Transbotics Acquisition Details
Quote:
Originally Posted by
Snoopy
Fairly light on detail with this announcement. We have thirty new members in the Scott's team as a result of buying Transbotics. Transbotics do Automotive Vehicle Guidance systems. The completion of the transaction announcement on 8th June says Transbotics has revenues of US$4.5m to US$11.0m over the past five years. Yet no mention of how much Scott's paid for the business? I guess ultimately we will find out when the AR comes out at the end of the year?
I have decided to tie up a few loose ends on this thread.
'Transbotics' supplies automated guided vehicles (AGVs) , and is based in North Carolina in the USA. The aim is to provide reliable automated material handling solutions for production and warehouse facilities.
From information from AR2018 p61 and p62, the total paid for Transbotics (USA) was $4.873m on 31st May 2018. $3.438m was paid in cash and $1.435m will be an earn out payment. The 31st May acquisition date means that Transbotics was on the books for just three months of FY2018 for Scott Technology. Extrapolating from this three month period to try and get an idea of revenue and EBITDA figures for the year:
Annualised Transbotics Revenue: 4 x $4.0m = $16m
Annualised Transbotics EBITDA: 4 x $0.8m = $3.2m
Last three months of FY2018 Transbotics EBITDA Margin: $0.8m/$4.0m = 20%
SNOOPY
Alvey Acquisition Details
Quote:
Originally Posted by
Snoopy
Alvey’s last year’s annual revenue was $56.5m. That price represented an EBITDA multiple of approximately 4.5 times. So EBITDA for Alvey’s most recent year must have been:
$56.5m / 4.5 = $12.5m
To calculate the NPAT of the acquisition under Scott’s ownership, we need to subtract the ‘ITDA’ bits from this. Let’s do that.
‘I’ (Interest payable): Because the Alvey purchase was made by cash, the ongoing interest bill associated with the purchase is zero
There is no information on Alvey’s depreciation or amortisation bills. But because the business looks like a smaller version of Scott’s, (combining intellectual property and spread international manufacturing facilities), I have decided to treat it as a small version of Scott’s and work out the depreciation and amortisation by scaling the Scott figures in proportion to the revenue of both companies before the merger.
‘D’ (Depreciation ) for Scott’s was $1.694m. Scaling according to company revenue, I estimate the annual depreciation at Alvey to be:
$1.694m x ($56.5m/$132.5m) = $0.722m
‘A’ (Amortisation) for Scott’s was $1.293m. However, on closer inspection, almost all of this ($1.261m) was a result of amortizing the recently acquired ‘Bladestop’ technology. IMO it is not reasonable to assume that Alvey has similarly spent a large amount of money on externally acquired intellectual property which must be similarly amortised. If I remove the ‘bladestop adjustments‘ from Scott’s accounts, I get a representative amortisation for Alvey of :
($1.293m - $1.261m) x ($56.5m/$132.5m) = $0.014m
So now we have enough information to calculate EBT for Alvey.
EBT = EBITDA –I –D –A = $12.5m - $0m - $0.722m - $0.014m = $11.764m
Assuming a New Zealand tax rate of 28% (Note: this is likely a wrong assumption, but I don’t want to make an uninformed guess about EU tax rates and tax subsidies that may exist), I get an incremental NPAT for the soon to be Scott owned Alvey of:
$11.764m x 0.72 = $8.470m
This is the kind of gain in net profit after tax I would expect once it is bedded in, and I must say it looks very juicy!
Alvey specialises in palletising, conveying and warehouse automation and is based in Europe. Alvey was acquired by Scott Technology on 23rd April 2018.
From information from AR2018 p61 and p62, the total paid for Alvey (Europe) was $19.303m on 23rd April 2018. $14.522m was paid in cash and $4.781m will be an earn out payment. The 23rd April acquisition date means that Alvey was on the books for just one hundred days of FY2018 for Scott Technology. Extrapolating from this period to try and get an idea of revenue and EBITDA figures for the year:
Annualised Alvey Revenue: (365/100) x $26.7m = $97.5m
Annualised Alvey EBITDA: (365/100) x $0.9m = $3.3m
Last three months of FY2018 Alvey EBITDA Margin: $3.3m/$97.5m = 3.4%
This doesn't compare well with the previous one year result, as noted in the quoted post above, pre-acquisition.
Previous Year Alvey EBITDA Margin: $12.5m/$56.5m = 22.1%
SNOOPY
FY2018 Profits: Forecast vs Reality
Quote:
Originally Posted by
Snoopy
If we add to this the underlying profitability of Scott Technology today, I get an underlying profitability for the combined ‘Scott’ and ‘Alvey’ group of:
$8.959m -$0.502m + $8.470m = $16.927m
This projection assumes no profit growth or decline from either company.
I do not expect the Scott Technology result for FY2018 to be this high, because Alvey will have only been owned for part of FY2018. Nevertheless I believe this figure is representative of the ongoing profitability of the group and should be used to assess value ahead of whatever the actual FY2018 result turns out to be.
With 74.681m shares on issue, Scott/Alvey should have ‘eps’ figures of:
$16.927m / 74.681m = 22.7cps
With a share price of $3.50, this means Scott’s is currently trading on a projected PE of:
$3.50/ 0.227 = 15.4
Note that this projection does not include the expected future ramp up of Meat Industry Robotics work to be done in association with major shareholder JBS. Compared to some of the sky high valuations on the market at the moment and with much growth to come, something around $3.50 is looking reasonable
Normalised Profit Calculation FY2018 (Refer AR2018 p33)
Declared Net Profit for FY2018 |
$10.772m |
add Loss on Property Plant and Equipment Sales |
$0.021m |
add Due Diligence Expenses |
0.72 x $0.271m |
add Unrealised Forex Losses |
0.72 x $0.271m |
add Fair Value Derivative Losses held as Fair Value Hedges |
0.72 x $1.579m |
add Unrealised Interest Rate Swap Contract losses |
0.72 x $0.043m |
less Foreign Exchange Gains |
0.72 x ($1.627m) |
less Fair Value Gains on Firm Commitments |
0.72 x ($1.579m) |
equals Normalised Net Profit |
$10.043m |
My previous forecast profit in the post above assumes a full years contribution from Alvey which didn't happen. Adjusting for that, the forecast was:
= $16.927m - [ (365-100)/365 ] x $8.470m = $10.777m
To calculate this I had assumed a drop in profit, due to a net interest annual income drop to $0.162m
$0.664m - $0.162m = $0.502m
Actual interest income received was a little more, at $0.369m.
SNOOPY