“The FCA’s desire to avoid stoking panic is perfectly understandable but the call for a delay in the publication of preliminary results leaves firms in a difficult position. Companies are duty bound to update the market once it becomes clear that their results are likely to be notably ahead or behind forecasts,” says Russ Mould, investment director at AJ Bell.
“In the current environment, no-one expects firms to be able to give precise forecasts as to the potential downturn they are facing or the impact it may have on sales, profits and – above all - cash flow. And share prices are already anticipating massive downgrades anyway.
“What shareholders and analysts are looking for is comment from management on what they are doing to preserve cash and give their company every chance of coming out the other side of the crisis and be ready for the eventual upturn.
“In the absence of information, people will make things up. This isn’t a positive step and has now got people posing the question of shutting down markets. This would be a catastrophe and represents the single biggest policy risk to the financial world right now. You don’t give up on price discovery because you don’t like the price. You don’t remove liquidity and access to savings when people are seeing a shuddering halt in their cash flows.
“The absence of commentary from management on their financial and contingency planning is far more likely to lead to a disorderly market than one where Boards are doing their best to communicate in as realistic a fashion as is possible in the current circumstances. This is what investors are looking for now. They know forecasts are likely to be wrong, are pricing in dividend cuts and are already expecting bad news.”
