Essentra confident but cautious on market recovery after mixed year

The FTSE 250 company said that on a constant currency basis, revenue grew marginally by 0.3%, though like-for-like sales declined 2.7%.

Adjusted operating profit fell 7.2% to £40.1m but rose 2.3% in constant currency terms.

The adjusted operating margin declined by 40 basis points to 13.3%, though it improved by 30 basis points on a constant currency basis.

Adjusted pre-tax profit dropped 23.3% to £31.2m, while adjusted basic earnings per share declined 19.8% to 8.5p.

Free cash flow fell 39.7% to £22.5m, while net debt excluding lease liabilities more than doubled to £68.2m, reflecting a leverage ratio of 1.3 times adjusted EBITDA, within the company’s target range.

Reported figures showed a more mixed performance - operating profit rose 33.9% to £14.6m, while net profit doubled to £11.6m.

However, reported pre-tax profit declined 32.1% to £5.7m.

The board declared a dividend of 2.8p per share, down 22.2% from the previous year.

Regional performance varied, with EMEA like-for-like revenue declining 4.2% due to softening market conditions in the second half.

The Americas recorded a 3.9% decline, though the pace of contraction eased from the second quarter as distributor channels stabilised.

Asia-Pacific was a bright spot, delivering 7% like-for-like revenue growth, supported by increased export demand within Asia and new customer projects.

Management reaffirmed its guidance for 2025 but remains cautious on the timing of market recovery, expecting variations across regions.

The company said it was focussed on operational efficiencies and selective investment in growth initiatives while maintaining its “hassle-free” customer proposition.

Essentra said it believed it was well-positioned to capitalise on improving market conditions and leverage its operational strengths.

“Essentra navigated challenging market conditions in 2024, yet remained focused on the elements within the group's control,” said chief executive officer Scott Fawcett.

“We delivered adjusted operating profit growth of 2.3% on a constant currency basis, maintained strong gross margins in excess of 45% and produced excellent operational cash flow in excess of 90%, all of which were in-line with the revised guidance provided in Q3 2024.

“Despite volume reductions, each of our regions reported improved gross margin performances, realising operational efficiencies.”

Fawcett said the company’s “agile approach” to operations across its global footprint had supported the mitigation of volume decline and protected profitability in the short term, while providing optionality to respond to macroeconomic changes, ensuring Essentra remained well-positioned to take advantage of market recoveries.

He added that the firm was taking a cautious view on the timing of any material improvement in end-market conditions, expecting market recovery to vary by region.

“At this early stage in the year, results for 2025 are anticipated to be in line with the board's expectations.

“The business continues to maintain a balanced approach to cost control and is driving further operational efficiencies, whilst also investing appropriately in value-enhancing growth initiatives and assessing bolt-on growth opportunities that will support long-term value creation.

“Essentra's strong market positions, differentiated business model, and right-sized cost base ensure the group is well-positioned to benefit from significant levels of operating leverage when markets recover.”

At 0914 GMT, shares in Essentra were down 2.22% at 113.03p.

Reporting by Josh White for Sharecast.com.