Tuesday’s Newsletter used the owner earnings method to value shares in Dewhurst. The estimates ranged from £5.74 to £17.51, compared with the current share price of £5.46.
Today we’ll look at return on net tangible assets, and approach the valuation issue from this angle.
Profits, assets and liabilities
£’000s Year end September | 2017 | 2016 | 2015 | ||
INCOME STATEMENT | (first half of 2017 numbers doubled) | ||||
Profit after tax | 4,370 | 3,508 | 4,316 | ||
Amortisation charge this year for accounting goodwill following acquisitions | 0 | 0 | 0 | ||
Exceptional items distorting profits (positive or negative) | 0 | 0 | 0 | ||
Profit for shareholders | 4,370 | 3,508 | 4,316 | ||
CURRENT ASSETS AND LIABILITIES | |||||
Inventories | 5,108 | 4,863 | 4,751 | ||
Receivables | 11,275 | 10,301 | 8,056 | ||
Cash needed for operations (assumed) | 1,000 | 1,000 | 1,000 | ||
Other current assets | 0 | 0 | 0 | ||
Payables | -5,824 | -5,365 | -4,502 | ||
Short-term debt | 0 | 0 | 0 | ||
Other current liabilities | -223 | -164 | -348 | ||
Working capital for operations | 11,336 | 10,635 | 8,957 | ||
Surplus cash (assumed) | 15,010 | 15,373 | 13,958 | ||
NON-CURRENT ASSETS AND LIABILITIES | |||||
Property, Plant and Equipment | 9,554 | 9,240 | 8,581 | ||
Goodwill in BS | 4,829 | 3,444 | 2,695 | ||
Previously written-off acquired goodwill – add back | Est 6,860 | 6,860 | 6,328 | ||
Other acquired intangible assets in BS | 0 | 0 | 83 | ||
Previously written-off other acquired intangibles – add | Est 945 | 945 | 657 | ||
Long-term debt | 0 | 0 | 0 | ||
Other non-current liabilities | 0 | 0 | 0 | ||
Net non-current assets for operations | 22,188 | 20,489 | 18,344 | ||
OTHER ITEMS TO CONSIDER | |||||
Defined benefit pension deficit | 14,890 | 16,373 | 12,197 | ||
Internally gen. intangible assets capitalised to BS | Est 91 | 91 | 88 | ||
Investments (in shares, bonds, etc.) | 0 | 0 | 0 | ||
Operating lease non-cancellable | 879 | 480 | |||
Preference share capital | 0 | 0 | |||
Minority interests in profit | 73 | 55 | 61 | ||
Minority interests in net assets | 589 | 534 |
£’000s Year end September | 2014 | 2013 | 2012 | 2011 | |||
INCOME STATEMENT | |||||||
Profit after tax | 3,930 | 960 | 3,786 | ||||
Amortisation charge this year for accounting goodwill following acquisitions | 296 | 1,490 | 3,889 | ||||
Exceptional items distorting profits (positive or negative) | 0 | 0 | -3,944 | ||||
Profit for shareholders | 4,226 | 2,450 | 3,731 | ||||
CURRENT ASSETS AND LIABILITIES | |||||||
Inventories | 4,501 | 4,557 | 4,852 | 4,269 | |||
Receivables | 9,199 | 8,556 | 8,421 | 8,394 | |||
Cash needed for operations (assumed) | 1,000 | 1,000 | 1,000 | 1,000 | |||
Other current assets | 26 | 20 | 0 | 203 | |||
Payables | -5,398 | -5,445 | -5,583 | -5,222 | |||
Short-term debt | 0 | 0 | 0 | 0 | |||
Other current liabilities | 0 | 0 | -35 | 0 | |||
Working capital for operations | 9,328 | 8,688 | 8,655 | 8,644 | |||
Surplus cash (assumed) | 11,928 | 9,506 | 10,101 | 4,009 | |||
NON-CURRENT ASSETS AND LIABILITIES | |||||||
Property, Plant and Equipment | 8,665 | 9,240 | 9,669 | 9,581 | |||
Goodwill in BS | 3,129 | 3,173 | 3,555 | 7,357 | |||
Previously written-off acquired goodwill – add back | 6,567 | 6,567 | 5,477 | 1,581 | |||
Other acquired intangible assets in BS | 0 | 0 | 0 | 0 | |||
Previously written-off other acq. intangibles – add | 0 | 0 | 0 | 0 | |||
Long-term debt | 0 | 0 | 0 | 0 | |||
Other non-current liabilities | 0 | 0 | 0 | 0 | |||
Net non-current assets for operations | 18,361 | 18,980 | 18,701 | 18,519 | |||
OTHER ITEMS TO CONSIDER | |||||||
Defined benefit pension deficit | 12,192 | 10,530 | 11,856 | 9,299 | |||
Internally gen. intangible assets capitalised to BS | 463 | 836 | 125 | 158 | |||
Investments (in shares, bonds, etc.) | 0 | 0 | 0 | 0 | |||
Operating lease non-cancellable | 394 | 541 | 461 | 690 | |||
Preference share capital | 0 | 0 | 0 | 0 | |||
Minority interests in profit | 16 | -48 | -32 | ||||
Minority interests in net assets | 635 | 611 | 0 | 149 |
Return on net tangible assets, RONTA = Profit for shareholders ÷ Average net tangible assets over the year (beginning BS and end BS averaged).
Return on tangible assets, RONA = Profit for shareholders ÷ Average net a……..
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