£940m dividend hit as Yorkshire companies preserve cash

Nearly £1bn of previously-promised dividend payments have been held back by the region’s stock market-listed companies as part of their efforts to cut costs and preserve cash.

The deferred dividends include £752m retained by York housebuilder Persimmon – currently the largest dividend deferral by a UK company this year – while trade supplier Howdens Joinery has delayed its planned £54m payment.

Provident Financial has also kept £40m in shareholder payments back, as had Card Factory, which has now made changes to its dividend payments twice since Christmas. In total 10 Yorkshire comapnies have reversed decisions on dividend payments totalling £940m already this year.

They join dozens of UK companies to take the drastic decision in response to the coronavirus crisis, with almost all of the £4bn-plus dividends deferred in 2020 having been pulled back in the last fortnight.

The largest to date have come from the housebuilding sector, with Taylor Wimpey second behind Persimmon after it retained £486m.

There are six other companies which have deferred shareholder payouts of more than £100m – broadcaster ITV, £216m, software business MicroFocus £165m, B&Q and Screwfix owner Kingfisher £158m, retail giant Marks & Spencer £132m, student accommodation provider Unite £121m, and Crowne Plaza and Holiday Inn hotel group InterContinental Hotels £120m.

Only nine companies maintained planned dividend payments last week, which totalled £970m. However this figure was dominated by SSE’s £582m and CCH’s £209m commitments.

“The businesses involved are all very different,” said AJ Bell investment director Russ Mould.

“Investors can take some pointers, even if a long lockdown period and any deep recession could test the resolve of even the most determined payer of dividends.”

Mould suggested it will be those businesses with stable revenues streams or that supply basic needs for those who are stuck as home, have robust balance sheets and cash at hand, and good levels of interest cover and earnings cover that are best placed to pay dividends to shareholders in the coming months.

In total those nine companies confirmed payments of £970.4m, compared with 94 companies which last week pulled back on a total of £3.4bn.

By comparison only Card Factory in January and three in February – Intu, Hammerson and McColl’s Retail – deferred or cut dividends, all victims of problems in the retail sector.

But now all stock market-listed companies are having to respond to the fast-changing outlook while in the public spotlight, which is itself creating additional challenges.

Some staff at acquisitive law firm Knights learned of the company-wide pay cut of 10%, which applies to those earning more than £30,000 a year, by reading TheBusinessDesk.com’s reporting of the company’s announcement to the stock market on Friday morning.

Some of that communication pressure is being eased, after the Financial Conduct Authority (FCA) “strongly requested” companies listed on the main market observed a voluntary moratorium on issuing preliminary results for two weeks.

The FCA said : “Investors in capital markets rely on trustworthy information on the companies whose instruments they trade. The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly.”

Companies must still abide by the Market Abuse Regulations, which require companies to announce inside information to the market as soon as possible.

Many companies reporting in the last few days have declined to provide guidance for the 2021 financial year and in some cases have also said they can no longer provide guidance for their current financial year, which in some cases finishes in the next few weeks.

AJ Bell’s Mould added: “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.”

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