Marsh & Mclennan Cos Inc Net Income jumped on 10.6% while EBITDA Margin decreased on 2.0 pp from 23.8% to 21.8%
31 Jan 2019 • About Marsh & Mclennan Cos Inc (
$MHM) • By InTwits
Marsh & Mclennan Cos Inc reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Marsh & Mclennan Cos Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.3%. At the same time it's a lot of higher than industry average of 0.7%.
- CAPEX is quite volatile: 2,061 ZARm in FY2018, 1,069 ZARm in FY2017, 1,824 ZARm in FY2016, 808 ZARm in FY2015, 646 ZARm in FY2014
- The company has highly profitable business model: ROIC is 20.5%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.5x 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
Marsh & Mclennan Cos Inc's Revenue increased on 6.6%. During the last 5 years Revenue growth bottomed in 2015 at -0.45% and was accelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.8 pp from 19.3% to 17.5% in FY2018. During 2014-2018 EBITDA Margin topped in 2017 at 23.8%.
Net Income margin showed almost no change in 2018. The efficient tax rate was 25.8% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.1% in 2018. CAPEX/Revenue showed almost no change from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 2.1%.
Marsh & Mclennan Cos Inc has spent
$884m on M&A in 2018 which accounts for 5.9% of revenue.
Return on investment
The company operates at high and attractive ROIC (20.5%) and ROE (22.2%). ROIC decreased on 2.7 pp from 23.3% to 20.5% in 2018. ROE showed almost no change in 2018. During 2014-2018 ROIC topped in 2016 at 23.6% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.5x and Debt / EBITDA is 1.8x. Net Debt / EBITDA surged on 0.2x from 1.3x to 1.5x in 2018. Debt increased on 6.1% while cash dropped on 11.5%. Net Debt/EBITDA stuck to a growing trend at 0.2x per annum in 2014-2018.
Marsh & Mclennan Cos Inc has good short term financial stability: Interest coverage ratio (ICR) is 9.5x. Marsh & Mclennan Cos Inc has no short term refinancing risk: cash is higher than short term debt (339.5%).
Average interest expence paid by the company was 5.0% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 1.6x and P/E 0.2x.
The company paid 48.9% of Net Income as dividends in 2018.
Management team
The company's CEO Dan Glaser has spent 7 years with the company. CEO total compensation was
$17,281,919 in 2018 which included
$1,475,000 salary. Mark C Mcgivney is a Marsh & Mclennan Cos Inc's CFO. Mark C Mcgivney has spent 4 years at the company.
At the end of financial year the company had 0.19% shares owned by insiders.
The company has 66,000 employees. Average revenue per employee in 2018 was
$226,515.
Financial and operational results
FY ended 31 Dec 2018
Marsh & Mclennan Cos Inc ($MHM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 12,951 | 12,893 | 13,211 | 14,024 | 14,950 | 6.6% |
| EBITDA | 2,689 | 2,842 | 3,102 | 3,337 | 3,255 | -2.5% |
| EBIT | | | | | 2,761 | |
| Interest expence | | | | | 290 | |
| Tax | | | | | 574 | |
| Net Income | 1,465 | 1,599 | 1,768 | 1,492 | 1,650 | 10.6% |
| Stock Based Compensation | | | | | 193 | |
Balance Sheet
|
|---|
| Cash | 1,958 | 1,374 | 1,026 | 1,205 | 1,066 | -11.5% |
| Accounts Receivable | | | | | 4,317 | |
| Short Term Debt | 11 | 12 | 312 | 262 | 314 | 19.8% |
| Long Term Debt | 3,368 | 4,402 | 4,495 | 5,225 | 5,510 | 5.5% |
Cash flow
|
|---|
| Capex | 368 | 325 | 253 | 302 | 314 | 4.0% |
| Dividends | | | | | 807 | |
| Acquisitions | | | | | 884 | |
Ratios
|
|---|
| Revenue growth | 5.6% | -0.4% | 2.5% | 6.2% | 6.6% | |
| EBITDA growth | 10.4% | 5.7% | 9.1% | 7.6% | -2.5% | |
|
|---|
| EBITDA Margin | 20.8% | 22.0% | 23.5% | 23.8% | 21.8% | -2.0% |
| EBIT Margin | | | | | 18.5% |
| SBC, % of revenue | | | | | 1.3% |
| Net Income Margin | 11.3% | 12.4% | 13.4% | 10.6% | 11.0% | 0.4% |
| CAPEX, % of revenue | 2.8% | 2.5% | 1.9% | 2.2% | 2.1% | -0.1% |
|
|---|
| ROIC | 21.0% | 22.0% | 23.6% | 23.3% | 20.5% | -2.7% |
| ROE | 19.6% | 23.6% | 27.8% | 22.0% | 22.2% | 0.2% |
| Net Debt/EBITDA | 0.5x | 1.1x | 1.2x | 1.3x | 1.5x | 0.2x |
| Interest coverage ratio (ICR) | | | | | 9.5x |
| Interest expence / Average debt | | | | | 5.0% | |
People
|
|---|
| Insider ownership | | | | | 0.2% | |
| Employees | | | | | 66,000 | |
| Revenue/Employee, th. $ | | | | | 227 | |
Peers in Nonlife Insurance
Below we provide Marsh & Mclennan Cos Inc benchmarking against other companies in Nonlife Insurance 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 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Randall & Quilter Invt Hldgs Ltd ($RQIH) | 20.7% | 10.0% | 22.1% | 110.7% | |
| Helios Underwriting ($HUW) | 47.9% | 12.8% | 54.8% | 18.4% | |
| Beazley ($BEZ) | 5.9% | 1.1% | 6.0% | 7.9% | |
| F.B.D.Hldgs ($FBH) | 1.1% | 0.8% | -6.5% | 5.8% | |
| Rsa Insurance Group ($RSAB) | | -17.2% | 2.6% | 3.4% | |
| |
|---|
| Median (8 companies) | 20.7% | 0.8% | 4.3% | 4.6% | |
|---|
| Marsh & Mclennan Cos Inc ($MHM) | | -0.4% | 2.5% | 6.2% | 6.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F.B.D.Hldgs ($FBH) | 7.0% | 5.2% | 3.7% | 2.3% | |
| Arab Insurance Group(Arig) ($AGRD) | 0.2% | 0.3% | 0.2% | 0.3% | |
| Randall & Quilter Invt Hldgs Ltd ($RQIH) | 1.1% | 0.3% | 3.5% | 0.3% | |
| Rsa Insurance Group ($RSAB) | 0.5% | 0.2% | 0.4% | 0.3% | |
| General Accident ($GACB) | 0.3% | 0.2% | 0.1% | 0.1% | |
| |
|---|
| Median (8 companies) | 0.3% | 0.2% | 0.2% | 0.2% | |
|---|
| Marsh & Mclennan Cos Inc ($MHM) | 2.8% | 2.5% | 1.9% | 2.2% | 2.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F.B.D.Hldgs ($FBH) | 0.2% | -9.0% | 0.9% | 4.5% | |
| Beazley ($BEZ) | 4.5% | 4.8% | 4.8% | 2.8% | |
| Rsa Insurance Group ($RSAB) | -0.1% | 1.2% | 2.7% | 2.8% | |
| Randall & Quilter Invt Hldgs Ltd ($RQIH) | -3.4% | -2.1% | 1.7% | 1.7% | |
| Arab Insurance Group(Arig) ($AGRD) | 1.2% | -0.7% | 1.1% | 0.9% | |
| |
|---|
| Median (8 companies) | 1.0% | 0.6% | 1.4% | 1.3% | |
|---|
| Marsh & Mclennan Cos Inc ($MHM) | 21.0% | 22.0% | 23.6% | 23.3% | 20.5% |
