Mer: Does the large global customer turn the backlog into a concentration risk
The main article showed better mix and profitability. This follow-up isolates what remains unresolved: one global customer already accounts for 28.9% of sales, Africa holds 76.5% of global backlog, and conversion to revenue still depends on approvals and collections.
Where The Concentration Really Sits
The main article argued that Mer made a real quality step in 2025: better mix, better profitability, and a calmer balance sheet. This follow-up isolates the part that the improvement still did not solve. In the global segment, the center of gravity did not really diversify. It became more sensitive.
The sharpest figure is the major global customer: NIS 192.99 million in 2025, equal to 28.9% of consolidated revenue. This is no longer just a large customer. On simple arithmetic, it represents about 58% of the entire global segment, whose revenue was NIS 332.21 million. When the anchor customer is that large, the question is not only how much was sold to it this year. The real question is what happens to backlog, collections, and working capital if its pace changes.
That is also why the top-two-customer number matters more than it first appears. The two major customers together already account for 45.3% of revenue, up from 36.8% a year earlier. So even in the same year Mer presented a mix shift, concentration actually increased. Put differently, the mix improvement did not yet create diversification. It created a stronger business that still rests on too few anchors.
The issue does not stop at revenue. It comes back in geography, back in backlog, and back again on the path to cash. Africa generated NIS 209.34 million of 2025 revenue, equal to 63.0% of the global segment. Inside global backlog, Africa already carries NIS 221.98 million, or 76.5% of the non-framework global backlog. This is no longer just “exposure to a region.” It is the axis on which most of the global story sits.
| Layer | 2025 figure | Why it matters |
|---|---|---|
| Major global customer | NIS 192.99 million, 28.9% of consolidated revenue | One customer already drives too much of the top line |
| Top two customers | 45.3% of revenue | Overall concentration rose rather than fell |
| Africa in global revenue | NIS 209.34 million, 63.0% of the global segment | Geography is concentrated too |
| Africa in global backlog | NIS 221.98 million, 76.5% of global backlog | Backlog does not diversify the risk, it carries it forward |
| Receipts still outstanding from the major global customer | NIS 52.06 million, all not overdue | The current risk is mainly timing and conversion, not an openly distressed receivable |
| Average credit days in Africa | 104 days versus 91 in 2024 | Time itself is already becoming part of the risk |
The important insight is that the large customer is not just a theoretical diversification issue. It sits inside a global segment that is itself concentrated around government offices and similar customers, which represented NIS 249.26 million, or 37% of consolidated revenue and 75% of the global segment. So this is not simply a question of one customer name. It is a question of business structure: large projects, government and similar customers, relatively narrow geography, and a backlog that moves through approvals and execution milestones.
Global Backlog Does Not Diversify The Risk, It Extends It
A quick read could suggest that at least the global backlog provides better diversification for the next few years. That is not what the numbers say. Global backlog excluding framework agreements fell to NIS 290.32 million from NIS 315.30 million. Framework-inclusive backlog fell to NIS 309.98 million from NIS 369.22 million. So the book did not grow. It entered 2026 smaller.
But the more interesting story is not only the decline. It is the composition. NIS 221.98 million of the global backlog sits in Africa. Central America carries NIS 56.23 million, and the rest of the world NIS 12.12 million. When Mer talks about a global backlog, most of it is no longer “global” in the sense of a broadly spread order book. It is concentrated in one region.
That is also why the framework-agreement discussion matters less here than the concentration of the underlying content. The gap between framework-inclusive global backlog and backlog excluding framework agreements is only about NIS 19.66 million. In other words, the main problem in the global segment at year-end 2025 is not an unusually inflated framework number. The problem is that the actual backlog that does exist sits too heavily on the same axis.
One more important point: NIS 235.97 million of global backlog belongs to Homeland Security solutions, while only NIS 54.36 million belongs to communications infrastructure. So concentration is not only geographic. It is also activity-specific. Mer does not hold a wide global order book balanced across several activities and regions. It holds one that rests mainly on Homeland Security in Africa.
That is where backlog stops being comforting and becomes analytical. This is the key point. If the large customer and the main region are effectively the same risk axis, backlog is not diluting the dependency. It is extending its life.
That chart sharpens another point. NIS 73.55 million of the global backlog is scheduled only for 2027 and later, and the whole layer sits in Africa. So even the longer-dated part of the book does not create a new geographic cushion. It pushes the same exposure further out in time.
The Problem Is Not Default, It Is The Chain Of Approvals And Collections
The wrong reading would be to frame this as if the customer is already distressed in a bad-debt sense. That is not what the report says. Receipts still outstanding from the major global customer amount to NIS 52.06 million, and all of them are classified as not overdue. So, at year-end 2025, this is not an immediate credit-failure picture.
But this is precisely where the risk sits. When exposure is this concentrated, default is not required to create real friction. A delay in execution, a slower approval, or longer collection timing is enough. And that is exactly what the report describes across several layers.
The first layer is the credit structure itself. In the global segment, most customers do not provide collateral against the credit they receive. The company says it insures part of its customer base, but not all of it. At the same time, average credit days in Africa rose to 104 from 91 a year earlier. That is not a dramatic data point by itself, but it does show that cash from the most important geography is taking longer to turn.
The second layer is regulatory approvals. Several of the West Africa agreements, including the roughly EUR 20 million November 2025 agreement, the roughly EUR 34 million December 2024 agreements, and the roughly EUR 30 million July 2024 agreement, include content that is partly subject to DECA approval. The directors’ report also says that some of the global-segment content within the additional roughly NIS 50 million of agreements remains subject to required regulatory approvals.
The third layer is customer-side financing. During 2025, bank financing agreements were completed that enabled the completion or financing of part of the West Africa agreements. That is not automatically negative. In projects like these, it may simply be part of the commercial mechanism. But when the backlog is already concentrated in one customer lane, one geography, and one activity cluster, any added dependence on approvals and financing makes the concentration more sensitive.
The implication is simple. The risk is not only whether the customer eventually pays. The risk is how many gates the backlog has to pass through before it becomes revenue, and how many more it has to pass through before revenue becomes cash. The more of the global book that rests on the same route, the more material even a modest delay becomes.
That is also why the generic sentence about broad customer dispersion sounds less convincing in 2025. It may describe the company’s longer history. It is less convincing in a year when one global customer stands at 28.9% of revenue, the top two customers reach 45.3%, and Africa holds more than three quarters of global backlog.
What Has To Change For The Risk To Start Falling
The fair counter-thesis is that management clearly knows the issue and is trying to fix it. The company explicitly says it is working to add more strategic customers. The directors’ report also points to about NIS 50 million of additional agreements, including a first customer in an EU member state. If those new customers begin to matter, the concentration read can soften.
But at year-end 2025, that is still not the story. One NIS 192.99 million global customer is not meaningfully offset by a geographically concentrated NIS 221.98 million Africa backlog, nor by NIS 73.55 million that is pushed into 2027 and later in the same region. For the market to read the global segment differently, it will need to see not just more contracts, but contracts that create real diversification.
What that means in practice over the next 2 to 4 quarters:
| Checkpoint | What would improve the read | What would keep the risk elevated |
|---|---|---|
| New customers abroad | The first EU customer starts converting into visible revenue | New wins remain too small relative to the anchor customer |
| Global backlog mix | Africa’s share of backlog starts to fall | More than 70% of the book remains in Africa |
| Collections | Receipts outstanding from the major global customer begin to come down | A large balance stays in place for several quarters |
| Approvals and execution | Approval-gated content moves smoothly into execution | Regulatory delays or execution deferrals prolong the cash-conversion cycle |
Bottom Line
The main article was right to identify a real quality improvement at Mer. This follow-up shows that the improvement still did not solve the core dependency inside the global segment. Concentration does not sit only in the revenue line. It comes back in backlog, in geography, and on the path to cash.
Current thesis: the large global customer is not just a big 2025 number. It makes the whole global book more sensitive because the backlog itself is concentrated in Africa and its conversion still depends on approvals, financing, and collections.
If Mer can show in 2026 that new customers are beginning to carry real weight, that receipts from the major customer are coming down, and that Africa is no longer the default destination of almost the entire global backlog, concentration can remain a manageable risk. If not, the market will increasingly read the global backlog less as a growth reservoir and more as an extended exposure to one customer lane, one geography, and one execution chain.
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