REG - Mpac Group PLC - Full Year Results
22/03/2023 07:15
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RNS Number : 7766T Mpac Group PLC 22 March 2023
22 March 2023
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 2022
FY22 trading performance and outlook for FY23 in line with market expectations
Financial Summary
· Order intake of £83.8m (2021: £117.9m) contributing to a closing
order book of £67.2m (2021: £78.4m)
· Group full year revenue up 4% to £97.7m (2021: £94.3m)
· Strong Service revenue growth, up 14% to £23.1m (2021: £20.2m)
· Underlying profit before tax of £3.5m (2021: £8.6m)
· Underlying earnings per share of 13.3p (2021: 39.7p)
· Statutory profit before tax of £0.2m (2021: £8.2m)
· Basic loss per share of 2.2p (2021: earnings per share of 39.1p)
· Net debt £4.7m (2021: Net cash £13.6m)
Operational and Strategic highlights
· Strong recovery of performance in H2 driven by unwinding of supply
chain issues, cost saving mitigations and leveraging One Mpac integrated
business systems
· Service revenue growth, supported by the increasing use of digital
technologies, driven by regional strategy
· Framework agreement signed with FREYR Battery (''FREYR''), a
developer of next-generation battery cell production capacity, for the
exclusive supply of battery cell automation lines
· Shipment of initially completed modules of battery cell assembly
automation line to FREYR Battery
· Launch of Mpac Cube service product line offering to enhance our
customers connectivity, productivity and sustainability in addition to
conventional service products
Current trading and outlook
· The Group has started 2023 in line with expectations with encouraging
order intake and a healthy pipeline of prospects, better positioned to address
what remains a challenging trading environment
Tony Steels, Chief Executive, commented:
"Mpac once again demonstrated its agility in implementing mitigations to
deliver a second half recovery. This was in the face of increased
macro-economic uncertainty and unprecedented volatility in the global supply
chain which impacted both the lead time of customers' order placement and
caused operational challenges. The Group responded dynamically to continue to
meet customer expectations and increase service revenue. The Group ended 2022
with a strong closing order book and a healthy prospect pipeline, providing
good coverage over 2023 forecast revenue."
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
In recent years the Group has made substantial progress in its strategic plans
to deliver growth from the resilient food and beverage and healthcare markets,
which have attractive long term growth drivers. However, well documented
short-term operational challenges caused by macro-economic headwinds and
volatile global supply chains resulted in lower order intake, reduced
operational efficiency, and extended project build time frames during 2022.
Against this backdrop, the Group was successfully able to implement a range
of mitigation measures which drove an improved financial performance in the
second half of the year. These included securing stock, establishing
alternative sources of electronic component supply, increased focus on
reliable planning data from our ERP system, close management of our supply
chain, negotiating price increases and implementing cost saving initiatives.
It is also thanks to the dedication and resourcefulness of our employees that
our customers' expectations have continued to be met during this challenging
period for Mpac.
In 2022 the Group continued to make progress in the development of casting and
unit cell assembly equipment for the battery cell production line at the FREYR
Battery ("FREYR") Customer Qualification Plant in Norway. During H2, changes
requested by FREYR have resulted in a revised plan for delivery of the line in
Q1 2023, and commissioning in Q2 2023. In September 2022, the Group
announced a framework agreement for the supply of assembly equipment to the
production lines intended by FREYR to follow-on from the initial Qualification
Plant.
2022 was a milestone for Mpac seeing the first graduates from our Mpac
Academy, which is developing future leaders for the Group. Also, for the first
time, Mpac was at the Pack Expo trade show in Chicago as a truly integrated
business, offering sales and service throughout the Americas through unified
teams.
Our search for further complementary acquisition targets continues. However,
the focus of management 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.
The fundamentals of Mpac remain strong and the business has again demonstrated
resilience in managing short term operational challenges. The Board is
excited about the next phase for the Group, given our strong position in the
growing healthcare and food & beverage sectors and we remain on track to
meet our long-term strategic objectives.
Supply chain
Disruption to the supply of critical, customer-specified chip based electronic
components continues; however, the Group has been proactive in implementing
mitigation measures as discussed above. Delays to parts delivery extended
project build times, resulting in increased levels of working capital of
£17.8m, which was funded by a combination of free cash and borrowing against
existing committed bank facilities. The increase in working capital is
expected to unwind as the backlog of projects are largely cleared in H1 2023.
Strategic update
Going for Growth
Offering comprehensive "Automation Ecosystems" in our target sectors, driven
by understanding customer needs and providing innovative solutions.
Our goal remains to grow Group revenue at a double-digit rate year on year.
The overall addressable end market is substantial and growing, though
macro-economic uncertainty has impacted the timing of customer investment,
extending decision-making cycles. However, the fundamentals of the markets
in which we operate remain strong.
During 2022 we further consolidated and focused our regional sales structure
through extensive training and sales tools, supporting cross selling and
delivering a wider range of machines to new and existing customers. Our One
Mpac model was reinforced with significant investment in trade shows, most
notably the flagship Chicago packaging exhibition, Pack Expo, in September,
resulting in a significant uptick in both followers and lead generation.
Innovation remains the key to long term sustainable growth. We have made
significant progress in 2022 developing technologies to support our solutions
for the clean energy sector in collaboration with 24M and FREYR. Furthermore,
we have launched additional products marketed under the Mpac Cube brand, which
incorporates innovations focused on improved machine performance and digital
enhancements as well as further Industry 4.0 enabled technology. Our recently
launched case packing solutions have become a key product to offer our
customers in combination with other Mpac solutions.
Make Service a Business
A comprehensive portfolio of service products to maximise customers' return on
investment.
Service continues to grow year on year supported by investments in innovation
and building resources located in the regions our customers operate. Mpac Cube
was further developed during the year to incorporate our service, installation
and commissioning, spare parts, site service and training, together with
retrofits and upgrades. In addition, a suite of digital products is now
available to provide customers with advanced engineering, information
management, connected services and machine insights, ensuring our customers
can fully embrace Industry 4.0.
Our goal is to generate 30% of our revenue from these services and we are well
on track to meet this target.
In 2022 we also enhanced our Service model, developing the Americas healthcare
service business unit, which provides proactive and responsive technical
support specific to the installed machine base. This remains a key focus as we
enter 2023.
Operational Efficiency
Operational excellence and flexible supply chains, increasing responsiveness
to our customers.
Our goal is to be a flexible organisation which can respond with agility to
our customers' needs, leveraging our global internal resources as one. Short
term operational challenges in 2022 highlighted the benefits of the prior
investment in business systems which played a key part in mitigating the
impact for the full year.
Our global ERP and business systems blueprint, implemented in our facilities
in the Netherlands, Canada and the UK, will be rolled out to our facility in
the US during 2023.
We are proud to have completed the inaugural year of our Mpac Academy and will
look to extend this in 2023 with a graduate development programme, to include
recent graduates, aimed at enlarging our graduate intake across all
disciplines in the Group and providing them with a broad base of training, to
support their career and future development with Mpac.
Environmental, Social & Governance
We are fully committed to improving our Environmental, Social & Governance
performance in all areas. Sustainability is at the core of the Mpac business
model. Our engineered automation and packaging solutions provide customers
with sustainable and environmentally sound equipment that support the global
megatrends of reductions in packaging, particularly single-use plastics,
reduced waste and increase overall equipment effectiveness. Our end-to-end
capabilities help our customers to achieve their sustainability goals.
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 key market
sectors. Several opportunities are currently under evaluation and further
updates will be provided as appropriate.
Outlook
The Group has a strong order book and prospect pipeline and continues to focus
on meeting customer commitments.
Economic conditions of rising energy costs, higher interest rates, skilled
labour shortages and ongoing semi-conductor supply constraints are expected to
continue from 2022 into 2023, setting the context for customer investments and
decision-making. The measures implemented to respond to the short-term
operational challenges of increasing inflation and supply chain disruption in
2022 have placed the Group in a good position to successfully manage any
ongoing disruption.
The Group remains focused on executing its long-term strategy of delivering OE
and Service growth at improved margins, increasingly through our digital
services customer offering, together with increased operational efficiencies.
We continue to work with our customer, FREYR, to develop and build a clean
energy casting and unit cell assembly line and, while timelines have been
extended, this project has the potential to open the clean energy sector to
Mpac. Delivering the initial development line and establishing Mpac's
position as a trusted partner to provide battery assembly automation in this
exciting and rapidly developing market will be a focus for the Group in 2023.
The Board believes the Group's long-term prospects are positive and the new
financial year has started in line with its expectations. Whilst the
macro-economic and geopolitical uncertainty looks likely to continue, Mpac is
well positioned to meet its strategic objectives.
Tony Steels
Chief Executive
FINANCIAL REVIEW
Will Wilkins
Revenue and operating results
Group revenues of £97.7m (2021: £94.3m) represent an increase of 4% compared
to the previous year. OE revenue remained broadly level at £74.6m (2021:
£74.1m), underpinned largely by growth in EMEA and from the clean energy
sector. Services revenue grew by 14% to £23.1m (2021: £20.2m), driven
predominantly by growth in the Americas and Asia Pacific. The rate of revenue
growth in all regions was impacted by lengthening supply chain lead times and
operational inefficiencies from erratic supplies of key electronic components.
Overall order intake for the Group fell by 29% to £83.8m (2021: £117.9m),
due primarily to the impact of lengthening customer investment decision making
in the light of a more challenging economic outlook.
The closing 2022 order book reduced to £67.2m (2021: £78.4m), albeit with
increased customer diversification. The value of the closing order book,
whilst below the prior year, continues to provide good coverage over the
forecast 2023 revenue. We remain vigilant to project execution risk and the
impact on operational efficiency of supply chain disruption.
The Group was significantly impacted by the supply chain crisis in 2022, which
resulted in a reduction in market profit guidance, announced in July 2022.
Pleasingly, the measures that we implemented have been successful and the
Group reported a full year underlying operating profit of £3.9m, ahead of
revised market guidance. Extended project build times led to an increase in
the volume of partially complete projects at the year end and resulted in
higher working capital. After the cost of debt to fund the increase in
working capital, underlying profit before tax for the year of £3.5m was in
line with revised market guidance.
We manage the business in two parts, OE and Service and across three regions,
Americas, EMEA and Asia.
Revenue
2022 2021
£m £m
Americas 52.8 63.3
EMEA 37.5 26.7
Asia 7.4 4.3
Revenue
2022 2021
£m £m
Food & Beverage 45.7 45.3
Healthcare 30.1 29.2
Clean Energy 11.1 2.6
Other 10.8 17.2
Individual OE contracts, and to a lesser extent the Service contracts, 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 £57.2m (2021: £96.0m) was 40% below the prior year due to
customer orders being brought forward into 2021. OE revenues of £74.6m (2021:
£74.1m) were in line with the prior year.
OE revenue generated in the Americas region was 23% below the prior year at
£40.9m (2021: £53.4m). The decrease in revenue was primarily driven by
supply chain delays impacting project deliveries in the food & beverage
sector.
In EMEA, OE revenue in the year was £27.8m (2021: £17.4m) with the increase
due primarily to the growth within the clean energy sector in 2022. OE
Revenue in Asia was £5.9m (2021: £3.3m).
Service
Order intake for the Service division was 21% above 2021 at £26.6m (2021:
£21.9m). Service revenue of £23.1m (2021: £20.2m) was 14% above the prior
year.
Service revenue in the Americas showed strong growth at £11.9m compared to
£9.9m in 2021, with the increase being driven largely by the healthcare and
food & beverage sectors. EMEA revenue in the year was £9.7m compared to
£9.3m in 2021. Asia revenue in the year was £1.5m compared to £1.0m in
2021.
Operating results
Gross profit was £24.4m (2021: £28.9m) and underlying selling, distribution
and administration costs were £20.5m (2021: £20.1m).
Underlying operating profit was £3.9m (2021: £8.8m). Underlying profit after
tax was £2.7m (2021: £7.9m) and statutory loss for the year was £0.4m
(2021: profit of £7.8m).
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,
reorganisation costs 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.
Net financing income was £0.2m (2021: expense of £0.1m). Tax on underlying
profit before tax was £0.8m (2021: £0.7m). The tax charge on the Group's
profit before tax was £0.6m (2021: £0.4m).
Reconciliation of underlying profit before tax to profit before tax
2022 2022 2021 2021
£m £m £m £m
Underlying profit before tax 3.5 8.6
Non-underlying items
Defined benefit pension scheme - other costs and interest (0.8) (1.0)
Acquisition costs (0.3) (0.4)
Reorganisation costs (0.6) -
Release of deferred consideration - 2.4
Acquired intangible asset amortisation (1.6) (1.6)
Deferred consideration interest - (0.1)
Profit on disposal of Coventry facility - 0.3
Non-underlying items total (3.3) (0.4)
Profit before tax 0.2 8.2
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 2022. 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 £4.2m (2021: £14.5m), after £8.0m of
borrowings were drawn during the year and £0.3m of the Group's arranged
overdraft facility was utilised. Net cash outflow before reorganisation was
£12.8m (2021: inflow of £0.8m), after an increase in working capital of
£17.7m (2021: £8.2m) and defined benefit pension payments of £2.1m (2021:
£2.6m). Reorganisation and acquisition costs of £0.8m (2021: £0.3m) were
paid in the year. Net taxation payments were £0.4m (2021: £0.1m). Capital
expenditure on property, plant and equipment was £1.0m (2021: £1.5m), and
capitalised product development expenditure was £1.4m (2021: £0.2m). Net
current assets at the end of the year were £12.2m (2021: £12.5m) and net
assets at the year end were £62.2m (2021: £65.4m).
Deferred consideration of £0.8m in respect of the acquisition of Switchback
in 2020, following the satisfaction of certain performance targets in the year
to 30 September 2022, was paid in October 2022. The two-year performance
criteria relating to the purchase of Switchback in 2020 has now concluded with
the deferred consideration paid in full.
The Group entered into a three-year funding agreement with HSBC in 2022, which
provides the Group with a £20.0m 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 Group utilised £8.0m of this facility in the year.
There were no significant changes during 2022 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 currencies other than the
functional currencies of its various operations.
Working Capital
The global supply chain crisis resulted in delays to project builds and more
OE projects at the design and assembly stage of completion than at the start
of the year. This change delayed the achievement of completion milestones,
delaying invoicing to customers.
This build-up of contract assets peaked in the fourth quarter of 2022
following the supply of certain key electrical components.
At the same time, order intake in the second half of 2022 was weighted towards
the end of the year, which broadly did not allow for sufficient time for the
collection of customer deposits before the year end. This combination of
factors led to an increase in working capital which we expect to largely
unwind in the first half of 2023.
Pension schemes
The Group is responsible for defined benefit pension schemes in the UK and the
US, 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 2022 and was based on the information used for the funding
valuation work as at 30 June 2021, updated to reflect both conditions at the
2022 year end and the specific requirements of IAS 19. The smaller US defined
benefit schemes were valued as at 31 December 2022, using actuarial data as of
1 January 2022, 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 £31.5m (2021: £35.7m) which is included within the Group's
assets. The value of the scheme's assets at 31 December 2022 was £311.2m
(2021: £453.1m) and the value of the scheme's liabilities was £279.7m (2021:
£417.4m). Despite the unprecedented volatility in financial markets around
the world in 2022, the scheme's protection strategies, notably its use of
Liability Driven Investments, ensured that the surplus was protected.
The IAS 19 valuations of the US pension schemes showed an aggregated net
deficit of £2.1m (2021: £2.5m) with total assets of £8.1m (2021: £9.9m).
During the year the Company made payments to the UK defined benefit scheme of
£2.0m (2021: £2.3m).
The UK scheme's triennial valuation as at 30 June 2021 was completed in the
year, with the reported deficit reducing to £28.4m (30 June 2018: £35.2m).
The contributions remained at the same level, but the recovery period reduced
to four years and six months (30 June 2018: 6 years 1 month).
Equity
Group equity at 31 December 2022 was £62.2m (2021: £65.4m). The movement
arises mainly from the loss for the year of £0.4m, a net actuarial loss in
respect of the Group's defined benefit pension schemes of £3.7m and 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
2022 2021
Non-underlying Non-underlying
(note 3) (note 3)
Underlying £m Total Underlying £m Total
Note £m £m £m £m
Revenue 2 97.7 - 97.7 94.3 - 94.3
Cost of sales (73.3) - (73.3) (65.4) - (65.4)
Gross profit 24.4 - 24.4 28.9 - 28.9
Distribution expenses (8.1) - (8.1) (6.8) - (6.8)
Administrative expenses (11.9) (3.9) (15.8) (12.4) (0.5) (12.9)
Other operating expenses (0.5) - (0.5) (0.9) - (0.9)
Operating profit 2, 3 3.9 (3.9) - 8.8 (0.5) 8.3
Financial income - 0.6 0.6 - 0.2 0.2
Financial expenses (0.4) - (0.4) (0.2) (0.1) (0.3)
Net financing (expense)/income
(0.4) 0.6 0.2 (0.2) 0.1 (0.1)
Profit before tax 3.5 (3.3) 0.2 8.6 (0.4) 8.2
Taxation (0.8) 0.2 (0.6) (0.7) 0.3 (0.4)
Profit for the period 2.7 (3.1) (0.4) 7.9 (0.1) 7.8
Earnings/(loss) per ordinary share
Basic 5 (2.2)p 39.1p
Diluted 5 (2.2)p 38.1p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2022 2021
£m £m
Profit for the period (0.4) 7.8
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Actuarial gains/(losses) (5.0) 20.7
1.3 (7.9)
Tax on items that will not be reclassified to profit or loss
(3.7) 12.8
Items that may be reclassified subsequently to profit or loss
Currency translation movements arising on foreign currency net investments
2.1 (0.2)
Effective portion of changes in fair value of cash flow hedges
(1.3) (1.0)
Reclassified to income statement from hedge reserve
- (0.3)
0.8 (1.5)
Other comprehensive income/(expense) for the period (2.9) 11.3
Total comprehensive income/(expense) for the period (3.3) 19.1
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 2021 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 0.3 0.3
Purchase of own shares - - - - -
(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
Profit for the period - - - - - (0.4) (0.4)
Other comprehensive (expense)/income for the period
- - 2.1 - (1.3) (3.7) (2.9)
Total comprehensive (expense)/income for the period
- - 2.1 - (1.3) (4.1) (3.3)
Equity-settled share based transactions
Purchase of own shares - - - - - 0.1 0.1
0.1 - - - - (0.1) -
Total transactions with owners, recorded directly in equity 0.1 - - - - - 0.1
Balance at 31 December 2022 5.1 26.0 2.4 3.9 (1.8) 26.6 62.2
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2022 2021
Note £m £m
Non-current assets
Intangible assets 25.4 25.3
Property, plant and equipment 4.0 4.0
Investment property 0.8 0.8
Right of use assets 5.0 5.8
Employee benefits 4 31.5 35.7
Deferred tax assets 1.3 1.4
68.0 73.0
Current assets
Inventories 9.6 5.5
Trade and other receivables 47.3 34.5
Current tax assets 0.6 0.6
Cash and cash equivalents 4.2 14.5
61.7 55.1
Current liabilities
Lease liabilities (1.4) (1.8)
Trade and other payables (39.0) (39.5)
Current tax liabilities (0.1) (0.7)
Provisions (1.0) (0.6)
Interest-bearing loans and borrowings (8.0) -
(49.5) (42.6)
Net current assets 12.2 12.5
Total assets less current liabilities 80.2 85.5
Non-current liabilities
Interest-bearing loans and borrowings 7 (0.9) (0.9)
Employee benefits 4 (2.1) (2.5)
Deferred tax liabilities (11.1) (12.5)
Lease liabilities (3.9) (4.2)
Deferred contingent consideration - -
(18.0) (20.1)
Net assets 62.2 65.4
Equity
Issued capital 5.1 5.0
Share premium 26.0 26.0
Reserves 2.1 3.7
Retained earnings 29.0 30.7
Total equity 62.2 65.4
CONSOLIDATED STATEMENT OF CASH FLOW
2022 2021
Note £m £m
Operating activities
Operating profit
Non-underlying items included in operating profit - 8.3
Amortisation
Depreciation 3.9 0.5
Profit on the same of property, plant and equipment
Other non-cash items 0.9 0.6
Pension payments
Working capital movements: 2.0 1.8
- (increase)/decrease in inventories
- increase in contract assets - 0.1
- decrease/(increase) in trade and other receivables
- (decrease)/increase in trade and other payables 0.2 0.3
- (decrease)/increase in provisions
- (decrease)/increase in contract liabilities (2.1) (2.6)
(3.7) (2.2)
(5.9) (4.4)
(6.3) 1.0
1.7 (1.1)
0.5 (0.8)
(4.0) (0.7)
Cash flows from continuing operations before reorganisation (12.8) 0.8
Acquisition and reorganisation costs paid
(0.8) (0.3)
Cash flows from operations (13.6) 0.5
Taxation paid
(0.4) (0.1)
Cash flows from operating activities (14.0) 0.4
Investing activities
Proceeds from sale of property, plant and equipment
Capitalised development expenditure - 2.0
Acquisition of property, plant and equipment
Net cash flow on acquisition/payment of deferred consideration (1.4) (0.2)
(1.0) (1.5)
(0.8) (0.6)
Cash flows used in investing activities (3.2) (0.3)
Financing activities
Interest paid
Purchase of own shares (0.3) (0.3)
Proceeds from borrowings
Principal elements of lease payments - (0.2)
8.0 -
(1.1) (0.9)
Cash flows used in financing activities 6.6 (1.4)
6
Net decrease in cash and cash equivalents (10.6) (1.3)
Cash and cash equivalents at 1 January 14.5 15.5
Effect of exchange rate fluctuations on cash held 0.3 0.3
Cash and cash equivalents at 31 December 2022 4.2 14.5
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 2022.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2022 or 2021. Statutory
accounts for 2021 have been delivered to the Registrar of Companies. The
auditors have reported on the 2022 and 2021 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 2022 12 months to 31 Dec 2021
OE Service Total OE Service Total
£m £m £m £m £m £m
Revenue
Americas 40.9 11.9 52.8 53.4 9.9 63.3
EMEA 27.8 9.7 37.5 17.4 9.3 26.7
Asia Pacific 5.9 1.5 7.4 3.3 1.0 4.3
Total 74.6 23.1 97.7 74.1 20.2 94.3
Gross profit 24.4 28.9
Selling, distribution & administration (20.5) (20.1)
Underlying operating profit 3.9 8.8
Unallocated non-underlying items included in operating profit
(3.9) (0.5)
Operating profit - 8.3
Net financing expense 0.2 (0.1)
Profit before tax 0.2 8.2
Geographical information
Revenue
(by location of customer)
2022 2022 2021 2021
£m % £m %
UK 9.2 9 7.7 8
Europe (excl. UK) 26.7 27 17.2 18
Africa & Middle East
1.6 2 0.7 1
USA
Americas (excl. USA) 45.8 47 56.9 61
Asia Pacific 7.0 7 7.2 7
7.4 8 4.6 5
97.7 100 94.3 100
3. Non-underlying items
2022 2021
£m £m
Acquisition costs (0.3) (0.4)
Reorganisation costs (0.6) -
Amortisation of acquired intangible assets (1.6) (1.6)
Release of deferred consideration costs - 2.4
Defined benefit pension scheme administration costs and interest (0.8) (1.0)
UK Defined benefit pension scheme - Past service cost for GMP equalisation - -
Profit on disposal of Coventry facility - 0.3
Interest on deferred and contingent consideration - (0.1)
Total non-underlying expense before tax (3.3) (0.4)
4. Employee benefits
The Group accounts for pensions under IAS 19 Employee benefits.
The most recent formal actuarial valuation of the scheme was carried out as at
30 June 2021 using the projected unit credit method. The market value of the
scheme assets at that date was £431.4m and the funding level was 94% of
liabilities, which represented a deficit of £28.4m. The principal terms of
the deficit funding agreement between the Company and the Fund's Trustees,
which is effective until 31 December 2035, but is subject to reassessment
every three years are that the Company will continue to pay a sum of £2.0m
per annum to the scheme (increasing at 2.1 per cent. per annum) in deficit
recovery payments.
The funding agreement focusses the scheme and the company on achieving a
funding level which should permit the scheme to achieve risk transfer to an
alternative arrangement which the company would not be liable for the
performance of. Based on annual tests, once the funding level on a technical
provisions basis reaches 103%, contributions will be redirected to an escrow
account which can only be used by the scheme to either enable risk transfer or
remedy a future deficit arising and would be returned to the company should
risk transfer be achieved without the funds being required. Should the funding
level reach 110% of technical provisions (including the value of the escrow
account), contributions cease.
The deficit recovery period from 30 June 2021 was estimated to be four years
and six months, which is scheduled to be formally reassessed following the
completion of the actuarial valuation being carried out as at 30 June 2024.
Formal valuations of the USA defined benefit schemes were carried out as at 1
January 2022, and their assumptions, updated to reflect actual experience and
conditions at 31 December 2022 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 £1.4m (2021: £1.2m) and a net financing
income on pension scheme balances of £0.6m (2021: £0.2m). In respect of
the UK scheme, the Group paid deficit recovery contributions of £2.0m (2021:
£1.9m). A contribution of £nil (2021: £0.4m), in accordance with the
profit-sharing arrangement in the previous schedule of contributions, was also
paid. Contributions to the US scheme totalled £0.1m (2021: £0.3m)
Employee benefits include the net pension asset of the UK defined benefit
pension scheme of £31.5m (2021: £35.7m) and the net pension liability of the
USA defined benefit pension schemes of £2.1m (2021: £2.5m), all figures
before tax.
5. Earnings per share
Basic earnings per ordinary share is based upon the loss for the period of
£0.4m (2021: profit of £7.8m) and on a weighted average of 20,261,505 shares
in issue during the year (2021: 19,920,895). 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 13.3p for the year (2021:
39.7p) and is based on underlying profit for the period of £2.7m (2021:
£7.9m), which is calculated on profit before non-underlying items.
6. Reconciliation of net cash flow to movement in net funds
2022 2021
£m £m
Net decrease in cash and cash equivalents (10.6) (1.3)
Change in net funds resulting from cash flows (10.6) (1.3)
Translation movements 0.3 0.3
Movement in net funds in the period (10.3) (1.0)
Opening net funds 7.6 10.4
Movement in interest bearing loans and borrowings (8.0) -
Movement in lease liabilities 0.7 (1.8)
Closing net funds (10.0) 7.6
7. Analysis of net funds
2022 2021
£m £m
Cash and cash equivalents - current assets 4.2 14.5
Interest-bearing loans and borrowings - current liabilities (8.0) -
Interest-bearing loans and borrowings - non-current liabilities (0.9) (0.9)
Lease liabilities (5.3) (6.0)
Closing net funds (10.0) 7.6
8. Contingent consideration
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 both the first and second year and consequently a
payment of $1.0m (£0.6m) was paid in both years. The two-year performance
criteria relating to the purchase of Switchback in 2020 has now concluded.
9. Annual Report and Accounts
Shareholders will be notified, on or around 31 March 2023 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 17 May 2023 at the offices of Hudson Sandler LLP, 25
Charterhouse Square, London, EC1M 6AE.
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