The deepening coronavirus crisis has forced UK companies to scrap dividend payments to shareholders worth £500m in one day, as heavy selling on global stock markets continued for a fifth week.
The total amount of dividends cancelled this year so far has reached £1.5bn, as every sector of the economy feels the impact of the pandemic. On Monday the companies scrapping payouts to save cash included the B&Q and Screwfix owner Kingfisher, the broadcaster ITV, the bus operators Stagecoach and Go-Ahead and the clothing retailer N Brown, whose brands include Simply Be and Jacamo.
Russ Mould, investment director at stockbroker AJ Bell, said: “It is another brutal day for income seekers as 10 more UK firms announce dividend cuts and an 11th – Britvic – joins Next and National Express in reviewing its payout as part of its contingency planning.”
Mould described the cutbacks as “a big blow for portfolio builders and savers who are looking for income at a time when interest rates on cash are reaching new historic lows”.
The FTSE-100 dropped almost another 4%, closing down 197 points at 4994.
As the corporate toll of the virus outbreak mounted, Britain’s financial watchdog wrote to companies over the weekend, advising them to delay their financial results for at least two weeks.
Kathleen Brooks, founder of the consultancy Minerva Analysis, said on BBC Radio 4: “This is a very big shift from the Financial Conduct Authority, this is a big statement, and there have been some people speculating that maybe this is a sign that stock markets will close down.
“One assumes that they don’t want to see continued falls of 15%-plus per week, but this is very unprecedented. Nothing like this happened during the financial crisis.”
The FCA later said it had no plans to close markets or ban short-selling, saying: “There is no evidence that short selling has been the driver of recent market falls.” It added that while there had been “significant volatility in market prices over the past weeks” and that this might continue for a period, markets had “continued to operate in an orderly fashion in the UK”.
The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the coronavirus, for which there is no specific cure or vaccine.
The UN agency advises people to:
- Frequently wash their hands with an alcohol-based hand rub or warm water and soap
- Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing
- Avoid close contact with anyone who has a fever or cough
- Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers
- Advice about face masks varies. Wearing them while out and about may offer some protection against both spreading and catching the virus via coughs and sneezes, but it is not a cast-iron guarantee of protection
Many countries are now enforcing or recommending curfews or lockdowns. Check with your local authorities for up-to-date information about the situation in your area.
In the UK, NHS advice is that anyone with symptoms should stay at home for at least 7 days.
If you live with other people, they should stay at home for at least 14 days, to avoid spreading the infection outside the home.
Elsewhere:
The Toulouse-based Airbus withdrew its 2020 financial guidance, ditched its dividend worth €1.4bn (£1.3bn) and suspended funding to top up staff pension schemes. The European aircraft maker signed a credit facility for €15bn to shore up its finances.
The publishing firm Pearson suspended its share buyback programme but also said demand for its online educational products had jumped.
ITV, hit by a slump in advertising, said it would save £300m by not paying a final dividend for 2019 and making cost cuts. The broadcaster has postponed some TV productions in the UK.
The Irn-Bru maker, AG Barr, was one of the first companies to delay the publication of its full-year results, scheduled for Tuesday, in response to the FCA. It has frozen all investment and is scaling back marketing.
Kingfisher also postponed its results and axed its final dividend for 2019-20. It said its UK stores remained open and that it was introducing a new drive-through option to enable customers to collect their purchases with minimal contact.
Mike Ashley’s Frasers Group, formerly known as Sports Direct, has suspended its share buyback. It issued a profit warning last week.
Clothing chain N Brown has axed its dividend. It said sales were down 40% and that it was in talks with its lenders about raising fresh finance.
Go-Ahead has suspended its dividend and reduced rail and bus services. Unused buses are being used to transport NHS workers, support supermarkets with food deliveries, and deliver essential goods to cut-off communities.
Stagecoach issued a profit warning and scrapped its dividend payments this year. Its directors are giving up half of their salaries and fees for a period of time, will not receive any bonuses for 2019-20 and will not receive any pay increase for 2020-21.
The FCA said it strongly requested that all listed companies observe a moratorium on the publication of preliminary financial statements, noting that financial investors rely on trustworthy information on companies.
“The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly,” the watchdog said. “It is important that due consideration is given by companies to these events in preparing their disclosures.”
Top 10 dividend cuts/deferrals announced since January
23 March ITV: £216.2m
18 March Micro Focus: £165.1m
23 March Kingfisher: £158m
20 March Marks & Spencer: £132.6m
20 March InterContinental Hotels: £120.4m
25 February Hammerson: £91.2m
20 March Travis Perkins: £83.2m
12 February Intu: £62.3m
19 March Crest Nicholson: £56m
16 March William Hill: £46.7m
Source: AJ Bell/company accounts
