50 2GM Saturday August 1 2020 | the times
Business
5
Crisis is ‘worst in history’
Continued from page 47
by 98.4 per cent on capacity down 95.3
per cent, while revenue in the six
months to the end of June dropped by
56 per cent to €5.33 billion. IAG also
booked an impairment charge of
€2.1 billion because of a fall in the value
of its fleet after announcing it would re-
tire its 32 jumbo jets last month to save
money, while fuel and foreign exchange
hedges also had an impact.
IAG’s proposed €2.75 billion rights
issue is backed by Qatar Airways, which
owns 25 per cent of the company and is
its largest shareholder. Mr Walsh said
the capital increase was “vital to ensur-
ing that IAG has sufficient liquidity
throughout a more prolonged down-turn in air travel”. IAG is going through
a redundancy programme at BA with
the aim of laying off 12,000 workers,
about a third of its staff, and is consult-
ing on changes to terms and conditions
for many of the remaining 30,000 staff.
There have been suggestions that the
Covid-19 crisis had enabled the IAG
boss to push through cuts he had long
wanted to make, but Mr Walsh dis-
missed this, saying: “The idea that we
welcome this crisis is absolute rubbish.
Nobody in their right minds would
want to go through something like this.”
IAG’s share price has lost more than
70 per cent of its value since the start of
the year. Yesterday the shares fell 16¼p,
or 9 per cent, to 164¾p.Behind the story
A
irline
passengers
may be in
short supply
but there is no
shortage of departures
and arrivals in the IAG
boardroom (Dominic
Walsh writes).
As the chief executive
Willie Walsh prepares to
make way for Luis
Gallego, head of its Iberia
business, Antonio
Vázquez, 68, is poised to
hand the chairmanship of
the airline group to Javier
Ferrán, an independentnon-executive director, in
January.
The appointments of
Mr Gallego, 51, and Mr
Ferrán, 63, will create an
all-Spanish top two at the
British Airways and
Iberia owner.
The appointment of Mr
Ferrán as chairman
raised a few eyebrows
because the former chief
executive of Bacardi is
chairman of Diageo, the
world’s biggest drinks
company and, like IAG, a
constituent of the FTSE
100.
While chairing two
FTSE 100 companies isnot banned by corporate
governance guidelines,
some analysts questioned
whether Mr Ferrán was
spreading himself thin
given that he is also a
non-executive director of
Coca-Cola European
Partners and an adviser
to Blackrock.
Asked whether this
might be an issue, Mr
Walsh said that his
colleague’s “temperament
and experience” would be
ideal for the
chairmanship of IAG,
adding: “I know he is
conscious of the need for
him to reduce hisexternal commitments
outside of Diageo.”
Qatar Airways, which
owns 25 per cent of IAG,
is taking up its rights
under Spanish law to put
forward two new non-
executive directors.
Mr Walsh, 58, who
delayed his retirement
until September to lead
the company’s response
to the Covid-19 crisis,
confirmed that he had no
plans to seek another job.
“I always said that I’d
retire and that remains
my plan. I will miss it but
it’s time to hand over to
somebody else,” he said.Disruption to televised sport hits BT
The disruption to televised sport during
the lockdown and reduced demand
from small business customers has hit
quarterly profits and revenue at BT.
The group posted revenues of £5.2
billion, down 7 per cent, in the three
months to June 30, its first quarter. It
said this was mainly down to reduced
revenue from BT Sport and a fall in ac-
tivity in its enterprise division, which
provides services to businesses,
because of the coronavirus pandemic.
Adjusted earnings before interest,
tax, depreciation and amortisation
(ebitda) declined by 7 per cent to £1.8
billion and pre-tax profits dropped 13
per cent to £561 million.
BT’s shares were down 9¼p, or 8.6 per
cent, at 98½p, closing below 100p for the
first time since 2009 and extending
losses this year to almost 50 per cent.
The shares were trading at about 500p
five years ago.
BT was privatised in 1984. In addition
to BT Sport and its enterprise business,
the group also includes EE, the mobile
network, Openreach, the broadband
infrastructure provider, and its global
services division for businesses.
The limited sport for broadcast
meant revenues from residential cus-
tomers and pubs and clubs declined.Retail customers were offered credit
when sport was not being played and
with many pubs still not showing live
sport, sales remained “well down”.
Call volumes among small business
customers fell as they took out fewer
package upgrades to conserve cash. BT
has offered deferred payment plans and
other support. Trading was also affect-
ed by the closure of its retail stores and
lower roaming and pay-and-as-you-go
revenue as fewer people travel.
Philip Jansen, group chief executive,
said the crisis had highlighted its
“systemically important role” and that
operationally it had performed well.
However, the economy was “not out ofthe woods yet” and the end of
government support schemes height-
ened the risk to recovery.
Mr Jansen, 53, said: “It is clear that
Covid-19 will continue to impact our
business as the full economic conse-
quences unfold”.
BT expects adjusted revenue to drop
by between 5 per cent and 6 per cent in
this financial year and adjusted ebitda
to fall to between £7.2 billion and £7.5
billion, compared with £7.9 billion last
year.
“Beyond this year, we expect to
return the business to sustainable
adjusted ebitda growth, driven in part
by the recovery from Covid-19,” MrJansen said. Operations have started to
return to normal with Openreach
resuming repairs, BT reopening about
80 per cent of its retail stores and
Premier League football being shown
on BT Sport.
The industry is facing the cost and
disruption of replacing Huawei equip-
ment from 5G mobile networks by 2027
and pressure from ministers to deliver
“gigabit” broadband speeds to all
premises by 2025.
BT started restructuring two years
ago, cutting 13,000 jobs and closing
about 90 per cent of its UK offices. It
said yesterday that 2,000 further jobs
had gone as it tightened recruitment.Alex Ralph
elsewhere by government-
mandated factory closures
and sales restrictions
including in South Africa,
Mexico and Argentina.
Travel restrictions hit
sales at transport hubs and
there was also a rise in
illicit trade in Pakistan.
BAT reiterated the cut it
made to its outlook in
June. It expects adjusted
revenue growth on a
constant currency basis of
1-3 per cent, weakened by
a 3 per cent headwind
from the Covid-19 fallout.
Shares in BAT were
down 132p, or 5 per cent,
at £25.24½.restructuring launched by
Jack Bowles, BAT’s chief
executive.
BAT, based in London,
operates in about 180
markets and is a
constituent of the FTSE
100, valued at £60 billion.
The impact of the
pandemic had little effect
on tobacco volumes in the
developed markets which
make up 75 per cent of
BAT’s group revenue, but
they were weakenedemerging markets (Alex
Ralph writes).
BAT, which is the
world’s second biggest
tobacco group with brands
including Lucky Stripe
and Dunhill, said revenue
rose by 0.8 per cent to
£12.3 billion in the six
months to the end of June,
despite cigarette and
heating tobacco volumes
declining 6.3 per cent.
Pre-tax profit inceased
to £4.6 billion from
£3.9 billion, after earnings
were hit the year before by
costs from a class action
involving smokers in
Quebec and aR
evenue rose at
British American
Tobacco in the
first half of the
year as consumers bought
higher-priced cigarettes
and more vaping products
in the United States,
alleviating a larger decline
in cigarette volumes inDividend hangs in
the balance as BP
braces for big loss
The biggest dividend left in the FTSE is
hanging in the balance with BP expect-
ed to reveal next week that it has
plunged to one of its worst ever losses
after the collapse in oil prices.
Analysts say BP’s share price
indicates that the market is expecting it
to follow the lead of Royal Dutch Shell,
its larger rival, which slashed its divi-
dend by 66 per cent last quarter. How-
ever, some argue BP could opt for a
smaller cut or even maintain the payout
after a modest recovery in oil prices and
moves to bolster its balance sheet.
BP has warned it will book up to
$17.5 billion of charges this quarter after
slashing its long-term oil price outlook
because the pandemic and the shift to
greener energy were likely to reduce
demand. About half of these charges
comprise write-offs of past exploration
costs for oil and gas it now expects to be
left in the ground. These are forecast to
send BP to an underlying net loss of
$6.8 billion for the quarter, compared
with a $2.8 billion profit a year earlier.
The other half of the charges are
counted as one-off impairments and
could leave BP on track for a total loss
to rival its worst ever quarterly result, a
$17 billion loss a decade ago after the
Gulf of Mexico disaster.
BP is one of the world’s biggest oil
companies. If it maintains its quarterly
dividend at 10.5 cents per share, it would
be on track to pay £6.7 billion this year,
accounting for 10.8 per cent of all fore-
cast payments by FTSE 100 companies,
according to AJ Bell, the investment
platform. BP has, however, been hit
hard by the drop in crude prices, which
averaged just under $30 a barrel in the
second quarter, compared with $69 a
barrel in the same period of last year, as
the pandemic ruined demand.
It is cutting billions of dollars in costs
and laying off 10,000 of its 70,000-
strong workforce. Bernard Looney, its
chief executive, warned staff in June
that it was spending millions of dollars
more every day than it was making.
Mr Looney, 49, who has talked of
being “in this together” during the cri-
sis, said in April that there was “no
inconsistency” in maintaining its first-
quarter dividend, since it had not laid
off any staff. A second quarter decision
would be taken “based on the underly-
ing business performance, the outlook
for the financial framework and the en-
vironment at that time”, he said.
BP’s shares are down 40 per cent over
the year to date. “Obviously [an] 11 per
cent yield tells you the market’s waiting
for a massive 60, 66 per cent dividend
cut on August 4,” Oswald Clint of Bern-
stein said in a note. However, Mr Clint
said he believed a one-third cut was a
“worst case scenario” and he expected
BP to “push on through and join the
untouched dividend club”.
Analysts at Barclays forecast a 30 per
cent cut while RBC Capital Markets say
a 40 per cent cut would reduce debt and
support a shift to green energy. How-
ever, analysts at Citi say that a recovery
in oil prices, an agreed $5 billion sale of
BP’s petrochemicals business to Ineos
and a hybrid debt issuance mean a cut
is now “a choice, not a necessity”.Emily Gosden Energy Editor
Cigarette
and vaping
sales puffed
up by US
Americans have spent more
on tobacco products but
pressures have built on BAT
in other parts of the worldALAMY