Divisional EBIT Allocation FY2017
Quote:
Originally Posted by
Snoopy
Divisional EBIT Allocation FY2016 |
|
EBT |
Revenue |
EBT Corporate Reallocated (A) |
Interest Expense |
Liabilities |
Corporate Interest Expense Reallocated (B) |
EBIT: (A)+(B) |
Auctions & Fleet |
$6.698m |
63.64% |
$3.090m |
$2.626m |
28.21% |
$3.226m |
$6.316m |
Finance |
$20.531m |
36.46% |
$18.461m |
$6.685m |
71.79% |
$8.210m |
$26.671m |
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 |
Divisional EBIT Allocation FY2017 |
|
EBT |
Revenue |
EBT Corporate Reallocated (A) |
Interest Expense |
Liabilities |
Corporate Interest Expense Reallocated (B) |
EBIT: (A)+(B) |
Automotive Retail |
$11.936m |
72.77% |
$6.046m |
$3.052m |
33.82% |
$3.838m |
$9.884m |
Finance |
$20.790m |
27.23% |
$18.585m |
$5.972m |
66.18% |
$7.512m |
$26.097m |
Corporate & Other |
-$8.095m |
|
|
$2.327m |
Sub Total |
$24.631m |
|
|
Eliminations |
$0m |
|
|
Total |
$24.631m |
100.00% |
$24.631m |
$11.350m |
100.00% |
$11.350m |
$35.981m |
SNOOPY
Deconstructing a 'hybrid' Turners for FY2017
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) |
$99.815m |
$65.582m |
$34.233m |
$3.23m |
$2.225m |
9.2% |
Finance, Insurance & Collection Services (FY2016) |
$262.488m |
$166.909m |
$95.579m |
$8.21m |
$13.292m |
13.9% |
Divisional Total (FY2016) |
$362.303m |
$232.491m |
$129.812m |
$11.44m |
$15.52m |
12.0% |
TRA for FY2017 |
|
Assets |
Liabiliities |
Shareholder Equity |
Interest Expense |
NPAT |
ROE |
Automotive Retail (FY2017) |
$164.16m |
$130.18m |
$33.98m |
$3.84m |
$4.353m |
12.8% |
Finance, Insurance & Collection Services (FY2017) |
$392.47m |
$254.74m |
$137.73m |
$7.51m |
$13.382m |
9.72% |
Divisional Total (FY2017) |
$556.63m |
$384.92m |
$171.71m |
$11.35m |
$17.73m |
10.3% |
Care needs to be taken when interpreting these figures, taken from the Annual Report of FY2017. The assets and liabilities are end of year figures. So they aren't necessarily representative of the assets and liabilities that were on the books through the year because two major acquisitions:
1/ 'Buy Right Cars' (29th July 2016), now part of 'Automotive Retail'
2/ 'Autosure' (31st March 2017), which I have grouped into 'Finance' above.
With 'Autosure' in particular, this came onto the Turners books on 31st March 2017. Yet no earnings for this business contributed to the 'Finance Division' result because 31st March 2017 was also the balance date. Thus the apparent sharp deterioration in 'Finance ROE' for the year is not what it seems.
SNOOPY
Annualised ROE corrections for FY2017
Quote:
Care needs to be taken when interpreting these figures, taken from the Annual Report of FY2017. The assets and liabilities are end of year figures. So they aren't necessarily representative of the assets and liabilities that were on the books through the year because tow major acquisitions:
1/ 'Buy Right Cars' (29th July 2016), now part of 'Automotive Retail'
2/ 'Autosure' (31st March 2017), which I have grouped into 'Finance' above.
With 'Autosure' in particular, this came onto the Turners books on 31st March 2017. Yet no earnings for this business contributed to the 'Finance Division' result because 31st March 2017 was also the balance date. Thus the apparent sharp deterioration in 'Finance ROE' for the year is not what it seems.
Note 18 in AR2018 allows us to annualize the profit contribution from acquisitions.
1/ Buy Right Cars:
"If the acquisition had occurred on 1st April 2016, management estimates the group consolidated <snip> profit before acquisition for the year would have been $18.6m"
Since the group consolidated profit was $17.574m, the extra contribution to profit from 'Buy Right Cars' would have been: $18.6m - $17.574m = $1.026m
That in turn means the underlying ROE for the automotive retail business is significantly higher than in my table in post 1478.
ROE [Turners Automotive Retail Only]: ($1.03m + $6.67m) / $33.98m = 22.7%
2/ Autosure:
"If the acquisition had occurred on 1st April 2016, management estimates the group consolidated <snip> profit before acquisition for the year would have been $23m"
Since the group consolidated profit was $17.574m, the extra contribution to profit from 'Autosure' would have been: $23.0m - $17.574m = $5.44m
That in turn means the underlying ROE for the finance business is significantly higher than in my table in post 1478.
ROE [Turners Finance Only]: ($5.44m + $11.06m) / $137.73m = 12.0%
(Note: 12% is very similar to the previous year figure of 11.6% from FY2016)
My observation: Both the 'Automotive Retail' (formerly Auctions and Fleet) and 'Finance' divisions are operating with greater capital efficiency than in FY2016. But it is the Automotive Retail business that is giving a better return on investment than the finance division by a factor of almost two to one. And that is a big difference compared to FY2016!
SNOOPY
BC1: EBIT to Interest Expense Test, FY2017
Quote:
Originally Posted by
Snoopy
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
In recognition of TNR being a hybrid company, I am now performing the EBIT to Interest expense test on the finance section of TNR only (my post 1477).
Updating for the FY2017 financial year (ended 31-03-2017)
The underlying interest expense is shown under note 7 (AR2017) to be $11.350m. Of this ( $11.350m x 0.6618= ) $7.511m 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) = [$18.585m+$7.511m]/$7.511m = 3.47 > 1.2
=> Pass Test
SNOOPY
BC3: Tier 1 and Tier 2 Lending Covenants FY2017
Quote:
Originally Posted by
Snoopy
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<script src="https://adservice.google.co.nz/adsid/integrator.sync.js?domain=www.sharetrader.co.nz" ></script><script >processGoogleTokenSync({"newToken":"FBS"},5);</script> 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$121.892m) - ($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
I am continuing 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' (AR2017, p38), and my post 1470 on asset allocation.
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)
= (0.7051x$171.716m) - ($172.088m -$45.600 -$22.859)
= $17.448m
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': $10.320m
2/ 'Finance Receivables': $207.143m
3/ 'Receivables and deferred expenses': 0.7051 x $8.489m
4/ 'Reverse annuity mortgages': $9.222m
For the FY17 year these come to $232.678m
$17.448m > 0.2 x $232.678m = $46.536m (false)
=> Fail Test
SNOOPY