Results show profits on recovery path

26 August 2009

Broking analysts were wringing their hands in the lead-up to the latest profit reporting season but so far the news has been surprisingly good.

Our sample of 176 companies shows that sales have continued to outpace inflation in the year to 30 June 2009 and underlying profitability has been remarkably resilient. Investors have responded positively too with most stocks rallying around 1.44% on the day of their profit announcement.

FY09 Corporate Earnings Results
Twelve months to:	Jun-2009	Jun-2008
Number of companies in sample	176	257
Median sales growth (%)	5.3	15.2
Median pre-tax profit growth (%)	-8.3	9.5
Median net profit growth (%)	-19.2	6.4
Median EPS growth (%)	-15.4	-2.3
Median net margin (%)	8.4	10.0
Median dividend yield (%)	5.6	5.4
Average share price reaction (%)	1.44	0.89

While the 19.2% slide in full-year net profits is not a great in absolute terms, it is significantly better than the 34.1% drop recorded in the year to December 2008.

The other surprising trend is that net profit margins have edged up slightly during the last six months, particularly among some of the smaller stocks.

And despite the drop in bottom line profits, the reaction of share investors has been favourable with nearly 52% of stocks rallying on the day of their profit release.