Sky Solar Holdings Ltd. :SKYS-US: Earnings Analysis: Q4, 2016 By the Numbers : October 10, 2017

Sky Solar Holdings Ltd. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 13.38 million, Net Earnings of USD -7.81 million.
  • Gross margins narrowed from 37.94% to 35.20% compared to the same period last year, operating (EBITDA) margins now -39.65% from -31.71%.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 13.38 23.52 17.2 11.72 11.9
Revenue Growth (%YOY) 12.41 100.89 47.73 30.93 58.16
Earnings (mil) -7.81 14.18 -1.43 -0.82 -7.05
Earnings Growth (%YOY) -10.65 361.99 -117.5 -136.23 87.25
Net Margin (%) -58.34 60.28 -8.28 -6.98 -59.27
EPS -0.15 0.32 -0.03 -0.02 -0.16
Return on Equity (%) -5.45 10.4 -1.2 -0.71 -5.98
Return on Assets (%) -6.16 11.72 -1.37 -0.86 -7.77

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, SKYS-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if SKYS-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -43.13% and earnings by -155.05% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 37.94% to 35.20%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from -31.71% to -39.65% in this time frame. For comparison, gross margins were 56.60% and EBITDA margins were 19.41% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

SKYS-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 476.62 days, compared to last year’s level of 108.79 days.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -31.71% to -39.65% and (2) one-time items that contributed to a decrease in pretax margins from -59.70% to -71.05%

EBIT Margin History
PreTax Margin History

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Company Profile

Sky Solar Holdings Ltd. engages in developing and owning solar parks. It operates through the following geographical segments: Bulgaria, Canada, Czech, Germany, Greece, Japan, Spain, USA, and Uruguay. The company was founded by Wei Li Su in 2009 and is headquartered in Hong Kong.

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