Member Info for Merciaman

I agree with C26's view on Moers - he is critical to AML going forward, to achieve the necessary cost efficiencies that will enable improved sales to generate a profit turnaround.

My own very simplistic model has, at the operating level, AML losing £100m in 2022, breaking even in 2023, and then getting into a healthy profit from 2024 onwards. This is on the basis that AML does sell increase its sales 10,000 cars in 2025, improves its gross margin to 40%, while also keeping opex per car and D&A under control.

That still leaves AML losing £250m+ after finance costs are factored in in 2022, hitting breakeven including finance costs in 2024, and generating pre-tax profit in 2025.

There are a lot of ifs in the assumptions that I've used - a lot has to go right for AML to become profitable. I have a small shareholding - essentially a punt - and I've not been tempted to add to it even as the share price has dropped over the past months. I remain of that view - my next review point will be the Q1 numbers due, I think, in early May.

Newcomer to Mirriad, interesting webinar last week.

Question in my mind is how they monetise their impressive technology to a point where they can make a profit ?

Assuming their cost base settles, for the forseeable future, at £20 million, then how many clients / activity does the business need to get to breakeven ? I think Mirriad aim to take about 25% of the value of an advertising campaign, so I guess that means they'll need to be involved in £80 million of advertising campaign / spend to cover their fixed costs and breakeven ?

Wonder what the average value of a campaign is, or how many campaigns / spending clients they need ?

Welcome any insight.

Yes, the share price fall says more about the city than it does the company. The results are good, over-delivery if anything, with the prospect of further improvements (and increasing value) going forward. But why invest in this when you can buy overvalued shares in businesses that lose money on small turnover while burning through cash - in the hope that one of them will be another amazon.

If you want one reason why the UK fails to earn enough to pay its way, and is becoming ever more reliant on selling swathes of the family silver to maintain its lifestyle, here is one laid bare.

I think the results were good, and reflect the successful execution of a lot of initiatives within the business. However, with all this effort generating an operating loss of £74m, and post finance loss of £212m, they also demonstrate how far the business still has to go to achieve a decent level of profitability.

AM needs 2 or 3 years of continuing excellent execution, and no external disasters to impact performance, to get to that point. That remains both achievable and still a big ask, and I think the value the share price puts on the business reflects that reality.

My comment is the comparison is a bit meaningless without taking into account the market capitalisation :
Lloyds : £37,721 million
Metro : £179 million
Virgin : £3,092 million
Barc : £34,544 million
And of course the number of shares in issue.....

No idea where the share price will go this afternoon, but recent fluctuations probably support the view of sell after a decent gain as I see Paul has done. And maybe buy again in a few days. Perfectly understandable.

I'm a long term hold of the shares, both for prospects of an increasing dividend and further capital growth over the next 12 months.

I think any thought through comment - positive or negative - should be welcomed as attempts to inform everyone. We may not like that content (especially if we're holding shares and the comment is negative), but if it has a basis in fact then it merits reading.

My view - as expressed previously and commenting as a shareholder in AML - is that 1) it is obvious that the company needs to increase sales and profitability (through more efficient production), 2) that it seems to be putting in place the mgt required to deliver this, 3) this is not yet coming through in the numbers, but we are still in the early stages of the AML recovery, 4) the debt looks a big issue now but may not be in a couple or three years if financial performance does improve significantly, 5) the extent to which all this will drive share price increase is unclear.

Hi Fusiontech - it may be described as a dividend on the HL app but not on Melrose's website (investor relations) or in any of the comms I received.

Fair point I think. As a point of semantics the payment hasn't been described as, and isn't, a dividend, - it's a return of capital (or capital reconstruction), but given the rise in the share price we'd have been better off keeping the shares.
I guess looking ahead if the company continues to drive improved financial performance and becomes more valuable there are fewer shares over which to spread the value, so the share price could appreciate more.

Good point ftseexplorer - but then jp71 should not have been subject to the shareholding reduction (not owning the shares on the relevant day) ? Which, given the share price, might have worked out better than the capital reduction ?

I'd be checking that advice JP71 - reducing your shareholding and not paying the capital reduction monies would not, I think, be legal.

Can't see any negatives in the results announced today - seem to be making progress on all fronts.

It will be interesting to see what the half year results say on Thursday, and whether the share price moves very much over the next week or so. This distribution of money was always described as a reduction of capital rather than a dividend. The aviation headwinds seem to be easing a little although automotive is still struggling with the chip shortage by the sound of it. Remain of the view this share is a long term hold.

I thought the results were a small step in the right direction. I think we all know the end point is some years away, and that the company has to 1) increase the number of cars it sells, 2) deliver direct cost saving through better procurement, and 3) improve the productivity so that opex per car produced reduces. The right noises are being made, lots of sensible things seem to be in progress, but really it's too early to be either very confident or severely disheartened.

The other questions in my mind are - if AML get to 10,000 cars sold, £2bn sales, £500m EBITDA in 2024/25, what does that mean for profit - £100 to £125 million ? And what p/e is it sensible to apply to get to a share price target in 4 years ? If that profit figure is realistic you'd need a very smoky p/e ratio applied to hit Stroll's £100 per share number (£5 x 20 share consolidation).

Spud, you'll find out timings and amount when the H1 results are announced on July 29th.

A fair strategy IAPR. I hold a block of Melrose shares long term as I think they drive long term value in the businesses they acquire. I also from time to time trade the shares - buy another block of them after a dip as they usually rebound, sell after a decent rise as they tend to drift down. As always everyone, DYOR.

Converts a portion of your investment into cash really. Melrose have done this before where they have sold businesses for a significant sum, and paid out part of this directly to shareholders.

Everyone receives one B2 share (nominal value 15p) for every ordinary share held as at 6pm 27th August.
The B2 shares get cancelled on the 31st August.
Shareholders will receive 15p for each cancelled by B2 share on 14th September.
The share consolidation then reduces the number of shares to reflect that all shareholders have been given 15p per share of their company in cash.
So it's effectively a dividend but not given as a dividend.

My experience with Melrose is that it can drift for periods between news. I also think that it's heavy exposure to automotive and, in particular, aviation, means that in the short term next year or two then growth is going to be limited.

Long term it's a good hold I think - I'm sure the businesses are being and will continue to be "sharpened", and that a lot of growth (when it comes) will feed through to the bottom line. I agree with Freddie2 that there will be a special dividend from the proceeds of the Nortek sale when that is completed.

So a long term hold for me.

LTI I think you're right in that the next set of results will be key - in particular to provide greater clarity on exactly what the dividend is likely to be going forward. Lloyds in general seems in decent shape, and while there are clearly fears about inflation generally I can still see a drift upwards but little more until late July. The likely yield going forward will probably then determine whether the shares take another step forward or not.