Jefferies downgrades Essentra as new CEO repairs 'self-inflicted wounds'

Jefferies downgraded its rating on Essentra to 'hold' as the cigarette filters and plastic packaging manufacturer's "self inflicted wounds" need time to repair.

The profit warning on 22 January outlined perfectly that new chief executive Paul Forman "has a sizeable job on his hands".

"The group needs to undergo significant change and while there is recovery potential, remedial work is needed, the recovery will take time to come through and will come from a lower-than-expected starting point."

Forman has outlined the areas of the group that need major work to repair and drive improvement.

"There is much work to do to get the group back to full health, and it will take time for the recovery to come through in earnest," Jefferies said.

"A fundamental change in culture is needed, but most the issues faced are self-inflicted, not structural in nature."

Analysts cut their full year PBT and EPS forecasts by 4%, but for the next two years take a more cautious view of the HPCP recovery and lower margin assumptions compared to other analysts and so raised their target price to 450p from 445p "to reflect recovery multiples".