Sailing through the COVID-19 Turbulent Wave - BBN, NCK, ALG, PRN, HLS, INR

Sailing through the COVID-19 Turbulent Wave - BBN, NCK, ALG, PRN, HLS, INR

The impact of COVID-19 has led to business disruptions across geographies and companies have been forced to take preventive actions to keep themselves operational. For instance, companies are deferring their respective dividend dates by extending them until October 2020.

The biggest concern at present is the uncertainty around the disease outbreak. While several studies are being conducted worldwide with some showing promising results, we still don’t have any globally accepted and approved treatment for the coronavirus. Also, despite the large-scale lockdowns and governments urging its citizens to follow social distancing, the number of affected cases continue to rise at an alarming rate.

Concerning the security and safety of employees and customers, many companies around the globe are taking several initiatives to lessen the adverse impact of coronavirus. Some of these initiatives include urging the employees to follow social distancing, asking the employees to work on alternate days, and providing options such as Work-From-Home.

The chart below shows the performance of six stocks on a YTD basis and their returns on the day of their respective COVID-19 updates.


Out of these six stocks, Healius Limited has witnessed the least effect on its stock performance as on the release of COVID-19 update, as well as on a YTD basis. The highest variance in YTD return is seen for the consumer discretionary company Ardent Leisure Group Limited.

Let’s deep dive into these stocks from diverse sectors and look at their COVID-19 updates and its impact on their businesses.


Baby Bunting Group Limited (
ASX:BBN)

Baby Bunting Group Limited is a retailer of specialty baby goods in Australia. It has 56 stores in large format destination centres and two shopping centre stores.

While the world is struggling with the impact of the coronavirus, the Company’s CEO and MD, Matt Spencer responded as follows:

Teams and Customers Health Concerns:

  • BBN holds a crucial role in providing essential and everyday consumable baby products to parents in Australia. These products include nappies, food, wipes, formula, strollers, prams, car safety seats and sleeping products.
  • Regarding team safety in the stores and operations, the Company has incorporated safety and health measures, such as:
    • Regulated the number management of customers visiting the stores, social distancing and supporting cashless transactions.
    • At store support office and distribution centre, BBN has changed work practices such as separating teams and allowing them to work remotely.

Business operations:

  • BBN assures that there has been a negligible impact on the supply chain. Moreover, supplier factories, inventory and international logistics are returning to normal.
  • Additionally, the Company share the following stats during 2H (30 December 2019 to 22 March 2020).
    • Total sales growth was 12.4% with online sales growth of 28.6%.
      • Whereas, the increase in total sales was 10% on YTD basis
    • Comparable store sales growth was 6.2% and on YTD basis, it was 2.5%.

Financial standpoint:

  • In order to reduce costs and capital expenditure, BBN had postponed the re-launch of its new website.
  • Baby Bunting mentions that it has deferred nearly $7 million of capital costs as a step towards preserving available funds.

BBN has suspended the guidance for FY 2020, which was issued earlier and assured that its performance till date is in line with the guidance.


Nick Scali Limited (
ASX:NCK)

Nick Scali Limited is a consumer discretionary company which has released an update on its outlook, trading, financials and dividend as follows:

  • Certain changes adopted by NCK includes - flexible working arrangements for staff, social distancing measures in stores, and staff restrictions on meetings and travels.
  • The Company does not provide an outlook for FY 2020, viewing the speed and effect of COVID-19 spread.
  • The payment date for distribution of interim dividend of 25 cents per security has been deferred from 27 March 2020 to 2 October 2020. This would help maintain Nick Scali’s strong balance sheet. NCK holds cash on hand worth $39 million and $34 million worth of gross debt outstanding.
  • NCK mentioned that it has concerns to assess its operating cost base, thereby taking appropriate measures on a priority basis.
  • The written sales growth was 3% while viewing January and February months of 2020. However, a substantial decline is felt in both sales orders and store traffic in the last 10 days. Nick Scali’s specifies that because of their business model, it is likely to impact sales in coming months.


Ardent Leisure Group Limited (
ASX:ALG)

Ardent Leisure Group Limited is an entertainment and leisure group with three divisions including Theme Parks (Dreamworld and WhiteWater World), Indoor entertainment (Main Event) and SkyPoint Climb. Annually, ALG has over three million customers.

Ardent’s Board has obeyed the Government’s order taken to cease the spread of COVID-19. For this, ALG has temporarily stopped its operations as detailed below:

SkyPoint:

  • As announced on 24 March 2020, SkyPoint is closed effective midday 23 March 2020 until 31 May 2020.

Theme Parks:

  • As a measure towards social distancing and Federal Government possessing restrictions on non-essential mass and indoor gatherings, Whitewater World and Dreamworld are ceased from its operations effective 23 March 2020 until 31 May 2020.
  • During this period, the Company plans to retain minimal staff to perform the ongoing care of its extensive animal collection. This would exclude all non-essential capital spending.

Main Event Entertainment centres:

  • Maintaining US Government order, the Company temporarily closed all Main Event centres effective 17 March 2020 until March end 2020.

ALG had encountered a decline in the attendance and revenue generated from centres across the United States. On 13 March 2020, the Company had suspended all its earning guidance for FY 2020 which was previously issued on 21 February 2020. Accordingly, Main Event Entertainment centres are not expecting to attain a revenue growth of 1.5 - 2.5%, and EBITDA margin is likely to be below 20% guidance previously announced.


Perenti Global Limited (
ASX:PRN)

Perenti Global Limited is a diversified mining services group having businesses in underground mining, surface mining and mining support services.

Viewing the ongoing outbreak of coronavirus and its uncertainties, PRN withdraws its FY 2020 guidance for underlying NPAT of $115 - $120 million. Also, the Company is unable to provide the revised earnings guidance due to the unknown impact of coronavirus.

Perenti management mentioned that the Company is performing every step to reduce any disruption to its business. As a part of the 2025 Group strategy, PRN continues to aim at capital management to confirm that it is well positioned for all economic cycles.

Regarding dividend distribution date, PRN notified the market that the payment date had been extended from 25 March 2020 to 20 October 2020. A fully franked dividend of 3.5 cents per security was declared to its stakeholders.


Healius Limited (
ASX:HLS)

Healius Limited is an Australia-based healthcare company with 13,000 employees. HLS mainly has three main businesses, including imaging, pathology and medical centres. Also, it has three emerging businesses comprising of IVF, dental and day hospitals.

On 24 March 2020, the Company updated its contribution to fighting against Covid-19 in Australian communities. Like many other companies, HLS had also withdrawn its guidance for FY 2020. The key highlights of the update are mentioned below:

  • Although the Company was trading in line with FY 2020 guidance, however, due to the increased turbulence in the country, the effect is felt on Healius business activities since last week.
  • The Company mentioned that it is fully committed to serve and deliver the best healthcare services relating to COVID-19, including GP isolation rooms, collection centres, diagnostic testing facilities and telehealth services. The Company is utilizing its laboratories to undertake nearly 2500 tests of COVID-19 per day.
  • On the contrary, specific routine and non-critical services have dropped.


ioneer Ltd
(ASX:INR)

ioneer Ltd is 100% owner of US-based project - Rhyolite Ridge Lithium-Boron Project which produces the materials (boron and lithium).

Another entity from metals & mining sector that declared its loss generated from COVID-19 is INR. On 24 March 2020, the Company mentioned that the completion and release of the Definitive Feasibility Study (DFS) for the Rhyolite Ridge Project in the US is likely to occur in late April. The Company and its engineering partner faced unprecedented global challenges to execute the project. ioneer mentioned that the DFS was near to completion level. However, the completion and delivery of the study got impacted.

As of 29 February 2020, the total cash on hand with INR was of $54.2 million, and 84% was held in US$ cash and cash equivalents.


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