Sars claims more corporate victims

Inter Continental warns of plunge in bookings and job losses while Cookson fears global recession

The Sars virus continued to wreak havoc on international businesses yesterday when Intercontinental Hotels said the outbreak was compounding the "worst conditions" the hotel industry has ever encountered while Cookson, the engineering group, said the epidemic could trigger a global recession.

Cookson has a dozen manufacturing plants across Asia with several in the Guangdong province of China where 800 workers are employed. Though the group said its own operations in China had so far been unaffected, some of its customers have been hit by higher levels of absenteeism and lower levels of capacity.

Stephen Howard, the company's chief executive, said: "The bigger worry that I have about Sars is not will it quieten things at the Guangdong plants, because even were that to happen it really only means that (production) will pick up somewhere else. (But) is this somehow a catalyst for global recession? Is this the thing that finally pushes us over when we were beginning to see some signs of recovery?"

InterContinental Hotels, the group spun out of Six Continents, said the outbreak of the deadly virus contributed to a sharp decline in the performance of the group's hotels across Europe, the Middle East and Asia. Revenues per available room (revpar), the key industry profitability measure, fell across the region in March by almost 10 per cent, the company said yesterday in its first trading statement as an independent company. In January and February, revpar in the region was down 2.5 per cent and 5.7 per cent respectively.

Richard North, the chief executive, said: "Sars has clearly materially impacted occupancies in the Far East." He admitted occupancies at the InterContinental Hong Kong were "very materially down".

Mr North added: "We are trying to find any way we can to mitigate the effect of Sars." This includes making staff in its Asian hotels take all their annual leave early, although the group is trying to avoid sweeping redundancies.

InterContinental said the impact of the Iraqi war and continued economic gloom meant profits in the first three months of the year were "substantially lower" than the year before. The group announced it was cutting 800 jobs from a global corporate staff of 2,600. This was in line with pledges to slash costs made ahead of its demerger and should yield savings of $40m (£25m) this year and $100m annually. It said delivering the cost reduction programme would cost $100m.

The company estimated the total cost of its separation would be £129m, of which £97m would be taken as an exceptional charge. It said it spent £10m defending itself from Hugh Osmond's hostile bid – its share of the £20m total. The group has cut its capital expenditure plans for the current year by £50m to £400m. It also revealed it expected to have £1.2bn of net debt at the end of the year. The shares fell 2p to 340p.

Separately the Organisation for Economic Cooperation and Development warned the overall economic fall-out from the Sars crisis for the worst-affected countries could be significant as tourism and retail sectors suffer major blows.

The warning, included in its twice-yearly report on the global economy, came after the World Bank cited the virus as one factor behind a cut in its East Asia growth forecast. The OECD said: "The ultimate macroeconomic repercussions of the epidemic are difficult to ascertain at this stage.But past experience with other disease outbreaks suggests that local or sectoral impacts in the most seriously affected countries could be significant if the emergency were to worsen and persist," it concluded.

It cited the meat-related diseases of the late 1990s as cases where public health scares had hit economies.

More than 250 people have died from severe acute respiratory syndrome, and the World Health Organisation has advised against non-essential travel to Beijing, China's Shanxi province and Toronto, Canada.