Fewer than half the ASX-listed companies that issued financial reports last month achieved an increase in profit, making it a disappointing reporting season. And the proportion of companies declaring a dividend fell
CommSec’s reporting season wrap shows that a total of 138 companies in the S&P/ASX 200 Index released half-year financial reports over the past month and anther 31 companies in the index reported full-year results.
Ninety-three per cent reported a profit. The high in the CommSec survey was 94 per cent, reported last year.
Only 49 per cent reported an increase in profit. Over the long term, an average of around 60 per cent report increased profit.
Net profits rose by an average of 15.3 per cent. However, this result was heavily influenced by two results – Wesfarmers and BHP. Excluding those two, the average increase was 5.3 per cent.
Eighty-three per cent of reporting companies declared a dividend, which is below the average of 86 per cent over the 18 reporting seasons that CommSec has surveyed.
Of those declaring a dividend, 58 per cent lifted the payout. A number of companies elected to pay special dividends and, as a result, dividends payouts rose by 11.7 per cent.
Eighty per cent of companies reported increases in expenses, while 79 reported increases in sales. On average, expenses rose by 5.6 per cent and revenues rose by 4.8 per cent. Cash holdings rose by 5 per cent.
Macquarie Securities says that of the 140 results it analysed, 26 per cent beat profit expectations and 31 per cent missed those expectations.
Resources stocks had the highest share of earnings “beats”, also “a higher share of “positive dividend surprises” and “positive analyst momentum” (upgrades). It highlighted results for Fortescue Metals, Mount Gibson Iron, Rio Tinto and BHP Group.
The small industrials produced the biggest share of “misses”. Included in this group were Bapcor, Baby Bunting Group, Blackmores, Emeco, GUD Holdings, 3P Learnings, Iress, and Invocare.
Reece Birtles, chief investment officer at Martin Currie Australia, Legg Mason affiliate, says: “There have been more misses than hits when you compare actual company results with what broker analysts had forecast for earnings per share.
Birtles the most interesting development has been in dividend payments. “The expected result of the Federal election has influenced companies such as Woolworths, Wesfarmers, Fortescue Metals Group and Woodside Petroleum to declare higher dividends.”
Julian Beaumont, investor director at Bennelong Australian Equity Partners, is more sanguine. He says there was some investor concern going into reporting season but “earnings held up well enough” and stock prices picked up during the month.
Beaumont says: “The tech sector has led the market in recent months and it continued its charge through reporting season. The likes of Altium, Appen and Afterpay all took off, having talked up lage growth opportunities. In an environment of slow grwth, investors are willing to pay over the odds for disruptive and other structural growth stories.
“Many of the best performers in recent times have been companies exporting or operating overseas. These include global tech companies, miners and global consumer brands such as Breville, IDP Education and A2 Milk.”
“Good retailers can still perform well with general consumer weakness, and this season we saw good numbers again from the likes of JB Hi-Fi, Lovisa and City Chic.