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Kromek Group reports 913% EBITDA decline in 2020 and 9.6% Revenue decline

07 Oct 2020 • About Kromek Group ($KMK) • By InTwits

Kromek Group reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • The company operates at negative EBITDA Margin: -115.3%
  • Kromek Group motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 was 0.0% while average EBITDA Margin was -31.4% for the sames years
  • Kromek Group has high CAPEX intensity: 5 year average CAPEX/Revenue was 17.7%. At the same time it's a lot of higher than industry average of 12.4%.
  • CAPEX is quite volatile: £7m in FY2020, £4m in FY2019, £0m in FY2018, £0m in FY2017, £0m in FY2016
  • The company has unprofitable business model: ROIC is -29.3%
  • It operates with high leverage: Net Debt/EBITDA is 4.5x while industry average is -0.5x
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 decreased on 9.6%. During the last 5 years Revenue growth topped in FY2018 at 32.1% and was decelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 128 pp from 12.8% to -115% in FY2020. During the last 5 years EBITDA Margin topped in FY2019 at 12.8%.

Gross Margin decreased on 9.9 pp from 57.2% to 47.3% in FY2020. SG&A as a % of Revenue jumped on 20.0 pp from 63.5% to 83.4% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2019 at 63.5%.

Net Income margin dropped on 124 pp from -1.9% to -126% in FY2020.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 53.1% in FY2020. CAPEX/Revenue surged on 50.2 pp from 2.9% in FY2017 to 53.1% in FY2020. It's average level of CAPEX/Revenue for the last three years was 26.8%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2018 at 2.3% and was growing since that time.

Return on investment

The company operates at negative ROIC (-29.3%) and ROE (-31.1%). ROIC dropped on 27.9 pp from -1.4% to -29.3% in FY2020. ROE dropped on 30.6 pp from -0.56% to -31.1% in FY2020. During the last 5 years ROIC topped in FY2019 at -1.4%. During FY2016-FY2020 ROE topped in FY2019 at -0.56%.

Leverage (Debt)

Debt level is 4.5x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA surged on 5.9x from -5.9x to in FY2020. Debt increased slightly on 1.2% while cash dropped on 54.2%.

Kromek Group has no short term refinancing risk: cash is higher than short term debt (236.5%).

Financial and operational results

FY ended 30 Apr 2020

Kromek Group ($KMK) key annual financial indicators

mln. £201620172018201920202020/2019
Gross Profit4.4295.1176.6848.3096.208-25.3%
Net Income-2.151-3.084-1.104-0.283-16.540
Balance Sheet
Short Term Debt0.0093.0003.0003.4063.99317.2%
Long Term Debt0.0000.0000.0006.2515.781-7.5%
Cash flow
Revenue growth3.0%7.5%32.1%22.6%-9.6%
EBITDA growth-6.2%-114.7%433.2%-912.8%

Gross Margin53.1%57.1%56.4%57.2%47.3%-9.9%
EBITDA Margin-30.2%-26.4%2.9%12.8%-115.3%-128.1%
SG&A, % of revenue102.0%98.8%76.2%63.5%83.4%20.0%
Net Income Margin-25.8%-34.4%-9.3%-1.9%-126.1%-124.1%
CAPEX, % of revenue5.3%2.9%2.3%25.1%53.1%28.0%

Net Debt/EBITDA-18.6x-5.9x

Peers in Health Care Equipment & Services

Below we provide Kromek Group benchmarking against other companies in Health Care Equipment & 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  FY2016 FY2017 FY2018 FY2019 FY2020
Caretech Hldgs ($CTH)19.9%11.4%11.8%112.7%-
Abbott Laboratories ($ABT)2.2%31.3%11.6%4.3%-
Median (2 companies)5.3%11.4%9.6%58.5%-
Kromek Group ($KMK)-7.5%32.1%22.6%-9.6%

Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Abbott Laboratories ($ABT)56.7%55.0%58.4%58.5%-
Caretech Hldgs ($CTH)36.4%36.1%35.2%33.7%-
Median (2 companies)57.7%55.0%58.4%46.1%-
Kromek Group ($KMK)53.1%57.1%56.4%57.2%47.3%

Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Caretech Hldgs ($CTH)27.7%21.3%18.1%15.3%-
Median (1 company)12.0%20.7%18.1%15.3%-
Kromek Group ($KMK)-30.2%-26.4%2.9%12.8%-115.3%

Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Caretech Hldgs ($CTH)7.2%9.6%7.8%7.0%-
Median (1 company)5.1%4.1%4.6%7.0%-
Kromek Group ($KMK)5.3%2.9%2.3%25.1%53.1%

Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Caretech Hldgs ($CTH)9.4%6.4%5.3%7.0%-
Abbott Laboratories ($ABT)8.6%3.4%6.6%--
Median (2 companies)3.3%6.4%5.3%7.0%-
Kromek Group ($KMK)-18.9%-12.9%-5.2%-1.4%-29.3%

Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Caretech Hldgs ($CTH)3.8x4.2x4.4x4.8x-
Median (1 company)-0.5x-0.5x0.5x4.8x-
Kromek Group ($KMK)---18.6x-5.9x-