Close Bros Group Net Income dropped on 45.7% while Revenue increased on 6.5%

22 Sep 2020 • About Close Bros Group ($CBG) • By InTwits

Close Bros Group reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:

Close Bros Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
The company has potentially unprofitable business model: ROIC is 3.3%
It operates with medium-size leverage: Net Debt/EBITDA is 1.0x while industry average is -1.5x

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 on 6.5%.

Net Income margin decreased on 9.7 pp from 19.8% to 10.1% in FY2020.

Investments (CAPEX, working capital and M&A)

In FY2020 the company had CAPEX/Revenue of 0.49%. Close Bros Group showed almost no change in CAPEX/Revenue from FY2017 to FY2020. It's average level of CAPEX/Revenue for the last three years was 0.71%.

Return on investment

The company operates at low ROIC (3.3%) and ROE (7.7%). ROIC decreased on 3.3 pp from 6.6% to 3.3% in FY2020. ROE decreased on 7.0 pp from 14.6% to 7.7% in FY2020. During the last 5 years ROIC topped in FY2017 at 8.1% and was declining since that time. ROE stuck to a declining trend at -2.2 pp per annum in FY2016-FY2020.

Leverage (Debt)

Debt increased on 3.2% while cash surged on 24.3%.

Close Bros Group has no short term refinancing risk: cash is higher than short term debt (211.4%).

Management team

Close Bros Group's CEO Adrian John Sainsbury has spent 6 months with the company. Mike Morgan is a the company's CFO. Mike Morgan has spent 2 years at the company.

Financial and operational results

FY ended 31 Jul 2020

Close Bros Group ($CBG) key annual financial indicators

mln. £	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	863	932	980	1,019	1,085	6.5%
Net Income	187	191	202	202	110	-45.7%
Balance Sheet
Cash	847	805	1,140	1,106	1,376	24.3%
Short Term Debt	540	403	565	577	651	12.7%
Long Term Debt	1,469	1,710	1,991	2,082	2,093	0.6%
Cash flow
Capex	14	7	11	5	5	8.2%
Ratios
Revenue growth	1.3%	8.0%	5.1%	4.1%	6.5%

Net Income Margin	21.6%	20.5%	20.7%	19.8%	10.1%	-9.7%
CAPEX, % of revenue	1.6%	0.8%	1.2%	0.5%	0.5%	0.0%

ROIC	7.7%	8.1%	7.5%	6.6%	3.3%	-3.3%
ROE	17.7%	16.4%	15.6%	14.6%	7.7%	-7.0%

Peers in Financial Services

Below we provide Close Bros Group benchmarking against other companies in Financial 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	FY2016	FY2017	FY2018	FY2019	FY2020
Mxc Capital ($MXCP)	118.4%	-3.5%	-76.6%	214.9%	-
Afh Financial Group ($AFHP)	15.0%	39.4%	50.6%	46.7%	-
Private & Commercial Finance Group ($PCF)	13.2%	-60.1%	22.4%	36.2%	-
Commercial Bank Of Qatar(The) ($CBQS)	1.7%	6.1%	17.8%	12.4%	-
Impax Asset Management Group ($IPX)	6.8%	55.2%	100.9%	12.2%	-
Median (16 companies)	5.9%	13.2%	16.1%	6.5%	1.9%
Close Bros Group ($CBG)	-	8.0%	5.1%	4.1%	6.5%

Top companies by Gross margin, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
1Pm ($OPM)	64.3%	64.0%	66.3%	67.7%	54.2%
Afh Financial Group ($AFHP)	55.4%	53.4%	54.4%	53.4%	-
Starvest ($SVE)	38.4%	49.4%	-	18.5%	-
Median (3 companies)	59.3%	51.4%	54.1%	53.4%	37.2%

Top companies by EBITDA margin, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Mxc Capital ($MXCP)	105.4%	-263.1%	-755.1%	299.5%	-
Starvest ($SVE)	63.4%	56.4%	-	134.5%	-
Ashmore Group ($ASHM)	57.1%	65.0%	63.6%	62.1%	61.0%
Plus500 Ltd ($PLUS)	46.0%	59.3%	70.2%	54.2%	-
City Of London Investment Group ($CLIG)	32.5%	37.5%	37.8%	33.9%	36.8%
Median (12 companies)	20.8%	22.8%	25.3%	28.6%	30.7%

Top companies by CAPEX/Revenue, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Mattioli Woods ($MTW)	2.6%	16.3%	13.2%	2.9%	1.4%
1Pm ($OPM)	4.4%	6.4%	3.4%	2.4%	1.3%
Commercial Bank Of Qatar(The) ($CBQS)	3.3%	1.8%	3.8%	1.9%	-
City Of London Investment Group ($CLIG)	0.6%	1.6%	0.4%	1.3%	0.2%
Afh Financial Group ($AFHP)	1.8%	0.8%	0.5%	1.1%	-
Median (14 companies)	0.9%	1.0%	1.0%	0.6%	0.7%
Close Bros Group ($CBG)	1.6%	0.8%	1.2%	0.5%	0.5%

Top companies by ROIC, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Plus500 Ltd ($PLUS)	118.9%	143.2%	196.2%	65.4%	-
City Of London Investment Group ($CLIG)	55.3%	71.6%	63.7%	47.5%	52.0%
Impax Asset Management Group ($IPX)	15.0%	19.7%	30.7%	28.8%	-
Ashmore Group ($ASHM)	17.6%	23.5%	24.3%	23.9%	23.4%
Starvest ($SVE)	5.9%	18.5%	-18.6%	21.4%	-
Median (19 companies)	9.1%	10.0%	7.8%	9.9%	8.9%
Close Bros Group ($CBG)	7.7%	8.1%	7.5%	6.6%	3.3%

Top companies by Net Debt / EBITDA


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Redde ($REDD)	1.3x	1.3x	1.8x	1.6x	2.4x
Afh Financial Group ($AFHP)	-1.0x	-1.1x	-1.8x	0.2x	-
1Pm ($OPM)	0.2x	-0.2x	0.3x	0.2x	0.5x
Starvest ($SVE)	-0.1x	-1.5x	-	-0.2x	-
Impax Asset Management Group ($IPX)	-0.6x	-2.0x	-0.3x	-0.5x	-
Median (12 companies)	-1.1x	-1.5x	-1.0x	-1.4x	-1.2x

Close Bros Group stock price chart

Close Bros Group financials

mln.	FY2015	FY2016	FY2017

Revenue	852.0	863.0	932.2
EBITDA	0.000	0.000	0.000
Net income	185.7	186.5	191.2
CAPEX	14.800	13.600	7.100
Debt	1,828	2,009	2,113
Cash	1,038	847.4	805.1

About Close Bros Group

Close Brothers Group plc, together with its subsidiaries, provides various financial services primarily in the United Kingdom. The company operates through three divisions: Banking, Securities, and Asset Management. Its deposit products include fixed term deposits and notice accounts; and treasury products. The company offers lending products, including asset and invoice finance products; asset-based lending products; funding for aviation aircraft, and leisure and commercial vessels; sale and rent back services for brewing sector; broker finance services to agriculture, construction, manufacturing, and transport industries; commercial vehicle rental services; insurance premium finance products; leasing, motor vehicle finance, and property finance services; and loan, hire purchase, leasing, and refinancing services to the professional service sectors, including dental, medical, pharmacy, and veterinary. It also provides liquidity and flexible execution services to retail brokers, asset managers, and institutional investors; market making, sales, sales trading, research, and corporate broking services to the secondary market and corporate clients; various independent, RDR compliant, dealing, custody, and settlement services to institutional, wealth management, and brokerage clients; and equity and debt capital markets, securities, and research services to mid-sized companies. In addition, the company offers bespoke investment management services, financial advice and planning services, employee benefit solutions, and self-directed services that help investors to manage investments online, as well as provides services for professional advisers. Close Brothers Group plc was founded in 1878 and is based in London, the United Kingdom.