- Sales and margins grow by double digits
- Returning more than a quarter of its market cap
- Shares just above a five-year low
Pure-play components firm Essentra (ESNT) delivered a solid set of full-year results and confirmed it would return £150 million of surplus capital, much to the relief of long-suffering shareholders.
The shares, which were trading at a multi-year low just last week, firmed 1.1% to 179.5p although volume wasn’t particularly elevated.
COMING GOOD ON ITS PROMISE
Consistent with its commitment to transform itself, the company has disposed of all non-core activities, including most recently the Filters and Packaging business, in order to focus on components.
In addition, late last year the firm acquired Chichester-based Wixroyd Group, a leading UK supplier of industrial parts for the engineering sector, expanding its offering in hardware components and creating cross-selling opportunities across its end-markets.
The new, streamlined business, which works with over 70% of the world’s global manufacturers, from automotive to electronics and medical equipment, posted revenue of £338 million in the year to December, a 12% increase on the previous year, and a similar increase in operating profit to £63.7 million before central costs of £23.7 million.
Margins increased thanks to ‘strong pricing delivery offsetting inflation’ and tight management of the cost base.
New chief executive Scott Fawcett commented: ‘Last year saw the conclusion of a transformational chapter and I am excited to be leading Essentra on the next stage of our strategy, as a leading global manufacturer and distributor of industrial components.’
While stocks of components remain high at distributors, especially in the US, there have been signs of improvement in China and to date this year new order intake is running 8% ahead of last year on a like-for-like basis.
FINANCIALLY HEALTHY
The firm enjoys a strong balance sheet, with roughly £114 million of ‘net funding surplus’ which it can use to invest in organic growth and further acquisitions.
Meanwhile, it is returning £150 million of excess capital to shareholders through a £90 million special dividend, equivalent to 29.8p per share on top of the ordinary dividend of 3.3p for the year, and a £60 million share buyback.
The return of capital equates to more than 25% of the company’s current market value.
