Atco Ltd/Canada reports 121% Net Income growth while 2.1% Revenue decline
03.03.2017 • About Atco Ltd/Canada (
$ACO.X) • By InTwits
Atco Ltd/Canada reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Atco Ltd/Canada has high CAPEX intensity: 5 year average CAPEX/Revenue was 46.8%. At the same time it's a lot of higher than industry average of 33.0%.
- CAPEX is quite volatile: 696 in 2016, 1,178 in 2015, 2,021 in 2014, 2,177 in 2013, 2,544 in 2012
- The company has business model with low profitability: ROIC is at 8.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Atco Ltd/Canada ($ACO.X) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 4,012 | 4,359 | 4,554 | 4,131 | 4,045 | -2.1% |
| Gross Profit | 3,433 | 3,708 | 3,749 | 3,511 | 3,590 | 2.3% |
| EBITDA | 1,598 | 1,789 | 1,887 | 1,599 | 1,928 | 20.6% |
| Net Income | 370 | 418 | 420 | 154 | 340 | 120.8% |
Balance Sheet
|
|---|
| Cash | 470 | 743 | 595 | 800 | 606 | -24.3% |
| Short Term Debt | 34 | 179 | 103 | 21 | 229 | 990.5% |
| Long Term Debt | 5,504 | 6,218 | 7,285 | 8,035 | 8,149 | 1.4% |
Cash flow
|
|---|
| Capex | 2,361 | 2,361 | 2,199 | 1,637 | 1,338 | -18.3% |
Ratios
|
|---|
| Revenue growth | 0.5% | 8.6% | 4.5% | -9.3% | -2.1% | |
| EBITDA growth | 9.2% | 12.0% | 5.5% | -15.3% | 20.6% | |
| Gross Margin | 85.6% | 85.1% | 82.3% | 85.0% | 88.8% | 3.8% |
| EBITDA Margin | 39.8% | 41.0% | 41.4% | 38.7% | 47.7% | 9.0% |
| Net Income Margin | 9.2% | 9.6% | 9.2% | 3.7% | 8.4% | 4.7% |
| CAPEX, % of revenue | 58.8% | 54.2% | 48.3% | 39.6% | 33.1% | -6.5% |
| ROIC | 10.8% | 10.5% | 9.6% | 5.6% | 8.1% | 2.5% |
| ROE | 16.3% | 16.0% | 13.9% | 4.7% | 9.9% | 5.1% |
| Net Debt/EBITDA | 3.2x | 3.2x | 3.6x | 4.5x | 4.0x | -0.5x |
Atco Ltd/Canada ($ACO.X) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,058 | 932 | 923 | 1,132 | -1.3% | -1.6% | -6.3% | 0.4% |
| EBITDA | 530 | 409 | 444 | 545 | 17.5% | 14.6% | 25.1% | 25.0% |
| Net Income | 109 | 61 | 70 | 100 | 16.0% | 662.5% | 32.1% | |
Balance Sheet
|
|---|
| Cash | 630 | 703 | 704 | 606 | -2.9% | 12.1% | -17.9% | -24.3% |
| Short Term Debt | 24 | 306 | 398 | 229 | -84.8% | -34.8% | 1,994.7% | 990.5% |
| Long Term Debt | 8,025 | 8,029 | 7,958 | 8,149 | 8.9% | 9.2% | 2.4% | 1.4% |
Ratios
|
|---|
| Gross Margin | 89.7% | 89.3% | 88.2% | 87.9% | 6.3% | 5.6% | 0.6% | 2.5% |
| EBITDA Margin | 50.1% | 43.9% | 48.1% | 48.1% | 8.0% | 6.2% | 12.1% | 9.5% |
| Net Income Margin | 10.3% | 6.5% | 7.6% | 8.8% | 1.5% | 5.7% | 2.2% | 8.9% |
Revenue and profitability
The company's Revenue decreased on 2.1%. Annual revenue decline showed slowdown in 16Q4 - revenue showed almost no change in 16Q4. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.0 pp from 38.7% to 47.7% in 2016.
Gross Margin increased on 3.8 pp from 85.0% to 88.8% in 2016.
Net Income marign increased on 4.7 pp from 3.7% to 8.4% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 33.1% in 2016. The company's CAPEX/Revenue dropped on 21.1 pp from 54.2% in 2013 to 33.1% in 2016. It's average CAPEX/Revenue for the last three years was 40.3%.Battling declining revenue the company invested a large share of EBITDA (69.4%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (8.06%) and ROE (9.85%). ROIC increased on 2.5 pp from 5.6% to 8.1% in 2016. ROE increased on 5.1 pp from 4.7% to 9.9% in 2016.
Leverage (Debt)
Debt level is 4.0x Net Debt / EBITDA and 4.3x Debt / EBITDA. Net Debt / EBITDA dropped on 0.5x from 4.5x to 4.0x in 2016. Debt increased on 4.0% while cash dropped on 24.3%.
Management team
The company's CEO Nancy C Southern is a founder and has spent 20 years at the company. Brian R Bale is a Atco Ltd/Canada's CFO. Brian R Bale has spent 9 years at the company.
Appendix 1: Peers in Utilities
Below we provide Atco Ltd/Canada benchmarking against other companies in Utilities 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 |
|---|
| 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% | 13.1% | -5.1% | 1.1% |
|---|
| Atco Ltd/Canada ($ACO.X) | | 8.6% | 4.5% | -9.3% | -2.1% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Canadian Utilities Ltd ($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% |
| Fortis Inc/Canada ($FTS) | 34.6% | 34.4% | 59.3% | 61.7% | 65.8% |
| Capital Power Corp ($CPX) | 58.9% | 59.8% | 58.4% | 61.4% | 65.4% |
| |
|---|
| Median (12 companies) | 34.2% | 36.1% | 45.5% | 56.6% | 58.8% |
|---|
| Atco Ltd/Canada ($ACO.X) | 85.6% | 85.1% | 82.3% | 85.0% | 88.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Northland Power Inc ($NPI) | 54.2% | 52.4% | 51.2% | 57.5% | 68.8% |
| Canadian Utilities Ltd ($CU) | 45.9% | 45.7% | 47.4% | 45.8% | 53.5% |
| TransAlta Corp ($TA) | 27.3% | 34.0% | 39.5% | 33.2% | 47.6% |
| Algonquin Power & Utilities Corp ($AQN) | 26.1% | 29.5% | 26.7% | 32.5% | 39.3% |
| GWR Global Water Resources Corp ($GWR) | | | | 46.1% | 38.8% |
| |
|---|
| Median (12 companies) | 28.3% | 34.0% | 33.6% | 33.4% | 35.4% |
|---|
| Atco Ltd/Canada ($ACO.X) | 39.8% | 41.0% | 41.4% | 38.7% | 47.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Northland Power Inc ($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% |
| Caribbean Utilities Co Ltd ($CUP.U) | 13.8% | 13.0% | 17.0% | 41.3% | 29.2% |
| GWR Global Water Resources Corp ($GWR) | | | | 10.5% | 28.8% |
| |
|---|
| Median (12 companies) | 31.4% | 24.5% | 20.6% | 21.1% | 26.9% |
|---|
| Atco Ltd/Canada ($ACO.X) | 58.8% | 54.2% | 48.3% | 39.6% | 33.1% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Keyera Corp ($KEY) | 13.8% | 12.7% | 14.3% | 12.6% | 10.5% |
| 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 ($CUP.U) | 5.8% | 6.3% | 6.1% | 5.7% | 5.8% |
| TransAlta Corp ($TA) | 0.5% | 2.4% | 5.3% | 1.7% | 5.0% |
| |
|---|
| Median (14 companies) | 4.2% | 5.6% | 5.0% | 5.2% | 4.3% |
|---|
| Atco Ltd/Canada ($ACO.X) | 10.8% | 10.5% | 9.6% | 5.6% | 8.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Atlantic Power Corp ($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 |
| Fortis Inc/Canada ($FTS) | 5.0x | 5.6x | 6.7x | 5.3x | 9.2x |
| GWR Global Water Resources Corp ($GWR) | | | | 6.3x | 8.1x |
| |
|---|
| Median (11 companies) | 5.3x | 5.5x | 4.6x | 5.2x | 7.8x |
|---|
| Atco Ltd/Canada ($ACO.X) | 3.2x | 3.2x | 3.6x | 4.5x | 4.0x |
