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Reitmans Canada Ltd EBITDA dropped on 58.1% in 2016 and Revenue showed almost no change

30.03.2016 • About Reitmans Canada Ltd ($RET) • By InTwits

Reitmans Canada Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Reitmans Canada Ltd doesn't have a profitable business model yet: FY2016 ROIC is -4.7%
  • EBITDA Margin is quite volatile: 3.0% in FY2016, 7.1% in FY2015, 7.0% in FY2014, 9.0% in FY2013, 12.4% in FY2012
  • Reitmans Canada Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.9%. At the same time it's in pair with industry average of 4.9%.
  • CAPEX is quite volatile: 33.4 in FY2016, 29.0 in FY2015, 34.5 in FY2014, 84.4 in FY2013, 59.2 in FY2012
  • The company has unprofitable business model: ROIC is at -4.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Reitmans Canada Ltd ($RET) key annual financial indicators

mln. CAD201220132014201520162016/2015
Gross Profit656628595567527-7.1%
Net Income48261113-25-284.1%
Balance Sheet
Short Term Debt122226.5%
Long Term Debt97542-53.4%
Cash flow
Revenue growth-3.7%-1.9%-4.0%-2.2%-0.2%
EBITDA growth-31.0%-28.9%-25.9%-0.4%-58.1%
Gross Margin64.4%62.8%61.9%60.4%56.2%-4.1%
EBITDA Margin12.4%9.0%7.0%7.1%3.0%-4.1%
Net Income Margin4.7%2.6%1.1%1.4%-2.6%-4.1%
SG&A, % of revenue58.3%59.8%61.6%59.1%58.1%-0.9%
CAPEX, % of revenue5.8%8.4%3.6%3.1%3.6%0.5%
Net Debt/EBITDA-1.5x-1.0x-1.7x-2.0x-4.1x-2.1x

Reitmans Canada Ltd ($RET) key quoterly financial indicators

mln. CADFY16Q1FY16Q2FY16Q3FY16Q4YoY change
Net Income-8-0-0-17-102.3%-102.1%-475.3%
Balance Sheet
Short Term Debt22226.5%6.5%6.5%6.5%
Long Term Debt3322-37.0%-41.2%-46.6%-53.4%
Gross Margin59.5%55.0%57.4%53.6%1.5%-4.0%-5.9%-7.4%
EBITDA Margin 0.9% 5.9% 6.1% -1.4%2.4%-3.1%-6.5%-8.3%
Net Income Margin -3.8% -0.1% -0.1% -6.8%2.7%-3.8%-5.5%-8.7%

Revenue and profitability

Reitmans Canada Ltd's Revenue showed almost no change in FY2016. Annual revenue decline showed slowdown in FY16Q4 - revenue increased on 2.5%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.64 pp from 6.9% to 7.6% in 2016.

Gross Margin decreased on 4.1 pp from 60.4% to 56.2% in FY2016. SG&A as a % of Revenue decreased slightly on 0.93 pp from 59.1% to 58.1% in FY2016.

Net Income marign decreased on 4.1 pp from 1.4% to -2.6% in FY2016.

Capital expenditures (CAPEX) and working capital investments

In FY2016 Reitmans Canada Ltd had CAPEX/Revenue of 3.6%. CAPEX/Revenue decreased on 4.9 pp from 8.4% in FY2013 to 3.6% in FY2016. Average CAPEX/Revenue for the last three years was 3.4%.Battling declining revenue the company made large investments to CAPEX (120% of EBITDA) but that didn't help at least in this year.

Return on investment

The company operates at negative ROIC (-4.66%) and ROE (-6.16%). ROIC decreased on 7.8 pp from 3.1% to -4.7% in FY2016. ROE decreased on 9.3 pp from 3.2% to -6.2% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is -4.1x and Debt / EBITDA is 0.1x. Net Debt / EBITDA dropped on 2.1x from -2.0x to -4.1x in FY2016. Debt dropped on 33.4% while cash dropped on 15.2%.

Appendix 1: Peers in Consumer, Cyclical

Below we provide Reitmans Canada Ltd benchmarking against other companies in Consumer, Cyclical 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 FY2012 FY2013 FY2014 FY2015 FY2016
Poydras Gaming Finance Corp ($PYD)539.9%
Restaurant Brands International Inc ($QSR)4.6%238.0%
Amaya Inc ($AYA)311.5%85.2%254.0%113.8%
NYX Gaming Group Ltd ($NYX)65.2%52.8%45.8%91.8%
Rainmaker Entertainment Inc ($RNK)-24.6%-45.0%30.1%56.4%
Median (49 companies)5.3%4.9%7.8%8.6%

Top companies by Gross margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
NYX Gaming Group Ltd ($NYX)91.3%86.7%88.3%85.6%
DEQ Systems Corp ($DEQ)77.5%78.4%84.7%82.7%
Second Cup Ltd/The ($SCU)86.6%85.1%72.7%81.1%
New Look Vision Group Inc ($BCI)71.8%72.6%72.6%78.7%
Cara Operations Ltd ($CAO)79.2%78.9%78.4%
Median (42 companies)34.1%31.8%31.9%30.6%

Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Westshore Terminals Investment Corp ($WTE)49.7%65.9%60.9%59.6%
Gamehost Inc ($GH)46.1%45.7%45.9%42.8%
Great Canadian Gaming Corp ($GC)16.8%41.1%40.1%36.6%
Restaurant Brands International Inc ($QSR)51.1%20.8%33.9%
Cara Operations Ltd ($CAO)9.6%22.6%32.6%
Median (46 companies)7.5%9.7%10.2%9.0%

Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Holloway Lodging Corp ($HLC)8.2%6.7%14.8%26.7%
WestJet Airlines Ltd ($WJA)7.9%19.5%18.6%22.5%
Westshore Terminals Investment Corp ($WTE)25.7%11.5%6.2%21.2%
Exchange Income Corp ($EIF)7.9%15.8%15.5%15.4%
Chorus Aviation Inc ($CHR.A)9.9%9.6%3.9%15.0%
Median (49 companies)2.7%3.1%3.4%2.8%

Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Partner Jet Corp ($PJT)-51.6%-50.8%85.1%51.1%
Westshore Terminals Investment Corp ($WTE)24.0%37.8%35.0%38.3%
Cara Operations Ltd ($CAO)24.7%35.1%
Air Canada ($AC)37.0%23.2%28.4%
BMTC Group Inc ($GBT)33.0%32.5%25.2%25.2%
Median (49 companies)9.2%9.7%9.9%7.7%

Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Poydras Gaming Finance Corp ($PYD)39.7x
Mountain China Resorts Holding Ltd ($MCG)317.1x29.0x
Rainmaker Entertainment Inc ($RNK)18.6x
Holloway Lodging Corp ($HLC)5.8x8.4x17.1x
AutoCanada Inc ($ACQ)4.2x4.7x6.4x8.0x
Median (38 companies)1.6x2.0x2.4x2.7x