Strong revenue growth is encouraging, but room for growth in EBIT

Fellow owners,

Welcome to the MBH Corporation half year financial results for 2022. Assuming this is not the first set of financial results you are looking at as we enter the 4th quarter of the year, you will no doubt be expecting some insightful commentary into the economically turbulent times we find ourselves in as a reason for the slowing  growth in profits. There is probably not much more that I can add to the reems already written, other than to show the results do clearly reflect a broader pattern of increased costs across the board.

Still the strong growth in revenue speaks to the enormous efforts being put in by our subsidiaries to get back to more positive times.  Speaking to the Principals within our Group - and the many companies still interested in joining MBH - it is very apparent that their success in today's environment is down to their ability to hold conflicting ideas in their heads.  ‘Things aren’t great, they could get worse, but I’ll handle it and come out stronger’.  This confidence is not by chance, it is based on knowing that they have done it many times before. The Covid pandemic..Brexit…terrorist attacks…the global financial crisis etc, and at a micro level the loss of big clients and key staff members etc.  All have been managed and the business presses on because you can only win as long as you’re still in the game.

Small businesses are pragmatic and MBH is made up of small businesses. 2022 started full of hope that we could finally spring back from the Covid pandemic and once again hit our stride of organic growth coupled with adding more fantastic businesses to the Group. Whilst demand for services was strong in the first half of the year, driving the growth in revenue, the cost of delivering those services grew significantly more than expected, hitting margins across all industries and countries within the Group. When margins are under pressure bad debt becomes even more costly. Without a couple of decent sized clients failing and defaulting, EBIT would actually have been marginally up in the first half of the year - which is notable. Although frustrating, it was again heartening to see that those in the Group who suffered from bad debt were not only quick to put in place precautions to protect themselves further, but shared those precautions across the Group so others might try and avoid the same situation..

Unlike financial traders, if we don’t like the current narrative we cannot short the future, we cannot bet against progress. The small business owner has only one option which is to double down, work harder, dig deeper and try new things until that vision starts to become a reality. It is what small business owners have always done.

MBH is unrecognisable from when we listed four years ago.

The journey may be taking longer than planned, but the path is as clear as always, both from a strategic perspective and also in other areas such as ESG. Whilst cynics may question our commitment to Environment, Societal and Governance, especially at times like this, the data is quite clear that investors are focused on sustainable businesses and, perhaps more importantly, that clients and employees alike are voting with their feet. ESG is integral to how we operate as a Group.

Somewhat understandably our pace of acquisition has slowed, but our commitment to that path is as strong as ever and we are confident that the pace will pick up again in the future. Adding great, cash generating businesses and providing an environment where they can strive for better things is the core of what we do.

As every small business owner knows, opportunities sit on the other side of challenges. As inflation bites, competition will fail, strong talent in the market will become available and opportunities to acquire more great businesses will present themselves. What does remain the same is the commitment of each Principal in every business to continue delivering great service to their client, a great workplace for their teams and the best possible returns to our shareholders.

Finally, it should be noted that the Board is currently receiving advice around a share buyback to take advantage of the current market conditions. More information will be released as that strategy is finalised.

On a personal note, and with the blessing of the board, I want to thank you for your continued support despite what has been a challenging 3 years and I want to extend my sincere gratitude to all the Principals and their teams for their enormous efforts. As a Group we will continue to make every effort to ‘level the playing field’ for small businesses and allow our owners to benefit from that growth.

GBPFinancial Performance

The post Covid pandemic recovery in the first half of 2022 was encouraging with all verticals within MBH recording increases in revenue. The Group’s total revenue increased by GBP23m or 47% and gross profit also increased by GBP4m or 34% from 1H 2021. However the cost of doing business increased significantly in 2022 due to inflation in supply chain and labour costs which eroded the additional gross profit generated for 1H 2022.

Click to learn about how the Principals reflect on joining MBH.

MBH Corporation’s approach to ESG is that it underpins everything that we do as an organisation. To put that into context it is important to understand where the businesses in the Group originally came from and the drivers for the business owners. Fundamentally they are all about people and what they do is driven by wanting to make improvements for people, the environment and the community. For customers that could be developing a space at a football ground where the local community come together on a weekend, educating someone who has been long term unemployed so they can get a job, or supporting people to buy their first property for their long term security or providing a taxi to get an elderly person to the shops every week. For employees it is creating jobs, paying a decent wage to keep them out of poverty, investing in their personal development so they can progress in a career or supporting them with their health and wellbeing. The bold founders who made that initial decision to start their own business did so with people at the centre of their vision for their businesses.

ES & G are not exclusive from one another and they all link together. For example, people in areas with higher pollution levels will be more negatively impacted with regards to their health, when you add poverty and inequalities that exist in society and communities, the more vulnerable suffer the most. Clearly there is an ethical consequence to that, however there is also an economic impact as social mobility slows, creativity is stemmed and opportunities are missed. This is the reason ESG is at the very centre of our strategy, and why leaders in the Group govern and lead to ensure we recognise the power and importance of our contribution to be the drivers of positive change through what we do every day.

There is no doubt that ESG for all companies is a challenge, however entrepreneurs are problem solvers and challenges frustrate, excite and drive us and this agenda is no different. To have a positive impact though we need to be honest, transparent and creative. We need to succeed and in some instances fail so we can learn, share and come up with new innovative ideas - the power of our collaboration, our culture and our ethos.

“Bringing entrepreneurial minds together for people,

our planet and prosperity”