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Newmark Security CAPEX surged on 647% and Revenue showed almost no change

03 Oct 2018 • About Newmark Security ($NWT) • By InTwits

Newmark Security reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
  • The company operates at negative EBITDA Margin: -1.8%
  • EBITDA Margin is quite volatile: -1.8% in FY2018, -2.4% in FY2017, 10.8% in FY2016, 15.3% in FY2015, 19.4% in FY2014
  • Newmark Security has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.0%. At the same time it's a lot of higher than industry average of 2.4%.
  • CAPEX is quite volatile: £2m in FY2018, £0m in FY2017, £0m in FY2016, £0m in FY2015, £0m in FY2014
  • The company has unprofitable business model: ROIC is -22.7%
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 showed almost no change in FY2018. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.1 pp from 5.2% to 6.3% in FY2018. EBITDA Margin followed a declining trend at -6.0 pp per annum in the last 5 years.

Gross Margin increased on 8.2 pp from 27.9% to 36.1% in FY2018. SG&A as a % of Revenue dropped on 18.0 pp from 60.5% to 42.6% in FY2018.

Net Income margin jumped on 21.0 pp from -32.7% to -11.6% in FY2018.

Investments (CAPEX, working capital and M&A)


Newmark Security's CAPEX/Revenue was 9.8% in FY2018. The company showed CAPEX/Revenue growth of 8.6 pp from 1.3% in FY2015 to 9.8% in FY2018. It's average CAPEX/Revenue for the last three years was 4.0%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2016 at 0.94% and was growing since that time.

Return on investment


The company operates at negative ROIC (-22.7%) and ROE (-25.4%). ROIC jumped on 20.8 pp from -43.5% to -22.7% in FY2018. ROE surged on 19.8 pp from -45.2% to -25.4% in FY2018.

Leverage (Debt)


Company's Net Debt / EBITDA is -4.3x and Debt / EBITDA is . Debt surged on 207% while cash dropped on 22.0%.

Newmark Security has no short term refinancing risk: cash is higher than short term debt (217.7%).

Financial and operational results


FY ended 30 Apr 2018

Newmark Security ($NWT) key annual financial indicators

mln. £201420152016201720182018/2017
P&L
Revenue19.17122.85421.82316.03616.0520.1%
Gross Profit7.4309.7129.0984.4745.79229.5%
SG&A6.4467.4447.9009.7076.831-29.6%
EBITDA3.7123.4942.357-0.385-0.295
Net Income0.8572.1431.227-5.236-1.868
Balance Sheet
Cash1.4414.2024.2991.3701.069-22.0%
Short Term Debt0.1960.1430.0990.0790.491521.5%
Long Term Debt0.1240.1130.0640.0980.053-45.9%
Cash flow
Capex0.3240.2880.2050.2111.576646.9%
Ratios
Revenue growth4.7%19.2%-4.5%-26.5%0.1%
EBITDA growth9.7%-5.9%-32.5%-116.3%-23.4%

Gross Margin38.8%42.5%41.7%27.9%36.1%8.2%
EBITDA Margin19.4%15.3%10.8%-2.4%-1.8%0.6%
SG&A, % of revenue33.6%32.6%36.2%60.5%42.6%-18.0%
Net Income Margin4.5%9.4%5.6%-32.7%-11.6%21.0%
CAPEX, % of revenue1.7%1.3%0.9%1.3%9.8%8.5%

ROIC15.2%16.9%7.9%-43.5%-22.7%20.8%
ROE7.6%17.0%8.8%-45.2%-25.4%19.8%
Net Debt/EBITDA-0.3x-1.1x-1.8x

Peers in Support Services


Below you can find Newmark Security benchmarking vs. other companies in Support 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 FY2014 FY2015 FY2016 FY2017 FY2018
Mobilityone Ltd ($MBO)3.7%23.0%-5.3%37.9%
Mortice Ltd ($MORT)18.9%51.1%36.1%21.1%
Rws Hldgs ($RWS)20.9%1.8%28.1%34.5%
Empresaria Group ($EMR)-3.3%-0.3%44.4%32.1%
Norish ($NSH)3.7%16.4%16.7%31.4%
 
Median (49 companies)4.3%6.9%3.5%7.0%8.2%
Newmark Security ($NWT)19.2%-4.5%-26.5%0.1%


Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Inspired Energy ($INSE)78.7%76.2%80.5%83.1%
Ienergizer Ltd ($IBPO)76.8%72.7%71.3%71.2%69.7%
Spectra Systems Corp ($SPSY)51.4%47.6%68.3%71.1%
Vianet Group ($VNET)58.8%69.2%70.1%69.7%69.9%
Grafenia ($GRA)56.1%70.8%66.3%63.0%57.0%
 
Median (43 companies)29.2%28.1%27.0%28.1%28.3%
Newmark Security ($NWT)38.8%42.5%41.7%27.9%36.1%


Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Northgate ($67GX)40.6%39.4%38.3%35.9%35.4%
Spectra Systems Corp ($SPSY)12.3%6.0%19.7%34.0%
Inspired Energy ($INSE)1.5%35.4%34.4%32.4%
Vp ($VP.)24.2%26.2%28.4%28.6%27.2%
Rws Hldgs ($RWS)22.8%23.1%26.4%25.5%
 
Median (49 companies)6.7%6.9%4.9%5.7%7.6%
Newmark Security ($NWT)19.4%15.3%10.8%-2.4%-1.8%


Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Vp ($VP.)21.6%25.7%24.1%26.0%23.6%
Augean ($AUG)12.3%12.3%11.0%10.0%
Petards Group ($PEG)0.5%0.9%1.7%10.0%
Capital Drilling Ltd ($CAPD)13.9%10.1%13.7%9.0%
Billing Services Group ($BILL)2.1%4.1%3.0%4.5%
 
Median (49 companies)1.0%0.9%1.1%0.9%1.1%
Newmark Security ($NWT)1.7%1.3%0.9%1.3%9.8%


Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Sthree ($STHR)38.1%50.2%46.2%43.4%
Mortice Ltd ($MORT)19.6%21.9%14.5%23.2%18.4%
Petards Group ($PEG)24.7%23.9%22.7%20.3%
Rws Hldgs ($RWS)24.5%23.3%23.5%20.2%
Latham(James) ($LTHM)17.5%16.8%19.2%19.3%17.4%
 
Median (50 companies)10.0%10.4%7.8%7.6%7.9%
Newmark Security ($NWT)15.2%16.9%7.9%-43.5%-22.7%


Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Nakama Group ($NAK)5.2x1.4x3.1x48.5x
21St Century Technology ($C21)-0.8x-0.2x11.2x
Ceps ($CEPS)6.6x3.8x13.9x5.8x
Ibex Global Solutions ($IBEX)2.7x1.0x1.7x4.5x
Menzies(John) ($68HN)2.0x2.4x1.2x3.0x
 
Median (43 companies)0.3x0.2x0.3x0.5x0.8x