TIDMMPAC
RNS Number : 8790X
Mpac Group PLC
03 September 2020
3 September 2020
AIM: MPAC
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No. 596/2014
Mpac Group plc
("Mpac", "Company" or "Group")
Mpac, the global packaging and automation solutions Group, today
announces its unaudited results for the six months to 30 June
2020
Resilient performance with strong cash generation in headwind of
the COVID-19 pandemic
Financial Highlights
-- Order book at 30 June 2020 up 14% compared to June 2019 to
GBP45.4m (2019: GBP39.9m)
-- H1 2020 order intake only 6% below comparable period despite
several projects deferred due to COVID-19 pandemic
-- Group revenue of GBP36.8m (2019: GBP45.8m), with a 29% decline
in Original Equipment revenues partially offset by a 28% growth
in Service revenues
-- Underlying profit before tax of GBP2.5m (2019: GBP4.5m)
-- Underlying earnings per share of 11.0p (2019: 21.3p)
-- Statutory profit before tax of GBP1.4m (2019 GBP2.9m)
-- Basic earnings per share of 6.0p (2019: 12.7p)
-- Focused working capital management leading to an increase in
net cash to GBP22.5m (30 June 2019: GBP9.6m; 31 December 2019:
GBP18.0m)
Operational and Strategic Highlights
-- Agility and ingenuity demonstrated by the global leadership
to provide essential service support
-- Increased use of technology to deploy digital service solutions,
enable digital marketing and to develop the innovation roadmap
-- Prior establishment of 'Make Service a Business' has benefited
the Group with good progress made in growing Service business,
despite travel restrictions. Remote Factory Acceptance Tests,
prior to shipment, are now the norm
-- Benefits accrued from the Group's focus to operate as a single
entity under the 'One Mpac' business model with the implementation
of common business processes and systems enabling the Group
to effectively operate despite travel restrictions
Tony Steels, Chief Executive, commented:
" I am really pleased with the way in which the business
responded to the COVID-19 pandemic, demonstrating agility,
ingenuity and resilience which contributed to positive financial
results and excellent cash generation in the first half of 2020. It
further demonstrates the good progress and, in some cases,
accelerated the positive impact and value of the strategic
objectives we have been working on. During the pandemic we have
taken steps to preserve cash, to reduce discretionary spend and
focus on our digital marketing presence and on new product
development. These measures will place the Group in a strong
position going into the second half of the year to leverage the
essential and COVID-19 resilient Healthcare and Food and Beverage
growth markets which we supply. We are well placed, serving markets
with good underlying demand and therefore the Board believes that
the Group's long-term prospects 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)
Patrick Castle Tel: +44 (0) 20 7468
Edward Mansfield 7923
Sarah Mather
Hudson Sandler Tel: +44 (0) 20 7796
Nick Lyon 4133
Nick Moore
HALF-YEAR MANAGEMENT REPORT
Introduction
Mpac serves customers' needs for ingenious, innovative packaging
machinery and automation encompassing Make, Pack, Monitor and
Service. We design, precision engineer, manufacture and support
high speed automation and packaging solutions, with embedded
process monitoring systems. In 2019 we acquired Lambert Automation
(Lambert) to further strengthen our position in the market to
deliver complete turnkey solutions including the design and
integration of packaging systems and lifetime service of our
machinery for factory automation and process innovation. Lambert,
which has been rebranded Mpac Lambert, is now fully integrated into
the Group.
The Group's packaging machinery and automation business is
focused on the high growth Healthcare, Pharmaceutical and Food and
Beverage markets, which we expect to enjoy long term growth rates
of between 4% and 6%.
The opportunities for the Group are based on the following
fundamental strengths:
-- Robust long-term growth drivers in our target markets
-- Heritage of innovative, extensive high-speed packaging
machinery and automation solutions
-- Global reach with embedded local presence providing
exceptional service to our customers
-- A talented and engaged workforce
We started 2020 with a healthy and diverse order book. Whilst
the pace of execution of these orders was impacted by the need to
make our facilities COVID-19 secure, the build progress of the
opening order book alongside new orders secured were key drivers
behind the positive results for the first half of 2020.
COVID-19
Throughout the pandemic, the health and wellbeing of our
employees and their families has remained the Board's primary
concern. Implementing appropriate social distancing practices
alongside increased emphasis on hygiene and the widespread use of
PPE has ensured our facilities were made safe for use and COVID-19
secure early in the pandemic. These measures enabled Mpac to
continue to provide essential support for our customers in critical
Healthcare, Pharmaceutical and Food and Beverage sectors.
Throughout, all sites have continued to operate, albeit at reduced
operational levels. By the end of June 2020, almost all direct
employees had returned to work and project execution and parts
fulfilment activity had returned to pre-COVID-19 levels.
Travel and social distancing restrictions since March have
limited the opportunity to complete on-site service work and
install and commission equipment. Mpac has utilised digital
solutions to provide services remotely to ensure high customer
service levels are maintained. We anticipate that travel
restrictions will remain a headwind to financial performance for
the foreseeable future.
Whilst it remains difficult to predict the length and depth of
the impact of the pandemic, measures have been put in place to
ensure that Mpac is positioned to take advantage when the market
establishes a new norm. Mpac is well positioned to service the
essential Healthcare, Pharmaceutical and Food and Beverage sectors
that we expect to remain relatively resilient in circumstances
where consumers have less disposable income. Proactive measures
include the launch of a new website, a virtual exhibition to
demonstrate the range of newly developed products and offering
customers creative and flexible digital solutions for remote
machine acceptance and servicing.
Strategic Progress
We have made further progress in delivering upon our strategic
plans, accelerating the use of digital technology, however, short
term growth rates have been impacted by the pandemic and several
significant prospects were deferred by customers until they have
greater visibility on the overall impact. The value of prospects in
our pipeline has continued to grow during the pandemic and the
market fundamentals remain positive. We have focused our investment
during the pandemic in digital marketing, innovative ways to
service our customers and in our innovation roadmap.
Our Service business faced specific challenges related to travel
and social distancing restrictions, however, there has been a
notable increase in the level of spare parts order intake and
revenue generation in the first half of the year as customers seek
to protect their output. This has offset the reduction in on-site
service and installation and commissioning revenue. The work done
prior to the pandemic to establish 'Make Service a Business' has
helped to ensure that we had the dedicated resource in place to
fulfil our customers' requirements with innovative solutions in the
period where it has not been possible to provide 'in person'
support. Remote Factory Acceptance Tests, prior to shipment, are
now the norm.
Our aim to operate as a single entity business model, 'One
Mpac', continues to be underpinned by the implementation of common
business processes and systems. We will complete the installation
of the global ERP system at our first site in 2020 and at the same
time Mpac Lambert will have completed the migration to common Mpac
Project and Engineering systems.
Financial results
The Group entered the year with a strong order book and no
orders have been cancelled in 2020 due to the pandemic. To protect
the wellbeing of our employees and to ensure that our facilities
were COVID-19 secure alongside appropriate social distancing
measures, we were operating at reduced capacity levels. Further,
the prior year included strong operational trading with several
repeat build projects running in parallel. Consequently, revenue in
the six months to 30 June 2020 was GBP36.8m (2019: GBP45.8m), a 20%
reduction on the same period in the prior year. Order intake in the
first half of 2020 was 6% below the same period in 2019 as certain
customers are delaying committing to investment in projects until
there is greater visibility on the wider economic impact of the
crisis. The closing order book for June 2020 remains robust and is
up 14% compared to the prior year.
Underlying profit before tax was GBP2.5m (2019: GBP4.5m),
reflecting the factors which restricted revenue growth in the
period. After a net tax charge of GBP0.3m (2019: GBP0.3m)
underlying profit after tax for the period was GBP2.2m (2019:
GBP4.2m). Underlying earnings per share was 11.0p (2019:
21.3p).
The underlying results are stated before pension related charges
of GBP0.3m (2019: GBP0.2m), comprising charges in respect of
administering the Group's defined benefit pension schemes of
GBP0.5m (2019: GBP0.4m) and finance income on pension scheme
balances of GBP0.2m (2019: GBP0.2m) and amortisation of acquired
intangible assets of GBP0.8m.
On a statutory basis, the profit after tax for the period was
GBP1.2m (2019: GBP2.6m). The basic earnings per share amounted to
6.0p (2019: 12.7p).
Finances
Net cash on 30 June 2020 was GBP22.5m (30 June 2019: GBP9.6m; 31
December 2019: GBP18.0m). Net cash inflow from operating activities
in the first half of the year was GBP5.6m, after a decrease in
working capital levels of GBP3.5m due to the timing of the Group's
order book and after deficit recovery payments to the Group's
defined benefit pension schemes of GBP1.1m. Tax paid in the period
was GBP0.2m. Capital and product development expenditure was a net
GBP0.8m.
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 2020 and the
lack of certainty on the short-term outlook in the light of the
COVID-19 pandemic, the Board has decided not to pay an interim
dividend. No dividends were paid in 2019. 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.
Management changes
Marc Booth joined the Group as the Managing Director of Mpac
Lambert ensuring a smooth transition of leadership with Warren
Limbert, the former Managing Director and co-owner, scheduled to
leave the Group at the end of the year. The board wishes to express
their appreciation for Warren's support during the integration of
Lambert into the Mpac Group.
Operating performance
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
Progress made in in delivering revenue growth in the period
differed by region.
OE revenue in EMEA grew by 52% to GBP12.0m (2019: GBP7.9m) while
in the Americas OE revenue declined by 53% to GBP12.8m (2019:
GBP27.2m). Growth in EMEA is primarily due to the full 6 months
trading of Lambert included within this half year compared to two
months in the prior half year. In 2019, revenue growth in the
Americas was driven by the timing of a significant value repeat
line order received in late 2018 for execution mainly in the first
half of 2019. Revenue development in EMEA and the Americas is
heavily dependent upon the timing of individual large value order
intake and customers' investment cycles. Sales in Asia Pacific, the
first area to be affected by COVID-19, declined to GBP2.3m (2019:
GBP3.1m).
Sales to the Food and Beverage sector increased by 17%, with
several significant contracts secured in late 2019 and early 2020.
Pharmaceutical and Healthcare sector revenue declined due to the
timing of orders and the strong comparatives from 2019 in the
Americas.
OE gross margin in the period was 25.8% (GBP7.0m) (2019: 27.2%
(GBP10.4m)) with the decrease in profitability due to the process
of making all sites COVID-19 secure and the reduction in capacity
following the implementation of social distancing practices.
Service
Service order intake in the period was broadly unchanged
compared to 2019, with strong growth in the early months of 2020
slowing thereafter as restrictions upon customer interaction and
site-based work reduced our ability to deliver key parts of the
service offering. As the restrictions ease in our key markets, we
expect service order intake growth to return.
Service revenue, despite the challenges of the COVID-19
disruption, continued to show strong growth over 2019 of 28% to
GBP9.7m, demonstrating the success of the 'Make Service a Business'
strategy and the improved offering in conjunction with new machine
sales. Growth was strong across each of the regions, with each
region growing by at least 10% over 2019.
The increased revenue from Service generated a gross margin in
the period of GBP4.3m (2019: GBP2.7m). Improved operational and
supply chain efficiency led to an increase in service margin in the
period to 44% (2019: 36%).
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 at 30 June 2020 shows a
surplus of GBP25.7m (GBP16.9m net of deferred tax), compared with a
surplus of GBP20.4m (GBP13.2m net of deferred tax) at 31 December
2019. The main drivers of the increase in the surplus was the
effectiveness of the liability matching programme and strong growth
in asset performance which was partially offset by a decrease in
the discount rate.
The net valuation of the USA pension schemes at 30 June 2020,
with total assets of GBP10.5m, showed a deficit of GBP4.9m, an
increase of GBP1.8m from 31 December 2019.
The aggregate expense of administering the pension schemes was
GBP0.5m (2019: GBP0.4m). The net financing income on pension scheme
balances was GBP0.2m (2019: GBP0.2m). Administration of the UK
scheme has been successfully outsourced which will enable
consideration of targeted member options exercises.
Acquisition strategy
The Board continues to evaluate potential acquisition
opportunities that strategically fit and which will enhance our
global presence in packaging solutions serving the Healthcare,
Pharmaceutical and Food and Beverage markets. An active pipeline of
opportunities continues to be progressed.
Outlook
Mpac has demonstrated resilience, agility and ingenuity to
navigate the impact of the pandemic, making significant progress
with our digital and innovative marketing presence and progressing
our new product development roadmap. Key development projects
successfully completed include an updated standard module platform
technology project and an advanced HMI (Human Machine Interface) to
support customer efficiency. A new side load case packer, 'Alisio',
was launched to the market along with a suite of Industry 4.0
products to augment our customers' productivity. A virtual trade
show was held for customers from all regions. These initiatives
have all contributed to both a strong start to the second half of
2020 and to a robust commercial prospect pipeline which we expect
to generate further good quality OE project orders.
All facilities have remained open during the pandemic and no
orders have been cancelled. Some prospective projects in our sales
pipeline, which were expected to be secured in the first half of
2020, have been delayed due to the pandemic. However, as the
essential Healthcare, Pharmaceutical and Food and Beverage sectors
are expected to be broadly shielded from the impact of the economic
crisis, we believe that we are well positioned to continue to meet
our longer-term strategic growth objectives. A review of our
current prospects indicates that approximately 75% are associated
with essential consumer products.
The financial performance in the first half of the year was
sound, positive cash was generated and we enter the second half of
the year with a good quality and robust order book, underpinned by
long-term growth factors in our target markets.
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.
We anticipate that current general market uncertainty will
remain for the foreseeable future and whilst the current order book
and prospect pipeline provide assurance for trading in the short
term, the longer-term outlook remains difficult to predict. We are,
however, well placed, serving markets with good underlying demand
and therefore the Board believes that the Group's long-term
prospects remain positive.
Tony Steels
Chief Executive
3 September 2020
CONDENSED CONSOLIDATED INCOME STATEMENT
6 months to 30 June 2020 6 months to 30 June 2019
(unaudited) (unaudited)
------------------------------------------------ --------------------------------------
Non-underlying Non-underlying
(note (note
Underlying 5) Total Underlying 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4 36.8 - 36.8 45.8 - 45.8
Cost of sales (25.5) (25.5) (32.7) - (32.7)
--------------------- --------------- -------- ----------- --------------- --------
Gross profit 11.3 - 11.3 13.1 - 13.1
Distribution expenses (3.3) - (3.3) (3.1) - (3.1)
Administrative expenses (4.9) (1.3) (6.2) (5.0) (1.8) (6.8)
Other operating
expenses (0.5) - (0.5) (0.4) - (0.4)
--------------------- --------------- -------- ----------- --------------- --------
4,
Operating profit 5 2.6 (1.3) 1.3 4.6 (1.8) 2.8
Financial income 6 - 0.2 0.2 - 0.2 0.2
Financial expenses 6 (0.1) - (0.1) (0.1) - (0.1)
--------------------- --------------- -------- ----------- --------------- --------
4,
Net financing income 6 (0.1) 0.2 0.1 (0.1) 0.2 0.1
--------------------- --------------- -------- ----------- --------------- --------
Profit before tax 4 2.5 (1.1) 1.4 4.5 (1.6) 2.9
Taxation 8 (0.3) 0.1 (0.2) (0.3) - (0.3)
--------------------- --------------- -------- ----------- --------------- --------
Profit for the period 2.2 (1.0) 1.2 4.2 (1.6) 2.6
===================== =============== ======== =========== =============== ========
Earnings per ordinary share
Basic 9 6.0p 12.7p
Diluted 9 6.0p 12.6p
------------------------- ------ --------------------- --------------- -------- ----------- --------------- --------
CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)
12 months to 31 December 2019
(audited)
-------------------------------------------
Non-underlying
(note 5)
Underlying GBPm Total
Notes GBPm GBPm
Revenue
Cost of sales 4 88.8 - 88.8
(62.8) - (62.8)
------------- ----------------- ---------
Gross profit 26.0 - 26.0
Distribution expenses (7.2) - (7.2)
Administrative expenses (10.3) (2.4) (12.7)
Other operating expenses (0.8) - (0.8)
------------- ----------------- ---------
4,
Operating profit 5 7.7 (2.4) 5.3
Financial income 6 - 0.4 0.4
Financial expenses 6 (0.2) (0.1) (0.3)
------------- ----------------- ---------
4,
Net financing income 6 (0.2) 0.3 0.1
------------- ----------------- ---------
Profit before tax 4 7.5 (2.1) 5.4
Taxation 8 0.3 0.2 0.5
------------- ----------------- ---------
Profit for the period 7.8 (1.9) 5.9
============= ================= =========
Earnings per ordinary share
Basic 9 29.7p
Diluted 9 29.4p
--------------------------- -------- --- ------------- ----------------- ---------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2020 2019 2019 (audited)
(unaudited) (unaudited) GBPm
GBPm GBPm
Profit for the period 1.2 2.6 5.9
-------------- -------------- -----------------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss 3.0 7.9 (0.3)
Actuarial gains
(1.5) (2.7) 0.1
Tax on items that will not be reclassified
to profit or loss
-------------- -------------- -----------------
1.5 5.2 (0.2)
-------------- -------------- -----------------
Items that may be reclassified subsequently
to profit or loss
Currency translation movements arising 0.1 0.4 (0.1)
on foreign currency net investments
(0.3) 0.6 1.1
Effective portion of changes in fair
value of cash flow hedges
-------------- -------------- -----------------
(0.2) 1.0 1.0
-------------- -------------- -----------------
Other comprehensive income for the period 1.3 6.2 0.8
-------------- -------------- -----------------
Total comprehensive income for the period 2.5 8.8 6.7
============== ============== =================
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
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
========== ========== ============== ============ ========== =========== =========
6 months to 30 June
2019
Balance at 1 January
2019 5.0 26.0 1.1 3.9 (0.8) 5.4 40.6
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period - - - - - 2.6 2.6
Other comprehensive
income for the period - - 0.4 - 0.7 5.2 6.3
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
income for the period - - 0.4 - 0.7 7.8 8.9
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total transactions
with owners, recorded - - - - - - -
directly in equity
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 30 June
2019 5.0 26.0 1.5 3.9 (0.1) 13.2 49.5
========== ========== ============== ============ ========== =========== =========
12 months to 31 December
2019
Balance at 1 January
2019 5.0 26.0 1.1 3.9 (0.8) 5.4 40.6
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period
- - - - - 5.9 5.9
Other comprehensive
income/(expense) for
the period - - (0.1) - 1.1 (0.2) 0.8
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
(expense)/income for
the period - - (0.1) - 1.1 5.7 6.7
---------- ---------- -------------- ------------ ---------- ----------- ---------
Equity-settled share-based
transactions - - - - - 0.3 0.3
Purchase of own shares - - - - - (0.1) (0.1)
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total transactions
with owners, recorded
directly in equity - - - - - 0.2 0.2
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 31 December
2019 5.0 26.0 1.0 3.9 0.3 11.3 47.5
========== ========== ============== ============ ========== =========== =========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June 31 Dec
2020 2019 2019
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Non-current assets
Intangible assets 17.1 17.1 16.9
Property, plant and equipment 5.3 6.2 5.6
Investment property 0.8 0.8 0.8
Leased assets 4.5 5.1 4.7
Other receivables - 0.1 -
Employee benefits 7 25.7 29.3 20.4
Deferred tax assets 1.8 1.7 1.7
-------------- -------------- ------------
55.2 60.3 50.1
-------------- -------------- ------------
Current assets
Inventories 6.7 7.3 7.1
Trade and other receivables 11.8 23.5 17.2
Contract assets 10.4 9.7 4.7
Current tax assets 0.1 0.8 0.4
Cash and cash equivalents 23.4 10.5 18.9
-------------- -------------- ------------
52.4 51.8 48.3
-------------- -------------- ------------
Current liabilities
Trade and other payables (21.3) (27.2) (22.9)
Contract liabilities (10.9) (7.1) (5.8)
Current tax liabilities (0.6) (0.4) (0.7)
Provisions (1.2) (1.2) (1.3)
Lease liabilities (0.8) (0.9) (0.9)
-------------- -------------- ------------
(34.8) (36.8) (31.6)
-------------- -------------- ------------
Net current assets 17.6 15.0 16.7
-------------- -------------- ------------
Total assets less current liabilities 72.8 75.3 66.8
-------------- -------------- ------------
Non-current liabilities
Interest-bearing loans and borrowings (0.9) (0.9) (0.9)
Lease liabilities (3.8) (4.2) (3.9)
Employee benefits 7 (4.9) (6.2) (3.1)
Deferred tax liabilities (10.3) (11.9) (8.8)
Deferred acquisition consideration (2.7) (2.6) (2.6)
-------------- -------------- ------------
(22.6) (25.8) (19.3)
-------------- -------------- ------------
Net assets 4 50.2 49.5 47.5
============== ============== ============
Equity
Issued capital 5.0 5.0 5.0
Share premium 26.0 26.0 26.0
Reserves 5.0 5.3 5.2
Retained earnings 14.2 13.2 11.3
-------------- -------------- ------------
Total equity 50.2 49.5 47.5
============== ============== ============
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2020 2019 2019
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Operating activities Operating profit
Non-underlying items included in operating
profit 1.3 2.8 5.3
Amortisation Depreciation Other non-cash 1.3 1.8 2.4
items Pension payments Working capital 0.1 0.1 0.2
movements: - decrease/(increase) in 0.6 0.7 1.9
inventories - decrease/(increase) 0.2 (0.2) 0.3
in trade and other receivables - (1.1) (1.3) (2.9)
(decrease)/increase
in contract assets - (decrease)/increase 0.7 (3.2) (3.2)
in trade and other payables - increase/(decrease) 5.3 (1.3) 1.8
in contract liabilities - (decrease)/increase (5.4) (3.2) 5.2
in provisions (1.9) 8.0 4.7
4.9 (9.6) (11.0)
(0.1) 0.3 0.4
-------------- -------------- ------------
Cash flows from continuing operations 5.9 (5.1) 5.1
before reorganisation Acquisition
and reorganisation costs paid (0.1) (0.3) (1.0)
-------------- -------------- ------------
Cash flows from operations Taxation 5.8 (5.4) 4.1
paid
(0.2) (0.3) 1.0
-------------- -------------- ------------
Cash flows from/ (used in) operating
activities 5.6 (5.7) 5.1
-------------- -------------- ------------
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 - 0.2
(0.5) (1.1) (1.4)
(0.1) (0.1) (0.3)
- (10.6) (10.6)
(0.3) - (0.6)
-------------- -------------- ------------
Cash flows from investing activities (0.8) (11.8) (12.7)
-------------- -------------- ------------
Financing activities Interest paid
Purchase of own shares (0.1) (0.1) (0.1)
Principal elements of lease payments - - (0.1)
(0.4) - (1.0)
-------------- -------------- ------------
Cash flows from financing activities (0.5) (0.1) (1.2)
-------------- -------------- ------------
Net decrease in cash and cash equivalents 11 4.3 (17.6) (8.8)
Cash and cash equivalents at 1 January 18.9 27.9 27.9
Effect of exchange rate fluctuations 0.2 0.2 (0.2)
on cash held
-------------- -------------- ------------
Cash and cash equivalents at period
end 23.4 10.5 18.9
============== ============== ============
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 2019 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 2019 are available from the Company's registered office at
13 Westwood Way, Westwood Business Park, Coventry, CV4 8HS or from
the Group's website at www.mpac-group.com.
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 1 September 2020.
2. Basis of preparation
(a) Statement of compliance
The condensed set of financial statements for the 6 months ended
30 June 2020 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 2019.
(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 2019.
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
2019 Annual Report and Accounts and have subsequently been updated
to further address the emergent COVID-19 impact.
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 2020 Jun 2019 Dec 2019
OE Service Total OE Service Total OE Service Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- -------- ------- ------- -------- ------- ------- -------- -------
Revenue
Americas 12.8 5.4 18.2 27.2 3.9 31.1 45.8 11.0 56.8
EMEA 12.0 3.4 15.4 7.9 3.1 11.0 17.6 7.2 24.8
Asia Pacific 2.3 0.9 3.2 3.1 0.6 3.7 6.0 1.2 7.2
------- -------- ------- ------- -------- ------- ------- -------- -------
Total 27.1 9.7 36.8 38.2 7.6 45.8 69.4 19.4 88.8
======= ======== ======= ======= ======== ======= ======= ======== =======
Gross profit 7.0 4.3 11.3 10.4 2.7 13.1 18.2 7.8 26.0
Selling, distribution
& administration (8.7) (8.5) (18.3)
------- ------- -------
Underlying operating 2.6 4.6 7.7
profit
Unallocated (1.3) (1.8) (2.4)
non-underlying
items included
in operating
profit
------- ------- -------
Operating profit 1.3 2.8 5.3
Net financing 0.1 0.1 0.1
income
------- ------- -------
Profit before
tax 1.4 2.9 5.4
======= ======= =======
30 June 30 June 31 Dec
2020 2019 2019
Disaggregation of revenue - Sales GBPm GBPm GBPm
by Market sector
Pharmaceutical 1.2 2.0 2.9
Healthcare 17.2 25.3 62.5
Food and Beverage 16.6 14.2 19.8
Other 1.8 4.3 3.6
-------- -------- -------
Total 36.8 45.8 88.8
======== ======== =======
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 2019.
30 June 30 June 31 Dec
2020 2019 2019
GBPm GBPm GBPm
Segment assets
Americas 13.7 26.2 16.4
EMEA 27.2 26.6 25.6
Asia Pacific 1.1 0.6 0.5
-------- -------- --------
Total segment assets 42.0 53.4 42.5
Segment liabilities
Americas (14.0) (19.3) (12.4)
EMEA (25.2) (20.3) (23.0)
Asia Pacific (0.4) (0.2) (0.2)
Total segment liabilities (39.6) (39.8) (35.6)
Segment net assets 2.4 13.6 6.9
Unallocated net assets 47.8 35.9 40.6
-------- -------- --------
Total net assets 50.2 49.5 47.5
======== ======== ========
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
2020 2019 2019
GBPm GBPm GBPm
Defined benefit pension scheme administration (0.5) (0.4) (1.2)
costs (note 7)
Reorganisation costs - (0.1) (0.3)
Amortisation of intangibles from business (0.8) (0.2) (0.9)
combinations
Acquisition costs - (0.8) (0.9)
Provision in respect of discontinued - (0.3) (0.2)
operations
US defined benefit pension scheme - - - 1.1
Past service gain
Total non-underlying operating expenditure
Interest on deferred and contingent (1.3) (1.8) (2.4)
acquisition consideration
Net financing income on pension scheme - - (0.1)
balances
0.2 0.2 0.4
-------------- -------------- -------------
Total non-underlying expense before
tax (1.1) (1.6) (2.1)
============== ============== =============
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
2020 2019 2019
GBPm GBPm GBPm
Financial income
Net interest received on pension scheme
balances 0.2 0.2 0.4
----------- ----------- ----------
0.2 0.2 0.4
----------- ----------- ----------
Financial expenses
Preference dividends and interest paid - (0.1) (0.1)
Interest on deferred contingent consideration - - (0.1)
Lease interest (IFRS 16) (0.1) - (0.1)
----------- ----------- ----------
(0.1) (0.1) (0.3)
----------- ----------- ----------
Net financing income 0.1 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 2017, and their assumptions, updated to
reflect actual experience and conditions at 31 December 2019 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 GBP0.5m (2019:
GBP0.4m) and a net financing income on pension scheme balances of
GBP0.2m (2019: GBP0.2m). Payments to the Group's UK defined benefit
pension scheme in the period included GBP1.0m (2019: GBP0.9m) in
respect of the agreed deficit recovery plan. Payments to the US
defined benefit pension plan were GBP0.1m (2019: GBP0.1m).
Employee benefits include the net pension asset of the UK
defined benefit pension scheme of GBP25.7m (2019: GBP29.3m) and the
net pension liability of the USA defined benefit pension schemes of
GBP4.9m (2019: GBP6.2m), all figures before tax.
Employee benefits as shown in the condensed consolidated
statement of financial position were:
30 June 30 June 31 Dec
2020 2019 2019
GBPm GBPm GBPm
UK scheme
Fair value of assets 441.0 427.4 423.6
Present value of defined benefit obligations (415.3) (398.1) (403.2)
--------- --------- ---------
Defined benefit asset 25.7 29.3 20.4
--------- --------- ---------
USA schemes
Fair value of assets 10.5 17.6 10.4
Present value of defined benefit obligations (15.4) (23.8) (13.5)
--------- --------- ---------
Defined benefit liability (4.9) (6.2) (3.1)
--------- --------- ---------
Total net defined benefit asset 20.8 23.1 17.3
========= ========= =========
8. Taxation
The tax charge for the 6 months to 30 June 2020 amounted to
GBP0.2m (6 months to 30 June 2019: GBP0.3m; 12 months to 31
December 2019: GBP0.5m credit) and is calculated as follows:
6 months 6 months 12 months
to 30 June to 30 June to 31
2020 2019 Dec
GBPm GBPm 2019
GBPm
Current tax 0.3 0.3 (0.3)
Deferred tax (0.1) - (0.2)
----------- ----------- ---------
Total tax charge/(credit) 0.2 0.3 (0.5)
=========== =========== =========
The main rate of UK corporation tax is 19% and is now expected
to remain at that level for the foreseeable future. The rate of
deferred tax liability arising from the surplus in respect of the
UK defined benefit pension scheme is 35%.
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
2020 2019 2019
Basic - weighted average number of ordinary
shares 19,971,967 19,963,922 19,968,000
Diluting effect of shares held by the
employee trust 217,944 92,857 178,256
----------- ----------- ----------
Diluted - weighted average number of ordinary
shares 20,189,911 20,056,779 20,146,256
=========== =========== ==========
Underlying earnings per share, which is calculated on the
earnings before non-underlying items, for the 6 months to 30 June
2020 amounted to 11.0p (6 months to 30 June 2019: 21.3p; 12 months
to 31 December 2019: 39.5p).
In the 6 months to 30 June 2020 the effect of dilution was nil
pence per share.
10. Dividends
Having considered the trading results to 30 June 2020, 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 2019. Future dividend payments
and the development of a new dividend policy will be considered by
the Board in the context of 2020 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
2020 2019 2019
GBPm GBPm GBPm
Net increase/(decrease) in cash and cash
equivalents 4.3 (17.6) (8.8)
Funds flow from movement in leases 0.2 - -
----------- ----------- ----------
Change in net funds resulting from cash
flows 4.5 (17.6) (8.8)
Translation movements 0.2 0.2 (0.2)
----------- ----------- ----------
Movement in net funds in the period 4.7 (17.4) (9.0)
Opening net funds 13.2 27.0 27.0
Recognised on adoption of IFRS16 - - (4.8)
----------- ----------- ----------
Closing net funds 17.9 9.6 13.2
=========== =========== ==========
Analysis of net funds
Cash and cash equivalents - current assets 23.4 10.5 18.9
Interest-bearing loans and borrowings - (0.9) (0.9) (0.9)
non-current liabilities
Closing net cash 22.5 9.6 18.0
----------- ----------- ----------
Lease liabilities (4.6) - (4.8)
Closing net funds 17.9 9.6 13.2
=========== =========== ==========
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 2019.
At 1 January 2020 and 30 June 2020, the Group held all financial
instruments at Level 2 (as defined in IFRS 7 Financial instruments:
disclosures) and there have been no transfers of assets or
liabilities between levels of the fair value hierarchy.
30 June 30 June 31 Dec
2020 2019 2019
Categories of financial instruments GBPm GBPm GBPm
Financial assets
Derivative instruments in designated
hedge accounting relationship - - 0.3
Loans and receivables (including cash
and cash equivalents) 33.5 34.0 35.3
------- ------- ------
33.5 34.0 35.6
======= ======= ======
Financial liabilities
Derivative instruments in designated - 0.1 -
hedge accounting relationship
Amortised cost 20.2 27.0 18.6
Fair value through income statement 2.7 2.6 2.6
------- ------- ------
22.9 29.7 21.2
======= ======= ======
Amortised cost comprises interest-bearing loans and borrowings
and trade and other payables, excluding foreign currency
derivatives.
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.
The fair value is the gain/loss on all open forward foreign
exchange contracts at the period end. These amounts are based on
the market values of equivalent instruments at the period end date
and all relate to those forward foreign exchange contracts that
have been designated as effective cash flow hedges under IAS 39
Financial instruments - recognition and measurement.
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 2019 Annual Report and Accounts.
14. Half-year report
A copy of this announcement will be made available to
shareholders from 3 September 2020 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. Business combination
There were no acquisitions in 2020. The acquisition of Lambert
in 2019 included the following items:
Contingent consideration
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.
A further GBP0.5m of consideration is contingent upon certain
tax receipts from HMRC. This balance, along with the associated
receivable, are expected to be settled over the next two years.
Revenue and profit contribution
The acquired business contributed revenues of GBP5.5m and net
profit of GBP1.3m to the group for the period from 1 May 2019 to 30
June 2019. If the acquisition had occurred on 1 January 2019,
consolidated revenue and consolidated profit after tax for the
half-year ended 30 June 2019 would have been GBP53.9m and GBP3.5m
respectively.
INDEPENT REVIEW REPORT TO Mpac Group plc
Introduction
We have reviewed the condensed set of financial statements in
the half-yearly financial report of Mpac Group plc (the 'Group')
for the six months ended 30 June 2020 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 yearly financial 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-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM rules.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
Our responsibility
Our responsibility is to express a conclusion to the company on
the condensed set of financial statements in the half-yearly
financial 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-yearly financial report requires us to obtain an understanding
of all relevant uncertainties, including those arising as a
consequence of the effects of 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 currently faced by 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 Group 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-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union.
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
3 September 2020
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END
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