MS International – the two pan-European niches

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MS International’s (LSE:MSI) directors have done a very good job of diversifying from guns and forks. In 2010 they paid £3.53m to buy the second half of the Petrol Station Superstructures business they did not own.  And in 2015 they paid €3.4m (£2.6m) for a company which was to become their Branding Division. Both divisions have generated strong profits and return on assets confirming that senior managers have demonstrated their ability to both see a strategic opportunity and to manage acquired businesses within the Group.

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Petrol Station Superstructures Division

The directors claim this to be “without doubt the leading specialist in the design, manufacture and installation of forecourt structures throughout Europe”.

Petrol station sites are becoming more complex and sophisticated constructions with a range of fuel types (petroleum, electricity or hydrogen), larger shops, sophisticated car valeting services, undercover electric vehicle charging and restaurant and coffee house/snack facilities. “This is all good news for our design and build superstructures business.” say MSI’s directors.

In addition, the division undertakes alterations, refurbishments, maintenance and damage repair services (a 24/7 call out service in the event of damage to canopies).

Superstructures is managed from operational bases in the UK (Doncaster), Poland and The Netherlands.

They hold a key asset: “the most comprehensive reference library of original drawings and structural calculations for thousands of petrol stations…..leads to prompt response, instant specification, minimising downtime, disruption and expensive intrusive site surveys and multiple site visits.”

Petrol Station Superstructures figures

£m Revenue   Operating profit   Capex   Assets minus liabilities   Operating profit/net assets
2011 9.0 0.6 0.2 1.8 33%
2012 10.6 1.1 1.9 1.3 85%
2013 12.2 1.5 0.7 1.4 107%
2014 13.6 1.7 0.1 2.6 65%
2015 13.4 0.7 0.2 3.2 22%
2016 10.8 0.3 0.5 7.1 4%
2017 13.8 1.0 0.3 5.7 18%
2018 12.4 0.02 0.1 6.9 0%
2019 16.3 2.1 0.2 6.4 33%
2020 12.3 0 0.3 6.1 0%
Half year to Oct 20 annualised 13.4 1.7 0.12 6.8 25%
Average 36%

The average figure for operating profit as a percentage of yearend net assets devoted to the division is a very impressive 36%.  But returns are volatile.

The lower revenue and profits in 2018 is put down to a hiatus in forecourt construction and refurbishment “owing to a notable change in the market it principally serves. Until relatively recently, many of the division’s major customers had been global oil companies but they have accelerated the divestment of their company owned petrol filling station estates, with ownership passing to both large and small independent dealer/retailers. Accordingly, construction of new sites and the refurbishment and expansion of existing facilities are passing through a state of limbo as numerous sale and purchase transactions continue to dominate the attention of the sector’s active participants.” (2018 Report).

As predicted, once the hiatus period was over, profits bounced back in 2018/19,  “driven by the structural transformation of traditional ‘petrol filling station’ sites, that were once almost exclusively selling fuel, into ones that are distinct, local convenience stores and multiple food outlets with ample car parking – that also serve fuel.” (2019 Report)

But in the year to end April 2020 profits fell to almost zero again. This time the excuse was the pandemic close down. But they pointed to “pent-up demand…starting to be unleashed” in the summer of 2020 as both new construction took place and essential maintenance was required.

Sure enough, the recent interim report showed an impressive profit for the half year of £0.835m (£1.7m annualised). The directors also noted “a recent upturn in the number of new station developments” suggesting that the full year result to end of April 2021 should be good.

Petrol station structures require the supplier to have knowledge beyond that for constructing conventional buildings.  For example, the flammable liquids or the presence of overhead cables requires great care in the design and erection.  Thus, an incumbent supplier such as MSI with a reputation and long experience has a competitive advantage.

Examples of recently completed projects beyond petrol stations:

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