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Essentra drops specialist components

The packaging components specialist made two acquisitions in the period
August 2, 2019

Essentra (ESNT) will dissolve its specialists components division by the end of the third quarter, consolidating its activities into three segments: components, packaging and filters.

IC TIP: Hold at 407p

The manufacturer of packaging products is on the path to recovery, having posted its first full-year profit in March after years of trouble driven by a  diversification strategy, which was pursued prior to Paul Forman’s tenure as chief executive. Essentra has disposed of four businesses in the year to date and moved Tear Tapes and Industrial Supply into the filters and components divisions, respectively, thereby allowing for the end of specialist components. 

While the group may have entered diet mode, it remains acquisitive. Funds raised from the rejig were put towards two acquisitions over the period, in filters and innovative components, as well as paying down debt. Excluding the impact of new lease accounting rules, Essentra’s net debt to cash profits stood at a multiple of 1.4, down from an unadjusted 1.9 at the same time last year.

House broker Peel Hunt forecasts full-year 2019 pre-tax profits and earnings per share of £80m and 23.5p, respectively, rising to £88.4m and 26p in 2020.

ESSENTRA (ESNT)   
ORD PRICE:407pMARKET VALUE:£ 1.07bn
TOUCH:407-409p12-MONTH HIGH:517pLOW: 325p
DIVIDEND YIELD:5.1%PE RATIO:27
NET ASSET VALUE:213p*NET DEBT:34%**
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201851320.85.76.3
201950753.111.66.3
% change-1+155+104

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Ex-div:26 Sep   
Payment:30 Oct   
*Includes intangible assets of £493m, or 187p a share **Net debt does not include £60m in lease liabilities