Headline earnings are grabbing attention in 2025 as investors search for reliable measures of company profitability amid changing accounting standards and volatile markets. But what do headline earnings really tell you, and how should Australians use them when making investment decisions?
What Are Headline Earnings?
Headline earnings represent a company’s profits from its core business activities, excluding ‘one-off’ items such as asset sales, restructuring costs, or revaluations. Unlike statutory (or reported) profits, headline earnings strip out irregular or non-recurring gains and losses, aiming to give investors a clearer view of sustainable profitability.
For example, if a mining company sells a major asset at a huge gain, its statutory profit may soar. But headline earnings would ignore this sale, focusing on what the business earned from its ongoing operations. This makes headline earnings especially valuable for comparing company performance across years or against industry peers.
Why Headline Earnings Matter More in 2025
- Accounting Standard Changes: The ongoing rollout of IFRS 18 in Australia this year has made it easier for companies to present alternative profit measures, but also increased the risk of confusion for investors. ASIC has issued new guidance in 2025 requiring clearer reconciliation between headline and statutory earnings in annual reports.
- Market Volatility: With the ASX experiencing sharper swings in 2025—driven by commodity price fluctuations and higher interest rates—one-off items have become more common. Headline earnings help investors filter out this noise.
- Dividend Decisions: Several big-name ASX companies, including CSL and Wesfarmers, have updated their dividend policies this year to base payouts more closely on headline earnings rather than statutory profits. This change aims to offer more predictable returns for shareholders.
How to Use Headline Earnings When Investing
Understanding headline earnings can help you:
- Assess True Performance: Look for companies with steadily rising headline earnings, which often signals robust underlying business growth.
- Compare Apples with Apples: When comparing two companies, headline earnings can level the playing field, especially if one has had recent asset write-downs or windfalls.
- Spot Red Flags: A large gap between headline and statutory earnings might indicate a company is frequently relying on non-core activities to boost its bottom line.
For instance, in 2025, several ASX-listed retailers reported strong headline earnings despite weak statutory profits, thanks to pandemic-era asset impairments finally rolling off their books. Savvy investors who focused on headline figures spotted the turnaround before it was reflected in statutory results.
Key Headline Earnings Trends to Watch in 2025
- Greater Transparency: ASIC’s 2025 rules mean all listed companies must publish a headline earnings reconciliation table in their financial statements, making it easier for retail investors to track adjustments.
- Growing Use in Analyst Reports: Broker research in 2025 increasingly highlights headline earnings per share (HEPS) as a primary valuation metric, especially in sectors with volatile asset values, like resources and property.
- Potential Pitfalls: Not all ‘one-off’ items are truly non-recurring. Investors should dig into the notes of financial statements to understand the nature and size of adjustments.
Conclusion: Headline Earnings as Your Investment Compass
In a landscape of shifting regulations and unpredictable markets, headline earnings remain a powerful tool for Australian investors. By focusing on sustainable, recurring profits and staying alert to the adjustments companies make, you’ll be better equipped to judge true value and make confident investment decisions.
