Harvey Nash Group EBITDA increased on 6.8% in 2016 and EBITDA Margin showed almost no change

28 Apr 2016 • About Harvey Nash Group ($HVN) • By InTwits

Harvey Nash Group reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

• EBITDA Margin is relatively stable: 1.7% in FY2016 vs. 1.6% in FY2015 vs. 2.1% in FY2012
• Harvey Nash Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.3%.
• The company has highly profitable business model: ROIC is at 13.2%

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

Harvey Nash Group ($HVN) key annual financial indicators

mln. £	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	533.0	594.7	697.3	677.9	676.5	-0.2%
Gross Profit	78.5	83.0	88.6	84.9	90.3	6.4%
SG&A	69.5	73.5	78.9	75.1	80.1	6.7%
EBITDA	11.3	11.0	9.1	10.7	11.5	6.8%
Net Income	5.8	5.5	3.8	5.3	-7.6	-244.5%
Balance Sheet
Cash	18.6	14.3	15.9	19.0	18.5	-2.6%
Short Term Debt	13.4	9.4	12.1	16.9	18.3	8.6%
Long Term Debt	0.0	0.0	0.0	0.0	0.0
Cash flow
Capex	2.0	2.8	1.7	1.8	2.0	8.9%
Ratios
Revenue growth	26.2%	11.6%	17.3%	-2.8%	-0.2%
EBITDA growth	34.9%	-2.7%	-17.1%	17.7%	6.8%
Gross Margin	14.7%	13.9%	12.7%	12.5%	13.3%	0.8%
EBITDA Margin	2.1%	1.8%	1.3%	1.6%	1.7%	0.1%
Net Income Margin	1.1%	0.9%	0.6%	0.8%	-1.1%	-1.9%
SG&A, % of revenue	13.0%	12.4%	11.3%	11.1%	11.8%	0.8%
CAPEX, % of revenue	0.4%	0.5%	0.2%	0.3%	0.3%	0.0%
ROIC	12.5%	11.3%	9.4%	11.7%	13.2%	1.5%
ROE	9.4%	8.3%	5.8%	8.1%	-12.8%	-20.9%
Net Debt/EBITDA	-0.5x	-0.5x	-0.4x	-0.2x	-0.0x	0.2x

Revenue and profitability

The company's Revenue showed almost no change in FY2016. EBITDA Margin showed almost no change in FY2016.

Gross Margin increased slightly on 0.83 pp from 12.5% to 13.3% in FY2016. SG&A as a % of Revenue increased slightly on 0.77 pp from 11.1% to 11.8% in FY2016.

Net Income marign decreased slightly on 1.9 pp from 0.78% to -1.1% in FY2016.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 0.29% in FY2016. The company showed almost no change in CAPEX/Revenue from FY2013 to FY2016. It's average level of CAPEX/Revenue for the last three years was 0.27%.

Return on investment

The company operates at low but positive ROIC (13.20%) and negative ROE (-12.81%). ROIC increased slightly on 1.5 pp from 11.7% to 13.2% in FY2016. ROE dropped on 20.9 pp from 8.1% to -12.8% in FY2016.

Leverage (Debt)

Debt level is -0.0x Net Debt / EBITDA and 1.6x Debt / EBITDA. Net Debt / EBITDA jumped on 0.2x from -0.2x to -0.015x in FY2016. Debt increased on 8.6% in FY2016 while cash decreased on 2.6% in FY2016.

Appendix 1: Peers in Support Services

Below we provide Harvey Nash Group benchmarking against other companies in Support Services 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
Camco Clean Energy ($CCE)		88.0%	-54.7%	99.4%
Optimal Payments ($OPAY)	39.9%	41.5%	44.0%	68.1%
Inspired Energy ($INSE)	83.8%	44.8%	42.2%	40.2%
Ibex Global Solutions ($IBEX)	7.4%	35.7%	30.0%	29.8%
Rtc Group ($RTC)	40.1%	13.6%	4.3%	27.4%
Median (51 companies)	6.8%	6.9%	4.7%	6.6%	3.1%
Harvey Nash Group ($HVN)		11.6%	17.3%	-2.8%	-0.2%

Top companies by Gross margin, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Inspired Energy ($INSE)	94.6%	86.8%	78.7%	76.2%
Ienergizer Ltd ($IBPO)	56.2%	78.4%	76.8%	72.7%
Grafenia ($GRA)	53.4%	54.3%	56.1%	70.8%
Vianet Group ($VNET)	53.3%	51.3%	58.8%	69.2%
Prime People ($PRP)	63.4%	58.3%	57.7%	61.4%
Median (45 companies)	29.5%	28.8%	30.4%	28.7%	25.7%
Harvey Nash Group ($HVN)	14.7%	13.9%	12.7%	12.5%	13.3%

Top companies by EBITDA margin, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Northgate ($67GX)	41.2%	40.4%	40.6%	39.4%	38.3%
Inspired Energy ($INSE)	46.2%	48.5%	1.5%	35.4%
Vianet Group ($VNET)	18.6%	17.3%	19.7%	27.1%
Vp ($VP.)	23.9%	24.5%	24.2%	26.2%
Optimal Payments ($OPAY)	10.3%	18.5%	21.3%	22.6%
Median (51 companies)	6.8%	6.4%	6.9%	7.8%	7.5%
Harvey Nash Group ($HVN)	2.1%	1.8%	1.3%	1.6%	1.7%

Top companies by CAPEX/Revenue, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vp ($VP.)	21.4%	17.7%	21.6%	25.7%
Sagentia Group ($SAG)	1.9%	1.4%	1.5%	25.2%
Augean ($AUG)	9.8%	15.9%	12.3%	12.3%
Falkland Islands Hldgs ($FKL)	3.7%	6.8%	12.9%	11.9%
Capital Drilling Ltd ($CAPD)	18.9%	4.9%	13.9%	10.1%
Median (51 companies)	1.1%	1.1%	1.1%	1.1%	0.9%
Harvey Nash Group ($HVN)	0.4%	0.5%	0.2%	0.3%	0.3%

Top companies by ROIC, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Inspired Energy ($INSE)	63.9%	65.5%	-7.5%	28.0%
Petards Group ($PEG)	35.5%	-78.0%	24.7%	23.9%
Servoca ($SVCA)	1.0%	7.8%	14.9%	22.3%
Rtc Group ($RTC)	14.6%	17.6%	19.9%	22.2%
Mortice Ltd ($MORT)	32.2%	29.2%	19.6%	21.9%
Median (51 companies)	9.5%	7.8%	9.3%	10.2%	11.9%
Harvey Nash Group ($HVN)	12.5%	11.3%	9.4%	11.7%	13.2%

Top companies by Net Debt / EBITDA

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Redhall Group ($RHL)	22.8x	5.8x	6.6x	16.8x
Mitsubishi Corp ($MBC)	9.9x	15.9x	14.3x	12.5x
Ienergizer Ltd ($IBPO)	6.3x	2.8x	3.0x	4.0x
Kellan Group(The ($KLN)			6.5x	3.6x
Premier Farnell ($PFLA)	1.7x	2.1x	2.1x	3.1x	3.8x
Median (48 companies)	0.8x	0.7x	0.6x	0.4x	1.3x
Harvey Nash Group ($HVN)	-0.5x	-0.5x	-0.4x	-0.2x	-0.0x

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