Elementis’s (ELM) “pretty exciting transformation” – a description provided by chief executive Paul Waterman – has coincided with an uptick in demand for its products, leaving its annual results in a much better state than this time last year. After stripping out numbers from the underperforming Surfactants business (which is up for sale), adjusted operating profits rose 32 per cent to $128m (£91.8m), which drove a 12 per cent increase in adjusted EPS to 19.5ȼ.
True, much of this growth came from the acquisition of SummitReheis, the antiperspirant chemicals specialist, which contributed $102m of revenue. But the underlying personal care business also reported a 23 per cent increase, thanks largely to growing demand in Asia. Personal care is now the dominant division in Elementis’s portfolio, contributing just under half of its profits.
As the SummitReheis acquisition has dragged the group into a net debt position, management has decided to update the dividend policy. The payout is now due to increase in line with earnings, with special returns offered once net debt falls below one times adjusted operating profits. Although currently on 2.2 times, management think the group’s impressive cash generation will bring leverage down to the desired level by 2019.
Analysts at Evercore have forecast 2018 pre-tax profits of $125m, giving adjusted EPS of 21.2ȼ (from $115m and 19.5ȼ in 2017).
| ELEMENTIS (ELM) | ||||
| ORD PRICE: | 283p | MARKET VALUE: | £1.31bn | |
| TOUCH: | 282-283p | 12-MONTH HIGH: | 313p | LOW: 255p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 151ȼ* | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2013 | 777 | 134 | 23.3 | 8.07 |
| 2014 | 790 | 148 | 38.1 | 8.45 |
| 2015 | 677 | 121 | 20.5 | 8.45 |
| 2016 | 617 | 76.1 | 14.9 | 8.45 |
| 2017 | 783 | 78.5 | 24.3 | 8.80 |
| % change | +27 | +3 | +63 | +4 |
| Ex-div: | 3 May | |||
| Payment: | 1 Jun | |||
| *Includes $717m of intangible assets, or 155ȼ a share £1=$1.4 | ||||
