After all BET components published their Q1 2020 results we bring you a short overview of their top and bottom line performance.
Overall, the top line performance of BET components in Q1 2020 was solid with 10 out of 14 companies posting improved top line results. The Bucharest Stock Exchange published the highest top line improvement of 29.1%. Higher revenue came as a result of increased trading activity, coupled with a value increase of secondary public offers. In second place comes Teraplast who managed to record a 20% YoY increase in sales despite the virus outbreak. The growth came on the back of construction works. Although Medlife’s business declined by 25% in March, January and February showed strong growth rates that ultimately managed to offset the impact of COVID-19 on sales
YoY Sales Change in Q1 2020 (%)
Unlike the top line, most BET components posted lower bottom line results in the first quarter with 9 out of 14 companies witnessing a decrease in net profit or a widening of their net loss. Note that we had to exclude some of the companies from the chart as their relative YoY performance were significant outliers.
On the bottom line Fondul Proprietatea posted a strong negative decline from last year’s net profit of RON 414m to a net loss of RON -1.9bn. Such a performance was a result of net unrealized loss from equity investments in the amount of RON 2.46bn. The loss was mainly generated by OMV Petrom (RON 889.2m, decrease in share price of 35.1%), Hidroelectrica (RON 349.7m), CN Aeroporturi Bucuresti (RON 311.2m), EDistributie Banat (RON 252.6m), E-Distributie Muntenia (RON 210.1m) and E-Distributie Dobrogea (RON 159.9m).
The worse bottom line performance, on a relative scale, was posted by Alro whose net loss widened 1114% from RON -9m to RON -110m. In second place comes Sphera, whose bottom line turned to RON -12m from a net profit of RON 1.3m witnessed in Q1 2019. The sharp decrease came as a result of the virus which forced the company to close most of their restaurants for a certain period of time.
On the flip side, Medlife posted the highest bottom line increase. Despite posting lower sales results, the company was able to boost their operating performance through measures taken to limit the financial impact of COVID-19. Adding on top of that an improved net financial result and the company was able to increase their bottom line 3x. In second place comes Transelectrica who managed to double their net profit on the back of a lower cost base (-16% YoY), coupled with a lower net financial loss.
YoY Net Profit Change in Q1 2020 (%)
Overall, if ones was to sum up the performance of BET components in Q1 2020 it would be that despite the fact that most companies managed to increase their top line, only the companies that were able to implement effective methods to limit the COVID-19 financial impacts successfully transferred those higher sales to the bottom line.
For today, we decided to present you with a YTD movement of VIX, which has observed a significant drop in the past 2 months.
The VIX has definitely been in the spotlight since the outbreak of the Covid-19 crisis, as the global markets have seen quite significant volatility. VIX, also known as the fear index, is calculated based on the S&P 500 options and reflects market expectations on (implied) volatility in the coming 30 days.
Unlike classic indexes, VIX’s growth represents negative sentiment or increased risk of market volatility. VIX levels over 30 could be considered risky as the market is expecting high volatility. On a YTD basis, US indices S&P 500 and Dow Jones have observed decreases of 8.5% and 14.3%, respectively, as April and May brought a partial rebound of the indices. Meanwhile, earlier this year, both indices observed a decrease higher than 20% in less than a month (compared to the 52-week peak) witnessing the fastest bear market in history.
VIX Movement YTD
Since, the S&P and VIX are negatively related, the recent market conditions (the combination of Covid-19 outbreak and an oil price war between Russia and Saudi Arabia) have led to a surge in the VIX index. As visible on the graph below, VIX was last time seen at the levels observed this year during the financial crisis in 2008. In March, VIX observed two sharp daily increases this month. The first one was on 12 March, which coincided with President Trump introducing the European travel ban. Meanwhile, on 16 March the index reached 82.69, which is the highest value since the CBOE (Chicago Board Options Exchange) introduced the new methodology for the index in 2003.
Since the beginning of the year, VIX has more than doubled and currently stands at 28.16 (which is one of the lowest values since the Covid-19 outbreak). However, if we were to compare it to the peak observed in mid March, the index is down by 66%. Compared to end of March, the figure is 47.4% lower, indicating that the implied volatility of the S&P500 is currently quite lower than it was almost 2 months ago.
VIX vs S&P500 (2003 – 22 May 2020)*
*indexed value relative to base year (2003)