L.S. Starrett Company (The) reports 88.2% EBITDA decline in 2020 and 7.1 pp EBITDA Margin decline from 8.1% to 1.1%
09/22/2020 • About L.S. Starrett Company (The) (
$SCX) • By InTwits
L.S. Starrett Company (The) reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- L.S. Starrett Company (The) is a company in decline: FY2020 revenue growth was -11.7%, 5 years revenue CAGR was -3.6%
- EBITDA Margin is quite volatile: 1.1% in FY2020, 8.1% in FY2019, 5.7% in FY2018, 2.9% in FY2017, -6.3% in FY2016
- L.S. Starrett Company (The) has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.6%. At the same time it's in pair with industry average of 5.0%
- CAPEX is quite volatile: $0m in FY2020, $1m in FY2019, $2m in FY2018, $0m in FY2017, $0m in FY2016
- The company has unprofitable business model: ROIC is -6.8%
- It operates with high leverage: Net Debt/EBITDA is 10.0x while industry average is 5.6x
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 11.7%. Revenue decline showed acceleration in FY20Q4 - it was 30.5% YoY. During the last 5 years Revenue growth topped in FY2019 at 5.4%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.1 pp from 8.1% to 1.1% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2019 at 8.1%.
Gross Margin decreased slightly on 2.0 pp from 32.9% to 30.9% in FY2020. During the last 5 years Gross Margin topped in FY2019 at 32.9%. SG&A as a % of Revenue increased slightly on 1.6 pp from 27.9% to 29.5% in FY2020.
Net Income margin dropped on 13.5 pp from 2.7% to -10.8% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 L.S. Starrett Company (The) had CAPEX/Revenue of 5.3%. CAPEX/Revenue increased on 2.4 pp from 2.8% in FY2017 to 5.3% in FY2020. It's average CAPEX/Revenue for the last three years was 3.7%. L.S. Starrett Company (The) has spent a lot to CAPEX (483% of EBITDA) which didn't stop revenue from falling. During FY2016-FY2020 CAPEX as a % of Revenue bottomed in FY2018 at 2.7% and was growing since that time.
Return on investment
The company operates at negative ROIC (-6.8%) and ROE (-33.8%). ROIC dropped on 19.2 pp from 12.4% to -6.8% in FY2020. ROE dropped on 40.9 pp from 7.1% to -33.8% in FY2020. During FY2016-FY2020 ROIC topped in FY2019 at 12.4%.
Leverage (Debt)
Company's Net Debt / EBITDA is 10.0x and Debt / EBITDA is 16.2x. Net Debt / EBITDA jumped on 9.7x from 0.3x to 10.0x in FY2020. Debt jumped on 64.0% while cash dropped on 13.6%.
L.S. Starrett Company (The) has no short term refinancing risk: cash is higher than short term debt (209.1%).
Management team
The company's CEO Douglas A Starrett has spent 19 years with the company. L.S. Starrett Company (The)'s CFO is John Casey Tripp. John Casey Tripp has 1 year tenure at the company.
Financial and operational results
FY ended 06/30/2020
L.S. Starrett Company (The) ($SCX) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 209.7 | 207.0 | 216.3 | 228.0 | 201.5 | -11.7% |
| Gross Profit | 47.0 | 62.0 | 69.0 | 74.9 | 62.2 | -17.0% |
| SG&A | 61.5 | 62.0 | 64.3 | 63.7 | 59.4 | -6.7% |
| EBITDA | -13.2 | 6.0 | 12.2 | 18.6 | 2.2 | -88.2% |
| Net Income | -14.1 | 1.0 | -3.6 | 6.1 | -21.8 | -459.3% |
Balance Sheet
|
|---|
| Cash | 19.8 | 14.6 | 14.8 | 15.6 | 13.5 | -13.6% |
| Short Term Debt | 1.5 | 11.5 | 3.7 | 4.1 | 6.4 | 58.4% |
| Long Term Debt | 17.1 | 6.1 | 17.3 | 17.5 | 29.0 | 65.3% |
Cash flow
|
|---|
| Capex | 8.2 | 5.8 | 5.8 | 7.2 | 10.6 | 46.7% |
Ratios
|
|---|
| Revenue growth | -13.2% | -1.3% | 4.5% | 5.4% | -11.7% | |
| EBITDA growth | -176.4% | -145.2% | 104.5% | 51.7% | -88.2% | |
|
|---|
| Gross Margin | 22.4% | 29.9% | 31.9% | 32.9% | 30.9% | -2.0% |
| EBITDA Margin | -6.3% | 2.9% | 5.7% | 8.1% | 1.1% | -7.1% |
| SG&A, % of revenue | 29.3% | 30.0% | 29.7% | 27.9% | 29.5% | 1.6% |
| Net Income Margin | -6.7% | 0.5% | -1.7% | 2.7% | -10.8% | -13.5% |
| CAPEX, % of revenue | 3.9% | 2.8% | 2.7% | 3.2% | 5.3% | 2.1% |
|
|---|
| ROIC | -20.1% | -1.2% | 5.3% | 12.4% | -6.8% | -19.2% |
| ROE | -13.7% | 1.1% | -4.0% | 7.1% | -33.8% | -40.9% |
| Net Debt/EBITDA | | 0.5x | 0.5x | 0.3x | 10.0x | 9.7x |
L.S. Starrett Company (The) ($SCX) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 52 | 57 | 50 | 42 | | 0.4% | 0.6% | -14.5% | -30.5% |
| EBITDA | 3 | 5 | 2 | -8 | | 24.1% | -12.5% | -65.6% | -233.7% |
| Net Income | 1 | 1 | 1 | -24 | | 33.2% | -34.6% | -70.6% | -1,753.6% |
Balance Sheet
|
|---|
| Cash | 11 | 9 | 10 | 13 | | -25.0% | -30.1% | -20.5% | -13.6% |
| Short Term Debt | 6 | 6 | 5 | 6 | | 69.0% | 106.4% | 61.5% | 58.4% |
| Long Term Debt | 23 | 22 | 29 | 29 | | 36.4% | 27.2% | 59.3% | 65.3% |
Ratios
|
|---|
| Gross Margin | 34.0% | 32.8% | 29.7% | 26.0% | | 2.1% | 0.2% | -3.1% | -8.3% |
| EBITDA Margin | 6.2% | 7.9% | 3.6% | -18.0% | | 1.2% | -1.2% | -5.4% | -27.4% |
| Net Income Margin | 1.5% | 2.2% | 1.2% | -57.7% | | 0.4% | -1.2% | -2.3% | -60.1% |
Peers in Industrial Machinery
Below we provide L.S. Starrett Company (The) benchmarking against other companies in Industrial Machinery 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 |
|---|
| Donaldson Company, Inc. ($DCI) | - | 6.8% | 15.3% | 4.0% | -9.2% |
| |
|---|
| Median (1 company) | - | 6.8% | 15.3% | 4.0% | -9.2% |
|---|
| L.S. Starrett Company (The) ($SCX) | - | -1.3% | 4.5% | 5.4% | -11.7% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Donaldson Company, Inc. ($DCI) | 34.0% | 34.7% | 34.2% | 33.3% | 33.8% |
| |
|---|
| Median (1 company) | 34.0% | 34.7% | 34.2% | 33.3% | 33.8% |
|---|
| L.S. Starrett Company (The) ($SCX) | 22.4% | 29.9% | 31.9% | 32.9% | 30.9% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Donaldson Company, Inc. ($DCI) | 15.7% | 17.0% | 16.6% | 16.5% | 16.6% |
| |
|---|
| Median (1 company) | 15.7% | 17.0% | 16.6% | 16.5% | 16.6% |
|---|
| L.S. Starrett Company (The) ($SCX) | -6.3% | 2.9% | 5.7% | 8.1% | 1.1% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Donaldson Company, Inc. ($DCI) | 3.3% | 2.8% | 3.6% | 5.3% | 4.8% |
| |
|---|
| Median (1 company) | 3.3% | 2.8% | 3.6% | 5.3% | 4.8% |
|---|
| L.S. Starrett Company (The) ($SCX) | 3.9% | 2.8% | 2.7% | 3.2% | 5.3% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Donaldson Company, Inc. ($DCI) | 20.4% | 23.6% | 26.5% | 26.4% | 20.9% |
| |
|---|
| Median (1 company) | 20.4% | 23.6% | 26.5% | 26.4% | 20.9% |
|---|
| L.S. Starrett Company (The) ($SCX) | -20.1% | -1.2% | 5.3% | 12.4% | -6.8% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Donaldson Company, Inc. ($DCI) | 0.9x | 0.7x | 0.7x | 1.0x | 1.1x |
| |
|---|
| Median (1 company) | 0.9x | 0.7x | 0.7x | 1.0x | 1.1x |
|---|
| L.S. Starrett Company (The) ($SCX) | - | 0.5x | 0.5x | 0.3x | 10.0x |
