Fortis Inc/Canada Debt jumped on 86.7% in 2016 and Net Debt / EBITDA surged on 4.0x from 5.3x to 9.2x
16.02.2017 • About Fortis Inc/Canada (
$FTS) • By InTwits
Fortis Inc/Canada reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Fortis Inc/Canada has high CAPEX intensity: 5 year average CAPEX/Revenue was 30.4%. At the same time it's in pair with industry average of 33.0%.
- CAPEX is quite volatile: 140 in FY2016, 130 in FY2015, 50 in FY2014, 146 in FY2013, 176 in FY2012
- The company has potentially unprofitable business model: ROIC is at 4.4%
- It operates with medium-size leverage: Net Debt/EBITDA is 9.2x while industry average is 8.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Fortis Inc/Canada ($FTS) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 3,654 | 4,047 | 5,401 | 6,757 | 6,838 | 1.2% |
| Gross Profit | 1,264 | 1,393 | 3,204 | 4,166 | 4,497 | 7.9% |
| EBITDA | 1,262 | 1,376 | 1,680 | 2,268 | 2,435 | 7.4% |
| Net Income | 362 | 410 | 379 | 805 | 660 | -18.0% |
Balance Sheet
|
|---|
| Cash | 154 | 72 | 230 | 242 | 269 | 11.2% |
| Short Term Debt | 302 | 947 | 1,063 | 921 | 1,482 | 60.9% |
| Long Term Debt | 6,169 | 6,841 | 10,406 | 11,271 | 21,277 | 88.8% |
Cash flow
|
|---|
| Capex | 1,146 | 1,175 | 1,725 | 2,131 | 1,912 | -10.3% |
Ratios
|
|---|
| Revenue growth | -2.2% | 10.8% | 33.5% | 25.1% | 1.2% | |
| EBITDA growth | 5.7% | 9.0% | 22.1% | 35.0% | 7.4% | |
| Gross Margin | 34.6% | 34.4% | 59.3% | 61.7% | 65.8% | 4.1% |
| EBITDA Margin | 34.5% | 34.0% | 31.1% | 33.6% | 35.6% | 2.0% |
| Net Income Margin | 9.9% | 10.1% | 7.0% | 11.9% | 9.7% | -2.3% |
| CAPEX, % of revenue | 31.4% | 29.0% | 31.9% | 31.5% | 28.0% | -3.6% |
| ROIC | 6.4% | 6.1% | 5.4% | 6.0% | 4.4% | -1.6% |
| ROE | 8.1% | 8.1% | 5.4% | 9.8% | 5.6% | -4.2% |
| Net Debt/EBITDA | 5.0x | 5.6x | 6.7x | 5.3x | 9.2x | 4.0x |
Fortis Inc/Canada ($FTS) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,757 | 1,477 | 1,510 | 2,094 | -8.3% | -4.0% | -3.6% | 20.5% |
| EBITDA | 600 | 535 | 579 | 721 | -0.5% | -1.5% | 2.3% | 29.7% |
| Net Income | 181 | 125 | 149 | 205 | -17.0% | -52.5% | -12.4% | 33.1% |
Balance Sheet
|
|---|
| Cash | 232 | 296 | 301 | 269 | -22.4% | -62.9% | -13.3% | 11.2% |
| Short Term Debt | 900 | 676 | 568 | 1,482 | -14.1% | -35.9% | -41.1% | 60.9% |
| Long Term Debt | 10,953 | 11,603 | 12,089 | 21,277 | -1.6% | 4.3% | 7.1% | 88.8% |
Ratios
|
|---|
| Gross Margin | 60.6% | 67.5% | 67.9% | 67.3% | 4.1% | 2.0% | 1.9% | 7.3% |
| EBITDA Margin | 34.1% | 36.2% | 38.3% | 34.4% | 2.7% | 0.9% | 2.2% | 2.4% |
| Net Income Margin | 10.3% | 8.5% | 9.9% | 9.8% | -1.1% | -8.6% | -1.0% | 0.9% |
Revenue and profitability
The company's Revenue increased slightly on 1.2%. Revenue growth showed acceleration in 16Q4 - it increased 20.5% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 56.1 pp from -5.8% to 50.3% in 2016.
Gross Margin increased on 4.1 pp from 61.7% to 65.8% in 2016.
Net Income marign decreased on 2.3 pp from 11.9% to 9.7% in 2016.
Capital expenditures (CAPEX) and working capital investments
Fortis Inc/Canada's CAPEX/Revenue was 28.0% in 2016. CAPEX/Revenue decreased slightly on 1.1 pp from 29.0% in 2013 to 28.0% in 2016. It's average level of CAPEX/Revenue for the last three years was 30.5%.Fortis Inc/Canada invested a large share of EBITDA (78.5%) to CAPEX.
Return on investment
The company operates at low ROIC (4.40%) and ROE (5.56%). ROIC decreased slightly on 1.6 pp from 6.0% to 4.4% in 2016. ROE decreased on 4.2 pp from 9.8% to 5.6% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 9.2x and Debt / EBITDA is 9.3x. Net Debt / EBITDA surged on 4.0x from 5.3x to 9.2x in 2016. Debt jumped on 86.7% while cash surged on 11.2%.
Management team
Fortis Inc/Canada's CEO Barry V Perry is a founder and has spent 3 years at the company. Karl W Smith is a Fortis Inc/Canada's CFO. Karl W Smith has spent 19 years at the company.
Appendix 1: Peers in Utilities
Below you can find Fortis Inc/Canada benchmarking vs. other companies in Utilities 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 |
|---|
| Emera Inc ($EMA) | | 8.3% | 31.8% | -5.1% | 53.3% |
| Northland Power Inc ($NPI) | | 54.1% | 36.4% | -4.2% | 50.9% |
| Boralex Inc ($BLX) | | -6.7% | 13.5% | 37.1% | 11.7% |
| Algonquin Power & Utilities Corp ($AQN) | | 93.6% | 39.4% | 9.2% | 6.6% |
| TransAlta Corp ($TA) | | 3.7% | 14.4% | -13.6% | 5.7% |
| |
|---|
| Median (14 companies) | | 11.0% | 10.6% | -9.3% | 0.2% |
|---|
| Fortis Inc/Canada ($FTS) | | 10.8% | 33.5% | 25.1% | 1.2% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Atco Ltd/Canada ($ACO.X) | 85.6% | 85.1% | 82.3% | 85.0% | 88.8% |
| Canadian Utilities Ltd ($CU) | 81.0% | 80.8% | 77.7% | 81.0% | 86.6% |
| Northland Power Inc ($NPI) | 52.5% | 63.7% | 61.8% | 69.0% | 82.4% |
| GWR Global Water Resources Corp ($GWR) | | | | 77.8% | 79.2% |
| Capital Power Corp ($CPX) | 58.9% | 59.8% | 58.4% | 61.4% | 65.4% |
| |
|---|
| Median (12 companies) | 43.1% | 46.8% | 45.5% | 56.6% | 58.8% |
|---|
| Fortis Inc/Canada ($FTS) | 34.6% | 34.4% | 59.3% | 61.7% | 65.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Northland Power Inc ($NPI) | 54.2% | 52.4% | 51.2% | 57.5% | 68.8% |
| Canadian Utilities Ltd ($CU) | 45.9% | 45.7% | 47.4% | 45.8% | 53.5% |
| Atco Ltd/Canada ($ACO.X) | 39.8% | 41.0% | 41.4% | 38.7% | 47.7% |
| TransAlta Corp ($TA) | 27.3% | 34.0% | 39.5% | 33.2% | 47.6% |
| Algonquin Power & Utilities Corp ($AQN) | 26.1% | 29.5% | 26.7% | 32.5% | 39.3% |
| |
|---|
| Median (12 companies) | 28.3% | 34.0% | 34.3% | 35.2% | 36.9% |
|---|
| Fortis Inc/Canada ($FTS) | 34.5% | 34.0% | 31.1% | 33.6% | 35.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Northland Power Inc ($NPI) | 84.0% | 60.2% | 238.7% | 265.9% | 148.0% |
| Algonquin Power & Utilities Corp ($AQN) | 21.7% | 23.5% | 45.9% | 19.9% | 37.0% |
| Canadian Utilities Ltd ($CU) | 70.7% | 66.4% | 58.5% | 47.2% | 35.4% |
| Atco Ltd/Canada ($ACO.X) | 58.8% | 54.2% | 48.3% | 39.6% | 33.1% |
| Caribbean Utilities Co Ltd ($CUP.U) | 13.8% | 13.0% | 17.0% | 41.3% | 29.2% |
| |
|---|
| Median (12 companies) | 31.8% | 24.5% | 20.6% | 21.1% | 27.3% |
|---|
| Fortis Inc/Canada ($FTS) | 31.4% | 29.0% | 31.9% | 31.5% | 28.0% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Keyera Corp ($KEY) | 13.8% | 12.7% | 14.3% | 12.6% | 10.5% |
| Atco Ltd/Canada ($ACO.X) | 10.8% | 10.5% | 9.6% | 5.6% | 8.1% |
| Canadian Utilities Ltd ($CU) | 10.0% | 9.4% | 9.2% | 5.9% | 8.0% |
| Northland Power Inc ($NPI) | 6.0% | 7.4% | 7.2% | 5.3% | 7.3% |
| Caribbean Utilities Co Ltd ($CUP.U) | 5.8% | 6.3% | 6.1% | 5.7% | 5.8% |
| |
|---|
| Median (14 companies) | 4.2% | 5.6% | 5.0% | 5.2% | 4.6% |
|---|
| Fortis Inc/Canada ($FTS) | 6.4% | 6.1% | 5.4% | 6.0% | 4.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Atlantic Power Corp ($ATP) | 12.6x | 13.0x | 22.4x | 251.1x | 24.3x |
| Emera Inc ($EMA) | 5.7x | 5.6x | 3.8x | 4.3x | 13.3x |
| Algonquin Power & Utilities Corp ($AQN) | 7.9x | 6.2x | 5.0x | 4.1x | 9.7x |
| GWR Global Water Resources Corp ($GWR) | | | | 6.3x | 8.1x |
| Northland Power Inc ($NPI) | 6.4x | 5.8x | 6.9x | 11.1x | 7.8x |
| |
|---|
| Median (11 companies) | 5.3x | 5.2x | 4.1x | 5.0x | 4.4x |
|---|
| Fortis Inc/Canada ($FTS) | 5.0x | 5.6x | 6.7x | 5.3x | 9.2x |
