- Earnings seen slightly above consensus
- Company sticking to its business plan
- Unhappy shareholders demanding a sale
In a brief trading update covering the final three months of 2023 and its full financial year, specialty chemicals firm Elementis (ELM) said results were ‘slightly’ ahead of expectations and it was sticking to the plan it outlined at its Capital Markets Day last November.
The shares, which had dropped over 8% since the start of the month, recovered 4.5% to 123p in mid-morning trading.
‘RESILIENT’ FINAL QUARTER
The FTSE 250 group said fourth-quarter revenue and profit growth showed a strong improvement over the previous year’s weak performance, as a result of which full-year adjusted operating profits were likely to be in the range of $102 million to $104 million against market expectations of $102 million.
It also flagged its year-end debt level was significantly reduced, at around $200 million against $367 million in 2022, bringing leverage down to 1.5 times from 2.2 times at the start of last year.
Looking ahead, the board said it remained committed to the financial targets it set out late last year including achieving an operating margin of above 19% by 2026 compared with 13.6% in 2022.
SHAREHOLDER UNREST
In the last few months, however, major shareholders have expressed their disappointment with the firm’s performance and called on the board to put the company up for sale rather than soldier on.
In September, Franklin Mutual Advisors LLC, which controls around 10% of Elementis’s shares, published an open letter requesting the board ‘initiate an immediate sale of the company’ after it questioned the firm’s capital allocation policy which it said had caused ‘a shocking amount of shareholder value destruction’.
Odyssean Capital, which holds roughly a 3% interest, also said in September that Elementis should be put up for sale.
‘It seems shareholders’ patience has run out and maybe it’s time for someone else or some other corporate to have a go at unlocking the value that sits within the company’, commented Odyssean managing partner Stuart Widdowson.
Elementis has a history of getting on the wrong side of investors, notably in 2018 when it took a shareholder rebellion to force the firm to reduce the acquisition price of Mondo Minerals, up to then the largest acquisition in its history.
