1-third of ASX companies in financial strife final year

According to robust evaluation by CPA Australia, nearly one-third of all ASX listed organizations had been facing significant monetary uncertainty in 2013.

CPA Australia has analysed practically 16,000 annual reports from Australian publicly listed organizations over the period 2005-2013 to reach this conclusion, revealing that there have been far more going concern warnings highlighted by independent auditors in 2013 than during the worldwide monetary crisis (GFC), when warnings peaked at 22%.

Going concern ‘emphasis of matter paragraphs’ are utilized by independent auditors to flag substantial uncertainty in an individual company’s ability to continue in business for the foreseeable future.

“What this new report shows is that there has been a steady increase in going concern warnings among the middle and bottom ASX listed companies since 2011,” said CPA Australia chief executive, Alex Malley. “Perhaps most alarmingly, this new research shows that in 2013, these numbers surged, with auditors raising a red flag on far more ASX businesses than at any time for the duration of or following the GFC.

“We’ve been talking about the possible impacts of the slow-down in China, the strength of the Australian dollar and the effects of the tapering mining boom on the economy for some time. Now, this report, compiled primarily based on practically all firms listed on the ASX, shows these economic variables are getting felt across the market and are placing nearly a third of ASX listed organizations at danger of economic catastrophe.”

According to ASIC’s report on corporate insolvencies 2012–2013, tiny to medium size corporate insolvencies are most typical. Of note, 85% had assets of $ 100,000 or less, 81% had much less than 20 staff and 43% had liabilities of $ 250,000 (or less). In terms of numbers of companies getting into into a form of external administration for the 1st time, the hardest hit industries (excluding “other”) more than the 2012/13 year had been:

• Construction


• Accommodation and meals service


• Retail trade


• Transport, postal and warehousing, and


• Manufacturing

“It genuinely begs the query how our economy would be placed were we to face yet another shock like the GFC,” observed Mr Malley.

1-third of ASX companies in financial strife final year