A Very Quick Look at British American Tobacco's Earnings
LONDON -- Right now I'm trawling through the FTSE 100 and double-checking for blue chips that may be flattering their profits.
You see, many companies these days report "underlying" earnings, which are calculated by excluding costs the firm deems to be "exceptional." The trouble is that some companies are more cavalier than others when it comes to sweeping awkward expenses away from the headline figures.
Today I'm looking at British American Tobacco (ISE: BATS.L) (NYS: BTI) to see if its reported earnings have been distorted significantly by exceptional, one-off, or unusual items. I've extracted the following statistics courtesy of S&P Capital IQ:
Profit Before Unusual Items
Gain on Sales of Assets and Investments
All figures in millions of pounds.
While annual figures can provide some insight into how a business has performed, I reckon looking back over several years provides a better view of possible problems in relation to one-off costs. So, between 2007 and 2011, my stats tell me British American Tobacco reported cumulative profits before exceptional items and tax of 21.8 billion pounds. However, aggregate exceptional costs came to 1.5 billion pounds -- equivalent to 7% of cumulative underlying profits.
British American Tobacco's profit and loss account looks pretty clean from this cursory inspection, and one-off items have done little to affect its impressive record of profit increases. However, it's worth noting that it has incurred restructuring costs in each of its last five financial years. This is something investors will want to keep an eye on in future periods, even though the costs to date have been relatively modest.
Somebody who always studies earnings numbers in detail is Neil Woodford, the U.K.'s leading equity income fund manager. Woodford's portfolios thrashed the FTSE 100 during the 15 years to 2011, and this exclusive Motley Fool report -- which can be downloaded free today -- reviews his favorite blue-chip shares for 2013 and beyond.
Are you looking to profit from this uncertain economy? "10 Steps To Making A Million In The Market" is the very latest Motley Fool guide to help Britain invest. Better. We urge you to read the report today -- it's free.
Further Motley Fool investment opportunities:
The article A Very Quick Look at British American Tobacco's Earnings originally appeared on Fool.com.Stuart does not own any share mentioned in this article. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.