It seems like every day another business is warning on coronavirus. How bad is it really?
It depends who you ask. At the heart of the matter is the fact that nobody knows how long the outbreak will last, meaning businesses cannot accurately forecast what impact it will have on them.
Do we have any rough numbers on the impact?
Analysis by investment researchers at Edison Group have calculated that consensus earnings forecasts have fallen by around 1 per cent in just 4 weeks on a global basis, as companies and analysts revise their expectations.
The downgrades have been led by oil, hotels, leisure and carmaking sectors.
Are investors ready?
Alastair George, investment director at Edison, doesn’t think so.
“The ongoing impacts on supply chains and global demand growth is becoming increasingly obvious as a trickle of cautious trading statement risks turning into a torrent,” he said.
“In the context of declining earnings forecasts and extended forward market valuations, global equities are in our view still too sanguine in respect of the ongoing risks to growth.”
Which companies are worst hit?
The obvious contenders are any with significant Chinese manufacturing operations or customer bases.
That’s why Apple sounded alarm bells earlier this week, saying it would miss some targets due to a cut in production of iPhones and the closure of many of its stores.
Luxury companies are some of the most exposed, suffering not just in Asia but also from lower numbers of Asian tourists in key locations across Europe and the US. A former LVMH executive said this week the outbreak could be a disaster for many brands.
Which British companies are affected?
Some manufacturers are struggling to get key components, with Jaguar Land Rover warning this week it could run out of parts in two weeks and it currently shipping them over in suitcases. A wide range of other industries are also worried. IT giant Aveva and recruiter Hays both cautioned over the virus.
Aveva, which is one of Britain’s biggest tech groups and makes 5 per cent of its revenues in China, said Chinese sales had been knocked by disruption, while Hays said it was too early to give details on any financial impact but it was “materially impacting” activity in the Chinese jobs market.
Are there any winners?
While it’s not an ideal situation for anyone, some companies are reaping the rewards. Some pharmacy branches in the UK have reported selling out of face masks, while app makers in China have benefited from bored people stuck at home.
An Australian casino company called Star Entertainment even said that, while some of its top-spending Chinese clients have been unable to visit the country because of the outbreak, others have been unable to leave. With a captive audience of high-rollers, its VIP tables have experienced an unexpected uptick in business.