25 August 2022
MACFARLANE GROUP PLC
("MACFARLANE GROUP", "THE COMPANY", "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2022
Expectations for the full year unchanged;
managing inflationary environment; slowdown in e-commerce; progress in Europe
Financial Highlights |
H1 2022 £000 | Restated1 H1 2021 £000 |
Increase % |
Continuing operations | | | |
Revenue | 139,209 | 122,144 | 14% |
Operating profit before amortisation2 | 11,384 | 10,817 | 5% |
Operating profit | 9,604 | 9,256 | 4% |
Profit before tax | 8,857 | 8,585 | 3% |
Continuing and discontinued1 operations | | | |
Profit for the period | 6,888 | 6,041 | 14% |
Interim dividend (pence) | 0.90p | 0.87p | 3% |
Basic earnings per share (pence) | 4.36p | 3.83p | 14% |
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
2 See note 2 for reconciliation of alternative performance measure, operating profit before amortisation, to operating profit.
Key highlights
· Sales from continuing operations1 grew by 14% versus H1 2021 to £139.2m.
· Operating profit at £9.6m and profit before tax at £8.9m, both from continuing operations, increased by 4% and 3% respectively with revenue growth partly offset by increased costs.
· Basic and diluted earnings per share were 4.36p per share (H1 2021: 3.83p per share) and 4.31p per share (H1 2021: 3.79p per share) respectively.
Packaging Distribution
· Achieved sales growth of 11% to £123.5m (H1 2021: £111.0m), with recovery of input price increases and the benefits from the acquisitions of Carters Packaging in March 2021 and PackMann in May 2022 offsetting lower demand from e-commerce customers after the sector experienced a strong H1 last year due to Covid-19 restrictions.
· Gross margin at 32.3% (H1 2021: 32.7%) was marginally behind a very strong H1 2021 and reflects effective recovery of input price inflation.
· Operating profit before amortisation reduced by 2% to £8.9m (H1 2021: £9.1m) due to cost increases of 14%. The key areas of increased costs were inflationary pressures on labour and logistics, start-up costs for the company's new North-west of England distribution centre and strategic IT investments.
· The contribution from acquisitions was reduced by the expensing of acquisition-related costs of £0.2m in H1 2022.
Manufacturing Operations
· Delivered strong growth, with sales increasing 40% to £15.7m (H1 2021: £11.2m) and operating profit before amortisation increasing 44% to £2.5m (H1 2021: £1.7m). There was a continued strong performance from GWP, acquired in February 2021, and recovery in the aerospace sector benefited the Macfarlane Design and Manufacture business.
· The Group sold its Labels division in December 2021. Labels generated a loss before tax of £0.1m in H1 2022 (H1 2021: Loss £0.8m) after finalisation of the net asset position.
Group
· Net cash inflow from operating activities of £6.5m (H1 2021: £11.3m) reflected significantly higher 2021 employee incentive payments paid in H1 2022 compared to the same period last year.
· The Group cash position continues to be managed well, enabling capital investment and acquisitions to be funded through the committed bank debt facility.
· The Group has reinvested the proceeds from the sale of the Labels business into the acquisition of PackMann in Germany, strengthening the platform from which it will accelerate the growth of the protective packaging business in Northern Europe.
· Net bank debt on 30 June 2022 was £9.7m - a cash outflow of £12.1m from 31 December 2021, including £9.1m of net investment in acquisitions and disposals. The Group is operating well within its existing bank facility of £30.0m which runs until 31 December 2025.
· Pension scheme surplus increased to £8.8m at 30 June 2022 (31 December 2021: £8.3m). The improvement is due to continued contributions from the Group and an increase in the discount rate, offset by lower investment returns in H1 2022. An additional contribution of £0.7m was paid into the pension scheme in H1 2022 to satisfy the debt on exit of the Labels business.
· Interim dividend increased to 0.90p per share (H1 2021: 0.87p per share) - to be paid on 13 October 2022 to shareholders on the register as at 16 September 2022.
Stuart Paterson, Chairman of Macfarlane Group PLC, today said: -
"Trading
The Group has achieved a solid performance in the first half of 2022, especially when compared to a strong trading period in H1 2021. This has been achieved against the backdrop of a slowdown in spend from the e-commerce sector and significant inflationary pressure on operating costs. We have also made strategic IT investments and incurred start-up costs on our new North-west of England distribution centre. Our people have consistently demonstrated commitment and operating excellence as the business continues to grow and develop.
Outlook
We expect to experience a continuing challenging environment with inflationary pressure on our operating costs and slower demand from our e-commerce customers. Overall, the Group is confident that the effectiveness of our strategy, the diversity of the customers and sectors we serve, the quality of our people, and the resilience of our business model will ensure 2022 will be another year of growth for Macfarlane. Our expectations for the full year 2022 are unchanged.
Board change
As set out in the Annual Report 2021, after over nine years on the Board, I am standing down from the Board, effective 30 September 2022, and I am pleased to announce my successor as Chair will be Aleen Gulvanessian.
Aleen joined the Board in October 2021 as Chair of the Remuneration Committee and in a short time has made a significant contribution through her Corporate legal background and extensive commercial and governance experience. Aleen was selected after an extensive process involving a number of very capable external candidates. We expect to make an announcement on a new Chair of the Remuneration Committee shortly.
I wish Aleen, the Board and all of Macfarlane's employees continued success in the future and thank them for their excellent support during my tenure as Chairman and Non-executive Director of Macfarlane Group."
Further enquiries: | Macfarlane Group | Tel: 0141 333 9666 |
| Stuart Paterson Chairman | |
| Peter Atkinson Chief Executive | |
| Ivor Gray Finance Director | |
| Spreng Thomson | |
| Callum Spreng | Mob: 07803 970103 |
Legal Entity Identifier (LEI): 213800LVRYDERSJAAZ73
Notes to Editors:
· Macfarlane Group PLC has been listed on the Premium segment of the Main Market of the London Stock Exchange (LSE: MACF) since 1973 with over 70 years' experience in the UK packaging industry.
· Through its two divisions Macfarlane Group services a broad range of business customers, supplying them high quality protective packaging which help customers reduce supply chain costs, improve their operational efficiencies and enhance their brand presentation. The divisions are:
o Packaging Distribution - Macfarlane Packaging Distribution is the leading UK distributor of a comprehensive range of protective packaging products; and
o Manufacturing Operations - Macfarlane Design and Manufacture who design and produce protective packaging for high value and fragile products.
· Headquartered in Glasgow, Scotland, Macfarlane Group employs over 1,000 people at 37 sites, principally in the UK, as well as in Ireland, Germany and the Netherlands.
· Macfarlane Group supplies more than 20,000 customers principally in the UK and Europe.
· In partnership with 1,700 suppliers, Macfarlane Group distributes and manufactures 600,000+ lines across a wide range of sectors, including: retail e-commerce; consumer goods; food; logistics; mail order; electronics; defence, automotive and aerospace.
Interim Results - Management Report
Macfarlane Group's trading activities comprise Packaging Distribution and Manufacturing Operations.
Macfarlane's Packaging Distribution business is the UK's leading specialist distributor of protective packaging materials with a growing presence in Europe. Macfarlane operates a stock and serve supply model in the UK, Ireland, the Netherlands and Germany from 27 Regional Distribution Centres ("RDCs") and three satellite sites, supplying industrial and retail customers with a comprehensive range of protective packaging materials on a local, regional and national basis.
Competition in the packaging distribution market is from local and regional protective packaging specialist companies as well as national/international distribution generalists who supply a range of products, including protective packaging materials. Macfarlane competes effectively on a local basis through its strong focus on customer service, its breadth and depth of product offer and through the recruitment and retention of high-quality staff with good local market knowledge. On a national basis, Macfarlane has market focus, expertise and a breadth of product and service knowledge, all of which enables it to compete effectively against non-specialist packaging distributors.
Packaging Distribution benefits its customers by enabling them to ensure their products are cost-effectively protected in transit and storage through the supply of a comprehensive product range, single source stock and serve supply, just-in-time delivery, tailored stock management programmes, electronic trading and independent advice on both packaging materials and packing processes. Through the 'Significant Six' sales approach we reduce our customers' 'Total Cost of Packaging' and their carbon footprint. This is achieved through supplying effective packaging solutions, optimising warehousing and transportation, reducing damages and returns and improving packaging efficiency.
| H1 2022 | H1 2021 |
| £000 | £000 |
Sales | 123,533 | 110,957 |
Cost of sales | 83,627 | 74,727 |
|
|
|
Gross margin | 39,906 | 36,230 |
Overheads | 31,022 | 27,152 |
|
|
|
Operating profit before amortisation | 8,884 | 9,078 |
Amortisation | 1,379 | 1,293 |
|
|
|
Operating profit | 7,505 | 7,785 |
|
| |
|
|
|
The main features of our first half performance in 2022 were:
· Organic growth in the UK and Ireland of £8.6m has been achieved through recovery in some industrial sectors, particularly in aerospace, engineering and hospitality, and inflation in pricing, offset by a marked reduction in demand from e-commerce customers and customers buying packaging using our online shop, which benefited from the Covid-19 lockdowns in H1 2021.
· Our 'Follow the Customer' strategy in Northern Europe achieved £1.6m of incremental sales through the Group subsidiary in the Netherlands, with the business now generating profits.
· Sales growth of £2.4m was achieved from the acquisitions of Carters Packaging, Cornwall, in March 2021 and PackMann, Germany, in May 2022. The PackMann pre-acquisition costs of £0.2m were expensed in H1 2022.
· Effective management of significant input price increases across all product categories in H2 2021 and H1 2022 has minimised the impact on gross margins which have reduced marginally to 32.3% (H1 2021: 32.7%).
· The marginally lower operating profit in H1 2022 was primarily due to overheads being higher than the same period in 2021. This is attributable to the impact of inflation on staff and logistics costs, strategic IT investments and start-up costs for our new distribution centre in the North-west of England.
Interim Results - Management Report (continued)
The key areas we will focus on in H2 2022 are to:
· Prioritise engagement with potential new customers in sectors where we see future growth opportunities such as e-commerce retail, medical, scientific, and third-party logistics.
· Continue to effectively manage input price changes and supply chain challenges as they arise.
· Maximise the benefits from our new "Packaging Optimiser" which was launched to our sales teams to better demonstrate our ability to add value for customers through our "Significant Six" sales approach.
· Achieve benefits from our information technology investments in Microsoft Dynamics, Slimstock and Warehouse Management.
· Refine and extend our product range to ensure we continue to offer our customers sustainable packaging solutions that reduce their carbon footprint.
· Introduce improvements to our web-based solutions to allow customers access to our full range of products and services more easily.
· Accelerate the progress we have made in Europe through our "Follow the Customer" programme and our recent acquisition of PackMann.
· Reduce operating costs through efficiency programmes in sales, logistics and administration.
· Realise the benefits from our new distribution centre in the North-west of England.
· Maintain the focus on working capital management to facilitate future investment and manage effectively the ongoing bad debt risk within the current economic environment.
· Supplement organic growth through progressing further high-quality acquisitions in the UK and Europe.
Manufacturing Operations comprises our Packaging Design and Manufacture business and GWP, acquired in February 2021.
Manufacturing Operations designs, manufactures, assembles and distributes bespoke packaging solutions for customers requiring cost-effective methods of protecting high value products in storage and transit. The primary raw materials are corrugate, timber and foam. The businesses operate from four manufacturing sites, in Grantham, Westbury, Swindon and Salisbury, supplying both directly to customers and through the national RDC network of the Packaging Distribution business.
Key market sectors are defence, aerospace, medical equipment, electronics, automotive, e-commerce retail and household equipment. The markets we serve are highly fragmented, with a range of locally based competitors. We differentiate our market offering through technical expertise, design capability, industry accreditations and national coverage through the Packaging Distribution business.
|
H1 2022 | Restated1 H1 2021 |
| £000 | £000 |
Sales | 15,676 | 11,187 |
Cost of sales | 8,486 | 5,657 |
|
|
|
Gross margin | 7,190 | 5,530 |
Overheads | 4,690 | 3,791 |
|
|
|
Operating profit before amortisation | 2,500 | 1,739 |
Amortisation | 401 | 268 |
|
|
|
Operating profit | 2,099 | 1,471 |
|
|
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
Interim Results - Management Report (continued)
Sales in H1 2022 increased by £4.5m compared to the equivalent period in 2021. This consisted of organic growth of 19.0% (£0.9m), due mainly to recovery in the aerospace (defence and commercial) sector, supplemented by £3.6m of incremental sales from the acquisition of GWP. This growth, combined with effective management of the gross margin and overhead costs reducing as a percentage of sales, has contributed to a significant improvement in operating profit in H1 2022 compared to H1 2021.
The priorities for Manufacturing Operations in the second half of 2022 are to:
· Focus the sales team on new business growth in target sectors e.g., medical and defence.
· Prioritise new sales activity on our higher added-value bespoke composite pack product range.
· Effectively manage material price changes to minimise the impact on gross margins.
· Continue to strengthen the relationship with our Packaging Distribution businesses to create both sales and cost synergies.
· Commence the process of GWP working more closely with the Macfarlane Packaging Design and Manufacture and Packaging Distribution businesses.
Summary and Future Prospects
Macfarlane Group's businesses all have strong market positions with differentiated product and service offerings. We have a flexible business model and effective implementation of a strategic plan, which is reflected in consistent profit growth and cash generation over a sustained period.
Our future performance is largely dependent on our own efforts to grow sales, increase efficiencies and bring high quality acquisitions into the Group. Whilst market conditions are challenging, our strategy and business model continue to prove to be resilient. We expect to deliver another year of profit growth in 2022.
Interim Results - Management Report (continued)
Risks and Uncertainties
The Group operates a formal framework for the identification and evaluation of the major business risks faced by each business and determines an appropriate course of action to manage these risks.
The principal risks and uncertainties which could impact on the performance of the Group, together with the mitigating actions, were outlined on pages 20 to 23 in our Annual Report and Accounts for 2021 (available on our website at www.macfarlanegroup.com). These remain substantially the same for the remaining six months of the current financial year and are summarised below:
· Failure to respond to strategic shifts in the market, including the impact of weaknesses in the economy as well as disruptive behaviour from competitors and changing customer needs (e.g., the move towards online retail) could limit the Group's ability to continue to grow revenues;
· Customers are increasingly focused on the environmental impacts of packaging, changing their buying behaviours in response to climate and sustainability concerns. Investors are looking to invest in companies that demonstrate strong Environmental, Social and Governance (ESG) credentials. There is increasing regulatory focus around reporting disclosures and new requirements, such as the Plastic Tax which was introduced from April 2022. If the Group is not proactive and transparent in how it is responding to environmental changes, this could lead to a loss of employees, customers and investors;
· The Group's businesses are impacted by commodity-based raw material prices and manufacturer energy costs, with profitability sensitive to input price changes including currency fluctuations. The principal components are corrugated paper, polythene films, timber and foam, with changes to paper and oil prices having a direct impact on the price we pay to our suppliers;
· The Group's growth strategy has included a number of acquisitions in recent years. There is a risk that such acquisitions may not be available on acceptable terms in the future. It is possible that acquisitions will not be successful due to the loss of key people or customers following acquisition or acquired businesses not performing at the level expected. This could potentially lead to impairment of the carrying value of the related goodwill and other intangible assets. Execution risks around the failure to successfully integrate acquisitions following conclusion of the earn-out period also exist;
· The Group has a property portfolio comprising 2 owned sites and 45 leased sites. This multi-site portfolio gives rise to risks in relation to ongoing lease costs, dilapidations and fluctuations in value;
· The increasing frequency and sophistication of cyber-attacks is a risk which potentially threatens the confidentiality, integrity and availability of the Group's data and IT systems. These attacks could also cause reputational damage and fines in the event of personal data being compromised;
· The Group needs continuous access to funding to meet its trading obligations and to support organic growth and acquisitions. There is a risk that the Group may be unable to obtain funds or that such funds will only be available on unfavourable terms. The Group's borrowing facility comprises a committed facility of up to £30m. This includes requirements to comply with specified covenants, with a breach potentially resulting in Group borrowings being subject to more onerous conditions;
· The Group has a significant investment in working capital in the form of trade receivables and inventories. There is a risk that this investment is not fully recovered; and
· The Group's defined benefit pension scheme is sensitive to a number of key factors including investment returns, the discount rates used to calculate the scheme's liabilities and mortality assumptions. Small changes in these assumptions could cause significant movements in the pension surplus/deficit.
Response to Covid-19 pandemic ("Covid-19")
The Group continues to respond to Covid-19 with the focus being on the safety and wellbeing of our people, protecting our financial position and limiting the interruption of service to our customers. Covid-19 was not classified as a separate principal risk due to its pervasive effect across all the principal risks and uncertainties. These uncertainties will remain for some time and to date the Group has adapted well to the constantly changing conditions.
Response to Brexit
The new trading arrangement between the UK and the EU came into effect on 1 January 2021. Whilst there has been some disruption to the supply chain and an increased administration burden, the impact on the Group has not been significant - largely due to mitigation measures put in place. We continue to monitor the impact of ongoing negotiations over the Northern Ireland protocol and the full implementation of customs checks at ports which came into effect from January 2022.
Interim Results - Management Report (continued)
Cautionary Statement
This announcement has been prepared solely to provide additional information to shareholders to assess the Group's strategy and the potential for the strategy to succeed. It should not be relied on by any other party or for any other purpose.
This report and the condensed financial statements contain certain forward-looking statements relating to operations, performance and financial status. By their nature, such statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors, including both economic and business risk factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report. Nothing in this Interim Results Statement should be construed as a profit forecast or an invitation to deal in the securities of the Group.
Responsibility Statement
The Directors of Macfarlane Group PLC during the first six months of 2022 were
S.R. Paterson Chairman
P.D. Atkinson Chief Executive
I. Gray Finance Director
R. McLellan Non-Executive Director/Senior Independent Director
J.W.F. Baird Non-Executive Director
A. Gulvanessian Non-Executive Director
The Directors confirm that, to the best of their knowledge:-
(i) the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
(ii) the interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(iii) the interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Approved by the Board of Directors on 25 August 2022 and signed on its behalf by
………………………….. ………………………
Peter D. Atkinson Ivor Gray
Chief Executive Finance Director
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
| |
| | | | |
| |
Six months to 30 June 2022 £000 | | Restated1 Six months to 30 June 2021 £000 | |
Year to 31 December 2021 £000 |
| Note |
| | | | |
Continuing operations | |
| | | | |
Revenue | 4 | 139,209 | | 122,144 | | 264,465 |
Cost of sales | | (92,113) | | (80,384) | | (174,998) |
| |
| |
| |
|
Gross profit | | 47,096 | | 41,760 | | 89,467 |
Distribution costs | | (5,169) | | (3,919) | | (8,651) |
Administrative expenses | | (32,323) | | (28,585) | | (60,761) |
| |
| |
| |
|
Operating profit | 4 | 9,604 | | 9,256 | | 20,055 |
Finance costs | 5 | (747) | | (671) | | (1,390) |
| |
| |
| |
|
Profit before tax | | 8,857 | | 8,585 | | 18,665 |
Tax | 6 | (1,882) | | (1,757) | | (4,917) |
| |
| |
| |
|
Profit for the period from continuing operations |
4 |
6,975 | |
6,828 | |
13,748 |
| |
| |
| |
|
Discontinued operations Loss for the period from discontinued operations | |
(87) | |
(787) | |
(1,150) |
| |
| |
| |
|
Profit for the period | | 6,888 | | 6,041 | | 12,598 |
| |
| |
| |
|
| |
| | | | |
Earnings per share from continuing operations | 9 |
| | | | |
Basic | | 4.41p | | 4.33p | | 8.71p |
| |
| |
| |
|
Diluted | | 4.36p | | 4.28p | | 8.62p |
| |
| |
| |
|
| |
| | | | |
Earnings per share from continuing and discontinued operations | 9 |
| | | | |
Basic | | 4.36p | | 3.83p | | 7.98p |
| |
| |
| |
|
Diluted | | 4.31p | | 3.79p | | 7.90p |
| |
| |
| |
|
| |
| | | | |
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
| | | | | | |
|
| Six months to 30 June 2022 £000 | | Six months to 30 June 2021 £000 | | Year to 31 December 2021 £000 |
Items that may be reclassified to profit or loss | Note |
| | | | |
Foreign currency translation differences | | 5 | | (89) | | (120) |
Items that will not be reclassified to profit or loss | |
| | | | |
Remeasurement of pension scheme liability | 12 | (825) | | 4,831 | | 8,212 |
Tax recognised in other comprehensive income | |
| | | | |
Tax on remeasurement of pension scheme liability | 13 | 206 | | (918) | | (2,054) |
Corporation tax rate change on deferred tax | 13 | - | | - | | 88 |
| |
| |
| |
|
Other comprehensive income for the period, net of tax | |
(614) | |
3,824 | |
6,126 |
Profit for the period | | 6,888 | | 6,041 | | 12,598 |
| |
| |
| |
|
Total comprehensive income for the period | | 6,274 | | 9,865 | | 18,724 |
| |
| |
| |
|
| |
| | | | |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
| Note | Share Capital £000 | Share Premium £000 | Revaluation Reserve £000 | Own Shares £000 | Translation Reserve £000 | Retained Earnings £000 |
Total £000 |
At 1 January 2022 |
| 39,453 | 13,148 | 70 | - | 171 | 42,052 | 94,894 |
|
|
|
|
|
|
|
|
|
Comprehensive income |
| | | | | | |
|
Profit for the period |
| - | - | - | - | - | 6,888 | 6,888 |
Foreign currency translation differences |
|
- |
- |
- |
- |
5 |
- |
5 |
Remeasurement of pension scheme liability |
12 |
- |
- |
- |
- |
- |
(825) |
(825) |
Tax on remeasurement of pension scheme liability |
13 |
- |
- |
- |
- |
- |
206 |
206 |
|
|
|
|
|
|
|
|
|
Total comprehensive income | - | - | - | - | 5 | 6,269 | 6,274 | |
|
|
|
|
|
|
|
| |
Transactions with shareholders | | | | | | | | |
Dividends | 8 | - | - | - | - | - | (3,677) | (3,677) |
New shares issued |
| 131 | 425 | - | (7) | - | - | 549 |
Share-based payments |
| - | - | - | - | - | (212) | (212) |
|
|
|
|
|
|
|
|
|
Total transactions with shareholders |
131 |
425 |
- |
(7) |
- |
(3,889) |
(3,340) | |
|
|
|
|
|
|
|
|
|
At 30 June 2022 |
| 39,584 | 13,573 | 70 | (7) | 176 | 44,432 | 97,828 |
|
|
|
|
|
|
|
|
|
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2021
|
Note |
Share Capital £000 |
Share Premium £000 |
Revaluation Reserve £000 |
Translation Reserve £000 |
Retained Earnings £000 |
Total £000 |
| | | | | | | |
At 1 January 2021 | | 39,453 | 13,148 | 70 | 291 | 26,816 | 79,778 |
| |
|
|
|
|
|
|
Comprehensive income | | | | | | | |
Profit for the period | | - | - | - | - | 6,041 | 6,041 |
Foreign currency translation differences | |
- |
- |
- |
(89) |
- |
(89) |
Remeasurement of pension scheme liability |
12 |
- |
- |
- |
- |
4,831 |
4,831 |
Tax on remeasurement of pension scheme liability |
13 |
- |
- |
- |
- |
(918) |
(918) |
| |
|
|
|
|
|
|
Total comprehensive income | - | - | - | (89) | 9,954 | 9,865 | |
| |
|
|
|
|
|
|
Transactions with shareholders | | | | | | |
|
Dividends | 8 | - | - | - | - | (2,920) | (2,920) |
Share-based payments | | - | - | - | - | 410 | 410 |
| |
|
|
|
|
|
|
Total transactions with shareholders | - | - | - | - | (2,510) | (2,510) | |
| |
|
|
|
|
|
|
| | | | | | |
|
At 30 June 2021 | | 39,453 | 13,148 | 70 | 202 | 34,260 | 87,133 |
| |
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
|
Note | Share Capital £000 | Share Premium £000 | Revaluation Reserve £000 | Translation Reserve £000 | Retained Earnings £000 |
Total £000 |
| | | | | | | |
At 1 January 2021 | | 39,453 | 13,148 | 70 | 291 | 26,816 | 79,778 |
| |
|
|
|
|
|
|
Comprehensive income | |
|
|
|
|
|
|
Profit for the year | | - | - | - | - | 12,598 | 12,598 |
Foreign currency translation differences | |
- |
- |
- |
(120) |
- |
(120) |
Remeasurement of pension scheme liability |
12 |
- |
- |
- |
- |
8,212 |
8,212 |
Tax on remeasurement of pension scheme liability |
13 |
- |
- |
- |
- |
(2,054) |
(2,054) |
Corporation tax rate change on deferred tax |
13 |
- |
- |
- |
- |
88 |
88 |
| |
|
|
|
|
|
|
Total comprehensive income | - | - | - | (120) | 18,844 | 18,724 | |
| |
|
|
| 2 |
|
|
Transactions with shareholders | | | | | | | |
Dividends | 8 | - | - | - | - | (4,293) | (4,293) |
Share-based payments | | - | - | - | - | 685 | 685 |
| |
|
|
|
|
|
|
Total transactions with shareholders | - | - | - | - | (3,608) | (3,608) | |
| |
|
|
|
|
|
|
| | | | | |
|
|
At 31 December 2021 | | 39,453 | 13,148 | 70 | 171 | 42,052 | 94,894 |
| |
|
|
|
|
|
|
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) AT 30 JUNE 2022
| | | | | | |
| | 30 June 2022 | | 30 June 2021 | | 31 December 2021 |
| Note | £000 | | £000 | | £000 |
Non-current assets |
|
| | | | |
Goodwill and other intangible assets |
| 79,447 | | 77,024 | | 74,902 |
Property, plant and equipment |
| 7,591 | | 9,497 | | 6,101 |
Right of use assets | | 33,807 | | 33,833 | | 34,718 |
Trade and other receivables | | 35 | | 35 | | 35 |
Deferred tax assets Retirement benefit surplus | 13 12 | 19 8,847 | | 116 4,566 | | 19 8,267 |
|
|
|
|
| |
|
Total non-current assets |
| 129,746 | | 125,071 | | 124,042 |
|
|
|
|
| |
|
Current assets |
|
| | | | |
Inventories |
| 25,150 | | 22,111 | | 21,269 |
Trade and other receivables |
| 60,833 | | 56,231 | | 58,541 |
Cash and cash equivalents | 11 | 6,804 | | 7,215 | | 12,315 |
|
|
|
|
| |
|
Total current assets |
| 92,787 | | 85,557 | | 92,125 |
|
|
|
|
| |
|
Total assets | 4 | 222,533 | | 210,628 | | 216,167 |
| |
|
|
| |
|
Current liabilities |
|
| | | | |
Trade and other payables |
| 61,184 | | 59,056 | | 60,975 |
Provisions |
| 1,370 | | 1,933 | | 1,730 |
Current tax liabilities |
| 524 | | 1,871 | | 771 |
Lease liabilities | 11 | 6,139 | | 7,173 | | 6,364 |
Bank borrowings | 11 | 16,473 | | 15,897 | | 9,840 |
|
|
|
|
| |
|
Total current liabilities |
| 85,690 | | 85,930 | | 79,680 |
|
|
|
|
| |
|
Net current assets/(liabilities) |
| 7,097 | | (373) | | 12,445 |
|
|
|
|
| |
|
Non-current liabilities |
|
| | | | |
Deferred tax liabilities | 13 | 8,241 | | 5,667 | | 7,472 |
Trade and other payables |
| 908 | | 3,714 | | 3,695 |
Provisions |
| 1,848 | | 1,365 | | 1,848 |
Lease liabilities | 11 | 28,018 | | 26,819 | | 28,578 |
|
|
|
|
| |
|
Total non-current liabilities |
| 39,015 | | 37,565 | | 41,593 |
|
|
|
|
| |
|
Total liabilities |
| 124,705 | | 123,495 | | 121,273 |
| |
|
|
| |
|
Net assets | 4 | 97,828 | | 87,133 | | 94,894 |
| |
|
|
| |
|
Equity |
|
| | |
|
|
Share capital |
| 39,584 | | 39,453 | | 39,453 |
Share premium |
| 13,573 | | 13,148 | | 13,148 |
Revaluation reserve |
| 70 | | 70 | | 70 |
Own Shares |
| (7) | | - | | - |
Translation reserve |
| 176 | | 202 | | 171 |
Retained earnings |
| 44,432 | | 34,260 | | 42,052 |
|
|
|
|
| |
|
Total equity | | 97,828 | | 87,133 | | 94,894 |
| |
|
|
| |
|
| | | | | | |
MACFARLANE GROUP PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED 30 JUNE 2022
| |
Six months to 30 June | | Restated1 Six months to 30 June | |
Year to 31 December |
|
Note | 2022 £000 | | 2021 £000 | | 2021 £000 |
Profit/(loss) before tax from: | | | | | | |
Continuing operations | | 8,857 | | 8,585 | | 18,665 |
Discontinued operations | | (87) | | (760) | | (938) |
|
|
| |
| |
|
Total operations | | 8,770 | | 7,825 | | 17,727 |
Adjustments for: | |
| | | | |
Amortisation of intangible assets | | 1,780 | | 1,561 | | 3,311 |
Depreciation of property, plant, equipment | | 693 | | 1,003 | | 1,989 |
Depreciation of right-of-use assets | | 3,768 | | 3,506 | | 7,282 |
Goodwill impairment Loss/(gain) on disposal of property,plant,equipment | 7 | - 132 | | 987 (19) | | 987 43 |
Loss on disposal of subsidiaries | 7 | 87 | | - | | 232 |
Share-based payment expense | | 337 | | 410 | | 685 |
Finance costs | | 747 | | 710 | | 1,390 |
|
|
| |
| |
|
Operating cash flows before movements in working capital | |
16,314 | |
15,983 | |
33,646 |
Increase in inventories | | (1,517) | | (4,288) | | (4,848) |
Increase in receivables | | (586) | | (1,544) | | (7,892) |
(Decrease)/increase in payables | | (2,923) | | 4,779 | | 8,905 |
(Decrease)/increase in provisions | | (360) | | 275 | | 1,884 |
Pension contributions less current service costs | | (1,322) | | (1,216) | | (1,533) |
|
|
| |
| |
|
Cash generated from operations | | 9,606 | | 13,989 | | 30,162 |
Income taxes paid | | (2,322) | | (1,983) | | (4,975) |
Interest paid | | (830) | | (700) | | (1,383) |
|
|
| |
| |
|
Net cash inflow from operating activities | | 6,454 | | 11,306 | | 23,804 |
|
|
| |
| |
|
Investing activities |
|
| | |
|
|
Acquisitions | 10 | (9,268) | | (12,238) | | (12,238) |
Proceeds from sales of subsidiaries | | 166 | | - | | 5,212 |
Proceeds on disposal of property, plant and equipment | 92 | | 134 | | 199 | |
Purchases of property, plant and equipment |
| (2,271) | | (1,063) | | (2,132) |
|
|
| |
| |
|
Net cash flows from investing activities |
| (11,281) | | (13,167) | | (8,959) |
|
|
| |
| |
|
Financing activities |
|
| | |
|
|
Dividends paid | 8 | (3,677) | | (2,920) | | (4,293) |
Drawdown of bank borrowings |
| 5,957 | | 8,887 | | 3,889 |
Repayment of lease obligations | 11 | (3,640) | | (3,363) | | (7,539) |
|
|
| |
| |
|
Net cash flows from financing activities | (1,360) | | 2,604 | | (7,943) | |
|
|
| |
| |
|
Net (decrease)/increase in cash and cash equivalents | (6,187) | | 743 | | 6,902 | |
| |
| | | | |
Cash and cash equivalents at beginning of period |
| 12,123 | | 5,221 | | 5,221 |
|
|
| |
| |
|
Cash and cash equivalents at end of period | | 5,936 | | 5,964 | | 12,123 |
|
|
| |
| |
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC SIX MONTHS ENDED 30 JUNE 2022 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Reconciliation to condensed consolidated cash flow statement | ||||||
Cash and cash equivalents per the balance sheet |
11 | Six months to 30 June 2022 £000
6,804 | | Six months to 30 June 2021 £000
7,215 | | Year to 31 December 2021 £000
12,315 |
Bank overdraft | | (868) | | (1,251) | | (192) |
|
|
| |
| |
|
Balances per the cash flow statement | | 5,936 | | 5,964 | | 12,123 |
|
|
| |
| |
|
1. Basis of preparation
Macfarlane Group PLC is a public company listed on the London Stock Exchange, incorporated and domiciled in the United Kingdom and registered in Scotland.
The Group's annual financial statements for the year ended 31 December 2021 were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom. This condensed set of interim financial statements has been prepared in accordance with United Kingdom adopted International Financial Reporting Standard IAS 34 Interim Financial Reporting.
This condensed set of interim financial statements has been prepared applying the accounting policies that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2021. There were no major changes from the adoption of new IFRS's in 2022.
Judgements, assumptions and estimation uncertainties
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the period. Due to the nature of estimation, the actual outcomes may well differ from these estimates. With the exception of the impairment in historic goodwill in note 7, no significant judgements have been made in the current or prior period. The key sources of estimation uncertainty that have a significant effect on the carrying amounts of assets and liabilities are discussed below:
The determination of any defined benefit pension scheme asset or liability is based on assumptions determined with independent actuarial advice. The key assumptions used include discount rate, inflation rate and mortality assumptions, for which a sensitivity analysis is provided in note 12. The Directors consider that those sensitivities represent reasonable sensitivities which could occur in the next financial period.
The provision held against trade receivables is based on applying an expected credit loss model and related estimates of recoverable amounts. Whilst every attempt is made to ensure that the provision held against doubtful trade receivables is as accurate as possible, there remains a risk that the provision may not match the level of debt which ultimately proves uncollectable.
Business activities, risks and financing
The Group's business activities, together with the factors likely to affect its future development, performance and financial position, are set out in the Interim Management Report.
The Group's principal financial risks in the medium term relate to liquidity and credit risk. Liquidity risk is managed by ensuring that the Group's day-to-day working capital requirements are met by having access to committed banking facilities with suitable terms and conditions to accommodate the requirements of the Group's operations. Credit risk is managed by applying considerable rigour in managing the Group's trade receivables. Although the current economic climate indicates an increased level of risk, the Directors believe that the Group is adequately placed to manage its financial risks effectively.
The Group's banking arrangement with Lloyds Bank PLC comprises a committed facility of £30 million, expiring in December 2025, secured over part of Macfarlane Group's trade receivables and bearing interest at commercial rates. The facility has financial covenants for interest cover and trade receivables headroom.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of preparation
Business activities, risks and financing
The Directors have reviewed the Group's cash and profit projections, which they believe are based on prudent market data and past experience taking account of reasonably possible changes in trading performance given current market and economic conditions. The Directors are of the opinion that these projections show that the Group should be able to operate within its current facilities and comply with its banking covenants.
In assessing the going concern basis, the Directors have considered the Group's business activities, the financial position of the Group and the Group's risks and uncertainties. The Directors have a reasonable expectation that, despite the current uncertain economic environment, the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. For this reason, this condensed set of financial statements has been prepared on the going concern basis.
Approval and review of condensed financial statements
These condensed financial statements were approved by the Board of Directors on 25 August 2022. As in previous years, the set of condensed financial statements for the half-year is unaudited.
2. Alternative performance measure
In addition to the various performance measures defined under IFRS the Group reports operating profit before amortisation as a measure to assist in understanding the underlying performance of the Group and its businesses when compared to similar companies. Operating profit before amortisation is not defined under IFRS and, as a result, does not comply with Generally Accepted Accounting Practice ("GAAP") and is therefore known as an alternative performance measure. Accordingly, this measure, which is not designed to be a substitute for any of the IFRS measures of performance, may not be directly comparable with other companies' alternative performance measures. Operating profit before amortisation is defined as operating profit before customer relationships and brand values amortisation reconciled in the table below.
Continuing operations |
Six months to 30 June 2022 £000 | Restated1 Six months to 30 June 2021 £000 |
Year to 31 December 2021 £000 |
Operating profit before amortisation | 11,384 | 10,817 | 23,366 |
Customer relationships/brand values amortisation | (1,780) | (1,561) | (3,311) |
|
|
|
|
Operating profit | 9,604 | 9,256 | 20,055 |
|
|
|
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
3. General information
Comparative figures for the year ended 31 December 2021 are extracted from Macfarlane Group's statutory accounts for 2021. The information for the year ended 31 December 2021 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor on 24 February 2022 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
4. Segmental information
The Group's principal business segment is Packaging Distribution, comprising the distribution of packaging materials and supply of storage services in the UK. Other operations for the design, manufacture and assembly of timber, corrugated and foam-based packaging materials in the UK comprise one segment headed Manufacturing Operations.
|
Six months to 30 June 2022 £000 | Restated1 Six months to 30 June 2021 £000 |
Year to 31 December 2021 £000 |
Group segment - total revenue |
| |
|
Packaging Distribution | 123,533 | 110,957 | 239,508 |
Manufacturing Operations | 17,739 | 12,963 | 28,527 |
Inter-segment revenue | (2,063) | (1,776) | (3,570) |
|
|
|
|
Revenue | 139,209 | 122,144 | 264,465 |
|
|
|
|
Trading results - continuing operations |
| |
|
Packaging Distribution |
| |
|
Revenue | 123,533 | 110,957 | 239,508 |
Cost of sales | (83,627) | (74,727) | (161,896) |
|
|
|
|
Gross profit | 39,906 | 36,230 | 77,612 |
Net operating expenses | (31,022) | (27,152) | (57,915) |
|
|
|
|
Operating profit before amortisation | 8,884 | 9,078 | 19,697 |
Amortisation | (1,379) | (1,293) | (2,642) |
|
|
|
|
Operating profit | 7,505 | 7,785 | 17,055 |
|
|
|
|
Manufacturing Operations |
| | |
Revenue | 15,676 | 11,187 | 24,957 |
Cost of sales | (8,486) | (5,657) | (13,102) |
|
|
|
|
Gross profit | 7,190 | 5,530 | 11,855 |
Net operating expenses | (4,690) | (3,791) | (8,186) |
|
|
|
|
Operating profit before amortisation and impairment | 2,500 | 1,739 | 3,669 |
Amortisation | (401) | (268) | (669) |
|
|
|
|
Operating profit | 2,099 | 1,471 | 3,000 |
|
|
|
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
4. Segmental information (continued)
|
Six months to 30 June 2022 £000 | Restated1 Six months to 30 June 2021 £000 |
Year to 31 December 2021 £000 |
Operating profit - continuing operations |
| | |
Packaging Distribution | 7,505 | 7,785 | 17,055 |
Manufacturing Operations | 2,099 | 1,471 | 3,000 |
|
|
|
|
Operating profit | 9,604 | 9,256 | 20,055 |
Finance costs (note 5) | (747) | (671) | (1,390) |
|
|
|
|
Profit before tax | 8,857 | 8,585 | 18,665 |
Tax (note 6) | (1,882) | (1,757) | (4,917) |
|
|
|
|
Profit for the period from continuing operations | 6,975 | 6,828 | 13,748 |
Loss for the period from discontinued operations | (87) | (787) | (1,150) |
|
|
|
|
Profit for the period | 6,888 | 6,041 | 12,598 |
|
|
|
|
|
30 June 2022 £000 | Restated1 30 June 2021 £000 |
31 December 2021 £000 |
Total assets |
| | |
Packaging Distribution | 192,221 | 168,638 | 185,111 |
Manufacturing Operations | 30,312 | 30,106 | 31,056 |
|
|
|
|
Total assets | 222,533 | 198,744 | 216,167 |
|
|
|
|
Net assets |
| | |
Packaging Distribution | 77,718 | 63,988 | 74,899 |
Manufacturing Operations | 20,110 | 18,405 | 19,995 |
|
|
|
|
Net assets | 97,828 | 82,393 | 94,894 |
|
|
|
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
5. Finance costs |
Six months to 30 June 2022 £000 | Restated1 Six months to 30 June 2021 £000 |
Year to 31 December 2021 £000 |
|
| | |
Interest on bank borrowings | 279 | 227 | 414 |
Interest on leases | 551 | 434 | 969 |
Finance (income)/cost relating to defined benefit pension scheme (note 12) | (83) | 10 | 7 |
|
|
|
|
Total finance costs from continuing operations | 747 | 671 | 1,390 |
|
|
|
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
6. Tax | Six months to 30 June 2022 £000 | Six months to 30 June 2021 £000 | Year to 31 December 2021 £000 |
Current tax |
| | |
UK corporation tax | 1,786 | 1,759 | 3,672 |
Foreign tax | 113 | 122 | 245 |
Prior year adjustments | (21) | (10) | 72 |
|
|
|
|
Total current tax | 1,878 | 1,871 | 3,989 |
|
|
|
|
Deferred tax current year | 4 | (68) | (76) |
Prior year adjustments | - | (19) | (61) |
Long-term corporation tax rate change | - | - | 1,277 |
|
|
|
|
Total deferred tax (note 13) | 4 | (87) | 1,140 |
|
|
|
|
Total tax | 1,882 | 1,784 | 5,129 |
|
|
|
|
Tax charge attributable to continuing operations | 1,882 | 1,757 | 4,917 |
Tax charge attributable to discontinued operations | - | 27 | 212 |
|
|
|
|
Tax charge for the period | 1,882 | 1,784 | 5,129 |
|
|
|
|
Tax for the six months ended 30 June 2022 has been charged at 19.00% (2021 - 19.00%) representing the best estimate of the effective tax charge for the full year. Deferred tax assets and liabilities at 30 June 2022 have been calculated based on the long-term corporation tax rate of 25%, which had been substantively enacted at that date.
7. Discontinued operations | Six months to 30 June 2022 £000 | Six months to 30 June 2021 £000 | Year to 31 December 2021 £000 |
Revenue | - | 11,369 | 21,220 |
Expenses | (87) | (12,129) | (22,158) |
|
|
|
|
Loss before tax | (87) | (760) | (938) |
Attributable tax expense | - | (27) | (212) |
|
|
|
|
Loss for the period from discontinued operations | (87) | (787) | (1,150) |
|
|
|
|
On 31 December 2021, the Group entered into a sales agreement to dispose of Macfarlane Labels Limited and its subsidiaries Macfarlane Group Ireland (Labels & Packaging) Limited and Macfarlane Group Sweden AB (collectively "Macfarlane Labels"). The results of the discontinued operations, which have been included as a single item of loss from discontinued operations for the period, are set out above.
The loss for the six months to 30 June 2021 and the year to 31 December 2021 was after charging £987,000 of goodwill impairment.
The loss on disposal was £319,000, £87,000 recognised in the six months to 30 June 2022 and £232,000 recognised in the year to 31 December 2021. No loss on disposal was recognised in the six months to 30 June 2021.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
8. Dividends | Six months to 30 June 2022 £000 | Six months to 30 June 2021 £000 | Year to 31 December 2021 £000 |
Amounts recognised as distributions to equity holders in the period | | | |
Final dividend 2.33p per share (2021: 1.85 per share) | 3,677 | 2,920 | 2,920 |
Interim dividend (2021: 0.87p per share) | - | - | 1,373 |
|
|
|
|
Distributions in the period | 3,677 | 2,920 | 4,293 |
|
|
|
|
An interim dividend of 0.90p per share, payable on 13 October 2022, was declared on 25 August 2022 and has therefore not been included as a liability in these condensed financial statements.
9. Earnings per share
Earnings |
Six months to 30 June 2022 £000 | Restated1 Six months to 30 June 2021 £000 |
Year to 31 December 2021 £000 |
Profit for the period from continuing operations | 6,975 | 6,828 | 13,748 |
|
|
|
|
Loss for the period from discontinued operations | (87) | (787) | (1,150) |
|
|
|
|
Profit for the period from continuing and discontinued operations | 6,888 | 6,041 | 12,598 |
|
|
|
|
Number of shares '000 | 30 June 2021 | 30 June 2021 | 31 December 2021 |
Weighted average number of shares in issue for the purposes of basic earnings per share |
157,987 |
157,812 |
157,812 |
Effect of Long-Term Incentive Plan awards in issue | 1,834 | 1,627 | 1,627 |
|
|
|
|
Weighted average number of shares in issue for the purposes of diluted earnings per share |
159,821 |
159,439 |
159,439 |
|
|
|
|
|
| | |
Basic earnings per share from continuing operations | 4.41p | 4.33p | 8.71p |
|
|
|
|
Diluted earnings per share from continuing operations | 4.36p | 4.28p | 8.62p |
|
|
|
|
Basic earnings per share from discontinued operations | (0.06)p | (0.50)p | (0.73)p |
|
|
|
|
Diluted earnings per share from discontinued operations | (0.05)p | (0.49)p | (0.72)p |
|
|
|
|
Basic earnings per share from continuing and discontinued operations |
4.36p |
3.83p |
7.98p |
|
|
|
|
Diluted earnings per share from continuing and discontinued operations |
4.31p |
3.79p |
7.90p |
|
|
|
|
1 In accordance with IFRS5, 2021 has been restated to reflect the result of the Labels division, sold on 31 December 2021, as a discontinued operation.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
10. Acquisitions
On 17 May 2022, Macfarlane Group PLC acquired 100% of PackMann Gesellschaft für Verpackungen und Dienstleistungen mbH ("PackMann"), for a maximum consideration of £7.4 million, excluding cash, bank balances and bank borrowings. £5.9 million was paid in cash on acquisition and the deferred consideration of £1.5 million is payable in the second quarters of 2023 and 2024, subject to certain trading targets being met in the two twelve-month periods ending on 31 May 2023 and 2024 respectively. A recovery for closing balance sheet adjustments is estimated to be £0.6 million receivable in H2 2022.
On 26 February 2021, Macfarlane Group UK Limited ("MGUK") acquired 100% of GWP Holdings Limited ("GWP"), for a maximum consideration of £15.1 million, excluding cash and bank balances retained. £10.0 million was paid in cash on acquisition, in addition to the cash and bank balances retained, £2.2 million was paid in the first half of 2022 as the profit target for the first twelve month period was met and a further £2.9 million is payable in 2023, subject to the profit target being met in the second twelve-month period ending on 28 February 2023. On 31 March 2021, MGUK acquired 100% of Carters Packaging (Cornwall) Limited ("Carters"), for a maximum consideration of £4.5 million, excluding cash and bank balances retained. £3.0 million was paid in cash on acquisition, in addition to the cash and bank balances retained, £0.7 million was paid in the first half of 2022 as the profit target for the first twelve month period was met and a further £0.8 million is payable in 2023, subject to the profit target being met in the second twelve-month period ending on 31 March 2023.
Contingent considerations are recognised as a liability in trade and other payables and are remeasured to fair value of £5.1 million at the balance sheet date based on a range of outcomes between £Nil and £5.1 million. Trading in the post-acquisition period supports the remeasured value of £5.0 million.
Carters and PackMann are packaging distributors, accounted for in the Packaging Distribution segment. Goodwill arising is attributable to the anticipated future profitability of the distribution of the Group's product ranges in the UK and anticipated operating synergies from future combinations of activities with the existing Packaging Distribution network. GWP is a packaging manufacturer, accounted for in the Manufacturing Operations segment. Goodwill arising is attributable to the anticipated future profitability of the manufacture of the Group's product ranges in the UK and anticipated operating synergies from future combinations of activities within the existing Manufacturing Operations. Fair values assigned to net assets acquired and consideration paid and payable are set out below:-
Net assets acquired | Six months to 30 June 2022 £000 | Six months to 30 June 2021 £000 | Year to 31 December 2021 £000 |
Other intangible assets | 3,520 | 9,482 | 9,482 |
Property, plant and equipment | 836 | 4,558 | 4,558 |
Inventories | 2,364 | 1,965 | 1,965 |
Trade and other receivables | 1,347 | 3,316 | 3,316 |
Cash and bank balances | 290 | 3,877 | 3,877 |
Bank borrowings | (730) | - | - |
Trade and other payables | (1,899) | (4,148) | (4,148) |
Current tax liabilities | (196) | (427) | (427) |
Lease liabilities | (739) | (3,500) | (3,500) |
Deferred tax liabilities | (971) | (1,875) | (1,875) |
|
|
|
|
Net assets acquired | 3,822 | 13,248 | 13,248 |
Goodwill | 2,843 | 9,492 | 9,492 |
|
|
|
|
Total consideration | 6,665 | 22,740 | 22,740 |
Contingent consideration on acquisitions Current year | (767) | (6,625) | (6,625) |
Prior years | 2,930 | - | - |
|
|
|
|
Total cash consideration | 8,828 | 16,115 | 16,115 |
|
|
|
|
Net cash outflow arising on acquisition |
| | |
Cash consideration | (8,828) | (16,115) | (16,115) |
Cash and bank borrowings acquired | (440) | 3,877 | 3,877 |
|
|
|
|
Net cash outflow | (9,268) | (12,238) | (12,238) |
|
|
|
|
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
11. Analysis of changes in net debt | | | | |
| Cash and cash equivalents £000 |
Bank borrowing £000 |
Lease liabilities £000 |
Total debt £000 |
Total debt |
| | | |
At 1 January 2021 | 7,228 | (7,766) | (28,692) | (29,230) |
Non-cash movements | | | |
|
Acquisitions | - | - | (3,500) | (3,500) |
New leases Exchange movements Lease modifications | - - - | - - - | (868) 86 (4,381) | (868) 86 (4,381) |
Cash movements | (13) | (8,131) | 3,363 | (4,781) |
|
|
|
|
|
At 30 June 2021 | 7,215 | (15,897) | (33,992) | (42,674) |
Non-cash movements | | | |
|
Disposals | - | - | 1,363 | 1,363 |
New leases | - | - | (8,235) | (8,235) |
Exchange movements | - | - | 40 | 40 |
Lease modifications | - | - | 1,706 | 1,706 |
Cash movements | 5,100 | 6,057 | 4,176 | 15,333 |
|
|
|
|
|
At 31 December 2021 | 12,315 | (9,840) | (34,942) | (32,467) |
Non-cash movements | | | |
|
Acquisitions | - | - | (739) | (739) |
Disposals | - | - | 163 | 163 |
New leases Exchange movements Lease modifications | - - - | - - - | (1,743) (4) (532) | (1,743) (4) (532) |
Cash movements | (5,511) | (6,633) | 3,640 | (8,504) |
|
|
|
|
|
At 30 June 2022 | 6,804 | (16,473) | (34,157) | (43,826) |
|
|
|
|
|
Total cash movements for 2021 | 5,087 | (2,074) | 7,539 | 10,552 |
|
|
|
|
|
Net bank debt
|
|
|
| Net bank Debt £000
|
At 30 June 2022 | 6,804 | (16,473) |
| (9,669) |
|
|
|
| |
At 31 December 2021 | 12,315 | (9,840) | | 2,475 |
|
|
|
|
Cash and cash equivalents (which are presented as a single class of asset on the balance sheet) comprise cash at bank and other short-term highly liquid investments with maturity of three months or less.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
12. Retirement benefit obligations
The figures below have been prepared by Aon based on the results of the triennial actuarial valuation as at 1 May 2020 updated to 30 June 2021, 31 December 2021 and 30 June 2022. The scheme investments and the scheme's net surplus position as calculated under IAS 19 are as follows:
Investment class | 30 June 2022 £000 | 30 June 2021 £000 | 31 December 2021 £000 |
Equities |
| | |
UK equity funds | 7,304 | 8,942 | 9,392 |
Overseas equity funds | 13,234 | 16,554 | 17,010 |
Multi-asset diversified growth funds | 27,061 | 32,566 | 29,113 |
Bonds |
| | |
Liability-driven Investment funds | 14,314 | 24,883 | 30,531 |
Other investments |
| | |
European loan fund | 6,332 | 6,657 | 6,778 |
Secured property income fund | 7,293 | 6,587 | 6,995 |
Cash | 1,010 | 316 | 604 |
|
|
|
|
Fair value of Scheme investments | 76,548 | 96,505 | 100,423 |
Present value of Scheme liabilities | (67,701) | (91,939) | (92,156) |
|
|
|
|
Pension scheme surplus | 8,847 | 4,566 | 8,267 |
|
|
|
|
These amounts were calculated using the following principal assumptions as required under IAS 19:
Assumptions | 30 June 2022 | 30 June 2021 | 31 December 2021 |
Discount rate | 3.80% | 1.90% | 1.90% |
Rate of increase in pensionable salaries | 0.00% | 0.00% | 0.00% |
Rate of increase in pensions in payment | 3% or 5% for fixed increases or 3.22% for LPI | 3% or 5% for fixed increases or 3.20% for LPI | 3% or 5% for fixed increases or 3.30% for LPI |
PIE take up rate | 65% | 65% | 65% |
Inflation assumption (RPI) | 3.30% | 3.30% | 3.40% |
Inflation assumption (CPI) | 2.80% | 2.80% | 2.90% |
Life expectancy beyond normal retirement age of 65 | | | |
Scheme member aged 55 Male 22.9 years | 22.9 years | 22.8 years | |
Female 24.5 years | 24.4 years | 24.4 years | |
Scheme member aged 65 Male | 22.3 years | 22.3 years | 22.3 years |
Female | 23.7 years | 23.6 years | 23.6 years |
Average uplift for GMP service | 0.40% | 0.40% | 0.40% |
| Six months to 30 June 2022 £000 | Six months to 30 June 2021 £000 | Year to 31 December 2021 £000 |
Movement in scheme surplus/(deficit) in the period |
| | |
At start of period | 8,267 | (1,471) | (1,471) |
Current service cost | (24) | (95) | (126) |
Employer contributions | 1,346 | 1,311 | 1,992 |
Past service costs (curtailed due to disposal of business) | - | - | (333) |
Net finance income/(cost) | 83 | (10) | (7) |
Re-measurement of pension scheme liability in the period | (825) | 4,831 | 8,212 |
|
|
|
|
At end of period | 8,847 | 4,566 | 8,267 |
|
|
|
|
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
12. Retirement benefit obligations (continued)
Sensitivity to key assumptions
Key assumptions used for IAS 19 are discount rate, inflation and mortality. If different assumptions were used, then this could have a material effect on the deficit. Assuming all other assumptions are held static then a movement in the following key assumptions would affect the level of the surplus as shown below:-
Assumptions | 30 June 2022 £000 | 30 June 2021 £000 | 31 December 2021 £000 |
|
| | |
Discount rate movement of +0.6% | 6,499 | 8,826 | 8,845 |
Inflation rate movement of +0.1% | (339) | (469) | (470) |
Mortality movement of +0.1 year in age rating | 203 | 276 | 277 |
Positive figures reflect a reduction in scheme liabilities and therefore an increase in the scheme surplus.
| Six months to 30 June 2022 £000 | Six months to 30 June 2021 £000 | Year to 31 December 2021 £000 |
Movement in fair value of Scheme investments |
| | |
Scheme investments at start of period | 100,423 | 99,430 | 99,430 |
Interest income | 947 | 663 | 1,332 |
Return on scheme assets (exc. amount shown in interest income) | (23,758) | (3,198) | 1,273 |
Contributions from sponsoring companies | 1,346 | 1,311 | 1,992 |
Contribution from scheme members | 4 | 14 | 23 |
Benefits paid | (2,414) | (1,715) | (3,627) |
|
|
|
|
Scheme investments at end of period | 76,548 | 96,505 | 100,423 |
|
|
|
|
Movement in present value of Scheme liabilities |
| | |
Scheme liabilities at start of period | (92,156) | (100,901) | (100,901) |
Normal service costs | (24) | (95) | (126) |
Past service costs (curtailed due to disposal of business) | - | - | (333) |
Interest cost | (864) | (673) | (1,339) |
Contribution from scheme members | (4) | (14) | (23) |
Actuarial (loss)/gain due to the changes in financial and experience | 22,933 | 8,029 | 6,939 |
Actuarial gain due to change in demographic assumptions | - | - | - |
Benefits paid | 2,414 | 1,715 | 3,627 |
|
|
|
|
Scheme liabilities at end of period | (67,701) | (91,939) | (92,156) |
|
|
|
|
Basis of recognition of surplus
Macfarlane Group PLC, based on legal opinion provided, has an unconditional right to a refund of surplus assets assuming the full settlement of plan liabilities in the event of a wind up of the Macfarlane Group PLC Pension & Life Assurance Scheme (1974) ('the Scheme'). Furthermore, in the ordinary course of business the trustees have no rights to unilaterally wind up the Scheme, or otherwise augment the benefits due to members of the scheme. Based on these rights, any net surplus in the Scheme is recognised in full.
Investments
The Trustees review the scheme investments regularly and consult with the Company regarding any changes.
Funding
Following the completion of the triennial actuarial valuation at 1 May 2020, Macfarlane Group PLC is paying deficit reduction contributions of £1.25 million per annum with a deficit recovery period of 4 years. The Group paid a further £0.7 million into the scheme in H1 2022 to satisfy the debt agreed with the trustees in relation to the cessation of Macfarlane Labels Limited as a sponsoring employer.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
13. Deferred tax | Tax losses less accelerated capital allowances £000 |
Other intangible assets £000 |
Retirement Benefit Obligations £000 |
Total £000 |
|
|
| | |
At 1 January 2021 | (79) | (2,876) | 279 | (2,676) |
Acquisitions | (73) | (1,802) | - | (1,875) |
Transferred to corporation tax | (168) | - | - | (168) |
Exchange movement | (1) | - | - | (1) |
Credited/(charged) in income statement | | | |
|
Current period | 19 | 297 | (229) | 87 |
Charged in other comprehensive income | | | |
|
Remeasurement of pension scheme liability | - | - | (918) | (918) |
|
|
|
|
|
At 30 June 2021 | (302) | (4,381) | (868) | (5,551) |
Disposal | 372 | - | - | 372 |
Exchange movement | 1 | - | - | 1 |
(Charged) in income statement | | | |
|
Current period | (390) | (684) | (153) | (1,227) |
(Charged)/credited in other comprehensive income | | | |
|
Remeasurement of pension scheme liability | - | - | (1,136) | (1,136) |
Corporation tax rate change | - | - | 88 | 88 |
|
|
|
|
|
At 1 January 2022 | (319) | (5,065) | (2,069) | (7,453) |
Acquisitions | - | (971) | - | (971) |
Credited/(charged) in income statement | | | |
|
Current period | 4 | 341 | (349) | (4) |
Credited in other comprehensive income | - | - | 206 | 206 |
|
|
|
|
|
At 30 June 2022 | (315) | (5,695) | (2,212) | (8,222) |
|
|
|
|
|
|
|
|
|
|
Deferred tax assets | 19 | - | - | 19 |
Deferred tax liabilities | (334) | (5,695) | (2,212) | (8,241) |
|
|
|
|
|
At 30 June 2022 | (315) | (5,695) | (2,212) | (8,222) |
|
|
|
|
|
14. Related party transactions
Related party transactions for 2021 are disclosed in note 27 of the 2021 Annual Report. The directors are satisfied that, other than the changes in the Retirement Benefit Obligations disclosed in note 12 above, there have been no changes which could have a material effect on the financial position of the Group in the first six months of the financial year.
Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed.
Details of individual and collective remuneration of the Company's Directors and dividends received by the Directors for calendar year 2022 will be disclosed in the Group's 2022 Annual Report. Peter Atkinson and Ivor Gray hold option awards over 1,055,972 and 463,112 ordinary shares respectively under the Macfarlane Group PLC Long Term Incentive Plan awarded in 2020, 2021 and 2022. Peter Atkinson and Ivor Gray hold 180,875 and 30,770 ordinary shares respectively after exercising option awards on 17 May 2022 under the Macfarlane Group PLC Long Term Incentive Plan awarded in 2019.
There are no other related party transactions during the six-month period which require disclosure.
MACFARLANE GROUP PLC
SIX MONTHS ENDED 30 JUNE 2022
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
15. Post balance sheet events
There are no post balance sheet events requiring disclosure.
16. Interim Report
The interim report will be posted to shareholders on 12 September 2022. Copies will be available from the registered office, 3 Park Gardens, Glasgow G3 7YE and available on the Company's website, www.macfarlanegroup.com, from that date.
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