Rm reports 12.6% Net Income growth in 2019 and 0.65 pp EBITDA Margin growth from 12.1% to 12.7%
04 Feb 2020 • About Rm (
$RM.) • By InTwits
Rm reported FY2019 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 31.6%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.5x while industry average is -1.8x
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 increased slightly on 1.3%. During the last 5 years Revenue growth topped in FY2018 at 18.9%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.1 pp from 36.1% to 34.0% in 2019. During the last 5 years EBITDA Margin bottomed in FY2017 at 9.9% and was growing since that time.
Gross Margin showed almost no change in FY2019.
Net Income margin increased slightly on 0.86 pp from 7.7% to 8.5% in FY2019. During the last 5 years Net Income margin bottomed in FY2017 at 6.9% and was growing since that time.
Investments (CAPEX, working capital and M&A)
Rm's CAPEX/Revenue was 1.3% in FY2019. The company showed almost no change in CAPEX/Revenue from FY2016 to FY2019. Average CAPEX/Revenue for the last three years was 0.79%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2018 at 0.47%.
Return on investment
The company operates at high and attractive ROIC (31.6%) and ROE (33.3%). ROIC decreased on 7.4 pp from 39.0% to 31.6% in FY2019. ROE decreased on 6.6 pp from 39.9% to 33.3% in FY2019. ROIC stuck to a declining trend at -73.1 pp per annum in FY2015-FY2019. ROE stuck to a declining trend at -20.0 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 0.5x Net Debt / EBITDA and 0.7x Debt / EBITDA. Net Debt / EBITDA surged on 0.3x from 0.2x to 0.5x in FY2019. Debt jumped on 144% while cash jumped on 110%.
Rm has no short term refinancing risk: cash is higher than short term debt (138.1%).
Valuation and dividends
Rm's trades at EV/EBITDA 8.8x and P/E 12.4x.
Financial and operational results
FY ended 30 Nov -0001
Rm ($RM.) key annual financial indicators| mln. £ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 178.2 | 167.6 | 185.9 | 221.0 | 223.8 | 1.3% |
| Gross Profit | 68.9 | 67.2 | 73.0 | 91.3 | 91.6 | 0.3% |
| SG&A | 42.2 | 40.1 | 50.0 | 62.0 | | |
| EBITDA | 22.3 | 17.8 | 18.4 | 26.7 | 28.5 | 6.8% |
| Net Income | 15.0 | 11.6 | 12.9 | 16.9 | 19.1 | 12.6% |
Balance Sheet
|
|---|
| Cash | 48.3 | 40.0 | 1.8 | 2.6 | 5.5 | 110.1% |
| Short Term Debt | 0.0 | 0.0 | 2.0 | 1.9 | 4.0 | 108.4% |
| Long Term Debt | 0.0 | 0.0 | 13.2 | 6.5 | 16.5 | 154.1% |
Cash flow
|
|---|
| Capex | 1.6 | 1.3 | 1.2 | 1.0 | 2.9 | 174.2% |
Ratios
|
|---|
| Revenue growth | -12.0% | -6.0% | 10.9% | 18.9% | 1.3% | |
| EBITDA growth | 7.2% | -19.9% | 3.1% | 45.0% | 6.8% | |
|
|---|
| Gross Margin | 38.7% | 40.1% | 39.3% | 41.3% | 40.9% | -0.4% |
| EBITDA Margin | 12.5% | 10.6% | 9.9% | 12.1% | 12.7% | 0.7% |
| SG&A, % of revenue | 23.7% | 23.9% | 26.9% | 28.1% | | |
| Net Income Margin | 8.4% | 6.9% | 6.9% | 7.7% | 8.5% | 0.9% |
| CAPEX, % of revenue | 0.9% | 0.8% | 0.6% | 0.5% | 1.3% | 0.8% |
|
|---|
| ROIC | 289.2% | 254.7% | 73.8% | 39.0% | 31.6% | -7.4% |
| ROE | 109.8% | 86.4% | 68.2% | 39.9% | 33.3% | -6.6% |
| Net Debt/EBITDA | -2.2x | -2.2x | 0.7x | 0.2x | 0.5x | 0.3x |
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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Actual Experience ($ACT) | | 2.3% | -49.1% | 195.1% | 79.7% |
| Micro Focus International ($MCRO) | | 49.2% | 29.3% | 128.8% | -9.1% |
| Proactis Holdings ($PHD) | 69.6% | 12.5% | 31.1% | 105.6% | |
| Zoo Digital Group ($ZOO) | 19.9% | 1.5% | 41.7% | 73.2% | |
| Sanderson Group ($SND) | 16.9% | 11.1% | 1.1% | 48.7% | |
| |
|---|
| Median (16 companies) | 6.3% | 12.2% | 14.1% | 24.7% | 4.3% |
|---|
| Rm ($RM.) | | -6.0% | 10.9% | 18.9% | 1.3% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Netcall ($NET) | 90.9% | 91.2% | 91.7% | 90.2% | |
| Proactis Holdings ($PHD) | 80.4% | 82.4% | 86.0% | 88.6% | |
| Sanderson Group ($SND) | 84.5% | 84.1% | 82.2% | 79.6% | |
| Dotdigital Group ($DOTD) | 89.3% | 87.4% | 86.1% | 78.9% | |
| Micro Focus International ($MCRO) | 89.0% | 89.1% | 77.2% | 73.0% | 76.4% |
| |
|---|
| Median (16 companies) | 60.2% | 60.8% | 57.6% | 46.0% | 59.3% |
|---|
| Rm ($RM.) | 38.7% | 40.1% | 39.3% | 41.3% | 40.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Micro Focus International ($MCRO) | 31.6% | 40.9% | 38.9% | 27.5% | 30.3% |
| Dotdigital Group ($DOTD) | 32.0% | 30.4% | 31.7% | 26.9% | |
| Proactis Holdings ($PHD) | 26.4% | 23.7% | 3.7% | 25.4% | |
| Oxford Metrics ($OMG) | 28.4% | 23.1% | 19.9% | 23.5% | 21.3% |
| International Bus Mach Corp ($IBM) | 23.1% | 19.8% | 20.5% | 20.9% | 20.7% |
| |
|---|
| Median (16 companies) | 12.3% | 10.3% | 11.3% | 9.9% | 21.0% |
|---|
| Rm ($RM.) | 12.5% | 10.6% | 9.9% | 12.1% | 12.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Csf Group ($CSFG) | 7.1% | 4.9% | 8.5% | 16.5% | |
| International Bus Mach Corp ($IBM) | 4.4% | 4.5% | 4.1% | 4.3% | 3.1% |
| Oxford Metrics ($OMG) | 2.4% | 1.8% | 5.8% | 3.9% | 1.3% |
| Unisys Corp ($USY) | 5.0% | 3.0% | 4.1% | 3.8% | |
| Actual Experience ($ACT) | 6.0% | 39.9% | 48.7% | 3.6% | 0.8% |
| |
|---|
| Median (16 companies) | 1.3% | 1.2% | 1.3% | 0.9% | 1.5% |
|---|
| Rm ($RM.) | 0.9% | 0.8% | 0.6% | 0.5% | 1.3% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Triad Group ($TRD) | 61.5% | 74.4% | 61.1% | 41.0% | |
| Dotdigital Group ($DOTD) | 31.4% | 28.9% | 29.3% | 26.6% | |
| International Bus Mach Corp ($IBM) | 29.7% | 21.5% | 19.5% | 19.8% | 13.0% |
| Oxford Metrics ($OMG) | 14.6% | 16.3% | 12.7% | 16.4% | 14.7% |
| Sanderson Group ($SND) | 10.6% | 12.0% | 11.2% | 10.7% | |
| |
|---|
| Median (18 companies) | 4.3% | 7.1% | 5.6% | 5.6% | 1.7% |
|---|
| Rm ($RM.) | 289.2% | 254.7% | 73.8% | 39.0% | 31.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Micro Focus International ($MCRO) | 5.3x | 2.1x | 6.6x | 4.2x | 4.3x |
| Proactis Holdings ($PHD) | -0.3x | 0.1x | 1.0x | 2.5x | |
| International Bus Mach Corp ($IBM) | 1.3x | 1.7x | 1.8x | 1.7x | 3.8x |
| Zoo Digital Group ($ZOO) | | 38.3x | 3.2x | 0.9x | |
| Netcall ($NET) | -3.4x | -4.3x | -4.3x | 0.3x | |
| |
|---|
| Median (13 companies) | -0.4x | -0.8x | -0.5x | -0.4x | 3.8x |
|---|
| Rm ($RM.) | -2.2x | -2.2x | 0.7x | 0.2x | 0.5x |
