Shares in Simply Group (LSE: JUST) led the FTSE 250 fallers on Friday morning (7 March) with an early 15% dip, regardless of sturdy headline outcomes for the 12 months to December.

CEO David Richardson mentioned: “We made a pledge three years in the past to double earnings over 5 years. We now have considerably exceeded that concentrate on in simply three years and created substantial shareholder worth because of this.“

What’s to not like about that? Perhaps it’s as a result of the excellent news was hinted at in a 15 January replace, boosting the share price. Maybe buyers are occurring ‘buy the rumour, sell the news?’

“Shaping a brighter future”

The CEO added: “Our markets remain buoyant and we are confident in our ability to grow earnings at an attractive rate from this significantly higher level.”

The pensions insurance coverage group noticed a 34% rise in underlying working revenue to £504m. That features a contribution from new enterprise development. However recurring earnings, which could be a key sustainer of long-term revenue, performed a component.

Adjusted revenue earlier than tax truly fell, to £482m from the earlier 12 months’s £520m. The majority of that’s deferred, which leaves IFRS revenue earlier than tax of simply £113m (£172m a 12 months in the past). Am I seeing some purpose behind the morning’s share sell-off?

A 15.3% return on fairness (up from 13.5%) and tangible web asset worth (NAV) per share of 254p (from 224p) each look spectacular. On the day past’s shut, that means a reduction to NAV of 36%.

5-year winner

Simply lifted its 2024 dividend by 20% to 2.5p per share for a 1.5% yield. It’s not among the many FTSE 250’s largest, however it beat forecasts. Seeing the share price greater than double over the previous 5 years greater than makes up for a low dividend in my books.

After such a steller efficiency, the inventory have to be extremely valued, proper? Nicely, that’s the place Simply Group provides one other to the checklist of puzzle-building, in my thoughts.

Underlying earnings per share (EPS) of 36.3p point out a trailing price-to-earnings (P/E) ratio of simply 4.5. However on a reported foundation, EPS got here in at solely 6.5p per share for a P/E of 25. That’s an enormous distinction, and it’s down to IFRS revenue earlier than tax being so low.

Forecasts had put EPS at 8.1p. So on a reported foundation, this was a miss. For 2025, the analysts predict 7.7p per share, which is a fall from the 2024 expectations however an increase on Simply’s precise reported 6.5p. How do these figures relate to adjusted earnings? My head hurts.

What ought to buyers do?

I feel outcomes like these provide us a useful lesson. Anybody contemplating shopping for ought to take care to grasp all of the changes. It doesn’t indicate something fallacious, and IFRS generally doesn’t apply effectively to particular companies. However various accounting requirements can imply it’s a lot tougher to make like-for-like comparisons between shares primarily based on the identical headline standards.

My tackle Simply as an funding? Till I do some additional research to make clear these confusions, I merely don’t know.