Marsh & Mclennan Cos Inc Debt jumped on 144% and Revenue surged on 11.4%
30 Jan 2020 • About Marsh & Mclennan Cos Inc (
$MHM) • By InTwits
Marsh & Mclennan Cos Inc reported FY2019 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 2.2%. At the same time it's a lot of higher than industry average of 0.7%.
- CAPEX is quite volatile: 1,303 EGPm in 2019, 875 EGPm in 2018, 745 EGPm in 2017, 561 EGPm in 2016, 304 EGPm in 2015
- The company has highly profitable business model: ROIC is 14.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.9x while industry average is 3.9x
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 surged on 11.4%. Revenue decline was slowing down on average by 2.8 pp per annum in the last 5 years. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.8 pp from 21.8% to 20.0% in FY2019. During FY2015-FY2019 EBITDA Margin topped in FY2017 at 23.8% and was declining since that time.
Net Income margin decreased slightly on 0.58 pp from 11.0% to 10.5% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 the company had CAPEX/Revenue of 2.5%. The company showed small growth in CAPEX/Revenue of 0.61 pp from 1.9% in FY2016 to 2.5% in FY2019. It's average CAPEX/Revenue for the last three years was 2.3%.
Return on investment
The company operates at high and attractive ROE (22.5%) while ROIC is a bit lower (14.9%). ROIC decreased on 5.7 pp from 20.5% to 14.9% in FY2019. ROE showed almost no change in FY2019. During the last 5 years ROIC topped in FY2016 at 23.6% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.9x and Debt / EBITDA is 4.3x. Net Debt / EBITDA surged on 2.5x from 1.5x to 3.9x in FY2019. Debt surged on 144% while cash increased on 8.3%. Net Debt/EBITDA followed a growing trend in FY2015-FY2019.
Marsh & Mclennan Cos Inc has short term refinancing risk: cash is only 74.2% of short term debt.
Valuation and dividends
Marsh & Mclennan Cos Inc's trades at EV/EBITDA 4.1x and P/E 0.2x.
Management team
Marsh & Mclennan Cos Inc's CEO Dan Glaser is a founder and has spent 7 years with the company. The company's CFO Mark C Mcgivney has spent 4 years with the company.
Financial and operational results
FY ended 30 Nov -0001
Marsh & Mclennan Cos Inc ($MHM) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 12,893 | 13,211 | 14,024 | 14,950 | 16,652 | 11.4% |
| EBITDA | 2,842 | 3,102 | 3,337 | 3,255 | 3,324 | 2.1% |
| EBIT | | | | 2,761 | | |
| Interest expence | | | | 290 | | |
| Tax | | | | 574 | | |
| Net Income | 1,599 | 1,768 | 1,492 | 1,650 | 1,742 | 5.6% |
| Stock Based Compensation | | | | 193 | | |
Balance Sheet
|
|---|
| Cash | 1,374 | 1,026 | 1,205 | 1,066 | 1,155 | 8.3% |
| Accounts Receivable | | | | 4,317 | | |
| Short Term Debt | 12 | 312 | 262 | 314 | 1,557 | 395.9% |
| Long Term Debt | 4,402 | 4,495 | 5,225 | 5,510 | 12,667 | 129.9% |
Cash flow
|
|---|
| Capex | 325 | 253 | 302 | 314 | 421 | 34.1% |
| Dividends | | | | 807 | | |
| Acquisitions | | | | 884 | | |
Ratios
|
|---|
| Revenue growth | -0.4% | 2.5% | 6.2% | 6.6% | 11.4% | |
| EBITDA growth | 5.7% | 9.1% | 7.6% | -2.5% | 2.1% | |
|
|---|
| EBITDA Margin | 22.0% | 23.5% | 23.8% | 21.8% | 20.0% | -1.8% |
| EBIT Margin | | | | 18.5% | |
| SBC, % of revenue | | | | 1.3% | |
| Net Income Margin | 12.4% | 13.4% | 10.6% | 11.0% | 10.5% | -0.6% |
| CAPEX, % of revenue | 2.5% | 1.9% | 2.2% | 2.1% | 2.5% | 0.4% |
|
|---|
| ROIC | 22.0% | 23.6% | 23.3% | 20.5% | 14.9% | -5.7% |
| ROE | 23.6% | 27.8% | 22.0% | 22.2% | 22.5% | 0.4% |
| Net Debt/EBITDA | 1.1x | 1.2x | 1.3x | 1.5x | 3.9x | 2.5x |
| Interest coverage ratio (ICR) | | | | 9.5x | |
| Interest expence / Average debt | | | | 5.1% | | |
People
|
|---|
| Insider ownership | | | | 0.2% | | |
| Employees | | | | 66,000 | | |
| Revenue/Employee, th. $ | | | | 227 | | |
Peers in Nonlife Insurance
Below you can find Marsh & Mclennan Cos Inc benchmarking vs. other companies in Nonlife Insurance 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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Arab Insurance Group(Arig) ($AGRD) | -14.9% | -14.5% | 1.2% | 10.3% | |
| Beazley ($BEZ) | 1.1% | 6.0% | 7.9% | 5.7% | |
| Lancashire Hldgs ($LRE) | -19.3% | -11.4% | -10.5% | -7.1% | |
| |
|---|
| Median (3 companies) | 0.8% | 4.3% | 4.6% | 5.7% | |
|---|
| Marsh & Mclennan Cos Inc ($MHM) | | 2.5% | 6.2% | 6.6% | 11.4% |
Top companies by CAPEX/Revenue, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Arab Insurance Group(Arig) ($AGRD) | 0.3% | 0.2% | 0.3% | 0.1% | |
| Beazley ($BEZ) | 0.1% | 0.2% | 0.1% | 0.1% | |
| Lancashire Hldgs ($LRE) | 0.0% | 0.1% | 0.1% | 0.0% | |
| |
|---|
| Median (3 companies) | 0.2% | 0.2% | 0.2% | 0.1% | |
|---|
| Marsh & Mclennan Cos Inc ($MHM) | 2.5% | 1.9% | 2.2% | 2.1% | 2.5% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Lancashire Hldgs ($LRE) | 6.6% | 6.2% | -1.7% | 2.2% | |
| Beazley ($BEZ) | 4.8% | 4.8% | 2.8% | 1.5% | |
| Arab Insurance Group(Arig) ($AGRD) | -0.7% | 1.1% | 0.9% | -5.4% | |
| General Accident ($GACB) | 0.6% | 0.4% | 0.7% | | |
| Rsa Insurance Group ($RSAB) | 1.2% | 2.7% | 2.8% | | |
| |
|---|
| Median (5 companies) | 0.6% | 1.4% | 1.3% | 1.5% | |
|---|
| Marsh & Mclennan Cos Inc ($MHM) | 22.0% | 23.6% | 23.3% | 20.5% | 14.9% |
