Sweett Group reports 176% EBITDA decline while 2.2% Revenue growth

08 Jun 2016 • About Sweett Group ($CSG) • By InTwits

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

• Sweett Group doesn't have a profitable business model yet: FY2016 ROIC is -18.6%
• EBITDA Margin is quite volatile: -5.9% in FY2016, 8.0% in FY2015, 7.2% in FY2014, 4.5% in FY2013, 2.3% in FY2012
• Sweett Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%.
• The company has unprofitable business model: ROIC is at -18.6%

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

Sweett Group ($CSG) key annual financial indicators

mln. £	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	72.806	80.636	89.398	58.031	59.318	2.2%
Gross Profit	21.457	23.238	27.462	15.628	15.616	-0.1%
SG&A			22.563	13.395	15.387	14.9%
EBITDA	1.650	3.611	6.401	4.654	-3.517	-175.6%
Net Income	-1.412	1.299	1.894	-1.841	-19.454	956.7%
Balance Sheet
Cash	2.268	3.915	4.664	3.082	0.835	-72.9%
Short Term Debt	10.485	8.710	7.222	8.563	3.385	-60.5%
Long Term Debt	0.020	2.265	5.633	4.211	0.000	-100.0%
Cash flow
Capex	0.922	1.013	0.760	0.641	0.255	-60.2%
Ratios
Revenue growth	-0.0%	10.8%	10.9%	-35.1%	2.2%
EBITDA growth	-68.3%	118.8%	77.3%	-27.3%	-175.6%
Gross Margin	29.5%	28.8%	30.7%	26.9%	26.3%	-0.6%
EBITDA Margin	2.3%	4.5%	7.2%	8.0%	-5.9%	-13.9%
Net Income Margin	-1.9%	1.6%	2.1%	-3.2%	-32.8%	-29.6%
SG&A, % of revenue			25.2%	23.1%	25.9%	2.9%
CAPEX, % of revenue	1.3%	1.3%	0.9%	1.1%	0.4%	-0.7%
ROIC	0.2%	5.0%	12.0%	7.3%	-18.6%	-25.9%
ROE	-4.7%	4.6%	6.8%	-7.0%	-114.0%	-107.0%
Net Debt/EBITDA	5.0x	2.0x	1.3x	2.1x		-2.1x

Revenue and profitability

The company's Revenue increased on 2.2% in FY2016. Revenue growth was financed by EBITDA margin decline. EBITDA Margin dropped on 13.9 pp from 8.0% to -5.9% in FY2016.

Gross Margin decreased slightly on 0.60 pp from 26.9% to 26.3% in FY2016. SG&A as a % of Revenue increased on 2.9 pp from 23.1% to 25.9% in FY2016.

Net Income marign dropped on 29.6 pp from -3.2% to -32.8% in FY2016.

Capital expenditures (CAPEX) and working capital investments

In FY2016 Sweett Group had CAPEX/Revenue of 0.43%. The company showed small CAPEX/Revenue decline of 0.83 pp from 1.3% in FY2013 to 0.43% in FY2016. Average CAPEX/Revenue for the last three years was 0.79%.

Return on investment

The company operates at negative ROIC (-18.60%) and ROE (-113.96%). ROIC dropped on 25.9 pp from 7.3% to -18.6% in FY2016. ROE dropped on 107 pp from -7.0% to -114% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.6x and Debt / EBITDA is . Net Debt / EBITDA dropped on 2.1x from 2.1x to in FY2016. Debt dropped on 73.5% in FY2016 while cash dropped on 72.9% in FY2016.

Appendix 1: Peers in Support Services

Below we provide Sweett 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 ($INSE)	83.8%	44.8%	42.2%	40.2%
21St Century Technology ($C21)	0.1%	-22.8%	-16.6%	35.5%
Ibex Global Solutions ($IBEX)	7.4%	35.7%	30.0%	29.8%
Median (54 companies)	5.9%	6.9%	4.7%	6.7%	1.1%
Sweett Group ($CSG)		10.8%	10.9%	-35.1%	2.2%

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 ($GRA)	53.4%	54.3%	56.1%	70.8%	66.3%
Vianet Group ($VNET)	53.3%	51.3%	58.8%	69.2%	70.1%
Prime People ($PRP)	63.4%	58.3%	57.7%	61.4%
Median (48 companies)	28.2%	28.5%	29.2%	29.8%	28.3%
Sweett Group ($CSG)	29.5%	28.8%	30.7%	26.9%	26.3%

Top companies by EBITDA margin, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
21St Century Technology ($C21)	13.4%	-0.2%	36.0%	44.8%
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 ($VNET)	18.6%	17.3%	19.7%	27.1%	22.1%
Vp ($VP.)	23.9%	24.5%	24.2%	26.2%	28.4%
Median (54 companies)	6.8%	6.4%	6.8%	7.2%	7.7%
Sweett Group ($CSG)	2.3%	4.5%	7.2%	8.0%	-5.9%

Top companies by CAPEX/Revenue, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vp ($VP.)	21.4%	17.7%	21.6%	25.7%	24.1%
Sagentia Group ($SAG)	1.9%	1.4%	1.5%	25.2%
Nature Group ($NGR)	14.3%	7.2%	5.6%	22.9%
Augean ($AUG)	9.8%	15.9%	12.3%	12.3%
Falkland Islands Hldgs ($FKL)	3.7%	6.8%	12.9%	11.9%
Median (54 companies)	1.0%	1.1%	1.1%	1.1%	2.0%
Sweett Group ($CSG)	1.3%	1.3%	0.9%	1.1%	0.4%

Top companies by ROIC, %

Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
21St Century Technology ($C21)	20.3%	-2.9%	45.6%	111.0%
Inspired Energy ($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 ($RTC)	14.6%	17.6%	19.9%	22.2%
Median (54 companies)	9.9%	7.9%	9.3%	10.3%	10.5%
Sweett Group ($CSG)	0.2%	5.0%	12.0%	7.3%	-18.6%

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	25.0x
Ienergizer Ltd ($IBPO)	6.3x	2.8x	3.0x	4.0x
Ceps ($CEPS)		3.0x	6.6x	3.8x
Kellan Group(The ($KLN)			6.5x	3.6x
Median (50 companies)	0.8x	0.5x	0.6x	0.4x	0.6x
Sweett Group ($CSG)	5.0x	2.0x	1.3x	2.1x

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