Market challenges lead Essentra earnings lower

Essentra posted its first half results for the six months to 30 June on Friday, with revenue broadly unchanged at £545m, although that was a 7% reduction on a like-for-like basis.

The FTSE 100 firm saw adjusted operating profit drop 18% at constant currencies to £70m, while its adjusted operating margin fell 200bps to 12.9%.

Adjusted earnings per share were 18% lower at 19.2p, while Essentra’s effective tax rate on adjusted profit reduced by 300bps to 20.0%.

At the end of the period, the company held net debt of £434m, up from £374m a year ago, with cash flow generation offset by higher dividends and foreign exchange.

The board left the half year dividend unchanged at 6.3p per share.

“As reported in our trading update of 9 June, Essentra has experienced a number of challenges - notably in the Filter Products and Health & Personal Care business - which have impacted our interim results,” said chief executive Colin Day.

“Notwithstanding these challenges, however, the company remains fundamentally strong, with global leading market positions in end-markets with positive growth characteristics, and attractive levels of profitability and cash generation.”

Day said that given many of the issues highlighted in the interim results are temporary in nature or are showing improvement in line with expectations, Essentra is confident of delivering a stronger result in the second half of 2016.

“As such, our FY 2016 outlook is for a mid single-digit decline in like-for-like revenue, with adjusted operating profit in the range of £155m - £165m.”