Netcall Net Income dropped on 90.8% in 2018 while Revenue jumped on 35.4%
16 Oct 2018 • About Netcall (
$NET) • By InTwits
Netcall reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 12.3% in FY2018 vs. 18.5% in FY2017 vs. 25.5% in FY2014
- Netcall has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.2%. At the same time it's in pair with industry average of 3.3%
- CAPEX is quite volatile: £0m in FY2018, £0m in FY2017, £0m in FY2016, £0m in FY2015, £0m in FY2014
- The company has potentially unprofitable business model: ROIC is 3.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.3x while industry average is -2.0x
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 jumped on 35.4%. During the last 5 years Revenue growth bottomed in FY2016 at -3.1% and was accelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 6.2 pp from 18.5% to 12.3% in FY2018. EBITDA Margin followed a declining trend at -3.1 pp per annum in FY2014-FY2018.
Gross Margin decreased slightly on 1.5 pp from 91.7% to 90.2% in FY2018. SG&A as a % of Revenue increased on 4.7 pp from 73.2% to 77.9% in FY2018. During the last 5 years SG&A as a % of Revenue bottomed in FY2016 at 71.6% and was growing since that time.
Net Income margin decreased on 8.5 pp from 9.1% to 0.62% in FY2018. Net Income margin followed a declining trend at -3.1 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
Netcall's CAPEX/Revenue was 0.78% in FY2018. CAPEX/Revenue showed almost no change from FY2015 to FY2018. Average CAPEX/Revenue for the last three years was 1.4%.
Return on investment
The company operates at low ROIC (3.2%) and ROE (0.6%). ROIC decreased on 4.3 pp from 7.5% to 3.2% in FY2018. ROE decreased on 6.1 pp from 6.8% to 0.64% in FY2018. ROIC declined at -2.8 pp per annum in FY2014-FY2018. ROE declined at -2.8 pp per annum in FY2014-FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.3x and Debt / EBITDA is 2.4x. Net Debt / EBITDA surged on 4.5x from -4.3x to 0.3x in FY2018. Debt jumped while cash dropped on 54.6%. During FY2014-FY2018 Net Debt/EBITDA bottomed in FY2016 at -4.3x and was growing since that time.
The company has no short term refinancing risk: short term debt is zero.
Valuation and dividends
Netcall's trades at EV/EBITDA 33.1x and P/E 652.6x.
Financial and operational results
FY ended 30 Nov -0001
Netcall ($NET) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 16.866 | 17.151 | 16.627 | 16.151 | 21.875 | 35.4% |
| Gross Profit | 15.353 | 15.587 | 15.164 | 14.818 | 19.732 | 33.2% |
| SG&A | 13.541 | 13.349 | 11.912 | 11.830 | 17.043 | 44.1% |
| EBITDA | 4.293 | 4.034 | 3.252 | 2.988 | 2.700 | -9.6% |
| Net Income | 2.213 | 2.655 | 1.886 | 1.475 | 0.136 | -90.8% |
Balance Sheet
|
|---|
| Cash | 11.377 | 13.726 | 14.122 | 12.724 | 5.779 | -54.6% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 6.518 | |
Cash flow
|
|---|
| Capex | 0.168 | 0.163 | 0.444 | 0.121 | 0.171 | 41.3% |
Ratios
|
|---|
| Revenue growth | 4.7% | 1.7% | -3.1% | -2.9% | 35.4% | |
| EBITDA growth | 15.0% | -6.0% | -19.4% | -8.1% | -9.6% | |
|
|---|
| Gross Margin | 91.0% | 90.9% | 91.2% | 91.7% | 90.2% | -1.5% |
| EBITDA Margin | 25.5% | 23.5% | 19.6% | 18.5% | 12.3% | -6.2% |
| SG&A, % of revenue | 80.3% | 77.8% | 71.6% | 73.2% | 77.9% | 4.7% |
| Net Income Margin | 13.1% | 15.5% | 11.3% | 9.1% | 0.6% | -8.5% |
| CAPEX, % of revenue | 1.0% | 1.0% | 2.7% | 0.7% | 0.8% | 0.0% |
|
|---|
| ROIC | 15.1% | 12.0% | 7.1% | 7.5% | 3.2% | -4.3% |
| ROE | 11.9% | 12.4% | 8.3% | 6.8% | 0.6% | -6.1% |
| Net Debt/EBITDA | -2.7x | -3.4x | -4.3x | -4.3x | 0.3x | 4.5x |
Peers in Software & Computer Services
Below you can find Netcall 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 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Pinnacle Technology Group ($PINN) | -17.1% | | | 108.6% | |
| Wandisco ($WAND) | 40.0% | -2.0% | 3.5% | 72.6% | |
| Microgen ($MCGN) | -0.0% | 7.2% | 34.5% | 45.7% | |
| Lombard Risk Management ($LRM) | 21.6% | 5.4% | 10.3% | 44.8% | |
| Zoo Digital Group ($ZOO) | | 19.9% | 1.5% | 41.7% | 73.2% |
| |
|---|
| Median (39 companies) | 0.8% | 6.3% | 11.7% | 12.4% | 3.0% |
|---|
| Netcall ($NET) | | 1.7% | -3.1% | -2.9% | 35.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Lombard Risk Management ($LRM) | 99.2% | 98.6% | 99.3% | 99.6% | |
| Wandisco ($WAND) | 80.7% | 93.2% | 88.1% | 90.0% | |
| Eleco ($ELCO) | 87.8% | 88.9% | 86.7% | 87.9% | |
| Dotdigital Group ($DOTD) | 90.5% | 89.3% | 87.4% | 86.1% | 78.9% |
| Proactis Holdings ($PHD) | 73.6% | 80.4% | 82.4% | 86.0% | |
| |
|---|
| Median (33 companies) | 57.5% | 55.0% | 56.6% | 55.1% | 35.3% |
|---|
| Netcall ($NET) | 91.0% | 90.9% | 91.2% | 91.7% | 90.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rightster Group ($RSTR) | -146.3% | -64.1% | -19.9% | 114.2% | |
| Dotdigital Group ($DOTD) | 29.2% | 32.0% | 30.4% | 31.7% | 26.9% |
| Sopheon ($SPE) | 6.8% | 19.8% | 22.6% | 27.9% | |
| Mail.Ru Group Ltd ($61HE) | 50.5% | 34.6% | 35.2% | 25.1% | |
| Gresham Computing ($GHT) | 8.8% | 18.1% | 20.6% | 22.6% | |
| |
|---|
| Median (39 companies) | 10.3% | 12.3% | 10.2% | 10.7% | 6.8% |
|---|
| Netcall ($NET) | 25.5% | 23.5% | 19.6% | 18.5% | 12.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Actual Experience ($ACT) | 2.6% | 6.0% | 39.9% | 48.7% | |
| Csf Group ($CSFG) | 2.4% | 7.1% | 4.9% | 8.5% | 16.5% |
| Pennant International Group ($PEN) | 1.4% | 0.2% | 6.3% | 7.1% | |
| Nasstar ($NASA) | 2.1% | 5.2% | 8.9% | 6.5% | |
| Oxford Metrics ($OMG) | 2.8% | 2.4% | 1.8% | 5.8% | |
| |
|---|
| Median (39 companies) | 1.9% | 1.4% | 1.2% | 1.3% | 1.0% |
|---|
| Netcall ($NET) | 1.0% | 1.0% | 2.7% | 0.7% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rm ($RM.) | 130.8% | 289.2% | 254.7% | 73.8% | |
| Triad Group ($TRD) | 24.5% | 61.5% | 74.4% | 61.1% | 41.0% |
| Sopheon ($SPE) | -10.5% | 14.7% | 22.7% | 32.3% | |
| Dotdigital Group ($DOTD) | 28.5% | 31.4% | 28.9% | 29.3% | 26.6% |
| International Bus Mach Corp ($IBM) | 31.6% | 29.7% | 21.5% | 19.5% | 19.8% |
| |
|---|
| Median (41 companies) | 9.0% | 4.0% | 8.2% | 6.3% | 7.5% |
|---|
| Netcall ($NET) | 15.1% | 12.0% | 7.1% | 7.5% | 3.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Datatec ($DTC) | 0.3x | 0.4x | 1.1x | 10.2x | |
| Progility ($PGY) | 1.8x | 12.8x | 6.8x | 3.9x | |
| Zoo Digital Group ($ZOO) | | | 38.3x | 3.2x | 0.9x |
| Statpro Group ($SOG) | -0.3x | -0.2x | | 3.0x | |
| Idox ($IDOX) | 1.0x | 1.3x | 1.2x | 2.2x | |
| |
|---|
| Median (31 companies) | -0.3x | -0.5x | -0.8x | -0.5x | -0.5x |
|---|
| Netcall ($NET) | -2.7x | -3.4x | -4.3x | -4.3x | 0.3x |
