When 'Normalised' Can Mean Anything You Want It To

‘Normalised’ earnings can help investors make informed investment decisions. But since it’s not a recognised term, it is crucial to determine what exactly each company’s definition of the word is.

- Simon Brown

Results for companies with a December year-end are being released thick and fast, swamping investors as they try and digest them all.

One trend I am seeing is the repeated addition of “normalised” to headline earnings per share (HEPS). I have written about this before, but it’s important for investors to know that, in truth, normalised means “made up”. It is not a term recognised in International Financial Reporting Standards (IFRS) and so a company can do anything it wants with “normalised” HEPS.

Barclays Africa Group (soon to be changing its name back to Absa Group) used normalised HEPS in its results because of the costs of separating from the UK parent company, Barclays Group. In its results, Barclays Africa states that normalised earnings “adjusts for the consequences of the separation and better reflects the group’s underlying performance. The group will present normalised results for future periods where the financial impact of separation is considered material.”