The outbreak of the coronavirus pandemic earlier this year threw the ASX into a panic. The S&P/ASX 200 Index (ASX: XJO) fell 36% from its February high to its March low and is only now testing pre-pandemic levels.
But there have been winners and losers along the way. Some ASX 200 shares have boomed as pandemic related tailwinds drove customer growth (hello, Afterpay Ltd (ASX: APT)). But many others have suffered due to pandemic-related restrictions.
For example, ongoing travel restrictions have taken their toll on ASX travel shares, which remain well down from their pre-COVID highs. With domestic borders in a state of flux, consumers are hesitant to make travel plans that may have to be hastily cancelled. International travel remains off the cards for most.
Lockdowns have also taken their toll on the retail sector, with all but essential stores shuttered across the country for parts of the year. This has impacted landlords, who have had difficulty collecting rents from tenants unable to open stores.
With this in mind, we take a look at some of the ASX 200 shares hardest hit by COVID in 2020.
|Company||Share Price (at the time of writing)||Share Price Decline in 2020|
|Flight Centre Travel Group Ltd (ASX: FLT)||$16.67||-58.96%|
|Unibail-Rodamco-Westfield (ASX: URW)||$5.26||-53.20%|
|Webjet Limited (ASX: WEB)||$5.27||-45.39%|
|Treasury Wine Estates Ltd (ASX: TWE)||$9.41||-43.31%|
|G8 Education Ltd (ASX: GEM)||$1.21||-37.79%|
|Qantas Airways Limited (ASX: QAN)||$4.95||-32.38%|
ASX 200 travel shares bear the brunt
The list reveals that ASX 200 travel shares have been among the hardest hit by the COVID-19 pandemic.
Flight Centre shares started the year trading above $51 dollars, but are ending the year among the most shorted stocks on the ASX. The travel management company was dumped from the ASX 100 in the December quarterly rebalance as a result of its share price slide.
Flight Centre reacted to the pandemic by withdrawing guidance in March and cancelling its interim dividend. By April, the company was raising $700 million in emergency equity as it announced annualised cost reductions of $1.9 billion. More than 50% of stores were shuttered globally, including more than 40% of Australian outlets.
Flight Centre has reported seeing green shoots in the travel market following the almost total shutdown of travel in April and May. Revenue for September was $25 million, about 12% of its normal level, or $38 million with government subsidies included. Recovery in some locations that would normally be material contributors to group earnings, such as Australia, the United Kingdom, and the United States, have been hampered by ongoing curbs on travel.
The Webjet share price has also suffered in 2020. The company announced a record half year result in February and provided full year guidance of $162 to $172 million in earnings before interest, tax, depreciation and amortisation (EBITDA). The record first half profits quickly became a memory as borders were closed in March and the gains of the first half erased.
Full year total transaction volumes were down 21% on the prior year at $3 billion and revenue was down 27% to $266.1 million. In April, Webjet conducted a $346 million capital raise to strengthen the balance sheet and reduce debtor exposure. Cost reductions have been implemented to reduce costs by 50%.
Qantas grounded its international fleet in March and cut domestic flights by 60%. As domestic border restrictions eased, Qantas increased flights, with domestic capacity at 68% of pre-COVID levels in December, prior to the Sydney COVID outbreak.
Qantas has warned of a substantial statutory loss for FY21. The first half is expected to be close to break even while the second half is expected to be net cash flow positive (excluding redundancies). This will allow Qantas to start repairing its balance sheet in the second half of FY21. A recovery program is also on track to deliver at least $1 billion in annual savings from FY23.
ASX 200 retail and education shares were not unscathed
But it wasn’t just ASX 200 travel shares that suffered in 2020. Shopping malls were deserted as the pandemic gripped the globe, closing all but the most essential stores. Landlords struggled to collect rent from tenants unable to trade, resulting in the share prices of ASX listed shopping centre operators plunging.
Unibail-Rodamco-Westfield saw net rental income decline by 17.2% in the September quarter while the company’s portfolio value fell 10.7%. The shopping centre operator conducted a $2 billion bond placement in November to strengthen its liquidity position and lengthen debt maturity. Unibail is also selling parts of its portfolio via a $4.8 billion disposal program and recently entered into an agreement to sell several office buildings in France.
The childhood education sector has also been a victim of the pandemic, with this ASX 200 share seeing its value crushed in 2020. G8 Education is one of Australia’s largest providers of early childhood education and care with more than 470 early learning centres across the country. The company reported a 28% decline in revenue in the first half of the year, driven by the capped revenue model under the government’s ‘free’ childcare package.
Following an immediate hit to occupancy at the start of the pandemic, G8 Education has seen occupancy levels increase in the period since, with like-for-like occupancy 75.5% in December. Nonetheless, the focus remains on cost management, with 2021 expected to be a recovery year given the absence of additional government subsidies and ongoing impacts of COVID-19 on occupancy.
Aussie-China trade tensions apply pressure
Finally, the pandemic has seen strained relations between Australia and China, resulting in the introduction of new restrictions on the import of Australian goods.
Treasury Wine Estates
This has been particularly bad news for Treasury Wine Estates. The ASX 200 share went into a trading halt in November when China announced anti-dumping measures on wine imports from Australia to China. Demand for Treasury Wine Estates’ products in China is expected to be extremely limited while the anti-dumping measures remain in place. China represents 25% of annual global Penfolds allocations.
Treasury Wine Estates plans to expand growth across other priority markets where there is unsatisfied demand, including in Australia, Europe, the US, and Asian markets outside of China.
2020 may have been an annus horribilis for these ASX 200 shares, but a light is on the horizon. The prospect of a widespread COVID vaccine in 2021 is bringing hope for an improvement in trading conditions for many.
There is no doubt 2020 has been a year like no other, and for these ASX 200 shares, a year they may rather forget.
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Returns as of 6th October 2020
Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.