Just turning over a few rocks to reacquaint myself with MCP's progress (or lack thereof).
In relation to the Housewares Consumables business (Multix) it:
(1) Has annual revenue of c. A$92m
(2) Is held for sale on the books at A$37.7m (note 14B of the AR)
It would appear from the narrative that this part of the business is significantly under performing in terms of margin compression. This seems plausible given that the primary sales are via a bully-boy duopoly.
In addition (from Note 11 of the AR) it would seem that these two clients (I assume Woolies and Coles) comprise of A$16.6m + A$5.5m of trade receivables for a total of A$22.1m or 45% of the total receivables of A$48.7m.
Thus a sale of this division for the carrying value would release c. A$59.8m in cash that could then either be applied to debt reduction (costing A$6.1m p.a. in ongoing interest costs) or acquire additional, higher margin brands for MCP to distribute.
The flip side though is that there will be less revenue for MCP to apportion fixed costs such as the MD's excessive salary over (2015 A$940k).
The sale of the Multix business, if it can be achieved, is a wise move considering that if MCP applied this against debt it would save A$6.1m in interest costs. I am certain, given MCP's total NPAT, that the Multix business isn't returning anywhere near this level of profitability to the company currently.
The big question, however, is why would anyone want to buy Multix for such a price given the above.
Cheers
John
MCP Price at posting:
74.5¢ Sentiment: None Disclosure: Held
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