Delay In Financial Results, Dividend Cuts; What’s Coming Next?

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Delay In Financial Results, Dividend Cuts; What’s Coming Next?

 Delay In Financial Results, Dividend Cuts; What’s Coming Next?

Financial Conduct Authority (FCA) urges companies to delay financial results disclosure

In one of the many government directives amid coronavirus crisis, UK Financial Conduct Authority (FCA) issued a letter asking British companies to delay the publishing of preliminary financial results for at least two weeks, in response to business disruption fears emerging from the Covid-19 pandemic. The announcement came on Saturday, 21 March 2020, as a measure to provide considerable time to the companies in planning and reporting on the recent unprecedented events driven by coronavirus outbreak and country lockdown.

All small and large businesses have temporarily shut down on government’s directives to halt rapid virus spread and maintain safe social distancing. The closures pushed the UK high street to shut down, which is famous for the big name like McDonald (McD), Primark, Nando’s, Waterstones and Timpson, among others.

FCA believes that given the rapidly changing scenario of the last couple of weeks, it is essential that companies consider these events in preparing their disclosures. The regulator further talked about the common practice of issuing unaudited financial statements earlier than the regulatory requirements among UK listed companies. FCA expressed that, at the moment, this practice is putting ‘unnecessary’ pressures on the audit profession and listed companies for which the regulator confirmed that it is in talks with PRA (Prudential Regulation Authority) and the Financial Reporting Council to consider the package of measures aimed at easing this pressure.

Since the delay in the issue of the preliminary financial statement is at companies’ discretion, London Stock Exchange (LSE) witnessed a release of 2019 financial results from many listed companies, including Seplat Petroleum Development Company PLC (LON: SEPL), EVE Sleep PLC (LON: EVE) among others.

British companies axe dividends as the bear market continues

The accelerating coronavirus crisis has forced several British companies to scrap dividend payments to shareholders as turbulence over the market sell-off continued for the fifth straight week. It is expected that a total £1.5 billion of the dividend would be cancelled as per the announcement made this year.

However, FCA has pointed out that short-selling could not be blamed for recent market falls as there has been no evidence for it to be the reason for volatility experienced over the past weeks. Let’s have a look at some LSE-listed companies that have slashed their dividend payments.

  • ITV PLC (LON: ITV) has confirmed its intention to save £300 million by suspending the 2019 final dividend payment and making other cost cuts. ITV stock price dropped 2.97% to trade at GBX 58.24 on Tuesday, 24 March 2020, as at 12:37 PM GMT.
  • Kingfisher PLC (LON: KGF) confirmed to delay the release of preliminary financial results as requested by FCA. The retailer also stated that due to unprecedented events caused by coronavirus outbreak, the Board would not go for the final dividend for fiscal 2019-2020. On Tuesday, Kingfisher’s stock price slid 0.28% in the early hours of day trading session. The stock was trading at GBX 143.00 per share as at 12:40 PM GMT.
  • Go-Ahead Group PLC (LON: GOG), a market pioneer in travel and leisure industry got hit hard amid the pandemic as tours, travel and any social gatherings have been strictly forbidden to halt the spread of the virus. In this time of financial setback, the company decided to suspend its proposed interim dividend of 30.17 pence per share in order to serve the current priority of prudent cash management. GOG stock price moved in the direction of the global equities market on Tuesday, reflecting an increase of 6.39% to trade at GBX 707.50 per share as at 12: 48 PM GMT.
  • Brown Group PLC (LON: BWNG), a diversified retailer suspended dividend payment for the foreseeable future, while also slashing a final dividend for the financial year ended 29 February 2020. In light of economic uncertainty due to the impact of COVID-19, the Board further confirmed that the group expects its adjusted profit before tax for FY2020 to be lower than the previously guided range of £70 million to £72 million. Brown Group’s stock price dropped 0.64% to trade at GBX 18.68 on 24 March 2020, as at 13:07 PM GMT.
  • Stagecoach Group PLC (LON: SGC) axed its dividend payment for the year ended 2 May 2020. However, the company assured investors about the financial health of the group to support the continuity of the business on the back of over £290 million of available cash and undrawn, committed bank facilities. Stagecoach stock price surged 12.35% to trade at GBX 74.60 on 24 March 2020 as at 13:20 PM GMT.

Britain goes into lockdown

The United Kingdom joined other nations in complete lockdown as the ‘contagion’ and ‘pandemic’ coronavirus engulfed the country in its speed and breadth. UK Prime Minister Boris Johnson urged people to stay at home and cooperate in the interest of nation and self-safety to avoid in coming to the contact with the virus-infected.

The government expressed how ugly it could get in terms of Italy becoming the biggest example of the virus spread to the entire world. As per the latest update, Italy reported 602 new coronavirus deaths which makes a total to 6,077 deaths in Italy as on 24 March 2020. Further, the government warned the public about the magnitude of virus stating that Britain is just about two weeks behind that of Italy. The figures suggest that COVID-19 deaths in the UK have increased on average about 30 per cent per day, which has led the number of deaths in the UK to rise by 47 to 281 while the number of confirmed cases rose to 5,683 from 5,018 as on March 22 2020.

However, global equities markets have shown some signs of recovery on Tuesday, in response to Fed action of an unlimited bond-buying to offer a further buffer to the US economy and the UK government’s decision to impose a lockdown. On 24 March 2020. Britain’s FTSE 100 surged by 4.02% or 200.61 points to trade at 5,194.50 as at 10:53 AM GMT.

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