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The exceptional circumstances sprouting due to the rapidly spreading COVID-19 has led to devastation in the equity markets across the globe. Businesses are feeling the heat from the disease outbreak and resulting in the deceleration in the economy.
Investor sentiment is down and reflected on the stock market performance. Although governments have announced fiscal stimulus packages and injected huge sums of money in the market, the measures haven’t provided the confidence the investors are seeking.
With the declaration of the disease as a pandemic, stocks have suffered substantial losses and businesses have withdrawn their guidance, cut short their schedules, shut their stores and much more.
Let us look at a few stocks and unbox their latest developments amidst COVID-19 outbreak.
NEC Withdraws FY20 Guidance
Being Australia’s largest domestically owned media company, Nine Entertainment Co. Holdings Limited (ASX:NEC) operates in the communication service sector with investments spanning television, video on demand, print, digital, and radio.
Amidst the spread of COVID-19, NEC believes that the short term impact remains limited to date while the March quarter FTA ad revenues for the Company continue to move closer to flat and the overall results for the quarter remain broadly in line with Company expectations.
Moreover, NEC finds it increasingly difficult to forecast the forward ad market reliably and has thus withdrawn the FY20 guidance.
Long-term Market Fundamentals Intact for SYR
Australian-based industrial minerals and technology company Syrah Resources Limited (ASX:SYR) has shown vigilance concerning the latest information on COVID-19. To ensure the safety of all personnel and to assess and manage potential operational risks to Balama Graphite Operation, the Company has:
- Formed protocols and procedures
- Implementing more proactive measures as deemed necessary
Continuing its moderated production strategy initiated in Q4 2019 into Q1 2020, SYR looks forward to maintaining a cash balance of US$64.6 million towards the end of the quarter, broadly aligned to the existing guidance.
SYR believes that the level of uncertainty that is arising amidst Covid-19 spread calls for a suspension of the full year 2020 guidance. However, long-term market fundamentals for natural flake graphite remain intact, with an ongoing commitment to the decarbonisation of the transport sector.
RDC Unable to pay March quarter distribution
As one of Australia’s leading pub and hotel operators, Redcape Hotel Group (ASX:RDC) announced its inability to pay March quarter distribution and has also revoked its FY20 guidance given the uncertainty about the COVID-19 pandemic.
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However, there has been no material evidence of any slowdown in patronage due to COVID-19 till date and RDC’s robust balance sheet keeps it well placed to navigate these uncertain times with:
- Substantial headroom of upwards of $80 million
- Gearing of 35.7 per cent at 12 March 2020
- Interest cover ratio of 4.65x as at 31 December 2019
- Debt facility of two tranches expiring in September 2022 and in September 2024
QAN to Stand Down Two-Thirds of Employees
Australia's largest domestic and international airline, Qantas Airways Limited (ASX:QAN) is witnessing a massive drop in travel demand triggered by the public health response to the Coronavirus crisis. With airlines being the most severely hit businesses across the globe, Qantas and Jetstar had declared cuts to 90 per cent of international flying and around 60 per cent of domestic flying.
Recently, Qantas and Jetstar have planned to suspend scheduled international flights from late March and have announced a 60 per cent reduction to domestic flights with a focus on cutting frequency. Further, QAN has plans to temporarily stand down two-thirds of employees to preserve as many jobs as possible.
The Covid-19 spread and current extraordinary circumstances have led to deferring of dividend payment of $201 million to shareholders until September 2020.
CWN Implements Social Distancing Measures
Being one of Australia’s largest entertainment groups, Crown Resorts Limited (ASX:CWN) has amended its social distancing policies, in consultation with the Victorian government. The policies imply a restriction on the number of patrons in individual food & beverage, banqueting and conference facilities to 100 persons (450 persons earlier).
Major social distancing measures at Crown Melbourne entertainment complex include:
- Deactivation of every second gaming machine and electronic table game, and distancing at seated table games
- Restricting the number of players at each stand-up table game to five
DOW Withdraws its FY20 Guidance
Leading provider of integrated services in Australia and New Zealand, Downer EDI Limited (ASX:DOW) withdrew its earnings guidance for FY20, given the uncertainty around the impact of the COVID-19 virus.
Downer poses a robust balance sheet with significant liquidity available and secure headroom in its bank covenants. The Company has debt facilities maturing in the coming 12 months of $50 million. It expects the demand for most of Downer’s services to remain healthy as DOW majorly caters to government and critical infrastructure.
Downer believes it has a solid financial foundation and a strong pipeline of ongoing work, and the decisions taken currently are likely to strengthen the position of Downer for the future after Covid-19 fades away.
BLD Expects Worsening Market Conditions
Australia-based building products and construction material company Boral Limited (ASX:BLD) also withdrew its FY2020 earnings guidance due to high level of uncertainty surrounding the spread, duration and impact of COVID-19.
Although BLD has not witnessed any material deterioration to its business, the Company acknowledges signs of impacts in its other markets. It expects the market conditions to worsen with temporary lockdowns and restrictions imposed to contain the spread of the virus.
Amongst the necessary measures that BLD is undertaking, reducing all non-essential capital expenditure and discretionary spending is one significant to conserve cash.
HVN Shuts Selective Stores
A consumer discretionary player, Harvey Norman Holdings Limited (ASX:HVN) has also closed its stores due to the Covid-19 outbreak. The Slovenian stores are closed until further notice while Malaysian and Croatian stores were closed due to their respective government’s decree.
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Amidst the mounting uncertainties, HVN’s aggregated written total and written comparable amount of sales from wholly-owned company-operated stores stand as follows:
Source: Company Announcement
LOV Shuts its Stores Globally
Consumer discretionary player Lovisa Holdings Ltd (ASX:LOV) has finally commenced production capacity at both its suppliers and distribution hub in China and have returned to normal levels. Although there exist delays in freight movements out of China and ambiguity in the timing of supplier deliveries.
Considering the recent escalation of the effect of COVID-19, LOV has closed stores in France, Spain and Malaysia, with stores in Spain and Malaysia, expected to remain closed until at least the end of the month. Across the US, LOV has closed 25 stores closed or closing due to the local governments’ directions.
