Firms face growth enigma
QUEENSLAND companies are facing sluggish earnings growth unless they acquire rivals, cut costs or introduce new technology.
As the state’s largest public companies report annual profit, analysts warn the market is getting tougher.
Pitcher Partners director of wealth manager David Lane said most Queensland companies reported as expected but were tending to underpromise and over-deliver.
Mr Lane said there were some standout performers such as Flight Centre and Cor- porate Travel Management (CTM), which benefited from a lower dollar and large international operations. Rail giant Aurizon raised earnings despite the mining downturn by cutting costs.
“Company management have become very conservative in their guidance on earnings and are tending to underpromise,” Mr Lane said.
Morgans analyst Tom Sartor said companies like Suncorp, Bank of Queensland and Aurizon were growing but at a slower rate.
“It is getting hard to grow organically,” Mr Sartor said. “There are some growth areas like property but generally things are tepid.”
Mr Sartor said the mining downturn that had hit the regions in the past few years was now affecting the southeast corner. “Retail companies like Super Retail Group have noted that the going is tough in Queensland,” Mr Sartor said. Super Retail Group, which owns the Supercheap Auto, Rebel Sport and BCF chains, last month said consumer spending in Queensland had put the brakes on profit.
Companies doing well such as CTM, Flight Centre or Domino’s were growing through acquisitions or by introducing new technology.
Flight Centre’s underlying pre-tax profit slipped 3.4 per cent to $363.7 million but that was at the upper end of the guidance it released in June and above analysts’ expectations. Brisbane-based CTM said statutory net profit climbed 75 per cent to a record $29.1 million, boosted by clients using new technology such as a taxi-sharing app.
Domino’s announced a better-than-expected 40 per cent spike in net profit to $64 million earlier this month, topping the company’s guidance of a 32.5 per cent profit jump outlined in February. The fastfood company said it would roll out new technology such as a newly launched driver tracker app.
Pitcher Partners’ Mr Lane said Brisbane-based gaming companies performed well despite tough conditions. Tatts Group posted a net profit of $252 million to June 30, a 25.7 per cent rise year on year.
Echo Entertainment’s net profit rose 59.3 per cent to $169.3 million in the year to June 30, up from $106.3 million, beating analysts’ expectations.
UBS analyst James Coghill said even though Suncorp’s net earnings after tax were slightly higher than expected, growth remained a challenge.