TI Fluid's £27m dividend ditched after Bain opposes

TI Fluid Systems' shareholders will miss out on a £27m dividend after the company's US majority shareholder voted against the payout because TI has furloughed and cut the pay of workers.

At the company's annual general meeting 57% of shareholder votes opposed the company's final dividend. The FTSE 250 company said on Tuesday it would go ahead with the payout after furloughing workers and cutting employees' pay.

The dividend would have paid US private equity firm Bain Capital almost £15m though Bain said it would not take a dividend while employees were furloughed. Bain, which owns 54% of the company, said it had changed its mind after initially electing to vote for the dividend.

A Bain spokesperson said: "We respect the company’s management and the board’s position on this matter. Upon further reflection and discussion with our partners, and in recognition of the unprecedented circumstances we are operating within – including employee sacrifices – we have reconsidered our prior position and believe it is not the right time to issue a dividend."

Bain is said to have changed its mind after considering the political and reputational implications of taking a payout from a company that has accepted government support to pay laid-off workers and cut most employees' earnings by 5%.

Shareholder groups such as the Investment Association have told companies to be wary of paying dividends when employees and taxpayers are shouldering the burden during the Covid-19 crisis. But Bain's statement suggests investors representing little more than 3% of the shares stood with it while others were happy to take the cash.

TI Fluid announced the 5.2p a share final payout for the year to the end of December after the Covid-19 shutdown caused revenue to fall 16% in its first quarter.

Announcing its decision to go ahead with the payout the company said on 11 May: "The group's Q1 performance and overall liquidity and financial position supports payment of the 2019 final dividend as previously announced." It said payment depended on approval at Thursday's AGM.

Bain said it had not fallen out with TI Fluid's leadership over the dividend. "We continue to have the utmost confidence in the company’s management team and board, and believe TI will emerge from the Covid crisis in a stronger position," Bain said.

TI Fluid makes automotive fluid storage for light vehicles. In its 11 May update it said suspension of economic activity because of Covid-19 caused a 23% drop in vehicle production in the first quarter and that its business outperformed the wider market.

Revenue for the three months to the end of March fell 15.6% to €717.3m (£635m) from a year earlier.