What does the ASX say about earnings guidance?

Chapter 3 of the ASX listing rules relate to "Continuous Disclosure" and there is a Guidance Note (Note 8) on the subject. Rule 3.1 refers to the fact that once a company becomes aware of a "material" variation in the financial results, from the previous corresponding year or previous announcements, the company must disclose the information. The Guidance Note issued in January 2003, added:

• Where the reference point is not the previous result or company forecast, but rather "analyst's consensus forecasts", then it may be appropriate for a company to disclose a material variation from consensus, and
• As a general rule, a variation in excess of 10% to 15% would be considered material. A slightly modified Guidance Note was issued by the ASX in June 2005 and the explicit 10% to 15% range was removed.

The practical interpretation of the listing rule and guidance note by leading companies and IR practitioners has tended to be:

• Companies need to disclose any material variation in their earnings estimates from market consensus "or" prior year results;
• Material may be a variation of more than 10% to 15% in EPS for most companies, but a higher figure for high-growth companies and a lower figure for low-growth companies.