Yule Catto latest to scrap its dividend to save cash

Yule Catto, the chemical group, is the latest UK company to scrap its dividend in the face of economic uncertainty and the need to conserve cash.

Although Yule Catto has signed a three-year £30m revolving loan with its principal banks, HSBC and Barclays, to replace the existing facility that is due to mature in November 2009, the group's management remains concerned about its liability levels.

Plans to take debt off the Yule Catto balance sheet have made progress. Some £55m has come in from the sale of three out of the company's five Impact Chemicals businesses, and there is an internal efficiency programme in train. But it is not enough, and net debt remains at £140m-£145m – or around 2.3 times earnings. The board wants to bring it down to below £100m over the next one to two years and, although the expectation is that dividend payments will resume within that period, in the short term they are to be shelved.

Yule Catto told the stock market yesterday: "In light of the current financial environment and economic uncertainty, the board has decided to suspend the payment of dividends until such time as net debt is nearer to its overall target and at which time the business environment and financial market conditions may well have improved."

The company joins a growing list. In December alone, Cattles, the sub-prime and doorstep lender, scrapped payouts for at least a year, blaming continuing delays in gaining a banking licence. And the car dealer Inchcape, warning that profits for 2009 will be hit by a rapid fall in sales, announced 1900 job losses and cancelled its dividend.

Since the summer, such announcements have come thick and fast. In July, Barratt Developments announced the postponement of payments alongside 1200 job cuts and an £85m writedown. In September, the plumbing materials giant Wolsley joined the pack as the problems in the housing market spread into the building sector. Punch Taverns, the pub company, and Mitchells & Butlers, its main rival, have taken a similar route, as have retailers including Topps Tiles and DSG International, the parent company of PC World and Currys.

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