Mind Gym half-year profits lagging pre-pandemic times

The brief window between the pandemic and the new belt-tightening approach of business was good for Mind Gym (MIND), the training and business transformation specialist. An improved US market drove a sales and cash profit uplift in the six months to 30 September - the latter climbing from just £700,000 a year ago to £1.9mn. 

A bright spot was a contract worth £10mn over the next two years signed with a “global energy company”. Chief executive Octavius Black framed this as a “culture change and leadership development” job with some potential additions. Perhaps a check on executive hubris in this record time for oil and gas profits. 

But now Mind Gym has warned on the US outlook, although it has held onto full-year guidance. Its key costs remain staff pay and investment into online coaching and training products - administrative expenses climbed 10 per cent to £22.7mn in the half year. 

The proportion of intangibles on the balance sheet has come up as well, after Mind Gym spent £2mn on developing new digital productions in the first half - total intangibles are up to £9.8mn from £5.2mn a year ago. 

The outlook for the company is mixed: in times of mass redundancies, executive teams may need more help both with basic workplace function and strategy, although its own profitability could fall. Liberum analyst Ciarán Donnelly forecasts both higher sales and higher capital costs over the coming years (£78mn and £10mn in 2025, respectively) , although he doesn’t see earnings per share returning to the 6.8p a share level seen in 2019. We would err on the optimistic side in terms of Mind Gym’s order book but don’t see significant growth or margin gains in its near future. Hold. 

Last IC View: Hold, 163p, 10 Dec 2019