(Alliance News) - Outsourcer Serco Group PLC on Thursday said its first dividend since 2014 has been withdrawn for now and added that it will take advantage of UK government measures to cushion the financial blow from the Covid-19 outbreak.
Serco said it will be using the UK government's value added tax deferral programme, postponing about GBP35 million of VAT payments to early 2021. Serco also will use the job retention scheme which offers salary support for employees who are furloughed.
Serco back in February proposed a 1.0 pence per share dividend for 2019, which would have been its first payout since 2014, an "important milestone" the company said at the time.
"At a time when the UK and other governments are helping Serco with its liquidity, it seems inappropriate to use that cash for anything other than its intended purpose of protecting the financial strength and resilience of our business. We are therefore withdrawing the resolution we had intended to propose at the annual general meeting authorising the payment of a final dividend in respect of 2019," the company explained on Thursday.
The company's annual general meeting is on May 14.
Serco said this will save it GBP12 million and it also will not pay any executive bonuses, pocketing the company an extra GBP1.4 million. Rather than buying shares as part of its employee share ownership trust, it will issue stock instead, saving GBP15 million.
Serco said: "In aggregate these actions, along with the VAT deferment, will reduce cash outflows in the second quarter by around GBP60 million compared to our previous plans."
Serco provides services to the public sector in various industries including health, transport and defence.
The company said: "In health, demand is unprecedented, as are the challenges of meeting that demand.
"In defence in the US, UK and Australia, most of the work we do has been designated as essential to national security, and so far we have not seen significant diminution of demand."
Serco shares were 0.3% lower at 119.40 pence each in London on Thursday morning.
By Eric Cunha; ericcunha@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
Serco (SRP)