The results of Australia’s largest listed companies suggest that revenues have outpaced expenses over the past financial year while profits look to be on the rise.
However, analysis by CommSec at the halfway point of the reporting season has revealed that cash levels have fallen compared to a year ago while dividends too have taken a downturn.
“Reflecting the uncertainties ahead, understandably investors have reacted cautiously to results. More companies have seen their share prices fall on the day of earnings release than those posting gains,” CommSec economists said in a recent note.
To date, only 43.6 per cent of ASX 200 companies have seen their share price rise or remain stable on their reporting date, with the average daily loss sitting at 0.3 per cent.
As part of their analysis, CommSec’s economists derived the aggregate results of ASX 200 companies during the August reporting season to date, which revealed a 10.4 per cent boost in aggregate revenues with 85 per cent of companies reporting revenue growth. The average increase in revenue sat at 21.8 per cent.
Moreover, higher expenses were reported by 81 per cent of companies with a 6.2 per cent increase in aggregate expenses. On average, expenses increased by 16.9 per cent.
CommSec also revealed that all but five companies posted a statutory profit, while as many as 63 per cent of companies reported a lift in profits compared to the previous financial year. Aggregate statutory net profits increased by 55.1 per cent, or 21 per cent when excluding BHP.
“Interestingly, aggregate cash levels are down on a year ago after soaring to record highs in the February profit season. Only 45 per cent of companies have lifted cash levels,” the CommSec economists noted.
“Some companies have been shoring up operations ahead of the challenges ahead. Some have stocked up on inventories or equipment to protect their businesses from supply-chain difficulties. Some companies have increased employment and lifted wages. And indeed others are paying dividends.”
Dividends were issued by 97 per cent of companies, above the long-term average of 85 per cent, but only 65 per cent of these companies actually lifted their dividends.
To date, both full-year and half-year reporting S&P/ASX 200 have announced a combined $27.5 billion in dividends, down 5.8 per cent on the previous year.
“When assessing earnings seasons, the common term used to describe results is ‘mixed’. And that makes sense because there are all manner of influences affecting companies,” CommSec’s economists said.
“While some influences are positive for a number of companies, like labour demand and rising interest rates, they are negative for other companies.”
Looking forward, the economists predicted that this year’s biggest issues are likely to persist over the next six to 12 months.
“For investors, it is simply a case of identifying which companies respond best to the challenges,” they concluded.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
