Gresham Computing Net Income surged on 33.6% in 2016 and EBITDA Margin increased on 2.5 pp from 18.1% to 20.6%
14 Mar 2017 • About Gresham Computing (
$GHT) • By InTwits
Gresham Computing reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Gresham Computing has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's a lot of higher than industry average of 2.0%.
- CAPEX is quite volatile: 0.51 in 2016, 0.22 in 2015, 0.24 in 2014, 0.56 in 2013, 0.20 in 2012
- The company has highly profitable business model: ROIC is at 12.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Gresham Computing ($GHT) key annual financial indicators
| mln. £ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 10.333 | 14.048 | 12.832 | 14.842 | 17.156 | 15.6% |
| Gross Profit | 7.960 | 10.286 | 9.423 | 12.020 | 14.172 | 17.9% |
| SG&A | | | 8.991 | 10.459 | 11.988 | 14.6% |
| EBITDA | 1.957 | 2.708 | 1.124 | 2.686 | 3.539 | 31.8% |
| Net Income | 1.965 | 2.100 | 1.095 | 1.950 | 2.605 | 33.6% |
Balance Sheet
|
|---|
| Cash | 2.891 | 4.386 | 4.707 | 4.666 | 7.206 | 54.4% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 0.201 | 0.557 | 0.244 | 0.217 | 0.508 | 134.1% |
Ratios
|
|---|
| Revenue growth | -10.9% | 36.0% | -8.7% | 15.7% | 15.6% | |
| EBITDA growth | 19.5% | 38.4% | -58.5% | 139.0% | 31.8% | |
| Gross Margin | 77.0% | 73.2% | 73.4% | 81.0% | 82.6% | 1.6% |
| EBITDA Margin | 18.9% | 19.3% | 8.8% | 18.1% | 20.6% | 2.5% |
| Net Income Margin | 19.0% | 14.9% | 8.5% | 13.1% | 15.2% | 2.0% |
| SG&A, % of revenue | | | 70.1% | 70.5% | 69.9% | -0.6% |
| CAPEX, % of revenue | 1.9% | 4.0% | 1.9% | 1.5% | 3.0% | 1.5% |
| ROIC | 33.0% | 23.6% | 3.8% | 12.6% | 12.3% | -0.3% |
| ROE | 38.6% | 24.4% | 9.1% | 14.0% | 14.4% | 0.4% |
| Net Debt/EBITDA | -1.5x | -1.6x | -4.2x | -1.7x | -2.0x | -0.3x |
Revenue and profitability
The company's Revenue surged on 15.6% in 2016. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.5 pp from 18.1% to 20.6% in 2016.
Gross Margin increased slightly on 1.6 pp from 81.0% to 82.6% in 2016. SG&A as a % of Revenue decreased slightly on 0.59 pp from 70.5% to 69.9% in 2016.
Net Income marign increased on 2.0 pp from 13.1% to 15.2% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 the company had CAPEX/Revenue of 3.0%. Gresham Computing showed small CAPEX/Revenue decline of 1.0 pp from 4.0% in 2013 to 3.0% in 2016. It's average level of CAPEX/Revenue for the last three years was 2.1%.
Return on investment
The company operates at good ROIC (12.35%) and ROE (14.44%). ROIC showed almost no change in 2016. ROE showed almost no change in 2016.
Leverage (Debt)
The company has no debt. Cash jumped on 54.4% in 2016.
Valuation
The company's trades at EV/EBITDA 28.2x and P/E 41.1x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 33.0x with the industry average at 19.0x.
Appendix 1: Peers in Software & Computer Services
Below you can find Gresham Computing benchmarking vs. other companies in Software & Computer Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
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 ($PHD) | | 7.0% | 26.2% | 69.6% | 12.5% |
| Progility ($PGY) | | | | 51.0% | 3.2% |
| Galasys ($GLS) | 14.3% | 20.9% | 311.1% | 33.0% | |
| |
|---|
| Median (45 companies) | 8.4% | 5.7% | 4.7% | 3.1% | 8.8% |
|---|
| Gresham Computing ($GHT) | | 36.0% | -8.7% | 15.7% | 15.6% |
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 ($WAND) | 91.8% | 80.3% | 80.7% | 93.2% | 88.1% |
| Netcall ($NET) | 88.2% | 89.7% | 91.0% | 90.9% | 91.2% |
| Idox ($IDOX) | 90.4% | 90.8% | 89.4% | 89.3% | 86.8% |
| |
|---|
| Median (38 companies) | 61.4% | 62.0% | 57.8% | 58.8% | 60.0% |
|---|
| Gresham Computing ($GHT) | 77.0% | 73.2% | 73.4% | 81.0% | 82.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mail.Ru Group Ltd ($61HE) | 43.1% | 47.4% | 50.5% | 34.6% | 35.2% |
| Dotdigital Group ($DOTD) | 31.4% | 39.4% | 29.2% | 32.0% | 30.4% |
| Idox ($IDOX) | 30.9% | 26.1% | 26.0% | 28.6% | 27.3% |
| Galasys ($GLS) | 44.0% | 83.6% | 32.6% | 28.5% | |
| Oxford Metrics ($OMG) | 15.7% | 6.0% | 14.7% | 28.4% | 23.1% |
| |
|---|
| Median (45 companies) | 13.3% | 12.8% | 13.0% | 12.3% | 11.0% |
|---|
| Gresham Computing ($GHT) | 18.9% | 19.3% | 8.8% | 18.1% | 20.6% |
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 ($USY) | 2.1% | 2.5% | 4.1% | 5.0% | 3.0% |
| |
|---|
| Median (45 companies) | 1.5% | 1.5% | 1.9% | 1.0% | 1.2% |
|---|
| Gresham Computing ($GHT) | 1.9% | 4.0% | 1.9% | 1.5% | 3.0% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Rm ($RM.) | | 48.6% | 130.8% | 289.2% | 263.8% |
| Triad Group ($TRD) | 4.1% | -3.8% | 24.5% | 61.5% | 74.4% |
| Dotdigital Group ($DOTD) | 26.4% | 38.0% | 28.5% | 31.4% | 28.9% |
| International Bus Mach Corp ($IBM) | 36.1% | 31.0% | 28.1% | 25.7% | 18.7% |
| Galasys ($GLS) | 58.7% | 60.9% | 40.8% | 22.2% | |
| |
|---|
| Median (45 companies) | 12.5% | 11.6% | 9.8% | 5.3% | 8.4% |
|---|
| Gresham Computing ($GHT) | 33.0% | 23.6% | 3.8% | 12.6% | 12.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Progility ($PGY) | 2.0x | | 1.8x | 12.8x | 6.8x |
| Parity Group ($PTY) | 4.7x | | 4.9x | 5.1x | |
| Nasstar ($NASA) | -5.3x | | 0.0x | 1.9x | |
| Phoenix It Group ($PNX) | 4.3x | | | 1.9x | |
| International Bus Mach Corp ($IBM) | 0.9x | 1.2x | 1.4x | 1.7x | 2.2x |
| |
|---|
| Median (35 companies) | -0.4x | -0.4x | -0.3x | -0.5x | -0.9x |
|---|
| Gresham Computing ($GHT) | -1.5x | -1.6x | -4.2x | -1.7x | -2.0x |
