REG - Macfarlane Group PLC - Final Results <Origin Href="QuoteRef">MACF.L</Origin> - Part 2
25/02/2016 07:10
- Part 2: For the preceding part double click ID:nRSY0786Qa
(5,150) (5,498)
External revenue - continuing operations 169,132 153,767
Operating profit - continuing operations
Packaging Distribution 6,751 5,758
Manufacturing Operations 951 888
Operating profit - continuing operations 7,702 6,646
Finance costs (935) (1,040)
Profit before tax 6,767 5,606
Tax (1,317) (1,164)
Profit for the year 5,450 4,442
Assets Liabilities Net assets
£000 £000 £000
Group segments
Packaging Distribution 87,590 61,625 25,965
Manufacturing Operations 14,544 7,037 7,507
Net assets 2015 102,134 68,662 33,472
Assets Liabilities Net assets
£000 £000 £000
Packaging Distribution 80,365 58,189 22,176
Manufacturing Operations 16,020 7,950 8,070
Net assets 2014 96,385 66,139 30,246
4. Finance costs 2015£000 2014£000
Interest on bank borrowings (460) (438)
Interest on obligations under finance leases (37) (8)
Net interest expense on retirement benefit obligation (see note 10) (438) (594)
Total finance costs (935) (1,040)
5. Tax 2015£000 2014£000
Current tax
United Kingdom corporation tax at 20.25% (2014: 21.50%) (1,134) (230)
Foreign tax (48) (95)
Prior period adjustments 80 -
Total current tax (1,102) (325)
Total deferred tax (see note 11) (215) (839)
Total (1,317) (1,164)
The standard rate of tax based on the UK average rate of corporation tax, is
20.25% (2014 - 21.50%). Taxation for other jurisdictions is calculated at the
rates prevailing in these jurisdictions. The actual tax charge for the
current and previous year varies from 20.25% (2014 - 21.50%) of the results as
set out in the consolidated income statement for the reasons set out in the
following reconciliation:
2015£000 2014£000
Profit before taxation 6,767 5,606
Tax on profit at 20.25% (2014 - 21.50%) (1,370) (1,205)
Factors affecting tax charge for the year:-
Non-deductible expenses (37) (1)
Difference on overseas tax rates 10 (1)
Changes in estimates related to prior years 80 43
Tax charge for the year (1,317) (1,164)
6. Dividends 2015£000 2014£000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2014 of 1.15p per share (2013 - 1.10p per share) 1,433 1,265
Interim dividend for the year ended 31 December 2015 of 0.53p per share (2014 - 0.50p per share) 661 623
2,094 1,888
In addition to the amounts shown above, a proposed dividend of 1.29p per share
will be paid on 9 June 2016 to those shareholders on the register at 13 May
2016. This is subject to approval by shareholders at the Annual General
Meeting on 10 May 2016 and has not been included as a liability in these
financial statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2015£000 2014£000
Earnings for the purposes of earnings per shareProfit for the year from continuing operations 5,450 4,442
Number of shares in issue for the purposes of calculating basic and diluted earnings per share 2015No. ofshares '000 2014No. ofshares '000
Weighted average number of ordinary shares in issue for the year 124,611 117,550
Weighted average number of shares in Employee Share Ownership Trusts - (184)
Weighted average number of shares in issue for the purposes of basic earnings per share 124,611 117,366
Effect of dilutive potential ordinary shares due to share options 576 -
Weighted average number of shares in issue for the purposes of diluted earnings per share 125,187 117,366
Basic Earnings per share 4.37p 3.78p
Diluted Earnings per share 4.35p 3.78p
8. Acquisition of subsidiary companies
On 5 August 2015, the Group acquired 100% of the issued share capital of One
Packaging Limited, a packaging distributor, for a consideration of
approximately £2,730k. £1,980k was paid in cash on acquisition, with the
deferred consideration payable in the final quarter of 2016, subject to
certain trading targets being met in the year to 31 July 2016. The contingent
consideration is recognised as a liability at the balance sheet date and is
remeasured to fair value at the balance sheet date on a range of outcomes
between £Nil and £750k.
During 2014 the Group acquired 100% of the issued share capital of PSD
Industrial Holdings Limited, the immediate parent company of Lane Packaging
Limited and 100% of the issued share capital of Network Packaging Limited.
The final earn-out of £246k for Lane Packaging was made in the first half of
2015, with an additional £83k of goodwill paid. The full earn-out of £1,312k
for the first of the two earn-out years for Network Packaging was paid in the
final quarter of 2015.
All three businesses are packaging distributors and are accounted for in the
Packaging Distribution segment. Goodwill arising on these acquisitions is
attributable to the anticipated future profitability of the distribution of
the Group's product ranges in new geographical markets in the UK and
anticipated operating synergies from the future combination of activities with
the existing Packaging Distribution network.
Fair values assigned to net assets acquired and consideration paid and payable
are set out below:-
2015£000 Total2014£000 Lane Packaging£000 Network Packaging£000
Net assets acquired
Other intangible assets 1,238 4,280 663 3,617
Property, plant and equipment 168 195 76 119
Inventories 350 538 72 466
Trade and other receivables 1,098 2,219 453 1,766
Cash and bank balances - 432 - 432
Bank loans and overdrafts (403) (532) (532) -
Trade and other payables (974) (2,315) (681) (1,634)
Current tax liabilities - (312) (16) (296)
Finance lease liabilities (59) (141) (56) (85)
Deferred tax liabilities (249) (858) (133) (725)
Net assets/(liabilities) acquired 1,169 3,506 (154) 3,660
Goodwill arising on acquisition 1,644 4,858 1,001 3,857
Total consideration 2,813 8,364 847 7,517
Satisfied by:
Cash 3,538 4,951 684 4,267
Deferred consideration 2015 acquisition 750 - - -
Deferred consideration 2014 acquisitions (1,475) 2,788 163 2,625
Shares - 625 - 625
Total consideration 2,813 8,364 847 7,517
Net cash outflow arising on acquisition
Cash consideration (3,538) (4,951) (684) (4,267)
Cash and bank balances acquired - 432 - 432
Bank loans and overdrafts assumed (403) (532) (532) -
Net cash outflow (3,941) (5,051) (1,216) (3,835)
9. Notes to the cash flow statement 2015£000 2014£000
Operating profit 7,702 6,646
Adjustments for:
Amortisation of intangible assets 826 428
Depreciation of property, plant and equipment 1,151 1,020
Loss/(gain) on disposal of property, plant and equipment 34 (8)
Operating cash flows before movements in working capital 9,713 8,086
Increase in inventories (546) (1,194)
Increase in receivables (2,042) (4,119)
Increase in payables 2,178 4,193
Decrease in provisions (32) (30)
Adjustment for pension scheme funding (exc. additional contribution in 2014) (2,682) (2,854)
Cash generated by operations 6,589 4,082
Income taxes paid (724) (793)
Interest paid (497) (446)
Net cash inflow from operating activities 5,368 2,843
Movement in net debt
Increase in cash and cash equivalents in the year 157 1,132
Increase in bank borrowings in the year (1,690) (11,349)
Decrease in bank loans - 6,000
New finance lease facilities (813) (683)
Repayment of obligations under finance leases 320 83
Movement in net debt in the year (2,026) (4,817)
Opening net debt (10,732) (5,915)
Closing net debt (12,758) (10,732)
Net debt comprises:
Cash and cash equivalents in statement of cash flows 1,407 1,250
Bank borrowings (13,039) (11,349)
Net bank debt (11,632) (10,099)
Obligations under finance leases Due within one year (388) (155)
Due outwith one year (738) (478)
Closing net debt (12,758) (10,732)
Cash and cash equivalents (which are presented as a single class of asset on
the face of the balance sheet) comprise cash at bank and other short-term
highly liquid investments with maturity of three months or less.
10. Pension scheme
Macfarlane Group PLC sponsors a defined benefit pension scheme for certain
active and former UK employees - the Macfarlane Group PLC Pension & Life
Assurance Scheme (1974) ("the scheme"). The two major trading subsidiaries,
Macfarlane Group UK Limited and Macfarlane Labels Limited are the other two
sponsoring employers of the scheme.
The scheme is administered by a separate Board of Trustees composed of
employer nominated representatives and member nominated Trustees and is
legally separate from the Group. The assets of the scheme are held separately
from those of the Group in managed funds under the supervision of the
Trustees. The Trustees are required by law to act in the interest of all
classes of beneficiary in the scheme and are responsible for investment policy
and the day-to-day administration of benefits. The scheme was closed to new
entrants during 2002.
The scheme provides qualifying employees with an annual pension of 1/60 of
pensionable salary for each completed year's service on attainment of a normal
retirement age of 65. Pensionable salaries were frozen for the remaining
active members at the levels current at 30 April 2009 with the change taking
effect from 30 April 2010 and as a result no further salary inflation applies
for active members who remained in the scheme. Active members' benefits also
include life assurance cover, albeit the payment of these benefits is at the
discretion of the scheme's Trustees.
On withdrawing from active service a deferred member's pension is revalued
from the time of withdrawal until the pension is drawn. Revaluation in
deferment is statutory and since 2010 has been revalued on the Consumer Price
Index ("CPI") measure of inflation. Revaluation of pensions in payment is a
blend of fixed increases and inflationary increases depending on the relevant
periods of accrual of benefit. For pensions in payment, with the inflationary
increases is currently based on the Retail Prices Index ("RPI") measure of
inflation.
During 2012, Macfarlane Group PLC agreed with the Board of Trustees to amend
benefits for pensioner, deferred and active members in the defined benefit
pension scheme by offering a Pension Increase Exchange ("PIE") option for
deferred and active members after 1 May 2012.
The Group will consider a number of further actions to reduce the deficit in
2016.
Balance sheet disclosures
The fair value of the scheme investments, present value of the scheme
liabilities and the expected rates of return have been based on the results of
the actuarial valuation as at 1 May 2014, updated to the year-end.
2015£000 2014£000 2013£000 2012£000 2011£000
Investment class
Equities 16,788 15,893 15,079 14,474 12,782
Multi-asset diversified funds 25,476 18,541 16,414 13,026 12,206
Liability-driven investment funds 14,107 22,195 - - -
Bonds 11,119 11,263 22,534 23,544 21,806
Other (cash and similar assets) 303 98 211 305 174
Fair value of assets 67,793 67,990 54,238 51,349 46,968
Present value of scheme liabilities (79,311) (81,863) (70,134) (70,247) (67,452)
Deficit in the scheme (11,518) (13,873) (15,896) (18,898) (20,484)
Related deferred tax asset (see note 11) 2,073 2,775 3,179 4,346 5,121
Net pension scheme liability (9,445) (11,098) (12,717) (14,552) (15,363)
The Trustees review the investments of the scheme on a regular basis and
consult with the Company regarding any proposed changes to the investment
profile. At the start of February 2014, the investment in fixed interest
government gilts was transferred into a liability-driven investment fund,
which concentrates solely on interest rate and inflation protection
strategies, to provide a more effective hedge against the impact of both
interest rates and inflation on the liabilities in the scheme. As a result,
despite the reductions in bond yields in 2014 causing an increase in
liabilities, improved investment returns have helped offset this.
The scheme's liabilities were calculated on the following bases as required
under IAS 19:
Assumptions 2015 2014 2013 2012 2011
Discount rate 3.70% 3.50% 4.50% 4.40% 4.80%
Rate of increase in salaries 0.00% 0.00% 0.00% 0.00% 0.00%
Inflation assumption (RPI) 3.10% 3.00% 3.40% 3.00% 3.00%
Inflation assumption (CPI) 2.10% 2.10% 2.50% 2.30% 2.20%
Spouse's pension assumption Pensioner membersDeferred and active members 70%80% 70%80% 70%80% 70%80% 90%90%
Life expectancy beyond normal retirement date of 65
Male 22.7 years 22.7 years 22.6 years 22.4 years 22.3 years
Female 25.3 years 25.1 years 25.1 years 24.6 years 24.6 years
24.6 years
2015 2014 2013 2012 2011
Movement in scheme deficit £000 £000 £000 £000 £000
At 1 January (13,873) (15,896) (18,898) (20,484) (15,725)
Current service cost (152) (126) (148) (146) (150)
Employer contributions 2,834 5,480 2,748 2,583 2,169
Pension Increase Exchange gain - - - 1,855 -
Net finance cost (438) (594) (775) (930) (333)
Curtailments and settlements - - - - (13)
Remeasurement of pension scheme liability 111 (2,737) 1,177 (1,776) (6,432)
At 31 December (11,518) (13,873) (15,896) (18,898) (20,484)
Funding
UK pension legislation requires that pension schemes are funded prudently.
Following the completion of the triennial actuarial valuation at 1 May 2014,
Macfarlane Group PLC is now paying deficit reduction contributions in
accordance with an agreement with the scheme trustees to reduce the deficit
over 10 years.
The next triennial actuarial valuation of the scheme is due at 1 May 2017.
Sensitivity to key assumptions
The key assumptions used for IAS 19 are discount rate, inflation and
mortality. If different assumptions were used, then this could have a
material effect on the results disclosed. Assuming all other assumptions are
held static then a movement in the following key assumptions would affect the
level of the deficit as shown below:-
Assumptions 2015£000 2014£000 2013£000
Discount rate movement of +0.1% 1,142 1,285 1,192
Inflation rate movement of +0.1% (404) (393) (281)
Mortality movement of +0.1 year in age rating 214 295 231
Positive figures reflect a reduction in the scheme liabilities and therefore a
reduction in the scheme deficit. The sensitivity information has been
prepared using the same method as adopted when adjusting the results of the
latest funding valuation to the balance sheet date and is consistent with the
approach adopted in previous years.
11. Deferred tax 2015£000 2014£000
At 1 January 2,226 3,375
Inherited on acquisitions (249) (858)
Charged in income statement (215) (839)
Credited/(charged) in other comprehensive income Remeasurement of pension scheme liability (22) 548
Long-term corporation tax rate change (229) -
At 31 December 1,511 2,226
On retirement benefit obligations (see note 10) 2,073 2,775
Corporation tax losses 426 470
Disclosed as deferred tax asset 2,499 3,245
On other intangible assetsDisclosed as a deferred tax liability (988) (1,019)
At 31 December 1,511 2,226
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1
April 2014) and 20% (effective from 1 April 2015) were substantively enacted
on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and
18% (effective from 1 April 2020) were substantively enacted on 26 October
2015. This will reduce the Company's future current tax charge accordingly.
The deferred tax asset at 31 December 2015 has been calculated based on these
rates.
12. Share capital 2015£000 2014£000
Allotted, issued and fully paid:
At 1 January 31,153 28,755
Issued during the year - 2,398
At 31 December 31,153 31,153
Share premium
At 1 January 1,018 -
Issue of new shares during the year - 1,227
Expenses of share issue - (209)
At 31 December 1,018 1,018
On 5 September 2014, the Company acquired the whole issued share capital of
Network Packaging Limited. As part of initial consideration, the Company
issued 1,592,360 ordinary shares of 25p each at a value of 39.25p per share,
which were admitted to the official List of the London Stock Exchange on 12
September 2014.
On 8 September 2014, the Company announced a placing of 8,000,000 ordinary
shares of 25p each at a price of 37.50p per share. The placing was approved
at a General Meeting of the Company on 1 October 2014 and the shares were
admitted to the official List of the London Stock Exchange on 2 October 2014.
Total proceeds raised were £2,791,000, net of issue expenses of £209,000.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed.
Details of individual and collective remuneration of the Company's Directors
and dividends received by the Directors for calendar year 2015 will be
disclosed in the Group's Annual Report for the year ending 31 December 2015.
On 8 May 2015, Peter Atkinson and John Love were granted option awards over
775,254 and 360,026 ordinary shares respectively under the Macfarlane Group
PLC Long Term Incentive Plan. These awards are based on targets around
Earnings per share, Total Shareholder Return and sales levels for the year
ended 31 December 2017.
Peter Atkinson, the Group's Chief Executive, exercised options over 551,372
ordinary shares during 2014. The consideration paid for the shares was
£143,357.
The directors are satisfied that there are no other related party transactions
occurring during the year which require disclosure.
14. Posting to shareholders and Annual General Meeting
The Annual Report and Accounts will be sent to shareholders on Thursday 31
March 2016 and will be available to members of the public at the Company's
Registered Office, 21 Newton Place, Glasgow G3 7PY from Monday 4 April 2015.
The Annual General Meeting will take place at the City Hotel, Cambridge Street
Glasgow at 12 noon on Tuesday 10 May 2016.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Macfarlane
See all newsREG - Macfarlane Group PLC - AGM trading update
AnnouncementREG - Macfarlane Group PLC - Notice of Annual General Meeting
AnnouncementREG - Macfarlane Group PLC - Holding(s) in Company
AnnouncementREG - Macfarlane Group PLC - Holding(s) in Company
AnnouncementREG - Macfarlane Group PLC Jupiter Fund Mgmt - Holding(s) in Company
Announcement