The rapid spread of coronavirus sent British businesses reeling on Thursday, with a series of FTSE 350 companies — from WHSmith and Cineworld to property group Intu, Go-Ahead, Berkeley and Travelex owner Finablr — warning investors about the impact of the global pandemic.
Bosses are racing to assess the damage caused by the disease, with consumer-facing businesses in particular affected as people limit travel, shopping and eating out.
“The impact of the coronavirus is now becoming very apparent among a large number of companies,” said Russ Mould, investment director at AJ Bell.
WHSmith was forced to issue a profit warning given lower earnings from its shops in airports, train stations and motorway service areas, while warning that Covid-19 could “result in reduced high-street footfall” more broadly across the UK.
Cineworld, the world’s second-biggest cinema chain, said the most extreme virus scenario could force it out of business. While the virus had yet to have a material impact on its finances, a scenario analysis carried out by management assumed the loss of the equivalent of two to three months’ revenue, risking a breach of financial covenants and causing material uncertainty over its future.
Finablr said on Thursday that it faced a cash squeeze in part because of reduced demand for its Travelex foreign exchange service, which has outlets in airports, and restrictions on the movement of physical currencies. It also blamed its association with troubled healthcare group NMC Health.
Shares in Finablr shed almost four-fifths of their value to less than 5p, while Cineworld’s dropped 24 per cent to 67p. WHSmith’s shares fell a fifth to £12.55.
Trevor Green, head of UK institutional funds at Aviva Investors, said investors were less concerned about short-term trading and disruption, “which are going to be hitting virtually every company”, but were focused more “on balance sheets and scenario analysis required to check which companies are going to potentially breach banking covenants”.
Housebuilder Berkeley suspended the payment of extra dividends given uncertainty over coronavirus, while bus and train operator Go-Ahead reduced earnings expectations. It said: “While it is unclear how the situation relating to coronavirus will evolve in the coming weeks, travel patterns in the second half of the year are likely to be impacted.”
Shares in Berkeley fell about 10 per cent to £36.30, while a third was wiped off the value of Go-Ahead, at £10.94. The FTSE 100 was trading 10 per cent lower on Thursday afternoon.
Corporate advisers say that companies are shelving IPOs and fundraisings that had been planned for the first and second quarters of this year. On Thursday, Investec said it would not continue with plans for a public offer of a 10 per cent stake in Ninety One, its asset management business “in light of the recent volatile market conditions”. The demerger of the business is still going ahead as planned, however.
Intu, the British shopping centre owner, warned about a material uncertainty over its future caused by a £2bn drop in the value of its properties in the past year. But it added it was seeking to assess the impact of coronavirus on footfall at its large regional malls — “including the potential impact on variable income, from reduced footfall, and future rents receivable”. Shares in Intu dropped more than a quarter to just 4p, giving it a market capitalisation of £58m.
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