Packaging firm DS Smith (SMDS) posted robust full year results but the share price tanked as a cap on future optimism prolonged the dividend drought.

The company reported a 2% decline in revenue to £6.04 billion in the 12 months to 30 April, yet saw operating profit climb 6% to £455 million.

DS Smith said that performance for the first 10 months of the financial year was robust with a relatively limited £15 million impact on operating profit during the final couple of months as the pandemic lockdown took hold.


But the share price slumped 8.5% in morning trade on Thursday as the company said it was too early to restart dividends given the ongoing uncertainties in the global economy.

End of 10 years of dividends*
2020 0p
2019 16.2p
2018 14.7p
2017 15.2p
2016 12.8p
2015 11.4p
2014 10p
2013 8p
2012 6.8p
2011 6.5p
2010 4.6p
Source: DS Smith *Year to 30 April

That pegged the stock back to 291.7p, its lowest point in two and half months, to head the FTSE 100’s loser board.

DS Smith axed its 5.4p per share interim payout in April.

This caution on the dividend comes as a major blow to income starved investors who would have hoped that a boom in online shopping during lockdown would have seen shareholder payouts return.

‘All the online orders made during lockdown need to be packaged up for delivery and sure enough there has been an eye-catching surge in demand for the company’s products which are targeted at this market,’ said Russ Mould, investment director at investment platform AJ Bell.

But big corrugated box sales to industrial customers have come under significant pressure, offsetting much of the e-commerce surge, and given by the company as the reason to withhold dividends for the time being, a decision that has drawn criticism.


It is hard for management to square the decision to deny income-starved investors any kind of dividend with a resilient performance in the 12 months to 30 April and the demand boost it is enjoying from the surge in web-based shopping,’ said AJ Bell’s Mould.

‘It doesn’t smack of too much confidence in the near-term outlook.’

David O’Brien, an analyst at stockbroker Goodbody, was also left unimpressed by the overall results, saying there was ‘little to get excited about’ in the figures or commentary.

‘The current valuations fail to capture the clear downside risk to forecasts, the wider industry and the group’s high leverage and sub-par returns profile,’ he said.

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Issue Date: 02 Jul 2020