Another British manufacturer no more

[WatcherZero]

Brush traction Group has just been bought by Wabtec for $33m, the company has a turnover of $55m so there must be some heavy debts in there.

http://profeng.com/news/rail-engineering-firm-snapped-up-by-us-giant

 

[route:oxford]

Brush traction Group has just been bought by Wabtec for $33m, the company has a turnover of $55m so there must be some heavy debts in there.

http://profeng.com/news/rail-engineering-firm-snapped-up-by-us-giant

I don't quite understand how you've come to the conclusion that a purchase of $33m for a company with a turnover of $55m equals heavy debts.

 

[WatcherZero]

Normally companies are valued at a multiple of their revenue (two to as much as ten depending on the industry), if a company is valued below its revenue its indicative that there is something else like debts depressing its value.

Went looking for the accounts but theirs a chain of ownership where Brush Traction is owned by FSK which is in turn owned by Melrose, they dont list any details of Brush Tractions financials in their accounts but do state that 2010 would be a tough year because of the end of the HST contract.

 

[jopsuk]

I'm sure I've seen that the "rule" for valueing a company is based on post-tax profit, not revenue? Of course, it's a pretty flexible rule.

 

[WillPS]

Turn-over/revenue means absolutely nothing. It's a figure businesses tout to make themselves look good. It says nothing about the viability of the business.

 

[Greenback]

It's the bottom line that counts!

 

[ian959]

WatcherZero, no one in their right mind would buy a business based upon a multiple of their revenue. Standard is usually a multiple of adjusted net profit.

 

[WatcherZero]

Youve obviously never worked in the telecommunications or retail sectors where even unproftable businesses are valued as much as 100 times their annual profits on their revenues. Also particually important in leveraging where a high revenue low profitability indicates a good takeover target. Heck look at Facebook, Spotify and Youtube, companies that have never made a profit in fact losing hundreds of millions a year since creation and valued at tens of billions.

 

[gordonthemoron]

or for instance Facebook which has never made a profit, but is worth rather a lot

 

[jon0844]

Once you go into tech, and telcoms, things do get very stupid indeed.

In fact, many buyouts seem to be for little more than acquiring IP or to simply get rid of the competition. Many services are also here today, gone tomorrow. However, that isn't stopping people trying to set something up with the sole aim of having a huge cash injection or buyout. There are enough, erm, idiots out there to acquire businesses with no idea on what they actually do or where they're going.

Augmented reality (you know, holding your phone up and moving it around with a camera view of the surroundings with info superimposed on top). A couple of years ago, starting with Layar, this was seem as the future - after all, it's just like out of the movies, from Sci-Fi to the military. All well and good, but who is using it? They're talking it up again now, as they try and figure out ways to monetise things.. like you holding your iPhone up and seeing a special offer at Starbucks in front of you (to save you looking in the shop window).. but who is using it? Who is LIKELY to use it in the future? Once you've got over the 'wow' factor, has it got any longevity at all?

Facebook has longevity, because as long as people have friends - including those they don't see or interact every day with - there's a benefit. Other services, like Tweeting your comments to the world - along with everyone else - may not have many benefits and could get boring. I've not Tweeted in over two weeks and doubt many people have been that bothered/upset!

 

[Wyvern]

Just a point of accuracy, since 1889, under the name Brush it was always a branch of an American Company.

Out of interest I'm attaching a photo from the 1930s when my Dad was an apprentice there.

 

[junglejames]

For the last few years it has been owned by FKI, a British firm as far as I know. Before that i think it was owned by the Germans. It is sold from company to company a few times by the seems of it, from country to country. May now be owned by the Americans (which actually is the nationality of the founder, Mr Brush), but as long as it retains the Brush name, it'll probably still be regarded as a British company. We shall see.
Also, whats happening with the other Brush companies? Brush Transformers etc etc??

 

[WatcherZero]

Still with FKI, so a Rolls Royce situation they also have considerably larger turnover (about 10x the size).

 

[route:oxford]

Youve obviously never worked in the telecommunications or retail sectors where even unproftable businesses are valued as much as 100 times their annual profits on their revenues. Also particually important in leveraging where a high revenue low profitability indicates a good takeover target. Heck look at Facebook, Spotify and Youtube, companies that have never made a profit in fact losing hundreds of millions a year since creation and valued at tens of billions.

I've never worked in the telecom or retail sectors...

But working in insolvency - I've been party to closing many of them down.

 

[ian959]

Youve obviously never worked in the telecommunications or retail sectors where even unproftable businesses are valued as much as 100 times their annual profits on their revenues. Also particually important in leveraging where a high revenue low profitability indicates a good takeover target. Heck look at Facebook, Spotify and Youtube, companies that have never made a profit in fact losing hundreds of millions a year since creation and valued at tens of billions.

Which bears out what I said - no one in their right mind would buy a business based on turnover.

As an accountant I know it happens but you would be very foolish to do it. Most of those foolish enough to do it end up in trouble (yes there are rare exceptions). Yes, high revenue low profitability may indicate a good takeover target but there are usually much more important factors behind the acquisition than simply the turnover.

 

[WatcherZero]

Good news for once, Rolls Royce is launching a 50/50 £2.75bn joint bid with Daimler for the German company Tognum which makes diesel engines for ships, heavy vehicles, trains, military vehicles and the oil and gas industry. Its the owner of MTU engines.