Minutes before releasing its results statement, Elementis (ELM) dropped a bombshell, informing investors that its proposed acquisition of Mondo Minerals BV may no longer go through because “major shareholders have expressed concerns about the transaction”. The speciality chemical group said it’s now “exploring its options” and plans to make a further announcement in due course.
The market wasn’t receptive to the idea of paying an enterprise value/cash profits multiple of 17 for the producer of industrial talc additives, so it should perhaps come as little surprise that Elementis’s shares surged in early morning trading. That it was accompanied by an encouraging set of results, was the icing on the cake.
The Personal Care division, home to last year’s acquisition SummitReheis, led the way, delivering a 45 per cent increase in revenue and a 47 per cent rise in adjusted operating profit. SummitReheis’ high-margin product line and cost synergies boosted Elementis’s bottom-line during the period, as did product rationalisation initiatives and the introduction of price increases to combat raw material inflation.
Management is now hopeful that its Reignite Growth programme can resuscitate its underperforming Energy unit, a victim of infrastructure constraints in Canada and the merging of two key customers, and the Chromium division, which was impacted by a previously announced three-week weather-related production outage.
Numis forecasts adjusted pre-tax profit of $120m for the December year-end, leading to EPS of 20.5¢, against $115m and 19.6¢ in 2017.
| ELEMENTIS (ELM) | ||||
| ORD PRICE: | 280p | MARKET VALUE: | £1.3bn | |
| TOUCH: | 280-281p | 12-MONTH HIGH: | 322p | LOW: 238p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 153ȼ* | NET DEBT: | 37% | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 384 | 44.9 | 7.9 | 2.70 |
| 2018 | 421 | 46.8 | 6.7 | 2.95 |
| % change | +10 | +4 | -15 | +9 |
| Ex-div: | 30 Aug | |||
| Payment: | 28 Sep | |||
| *Includes intangible assets of $708m, or 153ȼ a share £1=$1.31 | ||||
