REG - Macfarlane Group PLC - Half-year Report <Origin Href="QuoteRef">MACF.L</Origin> - Part 2
24/08/2017 07:05
- Part 2: For the preceding part double click ID:nRSX8330Oa
Finance costs (see note 4) (413) (464) (901)
Profit before tax 2,535 2,003 7,811
Tax (see note 5) (443) (327) (1,761)
Profit for the period 2,092 1,676 6,050
The Packaging Distribution business has historically benefited from additional
demand in the final months of the year, resulting in revenue and profitability
at higher levels in the second half of the year.
30 June2017£000 30 June2016£000 31 December2016£000
Total assets
Packaging Distribution 96,872 86,883 105,034
Manufacturing Operations 14,408 14,567 13,529
Total assets 111,280 101,450 118,563
Net assets
Packaging Distribution 32,342 25,530 32,531
Manufacturing Operations 6,834 6,323 6,792
Net assets 39,176 31,853 39,323
4. Finance costs Six monthsto 30 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Interest on bank borrowings (214) (241) (480)
Interest on obligations under finance leases (15) (23) (48)
Net interest expense on retirement benefit obligation (see note 10) (184) (200) (373)
Total finance costs (413) (464) (901)
5. Tax Six monthsto 30 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Current tax
UK corporation tax (327) (263) (1,409)
Overseas tax (12) (33) (79)
Prior year adjustments 49 99 83
Total current tax (290) (197) (1,405)
Total deferred tax (See note 11) (153) (130) (356)
Total (443) (327) (1,761)
Tax for the first six months has been charged at 19.25% (2016 - 20.00%)
representing the best estimate of the effective tax charge for the full year.
6. Dividends Six monthsto 30 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Amounts recognised as distributions to equity holders in the period
Final Dividend (1.40p per share) (2016 1.29p per share) 1,909 1,608 1,608
Interim Dividend (2016 0.55p per share) - - 750
Distributions in the period 1,909 1,608 2,358
An interim dividend of 0.60p per share, payable on 12 October 2017 was
declared on 24 August 2017 and has therefore not been included as a liability
in these condensed financial statements.
7. Earnings per share Earnings Six monthsto 30 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Earnings from continuing operations for the purposes of earnings per share being profit for the year from continuing operations 2,092 1,676 6,050
30 June2017 30 June2016 31 December 2016
Number of shares '000
Weighted average number of ordinary shares in issue 136,335 124,611 129,496
Weighted average number of shares in issue for the purposes of basic earnings per share 136,335 124,611 129,496
Effect of dilutive potential ordinary shares due to share options 967 743 859
Weighted average number of shares in issue for the purposes of diluted earnings per share 137,302 125,354 130,355
Basic Earnings per share 1.53p 1.35p 4.67p
Diluted Earnings per share 1.52p 1.34p 4.64p
8. Acquisitions
On 29 July 2016, the Group acquired 100% of Nelsons for Cartons & Packaging
Limited for a consideration of £7.2 million. £4.7 million was paid in cash on
acquisition with £1.0 million 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.
In the first half of 2016, Macfarlane Group UK Limited, acquired the business
of Colton Packaging Teesside ("Colton"), for £1.3 million and the packaging
business of Edward McNeil Limited, for £1.7 million. £2.7 million was paid in
cash on acquisition, with the deferred consideration payable based on earn-out
targets in Colton for the year to 31 March 2017 and based on working capital
levels in the Edward McNeil business. In 2017 £246,000 was paid to conclude
both transactions.
In 2014 and 2015 the Group acquired 100% of One Packaging Limited and Network
Packaging Limited. The final deferred considerations of £2.1m were paid in
the second half of 2016 following the successful conclusion of the respective
earn-out periods.
All the businesses above are packaging distributors, accounted for in our
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. All deferred consideration is recognised in liabilities at the
respective reporting dates. Fair values assigned to net assets acquired and
consideration paid and payable are set out below:-
Net assets acquired Six monthsto 30 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Other intangible assets - 1,619 4,552
Property, plant and equipment - 25 195
Inventories - 628 1,542
Trade and other receivables - - 1,728
Cash and bank balances - - 696
Trade and other payables - - (1,837)
Current tax liabilities - - (256)
Finance lease liabilities - - (7)
Deferred tax liabilities - (292) (828)
Net assets acquired - 1,980 5,785
Goodwill arising on acquisition - 1,041 4,386
Total consideration - 3,021 10,171
Contingent consideration on acquisitions
Current year - (320) (1,820)
Prior years 246 - 2,063
Shares - - (1,000)
Total cash consideration 246 2,701 9,414
Net cash outflow arising on acquisition
Cash consideration (246) (2,701) (9,414)
Cash and bank balances acquired - - 696
Net cash outflow (246) (2,701) (8,718)
9. Notes to the cash flow statement Six monthsto 30 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Operating profit 2,948 2,467 8,712
Adjustments for:
Amortisation of intangible assets 672 471 1,117
Depreciation of property, plant and equipment 629 661 1,267
Gain on disposal of property, plant and equipment (9) (3) (18)
Operating cash flows before movements in working capital 4,240 3,596 11,078
Decrease/(increase) in inventories 138 219 (885)
Decrease/(increase) in receivables 5,737 2,982 (3,450)
(Decrease)/increase in payables (2,905) (3,535) 1,280
Employer pension contributions less current service costs recognised in the income statement (1,807) (1,417) (2,906)
Cash generated from operations 5,403 1,845 5,117
Income taxes paid (747) (590) (1,295)
Interest paid (229) (264) (528)
Net cash inflow from operating activities 4,427 991 3,294
Movement in net debt
(Decrease)/increase in cash and cash equivalents (718) (677) 523
Decrease/(increase) in bank borrowings 1,947 (3,595) (4,167)
Cash flows from payment of finance lease liabilities 232 184 329
Movement in net debt in the period 1,461 (4,088) (3,315)
Opening net debt (16,073) (12,758) (12,758)
Closing net debt (14,612) (16,846) (16,073)
Net debt comprises:-
Cash and cash equivalents 1,212 730 1,930
Bank borrowings (15,259) (16,634) (17,206)
Net bank debt (14,047) (15,904) (15,276)
Finance lease liabilities
Due within one year (398) (383) (395)
Due outwith one year (167) (559) (402)
Closing net debt (14,612) (16,846) (16,073)
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 2017, 30 June 2016 and 31 December 2016. The assets in the scheme and
the net liability position of the scheme as calculated under IAS 19 are as
follows:
Investment class 30 June2017£000 30 June2016£000 31 December2016£000
Equities
UK equities and equity funds 7,129 5,725 6,604
Overseas equity funds 10,354 10,374 10,508
Multi-asset diversified funds 21,872 25,506 21,509
Bonds
Liability Driven Investment funds 26,526 26,660 26,532
Corporate bond fund - 952 -
Other
Loan fund 6,476 6,076 6,334
Secured property income fund 6,330 - -
Cash 343 859 6,321
Fair value of assets 79,030 76,152 77,808
Present value of scheme liabilities (92,449) (88,776) (92,345)
Pension scheme deficit (13,419) (12,624) (14,537)
Deferred tax asset (see note 11) 2,281 2,272 2,471
Pension scheme deficit net of related deferred tax asset (11,138) (10,352) (12,066)
These amounts were calculated using the following principal assumptions as
required under IAS 19:
Assumptions 30 June 2017 30 June 2016 31 December 2016
Discount rate 2.60% 2.90% 2.70%
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 3.20% for LPI 3% or 5% for fixed increases or 2.95% for LPI 3% or 5% for fixed increases or 3.20% for LPI
Inflation assumption (RPI) 3.30% 3.00% 3.30%
Inflation assumption (CPI) 2.30% 2.00% 2.30%
Life expectancy beyond normal retirement age of 65
Male 22.9 years 22.8 years 22.8 years
Female 25.4 years 25.3 years 25.3 years
25.3 years
LPI represents limited price indexation applied to pensions in payment.
30 June2017£000 30 June2016£000 31 December2016£000
Movement in scheme deficit in the period
At start of period (14,537) (11,518) (11,518)
Current service cost (61) (51) (95)
Employer contributions 1,868 1,468 3,001
Net finance cost (184) (200) (373)
Re-measurement of pension scheme liability in the period (505) (2,323) (5,552)
At end of period (13,419) (12,624) (14,537)
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 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Discount rate movement of +0.1% 1,572 1,278 1,478
Inflation rate movement of +0.1% (370) (453) (471)
Mortality movement of +0.1 year in age rating 276 240 277
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 June2017£000 Six monthsto 30 June2016£000 Year to 31December2016£000
Movement in fair value of scheme assets
Scheme assets at start of period 77,808 67,793 67,793
Interest income 1,045 1,243 2,470
Return on scheme assets (exc. amounts shown in interest income) 1,004 8,320 9,610
Contributions from sponsoring companies 1,868 1,468 3,001
Contribution from scheme members 36 35 72
Benefits paid (2,731) (2,707) (5,138)
Scheme assets at end of period 79,030 76,152 77,808
Movement in present value of defined benefit obligations
Obligations at start of period (92,345) (79,311) (79,311)
Current service cost (61) (51) (95)
Interest cost (1,229) (1,443) (2,843)
Contribution from scheme members (36) (35) (72)
Changes in assumptions underlying the defined benefit obligations (1,509) (10,643) (15,162)
Benefits paid 2,731 2,707 5,138
Obligations at end of period (92,449) (88,776) (92,345)
Investments
The Trustees review the scheme investments regularly and consult with the
Company regarding any proposed changes. During the first half of 2017, the
majority of the cash held at 31 December 2016 was invested in a Secured
property income 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 Tax losses lessaccelerated capital allowances£000 Other intangible assets£000 RetirementBenefitObligations£000 Total£000
At 1 January 2016 433 (995) 2,073 1,511
Acquisitions - (292) - (292)
(Charged)/credited in income statement
Current period (7) 96 (219) (130)
Credited in other comprehensive income - - 418 418
At 30 June 2016 426 (1,191) 2,272 1,507
Acquisitions - (536) - (536)
(Charged)/credited in income statement
Current period (19) 190 (237) (66)
Prior periods (160) - - (160)
Credited in other comprehensive income - - 436 436
At 1 January 2017 247 (1,537) 2,471 1,181
Credited/(charged) in income statement
Current period 3 120 (276) (153)
Credited in other comprehensive income - - 86 86
At 30 June 2017 250 (1,417) 2,281 1,114
Deferred tax assets 410 - 2,281 2,691
Deferred tax liabilities (160) (1,417) - (1,577)
At 30 June 2017 250 (1,417) 2,281 1,114
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 2017 will be
disclosed in the Group's 2017 Annual Report.
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. Interim Report
The interim report will be posted to shareholders on 8 September 2017. 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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