Chips are down for Famous Brands

The rand slumped late Friday, crossing above R19 to the US dollar after Fitch Ratings downgraded SA's by a further notch, pushing it deeper into sub-investment grade territory. That followed Moody's downgrade to junk just a week earlier.

According to Fitch, the downgrade is a result of the lack of a clear path towards government's debt stabilisation as well as the expected impact of the coronavirus shock on public finances and economic growth. And it's maintained a negative outlook, reflecting further the prospect of further significant pressure on debt and additional downside risks associated with the global shock.

Meanwhile, companies have resorted to cutting employees' salaries as an alternative to forced retrenchments as they start to feel the effect of Covid-19 and the 21-day lockdown. It couldn't come at a worse possible time for those companies that were midway through their recovery plans, such as EOH and ArcelorMittal SA. EOH told the MyBroadband news site that it may have to resort to trimming workers' salaries, while AMSA has already cut wages across the board for the next three months.

EOH releases its half-year results tomorrow and is likely to give more detail on its strategy make it through this tough period. While it's interim results will show significantly reduced losses, the coming six months could see previous gains reversed.

Famous Brands is another company that was part way through a turnaround - that of its Gourmet Burger Kitchen business in the UK. Last week, it said it wouldn't provide any further financial assistance to the struggling burger chain. On Friday, it outlined the impact Covid-19 was having on its operations in the Middle East and Africa, including South Africa.

In The Week Ahead, Chris Gilmour covers some of the other factors that have affected the markets, including shocking unemployment data out of the US on Friday as the impact of the coronavirus starts to be felt in the labour market.

For investors on the JSE looking on in despair, you aren't alone: the All Share Index rout isn't out of line with many other markets whilst relative to peers the rand has held up quite well - a statement that may seem counterintuitive to South Africans forking out R18 for a US dollar. In its latest report, Ingham Analytics also points to recent sober credit analysis from Moody's that lends some refreshing calm to the debate. Is there bounce back potential? What about global GDP? What about credit markets and the impact on equity markets? Click here to find out more.

Finally, with some companies postponing their annual general meetings due to the coronavirus, there is another solution. Ince has been assisting with online AGMs for companies since 2013, when it held the first hybrid online and physical AGM for Sasol Khanyisa using its iMeeting platform. It's an an interactive, virtual platform that facilitates shareholder attendance at a live AGM. And it's endorsed by the JSE. The AGM is one of the most important events in the business calendar and one you don't want to miss out on. Read more about iMeeting here.

Despite our current confinement, I hope you have good week. Stay safe.

Stephen Gunnion

Managing Editor, InceConnect

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