MBL Group Plc :MUBL-GB: Earnings Analysis: For the six months ended March 31, 2017 : September 12, 2017

MBL Group Plc reports financial results for the half-year ended March 31, 2017.

Highlights

  • Summary numbers: Revenues of GBP 8.42 million, Net Earnings of GBP 0.09 million.
  • Gross margins narrowed from 24.38% to 22.47% compared to the same period last year, operating (EBITDA) margins now 3.58% from 1.37%.
  • Change in operating cash flow of 28.57% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • One-time items weakened operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-09-30 2016-03-31 2015-09-30 2015-03-31
Relevant Numbers (Semi-Annual)
Revenues 8.42 7.54 8.11 6.65 7.12
Revenue Growth (YOY) 3.72 13.3 13.93 13.7 12.25
Earnings 0.09 -0.25 0.12 -0.04 -0.5
Earnings Growth (YOY) -20.51 -497.62 123.59 88.89 6.77
Net Margin 1.11 -3.33 1.44 -0.63 -6.97
EPS 0.01 -0.02 0.01 -0 -0.03
Return on Equity 3.49 -9.14 4.16 -1.51 -16.36
Return on Assets 4.19 -11 5.11 -1.9 -20.7

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, MUBL-GB‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if MUBL-GB‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 11.62% and earnings by 137.05% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 24.38% to 22.47%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 1.37% to 3.58%. For comparison purposes, gross margins were 25.26% and EBITDA margins were 3.44% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MUBL-GB‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 97.51 days from 106.81 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MUBL-GB‘s year-on-year change in operating cash flow of 28.57% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The expansion in operating (EBIT) margins from 0.81% to 3.16% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from 0.84% to 0.40%.

EBIT Margin History
PreTax Margin History

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Company Profile

MBL Group Plc is a distributor of home entertainment products. The company operates through two segments: Home Entertainment and Garden & Leisure. The Home Entertainment segment engages in the sale of home entertainment products to specialist independent and Internet retailers. The Garden & Leisure division trades direct to consumer comprises the two brands Garden Bird Supplies and Garden Centre Online. MBL Group was founded in December 1995 and is headquartered in Preston, the United Kingdom.

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