Leading law firm Russell McVeagh has today released analysis of announcements made by the constituent members of the NZX
20, in its 'Governance challenges amidst the pandemic' report, to provide insight on current practices relating to providing earnings guidance.
Russell McVeagh Corporate partner David Raudkivi says, "When the pandemic and first lockdown hit us in March, issuers across the board cancelled or suspended earnings
guidance. Now we are seeing guidance return with around half of NZX 20 issuers including it with their results or at
AGMs. It is certainly a focus for analysts and institutional investors.
"There is, and rightly, some apprehension from boards in providing forward looking information throughout this period of
heightened volatility and uncertainty. Legally, guidance can be provided as long as it is based on reasonable grounds
and monitored once given for material changes. While this will continue to be business and industry specific – if the
board has carefully considered the issuer’s expected performance and is satisfied with the underpinning information and
assumptions, we expect that the board could reach a decision to provide guidance through this volatile period," he says.
Russell McVeagh's analysis of the NZX 20 shows:
Guidance in relation to expected FY21 earningsAround half of the constituents provided guidance in relation to FY21 expected earnings, either as a specific expected
Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) amount, or as a range.Some others indicated that they would provide guidance at their shareholder meeting.A small number provided guidance on specific financial components such as expected cost implications from COVID-19 or
results from investments, but not expected group earnings.
Assumptions and qualifications in forward looking statementsSeveral of those companies providing guidance in relation to expected FY21 earnings, have included assumptions and
qualifications on their forward looking statements – including assuming that there are no material adverse changes,
significant intervening events, changes to market conditions, meaningful further COVID-19 disruptions or unforeseen
circumstances.
Dividend paymentsAll but 3 of the index constituents have announced that they will pay a dividend or signalled a return to paying
dividends.
Equity capital raisingsOnly 3 out of the 20 undertook equity capital raisings in the period since the first lockdown, reflecting the mature
nature of their businesses and resilience of their balance sheets.
GentailersListed Gentailers have had to factor in the expected implications of the decision to close the Tiwai aluminium smelter.
In its report, Russell McVeagh also considers the 2019 Australian Federal Court decision in TPT Patrol v Myer in the context of providing practical considerations for boards of listed issuers in decisions on providing guidance to
the market.