Record impairments and lowest ASX50 profits since 2009: KPMG survey

Record impairments and lowest ASX50 profits since 2009

Australia’s largest 50 companies have suffered their lowest collective profit since the Global Financial Crisis, a KPMG study of annual reports for the six months to 31 December 2015 has shown.

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The record low profitability was caused by A$41 billion of impairments - the highest since the twice-yearly survey started in 2008 - and the impact of low commodity prices. The annual write-downs of A$41 billion occurred mostly in the minerals and resources sectors.

But companies not exposed to commodity prices reported positive results. Thirty-six of the ASX50 reported growth in annual revenue, while 30 recorded growth in statutory profits before tax.

Julian McPherson, KPMG Audit Partner said: “Mining companies accounted for 62 percent of the non-current asset impairments and the energy and utilities companies a further 20 percent. The results reported in other sectors are quite strong and significant impairments outside the resource and energy sector were company-specific rather than indicating broader financial pressures.”

The survey also showed that non-statutory profits - results or performance measures not determined by International Financial Reporting Standards (IRFS) - continue to play a key role in how top companies communicate and analyse their financial performance. KPMG’s study shows 37 of the ASX50 reported an ‘alternative’ measure of earnings in their annual or half-year reports for reporting dates in the second half of 2015.

Most of these alternative earnings measured implied a better performance than the statutory earnings because significant one-off events, especially non-cash impairment charges, were not recorded in the alternative measure.*


Julian McPherson said: “The practice of reporting earnings using alternative measures to accounting standards has become a well-established part of market communications by corporates. During the period of post-GFC recovery the gap between reported statutory and alternative earnings had narrowed considerably, but in 2015 earnings reported using alternative measures jumped to 54 percent higher than the equivalent statutory earnings. This result includes the highest annual impairment charges since the start of the survey period in 2008 and the lowest collective annual statutory profits since 2009.”  

Highlights from the report include:

  • The impairment charges recorded in statutory profit were the highest in our survey period with nine of the 50 companies reporting impairments exceeding A$1 billion and 21 companies reporting impairments exceeding A$50 million.
  • Seventy-four percent of ASX50 companies reported a non-IFRS earnings measure in their annual report.
  • Sixty-five percent of these companies reported 2015 non-IFRS earnings that exceeded statutory earnings. 
  • The ASX50 combined earnings on non-IFRS measures (where reported) were the lowest since 2009 reflecting the effect of weak commodity prices on underlying operating performance.

*Today’s report follows another recent KPMG Australia study which showed, across a sample of 30 ASX200 companies, that most (26) used at least one non-IFRS performance measure in their annual report. Of those, 69% reported a measure that implied ‘better’ performance than the relevant statutory measure. View the study. 

Further information

Ian Welch
Senior Communications Manager, KPMG
T: 02 9335 7765 / 0400 818 891
E: iwelch@kpmg.com.au

ASX50 financial reporting insights: July-December 2015

KPMG's analysis of the financial reports of the ASX50 for 1 July 2015 to 31 December 2015.

 
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