29th Mar 2023 12:06
(Alliance News) - Analysts on Wednesday hailed Essentra PLC's first set of results as a pure-play components company.
The Oxford-based components company posted a pretax loss of GBP29.1 million in 2022, widened from GBP7.1 million. Revenue, however, grew 12% to GBP337.9 million from GBP301.7 million. However, it turned to a loss from discontinued operations of GBP152.7 million, from a profit of GBP33.2 million.
"Essentra's FY22 results for the year to 31 December 2022 offer us a clean picture of the company in its new form as a standalone components business," Berenberg said.
Berenberg noted that the components division recorded a 12% revenue growth year-on-year, "demonstrating an ability to protect profitability and drive growth despite a challenging macroeconomic backdrop".
Peel Hunt analyst Henry Carver said the results are in line with its expectations, following the disposals of the Filters and Packaging businesses. The company's restructure was completed in the fourth quarter of 2022.
Essentra recommended a final ordinary dividend of 1.0 pence per share, bringing the total payout to 3.3p, just over half of the 6.0p paid out in 2021.
Despite the lower profit and payout, the company noted that at December 31, it had a net funding surplus of GBP114 million, swung from net debt of GBP235 million a year ago.
Essentra said it also will begin its GBP60 million buyback programme. The programme, which returns the proceeds from its Packaging and Filters disposals, will run until no later than December 31.
It intends to cancel the majority of the repurchased shares, reserving a portion for its share option schemes. It will also pay out a special dividend of 29.8p in relation to the disposals.
Essentra said it outlook for 2023 remains unchanged.
"Although we continue to see distributor destocking, trading in Europe continues to be robust and China's reopening will increasingly benefit our business in Asia," Essentra said.
In the year to date, like-for-like orders are 8% ahead of 2022 levels.
Berenberg analysts added: "Into FY23, we expect volumes to continue to lag through Q1, before normalising in Q2 and beyond. As the group continues to build out its digital customer offering, implement its enterprise resource planning, and drive enhanced customer experience and cross-selling, we anticipate a mid-single digit organic growth profile."
Peel Hunt's Carver took a similar take. Carver said it expects to see destocking in the US to "normalise" by the end of the first half of the year. Peel Hunt's forecasts looking ahead also remain unchanged.
"Essentra is a market-leading pure-play components business that is well-poised for organic growth, plus it has a strong balance sheet and an active pipeline for earnings-accretive mergers & acquisitions," Carver added.
Shares in Essentra were up 3.4% to 183.40 pence each in London on Wednesday around midday.
Berenberg reiterated its 'buy' recommendation but pushed its target price down to 255p from 295p, to reflect updated forecasts and peer valuations. Peel Hunt also rates Essentra at 'buy', with a target price of 300p.
By Sophie Rose, Alliance News reporter
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