Sprue Aegis Plc :SPRP-GB: Earnings Analysis: For the six months ended June 30, 2017 : October 6, 2017

Sprue Aegis Plc reports financial results for the half-year ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of GBP 26.03 million, Net Earnings of GBP 1.27 million.
  • Gross margins widened from 19.88% to 25.74% compared to the same period last year, operating (EBITDA) margins now 7.77% from -0.77%.
  • Earnings growth from operating margin improvements as well as one-time items.

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

2017-06-30 2016-12-31 2016-06-30 2015-12-31 2015-06-30
Relevant Numbers (Semi-Annual)
Revenues 26.03 31.17 25.94 31.81 56.49
Revenue Growth (YOY) 0.34 -2.03 -54.08 -23.83 136.99
Earnings 1.27 2.4 -0.58 -1.68 7.69
Earnings Growth (YOY) 319.52 242.65 -107.53 -129.64 275.49
Net Margin 4.88 7.69 -2.23 -5.28 13.61
EPS 0.03 0.05 -0.01 -0.04 0.17
Return on Equity 4.23 8.24 -1.95 -5.25 25.37
Return on Assets 4.88 9.17 -2.12 -5.64 27.61

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, SPRP-GB’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 SPRP-GB’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 -16.50% and earnings by -47.00% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 19.88% to 25.74% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -0.77% to 7.77% compared to the same period last year. For comparison, gross margins were 24.24% and EBITDA margins were 8.05% in the last reporting 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

SPRP-GB’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now 294.16 days compared to 377.07 days for the same period last year.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -2.25% to 6.07% and (2) one-time items. The company’s pretax margins are now 4.98% compared to -4.38% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Sprue Aegis Plc engages in the provision of smoke detectors, carbon monoxide detectors and other home safety products. It offers the following brands: FireAngel, AngelEye, Sona, FireAngelPro, Pace Sensors, First Aler, BRK, and Dicon. The company was founded by Nicholas Alexander Rutter and Sam P. Tate in 1998 and is headquartered in Coventry, the United Kingdom.

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