Lpa Group reports 103% Net Income decline in 2019 and 30.2% Revenue decline

28 Jan 2020 • About Lpa Group ($LPA) • By InTwits

Lpa Group reported FY2019 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is quite volatile: 2.8% in FY2019, 9.9% in FY2018, 11.6% in FY2017, 9.3% in FY2016, 4.4% in FY2015
Lpa Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.8%. At the same time it's a lot of higher than industry average of 2.5%.
CAPEX is quite volatile: £0m in FY2019, £0m in FY2018, £2m in FY2017, £1m in FY2016, £0m in FY2015
The company has unprofitable business model: ROIC is -1.2%
It operates with high leverage: Net Debt/EBITDA is 4.5x while industry average is -0.1x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Lpa Group's Revenue dropped on 30.2%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.1 pp from 9.9% to 2.8% in FY2019. During the last 5 years EBITDA Margin topped in FY2017 at 11.6% and was declining since that time.

Gross Margin decreased on 3.1 pp from 25.4% to 22.3% in FY2019. During FY2015-FY2019 Gross Margin topped in FY2016 at 29.3% and was declining since that time. SG&A as a % of Revenue increased on 3.9 pp from 17.4% to 21.3% in FY2019. During FY2015-FY2019 SG&A as a % of Revenue bottomed in FY2017 at 12.7% and was growing since that time.

Net Income margin decreased on 6.6 pp from 6.3% to -0.27% in FY2019. During the last 5 years Net Income margin topped in FY2017 at 7.9% and was declining since that time.

Investments (CAPEX, working capital and M&A)

Lpa Group's CAPEX/Revenue was 2.0% in FY2019. CAPEX/Revenue decreased on 4.0 pp from 6.0% in FY2016 to 2.0% in FY2019. Average CAPEX/Revenue for the last three years was 3.7%. Lpa Group invested a big chunk of EBITDA (74.0%) to CAPEX which didn't stop revenue from falling.

Return on investment

The company operates at negative ROIC (-1.2%) and ROE (-0.4%). ROIC dropped on 15.0 pp from 13.8% to -1.2% in FY2019. ROE dropped on 15.5 pp from 15.1% to -0.42% in FY2019. During the last 5 years ROIC topped in FY2017 at 15.9% and was declining since that time. During the last 5 years ROE topped in FY2017 at 18.2% and was declining since that time.

Leverage (Debt)

Debt level is 4.5x Net Debt / EBITDA and 6.1x Debt / EBITDA. Net Debt / EBITDA surged on 3.8x from 0.7x to 4.5x in FY2019. Debt jumped on 13.1% while cash decreased on 7.0%. During FY2015-FY2019 Net Debt/EBITDA bottomed in FY2018 at 0.7x.

Lpa Group has short term refinancing risk: cash is only 31.7% of short term debt.

Financial and operational results

FY ended 30 Nov -0001

Lpa Group ($LPA) key annual financial indicators

mln. £	2015	2016	2017	2018	2019	2019/2018
P&L
Revenue	16.265	21.422	22.482	27.979	19.533	-30.2%
Gross Profit	4.455	6.280	6.337	7.117	4.359	-38.8%
SG&A	2.607	3.050	2.862	4.873	4.158	-14.7%
EBITDA	0.711	1.993	2.603	2.761	0.539	-80.5%
Net Income	0.694	1.462	1.768	1.771	-0.052	-102.9%
Balance Sheet
Cash	0.005	0.149	0.119	0.956	0.889	-7.0%
Short Term Debt	1.174	0.385	0.493	0.322	2.805	771.1%
Long Term Debt	1.548	2.305	2.379	2.605	0.504	-80.7%
Cash flow
Capex	0.287	1.294	1.643	0.496	0.399	-19.6%
Ratios
Revenue growth	-3.4%	31.7%	4.9%	24.5%	-30.2%
EBITDA growth	-26.5%	180.3%	30.6%	6.1%	-80.5%

Gross Margin	27.4%	29.3%	28.2%	25.4%	22.3%	-3.1%
EBITDA Margin	4.4%	9.3%	11.6%	9.9%	2.8%	-7.1%
SG&A, % of revenue	16.0%	14.2%	12.7%	17.4%	21.3%	3.9%
Net Income Margin	4.3%	6.8%	7.9%	6.3%	-0.3%	-6.6%
CAPEX, % of revenue	1.8%	6.0%	7.3%	1.8%	2.0%	0.3%

ROIC	2.1%	13.4%	15.9%	13.8%	-1.2%	-15.0%
ROE	9.2%	17.5%	18.2%	15.1%	-0.4%	-15.5%
Net Debt/EBITDA	3.8x	1.3x	1.1x	0.7x	4.5x	3.8x

Peers in Electronic & Electrical Equipment

Below we provide Lpa Group benchmarking against other companies in Electronic & Electrical Equipment 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	FY2015	FY2016	FY2017	FY2018	FY2019
Maruwa Co Ltd ($MAW)	-2.0%	-6.8%	5.3%	19.7%
Solid State ($SSP)	13.9%	20.6%	-9.2%	15.6%
Gooch & Housego ($GHH)		9.3%	30.2%	11.5%	3.4%
Dewhurst ($DWHA)		2.6%	12.2%	3.1%	3.6%
Volex ($VLX)	5.8%	-13.2%	-13.0%	0.9%
Median (9 companies)	-1.1%	-1.2%	8.9%	0.9%	-3.2%
Lpa Group ($LPA)		31.7%	4.9%	24.5%	-30.2%

Top companies by Gross margin, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Elektron Technology ($EKT)	35.6%	37.2%	39.1%	49.7%
Image Scan Hldgs ($IGE)		42.3%	38.3%	47.5%	54.1%
Maruwa Co Ltd ($MAW)	30.0%	35.9%	36.9%	43.1%
Gooch & Housego ($GHH)	39.4%	37.5%	41.1%	40.1%	34.8%
Zytronic ($ZYT)	41.9%	42.8%	41.1%	37.0%	33.8%
Median (7 companies)	24.1%	31.8%	32.4%	40.1%	34.8%
Lpa Group ($LPA)	27.4%	29.3%	28.2%	25.4%	22.3%

Top companies by EBITDA margin, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Maruwa Co Ltd ($MAW)	14.7%	19.6%	21.4%	28.7%
Zytronic ($ZYT)	27.8%	25.6%	28.8%	23.7%	20.6%
Elektron Technology ($EKT)	7.2%	8.1%	5.8%	17.8%
Dewhurst ($DWHA)	14.7%	13.4%	13.6%	14.2%	14.6%
Gooch & Housego ($GHH)	19.8%	17.3%	17.3%	14.1%	13.4%
Median (8 companies)	8.5%	8.3%	8.9%	14.2%	14.0%
Lpa Group ($LPA)	4.4%	9.3%	11.6%	9.9%	2.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Maruwa Co Ltd ($MAW)	6.5%	4.4%	6.1%	6.9%
Gooch & Housego ($GHH)	3.9%	11.3%	5.2%	4.7%	4.5%
Dewhurst ($DWHA)	1.9%	1.9%	1.8%	2.1%	9.3%
Elektron Technology ($EKT)	1.1%	1.8%	0.9%	1.3%
Zytronic ($ZYT)	4.7%	1.8%	2.1%	1.2%	2.5%
Median (8 companies)	1.4%	1.7%	1.6%	1.3%	3.5%
Lpa Group ($LPA)	1.8%	6.0%	7.3%	1.8%	2.0%

Top companies by ROIC, %


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Maruwa Co Ltd ($MAW)	5.7%	9.0%	11.4%	19.2%
Dewhurst ($DWHA)	27.3%	24.6%	24.1%	18.9%	14.1%
Elektron Technology ($EKT)	9.9%	7.0%	-9.0%	18.8%
Solid State ($SSP)	20.0%	23.0%	14.6%	15.2%
Zytronic ($ZYT)	22.7%	18.1%	20.9%	15.1%	11.1%
Median (11 companies)	9.9%	9.4%	13.4%	15.1%	8.4%
Lpa Group ($LPA)	2.1%	13.4%	15.9%	13.8%	-1.2%

Top companies by Net Debt / EBITDA


Top 5	FY2015	FY2016	FY2017	FY2018	FY2019
Gooch & Housego ($GHH)	-1.1x	-0.8x	-0.8x	0.6x	0.8x
Solid State ($SSP)	0.7x	0.7x	-0.3x	-0.2x
Volex ($VLX)	-0.7x	0.3x		-0.8x
Elektron Technology ($EKT)	0.8x	0.5x	-0.5x	-1.0x
Dewhurst ($DWHA)	-2.2x	-2.6x	-2.5x	-1.2x	-2.1x
Median (7 companies)	-0.2x	0.4x	-0.5x	-1.0x	-2.1x
Lpa Group ($LPA)	3.8x	1.3x	1.1x	0.7x	4.5x

Lpa Group stock price chart

Lpa Group financials

mln.	FY2010	FY2011	FY2012

Revenue	14.716	17.322	18.352
EBITDA	-0.035	0.804	1.219
Net income	-0.383	0.335	0.737
CAPEX	0.083	0.144	1.676
Debt	2.296	1.170	2.373
Cash	0.005	0.006	0.007

About Lpa Group

LPA Group Plc designs, manufactures, and distributes LED lighting, and electronic and electro-mechanical systems for rail, aerospace and defense, aircraft support, infrastructure, marine, and industrial markets primarily in the United Kingdom. The company offers ambient light responsive control systems; imperium LED highbay, a highbay luminaire; LumiBatten, a LED linear luminaire; LumiTray, a LED retrofit gear tray; LED lighting solutions; customized LED down lights; gooseneck LED reading lights; LED dimming unit and power supply units; LED emergency, flood, reading, step, and work lights; LumiMatrix light engine; LumiPanel LED luminaire replacement; LumiSpot for centralized power distribution; LumiStrip fluorescent tube replacement; LumiTile light engine; and marine LED spot lights. It also provides fluorescent lighting solutions for rail vehicles, such as battery back-up system, electronic ballast, and bespoke and long life fluorescent lighting solutions. In addition, the company offers connector systems, including aircraft ground power supply connectors, industrial and rail inter-car electrical connectors, rail electrical cabinets, rail auxiliary power systems, and rail repair and refurbishment systems. Further, it provides electrical components, including circuit breakers, connectors, contactors, fans, relays, snap action switches, and sockets for hermetically sealed relays; mechanical components comprising pipe and cable supports; and electronic and design manufacturing services for analogue and power electronics, printed circuit boards, and luminaries and electronics into enclosure or chassis. Additionally, the company offers LPA Transport+ support solutions, such as asset maintenance, refurbishment, repair, and upgrade solutions. The company also exports its products primarily to Europe, Asia, and Australia. LPA Group Plc was incorporated in 1961 and is based in Saffron Walden, the United Kingdom.