These first-half results from specialist plastics provider Essentra (ESNT) - Filtrona under a new name - demonstrate the rapid growth that has driven the company's share price to an all-time high this year. But a punchy forward earnings multiple of 22 leaves that growth looking mostly priced in.
Essentra, predominantly a maker of cigarette filters until a few years ago, changed its name in June to reflect its diversification into new products such as healthcare packaging, foams, plastic parts and machine components. This strategy is paying off in spades - the share price has more than quadrupled over the past three years and looks set to stay firm for the foreseeable future.
In the six months to 30 June, acquisitions, exposure to fast-moving markets overseas and decent organic growth combined to send underlying pre-tax profits up 25 per cent to £60m after adjusting for exceptional items and currency movements. And chief executive Colin Day reiterates that Essentra remains on track to deliver "at least mid single-digit like-for-like revenue growth and double-digit adjusted EPS growth" until at least 2015.
During the period Essentra completed the acquisitions of healthcare packaging group Contego and Nordic group Ulinco Components. Investment bank Deutsche Bank nevertheless sees ample room for further earnings-enhancing acquisitions, with net debt of £212m only 1.5 times annual cash profits. Its analysts forecasts pre-tax profits of £126m generating EPS of 38p in the current year, rising to £152m and 45.1p in 2014 (from £95m and 30.4p in 2012).
ESSENTRA (ESNT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 827p | MARKET VALUE: | £1.94bn | |
| TOUCH: | 826-828p | 12-MONTH HIGH: | 830p | LOW: 498p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 33 | |
| NET ASSET VALUE: | 174p* | NET DEBT: | 50% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 325 | 39.8 | 13.0 | 3.9 |
| 2013 | 385 | 45.4 | 13.9 | 4.8 |
| % change | +18 | +14 | +7 | +23 |
Ex-div: 25 Sep Payment: 28 Oct *Includes intangible assets of £377m, or 157p a share | ||||
