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Netcall Net Income dropped on 29.0% in 2016 and EBITDA Margin decreased on 4.0 pp from 23.5% to 19.6%

27 Sep 2016 • About Netcall ($NET) • By InTwits

Netcall reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Netcall has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's a lot of higher than industry average of 4.4%.
  • CAPEX is quite volatile: 0.44 in FY2016, 0.16 in FY2015, 0.17 in FY2014, 0.10 in FY2013, 0.18 in FY2012
  • The company has business model with low profitability: ROIC is at 7.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Netcall ($NET) key annual financial indicators

mln. £201220132014201520162016/2015
P&L
Revenue14.58916.11116.86617.15116.627-3.1%
Gross Profit12.87114.45015.35315.58715.164-2.7%
SG&A13.54113.34911.912-10.8%
EBITDA3.1653.7334.2934.0343.252-19.4%
Net Income1.8101.9992.2132.6551.886-29.0%
Balance Sheet
Cash8.4319.18711.37713.72614.1222.9%
Short Term Debt0.0000.0000.0000.0000.000
Long Term Debt0.0000.0000.0000.0000.000
Cash flow
Capex0.1810.1030.1680.1630.444172.4%
Ratios
Revenue growth7.1%10.4%4.7%1.7%-3.1%
EBITDA growth20.7%17.9%15.0%-6.0%-19.4%
Gross Margin88.2%89.7%91.0%90.9%91.2%0.3%
EBITDA Margin21.7%23.2%25.5%23.5%19.6%-4.0%
Net Income Margin12.4%12.4%13.1%15.5%11.3%-4.1%
SG&A, % of revenue80.3%77.8%71.6%-6.2%
CAPEX, % of revenue1.2%0.6%1.0%1.0%2.7%1.7%
ROIC13.5%14.9%15.1%12.0%7.1%-4.8%
ROE12.3%12.4%11.9%12.4%8.3%-4.1%
Net Debt/EBITDA-2.7x-2.5x-2.7x-3.4x-4.3x-0.9x

Revenue and profitability


The company's Revenue decreased on 3.1% in FY2016. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.0 pp from 23.5% to 19.6% in FY2016.

Gross Margin showed almost no change in FY2016. SG&A as a % of Revenue decreased on 6.2 pp from 77.8% to 71.6% in FY2016.

Net Income marign decreased on 4.1 pp from 15.5% to 11.3% in FY2016.

Capital expenditures (CAPEX) and working capital investments


In FY2016 the company had CAPEX/Revenue of 2.7%. CAPEX/Revenue increased on 2.0 pp from 0.64% in FY2013 to 2.7% in FY2016. It's average CAPEX/Revenue for the last three years was 1.5%.

Return on investment


The company operates at low ROIC (7.15%) and ROE (8.33%). ROIC decreased on 4.8 pp from 12.0% to 7.1% in FY2016. ROE decreased on 4.1 pp from 12.4% to 8.3% in FY2016.

Leverage (Debt)


The company has no debt. Cash increased on 2.9% in FY2016.

Valuation


Netcall's trades at EV/EBITDA 20.4x and P/E 42.6x while industy averages are 15.6x and 19.1x. Netcall's EV/(EBITDA-CAPEX) is 23.6x with the industry average at 19.0x.

Appendix 1: Peers in Software & Computer Services


Below we provide Netcall benchmarking against other companies in Software & Computer 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
Coms ($COMS)46.8%763.3%110.4%36.1%
Centralnic Group ($CNIC)15.9%4.0%98.9%71.3%
Proactis Holdings ($PHD)20.4%7.0%26.2%69.6%
Progility ($PGY)4.6%51.0%
Galasys ($GLS)14.3%20.9%311.1%33.0%
 
Median (44 companies)7.8%6.1%5.0%4.7%8.8%
Netcall ($NET)10.4%4.7%1.7%-3.1%


Top companies by Gross margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Lombard Risk Management ($LRM)99.0%98.8%99.2%98.6%99.3%
Phoenix It Group ($PNX)97.0%97.2%97.6%97.9%
Wandisco ($WAND)91.8%80.3%80.7%93.2%
Idox ($IDOX)90.4%90.8%89.4%89.3%
Dotdigital Group ($DOTD)94.0%92.7%90.5%89.3%
 
Median (37 companies)62.7%62.0%58.0%60.2%17.3%
Netcall ($NET)88.2%89.7%91.0%90.9%91.2%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Mail.Ru Group Ltd ($61HE)43.1%47.4%50.5%34.6%
Dotdigital Group ($DOTD)31.4%39.4%29.2%32.0%
Idox ($IDOX)30.9%26.1%26.0%28.6%
Galasys ($GLS)44.0%83.6%32.6%28.5%
Oxford Metrics ($OMG)15.7%6.0%14.7%28.4%
 
Median (44 companies)13.8%13.0%12.0%12.3%3.5%
Netcall ($NET)21.7%23.2%25.5%23.5%19.6%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Rapidcloud Intl ($RCI)1.0%23.1%11.6%19.6%
Coms ($COMS)0.5%0.9%3.4%7.5%0.1%
Csf Group ($CSFG)1.5%4.0%2.4%7.1%4.9%
Nasstar ($NASA)17.9%2.1%5.2%
Unisys Corp ($USY)2.1%2.5%4.1%5.0%
 
Median (44 companies)1.5%1.6%1.9%1.4%0.9%
Netcall ($NET)1.2%0.6%1.0%1.0%2.7%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Triad Group ($TRD)4.1%-3.8%24.5%61.5%74.4%
Dotdigital Group ($DOTD)26.4%38.0%28.5%31.4%
International Bus Mach Corp ($IBM)36.1%31.0%28.1%25.7%
Galasys ($GLS)58.7%60.9%40.8%22.2%
Instem ($INS)20.6%14.7%10.9%20.4%
 
Median (44 companies)12.5%11.5%9.4%4.3%1.6%
Netcall ($NET)13.5%14.9%15.1%12.0%7.1%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Progility ($PGY)2.0x1.8x12.8x
Parity Group ($PTY)4.7x4.9x5.1x
Nasstar ($NASA)-5.3x0.0x1.9x
Phoenix It Group ($PNX)4.3x1.9x
International Bus Mach Corp ($IBM)0.9x1.2x1.4x1.7x
 
Median (34 companies)-0.4x-0.4x-0.3x-0.5x-0.8x
Netcall ($NET)-2.7x-2.5x-2.7x-3.4x-4.3x