Companies axe £500m of dividends to hoard cash

Firms including Shell, Pearson, Kingfisher and IWG suspend share buybacks or axe dividends

Investors reeling from the coronavirus market collapse have suffered a fresh blow after blue chip firms including Royal Dutch Shell and Pearson axed share buybacks or cancelled £500m of dividends in a scramble to protect their finances.

Shell suspended its stock buying scheme and is also planning to slash $8bn (£7bn) of costs this year following a 50pc slump in oil prices over little more than a month.

Buybacks – where companies' profits are used to purchase stock, reducing the number of shares in circulation and boosting their value – have all but ground to a halt in the weeks since the coronavirus crisis erupted. Businesses are also scrapping the dividends relied on by millions of small investors for an income, because they need the money to survive.

Shell's position is particularly tough because Saudi Arabia and Russia have begun flooding the market with oil as part of a price war, at the exact moment that a wave of global shutdowns are drastically reducing the number of buyers.

Ben van Beurden, chief executive, said:  "As well as protecting our staff and customers in this difficult time, we are also taking immediate steps to ensure the financial strength and resilience of our business.

"The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past."

Shares in the Anglo-Dutch oil titian rose 1.9pc to £10.82. 

Pearson, Regus owner IWG and B&Q parent Kingfisher all took similar action to help get through the disruption. 

Publisher Pearson said it would halt share buybacks and forecast a £25m to £35m hit to operating profits in 2020 due to the closure of many of its academic testing centres as a result of the outbreak. Shares fell 8pc. 

Analysts at Citi said Pearson was an attractive place for investors to "hide" during the market turbulence because it s ramping up ts online education arm. 

Income investors, who buy into dividend payers in an effort to get a regular payout rather than focusing primarily on share price growth, were hit particularly hard.

IWG cancelled its dividend, suspended its £100m share buyback and said it was too early to provide guidance for this year.

The office space provider expects the increasing number of countrywide lockdowns to put pressure on its global business. 

Shares fell almost a fifth, valuing IWG at just £1.1bn. The stock has lost 70pc of its value in the past month.

Analysts at Peel Hunt said IWG's balance sheet is going to become stretched. They added: "There is too much risk and too little visibility.”

Kingfisher also scrapped its dividend due to the chaos, and closed its stores in Spain and France. 

Trading in the UK remained positive last week but was severely impacted in France and other countries on the Continent due to closures, it said.

The DIY company also delayed the release of preliminary results which were due on Tuesday. Shares rose 7pc to 135p. 

Generator provider Aggreko pulled its dividend too, as it seeks to shore up its finances. 

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