Reporting Season Toolkit

August marks one of the most important events on any shareholder's calendar. Here is your toolkit to help you avoid the losers and pick the winners this Reporting Season.

 

 

Get ready for reporting season 

If you own shares in ASX-listed companies, you might have heard of ‘reporting season’. So what is it and, more importantly, does it deliver any buying opportunities?

Well the answer to that second question is undoubtedly yes – occasionally anyway. We’ll get to some examples shortly but let’s cover some reporting season basics first.

All ASX-listed companies need to report their financial results to shareholders at least twice a year. And they must release them within two months of the end of the reporting period.

As most companies have balance dates of 30 June the main ‘reporting season’ takes place in August, when they release their full-year results. Half-yearly results are released in February.

Some companies report relatively early in the period, with education provider Navitas (ASX: NVT) and medical device manufacturer ResMed (ASX: RMD) two of the earliest. Navitas’s result is scheduled for 1 August next week, with ResMed due to report the following day.

August institutions

Most companies however usually take a little more time. The first week of August tends to be relatively quiet but it builds from there, with all June balance date companies required to report by 31 August. As you can imagine, there’s quite a flurry in the final two weeks.

Junior reporting seasons
Don’t worry if your company doesn’t report its results during August. Plenty of companies don’t have June balance dates. Most notably, three of the four major banks, National Australia Bank (ASX: NAB), ANZ Banking Group (ASX: ANZ) and Westpac (ASX: WBC) have 30 September balance dates and usually report in November. Some other companies have balance dates of 31 March or 30 April, while many retailers balance in July after their stock take sales.

Companies usually provide their reporting dates on the investor relations sections of their websites. But to make it easier for you, here's a calendar of reporting dates. Not all companies announce their dates in advance – and they can change – so any calendar is more guide than gospel.

Companies are complex beasts and there’s a great deal of information they need to disclose with their financial results. Most medium-sized to large companies release several documents to help shareholders and analysts.

The main one is the statutory result, which is usually called the ‘preliminary final report’ or similar. Or, if management has really got its act together, it might release the company’s annual report at the same time.

Most medium-sized to large companies release a ‘results presentation’ as well.  Sometimes it’s accompanied by a real-life management presentation at a venue or a telephone conference call for analysts. As you might imagine, the presentation is the prettier document than the statutory result and it highlights the numbers management most wants you to see.

Information overload

If you’ve ever tried to keep up with the number of documents released during reporting season, you’ll know the meaning of ‘information overload’.

This is where Intelligent Investor comes in. We analysts love the adrenalin rush of reporting season (some might say we’re a bit strange). Before the result is released we need to have an idea of what we’re expecting, then we must read and digest copious amounts of accompanying information.

Most importantly, we need to determine what management isn’t telling us. And, unlike brokers who only care about how the numbers fit into their spreadsheets, we analyse all the information released in a long-term context.

Oh, and this analysis often takes place in just a few of hours before the next result is released. ‘Busy’ doesn’t begin to describe it.

Result reviews
With so many results to cover during reporting season, we prioritise the ones with past or current Buy recommendations, or where you need to take action quickly. If we don’t review a company we cover within a day or two of its result – particularly during the mad rush of the final two weeks of August – it’s because you don’t need to take action.

So why should you care about reporting season?

Well, Intelligent Investor will summarise how your company has performed for the year in a reporting season update – and maybe tell you something about how the result affects the valuation. This is a key point, because while shares prices can move around rather a lot during reporting season, often the valuation doesn’t move much at all.

Expectations matter

Knowing whether you need to worry or not is important, especially because it’s market expectations that matter. A 20% rise in earnings might be met with a savage share price fall if the market was expecting 30%.

It’s this difference between market expectations and what a company delivers that can sometimes produce great buying opportunities in reporting season.

Take online employment classifieds company Seek (ASX: SEK), for example. A couple of profit downgrades in 2015, together with market concerns about growth, caused us to upgrade the stock to Buy shortly after that year’s reporting season. The stock has since risen 45%.

More recently Navitas, mentioned earlier, reported a weak result in February this year. After upgrading to Buy at $4.40, it’s since risen 15% (of course, we’re long-term investors so it’s too early to call Navitas a success).

Both Seek and Navitas have since been downgraded to Hold, but we’re on the outlook for the next Buy recommendation. With any luck this August’s reporting season might deliver some opportunities. Enjoy the looming rush of results – your analysts certainly will.

 

Our 5 latest Buy Recommendations

Company Code Review Date    
Brickworks Limited BKW 26 July 2017    
Virtus Health Limited VRT 12 July 2017    
Trade Me Group Limited TME 5 July 2017    
News Corporation NWS 27 June 2017    
Amaysim Australia Limited AYS  20 June 2017    

 

View all our Buy, Hold and Sell Recommendations

We currently have a total of 183 recommendations.

 

*Independently audited by Grant Thornton, the average return is based on 486 Buy recommendation made between 1 June 2001 and 30 June 2016. Figures exclude transaction costs and brokerage fees.


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