These results get worse and worse. HMLH delivered strong cash flow, acquisitions, and revenue growth, but negligible profit growth. Price 31p bid. Market Cap £14.2m using 31p and 45.8m shares in issue

Margins. Gross margin rose in the 2012-15 period from about 15.5% to 16.7% at the peak in 1H 2015. Since then they have declined in nearly every period, falling to 11.3% in the period just reported. This is a 34% fall in gross margin. 11.3% gross margin is the lowest it has been in ten years.

Operating margin rose from c5% in 2012 to a peak of 7.6% in 1H 2014. It has fallen dramatically since then and is now at 4.4%, the lowest operating margin for almost ten years. This shows a near halving ( -43%) of operating margin since 2014.

Profit. Though revenue has grown 74% since 1H 2015 ( £15.49m vs £8.92m) gross profit has grown by just 26% over five years (£1.75m vs £1.39m). At the operating level, over the same period, operating profit has grown by just 11% ( £0.688m vs £0.616m).

In the last five years, adding £6.6m of revenue, operating profit has risen by just £72,000 !!!

Acquisitions. Again, using the same period, 1H 2015 vs these results, HMLH has made nineteen announced acquisitions ( listed, as even I am surprised how many there have been: AMP ( gross announced cost £261,000); Qualitas £181k; Clearwater £86k; Castle Wildish £504k; MLP £715k; Coupe £325k; Homes &Watson £364k; Arkleygate £256k; Crown £291k; Goodacre £474k; Gordon £1.7m; Faraday £3.15m; CRC £90k; Dauntons £669k; RBMS £794k; Grillo £62k; FBA £695k; Prima ; Thornes £470k). It was worth listing those, to show how active they have been. Total, gross, consideration paid since 1H 2015 results is £10.06m. Yes, over £10m.

And, what has this added to operating profit ? £72,000. That means, at the margin, c1.5% of additional revenue has been converted to operating profit ( annualising the rise to £150,000).
Economies of scale ? absolutely not.

Staff, margins and profit. In the last annual report there are listed 549 staff. With three acquisitions since then, we could guess at 600 staff now ( I suspect a little higher than that). They have just reported ( and were “pleased to report”) operating profit of £688,000. This is only just over £1000 per employee. How can any company make money…

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