Ergoresearch Ltd reports 28.0% EBITDA growth while 7.6% Revenue decline
28.10.2016 • About Ergoresearch Ltd (
$ERG) • By InTwits
Ergoresearch Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Ergoresearch Ltd doesn't have a profitable business model yet: FY2016 ROIC is 0.6%
- EBITDA Margin is quite volatile: 7.8% in FY2016, 5.6% in FY2015, 17.3% in FY2014, 15.5% in FY2013, 16.3% in FY2012
- Ergoresearch Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.0%. At the same time it's a lot of higher than industry average of 44.7%.
- CAPEX is quite volatile: 0.38 in FY2016, 0.13 in FY2015, 0.33 in FY2014, 0.47 in FY2013, 0.12 in FY2012
- The company has potentially unprofitable business model: ROIC is at 0.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Ergoresearch Ltd ($ERG) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 8.231 | 13.469 | 17.862 | 15.498 | 14.327 | -7.6% |
| Gross Profit | 2.582 | 4.313 | 5.983 | 3.779 | 3.823 | 1.1% |
| SG&A | 1.366 | 2.545 | 3.683 | 3.533 | 3.302 | -6.5% |
| EBITDA | 1.345 | 2.089 | 3.093 | 0.868 | 1.111 | 28.0% |
| Net Income | 0.515 | 11.884 | 1.235 | -6.981 | 0.112 | |
Balance Sheet
|
|---|
| Cash | 1.445 | 6.679 | 2.695 | 2.075 | 2.009 | -3.2% |
| Short Term Debt | 0.269 | 1.397 | 1.571 | 1.031 | 0.361 | -65.0% |
| Long Term Debt | 0.491 | 4.095 | 1.872 | 0.841 | 0.000 | -100.0% |
Cash flow
|
|---|
| Capex | 0.118 | 0.469 | 0.326 | 0.127 | 0.377 | 196.8% |
Ratios
|
|---|
| Revenue growth | 14.1% | 63.6% | 32.6% | -13.2% | -7.6% | |
| EBITDA growth | 28.6% | 55.3% | 48.1% | -71.9% | 28.0% | |
| Gross Margin | 31.4% | 32.0% | 33.5% | 24.4% | 26.7% | 2.3% |
| EBITDA Margin | 16.3% | 15.5% | 17.3% | 5.6% | 7.8% | 2.2% |
| Net Income Margin | 6.3% | 88.2% | 6.9% | -45.0% | 0.8% | 45.8% |
| SG&A, % of revenue | 16.6% | 18.9% | 20.6% | 22.8% | 23.0% | 0.2% |
| CAPEX, % of revenue | 1.4% | 3.5% | 1.8% | 0.8% | 2.6% | 1.8% |
| ROIC | 23.1% | 13.6% | 10.8% | -0.6% | 0.6% | 1.2% |
| ROE | 13.0% | 88.7% | 4.8% | -27.6% | 0.5% | 28.1% |
| Net Debt/EBITDA | -0.5x | -0.6x | 0.2x | -0.2x | -1.5x | -1.2x |
Ergoresearch Ltd ($ERG) key quoterly financial indicators
| mln. CAD | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 4 | 4 | 3 | 4 | -14.5% | -3.1% | -9.0% | -3.7% |
| EBITDA | 0 | 0 | 0 | 0 | -54.3% | -4.3% | | |
| Net Income | 0 | 0 | -0 | 0 | -92.9% | -82.9% | | |
Balance Sheet
|
|---|
| Cash | 1 | 2 | 2 | 2 | -52.1% | -12.1% | 22.7% | -3.2% |
| Short Term Debt | 1 | 1 | 1 | 0 | -20.7% | -10.9% | -48.2% | -65.0% |
| Long Term Debt | 1 | 0 | 0 | 0 | -54.9% | -100.0% | -100.0% | -100.0% |
Ratios
|
|---|
| Gross Margin | 26.5% | 25.9% | 24.6% | 29.3% | -7.2% | -1.9% | 8.9% | 10.9% |
| EBITDA Margin | 9.3% | 7.3% | 4.1% | 9.7% | -8.1% | -0.1% | 7.5% | 10.7% |
| Net Income Margin | 0.6% | 0.0% | -5.0% | 6.3% | -7.0% | -0.0% | 2.0% | 184.5% |
Revenue and profitability
The company's Revenue decreased on 7.6%. Annual revenue decline showed slowdown in FY16Q4 - revenue decreased on 3.7%. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.2 pp from 5.6% to 7.8% in FY2016.
Gross Margin increased on 2.3 pp from 24.4% to 26.7% in FY2016. SG&A as a % of Revenue showed almost no change in FY2016.
Net Income marign surged on 45.8 pp from -45.0% to 0.78% in FY2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 2.6% in FY2016. The company's CAPEX/Revenue decreased slightly on 0.85 pp from 3.5% in FY2013 to 2.6% in FY2016. It's average CAPEX/Revenue for the last three years was 1.8%.
Return on investment
The company operates at low ROIC (0.61%) and ROE (0.52%). ROIC increased slightly on 1.2 pp from -0.56% to 0.61% in FY2016. ROE jumped on 28.1 pp from -27.6% to 0.52% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is -1.5x and Debt / EBITDA is 0.3x. Net Debt / EBITDA dropped on 1.2x from -0.2x to -1.5x in FY2016. Debt dropped on 80.7% while cash decreased on 3.2%.
Appendix 1: Peers in Industrial
Below you can find Ergoresearch Ltd benchmarking vs. other companies in Industrial industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Progressive Waste Solutions Ltd ($BIN) | | 16.1% | 7.8% | 1.8% | 59.4% |
| Baylin Technologies Inc ($BYL) | | 16.5% | -44.0% | -4.1% | 47.5% |
| CCL Industries Inc ($CCL.B) | | 44.4% | 36.8% | 17.5% | 30.8% |
| Stantec Inc ($STN) | | 17.9% | 13.3% | 14.4% | 30.5% |
| Avigilon Corp ($AVO) | | 72.6% | 41.9% | 17.7% | 22.2% |
| |
|---|
| Median (52 companies) | | 5.1% | 10.1% | 8.1% | 2.9% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Pure Technologies Ltd ($PUR) | 77.9% | 78.0% | 77.5% | 75.6% | |
| WSP Global Inc ($WSP) | 81.1% | 83.2% | 81.0% | 74.0% | 76.7% |
| Avigilon Corp ($AVO) | 49.3% | 54.2% | 56.6% | 57.4% | 52.0% |
| Stantec Inc ($STN) | 55.0% | 54.7% | 54.9% | 54.5% | 54.1% |
| IWG Technologies Inc ($IWG) | 53.3% | 54.0% | 49.0% | 47.8% | 54.9% |
| |
|---|
| Median (50 companies) | 23.6% | 23.4% | 21.7% | 21.7% | 22.2% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Canadian National Railway Co ($CNR) | 46.5% | 45.9% | 46.8% | 50.9% | 54.3% |
| Canadian Pacific Railway Ltd ($CP) | 26.1% | 32.4% | 43.7% | 48.9% | 51.6% |
| Badger Daylighting Ltd ($BAD) | 25.7% | 25.9% | 27.9% | 24.6% | 24.2% |
| IWG Technologies Inc ($IWG) | 12.7% | 25.5% | 20.0% | 24.0% | 26.9% |
| Winpak Ltd ($WPK) | 19.5% | 18.6% | 18.7% | 22.7% | 23.5% |
| |
|---|
| Median (54 companies) | 10.4% | 8.4% | 8.4% | 8.6% | 11.1% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Newalta Corp ($NAL) | 21.7% | 34.5% | 35.1% | 42.0% | 9.6% |
| Cargojet Inc ($CJT.A) | 7.0% | 6.3% | 54.1% | 41.3% | |
| Algoma Central Corp ($ALC) | 15.9% | 7.3% | 5.0% | 27.4% | 58.2% |
| Canadian Pacific Railway Ltd ($CP) | 20.2% | 20.2% | 21.9% | 22.7% | 19.0% |
| Canadian National Railway Co ($CNR) | 17.4% | 18.7% | 18.9% | 21.5% | 22.4% |
| |
|---|
| Median (55 companies) | 3.2% | 3.7% | 4.3% | 3.9% | 4.3% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| IBI Group Inc ($IBG) | 4.8% | -9.0% | 11.6% | 21.9% | 26.2% |
| IWG Technologies Inc ($IWG) | 17.0% | 36.3% | 23.4% | 27.2% | 25.7% |
| Winpak Ltd ($WPK) | 20.4% | 18.0% | 18.3% | 22.6% | 21.8% |
| Toromont Industries Ltd ($TIH) | 28.8% | 25.8% | 24.3% | 23.5% | 21.7% |
| Intertape Polymer Group Inc ($ITP) | 12.3% | 13.7% | 22.5% | 23.0% | 21.0% |
| |
|---|
| Median (56 companies) | 12.2% | 9.6% | 11.5% | 8.3% | 9.0% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Conifex Timber Inc ($CFF) | | 2.7x | 6.1x | 35.9x | 3.6x |
| Ag Growth International Inc ($AFN) | 2.9x | -0.1x | 2.1x | 14.1x | |
| Cargojet Inc ($CJT.A) | 1.5x | 1.5x | 31.5x | 12.9x | |
| Progressive Waste Solutions Ltd ($BIN) | 4.5x | 3.3x | 2.9x | 10.6x | 3.8x |
| Finning International Inc ($FTT) | 2.3x | 1.8x | 1.4x | 9.4x | 2.5x |
| |
|---|
| Median (50 companies) | 1.5x | 1.6x | 1.3x | 1.0x | 1.9x |
|---|
