Why is there a disconnect between historical and forecast revenue?

In interpreting our forecast data, it's worth nothing that there may sometimes (but very rarely) be a disconnect between certain line items on a historical basis versus the available forecast basis. This is because the consensus approach of analysts covering the company is different from this historical "as reported" basis.

This is usually because they focus on modelling a certain key performance indicator (KPI), in a way specific to the company, or because the forecast entity differs somehow from the historic entity due to, say, a disposal (although that issue is largely dealt with by the rules of estimate suppression).

The most common example of this is Revenue, or Sales. For any given company, on a historical basis, Thomson Reuters collects either Net Sales or Gross Sales, but not both, depending on the company's own reporting practices. Historical Net Sales strictly represents sales receipts for products and services, less cash discounts, trade discounts, excise tax, and sales returns and allowances. However, the approach of analysts may differ from this standardised approach.

An example of this is Imperial Brands where the only available consensus estimate for sales is a company specific definition of net sales, as defined in the 2015 company accounts here, as "Tobacco net revenue comprises tobacco revenue less duty and similar items, excluding peripheral products”. The majority of analysts covering Imperial Tobacco use the above mentioned basis for forecasting, hence it is used for the consensus sales forecasts.

As a result, the stock report shows historical annual revenue for 2015 of £25,289m (as reported by the company) but a net forecast revenue for 2016 of £7,889m. We've chosen to include this forecast on the stock report, despite this inconsistency, in the absence of any better forecasts, but clearly it needs to be interpreted in a company specific way. In such cases, we provide a banner at the top of the StockReport highlighting the discrepancy.

If you notice an inconsistency between historical and forecasts financials, do feel free to raise a ticket and we will look into any company specific factors that may be at play here.