The Motley Fool

When abnormal means normal

Companies usually deem one-off items including acquisition expenses and restructuring activities as abnormal items. Investors generally want to know what the underlying performance of the business is, so highlighting these items allows investors to make comparisons with previous years. As an example, Monadelphous Group (ASX: MND) reported an $11m gain on the sale of shares in Norfolk Group Limited (ASX: NFK).

The problem for investors is what do you do when the company has reported these types of abnormal items for five years in a row? Amcor is one such company, this year reporting significant expenses of $213.6m after tax. The total of significant items over the past five years is a net expense of $939m. The best way to treat these significant items for Amcor then is to include them and use the statutory net profit data.

Including the significant items, Amcor Limited (ASX: AMC) has today reported a 16% increase in full year net profit to $413m – not bad considering revenues were down 2%. Amcor declared an unfranked final dividend of 19 cents, bringing the total for the year to 37 cents.

Cash flows were strong at over $1 billion, but were offset by capital expenditure, acquisition expenses, dividends and a $150 million share buy-back. No wonder then that the company’s debt has increased by around $500m to a total of $3.9 billion and now represents 105% of equity.

The company has flagged plans to grow by acquisition and expand into the developing Asian and South American markets, to offset flat volumes at home in Australia a la Australia and New Zealand Banking Group (ASX: ANZ)  and Insurance Australia Group (ASX: IAG) which are both making moves into Asia.

For the 2013 financial year, Amcor expects its flexible plastics business to achieve a solid increase in earnings (in constant currency terms), and continued growth in emerging markets.

The Foolish bottom line

With return on equity of around 11-12%, a net debt to equity ratio over 100% and a P/E ratio of over 22, there are better options out there for Foolish investors.

If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.