BOTB ratio analysis

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BOTB Pty Ltd – Sell tickets both on-line and at airports and shopping centres for a spot the ball picture competition, there are over 180 cars to choose from as your winning prize. Each week consumers choose where they think the middle of the ball is on an image that has had the ball digitally removed from the photo. That same image is shown to a panel of judges who also mark where they think the centre is, the winner is the one closest to the judge’s position. The tickets vary in cost depending on the value of the car they have chosen for their prize. There is also an added option of paying extra for a year’s worth of free fuel and £10,000 cash prize.

The firm is certainly heading in the right direction when turning over a profit. In 2013 there was a modest 1.2% net profit margin, increasing to 5.1% in 2014 then in 2015 it jumped to 9.4% and slightly less in 2016 at 9.2%. From 2013 to 2016 that is an increase of 7% over the four years. So in the last financial year for every £1 that they take for the sale of a ticket they take £0.092 pounds sterling in profit. So a £7 ticket would clear £0.644. It doesn’t sound like much but with the massive turnover of sales it sure does add up to a sizable profit.

The firm has a huge 28.7% return on assets in the last financial year, so for every £1 of total assets the firm is generating £0.287 on assets. BOTB management are efficiently using its assets to make a profit. Being a business mainly on-line it’s only net assets are their cash balances, the 970 year leasehold of their office properties and their few display cars they have at the airports and shopping centres so they do not have lots of capital (large fixed assets). In actual fact, the only differentiating factor each year is the amount of cash balance the firm has. Comparing my firm to someone’s such as Martin’s Ryman’s Healthcare who are mainly capital based would be rather pointless.

Even in 2015 the return on assets ratio was 19.5% both years up significantly from the 213 and 2014, this is due to their focus turning their sales model to an on-line platform and reducing the shopping centres and airport locations. On-line sales represented 70.5% of their total revenue in 2016. Their on-line sales increased by 57.5% in 2015 and another 40.6% in 2016. They also went to weekly draws from fortnightly ones during this time which in turn increased their sales.

Earnings per share showed a measly .01 pence per share in 2013 up to .09 pence per share for the last two years. In 2015 shareholders received a special dividend due to the firm’s high cash balance. In 2016 shareholders received the good news that they were to receive a special interim dividend due to the firm receiving a payback on tax they overpaid dating back to 2010.

Dividends per share showed BOTB paid out a low .01 pence per share in 2013 and 2014 then increased to .16 pence per share in 2015 and .21 pence in 2016. BOTB are paying out more than their earnings per share. Shareholders are now receiving value, going from .01 pence per share to .16 is a good return on their investment, the increase in 2016 would have been paying shareholders the share of profits received from overpaid tax they received.

Price earnings ratio told me how much the market is willing to pay for BOTB’s earnings. Average is between 15-20. In 2013 this ratio was a little over this at £26.64 however it reduced to a better £18.37 in 2014, then in 2014 it dropped to a low £9.85. This is great for investors if it were to remain at this level although it did not, increasing again to an above average of £23.72 in 2016. It’s difficult to judge this with other investment opportunities and finding a firm in a similar industry to compare it to would also prove difficult, I am not aware of very many other private organisations that are similar to what BOTB do. This ratio is difficult and I would not use as one to determine an investment decision on its own, there are world wide market trends that could affect this ratio including the Black Market in 2015 which saw the China finance market crash sending the finance world into a spin with flow on affects felt throughout the market.

Current ratio has positively been reducing over the years and is at a comfortable level, with BOTB having very little current liabilities. It has dropped from 3.42 in 2013 to 1.02 in 2016. BOTB could confidently pay off their short term debts.

Days inventory final results are positively reduced each year from 71.3 to 29.02 in 2016, that is very efficient and as the firm is not a factory or retail store, I would expect that. As BOTB do not generate sales from stock I would not pay much attention to this ratio.

Asset turnover results are very positive increasing a large amount each year from £7.31to £24.06 in 2016. This shows BOTB are efficiently turning over their assets, or more to the point BOTB have a very high sales turnover and revenue. BOTB don’t really have many assets though mainly cash at bank, I don’t think this is very sustainable.

I’m comfortable that BOTB have the profit to cover the debt/equity. However, their equity is reducing each year, the only liabilities the firm have are taxes and its general trade and others payable. Tax is increasing because they are earning more cash profit however their trading expenses are increasing significantly. The form does not have any debts with banks, neither does it have any capital as such so I wouldn’t seem use this ratio to make an investment elision for this firm.

Return on equity ratio showed;

2016 2015 2014 2013
55.96% 102.35% 12.37% 2.77%

Well shareholders should be very happy with the return they are receiving, it’s really extremely impressive and BOTB are generating big profits with little capital. Although the firms equity is reducing too which isn’t so positive.

Return on net operating assets:

2016 2015 2014 2013
211.48% 388.12% 51.16% 8.54%

 BOTB’s assets are really it’s cash at bank and it returns on that very well, especially the last two years.

Profit margin:

2016 2015 2014 2013
8.79% 29.22% 5.04% 1.17%

The profit margin has varied, especially in 2015 so an average over the four years is 11.05% which is very good. The firm did receive some overpaid taxes back.

Economic profit = RNOA – cost of capital x NOA

2016 2015 2014 2013
£846,274 £2,553,856 £283, 757 -£12,883

The firm has no borrowings costs to calculate.

Efficiency Ratio

Asset Turnover = Sales/NOA

2016 2015 2014 2013
24.06 13.28 10.15 7.31

In 2016. BOTB’s OI was £888,276. The company had NOA of £420,022 in 2016 and £882,016 in 2013. It is not a growth company. It’s RNOA was 211.48% in 2016 however it has varied significantly over the four years. In 2016 BOTB had 10,114,580 shares on issue and economic profit of £846,274 which represents about £0.08 per share. The market price per share that same year was £2.19 which grew significantly from the previous years, 2015 bring £0.91 that’s a 240% increase. Back in 2013 it’s market price per share was £0.218 and then the firms economic profit was negative, however since then investors have received a good return and now it’s hare prices have also grown.

The firm is very efficient to generates sales, in 2016 for each pound sterling of net operating assets BOTB generated £24.06. However, it assets, being cash at bank is reducing and shareholders have received these profits through dividend payments over the last couple of years. Having an okay profit margin and a good ATO makes a decent return of value to the shareholders.

The firm have received a payback of taxes previous overpaid which added to its profits and are investing in its website.

BOTB have had a successful last couple of years since focusing their efforts to their website and generating on-line sales.

BOTB Spreadsheet

Draft Ass #2 Step #7-9


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