Essentra (ESNT) H1 2024 earnings summary

Executive summary

• Revenue reached £159.7m in H1 2024, up 1.5% at constant currency, with sequential improvement and a return to like-for-like growth in Q2 despite challenging market conditions.

• Adjusted operating profit was £21.8m, up 7.6% at constant currency, with gross margin expanding to 46.4%; all regions contributed to margin growth.

• Strategic focus on sustainability, commercial wins, and operational efficiency is yielding tangible benefits, with integration of BMP TAPPI unlocking cross-sell opportunities.

• Interim dividend increased by 4% to 1.25p per share, with a progressive dividend policy and share buyback programme 45% complete.

• Clean results post-divestment of discontinued businesses, allowing clear measurement of core operations.

Financial highlights

• Revenue up 1.5% in constant currency to £159.7m, with Q2 showing like-for-like growth and a 3.7% benefit from BMP TAPPI acquisition.

• Adjusted operating profit £21.8m, up 7.6% constant currency; gross margin improved to 46.4%; adjusted operating margin 13.7%.

• Adjusted EPS was 4.6p; dividend increased by 4%; cash conversion at 80% and free cash flow conversion above 90%.

• Net debt to EBITDA at 1.1x (pre-IFRS16); ROIC at 11.9%; net debt increased to £89.1m post-IFRS16.

• Reported net income £2.5m; profit for the period £1.3m; net finance expense increased to £4.1m.

Outlook and guidance

• FY 2024 expectations unchanged, with sequential quarterly revenue improvements and further modest recovery anticipated in H2.

• Full-year revenue expected around GBP 330 million, with low single-digit organic growth in H2.

• Management confident in achieving medium-term targets, with operating leverage expected as volumes recover.