COVID-19 Update and Impact on FY Guidance: MAH, WGN, ZEL, SRV

The race to come up with a treatment to cure the virus-infected citizens is picking tempo, and different countries including US, China, and Australia are actively looking for ways to curb the spread of the virus and treat the infected patients. The destruction caused by COVID-19 has been humongous, and the number of cases is growing at an alarming rate. With acute dedication, several academic institutions and companies around the globe are striving hard to cease further destruction.

On the one hand, numerous businesses in the world are cutting down their projected outlook as a prudent approach given the unpredictable nature of the infectious disease. On the other hand, there are certain companies which are still positive on their guidance for FY 2020. As directed by the government authorities, companies are adopting all the possible measures to care about the society, including their employees, suppliers, customers and other related parties.

Let’s have a look at four stocks from varied industries which are witnessing different degrees of impact of COVID-19 on their respective businesses.

Macmahon Holdings Limited

An ASX-listed company, Macmahon Holdings provides the complete array of mining services to miners across Southeast Asia and Australia. MAH has vast experience in both underground and surface mining.

Signed Contract with Silver Lake

Further to the announcement made on 18 February 2020, the Company disclosed that its GBF Group had signed contracts with Silver Lake Resources (ASX:SLR) on 3 April 2020. The contract is for GBF underground mining services business is for the extra work at the Mount Monger gold operations located in Western Australia.

These contracts would add almost $200 million to the Company’s order book and shall increase the tenure of GBF at Mount Monger to March 2023.

No significant impact of COVID-19 pandemic

Macmahon prioritised the safety of its workforce and implemented measures as screening protocols, following social distancing norms, and lengthen rosters to avoid multiple changeovers of the workforce at the sites.

As per the update for COVID-19 impact on the Company’s operations and financials, MAH highlighted that it has a robust balance sheet with unutilised working capital facilities and cash totalling $155 million as on 31 December 2019. Further, Macmahon also confirmed that it has recently paid the dividend as initially planned.

Following the government-directed coronavirus regulations on travel, the Company enforced the guidelines across all jurisdictions at places it operates. Macmahon does not find any material impact on its overall financial performance which underpin its guidance. Thus, the Company has not changed its guidance for FY 2020. Key highlights of FY 2020 guidance include:

  • Revenue of $1.3 billion to $1.4 billion
  • EBIT of $85 million to $95 million

On 7 April 2020, MAH stock closed the day’s trade at $0.210, down by 2.326 per cent relative to the previous close. The stock has delivered a negative return of 24.56 per cent on a YTD basis.

Wagners Holding Company Limited (ASX:WGN)

Construction materials company Wagners Holding uses innovative generation building materials including environment-friendly concrete businesses and composite fibre technologies to cater its clients.

Withdraws earnings guidance due to the uncertainty

On 3 April 2020, the Company issued an update on COVID-19 and its impact on business operations. WGN mentioned that till date, it had not experienced any significant interruptions to its operations in Australia. Although the Company stated that it is hard to predict the potential impact of coronavirus on the construction materials sector. All projects and sites of the Company were working in accordance.

The Company’s had faced challenges in achieving decent sales from its New Generation Building Materials in travel restricted regions including Europe, UK, USA and New Zealand. While the Company highlighted that the operations in Australia faced almost no interruption, as a prudent approach, Wagners Holding decided to suspend its previously issued earnings guidance for FY 2020. Key highlights of the withdrawn guidance FY 2020 included:

  • EBIT guidance of $12.5 million to $17.5 million.
  • NPBT of $3.9 million to $8.9 million.
  • NPAT of $2.7 million to $6.2 million.

On 7 April 2020, WGN stock closed the day’s trade at $0.930, up by 2.198 per cent relative to the previous close. The stock has delivered a negative return of 66.54 per cent on a YTD basis.

Z Energy Limited (ASX:ZEL)

ASX-listed company Z Energy provides fuel to both commercial and retail customers, including shipping entities, airlines and vehicle fleet operators. The Company is headquartered in Wellington, New Zealand.

Z Energy narrows its guidance amidst rising concerns

Following the adverse influence of COVID-19 on business operations, the Company has narrowed its FY 2020 earnings guidance. From the previous range of $350 million to $385 million, now change to lie in the range of $355 million to $365 million. ZEL also reiterated that it’s performance over the last 18 months had been impacted by various material external factors.

Z Energy is executing a series of initiatives with a focus on improving cash flow and reducing operating expenses to sustain a resilient balance sheet, as mentioned below.

  • Final Dividend for FY 2020 Withdrawn: After paying an interim dividend of 16.5cps during FY 2020, the Company’s Board has determined not to pay a final dividend for the current financial year.
  • Initiatives for Cost Reduction: Z is expediting numerous cost reduction initiatives which are already scheduled for FY 2021 and is striving to develop options to ensure survival from Covid-19 impact.
  • Working capital facilities: The Company is in constructive talk with its banks to boost its working capital facility as commodity prices and exchange rate are volatile.

On 7 April 2020, ZEL stock closed the day’s trade at $2.900, up by 1.754 per cent relative to the previous close. The stock has delivered a negative return of 35.08 per cent on a YTD basis.

Servcorp Limited (ASX:SRV)

Real estate company, Servcorp is in the business of providing flexible workplace to multiple enterprises. It provides business infrastructure and superior IT solutions. The Company has operations in 54 cities across 23 geographies.

Guidance suspension due to market volatility

On 3 April 2020, the Company updated the market about its COVID-19 update. SRV mentioned that despite the measures taken to date and considering the market volatility and uncertainty, it had withdrawn its guidance.

Some of the key measures taken by the Company due to COVID-19 are mentioned below:

  • More than 100 team members globally are on stand down or made redundant.
  • Most of the remaining employees have consented to cut their salary by 20 per cent during the crisis period.
  • The CEO and non-executive Directors have similarly consented to reduce the fees by 50 per cent and 20 per cent, respectively.

On 7 April 2020, SRV stock closed the day’s trade at $2.500, up by 8.696 per cent relative to the previous close. The stock has delivered a negative return of 44.31 per cent on a YTD basis.

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