Keith_Lard wrote:
So are you stating that a company with £10 million of tangible assets, making £100,000 worth of profit can be valued the same as a company making a profit of £100,000 without any assets?
Companies are valued on their ability to trade, make profit in the future, size of their customer base (existing and potential), reputation, brand etc.
If a company had £10m of tangible asset and was making only £0.1m of profit, I'd say it had an extremely poor management team. A 1% return on assets would suggest an inability to utilise resources.
Any prospective buyer would look at the asset base to see what was needed and what could be cut free. If the assets are not generating any real value of income its suggests they are either obsolete or at very best not recovering their value. This would lead to an impairment of said assets to their recoverable amount. In short there would be no point in those assets unless they created a reasonable return.
Critically what you miss out in your assessment is
"valued the same as a company making a profit of £100,000 without any assets
IN THE SAME INDUSTRY"
This is a massive factor as if a company can make £100k of profit with no assets (because the rent them for example) are in the same industry as a company with £10m of assets and can only create the same amount of profit. Why would any potential buyer of these companies take on the burden of these failing assets.
So, in short, you were wrong again.
All largely irrelevant given that its Intangible assets which are in the Hull FC balance sheet, which are basically worth the paper they are written on and have no effect on the valuation of the company.
HTH
