Storms eventually blow over, even CAT 5 hurricanes like COVID-19, which has grounded airlines, cruise ships & travel firms worldwide. Together with forcing many others to close, namely pubs, restaurants, hotels and more recently construction sites.
Last week came news that Watkin Jones was also temporarily suspending all nonessential work at its PBSA, BtR and housebuilding sites, in line with the rest of the industry. Nevertheless, sporting gross cash of £71m (net £35m, post site specific loans) as at March 2020, and a further £31m of undrawn credit facilities, we are confident that the group will emerge from this crisis in a stronger competitive position.
Additionally it has forward sold all of its 2020 developments, and 8 out of ten of those scheduled for 2021. Thus providing robust cashflow/earnings visibility, despite near term revenue recognition being pushed to the right due to business interruption and social distancing measures.
Well, the honest answer is nobody knows. Hence why the equity/bond markets are in such flux, while the VIX (ie investor fear gauge, see below) is trading at nose-bleed levels. However, after a great deal of digging into the pandemic, our base case is not quite so bleak.
Indeed given the amount of expertise being thrown at the problem, we are hopeful that an effective anti-viral will be found by the autumn. With the aim of reducing fatality/hospitalisation rates, so that global healthcare systems are not overwhelmed. Alongside permitting lockdown restrictions to be lifted, and economies to breathe again. Similarly, an effective vaccine should arrive in circa 12-18 months’ time (or earlier). At which point, the world can get back to a semblance of normality.