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2020 reporting season - impact of COVID on financial guidance trends for FY21

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This article was written by Joseph Muraca, Grace Lewis and Nelson.

140 ASX200 entities released their full year results for FY20 (30 June Entities) over approximately one month during August/September this year.

This reporting season was the first major full or half year reporting season since the onset of the COVID-19 pandemic.

As to be expected, we saw fewer companies provide financial guidance in the same form as last year.  Some changed their approach and provided different types of guidance while others walked away from guidance all together.

As we have flagged earlier, the ASX's approach to published guidance and its link to continuous disclosure obligations did not sit well with a more significant 'no-guidance' world.  Helpfully, the ASX has recently published updates to Guidance Note 8 to address this issue.

This note summarises our analysis of the guidance provided by 30 June Entities this year.

Key findings from the 2020 reporting season

Consistent with the uncertainty generated by the COVID-19 pandemic, we found that only 54% (75) of the 30 June Entities provided some form of financial guidance during the 2020 reporting season (see Figure 1). This represents a 25% reduction from the corresponding period in 2019.

Figure 1: The number of listed entities providing financial guidance was down 25% 

[insert figure 1]

As in 2019, some form of profit guidance was the most common form of financial guidance provided in 2020, with 20% (28) of the 30 June Entities using this metric. However, this was significantly down on the corresponding period in 2019 as shown in Figure 2 below.

 Figure 2: The number of listed entities providing profit guidance was down 50% 

[insert figure 2]

While the number of entities providing profit guidance was down, we saw an increase this year in other forms of financial guidance metrics being used.  For example, entities providing guidance on expenditure metrics increased by more than 100% this year. 

Use of AGMs to provide or upgrade guidance

Even though less financial guidance was initially provided, a number of the 30 June Entities have since used their AGMs to change that – presumably reflecting increasing confidence as the year has progressed and COVID-related restrictions have eased.

Of the 65 entities that provided no guidance, 15 subsequently provided some form of financial guidance in the lead up to or at their AGMs.

For example, Bingo Industries Ltd released profit guidance at its 2020 AGM, having made general outlook statements when releasing its FY20 results.

[insert diagram]

 

The 2020 AGM season has also provided an opportunity for entities to upgrade or supplement financial guidance that was previously provided in the 2020 reporting season.

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