Now there are four notches on ASIC’s belt as it revealed another major Australian company had been forced to impair an intangible asset for the six months to December 2016.
In a statement posted on its website on Monday, ASIC said it “notes the decision by Spotless Group Holdings Limited (Spotless) to write down goodwill relating to its Resources business by $99.2 million in its financial report for the half-year ended 31 December 2016. ASIC had raised questions in relation to the recoverable amount of the goodwill relating to the Resources business in Spotless’ financial report for the year ended 30 June 2016.
The victories (the three others were Seven West Media, Nine Entertainment and Pacific Star Network) puts every Australian company on notice that ASIC will force them to write down the value of assets, especially intangibles such as goodwill, where it feels they are out of alignment with market values.
Spotless made a loss of $358 million in the December half, partly due to $391 million in impairments, in the results announced on February 28. That takes the total impairments by the four companies to around $440 million.
The third write down among the media companies was a $4.5 million write-down last week in the value of goodwill on the publishing assets of Pacific Star Network.
“ASIC noted the decision by ASX-listed Pacific Star Network Limited (PNW), announced on 28 February, to record an impairment charge of $4.5 million on publishing mastheads and goodwill arising from the acquisition of Morrison Media,” the regulator said in a statement posted on its website last week.
"ASIC had previously made enquiries of PNW regarding the carrying value of non-current assets in its 30 June 2016 financial report as part of its financial reporting surveillance program. We were concerned that the assumptions used in the impairment models for the publishing business were too optimistic.” ASIC’s statement echoed similar worded comments in releases relating to Seven West Media (which was forced to write down the value of its Yahoo7 joint venture by more than $75 million) and the big one – forcing Nine Entertainment to impair the value of the goodwill on its TV licences by $260 million.
The write downs and ASIC statements will have been by now noted by boards and advisers in most Australian companies – especially in the media and related industries in the service sector where intangible such as goodwill are major assets. The banks to this companies will have also noted the write downs and ASIC’s move and should have, by now, started checking their clients in these sectors to make sure loan covenants won’t be breached by any future impairments. Pacific Star in fact made the point in its latest interim report that it remains within its banking covenants.
Pacific Star owns radio assets include SEN and digital radio channels, and magazines such as the once highly successful, but now fading Frankie and several lesser titles. Pacific Star released interim results a week ago today (Monday) and revealed a loss of (http://www.pacificstarnetwork.com.au/index.php?sectionID=5761&pageID=5768) of more than $4 million.
Spotless shares fell 3% to 79.5 cents.
