Prime Focus CAPEX dropped on 30.1% and Revenue dropped on 13.5%

31-05-2016 • About Prime Focus ($PFOCUS) • By InTwits

Prime Focus reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

• The company has potentially unprofitable business model: ROIC is 0.1%
• It operates with high leverage: Net Debt/EBITDA is 4.9x while industry average is 1.0x

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

Revenue and profitability

The company's Revenue dropped on 13.5%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.8 pp from 18.1% to 15.3% in FY2016.

Net Income margin surged on 10.8 pp from -19.0% to -8.2% in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 Prime Focus had CAPEX/Revenue of 16.8%. Prime Focus showed decline in CAPEX/Revenue of 3.0 pp from 19.8% in FY2013 to 16.8% in FY2016. Battling declining revenue the company made large investments to CAPEX (110% of EBITDA) but that didn't help at least in this year.

Return on investment

The company operates at low but positive ROIC (0.1%) and negative ROE (-10.5%). ROIC decreased on 2.8 pp from 2.9% to 0.13% in FY2016. ROE surged on 21.1 pp from -31.6% to -10.5% in FY2016. ROIC declined at -4.3 pp per annum in the last 5 years.

Leverage (Debt)

Debt level is 4.9x Net Debt / EBITDA and 5.3x Debt / EBITDA. Net Debt / EBITDA surged on 1.3x from 3.6x to 4.9x in FY2016. Debt increased on 4.4% while cash jumped on 156%.

Prime Focus has short term refinancing risk: cash is only 21.3% of short term debt.

Management team

Namit Malhotra is a the company's CEO. Namit Malhotra has spent 6 years with the company. Prime Focus's CFO Vikas Rathee has spent 6 years with the company.

Financial and operational results

Prime Focus ($PFOCUS) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	7,719	7,622	8,443	15,380	13,302	-13.5%
EBITDA	2,647	1,903		2,785	2,035	-26.9%
Net Income	993	-203	157	-2,922	-1,085
Balance Sheet
Cash	314	491	141	355	908	156.1%
Short Term Debt	4,163	3,785	2,548	4,633	4,265	-7.9%
Long Term Debt	1,234	3,306	5,701	5,774	6,602	14.4%
Cash flow
Capex	1,876	1,508		3,195	2,232	-30.1%
Ratios
Revenue growth	53.5%	-1.3%	10.8%	82.2%	-13.5%
EBITDA growth	43.7%	-28.1%			-26.9%
EBITDA Margin	34.3%	25.0%		18.1%	15.3%	-2.8%
Net Income Margin	12.9%	-2.7%	1.9%	-19.0%	-8.2%	10.8%
CAPEX, % of revenue	24.3%	19.8%		20.8%	16.8%	-4.0%
ROIC	19.3%	7.5%	6.0%	2.9%	0.1%	-2.8%
ROE	23.0%	-3.9%	2.4%	-31.6%	-10.5%	21.1%
Net Debt/EBITDA	1.9x	3.5x		3.6x	4.9x	1.3x

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	FY2012	FY2013	FY2014	FY2015	FY2016
Sri Adhikari Brothers Television Network ($SABTN)	-	22.2%	11.9%	-42.6%	27.3%
Saregama India ($SAREGAMA)	-	16.1%	-4.6%	5.1%	18.7%
Shemaroo Entertainment ($SHEMAROO)	-	18.0%	23.2%	21.7%	16.2%
Dq Entertainment (International) ($DQE)	-	1.0%	4.5%	-40.6%	15.4%
Eros International Media ($EROSMEDIA)	-	13.1%	6.2%	25.3%	11.4%
Median (8 companies)	-85.8%	17.0%	7.2%	-17.8%	15.4%
Prime Focus ($PFOCUS)	-	-1.3%	10.8%	82.2%	-13.5%

Top companies by EBITDA margin, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Dq Entertainment (International) ($DQE)	41.8%	48.8%	40.2%	50.5%	67.3%
Eros International Media ($EROSMEDIA)	61.2%	65.7%	67.6%	61.2%	60.8%
Sri Adhikari Brothers Television Network ($SABTN)	7.5%	24.7%	27.5%	43.7%	48.4%
Shemaroo Entertainment ($SHEMAROO)	28.4%	27.3%	24.8%	27.1%	29.4%
Tips Industries ($TIPSINDLTD)	17.8%	-	-	14.8%	21.9%
Median (8 companies)	15.0%	26.0%	26.1%	28.4%	25.6%
Prime Focus ($PFOCUS)	34.3%	25.0%	-	18.1%	15.3%

Top companies by CAPEX/Revenue, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Sri Adhikari Brothers Television Network ($SABTN)	28.9%	5.1%	9.4%	126.7%	41.9%
Dq Entertainment (International) ($DQE)	5.5%	2.0%	0.0%	0.6%	4.0%
Saregama India ($SAREGAMA)	2.7%	3.4%	4.3%	1.8%	3.3%
Media Matrix Worldwide ($MMWL)	-	-	-	-	3.2%
Shemaroo Entertainment ($SHEMAROO)	2.3%	0.9%	0.7%	0.7%	1.3%
Median (6 companies)	5.5%	2.0%	0.7%	0.6%	3.3%
Prime Focus ($PFOCUS)	24.3%	19.8%	-	20.8%	16.8%

Top companies by ROIC, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Shemaroo Entertainment ($SHEMAROO)	23.5%	22.9%	21.0%	21.8%	21.3%
Eros International Media ($EROSMEDIA)	18.4%	15.2%	17.6%	17.7%	14.1%
Sri Adhikari Brothers Television Network ($SABTN)	-4.4%	7.1%	10.6%	4.8%	9.5%
Dq Entertainment (International) ($DQE)	9.4%	9.3%	6.2%	3.4%	6.9%
Saregama India ($SAREGAMA)	4.1%	1.7%	8.2%	3.4%	5.1%
Median (12 companies)	2.1%	8.2%	10.6%	8.4%	8.2%
Prime Focus ($PFOCUS)	19.3%	7.5%	6.0%	2.9%	0.1%

Top companies by Net Debt / EBITDA

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Dq Entertainment (International) ($DQE)	1.8x	1.9x	2.8x	5.0x	3.9x
Shemaroo Entertainment ($SHEMAROO)	1.7x	1.9x	2.3x	1.2x	1.8x
Sri Adhikari Brothers Television Network ($SABTN)	16.1x	3.5x	2.5x	3.0x	1.4x
Eros International Media ($EROSMEDIA)	0.5x	0.5x	0.4x	0.4x	0.4x
Bgil Films & Technologies ($BGIL)	0.0x	-0.0x	-	-	0.0x
Median (9 companies)	2.4x	2.1x	1.3x	0.4x	0.0x
Prime Focus ($PFOCUS)	1.9x	3.5x	-	3.6x	4.9x

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