COVID-19 Pandemic Update for NZX-listed Companies

  • Mar 28, 2020 NZDT
  • Team Kalkine
COVID-19 Pandemic Update for NZX-listed Companies

Several economists are hinting that the world is heading towards another possible recession, worse than the one in 2008. Ever since the spread of COVID-19 gained pace on a global scale, strong projections regarding recession are doing the rounds in the market.

In the past few months, we have witnessed all, cities and countries locked down, stores shuttered, flights grounded, employee layoffs and temporary stand down, dividend and capex deferrals, and much more. As coronavirus has been declared ‘a national emergency in New Zealand’, all non-essential services have been closed with confirmed cases reaching 338 in the country, as of 27 March 2020, according to WHO. In New Zealand, we are currently witnessing increased implementation of measures by the government as well as business organisations, to curb the COVID-19 impacts.

Let us discuss recent developments of few NZX-listed companies amidst the COVID-19 pandemic.

South Port New Zealand Delivering Essential Services

South Port New Zealand Limited (NZX:SPN) is New Zealand’s southernmost commercial deep water port and is ideally situated to service Southland’s significant export and import industries. Amidst the COVID-19 outbreak, the Company is working closely with the Southern District Health Board and is complying with advice from the Ministry of Health.

Since South Port is classified as an essential service, the business of the Company remains operational under the COVID-19 Level 4 restrictions imposed by the New Zealand government. SPN has comprehensive response plans in place to secure staff and ensure continuity in the business.

Two-thirds of its cargoes are exempted from the lockdown restrictions since they are classified as essential while the most affected cargoes are the ones classified as non-essential like logs, wood chips and processed forestry products.

Loss from these cargoes, in addition to unbudgeted labour and other costs related to changed operational needs, would impact SPN’s annual profit this year, according to SPN CEO, Nigel Gear. Moreover, the Company expects full-year earnings to be at the lower end or slightly less than the range of $8.2 million to $8.7 million (previously updated to the market during mid-February 2020).

Metlifecare Retirement Villages and Aged Care Centres Operational 

Metlifecare Limited (NZX:MET), established in 1984, is a leading owner and operator of retirement villages in New Zealand, which has a portfolio of 25 villages in areas with strong local economies.

Retirement villages and aged care centres of the Company remain operational under the New Zealand Government’s COVID-19 Level 4 restrictions as essential services for their residents, with the Company mobilising its team to support the cause. Although all development activities have been ceased, the Company’s development programme can adapt to these changing terms.

With construction just materially begun, the Edgewater site has now rested, and the Company’s other development sites were in the process of finalizing the civil ground works.

MET believes that it is:

  • Well placed with sector-leading low gearing, strong banking facilities and associated debt headroom to navigate through the current environment
  • Well prepared to speed up its development programme as soon as it is possible to do so

 

Moreover, the Company expects a significant adverse impact on new sales and resales revenues in the next quarter, subsequent to the Level 4 lockdown, and looks forward to assisting the people who are willing to settle during the period of Level 4 restrictions.

Restaurant Brands Closes All NZ Stores

Restaurant Brands NZ Limited (NZX:RBD) is a corporate franchisee that handles multi-site branded food retail chains with corporate office located in Auckland.

Following the health ministry announcement, RBD has closed its 148 stores (under KFC, Pizza Hut, Carl’s Jr. and Taco Bell brands) in New Zealand for a minimum four-week period. However, 65 Australian stores (KFC and Taco Bell) of the Company would continue to operate on a limited basis with all dine-in operations remaining closed.

Similarly, 74 Taco Bell and Pizza Hut stores in Hawaii shall remain operational via take-out, drive-through and delivery channels; however, two mall stores in Guam have been shut as an effect of the directions from the regional government.

Restaurant Brands believes that the closure of the stores shall materially impact trading results for the current year. Also, the Company is well-financed under its existing banking arrangements and anticipates driving through any interruptions to the business.

Stride Property Group Delivers Business Update

A stapled group, Stride Property Group (NZX:SPG), which includes Stride Property Limited and Stride Investment Management Ltd, is a listed Portfolio Investment Entity investing in office, retail and industrial property in New Zealand while being a specialist real estate investment manager.

Currently, SPG has two committed portfolio sales in pipeline, subject to various conditions including approval from the Overseas Investment Office. The transactions are:

  • Sale of the three large format retail assets to Investore Property Limited for $140.75 million
  • Completion of the establishment of Industre Property Joint Venture, through a special purpose vehicle

 

Amidst the Covid-19 outbreak, operations of the Overseas Investment Office would continue, and the Company expects both transactions to complete in the next quarter.

As an effect of the completion of the above two transactions, the Loan to Value Ratio of 35.0% (as on 30 September 2019) is expected to slide down to ~20% based on current valuations, which would lie well within the banking covenant level of 50%.

Moreover, the Company anticipates roughly $110 million of drawn facilities and total available facilities of $340 million, leaving around $240 million of undrawn banking facilities available subsequent to completion of the two transactions.

The diversified business of Stride would continue to provide investors with revenues from various sources after the sales are completed. Amid the outbreak, a number of properties with tenants across New Zealand that are deemed as essential would continue to operate. And, the Company is expecting earnings to be materially in line with previous guidance for the financial year 2020 (FY20).

Cavalier Corporation Closes NZ Facilities, Business Continuity Plan in Place

With operations based in New Zealand and Australia and exports around the world, Cavalier Corporation Limited (NZX:CAV) operates across the soft flooring market while engaging in buying wool, producing yarn, and designing and developing broadloom carpet.

CAV believes that its business continuity plan is currently in place with many additional actions undertaken to safeguard business and jobs future. As an effect of the lockdown as per Government orders, the Company’s facilities in NZ have been closed while the key staff needed for business continuity remotely working.

CAV along with its banking partner is certifying constant liquidity and support in the current times. While the sales and business teams continue to work and orders are being taken in Australia, the Company acknowledged its inability to provide an earnings guidance for FY20.

   
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