Adjusted operating profit

Operating profit adjusted, in much same way as adjusted EPS, in order to provide a better indication of underlying trends. Like adjusted EPS, the exact definition can vary. It is similar to trading profit, and can be synonymous with it.

The most important adjustments are the adding back of one-off costs, such as exceptional items and impairments.

Other items that are commonly excluded are changes in the fair value of financial instruments and the cost of share based payments. Investors should keep an eye on these. Although neither is a cash cost to the operations of a company, both are real costs to investors. In the case of share based payments, they are usually a recurring cost.

Despite these reservations, adjusted operating profit is a very useful indicator of how a business is performing. It is frequently disclosed by companies. If not, investors and analysts may need to calculate it themselves. Even when it is disclosed, it may be necessary to recalculate it if one wishes to use a different definition.

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