Marks Electrical Share Discussion Threads

[brummy_git] 11/10/2022 07:31

Marks Electrical continues to knock the ball out the park wrt H1'23 trading. Posting LFL revenues up an impressive 15.1% to £43.1m, & ending Sept'22 with a hefty net cash pile of £7.7m (or 7.3p/share).

Find out all the news & commentary here.

www.linkedin.com/posts/paul-hill-a5994116_mrk-mrk-activity-6985482615898185728-3KUI?utm_source=share&utm_medium=member_desktop

[darrin1471] 21/8/2022 22:45

80% seems high but its a figure MRK use regularly

UK MDA market is £5.2b
There were an estimated 28.1 million households in the UK in 2021.
Social demographic AB are 22% of the population and C1 are 31%
ABC1 are 53% but as a guess probably buy 70% MDA by value
Guess most ABC1 would have 5 MDAs. 10 year lifespan. One distressed purchases every 2 years. 7 million MDA's for ABC1 per year. So 80% does not sound unreasonable.

Currys 33%, AO 15%, John Lewis 15%, Argos 13%, Appliance Direct 2%.

[debsdowner] 21/8/2022 19:24

darrin,


Thanks for all your hard work. Just one further point and I am not trying to put any negativity here

"80% of Marks Electrical revenue is from distressed purchases" i.e. broken and needs replacing."

White goods particularly washers appear to be at different ends of the pole, i.e Hoover, Electrolux and the like have a short life span compared to LG and a few others where you can get a 5 year guarantee.

Some people take service agreements but there will be less of this with a cost of living crisis.

However the European commission has ordered manufacturers to ensure manufacturers ensure products last longer in future and make it easier to mend.

I am not saying this will make a lot of difference short term however.

MARKS are up againat Currys and John Lewis and AO who probably take the biggest percentage share but not sure of that to be honest. Other retailers such as ARGOS and some of the Supermarkets sell white goods.

Having said all that MARKS electrical can beat on price with having no bricks and mortar stores.

Interesting.

[darrin1471] 21/8/2022 18:32

MRK business model is ultra low cost. A single warehouse and loads of vans which are written off over 3 years. Turnover can treble with little additional cap ex. They were talking about adding to the mezzanine floor.

[darrin1471] 21/8/2022 18:22

Mark Smithson owned 100% of Marks. He paid for the warehouse out of his own profits. The cost of the warehouse held back his cash flow and expansion. The warehouse was taken out of Marks before the IPO. The lease length was disclosed in the IPO and there are more details in the FY22 annual report. MRK have indicated they will need a larger warehouse once sales reach £250m and they have already started talks about a site.
I thought it needed mentioning as I had not seen it mentioned before on this thread.

[debsdowner] 21/8/2022 14:47

darrin, thanks for rundown. A few negatives Founder owns warehouse and leases to company and illiquid shares which is normal for many a company but will be worse when most of the stock tightly held by founder and a few other funds. Reminds me of Panther Holdings with a horrendous spread so the share price has to increase in double digits to make up for spread. Watching. One thing to watch on a company in an exansion phase,overheads go up but when market suddenly takes a downturn it can hit company when overheads need reducing. Gaining market share in a recession is harder than you think. In a recession your competitirs have to reduce costs and it can be savage, they may be better placed than some other retailers but there are other online retaillers oiut to take market share as well. White goods has always been very competitive.

It is an interesting stock non the less.

[darrin1471] 21/8/2022 14:13

Currently do not hold MRK. Hoping for lower entry point.

[darrin1471] 21/8/2022 14:05

I took a look at MRK last week. I read this thread, investor information and the online interviews with Mark and Josh.
My thoughts, are a little jumbled

Mark Smithson is an entrepreneur, a salesman and somebody who cares about his business. Not necessary somebody who I would want running a more complicated business.
In FY22 MRK had 1.6% market share of a £5.3 billion major domestic appliances market (MDA)and they are targeting a 10% market share. John Lewis have a 15% market share. MRK are starting to sell into the £3b UK consumer electronics market (CE) and currently have a 0.21% market share.
After rapid growth
2020 £31m
2021 £56m
2022 £80m
growth is forecast to rise at more sustainable levels
2023 £94m
2024 £112m
MRK are targeting £500m. Current warehouse site capacity is £250m
MRK are not targeting the whole of the MDA market. MRK target the ABC1 customer with higher average selling prices and fewer after sales issues. Premium brands. Top 5 by sales are Bosch, Samsung, Rangemaster, Neff & LG. MRK do not sell own brands imported direct from China
MRK are price competitive offering next day delivery from Newcastle to Exeter with a new biweekly delivery to Cornwall, Cumbria, Glasgow and Edinburgh.
MRK USP is their next day delivery using their own vans from a single warehouse in Leicestershire. Long term expansion will not include multiple warehouse locations.
Customer service is very important to Mark Smithson and results in a 4.8 Trustpilot score. A score he is very proud of and which MRK follows up on every negative review where possible.
Current adjusted EBITDA of 9% is maintainable.
FY22 adjusted eps 5.01p. Dividend 0.67p. "with the 0.67p being a typical two-third share of the annualised amount"
"it is the Board’s intention to pursue a progressive dividend policy and target a pay-out ratio, being the annual total dividend per share divided by earnings per share for the year, of up to 20 per cent."
IPO placed 27.3m at £1.10. Mark Smithson retains 73.6%. Octopus bought 3.9% and Canaccord took 5.24% leaving 18m in circulation which may result in an illiquid share and volatile movements if somebody wants to add/sell stock.
Mark Smithson retains ownership of warehouse and it is leased to MRK for £600k pa for 52 months ending 30/09/2024
Mkt cap at IPO was £115m and is currently £71m
IPO was well timed and valued as a company with good growth potential. 20% annual growth would be £250m year 5 and £500m year 9
Retail has been trashed ytd and MRK has followed the market. Group’s sales for the recent trading update. Revenue "first four months up 13.7% compared with the online MDA and CE markets being down over 20% in the first months of our FY23."
More of the growth came from volume increases than price increases.
"80% of Marks Electrical revenue is from distressed purchases" i.e. broken and needs replacing.
Stock shortages eased from April/May. Peak prices reached. Offers now being given as manufacturers need to clear.
Increased fuel costs not material. Other additional costs include NI, PLC costs and normal business rates environment.
"lean keen business model"
"not growth at all costs"
Marketing budget is 5% of sales to improve sales and brand awareness. Suppliers for the first time are looking to share marketing costs with MRK. MRK brand awareness is still only 7%.
Future costs of new larger semi automated warehouse could be a drain on cash.
Competitor AO could improve customer service and delivery times.
Retail stores can not compete with online costs.
MRK sees inhouse IT as a competitive advantage but does this increase risk to cyber security.
Part of buying group.

[nov31] 11/8/2022 10:03

Stonking results I have to say. I’m in with my first purchase - tuck them away for a couple of years and come back when they’re £1.10 plus

[brummy_git] 11/8/2022 07:20

Best in class trading (LFL sales up +13.7% vs market down -20%) update from
Marks Electrical this morning - knocking the socks off the competition.

All the commentary, forecasts & details here.

www.linkedin.com/posts/paul-hill-a5994116_mrk-mrk-mrk-activity-6963375981004783616-kDrl?utm_source=linkedin_share&utm_medium=member_desktop_web

[edmonda] 11/8/2022 07:13

Marks Electrical Group - Market share gains drive revenue growth (new note published today following Trading Update ahead of this morning's AGM)

Significant market share gains in a particularly tough market environment were responsible for Marks Electrical recording a strong 13.7% sales revenue growth rate in the first four months of its FY2023 financial year. With a sustained and impressive 4.8 Trustpilot score, and flat inventory levels, the company appears well positioned to make further sales gains and convert revenue and profits into increased free cash flow.

The current market share position implies massive headroom for growth, driven by a superior premium branded product range and service offering. Financially, a focus on costs and working capital should ensure that the company has adequate resources to fund future sales revenue expansion. Valuation does not reflect the clarity of Marks Electrical’s growth outlook, in our view. We continue to argue that the company’s well defined growth strategy - and ability to implement it - is superior to its peer group, much of which is not profitable. We reiterate our 150p / share fair value.

Link to full note here:

[hybrasil] 29/6/2022 09:09

For what is a box shifting business it does look highly valued at todays price.
I was drawn to have a look at it by the cfo's purchase announced today.
CFO's tend to put in hard earned cash (and they are normally accountants!)

I think one for the watch list.

[brummy_git] 08/6/2022 12:04

When it comes to quality, Marks Electrical has this in spades.

Here CEO Mark Smithson & CFO Josh Egan take me through today's record results & positive outlook.

www.linkedin.com/posts/paul-hill-a5994116_qa-with-marks-electrical-ceo-mark-smithson-activity-6940256351918985217-wqxn?utm_source=linkedin_share&utm_medium=member_desktop_web

[edmonda] 08/6/2022 09:35

#MRK A better than expected EPS outcome, strong cash conversion and an unusually high return on capital were pleasing financial features of Marks Electrical Group’s (MRK) FY2022 results statement, published today. The company also reports an upbeat start to FY2023 while articulating a clear path to sustainable growth through its customer proposition, increasing brand awareness, higher operational capacity and favourable financial dynamics. Expecting further meaningful progress this year, we reiterate our 150p / share fair value.

Marks Electrical’s FY2022 results follow a trading statement released on 11 April in which the company reported 44% net sales revenue growth and guided towards 9.0% EBITDA margins. Today’s announcement incorporates a pleasing 5.01p adjusted EPS outcome, a 57% ROCE and 119% cash conversion, as well as a 0.67p final dividend. End-year net cash was £3.9m.

The group’s invigorated customer proposition implies an ability to deliver both to a wider UK geographic footprint while maintaining service levels. Moreover, the company expects to broaden its product offering both within major domestic appliances (MDAs) and consumer electronics (CE).

Given the company’s still relatively low 1.6% share of a sizable market (up from 1.2% in FY2021), there should be significant revenue gains available from its improved brand awareness programme. Currently, recognition of MRK is estimated to be 7% in England. Encouragingly, progress was made in FY2022 with an increase in London (the UK’s largest next day delivery market) from 3% to 4%.

Expansion of operational capacity at the company’s single headquarters site in Leicester gives headroom to match increased demand. MRK continues to add to both warehouse capacity and increase the size of its branded van delivery fleet while making important additions to hiring. A strong people culture remains an important component of the growth story. Furthermore, the company’s ability to finance growth should benefit from being a debt-free business with strong cash conversion.

Valuation does not reflect the clarity of MRK’s growth outlook in our view. In particular, we argue that the company’s well defined growth strategy - and ability to implement it - is superior to its peer group: much of which is not profitable. At our 150p fair value level, implied valuation ratings are an FY2023 EV/sales ratio of 1.6x and 18.6x EV/EBITDA.

[brummy_git] 08/6/2022 07:28

Terrific results & positive guidance from Marks Electrical today.

Posting ad FY22 EPS & EBITDA of 5p & £7.2m respectively (9% margin) on sales up 44% LFL to £80.5m (vs tough comparatives) - alongside 119% cash conversion & Mar’22 net cash of £3.9m.

www.linkedin.com/posts/paul-hill-a5994116_mrk-mrk-activity-6940185270159859712-xQBD?utm_source=linkedin_share&utm_medium=member_desktop_web

[drattuts] 03/5/2022 13:49

Operating profit more important than gross. For the last reported full fiscal year that was 12.1% for MRK - not bad at all. Only 4.8% for ASC, for example.

[74tom] 03/5/2022 10:01

This looks like a success story which is always nice to see. I'd have no interest in buying shares at the current valuation though, particularly with such slim gross margins (19.2% last half year).

Equity developments think it should be trading at 150p which is nearly 19x EV/EBITDA and 28x PE, that makes no sense for a company that seems to be aggressively competing on price.

They use the following companies as comps in their 'analysis' but omit their gross margins...

Asos - Gross Margin 43.1%
B&M - Gross Margin 45.8%
Boohoo - Gross Margin 54.6%
Dunelm - Gross Margin 52.8%
Next - Gross Margin 58.8%
Ocado - Gross Margin 35.3%
Pets at home - Gross Margin 48.7%

The average P/E of the above is 21.3x, however I'd argue that none of them are relevant given the discrepancy in GM.

The one company that I would say has more relevance is Gear 4 Music, which had gross margins of 28% in their last trading update. It's currently trading at a 2022 PE of ~12.

Put Marks Electrical on the same PE (worse gross margins but arguably a slightly stronger financial position) and you'd have a share price of 56p. That would be 'fair value' in my opinion.

Let's see how things unfold over the coming months / years, I think this was another IPO that timed their listing perfectly, just prior to the cost of living crisis kicking off.

[brummy_git] 01/5/2022 09:23

The Sunday Times rates Marks Electrical Group plc as a BUY


hxxps://www.thetimes.co.uk/article/stick-your-head-in-the-oven-and-buy-marks-electrical-group-xk85tcr3d

[tole] 23/4/2022 12:42

https://www.equitydevelopment.co.uk/hubfs/Research/Marks%20Electrical/Marks%20Electrical%20Group%20%20initiation%20note%2016th%20March%202022.pdfMarks Electrical Group (Listing AIM, Market Cap £102m)Sales growth 44% in FY22 with ongoing momentum Marks Electrical released a pre-close trading update for twelve months to 31 March 2022, which confirmed our expectations of 44% sales growth and 9.0% EBITDA margins. Moreover, the company's strong end to the year – i.e. over 25% year on year growth in March 2022 - augurs well for FY2023, when we expect sales to expand by a further 20%. The strong £3.9m net cash position, sustained investment in marketing, and expansion to the UK delivery footprint all combine to support an optimistic view going into the new financial year. Operational highlights in FY2022 included strong market share gains in Major Domestic Appliances (MDAs) and Televisions, added focus on brand awareness initiatives, an increase in the number of delivery vehicles and warehouse efficiency improvements. Encouragingly, the company's Trustpilot rating - an objective measure of customer service - improved to 4.8. Looking ahead to FY2023, MRK confirms that trading momentum has continued during the start of April, which sets the company up well to match its targets for the new financial year. Other progress points which we infer are expansion into the southern areas of Scotland (including Edinburgh and Glasgow) as well as a broader English distribution footprint. Today's statement confirms that prospects remain exciting. The scalable nature of the business should deliver increased operating margins even after brand promotion costs. Plus, there is scope to sustain growth from relatively low inventory levels, which benefits free cash flow. At our 150p fair value level the implied ratings are an FY2023 EV/sales ratio of 1.6x and 18.7x EV/EBITDA.

[km18] 12/4/2022 15:05

Marks Electrical Group plc issued a pre-close trading update for the 12 months ended 31st March 2022 yesterday. Business is going well, the Group posted record full year revenue with growth of 44% up to £80.5m (2021: £56.0m). Operational leverage continued during the period, driving margin expansion in the second half, with the Group expected to achieve its full year Adjusted EBITDA margin target of 9.0% in line with market expectations. The business is very profitable and growing, valuation is average for the Computers, Phones and Household Electronics market. The share listed in November 2021 and has been in a shallow correction for most of the time since and therefore lacks positive momentum. There is no rush to buy and any further share price falls would start to make valuation a little more helpful. Monitor for now...

...from WealthOracleAM

[brummy_git] 11/4/2022 08:40

Investor update video with CEO Mark Smithson here

www.voxmarkets.co.uk/articles/q-a-with-marks-electrical-ceo-mark-smithson-125aa93