BT pulls dividend as full-year profit, revenue decline

BT pulled its dividend on Thursday due to the coronavirus pandemic, as it posted a drop in full-year profit and revenue.

The company said the final dividend for 2019/20 has been suspended, along with all dividends for 2020/21 "to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis". It expects to resume dividend payments in 2021/22 at an annual rate of 7.7p per share.

In the year to the end of March, pre-tax profit fell to £2.35bn from £2.67 bn the year before, while revenue edged down 2% to £22.9bn. BT said the profit figure includes charges of £95m as a result of Covid-19, mainly reflecting increased debtor provisions. The drop in revenue, meanwhile, was attributed to the impact of regulation, declines in legacy products, strategic reductions in low margin business and divestments.

Chief executive Philip Jansen said the coronavirus crisis was affecting the business, but that the full impact will only become clearer as the economic consequences unfold over the next 12 months. He added that the company was not providing any guidance for 2020/21 due to the pandemic.

"Today we are announcing a rapid acceleration of our Fibre-to-the-Premises build with a target of 20 million premises passed by the mid- to late-2020s, including a significant build in rural areas. After passing 1.3 million premises last year, we are aiming at over 2 million in 2020/21, and envisage a maximum build rate of 3 million premises per year," he said.

Russ Mould, investment director at AJ Bell, said: "One might be shocked that dividends are off the menu for at least the next 18 months rather than a short-term suspension. However now is the perfect time for BT to bury all thoughts of a dividend in favour of making its business more competitive.

"Years of paying dividends have made BT a popular stock among investors, particularly those in retirement who rely on their pensions to generate an income. The dividend cut will therefore be a blow to a lot of people’s finances.

"However, its investors shouldn’t have really been expecting a dividend at the moment, given so many other large companies are pausing the shareholder payment and the fact that BT has high debt levels and large capital expenditure requirements."

Mould said BT has "much more pressing needs" for its cash, so investors should support its decision to accelerate the roll-out of its fibre-to-the-premises network. "Giving up dividends now could be a small sacrifice if it enables the business become stronger for longer."