DS Smith is boxed in by investors over dividend
BRITAIN’S biggest box maker
DS Smith struck the wrong note with investors after it chose to withhold its dividend.
The packaging maker cancelled its final payout to shareholders despite the rise in online shopping that boosted business during lockdown.
Profits at the group – whose customers include Amazon – rose 5pc to £368m in the year to April. This was up from £350m the year before.
Around half of FTSE100 firms have cancelled their dividends as they scramble to save cash during the crisis.
DS Smith said orders from the division that makes packaging for industrial clients had taken a hit.
But in the UK its e-commerce arm jumped, with food and flower packaging doubling and clothing packaging rising 60pc.
But it said the ongoing uncertainty was forcing it to rein in spending as Covid-19 hit profits by £15m in March and April.
Boss Miles Roberts admitted it could be seen as ‘overcautious’ and that cutting the dividend ‘hurts’. He added: ‘We have to secure the company, that is our first priority.’ Traders were split by DS Smith’s prudence. Citi analyst Paul Bradley described it as ‘an overabundance of caution’ while Hargreaves Lansdown said it was a good move as DS Smith’s success tends to rise in line with the economy, which is heading for a mammoth recession.
Shares tumbled 6.9pc, or 22p, to 296.7p, making it the biggest faller in the FTSE 100. The wider Footsie was undeterred, rising 1.3pc, or 82.4 points, to 6240.36. The FTSE 250 followed suit, finishing up 1pc, or 178.43 points, to 17367.86.
Travel stocks climbed throughout the London Stock Exchange as investors bet on the prospect of at least some summer holiday travel. British Airways-owner IAG was the top Footise riser, up 5.7pc, or 12.5p, to 231.7p, while smallcap Jet2-owner Dart Group added 5.6pc, or 45p, to 848p and Easyjet rose 2.2pc, or 14.6p, to 684p. Mid-cap defence company Meggitt gained altitude despite revealing that revenue in its civil aerospace division – which makes parts for passenger planes – halved in the second quarter.
Overall turnover will fall 30pc in the second quarter and by 15pc in the first half, as its defence and energy businesses remained solid.
It is planning to cut 1,800 jobs and got a cash boost this week from selling a training systems unit for £118m. Its stock rose 6.2pc, or 18.9p, to 324p after it said it was beginning to see a recovery in aerospace demand, as more and more countries reopen their skies to international travel.
Avon Rubber, a relatively new addition to the FTSE 250 that has flown somewhat under the radar, advanced after it sold its dairy equipment arm for £180m.
Milkrite Interpuls, which makes what Avon monitoring systems that it describes as ‘Fitbit for cows’ and provides milking tubes, has been sold to a milking gear specialist DeLaval.
The deal needs sign-off from regulators and shareholders, but it means Avon can concentrate on its rapidly expanding body armour division. Investors greeted the news by sending shares up 2.7pc, or 90p, to 3380p.
And Premier Oil managed to clinch approval from its creditors to buy two fields in the North Sea from BP (up 1.3pc, or 3.9p, 313.25p). It will only need to pay £168m in cash after renegotiating the terms of the deal – or £260m if future oil and gas prices rise.
Premier also ditched a £152m deal to buy another 25pc stake in a gas project from a South Korean company. But its backers were unmoved, with shares falling 0.2pc, or 0.1p, to 50p.