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Mayfield Group – premium supplier of electrical and telecommunications infrastructure

Mayfield Group (ASX:MYG) CEO Andrew Rowe provides an overview of the company, discussing its divisions, growth strategy, pipeline of work, dividend policy and outlook.

Paul Sanger: I’m Paul Sanger for the Finance News Network. And today, I’m talking to Mayfield Group (ASX:MYG). Mayfield Group, trading under the ASX Code MYG with a market capitalization of 55 million owns a portfolio of complementary innovative companies comprising of Mayfield Industries, Mayfield Services, ATI Australia, and Power Parameters. Each business has a unique value proposition in the provision of electrical and telecommunications products and services.

Mayfield is one of Australia’s foremost producers of customized control and protection systems, switchboards, kiosks, transportable switch rooms, and telecommunications systems for critical electrical infrastructure where safety and performance are key requirements. Joining me today is Mayfield Group CEO, Andrew Rowe. Welcome, Andrew.

Andrew Rowe: Thanks, Paul.

Paul Sanger: Now, Andrew, it’s the first time we’ve had Mayfield on the network. Can you give us a brief overview of your company?

Andrew Rowe: Yeah thanks Paul, happy to. Since our inception in 1936 in South Australia, Mayfield’s expanded nationally to become a premium supplier of electrical and telecommunications infrastructure. We’ve got a range of electrical products including switchboards, motor control centres, telecommunications equipment, and fully transportable substations. Our national footprint starts with our headquarters in Adelaide with our main manufacturing plant based in Edinburgh which is just north of the city. We also have plant and manufacturing facilities in Perth, Brisbane, Sydney, and Melbourne. Today, you’ll find Mayfield with annual revenues of about 80 million and an end pad of 7% which is very healthy. We’ve enjoyed 20% year-on-year growth over the last decade which is fantastic. In 2020, we listed with the reverse takeover of the STEAM group. And today, you find us with a very healthy balance sheet and debt-free.

Paul Sanger: Now Andrew, let’s talk about a little more detail about the three companies you operate. Starting off with your core business, Mayfield Industries.

Andrew Rowe: Paul, Mayfield Industries is the heart of the Mayfield Group. Its core products are switchboards, motor control centres, kiosk substations, and transportable switch rooms. And it’s probably the brand that we’re most famous for. Our intellectual property comes from a number of licensing agreements with European manufacturers, most notably Schneider and Leistung.

In terms of our manufacturing capability, in 2019, we made the pivotal decision to move all of our manufacturing on shore from Malaysia. And now, by building most of our products through our Perth and Adelaide facilities, we’re able to offer a consistency of quality and a reliability of supply that is unmatched with our peers. And further in support of local manufacturing, we have a blossoming relationship with WA company Magellan Power, which allows us to manufacture a range of AC and DC power equipment.

Again, that helps us support local manufacturing and expand our product base further. A couple of signature projects would be Torrens Island, Collie, and the big battery that’s gone in for Sydney.

And further towards our initiative to decarbonize, we’re investing heavily in our battery technologies. We are going to release to market later in the year our first Battery Energy Storage System or BESS for short. We’ll be installing that at our Edinburgh facility. And that with 100 kilowatts of battery combined with 200 kilowatts of solar on the roof, will really work towards making us a net-zero producer out of our signature plant in South Australia.

Paul Sanger: Let’s move on to ATI Australia. Talk a bit more about that business.

Andrew Rowe: Yeah. Thanks, Paul. ATI Australia was founded in 1992 as a specialist in digital microwave telecommunications and it was acquired by the Mayfield Group in 2021. At the heart of what they do is digital telecommunications wireless for remote and regional areas where other traditional forms of communication can’t get there. But at the heart of what they do as well is making sure they’ve got a key quality and reliability in their power systems because remote comms mean nothing when the power goes out. And through that development of power systems, they’ve established a very good brand that’s allowed them to expand right across Australia. Their key markets are governments, utilities around the defence sector, mining companies, and anywhere where remote communications is required.

To further enhance that, they merged with a company called Power Parameters in 2022. Power Parameters specialize in the supply, service and maintenance of high-end power quality monitoring equipment, and that’s needed to maintain very intricate and complex electrical systems because you need to know that you’ve got reliable and quality power, and that dovetails very nicely into the ATI brand.

Paul Sanger: Thanks, Andrew. And then, let’s talk about Mayfield Services.

Andrew Rowe: Yeah. Mayfield Services is a really growing area of our business so I’m really pleased to talk about it. It’s been around for a decade and it’s a nationwide team of technicians and tradespeople that specialize in the asset management, maintenance, and service of electrical installations, wind farm, solar installations, and battery systems. As I say, it’s a growing area of our business and something that really complements what we do in electrical power and telecommunications. The vision is to make sure that we can offer an end-to-end product that not only do we sell quality power infrastructure and communications infrastructure, but we’ve got the teams to service, maintain, monitor, and make it reliable so our end-users have the confidence that a Mayfield product will be there forever. And I think that’s becoming really important, again, as Australia electrifies and has a higher reliance on their electrical networks.

Paul Sanger: And look, going forward, Andrew, how will you drive growth? Will it be organic, M&A, or a combination of both?

Andrew Rowe: Paul, it’s going to be a combination of both. Organically, I’m looking at what we do in South Australia. We’ve got a great facility and we are going through a process of using lean techniques and more modern advanced manufacturing to make South Australia the best version of itself. Over in the west, to keep up with demand, I’m looking at replicating what we have in South Australia and expanding and rebuilding our WA facility fundamentally based on the growth in the mining sector and the infrastructure sector in the west.

Again, I’ve mentioned services. That’s another organic push. We’re seeing a lot of demand coming in for that and I’m looking at expanding that service nationwide. Now, organically, to push revenues beyond about 100 million, I am looking at a range of M&A activity. Of course, I can’t comment too much about that but it is something that is on my agenda. And what I’m really looking for is something that sits in the sweet spot of electrical and telecommunications infrastructure.

That’s our heart. Something with a technology base, something with IP, ideally, and must have the right culture to work with the Mayfield team. Because if the culture isn’t there, the acquisition won’t work. And that is also going to look at expanding our geographic base, particularly on the East Coast, where we’re a little bit thin with boots on the ground.

Paul Sanger: Got you. And moving on to the pipeline of work, how’s that looking for 2024?

Andrew Rowe: Extremely healthy. Typically with a manufacturing business, your look ahead is only about three months. Our look ahead at the moment goes all the way through to calendar year 2025 and beyond with our pipeline of work. When I joined the company in October, our work in hand was about 30 million. Today, our work in hand sits at about 85 million which is unprecedented. So yes, very healthy indeed. Driven largely in demand by decarbonization and electrification.

Paul Sanger: I hear you loud and clear. And tell me, what industry sectors is your client list made up of?

Andrew Rowe: Yeah. Very diverse mix. Typically, our clients are what I would categorize as end users. So they’re mining companies, utilities, which are the major transmission distribution companies, the ElectroNets and the like. Water companies and energy companies, of course. Anywhere where they’re really focused on having quality electrical product. So our customer base, the usual suspects in mining, Rio Tinto, BHP, Fortescue, Roy Hill, Glencore. And we’re also doing a lot of work in the critical mineral sector with Pilbara Minerals now being a key customer of ours.

Again, I mentioned with energy, Santos, APA, are key customers. We’re doing work in defence which I can’t talk about. And also, in essential services. We’re doing a lot of work with data centres, a lot of work with councils, with fire departments, Victoria Police, to name but a few. Yeah. So very, very diverse mix. But again, very focused on end users that want a reliable, robust electrical product, and the support that goes with it.

Paul Sanger: And just to emphasize on that point, Andrew, that’s a pretty impressive array of Tier 1 clients that are obviously utilizing the Mayfield services and products, yeah?

Andrew Rowe: Yeah. And we are loyal to them and we found that they’ve been very loyal to us. So we found our customer base is quite static and as more customers are coming in, we’re finding that our levels of repeat business are quite high.

Paul Sanger: Excellent. And you recently announced a dividend for the first time. What’s the dividend policy going forward?

Andrew Rowe: Yes, the shareholders were very happy when we announced our maiden dividend in December ’22. We are looking to keep that dividend flow going with full dividends and interim dividends paid every six months. At the moment, we made our first maiden dividend as an interim in December. Then, we paid a full year dividend that was a full year of about 1.7 and I’ve just released an interim dividend of 1 cent this year. We are looking at releasing dividends at about 33% of impact. And given that we’ve got a large armada of franking credits, that dividend stream is sent to continue for the foreseeable future.

Paul Sanger: And it’s great to see that as your business has grown pretty impressively, your shareholders, you rewarded them with those dividends. It’s great to see. It doesn’t always happen in the world of small cap so it stands you out from amongst the crowd, I would say.

Andrew Rowe: Yeah. It’s a very good time to be in Mayfield and the future’s looking very bright for us.

Paul Sanger: So Andrew, to close up today, can you talk through your short-term and medium focuses for the balance of 2024.

Andrew Rowe: Yeah, Paul. Happy to. It really comes down to three key categories or initiatives of what I’m trying to achieve. With Mayfield Industries, which is the engine room, we’ve got a heightened level of activity, increased demand, so I want to look at our manufacturing processes in South Australia. Are they optimal? Are they working as effectively as they could and can they be better? And then, it’s the expansion of the WA facility that can meet the demand that we’re seeing coming out of the west.

With our services group, I’ll have an increased focus on their service offering to the market. I’m looking to expand that and have more market awareness of what we do offer, how we can stand behind our sold electrical products and communication products, and offering integrated services with our sold products. And then, as alluded to earlier, I’m also looking at a range of mergers and acquisitions. Fundamentally, that will increase our service offering, product offering, and bolster our presence on the East Coast.

Paul Sanger: Andrew Rowe, many thanks for your time today.

Andrew Rowe: Thanks, Paul. It’s a pleasure to be here.