Essentra plc Restored to a position where future revenue and profit growth can be sustained

[shareaholic app="share_buttons" id_name="post_below_content"]

Essentra plc (LON:ESNT), today announced results for the full year ended 31 December 2018

Summary:

· Full year results continue HY 2018 return to first growth in profit and margin from a stable revenue base since 2015.

− Revenue unchanged on a like-for-like1 basis (+1.4%, adjusting for the closure of the Newport IP5 cartons site at the end of 2017).

o Continued robust result in Components, despite underlying market softness in Q4.

o Return to growth for the Packaging division in H2, with an accelerating trend.

o Modest decline in Filters and Specialist Components.

− Adjusted operating profit2, 4 up 9.1% (at constant FX) to £91m, with improving momentum in H2.

− Reported operating profit4 of £47m compares to £6m in FY 2017.

− Adjusted basic EPS2, 4 higher by 2.3% (at constant FX) at 23.1p.

o Significant increase in minority interest, due to growth in Filters’ joint ventures.

o Reported basic EPS of 9.3p compares to 43.7p in FY 2017.

· Net debt of £240m (31 December 2017: £211m); increase primarily due to dividend payments and cash exceptional & other adjusting items.

− Net debt to EBITDA of 1.8x (31 December 2017: 1.7x).

− Strong operating cash conversion3, 4 of c. 85% (FY 2017: c. 95%).

o Balance sheet further strengthened by disposal of Pipe Protection Technologies in January 2019, notwithstanding continued planned investment in Packaging and IT.

· Full year dividend unchanged at 20.7p per share.

· Continued good progress on all key operating metrics of the stability programme: new Executive team now fully in place.

· Stable outlook – value levers primarily in Essentra’s control, in addition to defensive qualities in Packaging and Filters especially.

Results at a glance:

FY 2018	FY 2017	% change Actual FX	% change Constant FX
Revenue – cont.⁴	£1,026m	£1,027m	+0	+2
Adjusted² operating profit – cont.⁴	£91m	£85m	+7	+9
Adjusted² pre-tax profit – cont.⁴	£80m	£74m	+8	+10
Adjusted² net income⁵ – cont.⁴	£64m	£59m	+8	+6
Adjusted² basic earnings per share – cont.⁴	23.1p	22.1p	+5	+2
Dividend per share	20.7p	20.7p	–

Reported operating profit – cont.⁴	£47m	£6m	n / m	n / m
Reported pre-tax profit / (loss) – cont.⁴	£36m	£(5)m	n / m	n / m
Reported net income^{5, 6} – total	£28m	£116m	n / m	n / m
Reported basic earnings⁶ per share – total	9.3p	43.7p	n / m	n / m

You might also enjoy reading Essentra PLC 32.6% potential upside indicated by Deutsche

¹Excludes the impact of acquisitions, disposals and foreign exchange

² Before amortisation of acquired intangible assets and exceptional and other adjusting items

³ Operating cash conversion is defined as adjusted operating cash flow divided by adjusted operating profit

⁴ Continuing operations, excluding Porous Technologies, in light of the divestment on 6 March 2017

⁵ Net income is defined as profit after tax, before minority interests
⁶ FY 2017 net income and basic earnings per share reflect the exceptional gain on the divestment of Porous Technologies

Commenting on today’s results, Paul Forman, Chief Executive, said:

“At our HY 2018 results, when we reported profit growth from a stable revenue base for the first time in three years, I stated my firm conviction that we had turned a corner. We have maintained this strategic momentum during H2 – importantly, with our Packaging division returning to growth as anticipated, underpinned by continuing improvement in our customer relationships – and I am confident that we have restored Essentra to a position where future revenue and profit growth can be sustained.

Underpinning this improvement has been further progress in all aspects of our stability programme, from our key service and quality metrics to our IT systems. Importantly, we are seeing tangible evidence of the positive cultural shift which has been implemented, with a material uplift in our employee engagement to levels which are in line with global and manufacturing benchmarks as well as significant gains in our health and safety performance.

Of course, there is more for us still to do. However, I am proud of the great strides we have taken in FY 2018 versus our stated change plan to restore sustainable growth, and have every faith in our ability to deliver further improvement and achieve success together as a team.”

Outlook Statement

Heading into 2019, the macro economic environment is uncertain. However, while our Components division – and elements of Specialist Components – are more exposed to industrial segments with a certain degree of cyclicality, much of our Group serves end-markets which are non-cyclical in nature.

Accordingly, as we continue to drive the agenda and deliver the stated objectives for each of our divisions, we expect to make further strategic progress in 2019.