The list of events being cancelled due to worries about the spread of the coronavirus already stretches from rugby internationals and James Bond premieres to the World Mobile Congress, leaving investors and analysts worried about conference organisers such as Informa PLC (LON:INF), Ascential PLC (LON:ASCL) and Hyve Group PLC (LON:HYVE).
Ahead of Informa’s results on Tuesday, the FTSE 100 group has seen its shares lose almost a third of their value since mid January when the worries started to ramp up outside of China.
Ascential, which runs major corporate get-togethers such as the Cannes Lions marketing bash, and fellow FTSE 250 rival Hyve were both down around 30% and AIM-listed Arena Events Group PLC (LON:ARE) had tumbled more than 50%.
Hundreds of cancellations
On Friday, Apple was said to be on the verge of cancelling its big annual developer conference, WWDC, after public health officials in the region urged the postponement of mass gatherings.
Although the event is not coming around until June, Apple would normally be sending invitations in the coming weeks, meaning a decision needs to be taken soon.
Last week, Facebook cancelled its own such conference, while Google and Adobe both looked to switch to become a solely online event.
Elsewhere in the US, organisers of the massive South by Southwest media festival said the Texas event would still take place as planned in mid March, despite pressure from politicians and public health officials and with some participants pulling out.
On top of the headline-making delay to the release of the new James Bond film, the cancellation of France’s MIP TV film this week threw doubt on others in Europe, such as the Cannes Film Festival scheduled for the end of May.
Across Asia, Europe and North America, organisers have shelved at least 440 trade shows and exhibitions in response to the spread of Covid-19, German events magazine M+A has reported.
Hyve said this week that it had postponed four March events in Asia to later in the year and said while there was not currently a restriction on large events in the USA, it was clear that many US companies are restricting or discouraging travel for their employees, including to events.
The company said it currently predicts a one-time revenue knock of £17-19mln feeding through to £16-18mln on profits, but said the situation remains fluid and those numbers will change if things either improve or get worse.
Ascential last month, alongside its results, said that revenues from Chinese customers represent “less than 5% of the group”, giving an example that just 2% of attendees of Cannes Lions are from China, and it had “not yet seen any material impact on trading” from Covid-19.
Informa results due next week
Investors will be keen to hear what Informa has to say on Tuesday, especially as the group presides over a portfolio of over 900 events after buying rival UBM in 2018 to more than doubling its market value and establishing it as a leader in the global exhibitions industry.
In the first half of the year it said around 40% of our revenue coming from North America, 30% from Asia and 10% from the Middle East, with events and exhibitions making up two of the group’s five main operating units, with the others being focused on publishing, data and market intelligence.
In the events and exhibitions arms, the portfolio includes the China Beauty Expo (to be held in Shanghai in May), the World Tea Expo (in Denver in June), MRO Australasia (Brisbane in March), Data Center World (Texas in mid-March), Tissue World (Miami in March), Internet of Things World (California in April), Project Tokyo (Japan in March), London Tech Week (London in June) and the CMA Shipping conference (Connecticut in late March).
In the first half of the year, Informa reported higher underlying revenues but the final quarters of the year saw visitors put off exhibitions in Hong Kong because of the political, while Dubai was another tough market.
The current analysts’ consensus is looking for broadly flat sales of £2.9bn, a small increase in pre-tax profit to £816mln and a further hike in the dividend to 24.5p a share for 2020.
Knock on effect into 2021?
Analysts at Citigroup said on Friday that it was watching for “negative catalysts” at Informa, Ascential and Hyve.
Russ Mould, investment director at AJ Bell, said attention will certainly be on Informa management’s guidance for 2020.
In the past, he noted, Informa has that some two-thirds of its business is predictable and visible, thanks to subscriptions for its specialist journals, websites, research and data services.
But in contrast to other segments of media, where the theory was that any downturn should be “fairly V-shaped”, Citi’s analysts were worried that the disruption to the events subsector could be “significant” and “have a knock-on effect into 2021”.
Although the analysts said they think long-term investors “should ‘look through’ disruption”, they worried the market hasn’t yet fully factored this in.
Citi noted that the three big issues in events were: “Altering the timing of events is not always easy… investors should focus on earnings/cash as well as revenues… possible hangover for forward bookings & pricing”.
“Until we know the magnitude and duration of the impact, it will be difficult to call the bottom.”
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Indeed, health officials and economists were concerned about the risk that case numbers in China may rebound again when travel restrictions are relaxed and trade with the rest of the world returns to less depressed levels.
The steep rise in the number of active cases outside China is a potentially more dangerous third wave of the outbreak, said Holger Schmieding, chief economist at Berenberg.
“The health systems of advanced economies are also much better equipped to cope. In addition, compared with China, citizens in advanced democracies have more trust in their governments. Negative confidence effects in these democracies should, therefore, be somewhat less severe than in China (and Iran). However, a rapid spread in other less advanced regions could add significantly to global risks.”
Schmieding said western democracies are not inclined to impose measures that are as draconian as those in China, which he said, “reduces the immediate disruption but could allow the virus to spread further for longer”.
Berenberg forecasts a near-term recession in Italy, Germany and Japan, a “significant risk” of a modest recession in the Eurozone as a whole and the UK, with slower growth in the US in the first half.
Expecting economic disruption related to coronavirus will cost the world economy over $280bn in the first quarter, this “best guess” from Capital Economics would mean that global GDP will not grow quarter on quarter for the first time since 2009.