Divisional Asset Allocation FY2016
Quote:
Originally Posted by
Snoopy
TNR, I think is best considered as a 'hybrid' company. The successful 'Auction & Fleet' business will distort comparisons with other more pure finance companies. So 'Auction & Fleet' needs to be taken out for financial company yardstick comparisons. Do that and the 'deconstructed' TNR business is represented in the table below
TNR for FY2016 |
|
Assets |
Liabiliities |
Shareholder Equity |
Interest Expense |
NPAT |
ROE |
Auctions & Fleet (FY2016) |
$99.81m |
$65.58m |
$34.23m |
$3.23m |
$4.44m |
13.0% |
Finance, Insurance & Collection Services (FY2016) |
$262.49m |
$166.91m |
$95.58m |
$8.21m |
$11.08m |
11.6% |
Divisional Total (FY2016) |
$362.30m |
$232.49m |
$129.81m |
$11.44m |
$15.52m |
12.0% |
The folowing information is more than most shareholders want to know. But it is background information that feeds into the published table above, and which I intend to use again. The first column is taken from the Segmented Information as presented in the annual report.
Divisional Asset Allocation FY2016 |
|
Assets |
|
Elimination Assets Reallocated |
|
Corporate Assets Reallocated |
Auctions & Fleet |
$83.09m |
15.96% |
$57.81m |
27.55% |
$99.81m |
Finance |
$218.51m |
41.96% |
$152.04m |
72.45% |
$262.49m |
Corporate & Other |
$219.11m |
42.08% |
$152.45m |
|
|
Sub Total |
$520.71m |
|
|
|
|
Eliminations |
-$158.42m |
|
|
|
|
Total |
$362.30m |
100.00% |
$362.30m |
100.00% |
$362.30m |
SNOOPY
Divisional Liability Allocation FY2016
Divisional Liability Allocation FY2016 |
|
Liabilities |
|
Elimination Liabilities Reallocated |
|
Corporate Liabilities Reallocated |
Auctions & Fleet |
$62.63m |
22.97% |
$53.40m |
28.21% |
$65.58m |
Finance |
$159.39m |
58.45% |
$135.89m |
71.79% |
$166.91m |
Corporate & Other |
$50.67m |
18.58% |
$43.20m |
|
|
Sub Total |
$272.68m |
|
|
|
|
Eliminations |
-$40.19m |
|
|
|
|
Total |
$232.49m |
100.00% |
$232.49m |
100.00% |
$232.49m |
SNOOPY
Divisional EBIT Allocation FY2016
Divisional EBIT Allocation FY2016 |
|
EBT |
Revenue |
EBT Corporate Reallocated (A) |
Interest Expense |
Liabilities |
Corporate Interest Expense Reallocated (B) |
EBIT: (A)+(B) |
Auctions & Fleet |
$10.009m |
67.68% |
$6.166m |
$2.626m |
28.21% |
$3.226m |
$9.392m |
Finance |
$17.220m |
32.32% |
$15.385m |
$6.685m |
71.79% |
$8.210m |
$23.595m |
Corporate & Other |
-$5.678m |
|
|
$2.125m |
Sub Total |
$21.551m |
|
|
Eliminations |
$0m |
|
|
Total |
$21.551m |
100.00% |
$21.551m |
$11.436m |
100.00% |
$11.436m |
$32.987m |
SNOOPY
BC3: Tier 1 and Tier 2 Lending Covenants FY2016
Quote:
Originally Posted by
Snoopy
I am applying a 'banking covenant' to a non-bank. While not a legal requirement for TNR, this is to enable a comparison with other listed entities in the finance sector (real banks like Heartland for instance ;-) ), so please bear with me. The data below may be found in the 'Consolidated Statement of Financial Position' (AR2015, p32).
We are looking here for a certain equity holding to balance a possible temporary mismatch of cashflows. The company needs basic equity capital and we are looking for disclosed reserves defined as:
Tier 1 capital > 20% of the loan book.
(Dorchester has only Tier 1 capital for these calculation purposes.)
Tier 1 Capital = (Shareholder Equity) - (Intangibles) - (Deferred tax)
= $121.002m - $103.595m - $8.532m
= $8.875m
The money to be eventually repaid to the company (assets of the company) can be found as assets on the balance sheet. This is the sum total of:
1/ 'Financial Assets at fair value through profit or loss': $17.350m
2/ 'Finance Receivables': $142.827m
3/ 'Receivables and deferred expenses': $5.946m
4/ 'Reverse annuity mortgages': $13.253m
For the FY15 year these come to $179.376m
$8.875m / $179.376m = 4.9% < 20%
=> Fail test
Care needs to be taken in interpreting a result like this. A big increase in Intangible Assets over the year have done the damage to this statistic.
From note 22 in the annual report, $45.6m of intangibles was brought onto the books with the acquisition of TUA. $30.454m was brought onto the books with the acquisition of Oxford Finance. These companies were bought outright to become profitable acquisitions. A good margin over asset backing was paid because these assets were highly profitable, demanding any buyer to pay a premium. The downside is that should either of these assets suddenly become less profitable than expected an urgent capital raising from TNR shareholders could be required!
I am changing my analysis this year so that the financial statistics that I am evaluating are applied only to the financial division of the company.
I am applying a 'banking covenant' to a non-bank. While not a legal requirement for TNR, this is to enable a comparison with other listed entities in the finance sector (real banks like Heartland for instance ;-) ), so please bear with me. The data below may be found in the 'Consolidated Statement of Financial Position' (AR2016, p26).
Tier 1 capital > 20% of the loan book.
(Turners Group (Finance Division) has only Tier 1 capital for these calculation purposes.)
Tier 1 Capital = (Shareholder Equity) - (Intangibles: less Turners Auctions Intangibles) - (Deferred tax: Assume finance division using up deferred losses)
= (0.7245x$129.812m) - ($105.338m -$45.600 -$22.859) - $0m
= $57.170m
The money to be eventually repaid to the company (assets of the company) can be found as assets on the balance sheet. This is the sum total of:
1/ 'Financial Assets at fair value through profit or loss': $18.455m
2/ 'Finance Receivables': $167.598m
3/ 'Receivables and deferred expenses': 0.7179 x $8.505m
4/ 'Reverse annuity mortgages': $9.374m
For the FY16 year these come to $201.532m
$57.170m > 0.2 x $201.532m = $40.307m (true)
=> Pass Test
SNOOPY
BC1: EBIT to Interest Expense Test, FY2016
Quote:
Originally Posted by
Snoopy
Updating for the FY2015 financial year (ended 31-03-2015)
The underlying interest expense is shown under note 7 (AR2015) to be $7.381m.
The underlying EBIT is a bit more complicated. There is a $7.058m gain recorded because of the write up in the value of the then Dorchester's existing stake in TUA to 'market bid value' level. But the market bid was made my Dorchester. So Dorchester have in effect bid up the value of their pre-owned TUA shares to a market level that they themselves have chosen. $7.058m is a one off self controlled capital gain that is not repeatable. IMO this should not be included in any underlying EBIT to Interest Expense ratio.
(EBT +Interest Expense)/(Interest Expense) = [($18.264m-$7.058m)+$7.381m]/$7.381m = 2.52 > 1.2
=> Pass Test
In recognition of TNR being a hybrid company, I am no performing the EBIT to Interest expense test on the finance section of TNR only (my post 1257).
Updating for the FY2016 financial year (ended 31-03-2016)
The underlying interest expense is shown under note 7 (AR2016) to be $11.436m. Of this ( $11.436m x 0.7179= ) $8.210m can be applied to the finance division.
The underlying EBT for the finance division may be found in the same post.
(EBT +Interest Expense)/(Interest Expense) = [$15.385m+$8.210m]/$8.210m = 2.87 > 1.2
=> Pass Test
SNOOPY