Marks Electric Share Price (MRK)

Marks Electrical’s sales growth remained strong at 17.8% in Q3, and the company appears on track to match our full year expectations of an 18.7% increase following a strong 21.5% advance in the previous year. But as a company with a core strength in premium products, gross margins have come under pressure - customers’ buying patterns have been negatively impacted by the challenging trading environment. As a result, we cut our FY2024 EBITDA forecast from £8.0m to £5.0m (and reduce FY2025 expectations from £10.0m to £7.0m). Our new fair value is 100p / share.

Link to report: https://www.equitydevelopment.co.uk/research/strong-sales-growth-momentum-remains-in-place

Marks Electrical Group, the fast-growing online electrical retailer, conducted an investor webinar following publication of their Interim Results.

Mark Smithson (founder & Chief Executive Officer) and Josh Egan (Chief Financial Officer) ran investors through key details of their HY24 numbers which included strong revenue growth and the impact of distribution & installations costs on margin.

Management discussed their expanded geographic presence and the roll-out of their next-day installation offering, as well as their strong balance sheet and cash generation. There was also a wide-ranging Q&A session following the presentation.

The full video has been divided into chapters, as below:

0:00:03 Key highlights from HY24

0:03:00 Financial overview

0:10:51 Strategic update

0:24:14 Summary & Outlook

0:24:50 Questions & Answers

Link to full video: https://www.equitydevelopment.co.uk/research/marks-electrial-investor-presentation-interimresults-nov2023

Results confirm 24.8% sales growth to £53.9m in H1, and despite lower EBITDA margins, Marks Electrical converted 145% of operating profit into cash (vs. 118% for the whole of FY2023), enabling a 0.30p unchanged interim dividend.

Margins, as expected, were reduced by the strategic decision to add integrated gas, electrical and television installation services to its next day delivery service, and increased wages for the company’s drivers. As a result, EBITDA margins were two percentage points lower than a year earlier at 4.3%. Importantly, gross product margins were almost unchanged – i.e. products were not discounted.

Market share improvements in both Major Domestic Appliances (MDA) and Consumer Electronics (CE) demonstrates the success of the company’s strategy. In H1 MDA share rose to 2.9% from 2.4%, while CE share increased from 0.3% to 0.5%. For online only, the MDA share was 5.4% and CE 0.9%. Given the substantial headroom the company enjoys in terms of awareness and reach, that over 1 in 20 UK online MDA orders are already put through Marks Electrical appears impressive.

Operating efficiency in terms of overhead costs improved in the six months. Inventory days reduced to 64 in FY2024H1 from 82 days a year earlier, and net cash rose by £0.9m to £10.9m in the past 6 months. The company generated a still impressive 37% return on capital employed in FY2024H1. With sustained robust sales growth, driven by consistent market share increases from an already meaningful level online and strong cash conversion, we retain our 150p fair value.

Link to report: https://www.equitydevelopment.co.uk/research/market-share-gains-and-efficiency-drive-cash-flow

Marks Electrical Group plc, the fast-growing online electrical retailer, will be conducting an investor webinar following publication of their Interim Results.

The online presentation will be hosted by Mark Smithson (founder & Chief Executive Officer) and Josh Egan (Chief Financial Officer).

This event will take place at 2.00pm on Monday 20th November.

The webinar is open to all existing and potential shareholders. Questions can be submitted during the presentation to be addressed at the end.

You can sign up to register here:

https://www.equitydevelopment.co.uk/news-and-events/markselectrical-investor-presentation-20nov2023

Marks Electrical Group plc issued a trading update for the HY ended 30th September this morning. H1 Group revenue was up by 24.8% to £53.9m. The Strategic decision to introduce the Group’s own installation service, combined with inflationary pressures in distribution costs impacted H1 margins, but this pressure is expected to ease over H2. The balance sheet remains strong with net cash of £10.9m. Valuation is average with forward PE ratio up to 17.7x, the share price also remains in a 12- month uptrend and has some positive momentum. The fragile macro environment is the main cloud, but there is a lot to like here, not least longer run growth potential. BUY....

...from WealthOracle

wealthoracle.co.uk/detailed-result-full/MRK/814