Fairfax Financial Holdings Ltd reports 190% Net Income decline
16.02.2017 • About Fairfax Financial Holdings Ltd (
$FFH) • By InTwits
Fairfax Financial Holdings Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Fairfax Financial Holdings Ltd doesn't have a profitable business model yet: 2016 ROIC is -0.8%
- Fairfax Financial Holdings Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's a lot of higher than industry average of 7.1%.
- CAPEX is quite volatile: 208 in 2016, 201 in 2015, 67.1 in 2014, 48.1 in 2013, 71.5 in 2012
- The company has unprofitable business model: ROIC is at -0.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Fairfax Financial Holdings Ltd ($FFH) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 8,023 | 5,945 | 10,018 | 9,580 | 9,300 | -2.9% |
| Net Income | 527 | -573 | 1,633 | 568 | -513 | -190.3% |
Balance Sheet
|
|---|
| Cash | 1,169 | 1,297 | 1,244 | 1,277 | 1,372 | 7.5% |
| Short Term Debt | 472 | 11 | 217 | 129 | 716 | 455.2% |
| Long Term Debt | 2,525 | 2,958 | 2,962 | 3,223 | 4,052 | 25.7% |
Cash flow
|
|---|
| Capex | 72 | 48 | 67 | 201 | 208 | 3.5% |
Ratios
|
|---|
| Revenue growth | 7.3% | -25.9% | 68.5% | -4.4% | -2.9% | |
| Net Income Margin | 6.6% | -9.6% | 16.3% | 5.9% | -5.5% | -11.4% |
| CAPEX, % of revenue | 0.9% | 0.8% | 0.7% | 2.1% | 2.2% | 0.1% |
| ROIC | 2.7% | -2.4% | 7.8% | 2.4% | -0.8% | -3.2% |
| ROE | 6.2% | -8.5% | 20.3% | 6.0% | -6.4% | -12.4% |
Fairfax Financial Holdings Ltd ($FFH) key quoterly financial indicators
| mln. $ | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 2,187 | 2,907 | 2,431 | 1,775 | -8.4% | 64.3% | -18.3% | -27.5% |
| Net Income | -51 | 239 | 1 | -702 | -122.6% | | -99.7% | -778.4% |
Balance Sheet
|
|---|
| Cash | 1,588 | 1,523 | 1,127 | 1,372 | -28.5% | 37.2% | -4.2% | 7.5% |
| Long Term Debt | 3,788 | 3,794 | 4,209 | 4,052 | 15.2% | 12.1% | 26.7% | 25.7% |
Ratios
|
|---|
| Net Income Margin | -2.3% | 8.2% | 0.1% | -39.5% | -11.8% | 18.7% | -14.2% | -43.8% |
Revenue and profitability
The company's Revenue decreased on 2.9%. Revenue decline showed acceleration in 16Q4 - it was 27.5% YoY.
Net Income marign dropped on 11.4 pp from 5.9% to -5.5% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 2.2% in 2016. CAPEX/Revenue increased slightly on 1.4 pp from 0.81% in 2013 to 2.2% in 2016. It's average level of CAPEX/Revenue for the last three years was 1.7%.
Return on investment
The company operates at negative ROIC (-0.81%) and ROE (-6.38%). ROIC decreased on 3.2 pp from 2.4% to -0.81% in 2016. ROE dropped on 12.4 pp from 6.0% to -6.4% in 2016.
Leverage (Debt)
Debt jumped on 42.3% while cash increased on 7.5%.
Management team
V Prem Watsa is a Fairfax Financial Holdings Ltd's CEO. V Prem Watsa is a founder and has spent 33 years at the company. David J Bonham is a The company's CFO. David J Bonham has spent 6 years at the company.
Appendix 1: Peers in Financial
Below we provide Fairfax Financial Holdings Ltd benchmarking against other companies in Financial 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 |
|---|
| Grenville Strategic Royalty Corp ($GRC) | | | | 317.2% | |
| StorageVault Canada Inc ($SVI) | | 22.2% | 7.5% | 111.8% | |
| Slate Retail REIT ($SRT.UN) | | 316.8% | 229.7% | 92.5% | 21.6% |
| Mogo Finance Technology Inc ($GO) | | 13.7% | 34.6% | 86.0% | 14.6% |
| Morguard Corp ($MRC) | | 27.2% | 9.2% | 58.8% | 4.6% |
| |
|---|
| Median (53 companies) | | 7.5% | 9.0% | 3.6% | 5.8% |
|---|
| Fairfax Financial Holdings Ltd ($FFH) | | -25.9% | 68.5% | -4.4% | -2.9% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Olympia Financial Group Inc ($OLY) | 80.9% | 82.6% | 83.2% | 84.5% | 83.5% |
| Morguard Corp ($MRC) | 74.0% | 69.9% | 68.6% | 76.5% | 75.5% |
| Mogo Finance Technology Inc ($GO) | 70.4% | 64.5% | 63.4% | 62.3% | |
| StorageVault Canada Inc ($SVI) | 18.2% | 22.6% | 18.3% | 52.4% | |
| Clarke Inc ($CKI) | 28.1% | 20.0% | 18.9% | 43.4% | 41.6% |
| |
|---|
| Median (9 companies) | 28.1% | 30.7% | 28.3% | 43.4% | 30.3% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Firm Capital Mortgage Investment Corp ($FC) | 87.6% | 87.9% | 88.8% | 86.6% | |
| Equitable Group Inc ($EQB) | 88.1% | 87.4% | 86.0% | 84.7% | 83.0% |
| Atrium Mortgage Investment Corp ($AI) | 79.8% | | | 81.9% | 83.2% |
| Trez Capital Mortgage Investment Corp ($TZZ) | | | | 76.2% | |
| First National Financial Corp ($FN) | 67.8% | 76.5% | 77.1% | 74.6% | |
| |
|---|
| Median (37 companies) | 43.7% | 33.5% | 39.8% | 32.5% | 43.1% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Dundee Corp ($DC.A) | 10.3% | 14.1% | 88.8% | 123.6% | |
| Gazit-Globe Ltd ($GZT) | 80.2% | 43.3% | 52.1% | 69.3% | 95.5% |
| First Capital Realty Inc ($FCR) | 127.9% | 76.1% | 73.8% | 56.7% | 79.7% |
| Killam Properties Inc ($KMP) | 80.7% | 114.1% | 143.5% | 46.7% | 59.9% |
| StorageVault Canada Inc ($SVI) | 150.5% | 73.3% | 79.1% | 21.4% | |
| |
|---|
| Median (55 companies) | 0.5% | 0.5% | 0.6% | 0.7% | 0.6% |
|---|
| Fairfax Financial Holdings Ltd ($FFH) | 0.9% | 0.8% | 0.7% | 2.1% | 2.2% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| CI Financial Corp ($CIX) | | | | | 24.1% |
| FirstService Corp ($FSV) | | | | | 17.4% |
| IGM Financial Inc ($IGM) | 14.2% | 14.2% | 13.7% | 13.7% | 13.1% |
| Alaris Royalty Corp ($AD) | 9.5% | 10.1% | 10.7% | 7.3% | 12.3% |
| Genworth MI Canada Inc ($MIC) | 11.9% | 9.6% | 9.7% | 9.5% | 9.4% |
| |
|---|
| Median (55 companies) | 4.8% | 4.3% | 3.9% | 3.5% | 3.2% |
|---|
| Fairfax Financial Holdings Ltd ($FFH) | 2.7% | -2.4% | 7.8% | 2.4% | -0.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Element Financial Corp ($EFN) | 140.2x | 31.9x | 37.6x | 79.9x | 22.6x |
| First National Financial Corp ($FN) | 34.3x | 33.7x | 40.9x | 37.4x | |
| StorageVault Canada Inc ($SVI) | 11.2x | 9.7x | 13.6x | 35.7x | |
| Gazit-Globe Ltd ($GZT) | 12.8x | 12.7x | 15.3x | 22.1x | 15.2x |
| Equitable Group Inc ($EQB) | 11.8x | 10.2x | 9.8x | 12.3x | 13.7x |
| |
|---|
| Median (28 companies) | 5.3x | 4.6x | 4.7x | 6.0x | 7.8x |
|---|
