Lacklustre 2016 financial results are being seen across the board, according to Australian Unity Investments (AUI), thanks to the drop in average earnings.
Across the market as a whole, average company earnings were down eight per cent on the previous year, on the back of slumped resource company earnings, which fell 48 per cent.
Excluding that, average company 2016 profits had grown by five per cent, AUI said.
Chief executive, David Bryant, expected that investors would see better 2017 results, as more companies were restructuring their operations and exiting businesses.
“The big write downs we saw this year, largely in resources companies, shouldn’t be repeated in the 2017 financial year.”
Should the growth forecast of six to seven per cent be achieved in 2017, investors should be kept reasonably happy, particularly given the shirking number of alternative investments, due to record low interest rates, Bryant said.
However, he warned that dividend yields would continue to be under pressure.
“Investors still need to embrace equities, but they need to be very selective in companies and sectors they invest in. The resources sector results have been very poor as expected, and the banking sector is struggling to deliver much growth given low rates, strong competition and increasing bad debt,” he said.
That left only 40 per cent of the market to with, and as this profit reporting season has shown there was a huge gap between the best and worst companies.
Qantas for example, started a business transformation two years ago after they reported significant write offs. But today they showed the benefit of that work, he said.
He said, companies like Westfarmers Woolworths were tackling those issues, but were in the midst of write-downs and restructures, so their results would improve in a year or two.
