location being the USA with £321.6m (2019: £293.6m).
F
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A
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M
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S
1166
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
1177
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
168 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
2. Net operating expense
Changes in inventories of finished goods and work-in-progress
Raw materials and consumables
Personnel expense1 (note 5)
Depreciation of property, plant and equipment
Loss/(profit) on sale of property, plant and equipment
Depreciation of lease right-of-use assets
Amortisation of intangible assets
Adjusting items1
Exchange differences recognised in profit or loss
Other operating expenses
Net operating expenses
2020
£m
9.1
368.5
271.8
37.6
0.2
12.0
25.2
17.7
---
132.7
874.8
2019
£m
3.9
401.9
287.1
35.5
(0.2)
11.3
23.8
(15.4)
(0.3)
146.5
894.1
1 In addition to the above, the following items were included within adjusting items: personnel expenses totalling £1.5m (2019: £2.9m); and a pension curtailment credit of £0.4m (2019: £nil).
No income or expense (2019: £nil) was recognised in operating expense during the year in respect of ineffective cash flow hedges. Essentra’s
hedges of net investments were also entirely effective in 2020 and 2019, and therefore no hedge ineffectiveness has been recognised in net
operating expense in 2020 (2019: £nil). Research and development expenses (including relevant staff costs) charged to profit or loss during the
year amounted to £3.2m (2019: £3.6m). Other operating expenses include manufacturing, selling, general and administrative overheads.
Adjusting items
Losses/(gains) and transaction costs relating to acquisitions and disposals of businesses1
Acquisition integration and restructuring costs2
Other3
Adjusting items
2020
£m
5.7
0.5
11.5
17.7
2019
£m
(15.9)
0.7
(0.2)
(15.4)
Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence (considered for each operating segment).
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 the impact of 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 other items which are non-recurring
or one-off in nature (such as the costs of fundamental strategic review and reorganisation). Operating profit before adjusting items and acquired
intangible amortisation is called adjusted operating profit, which forms the primary basis of management’s review and assessment of operational
performance of the Group’s businesses.
The previous description "exceptional and other adjusting items" has been changed to "adjusting items", whilst its scope and definition
remains unchanged.
1 Losses/gains and transaction costs relating to acquisitions and disposals of businesses are made up of £0.3m gain relating to a VAT refund on
the costs of a previous business disposal, £0.1m consisting of acquisition related costs in relation to Innovative Components, £0.1m costs incurred
in establishing the China JV and £1.2m costs incurred in acquiring 3C! Packaging, Inc. ("3C!"). The remaining £4.6m cost relates to external
professional costs associated with certain corporate development activities during the year.
In 2019 there was a £8.9m gain on the disposal of Pipe Protection Technology, £14.9m gain on disposal of Speciality Tapes, offset by a £3.0m loss
on disposal of the Extrusion business, £1.3m loss on disposal of the Card Solutions business, £1.5m costs incurred in establishing the Filters China
joint venture, £0.1m costs incurred in acquiring non-controlling interest of Dubai, £0.9m costs incurred acquiring Innovative Components, and
£0.8m costs incurred acquiring Nekicesa. The remaining £0.3m related to costs incurred in pursuit of acquisition targets.
2 Acquisition integration and restructuring costs relates to £0.3m of costs incurred in the integration of Nekicesa, acquired in 2019, and 3C!,
acquired in 2020, into the existing business. Remaining £0.2m was incurred as a result of restructuring activities within the Filters division as a
result of the integration of the newly established Filters China joint venture into the existing business.
In 2019, acquisition integration and restructuring costs related to the integration of; Hertila, acquired in 2018, Innovative Components, acquired
in 2019, and Nekicesa, acquired in 2019, into the existing business. Included within the total is £0.1m credit relating to a release of Micro Plastics
integration costs accrued.
1188
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
2. Net operating expense
Changes in inventories of finished goods and work-in-progress
Raw materials and consumables
Personnel expense1 (note 5)
Depreciation of property, plant and equipment
Loss/(profit) on sale of property, plant and equipment
Depreciation of lease right-of-use assets
Amortisation of intangible assets
Adjusting items1
Exchange differences recognised in profit or loss
Other operating expenses
Net operating expenses
1 In addition to the above, the following items were included within adjusting items: personnel expenses totalling £1.5m (2019: £2.9m); and a pension curtailment credit of £0.4m (2019: £nil).
No income or expense (2019: £nil) was recognised in operating expense during the year in respect of ineffective cash flow hedges. Essentra’s
hedges of net investments were also entirely effective in 2020 and 2019, and therefore no hedge ineffectiveness has been recognised in net
operating expense in 2020 (2019: £nil). Research and development expenses (including relevant staff costs) charged to profit or loss during the
year amounted to £3.2m (2019: £3.6m). Other operating expenses include manufacturing, selling, general and administrative overheads.
Adjusting items
Other3
Adjusting items
Losses/(gains) and transaction costs relating to acquisitions and disposals of businesses1
Acquisition integration and restructuring costs2
Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence (considered for each operating segment).
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 the impact of 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 other items which are non-recurring
or one-off in nature (such as the costs of fundamental strategic review and reorganisation). Operating profit before adjusting items and acquired
intangible amortisation is called adjusted operating profit, which forms the primary basis of management’s review and assessment of operational
performance of the Group’s businesses.
remains unchanged.
The previous description "exceptional and other adjusting items" has been changed to "adjusting items", whilst its scope and definition
in establishing the China JV and £1.2m costs incurred in acquiring 3C! Packaging, Inc. ("3C!"). The remaining £4.6m cost relates to external
professional costs associated with certain corporate development activities during the year.
In 2019 there was a £8.9m gain on the disposal of Pipe Protection Technology, £14.9m gain on disposal of Speciality Tapes, offset by a £3.0m loss
on disposal of the Extrusion business, £1.3m loss on disposal of the Card Solutions business, £1.5m costs incurred in establishing the Filters China
joint venture, £0.1m costs incurred in acquiring non-controlling interest of Dubai, £0.9m costs incurred acquiring Innovative Components, and
£0.8m costs incurred acquiring Nekicesa. The remaining £0.3m related to costs incurred in pursuit of acquisition targets.
2 Acquisition integration and restructuring costs relates to £0.3m of costs incurred in the integration of Nekicesa, acquired in 2019, and 3C!,
acquired in 2020, into the existing business. Remaining £0.2m was incurred as a result of restructuring activities within the Filters division as a
result of the integration of the newly established Filters China joint venture into the existing business.
In 2019, acquisition integration and restructuring costs related to the integration of; Hertila, acquired in 2018, Innovative Components, acquired
in 2019, and Nekicesa, acquired in 2019, into the existing business. Included within the total is £0.1m credit relating to a release of Micro Plastics
integration costs accrued.
FINANCIAL STATEMENTS 169
2020
£m
9.1
368.5
271.8
37.6
0.2
12.0
25.2
17.7
---
132.7
874.8
2020
£m
5.7
0.5
11.5
17.7
2019
£m
3.9
401.9
287.1
35.5
(0.2)
11.3
23.8
(15.4)
(0.3)
146.5
894.1
2019
£m
(15.9)
0.7
(0.2)
(15.4)
2. Net operating expense continued
3 Other adjusting items in 2020 of £11.5m relate to:
• £7.6m costs relating to restructuring activities within the Packaging division. These relate to costs incurred in the re-evaluation of the divisional
footprint, which resulted in the announced closure of manufacturing facilities in Portsmouth, UK, and Moorestown, USA, as well as additional
workforce rationalisation costs.
• £2.1m of cost in relation to restructuring activities within the Components Europe business following a review of the operational footprint of the
region. This comprises £0.6m costs incurred in the transfer of manufacturing activities out of Åstorp, Sweden into Barcelona and £1.5m incurred
on moving the warehousing capabilities of certain central northern European (Bergeijk in the Netherlands, Geretsried in Germany and Bratislava
in Slovakia) into the newly established North European Distribution Hub in Nettetal, Germany.
• £2.5m of cost in relation to restructuring activities within the Components Americas business following a review of the operational footprint of
the region. The review has resulted in the announcement of closures of manufacturing sites in Schaumburg, Illinois, and Melbourne, Arkansas
and the transfer of production to the Components site to Flippin, Arkansas, as well as the exit of three smaller warehousing and distribution
express sites in Edison in New Jersey, Elgin in Illinois and Los Angeles in California.
• £1.2m credit in relation to the review of the compliance of certain group companies' export activities with US laws, as previously disclosed in the
2019 Annual Report. This comprises £0.2m of external advisory and consultancy costs, offset by a £1.4m release of excess provision held for
potential penalties in relation to this activity as the Company does not anticipate any significant enforcement action.
• £0.5m of external advisory costs in relation to a strategic review of the Group’s operational structure and cost profile, following the significant
structural changes in recent years.
Other adjusting items in 2019 of £0.2m relate to:
• £6.2m credit relating to the release of onerous lease liabilities, originally provided for as part of the closure of the Newport Cartons business in
2017, as a result of lease surrender being agreed with the lessor.
• £2.9m credit relating to the release of excess restructuring and closure provisions relating to the closure of the Largo and Kilmarnock sites within
the Packaging division and Speciality Tapes business at Nottingham within the now dissolved Specialist Components division.
• £0.6m cost in relation to the restructure of the Group Finance function. The programme represents an initiative to streamline and restructure the
Finance function, in line with managements' vision of the future of the Finance function.
• £7.5m of cost in relation to a review of the compliance of certain group companies’ export activities, as previously disclosed in the 2019 Annual
Report which included £3.2m of external advisory and consultancy costs involved in investigations conducted by the Group and £0.4m of costs of
external resources for direct remediation actions were incurred. As a result of impact on trading transactions with certain customers, impairment
losses of certain related assets (inventories, trade receivable and property, plant and equipment) amounting to £1.6m were also recognised.
• £0.7m restructuring cost relating to personnel within the now dissolved Specialist Components division not retained within the business.
• £0.1m in relation to Filters restructuring.
The tax effect of the adjusting items is a credit of £4.1m (2019: charge of £14.9m).
Auditor’s remuneration
F
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1 Losses/gains and transaction costs relating to acquisitions and disposals of businesses are made up of £0.3m gain relating to a VAT refund on
Audit of these financial statements
the costs of a previous business disposal, £0.1m consisting of acquisition related costs in relation to Innovative Components, £0.1m costs incurred
Amounts receivable by the Company's auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company
Audit-related assurance services1
2020
£m
0.2
2.0
0.2
2.4
2019
£m
0.2
1.6
0.2
2.0
1 These mainly relate to review of the half year financial statements. In addition, non-audit services primarily relating to tax compliance services required by law outside EU for which fees in the year
total less than £0.05m (2019: less than £0.05m).
1188
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
1199
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
170 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
3. Net finance expense
Finance income
Bank deposits
Other finance income
Net interest on net pension scheme assets (note 18)
Finance expense
Interest on loans and overdrafts
Amortisation of bank facility fees
Other finance expense
Net interest on net pension scheme liabilities (note 18)
Interest on leases
Net finance expense
4. Income tax
Amounts recognised in the consolidated income statement
Current tax
Prior years' tax
Deferred tax (note 16)
Prior years' deferred tax (note 16)
Income tax (credit)/expense
Amounts recognised in the consolidated statement of comprehensive income
Deferred tax credit on remeasurement of defined benefit pension schemes
Income tax expense/(credit) in respect of foreign exchange
Income tax credit
2020
£m
0.8
0.8
0.3
1.9
(11.1)
(0.7)
(2.4)
(1.0)
(2.4)
(17.6)
(15.7)
2020
£m
5.9
0.5
(6.9)
0.2
(0.3)
(2.1)
0.5
(1.6)
2019
£m
0.8
0.8
0.5
2.1
(12.2)
(0.8)
(0.3)
(1.2)
(2.1)
(16.6)
(14.5)
2019
£m
19.9
(0.4)
4.6
0.2
24.3
(1.0)
(1.6)
(2.6)
2200
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
Finance income
Bank deposits
Other finance income
Net interest on net pension scheme assets (note 18)
Finance expense
Interest on loans and overdrafts
Amortisation of bank facility fees
Other finance expense
Net interest on net pension scheme liabilities (note 18)
Interest on leases
Net finance expense
4. Income tax
Amounts recognised in the consolidated income statement
Current tax
Prior years' tax
Deferred tax (note 16)
Prior years' deferred tax (note 16)
Income tax (credit)/expense
Amounts recognised in the consolidated statement of comprehensive income
Deferred tax credit on remeasurement of defined benefit pension schemes
Income tax expense/(credit) in respect of foreign exchange
Income tax credit
2020
£m
0.8
0.8
0.3
1.9
(11.1)
(0.7)
(2.4)
(1.0)
(2.4)
(17.6)
(15.7)
2020
£m
5.9
0.5
(6.9)
0.2
(0.3)
(2.1)
0.5
(1.6)
2019
£m
0.8
0.8
0.5
2.1
(12.2)
(0.8)
(0.3)
(1.2)
(2.1)
(16.6)
(14.5)
2019
£m
19.9
(0.4)
4.6
0.2
24.3
(1.0)
(1.6)
(2.6)
3. Net finance expense
4. Income tax continued
FINANCIAL STATEMENTS 171
Factors affecting income tax for the year
Essentra operates in many countries and is subject to income tax in many different jurisdictions (the most significant jurisdictions being the UK,
US, Singapore, Hungary, Thailand and Indonesia). Essentra has previously calculated an average expected tax rate as a weighted average of the
applicable corporate income tax rates in the tax jurisdictions in which it operates. To enable a simpler comparison between years, Essentra has used
the UK statutory tax rate of 19% (2019: 19%) to show an expected tax expense/(credit) and the effects of the items which create variances.
The 2019 comparative reconciliation below has been represented to use the UK statutory tax rate.
Profit before income tax
Tax at UK statutory rate of 19.0% (2019: 19.0%)
Effects of:
Permanent disallowable items (including adjusting items)
Disposal of entities
Overseas state and local tax
Unrecognised tax attributes utilised1
Adjustments in respect of prior years
Withholding tax (including on unremitted earnings)
Change in tax rates2
Difference between UK and overseas tax rates3
Income tax (credit)/expense
2020
£m
6.0
1.1
(1.0)
---
0.6
(0.8)
0.7
2.9
(1.6)
(2.2)
(0.3)
2019
£m
65.5
12.4
5.3
8.8
(0.4)
(1.4)
(0.2)
1.0
0.3
(1.5)
24.3
Income tax expense in the UK is £1.9m (2019: £1.4m). The tax effect on exceptional items is included within note 2.
1 See further information regarding deferred tax asset recognition at note 16.
2 This reflects the impact of differences in substantively enacted, or enacted corporate tax rates, for future periods to those of the current period.
3 This reflects the impact of different tax rates in the jurisdictions in which Essentra operates by reference to the UK statutory rate. This impact may vary in future years due to changes in overseas tax
rates or Essentra's geographical profit split.
5. Personnel expense
Wages and salaries
Social security expense
Pension expense (note 18)
Share option expense (note 18)
Total personnel expense
2020
£m
236.8
24.5
9.3
1.2
271.8
In addition to the above, the following items were included within adjusting items: personnel expenses totalling £1.5m (2019: £2.9m); and
a pension curtailment credit of £0.4m (2019: £nil). The Report of the Remuneration Committee on pages 132 to 143 sets out information
on Directors’ remuneration.
Key management remuneration
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination benefits
2020
£m
3.4
0.5
1.1
---
5.0
Essentra considers key management personnel to be the Directors and the members of the Group Management Committee. The amounts
disclosed are on the same basis as those used to determine the relevant amounts disclosed in the Annual Report on Remuneration.
F
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A
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I
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A
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S
2019
£m
247.5
26.0
9.7
3.9
287.1
2019
£m
5.6
0.8
2.3
0.3
9.0
2200
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
2211
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
172 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
6. Earnings per share
Earnings
Earnings attributable to equity holders of Essentra plc
Adjustments
Amortisation of acquired intangible assets
Adjusting items
Tax (charge)/relief on adjustments
Adjusted earnings
Weighted average number of shares
Basic weighted average ordinary shares outstanding (million)
Dilutive effect of employee share option plans (million)
Diluted weighted average ordinary shares (million)
Earnings per share (pence)
Basic earnings per share
Adjustment
Basic adjusted earnings per share
Diluted earnings per share
Diluted adjusted earnings per share
2020
£m
2019
£m
4.5
38.4
22.6
17.7
40.3
(9.2)
35.6
272.7
2.0
274.7
1.7p
11.4p
13.1p
1.6p
13.0p
22.9
(15.4)
7.5
9.8
55.7
262.0
3.6
265.6
14.7p
6.6p
21.3p
14.5p
21.0p
Adjusted earnings per share is provided to reflect the underlying earnings performance of Essentra.
The basic weighted average number of ordinary shares in issue excludes shares held in treasury and shares held by an employee benefit trust.
7. Property, plant and equipment
Cost
Beginning of year
Acquisitions (note 23)
Additions
Disposals
Transfers
Currency translation
End of year
Accumulated depreciation and impairment
Beginning of year
Charge in period
Disposals
Impairment
Currency translation
End of year
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
81.9
1.5
2.2
(0.7)
---
(0.1)
84.8
13.4
3.7
(0.5)
0.2
0.4
17.2
384.8
4.9
18.9
(14.5)
---
(6.9)
387.2
215.4
25.5
(14.2)
1.7
(2.4)
226.0
78.9
0.3
6.8
(4.2)
(1.9)
(0.6)
79.3
40.8
8.4
(4.1)
0.1
(0.1)
45.1
2020
Total
£m
545.6
6.7
27.9
(19.4)
(1.9)
(7.6)
551.3
269.6
37.6
(18.8)
2.0
(2.1)
288.3
Net book value at end of year
67.6
161.2
34.2
263.0
2222
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
6. Earnings per share
7. Property, plant and equipment continued
Cost
Beginning of year
Acquisitions
Business disposals
Additions
Disposals
Transfers
Currency translation
End of year
Accumulated depreciation and impairment
Beginning of year
Business disposals
Charge in period
Disposals
Transfers
Impairment
Currency translation
End of year
FINANCIAL STATEMENTS 173
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
89.9
10.6
(18.0)
4.5
(1.7)
0.2
(3.6)
81.9
20.9
(7.6)
2.7
(1.2)
---
---
(1.4)
13.4
409.3
3.1
(33.8)
33.2
(13.3)
(1.5)
(12.2)
384.8
232.6
(22.2)
24.5
(11.4)
---
0.2
(8.3)
215.4
77.7
0.3
(2.3)
11.8
(5.6)
(1.7)
(1.3)
78.9
41.2
(2.0)
8.3
(5.6)
(0.5)
0.5
(1.1)
40.8
2019
Total
£m
576.9
14.0
(54.1)
49.5
(20.6)
(3.0)
(17.1)
545.6
294.7
(31.8)
35.5
(18.2)
(0.5)
0.7
(10.8)
269.6
Net book value at end of year
68.5
169.4
38.1
276.0
Included within land and buildings, plant and machinery and fixtures, fittings and equipment are assets in the course of construction of £2.1m
(2019: £14.2m) which were not depreciated during the year.
Contractual commitments to purchase property, plant and equipment amounted to £1.4m at 31 December 2020 (2019: £2.0m).
During the year property, plant and equipment with a net book value of £2.5m was impaired by £2.0m to a recoverable amount of £0.5m, which
represented fair value less cost to sell. £1.9m of this impairment relates to restructuring projects and has been charged to adjusting items.
F
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A
N
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T
A
T
E
M
E
N
T
S
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
Earnings
Adjustments
Adjusting items
Earnings attributable to equity holders of Essentra plc
Amortisation of acquired intangible assets
Tax (charge)/relief on adjustments
Adjusted earnings
Weighted average number of shares
Basic weighted average ordinary shares outstanding (million)
Dilutive effect of employee share option plans (million)
Diluted weighted average ordinary shares (million)
Earnings per share (pence)
Basic earnings per share
Adjustment
Basic adjusted earnings per share
Diluted earnings per share
Diluted adjusted earnings per share
2020
£m
2019
£m
4.5
38.4
22.6
17.7
40.3
(9.2)
35.6
272.7
2.0
274.7
1.7p
11.4p
13.1p
1.6p
13.0p
78.9
0.3
6.8
(4.2)
(1.9)
(0.6)
79.3
40.8
8.4
(4.1)
0.1
(0.1)
45.1
22.9
(15.4)
7.5
9.8
55.7
262.0
3.6
265.6
14.7p
6.6p
21.3p
14.5p
21.0p
2020
Total
£m
545.6
6.7
27.9
(19.4)
(1.9)
(7.6)
551.3
269.6
37.6
(18.8)
2.0
(2.1)
288.3
Adjusted earnings per share is provided to reflect the underlying earnings performance of Essentra.
The basic weighted average number of ordinary shares in issue excludes shares held in treasury and shares held by an employee benefit trust.
7. Property, plant and equipment
Cost
Beginning of year
Acquisitions (note 23)
Additions
Disposals
Transfers
Currency translation
End of year
Beginning of year
Charge in period
Disposals
Impairment
Currency translation
End of year
Accumulated depreciation and impairment
Land and
buildings
£m
Plant and
Fixtures, fittings
machinery
and equipment
£m
£m
81.9
1.5
2.2
(0.7)
---
(0.1)
84.8
13.4
3.7
(0.5)
0.2
0.4
17.2
384.8
4.9
18.9
(14.5)
---
(6.9)
387.2
215.4
25.5
(14.2)
1.7
(2.4)
226.0
Net book value at end of year
67.6
161.2
34.2
263.0
2222
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
2233
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
174 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
8. Intangible assets
Cost
Beginning of year
Acquisitions (note 23)
Additions
Transfer
Currency translation
End of year
Amortisation and impairment
Beginning of year
Charge for the year
Currency translation
End of year
Goodwill
£m
Customer
relationships
£m
Other intangible
assets
£m
339.0
20.9
---
---
(3.9)
356.0
28.3
---
(0.5)
27.8
402.1
25.4
---
---
(3.1)
424.4
243.8
22.3
(1.8)
264.3
23.8
---
14.2
1.9
(0.2)
39.7
6.5
2.9
(0.2)
9.2
2020
Total
£m
764.9
46.3
14.2
1.9
(7.2)
820.1
278.6
25.2
(2.5)
301.3
Net book value at end of year
328.2
160.1
30.5
518.8
Goodwill
£m
Customer
relationships
£m
Other intangible
assets
£m
Cost
Beginning of year
Acquisitions
Business Disposals
Additions
Disposals
Transfer
Currency translation
End of year
Amortisation and impairment
Beginning of year
Business Disposals
Charge for the year
Transfer
Disposals
Currency translation
End of year
370.8
12.6
(34.5)
---
---
---
(9.9)
339.0
31.9
(3.0)
---
---
---
(0.6)
28.3
430.3
13.3
(27.0)
---
---
---
(14.5)
402.1
246.7
(17.6)
21.9
---
---
(7.2)
243.8
Net book value at end of year
310.7
158.3
17.1
0.7
---
10.5
(7.3)
3.0
(0.2)
23.8
11.4
---
1.9
0.5
(7.3)
---
6.5
17.3
2019
Total
£m
818.2
26.6
(61.5)
10.5
(7.3)
3.0
(24.6)
764.9
290.0
(20.6)
23.8
0.5
(7.3)
(7.8)
278.6
486.3
Included within other intangible assets are assets in the course of construction of £15.8m (2019: £9.8m) which were not amortised during the year.
Other intangible assets principally comprise trade names acquired with Reid Supply, developed technology acquired with Richco, order backlog,
software development and e-Commerce development costs.
2244
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
8. Intangible assets
Cost
Beginning of year
Acquisitions (note 23)
Additions
Transfer
Currency translation
End of year
Beginning of year
Charge for the year
Currency translation
End of year
Amortisation and impairment
Cost
Beginning of year
Acquisitions
Business Disposals
Additions
Disposals
Transfer
Currency translation
End of year
Amortisation and impairment
Beginning of year
Business Disposals
Charge for the year
Transfer
Disposals
Currency translation
End of year
Customer
Other intangible
Goodwill
relationships
£m
£m
assets
£m
Customer
Other intangible
Goodwill
£m
relationships
£m
assets
£m
339.0
20.9
---
---
(3.9)
356.0
28.3
---
(0.5)
27.8
370.8
12.6
(34.5)
---
---
---
(9.9)
339.0
31.9
(3.0)
---
---
---
(0.6)
28.3
402.1
25.4
---
---
(3.1)
424.4
243.8
22.3
(1.8)
264.3
430.3
13.3
(27.0)
---
---
---
(14.5)
402.1
246.7
(17.6)
21.9
---
---
(7.2)
243.8
2020
Total
£m
764.9
46.3
14.2
1.9
(7.2)
820.1
278.6
25.2
(2.5)
301.3
2019
Total
£m
818.2
26.6
(61.5)
10.5
(7.3)
3.0
(24.6)
764.9
290.0
(20.6)
23.8
0.5
(7.3)
(7.8)
278.6
486.3
23.8
---
14.2
1.9
(0.2)
39.7
6.5
2.9
(0.2)
9.2
17.1
0.7
---
10.5
(7.3)
3.0
(0.2)
23.8
11.4
---
1.9
0.5
(7.3)
---
6.5
17.3
FINANCIAL STATEMENTS 175
8. Intangible assets
continued
The e-Commerce development and software development costs were not acquired through a business combination, and their amortisation
is included within operating profit before amortisation of acquired intangibles and adjusting items.
The weighted average remaining useful lives of customer relationships and other intangible assets at the end of the year were 8.1 years
and 5.8 years (2019: 7.9 years and 6.3 years) respectively.
Essentra tests intangible assets annually for impairment, or more frequently if there are indications of impairment. A discounted cash flow analysis
is computed to compare the discounted estimated future operating cash flows to the net carrying value of the goodwill and other intangible
and tangible assets for each cash generating unit or group of cash generating units as appropriate.
Goodwill is allocated to groups of cash generating units, being the operating segments, as follows:
Net book value at end of year
328.2
160.1
30.5
518.8
Intangible assets, apart from goodwill, are allocated to the businesses to which they relate as shown below:
Components
Packaging
Filters
Business
Components --- Businesses of former Moss and Skiffy
Components --- Businesses of former Richco
Components --- Business of former Mesan
Components --- Business of former Abric
Components --- Business of former MicroPlastics
Components --- Industrial Supply
Components --- Innovative Components
Components --- e-Commerce development costs
Components --- other businesses
Packaging --- Americas
Packaging --- Asia
Packaging --- Europe
Packaging --- Nekicesa
Filters
No allocated to divisions --- software and development costs
Operating segment
Components
Components
Components
Components
Components
Components
Components
Components
Components
Packaging
Packaging
Packaging
Packaging
Filters
Central
Goodwill
2019
£m
98.5
190.5
21.7
310.7
2020
£m
95.3
211.2
21.7
328.2
Customer relationships and
other intangible assets
2020
£m
10.3
18.4
3.0
8.1
4.0
2.4
7.2
12.6
3.9
50.3
1.2
49.1
4.2
0.9
15.0
190.6
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
2019
£m
10.7
22.6
4.6
8.6
4.5
3.5
8.1
5.2
4.8
31.9
1.5
55.5
4.2
0.6
9.3
175.6
Net book value at end of year
310.7
158.3
Included within other intangible assets are assets in the course of construction of £15.8m (2019: £9.8m) which were not amortised during the year.
Other intangible assets principally comprise trade names acquired with Reid Supply, developed technology acquired with Richco, order backlog,
software development and e-Commerce development costs.
At 31 December 2020, management has performed an impairment review of the assets in each division. Following the impairment assessment,
no impairment loss was recognised in 2020.
The impairment assessment for intangible assets (excluding goodwill) and property, plant and equipment is performed on the cash generating
units within the divisions. The cash generating units are primarily the manufacturing sites. Goodwill is tested at the divisional level, which is the
level that management monitor goodwill at. The recoverable amount is estimated on the basis of value in use, i.e. discounted cash flow projection
expected to be generated by the group of cash generating units. For assets in the cash generating units assessed to be impaired, their fair value
less costs to sell is also considered in determining the impairment loss to be recognised, if any. In these cases, the fair value less costs to sell is based
on estimated market prices reflecting the age and condition of the asset.
2244
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
2255
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
176 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
8. Intangible assets continued
The impairment tests for goodwill and intangible assets are based on the business plan (the "Plan"). Cash flow projections are over five years using
the approved annual budget for the first year and subsequent years based on the Group's Strategic Plan. The Groups impairment test incorporates
the following assumptions:
• Impairment reviews take into account the impact of IFRS 16 in both the calculation of discounted cash flows and the asset base.
• The key assumptions in the cash flow projections for the Plan are the revenue growth and operating margin for each division. Operating margin
is primarily based on historical levels achieved, adjusted by targets set for revenue expansion and cost control and reduction for each individual
division within the Plan period. The key assumptions underlying the estimation of cash flow projections for value in use are operating profit
margin and revenue growth assumptions. The values assigned to these assumptions represent management’s assessment of market condition
and scope for cost and profitability improvement, taking into account realisable synergies resulting from integration activities. The compound
annual revenue growth rate assumption across all three divisions for the next five years ranges from 4.1% to 7.5%. The average operating profit
margin assumption for the next five years included within the Packaging division impairment assessment ranges from 8.3% to 11.3%. In respect
of Components and Filters, the combined average operating profit margin over the five year forecast period is assumed to improve by 260 bps
from 2020.
• In relation to the test for the Components and Filters divisions, cash flows beyond the first year of the model are based on the approved annual
budget with growth rates specific to each business applied to revenue of up to 7.8%.
• The estimated cash flows are discounted using a pre-tax discount rate based upon Essentra’s estimated post-tax weighted average cost of
capital of 7.3% (2019: 7.5%). The specific pre-tax discount rates applied for each group of cash generating units to which significant goodwill is
allocated are as follows: 8.8% for Packaging, 9.4% for Components and 9.7% for Filters (2019: 9.0% for Packaging, 9.7% for Components and
9.5% for Filters).
• In relation to the test for the Packaging division, management carried out a detailed assessment of the growth and profit margin assumptions
for each of the next four years after the Plan period, and applied a terminal growth rate of 1.5% p.a. (2019: 1.5%) subsequently. The growth
and profit margin assumptions are based on management’s assessment of market condition and scope for cost and profitability improvement,
taking into account realisable synergies following the recent integration and reorganisation activities.
The Packaging division impairment test has historically been the most sensitive to changes in assumptions, therefore management have
performed additional sensitivity analysis to assess the robustness of the current headroom the recoverable amount has above the carrying amount.
The following change to key assumptions will cause the carrying amount to exceed the recoverable amount in the Packaging division:
• An increase in discount rate of 300 basis points
• A reduction of 510 basis points in the operating profit margin in the terminal year
• A reduction of 410 basis points in the terminal growth rate
Management considered the following reasonably possible changes in the key assumptions, and the associated impact on the impairment
assessment, in relation to the Packaging division:
• A 1.0% increase in discount rate would reduce headroom to £143.8m
• A 1.0% reduction in the terminal growth rate would reduce headroom to £162.8m
• A 1.5% reduction in each year’s growth rate would reduce headroom to £218.9m
• A 2.0% reduction in operating profit margin in the terminal year would reduce headroom to £153.2m
2266
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
The impairment tests for goodwill and intangible assets are based on the business plan (the "Plan"). Cash flow projections are over five years using
the approved annual budget for the first year and subsequent years based on the Group's Strategic Plan. The Groups impairment test incorporates
the following assumptions:
• Impairment reviews take into account the impact of IFRS 16 in both the calculation of discounted cash flows and the asset base.
• The key assumptions in the cash flow projections for the Plan are the revenue growth and operating margin for each division. Operating margin
is primarily based on historical levels achieved, adjusted by targets set for revenue expansion and cost control and reduction for each individual
division within the Plan period. The key assumptions underlying the estimation of cash flow projections for value in use are operating profit
margin and revenue growth assumptions. The values assigned to these assumptions represent management’s assessment of market condition
and scope for cost and profitability improvement, taking into account realisable synergies resulting from integration activities. The compound
annual revenue growth rate assumption across all three divisions for the next five years ranges from 4.1% to 7.5%. The average operating profit
margin assumption for the next five years included within the Packaging division impairment assessment ranges from 8.3% to 11.3%. In respect
of Components and Filters, the combined average operating profit margin over the five year forecast period is assumed to improve by 260 bps
from 2020.
9.5% for Filters).
• In relation to the test for the Components and Filters divisions, cash flows beyond the first year of the model are based on the approved annual
budget with growth rates specific to each business applied to revenue of up to 7.8%.
• The estimated cash flows are discounted using a pre-tax discount rate based upon Essentra’s estimated post-tax weighted average cost of
capital of 7.3% (2019: 7.5%). The specific pre-tax discount rates applied for each group of cash generating units to which significant goodwill is
allocated are as follows: 8.8% for Packaging, 9.4% for Components and 9.7% for Filters (2019: 9.0% for Packaging, 9.7% for Components and
• In relation to the test for the Packaging division, management carried out a detailed assessment of the growth and profit margin assumptions
for each of the next four years after the Plan period, and applied a terminal growth rate of 1.5% p.a. (2019: 1.5%) subsequently. The growth
and profit margin assumptions are based on management’s assessment of market condition and scope for cost and profitability improvement,
taking into account realisable synergies following the recent integration and reorganisation activities.
The Packaging division impairment test has historically been the most sensitive to changes in assumptions, therefore management have
performed additional sensitivity analysis to assess the robustness of the current headroom the recoverable amount has above the carrying amount.
The following change to key assumptions will cause the carrying amount to exceed the recoverable amount in the Packaging division:
• An increase in discount rate of 300 basis points
• A reduction of 510 basis points in the operating profit margin in the terminal year
• A reduction of 410 basis points in the terminal growth rate
Management considered the following reasonably possible changes in the key assumptions, and the associated impact on the impairment
assessment, in relation to the Packaging division:
• A 1.0% increase in discount rate would reduce headroom to £143.8m
• A 1.0% reduction in the terminal growth rate would reduce headroom to £162.8m
• A 1.5% reduction in each year’s growth rate would reduce headroom to £218.9m
• A 2.0% reduction in operating profit margin in the terminal year would reduce headroom to £153.2m
8. Intangible assets continued
9. Lease right-of-use assets
Cost
Beginning of year
Additions
Terminations
Acquisitions (note 23)
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge for the year
Terminations
Impairment
Currency translation
End of year
Net book value at end of year
Cost
Beginning of year
Additions
Terminations
Acquisitions
Business disposals
Currency translation
End of year
Accumulated depreciation
Beginning of year
Charge for the year
Terminations
Business disposals
Currency translation
End of year
Net book value at end of year
FINANCIAL STATEMENTS 177
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
84.4
19.5
(2.5)
2.5
(1.9)
102.0
50.2
8.8
(2.3)
1.7
(0.7)
57.7
44.3
14.6
2.2
(2.9)
---
---
13.9
5.5
3.1
(2.9)
---
---
5.7
8.2
0.2
0.2
---
---
---
0.4
0.1
0.1
---
---
---
0.2
0.2
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
83.2
10.6
(4.4)
0.3
(2.6)
(2.7)
84.4
48.2
8.2
(2.9)
(1.6)
(1.7)
50.2
34.2
11.1
2.6
(2.0)
3.5
(0.2)
(0.4)
14.6
4.8
3.1
(2.0)
(0.2)
(0.2)
5.5
9.1
0.2
0.1
(0.1)
---
---
---
0.2
0.2
---
(0.1)
---
---
0.1
0.1
2020
Total
£m
99.2
21.9
(5.4)
2.5
(1.9)
116.3
55.8
12.0
(5.2)
1.7
(0.7)
63.6
52.7
2019
Total
£m
94.5
13.3
(6.5)
3.8
(2.8)
(3.1)
99.2
53.2
11.3
(5.0)
(1.8)
(1.9)
55.8
43.4
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
During the year lease right-of-use assets with a net book value of £2.7m was impaired to a net book value of £1.0m. This £1.7m impairment
charge related to site closures as disclosed in adjusting items section of note 2. The assets were written down to their recoverable amount,
which represents their fair value. Contractual commitments to lease property, plant and equipment amounted to £4.0m at 31 December 2020
(2019: £5.1m).
2266
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
2277
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
178 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
9. Lease right-of-use assets continued
The income statement shows the following amounts relating to leases:
Lease right-of-use asset depreciation
Interest expense (included in finance cost)
Exchange losses (included in finance cost)
Expense relating to short-term leases (included in cost of goods sold and administrative expenses)
Expense relating to leases of low-value assets that are not shown above as short-term leases
(included in operating expenses)
2020
£m
12.0
2.4
1.1
0.2
0.1
15.8
2019
£m
11.3
2.1
0.1
0.2
0.2
13.9
The lease expenses for short-term leases for the year ending 31 December 2021 is not expected to be materially different to the expense as
disclosed above.
The maturity analysis on the lease liabilities have been included within note 19. The total cash outflow for leases and analysis of movements in lease
liabilities are included within note 22.
For the year ended 31 December 2020 the weighted average lessee's incremental borrowing rate applied to the lease liabilities was 5.1%
(2019: 3.9%).
10. Inventories
Raw materials and consumables
Work-in-progress
Finished goods and goods held for resale
Inventories with a total value of £nil (2019: £0.9m) were written down in the year.
11. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
12. Cash and cash equivalents
Bank balances
Short-term bank deposits and investments
Cash and cash equivalents
2288
ESSENTRA PLC FINANCIAL REPORT 2020
2020
£m
44.5
10.7
47.4
102.6
2020
£m
131.8
15.3
7.1
154.2
2020
£m
121.5
14.3
135.8
2019
£m
45.9
9.9
57.3
113.1
2019
£m
140.0
16.4
10.5
166.9
2019
£m
62.6
7.8
70.4
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
The lease expenses for short-term leases for the year ending 31 December 2021 is not expected to be materially different to the expense as
The maturity analysis on the lease liabilities have been included within note 19. The total cash outflow for leases and analysis of movements in lease
For the year ended 31 December 2020 the weighted average lessee's incremental borrowing rate applied to the lease liabilities was 5.1%
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
9. Lease right-of-use assets continued
The income statement shows the following amounts relating to leases:
Lease right-of-use asset depreciation
Interest expense (included in finance cost)
Exchange losses (included in finance cost)
Expense relating to short-term leases (included in cost of goods sold and administrative expenses)
Expense relating to leases of low-value assets that are not shown above as short-term leases
(included in operating expenses)
disclosed above.
liabilities are included within note 22.
(2019: 3.9%).
10. Inventories
Raw materials and consumables
Work-in-progress
Finished goods and goods held for resale
Trade receivables
Other receivables
Prepayments and accrued income
12. Cash and cash equivalents
Bank balances
Short-term bank deposits and investments
Cash and cash equivalents
Inventories with a total value of £nil (2019: £0.9m) were written down in the year.
11. Trade and other receivables
2020
£m
12.0
2.4
1.1
0.2
0.1
15.8
2020
£m
44.5
10.7
47.4
102.6
2020
£m
131.8
15.3
7.1
154.2
2020
£m
121.5
14.3
135.8
2019
£m
11.3
2.1
0.1
0.2
0.2
13.9
2019
£m
45.9
9.9
57.3
113.1
2019
£m
140.0
16.4
10.5
166.9
2019
£m
62.6
7.8
70.4
13. Trade and other payables
Trade payables
Other tax and social security contributions
Other payables
Accruals and deferred income
Included within other tax and social security contributions are non-current liabilities of £2.2m (2019: £nil).
14. Interest bearing loans and borrowings
Non-current liabilities
Unsecured bank loans
US Private Placement Loan Notes
Current liabilities
Other unsecured loans
US Private Placement Loan Notes
FINANCIAL STATEMENTS 179
2020
£m
88.3
11.3
13.7
44.3
157.6
2019
£m
108.3
8.0
14.3
43.9
174.5
2020
£m
2019
£m
212.6
72.6
285.2
---
---
---
192.5
56.5
249.0
0.1
60.6
60.7
At 31 December 2020, the Group had £154.0m (2019: £135.0m), and €67.0m (2019: €70.0m) of unsecured bank loans drawn in sterling and euros
at floating rates of interest set by reference to LIBOR. Essentra’s $100.0m US Private Placement Loan Notes are at a weighted average interest rate
of 4.44% per annum (2019: 5.26%).
In April 2020, a $80m USPP loan note matured, and a new USPP facility of $25m was drawn (for which the note purchase agreement was signed
in December 2019), of which $15m matures in April 2027 and $10m in April 2030. In addition, $75m of USPP loan notes raised in prior years remain
in place, which mature between November 2024 and November 2029. The RCF is made up of two tranches, £285m and €100.8m. The maturity
of £225m of the overall borrowing under the RCF was extended on 11 January 2021 for a further year to November 2023, with the balance
remaining on the original terms with a maturity date of November 2022. At 31 December 2020 the available bank facilities totalled £375.0m,
of which £213.8m was drawn. Furthermore, a bridging loan facility for £50.0m was agreed by banks in February 2020, which was drawn and
subsequently fully repaid during the year.
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
The currency profile of the carrying and nominal values of Essentra's loans and borrowings is as follows:
Sterling
US dollar
Euro
Carrying
Value
£m
153.1
72.6
59.5
285.2
2020
Nominal
Value
£m
154.0
73.0
59.8
286.8
Carrying
Value
£m
133.7
117.1
58.9
309.7
2019
Nominal
Value
£m
135.0
117.4
59.4
311.8
The difference between the total nominal and carrying value of loans and borrowings relates to the amortised value of prepaid facility fees of £1.6m
(2019: £2.1m).
2288
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
2299
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
180 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
15. Derivatives
Essentra uses derivatives to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment
activities. In accordance with its Treasury policy, Essentra does not hold or issue derivatives for trading purposes.
At 31 December 2020
Derivatives held as cash flow hedges
Forward foreign exchange contracts
At 31 December 2019
Derivatives held as cash flow hedges
Forward foreign exchange contracts
Assets
Contractual
or notional
amounts
£m
17.4
17.4
Assets
Contractual
or notional
amounts
£m
27.0
27.0
Fair
Values
£m
0.3
0.3
Fair
Values
£m
0.8
0.8
Liabilities
Contractual
or notional
amounts
£m
12.3
12.3
Liabilities
Contractual
or notional
amounts
£m
16.5
16.5
Fair
Values
£m
0.5
0.5
Fair
Values
£m
0.3
0.3
Cash flow hedges are hedges of the currency risk exposure to variability in cash flows. They relate to trading transactions and interest payments
denominated in foreign currencies.
Hedges of net investments are hedges of the currency risk exposure to changes in the carrying value of net investments in foreign operations.
The net fair value gains or losses on open forward foreign exchange contracts that hedge foreign currency risk of anticipated future sales,
purchases and interest payments are accounted for as cash flow hedges. The fair value will be transferred to the consolidated income statement
when the forecast transactions occur. All of the hedged transactions are expected to occur over the next 12 months and all derivative instruments
mature within the next 12 months.
Essentra had US dollar and euro denominated borrowings which it designated as hedges of its net investments in subsidiary undertakings.
The exchange losses of £1.2m (2019: gains of £3.7m) on the US dollar borrowings and the losses of £3.2m (2019: gains of £3.9m) on the euro
borrowings were recognised in other comprehensive income. In addition, certain foreign exchange contracts were also designated as hedges
of the Group’s net investments in foreign operations.
Finance income and expense arising on financial assets and financial liabilities held at amortised cost are those amounts, excluding interest
on pension scheme assets and interest on pension scheme liabilities, detailed in note 3.
3300
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FINANCIAL STATEMENTS 181
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
15. Derivatives
At 31 December 2020
Derivatives held as cash flow hedges
Forward foreign exchange contracts
At 31 December 2019
Derivatives held as cash flow hedges
Forward foreign exchange contracts
Essentra uses derivatives to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment
Deferred tax assets and liabilities are attributable to the following:
activities. In accordance with its Treasury policy, Essentra does not hold or issue derivatives for trading purposes.
16. Deferred tax
Assets
Contractual
or notional
amounts
£m
17.4
17.4
Assets
Contractual
or notional
amounts
£m
27.0
27.0
Fair
Values
£m
0.3
0.3
Fair
Values
£m
0.8
0.8
Liabilities
Contractual
or notional
amounts
£m
12.3
12.3
Liabilities
Contractual
or notional
amounts
£m
16.5
16.5
Fair
Values
£m
0.5
0.5
Fair
Values
£m
0.3
0.3
2020
Income
Statement:
Charge/
(Credit)
£m
(1.8)
(3.5)
0.4
(1.8)
---
---
---
(6.7)
Net
£m
3.1
43.5
(8.8)
(9.1)
28.7
---
28.7
---
Assets
£m
(8.1)
---
(10.1)
(14.9)
(33.1)
19.5
(13.6)
---
Liabilities
£m
13.0
41.1
2.9
7.8
64.8
(19.5)
45.3
---
2019
Income
Statement:
Charge/
(Credit)
£m
2.5
(2.8)
0.3
4.8
---
---
---
4.8
Net
£m
4.9
41.1
(7.2)
(7.1)
31.7
---
31.7
---
Assets
£m
Liabilities
£m
(10.1)
---
(11.2)
(18.7)
(40.0)
23.2
(16.8)
---
13.2
43.5
2.4
9.6
68.7
(23.2)
45.5
---
Property, plant and equipment1
Intangible assets2
Employee benefits3
Other4
Tax (assets)/liabilities
Set off of tax
Net tax (assets)/liabilities
Total income statement charge/(credit)
1 A deferred tax liability arises on property, plant and equipment as the tax value of assets is lower than the corresponding accounting value. This arises as tax deductions are determined by the
applicable tax laws in each country the Group operates in whereas accounting depreciation is calculated in line with the Group's accounting policy.
2 A deferred tax liability is provided on temporary differences arising on the Group's intangible assets as in the majority of cases the local tax authorities do not allow deduction for amortisation of these
intangible assets. The movement during the period is due to the acquisition of the 3C! business offset by reducing intangible asset value from the amortisation charge for the year.
3 This represents deferred tax on the Group's defined benefit pension schemes and share-based incentives.
4 This includes expenditure that will be deductible in future periods for tax purposes when the amounts are settled in cash, tax losses expected to be utilised in future periods and withholding tax
on overseas earnings from Group companies expected to be remitted in the foreseeable future of £8.5m (2019: £6.2m).
Movements in the year:
Cash flow hedges are hedges of the currency risk exposure to variability in cash flows. They relate to trading transactions and interest payments
denominated in foreign currencies.
Hedges of net investments are hedges of the currency risk exposure to changes in the carrying value of net investments in foreign operations.
The net fair value gains or losses on open forward foreign exchange contracts that hedge foreign currency risk of anticipated future sales,
Beginning of the year
purchases and interest payments are accounted for as cash flow hedges. The fair value will be transferred to the consolidated income statement
(Credit)/charge to the income statement in respect of current year
when the forecast transactions occur. All of the hedged transactions are expected to occur over the next 12 months and all derivative instruments
Charge to the income statement in respect of prior years
Credit to other comprehensive income
Credit to reserves on share-based incentives
Reclassification --- IFRS 16 adjustment
Reclassification to current tax
Acquisitions & disposals
Currency translation
End of year
mature within the next 12 months.
Essentra had US dollar and euro denominated borrowings which it designated as hedges of its net investments in subsidiary undertakings.
The exchange losses of £1.2m (2019: gains of £3.7m) on the US dollar borrowings and the losses of £3.2m (2019: gains of £3.9m) on the euro
borrowings were recognised in other comprehensive income. In addition, certain foreign exchange contracts were also designated as hedges
of the Group’s net investments in foreign operations.
Finance income and expense arising on financial assets and financial liabilities held at amortised cost are those amounts, excluding interest
on pension scheme assets and interest on pension scheme liabilities, detailed in note 3.
2020
Total
Net
£m
31.7
(6.9)
0.2
(2.1)
(0.3)
---
---
6.9
(0.8)
28.7
2019
Total
Net
£m
35.7
4.6
0.2
(1.0)
(1.0)
(1.2)
(1.0)
(2.8)
(1.8)
31.7
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
As at 31 December 2020 it was expected that earnings from certain overseas Group companies will be remitted and a deferred tax liability of £8.5m
(2019: £6.2m) has been recognised accordingly. This represents withholding taxes payable on the remittance of these earnings under local tax laws.
The amount of temporary differences associated with investments in subsidiaries and branches for which deferred tax liabilities have not been
recognised is £94.0m as at 31 December 2020 (2019: £134.0m), and the associated amount of unrecognised deferred tax is £10.6m (2019: £15.2m).
Based on available information, management determined whether it is probable for some or all of the deferred tax assets to be recognised.
In determining this management considered the cumulative losses in prior years, the history of tax losses, the manner in which assets can be
used (including time limitations under local laws), future earnings potential and expectation of future reversal of taxable temporary differences.
Following management assessment, gross deferred tax assets of £0.2m (2019: £0.2m) in respect of capital losses and unutilised tax losses of
£26.8m (2019: £27.3m) have not been recognised as their realisation is not probable. The capital losses have an unlimited expiry date. The tax
losses expire as follows: £5.7m within 5 years, £0.2m in 5 --- 10 years, £nil in over 10 years and £20.9m with no expiry. If future conditions change the
amount of unrecognised deferred tax assets will be reassessed. This may impact the income tax expense/(credit) in the year of remeasurement.
It was announced in the UK Budget on 3 March 2021 that, if enacted, the UK corporation tax rate would increase to 25% with effect from 1 April
2023. The impact of this announcement in relation to deferred tax is being assessed and is not expected to be significant.
3300
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
3311
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
182 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
17. Provisions
Beginning of year
Business combinations
Provisions made during year
Provisions released during year
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Beginning of year
Impact on adoption of IFRS 16
Provisions made during year
Provisions released during year
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Reorganisation
£m
---
---
5.2
---
---
---
5.2
0.6
4.6
5.2
Other
£m
9.3
0.3
1.4
(1.7)
(0.9)
(0.1)
8.3
7.4
0.9
8.3
Reorganisation
£m
Other
£m
17.0
(7.6)
---
(8.2)
(1.0)
(0.2)
---
---
---
---
9.0
(1.7)
3.4
(1.3)
---
(0.1)
9.3
6.0
3.3
9.3
2020
Total
£m
9.3
0.3
6.6
(1.7)
(0.9)
(0.1)
13.5
8.0
5.5
13.5
2019
Total
£m
26.0
(9.3)
3.4
(9.5)
(1.0)
(0.3)
9.3
6.0
3.3
9.3
Reorganisation provisions are generally held against restructuring and redundancy costs, primarily related to the integration of acquired businesses
and restructuring associated with acquisitions. During the year £5.2m was provided under restructuring provisions in relation to site closures, further
detail of these closures can be found in note 2.
Other provisions relate primarily to non-lease contracts on vacant properties, lease dilapidations, employees' compensation claims, regulatory
claims and other claims.
Non-current provisions are generally provisions for non-lease service contracts on vacant properties and lease dilapidations which are expected to
be utilised within the next 10 years. The timing of the utilisation of the lease dilapidations assumes the business continues to operate based on the
most up to date business plan. The release of other provisions during the year relates mostly to claims and non-lease property-related provisions.
3322
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
17. Provisions
Beginning of year
Business combinations
Provisions made during year
Provisions released during year
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Beginning of year
Impact on adoption of IFRS 16
Provisions made during year
Provisions released during year
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Reorganisation
£m
Reorganisation
5.2
---
---
---
---
---
5.2
0.6
4.6
5.2
£m
17.0
(7.6)
---
(8.2)
(1.0)
(0.2)
---
---
---
---
Other
£m
9.3
0.3
1.4
(1.7)
(0.9)
(0.1)
8.3
7.4
0.9
8.3
Other
£m
9.0
(1.7)
3.4
(1.3)
---
(0.1)
9.3
6.0
3.3
9.3
2020
Total
£m
9.3
0.3
6.6
(1.7)
(0.9)
(0.1)
13.5
8.0
5.5
13.5
2019
Total
£m
26.0
(9.3)
3.4
(9.5)
(1.0)
(0.3)
9.3
6.0
3.3
9.3
FINANCIAL STATEMENTS 183
18. Employee benefits
Post-employment benefits
The Group operates a number of defined benefit and defined contribution pension schemes around the world covering many of its employees.
The Group also has a number of other post-employment obligations in certain countries, some of which are required under local law.
The defined benefit plans are administered by boards of trustees and the assets are held independently from Essentra. The boards of trustees
comprise member nominated trustees, employer nominated trustees and independent advisory trustees. The articles of the plans prohibit a
majority on the boards to be established by either the member or employer nominated trustees.
Pension costs of the defined benefit schemes are assessed in accordance with the advice of independent professionally qualified actuaries.
Full triennial actuarial valuations were carried out on the principal European defined benefit schemes as at 5 April 2018 and annual actuarial
valuations are performed on the principal US defined benefit schemes. The assets and liabilities of the defined benefit schemes have been updated
to the balance sheet date from the most recently completed actuarial valuations taking account of the investment returns achieved by the
schemes and the level of contributions.
The principal European defined benefit schemes entitle remaining members to a pension calculated on 1.25% or 2% of their capped final
pensionable pay multiplied by the number of pensionable years of service. Some members have historical entitlements to accrual rates of 1.67%-
1.9% and 3% for certain tranches of their service. The principal US defined benefit schemes entitle certain participating employees to annuity
benefits equal to 50% of final average pensionable salary, reduced for years of service less than 30, and other participating employees to annuity
benefits equal to $49 per month for each year of service.
The amounts included in the consolidated financial statements are as follows:
Amounts expensed against operating profit
Defined contribution schemes
Defined benefit schemes --- current service cost
Defined benefit schemes --- curtailment gain
Other post-employment obligations
Total operating expense
Amounts included as finance (income)/expense
Net interest on defined benefit scheme assets (note 3)
Net interest on defined benefit scheme liabilities (note 3)
Net finance expense
2020
£m
7.2
1.6
(0.4)
0.5
8.9
(0.3)
1.0
0.7
2019
£m
7.5
1.7
---
0.5
9.7
(0.5)
1.2
0.7
Amounts recognised in the consolidated statement of comprehensive income
Return on defined benefit scheme assets excluding amounts in net finance income
Impact of changes in assumptions and experience to the present value of defined benefit scheme liabilities
Remeasurement of defined benefit schemes
(32.4)
39.1
6.7
(29.6)
34.5
4.9
The defined benefit schemes’ curtailment gain of £0.4m (2019: £nil) has been included within adjusting items (see note 2).
During 2015, the principal defined benefit pension schemes in the UK and the US were closed to future accrual. Following the closure of the Group’s
principal defined benefit pension schemes to future accruals, the schemes are funded by the Group’s subsidiaries and employees are not required
to make any further contribution. The funding of these schemes is based on separate actuarial valuations for funding purposes for which the
assumptions may differ from those used in the valuation for IAS 19 purposes.
There has been a change to the methodology and assumptions relating to Retail Prices Index (RPI) and Consumer Prices Index (CPI) in 2020.
This was due to the Chancellor issuing a response to set out that RPI inflation will be aligned with CPIH inflation (CPI plus housing) by no later than
2030. As such, the actuary has derived the inflation assumption based on a ‘term-based’ curve approach, by weighing the Scheme’s projected
cash flows with the gilt-based RPI curve.
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
Reorganisation provisions are generally held against restructuring and redundancy costs, primarily related to the integration of acquired businesses
and restructuring associated with acquisitions. During the year £5.2m was provided under restructuring provisions in relation to site closures, further
detail of these closures can be found in note 2.
claims and other claims.
Other provisions relate primarily to non-lease contracts on vacant properties, lease dilapidations, employees' compensation claims, regulatory
Non-current provisions are generally provisions for non-lease service contracts on vacant properties and lease dilapidations which are expected to
be utilised within the next 10 years. The timing of the utilisation of the lease dilapidations assumes the business continues to operate based on the
most up to date business plan. The release of other provisions during the year relates mostly to claims and non-lease property-related provisions.
3322
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
3333
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
184 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
18. Employee benefits continued
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 are as follows:
Increase in salaries (pre-2010)1
Increase in salaries (post-2010)1
Increase in pensions1
at RPI capped at 5%
at CPI capped at 5%
at CPI minimum 3%, capped at 5%
at CPI capped at 2.5%
Discount rate
Inflation rate --- RPI
Inflation rate --- CPI
Europe
n/a
n/a
2.70%
2.20%
3.10%
1.90%
1.30%
2.70%
2.20%
2020
US
n/a
n/a
n/a
n/a
n/a
n/a
2.45%
n/a
n/a
Europe
n/a
n/a
2.90%
2.10%
3.10%
1.90%
2.10%
3.00%
2.10%
1 For service prior to April 2010, pension at retirement is linked to salary at retirement. For service after April 2010, pension is linked to salary at April 2010 with annual increases capped at 3%.
Due to the timescale covered, the assumptions applied may not be borne out in practice.
The life expectancy assumptions (in number of years) used to estimate defined benefit obligations at the year end are as follows:
Male retiring today at age 65
Female retiring today at age 65
Male retiring in 20 years at age 65
Female retiring in 20 years at age 65
Europe
22.5
24.3
23.8
25.7
2020
US
20.4
22.4
21.9
23.8
Europe
22.3
24.2
23.7
25.6
2019
US
n/a
n/a
n/a
n/a
n/a
n/a
3.15%
n/a
n/a
2019
US
20.6
22.6
22.2
24.1
The allocation of assets between different classes of investment is reviewed regularly and is a key factor in the trustees’ investment policies.
The allocation of assets is arrived at taking into consideration current market conditions and trends, the size of potential returns relative to
investment risk and the extent to which asset realisation needs to match liability maturity. There are risks underlying these considerations. If asset
returns fall below the returns required for scheme assets to match the present value of scheme liabilities, a scheme deficit results. Persistent deficits
represent an obligation the Group has to settle through increased cash contributions. If asset maturities are not properly matched with liability
maturities, there is also the risk that the Group could be required to make unplanned short-term cash contributions to resolve resulting liquidity
issues. Scheme assets are invested by the trustees in asset classes and markets that are considered to be reasonably liquid, so through this
matching liquidity risk is considered to be sufficiently mitigated.
The fair value of scheme assets, which are not intended to be realised in the short-term and may be subject to significant change before they are
realised, and the present value of the pension scheme liabilities, which are derived from cash flow projections over long periods and are therefore
inherently uncertain, are:
Equities
Bonds/LDI
Other
Fair value of scheme assets
Present value of scheme liabilities
Net retirement benefit assets/(obligations)
26%
74%
---
Europe
£m
67.1
189.8
0.6
257.5
(248.7)
8.8
61%
38%
1%
2020
Total
£m
100.5
210.2
1.3
312.0
US
£m
33.4
20.4
0.7
54.5
(83.3)
(28.8)
(332.0)
(20.0)
3344
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
18. Employee benefits continued
18. Employee benefits continued
The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 are as follows:
Equities
Bonds/LDI
Other
Fair value of scheme assets
Present value of scheme liabilities
Net retirement benefit assets/(obligations)
FINANCIAL STATEMENTS 185
27%
73%
---
Europe
£m
61.6
169.1
1.2
231.9
(218.5)
13.4
57%
43%
---
2019
Total
£m
93.3
193.0
1.5
287.8
(301.2)
(13.4)
US
£m
31.7
23.9
0.3
55.9
(82.7)
(26.8)
The equity, corporate bond and government bond assets are either direct investments or investments made via a managed fund for those asset
classes. All of these assets have a quoted market price in an active market. The other asset class relates primarily to property and hedge funds,
which are valued at their cumulative unit offer price. No direct investment in property is held. No plan assets are invested directly in the shares
of Essentra plc.
The pension surplus in Europe is not restricted as the asset is considered realisable on the basis of the Group’s unconditional right to a refund.
The average expected duration of the Group’s European defined benefit pension liability at 31 December 2020 is 19.0 years (2019: 18.0 years).
The average expected duration of the Group’s US defined benefit pension liability at 31 December 2020 is 12.7 years (2019: 12.4 years).
The Group’s contributions to its defined benefit pension schemes are determined in consultation with trustees, taking into consideration actuarial
advice, investment conditions and other local conditions and practices. The outcome of these consultations can impact the timing of future cash
flows. In 2021, the Group expects to make defined benefit contributions of $9.1m to its US schemes and £0.4m in respect of the Group’s
European schemes.
Movement in fair value of post-employment obligations during the year
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
Increase in salaries (pre-2010)1
Increase in salaries (post-2010)1
Increase in pensions1
at RPI capped at 5%
at CPI capped at 5%
at CPI minimum 3%, capped at 5%
at CPI capped at 2.5%
Discount rate
Inflation rate --- RPI
Inflation rate --- CPI
Male retiring today at age 65
Female retiring today at age 65
Male retiring in 20 years at age 65
Female retiring in 20 years at age 65
1 For service prior to April 2010, pension at retirement is linked to salary at retirement. For service after April 2010, pension is linked to salary at April 2010 with annual increases capped at 3%.
Due to the timescale covered, the assumptions applied may not be borne out in practice.
The life expectancy assumptions (in number of years) used to estimate defined benefit obligations at the year end are as follows:
2.45%
3.15%
Europe
n/a
n/a
2.70%
2.20%
3.10%
1.90%
1.30%
2.70%
2.20%
Europe
22.5
24.3
23.8
25.7
2020
US
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2020
US
20.4
22.4
21.9
23.8
Europe
n/a
n/a
2.90%
2.10%
3.10%
1.90%
2.10%
3.00%
2.10%
Europe
22.3
24.2
23.7
25.6
2019
US
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2019
US
20.6
22.6
22.2
24.1
The allocation of assets between different classes of investment is reviewed regularly and is a key factor in the trustees’ investment policies.
The allocation of assets is arrived at taking into consideration current market conditions and trends, the size of potential returns relative to
investment risk and the extent to which asset realisation needs to match liability maturity. There are risks underlying these considerations. If asset
returns fall below the returns required for scheme assets to match the present value of scheme liabilities, a scheme deficit results. Persistent deficits
represent an obligation the Group has to settle through increased cash contributions. If asset maturities are not properly matched with liability
maturities, there is also the risk that the Group could be required to make unplanned short-term cash contributions to resolve resulting liquidity
issues. Scheme assets are invested by the trustees in asset classes and markets that are considered to be reasonably liquid, so through this
matching liquidity risk is considered to be sufficiently mitigated.
The fair value of scheme assets, which are not intended to be realised in the short-term and may be subject to significant change before they are
realised, and the present value of the pension scheme liabilities, which are derived from cash flow projections over long periods and are therefore
inherently uncertain, are:
Equities
Bonds/LDI
Other
Fair value of scheme assets
Present value of scheme liabilities
Net retirement benefit assets/(obligations)
26%
74%
---
61%
38%
1%
Europe
£m
67.1
189.8
0.6
257.5
(248.7)
8.8
2020
Total
£m
100.5
210.2
1.3
312.0
US
£m
33.4
20.4
0.7
54.5
(83.3)
(28.8)
(332.0)
(20.0)
Beginning of year
Current service cost and
administrative expense
Past service cost
Employer contributions
Return on plan assets excluding
amounts in net finance income
Actuarial (losses)/gain arising from
change in financial assumptions
Actuarial gains arising from change
in demographic assumptions
Actuarial gains arising from
experience adjustment
Finance income/(expense)
Benefits paid
Curtailments
Currency translation
Business disposals
End of year
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
2020
2019
Defined
benefit
pension
scheme
assets
£m
Defined
benefit
pension
scheme
liabilities
£m
Other
£m
Total
£m
Defined
benefit
pension
scheme
assets
£m
Defined
benefit
pension
scheme
liabilities
£m
Other
£m
Total
£m
287.8
(301.2)
(4.0)
(17.4)
261.3
(272.2)
(3.0)
(13.9)
(1.6)
---
1.1
32.4
---
---
---
6.4
(12.0)
---
(2.1)
---
---
---
0.1
---
(0.5)
---
---
---
(2.1)
---
1.2
(1.7)
---
3.4
32.4
29.6
---
---
0.1
---
(0.5)
---
---
---
(2.2)
---
3.5
29.6
(39.0)
0.2
(38.8)
1.9
(2.2)
(6.9)
12.0
---
3.3
---
---
---
(0.2)
---
0.4
0.2
---
1.9
(2.2)
(0.7)
---
0.4
1.4
---
---
---
---
8.1
(11.2)
---
(1.7)
---
(38.1)
(0.2)
(38.3)
3.0
0.8
(8.6)
11.2
---
2.6
---
---
---
(0.2)
---
---
(0.1)
---
(4.0)
3.0
0.8
(0.7)
---
---
0.8
---
(17.4)
312.0
(332.0)
(3.9)
(23.9)
287.8
(301.2)
3344
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
3355
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
186 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
18. Employee benefits continued
Sensitivity
For the significant assumptions used in determining defined benefit costs and liabilities, the following sensitivity analysis gives the estimate of the
impact on the measurement of the scheme liabilities as at 31 December 2020.
0.5% decrease in the discount rate
1.0% increase in the rate of inflation
1.0% increase in rate of salary/pension increases
1 year increase in life expectancy
1 year decrease in life expectancy
0.5% increase in the discount rate
1.0% decrease in rate of salary/pension increases
1.0% decrease in the rate of inflation
(Increase)/decrease in schemes net liabilities
Europe
£m
(25.2)
(25.0)
n/a
(10.9)
11.0
22.0
n/a
18.9
US
£m
(5.4)
n/a
n/a
(2.8)
n/a
4.9
n/a
n/a
Total
£m
(30.6)
(25.0)
n/a
(13.7)
11.0
26.9
n/a
18.9
Share-based incentives
Essentra operates equity-settled share-based incentive plans for its Executive Directors and employees. The total expense in respect of these plans
during the year was £1.2m (2019: £4.4m), of which £nil (2019: £0.5m) in relation to senior management restructuring was included within adjusting
items. Details of these plans are set out below:
Share options outstanding
Weighted
average
exercise
price
Granted
during the
year
Weighted
average
exercise
price
Lapsed
during the
year
Weighted
average
exercise
price
Exercised
during the
year
Weighted
average
exercise
price
Weighted
average
exercise
price
Exercisable
at 31 Dec
2020
Weighted
average
exercise
price
At 31 Dec
2020
At 1 Jan
2020
2020
(228,071) 412.4p
(37,146)
236.9p
113,980 607.8p
113,980 607.8p
LTIP Part A
379,197
453.9p
LTIP Part B 6,105,729
DASB
423,385
---
---
---
---
246,117
SAYE 3-year
plan
SAYE 5-year
plan
US SAYE
2-year plan
851,995
357.7p
186,821
357.7p
81,363
365.6p
---
---
---
---
---
---
---
---
---
(1,791,808)
(8,542)
---
---
(137,101)
(31,298)
--- 4,176,820
--- 629,662
---
---
(336,740) 385.5p
(45,095) 385.1p
---
---
---
515,255 339.5p
---
141,726 349.0p
(43,028) 377.9p
(5,341)
163.3p
32,994 338.2p
---
---
---
---
---
8,028,490
246,117
(2,453,284)
(210,886)
5,610,437
113,980
SAYE 3-year
plan
SAYE 5-year
plan
US SAYE
2-year plan
Weighted
average
exercise
price
Granted
during the
year
Weighted
average
exercise
price
Lapsed
during the
year
Weighted
average
exercise
price
Exercised
during the
year
Weighted
average
exercise
price
Weighted
average
exercise
price
Exercisable
at 31 Dec
2019
Weighted
average
exercise
price
At 31 Dec
2019
At 1 Jan
2019
LTIP Part A
921,994
551.4p
---
LTIP Part B 4,347,600
DASB
223,038
--- 2,531,573
---
236,361
---
---
---
(369,927) 808.9p
(172,870)
214.2p
379,197 453.9p 379,197 453.9p
(768,837)
---
---
---
(4,607)
(36,014)
--- 6,105,729
---
423,385
---
---
---
1,143
555,730
430.7p
637,870
327.1p
(338,547) 419.4p
(3,058)
407.2p
851,995 357.7p
216,874
449.0p
175,269
327.1p
(205,322) 428.0p
108,332
372.2p
25,389
359.2p
(52,358) 375.6p
---
---
---
---
186,821 357.7p
81,363 365.6p
21,239 442.0p
6,373,568
3,606,462
(1,734,991)
(216,549)
8,028,490
401,579
3366
ESSENTRA PLC FINANCIAL REPORT 2020
---
---
---
---
---
2019
---
---
---
---
---
---
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
18. Employee benefits continued
Sensitivity
0.5% decrease in the discount rate
1.0% increase in the rate of inflation
1.0% increase in rate of salary/pension increases
1 year increase in life expectancy
1 year decrease in life expectancy
0.5% increase in the discount rate
1.0% decrease in rate of salary/pension increases
1.0% decrease in the rate of inflation
Share-based incentives
items. Details of these plans are set out below:
Share options outstanding
(Increase)/decrease in schemes net liabilities
Europe
£m
(25.2)
(25.0)
n/a
(10.9)
11.0
22.0
n/a
18.9
US
£m
(5.4)
n/a
n/a
(2.8)
n/a
4.9
n/a
n/a
Total
£m
(30.6)
(25.0)
n/a
(13.7)
11.0
26.9
n/a
18.9
2020
Weighted
average
exercise
price
---
---
---
---
---
---
---
2019
---
---
---
---
---
---
---
---
---
Essentra operates equity-settled share-based incentive plans for its Executive Directors and employees. The total expense in respect of these plans
during the year was £1.2m (2019: £4.4m), of which £nil (2019: £0.5m) in relation to senior management restructuring was included within adjusting
Weighted
average
exercise
price
Granted
during the
year
Weighted
average
exercise
price
Weighted
Lapsed
during the
average
exercise
Exercised
during the
year
price
year
Weighted
average
exercise
price
Weighted
average
Exercisable
At 31 Dec
exercise
at 31 Dec
2020
price
2020
At 1 Jan
2020
LTIP Part A
379,197
453.9p
(228,071) 412.4p
(37,146)
236.9p
113,980 607.8p
113,980 607.8p
LTIP Part B 6,105,729
DASB
423,385
---
---
246,117
(1,791,808)
(8,542)
---
---
(137,101)
(31,298)
--- 4,176,820
--- 629,662
---
---
851,995
357.7p
(336,740) 385.5p
---
515,255 339.5p
186,821
357.7p
(45,095) 385.1p
---
141,726 349.0p
---
---
2-year plan
81,363
365.6p
(43,028) 377.9p
(5,341)
163.3p
32,994 338.2p
8,028,490
246,117
(2,453,284)
(210,886)
5,610,437
113,980
Weighted
average
exercise
price
Granted
during the
year
Weighted
average
exercise
price
Lapsed
during the
year
Weighted
average
exercise
price
Exercised
during the
year
Weighted
average
exercise
price
Weighted
average
exercise
Exercisable
at 31 Dec
price
2019
Weighted
average
exercise
price
At 31 Dec
2019
At 1 Jan
2019
LTIP Part A
921,994
551.4p
---
(369,927) 808.9p
(172,870)
214.2p
379,197 453.9p 379,197 453.9p
LTIP Part B 4,347,600
DASB
223,038
--- 2,531,573
---
236,361
(768,837)
---
---
---
(4,607)
(36,014)
--- 6,105,729
---
423,385
---
---
---
1,143
555,730
430.7p
637,870
327.1p
(338,547) 419.4p
(3,058)
407.2p
851,995 357.7p
216,874
449.0p
175,269
327.1p
(205,322) 428.0p
186,821 357.7p
---
---
---
---
2-year plan
108,332
372.2p
25,389
359.2p
(52,358) 375.6p
81,363 365.6p
21,239 442.0p
6,373,568
3,606,462
(1,734,991)
(216,549)
8,028,490
401,579
SAYE 3-year
plan
plan
SAYE 5-year
US SAYE
SAYE 3-year
plan
plan
SAYE 5-year
US SAYE
---
---
---
---
---
---
---
---
---
---
---
---
---
---
For the significant assumptions used in determining defined benefit costs and liabilities, the following sensitivity analysis gives the estimate of the
impact on the measurement of the scheme liabilities as at 31 December 2020.
The weighted average share price at the date of exercise for options exercised during the year was 300.0p (2019: 408.5p). The following table
shows the weighted average fair value at the date of grant for options granted during the year:
18. Employee benefits continued
The exercise prices of options outstanding at the end of the year range from nil to 692.0p.
FINANCIAL STATEMENTS 187
Year ended 31 December 2020
Year ended 31 December 2019
LTIP
Part A
n/a
n/a
LTIP
Part B
n/a
295.5p
DASB
212.3p
346.4p
Fair value model inputs for cumulative share options awarded
SAYE
3 year
plan
n/a
100.1p
SAYE
3 year
plan
97.8p
417.5p
339.5p
40.2%
4.98%
0.75%
85.8%
SAYE
5 year
plan
n/a
82.7p
2020
SAYE
5 year
plan
83.8p
428.6p
420.0p
35.7%
4.90%
0.83%
90.7%
LTIP
Part A
127.5p
607.8p
607.8p
28.6%
2.00%
0.54%
86.5%
LTIP
Part B
293.5p
413.0p
---
32.9%
5.06%
0.54%
90.9%
DASB
301.4p
348.7p
---
36.4%
4.20%
0.49%
100.0%
3.07 years
3.00 years
3.00 years
Binomial
Monte Carlo
Binomial
3.17 years
Binomial
5.16 years
Binomial
LTIP
Part A
103.4p
453.9p
453.9p
33.7%
2.53%
0.88%
88.2%
LTIP
Part B
319.2p
441.9p
---
35.5%
4.77%
0.47%
90.0%
DASB
359.8p
418.3p
---
40.4%
4.96%
0.73%
100.0%
SAYE
3 year
plan
106.7p
441.4p
357.7p
40.5%
4.75%
0.65%
88.7%
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
2019
SAYE
5 year
plan
89.9p
443.4p
430.1p
35.5%
4.83%
0.83%
86.7%
3.20 years
3.00 years
3.00 years
Binomial
Monte Carlo
Binomial
3.10 years
Binomial
5.20 years
Binomial
Weighted average fair value at grant
Weighted average share price at grant
Weighted average exercise price
Weighted average volatility
Weighted average dividend yield
Weighted risk free rate
Expected employee retention rates
Expected term
Valuation model
Weighted average fair value at grant
Weighted average share price at grant
Weighted average exercise price
Weighted average volatility
Weighted average dividend yield
Weighted risk free rate
Expected employee retention rates
Expected term
Valuation model
Where relevant, market conditions are taken into account in determining the fair value of the awards at grant date. The three year average historic
volatility at grant date has been used as the volatility input for the LTIP Part A, LTIP Part B, DASB and SAYE 3 year awards, and the five year
average historic volatility at grant date has been used as the volatility input for the SAYE 5 year award.
Contractual life
LTIP
Part A
LTIP
Part B
3 --- 10 years
3 --- 6 years
DASB
3 years
2020 and 2019
SAYE
3 year
plan
SAYE
5 year
plan
3 years
5 years
Details of the vesting conditions of the LTIP Part A, LTIP Part B and DASB share option schemes are set out in the Report of the Remuneration
Committee on pages 132 to 143.
3366
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
3377
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
188 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
19. Financial risk management
Essentra’s activities expose the business to a number of key financial risks which have the potential to affect its ability to achieve its
business objectives.
The Board has overall responsibility for Essentra’s system of internal control and financial risk management and for reviewing the effectiveness
of this system. Such a system can only be designed to mitigate, rather than eliminate, the risk of failure to achieve business objectives and can
therefore only provide reasonable, and not absolute, assurance against material misstatement or loss.
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 underlying business activities.
No transactions of a speculative nature are undertaken. The Treasury function is subject to periodic independent reviews by the Group Assurance
function. 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.
The following describes Essentra’s financial risk exposure and management from a quantitative and qualitative perspective.
i) Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial asset or liability fails to meet its contractual obligations, and arises
principally from trade receivables and cash and cash equivalents. Essentra has no significant individual concentrations of credit risk. The following
is an overview of how Essentra manages its credit risk exposures.
Trade and other receivables
Essentra’s exposure to credit risk is driven by the profile of its customers. This is influenced by the demographics of the customer base, including the
industry and country in which customers operate.
Essentra monitors significant customers’ credit limits and recognises an impairment of trade receivables in specific instances where a customer’s
credit standing has deteriorated to the extent that a credit default is considered probable. Following implementation of IFRS 9, Essentra also
recognises an expected credit loss impairment of trade receivables through an accounting policy election, whereby default losses are expected for
each receivables ageing category as follows: Current: 0.5%, Overdue 1-30 days: 1%, Overdue 31-60 days: 5%, Overdue 61-90 days: 10%, Overdue
91-180 days: 25%, Overdue 181-360 days: 50% and Overdue over 360 days: 100%.
Trade receivables were assessed for impairment using the expected credit loss model which requires expected credit losses and changes to expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition.
As at 31 December 2020, gross trade receivables were £134.5m (2019: £145.3m) of which £25.3m (2019: £30.5m) were past due. The ageing
analysis of trade receivables is as follows:
1-60 days
61-180 days
181-360 days
360+ days
2020
£m
20.3
3.6
0.8
0.6
25.3
2019
£m
23.6
3.4
1.8
1.7
30.5
As at 31 December 2020, the combined specific and expected credit loss impairment of trade receivables was of £2.7m (2019: £5.3m). The analysis
of the combined impairment based on the underlying receivables is as follows:
Current
1-60 days
61-180 days
181-360 days
360+ days
3388
ESSENTRA PLC FINANCIAL REPORT 2020
2020
£m
0.5
0.4
0.6
0.6
0.6
2.7
2019
£m
0.6
0.4
0.8
1.8
1.7
5.3
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
Essentra’s activities expose the business to a number of key financial risks which have the potential to affect its ability to achieve its
The movement in the provision for impaired receivables is as follows:
19. Financial risk management continued
Beginning of year
Impaired receivables acquired
Impairment loss recognised
Business disposals
Utilisation
End of year
FINANCIAL STATEMENTS 189
2020
£m
5.3
(0.3)
0.4
---
(2.7)
2.7
2019
£m
6.6
(1.2)
1.3
(0.4)
(1.0)
5.3
On a periodic basis the Group undertakes the sale of certain trade receivables to banks using facilities set up by its customers. These trade
receivables are factored on a non-recourse basis and therefore are derecognised from the Group’s balance sheet at the point of sale to the bank.
The Group does not operate its own invoice discounting or factoring facilities. As at 31 December 2020, £6.1m was drawn under invoice discounting
facilities (2019: £1.6m), representing cash collected before it was contractually due from the customer.
Derivative assets
Credit risk with respect to derivatives is controlled by limiting transactions to major banking counterparties where internationally agreed standard
form documentation exists. The credit ratings of these counterparties are monitored regularly.
Cash and cash equivalents
Credit risk relating to cash and cash equivalents is monitored daily, on a counterparty by counterparty basis. The credit limits imposed specify
the maximum amount of cash which can be invested in, or with, any single counterparty. These limits are determined by geographic presence,
expertise and credit rating. Essentra monitors the credit ratings of counterparties.
The following credit risk table provides information regarding the credit risk exposure of Essentra by classifying derivative assets, short-term
investments and cash and cash equivalents according to credit ratings of the counterparties. AAA is the highest possible rating and all of the
assets are neither impaired nor past due.
Derivative assets
Short-term investments
Cash and cash equivalents
Derivative assets
Short-term investments
Cash and cash equivalents
AAA
£m
---
---
3.4
3.4
AAA
£m
---
---
4.4
4.4
AA
£m
---
---
1.7
1.7
AA
£m
0.1
---
1.6
1.7
A
£m
0.3
---
115.6
115.9
A
£m
0.7
---
51.5
52.2
BBB
£m
---
---
8.2
8.2
BBB
£m
---
0.6
9.8
10.4
BB
£m
---
---
5.1
5.1
BB
£m
---
---
1.5
1.5
Not rated
£m
---
---
1.8
1.8
Not rated
£m
---
---
1.6
1.6
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
2020
Total
£m
0.3
---
135.8
136.1
2019
Total
£m
0.8
0.6
70.4
71.8
Essentra’s maximum credit risk exposure is £287.9m (2019: £239.4m) and no collateral is held against this amount (2019: £nil).
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
19. Financial risk management
business objectives.
The Board has overall responsibility for Essentra’s system of internal control and financial risk management and for reviewing the effectiveness
of this system. Such a system can only be designed to mitigate, rather than eliminate, the risk of failure to achieve business objectives and can
therefore only provide reasonable, and not absolute, assurance against material misstatement or loss.
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 underlying business activities.
No transactions of a speculative nature are undertaken. The Treasury function is subject to periodic independent reviews by the Group Assurance
function. 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.
The following describes Essentra’s financial risk exposure and management from a quantitative and qualitative perspective.
i) Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial asset or liability fails to meet its contractual obligations, and arises
principally from trade receivables and cash and cash equivalents. Essentra has no significant individual concentrations of credit risk. The following
is an overview of how Essentra manages its credit risk exposures.
Trade and other receivables
industry and country in which customers operate.
Essentra’s exposure to credit risk is driven by the profile of its customers. This is influenced by the demographics of the customer base, including the
Essentra monitors significant customers’ credit limits and recognises an impairment of trade receivables in specific instances where a customer’s
credit standing has deteriorated to the extent that a credit default is considered probable. Following implementation of IFRS 9, Essentra also
recognises an expected credit loss impairment of trade receivables through an accounting policy election, whereby default losses are expected for
each receivables ageing category as follows: Current: 0.5%, Overdue 1-30 days: 1%, Overdue 31-60 days: 5%, Overdue 61-90 days: 10%, Overdue
91-180 days: 25%, Overdue 181-360 days: 50% and Overdue over 360 days: 100%.
Trade receivables were assessed for impairment using the expected credit loss model which requires expected credit losses and changes to expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition.
As at 31 December 2020, gross trade receivables were £134.5m (2019: £145.3m) of which £25.3m (2019: £30.5m) were past due. The ageing
analysis of trade receivables is as follows:
As at 31 December 2020, the combined specific and expected credit loss impairment of trade receivables was of £2.7m (2019: £5.3m). The analysis
of the combined impairment based on the underlying receivables is as follows:
2020
£m
20.3
3.6
0.8
0.6
25.3
2020
£m
0.5
0.4
0.6
0.6
0.6
2.7
2019
£m
23.6
3.4
1.8
1.7
30.5
2019
£m
0.6
0.4
0.8
1.8
1.7
5.3
1-60 days
61-180 days
181-360 days
360+ days
Current
1-60 days
61-180 days
181-360 days
360+ days
3388
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
3399
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
190 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
19. Financial risk management continued
ii) Market price risk
Market price risk is the risk that changes in foreign exchange rates and interest rates will affect income or the value of financial assets and liabilities.
Essentra has produced a sensitivity analysis that shows the estimated change to the income statement and equity of a 1%, 5% or 10% weakening
or strengthening in sterling against all other currencies or an increase or decrease of 50 basis points (‘‘bps’’), 100bps and 200bps in market interest
rates. The amounts generated from the sensitivity analysis are estimates and actual results in the future may materially differ.
Essentra is exposed to two types of market price risk: currency risk and interest rate risk.
a) Currency risk
Essentra publishes its consolidated financial statements in sterling but conducts business in several foreign currencies. Therefore it is subject to
currency risk due to exchange rate movements which affect the translation of results and underlying net assets of its operations and their
transaction costs.
Hedge of net investment in foreign operations
The majority of Essentra’s net assets are in currencies other than sterling. The Company’s normal policy is to limit 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. Essentra’s US dollar denominated assets were approximately 27% (2019: 46%) hedged by the US dollar denominated borrowings.
Essentra’s euro denominated assets were approximately 32% hedged by the euro denominated borrowings (2019: 32%).
Transaction exposure hedging
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.
Essentra does not formally define the proportion of highly probable forecast sales and purchases to hedge, but agrees an appropriate percentage
on an individual basis with each business by reference to the Group’s risk management policies and prevailing market conditions. The Group
documents currency derivatives used to hedge its forecast transactions as cash flow hedges. To the extent that cash flow hedges are effective,
gains and losses are recognised in other comprehensive income until the forecast transaction occurs, at which point the gains and losses are
transferred either to the income statement or to the non-financial asset acquired.
The following table shows Essentra’s sensitivity to a 1%, 5% and 10% weakening or strengthening in sterling against all currencies. To calculate the
impact on the income statement for the year all currencies’ average rates have been increased or decreased by 1%, 5% or 10%. The translational
effect on equity is limited as a proportion of US dollar and euro exposure is hedged. Accordingly the effect on equity is calculated by increasing or
decreasing the closing rate of all currencies with an adjustment for the movement in currency hedges. It is assumed that all net investment and
cash flow hedges will continue to be 100% effective. The sensitivity on profit before tax is calculated by increasing or decreasing the average rate
of all currencies.
Impact on the profit before tax --- gain/(loss)
Impact on equity --- gain/(loss)
Impact on the profit before tax --- gain/(loss)
Impact on equity --- gain/(loss)
Weakening in sterling
Strengthening in sterling
2020
5%
£m
0.1
31.4
1%
£m
---
6.0
10%
£m
(0.2)
(54.2)
5%
£m
(0.1)
(28.4)
1%
£m
---
(5.9)
2019
Weakening in sterling
Strengthening in sterling
5%
£m
2.8
27.9
1%
£m
0.5
5.4
10%
£m
(4.9)
(48.2)
5%
£m
(2.6)
(25.2)
1%
£m
(0.5)
(5.2)
10%
£m
0.3
66.3
10%
£m
6.0
58.9
A 1 cent change to the US dollar rate against sterling will impact the adjusted operating profit by £0.2m (2019: £0.3m). A 1 cent change to the euro
rate against sterling will impact the adjusted operating profit by £0.3m (2019: £0.4m).
4400
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
19. Financial risk management continued
ii) Market price risk
Market price risk is the risk that changes in foreign exchange rates and interest rates will affect income or the value of financial assets and liabilities.
Essentra has produced a sensitivity analysis that shows the estimated change to the income statement and equity of a 1%, 5% or 10% weakening
or strengthening in sterling against all other currencies or an increase or decrease of 50 basis points (‘‘bps’’), 100bps and 200bps in market interest
rates. The amounts generated from the sensitivity analysis are estimates and actual results in the future may materially differ.
Essentra is exposed to two types of market price risk: currency risk and interest rate risk.
a) Currency risk
transaction costs.
Essentra publishes its consolidated financial statements in sterling but conducts business in several foreign currencies. Therefore it is subject to
currency risk due to exchange rate movements which affect the translation of results and underlying net assets of its operations and their
Hedge of net investment in foreign operations
The majority of Essentra’s net assets are in currencies other than sterling. The Company’s normal policy is to limit 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. Essentra’s US dollar denominated assets were approximately 27% (2019: 46%) hedged by the US dollar denominated borrowings.
Essentra’s euro denominated assets were approximately 32% hedged by the euro denominated borrowings (2019: 32%).
Transaction exposure hedging
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.
Essentra does not formally define the proportion of highly probable forecast sales and purchases to hedge, but agrees an appropriate percentage
on an individual basis with each business by reference to the Group’s risk management policies and prevailing market conditions. The Group
documents currency derivatives used to hedge its forecast transactions as cash flow hedges. To the extent that cash flow hedges are effective,
gains and losses are recognised in other comprehensive income until the forecast transaction occurs, at which point the gains and losses are
transferred either to the income statement or to the non-financial asset acquired.
The following table shows Essentra’s sensitivity to a 1%, 5% and 10% weakening or strengthening in sterling against all currencies. To calculate the
impact on the income statement for the year all currencies’ average rates have been increased or decreased by 1%, 5% or 10%. The translational
effect on equity is limited as a proportion of US dollar and euro exposure is hedged. Accordingly the effect on equity is calculated by increasing or
decreasing the closing rate of all currencies with an adjustment for the movement in currency hedges. It is assumed that all net investment and
cash flow hedges will continue to be 100% effective. The sensitivity on profit before tax is calculated by increasing or decreasing the average rate
of all currencies.
Impact on the profit before tax --- gain/(loss)
Impact on equity --- gain/(loss)
Impact on the profit before tax --- gain/(loss)
Impact on equity --- gain/(loss)
Weakening in sterling
Strengthening in sterling
10%
£m
0.3
66.3
10%
£m
6.0
58.9
5%
£m
0.1
31.4
5%
£m
2.8
27.9
1%
£m
---
6.0
1%
£m
0.5
5.4
10%
£m
(0.2)
(54.2)
5%
£m
(0.1)
(28.4)
10%
£m
(4.9)
(48.2)
5%
£m
(2.6)
(25.2)
Weakening in sterling
Strengthening in sterling
2020
1%
£m
---
(5.9)
2019
1%
£m
(0.5)
(5.2)
A 1 cent change to the US dollar rate against sterling will impact the adjusted operating profit by £0.2m (2019: £0.3m). A 1 cent change to the euro
rate against sterling will impact the adjusted operating profit by £0.3m (2019: £0.4m).
FINANCIAL STATEMENTS 191
19. Financial risk management continued
b) Interest rate risk
Essentra’s strategy is to ensure that at least 30% of the total debt with maturities of more than one year is protected with fixed interest rates
or approved interest rate derivatives.
The following table shows Essentra’s sensitivity to a 50bps, 100bps and 200bps decrease or increase in sterling, US dollar and euro interest rates.
To calculate the impact on the income statement for the year, the interest rates on all external floating rate interest bearing loans and borrowings
have been increased or decreased by 50bps, 100bps or 200bps and the resulting increase or decrease in the net interest charge has been adjusted
for the effect of Essentra’s interest rate derivatives.
Decrease in interest rates
2020
Increase in interest rates
200bps
£m
100bps
£m
50bps
£m
200bps
£m
100bps
£m
50bps
£m
Impact on the income statement ---
gain/(loss)
5.1
2.6
1.3
(5.1)
(2.6)
(1.3)
Decrease in interest rates
2019
Increase in interest rates
200bps
£m
100bps
£m
50bps
£m
200bps
£m
100bps
£m
50bps
£m
Impact on the income statement ---
gain/(loss)
4.2
2.1
1.1
(4.2)
(2.1)
(1.1)
See note 14 for interest rate disclosure on loans and borrowings.
iii) Liquidity risk
Liquidity risk is the risk that Essentra, although solvent, will encounter difficulties in meeting obligations associated with financial liabilities that
are settled by delivering cash or another financial asset.
Essentra’s objective is to maintain a balance between continuity of funding and flexibility. Essentra is primarily funded by a series of US Private
Placement Loan Notes from various financial institutions totalling US$100m and syndicated multi-currency 5-year revolving credit facilities of
£285.0m and €100.8m from its banks. The series of Loan Notes have original maturities ranging from seven to twelve years. The maturity of £225m
of the overall borrowing under the RCF was extended on 11 January 2021 for a further year to November 2023, with the balance remaining on the
original terms with a maturity date of November 2022. At 31 December 2020 the available bank facilities totalled £375m, of which £213.8m was
drawn. In addition, uncommitted and overdraft facilities are maintained to provide short-term flexibility.
In April 2020, a $80m USPP loan note matured, and a new USPP facility of $25m was drawn (for which the note purchase agreement was signed
in December 2019), of which $15m matures in April 2027 and $10m in April 2030. Furthermore, a bridging loan facility for £50m was agreed by
banks in February 2020, which was drawn and subsequently fully repaid during the year.
Amounts drawn by Essentra on its committed facilities are subject to standard banking covenants. The financial covenants require the net debt
to EBITDA ratio to be less than 3.0x and interest cover to be greater than 3.5x. There has been no covenant breach during the period.
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
4400
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
4411
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
192 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
19. Financial risk management continued
Essentra’s available undrawn committed facilities at 31 December were:
Expiring before two years
Expiring after two years
2020
£m
161.2
---
2019
£m
---
176.1
Any loans drawn on these facilities would bear interest at floating rates with reference to LIBOR for the currency and period of the loan. The above
does not reflect the extension of £225m of the RCF facility agreed on 11 January 2021, as noted above.
The maturity of Essentra’s financial liabilities, including estimated interest payments, is analysed below:
Unsecured bank loans
US Private Placement Loan Notes
Derivative liabilities
Trade and other payables
Lease liabilities
Other unsecured loans
Deferred consideration
Unsecured bank loans
US Private Placement Loan Notes
Derivative liabilities
Trade and other payables
Lease liabilities
Other unsecured loans
Deferred consideration
Fair value
£m
Carrying
amount
£m
Contractual
cash flows
£m
213.8
78.5
0.5
143.1
61.0
---
4.4
212.6
72.6
0.5
143.1
61.0
---
4.4
219.9
95.9
0.5
143.1
73.1
---
4.4
<1 yr
£m
3.2
3.2
0.5
143.1
14.5
---
3.2
1-2 yrs
£m
216.7
3.2
---
---
11.7
---
---
501.3
494.2
536.9
167.7
231.6
2-5 yrs
£m
---
23.7
---
---
24.2
---
1.2
49.1
2020
>5 yrs
£m
---
65.8
---
---
22.7
---
---
88.5
Fair value
£m
Carrying
amount
£m
Contractual
cash flows
£m
194.3
121.1
0.3
166.5
50.7
0.1
4.3
192.5
117.1
0.3
166.5
50.7
0.1
4.3
204.5
139.7
0.3
166.5
57.2
0.1
4.3
<1 yr
£m
3.5
65.0
0.3
166.5
13.2
0.1
0.9
537.3
531.5
572.6
249.5
2019 (represented)
1-2 yrs
£m
3.5
2.6
---
---
10.9
---
2.2
19.2
2-5 yrs
£m
197.5
22.9
---
---
20.8
---
1.2
242.4
>5 yrs
£m
---
49.2
---
---
12.3
---
---
61.5
Total trade and other payables carried at £157.6m (2019: £174.5m) including other taxes and social security contributions of £11.3m (2019: £8.0m)
which are not financial liabilities and are therefore excluded from the above analysis. All trade and other payables are due to be settled in less than
six months.
The fair value of the unsecured bank loans is the same as the carrying amount as the loans are at floating rate, except for unamortised facility fees.
The fair value of the US Private Placement Loan Notes is estimated by discounting the future cash flows (interests and principal) at the prevailing
market rates. The fair value of the trade and other payables approximate the carrying amount as they are due to be settled within six months.
4422
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
Expiring before two years
Expiring after two years
Unsecured bank loans
US Private Placement Loan Notes
Derivative liabilities
Trade and other payables
Lease liabilities
Other unsecured loans
Deferred consideration
Unsecured bank loans
US Private Placement Loan Notes
Derivative liabilities
Trade and other payables
Lease liabilities
Other unsecured loans
Deferred consideration
19. Financial risk management continued
Essentra’s available undrawn committed facilities at 31 December were:
Any loans drawn on these facilities would bear interest at floating rates with reference to LIBOR for the currency and period of the loan. The above
does not reflect the extension of £225m of the RCF facility agreed on 11 January 2021, as noted above.
The maturity of Essentra’s financial liabilities, including estimated interest payments, is analysed below:
2020
£m
161.2
---
2-5 yrs
£m
---
---
---
24.2
---
1.2
49.1
2-5 yrs
£m
197.5
22.9
---
---
20.8
---
1.2
242.4
2019
£m
---
176.1
2020
>5 yrs
£m
---
---
---
---
---
22.7
88.5
>5 yrs
£m
49.2
---
---
---
---
---
12.3
61.5
23.7
65.8
2019 (represented)
Fair value
£m
213.8
78.5
0.5
143.1
61.0
---
4.4
Carrying
amount
Contractual
cash flows
£m
212.6
72.6
0.5
143.1
61.0
---
4.4
£m
219.9
95.9
0.5
143.1
73.1
---
4.4
501.3
494.2
536.9
167.7
231.6
Fair value
£m
Carrying
amount
£m
Contractual
cash flows
£m
194.3
121.1
0.3
166.5
50.7
0.1
4.3
192.5
117.1
0.3
166.5
50.7
0.1
4.3
204.5
139.7
0.3
166.5
57.2
0.1
4.3
537.3
531.5
572.6
249.5
<1 yr
£m
3.2
3.2
0.5
143.1
14.5
---
3.2
<1 yr
£m
3.5
65.0
0.3
166.5
13.2
0.1
0.9
1-2 yrs
£m
216.7
3.2
11.7
---
---
---
---
1-2 yrs
£m
3.5
2.6
---
---
---
10.9
2.2
19.2
Total trade and other payables carried at £157.6m (2019: £174.5m) including other taxes and social security contributions of £11.3m (2019: £8.0m)
which are not financial liabilities and are therefore excluded from the above analysis. All trade and other payables are due to be settled in less than
six months.
The fair value of the unsecured bank loans is the same as the carrying amount as the loans are at floating rate, except for unamortised facility fees.
The fair value of the US Private Placement Loan Notes is estimated by discounting the future cash flows (interests and principal) at the prevailing
market rates. The fair value of the trade and other payables approximate the carrying amount as they are due to be settled within six months.
FINANCIAL STATEMENTS 193
19. Financial risk management continued
Total financial assets and liabilities
The table below sets out Essentra’s accounting categories and fair value for each class of financial asset and liability.
Trade and other receivables
Cash and cash equivalents
Other financial assets
Interest bearing loans and borrowings
Lease liabilities
Trade and other payables
Level 2 of fair value hierarchy
Derivative assets
Derivative liabilities
Level 3 of fair value hierarchy
Trade and other payables
Other non-current financial liabilities
Fair value
£m
Amortised cost
£m
2020
Total
carrying value
£m
Fair value
£m
Amortised cost
£m
2019
Total
carrying value
£m
---
---
---
---
---
---
0.3
(0.5)
(3.2)
(1.2)
(4.6)
151.8
135.8
---
(285.2)
(61.0)
(143.1)
---
---
---
---
151.8
135.8
---
(285.2)
(61.0)
(143.1)
0.3
(0.5)
(3.2)
(1.2)
(201.7)
(206.3)
---
---
---
---
---
---
0.8
(0.3)
(3.4)
(0.9)
(3.8)
162.0
70.4
6.2
(309.7)
(50.7)
(166.5)
---
---
---
---
(288.3)
162.0
70.4
6.2
(309.7)
(50.7)
(166.5)
0.8
(0.3)
(3.4)
(0.9)
(292.1)
Total trade and other receivables carried at £158.9m (2019: £172.5m) include prepayments of £7.1m (2019: £10.5m) which are not financial assets
and are therefore excluded from the above analysis. Fair values of forward foreign exchange contracts and cross currency swaps have been
calculated at year end forward exchange rates compared to contracted rates. These are determined to be level 2 in the fair value hierarchy.
Included within trade and other payables and other non-current financial liabilities, which is classified as level 3 in the fair value hierarchy, is the
deferred consideration of £4.4m relating to the acquisitions of Micro Plastics, Innovative Components and 3C! (2019: £4.3m). There are no non-
recurring fair value measurements. During the year, no fair value gain or loss (2019: £nil) was recognised in respect of financial instruments at level
3 fair value hierarchy, and £nil (2019: £nil) was settled in cash. No other fair value gains or losses were recorded in profit or loss and other
comprehensive income.
Included within interest bearing loans and borrowings are $100m (2019: $155m) US Private Placement Loan Notes. The Loan Notes are held at
amortised cost with a carrying value of £72.6m (2019: £117.1m). The Group estimates that the total fair value of the Loan Notes at 31 December
2020 is £78.5m (2019: £121.1m).
All other financial assets are held at amortised cost and mostly have short terms to maturity. For this reason, their carrying amounts at the
reporting date approximate the fair values. Unsecured bank loans, included within interest bearing loans and borrowings, incur interest at floating
rates and as a result their carrying amounts also approximate their fair values at the reporting date.
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
4422
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
4433
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
194 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
19. Financial risk management continued
The table below shows the amount of bank overdrafts offset against the bank balances under enforceable master netting agreements with banks:
Cash and cash equivalents:
At 31 December 2020
At 31 December 2019
Gross amount
of recognised
financial
assets
£m
Gross amount of
recognised financial
liabilities set off in
the balance sheet
£m
Net amount of
financial assets
presented in the
balance sheet
£m
139.5
73.6
(3.7)
(3.2)
135.8
70.4
iv) Capital structure
Essentra defines its capital structure as its equity and non-current interest bearing loans and borrowings, and aims to manage this to safeguard its
ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders.
Essentra sets the amount of capital in proportion to risk. Essentra manages the capital structure and makes adjustments to it in the light of
changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, Essentra
may return capital to shareholders through dividends and share buybacks, issue new shares or sell assets to reduce debt.
Essentra monitors its capital structure on the basis of the medium-term net debt-to-EBITDA ratio. EBITDA is defined as operating profit before
depreciation and other amounts written off property, plant and equipment, share option expense, intangible amortisation and adjusting items.
The net debt-to-EBITDA ratios at 31 December were as follows.
Net debt
Operating profit before intangible amortisation and adjusting items
Plus depreciation and other amounts written off property, plant and equipment, and
amortisation of non-acquired intangible assets
Plus share option expense
EBITDA
Net debt-to-EBITDA ratio
The net debt to EBITDA ratio excluding the impact of IFRS 16 is 1.5 times (2019: 1.9 times).
20. Issued share capital
Issued, authorised and fully paid ordinary shares of 25p (2019: 25p) each
Number of ordinary shares in issue
Beginning of year
Issue of shares during the year
End of year
Note
28
18
2020
£m
210.4
62.0
52.3
1.2
115.5
2019
£m
284.4
87.5
48.2
3.9
139.6
1.8
2.0
2020
£m
75.6
2019
£m
66.0
264,129,170
264,129,170
38,461,538
---
302,590,708
264,129,170
The issue of share capital during the year was in relation to a placement offering of 38,461,538 new shares with par value of 25p issued at 260p
per share.
At 31 December 2020, the Company held 908,650 (2019: 951,137) of its own shares with a nominal value of £0.2m (2019: £0.2m) in treasury.
This represents 0.3% (2019: 0.4%) of the number of ordinary shares in issue.
4444
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
Cash and cash equivalents:
At 31 December 2020
At 31 December 2019
iv) Capital structure
19. Financial risk management continued
21. Reserves
The table below shows the amount of bank overdrafts offset against the bank balances under enforceable master netting agreements with banks:
Gross amount
of recognised
financial
assets
£m
Gross amount of
recognised financial
liabilities set off in
the balance sheet
£m
Net amount of
financial assets
presented in the
balance sheet
£m
139.5
73.6
(3.7)
(3.2)
135.8
70.4
Within retained earnings the Company has deducted the value of own shares purchased for an employee trust and treasury shares held by the
Company with a total cost of £9.0m (2019: £10.4m).
Employee trust shares are ordinary shares of the Company held in an employee benefit trust. The purpose of this trust is to hold shares in the
Company for subsequent transfer to Executive Directors and employees relating to deferred share awards and options granted under the
Company's share-based incentive plans. Full details are set out in the Annual Report on Remuneration on pages 132 and 143. The assets, liabilities
and expenditure of the trust have been incorporated in these Financial Statements. At 31 December 2020, the trust held 864,912 (2019: 1,033,311)
shares, upon which dividends have been waived, with an aggregate nominal value of £0.2m (2019: £0.3m) and market value of £2.6m
(2019: £4.5m).
The other reserve relates to the Group reorganisation, which took place as part of the de-merger from Bunzl plc. It represents the difference
between Essentra plc's share capital and Essentra International Limited's share capital and share premium on 6 June 2005 and is not distributable.
Essentra defines its capital structure as its equity and non-current interest bearing loans and borrowings, and aims to manage this to safeguard its
ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders.
During the year the Company has raised £96.7m through an issue of share capital. An amount of £87.1m has recognised within the merger relief
reserve being the excess of net proceeds over the nominal value of shares issued under s612 of the Companies Act 2006.
FINANCIAL STATEMENTS 195
Essentra sets the amount of capital in proportion to risk. Essentra manages the capital structure and makes adjustments to it in the light of
changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, Essentra
may return capital to shareholders through dividends and share buybacks, issue new shares or sell assets to reduce debt.
Essentra monitors its capital structure on the basis of the medium-term net debt-to-EBITDA ratio. EBITDA is defined as operating profit before
depreciation and other amounts written off property, plant and equipment, share option expense, intangible amortisation and adjusting items.
The net debt-to-EBITDA ratios at 31 December were as follows.
Net debt
Operating profit before intangible amortisation and adjusting items
Plus depreciation and other amounts written off property, plant and equipment, and
amortisation of non-acquired intangible assets
The net debt to EBITDA ratio excluding the impact of IFRS 16 is 1.5 times (2019: 1.9 times).
Issued, authorised and fully paid ordinary shares of 25p (2019: 25p) each
Plus share option expense
EBITDA
Net debt-to-EBITDA ratio
20. Issued share capital
Number of ordinary shares in issue
Beginning of year
Issue of shares during the year
End of year
per share.
Note
28
18
2020
£m
210.4
62.0
52.3
1.2
115.5
2019
£m
284.4
87.5
48.2
3.9
139.6
1.8
2.0
2020
£m
75.6
2019
£m
66.0
264,129,170
264,129,170
38,461,538
---
302,590,708
264,129,170
The issue of share capital during the year was in relation to a placement offering of 38,461,538 new shares with par value of 25p issued at 260p
At 31 December 2020, the Company held 908,650 (2019: 951,137) of its own shares with a nominal value of £0.2m (2019: £0.2m) in treasury.
This represents 0.3% (2019: 0.4%) of the number of ordinary shares in issue.
22. Analysis of net debt
Cash at bank and in hand
Short-term deposits and investments
Cash and cash equivalents in the statement
of cash flows
Debt due within one year
Debt due after one year
Lease liabilities due within one year
Lease liabilities due after one year
Debt from financing activities
Other financial assets
Net debt
1 Jan 2020
£m
Cash flow
£m
Business
combinations
£m
Lease
additions
£m
Exchange
movements
£m
Non-cash
movements
£m
31 Dec 2020
£m
62.6
7.8
70.4
(60.7)
(249.0)
(11.4)
(39.3)
(360.4)
5.6
(284.4)
57.7
6.9
64.6
68.1
(34.0)
14.3
---
48.4
(5.6)
107.4
0.7
---
0.7
(4.1)
---
(0.2)
(2.3)
(6.6)
---
(5.9)
---
---
---
---
---
(2.6)
(19.3)
(21.9)
---
(21.9)
0.5
(0.4)
0.1
(3.3)
(1.2)
---
---
(4.5)
---
(4.4)
---
---
---
---
121.5
14.3
135.8
---
(1.0)
(285.2)
(12.0)
11.8
(1.2)
---
(11.9)
(49.1)
(346.2)
---
(1.2)
(210.4)
The non-cash movements in debt due after one year represent the amortisation of prepaid facility fees £0.7m. The net non-cash movement in
lease liabilities represents lease liability reduction of £2.2m due to renegotiated lease terms, offset by interest on leases £2.4m. The net cash outflow
relating to lease liabilities for low value, short term and variable lease payments was £0.3m (see note 9). During the year £9.6m of lease liabilities
moved from due after one year to due within one year.
During the year £5.0m was received in respect of the loan receivables arising from the disposal of Porous Technologies held in other financial assets
as at 31 December 2019.
Cash at bank and in hand
Short-term deposits and investments
Cash and cash equivalents in the
statement of cash flows
Debt due within one year
Debt due after one year
Lease liabilities due within one year
Lease liabilities due after one year
Debt from financing activities
Other financial assets
Net debt
Impact on
adoption of
IFRS 16
£m
1 Jan 2019
£m
Cash flow
£m
Business
combinations
£m
Lease
additions
£m
Exchange
movements
£m
Non-cash
movements
£m
31 Dec 2019
£m
62.3
3.9
66.2
(0.1)
(311.2)
---
---
(311.3)
5.0
(240.1)
---
---
---
---
---
(11.7)
(47.7)
(59.4)
---
(59.4)
0.8
4.3
5.1
0.1
10.0
14.5
---
24.6
0.6
30.3
---
---
---
---
(13.8)
(0.5)
(1.7)
(16.0)
---
---
---
---
---
---
(1.6)
(11.7)
(13.3)
---
(16.0)
(13.3)
(0.5)
(0.4)
(0.9)
---
6.1
0.3
1.1
7.5
---
6.6
---
---
---
(60.7)
59.9
(12.4)
20.7
7.5
---
7.5
62.6
7.8
70.4
(60.7)
(249.0)
(11.4)
(39.3)
(360.4)
5.6
(284.4)
F
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4444
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
4455
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
196 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
22. Analysis of net debt continued
The non-cash movements in debt due after one year represent the amortisation of prepaid facility fees £0.8m offset by £60.7m of debt moving
to debt due within one year. The net non-cash movement in lease liabilities represents early lease terminations £10.4m offset by interest on leases
£2.1m. The net cash outflow relating to lease liabilities for low value, short term and variable lease payments was £0.4m (see note 9). During the
year £20.7m of lease liabilities moved from due after one year to due within one year.
Included within other financial assets is £5.0m of loan receivables arising from the disposal of Porous Technologies and £0.6m of short-term liquid
investments. In the year ended 31 December 2019, the loan receivable arising from the disposal of Porous Technologies moved from non-current
to current assets.
23. Acquisitions and disposals
Establishment of joint venture China Tobacco Essentra (Xiamen) Filters Co., Ltd.
On 2 April 2020 Essentra plc confirmed that it has completed the establishment of the new joint venture company, China Tobacco Essentra
(Xiamen) Filters Co., Ltd. The Company's capital contribution into this business is US$10.3m, to be paid in three equal instalments over 18 months
following its establishment. As at 31 December 2020 the Company has paid two of these three instalments.
Acquisition of Nekicesa
On 6 September 2019, Essentra acquired 100% of the share capital of Nekicesa Packaging S.L. ("Nekicesa"). Due to the timing of the transaction,
the purchase price allocations including the goodwill and fair value adjustments included in the financial statements for the year ended
31 December 2019 were provisional.
During 2020, Essentra reassessed the fair value adjustments and made changes to the carrying amounts of certain plant, property and equipment,
inventory, payables and deferred tax balances. The impact on goodwill is an increase of £0.9m.
Acquisition of Innovative Components
On 26 June 2019, Essentra acquired 100% of the share capital of Innovative Components Inc. and Componentes Innovadores Limitada
(together ''Innovative Components''). Due to the timing of the transaction, the purchase price allocations including the goodwill and fair value
adjustments included in the financial statements for the year ended 31 December 2019 were provisional.
During 2020, Essentra reassessed the fair value adjustments and made changes to the carrying amounts of certain accruals, payables, receivables,
provisions and deferred tax balances. In addition to this Essentra received back £0.2m of the consideration originally paid from the vendors on
finalisation of the completion accounts. The net impact on goodwill is an increase of £0.2m.
Acquisition of 3C!
On 17 September 2020, Essentra acquired 100% of the share capital of 3C! Packaging, Inc. ("3C!"). 3C!, headquartered in North Carolina, USA,
is a leading designer and manufacturer of folding cartons, printed literature, foil and flexible packaging and labels focused on the pharmaceuticals
and healthcare sectors. 3C! is reported under the Packaging division.
On acquisition the assets and liabilities of the business acquired were adjusted to reflect their fair value to Essentra. Due to the timing of the
transaction, the purchase price allocations including the split between goodwill and intangible assets and fair value adjustments are provisional
and subject to finalisation for up to one year from the date of acquisition.
Had the acquisition been completed on 1 January 2020, the contribution to the Group’s revenue and operating profit would have been £28.2m
and £3.6m higher respectively.
Within adjusting items in the consolidated income statement are £1.2m of costs incurred in acquiring the business.
4466
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
The non-cash movements in debt due after one year represent the amortisation of prepaid facility fees £0.8m offset by £60.7m of debt moving
to debt due within one year. The net non-cash movement in lease liabilities represents early lease terminations £10.4m offset by interest on leases
£2.1m. The net cash outflow relating to lease liabilities for low value, short term and variable lease payments was £0.4m (see note 9). During the
year £20.7m of lease liabilities moved from due after one year to due within one year.
Included within other financial assets is £5.0m of loan receivables arising from the disposal of Porous Technologies and £0.6m of short-term liquid
investments. In the year ended 31 December 2019, the loan receivable arising from the disposal of Porous Technologies moved from non-current
to current assets.
23. Acquisitions and disposals
Establishment of joint venture China Tobacco Essentra (Xiamen) Filters Co., Ltd.
On 2 April 2020 Essentra plc confirmed that it has completed the establishment of the new joint venture company, China Tobacco Essentra
(Xiamen) Filters Co., Ltd. The Company's capital contribution into this business is US$10.3m, to be paid in three equal instalments over 18 months
following its establishment. As at 31 December 2020 the Company has paid two of these three instalments.
On 6 September 2019, Essentra acquired 100% of the share capital of Nekicesa Packaging S.L. ("Nekicesa"). Due to the timing of the transaction,
the purchase price allocations including the goodwill and fair value adjustments included in the financial statements for the year ended
Acquisition of Nekicesa
31 December 2019 were provisional.
During 2020, Essentra reassessed the fair value adjustments and made changes to the carrying amounts of certain plant, property and equipment,
inventory, payables and deferred tax balances. The impact on goodwill is an increase of £0.9m.
Acquisition of Innovative Components
On 26 June 2019, Essentra acquired 100% of the share capital of Innovative Components Inc. and Componentes Innovadores Limitada
(together ''Innovative Components''). Due to the timing of the transaction, the purchase price allocations including the goodwill and fair value
adjustments included in the financial statements for the year ended 31 December 2019 were provisional.
During 2020, Essentra reassessed the fair value adjustments and made changes to the carrying amounts of certain accruals, payables, receivables,
provisions and deferred tax balances. In addition to this Essentra received back £0.2m of the consideration originally paid from the vendors on
finalisation of the completion accounts. The net impact on goodwill is an increase of £0.2m.
Acquisition of 3C!
On 17 September 2020, Essentra acquired 100% of the share capital of 3C! Packaging, Inc. ("3C!"). 3C!, headquartered in North Carolina, USA,
is a leading designer and manufacturer of folding cartons, printed literature, foil and flexible packaging and labels focused on the pharmaceuticals
and healthcare sectors. 3C! is reported under the Packaging division.
On acquisition the assets and liabilities of the business acquired were adjusted to reflect their fair value to Essentra. Due to the timing of the
transaction, the purchase price allocations including the split between goodwill and intangible assets and fair value adjustments are provisional
and subject to finalisation for up to one year from the date of acquisition.
Had the acquisition been completed on 1 January 2020, the contribution to the Group’s revenue and operating profit would have been £28.2m
and £3.6m higher respectively.
Within adjusting items in the consolidated income statement are £1.2m of costs incurred in acquiring the business.
22. Analysis of net debt continued
23. Acquisitions and disposals continued
The fair value of assets and liabilities acquired as part of the acquisition of 3C! are detailed below:
Intangible assets
Property, plant and equipment
Lease right-of-use asset
Inventories
Trade and other receivables
Cash and cash equivalents
Deferred tax
Debt
Trade and other payables
Provisions
Lease liabilities
Goodwill
Consideration
Satisfied by:
Cash consideration
Deferred consideration
Cash consideration
Cash and cash equivalents acquired
Net cash outflow in respect of the acquisition
FINANCIAL STATEMENTS 197
3C!
£m
25.4
7.5
2.5
2.2
4.8
0.7
(6.9)
(4.1)
(6.9)
(0.2)
(2.5)
22.5
19.8
42.3
42.1
0.2
42.1
(0.7)
41.4
Goodwill represents the expected operating and financial synergies, and the value of an assembled workforce. Goodwill is not deductible for
tax purposes.
Fair values of assets and liabilities, including property, plant and equipment, acquired for 3C! are provisional and subject to change as the Group
is still permitted to make fair value adjustments up until 12 months after the date of acquisition.
2019: Disposals
On 14 January 2019, Essentra divested of its Pipe Protection Technologies business (‘‘PPT’’) to certain wholly-owned subsidiaries of National Oilwell
Varco, Inc. This disposal resulted in a gain before tax of £11.2m and was treated as an adjusting item. Proceeds of £38.5m were received in respect
of this transaction with £37.5m received on completion and £1.0m deferred, all of which was received in 2019. Included within the net assets
disposed was goodwill attributed to the business with a carrying value of £10.1m.
On 11 June 2019, Essentra divested of its Extrusion business to Inter Primo A/S. This disposal resulted in a loss before tax of £1.8m and was treated as
an adjusting item. Proceeds of £14.3m were received in respect of this transaction. Included within the net assets disposed was goodwill attributed
to the business with a carrying value of £3.7m.
On 28 June 2019, Essentra divested of its Speciality Tapes business (‘‘ST’’) to OpenGate Capital. This disposal resulted in a gain before tax of £20.0m
and was treated as an adjusting item. Proceeds of £60.8m were received in respect of this transaction. Included within the net assets disposed was
goodwill and customer relationship intangibles attributed to the business with a carrying value of £27.4 and £8.6m respectively.
On 23 July 2019, Essentra divested of its Cards Solution business to Barcodes, Inc. This disposal resulted in a loss before tax of £1.1m and was treated
as an adjusting item. Proceeds of £1.6m were received in respect of this transaction. Included within the net assets disposed was goodwill and
customer relationship intangibles attributed to the business with a carrying value of £0.4 and £0.8m respectively.
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24. Dividends
2019 interim: paid 30 October 2019
2020 proposed final: payable 1 June 2021
Per share
2019
p
6.3
---
2020
p
---
3.3
2020
£m
---
10.0
Total
2019
£m
16.5
---
During the year ended 31 December 2019 a final dividend of 14.4p was initially declared but then subsequently cancelled in 2020.
4466
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
4477
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
198 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
25. Related parties
Other than the compensation of key management (note 5) and the capital injection into the Filters joint venture entity China Tobacco Essentra
(Xiamen) Filters Co., Ltd. (note 23), Essentra has not entered into any material transactions with related parties since the last Annual Report.
ITC Essentra Limited is 50% owned by the Group. The results were fully consolidated within the Group’s financial statements as it is deemed
Essentra has control by virtue of having control of the board. As at 31 December 2020 the entity had gross assets of £24.3m (2019: £25.9m)
and gross liabilities of £7.4m (2019: £10.4m). Operating profit for the year amounted to £4.8m (2019: £6.3m) and movement in cash for the
year amounted to £1.7m (2019: £3.8m).
China Tobacco Essentra (Xiamen) Filters Co., Ltd is 49% owned by the Group. The results were fully consolidated within the Group’s financial
statements as it is deemed Essentra has control by virtue of having control of the board. As at 31 December 2020 the entity had gross assets
of £9.9m (2019: £nil) and gross liabilities of £nil (2019: £nil). Operating loss for the year amounted to £0.1m (2019: £nil) and movement in cash
for the year amounted to £9.9m (2019: £nil).
For the Group’s policy on the basis of consolidation, see note b within Accounting Policies.
26. Post balance sheet events
As noted in note 14, the maturity of £225m of the overall borrowing under the RCF was extended on 11 January 2021 for a further year to
November 2023, with the balance remaining on the original terms with a maturity date of November 2022.
27. Parent company
Essentra plc is a limited company incorporated and domiciled in the United Kingdom. It operates as the ultimate parent company of the
Essentra Group. Its registered office is Avebury House. 201-249 Avebury Boulevard, Milton Keynes, MK9 1AU, United Kingdom. The principal
subsidiary undertakings of Essentra plc are listed in note 10 to the Essentra plc Company Financial Statements.
28. Adjusted measures
Management reviews the adjusted operating profit and operating cash flow as measures of the performance of the business. Adjusted operating
profit is stated before amortisation of acquired intangible assets and adjusting items which are considered not relevant to measuring the
underlying performance of the business.
Note
2
3
3
6
6
2020
£m
21.7
22.6
17.7
62.0
1.9
(17.6)
46.3
(8.9)
37.4
35.6
1.8
37.4
13.1p
13.0p
2019
£m
80.0
22.9
(15.4)
87.5
2.1
(16.6)
73.0
(14.5)
58.5
55.7
2.8
58.5
21.3p
21.0p
Operating profit
Amortisation of acquired intangible assets
Adjusting items
Adjusted operating profit
Finance income
Finance expenses
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Adjusted profit
Adjusted earnings per share
Adjusted diluted earnings per share
4488
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Notes continued
25. Related parties
Other than the compensation of key management (note 5) and the capital injection into the Filters joint venture entity China Tobacco Essentra
(Xiamen) Filters Co., Ltd. (note 23), Essentra has not entered into any material transactions with related parties since the last Annual Report.
ITC Essentra Limited is 50% owned by the Group. The results were fully consolidated within the Group’s financial statements as it is deemed
Essentra has control by virtue of having control of the board. As at 31 December 2020 the entity had gross assets of £24.3m (2019: £25.9m)
and gross liabilities of £7.4m (2019: £10.4m). Operating profit for the year amounted to £4.8m (2019: £6.3m) and movement in cash for the
year amounted to £1.7m (2019: £3.8m).
China Tobacco Essentra (Xiamen) Filters Co., Ltd is 49% owned by the Group. The results were fully consolidated within the Group’s financial
statements as it is deemed Essentra has control by virtue of having control of the board. As at 31 December 2020 the entity had gross assets
of £9.9m (2019: £nil) and gross liabilities of £nil (2019: £nil). Operating loss for the year amounted to £0.1m (2019: £nil) and movement in cash
for the year amounted to £9.9m (2019: £nil).
For the Group’s policy on the basis of consolidation, see note b within Accounting Policies.
26. Post balance sheet events
As noted in note 14, the maturity of £225m of the overall borrowing under the RCF was extended on 11 January 2021 for a further year to
November 2023, with the balance remaining on the original terms with a maturity date of November 2022.
27. Parent company
28. Adjusted measures
Essentra plc is a limited company incorporated and domiciled in the United Kingdom. It operates as the ultimate parent company of the
Essentra Group. Its registered office is Avebury House. 201-249 Avebury Boulevard, Milton Keynes, MK9 1AU, United Kingdom. The principal
subsidiary undertakings of Essentra plc are listed in note 10 to the Essentra plc Company Financial Statements.
Management reviews the adjusted operating profit and operating cash flow as measures of the performance of the business. Adjusted operating
profit is stated before amortisation of acquired intangible assets and adjusting items which are considered not relevant to measuring the
underlying performance of the business.
Operating profit
Amortisation of acquired intangible assets
Adjusting items
Adjusted operating profit
Finance income
Finance expenses
Adjusted profit before income tax
Tax on adjusted profit
Adjusted profit
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Adjusted profit
Adjusted earnings per share
Adjusted diluted earnings per share
Note
2
3
3
6
6
2020
£m
21.7
22.6
17.7
62.0
1.9
(17.6)
46.3
(8.9)
37.4
35.6
1.8
37.4
13.1p
13.0p
2019
£m
80.0
22.9
(15.4)
87.5
2.1
(16.6)
73.0
(14.5)
58.5
55.7
2.8
58.5
21.3p
21.0p
FINANCIAL STATEMENTS 199
28. Adjusted measures continued
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 profit
Depreciation
Lease right-of-use asset depreciation
Amortisation of non-acquired intangible assets
Share option expense
Other non-cash items1
Working capital movements
Net capital expenditure2
Operating cash flow --- adjusted
Reconciliation of cash flows from adjusting items:
Adjusting items as shown on income statement
Non-cash (charge)/credit in adjusting items
Net gain on disposal of businesses
Cash outflow on adjusting items recognised in the year
Utilisation of prior period and acquired accruals and provisions
Cash outflow from adjusting items
2020
£m
62.0
37.6
12.0
2.6
1.2
(0.6)
6.2
(44.7)
76.3
17.7
(9.8)
---
7.9
3.0
10.9
2019
£m
87.5
35.5
11.3
0.9
3.9
(0.4)
(10.3)
(56.6)
71.8
(15.4)
0.6
28.3
13.5
11.1
24.6
1 Other non-cash items comprise impairment of fixed assets £0.1m (2019: £0.5m), hedging activities and other movements £1.3m (2019: £0.4m), and movement in provisions £nil (2019: negative
£1.3m) less Profit on lease termination £2.0m (2019: £nil).
2 Net capital expenditure within adjusted operating cash flow excludes £nil (2019: £0.3m) of property, plant and equipment disposal proceeds realised during site closures which relate to
adjusting items.
For further information on alternative performance measures applied by the Group refer to pages 48 and 49.
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4488
ESSENTRA PLC FINANCIAL REPORT 2020
NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
4499
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
200 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
EEsssseennttrraa ppllcc CCoommppaannyy
BBaallaannccee SShheeeett
At 31 December 2020
Fixed assets
Investment in subsidiary undertaking
Current assets
Debtors
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Non-current liabilities
Note
2020
£m
2019
£m
2,10
465.8
464.6
3
4
325.7
273.4
(0.2)
(61.5)
325.5
211.9
Creditors: amounts falling due after more than one year
5,6
(72.6)
(56.5)
Net assets
Capital and reserves
Issued share capital
Merger relief reserve
Capital redemption reserve
Profit and loss account
Shareholders' funds: equity interests
718.7
620.0
7
8
75.6
385.2
0.1
257.8
718.7
66.0
298.1
0.1
255.8
620.0
The profit attributable to the equity holders included in the accounts of the Company is £0.7m (2019: £1.3m).
The Company Financial Statements on pages 200 to 209 were approved by the Board of Directors on 5 March 2021 and were signed on its
behalf by:
Paul Forman
Chief Executive
Lily Liu
Chief Financial Officer
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FFiinnaanncciiaall SSttaatteemmeennttss
EEsssseennttrraa ppllcc CCoommppaannyy
BBaallaannccee SShheeeett
EEsssseennttrraa ppllcc CCoommppaannyy
SSttaatteemmeenntt ooff CChhaannggeess iinn EEqquuiittyy
FINANCIAL STATEMENTS 201
At 31 December 2020
For the year ended 31 December 2020
Creditors: amounts falling due after more than one year
5,6
(72.6)
(56.5)
Fixed assets
Investment in subsidiary undertaking
Creditors: amounts falling due within one year
Current assets
Debtors
Current liabilities
Net current assets
Non-current liabilities
Net assets
Capital and reserves
Issued share capital
Merger relief reserve
Capital redemption reserve
Profit and loss account
behalf by:
Paul Forman
Chief Executive
Note
2020
£m
2019
£m
2,10
465.8
464.6
3
4
7
8
325.7
273.4
(0.2)
(61.5)
325.5
211.9
718.7
620.0
75.6
385.2
0.1
257.8
718.7
66.0
298.1
0.1
255.8
620.0
Lily Liu
Chief Financial Officer
Shareholders' funds: equity interests
The profit attributable to the equity holders included in the accounts of the Company is £0.7m (2019: £1.3m).
The Company Financial Statements on pages 200 to 209 were approved by the Board of Directors on 5 March 2021 and were signed on its
Share options exercised
Share-based payments
Dividends paid
31 December 2019
66.0
298.1
0.1
Total comprehensive income for the year
---
---
---
Shares issued to satisfy employee share option exercises
1 January 2020
Profit for year
Total comprehensive income for the year
Issue of share capital
Shares issued to satisfy employee share option exercises
Share options exercised
Share-based payments
31 December 2020
1 January 2019
Profit for year
Profit and loss account
Issued share
capital
£m
Merger relief
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
equity
£m
66.0
298.1
0.1
266.2
(10.4)
620.0
---
9.6
---
87.1
---
0.7
0.7
(1.4)
0.1
1.2
---
1.4
0.7
0.7
96.7
---
0.1
1.2
75.6
385.2
0.1
266.8
(9.0)
718.7
Profit and loss account
Issued share
capital
£m
Merger relief
reserve
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
equity
£m
66.0
298.1
0.1
315.0
(11.1)
668.1
1.3
1.3
(0.7)
0.4
4.4
(54.2)
266.2
---
0.7
1.3
1.3
---
0.4
4.4
(10.4)
(54.2)
620.0
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
202 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
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AAccccoouunnttiinngg PPoolliicciieess
a. Authorisation of financial statements and statement of compliance with FRS 101
The parent company financial statements of Essentra plc (‘‘the Company’’) for the year ended 31 December 2020 were authorised for issue by the
Board of Directors on 5 March 2021 and the balance sheet was signed on the Board’s behalf by Paul Forman and Lily Liu. Essentra plc is a public
limited company that is incorporated, domiciled and has its registered office in England and Wales. The Company’s ordinary shares are publicly
traded on the London Stock Exchange and it is not under the control of any single shareholder. These financial statements were prepared in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
The profit and loss account of the Company is not presented as permitted by Section 408 of the Companies Act 2006.
b. Basis of preparation
The Company transitioned to FRS 101 from the UK Generally Accepted Accounting Practice during the year ended 31 December 2015. No
adjustments were required as part of this transition.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• the requirements of paragraph 45(b) and 46-52 of IFRS 2 Share-Based Payment;
• the requirements of paragraphs 62, B64(b), B64(e), B64(g), B64(h), B64(j) to B64(m), b64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67
of IFRS 3 Business Combinations;
• the requirement of IFRS 7 Financial Instruments: Disclosures;
• the requirement of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
• the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of paragraph
79(a)(iv) of IAS 1, paragraph 73(e) of IAS 16 Property, Plant and Equipment and paragraph 118(e) of IAS 38 Intangible Assets;
• the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of
Financial Statements;
• the requirements of IAS 7 Statement of Cash Flows;
• the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
• the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
• the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a
group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and
• the requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.
Where required, equivalent disclosures are given in the consolidated financial statements.
These accounts have been prepared in accordance with The Companies Act 2006 as applicable to companies using FRS 101 and are prepared on
a going concern basis.
The going concern assessment for the Company is carried out as part of the Group assessment. From the assessment performed, 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 Company financial statements. Further details are included on pages 6 and 7
of the Consolidated Financial Statements.
These accounts are prepared under the historical cost convention.
The following principal accounting policies have been consistently applied.
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a. Authorisation of financial statements and statement of compliance with FRS 101
The parent company financial statements of Essentra plc (‘‘the Company’’) for the year ended 31 December 2020 were authorised for issue by the
Board of Directors on 5 March 2021 and the balance sheet was signed on the Board’s behalf by Paul Forman and Lily Liu. Essentra plc is a public
limited company that is incorporated, domiciled and has its registered office in England and Wales. The Company’s ordinary shares are publicly
traded on the London Stock Exchange and it is not under the control of any single shareholder. These financial statements were prepared in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
The profit and loss account of the Company is not presented as permitted by Section 408 of the Companies Act 2006.
The Company transitioned to FRS 101 from the UK Generally Accepted Accounting Practice during the year ended 31 December 2015. No
b. Basis of preparation
adjustments were required as part of this transition.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• the requirements of paragraph 45(b) and 46-52 of IFRS 2 Share-Based Payment;
• the requirements of paragraphs 62, B64(b), B64(e), B64(g), B64(h), B64(j) to B64(m), b64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67
of IFRS 3 Business Combinations;
• the requirement of IFRS 7 Financial Instruments: Disclosures;
• the requirement of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
• the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of paragraph
79(a)(iv) of IAS 1, paragraph 73(e) of IAS 16 Property, Plant and Equipment and paragraph 118(e) of IAS 38 Intangible Assets;
• the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of
Financial Statements;
• the requirements of IAS 7 Statement of Cash Flows;
• the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
• the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
• the requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets.
Where required, equivalent disclosures are given in the consolidated financial statements.
These accounts have been prepared in accordance with The Companies Act 2006 as applicable to companies using FRS 101 and are prepared on
a going concern basis.
The going concern assessment for the Company is carried out as part of the Group assessment. From the assessment performed, 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 Company financial statements. Further details are included on pages 6 and 7
of the Consolidated Financial Statements.
These accounts are prepared under the historical cost convention.
The following principal accounting policies have been consistently applied.
FINANCIAL STATEMENTS 203
c. Investment in subsidiary undertaking
Investment in subsidiary undertaking is held at cost less any provision for impairment. The Company assesses at each balance sheet date whether
the investment in its subsidiary has been impaired.
d. Share-based payments
The fair value of share options is measured at grant date. It is recognised as an addition to the cost of investment in the subsidiary in which the
relevant employees work over the expected period between grant and vesting date of the options, with a corresponding adjustment to reserves.
Detailed disclosures for the share-based payment arrangements of the Company are provided in note 18 to the consolidated financial statements.
e. Own shares
The shares held in the Essentra Employee Benefit Trust for the purpose of fulfilling obligations in respect of share incentive plans are treated as
belonging to the Company and are deducted from its retained earnings. The cost of shares held directly (treasury shares) is also deducted from
retained earnings.
f. Dividends
Dividend distributions to the Company’s shareholders are recognised as a liability in the period in which they are approved by the shareholders of
the Company (final dividend) or paid (interim dividend).
Dividend income is recognised when the right to receive payment is established.
g. Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation
are included in the profit and loss account. Exchange differences arising from movements in spot rates are included in the profit and loss account
as exchange gains or losses, while those arising from the interest differential elements of forward currency contracts are included in external
interest income or expense.
h. Financial assets
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are included in current assets, except
for those with maturities greater than 12 months after the end of the reporting period which are classified as non-current assets. The Company’s
financial assets at amortised cost comprise receivables in the balance sheet.
• the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a
group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for
impairment. Interest income is recognised accordingly using the effective interest method.
i. Financial liabilities
Interest bearing loans and borrowings and other financial liabilities (excluding derivatives) are initially recognised at fair value net of transaction
costs incurred. They are subsequently held at amortised cost using the effective interest method. Any difference between the proceeds, net of
transaction costs, and the settlement or redemption of borrowings is recognised in profit or loss over the term of the borrowings.
The Company holds financial instruments which hedge the net investments in the foreign operations of its subsidiary undertakings. Gains and
losses on these instruments are recognised in the profit and loss account of the Company.
j. Taxation
Income tax in the profit and loss account comprises current and deferred tax. Income tax is recognised in the profit and loss account except to the
extent that it relates to items recognised in equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year using the applicable tax rates enacted or substantively enacted at the
balance sheet date and any adjustment to tax payable in prior years.
Deferred tax is provided, using the balance sheet liability method, on temporary differences arising between the tax bases and the carrying
amounts of assets and liabilities in the financial statements. The following temporary differences are not provided for: goodwill not deductible
for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit or loss, and differences relating to
investments in subsidiaries to the extent that they will not reverse in the foreseeable future. Deferred tax is determined using tax rates that are
expected to apply when the related deferred tax asset or liability is settled, using the applicable tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
204 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
EEsssseennttrraa ppllcc CCoommppaannyy NNootteess
1. Net operating charges
The auditor was paid £5,125 (2019: £5,125) for the statutory audit of the Company. Fees paid to the Company’s auditor for services other than the
statutory audit of the Company are disclosed in note 2 to the consolidated financial statements.
The Directors’ remuneration, which was paid by Essentra International Limited, is disclosed in the Annual Report on Remuneration on pages 132
to 143. The only employees of the Company are the Directors.
2. Investment in subsidiary undertaking
Investment in subsidiary undertaking
2020
£m
464.6
1.2
465.8
2020
£m
325.7
325.7
2020
£m
0.2
---
---
0.2
2020
£m
72.6
72.6
2020
£m
---
14.2
58.4
72.6
2019
£m
460.2
4.4
464.6
2019
£m
273.4
273.4
2019
£m
0.7
0.2
60.6
61.5
2019
£m
56.5
56.5
Non bank loans
2019
£m
60.6
14.8
41.7
117.1
Beginning of year
Additions
End of year
3. Debtors
Amounts receivable from subsidiary undertakings
4. Creditors: amounts falling due within one year
Accruals and deferred income
Corporate taxes
US Private Placement Loan Notes
5. Creditors: amounts falling due after more than one year
US Private Placement Loan Notes
6. Maturity of financial liabilities
Debt can be analysed as falling due:
Within one year
Between one and five years
More than five years
5544
ESSENTRA PLC FINANCIAL REPORT 2020
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FFiinnaanncciiaall SSttaatteemmeennttss
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to 143. The only employees of the Company are the Directors.
2. Investment in subsidiary undertaking
Beginning of year
Additions
End of year
3. Debtors
Amounts receivable from subsidiary undertakings
4. Creditors: amounts falling due within one year
Accruals and deferred income
Corporate taxes
US Private Placement Loan Notes
US Private Placement Loan Notes
6. Maturity of financial liabilities
Debt can be analysed as falling due:
Within one year
Between one and five years
More than five years
2020
£m
464.6
1.2
465.8
2020
£m
325.7
325.7
2020
£m
0.2
---
---
0.2
2020
£m
72.6
72.6
2020
£m
---
14.2
58.4
72.6
2019
£m
460.2
4.4
464.6
2019
£m
273.4
273.4
2019
£m
0.7
0.2
60.6
61.5
2019
£m
56.5
56.5
2019
£m
60.6
14.8
41.7
117.1
Non bank loans
1. Net operating charges
7. Issued share capital
The auditor was paid £5,125 (2019: £5,125) for the statutory audit of the Company. Fees paid to the Company’s auditor for services other than the
statutory audit of the Company are disclosed in note 2 to the consolidated financial statements.
The Directors’ remuneration, which was paid by Essentra International Limited, is disclosed in the Annual Report on Remuneration on pages 132
Issued, authorised and fully paid ordinary shares of 25p (2019: 25p) each
Investment in subsidiary undertaking
Number of ordinary shares in issue
Beginning of year
Issue of shares during the year
End of year
FINANCIAL STATEMENTS 205
2020
£m
75.6
75.6
2019
£m
66.0
66.0
2020
2019
264,129,170
264,129,170
38,461,538
---
302,590,708
264,129,170
The issue of share capital during the year was in relation to a placement offering of 38,461,538 new shares with par value of 25p issued at 260p
per share.
At 31 December 2020, the Company held 908,650 (2019: 951,137) of its own shares in treasury.
8. Reserves
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company has not been separately presented in these
Financial Statements. The profit attributable to equity holders included in the accounts of the Company is £0.7m (2019: £1.3m).
Included in the profit and loss account are accumulated share-based payments of £49.1m (2019: £47.9m) which are credited directly to reserves.
Full details of these share-based payments are set out in the Annual Report on Remuneration on pages 132 to 143.
9. Dividends
2019 interim: paid 30 October 2019
2020 proposed final: payable 1 June 2021
Per share
2019
p
6.3
2020
p
3.3
2020
£m
10.0
Total
2019
£m
16.5
5. Creditors: amounts falling due after more than one year
During the year ended 31 December 2019 a final dividend of 14.4p was declared but then subsequently cancelled in 2020.
10. Subsidiary undertakings
The companies named below (including dormant entities) are subsidiary undertakings of Essentra plc and are included in the Consolidated
Financial Statements of the Group. The investments in the companies below relate to ordinary shares or common stock. The principal country in
which each company operates is the country of incorporation.
All entities below are wholly owned subsidiaries of the Group except for ITC Essentra Limited (India) (50% owned) and China Tobacco Essentra
(Xiamen) Filters Co., Ltd (49% owned). The ownership held by the Group in these companies are through holding of ordinary shares in these
companies and they are accounted for as subsidiaries of the Group in the Consolidated Financial Statements due to a control achieved via board
membership.
Due to statutory requirements, ITC Essentra Limited (India) has a financial year end of 31 March. All other subsidiaries have the same year end as
the parent company of 31 December.
Essentra International Limited is the only direct subsidiary of Essentra plc.
Country of
incorporation
Principal activity
Essentra (Bangor) Ltd.
UK
Manufacturing
Essentra Components Limited
UK
Manufacturing
Essentra Filter Products Limited
UK
Manufacturing
Essentra Packaging Limited
UK
Manufacturing
Essentra Packaging & Security Limited
UK
Manufacturing
Address of registered office
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
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ESSENTRA PLC COMPANY NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
206 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Essentra plc Company Notes continued
10. Subsidiary undertakings continued
Country of
incorporation
Principal activity
ESNT Filter Products Limited
UK Holding Company
ESNT Holdings (No.1) Limited
UK Holding Company
ESNT Holdings (No.2) Limited
UK Holding Company
ESNT International Limited
UK Holding Company
ESNT Packaging & Securing Solutions
Limited
Essentra Filter Products International
Limited
Essentra International Limited
UK Holding Company
UK Holding Company
UK Holding Company
Essentra Overseas Limited
UK Holding Company
Essentra Pension Trustees Limited
UK
Pension Trustee
Essentra Finance Limited
UK Treasury activities
Essentra (Kilmarnock) Ltd.
Essentra (Northampton) Ltd.
Essentra Services Limited
Filtrona Limited
P. P. Payne Limited
Alliance Plastics Limited
Cigarette Components Limited
ESNT Components Limited
ESNT Limited
Filtrona Custom Moulding Limited
North West Plastics Limited
Skiffy Limited
Stera Tape Limited
Essentra Filter Products Inc
Essentra Packaging Inc
Essentra Plastics LLC
Essentra Packaging Puerto Rico, Inc.
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
US
US
US
US
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Address of registered office
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
4th Floor, 115 George Street, Edinburgh, Scotland, EH2 4JN
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
Manufacturing
1675 South State Street, Ste B Dover, DE 19901, United States
Manufacturing 10 S Jefferson Street, Ste 1400 Roanoke, VA 24011, United States
Manufacturing
1675 South State Street, Ste B Dover, DE 19901, United States
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Essentra Packaging US Inc
US
Manufacturing
Innovative Components, Inc.
Micro Plastics, Inc.
US
US
Manufacturing
1315 W Lawrence Avenue, Springfield, IL 62704, United States
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
3C! Packaging, Inc
US
Manufacturing
1000 CCC Drive, Clayton, NC 27520, United States
5566
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US NewCo LLC
US Holding Company
FFiinnaanncciiaall SSttaatteemmeennttss
Essentra plc Company Notes continued
FINANCIAL STATEMENTS 207
10. Subsidiary undertakings continued
10. Subsidiary undertakings continued
Country of
incorporation
Principal activity
ESNT Filter Products Limited
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Components Inc
ESNT Holdings (No.1) Limited
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Components Japan Inc
Country of
incorporation
US
US
Principal activity
Distribution
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Address of registered office
Distribution
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
ESNT Holdings (No.2) Limited
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
ESNT Holdings Inc
US Holding Company
ESNT International Limited
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
ESNT (Porous) Holdings Inc.
US Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
ESNT US Holdings Corp
Essentra Corporation
US Holding Company
1675 South State Street, Ste B Dover, DE 19901, United States
US Holding Company
1675 South State Street, Ste B Dover, DE 19901, United States
Essentra Holdings Corp. (DE)
US Holding Company
1675 South State Street, Ste B Dover, DE 19901, United States
ESNT Packaging & Securing Solutions
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Limited
Limited
Essentra Filter Products International
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra International Limited
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Overseas Limited
UK Holding Company
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Pension Trustees Limited
UK
Pension Trustee
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Finance Limited
UK Treasury activities
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra (Kilmarnock) Ltd.
Essentra (Northampton) Ltd.
Non-trading
4th Floor, 115 George Street, Edinburgh, Scotland, EH2 4JN
Non-trading
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Services Limited
Non-trading
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Address of registered office
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
Buckinghamshire, MK9 1AU
60154, United States
60154, United States
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
US
US
US
US
US
US
Filtrona Limited
P. P. Payne Limited
Non-trading
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
ESNT Holdings Cooperatie 1 W.A.
Netherlands Holding Company
Celsiusweg 37, 8912 AM, Leeuwarden, Netherlands
ESNT Holdings (Netherlands) BV
Netherlands Holding Company
Den Belleman 9, 5571 NR, Bergeijk, Netherlands
Non-trading
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Holdings Cooperative WA
Netherlands Holding Company
Den Belleman 9, 5571 NR, Bergeijk, Netherlands
Buckinghamshire, MK9 1AU
Essentra BV
Netherlands Holding Company
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Alliance Plastics Limited
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Cigarette Components Limited
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
ESNT Components Limited
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
ESNT Limited
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Filtrona Custom Moulding Limited
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Essentra Holdings (No.2) Cooperative WA
Netherlands Holding Company
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Essentra International BV/LLC
Netherlands Holding Company
Den Belleman 9, 5571 NR, Bergeijk, Netherlands
ESNT Holding BV
ESNT Holdings Cooperatie 2 W.A.
Fijnmechanica Surhuisterveen B.V.
Linde Vouwkartonnage B.V.
Richco Benelux BV
Skiffy BV
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Den Belleman 9, 5571 NR, Bergeijk, Netherlands
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Beeldschermweg 5-3, 3821 AH Amersfoot, Netherlands
Den Belleman 9, 5571 NR, Bergeijk, Netherlands
Essentra Packaging Ireland Limited
Ireland
Manufacturing
8 Airways , Industrial Estate, Dublin 17, Ireland
North West Plastics Limited
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Buckinghamshire, MK9 1AU
ESNT (Cherry Orchard) Holdings Limited
Ireland Holding Company
Unit 629 Ida Industrial Park Northern Extension, Old Kilmeaden
Road, Watherford, Ireland
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C.B. Packaging Limited
ESNT (Cherry Orchard) Limited
ESNT Finance Ireland Limited
Essentra Finance (Euro) Ireland Limited
Ireland
Ireland
Ireland
Ireland
Non-trading
Non-trading
8 Airways Industrial Estate, Dublin 17, Ireland
8 Airways Industrial Estate, Dublin 17, Ireland
Non-trading 7 Airways Industrial Estate, Cloghran, Dublin 17, D17 RR88, Ireland
Non-trading 7 Airways Industrial Estate, Cloghran, Dublin 17, D17 RR88, Ireland
Essentra Packaging Puerto Rico, Inc.
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL
Essentra (MEA) Pte. Ltd
Singapore Holding Company
Essentra Packaging US Inc
US
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL
Essentra Filter Products Development Co.
Pte. Ltd
Singapore
Non-trading
Essentra Pte.Ltd
Singapore
Distribution
Essentra Filter Products Leasing Pte. Ltd
Singapore Leasing Company
36 Robinson Road #17-01, City House, Singapore, 068877,
Singapore
36 Robinson Road #17-01, City House, Singapore, 068877,
Singapore
36 Robinson Road, #17-01 City House, Singapore, 068877,
Singapore
36 Robinson Road #17-01, City House, Singapore, 068877,
Singapore
Innovative Components, Inc.
Micro Plastics, Inc.
Manufacturing
1315 W Lawrence Avenue, Springfield, IL 62704, United States
Essentra Components GmbH
Austria Holding Company
Schubertring 6, 1010 Wien, Austria
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL
Essentra Pty Ltd
Australia Treasury activities
503-505 Victoria Street, Wetherill Park, NSW, 2145, Australia
3C! Packaging, Inc
US
Manufacturing
1000 CCC Drive, Clayton, NC 27520, United States
60154, United States
Essentra Industria E Commercio LTDA
Brazil
Manufacturing Room 7, No 1000 Avenida Emilio Marconato, Centro Comercial,
Chacara Primavera, Jaguariuna, Sao Paulo, 13.916-074, Brazil
5566
ESSENTRA PLC FINANCIAL REPORT 2020
ESSENTRA PLC COMPANY NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
5577
Skiffy Limited
Stera Tape Limited
Essentra Filter Products Inc
Essentra Packaging Inc
Essentra Plastics LLC
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Dormant
Avebury House, 201-249 Avebury Boulevard, Milton Keynes,
Manufacturing
1675 South State Street, Ste B Dover, DE 19901, United States
Manufacturing 10 S Jefferson Street, Ste 1400 Roanoke, VA 24011, United States
Manufacturing
1675 South State Street, Ste B Dover, DE 19901, United States
US
US
Non-trading
Non-trading
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL
60154, United States
Netherlands
Netherlands
Distribution
Distribution
Den Belleman 9, 5571 NR Bergeyk, Netherlands
Celsiusweg 37, 8912 AM, Leeuwarden, Netherlands
Netherlands Holding Company
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Netherlands Holding Company
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Netherlands Holding Company
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
Netherlands Holding Company
Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands
ESNT Components Co.
US LLC 2, LLC
Essentra Components BV
Essentra Packaging B.V.
Blue NewCo 1 B.V.
Blue NewCo 2 B.V.
Blue NewCo 3 B.V.
Blue NewCo 4 B.V.
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
208 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Essentra plc Company Notes continued
10. Subsidiary undertakings continued
Essentra Limited
China Tobacco Essentra (Xiamen) Filters
Co., Ltd
Essentra Precision Machinery Components
(Ningbo) Co. Ltd.
Country of
incorporation
Principal activity
Canada
Manufacturing
China
Non-trading
Address of registered office
2538 Spears Road, Oakville ON L6L 5K9, Canada
Floor 2 No.289 Binshui Road, Qiaoying Street, Jimei Ditrict,
Xiamen City, China
China
Manufacturing
99 Huanghai Road, Beilun District, Ningbo, Zhejiang Province,
China
Essentra Trading (Ningbo) Co. Ltd
China
Distribution
Essentra Components International Trading
(Shanghai) Co Ltd
China Holding Company
No.99 Huanghai Road, Beilum District, Ningbo, Zhejiang
Province, China
Room 347, Xinmaolou Building, 2 Taizhong South Road, China
(Shanghai) Pilot Free Trade Zone, Pudong New Area, Shanghai,
200120, China
Essentra Plastic Trading (Ningbo) Co. Ltd
China Holding Company
99 Huanghai Road, Beilun District, Ningbo, Zhejiang , China
Componentes Innovadores Limitada
Costa Rica
Essentra Components sro
Essentra Packaging S.a.r.l.
Essentra Components SAS
Essentra International Gmbh
Essentra Components GmbH
Essentra Packaging GmbH
Essentra Components Limited --- Branch
Germany
Manufacturing Cartago-Cartago Parque Industrial Y Zona Franca Zeta, Cartago,
Edificios, 48C3 48C4, Costa Rica
Holding Company
Víde?ská 101/119, Dolní Heršpice, Brno, 619 00, Czech Republic
Czech
Republic
France Holding Company
F-27200, Sarreguemines, Rue Guillaume, Schoettke , France
France
Non-trading
280 rue de la Belle Étoile, 95700 , Roissy , France
Germany Holding Company
Germany
Manufacturing
Filmstr. 5, 06766, Bitterfeld-Wolfen, Germany
3, Montel-Allee, Nettetal, 41334, Germany
Germany
Manufacturing
Filmstrasse. 5, D-06766 , Edisonstrasse, Wolfen , Germany
Germany
Distribution
Montel-Allee 3, 41334 Nettetal, Germany
Essentra (Hong Kong) Limited
Hong Kong
Non-trading
36/F, Tower Two, Times Square, 1 Matheson Street, Causeway
Bay, Hong Kong
Essentra Components Kft
Essentra Filter Products Kft
PT Essentra
Hungary Holding Company
Hungary
Manufacturing
1113, Nagyszolos ut 11-15, Budapest, Hungary
2310 Szigetszentmiklos, Leshegy ut 30, Hungary
Indonesia
Manufacturing Jalan Berbek Industri 1, 18-20 Surabaya Industrial Estate Rungkut
(SIER), Sidoario, 61256, Indonesia
PT Essentra Trading Surabaya
Indonesia
Manufacturing
Essentra (India) Private Limited
India
Manufacturing
Jalan Berbek Industri I/23, Kel. Berbek, Kec, Waru, Kab. Sidoarjo
Prov,Surabaya, Jawa Timur, Indonesia
No.3, (old plot nos. 18 & 23), 3rd Main Road, Peenya Industrial
Area, Phase 1,Bangalore, Yeshwantpur Hobli, 560 058, India
ITC Essentra Limited
ESNT Holdings SpA
India
Manufacturing Doddajala Post, Yarthiganahally, (Via) Bettahalasur, Bangalore
North, 562 157, India
Italy Holding Company Podenzano (PC), Loc.I Casoni Fraz. Gargia, Via Copernico no. 54,
29027, Italy
Essentra Packaging Srl
Italy
Distribution
Via Copernico n.54, Loc. 1 Casoni Fraz., Gariga, 29027,
Podenzano , Italy , Italy
Essentra Components srl
Essentra Filter Products Spa
Abric Encode Sdn Bhd
Italy
Italy
Malaysia
Essentra Malaysia Sdn Bhd
Malaysia
Non-trading
Via Massarenti, 1 Loc, 1 Maggio, 40013, Castel Maggiore, Italy
Non-trading
Casoni di Gariga, Via Copernico n. 54, Casoni PC, 29027, Italy
Manufacturing Unit 1110 Block A, Pusat Dagangan Phileo Damansara II, 15 Jalan
16/11 Off Jalan Damansara, 46350 Petaling Jaya, Selangor Darul
Ehsan, Malaysia
Non-trading Unit 1110 Block A, Pusat Dagangan Phileo Damansara II, 15 Jalan
16/11 Off Jalan Damansara, 46350 Petaling Jaya, Selangor Darul
Ehsan, Malaysia
Essentra Asia Sdn Bhd
Malaysia
Non-trading Unit D --- 3A --- 10, 4th Floor, Greentown Square, Jalan Dato' Seri
Ahmed Said, 30450 Ipoh, Perak, Malaysia
Essentra Components SEA (M) SDN BHD
Malaysia
Non-trading
D5-5-6, Solaris Dutamas 1 , Jalan Dutamas 1, 50480, Kuala
Lumpur, Malaysia
Essentra Components S.A. de C.V. de R.L.
Mexico
Manufacturing
Carretera a Huinala #510, Apodaca, NL 66640, Mexico
ESNT Limited
New Zealand
Services Quigg Partners, Floor 7, 36 Brandon Street, Wellington Central,
Wellington, 6011, New Zealand
Essentra Filter Products S.A.
Essentra Sp. z o.o.
Boxes Prestige Poland Sp. z o.o.
Paraguay
Poland
Poland
Distribution
Non-trading
Dormant
Calle 12, Acacary, Cuidad del Este, Paraguay
11 Lakowa Street, 90-562 , Lodz, Poland
Tokarska 25, 20-210, Lublin, Poland
5588
ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Essentra plc Company Notes continued
FINANCIAL STATEMENTS 209
10. Subsidiary undertakings continued
10. Subsidiary undertakings continued
Country of
incorporation
Principal activity
Address of registered office
Essentra Limited
Canada
Manufacturing
2538 Spears Road, Oakville ON L6L 5K9, Canada
Essentra Packaging Spó?ka z o.o.
China Tobacco Essentra (Xiamen) Filters
China
Non-trading
Floor 2 No.289 Binshui Road, Qiaoying Street, Jimei Ditrict,
Pharmagraphics --- Central Europe Spółka z
o.o.
Essentra Precision Machinery Components
China
Manufacturing
99 Huanghai Road, Beilun District, Ningbo, Zhejiang Province,
Essentra Co., Ltd.
Co., Ltd
(Ningbo) Co. Ltd.
Essentra Trading (Ningbo) Co. Ltd
China
Distribution
No.99 Huanghai Road, Beilum District, Ningbo, Zhejiang
Essentra Components SRL
Country of
incorporation
Principal activity
Poland
Poland
Manufacturing
Non-trading
Republic of
Korea
Romania
Distribution
Distribution
Essentra Components International Trading
China Holding Company
Room 347, Xinmaolou Building, 2 Taizhong South Road, China
OOO Essentra Filter Products
Russia
(Shanghai) Co Ltd
(Shanghai) Pilot Free Trade Zone, Pudong New Area, Shanghai,
Dormant ---
Dissolved 20th
February 2021
Xiamen City, China
China
Province, China
200120, China
Address of registered office
Tokarska 25, 20-210, Lublin, Poland
Wislisko 1, Kraków, 31-538, Poland
5th Floor, One IFC, 10, Gukjegeumyung-ro, Youngdeungpo-gu,
Seoul, 07326, Korea, Republic of
Burcuresti Sectorul 1, Strada POLANA, Nr. 68-72, Etaj 2 , Biroul
NR.5 , Romania
Moskovskyi pr. 60/129, Business center Senator, 190005, St
Petersburg, Russian Federation
Essentra Plastic Trading (Ningbo) Co. Ltd
China Holding Company
99 Huanghai Road, Beilun District, Ningbo, Zhejiang , China
Componentes Innovadores Limitada
Costa Rica
Manufacturing Cartago-Cartago Parque Industrial Y Zona Franca Zeta, Cartago,
Essentra Saint-Petersburg Limited Liability
Company
Russia
Dormant
4a Finlyandskiy Prospect, 194044, St. Petersburg, Russian
Federation
Edificios, 48C3 48C4, Costa Rica
Essentra Components sro
Slovakia
Distribution
Gogol'ova 18, 852 02 Bratislava, Slovakia
Essentra Components sro
Czech
Holding Company
Víde?ská 101/119, Dolní Heršpice, Brno, 619 00, Czech Republic
Essentra Components (Pty) Ltd
South Africa
Distribution Unit 2. Sage Corporate Park, Corner Suni and Tsessebe Streets,
South Midrand, Gauteng, 1683, South Africa
France Holding Company
F-27200, Sarreguemines, Rue Guillaume, Schoettke , France
ESNT Holdings S.A.U.
Spain Holding Company
Essentra Packaging S.A.
Spain
Manufacturing
Nekicesa Packaging SL
Spain
Manufacturing
Essentra Components S.L.U
Spain
Distribution
Carrer dels Fusters 18-20, Poligono Industrial Can Cuyas,
Montcada I Reixac, 08110, Barcelona, Spain
Carrer dels Fusters 18-20, Poligono Industrial Can Cuyas,
Montcada I Reixac, 08110, Barcelona, Spain
Ctra. de Navalcarnero a Chinchon km., 21,2 Grinon, 28971,
Madrid, Spain
Calle Roure Gros 1-11, Poligono Industrial Mas d'En Cisa, 08181,
Spain
Essentra Components AB
Essentra Hertila AB
Essentra Components Sarl
Sweden
Manufacturing Askims Verkstadsvag 13Sweden, 436 34 Askim, Vastra Gotalands
Ian, Goteborg kommun, Sweden
Sweden
Dormant
Switzerland
Non-trading
Persbogatan 1, SE-265 38 , Åstorp, Sweden
MCE Avocats, rue du Grand-Chêne 1-3, 1003 Lausanne,
Switzerland
Essentra Eastern Limited
Thailand
Non-trading 111/5 Moo 2 Tambon Makamku, Amphur Nikom Pattana, Rayong
Province, Thailand
San Yai Holding Company Limited
Thailand Holding Company
Pranakorn Holding Company Limited
Thailand Holding Company
Essentra Limited
Thailand
Manufacturing
Apex Filters Company Limited
Thailand
Non-trading
Chemical Resins (Thailand) Limited
Thailand
Non-trading
Turkey
Distribution
116/3 Soi Thiantalay 24, Bangkhunthian-Chaitalay Road, Sub-
District Thakam, District Bangkhunthian, Bangkok, 10150,
Thailand
116/3 Soi Thiantalay 24, Bangkhunthian-Chaitalay Road, Sub-
District Thakam, District Bangkhunthian, Bangkok, 10150,
Thailand
116/3 Soi Thiantalay 24, Bangkhunthian-Chaitalay Road,
Thakam, Bangkhunthian, Bangkok , 10150, Thailand
31/2 Rama 3 Road, Chongnonsee, Yannawa, Bangkok 10120,
Thailand
4th Floor, 77/1 Soi Ruamrudee 2, Ploenchit Road, Lumpini,
Pathumwan, Bangkok, 10330, Thailand
Ilitelli Organzie Sanayi, Bolgesi Metal Is San,Sit.7.Blok No24
Basaksehir, Istanbul, Turkey
United Arab
Emirates
Venezuela
Manufacturing Plot No. S20403, Jebel Ali Free Zone (JAFZA), PO Box No 261392,
Dubai, United Arab Emirates
Dormant Urbn. Parque Comercio Industrial Castillito, Lot No. P-8. STreet
103 c/c Av. 66, San Diego Municipality, Valencia, Edo Carabobo,
Venezuela
Mesan Kilit A.S.
Essentra FZE
Filtrona Venezolana C.A.
ESSENTRA PLC COMPANY NOTES
ESSENTRA PLC FINANCIAL REPORT 2020
5599
Essentra Packaging S.a.r.l.
Essentra Components SAS
Essentra International Gmbh
Essentra Components GmbH
Essentra Packaging GmbH
Germany
Republic
France
Non-trading
280 rue de la Belle Étoile, 95700 , Roissy , France
Germany Holding Company
Germany
Manufacturing
Filmstr. 5, 06766, Bitterfeld-Wolfen, Germany
3, Montel-Allee, Nettetal, 41334, Germany
Germany
Manufacturing
Filmstrasse. 5, D-06766 , Edisonstrasse, Wolfen , Germany
Essentra Components Limited --- Branch
Germany
Distribution
Montel-Allee 3, 41334 Nettetal, Germany
Essentra (Hong Kong) Limited
Hong Kong
Non-trading
36/F, Tower Two, Times Square, 1 Matheson Street, Causeway
Bay, Hong Kong
Essentra Components Kft
Essentra Filter Products Kft
PT Essentra
Hungary Holding Company
Hungary
Manufacturing
1113, Nagyszolos ut 11-15, Budapest, Hungary
2310 Szigetszentmiklos, Leshegy ut 30, Hungary
Indonesia
Manufacturing Jalan Berbek Industri 1, 18-20 Surabaya Industrial Estate Rungkut
PT Essentra Trading Surabaya
Indonesia
Manufacturing
Jalan Berbek Industri I/23, Kel. Berbek, Kec, Waru, Kab. Sidoarjo
(SIER), Sidoario, 61256, Indonesia
Prov,Surabaya, Jawa Timur, Indonesia
Essentra (India) Private Limited
India
Manufacturing
No.3, (old plot nos. 18 & 23), 3rd Main Road, Peenya Industrial
Area, Phase 1,Bangalore, Yeshwantpur Hobli, 560 058, India
ITC Essentra Limited
India
Manufacturing Doddajala Post, Yarthiganahally, (Via) Bettahalasur, Bangalore
ESNT Holdings SpA
Italy Holding Company Podenzano (PC), Loc.I Casoni Fraz. Gargia, Via Copernico no. 54,
Essentra Packaging Srl
Italy
Distribution
Via Copernico n.54, Loc. 1 Casoni Fraz., Gariga, 29027,
Essentra Components srl
Essentra Filter Products Spa
Abric Encode Sdn Bhd
Italy
Italy
Non-trading
Via Massarenti, 1 Loc, 1 Maggio, 40013, Castel Maggiore, Italy
Non-trading
Casoni di Gariga, Via Copernico n. 54, Casoni PC, 29027, Italy
Malaysia
Manufacturing Unit 1110 Block A, Pusat Dagangan Phileo Damansara II, 15 Jalan
16/11 Off Jalan Damansara, 46350 Petaling Jaya, Selangor Darul
Essentra Malaysia Sdn Bhd
Malaysia
Non-trading Unit 1110 Block A, Pusat Dagangan Phileo Damansara II, 15 Jalan
16/11 Off Jalan Damansara, 46350 Petaling Jaya, Selangor Darul
Essentra Asia Sdn Bhd
Malaysia
Non-trading Unit D --- 3A --- 10, 4th Floor, Greentown Square, Jalan Dato' Seri
Ahmed Said, 30450 Ipoh, Perak, Malaysia
Essentra Components SEA (M) SDN BHD
Malaysia
Non-trading
D5-5-6, Solaris Dutamas 1 , Jalan Dutamas 1, 50480, Kuala
Essentra Components S.A. de C.V. de R.L.
Mexico
Manufacturing
Carretera a Huinala #510, Apodaca, NL 66640, Mexico
ESNT Limited
New Zealand
Services Quigg Partners, Floor 7, 36 Brandon Street, Wellington Central,
North, 562 157, India
29027, Italy
Podenzano , Italy , Italy
Ehsan, Malaysia
Ehsan, Malaysia
Lumpur, Malaysia
Essentra Filter Products S.A.
Essentra Sp. z o.o.
Boxes Prestige Poland Sp. z o.o.
Paraguay
Poland
Poland
Distribution
Non-trading
Dormant
5588
ESSENTRA PLC FINANCIAL REPORT 2020
Wellington, 6011, New Zealand
Calle 12, Acacary, Cuidad del Este, Paraguay
11 Lakowa Street, 90-562 , Lodz, Poland
Tokarska 25, 20-210, Lublin, Poland
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
210 FINANCIAL STATEMENTS
IInnddeeppeennddeenntt aauuddiittoorrss’’ rreeppoorrtt
ttoo tthhee mmeemmbbeerrss ooff EEsssseennttrraa ppllcc
Report on the audit of the financial statements
Opinion
In our opinion:
• Essentra plc’s Group financial statements and Company financial statements (the ‘‘financial statements’’) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31 December 2020 and of the Group’s profit and the Group’s cash flows for the year
then ended;
• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101 ‘‘Reduced Disclosure Framework’’, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and Company Balance Sheets as
at 31 December 2020; the Consolidated Income Statement and Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Cash Flows, and the Consolidated and Company Statements of Changes in Equity for the year then ended; the Accounting Policies; the Critical
Accounting Judgements and Estimates; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in the Accounting Policies to the Group financial statements, the Group, in addition to applying international accounting standards
in conformity with the requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘‘ISAs (UK)’’) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided
to the Group.
Other than those disclosed in note 2 to the financial statements, we have provided no non-audit services to the Group in the period under audit.
Our audit approach
Overview
Audit scope
• Local PwC component teams engaged to perform full scope audit procedures over 33 reporting units
• PwC Group audit team performed full scope audit procedures over a further 7 reporting units
• Specified audit procedures were performed by component auditors over certain balances, including revenue, at a further 4 reporting units
• PwC Group audit team also performed audit procedures over specific balances within a further 34 reporting units
Key audit matters
• Presentation of adjusting items (Group)
• Goodwill impairment in the Packaging division (Group)
• Impact of COVID-19 (Group and Company)
• Compliance with US sanctions legislation (Group)
Materiality
• Overall Group materiality: £3,300,000 (2019: £3,600,000) based on a three year average of 5% of profit before tax, amortisation of acquisition
intangibles and adjusting item
• Overall Company materiality: £7,100,000 (2019: £6,200,000) based on 1% of net assets
• Performance materiality: £2,500,000 (Group) and £5,300,000 (Company)
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FINANCIAL STATEMENTS 211
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related
to non-compliance with the Listing Rules, UK and overseas tax legislation, employment laws and regulations , health and safety legislation and
import and export restrictions including US sanctions legislation, and we considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls), and determined that the principal risks were related to posting of journal entries
to improve revenue performance or to manipulate metrics relating to bank covenants, and management bias in key accounting estimates.
The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in
response to such risks in their work. Audit procedures performed by the Group engagement team and/or component auditors included:
• Review of correspondence with the regulators and government authorities.
• Review of correspondence with legal advisors.
• Review of matters reported through the Group’s whistleblowing helpline and the results of management’s investigation of such matters.
• Enquiries of management at the Group, divisional and local levels.
• Enquiries of the Group’s legal team.
• Enquiries with component auditors.
• Evaluation of management’s controls designed to prevent and detect irregularities, in particular their compliance procedures in respect
of sanction market trading.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted
• Review of internal audit reports in so far as they related to the financial statements.
• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations which result in an impact
to revenue or to metrics relevant to banking covenants.
• Challenging estimates and judgements made by management in determining significant accounting estimates, in particular in relation
to impairment of goodwill in the Packaging division, adjusting items, going concern and compliance with US sanctions legislation.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
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This is not a complete list of all risks identified by our audit.
COVID-19 is a new key audit matter this year. Otherwise, the key audit matters below are consistent with last year.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC
ESSENTRA PLC FINANCIAL REPORT 2020
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IInnddeeppeennddeenntt aauuddiittoorrss’’ rreeppoorrtt
ttoo tthhee mmeemmbbeerrss ooff EEsssseennttrraa ppllcc
Report on the audit of the financial statements
Opinion
In our opinion:
then ended;
• Essentra plc’s Group financial statements and Company financial statements (the ‘‘financial statements’’) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31 December 2020 and of the Group’s profit and the Group’s cash flows for the year
• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
• the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101 ‘‘Reduced Disclosure Framework’’, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and Company Balance Sheets as
at 31 December 2020; the Consolidated Income Statement and Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Cash Flows, and the Consolidated and Company Statements of Changes in Equity for the year then ended; the Accounting Policies; the Critical
Accounting Judgements and Estimates; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in the Accounting Policies to the Group financial statements, the Group, in addition to applying international accounting standards
in conformity with the requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union.
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘‘ISAs (UK)’’) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided
Other than those disclosed in note 2 to the financial statements, we have provided no non-audit services to the Group in the period under audit.
Independence
to the Group.
Our audit approach
Overview
Audit scope
• Local PwC component teams engaged to perform full scope audit procedures over 33 reporting units
• PwC Group audit team performed full scope audit procedures over a further 7 reporting units
• Specified audit procedures were performed by component auditors over certain balances, including revenue, at a further 4 reporting units
• PwC Group audit team also performed audit procedures over specific balances within a further 34 reporting units
Key audit matters
• Presentation of adjusting items (Group)
• Goodwill impairment in the Packaging division (Group)
• Impact of COVID-19 (Group and Company)
• Compliance with US sanctions legislation (Group)
Materiality
intangibles and adjusting item
• Overall Company materiality: £7,100,000 (2019: £6,200,000) based on 1% of net assets
• Performance materiality: £2,500,000 (Group) and £5,300,000 (Company)
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ESSENTRA PLC FINANCIAL REPORT 2020
• Overall Group materiality: £3,300,000 (2019: £3,600,000) based on a three year average of 5% of profit before tax, amortisation of acquisition
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
212 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Independent auditors’ report
to the members of Essentra plc continued
Key audit matter
How our audit addressed the key audit matter
Presentation of adjusting items (Group)
The financial statements include certain items which are disclosed
as adjusting items. In the year, the presentation of the consolidated
income statement has been changed to remove the adjusted
operating profit measure from the primary statement. A reconciliation
between reported operating profit and adjusted operating profit is now
presented as a footnote below the income statement. In addition, the
description previously used for adjusting items has been changed from
‘‘exceptional and other adjusting items’’ to ‘‘adjusting items’’, whilst its
scope and definition remains unchanged.
The nature of the adjusting items is explained within the Group
accounting policy and includes transaction costs relating to acquisition
and disposals of businesses, acquisition integration and restructuring
costs, and other items such as site closure costs and one-off projects.
In the year the most significant adjusting items relate to restructuring
costs (£12.7 million), external professional costs associated with certain
corporate development activities (£4.6 million), acquisition related
costs associated with 3C! and the formation of the China JV
(£1.3 million). These costs have been offset by a £0.3m gain relating
to a VAT refund on the costs of a previous business disposal and £1.2m
release of a provision relating to an investigation into compliance with
US sanctions laws within the Filters division.
We focused on this area as there is limited guidance relating to this
presentational matter within IFRS and judgement is required by
the directors in determining whether items classified as adjusting
are consistent with the group’s accounting policy. Consistency in
identifying and disclosing items as adjusting is important to maintain
comparability of the results year on year.
See the Critical Accounting Judgements and Estimates section for
management’s disclosure of this significant judgement. Also see
the Significant financial judgements section in the Audit and
Risk Committee report.
We have considered the appropriateness of the revised presentation
of adjusting items and assessed the appropriateness of the Group’s
accounting policy for the recognition of adjusting items with
reference to the applicable guidance relating to alternative
performance measures.
We challenged management and considered whether the items
disclosed as adjusting items were consistent with the accounting policy
and the approach taken in prior years, to determine that items were
appropriately classified. We did not identify any material items which
we would expect to be reported in earnings before adjusting items.
Restructuring costs include employee redundancy (£5.0m), write
down of assets (£3.9m) and other closure costs such as onerous
contracts, dilapidation provisions, external project management
consultants and legal costs (£3.8m). We have performed sample
testing across all balances and verified those samples to payroll
records, supporting invoices, agreements or other evidence. For asset
write offs, we have agreed the book value to the accounting records
and evaluated management estimates around potential sale of
fixed assets. To corroborate estimates of dilapidations provisions
and assumptions regarding property lease impairments we have
reviewed advice received by management’s property experts.
£4.6m of external professional costs and acquisition related costs
of £1.3 million associated with 3C! and the Filters China joint venture
have been tested through sampling and items have been traced to
supporting invoices, bank statements and other documentation.
As described in the compliance with US sanctions legislation key
audit matter below, a settlement with the US authorities concerning
compliance failures within its Filters division has been reached.
The surplus provision has been released. The classification of this
item is considered appropriate as the release mirrors the treatment
of the charge when the provision was created in a prior year.
We have considered other one-off or notable credits/charges
recognised in earnings before adjusting items to ensure consistent
treatment with adjusting items.
The disclosures included in note 2 were reviewed and
deemed reasonable.
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FFiinnaanncciiaall SSttaatteemmeennttss
Independent auditors’ report
to the members of Essentra plc continued
Presentation of adjusting items (Group)
We have considered the appropriateness of the revised presentation
The financial statements include certain items which are disclosed
of adjusting items and assessed the appropriateness of the Group’s
as adjusting items. In the year, the presentation of the consolidated
accounting policy for the recognition of adjusting items with
income statement has been changed to remove the adjusted
reference to the applicable guidance relating to alternative
operating profit measure from the primary statement. A reconciliation
performance measures.
between reported operating profit and adjusted operating profit is now
presented as a footnote below the income statement. In addition, the
description previously used for adjusting items has been changed from
‘‘exceptional and other adjusting items’’ to ‘‘adjusting items’’, whilst its
scope and definition remains unchanged.
The nature of the adjusting items is explained within the Group
accounting policy and includes transaction costs relating to acquisition
and disposals of businesses, acquisition integration and restructuring
costs, and other items such as site closure costs and one-off projects.
We challenged management and considered whether the items
disclosed as adjusting items were consistent with the accounting policy
and the approach taken in prior years, to determine that items were
appropriately classified. We did not identify any material items which
we would expect to be reported in earnings before adjusting items.
Restructuring costs include employee redundancy (£5.0m), write
down of assets (£3.9m) and other closure costs such as onerous
contracts, dilapidation provisions, external project management
consultants and legal costs (£3.8m). We have performed sample
In the year the most significant adjusting items relate to restructuring
testing across all balances and verified those samples to payroll
costs (£12.7 million), external professional costs associated with certain
records, supporting invoices, agreements or other evidence. For asset
corporate development activities (£4.6 million), acquisition related
write offs, we have agreed the book value to the accounting records
costs associated with 3C! and the formation of the China JV
and evaluated management estimates around potential sale of
(£1.3 million). These costs have been offset by a £0.3m gain relating
fixed assets. To corroborate estimates of dilapidations provisions
to a VAT refund on the costs of a previous business disposal and £1.2m
and assumptions regarding property lease impairments we have
release of a provision relating to an investigation into compliance with
reviewed advice received by management’s property experts.
US sanctions laws within the Filters division.
£4.6m of external professional costs and acquisition related costs
We focused on this area as there is limited guidance relating to this
of £1.3 million associated with 3C! and the Filters China joint venture
presentational matter within IFRS and judgement is required by
the directors in determining whether items classified as adjusting
are consistent with the group’s accounting policy. Consistency in
identifying and disclosing items as adjusting is important to maintain
comparability of the results year on year.
have been tested through sampling and items have been traced to
supporting invoices, bank statements and other documentation.
As described in the compliance with US sanctions legislation key
audit matter below, a settlement with the US authorities concerning
compliance failures within its Filters division has been reached.
See the Critical Accounting Judgements and Estimates section for
The surplus provision has been released. The classification of this
management’s disclosure of this significant judgement. Also see
item is considered appropriate as the release mirrors the treatment
the Significant financial judgements section in the Audit and
of the charge when the provision was created in a prior year.
Risk Committee report.
We have considered other one-off or notable credits/charges
recognised in earnings before adjusting items to ensure consistent
treatment with adjusting items.
The disclosures included in note 2 were reviewed and
deemed reasonable.
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
FINANCIAL STATEMENTS 213
Goodwill impairment in the Packaging division (Group)
The Group has goodwill of £328 million, of which £211 million is allocated
to the Packaging division, £95 million to Components, and £22 million
to Filters. Under IAS 36 Impairment of Assets, all cash generating units
(CGUs) containing goodwill and indefinite lived intangible assets must
be tested for impairment at least annually. Management has prepared
a value in use (‘‘VIU’’) calculation for each of the three divisions in order
to assess their recoverability.
Consistent with prior years, the headroom on the annual impairment
assessment for the Packaging division is more sensitive to changes in
key assumptions and as such is a focus area. The headroom against
the asset carrying value as at 31 December 2020 is £252 million as
compared to £284 million in 2019. The reduction in headroom is mainly
due to the impact of COVID-19 on trading performance, which has
affected both the beauty and pharmaceuticals markets and in 2020
has disrupted management’s plans to return to industry average
margins. The discount rate calculated by management has decreased
compared to prior year, which has offset some of the decrease in the
headroom in the Packaging model.
The impairment reviews performed by management contain a number
of significant judgements and estimates including revenue growth
rates, profit margins and discount rates. A change in these
assumptions can result in a material change in the valuation
of the assets.
See the Critical Accounting Judgements and Estimates section for
management’s disclosure of this significant accounting estimate.
Also see the Significant financial judgements section in the Audit & Risk
Committee report.
Impact of COVID-19 (Group and Company)
The COVID-19 pandemic has had a significant impact on the Group’s
business during 2020 with the performance of the business being
significantly adversely affected in the first half of 2020 followed by
a recovery in the last quarter of the year.
COVID-19 has had a pervasive impact across the Group and has
required management to reconsider a number of accounting
judgements and estimates. These included adjusting business plans
and models which underpin the annual assessments of impairment
and going concern; the assessment of the expected credit loss on trade
receivables; the impact on accruals for long term incentive schemes;
and the recognition of restructuring costs associated with footprint
changes announced in the second half of 2020.
We have considered the pervasive impact of COVID-19 through the
planning, risk assessment and execution phases of our audit with
particular focus on the effect the pandemic has had on areas of key
accounting judgement and estimation. Separate key audit matters
cover our conclusions on adjusting items and goodwill impairment.
We assessed the methodology applied by management in performing
their impairment reviews and tested the integrity of management’s
cash flow models.
We tested key assumptions made in the impairment review, such as
those around operating margins back to industry and competitor data.
We evaluated the future cash flow forecasts, including short term cash
flows, and the process by which they were determined. In doing so we
compared the cash flow forecasts to the latest Board approved plans
and compared prior year budgets to 2020 actual performance in order
to assess the quality of management’s forecasting process. Whilst the
actual performance in 2020 was below plan due to the impact of
COVID-19, based on the forecasting history to date, there are no
indicators of bias in management’s medium to long term forecasts
for Packaging.
With the support of our valuation experts, we have tested key
assumptions including long-term growth rates and discount rates.
We have compared growth rates to third party published economic
and industry forecasts and analyst reports. We validated the discount
rate by recalculating the Group’s weighted average cost of capital for
each CGU. We found the assumptions to be reasonable.
We performed sensitivity analyses around the key assumptions to
ascertain the extent of change in those assumptions that, either
individually or collectively, would be required for goodwill to be impaired.
We noted that the required level of change was beyond that which we
would consider likely given the current market conditions and recent
performance of the business.
Disclosures included within note 8 have also been assessed against the
requirements of IFRS and deemed reasonable.
During the course of 2020 management has prepared a number of
accounting position papers which consider the wider impact of COVID-
19 on the Group’s financial statements. We have reviewed these papers,
considered the appropriateness of management’s proposed treatments
in line with published guidance and, where the impact is material,
tested key assumptions to supporting documentation.
Where forecast financial information is relevant to an accounting
judgement we have considered how management has modelled the
impact of COVID-19 in its forecasts for 2021 and 2022. In performing
this assessment we have taken into account the impact that the first
wave of the virus and the associated government restrictions had on
the Group’s results in the second and third quarters of 2020 and the
subsequent partial recovery of the business in the second half of 2020
and considered how further lockdowns and restrictions may affect the
business in subsequent periods.
In the case of going concern we have assessed management’s base
case and the severe but plausible downside scenario which more closely
reflects the 2020 experience during a further forecast lockdown in 2021.
We have then recalculated management’s headroom and covenant
compliance tests throughout 2021 and 2022 to confirm that in their
severe scenario sufficient liquidity and covenant compliance remains.
Refer to our Key Audit matters above for details of how we have
considered the impact of COVID-19 in our audit procedures over the
impairment tests performed by management in respect to the carrying
value of goodwill recognised in the consolidated financial statements.
We have reviewed the disclosures included within the financial
statement in respect to the impact of COVID-19 to ensure that the
disclosures are consistent with published guidance and the presentation
of additional costs incurred by the Group in responding to the pandemic
is appropriate.
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC
ESSENTRA PLC FINANCIAL REPORT 2020
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FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
214 FINANCIAL STATEMENTS
FFiinnaanncciiaall SSttaatteemmeennttss
Independent auditors’ report
to the members of Essentra plc continued
Key audit matter
How our audit addressed the key audit matter
Compliance with US sanctions legislation (Group)
In the previous year, the Group identified sanctions compliance failures
within its Filters division and in early 2020 made a voluntary disclosure
to the US Office of Foreign Assets Control (‘OFAC’). During the year
the Group as reached a settlement with OFAC and a subsidiary entity,
Essentra FZE, has entered into a deferred prosecution agreement
(‘DPA’) with and been subject to a fine from the US Department of
Justice (‘DOJ’). OFAC has issued two Cautionary Letters to the Group
in response to a number of historical violations of sanctions but has
received no further financial penalties. The DPA imposes a number
of conditions on the Essentra FZE including maintaining an effective
compliance programme and reporting on the status of this on a
quarterly basis.
As noted in the adjusting items key audit matter, the settlement of
these matters resulted in a release of £1.2m of a provision recognised
in a prior period, which was recorded as an adjusting item.
We have verified payment of the monetary penalty imposed by the
DOJ to bank statements. We have read the cautionary letter from
OFAC and confirmed this is the final settlement of this matter. We have
met with the Group’s external legal advisers who are retained in respect
to these matters to understand the status of their discussions with
OFAC/DOJ and to make enquiries regarding the legal status and terms
of the DPA and cautionary letters. We have assessed the probability
of further material costs being incurred to be low and recalculated the
release of the remaining provision.
We have reviewed the DPA and assessed the ongoing obligations
placed on Essentra FZE. We have performed extended procedures at
sites within the Filters division, including Essentra FZE, to assess the
effectiveness of the Group’s updated compliance programme over
sanctioned markets trade. We have tested a sample of sales
transactions to verify whether they relate to sanctioned markets
and if so whether the internal controls and approval process has been
followed, and tested a sample of bank payments and receipts for
compliance with sanctions rules.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
The Group is split into three divisions being Components, Packaging and Filters. Each division consists of a large number of reporting sites spread
globally across 34 territories. There are 255 reporting units within the consolidation, which include the reporting sites and other consolidation units.
We did not identify any individually significant components within the Group, with the largest contribution to revenue being 6% from one reporting
site, and the average being 1%. We determined the most effective approach was to engage PwC local component teams to perform full scope
procedures over 33 reporting units, with the Group audit team performing full scope audit work over a further 7 reporting units. In addition,
specified audit procedures were performed over certain balances, including revenue, at a further 4 reporting units. In the largest sites in North
America, specified procedures over fixed assets, inventory and trade receivables were also performed. The Group audit team also performed audit
procedures over specific balances within a further 34 reporting units. This approach ensures that appropriate audit coverage has been obtained
over all financial statement line items.
Where work was performed by component auditors, we determined the appropriate level of involvement we needed to have in that audit work to
ensure we could conclude that sufficient appropriate audit evidence had been obtained for the Group financial statements as a whole. We issued
written instructions to all component auditors and had regular communications with them throughout the audit cycle. This included a virtual
clearance meeting with each component team and review of all significant matters reported.
In addition members of the Group engagement team have reviewed working papers of a number of component audit teams and attended
clearance meetings with local management for sites in Hungary, Singapore, UK and the US.
Based on the detailed audit work performed across the Group, we have gained coverage of 67% of revenue, 74% of profit before tax, and 73%
of net assets.
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ESSENTRA PLC FINANCIAL REPORT 2020
FINANCIAL STATEMENTSESSENTRA PLC ANNUAL REPORT 2020
FFiinnaanncciiaall SSttaatteemmeennttss
Independent auditors’ report
to the members of Essentra plc continued
Key audit matter
How our audit addressed the key audit matter
Compliance with US sanctions legislation (Group)
We have verified payment of the monetary penalty imposed by the
In the previous year, the Group identified sanctions compliance failures
DOJ to bank statements. We have read the cautionary letter from
within its Filters division and in early 2020 made a voluntary disclosure
OFAC and confirmed this is the final settlement of this matter. We have
to the US Office of Foreign Assets Control (‘OFAC’). During the year
met with the Group’s external legal advisers who are retained in respect
the Group as reached a settlement with OFAC and a subsidiary entity,
to these matters to understand the status of their discussions with
Essentra FZE, has entered into a deferred prosecution agreement
OFAC/DOJ and to make enquiries regarding the legal status and terms
(‘DPA’) with and been subject to a fine from the US Department of
of the DPA and cautionary letters. We have assessed the probability
Justice (‘DOJ’). OFAC has issued two Cautionary Letters to the Group
of further material costs being incurred to be low and recalculated the
in response to a number of historical violations of sanctions but has
release of the remaining provision.
received no further financial penalties. The DPA imposes a number
of conditions on the Essentra FZE including maintaining an effective
compliance programme and reporting on the status of this on a
quarterly basis.
We have reviewed the DPA and assessed the ongoing obligations
placed on Essentra FZE. We have performed extended procedures at
sites within the Filters division, including Essentra FZE, to assess the
effectiveness of the Group’s updated compliance programme over
As noted in the adjusting items key audit matter, the settlement of
sanctioned markets trade. We have tested a sample of sales
these matters resulted in a release of £1.2m of a provision recognised
transactions to verify whether they relate to sanctioned markets
in a prior period, which was recorded as an adjusting item.
and if so whether the internal controls and approval process has been
followed, and tested a sample of bank payments and receipts for
compliance with sanctions rules.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
The Group is split into three divisions being Components, Packaging and Filters. Each division consists of a large number of reporting sites spread
globally across 34 territories. There are 255 reporting units within the consolidation, which include the reporting sites and other consolidation units.
We did not identify any individually significant components within the Group, with the largest contribution to revenue being 6% from one reporting
site, and the average being 1%. We determined the most effective approach was to engage PwC local component teams to perform full scope
procedures over 33 reporting units, with the Group audit team performing full scope audit work over a further 7 reporting units. In addition,
specified audit procedures were performed over certain balances, including revenue, at a further 4 reporting units. In the largest sites in North
America, specified procedures over fixed assets, inventory and trade receivables were also performed. The Group audit team also performed audit
procedures over specific balances within a further 34 reporting units. This approach ensures that appropriate audit coverage has been obtained
over all financial statement line items.
Where work was performed by component auditors, we determined the appropriate level of involvement we needed to have in that audit work to
ensure we could conclude that sufficient appropriate audit evidence had been obtained for the Group financial statements as a whole. We issued
written instructions to all component auditors and had regular communications with them throughout the audit cycle. This included a virtual
clearance meeting with each component team and review of all significant matters reported.
In addition members of the Group engagement team have reviewed working papers of a number of component audit teams and attended
clearance meetings with local management for sites in Hungary, Singapore, UK and the US.
Based on the detailed audit work performed across the Group, we have gained coverage of 67% of revenue, 74% of profit before tax, and 73%
of net assets.
FINANCIAL STATEMENTS 215
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Company
£7,100,000 (2019: £6,200,000).
1% of net assets
The entity is a holding company of the rest of the
Group and is not a trading entity. Therefore an asset
based measure is considered appropriate.
Overall materiality
How we determined it
Rationale for
benchmark applied
Financial statements - Group
£3,300,000 (2019: £3,600,000).
Three year average of 5% of profit before tax,
amortisation of acquisition intangibles and
adjusting items
(2019: 5% of profit before tax, amortisation of
acquisition intangibles and adjusting items)
The Group is profit-oriented, therefore it is considered
most appropriate to apply a profit-based benchmark.
The Directors, management and the users of the Group
financial statements focus on adjusted numbers, being
adjusted operating profit, adjusted net income or
adjusted pre-tax profit. The Group defines ‘adjusted’
as excluding the impact of amortisation of acquired
intangible assets and adjusting items. In order to
incorporate the distorting effects of COVID-19 on
current year profits we consider a 3 year average best
reflects the considerations of the users of the financial
statements. Based on this, we consider a 3 year
average benchmark based on profit before tax,
amortisation of acquired intangible assets and
adjusting items to be most appropriate.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £50,000 and £2,200,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to £2,500,000 for the Group financial statements and £5,300,000 for the Company
financial statements.
In determining the performance materiality, we considered a number of factors --- the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls --- and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £160,000
(Group audit) (2019: £180,000) and £160,000 (Company audit) (2019: £180,000) as well as misstatements below those amounts that,
in our view, warranted reporting for qualitative reasons.
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Independent auditors’ report
to the members of Essentra plc continued
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going concern basis of
accounting included:
• obtaining and agreeing management’s going concern assessment to the business's board approved plan and ensuring that the base case
scenario, representing the business to 31 October 2022 indicates that the business generates sufficient cash flows to meets its long and short
term obligations while complying with covenant arrangements;
• identifying revenue growth and operating margin as the key assumptions inherent in the plan and validating these to historical precedent
and market or industry forecasts;
• analysing the cash flows in the forecast models to identify unexpected trends and relationships and ensuring the mathematical accuracy
of management's models;
• evaluating management's severe but plausible scenario of a similar extent of disruptions as seen in 2020 continuing into the future and ensuring
this is appropriately modelled through the cash flows;
• considering the risk of breach of the covenant arrangements in place for external borrowings under the severe but plausible scenario;
• observing that climate change is expected to have a limited impact during the period of the going concern assessment.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and the Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's and the Company's
ability to continue as a going concern.
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report based on these responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2006 have
been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors' Report for the
year ended 31 December 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors' Report.
Directors’ Remuneration
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
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Independent auditors’ report
to the members of Essentra plc continued
Our evaluation of the directors’ assessment of the Group's and the Company’s ability to continue to adopt the going concern basis of
Conclusions relating to going concern
accounting included:
• obtaining and agreeing management’s going concern assessment to the business's board approved plan and ensuring that the base case
scenario, representing the business to 31 October 2022 indicates that the business generates sufficient cash flows to meets its long and short
term obligations while complying with covenant arrangements;
• identifying revenue growth and operating margin as the key assumptions inherent in the plan and validating these to historical precedent
and market or industry forecasts;
of management's models;
• analysing the cash flows in the forecast models to identify unexpected trends and relationships and ensuring the mathematical accuracy
• evaluating management's severe but plausible scenario of a similar extent of disruptions as seen in 2020 continuing into the future and ensuring
this is appropriately modelled through the cash flows;
• considering the risk of breach of the covenant arrangements in place for external borrowings under the severe but plausible scenario;
• observing that climate change is expected to have a limited impact during the period of the going concern assessment.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and the Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group's and the Company's
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
financial statements is appropriate.
ability to continue as a going concern.
going concern basis of accounting.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report based on these responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures required by the UK Companies Act 2006 have
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
been included.
described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors' Report for the
year ended 31 December 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors' Report.
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies
Directors’ Remuneration
Act 2006.
FINANCIAL STATEMENTS 217
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement, included within the Chairman's Corporate Governance Statement is materially consistent with the financial statements and our
knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do so
over a period of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group's and Company’s prospects, the period this assessment covers and why the period
is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with
the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements
and our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company's position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the financial statements
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
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to the members of Essentra plc continued
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target
particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches
not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting
records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the directors on 20 April 2017 to audit the financial
statements for the year ended 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement is 4 years,
covering the years ended 31 December 2017 to 31 December 2020.
Nicholas Stevenson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Milton Keynes
5 March 2021
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Essentra plc
essentraplc.com
Avebury House
201-249 Avebury Boulevard
Milton Keynes
MK9 1AU
United Kingdom
Telephone: +44 (0)1908 359100
Email: enquiries@essentra.com