As the fallout from coronavirus continues, only one thing is certain – that no one knows what the full impact will be. As Monday’s market meltdown showed, it is not just ASX travel shares that stand exposed, but ASX shares across all industries.
Here we take a look at ASX shares that have abandoned their profit guidance in the face of the unprecedented epidemic.
Qantas Airways Limited (ASX: QAN)
Back in February, Qantas estimated coronavirus would have a negative impact on earnings before interest and tax (EBIT) of $100 million to $150 million. Since then, successive capacity cuts have meant the impact will be significantly greater.
Today, the airline announced much larger cuts to domestic and international flying schedules across Qantas and Jetstar in response to significant falls in travel demand and increasing government restrictions. Total group international capacity is to be cut by 90% until the end of May, up from the previously announced 23% cut.
Total group domestic capacity will be cut by 60% due to government containment measures, corporate travel bans, and general pullback from everyday activities across the community. This is a significant step up from the 5% reduction previously announced. The effect of the cuts is equivalent to the grounding of 150 aircraft.
Qantas believes travel demand is unlikely to rebound for weeks or even months. It emphasised that it is in a strong financial position but due to the evolving situation, is unable to provide meaningful guidance on impacts of the group’s earnings in FY20.
Qantas has $1.9 billion in cash and a further $1 billion in undrawn facilities, but to maintain its financial position has opted to cancel its share buyback, preserving $150 million in cash.
Auckland International Airport Limited (ASX: AIA)
Auckland International Airport suspended its FY20 guidance on Monday in the face of strict new border controls introduced in New Zealand. The unprecedented scale of the new border restrictions and uncertainty over the impact on the business forced the airport to withdraw earnings and capital expenditure guidance for the current financial year.
Chief Executive Adrian Littlewood said, “Auckland Airport is a strong, diverse, and resilient business, but these are unprecedented times.”
Auckland Airport is working to communicate the border changes to the 30 airlines that fly routes to the airport, but it is too early to judge the impact on future passenger and cargo air services. The focus has been on maintaining airfield operations and supporting front line workers and the government in protecting New Zealand against the spread of coronavirus.
“Aviation and tourism are vitally important to New Zealand, supporting thousands of businesses and jobs,” Littlewood said. “The future is very uncertain and our industry and government are pulling together so we can manage our way through this period and ensure we are in a strong position to rebuild,” he added.
Serko Ltd (ASX: SKO)
Serko withdrew its full-year guidance on Monday due to uncertainty surrounding the duration and scale of the coronavirus outbreak, and the impact related border control restrictions were having on corporate travel.
The company had previously advised (in late February) that it expected to come in at the lower end of its guidance range of achieving total operating revenue growth of 20% to 40% for the year ending 31 March.
The subsequent spread of the virus and increase in border access restrictions have made it difficult to predict the impact the virus is likely to have on Serko’s year-end position, prompting the company to withdraw its guidance.
Serko’s priority during this period is to maintain its current balance sheet strength and position. It presently has a strong cash balance following a successful capital raising late last year. Serko is also focused on continuing its growth following the current challenging trading period. The board and management are thus carefully managing the allocation of capital during this time to optimise the business for long term growth.
Cochlear Limited (ASX: COH)
Cochlear withdrew its earnings guidance on Monday as the spread of coronavirus saw a growing number of health authorities recommend or enforce a deferral of surgeries. A substantial short-term negative impact is expected on cochlear implant surgeries, particularly in the US and Western Europe, both major markets for Cochlear.
In response to the expected slowing in surgeries, Cochlear is reducing non-essential expenditure and capital expenditure for the balance of the financial year. The company has a conservatively geared balance sheet, headroom in existing debt facilities, and is confident it can arrange increased debt facilities if required.
oOh!Media Ltd (ASX: OML)
Ooh!media advised on Monday that its performance has been consistent with delivering FY20 earnings guidance provided in late February. Nonetheless, deteriorating macroeconomic conditions and the market uncertainty caused by coronavirus has made forecasting full-year revenue difficult, particularly as the company’s financial year runs to December.
Given the circumstances, Ooh!media has withdrawn its FY20 earnings guidance for the time being. Action is being taken to proactively manage the business through this period to ensure it remains well-positioned for when conditions stabilise. Ooh!media continues to make every effort to achieve prior earnings guidance.
Capital expenditure is being re-prioritised and will be materially below the bottom of the previous guidance of $60 million to $70 million. Ooh!media is maintaining strict cost and cash-flow discipline throughout the business. Once conditions stabilise, it will seek to reinstate earnings and capital expenditure guidance.
Apollo Tourism & Leisure Ltd (ASX: ATL)
Last week, Apollo Tourism advised that the spread of coronavirus into Europe, North American other parts of the world meant there was too much uncertainty around its future earnings to maintain its FY20 underlying net profit after tax guidance.
Europeans make up a significant portion of Apollo’s USA guests. With the US Government suspending all travel from Europe to the USA, Apollo expects cancellations to materially increase for US travel, although it notes that the US high season is not until June to September.
This week, Apollo released another trading update noting travel restrictions had been escalated in Apollo’s rental destinations of Australia, New Zealand, and France. In addition, government advice against large gatherings meant the cancellation of RV expos in Australia and the US at which Apollo would normally sell vehicles. These restrictions will further impact the company and its FY20 results, but it is not possible to quantify the extent in a rapidly evolving situation.
Apollo is taking steps across its global business to mitigate the impact of coronavirus, reviewing operating and capital expenditure spend as well as fleet life cycles across the globe. Additional cost-saving measures include having executive and non-executive board members forgo 20% of their salaries and fees for the remainder of FY20.
Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Serko Ltd. The Motley Fool Australia has recommended Cochlear Ltd., oOh!Media Ltd, and Serko Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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