Elementis (ELM) set itself the challenge of reducing its ratio of net debt to cash profits to two times by the end of 2019, after the chemicals group’s acquisition of Mondo Minerals lifted its net debt to $498m from $291m, taking the ratio to 2.5 times.
Management believes that cash generation holds the key to meeting this objective. Chief financial officer Ralph Hewins expects cash profits to rise following a full year of contributions from the Mondo acquisition. The group has signalled “£50m to £55m” of disciplined capital expenditure for the year, while Elementis will not be making any further cash contributions to its pension scheme until 2021, following the conclusion of the scheme’s most recent triennial valuation in 2018.
Cash generation will only get Elementis so far, however, and a touch of self-help will also be required. Chief executive Paul Waterman said that the reconfiguration of a plant in the US will save Elementis $3m (£2.3m) this year, while measures have also been taken to reduce fixed manufacturing costs in the coatings business.
Prior to these results, analysts at Berenberg forecast 2019 pre-tax profits and earnings per share of $120m and 16.3¢, respectively, against $85m and 12.8¢ in the prior year.
| ELEMENTIS (ELM) | ||||
| ORD PRICE: | 176p | MARKET VALUE: | £1.02bn | |
| TOUCH: | 175.8-176p | 12-MONTH HIGH: | 295p | LOW: 160p |
| DIVIDEND YIELD: | 6.3% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 158¢* | NET DEBT: | 54% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2014** | 790 | 148 | 35.1 | 7.77 |
| 2015** | 677 | 121 | 18.9 | 7.77 |
| 2016** | 617 | 76.1 | 13.7 | 7.77 |
| 2017** | 783 | 78.5 | 23.3 | 8.1 |
| 2018 | 822 | 65.4 | 7.9 | 8.4 |
| % change | +5 | -17 | -66 | +4 |
| Ex-div: | 02 May | |||
| Payment: | 31 May | |||
| £1=$1.3 *Includes intangible assets of $977m, or 168p per share **EPS and DPS figures restated for 2018 rights issue | ||||
