external headwinds mask a great growth story, page-19

One thing I've done in the past, with businesses where R&D features heavily, is to capitalise all R&D without applying any amortisation charge, and then see what the trend in ROC looks like. So this would be a ROC where the numerator has all R&D charges added back (those expensed, and any amortisation charges) and the denominator becomes increasingly bloated with accumulating R&D expense.

I've done this, in the past, with IFM and RMD.

So here I'm thinking of R&D as an investment with no life limit (no amortisation/depletion). I figure, if the ROC remains healthy over time (ie, substantially above the cost of capital), and there is no worrying trend, then the bulk of the R&D is clearly growing the business. If, however, a poor ROC results, then the exercise can be repeated by capitalising only a proportion of the R&D. It can be repeated for different proportions of R&D capitalisation. If almost any proportion results in a poor ROC (or trend of) then it can probably be inferred that the R&D is doing no more than helping the business to stay afloat.

Perhaps unconventional, and perhaps even a lot of rubbish. But there you go, I thought I'd put it out there.