Best result in years for big firms

AUSTRALIA’S major listed companies have turned in a bumper performance for the past financial year.

The proportion of companies in the benchmark ASX 200 index that increased their bottom lines was the biggest in more than a decade, and many declared generous dividends.

Of companies reporting full-year results, about 93 per cent reported a profit during the August reporting season – higher than the long-term average of 87 per cent.

The proportion chalking up increases in their profit was 78 per cent, up from 67 per cent last year.

That was the most since the 2007 season – on the eve of the global financial crisis – when 89 per cent of companies lifted their earnings.

CommSec chief economist Craig James said the results across the ASX 200 had been “impressive”.

“The percentage of companies issuing a dividend is near record highs, expenses have matched sales and cash levels are at record highs and up 8.5 per cent on a year ago,” he said.

Business confidence was also positive, he said, and this pointed to a stronger outlook for capital investment and continued growth in revenue.

And in most cases, those companies that reported falls in profit still had strong underlying results.

However, it wasn’t all smooth sailing.

Among companies to suffer a slide in profit was Australia’s

most widely held stock, Telstra.

The telco reported an 8.4 per cent slide in net profit, to $3.56 billion, as strong competition took a toll.

Still, the result was better than some analysts had forecast and was welcomed by investors, who pushed Telstra shares higher on the day, AMP Capital chief economist Shane Oliver said.

“Telstra was one of those perverse results – despite the profit fall, the result was actually seen as good,” Dr Oliver said.

“The share price bounced up because the profit met guidance and the market had feared it would be worse.”

Telstra shares surged almost 6 per cent to $3.02 on the day and gained more ground in subsequent sessions before sliding back towards $3 in the past two weeks.

Dr Oliver said market expectations dictated how companies fared on the stock market after they published their results.

He noted Insurance Australia Group, the company behind

brands including CGU and NRMA, only reported a small fall in profit – down 0.6 per cent.

“But the profit number was almost 10 per cent below what the market was expecting, so investors hit the share price hard,” he said.

Shares in IAG tumbled about 5 per cent on the day and have fallen further since.

Across the ASX 200, dividends were also higher this season.

About 76 per cent of companies increased their payouts to shareholders, compared with 60 per cent last year.

Motley Fool analyst Tom Richards nominated the performance of biotechnology titan CSL as the season highlight.

“The standout result came from CSL, which handed in a full-year result 29 per cent above the prior year at $US1.73 billion – and ahead of analysts’ average estimates,” Mr Richards said.

CSL shares have since increased more than 12 per cent and the group has a market value approaching $105 billion.