Savills chief executive Mark Ridley cut a surprisingly confident figure this week discussing the impact of the Covid-19 coronavirus. The pandemic is “a temporary issue”, he said, “and therefore a timing issue, as opposed to a change of outlook”. In some markets, he added, deals already appear to be back on the agenda.
Alas, there will be many business leaders who can only dream of feeling that reassured, as evidenced by a raft of statements from companies about the possible hit to business over the course of the week. That included several property-focused businesses, executives at which had expected to spend the week in the south of France before the cancellation of the annual MIPIM conference.
Although many companies argue that it is still too early to know the extent to which the spread of the virus will hit their activities, some of the worst-case scenarios outlined by businesses are stark.
Estate agents Countrywide and LSL, which are continuing merger talks, separately addressed the effect of the illness on their businesses in a trading statement and results announcement respectively.
Countrywide said it has seen “some softening in recent days”, but added that “it is too early to assess that impact”.
LSL chairman Simon Embley said: “The situation regarding the Covid-19 virus is rapidly evolving, and we have in recent days seen some slight softening of our lead sales indicators in estate agency.
“We are monitoring the situation very closely as it may create headwinds for our business in 2020 if changes in consumer behaviour impact residential property market conditions.”
Berkeley Group said it is delaying a planned boost to shareholder returns, and will review the decision in June, “by when it is indicated the effect of coronavirus will be more measurable and certain”.
The company said: “While there has been no noticeable impact on Berkeley’s business to date, the ultimate impact on UK business is unknown. There is no recent historical precedent, and for this reason it is absolutely right for any responsible business to approach the next six months with a reduced risk appetite and heightened sense of caution.”
Cineworld said it has seen a “minimal impact” on business at its cinemas so far. But it warned that if the situation worsened and led to it losing between one and three months of revenues across its estate, it could breach its covenants. Its shares tanked on the news.
At Dalata Hotel Group, which has a goal to grow its nascent UK business to match its Dublin operation, there has been a “significant reduction in bookings and a significant increase in cancellations” since the outbreak of the virus in Europe. The company said it was too early to comment on the financial impact.
Retailer WHSmith said it has seen a “material reduction” in passenger numbers at airports outside of Asia, including the UK – which accounts for 60% of its travel-centred revenue – the US and Europe. The company now expects a fall of 15-20% in revenue from its travel business during the second half of its financial year.
The impacts are, of course, being felt far beyond UK. Retail real estate investor Eurocommercial Properties has said it will grant tenants some rent payment deferrals for the second quarter, as Italy prepares to close almost all stores in response to the coronavirus.
Some companies are looking for a silver lining from the situation. In a portfolio update, real estate debt specialist ICG-Longbow said: “While the extent and duration of the Covid-19 outbreak and its impact on financial and lending markets cannot be forecast, in the board’s view the company’s portfolio remains well secured and is well placed to weather the current disruption and capitalise on any attractive opportunities which may result.”
The outbreak is also changing working practices for many companies. EG revealed this week that several property agencies are trialling remote working initiatives, closing offices for a day to ensure that staff and systems are ready in the event of a full closure.
The virus has also caused some logistical hiccups for companies. Just an hour and a half before an analyst presentation to accompany its full-year results was due to begin, Triple Point Social Housing REIT announced that it was changing the location. Analysts were asked to come directly to its own headquarters; the scheduled venue, the offices of its law firm, Taylor Wessing, have been temporarily closed owing to coronavirus concerns.
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