Press Release of the Day – 23rd March

Half a billion pounds of dividend cuts announced in one day

AJ Bell press comment – 23 March 2020

“It is another brutal day for income-seekers as ten more UK firms announce dividend cuts and an eleventh – Britvic – joins Next and National Express in reviewing its pay-out as part of its contingency planning,” says Russ Mould, AJ Bell Investment Director. “The loss of income from today alone totals some £500 million and takes the running aggregate this year to some £1.5 billion, 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.

Announced Company Dividend cut/deferral (£ million)
23-Mar-20 Bonhill 0.3
23-Mar-20 Go-Ahead 13.0
23-Mar-20 Stagecoach 22.3
23-Mar-20 Aggreko 46.5
23-Mar-20 Colefax 0.3
23-Mar-20 IWG 41.8
23-Mar-20 Card Factory (2nd) 21.9
23-Mar-20 N Brown 12.0
23-Mar-20 ITV 216.2
23-Mar-20 Kingfisher 158.0
20-Mar-20 Marks & Spencer 132.6
20-Mar-20 InterContinental Hotels 120.4
20-Mar-20 Travis Perkins 83.2
20-Mar-20 Johnson Service 8.7
20-Mar-20 JD Wetherspoon 4.2
19-Mar-20 Crest Nicholson 56.0
19-Mar-20 Playtech 33.9
19-Mar-20 Elementis 26.0
19-Mar-20 NewRiver Reit 16.5
19-Mar-20 PPHE Hotel 8.5
19-Mar-20 Portmieirion 3.1
19-Mar-20 Gym Group 1.6
19-Mar-20 Shepherd Neame 0.9
18-Mar-20 MicroFocus 165.1
18-Mar-20 McCarthy &Stone 18.8
18-Mar-20 Marston’s 17.8
18-Mar-20 Restaurant Group 12.4
17-Mar-20 Shoe Zone 4.0
16-Mar-20 William Hill 46.7
11-Mar-20 Costain 12.3
11-Mar-20 Dignity 12.2
10-Mar-20 John Menzies 12.2
26-Feb-20 McColl’s Retail 0.7
25-Feb-20 Hammerson 91.2
12-Feb-20 INTU 62.3
30-Jan-20 Renishaw 5.1
09-Jan-20 Card Factory 17.1
TOTAL 1505.8

Source: Company accounts

“The pace of cuts is picking up, too, and more look inevitable as companies scramble to preserve cash and management teams accept their share prices are getting little or no support from any commitments to defend a dividend.

“In some cases, investors are almost greeting the news of a cut with relief. Kingfisher’s shares are up today, as are those of Go-Ahead, although shareholders in ITV appear less pleased, given the firm’s commitment to its 8p-a-share dividend for both 2019 and 2020 less than three weeks ago.

“That shows how fast-moving the situation remains and how difficult it is for companies to plan. Yet investors are keen to hear how boardrooms are responding to the drop in business that they are facing. They will be looking for detail on plans to cut costs, husband cash and weather the coming downturn.

“This is what investors are looking for now and they are the comments by which they will set great store. Shareholders are realistic enough to know that profit forecasts are likely to be wrong and are looking instead for guidance on how the financial resources available to a firm, its banking covenants and what levers management can pull to help ensure that a company can come through the crisis and be ready for the eventual upturn. If a dividend cut is part of the near-term price that must be paid to ensure a firm’s long-term survival or avoid a major rights issue or debt-for-equity swap, then investors may well come to accept it, even if the loss of the precious payments is a big blow.

“Share buybacks are also falling by the wayside too. Pearson and Shell have joined Playtech, Inchcape and Direct Line in putting their buyback programmes on hold. This makes perfect sense in the near term as it is a quick and easy way to preserve cash, although it does question the long-term value of buyback schemes as it could be argued that boardrooms have fallen into the trap of buying near the top. The programmes have offered no support to share price at all, either, which is something else to consider in the future.”

Announced Company Buyback amount postponed (£m)
23-Mar-20 Shell TBC $1 billion buyback halted. $15bn of $25bn scheme completed
23-Mar-20 Pearson 183 £167 million of £350m million completed
20-Mar-20 Playtech 28 €10m of €40m completed
20-Mar-20 Inchape 125 £25 million of £150 million completed
19-Mar-20 Direct Line 121 £29 million of £150 million completed
  TOTAL 458 + Shell  

Source: Company accounts

– Ends –

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