Frontier Developments revenue dropped on 15.1% while EBITDA Margin increased on 9.1 pp from 32.3% to 41.4%
09 Sep 2020 • About Frontier Developments (
$FDEV) • By InTwits
Frontier Developments reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Frontier Developments has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.0%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: £1m in FY2020, £2m in FY2019, £5m in FY2018, £1m in FY2017, £0m in FY2016
- The company has highly profitable business model: ROIC is 17.4%
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 dropped on 15.1%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.1 pp from 32.3% to 41.4% in FY2020.
Gross Margin increased on 6.8 pp from 60.9% to 67.8% in FY2020. During FY2016-FY2020 Gross Margin bottomed in FY2019 at 60.9%. SG&A as a % of Revenue increased on 2.1 pp from 22.7% to 24.9% in FY2020.
Net Income margin increased slightly on 0.83 pp from 20.1% to 20.9% in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.88% in FY2020. CAPEX/Revenue decreased slightly on 0.82 pp from 1.7% in FY2017 to 0.88% in FY2020. It's average level of CAPEX/Revenue for the last three years was 5.7%. During FY2016-FY2020 CAPEX as a % of Revenue topped in FY2018 at 13.6% and was declining since that time.
Return on investment
The company operates at good ROIC (17.4%) and ROE (18.6%). ROIC dropped on 12.9 pp from 30.3% to 17.4% in FY2020. ROE decreased on 9.2 pp from 27.8% to 18.6% in FY2020.
Leverage (Debt)
Debt level is -0.7x Net Debt / EBITDA and 0.7x Debt / EBITDA. Debt surged while cash surged on 29.5%.
Frontier Developments has no short term refinancing risk: cash is higher than short term debt (3,421.9%).
Valuation and dividends
The company's trades at EV/EBITDA 32.0x and P/E 64.8x.
Financial and operational results
FY ended 31 May 2020
Frontier Developments ($FDEV) key annual financial indicators| mln. £ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 21.366 | 37.363 | 34.192 | 89.669 | 76.089 | -15.1% |
| Gross Profit | 16.268 | 27.356 | 24.100 | 54.648 | 51.557 | -5.7% |
| SG&A | 7.936 | 11.838 | 12.673 | 20.388 | 18.919 | -7.2% |
| EBITDA | 4.876 | 12.656 | 9.367 | 28.969 | 31.494 | 8.7% |
| Net Income | 1.432 | 7.711 | 3.594 | 17.990 | 15.894 | -11.7% |
Balance Sheet
|
|---|
| Cash | 8.610 | 12.579 | 24.124 | 35.332 | 45.751 | 29.5% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 1.337 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 22.198 | |
Cash flow
|
|---|
| Capex | 0.233 | 0.633 | 4.660 | 2.269 | 0.666 | -70.6% |
Ratios
|
|---|
| Revenue growth | -6.1% | 74.9% | -8.5% | 162.3% | -15.1% | |
| EBITDA growth | -24.9% | 159.6% | -26.0% | 209.3% | 8.7% | |
|
|---|
| Gross Margin | 76.1% | 73.2% | 70.5% | 60.9% | 67.8% | 6.8% |
| EBITDA Margin | 22.8% | 33.9% | 27.4% | 32.3% | 41.4% | 9.1% |
| SG&A, % of revenue | 37.1% | 31.7% | 37.1% | 22.7% | 24.9% | 2.1% |
| Net Income Margin | 6.7% | 20.6% | 10.5% | 20.1% | 20.9% | 0.8% |
| CAPEX, % of revenue | 1.1% | 1.7% | 13.6% | 2.5% | 0.9% | -1.7% |
|
|---|
| ROIC | 5.7% | 28.8% | 6.5% | 30.3% | 17.4% | -12.9% |
| ROE | 6.6% | 28.5% | 8.3% | 27.8% | 18.6% | -9.2% |
| Net Debt/EBITDA | -1.8x | -1.0x | -2.6x | -1.2x | -0.7x | 0.5x |
Peers in Leisure Goods
Below you can find Frontier Developments benchmarking vs. other companies in Leisure Goods 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Lightwaverf ($LWRF) | -31.3% | 110.1% | -7.2% | 45.5% | - |
| Character Group ($CCT) | 22.1% | -4.7% | -7.9% | 13.4% | - |
| Lg Electronics Inc ($39IB) | -2.0% | 10.9% | -0.1% | 1.6% | - |
| |
|---|
| Median (3 companies) | -2.0% | -4.7% | -7.2% | 13.4% | - |
|---|
| Frontier Developments ($FDEV) | - | 74.9% | -8.5% | 162.3% | -15.1% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Character Group ($CCT) | 31.6% | 32.6% | 34.2% | 34.5% | - |
| Lightwaverf ($LWRF) | 32.5% | 35.5% | 29.3% | 32.1% | - |
| |
|---|
| Median (2 companies) | 31.6% | 32.6% | 34.2% | 33.3% | - |
|---|
| Frontier Developments ($FDEV) | 76.1% | 73.2% | 70.5% | 60.9% | 67.8% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Character Group ($CCT) | 13.1% | 13.9% | 12.8% | 11.5% | - |
| Lightwaverf ($LWRF) | -43.8% | -15.2% | -65.8% | -66.7% | - |
| |
|---|
| Median (2 companies) | 4.2% | 6.9% | 7.7% | -27.6% | - |
|---|
| Frontier Developments ($FDEV) | 22.8% | 33.9% | 27.4% | 32.3% | 41.4% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Lightwaverf ($LWRF) | 0.3% | 0.9% | 2.1% | 7.7% | - |
| Character Group ($CCT) | 0.2% | 0.2% | 0.3% | 0.4% | - |
| |
|---|
| Median (2 companies) | 3.0% | 3.7% | 4.6% | 4.0% | - |
|---|
| Frontier Developments ($FDEV) | 1.1% | 1.7% | 13.6% | 2.5% | 0.9% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Character Group ($CCT) | 33.7% | 29.9% | 23.5% | 21.1% | - |
| Lightwaverf ($LWRF) | -71.4% | -63.2% | -85.2% | -90.4% | - |
| Lg Electronics Inc ($39IB) | 6.5% | 11.3% | 11.0% | - | - |
| |
|---|
| Median (3 companies) | 6.5% | 11.3% | 11.0% | -34.6% | - |
|---|
| Frontier Developments ($FDEV) | 5.7% | 28.8% | 6.5% | 30.3% | 17.4% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Character Group ($CCT) | -0.4x | -0.7x | -1.1x | -0.5x | - |
| |
|---|
| Median (1 company) | 0.1x | -0.8x | -1.1x | -0.5x | - |
|---|
| Frontier Developments ($FDEV) | -1.8x | -1.0x | -2.6x | -1.2x | -0.7x |
