Advanced note on EPS
Look at the following extracts from the annual report and accounts of the Carphone Warehouse and Vodafone.
From the Carphone Warehouse's annual report and accounts:
Financial highlightsEarnings per share 5.4p for 2001 and 3.8p for 200
Note that these EPS values don't agree with our calculations because the profit figure they use is profit before exceptional items and amortisation. They have adjusted their EPS figures for highlighting purposes.
On page 13 of their report, the Carphone Warehouse does say:
The Group's basic EPS rose by 85% from 2.7p to 5.0p. EPS before amortisation of goodwill and exceptional items rose by 42% from 3.8p to 5.4p per share.So, figures we can agree with and the adjusted figure shown for special purposes. Contrast this with Vodafone.
From page 3 of the Vodafone report, here is a graph that Vodafone presents that shows its EPS to be positive for each of the last five years, including 2001 and 2002.
Are our calculations wrong, then? No, here is why:
From page 27 of their report:
... Adjusted basic earnings per share is calculated after adjusting for goodwill amortisation and exceptional items. It is not a recognised measure under US GAAP but is presented under UK GAAP in order to highlight underlying performance.Vodafone is showing us the adjusted EPS in order to highlight the underlying performance! This can be dangerous if we believe that the real EPS is as shown in their diagram.
On page 37 of their report, though, Vodafone does admit:
Basic loss per share, after goodwill and exceptional items, increased from a loss of 16.09p for the year ended 31 March 2001 to a loss per share of 23.77p for the year ended 31 March 2002. The loss per share of 23.77p includes an increase in the charge for the amortisation of goodwill from 19.32p per share, for the year ended 31 March 2001, to a charge of 19.82p per share for the year.Back to Vodafone EPS
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