Why do per share figures in the accounts sometimes disagree with those on the Financial Summary?

Sometimes you will notice that the per share items displayed on the Financial Summary in the StockReport are different from those shown on the financial statements.  This can be a little confusing and is actually one of the hardest aspects of our data to understand.  It comes about from the need to account for the different number of shares outstanding between the primary listings of dual-listed companies and their secondary depository receipt listings.

The way this is accounted for and how this impacts the per share items on the Financial Summary is outlined below.

Reuters assign a 'RIC' (Reuters Identification Code) to each and every listing of a company.  Wherever there is a unique price on an exchange somewhere, there is a unique RIC assigned.

Financial Statements themselves are recorded separately, though.  Reuters record one set of unique filings under one 'RepoNo' (Repository Number).  A unique filing is defined as a set of accounts that is filed under a single set of accounting standards.

This means that there can be multiple RICs, or instruments, associated with a given set of accounts.  This makes sense, as a Depository Receipt does not file its own financial statements but instead is just another listing for a company that files in the country of incorporation.

As the number of depository receipt shares outstanding is obtained by applying a conversion factor to the number of shares outstanding for the primary listing, this means that the per share figures presented in the accounts are not appropriate for use in computing depository receipt valuation ratios.  Therefore, we must adjust the per share figures to be in line with the number of shares outstanding for the depository receipt.

What this comes down to then as far as knowing what is relating to a given security and what is relating to the filing of the primary listing is as follows:

  • Accounts, seen in the accounts section of the StockReport, are always, and can only be, the filings of the primary listing.  They are therefore stated in the share units of the primary listing and will reconcile to the filings of said listing.  We do not adjust these because they would then fail to reconcile to published accounts.
  • Financial Summary data, on the front page of the StockReport, will always relate to the actual security in question, as this is what we are providing a quote for on that page.  We must, therefore, translate any per share items into the correct share units of that listing, so that valuation ratios relative to the price of that listing can be computed accurately.  Of course, listing specific currency translations come into play here too.

Example

Vodafone is a good simple example of this, as they have both a US and UK listing.

As of July 2016, Vodafone (the UK listing), had 26,608,107,866 shares outstanding.  The US listing, on the other hand, had a conversion factor of 10 from the UK listing and the number of shares outstanding on the same date were therefore 2,660,810,787, one tenth the amount of the UK number.

On the same date, the price of the UK listing was GBp 233.6, or GBP 2.34 and the price of the US listing was USD 31.30.  As the financial statements are reported in GBP, let's convert the US price into GBP first.  The prevailing USDGBP exchange rate on the same date was 1.31, so the GBP price of the American listing was 31.3 / 1.31 = GBP 23.89.

Note that this is approximately 10 times the price of the UK listing, though not precisely as it is often the case that there are slight discrepancies between listings on different exchanges.  However, the price is roughly the same so we expect valuation ratios to be roughly the same too.

If we take a simple historical PB ratio, then the Book Value per Share reported in the UK for 2015 was GBP 2.481, giving us a PB ratio of 2.34 / 2.481 = 0.93.

If we use the same Book Value per Share figure for the US listing, though, we find that 23.89 / 2.481 = 9.63....  Oh dear, that can't be right, what's gone wrong?  The answer is that we forgot to adjust the Book Value per Share figure for the Depositary Receipt conversion factor.

If we multiply the Book Value per Share by 10 as there are a tenth the shares outstanding we find a new Book Value per Share figure of 2.481 * 10 = 24.81.  Now when we compute our PB ratio we get a much better answer.  23.89 / 24.81 = 0.96.

Not identical - we can see that the US shares were actually a little more expensive on this basis but the comparison is fair now.