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Golub Mid Market Report: Profit Growth Accelerates to 5% in Q1/2016

April 08, 2016, 08:01 AM
Filed Under: Industry News

Middle-market private companies in the Golub Capital Altman Index increased revenues by 9.08% and earnings (defined as earnings before interest, taxes, depreciation and amortization, or "EBITDA") by 5.05% year-over-year during the first two months of the first quarter of 2016. This is an increase from year-over-year growth of 6.69% and 2.15% in revenues and earnings, respectively, in the fourth quarter of 2015.

Lawrence E. Golub, CEO of Golub Capital, said "In aggregate, our data shows that the middle market is growing nicely, with profits growing faster than in the previous two quarters across most sectors. Though the economy is improving and the middle market is strengthening, we do see continued profit margin pressure, based on year over year comparisons within our portfolio. The improved Q1 earnings picture from our middle-market sample suggests that, ex-energy, public company profitability and growth may well beat expectations."

Dr. Altman said, "Earnings of middle-market firms staged a meaningful increase, to 5.05% from 2.15% and 3.95% in the two previous quarters. Consumer staples and IT sectors were the bright spots, with smaller increases in the health care and industrial sectors. The consumer discretionary sector has experienced a fair amount of volatility in growth from quarter to quarter in the past six quarters after a relatively high and stable growth period in 2013/2014."

The Golub Capital Altman Index, which is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman, is the first and only index based on actual sales and earnings data for middle market companies. It measures median revenue and earnings performance from the data of more than 150 private U.S. companies in the loan portfolio of Golub Capital, a leading middle market lender. Reported shortly before public company quarterly earnings season, the index has served as a reliable indicator of the overall growth rates in revenue and earnings of public companies in market indexes such as the S&P 500 and S&P SmallCap 600, as well as quarterly Gross Domestic Product ("GDP"), according to statistical back-testing dating back to 2012, when data began to be tracked.

Golub believes the results (1) are representative of the general performance of middle market companies, which are a major contributor to U.S. private sector employment, (2) can be easily compared to the performance of the public companies that make up major stock indexes, (3) are relevant to the aggregate economic performance of the U.S. economy, and (4) provide timely information for the investment community.

Importantly, the size and diversity of the Golub Capital loan portfolio ensures that the confidentiality of all company-specific information used in the report is maintained in both the aggregate and industry segment data.

The companies in the Golub Capital Altman Index operate in a wide range of industries, and aggregate results are provided for the total universe and by industry segment. Given the index's limited exposure to Financials, Utilities, Energy and Materials, calculations are made for the public indexes both including and excluding these sectors (for the latter, see charts marked "S&P 500 Adjusted" and "S&P 600 Adjusted").

The Golub Capital Middle Market Report analyzes the results of the Golub Capital Altman Index, which measures the median revenue and earnings growth of more than 150 privately owned companies in the Golub Capital loan portfolio for the first two months of each calendar quarter. It compares these results to the financial performance of public companies in well-known market indexes, including the S&P 500 and S&P SmallCap 600, as well as the quarterly Gross Domestic Product. The index is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman.

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