ASX top 50 double pre-tax profits

Profits were pushed higher by strong gains from the miners and a decline in impairments.

Miners helped drive profits higher in the year, with profit in the sector up $27.7bn (Photographer: Sergio Dionisio/Bloomberg)

Australia’s top 50 listed companies more than doubled their pre-tax profits last financial year, pushed higher by strong gains from the miners and a decline in impairments.

Profits in the ASX top 50 companies soared 103 per cent to $120.8 billion in the 12 months through June, according to a KPMG study of company annual reports.

Impairment charges fell to $14.1bn, down sharply from 2016’s $38.5bn. While falls in commodity prices were the main trigger for impairments in 2016, this year the largest impairments involved oil and gas assets in the energy and utilities sector.

Miners helped drive profits higher in the year, with profit in the sector up $27.7bn, while revenue rose 13 per cent on the back of stronger commodity prices and increased production. Elsewhere, energy and utilities companies posted a 127 per cent increase in profit and a 6 per cent lift in revenue, including a reduction in revenue at Woodside due to lower production volumes.

Performance across the sectors was mixed, with bank profits up 5 per cent and revenue down 2 per cent, while property companies saw profit rise 13 per cent, and revenue up 5 per cent.

Consumer staples hiked profits to $8bn, from a break-even result year ago, while revenue rose 3 per cent.

Meanwhile, materials and transport companies grew profits 92 per cent during the financial year, due to a lower level of impairments, while revenue dropped 2 per cent.

The report also found that 42 of the top 50 companies are now using ‘alternative’ measures of earnings in addition to statutory profits, in their annual reports. The measure includes performance measures reported internally, for decision-making purposes. The gap between alternative profit figures and statutory profits dropped significantly, with alternative profits 61 per cent higher in 2016, but just 7 per cent higher than statutory profits for 2017.

“The practice of reporting earnings using alternative measures to accounting standards has become a well-established part of market communications by corporates,” KPMG audit partner Julian McPherson said.

“The gap between statutory and alternative profit measures goes up and down but has decreased noticeably by 59 per cent this time compared to a year ago, which reflects the reduction in impairment charges and other significant items recorded outside of the alternative profit measure — such as costs related to restructuring, cost saving strategies and transformation programs.”