Dewhurst return on net tangible asset value, RONTA

Yesterday’s Newsletter used the owner earnings method to value shares in Dewhurst. The estimates ranged from £7.22 to £11.33, compared with the current share price of £5.60.

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
Profit after tax	4,621		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	4,621		3,508		4,316
CURRENT ASSETS AND LIABILITIES
Inventories	5,566		4,863		4,751
Receivables	10,011		10,301		8,056
Cash needed for operations (assumed)	1,000		1,000		1,000
Other current assets	0		0		0
Payables	-5,567		-5,365		-4,502
Short-term debt	0		0		0
Other current liabilities	-368		-164		-348
Working capital for operations	10,642		10,635		8,957
Surplus cash (assumed)	17,012		15,373		13,958
NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	9,267		9,240		8,581
Goodwill in BS	4,575		3,444		2,695
Previously written-off acquired goodwill – add back	6,803		6,860		6,328
Other acquired intangible assets in BS	0		0		83
Previously written-off other acquired intangibles – add back	934		945		657
Long-term debt	0		0		0
Other non-current liabilities	0		0		0
Net non-current assets for operations	21,579		20,489		18,344
OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	11,751		16,373		12,197
Internally generated intangible assets capitalised to BS	98		91		88
Investments (in shares, bonds, etc.)	0		0		0
Operating lease non-cancellable commitments	1,152		879		480
Preference share capital	0		0		0
Minority interests in profit	176		55		61
Minority interests in net assets	1,001		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

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