LONDON (ShareCast) - (Sharecast News) - Essentra reported an "encouraging" first half performance on Friday, as the rebound from the Covid-19 pandemic continued, and its revenue rose 7.5% year-on-year on a like-for-like basis, to £475m.
The FTSE 250 company said that compared to the first half of 2019, before the outbreak of Covid-19, first half revenue was down 1.9% like-for-like.

Adjusted operating profit was ahead 34% year-on-year at constant currency to £35.7m for the six months ended 30 June, while reported operating profit came in at £30.1m, compared to £15.6m in the first half of 2020.

The company's adjusted basic earnings per share grew by 39.9% at constant exchange rates to 7.7p, and reported basic earnings per share were 6.6p, compared to 2.3p a year earlier.

Adjusted operating cash flow for the period came in at £22.4m, and reported net cash inflow from operating activities totalled £26.1m for the first half.

Essentra said it was "well-positioned" for sustained growth in all divisions, with "clear and successful" strategies based on innovation, sustainability and strong customer partnerships.

In its components division, the firm reported an improving trend since the onset of the pandemic, leading to a "strong" first half performance.

For packaging, it said that while the impact to the underlying market continued to affect the period, customer relationships continued to strengthen, with the board expecting the market to return to "moderate growth" in the second half.

In filters, the company observed a "strong performance" in the six-month period, led by the winning of outsourcing contracts.

Essentra reported a margin expansion in the second quarter, both over the first quarter and the prior-year period, across all of its divisions and driven by self-help actions and operational leverage, despite cost inflation.

Price increases were being implemented to offset the impact of inflationary cost pressures, the directors confirmed.

Progress had also been made on strategic initiatives, which Essentra said underpinned its future profitability and provided a platform for industry average margin delivery in packaging towards the end of the year.

The company made the "value-enhancing and strategic" acquisition of Hengzhu in the components division, while the integration of 3C was running to plan in packaging.

Essentra reported a "strong" balance sheet, with net debt standing at £212.2m, narrowing from £297m a year earlier.

Its net debt-to-EBITDA ratio was 1.7x at period end, and excluding lease liabilities, the ratio was 1.5x.

The company noted the issue of $250m of private placement debt in July, securing more long-term funding.

Its board declared an interim dividend of 2.0p per share, in line with its progressive policy.

"The first half of 2021, much like the bulk of 2020, brought with it numerous challenges due to the ongoing pandemic, and I am very proud of how we have navigated through these difficult times, to deliver strong top and bottom line growth, with margin expansion across all divisions in the second quarter," said chief executive officer Paul Forman.

"Encouragingly, we are now trading ahead of 2019 levels, with second quarter revenue up by 2.5% like-for-like.

"Components and filters have had a particularly strong first half, whilst packaging has made good progress in margin initiatives and is coping well with continued difficult conditions within its underlying market."

Forman said that, while the company was "mindful" of external pressures in the current environment, it had been quick to take proactive actions to mitigate headwinds, such as the pricing actions in components and packaging in order to protect margins.

"The recent issuance of our private placement debt provides us with optimal long term funding.

"The strength of our balance sheet and liquidity position means we are well positioned to pursue attractive bolt-on acquisition opportunities, just like the one we will be completing on shortly in components of Hengzhu, which provides us with the ideal platform to take our fastest growing product range into our top target geographic market, China."

While there was "more to do", Paul Forman said the first half results demonstrated Essentra's ability to deliver financial progress despite a challenging market backdrop.

"We are well positioned for the remainder of 2021 and are on track to deliver full year adjusted operating profit in-line with the board's expectations."

At 1012 BST, shares in Essentra were up 0.53% at 285.5p.

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