19th Mar 2020 09:30
(Alliance News) - Chemicals firm Elementis PLC on Thursday decided against paying its final dividend for 2019 as it looks to preserve cash for Covid-19.
Shares were more than one and a half times higher Thursday, however, reaching 48.12 pence each. They closed Wednesday at 18.68p.
London-based Elementis declared a final dividend for 2019 of 4.4487 pence per share at the time of 2019 results early in March. At the same time, it reported a 6.7% fall in pretax profit despite revenue climbing over 6%, due to higher finance costs and a loss on a disposal.
However, the company has decided not to pay this dividend, which it said will save it USD33 million in cash. Future dividend decisions will be made "as and when conditions normalise".
Elementis stressed it has "very ample" liquidity, with over USD300 million available immediately if necessary. Total net debt as of December 31 was USD454 million.
It has secured a relaxation of banking covenants, to 3.75 times net debt to earnings before interest, tax, depreciation, and amortisation from 3.25 times before. This applies to tests due on June 31 and December 31.
The firm said trading up to March 18 had been "solid", with a limited impact from Covid-19 on production and demand. However, the outbreak is providing significant uncertainty going forward.
"While our business performance to-date is in line with our expectations, we are acutely aware of the increased level of market and macroeconomic uncertainty. Our focus remains on what we can control, namely active cost and cash management," said Chief Executive Paul Waterman.
"The relaxation of our banking covenants and the decision to suspend the final dividend will create material additional financial headroom to counter the potential impacts of the global Covid-19 crisis."
By George Collard; [email protected]
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