Essentra Plc revenue and profit growth restored

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Essentra Plc (LON:ESNT), today announced the six months results for the period ended 30 June.

Summary:

· Profit growth from a stable revenue base restored for the first time since 2015.

− Revenue unchanged on a like-for-like1 basis (+1.3%, adjusting for the closure of the Newport IP5 cartons site at the end of 2017).

− Adjusted operating profit2, 4 up 4.7% (at constant FX) to £43.5m; adjusted operating margin2, 4 +30bps to 8.5%.

§ Margin expansion in three out of four divisions.

− Reported operating profit4 growth of 7.6% (at constant FX) to £26.0m.

− Basic adjusted EPS2, 4 higher by 2.3% (at constant FX) to 11.0p.

· Strong operating cash conversion3, 4 of c. 84% (HY 2017: 71%), with net debt / EBITDA of 1.9x.

· The three elements of the Group programme all proceeding well and in line with plan:

− Stability: widespread progress again on all underlying operating metrics.

− Strategy: key elements of 2017 strategies progressing, strategic plan for Specialist Components now in place.

− Growth: Return to growth in Packaging – Europe & Asia (ex-Newport IP5 site). Strong performance in Components maintained, Filters more stable.

· Expectations for continued financial improvement and strategic progress in H2.

· Half year dividend maintained at 6.3p per share.

REsults at a glance:

	HY 2018	HY 2017	% change Actual FX	% change Constant FX
Revenue – cont.⁴	£513m	£523m	-2	+2
Adjusted² operating profit – cont.⁴	£44m	£43m	+2	+5
Adjusted² pre-tax profit – cont.⁴	£38m	£37m	+3	+6
Adjusted² net income⁵ – cont.⁴	£31m	£30m	+3	+6
Adjusted² basic earnings per share – cont.⁴	11.0p	11.2p	-2	+2
Dividend per share	6.3p	6.3p	–	n/a

Reported operating profit – cont.⁴	£26m	£25m	+4	+8
Reported pre-tax profit – cont.⁴	£21m	£19m	+7	+11
Reported net income⁵ – total	£17m	£127m	-87	-88
Reported basic earnings per share – total	5.7p	48.4p	-88	-89

¹Excludes the impact of acquisitions, disposals and foreign exchange

² Before intangible amortisation and exceptional & 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 for the period

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

“I am pleased by the Group’s continued transformation and the progress we have made on our strategic objectives in the first half of 2018, returning the Company to profit growth while maintaining widespread stability across the organisation.

Our Components business continued to deliver strong organic growth and has also now completed two acquisitions, in line with our strategy to selectively add high quality, value enhancing businesses to the Group. Filters is improving its focus on innovation and key customer account management capabilities, and continues to make progress with its three potential “game changers”, while we have also now developed strategies for each of our six Specialist Components businesses.

Importantly, I believe we have now turned a corner in Packaging, although there is still much to do. The sequential improvement in 2018 in both the revenue trend and profitability is testament to the significant efforts we have made to stabilise the business, to focus on doing the basics better and to become an increasingly valued partner to our customers. As a result, our Europe & Asia Packaging business returned to underlying growth (ie, adjusting for the closure of our Newport cartons site), and we are confident of reaching an inflection point for the entire Packaging division during the second half of this year.

There remains much to do to restore the Group to sustainable, profitable growth. However, together we are delivering against a clear plan and are making significant progress in building a brighter future for Essentra.”

Outlook Statement

As previously communicated, with effect from 1 January 2018, and consistent with our strategic review, we are now organised into four divisions: Components, Packaging, Filters and Specialist Components.

In our Components business we expect further broad-based growth and a stable margin versus FY 2017, through ongoing focus on building a consistent and “hassle free” proposition.

With the bias of our Filters business towards innovative special filters, and the exposure of Specialist Components to broad industrial end-markets, the year-on-year revenue outlook for each of these divisions is stable, with a broadly steady margin in Filters versus the prior year and the H2 margin in Specialist Components slightly higher than HY 2018.

Having stabilised our Packaging business, we anticipate improving year-on-year revenue and margin trends as we continue to regain “share of wallet” based on demonstrably improved customer service and operational metrics.

Accordingly, as we continue to drive our divisional strategies while maintaining stability across the organisation, our expectation for the total Group to deliver like-for-like revenue growth and margin expansion in 2018 is unchanged.

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