Investors to expect better 2017 results
Investors can expect better results from the 2017 financial year as more companies progress through the difficult process of exiting businesses and restructuring operations, according to Australian Unity Investments.
“Across the market as a whole, company earnings for the financial year 30 June 2016 are down on the previous year by around 8 per cent, but this reflects the major impact of resource companies where average earnings fell 48 per cent. Excluding this, company profits have grown around 5 per cent this financial year," said David Bryant, CEO at Australian Unity Investments.
“The big write-downs we saw this year, largely in resource companies, shouldn’t be repeated in the 2017 financial year. Overall it has been a fairly stable reporting season, without too much unexpected bad news.”
Mr Bryant said if the growth forecast for next year of 6-7 per cent is achieved, investors should be kept reasonably happy, particularly given the shrinking number of alternative investments and given record low interest rates.
“However, we are likely to see continued pressure on dividend yield which will concern some investors, particularly in certain sectors. Investors still need to embrace equities, but they need to be very selective in companies and sectors they invest in," Mr Bryant added.
Results throughout the resources sector have been very poor, he added, while the banking sector is struggling to deliver growth, given low rates, strong competition and increasing bad debt levels.
“That leaves only around 40 per cent of the market to work with, and as this profit reporting season has shown, there is a big gap between the best and worst companies," he said.
“The message from the reporting season so far is that investors will need to continue to have lower expectations of returns for the rest of 2016, as low interest rates and limited earnings growth prevail.
“As a result, investors need to be more well-researched and selective than ever, because the easy option of just investing in resources and banks is gone and the winners and losers in the next couple of years will deliver substantially different outcomes for investors," Mr Bryant said.