N Brown - A valuation using Return on Net Tangible Assets

PUBLISHED: 13 Jun 2019 @ 18:40 | Comments (0) |

So far in the N Brown (LSE:BWNG) analysis (see last few Newsletters) we have a dividend yield of 5.5%, an average EPS over 12 years using the statutory reported “basic” numbers of 17.9p (giving a CAPE of 7.3), and an average EPS over 12 years “adjusted” profits of 24.5p (giving a CAPE of 5.3).

We also estimated profit after tax and after deduction of a reasoned level of exceptional items which could well be recurring of £55m.

And we have an owner earnings estimate of £57m leading to an intrinsic value estimate of £713m.

The market capitalisation of the firm is £415m at 146p per share. I bought last month at 130p (MCap £369m)

Today I’ll add to the canvas by estimating share value using return on net tangible asset figures.

Selected data from the income statements and balance sheets

£’000s	2019	2018	2017	2016
INCOME STATEMENT
Profit after tax	-58.3	12.5	44.3	54.3
Amortisation charge this year for accounting goodwill following acquisitions	0	0	0	0
Exceptional items distorting profits (positive or negative)	122.7	46.0	20.2	7.8
Profit for shareholders	64.4	58.5	64.5	62.1


CURRENT ASSETS AND LIABILITIES
Inventories	99.8	110.6	105.5	101.5
Receivables	621.0	652.7	575.4	553.4
Cash needed for operations (assumed)	43.7	58.2	64.1	45.3
Other current assets			2.5	7.5
Payables	-140.9	-131.7	-98.9	-99.7
Short-term debt	-11.4	0	0	0
Other current liabilities	-33.4	-9.3	-13.4	0
Working capital for operations	578.8	680.5	635.2	608

Surplus cash (assumed)	0	0	0	0

NON-CURRENT ASSETS AND LIABILITIES
Property, Plant and Equipment	59.4	67.4	73.5	76.7
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	-500.2	-405	-355	-335
Other non-current liabilities	0	0	0	0
Net non-current assets for operations	-440.8	-337.6	-281.5	-258.3

OTHER ITEMS TO CONSIDER
Defined benefit pension deficit	surplus	surplus	surplus	surplus
Internally generated intangible assets capitalised to BS	145.2	156.0	141.9	124.9
Investments (in shares, bonds, etc.)	0	0	0	0
Operating lease non-cancellable commitments	8	18	24	26.3
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 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

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