Orange Flag 2: FY2018 results
Quote:
Originally Posted by
winner69
By the way the reported EPS of 15% was boosted by having a lower tax rate this year v last year. (Normalised you could say it was less than 10% but does it really matter when nobody knows what the F19 tax rate will be)
The tax rate for DPC/TNR/TRA (I will call it Turners Automotive Group, the new name going forwards) has certainly varied wildly even since FY2015. The first factor in this is that existing tax losses had to be used up. Then there were 'asset sales' to distort the tax take. The 'normal' company tax rate is 28%. However companies tend to pay provisional tax. That means that some tax payments for the current tax year roll over to the next. And when there are significant business changes over the year, the 'catch up' tax can significantly distort tax paid in any particular year. The table below shows the actual tax rate paid by Turners Automotive Group from FY2015 to FY2018.
Actual Tax Paid |
Financial Year |
Tax paid {A} |
Net Profit Before Tax {B} |
Net Profit After Tax {B}-{A) |
Tax rate paid {A}/{B} |
2015 |
$0.956m |
$19.006m |
$18.050m |
5% |
2016 |
$5.949m |
$21.551m |
$15.602m |
28% |
2017 |
$7.057m |
$24.631m |
$17.574m |
29% |
2018 |
$7.773m |
$31.133m |
$23.360m |
25% |
I don't know exactly why the tax rate has dropped for FY2018. But asset sales that are not subject to income tax could be one reason. And once an asset is sold, it cannot be sold again. So including such sales as profits are distortionary for inter year comparatory purposes.
For my own comparisons year to year, I look to take out one off asset sales and foreign exchange gains and losses. I also use a consistent tax rate (usually 28%) and work out the tax that would have been paid had none of those previously mentioned distortions existed.
Snoopy Modelled Tax Paid |
Financial Year |
Tax paid {A} |
Snoopy modelled Net Profit Before Tax {B} |
Snoopy modelled Net Profit After Tax {B}-{A) |
Tax rate paid {A}/{B} |
2015 |
$4.748m |
$16.958m |
$12.210m |
28% |
2016 |
$5.949m |
$21.281m |
$15.332m |
28% |
2017 |
$6.529m |
$23.318m |
$16.789m |
28% |
2018 |
$8.437m |
$30.133m |
$21.696m |
28% |
The fact that declared tax rates vary so much is an 'Orange Flag' to me that means a business is evolving. Thus extreme care is needed when projecting current declared after tax earnings trends into the future.
SNOOPY