REG - Mpac Group PLC - Half Year Results
07/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230907:nRSG6367La&default-theme=true
RNS Number : 6367L Mpac Group PLC 07 September 2023
7 September 2023
AIM: MPAC
Mpac Group plc
("Mpac", "the Company" or "the Group")
Half Year Results for the six months to 30 June 2023
Strong order intake and healthy prospects pipeline; remain confident in long
term prospects
Mpac Group (AIM: MPAC), the global packaging and automation solutions Group,
today announces its unaudited financial results for the six months to 30 June
2023 (the "period").
Financial Highlights
· Order intake of £62.4m (2022: £32.8m) contributing to a closing
order book of £77.5m (30 June 2022: £62.6m; 31 Dec 2022: £67.2m)
· Group revenue of £52.8m, up 4% (2022: £50.6m)
· Underlying* profit before tax of £1.9m (2022: £1.1m)
· Statutory profit before tax of £0.2m (2022: loss of £0.4m)
· Underlying* earnings per share of 6.5p (2022: 3.6p)
· Basic loss per share of (2.2)p (2022: earnings per share of 3.6p)
· Net cash of £2.2m (30 June 2022: £8.6m; 31 December 2022: Net
borrowings of £4.7m)
*Underlying results are stated before pension related credits of £0.3m (H1
2022: charges of £0.4m); amortisation of acquired intangible assets of £0.8m
(H1 2022: £0.8m); restructuring costs of £1.1m (H1 2022: £0.1m) and other
non-underlying items of £0.1m (H1 2022: £0.3m).
Operational and Strategic Highlights
· Shipment, installation, and commissioning of battery cell assembly
Customer Qualification Plant ("CQP") automation line to FREYR Battery
(''Freyr'') progressing to schedule
· Commenced pre-engineering work to define specification of Giga
America for Freyr
· Winning new customers in target sectors
· Strong growth in Service business, delivering on strategic focus
to improve and sustain customer support
· Reduction of working capital progressing to plan
· Implementation of One Mpac business systems in our Cleveland, USA
site
· Strengthened leadership team with new appointments in UK and
North America
· Second year cohort joined Mpac Academy to develop future leaders
and to retain talent
· Strong pipeline of potential acquisitions for future strategic
growth
Current trading and outlook
· Current trading is in line with the Board's expectations and full
year market guidance remains unchanged. Margins are normalising as anticipated
and with a strong order book and prospects pipeline, Mpac is well positioned
to deliver on the previously announced H2 weighting to the financial year,
despite the challenging trading environment.
Adam Holland, Chief Executive Officer, commented:
''I am delighted to report my first set of interim results as Chief Executive
Officer, which were in line with our expectations. I am pleased to be able
to report significant progress in the first half of 2023, with increases in
Original Equipment and Service order intake and a closing order book
significantly up on the prior year. In addition, the prior year expansion of
working capital has unwound in line with expectations, and we close H1 in a
positive net cash position. We have a lot to do in the second half but are
anticipating normalising margins in the period and are focused on delivering
the strong order book for our customers. We have made good progress in
developing the leadership team and I am confident that Mpac has the employee
skillset to take advantage of the attractive markets in which we operate and
deliver on our strategic objectives.''
For further information, please contact:
Mpac Group plc Tel: +44 (0) 2476 421100
Adam Holland, Chief Executive Officer
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
Notes to Editor
Mpac Group (AIM: MPAC) is a global leader in engineering and technology,
designing, precision engineering, manufacturing, and supporting high-speed
packaging equipment and solutions.
Mpac serves 80 countries across four key regions around the world including
the Americas, EMEA, APAC and the UK. The Company operates in the attractive
growth markets of Food & Beverage, Healthcare and Clean Energy. These
targeted markets boast significant growth opportunities.
Through its three core product lines - Lambert, Langen and Switchback - the
Company provides full line Original Equipment and Services for automated
high-speed packaging, from assembly of products through to case packing and
palletising. Mpac's high margin Service offering ensures a stable and
recurring revenue after the sale of Original Equipment.
Mpac is a people-driven business. It employs more than 500 colleagues around
the world including 180 dedicated global engineers & designers. The
business is also underpinned by innovation, as one of Mpac's key strategic
pillars which remains fundamental to the Company's long-term sustainable
growth.
Mpac is headquartered in Tadcaster, UK and operates sites in the US, Canada,
the Netherlands and Singapore.
HALF-YEAR MANAGEMENT REPORT
Introduction
Mpac serves customers' needs for ingenious, innovative automation and
packaging machinery. We design, precision engineer, manufacture and support
high-speed automation and packaging solutions, with embedded process
monitoring systems.
The Group is focused on the high growth, resilient, Healthcare and Food and
Beverage markets and benefits from an exclusive commercial framework agreement
to supply a customer in the Clean Energy storage market.
The opportunities for the Group are based on the following fundamental
strengths:
• Robust long-term growth drivers in our target
Healthcare and Food and Beverage markets
• Exciting opportunity to become a key supplier of
automation solutions for the Clean Energy storage market
• Leadership in innovative, high-speed packaging
machinery and automation solutions
• Global reach with embedded local presence
providing exceptional service to our customers
• A talented and engaged workforce
• Extensive machine installed base to drive
Service revenues
The Board believes that these fundamental strengths place Mpac in a strong
position for growth and that the Group continues to make good progress towards
achieving its long-term strategic objectives.
Overview
2023 started with good revenue coverage from the opening order book, but with
a project mix impacted by 2022 supply chain disruption. The effects of this
have now largely cleared and accordingly, second half trading is anticipated
at normalising margins, giving confidence to the second half earnings
weighting which we indicated earlier in the year.
Year to date order intake of £62.4m is significantly ahead of the prior year
(H1 2022: £32.8m) and the H1 2023 closing order book of £77.5m is above the
2023 opening order book of £67.2m, providing extensive coverage over forecast
revenue for the remainder of 2023. Furthermore, the focus on developing our
recurring, higher margin Service business continues with significant growth in
order intake and revenue.
The prior year expansion of working capital has begun to unwind and is in line
with expectations, and we closed the half year with a strong balance sheet and
positive net cash.
Beyond the challenging trading environment, the outlook for the business
remains positive. We carry forward a strong prospect pipeline and order
book, concentrated on companies in our core, resilient, end markets of
Healthcare and Food and Beverage. Our strong balance sheet provides us with
the ability to invest for growth over the medium term and beyond.
FREYR progress
In 2022 Mpac signed a three-year exclusive commercial framework agreement with
FREYR, a developer of battery cell production capacity, for the supply of
casting and unit cell assembly equipment. Mpac is completing the
commissioning of the CQP line for FREYR, which is progressing in line with the
customer's planning and expectations. We anticipate that the line will be
fully commissioned in H2 2023. In Q2 2023, we started work on the
pre-engineering activities for FREYR's first intended production line order,
Giga America, to define the specification and scoping. If the customer
proceeds to order production series cell assembly units, Mpac is well
positioned to be selected as the supplier of these lines. There remains no
certainty around the timing or quantum of production line orders and Mpac
remains focused on delivering the projects within the order book.
Working capital reduction
Due to extended supplier lead times, resulting in longer build times of Mpac
equipment, there was a significant expansion of working capital in 2022 which
resulted in the Group drawing down against its committed revolving credit
facility and reporting net debt at the 2022 year end. As anticipated, with
the wider project build portfolio from 2022 largely completing in H1 2023,
working capital has fallen in 2023 and we closed the half year with a net cash
position and a £7.3m reduction in working capital.
Strategic progress
Our focus in H1 2023 has been on our customers, deepening our relationship
with them to establish their longer term investment plans and Service
requirements. We have extended the bandwidth of our commercial, field
service and back-office teams to ensure that Mpac continues to provide a long
term sustainable, best in class, service to all our customers and an improved
response time. The impact of this increased focus is already evident from
the increased order intake from both existing and new key accounts, and
improved Service performance in H1.
Continuing with our longer-term strategy to operate as a single entity
business, we have deployed our common business systems to our site in
Cleveland, USA to enhance operational leverage and we have made considerable
progress in developing a product selector based customer website which will go
live in Q3 2023.
Innovation remains one of Mpac's key strategic pillars and is fundamental to
the Group's long-term sustainable growth. We made further progress in H1
2023 with the continued development of the Mpac Cube, which incorporates
innovations focused on improved machine performance, digital enhancements plus
further Industry 4.0 enabled technology. In addition, the next phase of
product development has been defined in an updated roadmap with deployment
commencing in H2 2023.
Financial results
The Group entered 2023 with a diverse and good quality order book which, along
with a strong H1 order intake resulted in sales in the period of £52.8m (H1
2022: £50.6m), a 4% increase on prior year. Gross profit margins increased to
23.9% (H1 2022: 21.1%), driven by a stronger product mix in the period. Order
intake in the period increased to £62.4m, 90% above the prior year. We have a
£77.5m order book going into the second half of 2023.
Underlying profit before tax was £1.9m (H1 2022: £1.1m). After a net tax
charge of £0.5m (H1 2022: £0.4m), underlying profit after tax for the period
was £1.4m (H1 2022: £0.7m). Underlying earnings per share was 6.5p (H1 2022:
3.6p).
The underlying results are stated before pension-related credits of £0.3m (H1
2022: charges of £0.4m), comprising charges in respect of administering the
Group's defined benefit pension schemes of £0.4m (H1 2022: £0.7m) and
finance income on pension scheme balances of £0.7m (H1 2022: £0.3m),
amortisation of acquired intangible assets of £0.8m (H1 2022: £0.8m) and
reorganisation costs of £1.2m (H1 2022: £0.2m),
On a statutory basis, the loss after tax for the period was £0.4m (H1 2022:
£0.7m). The basic loss per share amounted to 2.2p (H1 2022: 3.6p).
Operating performance
Overall revenue increased by 4% to £52.8m (H1 2022: £50.6m) supported by
strong order intake and execution of projects.
The Group manages the business in two parts, Original Equipment (OE) and
Service, and across three regions (Americas, EMEA and Asia Pacific).
Individual contracts received by the OE business can be sizeable. Accordingly,
one significant order can have a disproportionate impact on the growth rates
seen in individual markets year on year.
Original Equipment ("OE")
OE order intake increased by 131% to £46.0m (H1 2022: £19.9m). Our
customers in the Healthcare and Food & Beverages markets continue to
demonstrate resilient performance despite rising interest rates, fuelling
demand for Mpac's products.
Revenue decreased by 12% to £35.2m (H1 2022: £39.8m) with the reduction
being primarily in the Americas and driven by the timing of the orders
received last year as customers sought acceleration of capital investment into
2021, supported by post-covid tax incentives.
OE revenue in the Americas decreased by 34% to £16.4m (H1 2022: £25.0m)
while in EMEA OE revenue increased by 12% to £14.5m (2022: £12.9m). Growth
in EMEA was primarily due to a stronger performance across our traditional
markets in healthcare and food & beverage, supported by the continuing
development of the customer qualification battery cell assembly line for
FREYR.
Revenue development in all regions is dependent upon the timing of customers'
investment cycles, with differing industries and regions experiencing
differing effects from global inflationary pressures.
Service
Service order intake of £16.4m represents a 25% increase on the prior year
and has been driven mainly by order intake for upgrades and spares as a result
of the Group's focus on developing the Service business.
Service revenue grew strongly, up 63% to £17.6m (H1 2022: £10.8m) as our
customers look to increase their productivity by enhancing their existing
machines and reducing downtime. Service revenue represented approximately 33%
of Group revenue in the period, which demonstrates the success of Mpac's 'Make
Service a Business' strategy.
Finances
Gross cash at 30 June 2023 was £8.1m (30 June 2022: £9.5m; 31 December 2022:
£4.2m) after utilisation of the Revolving Credit Facility of £5.0m (30 June
2022: £nil, 31 December 2022: £8.0m). Cash balances are impacted by the
timing of project order intake and associated working capital cycles.
Net cash inflow from operating activities in the first half of the year was
£9.4m, after a decrease in working capital levels of £7.3m, due mainly to
the timing of project execution, partially offset by deficit recovery payments
to the Group's defined benefit pension schemes of £0.9m. Capital and product
development expenditure in the first half of the year was £1.1m (2022:
£0.6m).
The Group maintains bank facilities appropriate to its expected needs
including committed borrowing facilities with HSBC UK Bank Plc of £20.0m.
These facilities, which are committed until July 2025, are subject to
covenants covering interest cover and adjusted leverage and are both sterling
and multi-currency denominated.
Dividend
Having considered the trading results to 30 June 2023, together with the
opportunities for investment in the growth of the Group, the Board has decided
that it is appropriate not to pay an interim dividend in respect of the
period. No dividends were paid in 2022. Future dividend payments and the
development of a new dividend policy will be considered by the Board in the
context of the trading performance for 2023 and when the Board believes it is
prudent to do so.
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 Company is responsible for the
payment of a statutory levy to the Pension Protection Fund.
The IAS 19 valuation of the UK scheme as at 30 June 2023 shows a surplus of
£35.2m (£22.9m net of deferred tax), compared with a surplus of £31.5m
(£20.4m net of deferred tax) at 31 December 2022. The main driver of the
increase in the surplus was the increase in the discount rate required by
IAS19, partially offset by the effect of the liability matching programme on
asset values when discount rates rise and by increases in anticipated
inflation on future benefits.
The net valuation of the USA pension schemes at 30 June 2023, with total
assets of £7.9m, showed a deficit of £1.6m, a decrease of £0.5m from 31
December 2022, caused entirely by exchange rate movements.
The aggregate expense of administering the pension schemes was £0.4m (H1
2022: £0.7m). The net financing income on pension scheme balances was
£0.7m (H1 2022: £0.3m).
Acquisition strategy
The Board continues to evaluate potential acquisition opportunities that
strategically fit the Group, and which will enhance our global presence in
packaging solutions serving the Healthcare and Food and Beverage markets. Good
progress was made during the period in developing the pipeline of potential
acquisition opportunities. The Company will provide updates on acquisitions
whenever appropriate to do so.
Outlook
Current trading is in line with the Board's expectations and full year market
guidance remains unchanged. Margins are normalising as anticipated and with a
strong order book and prospects pipeline, Mpac is well positioned to deliver
on the previously announced H2 weighting to the financial year despite the
challenging trading environment.
We continue to be focused on executing our long-term strategy of delivering OE
and Service growth, broadening our customer base, and delivering on our
exciting new product development roadmap.
Our balance sheet remains healthy and provides us with the ability to invest
in the Group for growth. Accordingly, the Board remains confident in the
Group's longer-term prospects.
Adam Holland
Chief Executive
6 September 2023
CONDENSED CONSOLIDATED INCOME STATEMENT
6 months to 30 June 2023 (unaudited) 6 months to 30 June 2022 (unaudited)
Non-underlying Non-underlying
(note 5) (note 5)
Underlying £m Total Underlying £m Total
Note £m £m £m £m
Revenue 4 52.8 - 52.8 50.6 - 50.6
Cost of sales (40.2) - (40.2) (39.9) - (39.9)
Gross profit 12.6 - 12.6 10.7 - 10.7
Distribution expenses (3.6) - (3.6) (3.4) - (3.4)
Administrative expenses (6.2) (2.4) (8.6) (5.8) (1.8) (7.6)
Other operating expenses (0.6) - (0.5) (0.3) - (0.3)
Operating profit/(loss) 4, 5 2.2 (2.4) (0.2) 1.2 (1.8) (0.6)
Financial income - 0.7 0.7 - 0.3 0.3
Financial expenses (0.3) - (0.3) (0.1) - (0.1)
Net financing income/(expense) (0.3) 0.7 0.4 (0.1) 0.3 0.2
Profit/(loss) before tax 4 1.9 (1.7) 0.2 1.1 (1.5) (0.4)
(0.5)
Taxation (0.1) (0.6) (0.4) 0.1 (0.3)
Profit/(loss) for the period 1.4 (1.8) (0.4) 0.7 (1.4) (0.7)
Earnings/(loss) per ordinary share
Basic 7 (2.2p) (3.6p)
Diluted 7 (2.2p) (3.6p)
CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)
12 months to 31 December 2022 (audited)
Non-underlying
Underlying (note 5) Total
Notes £m £m £m
Revenue 4 97.7 - 97.7
Cost of sales (73.3) - (73.3)
Gross profit 24.4 - 24.4
Distribution expenses (8.0) - (8.0)
Administrative expenses (11.9) (3.9) (15.8)
Other operating expenses (0.5) - (0.5)
Operating profit 4, 5 3.9 (3.9) -
Financial income - 0.6 0.6
Financial expenses (0.4) - (0.4)
Net financing expense (0.4) 0.6 0.2
Profit before tax 4 3.5 (3.3) 0.2
Taxation (0.8) 0.2 (0.6)
Profit / (Loss) for the period 2.7 (3.1) (0.4)
Earnings / (Loss) per ordinary share
Basic 7 (2.0p)
Diluted 7 (2.0p)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months to 30 June 2023 (unaudited) 6 months to 30 June 2022 (unaudited) 12 months to 31 Dec 2022 (audited)
£m £m £m
Loss for the period (0.4) (0.7) (0.4)
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Actuarial gains/(losses) 2.9 23.5 (5.0)
Tax on items that will not be reclassified to profit or (1.2) (8.4) 1.3
loss
1.7 15.1 (3.7)
Items that may be reclassified subsequently to profit or loss
Currency translation movements arising on foreign currency net investments
(1.0) 1.2 2.1
Effective portion of changes in fair value of cash flow hedges
0.5 (1.0) (1.0)
Reclassified to income statement from hedge reserve
0.3 (0.1) (0.3)
(0.2) (0.1) 0.8
Other comprehensive income for the period 1.5 15.2 (2.9)
Total comprehensive income for the period 1.1 14.5 (3.3)
All income for the period was derived from continuing operations
CONDENSED 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
6 months to 30 June 2023
Balance at 1 January 2023 5.1 26.0 2.4 3.9 (1.8) 26.6 62.2
Profit for the period - - - - - (0.4) (0.4)
Other comprehensive (expense) / income for the period
- - (1.0) - 0.8 1.7 1.5
Total comprehensive (expense) / income for the period (1.0) 0.8 1.3 1.1
- - -
Equity-settled share-based transactions - - - - - - -
Purchase of own shares - - - - - - -
Total transactions with owners, recorded directly in equity
- - - - - - -
Balance at 30 June 2023 5.1 26.0 1.4 3.9 (1.0) 27.9 63.3
6 months to 30 June 2022
Balance at 1 January 2022 5.0 26.0 0.3 3.9 (0.5) 30.7 65.4
Profit for the period - - - - - (0.7) (0.7)
Other comprehensive (expense) / income for the period
- - 1.2 - (1.1) 15.1 15.2
Total comprehensive (expense) / income for the period
- - 1.2 - (1.1) 14.4 14.5
Total transactions with owners, recorded directly in equity
- - - - - 0.2 0.2
Balance at 30 June 2022 5.0 26.0 1.5 3.9 (1.6) 45.3 80.1
12 months to 31 December 2022
Balance at 1 January 2022 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 - - - - - 0.1 0.1
Purchase of own shares 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
CONDSENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 2023 (unaudited) 31 Dec 2022 (audited)
Note £m £m
Non-current assets
Intangible assets 24.3 25.4
Property, plant and equipment 4.0 4.0
Investment property 0.8 0.8
Right of use assets 4.5 5.0
Employee benefits 6 35.2 31.5
Deferred tax assets 1.0 1.3
69.8 68.0
Current assets
Inventories 10.2 9.6
Trade and other receivables 44.0 47.3
Current tax assets 0.8 0.6
Cash and cash equivalents 8.1 4.2
63.1 61.7
Current liabilities
Lease liabilities (1.3) (1.4)
Trade and other payables (43.6) (39.0)
Current tax liabilities (0.3) (0.1)
Provisions (1.0) (1.0)
Interest-bearing loans and borrowings (5.0) (8.0)
(51.2) (49.5)
Net current assets 11.9 12.2
Total assets less current liabilities 81.7 80.2
Non-current liabilities
Interest-bearing loans and borrowings (0.9) (0.9)
Employee benefits 6 (1.7) (2.1)
Deferred tax liabilities (12.4) (11.1)
Lease liabilities (3.4) (3.9)
(18.4) (18.0)
Net assets 63.3 62.2
Equity
Issued capital 5.1 5.1
Share premium 26.0 26.0
Reserves 2.9 2.1
Retained earnings 29.3 29.0
Total equity 63.3 62.2
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
(unaudited) (unaudited) (audited)
£m £m £m
Operating activities
Operating loss
Non-underlying items included in operating profit / (loss)
Amortisation (0.2) (0.6) -
Depreciation
Other non-cash items 2.4 1.8 3.9
Pension payments
Working capital movements: 0.3 0.3 0.9
- increase in inventories
- decrease / (increase) in trade and other receivables 0.9 1.0 2.0
- increase in contract assets
- increase in trade and other payables - 0.4 0.2
- increase / (decrease) in contract liabilities
- increase/(decrease) in provisions (0.9) (1.1) (2.1)
(0.8) (0.5) (2.2)
3.7 6.1 (6.3)
(0.6) (4.7) (5.9)
1.7 1.5 1.7
3.4 (7.6) (4.0)
(0.1) 0.1 0.5
Cash flows from continuing operations before reorganisation 9.8 (3.3) (12.8)
Acquisition and reorganisation costs paid
(0.4) - (0.8)
Cash flows from operations 9.4 (3.3) (13.6)
Taxation paid
(0.3) (0.2) (0.4)
Cash flows (used in) / from operating activities 9.1 (3.5) (14.0)
Investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment - 0.1 -
Capitalised development expenditure
Payment of deferred consideration (0.5) (0.6) (1.4)
(0.6) (0.1) (1.0)
- - (0.8)
Cash flows from investing activities (1.1) (0.6) (3.2)
Financing activities
Interest paid
Purchase of own shares (0.3) (0.1) (0.3)
Proceeds from borrowings - - (0.2)
Principal elements of lease payments (3.0) - 8.0
(0.4) (0.6) (1.1)
Cash flows from financing activities (3.7) (0.7) 6.6
Net increase/(decrease) in cash and cash equivalents 4.3 (4.8) (10.6)
Cash and cash equivalents at 1 January 4.2 14.5 14.5
Effect of exchange rate fluctuations on cash held (0.4) (0.2) 0.3
Cash and cash equivalents at period end 8.1 9.5 4.2
NOTES TO ANNOUNCEMENT
1. General information
The half-year results for the current and comparative period are unaudited but
have been reviewed by the auditors, PKF Littlejohn LLP, and their report is
set out after the notes. The comparative information for the year ended 31
December 2022 does not constitute statutory accounts as defined in section 434
of the Companies Act 2006. The Group's statutory accounts have been reported
on by the Group's auditor and delivered to the Registrar of Companies. The
report of the auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis without
qualifying its report, and (iii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006. The Group's statutory accounts for
the year ended 31 December 2022 are available from the Company's registered
office at Station Estate, Station Road, Tadcaster, North Yorkshire, LS24 9SG
or from the Group's website at www.mpac-group.com
(https://url.avanan.click/v2/___http:/www.mpac-group.com___.YXAxZTpzaG9yZWNhcDphOm86MjBhNjQxNWI3YTZlMTJhYWNhNzkxOGY2ZjQ1ZmZiYTQ6NjowZTllOjllN2MzN2MwMTI3Yzg3MGNhNjQ2OGE5M2U3MThjODcxMmYwYWYxNTJmNDdjY2IwOTI0MThkODE0NjhjMzgwN2Q6cDpU)
.
The Directors have considered the trading outlook of the Group for an 18-month
period ending 31 December 2024, its financial position, including its cash
resources and access to borrowings, and its continuing obligations, including
to its defined benefit pension schemes. Having made appropriate enquiries,
the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis in preparing
the condensed set of financial statements.
The condensed set of interim financial statements was approved by the Board of
directors on 6 September 2023.
2. Basis of preparation
(a) Statement of compliance
The condensed set of interim financial statements for the 6 months ended 30
June 2023 has been prepared in accordance with UK-adopted international
accounting standards, and in particular IAS 34 Interim financial reporting.
It does not include all the information required for full annual financial
statements and should be read in conjunction with the financial statements of
the Group for the year ended 31 December 2022.
(b) Judgements and estimates
The preparation of the condensed set of interim financial statements requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
In preparing the condensed set of financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were of the same type as those that
applied to the financial statements for the year ended 31 December 2022.
Mpac is subject to a number of risks which could have a serious impact on the
performance of the business. The Board regularly considers the principal
risks that the Group faces and how to mitigate their potential impact. The
key risks to which the business is exposed are set out on pages 17 to 21 of
the Group's 2022 Annual Report and Accounts.
3. Significant accounting policies
The accounting policies, presentation and methods of computation applied by
the Group in this condensed set of interim financial statements are the same
as those applied in the Group's latest audited financial statements. No new
accounting standards have been applied for the first time in these condensed
interim financial statements.
4. Operating segments
It is the Group's strategic intention to develop "One Mpac", accordingly
segmental reporting reflects the split of sales by both Original Equipment
(OE) and Service together with the regional split, Americas, EMEA and Asia.
The Group's operating segments reflect the basis of the Group's management and
internal reporting structure.
Unallocated costs include distribution and administrative expenditure.
Further details in respect of the Group structure and performance of the
segments are set out in the half-year management report.
6 months to 30 Jun 2023 6 months to 30 Jun 2022 12 months to 31 Dec 2022
OE Service Total OE Service Total OE Service Total
£m £m £m £m £m £m £m £m £m
Revenue
Americas 16.1 8.3 24.4 25.0 5.1 30.1 40.9 11.9 52.8
EMEA 14.9 8.3 23.2 12.9 5.1 18.0 27.8 9.7 37.5
Asia Pacific 4.2 1.0 5.2 1.9 0.6 2.5 5.9 1.5 7.4
Total 35.2 17.6 52.8 39.8 10.8 50.6 74.6 23.1 97.7
Gross profit 12.6 10.7 24.4
Selling, distribution & administration
(10.4) (9.5) (20.5)
Underlying operating profit 2.2 1.2 3.9
Unallocated non-underlying items included in operating profit
(2.4) (1.8) (3.9)
Operating profit (0.2) (0.6) -
Net financing income / (expense) 0.4 0.2 0.2
Profit before tax 0.2 (0.4) 0.2
5. Non-underlying items and alternative performance measures
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 administration charges and
interest, significant reorganisation costs, acquisition or disposal costs,
amortisation of acquired intangible assets, profits or losses arising on
discontinued operations, significant impairments of tangible and intangible
assets and related taxation 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 measure reviewed by key stakeholders.
The Group elects to include costs relating to the defined benefit pension
scheme in non-underlying as the costs would be immaterial to the Group should
the scheme not exist.
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
£m £m £m
Defined benefit pension scheme administration costs (note 6) (0.4) (0.7) (1.1)
Reorganisation costs (1.2) (0.1) (0.6)
Amortisation of intangibles from business combinations (0.8) (0.8) (1.6)
Acquisition costs - (0.2) (0.3)
Total non-underlying operating expenditure
(2.4)
(1.8)
(3.6)
Net financing income on pension scheme balances
0.7
0.3
0.3
Total non-underlying expense before tax (1.7) (1.5) (3.3)
The Group uses alternative performance measures (APM's), in addition to those
reported under IFRS, as management believe these measures enable the users of
financial statements to better assess the underlying trading performance of
the business. The APM's used include underlying operating profit, underlying
profit before tax and underlying earnings per share. These measures are
calculated using the relevant IFRS measure as adjusted for non-underlying
income/(expenditure) listed above.
6. Employee benefits
The Group accounts for pensions under IAS 19 Employee benefits. The most
recent formal valuation of the UK defined benefit pension scheme (Fund) was
completed as at 30 June 2021, which identified a deficit of £28.4m. The
deficit funding agreement focusses the scheme on achieving risk transfer to an
alternative arrangement which the company would not be liable for the
performance of. The principal terms of the deficit funding agreement, which is
effective until 31 December 2035 and is subject to reassessment every 3 years,
are as follows:
• the Company will continue to pay a sum of £2.0m per annum to the
Fund (increasing at 2.1% per annum) in deficit recovery payments;
• Once the funding level on a technical provisions basis exceeds
103% (based upon an annual test), contributions will be redirected to an
escrow account which can only be used to either enable risk transfer, remedy a
deficit arising or be returned to the Group should risk transfer be achieved
without the funds being required; and
• Should the funding level (including the escrow account) reach 110%
on a technical provisions basis (based upon an annual test), contributions
will cease.
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 in this set of financial statements.
Profit before tax includes charges in respect of the defined benefit pension
schemes' administration costs of £0.4m (2022: £0.7m) and a net financing
income on pension scheme balances of £0.7m (2022: £0.3m). In respect of
the UK scheme, the Group paid deficit recovery contributions of £0.9m (2022:
£1.0m). Contributions to the US scheme totalled £0.1m (2022: £0.1m)
Employee benefits include the net pension asset of the UK defined benefit
pension scheme of £35.2m (2022: £59.7m) and the net pension liability of the
USA defined benefit pension schemes of £1.0m (2022: £2.8m), all figures
before tax.
Employee benefits as shown in the condensed consolidated statement of
financial position were:
30 June 31 Dec
2023 2022
£m £m
UK scheme
Fair value of assets 295.8 311.1
Present value of defined benefit obligations (260.6) (279.7)
Defined benefit asset 35.2 31.5
USA schemes
Fair value of assets 7.9 8.1
Present value of defined benefit obligations (9.5) (10.2)
Defined benefit liability (1.6) (2.1)
Total net defined benefit asset 33.6 29.4
7. Earnings per share
Basic earnings per ordinary share is calculated by dividing the profit or loss
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period excluding shares held by the
employee trust in respect of the Company's long-term incentive arrangements.
For diluted earnings per ordinary share, the weighted average number of shares
includes the diluting effect, if any, of own shares held by the employee trust
and the effect of the Company's long-term incentive arrangements.
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
Basic - weighted average number of ordinary shares 20,474,424 20,035,439 20,261,505
Diluting effect of shares held by the employee trust - 261,568 41,304
Effect of shares conditionally granted under the LTIP 94,849 - -
Diluted - weighted average number of ordinary shares 20,569,273 20,297,007 20,302,809
Underlying earnings per share, which is calculated on the earnings before
non-underlying items, for the 6 months to 30 June 2023 amounted to 6.5p (6
months to 30 June 2022: 3.6p; 12 months to 31 December 2022: 13.3p).
In the 6 months to 30 June 2023 and 30 June 2022 the effect of dilution was
nil pence per share. The effect of the dilution at 31 December 2022 was nil
pence per share.
8. Financial risk management
The Group's financial risk management objectives and policies are consistent
with those disclosed in the financial statements for the year ended 31
December 2022.
The Group enters forward foreign exchange contracts solely for the purpose of
minimising currency exposures on sale and purchase transactions. The Group
has classified its forward foreign exchange contracts used for hedging as cash
flow hedges and states them at fair value.
9. Related parties
The Group has related party relationships with its directors and with the UK
and USA defined benefit pension schemes. There has been no material change
in the nature of the related party transactions described in note 31 of the
2022 Annual Report and Accounts.
10. Dividends
Having considered the trading results to 30 June 2023, together with the
opportunities for investment in the growth of the Company, the Board has
decided that it is appropriate not to pay an interim dividend. No dividends
were paid in 2022. Future dividend payments and the development of a new
dividend policy will be considered by the Board in the context of 2023 trading
performance and when the Board believes it is prudent to do so.
11. Half-year report
A copy of this announcement will be made available to shareholders from 7
September 2023 on the Group's website at www.mpac-group.com
(https://url.avanan.click/v2/___http:/www.mpac-group.com___.YXAxZTpzaG9yZWNhcDphOm86MjBhNjQxNWI3YTZlMTJhYWNhNzkxOGY2ZjQ1ZmZiYTQ6NjowZTllOjllN2MzN2MwMTI3Yzg3MGNhNjQ2OGE5M2U3MThjODcxMmYwYWYxNTJmNDdjY2IwOTI0MThkODE0NjhjMzgwN2Q6cDpU)
. This announcement will not be made available in printed form.
12. Future accounting policies
There are no changes anticipated to the Group's accounting policies in the
foreseeable future.
INDEPENDENT REVIEW REPORT TO MPAC GROUP PLC
Conclusion
We have been engaged by the group to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprise the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Changes in Equity, the Condensed
Consolidated Statement of Financial Position, the Condensed Consolidated
Statement of Cash Flows and related notes. We have read the other information
contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the AIM Rules for Companies.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity", issued for use in the United Kingdom.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2a, the annual financial statements of the group are
prepared in accordance with UK adopted IASs. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the AIM Rules for Companies.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the group
or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of financial information
In reviewing the half-yearly report, we are responsible for expressing to the
group a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company's directors, as a body, in
accordance with the terms of our engagement letter dated 8 August 2023. Our
review has been undertaken so that we might state to the company's directors
those matters we have agreed to state to them in a reviewer's report and for
no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone, other than the company and the company's
directors as a body, for our work, for this report, or for the conclusions we
have formed.
PKF Littlejohn
LLP
15 Westferry Circus
Statutory
Auditor
Canary Wharf
London E14 4HD
6(th) September 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR UNARROAUKRURRecent news on MPAC
See all newsRCS - Mpac Group PLC - SiSTEM pilot battery assembly line
AnnouncementRCS - Mpac Group PLC - Launch of ESG Report
AnnouncementREG - Mpac Group PLC - Grant of Options
AnnouncementREG - Mpac Group PLC - Notice of AGM
AnnouncementREG - Mpac Group PLC - Full Year Results
Announcement