REG - Macfarlane Group PLC - Half-year Report
25/08/2022 07:30
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RNS Number : 2006X Macfarlane Group PLC 25 August 2022
25 August 2022
MACFARLANE GROUP PLC
("MACFARLANE GROUP", "THE COMPANY", "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2022
Expectations for the full year unchanged;
managing inflationary environment; slowdown in e-commerce; progress in Europe
Restated(1)
Financial Highlights H1 2022 H1 2021 Increase
£000 £000 %
Continuing operations
Revenue 139,209 122,144 14%
Operating profit before amortisation(2) 11,384 10,817 5%
Operating profit 9,604 9,256 4%
Profit before tax 8,857 8,585 3%
Continuing and discontinued(1) operations
Profit for the period 6,888 6,041 14%
Interim dividend (pence) 0.90p 0.87p 3%
Basic earnings per share (pence) 4.36p 3.83p 14%
1 In accordance with IFRS5, 2021 has been restated to reflect the
result of the Labels division, sold on 31 December 2021, as a discontinued
operation.
2 See note 2 for reconciliation of alternative performance measure,
operating profit before amortisation, to operating profit.
Key highlights
· Sales from continuing operations(1) grew by 14% versus H1 2021 to
£139.2m.
· Operating profit at £9.6m and profit before tax at £8.9m, both from
continuing operations, increased by 4% and 3% respectively with revenue growth
partly offset by increased costs.
· Basic and diluted earnings per share were 4.36p per share (H1 2021:
3.83p per share) and 4.31p per share (H1 2021: 3.79p per share) respectively.
Packaging Distribution
· Achieved sales growth of 11% to £123.5m (H1 2021: £111.0m), with
recovery of input price increases and the benefits from the acquisitions of
Carters Packaging in March 2021 and PackMann in May 2022 offsetting lower
demand from e-commerce customers after the sector experienced a strong H1 last
year due to Covid-19 restrictions.
· Gross margin at 32.3% (H1 2021: 32.7%) was marginally behind a very
strong H1 2021 and reflects effective recovery of input price inflation.
· Operating profit before amortisation reduced by 2% to £8.9m (H1 2021:
£9.1m) due to cost increases of 14%. The key areas of increased costs were
inflationary pressures on labour and logistics, start-up costs for the
company's new North-west of England distribution centre and strategic IT
investments.
· The contribution from acquisitions was reduced by the expensing of
acquisition-related costs of £0.2m in H1 2022.
Manufacturing Operations
· Delivered strong growth, with sales increasing 40% to £15.7m (H1 2021:
£11.2m) and operating profit before amortisation increasing 44% to £2.5m (H1
2021: £1.7m). There was a continued strong performance from GWP, acquired in
February 2021, and recovery in the aerospace sector benefited the Macfarlane
Design and Manufacture business.
· The Group sold its Labels division in December 2021. Labels generated a
loss before tax of £0.1m in H1 2022 (H1 2021: Loss £0.8m) after finalisation
of the net asset position.
Group
· Net cash inflow from operating activities of £6.5m (H1 2021: £11.3m)
reflected significantly higher 2021 employee incentive payments paid in H1
2022 compared to the same period last year.
· The Group cash position continues to be managed well, enabling capital
investment and acquisitions to be funded through the committed bank debt
facility.
· The Group has reinvested the proceeds from the sale of the Labels
business into the acquisition of PackMann in Germany, strengthening the
platform from which it will accelerate the growth of the protective packaging
business in Northern Europe.
· Net bank debt on 30 June 2022 was £9.7m - a cash outflow of £12.1m
from 31 December 2021, including £9.1m of net investment in acquisitions and
disposals. The Group is operating well within its existing bank facility of
£30.0m which runs until 31 December 2025.
· Pension scheme surplus increased to £8.8m at 30 June 2022 (31 December
2021: £8.3m). The improvement is due to continued contributions from the
Group and an increase in the discount rate, offset by lower investment returns
in H1 2022. An additional contribution of £0.7m was paid into the pension
scheme in H1 2022 to satisfy the debt on exit of the Labels business.
· Interim dividend increased to 0.90p per share (H1 2021: 0.87p per
share) - to be paid on 13 October 2022 to shareholders on the register as at
16 September 2022.
Stuart Paterson, Chairman of Macfarlane Group PLC, today said: -
"Trading
The Group has achieved a solid performance in the first half of 2022,
especially when compared to a strong trading period in H1 2021. This has been
achieved against the backdrop of a slowdown in spend from the e-commerce
sector and significant inflationary pressure on operating costs. We have also
made strategic IT investments and incurred start-up costs on our new
North-west of England distribution centre. Our people have consistently
demonstrated commitment and operating excellence as the business continues to
grow and develop.
Outlook
We expect to experience a continuing challenging environment with inflationary
pressure on our operating costs and slower demand from our e-commerce
customers. Overall, the Group is confident that the effectiveness of our
strategy, the diversity of the customers and sectors we serve, the quality of
our people, and the resilience of our business model will ensure 2022 will be
another year of growth for Macfarlane. Our expectations for the full year 2022
are unchanged.
Board change
As set out in the Annual Report 2021, after over nine years on the Board, I am
standing down from the Board, effective 30 September 2022, and I am pleased to
announce my successor as Chair will be Aleen Gulvanessian.
Aleen joined the Board in October 2021 as Chair of the Remuneration Committee
and in a short time has made a significant contribution through her Corporate
legal background and extensive commercial and governance experience. Aleen was
selected after an extensive process involving a number of very capable
external candidates. We expect to make an announcement on a new Chair of the
Remuneration Committee shortly.
I wish Aleen, the Board and all of Macfarlane's employees continued success in
the future and thank them for their excellent support during my tenure as
Chairman and Non-executive Director of Macfarlane Group."
Further enquiries: Macfarlane Group Tel: 0141 333 9666
Stuart Paterson Chairman
Peter Atkinson Chief Executive
Ivor Gray
Finance Director
Spreng Thomson
Callum Spreng Mob: 07803 970103
Legal Entity Identifier (LEI): 213800LVRYDERSJAAZ73
Notes to Editors:
· Macfarlane Group PLC has been listed on the Premium
segment of the Main Market of the London Stock Exchange (LSE: MACF) since 1973
with over 70 years' experience in the UK packaging industry.
· Through its two divisions Macfarlane Group services a
broad range of business customers, supplying them high quality protective
packaging which help customers reduce supply chain costs, improve their
operational efficiencies and enhance their brand presentation. The divisions
are:
o Packaging Distribution - Macfarlane Packaging Distribution is the leading
UK distributor of a comprehensive range of protective packaging products; and
o Manufacturing Operations - Macfarlane Design and Manufacture who design
and produce protective packaging for high value and fragile products.
· Headquartered in Glasgow, Scotland, Macfarlane Group
employs over 1,000 people at 37 sites, principally in the UK, as well as in
Ireland, Germany and the Netherlands.
· Macfarlane Group supplies more than 20,000 customers
principally in the UK and Europe.
· In partnership with 1,700 suppliers, Macfarlane Group
distributes and manufactures 600,000+ lines across a wide range of sectors,
including: retail e-commerce; consumer goods; food; logistics; mail order;
electronics; defence, automotive 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 with a growing presence in
Europe. Macfarlane operates a stock and serve supply model in the UK,
Ireland, the Netherlands and Germany from 27 Regional Distribution Centres
("RDCs") and three satellite sites, supplying industrial and retail customers
with a comprehensive range of protective packaging materials 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. 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 market
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 benefits 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. Through the 'Significant Six' sales approach we reduce our
customers' 'Total Cost of Packaging' and their carbon footprint. This is
achieved through supplying effective packaging solutions, optimising
warehousing and transportation, reducing damages and returns and improving
packaging efficiency.
H1 2022 H1 2021
£000 £000
Sales 123,533 110,957
Cost of sales 83,627 74,727
Gross margin 39,906 36,230
Overheads 31,022 27,152
Operating profit before amortisation 8,884 9,078
Amortisation 1,379 1,293
Operating profit 7,505 7,785
The main features of our first half performance in 2022 were:
· Organic growth in the UK and Ireland of £8.6m has been achieved
through recovery in some industrial sectors, particularly in aerospace,
engineering and hospitality, and inflation in pricing, offset by a marked
reduction in demand from e-commerce customers and customers buying packaging
using our online shop, which benefited from the Covid-19 lockdowns in H1 2021.
· Our 'Follow the Customer' strategy in Northern Europe achieved £1.6m
of incremental sales through the Group subsidiary in the Netherlands, with the
business now generating profits.
· Sales growth of £2.4m was achieved from the acquisitions of Carters
Packaging, Cornwall, in March 2021 and PackMann, Germany, in May 2022. The
PackMann pre-acquisition costs of £0.2m were expensed in H1 2022.
· Effective management of significant input price increases across all
product categories in H2 2021 and H1 2022 has minimised the impact on gross
margins which have reduced marginally to 32.3% (H1 2021: 32.7%).
· The marginally lower operating profit in H1 2022 was primarily due to
overheads being higher than the same period in 2021. This is attributable to
the impact of inflation on staff and logistics costs, strategic IT investments
and start-up costs for our new distribution centre in the North-west of
England.
Interim Results - Management Report (continued)
The key areas we will focus on in H2 2022 are to:
· Prioritise engagement with potential new customers in sectors where we
see future growth opportunities such as e-commerce retail, medical,
scientific, and third-party logistics.
· Continue to effectively manage input price changes and supply chain
challenges as they arise.
· Maximise the benefits from our new "Packaging Optimiser" which was
launched to our sales teams to better demonstrate our ability to add value for
customers through our "Significant Six" sales approach.
· Achieve benefits from our information technology investments in
Microsoft Dynamics, Slimstock and Warehouse Management.
· Refine and extend our product range to ensure we continue to offer our
customers sustainable packaging solutions that reduce their carbon footprint.
· Introduce improvements to our web-based solutions to allow customers
access to our full range of products and services more easily.
· Accelerate the progress we have made in Europe through our "Follow the
Customer" programme and our recent acquisition of PackMann.
· Reduce operating costs through efficiency programmes in sales,
logistics and administration.
· Realise the benefits from our new distribution centre in the North-west
of England.
· Maintain the focus on working capital management to facilitate future
investment and manage effectively the ongoing bad debt risk within the current
economic environment.
· Supplement organic growth through progressing further high-quality
acquisitions in the UK and Europe.
Manufacturing Operations comprises our Packaging Design and Manufacture
business and GWP, acquired in February 2021.
Manufacturing Operations designs, manufactures, assembles and distributes
bespoke packaging solutions for customers requiring cost-effective methods of
protecting high value products in storage and transit. The primary raw
materials are corrugate, timber and foam. The businesses operate from four
manufacturing sites, in Grantham, Westbury, Swindon and Salisbury, supplying
both directly to customers and through the national RDC network of the
Packaging Distribution business.
Key market sectors are defence, aerospace, medical equipment, electronics,
automotive, e-commerce retail and household equipment. The markets we serve
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 the
Packaging Distribution business.
Restated(1)
H1 2022 H1 2021
£000 £000
Sales 15,676 11,187
Cost of sales 8,486 5,657
Gross margin 7,190 5,530
Overheads 4,690 3,791
Operating profit before amortisation 2,500 1,739
Amortisation 401 268
Operating profit 2,099 1,471
1 In accordance with IFRS5, 2021 has been restated to reflect
the result of the Labels division, sold on 31 December 2021, as a discontinued
operation.
Interim Results - Management Report (continued)
Sales in H1 2022 increased by £4.5m compared to the equivalent period in
2021. This consisted of organic growth of 19.0% (£0.9m), due mainly to
recovery in the aerospace (defence and commercial) sector, supplemented by
£3.6m of incremental sales from the acquisition of GWP. This growth, combined
with effective management of the gross margin and overhead costs reducing as a
percentage of sales, has contributed to a significant improvement in operating
profit in H1 2022 compared to H1 2021.
The priorities for Manufacturing Operations in the second half of 2022 are to:
· Focus the sales team on new business growth in target sectors e.g.,
medical and defence.
· Prioritise new sales activity on our higher added-value bespoke
composite pack product range.
· Effectively manage material price changes to minimise the impact on
gross margins.
· Continue to strengthen the relationship with our Packaging Distribution
businesses to create both sales and cost synergies.
· Commence the process of GWP working more closely with the Macfarlane
Packaging Design and Manufacture and Packaging Distribution businesses.
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 effective implementation of a strategic plan, which is reflected in
consistent profit growth and cash generation over a sustained 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 market conditions are challenging, our strategy and business model
continue to prove to be resilient. We expect to deliver another year of
profit growth in 2022.
Interim Results - Management Report (continued)
Risks and Uncertainties
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.
The principal risks and uncertainties which could impact on the performance of
the Group, together with the mitigating actions, were outlined on pages 20 to
23 in our Annual Report and Accounts for 2021 (available on our website at
www.macfarlanegroup.com (http://www.macfarlanegroup.com) ). These remain
substantially the same for the remaining six months of the current financial
year and are summarised below:
· Failure to respond to strategic shifts in the market, including the
impact of weaknesses in the economy as well as disruptive behaviour from
competitors and changing customer needs (e.g., the move towards online retail)
could limit the Group's ability to continue to grow revenues;
· Customers are increasingly focused on the environmental impacts of
packaging, changing their buying behaviours in response to climate and
sustainability concerns. Investors are looking to invest in companies that
demonstrate strong Environmental, Social and Governance (ESG) credentials.
There is increasing regulatory focus around reporting disclosures and new
requirements, such as the Plastic Tax which was introduced from April 2022. If
the Group is not proactive and transparent in how it is responding to
environmental changes, this could lead to a loss of employees, customers and
investors;
· The Group's businesses are impacted by commodity-based raw material
prices and manufacturer energy costs, with profitability sensitive to input
price changes including currency fluctuations. The principal components are
corrugated paper, polythene films, timber and foam, with changes to paper and
oil prices having a direct impact on the price we pay to our suppliers;
· The Group's growth strategy has included a number of acquisitions in
recent years. There is a risk that such acquisitions may not be available on
acceptable terms in the future. It is possible that acquisitions will not be
successful due to the loss of key people or customers following acquisition or
acquired businesses not performing at the level expected. This could
potentially lead to impairment of the carrying value of the related goodwill
and other intangible assets. Execution risks around the failure to
successfully integrate acquisitions following conclusion of the earn-out
period also exist;
· The Group has a property portfolio comprising 2 owned sites and 45
leased sites. This multi-site portfolio gives rise to risks in relation to
ongoing lease costs, dilapidations and fluctuations in value;
· The increasing frequency and sophistication of cyber-attacks is a risk
which potentially threatens the confidentiality, integrity and availability of
the Group's data and IT systems. These attacks could also cause reputational
damage and fines in the event of personal data being compromised;
· The Group needs continuous access to funding to meet its trading
obligations and to support organic growth and acquisitions. 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 up to £30m. This includes requirements to comply with
specified covenants, with a breach potentially resulting in Group borrowings
being subject to more onerous conditions;
· The Group has a significant investment in working capital in the form
of trade receivables and inventories. There is a risk that this investment
is not fully recovered; and
· The Group's defined benefit pension scheme is sensitive to a number of
key factors including investment returns, the discount rates used to calculate
the scheme's liabilities and mortality assumptions. Small changes in these
assumptions could cause significant movements in the pension
surplus/deficit.
Response to Covid-19 pandemic ("Covid-19")
The Group continues to respond to Covid-19 with the focus being on the safety
and wellbeing of our people, protecting our financial position and limiting
the interruption of service to our customers. Covid-19 was not classified as
a separate principal risk due to its pervasive effect across all the principal
risks and uncertainties. These uncertainties will remain for some time and
to date the Group has adapted well to the constantly changing conditions.
Response to Brexit
The new trading arrangement between the UK and the EU came into effect on 1
January 2021. Whilst there has been some disruption to the supply chain and
an increased administration burden, the impact on the Group has not been
significant - largely due to mitigation measures put in place. We continue to
monitor the impact of ongoing negotiations over the Northern Ireland protocol
and the full implementation of customs checks at ports which came into effect
from January 2022.
Interim Results - Management Report (continued)
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 condensed 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 2022 were
S.R. Paterson Chairman
P.D. Atkinson Chief Executive
I. Gray Finance Director
R. McLellan Non-Executive Director/Senior Independent
Director
J.W.F. Baird Non-Executive
Director
A. Gulvanessian 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 25 August 2022 and signed on its behalf
by
…………………………..
………………………
Peter D. Atkinson Ivor Gray
Chief Executive Finance Director
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Restated(1) ( )
Six Six Year
months to months to to 31
30 June 30 June December
2022 2021 2021
£000 £000 £000
Note
Continuing operations
Revenue 4 139,209 122,144 264,465
Cost of sales (92,113) (80,384) (174,998)
Gross profit 47,096 41,760 89,467
Distribution costs (5,169) (3,919) (8,651)
Administrative expenses (32,323) (28,585) (60,761)
Operating profit 4 9,604 9,256 20,055
Finance costs 5 (747) (671) (1,390)
Profit before tax 8,857 8,585 18,665
Tax 6 (1,882) (1,757) (4,917)
Profit for the period from continuing operations
4 6,975 6,828 13,748
Discontinued operations
Loss for the period from discontinued operations
(87) (787) (1,150)
Profit for the period 6,888 6,041 12,598
Earnings per share from continuing operations 9
Basic 4.41p 4.33p 8.71p
Diluted 4.36p 4.28p 8.62p
Earnings per share from continuing and discontinued operations 9
Basic 4.36p 3.83p 7.98p
Diluted 4.31p 3.79p 7.90p
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six Six Year
months to months to to 31
30 June 30 June December
2022 2021 2021
£000 £000 £000
Items that may be reclassified to profit or loss Note
Foreign currency translation differences 5 (89) (120)
Items that will not be reclassified to profit or loss
Remeasurement of pension scheme liability 12 (825) 4,831 8,212
Tax recognised in other comprehensive income
Tax on remeasurement of pension scheme liability 13 206 (918) (2,054)
Corporation tax rate change on deferred tax 13 - - 88
Other comprehensive income for the period, net of tax
(614) 3,824 6,126
Profit for the period 6,888 6,041 12,598
Total comprehensive income for the period 6,274 9,865 18,724
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Note Share Share Revaluation Own Translation Retained
Capital Premium Reserve Shares Reserve Earnings Total
£000 £000 £000 £000 £000 £000 £000
At 1 January 2022 39,453 13,148 70 - 171 42,052 94,894
Comprehensive income
Profit for the period - - - - - 6,888 6,888
Foreign currency
translation differences - - - - 5 - 5
Remeasurement of
pension scheme liability 12 - - - - - (825) (825)
Tax on remeasurement of
pension scheme liability 13 - - - - - 206 206
Total comprehensive income - - - - 5 6,269 6,274
Transactions with shareholders
Dividends 8 - - - - - (3,677) (3,677)
New shares issued 131 425 - (7) - - 549
Share-based payments - - - - - (212) (212)
Total transactions with
shareholders 131 425 - (7) - (3,889) (3,340)
At 30 June 2022 39,584 13,573 70 (7) 176 44,432 97,828
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2021
Share Share Revaluation Translation Retained Total
Note Capital Premium Reserve Reserve Earnings £000
£000 £000 £000 £000 £000
At 1 January 2021 39,453 13,148 70 291 26,816 79,778
Comprehensive income
Profit for the period - - - - 6,041 6,041
Foreign currency translation differences
- - - (89) - (89)
Remeasurement of pension scheme liability
12 - - - - 4,831 4,831
Tax on remeasurement of pension scheme liability
13 - - - - (918) (918)
Total comprehensive income - - - (89) 9,954 9,865
Transactions with shareholders
Dividends 8 - - - - (2,920) (2,920)
Share-based payments - - - - 410 410
Total transactions with shareholders - - - - (2,510) (2,510)
At 30 June 2021 39,453 13,148 70 202 34,260 87,133
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share Share Revaluation Translation Retained
Capital Premium Reserve Reserve Earnings Total
Note £000 £000 £000 £000 £000 £000
At 1 January 2021 39,453 13,148 70 291 26,816 79,778
Comprehensive income
Profit for the year - - - - 12,598 12,598
Foreign currency translation differences
- - - (120) - (120)
Remeasurement of pension scheme liability
12 - - - - 8,212 8,212
Tax on remeasurement of pension scheme liability
13 - - - - (2,054) (2,054)
Corporation tax rate change on deferred tax
13 - - - - 88 88
Total comprehensive income - - - (120) 18,844 18,724
2
Transactions with shareholders
Dividends 8 - - - - (4,293) (4,293)
Share-based payments - - - - 685 685
Total transactions with shareholders - - - - (3,608) (3,608)
At 31 December 2021 39,453 13,148 70 171 42,052 94,894
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) AT 30 JUNE 2022
30 June 30 June 31 December
2022 2021 2021
Note £000 £000 £000
Non-current assets
Goodwill and other intangible assets 79,447 77,024 74,902
Property, plant and equipment 7,591 9,497 6,101
Right of use assets 33,807 33,833 34,718
Trade and other receivables 35 35 35
Deferred tax assets 13 19 116 19
Retirement benefit surplus 12 8,847 4,566 8,267
Total non-current assets 129,746 125,071 124,042
Current assets
Inventories 25,150 22,111 21,269
Trade and other receivables 60,833 56,231 58,541
Cash and cash equivalents 11 6,804 7,215 12,315
Total current assets 92,787 85,557 92,125
Total assets 4 222,533 210,628 216,167
Current liabilities
Trade and other payables 61,184 59,056 60,975
Provisions 1,370 1,933 1,730
Current tax liabilities 524 1,871 771
Lease liabilities 11 6,139 7,173 6,364
Bank borrowings 11 16,473 15,897 9,840
Total current liabilities 85,690 85,930 79,680
Net current assets/(liabilities) 7,097 (373) 12,445
Non-current liabilities
Deferred tax liabilities 13 8,241 5,667 7,472
Trade and other payables 908 3,714 3,695
Provisions 1,848 1,365 1,848
Lease liabilities 11 28,018 26,819 28,578
Total non-current liabilities 39,015 37,565 41,593
Total liabilities 124,705 123,495 121,273
Net assets 4 97,828 87,133 94,894
Equity
Share capital 39,584 39,453 39,453
Share premium 13,573 13,148 13,148
Revaluation reserve 70 70 70
Own Shares (7) - -
Translation reserve 176 202 171
Retained earnings 44,432 34,260 42,052
Total equity 97,828 87,133 94,894
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Restated(1)
Six Six months to Year
months to 30 June to 31
30 June December
2022 2021 2021
Note £000 £000 £000
Profit/(loss) before tax from:
Continuing operations 8,857 8,585 18,665
Discontinued operations (87) (760) (938)
Total operations 8,770 7,825 17,727
Adjustments for:
Amortisation of intangible assets 1,780 1,561 3,311
Depreciation of property, plant, equipment 693 1,003 1,989
Depreciation of right-of-use assets 3,768 3,506 7,282
Goodwill impairment 7 - 987 987
Loss/(gain) on disposal of property,plant,equipment 132 (19) 43
Loss on disposal of subsidiaries 7 87 - 232
Share-based payment expense 337 410 685
Finance costs 747 710 1,390
Operating cash flows before movements in working capital
16,314 15,983 33,646
Increase in inventories (1,517) (4,288) (4,848)
Increase in receivables (586) (1,544) (7,892)
(Decrease)/increase in payables (2,923) 4,779 8,905
(Decrease)/increase in provisions (360) 275 1,884
Pension contributions less current service costs (1,322) (1,216) (1,533)
Cash generated from operations 9,606 13,989 30,162
Income taxes paid (2,322) (1,983) (4,975)
Interest paid (830) (700) (1,383)
Net cash inflow from operating activities 6,454 11,306 23,804
Investing activities
Acquisitions 10 (9,268) (12,238) (12,238)
Proceeds from sales of subsidiaries 166 - 5,212
Proceeds on disposal of property, plant and equipment 92 134 199
Purchases of property, plant and equipment (2,271) (1,063) (2,132)
Net cash flows from investing activities (11,281) (13,167) (8,959)
Financing activities
Dividends paid 8 (3,677) (2,920) (4,293)
Drawdown of bank borrowings 5,957 8,887 3,889
Repayment of lease obligations 11 (3,640) (3,363) (7,539)
Net cash flows from financing activities (1,360) 2,604 (7,943)
Net (decrease)/increase in cash and cash equivalents (6,187) 743 6,902
Cash and cash equivalents at beginning of period 12,123 5,221 5,221
Cash and cash equivalents at end of period 5,936 5,964 12,123
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Reconciliation to condensed consolidated cash flow statement
Six months to 30 June 2022 Six months to 30 June 2021 Year to 31 December 2021
£000 £000 £000
6,804 7,215 12,315
Cash and cash equivalents per the balance sheet 11
Bank overdraft (868) (1,251) (192)
Balances per the cash flow statement 5,936 5,964 12,123
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 for the year ended 31 December 2021
were prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the United Kingdom. This condensed set of interim
financial statements has been prepared in accordance with United Kingdom
adopted International Financial Reporting Standard IAS 34 Interim Financial
Reporting.
This condensed set of interim 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
2021. There were no major changes from the adoption of new IFRS's in 2022.
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. With the exception of the impairment in
historic goodwill in note 7, 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 asset or 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 12. 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.
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 December 2025, 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.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of preparation
Business activities, risks and financing
The Directors have reviewed the Group's cash and profit 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. 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 25 August 2022. As in previous years, the set of condensed financial
statements for the half-year is unaudited.
2. Alternative performance measure
In addition to the various performance measures defined under IFRS the Group
reports operating profit before amortisation as a measure to assist in
understanding the underlying performance of the Group and its businesses when
compared to similar companies. Operating profit before amortisation is not
defined under IFRS and, as a result, does not comply with Generally Accepted
Accounting Practice ("GAAP") and is therefore known as an alternative
performance measure. Accordingly, this measure, which is not designed to be
a substitute for any of the IFRS measures of performance, may not be directly
comparable with other companies' alternative performance measures. Operating
profit before amortisation is defined as operating profit before customer
relationships and brand values amortisation reconciled in the table below.
Restated(1) ( )
Six months Six months Year to 31
to 30 June to 30 June December
Continuing operations 2022 2021 2021
£000 £000 £000
Operating profit before amortisation 11,384 10,817 23,366
Customer relationships/brand values amortisation (1,780) (1,561) (3,311)
Operating profit 9,604 9,256 20,055
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
3. General information
Comparative figures for the year ended 31 December 2021 are extracted from
Macfarlane Group's statutory accounts for 2021. The information for the year
ended 31 December 2021 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 24 February 2022 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.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
4. 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 design, manufacture and assembly of timber,
corrugated and foam-based packaging materials in the UK comprise one segment
headed Manufacturing Operations.
Restated(1) ( )
Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Group segment - total revenue
Packaging Distribution 123,533 110,957 239,508
Manufacturing Operations 17,739 12,963 28,527
Inter-segment revenue (2,063) (1,776) (3,570)
Revenue 139,209 122,144 264,465
Trading results - continuing operations
Packaging Distribution
Revenue 123,533 110,957 239,508
Cost of sales (83,627) (74,727) (161,896)
Gross profit 39,906 36,230 77,612
Net operating expenses (31,022) (27,152) (57,915)
Operating profit before amortisation 8,884 9,078 19,697
Amortisation (1,379) (1,293) (2,642)
Operating profit 7,505 7,785 17,055
Manufacturing Operations
Revenue 15,676 11,187 24,957
Cost of sales (8,486) (5,657) (13,102)
Gross profit 7,190 5,530 11,855
Net operating expenses (4,690) (3,791) (8,186)
Operating profit before amortisation and impairment 2,500 1,739 3,669
Amortisation (401) (268) (669)
Operating profit 2,099 1,471 3,000
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
4. Segmental information (continued)
Restated(1) ( )
Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Operating profit - continuing operations
Packaging Distribution 7,505 7,785 17,055
Manufacturing Operations 2,099 1,471 3,000
Operating profit 9,604 9,256 20,055
Finance costs (note 5) (747) (671) (1,390)
Profit before tax 8,857 8,585 18,665
Tax (1,882) (1,757) (4,917)
(note 6)
Profit for the period from continuing operations 6,975 6,828 13,748
Loss for the period from discontinued operations (87) (787) (1,150)
Profit for the period 6,888 6,041 12,598
Restated(1) ( )
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Total assets
Packaging Distribution 192,221 168,638 185,111
Manufacturing Operations 30,312 30,106 31,056
Total assets 222,533 198,744 216,167
Net assets
Packaging Distribution 77,718 63,988 74,899
Manufacturing Operations 20,110 18,405 19,995
Net assets 97,828 82,393 94,894
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
Restated(1) ( )
5. Finance costs Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Interest on bank borrowings 279 227 414
Interest on leases 551 434 969
Finance (income)/cost relating to defined benefit pension scheme (note 12) (83) 10 7
Total finance costs from continuing operations 747 671 1,390
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
6. Tax Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Current tax
UK corporation tax 1,786 1,759 3,672
Foreign tax 113 122 245
Prior year adjustments (21) (10) 72
Total current tax 1,878 1,871 3,989
Deferred tax current year 4 (68) (76)
Prior year - (19) (61)
adjustments
Long-term - - 1,277
corporation tax rate change
Total deferred 4 (87) 1,140
tax
(note 13)
Total tax 1,882 1,784 5,129
Tax charge attributable to continuing operations 1,882 1,757 4,917
Tax charge attributable to discontinued operations - 27 212
Tax charge for the period 1,882 1,784 5,129
Tax for the six months ended 30 June 2022 has been charged at 19.00% (2021 -
19.00%) representing the best estimate of the effective tax charge for the
full year. Deferred tax assets and liabilities at 30 June 2022 have been
calculated based on the long-term corporation tax rate of 25%, which had been
substantively enacted at that date.
7. Discontinued operations Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Revenue - 11,369 21,220
Expenses (87) (12,129) (22,158)
Loss before tax (87) (760) (938)
Attributable tax expense - (27) (212)
Loss for the period from discontinued operations (87) (787) (1,150)
On 31 December 2021, the Group entered into a sales agreement to dispose of
Macfarlane Labels Limited and its subsidiaries Macfarlane Group Ireland
(Labels & Packaging) Limited and Macfarlane Group Sweden AB (collectively
"Macfarlane Labels"). The results of the discontinued operations, which have
been included as a single item of loss from discontinued operations for the
period, are set out above.
The loss for the six months to 30 June 2021 and the year to 31 December 2021
was after charging £987,000 of goodwill impairment.
The loss on disposal was £319,000, £87,000 recognised in the six months to
30 June 2022 and £232,000 recognised in the year to 31 December 2021. No loss
on disposal was recognised in the six months to 30 June 2021.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
8. Dividends Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Amounts recognised as distributions to equity holders in the period
Final dividend 2.33p per share (2021: 3,677 2,920 2,920
1.85 per share)
Interim - - 1,373
dividend
(2021: 0.87p per share)
Distributions in the period 3,677 2,920 4,293
An interim dividend of 0.90p per share, payable on 13 October 2022, was
declared on 25 August 2022 and has therefore not been included as a liability
in these condensed financial statements.
9. Earnings per share Restated(1) ( )
Six months Six months Year to 31
to 30 June to 30 June December
Earnings 2022 2021 2021
£000 £000 £000
Profit for the period from continuing operations 6,975 6,828 13,748
Loss for the period from discontinued operations (87) (787) (1,150)
Profit for the period from continuing and discontinued operations 6,888 6,041 12,598
30 June 30 June 31 December 2021
Number of shares '000 2021 2021
Weighted average number of shares in issue for the
purposes of basic earnings per share 157,987 157,812 157,812
Effect of Long-Term Incentive Plan awards in issue 1,834 1,627 1,627
Weighted average number of shares in issue for the
purposes of diluted earnings per share 159,821 159,439 159,439
Basic earnings per share from continuing operations 4.41p 4.33p 8.71p
Diluted earnings per share from continuing operations 4.36p 4.28p 8.62p
Basic earnings per share from discontinued operations (0.06)p (0.50)p (0.73)p
Diluted earnings per share from discontinued operations (0.05)p (0.49)p (0.72)p
Basic earnings per share from continuing and discontinued operations
4.36p 3.83p 7.98p
Diluted earnings per share from continuing and discontinued operations
4.31p 3.79p 7.90p
1 In accordance with IFRS5, 2021 has been restated to reflect the result
of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
10. Acquisitions
On 17 May 2022, Macfarlane Group PLC acquired 100% of PackMann Gesellschaft
für Verpackungen und Dienstleistungen mbH ("PackMann"), for a maximum
consideration of £7.4 million, excluding cash, bank balances and bank
borrowings. £5.9 million was paid in cash on acquisition and the deferred
consideration of £1.5 million is payable in the second quarters of 2023 and
2024, subject to certain trading targets being met in the two twelve-month
periods ending on 31 May 2023 and 2024 respectively. A recovery for closing
balance sheet adjustments is estimated to be £0.6 million receivable in H2
2022.
On 26 February 2021, Macfarlane Group UK Limited ("MGUK") acquired 100% of GWP
Holdings Limited ("GWP"), for a maximum consideration of £15.1 million,
excluding cash and bank balances retained. £10.0 million was paid in cash
on acquisition, in addition to the cash and bank balances retained, £2.2
million was paid in the first half of 2022 as the profit target for the first
twelve month period was met and a further £2.9 million is payable in 2023,
subject to the profit target being met in the second twelve-month period
ending on 28 February 2023. On 31 March 2021, MGUK acquired 100% of Carters
Packaging (Cornwall) Limited ("Carters"), for a maximum consideration of £4.5
million, excluding cash and bank balances retained. £3.0 million was paid
in cash on acquisition, in addition to the cash and bank balances retained,
£0.7 million was paid in the first half of 2022 as the profit target for the
first twelve month period was met and a further £0.8 million is payable in
2023, subject to the profit target being met in the second twelve-month period
ending on 31 March 2023.
Contingent considerations are recognised as a liability in trade and other
payables and are remeasured to fair value of £5.1 million at the balance
sheet date based on a range of outcomes between £Nil and £5.1 million.
Trading in the post-acquisition period supports the remeasured value of £5.0
million.
Carters and PackMann 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. GWP is a
packaging manufacturer, accounted for in the Manufacturing Operations
segment. Goodwill arising is attributable to the anticipated future
profitability of the manufacture of the Group's product ranges in the UK and
anticipated operating synergies from future combinations of activities within
the existing Manufacturing Operations. Fair values assigned to net assets
acquired and consideration paid and payable are set out below:-
Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
Net assets acquired £000 £000 £000
Other intangible assets 3,520 9,482 9,482
Property, plant and equipment 836 4,558 4,558
Inventories 2,364 1,965 1,965
Trade and other receivables 1,347 3,316 3,316
Cash and bank balances 290 3,877 3,877
Bank borrowings (730) - -
Trade and other payables (1,899) (4,148) (4,148)
Current tax liabilities (196) (427) (427)
Lease liabilities (739) (3,500) (3,500)
Deferred tax liabilities (971) (1,875) (1,875)
Net assets acquired 3,822 13,248 13,248
Goodwill 2,843 9,492 9,492
Total consideration 6,665 22,740 22,740
Contingent consideration on acquisitions Current year (767) (6,625) (6,625)
2,930 - -
Prior years
Total cash consideration 8,828 16,115 16,115
Net cash outflow arising on acquisition
Cash consideration (8,828) (16,115) (16,115)
Cash and bank borrowings acquired (440) 3,877 3,877
Net cash outflow (9,268) (12,238) (12,238)
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
11. Analysis of changes in net debt
Cash and
cash Bank Lease Total
equivalents borrowing liabilities debt
£000 £000 £000 £000
Total debt
At 1 January 2021 7,228 (7,766) (28,692) (29,230)
Non-cash movements
Acquisitions - - (3,500) (3,500)
New leases - - (868) (868)
Exchange movements - - 86 86
Lease modifications - - (4,381) (4,381)
Cash movements (13) (8,131) 3,363 (4,781)
At 30 June 2021 7,215 (15,897) (33,992) (42,674)
Non-cash movements
Disposals - - 1,363 1,363
New leases - - (8,235) (8,235)
Exchange movements - - 40 40
Lease modifications - - 1,706 1,706
Cash movements 5,100 6,057 4,176 15,333
At 31 December 2021 12,315 (9,840) (34,942) (32,467)
Non-cash movements
Acquisitions - - (739) (739)
Disposals - - 163 163
New leases - - (1,743) (1,743)
Exchange movements - - (4) (4)
Lease modifications - - (532) (532)
Cash movements (5,511) (6,633) 3,640 (8,504)
At 30 June 2022 6,804 (16,473) (34,157) (43,826)
Total cash movements for 2021 5,087 (2,074) 7,539 10,552
Net bank debt Net bank
Debt
£000
At 30 June 2022 6,804 (16,473) (9,669)
At 31 December 2021 12,315 (9,840) 2,475
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.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
12. Retirement benefit obligations
The figures below have been prepared by Aon based on the results of the
triennial actuarial valuation as at 1 May 2020 updated to 30 June 2021, 31
December 2021 and 30 June 2022. The scheme investments and the scheme's net
surplus position as calculated under IAS 19 are as follows:
30 June 30 June 31 December
Investment class 2022 2021 2021
£000 £000 £000
Equities
UK equity funds 7,304 8,942 9,392
Overseas equity funds 13,234 16,554 17,010
Multi-asset diversified growth funds 27,061 32,566 29,113
Bonds
Liability-driven Investment funds 14,314 24,883 30,531
Other investments
European loan fund 6,332 6,657 6,778
Secured property income fund 7,293 6,587 6,995
Cash 1,010 316 604
Fair value of Scheme investments 76,548 96,505 100,423
Present value of Scheme liabilities (67,701) (91,939) (92,156)
Pension scheme surplus 8,847 4,566 8,267
These amounts were calculated using the following principal assumptions as
required under IAS 19:
Assumptions 30 June 2022 30 June 2021 31 December 2021
Discount rate 3.80% 1.90% 1.90%
Rate of increase in pensionable salaries 0.00% 0.00% 0.00%
Rate of increase in pensions in payment 3% or 5% 3% or 5% 3% or 5%
for fixed increases for fixed increases for fixed increases
or 3.22% for LPI or 3.20% for LPI or 3.30% for LPI
PIE take up rate 65% 65% 65%
Inflation assumption (RPI) 3.30% 3.30% 3.40%
Inflation assumption (CPI) 2.80% 2.80% 2.90%
Life expectancy beyond normal retirement age of 65
Scheme member aged 55 22.9 years 22.8 years
Male 22.9 years
24.4 years 24.4 years
Female 24.5 years
Scheme member aged 65 Male 22.3 years 22.3 years 22.3 years
23.7 years 23.6 years 23.6 years
Female
Average uplift for GMP service 0.40% 0.40% 0.40%
Six months Six months Year to 31 December
to 30 June to 30 June 2021
2022 2021 £000
£000 £000
Movement in scheme surplus/(deficit) in the period
At start of period 8,267 (1,471) (1,471)
Current service cost (24) (95) (126)
Employer contributions 1,346 1,311 1,992
Past service costs (curtailed due to disposal of business) - - (333)
Net finance income/(cost) 83 (10) (7)
Re-measurement of pension scheme liability in the period (825) 4,831 8,212
At end of period 8,847 4,566 8,267
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
12. Retirement benefit obligations (continued)
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 surplus as
shown below:-
30 June 30 June 31 December
Assumptions 2022 2021 2021
£000 £000 £000
Discount rate movement of +0.6% 6,499 8,826 8,845
Inflation rate movement of +0.1% (339) (469) (470)
Mortality movement of +0.1 year in age rating 203 276 277
Positive figures reflect a reduction in scheme liabilities and therefore an
increase in the scheme surplus.
Six months Six months Year to 31
to 30 June to 30 June December
2022 2021 2021
£000 £000 £000
Movement in fair value of Scheme investments
Scheme investments at start of period 100,423 99,430 99,430
Interest income 947 663 1,332
Return on scheme assets (exc. amount shown in interest income) (23,758) (3,198) 1,273
Contributions from sponsoring companies 1,346 1,311 1,992
Contribution from scheme members 4 14 23
Benefits paid (2,414) (1,715) (3,627)
Scheme investments at end of period 76,548 96,505 100,423
Movement in present value of Scheme liabilities
Scheme liabilities at start of period (92,156) (100,901) (100,901)
Normal service costs (24) (95) (126)
Past service costs (curtailed due to disposal of business) - - (333)
Interest cost (864) (673) (1,339)
Contribution from scheme members (4) (14) (23)
Actuarial (loss)/gain due to the changes in financial and experience 22,933 8,029 6,939
Actuarial gain due to change in demographic assumptions - - -
Benefits paid 2,414 1,715 3,627
Scheme liabilities at end of period (67,701) (91,939) (92,156)
Basis of recognition of surplus
Macfarlane Group PLC, based on legal opinion provided, has an unconditional
right to a refund of surplus assets assuming the full settlement of plan
liabilities in the event of a wind up of the Macfarlane Group PLC Pension
& Life Assurance Scheme (1974) ('the Scheme'). Furthermore, in the
ordinary course of business the trustees have no rights to unilaterally wind
up the Scheme, or otherwise augment the benefits due to members of the
scheme. Based on these rights, any net surplus in the Scheme is recognised
in full.
Investments
The Trustees review the scheme investments regularly and consult with the
Company regarding any changes.
Funding
Following the completion of the triennial actuarial valuation at 1 May 2020,
Macfarlane Group PLC is paying deficit reduction contributions of £1.25
million per annum with a deficit recovery period of 4 years. The Group paid
a further £0.7 million into the scheme in H1 2022 to satisfy the debt agreed
with the trustees in relation to the cessation of Macfarlane Labels Limited as
a sponsoring employer.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
13. Deferred tax Tax losses less
accelerated capital allowances Other intangible assets Retirement
£000 £000 Benefit
Obligations Total
£000 £000
At 1 January 2021 (79) (2,876) 279 (2,676)
Acquisitions (73) (1,802) - (1,875)
Transferred to corporation tax (168) - - (168)
Exchange movement (1) - - (1)
Credited/(charged) in income statement
Current period 19 297 (229) 87
Charged in other comprehensive income
Remeasurement of pension scheme liability - - (918) (918)
At 30 June 2021 (302) (4,381) (868) (5,551)
Disposal 372 - - 372
Exchange movement 1 - - 1
(Charged) in income statement
Current period (390) (684) (153) (1,227)
(Charged)/credited in other comprehensive income
Remeasurement of pension scheme liability - - (1,136) (1,136)
Corporation tax rate change - - 88 88
At 1 January 2022 (319) (5,065) (2,069) (7,453)
Acquisitions - (971) - (971)
Credited/(charged) in income statement
Current period 4 341 (349) (4)
Credited in other comprehensive income - - 206 206
At 30 June 2022 (315) (5,695) (2,212) (8,222)
Deferred tax assets 19 - - 19
Deferred tax liabilities (334) (5,695) (2,212) (8,241)
At 30 June 2022 (315) (5,695) (2,212) (8,222)
14. Related party transactions
Related party transactions for 2021 are disclosed in note 27 of the 2021
Annual Report. The directors are satisfied that, other than the changes in
the Retirement Benefit Obligations disclosed in note 12 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 2022 will be
disclosed in the Group's 2022 Annual Report. Peter Atkinson and Ivor Gray
hold option awards over 1,055,972 and 463,112 ordinary shares respectively
under the Macfarlane Group PLC Long Term Incentive Plan awarded in 2020, 2021
and 2022. Peter Atkinson and Ivor Gray hold 180,875 and 30,770 ordinary
shares respectively after exercising option awards on 17 May 2022 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.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
15. Post balance sheet events
There are no post balance sheet events requiring disclosure.
16. Interim Report
The interim report will be posted to shareholders on 12 September 2022.
Copies will be available from the registered office, 3 Park Gardens, Glasgow
G3 7YE and available on the Company's website, www.macfarlanegroup.com
(http://www.macfarlanegroup.com) , from that date.
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