Essentra continues to climb back from second quarter slump

Essentra updated the market on its trading in 2020 on Friday, reporting that on a like-for-like basis, fourth quarter revenue was down 1.1% on the prior year.

The FTSE 250 foams and composites company said that was a continuation of the trend of steady quarterly improvement since revenue fell by 9.8% in the second quarter.

It said it was expecting to deliver 2020 operating profit in line with the consensus forecasts.

The firm said the improved like-for-like revenue trends seen through the second and third quarters were maintained in the fourth quarter for its components operations, while a reduction in elective surgeries and prescription levels first seen in the third quarter continued, although overall the packaging division had a “much improved” last quarter.

The filters division faced certain logistical challenges in Asia, derived from regional shipping container shortages, which resulted in a tougher fourth quarter.

Essentra said it had a “strong” balance sheet as at 31 December, with liquidity levels standing at around £285m.

The board’s strategic initiatives were continuing to be implemented, which the directors said were helping to underpin the company’s profitability potential.

“The company has undertaken a detailed review of its global footprint, which has resulted in the proposed closure of certain sites in 2021, across the components and packaging divisions,” Essentra explained in a statement.

“The exceptional cost related to these closures is estimated to be £17m.”

Essentra said it expected to start generating savings in 2021, with annual savings of around £13m from 2022 onwards, helping to underpin the profitability potential of the company.

“Now that the UK has exited the EU with a trade deal, the company's focus has shifted to ensuring the effective management of the new arrangements,” the directors added.

“Overall, we continue not to foresee any material direct impact to the company from Brexit.”

At 0824 GMT, shares in Essentra were up 1.82% at 324.2p.