TIDMMPAC
RNS Number : 4692K
Mpac Group PLC
02 September 2021
2 September 2021
AIM: MPAC
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 which is part of UK law
by virtue of the European Union (Withdrawal) Act 2018
Mpac Group plc
("Mpac", "Company" or "Group")
Strong H1 results with increasing profitability; full year
results expected to be ahead of market expectations
Mpac, a global leader in high-speed packaging and automation
solutions, today announces its unaudited results for the six months
to 30 June 2021 ("the period")
Financial Highlights
-- Strong commercial rebound with a 69% increase in order intake to GBP51.7m (2020: GBP30.5m)
-- Closing order book grew 12% to GBP62.0m (June 2020: GBP45.4m; Dec 2020: GBP55.5m)
-- Group revenue of GBP44.2m (2020: GBP36.8m), with a 25% growth
in Original Equipment revenue and continued progression in service
revenues
-- Underlying* profit before tax of GBP4.7m (2020: GBP2.5m)
-- Underlying* earnings per share of 18.3p (2020: 11.0p)
-- Statutory profit before tax of GBP2.8m (2020: GBP1.4m)
-- Basic earnings per share of 10.6p (2020: 6.0p)
-- Net cash of GBP10.3m (30 June 2020: GBP22.5m; 31 December 2020: GBP14.6m)
*Underlying results are stated before pension related charges of
GBP0.5m (2020: GBP0.3m); amortisation of acquired intangible assets
of GBP0.9m (2020: GBP0.8m); reorganisation in support of more
closely integrating the acquired businesses GBP0.2m, and other
non-underlying items of GBP0.3m.
Operational and Strategic Highlights
-- All employees continue to demonstrate agility and customer
focus during the pandemic, keeping themselves and their colleagues
safe
-- Strong momentum on order intake and enlarged order book with
the Americas region driving performance and an improving outlook in
EMEA
-- Newly acquired Mpac Switchback business fully integrated and exceeding expectations
-- Mpac Switchback relocating to a showcase facility which will
also function as Mpac USA headquarters
-- Regional Service strategy continues to develop with good
progress in the USA and the use of digital solutions
-- One Mpac unified business processes strategy reached a
milestone with go-live of global ERP systems achieving early
benefits of shared resources
-- Uptick in sales of newly developed products and continuation of customer developed options
-- Contract with FREYR, a developer of clean, next-generation,
battery cell production capacity
Tony Steels, Chief Executive, commented:
" I am really pleased with the performance of the business in
the first half of 2021. The strong momentum from H2 2020 has
carried into 2021 with Original Equipment order intake up
significantly. We made good progress with the implementation of our
strategic objectives which provided the platform for the business
to leverage the growth markets in which we operate. The Q3 2020
acquisition of Switchback is continuing to perform well and, with
the move to a purpose built Mpac showcase facility, we can
demonstrate to our US customers the full suite of Mpac brands,
solutions, and services in this critical market. We remain well
placed, serving markets with strong underlying demand and are
pleased to be upgrading expectations for the full year results
given the strength of current trading and our outlook for the
second half . The Group's long-term prospects also remain
positive".
For further information, please contact:
Mpac Group plc Tel: +44 (0) 24 7642
Tony Steels, Chief Executive 1100
Will Wilkins, Group Finance Director
Shore Capital (Nominated Adviser & Broker)
Corporate Advisory Tel: +44 (0) 20 7468
Patrick Castle 7923
Edward Mansfield
Iain Sexton
Corporate Broking
Henry Willcocks
Hudson Sandler Tel: +44 (0) 20 7796
Nick Lyon 4133
Nick Moore
HALF-YEAR MANAGEMENT REPORT
Introduction
Mpac serves customers' needs for ingenious, innovative
automation and packaging machinery. We design, precision engineer,
manufacture and support high-speed automation and packaging
solutions, with embedded process monitoring systems.
The Group's business is focused on the high growth Healthcare,
Food and Beverage and Pharmaceutical markets, which we expect to
enjoy long term annual growth rates of between 4% and 5%.
The opportunities for the Group are based on the following
fundamental strengths:
-- Robust long-term growth drivers in our target markets
-- Leadership in innovative, broad range of high-speed packaging
machinery and automation solutions
-- Global reach with embedded local presence providing
exceptional service to our customers
-- A talented and engaged workforce
Overview
We started 2021 with a good quality, diverse order book and are
pleased that the momentum from the second half of 2020 has
continued into 2021. Macro-economic factors, such as lengthening
global supply chain lead times, materials price increases and
availability of skilled labour remain a challenge. However, the
Board anticipates that the results for full year 2021 will be above
current market expectations, primarily as a result of the increase
in the value of the closing half-year order book and the quality of
the prospect pipeline for orders in the second half of 2021 and
that the Group's long-term prospects are positive.
Strategic Progress
During the period we continued to make good progress in
delivering upon our strategic plans. The rapid return to growth was
underpinned by the prior investment in our commercial footprint in
the Americas and EMEA, alongside market leading sales tools and
acceleration of the use of digital technology. Our pipeline has
continued to grow across all regions and the market fundamentals
remain positive. In 2020 we acquired Switchback to further
strengthen our position in the US market and to complement our
existing Mpac Langen and Mpac Lambert brands and product
portfolios. Since the acquisition, Switchback has been rebranded as
Mpac Switchback and has performed ahead of expectations.
Our strategy to 'Make Service a Business' has progressed well
with the development of a new combined Service team in the US,
providing elevated levels of support to customers and to enhance
the Service offering of Mpac Switchback. Our Service business
continues to face challenges related to travel restrictions,
particularly in EMEA and APAC, however we continue to work closely
with customers to find innovative solutions where it has not been
possible to provide 'in person' support.
Our aim to operate as a single entity business model, 'One
Mpac', reached another milestone during the period and is
underpinned by the implementation of common business processes and
systems. We successfully completed the implementation of the global
ERP system in the period to complement the previous deployment of
common engineering, CRM and project management systems, which we
anticipate will increase the Group's capacity to accommodate future
growth and to increase operational leverage.
COVID-19
Mpac continue to provide uninterrupted essential support for our
customers in critical Healthcare, Food and Beverage and
Pharmaceutical sectors. Travel restrictions, particularly in EMEA
and APAC, continue to restrict opportunities to complete on-site
service work and install and commission equipment, however Mpac
utilised digital solutions to provide services remotely to ensure
high customer service levels are maintained. Mpac is well
positioned to service these essential sectors and the business
continues to act proactively to promote the range of newly
developed products and to offer customers creative and flexible
digital solutions for remote machine acceptance and servicing.
Financial results
The Group entered the year with a diverse and good quality order
book and accordingly sales in the period were GBP44.2m (2020:
GBP36.8m), a 20% increase on prior year. Gross margins increased to
33.4% (2020: 30.7%). Order intake in the period was particularly
strong, 69% above the prior year, with strong momentum from the
second half of 2020 continuing into the first half of 2021.
Consequently, the value of our order book going into the second
half of 2021 is 12% above the value of the opening order book.
Underlying profit before tax was GBP4.7m (2020: GBP2.5m). After
a net tax charge of GBP1.0m (2020: GBP0.3m), underlying profit
after tax for the period was GBP3.7m (2020: GBP2.2m). Underlying
earnings per share was 18.3p (2020: 11.0p).
The underlying results are stated before pension related charges
of GBP0.5m (2020: GBP0.3m), comprising charges in respect of
administering the Group's defined benefit pension schemes of
GBP0.6m (2020: GBP0.5m) and finance income on pension scheme
balances of GBP0.1m (2020: GBP0.2m) and amortisation of acquired
intangible assets of GBP0.9m (2020: GBP0.8m). In addition, the
Group commenced a limited level of reorganisation to support the
further integration of acquired businesses of which costs were
recognised of GBP0.2m (2020: GBPnil).
On a statutory basis, the profit after tax for the period was
GBP2.1m (2020: GBP1.2m). The basic earnings per share amounted to
10.6p (2020: 6.0p).
The financial results for the period include the results of Mpac
Switchback, acquired in in September 2020.
Finances
Net cash on 30 June 2021 was GBP10.3m (30 June 2020: GBP22.5m;
31 December 2020: GBP14.6m). Cash balances reported are impacted by
the timing of project order intake and associated working capital
cycles. Working capital movements since June have increased net
cash above the opening cash balance of January 2021.
Net cash outflow from operating activities in the first half of
the year was GBP3.3m, after an increase in working capital levels
of GBP7.2m, due mainly to the timing of project execution, and
deficit recovery payments to the Group's defined benefit pension
schemes of GBP1.6m. Capital and product development expenditure was
a net GBP0.4m.
The Group maintains bank facilities appropriate to its expected
needs including currently undrawn committed borrowing facilities
with HSBC UK Bank Plc of GBP10.0m. These facilities, which are
committed until June 2022, are subject to covenants covering
interest cover and adjusted leverage and are both sterling and
multi-currency denominated.
Dividend Policy
Having considered the trading results to 30 June 2021 and the
outlook in the light of the COVID-19 pandemic, the Board has
decided not to pay an interim dividend in respect of the period. No
dividends were paid in 2020. Future dividend payments will be
considered by the Board in the context of trading performance and
as and when the Board believes it is prudent to do so.
Operating performance
Overall revenue increased by 20% supported by a strong orderbook
and execution within the operating sites.
The Group manages the business in two parts, Original Equipment
(OE) and Service, and across three regions (Americas, EMEA and Asia
Pacific). Individual contracts received by the OE business can be
sizeable. Accordingly, one significant order can have a
disproportionate impact on the growth rates seen in individual
markets year on year.
Original Equipment
Revenue increased by 25% with progress made with delivering
revenue growth in the period differing markedly by region.
Sales to the Food and Beverage sector increased by 35%, with
several significant contracts secured in late 2020. Pharmaceutical
and Healthcare sector revenue declined due to the timing of orders
and delays due to reconsideration of investment priorities
following the pandemic. The 'Other' category, which includes orders
from more specialised industrial sectors and consumer products,
grew by GBP2.7m over 2020 and included an initial order related to
clean energy storage.
OE revenue in the Americas grew by 94% to GBP24.7m (2020:
GBP12.8m) while in EMEA OE revenue declined by 31% to GBP8.3m
(2020: GBP12.0m). Growth in the Americas was primarily due to the
full six months trading of Mpac Switchback included within the
period and from the conversion of the strong opening order book.
Revenue development in all regions is dependent upon the timing of
customers' investment cycles, with differing industries and regions
recovering from the effects of the COVID-19 pandemic at different
rates.
Service
Service order intake was strong in the period, up 10% on the
prior year and driven mainly by order intake for upgrades.
Restrictions to customer interaction and site-based service work
continue to represent a headwind to business development, however
as restrictions ease in our key markets, we expect service order
intake growth to accelerate.
Service revenue grew 4%, despite the challenges of the pandemic
which continued to restrict on-site service provision. It
represented just over 23% of group revenue, in the period under
review, which demonstrates the success of the 'Make Service a
Business' strategy and our continued investment in remote service
provision.
Pension schemes
The Group is responsible for defined benefit pension schemes in
the UK and the USA in which there are no active members. The
Company is responsible for the payment of a statutory levy to the
Pension Protection Fund.
The IAS 19 valuation of the UK scheme as at 30 June 2021 shows a
surplus of GBP26.8m (GBP17.4m net of deferred tax), compared with a
surplus of GBP14.0m (GBP9.1m net of deferred tax) at 31 December
2020. The main drivers of the increase in the surplus were the
effectiveness of the liability matching programme and an increase
in the discount rate, partially offset by the effect of the
liability matching programme on asset values when discount rates
rise.
The net valuation of the USA pension schemes at 30 June 2021,
with total assets of GBP10.0m, showed a deficit of GBP2.3m, a
decrease of GBP0.7m from 31 December 2020.
The aggregate expense of administering the pension schemes was
GBP0.6m (2020: GBP0.5m). The net financing income on pension scheme
balances was GBP0.1m (2020: GBP0.2m).
FREYR contract win
As announced on 26 July 2021, the Group signed a contract with
FREYR Battery ("FREYR"), a developer of clean, next-generation
battery cell production capacity, for the supply of casting and
unit cell assembly equipment to the battery cell production line at
FREYR's Customer Qualification Plant in Norway. The equipment to be
supplied by Mpac Lambert will support FREYR in achieving its
ambitious growth plans for a more sustainable future, providing
equipment, services and know how to industrialise the battery cell
production.
Acquisition strategy
The Board continues to evaluate potential acquisition
opportunities that strategically fit the Group and which will
enhance our global presence in packaging solutions serving the
Healthcare, Food and Beverage and Pharmaceutical markets.
Outlook
It has been a positive start to the year with the momentum
established in the second half of 2020 flowing through into 2021,
resulting in an improved financial performance. Although the
challenges of continued travel restrictions, lengthening supply
chain lead times and general material and labour cost increases
represents a risk to financial performance, the quality and
increasing value of the order book going into the second half of
2021, alongside increasing operational efficiencies, will result in
our financial results for the full year 2021 exceeding current
market expectations. The Group's prospects remain strong,
underpinned by long term growth factors in our target markets.
The acquisition of Mpac Switchback in September 2020 provided
broader access to the important US market and by bringing all Mpac
brands into one US showcase facility, we can further strengthen our
support and offering to local customers.
More recently, securing the order for the supply of casting and
unit cell assembly equipment to FREYR, a Norway based developer of
clean, next-generation battery cell production capacity provides
Mpac with an exciting opportunity to be at the forefront of a
growing new market.
The Group has both the financial and managerial resources
available to develop its business, with the prime focus being on
organic growth, through leveraging of its global position,
development of its products and most particularly through an
improved service offering to its customers. In conjunction with
this, we are looking at a number of acquisition opportunities which
will be complementary to the Group's existing operations.
Overall progress in the development of the Group's business is
expected to continue and the Board believes that the Group's
prospects remain positive.
Tony Steels
Chief Executive
1 September 2021
CONDENSED CONSOLIDATED INCOME STATEMENT
6 months to 30 June 2021 6 months to 30 June 2020
(unaudited) (unaudited)
----------------------------------------------- --------------------------------------
Non-underlying Non-underlying
(note (note
Underlying 5) Total Underlying 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4 44.2 - 44.2 36.8 - 36.8
Cost of sales (29.4) - (29.4) (25.5) - (25.5)
-------------------- --------------- -------- ----------- --------------- --------
Gross profit 14.8 - 14.8 11.3 - 11.3
Distribution expenses (3.1) - (3.1) (3.3) - (3.3)
Administrative expenses (6.4) (1.9) (8.3) (4.9) (1.3) (6.2)
Other operating
expenses (0.5) - (0.5) (0.5) - (0.5)
-------------------- --------------- -------- ----------- --------------- --------
4,
Operating profit 5 4.8 (1.9) 2.9 2.6 (1.3) 1.3
Financial income 6 - 0.1 0.1 - 0.2 0.2
Financial expenses 6 (0.1) (0.1) (0.2) (0.1) - (0.1)
-------------------- --------------- -------- ----------- --------------- --------
Net financing (expense) 4,
/ income 6 (0.1) - (0.1) (0.1) 0.2 0.1
-------------------- --------------- -------- ----------- --------------- --------
Profit before tax 4 4.7 (1.9) 2.8 2.5 (1.1) 1.4
Taxation 8 (1.0) 0.3 (0.7) (0.3) 0.1 (0.2)
-------------------- --------------- -------- ----------- --------------- --------
Profit for the period 3.7 (1.6) 2.1 2.2 (1.0) 1.2
==================== =============== ======== =========== =============== ========
Earnings per ordinary share
Basic 9 10.6p 6.0p
Diluted 9 10.6p 6.0p
------------------------- ------ -------------------- --------------- -------- ----------- --------------- --------
CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)
12 months to 31 December 2020
(audited)
-------------------------------------------
Non-underlying
(note 5)
Underlying GBPm Total
Notes GBPm GBPm
Revenue 83.7 - 83.7
Cost of sales 4 (59.4) - (59.4)
------------- ----------------- ---------
Gross profit 24.3 - 24.3
Distribution expenses (6.8) - (6.8)
Administrative expenses (9.9) (3.6) (13.5)
Other operating expenses (1.1) - (1.1)
------------- ----------------- ---------
4,
Operating profit 5 6.5 (3.6) 2.9
Financial income 6 - 0.3 0.3
Financial expenses 6 (0.2) (0.1) (0.3)
------------- ----------------- ---------
4,
Net financing income 6 (0.2) 0.2 -
------------- ----------------- ---------
Profit before tax 4 6.3 (3.4) 2.9
Taxation 8 - 0.4 0.4
------------- ----------------- ---------
Profit for the period 6.3 (3.0) 3.3
============= ================= =========
Earnings per ordinary share
Basic 9 16.3p
Diluted 9 16.2p
--------------------------- -------- --- ------------- ----------------- ---------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2021 2020 2020 (audited)
(unaudited) (unaudited) GBPm
GBPm GBPm
Profit for the period 2.1 1.2 3.3
-------------- -------------- -----------------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss 12.4 3.0 (8.8)
Actuarial gains/(losses)
(4.6) (1.5) 2.2
Tax on items that will not be reclassified
to profit or loss
-------------- -------------- -----------------
7.8 1.5 (6.6)
-------------- -------------- -----------------
Items that may be reclassified subsequently
to profit or loss
Currency translation movements arising - 0.1 (0.5)
on foreign currency net investments
(0.4) (0.3) 0.5
Effective portion of changes in fair
value of cash flow hedges - -
-------------- -------------- -----------------
(0.4) (0.2) -
-------------- -------------- -----------------
Other comprehensive income for the period 7.4 1.3 (6.6)
-------------- -------------- -----------------
Total comprehensive income for the period 9.5 2.5 (3.3)
============== ============== =================
All income for the period was derived from continuing
operations.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Share Share Translation redemption Hedging Retained Total
capital premium reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
6 months to 30 June
2021
Balance at 1 January
2021 5.0 26.0 0.5 3.9 0.8 8.2 44.4
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period - - - - - 2.1 2.1
Other comprehensive
(expense) / income - - - - (0.4) 7.8 7.4
for the period
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
(expense) / income
for the period - - - - (0.4) 9.9 9.5
---------- ---------- -------------- ------------ ---------- ----------- ---------
Equity-settled share-based
transactions - - - - - 0.3 0.3
Purchase of own shares - - - - - (0.2) (0.2)
Equity settled share-based
transactions, being
total transactions
with owners, recorded
directly in equity - - - - - 0.1 0.1
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 30 June
2021 5.0 26.0 0.5 3.9 0.4 18.2 54.0
========== ========== ============== ============ ========== =========== =========
6 months to 30 June
2020
Balance at 1 January
2020 5.0 26.0 1.0 3.9 0.3 11.3 47.5
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period
Other comprehensive - - - - - 1.2 1.2
income / (expense)
for the period - - 0.1 - (0.3) 1.5 1.3
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
income / (expense)
for the period - - 0.1 - (0.3) 2.7 2.5
---------- ---------- -------------- ------------ ---------- ----------- ---------
Equity settled share-based
transactions, being
total transactions
with owners, recorded
directly in equity - - - - - 0.2 0.2
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 30 June
2020 5.0 26.0 1.1 3.9 - 14.2 50.2
========== ========== ============== ============ ========== =========== =========
12 months to 31 December
2020
Balance at 1 January
2020 5.0 26.0 1.0 3.9 0.3 11.3 47.5
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period
- - - - - 3.3 3.3
Other comprehensive
(expense) / income
for the period - - (0.5) - 0.5 (6.6) (6.6)
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
(expense) / income
for the period - - (0.5) - 0.5 (3.3) (3.3)
---------- ---------- -------------- ------------ ---------- ----------- ---------
Equity-settled share-based
transactions - - - - - 0.4 0.4
Purchase of own shares - - - - - (0.2) (0.2)
---------- ---------- -------------- ------------ ---------- ----------- ---------
Equity settled share-based
transactions, being
total transactions
with owners, recorded
directly in equity - - - - - 0.2 0.2
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 31 December
2020 5.0 26.0 0.5 3.9 0.8 8.2 44.4
========== ========== ============== ============ ========== =========== =========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 31 Dec
2021 2020
(unaudited) (audited)
Notes GBPm GBPm
Non-current assets
Intangible assets 26.3 27.4
Property, plant and equipment 3.4 5.1
Asset held for resale 1.4 -
Investment property 0.8 0.8
Right of use assets 3.6 4.0
Employee benefits 7 26.8 14.0
Deferred tax assets 1.0 1.8
-------------- ------------
63.3 53.1
-------------- ------------
Current assets
Inventories 4.9 3.5
Trade and other receivables 26.5 32.2
Current tax assets 0.8 0.8
Cash and cash equivalents 11.2 15.5
-------------- ------------
43.4 52.0
-------------- ------------
Current liabilities
Trade and other payables (32.3) (41.1)
Current tax liabilities (0.4) (0.4)
Provisions (1.2) (1.4)
Lease liabilities (0.7) (0.8)
-------------- ------------
(34.6) (43.7)
-------------- ------------
Net current assets 8.8 8.3
-------------- ------------
Total assets less current liabilities 72.1 61.4
-------------- ------------
Non-current liabilities
Interest-bearing loans and borrowings (0.9) (0.9)
Lease liabilities (3.2) (3.4)
Employee benefits 7 (2.3) (3.0)
Deferred tax liabilities (11.1) (6.8)
Deferred acquisition consideration (0.6) (2.9)
-------------- ------------
(18.1) (17.0)
-------------- ------------
Net assets 4 54.0 44.4
============== ============
Equity
Issued capital 5.0 5.0
Share premium 26.0 26.0
Reserves 4.8 5.2
Retained earnings 18.2 8.2
-------------- ------------
Total equity 54.0 44.4
============== ============
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months
to 30 June
6 months 2020 12 months
to 30 June (unaudited, to 31 Dec
restated
- Note
18)
Notes 2021 GBPm 2020
(unaudited) (audited)
GBPm GBPm
Operating activities Operating profit
Non-underlying items included in operating
profit 2.9 1.3 2.9
Amortisation Depreciation Other non-cash 1.9 1.3 3.6
items Pension payments Working capital 0.4 0.1 0.3
movements: - (increase)/decrease in 0.5 0.6 1.1
inventories - decrease/(increase) 0.3 0.2 0.4
in trade and other receivables - increase (1.6) (1.1) (3.0)
in contract assets / contract fulfilment
assets - (decrease)/increase in trade (1.4) 2.8 0.2
and other payables - (decrease)/increase 5.0 5.3 (0.6)
in contract liabilities - (decrease)/increase - (5.4) (1.7)
in provisions (4.8) (5.5) 4.1
(5.9) 6.4 5.4
(0.1) (0.1) 0.1
-------------- -------------- ------------
Cash flows from continuing operations (2.8) 5.9 12.8
before reorganisation Acquisition
and reorganisation costs paid (0.3) (0.1) (0.9)
-------------- -------------- ------------
Cash flows from operations Taxation (3.1) 5.8 11.9
paid
(0.2) (0.2) (0.7)
-------------- -------------- ------------
Cash flows (used in) / from operating
activities (3.3) 5.6 11.2
-------------- -------------- ------------
Investing activities Proceeds from
sale of property, plant and equipment
Acquisition of property, plant and
equipment Capitalised development
expenditure Net cash flow on acquisition
Acquisition of assets under construction
0.1 0.1 0.2
(0.3) (0.5) (1.2)
(0.2) (0.1) (1.8)
- - (10.3)
- (0.3) -
-------------- -------------- ------------
Cash flows from investing activities (0.4) (0.8) (13.1)
-------------- -------------- ------------
Financing activities Interest paid
Purchase of own shares (0.1) (0.1) (0.2)
Principal elements of lease payments (0.2) - (0.2)
(0.3) (0.4) (0.9)
-------------- -------------- ------------
Cash flows from financing activities (0.6) (0.5) (1.3)
-------------- -------------- ------------
Net (decrease)/increase in cash and 11 (4.3) 4.3 (3.2)
cash equivalents
Cash and cash equivalents at 1 January 15.5 18.9 18.9
Effect of exchange rate fluctuations - 0.2 (0.2)
on cash held
-------------- -------------- ------------
Cash and cash equivalents at period
end 11.2 23.4 15.5
============== ============== ============
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
1. General information
The half-year results for the current and comparative period are
unaudited but have been reviewed by the auditors, Grant Thornton UK
LLP, and their report is set out after the notes. The comparative
information for the year ended 31 December 2020 does not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. The Group's statutory accounts have been reported on by the
Group's auditor and delivered to the Registrar of Companies. The
report of the auditor was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying its report, and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006. The Group's statutory accounts for the year ended 31
December 2020 are available from the Company's registered office at
Station Estate, Station Road, Tadcaster, North Yorkshire, LS24 9SG
or from the Group's website at www.mpac-group.com.
The Directors have considered the trading outlook of the Group
for an 18 month period ending 31 December 2022, its financial
position, including its cash resources and access to borrowings,
and its continuing obligations, including to its defined benefit
pension schemes. Having made appropriate enquiries, the directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis in
preparing the condensed set of financial statements.
The condensed set of financial statements was approved by the
Board of directors on 26 August 2021.
2. Basis of preparation
(a) Statement of compliance
The condensed set of financial statements for the 6 months ended
30 June 2021 has been prepared in accordance with IAS 34 Interim
financial reporting as adopted by the EU. It does not include all
the information required for full annual financial statements and
should be read in conjunction with the financial statements of the
Group for the year ended 31 December 2020.
(b) Judgements and estimates
The preparation of the condensed set of financial statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing the condensed set of financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were of the same type as those that applied to the financial
statements for the year ended 31 December 2020.
Mpac is subject to a number of risks which could have a serious
impact on the performance of the business. The Board regularly
considers the principal risks that the Group faces and how to
mitigate their potential impact. The key risks to which the
business is exposed are set out on pages 18 to 20 of the Group's
2020 Annual Report and Accounts.
3. Significant accounting policies
The accounting policies, presentation and methods of computation
applied by the Group in this condensed set of financial statements
are the same as those applied in the Group's latest audited
financial statements. No new accounting standards have been applied
for the first time in these condensed financial statements.
4. Operating segments
It is the Group's strategic intention to develop "Make Service a
Business", accordingly segmental reporting reflects the split of
sales by both Original Equipment (OE) and Service together with the
regional split, Americas, EMEA and Asia. The Group's operating
segments reflect the basis of the Group's management and internal
reporting structure.
Unallocated costs include distribution and administrative
expenditure. Further details in respect of the Group structure and
performance of the segments are set out in the half-year management
report.
6 months to 30 6 months to 30 12 months to 31
Jun 2021 Jun 2020 Dec 2020
OE Service Total OE Service Total OE Service Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- -------- --------- ------- -------- -------- ------- -------- ---------
Revenue
Americas 24.7 5.4 30.1 12.8 5.4 18.2 36.2 10.5 46.7
EMEA 8.3 4.1 12.4 12.0 3.4 15.4 23.7 7.6 31.3
Asia Pacific 1.0 0.7 1.7 2.3 0.9 3.2 4.2 1.5 5.7
------- -------- --------- ------- -------- -------- ------- -------- ---------
Total 34.0 10.2 44.2 27.1 9.7 36.8 64.1 19.6 83.7
======= ======== ========= ======= ======== ======== ======= ======== =========
Gross profit 14.8 11.3 24.3
Selling,
distribution
& administration (10.0) (8.7) (17.8)
--------- -------- ---------
Underlying 4.8 2.6 6.5
operating
profit
(1.9) (1.3) (3.6)
Unallocated
non-underlying
items included
in operating
profit
--------- -------- ---------
Operating profit
Net financing 2.9 1.3 2.9
(expense) /
income (0.1) 0.1 -
--------- -------- ---------
Profit before
tax 2.8 1.4 2.9
========= ======== =========
30 June 30 June 31 Dec
2021 2020 2020
Disaggregation of revenue - Sales GBPm GBPm GBPm
by Market sector
Pharmaceutical 1.0 1.2 3.9
Healthcare 16.3 17.2 37.7
Food and Beverage 22.4 16.6 34.8
Other 4.5 1.8 7.3
-------- -------- -------
Total 44.2 36.8 83.7
======== ======== =======
Net financing expense includes dividends paid on preference
shares and the net interest receivable in respect of the defined
benefit pension schemes. The Company has in issue 900,000 6% fixed
cumulative preference shares. The preference dividend is payable on
30 June and 31 December and amounted to GBP0.1m in the 12 months
ended 31 December 2020.
30 June 31 Dec
2021 2020
GBPm GBPm
Segment assets
Americas 28.6 28.2
EMEA 26.0 30.7
Asia Pacific 0.5 0.5
-------- --------
Total segment assets 55.1 59.4
Segment liabilities
Americas (15.8) (20.7)
EMEA (19.6) (26.6)
Asia Pacific (0.2) (0.2)
Total segment liabilities (35.6) (47.5)
Segment net assets 19.5 11.9
Unallocated net assets 34.5 32.5
-------- --------
Total net assets 54.0 44.4
======== ========
5. Non-underlying items and alternative performance measures
Non-underlying items merit separate presentation in the
consolidated income statement to allow a better understanding of
the Group's financial performance, by facilitating comparisons with
prior periods and assessments of trends in financial performance.
Pension administration costs, restructuring costs, acquisition
costs, amortisation of intangibles arising on consolidation and
profit on disposal of surplus property are considered
non-underlying items as they are not representative of the core
trading activities of the Group and are not included in the
underlying profit before tax measure reviewed by key
stakeholders.
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2021 2020 2020
GBPm GBPm GBPm
Defined benefit pension scheme administration (0.6) (0.5) (0.9)
costs (note 7)
Reorganisation costs (0.2) - (0.5)
Amortisation of intangibles from business (0.9) (0.8) (1.6)
combinations
Acquisition costs (0.1) - (0.4)
Deferred and contingent acquisition (0.1) - -
consideration
UK defined benefit pension scheme - - (0.2)
GMP equalisation
Total non-underlying operating expenditure
Interest on deferred and contingent (1.9) (1.3) (3.6)
acquisition consideration
Net financing income on pension scheme (0.1) - (0.1)
balances
0.1 0.2 0.3
----------- ----------- ----------
Total non-underlying expense before
tax (1.9) (1.1) (3.4)
=========== =========== ==========
The group uses alternative performance measures (APM's), in
addition to those reported under IFRS, as management believe these
measures enable the users of financial statements to assess the
underlying trading performance of the business. The APM's used
include underlying operating profit, underlying profit before tax
and underlying earnings per share. These measures are calculated
using the relevant IFRS measure as adjusted for non-underlying
income/(expenditure) listed above.
6. Net financing income
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2021 2020 2020
GBPm GBPm GBPm
Financial income
Net interest received on pension scheme
balances 0.1 0.2 0.3
----------- ----------- ----------
0.1 0.2 0.3
----------- ----------- ----------
Financial expenses
Preference dividends and interest paid - - (0.1)
Interest on deferred contingent consideration (0.1) - (0.1)
Lease interest (IFRS 16) (0.1) (0.1) (0.1)
----------- ----------- ----------
(0.2) (0.1) (0.3)
----------- ----------- ----------
Net financing (expense) /income (0.1) 0.1 -
=========== =========== ==========
7. Employee benefits
The Group accounts for pensions under IAS 19 Employee benefits.
A formal valuation of the UK defined benefit pension scheme (Fund)
was carried out as at 30 June 2018. The principal terms of the
deficit funding agreement between the Company and the Fund's
Trustees, which is effective until 31 July 2024 but subject to
reassessment every 3 years, are as follows:
-- the Company will continue to pay a sum of GBP1.9m per annum
to the Fund (increasing at 2.1% per annum) in deficit recovery
payments;
-- if underlying operating profit (operating profit before
non-underlying items) in any year is in excess of GBP5.5m, the
Company will pay to the Fund an amount of 33% of the difference
between the annual underlying operating profit and GBP5.5m, subject
to a cap on underlying operating profit of GBP10.0m for the purpose
of calculating this payment; this part of the agreement will fall
away in 2021 if the funding deficit is below certain levels;
and
-- payments of dividends by Mpac Group plc will not exceed the
value of payments being made to the Fund in any one year.
Formal valuations of the USA defined benefit schemes were
carried out as at 1 January 2020, and their assumptions, updated to
reflect actual experience and conditions at 31 December 2020 and
modified as appropriate for the purposes of IAS 19, have been
applied in the condensed set of financial statements.
Profit before tax includes charges in respect of the defined
benefit pension schemes' administration costs of GBP0.6m (2020:
GBP0.5m) and a net financing income on pension scheme balances of
GBP0.1m (2020: GBP0.2m). Payments to the Group's UK defined benefit
pension scheme in the period included GBP1.0m (2020: GBP1.0m) in
respect of the agreed deficit recovery plan and GBP0.3m in respect
of the profit-sharing arrangement. Payments to the US defined
benefit pension plan were GBP0.3m (2020: GBP0.1m).
Employee benefits include the net pension asset of the UK
defined benefit pension scheme of GBP26.8m (2020: GBP25.7m) and the
net pension liability of the USA defined benefit pension schemes of
GBP2.3m (2020: GBP4.9m), all figures before tax.
Employee benefits as shown in the condensed consolidated
statement of financial position were:
30 June 31 Dec
2021 2020
GBPm GBPm
UK scheme
Fair value of assets 429.4 440.9
Present value of defined benefit obligations (402.6) (426.9)
--------- ---------
Defined benefit asset 26.8 14.0
--------- ---------
USA schemes
Fair value of assets 10.0 10.1
Present value of defined benefit obligations (12.3) (13.1)
--------- ---------
Defined benefit liability (2.3) (3.0)
--------- ---------
Total net defined benefit asset 24.5 11.0
========= =========
8. Taxation - income statement
The tax charge for the 6 months to 30 June 2021 amounted to
GBP0.7m (6 months to 30 June 2020: GBP0.2m; 12 months to 31
December 2020: GBP0.4m credit) and is calculated as follows:
6 months 6 months 12 months
to 30 June to 30 June to 31
2021 2020 Dec
GBPm GBPm 2020
GBPm
Current tax 0.4 0.3 0.6
Deferred tax 0.3 (0.1) (1.0)
----------- ----------- ---------
Total tax charge/(credit) 0.7 0.2 (0.4)
=========== =========== =========
9. Earnings per share
Basic earnings per ordinary share is calculated by dividing the
profit or loss attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period excluding shares held by the employee trust in respect of
the Company's long-term incentive arrangements. For diluted
earnings per ordinary share, the weighted average number of shares
includes the diluting effect, if any, of own shares held by the
employee trust.
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2021 2020 2020
Basic - weighted average number of ordinary
shares 19,898,866 19,971,967 19,955,307
Diluting effect of shares held by the
employee trust 63,734 217,944 135,254
----------- ----------- ----------
Diluted - weighted average number of ordinary
shares 19,962,600 20,189,911 20,090,561
=========== =========== ==========
Underlying earnings per share, which is calculated on the
earnings before non-underlying items, for the 6 months to 30 June
2021 amounted to 18.3p (6 months to 30 June 2020: 11.0p; 12 months
to 31 December 2020: 31.4p).
In the 6 months to 30 June 2021 and 30 June 2020 the effect of
dilution was nil pence per share.
10. Dividends
Having considered the trading results to 30 June 2021, together
with the opportunities for investment in the growth of the Company,
the Board has decided that it is appropriate not to pay an interim
dividend. No dividends were paid in 2020. Future dividend payments
and the development of a new dividend policy will be considered by
the Board in the context of 2021 trading performance and when the
Board believes it is prudent to do so.
11. Reconciliation of net cash flow to movement in net funds
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2021 2020 2020
GBPm GBPm GBPm
Net (decrease)/increase in cash and cash (4.3) 4.3 (3.2)
equivalents
Principal elements of lease payments net 0.3 0.2 0.6
of new leases recognised
Translation movements - 0.2 (0.2)
----------- ----------- ----------
Movement in net funds in the period (4.0) 4.7 (2.6)
Opening net funds 10.4 13.2 13.2
----------- ----------- ----------
Closing net funds 6.4 17.9 10.4
=========== =========== ==========
Analysis of net funds
Cash and cash equivalents - current assets 11.2 23.4 15.5
Interest-bearing loans and borrowings - (0.9) (0.9) (0.9)
non-current liabilities
Closing net cash 10.3 22.5 14.6
----------- ----------- ----------
Lease liabilities (3.9) (4.6) (4.2)
Closing net funds 6.4 17.9 10.4
=========== =========== ==========
12. Financial risk management
The Group's financial risk management objectives and policies
are consistent with those disclosed in the financial statements for
the year ended 31 December 2020.
The Group enters into forward foreign exchange contracts solely
for the purpose of minimising currency exposures on sale and
purchase transactions. The Group classified its forward foreign
exchange contracts used for hedging as cash flow hedges and states
them at fair value.
13. Related parties
The Group has related party relationships with its directors and
with the UK and USA defined benefit pension schemes. There has been
no material change in the nature of the related party transactions
described in note 32 of the 2020 Annual Report and Accounts.
14. Half-year report
A copy of this announcement will be made available to
shareholders from 2 September 2021 on the Group's website at
www.mpac-group.com . This announcement will not be available in
printed form.
15. Future accounting policies
There are no changes anticipated to the Group's accounting
policies in the foreseeable future.
16. Contingent consideration
Switchback - GBP1.4m outstanding, prior to discounting.
The contingent consideration arrangement requires the Group to
pay the former owners of Switchback up to US$1.0m (GBP0.7m) in each
of the next two years, with a minimum payment of US$0.5m in each if
Switchback's annual adjusted EBITDA is at least $1.1m and 50% of
the excess over US$1.1m, up to $2.1m.
There is no minimum amount payable.
Lambert - GBP2.5m outstanding, prior to discounting
The contingent consideration arrangement requires the Group to
pay the former owners of Lambert five times the average EBITDA of
Lambert in excess of GBP2.5m for three years ending 31 December
2021, up to a maximum payment of GBP2.5m. There is no minimum
amount payable.
17. Post balance sheet event
The contract for the sale of the Group's vacant Coventry site
exchanged on 23 July for a total consideration of GBP1.8m. The
consideration is being paid to the Group in three equal stages,
with the final payment and completion of the property transfer
expected in December 2021. The Group received GBP0.6m on 23 July.
Should any of the subsequent payments not be received on time, the
building will revert to the Group and no refund of the stage
payments made will be due. The site is shown in the statement of
financial position as an 'Asset held for sale' at its carrying
value of GBP1.4m. The costs related to the sale have not been
finalised but are not expected to exceed GBP0.2m.
18. 2020 restated cash flow statement
In line with the restatements made at 31 December 2020 to the
prior periods, the Group has restated certain balances previously
reported, in accordance with IAS 8, to align the treatment of
contract assets, contract liabilities and work in progress
recognised in relation to contracts more closely to the demands of
IFRS 15. This changed the 30 June 2020 cash flow statement, with an
increase in the inflows from decreased inventories of GBP2.1m and
contract liabilities of GBP1.5m, together with an increase to the
outflow from a decrease in trade and other payables of GBP3.6m.
These changes do not change any of the key metrics used by the
Group, with gross profit, operating profit, profit before and after
tax, earnings per share, net current assets and retained earnings
remaining unchanged. These adjustments do not affect the future
anticipated performance of the Group.
INDEPENT REVIEW REPORT TO Mpac Group plc
Introduction
We have reviewed the condensed set of financial statements in
the half year management report of Mpac Group plc (the 'Group') for
the six months ended 30 June 2021 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated statement of changes
in equity, condensed consolidated statement of financial position,
condensed consolidated statement of cash flows and the related
explanatory notes. We have read the other information contained in
the half year management report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half year management report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half year management report in accordance with
the AIM rules.
The annual financial statements of the Group are prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006. The condensed set
of financial statements included in this half year management
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting'.
Our responsibility
Our responsibility is to express a conclusion to the company on
the condensed set of financial statements in the half year
management report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
The impact of macro-economic uncertainties on our review
Our review of the condensed set of financial statements in the
half year management report requires us to obtain an understanding
of all relevant uncertainties, including those arising as a
consequence of the effects of macro-economic uncertainties such as
Covid-19 and Brexit. Such reviews assess and challenge the
reasonableness of estimates made by the directors and the related
disclosures and the appropriateness of the going concern basis of
preparation of the financial statements. All of these depend on
assessments of the future economic environment and the company's
future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic
events for the UK, and at the date of this report its effects are
subject to unprecedented levels of uncertainty, with the full range
of possible outcomes and their impacts unknown. We applied a
standardised firm-wide approach in response to these uncertainties
when assessing the company's future prospects and performance.
However, no review of interim financial information should be
expected to predict the unknowable factors or all possible future
implications for a company associated with these particular
events.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half year management report for the six months ended 30 June
2021 is not prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting'.
Use of our report
This report is made solely to the company, as a body, in
accordance with International Standard on Review Engagements (UK
and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'. Our review
work has been undertaken so that we might state to the company
those matters we are required to state to it in an independent
review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company as a body, for our review work, for
this report, or for the conclusion we have formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham, UK
1 September 2021
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END
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