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KFG Resources Ltd reports 23.7% revenue decline in FY2020 and 25.1 pp EBITDA Margin decline from -3.5% to -28.6%

09.10.2020 • About KFG Resources Ltd ($KFG) • By InTwits

KFG Resources Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • KFG Resources Ltd is a company in decline: FY2020 revenue growth was -23.7%, 5 years revenue CAGR was -16.8%
  • The company operates at negative EBITDA Margin: -28.6%
  • KFG Resources Ltd motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 was 0.0% while average EBITDA Margin was -10.8% for the sames years
  • KFG Resources Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.9%. At the same time it's a lot of higher than industry average of 7.2%.
  • CAPEX is quite volatile: $0m in FY2020, $0m in FY2019, $0m in FY2018, $0m in FY2017, $1m in FY2016
  • The company has unprofitable business model: ROIC is -131.6%
  • It operates with high leverage: Net Debt/EBITDA is 12.0x while industry average is 4.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

KFG Resources Ltd's Revenue dropped on 23.7%. Revenue decline showed acceleration in FY20Q4 - it was 46.4% YoY. During the last 5 years Revenue growth topped in FY2019 at 4.5%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 25.1 pp from -3.5% to -28.6% in FY2020.

SG&A as a % of Revenue increased on 4.5 pp from 15.2% to 19.7% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2018 at 14.6% and was growing since that time.

Net Income margin dropped on 32.2 pp from -10.3% to -42.5% in FY2020. During the last 5 years Net Income margin topped in FY2018 at -5.2% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2020 the company had CAPEX/Revenue of 0.48%. The company's CAPEX/Revenue showed almost no change from FY2017 to FY2020. Average CAPEX/Revenue for the last three years was 6.5%.

Return on investment

The company operates at negative ROIC (-131.6%) and ROE (-139.6%). ROIC dropped on 109 pp from -22.4% to -132% in FY2020. ROE dropped on 116 pp from -23.1% to -140% in FY2020.

Leverage (Debt)

Debt level is 12.0x Net Debt / EBITDA and Debt / EBITDA. Debt dropped on 24.8% while cash dropped on 28.9%.

The company has no short term refinancing risk: short term debt is zero.

Financial and operational results

FY ended 30.04.2020

KFG Resources Ltd ($KFG) key annual financial indicators

mln. $201620172018201920202020/2019
Gross Profit0.574
Net Income-0.778-0.490-0.071-0.148-0.464
Balance Sheet
Short Term Debt0.0000.0000.0000.0000.000
Long Term Debt0.0000.0000.0000.0180.013-24.8%
Cash flow
Revenue growth-39.2%-17.5%-0.5%4.5%-23.7%
EBITDA growth-132.5%14.2%-142.8%-143.8%519.2%

Gross Margin34.4%
EBITDA Margin-14.1%-19.6%8.4%-3.5%-28.6%-25.1%
SG&A, % of revenue17.6%16.5%14.6%15.2%19.7%4.5%
Net Income Margin-46.6%-35.6%-5.2%-10.3%-42.5%-32.2%
CAPEX, % of revenue34.8%0.1%6.3%12.7%0.5%-12.3%

Net Debt/EBITDA-6.1x

KFG Resources Ltd ($KFG) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
Revenue0000 -16.2%-28.0%-2.1%-46.4%
EBITDA0-0-0-0 -70.9%-313.3%--
Net Income0-0-0-0 -97.9%-425.1%--
Balance Sheet
Cash1000 -32.3%-39.6%-43.5%-28.9%
Short Term Debt0000 ----
Long Term Debt0000 ----24.8%
EBITDA Margin 8.9% -50.6% -0.3% -107.6% -16.7%-67.7%27.7%-107.6%
Net Income Margin 0.4% -61.6% -9.9% -143.5% -16.5%-75.2%29.4%-97.4%

Peers in Energy

Below you can find KFG Resources Ltd benchmarking vs. other companies in Energy 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  FY2016 FY2017 FY2018 FY2019 FY2020
Wescan Energy Corp ($WCE)-41.1%5.0%9.4%-23.5%
Arctic Hunter Energy Inc ($AHU)-564.3%57.9%-37.7%-47.8%
Strata-X Energy Ltd ($SXE)-24.6%-67.8%-37.2%-81.0%
Median (3 companies)-19.0%32.8%-4.1%-16.9%-47.8%
KFG Resources Ltd ($KFG)--17.5%-0.5%4.5%-23.7%

Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Arctic Hunter Energy Inc ($AHU)-104.8%33.2%47.6%17.3%25.6%
Pennine Petroleum Corp ($PNN)-19.9%-12.7%-20.0%-2.9%-
Median (2 companies)31.4%10.2%13.8%7.2%25.6%

Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Wescan Energy Corp ($WCE)-28.4%9.9%-0.9%-4.4%-27.3%
Arctic Hunter Energy Inc ($AHU)-1,288.0%-221.2%-180.7%-214.6%-354.0%
Strata-X Energy Ltd ($SXE)-2,196.8%-399.1%-1,113.2%-31,805.9%-19,396.4%
Median (3 companies)25.6%-310.1%-647.0%-311.7%-354.0%
KFG Resources Ltd ($KFG)-14.1%-19.6%8.4%-3.5%-28.6%

Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Strata-X Energy Ltd ($SXE)452.6%48.4%1,075.3%754.1%3,886.6%
Wescan Energy Corp ($WCE)16.2%2.0%0.0%0.0%0.3%
Arctic Hunter Energy Inc ($AHU)10.7%9.2%0.0%0.0%0.0%
Median (3 companies)23.0%28.8%162.1%0.0%0.3%
KFG Resources Ltd ($KFG)34.8%0.1%6.3%12.7%0.5%

Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Wescan Energy Corp ($WCE)-39.2%-9.3%-12.4%-13.2%-28.3%
Strata-X Energy Ltd ($SXE)-24.5%-7.7%-13.7%-182.7%-128.3%
Arctic Hunter Energy Inc ($AHU)-576.3%-119.1%-93.7%-92.3%-541.5%
Pennine Petroleum Corp ($PNN)-3,187.3%-4,980.0%---
Connacher Oil and Gas Ltd ($CLC)---52.1%-53.8%-
Median (5 companies)-2.2%-64.2%-32.9%-73.0%-128.3%
KFG Resources Ltd ($KFG)-46.7%-50.8%-11.8%-22.4%-131.6%