Rm EBITDA jumped on 45.0% and EBITDA Margin increased on 2.2 pp from 9.9% to 12.1%
05 Feb 2019 • About Rm (
$RM.) • By InTwits
Rm reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Rm has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.8%.
- The company has highly profitable business model: ROIC is 39.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.2x 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
Rm's Revenue surged on 18.9%. Revenue decline was slowing down on average by 10.6 pp per annum in FY2014-FY2018. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 17.7 pp from 38.5% to 20.8% in 2018.
Gross Margin increased on 2.0 pp from 39.3% to 41.3% in FY2018. Gross Margin grew at 0.86 pp per annum in the last 5 years. SG&A as a % of Revenue increased slightly on 1.2 pp from 26.9% to 28.1% in FY2018. SG&A as a % of Revenue grew at 1.5 pp per annum in FY2014-FY2018.
Net Income margin increased slightly on 0.75 pp from 6.9% to 7.7% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.47% in FY2018. Rm showed almost no change in CAPEX/Revenue from FY2015 to FY2018. Average CAPEX/Revenue for the last three years was 0.63%. CAPEX as a % of Revenue followed a declining trend at -0.19 pp per annum in the last 5 years.
Return on investment
The company operates at high and attractive ROIC (39.0%) and ROE (39.9%). ROIC dropped on 34.8 pp from 73.8% to 39.0% in FY2018. ROE dropped on 28.3 pp from 68.2% to 39.9% in FY2018. During the last 5 years ROIC topped in FY2015 at 289% and was declining since that time. During the last 5 years ROE topped in FY2015 at 110% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.2x and Debt / EBITDA is 0.3x. Net Debt / EBITDA dropped on 0.5x from 0.7x to 0.2x in FY2018. Debt dropped on 44.6% while cash jumped on 46.6%.
Rm has no short term refinancing risk: cash is higher than short term debt (137.0%).
Valuation and dividends
Rm's trades at EV/EBITDA 7.9x and P/E 12.1x.
Financial and operational results
FY ended 30 Nov 2018
Rm ($RM.) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 202.5 | 178.2 | 167.6 | 185.9 | 221.0 | 18.9% |
| Gross Profit | 75.6 | 68.9 | 67.2 | 73.0 | 91.3 | 25.1% |
| SG&A | 44.9 | 42.2 | 40.1 | 50.0 | 62.0 | 24.1% |
| EBITDA | 20.8 | 22.3 | 17.8 | 18.4 | 26.7 | 45.0% |
| Net Income | 11.6 | 15.0 | 11.6 | 12.9 | 16.9 | 31.7% |
Balance Sheet
|
|---|
| Cash | 47.9 | 48.3 | 40.0 | 1.8 | 2.6 | 46.6% |
| Short Term Debt | 0.2 | 0.0 | 0.0 | 2.0 | 1.9 | -5.2% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 13.2 | 6.5 | -50.7% |
Cash flow
|
|---|
| Capex | 2.6 | 1.6 | 1.3 | 1.2 | 1.0 | -8.8% |
Ratios
|
|---|
| Revenue growth | -22.6% | -12.0% | -6.0% | 10.9% | 18.9% | |
| EBITDA growth | 34.8% | 7.2% | -19.9% | 3.1% | 45.0% | |
|
|---|
| Gross Margin | 37.3% | 38.7% | 40.1% | 39.3% | 41.3% | 2.0% |
| EBITDA Margin | 10.3% | 12.5% | 10.6% | 9.9% | 12.1% | 2.2% |
| SG&A, % of revenue | 22.1% | 23.7% | 23.9% | 26.9% | 28.1% | 1.2% |
| Net Income Margin | 5.7% | 8.4% | 6.9% | 6.9% | 7.7% | 0.7% |
| CAPEX, % of revenue | 1.3% | 0.9% | 0.8% | 0.6% | 0.5% | -0.1% |
|
|---|
| ROIC | 130.8% | 289.2% | 254.7% | 73.8% | 39.0% | -34.8% |
| ROE | 62.5% | 109.8% | 86.4% | 68.2% | 39.9% | -28.3% |
| Net Debt/EBITDA | -2.3x | -2.2x | -2.2x | 0.7x | 0.2x | -0.5x |
Peers in Software & Computer Services
Below we provide Rm benchmarking against other companies in Software & Computer Services 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 |
|---|
| 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 ($ZOO) | | 19.9% | 1.5% | 41.7% | 73.2% |
| |
|---|
| Median (39 companies) | 0.8% | 6.3% | 11.7% | 12.4% | 24.7% |
|---|
| Rm ($RM.) | | -12.0% | -6.0% | 10.9% | 18.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Lombard Risk Management ($LRM) | 99.2% | 98.6% | 99.3% | 99.6% | |
| Netcall ($NET) | 91.0% | 90.9% | 91.2% | 91.7% | 90.2% |
| Wandisco ($WAND) | 80.7% | 93.2% | 88.1% | 90.0% | |
| Eleco ($ELCO) | 87.8% | 88.9% | 86.7% | 87.9% | |
| Dotdigital Group ($DOTD) | 90.5% | 89.3% | 87.4% | 86.1% | 78.9% |
| |
|---|
| Median (33 companies) | 57.6% | 58.8% | 60.0% | 57.0% | 43.0% |
|---|
| Rm ($RM.) | 37.3% | 38.7% | 40.1% | 39.3% | 41.3% |
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) | 11.1% | 12.3% | 10.2% | 11.0% | 9.9% |
|---|
| Rm ($RM.) | 10.3% | 12.5% | 10.6% | 9.9% | 12.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Actual Experience ($ACT) | 2.6% | 6.0% | 39.9% | 48.7% | 3.6% |
| 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% | 3.9% |
| |
|---|
| Median (39 companies) | 1.9% | 1.4% | 1.2% | 1.3% | 1.0% |
|---|
| Rm ($RM.) | 1.3% | 0.9% | 0.8% | 0.6% | 0.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Triad Group ($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 ($IBM) | 31.6% | 29.7% | 21.5% | 19.5% | 19.8% |
| Microgen ($MCGN) | 9.0% | 12.1% | 15.4% | 18.4% | |
| |
|---|
| Median (41 companies) | 9.0% | 4.0% | 7.1% | 6.3% | 6.4% |
|---|
| Rm ($RM.) | 130.8% | 289.2% | 254.7% | 73.8% | 39.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Datatec ($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 | -0.4x |
|---|
| Rm ($RM.) | -2.3x | -2.2x | -2.2x | 0.7x | 0.2x |
