LONDON (ShareCast) - (Sharecast News) - Essentra reported a "strong" first-half performance from its continuing operations on Wednesday, with revenue up 17% on a constant currency basis to £340.8m, and adjusted operating profit up 44% to £35.3m.
The FTSE 250 company said its components operation delivered a good performance, with revenue growth of 18.6% on a constant currency basis, and growth driven through price and volume.

Adjusted operating profit in the division increased to £35.9m, and adjusted operating margins expanded to 20.4%.

Filters revenue, meanwhile, grew 15.4% on a constant currency basis, underpinned by growth of outsourcing contract wins and an increase in China joint venture volumes.

Adjusted operating profit at the operation increased to £15.1m, with operating margins expanding to 9.2%.

Essentra's adjusted operating cash flow totalled £15.9m in the six months ended 30 June, down from £17.7m year-on-year, with the board putting the reduction down to working capital investments to support growth.

Group net debt widened to £248.9m from £159.1m on the year, with the net debt-to-EBITDA ratio standing at 1.9x, or 2.1x including lease liabilities.

The increase included adjusting items related to the strategic reviews, increased levels of working capital and higher interest expense, led by dollar exchange and a one-off revaluation of the US private placement loan notes to be repaid in association with the disposal of the packaging business.

Discontinued operations made a post-tax loss of £182.8m after incurring adjusting items of £193.6m, including a non-cash £181.6m impairment of goodwill for the packaging business.

Given the continuing group's strong performance, and aligned with its progressive dividend policy, the board recommended an interim dividend of 2.3p per share, up 15% compared to the first-half distribution last year.

"We have made significant progress on our journey to reposition Essentra as a leading manufacturer and distributor of components, with the announced sale of packaging to MM Group," said chief executive officer Paul Forman.

"This transaction will further strengthen our balance sheet and give components the flexibility to accelerate investment in growth opportunities.

"The strategic review of Filters is progressing well, and the board remains focused on maximising shareholder value."

Forman said Essentra would provide a further update towards the end of the third quarter.

"The company has delivered a strong first half; the components and filters divisions have delivered double-digit growth including margin expansion, and we continue to see strength in our order book, providing encouragement as we move into the second half.

"Whilst we are mindful of the wider macroeconomic uncertainty, the group remains well-positioned with organic and inorganic growth opportunities, strong order books and a robust balance sheet.

"We expect to deliver adjusted operating profit in line with the board's expectations."

At 1031 BST, shares in Essentra were down 4.13% at 244p.

Reporting by Josh White at Sharecast.com.

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