BT will not pay a dividend for the first time since the start of the millennium and warned shareholders to brace for lower payouts in the future as the UK telecoms group focuses on improving its broadband network and safeguarding its credit rating.
The former phone monopoly said on Thursday that it was suspending its final dividend for the 12 months to March and would not make any payouts in the current financial year.
Payouts are expected to resume in the next financial year but at just 7.7p a share, far below the last final dividend BT paid of 15.4p. In response, the group’s shares fell 10 per cent in early trading before rebounding slightly.
The move by BT is more severe than analysts had expected and underlines the extent to which the coronavirus pandemic is forcing even those companies perceived as more resilient to rethink their strategy.
Philip Jansen, BT’s chief executive, called it “hard for shareholders although necessary”, explaining that cancelling the dividend would save the company £2.5bn.
Jan du Plessis, BT chairman, said the company was “ready” to build out its full fibre network to 20m premises by the end of this year, but that cutting the dividend was needed to navigate “the unprecedented uncertainties caused by Covid-19 without compromising our credit rating".
“BT plays a key role in sustaining critical national infrastructure — as magnified by the Covid-19 crisis — and many stakeholders trust and rely on the connectivity we provide,” he said.
The group is set to face more intense competition after Virgin Media and O2 agreed to merge this week. Mr Jansen called the £31bn deal a “sensible move”.
“Personally, I think this industry needs consolidation,” he said. “Both O2 and Virgin are important customers for us, so I think it will bring opportunity.”
BT is one of the largest dividend payers in the FTSE 100 and last passed on making a payout in 2001-02. The group last cut its dividend in 2008, when the financial crisis deepened its problems.
The telecoms group has struggled to justify its large investment in sports rights made over the past decade due to its hefty pension deficit as well as political and consumer demands to upgrade old copper lines to full fibre networks.
Rivals including Vodafone, Deutsche Telekom and Orange have already cut dividends and BT had hinted that it was willing to reduce the payment to fund an overhaul of its network in line with government ambitions to improve Britain’s broadband speeds.
Analysts at Jefferies called the decision to temporarily remove the dividend “unexpected”, while counterparts at Citi said it was a “tough but sensible dividend decision” considering the £12bn the company had said it needed to build up the UK’s fibre network.
Mr Jansen inherited a big restructuring plan at BT from his predecessor Gavin Patterson that included 13,000 job cuts but a commitment to hire more engineers.
BT announced the payout cut as it reported full-year results. Revenues for the year to March fell 2 per cent to £22.9bn, largely in line with expectations. Pre-tax profit fell to £2.4bn from £2.6bn, partially due to accounting changes but also because of £95m worth of charges related to provisions “as a result of Covid-19”.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2U1MjlmNjYxLWFiYmEtNDcwNC05ZDg4LWQ0NmM2OTQ0ZGYxNdIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2U1MjlmNjYxLWFiYmEtNDcwNC05ZDg4LWQ0NmM2OTQ0ZGYxNQ?oc=5
2020-05-07 09:39:43Z
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