WEEKLY E-MAIL

24 March 2025

REPORTING SEASON WRAP UP

By James Malliaros

Reporting season for the first half of 2025 has recently concluded, with many ASX listed companies reporting half or full year results over the last few weeks. Reporting season gives investors insight into how companies are faring under current market conditions and outlining what they perceive to lie ahead.

The best performing sector was utilities and the worst was information technology. The chart below shows the 1-month performance of each ASX Sector to 20 March 2025:

Source: Markets Index

The banking sector experienced mixed results. CBA’s results were strong whilst the rest of the big four banks, NAB, ANZ and Westpac, reported weaker results. The banking and financial sector performance highlighted the broader disconnect between valuations and fundamentals, as the outlook suggests there will be a pullback in valuations.

The tech sector experienced significant volatility during the reporting season, with large-cap tech stocks were trading at expensive valuations, compared to the smaller and mid-cap stocks. This disparity created opportunities for smaller-caps to deliver positive results and re-rating valuations closer to their larger peers. Companies like WiseTech faced corporate governance concerns, detracting from overall sector performance.

The materials sector faced strong headwinds amidst heightened geopolitical tensions and depreciated key commodity prices, including iron ore, nickel and lithium. Larger mining companies such as BHP Billiton and Rio Tinto increased their capital expenditure in offshore copper and lithium projects, absorbing lower margins and entering a reinvestment cycle to take advantage of commodity price rebounds.

The uncertain economic backdrop saw a number of companies increasing their focus on debt repayments and investment in growth, leading many to reduce dividends. According to Commsec, major companies on the ASX 200 will pay out around $32.1 billion in dividends for the first five months of 2025, down 5.6% from last year’s $34 billion.

There is no doubt reporting season was volatile, with several macroeconomic factors contributed to the heightened volatility during reporting season.

Trade tensions and tariff threats, predominantly from the US and China, created an environment of unpredictability, directly flowing on to sectors exposed to global trade. Most notably, the mining sector, which accounts for a significant portion of Australia’s GDP, was particularly affected by these uncertainties.

Interest rates were also critical in influencing market sentiment, as the RBA cut rates for the first time in three years, prompting a positive response in property prices and surrounding sectors of the housing cycle.

Furthermore, leading into reporting season, valuations across many sectors were viewed as quite stretched by many analysts, which doesn’t always reflect the true value or performance of a business.

Looking forward, the growth outlook for the second half of 2025 is expected to continue to slow, largely due to inflationary and cost pressures. Despite this, we believe there are still opportunities for long term growth.

James Malliaros
Senior Financial Planner
Certified Financial Planner®
SMSF Specialist Advisor™
Authorised Representative No. 291633

If you have any questions or comments, please email me at james@gfmwealth.com.au

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