Cleaning out

mic 11 October 2019 Update
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mic

Cleaning out

Financials

Scale research report - Update

11 October 2019

Price

€0.20

Market cap

€3m

Share price graph

Share details

Code

M3BG

Listing

Deutsche Börse Scale

Shares in issue

15.3m

Equity ratio at June 2019

82%

Business description

mic is a diversified technology investment company focused on large-scale data handling, automated optical inspection systems for the automotive industry and acoustic and strain monitoring over fibre-optic networks. It holds majority stakes in companies through intermediate holding companies.

Bull

Prospects for new technology businesses.

Radical strategic refocus largely completed.

Resolution of historic accounting issues.

Bear

Weak finances and unproven business record.

Execution risk of acquisition strategy.

Risk of dilution from refinancing.

Analyst

Richard Finch

+44 (0)20 3077 5700

H119 has seen a respite from the drastic write-downs of financial assets of recent years (€0.3m against, for example, €3.9m in H218). Even so, mic remained mildly loss-making at the net level in the period, reducing equity at June 2019 to just €2.9m (€0.19 NAV per share). This is below 50% of total share capital, hence a statutory requirement to call a general meeting. Full 2018 results (net loss €4.9m) have also only just been reported, as correction of the company’s accounts for 2015 to 2017 was not completed until May this year. The main impact was on 2015 (net loss €35.7m vs net profit €1.4m, as originally reported), with consequential changes thereafter.

H119 – relative calm

As previously, interpretation of half-year performance is limited by scant management comment and no disclosure of individual business results. However, summary figures (see page 2) show modest operating returns after minor write-downs (€0.3m) and predictably stretched finances (€0.04 cash but no bank debt).

Tough going in 2018

Newly announced full-year results show both a step change in net loss (€4.9m against €0.6m y-o-y) and year-end equity (€3.1m) well below the benchmark of 50% of total share capital requiring the call for a general meeting to discuss the company’s situation. Write-downs of financial assets (€3.9m) and assorted receivables (€0.9m) were across the board.

Historic flaws addressed

Notwithstanding 2018 revaluations, current management’s focus has been on correcting accounts for 2015 to 2017, which are reported to have given an inaccurate picture of the net assets, financial position and operational results of the company. The bulk of the revaluation of investments and loans relates to 2015, which saw serious misjudgement of mic’s finances and ability to fund investments.

Historical financials

Year
end

Net profit
(€m)

Total equity
(€m)

EPS
(€)

NAV/share
(€)

P/E
(x)

P/NAV
(x)

12/15*

(35.7)

8.3

(3.5)

0.81

N/A

0.2

12/16*

(6.2)

7.2*

(0.6)

0.71

N/A

0.3

12/17*

(0.6)

7.7

N/M

0.52

N/A

0.4

12/18

(4.9)

3.1

(0.3)

0.20

N/A

1.0

Source: mic accounts. Note: *Restated in May 2019. **Including €5.1m from capital increase in progress at year-end.

Needs to deliver

The scale of uncertainties clouds assessment of mic’s valuation. In terms of comparing the price with the NAV, full 2018 accounts will offer only a rudimentary guide to the value of operating companies, as publication is in line with HGB and thus at written-down cost price.

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Financials

mic conducts its operations through distinct business units, each focused on a specific area of technology and application, and incorporated in discrete corporate entities: micData (large-scale data handling), Smarteag (fibre-optic infrastructure monitoring) and 4industries (industrial applications). One of these – micData – has a stock market quotation in its own right.

However, mic publishes accounts in line with German HGB solely for the parent company. While the presence of intermediate holding companies dilutes the impact of trading performance at the operating subsidiaries, general trends may be derived from the figures.

Exhibit 1: Financial summary

Year-end December (€m), HGB

2017

H118

H218

FY18

H119

Income statement

Gross profit

1.3

1.2

(1.1)

0.1

0.3

Write-downs

(1.1)

-

(3.9)

(3.9)

(0.3)

Net profit

(0.6)

N/M

(5.0)

(4.9)

(0.2)

Balance sheet

Increase in share capital

1.0

0.3

-

0.3

-

Equity

7.7*

8.0

3.1

3.1

2.9

Source: mic accounts. Note: *Including €0.1m deposits for capital increase at year end.

As can be seen in Exhibit 1, equity at June 2019 dropped to just €2.9m (€0.19 NAV per share). Equity at December 2018 fell short of 50% of total share capital, hence a statutory requirement to call a general meeting, which is scheduled for 18 December 2019.

Exhibit 2: Restatement of accounts for 2015 to 2017

Year-end December (€m), HGB

2015

2016

2017

Net profit:

Originally reported

1.4

(29.7)

0.1

Restated

(35.7)

(6.2)

(0.6)

Equity:

Originally reported

45.4

20.9

21.9

Restated

8.3

7.2

7.7

Source: mic accounts


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