Oil downturn drags on growth at Essentra

Essentra reported good growth across most of its operations for the year to 31 December on Friday, but a lagging oil and gas sector had one of its divisions dragging the company down.

The FTSE 250 plastic and fibre products firm saw revenue rise 27% on a constant currency basis during the year, to £1.1bn.

Like-for-like revenue was up 5% exlcuding Pipe Protection Technologies (PPT), and up 1% for the group as a whole. PPT was adversely affected by the oil and gas downturn, the company said, despite making a number of technological innovations during the year.

Adjusted operating profit was up 20% at constant currencies, to £172m, while the company's like-for-like operating margin was up 70 basis points excluding PPT, or 10 basis points including it.

The company's adjusted earnings per share were ahead 13% on a constant currency basis at 47.6p.

"Essentra made a solid start to our Drive for 2020 strategy notwithstanding the challenging environment in the Oil & Gas industry, with like-for-like revenue growth of 5% and the adjusted operating margin up 70 basis points excluding the impact of Pipe Protection Technologies," said chief executive Colin Day.

"We also made encouraging progress with the integration of the Clondalkin Specialist Packaging Division and, having closed (or being in the process of closing) some nine of the 24 sites acquired, we are on track to deliver our US$24m cost synergy target - being a 50% upward revision from our expectations," he added.

Day said that over and above the acquisition rationalisation, the company consolidated a further five facilities to better leverage its footprint and generate additional opportunities for efficiency savings.

"In an environment where economic growth is by no means well-established or uniform - notably in the oil and gas industry - we are nonetheless confident of delivering balanced profitable growth in 2016, due to our international footprint and diverse range of products and end-markets," he concluded.

On 31 December, Essentra had net debt of £374m, up significantly on the £62m reported at the end of 2014, with cash flow generation offset by the acquisition of Clondalkin Specialist Packaging Division and higher dividends.

Essentra's board recommended a 13% increase in the full year dividend, to 20.7p per share.