Following a succession of profit warnings, the market obviously wasn’t expecting the world from Essentra (ESNT). So the share price was unmoved following revelation of a 35 per cent fall in adjusted first-half operating profit, at constant currencies, to £43m. If you disregard positive currency translations, the specialist packaging group saw substantial like-for-like revenue declines in filter products as well as the health and personal care packaging segment, which together account for two-thirds of the top line. The components division fared better, but even there the operating margin was in retreat.
A day prior to the release of these figures, Essentra revealed that it was closing its Newport IP5 cartons facility as part of a major strategic review it embarked upon at the beginning of the year. Management intends to combine its smaller businesses into a separate division, and focus on larger business segments; the afore-mentioned components, packaging, and filter products.
Chief executive Paul Forman acknowledged that many of Essentra’s problems are “self-inflicted”, although difficulties linked to raw material costs and intensifying regulatory strictures in China’s tobacco market lie outside management’s sphere of influence. Remedial measures aimed at the packaging business – including £20m in equipment upgrades – are central to the turnaround strategy.
Peel Hunt gives adjusted pre-tax profit of £79.4m for the December year-end, leading to EPS of 23.8p, against £96.2m and 29.2p in 2016.
| ESSENTRA (ESNT) | ||||
| ORD PRICE: | 543p | MARKET VALUE: | £ 1.43bn | |
| TOUCH: | 543-545p | 12-MONTH HIGH: | 646p | LOW: 367p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | NA | |
| NET ASSET VALUE: | 248p* | NET DEBT: | 31% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 495 | 34.0 | 10.5 | 6.3 |
| 2017 | 523 | 19.4 | 5.6 | 6.3 |
| % change | +6 | -43 | -47 | - |
| Ex-div: | 28 Sep | |||
| Payment: | 30 Oct | |||
| *Includes intangible assets of £562m, or 214p a share | ||||
