Miclyn sinks dividend boat

Marine engineering group Miclyn Express Offshore (MIO) have found a new way to do over minority shareholders. Management unexpectedly ripped out the final dividend when it announced its full year result.

The move caught analysts by surprise with conspiracy theorists accusing the group of trying to hold down the share price to the benefit of its major shareholders, private equity groups CHAMP and Headland.

These two parties own three quarters of the stock and have run afoul with smaller shareholders who accuse them of trying to privatize Miclyn by stealth and not paying a takeover premium.

Miclyn is registered in Bermuda and is not subject to Australian law that would have required major shareholders to make a takeover offer if they own more than 20% of a listed company.

Citigroup was taken aback by the dividend decision as Miclyn reported strong cashflow and low debt.

“We find this highly unusual, particularly given the strong earnings growth forecast for 2013-14 and the undrawn debt facilities available at 30 June,” the broker wrote in its latest note.

“In our opinion this change looks to be more about the recent increase in shareholding by CHAMP and Headland Capital and their subsequent moves to take control of the Board, than it is about holding cash to fund future growth.”

JP Morgan echoed a similar sentiment by stating that the lack of a final dividend was a “real surprise for us”. The broker was forecasting a final dividend of 2.2 cents a share.

Miclyn reported a 9% drop in revenue to $US245.3 million and a 19% decline in normalised earnings per share to 19.3 cents on Monday, but the result didn’t surprise given that earnings are coming off a very strong 2012-13 year and its withdrawal from Iran.

What’s more important is that management is forecasting a return to profit growth in 2013-14 and reiterated guidance of around $US110 million in earnings before interest, tax, depreciation and amortisation (EBITDA).

Management justified the dividend cut by saying it was saving cash to help fund future growth opportunities.

The stock has dipped 0.5% to $1.95 since its result announcement.