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№ 246 14 filings · 2025-05-07 → 2026-08-21

MHA PLC

MHA
Industrial Goods and Services Share price 134p Market cap £379m Overall fit 370 /1000

Fair-priced, well-run, cash-generative professional-services roll-up — but a user of AI rather than a receiver of AI spending, and structurally limited operating leverage in a labour-heavy model, so it fails two of the three strategic pillars.

Fair value range 140p–170p Mid case · £445m
Absolute upside +17.3% vs current market cap
Conviction 3/5 confidence in fair call
Supports the call
  • Three consecutive in-line-to-beat trading updates post-IPO
  • Net cash balance sheet and 87% recurring revenue anchor the multiple
  • Clear listed peer set (Gateley, Begbies) for multiple triangulation
Limits the call
  • First statutory plc reporting year is FY26 — no full-cycle track record
  • Adjusted vs reported EBITDA gap is structural due to serial bargain-purchase gains and deemed remuneration
Methodology

EV/adjusted-EBITDA multiple with P/E cross-check

In one line · bull case

High-quality, cash-generative UK professional-services roll-up trading at ~8x EV/EBITDA with a fortress balance sheet, tailwinds from Big-Four displacement, and a proven bolt-on model backed by IPO proceeds.

In one line · biggest risk

AI is a medium-term headwind — automation of audit and tax compliance work erodes the recurring-revenue base MHA depends on, and the value from that automation flows to AI tooling vendors, not to MHA.

Drivers
AI beneficiary 22 /100
MHA spends on AI internally (Co-Pilot, ChatGPT Enterprise) to defend audit/tax productivity; value flows to Microsoft/OpenAI, and compliance work is a substitution target long-term.
Operating leverage 38 /100
People costs c.40% of revenue plus partner remuneration; EBITDA margin has been flat at 18% for three periods running, showing little scale gearing.
Earnings vs expectations 65 /100
FY25 beat consensus, H1 26 in line, FY26 revenue in line and EBITDA ahead — short but consistent pattern of meeting or exceeding.
Growth momentum 70 /100
12% revenue growth FY26 (9% organic in H1), £500m medium-term ambition credible given £251m base plus acquisition pipeline.
Moat 40 /100
Sector specialisation, Baker Tilly network membership and switching costs on incumbent audit relationships give a narrow, execution-based moat.
Earnings quality 55 /100
Cash conversion c.91% is genuinely good, but adjusted EBITDA relies heavily on excluding recurring bargain-purchase gains and deemed remuneration amortisation.
Management quality 65 /100
Long CEO tenure, disciplined M&A track record, chose to complete IPO through April 2025 tariff volatility, dividend initiated as promised.
Cyclicality 30 /100
Audit and tax compliance work is largely non-discretionary; advisory is more cyclical but only c.27% of fees. Overall defensive.
Leverage 10 /100
Net cash £24m at Mar-26, no meaningful debt, IPO added £97.8m gross proceeds — fortress balance sheet.

MHA PLC (AIM: MHA) — Research Note

Executive summary

MHA is a UK-headquartered mid-market professional services firm (audit, tax, accountancy and advisory), representing the Baker Tilly International network in the UK, Ireland and South-East Europe, with c.2,300 staff across 32 offices; it IPO'd on AIM in April 2025 raising £97.8m gross 2025-08-14 FY25. Trajectory has been strong and unbroken: revenue £154m → £224m → £251m (FY24→FY25→FY26), adjusted EBITDA c.£31m → £41m → £46m, with 87% recurring revenue and c.9% organic growth on top of a steady bolt-on M&A programme 2026-05-07 trading update; 2025-11-20 H1 26. The single most important point for valuation is that MHA is a high-quality, cash-generative professional-services compounder trading on ~8x EV/adj-EBITDA — attractive if you own it for the M&A roll-up story, but it is fundamentally a user of AI, not a beneficiary, so it does not fit the AI-receiver strategy.

Fair value estimate

  • Fair value range: 140p – 170p per share (implied market cap £402m – £488m).
  • Methodology: primary — EV/adjusted-EBITDA multiple applied to FY26 delivered adjusted EBITDA of £46m; secondary — P/E cross-check on adjusted earnings.
    • EV/EBITDA: 8.5–10.0x on £46m = EV £391–460m; add net cash £24m → mcap £415–484m → 146–169p on 286.9m shares.
    • P/E: H1 26 adjusted PBT £18.5m, H2 seasonally stronger → estimate FY26 adj PBT c.£38–40m; after 25% tax ≈ £29m PAT → adj EPS c.10p. At 14–16x → 140–162p.
    • Consistent with UK challenger-professional-services multiples (Gateley, Begbies Traynor, K3 Capital take-outs) allowing for MHA's better growth but early listed track record.
  • Mid fair value: ~155p per share / £445m market cap.
  • Vs current £407.6m mcap (143.5p): upside c.+8% — the stock is fair to modestly undervalued.

Sector context

  • Sector classification confirmed: Industrials / Industrial Goods & Services (business services).
  • Quality/growth/leverage profile is above the typical AIM-listed professional-services peer: 87% recurring revenue (unusually high), 18% adjusted EBITDA margins, net cash £24m and 91% cash conversion 2025-08-14 FY25.
  • Listed peers: Gateley plc (legal + advisory), Knights Group Holdings (legal), Begbies Traynor (restructuring/tax/advisory), FRP Advisory (restructuring/corp finance). MHA is closest to Gateley/Begbies as an audit-and-advisory challenger to the Big Four.

Investment thesis

  1. Structural tailwind + Big-Four displacement. UK audit/accounting market is £8.8bn growing 5% CAGR; regulatory complexity and audit-market reform are pushing mid-market work away from the Big Four toward scaled challengers with sector depth — MHA's H1 26 double-digit growth in FS, manufacturing and professional-services fees demonstrates this in action 2025-11-20 H1 26.
  2. Proven M&A compounding on a listed platform. MHA has integrated Moore & Smalley (2024), Baker Tilly Ireland (2024), BTSEE (Aug-25, Cyprus/Greece/SEE) and MS UAE (Apr-26) — three of these were bargain-purchase deals. The £98m IPO warchest and lockstep-vendor-equity model give a credible path to the stated £500m revenue medium-term ambition 2026-04-07 MS UAE completion; 2025-08-14 FY25.
  3. Fortress balance sheet at a reasonable multiple. Net cash £24m, 87% recurring fees, 91% cash conversion, no customer >10% — trading at c.8x EV/adj-EBITDA with FY26 delivered ahead of expectations (£46m vs £44m consensus) 2026-05-07 trading update. Downside protection is real; this is not a fragile balance sheet.

Key risks

  1. AI-driven substitution risk in audit and tax. Automation of standardised audit, tax-return prep and personal-tax compliance is precisely where mid-tier firms earn their recurring fees; management is investing in Co-Pilot/ChatGPT Enterprise to defend margin, but the medium-term direction of pricing on commodity compliance work is negative 2025-11-20 H1 26 — inferred from disclosure.
  2. Integration and partner-lockup risk in an acquisition roll-up. The BTSEE deal generated a £5.5m bargain-purchase gain because €21m of vendor equity was reclassified as deemed remuneration subject to lockup — MHA's growth model depends on retaining partners after multi-year clawback periods; departures would meaningfully impair goodwill and morale 2025-11-20 H1 26 note 8.
  3. Newly listed with limited public track record and reported-vs-adjusted noise. FY26 is MHA's first statutory reporting period; reported EBITDA is inflated by bargain-purchase credits, IPO costs, and deemed remuneration amortisation, so the "adjusted" number is doing significant work — margin of error on quality of earnings is wider than for a seasoned issuer 2025-11-20 H1 26 note 5.

Operating leverage

MHA is a people-heavy professional-services firm — this constrains operating leverage. In FY25, employee benefit expense was £89.9m on £224m revenue (40%), with a further large layer of partner remuneration (147 partners averaging £565k profit share) which is now expensed under the plc model. Cost base is therefore majority-variable to headcount, not truly fixed. EBITDA margin was 18.3% in FY25, 18% in H1 26 and 18.3% again on the FY26 outturn — remarkably flat and consistent with a labour-intensive services model where salary inflation eats scale benefits 2025-08-14 FY25; 2025-11-20 H1 26; 2026-05-07 trading update. There is some leverage on the c.£20m of central and property costs (32 offices, tech platform, listed-company overhead), and management's technology programme aims to widen this. On my working assumption, a 15% revenue beat over management plan would translate to c.15–25% EBITDA upside — well short of the multiple-of-profit outcome the strategy is looking for. There is no observable inflection point (no SaaS-style scale economics, no network effect, no capacity-constrained pricing power).

Value-trap signals

None identified. Revenue is growing, recurring fees are stable at 87%, balance sheet is net cash, dividend has been initiated (2.2p final + 1.0p interim), no going-concern issues, no customer concentration, no visible related-party abuses. The main "cheap for a reason" concern is the low AI-receiver score, not company-specific value-trap dynamics.

Earnings vs. expectations

  • FY25 trading update (Jun-25): prior consensus revenue £216m / adj EBITDA £40.1m → delivered £224m / £41m → beat on both metrics 2025-06-06 trading update.
  • H1 26 (Nov-25): full-year consensus £249.5m / £44m → H1 delivery £121.3m / £21.8m → in line, with H2 weighting confirmed 2025-11-20 H1 26.
  • FY26 trading update (May-26): consensus £249.5m / £44m → delivered ~£251m / ~£46m → revenue in line, adjusted EBITDA ahead 2026-05-07 trading update. The pattern is short (three data points post-IPO) but consistently at or slightly above guidance — no misses, one clear beat, two in-line-or-better. Encouraging for a newly-listed name.

Conviction: 3 (moderate)

Anchors: (i) three consecutive credible print-then-beat cycles support methodology, (ii) net cash balance sheet and 87% recurring revenue make EBITDA a defensible base for multiple-based valuation, (iii) sector comps (Gateley, Begbies) give clear multiple anchors. Limits: (i) first statutory year is FY26, so we have no cycle-tested plc P&L; (ii) reported vs adjusted EBITDA gap is large and structural (bargain-purchase gains recur through the roll-up model, deemed remuneration amortisation is opaque) — quality of the £46m adjusted number is not fully clean; (iii) partner-model share of profit still creates ambiguity about the true sustainable operating margin.

Overall assessment for this investor profile: 370 / 1000

This is a high-quality UK small-cap at a fair price with a fortress balance sheet — but it fails two of the three explicit pillars: it is not an AI beneficiary (arguably a mild AI headwind long term as compliance work automates) and it has limited operating leverage in a labour-heavy services business. Right kind of company for a value-plus-quality book; wrong kind of company for the AI-receiver + operating-leverage strategy laid out in the brief.

Filings consulted · 14

Every document the LLM read for this note. Click any row to open the source.

  1. 2026-08-21Result OF Agm2026-08-21_9734903_result-of-agm.md0.30
  2. 2026-07-29Notice OF Agm And Posting OF Annual Report2026-07-29_9694388_notice-of-agm-and-posting-of-annual-report.md0.95
  3. 2026-07-24Confirmation OF Full Year Results2026-07-24_9687375_confirmation-of-full-year-results.md1.00
  4. 2026-05-07Trading Update2026-05-07_9555871_trading-update.md0.85
  5. 2026-04-07Completion OF Acquisition2026-04-07_9506930_completion-of-acquisition.md0.75
  6. 2025-12-22Proposed Acquisition OF MS Uae2025-12-22_9311316_proposed-acquisition-of-ms-uae.md0.64
  7. 2025-11-20Half Year Results2025-11-20_9245429_half-year-results.md0.77
  8. 2025-11-13Notice OF Results And Investor Presentation2025-11-13_9230298_notice-of-results-and-investor-presentation.md0.59
  9. 2025-10-31Trading Update2025-10-31_9205071_trading-update.md0.72
  10. 2025-08-14Full Year Results2025-08-14_9051844_full-year-results.md0.65
  11. 2025-08-11Completion OF Acquisition2025-08-11_9042132_completion-of-acquisition.md0.49
  12. 2025-07-18Notice OF Results And Investor Presentation2025-07-18_8985797_notice-of-results-and-investor-presentation.md0.46
  13. 2025-06-06Trading Update2025-06-06_8915968_trading-update.md0.55
  14. 2025-05-07Proposed Acquisition2025-05-07_8863980_proposed-acquisition.md0.49

This research note was authored by a large language model after reading 14 regulatory filings published between 2025-05-07 and 2026-08-21. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.