REG - Macfarlane Group PLC - Half-year Report

MacfarlaneAnnouncement

27/08/2020 07:01

RNS Number : 2554X
  
Macfarlane Group PLC
  
27 August 2020
  
 

 
 
 
27 August 2020
 
MACFARLANE GROUP'S INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2020




Financial Highlights


2020


2019


Year on Year Change




 


 


 


 




Group turnover £000


105,572


107,542


(1.8)%




Profit before tax £000


3,622


3,832


(5.5)%




Interim dividend


0.70p


0.69p


1.4%




Basic earnings per share 


1.83p


1.99p


(8.0)%




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Stuart Paterson, Chairman of Macfarlane Group PLC ("Macfarlane Group" or "the Group"), today said: -
 
"Macfarlane Group has achieved a resilient performance in the first half of 2020 despite the challenging market conditions due to the impact of Covid-19.  The Board recognises this achievement is a testament to the exceptional contribution of our employees and wishes to take this opportunity to publicly thank the whole Macfarlane team for their hard work and commitment.  All our sites have remained open and trading throughout, albeit adjusted to service reduced demand, with social distancing and hygiene measures in place to protect the health, safety and well-being of our staff and our customers.  In addition, the majority of our office-based staff have been working successfully from home in accordance with our home working protocols.
Macfarlane Group sales decreased by 1.8% to £105.6m in the first half of 2020 (2019: £107.5m). Despite the impact of Covid-19 in the second quarter, our sales performance has been robust with the first half sales reduction versus the prior year comprising a 1.6% increase in sales in Q1 followed by a 5.2% fall in Q2. Profit before tax in the first half, at £3.6m, was 5.5% lower than in 2019 (2019: £3.8m) this excludes any benefit received from government support programmes as these have now been repaid.  Incremental costs of £0.2m were incurred in the first half of the year as a direct consequence of Covid-19. 
Packaging Distribution sales decreased by 1.7% in the first half of 2020 compared with 2019.  Sales increased by 3.0% in Q1 and decreased by 6.3% in Q2 compared to the equivalent periods in 2019.  Sales revenue was impacted by weaker demand from the automotive and high street retail sectors, although this was partially offset by underlying strength in the e-commerce, household and medical sectors.  First half sales also benefited from the 2019 acquisitions as well as the January 2020 acquisition of the packaging trade and assets of Armagrip Limited, ("Armagrip").  First half operating profit in Packaging Distribution of £4.0m was £0.4m below the equivalent period in 2019.
Sales in our Manufacturing Operations were 5.8% below 2019, with Q1 sales decreasing by 8.7% and Q2 sales falling by 2.9%.  Strong demand from the food, medical and household essentials sectors in the Labels business, particularly in the second quarter, was more than offset by weaker demand from the aerospace and automotive sectors in the Packaging Design and Manufacture business.  First half operating profit of £0.2m in our Manufacturing Operations was £0.2m below that achieved in 2019.
Group interest costs have decreased by £0.4m due to lower levels of bank debt and finance leases and a lower pension deficit in the first half of 2020 compared to the same period in 2019.
Net bank debt at 30 June 2020 was £0.8m, £11.9m below its 31 December 2019 level of £12.7m.  The improved cash position has been achieved through active management of working capital and reductions in the cost base.  The net debt of £0.8m has benefited by £5.4m from the various government support and deferral programmes, all of which we have repaid since 30 June 2020.  The Group is operating well within its existing bank facility of £30.0m.  We expect to pay an estimated £0.8m in deferred consideration, in the second half of 2020, relating to the acquisition of Ecopac in 2019.
The pension scheme deficit reduced to £6.0m at 30 June 2020 from £6.5m at 31 December 2019, mainly due to our continued payment of deficit reduction contributions during the six month period.  The reduction in the discount rate in the first six months was largely offset by strong investment returns, justifying the focus on liability-driven investments to match the scheme's liability profile.
There are still significant uncertainties and concerns over future economic conditions.  However, the Board is confident that, given the resilience of the business in the second quarter, the expected seasonal uplift in the final quarter and actions being taken to reduce operating costs, the Group will continue to progress in the second half of 2020.  The Board's current expectation for the full year in 2020 is largely dependent on: no further prolonged national or regional lockdowns; no abnormal bad debt exposure; and no significant reduction in consumer demand in the final quarter of the year, traditionally our busiest trading period.
As a key measure to conserve cash, the Board took the decision not to propose the 2019 final dividend of 1.76p per share, detailed in the preliminary announcement.  The Board recognises the importance of recommencing the payment of dividends to our shareholders as soon as possible.  Given the stronger than anticipated profit performance and cash position, the Board is recommending an interim dividend of 0.70p per share to be paid on 8 October 2020 to shareholders on the register as at 11 September 2020 (2019: 0.69p per share).
Despite the impact of Covid-19, our strategy remains the delivery of sustainable profit growth by focusing on added value products and services in our target market sectors, combined with the execution of value-enhancing acquisitions.  Macfarlane Group's performance in the first half of 2020 demonstrates the robust nature of our strategy and business model and we are confident that the Group is strongly positioned to effectively manage the challenges it will face in the remainder of 2020 and well placed to benefit when the UK economy begins to recover."
 




Further enquiries:


Macfarlane Group


Tel: 0141 333 9666




 


Stuart Paterson                 Chairman


 




 


Peter Atkinson                  Chief Executive


 




 


John Love                           Finance Director


 




 


Spreng Thomson


 




 


Callum Spreng


Mob: 07803 970103




Legal Entity Identifier (LEI):  213800LVRYDERSJAAZ73
 
 
 
Notes to Editors:
·      Macfarlane Group PLC is listed on the London Stock Exchange (LSE: MACF) in the Industrials Sector
·      The company is headquartered in Glasgow, Scotland and has more than 70 years' experience in the UK packaging industry.  Macfarlane Group's businesses are:
o  Packaging Distribution is the leading UK distributor of a comprehensive range of protective packaging products;
o  Manufacturing Operations which includes Labels who design and print high quality self-adhesive and resealable labels, principally for FMCG companies, and Packaging Design and Manufacture who design and produce protective packaging for high value, fragile products.
·      Macfarlane Group employs over 900 people at 31 sites, principally in the UK, but also in Ireland and Sweden.
·      The company has 15,000+ customers in the UK, Europe and the USA providing 600,000+ lines to a wide range of industry sectors including: consumer goods; food manufacturing; logistics; internet retail; mail order; electronics; defence and aerospace.
 
 
Interim Results - Management Report
Macfarlane Group's trading activities comprise Packaging Distribution and Manufacturing Operations.
Macfarlane's Packaging Distribution business is the UK's leading specialist distributor of protective packaging materials.  Macfarlane operates a stock and serve supply model from 25 Regional Distribution Centres ("RDCs") and three satellite sites, supplying industrial and retail customers with a comprehensive range of protective packaging materials and services on a local, regional and national basis.
Competition in the packaging distribution market is from local and regional protective packaging specialist companies as well as national/international distribution generalists who supply a range of products, including protective packaging materials.  In a fragmented market, Macfarlane competes effectively on a local basis through its strong focus on customer service, its breadth and depth of product offer and through the recruitment and retention of high-quality staff with good local market knowledge.  On a national basis Macfarlane has focus, expertise and a breadth of product and service knowledge, all of which enables it to compete effectively against non-specialist packaging distributors.
Packaging Distribution supports its customers by enabling them to ensure their products are cost-effectively protected in transit and storage through the supply of a comprehensive product range, single source stock and serve supply, just-in-time delivery, tailored stock management programmes, electronic trading and independent advice on both packaging materials and packing processes.




 


2020


2019




 


£000


£000




Sales


91,496


93,053




Cost of sales


62,013


65,103




 



 




 





Gross margin


29,483


27,950




Overheads


25,450


23,487




 



 




 





Operating profit


4,033


4,463




 



 




 





The main features of our first half performance in 2020 were: 
l Despite the challenges of Covid-19, existing business has remained resilient with weaker demand from customers in the automotive and high street retail sectors being offset by strong demand in the e-commerce and medical sectors;
l New business growth was subdued due to limited engagement with new prospects through the Covid-19 challenges, nevertheless there were some important new business wins in the period;
l Increasing numbers of customers switching to buying online either through our www.macfarlanepackaging.com shop or using our new Simplicit-e electronic trading platform;
l Positive impact from acquiring quality packaging distribution businesses in 2019 and 2020;
l An improved gross margin at 32.2% (2019: 30.0%) achieved through effective management of input price changes on paper-based products in the second half of 2019 flowing through into the first half of 2020;
l Progress in our "Follow the Customer" programme in Europe; and
l Overhead increases, primarily due to the impact of acquisitions (£1.0m), an increase in bad debt provisioning (£0.5m) and incremental Covid-19 related costs.
We expect sales to once again be weighted towards H2 reflecting the busiest trading period for internet retail customers, which will be a key contributor to our results in H2 2020.  The key areas we will focus on in the second half are:
l Prioritise engagement with potential new customers in stable and growing sectors such as e-commerce, medical and third party logistics;
l Invest in new technology to allow our sales teams to demonstrate our ability to add value for customers through ongoing implementation of our "Significant Six" sales approach to optimise their "Total Cost of Packaging" in both face-to-face and virtual environments;
l Accelerate implementation of our web-based solutions to allow customers access to our full range of products and services;
l Continue the good progress we have made in our "Follow the Customer" programme in Europe;
l Reduce operating costs through efficiency programmes in sales, logistics and administration;
l Maintain the focus on working capital management to facilitate future investment and manage effectively the bad debt risk which has increased in the current economic environment; and
l Supplement organic growth through progressing further suitable quality acquisitions.
Macfarlane's Manufacturing Operations comprises Packaging Design & Manufacture and Labels.




 


2020


2019




 


£000


£000




Sales


16,379


17,390




Cost of sales


11,043


12,099




 



 




 





Gross margin


5,336


5,291




Overheads 


5,105


4,881




 



 




 





Operating profit


231


410




 



 




 





The principal activity of the Packaging Design and Manufacture business is the design, manufacture and assembly of custom-designed packaging solutions for customers requiring cost-effective methods of protecting high value products in storage and transit.  The business operates from sites in Grantham and Westbury, supplying both directly to customers and also through Packaging Distribution's RDC network.
Key market sectors are defence, aerospace, medical equipment, electronics and automotive.  The markets in which we operate are highly fragmented, with a range of locally based competitors.  We differentiate our market offering through technical expertise, design capability, industry accreditations and national coverage through Macfarlane Packaging Distribution.
Packaging Design & Manufacture sales in H1 2020 decreased by 19.0% from the equivalent period in 2019 due to significantly weaker demand in the aerospace and automotive sectors.  As a result of the lower sales profit in H1 2020 is below the same period in 2019 and actions are in progress to realign the cost base.
Our Labels business designs and prints self-adhesive labels for major fast-moving consumer goods ("FMCG") customers in the UK and Europe and resealable labels for major customers in the UK, Europe and the USA.  The business operates from production sites in Kilmarnock and Wicklow and a sales and design office in Sweden, which focuses on the development and growth of our resealable labels business, Reseal-it.  The Labels business has a high level of dependence on a small number of major customers.  We have worked closely with these key customers over a long period to ensure high levels of service and to introduce product and service development initiatives to maintain competitive differentiation.
In H1 2020, sales at Macfarlane Labels were 6.7% higher than in 2019, mainly due to an increase in demand from existing customers in the food, household essentials and hygiene sectors.  Overhead costs have increased due to higher transportation costs servicing overseas customers.  Profit in H1 2020 is ahead of the same period in 2019. 
The priorities for the Manufacturing Operations in the second half of 2020 are to:
l Reduce the operating costs of the Design and Manufacture business in line with lower sales;
l Focus the Design & Manufacture sales team on growth sectors like Medical and Defence;
l Prioritise new sales activity on our higher added value bespoke composite pack product range;
l Continue to strengthen the relationship between our Design & Manufacture operations and our Packaging Distribution business to create both sales and cost synergies;
l Accelerate the Reseal-it growth momentum through improved geographic penetration, extending the product range and introducing Reseal-it to new product sectors; and
l Secure efficiency benefits from the installation of additional printing capacity in our Kilmarnock site in July 2020 to improve gross margins.
 
Summary and Future Prospects
Macfarlane Group's businesses all have strong market positions with differentiated product and service offerings.  We have a flexible business model and a clear strategic plan, being effectively implemented, which is reflected in consistent, profit and cash generation over a sustainable period.
Our future performance is largely dependent on our own efforts to grow sales, increase efficiencies and bring high quality acquisitions into the Group.  Whilst we have experienced significant challenges from the Covid-19 pandemic and there are still uncertainties ahead, our strategy and business model have proved resilient and robust.  We expect to deliver a solid sales and profit performance in 2020 and are well positioned to benefit as the economy recovers.
 
Risks and Uncertainties
The principal risks and uncertainties, which could impact on the performance of the Group, were outlined on pages 18 and 19 in our Annual Report and Accounts for 2019 (available on our website at www.macfarlanegroup.com) together with the mitigating actions.  These remain substantially the same for the remaining six months of the current financial year and are summarised below with the impact of the recent Covid-19 pandemic set out immediately underneath the table of risks: 
l The Group's businesses are impacted by commodity-based raw material prices and manufacturer energy costs, with profitability sensitive to supplier price changes including currency fluctuations.  The Group works closely with its supplier and customer base to manage effectively the scale and timing of these price changes and any resultant impact on profit;
l Given the multi-site nature of its business the Group has an extensive property portfolio comprising 3 owned sites and 36 leased sites, 3 of which are sub-let.  The portfolio can give rise to risks in relation to ongoing lease costs, dilapidations and fluctuations in value.  The Group adopts a proactive approach to managing property costs and exposures;
l The Group has a significant investment in working capital in trade receivables and inventories.  There is a risk that this investment is not fully recovered.  Rigour is applied to the management of trade receivables and inventories throughout the Group to mitigate these risks;
l The Group needs continued access to funding to meet its trading obligations and to support organic growth and acquisitions.  Although the current facility is only partly utilised, there is a risk that the Group may be unable to obtain funds or that such funds will only be available on unfavourable terms.  The Group's borrowing facility comprises a committed facility of £30 million with Lloyds Bank PLC, available until June 2022, which finances our trading requirements and supports controlled expansion, providing a medium-term funding platform for growth;
l The Group's defined benefit pension scheme is sensitive to a number of key factors; investment returns, discount rates used to calculate the scheme's liabilities and mortality assumptions.  Small changes in these assumptions could cause significant movements in the pension deficit.  The Group has sought to manage the volatility of the pension scheme deficit caused by these factors by undertaking exercises to reduce liabilities, more effectively match the investment profile with the liability profile and making contributions to reduce the deficit;
l In Packaging Distribution, the business model reflects a decentralised approach with a high dependency on effective local decision-making.  There is a risk that local decisions may not always meet overall corporate objectives. This is closely monitored using the Group's management information system, with regular reviews of performance for all locations; and
l The Group's growth strategy includes acquisitions as a key component.  There are risks that the availability of acquisitions may reduce, or that acquisitions may not perform as expected either immediately after acquisition or on subsequent integration.  Having made twelve acquisitions since 2014, the Group has well-established due diligence and integration processes and procedures and seeks to acquire quality businesses which will perform well in the Group.
Macfarlane Group has carried out scenario planning for the continuing effects of the Covid-19 pandemic considering impacts on sales, profitability, cash flow, bad debt risk and the health, safety and well-being of its employees.  These scenarios also assumed no further acquisition activity.  This is constantly under review and based on our experience to date we are confident the Group is robust enough to operate safely, profitably and within its borrowing facilities under all reasonable scenarios.
Macfarlane Group has also carried out an impact analysis and evaluated the potential short to medium-term implications of a no-deal Brexit including reversion to World Trade Organisation tariffs.  Where practical, we have put in place contingency measures to try to mitigate any immediate effects on our supply chain and these measures are being reviewed at regular intervals.  
The Group operates a formal framework for the identification and evaluation of the major business risks faced by each business and determines an appropriate course of action to manage these risks.
 
Cautionary Statement
This announcement has been prepared solely to provide additional information to shareholders to assess the Group's strategy and the potential for the strategy to succeed.  It should not be relied on by any other party or for any other purpose.
This report and the financial statements contain certain forward-looking statements relating to operations, performance and financial status.  By their nature, such statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future.  There are a number of factors, including both economic and business risk factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.  These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report.  Nothing in this Interim Results Statement should be construed as a profit forecast or an invitation to deal in the securities of the Group.
 
 
Responsibility Statement
 
The Directors of Macfarlane Group PLC during the first six months of 2020 were
S.R. Paterson                     Chairman
P.D. Atkinson                     Chief Executive 
J. Love                                 Finance Director
R. McLellan                        Non-Executive Director/Senior Independent Director
J.W.F. Baird                         Non-Executive Director
A.M. Dunstan                    Non-Executive Director
 
The Directors confirm that, to the best of their knowledge:-
(i)            the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
(ii)           the interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(iii)          the interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
 
Approved by the Board of Directors on 27 August 2020 and signed on its behalf by
 
…………………………..                            ………………………
Peter D. Atkinson                             John Love
Chief Executive                                 Finance Director
 
 
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2020
 




 


 


 


 


 


 


 




 


 


Six
months to
30 June
2020
£000


 


Six
months to
30 June
2019
£000


 


Year
to 31
December
2019
£000




 


Note


 


 


 


 


 




Continuing operations


 


 


 


 


 


 




Revenue


3


105,572


 


107,542


 


225,389




Cost of sales


 


(70,753)


 


(74,301)


 


(153,256)




 


 



 



 



 



 



 





Gross profit


 


34,819


 


33,241


 


72,133




Distribution costs


 


(4,171)


 


(4,204)


 


(8,441)




Administrative expenses


 


(26,384)


 


(24,164)


 


(50,062)




 


 



 



 



 



 



 





Operating profit


3


4,264


 


4,873


 


13,630




Finance costs


4


(642)


 


(1,041)


 


(1,606)




 


 



 



 



 



 



 





Profit before tax


 


3,622


 


3,832


 


12,024




Tax


5


(736)


 


(693)


 


(2,293)




 


 



 



 



 



 



 





Profit for the period


3


2,886


 


3,139


 


9,731




 


 



 



 



 



 



 





 


 


 


 


 


 


 




Earnings per share


7


 


 


 


 


 




  Basic 


 


1.83p


 


1.99p


 


6.17p




 


 



 



 



 



 



 





  Diluted 


 


1.82p


 


1.99p


 


6.16p




 


 



 



 



 



 



 





 


 


 


 


 


 


 




 
 
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2020




 


 


 


 


 


 


 




 
 


 
 
 


Six
months to
30 June
2020
£000


 


Six
months to
30 June
2019
£000


 


Year
to 31
December
2019
£000




Items that may be reclassified to profit or loss


Note


 


 


 


 


 




Foreign currency translation differences


 


67


 


(17)


 


(62)




Items that will not be reclassified to profit or loss


 


 


 


 


 


 




Remeasurement of pension scheme liability


10


(1,038)


 


(809)


 


537




Tax recognised in other comprehensive income


 


 


 


 


 


 




Tax on remeasurement of pension scheme liability


11


197


 


138


 


(92)




Long-term corporation tax rate change on deferred tax 


 
11


 
129


 


 
-


 


 
-




 


 



 



 



 



 



 





Other comprehensive (expense)/income for the period, net of tax


 


 
(645)


 


 
(688)


 


 
383




Profit for the period


 


2,886


 


3,139


 


9,731




 


 



 



 



 



 



 





Total comprehensive income for the period


 


2,241


 


2,451


 


10,114




 


 



 



 



 



 



 





 


 


 


 


 


 


 




 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2020
 




 


 
 
Note


Share
Capital
£000


Share
Premium
£000


Revaluation
Reserve
£000


Translation
Reserve
£000


Retained
Earnings
£000


 
Total
£000




 


 


 


 


 


 


 


 




At 1 January 2020


 


39,453


13,148


70


231


16,369


69,271




 


 



 




 




 




 




 




 





Comprehensive income


 


 


 


 


 


 


 




Profit for the period


 


-


-


-


 


2,886


2,886




Foreign currency translation differences


 


 
-


 
-


 
-


 
67


 
-


 
67




Remeasurement of pension scheme liability


 
10


 
-


 
-


 
-


 
-


 
(1,038)


 
(1,038)




Tax on remeasurement of pension scheme liability


 
11


 
-


 
-


 
-


 
-


 
197


 
197




Long-term corporation tax rate change on deferred tax


 
11


 
-


 
-


 
-


 
-


 
129


 
129




 


 



 




 




 




 




 




 





Total comprehensive income


-


-


-


67


2,174


2,241




 


 



 




 




 




 




 




 





Transactions with shareholders


 


 


 


 


 


 


 




Share-based payments


 


-


-


-


-


90


90




 


 



 




 




 




 




 




 





Total transactions with shareholders


-


-


-


-


90


90




 


 



 




 




 




 




 




 





 


 


 


 


 


 


 


 




At 30 June 2020


 


39,453


13,148


70


298


18,633


71,602




 


 



 




 




 




 




 




 





 
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2019
 




 


 
 
Note


Share
Capital
£000


Share
Premium
£000


Revaluation
Reserve
£000


Translation
Reserve
£000


Retained
Earnings
£000


 
Total
£000




 


 


 


 


 


 


 


 




At 1 January 2019


 


39,387


12,975


70


293


9,807


62,532




 


 



 




 




 




 




 




 





Comprehensive income


 


 


 


 


 


 


 




Profit for the period


 


-


-


-


-


3,139


3,139




Foreign currency translation differences


 


 
-


 
-


 
-


 
(17)


 
-


 
(17)




Remeasurement of pension scheme liability


 
10


 
-


 
-


 
-


 
-


 
(809)


 
(809)




Tax on remeasurement of pension scheme liability


 
11


 
-


 
-


 
-


 
-


 
138


 
138




 


 



 




 




 




 




 




 





Total comprehensive income


-


-


-


(17)


2,468


2,451




 


 



 




 




 




 




 




 





Transactions with shareholders


 


 


 


 


 


 


 




Dividends


6


-


-


-


-


(2,600)


(2,600)




Share-based payments


 


-


-


-


-


10


10




 


 



 




 




 




 




 




 





Total transactions with shareholders


-


-


-


-


(2,590)


(2,590)




 


 



 




 




 




 




 




 





 


 


 


 


 


 


 


 




At 30 June 2019


 


39,387


12,975


70


276


9,685


62,393




 


 



 




 




 




 




 




 





 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020




 


 
 
Note


Share
Capital
£000


Share
Premium
£000


Revaluation
Reserve
£000


Translation
Reserve
£000


Retained
Earnings
£000


 
Total
£000




 


 


 


 


 


 


 


 




At 1 January 2019


 


39,387


12,975


70


293


9,807


62,532




 


 



 




 




 




 




 




 





Comprehensive income


 


 


 


 


 


 


 




Profit for the year


 


-


-


-


-


9,731


9,731




Foreign currency translation differences 


 


 
-


 
-


 
-


 
(62)


 
-


 
(62)




Remeasurement of pension scheme liability


 
10


 
-


 
-


 
-


 
-


 
537


 
537




Tax on remeasurement of pension scheme liability


 
11


 
-


 
-


 
-


 
-


 
(92)


 
(92)




 


 



 




 




 




 




 




 





Total comprehensive income


-


-


-


(62)


10,176


10,114




 


 



 




 




 




2




 




 





Transactions with shareholders


 


 


 


 


 


 


 




Dividends


6


-


-


-


-


(3,689)


(3,689)




Share-based payments


 


-


-


-


-


75


75




Issue of share capital


 


66


173


-


-


-


239




 


 



 




 




 




 




 




 





Total transactions with shareholders


66


173


-


-


(3,614)


(3,375)




 


 



 




 




 




 




 




 





 


 


 


 


 


 


 


 




 


 



 




 




 




 




 




 





At 31 December 2019


 


39,453


13,148


70


231


16,369


69,271




 


 



 




 




 




 




 




 





 
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) AT 30 JUNE 2020




 


 


 


 


 


 


 




 


 


30 June
2020


 


30 June
2019


 


31 December
2019




 


Note


£000


 


£000


 


£000




Non-current assets


 


 


 


 


 


 




Goodwill and other intangible assets


 


61,857


 


60,795


 


62,663




Property, plant and equipment


 


9,248


 


9,221


 


9,621




Right of use assets


 


23,078


 


30,293


 


25,855




Trade and other receivables


 


35


 


56


 


35




Deferred tax assets


11


1,274


 


1,726


 


1,224




 


 



 




 




 



 



 





Total non-current assets


 


95,492


 


102,091


 


99,398




 


 



 




 




 



 



 





Current assets


 


 


 


 


 


 




Inventories


 


15,014


 


16,171


 


15,813




Trade and other receivables


 


44,641


 


48,867


 


52,044




Cash and cash equivalents


9


4,726


 


3,863


 


3,310




 


 



 




 




 



 



 





Total current assets


 


64,381


 


68,901


 


71,167




 


 



 




 




 



 



 





 


 



 




 




 



 



 





Total assets


3


159,873


 


170,992


 


170,565




 


 



 




 




 



 



 





Current liabilities


 


 


 


 


 


 




Trade and other payables


 


49,484


 


46,946


 


48,530




Current tax liabilities


 


756


 


860


 


1,084




Lease liabilities


 


5,384


 


6,249


 


6,321




Bank borrowings


9


5,542


 


18,811


 


15,984




 


 



 




 




 



 



 





Total current liabilities


 


61,166


 


72,866


 


71,919




 


 



 




 




 



 



 





Net current assets/(liabilities)


 


3,215


 


(3,965)


 


(752)




 


 



 




 




 



 



 





Non-current liabilities


 


 


 


 


 


 




Retirement benefit obligations


10


6,048


 


9,029


 


6,465




Deferred tax liabilities


11


3,256


 


3,119


 


3,242




Trade and other payables


 


22


 


24


 


22




Lease liabilities


 


17,779


 


23,561


 


19,646




 


 



 




 




 



 



 





Total non-current liabilities


 


27,105


 


35,733


 


29,375




 


 



 




 




 



 



 





 


 



 




 




 



 



 





Total liabilities


 


88,271


 


108,599


 


101,294




 


 



 




 




 



 



 





 


 



 




 




 



 



 





Net assets


3


71,602


 


62,393


 


69,271




 


 



 




 




 



 



 





Equity


 


 


 


 


 


 




Share capital


 


39,453


 


39,387


 


39,453




Share premium


 


13,148


 


12,975


 


13,148




Revaluation reserve


 


70


 


70


 


70




Translation reserve


 


298


 


276


 


231




Retained earnings


 


18,633


 


9,685


 


16,369




 


 



 




 




 



 



 





Total equity


 


71,602


 


62,393


 


69,271




 


 



 




 




 



 



 





 


 


 


 


 


 


 




 
 
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2020
 




 
 


 


Six
months to
30 June


 


Six months to
30 June


 


Year
to 31
December




 


 
Note


2020
£000


 


2019
£000


 


2019
£000




 


 


 


 


 


 


 




Profit before tax


 


3,622


 


3,832


 


12,024




Adjustments for:


 


 


 


 


 


 




   Amortisation of intangible assets


 


1,262


 


1,142


 


2,391




   Depreciation of property, plant and equipment


 


4,121


 


4,242


 


7,816




   Loss/(gain) on disposal of property, plant and equipment


 


 
32


 


 
(4)


 


 
5




   Share-based payments


 


90


 


-


 


75




   Finance costs


 


642


 


1,041


 


1,606




 


 



 



 



 



 



 





Operating cash flows before movements in working capital


 


 
9,769


 


 
10,253


 


 
23,917




   Decrease in inventories


 


1,080


 


1,164


 


2,006




   Decrease in receivables


 


7,609


 


3,003


 


1,178




   Increase/(decrease) in payables


 


1,021


 


(2,726)


 


(947)




   Pension contributions less current service costs 


 


(1,512)


 


(1,670)


 


(2,994)




 


 



 



 



 



 



 





Cash generated from operations


 


17,967


 


10,024


 


23,160




   Income taxes paid


 


(830)


 


(875)


 


(2,288)




   Interest paid


 


(585)


 


(916)


 


(1,375)




 


 



 



 



 



 



 





Net cash inflow from operating activities 


 


16,552


 


8,233


 


19,497




 


 



 



 



 



 



 





 


 


 


 


 


 


 




Investing activities


 


 


 


 


 


 




Acquisitions


8


(888)


 


(2,840)


 


(6,162)




Proceeds on disposal of property, plant and equipment


28


 


12


 


185




Purchases of property, plant and equipment


 


(627)


 


(1,295)


 


(2,648)




 


 



 



 



 



 



 





Net cash used in investing activities


 


(1,487)


 


(4,123)


 


(8,625)




 


 



 



 



 



 



 





 


 


 


 


 


 


 




Financing activities


 


 


 


 


 


 




Dividends paid


6


-


 


(2,600)


 


(3,689)




(Repayment)/drawdown of bank borrowings


 


(10,442)


 


1,042


 


(1,785)




Repayment of lease obligations


 


(3,207)


 


(3,300)


 


(6,699)




 


 



 



 



 



 



 





Net cash used in financing activities


(13,649)


 


(4,858)


 


(12,173)




 


 



 



 



 



 



 





 


 


 


 


 


 


 




Net increase/(decrease) in cash and cash equivalents


1,416


 


(748)


 


(1,301)




 


 


 


 


 


 


 




Cash and cash equivalents at beginning of period


 


3,310


 


4,611


 


4,611




 


 



 



 



 



 



 





Cash and cash equivalents at end of period


9


4,726


 


3,863


 


3,310




 


 



 



 



 



 



 





 
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2020
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 
1.         Basis of preparation
Macfarlane Group PLC is a public company listed on the London Stock Exchange, incorporated and domiciled in the United Kingdom and registered in Scotland.
The Group's annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.
This condensed set of financial statements has been prepared applying the accounting policies that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2019.  There were no major changes from the adoption of new IFRS's in 2020.
Judgements, assumptions and estimation uncertainties
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the period.  Due to the nature of estimation, the actual outcomes may well differ from these estimates.  No significant judgements have been made in the current or prior period.  The key sources of estimation uncertainty that have a significant effect on the carrying amounts of assets and liabilities are discussed below:
The determination of any defined benefit pension scheme liability is based on assumptions determined with independent actuarial advice. The key assumptions used include discount rate, inflation rate and mortality assumptions, for which a sensitivity analysis is provided in note 10.  The directors consider that those sensitivities represent reasonable sensitivities which could occur in the next financial period.
The provision held against trade receivables is based on applying an expected credit loss model and related estimates of recoverable amounts.  Whilst every attempt is made to ensure that the provision held against doubtful trade receivables is as accurate as possible, there remains a risk that the provision may not match the level of debt, which ultimately proves uncollectable.
Business activities, risks and financing
The Group's business activities, together with the factors likely to affect its future development, performance and financial position are set out in the Interim Management Report on pages 1 to 7.
The Group's principal financial risks in the medium term relate to liquidity and credit risk.  Liquidity risk is managed by ensuring that the Group's day-to-day working capital requirements are met by having access to committed banking facilities with suitable terms and conditions to accommodate the requirements of the Group's operations.  Credit risk is managed by applying considerable rigour in managing the Group's trade receivables. Although the current economic climate indicates an increased level of risk, the Directors believe that the Group is adequately placed to manage its financial risks effectively.
The Group's banking arrangement with Lloyds Bank PLC comprises a committed facility of £30 million, expiring in June 2022, secured over part of Macfarlane Group's trade receivables and bearing interest at commercial rates.  The facility has financial covenants for interest cover and trade receivables headroom.
The Directors have reviewed the Group's cash and revenue projections, which they believe are based on prudent market data and past experience taking account of reasonably possible changes in trading performance given current market and economic conditions including the impact of the ongoing Covid-19 pandemic. The Directors are of the opinion that these projections show that the Group should be able to operate within its current facilities and comply with its banking covenants. 
In assessing the going concern basis, the Directors have considered the Group's business activities, the financial position of the Group and the Group's risks and uncertainties.  The Directors have a reasonable expectation that, despite the current uncertain economic environment, the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report.  For this reason this condensed set of financial statements has been prepared on the going concern basis.
 
 
Approval and review of condensed financial statements
These condensed financial statements were approved by the Board of Directors on 27 August 2020.  As in previous years, the condensed set of financial statements for the half-year is unaudited.
2.         General information
Comparative figures for the year ended 31 December 2019 are extracted from Macfarlane Group's statutory accounts for 2019.  The information for the year ended 31 December 2019 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been reported on by the Company's auditor and delivered to the Registrar of Companies.  The report of the auditor on 27 February 2020 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
3.         Segmental information
The Group's principal business segment is Packaging Distribution, comprising the distribution of packaging materials and supply of storage services in the UK.  Other operations for the manufacture and supply of self-adhesive and resealable labels to a variety of FMCG customers in the UK, Europe and USA and the design, manufacture and assembly of timber, corrugated and foam-based packaging materials in the UK comprise one segment headed Manufacturing Operations.  None of the business segments within Manufacturing Operations represents more than 10% of Group revenue or profit.




 
 
 


Six months
to 30 June
2020
£000 


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




Group segment - total revenue


 


 


 




Packaging Distribution


91,496


93,053


196,706




Manufacturing Operations


16,379


17,390


34,016




Inter-segment revenue


(2,303)


(2,901)


(5,333)




 



 




 




 





Revenue


105,572


107,542


225,389




 



 




 




 





Trading results - continuing operations


 


 


 




Packaging Distribution


 


 


 




Revenue


91,496


93,053


196,706




Cost of sales


(62,013)


(65,103)


(135,525)




 



 




 




 





Gross profit


29,483


27,950


61,181




Net operating expenses


(25,450)


(23,487)


(48,775)




 



 




 




 





Operating profit


4,033


4,463


12,406




 



 




 




 





Manufacturing Operations


 


 


 




Revenue


16,379


17,390


34,016




Cost of sales


(11,043)


(12,099)


(23,064)




 



 




 




 





Gross profit


5,336


5,291


10,952




Net operating expenses


(5,105)


(4,881)


(9,728)




 



 




 




 





Operating profit


231


410


1,224




 



 




 




 





 




 


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




Operating profit - continuing operations


 


 


 




Packaging Distribution


4,033


4,463


12,406




Manufacturing Operations


231


410


1,224




 



 




 




 





Operating profit


4,264


4,873


13,630




Finance costs                     (note 4)


(642)


(1,041)


(1,606)




 



 




 




 





Profit before tax


3,622


3,832


12,024




Tax                                         (note 5)


(736)


(693)


(2,293)




 



 




 




 





Profit for the period


2,886


3,139


9,731




 



 




 




 





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 June
2020
£000


30 June
2019
£000


31 December
2019
£000




Total assets


 


 


 




Packaging Distribution


140,145


150,838


151,115




Manufacturing Operations


19,728


20,154


19,450




 



 




 




 





Total assets


159,873


170,992


170,565




 



 




 




 





Net assets


 


 


 




Packaging Distribution


63,235


54,276


60,607




Manufacturing Operations


8,367


8,117


8,664




 



 




 




 





Net assets


71,602


62,393


69,271




 



 




 




 





 




 
4.         Finance costs


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




 


 


 


 




Interest on bank borrowings


228


293


573




Interest on leases


357


623


802




Finance cost relating to defined benefit pension scheme (note 10)


 
57


 
125


 
231




 



 




 




 





Total finance costs


642


1,041


1,606




 



 




 




 





 




5.         Tax


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




Current tax


 


 


 




   UK corporation tax


529


611


2,057




   Foreign tax


32


68


104




   Prior year adjustments


(58)


(64)


(53)




 



 




 




 





Total current tax


503


615


2,108




 



 




 




 





Deferred tax      current year


(132)


78


185




                                Long-term corporation tax rate change


365


-


-




 



 




 




 





Total deferred tax                                                           (note 11)


233


78


185




 



 




 




 





 



 




 




 





Total tax


736


693


2,293




 



 




 




 





Tax for the six months ended 30 June 2020 has been charged at 19.00% (2019 - 19.00%) representing the best estimate of the effective tax charge for the full year.
 




6.         Dividends


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




Amounts recognised as distributions to equity holders in the period


 


 




Final dividend     (Nil per share)  (2018     1.65p per share)


-


2,600


2,600




Interim dividend                              (2019     0.69p per share)


-


-


1,089




 



 




 




 





Distributions in the period


-


2,600


3,689




 



 




 




 





An interim dividend of 0.70p per share, payable on 8 October 2020 was declared on 27 August 2020 and has therefore not been included as a liability in these condensed financial statements.
 




7.         Earnings per share
 
 
Earnings


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




Profit for the period from continuing operations


2,886


3,139


9,731




 



 




 




 





 


 


 


 




 
Number of shares '000


30 June
2020


30 June
2019


31 December 2019




Weighted average number of shares in issue for the 
purposes of basic earnings per share


 
157,812


 
157,548


 
157,636




Effect of Long-Term Incentive Plan awards in issue


358


114


393




 



 




 




 





Weighted average number of shares in issue for the 
purposes of diluted earnings per share


 
158,170


 
157,662


 
158,029




 



 




 




 





 


 


 


 




Basic earnings per share


1.83p


1.99p


6.17p




 



 




 




 





Diluted earnings per share


1.82p


1.99p


6.16p




 



 




 




 





 
8.         Acquisitions
On 6 January 2020, the Group's subsidiary, Macfarlane Group UK Limited ("MGUK") acquired the trade, selected assets and goodwill of the packaging distribution business of Armagrip for a cash consideration of £0.9m.
On 2 May 2019, MGUK acquired 100% of Ecopac (UK) Limited, for a maximum consideration of £3.9 million.  £3.1 million was paid in cash on acquisition and the deferred consideration of £0.8 million will be paid in 2020, as trading targets have been met in an agreed 12 month period after acquisition.  On 30 August 2019, Macfarlane Group PLC acquired 100% of Leyland Packaging Company (Lancs) Limited, for a maximum consideration estimated at £3.05 million.  £2.00 million was paid in cash and shares to the value of £0.25m issued to the Vendors on acquisition.  Deferred consideration of £0.8 million is payable in 2020, subject to certain trading targets being met in an agreed 12 month period after acquisition.
Contingent considerations are recognised as a liability in trade and other payables and are remeasured to fair value of £1.6 million at the balance sheet date based on a range of outcomes between £Nil and £1.8 million.  Trading in the post-acquisition periods supports the remeasured value of £1.6m.
All three businesses are packaging distributors, accounted for in the Packaging Distribution segment.  Goodwill arising 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 months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




 


 


 


 




Other intangible assets


298


1,701


3,313




Property, plant and equipment


-


701


1,194




Inventories


206


395


879




Trade and other receivables


282


1,170


1,797




Cash and bank balances


-


211


249




Bank borrowings


-


-


(149)




Trade and other payables 


-


(974)


(1,658)




Current tax liabilities


-


(91)


(235)




Lease liabilities  


-


(539)


(979)




Deferred tax liabilities


(57)


(311)


(599)




 



 




 




 





Net assets acquired


729


2,263


3,812




Goodwill


159


1,588


3,093




 



 




 




 





Total consideration


888


3,851


6,905




 


 


 


 




Contingent consideration on acquisitions       Current year


-


(800)


(1,600)




                                                                                  Prior years


-


-


1,207




Shares issued for non-cash consideration


-


-


(250)




 



 




 




 





Total cash consideration


888


3,051


6,262




 



 




 




 





Net cash outflow arising on acquisition


 


 


 




Cash consideration


(888)


(3,051)


(6,262)




Cash and bank borrowings acquired


-


211


100




 



 




 




 





Net cash outflow


(888)


(2,840)


(6,162)




 



 




 




 





 
 




9.         Notes to the cash flow statement


 


 


 


 




 


Cash and
cash
equivalents
£000


 
Bank
borrowing
£000


 
Lease
liabilities
£000


 
Total
debt
£000




Total debt


 


 


 


 




At 1 January 2019


4,611


(17,769)


(101)


(13,259)




Non-cash movements


 


 


 


 




         IFRS 16 transition on 1 January 2019


-


-


(29,701)


(29,701)




         New leases


-


-


(2,769)


(2,769)




         Acquisitions


-


-


(539)


(539)




Cash movements


(748)


(1,042)


3,300


1,510




 



 




 




 




 





At 30 June 2019


3,863


(18,811)


(29,810)


(44,758)




Non-cash movements


 


 


 


 




                Adjustments to IFRS 16 transition


-


-


1,738


1,738




                New leases


-


-


(854)


(854)




                Acquisitions


-


-


(440)


(440)




Cash movements


(553)


2,827


3,399


5,673




 



 




 




 




 





At 31 December 2019


3,310


(15,984)


(25,967)


(38,641)




Non-cash movements


 


 


 


 




          New leases


-


-


(403)


(403)




Cash movements


1,416


10,442


3,207


15,065




 



 




 




 




 





At 30 June 2020


4,726


(5,542)


(23,163)


(23,979)




 



 




 




 




 





 




Total cash movements for 2019


(1,301)


1,785


6,699


7,183




 



 




 




 




 





 




Net bank debt
 
 


 
 


 
 


 
 


Net bank
Debt
£000
 




At 30 June 2020


4,726


(5,542)


 


(816)




 



 




 




 





At 31 December 2019


3,310


(15,984)


 


(12,674)




 



 




 




 





 
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 based on the results of the triennial actuarial valuation as at 1 May 2017, updated to 30 June 2020, 31 December 2019 and 30 June 2019.  The scheme investments and the scheme's net liability position as calculated under IAS 19 are as follows:




 
Investment class


30 June
2020
£000


30 June
2019
£000


31 December
2019
£000




Equities


 


 


 




UK equity funds


7,520


7,330


8,913




Overseas equity funds


12,541


11,288


13,226




Multi-asset diversified growth funds


23,976


19,220


25,382




Bonds


 


 


 




Liability-driven Investment funds


32,694


33,601


27,688




Other investments


 


 


 




European loan fund


6,092


6,264


6,379




Secured property income fund


6,095


6,020


6,192




Cash


6,798


1,686


281




 



 




 




 





Fair value of Scheme investments


95,716


85,409


88,061




Present value of Scheme liabilities


(101,764)


(94,438)


(94,526)




 



 




 




 





Pension scheme deficit


(6,048)


(9,029)


(6,465)




 



 




 




 





These amounts were calculated using the following principal assumptions as required under IAS 19:
 




Assumptions 


30 June 2020


30 June 2019


31 December 2019




Discount rate


1.50%


2.20%


2.00%




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 2.85% for LPI


3% or 5% 
for fixed increases 
or 3.10% for LPI


3% or 5% 
for fixed increases 
or 2.95% for LPI




PIE take up rate


45%


45%


45%




Inflation assumption (RPI)


2.90%


3.20%


3.00%




Inflation assumption (CPI)


2.20%


2.20%


2.10%




Life expectancy beyond normal retirement age of 65


 


 




Male


23.4 years


23.6 years


23.3 years




Female


25.5 years


25.7 years


25.5 years




Average uplift for GMP service


0.40%


0.40%


0.40%




 




 


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31 December
2019
£000




Movement in scheme deficit in the period


 


 


 




At start of period


(6,465)


(9,765)


(9,765)




Current service cost


(62)


(62)


(112)




Employer contributions


1,574


1,732


3,106




Net finance cost


(57)


(125)


(231)




Re-measurement of pension scheme liability in the period


(1,038)


(809)


537




 



 




 




 





At end of period


(6,048)


(9,029)


(6,465)




 



 




 




 





 
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 


30 June
2020
£000


30 June
2019
£000


31 December
2019
£000




 


 


 


 




Discount rate movement of +0.4%


6,513


6,044


6,048




Inflation rate movement of +0.1%


(407)


(378)


(482)




Mortality movement of +0.1 year in age rating


305


283


284




Positive figures reflect a reduction in scheme liabilities and therefore a reduction in the scheme deficit.  
 




 


Six months
to 30 June
2020
£000


Six months
to 30 June
2019
£000


Year to 31
December
2019
£000




Movement in fair value of Scheme investments


 


 


 




Scheme investments at start of period


88,061


75,827


75,827




Interest income


879


1,062


2,109




Return on scheme assets (exc. amount shown in interest income)


 
7,021


 
8,525


 
11,154




Contributions from sponsoring companies


1,574


1,732


3,106




Contribution from scheme members


34


36


70




Benefits paid


(1,853)


(1,773)


(4,205)




 



 




 




 





Scheme investments at end of period


95,716


85,409


88,061




 



 




 




 





Movement in present value of Scheme liabilities


 


 


 




Scheme liabilities at start of period


(94,526)


(85,592)


(85,592)




Normal service costs


(62)


(62)


(112)




Interest cost


(936)


(1,187)


(2,340)




Contribution from scheme members


(34)


(36)


(70)




Actuarial loss due to the changes in financial and experience


(8,059)


(9,334)


(11,495)




Actuarial gain due to change in demographic assumptions


-


-


878




Benefits paid


1,853


1,773


4,205




 



 




 




 





Scheme liabilities at end of period


(101,764)


(94,438)


(94,526)




 



 




 




 





 
Investments
The Trustees review the scheme investments regularly and consult with the Company regarding any changes.  In the first half of 2020, surplus cash generated from the Liability-driven investment funds was held in cash funds at 30 June 2020, pending investment into the existing Multi-asset diversified growth funds in the second half of 2020.
Funding
Following the completion of the triennial actuarial valuation at 1 May 2017, Macfarlane Group PLC is paying deficit reduction contributions with a deficit recovery period of 7 years.  Contributions in 2020, inclusive of service costs and interest of £0.24 million, are expected to be £3.15 million.
The triennial actuarial valuation at 1 May 2020 has commenced and is likely to conclude in the first quarter of 2021. 
 




11.       Deferred tax 


Tax losses less
accelerated capital allowances
£000


 
Other intangible assets
£000


 
Retirement
Benefit
Obligations
£000


 
 
 
Total
£000




 


 


 


 


 




At 1 January 2019


(8)


(2,794)


1,660


(1,142)




Acquisitions


(22)


(289)


-


(311)




(Charged)/credited in income statement


 


 


 


 




                Current period


(10)


193


(261)


(78)




Credited in other comprehensive income


-


-


138


138




 



 




 




 




 





At 30 June 2019


(40)


(2,890)


1,537


(1,393)




Acquisitions


(15)


(273)


-


(288)




(Charged)/credited in income statement


 


 


 


 




            Current period


(111)


212


(208)


(107)




Charged in other comprehensive income


-


-


(230)


(230)




 



 




 




 




 





At 1 January 2020


(166)


(2,951)


1,099


(2,018)




Acquisitions


-


(57)


-


(57)




Credited/(charged) in income statement


 


 


 


 




                Current period


150


(107)


(276)


(233)




Credited in other comprehensive income


-


-


326


326




 



 




 




 




 





At 30 June 2020


(16)


(3,115)


1,149


(1,982)




 



 




 




 




 





 


 


 


 


 




Deferred tax assets


125


-


1,149


1,274




Deferred tax liabilities


(141)


(3,115)


-


(3,256)




 



 




 




 




 





At 30 June 2020


(16)


(3,115)


1,149


(1,982)




 



 




 




 




 





 
12.          Related party transactions
Related party transactions for 2019 are disclosed in note 28 of the 2019 Annual Report.  The directors are satisfied that other than the changes in the Retirement Benefit Obligations disclosed in note 10 above, there have been no changes which could have a material effect on the financial position of the Group in the first six months of the financial year.
Transactions between the Company and its subsidiaries 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 2020 will be disclosed in the Group's 2020 Annual Report.  Peter Atkinson and John Love hold option awards over 330,123 and 163,525 ordinary shares respectively under the Macfarlane Group PLC Long Term Incentive Plan awarded in 2019.
There are no other related party transactions during the six month period which require disclosure.
13.          Post balance sheet events
There are no post balance sheet events requiring disclosure.
14.          Interim Report
The interim report will be posted to shareholders on 11 September 2020.  Copies will be available from the registered office, 3 Park Gardens, Glasgow G3 7YE and available on the Company's website, www.macfarlanegroup.com, from that date.

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