Annual Report 2021 –

Financial Statements

Building

for the

futu

Laying the foundations of a

pure play Components business

Annual Rep rt 2021

St ateg c and D re tors Repor s

Building

for the

future

Laying the foundations of a

pure play Components business

This is part two of our

Annual Report for the

year ended 31 December.

Part one consists of our

Strategic and Directors’

Reports and can be

found on our corporate

website. When reviewing

the performance and

activities of Essentra plc

in 2021, both parts

should be read together.

Financial Statements

Consolidated Income Statement 143

Consolidated Statement of Comprehensive Income 144

Consolidated Balance Sheet 145

Consolidated Statement of Changes in Equity 146

Consolidated Statement of Cash Flows 147

Accounting Policies 148

Critical Accounting Judgements and Estimates 158

Notes 160

Essentra plc Company Balance Sheet 193

Essentra plc Company Statement of Changes in Equity 194

Essentra plc Company Accounting Policies 195

Essentra plc Company Notes 198

Independent auditors’ report to the members of Essentra plc 205

Strategic & Directors’ Reports

2021 saw the start

of a new and

transformational

chapter in Essentra’s

journey.”

Paul Forman

Chief Executive

ANNUAL REPORT 2021 – FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Consolidated Income Statement

For the year ended 31 December 2021

Note

2021

£m

(restated)*

2020

£m

Revenue

959.7

896.5

Operatin

profit 49.7

11.6

Finance income 3

2.8

1.9

Finance expense 3

(19.3)

(17.6)

Profit/(loss) before tax 33.2

(4.1)

Income tax (char

e)/credit

(4.9)

2.6

Profit/(loss) for the yea

28.3

(1.5)

Attributable to:

Equity holders of Essentra pl

26.9

(3.3)

Non-controllin

interests

1.4

1.8

Profit/(loss) for the yea

28.3

(1.5)

* See the note on accounting policies for further details of the prior year restatement.

Earnin

s per share attributable to equity holders of Essentra plc:

Basic 6

8.9p

(1.2)p

Diluted 6

8.9p

(1.2)p

Earnin

s pe

share from continuin

operations attributable to equity holders of Essentra plc:

Basic 6

8.9p

(1.2)p

Diluted 6

8.9p

(1.2)p

usted profit measure:

£m £m

Operatin

profit

49.7

11.6

Amortisation of acquired intan

ible assets

22.4

22.6

ustin

items 2

11.8

28.1

usted operatin

profit 83.9

62.3

See note 27 for further details of the ad

usted profit measure.

FINANCIAL STATEMENTS

143

ESSENTRA PLC ANNUAL REPORT 2021

CONSOLIDATED INCOME STATEMENT

Consolidated Statement of

Comprehensive Income

For the year ended 31 December 2021

Note

2021

£m

(restated)*

2020

£m

Profit/(loss) for the yea

28.3

(1.5)

Other comprehensive

income:

Items that will not be reclassified to profit or loss:

Remeasurement of defined benefit pension schemes 18

28.5

(6.7)

Deferred tax (expense)/income on remeasurement of defined benefit pension schemes 4,16

(7.9)

2.1

20.6

(4.6)

Items that may be reclassified subsequently to profit or loss:

Effective portion of chan

es in fair value of cash flow hed

es:

Net chan

e in fair value of cash flow hed

es transferred to the income statement 15

(1.8)

(0.5)

Ineffective portion of chan

es in fair value of cash flow hed

es transferred to the income statement 15

(0.5)

Effective portion of chan

es in fair value of cash flow hed

0.9

0.1

Forei

n exchan

e translation differences:

Attributable to equity holders of Essentra plc:

Arisin

on translation of forei

n operations

(23.4)

(9.3)

Arisin

on effective net investment hed

(0.4)

(3.3)

Income tax income/

(

expense)

0.4

(0.5)

Attributable to non-controllin

interests

(0.1)

(0.5)

(24.9)

(14.0)

Other comprehensive expense for the year, net of tax (4.3)

(18.6)

Total comprehensive income for the yea

24.0

(20.1)

Attributable to:

Equity holders of Essentra pl

22.7

(21.4)

Non-controllin

interests

1.3

Total comprehensive income for the yea

24.0

(20.1)

* See the note on accounting policies for further details of the prior year restatement.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

144

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Consolidated Balance Sheet

At 31 December 2021

Note

31 December

2021

£m

(restated)*

31 December

2020

£m

(restated)*

1 January

2020

£m

Assets

Property, plant and equipment 7 254.3 262.5 273.5

Lease right-of-use asset 9

50.4

52.7 43.4

Intangible assets 8 483.5 502.4 481.9

Long-term receivables 5.2 4.7 5.6

Derivative assets 15, 19

0.7

- -

Deferred tax assets 16

11.6

20.6 15.2

Retirement benefit assets 18 34.1 12.6 16.9

Total non-current assets 839.8 855.5 836.5

Inventories 10

128.7

102.6 113.1

Income tax receivable 1.5 3.7 7.0

Trade and other receivables 11, 19 175.2 154.2 166.9

Derivative assets 15, 19 0.5 0.3 0.8

Other financial assets

6.2

Cash and cash equivalents 12, 22, 19 136.3 135.8 70.4

Total current assets 442.2 396.6 364.4

Total assets 1,282.0 1,252.1 1,200.9

Equity

Issued share capital 20 75.6

75.6

66.0

Merger relief reserve 21 385.2 385.2 298.1

Capital redemption reserve 0.1 0.1 0.1

Other reserve 21 (132 .8) (132.8) (132.8)

Cash flow hedging reserve (1.5) (0.1) 0.3

Translation reserve (47.5) (24.1) (11.0)

Retained earnings 21 333.6 300.8 307.1

Attributable to equity holders of Essentra pl

612.7

604.7 527.8

Non-controllin

interests 16.2 13.3 7.7

Total equity 628.9 618.0 535.5

Liabilities

Interest bearing loans and borrowings 14,

19, 22 31 3.3 285.2 249.0

Lease liabilities 22 46.1 49.1 39.3

Retirement benefit obligations 18 25.1 36.5 34.3

Provisions 17 2.5 8.0 6.0

Other financial liabilities 19 5.6 1.2 3.4

Other payables 13, 19

2.2

Deferred tax liabilities 16 45.3 45.5 45.3

Total non-current liabilities 437.9 427.7 377.3

Interest bearing loans and borrowings 14, 19, 22

- -

60.7

Lease liabilities 22

11.6

11.9 11.4

Derivative liabilities 15, 19 0.1 0.5 0.3

Income tax payable 21.5 33.1 37.9

Trade and other payables 13, 19 180.9 155.4 174.5

Provisions 17 1.1 5.5 3.3

Total current liabilities 215.2 206.4 288.1

Total liabilities 653.1 634.1 665.4

Total equity and liabilities 1,282.0 1,252.1 1,200.9

* See the note on accounting policies for further details of the prior year restatement.

The consolidated financial statements on pages 143 to 192 were approved by the Board of Directors on 18 March 2022 and were signed on

its behalf by:

Paul Forman Lily Liu

Chief Executive Chief Financial Officer

Company registration no: 05444653

FINANCIAL STATEMENTS

145

ESSENTRA PLC ANNUAL REPORT 2021

CONSOLIDATED BALANCE SHEET

Consolidated Statement

of Changes in Equity

For the year ended 31 December 2021

2021

Note

Issued

capital

£m

Merger relief

reserve

£m

Capital

redemption

reserve

£m

Other

reserve

£m

Cash flow

hedging and

cost of

hedging

reserves

£m

Translation

reserve

£m

Retained

earnings

£m

Non-

controlling

interests

£m

Total

equity

£m

At 1 January 2021

(restated)

75.6 385.2 0.1 (132.8) (0.1) (24.1) 300.8 13.3 618.0

Profit for the year

26.9 1 .4 28.3

Other comprehensive

expense

(1.4) (23.4) 20.6 (0.1) (4.3)

Total comprehensive

income for the year

- - - -

(1.4) (23.4) 47.5 1.3 24.0

Equity issue to non-

controlling interest

3.1 3.1

Share option expense

0.8

Tax relatin

to share-

based incentives

0.5

Dividends paid 24

(16.0) (1.5) (17.5)

At 31 Decembe

2021 75.6 385.2 0.1 (132.8) (1.5) (47.5) 333.6 16.2 628.9

2020 (restated)

Note

Issued

capital

£m

Merger relief

reserve

£m

Capital

redemption

reserve

£m

Other

reserve

£m

Cash flow

hedging and

cost of

hedging

reserves

£m

Translation

reserve

£m

Retained

earnings

£m

Non-

controlling

interests

£m

Total

equity

£m

At 1 January 2020

(as previously

reported) 66.0 298.1 0.1 (132.8) 0.3 (11.0) 312.4 7.7 540.8

Prior period

restatement (5.3)

(5.3)

Restated total equity

at the beginning of

the financial year 66.0 298.1 0.1 (132.8) 0.3 (11.0) 307.1 7.7 535.5

Loss for the year

(restated)

(3.3) 1.8 (1.5)

Other comprehensive

expense (0.4) (13.1) (4.6) (0.5) (18.6)

Total comprehensive

loss for the year

- - - -

(0.4) (13.1) (7.9) 1.3 (20.1)

Issue of share capital 9.6 87. 1

- -

96.7

Equity issue to non-

controlling interest

5.0 5.0

Share options

exercised 0.1

are option expense 1.2

Tax relatin

to share-

based incentives 0.3

0.3

Dividends paid 2

(0.7) (0.7)

At 31 December 2020

(restated)

75.6

385.2

0.1 (132.8) (0.1) (24.1) 300.8 13.3 618.0

1 See the note on accounting policies for further details of the prior year restatement.

2 See note 15 for details of hedging reserve movements in relation to derivatives.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

146

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

- 0.1

- 1.2

Consolidated Statement

of Cash Flows

For the year ended 31 December 2021

Note

2021

£m

(restated)*

2020

£m

Operatin

activities

Profit/(loss) for the year

28.3

(1.5)

ustments for:

Income tax expense/(credit)

4.9

(2.6)

Net finance expense 3

16.5

15.7

Intan

ible amortisation 2,8

25.0

25.1

ustin

items 2

11.8

28.1

Depreciation of property, plant and equipment 7

36.6

37.3

Lease ri

ht-o

-use asset depreciation 9

12.0

Profit on lease termination

Impairm

ent of fixed assets

0.5

Share option expense 5,18

0.8

Hed

activities and other movements

(0.5)

(Increase)/decrease in inventories

(28.3)

(Increase)/decrease in trade and other receivables

(27.9)

Increase/(decrease) in trade and other payables

26.3

Cash outflow in respect of ad

ustin

items

(25.6)

(2.0)

0.1

1.2

1.3

9.6

14.9

(18.3)

(21.3)

ustment for pension contributions

(4.8)

0.9

Movement in provisions

(0.2)

Cash inflow from operatin

activities

75.4

100.5

Income tax paid

(12.2)

(7.7)

Net cash inflow from operatin

activities 63.2

92.8

Investing activities

Interest received

0.4

1.9

Acquisition of property, plant and equipment

(38.5)

(30.9)

Proceeds from sale of property, plant and equipment

8.9

0.4

Payments for intan

ible assets

(3.2)

(3.7)

Acquisition of businesses net of cash acquired 23

(14.6)

(41.2)

Proceeds from sale of businesses net of cash disposed 22

5.0

Short-term investments

0.6

Net cash outflow from investin

activities (47.0)

(67.9)

Financin

activities

Interest paid

(11.0)

(14.7)

Dividends paid to equity holders

(16.0)

Dividends paid to non-controllin

interests

(1.5)

(0.7)

Arran

ement fee paid for financin

facilities

(4.4)

Repayments of lon

-term loans

(182.5)

(352.9)

Proceeds from lon

-term loans

211.4

318.8

Lease liability principal repayments

(12.8)

(11.9)

Proceeds from equity issue

100.0

Costs incurred in equity issue

(3.3)

Proceeds from equity issue to non-controllin

interests

3.1

5.0

Proceeds from sale of employee trust shares

0.1

Net cash (outflow)/inflow from financin

activities (13.7)

40.4

Net increase in cash and cash equivalents

2.5

65.3

Net cash and cash equivalents at the be

innin

of the yea

135.8

70.4

Net increase in cash and cash equivalents

2.5

65.3

Net effect of currency translation on cash and cash equivalents

(2.0)

0.1

Net cash and cash equivalents at the end of the yea

12,22

136.3

135.8

* See the note on accounting policies for further details of the prior year restatement.

FINANCIAL STATEMENTS

147

ESSENTRA PLC ANNUAL REPORT 2021

CONSOLIDATED STATEMENT OF CASH FLOWS

Accounting Policies

a. Basis of preparation

The consolidated financial statements of the Essentra plc Group has been prepared in accordance with UK-adopted International

Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted

International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. Essentra

transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 1 January 2021. This change

constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period

reported as a result of the change in framework.

The Company has elected to prepare its individual company financial statements in accordance with Financial Reporting Standard 101

Reduced Disclosure Framework (‘‘FRS 101’’); these are presented on pages 193 to 204.

The financial statements are prepared under the historical cost convention except for derivatives which are stated at fair value

and retirement benefit obligations which are valued in accordance with IAS 19

Employee Benefits

The preparation of financial statements that conform with adopted IFRS requires the use of estimates and assumptions that affect the

reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during

the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results

may ultimately differ from those estimates.

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

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the

period in which the estimate is revised and future periods if relevant.

The accounting policies used in the preparation of these financial statements are detailed below. These policies have been consistently

applied to all periods presented.

Going Concern

Information regarding the financial position of the Group, its cash flows, liquidity position, and borrowing facilities are described in the

Financial Review on pages 40 to 42. 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 2021, the Group’s external financing arrangements amounted to £534.3m, comprising United States Private Placement

Loan Notes (‘‘USPP’’) of $350.0m (with a range of expiry dates from November 2024 to July 2033) and a multi-currency revolving credit

facility (‘‘RCF’’) of £275.0m (expiring in October 2026). Of the total facility of £534.3m, only £14.8m is expiring before 2026.

The amount drawn under the RCF as at 31 December 2021 was £59.2m, with the available undrawn amount at £215.8m. The facility is

subject to two covenants, which are tested semi-annually: net debt to EBITDA (leverage) and EBITA to net finance charges. 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. Despite the significant

economic and operational challenges in the recent years, the Group has not sought to change either of the two covenants. The Directors

believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts and

predictions, taking account of reasonably possible changes in trading performances and considering the existing borrowing facilities,

including the available liquidity, have a reasonable expectation that the Group has adequate resources to continue in operational existence

for at least the next 18 months following the date of approval of the financial statements, and no breaches of covenants are expected.

The uncertainty as to the future impact on the Group of the COVID-19 pandemic has been considered as part of the Group’s adoption

of the going concern basis, taking into account the experience during the recent years and the most recent circumstances. The Group

demonstrated resilient operational capability and ability to continue supporting the customers, as well as ability to raise additional

financing and renew borrowing facilities. As at 31 December 2021 and as at the date of approval of these financial statements, all of

the Group’s manufacturing and distribution facilities are operational and have resumed to pre-pandemic levels of operating capacity.

Across the Group, supply chain is being proactively managed, as are operating costs and the timing of capital expenditure and significant

cash spends.

As part of the going concern assessment, the Board has also considered a downside scenario that reflects a continuing level of operational

and commercial challenges experienced in recent years, which we consider to be severe but plausible. Included within the severe yet

plausible downside scenario are the potential significant costs of strategic reviews which are ongoing and possible impact of foreign

exchange fluctuations. The Directors have also considered scenarios which incorporate the potential outcomes of the strategic reviews

and the potential impact of the Group’s previously announced intentions to move to be a pure play components business over time.

The results of these scenarios show that there is sufficient liquidity in the business for a period of at least 18 months from the date of

approval of these financial statements, and do not indicate any covenant breach during the test period. The severe downside scenario

includes assumptions for the similar extent of operational disruptions as seen in 2021. Set against this were mitigating actions including

tight management of capital expenditure, sales and general overhead, and working capital. Overall level of liquidity (defined as available

undrawn borrowing facility plus cash and cash equivalent) at the end of December 2021 was £352.1m, which was significantly higher than

the £287.0m as at 31 December 2020. Further information on the Group’s borrowing facilities, cash resources and other financial

instruments can be found in notes 14 and 19 to the financial statements.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

148

ACCOUNTING POLICIES

a. Basis of preparation continued

These downside scenarios indicate that the Group is more sensitive to a decline in profit than a contraction in cash flows given the

importance of this metric to the Group’s covenant compliance. However, management has carried out reverse stress tests which indicated

that an overall reduction in adjusted operating profit of approximately 60% from the 2021 result would be required to result in a breach in

covenants over the testing period. This level of reduction is outside the range of outcomes that the Directors would consider plausible.

The severe but plausible scenario does not indicate a material uncertainty which may cast significant doubt over the Company’s and

Group’s ability to continue as a going concern. 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

Software as a service (‘‘SaaS’’) arrangements

During 2021, the Company has changed its accounting policy relating to the capitalisation of certain software costs; this change follows

the IFRS Interpretation Committee’s agenda decision published in April 2021 and relates to the capitalisation of costs of configuring or

customising application software under ‘‘Software as a Service’’ (‘‘SaaS’’) arrangements.

The Group’s accounting policy has historically been to capitalise costs attributable to the configuration and customisation of SaaS

arrangements as intangible assets on the balance sheet, irrespective of whether the services were performed by the SaaS supplier or third

party. Following the adoption of the above IFRIC agenda guidance, current SaaS arrangements were identified and assessed to determine

if the Group has control of the software. For those arrangements where we do not have control of the developed software, to the extent

that the services were performed by third parties and those services are distinct from the SaaS arrangement, the Group derecognised

the intangible asset previously capitalised. Amounts paid to the supplier in advance of the commencement of the service period, for

configuration or customisation, services which are not distinct from the SaaS arrangement, are treated as a prepayment. Any costs

incurred which resulted in a software asset from which the Company has control, i.e. the power to obtain the future economic benefits and

to restrict others’ access to those benefits, continue to be capitalised as an intangible asset.

The costs written off are presented within operating profit in the consolidated income statement. Given the significant impact of this

policy change, in presenting the Group’s adjusted operating profit, configuration and customisation costs of significant SaaS arrangements

are presented as part of adjusting items (see note 2) in order to present an alternative performance measure that excludes the impact

of such costs which, in the view of management, represent investments in upgrading the Group’s technological capability including costs

associated with current implementation of a cloud-based enterprise resource planning (‘‘ERP’’) system within the Group. Configuration

and customisation costs of non-significant SaaS arrangements are included within adjusted operating profit.

In addition, cash flows relating to the customisation and configuration costs of SaaS arrangements are presented as part of operating

activities in the consolidated cash flow statement. In relation to the Group’s adjusted performance measures for cash flows, the cash

outlay relating to customisation and configuration cost of major SaaS arrangements is presented as a cash outflow for adjusting items,

corresponding to the treatment of such costs with regards to adjusted operating profit. This change impacts the Group’s adjusted

operating cash flow and free cash flow.

This change in accounting policy led to adjustments amounting to £16.4m and £4.4m reduction in the intangible assets recognised in the

31 December 2020 and 1 January 2020 balance sheets respectively, as well as £0.5m and £2.5m reduction in property, plant and equipment.

Customisation and configuration costs for SaaS arrangements of £11.8m and £10.4m were charged to operating expenses for 2021 and

2020 respectively that relate to major SaaS arrangements and therefore are presented within adjusting items with regards to the Group’s

adjusted operating profit. Customisation and configuration costs for non-significant SaaS arrangements were included within adjusted

operating profit and amounted to £nil and £0.1m for 2021 and 2020 respectively.

Accordingly, the prior period balance sheet and consolidated income statement have been restated in accordance with IAS 8

Accounting

Policies, Changes in Accounting Estimates and Errors

. The tables below show the impact of the change in accounting policy on previously

reported financial results and position.

FINANCIAL STATEMENTS

149

ESSENTRA PLC ANNUAL REPORT 2021

ACCOUNTING POLICIES

Accounting Policies continued

a. Basis of preparation continued

(i) Impact on the consolidated balance sheet

As previously

reported

31 December

2020

£m

Impact of

restatement

£m

Restated

31 December

2020

£m

Property, plant and equipment

263.0 (0.5) 262.5

Intan

ible assets

518.8 (16.4) 502.

Deferred tax assets

16.8 3.8 20.6

Other assets and liabilities

(167.5) -

- (167.5)

Net assets 631.1 (13.1) 618.0

Retained earnin

313.9 (13.1) 300.8

Other equity balances

317.2 -

- 317.2

Total equity 631.1 (13.1) 618.0

As previously

reported

1 January 2020

£m

Impact of

restatement

£m

Restated

1 January 2020

£m

Property, plant and equipment

276.0 (2.5) 273.5

Intan

ible assets

486.3 (4.4) 481.9

Deferred ta

13.6 1.6 15.2

Other assets and liabilities

(235.1) -

- (235.1)

Net assets 540.8 (5.3) 535.5

Retained earnin

312.4 (5.3) 307.1

Other equity balances

228.

- 228.

Total equity 540.8 (5.3) 535.5

(ii) Impact on consolidated income statement and statement of comprehensive income

As previously

reported

2020

£m

Impact of

restatement

£m

Restated

2020

£m

Operatin

profit

21.

(10.1) 11.6

Profit before ta

6.0 (10.1) (4.1)

Tax credit

0.3 2.3 2.6

Profit/(loss) for the yea

6.3 (7.8) (1.5)

Attributable to owners of the Company

4.5 (7.8) (3.3)

Non-controllin

interest

1.8 -

- 1.8

Total comprehensive income/(expense) for the yea

6.3 (7.8) (1.5)

Alternative performance measures -

- Profit

Operatin

profit

21.

(10.1) 11.

ustin

items

17.

10.

28.1

Amortisation of acquired intan

ible assets

22.6 -

- 22.6

usted operatin

profit 62.0 0.3 62.3

(iii) Impact on earnings per share

As previously

reported

2020

Impact of

restatement

Restated

2020

Basic earnin

s per share

1.7

(2.9)p (1.2)p

Diluted earnin

s per share

1.6p (2.8)

(1.2)p

usted basic earnin

s per share

13.1p 0.1

13.2p

usted diluted earnin

s per share

13.0

0.1p 13.1p

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

150

ACCOUNTING POLICIES

a. Basis of preparation continued

(iv) Impact on consolidated statement of cash flows

As previously

reported

2020

£m

Impact of

restatement

£m

Restated

2020

£m

Net cash inflow from operatin

activities

103.3 (10.5) 92.8

Net cash outflow from investin

activities

(78.4) 10.5 (67.9)

Net cash inflow from financin

activities

40.

- 40.

Net increase in cash and cash equivalents

65.3 -

- 65.3

Alternative performance measures --- Cash flows

Cash outflow in respect of ad

ustin

items

(10.9) (10.

) (21.3)

usted operatin

cash flow

76.3 10.

86.

Free cash flow

56.9 10.

67.3

There was no impact on the overall level of cash and cash equivalent.

Other pronouncements

The Group adopted the following new pronouncements during 2021, which did not have a material impact on the Group’s financial

statement:

•

Interest Rate Benchmark Reform --- Phase 2 (Amendments to IFRS 7, IFRS 4 and IFRS 16)

, which address the effects of the reform on a

company’s financial statements that arise when an interest rate benchmark used to calculate interest on a financial asset is replaced

with an alternative benchmark

•

Amendments to UK and Republic of Ireland accounting standards as a result of the UK’s exit from the European Union

•

Amendment to IFRS 16

, which clarifies the extension of the practical expedient where the lessee is not required to assess whether eligible

COVID-19 related rent concessions are lease modifications

•

Amendments to IAS 1

, which address the presentation of financial statements on classification of liabilities

•

Revised Conceptual Framework for Financial Reporting (Amendments to IFRS 9, IAS 39 and IFRS 7)

The following standards and amendments issued before 31 December 2021 with an effective date on or after 1 January 2022 have not been

early adopted by the Group, they do not have a material impact on the Group’s financial statement:

•

Amendment to IAS 12 --- deferred tax related to assets and liabilities arising from a single transaction

•

A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16

b. Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by Essentra. Control exists when Essentra is exposed, or has rights, to variable returns from

its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements

of subsidiaries are included in the financial statements from the date that control commences until the date that control ceases. All

entities are wholly owned subsidiaries of the Group except for ITC Essentra Limited (India) (50% owned) and China Tobacco Essentra

(Xiamen) Filters Co., Ltd (49% owned). The ownership held by the Group in these companies are through holding of ordinary shares

in these companies and they are accounted for as subsidiaries of the Group in the consolidated financial statements due to a control

achieved via board membership.

(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.

FINANCIAL STATEMENTS

151

ESSENTRA PLC ANNUAL REPORT 2021

ACCOUNTING POLICIES

Accounting Policies continued

c. Foreign currency

Items included in the financial statements of the Group’s subsidiaries are measured using the currency of the primary economic

environment in which the subsidiary operates (‘‘functional currency’’). The consolidated financial statements are prepared in sterling

(functional currency of the parent company).

(i) Foreign currency transactions

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities

denominated in foreign currencies at the balance sheet date are translated into sterling at the exchange rate ruling at that date and

recognised in the income statement unless hedge accounting criteria apply (see policy for financial instruments).

(ii) Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into

sterling at the exchange rate ruling at the balance sheet date. The revenues and expenses of foreign operations are translated into sterling

at average exchange rates.

(iii) Net investment in foreign operations

Exchange differences on retranslation at the closing rate of the opening balances of overseas entities are taken to other comprehensive

income, as are exchange differences arising on related foreign currency borrowings and derivatives designated as net investment hedges,

to the extent that they are effective. Other exchange differences are taken to the income statement. Differences arising prior to 1 January

2004 are included in retained earnings.

d. Financial instruments

Interest bearing loans and borrowings and other financial liabilities (excluding derivatives) are held at amortised cost, unless they are

included in a hedge accounting relationship. See note 15 for separate disclosure of hedge types.

Derivatives are measured initially at fair value. Subsequent measurement in the financial statements depends on the classification of the

derivative as follows:

(i) Fair value hedges

Where a derivative is used to hedge the foreign exchange exposure of a monetary asset or liability, any gain or loss on the derivative

is recognised in the income statement.

(ii) Cash flow hedges

Where a derivative is designated as a hedging instrument in a cash flow hedge, the change in fair value is recognised in other

comprehensive income to the extent that it is effective and any ineffective portion is recognised in the income statement. Where the

underlying transaction results in a financial asset, accumulated gains and losses are recognised in the income statement in the same

period as the hedged item affects profit or loss. Where the hedged item results in a non-financial asset the accumulated gains and losses

previously recognised in other comprehensive income are included in the initial carrying value of the asset.

(iii) Hedges of net investment in foreign operations

The gain or loss on an instrument used to hedge a net investment in a foreign operation that is deemed effective is recognised in other

comprehensive income. Any ineffective portion is recognised in the income statement.

(iv) Unhedged derivatives

The movements in the fair value of derivatives which are not designated as an effective hedge relationship are charged/credited to the

profit or loss.

e. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Previously revalued properties

were treated as being held at deemed cost upon transition to adopted IFRS.

Where parts of an item of property, plant and equipment or other assets have different useful lives, they are accounted for as separate

items. The carrying values of property, plant and equipment and other assets are periodically reviewed for impairment when events or

changes in circumstances indicate that the carrying values may not be recoverable.

Property, plant and equipment are depreciated over their estimated remaining useful lives on a straight-line basis at the following

annual rates:

Land and buildings --- Freehold land Not depreciated

Land and buildings --- Buildings 2% or life of lease if shorter

Plant and machinery 7--20%

Fixtures, fittings and equipment 10---33%

The assets’ useful lives and residual values are reviewed, and adjusted if appropriate, at each balance sheet date.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

152

ACCOUNTING POLICIES

f. Lease liabilities and lease right-of-use assets

Leases greater than 12 months in length, and those not of low-value, are recognised as a lease right-of-use asset with the associated

future lease payment terms recognised as a lease liability. The right-of-use assets and the associated lease liabilities are recognised by

discounting the future lease payments at the rate implicit to the lease or, if the rate implicit to the lease cannot be readily determined,

at the relevant incremental borrowing rate.

Determining the incremental borrowing rate incorporates three key elements: risk-free rate (reflecting specific country and currency),

credit spread (reflecting the specific risk for each subsidiary within the Group) and an asset class adjustment (reflecting the variation

in risk between asset categories).

The Group has leases of certain equipment (e.g. printing and photocopying machines) that are considered of low value. Rentals associated

with leases that are of low-value or less than 12 months in length are expensed to the income statement on a straight-line basis. The

associated lease incentives are amortised in the income statement over the life of the lease.

(i) The Group’s leasing activities

The Group leases various properties, equipment and cars. Rental contracts are typically made for fixed periods of 1 to 20 years, but might

have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms

and conditions. The lease agreements do not impose any covenants, but leased assets cannot be used as security for borrowing purposes.

Approximately 85% of the Group’s future lease obligations under IFRS 16 relate to property leases.

The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining

balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the right-of-use asset’s useful life and the

lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the

following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable

• variable lease payments that are based on an index or a rate

• amounts expected to be payable by the lessee under residual value guarantees and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs and

• restoration costs.

(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.

g. Intangible assets

(i) Goodwill

Goodwill is stated at cost less any impairment losses.

Acquisitions are accounted for using the purchase method. For acquisitions that have occurred since 1 January 2004, goodwill represents

the difference between the fair value of the assets given in consideration and the fair value of identifiable assets, liabilities and contingent

liabilities of the acquiree. For acquisitions made before 1 January 2004, goodwill is included on the basis of its deemed cost, which

represents the amount previously recorded under UK GAAP.

Since 1 January 2010, the Group has expensed costs attributable to acquisitions in the income statement. Given their one-off nature,

these costs are generally presented within adjusting items.

FINANCIAL STATEMENTS

153

ESSENTRA PLC ANNUAL REPORT 2021

ACCOUNTING POLICIES

Accounting Policies continued

g. Intangible assets continued

(ii) Research and development

Research costs are expensed to the income statement in the year in which they are incurred.

Development costs relating to new products are capitalised when the Group is able to demonstrate the technical feasibility of completing

the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset

will generate future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the

expenditure during development.

(iii) Acquired intangible assets

An intangible asset acquired in a business combination is recognised at fair value to the extent it is probable that the expected future

economic benefits attributable to the asset will flow to the Group and that its cost can be measured reliably. Intangible assets principally

relate to customer relationships, which are valued using discounted cash flows based on historical customer attrition rates, and developed

technology, which is valued using an income approach. The cost of intangible assets is amortised through the income statement on a

straight-line basis over their estimated useful economic life.

(iv) Other intangible assets

Other intangible assets which are not acquired through a business combination (‘‘non-acquired intangible assets’’) are recognised at cost

to the extent it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can

be measured reliably, and amortised on a straight-line basis over their estimated useful economic life.

SaaS arrangements are service contracts providing the Company 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:

Goodwill Not amortised

Customer relationships 6---12%

Other intangibles --- research and development 7--20%

Other intangibles --- development of e-commerce 10---20%

Other intangibles --- software and software development 10---20%

h. Impairment

All assets are reviewed regularly to determine whether there is any indication of impairment. Goodwill is tested for impairment annually.

An impairment loss is recognised whenever the carrying amount of a non-financial asset or the cash generating unit to which it belongs

exceeds its recoverable amount, being the greater of value in use and fair value less costs to sell, and is recognised in the income

statement. Value in use is estimated based on future cash flows discounted using a pre-tax discount rate based upon the Group’s weighted

average cost of capital.

Financial assets were assessed for impairment using the expected credit loss model which requires expected credit losses and changes to

expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. Changes to the expected credit loss

are recognised in the income statement.

i. Inventories

Inventories are valued at the lower of standard cost and net realisable value. For work-in-progress and finished goods, cost includes an

appropriate proportion of labour cost and overheads.

j. Cash and cash equivalents

Cash and cash equivalents comprise cash balances and fixed term investments whose maturities are three months or less from the date

of acquisition. Bank overdrafts repayable on demand form an integral part of Essentra’s cash management and are included as part

of cash and cash equivalents in the statement of cash flows.

k. Loans and borrowings

Loans and borrowings are initially measured at cost (which is equal to fair value at inception plus issuance cost) and are subsequently

measured at amortised cost using the effective interest method.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

154

ACCOUNTING POLICIES

l. Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost, which is generally equivalent to

recognition at nominal value less impairment loss calculated using the expected loss model. Trade receivables subject to factoring are

financial assets at fair value through other comprehensive income.

The Group applies the simplified model to recognise lifetime expected credit losses for its trade receivables and other receivables, including

those due in greater than 12 months, by making an accounting policy election. The expected loss rate estimated for each ageing period is as

follows: Current: 0 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%.

m. Trade and other payables

Trade payables are non-interest bearing and are recognised initially at fair value and subsequently at amortised cost.

n. 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.

o. Income tax

Income tax in the income statement comprises current and deferred tax. Income tax is recognised in the income statement except to the

extent that it relates to items recognised in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year using the applicable tax rates enacted or substantively enacted

at the balance sheet date and any adjustment to tax payable in prior years. Deferred tax is provided, using the balance sheet liability

method, on temporary differences arising between the tax bases and the carrying amounts of assets and liabilities in the financial

statements. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition

of assets or liabilities that affect neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries

to the extent that they will not reverse in the foreseeable future.

Deferred tax is determined using tax rates that are expected to apply when the related deferred tax asset or liability is settled, using the

applicable tax rates enacted or substantively enacted at the balance sheet dates.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset

can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefits will be realised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against liabilities and

when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities

on a net basis.

p. Revenue

Revenue from the sale of goods is recognised in the income statement net of expected discounts, rebates, refunds, credits, price

concessions or other similar items, when the associated performance obligation has been satisfied, and control of the goods has been

transferred to the customer.

A significant part of the Group’s businesses sell goods on an ex-works basis, where the Group as seller makes its goods ready for collection

at its premises on an agreed upon sales date and the buyer incurs all transportation and handling costs and bears the risks for bringing

the goods to their chosen destination.

Where the Group operates non ex-works terms with customers, revenue is recognised when the control of the goods has been transferred

to the customer. These terms include consignment stock agreements, where revenue is recognised upon the customer removing goods

from consignment stock provided the relevant conditions for revenue recognition are met.

Each customer arrangement/contract is assessed to identify the performance obligations being provided to the customer. Where distinct

performance obligations are deemed to exist, an element of revenue is apportioned to that obligation.

q. Finance income and expense

Finance income and expense is recognised in the income statement as it accrues.

r. Segment reporting

A segment is identified on the basis of internal reports that are regularly reviewed by the Group Management Committee in order

to allocate resources to the segment and assess its performance.

FINANCIAL STATEMENTS

155

ESSENTRA PLC ANNUAL REPORT 2021

ACCOUNTING POLICIES

Accounting Policies continued

s. Pensions

(i) Defined contribution schemes

Obligations for contributions to defined contribution pension schemes are expensed to the income statement as incurred.

(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. 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.

t. 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.

u. Adjusting items

Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence (considered for each operating

segment). They are identified separately in order for the reader to obtain a clearer understanding of the underlying results of the ongoing

Group’s operations, by excluding the impact of items which, in management’s view, do not form part of the Group’s underlying operating

results, such as gains, losses or costs arising from business acquisition and disposal activities, significant restructuring and closure costs and

items which are non-recurring or one-off in nature (such as the costs of fundamental strategic review and reorganisation). Operating profit

before adjusting items and acquired intangible amortisation is called adjusted operating profit, which forms the primary basis of

management’s review and assessment of operational performance of the Group’s businesses.

(i) Gains/losses and transaction costs relating to acquisitions and disposals of businesses

In 2021, Essentra acquired Jiangxi Hengzhu Electrical Cabinet Lock Co., Ltd (‘‘Hengzhu’’), incurring one-off acquisition related costs

(refer to note 23).

In 2020, Essentra acquired 3C! Packaging, Inc. (‘‘3C!’’), incurring one-off acquisition related costs (refer to note 23). Further one-off costs

were incurred as a result of acquisition of Nekicesa, Innovative Components, alongside professional fees associated with certain corporate

development activities. A one-off credit was received in respect of a VAT refund on the costs of a previous business disposal.

(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 the adjusted operating profit.

(iv) Other adjusting items

In 2021 this represented advisory and professional fees in relation to strategic reviews of the Group’s Packaging and Filters businesses as well

as the costs of previously announced restructuring activities within the Group’s three divisions. Included within these previously announced

restructuring activities, Packaging generated a profit on disposal of tangible assets within the Moorestown site and credits relating to

Components and Packaging restructuring consisted of reversal of provisions as well as writebacks on the carrying value of lease right-of-use

assets and other tangible fixed assets. Within the Filters division, additional restructuring was incurred relating to the rationalisation of the

division’s innovation and development centres in the US and the UK and restructuring activities to rationalise the Tear Tapes operations.

In 2020, this represented restructuring activities within the Packaging division, comprising the closure of Portsmouth, UK and Moorestown,

USA; Components Europe, comprising the closure of the manufacturing facility in Åstorp, Sweden, and transfer to Barcelona, Spain, and

closure of warehousing capabilities in Northern Europe and transfer to Nettetal, Germany; and Components Americas, comprising the

closure of manufacturing sites in Schaumburg, Illinois, and Melbourne, Arkansas, with transfer of those activities to Flippin, Arkansas,

and the closure of warehousing facilities in Edison, in New Jersey, in Elgin, in Illinois, and in Los Angeles, California. In addition professional

fees have been incurred as part of a strategic review of the Group’s operational structure and cost profile. This is offset by a credit arising

on the release of excess provision held for potential penalties in relation to the review of the compliance of certain Group companies’ export

activities with US laws as the Company does not anticipate any significant enforcement action.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

156

ACCOUNTING POLICIES

v. 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.

w. 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.

x. Government grants

Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be

met, usually on submission of a valid claim for payment. Government grants in respect of capital expenditure are included within the

carrying amount of the related property, plant and equipment, and are released to profit or loss on a straight line basis over the expected

useful lives of the relevant assets. Grants of a revenue nature are credited to profit or loss so as to match them with the expenditure to

which they relate.

y. Net debt

Net debt is defined as cash and cash equivalents and short-term liquid investments, net of lease liabilities and interest bearing loans

and borrowings.

z. Dividends

Dividends are recognised as a liability in the period in which they are approved by the shareholders of the Company (final dividend) or paid

(interim dividend).

aa. Assets and disposal groups held for sale and discontinued operations

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be

recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower

of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held-for-sale and subsequent gains

and losses on remeasurement are recognised in profit or loss.

A disposal group qualifies as 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.

FINANCIAL STATEMENTS

157

ESSENTRA PLC ANNUAL REPORT 2021

ACCOUNTING POLICIES

Critical Accounting Judgements

and Estimates

The following provides information on those policies that management considers critical because of the level of judgement and estimation

required which often involves assumptions regarding future events which can vary from what is anticipated. The Directors believe that

the financial statements reflect appropriate judgements and estimates and provide a true and fair view of Essentra’s performance and

financial position.

Accounting Estimates

(i) Business combinations and intangible assets

IFRS 3 requires the identification of acquired intangible assets as part of a business combination. The methods used to value such intangible

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, as detailed in note 8.

The useful lives of the Group’s finite-lived intangible assets are reviewed following the tests for impairment annually.

Judgement may also be required in determining the fair value of other assets acquired and liabilities (including contingent liabilities) assumed.

In preparing the consolidated financial statements the Group has considered the impact that climate change may have on key accounting

judgements and estimates including asset useful economic lives and asset valuations and impairments. As set out on page 31 of the

Strategic Report, the Group continues to introduce initiatives designed to reduce the carbon emissions from its operations. As a result, the

Group considers the environmental assumptions embedded within the Group’s strategic business plan to support the key forward looking

accounting judgements and estimates.

(ii) 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 concludes 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. Included in the tax payable is a liability of £7.4m (2020: £12.0m) for transfer pricing matters and £12.3m (2020:

£20.2m) 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 and favourable agreements reached with tax authorities on previous matters. Adjustments for current year

transactions and foreign exchange movements complete the movement in the year.

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.

(iii) Pensions

Essentra accounts for its defined benefit pension schemes in accordance with IAS 19. The application of IAS 19 requires the exercise of

judgement in relation to the assumptions used, particularly in determining the discount rate, inflation rate assumption and mortality

assumptions. For each assumption there is a range of possible outcomes (see note 18). In consultation with Essentra’s actuaries,

management decides the point within those ranges that most appropriately reflects Essentra’s circumstances. Small changes to these

assumptions can have a significant impact on valuations. The Group performs a sensitivity analysis for the significant assumptions used

in determining post-employment costs and liabilities, as detailed in note 18.

Accounting Judgements

(i) Adjusting items

Judgement is required to determine whether items should be included within adjusting items by virtue of their size or incidence. Details of

the items categorised as adjusting items are disclosed in note 2.

As restructuring and reorganisation costs are recognised (for instance with respect to site rationalisation initiatives), estimates are often

involved in relation to property-related costs (such as restoration and dilapidation costs, recoverable amount of lease right-of-use assets

and potential sublet income) and asset impairment charges (in assessing recoverable amount such as fair value from potential sale of

assets). Where appropriate, management may engage with professional advisers in making these assessments.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

158

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

(ii) Consolidation of a subsidiary

Judgement is required to establish whether control exists over an entity in which Essentra holds part of the share capital. Essentra has a

49% shareholding in China Tobacco Essentra (Xiamen) Filters Co., Ltd which has been consolidated as a subsidiary within the consolidated

financial statements because management has assessed that Essentra has control over the entity to direct the relevant activities (including

approval of budgets and capital investments, and appointment of key management personnel) that significantly affect the entity’s returns

and the ability to use its power to affect those returns, through a majority of membership in the entity’s governing body (primarily the

board of directors). Subsidiaries are fully consolidated during the period which the Group holds control.

(iii) Leases and lease right-of-use assets

A key judgement in determining the right-of-use asset and lease liability is establishing whether it is reasonably certain that an option to

extend the lease will be exercised. Distinguishing whether a lease will be extended or otherwise could have a material impact on the value of

the right-of-use assets and lease liabilities recognised on the balance sheet, but may not have a material impact on the income statement.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an

extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the

lease term if the lease is reasonably certain to be extended (or not terminated).

The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is

within the control of the lessee.

(iv) ‘‘Software as a service’’ (‘‘SaaS’’) arrangements

The accounting treatment of customisation and configuration costs relating to SaaS arrangements involved a number of 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 result in an additional code from which the customer has the power to

obtain the future economic benefits and restrict others’ 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 Company 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 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 the third party provides etc.

See changes in accounting policies section for impact of SaaS arrangements on these financial statements.

(v) Assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be

recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower

of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held-for-sale and subsequent gains

and losses on remeasurement are recognised in profit or loss.

We assessed the status of the currently ongoing strategic reviews for the Packaging and Filters divisions, and considered the applicability

of the requirements in relation to assets held for sale. As previously announced, the strategic reviews are likely to conclude in the second

quarter of 2022 at the earliest, and at present no decision or commitment has been entered into by the management. Management

therefore concluded that the businesses under strategic review do not meet the requirements under IFRS 5 to be classified as ‘held for sale’

as at 31 December 2021.

FINANCIAL STATEMENTS

159

ESSENTRA PLC ANNUAL REPORT 2021

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

Notes

1. Segment analysis

In accordance with IFRS 8, Essentra has determined its operating segments based upon the information reported to the Group

Management Committee.

The operating segments are as follows:

Components --- A leading global manufacturer and distributor of a comprehensive range of components, used in diverse industrial

applications and end-markets.

Packaging --- One of very few multicontinental suppliers of a full range of secondary packaging to the pharmaceutical, personal care

and beauty sectors.

Filters --- The only global independent provider of filters and related solutions to the tobacco industry.

The adjusted operating profit/loss presented for each operating segment includes the effect of allocation of certain functional costs such as

finance, human resources, legal and IT, as well as costs relating to management of the divisions on an internal management methodology.

2021

Components

£m

Packaging

£m

Filters

£m

Eliminations

£m

Central

Services

£m

Total

£m

External revenue 301.7 362.4 295.6 -

- -

- 959.7

Total revenue 301.

362.

295.6 -

- -

- 959.7

Operatin

profit/(loss) before intan

ible amortisation

and adjusting items 56.9 15.4 28 2 --- (16.6) 83.9

Amortisation of acquired intan

ible assets (8.6) (13.8) -

- -

- (22.4)

ustin

items (0.4) 1.6 (3.3) -

- (9.7) (11.8)

Operatin

profit/(loss) 47.9 3.2 24.9 -

- (26.3) 49.

ment assets 172.

219.9 199.7 -

- 21.8 613.8

Intan

ible assets 158.9 297.1 23.0 -

- 4.5 483.5

Unallocated items

- -

- 184.7 184.7

Total assets 331.3 517.0 222.7 -

- 211.0 1,282.0

ment liabilities 74 2 77.7 66.7 -

- 29.2 247.8

Unallocated items

- -

- 405.3 405.3

Total liabilities 74.2 77.

66.7 -

- 434.5 653.1

Other segment items

Capital expenditure (cash spend) 9.1 14.8 13.9 -

- 3.9 41.7

Depreciation of property, plant and equipment 7 2 13.8 10.5 -

- 5.1 36.6

Avera

e number of employees 2,708 3,476 1,715 -

- 287 8,186

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

160

NOTES

1. Segment analysis continued

(restated)

2020

Components

£m

Packaging

£m

Filters

£m

Eliminations

£m

Central

Services

£m

Total

£m

External revenue 255.0 363 2 278.3 -

- -

- 896.5

Total revenue 255.0 363.2 278.3 -

- -

- 896.5

Operatin

profit/(loss) before intan

ible amortisation

and adjusting items 45.5 13.8 25 2 --- (22 2) 62.3

Amortisation of acquired intan

ible assets (8.9) (13.6) (0.1) -

- -

- (22.6)

ustin

items (9.3) (9.1) 0.9 -

- (10.6) (28.1)

Operatin

profit/(loss) 27.3 (8.9) 26.0 -

- (32.8) 11.

ment assets 149.1 218.5 186.6 -

- 22.5 576.7

Intan

ible assets 158 2 316.0 22.6 -

- 5.6 502.

Unallocated items

- -

- 173.0 173.0

Total assets 307.3 534.5 209.2 -

- 201.1 1,252.1

ment liabilities 60.4 85.8 56.7 -

- 30.4 233.3

Unallocated items

- -

- 400.8 400.8

Total liabilities 60.

85.8 56.7 -

- 431.2 634.1

Other segment items

Capital expenditure (cash spend) 10.6 11.0 8.5 -

- 4.

34.5

Depreciation of property, plant and equipment 7.3 13.

10.7 -

- 5.9 37.3

Avera

e number of employees 2,355 3,498 1,674 -

- 276 7,803

1 See the note on accounting policies for further details of the prior year restatement.

2 Central Services includes executive and non-executive management, Group Finance, Tax, Treasury, Legal, Group Assurance, Human Resources, Information Technology, Corporate

Development, Investor Relations and other services provided centrally to support the operating segments.

3 The unallocated assets relate to income and deferred tax assets, retirement benefit assets, derivatives, short-term investments, loan receivables and cash and cash equivalents.

The unallocated liabilities relate to interest bearing loans and borrowings, retirement benefit obligations, derivatives, deferred tax liabilities and income tax payable. Intersegment

transactions are carried out on an arm’s length basis.

Net finance expense of £16.5m (2020: £15.7m) and income tax charge of £4.9m (2020: credit of £2.6m) cannot be meaningfully

allocated by segment.

No customer accounted for more than 10% of revenue in either 2021 or 2020. Analysed by destination, revenue to Europe & Africa

is £453.1m (2020: £443.2m), revenue to Americas is £296.3m (2020: £277.2m) and revenue to Asia and Middle East is £210.3m

(2020: £176.1m). Revenue to the UK is £70.8m (2020: £81.5m), with other significant countries being the USA with revenue of £231.0m

(2020: £210.4m), Ireland £51 2m (2020: £49.5m) and Germany £47.8m (2020: £48.9m). Non-current assets in the UK total £145.6m

(2020: £167.9m), with the other significant location being the USA with £309.8m (2020: £321.6m).

FINANCIAL STATEMENTS

NOTES

161

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

2. Net operating expense

2021

£m

(restated)*

2020

£m

Chan

es in inventories of finished

oods and work-in-pro

ress

(10.6)

9.1

Raw materials and consumables

412.

368.5

Personnel expense

(note 5)

286.5

271.8

Depreciation of property, plant and equipment

36.6

37.3

Profit/(loss) on sale of property, plant and equipment

(0.2)

0.2

Depreciation of lease ri

ht-o

-use assets

12.0

Amortisation of intan

ible assets

25.0

25.1

Impairment of property, plant and equipment and intan

ibles

1.0

1.7

Impairment/(impairment writeback) of ri

ht-o

-use assets

(1.1)

2.0

ustin

items

11.8

28.1

Exchan

e differences reco

nised in profit or loss

(0.5)

Other operatin

expenses

136.8

129.1

Net operatin

expenses 910.0

884.9

* See the note on accounting policies for further details of the prior year restatement.

1 In addition to the above, the following items were included within adjusting items: personnel expenses totalling £9.6m (2020: £4.9m); and a pension curtailment credit of £nil

(2020: £0.4m).

No income or expense (2020: £nil) was recognised in operating expense during the year in respect of ineffective cash flow hedges.

Essentra’s hedges of net investments were also entirely effective in 2021 and 2020, and therefore no hedge ineffectiveness has

been recognised in net operating expense in 2021 (2020: £nil). Research and development expenses (including relevant staff costs)

charged to profit or loss during the year amounted to £2.1m (2020: £3 2m). Other operating expenses include manufacturing, selling,

general and administrative overheads.

Adjusting items

2021

£m

(restated)*

2020

£m

(Gains)/losses and transaction costs relatin

to acquisitions and disposals of businesses

(3.4)

5.7

Acquisition inte

ration and restructurin

costs

0.6

0.5

Customisation and confi

uration costs of si

nificant software as a service (‘‘SaaS’’) arran

ements

11.8

10.4

Other

2.8

11.5

ustin

items 11.8

28.1

* See the note on accounting policies for further details of the prior year restatement.

Adjusting items are separately presented from other items by virtue of their nature, size and/or incidence (considered for each operating

segment). They are identified separately in order for the reader to obtain a clearer understanding of the underlying results of the ongoing

Group’s operations, by excluding the impact of items which, in management’s view, do not form part of the Group’s underlying operating

results, such as gains, losses or costs arising from business acquisition and disposal activities, significant restructuring and closure costs

and other items which are non-recurring or one-off in nature (such as the costs of fundamental strategic reviews and reorganisation).

Operating profit before adjusting items and acquired intangible amortisation is called adjusted operating profit, which forms the primary

basis of management’s review and assessment of operational performance of the Group’s businesses.

1 (Gains)/losses and transaction costs relating to acquisitions and disposals of businesses are made up of a credit of £4.4m in relation

to the reversal of certain claim provisions in relation to prior disposals, following the conclusion of negotiation with the purchasers; a

gain of £0.4m in relation to a prior acquisition for claims made against the vendor. These are offset by acquisition-related costs of £1.0m

in relation to the acquisition of Jiangxi Hengzhu Electrical Cabinet Lock Co., Ltd (‘‘Hengzhu’’); £0 2m of costs in setting up the Filters

China joint venture, and £0.2m related to costs incurred in pursuit of acquisition targets.

In 2020, there was a £0.3m gain relating to a VAT refund on the costs of a previous business disposal, £0.1m consisting of acquisition

costs in relation to Innovative Components, £0.1m costs incurred in establishing the China JV and £1.2m costs incurred in acquiring 3C!

Packaging, Inc. (‘‘3C!’’). The remaining £4.6m cost related to external professional costs associated with certain development activities

during the year.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

162

NOTES

2. Net operating expense continued

2 Acquisition integration and restructuring costs are made up of £0.3m for the integration of the 3C! business, acquired in 2020, and

£0.3m for the integration of Hengzhu into the existing business.

In 2020, £0.3m of costs were incurred in the integration of Nekicesa, acquired in 2019, and 3C!, acquired in 2020, into the existing

business. The remaining £0 2m was incurred as a result of restructuring activities within the Filters division as a result of the integration

of the newly established Filters China joint venture in the existing business.

3 In accordance with the revised accounting policy in relation to the customisation and configuration costs of software as a service

(‘‘SaaS’’) arrangements (see the note on accounting policies), 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 the current year, costs of

£11.8m (2020: £10.4m) 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 Other adjusting items in 2021 of £2.8m relate to:

• £3.2m of professional and advisory fees in relation to strategic reviews of the Group’s Filters and Packaging businesses as announced

in October and November 2021, in which the Group sets out the strategic goal of becoming a pure play global Components business in

the future. The Board of Directors has decided to review the full range of strategic options for the Filters and Packaging businesses.

It is anticipated that the strategic reviews are likely to conclude in the second quarter of 2022 at the earliest

• £0.9m of advisory costs in relation to a strategic review of the Group’s operational structure and cost profile, and certain redundancies

in enabling functions as part of the review

• £4.3m profit on disposal of Moorestown property following the restructuring activities in the Packaging division initiated in 2020

• £1.8m restructuring costs in the Packaging Division, involving management restructuring and redundancies at various European sites,

offset by a credit from the release of a property provision in relation to prior year restructuring following a favourable outcome of

negotiation

• £2.5m cost in relation to Filters restructuring, including rationalisation of the division’s innovation and development centres in the US and

the UK and restructuring activities to rationalise the Tear Tapes operations

• £1.3m net credit relating to Components restructuring, comprising £0.6m costs in relation to restructuring activities within the

Components Europe and Americas businesses, offset by a £0.6m credit relating to the reversal of certain prior provisions, and a £1.3m

credit relating to adjustments on the carrying value of lease right-of-use assets.

Other adjusting items in 2020 of £11.5m relate to:

• £7.6m costs relating to restructuring activities within the Packaging division. These relate to costs incurred in the re-evaluation of the

divisional footprint, which resulted in the announced closure of manufacturing facilities in Portsmouth, UK, and Moorestown, US

as well as additional workforce rationalisation costs

• £2.1m of cost in relation to restructuring activities within the Components Europe business following a review of the operational footprint

of the region. This comprises £0.6m costs incurred in the transfer of manufacturing activities out of Åstorp, Sweden into Barcelona

and £1.5m incurred on moving the warehousing capabilities of certain central northern European (Bergeijk in the Netherlands, Geretsried

in Germany and Bratislava in Slovakia) into the newly established North European Distribution Hub in Nettetal, Germany

• £2.5m of cost in relation to restructuring activities within the Components Americas business following a review of the operational

footprint of the region. The review has resulted in the announcement of closures of manufacturing sites in Schaumburg, Illinois, and

Melbourne, Arkansas and the transfer of production to the Components site to Flippin, Arkansas, as well as the exit of three smaller

warehousing and distribution express sites in Edison in New Jersey, Elgin in Illinois and Los Angeles in California

• £1 2m credit in relation to the review of the compliance of certain Group companies’ export activities with US laws, as previously disclosed

in the 2019 Annual Report. This comprises £0 2m of external advisory and consultancy costs, offset by a £1.4m release of excess provision

held for potential penalties in relation to this activity as the Company does not anticipate any significant enforcement action

• £0.5m of external advisory costs in relation to a strategic review of the Group’s operational structure and cost profile, following the

significant structural changes in recent years.

The tax effect of the adjusting items is a credit of £1 2m (restated 2020: credit of £6.4m).

FINANCIAL STATEMENTS

NOTES

163

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

2. Net operating expense continued

Auditor’s remuneration

2021

£m

2020

£m

Audit of these financial statements

0.2

Amounts receivable by the Company’s auditor and its associates in respect of:

Audit of financial statements of subsidiaries of the Company

2.0

Audit-related assurance services

0.1

0.2

1 These mainly relate to review of the half year financial statements. In addition, non-audit services primarily relating to statutory audit of local tax return required by law outside EU for

which fees in the year total less than £0.05m (2020: less than £0.05m).

3. Net finance expense

2021

£m

2020

£m

Finance income

Bank deposits

0.8

Other finance income*

2.2

0.8

Net interest on pension scheme assets (note 18)

0.2

0.3

2.8

1.9

Finance expense

Interest on loans and overdrafts

(11.3)

(11.1)

Amortisation of bank facility fees

(1.1)

(0.7)

Other finance expense*

(3.3)

(2.4)

Net interest on pension scheme liabilities (note 18)

(0.8)

(1.0)

Interest on leases

(2.8)

(2.4)

(19.3)

(17.6)

Net finance expense (16.5)

(15.7)

* Included within Other finance income is £2.2m (2020: £0.4m) relating to exchange gains on cash, borrowings and leases. Included within Other finance expense is £3.1m (2020: £1.9m)

relating to exchange losses on cash, borrowings and leases.

4. Income tax expense/credit

2021

£m

(restated)*

2020

£m

Amounts recognised in the consolidated income statement

Current ta

5.9

Prior years’ ta

0.5

Deferred tax (note 16)

2.5

(9 2)

Prior years’ deferred tax (note 16)

(1.0)

0.2

Income tax expense/(credit) 4.9

(2.6)

Amounts reco

nised in the consolidated statement of comprehensive income

Tax (credit)/expense in respect of taxable forei

n exchan

e taxable income/losses

(0.4)

0.5

Tax expense/(credit) on remeasurement of defined benefit pension schemes

7.9

(2.1)

Income tax expense/(credit) 7.5

(1.6)

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

164

NOTES

4. Income tax expense/credit continued

Factors affecting income tax for the year

The tax charge for the year ended 31 December 2021 is lower than (2020: lower than) the standard rate of corporation tax in the UK of

19.0% (2020: 19.0%). The differences are explained below:

2021

£m

(restated)*

2020

£m

Profit/(loss) before income ta

33.2

(4.1)

Tax at UK statutory rate of 19.0% (2020: 19.0%)

6.3

(0.8)

Effects of:

Permanent disallowable items (includin

ustin

items)

(8.3)

(1.0)

Disposal of entities

1.6

Overseas state and local ta

(0.5)

0.6

Unreco

nised tax attributes utilised

1.0

(0.8)

ustments in respect of prior years

(0.3)

0.7

Withholdin

tax (includin

on unremitted earnin

2.9

Chan

e in tax rates

(2.2)

(1.6)

Difference between UK and overseas tax rates

(0.2)

(2 2)

Reassessment of deferred tax reco

nition

6.1

Other

(1.0)

(0.4)

Income tax expense/(credit) 4.9

(2.6)

* See the note on accounting policies for further details of the prior year restatement.

Income tax expense in the UK is £2.5m (2020: £1.9m credit). The tax effect on adjusting items is disclosed in note 2.

1 This includes a £6.0m tax charge arising on an intra-group transfer of a subsidiary net of the release of an uncertain tax provision of £4.4m relating to a prior year disposal where

the statute of limitations has now expired.

2 See further information regarding deferred tax asset recognition at note 16.

3 This reflects the impact of differences in substantively enacted, or enacted corporate tax rates, for future periods to those of the current period.

4 This reflects the impact of different tax rates in the jurisdictions in which Essentra operates by reference to the UK statutory rate. This impact may vary in future years due to changes

in overseas tax rates or Essentra’s geographical profit split.

5 This reflects the de-recognition of deferred tax assets (primarily 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.

6 Other includes £0.8m (2020: £0.4m) reflecting the difference between the UK statutory rate of 19% and the 25% enacted rate at which the deferred tax asset arising on the change

in SaaS accounting policy is recognised (see note 16).

5. Personnel expense

2021

£m

2020

£m

es and salaries

251.6

236.8

Social security expense

25.5

24.5

Pension expense (note 18)

8.6

9.3

Share option expense (note 18)

0.8

1 2

Total personnel expense 286.5

271.8

In addition to the above, the following items were included within adjusting items: personnel expenses totalling £9.6m (2020 restated:

£4.9m); and a pension curtailment credit of £nil (2020: £0.4m). The average number of employees is disclosed in note 1. The Report of the

Remuneration Committee on pages 118 to 133 sets out information on Directors’ remuneration.

Key management remuneration

2021

£m

2020

£m

Short-term employee benefits

5.2

Post-employment benefits

0.6

0.5

Share-based payments

0.5

1.1

Termination benefits

0.3

6.6

5.0

Essentra considers key management personnel to be the Directors and the members of the Group Management Committee. The amounts

disclosed are on the same basis as those used to determine the relevant amounts disclosed in the Annual Report on Remuneration.

FINANCIAL STATEMENTS

NOTES

165

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

6. Earnings per share

2021

£m

(restated)*

2020

£m

Earnings

Earnings attributable to equity holders of Essentra plc

26.9

(3.3)

Adjustments

Amortisation of acquired intangible assets

22.4

22.6

Adjusting items

11.8

28.1

34.2

50.7

Tax relief on adjustments

(6.3)

(11.5)

Adjusted earnings

54.8

35.9

Weighted average number of shares

Basic weighted average ordinary shares outstanding (million)

301.0

272.7

Dilutive effect of employee share option plans (million)

1.3

2.0

Diluted weighted average ordinary shares (million)

302.3

274.7

Earnings per share (pence)

Basic earnings per share

8.9p

(1 2)p

Adjustment

9.3p

14.4p

Adjusted basic earnings per share

18.2p

13 2p

Diluted earnings per share

8.9p

(1 2)p

Adjusted diluted earnings per share

18.1p

13.1p

* See the note on accounting policies for further details of the prior year restatement.

Adjusted earnings per share is provided to reflect the underlying earnings performance of Essentra.

The basic weighted average number of ordinary shares in issue excludes shares held in treasury and shares held by an employee

benefit trust.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

166

NOTES

7. Property, plant and equipment

2021

Land and

buildings

£m

Plant and

machinery

£m

Fixtures,

fittings and

equipment

£m

Total

£m

Cost

innin

of year

84.8 387.2 78.

550.

Acquisitions (note 23) (0.5) 2.

0.1

2.0

Additions 2.1 31.8 4.9

38.8

Disposals (4 2) (20.6) (3 2)

(28.0)

Currency translation (2.8) (14.3) (1.3)

(18.4)

End of yea

79.

386.5 78.9 544.8

Accumulated depreciation and impairment

innin

of year

17.2 226.0 44.

287.9

Char

e in period 3.2 25.3 8.1

36.6

Disposals (0.8) (19 2) (3 2)

(23.2)

Impairment 0 2 0.5 -

Currency translation (1.8) (8.9) (0.8)

(11.5)

End of yea

18.0 223.7 48.8 290.5

Net book value at end of yea

61.

162.8 30.1 254.3

2020

Land and

buildings

£m

Plant and

machinery

£m

(restated)*

Fixtures,

fittings and

equipment

£m

(restated)*

Total

£m

Cost

innin

of year 81.9 384.8 76.3 543.0

Acquisitions 1.5 4.9 0.3 6.7

Additions 2 2 18.9 6.8 27.9

Disposals (0.7) (14.5) (4 2) (19.4)

Currency translation (0.1) (6.9) (0.8) (7.8)

End of year 84.8 387.2 78.

550.4

Accumulated depreciation and impairment

innin

of year 13.

215.4 40.7 269.5

Char

e in period 3.7 25.5 8.1 37.3

Disposals (0.5) (14 2) (4.1) (18.8)

Impairment 0 2 1.7 0.1 2.0

Currency translation 0.4 (2.4) (0.1) (2.1)

End of year 17 2 226.0 44.7 287.9

Net book value at end of year 67.6 161.2 33.7 262.5

* See the note on accounting policies for further details of the prior year restatement.

Included within land and buildings, plant and machinery and fixtures, fittings and equipment are assets in the course of construction of

£1.7m (2020 restated: £1.8m) which were not depreciated during the year.

Contractual commitments to purchase property, plant and equipment amounted to £0.4m at 31 December 2021 (2020: £1.4m).

Property, plant and equipment with a net book value of £1.1m (2020: £2.5m) was impaired by £1.1m (2020: £2.0m) to a recoverable

amount of £nil (2020: £0.5m), which represented fair value less cost to sell. £0.8m (2020: £1.9m) of this impairment relates to restructuring

projects and has been charged to adjusting items. Furthermore, £0.4m (2020: £nil) has been written back to a recoverable amount of

£0.4m (2020: £nil) and this has been charged to adjusting items.

FINANCIAL STATEMENTS

NOTES

167

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

8. Intangible assets

2021

Goodwill

£m

Customer

relationships

£m

Other

intangible

assets

£m

Total

£m

Cost

innin

of year

356.0 424.

23.1 803.5

Acquisitions (note 23) 4.5 8.6 -

13.1

Additions -

- -

- 3.2

3.2

Currency translation (5.6) (9.8) 0.1

(15.3)

End of yea

354.9 423.2 26.

804.5

Amortisation and im

airment

innin

of year

27.8 264.3 9.0 301.1

Char

e for the year -

- 22.2 2.8

25.0

Impairment -

- -

- 0.3

0.3

Currency translation 0.1 (5.6) 0.1

(5.4)

End of yea

27.9 280.9 12.2 321.0

Net book value at end of yea

327.0 142.3 14.2 483.5

2020

Goodwill

£m

Customer

relationships

£m

(restated)*

Other

intangible

assets

£m

(restated)*

Total

£m

Cost

innin

of year 339.0 402.1 19.3 760.

Acquisitions 20.9 25.4 -

- 46.3

Additions -

- -

- 3.7 3.7

Currency translation (3.9) (3.1) 0.1 (6.9)

End of year 356.0 424.

23.1 803.5

Amortisation and impairment

innin

of year (restated)* 28.3 243.8 6.4 278.5

Char

e for the year (restated)* -

- 22.3 2.8 25.1

Currency translation (0.5) (1.8) (0 2) (2.5)

End of year 27.8 264.3 9.0 301.1

Net book value at end of year 328.2 160.1 14.1 502.

* See accounting policies for further details of the prior year restatement.

Included within other intangible assets are assets in the course of construction of £0.9m (2020 restated: £1.1m) which were not amortised

during the year.

Salary costs of £0.7m (2020: £1.1m) were capitalised as part of other intangible assets during the year.

Other intangible assets principally comprise trade names acquired with Reid Supply, developed technology acquired with Richco, order

backlog, software development and e-Commerce development costs.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

168

NOTES

8. Intangible assets continued

The e-Commerce development and software development costs were not acquired through a business combination, and their amortisation

is included within operating profit before amortisation of acquired intangibles and adjusting items. Amortisation charged on other

intangible assets is included within operating profit before amortisation of acquired intangibles and adjusting items.

The weighted average remaining useful lives of customer relationships and other intangible assets at the end of the year were 9.0 years

and 5.2 years (2020: 8.1 years and 5.8 years) respectively.

Essentra tests intangible assets annually for impairment, or more frequently if there are indications of impairment. A discounted cash flow

analysis is computed to compare the discounted estimated future operating cash flows to the net carrying value of the goodwill and other

intangible and tangible assets for each cash generating unit or group of cash generating units as appropriate.

Goodwill is allocated to groups of cash generating units, being the operating segments, as follows:

Goodwill

2021

£m

2020

£m

Components

96.8

95.3

Packa

208.5

211 2

Filters

21.

21.7

327.0

328 2

Intangible assets, apart from goodwill, are allocated to the businesses to which they relate as shown below:

Customer relationships

and other intangible assets

Business Operating segment

2021

£m

2020

£m

Components -

- Businesses of former Moss and Skiffy Components

8.8

10.3

Components -

- Businesses of former Richco Components

15.3

18.

Components -

- Business of former Mesan Components

3.0

Components -

- Business of former Abri

Components

8.1

Components -

- Business of former Micro Plastics Components

4.0

Components -

- Industrial Supply Components

1.6

2.5

Components -

- Innovative Components Components

6.6

7.2

Components -

- Hen

zhu Components

8.8

Components -

- e-Commerce development costs Components

6.3

5.6

Components -

- other businesses Components

3.0

3.9

Packa

- Americas Packa

45.5

50.3

Packa

- Asia Packa

1.1

1.3

Packa

- Europe Packa

38.2

49.0

Packa

- Nekicesa Packa

4 2

Filters Filters

1.3

0.9

Not allocated to divisions -

- software and development costs Central

4.5

5.5

156.5

174 2

At 31 December 2021, management has performed an impairment review of the assets in each division. Following the impairment

assessment, no impairment loss was recognised in 2021.

The impairment assessment for intangible assets (excluding goodwill) and property, plant and equipment is performed on the cash

generating units within the divisions. The cash generating units are primarily the manufacturing sites. Goodwill is tested at the divisional

level, which is the level that management monitors goodwill at. The recoverable amount is estimated on the basis of value in use,

i.e. discounted cash flow projection expected to be generated by the group of cash generating units. For assets in the cash generating

units assessed to be impaired, their fair value less costs to sell is also considered in determining the impairment loss to be recognised, if any.

In these cases, the fair value less costs to sell is based on estimated market prices reflecting the age and condition of the asset.

FINANCIAL STATEMENTS

NOTES

169

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

8. Intangible assets continued

The impairment tests for goodwill and intangible assets are based on the Board approved business plan (the ‘‘Plan’’). Cash flow projections

are over five years using the approved annual budget for the first year and subsequent years based on the Group and Divisional Strategic

Plan. The Group’s impairment test incorporates the following assumptions:

• The key assumptions in the cash flow projections for the Plan are the revenue growth and operating margin for each division. Operating

margin is primarily based on historical levels achieved, adjusted by targets set for revenue expansion and cost control and reduction for

each individual division within the Plan period. The key assumptions underlying the estimation of cash flow projections for value in use

are operating profit margin and revenue growth assumptions. The values assigned to these assumptions represent management’s

assessment of market condition and scope for cost and profitability improvement, taking into account realisable synergies resulting from

integration activities. The compound annual revenue growth rate assumption across all three divisions for the next five years ranges from

5.3% to 8.5%. The average operating profit margin assumption for the next five years included within the Packaging division impairment

assessment ranges from 6.9% to 10.9%. In respect of Components and Filters, the combined average operating profit margin over the

five year forecast period is assumed to improve by 300 bps from 2021

• In relation to the test for the Components and Filters divisions, cash flows beyond the first year of the model are based on the approved

annual budget with growth rates specific to each business applied to revenue of up to 5.8%

• The estimated cash flows are discounted using a pre-tax discount rate based upon Essentra’s estimated post-tax weighted average cost

of capital of 6.5% (2020: 7.3%). The specific pre-tax discount rates applied for each group of cash generating units to which significant

goodwill is allocated are as follows: 7.8% for Packaging, 8.4% for Components and 7.7% for Filters (2020: 8.8% for Packaging, 9.4%

for Components and 9.7% for Filters)

• In relation to the test for the Packaging division, management carried out a detailed assessment of the growth and profit margin

assumptions for each of the next four years after the Plan period, and applied a terminal growth rate of 1.8% p.a. (2020: 1.5%)

subsequently. The growth and profit margin assumptions are based on management’s assessment of market condition and scope for

cost and profitability improvement, taking into account realisable synergies following the recent integration and reorganisation activities.

The operating profit assumptions include an estimate for the impact of the key risks but not the opportunities from climate change and

includes costs and risks related to meeting environmental, social and governance targets.

The Packaging division impairment test has historically been the most sensitive to changes in assumptions, therefore management

has performed additional sensitivity analysis to assess the robustness of the current headroom the recoverable amount has above the

carrying amount. The following change to key assumptions will cause the carrying amount to exceed the recoverable amount in the

Packaging division:

• An increase in discount rate of 380 basis points

• A reduction of 600 basis points in the operating profit margin in the terminal year

• A reduction of 510 basis points in the terminal growth rate

Management considered the following reasonably possible changes in the key assumptions, and the associated impact on the impairment

assessment, in relation to the Packaging division:

• A 1.0% increase in discount rate would reduce headroom to £229.3m

• A 1.0% reduction in the terminal growth rate would reduce headroom to £251.2m

• A 1.5% reduction in each year’s growth rate would reduce headroom to £337.5m

• A 2.0% reduction in operating profit margin in the terminal year would reduce headroom to £253.7m.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

170

NOTES

9. Lease right-of-use assets

2021

Land and

buildings

£m

Plant and

machinery

£m

Fixtures,

fittings and

equipment

£m

Total

£m

Cost

innin

of year

102.0 13.9 0.

116.3

Additions, extensions and surrenders 8.2 1.8 -

10.0

Terminations (6.3) (1.7) -

(8.0)

Acquisitions (note 23) 2.0 -

- -

2.0

Currency translation (5.4) (0.6) -

(6.0)

End of yea

100.5 13.

114.3

Accumulated depreciation

innin

of year

57.

0.2 63.6

Char

e for the year 9.0 2.9 0.1

12.0

Terminations (6.0) (1.3) -

(7.3)

Impairment writeback (1.1) -

- -

(1.1)

Currency translation (3.0) (0.3) -

(3.3)

End of yea

56.6 7.0 0.3 63.9

Net book value at end of yea

43.9 6.

0.1 50.

2020

Land and

buildings

£m

Plant and

machinery

£m

Fixtures,

fittings and

equipment

£m

Total

£m

Cost

innin

of year 84.

14.6 0.2 99.2

Additions, extensions and surrenders 19.5 2 2 0.2 21.9

Terminations (2.5) (2.9) -

- (5.4)

Acquisitions 2.5 -

- -

- 2.5

Currency translation (1.9) -

- -

- (1.9)

End of year 102.0 13.9 0.4 116.3

Accumulated depreciation

innin

of year 50 2 5.5 0.1 55.8

Char

e for the year 8.8 3.1 0.1 12.0

Terminations (2.3) (2.9) -

- (5 2)

Impairment 1.7 -

- -

- 1.7

Currency translation (0.7) -

- -

- (0.7)

End of year 57.7 5.7 0.2 63.6

Net book value at end of year 44.3 8.2 0.2 52.7

During the year there was an impairment write back of £1.1m (2020: impairment of £1.7m). This £1.1m impairment write back is disclosed

in adjusting items section of note 2. The assets were uplifted to their recoverable amount, which represented their fair value. Contractual

commitments to lease property, plant and equipment amounted to £nil at 31 December 2021 (2020: £4.0m).

FINANCIAL STATEMENTS

NOTES

171

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

9. Lease right-of-use assets continued

The income statement shows the following amounts relating to leases:

2021

£m

2020

£m

Lease ri

ht-o

-use asset depreciation

12.0

Interest expense (included in finance cost)

2.8

Exchan

e losses (included in finance cost)

2.5

1.1

Expense relatin

to short-term leases (included in cost of

oods sold and administrative expenses)

0.2

Expense relatin

to leases of low-value assets that are not shown above as short-term leases

(included in operating expenses)

0.1

17.6

15.8

The lease expenses for short-term leases for the year ending 31 December 2022 is not expected to be materially different to the expense as

disclosed above.

The maturity analysis on the lease liabilities have been included within note 19. The total cash outflow for leases and analysis of movements

in lease liabilities are included within note 22.

For the year ended 31 December 2021 the weighted average lessee’s incremental borrowing rate applied to the lease liabilities was 5 2%

(2020: 5.1%).

10. Inventories

2021

£m

2020

£m

Raw materials and consumables

60.0

44.5

Work-in-progress

12.5

10.7

Finished goods and goods held for resale

56.2

47.4

128.7

102.6

Inventories with a total value of £0.1m (2020: £nil) were written down in the year. This relates to restructuring projects and has been

charged to adjusting items.

11. Trade and other receivables

2021

£m

2020

£m

Trade receivables

131.8

Trade receivables sub

ect to factorin

4.0

Other receivables

19.9

15.3

Prepayments and accrued income

6.5

7.1

175.2

154.2

Trade receivables subject to factoring are financial assets at fair value through other comprehensive income.

12. Cash and cash equivalents

2021

£m

2020

£m

Bank balances

123.9

121.5

Short-term bank deposits and investments

12.

14.3

Cash and cash equivalents 136.3

135.8

Included in cash and cash equivalents at 31 December 2021 were amounts totalling £12.6m (2020: £nil) subject to currency controls or other

legal restrictions.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

172

NOTES

13. Trade and other payables

2021

£m

2020

£m

Trade payables

103.3

88.3

Other tax and social security contributions

13.2

11.3

Other payables

15.2

13.7

Accruals and deferred income

49.2

44.3

180.9

157.6

Included within other tax and social security contributions are non-current liabilities of £nil (2020: £2 2m).

14. Interest bearing loans and borrowings

2021

£m

2020

£m

Non-current liabilities

Unsecured bank loans

55.6

212.6

US Private Placement Loan Notes

257.7

72.6

313.3

285.2

At 31 December 2021, the Group had £59 2m (2020: £154.0m), and €nil (2020: €67.0m) of unsecured bank loans drawn in sterling and

euros at floating rates of interest set by reference to SONIA (2020: LIBOR). The Group adopted SONIA from 1 January 2021 following the

adoption of the Interest Rate Benchmark Reform as detailed in the Accounting Policies. Essentra’s $350.0m US Private Placement Loan

Notes are at a weighted average interest rate of 4.02% per annum (2020: 4.44%).

In April 2020, a $80m USPP loan note matured, and a new USPP facility of $25m was drawn (for which the note purchase agreement

was signed in December 2019), of which $15m matures in April 2027 and $10m in April 2030. In addition, $75m of USPP loan notes raised

in prior years remain in place, which mature between November 2024 and November 2029. A further issue of $250m was agreed and

drawn in July 2021 (of which $80m matures in July 2028, $85m in July 2031 and $85m in July 2033). The RCF was made up of two tranches,

£285m and €100.8m. The maturity of £225m of the overall borrowing under the RCF was extended on 11 January 2021 for a further year to

November 2023, with the balance remaining on the original terms with a maturity date of November 2022. In October 2021 the facility was

renegotiated and at 31 December 2021 the available bank facilities totalled £275.0m, of which £59.2m was drawn with a maturity date of

October 2026.

The currency profile of the carrying and nominal values of Essentra’s loans and borrowings is as follows:

2021

2020

Carrying

value

£m

Nominal

value

£m

Carrying

value

£m

Nominal

value

£m

Sterlin

55.6 59.2

153.1 154.0

US dollar

257.7 259.3

72.6 73.0

Euro

- -

59.5 59.8

313.3 318.5

285.2 286.8

The difference between the total nominal and carrying value of loans and borrowings relates to the amortised value of prepaid facility fees

of £5.2m (2020: £1.6m).

FINANCIAL STATEMENTS

NOTES

173

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

15. Derivatives

Essentra uses derivatives to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and

investment activities. In accordance with its Treasury policy, Essentra does not hold or issue derivatives for trading purposes.

At 31 December 2021

At 31 December 2020

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

Current assets -

- Derivative assets

Forward forei

n exchan

e contracts desi

nated

in a cash flow hedge

0.5 23.0 0.2

0.3 17.4 (0.5)

0.5 23.0 0.2

0.3 17.

(0.5)

Non-current assets -

- Derivative assets

Cross currency interest rate swaps desi

nated

in a cash flow hedge

0.7 77.8 0.7

--- --- ---

77.8 0.

- -

Current liabilities -

- Derivative liabilities

Forward forei

n exchan

e contracts desi

nated

in a cash flow hedge

0.1 11.9 (0.4)

0.5 12.3 0.2

0.1 11.9 (0.4)

0.5 12.3 0.2

Non-current liabilities -

- De

ivative liabilities

Cross currency interest rate swaps desi

nated

in a cash flow hedge

--- 29.6 ---

--- --- ---

- 29.6 -

- -

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.

Hedges of net investments are hedges of the currency risk exposure to changes in the carrying value of net investments in foreign operations.

The net fair value gains or losses on open forward foreign exchange contracts that hedge foreign currency risk of anticipated future sales,

purchases and interest payments are accounted for as cash flow hedges. The fair value will be transferred to 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.

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 match those of the underlying loan notes with $20m notional value

maturing within three years and the remainder between five and seven years. These contracts are accounted for as cash flow hedges,

with the impact of cross currency basis treated as a cost of hedging.

Movements in the Group’s hedging reserves are analysed below.

2021 2020

Cost of

hedging

reserve

£m

Cash flow

hedging

reserve

£m

Total

hedging

£m

Cost of

hedging

reserve

£m

Cash flow

hedging

reserve

£m

Total

hedging

£m

Balance at the be

innin

of the yea

- (0.1) (0.1)

- 0.3 0.3

Chan

e in fair value of forward forei

n exchan

contracts recognised in other comprehensive income

0.2 0.2

(0.4) (0.4)

Chan

e in fair value of cross currency swaps reco

nised

in other comprehensive income

0.9 (0.2) 0.7

---

Ineffectiveness reco

nised in profit or loss (finance

income)

(0.5) (0.5)

---

Amounts recycled to finance expense to offset

retranslation of hedged loans

(1.8) (1.8)

---

Balance at the end of the yea

0.9 (2.4) (1.5)

- (0.1) (0.1)

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

174

NOTES

15. Derivatives continued

The following movements were recognised for the purpose of calculating hedge ineffectiveness in the year:

Movement in

hedging

instrument

£m

Movement in

hedged item

£m

Ineffectiveness

recognised

in the

consolidated

income

statement

£m

Movement in period

(0.2) 0.5

Cumulative movement at 31 Dec 2021 0.

(0.2) 0.5

Essentra had other US dollar and euro denominated borrowings which it designated as hedges of its net investments in subsidiary

undertakings. The exchange losses of £2.8m (2020: losses of £1.2m) on these US dollar borrowings and the gains of £2.6m (2020: losses

of £3 2m) on the euro borrowings were recognised in other comprehensive income.

16. Deferred tax

Deferred tax assets and liabilities are attributable to the following:

2021

2020

(restated)

Assets

£m

Liabilities

£m

Net

£m

Income

statement:

Charge/

(credit)

£m

Assets

£m

Liabilities

£m

Net

£m

Income

statement:

Charge/

(credit)

£m

Property, plant and equipment

(11.0) 13.2 2.2 1.9

(13.9) 13 2 (0.7) (4.1)

Intan

ible assets

- 39.9 39.9 (2.8)

- 43.5 43.5 (3.5)

Employee benefits

(8.5) 8.5 -

- 1.5

(11 2) 2.

(8.8) 0.4

Other

(20.2) 11.8 (8.4) 0.9

(18.7) 9.6 (9.1) (1.8)

Tax (assets)/liabilities (39.7) 73.

33.

(43.8) 68.7 24.9 -

Set off of ta

28.1 (28.1) -

- -

23 2 (23 2) -

- -

Net tax (assets)/liabilities (11.6) 45.3 33.

(20.6) 45.5 24.9 -

Total income statement char

e/(credit)

- -

- 1.5

- -- -

- (9.0)

1 A deferred tax liability arises on property, plant and equipment as the tax value of assets is lower than the corresponding accounting value. This arises as tax deductions are determined

by the applicable tax laws in each country the Group operates in whereas accounting depreciation is calculated in line with the Group’s accounting policy.

2 A deferred tax liability is provided on temporary differences arising on the Group’s intangible assets as in the majority of cases the local tax authorities do not allow deduction for

amortisation of these intangible assets. The movement during the period is due to the acquisition of the Hengzhu business offset by reducing intangible asset value from the

amortisation charge for the year.

3 This represents deferred tax on the Group’s defined benefit pension schemes and share-based incentives.

4 This includes expenditure that will be deductible in future periods for tax purposes when the amounts are settled in cash, tax losses expected to be utilised in future periods and

withholding tax on overseas earnings from Group companies expected to be remitted in the foreseeable future of £8.2m (2020: £8.5m).

Movements in the year:

2021

Total

Net

£m

2020

(restated)

Total

Net

£m

innin

of the year

24.9

30.2

Char

e/(credit) to the income statement in respect of current year

2.5

(9 2)

Char

e to the income statement in respect of prior years

(1.0)

0.2

Credit to other comprehensive income

7.9

(2.1)

Credit to reserves on share-based incentives

(0.5)

(0.3)

Acquisitions and disposals

0.6

6.9

Currency translation

(0.7)

(0.8)

End of yea

33.

24.9

As at 31 December 2021 it was expected that earnings from certain overseas Group companies will be remitted and a deferred tax liability

of £8 2m (2020: £8.5m) 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 £13.3m (2020: £10.6m).

FINANCIAL STATEMENTS

NOTES

175

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

16. Deferred tax continued

Based on available information, management determined whether it is probable for some or all of the deferred tax assets to be recognised.

In determining this management considered the cumulative losses in prior years, the history of tax losses, the manner in which assets can

be used (including time limitations under local laws), future earnings potential and expectation of future reversal of taxable temporary

differences. Following management assessment, gross deferred tax assets of £0 2m (2020: £0 2m) in respect of capital losses and

unutilised tax losses of £46.5m (2020: £26.8m) 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: £6.5m within five years, £26.4m in five or more years and £13.6m with no expiry.

If future conditions change the amount of unrecognised deferred tax assets will be reassessed. This may impact the income tax expense

in the year of remeasurement.

17. Provisions

2021

Reorganisation

£m

Other

£m

Total

£m

innin

of year

5.2 8.3 13.5

Provisions made durin

year 0.2 0.1

0.3

Provisions released durin

year (0 2) (5 2)

(5.4)

Utilised durin

year (4.3) (0.3)

(4.6)

Currency translation -

- (0 2)

(0.2)

End of yea

0.9 2.

3.6

Non-current 0.4 2.1

2.5

Current 0.5 0.6

1.1

End of yea

0.9 2.

3.6

2020

Reorganisation

£m

Other

£m

Total

£m

innin

of year -

- 9.3 9.3

Business combinations -

- 0.3 0.3

Provisions made durin

year 5.2 1.

6.6

Provisions released durin

year -

- (1.7) (1.7)

Utilised durin

year -

- (0.9) (0.9)

Currency translation -

- (0.1) (0.1)

End of year 5.2 8.3 13.5

Non-current 0.6 7.

8.0

Current 4.6 0.9 5.5

End of year 5.2 8.3 13.5

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.

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 ten years. The timing of the utilisation of the lease dilapidations assumes the business continues to

operate based on the most up to date business plan. The release of other provisions during the year relates mostly to claims and non-lease

property-related provisions.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

176

NOTES

18. Employee benefits

Post-employment benefits

The Group operates a number of defined benefit and defined contribution pension schemes around the world covering many of its

employees. The Group also has a number of other post-employment obligations in certain countries, some of which are required under

local law.

The defined benefit plans are administered by boards of trustees and the assets are held independently from Essentra. The boards of

trustees comprise member nominated trustees, employer nominated trustees and independent advisory trustees. The articles of the plans

prohibit a majority on the boards to be established by either the member or employer nominated trustees.

Pension costs of the defined benefit schemes are assessed in accordance with the advice of independent professionally qualified actuaries.

Full triennial actuarial valuations were carried out on the principal European defined benefit schemes as at 5 April 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.

The principal European defined benefit schemes entitle remaining members to a pension calculated on 1 25% or 2% of their capped final

pensionable pay multiplied by the number of pensionable years of service. Some members have historical entitlements to accrual rates of

1.67%-1.9% and 3% for certain tranches of their service. The principal US defined benefit schemes entitle certain participating employees

to annuity benefits equal to 50% of final average pensionable salary, reduced for years of service less than 30, and other participating

employees to annuity benefits equal to $49 per month for each year of service.

The amounts included in the consolidated financial statements are as follows:

2021

£m

2020

£m

Amounts expensed a

ainst operatin

profit

Defined contribution schemes

6.9

7.2

Defined benefit schemes -

- current service cost

1.5

1.6

Defined benefit schemes -

- curtailment

ain

(0.2)

(0.4)

Other post-employment obli

ations

0.5

Total operatin

expense 8.6

8.9

Amounts included as finance (income)/expense

Net interest on defined benefit scheme assets (note 3)

(0.2)

(0.3)

Net interest on defined benefit scheme liabilities (note 3)

0.8

1.0

Net finance expense 0.6

0.7

Amounts reco

nised in the consolidated statement of comprehensive income

Return on defined benefit scheme assets excludin

amounts in net finance income

0.6

(32.

)

Impact of chan

es in assumptions and experience to the present value of defined benefit scheme liabilities

(29.1)

39.1

Remeasurement of defined benefit schemes (28.5)

6.7

Curtailment gain of £nil (2020: £0.4m) in relation to defined benefit schemes has been included within adjusting items (see note 2).

During 2015, the principal defined benefit pension schemes in the UK and the US were closed to future accrual. Following the closure of the

Group’s principal defined benefit pension schemes to future accruals, the schemes are funded by the Group’s subsidiaries and employees

are not required to make any further contribution. The funding of these schemes is based on separate actuarial valuations for funding

purposes for which the assumptions may differ from those used in the valuation for IAS 19 purposes.

FINANCIAL STATEMENTS

NOTES

177

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

18. Employee benefits continued

The principal assumptions used by the independent qualified actuaries for the purposes of IAS 19 are as follows:

2021 2020

Europe US Europe US

Increase in salaries (pre-2010)

n/a n/a

Increase in salaries (post-2010)

n/a n/a

Increase in pensions

at RPI capped at 5%

3.1% n/a

2.70% n/a

at CPI capped at 5%

2.7% n/a

2 20% n/a

at CPI minimum 3%, capped at 5%

3.3% n/a

3.10% n/a

at CPI capped at 2.5%

2.2% n/a

1.90% n/a

Discount rate

1.9% 2.8%

1.30% 2.45%

Inflation rate -

- RPI

3.2% n/a

2.70% n/a

Inflation rate -

- CPI

2.7% n/a

2 20% n/a

1 For service prior to April 2010, pension at retirement is linked to salary at retirement. For service after April 2010, pension is linked to salary at April 2010 with annual increases capped

at 3%.

Due to the timescale covered, the assumptions applied may not be borne out in practice.

The life expectancy assumptions (in number of years) used to estimate defined benefit obligations at the year-end are as follows:

2021

2020

Europe US Europe US

Male retirin

today at a

e 65

22.0 20.5

22.5 20.4

Female retirin

today at a

e 65

24.

22.5

24.3 22.4

Male retirin

in 20 years at a

e 65

23.2 22.0

23.8 21.9

Female retirin

in 20 years at a

e 65

25.8 23.9

25.7 23.8

The allocation of assets between different classes of investment is reviewed regularly and is a key factor in the trustees’ investment policies.

The allocation of assets is arrived at taking into consideration current market conditions and trends, the size of potential returns relative to

investment risk and the extent to which asset realisation needs to match liability maturity. There are risks underlying these considerations.

If asset returns fall below the returns required for scheme assets to match the present value of scheme liabilities, a scheme deficit results.

Persistent deficits represent an obligation the Group has to settle through increased cash contributions. If asset maturities are not properly

matched with liability maturities, there is also the risk that the Group could be required to make unplanned short-term cash contributions

to resolve resulting liquidity issues. Scheme assets are invested by the trustees in asset classes and markets that are considered to be

reasonably liquid, so through this matching liquidity risk is considered to be sufficiently mitigated.

The fair value of scheme assets, which are not intended to be realised in the short-term and may be subject to significant change before

they are realised, and the present value of the pension scheme liabilities, which are derived from cash flow projections over long periods

and are therefore inherently uncertain, are:

2021

Europe

£m

Total

£m

Equities 28% 68.6 62% 36.8

105.

Bonds/LDI 71% 174.7 36% 21.3

196.0

Other 1% 2.8 2% 1.7

4.5

Fair value of scheme assets

246.1 59.8

305.9

Present value of scheme liabilities

(215.6) (77.5)

(293.1)

Net retirement benefit assets/(obli

ations)

30.5 (17.7)

12.8

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

178

NOTES

18. Employee benefits continued

2020

Europe

£m

Total

£m

Equities 26% 67.1 61% 33.

100.5

Bonds/LDI 74% 189.8 38% 20.4 210.2

Other -

- 0.6 1% 0.7 1.3

Fair value of scheme assets 257.5 54.5 312.0

Present value of scheme liabilities (248.7) (83.3) (332.0)

Net retirement benefit assets/(obli

ations) 8.8 (28.8) (20.0)

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 2021 is 18.0 years (2020:

19.0 years). The average expected duration of the Group’s US defined benefit pension liability at 31 December 2021 is 12.1 years

(2020: 12.7 years).

The Group’s contributions to its defined benefit pension schemes are determined in consultation with trustees, taking into consideration

actuarial advice, investment conditions and other local conditions and practices. The outcome of these consultations can impact the

timing of future cash flows. In 2022, the Group expects to make defined benefit contributions of $2.3m to its US schemes and £nil in

respect of the Group’s European schemes.

Movement in fair value of post-employment obligations during the year

2021

2020

Defined

benefit

pension

scheme

assets

£m

Defined

benefit

pension

scheme

liabilities

£m

Other

£m

Total

£m

Defined

benefit

pension

scheme

assets

£m

Defined

benefit

pension

scheme

liabilities

£m

Other

£m

Total

£m

innin

of year

312.0 (332.0) (3.9) (23.9)

287.8 (301 2) (4.0) (17.4)

Current service cost and administrative

expense

(1.5) --- (0.3) (1.8)

(1.6) -- (0.5) (2.1)

Past service cost

- -

- -- -

- -

Employer contributions

6.3 0.1 -

- 6.

1.1 0.1 -

- 1 2

Return on plan assets excludin

amounts in

net finance income

(0.6) --- --- (0.6)

32.4 -- --- 32.4

Actuarial

ain/(losses) arisin

from chan

e in

financial assumptions

--- 18.5 0.3 18.8

--- (39.0) 0 2 (38.8)

Actuarial

ains arisin

from chan

e in

demographic assumptions

--- 4.5 --- 4.5

--- 1.9 --- 1.9

Actuarial

ains/(losses) arisin

from

experience adjustment

--- 5.8 --- 5.8

--- (2 2) --- (2 2)

Finance income/(expense)

(5.1) (0.2) (0.6)

6.4 (6.9) (0 2) (0.7)

Benefits paid

(16.1) 16.1 -

- -

(12.0) 12.0 -

- -

Curtailments

- -

- 0.2 0.2

- -- 0.4 0.4

Currency translation

1.1 (1.0) 0.1 0.2

(2.1) 3.3 0 2 1.

End of yea

305.9 (293.1) (3.8) 9.0

312.0 (332.0) (3.9) (23.9)

Included within the other category above are other post-employment obligations outside of Europe and the US which are required under

local law.

FINANCIAL STATEMENTS

NOTES

179

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

18. Employee benefits continued

Sensitivity

For the significant assumptions used in determining defined benefit costs and liabilities, the following sensitivity analysis gives the estimate

of the impact on the measurement of the scheme liabilities as at 31 December 2021.

(Increase)/decrease in schemes’ net liabilities

Europe

£m

Total

£m

0.5% decrease in the discount rate (20 2) (4.8)

(25.0)

1.0% increase in the rate of inflation (15.7) n/a

(15.7)

1.0% increase in rate of salary/pension increases n/a n/a

n/a

1 year increase in life expectancy (9.4) (0.3)

(9.7)

1 year decrease in life expectancy 9.4 0.3

0.5% increase in the discount rate 17.7 4.

22.1

1.0% decrease in rate of salary/pension increases n/a n/a

n/a

1.0% decrease in the rate of inflation 15.3 n/a

15.3

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 £0.8m (2020: £1 2m). Details of these plans are set out below:

Share options outstanding

2021

At 1 Jan

2021

Weighted

average

exercise

price

Granted

during the

year

Weighted

average

exercise

price

Lapsed

during the

year

Weighted

average

exercise

price

Exercised

during

the year

Weighted

average

exercise

price

At 31 Dec

2021

Weighted

average

exercise

price

Exercisable

at 31 Dec

2021

Weighted

average

exercise

price

LTIP Part

113,980 607.8p

- -

- (15,245) 339.8p -

- -

98,735 649.1p 98,735 649.1p

LTIP Part B

4,176,820 -

3,279,124 -

- (2,068,570) -

- (16,522) -

5,370,852 -

- 38,199 -

DASB

629,662 -

- -

- (16,543) -

- (196,127) -

416,992 -

- -

SAYE 3 year plan

515,255 339.5p

694,862 248.0p (396,142) 331.9p -

- -

813,975 265.7p -

- -

SAYE 5 year plan

141,726 349.0p

193,408 248.0p (107,563) 339.1p -

- -

227,571 267.8p -

- -

US SAYE 2 year plan

32,99

338.2p

37,561 266.5p (20,244) 331.0p (3,493) 324.5p

46,818 284.8p -

- -

5,610,43

4,204,955 (2,624,307) (216,142) 6,974,943 136,93

2020

At 1 Jan

2020

Weighted

average

exercise

price

Granted

during the

year

Weighted

average

exercise

price

Lapsed

during the

year

Weighted

average

exercise

price

Exercised

during the

year

Weighted

average

exercise

price

At 31 Dec

2020

Weighted

average

exercise

price

Exercisable

at 31 Dec

2020

Weighted

average

exercise

price

LTIP Part

379,197 453.9p -

- -

- (228,071) 412.4p (37,146) 236.9p 113,980 607.8p 113,980 607.8p

LTIP Part B 6,105,729 -

- -

- (1,791,808) -- (137,101) -- 4,176,820 -

- -

DASB 423,385 -

- 246,117 -

- (8,542) -- (31,298) -- 629,662 -

- -

SAYE 3 year plan 851,995 357.7p -

- -

- (336,740) 385.5p -

- -- 515,255 339.5p -

- -

SAYE 5 year plan 186,821 357.7p -

- -

- (45,095) 385.1p -

- -- 141,726 349.0p -

- -

US SAYE 2 year plan 81,363 365.6p -

- -

- (43,028) 377.9p (5,341) 163.3p 32,994 338 2p -

- -

8,028,490 246,117 (2,453,284) (210,886) 5,610,437 113,980

The exercise prices of options outstanding at the end of the year range from nil to 692p.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

180

NOTES

18. Employee benefits continued

The weighted average share price at the date of exercise for options exercised during the year was 293.5p (2020: 300.0p). The following

table shows the weighted average fair value at the date of grant for options granted during the year:

LTIP

Part A

LTIP

Part B

DASB

SAYE

3 year

plan

SAYE

5 year

Plan

Year ended 31 December 2021 n/a 257.0p n/a 68.7p 74.7p

Year ended 31 December 2020 n/a n/a 212.3p n/a n/a

Fair value model inputs for cumulative share options awarded

2021

LTIP

Part A

LTIP

Part B

DASB

SAYE

3 year

plan

SAYE

5 year

plan

Wei

hted avera

e fair value at

rant 133.1p 273.6p 274.4p 75.7p 77.8p

Wei

hted avera

e share price at

rant 649.1p 337.1p 317.5p 319.0p 318.6p

Wei

hted avera

e exercise price 649.1p -

- -

- 265.7p 278.7p

Wei

hted avera

e volatility 27.2% 32.4% 34.6% 36.9% 40.1%

Wei

hted avera

e dividend yield 1.88% 3.72% 3.97% 3 21% 3.02%

Wei

hted risk free rate 0.46% 0 24% 0.33% 0.31% 0.46%

Expected employee retention rates 86.0% 83.3% 100.0% 81.1% 82.0%

Expected term 3.00 years 3.00 years 3.00 years 3 20 years 5.19 years

Valuation model Binomial Monte Carlo Binomial Binomial Binomial

2020

LTIP

Part A

LTIP

Part B DASB

SAYE

3 year

plan

SAYE

5 year

plan

Wei

hted avera

e fair value at

rant 127.5p 293.5p 301.4p 97.8p 83.8p

Wei

hted avera

e share price at

rant 607.8p 413.0p 348.7p 417.5p 428.6p

Wei

hted avera

e exercise price 607.8p -

- -

- 339.5p 420.0p

Wei

hted avera

e volatility 28.6% 32.9% 36.4% 40 2% 35.7%

Wei

hted avera

e dividend yield 2.00% 5.06% 4 20% 4.98% 4.90%

Wei

hted risk free rate 0.54% 0.54% 0.49% 0.75% 0.83%

Expected employee retention rates 86.5% 90.9% 100.0% 85.8% 90.7%

Expected term 3.07 years 3.00 years 3.00 years 3.17 years 5.16 years

Valuation model Binomial Monte Carlo 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.

2021 and 2020

LTIP

Part A

LTIP

Part B

DASB

SAYE

3 year

plan

SAYE

5 year

plan

Contractual life 3 -- 10 years 3 -- 6 years 3 years 3 years 5 years

Details of the vesting conditions of the LTIP Part A, LTIP Part B and DASB share option schemes are set out in the Report of the

Remuneration Committee on pages 118 to 133.

FINANCIAL STATEMENTS

NOTES

181

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

19. Financial risk management

Essentra’s activities expose the business to a number of key financial risks which have the potential to affect its ability to achieve

its business objectives.

The Board has overall responsibility for Essentra’s system of internal control and financial risk management and for reviewing the

effectiveness of this system. Such a system can only be designed to mitigate, rather than eliminate, the risk of failure to achieve

business objectives and can therefore only provide reasonable, and not absolute, assurance against material misstatement or loss.

Essentra has a centralised treasury function to manage funding, liquidity and exposure to interest rate and foreign exchange risk.

Treasury policies are approved by the Board and cover the nature of the exposure to be hedged, the types of derivatives that may be

employed and the criteria for investing and borrowing cash. Essentra uses derivatives only to manage currency and interest rate risk

arising from underlying business activities. No transactions of a speculative nature are undertaken. The Treasury function is subject

to periodic independent reviews by the Group Assurance function. Underlying policy assumptions and activities are reviewed by the

Treasury Committee.

Controls over exposure changes and transaction authenticity are in place and dealings are restricted to those banks with the relevant

combination of geographical presence, expertise and suitable credit rating.

The following describes Essentra’s financial risk exposure and management from a quantitative and qualitative perspective.

(i) Credit risk

Credit risk is the risk of financial loss if a customer or counterparty to a financial asset or liability fails to meet its contractual obligations,

and arises principally from trade receivables and cash and cash equivalents. Essentra has no significant individual concentrations of credit

risk. The following is an overview of how Essentra manages its credit risk exposures.

Trade and other receivables

Essentra’s exposure to credit risk is driven by the profile of its customers. This is influenced by the demographics of the customer base,

including the industry and country in which customers operate.

Essentra monitors significant customers’ credit limits and recognises an impairment of trade receivables in specific instances where a

customer’s credit standing has deteriorated to the extent that a credit default is considered probable. Following implementation of IFRS 9,

Essentra also recognises an expected credit loss impairment of trade receivables through an accounting policy election, whereby default

losses are expected for each receivables ageing category as follows: Current: 0 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 receivables were assessed for impairment using the expected credit loss model which requires expected credit losses and changes

to expected credit losses at each reporting date to reflect changes in credit risk since initial recognition.

As at 31 December 2021, gross trade receivables were £151.4m (2020: £134.5m) of which £27.1m (2020: £25.3m) were past due. The ageing

analysis of past due trade receivables is as follows:

2021

£m

2020

£m

-60 days

21.6

20.3

61--180 days

3.2

3.6

181-

-360 days

0.6

0.8

360+ days

0.6

27.1

25.3

As at 31 December 2021, the combined specific and expected credit loss impairment of trade receivables was of £2.6m (2020: £2.7m).

The analysis of the combined impairment based on the underlying receivables is as follows:

2021

£m

2020

£m

Current

0.5

-60 days

0.4

61-

-180 days

0.1

0.6

181-

-360 days

0.6

360+ days

0.6

2.6

2.7

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

182

NOTES

19. Financial risk management continued

The movement in the provision for impaired receivables is as follows:

2021

£m

2020

£m

innin

of year

5.3

Impaired receivables acquired/(disposed)

(0.1)

(0.3)

Impairment loss reco

nised

0.3

0.4

Utilisation

(0.3)

(2.7)

End of yea

2.6

2.7

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 2021, £19.9m was drawn under

invoice discounting facilities (2020: £6.1m), representing cash collected before it was contractually due from the customer.

Derivative assets

Credit risk with respect to derivatives is controlled by limiting transactions to major banking counterparties where internationally agreed

standard form documentation exists. The credit ratings of these counterparties are monitored regularly.

Cash and cash equivalents

Credit risk relating to cash and cash equivalents is monitored daily, on a counterparty by counterparty basis. The credit limits imposed

specify the maximum amount of cash which can be invested in, or with, any single counterparty. These limits are determined by geographic

presence, expertise and credit rating. Essentra monitors the credit ratings of counterparties.

The following credit risk table provides information regarding the credit risk exposure of Essentra by classifying derivative assets, short-term

investments and cash and cash equivalents according to credit ratings of the counterparties. AAA is the highest possible rating and all of

the assets are neither impaired nor past due.

2021

AAA

£m

BBB

£m

Not rated

£m

Total

£m

Current derivative assets

- -

- 0.5 -

- -

- 0.5

Non-current derivative assets

- -

- 0.

- -

- 0.

Cash and cash equivalents

1.5 11.3 107.5 15.2 -

- 0.8 136.3

1.5 11.3 108.

15.2 -

- 0.8 137.5

2020

AAA

£m

BBB

£m

Not rated

£m

Total

£m

Current derivative assets -

- -

- 0.3 -

- -

- 0.3

Non-current derivative assets -

- -

Cash and cash equivalents 3.

1.7 115.6 8 2 5.1 1.8 135.8

1.7 115.9 8 2 5.1 1.8 136.1

Essentra’s maximum credit risk exposure is £311.4m (2020: £287.9m) and no collateral is held against this amount (2020: £nil).

(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.

FINANCIAL STATEMENTS

NOTES

183

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

19. Financial risk management continued

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 53% (2020: 27%) hedged by $205m of US dollar denominated

borrowings. Essentra’s euro loan was repaid in the year and so the euro denominated assets were no longer hedged by any euro

denominated borrowings (2020: 32%).

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.

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 three years and the remainder between five and seven 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.

2021

Weakening in sterling Strengthening in sterling

10%

£m

10%

£m

Impact on the profit before tax -

ain/(loss)

1.8 0.8 0.2 (1.4) (0.8) (0.2)

Impact on equity -

ain/(loss)

65.5 31.0 6.0 (53.6) (28.1) (5.8)

2020

Weakening in sterling Strengthening in sterling

10%

£m

10%

£m

Impact on the profit before tax -

ain/(loss) 0.3 0.1 -- (0 2) (0.1) -

Impact on equity -

ain/(loss) 66.3 31.

6.0 (54 2) (28.4) (5.9)

A 1 cent change to the US dollar rate against sterling will impact the adjusted operating profit by £0.2m (2020: £0 2m). A 1 cent change to

the euro rate against sterling will impact the adjusted operating profit by £0.3m (2020: £0.3m).

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

184

NOTES

19. Financial risk management continued

b) Interest rate risk

Essentra’s strategy is to ensure that at least 30% of the total debt with maturities of more than one year is protected with fixed interest

rates or approved interest rate derivatives.

The following table shows Essentra’s sensitivity to a 50bps, 100bps and 200bps decrease or increase in sterling, US dollar and euro interest

rates. To calculate the impact on the income statement for the year, the interest rates on all external floating rate interest bearing loans

and borrowings have been increased or decreased by 50bps, 100bps or 200bps and the resulting increase or decrease in the net interest

charge has been adjusted for the effect of Essentra’s interest rate derivatives.

2021

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 -

ain/(loss)

2.9 1.5 0.

(2.9) (1.5) (0.7)

2020

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 -

ain/(loss) 5.1 2.6 1.3 (5.1) (2.6) (1.3)

See note 14 for interest rate disclosure on loans and borrowings.

(iii) Liquidity risk

Liquidity risk is the risk that Essentra, although solvent, will encounter difficulties in meeting obligations associated with financial liabilities

that are settled by delivering cash or another financial asset.

Essentra’s objective is to maintain a balance between continuity of funding and flexibility. Essentra is primarily funded by a series

of US Private Placement Loan Notes from various financial institutions totalling $250m and syndicated multi-currency five-year revolving

credit facilities of £275.0m from its banks. The series of Loan Notes have original maturities ranging from seven to 12 years. In April 2020,

a $80m USPP loan note matured, and a new USPP facility of $25m was drawn (for which the note purchase agreement was signed

in December 2019), of which $15m matures in April 2027 and $10m in April 2030. In addition, $75m of USPP loan notes raised in prior years

remain in place, which mature between November 2024 and November 2029. A further issue of $250m was agreed and drawn in July 2021

(of which $80m matures in July 2028, $85m in July 2031 and $85m in July 2033). The RCF was made up of two tranches, £285m and

€100.8m. The maturity of £225m of the overall borrowing under the RCF was extended on 11 January 2021 for a further year to November

2023, with the balance remaining on the original terms with a maturity date of November 2022. In October 2021 the facility was

renegotiated and at 31 December 2021 the available bank facilities totalled £275.0m, of which £59.2m was drawn with a maturity date

of October 2026.

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.

Essentra’s available undrawn committed facilities at 31 December were:

2021

£m

2020

£m

Expirin

before two years

161.2

Expirin

after two years

215.8

Any loans drawn on these facilities would bear interest at floating rates with reference to SONIA for the currency and period of the loan.

FINANCIAL STATEMENTS

NOTES

185

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

19. Financial risk management continued

The maturity of Essentra’s financial liabilities, including estimated interest payments, is analysed below.

2021

Fair value

£m

Carrying

amount

£m

Contractual

cash flows

£m

<1 yr

£m

1-2 yrs

£m

2-5 yrs

£m

>5 yrs

£m

Unsecured bank loans

59.2 55.6 64.6 1.1 1.1 62.

US Private Placement Loan Notes

270.5 257.7 349.1 10.

10.

44.

283.6

Derivative liabilities

0.1 0.1 0.1 0.1 -

- -

Trade and other payables

167.

- -

Lease liabilities

57.

68.1 14.3 12.2 24.

17.2

Other unsecured loans

- -

Deferred consideration

5.6 5.6 5.6 -

- 5.6 -

- -

560.8 544.

655.2 193.6 29.3 131.5 300.8

2020

Fair value

£m

Carrying

amount

£m

Contractual

cash flows

£m

<1 yr

£m

1-2 yrs

£m

2-5 yrs

£m

>5 yrs

£m

Unsecured bank loans 213.8 212.6 219.9 3.2 216.7 -

- -

US Private Placement Loan Notes 78.5 72.6 95.9 3 2 3.2 23.7 65.8

Derivative liabilities 0.5 0.5 0.5 0.5 -

- -

Trade and other payables 143.1 143.1 143.1 143.1 -

- -

Lease liabilities 61.0 61.0 73.1 14.5 11.7 24.2 22.7

Other unsecured loans -

- -

Deferred consideration 4.

3.2 -

- 1.2 -

501.3 494 2 536.9 167.7 231.6 49.1 88.5

Total trade and other payables carried at £180.9m (2020: £157.6m) including other taxes and social security contributions of £13 2m

(2020: £11.3m) which are not financial liabilities and are therefore excluded from the above analysis. All trade and other payables are due

to be settled in less than six months.

The value of deferred 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 fair value of the unsecured bank loans is the same as the carrying amount as the loans are at floating rate, except for unamortised

facility fees. The fair value of the US Private Placement Loan Notes is estimated by discounting the future cash flows (interests and

principal) at the prevailing market rates. The fair value of the trade and other payables approximate the carrying amount as they are due

to be settled within six months.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

186

NOTES

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.

2021

2020

Fair

value

£m

Amortised

cost

£m

Total

carrying

value

£m

Fair

value

£m

Amortised

cost

£m

Total

carrying

value

£m

Trade and other receivables (except those sub

ect

to factoring) -- 169.9

169.9

--- 151.8 151.8

Cash and cash equivalents -- 136.3

136.3

- 135.8 135.8

Other financial assets -

- --

- -

Interest bearin

loans and borrowin

s -- (313.3)

(313.3)

- (285 2) (285 2)

Lease liabilities -

- (57.7)

(57.7)

- (61.0) (61.0)

Trade and other payables -

- (167.7)

(167.7)

- (143.1) (143.1)

Level 2 of fair value hierarchy

Derivative assets 1 2 --

1.2

0.3 --- 0.3

Derivative liabilities (0.1) -

(0.1)

(0.5) -

- (0.5)

Level 3 of fair value hierarch

Trade receivables subject to factoring 4.0 --

4.0

-- --- -

Trade and other payables

-- --

(3 2) -

- (3 2)

Other non-current financial liabilities (5.6) -

(5.6)

(1 2) -

- (1 2)

(0.5) (232.5) (233.0)

(4.6) (201.7) (206.3)

Total trade and other receivables carried at £175.2m (2020: £154.2m) include prepayments of £6.5m (2020: £7.1m) which are not financial

assets and are therefore excluded from the above analysis. Fair values of forward foreign exchange contracts and cross currency swaps

have been calculated at year end forward exchange rates compared to contracted rates. These are determined to be level 2 in the fair value

hierarchy. Trade receivables subject to factoring are measured at fair value through other comprehensive income. Their fair value is

determined based on management’s expectation of recoverable amount, taking into account expected credit losses and, if material, time

value of money.

Included within trade and other payables and other non-current financial liabilities, which is classified as level 3 in the fair value hierarchy,

is the deferred consideration of £5.6m relating to the acquisitions of Micro Plastics and Hengzhu (2020: £4.4m). The value of deferred

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.

During the year, no fair value gain or loss (2020: £nil) was recognised in respect of financial instruments at level 3 fair value hierarchy, and

£nil (2020: £nil) was settled in cash. No other fair value gains or losses were recorded in profit or loss and other comprehensive income.

There are no non-recurring fair value measurements.

Included within interest bearing loans and borrowings are $350m (2020: $100m) US Private Placement Loan Notes. The Loan Notes are

held at amortised cost with a carrying value of £257.7m (2020: £72.6m). The Group estimates that the total fair value of the Loan Notes

at 31 December 2021 is £270.5m (2020: £78.5m).

All other financial assets are held at amortised cost and mostly have short terms to maturity. For this reason, their carrying amounts at

the reporting date approximate the fair values. Unsecured bank loans, included within interest bearing loans and borrowings, incur interest

at floating rates and as a result their carrying amounts also approximate their fair values at the reporting date.

The table below shows the amount of bank overdrafts offset against the bank balances under enforceable master netting agreements

with banks:

Gross amount of recognised

financial assets

£m

Gross amount of recognised

financial liabilities set off

in the balance sheet

£m

Net amount of financial

assets presented in the

balance sheet

£m

Cash and cash equivalents:

At 31 December 2021 137.

(1.4) 136.3

At 31 December 2020 139.5 (3.7) 135.8

FINANCIAL STATEMENTS

NOTES

187

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

19. Financial risk management continued

(iv) Capital structure

Essentra defines its capital structure as its equity and non-current interest bearing loans and borrowings, and aims to manage this to

safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other

stakeholders.

Essentra sets the amount of capital in proportion to risk. Essentra manages the capital structure and makes adjustments to it in the light

of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure,

Essentra may return capital to shareholders through dividends and share buybacks, issue new shares or sell assets to reduce debt.

Essentra monitors its capital structure on the basis of the medium-term net debt-to-EBITDA ratio. EBITDA is defined as operating profit

before depreciation and other amounts written off property, plant and equipment, share option expense, intangible amortisation and

adjusting items.

The net debt-to-EBITDA ratios at 31 December were as follows.

Note

2021

£m

(restated)

2020

£m

Net debt

234.7

210.4

Operatin

profit before intan

ible amortisation and ad

ustin

items 27

83.9

62.3

Plus depreciation and other amounts written off property, plant and equipment, and amortisation of

non-acquired intangible assets

51.2

51.8

Plus share option expense 18

0.8

1 2

EBITD

135.9

115.3

Net debt-t

-EBITDA ratio

1.8

Net debt-t

-EBITDA ratio excludin

the impact of IFRS 16

1.5

20. Issued share capital

2021

£m

2020

£m

Issued, authorised and fully paid ordinary shares of 25p (2020: 25p) each 75.6

75.6

Number of ordinary shares in issue

innin

of year

302,590,708

264,129,170

Issue of shares durin

the year

38,461,538

End of yea

302,590,708

The issue of share capital during 2020 was in relation to a placement offering of 38,461,538 new shares with par value of 25p issued

at 260p per share.

At 31 December 2021, the Company held 905,157 (2020: 908,650) of its own shares with a nominal value of £0 2m (2020: £0.2m)

in treasury. This represents 0.3% (2020: 0.3%) of the number of ordinary shares in issue.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

188

NOTES

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 £7.3m (2020: £9.0m).

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 118 to 133.

The assets, liabilities and expenditure of the trust have been incorporated in these financial statements. At 31 December 2021, the trust

held 645,507 (2020: 864,912) shares, upon which dividends have been waived, with an aggregate nominal value of £0 2m (2020: £0.2m)

and market value of £2 2m (2020: £2.6m).

The other reserve relates to the Group reorganisation, which took place as part of the de-merger from Bunzl plc. It represents the

difference between Essentra plc’s share capital and Essentra International Limited’s share capital and share premium on 6 June 2005

and is not distributable.

In 2020, the Company raised £96.7m through an issue of share capital. An amount of £87.1m was recognised with the merger relief reserve,

being the excess of net proceeds over the nominal value of shares issued under s612 of the Companies Act 2006.

22. Analysis of net debt

1 Jan 2021

£m

Cash flow

£m

Business

combinations

£m

Lease additions

£m

Exchange

movements

£m

Non-cash

movements

£m

31 Dec 2021

£m

Cash at bank and in hand 121.5 4 2 -

- -

- (1.8) -

123.9

Short-term deposits and investments 14.3 (1.7) -

- -

- (0 2) -

12.

Cash and cash equivalents in the

statement of cash flows

135.8 2.5 --- --- (2.0) ---

136.3

Debt due after one year (285.2) (24.5) -

- -

- (2.5) (1.1)

(313.3)

Lease liabilities due within one year (11.9) 15.6 (0.3) (2.0) 0.3 (13.3)

(11.6)

Lease liabilities due after one year (49.1) -

- (1.7) (8.0) 1.2 11.5

(46.1)

Debt from financin

activities

(346.2) (8.9) (2.0) (10.0) (1.0) (2.9)

(371.0)

Net debt

(210.4) (6.4) (2.0) (10.0) (3.0) (2.9)

(234.7)

The non-cash movements in debt due after one year represent the amortisation of prepaid facility fees £1.1m. The net non-cash movement

in lease liabilities represents lease liability surrender of £1.0m due to renegotiated lease terms, offset by interest on leases £2.8m. The net

cash outflow relating to lease liabilities for low value, short-term and variable lease payments was £0.3m (see note 9). During the year

£10.5m of lease liabilities moved from due after one year to due within one year.

1 Jan 2020

£m

Cash flow

£m

Business

combinations

£m

Lease additions

£m

Exchange

movements

£m

Non-cash

movements

£m

31 Dec 2020

£m

Cash at bank and in hand 62.6 57.7 0.7 -

- 0.5 -

- 121.5

Short-term deposits and investments 7.8 6.9 -

- -

- (0.4) -

- 14.3

Cash and cash equivalents in the

statement of cash flows

70.4 64.6 0.7 --- 0.1 --- 135.8

Debt due within one year (60.7) 68.1 (4.1) -

- (3.3) -

- -

Debt due after one year (249.0) (34.0) -

- -

- (1 2) (1.0) (285 2)

Lease liabilities due within one year (11.4) 14.3 (0 2) (2.6) -

- (12.0) (11.9)

Lease liabilities due after one year (39.3) -

- (2.3) (19.3) -

- 11.8 (49.1)

Debt from financin

activities

(360.4) 48.

(6.6) (21.9) (4.5) (1 2) (346 2)

Other financial assets 5.6 (5.6) -

- -

Net debt

(28

.4) 107.4 (5.9) (21.9) (4.4) (1 2) (210.4)

The non-cash movements in debt due after one year represent the amortisation of prepaid facility fees £0.7m. The net non-cash movement

in lease liabilities represents lease liability reduction of £2.2m due to renegotiated lease terms, offset by interest on leases £2.4m. The net

cash outflow relating to lease liabilities for low value, short-term and variable lease payments was £0.3m (see note 9). During the year

£9.6m of lease liabilities moved from due after one year to due within one year.

Included within other financial assets at 1 January 2020 was £5.0m of loan receivables arising from the disposal of Porous Technologies

and £0.6m of short-term liquid investments.

FINANCIAL STATEMENTS

NOTES

189

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

23. Acquisitions and disposals

Acquisition of 3C!

On 17 September 2020, Essentra acquired 100% of the share capital of 3C! Packaging, Inc. (‘‘3C!’’). 3C!, headquartered in North Carolina,

USA, is a leading designer and manufacturer of folding cartons, printed literature, foil and flexible packaging and labels focused on the

pharmaceuticals and healthcare sectors. 3C! is reported under the Packaging division.

During 2021, Essentra reassessed the fair value adjustments and made changes to the carrying amount of certain property, plant

and equipment and deferred tax balances. The net impact on goodwill is an increase of £0.6m.

In addition, during 2021 Essentra paid out the remaining deferred consideration on the acquisition amounting to £0.1m.

Establishment of joint venture China Tobacco Essentra (Xiamen) Filters Co., Ltd.

On 2 April 2020 Essentra plc confirmed that it has completed the establishment of the new joint venture company, China Tobacco Essentra

(Xiamen) Filters Co., Ltd. Essentra’s capital contribution into this business is $10.3m, to be paid in three equal instalments over 18 months

following its establishment. As at 31 December 2021, Essentra has paid all three of these instalments. During 2021, proceeds from capital

contributions from non-controlling interests into this joint venture company were £3.1m.

Acquisition of Innovative Components

On 26 June 2019, Essentra acquired 100% of the share capital of Innovative Components Inc. and Componentes Innovadores Limitada

(together ‘‘Innovative Components’’). During 2021, Essentra paid out the remaining deferred consideration relating to the acquisition of

Innovative Components, amounting to £1.8m.

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. During 2021, £1 2m of deferred consideration was paid out to the vendor,

with the remainder to be paid in the future.

Acquisition of Hengzhu

On 2 August 2021, Essentra acquired the majority of the share capital of Jiangxi Hengzhu Electrical Cabinet Lock Co., Ltd (‘‘Hengzhu’’),

an access hardware manufacturer and distributor in China. Essentra initially acquired 73% of the business for ¥103m (approximately

£11.8m), with the remaining 27% stake subject to put and call options whereby Essentra may acquire the minority shareholding for

consideration determined by the future operating performance of the business to 31 December 2022 and capped at a maximum of ¥37.5m

(approximately £4.2m) and are exercisable 18 months after the acquisition. The capped consideration has not changed since acquisition.

The remaining 27% stake does not confer any shareholder right (including voting right, entitlement to dividends and right to transfer to

other parties) to the vendor shareholder. Therefore it is concluded that the amount payable under the put option in substance represents

deferred consideration and is accounted for as a financial liability. No non-controlling interest is recognised in respect of this acquisition.

On acquisition, the assets and liabilities of the business acquired were adjusted to reflect their fair value to Essentra. Due to the timing of

the transaction, the purchase price allocations and fair value adjustments are provisional and subject to finalisation for up to one year from

the date of acquisition.

Had the acquisition been completed on 1 January 2021, the contribution to the Group’s revenue and operating profit would have been

£17.4m and £0.7m higher respectively. Included within the consolidated accounts are £7 2m of revenue and £nil of operating profit from

Hengzhu since acquisition.

Included within adjusting items in the consolidated income statement are £1.3m of costs incurred in acquiring the business.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

190

NOTES

23. Acquisitions and disposals continued

The fair value of assets and liabilities acquired as part of the acquisition of Hengzhu are detailed below:

Hengzhu

£m

Intan

ible assets

8.6

Property, plant and equipment

2.2

Lease ri

ht-o

-use asset

2.0

Inventories

2.2

Trade and other receivables

0.2

Trade and other payables

(1.4)

Lease liabilities

(2.0)

11.8

Goodwill

3.9

Consideration

15.

Satisfied by:

Cash consideration

11.5

Deferred consideration

4.2

Cash consideration

11.5

Cash outflow in respect of the acquisition 11.5

Goodwill represents the expected operating and financial synergies, and the value of an assembled workforce. Goodwill is not deductible for

tax purposes.

24. Dividends

Per share Total

2021

2020

2021

£m

2020

£m

2020 final: paid 1 June 2021

3.3

10.0

2021 interim: paid 29 October 2021

2.0

6.0

2021 proposed final: payable 1 June 2022

4.0

12.1

25. Related parties

Other than the compensation of key management (note 5) and the capital injection into the Filters joint venture entity China Tobacco Essentra

(Xiamen) Filters Co., Ltd. (note 23), Essentra has not entered into any material transactions with related parties since the last Annual Report.

ITC Essentra Limited is 50% owned by the Group. The results were fully consolidated within the Group’s financial statements as it is deemed

Essentra has control by virtue of having control of the board. As at 31 December 2021 the entity had gross assets of £27.6m (2020: £24.3m)

and gross liabilities of £9.9m (2020: £7.4m). Operating profit for the year amounted to £5.0m (2020: £4.8m) and movement in cash for the

year amounted to £0.8m (2020: £1.7m).

China Tobacco Essentra (Xiamen) Filters Co., Ltd is 49% owned by the Group. The results were fully consolidated within the Group’s

financial statements as it is deemed Essentra has control by virtue of having control of the board. As at 31 December 2021 the entity had

gross assets of £20.3m (2020: £9.9m) and gross liabilities of £5.4m (2020: £nil). Operating loss for the year amounted to £0.8m (2020:

£0.1m) and movement in cash for the year amounted to £0 2m (2020: £9.9m).

For the Group’s policy on the basis of consolidation, see note b within Accounting Policies.

26. Parent company

Essentra plc is a limited company incorporated and domiciled in the United Kingdom. It operates as the ultimate parent company of the

Essentra Group. Its registered office is Langford Locks, Kidlington, Oxford, OX5 1HX, United Kingdom. The principal subsidiary undertakings

of Essentra plc are listed in note 10 to the Essentra plc Company Financial Statements.

FINANCIAL STATEMENTS

NOTES

191

ESSENTRA PLC ANNUAL REPORT 2021

Notes continued

27. Adjusted measures

Management reviews the adjusted operating profit and operating cash flow as measures of the performance of the business. Adjusted

operating profit is stated before amortisation of acquired intangible assets and adjusting items which are considered not relevant to

measuring the underlying performance of the business.

Note

2021

£m

(restated)*

2020

£m

Operatin

profit

49.

11.6

Amortisation of acquired intan

ible assets

22.

22.6

ustin

items 2

11.8

28.1

usted operatin

profit

83.9

62.3

Finance income 3

2.8

1.9

Finance expenses 3

(19.3)

(17.6)

usted profit before income tax

67.

46.6

Tax on ad

usted profit

(11.2)

(8.9)

usted profit

56.2

37.7

Attributable to:

Equity holders of Essentra pl

54.8

35.9

Non-controllin

interests

1.8

usted profit

56.2

37.7

Basic ad

usted earnin

s per share 6

18.2

13 2p

Diluted ad

usted earnin

s per share 6

18.1

13.1p

Adjusted operating cash flow 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 Company, except amounts relating to adjusting items.

2021

£m

(restated)*

2020

£m

usted operatin

profit 83.9

62.3

Depreciation of property, plant and equipment

36.6

37.3

Lease ri

ht-o

-use asset depreciation

12.0

Amortisation of non-acquired intan

ible assets

2.6

2.5

Share option expense

0.8

1 2

Other non-cash items

(0.2)

(0.6)

Workin

capital movements

(29.9)

6.2

Net capital expenditure

(41.3)

(34 2)

usted operatin

cash flow 64.5

86.7

Reconciliation of cash flows from ad

ustin

items:

ustin

items as shown on income statement 11.8

28.1

Non-cash credit/(char

e) in ad

ustin

items

6.6

(9.8)

Cash outflow on ad

ustin

items reco

nised in the yea

18.

18.3

Utilisation of prior period and acquired accruals and provisions

7.2

3.0

Cash outflow from ad

ustin

items 25.6

21.3

1 Other non-cash items comprise impairment of fixed assets £0.5m (2020: £0.1m), outflow from hedging activities and other movements £0.5m (2020: inflow of £1.3m), less movement

in provisions £0.2m (2020: £nil) and profit on lease termination £nil (2020: £2.0m).

2 Net capital expenditure within adjusted operating cash flow excludes £8.5m (2020: £nil) of property, plant and equipment disposal proceeds realised during site closures which relate to

adjusting items.

For further information on alternative performance measures applied by the Group refer to pages 43 and 44.

28. Post balance sheet events

The Group has assessed the impact of the current conflict between Russia and Ukraine. Essentra has no significant operations or infrastructure

in Russia or Ukraine and no employees in either country. Sales to these markets are around 2% of total revenue. All sales to Russia have been

suspended and will continue to be suspended until further notice. Essentra has made a donation of £100,000 to the Disasters Emergency

Committee (‘‘DEC’’) Ukraine Appeal.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

192

NOTES

Essentra plc Company

Balance Sheet

At 31 December 2021

Note

2021

£m

2020

£m

Fixed assets

Investment in subsidiary undertakin

2,10

466.6

465.8

Current assets

Debtors 3

498.3

325.7

Current liabilities

Creditors: amounts fallin

due within one year

(3.5)

(0 2)

Net current assets

494.8

325.5

Non-current liabilities

Creditors: amounts fallin

due after more than one year 5,6

(257.7)

(72.6)

Net assets

703.

718.7

Capital and reserves

Issued share capital 7

75.6

Mer

er relief reserve

385.2

Capital redemption reserve

0.1

Profit and loss account 8

242.8

257.8

Shareholders’ funds: equity interests

703.

718.7

The profit attributable to the equity holders included in the accounts of the Company is £0 2m (2020: £0.7m).

The Company Financial Statements on pages 193 to 204 were approved by the Board of Directors on 18 March 2022 and were signed on its

behalf by:

Paul Forman Lily Liu

Chief Executive Chief Financial Officer

FINANCIAL STATEMENTS

193

ESSENTRA PLC ANNUAL REPORT 2021

ESSENTRA PLC COMPANY BALANCE SHEET

Essentra plc Company

Statement of Changes in Equity

For the year ended 31 December 2021

Profit and loss account

Issued

capital

£m

Merger

relief

reserve

£m

Capital

redemption

reserve

£m

Retained

earnings

£m

Own shares

£m

Total

equity

£m

1 January 2021 75.6 385 2 0.1 266.8 (9.0)

718.

Profit for the year 0.2

0.2

Total comprehensive income for the year -

- -

- 0.2 -

0.2

Shares issued to satisfy employee share option exercises (1.7) 1.7

Share-based payments 0.8

0.8

Dividends paid (16.0)

(16.0)

31 Decembe

2021 75.6 385.2 0.1 250.1 (7.3) 703.

Profit and loss account

Issued

capital

£m

Merger

relief

reserve

£m

Capital

redemption

reserve

£m

Retained

earnings

£m

Own shares

£m

Total

equity

£m

1 January 2020 66.0 298.1 0.1 266.2 (10.4) 620.0

Profit for the year 0.7 0.7

Total comprehensive income for the year -

- -

- 0.7 -

- 0.7

Issue of share capital 9.6 87.1 96.7

Shares issued to satisfy employee share option exercises (1.4) 1.

Share options exercised 0.1 0.1

Share-based payments 1.2 1 2

31 December 2020 75.6 385 2 0.1 266.8 (9.0) 718.7

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

194

ESSENTRA PLC COMPANY STATEMENT OF CHANGES IN EQUITY

Essentra plc Company Accounting Policies

a. Authorisation of financial statements and statement of compliance with FRS 101

The parent company financial statements of Essentra plc (‘‘the Company’’) for the year ended 31 December 2021 were authorised for issue

by the Board of Directors on 18 March 2022 and the balance sheet was signed on the Board’s behalf by Paul Forman and Lily Liu. Essentra

plc is a public limited company that is incorporated, domiciled and has its registered office in England and Wales. The Company’s ordinary

shares are publicly traded on the London Stock Exchange and it is not under the control of any single shareholder. These financial

statements were prepared in accordance with Financial Reporting Standard 101

Reduced Disclosure Framework

(FRS 101).

The profit and loss account of the Company is not presented as permitted by Section 408 of the Companies Act 2006.

b. Basis of preparation

The Company transitioned to FRS 101 from the UK Generally Accepted Accounting Practice during the year ended 31 December 2015.

No adjustments were required as part of this transition.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:

• the requirements of paragraph 45(b) and 46-52 of IFRS 2

Share-Based Payment

• the requirements of paragraphs 62, B64(b), B64(e), B64(g), B64(h), B64(j) to B64(m), b64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66

and B67 of IFRS 3

Business Combinations

• the requirement of IFRS 7

Financial Instruments: Disclosures

• the requirement of paragraphs 91-99 of IFRS 13

Fair Value Measurement

• the requirement in paragraph 38 of IAS 1

Presentation of Financial Statements

to present comparative information in respect of

paragraph 79(a)(iv) of IAS 1, paragraph 73(e) of IAS 16

Property, Plant and Equipment

and paragraph 118(e) of IAS 38

Intangible Assets

• the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1

Presentation of

Financial Statements

• the requirements of IAS 7

Statement of Cash Flows

• the requirements of paragraphs 30 and 31 of IAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

• the requirements of paragraph 17 of IAS 24

Related Party Disclosures

• the requirements in IAS 24

Related Party Disclosures

to disclose related party transactions entered into between two or more members

of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member and

• the requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36

Impairment of Assets

Where required, equivalent disclosures are given in the consolidated financial statements.

These accounts have been prepared in accordance with The Companies Act 2006 as applicable to companies using FRS 101 and are

prepared on a going concern basis.

The going concern assessment for the Company is carried out as part of the Group assessment. From the assessment performed, the

Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable

future, and accordingly have adopted the going concern basis in preparing the Company Financial Statements. Further details are included

on page 148 of the consolidated financial statements.

These accounts are prepared under the historical cost convention.

Other pronouncements

The Company adopted the following new pronouncements during 2021, which did not have a material impact on the Company’s

financial statement:

•

Interest Rate Benchmark Reform --- Phase 2 (Amendments to IFRS 7, IFRS 4 and IFRS 16)

, which address the effects of the reform on a

company’s financial statements that arise when an interest rate benchmark used to calculate interest on a financial asset is replaced

with an alternative benchmark

•

Amendments to UK and Republic of Ireland accounting standards as a result of the UK’s exit from the European Union

•

Amendment to IFRS 16

, which clarifies the extension of the practical expedient where the lessee is not required to assess whether eligible

COVID-19 related rent concessions are lease modifications

•

Amendments to IAS 1

, which address the presentation of financial statements on classification of liabilities

•

Revised Conceptual Framework for Financial Reporting (Amendments to IFRS 9, IAS 39 and IFRS 7)

FINANCIAL STATEMENTS

195

ESSENTRA PLC ANNUAL REPORT 2021

ESSENTRA PLC COMPANY ACCOUNTING POLICIES

Essentra plc Company Accounting Policies continued

b. Basis of preparation continued

The following standards and amendments issued before 31 December 2021 with an effective date on or after 1 January 2022 have not been

early adopted by the Group, they do not have a material impact on the Group’s financial statement:

•

Amendment to IAS 12

--- deferred tax related to assets and liabilities arising from a single transaction

•

A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16

The following principal accounting policies have been consistently applied.

c. Investment in subsidiary undertaking

Investment in subsidiary undertaking is held at cost less any provision for impairment. The Company assesses at each balance sheet date

whether the investment in its subsidiary has been impaired.

d. Share-based payments

The fair value of share options is measured at grant date. It is recognised as an addition to the cost of investment in the subsidiary in which

the relevant employees work over the expected period between grant and vesting date of the options, with a corresponding adjustment

to reserves. Detailed disclosures for the share-based payment arrangements of the Company are provided in note 18 to the consolidated

financial statements.

e. Own shares

The shares held in the Essentra Employee Benefit Trust for the purpose of fulfilling obligations in respect of share incentive plans are treated

as belonging to the Company and are deducted from its retained earnings. The cost of shares held directly (treasury shares) is also

deducted from retained earnings.

f. Dividends

Dividend distributions to the Company’s shareholders are recognised as a liability in the period in which they are approved by the

shareholders of the Company (final dividend) or paid (interim dividend).

Dividend income is recognised when the right to receive payment is established.

g. Foreign currencies

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and

liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or

losses on translation are included in the profit and loss account. Exchange differences arising from movements in spot rates are included

in the profit and loss account as exchange gains or losses, while those arising from the interest differential elements of forward currency

contracts are included in external interest income or expense.

h. Financial assets

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are included in current assets,

except for those with maturities greater than 12 months after the end of the reporting period which are classified as non-current assets.

The Company’s financial assets at amortised cost comprise receivables in the balance sheet.

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.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

196

ESSENTRA PLC COMPANY ACCOUNTING POLICIES

i. Financial liabilities

Interest bearing loans and borrowings and other financial liabilities (excluding derivatives) are initially recognised at fair value net of

transaction costs incurred. They are subsequently held at amortised cost using the effective interest method. Any difference between

the proceeds, net of transaction costs, and the settlement or redemption of borrowings is recognised in profit or loss over the term of

the borrowings.

The Company holds financial instruments which hedge the net investments in the foreign operations of its subsidiary undertakings.

Gains and losses on these instruments are recognised in the profit and loss account of the Company.

j. Taxation

Income tax in the profit and loss account comprises current and deferred tax. Income tax is recognised in the profit and loss account except

to the extent that it relates to items recognised in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year using the applicable tax rates enacted or substantively enacted

at the balance sheet date and any adjustment to tax payable in prior years.

Deferred tax is provided, using the balance sheet liability method, on temporary differences arising between the tax bases and the carrying

amounts of assets and liabilities in the financial statements. The following temporary differences are not provided for: goodwill not

deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit or loss, and

differences relating to investments in subsidiaries to the extent that they will not reverse in the foreseeable future. Deferred tax is

determined using tax rates that are expected to apply when the related deferred tax asset or liability is settled, using the applicable tax

rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset

can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

FINANCIAL STATEMENTS

197

ESSENTRA PLC ANNUAL REPORT 2021

ESSENTRA PLC COMPANY ACCOUNTING POLICIES

Essentra plc Company Notes

1. Net operating charges

The auditor was paid £5,125 (2020: £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 118 to 133. The only employees of the Company are the seven Directors and Company Secretary.

2. Investment in subsidiary undertaking

Investment in

subsidiary undertaking

2021

£m

2020

£m

innin

of year

465.8

464.6

Additions

0.8

1 2

End of year

466.6

465.8

3. Debtors

2021

£m

2020

£m

Amounts receivable from subsidiary undertakin

498.3

325.7

498.3

325.7

Receivables due from Group companies to the Company are interest free and repayable on demand. Receivables from Group companies

have been assessed based on lifetime expected credit losses. 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 2021

(2020: nil).

4. Creditors: amounts falling due within one year

2021

£m

2020

£m

Accruals and deferred income

3.5

0.2

3.5

0.2

5. Creditors: amounts falling due after more than one year

2021

£m

2020

£m

US Private Placement Loan Notes

257.7

72.6

257.7

72.6

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

198

ESSENTRA PLC COMPANY NOTES

6. Maturity of financial liabilities

Non bank loans

2021

£m

2020

£m

Debt can be analysed as fallin

due:

Between one and five years

14.8

14.6

More than five years

244.

58.4

Less prepaid facility fees

(1.5)

(0.4)

257.7

72.6

7. Issued share capital

2021

£m

2020

£m

Issued, authorised and fully paid ordinary shares of 25p (2020: 25p) each 75.6

75.6

Number of ordinary shares in issue

innin

of year

302,590,708

264,129,170

Issue of shares durin

the year

38,461,538

End of yea

302,590,708

The issue of share capital during 2020 was in relation to a placement offering of 38,461,538 new shares with par value of 25p issued at 260p

per share.

At 31 December 2021, the Company held 905,157 (2020: 908,650) of its own shares in treasury.

8. Reserves

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company has not been separately presented in

these Financial Statements. The profit attributable to equity holders included in the accounts of the Company is £0 2m (2020: £0.7m).

Included in the profit and loss account are accumulated share-based payments of £49.9m (2020: £49.1m) which are credited directly to

reserves. Full details of these share-based payments are set out in the Annual Report on Remuneration on pages 118 to 133.

9. Dividends

Per share Total

2021

2020

2021

£m

2020

£m

2020 final: paid 1 June 2021

3.3

10.0

2021 interim: paid 29 October 2021

2.0

6.0

2021 proposed final: payable 1 June 2022

4.0

12.1

FINANCIAL STATEMENTS

199

ESSENTRA PLC ANNUAL REPORT 2021

ESSENTRA PLC COMPANY NOTES

Essentra plc Company Notes continued

10. Subsidiary undertakings

The companies named below (including dormant entities) are subsidiary undertakings of Essentra plc and are included in the consolidated

financial statements of the Group. The investments in the companies below relate to ordinary shares or common stock. The principal

country in which each company operates is the country of incorporation.

All entities below are wholly owned subsidiaries of the Group except for ITC Essentra Limited (India) (50% owned) and China Tobacco

Essentra (Xiamen) Filters Co., Ltd (49% owned). The ownership held by the Group in these companies are through holding of ordinary

shares in these companies and they are accounted for as subsidiaries of the Group in the consolidated financial statements due to a control

achieved via board membership.

On 2 August 2021, Essentra acquired the majority of the share capital of Jiangxi Hengzhu Electrical Cabinet Lock Co., Ltd (‘‘Hengzhu’’),

an access hardware manufacturer and distributor in China. Essentra initially acquired 73% of the business for ¥103m (approximately

£11.8m), with the remaining 27% stake subject to put and call options whereby Essentra may acquire the minority shareholding for

consideration determined by the future operating performance of the business to 31 December 2022 and capped at a maximum of ¥37.5m

(approximately £4.3m) and are exercisable 18 months after the acquisition. The remaining 27% stake does not confer any shareholder right

(including voting right, entitlement to dividends and right to transfer to other parties) to the vendor shareholder. Therefore it is concluded

that the amount payable under the put option in substance represents deferred consideration and is accounted for as a financial liability

in the consolidated financial statements. No non-controlling interest is recognised in the consolidated financial statements in respect of

this acquisition.

Due to statutory requirements, ITC Essentra Limited (India) has a financial year end of 31 March. All other subsidiaries have the same year

end as the parent company of 31 December.

Essentra International Limited is the only direct subsidiary of Essentra plc.

Country of

incorporation

Principal activity Address of registered office

Essentra (Ban

or) Ltd. U

Manufacturin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Components Limited U

Manufacturin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Filter Products Limited U

Manufacturin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Packa

Limited U

Manufacturin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Packa

& Security Limited U

Manufacturin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT Filter Products Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT Holdin

s (No.1) Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT Holdin

s (No 2) Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT International Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT Packa

& Securin

Solutions Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Filter Products International Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra International Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Overseas Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Filter Holdin

s Limited U

Holdin

Company Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Pension Trustees Limited U

Pension Trustee Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Finance Limited U

Treasury activities Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra (Northampton) Ltd. U

Non-tradin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Essentra Services Limited U

Non-tradin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Filtrona Limited U

Non-tradin

Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Alliance Plastics Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

arette Components Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT Components Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

ESNT Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Filtrona Custom Mouldin

Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

North West Plastics Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Skiffy Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

Stera Tape Limited U

Dormant Lan

ford Locks, Kidlin

ton, Oxfordshire, OX5 1H

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

200

ESSENTRA PLC COMPANY NOTES

10. Subsidiary undertakings continued

Country of

incorporation

Principal activity Address of registered office

Essentra Filter Products In

Manufacturin

1675 South State Street, Ste B Dover, DE 19901,

United States

Essentra Packa

Inc US

Manufacturin

10 S Jefferson Street, Ste 1400 Roanoke, VA 24011,

United States

Essentra Plastics LLC US

Manufacturin

1675 South State Street, Ste B Dover, DE 19901,

United States

Essentra Packa

Puerto Rico, Inc. US

Manufacturin

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

Essentra Packa

US Inc US

Manufacturin

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

Innovative Components, Inc. US

Manufacturin

1315 W Lawrence Avenue, Sprin

field, IL 62704,

United States

Micro Plastics, Inc. US

Manufacturin

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

3C! Packa

, In

US Manufacturin

1000 CCC Drive, Clayton, NC 27520, United States

Essentra Components Inc US

Distribution

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

Essentra Components Japan In

Distribution

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

ESNT Holdin

s In

Holdin

Company

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

ESNT (Porous) Holdin

s Inc. US

Holdin

Company

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

ESNT US Holdin

s Corp US

Holdin

Company

1675 South State Street, Ste B Dover, DE 19901,

United States

Essentra Corporation US

Holdin

Company

1675 South State Street, Ste B Dover, DE 19901,

United States

Essentra Holdin

s Corp. (DE) US

Holdin

Company

1675 South State Street, Ste B Dover, DE 19901,

United States

US NewCo LLC US

Holdin

Company

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

ESNT Components Co. US

Non-tradin

Two Westbrook Corporate Center, Suite 200,

Westchester IL 60154, United States

Essentra Components B.

. Netherlands Distribution Dra

onder 3, 5554 GM Valkenswaard, Netherlands

Essentra Packa

B.V. Netherlands Distribution Celsiuswe

37, 8912 AM, Leeuwarden, Netherlands

Blue NewCo 1 B.V. Netherlands Holdin

Company Beatrixstraat 7, BUITENPOST, 9285 TV, Netherlands

Blue NewCo 2 B.V. Netherlands Holdin

Company Beatrixstraat 7, BUITENPOST, 9285 TV, Netherlands

Blue NewCo 3 B.V. Netherlands Holdin

Company Beatrixstraat 7, BUITENPOST, 9285 TV, Netherlands

Blue NewCo 4 B.V. Netherlands Holdin

Company Beatrixstraat 7, BUITENPOST, 9285 TV, Netherlands

ESNT Holdin

s Cooperatie 1 W.A. Netherlands Holdin

Company Celsiuswe

37, 8912 AM, Leeuwarden, Netherlands

ESNT Holdin

s (Netherlands) B.

. Netherlands

Holdin

Company -

Dissolved 6 January 2022

Dra

onder 3, 5554 GM Valkenswaard, Netherlands

Essentra B.

. Netherlands Holdin

Company Beatrixstraat 7, BUITENPOST, 9285 TV, Netherlands

Essentra Holdin

s Cooperative

. Netherlands

Holdin

Company -

Dissolved 6 January 2022

Dra

onder 3, 5554 GM Valkenswaard, Netherlands

Essentra Holdin

s (No 2) Cooperative

. Netherlands

Holdin

Company -

Dissolved 6 January 2022

Dra

onder 3, 5554 GM Valkenswaard, Netherlands

Essentra International B.

. / LLC Netherlands Holdin

Company Dra

onder 3, 5554 GM Valkenswaard, Netherlands

ESNT Holdin

. Netherlands Non-tradin

Dra

onder 3, 5554 GM Valkenswaard, Netherlands

ESNT Holdin

s Cooperatie 2 W.A. Netherlands Non-tradin

Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands

nmechanica Surhuisterveen B.V. Netherlands Non-tradin

Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands

Linde Vouwkartonna

e B.V. Netherlands Non-tradin

Beatrixstraat 7, Buitenpost, 9285 TV, Netherlands

Richco Benelux B.

. Netherlands Non-tradin

Dra

onder 3, 5554 GM Valkenswaard, Netherlands

FINANCIAL STATEMENTS

201

ESSENTRA PLC ANNUAL REPORT 2021

ESSENTRA PLC COMPANY NOTES

Essentra plc Company Notes continued

10. Subsidiary undertakings continued

Country of

incorporation

Principal activity Address of registered office

Skiffy B.

. Netherlands Non-tradin

Dra

onder 3, 5554 GM Valkenswaard, Netherlands

Essentra Packa

Ireland Limited Ireland Manufacturin

8 Airways, Industrial Estate, Dublin 17, Ireland

ESNT (Cherry Orchard) Holdin

s Limited Ireland

Holdin

Company -- strike

off listed

Unit 629 Ida Industrial Park Northern Extension,

Old Kilmeaden Road, Watherford, Ireland

C.B. Packa

Limited Ireland

Holdin

Company -- strike

off listed

8 Airways Industrial Estate, Dublin 17, Ireland

ESNT (Cherry Orchard) Limited Ireland

Holdin

Company -- strike

off listed

8 Airways Industrial Estate, Dublin 17, Ireland

ESNT Finance Ireland Limited Ireland

Holdin

Company -- strike

off listed

7 Airways Industrial Estate, Clo

hran, Dublin 17,

D17 RR88, Ireland

Essentra Finance (Euro) Ireland Limited Ireland

Holdin

Company -- strike

off listed

7 Airways Industrial Estate, Clo

hran, Dublin 17,

D17 RR88, Ireland

Essentra Pte.Ltd Sin

apore

Distribution

36 Robinson Road #17-01, City House, Sin

apore,

068877, Singapore

Essentra Filter Products Leasin

Pte. Ltd Sin

apore

Leasin

Company

36 Robinson Road #17-01, City House, Sin

apore,

068877, Singapore

Essentra (MEA) Pte. Ltd Sin

apore

Holdin

Company

36 Robinson Road #17-01, City House, Sin

apore,

068877, Singapore

Essentra Filter Products Development Co. Pte.

Ltd

Sin

apore

Non-tradin

36 Robinson Road #17-01, City House, Sin

apore,

068877, Singapore

Essentra Components GmbH Austria Holdin

Company Schubertrin

6, 1010 Wien, Austria

Essentra Pty Ltd Australia

Treasury activities 503-505 Victoria Street, Wetherill Park, NSW, 2145,

Australia

Essentra Industria E Commercio LTD

Brazil

Manufacturin

Room 7, No 1000 Avenida Emilio Marconato, Centro

Comercial, Chacara Primavera, Jaguariuna,

Sao Paulo, 13.916-074, Brazil

Essentra Limited Canada Manufacturin

2538 Spears Road, Oakville ON L6L 5K9, Canada

Essentra Hen

zhu Precision

Components Co., Ltd

China

Manufacturin

No. 12 Jin

fa Avenue, Yichun, Economic and

Technological, Development Zone, Yichun City,

Jiangxi Province, China

China Tobacco Essentra (Xiamen) Filters Co.,

Ltd

China

Manufacturin

Floor 2 No 289 Binshui Road, Qiaoyin

Street,

Jimei Ditrict, Xiamen City, China

Essentra Precision Machinery Components

(Ningbo) Co. Ltd.

China

Manufacturin

99 Huan

hai Road, Beilun District, Nin

bo,

Zhejiang Province, China

Essentra Tradin

(Nin

bo) Co. Ltd China

Distribution

No.99 Huan

hai Road, Beilum District, Nin

bo,

Zhejiang Province, China

Essentra Components International Tradin

(Shanghai) Co Ltd

China

Holdin

Company

Room 347, Xinmaolou Buildin

, 2 Taizhon

South

Road, China (Shanghai) Pilot Free Trade Zone,

Pudong New Area, Shanghai, 200120, China

Essentra Plastic Tradin

(Nin

bo) Co. Ltd China

Holdin

Company

99 Huan

hai Road, Beilun District, Nin

bo,

Zhejiang, China

Componentes Innovadores Limitada Costa Rica

Manufacturin

Carta

o-Carta

o Parque Industrial Y Zona Franca

Zeta, Cartago, Edificios, 48C3 48C4, Costa Rica

Essentra Components sro Czech Republic

Holdin

Company

Vídenská 101/119, Dolní Heršpice, Brno, 619 00,

Czech Republic

Essentra Packa

S.a.r.l. France

Holdin

Company

-27200, Sarre

uemines, Rue Guillaume, Schoettke,

France

Essentra Components SAS France Non-tradin

280 rue de la Belle Étoile, 95700, Roissy, France

Essentra International GmbH Germany Holdin

Company Filmstr. 5, 06766, Bitterfeld-Wolfen, Germany

Essentra Components GmbH Germany Manufacturin

3, Montel-Allee, Nettetal, 41334, Germany

Essentra Packa

GmbH Germany

Manufacturin

Filmstrasse. 5, D-06766, Edisonstrasse, Wolfen,

Germany

Essentra Components Limited -

Branch Germany

Germany

Distribution Montel-Allee 3, 41334 Nettetal, Germany

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

202

ESSENTRA PLC COMPANY NOTES

10. Subsidiary undertakings continued

Country of

incorporation

Principal activity Address of registered office

Essentra (Hon

Kon

) Limited Hon

Kon

Non-tradin

36/F, Tower Two, Times Square, 1 Matheson Street,

Causeway Bay, Hong Kong

Essentra Components Kft Hun

ary

Holdin

Company 1113, Na

yszolos ut 11-15, Budapest, Hun

ary

Essentra Filter Products Kft Hun

ary

Manufacturin

2310 Szi

etszentmiklos, Leshe

y ut 30, Hun

ary

PT Essentra Indonesia

Manufacturin

Jalan Berbek Industri 1, 18-20 Surabaya Industrial

Estate Rungkut (SIER), Sidoario, 61256, Indonesia

PT Essentra Tradin

Surabaya Indonesia

Manufacturin

Jalan Berbek Industri I/23, Kel. Berbek, Kec, Waru,

Kab. Sidoarjo Prov,Surabaya, Jawa Timur, Indonesia

Essentra (India) Private Limited India

Manufacturin

No.3, (old plot nos. 18 & 23), 3rd Main Road, Peenya

Industrial Area, Phase 1, Bangalore, Yeshwantpur

Hobli, 560 058, India

ITC Essentra Limited India

Manufacturin

Dodda

ala Post, Yarthi

anahally, (Via) Bettahalasur,

Bangalore North, 562 157, India

ESNT Holdin

s Sp

Italy

Holdin

Company

Podenzano (PC), Loc.I Casoni Fraz. Gar

ia,

Via Copernico no. 54, 29027, Italy

Essentra Packa

Srl Italy

Distribution

Via Copernico n.54, Loc. 1 Casoni Fraz., Gari

29027, Podenzano, Italy

Essentra Components srl Italy

Non-tradin

Via Massarenti, 1 Loc, 1 Ma

io, 40013, Castel

Maggiore, Italy

Essentra Filter Products Spa Italy

Non-tradin

Casoni di Gari

a, Via Copernico n. 54, Casoni PC,

29027, Italy

Essentra Packa

Luxembour

Sarl Luxembour

Non-tradin

8-10, Avenue de la Gare, L-1610, Luxembour

Abric Encode Sdn Bhd Malaysia

Manufacturin

Unit 1110 Block A, Pusat Da

an Phileo

Damansara II, 15 Jalan 16/11 Off Jalan Damansara,

46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Essentra Malaysia Sdn Bhd Malaysia

Non-tradin

Unit 1110 Block A, Pusat Da

an Phileo

Damansara II, 15 Jalan 16/11 Off Jalan Damansara,

46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Essentra Asia Sdn Bhd Malaysia

Non-tradin

Unit D -

- 3A -

- 10, 4th Floor, Greentown Square, Jalan

Dato’ Seri Ahmed Said, 30450 Ipoh, Perak, Malaysia

Essentra Components SEA (M) Sdn Bhd Malaysia

Non-tradin

D5-5-6, Solaris Dutamas 1 , Jalan Dutamas 1, 50480,

Kuala Lumpur, Malaysia

Essentra Components S.A. de C.V. de R.L. Mexico

Manufacturin

Carretera a Huinala #510, Apodaca, NL 66640,

Mexico

ESNT Limited New Zealand

Services Qui

Partners, Floor 7, 36 Brandon Street,

Wellington Central, Wellington, 6011, New Zealand

Essentra Filter Products S.A. Para

uay

Distribution Calle 12, Acacary, Cuidad del Este, Para

uay

Essentra Sp. z o.o. Poland

Non-tradin

11 Lakowa Street, 90-562, Lodz, Poland

Boxes Presti

e Poland Sp. z o.o. Poland

Dormant Tokarska 25, 20-210, Lublin, Poland

Essentra Packa

Spólka z o.o. Poland

Manufacturin

Tokarska 25, 20-210, Lublin, Poland

FINANCIAL STATEMENTS

203

ESSENTRA PLC ANNUAL REPORT 2021

ESSENTRA PLC COMPANY NOTES

Essentra plc Company Notes continued

10. Subsidiary undertakings continued

Country of

incorporation

Principal activity Address of registered office

Essentra Co., Ltd. Republic of

Korea

Distribution 5th Floor, One IFC, 10, Guk

eumyun

-ro,

Youngdeungpo-gu, Seoul, 07326, Korea, Republic of

Essentra Components SRL Romania

Distribution Burcuresti Sectorul 1, Strada

olana, Nr. 68-72, Eta

2, Biroul NR.5, Romania

Essentra Components sro Slovakia

Distribution Go

ol’ova 18, 852 02 Bratislava, Slovakia

Essentra Components (Pty) Ltd South Africa

Distribution Unit 2. Sa

e Corporate Park, Corner Suni and

Tsessebe Streets, South Midrand, Gauteng, 1683,

South Africa

ESNT Holdin

s S.A.U. Spain

Holdin

Company

Carrer dels Fusters 18-20, Poli

ono Industrial Can

Cuyas, Montcada I Reixac, 08110, Barcelona, Spain

Essentra Packa

S.A. Spain

Manufacturin

Carrer dels Fusters 18-20, Poli

ono Industrial Can

Cuyas, Montcada I Reixac, 08110, Barcelona, Spain

Nekicesa Global Packa

SL Spain

Non-tradin

Ctra. de Navalcarnero a Chinchon km., 21,2 Grinon,

28971, Madrid, Spain

Nekicesa Packa

S.L.U Spain

Manufacturin

Ctra. de Navalcarnero a Chinchon km., 21,2 Grinon,

28971, Madrid, Spain

Essentra Components S.L.U Spain

Distribution

Calle Roure Gros 1-11, Poli

ono Industrial Mas

d’En Cisa, 08181, Spain

Essentra Components AB Sweden

Manufacturin

Askims Verkstadsva

13Sweden, 436 34 Askim,

Vastra Gotalands Ian, Goteborg kommun, Sweden

Essentra Components Sarl Switzerland

Non-tradin

MCE Avocats, rue du Grand-Chêne 1-3, 1003

Lausanne, Switzerland

Essentra Eastern Limited Thailand

Non-tradin

111/5 Moo 2 Tambon Makamku, Amphur Nikom

Pattana, Rayong Province, Thailand

San Yai Holdin

Company Limited Thailand

Holdin

Company

116/3 Soi Thiantalay 24, Ban

khunthian-Chaitalay

Road, Sub-District Thakam, District Bangkhunthian,

Bangkok, 10150, Thailand

Pranakorn Holdin

Company Limited Thailand

Holdin

Company

116/3 Soi Thiantalay 24, Ban

khunthian-Chaitalay

Road, Sub-District Thakam, District Bangkhunthian,

Bangkok, 10150, Thailand

Essentra Limited Thailand

Manufacturin

116/3 Soi Thiantalay 24, Ban

khunthian-Chaitalay

Road, Thakam, Bangkhunthian, Bangkok, 10150,

Thailand

Apex Filters Company Limited Thailand

Non-tradin

31/2 Rama 3 Road, Chon

nonsee, Yannawa,

Bangkok 10120, Thailand

Mesan Kilit A.S. Turkey

Distribution

Ilitelli Or

anzie Sanayi, Bol

esi Metal Is San, Sit.7.Blok

No24 Basaksehir, Istanbul, Turkey

Essentra FZE

United Arab

Emirates

Manufacturin

Plot No. S20403, Jebel Ali Free Zone (JAFZA), PO Box

No 261392, Dubai, United Arab Emirates

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

204

ESSENTRA PLC COMPANY NOTES

Independent auditors’ report

to the members of Essentra plc

Report on the audit of the financial statements

Opinion

In our opinion:

• Essentra plc’s Group financial statements and Parent company financial statements (the ‘‘financial statements’’) give a true and fair

view of the state of the Group’s and of the Parent company’s affairs as at 31 December 2021 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;

• the Parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘‘Reduced Disclosure Framework’’, and applicable

law); and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report 2021 (the ‘‘Annual Report’’), which comprise: the

Consolidated Balance Sheet and Essentra plc Company Balance Sheet as at 31 December 2021; 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 Accounting Policies, Critical Accounting

Judgements and Estimates, Essentra plc Company Accounting Policies; and the Notes to the financial statements.

Our opinion is consistent with our reporting to the Audit and Risk Committee.

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 Parent company or its controlled undertakings in the

period under audit.

Our audit approach

Context

Strategic review:

On 26 October 2021, the Group announced the strategic goal to become a pure play Components business with the first step in this process

being to review the full range of strategic options for the Filters business. On 26 November 2021, it was announced the Group had decided

to commence a strategic review of the Packaging division. As part of our audit planning, we have considered the impact of the strategic

reviews on our audit risk assessment including evaluating management’s analysis of its impact on the Group financial statements. As part

of this risk assessment, we have considered the potential impact on the goodwill impairment and going concern assessments, along with

management’s assessment of the criteria to recognise assets held for sale, and concluded there to be no material impact based on the

information available up to the date of signing our report.

FINANCIAL STATEMENTS

205

ESSENTRA PLC ANNUAL REPORT 2021

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

Independent auditors’ report to the members of Essentra plc continued

Climate change:

In planning our audit, we considered the potential impact of climate change on the Group and Parent company financial statements.

Given the principal activities of the Group, it is highly likely that climate risk will have a significant 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. We note management’s conclusion that material physical risks

are likely to arise in the longer term and therefore have no current financial statement impacts. Transitional risks are considered to have

a more significant impact on the business. However, these are only expected to arise in the medium to long term as set out in the Task

Force on Climate-Related Financial Disclosures (‘‘TCFD’’) on page 29. We performed procedures to evaluate the appropriateness of

management’s risk assessment including the use of our climate change experts. 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 goodwill impairment in the Packaging division, as discussed in our key audit matter below,

and the long term viability assessment. However, our procedures did not identify any material impact on either the Group or Parent

company financial statements or our key audit matters for the year ended 31 December 2021. We reviewed management’s financial

statement disclosures relating to climate change, in the Critical Accounting Judgements and Estimates and note 8, to confirm they

are consistent with the results of management’s risk assessment and our audit procedures.

Overview

Audit scope

• Local PwC component teams engaged to perform full scope audit procedures over 33 reporting units.

• PwC Group audit team performed full scope audit procedures over a further 7 reporting units.

• Specified audit procedures were performed by component auditors over certain balances, including revenue, at a further 6 reporting units.

• PwC Group audit team also performed audit procedures over specific balances within a further 41 reporting units.

• The audit of the Parent company financial statements was undertaken by the PwC Group audit team and included substantive

procedures over all material balances and transactions.

Key audit matters

• Presentation of adjusting items (Group).

• Goodwill impairment in the Packaging division (Group).

• Recoverability of the Parent company’s investment in subsidiary undertakings (Parent company).

Materiality

• Overall group materiality: £3,300,000 (2020: £3,300,000) based on 5% of profit before tax.

• Overall Parent company materiality: £7,000,000 (2020: £7,100,000) based on 1% of net assets.

•

Performance materiality: £2,500,000 (2020: £2,500,000) (Group) and £5,250,000 (2020: £5,300,000) (Parent company).

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.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

206

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

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.

Recoverability of the Parent company’s investments in subsidiary undertakings (Parent company) is a new key audit matter this year.

Impact of COVID-19 (Group and Parent company) and Compliance with US sanctions legislation (Group), which were key audit matters

last year, are no longer included because the impact of COVID-19 is considered to be reduced to a sufficiently low level and compliance with

US sanctions legislation is now embedded within the business with no compliance issues noted in the year. Otherwise, the key audit matters

below are consistent with last year.

Key audit matter How our audit addressed the key audit matter

Presentation of ad

ustin

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 and other items such as site closure costs and one-

off projects.

In the year the most significant adjusting items relate to write off of

customisation and configuration costs of SaaS arrangements (£11.8

million), restructuring costs (£5.8 million), external professional

costs associated with the strategic reviews and certain corporate

development activities (£4.1 million), acquisition and integration

related costs associated with acquisition of Jiangxi Hengzhu

Electrical Cabinet Lock Co. Limited and the commencement of

production in the Filters China joint venture (£1.5 million). These

costs have been offset by a £4.5 million gain on sale of the former

Packaging Moorestown property and £4.8 million release of

provision relating to historical claims which have been settled in

the year.

We focused on this area as there is limited guidance relating to this

presentational matter within IFRS and judgement is required by the

directors in determining whether items classified as adjusting are

consistent with the Group’s accounting policy. Consistency in

identifying and disclosing items as adjusting is important to

maintain comparability of the results year on year.

See 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 financial judgements section in the Audit

and Risk Committee report.

We assessed the appropriateness of the Group’s accountin

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 written off which have

historically been capitalised in the balance sheet.

In April 2021 the International Accounting Standards Board (‘‘IASB’’)

ratified an earlier IFRS Interpretations Committee (‘‘IC’’) agenda

decision on Configuration and Customisation (‘‘CC’’) costs in a

Cloud Computing Arrangement. This clarified the status of SaaS

arrangements including consideration of whether spend on such

arrangements creates an asset that the Group controls. We have

tested a sample of projects previously capitalised and inspected

contracts, held discussions with external service providers together

with our internal specialist to test management’s assessment. Due

to the highly material value of the adjustment in the current and

prior year, we agree with management’s conclusions and

presentation of this item as adjusting in the year for projects of

significant value.

Restructuring costs include employee redundancy (£3 million),

write down of assets (£1 2 million) and other closure costs such as

external project management consultants, site closure and legal

costs (£1.6 million). We have performed sample testing across all

balances and verified those samples to payroll records, supporting

invoices, agreements or other evidence. For asset write-offs, we

have agreed the book value to the accounting records and

evaluated management estimates around potential resale values

of fixed assets.

The remaining cost of £4.1m relating to external professional costs

and acquisition and integration related costs of £1.5 million have

been tested through sampling and items have been traced to

supporting invoices and other documentation.

We have traced the sales proceeds on sale of the Packaging

Moorestown property to bank statements and recomputed the

gain on disposal.

We have tested other one off releases of provisions recognised

in adjusting items to underlying settlement agreements. The

classification of these items is considered appropriate as the release

mirrors the treatment of the charge when the provisions were

created in prior years.

The disclosures included in note 2 were reviewed and deemed

reasonable.

FINANCIAL STATEMENTS

207

ESSENTRA PLC ANNUAL REPORT 2021

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

Independent auditors’ report to the members of Essentra plc continued

Key audit matter How our audit addressed the key audit matter

Goodwill impairment in the Packa

division (Group)

The Group has goodwill of £327.0 million, of which £208.5 million is

allocated to the Packaging division, £96.8 million to Components,

and £21.7 million to Filters. Under IAS 36 Impairment of Assets, all

cash generating units (‘‘CGUs’’) containing goodwill and indefinite

lived intangible assets must be tested for impairment at least

annually. Management has prepared a value in use (‘‘VIU’’)

calculation for each of the three divisions in order to assess

their recoverability.

Consistent with prior years, the headroom on the annual

impairment assessment for the Packaging division is more sensitive

to changes in key assumptions and as such is the focus area for our

key audit matter. The headroom against the asset carrying value as

at 31 December 2021 is £380.8 million as compared to £252.5 million

in 2020. The increase in headroom is mainly due to the decrease in

the discount rate used and increase in long term revenue growth

rate used by management in the VIU model. The changes in these

assumptions has been partially offset by the impact of COVID-19 on

short term trading performance, which has affected both the

beauty and pharmaceuticals markets in 2020 and 2021 and has

disrupted management’s plans to return to industry average margins.

The impairment reviews performed by management contain

a number of significant judgements and estimates including

revenue growth rates, operating profit margins and discount

rates. A change in these assumptions can result in an impairment

of the assets.

Management considered the impact of climate change on their

impairment reviews, including an assessment of the impact of the

Group’s externally published environmental targets, along with the

output of the climate risks and opportunities assessment performed

by their external advisors.

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

financial judgements section in the Audit and Risk Committee report.

We assessed the methodolo

y applied by mana

ement in

performing their impairment review and tested the integrity of

management’s cash flow model for the VIU calculation.

We agreed key assumptions made in the impairment review, related

to operating profit margins to industry and competitor data. We

evaluated the future cash flow forecasts, including short term cash

flows, and the process by which they were determined. In doing so

we compared the cash flow forecasts to the latest Board approved

plans and compared prior year budgets to 2021 actual performance

in order to assess the quality of management’s forecasting process.

Whilst the actual performance in 2021 was below plan due to the

impact of COVID-19, based on the forecasting history to date, we

did not identify any indicators of bias in management’s medium to

long term forecasts for the Packaging division.

With the support of our valuation experts, we tested key

assumptions, including the long term revenue growth rate and

discount rate. We compared growth rates to third party published

economic and industry forecasts and analyst reports and found the

long term revenue growth assumption to be reasonable. We

validated the discount rate by recalculating the Group’s weighted

average cost of capital and found the assumption used by

management to be outside our reasonable range. Utilising a

discount rate that we would consider to be within an appropriate

range would reduce the headroom in the VIU calculation but would

not indicate any impairment.

We performed sensitivity analyses around the key assumptions to

ascertain the extent of change in those assumptions that, either

individually or collectively, would be required for goodwill to be

impaired. We noted that the required level of change was beyond

that which we would consider likely given the current market

conditions and recent performance of the business.

We challenged management on how they had incorporated the

impact of climate change into their VIU calculation. We obtained a

copy of the climate risks and opportunities assessment performed

by management’s external advisors, and understood the scenario

analysis performed. We obtained management’s bridge between

the report produced by their external advisors and future financial

impact included in the VIU model. We performed sensitivity

analyses around the assumptions included within management’s

bridge and noted that the assessment was not materially sensitive

to changes in these assumptions.

We also considered the Group’s externally published environmental

targets and the progress made towards these targets to date

including the potential costs of meeting these targets in the future.

Furthermore, given the announcement of the strategic review of the

Packaging business we considered any indicators of potential fair

value less cost to sell (‘‘FVLCTS’’) up to the date of signing the

report. Based on our inquiries of management, we are not aware of

any indications that the FVLCTS for the division would be lower than

the asset carrying values and did not identify any evidence which

contradicts the conclusions reached by management’s VIU

impairment test.

We also assessed disclosures included within note 8 against the

requirements of IFRS and found them to be reasonable.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

208

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

Key audit matter How our audit addressed the key audit matter

Recoverability of the Parent company’s investment in

subsidiary undertakings (Parent company)

The value of the investment held by the Parent company at year

end is £466.6 million. 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 Parent company balance sheet.

Investments are tested for impairment if impairment indicators

exist. If such indicators exist, the recoverable amounts of the

investments in subsidiaries are estimated in order to determine the

extent of the impairment charge, if any. Any such impairment

charge is recognised in the income statement.

Judgement is required in this area, particularly in assessing: (1)

whether an event has occurred that may indicate that the related

asset values may not be recoverable; and (2) whether the carrying

value of an asset can be supported by the recoverable value, being

the higher of FVLCTS or VIU which is estimated based on the

continued use of the asset in the business.

No impairment triggers were identified as a result of management’s

assessment.

Given the magnitude of the investment and the judgement involved

we have identified this area as a key audit matter for the audit of

the Parent company.

See notes 2 and 10 in the Parent company financial statements for

details of the Parent company’s investment in subsidiary entities.

We challen

ed mana

ement’s assertion that no impairment

triggers were identified that would necessitate a full impairment

review to be performed. We performed a review of the market

capitalisation of the Group and the net assets of the subsidiary

entity against the investment carrying value, considered the

external market and economic factors and also our review of the

discounted cash flow models prepared for the purpose of testing

impairment of the carrying value of goodwill across all three

divisions. (Please see our Key Audit Matter in respect of Goodwill

impairment in the Packaging division above).

Based on these procedures, we concluded that we concur with

management’s assessment that there were no triggers that

would indicate the directors were required to perform a full

impairment test.

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 Parent company, the accounting processes and controls, and the industry in

which they operate.

The Group is split into three divisions being Components, Packaging and Filters. Each division consists of a large number of reporting sites

spread globally across 34 territories. There are 468 reporting units within the consolidation, which include the reporting sites and other

consolidation units. We did not identify any individually significant components within the Group, with the largest contribution to revenue

being 6.9% from one reporting site, and the average being 1%. We determined the most effective approach was to engage PwC local

component teams to perform full scope procedures over 33 reporting units, with the Group audit team performing full scope audit work

over a further 7 reporting units. In addition, specified audit procedures were performed over certain balances, including revenue, at a

further 6 reporting units. In the larger sites in North America, specified procedures over fixed assets, inventory and trade receivables were

also performed. The Group audit team also performed audit procedures over specific balances within a further 41 reporting units. This

approach ensures that appropriate audit coverage has been obtained over all financial statement line items. Where work was performed

by component auditors, we determined the appropriate level of involvement we needed to have in that audit work to ensure we could

conclude that sufficient appropriate audit evidence had been obtained for the Group financial statements as a whole. We issued written

instructions to all component auditors and had regular communications with them throughout the audit cycle. This included a virtual

clearance meeting with each component team and review of all significant matters reported. In addition members of the Group

engagement team have reviewed working papers of a number of component audit teams and attended clearance meetings virtually with

local management for sites in the UK and the US. Based on the detailed audit work performed across the Group, we have gained coverage

of 68% of revenue, 62% of profit before tax and 74% of net assets.

FINANCIAL STATEMENTS

209

ESSENTRA PLC ANNUAL REPORT 2021

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

Independent auditors’ report to the members of Essentra plc continued

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,

together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit

procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually

and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Financial statements -- Group Financial statements -- Parent company

Overall materiality

£3,300,000 (2020: £3,300,000). £7,000,000 (2020: £7,100,000).

How we determined it 5% of profit before tax, amortisation of acquired

intangible assets and adjusting items.

(2020: Three year average of 5% of profit before

tax, amortisation of acquired intangible assets and

adjusting items).

1% of net assets.

Rationale for

benchmark applied

The Group is profit-oriented, therefore it is

considered most appropriate to apply a rule of

thumb based upon a profit-based benchmark. The

directors, management and the users of the Group

financial statements focus on adjusted numbers,

being adjusted operating profit, adjusted net

income or adjusted pre-tax profit. The Group

defines ‘adjusted’ as excluding the impact of

amortisation of acquired intangible assets

and adjusting items. Based on this, we consider

a benchmark based on profit before tax,

amortisation of acquired intangible assets

and adjusting items to be most appropriate.

The entity is a holdin

company of the rest of the

Group and is not a trading entity. Therefore an

asset based measure is considered appropriate.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall group materiality. The range of

materiality allocated across components was between £60,000 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% (2020: 75%) of overall materiality, amounting to £2,500,000 (2020: £2,500,000) for the Group financial

statements and £5,250,000 (2020: £5,300,000) for the Parent company financial statements.

In determining the performance materiality, we considered a number of factors --- the history of misstatements, risk assessment and

aggregation risk and the effectiveness of controls --- and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £160,000

(Group audit) (2020: £160,000) and £160,000 (Parent company audit) (2020: £160,000) as well as misstatements below those amounts

that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the directors’ assessment of the Group’s and the Parent 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 period to 31 October 2023 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;

• evaluating management’s analysis of the likely impacts of the ongoing strategic reviews on the going concern assessment; and

• validating that climate change is expected to have a limited impact during the period of the going concern assessment.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

210

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

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 Parent 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 Parent

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, which includes reporting based on the Task Force on Climate-related

Financial Disclosures (‘‘TCFD’’) recommendations. 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 2021 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 Parent 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.

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 Parent company’s compliance with the provisions of the UK Corporate Governance C

ode

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 Parent 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 Parent 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 Parent 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.

FINANCIAL STATEMENTS

211

ESSENTRA PLC ANNUAL REPORT 2021

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

Independent auditors’ report to the members of Essentra plc continued

Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and

only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in

alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with

the financial statements and our knowledge and understanding of the Group and Parent 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 Parent 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 Parent company’s

compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for

review by the auditors.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of Directors’ Responsibilities 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 Parent 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 Parent 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 the Listing Rules, UK and overseas tax legislation, employment laws and regulations , health and safety legislation and import

and export restrictions including US sanctions legislation, and we considered the extent to which non-compliance might have a m

aterial

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. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial

statements (including the risk of override of controls), and determined that the principal risks were related to posting of journal entries to

improve revenue performance or to manipulate metrics relating to bank covenants, and management bias in key accounting estimates.

The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit

procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or component

auditors included:

• Review of correspondence with regulators and government authorities.

• Review of correspondence with legal advisors.

• Review of matters reported through the Group’s whistleblowing helpline and the results of management’s investigation of such matters.

• Enquiries of management at the Group, divisional and local levels.

• Enquiries of the Group’s legal team.

• Enquiries with component auditors.

• Evaluation of management’s controls designed to prevent and detect irregularities, in particular their compliance procedures in respect

of sanction market trading.

• Review of internal audit reports in so far as they related to the financial statements.

• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations which result in an

impact to revenue or to metrics relevant to banking covenants.

• Challenging estimates and judgements made by management in determining significant accounting estimates, in particular in relation

to impairment of goodwill in the Packaging division, adjusting items and going concern.

FINANCIAL STATEMENTS

ESSENTRA PLC ANNUAL REPORT 2021

212

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

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 Parent company’s members as a body in accordance with

Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume

responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where

expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not obtained all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Parent 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 Parent 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 5

years, covering the years ended 31 December 2017 to 31 December 2021.

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.

Nicholas Stevenson (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Milton Keynes

18 March 2022

FINANCIAL STATEMENTS

213

ESSENTRA PLC ANNUAL REPORT 2021

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ESSENTRA PLC

Printed in the UK by Pureprint Group, a CarbonNeutral

company.

Both the paper mill and printer are registered to the Environmental

Management System ISO 14001 and are Forest Stewardship

Council

(FSC

) chain-of-custody certified.

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