Section Items
Short Term Holding
Slightly Off Topic

Share Trading - Adjusted Accounts

All companies are required to file accounts adhering to specific financial reporting standards but they are also free to report in addition using pretty much any accounting practices that they feel appropriate.

At first glance this seems quite sensible, a particular business may have a set of special circumstances that can be better reported using different logic.

Where I get concerned is when companies report massively different figures when using these two standards or when they focus heavily on their own internal standards and downplay the figures from the regulatory standards.

Adjustment Can Be Okay But It Does Hide Things

The table below comes from Non Standard Finance's accounts and it is one of the first things that you see in the 2018 Full Year's Results Statement.

Year to 31 December 2018
% change
Normalised revenue 166,502 119,756 +39%
Reported revenue 158,824 107,771 +47%
Normalised operating profit 35,876 23,684 +51%
Reported operating profit 19,517 3,802 +413%
Normalised profit before tax 14,769 13,203 +12%
Reported (loss) before tax (1,590) (13,021) +88%
Normalised profit after tax 11,572 10,890 +6%
Reported (loss) after tax (1,679) (10,335) +84%
Normalised earnings per share 3.70p 3.44p +8%
Reported (loss) per share (0.54)p (3.26)p +84%
Full year dividend per share 2.60p 2.20p +18%

In these results the Normalised figures are NSF's own, like all adjusted figures the intent is to see the true underlying performance of the business.

Given the variance in profit/loss, a £11.6 million profit or a £1.7 million loss you may be able to see why I have such worries.

Typically adjusted figures might be Profit defined as "Profit excluding the cost of exceptional items," that sort of makes sense we had a great year but had to pay to repair flood damage, but the flood damage still existed and had to be paid for.

Once companies get into the habit of doing this you can sometimes see Adjusted Profits always being positive numbers as more and more things become defined as Exceptional Items hiding the fact that they are not actually making a profit.