Capital structure and dividend
The Board's priorities for our free cash flow are to fund the Group's
investment and development, maintain a strong balance sheet and deliver a
sustainable dividend at a level which is affordable and appropriate.
The increased global economic uncertainty impacted our business in the second
quarter and slowed the pace of the Group's profit growth as the first half
progressed. Consequently, while operating profit was 21% above prior year, it
was only sequentially 2% higher than in the previous half. Considering this
slowing of profit growth and our current view on the likely growth in Group
profitability in this uncertain environment, we have decided that whilst the
previous level of dividend remains affordable today, it is no longer
appropriate to maintain the dividend at that level, which had been uncovered
for the last two years. We have therefore decided to rebase the dividend and
pay an interim dividend of 0.83p per share (2010: 1.85p). Furthermore we
believe that future dividends should be covered by earnings in the range 2.0x
to 3.0x and consider this revised payout policy to be appropriately
covered by earnings and cash flow.
Going forward, the Board remains committed to paying a sustainable and
progressive dividend. It is our intention to grow the dividend from this new
level when dividend cover reaches c.2.5x. The expected split of dividend
payout will be one-third interim and two-thirds final.
The interim dividend payment date will be 10 April 2012 and will be paid to
shareholders on the register at close of business on 2 March 2012.
