Welcome to the seventh edition of KPMG Australia's bi-annual Distance to Default (D2D) publication. In this edition, we share our viewpoint on the changing state of corporate health across all ASX sectors, following the end of the reporting season for the 6 months leading up to December 2019.

Consistent with the last report, our analysis to December 2019 indicates that the financial and real estate sectors continue to display the highest D2D scores (furthest from default), with the materials and energy sectors displaying the lowest D2D scores.

In this report, we briefly examine the impact of COVID-19 on the market and provide a commentary on some of the potential recovery scenarios. However, it does not come as a surprise that our analysis for March 2020 indicates a decline in D2D across all sector and industry groups. Financial, real estate and healthcare sectors were the most affected. We also observed four sector groups (energy, materials, information technology and healthcare) transition into the area of stress with an overall D2D score of less than 1.

We will continue to observe the market over the next 6 months to see how it recovers from the headwinds of the global COVID-19 pandemic. The full report is presented below.

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