N Brown - a valuation using Return on Net Tangible Assets

PUBLISHED: Aug 28 2018 @ 06:36 | Comments (0) |

Today I’ll examine if N Brown (LSE:BWNG) achieves high returns on tangible assets on a consistent basis. This will be followed by valuations informed by the return on net tangible assets data.

Selected data from the income statements and balance sheets

£’000s	2018	2017	2016
INCOME STATEMENT
Profit after tax	12.5	44.3	54.3
Amortisation charge this year for accounting goodwill following acquisitions	0	0	0
Exceptional items distorting profits (positive or negative)	46.0	20.2	7.8
Profit for shareholders	58.5	64.5	62.1


CURRENT ASSETS AND LIABILITIES
Inventories	110.6	105.5	101.5
Receivables	652.7	575.4	553.4
Cash needed for operations (assumed)	58.2	64.1	45.3
Other current assets	–	2.5	7.5
Payables	-131.7	-98.9	-99.7
Short-term debt	0	0	0
Other current liabilities	-9.3	-13.4	0
Working capital for operations	680.5	635.2	608

Surplus cash (assumed)	0	0	0

NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	67.4	73.5	76.7
Goodwill in BS	0	0	0
Previously written-off acquired goodwill – add back	0	0	0
Other acquired intangible assets in BS	0	0	0
Previously written-off other acquired intangibles – add back	0	0	0
Long-term debt	-405	-355	-335
Other non-current liabilities	0	0	0
Net non-current assets for operations	-337.6	-281.5	-258.3

OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	surplus	surplus	surplus
Internally generated intangible assets capitalised to BS	156.0	141.9	124.9
Investments (in shares, bonds, etc.)	0	0	0
Operating lease non-cancellable commitments	18	24	26.3
Preference share capital	0	0	0
Minority interests in profit	0	0	0
Minority interests in net assets	0	0	0

£’000s Year end April	2015	2014	2013	2012
INCOME STATEMENT
Profit after tax	49.4	75.9	79.4
Amortisation charge this year for accounting goodwill following acquisitions	0	0	0
Exceptional items distorting profits (positive or negative)	17	-5.6	0
Profit for shareholders	66.4	70.3	79.4


CURRENT ASSETS AND LIABILITIES
Inventories	94.8	89.9	86.5	82.6
Receivables	609.9	599.0	548.7	522.0
Cash needed for operations (assumed)	40.4	45.3	61.3	57.5
Other current assets	0	0	1.2	0
Payables	-108.9	-98.0	-109.7	-106.6
Short-term debt	-7.0	-9.0	0	0
Other current liabilities	-13.9	-20.4	-19.0	-23.0
Working capital for operations	615.3	606.8	569.0	532.5

Surplus cash (assumed)	0	0	0	0

NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	70.5	63.2	66.4	62.8
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	-280.0	-250.0	-250.0	-250.0
Other non-current liabilities	0	0	0	0
Net non-current assets for operations	-209.5	-186.8	-183.6	-187.2

OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	3.3	4.2	3.3	1.0
Internally generated intangible assets capitalised to BS	98.3	73.3	69.6	62.8
Investments (in shares, bonds, etc.)	0	0	0	0
Operating lease non-cancellable commitments	32.1	22.3	24.3	28.9
Preference share capital	0	0	0	0
Minority interests in profit	0	0	0	0
Minority interests in net assets	0	0	0	0

I deduct £6m each year for exceptional costs (The directors are in the habit of writing off loses in value for shareholders as exceptional costs – I assume they’ll carry on with this. Thus all the profit numbers below are taken from the table above but with £6m deducted)

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 assets over the year (includes internally generated intangible assets capitalised)

£’000s	2018	2017	2016	2015	2014	2013
Profit for shareholders	53	59	56	60	63	73

Working capital, averaged over year	656	622	612	611	588	551
Net non-current assets, averaged	-310	-270	-234	-198	-185	-185
Net tangible assets, averaged	346	352	378	413	403	366
RONTA	15.3%	16.8%

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