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Strategic review of its packaging arm lays groundwork for focus on higher quality components division
Thursday 02 Dec 2021 Author: Tom Sieber

Essentra (ESNT)  305p

Loss to date: 1.6%

Original entry point: Buy at 310p, 11 November 2021

Our positive call on support services business Essentra (ESNT) is down a touch on our recent entry point, but that needs to be viewed in the context of this week’s broader market wobble.

It has fallen less than the wider market since we said to buy in early November, with the FTSE All-Share dropping 4.3% against a 1.6% dip for Essentra over the same time period.

More relevant from our perspective is the welcome, though not unexpected, announcement that the company is actively considering an exit from its packaging arm, hot on the heels of a mooted disposal of the filters division.

This would leave the focus entirely on its higher margin components unit – a key reason we highlighted the group’s appeal. The accompanying revelation that chief financial officer Lily Liu is planning to leave next year also hints at an accelerated timetable for the move.

Commenting on the news Davy analyst David Greenall said: ‘We see this as a positive and suggests a swifter conclusion to the group becoming a solely components business.

‘CFO Lily Liu has announced that she will leave Essentra… again, we see this a further indication that the non-components operations will likely be divested, or a long way down the track to sale, by that date.’

SHARES SAYS: Still a buy.

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