Financial Report 2020

Initiatives and synergies like these rarely happen effectively when driven from the top down, but by creating the right environment and incentives for collaboration we expect to see many more initiatives over the coming years. Indeed every single company we add to the Group offers further opportunities to cross sell, cross promote, share knowledge, best practice and more.

But what last year really taught us is the power of agglomeration. 

Clients have more confidence in awarding contracts to companies that exist in a PLC. And yet each business in the Group was able to react in realtime on the ground to situations that differed both by sector, country and even by city. The autonomy that we offer the companies allowed the Principals to make the decisions that have been so successful in keeping these companies going through multiple downturns and in some cases generations without having to ‘run it past HQ’ or worry that it could negatively impact another subsidiary. Yet for the first time ever these Principals also had a sounding board of peers that could also share in real time what was and wasn’t working in different situations. I have never previously seen an environment like that, where businesses that might previously have been considered competitors were so willing to share ideas and step up to help others in the Group. It was truly inspiring to be around.

Acquisitions

Whilst 2020 saw our first company exit from the Group (APEV was strategically unwound early in the year to let it deal with Covid related issues with no downside for MBH shareholders), we were also able to bring on 12 more fantastic companies to the Group. New borders were broached, new industries were explored and the speed with which the companies have bedded down and begun to enjoy the benefits of being in the Group has been great to see.

Debt

Most of the acquisitions of 2020 were financed by our own Bond. We will touch on our views on debt within the company later in this micro-site but whilst our debt ratio has gone up this year, the Board is still very comfortable that it is within manageable levels and that the issuance of the Bond is directly correlated with an increase in EBIT allowing us to ‘grow into’ the our debt.

‘Virtual’ Investor Relations

With a fairly global investor base we have long focused on putting as much content online as possible rather than excluding people through physical only events. Our AGM for example has always been held virtually.

In addition, we are always looking to make it easier for our investors to understand more about MBH, and to this end we have moved the annual report to this purely online format. These changes are work in progress, so please do let us have your feedback.

Whilst we cover multiple areas, we have tied it to the 3 shareholder value drivers we are committed to. Accretive Acquisitions, Organic Growth and Group Synergies.

At the end of this financial year, we now have Group companies with headquarters in Asia, Europe, North America and Oceania, across different verticals and specialty areas. With this extensive geographical and industry coverage, Group companies were able to achieve even greater synergies over the year, working closely together when necessary to support their growth and market positions. As more profitable organisations join the Group, these synergies will no doubt continue to flourish.



All of the organisations within MBH today began with an individual or individuals who had entrepreneurial spirit and the desire to establish their own organisations in the way that they wanted to see them operate. Working with entrepreneurs is always rewarding…they see the glass ‘half full’, never ‘half empty’. They build their businesses with passion. And when they get a set-back, they quickly pick themselves up, learn from it and quickly move on. The resilience and positiveness of the entrepreneurs in our Group is something that I find personally encouraging and rewarding, with these traits magnifying themselves each time a new company becomes part of MBH.

On behalf of the MBH Board of Directors I would like to thank the Group leadership team and all Group companies for their commitment and dedication during the last financial period – and I look forward to the next twelve months with eager anticipation.

As we look back on 2020 it’s clear that it was an extraordinary year of disruption and uncertainty for many of us. It stress tested a number of businesses and industries throughout the world and the risks in the short term still exist. 

For MBH we were not immune to this situation and trading conditions were difficult. Whilst our main focus and attention was supporting our customers and colleagues through this period, we also delivered on the key strategic financial objectives we laid out for the Group which included the following:

• Diversification of our industry verticals;
• Collaboration between our portfolio companies; and
• Rebalancing our debt to equity ratio.

I am pleased that we were able to achieve the above strategic initiatives whilst navigating through the pandemic. The financial results for 2020 on the surface did not showcase the true potential of our businesses, however we believe that we have laid the foundations required to enable us to take advantage of when the economy and world recovers and deliver returns to our shareholders.

Key financial highlights:

Financial Performance

• Revenue for 2020 was £60.4m (up £9.6m or 19% from last year).  All verticals recorded revenue growth in 2020 (largely due to acquisitions) except for the construction vertical which was down £6.3m or 15% from last year.
• EBIT for 2020 was £1.8m (down £2.3m or 57% from last year) which was mainly due to the construction vertical which was down £4.6m or 137% from last year.

Diversification

• 12 acquisitions for 2020 which allowed us to diversify our portfolio.  Diversification will be a focus for growth and risk management purposes.
• 6 verticals in 2020 compared to 2 in 2019
• 12 acquisitions in 2020 generated a total of £43.0m in unaudited revenue in the financial year prior to joining MBH[1]
  

Balance Sheet

• Underlying net assets (excluding acquisition accounting transactions) increased by £4.5m to £10.2m.
• Cash on hand increased by £1.7m to £5.8m
• Current ratio of 1.37.

• Strategically increased our debt-to-equity ratio by launching the MBH Bond Programme to rebalance this particular measure.  This bond is specifically designed for acquisitions and issued to shareholders as consideration for our acquisitions.  The general terms on the bonds are 5-year maturity and a coupon rate of up to 5% per annum.  There are no financial covenants imposed by the bond holders.  Total bonds on issue as at 31 December 2020 is £23.3m.  Our debt-to-equity ratio now sits at 0.89 which is comparable to our peers in the industry.
• Total debt as at 31 December 2020 is £34.6m of which £23.3m relates to the MBH Bond Programme.
  

Summary

2019 was the year where we demonstrated our ability to grow in a listed environment.  In 2020, we demonstrated our resilience and continued our focus to implement key strategic initiatives.  Those initiatives have laid the foundations and we now turn our focus on 2021 to emerge from the pandemic and continue to deliver the returns for our shareholders.

I would like to thank our customers, shareholders, and key advisors for their support to MBH.

Dividend

Despite the challenges of 2020, MBH Corporation ended the year in profit and as with last year this gives the Board several options with regards dividend payments.  Since we do not send money back to our subsidiaries and we do not use cash for acquisitions, the 3 options considered by the Board were paying down debt, buying back shares or, again, issuing a dividend.

Whilst there are strong arguments for all 3, we have decided to continue our policy of issuing dividends to shareholders, allowing our fellow owners of MBH to be able to profit from that ownership.

Whilst we could have issued a higher dividend last year, given the Covid-19 uncertainty, we decided it was prudent to adopt a dividend of 0.005 Euro per share.  With the benefit of hindsight that looks like it was the correct decision.  With the reduced profit after tax of 2020 we have decided to maintain the dividend at 0.005 Euro per share again.  As in the previous year we will offer all shareholders the option of taking shares or cash.  Every Principal in the Group, representing a significant majority of shareholders, has already committed to taking stock instead of cash showing their commitment to, and belief in, the future of MBH.

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

2020 was anything but business as usual and MBH Group companies have had to adapt at pace to meet the extraordinary challenges created by the pandemic. 

There are  a significant number of examples of MBH Group companies changing their entire operating models and ways of working, almost overnight to make the best of an unprecedented situation. Following are just three examples of the agility and proactivity that sit at the heart of our 25 companies.

Bringing entrepreneurial minds together for people, our planet and prosperity.

MBH Corporation’s ESG strategy

When it comes to ESG, the MBH focus is on impact. We deem compliance as the minimum requirement and always stretch to go beyond compliance to support effective, impactful action.

We fully recognise as a group of business leaders, the value and responsibility we have with regards to our people and to our planet. This is driven by the culture of the group to ensure as leaders we use our position for a positive impact on the world and the recognition of the benefits for our businesses.

Our strategy has been developed by our people – they are ultimately the members not just of our businesses in the Group, but the communities in which we serve and operate. We align ourselves with the UN Sustainable Development Goals [UNSDG] and we actively measure impact to ensure that whatever we do has a purpose and is tangible.

MBH has adopted the following UNSDG’s and all companies in our group demonstrate a commitment to supporting these goals through the work that they undertake.

• Global Goal 8 - Decent Work and Economic Growth
• Global Goal 10 - Reduced Inequalities
• Global Goal 13 - Climate Action

ESG Strategy at Subsidiary Level

The benefit of our model means that in the true spirit of agglomeration our impact can be diverse and widespread. Therefore, our subsidiaries drive their own individual ESG strategies depending upon what matters to them, their people, customers, stakeholders, communities and suppliers. For example in practice, if Quality Education (UNSDG 4) is the key UNSDG for a company in the education vertical they continue to use this as their driver and include MBH’s over-arching goals in their work through engaging a diverse workforce, creating jobs and reducing energy consumption through the delivery of quality education.

MBH’s Committee and 5 stage Roadmap

The MBH ESG Committee consists of members from companies across the Group who are responsible for driving ESG through our businesses. Alongside informing and driving MBH’s strategy, they meet regularly to share practice, knowledge and learnings across the businesses collaboratively working within and across verticals. ESG is part of the due diligence process for companies coming into the Group and the committee’s ESG ambassadors work with new companies to support them on their ESG journey regardless of their starting point.

Our Impact on Developing Nations

During 2020, MBH Corporation has continued its partnership with B1G1.com - turning our business transactions into positive impacts around the world. At parent company level during 2020, we celebrated achieving our target of 100k impacts (actual achievement of 112k impacts) and a number of our subsidiaries also support B1G1 bringing the total number of impacts to well over 200k.

“Bringing entrepreneurial minds together for people,

our planet and prosperity”