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Mpac Group PLC Half year results

03/09/2020 7:00am

UK Regulatory (RNS & others)


Mpac (LSE:MPAC)
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From Aug 2020 to Oct 2020

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TIDMMPAC

RNS Number : 8790X

Mpac Group PLC

03 September 2020

3 September 2020

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 unaudited results for the six months to 30 June 2020

Resilient performance with strong cash generation in headwind of the COVID-19 pandemic

Financial Highlights

 
            --              Order book at 30 June 2020 up 14% compared to June 2019 to 
                             GBP45.4m (2019: GBP39.9m) 
            --              H1 2020 order intake only 6% below comparable period despite 
                             several projects deferred due to COVID-19 pandemic 
            --              Group revenue of GBP36.8m (2019: GBP45.8m), with a 29% decline 
                             in Original Equipment revenues partially offset by a 28% growth 
                             in Service revenues 
            --              Underlying profit before tax of GBP2.5m (2019: GBP4.5m) 
            --              Underlying earnings per share of 11.0p (2019: 21.3p) 
            --              Statutory profit before tax of GBP1.4m (2019 GBP2.9m) 
            --              Basic earnings per share of 6.0p (2019: 12.7p) 
            --              Focused working capital management leading to an increase in 
                             net cash to GBP22.5m (30 June 2019: GBP9.6m; 31 December 2019: 
                             GBP18.0m) 
 

Operational and Strategic Highlights

 
            --              Agility and ingenuity demonstrated by the global leadership 
                             to provide essential service support 
            --              Increased use of technology to deploy digital service solutions, 
                             enable digital marketing and to develop the innovation roadmap 
            --              Prior establishment of 'Make Service a Business' has benefited 
                             the Group with good progress made in growing Service business, 
                             despite travel restrictions. Remote Factory Acceptance Tests, 
                             prior to shipment, are now the norm 
            --              Benefits accrued from the Group's focus to operate as a single 
                             entity under the 'One Mpac' business model with the implementation 
                             of common business processes and systems enabling the Group 
                             to effectively operate despite travel restrictions 
 

Tony Steels, Chief Executive, commented:

" I am really pleased with the way in which the business responded to the COVID-19 pandemic, demonstrating agility, ingenuity and resilience which contributed to positive financial results and excellent cash generation in the first half of 2020. It further demonstrates the good progress and, in some cases, accelerated the positive impact and value of the strategic objectives we have been working on. During the pandemic we have taken steps to preserve cash, to reduce discretionary spend and focus on our digital marketing presence and on new product development. These measures will place the Group in a strong position going into the second half of the year to leverage the essential and COVID-19 resilient Healthcare and Food and Beverage growth markets which we supply. We are well placed, serving markets with good underlying demand and therefore the Board believes that the Group's long-term prospects remain positive".

For further information, please contact:

 
 Mpac Group plc                                Tel: +44 (0) 24 7642 
  Tony Steels, Chief Executive                  1100 
  Will Wilkins, Group Finance Director 
 
  Shore Capital (Nominated Adviser & Broker) 
  Patrick Castle                                Tel: +44 (0) 20 7468 
  Edward Mansfield                              7923 
  Sarah Mather 
 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, manufacture and support high speed automation and packaging solutions, with embedded process monitoring systems. In 2019 we acquired Lambert Automation (Lambert) to further strengthen our position in the market to deliver complete turnkey solutions including the design and integration of packaging systems and lifetime service of our machinery for factory automation and process innovation. Lambert, which has been rebranded Mpac Lambert, is now fully integrated into the Group.

The Group's packaging machinery and automation business is focused on the high growth Healthcare, Pharmaceutical and Food and Beverage markets, which we expect to enjoy long term growth rates of between 4% and 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, extensive high-speed packaging machinery and automation solutions

-- Global reach with embedded local presence providing exceptional service to our customers

   --              A talented and engaged workforce 

We started 2020 with a healthy and diverse order book. Whilst the pace of execution of these orders was impacted by the need to make our facilities COVID-19 secure, the build progress of the opening order book alongside new orders secured were key drivers behind the positive results for the first half of 2020.

COVID-19

Throughout the pandemic, the health and wellbeing of our employees and their families has remained the Board's primary concern. Implementing appropriate social distancing practices alongside increased emphasis on hygiene and the widespread use of PPE has ensured our facilities were made safe for use and COVID-19 secure early in the pandemic. These measures enabled Mpac to continue to provide essential support for our customers in critical Healthcare, Pharmaceutical and Food and Beverage sectors. Throughout, all sites have continued to operate, albeit at reduced operational levels. By the end of June 2020, almost all direct employees had returned to work and project execution and parts fulfilment activity had returned to pre-COVID-19 levels.

Travel and social distancing restrictions since March have limited the opportunity to complete on-site service work and install and commission equipment. Mpac has utilised digital solutions to provide services remotely to ensure high customer service levels are maintained. We anticipate that travel restrictions will remain a headwind to financial performance for the foreseeable future.

Whilst it remains difficult to predict the length and depth of the impact of the pandemic, measures have been put in place to ensure that Mpac is positioned to take advantage when the market establishes a new norm. Mpac is well positioned to service the essential Healthcare, Pharmaceutical and Food and Beverage sectors that we expect to remain relatively resilient in circumstances where consumers have less disposable income. Proactive measures include the launch of a new website, a virtual exhibition to demonstrate the range of newly developed products and offering customers creative and flexible digital solutions for remote machine acceptance and servicing.

Strategic Progress

We have made further progress in delivering upon our strategic plans, accelerating the use of digital technology, however, short term growth rates have been impacted by the pandemic and several significant prospects were deferred by customers until they have greater visibility on the overall impact. The value of prospects in our pipeline has continued to grow during the pandemic and the market fundamentals remain positive. We have focused our investment during the pandemic in digital marketing, innovative ways to service our customers and in our innovation roadmap.

Our Service business faced specific challenges related to travel and social distancing restrictions, however, there has been a notable increase in the level of spare parts order intake and revenue generation in the first half of the year as customers seek to protect their output. This has offset the reduction in on-site service and installation and commissioning revenue. The work done prior to the pandemic to establish 'Make Service a Business' has helped to ensure that we had the dedicated resource in place to fulfil our customers' requirements with innovative solutions in the period where it has not been possible to provide 'in person' support. Remote Factory Acceptance Tests, prior to shipment, are now the norm.

Our aim to operate as a single entity business model, 'One Mpac', continues to be underpinned by the implementation of common business processes and systems. We will complete the installation of the global ERP system at our first site in 2020 and at the same time Mpac Lambert will have completed the migration to common Mpac Project and Engineering systems.

Financial results

The Group entered the year with a strong order book and no orders have been cancelled in 2020 due to the pandemic. To protect the wellbeing of our employees and to ensure that our facilities were COVID-19 secure alongside appropriate social distancing measures, we were operating at reduced capacity levels. Further, the prior year included strong operational trading with several repeat build projects running in parallel. Consequently, revenue in the six months to 30 June 2020 was GBP36.8m (2019: GBP45.8m), a 20% reduction on the same period in the prior year. Order intake in the first half of 2020 was 6% below the same period in 2019 as certain customers are delaying committing to investment in projects until there is greater visibility on the wider economic impact of the crisis. The closing order book for June 2020 remains robust and is up 14% compared to the prior year.

Underlying profit before tax was GBP2.5m (2019: GBP4.5m), reflecting the factors which restricted revenue growth in the period. After a net tax charge of GBP0.3m (2019: GBP0.3m) underlying profit after tax for the period was GBP2.2m (2019: GBP4.2m). Underlying earnings per share was 11.0p (2019: 21.3p).

The underlying results are stated before pension related charges of GBP0.3m (2019: GBP0.2m), comprising charges in respect of administering the Group's defined benefit pension schemes of GBP0.5m (2019: GBP0.4m) and finance income on pension scheme balances of GBP0.2m (2019: GBP0.2m) and amortisation of acquired intangible assets of GBP0.8m.

On a statutory basis, the profit after tax for the period was GBP1.2m (2019: GBP2.6m). The basic earnings per share amounted to 6.0p (2019: 12.7p).

Finances

Net cash on 30 June 2020 was GBP22.5m (30 June 2019: GBP9.6m; 31 December 2019: GBP18.0m). Net cash inflow from operating activities in the first half of the year was GBP5.6m, after a decrease in working capital levels of GBP3.5m due to the timing of the Group's order book and after deficit recovery payments to the Group's defined benefit pension schemes of GBP1.1m. Tax paid in the period was GBP0.2m. Capital and product development expenditure was a net GBP0.8m.

The Group maintains bank facilities appropriate to its expected needs including currently undrawn committed borrowing facilities with HSBC UK Bank Plc of GBP10.0m. 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 Policy

Having considered the trading results to 30 June 2020 and the lack of certainty on the short-term outlook in the light of the COVID-19 pandemic, the Board has decided not to pay an interim dividend. No dividends were paid in 2019. Future dividend payments will be considered by the Board in the context of trading performance and as and when the Board believes it is prudent to do so.

Management changes

Marc Booth joined the Group as the Managing Director of Mpac Lambert ensuring a smooth transition of leadership with Warren Limbert, the former Managing Director and co-owner, scheduled to leave the Group at the end of the year. The board wishes to express their appreciation for Warren's support during the integration of Lambert into the Mpac Group.

Operating performance

The Group manages the business in two parts, Original Equipment (OE) and Service, and across three regions (Americas, EMEA and Asia Pacific). Individual contracts received by the OE business can be sizeable. Accordingly, one significant order can have a disproportionate impact on the growth rates seen in individual markets year on year.

Original Equipment

Progress made in in delivering revenue growth in the period differed by region.

OE revenue in EMEA grew by 52% to GBP12.0m (2019: GBP7.9m) while in the Americas OE revenue declined by 53% to GBP12.8m (2019: GBP27.2m). Growth in EMEA is primarily due to the full 6 months trading of Lambert included within this half year compared to two months in the prior half year. In 2019, revenue growth in the Americas was driven by the timing of a significant value repeat line order received in late 2018 for execution mainly in the first half of 2019. Revenue development in EMEA and the Americas is heavily dependent upon the timing of individual large value order intake and customers' investment cycles. Sales in Asia Pacific, the first area to be affected by COVID-19, declined to GBP2.3m (2019: GBP3.1m).

Sales to the Food and Beverage sector increased by 17%, with several significant contracts secured in late 2019 and early 2020. Pharmaceutical and Healthcare sector revenue declined due to the timing of orders and the strong comparatives from 2019 in the Americas.

OE gross margin in the period was 25.8% (GBP7.0m) (2019: 27.2% (GBP10.4m)) with the decrease in profitability due to the process of making all sites COVID-19 secure and the reduction in capacity following the implementation of social distancing practices.

Service

Service order intake in the period was broadly unchanged compared to 2019, with strong growth in the early months of 2020 slowing thereafter as restrictions upon customer interaction and site-based work reduced our ability to deliver key parts of the service offering. As the restrictions ease in our key markets, we expect service order intake growth to return.

Service revenue, despite the challenges of the COVID-19 disruption, continued to show strong growth over 2019 of 28% to GBP9.7m, demonstrating the success of the 'Make Service a Business' strategy and the improved offering in conjunction with new machine sales. Growth was strong across each of the regions, with each region growing by at least 10% over 2019.

The increased revenue from Service generated a gross margin in the period of GBP4.3m (2019: GBP2.7m). Improved operational and supply chain efficiency led to an increase in service margin in the period to 44% (2019: 36%).

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 2020 shows a surplus of GBP25.7m (GBP16.9m net of deferred tax), compared with a surplus of GBP20.4m (GBP13.2m net of deferred tax) at 31 December 2019. The main drivers of the increase in the surplus was the effectiveness of the liability matching programme and strong growth in asset performance which was partially offset by a decrease in the discount rate.

The net valuation of the USA pension schemes at 30 June 2020, with total assets of GBP10.5m, showed a deficit of GBP4.9m, an increase of GBP1.8m from 31 December 2019.

The aggregate expense of administering the pension schemes was GBP0.5m (2019: GBP0.4m). The net financing income on pension scheme balances was GBP0.2m (2019: GBP0.2m). Administration of the UK scheme has been successfully outsourced which will enable consideration of targeted member options exercises.

Acquisition strategy

The Board continues to evaluate potential acquisition opportunities that strategically fit and which will enhance our global presence in packaging solutions serving the Healthcare, Pharmaceutical and Food and Beverage markets. An active pipeline of opportunities continues to be progressed.

Outlook

Mpac has demonstrated resilience, agility and ingenuity to navigate the impact of the pandemic, making significant progress with our digital and innovative marketing presence and progressing our new product development roadmap. Key development projects successfully completed include an updated standard module platform technology project and an advanced HMI (Human Machine Interface) to support customer efficiency. A new side load case packer, 'Alisio', was launched to the market along with a suite of Industry 4.0 products to augment our customers' productivity. A virtual trade show was held for customers from all regions. These initiatives have all contributed to both a strong start to the second half of 2020 and to a robust commercial prospect pipeline which we expect to generate further good quality OE project orders.

All facilities have remained open during the pandemic and no orders have been cancelled. Some prospective projects in our sales pipeline, which were expected to be secured in the first half of 2020, have been delayed due to the pandemic. However, as the essential Healthcare, Pharmaceutical and Food and Beverage sectors are expected to be broadly shielded from the impact of the economic crisis, we believe that we are well positioned to continue to meet our longer-term strategic growth objectives. A review of our current prospects indicates that approximately 75% are associated with essential consumer products.

The financial performance in the first half of the year was sound, positive cash was generated and we enter the second half of the year with a good quality and robust order book, underpinned by long-term growth factors in our target markets.

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.

We anticipate that current general market uncertainty will remain for the foreseeable future and whilst the current order book and prospect pipeline provide assurance for trading in the short term, the longer-term outlook remains difficult to predict. We are, however, well placed, serving markets with good underlying demand and therefore the Board believes that the Group's long-term prospects remain positive.

Tony Steels

Chief Executive

3 September 2020

CONDENSED CONSOLIDATED INCOME STATEMENT

 
                                               6 months to 30 June 2020                         6 months to 30 June 2019 
                                                      (unaudited)                                      (unaudited) 
                                   ------------------------------------------------      -------------------------------------- 
 
                                                           Non-underlying                              Non-underlying 
                                                                    (note                                       (note 
                                              Underlying               5)     Total       Underlying               5)     Total 
                            Notes                   GBPm             GBPm      GBPm             GBPm             GBPm      GBPm 
 
 
 Revenue                        4                   36.8                -      36.8             45.8                -      45.8 
  Cost of sales                                   (25.5)                     (25.5)           (32.7)                -    (32.7) 
                                   ---------------------  ---------------  --------      -----------  ---------------  -------- 
Gross profit                                        11.3                -      11.3             13.1                -      13.1 
 
 
 Distribution expenses                             (3.3)                -     (3.3)            (3.1)                -     (3.1) 
 Administrative expenses                           (4.9)            (1.3)     (6.2)            (5.0)            (1.8)     (6.8) 
 Other operating 
  expenses                                         (0.5)                -     (0.5)            (0.4)                -     (0.4) 
                                   ---------------------  ---------------  --------      -----------  ---------------  -------- 
 
                               4, 
  Operating profit              5                    2.6            (1.3)       1.3              4.6            (1.8)       2.8 
Financial income                6                      -              0.2       0.2                -              0.2       0.2 
 Financial expenses             6                  (0.1)                -     (0.1)            (0.1)                -     (0.1) 
                                   ---------------------  ---------------  --------      -----------  ---------------  -------- 
                               4, 
Net financing income            6                  (0.1)              0.2       0.1            (0.1)              0.2       0.1 
                                   ---------------------  ---------------  --------      -----------  ---------------  -------- 
Profit before tax               4                    2.5            (1.1)       1.4              4.5            (1.6)       2.9 
 
 Taxation                       8                  (0.3)              0.1     (0.2)            (0.3)                -     (0.3) 
                                   ---------------------  ---------------  --------      -----------  ---------------  -------- 
Profit for the period                                2.2            (1.0)       1.2              4.2            (1.6)       2.6 
                                   =====================  ===============  ========      ===========  ===============  ======== 
 
Earnings per ordinary share 
Basic                           9                                              6.0p                                       12.7p 
 
 Diluted                        9                                              6.0p                                       12.6p 
-------------------------  ------  ---------------------  ---------------  --------      -----------  ---------------  -------- 
 

CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)

 
                                                   12 months to 31 December 2019 
                                                              (audited) 
                                            ------------------------------------------- 
 
                                                              Non-underlying 
                                                                    (note 5) 
                                               Underlying               GBPm      Total 
                                Notes                GBPm                          GBPm 
 
  Revenue 
   Cost of sales                    4                88.8                  -       88.8 
                                                   (62.8)                  -     (62.8) 
                                            -------------  -----------------  --------- 
 Gross profit                                        26.0                  -       26.0 
 
 
  Distribution expenses                             (7.2)                  -      (7.2) 
  Administrative expenses                          (10.3)              (2.4)     (12.7) 
  Other operating expenses                          (0.8)                  -      (0.8) 
                                            -------------  -----------------  --------- 
 
                                   4, 
   Operating profit                 5                 7.7              (2.4)        5.3 
 Financial income                   6                   -                0.4        0.4 
  Financial expenses                6               (0.2)              (0.1)      (0.3) 
                                            -------------  -----------------  --------- 
                                   4, 
 Net financing income               6               (0.2)                0.3        0.1 
                                            -------------  -----------------  --------- 
 Profit before tax                  4                 7.5              (2.1)        5.4 
 
  Taxation                          8                 0.3                0.2        0.5 
                                            -------------  -----------------  --------- 
 Profit for the period                                7.8              (1.9)        5.9 
                                            =============  =================  ========= 
 
 Earnings per ordinary share 
 Basic                              9                                             29.7p 
 
  Diluted                           9                                             29.4p 
---------------------------  --------  ---  -------------  -----------------  --------- 
 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
 
                                                           6 months             6 months               12 months 
                                                         to 30 June           to 30 June               to 31 Dec 
                                                               2020                 2019          2019 (audited) 
                                                        (unaudited)          (unaudited)                    GBPm 
                                                               GBPm                 GBPm 
 
   Profit for the period                                        1.2                  2.6                     5.9 
                                                     --------------       --------------       ----------------- 
 
   Other comprehensive income/(expense) 
 Items that will not be reclassified 
  to profit or loss                                             3.0                  7.9                   (0.3) 
  Actuarial gains 
                                                              (1.5)                (2.7)                     0.1 
  Tax on items that will not be reclassified 
  to profit or loss 
                                                     --------------       --------------       ----------------- 
                                                                1.5                  5.2                   (0.2) 
                                                     --------------       --------------       ----------------- 
 Items that may be reclassified subsequently 
  to profit or loss 
  Currency translation movements arising                        0.1                  0.4                   (0.1) 
  on foreign currency net investments 
 
 
                                                              (0.3)                  0.6                     1.1 
  Effective portion of changes in fair 
  value of cash flow hedges 
                                                     --------------       --------------       ----------------- 
                                                              (0.2)                  1.0                     1.0 
                                                     --------------       --------------       ----------------- 
 Other comprehensive income for the period                      1.3                  6.2                     0.8 
                                                     --------------       --------------       ----------------- 
 Total comprehensive income for the period                      2.5                  8.8                     6.7 
                                                     ==============       ==============       ================= 
 

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 
  2020 
  Balance at 1 January 
  2020                               5.0        26.0             1.0           3.9         0.3         11.3       47.5 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 
   Profit for the period 
   Other comprehensive                 -           -               -             -           -          1.2        1.2 
   income/(expense) for 
   the period                          -           -             0.1             -       (0.3)          1.5        1.3 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Total comprehensive 
  income/(expense) 
  for the period                       -           -             0.1             -       (0.3)          2.7        2.5 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Equity settled share 
  based transactions, 
  being total transactions 
  with owners, recorded 
  directly in equity                   -           -               -             -           -          0.2        0.2 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Balance at 30 June 
  2020                               5.0        26.0             1.1           3.9           -         14.2       50.2 
                              ==========  ==========  ==============  ============  ==========  ===========  ========= 
 
   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 
                              ==========  ==========  ==============  ============  ==========  ===========  ========= 
 
   12 months to 31 December 
   2019 
   Balance at 1 January 
   2019                              5.0        26.0             1.1           3.9       (0.8)          5.4       40.6 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 
   Profit for the period 
                                       -           -               -             -           -          5.9        5.9 
   Other comprehensive 
   income/(expense) for 
   the period                          -           -           (0.1)             -         1.1        (0.2)        0.8 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Total comprehensive 
  (expense)/income for 
  the period                           -           -           (0.1)             -         1.1          5.7        6.7 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Equity-settled share-based 
  transactions                         -           -               -             -           -          0.3        0.3 
 Purchase of own shares                -           -               -             -           -        (0.1)      (0.1) 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Total transactions 
  with owners, recorded 
  directly in equity                   -           -               -             -           -          0.2        0.2 
                              ----------  ----------  --------------  ------------  ----------  -----------  --------- 
 Balance at 31 December 
  2019                               5.0        26.0             1.0           3.9         0.3         11.3       47.5 
                              ==========  ==========  ==============  ============  ==========  ===========  ========= 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
 
 
 
                                                           30 June              30 June             31 Dec 
                                                              2020                 2019               2019 
                                                       (unaudited)          (unaudited)          (audited) 
                                             Notes            GBPm                 GBPm               GBPm 
 Non-current assets 
  Intangible assets                                           17.1                 17.1               16.9 
  Property, plant and equipment                                5.3                  6.2                5.6 
  Investment property                                          0.8                  0.8                0.8 
  Leased assets                                                4.5                  5.1                4.7 
  Other receivables                                              -                  0.1                  - 
  Employee benefits                              7            25.7                 29.3               20.4 
  Deferred tax assets                                          1.8                  1.7                1.7 
                                                    --------------       --------------       ------------ 
                                                              55.2                 60.3               50.1 
                                                    --------------       --------------       ------------ 
 Current assets 
  Inventories                                                  6.7                  7.3                7.1 
  Trade and other receivables                                 11.8                 23.5               17.2 
  Contract assets                                             10.4                  9.7                4.7 
  Current tax assets                                           0.1                  0.8                0.4 
  Cash and cash equivalents                                   23.4                 10.5               18.9 
                                                    --------------       --------------       ------------ 
                                                              52.4                 51.8               48.3 
                                                    --------------       --------------       ------------ 
 
  Current liabilities 
   Trade and other payables                                 (21.3)               (27.2)             (22.9) 
   Contract liabilities                                     (10.9)                (7.1)              (5.8) 
   Current tax liabilities                                   (0.6)                (0.4)              (0.7) 
   Provisions                                                (1.2)                (1.2)              (1.3) 
   Lease liabilities                                         (0.8)                (0.9)              (0.9) 
                                                    --------------       --------------       ------------ 
                                                            (34.8)               (36.8)             (31.6) 
                                                    --------------       --------------       ------------ 
 Net current assets                                           17.6                 15.0               16.7 
                                                    --------------       --------------       ------------ 
 Total assets less current liabilities                        72.8                 75.3               66.8 
                                                    --------------       --------------       ------------ 
 
  Non-current liabilities 
   Interest-bearing loans and borrowings                     (0.9)                (0.9)              (0.9) 
   Lease liabilities                                         (3.8)                (4.2)              (3.9) 
   Employee benefits                             7           (4.9)                (6.2)              (3.1) 
   Deferred tax liabilities                                 (10.3)               (11.9)              (8.8) 
   Deferred acquisition consideration                        (2.7)                (2.6)              (2.6) 
                                                    --------------       --------------       ------------ 
                                                            (22.6)               (25.8)             (19.3) 
                                                    --------------       --------------       ------------ 
 Net assets                                      4            50.2                 49.5               47.5 
                                                    ==============       ==============       ============ 
 
  Equity 
   Issued capital                                              5.0                  5.0                5.0 
   Share premium                                              26.0                 26.0               26.0 
   Reserves                                                    5.0                  5.3                5.2 
   Retained earnings                                          14.2                 13.2               11.3 
                                                    --------------       --------------       ------------ 
 Total equity                                                 50.2                 49.5               47.5 
                                                    ==============       ==============       ============ 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 
 
                                                                      6 months             6 months          12 months 
                                                                    to 30 June           to 30 June          to 31 Dec 
                                                                          2020                 2019               2019 
                                                                   (unaudited)          (unaudited)          (audited) 
                                                         Notes            GBPm                 GBPm               GBPm 
  Operating activities Operating profit 
  Non-underlying items included in operating 
  profit                                                                   1.3                  2.8                5.3 
  Amortisation Depreciation Other non-cash                                 1.3                  1.8                2.4 
  items Pension payments Working capital                                   0.1                  0.1                0.2 
  movements: - decrease/(increase) in                                      0.6                  0.7                1.9 
  inventories - decrease/(increase)                                        0.2                (0.2)                0.3 
  in trade and other receivables -                                       (1.1)                (1.3)              (2.9) 
  (decrease)/increase 
  in contract assets - (decrease)/increase                                 0.7                (3.2)              (3.2) 
  in trade and other payables - increase/(decrease)                        5.3                (1.3)                1.8 
  in contract liabilities - (decrease)/increase                          (5.4)                (3.2)                5.2 
  in provisions                                                          (1.9)                  8.0                4.7 
                                                                           4.9                (9.6)             (11.0) 
                                                                         (0.1)                  0.3                0.4 
                                                                --------------       --------------       ------------ 
 Cash flows from continuing operations                                     5.9                (5.1)                5.1 
  before reorganisation Acquisition 
  and reorganisation costs paid                                          (0.1)                (0.3)              (1.0) 
                                                                --------------       --------------       ------------ 
 Cash flows from operations Taxation                                       5.8                (5.4)                4.1 
  paid 
                                                                         (0.2)                (0.3)                1.0 
                                                                --------------       --------------       ------------ 
 Cash flows from/ (used in) operating 
  activities                                                               5.6                (5.7)                5.1 
                                                                --------------       --------------       ------------ 
 Investing activities Proceeds from 
  sale of property, plant and equipment 
  Acquisition of property, plant and 
  equipment Capitalised development 
  expenditure Net cash flow on acquisition 
  Acquisition of assets under construction 
                                                                           0.1                    -                0.2 
                                                                         (0.5)                (1.1)              (1.4) 
                                                                         (0.1)                (0.1)              (0.3) 
                                                                             -               (10.6)             (10.6) 
                                                                         (0.3)                    -              (0.6) 
                                                                --------------       --------------       ------------ 
 Cash flows from investing activities                                    (0.8)               (11.8)             (12.7) 
                                                                --------------       --------------       ------------ 
 Financing activities Interest paid 
  Purchase of own shares                                                 (0.1)                (0.1)              (0.1) 
  Principal elements of lease payments                                       -                    -              (0.1) 
                                                                         (0.4)                    -              (1.0) 
                                                                --------------       --------------       ------------ 
 Cash flows from financing activities                                    (0.5)                (0.1)              (1.2) 
                                                                --------------       --------------       ------------ 
 
 
  Net decrease in cash and cash equivalents                 11             4.3               (17.6)              (8.8) 
   Cash and cash equivalents at 1 January                                 18.9                 27.9               27.9 
   Effect of exchange rate fluctuations                                    0.2                  0.2              (0.2) 
    on cash held 
                                                                --------------       --------------       ------------ 
 Cash and cash equivalents at period 
  end                                                                     23.4                 10.5               18.9 
                                                                ==============       ==============       ============ 
 

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 UK LLP, and their report is set out after the notes. The comparative information for the year ended 31 December 2019 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 2019 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 appropriate enquiries the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed set of financial statements.

The condensed set of financial statements was approved by the Board of directors on 1 September 2020.

2. Basis of preparation

(a) Statement of compliance

The condensed set of financial statements for the 6 months ended 30 June 2020 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 2019.

(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 2019.

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 18 to 20 of the Group's 2019 Annual Report and Accounts and have subsequently been updated to further address the emergent COVID-19 impact.

3. Significant accounting policies

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. No new accounting standards have been applied for the first time in these condensed financial statements.

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 2020                         Jun 2019                         Dec 2019 
                             OE     Service    Total          OE     Service    Total          OE     Service    Total 
                            GBPm      GBPm      GBPm         GBPm      GBPm      GBPm         GBPm      GBPm      GBPm 
                          -------  --------  -------       -------  --------  -------       -------  --------  ------- 
 
  Revenue 
   Americas                  12.8       5.4     18.2          27.2       3.9     31.1          45.8      11.0     56.8 
   EMEA                      12.0       3.4     15.4           7.9       3.1     11.0          17.6       7.2     24.8 
   Asia Pacific               2.3       0.9      3.2           3.1       0.6      3.7           6.0       1.2      7.2 
                          -------  --------  -------       -------  --------  -------       -------  --------  ------- 
 
   Total                     27.1       9.7     36.8          38.2       7.6     45.8          69.4      19.4     88.8 
                          =======  ========  =======       =======  ========  =======       =======  ========  ======= 
 
   Gross profit               7.0       4.3     11.3          10.4       2.7     13.1          18.2       7.8     26.0 
 Selling, distribution 
  & administration                             (8.7)                            (8.5)                           (18.3) 
                                             -------                          -------                          ------- 
 Underlying operating                            2.6                              4.6                              7.7 
 profit 
 
 Unallocated                                   (1.3)                            (1.8)                            (2.4) 
 non-underlying 
 items included 
 in operating 
 profit 
                                             -------                          -------                          ------- 
 Operating profit                                1.3                              2.8                              5.3 
 
  Net financing                                  0.1                              0.1                              0.1 
  income 
                                             -------                          -------                          ------- 
 Profit before 
  tax                                            1.4                              2.9                              5.4 
                                             =======                          =======                          ======= 
 
 
                                        30 June        30 June        31 Dec 
                                           2020           2019          2019 
   Disaggregation of revenue - Sales       GBPm           GBPm          GBPm 
   by Market sector 
 
  Pharmaceutical                            1.2            2.0           2.9 
   Healthcare                              17.2           25.3          62.5 
   Food and Beverage                       16.6           14.2          19.8 
   Other                                    1.8            4.3           3.6 
                                       --------       --------       ------- 
 Total                                     36.8           45.8          88.8 
                                       ========       ========       ======= 
 
 

Net financing expense includes dividends paid on preference shares and the net interest receivable in respect of the defined benefit pension schemes. 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 2019.

 
                              30 June        30 June         31 Dec 
                                 2020           2019           2019 
                                 GBPm           GBPm           GBPm 
 Segment assets 
  Americas                       13.7           26.2           16.4 
  EMEA                           27.2           26.6           25.6 
  Asia Pacific                    1.1            0.6            0.5 
                             --------       --------       -------- 
 Total segment assets            42.0           53.4           42.5 
 
  Segment liabilities 
  Americas                     (14.0)         (19.3)         (12.4) 
  EMEA                         (25.2)         (20.3)         (23.0) 
  Asia Pacific                  (0.4)          (0.2)          (0.2) 
 Total segment liabilities     (39.6)         (39.8)         (35.6) 
 Segment net assets               2.4           13.6            6.9 
 Unallocated net assets          47.8           35.9           40.6 
                             --------       --------       -------- 
 Total net assets                50.2           49.5           47.5 
                             ========       ========       ======== 
 

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 
                                                              2020                   2019                         2019 
                                                              GBPm                   GBPm                         GBPm 
 
    Defined benefit pension scheme administration            (0.5)                  (0.4)                        (1.2) 
     costs (note 7) 
     Reorganisation costs                                        -                  (0.1)                        (0.3) 
     Amortisation of intangibles from business               (0.8)                  (0.2)                        (0.9) 
      combinations 
     Acquisition costs                                           -                  (0.8)                        (0.9) 
     Provision in respect of discontinued                        -                  (0.3)                        (0.2) 
      operations 
     US defined benefit pension scheme -                         -                      -                          1.1 
      Past service gain 
     Total non-underlying operating expenditure 
     Interest on deferred and contingent                     (1.3)                  (1.8)                        (2.4) 
      acquisition consideration 
     Net financing income on pension scheme                      -                      -                        (0.1) 
      balances 
                                                               0.2                    0.2                          0.4 
                                                    --------------         --------------                ------------- 
   Total non-underlying expense before 
    tax                                                      (1.1)                  (1.6)                        (2.1) 
                                                    ==============         ==============                ============= 
 

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 income

 
                                                    6 months         6 months       12 months 
                                                  to 30 June       to 30 June       to 31 Dec 
                                                        2020             2019            2019 
                                                        GBPm             GBPm            GBPm 
Financial income 
 Net interest received on pension scheme 
 balances                                                0.2              0.2             0.4 
                                                 -----------      -----------      ---------- 
                                                         0.2              0.2             0.4 
                                                 -----------      -----------      ---------- 
Financial expenses 
 Preference dividends and interest paid                    -            (0.1)           (0.1) 
 Interest on deferred contingent consideration             -                -           (0.1) 
 Lease interest (IFRS 16)                              (0.1)                -           (0.1) 
                                                 -----------      -----------      ---------- 
                                                       (0.1)            (0.1)           (0.3) 
                                                 -----------      -----------      ---------- 
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 2019 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 GBP0.5m (2019: GBP0.4m) and a net financing income on pension scheme balances of GBP0.2m (2019: GBP0.2m). Payments to the Group's UK defined benefit pension scheme in the period included GBP1.0m (2019: GBP0.9m) in respect of the agreed deficit recovery plan. Payments to the US defined benefit pension plan were GBP0.1m (2019: GBP0.1m).

Employee benefits include the net pension asset of the UK defined benefit pension scheme of GBP25.7m (2019: GBP29.3m) and the net pension liability of the USA defined benefit pension schemes of GBP4.9m (2019: GBP6.2m), all figures before tax.

Employee benefits as shown in the condensed consolidated statement of financial position were:

 
                                                  30 June        30 June         31 Dec 
                                                     2020           2019           2019 
                                                     GBPm           GBPm           GBPm 
UK scheme 
 Fair value of assets                               441.0          427.4          423.6 
 Present value of defined benefit obligations     (415.3)        (398.1)        (403.2) 
                                                ---------      ---------      --------- 
Defined benefit asset                                25.7           29.3           20.4 
                                                ---------      ---------      --------- 
USA schemes 
 Fair value of assets                                10.5           17.6           10.4 
 Present value of defined benefit obligations      (15.4)         (23.8)         (13.5) 
                                                ---------      ---------      --------- 
Defined benefit liability                           (4.9)          (6.2)          (3.1) 
                                                ---------      ---------      --------- 
Total net defined benefit asset                      20.8           23.1           17.3 
                                                =========      =========      ========= 
 

8. Taxation

The tax charge for the 6 months to 30 June 2020 amounted to GBP0.2m (6 months to 30 June 2019: GBP0.3m; 12 months to 31 December 2019: GBP0.5m credit) and is calculated as follows:

 
                               6 months         6 months      12 months 
                             to 30 June       to 30 June          to 31 
                                   2020             2019            Dec 
                                   GBPm             GBPm           2019 
                                                                   GBPm 
Current tax                         0.3              0.3          (0.3) 
 Deferred tax                     (0.1)                -          (0.2) 
                            -----------      -----------      --------- 
Total tax charge/(credit)           0.2              0.3          (0.5) 
                            ===========      ===========      ========= 
 

The main rate of UK corporation tax is 19% and is now expected to remain at that level for the foreseeable future. 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 
                                                       2020             2019            2019 
Basic - weighted average number of ordinary 
 shares                                          19,971,967       19,963,922      19,968,000 
 Diluting effect of shares held by the 
  employee trust                                    217,944           92,857         178,256 
                                                -----------      -----------      ---------- 
Diluted - weighted average number of ordinary 
 shares                                          20,189,911       20,056,779      20,146,256 
                                                ===========      ===========      ========== 
 

Underlying earnings per share, which is calculated on the earnings before non-underlying items, for the 6 months to 30 June 2020 amounted to 11.0p (6 months to 30 June 2019: 21.3p; 12 months to 31 December 2019: 39.5p).

In the 6 months to 30 June 2020 the effect of dilution was nil pence per share.

10. Dividends

Having considered the trading results to 30 June 2020, 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 2019. Future dividend payments and the development of a new dividend policy will be considered by the Board in the context of 2020 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 
                                                    2020             2019            2019 
                                                    GBPm             GBPm            GBPm 
Net increase/(decrease) in cash and cash 
 equivalents                                         4.3           (17.6)           (8.8) 
 Funds flow from movement in leases                  0.2                -               - 
                                             -----------      -----------      ---------- 
Change in net funds resulting from cash 
 flows                                               4.5           (17.6)           (8.8) 
Translation movements                                0.2              0.2           (0.2) 
                                             -----------      -----------      ---------- 
Movement in net funds in the period                  4.7           (17.4)           (9.0) 
Opening net funds                                   13.2             27.0            27.0 
 
 Recognised on adoption of IFRS16                      -                -           (4.8) 
                                             -----------      -----------      ---------- 
Closing net funds                                   17.9              9.6            13.2 
                                             ===========      ===========      ========== 
 
Analysis of net funds 
Cash and cash equivalents - current assets          23.4             10.5            18.9 
Interest-bearing loans and borrowings -            (0.9)            (0.9)           (0.9) 
 non-current liabilities 
 
 Closing net cash                                   22.5              9.6            18.0 
                                             -----------      -----------      ---------- 
Lease liabilities                                  (4.6)                -           (4.8) 
Closing net funds                                   17.9              9.6            13.2 
                                             ===========      ===========      ========== 
 

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 2019.

At 1 January 2020 and 30 June 2020, 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 
                                            2020         2019        2019 
Categories of financial instruments         GBPm         GBPm        GBPm 
 
Financial assets 
 Derivative instruments in designated 
  hedge accounting relationship                -            -         0.3 
 Loans and receivables (including cash 
  and cash equivalents)                     33.5         34.0        35.3 
                                         -------      -------      ------ 
                                            33.5         34.0        35.6 
                                         =======      =======      ====== 
 
Financial liabilities 
 Derivative instruments in designated          -          0.1           - 
  hedge accounting relationship 
 Amortised cost                             20.2         27.0        18.6 
 Fair value through income statement         2.7          2.6         2.6 
                                         -------      -------      ------ 
                                            22.9         29.7        21.2 
                                         =======      =======      ====== 
 

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 32 of the 2019 Annual Report and Accounts.

14. Half-year report

A copy of this announcement will be made available to shareholders from 3 September 2020 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

There were no acquisitions in 2020. The acquisition of Lambert in 2019 included the following items:

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.

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 'Group') for the six months ended 30 June 2020 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.

The impact of macro-economic uncertainties on our review

Our review of the condensed set of financial statements in the half-yearly financial report requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of Covid-19 and Brexit. Such reviews assess and challenge the reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the company's future prospects and performance.

Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the company's future prospects and performance. However, no review of interim financial information should be expected to predict the unknowable factors or all possible future implications for a Group associated with these particular events.

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 2020 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 it 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

3 September 2020

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