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Blog posts tagged in Reporting season

Over the last eight days we have been digesting multi-billion dollar profit results for the major trading banks and listening to bank CEOs and CFOs commenting on their profit results. In aggregate the four major banks generated $28.6 billion in cash profits over the 2014 financial year, which represented an increase of 5% on the previous year. In this piece we are going to look at the common themes arising out of the results, differentiate between the banks and hand out our reporting season awards to the stocks that comprise a large weighting in most investors' Australian equity portfolios. The large overall size of bank profits reflects that their core business of transforming savings into lending as loans to borrowers remains a very profitable task. Indeed over the past decade (inclusive of the GFC) the big four banks have generated approximately $200 billion in profits after tax.

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Assessing future prospects for the major banks is currently one of the biggest issues facing all Australian equity fund managers. Aside from employing over 200,000 Australians and touching every sector of the Australian economy, the four major banks plus the two regionals comprise 32% of the ASX100 and four of the five largest stocks listed on the ASX with a combined market value of A$400 billion. After several years of delivering strong profit and dividend growth, primarily due to the tailwind of declining bad debt charges, all bank share prices have been sold off aggressively (down -6%) over the past month. This fall can be attributed to investor concerns that the banks will face higher capital requirements post the upcoming Murray Financial System Inquiry, as well selling from foreign investors due to a sharp fall in the AUD. In this piece we are going to look at the causes of this correction and some thoughts for the future.

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During the months of February and August the majority of Australian listed companies reveal their profit results and generally provide guidance as to how they expect their businesses to perform in the upcoming year. Whilst we regularly meet with companies between reporting periods to gauge how their businesses are performing, during semi-annual reporting season companies fully open up their car bonnets to let investors have a detailed look at the company's financials. Until this happens, investors don't know for certain whether they are going to find burning oil and hissing snakes or see that the company's growth engine is running to expectations.

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Over the last fortnight the four major banks have reported earnings of almost $13 billion dollars which resulted in some commentary in the press about banks being too profitable. Similarly one of the minor political parties suggested last week that the way to solve Australia's deficit is to tax the miners more. Whilst the banks and miners generate large profits as companies, what is ignored in much of the debate is that these profits have to be shared amongst millions of individual shareholders; for example Westpac has 3.1 billion shares outstanding. In this piece we are going to look at measures of corporate profitability for large Australian listed companies.

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Over the last fortnight investors have been digesting multi-billion dollar profit results for the major trading banks, wading through voluminous investor discussion packs whilst listening to bank CEOs and CFOs report their profit results. Indeed Westpac offered investors over 200 detailed charts in their 137 page investor presentation!

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Over the last few weeks Philo Research have been busy meeting with the management teams of the trusts in the Core Property Portfolio and doing a few tours of some of the assets owned by the portfolio. The highlight of these tours was the top floor of Deutsche Bank Place on Phillip Street; very salubrious office space with great views over the Botanical Gardens and down the harbour at only $1,450 per m² per annum! If anyone needs some flashy office space, we will be delighted to put them in touch with the building's leasing manager. In this note we will look at what we have learned from the recently concluded reporting season, our positioning in the various property sectors and the strategy being used to manage the Core Property Portfolio.

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A key part of the investment process is that the Philo Research team meet with the management teams of the portfolio companies at least once every six months. Generally we seek to meet with management teams just after they have released their semi-annual profit results and at other times during the year when we have specific issues or concerns that we feel need to be addressed. The content and tone of these meetings varies widely depending on the nature of the company and how far the results that the management team has delivered deviates from our expectations. The Philo Research team have been very busy over the month meeting with management teams from huge (BHP) to small (Investa Office Fund).  In this piece we are looking to shed some light into the role that these meetings play in the investment process. As the portfolio has had no unpleasant surprises this month, these meetings were all pretty cordial.

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During the months of February and August the majority of Australian listed companies reveal their profit results and most provide guidance as to how they expect their businesses to perform in the upcoming year. As the financial noise reaches a crescendo during these months, in this note we are going to run through the key themes we have seen so far after 65% of companies have reported their results.

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During the months of February and August the majority of Australian listed companies reveal their profit results. Many companies also provide guidance as to how they expect to perform in the upcoming year. This can be a stressful time for a fund manager. When companies reveal unpleasant surprises the company’s stock price tends to get sold down hard. Alternatively, it can be very pleasant when the company benefits from factors that were behind the investment case for originally owning their shares. In this piece we are going to go through how Philo Research approaches each day during reporting season and relate our actions yesterday when portfolio companies Telstra, GPT, Transurban and Rio Tinto reported their results.

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During the months of February and August the majority of Australian listed companies reveal their profit results and mostly give us guidance as to how they expect their businesses to perform in the upcoming year. This can be a stressful time as when companies open up their financial closets and reveal unexpected unpleasant surprises, the company's share price tends to get sold down hard. In this note we are going to run through the key themes we have seen so far after 90% of companies have reported their results.

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Over the last five years one of most unpleasant feelings for an analyst or fund manager is when a portfolio company posts a notice on the ASX of a "Trading Update". Since 2008 this has almost always been a downgrade of a company's expected profits which then results in a sharp price fall, gnashing of teeth and tears from the analyst responsible for the stock. In recent memory the only profit upgrade we have seen was CSL's lift in November last year, so when I see "Trading Update", I expect the worst.

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Reporting season for the Australian banks (excluding CBA who have a June year end) has just finished and the following themes stood out to us:

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