Continuing operations

When companies disclose numbers for "continuing operations", it means that they have stripped out the effects of disposals but not of acquisitions. They have done the favourable part of the adjustments needed to calculate organic growth, but not the unfavourable part.

The implied justification for this is that acquisitive growth is part of how the continuing businesses grow and is to some extent sustainable, whereas disposals are no longer part of the company and their performance is irrelevant.

Continuing business numbers are not as useful for investors as organic growth numbers, and pro-forma organic numbers are generally preferable. If the acquisitions are part of a continuing pattern why not the disposals? The two may well be tied together as substantial disposals may be helping to pay for acquisitions.

Organic numbers, when compared to the reported numbers, allow investors to see what the effects of acquisitions disposals are - such as what effect they have on margins. Pro-forma numbers allow investors to see exactly how the business as it now is has performed.

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