Double-digit earnings growth has given Elementis reason to cheer, but it's the prospect of special dividends at the cash-generative chemicals group that has the City excited.
On top of the usual final dividend, chief executive David Dutro promises that, in future, up to half the net cash left at year-end will be returned to shareholders. If, as expected, that's $50m (£32m) in 2012, Elementis would hand back 5.5¢ (3.5p) a share, giving a prospective yield of around 4 per cent. Still, it is not guaranteed, and a tasty acquisition to boost the speciality products division, or extra investment elsewhere, could wipe out the dividend pot.
The payout aside, Elementis managed to report growth in difficult conditions. Revenue limped higher, but switching production from lower margin surfactants to coatings additives, where returns are better, offset weaker sales in Europe and explains why group operating margin topped 20 per cent for the first time. Fixing damage done during the annual storm season swelled demand for wood preservatives in North America, too, driving volumes at the chromium operation there up 14 per cent. And, with the benefit of margin improvement, profits in the business shot up 27 per cent to $33.4m.
Cannacord Genuity expects full-year underlying pre-tax profits to rise from $134m to $154m, giving EPS of 14.6p (12.8p last year).
ELEMENTIS (ELM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 211p | MARKET VALUE: | £954m | |
| TOUCH: | 210-211p | 12-MONTH HIGH: | 214p | Low: 105p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 101¢* | NET CASH: | $29.9m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 396 | 70.6 | 10.8 | 2.34 |
| 2012 | 401 | 79.0 | 12.4 | 2.45 |
| % change | +1 | +12 | +15 | +5 |
Ex-div: 5 Sep Payment: 5 Oct *Includes intangible assets of $335m, or 74¢ a share £1=$1.57 | ||||
