Today I?ll be taking a closer look at three companies announcing half-year financial results. Would it be wise to invest in these London-listed mid-caps following today?s updates?
Shares in FTSE 250-listed Essentra (LSE: ESNT) collapsed by a fifth this morning after the company reported a dip in both revenue and profits for the period to 30 June. The specialist plastic and fibre products supplier revealed pre-tax profits of £42.6m, compared to £45.1m for the same period a year earlier, with revenues £5.2m lower year-on-year at £545.2m. The disappointing results come after last month?s profit warning that also resulted in a…
Today I’ll be taking a closer look at three companies announcing half-year financial results. Would it be wise to invest in these London-listed mid-caps following today’s updates?
Shares in FTSE 250-listed Essentra (LSE: ESNT) collapsed by a fifth this morning after the company reported a dip in both revenue and profits for the period to 30 June. The specialist plastic and fibre products supplier revealed pre-tax profits of £42.6m, compared to £45.1m for the same period a year earlier, with revenues £5.2m lower year-on-year at £545.2m. The disappointing results come after last month’s profit warning that also resulted in a sharp fall in the share price.
The Milton Keynes-based firm has seen its shares fall by almost 50% during the last 12 months, sinking to sub-500p levels in early morning trading. Before today’s update, analysts had pencilled-in an 8% fall in earnings for the full year, but these consensus estimates will no doubt be revised downwards in the coming months. Despite the sharp falls in the share price this year, Essentra still looks expensive to me, trading at 14 times forecast earnings and given the challenges ahead.
In stark contrast, shares in speciality pharmaceuticals business Indivior (LSE: INDV) rose by 10% after a strong half-year update. The mid-cap firm reported a rise in net revenue for the first half to $531m, compared to $517m reported for the first half of 2015. However, expenses incurred as a result of investment in research and development led to a $32m fall in operating profit to $198m.
The US-based business has lifted its full-year guidance for net revenue from a range of $945m-$975m to a healthier $1bn-$1.03bn, and its net adjusted income guidance from $155m-$180m to $180m-$200m. Shares in Indivior have doubled in the last six months and are now trading at a demanding forward price-to-earnings ratio of 17 for 2017. Despite today’s encouraging results, the shares still look too expensive to me.
Also reporting today was textile services business Berendsen (LSE: BRSN). The London-based mid-cap firm reported a 7% rise in revenue to £533.5m for the six months to June, with adjusted operating profit also up by 7% to £70.2m. Adjusted pre-tax profit climbed to £60.2m, a 7% improvement on the first half of 2015, with earnings per share rising 8% to 27p. Management also decided to raise the interim dividend by 5% to 10.5p, leaving full-year dividend forecasts at 34.41p.
Market consensus suggests a 9% rise in full-year earnings for Berendsen, with a further 7% improvement expected next year. But the shares are trading at close to all-time highs and now look expensive at 20 times forward earnings. In my view the predicted growth is already priced-in so I would stay on the sidelines and wait for a more favourable valuation.
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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Essentra. The Motley Fool UK has recommended Berendsen. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.