Essentra beats on profits but lowers 2017 guidance
Essentra posted better-than-expected full-2016 fiscal year earnings while maintaining its dividend payout, but guided towards lower sales and profits in 2017.
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During the reporting period, the supplier of plastic and fibre products made three profit warnings, driven by tough conditions in its Health & Personal Care Packaging unit and short-term issues at its Filtre Products arm.
Commenting on the results, Essentra chief Paul Forman said he believed in the fundamental strengths of all of Essentra´s businesses.
Based on his initial assessment, Forman, who took over at the helm of the company in January, added that the issues which affected the fiscal year 2016 results were mainly "self-inflicted" and "therefore capable of reversal".
Like-for-like revenues dropped 9% to 999m pounds on a constant foreign exchange rate basis.
Also at constant foreign exchange rates, total adjusted operating profits declined 29% to 132m pounds, with earnings per share coming in at 36.3p (consensus: 35.6p) and down by 31% versus the year-ago period.
To take note of, the Milton Keynes-based firm booked an impairment of 124m pounds in the carrying value of its Health&Personal Care Packaging unit.
Net debt inched higher from 374.0m pounds to 379.0m pounds, although management said cash conversion improved during in the backhalf of the year.
The disposal of Porous Technologies was on track to complete in the first quarter of 2017, which analysts said would help the company to maintain its payout.
The annual dividend was steady at 20.7p
A full strategy review was still on-track for July, together with the company´s interims.
In terms of outlook, Essentra said it anticipated lower like-for-like fiscal year-2017 revenues and adjusted operating profits.
"Component Solutions and Filtration Products enter 2017 on amore stable footing, the Health & Personal Care Packaging business is receiving specific short-term focus and remedial action, in light of the continued significant decline in revenue and operating profit during the last months of 2016 and at the start of 2017 – with a deteriorating exit rate which needs to be stabilised. We therefore currently anticipate a reduction in Group like-for-like revenue and adjusted operating profit in FY 2017."