Market report: DS Smith shuts lid on dividend payout
Packaging group DS Smith dropped sharply after reporting full-year results that missed analysts’ estimates and maintained its dividend suspension.
The FTSE 100 group posted revenues of £6.04bn for the 12 months to the end of April – down 2pc on the previous year – with a profit before tax of £368m.
Its factories have remained open throughout the coronavirus crisis, with heightened e-commerce demand boosting a core pillar of its operations.
Miles Roberts, its chief executive, said: “Every week for the past eight weeks has been busier than in the run up to Christmas, despite the massive wider economic damage from coronavirus.”
In the UK, demand for DS Smith’s food and flower packaging has more than doubled, while packaging for clothes and leisure products has risen more than 60pc.
But the group disappointed investors by maintaining the suspension of its dividend.
Mr Roberts added: “With the current economic uncertainty, we continue to focus on our employees, our customers, our communities and on the efficiency and cash generation of our business and accordingly the board considers it premature to resume dividend payments at this stage.” Citi’s Paul Bradley said the decision not to declare a dividend was a surprise, adding it “looks to us to be an over-abundance of caution, rather than a real issue of affordability.”
The group dropped 22p to 296.7p, leaving it as the biggest faller on the FTSE 100.
European shares jumped on Thursday as optimism over reopenings, vaccine hopes and better-than-expected economic indicators put some wind in investors’ sails.
Nearly all off London’s blue-chips gained ground, with travel firms, retailers and financials all performing strongly.
Primark owner Associated British Foods jumped after reporting a “reassuring and encouraging” rebound in sales after reopening stores last month.
Barclays’ Warren Ackerman called the update “impressive”, adding: “The fear of big discounting has not materialised with markdowns limited, boding well for margins.” ABF climbed 81.5p to £20.46.
Elsewhere, energy supplier National Grid dropped 51.8p to 939.2p after HSBC analyst Verity Mitchell cut its rating to hold, while Sainsbury’s shares cooled off slightly after rising on Wednesday.
Down on the FTSE 250, which performed in line with its blue-chip sibling, shares in aerospace engineering group Meggitt jumped 18.9p to 324p.
The group warned it expects organic revenue to be 30pc lower in the three months to the end of June, and down about 15pc over the whole first half, after a “substantial reduction in both passenger demand and air traffic” prompted by Covid-19 cut its civil aerospace revenues in half.
It said “initial signs of a recovery in commercial aerospace have emerged” in recent weeks, but warned the road to recovery looks far from assured.
Jefferies’ Sandy Morris said the update was “reassuring”, adding that the current crisis might prompt some fundamental changes in how Meggitt operates.
