Core Net Profit vs Reported Profit: A Bursa Guide

What is core net profit?

Core net profit is an analyst’s or company’s view of recurring profit after stripping out items that are unlikely to repeat. It is not an MFRS-defined term. The international standard on presentation describes such measures as subtotals of income and expenses that the accounting standards do not specify, which management uses in public communications to describe performance ^[1].

That standard, IFRS 18, replaces IAS 1 and applies to annual reporting periods beginning on or after 1 January 2027, with earlier application permitted ^[1]. It requires disclosure of these management-defined performance measures ^[1]. Until a company’s reports follow it, treat any “core” or “normalised” figure as the preparer’s own construct, and look for the reconciliation.

Reported profit, by contrast, is the profit after tax in the income statement, prepared under the accounting standards. See our guide to reading an income statement for the layout.

Which items are usually excluded?

The items usually excluded are those that are large, unusual or not part of day-to-day operations. Common examples are:

• Impairments: write-downs when an asset’s carrying amount exceeds the amount recoverable from it; the loss is recognised immediately ^[2].
• Disposal gains or losses: profit from selling property, a subsidiary or an investment.
• Unrealised forex: revaluation of foreign-currency balances. The accounting standard sets rules for how exchange differences are reported ^[3].
• Restructuring costs and fair-value changes: one-time reorganisation expenses, or changes in the value of investments.

Whether an item is truly one-off is the hard part. A company that books “one-off” write-downs every year has a recurring cost. Test each adjustment against several years of reports.

Goodwill is a good example of an adjustment that follows rules: acquired goodwill is tested every year for impairment ^[2], so a loss may appear in any year the test fails.

Why do analysts arrive at different core figures?

Analysts arrive at different core figures because there is no rulebook, so each decides which items to exclude and how to treat tax and minority interests. One may remove an item that another keeps.

Differences also arise from timing, such as whether an impairment is adjusted in the year it was booked or spread out, and from how the tax effect of each adjustment is estimated. This article uses no named analyst figures.

The practical consequence is that you should reconcile the number yourself. Start from reported profit attributable to owners, list each adjustment with its source in the notes, and apply the tax effect where relevant.

Where are one-offs disclosed in the quarterly notes?

One-offs are usually disclosed in the explanatory notes to the quarterly report, in the notes to the income statement, and in the management’s discussion of performance. Look for sections on other income, other expenses, impairment, gain on disposal and foreign exchange.

The annual report gives the fuller picture, with separate notes on impairment testing, disposals and financial risk. Compare the current quarter with the same quarter a year earlier, since seasonal or one-time items show up in the gap. Our guide to trailing twelve-month versus quarterly results explains how to avoid mixing periods.

Hypothetical reconciliation

Every figure in this table is hypothetical. “Company A” is not a real company.

In this hypothetical illustration, the adjustments cancel out, so core profit equals reported profit even though three unusual items occurred. That is a reminder that adjustments can go in either direction: a quarter with a big gain looks worse once the gain is removed, and one with a big write-down looks better.

How does core profit change the P/E?

Core profit changes the P/E because the earnings in the denominator change, which changes the multiple. Price-to-earnings divides the share price by earnings per share; see the P/E ratio glossary entry and the EPS glossary entry.

Earnings per share depends on the weighted average number of shares outstanding for the period ^[4]. Core EPS uses the same share count with the adjusted profit.

Hypothetical illustration: suppose Company A has reported profit of RM100 million, core profit of RM80 million and 400 million shares. In the illustration, reported EPS is 25 sen and core EPS is 20 sen. At an assumed share price of RM3.00, the reported P/E is 12 times and the core P/E is 15 times. In the illustration, the same price looks more expensive on core earnings.

That does not mean either multiple is “right”. Show both, explain the gap, and avoid choosing the figure that flatters a conclusion. A multiple is a description of price relative to earnings, not a prediction.

Frequently asked questions

Sources

1. IFRS Foundation — IFRS 18 management-defined performance measures, replacement of IAS 1, effective 1 January 2027
2. IFRS Foundation — IAS 36 impairment recognised immediately, annual goodwill testing
3. IFRS Foundation — IAS 21 effects of changes in foreign exchange rates
4. IFRS Foundation — IAS 33 earnings per share, weighted average number of shares

See how Finworld organises Bursa Malaysia research