The Board of Directors of Equity Group Holdings Plc has withdrawn its recommendation of a Ksh. 9.5 billion dividend payout to its shareholders.
In a statement Tuesday, the board says by withdrawing the recommendation for a dividend payout it is exercising financial prudence so as to conserve cash to enable the Group to respond appropriately to the unfolding crisis in terms of supporting its customers, and to be able to direct cash resources to potential opportunities that may arise as economies in which Equity Group Holdings operates begin to recover.
” With this approach, the Group leadership and management can focus on strategically positioning the business, in order to protect and preserve its customer base through loan accommodations and rescheduling/restructuring to enable them to go through the prevailing turbulence while at the same time preserving cash to shore up the financial revival and growth of its customers’ businesses post the COVID-19 crisis. The Board continues to evaluate the potential impact of the pandemic on the Group and to formulate and implement strategic plans to mitigate any effects, and will, in the usual manner ensure that it keeps the shareholders and other stakeholders informed.” Said the statement.
The statement noted that the COVID-19 global health pandemic has led to a great lockdown which has induced a complex and multi-faceted global crisis of health, economic, and social challenges of an unprecedented magnitude.
“The pandemic’s effects have created a significant drop in the global GDP, and a substantial loss of employment leading to an economic recession which economists are projecting will evolve into a global depression worse than the Great Depression of the 1930’s.“ Said the statement
Noting that the global economic outlook has worsened considerably since the beginning of the year.
“The United Kingdom has entered a severe recession last experienced in the 17th Century, while the United States unemployment rate is expected to reach 25% by the end of 2020 with 39.6 million people already unemployed. The most recent global growth projections from the International Monetary Fund (IMF) have revised the global economic outlook to below the 2.9% achieved in 2019 from an initial projection of 3.3% to -3.0% (negative 3.0%) of GDP growth rate, which they feel is optimistic.” Added the statement.
They said that they are exercising caution after the IMF also projected that if the pandemic fades in the second half of 2020 and if policy actions taken around the world are effective in preventing widespread bankruptcies, extended job losses, and system-wide financial strains, global growth could rebound to 5.8% in 2021.
“The Equity Group Holdings Board took a conservative approach that recognizes the emerging unquantified risk of the pandemic and opted to preserve capital in the face of the prevailing uncertainty,” said Dr. James Mwangi, the Group CEO and Managing Director. He added that, “A strong capital and liquidity position gives us the strength and capacity to cushion our business and accommodate and walk with our customers during these challenging times”.
The board is encouraging its customers to seek opportunities to innovate amid the pandemic, and to keep looking for growth possibilities in order to preserve cash and capital.
“If the economic crisis mutates into a financial crisis, Equity Group will be well placed to weather the challenge with a strong capital base, strong liquidity and an agile balance sheet that improves its leverage, and would allow the financial services group to shield and accommodate its customers throughout this period of uncertainty,“ said Dr. Mwangi.
He added, “However, should the crisis not play out as anticipated, the Board will explore various options and make suitable recommendations that will enhance shareholder value.”