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MS International (LSE:MSI) is comprised of four business. Today we look at the first two, manufacturing defence equipment and the forgings business, which concentrates on making forks for fork-lift trucks.
Defence
The Defence division mostly makes naval guns and sells to 16 countries, with 250 systems in place. It also services those guns.
Defence division numbers
| £m | Revenue | Operating profit | Capex | Assets minus liabilities | Operating profit/ net assets | ||||
| 2011 | 32.6 | 5.4 | 0.0 | 16.6 | 33% | ||||
| 2012 | 29.9 | 6.6 | 0.1 | 15.8 | 42% | ||||
| 2013 | 28.0 | 2.9 | 0.1 | 16.7 | 17% | ||||
| 2014 | 19.4 | 0.9 | 0.1 | 14.4 | 6% | ||||
| 2015 | 17.0 | -0.2 | 0.1 | 14.1 | -1% | ||||
| 2016 | 21.9 | 2.0 | 0.2 | 14.2 | 14% | ||||
| 2017 | 20.8 | 1.8 | 0.2 | 12.2 | 15% | ||||
| 2018 | 21.9 | 2.6 | 0.02 | 21.5 | 12% | ||||
| 2019 | 26.7 | 2.8 | 0.07 | 10.4 | 27% | ||||
| Average 18% |
The strategy pursued for the Defence division is to keep ahead of the competition through R&D spend building on its current pre-eminence and to grow the non-UK market “so that we can effectively counter the varied current constraints on UK MoD decisions regarding future requirements and expenditure.” (2019 Report).
And this approach is bearing fruit: “It is pleasing to report that once again, international sales accounted for the major component of revenue as we reap the benefits of our considerable investment in a substantial number of new products aimed specifically at the global market.” (2019 Report)
A weakness remains in that one customer accounted for £10.9m of the £26.7m revenue in 2019 – a greater spread of revenue sources would be more reassuring.
There is a warning in the outlook statement this year. I’m not sure if it relates to the Defence division or other divisions, but it is quite serious:
“We believe that we are approaching ‘very interesting times’. Despite our best endeavours in corporate product development and international marketing, there are times, such as now, when experience tells us some challenging external influences may come to bear on the business.” (2019 Report)
Weighed against this pessimism, we should take account of the directors’ track record of being downbeat and cautious in their comments. Also, they have prepared for troubled times:
“Nevertheless, recognising the challenges ahead of the game, is of course critical to maintain momentum. We believe that we are fully aware of such circumstances and we will do whatever is necessary to overcome any hurdles and protect at all times the Company’s past and future development. We are committed to moving the business forward and have the resilience, experience, and dedication along with a great team of people plus the financial resources to support and develop opportunities as they arise.” (2019 Report)
More on the Defence division
The Defence division has a Norwich base w
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