Published by gbaf mag
Posted on June 22, 2020
4 min readLast updated: January 21, 2026
By Jamie Peel, director of corporate finance at independent investment bank Zeus Capital,
During the months spent in lockdown, there has been plenty of time for mid-market companies to draw up and implement their initial response to the crisis. Many public companies have announced the anticipated impacts of COVID-19 on their business and their short and medium term funding solutions.
Whilst the position of individual companies varies depending on their situation, there are some key themes that have occurred across how listed companies have chosen to respond to the crisis.
Communication with the market is key
Companies that have communicated clearly and early with the market have been well rewarded. Those that have been impacted and have opened up discussions with their shareholders and banks regarding future funding options have been able to source additional funding and/or flexibility from banks as needed, whilst those that have been able to announce that their business has not been heavily affected to date have been rewarded in some cases with substantial share price increases.
CentralNic is a great example of this – shares in the internet services provider closed on the day of lockdown (23rd March) at 68.5p. Recognising the need to communicate quickly with the market, the company put out a statement on how they anticipated the lockdown period would not affect their core business and that they remained on track for their previous market forecasts.
This transparency was clearly valued by investors – the business fully recovered to its 2nd January closing price of 93.5p by the 27th of April, and has been trading in a similar range to that experienced in January and February since the statement’s release. As a result, the firm closed on 18th June at 86p – 25 per cent higher than the initial lockdown price.
Dividend cuts have not been heavily penalised
Jamie Peel
In normal markets, dividend cuts can be harshly treated by shareholders, but in the current environment the market is understanding of the need for cash preservation and the long term benefits that this could bring. Zeus Capital analysis shows that since 23rd March, 427 companies have made statements regarding their dividends, and 373 of those have either cut, cancelled or suspended the payment (as at 16th June). These measures have paid off to this point, with 76 per cent of these companies trading back above the price at which they announced the dividend cut, illustrating that these cuts are being accepted by investors, and the ‘new normal’ is to preserve cash at this time.
Indeed, data from AJ Bell in May reveals that UK companies have cut or deferred £30bn in dividend payments, with the intention of shoring up balance sheets and weathering the financial impact of the pandemic. This includes unprecedented announcements from Royal Dutch Shell, which cut its first quarter payout by two thirds following the fall in oil prices – the first cut to Shell’s dividend since the Second World War.
Unsurprisingly, given the significant demand for lending from SMEs across the UK, it is the banks that made some of the largest cuts, suspensions or deferrals to dividends. Between Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered, nearly £8bn of dividends have been scrapped, across both 2019 and into 2020.
Equity fundraising is happening
In a number of cases, public companies have announced equity fundraisings to provide extra capital to see them through the crisis. Importantly, these fundraisings have often been associated with formal amendments to banking covenants, showing that shareholders are willing to support their stronger portfolio companies but that banks must also play their part in funding solutions. Public company boards have been keen to align themselves with shareholders in these situations by investing significantly in fundraises and/or taking voluntary reductions in their remuneration.
Equity fundraising activity has accelerated over recent weeks, with rescue and balance sheet repair fundraises being joined by opportunistic capital raising by companies that are ‘survivors’ in their sector and looking to accelerate their growth by taking advantage of opportunities created by the crisis. In May, we supported a £200m fundraising for fast fashion giant Boohoo as the retailer looked to create a war chest from which to make strategic acquisitions. Boohoo has previously had significant success acquiring struggling brands and retailers including Nasty Gal, MissPap, Coast and Karen Millen, and it is possible that more opportunities may arise as the economic damage from COVID-19 increases.
Whilst both repair and growth capital is currently available to the right companies, there is a risk that fatigue may set into the market as fundraisings increase in number, and we would advise companies considering a fundraise to implement this plan sooner rather than later in order to maximise their chances of raising the funds they need.
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