More firms cancel dividends as markets sell-off continues
The deepening coronavirus crisis has forced more UK and European companies to scrap their dividends and warn on profits or suspend financial guidance, as heavy selling on global stock markets continued for a fifth week.
The FTSE 100 index in London tumbled more than 4.5% at the start of trading, wiping out its hesitant recovery late last week. It fell by 245 points to 4,944, with every share down.
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South Korea’s Kospi and Australia’s main index lost more than 5%, the Shanghai market closed down 3% and India’s stock market plummeted more than 10%.
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.
How can I protect myself and others from the coronavirus outbreak?
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
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.
Every sector of the economy is being hit by the pandemic and a number of companies said on Monday that they were cancelling dividend payments to shareholders. They include the bus operators Stagecoach and Go-Ahead, the retailer N Brown, the broadcaster ITV and the Swedish home appliance maker Electrolux.
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. After a four-day shutdown, its factories in France and Spain reopen on Monday but will resume only partial aircraft production.
The oil group Royal Dutch Shell is slashing $8bn to $9bn of spending this year as it faces the twin threats of Covid-19 and the oil price war started by Saudi Arabia. It has also cancelled the next tranche of its share buyback programme.
The publishing firm Pearson suspended its share buyback programme but also said demand for its online educational products had jumped this month.
ITV, hit by a slump in advertising, said it would save £300m by not paying a final dividend for 2019 or paying one in 2020. 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.
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.
Sales at the clothing chain N Brown have crashed by 40%. It is axing its dividend and said it was in talks with its lenders about raising fresh finance.
The Financial Conduct Authority said it strongly requests all listed companies observe a moratorium on the publication of preliminary financial statements, noting that financial investors rely on trustworthy information on companies.
The watchdog said: “The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly. It is important that due consideration is given by companies to these events in preparing their disclosures.”
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