More than 30 companies recorded higher profits in the last six months of 2020 – after receiving hundreds of millions of dollars in JobKeeper subsidies – than in the last six months of 2019.
Key points:
- 34 companies reported an increase in underlying earnings for the six months to 31 December, when compared to the same period in 2019, after receiving JobKeeper subsidies
- A quarter of all companies on the ASX 300 received JobKeeper payments in 2020
- Ownership Matters says the JobKeeper program lacks basic transparency
JobKeeper payments accounted for approximately 20 per cent of their underlying earnings on average, an analysis of the financial reports of 299 companies on the ASX 300 has found.
Corporate governance advisory group Ownership Matters looked at the government subsidies received by the 300 largest entities listed on Australia’s stock exchange during calendar year 2020.
It wanted to know how companies were accounting for the wage subsidies in their financial reports.
It found 95 of 299 ASX 300-listed entities had now reported receiving government subsidies in 2020 worth a combined $3.8 billion, with JobKeeper payments received by 75 of those companies accounting for $2.5 billion (more than 60 per cent) of the $3.8 billion.
The six largest JobKeeper recipients – Qantas ($726 million), Crown Resorts ($254 million), Flight Centre ($195 million), Star Entertainment Group ($152 million), Eagers Automotive ($129 million) and G8 Education ($102 million) – accounted for roughly 63 per cent of all JobKeeper payments going to listed companies.
JobKeeper pays dividends
Some firms receiving JobKeeper have paid out increased dividends to shareholders and bonuses to executives, and one leading expert argues “that’s purely due to bad design” of the scheme.
However, Ownership Matters was particularly interested in the financial health of companies receiving JobKeeper payments.
It compared their financial positions in the last six months of 2020, as recorded in their financial reports, to the last six months of 2019.
It found 34 entities reported an increase in their underlying earnings from pre-pandemic levels after receiving a total of $284 million in JobKeeper subsidies.
It said that $284 million was worth roughly 20 per cent of all JobKeeper payments received by ASX 300 entities in the final six months of 2020.
“JobKeeper was clearly more material to some companies than others,” Ownership Matters told its clients.
“As these entities were significant beneficiaries of government subsidies in periods where they reported positive earnings metrics (in the six months to 31 December 2020), investors should closely scrutinise the sustainability of earnings in future periods as government assistance is being wound back.”
It sent its research note to its clients on Wednesday evening after the stock market closed.
Ownership Matters says the $2.5 billion worth of JobKeeper subsidies received by entities on the ASX 300 in 2020 only accounts for 3 per cent of the entire JobKeeper program and the rest of the program (worth $83 billion and counting) lacks basic transparency.
“ASX companies represent the only data through which to analyse the impact on corporate profits made by JobKeeper as, unlike other jurisdictions such as the United Kingdom, New Zealand and the US, there is no public register of subsidies received,” the note says.
It also warns its clients to pay special attention to how companies are disclosing their JobKeeper payments, because accounting choices for JobKeeper and other government subsidies vary between entities.
“Little formal disclosure was made to help investors ascertain the contribution made to earnings by JobKeeper,” the report says.
“In some instances the profit and loss impact of a temporary downturn in revenue in March to June (which was the qualifying criteria for JobKeeper 1.0) was more than offset by the receipt of up to $19,500 in JobKeeper subsidies per employee until September 2020.
“As restrictions eased across Australia and trading conditions improved, this direct labour subsidy represented a significant, one-off tailwind to profits. There was no requirement to return the JobKeeper subsidy if sales or profits increased after the recipient had qualified.”
ATO still waiting for money to be repaid
The research report also says 15 entities listed on the ASX 300 have announced their intention to return $100.25 million in JobKeeper payments, “with a common theme being that the repayment to the Australian Tax Office (ATO) would be net of tax”.
“These repayments account for approximately 4 per cent of all disclosed JobKeeper receipts by ASX 300 entities,” it says.
Last week, the ATO said 20 companies overall had now promised to repay about $144 million worth of JobKeeper payments, but it had only received about $20 million so far.
It also said it was still owed hundreds of millions of dollars from companies that had attempted to rort the JobKeeper program or were declared ineligible to receive JobKeeper payments in the first place.
The program was still worthwhile
At the start of February, Prime Minister Scott Morrison dismissed concerns about companies accepting millions of dollars from taxpayers under the JobKeeper scheme and using some of it to pay executive bonuses and dividends.
“I’m not into the politics of envy,” Mr Morrison said.
“If there are some companies that feel that they want to hand that [money] back, great. Good for them.
“But let’s not lose sight, in some sort of envy narrative, that that program did not change the course of the nation.”
Do you think executives working for companies that received JobSeeker supplements should have been paid bonuses? Should the government be investigating how big companies took advantage of the JobKeeper program, and ask for payback that could go on to support struggling, smaller businesses and workers?
