Chemring Group EBITDA dropped on 76.0% and EBITDA Margin decreased on 5.9 pp from 10.6% to 4.7%
17 Jan 2019 • About Chemring Group (
$BC88) • By InTwits
Chemring Group reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Chemring Group is a company in decline: FY2018 revenue growth was -45.7%, 5 years revenue CAGR was -8.8%
- EBITDA Margin is quite volatile: 4.7% in FY2018, 10.6% in FY2017, 14.6% in FY2016, 11.4% in FY2015, 16.1% in FY2014
- Chemring Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.1%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: £7m in FY2018, £5m in FY2017, £3m in FY2016, £3m in FY2015, £5m in FY2014
- The company has unprofitable business model: ROIC is -3.7%
- It operates with high leverage: Net Debt/EBITDA is 5.8x while industry average is 1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Chemring Group's Revenue dropped on 45.7%. During the last 5 years Revenue growth topped in FY2016 at 26.5% and was decelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 5.9 pp from 10.6% to 4.7% in FY2018.
Net Income margin dropped on 36.8 pp from 1.2% to -35.6% in FY2018. During FY2014-FY2018 Net Income margin topped in FY2016 at 2.3% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 6.3%. Chemring Group's CAPEX/Revenue increased on 4.1 pp from 2.2% in FY2015 to 6.3% in FY2018. Average CAPEX/Revenue for the last three years was 3.6%. The company has spent a lot to CAPEX (134% of EBITDA) which didn't stop revenue from falling. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2016 at 2.2% and was growing since that time.
Return on investment
The company operates at negative ROIC (-3.7%) and ROE (-30.4%). ROIC decreased on 7.0 pp from 3.3% to -3.7% in FY2018. ROE dropped on 32.0 pp from 1.6% to -30.4% in FY2018. During the last 5 years ROE topped in FY2016 at 3.2% and was declining since that time.
The company paid £9 despite negative Net Income of £-106 in FY2018.
Management team
Michael Ord is a Chemring Group's CEO. Michael Ord is a founder and has spent 1 year with the company. CEO total compensation was £969,000 in FY2018 which included £598,000 salary. The company's CFO Andrew G Lewis has spent 3 years with the company.
At the end of financial year the company had 0.85% shares owned by insiders.
At the end of financial year the company had 2,559 employees. Average revenue per employee in FY2018 was £116,217.
Financial and operational results
FY ended 31 Oct 2018
Chemring Group ($BC88) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 403.1 | 377.3 | 477.1 | 547.5 | 297.4 | -45.7% |
| Gross Profit | 126.7 | 104.8 | 123.4 | | | |
| SG&A | 80.0 | 70.4 | 74.9 | | | |
| EBITDA | 64.8 | 42.9 | 69.6 | 58.3 | 14.0 | -76.0% |
| EBIT | | | | | -16.6 | |
| Interest expence | | | | | 4.7 | |
| Tax | | | | | 18.8 | |
| Net Income | -54.9 | -0.4 | 11.1 | 6.6 | -105.8 | -1,703.0% |
| Stock Based Compensation | | | | | 1.1 | |
Balance Sheet
|
|---|
| Cash | 21.8 | 7.6 | 63.1 | 33.6 | 9.6 | -71.4% |
| Inventory | | | | | 71.4 | |
| Short Term Debt | 1.3 | 0.5 | 29.6 | 51.6 | | |
| Long Term Debt | 156.1 | 161.3 | 121.0 | 61.9 | 91.3 | 47.5% |
Cash flow
|
|---|
| Capex | 10.9 | 8.2 | 10.3 | 12.6 | 18.8 | 49.2% |
| Dividends | | | | | 9.0 | |
Ratios
|
|---|
| Revenue growth | -14.7% | -6.4% | 26.5% | 14.8% | -45.7% | |
| EBITDA growth | -3,510.5% | -33.8% | 62.2% | -16.2% | -76.0% | |
|
|---|
| Gross Margin | 31.4% | 27.8% | 25.9% | | | |
| EBITDA Margin | 16.1% | 11.4% | 14.6% | 10.6% | 4.7% | -5.9% |
| EBIT Margin | | | | | -5.6% |
| SG&A, % of revenue | 19.8% | 18.7% | 15.7% | | | |
| SBC, % of revenue | | | | | 0.4% |
| Net Income Margin | -13.6% | -0.1% | 2.3% | 1.2% | -35.6% | -36.8% |
| CAPEX, % of revenue | 2.7% | 2.2% | 2.2% | 2.3% | 6.3% | 4.0% |
|
|---|
| ROIC | 4.4% | 1.4% | 5.8% | 3.3% | -3.7% | -7.0% |
| ROE | -16.1% | -0.1% | 3.2% | 1.6% | -30.4% | -32.0% |
| Net Debt/EBITDA | 2.1x | 3.6x | 1.3x | 1.4x | 5.8x | 4.5x |
| Interest expence / Average debt | | | | | 5.1% | |
People
|
|---|
| Insider ownership | | | | | 0.9% | |
| Employees | | | | | 2,559 | |
| Revenue/Employee, th. £ | | | | | 116 | |
Peers in Aerospace & Defense
Below you can find Chemring Group benchmarking vs. other companies in Aerospace & Defense 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 |
|---|
| Velocity Composites Plc ($VEL) | | -4.9% | 0.6% | 46.2% | |
| Rolls-Royce Hldgs ($RR.) | | -0.1% | 9.0% | 9.0% | |
| Cobham ($85GU) | | 11.9% | -6.2% | 5.6% | |
| Qinetiq Group ($QQ.) | | -2.4% | -1.1% | 3.6% | 6.4% |
| Boeing Co ($BOE) | 4.8% | 5.9% | -1.6% | -1.2% | |
| |
|---|
| Median (6 companies) | 4.8% | 0.4% | -1.3% | 4.6% | 6.4% |
|---|
| Chemring Group ($BC88) | | -6.4% | 26.5% | 14.8% | -45.7% |
Top companies by Gross margin, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cobham ($85GU) | 30.3% | 32.0% | 19.4% | 29.0% | |
| Rolls-Royce Hldgs ($RR.) | 23.3% | 23.8% | 20.4% | 19.5% | |
| Boeing Co ($BOE) | 15.4% | 14.6% | 14.6% | 18.6% | |
| Velocity Composites Plc ($VEL) | 20.5% | 24.0% | 23.8% | 18.4% | |
| |
|---|
| Median (4 companies) | 21.9% | 23.9% | 19.9% | 19.0% | |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Qinetiq Group ($QQ.) | 16.8% | 17.9% | 13.6% | 20.6% | 20.8% |
| Cobham ($85GU) | 13.4% | 12.9% | -27.3% | 16.0% | |
| Boeing Co ($BOE) | 10.3% | 9.7% | 8.2% | 13.2% | |
| Rolls-Royce Hldgs ($RR.) | 14.8% | 16.1% | 6.6% | 12.5% | |
| Bae Systems ($BA.) | 12.1% | 11.0% | 11.2% | 11.4% | |
| |
|---|
| Median (6 companies) | 12.8% | 11.9% | 7.4% | 12.9% | 20.8% |
|---|
| Chemring Group ($BC88) | 16.1% | 11.4% | 14.6% | 10.6% | 4.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rolls-Royce Hldgs ($RR.) | 4.7% | 3.5% | 3.9% | 4.7% | |
| Qinetiq Group ($QQ.) | 3.1% | 3.2% | 3.8% | 3.9% | 5.5% |
| Cobham ($85GU) | 3.4% | 4.7% | 4.3% | 3.4% | |
| Bae Systems ($BA.) | 1.7% | 2.1% | 2.3% | 2.1% | |
| Boeing Co ($BOE) | 2.5% | 2.5% | 2.8% | 1.9% | |
| |
|---|
| Median (6 companies) | 3.3% | 2.9% | 3.3% | 2.7% | 5.5% |
|---|
| Chemring Group ($BC88) | 2.7% | 2.2% | 2.2% | 2.3% | 6.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Boeing Co ($BOE) | 29.5% | 38.9% | 38.5% | 82.7% | |
| Qinetiq Group ($QQ.) | 17.4% | 26.8% | 24.7% | 29.9% | 20.6% |
| Bae Systems ($BA.) | 26.0% | 27.9% | 26.0% | 18.4% | |
| Rolls-Royce Hldgs ($RR.) | 13.8% | 15.3% | -1.0% | 14.8% | |
| Cobham ($85GU) | 2.6% | 0.5% | -36.8% | 5.9% | |
| |
|---|
| Median (6 companies) | 17.4% | 27.4% | 25.4% | 16.6% | 20.6% |
|---|
| Chemring Group ($BC88) | 4.4% | 1.4% | 5.8% | 3.3% | -3.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cobham ($85GU) | 4.9x | 4.5x | | 1.2x | |
| Bae Systems ($BA.) | 0.5x | 0.8x | 0.8x | 0.4x | |
| Rolls-Royce Hldgs ($RR.) | -0.3x | 0.1x | 0.6x | 0.3x | |
| Boeing Co ($BOE) | -0.3x | -0.1x | 0.1x | 0.2x | |
| Qinetiq Group ($QQ.) | -1.3x | -1.3x | -2.6x | -1.3x | -1.5x |
| |
|---|
| Median (5 companies) | -0.3x | 0.1x | 0.2x | 0.3x | -1.5x |
|---|
| Chemring Group ($BC88) | 2.1x | 3.6x | 1.3x | 1.4x | 5.8x |
