REG - Mpac Group PLC - Full Year Results
17/03/2022 07:00
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RNS Number : 1100F Mpac Group PLC 17 March 2022
17 March 2022
AIM: MPAC
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018
Mpac Group plc
("Mpac", "the Company" or "the Group")
Mpac, the global packaging and automation solutions Group, today announces its results for the 12 months to 31 December 2021
Strong performance in FY21 with results exceeding market expectations and FY22
has started on track
Financial Highlights
· Order intake of £117.9m (2020: £83.9m) contributing to a
closing order book of £78.4m (2020: £55.5m)
· Group full year revenue up 13% to £94.3m (2020: £83.7m)
· Increase in operating margins, with underlying operating return
on sales 9.3% (2020: 7.8%)
· Underlying profit before tax up 36% to £8.6m (2020: £6.3m)
· Underlying earnings per share of 39.7p (2020: 31.4p)
· Statutory profit before tax of £8.2m (2020: £2.9m)
· Basic earnings per share of 39.1p (2020: 20.8p)
· Cash of £14.5m (2020: £15.5m)
Operational and Strategic Highlights
· Americas region continues to perform well alongside an improving
outlook in EMEA, driving a significant increase in the value of the closing
order book
· Further progress made in the integration of Mpac Switchback with
trading exceeding management expectations
· Mpac USA headquarters and showcase facility opened in Q3 2021
· Regional Service strategy continues to develop through the use of
digital solutions with good progress in the Americas
· One Mpac unified business processes strategy reached a milestone
with go-live of global ERP systems at UK and Canada sites, achieving early
benefits of shared resources
· Development of Mpac Cube offering - a suite of digital products to
enhance our customers connectivity, productivity and sustainability
· Contract secured with FREYR Battery, a developer of
next-generation battery cell production capacity, for the design and build of
a development line
· New 'go to market' proposition underpinned with Group-branded
website (www.mpac-group.com (http://www.mpac-group.com) )
Tony Steels, Chief Executive, commented:
"I am pleased to report Mpac made strong progress in the year, delivering
significant growth in order intake, order book and a financial performance for
2021 exceeding market expectations. In the year the Group surpassed the
milestone of generating more than £100m of order intake and grew operating
margins significantly over the prior year. The positive first half 2021
performance continued, and the Group ended 2021 with both a strong closing
order book and a healthy prospect pipeline, providing an encouraging outlook
for 2022. I would like to thank our global team, who excelled in challenging
circumstances and who continue to demonstrate agility and customer focus"
For further information, please contact:
Mpac Group plc Tel: +44 (0) 2476 421100
Tony Steels, Chief Executive
Will Wilkins, Group Finance Director
Shore Capital (Nominated Adviser & Broker) Tel: +44 (0) 20 7408 4050
Advisory
Patrick Castle
Iain Sexton
Broking
Henry Willcocks
Hudson Sandler Tel: +44 (0) 20 7796 4133
Nick Lyon / Nick Moore
OPERATING REVIEW
Tony Steels
Introduction
2021 has been a very successful year for Mpac in which we continued to make
substantial progress with our strategic plans and have delivered order intake,
margin and revenue growth, an improved return on sales, growth in underlying
profit before tax and a significantly higher closing order book. The 2020
acquisition of Switchback was a significant contributor to the 2021 revenue
growth. The progress we made in 2021 is a direct result of the dedication and
agility of our employees in maintaining support for our customers while
ensuring that the Group continued to operate efficiently, with minimal
disruption, despite the operational challenges caused by lengthening global
supply chain lead times, materials price increases and the impact on labour
availability due to Covid-19 related issues.
The strong financial performance in the year was driven by the Group's
continued progress in delivering on the 'One Mpac' business model. The Group
remains focused on executing its long-term strategy, including developing
Original Equipment ("OE") order intake growth, and improving margins through
our Service business and increased operational efficiencies. Delivery of these
strategic initiatives contributed to an improved financial performance and
underlying profit before tax for the year exceeding market expectations.
Since acquiring Switchback Group Inc ("Switchback") in September 2020 the
business has made great progress with the integration and is generating
synergies. The acquisition is a compelling fit with Mpac's strategic intent of
being a market leader in the provision of full-line packaging solutions for
the healthcare and food & beverage sectors. Critically, the acquisition
accelerated our expansion into the Americas market and, with the move to a
Showcase facility in September 2021 and the rebranding to Mpac, it provides a
physical location for the Group to further grow our Langen and Lambert product
lines in the region. The business continues to trade ahead of management
expectations.
As announced in July 2021, the Group signed a contract with FREYR Battery
("FREYR"), a developer of clean, next-generation battery cell production
capacity, for the supply of casting and unit cell assembly equipment to the
battery cell production line at FREYR's Customer Qualification Plant in
Norway. The equipment to be supplied by Mpac will support FREYR in achieving
its ambitious growth plans for a more sustainable future, with Mpac providing
equipment, services and know-how to industrialise the battery cell
production. This development line is due to be completed in Q4 2022.
Our innovation focus in 2021 was directed towards enhancing our range of end
of line packaging, full line medical devices and healthcare solutions and in
developing our clean energy battery automation offering. Our end of line case
packaging products have been approved by a global blue chip customer as their
preferred solution. We launched the Mpac Cube in the year which brings
together all our existing service products with a suite of digital
technologies aimed at providing our customers Industry 4.0 capabilities to
enhance their productivity.
Our search for further complementary acquisition targets continues; however,
management focus remains on delivering organic growth and extending our
commercial reach to new customers with new products and services, supported by
a comprehensive, market-led development roadmap. We remain a relatively small
player in a multi-billion revenue market with growth prospects.
The business fundamentals of Mpac are strong, and I am excited about the next
phase for the Group. With the opportunities within the clean energy sector
together with an enhanced position in the growing healthcare and food &
beverage sectors, we remain on track to meet the objectives of our long-term
strategy.
Trading
The trading performance in 2021 was strong.
Group revenues of £94.3m (2020: £83.7m) represent an increase of 13%
compared to the previous year (1% growth on a like-for-like basis). OE revenue
grew by 16% to £74.1m, supported by strong growth in the Americas and
healthcare sector. Services revenue grew by 3% to £20.2m, driven mainly by
growth in EMEA. The rate of revenue growth in all regions and for both OE and
Service was impacted by lengthening supply chain lead times and, particularly
in Q4 2022, by the impact on labour availability due to Covid-19.
Overall order intake for the Group grew by 41% to £117.9m (38% growth
excluding the effect of the Switchback acquisition ("like-for-like")), with a
significant increase in order intake from our OE business. The increase in
order intake drove a rise in the value of the closing 2021 order book to
£78.4m (2020: £55.5m), with increased customer diversification. The
increased value of the closing order book provides extensive coverage over the
forecast 2022 revenue. We remain vigilant to project execution risk and are
confident that the quality of the order book should result in continued margin
growth.
During 2021 we raised market profit guidance in the half year results
announcement and I am delighted to report that underlying profit before tax in
2021 was £8.6m, an increase of 36% compared to £6.3m in 2020.
We ended the year with cash of £14.5m, providing the Group with the financial
resources required to invest in the strategic initiatives to deliver
profitable growth in future years.
The Group aims to achieve double digit percentage revenue growth over the
medium-term, enabling an improved return on sales, targeted at 10%. Underlying
operating return on sales rose from 7.8% in 2020 to 9.3% in 2021, highlighting
the success of the Group's strategy. To support this intent, we manage the
business in two parts, OE and Service and across three regions, Americas, EMEA
and Asia.
Revenue by region was Americas £63.3m (2020: £46.7m), EMEA £26.7m (2020:
£31.3m) and Asia £4.3m (2020: £5.7m).
Revenue by sector was food & beverage £45.3m (2020: £34.8m), healthcare
£45.3m (2020: £44.5m), pharmaceutical £3.7m (2020: £3.9m).
Individual OE contracts, and to a lesser extent the Service business, can be
large. Accordingly, a few significant orders can have a disproportionate
impact on the growth rates seen in individual sectors and regions from year to
year.
Original Equipment
OE order intake of £96.0m (2020: £62.4m) was 54% above the prior year (54%
on a like-for-like basis). OE revenues of £74.1m (2020: £64.1m) were 16%
above the prior year (4% on a like-for-like basis).
Mpac's focus remains in the growth sectors of healthcare and food &
beverage which continue to drive our success.
OE revenue generated in the Americas region was 48% above the prior year at
£53.4m (2020: £36.2m), and 26% above prior year on a like for like basis.
The increase in revenue was primarily generated from customers in the food
& beverage sector and from both Langen and Lambert products, alongside the
inclusion of full year revenue from the Switchback product line.
In EMEA, OE revenue in the year was £17.4m (2020: £23.7m) with the reduction
due primarily to the timing of order placement from customers in the region.
Revenue in the region is generated by our Lambert and Langen product ranges,
with an increase in production from the Wijchen NL site associated with
machines sold into the Americas region. Covid-19 related restrictions were
much more impactful in the EMEA region.
In Asia, revenue, which is predominantly associated with orders from customers
in the food & beverage sector, was £3.3m compared to £4.2m in 2020. The
region retained pandemic-related travel restrictions for the majority of the
year, reducing opportunities for business development.
Service
Order intake for the Service division was 2% above 2020 at £21.9m (2020:
£21.5m). Growth in order intake in the Americas region offset a reduction in
order intake in EMEA.
Revenue in 2021 of £20.2m was 3% above the prior year (2020: £19.6m), with
growth mainly from the EMEA region and from the food & beverage sector.
Service revenue in the Americas was £9.9m compared to £10.5m in 2020 with
the reduction due mainly to the timing of large individual orders. EMEA
revenue in the year was £9.3m compared to £7.6m in 2020. Asia revenue in the
year was £1.0m compared to £1.5m in 2020, with the Asia region impacted by
the continued pandemic related travel restrictions.
Overall order prospects remain strong and the total OE and Service closing
order book is 41% above the opening order book and customer activity levels
remain robust across each region and sector.
Pandemic
Managing supply chain lead times and securing parts availability is a daily
challenge to our Operations and Project Management teams. Several OE project
build lead times were extended in the year due to supplier parts and material
delays, which we actively manage with our customers. The impact has been
largely mitigated by the Group's robust and secure supplier relationships;
however, the global shortage of certain electrical components is expected to
continue into H1 2022.
In addition, travel restrictions implemented to limit the spread of the
pandemic, particularly in EMEA and APAC, continued to make completing on-site
service work and installation and commissioning of equipment challenging. To
mitigate this, we utilise digital solutions to provide services remotely to
ensure high customer service levels are maintained. Mpac is well positioned to
service these essential sectors and the business continues to act proactively
to promote the range of newly developed products and to offer the customers
creative and flexible digital solutions for remote machine acceptance and
servicing.
The Board of Mpac continues to monitor the situation carefully across our
customer, supplier, and employee base.
'One Mpac' business model
Core to our five-year strategic plan is the evolution to a single entity
business model. We have operations around the world and industry-leading
technologies and innovation which is highly valued by our customers. None of
that is possible, of course, without the commitment of our people. Having a
highly skilled, technical workforce in place and ensuring everyone can
contribute at their highest level and grow in their position over the long
term enables us to win as a team. Through 'One Mpac' we are developing
leaders, whilst engaging and empowering our global workforce. With strong
leaders, engaged people and common processes we strengthen the organisation
and create value for our customers and shareholders.
Strategic update
The implementation of our strategic plans and continued focus on increasing
the scale and diversity of the Group is the driver to Mpac reporting growth in
order intake, revenue, and underlying profitability during a challenging year
in which all our sites were impacted by lengthening global supply chain lead
times, price increases and the availability of labour due to the Covid-19
resurgence.
Our strategy focuses on three key initiatives to drive growth:
Going for Growth - Offering customers comprehensive "Automation Ecosystems"
solutions in our target sectors.
Make Service a Business - Providing customers with a comprehensive portfolio
of service products to ensure they maximise their return on investment; and
Operational Efficiency - Operational excellence and flexibility of supply
chain to increase responsiveness to investment cycles.
Going for Growth
Our goal remains to grow Group revenue by a double digit rate year on year.
The overall market is huge and has fundamental growth drivers.
During 2021 we established a regional sales approach supported by our single
entity model, 'One Mpac', offering innovative packaging machinery solutions
from our extensive portfolio of engineered modules, which is delivering a
wider range of machines into new and existing customers. Expansion in the
Americas region continued with the move in 2021 into a new US headquarters and
showcase facility from which Mpac can promote, demonstrate, and configure the
Lambert, Langen and Switchback product ranges to local customers. Cross
selling of the existing product and service offering to new and existing
customers will be a key driver of growth in 2022, through ensuring we better
understand the customers' evolving needs and extend our proposition with a
broader solution approach.
The Group has undertaken a review of our market approach and digital platform
customer proposition and as a result, Mpac launched a new Group-branded
website (www.mpac-group.com) and aligned its commercial approach to the wider
Mpac product line websites. Our go to market approach is now under a unified
Mpac brand supported by strong product lines, covering all aspects of
automation and packaging solutions. This has been supported by a social media
campaign, resulting in a significant uptick in followers and lead generation.
Innovation remains the key to long term sustainable growth. During 2021 we
have developed technologies to support our solutions for the clean energy
sector in collaboration with 24M and FREYR Battery and have launched the Mpac
Cube, which incorporates innovations focused on improved machine performance,
digital enhancements plus further Industry 4.0 enabled technology.
Furthermore, we have continued to expand our full line solutions for
automation and packaging in the healthcare market and expansion of our end of
line offering for the food & beverage sector.
Make Service a Business
Our updated five-year Service strategic growth plan complements the OE growth
initiatives and is built around a world class Service support function which
uses innovative digital technologies, complemented by in-person field-based
support from a local operating model. Our goal is to generate 30% of our
revenue from services.
Our customers have an extensive globally installed base which they expect to
run continuously at high levels of overall equipment effectiveness. The trends
within Industry 4.0 and its enabling technological platforms support our
strategy to work with our customers to ensure they maximise their return on
investment throughout the life-cycle of the equipment. We launched our
Services product line during the year under the brand Mpac Cube. This brings
together all our existing service products with a suite of digital
technologies aimed at providing our customer Industry 4.0 capabilities to
enhance their productivity.
Throughout the pandemic the requirement from customers for digital technology
and remote support offerings increased significantly and Mpac was able to
fulfil this demand and offer solutions for customers, which ensured that most
lost or deferred 'on-site' Service revenues were mitigated with alternative
remote revenue streams. Mpac has now embedded these tools into our Service
product range.
As part of our strategic plan to provide local support to global customers, in
2021 we further enhanced our Service model in the Americas region with the
formation of an Americas healthcare service business unit, which provides
proactive and responsive technical support specific to the installed machine
base and product offering in the healthcare sector.
Operational Efficiency
Our goal is to be a flexible organisation which can respond quickly and with
agility to our customer needs, leveraging our global internal resources as
one. This is achieved through organisational excellence, underpinned by a
global supply chain and supported by a single business model, 'One Mpac'. The
cross utilisation of resources is now fully embedded within the Group's
operations.
In early 2021 we deployed our global ERP and business systems blueprint to our
facilities in Mississauga, Canada and Tadcaster, UK, which will support the
strategy to leverage the earlier deployments of common engineering design
platforms to our manufacturing sites and the initial ERP system at our
facility in the Netherlands.
Environmental, Social & Governance
We are fully committed to improving our Environmental, Social & Governance
(''ESG'') performance in all areas and we are pleased with our early progress.
Sustainability is at the core of the Mpac business model. Our engineered
automation and packaging solutions provide customers in the healthcare and
food & beverage sector with sustainable and environmentally sound
equipment that support the global megatrends of reductions in packaging use,
particularly single-use plastic packaging, and energy-efficient machinery. Our
end-to-end capabilities help environmentally focused businesses meet their ESG
targets and our evolving innovative solutions offer our customers
opportunities to achieve their sustainability goals.
There is an inverse relationship between Mpac's scope of influence and the
sustainability impact of the packaging industry. The highest potential to
drive carbon footprint reductions in the value chain is downstream, where
Mpac's leverage is to drive productivity improvements through our service
products.
We encourage the culture and adoption of continuous improvement in
sustainability.
Acquisition strategy and update
The Board continues to seek and evaluate potential acquisition opportunities,
the focus of which is to find businesses that will enhance our customer
proposition in automation and packaging solutions by extending our product
range and our access to a broader range of customers in our market sectors,
adding value to the Group. A number of opportunities are currently under
evaluation and further updates will be provided as appropriate.
Outlook
The Group made substantial progress in 2021 in delivering our five-year
strategic plan with the strong financial performance underpinned by the
Group's progress in realising the benefits of the 'One Mpac' business model.
The Group remains focused on executing its long-term strategy of delivering OE
order intake growth and improved margins, increasingly through our digital
services customer offering, together with increased operational efficiencies.
We announced in July 2021 that Mpac was awarded a contract with FREYR Battery
to develop and build a clean energy casting and unit cell assembly line and
this project has the potential to open the clean energy sector to Mpac in
2022. We remain focused on delivering this first development line and
establishing Mpac's position as a trusted partner to provide battery assembly
automation in this exciting and rapidly developing market.
Our opening 2022 order book provides extensive coverage over forecast revenue,
and we have again been successful in broadening the diversity of our customers
and product range in the current order book. Notwithstanding the potential for
ongoing uncertainties regarding Covid-19, and the Ukraine crisis, which we
will continue to monitor closely, the orderbook, prospect pipeline, strong
operational and management team, means the Group's prospects remain positive
and the year has started on track.
The Group has both the financial and managerial resource available to develop
the business, with the prime focus being on organic growth. This will be
delivered through the leveraging of its global position, development of its
products and an improved and expanded service offering to its customers. We
continue to evaluate complementary acquisition opportunities.
Tony Steels
Chief Executive
FINANCIAL REVIEW
Will Wilkins
Group revenue in the year was £94.3m (2020: £83.7m) with the growth in 2021
primarily driven by the 2020 acquisition of Switchback. Revenue in the
Original Equipment ('OE') division was £74.1m (2020: £64.1m) and revenue in
the Service division was £20.2m (2020: £19.6m). Order intake was £117.9m,
an increase of 41% from the previous year (2020: £83.5m).
Gross profit was £28.9m (2020: £24.3m) and underlying selling, distribution
and administration costs were £20.1m (2020: £17.8m).
Underlying operating profit was £8.8m (2020: £6.5m). Underlying profit
after tax was £7.9m (2020: £6.3m) and statutory profit for the year
was £7.8m (2020: £4.2m).
Non-underlying items
Non-underlying items merit separate presentation in the consolidated income
statement to allow a better understanding of the Group's financial
performance, by facilitating comparisons with prior periods and assessments of
trends in financial performance. Pension costs, acquisition-related items and
property transactions are considered non-underlying items as they are not
representative of the core trading activities of the Group and are not
included in the underlying profit before tax measure reviewed by key
stakeholders.
Reconciliation of underlying profit before tax to profit before tax
2021 2021 2020 2020
£m £m £m £m
Underlying profit before tax 8.6 6.3
Non-underlying items
Defined benefit pension scheme - past service cost GMP equalisation - (0.2)
Defined benefit pension scheme - other costs and interest (1.0) (0.6)
Acquisition costs (0.4) (0.4)
Reorganisation costs - (0.5)
Release of deferred consideration 2.4 -
Acquired intangible asset amortisation (1.6) (1.6)
Deferred consideration interest (0.1) (0.1)
Profit on disposal of Coventry facility 0.3
Non-underlying items total (0.4) (3.4)
Profit before tax 8.2 2.9
Interest and taxation
Net financing expense was £0.1m (2020: £nil). Tax on underlying profit
before tax was £0.7m (2020: £nil). The tax charge on the Group's profit
before tax was £0.4m (2020: £1.3m credit).
Dividends
Having considered the opportunities for investment in the growth of the Group,
the Board has decided that it is not appropriate to pay a final dividend. No
interim dividend was paid in 2021. Future dividend payments will be considered
by the Board in the context of future growth opportunities and when the Board
believes it is prudent to do so.
Cash, treasury and funding activities
Cash at the end of the year was £14.5m (2020: £15.5m). Net cash inflow
before reorganisation was £0.8m (2020: £12.8m), after an increase in working
capital of £8.2m (2020: £7.5m decrease) and defined benefit pension payments
of £2.6m (2020: £3.0m). Reorganisation and acquisition costs of £0.3m
(2020: £0.9m) were paid in the year. Net taxation payments were £0.1m (2020:
£0.7m). Capital expenditure on property, plant and equipment was £1.5m
(2020: £1.2m), and capitalised product development expenditure was £0.2m
(2020: £1.8m). Net current assets at the end of the year were £12.5m
(2020: £8.3m) and net assets at the year-end were £65.4m (2020: £46.2m).
Deferred consideration in respect of the acquisition of Switchback of £0.6m
regarding the satisfaction of certain performance targets in the year to 30
September 2021, was paid in October 2021.
The three-year performance criteria associated with the 2018 acquisition of
Lambert Engineering (''Lambert")' were not satisfied and consequently the
carrying value of the deferred consideration of £2.4m was released to the
income statement as a credit to non-underlying administrative expenses.
The Group entered into a three-year funding agreement with HSBC in 2019, which
provides the Group with a £10.0m revolving credit facility to support future
growth. This facility also provides a number of other opportunities to
proactively manage the Group's cash and ensure that the Group is well placed
to react to opportunities, both organic and acquisition related, as they
arise. The facility was not utilised in the year.
There were no significant changes during 2021 in the financial risks,
principally currency risks and interest rate movements, to which the business
is exposed, and the Group treasury policy has remained unchanged. The Group
does not trade in financial instruments and enters into derivatives (mainly
forward foreign exchange contracts) solely for the purpose of minimising
currency exposures on sales or purchases in other than the functional
currencies of its various operations.
Prior year adjustments
Following a review of the Group's compliance with certain technical aspects of
IAS 12, additional deferred tax assets have been recognised in the
consolidated statement of financial position. Deferred tax liabilities have
historically been recognised on consolidation in relation to acquired
intangible assets; however, deferred tax assets have not been recognised in
respect of losses where there has been uncertainty around when future taxable
profits will be generated to enable the Group to utilise the losses. The Group
has now reconsidered the requirements of IAS 12 and, where taxable losses are
held which relate to the same jurisdiction as the Group expects to benefit
from the intangible assets, deferred tax assets have been recognised. This
adjustment has no impact on the underlying results or cash flow of the Group.
Pension schemes
The Group is responsible for defined benefit pension schemes in the UK and
the USA, in which there are no active members.
The IAS 19 valuation of the UK scheme's assets and liabilities was undertaken
as at 31 December 2021 and was based on the information used for the funding
valuation work as at 30 June 2018, updated to reflect both conditions at the
2021 year end and the specific requirements of IAS 19. The smaller US defined
benefit schemes were valued as at 31 December 2021, using actuarial data as of
1 January 2021, updated for conditions existing at the year end. Under IAS 19
the Group has elected to recognise all actuarial gains and losses outside of
the income statement.
The IAS 19 valuation of the UK scheme resulted in a net surplus at the end of
the year of £35.7m (2020: £14.0m) which is included within the Group's
assets. The value of the scheme's assets at 31 December 2021 was £453.1m
(2020: £440.9m) and the value of the scheme's liabilities was £417.4m (2020:
£426.9m). The scheme was largely protected from the sharp increase in
inflation forecasts by the liability matching strategy whilst strong growth in
asset values generated a significant increase in the IAS 19 surplus.
The IAS 19 valuations of the US pension schemes showed an aggregated net
deficit of £2.5m (2020: £3.0m) with total assets of £9.9m (2020: £10.1m).
During the year the Company made payments to the UK defined benefit scheme of
£1.9m (2020: £1.9m) in respect of the deficit recovery plan. A contribution
of £0.4m (2020: £0.8m) in accordance with the profit-sharing arrangement in
the schedule of contributions was also paid.
In 2019 the UK scheme's triennial valuation as at 30 June 2018 was completed,
with the reported deficit reducing to £35.2m (30 June 2015: £69.6m). The
contributions remained at the same level, but the recovery period reduced to
six years and one month (30 June 2015: 14 years 2 months). Further details
are shown in note 4.
Lambert deferred consideration
The three-year performance criteria associated with the acquisition of Lambert
were not satisfied and consequently the carrying value of the deferred
consideration has been released to the income statement. Timing of individual
order placement and of project execution can have a material impact on the
trading performance in any one year and despite the targets not being met, the
trading performance of Lambert since acquisition remains strong. Furthermore
the release of the deferred consideration is not an indicator of an impairment
in the carrying value of the investment.
Equity
Group equity at 31 December 2021 was £65.4m (2020: £46.2m). The movement
arises mainly from the profit for the year of £7.8m, a net actuarial gain in
respect of the Group's defined benefit pension schemes of £12.8m, offset by
changes in the fair value of cash flow hedges of £1.3m; all figures
are stated net of tax where applicable.
Will Wilkins
Group Finance Director
CONSOLIDATED INCOME STATEMENT
2021 2020 Restated
Non-underlying Non-underlying
(note 3) (note 3)
Underlying £m Total Underlying £m Total
Note £m £m £m £m
Revenue 2 94.3 - 94.3 83.7 - 83.7
Cost of sales (65.4) - (65.4) (59.4) - (59.4)
Gross profit 28.9 - 28.9 24.3 - 24.3
Distribution expenses (6.8) - (6.8) (6.8) - (6.8)
Administrative expenses (12.4) (0.5) (12.9) (9.9) (3.6) (13.5)
Other operating expenses (0.9) - (0.9) (1.1) - (1.1)
Operating profit 2, 3 8.8 (0.5) 8.3 6.5 (3.6) 2.9
Financial income - 0.2 0.2 - 0.3 0.3
Financial expenses (0.2) (0.1) (0.3) (0.2) (0.1) (0.3)
Net financing (expense)/income
(0.2) 0.1 (0.1) (0.2) 0.2 -
Profit before tax 8.6 (0.4) 8.2 6.3 (3.4) 2.9
Taxation (0.7) 0.3 (0.4) - 1.3 1.3
Profit for the period 7.9 (0.1) 7.8 6.3 (2.1) 4.2
Earnings per ordinary share
Basic 5 39.1p 20.8p
Diluted 5 38.1p 20.7p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2021 2020 Restated
£m £m
Profit for the period 7.8 4.2
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Actuarial gains/(losses) 20.7 (8.8)
Tax on items that will not be reclassified to profit or (7.9) 2.2
loss
12.8 (6.6)
Items that may be reclassified subsequently to profit or loss
Currency translation movements arising on foreign currency net investments
(0.2) (0.5)
Effective portion of changes in fair value of cash flow hedges
(1.0) 0.8
Reclassified to income statement from hedge reserve
(0.3) (0.3)
(1.5) -
Other comprehensive income/(expense) for the period 11.3 (6.6)
Total comprehensive income/(expense) for the period 19.1 (2.4)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Share Share Translation redemption Hedging Retained Total
capital premium reserve reserve reserve earnings equity
£m £m £m £m £m £m £m
Balance at 1 January 2020 (restated) 5.0 26.0 1.0 3.9 0.3 12.2 48.4
Profit for the period - - - - - 4.2 4.2
Other comprehensive (expense)/income for the period
- - (0.5) - 0.5 (6.6) (6.6)
Total comprehensive (expense)/income for the period
- - (0.5) - 0.5 (2.4) (2.4)
Equity-settled share based transactions 0.4 0.4
Purchase of own shares - - - - -
(0.2) (0.2)
Total transactions with owners, recorded directly in equity
- - - - - 0.2 0.2
Balance at 31 December 2020 (restated) 5.0 26.0 0.5 3.9 0.8 10.0 46.2
Profit for the period - - - - - 7.8 7.8
Other comprehensive (expense)/income for the period
- - (0.2) - (1.3) 12.8 11.3
Total comprehensive (expense)/income for the period
- - (0.2) - (1.3) 20.6 19.1
Equity-settled share based transactions
Purchase of own shares - - - - - 0.3 0.3
- - - - - (0.2) (0.2)
Total transactions with owners, recorded directly in equity - - - - - 0.1 0.1
Balance at 31 December 2021 5.0 26.0 0.3 3.9 (0.5) 30.7 65.4
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2021 2020
Note £m Restated
£m
Non-current assets
Intangible assets 25.3 27.4
Property, plant and equipment 4.0 5.1
Investment property 0.8 0.8
Right of use assets 5.8 4.0
Employee benefits 4 35.7 14.0
Deferred tax assets 1.4 1.7
73.0 53.0
Current assets
Inventories 5.5 3.5
Trade and other receivables 34.5 32.2
Current tax assets 0.6 0.8
Cash and cash equivalents 14.5 15.5
55.1 52.0
Current liabilities
Lease liabilities (1.8) (0.8)
Trade and other payables (39.5) (41.1)
Current tax liabilities (0.7) (0.4)
Provisions (0.6) (1.4)
(42.6) (43.7)
Net current assets 12.5 8.3
Total assets less current liabilities 85.5 61.3
Non-current liabilities
Interest-bearing loans and borrowings 7 (0.9) (0.9)
Employee benefits 4 (2.5) (3.0)
Deferred tax liabilities (12.5) (4.9)
Lease liabilities (4.2) (3.4)
Deferred contingent consideration - (2.9)
(20.1) (15.1)
Net assets 65.4 46.2
Equity
Issued capital 5.0 5.0
Share premium 26.0 26.0
Reserves 3.7 5.2
Retained earnings 30.7 10.0
Total equity 65.4 46.2
CONSOLIDATED STATEMENT OF CASH FLOW
2021 2020
Note £m £m
Operating activities
Operating profit
Non-underlying items included in operating profit 8.3 2.9
Amortisation
Depreciation 0.5 3.6
Profit on the same of property, plant and equipment
Other non-cash items 0.6 0.3
Pension payments
Working capital movements: 1.8 1.1
- (increase)/decrease in inventories
- increase in contract assets 0.1 -
- decrease/(increase) in trade and other receivables
- (decrease)/increase in trade and other payables 0.3 0.4
- (decrease)/increase in provisions
- (decrease)/increase in contract liabilities (2.6) (3.0)
(2.2) 0.2
(4.4) (1.7)
1.0 (0.6)
(1.1) 4.1
(0.8) 0.1
(0.7) 5.4
Cash flows from continuing operations before reorganisation 0.8 12.8
Acquisition and reorganisation costs paid
(0.3) (0.9)
Cash flows from operations 0.5 11.9
Taxation paid
(0.1) (0.7)
Cash flows from operating activities 0.4 11.2
Investing activities
Proceeds from sale of property, plant and equipment
Capitalised development expenditure 2.0 0.2
Acquisition of assets under construction (0.2) (1.8)
Acquisition of property, plant and equipment
Net cash flow on acquisition/payment of deferred consideration - -
(1.5) (1.2)
(0.6) (10.3)
Cash flows used in investing activities (0.3) (13.1)
Financing activities
Interest paid
Purchase of own shares (0.3) (0.2)
Principal elements of lease payments
(0.2) (0.2)
(0.9) (0.9)
Cash flows used in financing activities (1.4) (1.3)
6
Net decrease in cash and cash equivalents (1.3) (3.2)
Cash and cash equivalents at 1 January 15.5 18.9
Effect of exchange rate fluctuations on cash held 0.3 (0.2)
Cash and cash equivalents at 31 December 2021 14.5 15.5
NOTES TO ANNOUNCEMENT
1. General information
The Group's accounts have been prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act
2006 that were effective at 31 December 2021.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2021 or 2020. Statutory
accounts for 2020 have been delivered to the Registrar of Companies. The
auditors have reported on the 2021 and 2020 statutory accounts; their reports
were (i) unqualified, (ii) did not include references to any matters to which
the auditors drew attention by way of emphasis without qualifying their
reports and (iii) did not contain statements under section 498 (2) or (3) of
the Companies Act 2006.
2. Operating segments
Segment information
12 months to 31 Dec 2021 12 months to 31 Dec 2020
OE Service Total OE Service Total
£m £m £m £m £m £m
Revenue
Americas 53.4 9.9 63.3 36.2 10.5 46.7
EMEA 17.4 9.3 26.7 23.7 7.6 31.3
Asia Pacific 3.3 1.0 4.3 4.2 1.5 5.7
Total 74.1 20.2 94.3 64.1 19.6 83.7
Gross profit 28.9 24.3
Selling, distribution & administration (20.1) (17.8)
Underlying operating profit 8.8 6.5
Unallocated non-underlying items included in operating profit
(0.5) (3.6)
Operating profit 8.3 2.9
Net financing expense (0.1) -
Profit before tax 8.2 2.9
Geographical information
Revenue
(by location of customer)
2021 2021 2020 2020
£m % £m %
UK 7.7 8 9.7 12
Europe (excl. UK) 17.2 18 19.2 23
Africa & Middle East
0.7 1 2.8 3
USA
Americas (excl. USA) 56.9 61 34.5 41
Asia Pacific 7.2 7 12.3 15
4.6 5 5.2 6
94.3 100 83.7 100
3. Non-underlying items
2021 2020
£m £m
Acquisition costs (0.4) (0.4)
Reorganisation costs (0.5)
Amortisation of acquired intangible assets (1.6) (1.6)
Release of deferred consideration costs 2.4 -
Defined benefit pension scheme administration costs and interest (1.0) (0.6)
UK Defined benefit pension scheme - Past service cost for GMP equalisation - (0.2)
Profit on disposal of Coventry facility 0.3 -
Interest on deferred and contingent consideration (0.1) (0.1)
Total non-underlying expense before tax (0.4) (3.4)
4. Employee benefits
The Group accounts for pensions under IAS 19 Employee benefits. A formal
valuation of the UK defined benefit pension scheme (Fund) was carried out as
at 30 June 2018. The principal terms of the deficit funding agreement between
the Company and the Fund's Trustees, which is effective until 31 July 2024,
but, is subject to reassessment every 3 years are as follows:
• the Company will continue to pay a sum of £1.9m per annum to the
Fund (increasing at 2.1% per annum) in deficit recovery payments;
• if underlying operating profit (operating profit before
non-underlying items) in any year is in excess of £5.5m, the Company will pay
to the Fund an amount of 33% of the difference between the annual underlying
operating profit and £5.5m, subject to a cap on underlying operating profit
of £10.0m for the purpose of calculating this payment; this part of the
agreement will fall away in 2021 if the funding deficit is above certain
levels; and
• payments of dividends by Mpac Group plc will not exceed the value
of payments being made to the Fund in any one year.
Formal valuations of the USA defined benefit schemes were carried out as at 1
January 2021, and their assumptions, updated to reflect actual experience and
conditions at 31 December 2021 and modified as appropriate for the purposes of
IAS 19, have been applied.
Profit before tax includes charges in respect of the defined benefit pension
schemes' administration costs of £1.2m (2020: £0.9m) and a net financing
income on pension scheme balances of £0.2m (2020: £0.3m). In respect of
the UK scheme, the Group paid deficit recovery contributions of £1.9m (2020:
£1.9m). A contribution of £0.4m (2020: £0.8m), in accordance with the
profit-sharing arrangement in the schedule of contributions, was also paid.
Contributions to the US scheme totalled £0.3m (2020: £0.3m)
Employee benefits include the net pension asset of the UK defined benefit
pension scheme of £35.7m (2020: £14.0m) and the net pension liability of the
USA defined benefit pension schemes of £2.5m (2020: £3.0m), all figures
before tax.
5. Earnings per share
Basic earnings per ordinary share is based upon the profit for the period of
£7.8m (2020: £4.2m) and on a weighted average of 19,920,895 shares in issue
during the year (2020: 19,955,307). The weighted average number of shares
excludes shares held by the employee trust in respect of the Company's
long-term incentive arrangements.
Underlying earnings per ordinary share amounted to 39.7p for the year (2020:
31.4p) and is based on underlying profit for the period of £7.9m (2020:
£6.3m), which is calculated on profit before non-underlying items.
6. Reconciliation of net cash flow to movement in net funds
2021 2020
£m £m
Net decrease in cash and cash equivalents (1.3) (3.2)
Change in net funds resulting from cash flows (1.3) (3.2)
Translation movements 0.3 (0.2)
Movement in net funds in the period (1.0) (3.4)
Opening net funds 10.4 13.2
Movement in lease liabilities (1.8) 0.6
Closing net funds 7.6 10.4
7. Analysis of net funds
2021 2020
£m £m
Cash and cash equivalents - current assets 14.5 15.5
Interest-bearing loans and borrowings - non-current liabilities (0.9) (0.9)
Lease liabilities (6.0) (4.2)
Closing net funds 7.6 10.4
8. Contingent consideration
Lambert
The contingent consideration arrangement required the Group to pay the former
owners of Lambert five times the average EBITDA of Lambert in excess of £2.5m
for three years ending 31 December 2021, up to a maximum payment of £2.5m.
There was no minimum amount payable. As the business did not achieve the base
target no contingent consideration and the discounted provision of £2.4m has
been released to non-underlying administrative expenses.
Switchback
The contingent consideration arrangement required the Group to pay the former
owners of Switchback up to US$1.0m (£0.7m) in 2021 and 2022 with a minimum
payment of US$0.5m in each if Switchback's annual adjusted EBITDA is at least
$1.1m and 50% of the excess over US$1.1m, up to US$2.1m. The business achieved
the target of US2.1m in the first year and consequently a payment of $1.0m
(£0.6m) was paid and the maximum amount payable under the arrangement is also
forecast to be paid in 2022.
9. Prior year adjustment
Following a review of the Group's compliance with certain technical aspects of
IAS 12, additional deferred tax assets have been recognised in the
consolidated statement of financial position. Deferred tax liabilities have
historically been recognised on consolidation in relation to acquired
intangible assets appropriately; however, deferred tax assets have not been
recognised in respect of losses where there has been uncertainty around when
future taxable profits will be generated to enable the Group to utilise the
losses. The Group has now reconsidered the requirements of IAS 12 and, where
taxable losses are held which relate to the same jurisdiction as the Group
entities expect to benefit from the intangible assets, deferred tax assets
have been recognised.
This accounting change has no impact on the underlying results or the cash
flow of the Group and no impact on the Company results
The impact of the adjustments on the Group financial statements are as
follows:
Group statement of financial position
2020 as reported Adjustment 2020 restated 2019 as reported Adjustment 2019 restated
£m £m £m £m £m £m
Deferred tax liability (6.7) 1.8 (4.9) (8.8) 0.9 (7.9)
Effect on net assets 44.4 1.8 46.2 47.5 0.9 48.4
Retained earnings 8.2 1.8 10.0 11.3 0.9 12.2
Effect on total equity 44.4 1.8 46.2 47.5 0.9 48.4
Group income statement
2020 as reported Adjustment 2020 restated
£m £m £m
Profit before tax 2.9 - 2.9
Taxation 0.4 0.9 1.3
Profit for the period 3.3 0.9 4.2
All of the taxation reported and restated has been considered to be
non-underlying.
10. Annual Report and Accounts
Shareholders will be notified, on or around 31 March 2022 of the availability
of the Annual Report and Accounts, together with the Company's Notice of
Annual General Meeting ("AGM"), via a Regulatory Information Service
announcement. Copies of the documents will be available on the Group's
website at www.mpac-group.com. Shareholders that have elected to receive a
hard copy of the Annual Report and Accounts, together with the Notice of AGM
will receive them shortly after. Details of arrangements for voting at the
AGM will also be notified to shareholders at the same time. The AGM will be
held at 12 noon on 4 May 2022 at the offices of Hudson Sandler LLP, 25
Charterhouse Square, London, EC1M 6AE.
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