Guidance withdrawal amidst an air of uncertainty - MGX, ARB, ED1, TYR, AUB, BOQ

The last couple of months have seen the global markets hit record highs as well as record lows, demonstrating how precarious the markets have been. In Australia, the Government has taken various measures to control the situation. However, other than a couple of positive sessions on the markets there hasn’t been much to cheer about.

To deal with the repercussions of COVID-19 outbreak, the Australian Government has actively implemented complete lockdown of states. With 4,557 confirmed cases and 19 deaths, there has been a complete halt on rail, roadways, air and ship transportation. The citizens are following measures such as social distancing, working from home, and limiting their visits out of the house to buy essential items only.

Deriving from the recent statement given by the PM, it seems that the situation might be reviving in Australia. He stated:

While the PM’s statement brings with it a ray of hope, there is still a long way to go. Companies have been less than confident about their respective futures and have been coerced to give a second look to their FY guidance.

Let’s have a look at six stocks which have extended staunch support to the Australian Government for combating the virus but have also retracted from their previously announced guidance due to the persistent uncertainty.

Mount Gibson Iron Limited (ASX:MGX)

Mount Gibson Iron Limited provided an update on its Western Australia’s mining activities post the government restrictions imposed to curb the spread of the virus.

Restrictions related to COVID-19:

On 26 March 2020, as announced by the WA Government, the Commonwealth Government had imposed specific travel restrictions on Kimberley region. This indicated that individuals were now prohibited from coming into the Kimberley region unless they were involved in essential activities and satisfy particular exceptions.

With prior approval from the relevant Government biosecurity authority, Mount Gibson has confirmed with the authorities that its mining-related individuals are taken as exceptions to enter Kimberley region.

Thereby, the Company is continuing its iron ore operations on Koolan Island in the Kimberley region, and at the Geraldton Port and Extension Hill in the Mid-West region.

Operational Update:

For the quarter ended March 2020, MGX total ore sales are likely to be near 1 million wet metric tonnes (Mwmt), which includes 0.4 Mwmt of high-grade fines ore from Koolan Island and 0.6 Mwmt of low-grade material from the Mid-West. Additionally, from Koolan Island, the Company expects improved sales and production of ore in the quarter ended June 2020.

However, citing the uncertain environment and operational challenges, Mount Gibson has withdrawn its sales and expenses guidance.

ARB Corporation Limited (ASX:ARB)

Consumer discretionary player, ARB Corporation Limited offers essential services to many industries around the globe.

ARB mentioned that it is very well positioned to cherish the opportunities which would arise when the prevailing conditions get better.

Update on Earnings Guidance and Dividend Payment

On 30 March 2020, The Company notified the market that it had withdrawn its previously declared earning guidance for FY ending 30 June 2020. ARB stated that it is closely working with its customers, employees and suppliers to handle disruptions to the business, thereby, ensuring the continuity once an improvement is seen in the market.

As a prudent step for maintaining its financial position, the Company deferred its dividend payment date from 17 April 2020 to 23 October 2020. The record date of this interim dividend (fully franked) of 18.5 cps had also been postponed from 3 April 2020 to 9 October 2020.

Evans Dixon Limited (ASX:ED1)

Financial services player Evans Dixon Limited has maintained a robust position in the current scenario. Key highlights on the outlook and financial position include:

• The Company’s Board suspended its previously announced underlying EBITDA guidance for FY 2020.
• ED1 reiterated the distribution of its previously declared dividend of 2.5 cents per share to be paid on 14 April 2020.
• Evans Dixon expects that its balance sheet would remain solid with net cash of more than $30 million. Moreover, it has access to undrawn overdraft facilities.
• Running against the virus-driven wind, ED1 had a noticeable increase in trading activity by customers of the Company’s E&P and Wealth Advice divisions in the last two months. This increase was due to impressive revenues from the brokerage. However, the Company predicts a negative impact on revenues of both the divisions.

Tyro Payments Limited (ASX:TYR)

IT company Tyro Payments Limited offers value-adding business banking products and payment solutions to Australian businesses.

Guidance Withdrawal

With the adoption of COVID-19 measures imposed by federal, state and territory governments, TYR had withdrawn its forecasted financials. These restrictions would increase the negative impact on TYR’s merchant businesses and any deriving revenue from those transactions.

The Company, however, holds a robust financial position with cash, cash equivalents and financial investments (excluding net banking funds) of $154 million at the end of February 2020 and $149 million as at 31 December 2019. The Company possess no corporate debt and has a simple capital structure.

AUB Group Limited (ASX:AUB)

An equity-based insurance broker, AUB Group Limited, opened its business operations in 1985. The company, despite the impressive results in the first half of FY2020, had to take specific steps in light of the COVID-19 pandemic. The measures include:

• The Company took the prudent decision of withdrawing its earnings guidance.
• To preserve cash to maintain strong liquidity and long-term shareholder value, the Company decided to make the following changes regarding dividend:
  • Dividend distribution date was changed from 3 April 2020 to 3 September 2020.
  • Suspension of the Dividend Reinvestment Plan.

AUB Group holds 49.9 per cent shareholding in MGA Whittles Group and had intended to acquire the remaining stake as announced on 17 February 2020. However, both the parties have now agreed not to proceed with the completion of this transaction. This means the Company would neither be paying $29.1 million of cash consideration nor issuing the consideration shares.

Also Read: AUB to hit the top of adjusted net profit guidance; CCP reports double-digit growth in first half

Bank of Queensland Limited (ASX:BOQ)

Despite the turmoil happening in the economic environment, the bank is committed to implementing its refreshed strategy. On 30 March 2020, the Company had withdrawn its guidance and outlook statements for FY 2020.

The Company’s financial position remains robust. Following the capital raising conducted recently, BOQ’s CET1 ratio (Pro-forma) for FY19 was 10.07 per cent.

Bank of Queensland is providing support to its customers by taking the following initiatives:

• For business loans up to $10 million, deferred repayment period is allowed for up to six months.
• For the preliminary period of three months, the option is available to choose between interest-only repayments and deferred mortgage repayments.
• Fast track hardship assistance is available for impacted customers.

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