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Afh Financial Group Net Income surged on 81.6% and EBITDA Margin increased on 2.7 pp from 20.4% to 23.1%

20 Jan 2020 • About Afh Financial Group ($AFHP) • By InTwits

Afh Financial Group reported FY2019 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Afh Financial Group is a fast growth stock: FY2019 revenue growth was 46.7%, 5 year revenue CAGR was 37.7% at FY2019 ROIC 16.5%
  • EBITDA Margin is expanding: 23.1% in FY2019 vs. 20.4% in FY2018 vs. 12.5% in FY2015
  • Afh Financial Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's in pair with industry average of 9.5%
  • CAPEX is quite volatile: £1m in FY2019, £0m in FY2018, £0m in FY2017, £0m in FY2016, £1m in FY2015
  • The company has highly profitable business model: ROIC is 16.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Afh Financial Group's Revenue jumped on 46.7%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.95 pp from 5.5% to 6.4% in FY2019. EBITDA Margin stuck to a growing trend at 2.7 pp per annum in the last 5 years.

Gross Margin decreased slightly on 1.0 pp from 54.4% to 53.4% in FY2019. SG&A as a % of Revenue decreased on 3.6 pp from 33.8% to 30.2% in FY2019. SG&A as a % of Revenue stuck to a declining trend at -4.0 pp per annum in FY2015-FY2019.

Net Income margin increased on 2.8 pp from 11.8% to 14.5% in FY2019. Net Income margin followed a growing trend at 2.3 pp per annum in the last 5 years.

Investments (CAPEX, working capital and M&A)

In FY2019 Afh Financial Group had CAPEX/Revenue of 1.1%. The company showed small CAPEX/Revenue decline of 0.63 pp from 1.8% in FY2016 to 1.1% in FY2019. It's average CAPEX/Revenue for the last three years was 0.82%. During FY2015-FY2019 CAPEX as a % of Revenue bottomed in FY2018 at 0.55%.

Return on investment

The company operates at good ROIC (16.5%) and ROE (14.6%). ROIC increased on 2.1 pp from 14.4% to 16.5% in FY2019. ROE increased on 3.0 pp from 11.6% to 14.6% in FY2019. During FY2015-FY2019 ROIC bottomed in FY2016 at 11.3% and was growing since that time. ROE grew at 1.0 pp per annum in FY2015-FY2019.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.2x and Debt / EBITDA is 0.9x. Net Debt / EBITDA surged on 2.0x from -1.8x to 0.2x in FY2019. Debt jumped on 389% while cash dropped on 44.5%. During FY2015-FY2019 Net Debt/EBITDA bottomed in FY2018 at -1.8x.

Afh Financial Group has no short term refinancing risk: cash is higher than short term debt (1,436.9%).

Valuation and dividends

Afh Financial Group's trades at EV/EBITDA 9.8x and P/E 15.1x.

Financial and operational results

FY ended 30 Nov -0001

Afh Financial Group ($AFHP) key annual financial indicators

mln. £201520162017201820192019/2018
Gross Profit10.96813.35917.96727.56539.68044.0%
Net Income1.1731.6773.0635.95410.81381.6%
Balance Sheet
Short Term Debt0.0630.0760.0772.2210.832-62.5%
Long Term Debt3.4323.3523.2811.06715.2411,328.4%
Cash flow
Revenue growth39.5%15.0%39.4%50.6%46.7%
EBITDA growth98.0%31.1%60.0%87.8%66.0%

Gross Margin52.3%55.4%53.4%54.4%53.4%-1.0%
EBITDA Margin12.5%14.3%16.4%20.4%23.1%2.7%
SG&A, % of revenue43.9%46.1%36.6%33.8%30.2%-3.6%
Net Income Margin5.6%6.9%9.1%11.8%14.5%2.8%
CAPEX, % of revenue3.8%1.8%0.8%0.5%1.1%0.6%

Net Debt/EBITDA-0.1x-1.0x-1.1x-1.8x0.2x2.0x

Peers in Financial Services

Below we provide Afh Financial Group benchmarking against other companies in Financial Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Development Securities(Investments) ($36JS)156.8%18.9%-48.8%40.1%
Corus Finance ($BD84)-99.5%13,313.3%10.4%12.9%
Bld Property Hldgs ($09GE)39.3%6.1%-0.2%8.5%
Sanctuary Housing ($BB21)5.3%7.2%0.3%5.5%
Housing Finance Corp ($68HB)9.1%10.9%8.2%3.0%
Median (14 companies)1.0%1.5%2.1%3.0%

Top companies by Gross margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Sanctuary Housing ($BB21)97.6%97.1%97.4%98.1%
Glh Hotels Ltd ($97KI)57.6%57.8%60.1%59.0%
Lewis(John)Partnership ($BD32)33.8%33.9%33.8%33.0%
Lewis(John) ($BC32)33.8%33.9%33.8%33.0%
Ashpol ($BC24)0.0%0.0%
Median (8 companies)33.8%32.7%31.9%16.5%

Top companies by EBITDA margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
T.H.F.C.(Indexed 2) ($90IL)97.9%97.1%96.2%96.4%
Housing Finance Corp ($68HB)97.9%97.1%96.2%96.4%
T.H.F.C.(Indexed) ($96JS)97.9%97.1%96.2%96.4%
T.H.F.C.(Social Housing Finance) ($96JP)97.9%97.1%96.2%96.4%
Bld Property Hldgs ($09GE)215.1%165.3%36.3%87.6%
Median (13 companies)44.3%39.7%29.2%52.7%

Top companies by CAPEX/Revenue, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Bld Property Hldgs ($09GE)59.2%84.6%53.0%55.6%
Sanctuary Housing ($BB21)60.0%31.0%33.3%42.3%
Mid Kent Water ($48HO)37.7%41.2%38.1%41.7%
Glh Hotels Ltd ($97KI)13.1%4.9%4.6%9.0%
Corus Finance ($BD84)9.6%6.6%5.7%
Median (13 companies)3.8%3.3%3.0%2.2%

Top companies by ROIC, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Corus Finance ($BD84)-19.6%2.1%8.4%10.7%
Lewis(John) ($BC32)18.6%19.8%22.0%8.2%
Lewis(John)Partnership ($BD32)18.6%19.8%22.0%8.2%
Glh Hotels Ltd ($97KI)4.9%5.7%5.6%7.5%
Development Securities(Investments) ($36JS)7.4%5.1%0.2%6.1%
Median (43 companies)3.2%3.9%2.6%1.0%

Top companies by Net Debt / EBITDA

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
T.H.F.C.(Indexed 2) ($90IL)20.3x22.6x24.3x28.0x
T.H.F.C.(Indexed) ($96JS)20.3x22.6x24.3x28.0x
T.H.F.C.(Social Housing Finance) ($96JP)20.3x22.6x24.3x28.0x
Housing Finance Corp ($68HB)20.3x22.6x24.3x28.0x
West Bromwich B.S. ($WBS)2.3x4.9x10.5x12.7x
Median (13 companies)3.1x4.0x4.6x8.6x