Half-year Report

RNS Number : 2554X
Macfarlane Group PLC
27 August 2020
 

 

 

 

27 August 2020

 

MACFARLANE GROUP'S INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2020

Financial Highlights

2020

2019

Year on Year Change

 

 

 

 

Group turnover £000

105,572

107,542

(1.8)%

Profit before tax £000

3,622

3,832

(5.5)%

Interim dividend

0.70p

0.69p

1.4%

Basic earnings per share

1.83p

1.99p

(8.0)%

 

Stuart Paterson, Chairman of Macfarlane Group PLC ("Macfarlane Group" or "the Group"), today said: -

 

"Macfarlane Group has achieved a resilient performance in the first half of 2020 despite the challenging market conditions due to the impact of Covid-19.  The Board recognises this achievement is a testament to the exceptional contribution of our employees and wishes to take this opportunity to publicly thank the whole Macfarlane team for their hard work and commitment .  All our sites have remained open and trading throughout, albeit adjusted to service reduced demand, with social distancing and hygiene measures in place to protect the health, safety and well-being of our staff and our customers.  In addition, the majority of our office-based staff have been working successfully from home in accordance with our home working protocols.

Macfarlane Group sales decreased by 1.8% to £105.6m in the first half of 2020 (2019: £107.5m). Despite the impact of Covid-19 in the second quarter, our sales performance has been robust with the first half sales reduction versus the prior year comprising a 1.6% increase in sales in Q1 followed by a 5.2% fall in Q2. Profit before tax in the first half, at £3.6m, was 5.5% lower than in 2019 (2019: £3.8m) this excludes any benefit received from government support programmes as these have now been repaid.  Incremental costs of £0.2m were incurred in the first half of the year as a direct consequence of Covid-19.

Packaging Distribution sales decreased by 1.7% in the first half of 2020 compared with 2019.  Sales increased by 3.0% in Q1 and decreased by 6.3% in Q2 compared to the equivalent periods in 2019.  Sales revenue was impacted by weaker demand from the automotive and high street retail sectors, although this was partially offset by underlying strength in the e-commerce, household and medical sectors.  First half sales also benefited from the 2019 acquisitions   as well as the January 2020 acquisition of the packaging trade and assets of Armagrip Limited, ("Armagrip").  First half operating profit in Packaging Distribution of £4.0m was £0.4m below the equivalent period in 2019.

Sales in our Manufacturing Operations were 5.8% below 2019 , with Q1 sales decreasing by 8.7% and Q2 sales falling by 2.9% .  Strong demand from the food, medical and household essentials sectors in the Labels business, particularly in the second quarter, was more than offset by weaker demand from the aerospace and automotive sectors in the Packaging Design and Manufacture business.  First half operating profit of £0.2m in our Manufacturing Operations was £0.2m below that achieved in 2019.

Group interest costs have decreased by £0.4m due to lower levels of bank debt and finance leases and a lower pension deficit in the first half of 2020 compared to the same period in 2019.

Net bank debt at 30 June 2020 was £0.8m, £11.9m below its 31 December 2019 level of £12.7m.  The improved cash position has been achieved through active management of working capital and reductions in the cost base.  The net debt of £0.8m has benefited by £5.4m from the various government support and deferral programmes, all of which we have repaid since 30 June 2020.  The Group is operating well within its existing bank facility of £30.0m.  We expect to pay an estimated £0.8m in deferred consideration, in the second half of 2020, relating to the acquisition of Ecopac in 2019 .

The pension scheme deficit reduced to £6.0m at 30 June 2020 from £6.5m at 31 December 2019, mainly due to our continued payment of deficit reduction contributions during the six month period.  The reduction in the discount rate in the first six months was largely offset by strong investment returns, justifying the focus on liability-driven investments to match the scheme's liability profile.

There are still significant uncertainties and concerns over future economic conditions.  However, the Board is confident that, given the resilience of the business in the second quarter, the expected seasonal uplift in the final quarter and actions being taken to reduce operating costs, the Group will continue to progress in the second half of 2020.  The Board's current expectation for the full year in 2020 is largely dependent on: no further prolonged national or regional lockdowns; no abnormal bad debt exposure; and no significant reduction in consumer demand in the final quarter of the year, traditionally our busiest trading period.

As a key measure to conserve cash, the Board took the decision not to propose the 2019 final dividend of 1.76p per share, detailed in the preliminary announcement.  The Board recognises the importance of recommencing the payment of dividends to our shareholders as soon as possible.  Given the stronger than anticipated profit performance and cash position, the Board is recommending an interim dividend of 0.70p per share to be paid on 8 October 2020 to shareholders on the register as at 11 September 2020 (2019: 0.69p per share).

Despite the impact of Covid-19, our strategy remains the delivery of sustainable profit growth by focusing on added value products and services in our target market sectors, combined with the execution of value-enhancing acquisitions.  Macfarlane Group's performance in the first half of 2020 demonstrates the robust nature of our strategy and business model and we are confident that the Group is strongly positioned to effectively manage the challenges it will face in the remainder of 2020 and well placed to benefit when the UK economy begins to recover."

 

Further enquiries:

Macfarlane Group

Tel: 0141 333 9666

 

Stuart Paterson Chairman

 

 

Peter Atkinson  Chief Executive

 

 

John Love Finance Director

 

 

Spreng Thomson

 

 

Callum Spreng

Mob: 07803 970103

Legal Entity Identifier (LEI):  213800LVRYDERSJAAZ73

 

 

 

Notes to Editors:

· Macfarlane Group PLC is listed on the London Stock Exchange (LSE: MACF) in the Industrials Sector

· The company is headquartered in Glasgow, Scotland and has more than 70 years' experience in the UK packaging industry.  Macfarlane Group's businesses are:

Packaging Distribution is the leading UK distributor of a comprehensive range of protective packaging products;

Manufacturing Operations which includes Labels who design and print high quality self-adhesive and resealable labels, principally for FMCG companies, and PackagingDesign and Manufacture who design and produce protective packaging for high value, fragile products.

· Macfarlane Group employs over 900 people at 31 sites, principally in the UK, but also in Ireland and Sweden.

· The company has 15,000+ customers in the UK, Europe and the USA providing 600,000+ lines to a wide range of industry sectors including: consumer goods; food manufacturing; logistics; internet retail; mail order; electronics; defence 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.  Macfarlane operates a stock and serve supply model from 25 Regional Distribution Centres ("RDCs") and three satellite sites, supplying industrial and retail customers with a comprehensive range of protective packaging materials and services 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.  In a fragmented market, 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 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 supports 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.

 

2020

2019

 

£000

£000

Sales

91,496

93,053

Cost of sales

62,013

65,103

 

 

 

Gross margin

29,483

27,950

Overheads

25,450

23,487

 

 

 

Operating profit

4,033

4,463

 

 

 

The main features of our first half performance in 2020 were:

l Despite the challenges of Covid-19, existing business has remained resilient with weaker demand from customers in the automotive and high street retail sectors being offset by strong demand in the e-commerce and medical sectors;

l New business growth was subdued due to limited engagement with new prospects through the Covid-19 challenges, nevertheless there were some important new business wins in the period;

l Increasing numbers of customers switching to buying online either through our www.macfarlanepackaging.com shop or using our new Simplicit-e electronic trading platform;

l Positive impact from acquiring quality packaging distribution businesses in 2019 and 2020;

l An improved gross margin at 32.2% (2019: 30.0%) achieved through effective management of input price changes on paper-based products in the second half of 2019 flowing through into the first half of 2020;

l Progress in our "Follow the Customer" programme in Europe; and

l Overhead increases, primarily due to the impact of acquisitions (£1.0m), an increase in bad debt provisioning (£0.5m) and incremental Covid-19 related costs.

We expect sales to once again be weighted towards H2 reflecting the busiest trading period for internet retail customers, which will be a key contributor to our results in H2 2020.  The key areas we will focus on in the second half are:

l Prioritise engagement with potential new customers in stable and growing sectors such as e-commerce, medical and third party logistics;

l Invest in new technology to allow our sales teams to demonstrate our ability to add value for customers through ongoing implementation of our "Significant Six" sales approach to optimise their "Total Cost of Packaging" in both face-to-face and virtual environments;

l Accelerate implementation of our web-based solutions to allow customers access to our full range of products and services;

l Continue the good progress we have made in our "Follow the Customer" programme in Europe;

l Reduce operating costs through efficiency programmes in sales, logistics and administration;

l Maintain the focus on working capital management to facilitate future investment and manage effectively the bad debt risk which has increased in the current economic environment; and

l Supplement organic growth through progressing further suitable quality acquisitions.

Macfarlane's Manufacturing Operations comprises Packaging Design & Manufacture and Labels.

 

2020

2019

 

£000

£000

Sales

16,379

17,390

Cost of sales

11,043

12,099

 

 

 

Gross margin

5,336

5,291

Overheads

5,105

4,881

 

 

 

Operating profit

231

410

 

 

 

The principal activity of the Packaging Design and Manufacture business is the design, manufacture and assembly of custom-designed packaging solutions for customers requiring cost-effective methods of protecting high value products in storage and transit.  The business operates from sites in Grantham and Westbury, supplying both directly to customers and also through Packaging Distribution's RDC network.

Key market sectors are defence, aerospace, medical equipment, electronics and automotive.  The markets in which we operate 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 Macfarlane Packaging Distribution.

Packaging Design & Manufacture sales in H1 2020 decreased by 19.0% from the equivalent period in 2019 due to significantly weaker demand in the aerospace and automotive sectors.  As a result of the lower sales profit in H1 2020 is below the same period in 2019 and actions are in progress to realign the cost base.

Our Labels business designs and prints self-adhesive labels for major fast-moving consumer goods ("FMCG") customers in the UK and Europe and resealable labels for major customers in the UK, Europe and the USA.  The business operates from production sites in Kilmarnock and Wicklow and a sales and design office in Sweden, which focuses on the development and growth of our resealable labels business, Reseal-it.  The Labels business has a high level of dependence on a small number of major customers.  We have worked closely with these key customers over a long period to ensure high levels of service and to introduce product and service development initiatives to maintain competitive differentiation.

In H1 2020, sales at Macfarlane Labels were 6.7% higher than in 2019, mainly due to an increase in demand from existing customers in the food, household essentials and hygiene sectors.  Overhead costs have increased due to higher transportation costs servicing overseas customers.  Profit in H1 2020 is ahead of the same period in 2019.

The priorities for the Manufacturing Operations in the second half of 2020 are to:

l Reduce the operating costs of the Design and Manufacture business in line with lower sales;

l Focus the Design & Manufacture sales team on growth sectors like Medical and Defence;

l Prioritise new sales activity on our higher added value bespoke composite pack product range;

l Continue to strengthen the relationship between our Design & Manufacture operations and our Packaging Distribution business to create both sales and cost synergies;

l Accelerate the Reseal-it growth momentum through improved geographic penetration, extending the product range and introducing Reseal-it to new product sectors; and

l Secure efficiency benefits from the installation of additional printing capacity in our Kilmarnock site in July 2020 to improve gross margins.

 

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 a clear strategic plan, being effectively implemented, which is reflected in consistent, profit and cash generation over a sustainable 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 we have experienced significant challenges from the Covid-19 pandemic and there are still uncertainties ahead, our strategy and business model have proved resilient and robust.  We expect to deliver a solid sales and profit performance in 2020 and are well positioned to benefit as the economy recovers.

 
Risks and Uncertainties

The principal risks and uncertainties, which could impact on the performance of the Group, were outlined on pages 18 and 19 in our Annual Report and Accounts for 2019 (available on our website at www.macfarlanegroup.com) together with the mitigating actions.  These remain substantially the same for the remaining six months of the current financial year and are summarised below with the impact of the recent Covid-19 pandemic set out immediately underneath the table of risks:

l The Group's businesses are impacted by commodity-based raw material prices and manufacturer energy costs, with profitability sensitive to supplier price changes including currency fluctuations.  The Group works closely with its supplier and customer base to manage effectively the scale and timing of these price changes and any resultant impact on profit;

l Given the multi-site nature of its business the Group has an extensive property portfolio comprising 3 owned sites and 36 leased sites, 3 of which are sub-let.  The portfolio can give rise to risks in relation to ongoing lease costs, dilapidations and fluctuations in value.  The Group adopts a proactive approach to managing property costs and exposures;

l The Group has a significant investment in working capital in trade receivables and inventories.  There is a risk that this investment is not fully recovered.  Rigour is applied to the management of trade receivables and inventories throughout the Group to mitigate these risks;

l The Group needs continued access to funding to meet its trading obligations and to support organic growth and acquisitions.  Although the current facility is only partly utilised, 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 £30 million with Lloyds Bank PLC, available until June 2022, which finances our trading requirements and supports controlled expansion, providing a medium-term funding platform for growth;

l The Group's defined benefit pension scheme is sensitive to a number of key factors; investment returns, discount rates used to calculate the scheme's liabilities and mortality assumptions.  Small changes in these assumptions could cause significant movements in the pension deficit.  The Group has sought to manage the volatility of the pension scheme deficit caused by these factors by undertaking exercises to reduce liabilities, more effectively match the investment profile with the liability profile and making contributions to reduce the deficit;

l In Packaging Distribution, the business model reflects a decentralised approach with a high dependency on effective local decision-making.  There is a risk that local decisions may not always meet overall corporate objectives. This is closely monitored using the Group's management information system, with regular reviews of performance for all locations; and

l The Group's growth strategy includes acquisitions as a key component.  There are risks that the availability of acquisitions may reduce, or that acquisitions may not perform as expected either immediately after acquisition or on subsequent integration.  Having made twelve acquisitions since 2014, the Group has well-established due diligence and integration processes and procedures and seeks to acquire quality businesses which will perform well in the Group.

Macfarlane Group has carried out scenario planning for the continuing effects of the Covid-19 pandemic considering impacts on sales, profitability, cash flow, bad debt risk and the health, safety and well-being of its employees.  These scenarios also assumed no further acquisition activity.  This is constantly under review and based on our experience to date we are confident the Group is robust enough to operate safely, profitably and within its borrowing facilities under all reasonable scenarios.

Macfarlane Group has also carried out an impact analysis and evaluated the potential short to medium-term implications of a no-deal Brexit including reversion to World Trade Organisation tariffs.  Where practical, we have put in place contingency measures to try to mitigate any immediate effects on our supply chain and these measures are being reviewed at regular intervals. 

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.

 

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 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 2020 were

S.R. Paterson  Chairman

P.D. Atkinson  Chief Executive

J. Love   Finance Director

R. McLellan     Non-Executive Director/Senior Independent Director

J.W.F. Baird                         Non-Executive Director

A.M. Dunstan  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 27 August 2020 and signed on its behalf by

 

…..  …

Peter D. Atkinson                             John Love

Chief Executive              Finance Director

 

 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

 

 

 

 

 

 

 

 

Six

months to

30 June

2020

£000

 

Six

months to

30 June

2019

£000

 

Year

to 31

December

2019

£000

 

Note

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

Revenue

3

105,572

 

107,542

 

225,389

Cost of sales

 

(70,753)

 

(74,301)

 

(153,256)

 

 

 

 

 

 

 

Gross profit

 

34,819

 

33,241

 

72,133

Distribution costs

 

(4,171)

 

(4,204)

 

(8,441)

Administrative expenses

 

(26,384)

 

(24,164)

 

(50,062)

 

 

 

 

 

 

 

Operating profit

3

4,264

 

4,873

 

13,630

Finance costs

4

(642)

 

(1,041)

 

(1,606)

 

 

 

 

 

 

 

Profit before tax

 

3,622

 

3,832

 

12,024

Tax

5

(736)

 

(693)

 

(2,293)

 

 

 

 

 

 

 

Profit for the period

3

2,886

 

3,139

 

9,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

7

 

 

 

 

 

  Basic

 

1.83p

 

1.99p

 

6.17p

 

 

 

 

 

 

 

  Diluted

 

1.82p

 

1.99p

 

6.16p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

 

 

 

 

 

 

 

 

 

 

Six

months to

30 June

2020

£000

 

Six

months to

30 June

2019

£000

 

Year

to 31

December

2019

£000

Items that may be reclassified to profit or loss

Note

 

 

 

 

 

Foreign currency translation differences

 

67

 

(17)

 

(62)

Items that will not be reclassified to profit or loss

 

 

 

 

 

 

Remeasurement of pension scheme liability

10

(1,038)

 

(809)

 

537

Tax recognised in other comprehensive income

 

 

 

 

 

 

Tax on remeasurement of pension scheme liability

11

197

 

138

 

(92)

Long-term corporation tax rate change on deferred tax

 

11

 

129

 

 

-

 

 

-

 

 

 

 

 

 

 

Other comprehensive (expense)/income for the period, net of tax

 

 

(645)

 

 

(688)

 

 

383

Profit for the period

 

2,886

 

3,139

 

9,731

 

 

 

 

 

 

 

Total comprehensive income for the period

 

2,241

 

2,451

 

10,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

 

 

Note

Share

Premium

£000

Revaluation

Reserve

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

 

 

 

 

 

 

 

At 1 January 2020

 

13,148

70

231

16,369

69,271

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

Profit for the period

 

-

-

-

 

2,886

2,886

Foreign currency translation differences

 

 

-

 

-

 

-

 

67

 

-

 

67

Remeasurement of pension scheme liability

 

10

 

-

 

-

 

-

 

-

 

(1,038)

 

(1,038)

Tax on remeasurement of pension scheme liability

 

11

 

-

 

-

 

-

 

-

 

197

 

197

Long-term corporation tax rate change on deferred tax

 

11

 

-

 

-

 

-

 

-

 

129

 

129

 

 

 

 

 

 

 

 

Total comprehensive income

-

-

-

67

2,174

2,241

 

 

 

 

 

 

 

 

Transactions with shareholders

 

 

 

 

 

 

 

Share-based payments

 

-

-

-

-

90

90

 

 

 

 

 

 

 

 

Total transactions with shareholders

-

-

-

-

90

90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2020

 

39,453

13,148

70

298

18,633

71,602

 

 

 

 

 

 

 

 

 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2019

 

 

 

 

Note

Share

Premium

£000

Revaluation

Reserve

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

 

 

 

 

 

 

 

At 1 January 2019

 

12,975

70

293

9,807

62,532

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

Profit for the period

 

-

-

-

-

3,139

3,139

Foreign currency translation differences

 

 

-

 

-

 

-

 

(17)

 

-

 

(17)

Remeasurement of pension scheme liability

 

10

 

-

 

-

 

-

 

-

 

(809)

 

(809)

Tax on remeasurement of pension scheme liability

 

11

 

-

 

-

 

-

 

-

 

138

 

138

 

 

 

 

 

 

 

 

Total comprehensive income

-

-

-

(17)

2,468

2,451

 

 

 

 

 

 

 

 

Transactions with shareholders

 

 

 

 

 

 

 

Dividends

6

-

-

-

-

(2,600)

(2,600)

Share-based payments

 

-

-

-

-

10

10

 

 

 

 

 

 

 

 

Total transactions with shareholders

-

-

-

-

(2,590)

(2,590)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2019

 

39,387

12,975

70

276

9,685

62,393

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

 

 

 

Note

Share

Premium

£000

Revaluation

Reserve

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

 

 

 

 

 

 

 

At 1 January 2019

 

12,975

70

293

9,807

62,532

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

-

9,731

9,731

Foreign currency translation differences

 

 

-

 

-

 

-

 

(62)

 

-

 

(62)

Remeasurement of pension scheme liability

 

10

 

-

 

-

 

-

 

-

 

537

 

537

Tax on remeasurement of pension scheme liability

 

11

 

-

 

-

 

-

 

-

 

(92)

 

(92)

 

 

 

 

 

 

 

 

Total comprehensive income

-

-

-

(62)

10,176

10,114

 

 

 

 

 

2

 

 

Transactions with shareholders

 

 

 

 

 

 

 

Dividends

6

-

-

-

-

(3,689)

(3,689)

Share-based payments

 

-

-

-

-

75

75

Issue of share capital

 

66

173

-

-

-

239

 

 

 

 

 

 

 

 

Total transactions with shareholders

66

173

-

-

(3,614)

(3,375)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2019

 

39,453

13,148

70

231

16,369

69,271

 

 

 

 

 

 

 

 

 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) AT 30 JUNE 2020

 

 

 

 

 

 

 

 

30 June

2020

30 June

2019

 

31 December

2019

 

Note

£000

£000

 

£000

Non-current assets

 

 

 

 

 

Goodwill and other intangible assets

 

61,857

60,795

 

62,663

Property, plant and equipment

 

9,248

9,221

 

9,621

Right of use assets

 

23,078

30,293

 

25,855

Trade and other receivables

 

35

56

 

35

Deferred tax assets

11

1,274

1,726

 

1,224

 

 

 

 

 

 

Total non-current assets

 

95,492

102,091

 

99,398

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

 

15,014

16,171

 

15,813

Trade and other receivables

 

44,641

48,867

 

52,044

Cash and cash equivalents

9

4,726

3,863

 

3,310

 

 

 

 

 

 

Total current assets

 

64,381

68,901

 

71,167

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

3

159,873

170,992

 

170,565

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

49,484

46,946

 

48,530

Current tax liabilities

 

756

860

 

1,084

Lease liabilities

 

5,384

6,249

 

6,321

Bank borrowings

9

5,542

18,811

 

15,984

 

 

 

 

 

 

Total current liabilities

 

61,166

72,866

 

71,919

 

 

 

 

 

 

Net current assets/(liabilities)

 

3,215

(3,965)

 

(752)

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Retirement benefit obligations

10

6,048

9,029

 

6,465

Deferred tax liabilities

11

3,256

3,119

 

3,242

Trade and other payables

 

22

24

 

22

Lease liabilities

 

17,779

23,561

 

19,646

 

 

 

 

 

 

Total non-current liabilities

 

27,105

35,733

 

29,375

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

88,271

108,599

 

101,294

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

3

71,602

62,393

 

69,271

 

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

 

39,453

39,387

 

39,453

Share premium

 

13,148

12,975

 

13,148

Revaluation reserve

 

70

70

 

70

Translation reserve

 

298

276

 

231

Retained earnings

 

18,633

9,685

 

16,369

 

 

 

 

 

 

Total equity

 

71,602

62,393

 

69,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

 

 

Six

months to

30 June

 

Six months to

30 June

 

Year

to 31

December

 

 

Note

2020

£000

 

2019

£000

 

2019

£000

 

 

 

 

 

 

 

Profit before tax

 

3,622

 

3,832

 

12,024

Adjustments for:

 

 

 

 

 

 

  Amortisation of intangible assets

 

1,262

 

1,142

 

2,391

  Depreciation of property, plant and equipment

 

4,121

 

4,242

 

7,816

  Loss/(gain) on disposal of property, plant and equipment

 

 

32

 

 

(4)

 

 

5

  Share-based payments

 

90

 

-

 

75

  Finance costs

 

642

 

1,041

 

1,606

 

 

 

 

 

 

 

Operating cash flows before movements in working capital

 

 

9,769

 

 

10,253

 

 

23,917

  Decrease in inventories

 

1,080

 

1,164

 

2,006

  Decrease in receivables

 

7,609

 

3,003

 

1,178

  Increase/(decrease) in payables

 

1,021

 

(2,726)

 

(947)

  Pension contributions less current service costs

 

(1,512)

 

(1,670)

 

(2,994)

 

 

 

 

 

 

 

Cash generated from operations

 

17,967

 

10,024

 

23,160

  Income taxes paid

 

(830)

 

(875)

 

(2,288)

  Interest paid

 

(585)

 

(916)

 

(1,375)

 

 

 

 

 

 

 

Net cash inflow from operating activities

 

16,552

 

8,233

 

19,497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Acquisitions

8

(888)

 

(2,840)

 

(6,162)

Proceeds on disposal of property, plant and equipment

28

 

12

 

185

Purchases of property, plant and equipment

 

(627)

 

(1,295)

 

(2,648)

 

 

 

 

 

 

 

Net cash used in investing activities

 

(1,487)

 

(4,123)

 

(8,625)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Dividends paid

6

-

 

(2,600)

 

(3,689)

(Repayment)/drawdown of bank borrowings

 

(10,442)

 

1,042

 

(1,785)

Repayment of lease obligations

 

(3,207)

 

(3,300)

 

(6,699)

 

 

 

 

 

 

 

Net cash used in financing activities

(13,649)

 

(4,858)

 

(12,173)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

1,416

 

(748)

 

(1,301)

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

3,310

 

4,611

 

4,611

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

9

4,726

 

3,863

 

3,310

 

 

 

 

 

 

 

 

MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2020

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

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 are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

This condensed set of 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 2019.  There were no major changes from the adoption of new IFRS's in 2020.

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.  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 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 10.  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 on pages 1 to 7.

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 June 2022, 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.

The Directors have reviewed the Group's cash and revenue 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 including the impact of the ongoing Covid-19 pandemic. 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 27 August 2020.  As in previous years, the condensed set of financial statements for the half-year is unaudited.

2.  General information

Comparative figures for the year ended 31 December 2019 are extracted from Macfarlane Group's statutory accounts for 2019.  The information for the year ended 31 December 2019 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 27 February 2020 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.

3.  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 manufacture and supply of self-adhesive and resealable labels to a variety of FMCG customers in the UK, Europe and USA and the design, manufacture and assembly of timber, corrugated and foam-based packaging materials in the UK comprise one segment headed Manufacturing Operations.  None of the business segments within Manufacturing Operations represents more than 10% of Group revenue or profit.

 

 

 

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

Group segment - total revenue

 

 

 

Packaging Distribution

91,496

93,053

196,706

Manufacturing Operations

16,379

17,390

34,016

Inter-segment revenue

(2,303)

(2,901)

(5,333)

 

 

 

 

Revenue

105,572

107,542

225,389

 

 

 

 

Trading results - continuing operations

 

 

 

Packaging Distribution

 

 

 

Revenue

91,496

93,053

196,706

Cost of sales

(62,013)

(65,103)

(135,525)

 

 

 

 

Gross profit

29,483

27,950

61,181

Net operating expenses

(25,450)

(23,487)

(48,775)

 

 

 

 

Operating profit

4,033

4,463

12,406

 

 

 

 

Manufacturing Operations

 

 

 

Revenue

16,379

17,390

34,016

Cost of sales

(11,043)

(12,099)

(23,064)

 

 

 

 

Gross profit

5,336

5,291

10,952

Net operating expenses

(5,105)

(4,881)

(9,728)

 

 

 

 

Operating profit

231

410

1,224

 

 

 

 

 

 

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

Operating profit - continuing operations

 

 

 

Packaging Distribution

4,033

4,463

12,406

Manufacturing Operations

231

410

1,224

 

 

 

 

Operating profit

4,264

4,873

13,630

Finance costs  (note 4)

(642)

(1,041)

(1,606)

 

 

 

 

Profit before tax

3,622

3,832

12,024

Tax  (note 5)

(736)

(693)

(2,293)

 

 

 

 

Profit for the period

2,886

3,139

9,731

 

 

 

 

The Packaging Distribution business has historically benefited from additional demand in the final months of the year, resulting in revenue and profitability at higher levels in the second half of the year.

 

 

30 June

2020

£000

30 June

2019

£000

31 December

2019

£000

Total assets

 

 

 

Packaging Distribution

140,145

150,838

151,115

Manufacturing Operations

19,728

20,154

19,450

 

 

 

 

Total assets

159,873

170,992

170,565

 

 

 

 

Net assets

 

 

 

Packaging Distribution

63,235

54,276

60,607

Manufacturing Operations

8,367

8,117

8,664

 

 

 

 

Net assets

71,602

62,393

69,271

 

 

 

 

 

 

4.  Finance costs

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

 

 

 

 

Interest on bank borrowings

228

293

573

Interest on leases

357

623

802

Finance cost relating to defined benefit pension scheme (note 10)

 

57

 

125

 

231

 

 

 

 

Total finance costs

642

1,041

1,606

 

 

 

 

 

5.  Tax

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

Current tax

 

 

 

  UK corporation tax

529

611

2,057

  Foreign tax

32

68

104

  Prior year adjustments

(58)

(64)

(53)

 

 

 

 

Total current tax

503

615

2,108

 

 

 

 

Deferred tax  current year

(132)

78

185

  Long-term corporation tax rate change

365

-

-

 

 

 

 

Total deferred tax    (note 11)

233

78

185

 

 

 

 

 

 

 

 

Total tax

736

693

2,293

 

 

 

 

Tax for the six months ended 30 June 2020 has been charged at 19.00% (2019 - 19.00%) representing the best estimate of the effective tax charge for the full year.

 

6.  Dividends

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

Amounts recognised as distributions to equity holders in the period

 

 

Final dividend    (Nil per share)  (2018  1.65p per share)

-

2,600

2,600

Interim dividend   (2019  0.69p per share)

-

-

1,089

 

 

 

 

Distributions in the period

-

2,600

3,689

 

 

 

 

An interim dividend of 0.70p per share, payable on 8 October 2020 was declared on 27 August 2020 and has therefore not been included as a liability in these condensed financial statements.

 

7.  Earnings per share

 

 

Earnings

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

Profit for the period from continuing operations

2,886

3,139

9,731

 

 

 

 

 

 

 

 

 

Number of shares '000

30 June

2020

30 June

2019

31 December 2019

Weighted average number of shares in issue for the

purposes of basic earnings per share

 

157,812

 

157,548

 

157,636

Effect of Long-Term Incentive Plan awards in issue

358

114

393

 

 

 

 

Weighted average number of shares in issue for the

purposes of diluted earnings per share

 

158,170

 

157,662

 

158,029

 

 

 

 

 

 

 

 

Basic earnings per share

1.83p

1.99p

6.17p

 

 

 

 

Diluted earnings per share

1.82p

1.99p

6.16p

 

 

 

 

 
8.  Acquisitions

On 6 January 2020, the Group's subsidiary, Macfarlane Group UK Limited ("MGUK") acquired the trade, selected assets and goodwill of the packaging distribution business of Armagrip for a cash consideration of £0.9m.

On 2 May 2019, MGUK acquired 100% of Ecopac (UK) Limited, for a maximum consideration of £3.9 million.  £3.1 million was paid in cash on acquisition and the deferred consideration of £0.8 million will be paid in 2020, as trading targets have been met in an agreed 12 month period after acquisition.  On 30 August 2019, Macfarlane Group PLC acquired 100% of Leyland Packaging Company (Lancs) Limited, for a maximum consideration estimated at £3.05 million.  £2.00 million was paid in cash and shares to the value of £0.25m issued to the Vendors on acquisition.  Deferred consideration of £0.8 million is payable in 2020, subject to certain trading targets being met in an agreed 12 month period after acquisition.

Contingent considerations are recognised as a liability in trade and other payables and are remeasured to fair value of £1.6 million at the balance sheet date based on a range of outcomes between £Nil and £1.8 million.  Trading in the post-acquisition periods supports the remeasured value of £1.6m.

All three businesses 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.  Fair values assigned to net assets acquired and consideration paid and payable are set out below:-

 

 

 

 

Net assets acquired

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

 

 

 

 

Other intangible assets

298

1,701

3,313

Property, plant and equipment

-

701

1,194

Inventories

206

395

879

Trade and other receivables

282

1,170

1,797

Cash and bank balances

-

211

249

Bank borrowings

-

-

(149)

Trade and other payables

-

(974)

(1,658)

Current tax liabilities

-

(91)

(235)

Lease liabilities 

-

(539)

(979)

Deferred tax liabilities

(57)

(311)

(599)

 

 

 

 

Net assets acquired

729

2,263

3,812

Goodwill

159

1,588

3,093

 

 

 

 

Total consideration

888

3,851

6,905

 

 

 

 

Contingent consideration on acquisitions     Current year

-

(800)

(1,600)

       Prior years

-

-

1,207

Shares issued for non-cash consideration

-

-

(250)

 

 

 

 

Total cash consideration

888

3,051

6,262

 

 

 

 

Net cash outflow arising on acquisition

 

 

 

Cash consideration

(888)

(3,051)

(6,262)

Cash and bank borrowings acquired

-

211

100

 

 

 

 

Net cash outflow

(888)

(2,840)

(6,162)

 

 

 

 

 

 

9.  Notes to the cash flow statement

 

 

 

 

 

Cash and

cash

equivalents

£000

 

Bank

borrowing

£000

 

Lease

liabilities

£000

 

Total

debt

£000

Total debt

 

 

 

 

At 1 January 2019

4,611

(17,769)

(101)

(13,259)

Non-cash movements

 

 

 

 

  IFRS 16 transition on 1 January 2019

-

-

(29,701)

(29,701)

  New leases

-

-

(2,769)

(2,769)

  Acquisitions

-

-

(539)

(539)

Cash movements

(748)

(1,042)

3,300

1,510

 

 

 

 

 

At 30 June 2019

3,863

(18,811)

(29,810)

(44,758)

Non-cash movements

 

 

 

 

  Adjustments to IFRS 16 transition

-

-

1,738

1,738

  New leases

-

-

(854)

(854)

  Acquisitions

-

-

(440)

(440)

Cash movements

(553)

2,827

3,399

5,673

 

 

 

 

 

At 31 December 2019

3,310

(15,984)

(25,967)

(38,641)

Non-cash movements

 

 

 

 

  New leases

-

-

(403)

(403)

Cash movements

1,416

10,442

3,207

15,065

 

 

 

 

 

At 30 June 2020

4,726

(5,542)

(23,163)

(23,979)

 

 

 

 

 

 

Total cash movements for 2019

(1,301)

1,785

6,699

7,183

 

 

 

 

 

 

Net bank debt

 

 

 

 

 

 

 

 

Net bank

Debt

£000

 

At 30 June 2020

4,726

(5,542)

 

(816)

 

 

 

 

At 31 December 2019

3,310

(15,984)

 

(12,674)

 

 

 

 

 

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.

 

10.  Retirement benefit obligations

The figures below have been prepared by Aon Hewitt based on the results of the triennial actuarial valuation as at 1 May 2017, updated to 30 June 2020, 31 December 2019 and 30 June 2019.  The scheme investments and the scheme's net liability position as calculated under IAS 19 are as follows:

 

Investment class

30 June

2020

£000

30 June

2019

£000

31 December

2019

£000

Equities

 

 

 

UK equity funds

7,520

7,330

8,913

Overseas equity funds

12,541

11,288

13,226

Multi-asset diversified growth funds

23,976

19,220

25,382

Bonds

 

 

 

Liability-driven Investment funds

32,694

33,601

27,688

Other investments

 

 

 

European loan fund

6,092

6,264

6,379

Secured property income fund

6,095

6,020

6,192

Cash

6,798

1,686

281

 

 

 

 

Fair value of Scheme investments

95,716

85,409

88,061

Present value of Scheme liabilities

(101,764)

(94,438)

(94,526)

 

 

 

 

Pension scheme deficit

(6,048)

(9,029)

(6,465)

 

 

 

 

These amounts were calculated using the following principal assumptions as required under IAS 19:

 

Assumptions

30 June 2020

30 June 2019

31 December 2019

Discount rate

1.50%

2.20%

2.00%

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 2.85% for LPI

3% or 5%

for fixed increases

or 3.10% for LPI

3% or 5%

for fixed increases

or 2.95% for LPI

PIE take up rate

45%

45%

45%

Inflation assumption (RPI)

2.90%

3.20%

3.00%

Inflation assumption (CPI)

2.20%

2.20%

2.10%

Life expectancy beyond normal retirement age of 65

 

 

Male

23.4 years

23.6 years

23.3 years

Female

25.5 years

25.7 years

25.5 years

Average uplift for GMP service

0.40%

0.40%

0.40%

 

 

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31 December

2019

£000

Movement in scheme deficit in the period

 

 

 

At start of period

(6,465)

(9,765)

(9,765)

Current service cost

(62)

(62)

(112)

Employer contributions

1,574

1,732

3,106

Net finance cost

(57)

(125)

(231)

Re-measurement of pension scheme liability in the period

(1,038)

(809)

537

 

 

 

 

At end of period

(6,048)

(9,029)

(6,465)

 

 

 

 

 

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 deficit as shown below:-

 

 

Assumptions

30 June

2020

£000

30 June

2019

£000

31 December

2019

£000

 

 

 

 

Discount rate movement of +0.4%

6,513

6,044

6,048

Inflation rate movement of +0.1%

(407)

(378)

(482)

Mortality movement of +0.1 year in age rating

305

283

284

Positive figures reflect a reduction in scheme liabilities and therefore a reduction in the scheme deficit. 

 

 

Six months

to 30 June

2020

£000

Six months

to 30 June

2019

£000

Year to 31

December

2019

£000

Movement in fair value of Scheme investments

 

 

 

Scheme investments at start of period

88,061

75,827

75,827

Interest income

879

1,062

2,109

Return on scheme assets (exc. amount shown in interest income)

 

7,021

 

8,525

 

11,154

Contributions from sponsoring companies

1,574

1,732

3,106

Contribution from scheme members

34

36

70

Benefits paid

(1,853)

(1,773)

(4,205)

 

 

 

 

Scheme investments at end of period

95,716

85,409

88,061

 

 

 

 

Movement in present value of Scheme liabilities

 

 

 

Scheme liabilities at start of period

(94,526)

(85,592)

(85,592)

Normal service costs

(62)

(62)

(112)

Interest cost

(936)

(1,187)

(2,340)

Contribution from scheme members

(34)

(36)

(70)

Actuarial loss due to the changes in financial and experience

(8,059)

(9,334)

(11,495)

Actuarial gain due to change in demographic assumptions

-

-

878

Benefits paid

1,853

1,773

4,205

 

 

 

 

Scheme liabilities at end of period

(101,764)

(94,438)

(94,526)

 

 

 

 

 

Investments

The Trustees review the scheme investments regularly and consult with the Company regarding any changes.  In the first half of 2020, surplus cash generated from the Liability-driven investment funds was held in cash funds at 30 June 2020, pending investment into the existing Multi-asset diversified growth funds in the second half of 2020.

Funding

Following the completion of the triennial actuarial valuation at 1 May 2017, Macfarlane Group PLC is paying deficit reduction contributions with a deficit recovery period of 7 years.  Contributions in 2020, inclusive of service costs and interest of £0.24 million, are expected to be £3.15 million.

The triennial actuarial valuation at 1 May 2020 has commenced and is likely to conclude in the first quarter of 2021.

 

11.  Deferred tax

Tax losses less

accelerated capital allowances

£000

 

Other intangible assets

£000

 

Retirement

Benefit

Obligations

£000

 

 

 

Total

£000

 

 

 

 

 

At 1 January 2019

(8)

(2,794)

1,660

(1,142)

Acquisitions

(22)

(289)

-

(311)

(Charged)/credited in income statement

 

 

 

 

  Current period

(10)

193

(261)

(78)

Credited in other comprehensive income

-

-

138

138

 

 

 

 

 

At 30 June 2019

(40)

(2,890)

1,537

(1,393)

Acquisitions

(15)

(273)

-

(288)

(Charged)/credited in income statement

 

 

 

 

  Current period

(111)

212

(208)

(107)

Charged in other comprehensive income

-

-

(230)

(230)

 

 

 

 

 

At 1 January 2020

(166)

(2,951)

1,099

(2,018)

Acquisitions

-

(57)

-

(57)

Credited/(charged) in income statement

 

 

 

 

  Current period

150

(107)

(276)

(233)

Credited in other comprehensive income

-

-

326

326

 

 

 

 

 

At 30 June 2020

(16)

(3,115)

1,149

(1,982)

 

 

 

 

 

 

 

 

 

 

Deferred tax assets

125

-

1,149

1,274

Deferred tax liabilities

(141)

(3,115)

-

(3,256)

 

 

 

 

 

At 30 June 2020

(16)

(3,115)

1,149

(1,982)

 

 

 

 

 

 

12.  Related party transactions

Related party transactions for 2019 are disclosed in note 28 of the 2019 Annual Report.  The directors are satisfied that other than the changes in the Retirement Benefit Obligations disclosed in note 10 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 2020 will be disclosed in the Group's 2020 Annual Report.  Peter Atkinson and John Love hold option awards over 330,123 and 163,525 ordinary shares respectively 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.

13.  Post balance sheet events

There are no post balance sheet events requiring disclosure.

14.  Interim Report

The interim report will be posted to shareholders on 11 September 2020.  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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