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After Pearson last week, it’s the turn of shareholders in Essentra (ESNT) to be on the wrong side of yet another profits warning – it’s fourth since last June. Having warned barely two months ago, management (new CEO as of 1 Jan) is already guiding to even lower full-year operating profits due to a “further significant decline in both revenue and profitability” for its Health & Personal Care packaging unit. Worse still, it doesn’t see things improving near-term and has pencilled in an impairment charge for the unit.
A brace of warnings in such quick succession is a real concern, and today’s sell-off adds to an existing downtrend and weak start to the year. However, bargain hunters have already stepped in to rally the shares well off their worst levels of -12.5%. Investors have endured several warnings before watching the shares deliver a bounce. Bulls look prepared to give them one more chance. The Component Solutions and Filtration units are said to be on-track while net debt may improve more than expected.
No pressure on the new CEO to deliver when FY results are published on 17 Feb.
Mike van Dulken, Head of Research, 23 Jan 2017
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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