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Summoned figures – SMI companies are becoming more and more involved in the trick box News

Wednesday, August 23rd, 2017 | Economy

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At least since the swearing-in of the Republican Donald Trump on the 45th President, the new American government is pushing its own view of the world under the term "alternative facts". At the same time, desire and reality often go so far as to say that this concept is already given the very best chances to choose the "Unverb of the Year".
With "alternative facts" we also work in Switzerland – less in politics than in the economy. As the corporate reporting for the first half of the year impressively shows, the local large conglomerates have discovered a preference for adjusted key figures.
Today's stock exchange legislation allows for the addition of additional adjusted key figures beyond the regular balance sheet and income statement. And the companies are making a lot of use of it.
As I can see from a strategic study conducted by Zürcher Kantonalbank on this topic, no less than 28 of the 30 major companies in the Swiss Leaders Index (including 19 companies from the Swiss Market Index (SMI)) have at least one adjusted characteristic over the past four years expelled. An exception is the consistently successful Innschweizer building material manufacturer Sika as well as the luxury goods group Swatch Group from Biel, which is often criticized for its high warehouses. No less than 19 companies have made adjustments over the entire four years, according to the study authors.

The price development of the Sika shares over the last five years shows: It can also go into the trick box without a handle (Source: www.cash.ch).
So far, so well – the media figures and the annual reports did not show the adjusted key figures. And these have it all in themselves: According to calculations by Zürcher Kantonalbank, the sum of the adjusted profits of all companies represented in the SLI last year was more than 30 percent above the profit margins audited by the auditors.
It is interesting that the risk capital specialist Partners Group and the life insurance group Swiss Life have even shown a single adjusted profit under the audited Reingewinn. It is in any case not possible to blame these two companies for a pardoning of their profitability.
The bakery manufacturers Aryzta and the rice-retail trade group Dufry, on the other hand, are not the only model. For 2016, according to the study authors, Dufry showed a reinsurance gain of more than a hundredfold over the adjusted profit margin. In the process, amortisations were elegantly excluded for the billions of money taken by World Duty Free and Nuance. At Aryzta, the profit adjusted for amortization and restructuring costs still corresponded to seven times the actual annual gain. But also the two Swiss big banks UBS and Credit Suisse do not seem to be innocent ones.
Adjusted, whatever can be adjusted – from the sales through the reingewinn to individual balance sheets. These include amortization, depreciation, value adjustments or restructuring costs.
In the face of this repression, the SIX Swiss Exchange has launched a preliminary draft for new directives. These guidelines are intended to guide the financial statements at least as far as possible.
However, the two study authors of Zürcher Kantonalbank do not hesitate to issue an unmistakable warning: the use of adjusted parameters for investment decisions risks, which is why caution should be exercised when interpreting them. Moreover, the lack of transparency made it difficult to trace and compare the different companies and the respective calculation periods.
I am aware that an immense pressure on success is weighing on the Swiss big conglomerates and their leaders. They are measured by the stock market quarter by quarter. Nevertheless, I think it is dangerous if more and more is used in the trick box. According to Novartis, ABB, or Nestlé, according to Zürcher Kantonalbank, last year, companies have shown a deeper effective profit than 2013, but in any case they have a deep look – and makes the said strategy study for investors compulsory.
The cash insider records and interprets market rumors as well as strategy, industry or corporate studies. Market rumors are deliberately not checked for their truth content. Rumors, speculation and everything that traders and market participants are interested in should be passed on to the readers quickly. No responsibility is assumed for the correctness of the contents. The personal opinion of the cash insider does not have to coincide with that of the cash editorial department. The cash insider itself is active on the stock market. This is the only way to reach the necessary market proximity for this kind of news. The opinions expressed do not constitute any recommendation to buy or sell to the reader.


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