First the good news: 92 per cent of companies reporting their full-year results made a profit, according to CommSec analysis of the results. This is above the average of 88 per cent over the past decade.
But only 52 per cent of companies were able to lift profits. Over the long term just over 60 per cent of companies increase their profits each year.
CommSec tracked the financial reporting of 138 S&P/ASX 200 companies that reported full-year results and 31 that reported half-year results.
Overall, profits were up 17 per cent. But if BHP and Wesfarmers are excluded, profits rose by only 1.2 per cent.
Among full-year reporting companies, 88.4 per cent declared a dividend. This is higher than the average of 86 per cent over the past 19 years. Nine companies are paying special dividends.
Dividends rose by 4.9 per cent, overall. Of those companies reporting a dividend 54.9 per cent increased their dividend, 21.3 per cent cut and 23.8 per cent left their dividend unchanged.
The increase in dividends was influenced by a number of special dividends. Companies declaring special dividends included ASX, Coles Group and Medibank Private.
Leaving special dividends out of the equation, aggregate dividend payments rose by 0.6 per cent.
Cash holdings fell by 0.1 per cent.
Seventy-nine per cent of companies reported an increase in revenue, while 82 ppeer cent of companies reported an increase in expenses.
Growth in expenses exceeded growth in revenue. In aggregate revenue rose by 6 per cent, while expenses rose by 6.8 per cent
CommSec says the most commonly cited reason given in financial reports for higher expenses were higher wage and energy bills.
Macquarie Securities says results and outlook statements were not strong enough for it to upgrade the earnings outlook for any more than a handful of companies. Of 80 results for S&P/ASX 100 companies, Macquarie raised 2019/20 earnings per share forecast by more than 5 per cent for only four companies – Unibail Rodamco Westfield, Qantas, Beach Energy and Wisetech Global.
It downgraded its 2019/20 earnings forecasts for 22 companies. They include AMP, IAG, QBE, Tabcorp Holdings, Nine Entertainment, SEEK, Telstra, Ramsay Health Care, A2 Milk Co, Domino’s Pizza Enterprises, Brambles, Reliance Worldwide, Worley Parsons, Amcor, Boral, Bluescope Steel, Orora, BHP, Iluka Resources, South32, Northern Star and Whitehaven Coal.
The more defensive sectors, including pharmaceuticals and biotechnology, staples retail, large cap REITs have the most upgrades.
Companies with housing exposure tend to have a positive outlook for 2019/20.
Macquarie is sticking to a more defensive position in its portfolio recommendations.
The head of equities research at Morningstar, Peter Warnes, says that, excluding resources, earnings growth was mediocre. Major banks, in particular, failed to make any meaningful headway in the post-royal commission environment. Net interest income was lower across all banks.
Warnes says there were some standouts in healthcare, including Cochlear, CSL and ResMed, which all showed the benefit of investment in research and development.
Another group of companies that performed well was the new media services companies, Domain, REA Group, and SEEK.
Warnes says a positive feature was the level of capital management activity – increased payout ratios for ordinary dividends, special dividends and share buybacks. Total shareholder returns were close to $90 billion – a record.
However, he expects returns to fall in the current financial year.