How well do you know the companies you own? Listed companies produce a huge swathe of information and while much of the information is required by accounting authorities, some companies also provide additional information in the belief that better disclosure reduces investor doubts about the company.
Of course most of the freely proffered information tends to be of the positive variety.
CommSec recently completed an exercise where we looked at where companies earn their revenue – that is, on a geographical basis rather than the particular industry segments. This information is provided by companies in their notes to the financial accounts. And, as would be expected, some companies produce good, clear information. For others, it is clear that the information is provided grudgingly.
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We found it surprising that only 58% of all the dollar revenues earned by the largest 40 companies was sourced from Australia (or in some cases Australasia). Of course, the two big global resource companies – BHP Billiton and Rio Tinto – skew the sample. Excluding these companies, 75% of all revenue is derived from Australia, so it still means around $1 in every $4 is earned abroad.
However, looking at all the 40 companies, just over 8% of revenue comes from China with BHP Billiton, Rio Tinto and Fortescue dominating. Around 7% of income is generated in North America, followed by 6.5% in Asia and 5.7% in New Zealand.
Only 6% of revenue comes from Europe, however, given the broad definitions applied by some companies, this could include the UK and even the Middle East and Africa. This further reinforces the fact that Australia is well insulated from the troubles in Europe.
The greatest concern Australian companies should have is the impact of European woes on business and consumer confidence. It could be argued that we are more worried about what is happening in Europe than the Europeans themselves.
The week ahead
It doesn’t seem to make much sense, but each change of season seems to be ushered in by a plethora of economic events and statistical events. And it’s happened again – something we call the ‘winter whirlwind’.
In the US, a quiet week is in prospect with the Federal Reserve dominating attention. And China releases its monthly statistics – at present this is set down for Saturday!
The week kicks off on Monday with data on job advertisements, the monthly inflation gauge, tourist arrivals and departures and the Bureau of Statistics’ Business Indicators publication.
The job market is hard to call at present. Many employers complain about the lack of staff, others are cutting jobs. And job ads fell by 3.1% in April after three months of gains. Similarly, tourism trends are hard to read.
Despite a firm dollar, tourist arrivals are at record highs. But tourist departures are also up to the second highest level on record – which is at least good for airports and airlines. The inflation gauge will also be watched closely to assess the timing of the next rate cut.
The Reserve Bank Board meets on Tuesday. In May, the RBA cut rates by half a per cent to shock consumers into action. So far it hasn’t been successful. So while we favour the next rate cut being delivered in August (after the June inflation data), clearly a follow-up rate cut on Tuesday must also be regarded as a major chance.
Also on Tuesday, the quarterly balance of payments is released together with government finance data and the Performance of Services index.
On Wednesday, the March quarter economic growth figures (national accounts) are released. And while consumer spending was firmer and we expect a lift in investment, this will be offset by a weaker trade sector. As a result the economy is treading water – probably only growing by 0.5% in the quarter.
On Thursday, the employment data for May is released and it’s probably fair to say that the April data came as a surprise. Media headlines have been littered with company announcements of job cuts. But, lo and behold, employment actually rose by 15,500 in April, with the jobless rate down to 4.9%. In May, we are tipping a slight correction with job losses of around 5,000 and a jobless rate up to nearly 5%.
On Friday, the data on exports and imports for April is released together with home loan figures while the Reserve Bank Governor delivers a speech in Adelaide. Economists have had a poor track record with the trade data – fortunately it doesn’t move markets nowadays. We tip a $1 billion deficit. And home loans probably rose by 1% in value terms in April, with no change in the number of owner-occupier loans.