REG - Macfarlane Group PLC - Half-year Report <Origin Href="QuoteRef">MACF.L</Origin> - Part 2
25/08/2016 07:06
- Part 2: For the preceding part double click ID:nRSY0702Ia
5. Tax Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Current tax
UK corporation tax (263) (180) (1,134)
Overseas tax (33) (27) (48)
Prior year adjustments 99 84 80
Total current tax (197) (123) (1,102)
Total deferred tax (See note 11) (130) (165) (215)
Total (327) (288) (1,317)
Tax for the first six months has been charged at 20.0% (2015 - 21.5%)
representing the best estimate of the effective tax charge for the full year.
6. Dividends Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Amounts recognised as distributions to equity holders in the period
Final Dividend (1.29p per share) (2015 1.15p per share) 1,608 1,433 1,433
Interim Dividend (2015 0.53p per share) - - 661
Distributions in the period 1,608 1,433 2,094
The dividend of 0.55p per share, payable on 13 October 2016 was declared on 25
August 2016 and has therefore not been included as a liability in these
condensed financial statements.
7. Earnings per share Earnings Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Earnings from continuing operations for the purposes of earnings per share being profit for the year from continuing operations 1,676 1,565 5,450
30 June2016 30 June2015 31 December 2015
Number of shares '000
Weighted average number of ordinary shares in issue 124,611 124,611 124,611
Weighted average number of shares in issue for the purposes of basic earnings per share 124,611 124,611 124,611
Effect of dilutive potential ordinary shares due to share options 743 46 576
Weighted average number of shares in issue for the purposes of diluted earnings per share 125,354 124,657 125,187
Basic Earnings per share 1.35p 1.26p 4.37p
Diluted Earnings per share 1.34p 1.26p 4.35p
8. Acquisitions
In 2015 the Group acquired 100% of One Packaging Limited for a consideration
of £2.7m. £2.0m was paid in cash on acquisition, with the deferred
consideration now payable in the second half of 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 £2.6m. £1.3m
of this was paid in 2015 with the remainder payable in the second half of 2016
following the achievement of the earn-out target. These deferred
considerations are recognised as liabilities at 30 June 2016.
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, the Group's subsidiary, Macfarlane Group UK Limited, 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.
All the businesses above are packaging distributors, 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 the UK and anticipated operating synergies from
future combinations of activities with the existing Packaging Distribution
network.
Fair values assigned to net assets acquired and consideration paid and payable
are set out below:-
Net assets acquired Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Other intangible assets 1,619 - 1,238
Property, plant and equipment 25 - 168
Inventories 628 - 350
Trade and other receivables - - 1,098
Bank loans and overdrafts - - (403)
Trade and other payables - - (974)
Finance lease liabilities - - (59)
Deferred tax liabilities (292) - (249)
Net assets acquired 1,980 - 1,169
Goodwill arising on acquisition 1,041 83 1,644
Total consideration 3,021 83 2,813
Deferred consideration on acquisitions
Current year (320) - -
Prior years - 163 725
Total cash consideration 2,701 246 3,538
Net cash outflow arising on acquisition
Cash consideration (2,701) (246) (3,538)
Bank loans and overdrafts assumed - - (403)
Net cash outflow (2,701) (246) (3,941)
9. Notes to the cash flow statement Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Operating profit 2,467 2,308 7,702
Adjustments for:
Amortisation of intangible assets 471 384 826
Depreciation of property, plant and equipment 661 530 1,151
(Gain)/loss on disposal of property, plant and equipment (3) (2) 34
Operating cash flows before movements in working capital 3,596 3,220 9,713
Decrease/(increase) in inventories 219 (1,363) (546)
Decrease/(increase) in receivables 2,982 1,606 (2,042)
(Decrease)/increase in payables (3,535) (417) 2,178
Decrease in provisions - - (32)
Employer pension contributions less amounts recognised in income statement (1,417) (1,421) (2,682)
Cash generated from operations 1,845 1,625 6,589
Income taxes paid (590) (75) (724)
Interest paid (264) (225) (497)
Net cash inflow from operating activities 991 1,325 5,368
Movement in net debt
(Decrease)/increase in cash and cash equivalents (677) (591) 157
Increase in bank borrowings (3,595) (230) (1,690)
New finance lease facilities - (402) (813)
Cash flows from payment of finance lease liabilities 184 100 320
Movement in net debt in the period (4,088) (1,123) (2,026)
Opening net debt (12,758) (10,732) (10,732)
Closing net debt (16,846) (11,855) (12,758)
Net debt comprises:-
Cash and cash equivalents 730 659 1,407
Bank borrowings (16,634) (11,579) (13,039)
Net bank debt (15,904) (10,920) (11,632)
Finance lease liabilities
Due within one year (383) (284) (388)
Due outwith one year (559) (651) (738)
Closing net debt (16,846) (11,855) (12,758)
Cash and cash equivalents (which are presented as a single class of asset on
the balance sheet) comprise cash at bank and other short-term highly liquid
investments with maturity of three months or less.
10. Retirement benefit obligations
The figures below have been prepared by Aon Hewitt and are based on the
results of the triennial actuarial valuation as at 1 May 2014, updated to 30
June 2016, 30 June 2015 and 31 December 2015. The assets in the scheme and
the net liability position of the scheme as calculated under IAS 19 are as
follows:
Investment class 30 June2016£000 30 June2015£000 31 December2015£000
Equities
UK equities and equity funds 5,725 5,905 6,030
Overseas equity funds 10,374 10,948 10,758
Multi-asset diversified funds 25,506 25,514 25,476
Bonds
Liability Driven Investment funds 26,660 13,810 14,107
Corporate bond fund 952 11,003 11,119
Other
Loan fund 6,076 - -
Cash 859 782 303
Fair value of assets 76,152 67,962 67,793
Present value of scheme liabilities (88,776) (80,022) (79,311)
Pension scheme deficit (12,624) (12,060) (11,518)
Deferred tax asset (see note 11) 2,272 2,412 2,073
Pension scheme deficit net of related deferred tax asset (10,352) (9,648) (9,445)
These amounts were calculated using the following principal assumptions as
required under IAS 19:
Assumptions 30 June 2016 30 June 2015 31 December 2015
Discount rate 2.90% 3.60% 3.70%
Rate of increase in pensionable salaries 0.00% 0.00% 0.00%
Rate of increase in pensions in payment 3% or 5% for fixed increases or 2.95% for LPI 3% or 5% for fixed increases or 3.30% for LPI 3% or 5% for fixed increases or 2.10% for LPI
Inflation assumption (RPI) 3.00% 3.20% 3.10%
Inflation assumption (CPI) 2.00% 2.30% 2.10%
Life expectancy beyond normal retirement age of 65
Male 22.8 years 22.8 years 22.7 years
Female 25.3 years 25.1 years 25.3 years
25.3 years
LPI represents limited price indexation applied to pensions in payment.
30 June2016£000 30 June2015£000 31 December2015£000
Movement in scheme deficit in the period
At start of period (11,518) (13,873) (13,873)
Current service cost (51) (83) (152)
Employer contributions 1,468 1,504 2,834
Net finance cost (200) (230) (438)
Remeasurement of pension scheme liability in the period (2,323) 622 111
At end of period (12,624) (12,060) (11,518)
Sensitivity to key assumptions
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 deficit. 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 Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Discount rate movement of +0.1% 1,278 1,280 1,142
Inflation rate movement of +0.1% (453) (380) (404)
Mortality movement of +0.1 year in age rating 240 288 214
Positive figures reflect a reduction in 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.
Six monthsto 30 June2016£000 Six monthsto 30 June2015£000 Year to 31December2015£000
Movement in fair value of scheme assets
Scheme assets at start of period 67,793 67,990 67,990
Interest income 1,243 1,187 2,364
Return on scheme assets (exc. amounts shown in interest income) 8,320 (901) (1,658)
Contributions from sponsoring companies 1,468 1,504 2,834
Contribution from scheme members 35 42 84
Benefits paid (2,707) (1,860) (3,821)
Scheme assets at end of period 76,152 67,962 67,793
Movement in present value of defined benefit obligations
Obligations at start of period (79,311) (81,863) (81,863)
Current service cost (51) (83) (152)
Interest cost (1,443) (1,417) (2,802)
Contribution from scheme members (35) (42) (84)
Changes in assumptions underlying the defined benefit obligations (10,643) 1,523 1,769
Benefits paid 2,707 1,860 3,821
Obligations at end of period (88,776) (80,022) (79,311)
Investments
The Trustees review the scheme investments regularly and consult with the
Company regarding any proposed changes. During the first half of 2016, the
majority of the investment in the Corporate Bond Fund was realised and
reinvested in Liability Driven Investments Funds and a Loan Fund.
Funding
Following the completion of the triennial actuarial valuation at 1 May 2014,
Macfarlane Group PLC is paying deficit reduction contributions in 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.
11. Deferred tax 30 June2016£000 30 June2015£000 31 December2015£000
Deferred tax asset on pension scheme deficit
At start of period 2,073 2,775 2,775
Credit/(charge) on actuarial movement in the period applied through statement of comprehensive income 418 (124) (22)
Charge due to long-term corporation tax rate change applied through statement of comprehensive income - - (229)
Charge through income statement based on payments made to reduce deficit in the period (219) (239) (451)
Deferred tax asset on pension scheme deficit (see note 10) 2,272 2,412 2,073
Deferred tax asset on other timing differences
At start of period 426 470 470
Credit through income statement - - (44)
Deferred tax asset on other timing differences 426 470 426
Total deferred tax assets at end of period 2,698 2,882 2,499
Deferred tax liability on other intangible assets
At start of period (988) (1,019) (1,019)
Acquisition (see note 8) (292) - (249)
Credit through income statement
Movement in other intangible assets in the period 89 74 280
Deferred tax liability at end of period (1,191) (945) (988)
12. 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 options over 775,254
and 360,026 ordinary shares respectively under the Macfarlane Group PLC Long
Term Incentive Plan. These Performance Share Plan 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 six month period which require disclosure.
13. Post balance sheet events
Acquisition
On 29 July 2016, the Company concluded the acquisition of Nelsons for Cartons
& Packaging Limited ("Nelsons"), a packaging distributor based in Leicester
for a maximum consideration of up to £6.75m. The initial cash consideration
was £4.25m. As part of the consideration, the vendors received 1,724,137 new
Ordinary shares of the Company at a price of 58p, a value of £1.0m. The
Acquisition has deferred consideration of £1.5m payable in two instalments and
is subject to certain trading targets being achieved in the two twelve month
periods ending on 31 July 2017 and 31 July 2018.
Share Placing
On 29 July 2016, the Company raised £5.8 million before expenses through a
Share Placing of 10,000,000 new Ordinary Shares at a price of 58 pence per
share with new and existing shareholders. In accordance with the authority
received at the 2016 Annual General Meeting, the proceeds from the Placing
Shares are being used to fund the acquisition of Nelsons.
Admission of both the Vendor Shares and the Placing Shares took place on 29
July 2016.
The current issued share capital consists of 136,335,497 Ordinary Shares. The
Company does not hold any Ordinary Shares in treasury. Therefore the total
number of Ordinary Shares and voting rights in the Company is 136,335,497.
14. Interim Report
The interim report will be posted to shareholders on 9 September 2016. Copies
will be available from the registered office, 21 Newton Place, Glasgow G3 7PY
and available on the Company's website, www.macfarlanegroup.com, from that
date.
This information is provided by RNS
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