RE: Undervalued but 250% debt17 Jan 2019 12:41
So just to explain the debt situation a little more, this was from last years Interims, as can be seen the lion's share of debt is the Debtor Finance facility, this is like factoring, invoice to client then gets factored and MRS receive the invoice amount less the take from the facility provider (this is very high at the moment at 18%). So although in the last results $7m was drawn down from this facility it will be paid from the invoice monies when they are received. This facility is use din many businesses but MRS probably have long terms with some of the big companies they del with and have weekly outgoings so this type of facility helps smooth this out. The ridiculous rate was set because MRS was financially on it's knees when it struck the deal, this is what needs restructuring.
As can be seen many of the loans will be paid off within a year from now, many of them being paid down by $100k a month, this is all from cashflow. They could have paid off the debt faster but have also been investing in the businesses to increase the future revenues, profits, etc from extra work. (Invested $13.7m and increased debt by $5m)
"During FY18, the Group invested $13.7m in Property, Plant & Equipment, with a further $2.0m in Capital Work In Progress. The majority of the capital expenditure (CAPEX) has been funded through free cash flow, new debt contributed $5.0m, with $2.0m equipment finance and $3.0m property finance"
Borrowings
There are 3 core debt facilities utilised by the MRS Group
1) Debtor Finance
2) Commercial Bills
3) Equipment Finance
1) Debtor Finance: BPH has a $2.6m facility and MRSSG has a $6.0m facility. The drawn down balance of both operations fluctuates on a weekly basis depending on the invoicing cycle and the receipts from customers.
2) Commercial Bills: The current commercial bills were established with the restructure of the company in February 2017. The initial balance in February 2017 being $4.3m, the balance at 31 December 2017 is $2.8m. These commercial bills will be fully repaid by early in 2020.
3) Equipment Finance: BPH was acquired in February 2016 partially with a 48 month $4.2m equipment finance facility, MRSSG was also acquired in October 2016 partially with a 48 month $4.2m equipment finance facility. During FY17 the rent to buy agreement within BPH was recognised on the balance sheet, increasing both the PP&E and debt by $3.6m. There are 25 repayments remaining at 31 December 2017.
Overall, the Group's borrowings net of cash reduced by $1.5 million between June and December 2017.
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