UK Cos. To Delay Financial Results Amid Virus Turmoil

Law360, London (March 23, 2020, 1:19 PM GMT) -- The Financial Conduct Authority has “strongly requested” that all listed companies postpone publishing their preliminary financial statements for at least two weeks so they can properly review how the fallout from the coronavirus is affecting profits.

The financial watchdog wrote on Saturday to companies listed on the London Stock Exchange asking them to hold off issuing their results to the market, which they were due to publish over the next few days. It wants them to fully assess how the outbreak will damage their business.

Companies issue preliminary numbers to update investors ahead of their yearly financial results — which have been checked by auditors. The audited statements are published within four months of the end of a listed company’s financial year, which for many is Dec. 31 or March 31.

Investors rely on accurate financial information about the companies they hold shares in. But the FCA said that the unprecedented events caused by the coronavirus pandemic mean that companies may have to change their statements.

“It is important that due consideration is given by companies to these events in preparing their disclosures,” Christopher Woolard, interim chief executive at the FCA, said in a letter to listed companies dated Saturday. “Observing timetables set before this crisis arose may not give companies the necessary time to do this.”

The watchdog also said that companies are “adding unnecessarily” to pressure on themselves and auditors by issuing preliminary financial statements before the audited versions. Although the practice is common among U.K. companies, it is not a requirement under the Listing Rules, which govern the stock exchange.

Listed companies released stock exchange announcements on Monday explaining to investors that they would delay publishing their preliminary statements. One, financial services company STM Group PLC, said it will no longer announce its results for the financial year ending December 2019 on March 24.

Tonic producer Fevertree Drinks PLC, media company Time Out Group PLC and retailer Card Factory PLC also made announcements.

The Financial Reporting Council said on Monday that it “fully supports the FCA’s request” and that listed companies should “consider carefully whether they should delay other corporate reports for the next two weeks.” This could include final audited financial statements.

But stockbroker AJ Bell said Monday that the delay “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,” Russ Mould, investment director at AJ Bell, said. “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,” he added.

The FCA also said Saturday that it is discussing a package of measures with the FRC and the Prudential Regulation Authority to ensure that companies are preparing appropriate disclosures and addressing the challenges that come with the spread of the COVID-19 disease.

The FRC has previously told U.K. companies that it expects their accounts to be audited to a proper standard despite the upheaval caused by the pandemic.

--Editing by Tom Mudd.

For a reprint of this article, please contact reprints@law360.com.

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