REG - Macfarlane Group PLC - Final Results <Origin Href="QuoteRef">MACF.L</Origin> - Part 2
23/02/2017 07:06
- Part 2: For the preceding part double click ID:nRSW6070Xa
Operations
represents more than 10% of Group revenue or income.
2016£000 2015£000
Packaging Distribution
Revenue 156,187 143,265
Cost of sales (110,928) (101,047)
Gross profit 45,259 42,218
Net operating expenses (37,423) (35,467)
Operating profit 7,836 6,751
Manufacturing Operations
Revenue 28,031 31,017
Cost of sales (17,577) (20,014)
Gross profit 10,454 11,003
Net operating expenses (9,578) (10,052)
Operating profit 876 951
2016£000 2015£000
Group segment - total revenue
Packaging Distribution 156,187 143,265
Manufacturing Operations 28,031 31,017
Inter-segment revenue (4,446) (5,150)
External revenue - continuing operations 179,772 169,132
Operating profit - continuing operations
Packaging Distribution 7,836 6,751
Manufacturing Operations 876 951
Operating profit - continuing operations 8,712 7,702
Finance costs (901) (935)
Profit before tax 7,811 6,767
Tax (1,761) (1,317)
Profit for the year 6,050 5,450
Assets Liabilities Net assets
£000 £000 £000
Group segments
Packaging Distribution 105,034 72,503 32,531
Manufacturing Operations 13,529 6,737 6,792
Net assets 2016 118,563 79,240 39,323
Assets Liabilities Net assets
£000 £000 £000
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
4. Finance costs 2016£000 2015£000
Interest on bank borrowings (480) (460)
Interest on obligations under finance leases (48) (37)
Net interest expense on retirement benefit obligation (see note 10) (373) (438)
Total finance costs (901) (935)
5. Tax 2016£000 2015£000
Current tax
United Kingdom corporation tax at 20.00% (2015: 20.25%) (1,409) (1,134)
Foreign tax (79) (48)
Prior period adjustments 83 80
Total current tax (1,405) (1,102)
Deferred tax
Current year (196) (215)
Prior period adjustments (160) -
Total deferred tax (see note 11) (356) (215)
Total (1,761) (1,317)
The standard rate of tax based on the UK average rate of corporation tax, is
20.00% (2015 - 20.25%). 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 20.00% (2015 - 20.25%) of the results as
set out in the consolidated income statement for the reasons set out in the
following reconciliation:-
2016£000 2015£000
Profit before taxation 7,811 6,767
Tax on profit at 20.00% (2015 - 20.25%) (1,562) (1,370)
Factors affecting tax charge for the year:-
Non-deductible expenses (122) (37)
Difference on overseas tax rates - 10
Changes in estimates related to prior years (77) 80
Tax charge for the year (1,761) (1,317)
Effective rate of tax for the year 22.5% 19.5%
6. Dividends 2016£000 2015£000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2015 of 1.29p per share (2014 - 1.15p per share) 1,608 1,433
Interim dividend for the year ended 31 December 2016 of 0.55p per share (2015 - 0.53p per share) 750 661
2,358 2,094
In addition to the amounts shown above, a proposed dividend of 1.40p per share
will be paid on 8 June 2017 to those shareholders on the register at 12 May
2017. This is subject to approval by shareholders at the Annual General
Meeting on 9 May 2017 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:
2016£000 2015£000
Earnings for the purposes of earnings per shareProfit for the year from continuing operations 6,050 5,450
Number of shares in issue for the purposes of calculating basic and diluted earnings per share 2016No. ofshares '000 2015No. ofshares '000
Weighted average number of shares in issue for the purposes of basic earnings per share 129,496 124,611
Effect of dilutive potential ordinary shares due to share options 859 576
Weighted average number of shares in issue for the purposes of diluted earnings per share 130,355 125,187
Basic Earnings per share 4.67p 4.37p
Diluted Earnings per share 4.64p 4.35p
8. Acquisition of subsidiary companies
On 5 April 2016, the Group's subsidiary, Macfarlane Group UK Limited, acquired
the business of Colton Packaging Teesside, for a consideration of
approximately £1.3 million. £1.1 million was paid in cash on acquisition,
with the deferred consideration of £0.2 million payable in the second quarter
of 2017, if the earn-out target for the year to 31 March 2017 is achieved. On
3 May 2016, Macfarlane Group UK Limited also acquired the packaging business
of Edward McNeil Limited, for a consideration of approximately £1.7 million.
£1.6 million was paid in cash on acquisition, with the deferred consideration
of £0.1 million payable in the next twelve months, based on certain working
capital targets.
On 29 July 2016, the Group acquired 100% of the issued share capital of
Nelsons for Cartons & Packaging Limited, a packaging distributor, for a
consideration of approximately £7.2 million. £4.7 million was paid in cash on
acquisition, and £1.0 million was settled by the issue of shares. The
deferred consideration of £1.5 million, is payable in two equal instalments in
the final quarter of 2017 and 2018, subject to certain trading targets being
met in the two twelve month periods ending on 29 July 2017 and 29 July 2018
respectively. The contingent consideration is recognised as a liability in
creditors and is remeasured to fair value at the balance sheet date on a range
of outcomes between £Nil and £1.5 million.
In 2015 the Group acquired 100% of One Packaging Limited for a consideration
of £2.7 million. £2.0 million was paid in cash on acquisition, with the
deferred consideration of £0.7 million paid in 2016 as the earn-out target for
the year to 31 July 2016 has been met. In 2014 the Group acquired Network
Packaging Limited with deferred consideration on acquisition of £2.6 million.
£1.3 million of this was paid in 2015 with the remainder of £1.3 million paid
in 2016 following the achievement of the earn-out target.
All of these businesses are accounted for in the Packaging Distribution
segment. Goodwill arising on these acquisitions is attributable to the
anticipated future profitability of the distribution of Group product ranges
in the UK and anticipated operating synergies from future combinations of
activities with the Packaging Distribution network. Fair values assigned to
net assets acquired and consideration paid and payable are set out below:-
2014/15Acquisitions£000 Colton &McNeil£000 Nelsons£000 2016£000 2015£000
Net assets acquired
Other intangible assets - 1,619 2,933 4,552 1,238
Property, plant and equipment - 25 170 195 168
Inventories - 628 914 1,542 350
Trade and other receivables - - 1,728 1,728 1,098
Cash and bank balances - - 696 696 -
Bank loans and overdrafts - - - - (403)
Trade and other payables - - (1,837) (1,837) (974)
Current tax liabilities - - (256) (256) -
Finance lease liabilities - - (7) (7) (59)
Deferred tax liabilities - (292) (536) (828) (249)
Net assets acquired - 1,980 3,805 5,785 1,169
Goodwill arising on acquisition - 1,041 3,345 4,386 1,644
Total consideration - 3,021 7,150 10,171 2,813
Contingent consideration on acquisitions
Current year - (320) (1,500) (1,820) -
Prior years 2,063 - - 2,063 725
Shares - - (1,000) (1,000) -
Total consideration 2,063 2,701 4,650 9,414 3,538
Net cash outflow arising on acquisition
Cash consideration (2,063) (2,701) (4,650) (9,414) (3,538)
Cash and bank balances acquired - - 696 696 -
Bank loans and overdrafts assumed - - - - (403)
Net cash outflow (2,063) (2,701) (3,954) (8,718) (3,941)
9. Notes to the cash flow statement 2016£000 2015£000
Operating profit 8,712 7,702
Adjustments for:
Amortisation of intangible assets 1,117 826
Depreciation of property, plant and equipment 1,267 1,151
(Gain)/loss on disposal of property, plant and equipment (18) 34
Operating cash flows before movements in working capital 11,078 9,713
Increase in inventories (885) (546)
Increase in receivables (3,450) (2,042)
Increase in payables 1,280 2,178
Decrease in provisions - (32)
Adjustment for pension scheme funding (2,906) (2,682)
Cash generated by operations 5,117 6,589
Income taxes paid (1,295) (724)
Interest paid (528) (497)
Net cash inflow from operating activities 3,294 5,368
Movement in net debt
Increase in cash and cash equivalents 523 157
Increase in bank borrowings (4,167) (1,690)
New finance lease facilities - (813)
Repayment of obligations under finance leases 329 320
Movement in net debt in the year (3,315) (2,026)
Opening net debt (12,758) (10,732)
Closing net debt (16,073) (12,758)
Net debt comprises:
Cash and cash equivalents in statement of cash flows 1,930 1,407
Bank borrowings (17,206) (13,039)
Net bank debt (15,276) (11,632)
Obligations under finance leases Due within one year (395) (388)
Due outwith one year (402) (738)
Closing net debt (16,073) (12,758)
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 further actions to reduce the deficit in 2017.
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.
2016£000 2015£000 2014£000 2013£000 2012£000
Investment class
Equities 17,112 16,788 15,893 15,079 14,474
Multi-asset diversified funds 21,509 25,476 18,541 16,414 13,026
Liability-driven investment funds 26,532 14,107 22,195 - -
Bonds - 11,119 11,263 22,534 23,544
European loan fund 6,334 - - - -
Other (cash and similar assets) 6,321 303 98 211 305
Fair value of assets 77,808 67,793 67,990 54,238 51,349
Present value of scheme liabilities (92,345) (79,311) (81,863) (70,134) (70,247)
Deficit in the scheme (14,537) (11,518) (13,873) (15,896) (18,898)
Related deferred tax asset (see note 11) 2,471 2,073 2,775 3,179 4,346
Net pension scheme liability (12,066) (9,445) (11,098) (12,717) (14,552)
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. During 2016, the interest rate and inflation rate protection in the
scheme was increased by adding to the Liability Driven Investment funds, a new
European loan fund was added to the portfolio and both of these investments
were financed by the disposal of the Corporate Bond Fund holding.
The ability to realise the Scheme's assets at, or very close to, fair value
was considered when setting the investment strategy. The Scheme's investment
strategy has 84% of the assets being able to be realised at fair value on a
daily or weekly basis. The remaining assets have monthly or quarterly
liquidity, however, whilst the income from these helps to meet the Scheme's
cashflow needs, they are not expected to require to be realised at short
notice.
The present value of the scheme liabilities is derived from cash flow
projections over a long period of time and is thus inherently uncertain.
The scheme's liabilities were calculated on the following bases as required
under IAS 19:
Assumptions 2016 2015 2014 2013 2012
Discount rate 2.70% 3.70% 3.50% 4.50% 4.40%
Rate of increase in salaries 0.00% 0.00% 0.00% 0.00% 0.00%
Inflation assumption (RPI) 3.30% 3.10% 3.00% 3.40% 3.00%
Inflation assumption (CPI) 2.30% 2.10% 2.10% 2.50% 2.30%
Spouse's pension assumption Pensioner membersDeferred and active members 70%80% 70%80% 70%80% 70%80% 70%80%
Life expectancy beyond normal retirement date of 65
Male 22.8 years 22.7 years 22.7 years 22.6 years 22.4 years
Female 25.3 years 25.3 years 25.1 years 25.1 years 24.6 years
24.6 years
2016 2015 2014 2013 2012
Movement in scheme deficit £000 £000 £000 £000 £000
At 1 January (11,518) (13,873) (15,896) (18,898) (20,484)
Current service cost (95) (152) (126) (148) (146)
Employer contributions 3,001 2,834 5,480 2,748 2,583
Pension Increase Exchange gain - - - - 1,855
Net finance cost (373) (438) (594) (775) (930)
Remeasurement of pension scheme liability (5,552) 111 (2,737) 1,177 (1,776)
At 31 December (14,537) (11,518) (13,873) (15,896) (18,898)
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 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 2016£000 2015£000 2014£000
Discount rate movement of +0.1% 1,478 1,142 1,285
Inflation rate movement of +0.1% (471) (404) (393)
Mortality movement of +0.1 year in age rating 277 214 295
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.
All of the sensitivity information assumes that the average duration of
liabilities in the scheme is seventeen years.
11. Deferred tax 2016£000 2015£000
At 1 January 1,511 2,226
Inherited on acquisitions (828) (249)
Charged in income statement Current year (196) (215)
Change in estimates for prior years (160) -
Credited/(charged) in other comprehensive income Remeasurement of pension scheme liability 1,000 (22)
Long-term corporation tax rate change (146) (229)
At 31 December 1,181 1,511
On retirement benefit obligations (see note 10) 2,471 2,073
Corporation tax losses 407 426
Disclosed as deferred tax asset 2,878 2,499
On accelerated capital allowancesDisclosed as a deferred tax liability (160) -
On other intangible assetsDisclosed as a deferred tax liability (1,537) (988)
At 31 December 1,181 1,511
Reductions in the UK corporation tax rate to 17% (effective from 1 April 2020)
were substantively enacted on 6 September 2016. This will reduce the
Company's future current tax charge accordingly. The deferred tax asset at 31
December 2016 has been calculated based on this rate.
12. Share capital 2016£000 2015£000
Allotted, issued and fully paid:
At 1 January 31,153 31,153
Issued during the year 2,931 -
At 31 December 34,084 31,153
Share premium
At 1 January 1,018 1,018
Issue of new shares during the year 3,869 -
Expenses of share issue (246) -
At 31 December 4,641 1,018
The Company has one class of ordinary shares, which carry no right to fixed
income. Each ordinary share carries one vote in any General Meeting of the
Company.
On 26 July 2016, the Company announced a placing of 10,000,000 ordinary shares
of 25p each at a price of 58p per share. These shares were admitted to the
official List of the London Stock Exchange on 29 July 2016.
On 29 July 2016, the Company acquired the whole issued share capital of
Nelsons for Cartons & Packaging Limited. As part of the initial
consideration, the Company issued 1,724,137 ordinary shares of 25p each at a
value of 58p per share to the Vendors, for a total value of £1,000,000, which
were also admitted to the official List of the London Stock Exchange on 29
July 2016.
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 2016 will be
disclosed in the Group's Annual Report for the year ending 31 December 2016.
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.
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 Friday 31 March
2017 and will be available to members of the public at the Company's
Registered Office, 21 Newton Place, Glasgow G3 7PY from Monday 3 April 2017.
The Annual General Meeting will take place at the Double Tree by Hilton Hotel,
Cambridge Street Glasgow G2 3HN at 12 noon on Tuesday 9 May 2017.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Macfarlane
See all newsREG - 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
AnnouncementREG - Macfarlane Group PLC - Director/PDMR Shareholding
Announcement