Good day, and welcome to the Essentra Strategic and Q3 Trading Update conference call. At this time, I'd like to turn the conference over to Paul Forman and Lily Liu. Please go ahead. Thank you, Tracy, and good morning to you all, and thank you for joining this call. It's Paul Forman here, and I'm with Lily. My intention would be to speak for 5-10 mins and then hand over the floor for questions. There were two elements to the announcement we made today, and I'll take each in turn. The first was to communicate the board's conclusion that both the growth aspirations of all three divisions and also shareholder value would be optimized by becoming a pure-play components business over time. Then secondly, we'll touch upon the trading update and the outlook statement. The background to the strategic update and the conclusions that the board have arrived at really has its origins going back to the earlier phases of our development. Our approach was always to have to stabilize the business, devise strategies, and then grow. Over time, we have built three global leadership or global divisions with leadership positions. I think that operationally, but also strategically, we continue to go from strength to strength. We have weathered the COVID storm, I think, in very good shape and are highly esteemed by our customers. All three divisions, notwithstanding a difficult market context for packaging through elective surgeries and prescriptions, have all progressed very pleasingly. We have to recognize, however, that they have three different growth journeys and limited synergies or overlaps. Therefore, when the board stands back, it is a unanimous view that to achieve those twin objectives of optimizing growth potential and creating value, that the three should have independent financing structures, partnerships or whatever else, and that the PLC will evolve to become a pure-play global components business in due course. The benefit of that is that the residual business will have the opportunity to accelerate its organic and its inorganic growth, and will also each business will have an appropriate capital and ownership and potentially partnership structure. The first step of that is therefore a review of the options for the filters business. This will not be a quick process. We believe that any, if you like, concrete outcome is not expected before the second quarter of 2022 at the earliest. In the meantime, the filters division, which is making outstanding progress in its key game changes, it continues to win new outsourcing deals. We're excited about the expansion of the ECO Programme, and the China JV is also starting very pleasingly. We will continue to invest in that and ensure that the filters division really does build upon the outstanding progress made. Happy to take any questions in due course on that. If we turn to trading, a like-for-like revenue growth of over 5%, which is driven by a very significant growth, which is both, I think, self-created and due to the market in components. You can see that they're about just shy of 30% compared to Q3 2020, which obviously was the second softest comp, Q2 2020 being the softest comp versus Q3 2019, 14% plus on a day adjusted basis. We're not unique in having supply chain challenges, but the business is both meeting those in terms of providing a sustained service level, but also putting pricing through to mitigate that. Two other highlights I think would be that, one, we are continuing the rollout of the ERP system, and secondly, that the acquisition in China is going well with demand probably, if anything, somewhat exceeding our expectations. Packaging declined some 6% on a like-for-like basis. Prescriptions and elective surgery, but actually, if we look particularly in America, the much-anticipated recovery is beginning, and so therefore, our bigger challenge at the moment there is finding the labor availability, and also we're seeing early signs of board pressure as well as in cardboard, which is an equally big challenge in the U.S. I think it would be fair to say that we see some signs of a diminution in Europe of a year-on-year decline. As we suspected, the U.S. is the faster market to recover. Our overall recent order trends for period 10 and 11 would imply that there is some recovery of pent-up demand. Clearly, in the U.K. to be specific, there is speculation about the incremental GBP 6 billion that Rishi Sunak wants to raise to address that backlog. It's a kind of concrete signal of intent. Filters through self-help, particularly outsourcing, and now with China kicking in, is growing. Again, looking ahead, I think we feel that there's a very bullish outlook for filters. It is definitely the strongest it's been performing in terms of top line and opportunities since I've been involved with the business for five years. If I then look at the outlook based on our order data, which shows no weakening of the upward trajectory in components, I talked about the packaging orders and filters, we think that demand is holding up pretty well. The only soft part probably is European healthcare. The challenges we face are as much about supply side as demand side, but fortunately or unfortunately, due to a heck of a lot of hard work, we are able to mitigate those cost impacts through pricing, and sustain our service levels. I think, ladies and gentlemen, I will pause there and, Tracy, I'll open it up for questions. If you could facilitate that, I'd be very grateful. Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question from Andrew Douglas, from Jefferies. Please go ahead. Good morning, Paul. Good morning, team. A few questions from me, if I may. Can I just double-check the kind of order of the potential reviews of the two businesses which you're looking to not own in the future? I'm assuming that packaging will be done as and when filters has been completed. It's gonna be quite difficult, I suspect, to run a dual process. I guess packaging is not quite ready yet, given what's happening with the trading perspective. Any view there would be great. Can I ask also kind of what's the. I'm assuming that all options will be considered, you're not kind of wedded to any specific outcome. I'm just kind of interested as to what's the fallback option if, you know, two or three options don't get either the number or the interest that you would expect. Third question is probably one for Lily. What should we be thinking about with regards to central costs? Is the central cost line something that you can kind of easily divide up amongst the three businesses going forward? Then I'll jump back in the queue for giving the people a chance. Right. I lost my bet, Andrew. I was sure Charles was gonna be first. Thanks, Philip. In terms of the order filters, clearly, we are focusing on. Having said that, clearly, we cannot predict what this announcement will spawn. If we found ourselves in the situation of having two sets of discussions and we thought they were the right thing for both divisions to optimize their potential, then we would find a way to do so. All we've done is really signal an end game and a start point, and what happens between A and Z will be not left to the fates to decide, but you know, we will see what happens. It may be that this, as I say, does spur certain responses in parties. I don't know. We could theoretically have the capability to have twin discussions. Okay. Good. The second was a fallback option. If we look at filters, we consider, I think, Andrew, a full range of options for monetizing value and for giving it the right environment in which to thrive, 'cause it's actually doing fantastically well. That could be a simple sale to a third party. It could be some kind of partnership with a party that would take it forward. There could be capital market options as well, which would see it kind of plowing its own furrow. Yeah. Everything is open for discussion. This is not us being clever and actually we've got a rabbit that we're unfurling. This is a clear statement of intent rather than a hint of an imminent solution. Yeah. Okay. Right. Last question. Andrew, on central costs, look, as part of this review, one work stream will be us reviewing the central costs, and you can see us, you know, study it and we're going to optimize the position with the direction of travel. It's slightly too early, Andrew, for me to give any guidance at this moment in time. I think, I mean, Andrew, if we conceive of Components as a pure play, standalone business, you could see obviously that it can be skinny compared to the more complex structure that we have at the moment. One way to look at it is to say you take the Components division and what would it take to be a fleet of foot skinny PLC? Okay. With regard to kind of back office shared service centers, kind of manufacturing distribution overlap, there's limited overlap, I guess, between the three divisions. The one area of material commonality is IT, so we'd have to figure a way out of that. Since we don't know the scenario which we're operating at the moment, and it's a bit difficult to speculate. Other than IT, the journey we've been going in the last 12-18 months is very much about deploying capability into the divisions now that we don't need a heavier overhead to fix these businesses. Super. Okay, I'll fall back in line with Charles. Okay. As a reminder, to ask a telephone question, please signal by pressing star one. We will now take our next question from Charles Hall from Peel Hunt. Please go ahead. Morning, Paul. Morning, Lily. I'm devastated to be beaten by Mr. Douglas, but there we go. Yes. First time for everything, isn't it? I know. It's the sign of the end. It's the beginning of the end, isn't it? Anyway, speaking of the end, I suppose we're moving to an exciting new pure play business. You've obviously given a view on timing. Just to be clear on that comment about Q2 at the earliest, is that meaning completion, or is that meaning decision as to which direction to travel in? I think we won't have a conclusion to this particular part of the journey. Clearly it doesn't take us six months to decide the best route forward. Yeah. We will remain flexible. There will be, you know, potential avenues we'll be pursuing, but we'll remain open to consider other avenues also. you'll be sort of having dual track processes, as much as it's sensible to do so to ensure that you Exactly, Charles. Yeah. You reach a conclusion. Exactly, Charles. We're not going to wake up in six months' time and you say, "Actually, we've reached a conclusion, and nothing's happening. I think it would be slightly foolhardy of me to announce what I've announced today and then say, "Yeah, we've decided that we think it's the right thing to remain in the shape we currently are. Yeah. That might be somewhat ill-considered. Yeah. You touched on capital structure. Is there anything to say at this stage of capital structure of the businesses if there was a- No. Sort of capital market situation or to be decided? No. I think as I say, I outlined three broad generic sets of options. You know, a full or partial sale to an appropriate owner that would take it forward, some kind of structured partnership and/or a capital market option. They all remain open to us at the moment, Charles, so I wouldn't prejudge it. Yeah. We're not ruling anything out either. Perfect. Just on the trading front, obviously very strong performance from components. A bit of that will be price put through earlier this year. I guess most of the prices was going in Q3. Presumably that's Yeah. That's sort of going to drive top line growth, assuming the volumes stay strong, which it sounds as though they are. Is that sort of one- Yes. of the points about why Q4 will be strong? If we look at the ratio of orders to sales, Charles, and if you look at the LTM, which we do on a weekly basis, the slope of the graph hasn't yet lessened. I mean, I think by definition, as the comps get harder, the rate of growth mathematically must diminish over time. I think if you were to ask Scott or myself, we'd say we're 98% focused on supply side as opposed to demand creation at the moment. I think Scott said at the recent call was that you were intending to at least recover the input cost inflation. Is that still the thought process a few weeks down the line? Yes. Yeah. Yeah. Great. In terms of the supply chain issues, obviously every company's having to comment about them, and they're real. Do you see yourselves in a stronger position than some of your peers because of the level of in-house manufacturing, or is that irrelevant on the basis that you still need to get the raw materials? I think we have certain advantages in components, Charles, one of which is because of our relative scale compared to these kind of GBP 20 million businesses. We have more clout with purchasing. Secondly, our ability, particularly in Kidlington, to use recycled PE, low-density polyethylene, gives us optionality which other people don't because you have to set up equipment to do that. The third is that because we have manufacturing in Asia, in Europe and in America, we have intra-continental as opposed to intercontinental supply chains mostly. That business is less reliant on freight stresses, except for product that we make in China and ship into Europe, into Kidlington. Got it. The comments you made previously about getting back to 2019 margins, given the volume growth, given the price you're achieving, that seems eminently achievable. It seems achievable. I would say we've got unprecedented uncertainty in all aspects. Achieving pricing which we're doing, cost of labor, cost of freight, availability of labor, underlying demand. In for the last two, three, four years, Charles, you could basically, if you got industrial production volume forecasted accurately, you'd add 4% and assume that there was broad stability in all the elements of the P&L below that. The budgeting discussions this year are gonna have variables in every single line, and I can't believe we're unique in that. Yeah. No, definitely not. Turning to a different issue, on the packaging side, obviously you're talking about North America starting to improve. Are we now moving to a stage where it's more of an issue on the supply side in terms of actually- Yes. Having enough people to produce the product? Yes. And- I mean, we have net recruited about 100-110 people in the last two months, and we're still light. Um- Of course, the other thing, Charles, is we have our main cluster of packaging manufacturing in North Carolina. Yeah. -which you may know is one of the worst hits. We've had through active cases and forced, you know, locking people locking themselves away. We've also had that as a double whammy. Yeah. If you've managed to recruit that many in the last two months, would you think that over the next two months, you'd hope to get to the level you need in order to fulfill the demand? Yes. Yes. Okay. Presumably you're having to pay people more to both retain Yes. recruit. Is that being passed on to the customers? Broadly, it's not an exact one-for-one in terms of timing and level, but yes, we are doing more on pricing and packaging than I can recall. Perfect. That's brilliant. That's all my questions. Thanks, Charles. Thanks. As another reminder, to ask a telephone question, please signal by pressing star one. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will now take a follow-up question from Andrew Douglas from Jefferies. Please go ahead. Hi, guys. Can you just give us an update on what you're seeing in China? I appreciate that China is not as big as we'd like it to be in components, but hopefully will one day. Just what you're seeing on the ground with regards to kinda power and whether that's been problematic for you or will be problematic for you over the next couple of months. Thank you. Well, we haven't yet. It varies from province to province and from city to city. We are deemed in our joint venture in Fujian to be a critical industry, and clearly, given the importance of tobacco to the state revenues and to government revenues, that's unlikely to change. I think what we're seeing, Andrew, broadly is that we sometimes have two days of limited power, so we effectively move our weekend around to whenever it suits. Our recent acquisition hasn't experienced, to the best of my knowledge, any power-related issues. Ningbo is more like Fujian, where we moved around. It hasn't compromised our ability yet, nor have we yet seen it compromise demand from customers who get maybe more affected. It remains a potential, Andrew, but not yet. As I said, the Hangzhou has actually, from a commercial order book point of view, started very, very strongly. Okay. Super. Thank you very much. There appears to be no further questions at this time. I would like to turn the conference back to the host for any additional or closing remarks. Thank you, Tracy, and thank you all for dialing in. We recognize it's half-term week, so not everybody will be around. Lily and I realize that there's quite a lot to digest here, and it'll probably take 24 hours to process it all. Through Peel Hunt and Jefferies, Lily and I will be available for discussions at investors' convenience over the coming week and a half. Delighted to mull it and kick it around with any of you on the call or your clients, for those of you in the sales force, over the next week and a half. I will leave you in peace, to enjoy the rest of your day, and just thank you very much indeed for dialing in. Thanks, Tracy. This concludes today's call. Thank you for your participation. You may now disconnect.