The most interesting reporting season since the global financial crisis kicks off next week, and these are the six key things to look out for:
- Big write-downs, particularly in the property and petroleum sector, some of which have already been announced
- Another raft of equity raising announcements taking advantage of the relaxed rules which make it easier to dilute retail shareholders
- A more conservative approach to paying dividends, particularly by banks, despite the desire from mum and dad investors for distribution of their beloved franking credits
- Commentary about the impact of COVID-19 when few companies really know what is going to happen
- Discretionary reductions in CEO bonus payments and board fees given the hardship being felt by everyone and huge government subsidies, and
- Disclosure, or lack thereof, about the scale of government support, particularly JobKeeper payments.
JobKeeper is currently running at $11 billion a month, so many listed companies are clearly receiving huge taxpayer subsidies with the biggest being the likes of Qantas, Crown Resorts, Myer, Premier Investments and cinema giant Village Roadshow.
Given the materiality of the payments, these companies are all expected to release precise JobKeeper numbers, similar to what K&S Corporation disclosed last week. The transport company founded by the late Mount Gambier Rich Lister Allan Scott revealed that its 2019-20 net profit is likely to be between $15.8 million and $16.8 million, but only after receiving a hefty $12.4 million in JobKeeper payments in the June quarter alone.
But what about the more marginal players? Will they reveal they are on JobKeeper, let alone the precise amount of government support received, particularly if it is controversial?
For instance, Crikey was surprised to learn that billionaire Kerry Stokes’ Seven West Media applied for JobKeeper support. It’s unclear whether its revenue has fallen by more than the 50% required for companies with revenue above $1 billion.
The company applied for JobKeeper back in April, telling staff at the time:
If we succeed in our application, the scheme will make a significant contribution to the company’s wages and salaries expense in this challenging environment.
Are other media companies such as Nine and News Corp also on JobKeeper?
And what about that other billionaire Solomon Lew who has voluntarily closed as many of his Premier Investments stores as possible and aggressively refused to pay the rent despite receiving large wage subsidies funded by the taxpayer.
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Is Premier going to report a big profit in 2019-20 courtesy of taxpayer bailouts, booming digital sales and refusing to pay the rent to landlords? The company reported a net profit of $107 million on revenues of $1.27 billion last year and its two biggest expenses were staff at $302.6 million and leases at $224.4 million.
And will Premier Investments CEO Mark McInnes take a pay cut on the $6.15 million he was paid in 2018-19, including a $2.5 million bonus?
All will be revealed in the full year results next month, hopefully including the $50 million-plus in JobKeeper payments paid to Premier Investments, which the company has stressed is being passed on directly to employees in full.
Indeed, as Lew told the ASX on May 12: “We are delighted to be making JobKeeper related payments directly to thousands of our employees.”
As Crikey reported last week, the New Zealand government has produced a searchable website, updated on a weekly basis, which precisely discloses which companies have received what public monies and for how many of their employees.
The Morrison government is clearly keen to remove a large proportion of recipients from the scheme, and public disclosure of recipients beyond September 30 would be a good technique to reduce potential rorting.
Both Seven West Media and Premier Investments are expected to fall off under the new arrangements because they won’t be able to prove a 50% drop in revenue over the six months to September 30, as opposed to the much easier, earlier threshold of a 50% drop for just one month, something many business suffered in March or April during the peak of the national lockdown.