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During the conference call following its latest set of results, Apple announced that it would no longer report unit sales for its Mac computers, iPhones and iPads.
This is totally within Apple’s rights, but it does raise the question of why – after ten years of detailed quarterly unit sales – it would suddenly decide to stop?
The official reason from Apple is that it does not believe details of unit sales per quarter are an indicator of the strength of its business.
The truth is more likely that sales growth is slowing in what is now a mature market, and that Apple wants to hide this information.
It is important to note that revenue and profits for iPhones remain very robust and flat iPhone sales still saw revenue for the quarter up 29% due to higher selling prices and margins.
My view is that it is not up to Apple to decide what data is important.
Sure, they know the business better than any analyst, but it is the analyst who decides what data helps them understand and value a business.
This issue got me thinking about how local companies report results.
Some data has to be published, such as the company’s income statement, cash flow and balance sheet.
Furthermore, headline earnings per share (HEPS) and dividend details are also required, but how and what a company reports and where it places the data on the Sens announcement can tell us a lot about the results.
As a rule, companies will put their best numbers right at the top.
This is why we sometimes get details of margins at the top, while others may trumpet revenue and ignore declining HEPS.
Some just kick off with a bland balance sheet.
A company that is trying to hide information always makes me more interested in its results.
If, for example, a company’s results announcement on Sens starts with a balance sheet, I immediately head down for the meatier stats around revenue, HEPS and cash conversion rates.
In short: it makes me suspicious.
So, if anything, it has the opposite effect to what they’d hoped for.
Some listed companies are commendable in their honesty. This is usually driven by the chairperson or the CEO who then also writes a frank assessment of trading conditions for the period under review.
I have written often about how reading the results commentary is a joy for me and how it makes me smarter, as the commentary details how the business works and generates profits.
If a company you are invested in (or would like to invest in), releases obscure results that provides little detail and attempts to hide important information around weak or unfavourable performance, then frankly that stock does not deserve your investment.
We need management to be open and honest and when times get tough (as they always will at some point) that history of honesty from them is what comforts us when they say good times will return.
Management that tries to hide the bad times is simply not to be trusted when they promise an awesome future.
This also ties in with those companies that have all sorts of non-IFRS HEPS data that often seems to be there to confuse.
As I always say, I only care about HEPS and diluted HEPS (the latter takes into account shares to be issued in the future).
In my ideal world, the JSE would require a certain standardisation for the first five lines of a results Sens.
In such an ideal world, these first five lines would include revenue, HEPS, dividend, cash on hand and operating margins.
You may prefer to see something else. Fair enough. But some standardisation would make life easier.
This article originally appeared in the 22 November edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
