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.
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.”
*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.
Senior Communications Manager, KPMG
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KPMG's analysis of the financial reports of the ASX50 for 1 July 2015 to 31 December 2015.