Third of Australia-listed firms face 'financial uncertainty'
Sydney (AFP) - More firms listed on Australia's stock exchange faced "serious financial uncertainty" last year than during the global downturn, an audit by a leading accountancy body showed on Wednesday, highlighting underlying weaknesses in the economy.
The Certified Practising Accountants' chief executive Alex Malley said findings that nearly a third of firms were at risk were "extraordinary" and a "sobering reminder of the fragility of the Australian economy and the challenges many businesses face".
The CPA, a professional accounting organisation, said its analysis found there were more going-concern warnings raised by independent auditors last year than during the global financial crisis, when the warnings rose to 22 percent.
The analysis encompassed 15,855 annual reports from about 98 percent of companies listed on the Australian Securities Exchange (ASX) from 2005 to 2013.
A going concern is a business that is able to operate for the foreseeable future.
"We've been talking about the potential impacts of the slowdown in China, the strength of the Australian dollar and the effects of the tapering mining boom on the economy for some time," Malley said in a statement.
"Now, this report, compiled based on virtually all companies listed on the ASX, shows these economic factors are being felt across the market and are putting almost a third of ASX-listed companies at risk of financial catastrophe.
"It really begs the question how our economy would be placed were we to face another shock like the (global financial crisis)?"
The Australian economy has avoided recession for more than two decades, boosted in part by an unprecedented mining investment boom driven by Chinese demand for commodities.
But with the investment boom tipped to fall sharply, the economy has been slowly transiting towards non-mining driven growth, aided by a record-low cash rate.
The CPA data showed that more than half of the bottom 500 ASX-listed companies had going-concern warnings in 2013.
The warnings rose the most in the energy and mining sectors, with more than 40 percent of firms judged to be "at risk".
Other firms in the consumer staples, industrials, health care and utilities sectors also experienced an increase in warnings.
In contrast, the financial sector was "notably strong" and reported the lowest level of warnings.
"It underscores the simple reality that we have not done enough to fill the void the end of the boom is already leaving in our economy or to address the competitiveness challenges that lay ahead for our nation," Malley added.
"With nearly a third of companies now having a cloud over them in terms of their financial future, the task is urgent."
