Prime Focus reports CAPEX growth

17-09-2015 • About Prime Focus ($PFOCUS) • By InTwits

Prime Focus reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

The company has potentially unprofitable business model: ROIC is at 2.9%
It operates with high leverage: Net Debt/EBITDA is 3.6x while industry average is 2.0x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Prime Focus ($PFOCUS) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	5,030	7,719	7,622	8,443	15,380	82.2%
EBITDA	1,842	2,647	1,903		2,785
Net Income	761	993	-203	157	-2,922	-1,957.4%
Balance Sheet
Cash	59	314	491	141	355	150.7%
Short Term Debt	1,518	4,163	3,785	2,548	4,633	81.9%
Long Term Debt	3,136	1,234	3,306	5,701	5,774	1.3%
Cash flow
Capex	2,273	1,876	1,508		3,195
Ratios
Revenue growth	-72.5%	53.5%	-1.3%	10.8%	82.2%
EBITDA growth	52.5%	43.7%	-28.1%
EBITDA Margin	36.6%	34.3%	25.0%	0.0%	18.1%	18.1%
Net Income Margin	15.1%	12.9%	-2.7%	1.9%	-19.0%	-20.9%
CAPEX, % of revenue	45.2%	24.3%	19.8%		20.8%	20.8%
ROIC	16.2%	19.3%	7.5%	6.0%	2.9%	-3.1%
ROE	27.3%	23.0%	-3.9%	2.4%	-31.6%	-34.0%
Net Debt/EBITDA	2.5x	1.9x	3.5x		3.6x	3.6x

Revenue and profitability

The company's Revenue jumped on 82.2% in FY2015.

Net Income marign dropped on 20.9 pp from 1.9% to -19.0% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Prime Focus's CAPEX/Revenue was 20.8% in FY2015. CAPEX/Revenue decreased on 3.5 pp from 24.3% in FY2012 to 20.8% in FY2015.The company has spent a lot to CAPEX (115% of EBITDA) to fuel its growth.

Return on investment

The company operates at low but positive ROIC (2.89%) and negative ROE (-31.60%). ROIC decreased on 3.1 pp from 6.0% to 2.9% in FY2015. ROE dropped on 34.0 pp from 2.4% to -31.6% in FY2015.

Leverage (Debt)

Debt level is 3.6x Net Debt / EBITDA and 3.7x Debt / EBITDA. Net Debt / EBITDA jumped3.6x from to 3.6x in FY2015. Debt jumped on 26.2% in FY2015 while cash jumped on 151% in FY2015.

Management team

Prime Focus's CEO Namit Malhotra has spent 4 years at the company. Vikas Rathee is a The company's CFO. Vikas Rathee has spent 4 years at the company.

Appendix 1: Peers in Movies & Entertainment

Below we provide Prime Focus benchmarking against other companies in Movies & Entertainment 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	FY2011	FY2012	FY2013	FY2014	FY2015
Eros International Media ($EROSMEDIA)		33.5%	13.1%	6.2%	25.3%
Shemaroo Entertainment ($SHEMAROO)		15.0%	18.0%	23.2%	21.7%
Saregama India ($SAREGAMA)		16.9%	16.1%	-4.6%	5.1%
Dq Entertainment (International) ($DQE)		9.3%	1.0%	4.5%	-40.6%
Sri Adhikari Brothers Television Network ($SABTN)		167.5%	22.2%	11.9%	-42.6%
Median (6 companies)		15.0%	17.0%	7.2%	-17.8%
Prime Focus ($PFOCUS)		53.5%	-1.3%	10.8%	82.2%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eros International Media ($EROSMEDIA)	57.9%	61.2%	65.7%	67.6%	61.2%
Picturehouse Media ($PICTUREHS)					54.1%
Dq Entertainment (International) ($DQE)	36.4%	41.8%	48.8%	40.2%	50.5%
Sri Adhikari Brothers Television Network ($SABTN)	2.1%	7.5%	24.7%	27.5%	43.7%
Mukta Arts ($MUKTAARTS)	9.2%	6.4%	4.0%	1.0%	29.8%
Median (10 companies)	9.2%	15.0%	26.0%	26.1%	28.4%
Prime Focus ($PFOCUS)	36.6%	34.3%	25.0%		18.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Sri Adhikari Brothers Television Network ($SABTN)	119.1%	28.9%	5.1%	9.4%	126.7%
Saregama India ($SAREGAMA)	4.7%	2.7%	3.4%	4.3%	1.8%
Shemaroo Entertainment ($SHEMAROO)	1.2%	2.3%	0.9%	0.7%	0.7%
Dq Entertainment (International) ($DQE)	78.6%	5.5%	2.0%	0.0%	0.6%
Picturehouse Media ($PICTUREHS)					0.5%
Median (6 companies)	18.1%	5.5%	2.0%	0.7%	0.6%
Prime Focus ($PFOCUS)	45.2%	24.3%	19.8%		20.8%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Shemaroo Entertainment ($SHEMAROO)	17.2%	23.5%	22.9%	21.0%	21.8%
Eros International Media ($EROSMEDIA)	21.0%	18.4%	15.2%	17.6%	17.7%
Picturehouse Media ($PICTUREHS)	23.0%	15.6%	17.3%	16.9%	12.0%
Sri Adhikari Brothers Television Network ($SABTN)	-4.8%	-4.4%	7.1%	10.6%	4.8%
Saregama India ($SAREGAMA)	-10.6%	4.1%	1.7%	8.2%	3.4%
Median (13 companies)	9.1%	2.1%	8.2%	10.6%	8.4%
Prime Focus ($PFOCUS)	16.2%	19.3%	7.5%	6.0%	2.9%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Picturehouse Media ($PICTUREHS)	-1.1x	6.2x	3.7x	3.4x	7.0x
Dq Entertainment (International) ($DQE)	1.7x	1.8x	1.9x	2.8x	5.0x
Sri Adhikari Brothers Television Network ($SABTN)	112.5x	16.1x	3.5x	2.5x	3.0x
Shemaroo Entertainment ($SHEMAROO)	2.5x	1.7x	1.9x	2.3x	1.2x
Eros International Media ($EROSMEDIA)	0.3x	0.5x	0.5x	0.4x	0.4x
Median (9 companies)	2.1x	2.4x	2.1x	1.3x	0.4x
Prime Focus ($PFOCUS)	2.5x	1.9x	3.5x		3.6x

Prime Focus stock price chart

Prime Focus financials

mln.	FY2010	FY2011	FY2012

Revenue	18,277	5,030	7,719
EBITDA	1,208	1,842	2,647
Net income	334.2	760.9	992.5
CAPEX	768.4	2,273	1,876
Debt	4,637	4,655	5,397
Cash	212.4	59.314	313.7

About Prime Focus

Prime Focus Limited, together with its subsidiaries, operates as a media and entertainment services company in India, the United Kingdom, the United States, Canada, and internationally. The company provides creative and technical services, including visual effects, stereo 3D conversion, animation, video/audio postproduction, digital content management and distribution, digital intermediate, versioning and adaptation, and equipment rental to the film, broadcast, advertising, and media industries. It also offers CLEAR, a hybrid cloud-enabled media ERP suite that virtualizes the content supply chain; View-D, a 2D-to-3D conversion process; and WorldSourcing, a digital pipeline and delivery model. In addition, the company provides production workflow and media asset management applications and services to the entertainment industry; and an SLA-based suite of media processing and monetization services comprising archiving, bulk digitization, mastering, delivery, multiplatform content preparation, editorial and packaging, localization, cataloguing, digital media supply chain management, SEO and analytics, on air promo creation, and contextual advertising. Additionally, the company is involved in the media and other investment; broadcast post production and VFX services; and digital asset management activities. Prime Focus Limited was founded in 1997 and is headquartered in Mumbai, India.