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Acuity Brands Inc reports 24.8% Net Income decline in 2020 and 1.3 pp EBITDA Margin decline from 15.0% to 13.7%

10/08/2020 • About Acuity Brands Inc ($AYI) • By InTwits

Acuity Brands Inc reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Acuity Brands Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's a lot of higher than industry average of 1.4%.
  • CAPEX is quite volatile: $54m in FY2020, $28m in FY2019, $35m in FY2018, $28m in FY2017, $20m in FY2016
  • The company has highly profitable business model: ROIC is 14.5%
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 9.4%. Annual revenue decline showed slowdown in FY20Q4 - revenue decreased on 5.0%. Revenue decline was accelerating on average at -6.9 pp per annum in the last 5 years. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 1.3 pp from 15.0% to 13.7% in FY2020.

Gross Margin increased slightly on 1.9 pp from 40.3% to 42.2% in FY2020. During the last 5 years Gross Margin bottomed in FY2019 at 40.3%. SG&A as a % of Revenue increased on 5.3 pp from 25.6% to 30.9% in FY2020.

Net Income margin decreased slightly on 1.5 pp from 9.0% to 7.5% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 9.5% and was declining since that time.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 1.7% in FY2020. The company's CAPEX/Revenue showed almost no change from FY2017 to FY2020. For the last three years the average CAPEX/Revenue was 1.4%. During FY2016-FY2020 CAPEX as a % of Revenue bottomed in FY2018 at 1.2% and was growing since that time.

Return on investment

The company operates at good ROIC (14.5%) and ROE (12.3%). ROIC decreased on 6.0 pp from 20.4% to 14.5% in FY2020. ROE decreased on 5.9 pp from 18.2% to 12.3% in FY2020. ROIC declined at -2.5 pp per annum in the last 5 years. During the last 5 years ROE topped in FY2018 at 20.7% and was declining since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.4x and Debt / EBITDA is 0.9x. Debt jumped on 12.5% while cash surged on 21.6%.

Acuity Brands Inc has no short term refinancing risk: cash is higher than short term debt (2,307.4%).

Valuation and dividends

The company's trades at EV/EBITDA 7.8x and P/E 15.0x.

Management team

The company's CEO Neil M Ashe has spent 8 months with the company. The company's CFO is Karen J Holcom. Karen J Holcom has 14 years tenure at the company.

Financial and operational results

Acuity Brands Inc ($AYI) key annual financial indicators

mln. $201620172018201920202020/2019
Gross Profit1,4361,4811,4851,4801,402-5.2%
Net Income291322350330248-24.8%
Balance Sheet
Short Term Debt000924167.0%
Long Term Debt3553573563483778.4%
Cash flow
Revenue growth21.6%6.5%5.0%-0.2%-9.4%
EBITDA growth27.4%12.0%-10.1%1.9%-17.5%

Gross Margin43.6%42.3%40.4%40.3%42.2%1.9%
EBITDA Margin16.3%17.2%14.7%15.0%13.7%-1.3%
SG&A, % of revenue28.7%25.4%26.0%25.6%30.9%5.3%
Net Income Margin8.8%9.2%9.5%9.0%7.5%-1.5%
CAPEX, % of revenue2.5%1.9%1.2%1.4%1.7%0.2%

Net Debt/EBITDA-0.1x0.1x0.4x-0.2x-0.4x-0.2x

Acuity Brands Inc ($AYI) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
Revenue835824776891 -10.5%-3.5%-18.1%-5.0%
EBITDA113111113132 -18.2%-5.5%-20.9%-13.9%
Net Income57576074 -28.4%-13.7%-31.7%-23.3%
Balance Sheet
Cash267381521561 24.1%64.1%56.0%21.6%
Short Term Debt26323424 6,375.0%357.1%273.6%167.0%
Long Term Debt397439432377 11.3%25.5%24.4%8.4%
Gross Margin42.6%41.7%42.2%42.1% 3.2%2.6%1.7%0.0%
EBITDA Margin 13.5% 13.5% 14.5% 14.8% -1.3%-0.3%-0.5%-1.5%
Net Income Margin 6.8% 6.9% 7.8% 8.3% -1.7%-0.8%-1.5%-2.0%

Peers in Electrical Components & Equipm

Below you can find Acuity Brands Inc benchmarking vs. other companies in Electrical Components & Equipm 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
Flux Power Holdings Inc ($FLUX)-61.6%356.5%126.3%80.8%
Espey Mfg. & Electronics Corp. ($ESP)--18.0%44.4%12.2%-13.6%
Median (2 companies)-21.8%200.5%69.2%33.6%
Acuity Brands Inc ($AYI)-6.5%5.0%-0.2%-9.4%

Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Espey Mfg. & Electronics Corp. ($ESP)26.8%20.9%23.6%19.4%17.6%
Flux Power Holdings Inc ($FLUX)-96.8%-79.8%-19.3%5.9%13.0%
Median (2 companies)-35.0%-29.4%2.1%12.6%15.3%
Acuity Brands Inc ($AYI)43.6%42.3%40.4%40.3%42.2%

Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Espey Mfg. & Electronics Corp. ($ESP)17.4%8.7%13.2%8.8%5.5%
Flux Power Holdings Inc ($FLUX)-732.1%-458.5%-149.5%-119.9%-73.7%
Median (2 companies)-357.3%-224.9%-68.2%-55.6%-34.1%
Acuity Brands Inc ($AYI)16.3%17.2%14.7%15.0%13.7%

Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Flux Power Holdings Inc ($FLUX)0.9%5.9%2.1%3.0%1.9%
Espey Mfg. & Electronics Corp. ($ESP)1.0%1.6%5.9%1.7%0.7%
Median (2 companies)1.0%3.7%4.0%2.3%1.3%
Acuity Brands Inc ($AYI)2.5%1.9%1.2%1.4%1.7%

Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Espey Mfg. & Electronics Corp. ($ESP)13.7%4.7%11.8%8.1%3.7%
Flux Power Holdings Inc ($FLUX)--1,762.0%-283.6%-333.9%-553.1%
Median (2 companies)13.7%-878.6%-135.9%-162.9%-274.7%
Acuity Brands Inc ($AYI)24.8%25.0%21.5%20.4%14.5%

Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Espey Mfg. & Electronics Corp. ($ESP)-2.1x-5.1x-1.0x-0.5x-3.1x
Median (1 company)-2.1x-5.1x-1.0x-0.5x-3.1x
Acuity Brands Inc ($AYI)-0.1x0.1x0.4x-0.2x-0.4x