Packaging products manufacturer Essentra (ESNT) said that its sales drop was mainly driven by a much weaker performance from its specialist components business, which it has now dissolved. The group restructured its business over the course of 2019, and has disposed of its extrusion, pipe protection technologies, card solutions and speciality tapes businesses.
The rationalisation measures taken during the year meant that £105m of revenue and £15m of trading profit were effectively disposed, which had an impact on year-on-year comparisons. Therefore, underlying revenue on a like-for-like basis was up by 1.5 per cent, which management attributed to a solid performance in its components and packaging divisions, where sales increased by 1.3 per cent and 3 per cent, respectively. More importantly, the group registered a 10 basis point increase in the underlying operating margin – a prime focus once the rationalisation measures are fully felt.
Analysts at Peel Hunt cautioned that Essentra will likely face some disruption in the Chinese market due to the virus outbreak this year. Management noted that 2020 macroeconomic environment looks uncertain, exacerbated by Covid-19.
Broker Peel Hunt forecasts adjusted pre-tax profits of £84.6m and EPS of 24.9p in 2020, compared with £20.7m and 23.6p in 2019.
| ESSENTRA (ESNT) | ||||
| ORD PRICE: | 335p | MARKET VALUE: | £882m | |
| TOUCH: | 334-335p | 12-MONTH HIGH: | 459p | LOW: 327p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 203p* | NET DEBT: | 53%** | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 1.01 | 73.8 | 21.4 | 20.7 |
| 2016 | 1.00 | -62.5 | -19.8 | 20.7 |
| 2017 | 1.03 | -4.9 | 1.5 | 20.7 |
| 2018 | 1.03 | 36.3 | 9.3 | 20.7 |
| 2019 | 0.97 | 65.5 | 14.7 | 20.7 |
| % change | -5 | +80 | +58 | |
| Ex-div: | 23 Apr | |||
| Payment: | 1 Jun | |||
| *Includes intangible assets of £486.3m, or 185p a share **Includes lease liabilities of £50.7m | ||||
