BT Group PLC cancels dividend for two years to fund investment and coronavirus

Chief executive Philip Jansen launched a “radical modernisation and simplification programme” to make £2bn of savings over the coming five years

(LON.BT.A) has finally buckled and decided to cancel its dividend as it announced a five-year ‘simplification’ plan and a decline in full-year revenue and profit.   

No final dividend will be paid for the past year to 31 March nor for the current year, with the telecoms group saying it expects to resume the payout in 2022 ‘rebased’ at an annual rate of 7.7p per share.

Investors had only been braced for a dividend cut rather than a cancellation, analysts said, with the consensus forecast pointing to a cut to around 10p from 15.4p last year.

Earnings for the past financial year would barely have covered the previous dividend, having fallen 20% to 17.5p per share as profit before tax fell to £2.4bn from £2.7bn last time, but with new IFRS 16 accounting rules making comparisons unfair. 

BT took a £95mln charge as a result of coronavirus-related provisions for bad debts, saying the biggest financial impact from the pandemic will be lower revenue from BT Sport, reduced SME business activity and rising insolvencies, plus lower installations for Openreach.

Revenue was down 2% on a reported basis to £22.9bn and 3% lower on an underlying basis, with average revenue per customer down in both fixed and mobile telecoms, BT blaming the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments.

Net debt has swelled to £18bn from £11bn a year ago, which was attributed to the IFRS 16 implementation and net cash outflows. 

Chief executive Philip Jansen said due to the Covid-19 pandemic the group was not providing guidance for the current year but he did say that he was aiming to make £2bn of savings over the coming five years from a “radical modernisation and simplification programme” in an initiative that will “re-engineer old and out of date processes, rationalise products, reduce re-work and switch off many legacy services”.

He said the dividend was cut “in order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major five-year modernisation programme”.

Market disappointment

BT shares fell 8% on Thursday morning to 104.79p, where they are down more than 46% since the start of the year. 

“Another one bites the dust,” said Neil Wilson at, with the company joining the massacre of FTSE dividends.

“Whether or not you agree that companies ought to be prioritising investment or survival over shareholder returns, the income investor is not going to find life easy for the next 18 months.”

Analysts at UBS said fourth-quarter results were generally in-line with forecasts but the dividend outcome “is worse than expected and will draw…

Read MoreBT Group PLC cancels dividend for two years to fund investment and coronavirus

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