TIDMMPAC
RNS Number : 2735L
Mpac Group PLC
05 September 2019
5 September 2019
AIM: MPAC
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No. 596/2014
Mpac Group plc
("Mpac", "Company" or "Group")
Mpac, the global packaging and automation solutions group, today
announces its results for the six months to 30 June 2019
Highlights
-- Increase in Group sales of 62% to GBP45.8m (2018: GBP28.2m),
including GBP5.5m from the acquisition of Lambert Automation
Group ("Lambert")
-- Underlying profit before tax of GBP4.5m (2018: GBPnil)
-- Good progress made in executing Original Equipment orders
during the first half of 2019, with a favourable repeat
project mix generating improved margins
-- Profits for the full year expected to be significantly above
current market expectations
-- On track to deliver the anticipated benefits from the acquisition
of Lambert
-- Overall order intake in the first half of 2019 is 54% above
the first half of 2018. Services order intake growth was
particularly strong in the first half, up 75% on the same
period of 2018
-- Order book at 30 June 2019 is broadly comparable to June
2018 on a like for like basis
-- Underlying earnings per share of 21.3p (2018: loss of 1.6p)
-- Statutory profit before tax of GBP2.9m (2018 loss: GBP0.6m).
Basic earnings per share of 12.7p (2018: loss of 3.9p)
-- Net cash of GBP9.6m (30 June 2018: GBP24.9m; 31 December
2018: GBP27.0m). Cash flows consistent with the improved
trading performance of the Group and the acquisition of
Lambert
-- Triennial valuation of the UK pension scheme completed,
and recovery plan agreed, with a gross reduction of contributions
of GBP9.7m compared to the previous agreement
Tony Steels, Chief Executive, commented:
"I am really pleased with the results for the first half of the
year which demonstrate the value of the strategic objectives we
have been working hard to implement. The recent acquisition of
Lambert is progressing to plan and has been well received by our
current customers and potential new customers, increasing our
prospects to provide full turnkey solutions. We remain focused on
continuing to deliver on our strategic objectives supported by
sound business fundamentals and growth markets."
For further information, please contact:
Mpac Group plc Tel: +44 (0) 24 7642
Tony Steels, Chief Executive 1100
Will Wilkins, Group Finance Director
Panmure Gordon (UK) Limited (Nominated
Adviser & Broker) Tel: +44 (0) 20 7886
Dominic Morley - Corporate Advisory 2500
James Stearns
Hudson Sandler Tel: +44 (0) 20 7796
Nick Lyon 4133
Nick Moore
HALF-YEAR MANAGEMENT REPORT
Introduction
Mpac serves customers' needs for ingenious, innovative packaging
machinery and automation encompassing, Make, Pack, Monitor and
Service. We design, precision engineer and manufacture high speed
automation and packaging solutions, with embedded process
monitoring systems. The addition of Lambert to the Group in May
2019 further strengthens our position in the market to deliver
complete solutions for factory automation and process innovation.
With the acquisition we now provide complete turnkey solutions
including the design and integration of packaging systems and a
lifetime service for our machinery.
The Group's packaging machinery and automation business is
focused on the high growth pharmaceutical, healthcare and food and
beverage markets, which we expect to enjoy long term growth rates
of between 4% to 6%.
The opportunities for the Group are based on the following
fundamental strengths:
-- Robust long-term growth drivers in our target markets
-- Heritage of 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
As outlined at the time of the Company's final results, Mpac
started 2019 with a significantly higher order book than at the
start of 2018. The quality of this opening order book is the driver
behind the financial performance achieved in the first half of the
year. However, there remains the potential for forecast orders to
be delayed due to general economic uncertainty for the medium term,
driven by macro-economic and political circumstances outside of the
control of the Group. Therefore, the Board anticipates that, while
the results for 2019 will be above current market expectations,
primarily as a result of an increased number of repeat projects and
by operational efficiencies, the medium-term economic outlook,
driven by macro-economic factors, is less certain.
Strategic Progress
We have made further good progress in delivering upon our
strategic plans. Growth at the target levels continues, underpinned
by a commercial excellence programme and innovation roadmap.
'Service as a Business' is becoming embedded within the culture of
the Group and operational efficiencies have been achieved resulting
in improved margins and profitability.
The acquisition of Lambert provides the Group with a significant
increase in scale and resource and positions the Group to be able
to offer full turnkey automation and packaging solutions to our
customers and a further presence in the strategically important
healthcare market. Current and potential customers have expressed
enthusiasm to work with our larger Group on relevant and larger
scaled projects. Cost and efficiency synergies from the acquisition
are on plan and we expect to deliver further savings over the
medium term.
Our aim to operate as a single entity business model, 'One Mpac'
is progressing well and we have concluded on a project to harmonise
our engineering platforms across the regions. Resources will be
further utilised across the businesses more effectively, leading to
efficiency gains, customer benefits such as reduced project
delivery periods and an order book that is of higher quality and
lower project complexity.
Make Service a Business has gained significant traction in the
first half of the year with the results of the strategy having a
material impact on the financial performance of the Group. Several
long-term service agreements, generating recurring income, have
been implemented and service order intake is above the prior year
across all regions.
A new senior management team in Canada is now embedded and is
providing the leadership necessary to support our strategic
ambitions. Our planned expansion in the USA market is progressing
well, starting with an enlarged sales team.
Financial results
The Group entered the year with a strong order book and
accordingly sales in the six months to 30 June 2019 were GBP45.8m
(2018: GBP28.2m), a 62% increase on the same period in the prior
year. Order intake in the first half of 2019 was 54% above the same
period in 2018, although order intake was significantly higher in
the second half of 2018. Currently, the order book is broadly in
line with the level at the end of June 2018 and, although the Group
has a robust level of prospects, the conversion of prospects to
orders is more difficult to predict in the current environment as
customers defer discretionary investments. The current order book
has been reviewed in detail to confirm that projects remain on
track within contractual terms.
Lambert, acquired on 1 May 2019, for an initial consideration of
GBP16.8m, following adjustments for cash and working capital, has
performed strongly during its initial period of ownership and will
be materially earnings enhancing throughout 2019 and beyond.
Further commercial and operational synergies are expected to be
delivered over the medium term. Non-recurring costs associated with
the acquisition were GBP0.8m.
Underlying operating profit before tax was GBP4.5m (2018:
GBPnil). After a net tax charge of GBP0.3m (2018: GBP0.3m), the
underlying operating profit after tax for the period was GBP4.2m
(2018: underlying loss GBP0.3m). The underlying earnings per share
was 21.3p (2018: loss of 1.6p).
The underlying results are stated before pension related charges
of GBP0.2m (2018: GBP0.4m), comprising charges in respect of
administering the Group's defined benefit pension schemes of
GBP0.4m (2018: GBP0.5m) and financing income on pension scheme
balances of GBP0.2m (2018: GBP0.1m), a provision in respect of
discontinued operations of GBP0.3m, acquisition costs of GBP0.8m
(2018: GBP0.1m), amortisation of acquired intangible assets of
GBP0.2m and restructuring costs of GBP0.1m (2018: GBP0.1m).
On a statutory basis, the profit after tax for the period was
GBP2.6m (2018: GBP0.9m loss). The basic earnings per share amounted
to 12.7p (2018: loss of 3.9p).
Finances
Net cash at 30 June 2019 was GBP10.5m (30 June 2018: net cash of
GBP25.8m; 31 December 2018: GBP27.9m) after a net cash payment for
the acquisition of Lambert of GBP10.6m. Net cash outflow from
operating activities in the first half of the year was GBP5.7m.
This is after an increase in working capital levels of GBP9.0m,
reflecting growth in sales from working through the Group's order
backlog and after deficit recovery payments to the Group's defined
benefit pension schemes of GBP1.3m. Tax paid in the period was
GBP0.3m. Capital and product development expenditure was GBP1.2m
net.
The Group maintains bank facilities appropriate to its expected
needs. In the UK, on 28 June 2019, the Group entered into committed
secured borrowing facilities with HSBC UK Bank Plc of GBP10m. These
facilities, which are committed until June 2022, 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 2019, 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 2018. Future dividend payments
and the development of a new dividend policy will be considered by
the Board in the context of trading performance and the pension
fund as and when the Board believes it is prudent to do so.
Operating performance
The Group manages the business in two parts (OE and service) and
across three regions (Americas, EMEA and Asia Pacific). Individual
contracts received by the OE business and the Service 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)
The Group made sound progress in both securing significant
growth in OE order intake in the first half of 2019 and in
generating an increase in OE gross margin. Order intake was
approximately 42% above the same period in 2018. At the end of June
2019, the OE order book is broadly in line with the level at June
2018.
OE revenue in the Americas region increased from GBP9.1m in 2018
to GBP27.2m in the current period. The EMEA regional performance
reduced by 32% to GBP7.9m (2018: GBP11.7m). Sales in the Asia
Pacific region grew steadily to GBP3.1m (2018: GBP2.4m) an increase
of 29%.
Sales to the Healthcare sector increased by over 200%, driven by
the large contracts won in late 2018 and early 2019. Sales to the
Food and Beverage and Other markets also showed steady progress.
Pharmaceutical revenue was adversely affected by the timing of
contracts within the industry and is expected to recover in the
second half of the year.
OE gross margin in the period was 27% (GBP10.4m) (2018: 18%
(GBP4.2m)) with the increase in profitability the result of
delivering the higher opening OE orderbook at contract margins. The
2018 comparative performance included a significant cost
contingency driven by two technically challenging legacy contracts.
There are no equivalent costs associated with legacy contracts
included within the gross margins reported to June 2019.
Service
Services order intake in the period was 75% higher than in 2018.
The increase was the result of additional focus on making 'Make
Service a Business' across all regions and an improved offering in
conjunction with new machine sales. This led to a 52% increase in
service revenues, with the improvement being broadly equal between
the Americas and EMEA regions. Service sales in Asia Pacific
improved more steadily but still showed progress, growing at 20%
over 2018.
The increased revenue from services generated a gross margin in
the period of GBP2.7m (2018: GBP1.7m). Improved operational and
supply chain efficiency led to an increase in service margin in the
period to 36% (2018: 34%).
Investment Property
The Group owns an investment property and land comprising of 10
acres in Monks Risborough, Buckinghamshire, UK, which is held at a
net book value of GBP0.8m and is not required for the Group's
operations. The Group was not successful in its recent efforts to
have the site designated for residential housing development but
will continue to explore all high-value options for the
investment.
It is difficult to be precise about the future value of the land
if planning approval was obtained for housing. It is not the
Group's current intention to redevelop the site itself.
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 at 30 June 2019 shows a
surplus of GBP29.3m (GBP19.2m net of deferred tax), compared with a
surplus of GBP20.5m (GBP13.2m net of deferred tax) at 31 December
2018. The main driver of the increase in the surplus was the strong
asset performance, partially offset by a decrease in the discount
rate.
The UK scheme was subject to a formal triennial actuarial
valuation as at 30 June 2018, which was completed in the first half
of 2019. The principal terms of the deficit funding agreement
between the Company and the Trustees are set out in note 7. The
next funding valuation will be carried out no later than at 30 June
2021 and the agreement between the Company and the Fund will be
reassessed at each of those valuations.
The actuarial deficit in the UK scheme reduced from GBP69.9m at
30 June 2015 to GBP35.2m at 30 June 2018 in the formal triennial
valuation. The actuarial deficit is now expected to be eliminated
in July 2024, compared to August 2029 under the previous valuation,
representing a gross saving of GBP9.7m. The current annual deficit
recovery payments have been maintained but will now cease more than
five years earlier than was agreed under the previous
valuation.
The net valuation of the USA pension schemes at 30 June 2019,
with total assets of GBP17.6m, showed a deficit of GBP6.1m, which
was unchanged from 31 December 2018.
The aggregate expense of administering the pension schemes was
GBP0.4m (2018: GBP0.5m). The net financing income on pension scheme
balances was GBP0.2m (2018: GBP0.1m).
Acquisition strategy
The Board will continue to evaluate potential acquisition
opportunities that strategically fit and will enhance our global
presence in packaging solutions serving the Pharmaceutical,
Healthcare, Food and Beverage markets.
Outlook
It has been a positive start to the year with the sound
foundations established in 2018 flowing through into 2019,
resulting in an improved financial performance. Additionally, an
increase in the number of repeat projects and in operational
efficiencies generated incremental margins and consequently the
expected results for the full year 2019 are above current market
expectations. The order book and future prospects remain strong,
underpinned by long term growth factors in our target markets.
Execution of the Group's strategic plans is beginning to have a
tangible impact and the Group is in an excellent position to
benefit from further commercial successes in the second half of the
year.
The acquisition of Lambert provides a significant step forward
in being able to deliver full turnkey solutions to our customers
and to complete for large scale commercial opportunities. The
integration plans are on track to deliver the expected results from
the acquisition in 2019.
The Group has both the financial and managerial resources
available to develop its business, with the prime focus being on
organic growth, through leveraging of its global position,
development of its products and most particularly through an
improved service offering to its customers. In conjunction with
this, we are looking at a number of acquisition opportunities which
will be complementary to the Group's existing operations.
General market uncertainty has increased with global FMCG
companies under pressure to eliminate plastic in consumer products
leading to investment delays whilst they develop new solutions.
Order intake is also variable and sensitive to geo-political events
and recent signs of slowing growth resulting in delayed investment
decisions.
Overall progress in the development of the Group's business is
expected to continue and the Board believes that short term
prospects remain positive.
Tony Steels
Chief Executive
4 September 2019
CONDENSED CONSOLIDATED INCOME STATEMENT
6 months to 30 June 2019 6 months to 30 June 2018
(unaudited) (unaudited)
------------------------------------------------ --------------------------------------
Non-underlying Non-underlying
(note (note
Underlying 5) Total Underlying 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Cost of sales 4 45.8 - 45.8 28.2 - 28.2
(32.7) (32.7) (22.3) - (22.3)
--------------------- --------------- -------- ----------- --------------- --------
Gross profit 13.1 - 13.1 5.9 - 5.9
Distribution expenses (3.1) - (3.1) (2.4) - (2.4)
Administrative expenses (5.0) (1.8) (6.8) (3.3) (0.7) (4.0)
Other operating
expenses (0.4) - (0.4) (0.2) - (0.2)
--------------------- --------------- -------- ----------- --------------- --------
4,
Operating profit/(loss) 5 4.6 (1.8) 2.8 - (0.7) (0.7)
Financial income 6 - 0.2 0.2 - 0.1 0.1
Financial expenses 6 (0.1) - (0.1) - - -
--------------------- --------------- -------- ----------- --------------- --------
4,
Net financing income 6 (0.1) 0.2 0.1 - 0.1 0.1
--------------------- --------------- -------- ----------- --------------- --------
Profit/(loss) before
tax 4 4.5 2.9 - (0.6) (0.6)
Taxation 8 (0.3) (1.6) (0.3) (0.3) - (0.3)
--------------------- --------------- -------- ----------- --------------- --------
Profit/(loss) for
the period 4.2 (1.6) 2.6 (0.3) (0.6) (0.9)
===================== =============== ======== =========== =============== ========
Earnings/(loss) per ordinary share
Basic 9 12.7p (3.9)p
Diluted 9 12.6p (3.9)p
------------------------- ------ --------------------- --------------- -------- ----------- --------------- --------
The Group has initially applied IFRS 16 using the cumulative
effect method. Under this method, the comparative information is
not restated. See Note 3.
CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)
12 months to 31 December 2018
(audited)
-------------------------------------------
Non-underlying
(note 5)
Underlying GBPm Total
Notes GBPm GBPm
Revenue
Cost of sales 4 58.3 - 58.3
(44.3) - (44.3)
------------- ----------------- ---------
Gross profit 14.0 - 14.0
Distribution expenses (5.0) - (5.0)
Administrative expenses (7.2) (9.0) (16.2)
Other operating expenses (0.4) - (0.4)
------------- ----------------- ---------
4,
Operating profit/(loss) 5 1.4 (9.0) (7.6)
Financial income 6 0.1 0.2 0.3
Financial expenses 6 (0.1) - (0.1)
------------- ----------------- ---------
4,
Net financing income 6 - 0.2 0.2
------------- ----------------- ---------
Profit/(loss) before 4 1.4 (8.8) (7.4)
tax
8 (0.5) 1.9 1.4
Taxation
------------- ----------------- ---------
Profit/(loss) for
the period 0.9 (6.9) (6.0)
============= ================= =========
Profit per ordinary share
Basic 9 (30.1)p
Diluted 9 (30.1)p
--------------------------- -------- --- ------------- ----------------- ---------
The Group has initially applied IFRS 16 using the cumulative
effect method. Under this method, the comparative information is
not restated. See Note 3.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2019 2018 2018 (audited)
(unaudited) (unaudited) GBPm
GBPm GBPm
Profit/(loss) for the period 2.6 (0.9) (6.0)
-------------- -------------- -----------------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss 7.9 17.3 8.3
Actuarial gains
(2.7) (6.1) (2.9)
Tax on items that will not be reclassified
to profit or loss
-------------- -------------- -----------------
5.2 11.2 5.4
-------------- -------------- -----------------
Items that may be reclassified subsequently
to profit or loss
Currency translation movements arising 0.4 (0.5) (0.6)
on foreign currency net investments
0.6 (0.5) (1.0)
Effective portion of changes in fair
value of cash flow hedges
-------------- -------------- -----------------
1.0 (1.0) (1.6)
-------------- -------------- -----------------
Other comprehensive income/(expense)
for the period 6.2 10.2 3.8
-------------- -------------- -----------------
Total comprehensive income/(expense)
for the period 8.8 9.3 (2.2)
============== ============== =================
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
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
6 months to 30 June
2019
Balance at 1 January
2019 5.0 26.0 1.1 3.9 (0.8) 5.4 40.6
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period - - - - - 2.6 2.6
Other comprehensive
income for the period - - 0.4 - 0.7 5.2 6.3
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
income
for the period - - 0.4 - 0.7 7.8 8.9
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total transactions
with owners, recorded - - - - - - -
directly in equity
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 30 June
2019 5.0 26.0 1.5 3.9 (0.1) 13.2 49.5
========== ========== ============== ============ ========== =========== =========
6 months to 30 June
2018
Balance at 1 January
2018 5.0 26.0 1.7 3.9 0.2 6.0 42.8
---------- ---------- -------------- ------------ ---------- ----------- ---------
Loss for the period
Other comprehensive - - - - - (0.9) (0.9)
income/(expense) for
the period - - (0.5) - (0.5) 11.2 10.2
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
income/(expense) for
the period - - (0.5) - (0.5) 10.3 9.3
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total transactions
with owners, recorded - - - - - - -
directly in equity
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 30 June
2018 5.0 26.0 1.2 3.9 (0.3) 16.3 52.1
========== ========== ============== ============ ========== =========== =========
12 months to 31 December
2018
Balance at 1 January
2018 5.0 26.0 1.7 3.9 0.2 6.0 42.8
---------- ---------- -------------- ------------ ---------- ----------- ---------
Profit for the period
- - - - - (6.0) (6.0)
Other comprehensive - - - - - - -
income/(expense) for
the period - - (0.6) - (1.0) 5.4 3.8
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total comprehensive
expense for the period - - (0.6) - (1.0) (0.6) (2.2)
---------- ---------- -------------- ------------ ---------- ----------- ---------
Total transactions
with owners, recorded - - - - - - -
directly in equity
---------- ---------- -------------- ------------ ---------- ----------- ---------
Balance at 31 December
2018 5.0 26.0 1.1 3.9 (0.8) 5.4 40.6
========== ========== ============== ============ ========== =========== =========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June 31 Dec
2019 2018* 2018*
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Non-current assets
Intangible assets 17.1 0.9 1.0
Property, plant and equipment 6.2 4.0 4.4
Investment property 0.8 0.8 0.8
Right of Use Assets 3 5.1 - -
Other receivables 0.1 0.8 -
Employee benefits 7 29.3 35.1 20.5
Deferred tax assets 1.7 1.7 1.7
-------------- -------------- ------------
60.3 43.3 28.4
-------------- -------------- ------------
Current assets
Inventories 7.3 4.9 3.3
Trade and other receivables 23.5 11.8 16.9
Contract assets 9.7 6.2 5.5
Current tax assets 0.8 0.1 0.8
Cash and cash equivalents 10.5 25.8 27.9
-------------- -------------- ------------
51.8 48.8 54.4
-------------- -------------- ------------
Current liabilities
Trade and other payables (27.2) (14.2) (14.7)
Contract liabilities (7.1) (5.5) (11.6)
Current tax liabilities (0.4) (0.6) (0.4)
Provisions (1.2) (0.7) (1.1)
Lease liabilities 3 (0.9) - -
-------------- -------------- ------------
(36.8) (21.0) (27.8)
-------------- -------------- ------------
Net current assets 15.0 27.8 26.6
-------------- -------------- ------------
Total assets less current liabilities 75.3 71.1 55.0
-------------- -------------- ------------
Non-current liabilities
Interest-bearing loans and borrowings (0.9) (0.9) (0.9)
Lease Liabilities 3 (4.2) - -
Employee benefits 7 (6.2) (5.8) (6.2)
Deferred tax liabilities (11.9) (12.3) (7.3)
Deferred acquisition consideration (2.6) - -
-------------- -------------- ------------
(25.8) (19.0) (14.4)
-------------- -------------- ------------
Net assets 4 49.5 52.1 40.6
============== ============== ============
Equity
Issued capital 5.0 5.0 5.0
Share premium 26.0 26.0 26.0
Reserves 5.3 4.8 4.2
Retained earnings 13.2 16.3 5.4
-------------- -------------- ------------
Total equity 49.5 52.1 40.6
============== ============== ============
* The Group has initially applied IFRS 16 using the cumulative
effect method. Under this method, the comparative information is
not restated. See Note 3.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2019 2018 2018
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
Operating activities Operating profit/(loss)
Non-underlying items included in operating
profit 2.8 (0.7) (7.6)
Amortisation Depreciation (including 1.8 0.7 9.0
right of use assets from 1 January 0.1 0.1 0.2
2019) Other non-cash items Defined 0.7 0.4 0.6
benefit pension payments Working capital (0.2) - -
movements: - (increase)/decrease in (1.3) (1.0) (3.0)
inventories - (increase)/decrease -
in trade and other receivables - increase (3.2) (0.1) 1.7
in contract assets - increase/(decrease) (1.3) 3.3 (1.3)
in trade and other payables - (decrease)/increase (3.2) (2.4) (1.3)
in contract liabilities - increase 8.0 (1.6) (1.4)
in provisions (9.6) (1.6) 4.1
0.3 - 0.1
-------------- -------------- ------------
Cash (used)/generated from operations (5.1) (2.9) 1.1
before reorganisation Reorganisation
costs paid (0.3) (0.7) (1.0)
-------------- -------------- ------------
Cash flows from operations Taxation (5.4) (3.6) 0.1
paid
(0.3) (0.1) (1.0)
-------------- -------------- ------------
Cash flows from operating activities (5.7) (3.7) (0.9)
-------------- -------------- ------------
Investing activities Proceeds from
sale of property, plant and equipment
Acquisition of property, plant and
equipment Capitalised development
expenditure Payment for acquisition
of subsidiary, net of cash acquired
- 0.1 0.1
(1.1) (0.5) (1.1)
(0.1) (0.1) (0.3)
16 (10.6) - -
-------------- -------------- ------------
Cash flows from investing activities (11.8) (0.5) (1.2)
-------------- -------------- ------------
Financing activities Interest paid (0.1) - (0.1)
-------------- -------------- ------------
Cash flows from financing activities (0.1) - (0.1)
-------------- -------------- ------------
Net decrease in cash and cash equivalents 11 (17.6) (4.2) (2.2)
Cash and cash equivalents at 1 January 27.9 30.3 30.3
Effect of exchange rate fluctuations 0.2 (0.3) (0.2)
on cash held
-------------- -------------- ------------
Cash and cash equivalents at period
end 10.5 25.8 27.9
============== ============== ============
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
1. General information
The half-year results for the current and comparative period are
unaudited but have been reviewed by the auditors, Grant Thornton
LLP, and their report is set out after the notes. The comparative
information for the year ended 31 December 2018 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 2018 are available from the Company's registered office at
13 Westwood Way, Westwood Business Park, Coventry, CV4 8HS or from
the Group's website at www.mpac-group.com.
Having made due 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 financial statements was approved by the
Board of directors on 5 September 2019.
2. Basis of preparation
(a) Statement of compliance
The condensed set of financial statements for the 6 months ended
30 June 2019 has been prepared in accordance with IAS 34 Interim
financial reporting as adopted by the EU. 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 2018. This is the first set of
the Group's financial statements where IFRS 16 has been applied.
Changes to significant accounting policies are described in note
3.
(b) Judgements and estimates
The preparation of the condensed set of 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 2018 with the addition of
the fair values for the acquisition of Lambert and around IFRS
16.
In this respect, management have made judgements regarding the
provisional fair value of assets and liabilities acquired in the
period, including the identification and estimate of the fair value
of the intangible assets. Workings to obtain the fair value of
these intangible assets are largely based on management's estimates
of attributable cash flows, discounted to their present value.
Details of the acquired assets, including the intangible assets,
are set out in note 16.
In respect of IFRS 16, management have made judgements regarding
the appropriate interest rates to be applied and the expected terms
of the leases where break clauses under Mpac's control exist.
Details of the impact of IFRS 16 are set out in note 3.
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 20 and 21 of the Group's
2018 Annual Report and Accounts.
3. Significant accounting policies
Except as described below, the accounting policies, presentation
and methods of computation applied by the Group in this condensed
set of financial statements are the same as those applied in the
Group's latest audited financial statements.
The changes in accounting policies are also expected to be
reflected in the Group's consolidated financial statements for the
year ending 31 December 2019.
Business Combinations
The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired.
The consideration transferred for the acquisition of a
subsidiary comprises the:
-- fair values of the assets transferred;
-- liabilities incurred to the former owners of the acquired
business;
-- equity interests issued by the group;
-- fair value of any asset or liability resulting from a contingent
consideration arrangement; and
-- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the:
-- consideration transferred;
-- amount of any non-controlling interest in the acquired entity;
and
-- acquisition-date fair value of any previous equity interest
in the acquired entity
over the fair value of the net identifiable assets acquired is
recorded as goodwill. Where settlement of any part of cash
consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The
discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from
an independent financier under comparable terms and conditions.
Contingent consideration is classified as a financial liability.
Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in
profit or loss.
IFRS 16 - Leases
The Group has initially adopted IFRS 16 Leases from 1 January
2019. The effect of initially applying this standard is to increase
both the assets and liabilities of the Group through the
recognition on the balance sheet of the operating leases in respect
of rented properties and vehicles.
The group has adopted IFRS 16 retrospectively from 1 January
2019 but has not restated comparatives for the 2018 reporting
period, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 2.5%.
GBPm
Operating lease commitments disclosed as at 31 December
2018 4.2
Discounted using the lessee's incremental borrowing
rate of at the date of initial application (0.3)
Less short-term and low value leases recognised on
a straight-line basis as expense (0.1)
Lease liability recognised as at 1 January 2019 3.8
-----
Of which are:
Current lease liabilities 0.7
Non-current lease liabilities 3.1
Lease liability recognised as at 1 January 2019 3.8
=====
At the date of acquisition Lambert held GBP1.9m of right of use
assets, consisting of GBP1.8m of land & buildings and GBP0.1m
of vehicles.
The associated right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
balance sheet as at 31 December 2018. There were no onerous lease
contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
The right of use assets relate to the following asset types:
30 June 1 January
2019 2019
GBPm GBPm
Properties 4.8 3.5
Plant & Machinery 0.1 -
Vehicles 0.2 0.3
Total right of use assets 5.1 3.8
======= =========
The undiscounted payments under the leases fall due as
follows:
30 June
2019
GBPm
Up to one year 0.9
One to five years 3.0
Over five years 1.8
-------
Total undiscounted payments due under leases 5.7
=======
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
1 January
2019
GBPm
Right of use assets 5.5
Lease liabilities (5.5)
Net impact upon retained earnings -
=========
The introduction of IFRS16 did not have an impact upon the
Group's recognised deferred tax balances.
Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for June
2019 all increased as a result of the change in accounting policy.
Lease liabilities are now included in segment liabilities. The
impact on the segments affected by the change in policy are:
Adjusted Segment Segment
EBITDA assets liabilities
GBPm GBPm GBPm
Americas 0.2 1.9 (1.9)
EMEA 0.2 3.2 (3.2)
Asia Pacific - - -
Total 0.4 5.1 (5.1)
-------- ------- ------------
Earnings per share was unchanged for the six months to 30 June
2019 as a result of the adoption of IFRS 16.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
-- reliance on previous assessments on whether leases are onerous;
-- the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases;
-- the exclusion of initial direct costs for the measurement
of the right-of-use asset at the date of initial application;
and
-- the use of hindsight in determining the lease term where
the contract contains options to extend or terminate the
lease.
The group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
The Group's leasing activities and how these are accounted
for.
The Group leases various factories, equipment and cars. Rental
contracts are typically made for fixed periods of 3 to 5 years for
equipment and 10-20 years for properties. These may have extension
options. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and
equipment were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease. From 1 January
2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the group. Each lease payment is allocated
between the liability and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated
over the shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments (where they exist
within a lease):
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual
value guarantees;
-- the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise small
items of workshop equipment, office furniture and machines.
4. Operating segments
It is the Group's strategic intention to develop "Make Service a
Business", 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 6 months to 30 12 months to 31
Jun 2019 Jun 2018 Dec 2018
OE Service Total OE Service Total OE Service Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- -------- ------- ------- -------- ------- ------- -------- -------
Revenue
Americas 27.2 3.9 31.1 9.1 2.4 11.5 20.5 6.4 26.9
EMEA 7.9 3.1 11.0 11.7 2.1 13.8 20.1 4.6 24.7
Asia Pacific 3.1 0.6 3.7 2.4 0.5 2.9 5.6 1.1 6.7
------- -------- ------- ------- -------- ------- ------- -------- -------
Total 38.2 7.6 45.8 23.2 5.0 28.2 46.2 12.1 58.3
======= ======== ======= ======= ======== ======= ======= ======== =======
Gross profit 10.4 2.7 13.1 4.2 1.7 5.9 9.3 4.7 14.0
Selling, distribution
& administration (8.5) (5.9) (12.6)
------- ------- -------
Underlying operating 4.6 0.0 1.4
profit
Unallocated (1.8) (0.7) (9.0)
non-underlying
items included
in operating
profit
------- ------- -------
Operating profit 2.8 (0.7) (7.6)
/ (loss)
0.1 0.1 0.2
Net financing
expense
------- ------- -------
Profit/(loss)
before tax 2.9 (0.6) (7.4)
======= ======= =======
30 June 30 June 31 Dec
2019 2018 2018
Disaggregation of revenue - Sales GBPm GBPm GBPm
by Market sector
Pharmaceutical 2.0 3.5 5.6
Healthcare 25.3 8.4 13.1
Food and Beverage 14.2 13.5 32.5
Other 4.3 2.8 7.1
-------- -------- -------
Total 45.8 28.2 58.3
Timing of Revenue recognition
Products and services transferred 9.0 6.5 14.0
at a point in time
Products and services transferred 36.8 21.7 44.3
over time
Total 45.8 28.2 58.3
Net financing expense includes dividends paid on preference
shares and the net interest receivable in respect of the defined
benefit pension scheme. The Company has in issue 900,000 6% fixed
cumulative preference shares. The preference dividend is payable on
30 June and 31 December and amounted to GBP0.1m in the 12 months
ended 31 December 2018.
30 June 30 June 31 Dec
2019 2018 2018
GBPm GBPm GBPm
Segment assets
Americas 26.2 13.9 19.7
EMEA 26.6 17.3 9.7
Asia Pacific 0.6 0.6 0.5
-------- -------- --------
Total segment assets 53.4 31.8 29.9
Segment liabilities
Americas (19.3) (7.5) (18.0)
EMEA (20.3) (9.1) (7.0)
Asia Pacific (0.2) (0.6) (0.2)
Total segment liabilities (39.8) (17.2) (25.2)
Segment net assets 13.6 14.6 4.7
Unallocated net assets 35.9 37.5 35.9
-------- -------- --------
Total net assets 49.5 52.1 40.6
======== ======== ========
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 costs, restructuring costs, acquisition
costs, amortisation of intangibles arising on consolidation and
profit on disposal of surplus property 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.
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2019 2018 2018
GBPm GBPm GBPm
Defined benefit pension scheme administration (0.4) (0.5) (0.9)
costs (note 7)
Reorganisation costs (0.1) (0.1) (0.7)
Amortisation of intangibles from business (0.2) - -
combinations
Acquisition costs (0.8) (0.1) -
Provision in respect of discontinued (0.3) - (0.1)
operations
Net financing income on pension scheme 0.2 0.1 0.2
balances
UK Pension scheme - GMP equalisation - - (7.3)
-------------- -------------- -------------
Total non-underlying expenditure before
tax (1.6) (0.6) (8.8)
-------------- -------------- -------------
The Group holds a receivable in respect of an amount held in
escrow in respect of the consideration for the sale in 2017 of the
Instrumentation and Tobacco Machinery business. The Group has made
a provision of GBP0.3m against the receivable in respect of a claim
that has been received from the purchaser.
The acquisition of Lambert was completed on 1 May 2019 with
transaction related costs totalling GBP0.8m. These costs are not
related to the operation of the business. The amortisation of the
acquired Lambert intangibles is also unrelated to the performance
of the underlying business. Further detail of the intangible assets
is set out in note 16.
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 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. Net financing expense
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2019 2018 2018
GBPm GBPm GBPm
Financial income
Defined benefit pension scheme finance
income 0.2 0.1 0.2
----------- ----------- ----------
0.2 0.1 0.2
----------- ----------- ----------
Financial expenses
Preference dividends and interest paid (0.1) - (0.1)
----------- ----------- ----------
(0.1) - (0.1)
----------- ----------- ----------
Net financing income 0.1 0.1 0.1
=========== =========== ==========
7. 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 subject to
reassessment every 3 years, are as follows:
-- the Company will continue to pay a sum of GBP1.9m 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 GBP5.5m, the Company will
pay to the Fund an amount of 33% of the difference between
the annual underlying operating profit and GBP5.5m, subject
to a cap on underlying operating profit of GBP10.0m for the
purpose of calculating this payment; this part of the agreement
will fall away in 2021 if the funding deficit is below 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 2017, and their assumptions, updated to
reflect actual experience and conditions at 31 December 2018 and
modified as appropriate for the purposes of IAS 19, have been
applied in the condensed set of financial statements.
Profit before tax includes charges in respect of the defined
benefit pension schemes' administration costs of GBP0.4m (2018:
GBP0.5m) and a net financing income on pension scheme balances of
GBP0.2m (2018: GBP0.1m). Payments to the Group's UK defined benefit
pension scheme in the period included GBP0.9m (2018: GBP0.9m) in
respect of the agreed deficit recovery plan. Payments to the US
defined benefit pension plan were GBP0.1m (2018: GBP0.1m).
Employee benefits include the net pension asset of the UK
defined benefit pension scheme of GBP29.3m (2018: GBP35.1m) and the
net pension liability of the USA defined benefit pension schemes of
GBP6.2m (2018: GBP5.8m), all figures before tax.
Employee benefits as shown in the condensed consolidated
statement of financial position were:
30 June 30 June 31 Dec
2019 2018 2018
GBPm GBPm GBPm
UK scheme
Fair value of assets 427.4 410.4 398.2
Present value of defined benefit obligations (398.1) (375.3) (377.7)
--------- --------- ---------
Defined benefit asset 29.3 35.1 20.5
--------- --------- ---------
USA schemes
Fair value of assets 17.6 16.0 16.3
Present value of defined benefit obligations (23.8) (21.8) (22.5)
--------- --------- ---------
Defined benefit liability (6.2) (5.8) (6.2)
--------- --------- ---------
Total net defined benefit asset 23.1 29.3 14.3
========= ========= =========
8. Taxation
The tax charge for the 6 months to 30 June 2019 amounted to
GBP0.3m (6 months to 30 June 2018: GBP0.3m; 12 months to 31
December 2018: GBP1.4m credit) and is calculated as follows:
6 months 6 months 12 months
to 30 June to 30 June to 31
2019 2018 Dec
GBPm GBPm 2018
GBPm
Tax charge on underlying profit (0.3) (0.3) (0.5)
Tax credit on non-underlying items - - 1.9
----------- ----------- ---------
Total tax (charge)/credit (0.3) (0.3) 1.4
=========== =========== =========
The main rate of UK corporation tax is 19% and will be reduced
to 17% from 1 April 2020, as enacted in the Finance Act 2015. The
rate of deferred tax liability arising from the surplus in respect
of the UK defined benefit pension scheme is 35%.
9. 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.
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2019 2018(1) 2018(1)
Basic - weighted average number of ordinary
shares 19,963,922 19,918,951 19,932,786
Diluting effect of shares held by the
employee trust 92,857 - -
----------- ----------- ----------
Diluted - weighted average number of ordinary
shares 20,056,779 19,918,951 19,932,786
----------- ----------- ----------
(1) The effect of dilution on these periods would be to decrease
the loss per ordinary share and is therefore excluded from the
dilution calculation.
Underlying earnings per share, which is calculated on the
earnings before non-underlying items, for the 6 months to 30 June
2019 amounted to 21.3p (6 months to 30 June 2018: loss per share
1.6p; 12 months to 31 December 2018: earnings per share 4.5p).
In the 6 months to 30 June 2019 the effect of dilution was 0.1p
per share.
10. Dividends
Having considered the trading results to 30 June 2019, 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 2018. Future dividend payments
and the development of a new dividend policy will be considered by
the Board in the context of 2019 trading performance and when the
Board believes it is prudent to do so.
11. Reconciliation of net cash flow to movement in net funds
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2019 2018 2018
GBPm GBPm GBPm
Net decrease in cash and cash equivalents (17.6) (4.2) (2.2)
Cash inflow from movement in borrowings - - -
----------- ----------- ----------
Change in net funds resulting from cash
flows (17.6) (4.2) (2.2)
Translation movements 0.2 (0.3) (0.2)
----------- ----------- ----------
Movement in net funds in the period (17.4) (4.5) (2.4)
Opening net funds 27.0 29.4 29.4
----------- ----------- ----------
Closing net funds 9.6 24.9 27.0
=========== =========== ==========
Analysis of net funds
Cash and cash equivalents - current assets 10.5 25.8 27.9
Interest-bearing loans and borrowings -
non-current liabilities (0.9) (0.9) (0.9)
----------- ----------- ----------
Closing net funds 9.6 24.9 27.0
=========== =========== ==========
12. 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 2018.
At 1 January 2019 and 30 June 2019 the Group held all financial
instruments at Level 2 (as defined in IFRS 7 Financial instruments:
disclosures) and there have been no transfers of assets or
liabilities between levels of the fair value hierarchy.
30 June 30 June 31 Dec
2019 2018 2018
Categories of financial instruments GBPm GBPm GBPm
Financial assets
Derivative instruments in designated
hedge accounting relationship
Loans and receivables (including cash - - -
and cash equivalents) 34.0 33.3 40.9
------- ------- ------
34.0 33.3 40.9
======= ======= ======
Financial liabilities
Derivative instruments in designated
hedge accounting relationship 0.1 0.3 -
Amortised cost 27.0 15.0 15.5
Fair value through profit & loss 2.6 - -
------- ------- ------
29.7 15.3 15.5
======= ======= ======
Amortised cost comprises interest-bearing loans and borrowings
and trade and other payables, excluding foreign currency
derivatives.
The Group enters into forward foreign exchange contracts solely
for the purpose of minimising currency exposures on sale and
purchase transactions. The Group classified its forward foreign
exchange contracts used for hedging as cash flow hedges and states
them at fair value.
The fair value is the gain/loss on all open forward foreign
exchange contracts at the period end. These amounts are based on
the market values of equivalent instruments at the period end date
and all relate to those forward foreign exchange contracts that
have been designated as effective cash flow hedges under IAS 39
Financial instruments - recognition and measurement.
13. 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 2018 Annual Report and Accounts, other
than in relation to the acquisition of Lambert. No transactions
between Lambert and the remainder of the Group took place from 1
January 2018 to the date of acquisition.
14. Half-year report
A copy of this announcement will be made available to
shareholders from 5 September 2019 on the Group's website at
www.mpac-group.com. This announcement will not be available in
printed form.
15. Future accounting policies
There are no changes anticipated to the Group's accounting
policies in the foreseeable future.
16. Business combination
On 1 May 2019 Mpac acquired the entire issued share capital of
Lambert Automation Limited ("Lambert"), a provider of technology
leading automation solutions to the medical and consumer healthcare
markets, for an initial consideration of GBP15m (subject to
adjustment for working capital movements) with a further GBP3.0m
subject to Lambert achieving certain earn-out criteria and tax
recoveries, which the Group anticipates will be met in full. It is
expected that the acquisition will be materially earnings
enhancing.
Details of the purchase consideration, the net assets acquired
and goodwill are as follows:
GBPm
Purchase consideration
Cash paid 16.8
Contingent consideration (see below) 2.6
------
Total purchase consideration 19.4
------
The assets and liabilities recognised as a result of the
acquisition are as follows:
Provisional
Fair value
GBPm
Cash and cash equivalents 6.2
Property, plant and equipment 1.1
Trade name 1.4
Customer relationships 4.2
Know-how 4.9
Inventories 0.8
Receivables 4.9
Contract assets 1.0
Payables (3.8)
Contract liabilities (5.4)
Deferred tax on intangible assets (1.8)
-----------
Net identifiable assets acquired 13.5
Add: goodwill 5.9
-----------
19.4
===========
The fair values of all of the acquired assets, including the
values of the acquired trade name, customer relationships and
know-how of GBP10.5m, are provisional pending receipt of the final
valuations for those assets.
The goodwill is attributable to Lambert's strong position and
profitability for the pharmaceutical, healthcare and food and
beverage sectors expected to arise after the Group's acquisition of
the new subsidiary. None of the goodwill is expected to be
deductible for tax purposes.
Acquisition-related costs
Acquisition-related costs of GBP0.8m are included in
administrative expenses in profit or loss.
Contingent consideration
The contingent consideration arrangement requires the group to
pay the former owners of Lambert five times the average EBITDA of
Lambert in excess of GBP2.5m for three years ending 31 December
2021, up to a maximum payment of GBP2.5m. There is no minimum
amount payable.
A further GBP0.5m of consideration is contingent upon certain
tax receipts from HMRC. This balance, along with the associated
receivable, are expected to be settled over the next two years.
The fair value of the contingent consideration arrangement of
GBP2.6m was estimated by calculating the present value of the
future expected cash flows. The Group's forecasts identify that the
maximum deferred consideration will be payable. Under IFRS3, the
company is required to discount the contingent consideration at a
rate reflective of the risk of the amounts not falling due. This
results in a discount to the total amount of GBP0.4m, which is
expected to be amortised over the period to which the amounts fall
due through the interest charge.
Acquired receivables
The fair value of trade and other receivables is GBP4.9m and
includes trade receivables with a fair value of GBP4.3m. The gross
contractual amount for trade receivables due is GBP4.4m of which
GBP0.1m is expected to be uncollectible.
Revenue and profit contribution
The acquired business contributed revenues of GBP5.5m and net
profit of GBP1.3m to the group for the period from 1 May 2019 to 30
June 2019. If the acquisition had occurred on 1 January 2019,
consolidated revenue and consolidated profit after tax for the
half-year ended 30 June 2019 would have been GBP53.9m and GBP3.5m
respectively.
INDEPENT REVIEW REPORT TO Mpac Group plc
Introduction
We have reviewed the condensed set of financial statements in
the half-yearly financial report of Mpac Group plc (the 'company')
for the six months ended 30 June 2019 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated statement of changes
in equity, condensed consolidated statement of financial position,
condensed consolidated statement of cash flows and the related
explanatory 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM rules.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
Our responsibility
Our responsibility is to express a conclusion to the company on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'. 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.
Conclusion
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 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union.
Use of our report
This report is made solely to the company, as a body, in
accordance with International Standard on Review Engagements (UK
and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'. Our review
work has been undertaken so that we might state to the company
those matters we are required to state to them in an independent
review 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 as a body, for our review work, for
this report, or for the conclusion we have formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham, UK
4 September 2019
This information is provided by RNS, the news service of the
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Authority to act as a Primary Information Provider in the United
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contact rns@lseg.com or visit www.rns.com.
END
IR USARRKRAKRUR
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