Essentra profits all but eliminated by pandemic

Essentra has a fairly even revenue split across its three divisions, with components (its smallest segment) being the most exposed to cyclical trends. Happily, components' revenues and order intake have improved, although the company expects its packaging arm to experience an indifferent third quarter before staging a recovery towards the end of the year.

Essentra’s turnover fell across its three divisions during the period, while the pandemic disrupted its supply chain across multiple sites. High fixed costs twinned with the revenue decline hit profitability. Operating profits of £15.6m fell way below last year’s £60.1m level, owing in part to £10.9m in amortised intangible assets and a £2.5m charged linked to internal corporate development, while Essentra’s prior year also included £19m raised from disposals. 

The company boosted its inventories and paid suppliers early as part of its coronavirus response, which altogether pushed net working capital up by 6 per cent, even with healthy levels of cash collection during the period.

Broker Peel Hunt forecasts full-year 2020 adjusted pre-tax profits and earnings per share of £51m and 14.9p respectively, rising to £76.5m and 22.3p in 2021.