Smiths Group Net Income surged on 17.8% and Revenue increased on 2.0%
24 Sep 2020 • About Smiths Group (
$SMIN) • By InTwits
Smiths Group reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Smiths Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.6%. At the same time it's a lot of higher than industry average of 19.1%.
- CAPEX is quite volatile: £1m in FY2020, £2m in FY2019, £8m in FY2018, £8m in FY2017, £1m in FY2016
- The company has potentially unprofitable business model: ROIC is 6.1%
- It operates with high leverage: Net Debt/EBITDA is 3.1x 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
Smiths Group's Revenue increased on 2.0%. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 3.4 pp from 18.5% to 15.1% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2017 at 24.2% and was declining since that time.
Gross Margin decreased on 4.0 pp from 42.8% to 38.8% in FY2020. Gross Margin stuck to a declining trend at -1.8 pp per annum in FY2016-FY2020. SG&A as a % of Revenue showed almost no change in FY2020.
Net Income margin increased slightly on 1.4 pp from 9.0% to 10.4% in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.4% in FY2020. CAPEX/Revenue increased slightly on 0.50 pp from 1.9% in FY2017 to 2.4% in FY2020. For the last three years the average CAPEX/Revenue was 2.8%.
Return on investment
The company operates at low ROIC (6.1%) and ROE (11.2%). ROIC decreased on 2.3 pp from 8.4% to 6.1% in FY2020. ROE increased slightly on 1.5 pp from 9.7% to 11.2% in FY2020. During the last 5 years ROIC topped in FY2017 at 20.2% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.1x and Debt / EBITDA is 4.1x. Net Debt / EBITDA surged on 0.5x from 2.6x to 3.1x in FY2020. Debt increased on 3.4% while cash surged on 26.6%. During FY2016-FY2020 Net Debt/EBITDA bottomed in FY2017 at 1.2x and was growing since that time.
Smiths Group has no short term refinancing risk: cash is higher than short term debt (892.7%).
Valuation and dividends
The company's trades at EV/EBITDA 17.6x and P/E 21.0x.
Management team
Andrew Reynolds Smith "Andy" is a the company's CEO. Andrew Reynolds Smith "Andy" has spent 5 years with the company. Smiths Group's CFO John Francis Shipsey has spent 3 years with the company.
Financial and operational results
FY ended 31 Jul 2020
Smiths Group ($SMIN) key annual financial indicators| mln. £ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 2,949 | 3,280 | 2,328 | 2,498 | 2,548 | 2.0% |
| Gross Profit | 1,349 | 1,525 | 1,001 | 1,069 | 989 | -7.5% |
| SG&A | 978 | 1,026 | 666 | 743 | 748 | 0.7% |
| EBITDA | 498 | 793 | 468 | 463 | 385 | -16.8% |
| Net Income | 259 | 564 | 277 | 225 | 265 | 17.8% |
Balance Sheet
|
|---|
| Cash | 431 | 782 | 717 | 289 | 366 | 26.6% |
| Short Term Debt | 270 | 151 | 203 | 9 | 41 | 355.6% |
| Long Term Debt | 1,139 | 1,598 | 1,407 | 1,500 | 1,520 | 1.3% |
Cash flow
|
|---|
| Capex | 74 | 62 | 68 | 79 | 61 | -22.8% |
Ratios
|
|---|
| Revenue growth | 1.8% | 11.2% | -29.0% | 7.3% | 2.0% | |
| EBITDA growth | -3.1% | 59.2% | -41.0% | -1.1% | -16.8% | |
|
|---|
| Gross Margin | 45.7% | 46.5% | 43.0% | 42.8% | 38.8% | -4.0% |
| EBITDA Margin | 16.9% | 24.2% | 20.1% | 18.5% | 15.1% | -3.4% |
| SG&A, % of revenue | 33.2% | 31.3% | 28.6% | 29.7% | 29.4% | -0.4% |
| Net Income Margin | 8.8% | 17.2% | 11.9% | 9.0% | 10.4% | 1.4% |
| CAPEX, % of revenue | 2.5% | 1.9% | 2.9% | 3.2% | 2.4% | -0.8% |
|
|---|
| ROIC | 14.0% | 20.2% | 8.9% | 8.4% | 6.1% | -2.3% |
| ROE | 16.9% | 30.2% | 12.7% | 9.7% | 11.2% | 1.5% |
| Net Debt/EBITDA | 2.0x | 1.2x | 1.9x | 2.6x | 3.1x | 0.5x |
Peers in General Industrials
Below we provide Smiths Group benchmarking against other companies in General Industrials 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Smurfit Kappa Group ($SKG) | 0.6% | 4.9% | 4.5% | 1.1% | - |
| Honeywell International Inc ($HON) | 1.9% | 3.1% | 3.1% | -12.2% | - |
| General Electric Co. ($GEC) | 3.9% | 0.7% | 1.0% | -21.7% | - |
| |
|---|
| Median (3 companies) | 1.2% | 5.9% | 2.7% | -12.2% | - |
|---|
| Smiths Group ($SMIN) | - | 11.2% | -29.0% | 7.3% | 2.0% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Honeywell International Inc ($HON) | 30.9% | 32.0% | 30.5% | 33.7% | - |
| Smurfit Kappa Group ($SKG) | 30.3% | 29.8% | 33.1% | 33.1% | - |
| General Electric Co. ($GEC) | 21.4% | 9.5% | 19.1% | 20.3% | - |
| |
|---|
| Median (3 companies) | 28.0% | 27.7% | 30.5% | 33.1% | - |
|---|
| Smiths Group ($SMIN) | 45.7% | 46.5% | 43.0% | 42.8% | 38.8% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Honeywell International Inc ($HON) | 19.6% | 20.4% | 18.7% | 22.2% | - |
| Smurfit Kappa Group ($SKG) | 14.9% | 14.0% | 16.3% | 15.7% | - |
| |
|---|
| Median (2 companies) | 13.5% | 10.5% | 10.2% | 19.0% | - |
|---|
| Smiths Group ($SMIN) | 16.9% | 24.2% | 20.1% | 18.5% | 15.1% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Smurfit Kappa Group ($SKG) | 5.2% | 5.2% | 5.9% | 6.8% | - |
| Honeywell International Inc ($HON) | 2.8% | 2.5% | 2.0% | 2.3% | - |
| |
|---|
| Median (2 companies) | 4.2% | 3.8% | 3.1% | 4.5% | - |
|---|
| Smiths Group ($SMIN) | 2.5% | 1.9% | 2.9% | 3.2% | 2.4% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Honeywell International Inc ($HON) | 19.6% | 19.0% | 18.1% | 18.5% | - |
| Smurfit Kappa Group ($SKG) | 14.1% | 13.4% | 16.3% | 13.3% | - |
| General Electric Co. ($GEC) | 4.0% | -4.1% | -11.5% | 0.5% | - |
| |
|---|
| Median (3 companies) | 12.7% | 12.2% | 9.2% | 13.3% | - |
|---|
| Smiths Group ($SMIN) | 14.0% | 20.2% | 8.9% | 8.4% | 6.1% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Smurfit Kappa Group ($SKG) | 2.4x | 2.4x | 2.1x | 2.5x | - |
| Honeywell International Inc ($HON) | 1.0x | 1.3x | 0.9x | 0.9x | - |
| |
|---|
| Median (2 companies) | 1.3x | 1.3x | 2.1x | 1.7x | - |
|---|
| Smiths Group ($SMIN) | 2.0x | 1.2x | 1.9x | 2.6x | 3.1x |
