The evolution of ASX disclosure in a COVID-19 environment

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This article was written by Stephen Minns, Nicola Charlston and Anthony Hong.

As the COVID-19 situation continues to develop, there is unsurprisingly an increased focus on the continuous disclosure obligations of Australian listed entities. 

There have been over 300 ASX announcements released by the ASX300 relating to COVID-19 since the start of this year, which will inevitably increase over the next few weeks.

With the majority of ASX listed companies having moved past half-year and annual reporting, we are now seeing an increasing number of entities make specific COVID-19 disclosures, covering a number of areas.

This note brings together key trends observed in those announcements, and discusses the regulatory regime underpinning them.

ASX Listing Rule 3.1 and Guidance Note 8

In Guidance Note 8, ASX recognises that an entity is not generally expected to disclose publicly available information about external events or circumstances that affect all entities in the market, or in a particular sector, in the same way. On its face, it is hard to think of an event which has received more exposure than COVID-19.  However, a company is required to disclose information that particularly concerns it, such as when the company has previously given earnings guidance and the external events are likely to cause its earnings to differ from that guidance by a material amount.

It is readily apparent through recent disclosures that, while the general impact of COVID-19 is well understood, the impacts on particular businesses remain unclear as individual sectors are experiencing drastically different outcomes – for example, while most announcements indicate negative outcomes, in some cases entities have announced greater than anticipated revenue arising from increased demand for their products and services. 

Adding to the regulatory matrix is ASX's recent update to Guidance Note 8, which now indicates that ASX 300 entities should generally be applying a materiality threshold closer to 5 per cent when thinking about whether a variation from guidance is material. 

Listed entities, including both companies that have given formal guidance and those that have not done so, must therefore continue to carefully assess their disclosure obligations based on the information they have at hand, which is likely to involve a continual re-assessment as more information, and associated impacts, become known.

Recent trends

We have seen an increasing number of entities issue COVID-19 announcements which cover one or more of the following categories:

  • a suspension or withdrawal of earnings guidance (with no revision);
  • a downgrade to previous guidance;
  • specific business commentary on actual or foreseeable disruptions to current and future business activities, or a statement that the company has not seen (and does not anticipate) significant disruption to their business; and / or
  • statements regarding the strength of the entity's balance sheet, available liquidity and comfort with the headroom in bank covenants.

The majority of announcements at this stage withdraw previous guidance, citing uncertainty regarding how COVID-19 will impact their business and earnings and/or profit for the relevant reporting period.

Entities whose businesses are most heavily exposed to COVID-19 (largely the travel and leisure sectors or those who have significant interests in China or Europe) have also announced new strategic plans, and changes to corporate actions and capital management policies.

There also appears to be a growing trend of entities making disclosures based on general market uncertainty and a potential general downturn in the economy. Although, as noted above, some announcements indicate positive impacts and fall outside of this trend.

In making disclosures, entities must remain mindful of ASX's guidance that any disclosure should contain sufficient detail to enable investors to understand its ramifications and to assess its impact on the price or value of the entity's securities.  Announcements must also be carefully drawn to be accurate, complete and not misleading.

As the COVID-19 situation develops, so will expectations and market practice around the content, timing and frequency ASX disclosures.  We are happy to provide our insights regarding the latest developments in this area as we continue to track this rapidly evolving space. 

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