SEOUL, South Korea--(BUSINESS WIRE)--Hyundai Mobis (KRX:012330) announced a detailed plan for improving actual shareholder value. The three shareholder-friendly policies the company announced include retirement of treasury stock, quarterly dividends payment and mid- and long-term profit goals.
Retiring treasury stock worth 587.5 billion won
At the special board of directors meeting held on 2nd, Hyundai Mobis resolved to retire all of the ordinary shares it acquired and holds within the range of profit available for dividends in next year and additionally purchase and retire ordinary shares worth 187.5 billion won for three years from next year.
The 2.04 million treasury shares the company acquired and holds within the range of profit available for dividends will be adjusted to 1.61 million shares as per the division ratio (*0.79) after the division-merger, although it could vary depending on changes in book value or share price, and based on the current share price (248,000 won as of Apr. 30), it is estimated to be worth approximately 400 billion won. Adding 187.5 billion won from the expected additional purchase and retirement for 3 years to this will increase the amount to approximately 600 billion won.
Similarly, the volume simply converted based on the current share price is expected to reach a total of 2.37 million shares consisting of the existing 1.61 million ordinary shares (2.04 million before division) and 0.76 million shares to be additionally purchased and retired. This corresponds to 3.1% of the total number of shares issued after division, with EPS and DPS increasing by about 3.1% respectively.
In addition to the 2.04 million treasury shares currently held, the company plans to purchase and retire additional treasury shares worth 187.5 billion won over three years from next year, with 62.5 billion won to be retired each year.
"We intend to utilize a reduction in dividends caused by the decrease in the total number of shares issued after division to purchase and retire treasury shares to improve shareholder values," said a source from Hyundai Mobis. "We will start this from next year and review the result after 3 years."
This marks the first time for Hyundai Mobis to retire its ordinary shares after it retired 0.85 million shares in 2003. Aside from this, the company had retired 21,484 preferred shares in 2014.
Paying 1/3 of annual dividend amount as quarterly dividend from next year
To improve the cash flow of shareholders, Hyundai Mobis decided to pay quarterly dividends once a year from next year. This means the company will execute about 1/3 of annual dividends amount prior to the existing dividend date.
The company will execute a quarterly dividend for the half year every year from 2019. As a result, Hyundai Mobis shareholders are expected to see improved stability of their dividend cash flow.
Meanwhile, in February, Hyundai Mobis had promised that it would return profits to its shareholders with a dividend policy at the level of 20% to 40% of free cash flow, and when there is any significant reduction or rise in dividends due to any major change in business environment, it would disclose the cause.
"We decided to retire treasury shares and execute quarterly dividend this time as part of our efforts we had continuously made to elevate shareholder values," said a source from Hyundai Mobis. "We will continue to strengthen our investor confidence through various policies for returning profits to shareholders based on our improved performance."
Hyundai Mobis has continuously implemented various shareholder-friendly policies. In March last year, the company assembled Transparent Management Committee, an organization designed to protect shareholder rights in its board of directors, appointing an outside director responsible for protecting shareholder rights. From the year 2020 when the outside director's term will end, the company will receive recommendations for the position from shareholders at home and abroad.
It will also consider the expertise, experience and nationality of candidates when appointing outside directors, thereby improving diversity. This is why it decided to appoint professor Sunwoo Myungho from Hanyang University, who is the world's foremost authority on autonomous driving, at the general meeting of shareholders scheduled on May 29th. By appointing him, Hyundai Mobis will have a pool of outside directors covering not only fair trading, business strategy and finance but also future technology research.
To effectively and proactively respond to shareholders' demand for more transparent management, the company also decided to assemble Transparent Management Support Team, a dedicated organization for the purpose, on July 1st. Led by this team, the company will establish and implement various compliance policies for compliance management and provide enterprise-wide training.
Presenting mid- and long-term profit goals… Operating margin of 10% by 2025
On this day, Hyundai Mobis also announced its updated mid- and long-term vision that was added with mid- and long-term profit goals. This new vision includes the company's plan to increase the operating margin for core auto components and future business divisions to 10% by 2025 in stages.
It also includes a specific goal of winning more contracts for future core auto components based on profitability rather than external growth and thereby reducing the ratio of materials to 60% or below. To attain this goal, Hyundai Mobis will strive to maximize its design improvement capability and production efficiency.
Based on this, the company aims to expand its R&D investment to 10% of the sales for core auto components and future business, focusing on development of future advanced technologies.
Earlier, Hyundai Mobis had announced its mid- and long-term vision of achieving CAGR of 8%, thereby increasing its sales from this year's 25 trillion won to 36 trillion won by 2022 and 44 trillion won by 2025.
This mid- and long term vision contains the company's commitment to becoming a future new technology company based on its capabilities for core auto components and system integration through 'selection and concentration'.
Meanwhile, having promoted the division and merger with Hyundai Glovis as part of Hyundai Motor Group's restructuring, Hyundai Mobis has continuously explained about the meaning of the division and merger and the appropriateness of the merger ratio to its domestic and foreign investors. From now, the company will communicate with its investors, focusing on future values, including its long-term vision, and its shareholder-friendly policies.
As part of such efforts, Hyundai Mobis is going to meet with major domestic institutional investors for 2 to 4 days and also hold NDR (Non-Deal Roadshow) for major foreign institutional investors in USA (May 7 to 9), Europe (May 7 to 10) and Asia (May 2 to 4).