MHM Automation - MHM

[nztx]

With the change of focus I'm very bullish on this "new company" . Hopefully will see the EBITDA growing in the 100%+ range over next few years as margins improve

Some of businesses acquired are very very cyclical though

Bear in mind they are operating also in markets overseas where travel is not possible to, so reliant on teams on the ground there already

Interesting the Milmeq acquisition - low cost - high volume - low margin

The balance sheet shows signs of forward projects heavily funded upfront by customers - see the contract liabilities
This has become more apparent over recent years

H&C - a $1-2 mill acquisition seems to be fuelling much of T/o & growth, but beware that operation is cyclical and has it's good & bad years, and has been known to be very quiet as well -- factor in that the operation being major money spinner for MHM - Travel limitations under Covid-19 & what does that mean ?

The Dairy an other companies don't do major Capital jobs every year.. What will any form of local or global downturn do for MHM Order Books ? The Milmeq acquisition allowed entry into Freezing Co's - but there too they are surrounded by other suppliers .. whether the bits they acquired as a further 'Bolt- On' was unwanted by others in the Sector - who knows, but it was certainly not expensive to add to the MGl stable. ($50K + whatever else ?)


Some may buy on reimaged Company name - but the former business units are not all that exciting & risk exists with newer ones that produce margin (now anchored on average around 35% ave GP - but that has been higher previously)

Trying to make the current bundle of past few years acquisitions & bolt-ons even look remotely sexy now with the same old (roughly $1 mil or less Surplus) without doing further to actually make things a bit more sexy than an Automation Machine Maker & Freezing Works Servicing Outfit - seems tough ask .. what has really changed ? (aside from rebranding & rekitting at a large cost)


I don't fancy chances of a dividend any time soon from MHM & furthermore the kind of miraculous large turn around spin from the Board seems just that - Spin and nothing more .. put a $5 - $10 mil profit on the table - I'd think differently, but I don't see that happening anytime soon from MHM with sub $5 mill net shareholder funds, in the businesses & sectors they are in, in current times & suspect possibly limited future growth possibilities..

Past history suggests over the long & chequered history only in very few years has a dividend been paid - starting way back in days of the listed Broadway Industries from memory.

In recent years, major shareholder loans in have been capitalised into addition shareholding stakes, with Loss of most previously accumulated tax losses, there are few if any Imputation credits, and like some other listed companies - MGL has been no different in using borrowed funds for larger new acquisitions in earlier attempted reincarnations / reimaging, only to have to have these not turn out well , then reformulated into additional shareholder injection / debt-share swaps or variants of this sort of thing.. (as was seen with STU)

At the end of the day given the choice of either MHM (MGL) or STU, I know which I would probably lean towards, if forced to choose..


Discl: Holder MGL & STU

[winner69]

Was the shareprice over 7 bucks once ... and more recently over 4 bucks

[bung5]

Good insight

there are few if any Imputation credit

What do you mean by this. Surely if they were to pay a dividend , it would be from profits which they would be paying tax on so would be fully imputed dividend.
In any case would prefer no dividend payed and focus on growth.

[nztx]

Was the shareprice over 7 bucks once ... and more recently over 4 bucks

I been around a fair while & dont recall that .. at all

dont forget there was a share consolidation & large trove of shares cancelled too if memory serves correct!

Add: Yes between 2016 & 2017 years:

2016 Year end 330.4 Mil Shares
2017 Year end 41.038 Mil Shares

[nztx]

Good insight





What do you mean by this. Surely if they were to pay a dividend , it would be from profits which they would be paying tax on so would be fully imputed dividend.
In any case would prefer no dividend payed and focus on growth.

Good point yes .. but fairly good call that they would retain earnings

Accumulated P&L shows a fairly hefty trove of past red ink

[winner69]

Mercer aint paid dividend for decades

Doubt if they ever will

[nztx]

+3c to 41c so far today .. does someone know something ?

I remember last year when they were between 18 & 20c

[nztx]

A bit of History -

From the 2001 Prospectus of Broadway Industries (which was the former name)

Dividend Policy:

The Company has not paid a dividend since 9 December 1996
Directors presently do not expect to recommence the payment of dividends until the Balance Sheet is sufficiently strengthened

At that time the trading subsidiaries were Mercer Stainless & H E Perry

On 2 March 2001, the Directors announced a profit for the six months ended 31 December 2000 of $304,000 ....

The Directors expect that the result for the current financial year end 30 June 2001 will be a net surplus within the range
of $600,000 to $800,000 ...


Moving forward - looking at the 11 FY periods to 30 June 2019 -
the following are from extract summaries of Annual Financial Statements crunched

Comprehensive Income (Loss) , or bottom line reported -

2009 ($1595 K)
2010 ($3367 K)
2011 ($9123 K)
2012 ($1008 K)
2013 $ 631 K Surplus
2014 $ 193 K Surplus
2015 ($7025 K)
2016 ($6373 K)
2017 ($6975 K)
2018 ($7910 K)
2019 ($1029 K)

A grand total of Net Losses of ($43.581) million reported over 11 Years

Included across these years

Restructuring Costs $5348 K
Impairment Charges $6363 K
Deficit - Discontinued Operations $9008 K
Fonterra Settlement $1111 K

Asset Revaluation movement ($1923 K) Surplus
Insurance Proceeds ($2608 K) Surplus


Net Shareholders Funds total movements reported over 11 years period from 2009 - 2019 were


Share Capital +24929 K
Other Reserves + 1071 K
Retained Earnings (- 42948 K)

Net Movement (-$ 16948 K)

Shareholders Funds YE 2009 $20.363 Million
Shareholders Funds YE 2019 $ 3.415 Million

Net Movement (-$ 16948 K)

Shareholders Funds at YE 2009 comprised:

Share Capital $19.437 million
Other Reserves $1.934 million
Retained Earnings ($1.008) million

Total 2009 YE SH Funds $20.363 million


Gross Profit Margins in Reported Statements -

2009-2016 periods - 2012 49%, the rest in Low to mid 50% range
2017 period circa 44%
2018 - 2019 periods - 35.5% & 38.8% respectively

Turnover range across 11 years $30 Million - 40 million pa


This suggests the extent to which New & Existing Shareholders Funds & Value have been lost / destroyed
over the 2009-2019 FY periods, as reported.

Most recent strategies & acquisitions may be different and be far more successful and profitable forays, which 2020
reporting suggests may be possible / occurring

A fair amount of new capital appears to have been injected from current & former major shareholder(s) and across
recent years refinanced bank borrowing perhaps connected to acquisitions or closed divisions which have not fared well


2016-17 1:20 Share Consolidation:

https://www.nzx.com/announcements/294403

5/12/2016, 1:21 pm CAPREC
SHARE CONSOLIDATION OF 1 SHARE PER 20 SHARES CURRENTLY ON ISSUE

The Company has resolved to implement a share consolidation in order to rationalise the number of ordinary shares of the Company on issue.

Every 20 shares held in Mercer Group Limited on 9 January 2017 will be consolidated into 1 share, with all fractional entitlements rounded to the nearest whole number of shares (and a fractional entitlement to half a share being rounded up). As a result of the consolidation, the number of shares on issue in Mercer will be reduced from 1,151,903,950 to approximately 57,595,198 shares.
The expected timetable for the share consolidation is as follows:
• 4 January 2017 – Last day for trading in pre-consolidation shares on the NZX Main Board.
• 5 January 2017 - Ex-date for the consolidation. Mercer's shares are expected to enter a two day trading halt from this date.
• 6 January 2017 – Record date for the consolidation.

[winner69]

nztx ....just as well all that incredible degree of wealth destruction over the years is behind them and the turn around story underway has real momentum and the future is looking really bright

Percy probably got some good stories to tell about Mercer .....but maybe, just maybe, he’s interested now, if so a great investment.

[winner69]

At least they recovering from the dud silo they built. That disaster could have been terminal

https://www.stuff.co.nz/business/858...-cost-hits-45m