Manufacture Essentra falls to loss following major goodwill charge
Manufacturer Essentra swings to £183m loss on hefty goodwill costs from recently sold packaging division
- Essentra posted a loss of £183.8 million for 2022, after making a profit of £28.3 million last year
- The packaging arm was bought for £262 million by Austrian firm Mayr-Melnhof Group
- The company’s filtration business was bought by Frank Acquisition Four for £312 million
Component maker Essentra has suffered a substantial annual loss after taking a significant write-down on the sale of its packaging activities.
The FTSE 250 business, which produces molded plastics and bespoke hinges, among other things, reported a loss of £183.8m for 2022, following a profit of £28.3m last year.
In the fourth quarter of last year, the Milton Keynes-based group completed the sale of its filters and packaging divisions, writing off £182.7 million of goodwill from the former company and leaving it as a component-led operation only.
Strategic move: Essentra completes transition to a pure-play parts company after selling its packaging and filter divisions in the second half of last year
The packaging segment was acquired by Austrian manufacturer Mayr-Melnhof Group for £262 million, while the filter arm was purchased by Frank Acquisition Four, a subsidiary of Centaury Management, for £312 million.
From continuing operations, Essentra disclosed losses more than sixfold to £31.1 million as it recognized central costs previously allocated to the discontinued operations and incurred higher net interest debt costs.
But the divestments have allowed the company to hand investors £150 million through a special dividend and share buyback, posting net cash of £113.8 million at the end of December, compared to net debt of £234.7 million at the end of 2021.
Chief executive Scott Fawcett said, “While 2022 has brought some changes to the organization as a whole, it has laid the groundwork to capture future growth opportunities.
“We continued to make organic and inorganic investments, supporting the company to drive commercial progress while maintaining strong operating margins.”
Essentra’s sales rose 9.5 percent at constant exchange rates to £338 million last year, amid a recovery in demand from the Americas and Europe.
The group also protected margins by implementing price increases to compensate for the rising costs of freight, labour, energy and materials.
Trading was impacted by draconian Covid-19 restrictions in China and distributor destocking in the US.
But the company said the easing of lockdown restrictions in China would benefit the company, while demand in Europe remained healthy and new orders so far this year are 8 percent higher than 2022 volumes on a like-for-like basis.
Essential shares were up 0.9 percent on Wednesday morning to 179 pence, though their value has shrunk by about 44 percent over the past 12 months.