Strengthening the
component parts
of our vision
Annual Report & Accounts 2023
We are
Essentra
Our vision: To be the world’s
leading responsible hassle-
free supplier of essential
industrial components
Essentra plc is a FTSE 250 company
and a leading global provider of essential
components and solutions, focusing on
the manufacture and distribution of plastic
injection moulded, vinyl dip moulded and
metal items.
Headquartered in the United Kingdom,
Essentra’s global network extends to 28
countries and includes c.3,000 employees,
14 manufacturing facilities, 24 distribution
centres and 33 sales & service centres.
We serve c.69,000 customers with a rapid
supply of low cost but essential products for
a variety of applications in industries such
as equipment manufacturing, automotive,
fabrication, electronics, medical and
renewable energy.
DIRECTORS’
REPORT
SCOTT FAWCETT
Chief Executive
We continue to demonstrate
the strength and resilience
of our business model,
which is underpinned by
our global footprint, the
breadth and depth of our
diverse product offering, a
wide range of end-markets,
and our focus on a hassle-
free customer proposition.”
AT A GLANCE
Essentra at a glance
A global manufacturing and distribution footprint,
balancing local customer service with operational scale.
EMEA
54%
of revenue
AMERS
34%
of revenue
APAC
12%
of revenue
DIRECTORS’
REPORT
Investment case
STRATEGIC REPORT
1
Essentra at a glance
3 Our business model
4 Chair’s statement
6 Chief Executive’s review
8
9 Market trends
10 Operational review
14 Key performance indicators
16 Financial review
19 Alternative Performance Measures
21 Environment, Social and Governance
40 Our Climate Transition Plan
54 Non-financial key performance indicators
56 Stakeholder engagement
58
Task Force on Climate-Related
Financial Disclosures
65 Risk management report
74 Group Executive Committee
DIRECTORS’ REPORT
77 Chair’s Corporate Governance statement
78 Board of Directors
80 Corporate Governance report
100 ESG Committee report
103 Nomination Committee report
109 Chair of the Audit and Risk Committee’s letter
111 Audit and Risk Committee report
117 Chair of the Remuneration Committee’s letter
121 Remuneration at a glance
122 Annual Report on Remuneration
133 The Directors’ Remuneration Policy report
141 Other statutory information
147 Statement of Directors’ responsibilities
in respect of the Financial Statements
148 Independent Assurance Statements to
Essentra plc
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
165 Critical Accounting Judgements and Estimates
168 Notes to the Consolidated Financial Statements
206 Essentra plc Company Balance Sheet
207 Essentra plc Company Statement of Changes
in Equity
208 Essentra plc Company Notes
216 Independent Auditors’ report to the members
of Essentra plc
14
manufacturing
sites
24
distribution
centres
33
sales and service
centres
c.3,000
employees
worldwide
c.69k
customers
c.60m
parts produced
per week
c.2bn
parts in stock
1
ESSENTRA PLC ANNUAL REPORT 2023
The numbers presented in this Strategic Report reflect the
continuing operations of the Company unless otherwise stated.
Adjusted measures
Adjusted results exclude certain items because, if included, these
items could distort the understanding of Essentra’s performance
for the year and the comparability between periods. In
management’s view, such alternative performance measures
(“APMs”) reflect the underlying performance of the business and
provide a more meaningful comparison of how the business is
managed and measured on a periodic basis. Our APMs and Key
Performance Indicators (“KPIs”) are aligned to our strategy and
business segments, and are used to measure the performance of
the Company and form the basis of the performance measures
for remuneration. See pages 14 and 15 for KPIs and pages 19 and
20 for APMs.
Cautionary forward-looking statement
This Annual Report contains forward-looking statements based
on current expectations and assumptions. Various known and
unknown risks, uncertainties and other factors may cause actual
results to differ from any future results or developments expressed
or implied by the forward-looking statement. Each forward-
looking statement speaks only as of the date of this Annual
Report. The Company accepts no obligation to revise or publicly
update these forward-looking statements or adjust them to
future events or developments, whether as a result of new
information, future events or otherwise, except to the extent
legally required.
DIRECTORS’
REPORT
Operational highlights
First full year of the new pure-play
components focused Essentra plc,
delivering progress towards our
medium-term targets
Continued improvement in
customer satisfaction and
service levels enhancing our
hassle-free proposition
Strong balance sheet, enabling
investment in organic and
inorganic growth
Excellent progress in all areas of
ESG, including announcement of
targets aligned with the Science
Based Targets initiative (“SBTi”)
Value-enhancing acquisition
of BMP TAPPI, a leading Italian
manufacturer and distributor
of protective caps and plugs
Employee engagement score of 82,
above industry benchmark levels
Central corporate costs right-sized
as part of Essentra’s transition to a
pure-play business
Centre of Excellence established
in the UK to test and develop
sustainable product ranges
Pro-active and disciplined cost
control with strong pricing
maintained to offset inflation
Operational footprint enhanced
with the opening of a new
manufacturing facility in Mexico
AT A GLANCE CONTINUED
Financial highlights
Revenue
£316.3m
(2022: £337.9m)
Adjusted operating
profit
£43.2m
(2022: £25.1m)1
Adjusted operating
margin
Reported operating
profit/(loss)
13.7%
(2022: 7.4%)
£10.9m
(2022: £11.3m loss)
Adjusted operating
cash conversion
Reported profit/(loss)
per share
111.6%
(2022: 80.5%)
2.0p
(2022: 10.3p loss)
Adjusted basic
earnings per share
10.6p
(2022: 1.9p)
Dividend per share
3.6p
(2022: 3.3p)
Net debt/(funding
surplus) ratio
Return on invested
capital2
1.0x
12.4%
(2022: 2.3x funding surplus)
(2022: 13.3%)
In addition to adjusted operating profit reported in 2022, pro-forma operating
profit of £43.0m and pro-forma operating margin of 12.7% were included as
additional alternative performance measures and previously used to represent
the continuing business on a standalone basis after the strategic review.
Return on Invested Capital has been adjusted for acquisitions in the period.
Notes:
1
2
2
ESSENTRA PLC ANNUAL REPORT 2023 OUR BUSINESS MODEL
Our business model
Our model is unique in the market. We combine the
expertise and flexibility of a manufacturer with
the service and range of a distributor.
DIRECTORS’
REPORT
Our purpose
Our values
What we do
Our products
Who we serve
Our vision
Our purpose
is to help
customers
build a
sustainable
future
We manufacture
We have the capacity and expertise to
manufacture a wide range of products
14
manufacturing
sites globally
60m
parts produced
per week
We distribute
Our global scale and market knowledge
means that we are able to anticipate
and meet the needs of our customers,
whether large or small, in a wide variety
of end-markets and geographies
24
distribution centres
2bn
parts in stock
We support
Our customers are manufacturers and our
products are a small but critical part of their
manufacturing bill of materials
33
sales and
service locations
c.69k
customers
We care about
our customers
We care about
each other
We deliver
We are an
effective team
Protective
caps and
plugs
Access
hardware
Automotive
and EV
charging
Renewable
energy
Cable
management
Medical
devices
Plastic
fasteners
Electronics
hardware
Other
hardware
Security seals
Other
Our vision
is to be the
world’s leading
responsible
hassle-free
supplier of
essential
industrial
components
ConAgg
Automation
Telecoms
Consumer
equipment
Other
Industrial
equipment
3
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
On a daily basis we manufacture nearly
nine million component items and annually
we produce over three billion components.
These are small but critical parts that go
into other items.”
CHAIR’S STATEMENT
Chair’s statement
Over the past year, the Board and I have seen
the new Essentra emerge and stand itself up as a
strong pure-play global components business that
is already delivering results.
We serve a broad and fragmented industrial
manufacturing market, typically catering to
business to business (“B2B”) manufacturers.
Our day-to-day core markets range from
data cabinet manufacturers to automotive
tier suppliers with our products employed
across a wide range of products, from small
household appliances, to larger agricultural
machinery and telecoms base stations.
Uniquely we combine the range and
service of a distributor with the expertise
and flexibility of a manufacturer. This brings
the customer a hassle-free experience when
buying components that are relatively low in
cost but with propensity to cause disruption
if there is a problem with either delivery
or quality.
In line with announcements that we made
during 2022 and 2023, we have completed
the execution of the strategic reviews and
we have now reached the end of our first full
year as a pure-play components business.
2023 has been a relatively challenging
year due to market conditions, however,
we have taken necessary actions to deliver
an acceptable financial performance whilst
making sure that we have prioritised our
commitment to invest in our future, both
in our existing business, and through our
acquisition of BMP TAPPI in Italy.
On a daily basis we manufacture nearly
nine million component items and annually
we produce over three billion components.
These are small but critical components that
go into other items. When manufacturing on
the scale we do, it becomes impossible to
visualise how these small component parts
are employed into a lot of every day items
that are used by the public.
PAUL LESTER, CBE
Non-Executive Chair
4
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR’S STATEMENT CONTINUED
Growth
We set out our plans for growth at our
Capital Markets Event in November 2022.
Our medium-term goal is to double our
revenue and triple our operating profits.
The business has been focused on achieving
this by leveraging its unique business model
as a global manufacturer and distributor to
ensure the building blocks are in place to
drive organic and inorganic growth, increase
operating efficiencies and margins and
create returns for shareholders.
We opened a new site in Monterrey, Mexico,
during the year and as this site continues to
ramp up its production capabilities, it will also
underpin growth in the Americas, reflecting
the significant contribution this region will
make in the medium and long term.
Also in line with our growth plans, we
were pleased to acquire BMP TAPPI, a
business based outside Milan, Italy, that
produces plastic caps and protection plugs.
BMP TAPPI and Essentra have worked together
for many years already, we therefore know
and understand the business well. The
acquisition provides us with significant
additional capacity to meet customer needs
and has further potential for expansion.
The existing customer base and accessible
location makes this a strategic fit that will
underpin future growth in Europe.
As for many businesses, we have felt
the impact of the challenging economic
environment. We took action during the
year to protect the financial performance
of the Company through cost reduction.
The business has shown its resilience in a
difficult market, as have the people who
work at Essentra. Essentra has demonstrated
its ability to deliver results through financial
cycles during the last year and achieved
adjusted operating margins of 13.7% (2022:
7.4%) on a constant currency current basis.
Environment, social and
governance progress
At the start of this year, with a simplified
business structure, we were able to launch
a holistic ESG strategy. This is a long-term
plan, and the Board and I are pleased to
see continued progress being made which
was underpinned when we moved to
Silver EcoVadis status at the end of 2023,
had our targets approved by the Science
Based Targets initiative (“SBTi”) at the
start of 2024, were accepted as a
member of the UN Global Compact
and achieved an A- rating for climate
from CDP.
We opened our Centre of Excellence
in Kidlington, Oxfordshire, in October
2023. The Centre of Excellence is steadily
evolving to provide technical excellence
for product knowledge, and serves and
supports each site as they work towards
manufacturing a greater proportion of
sustainable products. Other initiatives
are also under way across the social
workstream, with clear goals established
to increase diversity and inclusivity across
the business, and to ensure our people are
able to engage with the community in
which they work.
More information on our ESG progress
can be found on pages 21 to 64.
Stakeholder
engagement and s172
Directors Duties are
reported on page 56
People
Keeping our people safe, and working in a
thriving workplace is essential and at the
heart of everything we do. We are pleased
our health and safety record has improved
this year with 10 Lost Time Incidents (“LTIs”)
compared to 23 LTIs in 2022. This is a LTI rate
of 0.42 for 2023 compared to 0.96 for 2022.
Each site signed up to a safety pledge at the
start of the year, ensuring health and safety
is embedded and owned by every individual
within the business and we continue to place
emphasis on running our business safely as
our first priority.
Leading our people effectively has been
another area of focus this year, with Scott
Fawcett having taken over at the start of
January 2023 as Chief Executive. Scott was
previously the Managing Director of the
Components business, and has an in depth
understanding of how the business operates.
Having travelled with Scott to sites during
the year, I am able to say he is very well
respected for his extensive knowledge of
each site, as well as knowing the people
at the sites.
The Group Executive Committee (“GEC”)
have also developed significantly this year
and the Board have dedicated additional
time to this, on a one-on-one basis. The GEC
decided to move day-to-day management
to a regional structure, which aligns
operations with how we report externally,
with each region having a strong lead. Two
new regional leader appointments complete
the GEC and you can read more about this
in Scott’s Chief Executive Review on page 6.
Full details of the Group Executive
Committee can be found on pages
74 to 75.
DIRECTORS’
REPORT
Future and farewells
During the year, we welcomed Kath Durrant
to the Board as a Non-Executive Director,
and we are pleased that Kath will take on
the role of Remuneration Committee Chair
from the conclusion of the 2024 AGM.
My thanks go to Ralf Wunderlich, who
has chaired the Remuneration Committee
since May 2021, and overseen a period of
significant change. Ralf remains the
Chair of the ESG Committee.
Alongside announcing the 2023 year
end results, the Board announced that
Jack Clarke, our CFO, intends to retire. The
Board and I would like to thank Jack who
has supported Scott and the Company as
it has transitioned to a pure-play components
business. The Board wish Jack well as he plans
for his retirement. The Board has commenced
a search for his successor and will make an
announcement in due course. We will also
report on the appointment process in the
2024 Annual Report.
I have now entered my last year as
Chair of Essentra and my time here has
been very interesting, enjoyable and at
times challenging. In line with corporate
governance requirements, I will step away
before the end of December 2024 and will do
so having seen a significant transformation
in the business. More information on the
process to appoint a new Chair can be
found on page 104.
In the meantime, as always, I would like
to thank all of our stakeholders for what
has been achieved over the last eight years.
I hope you will join us for our AGM on 23 May
2024, which will be held at our site in
Kidlington, just outside of Oxford in the UK,
which will give you the chance to see one
of our manufacturing sites at work.
Paul Lester, CBE
Non-Executive Chair
18 March 2024
5
ESSENTRA PLC ANNUAL REPORT 2023
DIRECTORS’
REPORT
2023 saw the delivery of Essentra’s first
year as a pure-play components business.
The Group achieved a resilient financial and
operational performance whilst navigating
challenges within the external demand
environment, demonstrating the strength
of our business model and the experience of
our people in managing the business
through economic cycles.”
SCOTT FAWCETT
Chief Executive
CHIEF EXECUTIVE’S REVIEW
Chief Executive’s review
We have made good progress towards our medium-
term targets, and have continued to focus on the
delivery of our Essentra Purpose, Vision and Strategy
throughout the year and on the behavioural norms
which will support our delivery.
I am proud of our achievements in the first
year of the new pure-play components
focused Essentra plc. The Company
navigated challenges within the external
demand environment throughout the year,
achieving a resilient financial and operational
performance. Our 2023 results demonstrate
the strength of our business model and
the experience of our leadership team in
managing the business through economic
cycles. I have enjoyed leading the business in
the capacity as Chief Executive and the new
experiences this has provided both internally
and externally, not least the opportunity to
talk to existing and potential shareholders
on a regular basis.
Whilst organic sales have declined year
on year, reflecting wider macroeconomic
trends, the business has made good progress
overall towards our medium-term targets,
initially set at the Capital Markets Event in
2022, which are expected to be across a
five-year time horizon.
We have continued to focus on the delivery
of our Essentra Purpose, Vision and Strategy
throughout the year and on the behavioural
norms which will support our delivery.
We care about our customers
I’m delighted that our customer satisfaction,
as measured by our Net Promoter Score
(“NPS”), has increased by six points in 2023
to 40. This is supported by the improvement
6
in underlying service across all three regions,
and also the care for our customers which we
have demonstrated across the organisation.
This will remain a key area of focus for us
moving forwards as we seek to deliver our
medium-term NPS target of 50.
We care about each other
I have always believed there is a clear link
between customer satisfaction and employee
engagement. Having strong levels of one
supports the other. I’m very pleased that we
have maintained our employee engagement
at levels above industry benchmark levels
despite operating through a challenging
point of the economic cycle. The employee
engagement score of 82, with 86%
participation rate, is a credit to all of our
people and a demonstration of the passion
within the organisation to help us succeed.
Our improving customer satisfaction scores
combined with above-benchmark levels
of engagement mean that we are well
positioned to grow market share as the
macroeconomic environment improves.
We deliver
As well as Essentra’s resilient financial
performance, I am pleased with the
significant progress that we have made as
an organisation on our journey to becoming
the world’s leading responsible hassle-free
supplier of essential industrial components.
I have been pleased with the improvement
in safety performance through the year and
ESSENTRA PLC ANNUAL REPORT 2023 CHIEF EXECUTIVE’S REVIEW CONTINUED
whilst there are still areas that we continue
to address, the balance of central focus and
campaigns along with local accountability
and reinforcement has delivered good
progress during the year, with 10 lost time
incidents in 2023 (2022: 23).
We have made significant progress with our
sustainability agenda throughout 2023 and
have continued to reduce carbon emissions
from our operations. I’m delighted that we
have our first on-site solar panels in Rayong,
Thailand and we have continued to make
great progress on increasing the amount of
sustainable materials in our polymer ranges,
delivering on our commitment of 20%
sustainable materials two years ahead of
schedule in 2023. In this year’s Annual Report
we are publishing our first climate transition
plan, and in February 2024 received Science
Based Targets initiative (“SBTi”) approval for
our near-term and long-term science-based
emissions reduction targets, including
verification of our net-zero science-based
target by 2050. Further detail can be found
on pages 21 to 53.
We have continued to invest in the footprint
of the business with the launch of our new
facility in Monterrey, Mexico which will
support growth across the Americas region
in the coming years. I’m also pleased to
report that in January 2024, the Microsoft
Net Promoter Score
40
Our Net Promoter Score,
has increased by six points
in the year to 40
The engagement
score of 82 is a
credit to all of
our people and a
demonstration of
the passion within
the organisation to
help us to succeed.”
DIRECTORS’
REPORT
Looking forward
Management retains confidence in the medium-term
targets shared at the Capital Market Event in
November 2022:
>5%
Organic revenue (CAGR)
>10%
Total revenue (CAGR)
c.18%
Adjusted operating
margin
<1.5x
Net debt to EBITDA
Supported by:
• A clear strategy to
drive market share
gains, supported by
a leading market
position in a highly
fragmented market
>85%
Operating cash
conversion
• Margin expansion
from scale, operating
efficiencies, and
pricing initiatives
• A highly cash generative
business with continued
focus on working capital
management
• A strong financial
framework and balance
sheet to pursue value
enhancing bolt-on M&A
Dynamics ERP platform was implemented in
our five Eastern European markets, including
the distribution hub in Poland, another
milestone in our digital journey.
Following the acquisition of Wixroyd in
the UK in December 2022, it was exciting to
be able to announce the acquisition of BMP
TAPPI in Italy that completed in October
2023. I’m pleased to report both businesses
are performing in line with expectations,
giving us further confidence in our inorganic
growth strategy, as we continue to acquire
further bolt-on businesses within the
broad and fragmented market in which
Essentra operates.
We are an effective team
As the Group has progressed through its first
year as a pure-play components business, it
has become clear that the execution of our
strategy in each of our three regions will be
a critical success factor. I am delighted to
welcome Chris Brooks to the Group Executive
Committee (“GEC”), who brings a wealth of
industrial experience as President of the
Americas, as well as Richard Sederman, who
has worked within Essentra for 20 years in a
variety of roles across the business, and has
been promoted into the role of Managing
Director, APAC.
Looking forward
The GEC is excited about the prospects
for 2024 and we are continuing to align
the organisation behind the delivery of our
medium-term goals. Collectively, Essentra
remains focused on executing our strategy
and is confident in achieving the targets
outlined in the Capital Markets Event in 2022.
Scott Fawcett
Chief Executive
18 March 2024
7
ESSENTRA PLC ANNUAL REPORT 2023 INVESTMENT CASE
Investment case
A unique, highly profitable and resilient business.
DIRECTORS’
REPORT
1
2
3
4
Clear strategy to
drive organic growth
and market share
gains supported by
digitalisation and
sustainability
Our hassle-free approach is
supported by our range, availability
and continued investment in our
digital offering to support the
customer experience. The
implementation of CRM solutions,
AI prompts and the upskilling of
our commercial teams enables
Essentra to drive cross-selling
opportunities. Essentra’s focus
on sustainability is a source of
competitive advantage; by
focusing on the sustainability
of our own operations and the
components we manufacture,
we will be able to support our
customers to achieve their own
sustainability goals.
Market leader with
a unique proposition
in a large and
fragmented market
Essentra’s unique model
combines the expertise and
flexibility of a manufacturer
with the service and range of
a distributor. We operate in a
highly fragmented £8-£10bn
addressable market, with over
one million potential customers.
The breadth and depth of our
offer is also unique, and enables
us to serve a broad range of
industrial customers, whilst
our global manufacturing
and distribution footprint
balances local customer
service with operational scale.
Our committed and engaged
employees, extensive network,
deep industry expertise and
strong focus on innovation
and sustainability are our
key differentiators.
8
High margin business
with scope to expand
Strong returns and cash
conversion enabling
value enhancing M&A
Our ambition
is to double revenue
and triple operating
profit in the
medium-term
Essentra has significant margin
expansion opportunities driven
through scale efficiencies,
operational effectiveness and
pricing. We continue to optimise
our global footprint for growth,
balancing our costs with our
commitment to service. Our scale
also allows us to focus on buying
better and operating efficiently.
We are transforming our sourcing
and purchasing capabilities and
improving our processes and
technology, underpinned by an
improved ERP platform to drive
efficiencies and support margin
expansion. Essentra continues to
deliver successful pricing
management and cost control
actions which enable us to
mitigate cost inflation and
enhance margin.
A strong financial framework and
healthy balance sheet provides
Essentra with significant scope
to pursue value creating
opportunities. Our medium-term
targeted gearing range of 0x to
1.5x net debt to adjusted EBITDA,
provides a platform from which
we can explore and drive further
strategic opportunities. The
strength of our balance sheet
means we are well positioned to
invest in organic development
such as accelerating digitalisation
and expanding our sustainable
product offering. We continue to
develop our healthy pipeline of
opportunities and to look for
value enhancing and strategic
acquisitions, including new
product capabilities to support
our organic growth initiatives.
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
We manufacture products
across multiple product and
customer categories and
are therefore focused on
identifying and developing
new opportunities in a wide
variety of industrial markets.”
Whilst Essentra does not have direct
operations, or physical presence in the
Middle East or Ukraine, in 2023, we saw
an indirect impact through higher energy
prices and supply chain disruption.
Essentra’s global operations provided
benefits, as we continued to serve our
customers, deploying near-shoring
strategies across our regions, to build a
strong presence with local service and we
will continue to selectively strengthen our
positions in fast growing industries and
countries in 2024.
MARKET TRENDS
Market trends
Monitoring and responding to changes in our end-
markets is essential for us to support our customers
and to deliver the products they need, and to help
our customers build a sustainable future.
We look to a number of sources to gather
information on the broader economic
landscape, supportng business planning with
our customers and across the wider supply
chain. Maintaining good quality relationships
is important to ensure that our business
remains well positioned to support our
customers to deliver the products they need.
Geographically, we saw a gradual recovery
in China during 2023, and expect this to
improve through 2024. We have a clear
focus on our two sites in China, particularly
Henzghu which we acquired in 2021, where
we continue to build opportunities for
domestic and export sales growth within
access hardware categories.
In 2023, the business responded to a number
of global challenges across the economic
landscape and will continue to monitor
and respond throughout 2024.
The ongoing focus on ESG provides Essentra
with a significant opportunity to accelerate
and embed ESG within our wider strategy.
We are encouraged to hear our customers
are focusing on supply chain, community and
environmental matters and want opportunities
to source products and partner with suppliers
that place importance on these topics.
We remain well placed to meet these
opportunities, for example with product
expertise in piping and flange products for gas
and nuclear energy, as well as access hardware,
and electronic hardware components, all
of which are critical to customers who are
reducing their carbon footprint. For more
information see pages 32 to 33.
In 2023, we remained focused on our
end-customer geographies to continue our
plans to optimise our operational footprint
including near-shoring opportunities.
EMEA has seen a slower rate of investment in
construction related end-markets, including
HVAC, white goods, electronic devices and
automotive. In the Americas, distributor
destocking has been experienced after a
significant inventory rebalance at the start
of 2022. The business has seen signs of
stabilisation towards the end of 2023, and
we anticipate normalisation during 2024
with growth in distributor demand. In
readiness for this, our commercial and
operational teams globally have been
working to improve inventory availability,
maintaining a focus on improving service
to our customers, to deliver future growth.
We continue to review global opportunities
across the breadth of our product range.
Whilst our traditional cap, plug and seal
product ranges will continue to remain as a
core part of our business, we anticipate that
our access hardware range will provide us
with considerable new opportunities for
expansion in high-growth industries.
9
ESSENTRA PLC ANNUAL REPORT 2023 OPERATIONAL REVIEW
Operational review
We are a leading global manufacturer and distributor of a
comprehensive range of components, used in a diverse
range of industrial applications and end markets. Our
vision is to be the world’s leading responsible hassle-free
supplier of essential industrial components.
Who we are
Markets we serve
Revenue by customer segment
Automotive and
EV charging
Renewable
energy
Medical
devices
ConAgg
Automation
Telecoms
Consumer
equipment
Other Industrial
equipment
10
SME /
Consumers
9%
Larger
consumer
manufacturers
20%
Revenue by region
APAC
12%
Americas
34%
Industrial
manufacturers
71%
EMEA
54%
Financial KPIs
Non-financial KPIs
Revenue
£316.3m
(2022: £337.9m)
Adjusted operating
Profit1
£43.2m
(2022: £25.1m)
Adjusted operating
margin1
13.7%
(2022: 7.4%)
1 Excluding impact of amortisation
of acquired intangible assets and
adjusting items. Adjusted
measures have been used to
reflect the underlying
performance of the business.
Please refer to page 19 and page
20 for further detail of Alternative
Performance Measures (“APMs”)
Lost-time
Incidents
10
(2022: 23)
Active
customers
69k
(2022: 74k)
Net Promoter
Score
40
(2022: 34)
DIRECTORS’
REPORT
Why we measure it
Indicates our overriding commitment to
health, safety and welfare in the workplace.
How we have done
A new safety commitment for site leaders
and management regarding Essentra’s
approach to achieving excellence in
operational safety was introduced. The
commitment provides clarity to leading
the change in Essentra’s safety culture.
Why we measure it
Reflects marketing effectiveness and
measures the potential population for
further growth opportunities.
How we have done
The active customer count has reduced
as we have increased our focus on our mid-
size, scalable customer base supported by
a focused digital marketing strategy.
Why we measure it
Reflects our customers’ overall satisfaction
with our products and service, as well as
loyalty to our brand.
How we have done
The increase of six points reflects our focus
on service recovery following recent global
supply challenges and commitment to our
hassle-free proposition. We remain focused
on our customers and continue to work
towards our target of 50.
On Time in Full
Why we measure it
82.2%
(2022: 78.2%)
Demonstrates the ability to meet
delivery demand.
How we have done
We have continued to navigate
global supply chain challenges and have
enhanced our product offering, including
the rebuilding of inventory levels to improve
service to our customers. We saw On Time
In Full (“OTIF”) increase to 82.2% across the
business, and achieved an exit rate of 86.5%
in 2023, as we progress towards our target
of >95%.
ESSENTRA PLC ANNUAL REPORT 2023 OPERATIONAL REVIEW CONTINUED
2023 performance
summary: EMEA
% of Group revenue
54%
Financial performance
Revenue
£170.8m
(2022: £167.0m)
Operational highlights
Financial performance
The EMEA region saw revenue of £170.8m
in 2023 (2022: £167.0m), an increase of
4.8% on a constant currency basis
compared to the prior year.
H1 performance saw a 0.1% decline on
a constant currency basis, improving to
10.9% growth in H2. The improvement in
H2 was supported by easing prior year
comparatives through the second half,
after strong market recovery at the start
of 2022.
Gross profit
£87.5m
(2022: £84.5m)
Gross margin
51.2%
(2022: 50.6%)
Lost-time incidents
On-time-in-full
Net Promoter Score
7
(2022: 10)
83.5%
(2022: 82.3%)
40
(2022: 36)
Like-for-like excludes the impacts of acquisitions and foreign exchange.
1
See Note 1 of the Consolidated Financial Statements on pages 168 and 169 for further detail on segmental reporting.
The region completed two acquisitions
within a 13-month period. Wixroyd, acquired
in December 2022, has met management
expectations throughout the year, with
Wixroyd’s precision fasteners product
range gaining traction across Europe,
demonstrating Essentra’s cross-sell strategy
in action. Early integration plans for BMP
TAPPI, acquired in October 2023, are on
track, and will further strengthen Essentra’s
product portfolio, enhancing the Company’s
manufacturing footprint in Europe.
On a like-for-like¹ (“LFL”) basis, after
adjusting for the acquisition of Wixroyd and
BMP TAPPI, the region saw a decline of 2.9%.
In 2023, Wixroyd and BMP TAPPI contributed
£13.3m to Group revenues (2022: £0.7m
Wixroyd only).
Operational performance
Within the wider macroeconomic
environment, supply chains have normalised
once again as have higher interest rates in
2023. Whilst energy pricing and labour costs
remained high throughout the year, the
region has seen margins remain resilient
with pro-active pricing initiatives and
good cost control.
Western Europe, and Germany in particular,
saw market softening in line with wider
industrial production trends, while Turkey
and MENA (Middle East and North Africa)
continued their growth trajectory. Eastern
Europe and the Nordics remained resilient.
The region as a whole has been able to
remain dynamic, adjusting capacity as
required. The business continues to invest
in high-growth markets, with a particular
focus on operations in Turkey. Electrification
end-market trends have continued to gain
momentum which has been beneficial for
the access hardware and electronic
hardware product categories.
DIRECTORS’
REPORT
Power generators, data servers and
renewable energy were the fastest growing
sectors while heat pumps were impacted by
the wider trends of construction slow down.
Enhancing customer service has remained
a focus, with a greater emphasis on stock
availability throughout the year. The region
is pleased to see Net Promoter Score
increase by four points to 40.
The region has seen good sustainability
progress in the year, increasing the use of
recycled content material in the general
protection product range to 25% in 2023,
alongside other initiatives such as packaging
optimisation. The region was also proud to
establish a Centre of Excellence in Kidlington,
UK, to test and develop new materials that
will enable it to offer an increase in the
number of sustainable product ranges
globally for its customers.
The ERP roll out has continued to
progress in 2023 after an initial pause in
2022 to re-assess the programme in light
of becoming a pure-play components
business. The business has continued to
make operational improvements to live sites
in Spain and France and prepared five sites in
Eastern Europe, which subsequently went live
in January 2024, including the distribution
hub warehouse in Łódź, Poland.
2024 Focus
• Leveraging the additional manufacturing
capabilities from the acquisition of BMP
TAPPI to strengthen Essentra’s general
protection product offering
• Continuing to invest in access hardware
growth, including capacity expansion and
commercial resource, capitalising on the
positive market dynamics
• Developing presence in the faster growing
MENA region
11
ESSENTRA PLC ANNUAL REPORT 2023 OPERATIONAL REVIEW CONTINUED
2023 performance
summary: Americas
% of Group revenue
34%
Financial performance
Revenue
£106.2m
(2022: £123.4m)
Operational highlights
Financial performance
The Americas region delivered revenue
of £106.2m in 2023 (2022: £123.4m), a
reduction of 13.4% on a constant currency
basis compared to the prior year.
Consistent with the market environment,
distributors have shown signs of destocking
behaviour throughout the year after a
significant inventory rebalance at the
start of 2022.
H1 saw a decline of 12.6% on a constant
currency basis, H2 saw a decline of 14.4%
on a constant currency basis.
Gross profit
£40.3m
(2022: £47.2m)
Gross margin
37.9%
(2022: 38.2%)
Lost-time incidents
On-time-in-full
Net Promoter Score
1
(2022: 8)
75.8%
(2022: 65.6%)
47
(2022: 35)
See Note 1 of the Consolidated Financial Statements on pages 168 and 169 for further detail on segmental reporting.
12
The region has sustained pricing actions and
disciplined cost management throughout
the year, controlling costs that remain within
the regions control and have successfully
mitigated a portion of decline from sales
volumes, maintaining gross margin in the
region of 38%.
Operational performance
In 2023, the region has focused on driving
new business across the customer base,
including cross-sell and new customer
acquisition, whilst remaining focused
on distributor end-channel volumes
and trends. Encouragingly, the general
industrial environment showed signs
of stability towards the end of the year
with some end customers returning to
normalised levels of order patterns.
Electronics industries continued to
be subdued throughout 2023 whilst
automotive demand remained stable
in H2 as supply chains recovered from
previous component shortages.
The Security Seals product category saw
volume declines in 2023, in line with reduced
shipping demand. Underlying new customer
growth was encouraging, with re-negotiated
contracts being agreed with major customers
that will allow the business to see a positive
trajectory into 2024.
Throughout the year, the region has
focused on improving service to its
customers, with an increase in standard
part stock levels, sample availability and
customer satisfaction activities. These have
led to a 12 point improvement in NPS to 47
in 2023 (2022: 35) and OTIF increasing to
75.8% (2022: 65.6%).
DIRECTORS’
REPORT
The region has expanded manufacturing
and distribution capabilities in 2023.
Near-shoring opportunities have been
accelerated, enabled by the opening of the
manufacturing facility in Monterrey, Mexico
which commenced operations in H2 2023.
This expansion project builds Essentra’s
manufacturing presence, increasing
capacity to support future wider growth
plans, and will bring production closer
to customer demand.
The region has also invested in new
manufacturing capabilities in Brazil,
with new dip-moulding machinery which
will help to service customer demand in
South America, improving Essentra’s
presence in the region.
The Americas remain committed to
sustainability progress, achieving an
increased level of recycled content within
manufacturing to 21% in 2023 (2022: 11%).
The facility in Flippin has also made several
changes to improve the sustainability of its
packaging, including the introduction of
recycled cardboard and bio-degradable tapes.
2024 Focus
• Normalising distributor volumes,
and driving new business wins in
end-market channels
• Capitalising on the commercial
opportunities in Mexico
• Development and utilisation
of manufacturing capabilities,
maintaining improved service
momentum and optimisation
of the distribution network
ESSENTRA PLC ANNUAL REPORT 2023 OPERATIONAL REVIEW CONTINUED
2023 performance
summary: APAC
% of Group revenue
12%
Financial performance
Revenue
£39.3m
(2022: £47.5m)
Operational highlights
Financial performance
The APAC region delivered
revenue of £39.3m in 2023 (2022: £47.5m),
a reduction of 13.1% on a constant currency
basis compared to the prior year.
Performance in 2023 was driven by
the market dynamic in China (c.68%
of regional revenue and c.8% of the
Company revenue) with recovery initially
seen from the end of the first quarter
of 2023.
Gross profit
£14.0m
(2022: £16.5m)
Gross margin
35.6%
(2022: 34.7%)
Lost-time incidents
On-time-in-full
Net Promoter Score
(China)
2
(2022: 5)
96.0%
(2022: 95.4%)
51
(2022: 43)
See Note 1 of the Consolidated Financial Statements on pages 168 and 169 for further detail on segmental reporting.
DIRECTORS’
REPORT
In 2021, Essentra acquired Jiangxi Hengzhu
Electrical Cabinet Lock Co. Ltd (“Hengzhu”).
Given previous travel restrictions in China,
2023 was the first year following the
acquisition that integration activities
could be accelerated as part of Essentra’s
inorganic growth strategy. The focus in 2023
has been on ensuring the operating
environment aligns with our culture,
investing in upgrades to manufacturing
equipment and exploring opportunities to
develop the access hardware product range
across the rest of Asia.
A number of sites within the region
have benefited from Essentra’s wider
sustainability focus in the year, with the
installation of solar panels in two of the
region’s factories based in Rayong in
Thailand and Yichun in China. The region
has also introduced recycled content to
factories in Ningbo, China and Sydney,
Australia whilst reaching 28% recycled
content in our Rayong facility.
2024 Focus
• Footprint and cost optimisation,
ensuring that the region is well
placed to support growth
• Expansion of capabilities in
high-growth locations, including
development of business operations
in India, Vietnam and Indonesia
• Continuing the momentum of the
integration of the Hengzhu acquisition,
with a specific focus on growing the
access hardware product range across
the region
In H1, the region recognised a decline
of 18.3%, improving to 7.0% decline in
H2, with a steady and gradual increase
alongside easing comparatives as the
year progressed.
Operational performance
Throughout 2023, the APAC management
team worked with customers and the wider
supply chain to understand underlying
market needs. The commercial and
operational footprint has been reviewed,
which included consideration for higher
levels of investment in countries outside
of China with a view to building Essentra’s
future success in this region.
In Q2 2023, the distribution centre in Perth,
Australia, was closed and operations were
moved to the existing facility in Sydney. In
June, Essentra entered the Vietnamese
market, establishing a physical presence.
The APAC region has continued to
maintain a focus on improving service
to its customers, and has placed greater
emphasis on improving inventory availability.
This has resulted in reduced lead times to
better meet the needs of our customers.
The region is pleased to see an improvement
in Net Promoter Score in the year, which is
up by 8 points in China and up by
23 in the Rest of Asia.
The business continues to invest in
high-growth markets and has seen
increased levels of interest in product
categories that support faster growing
industries and infrastructure development.
These include renewable energy,
telecommunication and data networks,
particularly in developing countries.
13
ESSENTRA PLC ANNUAL REPORT 2023 KEY PERFORMANCE INDICATORS
Key performance
indicators
DIRECTORS’
REPORT
The delivery of Essentra’s
strategic priorities is
underpinned by a focus on
Key Performance Indicators
(“KPIs”) which measure
Essentra’s progress in the
delivery of value.
Adjusted operating profit1 from
continuing operations
Like-for-like revenue growth,
continuing operations
(%)
Adjusted operating profit1 from
continuing operations
(£m)
£43.2m
(2022: £25.1m)
Adjusted operating cash conversion
from continuing operations1,3
How we measure it
Revenue at constant exchange rates, excluding
acquisitions and disposals.
How we measure it
Operating profit excluding the impact of
acquired intangible assets and adjusting items.
Why this is important
Measures the ability of the Company to grow
sales by operating in selected geographies and
categories, and offering differentiated,
cost-competitive products and services.
Why this is important
Measures the profitability of the Company.
111.6%
(2022: 80.5%)
Dividend per share
3.6p
(2022: 3.3p)
2023
2022
2021
-8.2
6.5
2023
2022
2021
21.74
43.2
25.1
26.4
Net working capital2 ratio
from continuing operations
(%)
Adjusted operating cash flow
from continuing operations1,3
(£m)
Alignment of KPIs to executive
remuneration
Performance measures for the
executive Annual Bonus Plan
1
Excluding impact of amortisation of acquired intangible
assets and adjusting items.
How we measure it
Average net working capital2 per month,
as a % of revenue.
Why this is important
Measures the ability of the Company
to finance its expansion and release
cash from working capital.
How we measure it
Adjusted operating profit¹ less non-cash items,
net working capital2 and net capital expenditure.
Why this is important
Measures the cash generation
capability of the Company.
2 As defined in the Financial review on pages 16 to 18.
3
As defined in the Alternative Performance Measures on
pages 19 to 20.
Prior year re-presentation required to show the business
on a continuing operations basis.
4
14
2023
2022
2021
18.4
15.9
11.64
2023
2022
2021
20.2
17.84
48.2
ESSENTRA PLC ANNUAL REPORT 2023 KEY PERFORMANCE INDICATORS CONTINUED
DIRECTORS’
REPORT
Adjusted basic earnings per share1
from continuing operations
(p)
Dividend per share
(p)
Total Shareholder Return
(%)
Alignment of KPIs to executive
remuneration
How we measure it
Earnings per share, excluding the impact
of amortisation of acquired intangible assets
and adjusting items.
Why this is important
Measures the benefits generated for
shareholders from the Company’s
overall performance.
How we measure it
Total dividends paid divided by the number
of relevant shares in issue.
Why this is important
Measures the amount of cash per share which
the Company returns to shareholders.
How we measure it
Total annual increase in value. Based on
the increase in share price and the dividend
paid to shareholders.
Why this is important
Measures the Company’s ability to generate
long-term value.
2023
2022
2021
1.9
3.74
10.6
2023
2022
2021
3.6
3.3
6.0
2023
2022
2021
-15.6
-29.8
14.7
Adjusted operating cash conversion1
from continuing operations
(%)
Return on Invested Capital,
continuing operations5
(%)
Return on Capital Employed,
continuing operations5
(%)
How we measure it
Adjusted operating cash flow3 as a percentage
of adjusted operating profit1.
Why this is important
Measures how the Company converts its profit
into cash/quality of the Company’s earnings.
How we measure it
Adjusted operating profit1 after tax, including an
allocation of central service costs, divided by
capital employed plus intangible assets.
How we measure it
Adjusted operating profit1, including an
allocation of central service costs, divided by
tangible fixed assets and net working capital2.
Why this is important
Measures the Company’s ability to effectively
deploy capital.
Why this is important
Measures how effectively the Company uses its
operational assets.
2023
2022
2021
112
80
67
2023
2022
2021
12.4
13.3
14.34
2023
2022
2021
28.3
29.5
33.44
Performance measures for the executive
Long-Term Incentive Plan
1
Excluding impact of amortisation of acquired intangible
assets and adjusting items.
2 As defined in the Financial review on page 16 to 18.
3
As defined in the Alternative Performance Measures on
page 19 to 20.
Prior year re-presentation required to show the business
on a continuing operations basis.
Includes an allocation of central service costs
to Components division in 2021 and 2022.
4
5
15
ESSENTRA PLC ANNUAL REPORT 2023
DIRECTORS’
REPORT
The Group continues to
demonstrate operational and
financial resilience, remaining well
positioned to continue to progress
towards its medium-term targets.”
JACK CLARKE
Chief Financial Officer
FINANCIAL REVIEW
Financial review
In its first year as a pure-play components business,
Essentra is making progress towards its medium-
term targets; delivering margin expansion, investing
in profitable organic and inorganic growth, whilst
retaining a strong balance sheet.
The Group achieved revenue of £316.3m in
2023, a decline of 6.4% compared to 2022
(£337.9m) and 4.4% decline on a constant
currency basis, with organic sales reducing
by 8.2% year on year and acquisitions
adding 3.8% of revenue to the Group.
The Group has remained focused on
maintaining and protecting operating
margins in a softer trading environment.
Adjusted operating profits increased to
£43.2m in 2023 (2022: £25.1m; £43.0m on a
pro-forma¹ basis) with the Group delivering
a strong adjusted operating profit margin
of 13.7%.
Strong adjusted operating margins in the year
reflect pro-active cost control, disciplined
pricing actions, which more than offset cost
inflation for the year, and the right-sizing of
costs, including central corporate costs, as
the Group transitioned to a pure-play
components business.
Adjusting items in 2023 reduced to £21.0m
(2022: £26.0m). 2023 adjusting items include
£10.8m customisation and configuration
costs of significant ‘software as a service’
(“SaaS”) arrangements, £1.0m net credit for
gains/losses and transaction costs relating
to acquisitions of businesses and £3.4m
relating to impairment of non-current
assets held in China.
Also reported within adjusting items are
£7.8m of costs related to legacy items within
the Group and include £1.3m restructuring
activities, £1.8m recurring legacy pension
scheme costs, £3.7m write-down of
investment property to market value and
£0.8m indemnity provisions. Details of all
adjusting items are shown in Note 2 to
the Consolidated Financial Statements.
After adjusting items and amortisation
of acquired intangible assets, the Group
reported operating profit improved to
£10.9m (2022: £11.3m loss).
Acquisitions
In October 2023, Essentra announced
the completion of BMP s.r.l (“BMP TAPPI”),
a strategically aligned, bolt-on acquisition
for an initial cash consideration of €39.5m
(€33.5m net of cash acquired). The
Consolidated Financial Statements include
£1.8m of revenue and £0.3m of adjusted
operating profit since acquisition.
1
In addition to adjusted operating profit reported in 2022, pro-forma operating profit of £43.0m was included as an additional
Alternative Performance Measure and previously used to represent the continuing business on a standalone basis after the
strategic review.
16
ESSENTRA PLC ANNUAL REPORT 2023 FINANCIAL REVIEW CONTINUED
DIRECTORS’
REPORT
Adjusted Operating Cashflow
111.6%
(2022: 80.5%)
Central corporate costs
In 2023, the Group recognised £11.6m
of central corporate costs compared to
£23.1m recognised as being attributable
to the go-forward business in 2022.
Progression towards medium-term targets
Net Debt/(funding surplus)
to Adjusted EBITDA
(post-IFRS 16)
1.0x
(2022: 2.3x funding surplus)
Read more about our financial
performance measures on pages
14 and 15
17
In 2022, the Group guided that it would
reach a normalised corporate cost base of
c.£13m at the start of 2024. This normalised
base was achieved in H1 2023 as the business
took the opportunity to accelerate the
review of the central corporate cost base.
Revenue
growth
-4.4%
Revenue
CAGR:
>10% total
>5% organic
Profitability
Cashflow
Leverage
Returns
Dividends
13.7%
Adjusted
operating
profit margin:
c.18%
111.6%
Cash
conversion:
>85%
1.0x
Medium term:
0x–1.5x
12.4%
ROIC:
>15%
3.6p
Maintain
dividend cover
in the order of
3.0x earnings
Net income
Net finance expense of £2.5m reduced
compared to the prior year of £17.8m
owing to reduced interest on loans and
overdrafts and bank facility fees.
On an adjusted basis, the Group saw
net income of £31.1m and adjusted basic
earnings per share of 10.6p. Including losses
on discontinued operations, the total
reported net profit was £5.4m.
Net working capital
The Group saw an increase in net
working capital to £57.8m (2022: £44.2m),
predominately driven by a higher than
usual level of trade payables associated
with strategic review activities in 2022,
and a reduced corporate central cost base
in 2023. The average net working capital
ratio of 18.4% increased compared to
2022 (15.9%).
In addition, following the disposal of its
Packaging and Filters businesses in 2022,
and as disclosed at the interim results in
August 2023, the Group has reassessed the
inputs into its inventory provision calculations
in the context of its new strategic direction as
a pure-play components business and is in
place to ensure that inventories continue to
be measured at the lower of cost and net
realisable value.
Operating cash flow
The Group has seen excellent adjusted
operating cash flow and free cash flow in
2023. Adjusted operating cash flow from
continuing operations was £48.2m (2022:
£20.2m), equating to a cash conversion of
111.6% compared to 80.5% in 2022.
This includes an outflow of net working
capital for the year of £2.6m (2022: £14.2m)
and net capital expenditure of £13.2m (2022:
£12.8m). This net capital expenditure
equated to 4.2% of revenues in 2023, in line
with medium-term guidance, and reflects
94.3% (2022: 77.1%) of the depreciation
charge (including amortisation of non-
acquired intangible assets) for the year
of £14.0m (2022: £16.6m).
Net interest paid was £6.4m (2022: £16.2m)
and net tax outflow £4.5m (2022: £1.7m
inflow). In 2022, tax payment figures exclude
the tax paid/received in relation to adjusting
items. Free cash flow of £37.3m compared
to a free cash outflow of £5.7m in 2022.
An adjusted cash flow reconciliation can
be found on page 20, Alternative
Performance Measures.
Tax
The effective tax rate on underlying profit
before tax (before adjusting items and
amortisation of acquired intangible assets)
was 23.6% (2022: 21.5%). The underlying
effective tax rate for 2023 is towards the
lower end of the forecast tax rate range of
23% to 25%. This increased tax rate
compared to the prior year is primarily driven
by the previously announced increase of the
UK income tax rate from 19% to 25% with
effect from 1 April 2023. The overall tax
position for the Group has reported a net tax
credit as a result of prior year adjustments
related to discontinued operations.
Pensions
As at 31 December 2023, the Company’s
IAS 19 net pension net liability was £9.6m
(2022: net £10.6m). Further information can
be found in Note 18 to the Consolidated
Financial Statements.
Net debt
Net debt at the end of the period, including
lease liabilities, was £62.5m (2022: £113.8m
net funding surplus). The overall increase in
net debt was driven by the previously
communicated uses of disposal proceeds
received in 2022 allocated for shareholder
return in 2023, including £89.8m special
dividend paid in April 2023, and £60.0m
share buyback programme, of which £24.0m
has been returned as of 31 December 2023.
In 2023, the Group has also seen cash flow
movements linked to the strategic review
and cash paid relating to acquisitions.
ESSENTRA PLC ANNUAL REPORT 2023 FINANCIAL REVIEW CONTINUED
The Board is committed to
a progressive dividend policy
going forwards, maintaining
dividend cover in the order of
three times.”
Banking facilities
One of the main sources of funding for
the Company is a Revolving Credit Facility
(“RCF”) provided by a group of six highly-
rated banks totalling £200.0m. As at
31 December 2023, £15.2m was drawn.
The Company also holds $102.5m of long
dated US private placement debt (“USPP”)
at an average coupon rate of 3.8%.
Amount
Interest
rate
exposure
Maturity
£200.00m
Floating
October 2026
$32.80m
$34.85m
$34.85m
3.62%
3.91%
4.00%
July 2028
July 2031
July 2033
Type
RCF
USPP
USPP
USPP
Balance sheet
At the end of 2023, the Company had
shareholders’ funds attributable to Essentra
equity holders of £273.2m (2022: £404.1m).
Total capital invested in the business was
£372.1m (2022: £344.0m). This finances
non-current assets of £348.7m (2022:
£339.3m), of which £71.4m (2022: £72.2m)
is tangible fixed assets, the remainder
being intangible assets, right-of-use assets,
deferred tax assets, retirement benefit assets,
derivative assets, and long-term receivables.
A clear capital allocation policy to support organic and acquisitive growth
Organic
growth
• Capital investment remains core to strategic growth
• Capex expected to be maintained between 4 – 5% of sales
• Sustainable new product development and propositions
Innovation
• Digitalising the customer experience drives cross-sell and
customer acquisition
• Strong pipeline of potential acquisitions
Acquisitions
• Addition of product adjacencies enables higher organic growth
through cross-sell
Ordinary
dividends
• Maintaining dividend cover in the order of three times
18
Impact of IAS 29 (Financial Reporting
in Hyperinflationary Economies)
During 2023, the Group held trade and
assets denominated in Turkish Lira where
IAS 29 has been applied, consistent with
2022, when it was applied for the first time.
Turkey contributes c.7% revenue to the
Group. For the year ended 31 December
2023, a monetary gain of £1.3m (2022:
£3.2m gain) was included within net finance
expense, and an increase in net assets of
£0.7m (2022: £18m increase) has been
recognised as a result of IAS 29.
Shareholder return and
ordinary dividend
In 2022, the Board confirmed its intention
to return to shareholders, approximately
£150m of the residual net transaction
proceeds from the disposals of its Filters
and Packaging businesses which completed
in Q4 of 2022. In 2023, a special dividend of
£89.8m, representing 29.8p per ordinary
share was paid on 27 April 2023. In addition
to the special dividend, a share buyback
programme of up to £60m commenced.
As of 31 December 2023, the buyback
programme was c.40% complete.
The Board of Directors recommend a final
ordinary dividend of 2.4p and therefore a
total 2023 dividend of 3.6p. (2022: final 1.0p,
total 3.3p). The Board is committed to a
progressive dividend policy going forward,
maintaining dividend cover in the order of
three times.
Treasury policies and controls
Essentra has a centralised treasury function
to control external borrowing and manage
exchange risk. Treasury policies are reviewed
by the Audit and Risk Committee (for more
information, see the ARC Report on page
112), and approved by the Board and cover
the nature of the exposure to be hedged,
DIRECTORS’
REPORT
the types of financial investments that may
be employed and the criteria for investing
and borrowing cash. The Company intends
on only using derivatives to manage foreign
currency and interest rate risk arising from
underlying business activities. Whilst some
transactions may be of a more speculative
nature, they are in place to manage and
mitigate exchange rate risk only. Underlying
policy assumptions and activities are
reviewed by the Treasury Committee.
Controls over exposure changes and
transaction authenticity are in place,
and dealings are restricted to those
banks with the relevant combination of
geographical presence and suitable credit
rating. Essentra monitors the credit ratings
of its counterparties and credit exposure
to each counterparty.
Foreign exchange risk
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 by borrowing
in those currencies in which the Company
has significant net assets.
The majority of Essentra’s transactions
are carried out in the functional currencies
of its operations and therefore transaction
exposure is limited. However, where such
exposure does occur, Essentra uses
derivatives to hedge its exposure to
movements in the exchange rates on its
highly probable forecast foreign currency
sales and purchases over a period of up
to 18 months.
Jack Clarke
Chief Financial Officer
18 March 2024
ESSENTRA PLC ANNUAL REPORT 2023 ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance
Measures
Management use a number of measures of financial
performance, financial position and cash flows which
are not defined or specified in accordance with relevant
financial reporting standards.
In Management’s view, these Alternative Performance Measures
reflect the underlying performance of the Company and provide
a more meaningful comparison of how the business is managed
and measured on a periodic basis.
FY 2023 results at a glance
Revenue
Pro-forma operating profit for the ongoing business1
Adjusted operating profit
Adjusted pre-tax profit
Adjusted net income
Adjusted basic earnings per share
Dividend per share
Reported operating profit /(loss)
Reported pre-tax profit /(loss)
Reported net profit /(loss) from continuing operations
Adjusted net cash flow from operating activities
FY 2023
£m
FY 2022
£m
% change
Actual FX
% change
Constant FX
316
n/a
43
41
31
10.6p
3.6p
11
8
6
48
338
43
25
7
6
1.9p
3.3p
(11)
(29)
(31)
20
(6)
–
72
>100
>100
>100
9
–
–
–
(4)
–
85
>100
>100
>100
–
–
–
–
>100
>100
1
Pro-forma operating profit is an additional Alternative Performance Measure that was used to present the business on a
standalone basis, using historical cost allocation methodologies.
DIRECTORS’
REPORT
The financial information in this 2023
Annual Report is prepared in accordance
with UK-adopted International Accounting
Standards and with the requirements of
the Companies Act 2006, and with the
accounting policies section starting
on page 156 of the Consolidated
Financial Statements.
For the principal exchange rates for Essentra
for the year ended 31 December 2023 (“FY23”),
see the table below. Re-translating the FY22
actual results at FY23 average exchange rates
reduces prior year revenue by c.£7m, and
reduces adjusted operating profit by c.£2m.
Principal exchange rates
US$:£
€:£
Basis of preparation
Continuing and
Discontinued operations
In accordance with IFRS 5, Continuing
and Discontinuing operations are
presented as GAAP numbers.
The numbers presented in this Strategic
Report reflect the continuing operations
of the Group unless otherwise stated.
Non-GAAP measures
Throughout this 2023 Annual Report,
the following terms are used to describe
Essentra’s financial performance:
Constant exchange rates
Movements in exchange rates relative to
sterling affect actual results as reported.
The constant exchange rate basis adjusts
the comparative to exclude such
movements, to show the underlying
performance of the Company.
Average
FY23
FY22
Closing
FY23
FY22
1.25
1.24
1.27
1.20
1.15
1.17
1.15
1.13
Like-for-like basis (“LFL”)
The term “like-for-like” describes the
performance of the continuing business
on a comparable basis, adjusting for the
impact of acquisitions, disposals and
foreign exchange.
The FY 2023 LFL results are adjusted for
the acquisition of Wixroyd Holdings Limited
(“Wixroyd”) on 1 December 2022, and the
acquisition of BMP s.r.l (“BMP TAPPI”) on
26 October 2023.
The 2022 results have been adjusted for
the completion of the Packaging business
disposal previously announced on 3 October
2022 and the completion of the Filters
business disposal previously announced
on 5 December 2022.
Adjusted basis
The term “adjusted” excludes the impact
of amortisation of acquired intangible assets
and adjusting items, less any associated tax
impact. In 2023, amortisation of acquired
intangible assets was £11.3m (2022: £10.4m),
and there was a pre-tax charge for adjusting
items of £21.0m (2022: £26.0m).
19
ESSENTRA PLC ANNUAL REPORT 2023 ALTERNATIVE PERFORMANCE MEASURES CONTINUED
DIRECTORS’
REPORT
Adjusting items are separately presented
from other items of financial performance
as this enables management to reflect the
underlying performance of the continuing
operations of the Group.
Further details of adjusting items are shown
in Note 2 to the Financial Statements.
Constant exchange, like-for-like and
adjusted measures are provided to reflect
the underlying performance of Essentra.
For further details of the performance
metrics used by Essentra, please refer
to pages 14 and 15.
Pro-forma operating profit in FY 2022
In 2022, pro-forma operating profit
was used to present the business on a
standalone basis, using historical cost
allocation methodologies.
Return on Invested Capital and
Return of Capital Employed
Return on Invested Capital and Return on
Capital Employed have been adjusted for
acquisitions in the period.
Cash flow
Adjusted operating cash flow is net cash
flow from operating activities, excluding
income tax paid, pensions adjustments,
and cash flows relating to adjusting items,
less net capital expenditure. It is a measure
of the underlying cash generation of the
business. Net capital expenditure is included
in this measure as management regard
investment in operational assets (tangible
and intangible) as integral to the underlying
cash generation capability of the Company.
Adjusted Operating Cash Conversion
Adjusted operating cash conversion is
presented as adjusted operating cash flow
as a percentage of adjusted operating profit.
Reconciliation of GAAP to
non-GAAP measures
The following tables are presented by
way of reconciling the metrics which
management uses to evaluate the
Essentra Group to GAAP measures.
Net income
£m
Adjusted net income
Amortisation of acquired intangible assets
Adjusting items
Tax on adjustments
Profit / loss after tax
FY 2023
FY 2022
31.1
(11.3)
(21.0)
7.0
5.8
5.7
(10.4)
(26.0)
(0.4)
(31.1)
Adjusted operating cash flow from continuing operations
£m
FY 2023
FY 2022
Adjusted operating profit on continuing operations
Depreciation and amortisation of non-acquired intangible assets
Right of use asset depreciation
Share option expense / other movements
Change in working capital
Net capital expenditure (excluding disposal proceeds relating to adjusting items)
Adjusted operating cash flow from continuing operations
Tax1
Cash outflow in respect of adjusting items
Pension obligations2
Add back: net capital expenditure (excluding disposal proceeds relating to adjusting items)
Net cash inflow from continuing operating activities
Adjusted operating cash flow
Tax1
Net interest paid
Pension obligations2
Free cash flow
43.2
14.0
5.9
0.9
(2.6)
(13.2)
48.2
(4.5)
(23.6)
–
13.2
33.3
48.2
(4.5)
(6.4)
–
37.3
25.1
16.6
5.6
(0.1)
(14.2)
(12.8)
20.2
1.7
(30.4)
–
12.8
4.3
20.2
1.7
(16.2)
–
5.7
1
In 2022, tax paid excludes the tax paid/received on business disposals. This is included within the cash outflow in respect of
adjusting items.
2 Pension contributions of £3.7m for legacy pension schemes has been included within cash outflow in respect of adjusting items.
20
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Environmental,
Social and
Governance
DIRECTORS’
REPORT
IN THIS
SECTION
Introduction and background
22
26 Our planet
30 Our components
32 Our customers
34 Our culture
37 Our communities
Madrid team – planting trees at a local forest
21
ESSENTRA PLC ANNUAL REPORT 2023
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Building a sustainable future
2023 has been a year of significant progress for the business
across the areas of environment, social and governance. In our
first year as a pure-play components business, we have been
able to sharpen our focus on the ESG topics that will drive
us towards our goal of building a sustainable future.
Our purpose is to help customers build a
sustainable future. With our unique business
model combining manufacturing and
distribution, we are ideally placed to provide
a low-carbon service to our customers from
design to delivery, and supporting them in
their low-carbon transition.
Our ESG strategy is set out against
five pillars: our planet, our components,
our customers, our culture and our
communities. We recognise that each of
these are of great importance in our ESG
journey, and interconnected. These pillars
in turn are aligned to the United Nations
(“UN”) Sustainable Development Goals,
with nine goals having a direct link to how
we operate and the work we do.
In this report we set out our progress against
our five pillars, and what we have planned
for 2024. Highlights include achieving our
goal two years ahead of plan, for at least
20% of materials to be from sustainable
sources in our polymer ranges, and gaining
approval of our near- and long-term
science-based emissions reduction targets
with the Science Based Targets initiative
(“SBTi”). More details on these targets is
on page 26.
Our ESG pillars
DIRECTORS’
REPORT
JENNIFER SPENCE
ESG Director
To support our decarbonisation targets,
this year, for the first time, alongside this
ESG report we have published our first
climate transition plan, on pages 40 to 53.
This plan details our targets, focus areas and
actions we will take across the Company,
and in our value chain, for us to maintain
our momentum in relation to sustainability
whilst continuing to deliver for our customers
and investors.
Delivering a sustainable
service for our customers,
our people and the planet
sits at the heart of
Essentra’s ESG strategy.”
Our planet
Driving resource and energy
efficiency, reducing emissions and
embracing renewables.
Our components
Developing innovative products
using renewables, recyclables,
reusables and biodegradables.
Our culture
A safe, supportive work
environment that champions
equality and celebrates diversity.
Our communities
Working with suppliers to ensure
ethical practices and contribute to
equitable economies. Volunteering
our time and supporting good causes.
Our customers
Providing a hassle-free service that
helps customers achieve their
sustainability goals.
22
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
DIRECTORS’
REPORT
Materiality assessment
Understanding the material risks and
opportunities for our business is vital to form
a comprehensive and effective sustainability
strategy. We have identified 19 material
topics, that vary in priority according to both
our own and our stakeholders’ perspective.
These risks and opportunities are also
considered as part of our approach to risk
management and more information on
ESG risks is available on page 71.
Sustainability priority topics
Our materiality assessment, our alignment
to global reporting requirements and the UN
Sustainable Development Goals, provides us
with a clear set of focus areas and priorities
from which we have built out our targets
and reporting. In order to ensure our
materiality assessment remains relevant, we
review and update this assessment at least
annually to incorporate any emerging topics
and update existing topics as necessary.
External frameworks we align to
2023 ESG ratings
Task Force on
Climate-Related
Financial
Disclosures
SBTi
CDP
2023 ratings:
A– Climate Change
B Water Security
EcoVadis
Silver Medal 2023
l
s
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e
d
o
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e
k
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P
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t
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8
10
11
2
5
1
4
3
6
7
9
t
n
a
c
fi
n
g
S
i
i
15
14
13
12
UN Sustainable
Development Goals
MSCI
AA Rating 2023
e
t
a
r
e
d
o
M
r
o
n
M
i
19
Minor
17
16
18
Moderate
Significant
Major
Critical
Importance to Essentra
UN Global
Compact
Our culture
Our communities
Our components
Our planet
1
2
Physical pollution and end
of life disposal
Changes in legislation
on material use
and environment
Rejection of
single-use plastics
4 Greenhouse gases
5
3
Mental and physical health,
safety and wellbeing
Circular economy principles
Manufacturing
waste streams
Natural environment,
including marine ecosystems
6
7
8
9 Resource efficiency
10 Diversity, equality
and inclusion
11 Transparency
12 Impact of extreme weather
and climate action failure
13 Ethical supply chain
14 Use of renewable energy
15 Access to sufficient
clean water
16 Atmospheric pollution
17 Product traceability, origin
and conflict materials
18 Availability of raw materials
19 Community relations
23
ESSENTRA PLC ANNUAL REPORT 2023
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our ESG strategy
DIRECTORS’
REPORT
On track
Slightly behind target
Behind target
ESG framework
Our focus and targets
Our progress
Status Performance highlight
Read more
Our
planet
Reduce absolute scope one and two GHG emissions by
50% by 2030 from a 2019 base year.*
Scope one and two emissions have reduced by 38%
since 2019.
Reduce our scope three GHG emissions intensity from
purchased goods and services, and upstream transportation
and distribution by 55% per GBP of value added by 2030.*
Scope three emissions intensity has reduced by 30%.
All sites to achieve zero waste to landfill by 2030.*
14 sites achieved zero waste to landfill in 2023.
Reduce overall waste volumes by 50% by 2030.*
Waste intensity has reduced 28% against 2019 baseline.
Our
components
50% of materials from sustainable sources by 2030 across our
manufactured polymer ranges.*
We hit our previous target of 20% by 2025, two years
early, reaching 21% in 2023.
Our
customers
Our
culture
100% of our packaging is reusable, recyclable or compostable
by 2030.*
58% of our packaging is recyclable, or compostable.
50% recycled content in our packaging materials by 2030.*
28% of packaging materials contain recycled content.
Increasing the number of products introduced with
sustainability criteria.*
7,981 products across our ranges now have sustainability
attributes, 750 were introduced in 2023.
Zero accidents for our people and visitors.
57% reduction in days lost in 2023, from 23 to 10 lost
time incidents.
100% of employees trained on Ethics Code biannually.
99% of employees were trained on Ethics Code in 2023.
Healthy lifestyles campaigns at 50% of sites by 2025.
Healthy lifestyles campaign roll out commenced in
January 2024.
Mental health training to 80% of leaders by end 2024.
9% of leaders have received mental health training.
38%
reduction in scope
one and two emissions
since 2019.
See pages
26 to 29
21%
of our polymers
in 2023 from
sustainable sources.
7,981
total sustainable
products.
57%
reduction in days lost
in 2023.
See pages
30 to 31
See pages
32 to 33
See pages
34 to 37
40% women in leadership teams by 2025.
Our
communities
Supplier Code of Conduct refreshed and launched in 2023 to
all suppliers over a material spend threshold.*
31% women in leadership teams in 2023, and 38%
on the Board.
18% of targeted suppliers have signed up to this code.
Top 70% of suppliers by spend actively risk monitored.
Top 75% of suppliers actively risk monitored.
A community engagement day taken by 25% of employees
during 2023.
Community engagement days taken by 13% of
employees in 2023.
13%
of employees took a
community engagement
day in 2023.
See pages
37 to 39
* ERM CVS has assured a selection of our environmental, social and governance metrics for 2023. Full details of the scope, activities, limitations and conclusions of the assurance engagement are included in the Assurance Report on pages 148 to 149. Further details on our
basis for reporting can be found at www.essentraplc.com/responsibility.
24
ESSENTRA PLC ANNUAL REPORT 2023
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
2023 environmental data
Scope one and two GHG emissions (tonnes CO2e)*
Stationary fuel combustion
Mobile fuel combustion
Fugitive emissions
Total scope one emissions
Electricity – location based
Electricity – market based
Off-site electric vehicle charging – location based
Off-site electric vehicle charging – market based
Purchased heating and cooling
Total scope two – location
Total scope two – market
Total scope one and two emissions location
Total scope one and two emissions market
GHG intensity (total scope one and market-based
two emissions per £m revenue)
Scope three emissions
1. Purchased goods and services*
2. Capital goods*
3. Fuel and energy-related activities*
4. Upstream transportation and distribution*1
5. Waste generated in operations*
6. Business travel2
7. Employee commuting*
10. Processing of sold products
12. End of life treatment of sold products*5
13. Downstream leased assets
Near-term target total (categories 1 and 4)*
Near-term GHG intensity (kgs/£ of value added)*
Total scope three emissions*
2019
3,050
372
–
3,422
22,587
18,814
–
–
–
22,587
18,814
26,009
22,236
2022
2,922
456
57
3,435
17,155
12,755
–
–
–
17,155
12,755
20,590
16,190
2023
2,323
604
247
3,174
15,303
10,498
2
4
89
15,394
10,591
18,568
13,765
% change
2023/2019
Materials from sustainable sources*
-24%
62%
–
-7%
-32%
-44%
New
New
New
-32%
-44%
-29%
-38%
Percentage of polymers from sustainable sources
Percentage of recycled content in packaging materials
Percentage of packaging that is recyclable or compostable
Energy (MWh)*
Total Electricity
Procured
Renewable Electricity
Procured
Natural Gas
Fuels
UK
Global
UK
Global
UK
Global
UK
Global
74.2
47.9
43.5
-41%
DIRECTORS’
REPORT
2019
2%
–
–
2022
10.8%
–
–
2019
8,055
2022
6,477
2023
6,034
2023
20.7%
28%
58%
TCO2e
2023
2
48,729
42,263
38,873
10,498
7,896
7,896
14
6,423
5,973
13,277
16,967
38
367
–
–
67
14,318
13,683
12,145
2,217
691
572
409
2,206
2,503
2,944
2022
2023
98,789
66,557
1,161
5,215
44,756
479
809
6,741
29,859
2913
84
141
4,344
29,806
175
809
6,433
23,141
244
84
143,545
96,363
1.8
1.3
188,1844
131,733
-33%
-88%
-17%
-33%
-64%
–
-5%
-22%
-16%
–
-33%
-30%
-30%
Solid hazardous and
non-hazardous waste
destinations (tonnes)*
% change
2023/22
20191
2022
2023
Liquid hazardous and
non-hazardous waste
destinations (tonnes)*
Recycling
Recovery
Incineration
Landfill
Total solid waste
% solid waste
diverted from landfill
Water (cubic metres)*
Water usage
1,374
2,232
2,709
Recycling
161
66
2,787
4,388
199
397
896
330
80
204
Recovery
Incineration
Landfill
3,724
3,323
Total liquid waste
2020
66
198
4
3
271
2022
69
1
6
–
76
36%
76%
94%
% liquid waste
diverted from landfill
99%
100%
100%
2020
2022
135,015
158,383
2023
171,145
% change
2023/22
8%
The organisational boundary for this data is determined using an operational control approach. All comparatives from 2019 to 2022
were restated in 2022, to reflect the divestment of our Filters and Packaging businesses. The 2019-2022 reporting periods are January
to December. The 2023 reporting period is January to December, for all data except for scope three categories one, two and four, where
the reporting period is October 2022 to September 2023. Excluded categories were determined via a materiality threshold assessment to
be either inapplicable due to no related activity, or excluded due to low significance. This will be periodically reviewed.
1
Upstream transportation includes intra-company transport and products to customers. Downstream transportation is captured in
category one as part of our spend on materials and services.
2023 business travel emissions is based on a study developed based on 2022 data.
2022 end of life treatment of sold products has been restated due to an amendment to include our goods for resale.
Total Scope 3 emissions has been restated for 2022 to include all emissions within Essentra’s Scope 3 emissions inventory which forms
the Science-Based Targets initiative approved near- and long-term target baseline.
Excludes Wixroyd as no data available.
109
710
2023
57
26
12
–
95
25
Zero waste to landfill*
Number of sites at zwtl
2019
2
2022
12
2023
14
* ERM CVS has assured a selection of our environmental, social and governance metrics for 2023. Full details of the scope, activities,
limitations and conclusions of the assurance engagement are included in the Assurance Report on pages 148 to 149. Further details
on our basis for reporting can be found at www.essentraplc.com/responsibility.
2
3
4
5
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our
planet
We want to end our
dependency on virgin fossil
materials and fuels, making
significant emissions reductions
across our value chain through
energy efficiency, renewables,
material and transport choices.
Reducing
emissions
Our targets
Reduce our scope one and two GHG
emissions by
50%
by 2030 from a 2019 baseline, and reach
net-zero by 2040 at the latest.
Reduce our scope three GHG emissions
intensity, from purchased goods and
services, and upstream transportation
and distribution by
55%
per GBP of value added by 2030 from a
2022 baseline, and reach net-zero by 2050
at the latest.
Our progress
38%
Reduction in scope one and two GHG
emissions since 2019.
30%
Reduction in scope three GHG emissions
intensity since 2022.
We are committed to continuing to reduce
our emissions. In 2022, we reset our baseline
for scope one, two and three emissions as
part of our transition to a pure-play
components business. Since 2019, we have
reduced our total scope one and two CO2e
emissions by 38%, and indexed to revenue,
emissions intensity has declined by 41%.
Total scope one and two emissions
reduced by 15% in the year due to our
continuing transition to renewable electricity
and our focus on energy management
programmes. Renewable electricity now
accounts for 44% of total electricity usage,
an increase of 13% compared to 2022. 2023
also saw our first on site solar project begin
generating power at our Rayong, Thailand
site, followed by our second site in our
Yichun site in China, at the end of the year.
Renewable energy generated on site is now
2% of our total usage.
We have continued to implement energy
efficiency projects across the Company. In
2023, we completed 12 projects across seven
sites. These ranged from injection moulding
machine replacements at several sites,
installation of lighting sensors at our site in
Ningbo in China, LED installations at our site
in Erie in the USA, and a new chiller system
at our Barcelona site.
In 2023, our scope three near-term emissions
intensity has reduced by 30% compared to
our 2022 baseline. Key to this has been our
progress in understanding of emissions
hotspots within our scope three emissions,
working with our supply chain to gather the
DIRECTORS’
REPORT
data required to transition from calculations
based on our spend, to activity data which
provides more precise measurements.
Then using this data to determine actions
for decarbonisation.
The largest areas of our scope three
emissions are the goods and services we
purchase, and the transport we use both
upstream with our suppliers and
downstream to our customers. In purchased
goods and services, we have commenced
engagement with our metals and packaging
suppliers to collaborate on emissions
reduction initiatives. We will be continuing
this in 2024 and expanding to incorporate
more suppliers across our value chain.
Within our product transportation, we
have implemented a third-party shipment
tracking service, which allows us to optimise
the route and mode of shipments, reducing
emissions by ensuring each shipment is using
the most efficient methods available. In
addition, we are continuing to engage our
transport providers to decarbonise their
operations and implement lower carbon
equipment such as sustainable fuels, and
electric vehicles.
In 2023, we submitted our scope one, two
and three near-term and net-zero targets
to the SBTi for validation, and these targets
were approved in February 2024. To support
our targets, in 2023, we developed our
inaugural climate transition plan, which
can be found on pages 40 to 53. This plan
details the key initiatives we will be focusing
on to reduce our emissions further and meet
our targets across our scope one, two and
three emissions.
26
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Waste
Our targets
All sites to achieve
zero waste to landfill
by 2030 at the latest.
Reduce waste intensity by
50%
by 2030 from a 2019 baseline.
Our progress
14 sites
achieved zero waste to landfill in
2023, and 94% of waste is now diverted
from landfill.
Waste intensity has reduced
28%
from our 2019 baseline.
We aim to dispose of zero waste to landfill
(“zwtl”) across our operations, as well as
minimising the waste we generate across
the product lifecycle. We recognise that
waste, in particular plastic waste, is a key
global challenge and reducing our waste
generation alongside increasing reuse and
recycling will provide us with cost and
resource savings. In 2023, two additional
sites achieved zwtl, taking our total to 14, or
34% of all sites. Looking ahead to 2024, we
have a further seven sites which achieved at
least three months of zwtl during the year,
and are on track to reach full zero waste to
landfill status by the end of 2024.
Overall, 94% of solid waste was diverted
from landfill across our operations in 2023,
an increase of 18% compared to 2022, and
our waste intensity has reduced by 28%
against our 2019 baseline. Throughout the
year, we focused efforts and investment on
waste prevention and reusing waste in our
manufacturing and operations process. At
our Kidlington site in the UK, we invested in
new equipment that allows us to reuse our
internal manufacturing polymer waste.
Since installation, over three tonnes of resin
has been internally reused across a range of
products. At our metal manufacturing site in
Silivri, projects have also been undertaken to
reduce waste through design. This has
resulted in a reduction in waste from the
manufacturing process, and an increase in
material suitable for reuse. In 2024, waste is
a specific area of focus for our management
and site teams, as 57% of all employees will
have a waste reduction measure as part of
their bonus objectives.
Madrid team – planting trees at a local forest
Louisville team – adopt a park initiative
DIRECTORS’
REPORT
Water use and our wider impacts
on nature
Our polymer manufacturing operations
predominantly use water in closed loop
systems, and consequently our overall
water usage globally is a result of metal
manufacturing, hygiene, catering and
cleaning at our sites. We are mindful
that water is of great importance in the
communities we operate in, and therefore
ensure that we monitor our water
consumption and track any reduction
initiatives at our sites. In 2023, our water use
has increased by 8%, due to an increase in
our operational footprint reporting coverage,
with nine additional sites reporting in 2023,
and an increase in water usage at our
metals manufacturing sites. In 2024, we plan
to begin reporting on water usage per head
and create an action plan for our Silivri,
Yichun and Ningbo sites, which account for
just under 80% of our total water usage.
We monitor water stress across all of our
sites globally on at least an annual basis.
In 2023, we identified two water basins in
“extremely high” water stressed regions
where we have manufacturing sites, Silivri
in Turkey, and Monterrey in Mexico. In our
Silivri facility, water efficiency actions have
been implemented in the washrooms on
site, and in Monterrey, we moved to a new
purpose built facility in November 2023,
where we will reset the baseline for our water
usage in 2024. We monitor any site where we
have water discharge consents to ensure
compliance. In 2023, two sites, Yichun
in China and Rayong in Thailand, had
consents to discharge water and there
were no incidents of non-compliance.
27
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
DIRECTORS’
REPORT
Across our sites globally in 2023, we have
participated in many local initiatives that
benefit the local natural environment.
Highlights from some of those countries
include: Spain, where the Madrid team and
their families spent the day planting trees to
restore an area of forest local to our site; in
the USA, where our Louisville team adopted
a local park, becoming stewards of Riverview
Park which they will look after with various
projects throughout the year; and Germany,
where employees at our Nettetal site gave
their support to a local conservation area,
volunteering to maintain the nearby
Brachter Wald nature reserve to preserve the
sand dunes, which are an important special
habitat for rare plant species.
In 2023, we also commenced our analysis
of the Taskforce for Nature related Financial
Disclosures (“TNFD”) recommendations,
and in 2024 we will be conducting our first
TNFD assessment of our nature related risks
and opportunities at our manufacturing
and distribution sites in line with the
TNFD guidance.
Nettetal team – Brachter Wald nature reserve volunteering
28
Madrid team – planting trees at a local forest
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
DIRECTORS’
REPORT
Environmental Compliance
In 2023, nine of our manufacturing sites
equating to 80% of our production, are
covered by ISO14001 certifications.
There were no reportable spillages or
environmental incidents at any of our sites
during the year, nor were there any fines or
penalties related to environmental incidents.
Solar panels at our Yichun site
Solar panels have been installed at our
largest manufacturing site in Yichun,
China, this year.
The installation comes only three months
after commissioning a 6,000m2 solar
array at Essentra’s manufacturing site in
Rayong, Thailand.
The solar panels will generate up to
1,650MWh of energy annually, reducing
the sites reliance on fossil-fuel generated
electricity and avoiding the unnecessary
generation of an estimated 1,000 tonnes
of GHG emissions each year.
The solar array reflects
our overarching aim to
reduce carbon emissions
and practice sustainability
in manufacturing across all
of our global sites.”
JENNIFER SPENCE
ESG Director
29
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our
components
We will strive to design
new products through the
innovative use of renewable,
reusable, recyclable and
biodegradable materials.
We have a Centre of Excellence
where we can showcase
products to our customers,
and provide a space for ideas
to flourish into innovative
new products.
Transitioning
to more
sustainable
materials
Our focus and targets
50%
of raw materials from sustainable sources
by 2030 across our polymer ranges.
100%
of raw materials from sustainable sources
by 2030 across our general protection and
security seal ranges.
Our progress
In 2023, we hit our 2025 target
early, achieving
20.7%
of sustainable materials in our
polymer ranges.
In 2020, we signed up to the Circular Plastics
Alliance commitment to use at least 20%
recycled content in our polymer ranges by
2025. We have achieved our target early,
developing our use of recycled content during
the year to 20.7% for 2023. Consequently, we
have set a new target to achieve 50% of raw
materials from sustainable sources across our
polymer ranges, and 100% in our general
protection and security seals ranges by 2030.
In 2023, we have increased the number of
products and sites that have transitioned
to using recycled content in our polymer
ranges. We now have seven manufacturing
sites globally where recycled content is
used as standard, across a range of over
7,000 products.
Our site in Kidlington, UK, now includes 50%
recycled content as standard across most of
our LDPE product range, with over 3,300
products achieving 98% recycled content.
In 2023, our Jaguariuna site in Brazil
moved to producing 365 products with
50% recycled HDPE and LDPE material
across our general protection ranges.
Alongside this, our Erie facility also
transitioned an additional 466 products
to using recycled material. By delivering
products with lower GHG emissions and
improved circularity through our substitution
programme, Essentra has helped customers
reduce their own GHG emissions without
the need for extra investment. We have
conducted a lifecycle assessment on one
of our most popular products, a push-in-
plug from our general protection range,
which has shown that the recycled material
we currently use reduces product emissions
by around 30%. We estimate in 2023, we
avoided GHG emissions of over 950 tonnes
by making the transition to more sustainable
materials across our polymer ranges.
DIRECTORS’
REPORT
Our Centre of Excellence
In 2023, we launched our Centre of
Excellence to support our transition to
using more sustainable materials
across our product range.
This dedicated centre at our Kidlington
site in the UK, is used to trial a wide array
of materials with sustainability benefits
such as reduced emissions, improved
recyclability and improved circularity.
The centre has a dedicated test engineer,
who conducts testing on both recycled
content and various biodegradable and
bio-based materials, including bio-woods
and nylon, to establish how they perform
when replaced or added to existing resins
used in the manufacture of plastic
components. These innovative new
materials can reduce the environmental
and carbon impact of the products we
manufacture, and helps our customers
reduce their GHG emissions.
The Centre of Excellence uses the
latest technology, and we have made
a significant investment in two different
types of machinery: an all-electric
machine and a servo drive machine.
The principal purpose is to enable us to
test not only how the materials will
behave in the manufacturing process,
but also the impact of different types of
tooling. The results will provide us with the
tool to drive efficiency and sustainability
in our products and processes, reducing
scrap rates and accelerating speed of
delivery. The Centre of Excellence is an
example of how sustainability is embedded
in our culture. We are investing significantly
in new infrastructure and equipment,
allowing us to test and process new
types of materials, and optimise
energy consumption.
30
ESSENTRA PLC ANNUAL REPORT 2023 Our Centre of Excellence
In 2023, we launched our Centre of
Excellence to support our transition to
using more sustainable materials
across our product range.
This dedicated centre at our Kidlington
site in the UK, is used to trial a wide array
of materials with sustainability benefits
such as reduced emissions, improved
recyclability and improved circularity.
The centre has a dedicated test engineer,
who conducts testing on both recycled
content and various biodegradable and
bio-based materials, including bio-woods
and nylon, to establish how they perform
when replaced or added to existing resins
used in the manufacture of plastic
components. These innovative new
materials can reduce the environmental
and carbon impact of the products we
manufacture, and helps our customers
reduce their GHG emissions.
The Centre of Excellence uses the
latest technology, and we have made
a significant investment in two different
types of machinery: an all-electric
machine and a servo drive machine.
The principal purpose is to enable us to
test not only how the materials will
behave in the manufacturing process,
but also the impact of different types of
tooling. The results will provide us with the
tool to drive efficiency and sustainability
in our products and processes, reducing
scrap rates and accelerating speed of
delivery. The Centre of Excellence is an
example of how sustainability is embedded
in our culture. We are investing significantly
in new infrastructure and equipment,
allowing us to test and process new
types of materials, and optimise
energy consumption.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our
packaging
Our focus and targets
Support a circular economy by ensuring
100%
of our packaging is reusable, recyclable or
compostable by 2030.
50%
recycled content in our packaging
materials by 2030.
Our progress
58%
of our packaging is reusable, widely
recyclable or compostable.
28%
recycled content in our packaging.
Packaging is an important part of our
resource usage and is key to ensuring our
products are delivered damage and hassle-
free to our customers. 2023 is the first year
since we introduced packaging targets, and
during the year we have been engaging with
our packaging suppliers to determine the
current rates of recycled content in our
packaging, and to explore opportunities
to reduce packaging and waste. At the
end of the year, we reached 28% recycled
content across all of our packaging, and
58% of our packaging is deemed to be
widely recyclable or compostable. We have
included paper and wood in our scope of
what we determine to be widely recyclable,
or compostable.
In 2023, we implemented more recycled
content into our packaging across our
sites globally. At our Flippin site in the
USA, we have transitioned our packaging
to biodegradable and recyclable tape, with
cardboard boxes which are now made using
62% recycled content. At our key European
distribution sites, Łódź in Poland and
Nettetal in Germany, we have established
a reuse system for our intra-company
product movements. By reusing our shipping
boxes between the two hubs, we are reducing
the amount of boxes we use by around 1,600
in 2023, reducing the amount of waste
we generate and the amount of materials
we buy.
In 2024, we will be continuing to engage
with our packaging suppliers to share best
practice and increase recycled content.
DIRECTORS’
REPORT
Collaborating with suppliers to
support packaging goal
At our manufacturing and distribution
centre in Kidlington, in the UK, we
have switched to using paper-based
packaging. The new packaging
contains recycled content and is
widely recyclable after use.
Working closely with packaging suppliers,
the Kidlington distribution team focused
on replacing transport packaging with
more sustainable options:
• plastic used to fill voids has been
replaced by 100% recycled cardboard,
created by converting waste cardboard
on site
• plastic mailers have been replaced
with paper versions containing 20%
recycled paper
• the tape used to seal boxes is now
made from widely recyclable paper,
and the adhesive is biodegradable.
31
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our targets
Increasing the number of products
introduced with sustainability criteria.
Our progress
750
products in 2023 introduced with
sustainability criteria.
Our
customers
This pillar focuses on
supporting our customers
to achieve their sustainability
goals. As the only global
manufacturer and distributor
of our kind, we are in a leading
position to assist customers
by providing products and
services that have been
developed to provide a hassle-
free sustainable choice.
32
Sustainable products and services
Our purpose is to help customers build a
sustainable future, and therefore working
with them on their approach to
sustainability is a key area of activity.
We are committed to continuing to invest
in developing new products with improved
sustainability performance and lower
lifecycle emissions, and providing our
customers with expert advice on the
most sustainable choice for their needs.
In 2023, we introduced 750 new products
that provide a sustainability benefit. This
includes lower GHG emissions, increased
recycled content or biomaterials, and
improved circularity. Our total products
with sustainability features is now 7,981.
Alongside sustainable products, we are
in a leading position to assist customers
in defining, and reducing their scope three
emissions. As a market leader with the
unique proposition of offering
manufacturing and distribution of our
products in an otherwise fragmented
market, we can provide clarity to our
customers of our products emissions
across its lifecycle. As detailed in our climate
transition plan on pages 40 to 53, we intend
to reduce our emissions to net-zero across
the manufacture and distribution of our
products to customers, delivering a low-
carbon service to our customers from
product design through to delivery. We
commenced the work to establish product
carbon footprints for our vast and diverse
range of products in 2023, and delivered
product-level footprints across our product
categories, including our general protection
and electronics ranges to our customers. We
intend to continue and expand on this work
in 2024 to provide product carbon footprints
across our ranges.
DIRECTORS’
REPORT
Product governance
We are committed to achieving the highest
standards of product quality, reliability and
safety. We have comprehensive product
design and development procedures to
ensure precise delivery to specifications,
and are constantly seeking opportunities to
enhance quality and safety performance.
In 2023, 11 of our manufacturing sites,
equivalent to 95% of products we
manufacture, were certified to a recognised
international quality management standard
of ISO 9001 or ISO/IATF 16949.
Sustainable economies
In addition to supporting our customers
with low carbon and circular products, we
are also actively increasing our abilities and
product offerings that serve the new and
emerging markets that will be required in a
low-carbon world. Our category teams are
focused on identifying opportunities in
high-growth, low-carbon markets such as
renewables, electric vehicles, automation
and electrical heating and cooling.
Within the heating and cooling markets,
we have developed new relationships with
customers who are leading the way with
innovative new technology, with our diverse
product ranges supporting a range of
requirements from electrical components
to access hardware.
We are ensuring we support our
automotive customers in their transition
to electric vehicles (“EV”) and also providing
the components needed for the supporting
charging infrastructure. Our components
are used throughout EV charging from
the enclosure hardware to the
electrical components.
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Providing solutions for customers to charge ahead
Ingeteam is a leading energy
conversion company, with a wide
range of products across renewable
energy generation, storage and
e-mobility.
In 2023, as an existing customer of our
recently acquired Wixroyd business, we
were given the opportunity to provide
Ingeteam with our full product range.
Ingeteam can now source the wide
variety of electrical, general protection
and access hardware components they
need from one place, saving time,
creating efficiency and reducing
packaging and transport emissions.
CABLE GLANDS
Maintain uptime, seal electronics
and protect cables from strain relief
with IP rated cable glands
SPRING PLUNGER
Make sure the charging gun is
secure whilst ensuring ease of use
EMERGENCY BUTTON
Ensure user safety with our emergency
stop buttons
SWING HANDLE
Maintain easy access for maintenance
whilst ensuring security and aesthetics
are not compromised
LEAF HINGE
Ensure easy access for maintenance
with easy to install leaf hinges
DIRECTORS’
REPORT
CONCEALED HINGE
Concealed hinges provide additional
security by removing pry points
BUBBLE GASKET
Maintain enclosure protection
with IP rated gaskets
PLASTIC SCREWS
Prevent short circuits in electronics
applications with non-conductive screws
QUARTER TURN LOCKS
Make sure electrical applications
are secure and sealed from the
elements with IP rated locks
BRAIDED CABLE SLEEVES
Protect wiring and ensure uptime
with UL rated cable sleeves
TERMINALS
Maintain reliability with quality
electrical connectors
STANDOFFS
Mount PCB’s securely and easily
using a screw in standoff
CABLE TIES
Efficiently organise wiring to enhance
reliability and reduce downtime
33
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Health, safety
and wellbeing
Our focus and targets
Zero accidents
for our people and visitors.
Mental health training to
80%
of leaders by 2024.
Healthy lifestyles campaigns at
50%
of sites by 2025.
Our progress
Lost time incidents reduced by
57%
in 2023.
9%
of leaders have received mental
health training.
Healthy lifestyles campaigns
launched in 2024.
Our
culture
This pillar focuses on
creating a safe, supportive
work environment that
champions equality and
celebrates diversity.
34
We know from our employee engagement
survey that employee perceptions of health
and safety at work have improved. “My
Company is safe place to work” was one of
the top scoring statements at 91%. This has
improved by 2% against 2022 and is 8%
above our industry benchmark.
Our commitment to safety in 2023
resulted in tangible improvements, ranging
from increased visibility and accountability
among leaders to successful hazard
reduction initiatives and a significant 57%
reduction in lost time incidents. All our
sites have health and safety management
systems in place. Of these, nine sites are
certified to ISO 45001 or an equivalent
standard, covering 73% of employees.
In 2023, we launched the Leadership Safety
Commitment, a standard to align all leaders
in the organisation. We increased safety
visibility, by installing lost time clocks at
sites, and developing and embedding safety
commitments into our 2023 objectives. As
part of the safety protocol, our CEO, Scott
Fawcett, actively participated in a review
of each lost time incident. This practice
ensures that leadership is actively engaged
in addressing safety concerns, fostering a
culture of transparency, responsibility, and
a collective commitment to the wellbeing
of every Essentra employee.
Our site in Yichun, China, implemented
a risk reduction programme as a key safety
initiative in 2023, and the site achieved an
impressive milestone by reaching 365 days
without a lost time incident. A third-party
audit was conducted in 2022, and in 2023
all high-risk issues identified at the site were
successfully resolved or reduced to a low
level. In 2023, we ran a pedestrian
segregation project, improving the
separation of pedestrians from vehicles at
each site. Fourteen projects were completed
in the year, and the project drove an increase
DIRECTORS’
REPORT
in positive engagement. The emphasis on
both our Yichun site, and the pedestrian
segregation project has provided a holistic
approach to safety, addressing site-specific
needs while implementing broad, company-
wide initiatives.
In 2024, our safety culture journey continues
through a comprehensive strategy focusing on
leadership commitment, active “grassroots”
employee participation, stringent compliance
measures, and continuous improvement. By
embedding safety into our daily operations
and ensuring leadership commitment at all
levels, we aim to create a workplace that
gives every team member a voice and
leaders champion safety.
As well as physical health and safety, we
recognise the importance of our people’s
mental health and wellbeing. We currently
have 24 mental health first-aiders trained
across the business, and in-house capability
to train our people in mental health first aid.
We recognise that, as well as having mental
health first-aiders, it is valuable to equip our
leadership with the skills required to support
their teams and encourage employees to
thrive. Currently, we are behind target, with
9% of our leadership team trained. In 2024,
we are rolling out the training to more
leaders and employees to reach our 80%
target, ensuring a consistent approach to
mental health and wellbeing across the
business. We have also commenced our
healthy lifestyle campaigns, starting with
a global walking challenge in February 2024,
this will be followed up with a rolling
programme of activities during 2024.
We provide all of our people with access
to our Employee Assistance Programme,
providing them and their families with 24/7
access via a confidential phone line to
support on any financial, legal or family
topics. This is backed up with access to
online health and wellbeing resources.
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Safety performance 2023
2023
2022
%
change
Lost time incidents
(“LTIs”)
10
231
-57%
LTI rate per
200,000 hours
Days lost
Severity rate
(days lost per
200,000 hours)
0.42
128
0.96
3821
-56%
-66%
5.41
16.02
-66%
1
2022 LTI and days lost restated due to an incident severity
change after publication of the 2022 Annual Report.
Employee engagement
and recognition
Employee engagement is one of the most
important indicators of the health of our
business, as we believe that higher rates
of employee engagement generate higher
levels of customer satisfaction. In 2023, we
changed the timing and cadence of our
employee engagement survey, conducting a
shorter survey earlier in the year, with further
surveys planned throughout the year. We see
this as an opportunity to introduce a more
dynamic, frequent and data-driven approach
to employee engagement through the
concept of continuous listening.
86% of employees responded to the
survey, meaning that the findings are a
true representation of the employee voice
at Essentra. The results of our 2023 survey
show we have an overall engagement across
the business of 82%. This is down by 1% in
comparison to 2022, but exceeds the industry
benchmark by 7%. Of the 22 questions in
the shortened survey where we could make
comparisons to the previous year, we exceed
industry benchmarks in three key areas:
• “My company is a safe place to work” – at
91% this has improved by two percentage
points since 2022 and is eight percentage
points above the industry benchmark
• “I would like to be working for Essentra 12
months from now” – at 86% this remains
the same as 2022, but still 14 percentage
points above the industry benchmark
• “I am satisfied with Essentra as a place to
work” – at 84% this remains the same as
2022, but continues to be 11 percentage
points above the industry benchmark.
In comparison, the main areas where we
want to continue to make improvements
are:
• good communication between
departments – this question scored 57%
which is an increase of 1% against 2022
but still the lowest scored question
• similarly, when asked if there was little
wasted time and effort only 61% of
respondents agreed.
To implement improvements, every site
and functional area of the business will be
reviewing their 2023 engagement action
plans, and building a 2024 plan to drive
improvements in their area.
In 2023, we carried on our annual We Make
it Work Awards. We had a great response
rate, receiving 666 nominations across
six categories:
• we deliver
• we champion equality and
celebrate diversity
• we care about each other
• we care about our customers
• we drive a sustainable culture
• we are an effective team.
Recognising our employees through the
awards provides a great opportunity to
share good practice and spotlight great
initiatives happening across the Company.
Championing
equality and
celebrating
diversity
Our focus and targets
40%
women in leadership teams by 2025.
25%
of leaders identify as ethnically
diverse by 2030.
Our progress
31%
of women in leadership teams at
end of 2023.
17%
of leaders identify as ethnically diverse
in 2023.
DIRECTORS’
REPORT
In 2023, we progressed in our journey
to create a more diverse, equitable and
inclusive workplace. In 2022, we set a target
to have 40% of women in leadership teams
by 2025, at the end of 2023 this was at 31%,
an increase of 5% from 2022. In addition, we
have for the first time collected information
on the ethnic diversity of our senior
leadership team, and found that 17% of
employees in the team identify as ethnically
diverse. With this baseline, we assessed
suitable targets for a global business like
ours, and used benchmarking across the
regions we operate in to formulate a target
for ethnic diversity that we believe not just
represents, but surpasses the broader
populations where we work. Consequently,
we have set a new target for 25% ethnic
diversity in our senior leadership team by
2030, with an interim target of 20% by 2027.
This also meets the voluntary request made
by the Parker Review to set an ethnicity
target for 2027.
Our overall diversity, equality and inclusion
(“DE&I”) goals are supported by series of
campaigns that we run throughout the
year, organised by a cross-functional team
of our people that forms the DE&I team
across Essentra. This team ran a series of
campaigns across 2023 related to various
topics including Pride, Black History Month,
International Women’s Day and
International Men’s Day. In 2024, we are
focusing on a broader DE&I strategy that
complements and supports our ESG
strategy. This strategy covers all facets of
DE&I, and brings together the targets and
campaigns we run throughout the year,
supported by activities to ensure we attract,
recruit, train and retain diverse talent across
our business.
35
ESSENTRA PLC ANNUAL REPORT 2023 Our
commitment
to being an
ethical
employer
Our target
100%
of employees trained on Ethics
Code biannually.
Our progress
99%
of employees trained on Ethics Code.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our employee diversity as of 31 December 2023
Permanent/Contractor
split
(%)
Gender
(%)
Ethnicity
(%)
All employees
Employees: 97% (2,978)
Agency/Contractors: 3% (92)
Total: 3,070
Leadership team
Employees: 100% (70)
Agency/Contractors: 0% (0)
Total: 70
All employees
Women: 43% (1,329)
Men: 57% (1,741)
Leadership team
Women: 31% (22)
Men: 69% (48)
Board of Directors
Women: 38% (3)
Men: 62% (5)
All employees1
Ethnically diverse: 15% (325)
White: 40% (848)
N/A or no response: 45% (973)
Leadership team
Ethnically diverse: 17% (12)
White: 64% (45)
N/A or no response: 19% (13)
Board of Directors
Ethnically diverse: 25% (2)
White: 75% (6)
1 Ethnic diversity of employees responding to the 2022 Employee survey (2,146 employees)
Women’s Health In South Tyneside
The Social Committee team at our Jarrow,
UK site held a number of fundraising
activities for International Women’s Day
2023. These included a bake sale, raffle,
and donation of sanitary products in
partnership with a local supermarket.
All the funds and donations went to a
local women’s charity, Women’s Health
In South Tyneside (“WHIST”).
36
DIRECTORS’
REPORT
Our Ethics Code is the core foundation of
our compliance strategy and is issued to
all employees globally. It is supported by
a comprehensive training schedule, both
online, virtual face to face and in person
training that is delivered by our in house
team. In 2023, 99% of employees who were
assigned to receive Ethics Code training
completed it. Management followed up
with those who did not complete on time
to understand why, and ensure there was
a thorough understanding of the subject
matter and the importance that is placed
on compliance with the Ethics Code. The
Ethics Code is available in all Essentra
languages both in hard copy for colleagues
working in factories, and online, so that
employees are able to access it easily. An
ethics decision tree helps guide employees
on making the right decision. In addition, we
have specific policies relating to Sanctions,
Anti-Bribery and Corruption, Anti–Money
Laundering, Anti-Trust and Competition
and Third-Party Due Diligence. These policies
are made available to all employees and
specifically issued for affirmation to senior
leaders and other employees who hold
positions where such polices are relevant
to ensure best practice.
Our Right to Speak Policy, which meets our
obligations with regards to whistleblowing
across the jurisdictions in which we operate,
is well established and enables any employee,
customer, supplier or individual otherwise
connected to the business, to report
circumstances where they believe that the
standards of our Ethics Code, or our wider
policies and guidance, are not being upheld.
We are committed to ensuring employees
feel able to raise any concerns in good faith,
without fear of victimisation or retaliation
and with our support. Employees can report
any concerns on a confidential basis online or
by telephone. During 2023, our Audit and Risk
Committee received updates at each of its
meetings on all Right to Speak issues raised
ESSENTRA PLC ANNUAL REPORT 2023
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
Our
communities
We work with our suppliers,
local communities and wider
family to ensure our values,
ethical practices and processes
provide equitable outcomes, as
well as volunteering our time
supporting good causes.
and sought assurance from management on
the issues and the response. The issues raised
mainly related to employment practices that
were investigated in full under HR policies and
gift disclosures. More information can also be
found in the Audit and Risk Committee
Report on page 113.
Throughout our international operations,
we support and endorse human rights – as
set down by the United Nations Declaration
and its applicable International Labour
Organisation conventions – through the
active demonstration of our employment
policies, our supply chain and the responsible
provision of our products and services.
This commitment includes a mandatory
requirement at all our sites to avoid the
employment of children, as well as a
commitment to the prevention of slavery
and human trafficking. Each of our websites
includes a statement on Anti Modern
Slavery, this statement is reviewed each
year by management and then assurances
provided as appropriate to the Board, prior
to being agreed.
We are proud that in 2023, we joined the
United Nations (“UN”) Global Compact
initiative, confirming our commitment to
responsible business practices, human rights
and our support of the UN Sustainable
Development Goals. The UN Global
Compact is a voluntary leadership platform
for the development, implementation and
disclosure of responsible business practices.
DIRECTORS’
REPORT
We are committed to conducting our
business in a responsible and ethical
manner. We recognise that our suppliers
play a crucial role in our value chain and
share in our commitment to upholding high
standards of integrity, sustainability, and
social responsibility. We have over 1,500 raw
material and goods for resale suppliers who
provide over 50,000 products, our supply
chain is a core component of our business.
We recognise that local laws and
regulations may differ across the regions
in which we operate. However, our universal
Supplier Code framework guides our
suppliers’ behaviour and encourage best
practices, irrespective of legal requirements.
We expect our suppliers to not only comply
with applicable laws but also embrace these
principles and work towards continuous
improvement. The Supplier Code is split
into three distinct areas:
• health, safety and the environment
• respecting human and labour rights
• acting with integrity, ethics and
compliance.
Developing
an ethical
supply chain
Our targets
Our Supplier Code of Conduct (”Supplier
Code”) refreshed and launched in 2023 to
all suppliers over a material spend threshold.
70%
of suppliers by spend actively
risk monitored.
Our progress
18%
of suppliers targeted have agreed to our
new Supplier Code so far.
75%
of suppliers by spend actively risk
monitored – all suppliers over a material
threshold spend.
37
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
We believe that our suppliers are integral
partners in achieving our ESG goals. By
agreeing to operate to our Supplier Code,
suppliers demonstrate their commitment to
these principles and their willingness to work
in collaboration with us towards a more
sustainable and responsible future. Since
its launch in October 2023, 18% of targeted
suppliers have signed up to our Supplier
Code. In 2024, we will be continuing
engagement to increase responses.
In 2023, we also developed and launched
a new approach to supplier development
incorporating four levels of engagement,
from onboarding through to ongoing
supplier relationship management. This
new framework provides a collaborative
approach to ESG matters and opportunities
for decarbonisation.
Supplier development pyramid
We enhanced and rolled out a new suppler
review and audit programme completing
19 on-site audits across the globe, which
also forms part of our risk management
approach (see page 65). In 2024, we will
continue to work with our key partners to
drive sustainable solutions. We have set
additional targets to conduct supplier audits
for tier one suppliers, based on the criticality
of those suppliers, and to increase the
percentage of spend actively risk monitored.
We also plan to perform an assessment of
our supplier’s emissions reduction targets and
alignment to science-based targets. Once
this is complete we aim to set a target for our
suppliers to set science-based targets in 2024,
to ensure we continue to decarbonise our
value chain.
Supporting
good causes
Our targets
Community engagement days taken by
25%
of employees.
Our progress
13%
of employees took a community
engagement day in 2023.
Procurement will actively manage the supply chain to minimise risk and improve performance.
Audit
Supplier
reviews
Specialist
questionnaires
Onboarding and
ongoing monitoring
Level 4
• Planned and reactive on-site audits
• Compliance and quality driven audits
• Remote audit assessment
Level 3
• Supplier relationship management
• Supplier performance reviews
• Supplier self-assessment
Level 2
• ESG questionnaire
• Quality assurance questionnaires
Level 1
• Enhanced onboarding
• Onboarding monitoring:
– Modern slavery
– Reputation
– Sanctions
38
DIRECTORS’
REPORT
We engage with our local communities to
create a positive impact through initiatives
that positively impact those in need,
improving their lives, the community
and the local economy. We relaunched
our Community Engagement Policy in
2023 during our Sustainability Week in
April, increasing visibility of the option that
every employee has to receive one days paid
leave each year to volunteer, and providing
guidance to all of our employees on how
they could spend their time.
In 2023, a total of 2,852 hours of volunteering
were recorded by 405 employees, which is
13% of employees. As this is the first year
we are recording volunteering, we recognise
there is further engagement needed to
encourage employees to volunteer and
record their time, and this will be a focus
area for 2024.
Our employees volunteered to support
a wide variety of good causes across the
world, illustrating the wide range of local
communities our employees work and live in.
Some examples include our employees in the
UK taking part in beach cleans around the
country, and helping a local school to tidy up
their gardens. In the USA, our Louisville team
adopted a local park, becoming stewards of
Riverview Park which they will look after with
various projects throughout the year.
In Thailand, over 200 employees took part in
a local project to regenerate the local coral
reefs, by creating the frames to support the
reef restoration and planting live coral
cuttings, and in China a team from our
Yichun site donated stationery, schoolbags
and sports supplies to a local school.
ESSENTRA PLC ANNUAL REPORT 2023 ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED
DIRECTORS’
REPORT
Chicago team – litter picking
Chichester team – beach clean
Rayong team – coral reef regeneration
39
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN
Our Climate
Transition
Plan
DIRECTORS’
REPORT
IN THIS
SECTION
Introduction and background
41
42 Strategic ambition
44 Our operations
45 Our supply chain
47 Our products and services
48 Engagement with stakeholders
49 Our targets
51 Our culture
53 Governance
40
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
DIRECTORS’
REPORT
We are committed to
playing our part in solving
sustainability challenges, and
helping our customers achieve
their sustainability goals.”
This plan supports our ESG strategy, and
is supported by our assessment of risks
and opportunities using the Taskforce for
Climate-Related Financial Disclosures
(“TCFD”) framework. We will report on this
plan annually, and update this plan no less
than every three years to ensure relevance
with latest standards and developments.
Essentra at a glance
14
manufacturing
sites
24
distribution
centres
33
sales and
service centres
c.3,000
employees
worldwide
Introduction and background
Essentra is a global market leader in the
manufacture and distribution of essential
components. We have a history of over 65
years, with customers across a huge range
of industries and applications. Making it
easier for our customers is our top priority,
with every order, we aim to offer a hassle-
free experience. We operate across four
continents, through our 14 manufacturing
facilities, 24 distribution centres and 33 sales
and service locations.
Our purpose is to build a sustainable future
for our customers. Climate change is one of
the biggest challenges that humanity faces.
We are committed to playing our part in
solving global sustainability challenges,
and helping our customers achieve their
sustainability goals.
Our ESG strategy sits across five pillars,
which considers our operations, customers,
products, employees, value chain and
communities in which we operate. We have
had greenhouse gas (“GHG”) emissions
reduction targets in place since 2020, and
in early 2024, the Science Based Targets
initiative (“SBTi”) approved our near-term
and net-zero targets. We have created this
climate transition plan to set out our
net-zero emissions reduction targets, and
our approach to reducing GHG emissions
from our operations and value chain. This
plan contains the actions, owners, timelines
and anticipated costs to make the transition
to net-zero.
41
ESSENTRA PLC ANNUAL REPORT 2023
41
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
Strategic ambition
Our ambition is to reach net-zero GHG
emissions across our value chain by 2050.
We are committed to reducing our absolute
scope one and two GHG emissions 90% by
2040, from a 2019 base year, and reducing
our absolute scope three GHG emissions
90% by 2050, from a 2022 base year. Our
targets are approved by the Science Based
Targets initiative (“SBTi”). In 2022, we also
signed up to the Business Ambition for 1.5°
campaign, led by the United Nations Race
to Zero, and our approved targets are
aligned with limiting warming to 1.5°C.
When developing this plan, three time
horizons were used, which align to our
business planning and TCFD assessments.
These are short-term (one – three years),
medium-term (three – seven years) and
long-term (over seven years).
Our SBTi approved targets
Our pathway to net-zero
Near-term
Long-term
25,000
Net-zero
by 2040 at
the latest
Net-zero
by 2050 at
the latest
)
e
2
O
C
t
(
s
n
o
i
s
s
i
m
e
G
H
G
2
d
n
a
1
e
p
o
c
S
20,000
15,000
10,000
5,000
Scope
1 & 2
Scope 3
Reduce absolute
scope 1 and 2
GHG emissions
50% by 2030 from
2019 base year
Reduce scope 3
emissions from
purchased goods
and services
and upstream
transportation
and distribution
55% per GBP value
add by 2030 from
2022 base year
42
DIRECTORS’
REPORT
Key assumptions and external
factors
We have set out our key risks and
opportunities relating to climate change
in our latest TCFD report (pages 58 to 64).
The following assumptions and dependencies
have been made with regards to this
transition plan:
• high quality carbon offsets will be
available to offset residual emissions
when required
• key suppliers within our value chain
will engage and collaborate to transition
their own operations to net-zero
• grid decarbonisation will continue
at the pace required to meet our
reduction targets.
Business model implications
Our ambition to transition to net-zero has
implications for the way we operate, and
engage with our value chain. Within our
ESG strategy, our customer pillar sets
out how we will increase the number of
sustainable products being offered to our
customers, including substitution of our
products with low-carbon alternatives,
collaborating to reduce emissions at the
end of a products life, and investment in
research and development to provide
innovative new products. Our components
pillar details our aims to increase the
sustainable materials within our product
ranges, and increasing the efficiency of our
designs, to reduce the lifecycle emissions of
our products. This will require cultivation of
new collaborations with our suppliers,
research bodies and academic institutions to
drive innovation across our diverse product
ranges. Our progress in these areas can be
read on pages 21 to 39.
0
20%
40%
60%
80%
n
o
i
t
c
u
d
e
r
s
n
o
i
s
s
i
m
e
%
2.0
1.8
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1.4
1.2
1.0
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0.6
0.4
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)
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o
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m
r
e
t
-
r
a
e
n
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
n
o
i
t
c
u
d
e
r
%
2
2
0
2
Year
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
2
100%
0
3
0
2
Target
0
9
1
0
2
Year
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
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6
2
0
2
7
2
0
2
8
2
0
2
100%
9
2
0
2
0
3
0
2
Target
ESSENTRA PLC ANNUAL REPORT 2023
OUR CLIMATE TRANSITION PLAN CONTINUED
Our climate transition plan on a page
DIRECTORS’
REPORT
Focus
2023
2024
2025
2026
2027
2028
2029
2030+
Our operations
Transition to renewable electricity at all of our sites
Maintaining 100%
renewable
Develop plans for renewable heating for key sites
Implement at key sites, plan smaller sites
Implement smaller sites
Develop and implement regional policies for low and zero
emission vehicles
Transition to low and zero emissions vehicles as leases expire
No new fossil fuel vehicles
leased or purchased
Our supply
chain
Goods for resale: initial supplier engagement to agree initiatives
to lower the embodied emissions in products
Implement category specific ESG initiatives to reduce emissions
Logistics: move to central freight
emissions monitoring system globally
Route optimisation to reduce travel time and distance of products to customers.
Engage transport and distribution suppliers, to agree on low and zero emission vehicle transition
Our products
and services
Sustainable
materials: 20%
target achieved
Increase to 50% of polymer from sustainable materials by 2030.
100% of general protection and security seal ranges transitioned to sustainable materials by 2030
Ongoing improvements
using supplier engagement
processes
Continue collaboration
with providers on
renewable fuels
Maintaining progress and
new targets implemented
Creation and roll-out of packaging sustainability standard to support targets of 50% recycled content by 2030,
and 100% of packaging recyclable, reusable or compostable by 2030
Continue to reduce
emissions per package
43
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
Our operations
We have made good progress in 2023,
reducing our scope one and two emissions
by 38% from 2019, through a combination
of transitioning to renewable energy and
investing in energy efficiency measures.
We have the most control over GHG
emissions in our operations, and electricity
use is the biggest source of these emissions,
with our top eight sites representing 89% of
our electricity usage. Our roadmap focuses
on continuing our transition to renewable
electricity across our sites, both from the
grid and installing on-site solar where
possible, alongside improving our energy
efficiency, and a transition to renewable
fuels for heating.
Transportation is a small but highly visible
part of our direct emissions, however, we are
mindful that as we move to renewable and
zero emission electricity across our sites, our
transport emissions will become a larger part
of our emissions profile. Therefore, our aim is
to move to low and zero emission vehicles
across our fleet. In 2023, we commenced
installation of electric chargers and leased
an electric vehicle and two hybrid vehicles for
our sales team in our Paris-Roissy site, and
one at our Nettetal site. Our aim is to expand
this programme from 2024–2030 to move
our fleet progressively to low and zero
emissions vehicles.
DIRECTORS’
REPORT
Percentage of 2023
scope one and two
GHG emissions
Our focus areas
76% Renewable electricity
Transition to 100% renewable
electricity
Energy efficiency
Continue to optimise our
energy demand through
machine replacements and
energy efficiency programmes
Short-term
(2023–2026)
Medium-term
(2026–2030)
Long-term
(2030–2040)
• On-site solar projects
• Sourcing of renewable
electricity at sites in
deregulated markets
• On site solar projects
• Progressively increase
• Maintain 100% renewable
energy across all sites
energy attribute certificates
to close gap at sites in
regulated markets
• Machine replacements
• Targeted energy audits for
top eight largest sites
• Continue machine
replacements
• Energy audits for
distribution sites
• Move to a business as usual
replacement plan
• Rolling audit programme
17% Renewable heating
Transition fossil fuel heating
sources at all sites to renewable
energy sources
• Develop plans for top three
consuming sites at Yichun,
Erie, and Silivri
• Commence programme
• Commence smaller sites
for top three sites
• Plan smaller sites
5% Transportation fleet and
machinery
Introducing low and zero
emissions vehicles progressively
into our fleet
• Develop and implement
regional policy to replace
leased vehicles
• Plan transition and process
• Continue lease replacements
• Commence replacement
of purchased fleet and
equipment at end of life
• Continue lease replacements
• No new lease or purchases
of fossil fuel vehicles and
machinery
for owned fleet
2% Reducing refrigerants
Eliminate any high global
warming potential (“GWP”)
refrigerants, retrofitting or
replacing them with low
GWP refrigerants
• Audit of cooling systems to
determine current state
• Develop plan to retrofit or
• Implement plan
replace systems
44
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
Worldwide facilities electricity consumption in 2023 (GWh)
8
sites represent
89%
of Essentra electricity
consumption
1
2
4
3
5
8
7
6
Our supply chain
Within our supply chain, we will be
focusing on three areas, which are our
largest impact areas included in our SBTi
approved scope three near-term target.
These are raw materials, goods for resale,
and transportation.
Sustainable materials
As a manufacturer, our raw materials are of
great importance to us and our customers.
We will continue transitioning our plastic
products to sustainable alternatives. Our
metals manufacturing sites will also increase
focus on recycled content, and we will work
with our suppliers to ensure they have plans
to transition to renewable energy sources.
In addition to our net-zero targets, we have
a target that 50% of our polymers will be
sustainable by 2030, and 100% of our general
protection and security seals ranges. In 2023,
we invested in our Centre of Excellence, at our
Kidlington, UK site. The Centre allows us to
trial innovative materials with lower emissions
and improved environmental impacts, across
our diverse product range. Since 2019, we
DIRECTORS’
REPORT
have substituted recycled content into
over 7,000 products across our ranges,
providing products with lower emissions
and reduced environmental impact.
Goods for resale
Products that we buy to distribute to our
customers is a key emissions hotspot. Our
main short-term actions in this area are a
review of products to determine which
can be brought in-house, and a series of
supplier engagement campaigns to begin
collecting product level emissions
information from our suppliers.
28%
of our scope three
emissions is from our
metal and polymer
materials
1
2
3
4
5
6
7
8
Erie, PA,
USA
Flippin, AR,
USA
Barcelona,
Spain
Kidlington,
UK
Istanbul,
Turkey
Rayong,
Thailand
Yichun,
China
Ningbo,
China
4.2GWh
6.5GWh
1.5GWh
6.4GWh
5.5GWh
5.7GWh
5.9GWh
1.8GWh
Total energy usage
13.9 GWh
14.6 GWh
13.8 GWh
AMERS
EMEA
APAC
45
ESSENTRA PLC ANNUAL REPORT 2023
OUR CLIMATE TRANSITION PLAN CONTINUED
Our sustainable product journey
DIRECTORS’
REPORT
2022
2023
2030
99%
recycled content used across
much of our LDPE range.
31%
reduction in GHG emissions
per kg of LDPE.
20%
of polymers from sustainable
sources, reached two years
ahead of target.
50%
of all polymer materials
used will be from
sustainable sources.
Percentage of
2023 scope three
GHG emissions
Our three focus areas
28% Sustainable materials
• Polymers: development of solutions to
decarbonise our polymer products in our
Centre of Excellence
• Metals: engagement with supply chain to
determine and then transition to sustainable
material options
• Packaging: develop packaging standard to meet
2030 targets of 50% recycled content across all
packaging; and 100% to be reusable, recyclable
or compostable
23% Transport
• Make where buy: ongoing project to reduce
transport distances of our products using our
global presence
• Improved analytics: transport tracking software
providing greater visibility and insights to make
cost and emissions improvements
14% Goods for re-sale
• Bringing in house: strategy to transition
to manufacturing ourselves where possible
• Supplier engagement: working with suppliers
to determine and then transition to sustainable
material options
Short-term
(2023–2026)
• Continued focus on
polymer alternatives
• Develop product
specific GHG emissions
inventory for metals
• Engage supply
chain to develop
packaging standard
Medium-term
(2026–2030)
• Increasing
replacements to reach
50% polymer target
Long-term
(2030–2050)
• Develop and
implement
2030+ targets
• Commence
• Develop and
transition to low
GHG emission metals
• Implement
packaging standard
across all sites
implement 2030+
targets for metal
across categories
• Develop and
implement targets
for 2030+
• Transport tracking
implemented globally
• Make where buy project
commenced
• As transport contracts
expire, sustainability
to be key part of new
award criteria
• Continued
collaboration
with providers to
move to renewable
fuel options
• Development of
decarbonisation
strategy at
category level
• Implement product
strategy and
sustainability decision
making process
• Develop and
implement
2030+ targets
Transportation
Our focus on transport will be across three
areas. Firstly, we will continue to optimise
where products are made to reduce
transport distances to customers. We will
support this by using transport tracking
software to use the most efficient and low
emission routes and providers, and alongside
this we will work with our supply chain to
transition to low-carbon vehicles.
In 2023, we implemented a transport
tracking software, which provides us with
real time tracking of our shipments, and the
GHG emissions of each movement. It also
allows us to optimise routes and choose
providers based on their sustainability
credentials, allowing us to include the
sustainability of shipments in our
decision making.
23%
of our value chain
emissions is from
transport
46 46
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
DIRECTORS’
REPORT
Our products and services
The work on reducing GHG emissions
in our operations and supply chain will
support our net-zero transition in our
products and services. Our focus will
span five focus areas:
• sustainable design
• material innovation
• low-carbon manufacture
• responsible sourcing
• circular packaging.
We recognise the importance of leading
by example, which is why we have set
ambitious targets and are implementing
strategic measures to decarbonise our own
operations and empower our suppliers to
do the same. Within our supply chain, our
focus is now on further eliminating and
reducing our scope three GHG emissions,
with a particular focus on the circular
economy and initiatives to buy or make
goods closer to our customers.
Our initial focus on decarbonising our
supply chain has been led through raw
material replacement, and engagement
with suppliers to identify opportunities for
improvement. Through this engagement
we share best practice to support their
journeys, and our own, to net-zero.
Our short-term focus is to scale up our
engagement with key suppliers. In the
medium-term, our goal is to integrate
carbon pricing into sourcing and
procurement decisions, alongside net-zero
clauses in our contracts, and including
emissions reduction criteria in our
tender processes.
Financial planning
Each of the actions detailed within this
plan in our operations has been assessed
to quantify the financial impact, and we
47
Our focus will span five focus areas:
Circular
packaging and
end of life
Sustainable
design
Low-carbon
manufacture
Material
innovation
Responsible
sourcing
Sustainable design
Adopt circular economy principles to reduce material use per product and
per process cycle. Maximise resource efficiency and design out waste.
Material innovation
Transition to more sustainable materials and increase recycled content
across our product ranges.
Responsible sourcing
Embed environmental and social objectives and targets into our supply
chain, and engagement to identify decarbonisation opportunities.
Low-carbon manufacture
Reduce the emissions intensity of our products by decarbonising our
energy usage, increase our energy efficiency through new technologies,
and reduce waste through employee engagement and improved tooling.
Circular packaging and end of life
Increase the circularity of our packaging through initiatives like increasing
recycled content and ensuring reuse, recyclability or compostability at
end of life.
expect to be able to fund this plan through
our existing capital and operational
expenditure models. In the short-term,
we have no additional capital expenditure
beyond the ongoing planned machine
replacement programme, and Centre
of Excellence project. In the medium and
long-term, we anticipate additional capital
expenditure to transition our heating and
owned-transportation, and this will be
reflected in our forecasting once fully
quantified, but is expected to be less
than 10% of 2023 adjusted operating profit.
Our transition to renewable electricity is
considered in our ongoing operational
expenditure, and we forecast this will be less
than 0.5% of adjusted operating profit
each year. Within our value chain, we
have commenced engagement within our
implementation focus areas to ascertain
what (if any) the financial impact of our
increasing climate-related requirements
will be on our existing relationships in the
medium and long-term. In the short-term,
our sustainable material and goods for
resale initiatives are currently cost-neutral,
and our transport optimisation work is
realising cost savings.
Our climate-related risks and opportunities
includes revenue shift from current
technologies to emerging low-carbon
markets, and more information our climate-
related risks and opportunities including
financial impacts is available in our latest
TCFD report on pages 58 to 64.
Our policies
We have policies in place to support
our transition to net-zero. We have a
Sustainability Policy which sets out our
emissions reduction targets, including our
commitment to continue to set science-
based targets across our scope one, two
and three emissions. We also have a
Renewable Energy Policy which states
our objective to transition to renewable
energy at all of our sites.
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
Engagement with value chain
Having an effective, efficient and
sustainable supply chain is essential to
enable us to deliver for our customers and
end-users. Engagement with our suppliers
is a key element of our transition plan, as
emissions from our purchased goods and
services is the biggest proportion of our
total GHG emissions.
Engaged suppliers perform at a much higher
level, knowing they are regarded as valued
partners and critical to mutual success.
We work hard to engage directly with
our key suppliers and maintain close
relationships to ensure continuity of supply,
and to proactively manage potential risks
of supply chain disruption. During 2023, we
have focused on how to better support our
suppliers, for example by providing extended
demand visibility, and providing our expertise
to find mutual solutions to identified risks.
We also refreshed and launched our Supplier
Code, to all our suppliers with annual spend
over a material spend threshold. Our
Supplier Code sets out our expectations
with regards to ESG performance from our
suppliers, including our emissions reduction
targets and objectives for the coming years.
We will continue these campaigns, focused
on alignment to the topics most material to
each spend type. In addition, from 2024, we
will commence engagement to encourage
suppliers to set their own science-based
targets for emissions reduction with the SBTi.
This will ensure we continue to decarbonise
our value chain.
Identification of our key suppliers, who
contribute the highest proportion of our
GHG emissions, has been established based
on the products and services they provide.
This information has then been used to
implement targeted campaigns with
suppliers based on spend category, to
set specific objectives based on the most
material impacts of their services as they
relate to our ESG targets. For example, our
packaging providers will support our target
to reach 50% recycled content in our
packaging by 2030, which in turn reduces
our emissions from materials and waste.
Category
Materials
Transport
Goods for resale
2023
Spend
(%)
2023 GHG
emissions
(%)
15
11
22
28
23
14
We recognise that our supplier base will
change over time as we update and replace
existing procurement arrangements. Our
engagement with suppliers will be maintained
by integrating ESG requirements, such as
requirements for emissions reduction targets,
into our procurement processes, contracts
and ongoing supplier management.
We are a member
of the European
Circular Plastics
Alliance
DIRECTORS’
REPORT
Engagement with industry,
government, public sector,
communities and civil society
We engage with industry groups to
further our ESG strategy and goals.
We are a member of the British Plastics
Federation (“BPF”) and engage with their
events and frameworks on sustainability.
We also recognise the importance of
collaboration with local authorities and
communities in our transition to net-zero,
and as a global business acknowledge this
requires engagement in the UK and
internationally. We are a member of the
European Circular Plastics Alliance, and
have joined their initiative to boost the
EU market for recycled plastics with a
commitment to increase the amount of
recycled plastics in our products to 20%
by 2025, a target we hit two years early
at the end of 2023.
48
ESSENTRA PLC ANNUAL REPORT 2023 2023 GHG emission reduction progress
220,000
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
DIRECTORS’
REPORT
Scope 1
Scope 2
38% reduction
since 2019
Scope 3
30% reduction
since 2022
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
2023 total GHG emissions
Scope 1
Scope 2
9%
13,765 tCO2e
Scope 3
91%
131,733 tCO2e
6. 4%
5. 16%
8. 1%
1. 2%
7. 3%
2. 7%
4. 21%
3. 46%
1. Scope 1
2. Scope 2
Scope 3
3. Purchased Goods
and Services
4. Transport and
Distribution
5. Processing and
treatment of
Sold Products
6. Employee
commuting
7. Fuel and Energy
related activities
8. Business travel
OUR CLIMATE TRANSITION PLAN CONTINUED
Our climate-related targets
and metrics
We report on a variety of operational
metrics that support our net-zero
transition, as part of our ESG strategy
and regulatory disclosures. Many of
these metrics also align to the guidance
provided by the Transition Plan Taskforce
(“TPT”), and reporting frameworks
including TCFD (pages 58 to 64), the
Global Reporting Initiative (“GRI”) and
the International Sustainability Standards
Board (“ISSB”). Our progress across all
ESG metrics is on pages 21 to 39.
Energy metrics
• Total energy consumed, and energy
consumption broken down by source
• Total transport fuel consumed , and
broken down by type
• The percentage of renewable electricity
consumed, and generated on site
Environmental metrics
• Water usage and water drawn in areas
of high water stress
• Waste intensity and waste volumes by
end destination
• Sites with zero waste to landfill
Products and material metrics
• The percentage of raw material from
sustainable sources
Our GHG targets and progress
As outlined in our strategic ambition,
our aim is to reach net-zero GHG
emissions across our value chain by
2050. We are committed to reducing
our absolute scope one and two GHG
emissions 90% by 2040, from a 2019
base year, and reducing our absolute
scope three GHG emissions 90% by
2050, from a 2022 base year.
Our scope one and two near-term
target includes all GHG emissions
within our operational control. Our
scope three near-term target includes
our purchased goods and services,
and upstream transportation and
distribution. A screening assessment was
carried out to determine our applicable
and material scope three categories, and
this is reviewed annually.
Our targets are approved by the Science
Based Targets initiative (“SBTi”). In 2022,
we also signed up to the Business
Ambition for 1.5° campaign, led by the
United Nations Race to Zero, and our
approved targets are aligned with
limiting warming to 1.5°C.
Our SBTi approved targets
Scope
Near-term
Long-term
• Number of new products introduced
with sustainability criteria
1 & 2
3
Net-zero
by 2040
Net-zero
by 2050
Reduce absolute
scope 1 and 2 GHG
emissions 50% by
2030 from a 2019
base year
Reduce scope 3
emissions from
purchased goods and
services, and upstream
transportation and
distribution, 55% per
GBP value add by 2030
from a 2022 base year
49
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
Our net-zero target
is aligned
to the
SBTi
Net-Zero Standard
OUR CLIMATE TRANSITION PLAN CONTINUED
Carbon credits
Our net-zero target is aligned to the Science
Based Targets initiative (“SBTi”) Net-Zero
Standard, and includes a projected 10% of
residual emissions after achieving a 90%
reduction from our baseline emission levels.
Our approach to achieving net-zero in the
long-term will likely include buying high-
quality carbon credits to offset the
remaining 10% of GHG emissions that
we cannot reduce further.
We have no plans in the short-term to
use offsetting or carbon credits, and we
recognise that the market for carbon credits
is developing. Any investments we do make
into carbon credits will need assurance that
they will provide genuine carbon reduction
and are implemented in a way that is not
detrimental to the environment. We will
disclose any plans to use carbon credits
in future transition plans.
50
Reporting and assurance
We understand that transparency of our
GHG emissions and how we are making
progress against our targets is critical to
delivering our ambitions.
We disclose our emissions reduction
performance annually, through our Annual
Report. We have disclosed in alignment to
the Taskforce on Climate-related Financial
Disclosures since 2021 and use the
framework to disclose our climate-related
risks and opportunities in a standardised
and comparable way.
We have submitted CDP disclosures since
2012 and most recently received an A– for
Climate Change, we also do an annual
EcoVadis disclosure, and achieved silver
in 2023.
Our scope one and two operational emissions
are measured using activity data collected
from our internal systems. Our scope three
emissions inventory uses a hybrid model of
spend and activity data. The model has been
developed internally and uses lifecycle
analysis, industry databases and supplier
specific information where it is available.
We are continually improving our scope three
inventory as improved data sources and
measurement techniques become available.
This is tracked internally and reported on
annually within our Annual Report. More
information on our reporting methodology
can be found in our 2023 Basis of Reporting,
available at essentraplc.com/responsibility.
Selected ESG information, including
emissions reporting, is externally assured
on an annual basis to ISAE 3000, to ensure
the data is robust and reliable. In 2023,
we engaged ERM CVS to provide limited
assurance on selected ESG metrics, the
assurance statement is available on pages
148 to 149.
DIRECTORS’
REPORT
We have submitted
CDP disclosures since
2012
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
DIRECTORS’
REPORT
Culture
Our purpose is that we help customers
build a sustainable future, and one of our
four goals is our strategy to drive growth
supported by sustainability. This transition
plan and the aims and actions within is a
key part of ensuring we deliver on that
purpose. We embed our culture
throughout our business via training,
engagement, remuneration and annual
objective setting.
To ensure our transition is fair, we will
provide training to equip our employees
with any new skills and capabilities
required, and we include ESG in personal
objectives and our remuneration systems.
We have an employee recognition awards
annually, the Make It Work awards, with a
category dedicated to driving a sustainable
culture. Our annual engagement survey
allows our employees to provide anonymous
feedback on our ESG strategy and goals,
and we hold monthly town halls, globally,
where ESG updates are provided and
employees encouraged to participate
in the discussion.
We are also considering benefits such as a
leasing scheme for low and zero emission
vehicles, to give staff the opportunity to
choose more sustainable approaches to
commuting and support our scope three
emissions reduction targets.
Our purpose
Our vision
Our goals
Our ambition
Living our values
We help
customers
build a
sustainable
future
To be the
world’s leading
responsible,
hassle-free
supplier of
essential
components
• Market leader with a unique
proposition in a fragmented
£8–10bn market
• Clear strategy to drive organic
growth and market share gains
supported by digitalisation
and sustainability
• High margin business with scope
to expand through scale efficiencies,
operational effectiveness and pricing
• Strong returns and cash conversion
enabling value-enhancing mergers
and acquisitions
To double
the revenue
and triple
operating
profits
We care about
our customers
We care about
each other
We deliver
We are
an effective
team
51
ESSENTRA PLC ANNUAL REPORT 2023 OUR CLIMATE TRANSITION PLAN CONTINUED
Incentives and remuneration
The Remuneration Committee has
oversight of remuneration policy for
all Essentra employees, including how
climate and transition related risks and
opportunities are taken into account in
determining rewards and incentives,
linking to our strategic ambition.
For Executive Directors and the Group
Executive Committee (“GEC”), a climate
transition plan linked objective is set
annually, within the short-term bonus
structure, which carries at least a 10%
weighting. In 2023, this metric was the
percentage of sustainable materials
used in our polymer ranges, which
impacts our product offering and scope
three emissions. In 2024, this metric will
be focused on waste reduction, which
reduces our scope three emissions from
materials and transport. In addition,
there is a greenhouse gas reduction
target within Essentra’s long-term
incentive plan. This metric comprises
20% of the weighting, and is linked to
our greenhouse gas reduction targets.
We operate a performance related
pay and bonus structure for all Essentra
employees. Where appropriate,
responsibilities for implementing this plan
are reflected in employee objectives. In
addition, from 2024, almost 60% of
Essentra employees have an ESG metric
within their overall bonus structure, which
will be reviewed and set annually. The 2024
metric is linked to waste reduction at sites,
which directly impacts our scope three
emissions from material usage and waste
generation, and has a 30% weighting.
52
DIRECTORS’
REPORT
These measures ensure the Board
and Executive management have regular
opportunities to gain access to skills to
oversee implementation of this plan.
Our training team assess competencies
and knowledge requirements across the
Company, and work with our Sustainability,
Compliance, and Health, Safety and
Environment teams, to design and develop
training to provide employees with new
knowledge and skills to support this plan.
Training is broadly split into three categories:
Regulatory compliance
Regular training, briefings and guidance is
provided to relevant roles to ensure they
have the tools and knowledge to comply
with new and upcoming ESG legislation.
Internal ESG training
We have a sustainability week which
takes place annually, where all employees
are provided training, information and tasks
on a chosen topic to support our ESG goals
and net-zero transition. The aim is to provide
all employees with the language, awareness
and tools to take ownership in their role.
In addition to this, we have developed and
delivered training internally for specific
groups of employees such as our sales
team, providing tailored guidance that
equips employees to manage ESG in their
areas, and support our customers with
their own transition.
Our Centre of Excellence
Our new dedicated research facility at
our Kidlington site in the UK, is providing
training opportunities for employees on
new machinery, materials and processes to
ensure we provide employees with the skills
we will need, as we transition to new product
ranges and innovative material types.
60%
of employees have an
ESG metric within
their bonus
Skills competencies and training
We recognise that in order to effectively
deliver on our transition plan, we need
everyone in Essentra to take part and
be part of the journey.
At leadership level, we conduct Board
effectiveness assessments annually, and
this includes an assessment of the skills
and competencies required in relation
to climate and transition planning. In
addition, the Board level ESG Committee
assesses whether it has the right
knowledge and competencies to carry
out its duties. The ESG Committee invites
guest speakers to meetings at least twice
per year to provide guidance and
inspiration on a variety of ESG topics
including climate, and these sessions
are open to the wider leadership team.
ESSENTRA PLC ANNUAL REPORT 2023 Our governance structure
ESG Committee
What: sets direction of
ESG strategy, reviews
and challenges ESG
opportunities for
improving performance
and reducing risk profile.
Has oversight of ESG
targets and reporting
Audit and Risk
Committee
What: oversight of
climate-related risks and
opportunities process,
scrutiny of climate-related
risk disclosures, including
TCFD and Essentra’s
Principal Risks
Remuneration
Committee
What: aligns
remuneration policy
with ESG strategy and
monitors performance
against targets
Executive Committee
What: oversight of ESG activities and process against targets, reviews Principal
Risks including climate-related risks and opportunities
Social Steering Committee
Sustainability Steering Committee
What: oversight of initiatives to support
social sustainability targets, and manages
risks and opportunities
What: oversees initiatives to support
environmental sustainability targets, and
manages risks and opportunities
Diversity and Inclusion Team
What: co-ordinates diversity and inclusion
activities across the business and shares
best practice
Operational Sustainability
Committee
What: co-ordinates sites environmental
sustainability activities and shares
best practice
d
r
a
o
B
t
n
e
m
e
g
a
n
a
M
s
n
o
i
t
a
r
e
p
O
DIRECTORS’
REPORT
The ESG Committee, which is a Board
level committee, provides oversight of
climate-related risks and opportunities,
and oversees the development of our ESG
strategy, and this climate transition plan,
reviews company-wide opportunities for
improving performance and reducing
the Company’s risk profile through
sustainability related activities, and
has oversight of our climate and wider
sustainability reporting.
The Audit and Risk Committee
has responsibility for reviewing and
recommending to the Board for approval
our climate-related risks and opportunities,
our approach to identifying and managing
these risks and our alignment to the
Taskforce for Climate-related Financial
Disclosures (“TCFD”) recommendations.
Our latest TCFD report is available on
pages 58 to 64. The Remuneration
Committee has oversight of ESG metrics
within our rewards and incentives.
Alongside Board oversight, we have
various management and operational
groups with responsibility and oversight
of our climate transition plan and ESG
strategy. These groups ensure that our
strategic ambitions outlined in this
transition plan are embedded throughout
the organisation.
Approval of this plan
This transition plan is subject to
shareholder approval, via a non-binding
advisory vote.
OUR CLIMATE TRANSITION PLAN CONTINUED
Governance
Climate-related risks and opportunities,
and our transition to net-zero is addressed
collectively across the Company, from the
Board through to management and
operations, providing robust governance
and alignment to all aspects of company
strategy. Our CEO and Executive Board
member, Scott Fawcett, has overall
responsibility for setting Company
objectives and strategy for Board
approval. The Board has overall
accountability for the management
of our Principal Risks, and these risks
incorporate climate-related risks and
opportunities. More information on our
Principal Risks is on pages 70 to 73.
This transition plan is
subject to shareholder
approval, via a non-
binding advisory vote
53
ESSENTRA PLC ANNUAL REPORT 2023 NON-FINANCIAL KEY PERFORMANCE INDICATORS
Non-financial
key performance indicators
DIRECTORS’
REPORT
Essentra’s strategic priorities
and progress are measured
with KPIs against stated priorities
in terms of the environment,
our customers, communities
and people.
Non-Financial and sustainability
information statement
This table follows the requirements of Companies
Act 2016 Sections 414C(7), 414CA and 414CB and
is intended to help stakeholders understand our
position on key non-financial matters. We have
a number of Group policies and standards which
govern our approach to these matters. These are
detailed in this report in the sections shown.
REPORTING
REQUIREMENT
Environmental matters:
Environment, social and governance
Employees and health and safety:
Environment, social and governance
Social matters:
Environment, social and governance
Human rights:
Environment, social and governance
Anti-bribery and corruption:
Environment, social and governance
Business model:
Our business model
PAGES
22 to 33
34 to 35
34 to 39
36 to 38
36 to 38
3
Customers
Environment
Active customers
Why this is important
This reflects marketing effectiveness and
measures the potential population for further
growth opportunities. Customer numbers can
fluctuate, for example due to strategic focus on
mid-size accounts and digital marketing strategy.
2023
2022
2021
69k
74k
79k
Net Promoter Score
Why this is important
Reflects our customers’ overall satisfaction
with our products and service, as well as loyalty
to our brand.
2023
2022
2021
40
34
23
On Time In Full%
Why this is important
Our ability to deliver quality products on time
and in full demonstrates our ability to meet
our customers’ delivery demands.
Why this is important
We recognise that we have a responsibility to provide environmental stewardship. We know that the
way we manage our environmental impacts affects our reputation, and is a measure of the quality
of Essentra’s businesses. Our environmental metrics use a 2019 base year.
Scope one and two GHG emissions
Total CO2e
Number of sites at Zero Waste
to Landfill (“zwtl”)
Our target
50% reduction in emissions by 2030 (from 2019).
Our target
All sites at zwtl by 2030 (from 2019).
2023
-38%
2022
2021
-27%
-11%
2023
2022
2021
14
12
2
Waste intensity
Total tonnes per £m revenue
Our target
50% reduction by 2030 (from 2019).
2023
2022
-28%
-25%
2021
-36%
Percentage of polymers from more
sustainable sources
Our target
50% of polymer materials from more
sustainable sources by 2030 (from 2019).
2023
2022
2021
20.7
10.8
8.5
Re-presenting comparatives to reflect the continuing business: to provide a like-for-like position, comparatives have been restated
for 2021, to reflect the continuing business operations.
Climate-related financial disclosures:
TCFD update
58 to 64
Principal risks:
Risk management report
65
2023
2022
2021
82.2
78.2
54.1
54
ESSENTRA PLC ANNUAL REPORT 2023
NON-FINANCIAL KEY PERFORMANCE INDICATORS CONTINUED
DIRECTORS’
REPORT
Safety
People
Lost Time Incidents (“LTIs”)
Why this is important
Our overriding commitment in the workplace
is the health, safety and welfare of our employees
and all those who visit Essentra’s operations.
Our aim is to be in the top quartile of
manufacturing companies for the lowest
Incident Frequency Rates.
2023
2022
2021
10
23
22
*
2022 LTIs restated due to an incident severity change
after publication of the 2022 Annual Report.
Number of days lost
Why this is important
This is a measure used to quantify the severity
of LTIs. Where incidents do result in lost time, we
work hard to minimise the amount and to support
the injured person in their recovery by offering
restricted or light duties, and through a structured
return to work programme.
128
2023
2022
2021
382
518
*
2022 days lost restated due to an incident severity change
after publication of the 2022 Annual Report.
55
Employee engagement
(%)
Why this is important
The happiness and fulfilment of our people is a key priority.
Having more engaged employees reduces staff turnover,
improves productivity and helps us serve and retain customers.
2023
2022
82
83
Board gender
diversity (%, number)
Board ethnic
diversity (%, number)
Leadership team (includes
GEC) gender diversity
(%, number)1
Leadership team (includes
GEC) ethnic diversity
(%, number)
2023
Men: 62% (5)
Women: 38% (3)
2022
Men: 62% (5)
Women: 38% (3)
2021
Men: 57% (4)
Women: 43% (3)
2023
Ethnically diverse: 25% (2)
White: 75% (6)
2022
Ethnically diverse: 25% (2)
White: 75% (6)
2021
Ethnically diverse: 29% (2)
White: 71% (5)
2023
Men: 69% (48)
Women: 31% (22)
2022
Men: 71% (34)
Women: 29% (14)
2021
Men: 79% (79)
Women: 21% (21)
2023
Ethnically diverse: 17% (12)
White: 64% (45)
N/A or no response: 19% (13)
1
During the year, the leadership team
was reviewed and new members added
to ensure appropriate representation
across the business.
Why this is important
At Essentra we are committed to progress in terms of the diversity of our leadership community. We believe this diversity brings a range of outlooks to decision-making
and problem-solving, ensures representation of our employee base and the communities in which we operate. We also report this information to meet FCA reporting
requirements and we aim to meet all FCA targets: we currently have 38% women on the Board and ensure diversity is considered in our recruitment processes, our
Senior Independent Director is a women and we have two Board members from an ethnic minority background. More information can be found on pages 35 to 36.
ESSENTRA PLC ANNUAL REPORT 2023 S172 STAKEHOLDER ENGAGEMENT
s172 Stakeholder
Engagement
Engaging with all of our stakeholders
is important to Essentra. We believe
in listening to first-hand feedback and
views from shareholders, customers,
employees, suppliers and government
and regulators. Essentra’s Board and
GEC believe that highly engaged
employees drives customer growth,
thereby creating returns for shareholders.
The Board, and GEC, many of whom are directors
on Essentra’s subsidiary entities, carefully consider
their duties as directors, taking into account the
long-term impact, the interests of employees, how
a decision may impact shareholders, suppliers and
customers, the community and the environment in
which the business operates, and the impact on
the Company’s reputation as well as the perception
of shareholders and the public as a result. On a
day-to-day basis, the GEC give consideration to all
these factors when managing the business, with
the support of the Board who take into account
these matters during their meetings and when
reviewing performance and making decisions.
The Board has disclosed in the report that follows
how it has regard to S172(1) (a) to (f) and forms
the Directors’ statement required under Section
414CZA of the Companies Act 2006.
56
DIRECTORS’
REPORT
Investors
Customers
Why we engage
• To understand our shareholders views
• To secure support for the transition to a pure-play
components business
Why we engage
• To establish and maintain long-term, trusted business
relationships, which provide depth of knowledge of our
customers’ requirements
• To continue to access capital for Essentra’s long-term success and
to understand the nature of returns our shareholders expect
• To support our ambitions for growth
• To ensure opportunities to further support our customers are
What we discuss
• Investor buy-in to our strategic objectives and execution of them
• Long-term interest in Essentra which provides us with a secure
base for our growth
• General updates on strategy, governance and performance
• The most efficient way to return funds following the disposal of
the Packaging and Filters businesses
• Future organic and inorganic growth opportunities, including the
timing of the acquisition of BMP TAPPI
• Investors’ knowledge of the business model, strategy and
management team to support a deeper understanding of the
direction of growth for the business
How we engage
• AGM
• Full year and half year presentations
• One-on-one meetings with the Chair, Chief Executive, Chief
Financial Officer, Senior Independent Director and Remuneration
Committee Chair and other NEDs as appropriate
identified through custom solutions
• To ensure our customers are provided with the technical
knowledge for our products
• To share our approach to sustainability across our products and
operations and consider further ways this can support their own
sustainability progress
• To share information that supports our expansion and cross-
selling across our product range
What we discuss
• Ways to support our customers, including opportunities to
collaborate to produce innovative products, such as products
specific ESG credentials, or to provide bespoke parts needed to fit
their own designs
• Updates on our approach to providing reliable lead times, business
continuity and supply chain challenges
How we engage
• Country based teams manage relationships with our broad range
of customers globally
• Subject specific meetings with senior leaders
• Key account managers also establish relationships with larger
KPIs we share
• Earnings Per Share (“EPS”)
• Total dividends paid
• Total Shareholder Return (“TSR”)
• Dividend yield and cover
What is the impact of engagement
• Timely communication has ensured the new CEO and executive
management team have the support of investors and the time
needed to establish themselves and the strategy
• Taking views of shareholders led to the decision by the Board to
pay a special dividend of £89.8m and commence a share buyback
programme of £60m
• Views of investors for inorganic growth directly contributed to the
decision to acquire BMP TAPPI in Italy
• By deepening the understanding of investors, they understand
the potential growth of the business, underpinned by Essentra’s
unique position as a manufacturer and distributor
strategic customers
• More formal and regular feedback gathered through NPS surveys
KPIs we share
• On Time and In Full (“OTIF”)
• Quality/complaints
• Net Promoter Score (“NPS”)
What is the impact of engagement
• Long-term relationships in which customers are carefully listened
to, heard and feedback given to teams to provide to the rest of
the business to create opportunities for improvement
• Customer requirement for speed and reliable service has
contributed to the Company’s decision to focus on building
the tools, for example, the implementation of a ERP system,
which the Board receive regular updates on
• Increased opportunities to expand the products supplied to
our customers through cross-selling, for instance, ensuring
caps and plugs customers are aware that we also manufacture
access hardware
ESSENTRA PLC ANNUAL REPORT 2023 S172 STAKEHOLDER ENGAGEMENT CONTINUED
DIRECTORS’
REPORT
Government and Regulators
Suppliers
Employees
Why we engage
• To create strong and transparent dialogue with government and
Why we engage
• The Company has an extensive number of suppliers, with key
Why we engage
• The Board and GEC believe that engaging effectively with our
regulatory agencies in the international jurisdictions that Essentra
operates, as well as in other jurisdictions where Essentra may wish
to operate
• To ensure our approach to compliance with legislation is effective
and to ensure that we are working to meet future legislation or
regulatory requirements
• To create opportunities to influence and input thought leadership
to the development of regulatory governance requirements that
will impact Essentra’s operations
• In accordance with our Ethics Code, Essentra does not make
financial contributions to political parties and lobby groups
What we discuss
• Our approach to compliance, including our Ethics Code, which
sets our expectations for how we conduct business
• Essentra’s strategic outlook and plans for development of
its business, permissions that may be required as well as
the infrastructure and support to set up business in a new
geographical location
• Our commitment to working with government bodies at national
and regional level to create strong and transparent relationships
How we engage
• Relationships are managed both within the country as well as
centrally on behalf of the business as a UK FTSE plc
• A range of key employees have roles in engagement, including
country General Managers and Finance Directors, Regional MDs,
the Company Secretary, CEO and CFO
KPIs we share
• Revenue
• Operating Profit
• Numbers of employees and locations of sites
• Sustainability metrics
suppliers providing raw materials that we use to manufacture our
components and engagement mitigates risk to our supply chain
• Identifying and building relationships for the secure supply
of sustainable products to allow Essentra to meet and exceed
its targets and complete third party due diligence checks
• Engaging with local suppliers to our sites in line with our approach
on community engagement
people is critical to ensuring our business operates at its best and
that engaged employees supports satisfied customers which in
turn, provides our opportunity for growth
• The Board engage directly through the Board Champion and
Voice of Employee programme, as well as through other site visits,
to understand employee views on a broad range of topics, from
strategy to the employee experience on site
What we discuss
• Terms of supply to ensure we can maintain reliable supply chains
• Impacts to our supply chain, including global events, such as
the war in Ukraine, the situation in Yemen, and as well as local
challenges that may occur
What we discuss
• We discuss the strategic focus with our employees to understand
their views and the impact of Board’s decision-making on their
working day
• The effectiveness of people related strategies and opportunities
How we engage
• Our Procurement team engage with a broad range of suppliers
and are supported by regional Procurement managers
• Engagement occurs across a range of mediums to share
our Supplier Code and Modern Slavery Statement to provide
assurance to all our stakeholders
• Initial engagement is often through a tender process, with the
internal relationship owner taking responsibility for ongoing
maintenance of the relationship with the supplier
KPIs we share
• Revenue
• Operating profit
• Number of employees
• Location of sites
• Sustainability metrics
What is the impact of engagement
• Engagement ensures our suppliers have clarity on our
requirements and are able to respond in the timeframes we need
to guarantee our supply chains, which are critical to our customers
for continuous improvement
• The culture at a site and how that compares to other sites and
whether that reflects the culture that the Board and GEC have
set for the business
How we engage
• Through small focus groups under the Voice of the Employee
initiative, with like for like employees meeting with one of our
three Board Champions, Mary, Ralf or Adrian
• Through virtual meetings where in person meetings are difficult
to achieve
• Through site visits and site events, e.g. the launch of the Centre of
Excellence at Kidlington, in the UK, in October 2023
KPIs we share
• Employee engagement score for the whole Company and for
the site
What is the impact of engagement
• Engagement with our employees has led to opportunities for
improvement of facilities and ways of working for people working
at site, for instance, ensuring all employees have access to HR so
they can raise any concerns directly to them in person
• Engagement with site based employees to understand the impact
of the roll out of the ERP system, the benefits and the pain points,
which has provided the Board with first-hand insights into the
strategic focus and importance of rolling out the ERP system in a
carefully planned manner
What is the impact of engagement
• Engaging with local government and regulators is under constant
management to ensure we achieve our goals in line with our
approach to doing business
• The decision by the Board to introduce sustainability related
targets in 2020 and the continuous upward trajectory of those
targets, creates greater emphasis to successfully source reliable
supplies of raw materials
• In Monterrey, Mexico, we opened a new manufacturing and
• For non-materials, engagement with suppliers improves
distribution site during 2023, that required additional focus, and
remains ongoing, to ensure the permits and licences required
remain in place as the site continues to ramp up its production
• In Italy, we were granted a “Golden Power” to acquire BMP Srl
by the government in a very short timeframe following careful
preparation and engagement
relationships and provides an opportunity for transparent
feedback in respect of areas for improvement both for Essentra
as well as suppliers.
• During the year, the Board and GEC made decisions with regards
to key suppliers in order to ensure service levels
57
ESSENTRA PLC ANNUAL REPORT 2023 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
Task Force on
Climate-Related
Financial Disclosures
DIRECTORS’
REPORT
We acknowledge the
important role of the Task
Force on Climate-Related
Financial Disclosures, in
improving transparency
and driving improvements
across industry.”
We acknowledge the important role
of the Task Force on Climate-Related
Financial Disclosures (“TCFD”) in improving
transparency and driving improvements
across industry.
This report details our climate-related
financial disclosures, that are consistent
with the requirements of Listing Rule 9.8.6R,
the TCFD recommendations and the TCFD
All Sector Guidance and Annexes (October
2021). This is our third report based on
the TCFD recommendations, and the
assessments, findings and conclusions
within this report supersede earlier ones.
Climate change is addressed collectively across
our Company Board Committees, providing
robust governance and alignment to all
aspects of Company strategy. We manage
ESG risks and opportunities, including climate
change through a range of different processes,
including the Audit and Risk Committee
(“ARC”), the ESG Committee (“ESGC”),
Group Executive Committee (“GEC”) and
operational management processes. These
approaches address many of the
recommendations of TCFD.
During 2023, we have built on the work
and recommendations received from
our inaugural 2021 report developed with
third-party experts, and revised our risks
and opportunities to align with our transition
into a pure-play components business.
We have undertaken a review of the
Company’s climate change risks and
opportunities, across various scenarios
and time horizons, to ensure management
teams have a thorough understanding of
their most relevant climate change-related
risks and opportunities, and to inform our
response to TCFD recommendations.
Compliance with TCFD requirements
Essentra expects that these disclosures
will evolve over time as we deepen our
understanding of our climate change-
related risks and opportunities and as
TCFD and other related guidance evolve.
The tables that follow discloses our response
and the outcomes of the work we have
undertaken on the TCFD recommendations,
and signposts where further relevant
information can be found within other
sections of this report.
58
ESSENTRA PLC ANNUAL REPORT 2023 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED
DIRECTORS’
REPORT
Governance
Risk management
Disclose the organisation’s governance around climate-related risks
and opportunities
Disclose how the organisation identifies, assesses, and manages
climate-related risks.
Recommended disclosures
Commentary
Recommended disclosures
Commentary
Describe the
approach to
identifying
climate-related
risks and
opportunities
In 2023, we reviewed and built on the comprehensive database of CRROs
established in 2021, and redefined in 2022 to focus on our new business
model. Our assessment covers a large geographic scope, including all
manufacturing and distribution centres alongside strategic offices. We have
incorporated all new sites we have acquired since 2022, such as the Wixroyd
site in Chichester in the UK, into the model.
The time horizons used in our analysis and disclosures for 2023 are short-
term (2026), medium-term (2030) and long-term (2040). The long-term
time frame of 2040 is aligned with Essentra’s target of reaching net-zero in
our scope one and two emissions by 2040. The short- and medium-term time
frames are aligned with our business continuity planning.
Using a long list of 32 risks and opportunities established in 2021, we use
a bespoke scoring system where vulnerability and advantage of each item
is assessed to determine the most material impacts. Vulnerability is used
to assess climate risks and is defined as the degree to which the business
is susceptible to, and able to deal with, the impacts of climate change.
Advantage is used to assess climate opportunities and is defined as the
degree to which the business is able to capture the potential value from the
transition opportunity. Physical impacts were assessed based on the analysis
of our insurance partners, and third-party climate risk data for all Essentra
sites, and 12 key suppliers’ sites.
We then conducted a quantitative financial analysis on the nine material
CRROs, modelled across our three scenarios. The potential unmitigated
impact on profit is shown as a range of low (<£1m), medium (£1m–£10m)
or high (>£10m), for both risks and opportunities, across each time horizon
in each scenario.
Describe the
Board’s oversight
of climate-
related risks and
opportunities
Describe
management’s
role in assessing
climate-related
risks and
opportunities
59
Our risk governance approach is provided on pages 66 to 67.
The Board has strategic oversight of the Company’s Principal Risks,
which incorporate our climate-related risks and opportunities (“CRROs”)
as detailed on pages 65 to 73.
The Environmental, Social and Governance Committee (“ESGC”) has
oversight of our CRROs, TCFD action plans and progress, ESG strategy
and metrics. Details of the responsibilities, composition, remit and meeting
frequency of the ESGC are provided on pages 100 to 102. The ESGC member’s
expertise in managing ESG and CRROs, is detailed on pages 78 to 79. In
addition, the ESGC invites input from third parties, on a regular basis, to
improve its understanding of ESG matters – recent speakers have come
from leading industrial companies, global management consultancies
and City institutions.
The Audit and Risk Committee (“ARC”) has responsibility for reviewing our
CRROs, quantitative modelling and assessing the content of our disclosures
against TCFD recommendations. Details of the ARC and its activities are
provided from pages 109 to 116.
The Remuneration Committee is responsible for determining remuneration
policy, including how CRROs are taken into account in determining rewards
and incentives, and agreeing climate-related KPIs that form employee
rewards. Details of this can be found in the Remuneration Committee
Report from pages 117 to 120.
The Nomination Committee is responsible for Board appointments and
succession planning and takes account of experience in ESG and CRROs in
fulfilling its responsibilities. Details of the Nomination Committee and its
activities are provided from pages 103 to 108.
Our risk governance approach, including how Board and management
interact is provided on pages 66 to 68. The Group Executive Committee
(“GEC”) is responsible for managing key risks, and our approach to identifying
and assessing risks; conducts quarterly risk deep-dives which incorporates
sessions on TCFD to assess our CRROs and overall TCFD approach.
Our ESG governance structure including our Sustainability Steering
Committee is detailed on page 53. The Sustainability Steering Committee
includes members of the leadership team and senior leaders from across the
business. The Committee review the quantitative and qualitative modelling
of CRROs, conduct climate scenario analysis and manage TCFD action plans
and disclosure plans.
ESG is also included in the due diligence and integration stage of any
new acquisitions, such as BMP TAPPI in 2023, to establish ESG processes
and reporting, determine the impact of the acquisition on our CRROs and
include into our overall TCFD disclosures.
ESSENTRA PLC ANNUAL REPORT 2023
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED
DIRECTORS’
REPORT
Strategy continued
Recommended disclosures Commentary
Describe the
resilience of the
organisation’s
strategy taking
into consideration
different climate
related scenarios,
including a 2ºC or
lower scenario
Our qualitative and quantitative analysis of climate-related risk and opportunities, looks at three scenarios. These scenarios draw on publicly available and widely accepted third-party
scenarios from the Intergovernmental Panel on Climate Change’s (“IPCC”), and the International Energy Agency (“IEA”), which we review and update as necessary on an annual basis.
Our 2023 scenarios combine elements from the IPCC Sixth Assessment Report for physical changes, and the IEA reference scenarios from the 2023 World Energy Outlook. These reference
scenarios are outlined in the table below.
We have assessed our overall strategy against our three scenarios, and our CRROs, and consider it to be resilient. Our diverse product ranges and services allow us to respond quickly to
changing customer needs, our global manufacturing and distribution capabilities means we have an inherent operational resilience with an ability to quickly move production to another
site if needed, and our focus on high-growth, low-emission markets such as renewables and electric vehicles provides the business with good growth opportunities. Further information is
detailed in our climate transition plan on pages 40 to 53.
Physical
Transition
Climate scenario
Warming by 2100
Future emissions
Energy source
Scenario narrative
Reference scenarios
Business as usual
(“BAU”)
>5ºC
High
Mostly fossil fuels
Middle of the road
(“MR”)
Approx. 2.7ºC
Medium
A mix fossil fuels
and renewables
Without additional efforts to reduce emissions and a continued trajectory of
slow and limited ambition climate policy, operating practices remain as they
are at present and emissions continue to rise at current rates. This results
in a severe increase of frequency and intensity of devastating extreme
weather, resulting increases in insurance premiums and economic pressure
in worst hit regions where assets are uninsurable. Global ecosystems suffer
irreversible changes and significant loss of biodiversity.
The world continues to decarbonise and achievement of nationally
determined contributions under the Paris Agreement and other policy
commitments. As a result of the eventual albeit unco-ordinated approach
to address climate change, there is a major increase in frequency and
severity of weather events. Parts of global ecosystems suffer abrupt and
irreversible changes and loss of biodiversity.
IPCC AR6 5-8.5 “Fossil-fuelled Development”; IEA World
Energy Outlook 2023 “Stated Policies Scenario (STEPS)”
IPCC AR6 SSP 2-4.5 “Middle of the Road”; IEA World
Energy Outlook 2023 “Announced Pledges Scenario”
Low carbon (“LC”)
1.5ºC
Low
Mostly renewables
and low-carbon
fuels
Ambitious and co-ordinated climate policies globally leads to
transformation of the energy system. The global energy sector reaches net-
zero emissions by 2050, with advanced economies achieving net-zero earlier.
There is a significant increase in frequency and severity of extreme weather,
which stabilises towards the latter half of the century. There remains a high
risk for vulnerable ecosystems such as coral reefs and Arctic sea ice.
IPCC AR6 SSP 1-2.6 “Sustainable”; IEA World Energy
Outlook 2023 “Net Zero Emissions by 2050 Scenario (NZE)”
60
ESSENTRA PLC ANNUAL REPORT 2023 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED
DIRECTORS’
REPORT
Strategy continued
Recommended disclosures
Commentary
Describe the
climate related risks
and opportunities
the organisation
has identified, and
the impact on the
businesses, strategy
and financial
planning
The gross, unmitigated potential financial impact of the nine most relevant climate-related risks and opportunities are quantified across all three time horizons and three scenarios,
supported by third-party experts. A range of management approaches are then identified, many of which the Company has in place already, to mitigate these risks and capture
opportunities. The table below maps approaches to risks and opportunities, as well as potential unmitigated profit impact, and potential profit opportunity, in all three scenarios.
Risk/Opportunity
category
Description
Risk/Opportunity
category
Description
Risk
Low
(<£1m)
Opportunity
Low
(<£1m)
Medium
(£1m–£10m)
Medium
(£1m–£10m)
High
(>£10m)
High
(>£10m)
BAU Business as usual
MR Middle of the road
LC
Low carbon
Risk management and 2023 progress
Potential unmitigated profit impact
Metrics
Physical risk
Damage to physical assets and
disruption at own sites due to
high-speed wind.
• Emergency plans are in place at all sites, and annually reviewed
• Site activities are based on risk assessments to reduce exposure to natural hazards
• Business continuity plans in place at all sites, to respond to extreme weather events
Short-term
Medium-term
Longer-term
BAU MR
LC
BAU MR
LC
BAU MR
LC
Physical risk
Damage to physical assets
and disruption at own sites
due to increased precipitation
and flooding.
including appropriate mitigation plans, such as transferring operations across
manufacturing and distribution sites
• Expansion of global footprint, such as opening of new Monterrey facility in 2023
(see page 12), builds resiliency
• Emergency plans are in place at all sites
• Site activities are based on risk assessments to reduce exposure to natural hazards
• Business continuity plans in place at all sites, to respond to extreme weather events
including appropriate mitigation plans, such as transferring operations across
manufacturing and distribution sites
• Expansion of global footprint, such as opening of new Monterrey facility in 2023
(see page 12), builds resiliency
Transition risk/
opportunity
Fluctuations in fossil fuel price.
• Ongoing plans to transition from fossil fuel resins and films to sustainable
Transition risk
Increased expenditure due
to carbon pricing for energy
and power.
alternatives, in 2023 our 20% target was achieved, new target of 50% by 2030
• Continuing our supply chain initiatives to source and manufacture products close
to our customers, taking advantage of our global presence (see page 46)
• Continue reducing reliance on fossil fuels in operations (see page 44)
• Commenced planning of decarbonisation of logistics by switching to low and zero
emission transport, as detailed in our climate transition plan on pages 44 to 46
• Scope one, two and three emissions have reduced in 2023, and our near and long-
term targets were approved by the Science Based Targets initiative in 2024, as being
aligned to a 1.5 degrees pathway
• The European Union Carbon Border Adjustment Mechanism was introduced in 2023,
with first reporting due in 2024, and a carbon levy due from 2026. As some of our
metal products are in scope, we have introduced the potential financial impacts into
this model from 2026 onward, and are evaluating how to reduce our exposure, and
the potential cost increase to our customers
BAU MR
LC
BAU MR
LC
BAU MR
LC
BAU MR
LC
BAU MR
LC
BAU MR
LC
BAU MR
LC
BAU MR
LC
BAU MR
LC
• Number of sites
with business
continuity plans1
Insurance policies1
•
• Number of sites
with business
continuity plans1
Insurance policies1
•
• Percentage of
materials from
sustainable sources2
• Total scope one, two
and three emissions2
• Emissions intensity2
• Freight costs1
• Freight emissions2
• Total scope one, two
and three emissions2
• Total energy usage2
• Emissions intensity2
Transition risk
Reduced revenue from
components specific to
conventional fuel automobiles.
• Continue plan to switch from conventional vehicle to low-carbon
vehicle components
• Annual market analysis to prepare for market changes, such as speed of price parity
for electric vehicles; charging maturity; non-ICE vehicle penetration
BAU MR
LC
BAU MR
LC
BAU MR
LC
• Revenue from
ICE components1
1 Metrics internally monitored by the relevant functional management teams.
2 These targets and progress are detailed in our ESG update pages 21 to 39.
61
ESSENTRA PLC ANNUAL REPORT 2023 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED
DIRECTORS’
REPORT
Strategy continued
Recommended disclosures
Commentary
Describe impact
of climate-related
risks and
opportunities on
the businesses,
strategy and
financial planning
(continued)
Risk/Opportunity
category
Description
Risk/Opportunity
category
Description
Risk
Low
(<£1m)
Opportunity
Low
(<£1m)
Medium
(£1m–£10m)
Medium
(£1m–£10m)
High
(>£10m)
High
(>£10m)
BAU Business as usual
MR Middle of the road
LC
Low carbon
Risk management and 2023 progress
Potential unmitigated profit impact
Metrics
Transition risk
Risk of increased costs due to
transition from petrochemical
feedstocks and non-recyclable /
non-biodegradable materials.
• Our Centre of Excellence opened in 2023, to trial and bring to market
alternative materials
• Continued close collaboration with supply chain to explore alternative
material options
• Continuous monitoring of evolving legislation on material use and labelling
Short-term
Medium-term
Longer-term
BAU MR
LC
BAU MR
LC
BAU MR
LC
• Percentage of
materials from
sustainable sources2
Transition
opportunity
Increased revenue from sales
of components for electric and
hydrogen-based vehicles.
• Continue plan to switch from conventional vehicle to low-carbon vehicle components
• Annual market analysis to prepare for market changes, such as speed of price parity
for electric vehicles; charging maturity; non-ICE vehicle penetration
BAU MR
LC
BAU MR
LC
BAU MR
LC
• Revenue from EV
components1
Transition
opportunity
Transition
opportunity
Increased revenue from sales
of components for renewable
energy, HVAC for cooling and
water pipes/pumping.
• Our sales teams conduct annual market analysis to prepare for market changes
• Continuous development of service and product offering for this growth market
BAU MR
LC
BAU MR
LC
BAU MR
LC
Reduced energy costs through
implementation of renewable
energy and adoption of energy
efficiency measures.
•
In 2023, we have commissioned our first two on-site solar systems, and have more
projects in Europe in pipeline for 2024. These projects provide price certainty and a
reduction in price per kWh for electricity.
• Our machine replacement programme is ongoing, providing efficiency savings
BAU MR
LC
BAU MR
LC
BAU MR
LC
• Revenue from
renewable energy and
HVAC components1
• Percentage of
renewable energy2
• Total energy usage2
The impact of unmitigated opportunities on profit, outweigh the unmitigated impact of risks on profit, across all scenarios in the short and medium-term. In the long-term, within the low-carbon scenario there is a
potential unmitigated profit impact representing c.5% of 2023 adjusted operating profit.
Physical risks to sites from increased flooding and wind speeds, are broadly consistent across all three scenarios. Whilst the cost impact of fossil fuel prices is greater in the short-term under the business as usual
and middle of the road scenarios, it becomes a possible opportunity for cost savings in the medium-term when considering a low-carbon scenario, and in the long-term due to a forecast in peak oil demand by
2030, coupled with the decarbonisation of heating and transport and the transition to more sustainable materials. The impact of carbon pricing is greatest in the long-term when considering a low-carbon scenario,
reflecting the emerging requirements in Europe, the UK and the USA, to consider the carbon intensity of products, and impose a carbon tariff on imports. The opportunities of increased revenues in high-growth and
low-carbon markets such as electric vehicles and renewable energy are both highest in the low-carbon scenario, when taking a medium- and long-term view. The cost reduction opportunity from energy efficiency
and implementation of renewable energy also increases in the medium- and long-term scenarios.
We have considered our assessment of the unmitigated, profit impacts of the identified risks and opportunities, together with existing and proposed mitigation actions, as inputs to our Long-Term Viability
Statement and impairment reviews. On the basis of our current analysis, we have concluded that the aggregate impact of the identified risks and opportunities in a middle of the road scenario represents less
than 8% of adjusted operating profit and consequently is not material. We will continue to review our assessment of both the individual risks and opportunities and the aggregate impact as part of our regular
risk management practices and with regard to future reporting and disclosure requirements in relation to climate change.
1 Metrics internally monitored by the relevant functional management teams.
2 These targets and progress are detailed in our ESG update pages 21 to 39.
62
ESSENTRA PLC ANNUAL REPORT 2023 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED
DIRECTORS’
REPORT
Risk management
Disclose how the organisation identifies, assesses and manages climate-related risks
Recommended disclosures
Commentary
Recommended disclosures
Commentary
Describe the
organisation’s
processes for
identifying
and assessing
climate-
related risks
Describe the
organisation’s
processes for
managing
climate-
related risks
ESG risks are Principal Risks for Essentra, managed and discussed at
the Board and the ARC, in accordance with Essentra risk management
processes. Our CRROs are fed into the relevant Principal Risks on at least
an annual basis. Descriptions of each of the ESG Principal Risks are provided
within our risk management report on page 71. Details of Essentra’s risk
management framework and governance structure is provided on pages
66 to 68.
Operational management teams identify and discuss site and region specific
CRROs in strategy reviews during the year.
The ESGC considers CRROs for the Company as a whole. Details of the ESGC
and its activities is on pages 100 to 102.
Company-wide and specific regional risks and opportunities are also
discussed at GEC.
CRROs are identified and managed in accordance with the Company’s risk
management processes. Each CRRO has an owner, rating, mitigation plan
and metric(s) which are monitored and reported against at least quarterly.
Our internal risk team monitor the process and controls for our CRROs.
Business-wide activities are undertaken and managed centrally via the
Sustainability team, working across the Company. For example, to reduce
our GHG emissions, management of solar PV projects is done centrally to
facilitate and accelerate activity, working with sites across the Company.
Progress on the management of CRROs is subject to regular review by the
ESGC, ARC and GEC.
Describe how
processes for
identifying,
assessing and
managing
climate-related
risks are
integrated into
the organisation’s
overall risk
management
ESG risks are Principal Risks for Essentra, managed and discussed at ARC
in accordance with Essentra risk management processes. Description of the
ESG Principal Risks are provided on page 71. Details of the ARC and Essentra’s
risk management processes are provided on pages 66 to 68.
Operational management teams consider site specific climate-related risks
and opportunities and report them as appropriate to the ESGC, ARC and
GEC. These risks are then incorporated into TCFD modelling as appropriate.
The ESGC considers CRROs for the Company as a whole and reports them
as appropriate to the ARC and GEC. Details of the ESGC and its activities
are provided from pages 100 to 102.
Risks and opportunities identified as part of TCFD activity are integrated into
the ESG Principal Risk coverage, and Principal Risk reviews include a review
and update of activity related to these areas.
Company-wide or specific regional CRROs are discussed at ARC, GEC
and ESGC.
63
ESSENTRA PLC ANNUAL REPORT 2023 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED
DIRECTORS’
REPORT
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
Recommended disclosures
Commentary
Recommended disclosures
Commentary
Describe the
metrics used by
the organisation
to assess climate-
related risks and
opportunities in
line with its
strategy and risk
management
process
We use several metrics to monitor our climate-related risks
and opportunities:
• absolute scope one, two and three GHG emissions
• energy usage
• GHG intensity (per million GBP of revenue and per GBP of value added)
• revenue from low-carbon industries
• transportation and fuel costs
• carbon pricing
• percentage of materials from sustainable sources
• percentage of energy from renewable sources.
Describe the
targets used by
the organisation
to manage
climate-related
risks and
opportunities
and performance
against targets
Our near-term and net-zero targets for scope one, two and three GHG
emissions have been approved by the Science Based Targets initiative
(“SBTi”). As per the SBTi Net-Zero Standard, we have committed to reduce
our scope one and two GHG emissions by 90% by 2040 from a 2019 baseline,
and our scope three emissions by 90% by 2050 from a 2022 baseline.
Progress on our emissions reduction can be found on pages 22 to 26.
Our current target for our transition to sustainable materials is: 50% of
materials from sustainable sources across our polymer ranges by 2030; and
100% of our general protection and security seals ranges. Progress on our
sustainable materials metrics can be found on pages 30 to 31.
Disclose scope
one, scope two
(and if
appropriate,
scope three) GHG
emissions and the
related risks
Relevant metrics are linked to the transition risks and opportunities detailed
on pages 61 to 62.
We also monitor our preparedness and capability to respond to physical risks
to our assets and operations through the preparation and regular review of
business continuity plans.
Progress on our emissions reduction can be found on pages 22 to 26,
disclosure of our scope one, two and three emissions can be found on
page 25.
Our scope three inventory has been developed using a hybrid model of spend
and activity data. The model has been developed internally and uses lifecycle
analysis, industry databases and supplier specific information where it is
available. The majority of our scope three emissions relate to purchased raw
materials and products, and transportation and distribution. The related
risks and opportunities are:
• fluctuation of fossil fuel prices
• risk of increased costs due to carbon pricing for energy and power
• increased cost of materials
• opportunity for reduced costs through implementation of renewable
energy and adoption of energy efficiency measures.
64
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT
Risk management report
Risk management is integral to proactively supporting
business resilience and the successful delivery of the
Company’s strategic objectives.
DIRECTORS’
REPORT
Our risk management
framework has continued
to evolve throughout
the year and is now fully
aligned to the needs of
Essentra as a pure-play
components business.”
Responding to change in 2023
During the past two years, the Company
has had to navigate and manage disruption
caused by the strategic reviews of the
Packaging and Filters businesses, the war
in Ukraine as well as disruption across our
supply chain and workforce.
The risk framework became fully aligned
to the needs of Essentra as a pure-play
components business in 2023. The
framework now supports the evolution of
our approach and considers risk at both a
strategic and an operational level with a
view to improving business resilience over
the short- to long-term.
Looking ahead to 2024, we anticipate that
macroeconomic uncertainty will remain,
at least for the short- to medium-term.
However, the focus on our risk management
processes and practices over the past two
years means that the business is well placed
to continue to manage this, and protect
profitability efficiently and effectively.
Our geographical breadth, coupled with our
ability to flex operating models with a high
degree of agility, means we are well placed
to maintain customer service levels whilst
managing the risks to our operations and
the wellbeing of our people.
65
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
Roles and responsibilities of the Group Executive
Committee in respect of Risk
The process for identifying,
assessing and controlling
material business risks is
designed to manage within
agreed appetite, rather than
to eliminate.
IDENTIFY
MANAGE
ASSESS
REPORT
CONTROL
Identify
• Establish the process for identifying and understanding key business risks
• Identify risks in each of our businesses and enabling functions
• Perform risk reviews with senior leadership
• Review Principal, Key and Emerging Risks
Assess
• Prioritise risks through agreed ranking criteria
• Ensure our response to risks is consistent with the risk appetite set by the Board
Control
• Ensure risk ownership is defined and appropriate
• Establish key control processes and practices
• Assess the mitigating controls in place to manage the risk within appetite
• Monitor the operation of the controls
• Track progress of mitigation initiatives
Report
• Agree and implement measurement and reporting standards
• Communicate with all stakeholders
Manage
• Review all aspects of the Company’s risk profile
• Review, challenge and continuously improve risk management practices
66
Risk governance structure and
oversight
The Board has established a risk and
internal control structure designed to
manage the delivery of the Company’s
strategic objectives. The Risk Assurance
team, independent of management, enables
and facilitates the risk management process
across the Company and acts as the custodian
of the Company’s risk framework and
supports risk management activities.
The Group Executive Committee (“GEC”) has
assumed the risk responsibilities previously
discharged by the Group Risk Committee
(“GRC”), which reflects the simplified
structure of the business following the
completion of the strategic reviews. These
responsibilities are to focus and co-ordinate
risk management activities across the
Company and to facilitate the appropriate
identification, evaluation, mitigation and
management of all key business risks. In
addition, the GEC reviews the risk appetite
and ongoing risk management approach
and makes recommendations to the Board
on appetite levels and the actions required
to ensure adequate controls and mitigating
actions are in place against identified risks.
As an important part of fulfilling its
responsibilities, the Board receives regular
reporting from the Chief Executive in relation
to risks and exposures. This enables the Board
to challenge and review the GEC’s approach
and views on key risks.
The ARC, with assistance from Risk
Assurance, oversees compliance with risk
management processes and the adequacy
of risk management activities related to
the Company’s operations.
DIRECTORS’
REPORT
The regional and functional leadership
teams undertake regular reviews during the
course of the year and engage in facilitated
discussions with Risk Assurance to consider
the risk environment for their particular
functional or geographic area of responsibility.
They also consider how these could impact
on the achievement of the Company’s
strategic objectives.
The Board considers the nature and extent
of the Principal Risks it is prepared for the
business to take for risk appetite towards
achieving its strategic objectives by
evaluating these risks against a three-point
scale from “risk-averse” to “risk-neutral” to
“risk-tolerant”. This informs the development
and focus of mitigating actions for each of
the Principal Risks with a particular focus on
risks that are assessed to be outside the
agreed appetite.
At a strategic level, our risk management
objectives are to:
• identify the Company’s Principal
and Emerging Risks and appropriate
mitigating actions
• formulate the risk appetite and ensure
that our business profile and plans are
consistent with it
• develop plans to bring any exposures
that are outside appetite in line with
the agreed appetite
• ensure that growth plans are properly
supported by an effective risk
management framework
• help management teams to improve the
control and co-ordination of risk-taking
across the Company.
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
Risk management framework
The framework was developed to support
the Company in identifying and managing
risk within defined appetite levels, at both
a strategic and an operational level. The
current framework was designed to provide
the GEC and the Board with a clear line of
sight over risk, to enable informed decision-
making and to deliver improved resilience.
Our risk management framework continues
to evolve in line with best practice to ensure
that it supports the Company’s growth and
strategic objectives. A robust, but flexible,
approach to the management of risk is
fundamental to the continued success of
the Company. In 2023, the challenges the
Company faced included the disruption
caused by the strategic reviews of the
Packaging and Filters divisions and ongoing
geopolitical unrest, including the war in
Ukraine and risks to shipping around
Yemen, which resulted in supply chain
disruption, volatile supply and demand,
and distribution challenges.
A clear focus was placed on ensuring the
continued operation of our risk management
framework in this dynamic and disruptive
environment. As such, during the year, the
Risk Assurance team supported regional
and functional leadership teams in the
management of their risk processes.
Risk management approach
We are committed to managing risks in
a proactive, efficient and effective manner
to protect and enhance value, and provide
assurance to the Board and our stakeholders.
67
Our risk governance structure
Facilitators
Risk Assurance
• Direct and
monitor
• Report
BOARD
Overall responsibility for assessing the Company’s Principal
Risks, setting risk appetite and monitoring risk management
performance and the framework.
AUDIT AND RISK
COMMITTEE (“ARC”)
Responsible for
reviewing the
effectiveness of the risk
management systems
and processes.
GROUP EXECUTIVE COMMITTEE (“GEC”)
Chaired by the Chief Executive and comprised of the
Company’s executive leadership team. The GEC meets on a
monthly basis and discusses risk as a standing agenda item
with quarterly risk deep–dive reviews. In this context, the GEC is
responsible for monitoring key risks and ensuring the
effectiveness of regional and functional risk management.
REGIONAL AND FUNCTIONAL
LEADERSHIP TEAMS
Each leadership team is responsible
for ensuring their risks are captured and
are being effectively mitigated within
business-as-usual processes. Risk
management is considered during
leadership team meetings.
ESG COMMITTEE (“ESGC”)
The ESGC is responsible for overseeing ESG
strategy, and ensuring that it aligns to the
overall business strategy, as well as the other
matters already identified. The Committee
oversees the Company’s ESG strategy and its
response to emerging ESG related concerns,
risks, laws and regulations.
SITES
Sites are developing and implementing their own risk registers, risk and action
owners. Management are responsible for managing local level risk and
reporting to the respective leadership teams.
DIRECTORS’
REPORT
Our risk framework
STRATEGIC
Internal risks that may
impede achievement of
strategic goals.
EXTERNAL
Risks relating to the
macroeconomic climate,
political events,
competitive pressures or
regulatory issues.
OPERATIONAL
Risks that could impact
day-to-day operations
and prevent business-as-
usual activities.
DISRUPTIVE
Risks that could impact
the business model or
viability of the Company.
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
The Essentra risk framework
DIRECTORS’
REPORT
Strategic
layer
STRATEGY AND CULTURE
• Strategic
• Risk appetite
objectives
& planning
• Capital
allocation
• Business model
• Risk culture
Board
GEC
Regions &
functions
Sites
GOVERNANCE
• Board risk governance
RISK LANDSCAPE
• Strategic risk
• GEC – ToR in respect of risk
• Risk networks
• Risk taxonomy
• Assurance mapping
• Individual vs. Portfolio
• Risk blind spots
• High impact, low
probability
• Emerging Risks
RESILIENCE
• Resilience strategy
• Resilience planning &
execution
• Disruptive risks
Monitoring
& reporting
Operational
layer
Individuals
IDENTIFY AND ASSESS
• Risk/opportunity
identification
• Profiling and
categorisation
• Risk quantification
• Risk velocity
• Top-down vs. bottom-up
RESPOND AND MANAGE
• Response decision
• Thematic analysis
• Action tracking
• Review & revise
CONTINUITY
MANAGEMENT
• Scenario plan
• Testing
• Respond
• Learn
Risk
aware
Continuous improvement
Risk
smart
68
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
DIRECTORS’
REPORT
Principal Risk movement from 2022 Annual Report
5
5
4
4
6
6
9
9
7
1
10
8
11
7
10
2
2
3
l
a
c
i
t
i
r
C
+
m
0
1
£
j
r
o
a
M
m
0
1
-
6
£
t
c
a
p
m
I
t
n
a
c
fi
n
g
S
i
i
m
6
-
4
£
e
t
a
r
e
d
o
M
m
4
-
2
£
r
o
n
M
i
m
2
£
<
Rare <10%
Unlikely 10-40%
Possible 40-60%
Likely 60-90%
Almost Certain 90%+
Likelihood
1.
Environmental (no change)
7. M&A Execution and Integration
2. Social
8. Cyber Event (no change)
3. Governance (no change)
9. Execution of Strategic Plan
4. Operational and Supply Chain Disruption
10. Health and Safety Performance
5. Digital Transformation
11. Macroeconomic Environment
6. Leadership Talent and Capability
(no change)
Strategic Risks
External Risks
Operational Risks
Movement
Disruptive Risks
Key changes during the year
At the Half Year we disclosed that there had
been no material changes to the Company’s
Principal and Emerging Risks since the
publication of our 2022 Annual Report
and Accounts. Whilst challenges remained
within the macroeconomic environment,
geopolitical situation and general trading
conditions, the Company retained
confidence that the mitigations already
in place were sufficient to manage the risk
within the previously agreed risk appetite.
Since our Half Year disclosure, we
continued our review of our Principal and
Emerging Risk profiles. The following key
changes have since been made:
New Emerging Risks:
• Artificial Intelligence (“AI”) emerging
risk has been added to reflect the various
risks and opportunities associated with
this emerging technology and how it
might affect the way a business or
an industry operates
• ‘China Plus One (“C+1”) emerging
risk has been added a result of the
need to implement a portfolio of
strategic initiatives to meet our
growth commitments
Changes in Emerging Risks as now
subsumed in the Principal Risks:
• Technology disruptors: failing to manage
our response to evolving technologies
• Sentiment towards plastic: market/
stakeholder sentiment evolving could
affect product demand
All other risks have been reviewed and
updated to reflect the current nature of
the risk and mitigating activities.
Principal Risks
The GEC has responsibility for enabling the
identification and management of Essentra’s
Principal Risks.
The output from these considerations
were presented to the Board, including
a recommendation of Principal Risks to be
included in long-term viability modelling and
overall approval.
The Board believes the Principal Risks are
specific to Essentra and reflect the risk
profile of the Company at the current time.
All Principal Risks are managed within their
individual risk appetite.
The Board and GEC evaluate the potential
effects of Principal Risks materialising over
a three-year period to understand how they
could impact the Company’s long-term
viability. The evaluation is based on
plausible worst-case scenarios.
To make this evaluation, the estimated
financial impact of each Principal Risk
crystallising was considered. The Board
and GEC assessed the potential impact on
the Company’s viability, based on selected
severe plausible risk scenarios. These were
developed in conjunction with senior
management. The Principal Risks that
were considered to have a potentially
significant impact on the Company’s
viability are included in our Long-Term
Viability Statement.
In addition to the Principal Risks, Emerging
Risks and wider key risks have been identified
and are being monitored by the Company.
Mitigation actions in response to such risks
are an important part of the regional
and functional risk reporting to the
GEC and Board.
69
ESSENTRA PLC ANNUAL REPORT 2023
RISK MANAGEMENT REPORT CONTINUED
Emerging Risks
We define an Emerging Risk as a changing
risk or a novel combination of risks for
which there is no track record or previous
experience by which the impact, likelihood
or costs can be understood. Its potential
impact is viewed as being two years or
more in the future.
We strongly believe that the identification
and appropriate management or mitigation
of Emerging Risks is critical to our long-
term success.
Emerging Risks have the potential to
increase in significance and affect the
performance of the Company and as
such are continually monitored through
our existing risk management processes.
Our risk management process ensures
Emerging Risks are identified and aids the
GEC and the Board’s assessment of whether
the Company is adequately prepared for
the potential opportunities and threats
they present.
Emerging Risks
Emerging Risk
Regulatory change
Owner
Company Secretary
Risk description
Emerging regulatory change remains a
risk. Governments might react to prevailing
economic circumstances by increasing taxes
and tariffs. Evolving public sentiment on
sustainability might result in further legislation.
DIRECTORS’
REPORT
Emerging Risk
Artificial Intelligence (“AI”)
Owner
Emerging Risk
China Plus One
(“C+1”)
Owner
Chief Digital Information Officer
Managing Director, APAC
Risk description
Risk description
There is a risk that the adoption or use of AI is
not controlled both internally and in external
interactions with suppliers and customers. The
adoption of artificial intelligence (“AI”) comes
with various opportunities that can transform
the way in which an industry and/or business
operates. The widely available Large Language
Models (“LLM”) are driving the mass adoption
of Generative AI at a pace and cost that was
previously unachievable. The opportunities
presented by these are common across
businesses but there is a risk that Essentra is slow
to adopt this technology versus competitors.
This adoption can take the form of automation
and efficiency but also through to changing how
an industry operates.
As a result of challenges in the Chinese
domestic market along with political tensions
between China and Taiwan, many multinational
businesses are considering how they might
mitigate their risk exposure to China.
Given the size of the Chinese domestic and
export markets and still, broadly, positive
growth forecasts, businesses are mitigating
by maintaining a presence in China but also
expanding operations in APAC (and, in some
cases, elsewhere in the world).
Essentra is monitoring the developments in its
customer base and their supply chain to ensure
that our commercial footprint is aligned with
our customers’ intentions.
Mitigation
Mitigation
Mitigation
The process enables new and changing risks
to be identified at an early stage so we can
analyse them thoroughly and assess any
potential exposure.
We continue to proactively monitor and review
developments in the regulatory environments
in which we operate. This includes leveraging
the knowledge of those colleagues operating in
local markets and seeking external advice.
The Company continues to monitor the
development of generative AI and a detailed
review of the risks and opportunities that it
presents is planned.
We undertake a top-down and a bottom-up
assessment to identify Emerging Risks. This is
enabled by a series of risk workshops with
regional and functional leadership teams
to consider current and emerging risks.
The Board can confirm that it has
completed a robust assessment of the
Company’s Emerging Risks. The Company
continues to focus on ensuring the adequate
mitigation of risks faced by the Company to
ensure alignment with the Board-approved
risk appetite.
70
Our strategy for APAC is designed to ensure
our businesses in China deliver profitable
growth and leverage the opportunity across
the rest of the region that our customers’
China +1 strategies provide. We continue to
monitor the macroeconomic and geopolitical
environment across the region in the context
of the execution of our strategic plan.
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
STRATEGIC RISK:
Environmental
STRATEGIC RISK:
Social
EXTERNAL RISK:
Governance
DIRECTORS’
REPORT
DISRUPTIVE RISK:
Operational and supply chain
disruption
Change in risk level
Change in risk level
Change in risk level
Change in risk level
Unchanged
Ownership
Down
Ownership
Unchanged
Ownership
Up
Ownership
Chief Operations Officer
Company Secretary
Company Secretary
Chief Operations Officer
Relevance
Industry general
Risk description
This risk considers the rapidly evolving
customer expectations regarding sustainability
and changing sentiment towards plastics –
all of which could have an adverse effect
on demand for many Essentra products. This
includes the use of single-use plastics, recycled
content and consideration of the wider
impacts of our business operations on climate
change. Increasing legislation – such as the
European Plastics Tax – and consequential
requirements for reporting (including TCFD)
all place increasing pressure on resources.
Mitigation
The mitigation of the risk continues to be
governed through the ESG Committee. SBTi
targets have been set and strong progress
is being made in several areas, including:
recycled content (hitting targets sooner
than planned); EcoVadis rating improvement;
improved reporting; and, the launch of the new
sustainability Centre of Excellence. Renewable
energy has been a particularly strong area of
progress with the implementation of solar
energy at key manufacturing sites and the
sourcing of renewable energy contracts.
Relevance
Industry general
Risk description
The Social elements of ESG include broader
considerations around supply chain ethics,
diversity and inclusion and the Company’s
wider relationships with its internal and
external stakeholders, and thus the impact
of our business on our stakeholders and the
societies in which we operate.
Mitigation
Consistent progress has been made to
implement processes to improve end to end
supply chain management which includes
supplier audits and Know Your Customer
processes working towards agreed minimum
targets and which will continue into 2024.
Other Social workstream initiatives are gaining
momentum and heading towards making
progress by the end of 2024, such as Mental
Health First Aider training and Community
Engagement Days.
Increased focus on the horizon scanning
framework, bringing in operational as well
as existing regulatory changes, is expected
to further support the business’s ambition
to use its broader ESG initiatives as a
competitive advantage.
Relevance
Industry general
Risk description
Regulatory Governance has been one of
Essentra’s Principal Risks for a number of
years. The risk relates to the effect current
and emerging regulations have on our ability
to conduct business efficiently, and in
compliance with applicable requirements,
across the broad range of jurisdictions in
which we operate.
Mitigation
Key mitigation activities are consistent with
existing practices. Key functions work together
to horizon scan to ensure any regulatory
changes are planned into our work and
changes are embedded into our working
practices to reflect regulatory requirements
that have been implemented, with ongoing
workstreams in place across the business
where required.
Relevance
Industry general
Risk description
This risk is focused on the impact of
disruption on business operations, and
therefore disruption to service, related largely
to the increasing risk of extreme weather and
natural disasters. However, more wide-ranging
supply chain disruption risks are both clear
and present, and far-reaching, including
pandemics, geopolitical events, material
shortages and price inflation. The wide spread
of our footprint exposes us to global events
wherever they occur, especially as we acquire
new locations through our M&A activity.
Mitigation
Given the breadth of our operational footprint,
we have an inherent level of resilience through
our ability to quickly transfer manufacturing
from site to site. Even though COVID-19 related
disruption has abated, disruption continues to
emerge through increasing geopolitical and
weather-related events. Refreshing our
business continuity plans at the site, regional
and global level remains a critical area of focus
– for example, our strategic footprint review of
our operations in Istanbul. Given our strong
links to China, we continue to monitor the
China/Taiwan relationship and mitigate our
reliance on China operations for the wider
global supply chain. The strategy of producing
and sourcing close to the point of demand
(often referred to as “near shoring”) continues
to drive our footprint and manufacturing
decision-making, notably the establishment
of our new production facility in Mexico to
serve the wider Americas region.
71
ESSENTRA PLC ANNUAL REPORT 2023
71
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
DIRECTORS’
REPORT
STRATEGIC RISK:
Digital Transformation
STRATEGIC RISK:
Leadership talent and capability
STRATEGIC RISK:
M&A execution and integration
EXTERNAL RISK:
Cyber events
Change in risk level
Change in risk level
Change in risk level
Change in risk level
Up
Ownership
Up
Ownership
Down
Ownership
Unchanged
Ownership
Chief Strategy Officer
Chief People Officer
Chief Financial Officer
Chief Digital Information Officer
Relevance
Company specific
Risk description
Relevance
Company specific
Risk description
Relevance
Company specific
Risk description
Relevance
Industry general
Risk description
The delivery of our key digital projects is
a foundation for our strategic success. We
continue to drive our Business Process Redesign
(“BPR”) programme, the evolution of our
e-Commerce platforms and further digital
and data projects to improve our service.
Failure to deliver the digital programmes
could adversely affect our ability to maintain
a competitive advantage and wider growth
initiatives. Our e-Commerce platform remains
a pillar of our strategy and addresses a core
market need. The BPR project itself looks to
mitigate the risk of legacy systems and
misaligned data and processes to future
proof our strategic ambition.
Mitigation
Significant focus has been given to improving
the BPR template as well as preparing an
implementation methodology to conduct
more stable, repeatable launches. Five sites
and a first hub warehouse were included in the
biggest cluster launch to date. Work is now
underway to accelerate the implementation
schedule. The BPR programme seeks to
balance platform evolution and delivery
speed to manage business risk to avoid
adverse effect on service and customers.
The e-Commerce platform is supported by
a hybrid of internal and external experts in a
balanced risk approach, with developments
for continuous improvement following an
agile approach.
72
Talent has been a key theme during 2023,
having been recognised as a key enabler of
the business achieving its strategic objectives.
To deliver the strategic objectives, we
need our talent to have the motivation and
incentive as well as the relevant capability and
capacity to consistently deliver key targets in
a challenging economic environment. As a
result, our ability to attract and retain talent
is increasingly important.
The ongoing economic environment means
that our leaders remain vigilant to the stretch
on our “top talent”. We remain focussed on
providing support and ongoing development
opportunities that balance managing
workload and future development in role.
Mitigation
To support the development of the next
level of leadership, an Accelerated Leadership
Programme was established ensuring a good
pipeline of future leaders. Likewise, the Future
Leaders Programme has continued to operate
with a new leader re-invigorating the
programme. In addition to this, a review of
talent and succession planning is scheduled for
H1 2024. A thorough review of the bonus plan
scheme has been undertaken with a new
bonus scheme being rolled out in 2024.
Key roles have been filled during 2023;
recruitment for the President, Americas
region and the Managing Director, APAC
has concluded.
M&A is a key part of the Company’s growth
strategy. There is a risk that whilst the current
economic climate might impact valuations,
there are insufficient available targets to
deliver the M&A plan. Additionally, there
is a risk that the Company is unable to
successfully implement its post-acquisition
integration strategy.
Mitigation
Following the acquisition of Wixroyd in 2022
and BMP TAPPI in 2023, the Company has
demonstrated its ability to implement its
M&A strategy successfully.
The Company continues to maintain an active
M&A pipeline, focused on its strategic
imperatives, and continues to assess the level
of resource necessary to successfully integrate
acquisitions into the wider business. To this
end, a new Integration Director, with years of
experience in the business, has been appointed
in H2 2023.
Cyber events continue as a Principal Risk with
a continued priority focus in light of ongoing
geopolitical events. The finalisation of the
separation of the Filters and Packaging
businesses has reduced and simplified the
potential attack surface, but the profile
remains high. Continued evolution of attack
methods means there is an ongoing need to
monitor and adapt to new and emerging risks.
The risk continues to constitute the loss
of data, sites or systems resulting loss of
confidential data and/or the disruption to
ongoing business activities with customer,
suppliers and employees. This included the loss
of data through an action by an employee or
third-party contractor.
Mitigation
• Ongoing understanding and monitoring
of the external and internal environments
to identify, understand and eliminate
potential risks
• Application of governance and compliance
to systems, process and data along with
awareness and training programmes for
employees and third parties
• Continued investment in services, tools
and people to monitor, detect and prevent
malicious attempts to penetrate the
Essentra IT environment
• Alignment of vulnerability management
to the Cybersecurity and Infrastructure
Security Agency’s Known Exploited
Vulnerability (“KEV”) catalogue,
enabling mitigation of risks
ESSENTRA PLC ANNUAL REPORT 2023 RISK MANAGEMENT REPORT CONTINUED
DIRECTORS’
REPORT
OPERATIONAL RISK:
Execution of strategic plan
OPERATIONAL RISK:
Health and Safety performance
STRATEGIC RISK:
Macroeconomic environment
The organisational
structure has evolved
to promote regional
accountability to support
frontline execution
and growth
Change in risk level
Change in risk level
Change in risk level
Up
Ownership
Down
Ownership
Unchanged
Ownership
Chief Strategy Officer
Chief Operations Officer
Chief Financial Officer
Relevance
Company specific
Risk description
Relevance
Industry general
Risk description
Relevance
Industry general
Risk description
The Company outlined ambitious plans during
the Capital Markets Event, underpinned by key
strategic initiatives. These include driving cross
sell, new product introductions, geographic
growth alongside a strong ESG agenda and
ensuring the growth is accompanied by margin
enhancement to support doubling the revenue
and tripling operating profits.
Refinement of the strategic choices and solid
execution are critical while we build the
platform growth. Whilst elements of this
strategy are touched upon in other Principal
Risks, there is a wider risk in relation to the
Company’s ability to deliver the growth and
margin initiatives, in the context of a
challenging macroeconomic environment.”.
There is a risk that the Company does not
effectively prioritise and execute critical
strategic initiatives.
Mitigation
The Company’s strategy and its key initiatives
are in place and the business continues
investment in key strategic projects and
remains focused on execution. The
organisational structure has evolved to
promote regional accountability to support
frontline execution and growth. This includes
actions to support margin through pricing
and operational effectiveness.
Increased governance and rigour around
project delivery and resourcing is a key
mitigation, supported by the regional focus as
appropriate and on a global level by the Project
Management Office with oversight anchored
in the GEC.
This risk recognises the impact of physical
injury, or fatality, to our people and our
reputation as a result of a significant impact
event such as a workplace accident, war, fire,
flood, or severe weather. Given our operational
environment, this risk is focused largely on our
manufacturing and distribution operations,
but it also covers our office locations and
environments. Our geographical spread
also exposes us to a wide range of potential
safety risks.
Mitigation
The business seeks to embed a zero-accident
ethos and world-leading safety culture
driven through three pillars – Leadership,
Participation, and Compliance. The business
launched the “Safety Commitment” at all
locations in 2023 to ensure a baseline of
expectations for all staff. In our recently
acquired China operation (“Hengzhu”), there
has been a significant focus on compliance
and the engineering out of some high-risk
processes that could harm our people. All sites
continue to focus on machine-pedestrian
segregation to minimise the risk of collision.
These mitigation activities have gone some
way to improving performance and reducing
the level of risk but being “world-class”
requires much more of a transformational
and cultural change mindset over the next
three to five years.
The Company operates across a broad range
of global and geographic markets many of
which have their own underlying fundamentals.
This breadth of operation provides a degree
of macroeconomic risk mitigation through
geographical diversification.
The current macroeconomic and geopolitical
environment has resulted in downturns in
industrial production in many of our end-
markets. Whilst the Company is well positioned
to navigate the effects of fluctuating industrial
demand, there remains a risk that concurrent
downturns occur for which mitigating actions
are insufficient.
Mitigation
Whilst the broad economic environment
continues to be difficult with low growth
rates in many end markets, the Company
continues to manage its cost base so as to
minimise the impact on operating margins.
There is a significant level of interconnectedness
between this Principal Risk and the Principal
Risk around the execution of strategic plan
and thus commonality in terms of the
mitigating actions.
73
ESSENTRA PLC ANNUAL REPORT 2023 Board of Directors
GROUP EXECUTIVE COMMITTEE
Group
Executive
Committee
Paul Lester, CBE
Non-Executive Chairman
Scott Fawcett
Chief Executive Officer
Jack Clarke
Chief Financial Officer
Mary Reilly
Senior Independent Director
SCOTT
FAWCETT
Chief Executive
JACK
CLARKE
Chief Financial
Officer
EMMA
REID
Company
Secretary
ROB
BAKER
Chief Operating
Officer
SAM
EDWARDS
Chief Digital
Information
Officer
Adrian I Peace
Non-Executive Director
Ralf K. Wunderlich
Non-Executive Director
Dupsy Abiola
Non-Executive Director
Scott Fawcett will join the Board on 1 January 2023
Emma Reid will become Company Secretary on 1 January 2023
Emma Reid
Company Secretary
74
33
3
Scott Fawcett
Chief Executive
Jack Clarke
Chief Financial Officer
Rob Baker
Chief Operating Officer
Appointed to the Group Executive Committee:
January 2023
Appointed to the Group Executive Committee:
January 2023
Appointed to the Group Executive Committee:
January 2023
Joined Essentra:
December 2010
Joined Essentra:
April 2022
Joined Essentra:
October 2021
DIRECTORS’
REPORT
Scott was appointed as Chief Executive in
January 2023, having joined Essentra in 2010 as
Managing Director of the Components European
business and subsequently joined the former
executive committee in January 2014 leading the
Components business. Prior to joining Essentra,
Scott was Head of e-Commerce at RS Group
(formerly Electrocomponents plc), where he held
a variety of increasingly senior sales, marketing
and e-Commerce positions during his 17-year
career there.
Jack was appointed Chief Financial Officer in April
2022 and joined the former executive committee.
Jack was the Group Finance and Executive Director
of Marshalls plc from October 2014 to April 2021.
Previously, Jack served as the Strategy Director
and then CFO of AMEC (E&I) between January
2010 and September 2014. Jack is a qualified
chartered accountant.
Emma Reid
Company Secretary
Appointed to the Group Executive Committee:
January 2023
Joined Essentra:
January 2020
Emma joined Essentra in 2020, and was appointed
as Company Secretary in 2023. Prior to becoming
Company Secretary, Emma was Head of Governance,
and previously worked for Which? and Imagination
Technologies. Emma has extensive governance, legal
and DE&I experience at board level. Emma is a
qualified company secretary.
Rob joined Essentra in 2021 as Supply Chain
Director of the Components business. Rob has
over 25 years of supply chain experience covering
end-to-end supply chain across both industrial
products and consumer goods sectors. Prior to
joining Essentra, Rob’s background combines
both senior operational leadership roles with
business consulting, with a focus on operational
transformation, performance improvement and
sustainable procurement.
Sam Edwards
Chief Digital Information Officer
Appointed to the Group Executive Committee:
January 2023
Joined Essentra:
June 2014
Sam joined in 2014 and during his time with
Essentra has been primarily responsible for
digital and hassle-free strategic programmes
along with embedding digital and data into the
business globally. Prior to joining Essentra, Sam
spent 11 years at RS Components in a number of
increasingly senior digital and commercial roles.
ESSENTRA PLC ANNUAL REPORT 2023 GROUP EXECUTIVE COMMITTEE CONTINUED
More information
on the background
and experience held
by our Group Executive
Committee can be found
in the Notice of our Annual
General Meeting
Hugues Delcourt
Managing Director, EMEA
Gabriele Hannen
Chief Strategy Officer
DIRECTORS’
REPORT
Richard Sederman
Managing Director, APAC
Appointed to the Group Executive Committee:
January 2023
Appointed to the Group Executive Committee:
March 2023
Appointed to the Group Executive Committee:
January 2024
Joined Essentra:
July 2019
Joined Essentra:
August 2019
Joined Essentra:
September 2003
Hugues joined Essentra in 2019 as Managing
Director of the Components European business
and was appointed to his current role in July 2022.
Prior to joining Essentra, Hugues was Global
Commercial Director at Coats, where he held a
variety of increasingly senior Commercial and P&L
management positions during his 16-year career
there. Hugues started his career at Moss Plastic
Parts and Alliance Plastics, which later formed
part of Essentra.
Gabriele joined Essentra in 2019 as Finance
Director for the Components business. Prior to
joining Essentra, she worked across Manufacturing
& Distribution, Consumer, Media and Market
Research in privately owned and listed businesses.
Gabriele held a variety of Finance and wider
leadership roles with a focus on business growth
and change. She is a professional certified Coach
from Henley Business School.
HUGUES
DELCOURT
Managing
Director, EMEA
GABRIELE
HANNEN
Chief Strategy
Officer
RICHARD
SEDERMAN
Managing
Director, APAC
CHRIS
BROOKS
President,
Americas
Richard joined Essentra in 2003 as part of
the graduate programme and was promoted to
Managing Director, APAC in January 2024. During
his time with Essentra, Richard has held several
roles within Product and Marketing of increasing
seniority. Richard has also been instrumental in
several acquisitions, and in developing our
sustainable materials expertise and initiatives.
Richard brings a strong commercial background
with previous experience of having integrated
and ran the APAC based Abric Security
Seals acquisition.
Chris Brooks
President, Americas
Appointed to the Group Executive Committee:
February 2024
Joined Essentra:
February 2024
Chris Brooks joined Essentra in February 2024
as President, Americas. Prior to joining Essentra,
Chris was President of X-Rite, a former Danaher
operating company, and brings a wealth of
experience with a diverse industrial
manufacturing background. He has more than
20 years of experience as a general manager of
global operations and various functional
enterprise disciplines.
As at the date
of signing, on 18th
March 2024, Catherine
Lynch, Chief People
Officer, was also a
member of the GEC.
75
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
Directors’
Report
IN THIS
SECTION
77 Chair’s Corporate Governance statement
78 Board of Directors
80 Corporate Governance report
100 ESG Committee report
103 Nomination Committee report
109 Chair of the Audit and
Risk Committee’s letter
111 Audit and Risk Committee report
117 Chair of the Remuneration
Committee’s letter
121 Remuneration at a glance
122 Annual Report on Remuneration
133 The Directors’ Remuneration Policy report
141 Other statutory information
147 Statement of Directors’ responsibilities
in respect of the Financial Statements
148 Independent Assurance Statements to
Essentra plc
76
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR’S STATEMENT
Chair’s Corporate Governance
statement
DIRECTORS’
REPORT
PAUL LESTER, CBE
Chair
Dear Shareholder
The 2023 Corporate Governance statement
and report provides you with a more detailed
look into how we approach Corporate
Governance at Essentra and how it supports
our purpose and strategy.
We have reported on activity over the last year
and where relevant we have included forward-
looking information, to provide you with the
fullest picture of our approach to Corporate
Governance and how the business operates in
practice against our governance framework.
The Board has the highest regard for
good governance and is mindful that all
its discussions and decisions should consider
the principles of the 2018 UK Corporate
Governance Code (“2018 Code”). The Board
keeps under review the way it operates and
responds to changes in the business and
external environment, including the
forthcoming changes under the UK
Corporate Governance Code 2024 (“2024
Code”). The Board considers that it applies
the principles of the 2018 Code to its
discussions and decision making.
The Board is pleased to confirm that from
1 January 2023, it was, and remains, in full
compliance with all aspects of the 2018
Code. The Corporate Governance report
that follows sets out in more detail how the
Board has observed and applied the 2018
Code, what action was taken to achieve
this and the outcomes which support the
Company’s long-term success. Additional
information has been provided where this
will better inform stakeholders. Information
required to be reported under the Directors’
Report is reported here and within the
77
Strategic Report. The ESG report contains
additional disclosures and we have included
cross-references throughout for ease.
strategy, which provided an opportunity
to ensure the business was focused in the
right areas for growth.
Our Section 172 Statement can be found
on page 56. This includes reporting on all
stakeholder engagement and gives a sense
for the matters that the Board considers
during the year. The Board continues to
engage directly with employees through
our Board Champions to listen first-hand
to their views. More information can be
found on pages 90 to 91.
The Board and its committees continued
to receive regular reports in key areas, such
as health and safety and the environment,
compliance, controls and risk management.
The Board reviewed risks and mitigations
several times. Given the changing nature of
the business, it was opportune to ensure our
view of risks considered the most significant
opportunities within our strategy.
The Board considered its own composition,
and will keep this under review to ensure
the Board composition best supports the
business. The Board continues to support
and develop the skills and composition of
the Group Executive Committee (“GEC”).
More information on the GEC and the Board,
can be found on page 74 and page 78. As
the Board composition has remained static
over the last year, gender balance remains
at 38% women, just under the 40% target
set by the FTSE Women Leaders initiative
and the Financial Conduct Authority. We
remain committed to exceeding this figure
when we actively recruit. Our commitment to
diversity is clear, as we continue to exceed “At
least One by 2021” that was set by the Parker
Review. This is further supported by setting
a voluntary Ethnicity Target of 20% by 2027,
as requested by the Parker Review. We also
have a woman appointed as our Senior
Independent Director. These disclosures
also meet reporting requirements.
Throughout the year, the Board oversaw
performance of the businesses, as well
as carrying out an in-depth review of
Through delegated authority to the ESG
Committee and Audit and Risk Committee
(“ARC”), we spent time challenging and
ensuring our environmental sustainability
targets were sufficiently stretching to bring
about a noticeable change, and to consider
whether internal controls need further
strengthening to meet the recently published
2024 Code, which will be effective from the
end of 2026 . You can read more on these
topics in the ESG Committee report on
page 100 and ARC report on page 109.
As in other years, we completed the year
with a board evaluation. More information
can be found on page 103.
This is my last year as Chair of the Board,
having joined in 2015. It has been both
interesting and challenging and I leave
a business that has been significantly
transformed over the last nine years.
Paul Lester, CBE
Chair
18 March 2024
The Board is pleased to
confirm that from 1 January
2023, it was, and remains,
in full compliance with all
aspects of the 2018 Code.”
ESSENTRA PLC ANNUAL REPORT 2023 BOARD OF DIRECTORS
Board of Directors
Experienced, effective and diverse leadership.
Our Business is led by our Board of Directors,
biographical details of the Directors are available
at essentraplc.com/about-us/board-of-directors.
Audit and Risk Committee
Nomination Committee
Remuneration Committee
ESG Committee
C Committee Chair
PAUL LESTER,
CBE
Non-Executive
Chair
SCOTT
FAWCETT
Chief Executive
JACK CLARKE
Chief Financial
Officer
MARY REILLY
Senior
Independent
Director
78
Paul Lester, CBE
Chair & Non-Executive Director
Independent on appointment
C
Appointed to the Board:
23 December 2015
Skills and experience:
Paul is a highly experienced plc chair and has
led the Company through a series of significant
changes. Appointed to the Board in December
2015, he became Non-Executive Chair in 2016. Paul
brings a wealth of experience to Essentra, gained in
a broad range of senior operational and strategic
executive roles and has also served on a number
of Boards in an executive and Non-Executive
capacity for over 30 years. Paul’s former roles
include CEO of engineering services company, VT
Group plc and Group Managing Director of Balfour
Beatty plc. Paul has also been Chair of McCarthy
& Stone plc, Forterra plc, John Laing Infrastructure,
Greenenergy, Knight Square Holdings and a
Non-executive Director of Invensys plc.
Other current appointments:
• Non-Executive Chair, Telent Technologies Limited
• Non-Executive Chair, Funeral Partners Limited
Jack Clarke
Chief Financial Officer & Executive Director
Independent on appointment
Appointed to the Board:
19 May 2022
Skills and experience:
Jack was appointed as Chief Financial Officer
Designate on 4 April 2022 and as a Director of
the Board following his election at the AGM
in 2022. Since joining, Jack has contributed to
the transformation of the business into a pure-
play components business. Jack has extensive
experience of leading M&A strategies which
remains an important area of growth for
Essentra. Jack’s former roles include CFO of
Marshalls plc from 2014 until 2021 and CFO
of AMEC E&I including several other positions,
having joined in 2006.
Other current appointments:
• Director, Martyr Court Limited
DIRECTORS’
REPORT
Scott Fawcett
Chief Executive & Executive Director
Appointed to the Board:
1 January 2023
Skills and experience:
Scott was appointed as Chief Executive in January
2023, having joined the Group Executive Committee
in January 2014 as the Managing Director for the
former Components division. Previously, Scott was
Head of e-Commerce at RS Group plc and during
a 17-year career held a variety of increasingly senior
sales, marketing and e-Commerce positions. Scott
has an excellent track record within the components
industry and has proven experience in creating strong
organisational purpose, and employee engagement.
He is customer focused and continues to be a well-
respected Chief Executive across the business.
Other current appointments:
• None
Mary Reilly
Senior Independent Director
Independent on appointment
C
Appointed to the Board:
1 June 2017
Skills and experience:
Mary was appointed as the Senior Independent
Director in May 2021, and is also a Board Champion,
responsible for bringing the “Voice of the Employee”
to the Boardroom. Mary is currently Non-Executive
Director for a range of businesses and brings a
wealth of finance and international experience
to Essentra, having previously been a Partner of
Deloitte LLP for more than 20 years, as well as
serving on a number of Boards in a Non-Executive
capacity since 2000. She also serves as a trustee
on a range of charities.
Other current appointments:
• Non-Executive Director, Chair of Audit Committee,
Member of Nomination Committee, Mitie plc
• Non-Executive Director, Gemfields Group Limited
• Non-Executive Director, Cazoo Group Limited
• Non-Executive Director, Mar HoldCo Sarl
ESSENTRA PLC ANNUAL REPORT 2023
Board of Directors
Paul Lester, CBE
Non-Executive Chairman
Scott Fawcett
Chief Executive Officer
BOARD OF DIRECTORS CONTINUED
Jack Clarke
Chief Financial Officer
Mary Reilly
Senior Independent Director
Kath Durrant
Non-Executive Director
Independent on appointment
Dupsy Abiola
Non-Executive Director
Independent on appointment
Appointed to the Board:
3 January 2023
Appointed to the Board:
18 March 2022
Skills and experience:
Kath has more than 30 years’ human resources
experience, with a strong operational and strategic
track record, gained at several large global
manufacturing companies. As well as working at
GlaxoSmithKline plc and AstraZeneca plc she has
served as the Group Human Resources Director
of Rolls-Royce plc, and was most recently Group
Ralf K. Wunderlich
HR Director of Ferguson plc and Chief HR Officer
Non-Executive Director
of CRH plc.
Skills and experience:
Dupsy is an experienced senior executive and tech
leader who works across a range of sectors. She is
also a former commercial lawyer and tech founder
by background. Her most recent role was Vice
President, Chief of Staff at Monzo, the UK’s leading
digital bank. Her career has focused on leading
impactful strategic projects and programmes.
Dupsy Abiola
Non-Executive Director
Other current appointments:
• Director, Alphathinx Limited
Adrian I Peace
Non-Executive Director
Other current appointments:
• Senior Independent Director, SIG plc
Scott Fawcett will join the Board on 1 January 2023
Emma Reid will become Company Secretary on 1 January 2023
• Non-Executive Director, Vesuvius plc
Adrian Peace
Non-Executive Director
Independent on appointment
Ralf K. Wunderlich
Non-Executive Director
Independent on appointment
C C
Appointed to the Board:
1 June 2017
Appointed to the Board:
28 June 2021
Skills and experience:
Adrian is a member of the ARC and ESG
Committee, as well as being a Board Champion.
Adrian holds the position of President, Performance
Technologies, at Modine Manufacturing Company.
He has experience of leading full P&Ls, digitising
businesses and driving operational efficiencies that
have transformed the businesses he has worked
in. Adrian has also worked with WW Grainger and
then Republic Services as Senior Vice President,
Emerging Business Operations, where he led
Republic’s sustainability initiatives, driving forward
Environmental Social and Governance issues.
Skills and experience:
Ralf is Chair of the ESG Committee and
additionally served as Chair of the Remuneration
Committee since the 2022 AGM, as well as being
a Board Champion. Ralf is currently Non-Executive
Director of Aptar Group Inc, Huhtamaki Oyj,
Klöckner Pentaplast Group and Shepherd Building
Group Limited. He is also an adviser to the Board of
Nordmeccanica Group. Ralf has direct experience
of being responsible for businesses with injection
moulding capabilities gained over many years
living and working across three continents.
Other current appointments:
• Non-Executive Director and member of
Management Development and Compensation
Committee, Aptar Group Inc
Other current appointments:
• Independent Strategy Adviser & Director, AIP LLC
• Non-Executive Director and member of
HR Committee, Huhtmaki Oyi
• President, Performance Technologies, Modine
• Non-Executive Director and member of
Manufacturing Company
79
Audit & Risk, Nomination and Remuneration
Committee, Shepherd Building Group Board Ltd
• Advisory to the Board of Nordmeccanica Group
• Non-Executive Director and member of the HR
Committee, Klöckner Pentaplast Group
DIRECTORS’
REPORT
EMMA
REID
Company
Secretary
More information on
the background and
experience held by our
Board can be found in
the Notice of our Annual
General Meeting
Appointed to the Board:
Secretary to the Board in January 2023
Emma Reid
Company Secretary
As the Company Secretary, Emma is also
part of the Group Executive Committee.
For full biography, see page 74
DUPSY
ABIOLA
Non-Executive
Director
33
3
KATH
DURRANT
Non-Executive
Director
ADRIAN
PEACE
Non-Executive
Director
RALF K.
WUNDERLICH
Non-Executive
Director
ESSENTRA PLC ANNUAL REPORT 2023
CORPORATE GOVERNANCE REPORT
Corporate
governance report
Governance at Essentra supports good decision
making and is key to ensuring information flows
up and down the organisation efficiently.
Our governance framework is designed to support
our ambitious growth plans in a responsible and
sustainable manner.
The Board can confirm that during 2023,
it has applied and complied with all of the
Principles of the UK Corporate Governance
Code (“2018 Code”). In the prior year, 2022,
Principle 38, relating to pension contribution
rates, was not in full compliance as a
transition plan was in place to gradually move
to the same rate paid to all members of the
pension for the former CEO. However, upon
the appointment of Scott Fawcett as CEO
on 1 January 2023, Principle 38 was complied
with in full as Scott receives the same
contribution to his pension as the workforce.
From 1 January 2023, the Company has been
in full compliance with all provisions of the
2018 Code.
DIRECTORS’
REPORT
The following Corporate Governance report
addresses each of the pillars of the 2018
Code and provides an explanation to our
stakeholders of how we have approached
compliance with the 2018 Code. Some of the
information that we are required to report
on under the 2018 Code is included in the
Strategic Report under s414C(11) of the
Companies Act 2006 and where that is the
case, we have provided a cross-reference to
avoid duplication. In all instances, we have
provided additional relevant information to
provide the fullest picture to stakeholders.
Board membership and attendance
Board meetings during the year
Paul Lester
Chair
Scott Fawcett
Chief Executive Officer
Jack Clarke
Chief Financial Officer
Dupsy Abiola
Non-Executive Director
Kath Durrant
Non-Executive Director
Adrian Peace
Non-Executive Director
Mary Reilly
Senior Independent Director
Ralf Wunderlich
Non-Executive Director
8 (8)
8 (8)
8 (8)
8 (8)
8 (8)
8 (8)
8 (8)
8 (8)
CORPORATE
GOVERNANCE CODE
KEY TOPICS
86 Company purpose
Business model
3
34
People and culture
92 Division of responsibilities
56
Stakeholder engagement and Section 172
responsibilities
104 Composition, succession and
board evaluation
109 Audit, risk and internal control
117 Remuneration
Figures in brackets denote the maximum number of
meetings that a director could have attended.
In addition, Emma Reid, the Company Secretary,
attended all meetings.
80
ESSENTRA PLC ANNUAL REPORT 2023 The Board assesses
culture within Essentra
through employee
engagement
CORPORATE GOVERNANCE REPORT CONTINUED
Board leadership and purpose
The Board of Directors are appointed by
shareholders, the owners of the Company,
annually at the Annual General Meeting.
The Board’s primary role and responsibility
is to provide effective and entrepreneurial
leadership, to promote the long-term
sustainable success of the Company and
to generate value for shareholders as well
as to ensure the Company contributes to
wider society.
In practice, the Board achieves this through
its regular meeting cycle, which includes a
range of committee meetings and other
events, such as opportunities to meet
employees and strategy planning sessions.
In these sessions the Board focuses on
discussions that cover a broad range of topics
including understanding and ensuring that
the activity that underpins the Company’s
strategy, aligns with the Company’s purpose
and values. The Group Executive Committee
(“GEC”) provide the Board the support that is
required to do this through delegation to the
Chief Executive. This supports the Board and
its delegated committee structure to focus
on delivering their role in respect of setting
long-term sustainable objectives,
and to demonstrate effective oversight
through regular review of the Company’s
performance, which also has regard to short
and long-term risks and opportunities that
the Company faces in achieving its strategy.
During the year, and when considering any
new initiatives the Board always considers
the risks and opportunities, and this is
supplemented by dedicated risk review
sessions at which Principal and Emerging risks
are considered in detail. More information on
how the Board reviews risks and opportunities
to the Company’s strategy can be found on
pages 65 to 73.
81
The schedule of matters reserved to the
Board, which is available on the Essentra plc
website, sets out the authority for matters
that the Board has retained and those which
it delegates to the Chief Executive, CFO and
GEC. Below the schedule of matters reserved
to the Board, the Company maintains a
schedule of authority that provides
members of the GEC, and their teams,
with levels of authority for decision making,
that operates within the parameters of the
schedule of matters reserved and the
business plan for any given year.
The Board meet with management
throughout the year, formally and informally,
to regularly understand how relevant areas
of the strategy are formed, resourced and
assessed, including reviewing metrics
measuring progress, which supports the
Board’s duties. The Board assesses culture
within Essentra through employee
engagement and observes whether the
Company’s values in practice are aligned
to those it has publicly committed to.
The Board, through the Audit and Risk
Committee (“ARC”) also receives reports
from the Risk Assurance team, which carry
out internal audit reviews on agreed areas
of the business. These reviews provide the
Board with insights into how the values
operate across a range of sites over a range
of territories. The Board, through the ARC
and its Chair, Mary Reilly, where necessary,
deploy the use of internal audit reviews as
one of its tools to take corrective action.
The Board has agreed a series of norms and
values that they, the GEC and senior leaders
use to demonstrate the behaviours that are
important to Essentra. In addition to
management’s own emphasis on working in
accordance with these norms and values, a
whistleblowing system is also in place and
regular reports are provided on any cases
raised and the outcomes. More information
on our whistleblowing process can be found
DIRECTORS’
REPORT
on page 36 and 113. The Board expect any
corrective action to be reported on and seek
continual improvements to be made in
response. More information on this is
available in the ARC report on page 113.
As well as the formal framework, the
Board takes the opportunity to meet with
employees to consider the way in which the
Chief Executive and his team have adopted
and demonstrated the Company’s values,
and how these have in turn been adopted
by other leaders, and the impact this has
on employees. All of the Board have
opportunities to meet employees during
the year, and this is further supplemented
by three Non-Executive Directors who are
appointed as Board Champions and hold
Voice of the Employee sessions with
employees across our global sites. More
information on the Voice of the Employee
can be found on pages 90 and 91.
During the year, the Chair of the Board,
Paul Lester, regularly engaged with the
Company’s shareholders outside of the
formal Annual General Meeting. Paul meets
with shareholders to understand their views
on the Company’s performance and its
strategy and this is fed back regularly at
each Board meeting, and is supplemented
by the Chair of each Board committee
providing information on shareholders, as
well as the Chief Executive, CFO and Investor
Relations Manager’s view on shareholder’s
perspectives. These views are taken into
consideration when the Board is reviewing
performance and developing strategy.
During 2023, direct discussion and feedback
from shareholders led the Board to make
a decision to return funds from the sale of
the Packaging and Filters business through
a special dividend and a share buyback,
having been prompted by shareholders to
retain a portion of the proceeds for a longer
period. The Board and management are very
supportive of this reciprocal relationship and
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
Essentra Board and Executive governance structure
Essentra plc
Board
Audit and
Risk
Committee
Remuneration
Committee
Nomination
Committee
ESG
Committee
Group
Executive
Committee
Social
Steering
Committee
Treasury
Committee
Sustainability
Steering
Committee
Investment
Committee
CORPORATE GOVERNANCE REPORT CONTINUED
the support that shareholders continue
to provide for the long-term growth of the
Company. In addition to shareholder and
employee views, the Board also takes into
consideration views of a range of stakeholders,
including customers, advisers and external
influences and movements in sentiment,
and always seek to respond to these in a
manner that best suits the Company’s
strategy. More information on how the
Board considers and engages with the
Company’s stakeholders can be found in
the s172 Stakeholder Engagement report
on pages 56 to 57.
The Board, through the Remuneration
Committee, and with the support of the
Chief People Officer and Reward Director,
give significant consideration to how the
Company’s employees are rewarded and the
investment made in people. The Board were
pleased that during 2023, a new bonus plan
was developed and is now in place for 2024
onwards, that applies to all countries that
Essentra operates in and brings a parity to
the Company’s approach to reward that had
not previously been possible until the sale of
the Packaging and Filters businesses. The
Board are pleased, as are Essentra’s
employees who have given feedback at the
opportunity this brings, and the focus this
was given during the first year as a pure-play
components business. More information on
the bonus plan can be found on page 131.
At each Board meeting, the Board review
a schedule of any potential conflicts of
interest, both in terms of the other outside
roles held by the Board members, and the
percentage of their shareholding in the
Company, to consider the impact that this
may have on the discussions and outcome
of any decision. The Board are asked to
declare any new interests at each Board
meeting. During the year, a declaration
was made by the Chief Executive, who
confirmed that his spouse works in the
82
business. The Board were aware of
this potential conflict prior to Scott’s
appointment and a process has been put
in place that ensures any decisions relating
his spouse's pay or role, sits primarily with
the Chief People Officer.
Structure
At the start of 2023, a refreshed governance
framework was adopted that reduced the
number of formal committees, reflecting
the reduction in size of the business. The
same structure remains in place and below
the Board, there is an ESG Committee, an
Audit and Risk Committee, a Remuneration
Committee and a Nomination Committee.
Supporting the Board and its committees,
the Group Executive Committee operates,
with delegated authority from the Chief
Executive, and where considered necessary
a series of management level forums
operate to ensure any decisions are taken
with all stakeholders consulted, and progress
is regularly reviewed and monitored. During
2023, at management level, a dedicated
Social Steering Committee was established
to move forward the Social workstream of
the ESG strategy. The responsibilities of this
forum have been transitioned into the
People and Operations forum from 2024,
reflecting the way in which ESG matters
are embedded fully into the Company’s
operations. From the start of 2024, the
Group Executive Committee implemented
a range of forums to ensure decision making
is made swiftly and consistently across the
organisation, which further supports its
approach to developing talent and
empowering the organisation to own
and be accountable for the Company’s
performance. Each of the forums is led by
the relevant GEC member, operating in line
with the schedule of authority. Information
is cascaded to the GEC and other
stakeholders as required.
ESSENTRA PLC ANNUAL REPORT 2023 CORPORATE GOVERNANCE REPORT CONTINUED
DIRECTORS’
REPORT
Terms of Reference for the Board committees
and the matters reserved to the Board are
available on the Essentra plc website.
Audit and Risk Committee (“ARC”)
The ARC supports the Board and is
responsible for:
Essentra plc Board (the “Board”)
In fulfilling its role, the Board:
• establishes the Company’s purpose, values
and strategy and has satisfied itself that
these and its culture are aligned
• sets, continually reviews and tests the
Company’s strategic aims
• determines the nature and extent of
acceptable risks in achieving the Company’s
strategic objectives, including its approach
to managing climate-related matters
• assesses shareholder and stakeholder
interests from the perspective of the long-
term sustainable success of the Company
• oversees the establishment of formal
and transparent arrangements for the
application of corporate reporting,
risk management and internal control
requirements and principles
• ensures that the necessary financial
and human resources are in place for
the Company to meet its objectives
• reviews the performance of the
Company’s executive management
• presents a fair, balanced and
understandable assessment of the
Company’s position and prospects
to its shareholders.
Disclosures
Disclosures within Essentra are managed
by the Chief Executive, CFO and the
Company Secretary, who are responsible
for the identification and disclosure of
inside information and ensuring that
announcements comply with applicable
regulatory requirements.
• monitoring the integrity of the Company’s
Financial Statements
• reviewing, challenging and approving its
accounting policies
• scrutinising the effectiveness of the
internal and external auditors and the
Company’s internal control and risk
management systems.
Remuneration Committee
The Remuneration Committee is established
by the Board and is responsible for setting a
remuneration policy for Directors and senior
executives. This policy is designed to promote
the long-term success of the Company,
taking into consideration the reward,
incentives and conditions available to
the Company’s workforce, shareholders
and other stakeholders. The Remuneration
Committee determines an appropriate
balance between fixed and performance-
related and immediate and deferred
remuneration. The Remuneration Committee
is also responsible for setting the fees of
the Chair.
Nomination Committee
The Nomination Committee is responsible
for regularly reviewing the structure, size
and composition of the Board for any
changes that it considers to be appropriate.
The Nomination Committee will lead the
process for Board appointments and make
recommendations to the Board taking into
account the Company’s strategic priorities,
the main trends and factors affecting the
long-term success and future viability of
the Company and consider candidates in
accordance with the Board Diversity Policy.
83
ESSENTRA PLC ANNUAL REPORT 2023 CORPORATE GOVERNANCE REPORT CONTINUED
DIRECTORS’
REPORT
In addition to shareholder
and employee views, the
Board also takes into
consideration views of a range
of stakeholders, including
customers, advisers and
external influences and
movements in sentiment.”
Independence
Of the eight Board members, six (75%) are
considered to be independent as deemed
by the 2018 Code. Whilst this includes the
Chair, who was considered independent
upon appointment, it is recognised the
Chair’s independence becomes difficult
to maintain as they progress through
a nine-year tenure.
Board composition
Executive
Non-Executive
Tenure – Non Executive
Up to 3 years
3–6 years
6–9 years
25 %
75 %
50%
13%
37%
ESG Committee
The ESG Committee was established in
2023 with oversight delegated to it by the
Board for determining the ESG strategy
and approach to ESG affairs. The ESG
Committee is responsible for scrutinising the
ongoing performance against sustainability
targets and measuring progress of each
aspect of Environmental, Social and
Governance strategy. The ESG Committee
provides feedback where appropriate to other
committees, including the Remuneration
Committee on ESG measures that are
incorporated into bonusable targets.
Group Executive Committee (“GEC”)
The GEC provides executive management
of the business and operates within the
delegated authority limits determined by
the Board. The GEC supports the Chief
Executive in achieving Essentra’s values
and goals through the execution of the
businesses strategic priorities. Membership
of the GEC is set out on page 74.
The GEC is responsible for monitoring
Principal and Emerging Risks, and ensuring
the effectiveness of business and functional
risk management and formally reviews its
approach to risk four times a year. Further
details of the Company’s risk management
framework can be found on page 65.
The GEC is also responsible for overseeing
the implementation of compliance
programmes, policies and procedures that
are required both to meet local compliance
and regulatory requirements, and to meet
Essentra’s own values and norms. The GEC
monitors the effectiveness and completion
rates of training to ensure the importance of
compliance across the business is clearly
articulated, and the GEC support an IT
lockout system, which escalates to the
disciplinary process, for non-completion
of training.
Tenure
The Board are appointed for terms of
three years, and each Non-Executive
Director may serve up to a maximum
of nine years. Each Director of the Board
stands for election or re-election each
year as appropriate.
The Board has considered which of the
Non-Executive Directors are considered to
be experts in specific fields as shown below.
Further information on the background and
experience of our Board can be found on
pages 78 and 79 and in the Notice of
Annual General Meeting.
• Risk management
Paul Lester, Ralf K. Wunderlich,
Adrian Peace, Mary Reilly
• Investor Relations
Paul Lester
• Recent Audit and Financial
Mary Reilly, Ralf K. Wunderlich
• Remuneration
Ralf K. Wunderlich, Kath Durrant
• People and social
Kath Durrant, Adrian Peace
• Innovation
Dupsy Abiola
• Technology
Dupsy Abiola, Adrian Peace
• Industry Expert
Adrian Peace
• Sustainability
Ralf K. Wunderlich, Adrian Peace
• Regulatory & Governance
Dupsy Abiola, Mary Reilly, Paul Lester,
Kath Durrant
84
ESSENTRA PLC ANNUAL REPORT 2023 CORPORATE GOVERNANCE REPORT CONTINUED
The GEC
provides executive
management of the
business and operates
within the delegated
authority limits
85
DIRECTORS’
REPORT
Fair, balanced and understandable
One of the key requirements is for the
Annual Report to be fair, balanced and
understandable. In coming to a conclusion
that the Annual Report is fair, balanced and
understandable the Board is supported by
the ARC, which makes recommendations
to it on this and also considers the process
adopted by the organisation in drafting the
Annual Report, which requires Company-
wide co-ordination and review. That process
runs alongside the formal audit of the
Financial Statements conducted by the
External Auditor. The Board further takes
into account representations made by
management and the views of the internal
and external auditors as to the integrity of
the narrative and financial statements.
The comprehensive review process is carried
out with appropriate scrutiny, assessment
and reporting from the ARC to the Board.
This is followed by further critical review by
the Board as a whole, prior to the Board
making its determination that the 2023
Annual Report, taken as a whole presents
a fair, balanced and understandable
position and provides shareholders with
the information necessary to assess the
performance, strategy and the business
model of the Company.
The GEC is directly responsible for ESG
matters and receives regular reports on
progress of its environmental sustainability
and social initiatives and targets, which are
reported onwards to the ESG Committee.
Through the additional support of a working
group focused on Sustainability and Social
matters, these initiatives are driven forward
throughout the business, both through the
enthusiasm of employees with dedicated
roles, and also through employees who
have volunteered to become involved as
they are committed to making change.
The GEC wish to note their thanks to
these dedicated volunteers.
Treasury Committee
The Treasury Committee operates as a
sub-committee of the GEC and reports
on treasury and financial operating risks
to the GEC, the CFO and the ARC as may
be appropriate. The Treasury Committee
sets Treasury Policy for approval by the
Board and reports on any treasury related
risks to the GEC, which is escalated to the
ARC as part of the regular reporting process
to ensure the ARC is able to maintain an
effective process for managing those risks.
Investment Committee
During 2023, the Investment Committee,
which is a sub-committee of the GEC, formed
of the Chief Executive and the CFO, met to
consider, control and challenge decisions
relating to major capital expenditure in excess
of £250k in line with the Delegated Authority.
From 2024, the Investment Committee will
have an expanded composition to include
the CFO, Chief Operating Officer, Chief
Strategy Officer and the Finance Director.
ESSENTRA PLC ANNUAL REPORT 2023 ESSENTRA PURPOSE, VALUES AND CULTURE
Essentra purpose,
values and culture
Essentra renewed its purpose at the
start of 2023 to align with its business
model and during the year it has
communicated, embedded and
lived the values introduced.
DIRECTORS’
REPORT
Our purpose
Our vision
Our goals
Our ambition
Living our values
We help
customers
build a
sustainable
future
To be the
world’s leading
responsible,
hassle-free
supplier of
essential
components
• Market leader with a unique
proposition in a fragmented
£8–10bn market
• Clear strategy to drive organic
growth and market share gains
supported by digitalisation and
sustainability
• High margin business with scope to
expand through scale efficiencies,
operational effectiveness and pricing
• Strong returns and cash conversion,
enabling value enhancing M&A
To double
the revenue
and triple
operating
profits
We care about
our customers
We care about
each other
We deliver
We are
an effective
team
86
ESSENTRA PLC ANNUAL REPORT 2023 ESSENTRA PURPOSE, VALUES AND CULTURE CONTINUED
All teams work together
as one winning team –
Team Essentra.”
At the start of 2023, Essentra refreshed
its purpose, vision, goals and values based
on existing norms that the business were
familiar with. In doing this, we returned
to basics, to consider what the Company
was here to do. On a day-to-day basis,
we manufacture small component plastic
parts and metal access hardware, such as
locks. These are small items that make up
a larger bill of materials that customers
require, in sometimes a lengthy bill of
materials, to build larger items, such as
cabinets for cables or electrical engines
for cars. Delivering small component parts
to our customers, on time and in full is
essential. We are continually seeking to
improve our service to customers, and
are working hard to be the world’s leading
responsible, hassle-free supplier of essential
components. We are working to make our
unassuming brand, Essentra, synonymous
with reliability for customers where that
is essential; and technical engineering
expertise for where our customers require
a uniquely sustainable option.
The refreshed purpose, values and cultures
were launched in Q2 2023, through a series
of communications and cascades across the
business. The GEC took further opportunities
to engage with colleagues to ensure that
they recognised the values and were able to
live and to demonstrate them in practice.
We care about our customers
By caring about our customers, every
employee strives to provide the best service
they can, whether that is to an external or
internal customer, and by asking our people
to identify the underlying end customer we
are able to ensure our day-to-day activity
brings real value and purpose through
thoughtful prioritisation.
87
DIRECTORS’
REPORT
We care about each other
In caring about each other, every
employee has an opportunity to take
steps to create a better community and
to engage with their colleagues. We care
about each other supports the business in
considering how our actions impact each
other, and the subsequent impact this can
have on whether we are able to delivering
a hassle-free experience for our customers.
We deliver
To meet our purpose, it is essential that
we deliver our products, but it is just as
essential that everyone within Essentra
delivers their purpose too, as we all
contribute to meet our customers’
satisfaction. Colleagues recognised
that delivery was vital and therefore this
resonated well and commitments both for
the everyday and the extraordinary are taken
seriously with the impact of non-delivery to
our goals and purpose clearly understood.
We are an effective team
To achieve our purpose and our goals, to
double our revenue and triple our operating
profits, an ambitious ask, the business needs
to have a high performing and effective
team. There would only ever be one way
to ensure this is achieved; with aligned,
focused and cohesive teams. All teams in
Essentra understand their role and their
contribution to achieving our shared
end-goals. We operate as one winning
team – Team Essentra.
ESSENTRA PLC ANNUAL REPORT 2023 MATTERS CONSIDERED BY THE BOARD IN 2023
Matters considered
by the Board in 2023
DIRECTORS’
REPORT
During 2023, the Board held eight scheduled
meetings with additional sub-committee
meetings and informal preparatory sessions
in advance of key decisions being taken to
support their understanding, rationale and
the process used to reach the decision.
The Board’s agenda is set by the Chair and
carefully planned against the strategy to
ensure that appropriate time is given to
managing the affairs of the Company. This
ensures focus on the Company’s strategic
activities and key monitoring activities, as
well as reviewing significant issues so that
matters are considered in line with the
schedule of reserved matters. An annual
cycle of agenda items is in place to support
the work of the Board.
Strategy
Financial
Operational and risk
Governance and ethics
Leadership and people
• Received updates from the Board
Employee Champions following
in-person visits to sites with
insights on whether management
were operating in line with the
Company’s culture and values
• Received regular updates on the
safety and wellbeing of our people
• Received regular updates on our
people and related initiatives,
including the roll out of a new
global bonus plan
• Participated in an externally
• Monitored Health & Safety
facilitated Board evaluation, review
of the conclusions and agreement
on subsequent action plans
• Reviewed and approved the annual
Modern Slavery Statement
• Received updates from
Board committees on their
respective meetings
throughout the organisation
• Received updates on the Parker
Review ethnicity target with a view
to agreeing a target
• Considered succession planning
• Approved the Company’s trading
statements, Full Year and Half
Year results and quarterly
trading statements
• Approved the Company budget
and plan for 2024
• Approved dividend payments with
2022 final year dividend of 1.0p per
share, giving a full year dividend for
2022 of 3.3p per share and interim
dividend for 2023 of 1.2p per share
• Considered and agreed the ways
in which the proceeds from the
sale of the Filters and Packaging
business should be used and
agreed to return funds of £89.8m
to shareholders by way of a special
dividend of 29.8p per share and a
£60m share buyback programme
• Approved the acquisition of BMP
TAPPI, a strategic and bolt on
acquisition based in North Italy
• Held a deep dive session with
the Group Executive Committee
to consider areas of focus to
accelerate growth towards
realising the ambition to double
revenue and triple operating profit
• Received regular updates, as
well as held in-depth sessions, on
progress of the Business Process
Redesign (“BPR”) project which
includes implementing a new
ERP system
• Received updates on the
completion accounts for
the sale of the Filters and
Packaging businesses
• Oversaw changes to the
organisation design which
transitioned to a regional approach,
and the accompanying changes in
operating model and composition
of the Group Executive Committee
• Received regular reports from the
Chief Executive and the CFO
• Received detailed presentations
from senior management across
the businesses and considered
reports from functional
management about matters
of material importance to
the Company
• Reviewed the impact of the
global economic slow down on
the business, arising from the war
in Ukraine and political tensions in
other regions
• Undertook an in-depth review
of each Principal Risk and
Emerging Risk and challenged the
Group Executive Committee on
whether the risks were sufficiently
broad and aligned to strategy.
Subsequently, following a further
review, considered and approved
the Principal Risks for the Half Year,
and approved a refreshed set of
Principal and Emerging Risks for
the Full Year
• Received regular updates on
progress of the BPR project
• Continued consideration of cyber
security risk
88
ESSENTRA PLC ANNUAL REPORT 2023 MATTERS CONSIDERED BY THE BOARD IN 2023 CONTINUED
Delay of the Year End 2022 results by one week
• Received regular weekly, then progressively more
Acquisition of BMP TAPPI in Italy
• Approved the acquisition of BMP TAPPI, a
frequent updates on the progression of the year end
2022 process from the Finance team and from the
external auditor, PwC
• Considered with management the additional time
realistically required, being one further week, to
complete the year end 2022 audit process and
ensure the accuracy and reliability of the results
• Sought input from advisers on the impact of the
year end results being delayed and agreed to update
the market through the publication of an RNS to
communicate the delays
• Commissioned a post event analysis carried out by
the Company Secretary to identify the areas that had
caused the delay and the lessons learned, including
that the strategic reviews had created significant
complexity at a time when the business had reduced
headcount in readiness for becoming a pure-play
components business
complementary and strategic bolt on acquisition
of an established business based in North Italy that
manufactures and distributes protective caps and
plugs, closely aligned to Essentra’s own business model
and delivering on the Company’s commitment for
inorganic growth
• Approved the purchase for an initial cash consideration
of €33.5m, with a deferred contingent of up to €3.5m,
on a cash-free, debt-free basis. The initial consideration
was forecast to represent an acquisition multiple of
c.8.0x EBITDA on a full year 2023 basis and a post
synergy multiple approaching 5.3x EBITDA
• The Board agreed that BMP Srl, which was also a
supplier to the business, with which there was a good
working relationship, had very strong product overlap
that would provide opportunities to increase margin on
common lines
• There were strong opportunities for cross selling other
Essentra products given the strong penetration within
Essentra’s core target markets by BMP TAPPI
• The existing management team in Italy are exceptionally
talented, and therefore the additional capacity and
site would provide opportunities for their personal
professional development but also ensure the new site
was integrated and assimilated smoothly into Essentra
• Future opportunities for growth through the physical
location of the site were agreed to be a notable benefit
• The capacity within the site, as well as the opportunity
to extend capacity through adding new machinery
would align well to the existing EMEA strategy
for growth
DIRECTORS’
REPORT
Merger Reserve Relief
• Approved a process to seek to move the Company’s
merger reserve relief from non-distributable reserves to
distributable profits, thereby increasing the headroom
to pay future dividends to shareholders
• Considered how the merger reserve had built up
to such an extensive figure, noting that previous
acquisitions had intentionally allocated the merger
reserve to non-distributable reserves for future use
and that as part of the significant separation work
that had been carried out under the strategic reviews,
moving the merger reserve was a final step in building
a strong balance sheet
• Approved the process to be used, whereby one share of
a single separate class would be issued to a third party
by way of a bonus share issue (known as the Capital
Reduction Share) and applying the amount standing to
the credit of the merger reserve account in paying the
capital reduction share in full
• Shortly following the share being issued, the share was
cancelled, effecting the cancellation of the Capital
Reduction share for no payment, upon application to
the High Court for a court-sanctioned reduction of
capital on the day following the share being cancelled
and the amount credited to distributable reserves
• Approved a proposal to amend the Articles of
Association to provide for the above issue of a separate
class of share and the subsequent approval of Notice
of General Meeting and issue of the Capital Reduction
Share required to support the process
89
ESSENTRA PLC ANNUAL REPORT 2023 BOARD EMPLOYEE ENGAGEMENT
Board employee
engagement
The Board and GEC believe that employee engagement
is a key input and barometer for the success of the
business. An engaged workforce, that are proud to
work for Essentra, will want to share our common goals
that supports the delivery of our short, medium-and
long-term strategic priorities and goals.
Essentra fulfils the 2018 Code requirements
for employee engagement in a number of
ways. The key method is through designated
Non-Executive Director “Board Champions”
who hold Voice of the Employee (“VoE”)
sessions at sites. We have three Board
Champions, to cover each region. Mary
Reilly covers West Europe and the UK, Ralf
Wunderlich covers East Europe plus APAC,
Adrian Peace covers the Americas.
The Board expects each Board Champion
to travel to at least two sites per year to meet
with employees, holding sessions with small
groups, that are closed to management.
The Board Champions use the results of the
employee engagement survey to focus on site
relevant topics, as well as any issues that are
known to management.
The Non-Executive Directors were selected
for their personal interest in engaging with
employees, ability to engage with people
and geographical knowledge and location.
The Board ensure that each time they
meet they discuss the feedback, whether
any follow up is required and how this may
impact their consideration of decisions they
make, for instance, a visit to Barcelona
provided insights on the impact of rolling
out the new ERP system has on day-to-day
operations at a site.
Listening to the voice of the
employee
In addition to the Board Champions, the
GEC led by our Chief Executive, Scott
Fawcett, take particular care to ensure they
travel to sites throughout the year and speak
with employees in a broad range of roles to
understand the culture at each site and
to ensure shared behaviours and norms
are displayed.
These two channels are shared at formal
and informal meetings with the Board and
GEC and help us to ensure that we are
listening and responding to our workforce as
well as providing an opportunity for Non-
Executive Directors to see first hand whether
our policies and practices are consistent with
Essentra’s values.
90
Voice of the Employee process
Board Champions visit sites and speak
to employees
Board Champions report back to the
Board on themes and findings, VoE
attendees complete usefulness of how
useful session
Employees complete confidential
survey on how useful the VoE session
has been
Company Secretary analyses feedback
from trends and recommendation
Board Champion and Company
Secretary agree key actions and
recommendations
GEC supports actions required and
ensures this aligns with priorities if
required
GEC recommend any follow up site
visits or new visits for the coming year
Board Champion and Company
Secretary prepare for Voice of
Employee session
DIRECTORS’
REPORT
This is also underpinned by a Right to Speak
whistleblowing policy and process and the
Risk Assurance team carrying out internal
audit reviews.
VoE sessions are held with small groups at
site, often inviting or asking for volunteers to
met each Board Champion. The sessions are
closed to management, and for larger sites,
separate sessions are held by job family as
the experience and issues of one group can
differ, for instance, employees in production
may have concerns around health & safety
that back office employees do not share.
By holding separate VoE sessions, the Board
believes this provides each group with
more time to share their views.
The Board, being mindful of the 2018 Code
requirements, carried out a review of the
effectiveness of their approach to employee
engagement during 2022, with the support
of the Company Secretary, who recommended
a new process that ensures site visits are
aligned to those under focus in any given
year, and that feedback and actions to be
taken after a meeting are considered by the
GEC also align with priorities and investment
priorities, whilst ensuring any health and safety
issues, if raised, are always addressed.
VoE feedback, discussion and
decision making
During the year, the most significant
feedback received by the Board related to
shift change patterns at Kidlington in the
UK. Management at site had been tasked
with increasing capacity to meet demand.
The changes made in the shift patterns
created challenges on implementation with
delays in production. Mary Reilly heard that
the change in shift patterns had created
ESSENTRA PLC ANNUAL REPORT 2023 Sites visited in 2023
Board Champion site visits
During 2023, the Board Champions visited eight sites. The Board and Executive Management believe it is important to meet employees at
more than one site for the employee voice to be properly heard and understood and this multi-site approach reflects the Board’s
commitment to engaging directly with employees.
1
2
3
4
5
6
7
8
DIRECTORS’
REPORT
Erie,
US
Wixroyd,
Chichester,
UK
Kidlington,
UK
Barcelona,
Spain
Valkenswaard,
Netherlands
Nettetal,
Germany
Silivri,
Turkey
Rayong,
Thailand
In-person
In-person
In-person
In-person
In-person
In-person
In-person
In-person
1
2,3
5
6
4
7
8
BOARD EMPLOYEE ENGAGEMENT CONTINUED
disruption and a backlog in production and
it was recognised that further consideration
was required as to whether the approach
had been in line with Essentra’s norms. As a
result, the GEC reviewed the approach taken
by the site’s management team and agreed
the site needed a closer focus and review of
the change in shift pattern to ensure it
was providing the outputs expected.
The visit to the Mesan operation in Silivri
in Turkey provided Ralf Wunderlich with an
opportunity to understand the scale of our
operations and technical knowledge with
regards to manufacturing access hardware.
Additionally, a satellite office had been
established in Istanbul that is focused on
technical and digital expertise. Ralf found
the sites to be well run with high levels of
engagement. The visit to manufacturing
sites provided Ralf and the Board with
useful insights and background for ongoing
discussions around the Company’s access
hardware strategy and the synergies that
exist between the site in Turkey, and the
Hengzhu acquisition made in China in 2021,
which also produces access hardware.
91
ESSENTRA PLC ANNUAL REPORT 2023 DIVISION OF RESPONSIBILITIES
DIRECTORS’
REPORT
The Board considers that, for the
year ended 31 December 2023,
each of the Non-Executive
Directors were independent
Division of
responsibilities
The roles of the Chair and the Chief Executive are separate and
clearly defined so as to ensure a clear separation of responsibilities
which are set out in writing and agreed by the Board.
The Board believes that any shareholdings
of the Chair and Non-Executive Directors
serve to align their interests with those of
shareholders. The Board considers that
the Non-Executive Directors provide an
independent view in Board discussions
and in the development of the Company’s
strategy. Non-Executive Directors ensure a
sound basis is in place that supports good
corporate governance for the Company,
challenging management’s performance
and, in conjunction with the Executive
Directors, ensuring that financial controls
and systems of risk management are
maintained as appropriate to the needs
of the businesses within Essentra.
The Chair leads the Board and ensures
its effectiveness. The Chief Executive is
responsible for the executive management
and performance of Essentra’s operations.
The Board considers that, for the year
ended 31 December 2023, each of the
Non-Executive Directors were independent.
In making this assessment of independence,
the Board considers that the Chair and
Non-Executive Directors are independent
of management, and free from business
and other relationships which could interfere
with the exercise of independent judgement
now and in the future. However, the Board
also recognises that the Chair has been in
his role since 2015 and whilst independent
upon appointment, the length of his tenure
potentially creates an imbalance to his
independence, but it should be noted that
the Board announced last year that the
Chair was due to complete his final term
during 2024, and this remains the case.
The Board also note that despite
the Chair’s length of service, there has
never been any cause to question his
independence from management.
92
ESSENTRA PLC ANNUAL REPORT 2023 DIVISION OF RESPONSIBILITIES CONTINUED
As Senior Independent
Director, Mary Reilly, is
available to shareholders
to discuss and develop an
understanding of their issues
and any concerns which
cannot be resolved by
discussions with the Chair,
Chief Executive or CFO
93
The Senior Independent Director (“SID”)
can be contacted via the Company
Secretary and through the Company’s
registered office. During the year, this role
was held by Mary Reilly, as SID, Mary is
available to shareholders to discuss and
develop an understanding of their issues
and any concerns which cannot be resolved
by discussions with the Chair, the Chief
Executive or CFO, or where such contact
is inappropriate.
External commitments
The Board is fully aware of current external
commitments for all of the Non-Executive
Directors and is satisfied these do not
distract from the time commitment required
by Essentra. Non-Executive Directors are also
required to discuss any additional external
appointments with the Chair prior to their
acceptance. In addition, the time
commitments of the Chair are the subject
of review by the SID, in conjunction with the
other Non-Executive Directors. The Conflicts
of Interest register is reviewed at each Board
meeting. All of the Board have attended all
Board and committee meetings this year
and with their commitment to their roles
clear, the Board is content that the Non-
Executive Directors devote sufficient time to
the business of Essentra. Executive Directors
may accept outside appointments, provided
that such appointments do not in any way
prejudice the ability to perform their duties
on behalf of Essentra.
The Chief Executive, Scott Fawcett does not
hold any Non-Executive positions. The CFO is
a director of a residential property company
for a property he owns. The letters of
appointment for Non-Executive Directors
are available for review at the Company’s
registered office and prior to the AGM.
DIRECTORS’
REPORT
Directors’ elections
The Company’s Articles of Association
require that all new Directors seek election
to the Board at the AGM following their
appointment and there are no other rules
specified around director re-elections. In
compliance with the 2018 Code, all eligible
Directors will put themselves forward for
re-election on an annual basis. The Board,
including the Chair, is satisfied that each
of the Directors being put forward for
re-election continues to be independent
and effective and that their ongoing
commitment to the role is undiminished.
All Directors will stand for re-election at the
Annual General Meeting. The Notice of
Annual General Meeting includes more
detailed information on the background
and experience of all Directors and sets out
the reasons and rationale that the Board
support their election or re-election.
The conduct of Board matters
During the year, there were eight scheduled
Board meetings. In addition to these scheduled
formal meetings, the Board met on a further
five occasions, with sub-committee meetings
held to receive updates and agree final
approvals for key decisions as the Board
considered appropriate.
Informal discussions are also held between
the Chair and the Non-Executive Directors
on a regular basis and additionally prior
to or after each scheduled Board meeting.
Frequent contact is also maintained by the
Board with the Chief Executive and with
members of the GEC and during the year
mentor style meetings between the GEC
and the Board were initiated. The SID has
also held meetings with Non-Executive
Directors without the Chair present.
ESSENTRA PLC ANNUAL REPORT 2023 DIVISION OF RESPONSIBILITIES CONTINUED
The Board is of the view that
it has a highly competent Chair
who, together with each of the
other Non-Executive Directors,
has considerable experience
at a senior level
94
The Board is supported in its role by Board
committees and whilst they are a valuable
part of the Company’s corporate governance
structure, the Board, as a whole, maintains
oversight of important matters and, after
each committee meeting, the chairs of the
committees report on the matters which
have been reviewed. In particular, the Board
looks to the Audit and Risk Committee to
undertake the majority of the work involved
in monitoring and seeking assurance as to
compliance with the internal controls and
risk management practices. Other specific
responsibilities are delegated to the
Remuneration, Nomination and ESG
Committees. The Board believes that it,
and its Committees, have the appropriate
composition to discharge their respective
duties effectively with the appropriate level
of challenge and independence, and that
the members of the Board in conjunction
with the GEC and other senior leaders in
the business, are well equipped to drive and
deliver, the Company’s strategic objectives.
The Board is of the view that it has a highly
competent Chair who, together with each
of the other Non-Executive Directors, has
considerable international experience at a
senior level in the management of activities
broadly similar to those carried out by
Essentra and the material issues likely
to arise for the Company.
Operational matters and the responsibility
for the day-to-day management of the
business is delegated to the Chief Executive,
supported by members of senior executive
management as appropriate, within
delegated authority limits and supported
by a Schedule of Authority that ensures a
strong control culture is in place.
The GEC is the executive committee and
they meet on a weekly basis for a shorter
catch-up style meeting, which is supported
by a longer monthly meeting, which is
usually held in person. Full details of the
membership of the GEC can be found on
pages 74 and 75.
The GEC has adopted a governance
framework whereby agendas are set
according to the corporate strategy and risk
management framework so that all relevant
matters are addressed. Papers are circulated
in advance of the meetings to ensure papers
can support good decision making and
therefore include a broad range of views, are
validated and provide sufficient information
for the GEC or Board to make decisions.
Board papers
During 2022, some Board papers were
submitted to the Board at short notice,
reflecting the pace at which the strategic
reviews were developing. During 2023, the
Board requested that papers be provided
with more reading time, and the Chief
Executive and Company Secretary
implemented a stricter approach to paper
drafting and circulation as a result. This
remains an area in progress and the
Company Secretary has put in place
methods to support papers being drafted
on time. The GEC also participated in a
refresher session with Board Intelligence
in January 2024, to further support the
provision of high-quality papers.
Applying Essentra’s corporate
responsibility principles
The Chief Operating Officer is responsible
for oversight of the operation of policies
on health and safety and sustainability; the
Company Secretary is responsible for policies
on Ethics,and during 2023, responsibility for
compliance related policies transferred from
the Head of Risk to the Company Secretary.
Further details can be found in the ESG
report on page 21.
DIRECTORS’
REPORT
Diversity
The Board, GEC and senior management are
committed to ensuring ethnic and gender
balance across the business to reflect the
communities in which we operate and
consider it as critical to the business’s
success. Furthermore, the Board also
reported on gender during 2023 in
compliance with the Companies Act
and the 2018 Code.
In terms of Board diversity as at
31 December 2023, and to meet the
FCA Policy Statement PS22/3 April 2022,
the Board report that:
• 38% of the Board were women
• the Senior Independent Director was
a woman
• the Board membership consisted of
two individuals from a non-white ethnic
minority background.
As the Board have not recruited since the
end of 2022, the gender balance of the
Board remains at the same level, however,
the Board intend to take opportunities as
presented when current Non-Executive
Directors retire, to recruit a more gender
balanced Board.
The Board maintain, that the appointment
of a woman Company Secretary, who
actively inputs into discussions and makes
a significant contribution strengthens the
gender balance on the Board. If this
appointment were to be counted, the
gender balance would be 44% women.
ESSENTRA PLC ANNUAL REPORT 2023 The Board continues
to confirm a strong
commitment to diversity
including, but not limited
to, gender and ethnicity
diversity at all levels
of the Company.”
In addition to Board and GEC level
diversity, through the adoption of an
Equal Opportunities Policy, the Company’s
approach to recruitment throughout the
organisation gives full and fair consideration
to applications for employment made by
disabled persons, having regard to their
particular aptitudes and abilities. When in
employment with Essentra, as is the case for
all employees. ongoing appropriate training
is provided to support individuals in both
delivering their roles and to further develop
their roles.
DIRECTORS’
REPORT
Conflicts of interest
Directors have a statutory duty to avoid
actual or potential conflicts of interest. The
Company’s Articles of Association permit
the Board to consider and, if it sees fit, to
authorise situations where a Director has
an interest that conflicts, or may possibly
conflict, with the interests of the Company.
The decision to authorise a conflict of
interest can only be made by non-conflicted
Directors. A register of Directors’ Interests is
maintained so that any potential concerns
are addressed before any material issues
may arise. The Conflicts of Interest register
and the schedule of Directors’ Interests
is reviewed at each Board meeting. There
were no conflicts declared during the year.
Information and professional
development
The Chair, supported by the Company
Secretary, takes responsibility for ensuring
that the Directors receive accurate, timely
and clear information. On appointment,
an induction programme tailored to
their individual needs is available to
Directors, and is designed to assist them
in their understanding of Essentra and
its operations.
Throughout a Director’s tenure, they are
encouraged to develop their knowledge of
the Company through meetings with senior
management and site visits.
DIVISION OF RESPONSIBILITIES CONTINUED
The Board continues to confirm a strong
commitment to diversity including, but
not limited to, gender and ethnicity diversity
at all levels of the Company, and considers
its own composition provides a reasonable
indication of its approach to this
commitment. The Board Diversity Policy
continues to serve to ensure that all
candidates for Board appointments are
considered in accordance with the Policy
during the nomination process.
In continued support of increasing diversity
for all UK listed companies, the Board
commenced a search for its next Board
trainee and looks forward to making an
announcement once the trainee has been
appointed. Further information on diversity
within the GEC and below the GEC, can be
found on pages 55 and 105, whilst more
information on ESG can be found on pages
21 to 39.
The Board has set a target, as per the Parker
Review, to increase ethnicity representation
across the senior leadership of the Company
to 20% by 2027, and to 25% by 2030. The
Board considered the current baseline of
the organisation and benchmarks for an
organisation similar to Essentra, to establish
what a useful and meaningful target would
be the organisation.
Whilst supportive of the Parker Review
target, the Board considers that the Parker
Review target takes a UK centric approach.
The ethnicity categories are defined from
a UK viewpoint and very narrow and they
do reflect how ethnicity is viewed in other
countries, such as the Americas. In addition,
in some countries that Essentra operates,
including France, it is not possible
to ask for ethnicity or diversity data and
therefore targets and data disclosed
provides an imperfect picture of the
progress being made.
95
ESSENTRA PLC ANNUAL REPORT 2023 DIVISION OF RESPONSIBILITIES CONTINUED
The Directors are also provided with updates,
as appropriate, on matters such as fiduciary
duties, Companies Act requirements, share
dealing restrictions and corporate governance
matters. All Directors have access to the
advice and services of the Company
Secretary. In the furtherance of their
duties, there are agreed procedures
for the Directors to take independent
professional advice, if necessary, at the
Company’s expense. No Director took
independent professional advice during
the year in respect of Board matters.
Shareholder communications
The Board recognises the importance
of effective communication, and seeks to
maintain open and transparent relationships
with its shareholders and other stakeholders,
including providers of finance, customers
and suppliers. This is achieved by regular
updates through public announcements, the
corporate website, other published material,
meeting shareholders in person at the
Annual General Meeting, and meetings with
shareholders that are scheduled throughout
the year as may be requested.
All shareholders can meet any of the
Directors of the Company should they so
wish. In particular, the SID is available to
shareholders should they have concerns or
wish to share their views. Feedback from
meetings with shareholders is provided
regularly to the Board so they are aware
of any issues or concerns, and ensures
that the Board has a balanced view
from major investors.
Since 2020, the Board have held General
Meetings both as hybrid, in person only
and online only. As the Board are keen to
encourage shareholders to participate in the
General Meeting, it is the intention to hold a
hybrid style meeting so that shareholders
can join virtually for the AGM in May 2024.
96
This is balanced against the prior experience
that whilst offering this, there may be
few shareholders who take up this option,
and as a result the Board have selected
a cost effective method that will allow
shareholders to join and ask questions,
but not vote at meetings.
Shareholders should refer to the AGM
Notice for details of how to join the
meeting whether in person or virtually.
At the AGM, the level of proxy votes lodged
on each resolution is made available, both
at the meeting and subsequently on the
Company’s website. Each substantially
separate issue is presented as a separate
resolution, and the Chairs of the Audit and
Risk, Nomination, Remuneration and ESG
Committees are available to answer
questions from shareholders.
The Company communicates and engages
regularly with its major institutional
shareholders and ensures that all the
Directors, including the Non-Executive
Directors, understand the views and
concerns of major shareholders in relation
specifically to their views on governance
and performance of the Company against
strategy. The Chief Executive, CFO and
Investor Relations Manager have primary
responsibility for investor relations. Hybrid
presentations for analysts and shareholders
were held during the year, and both virtual
and in-person meetings were also undertaken
with key institutional investors to discuss
strategy, financial performance and
investment activities. Presentations are
made immediately available after the
Full and Half Year results, and are also
available on the Company’s website to
view and download.
DIRECTORS’
REPORT
The Company ensures that any price-sensitive
information is released to all shareholders
at the same time, in accordance with
regulatory requirements.
At each Board meeting, reports are
presented detailing the engagements with
shareholders to ensure that the Board as
a whole has a clear understanding of the
views of shareholders.
Directors understand
the views and concerns
of major shareholders in
relation specifically to their
views on environmental,
social and governance
issues and the way in
which they are embedded
in strategy and measured
in the performance of the
Company against strategy.”
ESSENTRA PLC ANNUAL REPORT 2023 DIVISION OF RESPONSIBILITIES CONTINUED
DIRECTORS’
REPORT
Non-Executive Directors
• Provides constructive and
independent challenge to
executive management
• Brings experience
and objectivity to the
Board’s discussions and
decision-making
• Monitors the delivery of the
Company’s strategy against
the governance, risk and
control framework established
by the Board
• Responsible for evaluating the
performance of the Chair, led
by the SID
Senior Independent
Director (“SID”)
• Provides a “sounding board”
for the Chair
• Serves as an intermediary
for the other Directors
when necessary
• Acts as an alternative point
of contact for shareholders
where contact through the
normal channels of Chair, or
other Executive Directors, has
failed to resolve any concerns,
or for which such contact
is inappropriate
• Leads the annual assessment
of the effectiveness of
the Chair
• Leads the search and
appointment process and
makes the recommendation
to the Board for a new Chair
Chief Executive
• Proposes the strategy to the
Board and implements the
strategy which has been
approved by the Board
• Communicates to the
workforce the expectations
in respect of the Company’s
culture and ensures
that operational policies
and practices drive
appropriate behaviour
• Develops manageable goals
and priorities for the GEC
• Leads and motivates senior
management
• Ensures that the Board is
aware of the views of the
senior management team
on business issues
• Develops proposals to present
to the Board on all areas
reserved for its judgement
Chief Financial Officer
• Leads, directs and oversees
all aspects of the finance
and accounting functions
of the Company
• Contributes to the
development of strategy
and management of the
Company’s business
• Manages relationships
with the external auditor
and key financial institutions
and advisers
• Ensures effective internal
controls are in place and
compliance with appropriate
accounting regulations for
financial, regulatory and
tax reporting
Company Secretary
• Maintains a record
of attendance at
Board meetings and
committee meetings
• Responsible for ensuring
good information flows
to the Board and its
committees, and between
the GEC and the Non-
Executive Directors
• Advises the Board on all
regulatory and corporate
governance matters
• Assists the Chair in ensuring
that the Directors have
suitably tailored and detailed
induction and ongoing
training and professional
development programmes
Roles and responsibilities
Chair
• Sets the Board agenda
primarily focused on
strategy, performance,
value creation, culture,
stakeholders and
accountability, and
ensuring that issues relevant
to these areas are reserved
for Board decision
• Shapes the culture in
the Boardroom
• Encourages Board members
to engage in Board and
committee meetings and
ensures sufficient time
is allocated to promote
effective debate to support
sound decision making
• Fosters relationships based
on trust, mutual respect
and open communication
between Non-Executive
Directors and the Group
Executive Committee
• Develops a working
relationship with the
Chief Executive
• Provides guidance
and mentoring to new
Directors as appropriate
• Maintains a dialogue
with shareholders on the
governance of the Company
97
ESSENTRA PLC ANNUAL REPORT 2023 An established internal
control system is essential
for reliable financial
reporting and also for the
effective management
of the Company.”
DIRECTORS’
REPORT
A Delegation of Authority is in place,
that is also reviewed and updated on a
regular basis, that identifies approval
processes for different matters. The Manual
is applied across the entire Company and
supported by twice-yearly confirmations
from management in relation to adherence
to the Company’s accounting policies and
internal controls.
The Board have considered the publication
of the updated UK Corporate Governance
Code 2024 (“2024 Code”). With
management’s support, it is the Board’s
intention to ensure the 2024 Code is
implemented appropriately for the Company
that will extend its responsibility for
establishing and maintaining internal
controls, reviewing the effectiveness of the
risk management and the internal control
framework. The ARC have initiated a
programme of work during 2024 that will
strengthen and embed existing processes
towards supporting the ARC, and the
Board’s responsibility for reviewing the
effectiveness of risk management and
the internal control framework. More
information on this has been included in
the ARC report on page 111, whilst further
details on the Company’s risk management
system can be found on page 65.
Internal controls
In accordance with the 2018 Code, the
Board acknowledges its overall responsibility
to shareholders to ensure that an adequate
system of risk management and internal
control is in place 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. An established internal control system is
essential for reliable financial reporting and
also for the effective management of the
Company. The internal control and risk
management process for financial reporting
processes is documented within the Essentra
Accounting Manual (the “Manual”) that is
updated as required. The Manual sets out
the procedures and processes established for
internal and external financial reporting and
incorporates accounting policies that are
adopted by the Company, as well as
processes and controls relating to tax
and treasury matters.
The Manual sets out clear processes that
cover, amongst other matters, segregation
of duties, reporting responsibilities and
review and approval requirements. The
Manual prohibits management overrides
and the processes set out within the Manual
are also reflected within financial reporting
systems and the framework for financial
controls within the Company.
DIVISION OF RESPONSIBILITIES CONTINUED
Financial reporting
The Directors have acknowledged, in the
Statement of Directors’ Responsibilities
set out on page 147, their responsibility for
preparing the Financial Statements of the
Company. The Directors are responsible for
preparing the Annual Report and Accounts,
and they consider that the Annual Report
and Accounts taken as a whole are fair,
balanced and understandable. The External
Auditor has included a statement about
their reporting responsibilities in the
Independent Auditors‘ Report, set out
on pages 216 to 223.
The Directors understand the views and
concerns of major shareholders in relation
to the Company’s strategy as well as their
views on environmental, social and
governance (“ESG”) issues. The Company
has embedded its strategy in relation to ESG
within the wider strategy and performance
of the Company against strategy is regularly
assessed by the Board. The Directors are
also responsible for the publication of Half
Year and Full Year results, as required by the
Disclosure and Transparency Rules of the
Financial Conduct Authority. This provides a
general description of the financial position
and performance of the Company during
the relevant period. In accordance with the
2018 Code, the Board acknowledges its
overall responsibility to shareholders to
ensure that an adequate system of risk
management and internal control is in place.
The Risk Assurance team who manage the
risk management process and carry out
audits of internal controls, continue to
provide assurance around the risk process
and the Board are satisfied that the depth
of knowledge held by the Risk Assurance
team also supports this process.
98
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
Directors’ and Officers’ insurance
In accordance with the Company’s Articles
of Association, and to the extent permitted
by the laws of England and Wales, the
Directors are granted an indemnity from
the Company in respect of those liabilities
incurred as a result of their office. In respect
of those matters for which the Directors
may not be indemnified, the Company
maintained a Directors’ and Officers’
Liability Insurance Policy throughout the
year and this was in place at the time of
the signing of financial statements. It is
anticipated this policy will be renewed.
Neither the Company’s indemnity, nor the
insurance policy provide cover, to the extent
that a Director is proven to have acted
dishonestly or fraudulently.
The following currently enables the Board
to review the effectiveness of the system
of internal control and the financial
reporting processes:
• the ARC meets regularly and receives
reports from the Risk Assurance team
on the effectiveness of internal controls
and then reports to the Board, no less
frequently than at every Board meeting
following an ARC meeting
• the terms of reference provide a
framework for the ARC to review
and oversee the quality, integrity,
appropriateness and effectiveness of the
Company’s internal control framework
• the Board received updates from the CEO
with additional reporting provided from
GEC members, with regular updates on
Compliance from the Global Compliance
and Controls Officer
• during the period, certificates were
required from each region to confirm
compliance with the Company’s policies
(including financial) and procedures at
both the Half Year and Full Year.
DIVISION OF RESPONSIBILITIES CONTINUED
99
ESSENTRA PLC ANNUAL REPORT 2023 ESG COMMITTEE REPORT
ESG Committee report
Our overall approach to ESG stems from our ambition to make
real change. The Company believes that a strategic focus on
environmental and social sustainability provides opportunities
to demonstrate our competitive advantage to our suppliers,
customers, employees and investors by reducing our impacts
on nature and climate, whilst ensuring our people are valued
and the communities we work within benefit from our presence.
DIRECTORS’
REPORT
RALF K. WUNDERLICH
Non-Executive Director
Roles and responsibilities
Membership and attendance
The ESG Committee was formed in 2020
with an initial remit of environmental
sustainability. This was expanded to
incorporate social and governance
activities, in 2022. Consequently, the roles
and responsibilities have developed to
reflect this increased oversight.
Ralf K. Wunderlich
Chair
Dupsy Abiola
Kath Durrant
Scott Fawcett
Adrian Peace
Mary Reilly
Meetings during the year
4 (4)
4 (4)
4 (4)
4 (4)
4 (4)
4 (4)
Figures in brackets denote the maximum number of
meetings that could have been attended.
Other attendees
During 2023, Paul Lester, Chair of the Board,
attended every meeting. Other regular attendees
included Jennifer Spence, ESG Director, Emma Reid,
Company Secretary, Jack Clarke, CFO and the Chief
People Officer.
• Overseeing the Company’s approach to
its ESG and ensuring it aligns with the
Company’s overall strategic plan to
promote the Company’s long-term
sustainable success
• Providing advice and assurance to the
Group Executive Committee and other
Board Committees on developing ESG
targets, and monitoring the Company’s
progress towards the achievement of
these targets
• Reviewing and advising on the
recommendations of the Task Force on
Climate-related Financial Disclosures
(“TCFD”) and the Taskforce on Nature-
related Financial Disclosures (“TNFD”)
• Ensuring policies relating to ESG
matters are in place with onward
recommendation to other Board
committees as necessary
• Working with other Board committees
to ensure information is passed between
each committee, and up to the Board to
support the Board’s responsibility for ESG
100
ESSENTRA PLC ANNUAL REPORT 2023 ESG COMMITTEE REPORT CONTINUED
Key activities 2023
2023 was the first year of the ESG
Committee operating with its expanded
remit of environmental, social and
governance oversight, and the following
activities demonstrate the breadth of
this expansion:
• reviewed the inaugural climate
transition plan
• approved Essentra’s commitment
and submission to the Science Based
Target initiative (“SBTi”), committing to
near-term and net-zero targets for our
scope one, two and three emissions
• monitored reporting and progress
across all of our ESG targets, including
environmental targets on waste,
materials and emissions; social targets,
including safety and wellbeing, diversity,
equality and inclusion, our supply chain
and customers; and governance targets
on ethics training and compliance
• where targets have been met, endorsed
new targets to 2030 for:
i) total waste production
ii) the percentage of packaging and
materials from sustainable sources and
iii) scope one, two and three greenhouse
gas (“GHG”) emissions
• led deep dives into a selection of our
ESG targets via a defined rotation of
topics throughout the year across our
environment, social and governance
targets, to ensure that each remains
on track and relevant to the Company,
and to understand the longer term
trajectories required to meet our goals
• provided oversight to the ongoing
development of our scope three
emissions inventory
101
• reviewed engagement with the value
chain to foster information sharing from
suppliers on product level emissions and
to customers by providing product
lifecycle assessments
• reviewed ESG reporting for the
2022 Annual Report, and agreed the
reporting approach for the 2023 Annual
Report, reflecting the aim to embed
ESG matters across the business
• reviewed the regulatory disclosures on
TCFD and assessed ways in which they
can be integrated into the business to
bring about greater impact
• considered the Company’s approach
to external benchmarking and ratings
agencies, including submissions and the
outcomes for CDP, EcoVadis, SBTi and
UN Global Compact
• reviewed the ESG criteria used when
considering potential acquisitions both
during the due diligence phase and the
acquisition phase, and reviewed the
effectiveness of the criteria developed
in the recent acquisition of BMP TAPPI,
providing greater clarity on the current
ESG performance of the acquisition
• collaboration with the Nomination
Committee to recommend they
approve the current Diversity,
Equality and Inclusion policy
• reviewed all proposed short-
and long-term ESG-related
remuneration targets.
Our progress
The overall approach to ESG adopted
across the business arises out of our
ambition to make real change. The
Company believes that a strategic focus
on environmental and social sustainability
provides opportunity to our Non-Executive
Directors to provide competitive advantage,
gained by reducing our impacts on nature
and climate, whilst ensuring our people
are valued and the communities we work
within benefit from our presence. This in
turn enables management to channel
its resources to identify and implement
essential changes effectively and
efficiently. The targets selected are
chosen because they provide a positive
and measurable impact on our
environmental, social and governance
goals, selected through a materiality
matrix, and at the same time, they are
also the right thing to do for a broad
range of stakeholders including regulatory
bodies. This approach is enabling us to
run a better business for the benefit of
all stakeholders.
In 2023, the business developed its
first climate transition plan, which can
be viewed on pages 40 to 53. This plan
has been developed by management
with particular attention paid to the
recommendations of the transition
plan taskforce, and provides the ESG
Committee with an overview of the
key set of strategic actions the business
will undertake in its journey to net-
zero, alongside providing credibility to
investors on the businesses commitment
to decarbonisation.
During the year, the ESG Committee
continued to review the progress made
towards meeting our ESG targets, and
considered and endorsed, if appropriate,
any new targets set in the year. To ensure
robust plans were in place to meet targets,
DIRECTORS’
REPORT
the ESG Committee worked with
management to ensure actions were
in place to form a bridge from actual
achievement, to mid- and long-term targets,
and the ESG Committee carefully assessed
the robustness of these bridges. An overview
of our ESG progress can be found on page 24.
The ESG Committee was pleased to continue
its practice of inviting guest speakers to
join meetings and recognising that ESG
requirements are constantly evolving, and
collaboration is key to making progress on
our own journey, extended invites to two
guest speakers in 2023. The first, a large UK
based bank, provided an overview of their
own ESG journey and a broader look at how
externalities are influencing the ESG agenda
in the financial sector. The ESG Committee
was particularly interested to learn more
about how a bank views the effectiveness
of ESG activities in providing a sustainable
business model, and how those activities can
provide preferential financing. In addition,
and aligned to the ESG Committee’s recent
expansion to incorporate social strategy into
its remit, the ESG Committee invited a senior
executive from a large pharmaceutical
company to provide insights into leading
an effective social strategy. Given the
Company’s increasing focus on diversity,
equality and inclusion (“DE&I”), the wisdom
shared on this topic proved to be timely.
The ESG Committee also reviewed the
effectiveness of the recently refined
ESG criteria for acquisitions, which was
used during the recent acquisition of BMP
TAPPI. The use of the criteria is pivotal for
supporting the business in its inorganic
growth strategy and therefore the criteria
covers the diligence phase, and post-
acquisition integration to best assess how,
and if, an acquisition can be integrated
into the existing business as effectively
as possible.
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
At the AGM in 2024, the ESG Committee,
with the Board’s support, will seek
shareholder support for the Company’s
climate transition plan. This non-binding
advisory vote will provide investors an
opportunity to assess the business climate
transition plan, and provide feedback.
Alongside our continued focus on climate,
we have planned an increased focus on
our nature related impacts, recognising
the interdependencies between our
impacts on nature, our scope three
emissions, and our ability to mitigate
the impacts of climate change.
Ralf K. Wunderlich
Non-Executive Director
ESG Committee Chair
18 March 2024
To learn more about our full ESG
strategy, our goals and progress,
refer to pages 21 to 39.
With the upcoming TNFD disclosure
requirements, the ESG Committee has
considered the recommendations published
in late 2023, and the business plans to adopt
the measures in 2024 onwards.
Membership
The ESG Committee continues to be chaired
by Ralf K. Wunderlich with the support of the
following colleagues:
• Kath Durrant
• Dupsy Abiola
• Adrian Peace
• Mary Reilly
• Scott Fawcett
Jennifer Spence, ESG Director, and Emma
Reid, Company Secretary, have a standing
invitation to attend every meeting, reflecting
their day-to-day responsibility for the overall
ESG strategy.
Jack Clarke, CFO, also attends every
meeting, reflecting the significance of
ESG to our overall strategy.
The ESG Committee extends an invite to all
members of the Board to all meetings, and
the GEC are invited to join meetings when
guest speakers are present or when specific
topics are discussed of relevance. The ESG
Committee also invites subject experts from
across the business to present on their
individual specialisms.
The Terms of Reference, which
are reviewed annually for the ESG
Committee, are available on our
website www.essentraplc.com
Outlook to 2024
Each year, on an ongoing basis and
formally towards the end of the year, the
ESG Committee evaluates its performance
and whether its Terms of Reference remain
relevant and fit for purpose. In 2023, the ESG
Committee contributed to the review of a
new model set of terms of reference that
the Chartered Governance Institute UK &
Ireland were developing for Board level ESG
Committees. The ESG Committee was pleased
to note our Terms of Reference are very closely
aligned to the model in development.
During 2024, the ESG Committee will
continue to champion and to provide the
business with the momentum required to
ensure that ESG related opportunities drive
the business forward towards long-term
sustainable success. The business, and the
ESG Committee, recognise that there are
interdependencies between each of the
environmental, social and governance
related topics, such as the impact of
end-to-end supply chain governance
on our scope three emissions, or how
employee engagement impacts our ability
to implement effective energy and waste
reduction projects. Therefore, full oversight
and governance of this area is critical for
the Board, and to ensure this is carefully
monitored and challenged, the Board has
delegated this work to the ESG Committee.
Through the ESG Committee, the Board is
able to ensure that more time is given to
each of these areas, and that they are
monitored closely to ensure they support
the long-term strategic objectives.
ESG COMMITTEE REPORT CONTINUED
TCFD and TNFD
During the year, the ESG Committee
considered its approach to TCFD and
the upcoming TNFD. For TCFD, a multi-
disciplinary approach was used to review
the risks and opportunities most material
to the Company in relation to climate
change. Colleagues from Sustainability,
Risk Assurance, Finance, Operations and
Governance teams reviewed the building
blocks for assessing disclosures on
governance, strategy, risk management
and metrics and targets for 2023. The ESG
Committee concluded that the scenarios
and consequent updates remain relevant,
and it would support the business as the
output from the TCFD report was
integrated into the business plan for the
coming year. The ESG Committee, and
management, also considered the range
of risks identified within the TCFD report
and agreed that some risks were no
longer relevant and were therefore
removed. The ESG Committee reviewed
all TCFD disclosures in detail, including
the progress made on quantifying risk and
how this impacted the Long-Term Viability
Statement, with reporting on this shared
with the Audit and Risk Committee.
The full report on TCFD
is available on pages 58 to 64.
102
ESSENTRA PLC ANNUAL REPORT 2023 NOMINATION COMMITTEE REPORT
Nomination Committee report
The Nomination Committee has maintained its focus on ensuring the
Board’s composition is strong and diverse, providing support and advice
to enable management to steer the Company forward as a pure-play
components business.
DIRECTORS’
REPORT
PAUL LESTER, CBE
Board Chair
Roles and responsibilities
Membership and attendance
• Leading the process for appointments
to the Board and senior management
roles, using a established, rigorous and
transparent procedure that meets the
Board Diversity Policy
• Reviewing the skills of the Board to
ensure their combined skills meet the
needs and support the long-term
strategic objectives of the business
• Reviewing the independence and time
commitment made by the Non-Executive
Directors to discharging their duties
• Reviewing and making recommendations
on the composition of the Board
• Overseeing a diverse succession pipeline for
Board and other senior management roles
• Arranging the external evaluation of the
Board’s effectiveness
• Evaluating the effectiveness of the
Company’s policy on diversity, equality
and inclusion
• Reviewing the Company’s approach
to gender and ethnicity diversity of
the Board and senior management
• Reviewing and agreeing the induction
for new Non-Executive Directors and
the training needs for each Director
and the Board as a whole
Paul Lester
Chair
Dupsy Abiola
Non-Executive Director
Kath Durrant
Non-Executive Director
Adrian Peace
Non-Executive Director
Mary Reilly
Senior Independent Director
Ralf K. Wunderlich
Non-Executive Director
Meetings during the year
3 (3)
3 (3)
3 (3)
3 (3)
3 (3)
3 (3)
Figures in brackets denote the total number of
meetings a Director could attend.
Other attendees
During the year, as deemed appropriate, Chief
Executive, Scott Fawcett, attended the meetings, as
did the Chief People Officer. The Company Secretary
attended all meetings.
103
ESSENTRA PLC ANNUAL REPORT 2023 NOMINATION COMMITTEE REPORT CONTINUED
Key activities 2023
Key activities for 2024
• Overseeing the appointment process
and induction programme of the
incoming Chair of the Board
• Overseeing the appointment process
and induction programme for an
incoming Board Trainee
• Overseeing ongoing training for all
Board members to ensure they receive
relevant training in line with their skills
and experience
• Providing guidance on the ongoing
development of plans to support the
DE&I strategy
• Overseeing the succession plan that
supports a diverse pipeline of talent for
Board and senior management roles
• Agreed the approach for the recruitment
of the Chair of the Board, including
agreement of the job specification, time
commitment required, appointment of
the head hunter and selection process
to be used
• Reviewed and recommended the
appointment of Kath Durrrant as chair
of the Remuneration Committee, to
take effect from the close of the AGM
in 2024
• Kept under review the size and
composition of the Group Executive
Committee and other key senior
leadership roles to ensure the business
was appropriately supported
• Oversaw the external board
evaluation process
• Reviewed the gender and ethnicity
targets and gender and ethnicity
reporting as part of the Nomination
Committee’s responsibility for the DE&I
strategy and for the voluntary target
setting under the Parker Review
• Reviewed and approved an updated
Diversity, Equality and Inclusion Policy
for the Company
• Reviewed and approved an updated
Board Diversity Policy
• Reviewed and approved the
Nomination Committee Report for
inclusion in the 2022 Annual Report
• Reviewed and agreed the
revised Terms of Reference for
the Nomination Committee
104
Chair of the Board Recruitment
Paul Lester was appointed to the Board in
December 2015, initially as a Non-Executive
Director, and became Chair in May 2016.
By December 2024, Paul will have served
nine years as a Non-Executive Director
and eight years as Chair of the Board.
In line with the guidance provide by the
2018 Code, the Nomination Committee
and Paul, acknowledged that this would
be his last year as Chair. Accordingly, a
recruitment process is required to identify
a new Chair.
Mary Reilly, as Senior Independent
Director, is leading the process. A proposal
was put to the Nomination Committee,
aligned to the existing Non-Executive
Director recruitment process, that would
ensure a robust, transparent and staged
recruitment process will take place. The
Nomination Committee agreed with the
approach, and the initial phase, which
involved a tender process for the selection
of a head hunter, resulted in the Inzito
Partnership being successfully appointed.
It was noted that the Company had
worked with the Inzito Partnership
previously to place other key senior
leaders and they had a good
understanding of the business and its
requirements in order to successfully
place a candidate, but otherwise has no
other connection with the Company or
individual Directors. The Inzito Partnership
are committed to providing a diverse
range of candidates in line with our
Board Diversity Policy.
As the recruitment process remains
ongoing. The Company expects to
provide an update on recruitment
at a future date.
DIRECTORS’
REPORT
Board Trainee Recruitment
As part of the recruitment process for the
Chair, the Inzito Partnership were asked to
also oversee the recruitment of the second
Board Trainee. The same approach to
identifying a Board Trainee has been
adopted as is used for Non-Executive
Directors, and a three-stage process will
be used. As the process is ongoing, the
Company will provide an update on this
at a future date.
Senior Leadership Team
Within the Group Executive Committee
(“GEC”) and wider Senior Leadership
Team, during the first year as a pure-play
components business, the GEC agreed
to re-structure the business by region
and accordingly the GEC composition
was amended to reflect this. Three regional
leaders lead EMEA, APAC and the Americas.
Their appointments were reported to
the Nomination Committee for approval
who were pleased to be able to support
those appointments.
Succession Planning
For the Board, the GEC and senior
management, the Nomination Committee
has regard to the need to maintain a diverse
pipeline of talent. During the year, following
the transition of Essentra to being a pure-play
components business, succession planning
was re-visited as an ongoing mitigation of
the Principle Risk on Leadership Talent and
Capability. Developing the pipeline remains
an area of ongoing development into 2024
to ensure the pipeline is robust and diverse,
supported by a formally recorded process
with the existing skills matrix updated.
Key appointments take into account the
potential of the role to progress further,
and where gaps have been identified, the
approach to recruitment will consider the
growth potential of a candidate to ensure
that the business has the bench strength
ESSENTRA PLC ANNUAL REPORT 2023 The Nomination
Committee, and
the Board, continue
to believe and support
recruitment that creates
a diverse, inclusive and
equal workplace
NOMINATION COMMITTEE REPORT CONTINUED
required and expected for the Company’s
size and structure. Building the pipeline
below GEC will also form a key area of
focus during 2024.
Board Training
As reported within the Corporate
Governance Report on page 80, the
Nomination Committee ensured the Board
received appropriate training. A formal
training session on Directors’ Duties under
the Listing Rules and the Health and Safety
At Work Act was provided by Slaughter and
May during the year. The Board were also
provided with opportunities to gain further
insights into processes that supported their
decisions during the year, such as ensuring
the Board had a full understanding of the
steps required to complete the merger
reserve reduction, with opportunities
to speak to experts on this matter.
The Nomination Committee also noted
that the ESG Committee continued to
provide opportunities to gain new insights
with the inclusion of two guest speakers
at their meetings.
Diversity, Equality and Inclusion
During the year, the Nomination Committee
considered its role towards Diversity, Equality
and Inclusion. The Nomination Committee
and the Board continue to believe and
support recruitment that creates a diverse,
inclusive and equal workplace. This is further
championed by the CEO and the GEC, who
likewise, believe that the strongest and best
in class businesses are built on strong diverse
foundations and is reinstated through both
the Board Diversity Policy and the Company
wide Diversity Equality and Inclusion policy
which was refreshed in 2023 and will be
subject to a further review in 2024.
105
More information on the output of the
application of the Company wide policy can
be found in the ESG report on pages 21 to 39,
where there are further explanations about
the Company’s overall diversity.
As part of the Company’s transition to a
pure-play components business, a new ESG
strategy was launched, with five pillars, two
of which relate directly to DE&I – our Culture
and Our Communities. These two pillars are
underpinned by longer-term plans and
activity that places greater emphasis on
increasing DE&I within the business and
creating opportunities for communities,
including vendors, that are owned or
operated by minority groups, to receive
equal opportunities.
Board and GEC Diversity
The Board maintains a Board Diversity Policy
which it reviews at least annually and has
careful regard of when considering
DIRECTORS’
REPORT
succession planning for the Board, and in its
approach to recruitment for the Board. The
Board Diversity Policy’s objective is to ensure
the Board and its committees are diverse
and inclusive as they will operate at their
most effective when composition reflects
the workforce and the wider geography in
which Essentra operate. The Policy applies to
the Board and all its committees. The Board
Diversity Policy is available at
www.essentraplc.com.
The Board’s and GEC’s diversity is set out
below and the disclosures are intended to
meet FCA LR 9.8.6 R(9), FCA Policy
Statement PS 22/3 April 2022.
The Board remain committed to meeting
and exceeding the 40% target when actively
recruiting and note that the last two NED
appointments have both been women.
Gender
Men
Women
Other
Not specified
Ethnicity
Number
of Board
members
Percentage
of the
Board
members
Number
of senior
positions on
the Board
Number
in executive
management
Percentage
of executive
management
5
3
–
–
62%
38%
–
–
1
1
–
–
2
–
–
–
25%
–
–
–
White British or other White
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other Ethnic Group
Not specified
Number
of Board
members
Percentage
of the
Board
members
Number
of senior
positions on
the Board
Number
in executive
management
Percentage
of executive
management
6
1
–
1
–
–
75%
12.5%
–
12.5%
–
–
4
–
–
–
–
–
2
–
–
–
–
–
25%
–
–
–
–
–
ESSENTRA PLC ANNUAL REPORT 2023 NOMINATION COMMITTEE REPORT CONTINUED
Updates on the 2022 Board Evaluation
The internal Board Evaluation carried
out in 2022, identified five areas of focus
and agreed five subsequent actions
to be taken.
The Nomination Committee consider that satisfactory progress has been made on each
of the agreed actions, as outlined below.
DIRECTORS’
REPORT
Action 1
Mechanism
Progress made
Ensure sufficient time is provided by the Board
to pursue strategic discussions, including
considerations of the skills required within the
business to deliver the strategy
Action 2
Ensure a suite of KPIs were developed that
supported the Board and the business in
monitoring its progress
Action 3
Develop deeper relationships between the
Board and the new executive management
(the “GEC”) through a mentoring programme
between the Board and the GEC
Action 4
Oversee the ESG strategy and the resources
required to support its delivery, through
establishing the ESG Committee
Action 5
Assess and monitor current approaches
to stakeholder engagement, keeping this
under review both inside and outside of
Board meetings
Action 1
Strategic discussions
and skills alignment
• A strategy session held during the year provided a springboard
for more in depth discussions around the execution of strategy
which resulted in a regional focus and subsequent re-shape of
the organisation to align with this
• The subsequent need to ensure the GEC possessed the
appropriate skills to drive the business forward and changes to
the overall composition of the GEC resulted
Action 2 KPIs to be developed
and reviewed
• KPIs in place have been agreed by the Board, a large portion of
which are published in this Annual Report, with other internal
KPIs providing the Board with effective oversight
Action 3 Board and GEC to be
paired as mentors to
each other
• GEC and Board mentors met during the year and there was
significant value derived: the Board were able to discuss issues
in greater depth whilst the GEC have benefitted from exposure
to the Board. The mentor arrangement will continue with new
pairings in 2024
Action 4 ESG Committee
established
• ESG Committee is now established and meets quarterly. It has a
robust set of Terms of Reference, which are closely aligned to the
draft CGI model version. Its remit is clear and it has spent further
time focused on ways to lend its support to furthering the Social
aspects of the ESG strategy
Voice of the employee
Action 5 Refreshing the Voice of
the Employee initiative
Greater focus on
Investor Relations
reporting
• The Board agreed a structured approach that ensures fair
representation across all sites over the course of a year, with
accompanied visits by the Company Secretary to ensure that
feedback is collected and acted upon, both in line with the
business’s strategy and in line with the Companies’ values
Investor relations
• Greater focus has been placed on Investor Relations reporting
and in addition to raising the item on the Board agenda earlier in
the meeting, the Investor Relations Manager, Claire Goodman,
has been invited to attend Board meetings to present the item
and provide her own views of shareholder meetings
106
ESSENTRA PLC ANNUAL REPORT 2023 NOMINATION COMMITTEE REPORT CONTINUED
KPIs introduced at the
start of 2023 were relevant
and supported the Board in
monitoring the performance
of the business.”
DIRECTORS’
REPORT
2023 Board Evaluation Findings
The most recent review identified the
following areas of strength:
• Board members continue to work well
with each other, they communicate well
and participate at Board meetings
• The Chair of the Board was rated
very highly
• Committees particularly function well
and support the Board in their duties.
The review noted mechanisms were
in place and would continue to evolve to
ensure that ESG metrics that were agreed
by the ESG Committee and related to
remuneration outcomes, would receive
due scrutiny by the Remuneration
Committee as well as the ARC, to
ensure the process supporting the
activity was robust
• Mentoring that had started in 2023 had
been well received and the Board wished
to continue this into 2024
• KPIs introduced at the start of 2023
were relevant and supported the Board
in monitoring the performance of
the business.
Paul Lester, CBE
Non-Executive Chair
Nomination Committee Chair
18 March 2024
Group Executive Committee Diversity
The Board and the GEC recognise that the
GEC’s diversity requires further challenge
and to support this, our DEI strategy includes
targets for increasing gender balance and
ethnicity at senior levels.
The decision to use Red Bridge Advisory was
made by the Nomination Committee, with
the Company Secretary identified as the
person responsible within the Company for
providing any support and resources that
may be required.
The Nomination Committee agreed
that Paul Lester would be the nominated
individual responsible for escalation
throughout the process. Red Bridge Advisory
consider that they meet the CGI’s Principles
of Good Practice for Listed Companies Using
External Board Reviewers.
Whist the Nomination Committee
recognised that Red Bridge Advisory had
provided services in the past, they were
considered to have no connection with the
Company or individual Directors that would
impact the results of the review.
The Nomination Committee agreed
that a series of interviews, supported by a
questionnaire, would be appropriate, and
the Company Secretary and Chair of the
Board oversaw the review, agreeing with
challenge from Red Bridge Advisory on the
questions and topics to be discussed, with a
specific request that a series of questions be
put to the GEC also, to ascertain their view
on the role of the Board and their value
in leading the business. The scope of the
review extended to the evaluation
of the Board’s effectiveness and that
of all the Board committees.
With the GEC composition having changed
over the last year, the focus of the targets
are to build diverse succession pipelines. The
senior leadership team, being the team who
report directly to the GEC, have a 69% men
to 31% women gender balance ratio. The
target for this group is to achieve at least
40% women. More information is available
on page 36.
The Board have also agreed, as requested by
the Parker Review, an overall target of 20%
by 2027, and 25% by 2030, to increase the
ethnicity within the senior leadership team.
More information can be found about this
target on page 35 of the ESG Report.
External Board Evaluation
For 2023, the Board Evaluation has been
facilitated externally, by Red Bridge Advisory.
Red Bridge Advisory previously provided
outsourced governance services to the
Company during late 2021 and early 2022
when the Governance Team were engaged
in work relating to the Strategic Review and
required additional support for a limited
scope of works. The Board and the
Nomination Committee did not consider
this to be a matter that would impact Red
Bridge Advisory’s view or interpretation of
the results. The team at Red Bridge Advisory
have conducted board evaluations for a
total of 12 years, and specifically for the
Company, they have provided support for
internal reviews for the last two years.
107
ESSENTRA PLC ANNUAL REPORT 2023 NOMINATION COMMITTEE REPORT CONTINUED
Areas for focus during 2024
DIRECTORS’
REPORT
Action 1
Action 2
Mechanism
Action
Mechanism
Improvements to the annual strategy
planning process and agreement
of priorities
• The Board and GEC to engage earlier
• CEO, Company Secretary and CSO to engage
to agree expectations and areas of focus
for short-, medium- and long-term plans
Board on areas of focus
Improvements to the quality of
information provided to the Board,
which is expected to improve as the
GEC also becomes more established
• Deep dives to be provided on a regular cadence,
with opportunities for regional performance to
be reviewed
• Board paper quality and timeliness to be an area
of focus with regular feedback to be sought
• Refreshed forward agenda to be agreed with
CEO and Chair
• Board Intelligence’s Question Driven Insights
tool and training to be refreshed throughout
the organisation by the Company Secretary
Action 3 Review the skills of the Board in
• Nomination Committee to extend its regular
• Skills matrix to be refreshed and reviewed
view of impending changes to the
composition of the Board
review of the composition and skills of the board to
take account of a impending changes at Board level
as well as to consider whether the Board have the
skills and experience required to support a pure-play
components business in the medium- to long-term
Action 4 Continue mentoring between
the Board and GEC to provide
opportunities for both groups to
get to know the business and each
other better to produce better
quality discussions
• Mentoring to continue between the Board and
• New mentoring partners to be agreed and
the GEC to deepen knowledge and understanding
of each other’s roles and to provide greater
knowledge of the business
handover sessions to be held
Action 5 Review the process for investor
• The existing approach to investor meetings will be
• A new Chair will be asked to
meetings once a new Chair has
been onboarded
considered by a new Chair, once appointed
consider appropriate mechanisms
for shareholder engagement
Action 6 Monitor the refreshed Voice of
the Employee process to ensure
outputs provide useful insights
for the business
• A refreshed approach to the Voice of the Employee
has been agreed and will be reported on to the
Board at each meeting
• A feedback loop will be used, involving
employees, GEC and the Board to ensure
value is derived from the Voice of the
Employee programme
108
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR OF THE AUDIT AND RISK COMMITTEE’S LETTER
Chair of the Audit and Risk
Committee’s letter
During the year, the Audit and Risk Committee continued
to assist the Board in fulfilling its oversight responsibilities
by monitoring and robustly challenging the integrity of the
Company’s financial reporting; reviewing and challenging
the use of accounting policies, scrutinising the systems of
internal control and the risk management framework.
DIRECTORS’
REPORT
MARY REILLY
Senior Independent
Non-Executive Director
Audit and Risk
Committee Chair
Roles and responsibilities
Membership and attendance
The main roles and responsibilities of the
Committee include:
• monitoring and reviewing the
effectiveness of the External Auditor
• ensuring the interests of the
shareholders are properly protected
in relation to financial reporting and
internal controls
• monitoring the integrity of the
financial statements and any
formal announcements relating
to financial performance
• reviewing and challenging the
accounting policies presented to
the Board for approval
• reviewing internal financial controls and
reviewing the internal control and risk
management systems
• monitoring and reviewing
the effectiveness of the Risk
Assurance function
• reviewing the External Auditor’s
independence and objectivity.
Additionally, the Committee is also
responsible for:
• challenging significant
accounting judgements
• agreeing the annual Risk Assurance
internal audit plan and monitoring
its delivery
• monitoring the Right to Speak
arrangements and the assessment
and investigation of any claims made
through this mechanism
• reviewing regular compliance updates
and assessing progress on the compliance
transformation programme
• making recommendations to the
Board in relation to the appointment,
re-appointment and removal of the
External Auditor and approving the
remuneration and terms of engagement
of the External Auditor
• monitoring the engagement policy
of the External Auditor to supply
non-audit services
• reviewing and discussing reports
presented by the external auditor
at each meeting.
109
Mary Reilly
Chair
Ralf K. Wunderlich
Adrian Peace
Meetings during the year
5 (5)
5 (5)
5 (5)
Figures in brackets denote the number of meetings
that could have been attended.
Other attendees
The External Auditor, Chair of the Board, other
Non-Executive Directors, Chief Executive, Chief
Financial Officer, Head of Risk Assurance, Group
Financial Controller and members of the Group
Executive Committee (“GEC”) attended meetings by
invitations, as appropriate. During the year, the ARC
met the External Auditor, PricewaterhouseCoopers
LLP (“PwC”), and the Head of Risk Assurance without
the Executive Directors being present.
The ARC received presentations from the Chief
Executive, the Chief Financial Officer, Group Financial
Controller, Head of Risk Assurance, Group Head of
Tax, Group Head of Treasury, the Head of Cyber
Security and the Chief Digital Information Officer.
During 2023, the Company Secretary attended all
the meetings.
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR OF THE AUDIT AND RISK COMMITTEE’S LETTER CONTINUED
During the year, the ARC
continued to assist the Board
in fulfilling its oversight
responsibilities by monitoring
and robustly challenging the
integrity of the Company’s
financial reporting, systems
of internal control and risk
management framework.”
Dear Shareholder
As Chair of the Essentra plc Audit and Risk
Committee (“ARC”), I am pleased to present
my report for the year ended 31 December
2023 to shareholders.
During the year, the ARC continued to
assist the Board in fulfilling its oversight
responsibilities by monitoring and robustly
challenging the integrity of the Company’s
financial reporting, the systems of internal
control and its risk management framework.
This report gives an overview of the activities
undertaken and overseen during the year
and explains how the ARC has met the
requirements placed on audit committees
by the 2018 Code and applicable guidance,
laws and regulations. In carrying out its
duties the ARC also operated in accordance
with recommendations set out in the FRC
Guidance on Audit Committees which
was published in April 2016 and remains
cognisant of updated FRC guidance, letters
and reports that are relevant to the work
of the ARC.
The ARC worked largely to a recurring
and structured programme of activities
which, following the completion of the
strategic review in late 2022, was focused
on the Company’s new direction as a
pure-play components business whilst also
covering, and supporting, the remaining
separation activities for the Packaging
and Filters businesses.
The 2023 internal audit plan was presented to
the ARC at the end of 2022 in the knowledge
that, whilst the strategic reviews of the
Packaging and Filters businesses were
complete, there would still need to be an
agile and flexible approach to ensure that
the ARC and the Board would have the
level of assurance required in an evolving
environment. The internal audit plan proposed
a blend of audits that focused on the
110
DIRECTORS’
REPORT
In August 2023, the Company received
a letter from the FRC which had carried
out a review of the Annual Report and
Accounts for the year ended 31 December
2022. This review was focused on considering
compliance with reporting requirements
and did not seek to provide assurance that
the 2022 annual report and accounts were
correct in all material respects, nor did it
seek to verify the information provided. The
FRC accepts no liability for reliance on the
letter by the Company or any third party.
The outcome of the review was positive and
concluded that there were no questions or
queries to be raised in respect of the 2022
Annual Report at that time. A number of
improvement opportunities for existing
disclosures were noted and, in September
2023, an update was provided to the Board
on how these were to be addressed for 2023.
All material improvement observations have
been reflected in the 2023 Annual Report
and Accounts.
Finally, as Chair of the ARC, I am pleased to
engage with shareholders and continue to
be available to meet if asked.
Mary Reilly
Senior Independent Non-Executive Director
Audit and Risk Committee Chair
18 March 2024
Principal Risks, strategic initiatives and
traditional site visits. Of the 11 Principal Risks
presented during 2023, the internal audit
plan focused on seven of those areas, which
provided good coverage but also allowed the
internal audit team the capacity and time
required to support separation activities.
The Principal Risk areas covered during 2023
have included environmental, governance,
operational and supply chain disruption,
digital transformation, cyber events,
execution of strategic plan projects
and health and safety performance.
Members of the Risk Assurance team
also spent considerable time during the
year providing assurance and support over
the separation of co-mingled data from
systems and data repositories in support
of the separation of the Packaging and
Filters businesses.
A key role of the ARC is to support the
Board in its assessment of the Principal
and Emerging Risks and effectiveness of
mitigation plans. The ARC considered the
profile of some of the Company’s Principal
Risks which changed throughout the year
reflecting both the changed shape of the
Company and the embedding of a new
leadership team. In December 2023, the
ARC agreed to recommend to the Board
updates to the Principal and Emerging
Risks that were relevant to the business and
reflected its ongoing goals and ambitions.
The ARC continued to receive regular
reports on the Company’s Compliance
Programme. The ARC noted that the business
had continued to encourage and enhance
compliance reporting and emphasised that
the importance of compliance remained
following a period of intense change. There
were no material compliance breaches
identified during the year.
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
Ensuring the integrity of
the Financial Statements and
associated announcements is
a fundamental responsibility
of the ARC.”
REPORT OF THE AUDIT AND RISK COMMITTEE
Report of the Audit
and Risk Committee
Governance
Financial Statements and external
financial reporting
All the Audit and Risk Committee (“ARC”)
members are independent Non-Executive
Directors and have financial, risk management
or related business experience gained in senior
positions at other large diverse
organisations.
Mary Reilly has been the Chair of the ARC
since April 2018, and the Board is satisfied
that Mary has recent and relevant financial
experience. Mary spent the majority of her
career at Deloitte and is an experienced audit
Chair. Each of the other ARC members also
have relevant experience: Ralf K. Wunderlich
has a deep understanding of internal capital
market regulations and is a member of other
firms’ audit committees and Adrian Peace
has extensive financial experience as a
manufacturing industry expert.
Biographies of the ARC members can be
found on pages 78 and 79 and in the Notice
of Annual General Meeting. As a whole, the
Board believes that the members of the ARC
are competent in the business sectors within
which Essentra operates. The ARC supports
the Board and reports to it following each of
its meetings. No member of the ARC has a
connection with the current External Auditor.
The ARC has independent access to Head
of Risk Assurance, who leads the Internal
Audit team, and the External Auditors and
may obtain outside professional advice if
required. Risk Assurance and the External
Auditor have direct access to the Chair of
the ARC who held a number of meetings
with the Risk Assurance Team and the
External Auditor during the year outside
formal ARC meetings. The Chair of the ARC
also liaises with the Chief Financial Officer,
and other senior members of the finance
function, as well as the Company Secretary
as necessary to ensure there is robust
oversight and challenge in relation to
financial control, risk management
and compliance.
An internal evaluation of the ARC is carried
out on an annual basis, the last review being
performed in 2023 and concluding that the
ARC continued to be a well-run committee,
operating in line with the 2018 Code and
with the opportunity for all members to
contribute and consider issues properly.
The ARC observes an annual cycle of
items that covers the requirements of the
external audit cycle and any other relevant
matters, as detailed in the ARC’s Terms of
Reference. The agenda cycle is reviewed
annually to ensure that the ARC remains
proactive and relevant. The current Terms
of Reference for the ARC are available
at www.essentraplc.com.
Ensuring the integrity of the Financial
Statements and associated announcements
is a fundamental responsibility of the ARC.
In recommending to the Board, with regard
to the approval of the 31 December 2022
Annual Report and the 30 June 2023 Half
Year Report, the ARC reviewed, examined
and challenged the Chief Financial Officer
and External Auditor on their respective
The Terms of Reference
provide a framework for
the ARC’s work to review
and oversee the quality,
integrity, appropriateness
and effectiveness including
the following:
• Financial Statements and external
financial reporting
• Internal controls
• Significant financial judgements
• Tax and Treasury function
• Cyber security response
• The compliance programme
• The efficacy of the Risk Assurance
(Internal Audit) function
• The risk management processes
and practice
• The relationship with, and performance
of, the External Auditor
111
ESSENTRA PLC ANNUAL REPORT 2023 REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED
assessments on such items as the estimate
and disclosure of Packaging and Filters final
disposal consideration, presentation of
separation costs, the allocation of goodwill
following disposals, the presentation of
discontinued operations, the presentation
of new segmented results for the retained
business, accounting for loans and hedging
relationship and their presentation in the
financial statements, developments in
accounting standards which might affect the
Group’s financial statements, the acquisition
of Wixroyd Group, hyperinflation in Turkey,
accounting policies and disclosures, any
financial reporting issues, significant financial
judgements made, the triggers that led to an
impairment assessment at the Half Year and
appropriate levels of disclosures to ensure
that the reports are fair, balanced and
understandable. The ARC also challenged
the External Auditor on the appropriateness
of their audit coverage and their measure
of materiality.
As part of the process for the year ended
31 December 2023, the ARC reported on its
assessment of the Financial Statements so
that the Remuneration Committee could
consider whether it needed to exercise its
discretion when considering the outturns
for 2023.
During the year, the ARC also considered
the adequacy of the Group’s Long-Term
Viability Statement and going concern, and
challenged the risk scenarios, the range of
sensitivities applied and the potential impacts
considered in line with FRC guidance. The risk
scenarios used for the Year End 2023 reflected
the critical importance of the strategic
reviews, alongside areas regularly monitored
by the businesses, such as operational and
supply chain disruption, which remained
common concerns across our three regions.
Following consideration of these
assessments, the ARC confirmed that the
application of the going concern basis for
the preparation of the Financial Statements
continued to be appropriate.
Tax and treasury
During the year, presentations were made to
the ARC on the subject of Treasury and Tax.
Particular attention in the presentations was
drawn to:
• the underlying tax rate of 21.5% at Year
End 2022 (represented for continuing
group) and the assumptions and
judgements used to forecast the
effective tax rate during the year
• the underlying tax rate of 23.6% at
Half Year 2023 (again represented for
continuing group)
• the tax costs of the restructuring projects
to support the strategic review process
• the status of tax assets and liabilities held
on the balance sheet
• the provisions in place for uncertain and
central tax items
• a review of FX exposures which confirmed
the business was operating in line with the
Treasury Policy.
The ARC considered the matters presented
and were satisfied with the approach
being taken.
Additional details on the Group Tax Strategy
can be found at www.essentraplc.com/
responsibility.
112
Cyber security response
During the year, the Chief Digital
Information officer met with the ARC Chair
regularly and was invited to attend ARC
meetings as necessary.
Following the completion of the strategic
reviews, the responsibility for Cyber Security
passed to the newly appointed Chief Digital
Information Officer, supported by the Head
of Cyber Security. Both individuals attended
ARC meetings in June and December to
update the Committee on the status of the
Company’s cyber control framework and the
steps being taken to mitigate the risk of
cyber events.
DIRECTORS’
REPORT
Key activities 2023
• Ongoing review and roll out of
compliance training
• Regular discussions with the Group
Compliance Officer to assess and
monitor the approach to compliance
and understand its effectiveness
• Monitoring and testing the
effectiveness of the 2023
compliance programme
• Review the compliance plan for 2024
• Continued focus on third party
due diligence, notably in higher
risk jurisdictions
• Regular review of training completion
rates across the Group
• Monitoring the Company’s processes
for understanding and managing its
Principal, Emerging and key risks
• The Company reviewed a letter from
the FRC regarding a review of the 2022
Annual Report and Accounts. The FRC
had no questions or queries but ARC
recommended to the Board that
additional disclosures around these
points be developed. The review
conducted by the FRC was based solely
on the Group’s published Annual Report
and does not provide assurance that the
Annual Report is correct in all material
respects; the FRC’s role is not to verify
the information provided but to consider
compliance with reporting requirements
• Following the sale of the Filters business
on 3 December 2022, the Company is
no longer subject to the Deferred
Prosecution Agreement to the US
Department of Justice and its reporting
requirements but continues to adhere
to applicable sanctions regimes as part
of its compliance activities
ESSENTRA PLC ANNUAL REPORT 2023 REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED
Compliance
The Company’s commitment to conducting
its business activities in accordance with all
applicable laws and regulations continued to
be prioritised during the year. The Compliance
programme therefore operated on a
business-as-usual basis, with opportunities
for raising awareness and the requirement for
training remaining regular features during the
year, with some changes as set out below.
Following the change in Company’s focus
resulting from the strategic reviews in 2022,
the work formerly undertaken by the Group
Compliance Committee was transitioned to
the Group Executive Committee.
The business has continued its approach
to compliance, training and awareness,
regulatory and sanctions compliance,
third-party due diligence, insider dealing
and data privacy and undertook activities
that supported these key areas.
The GEC received regular reports
monitoring compliance training whilst the
ARC continued to receive broad compliance
reports from the Group Compliance Officer
on key compliance risks and the status of
the programme of activities designed to
mitigate exposure.
Right to speak and whistleblowing
The ARC received updates at each of its
meetings on any Right to Speak issues raised
and sought assurance from management on
these issues and the Company’s response.
The ARC noted that the Company has
responded to each report received through
the Ethics Point reporting system, and carried
out an investigation, using internal or external
resources depending on the nature of the
report, or by referring the case for resolution
pursuant to HR grievance protocols.
113
During the year, the issues raised related
predominantly to specific HR concerns and
where there were particular concerns
expressed, the ARC had oversight of the
actions taken in response which it found
to be appropriate.
Internal control and internal audit
The ARC is supported in this work by the Risk
Assurance team, who are responsible for
internal audits and are independent of
management. The ARC is supported in this
work by the Risk Assurance team, who are
responsible for internal audits and are
independent of management.
In 2023, the Risk Assurance Team augmented
the progress made through the business
partnering approach implemented during
2021 in order to continue to deliver value-
adding objective reports. Given the new
direction of the business and resulting
dynamic risk environment, the ARC agreed
that for 2023, Risk Assurance should
continue to have an agile and adaptable
mindset. Audit reviews were prioritised
against current risk exposures and alignment
with longer-term strategic objectives.
This ensured Risk Assurance continued to
meet its core function as well as providing
support to the Company where it was needed
the most and accomplished its objectives
through a systematic and disciplined
approach to the evaluation, assurance and
improvement in the effectiveness of the
organisation’s risk management, internal
control and governance processes. It provided
independent assessments of key processes
and controls across the Company in support
of its business objectives and strategies.
In order to achieve this the ARC reviewed:
• the internal audit plan and its
achievement of the approved internal
audit plan’s activities
• the level and skills of the resource available
to the Risk Assurance function in line with
the budget
• the effectiveness of the Risk Assurance
function including its structure, and how
it was supporting the new pure-play
components business
• internal audit activities with a focus on
unsatisfactory audit results
• the adequacy of management’s response
and the necessary actions taken to
address and rectify any weaknesses
identified in a timely manner.
At the ARC meetings, Risk Assurance
provided a report on the latest position
with regards to the Company’s systems
of internal control, its effectiveness in
managing Principal Risks and identifying
any control failings or weaknesses.
Risk Assurance also reported on resourcing of
the function. In June 2023, the Head of Risk
moved to another internal position and was
replaced on an interim basis by an existing
member of the Risk Assurance team. In
January 2024, the interim role was confirmed
in this position on a permanent basis. In 2023,
the Internal Audit plan was delivered entirely
through internal resources. The team also
provided assurance over certain specific
activities relating to the separation of the
Packaging and Filters businesses.
For the Business Process Redesign (“BPR”)
programme and Monterrey facility project,
the Risk Assurance team performed agreed
specific procedures to provide assurance
over the controls in place.
DIRECTORS’
REPORT
The 2024 internal Audit Plan comprises a
blend of audits focused on Principal Risks,
strategic initiatives and more traditional
site-based controls audits.
Risk management process
The ARC’s discussions and considerations
and oversight of the risk management
process continued throughout the year
working closely with the Group Executive
Committee and the Risk Assurance function.
In 2023, the focus was on ensuring that
the Company’s Principal and Emerging
Risks remained appropriate in the light
of changing geopolitical and
macroeconomic environments.
In addition to considering the adequacy of
Principal and Emerging Risks, the existing
risk management process continued to
enable the ARC to assess the quality of
existing practices and processes used to
identify, assess and mitigate responses to
existing and evolving risks to the Company
achieving its long-term strategic objectives.
This approach, combined with the risk
management approach supported the
ARC’s challenge of the effectiveness of the
Company’s response, its actions and the
process used to consider the effectiveness
of the mitigations.
The ARC concluded that the process had
been very thorough and remained fit for
purpose and that the risks had been
reviewed and challenged thoroughly, with
appropriate resilience testing of assumptions
also having been undertaken. The ARC’s
work in turn supported the Board by
providing it with the assurance it needed as
to the robust nature of the process used by
the Company to identify risk.
ESSENTRA PLC ANNUAL REPORT 2023 REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED
The ARC concluded at Half Year 2023 that
the Principal and Emerging risks remained
appropriate. The ARC also concluded that
the changes proposed to the narrative and
mitigation of certain Principal Risks and the
addition of two new Emerging Risks at the
full year were appropriate.
More information on Principal and Emerging
Risks can be found on pages 69 to 73, the
Long-Term Viability Statement on page 145
and the Risk management process on 66.
External Auditor
During the year the ARC:
• performed a debrief on the 2022 external
audit process with PwC
• engaged with Katherine Birch-Evans, the
new PwC audit partner and supported the
handover process
• agreed the terms of engagement and
fees to be paid to the External Auditor
• reviewed and agreed the scope and
strategic nature of the audit work to
be undertaken, with changes to sites in
scope reflecting the change in the shape
of the Company
• reviewed the qualifications, resources and
independence of the External Auditor and
assessed its performance with particular
regard to the overall quality of the
external audit
• reviewed the level of non-audit work
carried out by the External Auditor which,
during 2023, was limited to an interim
review of the half-year financial
statements and subscription to access
PwC’s accounting and corporate
reporting guidance
• the Chair of the ARC met with the
External Audit partner frequently
outside of the meeting schedule.
Assessment of the External Auditor
The ARC is dedicated to ensuring that
the Company receives a high quality and
effective external audit. Throughout the
year, the ARC is provided with reports,
reviews, information and advice, as set
out in the terms of the External Auditor’s
engagement and performance is formally
assessed by the ARC in conjunction with the
GEC. The ARC assesses the External Auditor’s
independence annually and remains satisfied
that the External Auditor is effective and
provided appropriate independent challenge
to the Company’s management.
Independence of the External Auditor
The ARC believes that it is important to
maintain the objectivity and independence
of the External Auditor by minimising their
involvement in projects of a non-audit
nature. The Company policy complies with
the FRC Revised Ethical Standard 2019 which
provides a whitelist of services which may
be provided to public interest entities and
reflects best practice in relation to the
engagement of the External Auditor to
supply non-audit services in compliance
with the whitelist, with defined parameters
and approval requirements.
The ARC Chair, without the approval of
the ARC, is authorised by the Company to
engage the External Auditor on non-audit
related work where the service is in
compliance with the whitelist of services
under the Revised Ethical Standard 2019,
and the fees per project are not considered
to be significant, provided that the annual
aggregate of non-audit related fees shall
not exceed 70% of the average of the audit
fees paid in the last three consecutive
financial years.
The ARC’s oversight of
risk management continued
throughout the year
and included working
closely with the GEC
114
DIRECTORS’
REPORT
Following the substantial reduction in
non-audit services following the conclusion
of the strategic reviews in 2022, fees were
expected to be comfortably within the 70%
fee cap (calculated based on the average of
the last three years’ audit fees).
Details of the fees paid to PwC up until
31 December 2023 can be found in Note 2
of the Notes to the Consolidated Financial
Statements, which includes fees paid to
the External Auditor and its network firms
for audit services, audit-related services
and non-audit services. PwC provided a
letter confirming that it believes it remains
independent within the meaning of the
regulations on this matter and in accordance
with their professional standards.
The ARC formally reviewed the letter
which describes arrangements in place to
identify, report, and manage any conflicts
of interests and policies and procedures,
including the extent of non-audit services,
to maintain independence and the
subsequent monitoring.
Effectiveness of the External Auditor
The ARC assessed the effectiveness of the
External Auditor by reviewing:
• the External Auditor’s fulfilment of the
agreed audit plan and the quality of their
work including the depth and appropriate
challenges of management
• feedback highlighting the major issues
that arose during the course of the audit
• feedback from the businesses and
management evaluating the performance
of each assigned audit team.
ESSENTRA PLC ANNUAL REPORT 2023 REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED
The ARC supports
the Board in meeting its
responsibility for maintaining
and monitoring sound risk
management and internal
control systems. It achieves
this by assessing the
effectiveness of
those systems.”
The Company has discussed the rotation
of the external auditor and continues to
consider, on a regular basis, any potential
benefits from tendering the audit process
having regard, in particular, to the importance
of audit quality or the continued independence
of the External Auditor. There are no
contractual obligations in place that restrict
the Company’s choice of statutory auditor.
The Company currently anticipates that it will
tender for the role of external auditor during
2025 or 2026 to ensure that, if a change is
deemed appropriate, the new external
auditor is able to familiarise themselves
with the business. The Company believes
this timeline will best serve the interests of
shareholders by minimising disruption to the
business. The Company will provide an
update if this approach changes.
The Company has complied throughout the
year with the Statutory Order 2014 issued by
the Competition and Markets Authority.
Engagement of the External Auditor
The External Auditor was originally
engaged by the Company in 2017,
following a competitive tendering process.
The External Auditor is engaged to express
an audit opinion on the truth and fairness of
the Financial Statements. The external audit
includes the review and testing of the system
of internal financial controls and the data
contained in the Financial Statements to
the extent necessary. In order to protect
independence and objectivity and provide
fresh challenge to the business, the External
Auditor periodically changes the audit
partners at a Group, regional and country
level, in accordance with professional and
regulatory standards. As noted, Katherine
Birch-Evans was welcomed as the new
Group audit partner during the year. Such
changes are carefully planned to ensure that
the Group benefits from staff continuity
without incurring undue risk of inefficiency.
The ARC has been kept up to date with
the development of regulations concerning
audit tenure and the longevity of audit firm
relationships with companies they audit. In
2016, a comprehensive competitive tender
was undertaken for the external audit and
subsequently the appointment of PwC to
replace the Company’s previous auditors
was approved by the shareholders at the
2017 AGM. As detailed above, the ARC is
satisfied with the External Auditor’s
effectiveness and independence and
accordingly has recommended to the
Board that PwC be reappointed as the
Company’s External Auditor at the
2024 AGM.
115
DIRECTORS’
REPORT
Significant Accounting Matters
Valuation of non-current assets
As required by IAS 36, the Company
undertakes an assessment of the carrying
value of intangible assets on an annual
basis, or more frequently if there is an
indication of impairment. The details of the
work carried out and the results are in Note
8 of the Notes to the Financial Statements.
The assumptions for 2024 and beyond (such
as the annual growth rate and the terminal
growth rate) are based on the 2024 annual
plan and management’s financial
projections in subsequent years and are
risk-adjusted. The impairment reviews
performed by management contain a
number of significant judgements and
estimates including Revenue growth, profit
margins and discount rates. A change in
these assumptions can result in material
changes in the valuation of the assets
and the eventual outcome of the
impairment assessment. The ARC evaluated
and challenged the methodology of the
impairment review and the assumptions on
which it was based, including the financial
plans approved by the Board.
The ARC discussed the current year
assessment, focusing on regional growth
rates, purchasing manager index data,
customer sentiment and the risks inherent
with the annual plan and management’s
longer term projections. Specific
consideration was given to impairment
reviews in APAC, for the parent company
investment and in relation to certain
investment properties.
ESSENTRA PLC ANNUAL REPORT 2023 REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED
DIRECTORS’
REPORT
Significant Accounting Matters continued
Adjusting items
The Financial Statements include certain
items which are disclosed as adjusting
items. The nature of these items is
explained within the Group Accounting
Policy, and includes transaction costs and
gains or losses relating to acquisitions and
disposals of businesses, acquisition related
integration and restructuring costs, and
other items such as impairment losses.
Following an extensive review, the ARC is
satisfied that the Company’s definition of
adjusting items remains clear and the
appropriate level of disclosure is included.
The ARC challenged the Chief Financial
Officer about the appropriateness of
items presented including, costs relating
to major Software-as-a-Service (“Saas”)
projects, impairments, acquisition costs
and ongoing activities relating to the
separation of the Packaging and Filters
businesses to ensure they are one-off
material items, rather than incurred in
the ordinary course of business, to allow
a better understanding of the Company’s
ongoing activities. Further details can be
found in Notes 8 and 24 of the Notes to
the Financial Statements.
Tax liabilities
The Company is, on occasion, subject
to tax assessments that may represent
potential future tax exposures, which arise
from tax authorities in a number of the
jurisdictions in which it operates. The
Company assesses all such exposures in
the context of specific country tax laws,
and where applicable, makes provisions
for any settlements which it considers
appropriate. The Company operates in a
number of tax jurisdictions, and recognises
116
tax based on interpretation of local laws and
regulations which are sometimes opaque.
Where the amount of tax payable is
uncertain, the Directors are required
to exercise significant judgement in
determining the appropriate amount
to provide in respect of potential
tax exposures.
The ARC challenged the nature and extent
of the Company’s tax provisions and sought
assurance that the Company was working
diligently to resolve outstanding liabilities in
an appropriate fashion. The potential tax
exposures over the Company’s transfer
pricing position and the deductibility of
interest on internal financing are also
considered. The ARC reviewed the
assumptions of the tax liabilities at the
start of the year, those created during the
year and the effective tax rate. The ARC
challenged the Chief Financial Officer and
Head of Tax as to the appropriateness of the
Company’s risk attitude and appetite in this
area. The ARC was satisfied that the tax
liabilities are appropriate, and that the
Company’s tax disclosures are adequate
given the nature of its activities.
Going concern and Long-Term
Viability assessment
The ARC reviewed the assumptions applied
for going concern and long-term viability
assessment. At Half Year 2023 and at Full
Year 2023, an extensive process was applied
to the going concern that assessed the
outcome of a range of scenarios.
The Company has considered a downside
scenario that includes reasonably plausible
changes in macroeconomic conditions and
is considered to represent a severe but
plausible scenario.
The results of this downside scenario
show that there is sufficient liquidity in
the business for a period of 18 months from
the date of approval of these Financial
Statements, and do not indicate any
covenant breach during the test period.
The External Auditor challenged the ARC on
the process used to make the assessment
and the outcome of the scenarios. The ARC,
on behalf of the Board, also challenged
management on the assumptions and
sensitivities used within the scenarios to
ensure they captured sufficient macro and
micro environmental factors, as well as
where judgement had been applied, and
sought an explanation from management
on this. Management provided this
assurance and explained to the ARC that
the scenarios had been carefully calculated
with dedicated resource provided to test
the range of outcomes. The ARC was
satisfied that the process used to assess
the Company’s going concern position was
appropriate and made a recommendation
to the Board in line with this view.
More information on the going concern
can be found on pages 144 to 145.
The ARC reviewed the long-term viability
assessment for the period to 31 December
2026 which considered a range of scenarios
based on an assessment of four risks: ESG
risks, Operational and Supply Chain
Disruption, Macroeconomic Environment
and Execution of Strategic Plan, which were
selected from the Principal Risks. The ARC
considered the process used to assess the
long-term viability against these risks and
challenged management on the
assumptions. The External Auditor in turn
challenged the ARC on the process that
had been adopted and was satisfied that
the process used was robust and thorough.
The ARC was satisfied that they could make
a recommendation to the Board on the
Group’s long-term viability.
The ARC also reviewed the information
supporting the Critical Accounting
Judgments and Estimates section of the
Financial Statements starting on page 165.
Other significant matters
The ARC also considered the following
significant matters during the course
of the year:
• the estimation and valuation of
completion accounts payments
in relation to the disposal of the
Filters business
• the estimation and valuation of
contingent consideration receivable,
or earn-out, in relation to the disposal
of the Filters business
• provisions in relation to contractual
obligations following the disposal of
the Packaging and Filters businesses
• valuation of net assets following the
acquisition of BMP TAPPI
• the funding position on the Company’s
defined benefit pension schemes
• the appropriateness and accuracy of
hyperinflationary accounting in the
Company’s business in Turkey
• updates to inventory provisioning
calculation inputs following the disposal
of the Group’s Packaging and Filters
businesses in 2022.
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
RALF K. WUNDERLICH
Non-Executive Director
• Flexible in our approach to remuneration
so that we can respond to a rapidly
changing world.
In principle, our pay policy for our wider
workforce is closely aligned with our Policy,
reflecting our commitment to fairness and
consistency in compensation practices
throughout the organisation. However,
it is essential to note that there are some
differences, primarily in the treatment of
variable and non-variable pay components.
This means that the variable and non-
variable pay structures for our workforce
may diverge from those of our Directors to
accommodate the diverse needs and roles
within our organisation. While our Policy
may include specific provisions tailored to
the unique roles and responsibilities of our
executive team, our strategic drivers, and
objectives flow throughout the organisation.
THIS
REPORT
INCLUDES
• Our proposed new Directors’
Remuneration Policy (the “Policy”)
• The Annual Report on Remuneration,
which describes how the current
Policy has been put into practice
during 2023 and how we plan to
implement the new Policy in 2024
CHAIR OF THE REMUNERATION COMMITTEE LETTER
Chair of the
Remuneration
Committee’s letter
Dear Shareholder,
I am pleased to present to you the Directors’
Remuneration Report for the year ended
31 December 2023.
As we reflect on the accomplishments
of the past year, it is evident that 2023
has been a notable period for the business,
marking a significant step forward in our
journey as the new Essentra plc. The
dedication and hard work of our team has
been instrumental in ensuring the successful
realisation of our commitments to the market.
New Policy
At the May 2024 AGM, we are proposing
a binding shareholder vote on our new
Directors’ Remuneration Policy (“Policy”)
which is required under the standard
three-year approval cycle. The Remuneration
Committee discussed the existing Policy over
a series of meetings which considered the
strategic priorities of Essentra, governance
requirements and evolving market practice.
The conclusion of the review was that
the structure of the existing Directors’
Remuneration Policy had operated as
intended, that it remained fit for purpose
and that it would continue to provide strong
alignment between performance and the
remuneration of the Executive Directors.
Accordingly, there are no material changes
in the new Policy (full details of which are
set out on pages 133 to 140).
117
We consulted with our major shareholders
and proxy voting bodies on the new Policy
and I am pleased to say that respondents in
that consultation were supportive. I would
like to express my thanks to all those who
took the time to participate in this process.
Implementation of new Policy in 2024
Principles
Our approach to setting executive
remuneration continues to be guided
by the following principles:
• Rewarding the creation of sustainable,
long-term performance, with long-term
value creation for shareholders and pay
for performance being at the heart of our
policy and practices
• Incentivising and rewarding delivery
of the business strategy, with market
competitive pay in return for performance
against our strategic objectives
• Attracting and retaining the talent
we need to lead our business. This must
also reflect the complexities of a global
business, attracting and nurturing a mix
of talent with a range of backgrounds,
skills and capabilities that will enable
Essentra to thrive
• Consideration of stakeholder interests.
ensuring our reward packages are
appropriate and fair in the context of
the experience of our key stakeholders –
employees, shareholders and customers
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR OF THE REMUNERATION COMMITTEE LETTER CONTINUED
These key differences are carefully
considered to ensure that our pay policy
remains equitable and relevant across all
employee levels, effectively addressing the
specific requirements of each group while
adhering to the overarching principles of
fairness, performance-based incentives
and competitive remuneration. Our ultimate
goal is to maintain a unified framework that
promotes a culture of fairness and inclusion
while recognising the distinctive attributes
of our various employee categories.
Salary increases in 2024
Salaries for 2024 (effective 1 April)
are £558,900 and £362,250 for the Chief
Executive and Chief Financial Officer,
respectively. These represent a 3.5% year-on-
year increase in both cases. The increases
were determined by the Remuneration
Committee having taken into account
Group and individual performance and
are slightly below the 4% average salary
increase awarded to our UK employee
workforce for 2024.
Linking reward to strategy –
incentive plans in 2024
We’ve made substantial strides in advancing
our sustainability agenda in 2023. Our focus
for 2024 has shifted towards waste reduction,
especially within our Customer Supply
Chain teams. Our philosophy remains to set
ESG targets that are stretching and well
above ‘business as usual’ standards within
our industry.
As well as Essentra’s resilient financial
performance, I am pleased with the
significant progress that we have made as
an organisation on our journey to becoming
the world’s leading responsible hassle-free
supplier of essential industrial components,
with Customer Service Net Promoter Score
featuring across the entire organisation’s
incentive plans.
We are pleased our health and safety record
has improved this year with 10 Lost Time
Incidents (“LTIs”) compared to 23 LTIs in 2022.
This is a LTI rate of 0.42 for 2023 compared to
0.96 for 2022. Each site signed up to a safety
pledge at the start of the year, ensuring
health and safety is embedded and owned by
every individual within the business, and we
continue to place emphasis on running our
business safely as our first priority.
We have taken a balanced approach
to setting the annual bonus and LTIP
performance targets given the uncertain
economic environment in which the awards
are being made. The Remuneration
Committee retains the discretion to adjust
the outcomes of the incentive awards to
reflect the overall performance of the
business over the performance period.
Our current intention is that LTIP awards for
2024 will be granted for shares worth 150% of
salary to both the Chief Executive and Chief
Financial Officer although, as in previous
years, the Remuneration Committee will
carefully consider the appropriateness
of these award sizes shortly before the
grant date.
118
The Committee reflected
on the remuneration outcomes
in the context of a year of
exceptional change and
believes they appropriately
reflect the performance of
the Company and the broader
stakeholder experience.”
DIRECTORS’
REPORT
Business performance in 2023
Essentra has demonstrated resilience
throughout 2023 in its first year as a
pure-play components business,
delivering both operational and financial
progress in 2023 whilst navigating a
changing macroeconomic backdrop
across our three operating regions.
The organisation has delivered good
margin progression, despite a reduction
in operational leverage from sales volume
declines. The Company has taken a
pro-active approach to cost control,
which has included the right-sizing
of central corporate costs, as well as
procurement initiatives and disciplined
pricing actions which have offset
inflationary pressures in the year –
the business has been exposed to
the cost of raw materials and wage
inflation in particular.
Further progress has been made towards
the Components growth strategy with
the successful acquisition in Italy of BMP
TAPPI in October, the second acquisition
in a 13 month period, following Wixroyd in
KPI
2023
2024
Strategic rationale
Annual Bonus: one-year performance
Adjusted operating profit
Adjusted operating cash flow
ESG
Personal Objectives
LTIP: three-year performance
Relative TSR
Adjusted EPS
50%
20%
10%
20%
30%
50%
50% The metrics are designed to provide a balanced
alignment with our goals of generating sustainable,
profitable growth and strong cash generation.
The ESG metric will be based on waste reduction as
outlined above.
20%
10%
20%
30% The measures are designed to provide a balanced
50%
alignment with our goals of delivering shareholders
a superior return on their investment and generating
sustainable, profitable growth.
ESG
20%
20%
Our Environmental targets now align to SBTi standards,
while the Social aspect of ESG focuses on our
commitment to diversity.
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR OF THE REMUNERATION COMMITTEE LETTER CONTINUED
DIRECTORS’
REPORT
December 2022, which will strengthen
and enhance the Group’s existing product
range, and further expand the Group’s
manufacturing footprint in Europe.
Despite a period of transition for people
across our organisation and operating within
a more challenging trading environment,
customer satisfaction as measured by our
Customer Service Net Promoter Score
(“NPS”) has increased by six points to 40
in 2023, supported by focus on customer
service. The Company has also maintained
the employee engagement score at 82,
with 86% participation, which is above
benchmark levels of engagement.
The business also made significant progress
towards our sustainability agenda. We have
installed our first solar panel array in Rayong,
Thailand, and have continued to make great
progress on the percentage of raw materials
from sustainable sources across our polymer
range as an organisation, delivering our 2025
commitment of 20% recycled content in
2023, two years ahead of schedule.
Linking reward to performance
in 2023
2023 annual bonus
The Remuneration Committee gave careful
consideration to the formulaic outturn of
the annual bonus which produced an overall
outturn of 50.3%. In light of overall financial
performance and the experience of our
various stakeholders during the year, the
Committee noted that although overall
financial and operational performance
had been delivered during the year, this
performance had not yet been reflected
in enhanced shareholder value. The
Remuneration Committee also noted the
particularly challenging market that the
Group currently faces. Having considered
the above factors, and with the full support
of the Board, the Remuneration Committee
exercised its discretion to reduce bonus
pay-outs to 30% of maximum.
Vesting of 2021 Long Term
Investment Plan (“LTIP”) award
Last year’s Remuneration Report highlighted
that the materiality of the Packaging and
Filters transactions during 2022 created a
number of complexities for the measurement
and assessment of performance for in-flight
incentive awards. It also laid out the following
principles that the Remuneration Committee
would use to ensure a fair and robust
measurement and assessment process
applied for the affected awards:
• maintain consistency between the
basis on which targets are set and how
performance is measured
• ensure use of a consistent approach across
affected awards where possible
• maintain the original performance periods
• use audited data to the extent that this
is feasible.
More detail on the Remuneration
Committee’s specific application of these
principles to the 2021 LTIP award is set out
on page 127.
Following a performance assessment at the
end of the three-year performance period,
the 2021 LTIP award vested at 63.5% of
maximum – details of which are set out on
page 127. The Committee was satisfied
that this outturn was appropriate having
considered underlying business performance
and successful strategic execution over the
three-year period. Its conclusion also took into
account the challenge of ensuring that the
LTIP remains a credible reward and retention
device for employees given the partial vesting
of only one LTIP award in the preceding seven
award cycles.
Employee reward and engagement
In an effort to promote a performance-driven
culture, we made significant changes this
year in our bonus structure which will directly
impact all employees in 2024. Some of the key
reasons for the change were to have a greater
alignment to our key strategic pillars and
promote a high performance culture. A special
emphasis was placed on aligning our bonus
programmes to our strategic objectives with
sales teams focusing on revenue delivery and
driving cross sell, and our customer supply
chain team (which is our largest employee
population) focused on Net Promoter Score
(“NPS”) and waste reduction across each site.
This new approach intends to empower each
of our people to have a greater influence on
their bonus outcomes, aligning their efforts
with our core strategic pillars.
Our consultation with employees, which is
covered in more detail on page 134 as well
as in the ESG and Corporate Governance
chapters, includes explanations of how
executive remuneration aligns with our wider
company pay policy. During 2023, our Board
Champions met with employees, giving
them the opportunity to raise remuneration
as a topic with them.
In 2023, we emphasised
alignment of our bonus
programmes for 2024 with our
strategic goals. Sales teams
being incentivised to drive
revenue and cross-selling, while
our customer supply chain
team focuses on NPS and
waste reduction at each site.”
119
ESSENTRA PLC ANNUAL REPORT 2023 CHAIR OF THE REMUNERATION COMMITTEE LETTER CONTINUED
DIRECTORS’
REPORT
Our people are key to
our success. Keeping our
people safe, and working
in a thriving workplace
is at the heart of
everything we do
Looking ahead, we remain committed to
fostering growth, innovation, and excellence
across all facets of our operations. As we
navigate the complexities of the business
landscape, we appreciate the hard work
and dedication of each member of the
Essentra team.
I have greatly valued feedback received
from shareholders, which has been
considered by the Remuneration Committee,
as relevant, within our regular meetings.
I hope that you will find this report to be
clear and helpful in understanding our
remuneration practices and that you will
support the remuneration resolutions at
the forthcoming AGM.
The annual report on remuneration has
been approved by the Board of Directors
and signed on its behalf by,
Ralf K. Wunderlich
Non-Executive Director
Remuneration Committee Chair
18 March 2024
Two of the Board Champions include the
Remuneration Committee Chair and the
Senior Independent Director, who is also a
member of the Remuneration Committee.
AGM votes
There will be five remuneration-related votes
at the 2024 AGM. These comprise:
• The usual advisory vote on the Annual
Report on Remuneration
• A binding vote on a new Policy as
outlined above
• Binding votes to approve the renewal
of each of the LTIP, the Deferred Bonus
Plan and the Sharesave Plan. These
renewals are required because the existing
plans are all approaching their expiry date
(10th anniversary of their approval by
shareholders). Full details of the terms of
the plan rules will be in the Notice of AGM
although changes to the existing plan
rules are limited and principally reflect
governance requirements and evolutions
in market practice over the past decade.
Conclusion
This is my last letter as Chair of the
Remuneration Committee and Kath Durrant
will succeed me following the AGM. I would
like to express my immense thanks to the
Board Chair and the members of the
Remuneration Committee for the invaluable
support and engagement that they have
given me during my tenure.
120
ESSENTRA PLC ANNUAL REPORT 2023 REMUNERATION AT A GLANCE
Remuneration
at a glance
2023 remuneration structure for Executive Directors.
2023 total remuneration
Scott Fawcett (£000)
2023
2022
DIRECTORS’
REPORT
581
430
RALF K. WUNDERLICH
Remuneration
Committee Chair
Enhancing customer service has
remained a focus, we’re pleased to
see Net Promoter Score increase by
an additional six points to 40. We remain
focused on our customers and continue
to work towards our target of 50.”
121
£0m
£0.5m
£1.0m
£1.2m
Jack Clarke(£000)
2023
2022
381
134
284
180
£0m
£0.5m
£1.0m
£1.2m
Fixed pay – salary, benefits and, pension allowance.
Performance pay – annual bonus and LTIPs earned
in respect of the three-year performance period.
Data in these charts relates to the period that individuals were Board members.
Jack Clarke joined the Board in April 2022.
Scott Fawcett joined the Board in January 2023.
2023 Annual bonus
Operating Profit
Operating cash flow
Personal Performance
Environmental
Entry
Target
26%
44%
75.0%
85%
1 Bonus outturn reflects the Committee’s use of downward discretion as reflected in the Chair’s letter.
Long Term Incentive
Adjusted EPS growth
– (40% weighting)
Average ROIC
– (30% weighting)
Relative TSR
– (20% weighting)
Reduction in GHG Emissions
–(10% weighting)
0%
Entry
Target
45%
30%1
Maximum
100%
63.5%
Maximum
100%
100%
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION
Annual Report
on Remuneration
This section of the
Remuneration Report
will be subject to an
advisory vote at the 2024
AGM together with the
Annual Statement from
the Remuneration
Committee Chair
Key activities
Meetings during 2023
Q1 2023
• Approved Remuneration
Report
• Approved 2022 Management
Bonus Outturn
• Approved 2022 deferred bonus
share awards
• Approved targets, participation and
grant of the 2023 LTIP
• Approved Proposed 2023 Management
Bonus targets and rules
• Approved personal objectives for GEC
for 2023
• Approved SAYE invitation for UK staff
DIRECTORS’
REPORT
Q3 2023
• Director Remuneration Policy review
and approval
• Approved changes to LTIP, Deferred
Bonus and SAYE rules
Q4 2023
• Review of Chair fees
Membership and attendance
Meetings during the year
Ralf K. Wunderlich
Non-Executive Director
Mary Reilly
Non-Executive Director
Dupsy Abiola
Non-Executive Director
Kath Durrant
Non-Executive Director
5 (5)
5 (5)
5 (5)
5 (5)
• Approved 2024 Executive Director
Other attendees
Objectives
• Approved 2024 LTIP measures and
targets
• Agreed 2024 Bonus measures
In the past year, the Remuneration Committee
engaged with the Board Chair, CEO, CFO, CPO, and
Reward Director, for insights and advice. Notably,
none participated in discussions about their own
remuneration. The Company Secretary serves as the
secretary and attends all meetings.
The Committee consistently oversees the Company’s
relationships with independent advisers. Independent
advice was sought from Deloitte LLP, a member
of the Remuneration Consultants Group. Deloitte,
adhering to the Group’s Code of Conduct, provided
counsel on executive and senior staff remuneration.
The Remuneration Committee annually reviews
Deloitte’s performance and is selected based on
expertise and experience in executive remuneration.
The Remuneration Committee selected Deloitte
through a majority vote as a result of the quality of
their services and independence, and as a result they
continue to be the preferred consultant. The fees
for the year for advice to the committee amounted
to £63,200, charged based on time and expenses.
Deloitte also offered additional share plan, consulting
and tax services to the Company in 2023.
122
ESSENTRA PLC ANNUAL REPORT 2023 ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
Total Single Figure of Remuneration Table for 2023 (audited)
The remuneration received by Executive Directors and Non-Executive Directors for the year ended 31 December 2023 (and the 31 December 2022 comparative) was as follows:
Salary and
fees for the
year or from
the date of
appointment
£000
Taxable
benefits¹
£000
Pension2
£000
Total fixed
remuneration
£000
Bonus
(cash and
deferred
shares)
£000
Long-Term
Incentive
Plan
£000
Other
£000
Total variable
remuneration
£000
Executive Directors
Scott Fawcett3
Jack Clarke4
Non-Executive Directors
Paul Lester
Mary Reilly
Ralf K. Wunderlich
Adrian Peace
Dupsy Abiola6
Kath Durrant7
Totals
Totals
Year
2023
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2023
2022
540
350
261
2255
250
85
85
86
80
62
62
52
42
52
1,452
780
14
13
10
–
–
3
–
14
6
20
13
–
–
4
68
29
27
18
13
–
–
–
–
–
–
–
–
–
–
–
45
13
581
381
284
225
250
88
85
100
86
82
75
52
42
56
1,565
822
243
131
180
–
–
–
–
–
–
–
–
–
–
–
374
180
1828
–
–
–
–
–
–
–
–
–
–
–
–
–
182
0
59
39
–
–
–
–
–
–
–
–
–
–
–
–
8
0
Taxable benefits comprise a car allowance, private medical insurance and life insurance cover for Executive Directors and for Non-Executive Directors covers travel allowance under the Travel Policy.
Notes:
1
2 None of the Executive Directors are entitled to any benefit under the Essentra Defined Benefit Pension Scheme. Pension may be received as Cash in lieu of pension. The amount stated above is the employer pension contribution.
3 Scott Fawcett became the CEO 1 January 2023.
4 Jack Clarke joined as CFO in April 2022.
5 Paul Lester had a reduction in fees, effective 1 January 2023.
6 Dupsy Abiola joined the Board in March 2022.
7 Kath Durrant joined the Board in January 2023.
8 2021 LTIP vesting approximate value based on average share price over the last three months of 2023 of 158.2p. The value includes zero share price appreciation since grant.
9 SAYE discount (15%).
10 These totals exclude Directors who ceased their directorships during 2022. Total remuneration inclusive of all directors in the year was £2.668m (see page 112 of the 2022 Annual Report).
123
Total
£000
1,011
515
464
225
250
88
85
100
86
82
75
52
42
56
430
134
180
–
–
–
–
–
–
–
–
–
–
–
564
180
2,129
1,00210
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
CEO pay ratio (unaudited)
This marks the fifth year of publishing our CEO pay ratio. We have opted for Option A in the
regulations, utilising full-time equivalent pay and benefits for all UK employees in 2023. This
choice, ensures a more accurate portrayal of the Chief Executive’s compensation relative to
the broader UK workforce.
As outlined in last year’s Remuneration Report, the balance of the performance
measures for the 2023 annual bonus were intended to align with the strategy of Essentra
as a pure-play components business. In particular, the metrics were designed to provide
a balanced alignment with our goals of generating sustainable, profitable growth and
strong cash generation.
Irrespective of the outcome, the bonus design includes a ‘gate’ whereby no bonus is
payable unless the Remuneration Committee determines that the Company’s 2023
financial performance is satisfactory. As both financial measures met the Entry
performance target, the Committee was satisfied that this ‘gate’ had been satisfied.
Additionally, the Remuneration Committee gave careful consideration to the formulaic
outturn of the annual bonus in light of overall financial performance and the experience
of our various stakeholders during the year. It noted that although financial and operational
performance had been solid during the year, this performance had not as yet been reflected
in enhanced shareholder value. It also noted the particularly challenging market that the
Group currently faces. Having considered the above factors, and with the full support of
the Board, the Remuneration Committee exercised its discretion to reduce bonus pay-outs
to 30% of maximum.
2023 Annual Bonus Outturn
Weighting
Entry
performance1
Target
performance1
Maximum
performance1
Actual
performance
50%
20%
10%
20%
£39.4m
£34.7m
£46.3m
£38.6m
£48.6m
£40.5m
£43.0m2
£55.7m2
17%
20%
21%
20.7%
Details in analysis below
Performance measure
Adjusted Operating Profit2
Adjusted Operating Cash Flow2
ESG – Recycled Content
Other strategic objectives
Total formulaic outturn
Post downward discretion
applied
% of
overall bonus
payable
13.0%
20%
8.5%
CEO – 8.8%
CFO – 8.8%
CEO – 50.3%
CFO – 50.3%
CEO – 30%
CFO – 30%
Notes:
1
0%, 50% and 100% of the relevant portion of the bonus was payable for achieving Entry, on Target and Maximum
performance, respectively.
As in prior years, outturn was adjusted to be consistent with plan FX rates in order to align with the targets. Adjusted Operating
Profit outturn disclosed here is before the discretionary adjustment disclosed above.
Salary
Total pay
FY 2023
FY 2022
FY 2021
FY 2020
FY 2019
25th Percentile
50th Percentile
75th Percentile
£ 24,807
£ 26,879
£ 35,194
£ 38,321
£ 54,243
£ 59,386
38:1
57:1
68:1
38:1
67:1
26:1
40:1
54:1
30:1
50:1
17:1
25:1
34:1
19:1
36:1
The salaries for employees at specified percentiles represent typical compensation for
operational roles, including Customer Service Assistant, Supply Planner, and Category
Manager. Primarily fixed, these roles have minimal performance-linked components. Ratios
are calculated using the Chief Executive’s total remuneration for 2023, outlined in the Single
Figure Table. The Company deems the median pay ratio in line with its UK employee pay,
reward, and progression policies.
The day by reference to which the Company determined the date for the three percentile
employees was 31 December 2023. The Company believes the median pay ratio for the
relevant financial year is consistent with the pay, reward and progression policies for
the Company’s UK employees taken as a whole.
The CEO pay ratio for 2023, has decreased to 26:1 at the median.
The CEO pay ratio will vary annually due to the Chief Executive’s higher variable
remuneration tied to Essentra’s performance and share price. Consequently, the
Remuneration Committee does not set a specific target for the CEO pay ratio. Instead,
the Remuneration Committee will yearly evaluate if the ratio’s fluctuations align with
Company performance and employee reward decisions.
Annual bonus (audited)
Under the terms of the annual bonus arrangements for 2023, Scott Fawcett was
potentially entitled to a maximum bonus of up to 150% of basic salary and Jack
Clarke was potentially entitled to a maximum bonus of up to 125% of basic salary.
50% of bonus earned is deferred in shares for three years and is usually dependent
on continued employment.
2
124
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
Personal objectives 2023
2023 has been a challenging year with management required to not only deliver strong
operational performance and profitability from ‘business as usual’ activities but also to
devote considerable amounts of time to ensure successful standing up of the new
pure-play components business.
The following table sets out a summary of the Remuneration Committee’s assessment
in each of the key areas of strategic performance identified for 2023, as well as the
Committee’s overall assessment of the outcome for each objective. As outlined above,
these outcomes in combination with the outcomes from the financial metrics were further
assessed by the Remuneration Committee in the context of relevant factors, including
overall Group performance.
Scott Fawcett
Strategic area and associated performance target
Weighting
Assessment of performance
Net Promoter Score has increased from 34 to 40 in 2023. This exceeds the maximum target set
for this objective.
Outcome
Fully met
Despite a challenging year, we have maintained a high employment engagement score of 82 in
2023, a very pleasing outcome given the degree of organisational change in 2023.
Partially met
Our strategic objective to enhance cross-selling encountered a challenging environment,
primarily due to wider macroeconomic factors which led to a reduction in our customers’
investment in new projects, impacting the number of opportunities for cross-selling. Additionally,
the stabilisation and improvement of supply chains in a market with lower demand have resulted
in a decreased inclination among customers to switch suppliers. Despite these headwinds, cross-
selling remains a cornerstone of our strategy. Recognising its importance, we introduced a sales
incentive plan for 2024 to align our sales team’s efforts with this objective.
Moreover, in anticipation of a market recovery, we have proactively invested in stock. This
strategic stockpiling positions us advantageously against competitors facing service challenges,
thereby enhancing our capability to capitalise on cross-selling opportunities in the upcoming
growth cycle.
In September 2023, we announced the acquisition of BMP TAPPI, Italy’s leading manufacturer of
protective caps and plugs. This acquisition will strengthen Essentra’s product portfolio, unlock
further cross-selling opportunities, and will enhance the Group’s manufacturing footprint in
Europe. BMP TAPPI is expected to be accretive to Group margins and adjusted EPS in the first
full year post-completion. The acquisition was successfully completed in October 2023.
Understanding the importance of meticulous planning and execution in such transformative
initiatives, we opted for a postponement of the BPR go-live in Eastern Europe. While this
impacted the ability to achieve this particular bonus-able objective, it was agreed with senior
management to ensure we stayed aligned with our commitment to operational excellence.
Not met
Fully met
Not met
Customer service – Focus on smooth hassle-free customer service underpins the priorities of
the business. Performance measured by year-on-year improvement in Net Promoter Score –
maximum target for 2023 of 39 relative to 2022 score of 34.
Employee Engagement – World-leading employee engagement leads to world-leading customer
service which in turn leads to world-leading financial results. Performance measured by Group
score in our employee engagement survey – maximum target for 2023 of 85 relative to 2022
score of 83.
Cross sell – This is an important element of our organic growth strategy. The acquisition of
Wixroyd Group in 2022 expanded Essentra’s capabilities in hardware components and created
significant cross-selling opportunities across a range of Essentra’s current end markets.
Performance measured by year-on-year improvement in categories per target customer.
M&A – Delivery of value enhancing M&A is an important component of our strategic growth
ambitions. Performance measured by assessment of M&A pipeline and successful delivery of
value enhancing transactions.
Digitalisation of back office – Successful delivery of the Business Process Redesign (BPR) project is
strategically important to mitigate the risk of legacy systems and misaligned data and processes
to future proof our strategic ambition and further improve our service. Performance measured by
assessment of implementation of BPR relative to agreed plan.
20%
20%
20%
20%
20%
125
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
Jack Clarke
Strategic area and associated performance target
Weighting
Assessment of performance
DIRECTORS’
REPORT
Net Promoter Score has increased from 34 to 40 in 2023. This exceeds the maximum target set
for this objective.
Outcome
Fully met
Despite a challenging year, we have maintained a high employment engagement score of 82 for
2023, a very pleasing outcome given the degree of organisational change in 2023.
Partially met
This was partially achieved throughout 2023 with development of our shareholder base including
some new investors joining our Essentra journey. However we were not able to attract as many
major new investors as we had ambitiously targeted, and so this objective was only partially met.
We will continue to work towards this target in 2024.
Partially met
Central costs for 2023 were lower than plan assumptions and allocation methodology for central
costs was successfully implemented in line with market best practice
Fully met
Understanding the importance of meticulous planning and execution in such transformative
initiatives, we opted for a postponement of the BPR go-live in Eastern Europe. While this
impacted the ability to achieve this particular bonus-able objective, it was agreed with senior
management to ensure we stayed aligned with our commitment to operational excellence.
Not met
Customer service – Focus on smooth hassle-free customer service underpins the priorities of
the business. Performance measured by year-on-year improvement in Net Promoter Score –
maximum target for 2023 of 39 relative to 2022 score of 34.
Employee Engagement – World-leading employee engagement leads to world-leading customer
service which in turn leads to world-leading financial results. Performance measured by Group
score in our employee engagement survey – maximum target for 2023 of 85 relative to 2022
score of 83.
Investor relations – Growth of our shareholder base and the associated continued access
to capital is vitally importance to Essentra’s long-term success. Performance measured by
development of shareholder base during 2023.
Cost control – This objective was included by the Committee on the basis that it was vital for
management to not just focus on growth’ activities, but to also ensure the Components business
is a cost-effective, fully functioning plc. Performance measured by assessment of 2023 central
costs relative to plan and successful implementation of central cost allocation methodology.
Digitalisation of back office – Successful delivery of the Business Process Redesign (BPR) project is
strategically important to mitigate the risk of legacy systems and misaligned data and processes
to future proof our strategic ambition and further improve our service. Performance measured by
assessment of implementation of BPR relative to agreed plan.
20%
20%
20%
20%
20%
126
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
Equity incentives (audited)
Details of the awards granted and outstanding during the year to the Executive Directors under the LTIP, DASB and SAYE are as follows:
Scott Fawcett
LTIP
LTIP
LTIP1
DASB3
DASB2
DASB2
SAYE
SAYE
Jack Clarke
LTIP1
LTIP1
DASB2
SAYE
Date of
grant
At 1 Jan
2023
Awarded
in 2023
Exercised/
transferred
in 2023
Lapsed
in 2023
At 31 Dec
2023
Share price
at date
of grant
Earliest
vesting date
Expiry date
31 Mar 21
04 Oct 22
31 Mar 23
30 Mar 21
04 Oct 22
31 Mar 23
01 May 21
01 Jul 23
31 Mar 23
04 Oct 22
31 Mar 23
01 Jul 23
149,5895
189,2105
–
–
42,261
–
7,258
–
–
214,739
–
–
–
–
413,687
–
–
30,519
–
24,0426
268,131
–
46,011
10,606
–
–
–
–
–
–
–
–
–
–
–
–
54,600
–
–
–
–
–
7,258
–
–
–
–
–
115,1224
189,210
413,687
–
42,261
30,519
–
24,0426
268,131
214,739
46,011
10,606
291.8p
210.5p
195.8p
–
210.5p
195.8p
248.0p
169.7p
195.8p
210.5p
195.8p
169.7p
31 Mar 24
04 Oct 25
31 Mar 26
–
31 Mar 26
04 Oct 27
31 Mar 28
–
04 Oct 25
04 Oct 25
31 Mar 26
01 May 26
01 Jul 28
31 Mar 26
04 Oct 25
31 Mar 26
01 Jul 28
31 Mar 26
01 May 26
01 Jul 28
31 Mar 28
04 Oct 27
31 Mar 26
01 Jul 28
Notes:
1 Subject to a two-year holding period post vesting and is calculated as a percentage of base salary.
2 DASB is deferred for three years from grant and not subject to any performance conditions and is calculated as 50% of annual bonus awarded.
3 No DASB awarded in 2021 as there was no bonus in 2020.
4 2021 LTIP was awarded with a face value at time of grant of £436k, and saw a total value depreciation of c42% and vested at 63.5%. The vesting amount includes an additional dividend of 20,133 shares.
5 Granted prior to becoming a CEO
6
Includes 6,364 SAYE options held by spouse
LTIP awards (audited)
Performance Conditions for LTIP awards made in 20211
Condition
Compound Annual Growth in Adjusted EPS (40%)
ROIC (30%)
Relative TSR v FTSE 2502 (20%)
Reduction in GHG Emissions3 (10%)
Threshold
(25% Vesting)
5%
8.5%
Maximum
13%
14.5%
Actual
outturn
14.2%
10.1%
Median Upper quartile
Below median
10%
15%
21.7%
Vesting
100%
45%
0%
100%
Overall Vesting
63.5%
1
2
3
Following the Packaging and Filters transactions, performance continued to be measured over the original three-year performance
period for the 2021 LTIP award. In order to ensure a fair and robust process, the Remuneration Committee determined that assessment
of the EPS, ROIC and GHG emissions performance measures should be a combination of Essentra Group performance up to 2022 and
Components performance in 2023. In order to provide consistent year-on-year comparisons, Essentra Group performance in 2022
included a combination of actual performance and forecast performance for the Packaging business and the Filters business for
the short period that they were no longer owned by Essentra (Packaging: October – December 2022; Filters: December 2022). The
assumption of forecast performance for this purpose was considered more appropriate by the Remuneration Committee than
use of the original Plan figures which would have produced a slightly higher vesting outcome. As the original targets assumed an
assessment of Essentra Group performance over the full three-year period, the Remuneration Committee reviewed whether any
changes were required to the targets to ensure they remained consistent with the logic that underlay them when they were originally
set. Following that review, the Remuneration Committee was satisfied that the original targets retained the required level of stretch
when applied to the performance assessment process outlined above.
FTSE 250 excluding companies in the following industries: basic materials, energy, financial services, real estate, utilities and travel
and leisure.
Externally audited scope 1 and 2 GHG emissions consistent with our publicly stated commitment to be carbon neutral by 2040, and
an interim reduction of 25% by 2025 relative to a 2019 baseline.
127
ESSENTRA PLC ANNUAL REPORT 2023 ANNUAL REPORT ON REMUNERATION CONTINUED
LTIP awards (audited)
Performance Conditions for LTIP awards made in 2023
Measures
Adjusted EPS growth
Relative TSR vs comparator group
of the FTSE 250 index excluding the
following industries: basic materials,
energy, financial services, real estate,
utilities and travel and leisure.
Weighting Threshold
Maximum
50%
30%
7% CAGR for 25% of the EPS
element to vest
12.5% CAGR for 100% of the EPS
element to vest
If median rank is achieved,
25% of the TSR element vests
If upper quartile rank is
achieved, 100% of the TSR
element vests
ESG comprised of
20%
GHG reduction comprised of
Scope 1 & 2 emissions -(10%)
Diversity of gender in our Group
Leadership team, including the
GEC. (10%)
11.5% reduction for 25%
of the GHG reduction to vest
17% reduction for 100% of the
GHG reduction to vest
Executive Directors
Scott Fawcett
Jack Clarke
Non-Executive Directors
28% female representation
for 0% of the Diversity target
to vest.
40% female representation for
100% of the Diversity target
to vest
Paul Lester
Ralf K. Wunderlich
Share awards granted during the year (audited)
The following conditional share awards were granted to Executive Directors on 31 March 2023.
Mary Reilly
Adrian Peace
Dupsy Abiola
Kath Durrant2
DIRECTORS’
REPORT
Directors’ shareholdings (audited)
The beneficial interests of the current Directors in office and their connected persons at the
end of the year, in the issued ordinary share capital of the Company were as follows:
There have been no changes in the Directors’ interests between 31 December 2023 and the
date of this Report.
Beneficially owned1
LTIP
DASB
SAYE Options
31 Dec 2022 31 Dec 2023
Unvested
Unvested
Unvested
47,847
53,1083
–
13,500
602,897
482,870
72,780
46,011
17,678
10,606
21,346
32,546
170,230
180,230
14,423
16,423
–
–
–
2,000
2,011
7,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Number
of awards
granted
Share price
used to
determine
award
413,687
195.8p
Face value
£809,999
(150% of salary)
Percentage
which
vests at
threshold
Notes:
1 Beneficially owned includes the vested after tax shares as at 31 Dec 2022 and 31 Dec 2023.
2
3
Kath Durrant joined the Board in January 2023.
Of the DASB amount vested in 2023, 4,325 have been sold to cover tax, in line with plan rules and the Remuneration Policy, with the
remainder included in the amount disclosed as beneficially owned.
The DASB share awards are subject to continued service, however are not performance related, but can be counted towards the
post-employment shareholding requirements
25%
4
Executive
Scott Fawcett
Jack Clarke
Type of
award
Conditional
share award1
DASB Share
awards
Conditional
share award1
DASB Share
awards
30,519
195.8p
£59,756
268,131
195.8p
£525,000
(150% of salary)
46,011
195.8p
£90,090
N/A
25%
N/A
Notes:
1
The performance period for these awards is three financial years to 31 December 2025 plus an additional two-year holding period
following vesting. The vesting takes place on the third anniversary of the grant.
Face value is based on the mid-market closing share price on the day preceding the grant, ie
30 March 2023.
128
Scott Fawcett and Jack Clarke are required to build up a shareholding worth 300% and
200% of salary, respectively. Beneficially owned shares include the vested DASB awards and
shares held directly. The shareholding guidelines are to be achieved up by retaining 50% of
post-tax vested shares from the date of approval of this Policy. The current holdings (which
include the vested and unvested DASBs) as a percentage of salary for Scott Fawcett is 39.5%
and Jack Clarke is 28.8%.
Salary used is the prevailing annual salary as at 31 December 2023.
The Executive Directors are regarded as being interested in a portion of the 9,180 ordinary
shares in Essentra plc that are held by the Essentra Employee Benefit Trust (“EBT”) as they
are, together with other Essentra employees, potential beneficiaries of the EBT.
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
Performance graph (unaudited)
The graph represents the comparative Total Shareholder Return (“TSR”) performance of the
Company versus the FTSE 250 (excluding investment trusts) index for the last ten years.
This index has been selected as it is considered the most appropriate published general index
in which the Company is a constituent.
This graph shows the value, by 31 December 2023, of £100 invested in Essentra on
31 December 2013, compared with the value of £100 invested in the FTSE 250 (excluding
Investment Trusts) Index.
The other points plotted are the values at intervening financial year ends.
£
200
180
160
140
120
100
80
60
40
20
0
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Dec
2019
Dec
2020
Dec
2021
Dec
2022
Dec
2023
Essentra
FTSE 250 (excluding Investment Trusts) index
Chief Executive remuneration table (unaudited)
Total remuneration (£000)
Annual bonus (% maximum)
LTIP vesting (% maximum)
Colin Day
Paul Forman
Scott Fawcett
2014
5,661
60
100
2015
2,281
46.2
50
2016
876
0
0
2017
1,267
48
0
2018
1,420
64.2
0
2019
1,296
30.2
13.5
2020
800
0
0
2021
1,483
67
0
2022
1,410
54.9
0
2023
1,011
30
63.5
Colin Day retired as Chief Executive on 31 December 2016. Paul Forman was appointed as Chief Executive on 1 January 2017, and stepped down on the 31st December 2022. Scott Fawcett
was appointed as Chief Executive on 1 January 2023.
129
ESSENTRA PLC ANNUAL REPORT 2023 ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
Year-on-year change in pay for Directors compared to the average of employees (unaudited)
In line with the requirements in The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, which implement Articles 9a and 9b of the European
Directive 2017/828/EC1 (commonly known as the Revised Shareholder Rights Directive), the table below shows the percentage change in Directors’ remuneration and average remuneration
of employees from the year ended 31 December 2020 to the year ended 31 December 2023. Given that the Essentra plc entity has no employees, as a voluntary disclosure, data for all
employees of the Essentra Group has been included.
Average employee1
Directors
Paul Forman2
Lily Lui3
Paul Lester4
Dupsy Abiola5
Ralf K. Wunderlich6
Mary Reilly8
Kath Durrant9
Adrian Peace10
Jack Clarke11
Scott Fawcett12
2023
Bonus
+2.2%
Benefits
+31.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-27.2%
n/a
n/a
n/a
n/a
n/a
+133.3%7
n/a
n/a
+53.8%
+34.8%
n/a
Salary
+17.6%
n/a
n/a
-10%
+23.8%
+7.5%
0%
n/a
0%
+34.1%
n/a
2022
Bonus
+17.6%
-17.3%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Salary
-6.3%
+3.4%
-82.2%
0.0%
n/a
+15.1%
+4.7%
n/a
+58.7
n/a
n/a
Benefits
-7.3%
-0.6%
-47.8%
n/a
n/a
+16.7%
n/a
n/a
n/a
n/a
n/a
2021
2020
Salary
+4.6%
+6.3%
+8.1%
+4.8%
n/a
+5.5%
+12.3%
n/a
n/a
n/a
n/a
Bonus
-7.3%
Benefits
+14.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-9.0%
-9.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Salary
+1.7%
-4.3%
+0.9%
-4.8%
n/a
+21%
-7.8%
n/a
n/a
n/a
n/a
Bonus
Benefits
-73.3%
+4.7%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0%
-57.6%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The average employee salary is based on all global employees. The average employee benefits and bonus are based on global employee data located in the UK and USA. The differing approach reflects the information held in global systems.
Notes:
1
2 Paul Forman stepped down in 2022.
3 Lily Liu stepped down in 2022.
4 Paul Lester received a reduction in salary effective 1 January 2023.
5 Dupsy Abiola joined in March 2022. 2023 was the first full year fees paid.
6 Ralf Wunderlich had an increase in fees in May 2022 as a result of taking on additional responsibility. The increase shown relates to a full year on the new fees for 2023.
7 Ralf Wunderlich has significant increase in travel as an Board Champion, and the benefits relate to a taxable travel allowance.
8 Mary Reilly was paid a taxable travel allowance in 2023 which she had not previously received.
9 Kath Durrant joined in 2023, so no prior year to compare to.
10 Adrian Peace benefits relate to a taxable travel allowance.
11 Jack Clarke joined in 2022, so the perceived increase is due to a partial years data in 2022. Jack did not receive a pay increase in 2023.
12 Scott Fawcett became CEO in January 2023, so no prior year to compare to.
Relative importance of spend on pay (unaudited)
Wages and salaries1
Distributions to shareholders2
Revenue – total3
Adjusted Operating Profit – total3
2023
£m
90.7
6.5
316.3
43.2
2022
£m
105.4
19.0
337.9
25.1
%
change
-13.9
-65.8
-6.4
72.1
Notes:
1 Wages and salary costs are as per Note 5 of the Financial Statements.
2 This excludes the £89.8m special dividend paid to shareholders in April 2023.
3
Revenue and Adjusted Operating Profit included in this analysis as indicators of the continuing operations of the business performance
and can be found on page 151 of the annual report.
Payments for loss of office (audited)
As detailed in the 2022 annual report, Paul Forman stepped down as CEO for Essentra plc on
31 December 2022 and received a loss of office payment, disbursed in monthly instalments
of £62,637 (gross) per month. The last instalment, totalling £31,318, was adjusted pro rata to
account for the unexpired notice period as of October 2023, which totalled £595,051 in 2023.
The Company also provided a payment to Paul in lieu of accrued, untaken holiday entitlement
to the value of £52,428 as of 31 December 2022. Furthermore, the Remuneration Committee
exercised discretion to treat Paul as a ‘good leaver’. Paul received his 2022 Annual bonus in
2023, which came to a total of £561,378.
130
ESSENTRA PLC ANNUAL REPORT 2023
ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
Payments to past Directors (audited)
Paul Forman, in his capacity as an Executive Director of Essentra plc, was awarded
Performance Shares in 2021. As of March 30, 2024, Paul Forman’s pro-rated shares are set
to vest at 63.5%, with an estimated value of £294,970. (Share price used is based on the
average share price over the last three months of the financial year.)
Executive Director Contracts and NED letters of appointment
The Executive Directors have open-ended contracts containing 12 months’ notice periods
with their reappointment being confirmed annually at the AGM.
The Chair and Non-Executive Directors do not have service contracts, instead they have
letters of appointment for an initial period of 3 years which may be terminated at three-
months’ notice.
Implementation of Remuneration Policy for 2024 (unaudited)
When considering the implementation of the policy for 2024, the Remuneration Committee
was mindful of the 2018 Code and considers that the executive remuneration framework
appropriately addresses the following factors:
Clarity
Simplicity
Predictability
Alignment to
culture
Proportionality
and risk
We provide open and transparent disclosures both internally and externally in relation to our
executive remuneration arrangements.
Variable remuneration arrangements for our executives and our wider workforce are simple in
nature with individuals eligible for a bonus and, at more senior levels, a single long-term incentive
plan. These are well understood by both participants and shareholders.
Our executive remuneration framework contains maximum opportunity levels for each component
of remuneration with variable incentive outcomes varying depending on the level of performance
achieved against specific measures.
The performance measures used for annual bonus and LTIP awards are KPIs that drive behaviours
that are closely aligned to our strategy and Company values. Including a greenhouse gas (“GHG”)
emissions measure and a waste reduction measure.
The Remuneration Committee believes that our variable pay structures provide a fair and
proportionate link between Company performance and reward. In particular, the use for Executive
Directors of annual bonus deferral, LTIP holding periods and shareholding requirements provide a
clear link to the ongoing performance of the Company and therefore long-term alignment with
stakeholders. For example, the shareholding guideline for Executive Directors continues two years
after leaving Essentra.
We are also satisfied that the variable pay structures do not encourage inappropriate risk-taking.
Notwithstanding this, the Remuneration Committee retains an overriding discretion that allows
it to adjust formulaic outcomes from incentive plans so as to guard against disproportionate out-
turns. Malus and clawback provisions also apply to both the annual bonus and LTIP.
Salary
Basic salary for each Executive Director is determined by the Remuneration Committee,
taking into account the role, responsibilities, performance, experience of the individual and
market movement. Any salary change is normally effective in April each year.
We are awarding Executive Directors a 3.5% increase, in line with the wider UK workforce.
Scott
Fawcett1
£
558,900
540,000
Jack
Clarke
£
362,250
350,000
Annual salary effective from 1 April 2024
Annual salary effective from 1 April 2023
Notes:
1 Scott Fawcett was promoted to CEO on 1 January 2023 on a salary of £540,000.
Benefits
Executive Directors are provided with the following benefits:
• car allowance
• private medical insurance with family level cover
• life assurance cover of four times basic salary.
Pension
In line with best practice, our Executive Directors’ pension contributions are aligned with
the wider workforce. The contributions for our CFO, Jack Clarke, have been aligned since his
appointment April 2022, and the contributions for our CEO, Scott Fawcett, were set at 5% of
salary from appointment in January 2023. This completes the phased approach to align
with the wider UK workforce by the end of 2022 and ensures we are fully compliant with
provision 38 of the 2018 Code going forward.
2024 Annual bonus
Under the terms of the annual bonus arrangements for 2024, the CEO is potentially entitled
to a maximum bonus of up to 150% of basic salary and the CFO is potentially entitled to a
maximum bonus of up to 125% of basic salary.
The metrics used in the 2024 annual bonus (table below) are intended to align
with the strategy of Essentra plc. In particular, the metrics are designed to provide a
balanced alignment with our goals of generating sustainable, profitable growth and
strong cash generation.
Measures
Adjusted Operating Profit
Adjusted Operating Cash Flow
Strategic Objectives
Environmental targets
2023 Weighting
(%)
2024 Weighting
(%)
50%
20%
20%
10%
50%
20%
20%
10%
131
ESSENTRA PLC ANNUAL REPORT 2023 ANNUAL REPORT ON REMUNERATION CONTINUED
DIRECTORS’
REPORT
In 2024, there will be no bonus payable unless the Remuneration Committee determines
that the Company’s 2024 financial performance is satisfactory. For achieving threshold
Adjusted Operating Profit and Adjusted Operating Cash Flow, 20% of the relevant portion
of the bonus will be payable. Progress against environmental targets will be reviewed by
the ESG Committee.
Targets are considered to be commercially sensitive so will be disclosed retrospectively in
next year’s Remuneration Report.
2024 LTIP
An award granted under the LTIP consists of a conditional right to receive shares in the
Company, subject to satisfaction of performance conditions over a three-year period.
An additional two-year holding period applies. Malus and clawback provisions also apply
to LTIP awards for three years from vesting.
The following LTIP awards are intended to be granted to the CEO and CFO during 2024.
Non-Executive Director fees
The fees for the Chair are set by the Remuneration Committee, while fees for the Non-
Executive Directors are determined by the Chief Executive and the Chair. Fee reviews take
into account a range of relevant factors, including time commitment and responsibilities for
individual Non-Executive Director roles and relevant market data. Following the most recent
review, the Company Chair’s fee increased by 2.2% to £230,000 effective 1 January 2024 and
the basic Non-Executive Director fee will increase from £52,000 to £60,000 effective 1 June
2024. This is the first increase in the basic Non-Executive Director fee since 2015.
Annual fee effective
Chair
Non-
Executive
Director
Additional
fee for Senior
Independent
Director
Additional
fee for
Audit and
Remuneration
Committee
chairs
Additional
fee for
sustainability
Committee
chair
Additional
fee for
Employee
Champions
From 1 Jan/June 2024
£230,000
£60,000
£10,000
£13,000
£11,000
£10,000
Scott
Fawcett
150%
Jack
Clarke
150%
Statement of shareholder voting (unaudited)
The results of shareholder voting in relation to the approval of the 2021 Directors’
Remuneration Policy and the Directors’ Remuneration Report at the 2023 AGM, respectively,
were as follows:
Threshold4
Maximum
7%
12.5%
Median
Upper quartile
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
Annual Report on Remuneration
excluding the Policy
(2023 AGM)
Remuneration
Policy Report
(2021 AGM)
No. of
votes
232,551,056
6,925,444
239,476,500
23,339
%
97.11
2.89
No. of
votes
255,799,845
15,919,880
271,719,725
%
94.14
5.86
–
7,852
–
Condition
LTIP awards as a percentage of salary
Condition
Compound Annual Growth in Adjusted EPS1 (50%)
Relative TSR v FTSE 2501 (30%)
ESG
GHG3 – reduction in GHG emissions over the three-year LTIP (10%)
Social – Diversity of gender in our Leadership teams both GEC and the GEC – 1 (10%)
11.5%
30%
17%
40%
Notes:
1 Adjusted EPS is subject to adjustment from portfolio management/changes .
2
FTSE 250 excluding companies in the following industries: basic materials, energy, financial services, real estate, utilities and travel
and leisure.
Externally audited scope 1 and 2 GHG emissions consistent with our publicly stated commitment to be carbon neutral by 2040, and
an interim reduction of 25% by 2025 relative to a 2019 baseline.
3
4 25% vests at threshold, with the exception of the Diversity measure, where 0% vests at threshold.
132
ESSENTRA PLC ANNUAL REPORT 2023
DIRECTORS’
REPORT
Summary of key changes:
As discussed in the Remuneration
Committee Chair’s letter, the updated
Policy Report is materially unchanged
from the existing Policy Report approved
at the 2021 AGM with the only changes
of note being:
• Amendment to the Chair and
NED fees section to provide flexibility
to meet the costs of providing tax
advice and tax return assistance
for international NEDs
• Addition of discretion, in line with
Investment Association guidance, for
the Remuneration Committee to adjust
formulaic incentive outturns so that
they properly reflect the performance
of the executives and the business, the
experience of stakeholders and the
general market environment.
We have
consulted with our
major shareholders
and taken advice
from our independent
advisers, Deloitte
THE DIRECTORS’ REMUNERATION POLICY REPORT
The Directors’ Remuneration
Policy report
The Directors’ Remuneration Policy Report (the “Policy Report”)
sets out the policies under which the Executive and Non-Executive
Directors are remunerated. The Policy Report is designed to be
in full compliance with the requirements of the Large and Medium-
sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013, the 2018 Code as issued by the Financial Reporting
Council and the Listing Rules.
The current Directors’ Remuneration Policy
was approved by our shareholders at the
AGM in 2021. We are required by law to put
a new Policy to our shareholders for approval
three years later. This will be presented at the
2024 AGM. The current Policy Report can be
found in full in the Essentra Annual Report
2021, a copy of which can be downloaded
from www.essentraplc.com.
The Remuneration Committee has reviewed
the continued appropriateness of the current
Policy Report in the context of the Company’s
corporate strategy. Shareholder approval will
be sought at the AGM on 23 May 2024 for the
updated Policy Report set out below. Subject
to shareholder approval, the updated Policy
Report will take effect immediately after the
AGM and will apply to the 2024 financial year.
The Remuneration Committee discussed
this Policy Report over a series of meetings
which considered the strategic priorities
of the business post the strategic review
and moving to a standalone pure-play
components business, governance
requirements and evolving market practice.
Input was sought from the CEO, CFO and
members of the HR team, while ensuring
that conflicts of interests were suitably
mitigated. Consideration was given to
the wider workforce when evaluating the
approach to Directors’ remuneration.
No employees were directly consulted
on the development of the Policy.
133
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
2. Summary of components of
Executive Directors’ remuneration
The Remuneration Committee structures
Executive Directors’ remuneration in two
distinct parts:
• fixed remuneration of basic salary,
pension provision and benefits; and
• variable performance-related
remuneration in the form of cash
bonuses, deferred share bonuses and
long-term incentive arrangements.
Remuneration for Executive Directors
is structured so that the variable
performance-related pay element forms
a significant portion of each package.
A significant portion of total remuneration
at the maximum performance level will
derive from the Company’s long-term
incentive arrangements. All incentives
are designed to be aligned to delivery
of Essentra’s strategic priorities.
THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
Remuneration
Policy
1. Overview
The Remuneration Committee determines
and recommends to the Board the framework
for the remuneration of the Executive Directors
and the Chair of the Board. The remuneration
of the Non-Executive Directors is the
responsibility of the Board as a whole. No
Director is involved in determining or voting
on their own remuneration.
The Chief Executive’s remuneration
proposals for the other members of the
Group Executive Committee, including
the Company Secretary (“GEC”) are
reviewed by the Remuneration Committee,
and the Remuneration Committee’s
recommendations with regards to those
proposals are made to the Board.
The Remuneration Committee also takes
note of the remuneration policy as detailed
by the Chief Executive in respect of other
levels of management in the Company
and makes such recommendations to the
Chief Executive as the Remuneration
Committee deems appropriate. The
Remuneration Committee has regard to
the proposed remuneration policy for other
management and employees across the
Group, when determining recommendations
on remuneration for the Executive
Directors and other senior executives.
The Remuneration Committee places
significant focus on, and spends considerable
time reviewing the risks surrounding the
Company’s existing remuneration policies
on an annual basis and has determined that
there are currently no significant concerns
with the structure or operation of the
remuneration policy.
134
The Remuneration Committee’s main
responsibilities are to:
• Develop the Company’s Remuneration
Policy for the Chair, Executive Directors,
the members of the GEC and other senior
executives, covering basic salary, bonus,
long-term incentives, retirement provisions
and other benefits
• Strike an appropriate balance between:
– the fixed and variable; and
– the cash and equity-
related components of total
remuneration packages.
• Review and determine the terms of
employment and remuneration of the
individual Executive Directors and
nominated senior management, including
any specific retirement or severance terms
• Determine the remuneration of the Chair
of the Board
• Establish and review the operation
of any employee share plans, including
the granting of awards, the setting and
testing of performance conditions and
exercising of any awards under long-term
incentive plans
• Review the workforce remuneration
and related policies and the alignment
of incentives and reward with the
Company culture
• Select, appoint and determine the terms
of reference for independent consultants
to advise the Remuneration Committee
on remuneration matters
In determining the policy for the Executive
Directors, the Remuneration Committee’s
key objectives are to:
• Ensure that senior executives’
remuneration is designed so as to
attract, retain and motivate high
quality executives in a manner that
aligns their remuneration with the
interests of shareholders and other
stakeholders, particularly in the design
of the performance-related elements of
their remuneration packages and their
shareholding guidelines
• Promote the achievement of both
the Company’s annual and longer-term
strategic objectives. The Remuneration
Committee considers the alignment
of Company performance and the
remuneration of its senior executives,
including the Executive Directors, to be an
important element of driving shareholder
value. It believes that senior executives
should be highly rewarded (on a market-
competitive basis) for the delivery of
stretching goals but should also receive
reduced rewards when the business does
not perform to expectations
• Encourage Executive Directors to act
in a fair and responsible manner without
unnecessary risk-taking having regard
to the long-term performance of
the Company.
The Remuneration Committee considers all
elements of the remuneration package as a
whole. It looks to ensure that an appropriate
balance is maintained between them so
that the need for both short-term success
and long-term sustainable growth is
recognised. The Remuneration Committee
also ensures that non-financial business
measures and individual objectives reflect
adequately the Company’s Environmental,
Social and Governance (“ESG”)
responsibilities.
ESSENTRA PLC ANNUAL REPORT 2023 THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
DIRECTORS’
REPORT
3. Policy Table
Basic salary
Basic salary
Purpose and link to strategy
Bonus
Purpose and link to strategy
To reflect the particular skills and experience of an individual and to provide a competitive basic salary.
To ensure the delivery of Company performance-related objectives, aid retention and to align
Directors’ interests with those of the Company’s shareholders.
Operation
Operation
Generally reviewed annually with any increase normally taking effect from 1 April, although
the Remuneration Committee may award increases at other times of the year if it considers
it appropriate.
The review takes into consideration a number of factors, including (but not limited to):
• The individual Director’s role, experience and performance
• Business performance
• Pay and conditions elsewhere in the Group
• Market data for comparable roles in appropriate pay comparators
• Overall external climate around the cost of living
Opportunity
No absolute maximum has been set for Executive Director base salaries.
Any annual increase in salaries is at the discretion of the Remuneration Committee taking into
account the factors stated in this table and the following principles:
• Salaries would typically be increased at a rate consistent with the average salary increase (in
percentage of salary terms) for the relevant workforce.
• Larger increases may be considered appropriate in certain circumstances (including, but not limited
to, a change in an individual’s responsibilities or in the scale of their role or in the size and complexity
of the Group).
• Larger increases may also be considered appropriate if a Director has been initially appointed to the
Board at a lower than typical salary.
Performance measure
Not applicable.
One half of the total bonus is usually paid in cash shortly after the announcement of the
annual results.
The other half is usually deferred into shares in the Deferred Annual Share Bonus Plan (the “DASB”)
which will normally vest after three years subject to continued service.
Performance is assessed against measures and targets which are established by the Remuneration
Committee. As performance increases so does the percentage payable up to the maximum.
The bonus is subject to malus and clawback provisions for a period of three years following the
determination of the bonus. Circumstances in which these provisions could be applied by the
Remuneration Committee include material misstatement in the Company’s Financial Statements,
error in assessing the performance conditions, a material failure in risk management, serious
misconduct or material error by an individual, business failure or serious reputational damage
to the Company or a relevant business unit.
An additional payment (in the form of cash or shares) may be made in respect of shares which
vest under deferred awards to reflect the value of dividends which would have been paid on those
shares during the deferral period (this payment may assume that dividends had been reinvested in
Company shares on a cumulative basis).
Opportunity
150% of basic salary.
Performance measure
The bonus will be based on performance using appropriate financial, strategic and individual
performance measures.
The majority of the bonus will normally be determined by measure(s) of the Company’s financial
performance. The remainder of the bonus will be based on financial, strategic, ESG, operational or
other suitable business measures appropriate to the individual Director.
No more than 20% of each financial measure will be payable at threshold performance.
135
ESSENTRA PLC ANNUAL REPORT 2023 THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
DIRECTORS’
REPORT
3. Policy Table continued
Long-Term Incentive Plan (“LTIP”)
Purpose and link to strategy
Employment and Post-Employment Shareholding guideline
Purpose and link to strategy
To drive the long-term delivery of the Company’s strategic objectives, aid retention and to align
Directors’ interests with those of the Company’s shareholders.
To align the interests of Executive Directors and shareholders, encourage a focus on long-term
performance and risk management.
Operation
Operation
An annual grant of performance share awards usually with a three-year performance and additional
two-year holding period.
Awards are subject to the LTIP plan rules, including malus and clawback provisions for a period of
three years following the vesting of the awards. Circumstances in which these provisions could be
applied by the Remuneration Committee include material misstatement in the Company’s Financial
Statements, error in assessing the performance conditions, a material failure in risk management
serious misconduct or material error by an individual, business failure or serious reputational
damage to the Company or a relevant business unit.
An additional payment (in the form of cash or shares) may be made in respect of shares which vest
under LTIP awards to reflect the value of dividends which would have been paid on those shares
during the period up to the release of the shares (this payment may assume that dividends had
been reinvested in Company shares on a cumulative basis).
Whilst in employment, Executive Directors are expected to build up a shareholding worth 300%
of salary for the Chief Executive and 200% for the Chief Financial Officer. The shareholding is to be
built up by retaining a minimum of 50% of post-tax vested shares (subsequent to the
2021 AGM).
The Remuneration Committee will review progress towards the guidelines on an annual basis and
has the discretion to adjust the guidelines in what it feels are appropriate circumstances.
Executive Directors will also be expected to remain compliant with the above guideline for a period
of two years post-employment. This guideline applies to shares from incentive awards released
subsequent to the 2021 AGM. The Remuneration Committee would retain discretion to waive this
guideline if it is not considered appropriate in the specific circumstances.
Non-Executive Directors are encouraged to hold a minimum of 7,500 shares.
Opportunity
An award to any Executive Director would be limited to a maximum of 300% of salary.
Performance measure
Vesting will be subject to performance conditions as determined by the Remuneration Committee
on an annual basis.
The performance conditions will usually be some combination of relative TSR, adjusted EPS, adjusted
cumulative operating cash flow, ESG and a capital return measure although the Remuneration
Committee will retain discretion to use alternative performance measures which are aligned to the
corporate strategy.
The Remuneration Committee may adjust the weightings of the performance conditions for
each award, although usually each condition would have a weighting in the range of 10% to 40%
of the award.
Performance will usually be measured over a three-year period.
Up to 25% of each element vests at threshold performance, usually rising on a straight-line basis
for performance up to the maximum level for full payment. If below threshold performance, that
element of the award will not vest.
Opportunity
Not applicable.
Performance measure
Not applicable.
Pension
Purpose and link to strategy
To provide cost-effective long-term benefits comparable with similar roles in similar companies.
Operation
A contribution to a defined contribution plan or paid as a cash supplement.
Opportunity
The Executive Directors have a pension provision in line with the relevant workforce. This is currently
5% of base salary.
Performance measure
Not applicable.
136
ESSENTRA PLC ANNUAL REPORT 2023 THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
DIRECTORS’
REPORT
Employee Plans – Sharesave
Purpose and link to strategy
Chair and Non-Executive Directors – Fees
Purpose and link to strategy
To create alignment of employees’ interests with those of shareholders.
To attract a high-calibre Chair and Non-Executive Directors with the relevant experience and skills.
Operation
Operation
Under the UK Sharesave, employees (including Executive Directors) are invited to enter a savings
contract of three years or five years, whereby the proceeds can be used towards the exercise of
an option granted at the time they choose to participate. The Remuneration Committee has
the discretion to set the option price up to a 20% discount on the share price in line with
HMRC legislation.
An equivalent US plan is operated under applicable US tax legislation, with options granted at up to
a 15% discount on the share price.
Opportunity
For the UK plan, shares worth up to the value of the savings an Executive Director makes over
the saving period at the previously agreed option price may be purchased. The savings amount is
subject to the HMRC limit, currently £500 per month.
The US Plan is usually limited to the monthly dollar equivalent of the UK Sharesave plan.
Performance measure
A basic fee is payable to the Chair and Non-Executive Directors (“NEDs”) with supplementary
fees for those NEDs with additional responsibilities, such as acting as Senior Independent Director,
chairing a Board Committee, an additional defined role such as a Board Champion or for a
significantly increased time commitment.
Additional payments may be made to NEDs for time spent travelling on Company business.
Fees are reviewed periodically with reference to market levels in companies of a comparable size,
complexity and taking account of the responsibilities and time commitment of each role.
The Chair and the NEDs do not participate in the Group’s incentive arrangements or
pension plan.
Where travel to the Company’s registered office is recognised as a taxable benefit, the
Chair or a NEDs may receive the grossed-up costs of travel as a benefit. The Company may
also meet the costs (including tax thereon) of providing tax advice and tax return assistance for
international NEDs.
The Chair and NEDs are entitled to reimbursement of reasonable expenses plus any associated
tax thereon.
The Remuneration Committee agree the annual discount to be applied to the Sharesave schemes.
No performance conditions apply to All Employee Plans.
Opportunity
Other benefits
Purpose and link to strategy
Fees for the current year are stated in the Annual Report on Remuneration.
Fee increases may be greater than those of the wider workforce in any particular year as they reflect
changes to responsibilities and time commitments and the periodic nature of any increases.
Performance measure
To provide cost-effective benefits comparable with similar roles in similar companies.
Not applicable.
Operation
Other benefits include family medical expenses, life insurance, and car allowance.
The Remuneration Committee may vary these benefits from time to time to suit business needs, but
they will usually be provided on broadly similar terms to those offered to other Group employees.
Executive Directors are entitled to reimbursement of reasonable expenses plus any associated
tax thereon.
Opportunity
There is no overall maximum, as the level of benefits depends on the annual cost of providing
individual benefits in the relevant local market and the individual’s specific role.
Performance measure
Not applicable.
137
ESSENTRA PLC ANNUAL REPORT 2023 THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
DIRECTORS’
REPORT
4. Remuneration Committee
discretion
The Remuneration Committee will operate the
bonus plan and long-term incentive plans
according to their respective rules and will be
consistent with normal market practice, the
Listing Rules and relevant income tax and
social security rules, including flexibility in
a number of regards. These include:
• when to make awards and payments
• how to determine the size of an award or
a payment, or when and how much of an
award should vest
• who receives an award or payment
• whether awards are settled in shares
or cash
• how to deal with a change of control or
restructuring of the Group
• whether a participant is a good / bad
leaver for incentive plan purposes, and
whether and what proportion of awards
vest and timing of delivery
• how and whether an award (or an
award of shares outlined in this Policy
that is yet to be granted) may be adjusted
in certain circumstances (eg rights issues,
corporate restructuring, events and
special dividends)
• what the weighting, measures and
targets should be for the bonus plan
and LTIP from year to year.
The Remuneration Committee may use its
discretion to amend the formulaic outturn
upwards or downwards if it does not
consider the formulaic outcome as
appropriate in the context of overall
performance / stakeholder experience /
general market environment. The
Remuneration Committee also retains the
ability within the Remuneration Policy to
adjust the targets and / or set different
measures and alter weightings and the
138
formulaic outcomes for the bonus plan and
LTIP, and to adjust targets for the LTIP if
events occur which cause it to determine
that the conditions are unable to fulfil their
original intended purpose.
The Remuneration Committee may make
minor amendments to the Remuneration
Policy as set for regulatory, exchange
control, tax or administrative purposes or
to take account of a change in legislation,
without obtaining shareholder approval for
that amendment.
6. Choice of performance measures
and approach to target setting
The Remuneration Committee sets
performance metrics under both the bonus
plan and LTIP which are clearly aligned to the
Group’s strategy and are usually part of its
Key Performance Indicators (“KPIs”).
Personal objective performance measures
within the bonus are also directly linked to
key strategic objectives.
Targets are set at the start of each
performance period by the Remuneration
Committee taking into account relevant
internal and external reference points and
are designed to be appropriately stretching.
7. Remuneration mix
The graphs below demonstrate the potential
remuneration mix for both of the Executive
Directors in 2024 in four theoretical
scenarios: minimum, meeting expectations,
maximum (assumed no share price growth)
and maximum (assumed 50% share price
growth over the LTIP performance period).
5. Existing awards
The Remuneration Committee reserves the
right to make any remuneration payments
and / or payments for loss of office
(including exercising any discretions available
to it in connection with such payments)
notwithstanding that they are not in line
with the Remuneration Policy 2024 (set out
above) where the terms of the payment
were agreed:
SCOTT
(i) before the Remuneration Policy set
out above came into effect, provided
that the terms of the payment were
consistent with the shareholder-
approved Directors’ Remuneration Policy
in force at the time they were agreed; or
(ii) at a time when the relevant individual
was not a Director of the Company and,
in the opinion of the Remuneration
Committee, the payment was not in
consideration for the individual becoming
a Director of the Company. For these
purposes “payments” includes the
Remuneration Committee satisfying
awards of variable remuneration and, in
relation to an award over shares, the
terms of the payment are “agreed” at
the time the award is granted.
Jack
2024 potential remuneration mix
Scott Fawcett
Fixed Pay
Annual Bonus
LTIP
s
o
i
r
a
n
e
c
S
l
a
c
i
t
e
r
o
e
h
T
1
2
3
4
100%
£600k
49%
26%
22%
34%
17%
£1,228k
37%
31%
0
500
1,000
1,500
(£000s)
Jack Clarke
1 Minimum
2 Meeting Expectations
3 Maximum, no share price growth
4
Maximum, assumed 50%
share price growth
37%
£2,276k
47%
£2,696k
2,000
2,500
3,000
s
o
i
r
a
n
e
c
S
l
a
c
i
t
e
r
o
e
h
T
1
2
3
4
100%
£393k
52%
28%
24%
30% 18%
£755k
33%
27%
0
250
500
750
1,000
(£000s)
39%
£1,389k
49%
£1,661k
1,250
1,500
1,750
2,000
Assumptions:
1 Salary: to be paid effective 1 April 2024.
2 Benefits: 2023 reported taxable benefits.
3 Bonus maximum of 150% of salary for Scott Fawcett and 125% of salary Jack Clarke.
4 LTIP award of 150% of salary for Scott Fawcett and 150% of salary for Jack Clarke.
5 Pension allowance assumed to be 5%.
6 Meeting expectations scenario assumptions – 50% of bonus maximum paid and 25% of LTIP award vests.
7 Maximum scenarios assumptions – 100% of bonus maximum paid and 100% of LTIP award vests.
8 No dividend accrual considered.
9 Sharesave awards have been ignored
ESSENTRA PLC ANNUAL REPORT 2023
THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
8. New appointments
Basic salary
Will be set based on relevant market
data, experience and skills of the individual,
internal relativities across the Company
and the individual’s current basic salary.
Any annual increase in salary for a new
appointment would be at the discretion
of the Remuneration Committee and
would typically be broadly consistent with
the average salary increase for the relevant
workforce. However, larger increases may
be considered appropriate in certain
circumstances. For example, where new
appointees have initial basic salaries set
below market rates, any shortfall will be
managed with phased increases (which
may be greater than those offered to the
relevant workforce) over a period of two to
three years, subject to their development
in the role.
Bonus
New appointees will be able to participate
in the bonus plan up to the limit described in
the Policy Table; and, in the first year, being
pro-rated to reflect the proportion of
employment during the year. In the first
year, the Remuneration Committee may
set different performance measures and
targets for the bonus to those of the other
Executive Directors, depending on the timing
and scope of any appointment. In order to
facilitate recruitment, the Remuneration
Committee may compensate for any bonus
forgone when the individual leaves their
previous employer.
Share incentives
New appointees will be granted awards
under the LTIP up to the limit described in
the Policy Table. An award may be made
shortly following a new appointment. In the
first year, the Remuneration Committee
may set different performance measures
and targets for the LTIP to those of the other
Executive Directors, depending on the timing
and scope of any appointment.
139
Pension
A contribution to a defined contribution
plan or a cash supplement as described
in the policy table in line with the
relevant workforce.
Other benefits
As provided to current Executive Directors.
Where necessary the Remuneration
Committee may approve the payment of
relocation expenses to facilitate recruitment,
and flexibility is retained for the Company to
pay for legal fees and other costs incurred by
the individual in relation to their appointment.
Buy-out awards
To potentially facilitate the recruitment
through the buy-out of existing awards
and compensation arrangements from
their current employer, the Remuneration
Committee will retain the ability to make
a one-off buy-out award. In doing so, the
Remuneration Committee will take account
of all relevant factors, including any
performance conditions attached to incentive
awards, the likelihood of those conditions
being met, the proportion of the vesting /
performance period remaining and the
form of the award (eg cash or shares). The
overriding principle will be that any buy-out
award should be of comparable commercial
value to the compensation which has been
forfeited. Buy-out awards will be made
using existing incentive arrangements where
possible, but it may be necessary to use
the exemption under Listing Rule 9.4.2.
Shareholders will be informed of any such
payments at the time of appointment.
In the case of internal appointments or
appointments following the Company’s
acquisition of or merger with another
company or business, any variable pay
element or legacy arrangements in respect
of the prior role would normally be allowed
to pay-out according to its terms, adjusted
as relevant, to take into account
the appointment.
Non-Executive Directors
In the event of the appointment of a new
Non-Executive Director, remuneration
arrangements will normally be in line with
the structure set out in the Policy Table for
Non-Executive Directors. In the event that
a Non-Executive Director is required to
temporarily take on the role of an Executive
Director, their remuneration may include any
of the elements listed in the Policy Table for
Executive Directors.
9. Service contracts and exit
payments
Service contracts normally continue until the
Director’s agreed retirement date or such
other date as the parties agree.
• The policy for executive service contracts
is that notice periods will normally not
exceed 12 months. Scott Fawcett has a
service contract dated 31 October 2022,
(effective 1 January 2023) and Jack Clarke
has a service contract dated 10 March
2022 (effective 4 April 2022), both with a
notice period of 12 months from either
party. The service contracts for the
Executive Directors are available for
inspection by shareholders at each AGM
and during normal business hours at the
Company’s registered office
• The Remuneration Committee’s policy in
relation to termination of service contracts
is to apply an appropriate level of
mitigation, having regard to all of the
circumstances of the individual, the
termination of employment, and to any
legal advice received. The Company has
the right to make a payment in lieu of
notice (such payment being made based
on salary and at the Remuneration
Committee’s discretion as to the value
of benefits), and any such payment may
be made in monthly instalments at the
Company’s discretion, with a requirement
for the individual to make reasonable
endeavours to find alternative
DIRECTORS’
REPORT
employment and may be reduced
to take into account any sums earned
during the payment period by way of
employment elsewhere
• There are no enhanced provisions on a
change of control
• In certain circumstances, such as gross
misconduct, the Company may terminate
employment immediately without notice
or payment
• The Remuneration Committee reserves
the right to make any other payments
in connection with a Director’s cessation
of office or employment where the
payments are made in good faith in
discharge of an existing legal obligation
(or by way of damages for breach of
such an obligation) or by way of a
compromise or settlement of any claim
arising in connection with the cessation
of a Director’s office or employment
• Any such payments may include, but
are not limited to, paying any fees for
outplacement assistance and / or the
Director’s legal and / or professional
advice fees in connection with their
cessation of office or employment. In
some cases they may receive a modest
leaving gift
• The service contract for any new
appointment would be on a similar basis
to that described above
• The payment of any bonus will be at
the Remuneration Committee’s discretion,
based on the individual circumstances and
would usually be pro-rated for the period
of service and may be paid entirely in
cash. In determining the level of bonus to
be paid, the Remuneration Committee
may, at its discretion, take into account
performance up to the date of cessation
or over the financial year as a whole
based on appropriate performance
measures as determined by the
Remuneration Committee
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
13. External appointments
Essentra recognises its senior executives
can benefit from serving in a personal
capacity as Non-Executive Directors of
non-Essentra Group companies. It is, at
the same time, conscious of the corporate
governance recommendations that
Executive Directors should take account
of the time commitment required by a
non-executive position. Executive Directors
are permitted to accept non-executive
directorships offered by listed companies
and other organisations, which provide
industry experience or public service. Such
outside appointments are subject to prior
Board approval, taking into account existing
duties, potential conflicts of interest and
time commitments outside of Essentra’s
responsibilities. Any fees earned from
these roles may be retained by the
Executive Director.
Ralf K. Wunderlich
Non-Executive Director
Remuneration Committee Chair
18 March 2024
THE DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
• Under the rules of the LTIP, outstanding
awards may vest if a participant leaves
for specified reasons, including injury,
disability, ill health, death, redundancy,
the business or company in which the
participant is employed ceasing to be
part of the Group, at the discretion of the
Remuneration Committee (except where
a participant leaves by reason of gross
misconduct) or on a change of control.
In these circumstances, a participant’s
award vests on an appropriate time pro
rata basis (unless the Remuneration
Committee decides it is inappropriate to
do so) subject to the satisfaction of the
relevant performance criteria at the
normal vesting date with the balance
of the award lapsing. The Remuneration
Committee has the discretion to
determine that the award will vest earlier
with an earlier performance assessment
if it feels this is appropriate. If, however,
the termination of employment is not
for one of the specified reasons, and
the Remuneration Committee does not
exercise its discretion to allow an award
to vest, a participant’s award lapses in
full on the date of cessation. The
Remuneration Committee retains
discretion to allow the holding period for
vested awards to expire at the end of the
normal two year period or, if appropriate,
at an earlier date
• The DASB awards may vest if a participant
leaves for specified reasons, including
injury, disability, ill health or redundancy,
the business or company in which the
participant is employed ceasing to be part
of the Group or at the discretion of the
Remuneration Committee (except where
a participant leaves by reason of gross
misconduct). In these circumstances,
DASB awards will usually vest on the
normal vesting date unless the
Remuneration Committee exercises its
discretion to determine that the award will
vest earlier. Where a participant dies, their
DASB award will usually vest as soon as is
practicable thereafter. On a change of
control, DASB awards will usually
automatically vest
10. Non-Executive Directors
The Chair and Non-Executive Directors do
not have service contracts and do not
participate in any Company pension, share
or incentive schemes. In accordance with
best practice, letters of appointment have
been issued for all Non-Executive Directors
for an initial period of three years but may
be terminated by either party with three
months’ notice. No compensation is payable
on termination, except for fees and expenses
accrued to date. These letters are available
for inspection by shareholders at each AGM
and during normal business hours at the
Company’s registered office.
11. Relationship between
remuneration of Executive Directors
and other employees
The Remuneration Committee is kept
informed of pay and employment conditions
in the wider Group and this is factored into
deliberations when setting the Remuneration
Policy for Executive Directors. The Group-wide
salary increase budget and the proposed
increase for permanent employees in the
relevant markets, or employees of such other
jurisdiction within which the Executive
Directors operate or reside, is considered
by the Remuneration Committee when
determining any basic salary increase for
Executive Directors.
As stated previously, the overall
remuneration package for Executive
Directors is structured so that the variable
performance-related pay element forms a
more significant portion compared to pay
for other employees. This Policy is to ensure
there is a clear link between the individual
140
and corporate performance achieved,
the value this creates for shareholders and
the overall reward to Executive Directors.
The weighting of variable pay will vary
throughout the Group, based on the
seniority of the individual, the role and
specific responsibilities. The Essentra
Management Bonus Plan also provides
a consistent approach for the Executive
Directors and Managers within Essentra by
aligning the same performance conditions
for their bonus plans.
Essentra currently manages a number of
employee forums, including sessions with
the three Employee Champions, and with
specific groups covering diversity and
inclusion, employee engagement focus
groups, leadership team sessions and other
focus groups. Executive pay is not normally
a discussion in these forums, and there has
been no specific consultation on this
Remuneration Policy, however information
on executive pay is made available on our
internal intranet sites.
12. How the views of shareholders are
taken into account
The Remuneration Committee has consulted
with major shareholders and investor bodies
in the past when material changes to the
Policy have been proposed, and this approach
will continue in the future with the overall aim
to maintain an open and transparent
dialogue. A thorough consultation process
was undertaken with our major shareholders
and representative bodies before this updated
Policy Report was submitted for the approval
of all shareholders.
ESSENTRA PLC ANNUAL REPORT 2023 OTHER STATUTORY INFORMATION
Other statutory
information
The Directors present their Report prepared in accordance
with the Companies Act 2006, which requires the Company
to provide a fair review of the business of the Group during the
financial year ended 31 December 2023 and audited Financial
Statements of the Company and its subsidiary undertakings for
the year ended 31 December 2023. The Company’s Registered
Office is Langford Locks, Kidlington, Oxford OX5 1HX.
In accordance with the UK Financial Conduct Authority’s Listing
Rules (LR 9.8.4C), the information to be included in the Annual
Report and Accounts, where applicable, under LR 9.8.4 is set out
in the Directors’ Report.
DIRECTORS’
REPORT
Results and dividends
The adjusted profit after tax of the total
Group for the year ended 31 December
2023 was £31.1m (2022: £5.7m).
As at 19 March 2024, the Company has
paid the following dividend in respect of
the year ended 31 December 2023.
Interim dividend paid
27 October 2023
Per share
p
Total
£m
1.2
3.3
The Directors recommend that a final
dividend of 2.4p (2022: 1.0p) per share be
paid, making a total dividend distribution
for the year of 3.6p (2022: 3.3p).
The final dividend, subject to shareholders
approval at the AGM, will be paid on
5 July 2024 to shareholders on the register
on 17 May 2024. The ex-dividend date will
be 16 May 2024.
The Company announced a Special
Dividend and Share Buyback Programme
on 2 February 2023, using the proceeds
of the sale of the Filters and Packaging
businesses. The Special Dividend, of
approximately 29.8p per share was paid
on 27 April 2023 to shareholders on the
register on 21 March 2023. This equates
to a total Special Dividend of £89.8m.
The Share Buyback Programme
commenced on 29 March 2023, following
the release of the Full Year results for an
amount of approximately £60m, and
remains ongoing. As at 31 December
2023, the Company has purchased
13,364,814 shares for a total consideration
of £23,987,973 and retained 5,039,265
shares in Treasury.
IN THIS SECTION
The Directors’ Report comprises pages
76 to 149, and where information has
been included in the Strategic Report
sections of the Annual Report this has
been incorporated by reference and as
set out as per the below:
Membership of Board during 2023
financial year
pages 78 to 79
Financial instruments and financial
risk management
pages 16 to 20
CO2 emissions
Corporate governance report
Future developments of the business
of the Group
Employee diversity
Stakeholder engagement and
s172 report
TCFD disclosures
pages 25
page 80
pages 8 to 13
pages 35 to 36
pages 56 to 57
pages 58 to 64
141
ESSENTRA PLC ANNUAL REPORT 2023 OTHER STATUTORY INFORMATION CONTINUED
Directors
As at 31 December 2023 the Board of
Directors comprised:
Paul Lester
Scott Fawcett
Jack Clarke
Dupsy Abiola
Kath Durrant
Mary Reilly
Non-Executive Chair
Chief Executive
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Ralf K. Wunderlich
Non-Executive Director
Adrian Peace
Non-Executive Director
The Company requires all Directors
appointed since the last AGM to be elected
at the following AGM and for all other
Directors to be re-elected at each AGM.
None of the Non-Executive Directors have
service contracts. In accordance with the
Company’s Conflict of Interests policy,
Directors are required to review their
potential conflict of interests at least on an
annual basis and to notify any changes to
the Company Secretary as soon as possible.
During 2023, the current register of
conflicts was approved at each Board
meeting. At no time during the year was a
Director considered to have a conflict with a
matter under consideration by the Board.
At no time during the year has any
Director had any material interest in a
contract with the Group, being a contract
of significance in relation to the Group’s
business. A statement of Directors’ interests
in shares of the Company as at 31 December
2023 and as at the date of this Report is
shown on page 128.
142
DIRECTORS’
REPORT
Share capital
The issued share capital of the Company
is shown in Note 20 of the Notes to the
Financial Statements.
Unless expressly specified to the contrary in
the Articles of Association of the Company,
the Company’s Articles of Association may
be amended by special resolution of the
Company’s shareholders.
On 31 December 2023, there were
293,546,403 ordinary shares of 25p each in
issue. There were 5,039,265 ordinary shares
of 25p each held in treasury. The rights and
obligations attaching to the Company’s
ordinary shares, and the provisions governing
the appointment and replacement of, as well
as the powers of, the Company’s Directors,
are set out in the Company’s Articles of
Association, copies of which can be obtained
from Companies House in the UK or by
writing to the Company Secretary.
There are no restrictions on the voting
rights attaching to the Company’s ordinary
shares or on the transfer of securities in the
Company, except, in the case of transfers
of securities:
• that certain restrictions may from time to
time be imposed by laws and regulations
(for example, insider trading laws)
• whereby, pursuant to the Listing Rules of
the Financial Conduct Authority, certain
employees of the Company require
approval of the Company to deal in the
Company’s ordinary shares.
Articles of Association
There are no rules relating to the
amendment of the Articles of Association
other than the usual tabling of proposed
amendments through resolutions tabled
at the AGM.
Substantial shareholders
As at 31 December 2023, the Company
was advised of the following voting rights
attaching to the Company’s shares in
accordance with the Disclosure and
Transparency Rules:
SFM UK Management LLP
FIL Limited
M&G plc
Liontrust Asset Management plc
Ninety One UK Limited
Ameriprise Financial, Inc. and its group
Invesco
Royal London Asset Management
Standard Life
AXA Investment Managers
No persons hold securities in the Company
carrying special rights with regard to control
of the Company. The Company is not aware
of any agreements between holders of
securities that may result in restrictions on
the transfer of securities or on voting rights.
Heronbridge
BlackRock, Inc
Sterling Strategic Value Fund SA
Kames Capital
Norge Bank
% holding
9.86%
9.32%
5.00%
5.00%
4.98%
4.98%
4.90%
4.90%
4.82%
4.81%
4.80%
4.78%
3.04%
2.99%
2.98%
ESSENTRA PLC ANNUAL REPORT 2023 OTHER STATUTORY INFORMATION CONTINUED
Employees
As at 31 December 2023, the Company
employed 3,070 people globally and
473 people in the UK. Information on
the Company’s policies on employee
recruitment, engagement and the
employment of disabled persons
can be found on page 95.
Political contributions
In line with Group policy, the Company
made no political contributions (2022: £nil).
Environmental
The disclosures concerning CO2 emissions
required by law are included in ESG section
on page 25. The Company’s approach to
ESG forms a key element of its strategy.
The Company minimises its carbon footprint
where possible, which includes using public
transport and has never operated or used
private aeroplanes.
Directors’ indemnities
During the year, and as at the date of
signing of the Financial Statements and this
Report, qualifying third-party indemnities
are in force under which the Company has
agreed to indemnify the Directors and the
Company Secretary, in addition to other
senior executives who are Directors of
subsidiaries of the Company, to the extent
permitted by law and the Company’s
Articles of Association, in respect of all
losses arising out of or in connection with
the execution of their powers, duties and
responsibilities as a Director or Officer of the
Company or any of its subsidiaries, including
the pension scheme trustee companies. The
scope of the indemnities extends to include
liabilities to third parties.
143
Significant agreements
The Company has a multicurrency
revolving credit facility (“RCF”) of which
£15.2m was drawn as at 31 December 2023.
All other terms and conditions of the RCF
remain in place with six syndicated banks
until October 2026.
In January 2023, a portion of the proceeds
from the sale of the Filters and Packaging
businesses, was used to repay the 2017 and
2019 USPP notes in full and the par offer for
the 2021 notes. at the date of this report,
the Company holds $102.5m of medium- and
long-dated debt in private placement notes.
Annual General Meeting
The AGM of the Company will be held at
Langford Locks, KIdlington, Oxford OX5 1HX
on 23 May 2024 at 13:00. The meeting will be
held in person with a virtual, non-voting link,
for shareholders who may wish to join.
Details of how to join virtually are available
in the AGM Notice.
In addition to the ordinary business of the
AGM, resolutions in respect of the following
matters of special business are included in
the Notice of Annual General Meeting:
Authority to allot unissued shares
At the 2023 AGM, the Directors were granted
authority to allot relevant securities up to a
nominal amount of £25,065,901, which
expires at the end of the forthcoming AGM.
At this year’s AGM, shareholders will be
asked to grant the Directors’ authority to
allot shares or grant rights to subscribe for or
convert any security into shares: (i) up to an
aggregate nominal amount of £23,686,577
representing approximately one-third of the
Company’s issued share capital, excluding
treasury shares, at 12 March 2023
(such an amount to be reduced by the
nominal mount allotted or granted under
section (ii) below in excess of such sum);
and (ii) comprising equity securities up to an
aggregate nominal amount of £47,373,155
representing approximately two-thirds of
the issued share capital, excluding treasury
shares, at 12 March 2023 (such an amount
to be reduced by any allotments or grants
made under section (i) above) in connection
with an offer by way of a rights issue.
The proposal conforms to the guidelines
issued by the institutional investment
protection bodies to ensure that existing
shareholders’ interests are safeguarded.
The Directors have no present intention of
exercising either of these authorities, which
will expire at the end of next year’s AGM (or,
if earlier, the close of business on 23 August
2025), except in relation to share options.
Allotment of shares for cash
At the 2023 AGM, shareholders approved
a special resolution to enable the Directors
to allot shares for cash without first offering
them to existing shareholders in proportion
to their existing shareholdings. That approval
expires at the end of the forthcoming AGM
and resolutions 17 and 18 in the Notice of
AGM seek to renew it.
Following changes in the Pre-Emption
Group’s Statement of Principles, made in
November 2022, and the updated guidance
on Share Capital Management Guidelines,
which was issued by the Investment
Association in February 2023, the Company
intends to again seek a resolution which
authorises disapplication of pre-emption
rights in respect of up to an aggregate
nominal amount of £7,177,750 (representing
28,711,003 ordinary shares).
DIRECTORS’
REPORT
This aggregate nominal amount represents
approximately 10% of the issued ordinary
share capital of the Company (excluding
treasury shares). The Board did not use
this authority last year.
In addition to the above Resolution,
the Company seeks a Resolution which
authorises disapplication of pre-emption
rights in respect of up to an aggregate
nominal amount of £7,177,750 (representing
28,711,003 ordinary shares)in connection with
acquisitions and other capital investments,
which is in line with the Pre-Emption Group’s
Statement of Principles and the guidance of
The Investment Association. This aggregate
nominal amount represents an additional
10% of the issued ordinary share capital of
the Company (excluding treasury shares).
The Board did not use this authority last
year and does not currently intend to make
use of these resolutions. The Board continues
to believe the flexibility that the increased
levels to which pre-emption rights may be
disapplied, provides the Company flexibility
for future opportunities however, the Board
intends to only issue any amount in excess
of one-third on a fully pre-emptive basis.
The Board therefore support both these
resolutions which seek authority to disapply
pre-emption rights at the amount of 10%
of the ordinary share capital (excluding
treasury shares).
These authorities will expire at the
conclusion of the following AGM or, if
earlier, on 23 August 2025. The proposal
conforms to the guidelines issued by the
institutional investment protection bodies
to ensure that existing shareholders’
interests are safeguarded.
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
of the Company’s own shares, where made,
would be in the best interests of the Company
and of its shareholder generally and could
generally be expected to result in an increase
in earnings per share.
In accordance with the requirements of
the Listing Rules of the Financial Conduct
Authority, the minimum price (exclusive of
expenses) which may be paid for a share is
its nominal value and the maximum price
(exclusive of expenses) for shares which may
be paid is the highest of: (i) an amount equal
to 105% of the average market value for a
share for the five business days immediately
preceding the date of the purchase; and (ii)
the higher of the price of the last independent
trade and the highest current independent
bid on the trading venues where the purchase
is carried out.
During the financial year ending
31 December 2023, no ordinary shares
were transferred out of Treasury by the
Company to satisfy share options under the
Company’s Sharesave and executive share
incentive plans.
No dividends have been paid on shares while
held in Treasury and no voting rights attach
to the treasury shares.
External Auditor
PricewaterhouseCoopers LLP have expressed
their willingness to continue to be appointed
as External Auditor of the Company. Upon
the recommendation of the Audit and Risk
Committee, resolutions to appoint them
as External Auditor and to authorise the
Directors to determine their remuneration
will be proposed at the AGM.
Recommendation
The Directors believe that the resolutions
in the Notice of Annual General Meeting are
in the best interests of the Company and its
shareholders as a whole, and unanimously
recommend that shareholders vote in
favour of each resolution.
At 31 December 2023, the Group’s external
financing arrangements amounted to
£280.7m, comprising United States Private
Placement Loan Notes (“USPP”) of US$102.5m
(with a range of expiry dates from July 2028 to
July 2033) and a multi-currency revolving
credit facility (“RCF”) of £200.0m.
Derivatives
Information related to derivatives is included
in the Accounting Policies on page 156 and
in Note 15 and Note 19 to the Notes of the
Financial Statements.
Going concern
The Directors have prepared the
Consolidated Financial Statements for
the year ended 31 December 2023 on a
going concern basis. In adopting the going
concern basis, the Directors have considered
the Group’s balance sheet position, forecast
earnings and cash flows for a period of
18 months from the date of approval of
these Consolidated Financial Statements.
Information regarding the financial
position of the Group, its cash flows,
liquidity position, and borrowing facilities
are described in the Financial Review on
pages 16 to 18.
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.
An amount of £15.2m was drawn down
under the RCF as at 31 December 2023, with
the available undrawn balance amounting
to £184.8m. The facility is subject to two
covenants, which are tested semi-annually:
net debt to EBITDA (leverage) and EBITA
to net finance charges. Despite significant
economic and operational challenges in the
recent years, the Group has not sought to
change either of the two covenants. The
Directors believe that the Group is well
placed to manage its business risks and,
after making enquiries including a review
of forecasts and predictions, taking account
of reasonably possible changes in trading
performances and considering the existing
borrowing facilities, including the available
liquidity, have a reasonable expectation
that the Group has adequate resources to
continue in operational existence for at least
the next 18 months following the date of
approval of the Financial Statements, and
no breaches of covenants are expected.
As part of the going concern assessment,
the Board has considered a downside
scenario that includes reasonably plausible
changes in macroeconomic conditions
and is considered to represent a severe
but plausible scenario.
OTHER STATUTORY INFORMATION CONTINUED
Purchase of own shares
The Company announced on 2 February
2023, the intention to launch a share
buyback programme of approximately
£60m (“Share Buyback Programme”) which
commenced following the Company’s Full
Year results on 29 March 2023. The Share
Buyback Programme returns funds to
shareholders following the sale of the
Filters and Packaging businesses.
The purpose of the Share Buyback Programme
is to return funds to shareholders following
the divestment of the Filters and Packaging
businesses during 2022 and this has reduced
the share capital of the Company. The Directors
consider the Share Buyback Programme
to be in the best interests of the Company
and of its shareholders generally, and it
is expected over the long term that the
implementation of the Share Buyback
Programme will enhance earnings per share.
To support the ongoing Share Buyback
Programme, the Board have proposed
a resolution which would authorise the
Company to purchase 10% (excluding any
treasury shares) of its own shares which
will be put to shareholders at the 2024 AGM.
Under the arrangements for the Share
Buyback Programme, shares once
purchased, will be cancelled or held in
treasury. The power would apply until
the end of next year’s AGM (or if earlier,
23 August 2025).
Other than the Share Buyback Programme,
the Directors have no immediate plans to
exercise this authority, but will keep under
review the need to do so in light of business
and investment opportunities. Purchases
144
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
The Directors believe that this presents a
reasonable degree of confidence over this
longer-term outlook, However, the Directors
have also given due consideration to any
potential significant risks beyond this
time horizon.
This assessment includes the potential
financial impact of the following Principal
Risks materialising over the three-year period:
• operational & supply chain disruption
including business disruption due to a
cyber related event
• macroeconomic environment
uncertainties including GDP decline,
inflation and cost pass-through
• execution of the strategic plan
• environmental relating to climate change
related transition risks and opportunities.
In order to support the assessment of the
viability, the Directors have considered
three realistic and plausible scenarios. The
Directors have assumed that the Principle
Risks in each scenario would all crystallise
simultaneously. In Scenario 3, the Directors
have considered the worst case events
from each of the selected Principal Risks.
OTHER STATUTORY INFORMATION CONTINUED
The results of this downside scenario
show that there is sufficient liquidity in
the business for a period of 18 months from
the date of approval of these Financial
Statements, and do not indicate any
covenant breach during the test period.
The downside scenario assumes a period
of prolonged revenue decline in 2024, and
subsequently delays market recovery to
2025. The downside scenario also assumes
a higher inflationary cost environment,
the impacts of which are not fully offset by
price increases and also includes transition
risks associated with a ‘middle of the road
scenario’ without the inclusion of any
opportunities from the climate change
quantitative analysis. The financial impact
of the severe but plausible downside scenario
in 2024 and 2025 is a reduction in adjusted
operating profits by 24.5% and 19.0%
respectively compared to the Group
strategic plan.
The overall level of liquidity (defined as
available undrawn borrowing facility plus
cash and cash equivalent) at 31 December
2023 was £244.5m, which was significantly
lower than the £621.4m as at 31 December
2022. As anticipated in the 2022 Annual
Report and Accounts, the Group saw partial
repayment of borrowings in 2023 for the
USPP of c.$247m, the special dividend of
£90m and commencement of a £60m
share buyback programme.
Capital expenditure, sales and general
overheads, and working capital will
continue to be managed closely to
ensure sufficient liquidity.
The scenarios assessed do not indicate
a material uncertainty which may cast
significant doubt over the Company’s
and Group’s ability to continue as a going
concern. 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 2018 Code.
Long-term viability statement
In accordance with provision 31 of the
2018 Code, the Directors have assessed the
long-term viability of the Company over the
three-year period to December 2026.
The assessment has been based on the
Company’s strategic plan, balance sheet
and financing position, and the potential
impact of the key risks and uncertainties
described as part of the Financial
Statements. The Company strategy has
been translated into a three-year strategic
plan comprising a one-year detailed budget
and a financial forecast for the following
two years. The plan will be subject to annual
updates by management and review by the
Board. As a consequence, the Directors have
chosen a three-year time horizon for the
Long-Term Viability Statement (“LTVS”)
as being an appropriate timeframe for
assessing the viability of the Company, as
this is the period reviewed by the Board in
its strategic planning process.
145
ESSENTRA PLC ANNUAL REPORT 2023
In all of the scenarios assessed, there is
no indication of potential breaches of
banking covenants, and there remains
sufficient liquidity headroom from the
Group’s current borrowing facilities. In
making the assessment, the Directors
have assumed that capital markets and
bank funding will continue to be available
over the period. Furthermore, management
would be in a position to implement
effective mitigation actions to reduce
the impact a potential risk event and
to preserve cash resources.
Mitigating actions considered by
management include availability of
alternative sources of funding, cost
rationalisation measures, working capital
and capital expenditure management
and potential disposal of non-core assets.
Based on the viability assessment
undertaken, the Directors have a
reasonable expectation that the Group
will be able to continue in operational
existence and meet its liabilities as they
fall due over the period of the assessment.
DIRECTORS’
REPORT
Directors’ statement as to
disclosure of information
to the External Auditor
As required by Section 418(2) of the
Companies Act 2006, the Directors who
were members of the Board at the time
of approving this Report, having made
enquiries of fellow Directors and of the
External Auditor, confirm that:
• as far as each Director is aware, there is
no relevant audit information of which the
Company’s External Auditor is unaware
• each Director has taken all reasonable
steps that they ought to have taken as
a Director to ascertain any relevant audit
information, and to ensure that the
Company’s External Auditor is aware
of that information
• the Strategic Report and Directors’ Report,
including the Report of the Remuneration
Committee, were approved by the Board
on 18 March 2023.
By order of the Board
Emma Reid
Company Secretary
18 March 2024
OTHER STATUTORY INFORMATION CONTINUED
Scenario 1
Level of severity tested
Environment, Social and
Governance (low)
Transition risks and opportunities from the climate change quantitative analysis,
and a ‘middle of the road’ scenario, leading to an increase in operating profit of
£0.8m, £1.6m and £2.4m respectively for 2024, 2025 and 2026.
Operational and Supply
Chain disruption (severe)
Key manufacturing and distribution sites are subject to supply chain disruption, or
business disruption due to a cyber related event, causing £4.8m revenue loss and
£1.8m operating loss in 2024 and 2025.
£15.8m reduction in sales, and £7.7m reduction in 2024, with a subsequent
reduction in operating profit of £10.1m in 2025 and £12.7m in 2026.
Per base case.
Macroeconomic
environment (low)
Execution of strategic
plan (low)
Scenario 2
Level of severity tested
Environment, Social and
Governance (severe)
Transition risks assumed, without opportunities from the climate change
quantitative analysis, and a ‘middle of the road’ scenario, leading to a reduction in
operating profit by £0.3m, £0.7m and £1.0m respectively for 2024, 2025 and 2026.
Operational and Supply
Chain disruption (severe)
Key manufacturing and distribution sites are subject to supply chain disruption, or
business disruption due to a cyber related event, causing £4.8m revenue loss and
£1.8m operating loss in 2024 and 2025.
Macroeconomic
environment (medium)
£20.1m reduction in sales, and £9.8m reduction in 2024, with a subsequent
reduction in operating profit of £12.2m in 2025 and £14.6m in 2026.
Execution of strategic
plan (severe)
£3.3m reduction in operating profit in 2024 and £3.6m reduction in operating
profit in 2025.
Scenario 3
Level of severity tested
Environment, Social and
Governance (severe)
Transition risks assumed, without opportunities from the climate change
quantitative analysis, and a ‘middle of the road’ scenario, leading to a reduction in
operating profit by £0.3m, £0.7m and £1.0m respectively for 2024, 2025 and 2026.
Operational and Supply
Chain disruption (severe)
Key manufacturing and distribution sites are subject to supply chain disruption, or
business disruption due to a cyber related event, causing £4.8m revenue loss and
£1.8m operating loss in 2024 and 2025.
Macroeconomic
environment (severe)
£33.8m reduction in sales, and £16.5m reduction in 2024, with a subsequent
reduction in operating profit of £19.2m in 2025 and £22.1m in 2026.
Execution of strategic
plan (severe)
£3.3m reduction in operating profit in 2024 and £3.6m reduction in operating
profit in 2025.
146
ESSENTRA PLC ANNUAL REPORT 2023 OTHER STATUTORY INFORMATION CONTINUED
Statement of Directors’
Responsibilities in respect
of the Financial Statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulation.
Company law requires the Directors to prepare
Financial Statements for each financial year.
Under that law the Directors have prepared
the Group financial statements in accordance
with UK-adopted International Accounting
Standards and the Company Financial
Statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law).
Under company law, Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs of the Group and
Company and of the profit or loss of the
Group for that period.
DIRECTORS’
REPORT
In preparing the Financial Statements, the
directors are required to:
• select suitable accounting policies and
then apply them consistently
• state whether applicable UK-adopted
international accounting standards have
been followed for the Group financial
statements and United Kingdom
Accounting Standards, comprising
FRS 101 have been followed for the
Company financial statements, subject
to any material departures disclosed and
explained in the financial statements
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The directors are responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The directors are also responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and Company
and enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
Directors’ confirmations
Each of the Directors, whose names and
functions are listed in the Directors’ Report
confirm that, to the best of their knowledge:
• the Group Financial Statements, which
have been prepared in accordance with
UK-adopted international accounting
standards, give a true and fair view of the
assets, liabilities, financial position and
profit of the Group;
• the Company Financial Statements, which
have been prepared in accordance with
United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair
view of the assets, liabilities and financial
position of the Company; and
• the Strategic Report includes a fair review
of the development and performance of
the business and the position of the Group
and Company, together with a description
of the Principal Risks and uncertainties
that it faces.
In the case of each Director in office at the
date the Directors’ report is approved:
• so far as the Director is aware, there is
no relevant audit information of which
the Group’s and Company’s auditors are
unaware; and
• they have taken all the steps that they
ought to have taken as a director in order
to make themselves aware of any relevant
audit information and to establish that
the Group’s and Company’s auditors are
aware of that information.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
Scott Fawcett
Chief Executive
Jack Clarke
Chief Financial Officer
18 March 2024
147
ESSENTRA PLC ANNUAL REPORT 2023 INDEPENDENT LIMITED ASSURANCE STATEMENTS TO ESSENTRA PLC
DIRECTORS’
REPORT
Independent Limited Assurance
Report to Essentra plc
ERM Certification and Verification Services Limited (“ERM CVS”) was
engaged by Essentra plc (“Essentra”) to provide limited assurance in
relation to the selected information set out below and presented in
Essentra’s Annual Report 2023 (the “Report”).
Engagement summary
Scope of our
assurance
engagement
Whether the 2023 data for the following selected indicators, as indicated on
pages 24-25 of the Annual Report are fairly presented, in all material
respects, in accordance with the reporting criteria.
• Total Scope 1 GHG emissions (metric tonnes of CO2e)
• Total Scope 2 GHG emissions (location-based) (metric tonnes of CO2e)
• Total Scope 2 GHG emissions (market-based) (metric tonnes of CO2e)
• Total Scope 3 GHG emissions from the following categories (metric
tonnes of CO2e):
– Category 1: Purchased goods and services
– Category 2: Capital goods
– Category 3: Fuel- and energy-related activities
– Category 4: Upstream transportation and distribution
– Category 5: Waste generated in operations
– Category 7: Employee commuting
– Category 12: End-of-life treatment of sold products
• Total solid hazardous and non-hazardous waste by destination (Recycling,
Recovery, Incineration, Landfill) (metric tonnes)
• Total liquid hazardous and non-hazardous waste by destination
(Recycling, Recovery, Incineration, Landfill) (cubic metres)
• Zero waste to landfill sites (number)
• Total water usage (cubic metres)
• Percentage of raw materials from sustainable sources in polymer ranges
• Percentage of spend with targeted suppliers which have signed up to
Essentra’s Code of Conduct
• Products introduced with sustainability criteria (number)
• Recycled content in packaging materials (percentage)
Our assurance engagement does not extend to information in respect of
earlier periods or to any other information included in the Report.
148
Reporting period
1 January 2023 – 31 December 2023
Reporting criteria
• WBCSD/WRI Greenhouse Gas Protocol Corporate Accounting and
Reporting Standard for the Scope 1 and Scope 2 GHG emissions;
Assurance
standard and
level of assurance
Respective
responsibilities
• WBCSD/WRI Greenhouse Gas Protocol Corporate Value Chain (Scope 3)
Accounting and Reporting Standard for the Scope 3 GHG emissions; and
• Essentra’s internal definitions and methodology for the waste, zero waste to
landfill, water, raw materials, supplier, product and packaging metrics.
We performed a limited assurance engagement, in accordance with the
International Standard on Assurance Engagements ISAE 3000 (Revised)
‘Assurance Engagements other than Audits or Reviews of Historical
Financial Information’ issued by the International Auditing and Assurance
Standards Board.
The procedures performed in a limited assurance engagement vary in nature
and timing from and are less in extent than for a reasonable assurance
engagement and consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that
would have been obtained had a reasonable assurance engagement
been performed.
Essentra is responsible for preparing the Report and for the collection and
presentation of the information within it, and for the designing, implementing
and maintaining of internal controls relevant to the preparation and
presentation of the Report.
ERM CVS’ responsibility is to provide a conclusion to Essentra on the agreed
scope based on our engagement terms with Essentra the assurance activities
performed and exercising our professional judgement.
ESSENTRA PLC ANNUAL REPORT 2023 INDEPENDENT LIMITED ASSURANCE STATEMENTS TO ESSENTRA PLC CONTINUED
DIRECTORS’
REPORT
ERM CVS applies a Code of Conduct and related policies to ensure that its employees
maintain integrity, objectivity, professional competence and high ethical standards in their
work. Our processes are designed and implemented to ensure that the work we undertake
is objective, impartial and free from bias and conflict of interest. Our certified management
system covers independence and ethical requirements that are at least as demanding as
the relevant sections of the IESBA Code relating to assurance engagements.
ERM CVS has extensive experience in conducting assurance on environmental, social, ethical
and health and safety information, systems and processes, and provides no consultancy
related services to Essentra in any respect.
Gareth Manning
Partner, Corporate Assurance
London, United Kingdom
18 March 2024
On behalf of:
ERM Certification and Verification Services Limited
www.ermcvs.com | post@ermcvs.com
Our conclusion
Based on our activities, as described below, nothing has come to our attention to indicate
that the 2023 data for the indicators listed under ‘Scope’ above are not fairly presented in
the Report, in all material respects, in accordance with the reporting criteria.
Our assurance activities
Considering the level of assurance and our assessment of the risk of material misstatement of
the 2023 data a multi-disciplinary team of sustainability and assurance specialists performed a
range of procedures that included, but was not restricted to, the following:
• Evaluating the appropriateness of the reporting criteria for the selected indicators
• Interviews with relevant staff to understand and evaluate the management systems
and processes (including internal review and control processes) used for collecting and
reporting the selected disclosures
• A review at corporate level of a sample of qualitative and quantitative evidence supporting
the reported data and information
• An analytical review of the year end data submitted by locations included in the
consolidated 2023 Group data for the selected indicators which included testing
the completeness and mathematical accuracy of conversions and calculations,
and consolidation in line with the stated reporting boundary
• Conducting in-person visits to Essentra operations in Istanbul, Turkey and Nettetal,
Germany, and a virtual visit to Hengzhu, China to review site level data management
and reporting processes and assess the consistency of reported 2023 data for the
indicators with underlying source data and related information
• Testing the accuracy of the Scope 1, 2 and Scope 3 GHG emissions calculations from the
underlying activity data including a review of the conversion and emission factors used in
these calculations
• Reviewing the presentation of information relevant to the scope of our work in the Annual
Report to ensure consistency with our findings.
The limitations of our engagement
The reliability of the assured information is subject to inherent uncertainties, given the
available methods for determining, calculating or estimating the underlying information.
It is important to understand our assurance conclusions in this context.
Our independence, integrity and quality control
ERM CVS is an independent certification and verification body accredited by UKAS
to ISO 17021:2015. Accordingly, we maintain a comprehensive system of quality control,
including documented policies and procedures regarding compliance with ethical
requirements, professional standards, and applicable legal and regulatory requirements.
Our quality management system is at least as demanding as the relevant sections of
ISQM-1 and ISQM-2 (2022).
149
ESSENTRA PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS
Financial
statements
DIRECTORS’
REPORT
IN THIS
SECTION
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
165 Critical Accounting Judgements and Estimates
168 Notes to the Consolidated Financial Statements
206 Essentra plc Company Balance Sheet
207 Essentra plc Company Statement of Changes
in Equity
208 Notes to the Company Financial Statements
216 Independent auditors’ report to the members
of Essentra plc
150
ESSENTRA PLC ANNUAL REPORT 2023 CONSOLIDATED INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT
Consolidated Income Statement
For the year ended 31 December 2023
Revenue
Gross profit
Operating profit/(loss)1
Finance income
Finance expense
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the year from continuing operations
Note
2023
£m
2022
£m
Adjusted profit measure: continuing operations
1
1
1
3
3
4
316.3
337.9
Operating profit/(loss)
Amortisation of acquired intangible assets
141.8
148.2
Adjusting items
Adjusted operating profit2
Notes:
1
2 See note 27 for further details of the adjusted profit measure.
Includes impairment charge on trade receivables of £0.4m (2022: £0.8m). See note 19.
10.9
11.0
(13.5)
8.4
(2.6)
5.8
(11.3)
7.1
(24.9)
(29.1)
(2.0)
(31.1)
DIRECTORS’
REPORT
Note
2
2
2023
£m
10.9
11.3
21.0
43.2
2022
£m
(11.3)
10.4
26.0
25.1
Loss from discontinued operations
Profit/(loss) for the year
24
(0.4)
(152.7)
5.4
(183.8)
5.4
–
5.4
(188.0)
4.2
(183.8)
6
6
6
6
1.8p
1.8p
(62.4)p
(62.4)p
2.0p
2.0p
(10.3)p
(10.3)p
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Profit/(loss) 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
151
ESSENTRA PLC ANNUAL REPORT 2023
151
ESSENTRA PLC ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Profit/(loss) for the year
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement of defined benefit pension schemes
Deferred tax on remeasurement of defined benefit pension schemes
Items that may be reclassified to profit or loss in subsequent periods:
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
Ineffective portion of changes 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
Recycling of foreign currency translation reserve
Arising on effective net investment hedges
Net income tax credit
Attributable to non-controlling interests
Total other comprehensive expense for the year, net of tax
Total comprehensive expense for the year
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Total comprehensive expense for the year
Attributable to:
Continuing operations
Discontinued operations
Total comprehensive expense for the year
152
152
ESSENTRA PLC ANNUAL REPORT 2023
DIRECTORS’
REPORT
CONSOLIDATED BALANCE SHEET
Consolidated Balance Sheet
At 31 December 2023
31 December
31 December
31 December
31 December
Assets
Property, plant and equipment
Lease right-of-use asset
Investment properties
Intangible assets
Long-term receivables
Derivative assets
Deferred tax assets
Retirement benefit assets
Total non-current assets
Inventories
Income tax receivable
Trade and other receivables
Derivative assets
Cash and cash equivalents
Total current assets
Total assets
Equity
Issued share capital
Merger reserve
Capital redemption reserve
Other reserve
Cash flow hedging reserve
Translation reserve
Retained earnings
Attributable to equity holders of Essentra plc
Total equity
2022
£m
65.2
21.0
7.0
11.6
8.3
11.7
7.9
Liabilities
Interest bearing loans and borrowings
Lease liabilities
Retirement benefit obligations
206.6
Provisions
Other financial liabilities
Deferred tax liabilities
Total non-current liabilities
Interest bearing loans and borrowings
65.0
Derivative liabilities
1.1
Income tax payable
66.4
Trade and other payables
0.2
Other financial liabilities
Provisions
421.4
554.1
Total current liabilities
893.4
Total liabilities
Total equity and liabilities
348.7
339.3
Lease liabilities
Note
7
9
7
8
19
16
18
10
15, 19
11, 19
15, 19
12, 19, 22
20
20
20
21
21
2023
£m
68.1
27.9
3.3
215.0
10.1
4.2
12.2
7.9
64.7
1.4
61.5
–
59.7
187.3
536.0
73.3
–
2.4
(132.8)
(0.2)
(70.5)
401.0
273.2
273.2
75.6
385.2
0.1
(132.8)
(0.8)
(52.4)
129.2
404.1
404.1
The consolidated financial statements on pages 151 to 205 were approved by the Board of
Directors on 18 March 2024 and were signed on its behalf by:
Scott Fawcett
Chief Executive
Jack Clarke
Chief Financial Officer
Company registration no: 05444653
Note
14, 19, 22
19, 22
18
17
19
16
14, 19, 22
19, 22
15, 19
13, 19
19
17
2023
£m
95.5
23.8
17.5
0.2
–
12.4
149.4
7.1
–
–
12.0
60.7
28.0
5.6
113.4
262.8
536.0
2022
£m
85.0
18.0
18.5
1.1
2.4
7.6
132.6
208.0
4.9
1.3
16.2
91.5
24.1
10.7
356.7
489.3
893.4
Note
18
4,16
15
15
15
4
2023
£m
5.4
2022
£m
(183.8)
(1.3)
0.3
(1.0)
2.4
–
(1.8)
(19.4)
–
0.7
0.6
–
(17.5)
(20.5)
5.1
(15.4)
(16.4)
1.0
16.1
54.6
(38.7)
(21.7)
0.9
(0.1)
(4.3)
(18.5)
(19.7)
(13.1)
(203.5)
(13.1)
(207.6)
–
4.1
(13.1)
(203.5)
(12.7)
(0.4)
(13.1)
(12.1)
(191.4)
(203.5)
ESSENTRA PLC ANNUAL REPORT 2023
153
ESSENTRA PLC ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Profit/(loss) for the year
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement of defined benefit pension schemes
Deferred tax on remeasurement of defined benefit pension schemes
Items that may be reclassified to profit or loss in subsequent periods:
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
Ineffective portion of changes 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
Recycling of foreign currency translation reserve
Arising on effective net investment hedges
Net income tax credit
Attributable to non-controlling interests
Total other comprehensive expense for the year, net of tax
Total comprehensive expense for the year
Attributable to:
Equity holders of Essentra plc
Non-controlling interests
Total comprehensive expense for the year
Attributable to:
Continuing operations
Discontinued operations
Total comprehensive expense for the year
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET
Consolidated Balance Sheet
At 31 December 2023
Assets
Property, plant and equipment
Lease right-of-use asset
Investment properties
Intangible assets
Long-term receivables
Derivative assets
Deferred tax assets
Retirement benefit assets
Total non-current assets
Inventories
Income tax receivable
Trade and other receivables
Derivative assets
Cash and cash equivalents
Total current assets
Total assets
Equity
Issued share capital
Merger reserve
Capital redemption reserve
Other reserve
Cash flow hedging reserve
Translation reserve
Retained earnings
Attributable to equity holders of Essentra plc
Total equity
Note
18
4,16
15
15
15
4
2023
£m
5.4
2022
£m
(183.8)
(1.3)
0.3
(1.0)
2.4
–
(1.8)
(19.4)
–
0.7
0.6
–
(17.5)
(20.5)
5.1
(15.4)
(16.4)
1.0
16.1
54.6
(38.7)
(21.7)
0.9
(0.1)
(4.3)
(18.5)
(19.7)
(13.1)
(203.5)
(13.1)
(207.6)
–
4.1
(13.1)
(203.5)
(12.7)
(0.4)
(13.1)
(12.1)
(191.4)
(203.5)
31 December
2023
£m
31 December
2022
£m
Note
31 December
2023
£m
31 December
2022
£m
Note
DIRECTORS’
REPORT
68.1
27.9
3.3
215.0
10.1
4.2
12.2
7.9
Liabilities
65.2
21.0
7.0
Interest bearing loans and borrowings
Lease liabilities
Retirement benefit obligations
206.6
Provisions
11.6
8.3
11.7
7.9
Other financial liabilities
Deferred tax liabilities
Total non-current liabilities
Interest bearing loans and borrowings
348.7
339.3
Lease liabilities
65.0
Derivative liabilities
1.1
Income tax payable
66.4
Trade and other payables
0.2
Other financial liabilities
421.4
554.1
Provisions
Total current liabilities
893.4
Total liabilities
Total equity and liabilities
7
9
7
8
19
15, 19
16
18
10
11, 19
15, 19
12, 19, 22
20
20
20
21
21
64.7
1.4
61.5
–
59.7
187.3
536.0
73.3
–
2.4
(132.8)
(0.2)
(70.5)
401.0
273.2
273.2
75.6
385.2
0.1
(132.8)
(0.8)
(52.4)
129.2
404.1
404.1
The consolidated financial statements on pages 151 to 205 were approved by the Board of
Directors on 18 March 2024 and were signed on its behalf by:
Scott Fawcett
Chief Executive
Jack Clarke
Chief Financial Officer
Company registration no: 05444653
14, 19, 22
19, 22
18
17
19
16
14, 19, 22
19, 22
15, 19
13, 19
19
17
95.5
23.8
17.5
0.2
–
12.4
149.4
–
7.1
–
12.0
60.7
28.0
5.6
113.4
262.8
536.0
85.0
18.0
18.5
1.1
2.4
7.6
132.6
208.0
4.9
1.3
16.2
91.5
24.1
10.7
356.7
489.3
893.4
152
ESSENTRA PLC ANNUAL REPORT 2023
153
ESSENTRA PLC ANNUAL REPORT 2023
153
ESSENTRA PLC ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
DIRECTORS’
REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
At 1 January 2023
Profit for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income for the
year
Share option expense
Tax relating to share-based incentives
Net impact of hyperinflation2
Purchase of own shares
Cancellation of shares
Reduction of capital
Dividends paid
At 31 December 2023
At 1 January 2022
Loss for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income for the
year
Recycling of non-controlling interest
Share option expense
Tax relating to share-based incentives
Net impact of hyperinflation2
Dividends paid
At 31 December 2022
–
–
–
–
–
–
–
(2.3)
–
–
73.3
Issued
capital
£m
75.6
–
–
–
–
–
–
–
–
25
Note
24
25
Note
Issued
capital
£m
75.6
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
0.1
Other
reserve
£m
(132.8)
Cash flow
hedging and
cost of
hedging
reserves1
£m
(0.8)
–
0.6
0.6
–
–
–
–
–
–
–
Translation
reserve
£m
(52.4)
–
(18.1)
(18.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(132.8)
(0.2)
(70.5)
–
–
–
–
–
–
–
–
(385.2)
–
–
–
–
–
–
–
–
–
2.3
–
–
2.4
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
0.1
Other
reserve
£m
(132.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cash flow
hedging and
cost of
hedging
reserves1
£m
(1.5)
–
0.7
0.7
–
–
–
–
–
Translation
reserve
£m
(47.5)
–
(4.9)
–
–
–
–
–
(4.9)
(203.4)
75.6
385.2
0.1
(132.8)
(0.8)
(52.4)
2023
Total
equity
£m
404.1
5.4
(18.5)
(13.1)
1.4
(0.3)
1.4
(24.0)
–
–
(96.3)
273.2
2022
Total
equity
£m
628.9
(183.8)
(19.7)
(203.5)
(18.4)
3.1
(0.6)
15.5
(20.9)
404.1
Non-
controlling
interests
£m
–
–
–
–
–
–
–
–
–
–
–
–
Non-
controlling
interests
£m
16.2
4.2
(0.1)
4.1
(18.4)
–
–
–
(1.9)
–
Retained
earnings
£m
129.2
5.4
(1.0)
4.4
1.4
(0.3)
1.4
(24.0)
–
385.2
(96.3)
401.0
Retained
earnings
£m
333.6
(188.0)
(15.4)
–
3.1
(0.6)
15.5
(19.0)
129.2
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Note
2023
£m
2022
£m
Operating activities
Profit/(loss) for the year from:
Continuing operations
Discontinued operations
Profit/(loss) for the year
Adjustments for:
Income tax credit
Net finance expense
Intangible amortisation
Adjusting items
Loss on business disposals
Impairment of acquired intangible assets on
discontinued operations
Depreciation of property, plant and equipment
Lease right-of-use asset depreciation
Loss on disposal of right of use asset
Loss on disposal of fixed assets
Impairment of fixed assets
Share option expense
Hedging activities and other movements
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Movement in provisions
Adjustment for pension contributions
Movement due to hyperinflation
Cash inflow from operating activities
Income tax paid
Net cash inflow from operating activities
4
3,24
2,8,24
2
24
7
9
2
5,18
Note
23
24
24
25
Investing activities
Interest received
(31.1)
Acquisition of property, plant and equipment3
(152.7)
Proceeds from sale of property, plant and equipment
(183.8)
Payments for intangible assets
Acquisition of businesses net of cash acquired1
(2.0)
Proceeds from sale of businesses net of cash disposed2
Cash outflow from cost of business disposals
Net cash (outflow)/inflow from investing activities
Financing activities
Interest paid
Dividends paid to equity holders
Dividends paid to non-controlling interests
Repayment of short-term loans
Repayments of long-term loans
Proceeds from long-term loans
Proceeds from early settlement of derivative contracts
Lease liability principal repayments
Purchase of own shares
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Net cash and cash equivalents at the beginning of the
Net (decrease)/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
12,22
(12.5)
Notes:
1 Acquisition of businesses is net of cash acquired of £5.3m (2022: £3.5m). See note 23.
2
In 2022 proceeds from sale of businesses is net of cash disposed of £45.7m. See note 24.
3 Acquisition of property, plant and equipment includes capex accrual movements of £nil (2022: £0.4m).
5.8
(0.4)
5.4
(1.1)
2.5
14.2
13.9
3.7
–
11.1
5.9
–
–
7.1
1.4
(0.5)
(3.1)
10.0
(10.1)
(23.6)
(2.8)
–
–
34.0
(4.5)
29.5
18.4
19.6
26.0
19.0
182.7
29.5
10.1
0.2
0.3
0.5
2.6
0.8
(27.4)
(35.5)
41.2
1.0
0.2
(3.2)
76.5
64.0
2023
£m
3.5
(12.4)
(0.8)
(33.3)
–
–
(17.8)
(60.8)
(9.9)
(96.3)
–
(208.0)
(46.9)
61.8
–
(5.4)
(24.0)
(328.7)
(360.0)
421.4
(360.0)
(1.7)
59.7
2022
£m
2.3
(39.7)
0.5
(1.0)
(27.9)
416.9
(31.5)
319.6
(19.5)
(19.0)
(1.9)
–
(124.2)
65.0
6.5
(11.5)
–
(104.6)
279.0
136.3
279.0
6.1
421.4
Cash outflow in respect of adjusting items
27
(23.7)
year
Notes:
1 See note 15 for details of hedging reserve movements in relation to derivatives.
2 The net impact on retained earnings as a result of the index-based adjustments in Turkey under IAS 29 Financial Reporting in Hyperinflationary Economies.
154
154
ESSENTRA PLC ANNUAL REPORT 2023
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155
ESSENTRA PLC ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
At 1 January 2023
Profit for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income for the
year
Share option expense
Tax relating to share-based incentives
Net impact of hyperinflation2
Purchase of own shares
Cancellation of shares
Reduction of capital
Dividends paid
At 31 December 2023
At 1 January 2022
Loss for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income for the
year
Recycling of non-controlling interest
Share option expense
Tax relating to share-based incentives
Net impact of hyperinflation2
Dividends paid
At 31 December 2022
Notes:
25
Note
24
25
(2.3)
73.3
Issued
capital
£m
75.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note
Issued
capital
£m
75.6
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
0.1
Other
reserve
£m
(132.8)
Cash flow
hedging and
cost of
hedging
reserves1
£m
(0.8)
2.3
(385.2)
2.4
(132.8)
(0.2)
(70.5)
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
0.1
Other
reserve
£m
(132.8)
Cash flow
hedging and
cost of
hedging
reserves1
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Translation
reserve
£m
(52.4)
–
(18.1)
(18.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
0.6
–
–
–
–
–
–
–
(1.5)
–
0.7
0.7
–
–
–
–
–
Retained
earnings
£m
129.2
5.4
(1.0)
4.4
1.4
(0.3)
1.4
(24.0)
–
385.2
(96.3)
401.0
Retained
earnings
£m
333.6
(188.0)
(15.4)
–
3.1
(0.6)
15.5
(19.0)
129.2
Non-
controlling
interests
£m
–
–
–
–
–
–
–
–
–
–
–
–
Non-
controlling
interests
£m
16.2
4.2
(0.1)
4.1
(18.4)
–
–
–
–
(1.9)
Translation
reserve
£m
(47.5)
–
(4.9)
(4.9)
(203.4)
2023
Total
equity
£m
404.1
5.4
(18.5)
(13.1)
1.4
(0.3)
1.4
(24.0)
–
–
(96.3)
273.2
2022
Total
equity
£m
628.9
(183.8)
(19.7)
(203.5)
(18.4)
3.1
(0.6)
15.5
(20.9)
404.1
1 See note 15 for details of hedging reserve movements in relation to derivatives.
2 The net impact on retained earnings as a result of the index-based adjustments in Turkey under IAS 29 Financial Reporting in Hyperinflationary Economies.
75.6
385.2
0.1
(132.8)
(0.8)
(52.4)
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Operating activities
Profit/(loss) for the year from:
Continuing operations
Discontinued operations
Profit/(loss) for the year
Adjustments for:
Income tax credit
Net finance expense
Intangible amortisation
Adjusting items
Loss on business disposals
Impairment of acquired intangible assets on
discontinued operations
Depreciation of property, plant and equipment
Lease right-of-use asset depreciation
Loss on disposal of right of use asset
Loss on disposal of fixed assets
Impairment of fixed assets
Share option expense
Hedging activities and other movements
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash outflow in respect of adjusting items
27
Movement in provisions
Adjustment for pension contributions
Movement due to hyperinflation
Cash inflow from operating activities
Income tax paid
Net cash inflow from operating activities
Note
2023
£m
2022
£m
Investing activities
Interest received
Acquisition of property, plant and equipment3
(31.1)
(152.7)
Proceeds from sale of property, plant and equipment
4
3,24
2,8,24
2
24
7
9
2
5,18
5.8
(0.4)
5.4
(1.1)
2.5
14.2
13.9
3.7
–
11.1
5.9
–
–
7.1
1.4
(0.5)
(3.1)
10.0
(10.1)
(23.6)
(2.8)
–
–
34.0
(4.5)
29.5
Payments for intangible assets
Acquisition of businesses net of cash acquired1
Proceeds from sale of businesses net of cash disposed2
Cash outflow from cost of business disposals
Net cash (outflow)/inflow from investing activities
Financing activities
Interest paid
Dividends paid to equity holders
Dividends paid to non-controlling interests
Repayment of short-term loans
Repayments of long-term loans
Proceeds from long-term loans
Proceeds from early settlement of derivative contracts
Lease liability principal repayments
Purchase of own shares
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Net cash and cash equivalents at the beginning of the
year
Net (decrease)/increase in cash and cash equivalents
Net effect of currency translation on cash and cash
equivalents
(183.8)
(2.0)
18.4
19.6
26.0
19.0
182.7
29.5
10.1
0.2
0.3
0.5
2.6
0.8
(27.4)
(35.5)
41.2
(23.7)
1.0
0.2
(3.2)
76.5
(12.5)
64.0
Net cash and cash equivalents at the end of the year
12,22
Notes:
1 Acquisition of businesses is net of cash acquired of £5.3m (2022: £3.5m). See note 23.
2
3 Acquisition of property, plant and equipment includes capex accrual movements of £nil (2022: £0.4m).
In 2022 proceeds from sale of businesses is net of cash disposed of £45.7m. See note 24.
DIRECTORS’
REPORT
Note
23
24
24
25
2023
£m
3.5
(12.4)
–
(0.8)
(33.3)
–
(17.8)
(60.8)
(9.9)
(96.3)
–
(208.0)
(46.9)
61.8
–
(5.4)
(24.0)
(328.7)
(360.0)
421.4
(360.0)
(1.7)
59.7
2022
£m
2.3
(39.7)
0.5
(1.0)
(27.9)
416.9
(31.5)
319.6
(19.5)
(19.0)
(1.9)
–
(124.2)
65.0
6.5
(11.5)
–
(104.6)
279.0
136.3
279.0
6.1
421.4
154
ESSENTRA PLC ANNUAL REPORT 2023
155
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155
ESSENTRA PLC ANNUAL REPORT 2023
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
DIRECTORS’
REPORT
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
Basis of preparation
Basis of Preparation and Principal Accounting Policies
a
Essentra plc is a public company limited by shares that is incorporated and domiciled in England
and Wales (registration no 05444653). The address of its registered office is Langford Locks,
Kidlington, Oxford, OX5 1HX, United Kingdom. The Company’s ordinary shares are publicly
traded on the London Stock Exchange. For the purposes of these consolidated financial
statements “Essentra” or “the Group” means Essentra plc (the “Company”) and its subsidiaries.
The Group’s principal activities are focused on the manufacture and distribution of a
comprehensive range of components, used in diverse industrial applications and end-markets.
The Group’s consolidated financial statements for the year ended 31 December 2023 have
been prepared in accordance with UK-adopted International Accounting Standards and
comply with the requirements of the Companies Act 2006.
These consolidated financial statements are prepared under the historical cost convention
unless otherwise stated.
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 page 208.
The principal accounting policies used in the preparation of the consolidated financial
statements for the year ended 31 December 2023 are detailed below. These policies, except
those set out below under the heading ‘Changes in accounting policies’ adopted during the
year, have been consistently applied to all periods presented.
In preparing the consolidated financial statements, management have taken into account
the potential effects of climate changes, including medium- to longer-term transitional
risks resulting from the relative uncertainty created by the global shift towards a more
sustainable, net-zero economy, which include regulatory, geopolitical and social pressures
that may impact the operations of the business in future. Management have considered the
potential effects of climate related changes in its assessment of going concern, and longer
term viability of the business, in preparing the Group's future cash flow forecasts underpinning
impairment testing, and in its assessment of the residual values of property, plant and
equipment. Management have determined that, other than the expected capital expenditure
due to the future spend on machine replacement and efficiency upgrades factored into the
Group’s cash flow forecasts, there is no material impact on these financial statements.
Going concern
The Directors have prepared the consolidated financial statements for the year ended
31 December 2023 on a going concern basis. In adopting the going concern basis, the
Directors have considered the Group’s balance sheet position, forecast earnings and
cash flows for a period of 18 months from the date of approval of these consolidated
financial statements.
Information regarding the financial position of the Group, its cash flows, liquidity position,
and borrowing facilities are described in the Financial Review on pages 16 to 18. 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 2023, the Group’s external financing arrangements amounted to £280.7m,
comprising United States Private Placement Loan Notes (“USPP”) of US$102.5m (with a
range of expiry dates from July 2028 to July 2033) and a multi-currency revolving credit
facility (“RCF”) of £200.0m (expiring in October 2026).
£15.2m was drawn under the RCF as at 31 December 2023, with the available undrawn
balance amounting to £184.8m. The facility is subject to two covenants, which are tested
semi-annually: net debt to EBITDA (leverage) and EBITA to net finance charges. Despite the
significant economic and operational challenges in the recent years, the Group has not
sought to change either of the two covenants. The Directors believe that the Group is
well placed to manage its business risks and, after making enquiries including a review
of forecasts and predictions, taking account of reasonably possible changes in trading
performances and considering the existing borrowing facilities, including the available
liquidity, have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the next 18 months following the date of approval of the financial
statements, and no breaches of covenants are expected.
As part of the going concern assessment, the Board has considered a downside scenario that
includes severe, but reasonably plausible changes in macro-economic conditions. The results
of this scenario show that there is sufficient liquidity in the business for a period of 18 months
from the date of approval of these financial statements, and does not indicate any covenant
breach during the test period. The downside scenario assumes a period of prolonged revenue
decline in 2024, and subsequently delays in market recovery to 2025. The downside scenario
also assumes a higher inflationary cost environment, the impacts of which are not fully offset
by price increases and also includes transition risks associated with a “middle of the road
scenario” without the inclusion of any opportunities from the climate change quantitative
analysis. The financial impact of the severe but plausible downside scenario in 2024 and 2025
is a reduction in adjusted operating profits by 24.5% and 19.0%, respectively, compared to
the Group strategic plan.
The overall level of liquidity (defined as available undrawn borrowing facility plus cash and
cash equivalent) at 31 December 2023 was £244.5m. Adjusting for share repurchases of
£36.0m under the remainder of the buyback programme of £60.0m, this still leaves overall
liquidity at £208.5m. Capital expenditure, sales and general overhead, and working capital
will continue to be managed closely to ensure sufficient liquidity.
a
Basis of preparation continued
The scenarios do not indicate a material uncertainty which may cast significant doubt over
The amendments also require Essentra plc to disclose information regarding the estimated
the Company’s and Group’s ability to continue as a going concern. Based on these, and
impact of the Pillar Two rules and has performed an initial analysis under the UK legislation
taking into consideration the risks detailed in note 19, the Directors have a reasonable
of potential exposure to additional tax under the Pillar Two rules based on the Group’s most
expectation that the Company has adequate resources to continue in operational existence
recent finalised country-by-country reporting data, income tax return filings and consolidated
for the foreseeable future, and accordingly, have adopted the going concern basis in
accounts (for the year ended 31 December 2022). Based on the data for the year ended
preparing the consolidated financial statements. This disclosure has been prepared in
31 December 2022, in most of the territories in which the Group operates it will meet the
accordance with the Financial Reporting Council’s UK Corporate Governance Code.
financial thresholds required to apply the transitional safe harbour rules which will exempt
Changes in accounting policies
Other pronouncements
The Group adopted the following new pronouncements during 2023, which did not have
a material impact on the Group’s financial statements:
to be material.
the Group from applying the Pillar Two rules in those territories. There are a small number of
territories where, based on data for the year ended 31 December 2022, the Group may not
have access to the transitional safe harbour rules, and the Group has assessed that the
potential liability to additional tax under the Pillar Two rules in those territories is not expected
• Amendments to IAS 12 – Deferred Tax Related to Assets and Liabilities Arising from
a Single Transaction;
• Amendments to IAS1 – Disclosure of Accounting Policies; and
• Amendments to IAS 8 – Definition of Accounting Estimates.
The following standards and amendments, issued before 31 December 2023 with an
effective date on or after 1 January 2024, have not been early adopted by the Group,
they do not have a material impact on the Group’s financial statements:
• Amendment to IFRS 16 – Leases on sale and leaseback;
• Amendment to IAS 1 – Non-current liabilities with covenants;
• Amendment to IAS 7 and IFRS 7 – Supplier finance;
• Amendments to IAS 21 – Lack of Exchangeability.
Impact of Pillar two rules
The Group continues to refine its analysis of its potential exposure to the Pillar Two rules and
will refresh its analysis based on its country-by-country reporting data, income tax return
filings and consolidated accounts for the year ended 31 December 2023 once finalised.
b
Principal accounting policies
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 consolidated financial statements of the Group from the date that control
commences until the date that control ceases. The Group’s subsidiaries (including dormant
entities) at 31 December 2023, are set out within the Essentra plc companies accounts on
pages 213 to 215.
The Organisation for Economic Cooperation and Development (“OECD”) Global Anti-Base
Non-controlling interests (“NCI”) are measured at their proportionate share of the investee’s
Erosion Model Rules (Pillar Two rules) were initially introduced by the OECD in December 2021
identifiable net assets at the date of acquisition.
and adopted by the UK in Finance Act (no. 2) Act 2023. The rules will come into effect for
the Essentra Group in relation to accounting periods beginning on or after 1 January 2024.
A Pillar 2 Effective Tax Rate (“ETR”) is calculated for every jurisdiction in which the Group
operates, and Pillar 2 Income Taxes will arise when the Pillar 2 ETR is less than 15%. Pillar Two
Income Taxes could be payable in the UK, or the local jurisdiction if it has introduced a
Qualifying Domestic Minimum top-up Tax.
When the group loses control of a subsidiary, it derecognises the net assets of the subsidiary
together with any NCI and other related components of equity. Any resulting gain or loss
on disposal is recognised in the consolidated income statement. On 3 December 2022, the
Group completed the sale of Essentra Filter Holdings Limited and its respective subsidiary
companies (the ‘Filters business’) which included the Group’s investments in ITC Essentra
Limited (India) (50% owned) and China Tobacco Essentra (Xiamen) Filters Co., Ltd (China)
Recognising that there is still uncertainty in how the Pillar Two rules will impact existing
(49% owned).
and future deferred tax positions, as well as whether the Pillar Two rules create permanent
differences, both the AASB and IASB have issued amendments to IAS12 ‘Income Taxes’. The
amendments contain a mandatory temporary exemption to IAS12 which exempts a company
from disclosing changes to deferred tax assets / liabilities related to the Pillar Two rules. As the
parent of the Essentra Group of companies, Essentra plc is applying the exemption IAS 12 for
the year ended 31 December 2023.
Previously, the ownership held by the Group in these companies through its holding of
ordinary shares were accounted for as subsidiaries of the Group in the consolidated financial
statements due to the control achieved via board membership. Following the disposal
of the Group’s investments in India and China as part of the wider Filters business disposal,
the associated balance of NCI arising on consolidation was derecognised.
156
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ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
157
ESSENTRA PLC ANNUAL REPORT 2023
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
DIRECTORS’
REPORT
Basis of Preparation and Principal Accounting Policies
a
Basis of preparation
Essentra plc is a public company limited by shares that is incorporated and domiciled in England
Information regarding the financial position of the Group, its cash flows, liquidity position,
and Wales (registration no 05444653). The address of its registered office is Langford Locks,
and borrowing facilities are described in the Financial Review on pages 16 to 18. In addition,
Kidlington, Oxford, OX5 1HX, United Kingdom. The Company’s ordinary shares are publicly
note 19 to the financial statements includes the Group’s objectives, policies and processes
traded on the London Stock Exchange. For the purposes of these consolidated financial
for managing its capital, its financial risk management objectives, details of its financial
statements “Essentra” or “the Group” means Essentra plc (the “Company”) and its subsidiaries.
instruments and hedging activities and exposures to credit, market and liquidity risk.
The Group’s principal activities are focused on the manufacture and distribution of a
comprehensive range of components, used in diverse industrial applications and end-markets.
At 31 December 2023, the Group’s external financing arrangements amounted to £280.7m,
Cash balances and borrowings are detailed in note 22.
The Group’s consolidated financial statements for the year ended 31 December 2023 have
been prepared in accordance with UK-adopted International Accounting Standards and
comply with the requirements of the Companies Act 2006.
These consolidated financial statements are prepared under the historical cost convention
unless otherwise stated.
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 page 208.
The principal accounting policies used in the preparation of the consolidated financial
statements for the year ended 31 December 2023 are detailed below. These policies, except
those set out below under the heading ‘Changes in accounting policies’ adopted during the
year, have been consistently applied to all periods presented.
In preparing the consolidated financial statements, management have taken into account
the potential effects of climate changes, including medium- to longer-term transitional
risks resulting from the relative uncertainty created by the global shift towards a more
sustainable, net-zero economy, which include regulatory, geopolitical and social pressures
that may impact the operations of the business in future. Management have considered the
potential effects of climate related changes in its assessment of going concern, and longer
term viability of the business, in preparing the Group's future cash flow forecasts underpinning
impairment testing, and in its assessment of the residual values of property, plant and
equipment. Management have determined that, other than the expected capital expenditure
due to the future spend on machine replacement and efficiency upgrades factored into the
Group’s cash flow forecasts, there is no material impact on these financial statements.
Going concern
The Directors have prepared the consolidated financial statements for the year ended
31 December 2023 on a going concern basis. In adopting the going concern basis, the
Directors have considered the Group’s balance sheet position, forecast earnings and
cash flows for a period of 18 months from the date of approval of these consolidated
financial statements.
comprising United States Private Placement Loan Notes (“USPP”) of US$102.5m (with a
range of expiry dates from July 2028 to July 2033) and a multi-currency revolving credit
facility (“RCF”) of £200.0m (expiring in October 2026).
£15.2m was drawn under the RCF as at 31 December 2023, with the available undrawn
balance amounting to £184.8m. The facility is subject to two covenants, which are tested
semi-annually: net debt to EBITDA (leverage) and EBITA to net finance charges. Despite the
significant economic and operational challenges in the recent years, the Group has not
sought to change either of the two covenants. The Directors believe that the Group is
well placed to manage its business risks and, after making enquiries including a review
of forecasts and predictions, taking account of reasonably possible changes in trading
performances and considering the existing borrowing facilities, including the available
liquidity, have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the next 18 months following the date of approval of the financial
statements, and no breaches of covenants are expected.
As part of the going concern assessment, the Board has considered a downside scenario that
includes severe, but reasonably plausible changes in macro-economic conditions. The results
of this scenario show that there is sufficient liquidity in the business for a period of 18 months
from the date of approval of these financial statements, and does not indicate any covenant
breach during the test period. The downside scenario assumes a period of prolonged revenue
decline in 2024, and subsequently delays in market recovery to 2025. The downside scenario
also assumes a higher inflationary cost environment, the impacts of which are not fully offset
by price increases and also includes transition risks associated with a “middle of the road
scenario” without the inclusion of any opportunities from the climate change quantitative
analysis. The financial impact of the severe but plausible downside scenario in 2024 and 2025
is a reduction in adjusted operating profits by 24.5% and 19.0%, respectively, compared to
the Group strategic plan.
The overall level of liquidity (defined as available undrawn borrowing facility plus cash and
cash equivalent) at 31 December 2023 was £244.5m. Adjusting for share repurchases of
£36.0m under the remainder of the buyback programme of £60.0m, this still leaves overall
liquidity at £208.5m. Capital expenditure, sales and general overhead, and working capital
will continue to be managed closely to ensure sufficient liquidity.
Basis of preparation continued
a
The scenarios do not indicate a material uncertainty which may cast significant doubt over
the Company’s and Group’s ability to continue as a going concern. 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.
Changes in accounting policies
Other pronouncements
The Group adopted the following new pronouncements during 2023, which did not have
a material impact on the Group’s financial statements:
• Amendments to IAS 12 – Deferred Tax Related to Assets and Liabilities Arising from
a Single Transaction;
• Amendments to IAS1 – Disclosure of Accounting Policies; and
• Amendments to IAS 8 – Definition of Accounting Estimates.
The following standards and amendments, issued before 31 December 2023 with an
effective date on or after 1 January 2024, have not been early adopted by the Group,
they do not have a material impact on the Group’s financial statements:
• Amendment to IFRS 16 – Leases on sale and leaseback;
• Amendment to IAS 1 – Non-current liabilities with covenants;
• Amendment to IAS 7 and IFRS 7 – Supplier finance;
• Amendments to IAS 21 – Lack of Exchangeability.
Impact of Pillar two rules
The Organisation for Economic Cooperation and Development (“OECD”) Global Anti-Base
Erosion Model Rules (Pillar Two rules) were initially introduced by the OECD in December 2021
and adopted by the UK in Finance Act (no. 2) Act 2023. The rules will come into effect for
the Essentra Group in relation to accounting periods beginning on or after 1 January 2024.
A Pillar 2 Effective Tax Rate (“ETR”) is calculated for every jurisdiction in which the Group
operates, and Pillar 2 Income Taxes will arise when the Pillar 2 ETR is less than 15%. Pillar Two
Income Taxes could be payable in the UK, or the local jurisdiction if it has introduced a
Qualifying Domestic Minimum top-up Tax.
Recognising that there is still uncertainty in how the Pillar Two rules will impact existing
and future deferred tax positions, as well as whether the Pillar Two rules create permanent
differences, both the AASB and IASB have issued amendments to IAS12 ‘Income Taxes’. The
amendments contain a mandatory temporary exemption to IAS12 which exempts a company
from disclosing changes to deferred tax assets / liabilities related to the Pillar Two rules. As the
parent of the Essentra Group of companies, Essentra plc is applying the exemption IAS 12 for
the year ended 31 December 2023.
The amendments also require Essentra plc to disclose information regarding the estimated
impact of the Pillar Two rules and has performed an initial analysis under the UK legislation
of potential exposure to additional tax under the Pillar Two rules based on the Group’s most
recent finalised country-by-country reporting data, income tax return filings and consolidated
accounts (for the year ended 31 December 2022). Based on the data for the year ended
31 December 2022, in most of the territories in which the Group operates it will meet the
financial thresholds required to apply the transitional safe harbour rules which will exempt
the Group from applying the Pillar Two rules in those territories. There are a small number of
territories where, based on data for the year ended 31 December 2022, the Group may not
have access to the transitional safe harbour rules, and the Group has assessed that the
potential liability to additional tax under the Pillar Two rules in those territories is not expected
to be material.
The Group continues to refine its analysis of its potential exposure to the Pillar Two rules and
will refresh its analysis based on its country-by-country reporting data, income tax return
filings and consolidated accounts for the year ended 31 December 2023 once finalised.
Principal accounting policies
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 consolidated financial statements of the Group from the date that control
commences until the date that control ceases. The Group’s subsidiaries (including dormant
entities) at 31 December 2023, are set out within the Essentra plc companies accounts on
pages 213 to 215.
Non-controlling interests (“NCI”) are measured at their proportionate share of the investee’s
identifiable net assets at the date of acquisition.
When the group loses control of a subsidiary, it derecognises the net assets of the subsidiary
together with any NCI and other related components of equity. Any resulting gain or loss
on disposal is recognised in the consolidated income statement. On 3 December 2022, the
Group completed the sale of Essentra Filter Holdings Limited and its respective subsidiary
companies (the ‘Filters business’) which included the Group’s investments in ITC Essentra
Limited (India) (50% owned) and China Tobacco Essentra (Xiamen) Filters Co., Ltd (China)
(49% owned).
Previously, the ownership held by the Group in these companies through its holding of
ordinary shares were accounted for as subsidiaries of the Group in the consolidated financial
statements due to the control achieved via board membership. Following the disposal
of the Group’s investments in India and China as part of the wider Filters business disposal,
the associated balance of NCI arising on consolidation was derecognised.
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b
Principal accounting policies continued
(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.
Foreign currency
With the exception of the financial statements of the Group’s foreign operations in
hyperinflationary economies (see ‘Adjustments for hyperinflation’ below), 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 presented in sterling (the functional currency
of the Company). On disposal of a foreign operation, the deferred cumulative amount
recognised in equity relating to that particular operation is recognised in the consolidated
income statement as part of the gain/loss on disposal.
(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 from their functional currency 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.
(iv) Adjustments for hyperinflation
The Group applies hyperinflationary accounting to the financial statements of foreign
operations that meet the requirements to be designated a hyperinflationary economy as
specified in IAS 29 Financial Reporting in Hyperinflationary Economies. In accordance with IAS
21 The Effects of Changes in Foreign Exchange Rates, comparative amounts are not restated.
Under IAS 29, the results and non-monetary asset and liability balances are revalued to
present value equivalent local currency amounts, based on an inflation index, before
translation to sterling at the reporting-date exchange rates. The gain or loss on net monetary
assets resulting from the application of IAS 29 is recognised in the consolidated income
statement within net finance expense. Subsequent IAS 29 equity restatement effects and the
impact of currency movements are presented under amounts arising on translation of foreign
operations within other comprehensive income. The Group also presents the gain or loss on
cash and cash equivalents as monetary items together with the effect of inflation as
operating, investing and financing cash flows in the consolidated statement of cash flows.
The Group’s foreign operations in Turkey, whose functional currency is the Turkish Lira, were
designated as hyperinflationary during the year ended 31 December 2022. For the year ended
31 December 2023, the Turkish economy continued to be designated as hyperinflationary,
and therefore the Group has continued to apply hyperinflationary accounting using the historic
cost approach to its Turkish operations for the reporting period ended 31 December 2023.
The price index used to apply IAS 29 is the Turkish Consumer Price Index. At 31 December 2023,
the price index was 1,860.90 (31 December 2022: 1,128.45, 31 December 2021: 686.95).
Alternative performance measures
The consolidated financial statements provide further disclosures and measures of financial
performance, including adjusted operating profit and adjusted earnings per share, which are
not defined or specified in accordance with UK adopted International Financial Reporting
Standards. The presentation of alternative performance measures enables management to
reflect the underlying performance of the continuing operations of the Group and provides
investors with a more meaningful comparison of how the business is managed and measured
on a periodic basis.
Adjusting items are separately presented from other items by virtue of their nature, size
and/or incidence. They are identified separately in order for the reader to obtain a clearer
understanding of the underlying results of the ongoing Group’s operations, by excluding items
which, in management’s view, do not form part of the Group’s underlying operating results,
such as gains, losses or costs arising from business acquisition and disposal activities,
significant restructuring and closure costs, costs of major Software as a Service projects,
defined benefit pension scheme charges that no longer pertain to the continuing operations
of the Group and items which are non-recurring or one-off in nature (such as impairment of
acquired intangible assets, impairment of investment property, historic indemnity claims and
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 for management’s review and assessment of the operational
performance of the Group’s businesses.
b
Principal accounting policies continued
(i) Expense/(credit) relating to acquisitions, disposals and restructuring following
Discontinued operations
disposals of businesses
A disposal group qualifies as a discontinued operation if it is a component of an entity that
In 2023 and 2022, Essentra incurred advisory and reorganisation costs in relation to major
either has been disposed of, or is classified as held for sale, and:
restructuring activities to “right size” the continuing operations of the business following the
disposal of the Filters and Packaging businesses. These costs do not include costs relating to
the disposal of those businesses, which form part of the result from discontinued operations
• represents a separate major line of business or geographical area of operations; or
• is part of a single co-ordinated plan to dispose of a separate major line of business or
In 2023, Essentra acquired BMP TAPPI, incurring one-off acquisition related costs (refer to
(refer to note 24).
note 23).
(refer to note 23).
geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are
presented as a single amount as profit or loss after tax from discontinued operations in
In 2022, Essentra acquired the Wixroyd Group, incurring one-off acquisition related costs
the income statement.
(ii) Acquisition integration and restructuring costs
A segment is identified on the basis of internal reports that are regularly reviewed by the
These relate to costs incurred on the integration of acquired businesses and restructuring
Board of Directors (identified as the Chief Operating Decision Maker) in order to allocate
associated with acquisitions.
resources to the segment and assess its performance.
Segment reporting
(iii) Customisation and configuration costs of significant Software as a Service
Revenue
(“SaaS”) arrangements
Revenue from the sale of component parts is recognised in the income statement with
These relate to costs incurred on implementation (customisation and configuration) of
reference to the amount invoiced to the customer, net of expected discounts, rebates,
significant “software as a service” (“SaaS”) arrangements. In the view of management, these
refunds, credits, price concessions or other similar items, when the associated performance
are investments to upgrade the Group’s technical capabilities, and therefore their costs are
obligation has been satisfied, and control of the goods has been transferred to the customer.
excluded from adjusted operating profit.
Customer volume discounts and right to return goods purchased are calculated by
estimating the expected discount percentage that will be achieved for the contractual period
using historical data adjusted for current experience and those obligations are included in
(iv) Defined benefit pension scheme charges (from 2022)
These relate to costs incurred in relation to defined benefit pension scheme charges which,
other payables.
following the completion of the strategic review, no longer pertain to employees of the
continuing Group and are therefore excluded from adjusted operating profit.
The substantial majority of the Group’s revenue is generated through delivery of component
Group’s operational requirements and impairment of intangible and other non-current assets
A significant part of the Group’s businesses sell goods on an ex-works basis, where the Group,
(v) Impairment of non-current assets
In 2023, this comprised impairment of investment property which is held in excess of the
in Hengzhu (following an impairment review in that CGU).
(vi) Other adjusting items
In 2023, this comprised professional fees relating to the capital reduction completed during
2023, and £0.8m provision relating to a historic indemnity claim.
In 2022, this comprised costs in respect of the write-down of centrally held IT assets following
the completion of the strategic review, and costs of restructuring activities within the
continuing European and Americas businesses, offset by a credit relating to adjustments
to the carrying value of right of use assets.
provided to the customer.
Further details of the Group’s adjusting items are included in note 2. The Group has also
provided a reconciliation of its adjusted performance measures in note 27 to the consolidated
financial statements.
parts which results in revenue being recognised at a point where control has been transferred
to the customer as opposed to over a performance obligation period.
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
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b
Principal accounting policies continued
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expense arising from
present value equivalent local currency amounts, based on an inflation index, before
intragroup transactions are eliminated in preparing the consolidated financial statements.
translation to sterling at the reporting-date exchange rates. The gain or loss on net monetary
Under IAS 29, the results and non-monetary asset and liability balances are revalued to
Foreign currency
With the exception of the financial statements of the Group’s foreign operations in
hyperinflationary economies (see ‘Adjustments for hyperinflation’ below), 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 presented in sterling (the functional currency
of the Company). On disposal of a foreign operation, the deferred cumulative amount
income statement as part of the gain/loss on disposal.
(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
assets resulting from the application of IAS 29 is recognised in the consolidated income
statement within net finance expense. Subsequent IAS 29 equity restatement effects and the
impact of currency movements are presented under amounts arising on translation of foreign
operations within other comprehensive income. The Group also presents the gain or loss on
cash and cash equivalents as monetary items together with the effect of inflation as
operating, investing and financing cash flows in the consolidated statement of cash flows.
The Group’s foreign operations in Turkey, whose functional currency is the Turkish Lira, were
31 December 2023, the Turkish economy continued to be designated as hyperinflationary,
and therefore the Group has continued to apply hyperinflationary accounting using the historic
cost approach to its Turkish operations for the reporting period ended 31 December 2023.
The price index used to apply IAS 29 is the Turkish Consumer Price Index. At 31 December 2023,
the price index was 1,860.90 (31 December 2022: 1,128.45, 31 December 2021: 686.95).
recognised in equity relating to that particular operation is recognised in the consolidated
designated as hyperinflationary during the year ended 31 December 2022. For the year ended
recognised in the income statement unless hedge accounting criteria apply (see policy for
Alternative performance measures
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 from their functional currency 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.
on a periodic basis.
The consolidated financial statements provide further disclosures and measures of financial
performance, including adjusted operating profit and adjusted earnings per share, which are
not defined or specified in accordance with UK adopted International Financial Reporting
Standards. The presentation of alternative performance measures enables management to
reflect the underlying performance of the continuing operations of the Group and provides
investors with a more meaningful comparison of how the business is managed and measured
(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.
(iv) Adjustments for hyperinflation
The Group applies hyperinflationary accounting to the financial statements of foreign
operations that meet the requirements to be designated a hyperinflationary economy as
specified in IAS 29 Financial Reporting in Hyperinflationary Economies. In accordance with IAS
21 The Effects of Changes in Foreign Exchange Rates, comparative amounts are not restated.
Adjusting items are separately presented from other items by virtue of their nature, size
and/or incidence. They are identified separately in order for the reader to obtain a clearer
understanding of the underlying results of the ongoing Group’s operations, by excluding items
which, in management’s view, do not form part of the Group’s underlying operating results,
such as gains, losses or costs arising from business acquisition and disposal activities,
significant restructuring and closure costs, costs of major Software as a Service projects,
defined benefit pension scheme charges that no longer pertain to the continuing operations
of the Group and items which are non-recurring or one-off in nature (such as impairment of
acquired intangible assets, impairment of investment property, historic indemnity claims and
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 for management’s review and assessment of the operational
performance of the Group’s businesses.
Principal accounting policies continued
b
(i) Expense/(credit) relating to acquisitions, disposals and restructuring following
disposals of businesses
In 2023 and 2022, Essentra incurred advisory and reorganisation costs in relation to major
restructuring activities to “right size” the continuing operations of the business following the
disposal of the Filters and Packaging businesses. These costs do not include costs relating to
the disposal of those businesses, which form part of the result from discontinued operations
(refer to note 24).
In 2023, Essentra acquired BMP TAPPI, incurring one-off acquisition related costs (refer to
note 23).
In 2022, Essentra acquired the Wixroyd Group, incurring one-off acquisition related costs
(refer to note 23).
(ii) Acquisition integration and restructuring costs
These relate to costs incurred on the integration of acquired businesses and restructuring
associated with acquisitions.
(iii) Customisation and configuration costs of significant Software as a Service
(“SaaS”) arrangements
These relate to costs incurred on implementation (customisation and configuration) of
significant “software as a service” (“SaaS”) arrangements. In the view of management, these
are investments to upgrade the Group’s technical capabilities, and therefore their costs are
excluded from adjusted operating profit.
(iv) Defined benefit pension scheme charges (from 2022)
These relate to costs incurred in relation to defined benefit pension scheme charges which,
following the completion of the strategic review, no longer pertain to employees of the
continuing Group and are therefore excluded from adjusted operating profit.
(v) Impairment of non-current assets
In 2023, this comprised impairment of investment property which is held in excess of the
Group’s operational requirements and impairment of intangible and other non-current assets
in Hengzhu (following an impairment review in that CGU).
(vi) Other adjusting items
In 2023, this comprised professional fees relating to the capital reduction completed during
2023, and £0.8m provision relating to a historic indemnity claim.
In 2022, this comprised costs in respect of the write-down of centrally held IT assets following
the completion of the strategic review, and costs of restructuring activities within the
continuing European and Americas businesses, offset by a credit relating to adjustments
to the carrying value of right of use assets.
Further details of the Group’s adjusting items are included in note 2. The Group has also
provided a reconciliation of its adjusted performance measures in note 27 to the consolidated
financial statements.
Discontinued operations
A disposal group qualifies as a discontinued operation if it is a component of an entity that
either has been disposed of, or is classified as held for sale, and:
• represents a separate major line of business or geographical area of operations; or
• is part of a single co-ordinated plan to dispose of a separate major line of business or
geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are
presented as a single amount as profit or loss after tax from discontinued operations in
the income statement.
Segment reporting
A segment is identified on the basis of internal reports that are regularly reviewed by the
Board of Directors (identified as the Chief Operating Decision Maker) in order to allocate
resources to the segment and assess its performance.
Revenue
Revenue from the sale of component parts is recognised in the income statement with
reference to the amount invoiced to the customer, 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.
Customer volume discounts and right to return goods purchased are calculated by
estimating the expected discount percentage that will be achieved for the contractual period
using historical data adjusted for current experience and those obligations are included in
other payables.
The substantial majority of the Group’s revenue is generated through delivery of component
parts which results in revenue being recognised at a point where control has been transferred
to the customer as opposed to over a performance obligation period.
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.
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Principal accounting policies continued
b
Finance income and expense
Finance income is recognised in the consolidated income statement as it accrues by reference
to the principal outstanding and at the effective interest rate applicable.
Finance expense consists of interest and other expenses that are incurred in connection with
the Group’s external financing arrangements and is recognised in the consolidated income
statement as it accrues. Prepaid facility fees are amortised over the term of the related debt
financing using the effective interest method. Finance expense includes the interest portion
of lease liabilities.
Income tax
Income tax in the consolidated 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.
Business combinations
Business combinations are accounted for using the acquisition method. Goodwill arising in
a business combination represents the difference between the fair value of the assets given
in consideration and the fair value of identifiable assets, liabilities and contingent liabilities
assumed of the acquiree, at the date of acquisition.
Costs attributable to acquisitions are expensed in the consolidated income statement.
Given their one-off nature, these costs are generally presented within adjusting items.
Where consideration for an acquisition includes any assets or liabilities resulting from
a contingent consideration arrangement, the contingent consideration amount is measured
at fair value at the acquisition date. Subsequent changes in the fair value of such contingent
consideration is adjusted against the cost of acquisition where they result from additional
information, obtained within one year from the acquisition date, about facts and
circumstances that existed at the acquisition date. All other subsequent changes in the
fair value of contingent consideration classified as an asset or liability are recognised in
the consolidated income statement.
Intangible assets
(i) Goodwill
Goodwill is initially recognised as an intangible asset at cost and subsequently measured
at cost less accumulated impairment. Goodwill is allocated to the cash-generating unit
(“CGU”) or group of CGUs expected to benefit from the synergies related to the business
combination.
(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.
b
Principal accounting policies continued
(iv) Other intangible assets
Property, plant and equipment
Other intangible assets which are not acquired through a business combination (“non-
Property, plant and equipment are stated at cost less accumulated depreciation and
acquired intangible assets”) are recognised at cost to the extent it is probable that the
impairment losses. Previously revalued properties were treated as being held at deemed cost
expected future economic benefits attributable to the asset will flow to the Group and that
upon transition to adopted IFRS.
its cost can be measured reliably, and amortised on a straight-line basis over their estimated
useful economic life.
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
SaaS arrangements are service contracts providing the Group with the right to access the
and equipment and other assets are periodically reviewed for impairment when events or
cloud provider’s application software over the contract period. Costs incurred to configure
changes in circumstances indicate that the carrying values may not be recoverable.
or customise, and the ongoing fees to obtain access to the cloud provider’s application
software, are recognised as operating expenses when the services are received. Where costs
incurred for the development of software code enhances, modifies, or creates additional
capability to existing on-premise systems and meets the definition of and recognition criteria
for an intangible asset, these costs are recognised as intangible software assets and
amortised over the useful life of the software on a straight-line basis.
Intangibles are amortised over their estimated remaining useful lives on a straight-line basis
at the following annual rates:
Customer relationships
Other intangibles – research and development
Other intangibles – development of e-commerce
Other intangibles – software and software development
6–12%
7–20%
10–20%
10–20%
Impairment
All assets are reviewed regularly to determine whether there is any indication of impairment.
Goodwill is tested for impairment annually.
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
Not depreciated
2% or life of lease if shorter
7–20%
10–33%
Land and buildings – Buildings
Plant and machinery
Fixtures, fittings and equipment
balance sheet date.
Inventories
The assets’ useful lives and residual values are reviewed, and adjusted if appropriate, at each
Inventories are valued at the lower of standard cost and net realisable value. Cost are
assigned to individual items based on first-in first-out which is approximated using a
standard cost methodology in valuing the inventory. For work-in-progress and finished goods,
standard cost includes an appropriate proportion of direct production labour costs and
overheads attributable to bringing inventory items to their present location and condition,
allocated by rates based upon a budgeted level of normal activity. Net realisable value is
An impairment loss is recognised whenever the carrying amount of a non-financial asset
based on the estimated selling price net of the expected costs to sell. Provision is made for
or the CGU to which it belongs exceeds its recoverable amount, being the greater of value
slow-moving, defective and obsolete items where appropriate.
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.
Following the disposal of its Packaging and Filters businesses in 2022, and the Group’s
transition to a pure-play components business, based upon the most recent reliable
information, the Group has updated the inputs into its inventory provisioning calculations
Financial assets are assessed for impairment using the expected credit loss model which
in order to ensure that inventories continue to be measured at the lower of cost and net
requires expected credit losses and changes to expected credit losses at each reporting date
realisable value.
to reflect changes in credit risk since initial recognition. Changes to the expected credit loss
are recognised in the income statement.
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Finance income is recognised in the consolidated income statement as it accrues by reference
a contingent consideration arrangement, the contingent consideration amount is measured
b
Principal accounting policies continued
Finance income and expense
to the principal outstanding and at the effective interest rate applicable.
Finance expense consists of interest and other expenses that are incurred in connection with
the Group’s external financing arrangements and is recognised in the consolidated income
statement as it accrues. Prepaid facility fees are amortised over the term of the related debt
financing using the effective interest method. Finance expense includes the interest portion
Where consideration for an acquisition includes any assets or liabilities resulting from
at fair value at the acquisition date. Subsequent changes in the fair value of such contingent
consideration is adjusted against the cost of acquisition where they result from additional
information, obtained within one year from the acquisition date, about facts and
circumstances that existed at the acquisition date. All other subsequent changes in the
fair value of contingent consideration classified as an asset or liability are recognised in
the consolidated income statement.
of lease liabilities.
Income tax
Income tax in the consolidated 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.
Goodwill is initially recognised as an intangible asset at cost and subsequently measured
at cost less accumulated impairment. Goodwill is allocated to the cash-generating unit
(“CGU”) or group of CGUs expected to benefit from the synergies related to the business
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
Research costs are expensed to the income statement in the year in which they are incurred.
Intangible assets
(i) Goodwill
combination.
(ii) Research and development
Principal accounting policies continued
b
(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.
SaaS arrangements are service contracts providing the Group with the right to access the
cloud provider’s application software over the contract period. Costs incurred to configure
or customise, and the ongoing fees to obtain access to the cloud provider’s application
software, are recognised as operating expenses when the services are received. Where costs
incurred for the development of software code enhances, modifies, or creates additional
capability to existing on-premise systems and meets the definition of and recognition criteria
for an intangible asset, these costs are recognised as intangible software assets and
amortised over the useful life of the software on a straight-line basis.
Intangibles are amortised over their estimated remaining useful lives on a straight-line basis
at the following annual rates:
amounts of assets and liabilities in the financial statements. The following temporary
Development costs relating to new products are capitalised when the Group is able
differences are not provided for: goodwill not deductible for tax purposes; the initial
to demonstrate the technical feasibility of completing the intangible asset so that it will
recognition of assets or liabilities that affect neither accounting nor taxable profit or loss; and
be available for use or sale, its intention to complete and its ability to use or sell the asset,
differences relating to investments in subsidiaries to the extent that they will not reverse in
how the asset will generate future economic benefits, the availability of resources to
Customer relationships
Other intangibles – research and development
Other intangibles – development of e-commerce
the foreseeable future.
complete the asset and the ability to measure reliably the expenditure during development.
Other intangibles – software and software development
6–12%
7–20%
10–20%
10–20%
Deferred tax is determined using tax rates that are expected to apply when the related
(iii) Acquired intangible assets
deferred tax asset or liability is settled, using the applicable tax rates enacted or substantively
An intangible asset acquired in a business combination is recognised at fair value to the
enacted at the balance sheet dates.
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.
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
Intangible assets principally relate to customer relationships, which are valued using
to the extent that it is no longer probable that the related tax benefits will be realised.
discounted cash flows based on historical customer attrition rates, and developed
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
useful economic life.
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
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
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 CGU 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 are 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. Changes to the expected credit loss
are recognised in the income statement.
Business combinations
Business combinations are accounted for using the acquisition method. Goodwill arising in
a business combination represents the difference between the fair value of the assets given
in consideration and the fair value of identifiable assets, liabilities and contingent liabilities
assumed of the acquiree, at the date of acquisition.
Costs attributable to acquisitions are expensed in the consolidated income statement.
Given their one-off nature, these costs are generally presented within adjusting items.
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
Not depreciated
Land and buildings – Buildings
Plant and machinery
Fixtures, fittings and equipment
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.
Inventories
Inventories are valued at the lower of standard cost and net realisable value. Cost are
assigned to individual items based on first-in first-out which is approximated using a
standard cost methodology in valuing the inventory. For work-in-progress and finished goods,
standard cost includes an appropriate proportion of direct production labour costs and
overheads attributable to bringing inventory items to their present location and condition,
allocated by rates based upon a budgeted level of normal activity. Net realisable value is
based on the estimated selling price net of the expected costs to sell. Provision is made for
slow-moving, defective and obsolete items where appropriate.
Following the disposal of its Packaging and Filters businesses in 2022, and the Group’s
transition to a pure-play components business, based upon the most recent reliable
information, the Group has updated the inputs into its inventory provisioning calculations
in order to ensure that inventories continue to be measured at the lower of cost and net
realisable value.
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BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES
Principal accounting policies continued
b
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.
Loans and borrowings
Loans and other borrowings are initially recorded at cost (which is equal to fair value at
inception plus interest cost) and are subsequently measured at amortised cost using the
effective interest method.
Trade and other receivables
Trade and other 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 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 0.2%; Overdue 1-30 days 0.5%; Overdue 31-60 days 1%; Overdue 61-90 days
5%; Overdue 91-180 days 10%; Overdue 181-360 days 50%; and Overdue over 360 days 100%.
Trade other payables
Trade payables are non-interest bearing and are recognised initially at fair value and
subsequently at amortised cost.
Deferred consideration
Deferred consideration is recognised and held at fair value. Changes in its fair value are
recognised in profit or loss, within adjusting items.
Financial instruments
(i) Financial assets
Financial assets comprise trade and other receivables, cash and cash equivalents, deferred
consideration receivable and derivative financial instruments.
(ii) Financial liabilities
Financial liabilities comprise trade and other payables, deferred consideration payable, and
financing liabilities.
Interest bearing loans and borrowings and other financial liabilities (excluding derivatives)
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, unless
they are included in a hedge accounting relationship. See note 15 for separate disclosure of
hedge types.
(iii) Derivative financial instruments and hedge accounting
Derivatives are measured initially at fair value with any related transaction costs expensed as
incurred. Subsequent measurement in the financial statements depends on the classification
of the derivative as follows:
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.
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.
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.
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.
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.
b
Principal accounting policies continued
(i) The Group’s leasing activities
(ii) Variable lease payments
The Group leases various properties, equipment and cars. Rental contracts are typically made
The Group has certain assets which may include variable lease payments based on usage,
for fixed periods of 1 to 20 years, but might have extension options as described below. Lease
although this is a small proportion of the Group’s assets. These include vehicles, with variable
terms are negotiated on an individual basis and contain a wide range of different terms and
lease payments based on mileage or equipment such as printers, of which the lease payments
conditions. The lease agreements do not impose any covenants, but leased assets cannot be
vary based on their usage. The variable lease payments are not material for the Group.
used as security for borrowing purposes.
The finance cost is charged to profit or loss over the lease period so as to produce a constant
included. Future lease payments should then be applied only when they are known, with no
Any future variable payment increase that requires either speculation or an estimate is not
periodic rate of interest on the remaining balance of the liability for each period. The right-of-
change to the discount rate.
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.
(iii) Extension and termination options
Extension and termination options are included in a number of property and equipment
Assets and liabilities arising from a lease are initially measured on a present value basis.
leases across the Group. These terms are used to maximise operational flexibility in terms of
Lease liabilities include the net present value of the following lease payments:
managing contracts. The majority of extension and termination options held are exercisable
• 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.
Lease 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.
only by the Group and not by the respective lessor.
Provisions
sheet date.
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
A provision for onerous contracts is recognised when the expected benefits to be derived by
the Group from a contract are lower than the unavoidable cost of meeting its obligations
under the contract. Unavoidable costs include a reasonable allocation of shared costs that
can be directly linked to fulfilling contractual obligations. The provision is calculated as the
lower of the termination costs payable for an early exit from the contract and the expected
net cost to fulfil the Group’s unavoidable contract obligations.
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REPORT
effective interest method.
Trade and other receivables
b
Principal accounting policies continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and fixed term investments whose
Derivatives are measured initially at fair value with any related transaction costs expensed as
maturities are three months or less from the date of acquisition. Bank overdrafts repayable
incurred. Subsequent measurement in the financial statements depends on the classification
(iii) Derivative financial instruments and hedge accounting
on demand form an integral part of Essentra’s cash management and are included as part
of the derivative as follows:
of cash and cash equivalents in the statement of cash flows.
Loans and borrowings
Where a derivative is used to hedge the foreign exchange exposure of a monetary asset or
Loans and other borrowings are initially recorded at cost (which is equal to fair value at
liability, any gain or loss on the derivative is recognised in the income statement.
inception plus interest cost) and are subsequently measured at amortised cost using the
Fair value hedges
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
Trade and other receivables are initially recognised at fair value and subsequently measured
and any ineffective portion is recognised in the income statement. Where the underlying
at amortised cost, which is generally equivalent to recognition at nominal value less
transaction results in a financial asset, accumulated gains and losses are recognised in
impairment loss calculated using the expected loss model.
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 Group applies the simplified model to recognise lifetime expected credit losses for its
trade 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
the asset.
follows: Current 0.2%; Overdue 1-30 days 0.5%; Overdue 31-60 days 1%; Overdue 61-90 days
Hedges of net investment in foreign operations
5%; Overdue 91-180 days 10%; Overdue 181-360 days 50%; and Overdue over 360 days 100%.
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
Trade payables are non-interest bearing and are recognised initially at fair value and
Trade other payables
subsequently at amortised cost.
Deferred consideration
Financial instruments
(i) Financial assets
(ii) Financial liabilities
financing liabilities.
Financial assets comprise trade and other receivables, cash and cash equivalents, deferred
consideration receivable and derivative financial instruments.
Financial liabilities comprise trade and other payables, deferred consideration payable, and
Interest bearing loans and borrowings and other financial liabilities (excluding derivatives)
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, unless
they are included in a hedge accounting relationship. See note 15 for separate disclosure of
hedge types.
recognised in the income statement.
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.
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.
Deferred consideration is recognised and held at fair value. Changes in its fair value are
recognised in profit or loss, within adjusting items.
Lease liabilities and lease right-of-use assets
Principal accounting policies continued
b
(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.
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.
Lease 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.
(ii) Variable lease payments
The Group has 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.
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.
A provision for onerous contracts is recognised when the expected benefits to be derived by
the Group from a contract are lower than the unavoidable cost of meeting its obligations
under the contract. Unavoidable costs include a reasonable allocation of shared costs that
can be directly linked to fulfilling contractual obligations. The provision is calculated as the
lower of the termination costs payable for an early exit from the contract and the expected
net cost to fulfil the Group’s unavoidable contract obligations.
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CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
Principal accounting policies continued
b
Retirement benefit obligations
(i) Defined contribution schemes
Obligations for contributions to defined contribution pension schemes are expensed to the
income statement as incurred.
Net debt
Net debt is defined as cash and cash equivalents, short-term liquid investments and
derivatives hedging against placement loans, net of lease liabilities and interest bearing
loans and borrowings.
(ii) Defined benefit schemes
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.
Investment properties
Properties that are either owned or leased by the Group that are held to earn rental income
or for capital appreciation, or both, are accounted for as investment properties. Investment
properties are measured initially at cost including directly related transaction costs, and
subsequently, applying the cost model.
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 the amount that may be recovered either through reduced
contributions or agreed refunds from the scheme.
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.
Dividends
Dividends are recognised as a liability in the period in which they are approved in a general
meeting by the shareholders of the Company (final dividend) or paid (interim dividend).
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.
Under the cost model, the carrying value of investment properties where the Group owns the
freehold to the properties, is stated at cost less accumulated depreciation (on a straight-line
basis) and impairment losses. The useful lives of investment properties where the Group owns
the freehold are adjusted, as appropriate, at each balance sheet date.
Where an investment property is owned through a long leasehold arrangement under which
the Group is a lessee rather than owning the freehold to the property, a right-of-use asset
is recognised at the commencement date of the lease and accounted for as an investment
property. The cost of leased investment properties recognised in right-of-use assets includes
the present value of future lease payments recognised together with lease payments made
before commencement of the lease, less any incentives received. A corresponding lease
liability is recognised on the balance sheet.
The Group transfers a property to or from its classification of investment properties only when
there is a change in use. For example, when it is the Group’s intention to end or commence
owner-occupation is the point at which the property respectively meets or ceases to meet
the definition of an investment property, the determination of which, may require the
application of management judgement.
Investment properties are classified as non-current assets in the consolidated balance sheet.
The carrying value of investment properties is periodically reviewed for impairment when
events and circumstances indicate that the carrying amount may not be recoverable.
Lessor income
Essentra lets out a small number of properties that are owned or held under a leased
contract which is in excess of the Group’s operational requirements. Lessor income from
operating leases is recognised on a straight-line basis over the term of the lease. Where the
Group is an intermediate lessor, the sublease income classification is assessed with reference
to the head lease right of use asset. The head lease right of use asset is depreciated over the
term of the sublease on a straight-line basis.
Critical Accounting Judgements and Estimates
The preparation of the consolidated financial statements requires the Directors and
“Software as a Service” (“SaaS”) arrangements
management to make judgements and estimates in respect of certain items where the
The recognition of customisation and configuration costs of £10.8m (2022: £12.4m)
choice of accounting policy and assumptions applied in determining the judgement or
(which are included within adjusting items) relating to SaaS arrangements involves
estimate could materially affect the Group’s financial position, results, or cash flows at
a number of key judgements:
the reporting date.
Management regularly reviews the critical accounting judgements that significantly impact
the amounts recognised in the consolidated financial statements and the critical accounting
estimates that due to their significant estimation uncertainty, may give rise to a material
as a service”;
adjustment in the next financial reporting period.
Although the determination of accounting estimates is based on management’s best
estimate considering its knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis and revisions to accounting estimates are recognised in the
period in which the estimate is revised and future periods if the revision affects both current
and future reporting periods.
The Group’s critical accounting judgements and estimates are detailed below.
Accounting Judgements
Adjusting items
Adjusting items are separately presented from other items of financial performance as this
enables management to reflect the underlying performance of the continuing operations of
the Group. Judgement is required to determine whether such items of financial performance
should be included within adjusting items by virtue of their nature, size or incidence.
The Group’s accounting policy concerning adjusting items is detailed under alternative
performance measures.
Adjusting items of £21.0m (2022: £26.0m) have been reported in continuing operations
which includes £1.3m of costs incurred relating to restructuring of the continuing business
following the sale of the Filters and Packaging divisions, a £1.0m credit relating to acquisitions
of businesses, £10.8m has been incurred in relation to the customisation and configuration
costs of significant “software as a service” (“SaaS”) arrangements, which, in management’s
judgement, constitute material one-off charges to upgrade the Group’s technical capabilities
and meets the Group’s policy for being categorised as adjusting items, £1.8m in relation
to legacy defined benefit pension charges, £0.8m in respect of indemnity provisions raised
for historic claims on previous acquisitions, £3.4m in relation to impairment of fixed assets
following an impairment assessment and £3.7m in relation to impairment of
investment properties.
A complete analysis of the amounts included in adjusting items is detailed in note 2.
• whether a software arrangement is a SaaS arrangement: management considers the fact
pattern of the software arrangement carefully to identify SaaS arrangements,
distinguishing from other arrangements such as “platform as a service” or “infrastructure
• whether any cost incurred in customisation and configuration results in additional code
from which the Group has the power to obtain the future economic benefits and restricts
other third parties access to those benefits: management considered whether the code
can be used in or transferred to another computing arrangement;
• whether the customisation and configuration service provided by the SaaS provider is
distinct from the regular SaaS arrangement: management considers factors such as
whether the Group can benefit from the service separately from the other elements of
deliverables from the SaaS provider;
• whether a third party providing customisation and configuration service is in effect
a subcontractor of the SaaS provider: management considers factors such as the nature
of the contractual and working relationship between the SaaS provider and the third party,
the obligations of the third party who has the primary responsibility for the services that
it provides.
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.
Recognition of Retirement benefit assets
A key judgement when recognising a retirement benefit asset is whether the Company has
an unconditional right to a refund on such a surplus. A retirement benefit assets for £7.9m
(2022: £7.9m) has been recognised on the Group’s European pension surplus because it was
judged that the trustees cannot use trustee’s discretionary power to use this surplus to
augment member benefits.
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CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
DIRECTORS’
REPORT
Obligations for contributions to defined contribution pension schemes are expensed to the
derivatives hedging against placement loans, net of lease liabilities and interest bearing
Net debt is defined as cash and cash equivalents, short-term liquid investments and
b
Principal accounting policies continued
Retirement benefit obligations
(i) Defined contribution schemes
income statement as incurred.
(ii) Defined benefit schemes
Net debt
loans and borrowings.
Investment properties
The net obligations in respect of defined benefit pension schemes are calculated separately
Properties that are either owned or leased by the Group that are held to earn rental income
for each scheme by estimating the amount of future benefit that employees have earned
or for capital appreciation, or both, are accounted for as investment properties. Investment
in return for their service in the current and prior periods; that benefit is discounted to
properties are measured initially at cost including directly related transaction costs, and
determine its present value, and the fair value of any scheme assets is deducted.
subsequently, applying the cost model.
The discount rate is the yield at the balance sheet date on AA credit-rated bonds that have
Under the cost model, the carrying value of investment properties where the Group owns the
maturity dates approximating to the terms of Essentra’s obligations. The calculation is
freehold to the properties, is stated at cost less accumulated depreciation (on a straight-line
performed by a qualified independent actuary using the projected unit credit method.
basis) and impairment losses. The useful lives of investment properties where the Group owns
Net interest on defined benefit assets is presented within finance income, and net interest
the freehold are adjusted, as appropriate, at each balance sheet date.
on defined benefit liabilities is presented within finance expense.
Actuarial gains and losses that have arisen are recognised in full in the consolidated
the Group is a lessee rather than owning the freehold to the property, a right-of-use asset
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 the amount that may be recovered either through reduced
contributions or agreed refunds from the scheme.
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.
Dividends
Dividends are recognised as a liability in the period in which they are approved in a general
meeting by the shareholders of the Company (final dividend) or paid (interim dividend).
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.
Where an investment property is owned through a long leasehold arrangement under which
is recognised at the commencement date of the lease and accounted for as an investment
property. The cost of leased investment properties recognised in right-of-use assets includes
the present value of future lease payments recognised together with lease payments made
before commencement of the lease, less any incentives received. A corresponding lease
liability is recognised on the balance sheet.
The Group transfers a property to or from its classification of investment properties only when
there is a change in use. For example, when it is the Group’s intention to end or commence
owner-occupation is the point at which the property respectively meets or ceases to meet
the definition of an investment property, the determination of which, may require the
application of management judgement.
Investment properties are classified as non-current assets in the consolidated balance sheet.
The carrying value of investment properties is periodically reviewed for impairment when
events and circumstances indicate that the carrying amount may not be recoverable.
Lessor income
Essentra lets out a small number of properties that are owned or held under a leased
contract which is in excess of the Group’s operational requirements. Lessor income from
operating leases is recognised on a straight-line basis over the term of the lease. Where the
Group is an intermediate lessor, the sublease income classification is assessed with reference
to the head lease right of use asset. The head lease right of use asset is depreciated over the
term of the sublease on a straight-line basis.
Critical Accounting Judgements and Estimates
The preparation of the consolidated financial statements requires the Directors and
management to make judgements and estimates in respect of certain items where the
choice of accounting policy and assumptions applied in determining the judgement or
estimate could materially affect the Group’s financial position, results, or cash flows at
the reporting date.
Management regularly reviews the critical accounting judgements that significantly impact
the amounts recognised in the consolidated financial statements and the critical accounting
estimates that due to their significant estimation uncertainty, may give rise to a material
adjustment in the next financial reporting period.
Although the determination of accounting estimates is based on management’s best
estimate considering its knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis and revisions to accounting estimates are recognised in the
period in which the estimate is revised and future periods if the revision affects both current
and future reporting periods.
The Group’s critical accounting judgements and estimates are detailed below.
Accounting Judgements
Adjusting items
Adjusting items are separately presented from other items of financial performance as this
enables management to reflect the underlying performance of the continuing operations of
the Group. Judgement is required to determine whether such items of financial performance
should be included within adjusting items by virtue of their nature, size or incidence.
The Group’s accounting policy concerning adjusting items is detailed under alternative
performance measures.
Adjusting items of £21.0m (2022: £26.0m) have been reported in continuing operations
which includes £1.3m of costs incurred relating to restructuring of the continuing business
following the sale of the Filters and Packaging divisions, a £1.0m credit relating to acquisitions
of businesses, £10.8m has been incurred in relation to the customisation and configuration
costs of significant “software as a service” (“SaaS”) arrangements, which, in management’s
judgement, constitute material one-off charges to upgrade the Group’s technical capabilities
and meets the Group’s policy for being categorised as adjusting items, £1.8m in relation
to legacy defined benefit pension charges, £0.8m in respect of indemnity provisions raised
for historic claims on previous acquisitions, £3.4m in relation to impairment of fixed assets
following an impairment assessment and £3.7m in relation to impairment of
investment properties.
A complete analysis of the amounts included in adjusting items is detailed in note 2.
“Software as a Service” (“SaaS”) arrangements
The recognition of customisation and configuration costs of £10.8m (2022: £12.4m)
(which are included within adjusting items) relating to SaaS arrangements involves
a number of key judgements:
• whether a software arrangement is a SaaS arrangement: management considers the fact
pattern of the software arrangement carefully to identify SaaS arrangements,
distinguishing from other arrangements such as “platform as a service” or “infrastructure
as a service”;
• whether any cost incurred in customisation and configuration results in additional code
from which the Group has the power to obtain the future economic benefits and restricts
other third parties access to those benefits: management considered whether the code
can be used in or transferred to another computing arrangement;
• whether the customisation and configuration service provided by the SaaS provider is
distinct from the regular SaaS arrangement: management considers factors such as
whether the Group can benefit from the service separately from the other elements of
deliverables from the SaaS provider;
• whether a third party providing customisation and configuration service is in effect
a subcontractor of the SaaS provider: management considers factors such as the nature
of the contractual and working relationship between the SaaS provider and the third party,
the obligations of the third party who has the primary responsibility for the services that
it provides.
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.
Recognition of Retirement benefit assets
A key judgement when recognising a retirement benefit asset is whether the Company has
an unconditional right to a refund on such a surplus. A retirement benefit assets for £7.9m
(2022: £7.9m) has been recognised on the Group’s European pension surplus because it was
judged that the trustees cannot use trustee’s discretionary power to use this surplus to
augment member benefits.
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CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
DIRECTORS’
REPORT
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
Accounting Estimates
Business disposals – completion accounts
At 31 December 2023, the Group has recognised £23.0m (2022: £18.0m) in other financial
liabilities in relation to the completion accounts processes in respect of the Group’s business
disposals in 2022.
The amount recognised, based on the facts and circumstances that were present and
known at the balance sheet date, represents management’s best estimate of the expected
settlement payable through the respective completion accounts processes and other
mechanisms allowed by the share purchase agreements (“SPA”). Although the outcome of
the completion accounts process for the Filters business remains inherently uncertain at the
end of the reporting period, given that the SPA terms related to the completion accounts
mechanisms are complex, and the completion accounts could be the subject of commercial
negotiation and, in the absence of agreement, an expert determination process, it is therefore
recognised that the final amount agreed could be materially different from the estimate.
The future range of possible outcomes associated with the various assumptions and
judgements applied in the determination of the total value of the financial liability recognised
at 31 December 2023 could therefore lead to an increase or decrease in the value of the
financial liability recognised in the next financial year. The assessed range of possible future
outcomes in the next financial year could potentially lead to a decrease in the liability of up
to £2.0m or an increase of up to £1.9m.
Business disposals – measurement of contingent consideration
During 2022, the Group recognised a net loss of £16.6m on the disposal of the Filters business.
The value of the loss is subject to finalisation of the deferred contingent consideration
receivable which requires judgement. The maximum potential undiscounted deferred
contingent consideration amount that the Group could receive is £20.0m. Deferred
consideration is structured as an earn-out in two tranches of up to £10.0m, with each
tranche contingent upon the Filters business achieving certain contractual profit
performance targets in its financial years ending 31 December 2023 and 31 December 2024
(the “earn-out years”), respectively.
Management has, with the assistance of an external valuation specialist, determined the
fair value of contingent consideration receivable using an option pricing model which applies
prudent assumptions to risk-free cash flows in each of the earn-out years. For valuation
purposes, as inputs into the model are intended to be risk-neutral, profit forecasts for the
earn-out years are discounted to neutralise forecast risk by applying a risk-adjusted rate
to expected cash flows based on an industry specific and geographically derived weighted
average cost of capital. The resulting risk-adjusted profit for each earn-out year has been
modelled against the respective contractually agreed profit performance target with the
calculated earn-out achieved discounted to present value by applying a rate that reflects
counterparty credit risk and the timing of future cash flows.
At 31 December 2023, deferred contingent consideration receivable with a fair value of £9.3m
(2022: £10.6m) has been classified as a long-term receivable and £9.7m (2022: £nil) has been
classified as trade and other receivables in the consolidated financial statements (refer to
note 19). The actual earn-out receivable when the contingent consideration is finalised may
differ materially from the fair value estimate at 31 December 2023 as a result of reasonable
changes to assumptions applied.
Based on information available at the reporting date, the assessed range of possible future
outcomes could potentially lead to an increase of up to £nil in the earn-out receivable being
recognised in the next financial year, or a decrease of £9.3m were the conditions for the earn-
out to fail in their entirety, representing the resolution of the uncertainty inherent in the cash
flows. Any future movements in fair value of the deferred contingent consideration when
remeasured at subsequent reporting period end dates will be taken through the consolidated
income statement, and recognised as part of the result from discontinued operations.
Taxation
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 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.
Key judgement areas for the Group include the pricing of intercompany goods and services
as well as the tax consequences arising from restructuring operations. Management may
engage with professional advisers 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 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.
Uncertain tax provisions
At 31 December 2023, included in the tax payable is a liability of £4.0m (2022: £4.4m)
for transfer pricing matters and £5.8m (2022: £11.7m) for other uncertain tax positions.
The reduction in each provision is primarily due to the expiry of statute of limitations following
the passage of time, favourable agreements reached with tax authorities on previous matters
and part of the liability transferring with disposed entities. Adjustments for current year
transactions and foreign exchange movements complete the movement in the year. Of the
amount recognised at the end of the reporting period, a possible range of outcomes could
potentially see between £3.7m and £4.8m resolved in the next financial year as a result of
expiring statute of limitations and completion of tax audits.
UK Deferred tax assets
The Group has recognised a net deferred tax asset of £5.7m in the UK. The assessed range of
possible future outcomes in the next financial year could potentially lead to a decrease in the
deferred tax asset of up to £1.9m or an increase of up to £4.0m. For more details see note 16.
Accounting Estimates continued
Retirement benefit obligations
Estimate of inventory obsolescence
At 31 December 2023, the net retirement benefit liability was £9.6m (2022: £10.6m), including
Inventories represent a material proportion of the Group’s net assets. At 31 December 2023,
a retirement benefit liability of £17.5m (2022: £18.5m). The measurement of defined benefit
the Group had £64.7m (2022: £65.0m) of inventories on the balance sheet.
obligations requires the application of judgement in relation to the key assumptions used,
particularly in determining the discount rate, inflation rate, and mortality rates.
The Group estimates the net realisable value of inventories in order to determine the value of
any provision required. These estimations are based on recent experience and knowledge of
In consultation with Essentra’s actuaries, management determines the point within the range
the products held in inventory estimations, include any impact of obsolescence including that
of possible outcomes for those assumptions applied at the balance sheet date that most
related to regulatory changes including climate change, are made in relation to the number
appropriately reflects Essentra’s circumstances. Small changes to these assumptions can
of years of sales of each product and the value recoverable from those inventories.
have a material impact on the valuation and consequently reported amounts. Accordingly,
the Group performs a sensitivity analysis for the key assumptions applied in determining post-
employment costs and liabilities, as detailed in note 18.
Provision for contractual obligations
The provision for contractual obligations represents amounts that the Group may be liable
to pay arising from the disposal of the Packaging and Filters businesses during the year.
The Group undertakes periodic reviews of inventory levels and quality, and following those
reviews provides for all inventory that is considered obsolete. Furthermore, the Group provides
in full for unsold or slow moving inventory.
Following the disposal of its Packaging and Filters businesses in 2022, and based upon
the most recent reliable information, the Group has updated the inputs into its inventory
provisioning calculations in order to ensure that inventories continue to be measured at the
At 31 December 2023 provisions for contractual obligations amounted to £3.4m (2022:
lower of cost and net realisable value. The impact on inventory provisioning resulted in an
£5.5m), representing the Group’s estimate of ongoing obligations due to each of the buyers
increase in inventories and a resultant credit to gross profit (see note 10).
under the respective Share Purchase Agreements. The assessed range of possible future
outcomes in the next financial year could potentially lead to a decrease in the provision of up
to £2m or an increase of up to £1.0m.
Business combinations and intangible assets
IFRS 3 Business Combinations 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 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.
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. 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 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 and recognises impairments when required. The critical estimates made for the
year ended 31 December 2023 are related to the APAC region, as detailed in note 8.
The useful lives of the Group’s finite-lived intangible assets are reviewed following the tests
for impairment annually.
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CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
Accounting Estimates
Business disposals – completion accounts
At 31 December 2023, the Group has recognised £23.0m (2022: £18.0m) in other financial
(2022: £10.6m) has been classified as a long-term receivable and £9.7m (2022: £nil) has been
liabilities in relation to the completion accounts processes in respect of the Group’s business
classified as trade and other receivables in the consolidated financial statements (refer to
At 31 December 2023, deferred contingent consideration receivable with a fair value of £9.3m
disposals in 2022.
note 19). The actual earn-out receivable when the contingent consideration is finalised may
differ materially from the fair value estimate at 31 December 2023 as a result of reasonable
The amount recognised, based on the facts and circumstances that were present and
known at the balance sheet date, represents management’s best estimate of the expected
changes to assumptions applied.
settlement payable through the respective completion accounts processes and other
Based on information available at the reporting date, the assessed range of possible future
mechanisms allowed by the share purchase agreements (“SPA”). Although the outcome of
outcomes could potentially lead to an increase of up to £nil in the earn-out receivable being
the completion accounts process for the Filters business remains inherently uncertain at the
recognised in the next financial year, or a decrease of £9.3m were the conditions for the earn-
end of the reporting period, given that the SPA terms related to the completion accounts
out to fail in their entirety, representing the resolution of the uncertainty inherent in the cash
mechanisms are complex, and the completion accounts could be the subject of commercial
flows. Any future movements in fair value of the deferred contingent consideration when
negotiation and, in the absence of agreement, an expert determination process, it is therefore
remeasured at subsequent reporting period end dates will be taken through the consolidated
recognised that the final amount agreed could be materially different from the estimate.
income statement, and recognised as part of the result from discontinued operations.
The future range of possible outcomes associated with the various assumptions and
Taxation
judgements applied in the determination of the total value of the financial liability recognised
Liabilities for tax contingencies require management judgements and estimates in respect of
at 31 December 2023 could therefore lead to an increase or decrease in the value of the
tax audit issues and exposures in each of the jurisdictions in which it operates. Management
financial liability recognised in the next financial year. The assessed range of possible future
is also required to make an estimate of the current tax liability together with an assessment
outcomes in the next financial year could potentially lead to a decrease in the liability of up
of the temporary differences which arise as a consequence of different accounting and tax
to £2.0m or an increase of up to £1.9m.
Business disposals – measurement of contingent consideration
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.
During 2022, the Group recognised a net loss of £16.6m on the disposal of the Filters business.
Key judgement areas for the Group include the pricing of intercompany goods and services
The value of the loss is subject to finalisation of the deferred contingent consideration
as well as the tax consequences arising from restructuring operations. Management may
receivable which requires judgement. The maximum potential undiscounted deferred
engage with professional advisers in making their assessment and, if appropriate, will liaise
contingent consideration amount that the Group could receive is £20.0m. Deferred
with the relevant taxation authorities to resolve the matter. The tax liability is reassessed in
consideration is structured as an earn-out in two tranches of up to £10.0m, with each
each period to reflect Management’s best estimate in light of information available. If the
tranche contingent upon the Filters business achieving certain contractual profit
final outcome of these matters differs to the liability held in the financial statements, the
performance targets in its financial years ending 31 December 2023 and 31 December 2024
difference may impact the income tax charge / (credit) in the year the matter is concluded.
(the “earn-out years”), respectively.
Uncertain tax provisions
Management has, with the assistance of an external valuation specialist, determined the
At 31 December 2023, included in the tax payable is a liability of £4.0m (2022: £4.4m)
fair value of contingent consideration receivable using an option pricing model which applies
for transfer pricing matters and £5.8m (2022: £11.7m) for other uncertain tax positions.
prudent assumptions to risk-free cash flows in each of the earn-out years. For valuation
The reduction in each provision is primarily due to the expiry of statute of limitations following
purposes, as inputs into the model are intended to be risk-neutral, profit forecasts for the
the passage of time, favourable agreements reached with tax authorities on previous matters
earn-out years are discounted to neutralise forecast risk by applying a risk-adjusted rate
and part of the liability transferring with disposed entities. Adjustments for current year
to expected cash flows based on an industry specific and geographically derived weighted
transactions and foreign exchange movements complete the movement in the year. Of the
average cost of capital. The resulting risk-adjusted profit for each earn-out year has been
amount recognised at the end of the reporting period, a possible range of outcomes could
modelled against the respective contractually agreed profit performance target with the
potentially see between £3.7m and £4.8m resolved in the next financial year as a result of
calculated earn-out achieved discounted to present value by applying a rate that reflects
expiring statute of limitations and completion of tax audits.
counterparty credit risk and the timing of future cash flows.
UK Deferred tax assets
The Group has recognised a net deferred tax asset of £5.7m in the UK. The assessed range of
possible future outcomes in the next financial year could potentially lead to a decrease in the
deferred tax asset of up to £1.9m or an increase of up to £4.0m. For more details see note 16.
Accounting Estimates continued
Retirement benefit obligations
At 31 December 2023, the net retirement benefit liability was £9.6m (2022: £10.6m), including
a retirement benefit liability of £17.5m (2022: £18.5m). The measurement of defined benefit
obligations requires the application of judgement in relation to the key assumptions used,
particularly in determining the discount rate, inflation rate, and mortality rates.
In consultation with Essentra’s actuaries, management determines the point within the range
of possible outcomes for those assumptions applied at the balance sheet date that most
appropriately reflects Essentra’s circumstances. Small changes to these assumptions can
have a material impact on the valuation and consequently reported amounts. Accordingly,
the Group performs a sensitivity analysis for the key assumptions applied in determining post-
employment costs and liabilities, as detailed in note 18.
Provision for contractual obligations
The provision for contractual obligations represents amounts that the Group may be liable
to pay arising from the disposal of the Packaging and Filters businesses during the year.
At 31 December 2023 provisions for contractual obligations amounted to £3.4m (2022:
£5.5m), representing the Group’s estimate of ongoing obligations due to each of the buyers
under the respective Share Purchase Agreements. The assessed range of possible future
outcomes in the next financial year could potentially lead to a decrease in the provision of up
to £2m or an increase of up to £1.0m.
Business combinations and intangible assets
IFRS 3 Business Combinations 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 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.
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. 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 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 and recognises impairments when required. The critical estimates made for the
year ended 31 December 2023 are related to the APAC region, as detailed in note 8.
The useful lives of the Group’s finite-lived intangible assets are reviewed following the tests
for impairment annually.
DIRECTORS’
REPORT
Estimate of inventory obsolescence
Inventories represent a material proportion of the Group’s net assets. At 31 December 2023,
the Group had £64.7m (2022: £65.0m) of inventories on the balance sheet.
The Group estimates the net realisable value of inventories in order to determine the value of
any provision required. These estimations are based on recent experience and knowledge of
the products held in inventory estimations, include any impact of obsolescence including that
related to regulatory changes including climate change, are made in relation to the number
of years of sales of each product and the value recoverable from those inventories.
The Group undertakes periodic reviews of inventory levels and quality, and following those
reviews provides for all inventory that is considered obsolete. Furthermore, the Group provides
in full for unsold or slow moving inventory.
Following the disposal of its Packaging and Filters businesses in 2022, and based upon
the most recent reliable information, the Group has updated the inputs into its inventory
provisioning calculations in order to ensure that inventories continue to be measured at the
lower of cost and net realisable value. The impact on inventory provisioning resulted in an
increase in inventories and a resultant credit to gross profit (see note 10).
166
ESSENTRA PLC ANNUAL REPORT 2023
167
ESSENTRA PLC ANNUAL REPORT 2023
167
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Segment analysis
Notes to the Consolidated Financial Statements
1.
The Group has determined its operating segments based upon the information reported to the Board of Directors (“Board”), which is the Group’s Chief Operating Decision Maker.
Segment information is reported on a geographical basis consistent with the basis upon which the Group manages its operations, allocates resources, and assesses performance.
Central corporate costs include executive and non-executive management, investor relations, corporate development, corporate reward, governance, risk and assurance, group finance,
tax, treasury and related information technology costs.
Following the disposal of the Packaging and Filters businesses during the year ended 31 December 2022, the Group has changed the way its information is reported to the Board.
Previously performance was reported on a divisional basis. Performance is now managed on a geographical basis with Gross profit introduced as an additional segment profit measure.
Central corporate costs (previously disclosed as Central Services) now exclude certain costs that are now regarded as attributable to the operating segments.
EMEA
£m
170.8
87.5
53.9
53.9
(4.0)
0.8
50.7
110.8
147.0
Americas
£m
106.2
40.3
19.5
19.5
(5.5)
(1.5)
12.5
70.2
53.3
257.8
123.5
44.2
44.2
3.7
4.3
1,180
27.9
27.9
6.3
2.8
727
APAC
£m
39.3
14.0
3.5
3.5
(1.8)
(3.4)
(1.7)
25.8
9.0
34.8
7.7
7.7
1.7
1.9
950
Unallocated
items1
£m
Continuing
operations
£m
Discontinued
operations3
£m
–
–
(22.1)
(11.6)
(33.7)
–
(16.9)
(50.6)
28.8
5.7
85.4
119.9
45.6
137.4
183.0
1.5
2.1
194
316.3
141.8
54.8
(11.6)
43.2
(11.3)
(21.0)
10.9
235.6
215.0
85.4
536.0
125.4
137.4
262.8
13.2
11.1
3,051
–
–
(0.4)
–
(0.4)
–
–
(0.4)
–
–
–
–
–
–
–
–
–
–
–
2023
Total
£m
316.3
141.8
54.4
(11.6)
42.8
(11.3)
(21.0)
10.5
235.6
215.0
85.4
536.0
125.4
137.4
262.8
13.2
11.1
3,051
Income statement information
External revenue
Gross profit
Adjusted operating profit/(loss) before corporate costs
Central corporate costs2
Adjusted operating profit/(loss)
Amortisation of acquired intangible assets
Adjusting items
Operating profit/(loss)
Balance sheet information
Segment assets
Intangible assets
Unallocated items 4
Total assets
Segment liabilities
Unallocated items 4
Total liabilities
Other segment information
Capital expenditure (cash spend)
Depreciation of plant, property and equipment
Average number of employees
168
168
ESSENTRA PLC ANNUAL REPORT 2023
1.
Segment analysis continued
Income statement information
External revenue
Gross profit
Adjusted operating profit/(loss) before corporate costs
Central corporate costs2
Adjusted operating profit/(loss) after allocation of central costs
to discontinued operations5
Operating expenses allocated to discontinued operations
Adjusted operating profit/(loss)
Amortisation and impairment of acquired intangible assets
Adjusting items
Operating profit/(loss)
Balance sheet information
Segment assets
Intangible assets
Unallocated items4
Total assets
Segment liabilities
Unallocated items4
Total liabilities
Other segment information
Capital expenditure (cash spend)
Depreciation of plant, property and equipment
Average number of employees
Notes:
EMEA
£m
167.0
84.5
51.3
51.3
–
51.3
(2.6)
(1.4)
47.3
103.0
122.7
225.7
40.9
40.9
5.5
3.6
1,211
Americas
£m
123.4
47.2
25.3
25.3
–
25.3
(5.9)
(0.5)
18.9
63.3
61.9
125.2
18.7
18.7
3.4
2.8
821
APAC
£m
47.5
16.5
5.8
5.8
–
5.8
(1.9)
–
3.9
32.9
14.3
47.2
15.9
15.9
2.1
2.1
1,011
Unallocated
items1
£m
Continuing
operations
£m
Discontinued
operations3
£m
(re-presented) 2022
–
–
(20.5)
(23.1)
(43.6)
(13.7)
(57.3)
–
(24.1)
(81.4)
37.0
7.7
450.6
495.3
77.2
336.6
413.8
2.5
5.4
305
337.9
148.2
61.9
(23.1)
38.8
(13.7)
25.1
(10.4)
(26.0)
(11.3)
236.2
206.6
450.6
893.4
152.7
336.6
489.3
13.5
13.9
3,348
653.9
116.9
38.4
–
38.4
13.7
52.1
(189.2)
(137.1)
–
–
–
–
–
–
–
–
–
27.5
15.6
4,067
Total
£m
991.8
265.1
100.3
(23.1)
77.2
–
77.2
(199.6)
(26.0)
(148.4)
236.2
206.6
450.6
893.4
152.7
336.6
489.3
41.0
29.5
7,415
1 Unallocated items include operating expenses related to the regions that are managed at a total trading level rather than by individual segment. Assets, liabilities and employees also managed at a total trading level are presented within Unallocated operating expenses. Segment assets
of £28.8m (2022: £37.0m) includes investment property of £3.3m (2022: £7.0m).
2 Central corporate costs (previously disclosed as Central Services) include executive and non-executive management, investor relations, corporate development, governance, risk and assurance, group finance, tax, treasury, and related information technology costs. The comparative numbers have
been re-presented to exclude certain costs that, following the completion of the strategic review, are now regarded as attributable to the operating segments. The effect of this change is to reallocate £1.8m of costs previously included within Central Services in 2022, to Operating expenses.
3 Operating loss from discontinued operations (see note 24) excludes the loss on disposal of £3.7m (2022: £19.0m).
liabilities and income tax payable. Intersegment transactions are carried out on an arm’s-length basis.
4 The unallocated assets relate to income and deferred tax assets, retirement benefit assets, derivatives, other financial assets and cash and cash equivalents. The unallocated liabilities relate to interest bearing loans and borrowings, retirement benefit obligations, derivatives, deferred tax
5 Adjusted operating profit of £38.8m in 2022 includes costs that would have otherwise been allocated to the Packaging and Filters businesses had those businesses not been disposed. Had those additional costs been adjusted for the adjusted operating profit would have been £43.0m.
On a continuing basis, no customer accounted for more than 10% of revenue in either 2023 or 2022. Non-current assets in the UK (the Company’s country of domicile) total £93.6m (2022:
£91.1m), with the other significant location being the USA with £106.2m (2022: £114.2m). Total Group net finance expense of £2.5m (2022: £18.4m) and total Group income tax credit of £1.1m
(2022: £2.0m) cannot be meaningfully allocated by segment. The Group revenue does not include any variable consideration which is constrained.
ESSENTRA PLC ANNUAL REPORT 2023
169
ESSENTRA PLC ANNUAL REPORT 2023
Notes to the Consolidated Financial Statements
1.
Segment analysis
The Group has determined its operating segments based upon the information reported to the Board of Directors (“Board”), which is the Group’s Chief Operating Decision Maker.
Segment information is reported on a geographical basis consistent with the basis upon which the Group manages its operations, allocates resources, and assesses performance.
Central corporate costs include executive and non-executive management, investor relations, corporate development, corporate reward, governance, risk and assurance, group finance,
tax, treasury and related information technology costs.
Following the disposal of the Packaging and Filters businesses during the year ended 31 December 2022, the Group has changed the way its information is reported to the Board.
Previously performance was reported on a divisional basis. Performance is now managed on a geographical basis with Gross profit introduced as an additional segment profit measure.
Central corporate costs (previously disclosed as Central Services) now exclude certain costs that are now regarded as attributable to the operating segments.
Income statement information
External revenue
Gross profit
Adjusted operating profit/(loss) before corporate costs
Central corporate costs2
Adjusted operating profit/(loss)
Amortisation of acquired intangible assets
Adjusting items
Operating profit/(loss)
Balance sheet information
Segment assets
Intangible assets
Unallocated items 4
Total assets
Segment liabilities
Unallocated items 4
Total liabilities
Other segment information
Capital expenditure (cash spend)
Depreciation of plant, property and equipment
Average number of employees
EMEA
£m
170.8
87.5
53.9
53.9
(4.0)
0.8
50.7
110.8
147.0
44.2
44.2
3.7
4.3
1,180
Americas
£m
106.2
40.3
19.5
19.5
(5.5)
(1.5)
12.5
70.2
53.3
27.9
27.9
6.3
2.8
727
257.8
123.5
APAC
£m
39.3
14.0
3.5
3.5
(1.8)
(3.4)
(1.7)
25.8
9.0
34.8
7.7
7.7
1.7
1.9
950
Unallocated
items1
£m
Continuing
operations
£m
Discontinued
operations3
£m
–
–
–
(22.1)
(11.6)
(33.7)
(16.9)
(50.6)
28.8
5.7
85.4
119.9
45.6
137.4
183.0
1.5
2.1
194
316.3
141.8
54.8
(11.6)
43.2
(11.3)
(21.0)
10.9
235.6
215.0
85.4
536.0
125.4
137.4
262.8
13.2
11.1
3,051
(0.4)
(0.4)
(0.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2023
Total
£m
316.3
141.8
54.4
(11.6)
42.8
(11.3)
(21.0)
10.5
235.6
215.0
85.4
536.0
125.4
137.4
262.8
13.2
11.1
3,051
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Segment analysis continued
Income statement information
External revenue
Gross profit
Adjusted operating profit/(loss) before corporate costs
Central corporate costs2
Adjusted operating profit/(loss) after allocation of central costs
to discontinued operations5
Operating expenses allocated to discontinued operations
Adjusted operating profit/(loss)
Amortisation and impairment of acquired intangible assets
Adjusting items
Operating profit/(loss)
Balance sheet information
Segment assets
Intangible assets
Unallocated items4
Total assets
Segment liabilities
Unallocated items4
Total liabilities
Other segment information
Capital expenditure (cash spend)
Depreciation of plant, property and equipment
Average number of employees
EMEA
£m
167.0
84.5
51.3
51.3
–
51.3
(2.6)
(1.4)
47.3
103.0
122.7
225.7
40.9
40.9
5.5
3.6
1,211
Americas
£m
123.4
47.2
25.3
25.3
–
25.3
(5.9)
(0.5)
18.9
63.3
61.9
125.2
18.7
18.7
3.4
2.8
821
DIRECTORS’
REPORT
(re-presented) 2022
APAC
£m
47.5
16.5
5.8
5.8
–
5.8
(1.9)
–
3.9
32.9
14.3
47.2
15.9
15.9
2.1
2.1
1,011
Unallocated
items1
£m
Continuing
operations
£m
Discontinued
operations3
£m
–
–
(20.5)
(23.1)
(43.6)
(13.7)
(57.3)
–
(24.1)
(81.4)
37.0
7.7
450.6
495.3
77.2
336.6
413.8
2.5
5.4
305
337.9
148.2
61.9
(23.1)
38.8
(13.7)
25.1
(10.4)
(26.0)
(11.3)
236.2
206.6
450.6
893.4
152.7
336.6
489.3
13.5
13.9
3,348
653.9
116.9
38.4
–
38.4
13.7
52.1
(189.2)
–
(137.1)
–
–
–
–
–
–
–
–
27.5
15.6
4,067
Total
£m
991.8
265.1
100.3
(23.1)
77.2
–
77.2
(199.6)
(26.0)
(148.4)
236.2
206.6
450.6
893.4
152.7
336.6
489.3
41.0
29.5
7,415
168
ESSENTRA PLC ANNUAL REPORT 2023
169
ESSENTRA PLC ANNUAL REPORT 2023
169
Notes:
1 Unallocated items include operating expenses related to the regions that are managed at a total trading level rather than by individual segment. Assets, liabilities and employees also managed at a total trading level are presented within Unallocated operating expenses. Segment assets
of £28.8m (2022: £37.0m) includes investment property of £3.3m (2022: £7.0m).
2 Central corporate costs (previously disclosed as Central Services) include executive and non-executive management, investor relations, corporate development, governance, risk and assurance, group finance, tax, treasury, and related information technology costs. The comparative numbers have
been re-presented to exclude certain costs that, following the completion of the strategic review, are now regarded as attributable to the operating segments. The effect of this change is to reallocate £1.8m of costs previously included within Central Services in 2022, to Operating expenses.
3 Operating loss from discontinued operations (see note 24) excludes the loss on disposal of £3.7m (2022: £19.0m).
4 The unallocated assets relate to income and deferred tax assets, retirement benefit assets, derivatives, other financial assets and cash and cash equivalents. The unallocated liabilities relate to interest bearing loans and borrowings, retirement benefit obligations, derivatives, deferred tax
liabilities and income tax payable. Intersegment transactions are carried out on an arm’s-length basis.
5 Adjusted operating profit of £38.8m in 2022 includes costs that would have otherwise been allocated to the Packaging and Filters businesses had those businesses not been disposed. Had those additional costs been adjusted for the adjusted operating profit would have been £43.0m.
On a continuing basis, no customer accounted for more than 10% of revenue in either 2023 or 2022. Non-current assets in the UK (the Company’s country of domicile) total £93.6m (2022:
£91.1m), with the other significant location being the USA with £106.2m (2022: £114.2m). Total Group net finance expense of £2.5m (2022: £18.4m) and total Group income tax credit of £1.1m
(2022: £2.0m) cannot be meaningfully allocated by segment. The Group revenue does not include any variable consideration which is constrained.
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Segment analysis continued
1.
Disaggregation of revenue
% of Total Continuing External Revenue
Revenue by channel
End users
Distributors
Revenue by offer type
Standard
Configured
Custom
Revenue by customer segment
Industrial manufacturers
Large consumer manufacturers
SME consumers
Revenue by geographical location
External revenue presented in the table below, on a continuing basis, by location of the Group operation where the sales originated.
UK (country of domicile)
US
China
Turkey
Germany
Italy
France
The Netherlands
Spain
Poland
Rest of World
Total continuing Group
2023
2022
Changes in inventories of finished goods and work-in-progress
78%
22%
63%
31%
6%
71%
20%
9%
2023
£m
30.2
94.6
26.9
23.6
22.4
14.8
15.1
13.8
12.3
10.9
51.7
79%
21%
64%
28%
8%
72%
21%
7%
2022
£m
22.1
111.1
32.6
21.6
23.7
14.4
17.4
14.7
12.3
10.7
57.3
316.3
337.9
Adjusting items before tax
2. Net operating expense
Raw materials and consumables
Personnel expense1
Depreciation of property, plant and equipment
Depreciation of lease right-of-use assets
Loss on sale of property, plant and equipment
Amortisation of intangible assets3
Adjusting items
Exchange differences recognised in profit or loss
Other operating expenses2
Net operating expenses
Notes:
1 Excludes personnel expenses totalling £2.2m (2022: £5.1m) recognised within adjusting items.
2 Other operating expenses includes manufacturing, selling, general and administrative overheads.
3
Includes amortisation of non-acquired intangible assets of £2.9m (2022: £2.7m).
Adjusting items from continuing operations
Costs relating to restructuring following disposals of businesses1
(Gains)/losses and transaction costs relating to acquisitions of businesses2
Acquisition integration and restructuring costs
Customisation and configuration costs of significant software as a service (“SaaS”) arrangements3
Defined benefit pension scheme charges4
Impairment of non-current assets5
Other6
Tax
Adjusting items after tax
Note
5
7
9
8
2
2023
£m
(2.6)
90.7
107.9
11.1
5.9
–
14.2
21.0
(1.1)
58.3
305.4
2023
£m
1.3
(1.0)
–
10.8
1.8
7.1
1.0
21.0
(4.3)
16.7
2022
£m
(7.7)
109.3
122.7
13.9
5.6
0.1
13.1
26.0
–
66.2
349.2
2022
£m
10.4
0.3
0.2
12.4
2.0
–
0.7
26.0
2.8
28.8
Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence. They are identified separately in order for the reader to obtain a clearer
understanding of the underlying results of the ongoing Group’s operations, by excluding items which, in management’s view, do not form part of the Group’s underlying operating results,
such as gains, losses or costs arising from business acquisition and disposal activities, significant restructuring and closure costs, and costs of major Software as a Service projects, items
which are non-recurring or one-off in nature (such as the costs of fundamental strategic review and reorganisation), one-off impairments of non-current assets and charges relating to the
Group’s legacy defined benefit pension schemes, and the related tax effect.
170
170
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
171
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Net operating expense
2023
2022
Changes in inventories of finished goods and work-in-progress
Raw materials and consumables
Personnel expense1
Depreciation of property, plant and equipment
Depreciation of lease right-of-use assets
Loss on sale of property, plant and equipment
Amortisation of intangible assets3
Adjusting items
Exchange differences recognised in profit or loss
Other operating expenses2
Net operating expenses
Notes:
1 Excludes personnel expenses totalling £2.2m (2022: £5.1m) recognised within adjusting items.
2 Other operating expenses includes manufacturing, selling, general and administrative overheads.
3
Includes amortisation of non-acquired intangible assets of £2.9m (2022: £2.7m).
Adjusting items from continuing operations
DIRECTORS’
REPORT
Note
5
7
9
8
2
2023
£m
(2.6)
90.7
107.9
11.1
5.9
–
14.2
21.0
(1.1)
58.3
305.4
2022
£m
(7.7)
109.3
122.7
13.9
5.6
0.1
13.1
26.0
–
66.2
349.2
Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence. They are identified separately in order for the reader to obtain a clearer
understanding of the underlying results of the ongoing Group’s operations, by excluding items which, in management’s view, do not form part of the Group’s underlying operating results,
such as gains, losses or costs arising from business acquisition and disposal activities, significant restructuring and closure costs, and costs of major Software as a Service projects, items
which are non-recurring or one-off in nature (such as the costs of fundamental strategic review and reorganisation), one-off impairments of non-current assets and charges relating to the
Group’s legacy defined benefit pension schemes, and the related tax effect.
Costs relating to restructuring following disposals of businesses1
(Gains)/losses and transaction costs relating to acquisitions of businesses2
Acquisition integration and restructuring costs
Customisation and configuration costs of significant software as a service (“SaaS”) arrangements3
Defined benefit pension scheme charges4
Impairment of non-current assets5
Other6
316.3
337.9
Adjusting items before tax
Tax
Adjusting items after tax
2023
£m
1.3
(1.0)
–
10.8
1.8
7.1
1.0
21.0
(4.3)
16.7
2022
£m
10.4
0.3
0.2
12.4
2.0
–
0.7
26.0
2.8
28.8
1.
Segment analysis continued
Disaggregation of revenue
% of Total Continuing External Revenue
Revenue by channel
Revenue by offer type
End users
Distributors
Standard
Configured
Custom
Revenue by customer segment
Industrial manufacturers
Large consumer manufacturers
SME consumers
Revenue by geographical location
UK (country of domicile)
US
China
Turkey
Germany
Italy
France
The Netherlands
Spain
Poland
Rest of World
Total continuing Group
External revenue presented in the table below, on a continuing basis, by location of the Group operation where the sales originated.
78%
22%
63%
31%
6%
71%
20%
9%
2023
£m
30.2
94.6
26.9
23.6
22.4
14.8
15.1
13.8
12.3
10.9
51.7
79%
21%
64%
28%
8%
72%
21%
7%
2022
£m
22.1
111.1
32.6
21.6
23.7
14.4
17.4
14.7
12.3
10.7
57.3
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ESSENTRA PLC ANNUAL REPORT 2023
171
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171
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Net operating expense continued
Reconciliation of cash flows from adjusting items:
Adjusting items
Non-cash charge in adjusting items
Pension contribution adjustment
Utilisation of prior year and acquired accruals and provisions
Cash outflow from adjusting items
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Net finance expense from continuing operations
4.
Income tax expense/(credit)
2023
£m
21.0
(5.9)
1.9
6.6
23.6
2022
£m
26.0
(2.0)
–
(0.3)
23.7
Notes:
1 Costs of £1.3m (2022: £9.9m), in relation to major restructuring activities to “right size” the continuing operations of the business following the disposal of the Filters and Packaging businesses; a charge of £nil (2022: £0.5m) in relation to the acceleration of share options in respect of
certain senior management employees leaving the business following the completion of the strategic review.
2 A credit of £1.0m (2022: £0.3m charge) relating to acquisitions, of which £0.6m cost relates to the acquisition of BMP TAPPI in October 2023, and a £1.6m credit (2022: £0.3m charge) relating to the acquisition of Wixroyd Group, acquired in December 2022, comprising costs of £0.6m
and a credit of £2.2m for the reduction in contingent consideration payable.
3 Costs of significant SaaS arrangements which, in the view of management, represents investment in upgrading the Group’s technological capability, were expensed as adjusting items in accordance with the Group’s accounting policies. In the current year, costs of £10.8m (2022: £12.4m)
were attributable to major SaaS projects and relate primarily to the costs of implementing a new cloud-based enterprise resource planning (“ERP”) system within the Group.
4 Costs of £1.8m (2022: £2.0m) were incurred in relation to defined benefit pension scheme charges which, following the outcome of the strategic review in 2022, no longer pertain to the continuing operations of the Group.
5
6 Costs of £0.2m for professional fees relating to the capital reduction completed during 2023 and £0.8m provision relating to a historic indemnity claim. 2022 comprises a £0.6m write-down of centrally held IT assets following completion of the strategic review and £0.6m costs of
Includes impairment loss of £3.7m relating to a write-down of investment property to market value and a £3.4m impairment loss in relation to non-current assets held within the APAC segment.
restructuring activities within the continuing European and Americas businesses, offset by a £0.5m credit relating to adjustments to the carrying value of lease right-of-use assets.
Auditor’s remuneration
Fees payable to the Company’s external auditor, PricewaterhouseCoopers LLP and its associates are analysed below:
Fees payable for the audit of the Company and the consolidated financial statements
Audit of the financial statements of the Company’s subsidiaries pursuant to legislation
Total audit fees
Audit-related assurance services1
Other assurance services2
Total non-audit fees
Total fees
Notes:
1 Audit-related assurance services mainly comprises the review of the half-year financial statements and associated results announcement.
2
In 2022, other assurance services relates to Reporting Accountant services in respect to the Class 1 Circulars issued in respect of the disposals of the Packaging business and the Filters business.
2023
£m
1.9
0.4
2.3
0.1
–
0.1
2.4
2022
£m
3.1
0.4
3.5
0.1
1.2
1.3
4.8
Finance income
Bank deposits
Other finance income1
Net interest on pension scheme assets
Total finance income
Finance expense
Interest on loans and overdrafts
Amortisation of bank facility fees
Other finance expense2
Net interest on pension scheme liabilities
Interest on leases
Total finance expense
Net finance expense
Notes:
Note
18
18
9
2023
£m
3.5
7.0
0.5
11.0
(4.9)
(0.8)
(1.8)
(13.5)
(2.5)
2022
£m
1.4
5.1
0.6
7.1
Amounts recognised in the consolidated income statement
Current tax
Deferred tax
Adjustment in respect of prior years’ tax
Adjustment in respect of prior years’ deferred tax
Income tax credit
Note
16
16
(6.0)
(15.9)
Income tax expense/(credit) attributable to:
–
(4.7)
Expense on profit/loss from continuing operations
(2.2)
Credit on loss from discontinued operations
(0.6)
Income tax credit
(1.5)
(24.9)
Amounts recognised in the consolidated statement of
(17.8)
comprehensive income
Tax credit in respect of taxable foreign exchange taxable losses
2023
£m
4.8
(2.6)
(1.2)
(2.1)
(1.1)
2.6
(3.7)
(1.1)
(1.7)
1.1
(0.6)
(0.3)
2022
£m
14.5
(2.0)
(16.3)
1.8
(2.0)
2.0
(4.0)
(2.0)
(0.9)
–
(0.9)
(5.1)
1
Included within Other finance income is £5.7m (2022: £1.8m) relating to exchange gains on cash, borrowings and leases and £1.3m
Tax expense in respect of fair value hedges
(2022: £3.2m) relating to monetary gains on Hyperinflationary economies.
2
Included within Other finance expense is £2.3m (2022: £0.9m) relating to loss on derivative financial instruments, £nil (2022: £0.8m)
of hedge ineffectiveness, and £2.6m (2022: £0.3m) relating to exchange losses on cash, borrowings and leases.
Net Tax credit
Tax credit on remeasurement of defined benefit pension schemes
Net total tax credit through consolidated statement of
comprehensive income
(0.9)
(6.0)
172
172
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
173
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
3. Net finance expense from continuing operations
4.
Income tax expense/(credit)
Finance income
Bank deposits
Other finance income1
Net interest on pension scheme assets
Total finance income
Finance expense
Interest on loans and overdrafts
Amortisation of bank facility fees
Other finance expense2
Net interest on pension scheme liabilities
Interest on leases
Total finance expense
Net finance expense
Note
18
18
9
Notes:
1
Included within Other finance income is £5.7m (2022: £1.8m) relating to exchange gains on cash, borrowings and leases and £1.3m
(2022: £3.2m) relating to monetary gains on Hyperinflationary economies.
Included within Other finance expense is £2.3m (2022: £0.9m) relating to loss on derivative financial instruments, £nil (2022: £0.8m)
of hedge ineffectiveness, and £2.6m (2022: £0.3m) relating to exchange losses on cash, borrowings and leases.
2
2023
£m
3.5
7.0
0.5
11.0
2022
£m
1.4
5.1
0.6
7.1
Amounts recognised in the consolidated income statement
Current tax
Adjustment in respect of prior years’ tax
Deferred tax
Adjustment in respect of prior years’ deferred tax
Income tax credit
Note
16
16
(6.0)
(15.9)
Income tax expense/(credit) attributable to:
–
(4.7)
Expense on profit/loss from continuing operations
(2.2)
Credit on loss from discontinued operations
(0.6)
Income tax credit
(4.9)
(0.8)
(1.8)
(13.5)
(2.5)
(1.5)
(24.9)
(17.8)
Amounts recognised in the consolidated statement of
comprehensive income
Tax credit in respect of taxable foreign exchange taxable losses
Tax expense in respect of fair value hedges
Net Tax credit
Tax credit on remeasurement of defined benefit pension schemes
Net total tax credit through consolidated statement of
comprehensive income
2023
£m
4.8
(2.6)
(1.2)
(2.1)
(1.1)
2.6
(3.7)
(1.1)
(1.7)
1.1
(0.6)
(0.3)
2022
£m
14.5
(2.0)
(16.3)
1.8
(2.0)
2.0
(4.0)
(2.0)
(0.9)
–
(0.9)
(5.1)
(0.9)
(6.0)
2. Net operating expense continued
Reconciliation of cash flows from adjusting items:
Adjusting items
Non-cash charge in adjusting items
Pension contribution adjustment
Utilisation of prior year and acquired accruals and provisions
Cash outflow from adjusting items
Notes:
1 Costs of £1.3m (2022: £9.9m), in relation to major restructuring activities to “right size” the continuing operations of the business following the disposal of the Filters and Packaging businesses; a charge of £nil (2022: £0.5m) in relation to the acceleration of share options in respect of
2 A credit of £1.0m (2022: £0.3m charge) relating to acquisitions, of which £0.6m cost relates to the acquisition of BMP TAPPI in October 2023, and a £1.6m credit (2022: £0.3m charge) relating to the acquisition of Wixroyd Group, acquired in December 2022, comprising costs of £0.6m
certain senior management employees leaving the business following the completion of the strategic review.
and a credit of £2.2m for the reduction in contingent consideration payable.
3 Costs of significant SaaS arrangements which, in the view of management, represents investment in upgrading the Group’s technological capability, were expensed as adjusting items in accordance with the Group’s accounting policies. In the current year, costs of £10.8m (2022: £12.4m)
were attributable to major SaaS projects and relate primarily to the costs of implementing a new cloud-based enterprise resource planning (“ERP”) system within the Group.
4 Costs of £1.8m (2022: £2.0m) were incurred in relation to defined benefit pension scheme charges which, following the outcome of the strategic review in 2022, no longer pertain to the continuing operations of the Group.
5
Includes impairment loss of £3.7m relating to a write-down of investment property to market value and a £3.4m impairment loss in relation to non-current assets held within the APAC segment.
6 Costs of £0.2m for professional fees relating to the capital reduction completed during 2023 and £0.8m provision relating to a historic indemnity claim. 2022 comprises a £0.6m write-down of centrally held IT assets following completion of the strategic review and £0.6m costs of
restructuring activities within the continuing European and Americas businesses, offset by a £0.5m credit relating to adjustments to the carrying value of lease right-of-use assets.
Auditor’s remuneration
Fees payable to the Company’s external auditor, PricewaterhouseCoopers LLP and its associates are analysed below:
Fees payable for the audit of the Company and the consolidated financial statements
Audit of the financial statements of the Company’s subsidiaries pursuant to legislation
Total audit fees
Audit-related assurance services1
Other assurance services2
Total non-audit fees
Total fees
Notes:
1 Audit-related assurance services mainly comprises the review of the half-year financial statements and associated results announcement.
2
In 2022, other assurance services relates to Reporting Accountant services in respect to the Class 1 Circulars issued in respect of the disposals of the Packaging business and the Filters business.
2023
£m
21.0
(5.9)
1.9
6.6
23.6
2022
£m
26.0
(2.0)
–
(0.3)
23.7
2023
£m
1.9
0.4
2.3
0.1
–
0.1
2.4
2022
£m
3.1
0.4
3.5
0.1
1.2
1.3
4.8
172
ESSENTRA PLC ANNUAL REPORT 2023
173
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173
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense/(credit) continued
4.
Factors affecting income tax for the year
The tax credit for the year ended 31 December 2023 is lower than (2022: higher than)
the standard rate of corporation tax in the UK of 23.5% (2022: 19.0%). The differences
are explained below:
Profit/(loss) from continuing operations before income tax
Loss from discontinued operations before income tax
Note
24
Tax at UK statutory rate of 23.5% (2022: 19.0%)
Effects of:
Permanent disallowable items (including adjusting
items)1
Disposal of entities2
Overseas state and local tax
Unrecognised tax attributes (arising)/utilised3
Adjustments in respect of prior years
Withholding tax (including on unremitted earnings)
Change in tax rates4
Difference between UK and overseas tax rates5
Reassessment of deferred tax recognition6
Income tax credit7
2023
£m
8.4
(4.1)
4.3
1.0
1.1
–
–
(1.3)
(4.7)
0.6
–
–
2.2
(1.1)
2022
£m
(29.1)
(156.7)
(185.8)
(35.3)
16.6
4.7
0.3
10.6
(0.2)
1.1
(1.3)
(2.0)
3.5
(2.0)
Notes:
1 This is in relation to permanent differences arising from profits/losses on disposal, impairments and other costs associated with the
2
disposals, net of the releases of uncertain tax provisions of £2.3m (2022: £2.9m).
Includes £nil (2022: £5.9m) tax charge arising on an intra-group transfer of a subsidiary net of the release of an uncertain tax provision
of £nil (2022: £1.2m) relating to a disposal in prior years where the statute of limitations has now expired.
3 See further information regarding deferred tax asset recognition in note 16.
4 Reflects the impact of differences in substantively enacted, or enacted corporate tax rates, for future periods to those of the current period.
5 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.
6 This reflects the de-recognition of deferred tax assets (on tax losses) due to changes in the year and latest forecasts which mean it is no
longer probable that the related tax benefits will be realised.
7 The income tax charge in the UK is £2.2m (2022: £0.9m credit).
5. Personnel expense
Total personnel expense, including Directors, is analysed below:
6.
Earnings per share
Wages and salaries
Social security expense
Pension expense (note 18)
Share option expense (note 18)
Total personnel expense
Continuing operations
2023
£m
90.7
13.0
2.8
1.4
2022
£m
105.4
13.0
2.9
1.4
2023
£m
90.7
13.0
2.8
1.4
Total
2022
£m
245.5
25.1
7.4
2.6
107.9
122.7
107.9
280.6
Additional personnel expenses totalling £2.2m (2022: £5.1m) were included within adjusting
items, including: wages and salaries of £1.9m (2022: £4.1m); social security expense of £0.2m
(2022: £0.4m); pension contributions expense of £0.1m (2022: £0.1m); and £nil (2022: £0.5m)
relating to share option expense.
The Annual Report on Remuneration on pages 122 to 132 sets out information on Directors’
remuneration.
Notes:
1 Adjusted earnings per share from continuing operations is provided to reflect the underlying performance of the Group.
Key management remuneration
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination benefits
2023
£m
3.4
0.1
0.9
0.1
4.5
2022
£m
5.2
0.3
1.8
0.9
8.2
Essentra considers key management personnel to be the Directors and the members of the
Group Executive Committee.
Earnings from continuing operations
Weighted average number of shares
Profit/(loss) attributable to equity holders of the Company
5.8
(31.1)
Basic weighted average number of ordinary shares outstanding (million)1
Note
2023
£m
2022
£m
Adjusted earnings attributable to equity holders of the
Adjustment
Adjustments:
Amortisation of acquired intangible assets
Tax on amortisation of acquired intangible assets
Adjusting items
Tax relief on adjustments
Company1
Earnings from discontinued operations
Earnings attributable to equity holders of Essentra plc
2
2
2
11.3
(2.7)
21.0
(4.3)
10.4
(2.4)
26.0
2.8
Dilutive effect of employee share option plans (million)
Diluted weighted average number of ordinary shares (million)
Earnings per share from continuing operations (pence)
Basic earnings per share from continuing operations
31.1
5.7
Basic adjusted earnings per share from continuing operations
(0.4)
(156.9)
Adjustment
Diluted earnings per share from continuing operations
Diluted adjusted earnings per share from continuing operations
Earnings per share from discontinued operations (pence)
2023
2022
294.6
2.4
297.0
2.0p
8.6p
10.6p
2.0p
8.5p
10.5p
301.1
2.0
303.1
(10.3)p
12.2p
1.9p
(10.3)p
12.2p
1.9p
(0.2)p
(0.2)p
(52.1)p
(52.1)p
1.8p
1.8p
(62.4)p
(62.4)p
Total Earnings per share attributable to equity holders of the
Basic earnings per share
Diluted earnings per share
Company (pence)
Basic earnings per share
Diluted earnings per share
Notes:
benefit trust.
1 The basic weighted average number of ordinary shares in issue excludes shares held in treasury and shares held by the employee
174
174
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
175
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
4.
Income tax expense/(credit) continued
Factors affecting income tax for the year
The tax credit for the year ended 31 December 2023 is lower than (2022: higher than)
the standard rate of corporation tax in the UK of 23.5% (2022: 19.0%). The differences
are explained below:
Profit/(loss) from continuing operations before income tax
Loss from discontinued operations before income tax
Note
24
Tax at UK statutory rate of 23.5% (2022: 19.0%)
Effects of:
items)1
Permanent disallowable items (including adjusting
Disposal of entities2
Overseas state and local tax
Unrecognised tax attributes (arising)/utilised3
Adjustments in respect of prior years
Withholding tax (including on unremitted earnings)
Change in tax rates4
Difference between UK and overseas tax rates5
Reassessment of deferred tax recognition6
Income tax credit7
Notes:
5. Personnel expense
Total personnel expense, including Directors, is analysed below:
Wages and salaries
Social security expense
Pension expense (note 18)
Share option expense (note 18)
Total personnel expense
Continuing operations
2023
£m
90.7
13.0
2.8
1.4
2022
£m
105.4
13.0
2.9
1.4
2023
£m
90.7
13.0
2.8
1.4
Total
2022
£m
245.5
25.1
7.4
2.6
107.9
122.7
107.9
280.6
Additional personnel expenses totalling £2.2m (2022: £5.1m) were included within adjusting
items, including: wages and salaries of £1.9m (2022: £4.1m); social security expense of £0.2m
(2022: £0.4m); pension contributions expense of £0.1m (2022: £0.1m); and £nil (2022: £0.5m)
relating to share option expense.
2023
£m
8.4
(4.1)
4.3
1.0
1.1
–
–
(1.3)
(4.7)
0.6
–
–
2.2
(1.1)
2022
£m
(29.1)
(156.7)
(185.8)
(35.3)
16.6
4.7
0.3
10.6
(0.2)
1.1
(1.3)
(2.0)
3.5
(2.0)
remuneration.
Key management remuneration
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination benefits
2023
£m
3.4
0.1
0.9
0.1
4.5
2022
£m
5.2
0.3
1.8
0.9
8.2
1 This is in relation to permanent differences arising from profits/losses on disposal, impairments and other costs associated with the
disposals, net of the releases of uncertain tax provisions of £2.3m (2022: £2.9m).
2
Includes £nil (2022: £5.9m) tax charge arising on an intra-group transfer of a subsidiary net of the release of an uncertain tax provision
of £nil (2022: £1.2m) relating to a disposal in prior years where the statute of limitations has now expired.
3 See further information regarding deferred tax asset recognition in note 16.
4 Reflects the impact of differences in substantively enacted, or enacted corporate tax rates, for future periods to those of the current period.
5 Reflects the impact of different tax rates in the jurisdictions in which Essentra operates by reference to the UK statutory rate. This impact
Group Executive Committee.
may vary in future years due to changes in overseas tax rates or Essentra’s geographical profit split.
6 This reflects the de-recognition of deferred tax assets (on tax losses) due to changes in the year and latest forecasts which mean it is no
longer probable that the related tax benefits will be realised.
7 The income tax charge in the UK is £2.2m (2022: £0.9m credit).
6.
Earnings per share
Earnings from continuing operations
Profit/(loss) attributable to equity holders of the Company
5.8
(31.1)
Note
2023
£m
2022
£m
Adjustments:
Amortisation of acquired intangible assets
Tax on amortisation of acquired intangible assets
Adjusting items
Tax relief on adjustments
Adjusted earnings attributable to equity holders of the
Company1
2
2
2
11.3
(2.7)
21.0
(4.3)
10.4
(2.4)
26.0
2.8
Weighted average number of shares
Basic weighted average number of ordinary shares outstanding (million)1
Dilutive effect of employee share option plans (million)
Diluted weighted average number of ordinary shares (million)
Earnings per share from continuing operations (pence)
Basic earnings per share from continuing operations
Adjustment
31.1
5.7
Basic adjusted earnings per share from continuing operations
The Annual Report on Remuneration on pages 122 to 132 sets out information on Directors’
Notes:
1 Adjusted earnings per share from continuing operations is provided to reflect the underlying performance of the Group.
Diluted adjusted earnings per share from continuing operations
Earnings from discontinued operations
Earnings attributable to equity holders of Essentra plc
(0.4)
(156.9)
Adjustment
Diluted earnings per share from continuing operations
Earnings per share from discontinued operations (pence)
Basic earnings per share
Diluted earnings per share
Total Earnings per share attributable to equity holders of the
Company (pence)
Basic earnings per share
Diluted earnings per share
2023
2022
294.6
2.4
297.0
2.0p
8.6p
10.6p
2.0p
8.5p
10.5p
301.1
2.0
303.1
(10.3)p
12.2p
1.9p
(10.3)p
12.2p
1.9p
(0.2)p
(0.2)p
(52.1)p
(52.1)p
1.8p
1.8p
(62.4)p
(62.4)p
Essentra considers key management personnel to be the Directors and the members of the
Notes:
1 The basic weighted average number of ordinary shares in issue excludes shares held in treasury and shares held by the employee
benefit trust.
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ESSENTRA PLC ANNUAL REPORT 2023
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175
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
Investment Properties, Property, plant and equipment
7.
Investment Properties, Property, plant and equipment continued
Cost
Beginning of year
Acquisitions8
Additions
Disposals
Currency translation3
End of year
Accumulated depreciation and impairment
Beginning of year
Charge in period6
Disposals
Impairment4,5
Currency translation3
End of year
Net book value at end of year1
Note
23
2023
Total
Investment
properties5
£m
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
2023
Total
Property,
plant and equipment
£m
7.0
–
–
–
–
7.0
–
–
–
3.7
–
3.7
3.3
37.7
–
1.3
(0.1)
0.1
39.0
14.2
1.6
(0.1)
–
0.7
16.4
125.6
4.2
7.0
(14.1)
(4.6)
118.1
95.7
5.6
(14.1)
0.9
(3.6)
84.5
72.0
–
4.1
(7.4)
(0.2)
68.5
60.2
3.9
(7.3)
–
(0.2)
56.6
235.3
4.2
12.4
(21.6)
(4.7)
225.6
170.1
11.1
(21.5)
0.9
(3.1)
157.5
22.6
33.6
11.9
68.1
Accumulated depreciation and impairment
Cost
Beginning of year
Acquisitions
Additions
Disposals
Business Disposals
Transfers7
Currency translation3
End of year
Beginning of year
Charge in period6
Disposals
Business Disposals
Impairment4
Currency translation3
End of year
Net book value at end of year1
Notes:
2022
Total
Investment
properties5
£m
Land and
buildings
£m
Plant and
machinery
Fixtures, fittings
and equipment
£m
£m
–
–
–
–
–
7.0
-
7.0
–
–
–
–
–
–
–
(324.5)
(14.4)
79.4
0.5
2.5
(0.7)
(43.5)
(7.0)
6.5
37.7
18.0
2.8
(0.7)
(9.0)
–
3.1
14.2
386.5
0.7
33.1
(9.4)
–
39.2
125.6
223.7
18.5
(8.7)
(161.2)
0.1
23.3
95.7
78.9
0.2
4.0
–
–
3.3
72.0
48.8
8.2
–
(0.1)
0.4
2.9
60.2
2022
Total
£m
544.8
1.4
39.6
(10.1)
(382.4)
(7.0)
49.0
235.3
290.5
29.5
(9.4)
(170.3)
0.5
29.3
170.1
7.0
23.5
29.9
11.8
65.2
1
Included within land and buildings, plant and machinery and fixtures, fittings and equipment are assets in the course of construction of £2.3m (2022: £0.3m) which were not depreciated during the year.
2 Contractual commitments to purchase property, plant and equipment amounted to £0.3m at 31 December 2023 (2022: £0.3m).
3 Currency translation movement for the year includes a £1.8m increase (2022: £3.2m increase) in respect of adjustments for hyperinflation.
4 Property, plant and equipment with a net book value of £2.9m (2022: £0.6m) was impaired by £0.9m (2022: £0.6m) to a recoverable amount of £nil (2022: £nil), which represented fair value less cost to sell. £0.9m (2022: £0.6m) of this impairment has been charged to adjusting items
(see note 2).
5 As at 31 December 2023, the fair value of the investment property was £3.3m and as consequence, a reduction of £3.7m has been recorded as an expense to adjusting items (see note 2).
6
Included within the depreciation charge for the period is £11.1m (2022: £13.9m) relating to continuing operations.
7 During the year to 31 December 2022, land and buildings with a net book value of £7.0m, were reclassified as investment properties. The transfer follows the disposal of the Filters business which held a pre-existing property lease arrangement with the continuing Group. At the date
of disposal of the Filters business on 3 December 2022, the continuing Group ceased owner-occupation. Following its assessment of the remaining useful economic life associated to investment properties at the balance sheet date, the Group is depreciating the building element of the
long-term leasehold owned investment property at 2% on a straight-line basis.
8 Acquisitions in 2023 include £4.0m relating to the acquisition of BMP TAPPI, and £0.2m final purchase price allocation adjustment relating to the acquisition of Wixroyd Group.
Investment property valuation
The property has a market value of £3.3m and is valued based on a level 3 of fair value hierarchy. The valuation was performed by an independent valuer who holds a recognised and relevant
professional qualification and has recent experience in the location and category of the investment property. The valuation took into account the contractual terms of the current tenant,
who has occupation until 2027 with an option to extend until 2032 with an estimated amount for typical market rent based on a 5 year term. The valuation applies a market yield of 7% until
2027 and 10% beyond 2027. The valuation takes into account, among other factors, marketability, demand, energy performance, rating assessment, size, location and condition.
No amounts were received in respect of rental income during the year.
176
176
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
177
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
Investment Properties, Property, plant and equipment
7.
Investment Properties, Property, plant and equipment continued
Cost
Beginning of year
Acquisitions8
Additions
Disposals
Currency translation3
End of year
Beginning of year
Charge in period6
Disposals
Impairment4,5
Currency translation3
End of year
Accumulated depreciation and impairment
2023
Total
Investment
properties5
£m
Note
23
7.0
7.0
–
–
–
–
–
–
–
–
3.7
3.7
3.3
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
Property,
and equipment
plant and equipment
2023
Total
£m
235.3
4.2
12.4
(21.6)
(4.7)
225.6
170.1
11.1
(21.5)
0.9
(3.1)
157.5
£m
72.0
–
4.1
(7.4)
(0.2)
68.5
60.2
3.9
(7.3)
–
(0.2)
56.6
37.7
–
1.3
(0.1)
0.1
39.0
14.2
1.6
(0.1)
–
0.7
16.4
125.6
4.2
7.0
(14.1)
(4.6)
118.1
95.7
5.6
(14.1)
0.9
(3.6)
84.5
Cost
Beginning of year
Acquisitions
Additions
Disposals
Business Disposals
Transfers7
Currency translation3
End of year
Accumulated depreciation and impairment
Beginning of year
Charge in period6
Disposals
Business Disposals
Impairment4
Currency translation3
End of year
Net book value at end of year1
22.6
33.6
11.9
68.1
DIRECTORS’
REPORT
2022
Total
Investment
properties5
£m
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
–
–
–
–
–
7.0
-
7.0
–
–
–
–
–
–
–
79.4
0.5
2.5
(0.7)
(43.5)
(7.0)
6.5
37.7
18.0
2.8
(0.7)
(9.0)
–
3.1
14.2
386.5
0.7
33.1
(9.4)
78.9
0.2
4.0
–
(324.5)
(14.4)
–
39.2
125.6
223.7
18.5
(8.7)
(161.2)
0.1
23.3
95.7
–
3.3
72.0
48.8
8.2
–
(0.1)
0.4
2.9
60.2
2022
Total
£m
544.8
1.4
39.6
(10.1)
(382.4)
(7.0)
49.0
235.3
290.5
29.5
(9.4)
(170.3)
0.5
29.3
170.1
Net book value at end of year1
7.0
23.5
29.9
11.8
65.2
Included within land and buildings, plant and machinery and fixtures, fittings and equipment are assets in the course of construction of £2.3m (2022: £0.3m) which were not depreciated during the year.
Notes:
1
2 Contractual commitments to purchase property, plant and equipment amounted to £0.3m at 31 December 2023 (2022: £0.3m).
3 Currency translation movement for the year includes a £1.8m increase (2022: £3.2m increase) in respect of adjustments for hyperinflation.
4 Property, plant and equipment with a net book value of £2.9m (2022: £0.6m) was impaired by £0.9m (2022: £0.6m) to a recoverable amount of £nil (2022: £nil), which represented fair value less cost to sell. £0.9m (2022: £0.6m) of this impairment has been charged to adjusting items
(see note 2).
5 As at 31 December 2023, the fair value of the investment property was £3.3m and as consequence, a reduction of £3.7m has been recorded as an expense to adjusting items (see note 2).
6
7 During the year to 31 December 2022, land and buildings with a net book value of £7.0m, were reclassified as investment properties. The transfer follows the disposal of the Filters business which held a pre-existing property lease arrangement with the continuing Group. At the date
Included within the depreciation charge for the period is £11.1m (2022: £13.9m) relating to continuing operations.
of disposal of the Filters business on 3 December 2022, the continuing Group ceased owner-occupation. Following its assessment of the remaining useful economic life associated to investment properties at the balance sheet date, the Group is depreciating the building element of the
long-term leasehold owned investment property at 2% on a straight-line basis.
8 Acquisitions in 2023 include £4.0m relating to the acquisition of BMP TAPPI, and £0.2m final purchase price allocation adjustment relating to the acquisition of Wixroyd Group.
Investment property valuation
The property has a market value of £3.3m and is valued based on a level 3 of fair value hierarchy. The valuation was performed by an independent valuer who holds a recognised and relevant
professional qualification and has recent experience in the location and category of the investment property. The valuation took into account the contractual terms of the current tenant,
who has occupation until 2027 with an option to extend until 2032 with an estimated amount for typical market rent based on a 5 year term. The valuation applies a market yield of 7% until
2027 and 10% beyond 2027. The valuation takes into account, among other factors, marketability, demand, energy performance, rating assessment, size, location and condition.
No amounts were received in respect of rental income during the year.
176
ESSENTRA PLC ANNUAL REPORT 2023
177
ESSENTRA PLC ANNUAL REPORT 2023
177
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
Intangible assets
Cost
Beginning of year
Acquisitions8 (note 23)
Additions
Disposals
Currency translation7
End of year
Amortisation and impairment
Beginning of year
Charge for the year3
Impairment5
Disposal
Currency translation7
End of year
Goodwill
£m
Customer
relationships6
£m
Other intangible
assets1,2
£m
140.1
14.5
–
–
(6.0)
148.6
4.5
–
–
–
(0.3)
4.2
159.3
16.9
–
–
(6.9)
169.3
99.1
10.7
2.2
–
(4.6)
107.4
24.8
0.8
0.8
(1.0)
(0.8)
24.6
14.0
3.5
–
(1.0)
(0.6)
15.9
2023
Total
£m
324.2
32.2
0.8
(1.0)
(13.7)
342.5
117.6
14.2
2.2
(1.0)
(5.5)
127.5
Net book value at end of year
144.4
61.9
8.7
215.0
8.
Intangible assets continued
Cost
Beginning of year
Acquisitions
Additions
Disposals
Business disposals4
Currency translation7
End of year
Beginning of year
Charge for the year3
Business disposals4
Impairment5
Disposal
Currency translation7
End of year
Amortisation and impairment
Net book value at end of year
Notes:
assets during the year.
Goodwill1
EMEA
Americas
Goodwill
£m
Customer
relationships6
£m
Other intangible
assets1,2
£m
354.9
20.7
–
–
(271.9)
36.4
140.1
27.9
-
(214.6)
181.6
–
9.6
4.5
135.6
423.2
8.2
–
–
(319.2)
47.1
159.3
280.9
16.6
(228.0)
1.1
–
28.5
99.1
60.2
26.4
0.6
1.0
(1.4)
(2.7)
0.9
24.8
12.2
3.0
(1.1)
–
(0.8)
0.7
14.0
10.8
206.6
2022
Total
£m
804.5
29.5
1.0
(1.4)
(593.8)
84.4
324.2
321.0
19.6
(443.7)
182.7
(0.8)
38.8
117.6
2023
£m
109.3
35.1
144.4
1 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. Salary costs of £nil (2022: £0.2m) were capitalised as part of other intangible
2
Included within other intangible assets at 31 December 2023, are assets in the course of construction of £0.8m (2022: £nil) which were not amortised during the year.
3 Amortisation charged on other intangible assets (which includes e-Commerce development and software development costs not acquired through a business combination), is included within operating profit before amortisation of acquired intangibles and adjusting items.
Amortisation charged on customer relationships acquired in a business combination is excluded from the Group’s adjusted operating profit measure. Included within the amortisation charge for the period is £14.2m (2022: £13.1m) relating to continuing operations.
4 The Group disposed of the Packaging business and the Filters business during the year to 31 December 2022. The goodwill disposed was £35.6m and £21.7m, respectively.
5
In 2023 an impairment charge of £2.2m relates to the Hengzhu CGU. In 2022, an impairment charge of £181.6m was recognised following the Group’s impairment assessment in respect of the carrying value of goodwill allocated to the Packaging business prior to its disposal. An impairment charge
of £1.1m was also recognised relating to intangible assets held in India following an impairment review triggered by the divestment of the Packaging business. These impairment charges have been included within the result from discontinued operations for the year ended 31 December 2022.
6 The weighted average remaining useful lives of customer relationships and other intangible assets at the end of the year were 8.5 years and 3.9 years (2022: 5.8 years and 4.3 years), respectively.
7 Currency translation movement for the year includes a £1.1m increase (2022: £13.9m increase) in respect of adjustments for hyperinflation.
8 Acquisitions includes goodwill of £15.0m and customer relationships and other intangibles of £17.7m relating to the acquisition of BMP TAPPI, less an adjustment of £0.5m relating to the finalisation of the purchase price allocation relating to the acquisition of Wixroyd Group in 2022 (see note 23).
9
Included within other intangible cost is £16.4m (2022: £16.7m) that was internally generated with a accumulated amortisation of £10.2m (2022: £8.4m). Internally generated additions amounted to £0.8m (2022: £0.7m) and amortisation £2.9m (2022: £2.7m).
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. Following an impairment assessment of the carrying value of goodwill held by the Group’s operations performed by management at 31 December 2023, no impairment of
goodwill was required to be recognised on the Group’s continuing operations.
Goodwill is allocated to groups of cash generating units, being the operating segments, as follows:
178
178
ESSENTRA PLC ANNUAL REPORT 2023
1 Following the disposal of the Packaging and Filters businesses in 2022, the only goodwill remaining was for the Components division which is now monitored by geographical operating segment (EMEA, Americas and APAC).
ESSENTRA PLC ANNUAL REPORT 2023
179
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
Intangible assets
Cost
Beginning of year
Acquisitions8 (note 23)
Additions
Disposals
Currency translation7
End of year
Beginning of year
Charge for the year3
Impairment5
Disposal
Currency translation7
End of year
Amortisation and impairment
Goodwill
£m
relationships6
£m
assets1,2
£m
Customer
Other intangible
140.1
14.5
(6.0)
148.6
4.5
–
–
–
–
–
(0.3)
4.2
159.3
16.9
–
–
(6.9)
169.3
99.1
10.7
2.2
–
(4.6)
107.4
24.8
0.8
0.8
(1.0)
(0.8)
24.6
14.0
3.5
–
(1.0)
(0.6)
15.9
2023
Total
£m
324.2
32.2
0.8
(1.0)
(13.7)
342.5
117.6
14.2
2.2
(1.0)
(5.5)
127.5
8.
Intangible assets continued
Cost
Beginning of year
Acquisitions
Additions
Disposals
Business disposals4
Currency translation7
End of year
Amortisation and impairment
Beginning of year
Charge for the year3
Business disposals4
Impairment5
Disposal
Currency translation7
End of year
Net book value at end of year
Net book value at end of year
144.4
61.9
8.7
215.0
DIRECTORS’
REPORT
Goodwill
£m
Customer
relationships6
£m
Other intangible
assets1,2
£m
2022
Total
£m
804.5
29.5
1.0
(1.4)
(593.8)
84.4
324.2
321.0
19.6
(443.7)
182.7
(0.8)
38.8
117.6
26.4
0.6
1.0
(1.4)
(2.7)
0.9
24.8
12.2
3.0
(1.1)
–
(0.8)
0.7
14.0
10.8
206.6
354.9
20.7
–
–
(271.9)
36.4
140.1
27.9
-
(214.6)
181.6
–
9.6
4.5
135.6
423.2
8.2
–
–
(319.2)
47.1
159.3
280.9
16.6
(228.0)
1.1
–
28.5
99.1
60.2
178
ESSENTRA PLC ANNUAL REPORT 2023
1 Following the disposal of the Packaging and Filters businesses in 2022, the only goodwill remaining was for the Components division which is now monitored by geographical operating segment (EMEA, Americas and APAC).
179
ESSENTRA PLC ANNUAL REPORT 2023
179
Notes:
1 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. Salary costs of £nil (2022: £0.2m) were capitalised as part of other intangible
assets during the year.
Included within other intangible assets at 31 December 2023, are assets in the course of construction of £0.8m (2022: £nil) which were not amortised during the year.
2
3 Amortisation charged on other intangible assets (which includes e-Commerce development and software development costs not acquired through a business combination), is included within operating profit before amortisation of acquired intangibles and adjusting items.
Amortisation charged on customer relationships acquired in a business combination is excluded from the Group’s adjusted operating profit measure. Included within the amortisation charge for the period is £14.2m (2022: £13.1m) relating to continuing operations.
4 The Group disposed of the Packaging business and the Filters business during the year to 31 December 2022. The goodwill disposed was £35.6m and £21.7m, respectively.
5
In 2023 an impairment charge of £2.2m relates to the Hengzhu CGU. In 2022, an impairment charge of £181.6m was recognised following the Group’s impairment assessment in respect of the carrying value of goodwill allocated to the Packaging business prior to its disposal. An impairment charge
of £1.1m was also recognised relating to intangible assets held in India following an impairment review triggered by the divestment of the Packaging business. These impairment charges have been included within the result from discontinued operations for the year ended 31 December 2022.
6 The weighted average remaining useful lives of customer relationships and other intangible assets at the end of the year were 8.5 years and 3.9 years (2022: 5.8 years and 4.3 years), respectively.
7 Currency translation movement for the year includes a £1.1m increase (2022: £13.9m increase) in respect of adjustments for hyperinflation.
8 Acquisitions includes goodwill of £15.0m and customer relationships and other intangibles of £17.7m relating to the acquisition of BMP TAPPI, less an adjustment of £0.5m relating to the finalisation of the purchase price allocation relating to the acquisition of Wixroyd Group in 2022 (see note 23).
9
Included within other intangible cost is £16.4m (2022: £16.7m) that was internally generated with a accumulated amortisation of £10.2m (2022: £8.4m). Internally generated additions amounted to £0.8m (2022: £0.7m) and amortisation £2.9m (2022: £2.7m).
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. Following an impairment assessment of the carrying value of goodwill held by the Group’s operations performed by management at 31 December 2023, no impairment of
goodwill was required to be recognised on the Group’s continuing operations.
Goodwill is allocated to groups of cash generating units, being the operating segments, as follows:
Goodwill1
EMEA
Americas
2023
£m
109.3
35.1
144.4
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets continued
8.
Customer relationships and other intangible assets are allocated to the businesses to which
they relate, as follows:
Business
Businesses of former Moss and Skiffy
Businesses of former Richco
Business of former Mesan
Business of former Abric
Business of former Micro Plastics, Inc
Industrial Supply
Innovative Components
Hengzhu
Wixroyd
BMP TAPPI
e-Commerce development costs
Other businesses
Components Sweden
Software and development costs
2023
£m
7.2
9.0
0.4
4.3
3.2
0.3
5.5
4.8
7.9
17.4
4.9
2.9
1.9
0.9
70.6
2022
£m
8.3
13.4
0.9
5.9
3.8
0.7
6.6
8.3
8.8
–
5.9
3.7
2.5
2.2
71.0
Management have reviewed the cash-generating-units (“CGUs”) across the Group, and
have concluded that the CGUs for the remaining Components business continue to be
primarily the manufacturing and distribution sites.
The individual CGUs were assessed for impairment and due to the underlying economic
environment impacting the APAC region, there was an indicator of impairment within the
CGU impact Hengzhu. As a consequence an impairment charge of £3.4m was recognised
on net assets within APAC of £28.9m, comprising customer relationship intangibles (£2.2m),
property, plant and equipment (£0.9m), and right of use assets (£0.3m).
Following the disposal of the Packaging and Filters businesses, the goodwill associated with
those operating segments was also disposed. The remaining goodwill, previously allocated
to the Components segment, has now been reallocated to the newly created geographical
segments: EMEA, Americas and APAC. The allocation was made by calculating the notional
goodwill for each CGU by deducting its identifiable net assets from its recoverable amount
and allocating the goodwill to each CGU in the ratio: CGU notional goodwill to total notional
goodwill of the three geographical segments. These new operating segments, represented by
groups of cash-generating-units (the manufacturing and distribution sites), are considered to
represent the lowest level within the Group at which goodwill is monitored for internal
management purposes.
The impairment tests for goodwill and intangible assets (and in the case of Hengzhu, other
non-current assets) are based first on the Board approved business plan (the “Plan”) and
then has been risk-adjusted for impairment testing purposes. The recoverable amount of
each CGU (and Groups of CGUs) was determined by performing a value-in-use calculation
taking into account the wider market conditions and revenue growth projections within the
industry the Groups operates in. The risk-adjusted cash flow projections are over five years
based on the approved annual budget for the first year and subsequent years based on the
Group Strategic Plan. The key assumptions in the cash flow projections for the risk-adjusted
Plan are set out below.
Region
Groups of cash-generating-units:
EMEA
AMERICAS
Average annual growth
rate over five-year
Forecast period
Terminal
growth rate
from 2028 onwards
Improvement in
average operating
profit over
five-year period
Pre-tax
discount rate
6.2%
5.8%
3.1%
2.2%
620 bps
770 bps
16.9%
15.3%
Cash-generating-unit assumptions:
Hengzhu (individual CGU)
6.0%
2.0%
600 bps
14.1%
Operating margin is primarily based upon the historical levels achieved, adjusted by targets set
for revenue expansion and cost control and reduction within the Plan period. 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 estimated cash flows are discounted using a pre-tax discount rate
based upon Essentra’s estimated pre-tax weighted average cost of capital by operating segment.
For the Hengzhu CGU the recoverable amount remaining is sensitive to reasonably possible
changes in the underlying cash flows and key assumptions. After taking into account the
£3.4m impairment, and based upon the assumptions above, the recoverable amount aligns
to its carrying value. Management considered the following reasonably possible changes in
the key assumptions, in the context of the macro-economic conditions in China, and the
associated impact on the impairment assessment, in relation to the Hengzhu CGU:
Sensitivities impacting Hengzhu CGU
50 bps increase in pre-tax discount rate
100 bps reduction in terminal growth rate
100 bps reduction in each year‘s growth rate
100 bps reduction in operating profit margin in the terminal year
Impairment
£m
0.5
0.4
0.1
0.9
No sensitivities are presented for the Group’s other CGUs or the other two Groups of CGUs
(being Americas and EMEA geographical segments) given no reasonably possible changes in
inputs would lead to an impairment, there being significant headroom between their carrying
amounts and respective recoverable amounts.
9.
Lease right-of-use assets
Additions, extensions and surrenders
Accumulated depreciation and impairment
Cost
Beginning of year
Terminations
Currency translation4
End of year
Beginning of year
Charge for the year3
Impairment5
Terminations
Currency translation4
End of year
Net book value at end of year
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
40.3
12.3
(2.2)
(1.6)
48.8
20.4
4.9
–
(2.2)
(0.6)
22.5
26.3
2.9
1.8
(1.6)
0.1
3.2
1.9
0.9
0.3
(1.6)
0.1
1.6
1.6
0.2
–
(0.1)
–
0.1
0.1
0.1
(0.1)
0.1
–
–
–
2023
Total
£m
43.4
14.1
(3.9)
(1.5)
52.1
22.4
5.9
0.3
(3.9)
(0.5)
24.2
27.9
180
180
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
181
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
Lease right-of-use assets
Cost
Beginning of year
Additions, extensions and surrenders
Terminations
Currency translation4
End of year
Accumulated depreciation and impairment
Beginning of year
Charge for the year3
Impairment5
Terminations
Currency translation4
End of year
Net book value at end of year
Customer relationships and other intangible assets are allocated to the businesses to which
The impairment tests for goodwill and intangible assets (and in the case of Hengzhu, other
8.
Intangible assets continued
they relate, as follows:
Business
Businesses of former Moss and Skiffy
Businesses of former Richco
Business of former Mesan
Business of former Abric
Business of former Micro Plastics, Inc
Industrial Supply
Innovative Components
Hengzhu
Wixroyd
BMP TAPPI
e-Commerce development costs
Other businesses
Components Sweden
Software and development costs
2023
£m
7.2
9.0
0.4
4.3
3.2
0.3
5.5
4.8
7.9
17.4
4.9
2.9
1.9
0.9
70.6
2022
£m
8.3
13.4
0.9
5.9
3.8
0.7
6.6
8.3
8.8
–
5.9
3.7
2.5
2.2
71.0
non-current assets) are based first on the Board approved business plan (the “Plan”) and
then has been risk-adjusted for impairment testing purposes. The recoverable amount of
each CGU (and Groups of CGUs) was determined by performing a value-in-use calculation
taking into account the wider market conditions and revenue growth projections within the
industry the Groups operates in. The risk-adjusted cash flow projections are over five years
based on the approved annual budget for the first year and subsequent years based on the
Group Strategic Plan. The key assumptions in the cash flow projections for the risk-adjusted
Plan are set out below.
Average annual growth
rate over five-year
Forecast period
from 2028 onwards
five-year period
discount rate
growth rate
profit over
Pre-tax
Terminal
average operating
Improvement in
6.2%
5.8%
3.1%
2.2%
620 bps
770 bps
16.9%
15.3%
Groups of cash-generating-units:
Region
EMEA
AMERICAS
Cash-generating-unit assumptions:
Hengzhu (individual CGU)
6.0%
2.0%
600 bps
14.1%
Operating margin is primarily based upon the historical levels achieved, adjusted by targets set
for revenue expansion and cost control and reduction within the Plan period. 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 estimated cash flows are discounted using a pre-tax discount rate
based upon Essentra’s estimated pre-tax weighted average cost of capital by operating segment.
For the Hengzhu CGU the recoverable amount remaining is sensitive to reasonably possible
changes in the underlying cash flows and key assumptions. After taking into account the
£3.4m impairment, and based upon the assumptions above, the recoverable amount aligns
to its carrying value. Management considered the following reasonably possible changes in
the key assumptions, in the context of the macro-economic conditions in China, and the
associated impact on the impairment assessment, in relation to the Hengzhu CGU:
Management have reviewed the cash-generating-units (“CGUs”) across the Group, and
have concluded that the CGUs for the remaining Components business continue to be
primarily the manufacturing and distribution sites.
The individual CGUs were assessed for impairment and due to the underlying economic
environment impacting the APAC region, there was an indicator of impairment within the
CGU impact Hengzhu. As a consequence an impairment charge of £3.4m was recognised
on net assets within APAC of £28.9m, comprising customer relationship intangibles (£2.2m),
property, plant and equipment (£0.9m), and right of use assets (£0.3m).
Following the disposal of the Packaging and Filters businesses, the goodwill associated with
those operating segments was also disposed. The remaining goodwill, previously allocated
to the Components segment, has now been reallocated to the newly created geographical
segments: EMEA, Americas and APAC. The allocation was made by calculating the notional
Sensitivities impacting Hengzhu CGU
goodwill for each CGU by deducting its identifiable net assets from its recoverable amount
50 bps increase in pre-tax discount rate
and allocating the goodwill to each CGU in the ratio: CGU notional goodwill to total notional
goodwill of the three geographical segments. These new operating segments, represented by
groups of cash-generating-units (the manufacturing and distribution sites), are considered to
represent the lowest level within the Group at which goodwill is monitored for internal
100 bps reduction in terminal growth rate
100 bps reduction in each year‘s growth rate
100 bps reduction in operating profit margin in the terminal year
management purposes.
Impairment
£m
0.5
0.4
0.1
0.9
No sensitivities are presented for the Group’s other CGUs or the other two Groups of CGUs
(being Americas and EMEA geographical segments) given no reasonably possible changes in
inputs would lead to an impairment, there being significant headroom between their carrying
amounts and respective recoverable amounts.
DIRECTORS’
REPORT
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
40.3
12.3
(2.2)
(1.6)
48.8
20.4
4.9
–
(2.2)
(0.6)
22.5
26.3
2.9
1.8
(1.6)
0.1
3.2
1.9
0.9
0.3
(1.6)
0.1
1.6
1.6
0.2
–
(0.1)
–
0.1
0.1
0.1
–
(0.1)
–
0.1
2023
Total
£m
43.4
14.1
(3.9)
(1.5)
52.1
22.4
5.9
0.3
(3.9)
(0.5)
24.2
–
27.9
180
ESSENTRA PLC ANNUAL REPORT 2023
181
ESSENTRA PLC ANNUAL REPORT 2023
181
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
Lease right-of-use assets continued
Cost
Beginning of year
Additions, extensions and surrenders
Terminations
Business disposals
Currency translation4
End of year
Accumulated depreciation and impairment
Beginning of year
Charge for the year3
Terminations
Disposal of businesses
Impairment write back1
Currency translation4
End of year
Net book value at end of year
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
100.5
7.6
(6.9)
(71.2)
10.3
40.3
56.6
7.4
(6.7)
(40.4)
(0.6)
4.1
20.4
19.9
13.4
2.7
(1.5)
(12.4)
0.7
2.9
7.0
2.5
(1.3)
(6.8)
–
0.5
1.9
1.0
0.4
–
(0.1)
(0.2)
0.1
0.2
0.3
0.2
(0.1)
(0.2)
–
(0.1)
0.1
2022
Total
£m
114.3
10.3
(8.5)
(83.8)
11.1
43.4
63.9
10.1
(8.1)
(47.4)
(0.6)
4.5
22.4
0.1
21.0
Notes:
1 During the year, an impairment write back of £nil (2022: £0.6m) was recognised in adjusting items (refer to note 2). The assets were uplifted to their recoverable amount, which represented their fair value.
2 Contractual commitments to lease property, plant and equipment amounted to £nil at 31 December 2023 (2022: £nil).
3 Depreciation charge of £5.9m (2022: £10.1m) in the year includes an amount of £5.9m (2022: £5.6m) relating to continuing operations and £nil (2022: £4.5m) relating to discontinued operations.
4 Currency translation as at 31 December 2023 includes net book value movement of £0.2m decrease (2022: £2.7m increase) in respect of adjustments for hyperinflation.
5 During the year, an impairment of £0.3m was recognised in adjusting items (refer to note 2). The assets were written down to their recoverable amount.
182
182
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
183
1 See note 19 for further details on the credit risk disclosures relating to trade and other receivables.
2 Other receivables includes £9.7m (2022: £nil) of contingent consideration for an earnout receivable (following the disposal of the Filters
9.
Lease right-of-use assets continued
The income statement includes the following amounts relating to leases:
11. Trade and other receivables
On continuing operations
Lease right-of-use asset depreciation
Interest expense (included in finance costs)1
Exchange losses (included in finance costs)
Notes
2, 27
3
3
Expense relating to short-term leases (included in cost of
goods sold and administrative expenses)2
Expense relating to leases of low-value assets that not shown
above as short-term leases (included in operating expenses)
1 For the year ended 31 December 2023, the weighted average lessee’s incremental borrowing rate applied to lease liabilities was 8.6%
2 The short-term leases expense for the year ending 31 December 2024 is not expected to be materially different to the expense
Notes:
(2022: 7.1%).
disclosed above.
The maturity analysis on the lease liabilities has been included in note 19. The total cash
outflow for leases and analysis of movements in lease liabilities are included in note 22.
10.
Inventories
Raw materials and consumables
Work-in-progress
Finished goods and goods held for resale
Total1,2
Notes:
gross profit.
1 Following the disposal of its Packaging and Filters businesses in 2022, and based upon the most recent reliable information, the Group has
updated the inputs into its inventory provisioning calculation in order to ensure that inventories continue to be measured at the lower of
cost and net realisable value. The impact on inventory provisioning resulted in a £4.3m increase in inventories and a resultant credit to
2
Inventories with a total value of £nil (2022: £nil) were written down in the year.
2023
£m
5.9
1.8
2.2
–
0.1
10.0
2023
£m
7.7
6.0
51.0
64.7
Prepayments and accrued income
Trade receivables
Other receivables2
Total1
Notes:
business in 2022).
12. Cash and cash equivalents
13. Trade and other payables
Other tax and social security contributions
Bank balances
Total
Trade payables
Other payables
Accruals
Total
2022
£m
5.6
1.5
1.2
0.1
0.1
8.5
2022
£m
10.6
4.3
50.1
65.0
2023
£m
43.5
14.7
3.3
61.5
2023
£m
59.7
59.7
2023
£m
23.8
5.4
3.4
28.1
60.7
2022
£m
45.3
17.7
3.4
66.4
2022
£m
421.4
421.4
2022
£m
31.9
9.5
7.9
42.2
91.5
ESSENTRA PLC ANNUAL REPORT 2023
9.
Lease right-of-use assets continued
Accumulated depreciation and impairment
Additions, extensions and surrenders
Cost
Beginning of year
Terminations
Business disposals
Currency translation4
End of year
Beginning of year
Charge for the year3
Terminations
Disposal of businesses
Impairment write back1
Currency translation4
End of year
Net book value at end of year
Notes:
Land and
buildings
£m
Plant and
machinery
£m
Fixtures, fittings
and equipment
£m
100.5
7.6
(6.9)
(71.2)
10.3
40.3
56.6
7.4
(6.7)
(40.4)
(0.6)
4.1
20.4
19.9
13.4
2.7
(1.5)
(12.4)
(1.3)
(6.8)
0.7
2.9
7.0
2.5
–
0.5
1.9
1.0
0.4
–
(0.1)
(0.2)
0.1
0.2
0.3
0.2
(0.1)
(0.2)
–
(0.1)
0.1
2022
Total
£m
114.3
10.3
(8.5)
(83.8)
11.1
43.4
63.9
10.1
(8.1)
(47.4)
(0.6)
4.5
22.4
0.1
21.0
1 During the year, an impairment write back of £nil (2022: £0.6m) was recognised in adjusting items (refer to note 2). The assets were uplifted to their recoverable amount, which represented their fair value.
2 Contractual commitments to lease property, plant and equipment amounted to £nil at 31 December 2023 (2022: £nil).
3 Depreciation charge of £5.9m (2022: £10.1m) in the year includes an amount of £5.9m (2022: £5.6m) relating to continuing operations and £nil (2022: £4.5m) relating to discontinued operations.
4 Currency translation as at 31 December 2023 includes net book value movement of £0.2m decrease (2022: £2.7m increase) in respect of adjustments for hyperinflation.
5 During the year, an impairment of £0.3m was recognised in adjusting items (refer to note 2). The assets were written down to their recoverable amount.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Lease right-of-use assets continued
9.
The income statement includes the following amounts relating to leases:
11. Trade and other receivables
On continuing operations
Lease right-of-use asset depreciation
Interest expense (included in finance costs)1
Exchange losses (included in finance costs)
Notes
2, 27
3
3
Expense relating to short-term leases (included in cost of
goods sold and administrative expenses)2
Expense relating to leases of low-value assets that not shown
above as short-term leases (included in operating expenses)
2023
£m
5.9
1.8
2.2
–
0.1
10.0
2022
£m
5.6
1.5
1.2
0.1
0.1
8.5
Trade receivables
Other receivables2
Prepayments and accrued income
Total1
Notes:
1 See note 19 for further details on the credit risk disclosures relating to trade and other receivables.
2 Other receivables includes £9.7m (2022: £nil) of contingent consideration for an earnout receivable (following the disposal of the Filters
business in 2022).
12. Cash and cash equivalents
Notes:
1 For the year ended 31 December 2023, the weighted average lessee’s incremental borrowing rate applied to lease liabilities was 8.6%
(2022: 7.1%).
2 The short-term leases expense for the year ending 31 December 2024 is not expected to be materially different to the expense
Bank balances
Total
disclosed above.
The maturity analysis on the lease liabilities has been included in note 19. The total cash
outflow for leases and analysis of movements in lease liabilities are included in note 22.
10.
Inventories
Raw materials and consumables
Work-in-progress
Finished goods and goods held for resale
Total1,2
2023
£m
7.7
6.0
51.0
64.7
2022
£m
10.6
4.3
50.1
65.0
Notes:
1 Following the disposal of its Packaging and Filters businesses in 2022, and based upon the most recent reliable information, the Group has
updated the inputs into its inventory provisioning calculation in order to ensure that inventories continue to be measured at the lower of
cost and net realisable value. The impact on inventory provisioning resulted in a £4.3m increase in inventories and a resultant credit to
gross profit.
Inventories with a total value of £nil (2022: £nil) were written down in the year.
2
13. Trade and other payables
Trade payables
Other tax and social security contributions
Other payables
Accruals
Total
DIRECTORS’
REPORT
2023
£m
43.5
14.7
3.3
61.5
2022
£m
45.3
17.7
3.4
66.4
2023
£m
59.7
59.7
2023
£m
23.8
5.4
3.4
28.1
60.7
2022
£m
421.4
421.4
2022
£m
31.9
9.5
7.9
42.2
91.5
182
ESSENTRA PLC ANNUAL REPORT 2023
183
ESSENTRA PLC ANNUAL REPORT 2023
183
ESSENTRA PLC ANNUAL REPORT 2023
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. Derivatives
Derivative financial instruments – cash flow hedges
The Group uses derivatives to hedge its exposure to foreign exchange and interest rate risks
arising from operational, financing and investment activities. The carrying value of derivatives
designated in cash flow hedges at the balance sheet date was as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.
Interest bearing loans and borrowings
Non-current liabilities
Unsecured bank loans
US Private Placement Loan Notes
Total
Current liabilities
US Private Placement Loan Notes
Total
2023
£m
15.2
80.3
95.5
2022
£m
–
85.0
85.0
–
–
208.0
208.0
Current assets
Forward foreign
exchange contracts
At 31 December 2023, the Group had £15.2m (2022: £nil) of unsecured bank loans drawn
in euros at floating rates of interest set by reference to SONIA (2022: SONIA). Essentra’s
$102.5m US Private Placement Loan Notes are at a weighted average interest rate of 3.84%
per annum (2022: 4.01%).
Non-current assets
Cross currency interest
rate swaps
In October 2022, following lender consent and following the sale of the Packaging business
and the expected completion of the Filters business, the decision was taken by the Directors
to reduce the facility to £200m, maintaining the same terms.
Current liabilities
Forward foreign exchange
contracts
Following the sale of the Packaging and Filters businesses, $247m of the US Private Placement
Loan Notes were repaid in January 2023. This left $33m maturing July 2028, $35m maturing
July 2031 and $35m maturing July 2033.
The currency profile of the carrying and nominal values of Essentra‘s loans and borrowings is
as follows:
US dollar
Euro
Total
Carrying
value
£m
80.3
15.2
95.5
2023
Nominal
value
£m
80.7
15.2
95.9
Carrying
value
£m
2022
Nominal
value
£m
293.0
291.7
–
–
293.0
291.7
The difference between the total nominal and carrying value of loans and borrowings relates
to the amortised value of prepaid facility fees of £0.4m (2022: £0.4m) and to the accrued
make-whole payments due on early repayment in January 2023 of £nil (2022: £1.7m).
At 31 December 2023
At 31 December 2022
Fair
values
£m
Contractual
or notional
amounts
£m
Change in
fair value
£m
Fair
values
£m
Contractual
or notional
amounts
£m
Change in
fair value
£m
–
–
2.2
2.2
(0.2)
(0.2)
0.2
0.2
58.4
58.4
(0.3)
(0.3)
4.2
4.2
63.0
63.0
(4.1)
(4.1)
–
–
1.0
1.0
(1.3)
(1.3)
8.3
8.3
1.3
1.3
66.7
66.7
77.4
77.4
7.6
7.6
1.2
1.2
Cash flow hedges are hedges of the currency risk exposure to variability in cash flows.
They relate to trading transactions and interest and principal payments denominated in
foreign currencies.
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 profit or loss when
the forecast transactions occur. All of these hedged transactions are expected to occur over
the next 12 months and all derivative instruments mature in the next 12 months.
15. Derivatives continued
In July 2021, Essentra entered into a number of cross currency interest rate swap contracts
The following movements were recognised for the purpose of calculating hedge
to hedge the foreign currency risk of $145m of its US Private Placement Loan Notes.
ineffectiveness in the year:
The maturity profile of these matched those of the underlying loan notes with $20m notional
value maturing within 3 years and the remainder between 5 and 7 years. These contracts were
accounted for as cash flow hedges, with the impact of cross currency basis treated as a cost
of hedging. In November 2022, following the Group’s strategic review, swap contracts hedging
$65m were terminated on 28 November 2022 for a net receipt of £6.5m. This resulted in
Cumulative movement at 1 January 2023
ineffectiveness being recognised in 2022 of £0.8m and hedge accounting being discontinued
Movement in year
Cumulative movement at 31 December
at the repayment date. At 31 December 2023, the Group has derivatives with a total notional
value of $80m (2022: $80m), which are due to mature in 2028. Of these remaining derivatives,
2023
hedge accounting was discontinued in 2022 for a total notional value of $47m as the related
debt was repaid in the year. The hedge ratio for these derivatives is 1:1 and ineffectiveness
can arise due credit risk in the counterparty and in the Group. The average rate for the cross
currency swaps in place at 31 December 2023 is $1.37 / £.
Movements in the Group‘s hedging reserves are analysed below.
Cumulative movement at 1 January 2022
Movement in year
Cumulative movement at 31 December 2022
Movement in
hedging
instrument
Movement in
hedged item
£m
(14.9)
4.1
£m
14.6
(4.1)
Ineffectiveness
recognised in
P&L
£m
(0.3)
–
10.5
(10.8)
(0.3)
Movement in
hedging
instrument
Movement in
hedged item
Ineffectiveness
recognised in
£m
0.7
13.9
14.6
£m
(0.2)
(14.7)
(14.9)
P&L
£m
0.5
(0.8)
(0.3)
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
2023
Total
hedging
reserve
£m
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
2022
Total
hedging
reserve
£m
(1.1)
0.3
(0.8)
0.9
(2.4)
(1.5)
Hedges of net investments in foreign operations
Hedges of net investments are hedges of the currency risk exposure to changes in the carrying
value of net investments in foreign operations. The hedge ratio is 1:1.
Essentra had other US dollar and euro denominated borrowings which it designated as
hedges of its net investments in subsidiary undertakings. Exchange gains of £1.0m (2022:
losses of £21.7m) on these US dollar borrowings and the losses of £0.3m (2022: gains of £nil)
(0.1)
(0.1)
(0.9)
(0.9)
on the euro borrowings were recognised in other comprehensive income.
–
–
–
–
0.2
0.2
–
–
Balance at the beginning of
the year
Change in fair value of forward
foreign exchange contracts
recognised in other
comprehensive income1
Amounts recycled to finance
expense on discontinued hedges
Change in fair value of cross
currency interest rate swaps
recognised in other
comprehensive income1
Ineffectiveness recognised in
finance expense
Amounts recycled to finance
expense to offset retranslation
of hedged loans
Balance at the end of the year
Notes:
1.2
(2.9)
(1.7)
(2.0)
19.0
17.0
–
–
–
–
0.8
0.8
–
0.1
2.4
(0.3)
2.4
(0.2)
–
(16.4)
(16.4)
(1.1)
0.3
(0.8)
1 Amounts charged to other comprehensive income in the year totalled £1.8m (2022: £16.1m credit)
184
184
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
185
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.
Interest bearing loans and borrowings
15. Derivatives
Non-current liabilities
Unsecured bank loans
US Private Placement Loan Notes
Total
Total
Current liabilities
US Private Placement Loan Notes
2023
£m
15.2
80.3
95.5
2022
£m
–
85.0
85.0
Derivative financial instruments – cash flow hedges
The Group uses derivatives to hedge its exposure to foreign exchange and interest rate risks
arising from operational, financing and investment activities. The carrying value of derivatives
designated in cash flow hedges at the balance sheet date was as follows:
At 31 December 2023
At 31 December 2022
Fair
values
£m
Contractual
or notional
amounts
£m
Change in
fair value
£m
Fair
values
£m
Contractual
or notional
amounts
£m
Change in
fair value
£m
–
–
208.0
208.0
Current assets
Forward foreign
exchange contracts
At 31 December 2023, the Group had £15.2m (2022: £nil) of unsecured bank loans drawn
in euros at floating rates of interest set by reference to SONIA (2022: SONIA). Essentra’s
$102.5m US Private Placement Loan Notes are at a weighted average interest rate of 3.84%
Cross currency interest
per annum (2022: 4.01%).
In October 2022, following lender consent and following the sale of the Packaging business
and the expected completion of the Filters business, the decision was taken by the Directors
to reduce the facility to £200m, maintaining the same terms.
Following the sale of the Packaging and Filters businesses, $247m of the US Private Placement
Loan Notes were repaid in January 2023. This left $33m maturing July 2028, $35m maturing
July 2031 and $35m maturing July 2033.
The currency profile of the carrying and nominal values of Essentra‘s loans and borrowings is
foreign currencies.
Non-current assets
rate swaps
Current liabilities
Forward foreign exchange
contracts
2.2
2.2
(0.2)
(0.2)
0.2
0.2
58.4
58.4
(0.3)
(0.3)
4.2
4.2
63.0
63.0
(4.1)
(4.1)
1.0
1.0
(1.3)
(1.3)
8.3
8.3
1.3
1.3
66.7
66.7
77.4
77.4
7.6
7.6
1.2
1.2
–
–
–
–
Cash flow hedges are hedges of the currency risk exposure to variability in cash flows.
They relate to trading transactions and interest and principal payments denominated in
as follows:
US dollar
Euro
Total
Carrying
Nominal
Carrying
Nominal
accounted for as cash flow hedges. The fair value will be transferred to profit or loss when
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
the forecast transactions occur. All of these hedged transactions are expected to occur over
the next 12 months and all derivative instruments mature in the next 12 months.
2023
value
£m
80.7
15.2
95.9
2022
value
£m
value
£m
293.0
291.7
–
–
293.0
291.7
value
£m
80.3
15.2
95.5
The difference between the total nominal and carrying value of loans and borrowings relates
to the amortised value of prepaid facility fees of £0.4m (2022: £0.4m) and to the accrued
make-whole payments due on early repayment in January 2023 of £nil (2022: £1.7m).
15. Derivatives continued
In July 2021, Essentra entered into a number of cross currency interest rate swap contracts
to hedge the foreign currency risk of $145m of its US Private Placement Loan Notes.
The maturity profile of these matched those of the underlying loan notes with $20m notional
value maturing within 3 years and the remainder between 5 and 7 years. These contracts were
accounted for as cash flow hedges, with the impact of cross currency basis treated as a cost
of hedging. In November 2022, following the Group’s strategic review, swap contracts hedging
$65m were terminated on 28 November 2022 for a net receipt of £6.5m. This resulted in
ineffectiveness being recognised in 2022 of £0.8m and hedge accounting being discontinued
at the repayment date. At 31 December 2023, the Group has derivatives with a total notional
value of $80m (2022: $80m), which are due to mature in 2028. Of these remaining derivatives,
hedge accounting was discontinued in 2022 for a total notional value of $47m as the related
debt was repaid in the year. The hedge ratio for these derivatives is 1:1 and ineffectiveness
can arise due credit risk in the counterparty and in the Group. The average rate for the cross
currency swaps in place at 31 December 2023 is $1.37 / £.
Movements in the Group‘s hedging reserves are analysed below.
Balance at the beginning of
the year
Change in fair value of forward
foreign exchange contracts
recognised in other
comprehensive income1
Amounts recycled to finance
expense on discontinued hedges
Change in fair value of cross
currency interest rate swaps
recognised in other
comprehensive income1
Ineffectiveness recognised in
finance expense
Amounts recycled to finance
expense to offset retranslation
of hedged loans
Balance at the end of the year
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
2023
Total
hedging
reserve
£m
Cost of
hedging
reserve
£m
Cash flow
hedging
reserve
£m
2022
Total
hedging
reserve
£m
(1.1)
0.3
(0.8)
0.9
(2.4)
(1.5)
–
–
(0.1)
(0.1)
–
–
–
–
(0.9)
(0.9)
0.2
0.2
1.2
(2.9)
(1.7)
(2.0)
19.0
17.0
–
–
–
–
0.8
0.8
–
0.1
2.4
(0.3)
2.4
(0.2)
–
(16.4)
(16.4)
(1.1)
0.3
(0.8)
Notes:
1 Amounts charged to other comprehensive income in the year totalled £1.8m (2022: £16.1m credit)
DIRECTORS’
REPORT
The following movements were recognised for the purpose of calculating hedge
ineffectiveness in the year:
Cumulative movement at 1 January 2023
Movement in year
Cumulative movement at 31 December
2023
Cumulative movement at 1 January 2022
Movement in year
Cumulative movement at 31 December 2022
Movement in
hedging
instrument
£m
Movement in
hedged item
£m
Ineffectiveness
recognised in
P&L
£m
14.6
(4.1)
(14.9)
4.1
(0.3)
–
10.5
(10.8)
(0.3)
Movement in
hedging
instrument
£m
Movement in
hedged item
£m
Ineffectiveness
recognised in
P&L
£m
0.7
13.9
14.6
(0.2)
(14.7)
(14.9)
0.5
(0.8)
(0.3)
Hedges of net investments in foreign operations
Hedges of net investments are hedges of the currency risk exposure to changes in the carrying
value of net investments in foreign operations. The hedge ratio is 1:1.
Essentra had other US dollar and euro denominated borrowings which it designated as
hedges of its net investments in subsidiary undertakings. Exchange gains of £1.0m (2022:
losses of £21.7m) on these US dollar borrowings and the losses of £0.3m (2022: gains of £nil)
on the euro borrowings were recognised in other comprehensive income.
184
ESSENTRA PLC ANNUAL REPORT 2023
185
ESSENTRA PLC ANNUAL REPORT 2023
185
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Deferred tax
Deferred tax assets and liabilities are attributable to the following:
Movements in the year:
2023
Income
statement:
(Charge)/
credit
£m
Assets
£m
Liabilities
£m
Net
£m
Assets
£m
Liabilities
£m
Net
£m
Property, plant and
equipment1
Intangible assets2
Employee benefits3
Other4
Tax
(assets)/liabilities
(8.4)
3.8
(4.6)
(0.8)
(7.1)
2.9
(4.2)
–
16.0
16.0
(1.9)
–
13.3
13.3
(5.6)
1.3
(4.3)
(0.6)
(4.6)
0.6
(4.0)
(10.4)
3.5
(6.9)
–
(11.3)
2.1
(9.2)
(24.4)
24.6
0.2
–
(23.0)
18.9
(4.1)
Set off of tax
12.2
(12.2)
–
–
11.3
(11.3)
–
(12.2)
12.4
0.2
–
(11.7)
7.6
(4.1)
2022
Income
statement:
(Charge)/
credit
£m
(2.0)
(13.0)
0.1
0.4
–
–
–
Net tax (assets)/liabilities at beginning of year
Credit to the income statement in respect of current year
(Credit)/charge to the income statement in respect of prior years
Credit to other comprehensive income – defined benefit pensions
Expense to reserves – hyperinflation (IAS 29)
Expense to reserves on share-based incentives
Expense to other income in respect of fair value hedges
Acquisitions and disposals
Currency translation
Net tax liabilities/(assets) at end of year
2023
Total
Net
£m
(4.1)
(1.2)
(2.1)
(0.3)
1.0
0.3
1.1
5.1
0.4
0.2
2022
Total
Net
£m
33.7
(16.3)
1.8
(5.1)
2.7
0.6
–
(25.8)
4.3
(4.1)
Net tax
(assets)/liabilities
Total income
statement
credit
–
–
–
(3.3)
–
–
–
(14.5)
Notes
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 increase during the period is primarily due to the
acquisition of BMP TAPPI.
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 £1.6m (2022: £1.4m). The reductions in 2022 primarily related to the disposal of the Packaging and Filters businesses
and the de-recognition of deferred tax assets on tax losses.
186
186
ESSENTRA PLC ANNUAL REPORT 2023
As at 31 December 2023, it was expected that earnings from certain overseas Group
companies will be remitted and a deferred tax liability of £1.6m (2022: £1.4m) has been
recognised accordingly. This represents withholding taxes payable on the remittance
of these earnings under local tax laws. The amount of unrecognised deferred tax in respect
of unremitted earnings is £2.5m (2022: £2.0m).
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 £0.1m (2022: £0.2m) in respect of capital losses
and unutilised tax losses of £57.7m (2022: £61.6m) have not been recognised as their
realisation is not probable. The capital losses have an unlimited expiry date.
The income tax losses expire as follows: £2.3m within 5 years, £4.9m in 5+ years and £51.0m
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.
Reorganisation
Contractual
obligations
Onerous
contracts
£m
3.6
0.3
(3.4)
–
0.5
–
0.5
0.5
£m
0.9
3.4
–
(0.5)
(0.2)
–
3.6
–
3.6
3.6
£m
5.5
–
(2.1)
–
3.4
–
3.4
3.4
£m
–
–
6.5
(1.0)
–
–
5.5
–
5.5
5.5
£m
1.9
(0.5)
–
0.5
0.1
0.4
0.5
£m
–
1.9
–
–
–
–
1.9
0.7
1.2
1.9
Other
£m
0.8
0.8
–
1.4
0.1
1.3
1.4
Other
£m
2.7
0.6
–
(2.0)
(0.7)
0.2
0.8
0.4
0.4
0.8
Reorganisation
Contractual
obligations
Onerous
contracts
2023
Total
£m
11.8
0.6
–
5.8
0.2
5.6
5.8
2022
Total
£m
3.6
5.9
6.5
(2.5)
(1.9)
0.2
11.8
1.1
10.7
11.8
17. Provisions
Beginning of year
Provisions made/(released) during
year
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Beginning of year
Provisions made during year
Provisions recognised on
business disposal
Business disposals
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Reorganisation
(see note 2).
Reorganisation provisions are generally held against restructuring and redundancy costs,
primarily related to the integration of acquired businesses and restructuring associated with
acquisitions and other businesses. During the year to 31 December 2023, £0.3m (2022: £3.4m)
of costs associated to reorganisation provisions were recognised in adjusting items
Contractual obligations
The provision for contractual obligations represents amounts that the Group may be
liable to pay arising from the disposal of the Packaging and Filters businesses in 2022.
At 31 December 2023, provisions for contractual obligations amounted to £3.4m (2022:
£5.5m), representing the Group’s estimate of ongoing obligations due to each of the
buyers under the respective Share Purchase Agreements.
Onerous contracts
(0.9)
(0.2)
(6.6)
At 31 December 2023, onerous contract provisions of £0.5m (2022: £1.9m) were recognised in
respect of contracts for services that are now in excess of the Group’s requirements following
the disposal of the Packaging and Filters businesses during 2022.
Other
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. In 2022, the release of £2.0m mainly
relates to claims and non-lease property-related provisions.
18. Employee benefits
Post-employment benefits
The Group operates a number of defined benefit and defined contribution pension schemes
around the world, the latter 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 2021 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.
In June 2023, the UK High Court (Virgin Media Limited v NTL Pension Trustees II Limited) ruled
that certain historical amendments for contracted out defined benefit schemes were invalid
if they were not accompanied by the correct actuarial confirmation. The judgment is subject
to appeal. The Trustee and Group are monitoring developments and will consider if there are
any implications for the UK Pension Fund, if the ruling is upheld.
ESSENTRA PLC ANNUAL REPORT 2023
187
ESSENTRA PLC ANNUAL REPORT 2023
2023
Income
statement:
(Charge)/
Assets
Liabilities
£m
£m
Net
£m
credit
£m
Assets
Liabilities
£m
£m
Net
£m
(8.4)
3.8
(4.6)
(0.8)
(7.1)
2.9
(4.2)
–
16.0
16.0
(1.9)
–
13.3
13.3
(5.6)
1.3
(4.3)
(0.6)
(4.6)
0.6
(4.0)
(10.4)
3.5
(6.9)
–
(11.3)
2.1
(9.2)
(assets)/liabilities
(24.4)
24.6
0.2
–
(23.0)
18.9
(4.1)
12.2
(12.2)
–
–
11.3
(11.3)
–
(assets)/liabilities
(12.2)
12.4
0.2
–
(11.7)
7.6
(4.1)
Property, plant and
equipment1
Intangible assets2
Employee benefits3
Other4
Tax
Set off of tax
Net tax
Total income
statement
credit
Notes
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 increase during the period is primarily due to the
acquisition of BMP TAPPI.
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 £1.6m (2022: £1.4m). The reductions in 2022 primarily related to the disposal of the Packaging and Filters businesses
and the de-recognition of deferred tax assets on tax losses.
2022
Income
statement:
(Charge)/
credit
£m
(2.0)
(13.0)
0.1
0.4
–
–
–
Net tax (assets)/liabilities at beginning of year
Credit to the income statement in respect of current year
(Credit)/charge to the income statement in respect of prior years
Credit to other comprehensive income – defined benefit pensions
Expense to reserves – hyperinflation (IAS 29)
Expense to reserves on share-based incentives
Expense to other income in respect of fair value hedges
Acquisitions and disposals
Currency translation
Net tax liabilities/(assets) at end of year
2023
Total
Net
£m
(4.1)
(1.2)
(2.1)
(0.3)
1.0
0.3
1.1
5.1
0.4
0.2
2022
Total
Net
£m
33.7
(16.3)
1.8
(5.1)
2.7
0.6
–
(25.8)
4.3
(4.1)
As at 31 December 2023, it was expected that earnings from certain overseas Group
companies will be remitted and a deferred tax liability of £1.6m (2022: £1.4m) has been
recognised accordingly. This represents withholding taxes payable on the remittance
of these earnings under local tax laws. The amount of unrecognised deferred tax in respect
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 £0.1m (2022: £0.2m) in respect of capital losses
and unutilised tax losses of £57.7m (2022: £61.6m) have not been recognised as their
realisation is not probable. The capital losses have an unlimited expiry date.
The income tax losses expire as follows: £2.3m within 5 years, £4.9m in 5+ years and £51.0m
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.
–
–
–
(3.3)
–
–
–
(14.5)
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
of unremitted earnings is £2.5m (2022: £2.0m).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Deferred tax
Deferred tax assets and liabilities are attributable to the following:
Movements in the year:
17. Provisions
Reorganisation
£m
Contractual
obligations
£m
Onerous
contracts
£m
Beginning of year
Provisions made/(released) during
year
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
3.6
0.3
(3.4)
–
0.5
–
0.5
0.5
5.5
–
(2.1)
–
3.4
–
3.4
3.4
1.9
(0.5)
–
0.5
0.1
0.4
0.5
(0.9)
(0.2)
(6.6)
Beginning of year
Provisions made during year
Provisions recognised on
business disposal
Business disposals
Utilised during year
Currency translation
End of year
Non-current
Current
End of year
Reorganisation
£m
Contractual
obligations
£m
Onerous
contracts
£m
0.9
3.4
–
(0.5)
(0.2)
–
3.6
–
3.6
3.6
–
–
6.5
–
(1.0)
–
5.5
–
5.5
5.5
–
1.9
–
–
–
–
1.9
0.7
1.2
1.9
Reorganisation
Reorganisation provisions are generally held against restructuring and redundancy costs,
primarily related to the integration of acquired businesses and restructuring associated with
acquisitions and other businesses. During the year to 31 December 2023, £0.3m (2022: £3.4m)
of costs associated to reorganisation provisions were recognised in adjusting items
(see note 2).
DIRECTORS’
REPORT
2023
Total
£m
11.8
0.6
Other
£m
0.8
0.8
Contractual obligations
The provision for contractual obligations represents amounts that the Group may be
liable to pay arising from the disposal of the Packaging and Filters businesses in 2022.
At 31 December 2023, provisions for contractual obligations amounted to £3.4m (2022:
£5.5m), representing the Group’s estimate of ongoing obligations due to each of the
buyers under the respective Share Purchase Agreements.
–
1.4
0.1
1.3
1.4
Other
£m
2.7
0.6
–
(2.0)
(0.7)
0.2
0.8
0.4
0.4
0.8
–
5.8
0.2
5.6
5.8
2022
Total
£m
3.6
5.9
6.5
(2.5)
(1.9)
0.2
11.8
1.1
10.7
11.8
Onerous contracts
At 31 December 2023, onerous contract provisions of £0.5m (2022: £1.9m) were recognised in
respect of contracts for services that are now in excess of the Group’s requirements following
the disposal of the Packaging and Filters businesses during 2022.
Other
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. In 2022, the release of £2.0m mainly
relates to claims and non-lease property-related provisions.
18. Employee benefits
Post-employment benefits
The Group operates a number of defined benefit and defined contribution pension schemes
around the world, the latter 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 2021 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.
In June 2023, the UK High Court (Virgin Media Limited v NTL Pension Trustees II Limited) ruled
that certain historical amendments for contracted out defined benefit schemes were invalid
if they were not accompanied by the correct actuarial confirmation. The judgment is subject
to appeal. The Trustee and Group are monitoring developments and will consider if there are
any implications for the UK Pension Fund, if the ruling is upheld.
186
ESSENTRA PLC ANNUAL REPORT 2023
187
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187
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Employee benefits continued
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 former 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 on a total group basis
(including discontinued operations) 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 assets1
Net interest on defined benefit scheme liabilities2
Net finance expense
2023
£m
2022
£m
2.7
1.8
–
0.1
4.6
7.0
2.0
–
0.4
9.4
(0.5)
(0.6)
0.8
0.3
0.7
0.1
Amounts recognised in the consolidated statement of comprehensive income
(2.3)
Return on defined benefit scheme assets excluding amounts in net finance income
108.5
Impact of changes in assumptions and experience to the present value of defined
benefit scheme liabilities
Remeasurement losses of defined benefit schemes
3.6
1.3
(88.0)
20.5
Notes:
1 Net interest income on defined benefit scheme assets on a continuing basis (note 3) was £0.5m (2022: £0.6m).
2 Net interest expense on defined benefit scheme liabilities on a continuing basis (note 3) was £0.8m (2022: £0.6m).
During the year, the Group incurred service cost expenses totalling £1.8m (2022: £2.0m)
which, in management’s judgement, are not considered to be part of the Group’s ongoing
operations. As such, these expenses have been classified as adjusting items and have been
presented separately (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 Employee Benefits purposes.
In April 2022, the Company, Essentra Components Limited and Essentra Pension Trustees
Limited (the trustee of the UK Essentra Pension Plan) entered into a flexible apportionment
agreement (“FAA”) subject to UK legislation such that Essentra Packaging and Security
Limited (a former participating employer and Group subsidiary disposed of as part of
the Packaging business), and Essentra Filter Products Limited and Essentra Pte Limited
(both former participating employers and Group subsidiaries disposed of as part of the
Filters business) transferred all defined benefit pension liabilities to Essentra Components
Limited, a continuing participating employer of the UK Essentra Pension Plan.
In consideration for the trustee entering into the FAA, it was agreed that Essentra Components
Limited pay the following amounts into the Essentra section of the UK Essentra Pension Plan:
(i) £0.7m (this was paid during 2022); (ii) £1.3m payable upon completion of the divestiture
of the Packaging business in the year of disposal which was paid in 2023, and make further
cash payments of £0.6m in each of the six years after the year of divestiture; and (iii) £1.3m
payable upon completion of the divestiture of the Filters business in the year of disposal which
was paid in 2023, and make further payments of £0.6m in each of the six years after the year
of divestiture.
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. Contributions payable by the Group to its defined benefit
pension schemes during the year to 31 December 2023 amounted to £nil (2022: £nil) to its
US schemes and £3.8m (2022: £0.7m) in respect of the Group’s European schemes. In 2024,
the Group expects to make defined benefit contributions of $2.4m to its US schemes and
£0.7m in respect of the Group’s European schemes.
18. Employee benefits continued
During the year, the Group’s total contributions to defined contribution schemes amounted to
The life expectancy assumptions (in number of years) used to estimate defined benefit
£2.7m (2022: £7.0m). Contributions on continuing operations of £2.7m (2022: £2.9m) were
pension obligations at the year end are as follows:
paid in 2023. A similar amount is expected to be payable during the ending 31 December 2024.
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 – RPI2
Inflation rate – CPI2
Notes:
Europe
n/a
n/a
2.9%
2.6%
3.4%
2.0%
4.6%
3.0%
2.6%
2023
US
n/a
n/a
n/a
n/a
n/a
n/a
4.8%
n/a
n/a
Europe
n/a
n/a
3.0%
2.7%
3.3%
2.2%
4.8%
3.1%
2.7%
2022
US
n/a
n/a
n/a
n/a
n/a
n/a
5.0%
n/a
n/a
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
22.4
24.8
23.7
26.2
2023
US
20.7
22.6
22.2
24.1
Europe
22.0
24.4
23.3
25.9
2022
US
20.5
22.5
22.1
24.0
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
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
considered to be sufficiently mitigated.
at April 2010 with annual increases capped at 3%.
2 During 2021, the Group changed its methodology and assumptions relating to inflation applied to the UK defined benefit pension scheme
(included within Europe) pertaining to the Retail Prices Index (“RPI”) and the Consumer Prices Index (CPI). This follows the government’s
announcement in November 2020 that RPI inflation will be aligned with CPIH inflation (CPI plus housing) from 2030. As such, the actuary
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.
3 Due to the timescale covered, the assumptions applied may not be borne out in practice.
188
188
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
189
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
18. Employee benefits continued
The principal European defined benefit schemes entitle remaining members to a pension
During the year, the Group incurred service cost expenses totalling £1.8m (2022: £2.0m)
calculated on 1.25% or 2% of their capped final pensionable pay multiplied by the number
which, in management’s judgement, are not considered to be part of the Group’s ongoing
of pensionable years of service. Some members have historical entitlements to accrual rates
operations. As such, these expenses have been classified as adjusting items and have been
of 1.67%-1.9% and 3% for certain tranches of their service. The principal US defined benefit
presented separately (see note 2).
schemes entitle certain former 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.
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
The amounts included in the consolidated financial statements on a total group basis
are not required to make any further contribution. The funding of these schemes is based on
(including discontinued operations) are as follows:
separate actuarial valuations for funding purposes for which the assumptions may differ from
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 assets1
Net interest on defined benefit scheme liabilities2
Net finance expense
Amounts recognised in the consolidated statement of comprehensive income
Return on defined benefit scheme assets excluding amounts in net finance income
(2.3)
108.5
of divestiture.
Impact of changes in assumptions and experience to the present value of defined
benefit scheme liabilities
Remeasurement losses of defined benefit schemes
3.6
1.3
20.5
Notes:
1 Net interest income on defined benefit scheme assets on a continuing basis (note 3) was £0.5m (2022: £0.6m).
2 Net interest expense on defined benefit scheme liabilities on a continuing basis (note 3) was £0.8m (2022: £0.6m).
those used in the valuation for IAS 19 Employee Benefits purposes.
2023
£m
2022
£m
In April 2022, the Company, Essentra Components Limited and Essentra Pension Trustees
Limited (the trustee of the UK Essentra Pension Plan) entered into a flexible apportionment
2.7
1.8
–
0.1
4.6
7.0
2.0
–
0.4
9.4
agreement (“FAA”) subject to UK legislation such that Essentra Packaging and Security
Limited (a former participating employer and Group subsidiary disposed of as part of
the Packaging business), and Essentra Filter Products Limited and Essentra Pte Limited
(both former participating employers and Group subsidiaries disposed of as part of the
Filters business) transferred all defined benefit pension liabilities to Essentra Components
Limited, a continuing participating employer of the UK Essentra Pension Plan.
(0.5)
(0.6)
0.8
0.3
0.7
0.1
In consideration for the trustee entering into the FAA, it was agreed that Essentra Components
Limited pay the following amounts into the Essentra section of the UK Essentra Pension Plan:
(i) £0.7m (this was paid during 2022); (ii) £1.3m payable upon completion of the divestiture
of the Packaging business in the year of disposal which was paid in 2023, and make further
cash payments of £0.6m in each of the six years after the year of divestiture; and (iii) £1.3m
payable upon completion of the divestiture of the Filters business in the year of disposal which
was paid in 2023, and make further payments of £0.6m in each of the six years after the year
(88.0)
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. Contributions payable by the Group to its defined benefit
pension schemes during the year to 31 December 2023 amounted to £nil (2022: £nil) to its
US schemes and £3.8m (2022: £0.7m) in respect of the Group’s European schemes. In 2024,
the Group expects to make defined benefit contributions of $2.4m to its US schemes and
£0.7m in respect of the Group’s European schemes.
18. Employee benefits continued
During the year, the Group’s total contributions to defined contribution schemes amounted to
£2.7m (2022: £7.0m). Contributions on continuing operations of £2.7m (2022: £2.9m) were
paid in 2023. A similar amount is expected to be payable during the ending 31 December 2024.
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 – RPI2
Inflation rate – CPI2
Europe
n/a
n/a
2.9%
2.6%
3.4%
2.0%
4.6%
3.0%
2.6%
2023
US
n/a
n/a
n/a
n/a
n/a
n/a
4.8%
n/a
n/a
Europe
n/a
n/a
3.0%
2.7%
3.3%
2.2%
4.8%
3.1%
2.7%
2022
US
n/a
n/a
n/a
n/a
n/a
n/a
5.0%
n/a
n/a
Notes:
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%.
2 During 2021, the Group changed its methodology and assumptions relating to inflation applied to the UK defined benefit pension scheme
(included within Europe) pertaining to the Retail Prices Index (“RPI”) and the Consumer Prices Index (CPI). This follows the government’s
announcement in November 2020 that RPI inflation will be aligned with CPIH inflation (CPI plus housing) from 2030. As such, the actuary
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.
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
pension 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
22.4
24.8
23.7
26.2
2023
US
20.7
22.6
22.2
24.1
Europe
22.0
24.4
23.3
25.9
2022
US
20.5
22.5
22.1
24.0
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.
188
ESSENTRA PLC ANNUAL REPORT 2023
189
ESSENTRA PLC ANNUAL REPORT 2023
189
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Employee benefits continued
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 assets1
Present value of scheme liabilities2
Net retirement benefit
assets/(obligations)3
Equities
Bonds/LDI
Other
Fair value of scheme assets1
Present value of scheme liabilities2
Net retirement benefit
assets/(obligations)3
% of total
fair value of
scheme assets
22%
76%
2%
% of total
fair value of
scheme assets
60%
38%
2%
Europe
£m
33.2
112.7
3.0
148.9
US
£m
29.1
18.7
0.8
48.6
2023
Total
£m
62.3
131.4
3.8
197.5
(143.5)
(63.3)
(206.8)
5.4
(14.7)
(9.3)
% of total
fair value of
scheme assets
42%
57%
<1%
% of total
fair value of
scheme assets
64%
34%
2%
Europe
£m
61.8
84.0
0.7
146.5
(141.1)
5.4
2022
Total
£m
95.1
101.3
1.9
198.3
US
£m
33.3
17.3
1.2
51.8
(67.6)
(208.7)
(15.8)
(10.4)
Notes:
1 The fair value of scheme assets are not intended to be realised in the short term and may be subject to significant change before they
are realised.
2 The present value of the pension scheme liabilities, which are derived from cash flow projections over long periods and are therefore
3
inherently uncertain.
In the Consolidated Balance Sheet, the retirement benefit asset of £7.9m relates to the UK pension scheme (2022: £7.9m), and the
retirement benefit obligations of £17.5m relate to the US and other smaller schemes (2022: £18.5m).
190
190
ESSENTRA PLC ANNUAL REPORT 2023
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 2023 is 13.5 years (2022: 14.0 years). The average expected duration
of the Group’s US defined benefit pension liability at 31 December 2023 is 10.0 years
(2022: 10.2 years).
18. Employee benefits continued
Movement in fair value of post-employment obligations recognised during the year
Beginning of year
Current service cost and administrative expense2
Employer contributions
Return on plan assets excluding amounts in net finance income3
Actuarial (losses)/gains arising from change in financial assumptions
Actuarial gains/(losses) arising from change in demographic assumptions
Actuarial losses arising from experience adjustment
Defined benefit pension schemes
Defined benefit pension schemes
Liabilities
£m
(208.7)
Other1
£m
(0.2)
(0.1)
Assets
£m
198.3
(1.8)
3.7
2.3
–
–
–
9.3
(11.4)
(2.9)
–
0.1
–
–
(3.9)
0.6
(0.3)
(9.6)
11.4
3.8
(0.2)
(9.3)
197.5
(206.8)
(0.3)
2023
Total
£m
(10.6)
(1.9)
3.8
2.3
(3.9)
0.6
(0.3)
(0.3)
–
0.9
(0.2)
(9.6)
–
–
–
–
–
–
–
–
–
Assets
£m
305.9
(1.8)
0.7
(108.5)
–
–
–
6.3
(11.5)
7.2
–
198.3
Liabilities
£m
(293.1)
(0.2)
0.2
–
95.5
(1.9)
(5.6)
(6.3)
11.5
(9.4)
0.6
(208.7)
(10.4)
2022
Total
£m
9.0
(2.4)
0.9
(108.5)
95.5
(1.9)
(5.6)
(0.1)
–
(2.3)
4.8
(10.6)
Other1
£m
(3.8)
(0.4)
–
–
–
–
–
–
(0.1)
(0.1)
4.2
(0.2)
Defined benefit schemes – net retirement benefit assets/(obligations)
1
Included within the other category above are other post-employment obligations outside of Europe and the US which are required under local law.
2 During the period, the Group incurred administrative expenses totalling £1.8m (2022: £2.0m) which, in management’s judgement, are not considered to be part of the Group’s ongoing operations. As such, these expenses have been classified as adjusting items and have been presented
3 For 2022, included within reduction on plan assets is an actuarial loss of £10.8m relating to an investment decision to purchase a bulk purchase annuity (“buy-in”) contract. A premium of £38.2m was paid to purchase buy-in to insure against liabilities within the UK defined benefits
scheme. The loss represented the difference between the premium paid and the estimated present value of the obligations and was included within other comprehensive income.
4
In 2023 £0.2m pension obligation relates to BMP TAPPI acquisition. In 2022 the Group disposed of the Packaging business and the Filters business. The participating employers in the UK Essentra Pension Plan of the divested businesses transferred their defined benefit pension liabilities
to Essentra Components Limited as part of the FAA executed in April 2022.
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
Finance income/(expense)
Benefits paid
Currency translation
Business combinations4
End of year
Notes:
separately (see note 2).
Sensitivity
scheme liabilities.
3.0% decrease in the discount rate
3.0% 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
3.0% increase in the discount rate
1.0% decrease in rate of salary/pension increases
3.0% decrease in the rate of inflation
(Increase)/decrease in schemes net liabilities
Europe
£m
(74.3)
(23.2)
n/a
(4.4)
5.2
39.9
n/a
16.5
as at 31 December 2023
US
£m
Total
£m
(31.3)
(105.6)
n/a
n/a
(1.9)
1.9
18.6
n/a
n/a
(23.2)
n/a
(6.3)
7.1
58.5
n/a
16.5
ESSENTRA PLC ANNUAL REPORT 2023
191
ESSENTRA PLC ANNUAL REPORT 2023
18. Employee benefits continued
The fair value of scheme assets, which are not intended to be realised in the short term and
The equity, corporate bond and government bond assets are either direct investments or
may be subject to significant change before they are realised, and the present value of the
investments made via a managed fund for those asset classes. All of these assets have a
pension scheme liabilities, which are derived from cash flow projections over long periods
quoted market price in an active market. The other asset class relates primarily to property
and are therefore inherently uncertain, are:
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.
% of total
fair value of
scheme assets
% of total
Europe
fair value of
£m
scheme assets
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 2023 is 13.5 years (2022: 14.0 years). The average expected duration
of the Group’s US defined benefit pension liability at 31 December 2023 is 10.0 years
197.5
(2022: 10.2 years).
(63.3)
(206.8)
5.4
(14.7)
(9.3)
60%
38%
2%
64%
34%
2%
22%
76%
2%
33.2
112.7
3.0
148.9
(143.5)
42%
57%
<1%
61.8
84.0
0.7
146.5
(141.1)
5.4
% of total
fair value of
scheme assets
Europe
% of total
fair value of
£m
scheme assets
2023
Total
£m
62.3
131.4
3.8
2022
Total
£m
95.1
101.3
1.9
198.3
US
£m
29.1
18.7
0.8
48.6
US
£m
33.3
17.3
1.2
51.8
(67.6)
(208.7)
(15.8)
(10.4)
Equities
Bonds/LDI
Other
Fair value of scheme assets1
Present value of scheme liabilities2
Net retirement benefit
assets/(obligations)3
Equities
Bonds/LDI
Other
Fair value of scheme assets1
Present value of scheme liabilities2
Net retirement benefit
assets/(obligations)3
Notes:
are realised.
inherently uncertain.
1 The fair value of scheme assets are not intended to be realised in the short term and may be subject to significant change before they
2 The present value of the pension scheme liabilities, which are derived from cash flow projections over long periods and are therefore
3
In the Consolidated Balance Sheet, the retirement benefit asset of £7.9m relates to the UK pension scheme (2022: £7.9m), and the
retirement benefit obligations of £17.5m relate to the US and other smaller schemes (2022: £18.5m).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Employee benefits continued
Movement in fair value of post-employment obligations recognised during the year
Beginning of year
Current service cost and administrative expense2
Employer contributions
Return on plan assets excluding amounts in net finance income3
Actuarial (losses)/gains arising from change in financial assumptions
Actuarial gains/(losses) arising from change in demographic assumptions
Actuarial losses arising from experience adjustment
Finance income/(expense)
Benefits paid
Currency translation
Business combinations4
End of year
Defined benefit pension schemes
Assets
£m
198.3
(1.8)
3.7
2.3
–
–
–
9.3
(11.4)
(2.9)
–
Liabilities
£m
(208.7)
–
0.1
–
(3.9)
0.6
(0.3)
(9.6)
11.4
3.8
(0.2)
Other1
£m
(0.2)
(0.1)
–
–
–
–
–
–
–
–
–
197.5
(206.8)
(0.3)
Defined benefit schemes – net retirement benefit assets/(obligations)
(9.3)
DIRECTORS’
REPORT
2023
Total
£m
(10.6)
(1.9)
3.8
2.3
(3.9)
0.6
(0.3)
(0.3)
–
0.9
(0.2)
(9.6)
Defined benefit pension schemes
Assets
£m
305.9
(1.8)
0.7
(108.5)
–
–
–
6.3
(11.5)
7.2
–
198.3
Liabilities
£m
(293.1)
(0.2)
0.2
–
95.5
(1.9)
(5.6)
(6.3)
11.5
(9.4)
0.6
(208.7)
(10.4)
2022
Total
£m
9.0
(2.4)
0.9
(108.5)
95.5
(1.9)
(5.6)
(0.1)
–
(2.3)
4.8
(10.6)
Other1
£m
(3.8)
(0.4)
–
–
–
–
–
(0.1)
–
(0.1)
4.2
(0.2)
Notes:
1
2 During the period, the Group incurred administrative expenses totalling £1.8m (2022: £2.0m) which, in management’s judgement, are not considered to be part of the Group’s ongoing operations. As such, these expenses have been classified as adjusting items and have been presented
Included within the other category above are other post-employment obligations outside of Europe and the US which are required under local law.
separately (see note 2).
3 For 2022, included within reduction on plan assets is an actuarial loss of £10.8m relating to an investment decision to purchase a bulk purchase annuity (“buy-in”) contract. A premium of £38.2m was paid to purchase buy-in to insure against liabilities within the UK defined benefits
4
scheme. The loss represented the difference between the premium paid and the estimated present value of the obligations and was included within other comprehensive income.
In 2023 £0.2m pension obligation relates to BMP TAPPI acquisition. In 2022 the Group disposed of the Packaging business and the Filters business. The participating employers in the UK Essentra Pension Plan of the divested businesses transferred their defined benefit pension liabilities
to Essentra Components Limited as part of the FAA executed in April 2022.
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.
3.0% decrease in the discount rate
3.0% 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
3.0% increase in the discount rate
1.0% decrease in rate of salary/pension increases
3.0% decrease in the rate of inflation
(Increase)/decrease in schemes net liabilities
as at 31 December 2023
Europe
£m
(74.3)
(23.2)
n/a
(4.4)
5.2
39.9
n/a
16.5
US
£m
Total
£m
(31.3)
(105.6)
n/a
n/a
(1.9)
1.9
18.6
n/a
n/a
(23.2)
n/a
(6.3)
7.1
58.5
n/a
16.5
190
ESSENTRA PLC ANNUAL REPORT 2023
191
ESSENTRA PLC ANNUAL REPORT 2023
191
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Employee benefits continued
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 £1.4m (2022: £2.6m).
A charge of £nil (2022: £0.5m) was also recognised in the year within adjusting items, in relation to the acceleration of share options in respect of certain senior management employees
leaving the business following the completion of the strategic review. Details of these plans are set out below:
Share awards/options outstanding
LTIP Part A
LTIP Part B
DASB
SAYE 3-year plan
SAYE 5-year plan
US SAYE 2-year plan
Restrictive Shares
LTIP Part A
LTIP Part B
DASB
SAYE 3-year plan
SAYE 5-year plan
US SAYE 2-year plan
Restrictive Shares
–
–
249.2p
256.2p
294.3p
–
Weighted
average
exercise price
649.1p
–
–
265.7p
267.8p
284.8p
Granted
during the year
–
1,628,540
76,530
331,917
93,688
–
–
2,130,675
–
961,501
253,721
–
–
–
–
419,519
1,634,741
2,543,804
435,590
322,012
110,163
30,825
419,519
3,928,113
At 1 Jan
2022
98,735
5,370,852
416,992
813,975
227,571
46,818
–
6,974,943
At 1 Jan
2023
66,200
Weighted
average
exercise price
692.0p
Weighted
average
exercise price
Lapsed
during the year
Weighted
average
exercise price
Exercised
during the year
Weighted
average
exercise price
(66,200)
692.0p
–
–
–
–
169.7p
169.7p
–
–
(259,682)
–
(267,843)
(95,416)
(25,725)
(85,163)
(800,029)
–
–
(34,958)
(365,897)
237.4p
253.1p
299.8p
–
–
–
–
–
(400,855)
4,857,904
Granted
during the year
Weighted
average
exercise price
Lapsed
during the year
Weighted
average
exercise price
Exercised
during the year
Weighted
average
exercise price
–
–
–
–
–
–
–
(32,535)
562.0p
(3,788,200)
–
(487,933)
(117,408)
(15,993)
–
–
–
276.9p
278.7p
266.5p
–
–
(349)
(235,123)
–
–
–
(4,030)
248.0p
–
–
–
–
–
–
(4,442,069)
(239,502)
At 31 Dec
2023
–
3,877,704
146,223
386,086
108,435
5,100
334,356
–
–
–
–
–
–
–
At 31 Dec
2022
66,200
2,543,804
435,590
322,012
110,163
30,825
419,519
3,928,113
Weighted
average
exercise price
Exercisable
at 31 Dec
2023
Weighted
average
exercise price
2023
–
–
–
189.0p
184.2p
266.5p
–
Weighted
average
exercise price
692.0p
–
–
249.2p
256.2p
294.3p
–
–
–
–
–
–
–
17,919
18,595
210.9p
184.2p
–
–
36,514
Exercisable
at 31 Dec
2022
66,200
33,826
10,494
45,591
31,449
–
–
187,560
–
–
2022
Weighted
average
exercise price
692.0p
–
–
–
–
–
–
18. Employee benefits continued
The exercise prices of options outstanding at the end of the year range from nil to 266.5p.
The weighted average share price at the date of exercise for options exercised during the year
was 205.2p (2022: 257.6p). The following table shows the weighted average fair value at the
Weighted average fair value
LTIP
Part A
LTIP
Part B
SAYE 3-year
SAYE 5-year
Restrictive
DASB
plan
plan
Shares
date of grant for options granted during the year:
at grant
141.4p
225.8p
189.0p
69.2p
75.5p
230.2p
LTIP
Part A
LTIP
Part B
SAYE 3-year
SAYE-5 year
Restrictive
DASB
plan
Plan
Shares
at grant
692.0p
275.6p
223.7p
293.1p
304.2p
237.0p
Year ended 31 December 2023
163.6p
175.5p
20.3p
20.3p
n/a
Year ended 31 December 2022
165.4p
172.3p
n/a
n/a
230.2p
n/a
n/a
Weighted average volatility
27.0%
37.0%
35.8%
36.1%
40.5%
692.0p
–
–
249.2p
265.5p
Fair value model inputs for cumulative share options awarded
Weighted average volatility
38.1%
40.0%
36.0%
40.9%
40.0%
Weighted average fair
value at grant
Weighted average share price
at grant
Weighted average
exercise price
Weighted average
dividend yield
Weighted risk free rate
Expected employee
retention rates
Expected term
Valuation model
–
–
–
–
–
–
–
–
–
LTIP
Part A
LTIP
Part B
SAYE-3 year
SAYE-5 year
Restrictive
DASB
plan
plan
Shares
205.7p
174.0p
32.2p
29.6p
230.2p
243.1p
202.8p
210.5p
204.2p
237.0p
0.0p
0.0p
189.0p
185.7p
0.0p
2.86%
3.00%
2.93%
2.99%
2.50%
2.02%
3.74%
2.69%
2.98%
3.40%
92.3%
100.0%
80.0%
80.2%
85.0%
3.00
years
3.20
years
5.20
years
3.00
years
3.00
years
Monte
Carlo Binomial Binomial Binomial Binomial
2022
–
40%
2.5%
3.4%
Weighted average share price
Weighted average
exercise price
Weighted average
dividend yield
2023
Weighted risk free rate
Expected employee
retention rates
Expected term
1.80%
0.4%
2.79%
1.08%
3.00%
2.37%
2.74%
0.21%
2.94%
0.44%
85.0%
81.1%
100.0%
80.1%
81.0%
85.0%
3.00
years
2.30
years
Monte
3.00
years
3.20
years
5.20
years
3.0
years
Valuation model
Binomial
Carlo Binomial Binomial Binomial Binomial
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.
LTIP
Part A
LTIP
Part B
DASB
SAYE
3 year
plan
2023 and 2022
SAYE
5 year
Plan
Restrictive
Shares
Contractual life
3–10 years
3–6 years
3 years
3 years
5 years
3 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 127 and 128.
192
192
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
193
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Employee benefits continued
The exercise prices of options outstanding at the end of the year range from nil to 266.5p.
The weighted average share price at the date of exercise for options exercised during the year
was 205.2p (2022: 257.6p). The following table shows the weighted average fair value at the
date of grant for options granted during the year:
2023
Weighted
average
Year ended 31 December 2023
Year ended 31 December 2022
n/a
n/a
163.6p
175.5p
20.3p
20.3p
n/a
165.4p
172.3p
n/a
n/a
230.2p
LTIP
Part A
LTIP
Part B
SAYE 3-year
plan
SAYE-5 year
Plan
Restrictive
Shares
DASB
Fair value model inputs for cumulative share options awarded
LTIP
Part A
LTIP
Part B
SAYE-3 year
plan
SAYE-5 year
plan
Restrictive
Shares
DASB
2023
18. Employee benefits continued
Share-based incentives
Share awards/options outstanding
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 £1.4m (2022: £2.6m).
A charge of £nil (2022: £0.5m) was also recognised in the year within adjusting items, in relation to the acceleration of share options in respect of certain senior management employees
leaving the business following the completion of the strategic review. Details of these plans are set out below:
At 1 Jan
Weighted
average
Granted
Weighted
average
Lapsed
Weighted
average
Exercised
At 31 Dec
Weighted
average
Weighted
average
Exercisable
at 31 Dec
2023
exercise price
during the year
exercise price
during the year
exercise price
during the year
exercise price
2023
exercise price
2023
exercise price
LTIP Part A
LTIP Part B
DASB
SAYE 3-year plan
SAYE 5-year plan
US SAYE 2-year plan
Restrictive Shares
66,200
692.0p
(66,200)
692.0p
2,543,804
435,590
322,012
110,163
30,825
419,519
3,928,113
–
–
–
249.2p
256.2p
294.3p
1,628,540
76,530
331,917
93,688
2,130,675
169.7p
169.7p
(259,682)
–
(267,843)
(95,416)
(25,725)
(85,163)
(800,029)
–
–
–
237.4p
253.1p
299.8p
(34,958)
(365,897)
–
3,877,704
146,223
386,086
108,435
5,100
334,356
–
–
–
–
189.0p
184.2p
266.5p
–
–
–
–
–
17,919
18,595
210.9p
184.2p
(400,855)
4,857,904
36,514
LTIP Part A
LTIP Part B
DASB
SAYE 3-year plan
SAYE 5-year plan
US SAYE 2-year plan
Restrictive Shares
At 1 Jan
2022
98,735
5,370,852
416,992
813,975
227,571
46,818
–
6,974,943
Weighted
average
649.1p
265.7p
267.8p
284.8p
–
–
961,501
253,721
–
419,519
1,634,741
exercise price
during the year
exercise price
during the year
exercise price
during the year
exercise price
2022
exercise price
2022
exercise price
Granted
Weighted
average
Lapsed
Weighted
average
Exercised
At 31 Dec
Weighted
average
Weighted
average
Exercisable
at 31 Dec
(32,535)
562.0p
66,200
692.0p
–
(349)
(235,123)
(4,030)
248.0p
(3,788,200)
(487,933)
(117,408)
(15,993)
–
–
–
–
–
276.9p
278.7p
266.5p
(4,442,069)
(239,502)
2,543,804
435,590
322,012
110,163
30,825
419,519
3,928,113
–
–
–
249.2p
256.2p
294.3p
66,200
33,826
10,494
45,591
31,449
–
–
187,560
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2022
Weighted
average
692.0p
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
–
–
–
–
–
–
–
–
–
205.7p
174.0p
32.2p
29.6p
230.2p
DIRECTORS’
REPORT
LTIP
Part A
LTIP
Part B
DASB
SAYE 3-year
plan
SAYE 5-year
plan
Restrictive
Shares
2022
141.4p
225.8p
189.0p
69.2p
75.5p
230.2p
692.0p
275.6p
223.7p
293.1p
304.2p
237.0p
–
40%
2.5%
3.4%
1.80%
0.4%
2.79%
1.08%
3.00%
2.37%
2.74%
0.21%
2.94%
0.44%
85.0%
81.1%
100.0%
80.1%
81.0%
85.0%
3.00
years
2.30
years
3.00
years
3.20
years
5.20
years
3.0
years
Weighted average fair value
at grant
Weighted average share price
at grant
Weighted average
exercise price
Weighted average
dividend yield
Weighted risk free rate
Expected employee
retention rates
Expected term
Weighted average volatility
27.0%
37.0%
35.8%
36.1%
40.5%
692.0p
–
–
249.2p
265.5p
243.1p
202.8p
210.5p
204.2p
237.0p
Valuation model
Binomial
Monte
Carlo Binomial Binomial Binomial Binomial
0.0p
0.0p
189.0p
185.7p
0.0p
38.1%
40.0%
36.0%
40.9%
40.0%
2.86%
3.00%
2.93%
2.99%
2.50%
2.02%
3.74%
2.69%
2.98%
3.40%
92.3%
100.0%
80.0%
80.2%
85.0%
3.00
years
3.00
years
3.20
years
5.20
years
3.00
years
Monte
Carlo Binomial Binomial Binomial Binomial
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.
LTIP
Part A
LTIP
Part B
DASB
SAYE
3 year
plan
2023 and 2022
SAYE
5 year
Plan
Restrictive
Shares
Contractual life
3–10 years
3–6 years
3 years
3 years
5 years
3 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 127 and 128.
192
ESSENTRA PLC ANNUAL REPORT 2023
193
ESSENTRA PLC ANNUAL REPORT 2023
193
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
Current
1-60 days
61-180 days
181-360 days
360+ days
(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. With the exception deferred contingent consideration
receivable of £19.0m (2022: £10.6m) in respect of the sale of the Filters business, 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 primarily 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.
Trade receivables were assessed for impairment at the balance sheet date using an expected
credit loss model which measures the required allowance at an amount equal to expected
lifetime credit losses applying both a qualitative and quantitative analysis of the asset base.
The Group monitors significant customers’ credit limits and recognises a specific impairment
of trade receivables in circumstances where a customer’s credit standing has deteriorated
to the extent that a credit default is considered probable. The Group also recognises an
expected credit loss impairment of trade receivables through an accounting policy election,
whereby default losses are expected for each ageing category as follows: Current 0.2%;
Overdue 1-30 days 0.5%; Overdue 31-60 days 1%; Overdue 61-90 days 5%; Overdue 91-180
days 10%; Overdue 181-360 days 50%; and Overdue over 360 days 100%.
194
194
ESSENTRA PLC ANNUAL REPORT 2023
As at 31 December 2023, gross trade receivables were £45.2m (2022: £46.7m) of which £10.1m
(2022: £15.7m) were past due. The ageing analysis of past due trade receivables is as follows:
1-60 days
61-180 days
181-360 days
360+ days
2023
£m
7.5
1.6
0.6
0.4
10.1
2022
£m
13.7
1.4
0.3
0.3
15.7
As at 31 December 2023, the combined specific and expected credit loss impairment of trade
receivables was of £1.7m (2022: £1.4m). The analysis of the combined impairment based on
the underlying receivables is as follows:
2023
£m
0.3
0.1
0.3
0.6
0.4
1.7
2023
£m
1.4
–
0.4
–
(0.1)
1.7
2022
£m
0.3
0.1
0.4
0.3
0.3
1.4
2022
£m
2.6
–
1.1
(2.3)
–
1.4
The movement in the provision for impaired receivables is as follows:
Beginning of year
Impaired receivables acquired/(disposed)
Impairment loss recognised1
Business disposals
Utilisation
End of year
Notes:
1
Impairment loss on a continuing basis is £0.4m (2022: £0.8m).
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 2023, £nil was drawn under invoice discounting facilities (2022: £nil),
representing cash collected before it was contractually due from the customer.
19. Financial risk management continued
(ii) Market price risk
Long-term receivables of £10.1m (2022: £11.6m) and other receivables of £14.7m (2022: £17.7m)
Market price risk is the risk that changes in foreign exchange rates and interest rates will
(see note 11) include £19.0m (2022: £10.6m) relating to a deferred contingent consideration on
affect income or the value of financial assets and liabilities. Essentra has produced a
the disposal of the Filters business. See the Accounting Estimates section on page 166 for
sensitivity analysis that shows the estimated change to the income statement and equity
valuation details which includes counterparty credit risk. The remaining £5.8m (2022: £18.7m)
of a 1%, 5% or 10% weakening or strengthening in sterling against all other currencies or an
includes indirect taxes recoverable for which no expected credit loss impairment is required.
increase or decrease of 50 basis points (“bps”), 100bps and 200bps in market interest rates.
Derivative assets
Credit risk with respect to derivatives is controlled by limiting transactions to major banking
The amounts generated from the sensitivity analysis are estimates and actual results in the
future may materially differ.
counterparties where internationally agreed standard form documentation exists. The credit
Essentra is exposed to two types of market price risk: currency risk and interest rate risk.
ratings of these counterparties are monitored regularly. The maximum exposure to credit risk
in relation to derivatives at the balance sheet date is £4.2m (2022: £8.5m) being
predominantly, the fair value of cross currency interest rate swaps (see note 15).
(a) Currency risk
Cash and cash equivalents
Credit risk relating to cash and cash equivalents is monitored daily, on a counterparty by
and their transaction costs.
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. The Group regularly monitors the credit
ratings of counterparties.
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
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
The following table provides information regarding the credit risk exposure of Essentra by
significant net assets. Essentra’s US dollar denominated assets were approximately 26%
classifying derivative assets, short-term investments and cash and cash equivalents according
(2022: 100%) hedged by $23m (2022: $205m) of US dollar denominated borrowings.
to credit ratings of the counterparties. AAA is the highest possible rating and all of the assets
Essentra’s Euro denominated assets were approximately 17% (2022: 0%) hedged by €18m
are neither impaired nor past due.
(2022: €nil) of euro denominated borrowings. Hedge ineffectiveness will arise if the amount
of the investment in the foreign subsidiary becomes lower than the notional amount of the
Non-current derivative assets
Cash and cash equivalents
Total
Current derivative assets
Non-current derivative assets
Cash and cash equivalents
Total
AA
£m
–
3.5
3.5
AA
£m
–
–
2.8
2.8
A
£m
–
10.0
10.0
A
£m
0.1
8.3
BBB
£m
4.2
44.5
48.7
BBB
£m
0.1
–
232.4
240.8
180.9
181.0
BB
£m
–
–
–
BB
£m
–
–
–
–
£m
–
1.0
1.0
£m
–
–
–
–
2023
Total
£m
4.2
59.7
63.9
2022
Total
£m
0.2
8.3
421.4
429.9
£m
–
0.7
0.7
£m
–
–
5.3
5.3
Essentra’s maximum credit risk exposure is £131.4m (2022: £504.5m) and no collateral is held
against this amount (2022: £nil).
B
Not rated
hedging instrument.
Transaction exposure hedging
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
B
Not rated
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 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.
speculative purposes.
In accordance with its Treasury policy, Essentra does not hold or issue derivatives for
ESSENTRA PLC ANNUAL REPORT 2023
195
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. Financial risk management continued
Long-term receivables of £10.1m (2022: £11.6m) and other receivables of £14.7m (2022: £17.7m)
(see note 11) include £19.0m (2022: £10.6m) relating to a deferred contingent consideration on
the disposal of the Filters business. See the Accounting Estimates section on page 166 for
valuation details which includes counterparty credit risk. The remaining £5.8m (2022: £18.7m)
includes indirect taxes recoverable for which no expected credit loss impairment is required.
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. The maximum exposure to credit risk
in relation to derivatives at the balance sheet date is £4.2m (2022: £8.5m) being
predominantly, the fair value of cross currency interest rate swaps (see note 15).
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. The Group regularly monitors the credit
ratings of counterparties.
The following 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.
Non-current derivative assets
Cash and cash equivalents
Total
Current derivative assets
Non-current derivative assets
Cash and cash equivalents
Total
AA
£m
–
3.5
3.5
AA
£m
–
–
2.8
2.8
A
£m
–
10.0
10.0
A
£m
0.1
8.3
BBB
£m
4.2
44.5
48.7
BBB
£m
0.1
–
232.4
240.8
180.9
181.0
BB
£m
–
–
–
BB
£m
–
–
–
–
B
£m
Not rated
£m
–
1.0
1.0
–
0.7
0.7
B
£m
Not rated
£m
–
–
–
–
–
–
5.3
5.3
2023
Total
£m
4.2
59.7
63.9
2022
Total
£m
0.2
8.3
421.4
429.9
Essentra’s maximum credit risk exposure is £131.4m (2022: £504.5m) and no collateral is held
against this amount (2022: £nil).
DIRECTORS’
REPORT
(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 26%
(2022: 100%) hedged by $23m (2022: $205m) of US dollar denominated borrowings.
Essentra’s Euro denominated assets were approximately 17% (2022: 0%) hedged by €18m
(2022: €nil) of euro denominated borrowings. Hedge ineffectiveness will arise if the amount
of the investment in the foreign subsidiary becomes lower than the notional amount of the
hedging instrument.
Transaction exposure hedging
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 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.
In accordance with its Treasury policy, Essentra does not hold or issue derivatives for
speculative purposes.
195
ESSENTRA PLC ANNUAL REPORT 2023
195
19. Financial risk management
Essentra’s activities expose the business to a number of key financial risks which have the
As at 31 December 2023, gross trade receivables were £45.2m (2022: £46.7m) of which £10.1m
potential to affect its ability to achieve its business objectives.
(2022: £15.7m) were past due. The ageing analysis of past due trade receivables is as follows:
1-60 days
61-180 days
181-360 days
360+ days
Current
1-60 days
61-180 days
181-360 days
360+ days
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. With the exception deferred contingent consideration
receivable of £19.0m (2022: £10.6m) in respect of the sale of the Filters business, 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 primarily 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.
Trade receivables were assessed for impairment at the balance sheet date using an expected
credit loss model which measures the required allowance at an amount equal to expected
lifetime credit losses applying both a qualitative and quantitative analysis of the asset base.
The Group monitors significant customers’ credit limits and recognises a specific impairment
of trade receivables in circumstances where a customer’s credit standing has deteriorated
to the extent that a credit default is considered probable. The Group also recognises an
expected credit loss impairment of trade receivables through an accounting policy election,
whereby default losses are expected for each ageing category as follows: Current 0.2%;
Overdue 1-30 days 0.5%; Overdue 31-60 days 1%; Overdue 61-90 days 5%; Overdue 91-180
days 10%; Overdue 181-360 days 50%; and Overdue over 360 days 100%.
194
ESSENTRA PLC ANNUAL REPORT 2023
2023
£m
7.5
1.6
0.6
0.4
10.1
2023
£m
0.3
0.1
0.3
0.6
0.4
1.7
2023
£m
1.4
0.4
–
–
(0.1)
1.7
2022
£m
13.7
1.4
0.3
0.3
15.7
2022
£m
0.3
0.1
0.4
0.3
0.3
1.4
2022
£m
2.6
–
1.1
(2.3)
–
1.4
As at 31 December 2023, the combined specific and expected credit loss impairment of trade
receivables was of £1.7m (2022: £1.4m). The analysis of the combined impairment based on
the underlying receivables is as follows:
The movement in the provision for impaired receivables is as follows:
Beginning of year
Impaired receivables acquired/(disposed)
Impairment loss recognised1
Business disposals
Utilisation
End of year
Notes:
1
Impairment loss on a continuing basis is £0.4m (2022: £0.8m).
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 2023, £nil was drawn under invoice discounting facilities (2022: £nil),
representing cash collected before it was contractually due from the customer.
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. Financial risk management continued
Hedging of foreign currency loan principal and interest payments
In July 2021, Essentra entered into a number of cross currency interest rate swap contracts
to hedge the foreign currency risk (principal and interest) of $145m of its US dollar loan notes.
The maturity profile of these match those of the underlying instruments with $20m notional
value maturing within 3 years and the remainder between 5 and 7 years. In November 2022,
$65m of these swap contracts were terminated leaving $80m notional value maturing within
5 years.
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.
(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 the Group’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. See note 14 for interest rate disclosures on loans
and borrowings.
Decrease in interest rates
Increase in interest rates
200bps
£m
100bps
£m
50bps
£m
200bps
£m
100bps
£m
50bps
£m
2023
Impact on the income
statement – gain/(loss)
0.3
0.2
0.1
(0.3)
(0.2)
(0.1)
Weakening in sterling
Strengthening in sterling
2023
5%
£m
1.0
13.1
1%
£m
0.2
2.5
10%
£m
5%
£m
1%
£m
(1.8)
(0.9)
(22.6)
(11.8)
(0.2)
(2.5)
Impact on the income
statement – gain/(loss)
Decrease in interest rates
Increase in interest rates
200bps
£m
100bps
£m
50bps
£m
200bps
£m
100bps
£m
50bps
£m
2022
1.9
1.0
0.5
(1.9)
(1.0)
(0.5)
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)
10%
£m
2.2
27.6
10%
£m
0.4
25.0
2022
Weakening in sterling
Strengthening in sterling
5%
£m
0.2
11.8
1%
£m
0.0
2.3
10%
£m
5%
£m
1%
£m
(0.3)
(0.2)
(20.4)
(10.7)
(0.0)
(2.2)
A 1 cent change to the US dollar rate against sterling will impact the adjusted operating
profit by £nil (2022: £0.1m). A 1 cent change to the euro rate against sterling will impact the
adjusted operating profit by £nil (2022: £0.1m).
(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$103m (2022: US$350m) and syndicated multi-currency
5-year revolving credit facilities of £200.0m (2022: £200.0m) from its banks. Following the
disposal of the Packaging and Filters businesses, in January 2023 $247m of the loan notes
were repaid leaving $33m maturing in July 2028, $35m in July 2031 and $35m in July 2033).
As at 31 December 2023, the amount drawn on the revolving credit facility was £15.2m
(2022: £nil). The Group manages liquidity by drawing down on this revolving credit facility
as and when needed throughout 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.
19. Financial risk management continued
Essentra’s available undrawn committed facilities at 31 December were:
Expiring before two years
Expiring after two years
Any loans drawn on these facilities would bear interest at floating rates with reference to
SONIA for the currency and period of the loan.
The maturity of Essentra’s financial liabilities, including estimated interest payments, is
analysed below.
Derivative liabilities
Trade and other payables2
Lease liabilities
Deferred contingent consideration3
Other financial liabilities
1.3
82.0
22.9
2.4
24.1
1.3
82.0
22.9
2.4
24.1
2023
£m
–
2022
£m
–
184.8
200.0
US Private Placement Loan Notes1
277.7
293.0
326.4
215.3
Carrying
amount
£m
Undiscounted
contractual
cash flows
£m
Fair value
£m
<1 yr
£m
1.3
82.0
6.3
–
24.1
1-2 yrs
2-5 yrs
£m
3.3
–
–
4.9
2.4
–
£m
9.9
–
–
–
–
1.3
82.0
28.3
2.4
24.1
10.5
6.6
2022
>5 yrs
£m
97.9
–
–
–
–
Unsecured bank loans
US Private Placement Loan Notes1
Trade and other payables2
Lease liabilities
Deferred contingent consideration3
Other financial liabilities
Undiscounted
Carrying
amount
contractual
cash flows
Fair value
£m
15.2
70.0
55.3
30.9
5.0
23.0
£m
15.2
80.3
55.3
30.9
5.0
23.0
£m
17.5
<1 yr
£m
0.8
90.7
48.9
55.3
55.3
49.3
5.0
8.1
5.0
23.0
23.0
£m
0.8
1.3
–
–
–
£m
15.9
14.4
£m
–
26.1
–
–
–
–
–
–
7.3
15.6
18.3
Total
199.4
209.7
240.8
141.1
9.4
45.9
44.4
Total
2023
Notes:
prevailing market rates.
1 The fair value of the US Private Placement Loan Notes is estimated by discounting the future cash flows (interests and principal) at the
1-2 yrs
2-5 yrs
>5 yrs
2 Total trade and other payables carried at £60.7m (2022: £91.5m), including other taxes and social security contributions of £5.4m (2022:
£9.5m), are not financial liabilities and are therefore excluded from the above analysis. The fair value of the trade and other payables
approximate the carrying amount as they are due to be settled within six months.
3 The value of deferred contingent consideration is primarily based on the post-acquisition financial performance of the acquired business,
and reflects management’s expectation of the performance during the earn-out period.
410.4
425.7
464.5 329.0
10.6
20.4
104.5
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 2023
At 31 December 2022
Gross amount of
Gross amount
recognised financial
of recognised
liabilities set off in
financial assets
the balance sheet
Net amount of
financial assets
presented in the
balance sheet
£m
£m
59.7
421.4
£m
–
–
59.7
421.4
196
196
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
197
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
19. Financial risk management continued
Essentra’s available undrawn committed facilities at 31 December were:
Expiring before two years
Expiring after two years
2023
£m
–
2022
£m
–
184.8
200.0
Any loans drawn on these facilities would bear interest at floating rates with reference to
SONIA for the currency and period of the loan.
The maturity of Essentra’s financial liabilities, including estimated interest payments, is
analysed below.
Carrying
amount
£m
Undiscounted
contractual
cash flows
£m
Fair value
£m
<1 yr
£m
1-2 yrs
£m
2-5 yrs
£m
>5 yrs
£m
2022
US Private Placement Loan Notes1
277.7
293.0
326.4
215.3
3.3
9.9
97.9
Derivative liabilities
Trade and other payables2
Lease liabilities
Deferred contingent consideration3
Other financial liabilities
1.3
82.0
22.9
2.4
24.1
1.3
82.0
22.9
2.4
24.1
1.3
82.0
28.3
2.4
24.1
1.3
82.0
6.3
–
24.1
–
–
4.9
2.4
–
–
–
–
–
10.5
6.6
–
–
–
–
Total
410.4
425.7
464.5 329.0
10.6
20.4
104.5
Carrying
amount
£m
Undiscounted
contractual
cash flows
£m
Fair value
£m
Unsecured bank loans
US Private Placement Loan Notes1
Trade and other payables2
Lease liabilities
Deferred contingent consideration3
Other financial liabilities
15.2
70.0
55.3
30.9
5.0
23.0
15.2
80.3
55.3
30.9
5.0
23.0
<1 yr
£m
0.8
17.5
90.7
48.9
55.3
55.3
49.3
5.0
8.1
5.0
23.0
23.0
1-2 yrs
£m
2-5 yrs
£m
>5 yrs
£m
0.8
1.3
–
15.9
14.4
–
–
26.1
–
7.3
15.6
18.3
–
–
–
–
–
–
Total
199.4
209.7
240.8
141.1
9.4
45.9
44.4
2023
Notes:
1 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.
2 Total trade and other payables carried at £60.7m (2022: £91.5m), including other taxes and social security contributions of £5.4m (2022:
£9.5m), are not financial liabilities and are therefore excluded from the above analysis. The fair value of the trade and other payables
approximate the carrying amount as they are due to be settled within six months.
3 The value of deferred contingent consideration is primarily based on the post-acquisition financial performance of the acquired business,
and reflects management’s expectation of the performance during the earn-out period.
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 2023
At 31 December 2022
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
59.7
421.4
–
–
59.7
421.4
19. Financial risk management continued
Hedging of foreign currency loan principal and interest payments
In July 2021, Essentra entered into a number of cross currency interest rate swap contracts
to hedge the foreign currency risk (principal and interest) of $145m of its US dollar loan notes.
The maturity profile of these match those of the underlying instruments with $20m notional
value maturing within 3 years and the remainder between 5 and 7 years. In November 2022,
$65m of these swap contracts were terminated leaving $80m notional value maturing within
5 years.
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.
(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 the Group’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. See note 14 for interest rate disclosures on loans
and borrowings.
Decrease in interest rates
Increase in interest rates
200bps
£m
100bps
£m
50bps
£m
200bps
£m
100bps
£m
50bps
£m
Impact on the income
statement – gain/(loss)
0.3
0.2
0.1
(0.3)
(0.2)
(0.1)
2023
2022
50bps
£m
Decrease in interest rates
Increase in interest rates
200bps
£m
100bps
£m
50bps
£m
200bps
£m
100bps
£m
1.9
1.0
0.5
(1.9)
(1.0)
(0.5)
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)
10%
£m
2.2
27.6
10%
£m
0.4
25.0
5%
£m
1.0
13.1
5%
£m
0.2
11.8
1%
£m
0.2
2.5
1%
£m
0.0
2.3
Weakening in sterling
Strengthening in sterling
10%
£m
5%
£m
2023
1%
£m
(1.8)
(0.9)
(22.6)
(11.8)
(0.2)
(2.5)
Impact on the income
statement – gain/(loss)
(iii) Liquidity risk
10%
£m
5%
£m
1%
£m
financial asset.
(0.3)
(0.2)
(20.4)
(10.7)
(0.0)
(2.2)
A 1 cent change to the US dollar rate against sterling will impact the adjusted operating
profit by £nil (2022: £0.1m). A 1 cent change to the euro rate against sterling will impact the
adjusted operating profit by £nil (2022: £0.1m).
Weakening in sterling
Strengthening in sterling
2022
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
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$103m (2022: US$350m) and syndicated multi-currency
5-year revolving credit facilities of £200.0m (2022: £200.0m) from its banks. Following the
disposal of the Packaging and Filters businesses, in January 2023 $247m of the loan notes
were repaid leaving $33m maturing in July 2028, $35m in July 2031 and $35m in July 2033).
As at 31 December 2023, the amount drawn on the revolving credit facility was £15.2m
(2022: £nil). The Group manages liquidity by drawing down on this revolving credit facility
as and when needed throughout 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.
196
ESSENTRA PLC ANNUAL REPORT 2023
197
ESSENTRA PLC ANNUAL REPORT 2023
197
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
(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.
Fair
value
£m
Amortised
cost
£m
2023
Total
carrying
value
£m
–
–
–
–
–
48.5
59.7
48.5
59.7
(95.5)
(95.5)
(30.9)
(30.9)
(55.3)
(55.3)
Fair
value
£m
Amortised
cost
£m
63.0
421.4
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.
2022
Total
carrying
value
£m
63.0
421.4
(293.0)
(293.0)
(22.9)
(22.9)
(82.0)
(82.0)
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. At 31 December 2023, the net debt was £62.5m (2022: net funding surplus of £113.8m).
–
–
–
–
–
4.2
–
19.0
–
(28.0)
–
–
–
–
4.2
8.5
–
(1.3)
19.0
–
11.6
(2.4)
(28.0)
(24.1)
–
–
–
–
–
8.5
Essentra’s medium-term target for net-debt to Adjusted EBITDA is 0x-1.5x.
(1.3)
The net debt-to-EBITDA ratios at 31 December were as follows.
11.6
(2.4)
(24.1)
Total Group (including discontinued operations in 2022)
Net debt/(funding surplus)
Trade and other receivables2
Cash and cash equivalents
Interest bearing loans and
borrowings3
Lease liabilities
Trade and other payables
Level 2 of fair value hierarchy
Derivative assets5
Derivative liabilities5
Level 3 of fair value hierarchy
Other financial assets6
Other non-current financial liabilities4
Other current financial liabilities7
Total Group (including
discontinued operations in 2022)
(4.8)
(73.5)
(78.3)
(7.7)
86.5
78.8
Notes:
1 Financial assets and liabilities held at amortised cost mostly have short terms to maturity. For this reason, their carrying amounts at the
reporting date approximate the fair values.
3
2 Total trade and other receivables carried at £61.5m (2022: £66.4m) include prepayments of £3.3m (2022: £3.4m) which are not financial
assets and are therefore excluded from the above analysis and £9.7m included within level 3 of fair value hierarchy other financial assets.
Included within interest bearing loans and borrowings are $103m (2022: $350m) US Private Placement Loan Notes. The Loan Notes are
held at amortised cost with a carrying value of £80.3m (2022: £293.0m). The Group estimates that the total fair value of the Loan Notes
at 31 December 2023 is £70.0m (2022: £277.7m). Unsecured bank loans amounting to £15.2m (2022: £nil), 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.
Included within other non-current financial liabilities (classified as level 3 in the fair value hierarchy), is an amount of £nil (2022: £2.4m)
representing deferred consideration payable in respect of acquisitions (2022: £2.4m).
4
5 Fair values of forward foreign exchange contracts and cross currency interest rate swaps have been calculated at year end forward
exchange rates compared to contracted rates using observable market data from third party financial institutions.
6 Other financial assets includes deferred contingent consideration receivable amounting to £19.0m (2022: £10.6m) following the disposal
of the Filters business, £9.3m of which is due greater than 1 year and £9.7m due less than 1 year. The consideration, which is structured as
an earn-out, has been classified as a long-term receivable in the consolidated financial statements. The fair value has been determined at
the balance sheet date based on management’s best estimate of the Filters business achieving future performance targets to which the
earn-out is linked with forecast earnings being a critical unobservable input into the fair value measurement. Management have assessed
and concluded that for 2022 any difference in fair value between completion date (the date at which the valuation was carried out) and
31 December 2022 would have been immaterial.
7 Other current financial liabilities include £23.0m (2022: £18.0m) which represents management’s best estimate of the combined expected
settlement payable by the Group through the respective completion accounts mechanisms linked to both the Filters business and
Packaging business disposals. The amount recognised is based on the facts and circumstances that were present and known at the
balance sheet date. Other current financial liabilities also include deferred contingent consideration of £5.0m (2022: £6.1m) in respect
of acquisitions.
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 assets1
Plus share option expense
Adjusted EBITDA
Net debt/(funding surplus)-to-Adjusted-EBITDA ratio
Net debt/(funding surplus)-to-Adjusted-EBITDA ratio excluding the
impact of IFRS 16 Leases
Notes:
1
Includes amortisation on non-acquired intangible assets of £2.9m (2022: £2.7m).
2023
£m
62.5
43.2
19.9
1.4
64.5
1.0
0.5
2022
£m
(113.8)
77.2
42.3
2.6
122.1
(0.9)
(1.3)
Purchase and cancellation of own shares
During the year, 13,364,814 (2022: nil) 25p Ordinary Shares (“shares”) were purchased by
the Company for total cash consideration of £24.0m (2022: £nil) at a weighted average
price of 179.5 pence per share, of which 9,223,493 shares with an aggregate nominal value
of £2.3m were cancelled, and £2.3m transferred from issued share capital to the capital
redemption reserve.
At 31 December 2023, the Company held 5,039,265 (2022: 897,944) of its own shares with
a nominal value of £1.3m (2022: £0.2m) in treasury. This represents 1.7% (2022: 0.3%) of
the number of ordinary shares in issue.
Capital reduction
The capital reduction, comprising the merger reserve, was approved by shareholders
at a General Meeting held on 14 November 2023. In connection with the capitalisation of
the merger reserve, resolutions authorising the Directors to allot one new B ordinary share
(the “Capital Reduction Share”), and to subsequently cancel the Capital Reduction Share
were passed at the General Meeting. On 4 December 2023, the amount of £385,219,535
standing to the credit of the merger reserve of the Company was capitalised and applied
in paying up in full at par one Capital Reduction Share with a nominal value of £385,219,535.
On 14 December 2023, Essentra announced that the capital reduction had become effective
following the confirmation by the Court approval on 5 December 2023 and the registration
of the Court order with the Registrar of Companies on 7 December 2023.
20. Issued share capital
Issued, authorised and fully paid ordinary shares
of 25p (2022: 25p) each:
Beginning of year
Cancellation of shares of 9,223,493 shares of
25p each:
End of year
Number of ordinary shares in issue
Beginning of year
Cancellation of shares
End of year
2023
£m
75.6
(2.3)
73.3
2022
£m
75.6
–
75.6
21. Reserves
(2022: £5.5m).
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 £10.1m
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 122 and 132. The assets, liabilities, and expenditure
of the trust have been incorporated in these financial statements. At 31 December 2023,
the trust held 9,180 (2022: 410,035) shares, upon which dividends have been waived,
with an aggregate nominal value of £2,295 (2022: £102,509) and market value of £15,569
302,590,708
302,590,708
(9,223,493)
–
(2022: £969,733).
293,367,215
302,590,708
The other reserve balance of £132.8m debit (2022: £132.8m) 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.
198
198
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
199
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. Financial risk management continued
Total financial assets and liabilities
(iv) Capital structure
Essentra defines its capital structure as its equity and non-current interest bearing loans and
20. Issued share capital
Issued, authorised and fully paid ordinary shares
of 25p (2022: 25p) each:
Beginning of year
Cancellation of shares of 9,223,493 shares of
25p each:
End of year
Number of ordinary shares in issue
Beginning of year
Cancellation of shares
End of year
2023
£m
75.6
(2.3)
73.3
2022
£m
75.6
–
75.6
302,590,708
302,590,708
(9,223,493)
–
293,367,215
302,590,708
Purchase and cancellation of own shares
During the year, 13,364,814 (2022: nil) 25p Ordinary Shares (“shares”) were purchased by
the Company for total cash consideration of £24.0m (2022: £nil) at a weighted average
price of 179.5 pence per share, of which 9,223,493 shares with an aggregate nominal value
of £2.3m were cancelled, and £2.3m transferred from issued share capital to the capital
redemption reserve.
At 31 December 2023, the Company held 5,039,265 (2022: 897,944) of its own shares with
a nominal value of £1.3m (2022: £0.2m) in treasury. This represents 1.7% (2022: 0.3%) of
the number of ordinary shares in issue.
Capital reduction
The capital reduction, comprising the merger reserve, was approved by shareholders
at a General Meeting held on 14 November 2023. In connection with the capitalisation of
the merger reserve, resolutions authorising the Directors to allot one new B ordinary share
(the “Capital Reduction Share”), and to subsequently cancel the Capital Reduction Share
were passed at the General Meeting. On 4 December 2023, the amount of £385,219,535
standing to the credit of the merger reserve of the Company was capitalised and applied
in paying up in full at par one Capital Reduction Share with a nominal value of £385,219,535.
On 14 December 2023, Essentra announced that the capital reduction had become effective
following the confirmation by the Court approval on 5 December 2023 and the registration
of the Court order with the Registrar of Companies on 7 December 2023.
The table below sets out Essentra’s accounting categories and fair value for each class of
borrowings, and aims to manage this to safeguard its ability to continue as a going concern,
financial asset and liability.
so that it can continue to provide returns to shareholders and benefits for other stakeholders.
Fair
Amortised
carrying
Fair
Amortised
carrying
value
£m
cost
£m
48.5
59.7
2023
Total
value
£m
48.5
59.7
(95.5)
(95.5)
(30.9)
(30.9)
(55.3)
(55.3)
2022
Total
value
£m
63.0
421.4
cost
£m
63.0
421.4
(293.0)
(293.0)
(22.9)
(22.9)
(82.0)
(82.0)
value
£m
–
–
–
–
–
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. At 31 December 2023, the net debt was £62.5m (2022: net funding surplus of £113.8m).
4.2
4.2
8.5
8.5
Essentra’s medium-term target for net-debt to Adjusted EBITDA is 0x-1.5x.
–
(1.3)
(1.3)
The net debt-to-EBITDA ratios at 31 December were as follows.
–
–
–
–
–
19.0
–
11.6
(2.4)
(28.0)
(24.1)
11.6
(2.4)
(24.1)
Total Group (including discontinued operations in 2022)
Net debt/(funding surplus)
Trade and other receivables2
Cash and cash equivalents
Interest bearing loans and
borrowings3
Lease liabilities
Trade and other payables
Level 2 of fair value hierarchy
Derivative assets5
Derivative liabilities5
Level 3 of fair value hierarchy
Other financial assets6
19.0
Other non-current financial liabilities4
Other current financial liabilities7
(28.0)
Total Group (including
–
–
–
–
–
–
–
–
–
–
–
discontinued operations in 2022)
(4.8)
(73.5)
(78.3)
(7.7)
86.5
78.8
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 assets1
1 Financial assets and liabilities held at amortised cost mostly have short terms to maturity. For this reason, their carrying amounts at the
reporting date approximate the fair values.
Plus share option expense
2 Total trade and other receivables carried at £61.5m (2022: £66.4m) include prepayments of £3.3m (2022: £3.4m) which are not financial
assets and are therefore excluded from the above analysis and £9.7m included within level 3 of fair value hierarchy other financial assets.
Adjusted EBITDA
2023
£m
62.5
43.2
19.9
1.4
64.5
1.0
0.5
2022
£m
(113.8)
77.2
42.3
2.6
122.1
(0.9)
(1.3)
Net debt/(funding surplus)-to-Adjusted-EBITDA ratio
Net debt/(funding surplus)-to-Adjusted-EBITDA ratio excluding the
impact of IFRS 16 Leases
Notes:
1
Includes amortisation on non-acquired intangible assets of £2.9m (2022: £2.7m).
Notes:
3
4
reporting date.
Included within interest bearing loans and borrowings are $103m (2022: $350m) US Private Placement Loan Notes. The Loan Notes are
held at amortised cost with a carrying value of £80.3m (2022: £293.0m). The Group estimates that the total fair value of the Loan Notes
at 31 December 2023 is £70.0m (2022: £277.7m). Unsecured bank loans amounting to £15.2m (2022: £nil), 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
Included within other non-current financial liabilities (classified as level 3 in the fair value hierarchy), is an amount of £nil (2022: £2.4m)
representing deferred consideration payable in respect of acquisitions (2022: £2.4m).
5 Fair values of forward foreign exchange contracts and cross currency interest rate swaps have been calculated at year end forward
exchange rates compared to contracted rates using observable market data from third party financial institutions.
6 Other financial assets includes deferred contingent consideration receivable amounting to £19.0m (2022: £10.6m) following the disposal
of the Filters business, £9.3m of which is due greater than 1 year and £9.7m due less than 1 year. The consideration, which is structured as
an earn-out, has been classified as a long-term receivable in the consolidated financial statements. The fair value has been determined at
the balance sheet date based on management’s best estimate of the Filters business achieving future performance targets to which the
earn-out is linked with forecast earnings being a critical unobservable input into the fair value measurement. Management have assessed
and concluded that for 2022 any difference in fair value between completion date (the date at which the valuation was carried out) and
31 December 2022 would have been immaterial.
7 Other current financial liabilities include £23.0m (2022: £18.0m) which represents management’s best estimate of the combined expected
settlement payable by the Group through the respective completion accounts mechanisms linked to both the Filters business and
Packaging business disposals. The amount recognised is based on the facts and circumstances that were present and known at the
balance sheet date. Other current financial liabilities also include deferred contingent consideration of £5.0m (2022: £6.1m) in respect
of acquisitions.
DIRECTORS’
REPORT
21. Reserves
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 £10.1m
(2022: £5.5m).
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 122 and 132. The assets, liabilities, and expenditure
of the trust have been incorporated in these financial statements. At 31 December 2023,
the trust held 9,180 (2022: 410,035) shares, upon which dividends have been waived,
with an aggregate nominal value of £2,295 (2022: £102,509) and market value of £15,569
(2022: £969,733).
The other reserve balance of £132.8m debit (2022: £132.8m) 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.
198
ESSENTRA PLC ANNUAL REPORT 2023
199
ESSENTRA PLC ANNUAL REPORT 2023
199
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. Analysis of net debt
Cash at bank and in hand
Cash and cash equivalents in the statement
of cash flows
Derivative financial instruments hedging
private placement loans
Debt due within one year
Debt due after one year
Lease liabilities due within one year3
Lease liabilities due after one year3
Debt from financing activities
Net (debt)/funding surplus
Cash at bank and in hand
Short-term deposits and investments
Cash and cash equivalents in the statement
of cash flows
Derivative financial instruments hedging
private placement loans
Debt due within one year
Debt due after one year
Lease liabilities due within one year3
Lease liabilities due after one year3
Debt from financing activities
Net (debt)/funding surplus
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 January
2023
£m
421.4
Cash flow
£m
(308.9)
Business
disposals
£m
(17.8)
Business
acquisitions
£m
(33.3)
421.4
(308.9)
(17.8)
(33.3)
8.3
(208.0)
(85.0)
(4.9)
(18.0)
(307.6)
113.8
1 January
2022
£m
123.9
12.4
(0.3)
208.0
(14.9)
7.2
–
200.0
(108.9)
Cash flow
£m
(115.7)
5.7
–
–
–
–
–
–
–
–
–
–
–
–
(17.8)
(33.3)
Business
disposals
£m
434.9
(18.0)
Business
acquisitions
£m
(27.9)
–
136.3
(110.0)
416.9
(27.9)
–
–
(313.3)
(11.6)
(46.1)
(371.0)
(234.7)
(6.5)
–
59.2
14.3
–
67.0
(43.0)
–
–
–
7.5
30.1
37.6
454.5
–
–
–
–
–
-
(27.9)
Lease
additions
£m
Exchange
movements
£m
Non-cash
movements1,2,4
£m
31 December
2023
£m
–
–
–
–
–
(2.0)
(12.0)
(14.0)
(14.0)
(1.7)
(1.7)
(3.8)
–
4.4
–
0.6
1.2
(0.5)
–
–
–
–
–
(7.4)
5.6
(1.8)
(1.8)
59.7
59.7
4.2
–
(95.5)
(7.1)
(23.8)
(122.2)
(62.5)
Lease
additions
£m
Exchange
movements
£m
Non-cash
movements1,2,4
£m
31 December
2022
£m
–
–
–
–
–
–
(2.9)
(7.4)
(10.3)
(10.3)
6.2
(0.1)
6.1
13.4
(1.2)
(31.2)
(0.9)
(3.3)
(23.2)
(17.1)
–
–
–
1.4
(206.8)
200.3
(11.3)
8.7
(7.7)
(7.7)
421.4
–
421.4
8.3
(208.0)
(85.0)
(4.9)
(18.0)
(307.6)
113.8
Notes:
1 The non-cash movements in debt due after one year represents the amortisation and write down of prepaid facility fees of £nil (2022: £4.8m amortisation of prepaid facility fees) and the revaluation of loan to fair value of £nil (2022: £1.7m). In the year ended 31 December 2022 loans
of £185.0m were reallocated to debt due within one year following an agreement to repay on demand in January 2023.
2 The net non-cash movements in lease liabilities represents lease surrenders of £nil (2022: £0.2m) due to renegotiated lease terms, offset by interest on leases of £1.8m (2022 £2.8m).
3 During the year, £5.6m (2022: £8.7m) of lease liabilities moved from due after one year to due within one year.
4
Included within non-cash movements for derivative financial instruments hedging private placement loans is outflow of £2.3m (2022: £1.4m inflow) relating to the fair value movements on cross currency interest rate swaps.
The net cash outflow relating to lease liabilities for low value, short term and variable lease payments was £0.1m (2022: £0.2m) (see note 9).
23. Acquisitions
Acquisition of BMP s.r.l (“BMP TAPPI”)
On 26 October 2023, Essentra acquired 100% of the equity interests of BMP TAPPI, a global
provider of essential components and solutions, to strengthen the Essentra‘s product portfolio,
unlock further cross-selling opportunities, and to enhance the Group‘s manufacturing
footprint in Europe. The Group acquired BMP TAPPI for an initial cash consideration of €39.5m
(£34.3m), up to €3.5m (£3.0m) deferred contingent consideration, and €0.7m (£0.6m)
adjustment for net working capital and financial position. The deferred contingent
consideration is conditional on achieving certain performance criteria over a two-year period
commencing 1 January 2023.
On acquisition, the assets and liabilities of the business acquired were adjusted to reflect their
fair value to Essentra. The most significant fair value adjustment arising on the acquisition
of BMP TAPPI related to the attribution of fair value to the acquired customer relationships
external valuation specialist whose assessment considered forecast cash flows from BMP
TAPPI‘s customer contracts, expected attrition rates based on an analysis of historic
customer sales data, and the application of an appropriate discount rate specific to the
customer relationship asset. The resulting analysis indicated a provisional fair value for the
customer relationships asset of £16.9m, with a corresponding provisional deferred tax liability
in relation to the intangible asset of £4.8m.
Intangible assets1
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Retirement benefit obligations
Corporation tax payable
Deferred tax liabilities
Goodwill2
Total consideration
Cash consideration
Deferred consideration3
Total consideration
intangible asset. In determining the fair value of the intangible asset, the Group used an
Net identifiable assets acquired
Under IFRS 3 Business Combinations, the fair value of assets and liabilities must be finalised
within a 12-month “measurement period” from the date of acquisition. At the reporting
Notes:
date, the purchase price allocation and fair value adjustments are provisional. The acquired
business contributed revenues of £1.8m and net profit of £nil to the Group for the period from
26 October to 31 December 2023 and these results are included within these consolidated
financial statements. Had the acquisition completed on 1 January 2023, the contribution to the
Group’s revenue and operating profit would have been £12.5m and £2.5m higher, respectively.
Acquisition-related costs of £0.6m are included within adjusting items in the consolidated
income statement (see note 2) and in operating cash flows in the consolidated statement
of cash flows.
The Group‘s provisional assessment of the fair value of assets and liabilities recognised as part
of the acquisition of BMP TAPPI are detailed below:
1
Intangible assets comprise customer relationships of £16.9m and other intangible assets of £0.8m.
2 Goodwill recognised of £15.0m represents the expected operating and financial synergies, and the value of the assembled workforce
3 Deferred consideration includes £3.0m of deferred contingent consideration and £0.6m of adjustments to the purchase price for net
acquired. Goodwill is not deductible for tax purposes.
financial capital and financial position.
Provisional
fair value
£m
17.7
4.0
0.2
3.2
5.3
(2.0)
(0.2)
(0.4)
(4.9)
22.9
15.0
37.9
34.3
3.6
37.9
200
200
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
201
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
22. Analysis of net debt
Cash at bank and in hand
Cash and cash equivalents in the statement
of cash flows
Derivative financial instruments hedging
private placement loans
Debt due within one year
Debt due after one year
Lease liabilities due within one year3
Lease liabilities due after one year3
Debt from financing activities
Net (debt)/funding surplus
Cash at bank and in hand
Short-term deposits and investments
Cash and cash equivalents in the statement
of cash flows
Derivative financial instruments hedging
private placement loans
Debt due within one year
Debt due after one year
Lease liabilities due within one year3
Lease liabilities due after one year3
Debt from financing activities
Net (debt)/funding surplus
Notes:
1 January
2023
£m
421.4
Cash flow
£m
(308.9)
Business
disposals
£m
(17.8)
Business
acquisitions
£m
(33.3)
Lease
additions
£m
Exchange
movements
Non-cash
movements1,2,4
31 December
421.4
(308.9)
(17.8)
(33.3)
(2.0)
(12.0)
(14.0)
(14.0)
–
–
–
–
–
–
–
–
–
–
–
8.3
(208.0)
(85.0)
(4.9)
(18.0)
(307.6)
113.8
1 January
2022
£m
123.9
12.4
136.3
–
–
(313.3)
(11.6)
(46.1)
(371.0)
(234.7)
(0.3)
208.0
(14.9)
7.2
–
200.0
(108.9)
Cash flow
£m
(115.7)
5.7
(6.5)
59.2
14.3
–
–
67.0
(43.0)
–
–
–
–
–
–
–
–
–
7.5
30.1
37.6
454.5
(17.8)
(33.3)
Business
disposals
£m
434.9
(18.0)
Business
acquisitions
£m
(27.9)
(110.0)
416.9
(27.9)
–
–
–
–
–
–
–
–
–
–
–
–
-
(2.9)
(7.4)
(10.3)
(10.3)
(27.9)
£m
(1.7)
(1.7)
(3.8)
4.4
–
–
0.6
1.2
(0.5)
£m
6.2
(0.1)
6.1
13.4
(1.2)
(31.2)
(0.9)
(3.3)
(23.2)
(17.1)
£m
–
–
–
–
–
(7.4)
5.6
(1.8)
(1.8)
–
–
–
1.4
(206.8)
200.3
(11.3)
8.7
(7.7)
(7.7)
2023
£m
59.7
59.7
4.2
–
(95.5)
(7.1)
(23.8)
(122.2)
(62.5)
2022
£m
421.4
–
421.4
8.3
(208.0)
(85.0)
(4.9)
(18.0)
(307.6)
113.8
Lease
additions
£m
Exchange
movements
Non-cash
movements1,2,4
£m
31 December
1 The non-cash movements in debt due after one year represents the amortisation and write down of prepaid facility fees of £nil (2022: £4.8m amortisation of prepaid facility fees) and the revaluation of loan to fair value of £nil (2022: £1.7m). In the year ended 31 December 2022 loans
of £185.0m were reallocated to debt due within one year following an agreement to repay on demand in January 2023.
2 The net non-cash movements in lease liabilities represents lease surrenders of £nil (2022: £0.2m) due to renegotiated lease terms, offset by interest on leases of £1.8m (2022 £2.8m).
3 During the year, £5.6m (2022: £8.7m) of lease liabilities moved from due after one year to due within one year.
4
Included within non-cash movements for derivative financial instruments hedging private placement loans is outflow of £2.3m (2022: £1.4m inflow) relating to the fair value movements on cross currency interest rate swaps.
The net cash outflow relating to lease liabilities for low value, short term and variable lease payments was £0.1m (2022: £0.2m) (see note 9).
23. Acquisitions
Acquisition of BMP s.r.l (“BMP TAPPI”)
On 26 October 2023, Essentra acquired 100% of the equity interests of BMP TAPPI, a global
provider of essential components and solutions, to strengthen the Essentra‘s product portfolio,
unlock further cross-selling opportunities, and to enhance the Group‘s manufacturing
footprint in Europe. The Group acquired BMP TAPPI for an initial cash consideration of €39.5m
(£34.3m), up to €3.5m (£3.0m) deferred contingent consideration, and €0.7m (£0.6m)
adjustment for net working capital and financial position. The deferred contingent
consideration is conditional on achieving certain performance criteria over a two-year period
commencing 1 January 2023.
On acquisition, the assets and liabilities of the business acquired were adjusted to reflect their
fair value to Essentra. The most significant fair value adjustment arising on the acquisition
of BMP TAPPI related to the attribution of fair value to the acquired customer relationships
intangible asset. In determining the fair value of the intangible asset, the Group used an
external valuation specialist whose assessment considered forecast cash flows from BMP
TAPPI‘s customer contracts, expected attrition rates based on an analysis of historic
customer sales data, and the application of an appropriate discount rate specific to the
customer relationship asset. The resulting analysis indicated a provisional fair value for the
customer relationships asset of £16.9m, with a corresponding provisional deferred tax liability
in relation to the intangible asset of £4.8m.
Under IFRS 3 Business Combinations, the fair value of assets and liabilities must be finalised
within a 12-month “measurement period” from the date of acquisition. At the reporting
date, the purchase price allocation and fair value adjustments are provisional. The acquired
business contributed revenues of £1.8m and net profit of £nil to the Group for the period from
26 October to 31 December 2023 and these results are included within these consolidated
financial statements. Had the acquisition completed on 1 January 2023, the contribution to the
Group’s revenue and operating profit would have been £12.5m and £2.5m higher, respectively.
Acquisition-related costs of £0.6m are included within adjusting items in the consolidated
income statement (see note 2) and in operating cash flows in the consolidated statement
of cash flows.
The Group‘s provisional assessment of the fair value of assets and liabilities recognised as part
of the acquisition of BMP TAPPI are detailed below:
Intangible assets1
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Retirement benefit obligations
Corporation tax payable
Deferred tax liabilities
Net identifiable assets acquired
Goodwill2
Total consideration
Cash consideration
Deferred consideration3
Total consideration
Provisional
fair value
£m
17.7
4.0
0.2
3.2
5.3
(2.0)
(0.2)
(0.4)
(4.9)
22.9
15.0
37.9
34.3
3.6
37.9
Notes:
1
2 Goodwill recognised of £15.0m represents the expected operating and financial synergies, and the value of the assembled workforce
Intangible assets comprise customer relationships of £16.9m and other intangible assets of £0.8m.
acquired. Goodwill is not deductible for tax purposes.
3 Deferred consideration includes £3.0m of deferred contingent consideration and £0.6m of adjustments to the purchase price for net
financial capital and financial position.
200
ESSENTRA PLC ANNUAL REPORT 2023
201
ESSENTRA PLC ANNUAL REPORT 2023
201
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Acquisitions continued
Acquisition of Wixroyd Group
On 1 December 2022, Essentra acquired 100% of the equity interests of Wixroyd Holdings
Limited (the "Wixroyd Group"), a leading UK supplier of industrial parts for the engineering
sector for an initial consideration of £31.4m. The consideration payable for the Wixroyd Group
comprised an initial cash consideration of £31.4m and up to £7.0m deferred contingent
consideration. The deferred earn-out consideration was conditional on achieving certain
performance criteria for the 12 month period commencing 1 January 2023.
During 2023, Essentra reassessed the fair value adjustments and made changes to property,
plant and equipment, inventories and tax. The impact of this on goodwill is a decrease of
£0.5m. The process of allocating the purchase price, including the split between goodwill and
intangible assets and fair value adjustments, has been concluded. Accordingly, the purchase
price allocation presented in these financial statements is now final.
On finalisation of the trading performance over 2023, a reduction in the fair value of deferred
contingent consideration payable was recognised resulting in a credit of £2.2m (2022: £nil)
being recognised in the income statement for the year. Furthermore, a payment of £0.2m in
relation to the resolution of an uncertain tax position was made to the vendor during the year.
As a result, the deferred consideration recognised for Wixroyd at 31 December 2023 was £0.2m
(2022: £2.6m).
Acquisition of Hengzhu
On 2 August 2021, Essentra acquired the trade and assets of Jiangxi Hengzhu Electrical
Cabinet Lock Co., Ltd (“Hengzhu”), an access hardware manufacturer and distributor in
China via a newly incorporated entity, Essentra Hengzhu Precision Components Co Ltd, which
acquired 100% of the business for ¥103m (approximately £11.8m). Essentra had subscribed
and paid up 73% of the issued share capital of Essentra Hengzhu Precision Components Co
Ltd with the remaining 27% stake subject to put and call options exercisable 6 months after
issuance of the subsidiary’s audit report for 2022. The remaining 27% stake did not confer any
shareholder right (including, entitlement to dividends and right to transfer to other parties)
to the vendor shareholder. Therefore, it was concluded that the amount payable under the
put option of £4.7m, as of 31 December 2022, in substance represented deferred
consideration and was accounted for as a financial liability as at 31 December 2022. No non-
controlling interest was recognised in respect of this acquisition. During the year ended 31
December 2023, the remaining amount due under the put option was paid in full leaving a
balance of £nil (2022: £4.7m) in respect of deferred consideration relating to this acquisition.
Acquisition of Micro Plastics
On 12 December 2017, Essentra acquired 100% of the share capital of Micro Plastics, Inc.
The transaction was settled with cash consideration of £19.7m and deferred consideration
of £3.7m, of which £1.2m (31 December 2022: £1.3m) remains payable to the vendor.
24. Discontinued operations
Disposal of Packaging and Filters businesses
On 1 October 2022, the Group completed its sale of ESNT Packaging & Securing Solutions
Limited and Essentra Packaging US Inc and their respective subsidiary companies (together
the ‘Packaging business’). On 3 December 2022, the Group also completed the sale of
Essentra Filter Holdings Limited and its respective subsidiary companies (the ‘Filters
business’). Financial information relating to these discontinued operations is set out below.
On 28 September 2022, the Group also completed the sale of its Packaging business in India
for cash consideration of £1.1m.
Income statement analysis of discontinued operations
Total discontinued operations
Revenue
Operating loss1
Finance income
Finance expense
Loss before tax on discontinued activities
Loss before tax on disposal2
Total loss before tax on discontinued operations
Income tax credit
Total loss for the year from discontinued operations
2023
£m
–
(0.4)
–
–
(0.4)
(3.7)
(4.1)
3.7
(0.4)
2022
£m
653.9
(137.1)
1.5
(2.1)
(137.7)
(19.0)
(156.7)
4.0
(152.7)
Notes:
1 For the year ended 31 December 2023 the operating loss from discontinued operations includes gross income of £5.5m and costs of £5.9m.
2 For the year ended 31 December 2023, the loss on disposal of discontinued operations includes a charge of £3.7m based upon the Group‘s
latest estimate of amounts due to the respective purchasers of the Packaging and Filters businesses. For the year ended 31 December 2022
refer to page 180 of the 2022 Essentra plc Annual Report for the calculation of the loss on disposal of discontinued operations of £19.0m.
The results from discontinued operations are attributable entirely to the equity holders of
Essentra plc. The results for the year ended 31 December 2023 include profit after tax
attributable to non-controlling interests of £nil (2022: £4.2m). The earnings per share of
discontinued operations are disclosed in note 6.
Cash flows of discontinued operations
Total discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash (outflow)/inflow from investing activities1
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
2023
£m
(3.8)
(17.8)
–
(21.6)
2022
£m
59.7
358.8
(10.3)
408.2
Notes:
1
Included within investing activities in 2023 is £5.3m for settlement of deferred consideration on the disposal of the Packaging business and
£12.5m (2022: £31.5m) on cash outflow from costs of business disposal. In 2022, proceeds from the disposal of businesses of £462.6m, net
of cash disposed of £45.7m was £416.9m.
25. Dividends
26. Related parties
2022 interim: paid 28 October 2022
2022 special dividend: paid 27 April 20231
2022 proposed final: paid 30 June 2023
2023 interim: paid 27 October 2023
2023 proposed final: payable 5 July 20242
Per share
2022
p
2.3
29.8
1.0
2023
p
1.2
2.4
2023
£m
3.5
7.0
Total
2022
£m
6.9
89.8
3.0
1 The special dividend paid on 27 April 2023 amounted to £89.8m, and therefore this figure has been re-presented.
2 Subject to approval at the Annual General Meeting on 23 May 2024, the proposed final dividend for the year ended 31 December 2023 will
be paid on 5 July 2024 to shareholders on the register of the Company on 17 May 2024. The ordinary shares will be quoted ex-dividend on
Notes:
16 May 2024.
During the year, the Company paid £47,937, and granted 6,364 SAYE share options to the
wife of Scott Fawcett, CEO of Essentra plc, in respect of her employment by the Group.
Scott’s wife was employed by the Group prior to his appointment as a director of Essentra plc
on 1 January 2023.
ITC Essentra Limited was 50% owned by the Group until its disposal on 3 December 2022.
Until that date, its results were fully consolidated within the Group’s results as it was deemed
Essentra had control up to the date of disposal by virtue of its having control of the board.
At the date of disposal, the entity had gross assets of £34.0m and gross liabilities of £14.6m.
Operating profit for the period to disposal was £6.9m and cash decreased by £0.5m.
China Tobacco Essentra (Xiamen) Filters Co., Ltd was 49% owned by the Group until its
disposal on 3 December 2022. Until that date, its results were fully consolidated within the
Group’s results as it was deemed Essentra had control up to the date of disposal by virtue of
its having control of the board. As the date of disposal, the entity had gross assets of £30.0m
and gross liabilities of £12.7m. Operating profit for the period to disposal was £2.4m and cash
decreased by £0.9m.
For the Group’s basis of consolidation policy, see note b within Accounting Policies.
202
202
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
203
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Acquisitions continued
Acquisition of Wixroyd Group
24. Discontinued operations
Disposal of Packaging and Filters businesses
On 1 December 2022, Essentra acquired 100% of the equity interests of Wixroyd Holdings
On 1 October 2022, the Group completed its sale of ESNT Packaging & Securing Solutions
Limited (the "Wixroyd Group"), a leading UK supplier of industrial parts for the engineering
Limited and Essentra Packaging US Inc and their respective subsidiary companies (together
sector for an initial consideration of £31.4m. The consideration payable for the Wixroyd Group
the ‘Packaging business’). On 3 December 2022, the Group also completed the sale of
comprised an initial cash consideration of £31.4m and up to £7.0m deferred contingent
Essentra Filter Holdings Limited and its respective subsidiary companies (the ‘Filters
consideration. The deferred earn-out consideration was conditional on achieving certain
business’). Financial information relating to these discontinued operations is set out below.
performance criteria for the 12 month period commencing 1 January 2023.
On 28 September 2022, the Group also completed the sale of its Packaging business in India
During 2023, Essentra reassessed the fair value adjustments and made changes to property,
plant and equipment, inventories and tax. The impact of this on goodwill is a decrease of
Income statement analysis of discontinued operations
for cash consideration of £1.1m.
£0.5m. The process of allocating the purchase price, including the split between goodwill and
intangible assets and fair value adjustments, has been concluded. Accordingly, the purchase
Total discontinued operations
price allocation presented in these financial statements is now final.
25. Dividends
2022 interim: paid 28 October 2022
2022 special dividend: paid 27 April 20231
2022 proposed final: paid 30 June 2023
2023 interim: paid 27 October 2023
2023 proposed final: payable 5 July 20242
Per share
2022
p
2.3
29.8
1.0
2023
p
1.2
2.4
2023
£m
3.5
7.0
Total
2022
£m
6.9
89.8
3.0
Notes:
1 The special dividend paid on 27 April 2023 amounted to £89.8m, and therefore this figure has been re-presented.
2 Subject to approval at the Annual General Meeting on 23 May 2024, the proposed final dividend for the year ended 31 December 2023 will
be paid on 5 July 2024 to shareholders on the register of the Company on 17 May 2024. The ordinary shares will be quoted ex-dividend on
16 May 2024.
DIRECTORS’
REPORT
26. Related parties
During the year, the Company paid £47,937, and granted 6,364 SAYE share options to the
wife of Scott Fawcett, CEO of Essentra plc, in respect of her employment by the Group.
Scott’s wife was employed by the Group prior to his appointment as a director of Essentra plc
on 1 January 2023.
ITC Essentra Limited was 50% owned by the Group until its disposal on 3 December 2022.
Until that date, its results were fully consolidated within the Group’s results as it was deemed
Essentra had control up to the date of disposal by virtue of its having control of the board.
At the date of disposal, the entity had gross assets of £34.0m and gross liabilities of £14.6m.
Operating profit for the period to disposal was £6.9m and cash decreased by £0.5m.
China Tobacco Essentra (Xiamen) Filters Co., Ltd was 49% owned by the Group until its
disposal on 3 December 2022. Until that date, its results were fully consolidated within the
Group’s results as it was deemed Essentra had control up to the date of disposal by virtue of
its having control of the board. As the date of disposal, the entity had gross assets of £30.0m
and gross liabilities of £12.7m. Operating profit for the period to disposal was £2.4m and cash
decreased by £0.9m.
For the Group’s basis of consolidation policy, see note b within Accounting Policies.
On finalisation of the trading performance over 2023, a reduction in the fair value of deferred
contingent consideration payable was recognised resulting in a credit of £2.2m (2022: £nil)
being recognised in the income statement for the year. Furthermore, a payment of £0.2m in
relation to the resolution of an uncertain tax position was made to the vendor during the year.
As a result, the deferred consideration recognised for Wixroyd at 31 December 2023 was £0.2m
(2022: £2.6m).
Acquisition of Hengzhu
On 2 August 2021, Essentra acquired the trade and assets of Jiangxi Hengzhu Electrical
Cabinet Lock Co., Ltd (“Hengzhu”), an access hardware manufacturer and distributor in
Notes:
China via a newly incorporated entity, Essentra Hengzhu Precision Components Co Ltd, which
acquired 100% of the business for ¥103m (approximately £11.8m). Essentra had subscribed
and paid up 73% of the issued share capital of Essentra Hengzhu Precision Components Co
Ltd with the remaining 27% stake subject to put and call options exercisable 6 months after
issuance of the subsidiary’s audit report for 2022. The remaining 27% stake did not confer any
shareholder right (including, entitlement to dividends and right to transfer to other parties)
to the vendor shareholder. Therefore, it was concluded that the amount payable under the
put option of £4.7m, as of 31 December 2022, in substance represented deferred
consideration and was accounted for as a financial liability as at 31 December 2022. No non-
controlling interest was recognised in respect of this acquisition. During the year ended 31
December 2023, the remaining amount due under the put option was paid in full leaving a
Total discontinued operations
balance of £nil (2022: £4.7m) in respect of deferred consideration relating to this acquisition.
Acquisition of Micro Plastics
On 12 December 2017, Essentra acquired 100% of the share capital of Micro Plastics, Inc.
The transaction was settled with cash consideration of £19.7m and deferred consideration
of £3.7m, of which £1.2m (31 December 2022: £1.3m) remains payable to the vendor.
Notes:
Revenue
Operating loss1
Finance income
Finance expense
Loss before tax on discontinued activities
Loss before tax on disposal2
Total loss before tax on discontinued operations
Income tax credit
Total loss for the year from discontinued operations
2023
£m
(0.4)
–
–
–
(0.4)
(3.7)
(4.1)
3.7
(0.4)
2022
£m
653.9
(137.1)
1.5
(2.1)
(137.7)
(19.0)
(156.7)
4.0
(152.7)
1 For the year ended 31 December 2023 the operating loss from discontinued operations includes gross income of £5.5m and costs of £5.9m.
2 For the year ended 31 December 2023, the loss on disposal of discontinued operations includes a charge of £3.7m based upon the Group‘s
latest estimate of amounts due to the respective purchasers of the Packaging and Filters businesses. For the year ended 31 December 2022
refer to page 180 of the 2022 Essentra plc Annual Report for the calculation of the loss on disposal of discontinued operations of £19.0m.
The results from discontinued operations are attributable entirely to the equity holders of
Essentra plc. The results for the year ended 31 December 2023 include profit after tax
attributable to non-controlling interests of £nil (2022: £4.2m). The earnings per share of
discontinued operations are disclosed in note 6.
Cash flows of discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash (outflow)/inflow from investing activities1
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
2023
£m
(3.8)
(17.8)
–
(21.6)
2022
£m
59.7
358.8
(10.3)
408.2
1
Included within investing activities in 2023 is £5.3m for settlement of deferred consideration on the disposal of the Packaging business and
£12.5m (2022: £31.5m) on cash outflow from costs of business disposal. In 2022, proceeds from the disposal of businesses of £462.6m, net
of cash disposed of £45.7m was £416.9m.
202
ESSENTRA PLC ANNUAL REPORT 2023
203
ESSENTRA PLC ANNUAL REPORT 2023
203
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. Adjusted performance measures
The Group presents alternative performance measures, including adjusted operating profit,
adjusted operating profit after allocation of central costs, adjusted operating cash flow
and adjusted earnings per share, which are not defined or specified in accordance with UK
adopted International Financial Reporting Standards. These non-GAAP measures enable
management to reflect the underlying performance of the continuing operations of the
Group and provides investors with a more meaningful comparison of how the business is
managed and measured on a periodic basis. For further information on alternative
performance measures applied by the Group, refer to pages 19 and 20.
The adjusted performance measures presented below cannot be derived directly from the
Group’s consolidated financial statements, and therefore a reconciliation of the adjusted
performance measure to the most directly comparable reported measure in accordance
with UK adopted International Financial Reporting Standards has been provided.
Reconciliation to the Group‘s adjusted profit measures
Continuing operations
Operating profit/(loss)
Reported statutory measure
Amortisation of acquired intangible assets Note 2
Adjusting items
Note 2
Adjusted operating profit
Adjusted performance measure
Finance income
Finance expenses
Note 3
Note 3
Adjusted profit before income tax
Adjusted performance measure
Tax on adjusted profit
Adjusted net income
Adjusted performance measure
2023
£m
10.9
11.3
21.0
43.2
11.0
2022
£m
(11.3)
10.4
26.0
25.1
7.1
(13.5)
(24.9)
40.7
(9.6)
31.1
7.3
(1.6)
5.7
Reconciliation of reported statutory measures to the Group‘s segment analysis
EMEA
£m
Americas
£m
APAC
£m
Unallocated
operating
expenses
£m
Central
corporate
costs
£m
Continuing
operations
£m
Discontinued
operations3
£m
Total
£m
EMEA
£m
Americas
£m
APAC
£m
Unallocated
operating
expenses2
£m
Central
corporate
costs
£m
Continuing
operations
£m
Discontinued
operations3
£m
2023
20221
Total
£m
Operating profit/(loss)
Reported statutory measure
50.7
12.5 (1.7)
(39.0)
(11.6)
Adjusting items
Note 2
(0.8)
1.5 3.4
16.9
4.0
5.5
1.8
–
10.9
21.0
11.3
(0.4) 10.5 47.3
18.9
3.9
(58.3)
(23.1)
(11.3)
(137.1) (148.4)
– 21.0
1.4
0.5
–
24.1
–
11.3
2.6
5.9
1.9
–
–
–
26.0
–
26.0
10.4
189.2
199.6
Net cash inflow from operating activities
Reported statutory measure
–
–
Amortisation of acquired
intangible assets
Adjusted operating
profit/(loss)
Adjusted performance
measure
53.9
19.5 3.5
(22.1)
(11.6)
43.2
(0.4) 42.8
51.3
25.3
5.8
(34.2)
(23.1)
25.1
52.1
77.2
Notes:
1 Following the disposal of the Packaging and Filters businesses during the year ended 31 December 2022, the Group has changed its segment analysis from a divisional to a geographical basis, and therefore this note has been re-presented.
2
3 Discontinued operations includes £nil (2022: £6.5m) of intangible amortisation and £nil (2022: £182.7m) relating to impairments.
Includes £13.7m of operating expenses that were allocated previously to discontinued operations.
204
204
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
205
27. Adjusted performance measures continued
Net (debt)/funding surplus
Net (debt)/funding surplus is defined as cash and cash equivalents (including short-term
liquid investments) and derivatives against hedging placement loans, net of lease liabilities
Adjusting operating profit from continuing
and interest bearing loans and borrowings. It is a measure that provides additional
operations
Adjusted performance measure
43.2
information on the Group’s financial position.
Cash and cash equivalents
Reported statutory measure
421.4
Share option expense
Note 5
Debt liabilities
Lease liabilities
Derivative financial instruments hedging
placement loans
Note 14
Note 19
Note 15
Depreciation of property, plant and equipment Note 2
Lease right-of-use asset depreciation
Note 2
Amortisation of non-acquired intangible assets Note 2
2023
£m
59.7
2022
£m
(95.5)
(293.0)
Other non-cash items1
(30.9)
(22.9)
Working capital movements
Net capital expenditure
4.2
8.3
Adjusted operating cash inflow from
Net (debt)/funding surplus
Adjusted performance measure
(62.5)
113.8
continuing operations
Adjusted performance measure
48.2
20.2
Reconciliation to the Group‘s adjusted operating cash flow measure
Adjusted operating cash flow from continuing operations is presented to exclude the impact
of tax, adjusting items, interest and other items not impacting operating profit. Net capital
expenditure is included in this measure as management regards investment in operational
assets (tangible and intangible) as integral to the underlying cash generation capability of
the Group, except amounts relating to adjusting items.
Reconciliation of cash flows from adjusting
items:
Adjusting items
Non-cash expenses/credits in adjusting items2 Note 2
Cash adjustment for pension contributions
Note 2
Cash outflow on adjusting items recognised
Note 2
Adjusted for: net cash inflow/(outflow) from
discontinued operations
Note 24
Operating net cash inflow from continuing
activities
Cash outflow from adjusting items
Note 2
Net tax paid on continuing operations
Net capex expenditure on continuing operations Note 1
Adjusted operating cash inflow from
continuing operations
Adjusted performance measure
48.2
20.2
2023
£m
29.5
2022
£m
64.0
in the year
and provisions
Utilisation of prior year end acquired accruals
Note 2,17
Adjusted performance measure
17.0
24.0
Cash outflow from adjusting items
Adjusted performance measure
1 Other non-cash items comprise impairment of fixed assets £nil (2022: £0.5m), outflow from hedging activities and other movements
£0.5m (2022: £1.1m outflow), movement in provisions £nil (2022: £0.1m) less movement due to hyperinflation £nil (2022 £3.2m).
2 Non-cash expenses/credits in adjusting items includes £3.7m (2022: £nil) investment property impairment, £3.4m (2022: £nil) impairment
of non-current assets following impairment review less £1.3m (2022: add £2.0m) other non-cash movements in adjusting items.
3.8
(59.7)
Notes:
33.3
23.6
4.5
4.3
23.7
5.0
(13.2)
(12.8)
2023
£m
11.1
5.9
2.9
1.4
2022
£m
25.1
13.9
5.6
2.7
1.4
(0.5)
(2.6)
(13.2)
(1.5)
(14.2)
(12.8)
21.0
(5.9)
1.9
26.0
(2.0)
–
6.6
23.6
(0.3)
23.7
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. Adjusted performance measures continued
Net (debt)/funding surplus
Net (debt)/funding surplus is defined as cash and cash equivalents (including short-term
liquid investments) and derivatives against hedging placement loans, net of lease liabilities
and interest bearing loans and borrowings. It is a measure that provides additional
information on the Group’s financial position.
DIRECTORS’
REPORT
2023
£m
Adjusting operating profit from continuing
operations
Adjusted performance measure
43.2
(13.5)
(24.9)
Cash and cash equivalents
Reported statutory measure
Debt liabilities
Lease liabilities
Derivative financial instruments hedging
placement loans
Note 14
Note 19
Note 15
2023
£m
59.7
2022
£m
421.4
(95.5)
(293.0)
Depreciation of property, plant and equipment Note 2
Lease right-of-use asset depreciation
Note 2
Amortisation of non-acquired intangible assets Note 2
Share option expense
Other non-cash items1
Note 5
(30.9)
(22.9)
Working capital movements
4.2
8.3
Net capital expenditure
Adjusted operating cash inflow from
continuing operations
Net (debt)/funding surplus
Adjusted performance measure
(62.5)
113.8
Adjusted performance measure
48.2
20.2
27. Adjusted performance measures
Reconciliation to the Group‘s adjusted profit measures
The Group presents alternative performance measures, including adjusted operating profit,
adjusted operating profit after allocation of central costs, adjusted operating cash flow
Continuing operations
and adjusted earnings per share, which are not defined or specified in accordance with UK
Operating profit/(loss)
Reported statutory measure
adopted International Financial Reporting Standards. These non-GAAP measures enable
management to reflect the underlying performance of the continuing operations of the
Group and provides investors with a more meaningful comparison of how the business is
managed and measured on a periodic basis. For further information on alternative
performance measures applied by the Group, refer to pages 19 and 20.
The adjusted performance measures presented below cannot be derived directly from the
Group’s consolidated financial statements, and therefore a reconciliation of the adjusted
performance measure to the most directly comparable reported measure in accordance
with UK adopted International Financial Reporting Standards has been provided.
Adjusting items
Finance income
Finance expenses
Tax on adjusted profit
Adjusted net income
Amortisation of acquired intangible assets Note 2
Adjusted operating profit
Adjusted performance measure
Note 2
Note 3
Note 3
Adjusted profit before income tax
Adjusted performance measure
Adjusted performance measure
2023
£m
10.9
11.3
21.0
43.2
11.0
40.7
(9.6)
31.1
Reconciliation of reported statutory measures to the Group‘s segment analysis
Operating profit/(loss)
Reported statutory measure
50.7
12.5 (1.7)
(39.0)
(11.6)
(0.4) 10.5 47.3
18.9
3.9
(58.3)
(23.1)
(11.3)
(137.1) (148.4)
Adjusting items
Note 2
(0.8)
1.5 3.4
16.9
– 21.0
1.4
0.5
–
24.1
26.0
–
26.0
Unallocated
Central
operating
corporate
Continuing
Discontinued
2023
EMEA
Americas
APAC
expenses
costs
operations
£m
£m
£m
£m
£m
operations3
£m
Total
£m
EMEA
Americas
APAC
£m
£m
£m
Unallocated
Central
operating
expenses2
corporate
Continuing
Discontinued
costs
operations
operations3
£m
£m
£m
£m
£m
10.9
21.0
11.3
–
–
–
–
profit/(loss)
measure
53.9
19.5 3.5
(22.1)
(11.6)
43.2
(0.4) 42.8
51.3
25.3
5.8
(34.2)
(23.1)
25.1
52.1
77.2
Amortisation of acquired
intangible assets
Adjusted operating
Adjusted performance
Notes:
1 Following the disposal of the Packaging and Filters businesses during the year ended 31 December 2022, the Group has changed its segment analysis from a divisional to a geographical basis, and therefore this note has been re-presented.
2
Includes £13.7m of operating expenses that were allocated previously to discontinued operations.
3 Discontinued operations includes £nil (2022: £6.5m) of intangible amortisation and £nil (2022: £182.7m) relating to impairments.
2022
£m
(11.3)
10.4
26.0
25.1
7.1
7.3
(1.6)
5.7
20221
Total
£m
Reconciliation to the Group‘s adjusted operating cash flow measure
Adjusted operating cash flow from continuing operations is presented to exclude the impact
of tax, adjusting items, interest and other items not impacting operating profit. Net capital
expenditure is included in this measure as management regards investment in operational
assets (tangible and intangible) as integral to the underlying cash generation capability of
the Group, except amounts relating to adjusting items.
Reconciliation of cash flows from adjusting
items:
Adjusting items
Note 2
Non-cash expenses/credits in adjusting items2 Note 2
Cash adjustment for pension contributions
Note 2
21.0
(5.9)
1.9
26.0
(2.0)
–
4.0
5.5
1.8
–
–
11.3
2.6
5.9
1.9
–
10.4
189.2
199.6
Net cash inflow from operating activities
Reported statutory measure
Adjusted for: net cash inflow/(outflow) from
discontinued operations
Note 24
Operating net cash inflow from continuing
activities
Cash outflow from adjusting items
Note 2
Net tax paid on continuing operations
Net capex expenditure on continuing operations Note 1
Cash outflow on adjusting items recognised
in the year
Adjusted performance measure
17.0
24.0
Utilisation of prior year end acquired accruals
and provisions
Note 2,17
Cash outflow from adjusting items
Adjusted performance measure
6.6
23.6
(0.3)
23.7
Notes:
1 Other non-cash items comprise impairment of fixed assets £nil (2022: £0.5m), outflow from hedging activities and other movements
£0.5m (2022: £1.1m outflow), movement in provisions £nil (2022: £0.1m) less movement due to hyperinflation £nil (2022 £3.2m).
2 Non-cash expenses/credits in adjusting items includes £3.7m (2022: £nil) investment property impairment, £3.4m (2022: £nil) impairment
of non-current assets following impairment review less £1.3m (2022: add £2.0m) other non-cash movements in adjusting items.
2023
£m
29.5
2022
£m
64.0
3.8
(59.7)
33.3
23.6
4.5
4.3
23.7
5.0
(13.2)
(12.8)
Adjusted operating cash inflow from
continuing operations
Adjusted performance measure
48.2
20.2
204
ESSENTRA PLC ANNUAL REPORT 2023
205
ESSENTRA PLC ANNUAL REPORT 2023
205
2022
£m
25.1
13.9
5.6
2.7
1.4
11.1
5.9
2.9
1.4
(0.5)
(2.6)
(13.2)
(1.5)
(14.2)
(12.8)
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC COMPANY BALANCE SHEET
ESSENTRA PLC COMPANY BALANCE SHEET
Essentra plc Company Balance Sheet
At 31 December 2023
Fixed assets
Investment in subsidiary undertaking
Current assets
Debtors
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Non-current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Issued share capital
Merger reserve
Capital redemption reserve
Profit and loss account
Total shareholders‘ funds
The loss attributable to the equity holders included in the financial statements of the Company is £38.7m (2022: £0.1m profit).
The Company Financial Statements on pages 206 to 215 were approved by the Board of Directors on 18 March 2024 and were signed on its behalf by:
Scott Fawcett
Chief Executive
Jack Clarke
Chief Financial Officer
DIRECTORS’
REPORT
ESSENTRA PLC COMPANY STATEMENT OF CHANGES IN EQUITY
Essentra plc Company Statement of Changes in Equity
For the year ended 31 December 2023
1 January 2023
Loss for year
Total comprehensive loss for
the year
Share-based payments
Shares issued to satisfy employee
share option exercises
Purchase of own shares
Cancellation of shares
Reduction of capital
Dividends paid
31 December 2023
Issued
share
capital
£m
75.6
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Own
shares
£m
Total
equity
£m
(5.5)
687.9
1 January 2022
(38.7)
Profit for year
Profit and loss account
Retained
earnings
£m
232.5
(38.7)
(38.7)
1.4
Total comprehensive income for
(38.7)
the year
1.4
Share-based payments
Shares issued to satisfy employee
(3.4)
3.4
share option exercises
–
(24.0)
(24.0)
Dividends paid
–
–
–
–
–
–
–
–
(96.3)
(385.2)
385.2
(96.3)
73.3
2.4
464.7
(10.1)
530.3
Issued
share
capital
£m
75.6
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
0.1
–
–
–
–
–
–
–
–
–
–
Profit and loss account
Retained
earnings
£m
250.1
0.1
0.1
3.1
(1.8)
(19.0)
–
–
–
–
–
Own
shares
£m
Total
equity
£m
(7.3)
703.7
–
–
–
1.8
–
0.1
0.1
3.1
–
(19.0)
(2.3)
2.3
(16.0)
16.0
31 December 2022
75.6
385.2
0.1
232.5
(5.5)
687.9
Note
2023
£m
2022
£m
3
4
5
426.1
469.7
185.8
515.0
(1.3)
(211.8)
184.5
303.2
6,7
(80.3)
(85.0)
530.3
687.9
8
9
8
9
73.3
–
2.4
454.6
530.3
75.6
385.2
0.1
227.0
687.9
206
206
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
207
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC COMPANY BALANCE SHEET
Essentra plc Company Balance Sheet
At 31 December 2023
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 reserve
Capital redemption reserve
Profit and loss account
Total shareholders‘ funds
Note
2023
£m
2022
£m
3
4
5
8
9
8
9
426.1
469.7
185.8
515.0
(1.3)
(211.8)
184.5
303.2
530.3
687.9
73.3
–
2.4
454.6
530.3
75.6
385.2
0.1
227.0
687.9
Creditors: amounts falling due after more than one year
6,7
(80.3)
(85.0)
The loss attributable to the equity holders included in the financial statements of the Company is £38.7m (2022: £0.1m profit).
The Company Financial Statements on pages 206 to 215 were approved by the Board of Directors on 18 March 2024 and were signed on its behalf by:
Scott Fawcett
Chief Executive
Jack Clarke
Chief Financial Officer
ESSENTRA PLC COMPANY STATEMENT OF CHANGES IN EQUITY
ESSENTRA PLC COMPANY STATEMENT OF CHANGES IN EQUITY
Essentra plc Company Statement of Changes in Equity
For the year ended 31 December 2023
DIRECTORS’
REPORT
1 January 2023
Loss for year
Total comprehensive loss for
the year
Share-based payments
Shares issued to satisfy employee
share option exercises
Purchase of own shares
Cancellation of shares
Reduction of capital
Dividends paid
31 December 2023
Issued
share
capital
£m
75.6
Merger
reserve
£m
385.2
–
–
–
–
–
(2.3)
–
–
73.3
–
–
–
–
–
–
(385.2)
–
–
Profit and loss account
Capital
redemption
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
equity
£m
0.1
232.5
(5.5)
687.9
1 January 2022
–
–
–
–
–
(38.7)
(38.7)
1.4
–
–
–
(38.7)
Profit for year
(38.7)
Total comprehensive income for
the year
1.4
Share-based payments
(3.4)
3.4
–
Shares issued to satisfy employee
share option exercises
–
(24.0)
(24.0)
Dividends paid
Profit and loss account
Issued
share
capital
£m
75.6
Merger
reserve
£m
385.2
Capital
redemption
reserve
£m
Retained
earnings
£m
Own
shares
£m
Total
equity
£m
0.1
250.1
(7.3)
703.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
0.1
3.1
(1.8)
(19.0)
–
–
–
1.8
–
0.1
0.1
3.1
–
(19.0)
2.3
(16.0)
16.0
–
–
385.2
(96.3)
–
–
–
–
(96.3)
2.4
464.7
(10.1)
530.3
31 December 2022
75.6
385.2
0.1
232.5
(5.5)
687.9
206
ESSENTRA PLC ANNUAL REPORT 2023
207
ESSENTRA PLC ANNUAL REPORT 2023
207
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Basis of preparation and principal accounting policies
Notes to the Company Financial Statements
1.
(a) Basis of preparation
Essentra plc (the “Company”) 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 using the historical cost convention in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101)
and the Companies Act 2006. The Company financial statements have been prepared on
a going concern basis for the reasons set out on pages 156 and 157 to the consolidated
financial statements.
The profit and loss account of the Company is not presented as permitted by Section 408
of the Companies Act 2006.
In the preparation of these financial statements, the Company has applied the following
disclosure exemptions available under FRS 101, which the Company intends to maintain
in future years:
• the requirements of paragraph 45(b) and 46-52 of IFRS 2 Share-Based Payments;
• 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.
The results of the Company are included in the Group’s consolidated financial statements.
Where required, equivalent disclosures are given in the consolidated financial statements.
There are no new and mandatory effective standards in the year that would have a material
impact on the financial statements.
(b) Principal accounting policies
The following principal accounting policies have been consistently applied.
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.
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.
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.
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.
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.
1.
Basis of preparation and principal accounting policies continued
Critical Accounting Judgements and Estimates
Financial assets
The preparation of the financial statements for the Company requires the Directors and
Non-derivative financial assets with fixed or determinable payments that are not quoted in
management to make judgements and estimates in respect of certain items where the
an active market are included in current assets, except for those with maturities greater than
choice of accounting policy and assumptions applied in determining the judgement or
12 months after the end of the reporting period which are classified as non-current assets.
estimate could materially affect the Company’s financial position, results, or cash flows
The Company’s financial assets at amortised cost comprise receivables in the balance sheet.
at the reporting date.
Receivables are recognised initially at fair value and subsequently measured at amortised
No critical accounting judgements were required. The Company’s critical accounting
cost using the effective interest method, less provision for impairment. Interest income is
estimates are detailed below:
recognised accordingly using the effective interest method.
Financial liabilities
Investment in subsidiary undertaking
Investment in subsidiary undertakings are required to be assessed for indications of
Interest bearing loans and borrowings and other financial liabilities (excluding derivatives) are
impairment and where indications have been identified the recoverability may need to be
initially recognised at fair value net of transaction costs incurred. They are subsequently held
determined through the subsidiary’s underlying cash flows. The methods used to determine
at amortised cost using the effective interest method. Any difference between the proceeds,
require the use of estimates and judgements such as customer attrition, cash flow
net of transaction costs, and the settlement or redemption of borrowings is recognised in
generation from the existing relationships with customers and returns on other assets.
profit or loss over the term of the borrowings.
Future results are impacted by the amortisation periods adopted and changes to the
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
Investment in subsidiary undertaking are tested annually for impairment, along with the
estimated useful lives.
recognised in the profit and loss account of the Company.
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.
other assets within the Company such as receivables in subsidiary undertakings. 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 assessing fair value of the
investments when allocating an impairment loss. The Company performs various sensitivity
analyses in respect of the tests for impairment, as detailed in note 3 to Essentra plc
Company accounts. The investment in subsidiary is then reviewed following the tests for
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
impairment annually.
adjustment to tax payable in prior years.
2. Net operating charges
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.
The auditor was paid £6,000 (2022: £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 122 to 132. The only employees of the
Company are the eight Directors and Company Secretary.
208
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ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
209
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
DIRECTORS’
REPORT
Essentra plc (the “Company”) is a public limited company that is incorporated, domiciled
Where required, equivalent disclosures are given in the consolidated financial statements.
The results of the Company are included in the Group’s consolidated financial statements.
Notes to the Company Financial Statements
1.
Basis of preparation and principal accounting policies
(a) Basis of preparation
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 using the historical cost convention in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101)
and the Companies Act 2006. The Company financial statements have been prepared on
a going concern basis for the reasons set out on pages 156 and 157 to the consolidated
financial statements.
of the Companies Act 2006.
The profit and loss account of the Company is not presented as permitted by Section 408
has been impaired.
In the preparation of these financial statements, the Company has applied the following
disclosure exemptions available under FRS 101, which the Company intends to maintain
in future years:
• the requirements of paragraph 45(b) and 46-52 of IFRS 2 Share-Based Payments;
• 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;
Own shares
• 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;
Dividends
There are no new and mandatory effective standards in the year that would have a material
impact on the financial statements.
(b) Principal accounting policies
The following principal accounting policies have been consistently applied.
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
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.
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.
• 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;
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)
• the requirements of IAS 7 Statement of Cash Flows;
or paid (interim dividend).
• the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors;
Dividend income is recognised when the right to receive payment is established.
• the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
Foreign currencies
• the requirements in IAS 24 Related Party Disclosures to disclose related party transactions
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date
entered into between two or more members of a group, provided that any subsidiary which
of the transaction. Monetary assets and liabilities denominated in foreign currencies are
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.
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.
Basis of preparation and principal accounting policies continued
1.
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.
Critical Accounting Judgements and Estimates
The preparation of the financial statements for the Company requires the Directors and
management to make judgements and estimates in respect of certain items where the
choice of accounting policy and assumptions applied in determining the judgement or
estimate could materially affect the Company’s financial position, results, or cash flows
at the reporting date.
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.
No critical accounting judgements were required. The Company’s critical accounting
estimates are detailed below:
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.
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.
Investment in subsidiary undertaking
Investment in subsidiary undertakings are required to be assessed for indications of
impairment and where indications have been identified the recoverability may need to be
determined through the subsidiary’s underlying cash flows. The methods used to determine
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.
Investment in subsidiary undertaking are tested annually for impairment, along with the
other assets within the Company such as receivables in subsidiary undertakings. 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 assessing fair value of the
investments when allocating an impairment loss. The Company performs various sensitivity
analyses in respect of the tests for impairment, as detailed in note 3 to Essentra plc
Company accounts. The investment in subsidiary is then reviewed following the tests for
impairment annually.
2. Net operating charges
The auditor was paid £6,000 (2022: £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 122 to 132. The only employees of the
Company are the eight Directors and Company Secretary.
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209
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
3.
Investment in subsidiary undertaking
Beginning of year
Additions
Impairment
End of year
2023
£m
469.7
1.4
(45.0)
426.1
2022
£m
466.6
3.1
–
469.7
Following an impairment assessment of the carrying value of investments, an impairment
charge of £45.0m has been expensed to the profit and loss. Support for the investment
valuation is primarily risk-adjusted cash flows generated from subsidiaries of which
Essentra plc is the ultimate parent Company. The impairment tests for investments are
based on the Board approved business plan (the “Plan”) that has then been risk-adjusted
for impairment testing purposes.
The recoverable amount was determined by performing a value in use calculation. Cash flow
projections are over five years based upon the Group Strategic Plan and have been risk-
adjusted for impairment testing purposes.
The key assumptions in the cash flow projections for the risk-adjusted Plan are set out below.
Average annual growth rate
over five year forecast period
Terminal growth rate
from 2028 onwards
Improvement in average
operating profit over five year
forecast period
Pre-tax
discount rate
Assumption
applied:
6.1%
2.7%
620 bps
16.3%
Operating margin is primarily based upon the historical levels achieved, adjusted by targets
set for revenue expansion and cost control and reduction within the Plan period. 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 estimated cash flows are discounted using a pre-tax
discount rate based upon an estimated pre-tax weighted average cost of capital.
DIRECTORS’
REPORT
NOTES TO THE COMPANY FINANCIAL STATEMENTS
The recoverable amount of the investment is sensitive to reasonably possible changes
in the underlying cash flows and key assumptions. Based upon the assumptions above,
the carrying amount exceeds its recoverable amount, prior to impairment during the year,
by £45.0m. Management considered the following reasonably possible changes in the key
assumptions, and the associated impact on the impairment assessment of Investment
in subsidiary undertaking:
50 bps decrease/(increase) in pre-tax discount rate
100 bps increase/(decrease) in terminal growth rate
100 bps increase/(decrease) in each year‘s growth rate
100 bps increase/(decrease) in operating profit margin in the terminal year
Reduction in
impairment
£m
Additional to
impairment
£m
22.7
27.9
16.1
16.3
(21.0)
(24.1)
(15.5)
(16.3)
4. Debtors
8.
Issued share capital
Amounts receivable from subsidiary undertakings
Issued, authorised and fully paid ordinary shares of 25p (2022: 25p) each:
Receivables due from group companies to the Company are interest free and repayable
on demand. Receivables from group companies have been assessed for impairment in
accordance with IFRS 9 Financial Instruments. As all balances are repayable on demand,
and the Company expects to be able to recover the outstanding intercompany balances if
demanded, no provision has been recognised in the year ended 31 December 2023 (2022: £nil).
5. Creditors: amounts falling due within one year
Cancellation of shares of 9,223,493 shares of 25p each:
Beginning of year
End of year
Number of ordinary shares in issue
Beginning of year
Cancellation of shares
End of year
2023
£m
75.6
(2.3)
73.3
2022
£m
75.6
–
75.6
2023
2022
302,590,708 302,590,708
(9,223,493)
–
293,367,215 302,590,708
2023
£m
185.8
185.8
2022
£m
515.0
515.0
2023
£m
1.3
–
1.3
2023
£m
80.3
80.3
2022
£m
3.8
208.0
211.8
2022
£m
85.0
85.0
2023
£m
2022
£m
–
208.0
25.7
54.9
(0.3)
80.3
–
85.4
(0.4)
293.0
US Private Placement Loan Notes1
Accruals
Notes:
US Private Placement Loan Notes1
1. Refer to note 14 of the consolidated financial statements for details of the US Private Placement Loan Notes.
6. Creditors: amounts falling due after more than one year
Notes:
1 Refer to note 14 of the consolidated financial statements for details of the US Private Placement Loan Notes.
7. Maturity of financial liabilities
Debt analysed as falling due:
Within one year
Between one and five years
More than five years
Less prepaid facility fees
Purchase and cancellation of own shares
During the year 13,364,814 (2022: nil) 25p Ordinary Shares (“shares”) were purchased by the
Company for total cash consideration of £24.0m (2022: £nil) at a weighted average price
of 179.5 pence per share, of which 9,223,493 shares with an aggregate nominal value of
£2.3m were cancelled, and £2.3m transferred from issued share capital to the capital
redemption reserve.
At 31 December 2023, the Company held 5,039,265 (2022: 897,944) of its own shares with
a nominal value of £1.3m (2022: £0.2m) in treasury. This represents 1.7% (2022: 0.3%) of
the number of ordinary shares in issue.
Capital reduction
The capital reduction, comprising the merger reserve, was approved by shareholders at
a General Meeting held on 14 November 2023. In connection with the capitalisation of
the merger reserve, resolutions authorising the Directors to allot one new B ordinary share
(the “Capital Reduction Share”), and to subsequently cancel the Capital Reduction Share
were passed at the General Meeting. On 4 December 2023, the amount of £385,219,535
standing to the credit of the merger reserve of the Company was capitalised and applied
in paying up in full at par one Capital Reduction Share with a nominal value of £385,219,535.
On 14 December 2023, Essentra announced that the capital reduction had become effective
following the confirmation by the Court approval on 5 December 2023 and the registration
of the Court order with the Registrar of Companies on 7 December 2023.
210
210
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
211
ESSENTRA PLC ANNUAL REPORT 2023
The recoverable amount of the investment is sensitive to reasonably possible changes
in the underlying cash flows and key assumptions. Based upon the assumptions above,
the carrying amount exceeds its recoverable amount, prior to impairment during the year,
466.6
by £45.0m. Management considered the following reasonably possible changes in the key
assumptions, and the associated impact on the impairment assessment of Investment
in subsidiary undertaking:
2023
£m
469.7
1.4
(45.0)
426.1
2022
£m
3.1
–
469.7
50 bps decrease/(increase) in pre-tax discount rate
100 bps increase/(decrease) in terminal growth rate
100 bps increase/(decrease) in each year‘s growth rate
100 bps increase/(decrease) in operating profit margin in the terminal year
Reduction in
impairment
Additional to
impairment
£m
22.7
27.9
16.1
16.3
£m
(21.0)
(24.1)
(15.5)
(16.3)
NOTES TO THE COMPANY FINANCIAL STATEMENTS
3.
Investment in subsidiary undertaking
Beginning of year
Additions
Impairment
End of year
Following an impairment assessment of the carrying value of investments, an impairment
charge of £45.0m has been expensed to the profit and loss. Support for the investment
valuation is primarily risk-adjusted cash flows generated from subsidiaries of which
Essentra plc is the ultimate parent Company. The impairment tests for investments are
based on the Board approved business plan (the “Plan”) that has then been risk-adjusted
for impairment testing purposes.
The recoverable amount was determined by performing a value in use calculation. Cash flow
projections are over five years based upon the Group Strategic Plan and have been risk-
adjusted for impairment testing purposes.
The key assumptions in the cash flow projections for the risk-adjusted Plan are set out below.
Average annual growth rate
Terminal growth rate
operating profit over five year
Pre-tax
over five year forecast period
from 2028 onwards
forecast period
discount rate
Improvement in average
Assumption
applied:
6.1%
2.7%
620 bps
16.3%
Operating margin is primarily based upon the historical levels achieved, adjusted by targets
set for revenue expansion and cost control and reduction within the Plan period. 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 estimated cash flows are discounted using a pre-tax
discount rate based upon an estimated pre-tax weighted average cost of capital.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
DIRECTORS’
REPORT
4. Debtors
8.
Issued share capital
Amounts receivable from subsidiary undertakings
2023
£m
185.8
185.8
2022
£m
515.0
515.0
Issued, authorised and fully paid ordinary shares of 25p (2022: 25p) each:
Beginning of year
Cancellation of shares of 9,223,493 shares of 25p each:
Receivables due from group companies to the Company are interest free and repayable
on demand. Receivables from group companies have been assessed for impairment in
accordance with IFRS 9 Financial Instruments. As all balances are repayable on demand,
and the Company expects to be able to recover the outstanding intercompany balances if
demanded, no provision has been recognised in the year ended 31 December 2023 (2022: £nil).
5. Creditors: amounts falling due within one year
End of year
Number of ordinary shares in issue
Beginning of year
Cancellation of shares
End of year
2023
£m
75.6
(2.3)
73.3
2022
£m
75.6
–
75.6
2023
2022
302,590,708 302,590,708
(9,223,493)
–
293,367,215 302,590,708
Accruals
US Private Placement Loan Notes1
Notes:
1. Refer to note 14 of the consolidated financial statements for details of the US Private Placement Loan Notes.
6. Creditors: amounts falling due after more than one year
US Private Placement Loan Notes1
Notes:
1 Refer to note 14 of the consolidated financial statements for details of the US Private Placement Loan Notes.
7. Maturity of financial liabilities
Debt analysed as falling due:
Within one year
Between one and five years
More than five years
Less prepaid facility fees
2023
£m
1.3
–
1.3
2023
£m
80.3
80.3
2022
£m
3.8
208.0
211.8
2022
£m
85.0
85.0
2023
£m
2022
£m
–
208.0
25.7
54.9
(0.3)
80.3
–
85.4
(0.4)
293.0
Purchase and cancellation of own shares
During the year 13,364,814 (2022: nil) 25p Ordinary Shares (“shares”) were purchased by the
Company for total cash consideration of £24.0m (2022: £nil) at a weighted average price
of 179.5 pence per share, of which 9,223,493 shares with an aggregate nominal value of
£2.3m were cancelled, and £2.3m transferred from issued share capital to the capital
redemption reserve.
At 31 December 2023, the Company held 5,039,265 (2022: 897,944) of its own shares with
a nominal value of £1.3m (2022: £0.2m) in treasury. This represents 1.7% (2022: 0.3%) of
the number of ordinary shares in issue.
Capital reduction
The capital reduction, comprising the merger reserve, was approved by shareholders at
a General Meeting held on 14 November 2023. In connection with the capitalisation of
the merger reserve, resolutions authorising the Directors to allot one new B ordinary share
(the “Capital Reduction Share”), and to subsequently cancel the Capital Reduction Share
were passed at the General Meeting. On 4 December 2023, the amount of £385,219,535
standing to the credit of the merger reserve of the Company was capitalised and applied
in paying up in full at par one Capital Reduction Share with a nominal value of £385,219,535.
On 14 December 2023, Essentra announced that the capital reduction had become effective
following the confirmation by the Court approval on 5 December 2023 and the registration
of the Court order with the Registrar of Companies on 7 December 2023.
210
ESSENTRA PLC ANNUAL REPORT 2023
211
ESSENTRA PLC ANNUAL REPORT 2023
211
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
DIRECTORS’
REPORT
NOTES TO THE COMPANY FINANCIAL STATEMENTS
9. Reserves
The merger reserve amounting to £nil (2022: £385.2m) represented the excess of net
proceeds received over the nominal value of shares issued subject to the provisions of s612
of the Companies Act 2006.
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 loss
attributable to equity holders included in the accounts of the Company is £38.7m
(2022: £0.1m).
Included in the profit and loss account are accumulated share-based payments of £54.4m
(2022: £53.0m) which are credited directly to reserves. Full details of these share-based
payments are set out in the Annual Report on Remuneration on pages 127 and 128.
10. Dividends
2022 interim: paid 28 October 2022
2022 special dividend: paid 27 April 20231
2022 proposed final: paid 30 June 2023
2023 interim: paid 27 October 2023
2023 proposed final: payable 5 July 20242
Per share
2022
p
2.3
29.8
1.0
2023
p
1.2
2.4
Total
2022
£m
6.9
89.8
3.0
2023
£m
3.5
7.0
Notes:
1 The special dividend paid on 27 April 2023 amounted to £89.8m, and therefore this figure has been re-presented.
2 Subject to approval at the Annual General Meeting on 23 May 2024, the proposed final dividend for the year ended 31 December 2023 will
be paid on 5 July 2024 to shareholders on the register of the Company on 17 May 2024. The ordinary shares will be quoted ex-dividend on
16 May 2024.
11. Subsidiaries exempt from audit
The following UK subsidiaries will take advantage of the exemption from the requirements
under section 479A of the Companies Act 2006 relating to the audit of financial statements
for the year ended 31 December 2023. Essentra plc has given a parental guarantee in
respect of the debts and liabilities of these subsidiaries under section 479C of the Companies
Act 2006.
Company name
Essentra Components Limited
ESNT Holdings (No.1) Limited
ESNT Holdings (No.2) Limited
ESNT International Limited
Essentra International Limited
Essentra Overseas Limited
Company name
Essentra (Northampton) Ltd
Essentra Services Limited
Wixroyd Holdings Limited
Wixroyd Group Limited
Automation Components Limited
Coburg Components Ltd
Essentra Pension Trustees Limited
Teknipart Limited
Essentra Finance Limited
12. Subsidiary undertakings
The Group’s subsidiaries (including dormant entities) at 31 December 2023, are set out below
and are 100% owned directly or indirectly by the Group unless otherwise indicated. Essentra
International Limited is the only direct subsidiary of Essentra plc. The principal country in
which each company operates is the country of incorporation. All subsidiaries have the same
31 December year end date as the Company.
All subsidiaries have the same year-end as the parent company of 31 December. Essentra
International Limited is the only direct subsidiary of Essentra plc.
212
212
ESSENTRA PLC ANNUAL REPORT 2023
Address of registered office
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
12. Subsidiary undertakings continued
Country of incorporation
Company name
Essentra Components Limited
ESNT Holdings (No.1) Limited
ESNT Holdings (No.2) Limited
ESNT International Limited
Essentra International Limited
Essentra Overseas Limited
Essentra Pension Trustees Limited
Essentra Finance Limited
Essentra (Northampton) Ltd
Essentra Services Limited
Alliance Plastics Limited
Cigarette Components Limited
ESNT Components Limited
Filtrona Custom Moulding Limited
Stera Tape Limited
Wixroyd Holdings Limited
Wixroyd Group Limited
Automation Components Limited
Coburg Components Ltd
Teknipart Limited
Essentra Plastics LLC
Innovative Components, Inc.
Micro Plastics, Inc.
Essentra Components Inc
Essentra Components Japan Inc
ESNT Holdings Inc
ESNT (Porous) Holdings Inc.
ESNT US Holdings Corp
Essentra Corporation
Essentra Holdings Corp. (DE)
US NewCo LLC
ESNT Components Co.
Essentra Components BV
Blue NewCo 1 B.V.
Blue NewCo 2 B.V.
Blue NewCo 3 B.V.
Blue NewCo 4 B.V.
Principal activity
Manufacturing
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Pension Trustee
Treasury activities
Non-trading
Non-trading
Dormant1
Dormant1
Dormant1
Dormant1
Dormant1
Trading
Trading
Trading
Trading
Trading
Manufacturing
Manufacturing
Distribution
Distribution
Distribution
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
US
US
US
US
US
US
US
US
US
US
US
US
Essentra Components Japan Inc – Japanese branch
Japan
18F, Tobu Tateno Building, 2-10-27, Kitasaiwai, Nishi-ku, Yokohama-shi, Japan
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, 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
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
ESSENTRA PLC ANNUAL REPORT 2023
213
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Non-trading
Distribution
Holding Company
Holding Company
Holding Company
Holding Company
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
9. Reserves
The merger reserve amounting to £nil (2022: £385.2m) represented the excess of net
proceeds received over the nominal value of shares issued subject to the provisions of s612
of the Companies Act 2006.
11. Subsidiaries exempt from audit
The following UK subsidiaries will take advantage of the exemption from the requirements
under section 479A of the Companies Act 2006 relating to the audit of financial statements
for the year ended 31 December 2023. Essentra plc has given a parental guarantee in
respect of the debts and liabilities of these subsidiaries under section 479C of the Companies
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 loss
attributable to equity holders included in the accounts of the Company is £38.7m
Act 2006.
Company name
Included in the profit and loss account are accumulated share-based payments of £54.4m
(2022: £53.0m) which are credited directly to reserves. Full details of these share-based
payments are set out in the Annual Report on Remuneration on pages 127 and 128.
(2022: £0.1m).
10. Dividends
Essentra Components Limited
ESNT Holdings (No.1) Limited
ESNT Holdings (No.2) Limited
ESNT International Limited
Essentra International Limited
Essentra Overseas Limited
Essentra Finance Limited
12. Subsidiary undertakings
Essentra Pension Trustees Limited
Teknipart Limited
Company name
Essentra (Northampton) Ltd
Essentra Services Limited
Wixroyd Holdings Limited
Wixroyd Group Limited
Automation Components Limited
Coburg Components Ltd
The Group’s subsidiaries (including dormant entities) at 31 December 2023, are set out below
and are 100% owned directly or indirectly by the Group unless otherwise indicated. Essentra
International Limited is the only direct subsidiary of Essentra plc. The principal country in
which each company operates is the country of incorporation. All subsidiaries have the same
31 December year end date as the Company.
Per share
2022
p
2.3
29.8
1.0
2023
p
1.2
2.4
Total
2022
£m
6.9
89.8
3.0
2023
£m
3.5
7.0
1 The special dividend paid on 27 April 2023 amounted to £89.8m, and therefore this figure has been re-presented.
2 Subject to approval at the Annual General Meeting on 23 May 2024, the proposed final dividend for the year ended 31 December 2023 will
be paid on 5 July 2024 to shareholders on the register of the Company on 17 May 2024. The ordinary shares will be quoted ex-dividend on
All subsidiaries have the same year-end as the parent company of 31 December. Essentra
International Limited is the only direct subsidiary of Essentra plc.
2022 interim: paid 28 October 2022
2022 special dividend: paid 27 April 20231
2022 proposed final: paid 30 June 2023
2023 interim: paid 27 October 2023
2023 proposed final: payable 5 July 20242
Notes:
16 May 2024.
212
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
12. Subsidiary undertakings continued
Company name
Essentra Components Limited
ESNT Holdings (No.1) Limited
ESNT Holdings (No.2) Limited
ESNT International Limited
Essentra International Limited
Essentra Overseas Limited
Essentra Pension Trustees Limited
Essentra Finance Limited
Essentra (Northampton) Ltd
Essentra Services Limited
Alliance Plastics Limited
Cigarette Components Limited
ESNT Components Limited
Filtrona Custom Moulding Limited
Stera Tape Limited
Wixroyd Holdings Limited
Wixroyd Group Limited
Automation Components Limited
Coburg Components Ltd
Teknipart Limited
Essentra Plastics LLC
Innovative Components, Inc.
Micro Plastics, Inc.
Essentra Components Inc
Essentra Components Japan Inc
Country of incorporation
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
US
US
US
US
US
Essentra Components Japan Inc – Japanese branch
Japan
ESNT Holdings Inc
ESNT (Porous) Holdings Inc.
ESNT US Holdings Corp
Essentra Corporation
Essentra Holdings Corp. (DE)
US NewCo LLC
ESNT Components Co.
Essentra Components BV
Blue NewCo 1 B.V.
Blue NewCo 2 B.V.
Blue NewCo 3 B.V.
Blue NewCo 4 B.V.
213
US
US
US
US
US
US
US
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Principal activity
Manufacturing
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Pension Trustee
Treasury activities
Non-trading
Non-trading
Dormant1
Dormant1
Dormant1
Dormant1
Dormant1
Trading
Trading
Trading
Trading
Trading
DIRECTORS’
REPORT
Address of registered office
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Langford Locks, Kidlington, Oxfordshire, OX5 1HX
Manufacturing
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Manufacturing
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Distribution
Distribution
Distribution
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
18F, Tobu Tateno Building, 2-10-27, Kitasaiwai, Nishi-ku, Yokohama-shi, Japan
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Non-trading
Distribution
Holding Company
Holding Company
Holding Company
Holding Company
Two Westbrook Corporate Center, Suite 200, Westchester IL 60154, United States
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
ESSENTRA PLC ANNUAL REPORT 2023
213
ESSENTRA PLC ANNUAL REPORT 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
12. Subsidiary undertakings continued
Company name
ESNT Holdings Cooperatie 1 W.A.
Essentra BV
Essentra International BV/LLC
ESNT Holdings Cooperatie 2 W.A.
Essentra Components GmbH
Essentra Pty Ltd
Essentra Industria E Commercio LTDA
Essentra Limited
Essentra Hengzhu Precision Components Co., Ltd
Essentra Precision Machinery Components (Ningbo) Co. Ltd.
Essentra Trading (Ningbo) Co. Ltd
Essentra Components International Trading (Shanghai) Co Ltd
Essentra Components sro
Essentra Components SAS
Essentra International Gmbh
Essentra Components GmbH
Essentra Components Limited – Branch Germany
Essentra (Hong Kong) Limited
Essentra Components Kft
Essentra (India) Private Limited
Essentra Components (India) Private Limited
ESNT Holdings SpA
Essentra Components srl
Essentra Filter Products Srl
BMP Srl
Abric Encode Sdn Bhd
Country of incorporation
Principal activity
Address of registered office
Company name
Country of incorporation
Address of registered office
DIRECTORS’
REPORT
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Netherlands
Netherlands
Netherlands
Netherlands
Austria
Australia
Brazil
Canada
China
China
China
China
Holding Company
Holding Company
Holding Company
Non-trading
Holding Company
Treasury activities
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Distribution
Holding Company
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Essentra Components Sdn Bhd
Unit 1108, Block A Pusat Dagangan Phileo Damansara 2, 15 Jalan 16/11 Off Jalan
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
22, 5, Augasse, Neunkirchen, 2620, Austria
503-505 Victoria Street, Wetherill Park, NSW, 2145, Australia
Room 7, No 1000 Avenida Emilio Marconato, Centro Comercial, Chacara Primavera,
Jaguariuna, Sao Paulo, 13.916-074, Brazil
400 – 77 King Street, Toronto, Ontario, M5K OA1, Canada
No. 12 Jingfa Avenue, Yichun, Economic and Technological, Development Zone, Yichun
City, Jiangxi Province, China
99 Huanghai Road, Beilun District, Ningbo, Zhejiang Province, China
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
99 Huanghai Road, Beilun District, Ningbo, Zhejiang, China
Cartago-Cartago Parque Industrial Y Zona Franca Zeta, Cartago, Edificios, 48C3 48C4,
Costa Rica
12. Subsidiary undertakings continued
Essentra Components S. de R.L. de C.V.
Essentra Sp. z o.o.
Essentra Components SRL
Essentra Components Products Pte Limited
Essentra Components sro
Essentra Components (Pty) Ltd
ESNT Holdings S.A.U.
Essentra Components S.L.U
Essentra Components AB
Essentra Components Sarl
Essentra Eastern Limited
Ban Lamai Limited
Essentra Components AB – Finland Branch
Principal activity
Non-trading
Manufacturing
Non-trading
Distribution
Non-trading
Distribution
Distribution
Manufacturing
Manufacturing
Non-trading
Damansara, Petaling Jaya, Selangor, 46350, Malaysia
Carretera a Huinala #510, Apodaca, NL 66640, Mexico
104a, Maratońska, Łódź, 04-007, Poland
Burcuresti Sectorul 1, Strada POLANA, Nr. 68-72, Etaj 2, Biroul NR.5, Romania
1 Paya Lebar Link, #04-01, Paya Lebar Quarter, Singapore, 408533, Singapore
Gogol’ova 18,85202 Bratislava, Slovakia
Africa
Barcelona, Spain
Calle Roure Gros 1-11, Poligono Industrial Mas d’En Cisa, 08181, Spain
7, Bäckstensgatan, Mölndal, 431 39, Sweden
2A, Tallbergsgatan, Helsinki 00180, Finland
MCE Avocats, rue du Grand-Chêne 1-3, 1003 LAUSANNE, Switzerland
South Africa
Distribution
71, Tsessebe Crescent, Corporate Park South, Randjisfontein Midrand, GP, 1685, South
Spain
Holding Company
Carrer dels Fusters 18-20, Poligono Industrial Can Cuyas, Montcada I Reixac, 08110,
Non-trading
111/5 Moo 2 Tambon Makamku, Amphur Nikom Pattana, Rayong Province, Thailand
Holding Company
o. 111/5, Moo 2, Makham Khu Sub-district, Nikhom Phatthana District,
Rayong Province, Thailand
Non-trading
31/2 Rama 3 Road, Chongnonsee, Yannawa, Bangkok 10120, Thailand
Distribution
Ilitelli Organzie Sanayi, , Bolgesi Metal Is San,Sit.7.Blok No24 Basaksehir, Istanbul, Turkey
Trading
Trading
Trading
Mimar Sinan Mah. Uluğbey Cad. Ofis İşyeri, Blok No: 5, Silivri, Istanbul, Turkey
Maslak Mahallesi, Bilim Sokak, Sun Plaza Blok No: 5A, İç Kapı No.41 Sarıyer, Istanbul,
Turkey
11, Bis Phan Ngu, Da Kao Ward, District 01, Ho Chi Minh city, Viet Nam
Malaysia
Mexico
Poland
Romania
Singapore
Slovakia
Spain
Sweden
Finland
Switzerland
Thailand
Thailand
Thailand
Thailand
Turkey
Turkey
Turkey
Vietnam
Czech Republic
Holding Company
Vídenská 101/119, Dolní Heršpice, Brno, 619 00, Czech Republic
Essentra Components (Thailand) Limited
Trading
111/5 Moo 2 Tambon Makamku, Amphur Nikom Pattana, Rayong Province, Thailand
France
Germany
Germany
Germany
Hong Kong
Hungary
India
India
Italy
Italy
Italy
Italy
Non-trading
Holding Company
Manufacturing
Distribution
Non-trading
Holding Company
Manufacturing
280 rue de la Belle Étoile, 95700, Roissy, France
Apex Filters Company Limited
3, Montel-Allee, Nettetal, 41334, Germany
Mesan Kilit A.S.
3, Montel-Allee, Nettetal, 41334, Germany
Mesan Kilit Anonim Şirketi Maslak Şubesi – Digital Hub Branch
Montel-Allee 3, 41334 Nettetal, Germany
Mesan Kilit Anonim Şirketi Silivri Şubesi – Branch
1106-8 11F, Tai Yau Building, No. 181 Johnston Road, Wanchai, Hong Kong
1113, Nagyszolos ut 11-15, Budapest, Hungary
Essentra Components Vietnam Limited Liability Company
Brigade Rubix, No. 20, Unit 302, HMT Main Road, Phase-1, Jalahalli, Bengaluru, 560022,
India
Notes:
1 Exempt from requirement to prepare individual accounts by virtue of s448A of Companies Act 2006
Dissolved
30 December 2023
No 3, Main Rd, Phase 1 Yeshwanthpur Hobli, Bengaluru, Bangalore, Karnataka, 560058,
India
Holding Company
Padulle di Sala Bolognese, Via dei Pioppi 2, Bologna, 40010, Italy
Non-trading
Non-trading
Trading
Padulle di Sala Bolognese, Via dei Pioppi 2, Bologna, 40010, Italy
Casoni di Gariga, Via Copernico n. 54, Casoni PC, 29027, Italy
9, Via delle Industrie, Cambiago, 20040, Italy
Essentra Plastic Trading (Ningbo) Co. Ltd
Componentes Innovadores Limitada
China
Holding Company
Costa Rica
Manufacturing
Essentra Malaysia Sdn Bhd
Malaysia
Non-trading
Malaysia
Manufacturing
Unit 1110 Block A, Pusat Dagangan Phileo Damansara II, 15 Jalan 16/11 Off Jalan
Damansara, 46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia
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
214
214
ESSENTRA PLC ANNUAL REPORT 2023
ESSENTRA PLC ANNUAL REPORT 2023
215
ESSENTRA PLC ANNUAL REPORT 2023
Country of incorporation
Principal activity
Address of registered office
Company name
Country of incorporation
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Essentra Components Sdn Bhd
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
Dragonder 3, 5554 GM Valkenswaard, Netherlands
22, 5, Augasse, Neunkirchen, 2620, Austria
503-505 Victoria Street, Wetherill Park, NSW, 2145, Australia
Essentra Components S. de R.L. de C.V.
Essentra Sp. z o.o.
Essentra Components SRL
Essentra Components Products Pte Limited
Essentra Components sro
Jaguariuna, Sao Paulo, 13.916-074, Brazil
Essentra Components (Pty) Ltd
Malaysia
Mexico
Poland
Romania
Singapore
Slovakia
South Africa
Principal activity
Non-trading
Manufacturing
Non-trading
Distribution
Non-trading
Distribution
Distribution
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
12. Subsidiary undertakings continued
Essentra Industria E Commercio LTDA
Manufacturing
Room 7, No 1000 Avenida Emilio Marconato, Centro Comercial, Chacara Primavera,
Essentra Limited
Manufacturing
400 – 77 King Street, Toronto, Ontario, M5K OA1, Canada
Essentra Hengzhu Precision Components Co., Ltd
Manufacturing
No. 12 Jingfa Avenue, Yichun, Economic and Technological, Development Zone, Yichun
City, Jiangxi Province, China
Essentra Precision Machinery Components (Ningbo) Co. Ltd.
Essentra Trading (Ningbo) Co. Ltd
Manufacturing
Distribution
99 Huanghai Road, Beilun District, Ningbo, Zhejiang Province, China
No.99 Huanghai Road, Beilum District, Ningbo, Zhejiang Province, China
Essentra Components International Trading (Shanghai) Co Ltd
Holding Company
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
Componentes Innovadores Limitada
China
Holding Company
99 Huanghai Road, Beilun District, Ningbo, Zhejiang, China
Costa Rica
Manufacturing
Cartago-Cartago Parque Industrial Y Zona Franca Zeta, Cartago, Edificios, 48C3 48C4,
NOTES TO THE COMPANY FINANCIAL STATEMENTS
12. Subsidiary undertakings continued
ESNT Holdings Cooperatie 1 W.A.
Company name
Essentra BV
Essentra International BV/LLC
ESNT Holdings Cooperatie 2 W.A.
Essentra Components GmbH
Essentra Pty Ltd
Essentra Components sro
Essentra Components SAS
Essentra International Gmbh
Essentra Components GmbH
Essentra (Hong Kong) Limited
Essentra Components Kft
Essentra (India) Private Limited
Essentra Components Limited – Branch Germany
ESNT Holdings SpA
Essentra Components srl
Essentra Filter Products Srl
BMP Srl
Abric Encode Sdn Bhd
Netherlands
Netherlands
Netherlands
Netherlands
Austria
Australia
Brazil
Canada
China
China
China
China
France
Germany
Germany
Germany
Hong Kong
Hungary
India
India
Italy
Italy
Italy
Italy
Holding Company
Holding Company
Holding Company
Non-trading
Holding Company
Treasury activities
Non-trading
Holding Company
Manufacturing
Distribution
Non-trading
Holding Company
30 December 2023
Holding Company
Non-trading
Non-trading
Trading
Essentra Components (India) Private Limited
Dissolved
No 3, Main Rd, Phase 1 Yeshwanthpur Hobli, Bengaluru, Bangalore, Karnataka, 560058,
Essentra Malaysia Sdn Bhd
Malaysia
Non-trading
Unit 1110 Block A, Pusat Dagangan Phileo Damansara II, 15 Jalan 16/11 Off Jalan
Malaysia
Manufacturing
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,
Padulle di Sala Bolognese, Via dei Pioppi 2, Bologna, 40010, Italy
Padulle di Sala Bolognese, Via dei Pioppi 2, Bologna, 40010, Italy
Casoni di Gariga, Via Copernico n. 54, Casoni PC, 29027, Italy
9, Via delle Industrie, Cambiago, 20040, Italy
Damansara, 46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia
Perak, Malaysia
ESNT Holdings S.A.U.
Essentra Components S.L.U
Essentra Components AB
Essentra Components AB – Finland Branch
Essentra Components Sarl
Essentra Eastern Limited
Ban Lamai Limited
Czech Republic
Holding Company
Vídenská 101/119, Dolní Heršpice, Brno, 619 00, Czech Republic
Essentra Components (Thailand) Limited
280 rue de la Belle Étoile, 95700, Roissy, France
Apex Filters Company Limited
3, Montel-Allee, Nettetal, 41334, Germany
Mesan Kilit A.S.
3, Montel-Allee, Nettetal, 41334, Germany
Mesan Kilit Anonim Şirketi Maslak Şubesi – Digital Hub Branch
Montel-Allee 3, 41334 Nettetal, Germany
Mesan Kilit Anonim Şirketi Silivri Şubesi – Branch
1106-8 11F, Tai Yau Building, No. 181 Johnston Road, Wanchai, Hong Kong
1113, Nagyszolos ut 11-15, Budapest, Hungary
Essentra Components Vietnam Limited Liability Company
Manufacturing
Brigade Rubix, No. 20, Unit 302, HMT Main Road, Phase-1, Jalahalli, Bengaluru, 560022,
Notes:
1 Exempt from requirement to prepare individual accounts by virtue of s448A of Companies Act 2006
Costa Rica
India
India
Spain
Sweden
Finland
Switzerland
Thailand
Thailand
Thailand
Thailand
Turkey
Turkey
Turkey
Vietnam
Distribution
Manufacturing
Manufacturing
Non-trading
Spain
Holding Company
DIRECTORS’
REPORT
Unit 1108, Block A Pusat Dagangan Phileo Damansara 2, 15 Jalan 16/11 Off Jalan
Damansara, Petaling Jaya, Selangor, 46350, Malaysia
Address of registered office
Carretera a Huinala #510, Apodaca, NL 66640, Mexico
104a, Maratońska, Łódź, 04-007, Poland
Burcuresti Sectorul 1, Strada POLANA, Nr. 68-72, Etaj 2, Biroul NR.5, Romania
1 Paya Lebar Link, #04-01, Paya Lebar Quarter, Singapore, 408533, Singapore
Gogol’ova 18,85202 Bratislava, Slovakia
71, Tsessebe Crescent, Corporate Park South, Randjisfontein Midrand, GP, 1685, South
Africa
Carrer dels Fusters 18-20, Poligono Industrial Can Cuyas, Montcada I Reixac, 08110,
Barcelona, Spain
Calle Roure Gros 1-11, Poligono Industrial Mas d’En Cisa, 08181, Spain
7, Bäckstensgatan, Mölndal, 431 39, Sweden
2A, Tallbergsgatan, Helsinki 00180, Finland
MCE Avocats, rue du Grand-Chêne 1-3, 1003 LAUSANNE, Switzerland
Non-trading
111/5 Moo 2 Tambon Makamku, Amphur Nikom Pattana, Rayong Province, Thailand
Holding Company
o. 111/5, Moo 2, Makham Khu Sub-district, Nikhom Phatthana District,
Rayong Province, Thailand
Trading
111/5 Moo 2 Tambon Makamku, Amphur Nikom Pattana, Rayong Province, Thailand
Non-trading
31/2 Rama 3 Road, Chongnonsee, Yannawa, Bangkok 10120, Thailand
Distribution
Ilitelli Organzie Sanayi, , Bolgesi Metal Is San,Sit.7.Blok No24 Basaksehir, Istanbul, Turkey
Trading
Trading
Trading
Mimar Sinan Mah. Uluğbey Cad. Ofis İşyeri, Blok No: 5, Silivri, Istanbul, Turkey
Maslak Mahallesi, Bilim Sokak, Sun Plaza Blok No: 5A, İç Kapı No.41 Sarıyer, Istanbul,
Turkey
11, Bis Phan Ngu, Da Kao Ward, District 01, Ho Chi Minh city, Viet Nam
214
ESSENTRA PLC ANNUAL REPORT 2023
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ESSENTRA PLC ANNUAL REPORT 2023
215
ESSENTRA PLC ANNUAL REPORT 2023
INDEPENDENT AUDITORS’ REPORT
DIRECTORS’
REPORT
Independent auditors’ report to the members of Essentra plc
Report on the audit of the financial statements
environment in the various global markets Essentra operates in based on the latest available market
data. Our audit scope is detailed below and reflects the coverage required now that the business is pure
play Components.
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 2023 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 UK-adopted
international accounting standards as applied in accordance with the provisions 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, including 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 & Accounts (the “Annual
Report”), which comprise: the Consolidated Balance Sheet and Essentra plc Company Balance Sheet as
at 31 December 2023; the Consolidated Income Statement, Consolidated Statement of Comprehensive
Income, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Equity and
Essentra plc Company Statement of Changes in Equity for the year then ended; the Basis of Preparation
and Principal Accounting Policies, Critical Accounting Judgements and Estimates; and the notes to the
financial statements.
Overview
Audit scope
• Local PwC component teams engaged to perform full scope audit procedures over 10 reporting units
• PwC Group audit team performed full scope audit procedures over a further 15 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 4
reporting units
• The audit of the company financial statements was undertaken by the PwC Group audit team and
included substantive procedures over all material balances and transactions
Key audit matters
• Impairment of assets in the APAC segment (group)
• Recoverability of the company investment (parent)
• Presentation of adjusting items (group)
Materiality
• Overall group materiality: £3,000,000 (2022: £3,500,000) based on 0.95% of revenue.
• Overall company materiality: £5,300,000 (2022: £6,879,000) based on 1% of net assets.
• Performance materiality: £2,250,000 (2022: £2,625,000) (group) and £3,975,000 (2022: £5,159,000)
Our opinion is consistent with our reporting to the Audit and Risk Committee.
(company).
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.
Other than those disclosed in note 2, we have provided no non-audit services to the company or its
controlled undertakings in the period under audit.
Our audit approach
Context
2023 represents the first year for Essentra as a pure play Components business following the disposals
of the Packaging and Filters divisions in 2022. As part of our audit planning, we assessed the ongoing
impacts of the disposal transactions including the consideration of the settlement of disposal liabilities.
In performing our impairment assessments, we have taken into consideration the macroeconomic
216
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.
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.
This is not a complete list of all risks identified by our audit.
Impairment of assets in the APAC segment is a new key audit matter this year. Presentation of
discontinued operations, which was a key audit matter last year, is no longer included because of
the disposals completed in the prior year and therefore the magnitude of amounts recognised in
discontinued operations is significantly lower in the current year. Otherwise, the key audit matters
below are consistent with last year.
ESSENTRA PLC ANNUAL REPORT 2023 INDEPENDENT AUDITORS’ REPORT CONTINUED
DIRECTORS’
REPORT
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
We obtained management’s models and assessed
the methodology and mathematical accuracy.
We engaged our valuation experts to assess the
reasonableness of the discount rate and long
term growth rates applied in the models.
We challenged management to provide
internal and external market data for the key
assumptions in the model and performed our
own research for further external market data
for these assumptions.
We assessed management’s assumptions against
historic results and forecasting accuracy.
We performed sensitivities over the key
assumptions used in management’s models.
We challenged the extent to which climate
change had been considered and reflected in the
future cash flows used in management’s models.
Impairment of assets in the APAC segment
(group) – continued
We consider this area to be a key audit matter
since the impairment review performed by
management contains a number of significant
judgements and estimates, including revenue
growth rates to FY28, target operating profit
margins, long term (perpetuity) growth rates and
discount rates. Since the impairment assessment
is very sensitive, changes in these assumptions
can result in a further impairment of the assets.
See note 8 to the Group financial statements for
details of management’s impairment exercise and
the Critical Accounting Judgements and
Estimates section for management’s disclosure of
this significant accounting estimate. Also see the
Significant Accounting Matters section in the
Audit and Risk Committee report.
Based on these procedures, whilst sensitive to
changes in assumptions, we concluded that we
concur with management’s assessment of the
VIU and therefore the £3.4 million impairment
recognised in Hengzhu and that no further
impairment triggers exist in the APAC CGUs.
We evaluated the disclosures in the financial
statements and consider these to be appropriate.
Impairment of assets in the APAC segment
(group)
The APAC segment consists of a number of
manufacturing and distribution sites, each
determined to be a separate CGU. As there
is no goodwill recognised for the APAC segment,
asset impairment tests are only performed where
impairment indicators exist. If such indicators exist,
the recoverable amounts of the assets at each CGU
are estimated in order to determine the extent of
any impairment charge. An impairment charge is
recognised in the income statement. As a result of
the business performance in Hengzhu, China and
challenging macroeconomic environment,
management considered there to be an
impairment trigger for this CGU.
An impairment assessment using a VIU (value in
use) model has been prepared to determine the
recoverable amount of the Hengzhu CGU assets.
The VIU model is based on a risk-adjusted Board
approved plan for FY24 to FY28 and assumptions
for long term growth rates into perpetuity which
were discounted to the present value.
Through this assessment, management identified
that the carrying value of the assets in Hengzhu
exceeded the VIU calculation and recognised an
impairment of £3.4 million to the value of the
assets as at the year end and apportioned this
against the categories of assets in Hengzhu.
The value of the Hengzhu assets following the
impairment recognised was £9.5 million.
Following the impairment of the Hengzhu assets,
the value of the APAC segment assets was £28.9m.
Management performed an assessment to
consider whether there was any further indication
of impairment within the other CGUs in this
segment. No further triggers were identified.
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ESSENTRA PLC ANNUAL REPORT 2023
INDEPENDENT AUDITORS’ REPORT CONTINUED
DIRECTORS’
REPORT
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
Recoverability of the company investment
(parent) – continued
See note 3 in the company financial statements for
details of the company’s investment in subsidiary
entities and the Critical Accounting Judgements
and Estimates section for management’s
disclosure of this significant judgement. Also see
the Significant Accounting Matters section in the
Report of the Audit and Risk Committee.
We also considered alternative valuation reference
points including the Group’s market capitalisation
at 31 December 2023 adjusted for the external
debt held in the company's balance sheet.
Based on these procedures, whilst sensitive
to changes in assumptions, we concluded that
we concur with management’s assessment
of the VIU and therefore the £45.0 million
impairment recognised.
We evaluated the disclosures in the company
financial statements and consider these to
be appropriate.
We obtained management’s model and assessed
the methodology and mathematical accuracy.
We engaged our valuation experts to assess the
reasonableness of the discount rate and long
term growth rates applied in the model.
We challenged management to provide
internal and external market data for the key
assumptions in the model and performed our
own research for further external market data
for these assumptions.
We assessed management's assumptions against
historic results and forecasting accuracy.
We performed sensitivities over the key
assumptions used in management's model.
We challenged the extent to which climate
change had been considered and reflected in the
future cash flows used in management's model.
Recoverability of the company investment
(parent)
Essentra plc holds a direct investment in Essentra
International Limited, and through this entity an
indirect investment in the Group as a whole. The
valuation of this investment is significant to the
company balance sheet.
The value of the investment held by the company
at year end was £426.1 million, following an
impairment of £45 million being recognised.
Investments are tested for impairment if
impairment indicators exist. If such indicators
exist, the recoverable amounts of the investments
are estimated in order to determine the extent of
any impairment charge. An impairment charge is
recognised in the income statement. Given the
decline in market capitalisation, an impairment
trigger is deemed to have occurred.
Management performed an impairment
assessment using a VIU model based on a
risk-adjusted Board approved plan for FY24 to
FY28 and assumptions for long term growth rates
into perpetuity which were discounted to the
present value.
Through this assessment, management identified
that the carrying value of the investment exceeded
the VIU calculation and recognised an impairment
of £45.0 million to the investment value as at the
year end.
Given the magnitude of the value of the
investment and the judgement involved in
assessing for impairment, we have identified this
area as a key audit matter for the audit of the
company. The key areas of audit focus were the
significant assumptions used in the VIU model
including revenue growth rates to FY28, target
operating profit margins, long term (perpetuity)
growth rates and discount rates.
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ESSENTRA PLC ANNUAL REPORT 2023
INDEPENDENT AUDITORS’ REPORT CONTINUED
DIRECTORS’
REPORT
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
Presentation of adjusting items
(group) – continued
See note 2 to the Group financial statements
for details of adjusting items and the Critical
Accounting Judgements and Estimates section
for management’s disclosure of this significant
judgement. Also see the Significant Accounting
Matters section in the Report of the Audit and
Risk Committee.
Management engaged a third party expert to
prepare a valuation for the investment property.
Having engaged our property valuations experts,
we found the valuation prepared to be reasonable
and agree with the £3.7m impairment recognised.
Due to the material impairment in the year and in
line with the Group's accounting policy, we agree
with management's presentation of this item as
adjusting in the year.
We performed sample testing over the remaining
categories included in adjusting items and verified
samples to payroll records, supporting invoices,
agreements or other evidence. The amounts
tested were classified as adjusting items in line
with the Group’s accounting policy.
We evaluated the disclosures in the financial
statements and consider these to be appropriate.
Presentation of adjusting items
(group)
The financial statements include certain items
which are disclosed as adjusting items. The nature
of the adjusting items is explained within the Group
accounting policies and includes transaction costs
relating to acquisition and disposals of businesses,
acquisition integration and restructuring costs,
customisation and configuration costs of significant
Software as a Service (‘SaaS’) arrangements,
material asset impairments and other items such
as site closure costs and one-off projects.
In the year the most significant adjusting items
relates to customisation and configuration costs of
SaaS arrangements of £10.8 million, impairment of
non-current assets of £7.1 million and other items
of £3.1m. The impairment of non current assets
relates to impairment of assets in Hengzhu and an
impairment of an investment property in the year.
We identified this area as a key audit matter given
there is judgement 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.
We assessed the appropriateness of the Group’s
accounting policy for the recognition of adjusting
items with reference to the applicable accounting
guidance. 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.
Customisation and configuration costs relate
to costs incurred in system development and
implementation have been expensed to the
income statement in line with the Group's
accounting policy. In 2023, the Group incurred
costs of £10.8 million in relation to SaaS related
projects that meet this criteria. We have selected
a sample of costs incurred in the current year and
obtained supporting documents to ensure the
accuracy of the cost and inspected the nature
of these projects to ensure they relate to SaaS
arrangements. Due to the highly material nature
of the costs and consistent with prior years and
the Group's accounting policy, we agree with
management’s conclusions and presentation
of this item as adjusting in the year for projects
of significant value.
We performed testing over the Hengzhu asset
impairment of £3.4million as set out in our Key
audit matter for Impairment of assets in the
APAC segment as above. Due to the material
impairment in the year and in line with the
Group's accounting policy, we agree with
management's presentation of this item
as adjusting in the year.
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ESSENTRA PLC ANNUAL REPORT 2023
INDEPENDENT AUDITORS’ REPORT CONTINUED
DIRECTORS’
REPORT
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.
There were 119 reporting units within the consolidation, which included the reporting sites and other
consolidation units. We identified 1 individually significant component within the Group in the US which
contributes 15.2% of revenue. We determined the most effective approach was to engage PwC local
component teams to perform full scope procedures over 10 reporting units, with the Group audit team
performing full scope audit work over a further 15 reporting units. In addition, specified audit
procedures were performed over certain balances, including revenue, at a further 4 reporting units by
component auditors. The Group audit team also performed audit procedures over specific balances
within a further 4 reporting units. This approach ensures that appropriate audit coverage has been
obtained over all material 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 have performed oversight visits to teams in the US, Germany, Turkey and the UK.
Based on the detailed audit work performed across the Group, we have gained coverage of 71% of
revenue, 60% of profit before tax and 84% of net assets.
The impact of climate risk on our audit
In planning our audit, we considered the potential impact of climate change on the Group and company
financial statements. Given the principal activities of the Group, it is highly likely that climate risk will have
an impact on the Group’s business. As part of our audit, we evaluated management’s climate change risk
assessment including the identified physical and transitional risks and the assessment of the impact of
those risks on the Group financial statements. The material physical and transitional risks are set out in
the Task Force on Climate-Related Financial Disclosures (TCFD) on pages 61 and 62. We performed
procedures to evaluate the appropriateness of management’s risk assessment. We considered the
Group’s externally published environmental targets and understood the progress made towards
these targets to date in addition to plans in place to bridge to meeting these targets in the future.
We challenged management on the potential additional future costs associated with meeting these
targets. We assessed that the key financial statement line items and estimates which are more likely
to be impacted by climate risks are those associated with future cash flows, given the more notable
impacts of climate change on the business are expected to arise in the medium to long term. These
included the assessment of impairment and the long term viability assessment. However, our
procedures did not identify any further material impact on either the Group or company financial
statements or our key audit matters for the year ended 31 December 2023 which were not already
included in the cash flows.
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:
Overall
materiality
Rationale for
benchmark
applied
Financial statements – group
£3,000,000 (2022: £3,500,000).
Given the significant changes in the Group’s
structure following the disposal of the Packaging
and Filters divisions, we considered materiality in
a number of different ways, including:
• revenue benchmarks;
• income statement benchmarks, including
adjusted profit metrics;
• asset benchmarks.
We determined that an appropriate level of
materiality for performing the 2023 audit would
be within the range of the above benchmarks,
whilst at neither the upper nor lower ends. Based
on our professional judgement, we selected an
overall materiality level of £3,000,000, which
represents 0.95% of revenue
Financial statements – company
£5,300,000 (2022: £6,879,000).
The entity is a holding company
for the rest of the Group and is
not a trading entity. Therefore
an asset based measure is
considered appropriate and we
used 1% of net assets which
resulted in an overall materiality
of £5,300,000
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 £380,000 and
£2,000,000. 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% (2022: 75%) of overall materiality, amounting to
£2,250,000 (2022: £2,625,000) for the group financial statements and £3,975,000 (2022: £5,159,000)
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 £150,000 (group audit) (2022: £170,000) and £150,000 (company audit) (2022:
£170,000) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
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ESSENTRA PLC ANNUAL REPORT 2023 INDEPENDENT AUDITORS’ REPORT CONTINUED
DIRECTORS’
REPORT
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 board approved business
plan and ensuring that the base case scenario for the 18 month period to 30 September 2025
indicates that sufficient cash flows are generated to meet the obligations of the business as they
fall due 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 downside scenario including the impact on the
Group’s liquidity headroom and its ability to meet debt covenants; and
• assessing 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 directors’ 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 2023 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 Annual Report on Remuneration to be audited has been properly
prepared in accordance with the Companies Act 2006.
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DIRECTORS’
REPORT
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 in respect of the Financial
Statements, 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.
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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, 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 employment laws and regulations, health and safety
legislation and import and export restrictions, 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 financial statements such as the Companies Act 2006, the Listing Rules
and UK and overseas tax legislation. 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 performance metrics relating to bank covenants, and
management bias in key accounting estimates.
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 Risk Management Report and
Other Statutory Information 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 and company
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.
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ESSENTRA PLC ANNUAL REPORT 2023 INDEPENDENT AUDITORS’ REPORT CONTINUED
DIRECTORS’
REPORT
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:
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• 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, regional 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;
• Identifying and testing journal entries, in particular any journal entries posted with unusual account
combinations which result in an impact to revenue or to performance metrics relevant to banking
covenants; and
• Testing of critical accounting estimates to identify evidence of management bias.
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.
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.
• 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 Annual Report on Remuneration 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 7 years, covering the years ended
31 December 2017 to 31 December 2023.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency
Rule 4.1.14R, these financial statements will form part of the ESEF-prepared annual financial report filed
on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether
the annual financial report will be prepared using the single electronic format specified in the ESEF RTS.
Katherine Birch-Evans (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
18 March 2024
223
ESSENTRA PLC ANNUAL REPORT 2023 DIRECTORS’
REPORT
Principal Bankers
Citibank N.A., London Branch
Citigroup Centre, Canada Square,
Canary Wharf, London E14 5LB
National Westminster Bank plc
250 Bishopsgate, London EC2M 4AA
BBVA
44th Floor, One Canada Square,Canary
Wharf, London E14 5AA
BNP Paribas, London Branch
10 Harewood Avenue, London NW1 6AA
DBS Bank Ltd, London Branch
One London Wall, Barbican, London
EC2Y 5EB
Santander UK plc
2 Triton Square, London NW1 3AN
Registrar
Computershare Investor Services plc
The Pavilions, Bridgwater Road,
Bristol BS99 6ZY
Tel: 0370 703 6394
Shareholders can access online facilities at
www.computershare.com
Auditor
PricewaterhouseCoopers LLP
40 Clarendon Road, Watford,
Hertfordshire WD17 1JJ
Legal Adviser
Slaughter and May
One Bunhill Row, London EC1Y 8YY
Joint Stockbrokers
Jefferies International Limited
100 Bishopsgate, London EC2N 4JL
Peel Hunt LLP
100 Liverpool Street, London EC2M 2AT
Corporate PR
FTI Consulting
200 Aldersgate, Aldersgate Street,
London EC1A 4HD
SHAREHOLDER INFORMATION
Shareholder
information
Registered Office
Langford Locks, Kidlington, Oxford OX5 1HX
Registered number 05444653
Tel: 01908 359100
Company Secretary
Emma Reid
Investor Relations
investorrelations@essentra.com
Company Website
www.essentraplc.com
224
ESSENTRA PLC ANNUAL REPORT 2023 Essentra would like to thank all
of its employees and partners
who have contributed to the
drafting of the Annual Report
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Essentra plc
essentraplc.com
Langford Locks
Kidlington
Oxford OX5 1HX
United Kingdom
Telephone: +44 (0)1908 359100
Email: enquiries@essentra.com
Registered in England No. 05444653