Ann: Non-Renewal of JLR DLA & Revised FY2015 Profit Guidance, page-17

Just keep in mind that PE's based on pro-forma results re often not all that instructive in terms of estimating the value of a business. The earnings that matter are those that can do one of two things: (1) be re-invested to make the pie larger tomorrow, or (2) be converted into dividends.

There are two very key things to consider here. First, IFM has been spending increasingly larger sums, I mean vastly larger, on R&D in the last few years. Second, current R&D amortization expense is an accounting entry, but does not reduce true earnings.

So, if you believe that the increasing R&D spend is required just for IFM to keep it's head above water, then sure, write it off (though add back the amortization). However, if a portion of the R&D expenditure is really an investment in the in the future, then true earnings may be understated (MAY, we each have to make our own assessment).

If this is the case, ie a portion of the R&D is actually an investment in the future, then there are two possible and potentially very powerful drivers for a re-rating of IFM: (1) the investment may lead to substantial future business, or (2) the R&D spend might become smaller relative to revenues, if the business grows, thus leading to increased cash-flow, or (3) both of these factors might powerfully combine.

Nothing is certain, but we need to consider what is possible.