Character Group - Return on net tangible assets

PUBLISHED: Jun 11 2020 @ 06:31 | Comments (0) |

Character Group (LSE:CCT) has a very good record of producing high profits and return on capital employed. Today we take a closer look at profits generated relative to net tangible assets under the control of the directors.

Profits, assets and liabilities

£’000s Year end 31 August	2019	2018	2017	2016	2015
INCOME STATEMENT
Profit after tax	7,505	9,612	10,050	10,787	10,239
Amortisation charge this year for accounting goodwill following acquisitions	3,132	0	0	0	0
Exceptional items distorting profits (positive or negative)	-1,547	0	0	0	0
Profit for shareholders	9,090	9,612	10,050	10,787	10,239


CURRENT ASSETS AND LIABILITIES
Inventories	16,405	10,890	8,994	10,303	8,965
Receivables	34,973	25,555	25,817	25,082	15,535
Cash needed for operations (assumed)	22,174	19,050	17,216	21,647	21,246
Other current assets	398	181	32	540	256
Payables	-28,776	-24,666	-22,700	-25,418	-19,015
Short-term debt	-22,174	-19,050	-17,216	-21,647	-21,246
Other current liabilities	-1,720	-1,893	-3,137	-1,195	-2,225
Working capital for operations	21,280	10,067	9,006	9,312	3,516

Surplus cash (assumed)	7,816	15,580	11,536	6,913	4,535
Investment property (rent received)	2,900	1,715	1,780	1,845	1,911
Total surplus available for SHs	10.716	17,295	13,316	8,758	6,446
NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	3,251	3,130	3,204	3,357	3,551
Goodwill in BS	0	0	0	0	0
Previously written-off acquired goodwill – add back	3,132	0	0	0	0
Other acquired intangible assets in BS	0	0	0	0	0
Previously written-off other acquired intangibles – add	0	0	0	0	0
Long-term debt	1,312	0	0	0	0
Other non-current liabilities	2	0	0	0	0
Net non-current assets for operations	7,697	3,130	3,204	3,357	3,551

OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	0	0	0	0	0
Internally gen. intangible assets capitalised to BS	903	803	698	1,117	837
Investments (in shares, bonds, etc.)	0	0	0	0	0
Operating lease non-cancellable	1,830	551	944	714	115
Preference share capital	0	0	0	0	0
Minority interests in profit	416	0	0	0	0
Minority interests in net assets	400	0	0	0	0

£’000s Year end September	2014	2013	2012	2011
INCOME STATEMENT
Profit after tax	5,945	683	5,750
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	5,945	683	5,750


CURRENT ASSETS AND LIABILITIES
Inventories	8,854	6,178	7,356	11,563
Receivables	23,417	18,722	17,105	17,106
Cash needed for operations (assumed)	17,702	9,242	5,908	10,859
Other current assets	160	1,203	667	355
Payables	-20,545	-16,541	-13,389	-20,529
Short-term debt	-22,217	-15,260	-13,804	-15,727
Other current liabilities	-3,787	-1,157	-975	-3,880
Working capital for operations	3,584	2,387	2,868	-253

Surplus cash (assumed)	0	0	0	0
Investment property (rent received)	1,976	2,042	2,107	2,172
Total surplus available for SHs	1,976	2,042	2,107	2,172
NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	3,623	3,678	3,870	3,845
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 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	3,623	3,678	3,870	3,845

OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	0	0	0	0
Internally gen. intangible assets capitalised to BS	238	748	1,335	1,630
Investments (in shares, bonds, etc.)	0	0	0	0
Operating lease non-cancellable	421	480	172	222
Preference share capital	0	0	0	0
Minority interests in profit	0	0	0	0
Minority interests in net assets	0	0	0	0

(For 2015-19 I’ve put “cash needed for operations” equal to short term borrowings because there are certain times of the year, especially in the months leading up to Christmas when the company is borrowing to pay for inventory and receivables. Currently, this money comes from overdraft, factoring, invoice discounting and import loans. But, conceivably, the directors might decide to use some cash to reduce borrowings and thereby save on interest and lower financial risk.)

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		2019		2018		2017		2016
Profit for shareholders		9,090		9,612		10,050		10,787

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