Marks Electrical Share Discussion Threads

[debsdowner] 18/4/2024 15:01

darrin,

"I'm surprised MRK held up so well today.
Sales growth crashed in Q4 to 2%
"

Yes that was the highlight to me.

If they are that competitive sales should not have crashed as much imo.

But big ticket items have slowed somewhat.

There is another play here which could affect future performance ansd that is products are lasting longer due to a new europeam law.

[darrin1471] 16/4/2024 19:24

I'm surprised MRK held up so well today.
Sales growth crashed in Q4 to 2%

Q4 2023 20%
First 2 months of Q1 30%+
First 4 months of H1 30.7%
H1 24.8%
Q3 17.8%
Q4 2%

31 March 2024 closing net cash position of £7.8m(ahead of lowered forecasts of £7.05m)
Last year closing net cash position of GBP10.0m

EBITDA of approximately £5.0m is inline with lowered forecasts but down from £7.5m last year

Leaving Euronics "will lead to revenue and margin upside in the medium-term". But not the short term?

Falling "average order value, resulting in customer order volumes growing faster than revenue. This impact will limit our ability for margin expansion in the short-term".
No recovery in margin.

Most of the above has already been priced in with previous trading updates. The 2% sales growth in Q4 has not.
The p/e was better than many shares and could be justified by the growth prospects. With margins under pressure and now growth suffering the share price has to be at risk with little margin for error.
I wonder if margin pressures in Q3 resulted in lower marketing spend, leading to lower growth.

It will be interesting to hear what Mark has to say. In the short term it appears there may need to be a choice between margins and growth.

I'm not currently holding MRK but will be watching closely for a re-entry point

[debsdowner] 16/4/2024 10:59

Growth seems to have fizled out in last quarter hence overvalued on pe ratio.

bspgamer hyou are probably right, with a caveat I don't know how tight the shares are held.

Outlook will get tougher still with unemployment rising and consumer spend set to tighten up further.

White goods always been very competitive. I think managemnt trying to put a possitive spin on company since listing.

Yes they have done well but still a small company and the gients also struggling.

[bspgamer] 10/1/2024 23:01

There is no way this is a 70 million market cap business, 40 at best this will drop much more yet!!

[debsdowner] 10/1/2024 17:01

SKY business:

Said like some other retailers Black Friday too promotional hence lower margins.

[debsdowner] 10/1/2024 11:46

Could be a value trap?

However you have a good take on most retailers darrin and I havent followed for long so don't take my view on this just watching.

[darrin1471] 10/1/2024 10:18

"revenue growth of 17.8%" in Q3-24 (October to December)is not the problem.
Its the gross margins in H1 and now in the golden quarter of Q3 which has kicked the share price.
This was initially a value/growth share for me. I reduced as the price rose and it became just a growth share. Its very much a value/growth share again for me at the current price. All time low is about 56p, so we may test that level again.

[debsdowner] 10/1/2024 09:37

Shock expected fall in profits, risk has increased hence fall of 25% in share price.

There is certainly going to be less discretionary spend and more retailers will find it difficult to make headway on profits.

White goods always risky.

[johndoe23] 10/1/2024 09:34

Can see this falling further

[pugugly] 10/1/2024 09:14

Macro economic forecasts against the company (imo) - Less discretionary income likely. Also if offering free delivery but not up front about only limited to orders of £1,000 or above possible breach of Advertising Standards Authority (CAP rules)

[eigthwonder] 10/1/2024 08:31

In the market for a new freezer I thought I would give them a shot, helped by the competitive price and promise of “free delivery “. But when I came to look at the basket they had added in all the unnecessary extras, which I had to untick and I was still left with a “shipping charge”. Turns out free delivery only for £1,000 orders, so they were no better than the competitors. The use of default extras and disingenuous use of “free delivery “ all felt a bit yesteryear and I took my business elsewhere

[darrin1471] 10/1/2024 07:40

"our gross product margin did not increase to the levels we expected, and despite proactive action on other controllable costs, the impact of this in the peak trading period has had a material impact on our full year profit guidance."
"As a result, we now expect our full year revenue to be in the range of GBP115-118m with EBITDA in the range of GBP5-6m"

[darrin1471] 28/12/2023 10:52

"Defra explained online sellers and in-store retailers would have to collect any broken or rejected large electrical goods while delivering replacement goods from 2026."



Marks already collect for a fee.

[edmonda] 22/11/2023 15:07

Video recording now available - Investor Presentation with Q&A (Interim Results)

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:

[edmonda] 16/11/2023 07:56

"Market share gains and efficiency drive cash flow"

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:

[darrin1471] 23/10/2023 19:48

Welcome aboard tiger.

There is not much history to go on but margins do appear to be squeezed in H1. Twelve months ago MRK said H2 margins would be improved by "operating leverage during the peak trading period" and they did. This year they said "pressure to ease over H2 as we benefit from improved operating leverage during the peak trading period"

Recent price fall may offer a buying opportunity but uptrend has been broken by the fall bellow the 50/100/200ma

[thorpematt] 16/10/2023 12:44

ST,
It is due to the brokers change in forecasts. It is not that the results are bad per se. It is simply that the market was forecasting one thing and the reality is lower than expected.

Both ED and Cavendish have reduced forecasts to name 2 I have access to. Cavendish have reduced from buy to hold also.

The reductions are not in the headline revenue forecasts, but in the operating margins. This is largely due to incrmental wage increases for existing staff and investment into installations. But also there was a discrepency between order growth and actual revenue.

All of this means that the diluted EPS is now a bit lower than it was forecast to be.

So the longer term story is intact but the short to mid term profitablity a little less rosy. Patience is required here. I am still wathing from the sidleine because this sector in a this economic climate is going to be under pressure for a little while longer (I think).

[silver tortoise] 16/10/2023 08:21

Just don't get it good results and the share price has been dropping?

[castleford tiger] 14/10/2023 17:46

the ut trade was a buy as it was my first in this company.

Hoping to build a position under 100p

tiger

[kalai1] 12/10/2023 14:01

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

[edmonda] 12/10/2023 07:49

Service uplift sparks 25% sales growth - new note & audio summary here:

Marks Electrical Group’s sales revenue advanced by 24.8% in the first half of its 2024 financial year, according to a trading update released today, as the company made further market share gains in its core categories. Notably strong advances by category included +71% for televisions, +74% for washer-dryers and +36% for American fridge-freezers. These gains were achieved against relatively flat domestic markets for both Major Domestic Appliances (MDAs) and Consumer Electronics (CEs). An improved service offering, which now includes integrated installation services, made a notable impact: not only in a strong sales growth rate, but also a best-in-class 4.8 Trustpilot score.

Due to first half sales growth strength, we have revised upwards our sales forecast for FY2024 from £114.5m to £116.0m. However, we reduce our EBITDA forecast from £8.9m to £8.0m as well as making downward adjustments to FY2025. Margins are expected to contract as a result of order growth being faster than revenue, higher driver wages and the integrated installation service addition. Importantly, the company is not willing to make reductions in marketing spend to offset these items. Rather, it continues to invest in brand recognition with a view to sustainable growth.

Given MRK’s strong cash position and clearly articulated strategy for sustainable business expansion, we maintain our 150p fair value for the shares.

[cf456] 18/9/2023 15:55

Finally breaking out?

[sammy aftal] 08/9/2023 07:37

These guys should have a good qtr