Dewhurst – return on net tangible assets

PUBLISHED: Apr 30 2019 @ 04:21 | Comments (0) |

In newsletters last week and yesterday I showed that Dewhurst (LSE:DWHA) has a stable profits history as well as a strong balance sheet. It has very experienced managers in the niche businesses where it operates, with some good pricing power due to the economic franchises it created over decades combined with shrewd acquisitions.

I bought “A” shares (non-voting) a few days ago at an average of £5.64. They have now risen to £7.00 – £7.50. When writing the following analysis I judged there to be a good margin of safety at £5.64. I invite readers to make their own judgement on whether there is a good margin of safety at £7.50 – and comment, it’ll be good to get a discussion going.

Today’s newsletter looks makes a stab at a valuation of a Dewhurst “A” share through a consideration of its return on net tangible assets.

Profits, assets and liabilities

£’000s Year end September	2018	2017	2016	2015
INCOME STATEMENT
Profit after tax	4,260	4,621	3,508	4,316
Amortisation charge this year for accounting goodwill following acquisitions	555	0	0	0
Exceptional items distorting profits (positive or negative)	0	0	0	0
Profit for shareholders	4,815	4,621	3,508	4,316
CURRENT ASSETS AND LIABILITIES
Inventories	6,279	5,566	4,863	4,751
Receivables	13,920	10,011	10,301	8,056
Cash needed for operations (assumed)	1,000	1,000	1,000	1,000
Other current assets	0	0	0	0
Payables	-8,185	-5,567	-5,365	-4,502
Short-term debt	0	0	0	0
Other current liabilities	-836	-368	-164	-348
Working capital for operations	12,178	10,642	10,635	8,957

Surplus cash (assumed)	8,440	17,012	15,373	13,958
NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	9,271	9,267	9,240	8,581
Goodwill in BS	8,598	4,575	3,444	2,695
Previously written-off acquired goodwill – add back	6,803	6,803	6,860	6,328
Other acquired intangible assets in BS	4,445	0	0	83
Previously written-off other acquired intangibles – add back	1,433	934	945	657
Long-term debt	0	0	0	0
Other non-current liabilities	0	0	0	0
Net non-current assets for operations	30,550	21,579	20,489	18,344
OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	7,628	11,751	16,373	12,197
Internally generated intangible assets capitalised to BS	65	98	91	88
Investments (in shares, bonds, etc.)	0	0	0	0
Operating lease non-cancellable commitments	2,382	1,152	879	480
Preference share capital	0	0	0	0
Minority interests in profit	221	176	55	61
Minority interests in net assets	1,057	1,001

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