Samuel Heath - Return on net tangible assets

PUBLISHED: 05 Aug 2020 @ 15:54 | Comments (0) |

Samuel Heath (LSE:HSM) has been consistently profitable, but has it produced good returns on net tangible assets? Also, given the strong link between a company’s return on net tangible assets over the long stretch and share performance will it be enlightening to estimate intrinsic value using return on net tangible assets data?

To answer these questions we need to look at the historical numbers.

Profits, assets and liabilities

£’000s Year end September	2020	2019	2018	2017
INCOME STATEMENT
Profit after tax	1,069	738	980	1,013
Amortisation charge this year for accounting goodwill following acquisitions	0	0	0	0
Exceptional items distorting profits (positive or negative)	0	240	0	0
Profit for shareholders	1,069	978	980	1,013

CURRENT ASSETS AND LIABILITIES
Inventories	4,230	3,989	3,930	3,789
Receivables	2,370	2,286	2,287	2,169
Cash needed for operations (assumed)	1,000	1,000	1,000	1,000
Other current assets	0	0	0	0
Payables	-1,868	-1,789	-1,474	-1,400
Short-term debt	0	0	0	0
Other current liabilities	-137	-171	-175	-158
Working capital for operations	5,595	5,315	5,568	5,558

Surplus cash (assumed)	2,016	2,153	1,366	1,079

NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	3,635	3,210	3,337	3,511
Goodwill in BS	0	0	0	0
Previously written-off acquired goodwill – add back	0	0	0	0
Other acquired intangible assets in BS	0	0	0	0
Previously written-off other acquired intangibles – add back	0	0	0	0
Long-term debt	0	0	0	0
Other non-current liabilities	-46	0	-175	-158
Net non-current assets for operations	3,589	3,210	3,162	3,353

OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	6,575	7,420	6,472	6,501
Internally generated intangible assets capitalised to BS	151	82	85	79
Investments (in shares, bonds, etc.)	0	0	0	0
Operating lease non-cancellable commitments	25	210	109	159
Preference share capital	0	0	0	0
Minority interests in profit	0	0	0	0
Minority interests in net assets	0	0	0	0

£’000s Year end September	2016	2015	2014	2013
INCOME STATEMENT
Profit after tax	769	394	443
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	769	394	443

CURRENT ASSETS AND LIABILITIES
Inventories	3,321	3,157	2,899	2,731
Receivables	2,153	2,085	1,819	1,909
Cash needed for operations (assumed)	1,000	1,000	1,000	219
Other current assets	0	56	0	1,401
Payables	-1,317	-1,126	-1,164	-949
Short-term debt	0	0	0	0
Other current liabilities	-162	-72	-118	-19
Working capital for operations	4,995	5,100	4,436	5,292

Surplus cash (assumed)	1,078	648	1,026	0

NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	1,581	1,47

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