Last week saw more volatility on the share market as investors were simultaneously spooked by the increasing spread of coronavirus and buoyed by government stimulus packages.
A host of companies withdrew or suspended guidance as the fallout from coronavirus continued. Dividends were deferred or cut altogether to preserve cash. Increasing numbers of ASX retailers made the decision to close stores for the foreseeable future.
The S&P/ASX 200 Index (ASX: XJO) fell over 6% on Monday but gained more than 13% over the following three days before falling again by 5.3% on Friday. Overall, the ASX 200 Index ended the week roughly on par with where it started.
The US Senate finally approved its massive $2 trillion stimulus package after days of debate, which temporarily lifted US shares, but what is clear is that uncertainty is the rule of the day.
In Australia, there is potential for further dividend cuts and guidance downgrades with many sectors pleading for government assistance.
Here we take a look at the five ASX 200 shares that recorded the biggest falls last week.
GrainCorp Ltd (ASX: GNC)
GrainCorp shares fell 60.1% last week to close the week at $2.95. The demerger of United Malt Group from GrainCorp became effective last week, with GrainCorp shares trading on an ex-demerger entitlement basis from Tuesday 24 March. As a result, GrainCorp shares fell 56.7% from $7.06 at close of market on Monday to $3.05 at market close Tuesday.
United Malt Group Limited (ASX: UMG) has now listed on the ASX separately and commenced trading. A number of GrainCorp directors have stepped down and joined the United Malt Board, while Graincorp CEO Mark Palmquist will resign when the demerger is completed.
The demerger is expected to be implemented on Wednesday 1 April and has the effect of separating the grain business from global malting operations. GrainCorp shareholders will be issued with one United Malt share for every GrainCorp share they hold.
GrainCorp will continue to operate its bulk handling sites, seaboard grain terminals, oilseed processing operations and overseas processing and trading offices. United Malt will be the world’s fourth-largest maltster, with a malting and malt product distribution network in Australia, the UK and the US.
Southern Cross Media Group Ltd (ASX: SXL)
Southern Cross Media shares were down 32.7% last week to finish at 16.5 cents. Shares in the company crashed lower on Monday, losing 6 cents in morning trade, before entering a trading halt at 1pm. On Wednesday, shares were suspended from quotation pending the release of an announcement regarding the impact of coronavirus on the business.
Southern Cross Media owns Australia’s largest radio network and also broadcasts television into rural and regional Australia. The advertising market has been weak in the lead up to the coronavirus crisis, and investors are no doubt speculating it will become weaker still as a result.
Many companies are reducing variable spending in an attempt to rein in costs in the face of lower projected revenue. Advertising spend has become uncertain with forward ad market projections increasingly hard to predict.
Revenue from advertising has slowed significantly with NewsCorp warning of job cuts, oOh!Media Ltd (ASX: OML) deferring its dividend and launching an equity raising, and Nine Entertainment Co Holdings Ltd (ASX: NEC) withdrawing its full-year guidance.
InvoCare Limited (ASX: IVC)
Shares in InvoCare ended last week 23.8% lower at $9.98. InvoCare was one of the few ASX companies whose shares held up during the market rout over the last few weeks. That run came to an end last week when the Federal Government announced funerals would be limited to 10 attendees.
Shares in InvoCare fell 18% overnight, crashing to a low of $9.07 as a result of the Government’s announcement. The funeral operator advised that it was beginning to see an impact on its core business due to restrictive social gathering measures. It said the inability to provide its full range of services would impact business performance, however, the scale of the impact was difficult to quantify.
InvoCare is taking measures to mitigate the as-yet-unknown impact on the business including deferring non-essential capital expenditure and implementing a hiring freeze.
CEO Martin Earp said, “we are now focusing on implementing a series of contingency plans to both reduce the impact of COVID-19 on our business and allow us to continue to meet the needs of our client families during this unprecedented crisis.”
AP Eagers Ltd (ASX: APE)
Shares in AP Eagers fell 22.6% last week to close at $2.94. AP Eagers reduced its final dividend last week due to the ongoing uncertainty around the duration and impact of coronavirus.
The fully franked dividend has been halved from 22.5 cents per share to 11.25 cents per share. AP Eagers says it considers it prudent to ensure that cash is preserved until the current uncertainties are better understood. It said it would consider payment of an additional dividend of an equivalent amount later in the year once the uncertainty has settled.
Cost-saving measures have been implemented with non-executive directors foregoing their full board fees with immediate effect. The Managing Director has agreed to an effective 46% reduction in remuneration by foregoing all short and long term incentives and reducing his base salary.
As a motor vehicle dealership owner and operator, AP Eagers will likely see reductions in sales if the predicted coronavirus-induced recession takes hold. In Australia, car sales have already fallen 11% from their high in 2017. During the GFC, Australia saw a 23% drop in car sales. With cars typically the second-largest household expenditure, consumers will naturally refrain from making purchases during an economic downturn.
Pinnacle Investment Management Group Ltd (ASX: PNI)
Shares in Pinnacle Investment Management ended the week down 19.7% at $2.61. The investment management firm was one of the best performing shares on the ASX in February when it reported a sizeable increase in its first-half profit.
Since then, shares have slid with investors backing away from investment managers as interest rates have fallen and the share market has taken a tumble. Shares in Magellan Financial Group Ltd (ASX: MFG) are down 48% from February highs, while Platinum Asset Management Ltd (ASX: PTM) shares are down 32%.
It is worth noting, however, that Pinnacle shares had increased 555% in the four years to their high point of $6.63 in February, so at their current price, shares are trading on par with their levels nearly three years ago.
There was no significant news out of Pinnacle Investment Management last week, however, the company’s director of institutional sales did announce his departure for a role at a boutique firm.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited, Nine Entertainment Co. Holdings Limited, and oOh!Media 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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