Continental Holdings Ltd Net Income dropped on 135% and Revenue decreased on 4.7%
29/09/2020 • About Continental Holdings Ltd (
$513) • By InTwits
Continental Holdings Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Continental Holdings Ltd is a company in decline: FY2020 revenue growth was -4.7%, 5 years revenue CAGR was -10.5%
- The company operates at negative EBITDA Margin: -1.7%
- EBITDA Margin is quite volatile: -1.7% in FY2020, 9.2% in FY2019, 106.7% in FY2018, 0.3% in FY2017, -2.8% in FY2016
- Continental Holdings Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 5.0%. At the same time it's in pair with industry average of 4.7%
- CAPEX is quite volatile: 44 HKDm in FY2020, 22 HKDm in FY2019, 16 HKDm in FY2018, 11 HKDm in FY2017, 21 HKDm in FY2016
- The company has unprofitable business model: ROIC is -0.5%
- It operates with high leverage: Net Debt/EBITDA is 16.2x while industry average is 0.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Continental Holdings Ltd's Revenue decreased on 4.7%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 36.8 pp from -73.4% to -36.6% in FY2020. During the last 5 years EBITDA Margin topped in FY2018 at 107% and was declining since that time.
Gross Margin decreased on 2.8 pp from 24.7% to 21.9% in FY2020. Gross Margin grew at 1.9 pp per annum in FY2016-FY2020. SG&A as a % of Revenue increased on 3.9 pp from 27.1% to 31.0% in FY2020. SG&A as a % of Revenue followed a growing trend at 2.4 pp per annum in the last 5 years.
Net Income margin dropped on 13.6 pp from 9.9% to -3.6% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 90.5% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2020 Continental Holdings Ltd had CAPEX/Revenue of 10.4%. Continental Holdings Ltd's CAPEX/Revenue increased on 8.7 pp from 1.7% in FY2017 to 10.4% in FY2020. Average CAPEX/Revenue for the last three years was 6.5%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2017 at 1.7% and was growing since that time.
Accounts receivable as a % of Revenue decreased on 4.0 pp from 26.1% to 22.1% in FY2020. Inventories as a % of Revenue jumped on 15.0 pp from 37.5% to 52.5% in FY2020. Accounts payable as a % of Revenue increased on 3.2 pp from 19.3% to 22.5% in FY2020.
Return on investment
The company operates at negative ROIC (-0.5%) and ROE (-0.7%). ROIC decreased slightly on 1.6 pp from 1.1% to -0.48% in FY2020. ROE decreased on 2.6 pp from 1.9% to -0.69% in FY2020. During the last 5 years ROIC topped in FY2018 at 14.4% and was declining since that time. During FY2016-FY2020 ROE topped in FY2018 at 17.3% and was declining since that time.
Leverage (Debt)
Debt level is 16.2x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA dropped on 3.1x from 3.1x to in FY2020. Debt increased on 3.6% while cash dropped on 24.6%.
Continental Holdings Ltd has short term refinancing risk: cash is only 62.0% of short term debt.
Average interest expence charged on company's debt was 3.3% in FY2020.
The company paid 17 HKD despite negative Net Income of -15 HKD in FY2020.
Management team
0.078% of the company is owned by insiders. Insider ownership didn't change in 2020.
At the end of financial year the company had 623 employees. The number of employees decreased on 6.2%. Average revenue per employee in FY2020 was 674,663 HKD and it increased slightly on 1.6%.
Financial and operational results
FY ended 30/06/2020
Continental Holdings Ltd ($513) key annual financial indicators| mln. HKD | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 552.6 | 627.3 | 391.9 | 441.0 | 420.3 | -4.7% |
| Gross Profit | 87.0 | 111.5 | 77.7 | 109.0 | 92.0 | -15.6% |
| SG&A | 126.4 | 122.4 | 95.6 | 119.7 | 130.4 | 8.9% |
| EBITDA | -15.5 | 1.6 | 418.3 | 40.7 | -7.2 | -117.8% |
| EBIT | | -6.0 | 370.1 | 34.7 | -15.8 | -145.6% |
| Interest expence | | 14.5 | 23.9 | 24.4 | 25.9 | 6.4% |
| Tax | | 4.1 | 75.1 | -22.2 | 4.2 | |
| Net Income | -175.7 | 98.3 | 354.8 | 43.7 | -15.3 | -135.1% |
| Stock Based Compensation | | 2.1 | | | | |
Balance Sheet
|
|---|
| Cash | 45.6 | 374.6 | 1,128.7 | 621.4 | 468.5 | -24.6% |
| Accounts Receivable | | 96.1 | 111.7 | 114.9 | 92.7 | -19.3% |
| Inventory | | 169.9 | 161.8 | 165.4 | 220.5 | 33.3% |
| Accounts Payable | | 58.7 | 54.9 | 64.1 | 74.0 | 15.5% |
| Short Term Debt | 571.9 | 119.4 | 611.1 | 743.6 | 755.6 | 1.6% |
| Long Term Debt | 132.4 | 0.3 | 4.8 | 4.5 | 19.8 | 334.9% |
Cash flow
|
|---|
| Capex | 20.8 | 10.6 | 15.8 | 22.3 | 43.8 | 96.6% |
| Dividends | | | | 34.0 | 17.0 | -50.0% |
Ratios
|
|---|
| Revenue growth | -24.4% | 13.5% | -37.5% | 12.5% | -4.7% | |
| EBITDA growth | -11,548.1% | -110.6% | 25,484.3% | -90.3% | -117.8% | |
|
|---|
| Gross Margin | 15.7% | 17.8% | 19.8% | 24.7% | 21.9% | -2.8% |
| EBITDA Margin | -2.8% | 0.3% | 106.7% | 9.2% | -1.7% | -11.0% |
| EBIT Margin | | -1.0% | 94.5% | 7.9% | -3.8% | -11.6% |
| SG&A, % of revenue | 22.9% | 19.5% | 24.4% | 27.1% | 31.0% | 3.9% |
| SBC, % of revenue | | 0.3% | | | |
| Net Income Margin | -31.8% | 15.7% | 90.5% | 9.9% | -3.6% | -13.6% |
| CAPEX, % of revenue | 3.8% | 1.7% | 4.0% | 5.1% | 10.4% | 5.4% |
|
|---|
| ROIC | -0.9% | -0.3% | 14.4% | 1.1% | -0.5% | -1.6% |
| ROE | -9.4% | 5.5% | 17.3% | 1.9% | -0.7% | -2.6% |
| Net Debt/EBITDA | | -155.9x | -1.2x | 3.1x | |
| Interest expence / Average debt | | 3.5% | 6.5% | 3.6% | 3.3% | -0.2% |
People
|
|---|
| Insider ownership | | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | | 828 | 660 | 664 | 623 | -6.2% |
| Revenue/Employee, th. HKD | | 758 | 594 | 664 | 675 | 1.6% |
Peers in Miscellaneous Manufactur
Below you can find Continental Holdings Ltd benchmarking vs. other companies in Miscellaneous Manufactur 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 |
|---|
| VS International Group Ltd ($1002) | - | 43.7% | -12.2% | -41.8% | -25.7% |
| Time Watch Investments Ltd ($2033) | - | 6.0% | 7.2% | -9.9% | -35.3% |
| |
|---|
| Median (2 companies) | 7.5% | 24.9% | -2.5% | -25.8% | -30.5% |
|---|
| Continental Holdings Ltd ($513) | - | 13.5% | -37.5% | 12.5% | -4.7% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Time Watch Investments Ltd ($2033) | 68.5% | 66.9% | 70.2% | 70.6% | 73.7% |
| VS International Group Ltd ($1002) | 16.9% | 16.8% | 13.4% | 4.4% | 12.4% |
| |
|---|
| Median (2 companies) | 26.0% | 41.9% | 41.8% | 37.5% | 43.1% |
|---|
| Continental Holdings Ltd ($513) | 15.7% | 17.8% | 19.8% | 24.7% | 21.9% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Time Watch Investments Ltd ($2033) | 16.4% | 13.5% | 15.5% | 15.7% | 14.1% |
| VS International Group Ltd ($1002) | 4.7% | 8.1% | 5.8% | -7.9% | 0.9% |
| |
|---|
| Median (2 companies) | 9.7% | 10.8% | 10.6% | 3.9% | 7.5% |
|---|
| Continental Holdings Ltd ($513) | -2.8% | 0.3% | 106.7% | 9.2% | -1.7% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Time Watch Investments Ltd ($2033) | 3.6% | 2.9% | 3.8% | 5.2% | - |
| VS International Group Ltd ($1002) | 5.4% | 8.1% | 8.2% | 1.0% | - |
| |
|---|
| Median (2 companies) | 3.7% | 5.5% | 6.0% | 3.1% | - |
|---|
| Continental Holdings Ltd ($513) | 3.8% | 1.7% | 4.0% | 5.1% | 10.4% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Time Watch Investments Ltd ($2033) | 18.6% | 14.2% | 16.7% | 14.4% | 6.6% |
| VS International Group Ltd ($1002) | -1.1% | 6.9% | 2.0% | -15.5% | -3.8% |
| |
|---|
| Median (2 companies) | 9.2% | 10.6% | 9.3% | -0.6% | 1.4% |
|---|
| Continental Holdings Ltd ($513) | -0.9% | -0.3% | 14.4% | 1.1% | -0.5% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VS International Group Ltd ($1002) | 4.6x | 1.6x | 1.6x | - | 16.2x |
| Time Watch Investments Ltd ($2033) | -0.9x | -1.3x | -1.2x | -0.5x | -2.7x |
| |
|---|
| Median (2 companies) | -0.7x | 0.2x | 0.2x | -0.5x | 6.7x |
|---|
