COVID-19 Prompts Earnings Guidance Withdrawal by CCP, SGM, SHL, MVF

Scepticism or Realism? Businesses across Australia are withdrawing earnings guidance, conforming to the downturn being witnessed across the global market as well as probability of a further near-term impact on operations, as COVID-19-affected regions declare quarantine causing supply chain disruptions.

Concerted efforts are being undertaken worldwide to mitigate the impact and contain the spread of COVID-19. Consequently, companies believe that the magnitude of the impact of these developments on economic activity is going to be huge, which makes it prudent to withdraw their business outlook for the near future.

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Credit Corp Group Limited (ASX: CCP)

Sydney-based Credit Corp Group, offering collection and credit management services in Australia, withdrew its 2020 earnings and investment guidance due to uncertain impacts arising from the spread of coronavirus (COVID-19), on 20 March 2020. The potential impacts, as per the company, may be possibly due to limited availability of workforce along with the prospect of a deterioration in economic conditions that may lower customers’ capacity to make repayments.

Nevertheless, Credit Corp Group has continued to deliver a strong performance over last few weeks with no material impacts arising from the coronavirus pandemic yet identified in the Group’s operating results.

Credit Corp also has a proven well-known approach to customer hardship, which supports strong business results and sustainable consumer outcomes and the Company will continue to apply this approach in times of increased demand for these capabilities by major credit issuer clients. Credit Corp’s $ 170 million of cash in hand indicates a strong funding position plus there are undrawn credit lines presently available under facility agreements maturing in 2022 and 2023.

Stock Information: The CCP stock last traded at $ 9.830, down ~2.77%, on 20 March 2020. CCP’s market cap is $ 555.22 million.

Sims Limited (ASX: SGM)

Sims Limited, established in 1917, is a global leader in recycling of metal and electronics, and an emerging leader in the municipal recycling and renewable energy industries. The Company employs a staff of nearly 4,500 at its ~250 facilities located across 15 countries.

On 18 February 2020, Sims advised that its underlying EBIT for the second half of financial year 2020 (2H FY20) is anticipated to be within the range of $ 40 million to $ 60 million with the risks to this outcome being COVID-19, aggressive competitor buy side pricing and change to the gradual Turkish recovery.

Recently, on 20 March 2020, the Company stated that there is an unprecedented worldwide response to slowing the spread of COVID-19. Owing to the magnitude of the impact this will have on economic activity, it is only practical to withdraw the outlook for 2H FY20, added SGM.

As per Sims, the current market conditions look like:

• Notwithstanding the significant global contraction in business activity, Sims has sales across all divisions, including cloud infrastructure.
• China has commenced progressive resumption of business activity across the country with demand for non-ferrous metals now evident.
• Ferrous scrap liquidity in North and South East Asia is limited; however, there is demand in the Gulf Cooperation Council, as well as Turkey, and Central and South America, albeit at lower prices.

“The safety of our employees, suppliers, customers and communities in which we operate is our first priority and we are following the guidelines and recommendations made by the various authorities, including health, hygiene and social distancing.” - Group CEO & Managing Director, Alistair Field.

Stock Information: With a market cap of ~ $ 1.29 billion, the SGM stock settled the day’s trade at $ 6.400, down 0.312% with ~ 1.85 million shares traded.

Sonic Healthcare Limited (ASX: SHL)

Medical diagnostics company, Sonic Healthcare Limited operates in Australia, New Zealand, and Europe. The Company provides a comprehensive range of pathology and diagnostic imaging services to medical practitioners, hospitals and their patients along with providing administrative services and facilities to medical practitioners.

At the backdrop of uncertainty resulting from the COVID-19 pandemic, Sonic Healthcare has also announced withdrawal of its earnings guidance for FY 2020. The company explained that its trading results after 8.5 months are in line with the prescribed earnings guidance but as people self-isolate themselves, particularly in Sonic’s markets, it is highly likely that diagnostic testing volumes would be affected in the short to medium term.

Dr Colin Goldschmidt, Sonic’s CEO also highlighted that the company is playing a key role in combatting COVID-19 pandemic with its laboratories in Australia, US and Europe testing thousands of patients on a daily basis for COVID-19. Sonic is also trying to enhance its testing capacity to meet the current needs of the communities.

Furthermore, Sonic’s expert and experienced management teams and medical staff are collaborating with governments and other healthcare organisations to extend maximum support while striving to ensure that there is sufficient necessary materials and equipment for COVID-19 testing.

Sonic’s balance sheet remains robust with nearly $ 1 billion of cash and committed credit facilities currently available (prior to payment on 25 March of the FY 2020 Interim Dividend totalling ~$ 162 million). Moreover, all of Sonic’s debt facilities are due to mature after CY 2021.

Stock Information: Sonic’s market cap is ~ $ 11.77 billion and the SHL stock settled the day’s trade on 20 March 2020 at $ 21.670, dropping 12.55% with ~ 5.02 million shares traded.

Monash IVF Group Limited (ASX: MVF)

Monash IVF Group Limited is a fertility research and treatment centre where reproduction supportive medications are developed.

In a recent announcement of 20 March 2020, Monash IVF Group provided an update on its assessment of the implications of COVID-19 for the company. As the World Health Organization (WHO) has declared a pandemic and the community concern and spread of COVID-19 globally is growing, the Fertility Society of Australia has recommended that there is no evidence to advise contraception or cessation of attempts to conceive, either unassisted or assisted. Consequently, the company continues to provide assisted reproductive and women’s imaging services to its patients.

Notwithstanding this, uncertainty around current economic conditions and supply side risk caused by COVID-1 have made it difficult for companies to forecast full-year earnings. As a result, MVF too withdrew FY20 earnings guidance, considering the risk attached to Q4FY20 financial performance.

The company is also executing pre-emptive measures to ensure the health and safety of its patients, employees and doctors. At the same time, Monash IVF is taking decisive action to proactively manage the business through this period.

Stock Information: With a market cap of ~ $ 142.65 million and ~ 235.79 million shares outstanding, the MVF stock settled the day’s trade on 20 March 2020 at $ 0.510, down 15.7% by $ 0.095.