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There’s been a 41% decline in “zombie companies” listed on the ASX over the last six months, according to new data released by KPMG Australia this week, since it originally peaked in September last calendar year.
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What makes a zombie? Well, usually some fantasy storytelling and a (long-hidden, in nearly every story) zombie bite. On the ASX, it’s a little different, though: A listed company has to “exhibit indicators of financial distress for an extended period of time but is not yet insolvent and continues to trade.”
To date, there are 90 reported ‘zombies’ on the Aussie bourse, which fell from around 150 in March, and an even larger horde, 180, twelve months ago.
KPMG also reported that the average of these 90 zombie companies has shrunk quite a bit recently, too, with the market cap for the whole horde coming down to $525 million. When last clocked in March, it was $1.08 billion.
“Lower interest rates, rising consumer sentiment, and high commodity prices have all been acting as an antidote to the scourge of zombies that have been infecting the ASX,” the financial gurus at KPMG explained.
“Growth in stock market valuations, lower interest rates, and increased consumer sentiment are allowing businesses the extra breathing room to keep themselves solvent,” added KPMG’s head of turnaround and restructuring, Gayle Dickerson.
Her statement came with a warning, too, though, like all good zombie flicks: “This improvement stays delicate.” Geopolitical risk and potential interest rate hikes – something I covered just yesterday – are both still concerns.
There’s three sectors that still carry the bulk of the worry as well, with Raw Materials and Natural Resources companies making up as much as 36% of the zombies on the Australian markets through to last month.
Healthcare and manufacturing round out the in-distress sectors; between the three concerning stock groups, there are 57% of all ASX zombies.
Most zombie firms are in Western Australia, New South Wales, and Victoria.
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