Half-year Report

Macfarlane Group PLC
24 August 2023
 

 

24 August 2023

MACFARLANE GROUP PLC

("MACFARLANE GROUP", "THE COMPANY", "THE GROUP")

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2023

 

RESILIENT H1 2023 PERFORMANCE - PROFIT EXPECTATIONS FOR THE FULL YEAR UNCHANGED

 

 

Financial Highlights

H1 2023

£000

H1 2022

£000

Increase

%

Revenue

141,612

139,209

2%

Operating profit before amortisation1

12,839

11,384

13%

Operating profit

10,800

9,604

12%

Profit before tax

9,987

8,857

13%

Profit for the period

7,510

6,888

9%

Interim dividend (pence)

0.94p

0.90p

4%

Basic earnings per share (pence)

4.74p

4.36p

9%

1    See note 2 for reconciliation of alternative performance measure, operating profit before amortisation, to operating profit.

 

Key highlights

·   Revenue grew by 2% versus H1 2022 to £141.6m.

·   Profit before tax at £10.0m increased by 13%.

·   Basic and diluted earnings per share were 4.74p per share (H1 2022: 4.36p per share) and 4.70p per share (H1 2022: 4.31p per share) respectively.

·   Profit in line with expectations for the full year.

Packaging Distribution

·   Packaging Distribution grew revenue by £0.4m to £124.0m in H1 2023.

·   A good contribution from the acquisitions of PackMann in May 2022 and Gottlieb in April 2023, combined with organic growth in Europe and new business wins, offset lower demand from customers in the UK and Ireland.

·   Operating profit before amortisation increased by 6% to £9.4m (H1 2022: £8.9m) through effective management of input pricing which offset inflation in operating costs.

Manufacturing Operations

·   Manufacturing Operations delivered strong revenue growth of 13% to £17.7m (H1 2022: £15.7m).

·   A good contribution from Suttons, acquired in February 2023, offset the slower demand in certain industrial markets.

·   Operating profit before amortisation increased 36% to £3.4m (H1 2022: £2.5m).

Group

·   Effective management of working capital resulted in net cash inflow from operating activities of £20.3m (H1 2022: £6.5m).

·   Net bank debt on 30 June 2023 was £3.3m - a cash inflow of £0.1m from 31 December 2022, after £11.4m of investment in acquisitions and £1.4m of capital expenditure.  The Group is operating well within its bank facility of £35.0m, increased from £30.0m at 31 December 2022, which runs until 31 December 2025.

·   Pension scheme surplus increased to £12.8m at 30 June 2023 (31 December 2022: £10.2m).  The improvement is due to continued contributions from the Group and an increase in the discount rate, offset by lower investment returns in H1 2023.

·   Interim dividend increased to 0.94p per share (H1 2022: 0.90p per share) - to be paid on 12 October 2023 to shareholders on the register as at 15 September 2023 (ex-dividend date 14 September 2023).

Aleen Gulvanessian, Chair of Macfarlane Group PLC, today said: -

Trading

"The Group has demonstrated resilience in the first half of 2023, against the backdrop of a slowdown in customer demand.  We have executed two high quality acquisitions which are both performing well, we continue to make good progress in Europe and have positive new business momentum.  The inflationary impact of operating cost increases has been offset by effective input price management.  We opened our new Northern Innovation Lab in March 2023 which is already having early success in helping our customers reduce their total cost of packaging and carbon footprint."

Outlook

"Whilst we expect the second half of 2023 to remain challenging, our good progress in Europe, diverse customer base, strong new business momentum and effective management of pricing and costs mean that our profit expectations for the full year remain unchanged."

Further enquiries:

Macfarlane Group

Tel: 0141 333 9666


Aleen Gulvanessian             Chair



Peter Atkinson                     Chief Executive



Ivor Gray                                Finance Director



Spreng Thomson



Callum Spreng

Mob: 07803 970103

 

Legal Entity Identifier (LEI):  213800LVRYDERSJAAZ73

Notes to Editors:

  • Macfarlane Group PLC has been listed on the Premium segment of the Main Market of the London Stock Exchange (LSE: MACF) since 1973 with over 70 years' experience in the UK packaging industry. Through its two divisions, Macfarlane Group services a broad range of business customers, supplying them with high quality protective packaging products which help customers reduce supply chain costs, improve operational efficiencies and enhance their brand presentation. The divisions are:
    • Packaging Distribution - Macfarlane Packaging Distribution is the leading UK distributor of a comprehensive range of protective packaging products; and 
    • Manufacturing Operations - Macfarlane Design and Manufacture who design and produce protective packaging for high value and fragile products.
  • Headquartered in Glasgow, Scotland, Macfarlane Group employs over 1,000 people at 37 sites, principally in the UK, as well as in Ireland, Germany and the Netherlands.
  • Macfarlane Group supplies more than 20,000 customers, principally in the UK and Europe.
  • In partnership with 1,700 suppliers, Macfarlane Group distributes and manufactures 600,000+ lines supplying to a wide range of sectors, including: retail e-commerce; consumer goods; food; logistics; mail order; electronics; defence; medical; automotive; and aerospace.

Interim Results - Management Report

Macfarlane Group's trading activities comprise Packaging Distribution and Manufacturing Operations.

Macfarlane's Packaging Distribution business is the UK's leading specialist distributor of protective packaging materials, with a growing presence in Europe.  Macfarlane operates a stock and serve supply model in the UK, Ireland, the Netherlands, and Germany from 27 Regional Distribution Centres ("RDCs") and three satellite sites, supplying industrial and retail customers with a comprehensive range of protective packaging materials on a local, regional, and national basis.

Competition in the packaging distribution market is from local and regional protective packaging specialist companies as well as national/international distribution generalists who supply a range of products, including protective packaging materials.  Macfarlane competes effectively on a local basis through its strong focus on customer service, its breadth and depth of product offering and through the recruitment and retention of high-quality staff with good local market knowledge.  On a national and international basis, Macfarlane has market focus, expertise and a breadth of product and service knowledge, all of which enable it to compete effectively against non-specialist packaging distributors.

Packaging Distribution benefits its customers by enabling them to ensure their products are cost-effectively protected in transit and storage through the supply of a comprehensive product range, single source stock and serve supply, just-in-time delivery, tailored stock management programmes, electronic trading and independent advice on both packaging materials and packing processes. Through the 'Significant Six' sales approach we reduce our customers' 'Total Cost of Packaging' and their carbon footprint.  This is achieved through supplying effective packaging solutions, optimising warehousing and transportation, reducing damages and returns, and improving packaging efficiency.

"Significant Six" represents the six key costs in a customer's packing process being transport, warehousing, administration, damages and returns, productivity and customer experience.

 


H1 2023

H1 2022


£000

£000

Revenue

123,955

123,533

Cost of sales

(81,563)

(83,627)


 

 

Gross margin

42,392

39,906

Overheads

(32,954)

(31,022)


 

 

Operating profit before amortisation

9,438

8,884

Amortisation

(1,461)

(1,379)


 

 

Operating profit

7,977

7,505

 

 


 

 

 

The main features of Packaging Distribution performance in H1 2023 were:

·   Some weakening of demand from customers in the UK and Ireland.

·   Good organic growth in Europe through our "Follow the Customer" strategy.

·   Revenue growth of £6.3m achieved from the acquisition of Gottlieb in April 2023 and PackMann in May 2022.

·   New business in H1 2023 24% higher than H1 2022, with early success from our new Northern Innovation Lab.

·   Effective management of input prices which has offset the impact of inflationary increases in operating costs, particularly energy and labour.

·   Increase in operating profit before amortisation of 6%.

·   Improvement in operating profit before amortisation as a percentage of revenue to 7.6% (H1 2022: 7.2%).



Interim Results - Management Report (continued)

The key areas we will focus on in H2 2023 are to:

·   Accelerate new business momentum through effective use of our leading sales tools and processes - "Packaging Optimiser" ', Significant Six and our Innovation Labs.

·   Support our customers to reduce their carbon footprint through offering more sustainable packaging solutions.

·   Continue to effectively manage input price changes.

·   Achieve benefits from our information technology investments in Microsoft Dynamics, Slimstock, and Warehouse Management.

·   Introduce improvements to our web-based solutions to provide customers with access to our full range of products and services more easily.

·   Accelerate the progress we have made in Europe through our "Follow the Customer" programme and PackMann, acquired in H1 2022.

·   Reduce operating costs through efficiency programmes in sales, logistics and administration.

·   Plan our second major site consolidation in the East Midlands.

·   Maintain our focus on working capital management to facilitate future investment and manage effectively the ongoing bad debt risk within the current economic environment.

·   Supplement organic growth through progressing further high-quality acquisitions in the UK and Europe.

'   Packaging Optimiser is a Macfarlane developed software tool that measures the financial and carbon benefits of the Significant Six selling approach.

Manufacturing Operations comprises our Packaging Design and Manufacture business as well as GWP, acquired in February 2021, and Suttons acquired in March 2023.

Manufacturing Operations designs, manufactures, assembles, and distributes bespoke packaging solutions for customers requiring cost-effective methods of protecting high value products in storage and transit.  The primary raw materials are corrugate, timber and foam. The businesses operate from five manufacturing sites, in Grantham, Westbury, Swindon, Salisbury and Chatteris, supplying both directly to customers and through the national RDC network of the Packaging Distribution business.

Key market sectors are defence, aerospace, medical equipment, electronics, automotive, e-commerce retail and household equipment. The markets we serve are highly fragmented, with a range of locally based competitors.  We differentiate our market offering through technical expertise, design capability, industry accreditations and national coverage through the Packaging Distribution business.


H1 2023

H1 2022


£000

£000

Revenue

17,657

15,676

Cost of sales

(8,729)

(8,486)


 

 

Gross margin

8,928

7,190

Overheads

(5,527)

(4,690)


 

 

Operating profit before amortisation

3,401

2,500

Amortisation

(578)

(401)


 

 

Operating profit

2,823

2,099


 

 

 

Good growth in operating profit of 34% has been achieved, despite slowing demand in certain industrial sectors, by:

·   A strong contribution from the acquisition of Suttons in February 2023.

·   Effective management of input pricing to offset increasing operating costs, particularly energy and labour.



 

Interim Results - Management Report (continued)

The priorities for Manufacturing Operations in the second half of 2023 are to:

·   Increase momentum of new business growth in target sectors e.g. medical and defence.

·   Prioritise new sales activity of our higher added-value bespoke composite pack product range.

·   Work with our customers to effectively manage material price changes.

·   Continue to strengthen the relationship with our Packaging Distribution businesses to create both sales and cost synergies.

·   Supplement organic growth through progressing further high-quality acquisitions in the UK.

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 we effectively implement our strategic plan, which is reflected in consistent profit growth and cash generation over a sustained period.

Our future performance continues to depend on our effectiveness in growing sales and managing input prices, increasing efficiencies and bringing high quality acquisitions into the Group.  There will continue to be challenges in 2023, with rising costs and weak demand.  However, our strategy and business model have proved to be resilient and we expect to deliver further growth in 2023 and beyond.

 



 

Interim Results - Management Report (continued)

Risks and Uncertainties

The Group operates a formal framework for the identification and evaluation of the major business risks faced by each business and determines an appropriate course of action to manage these risks.

The principal risks and uncertainties which could impact on the performance of the Group, together with the mitigating actions, were outlined on pages 24 to 28 in our Annual Report and Accounts for 2022 (available on our website at www.macfarlanegroup.com).  These remain the same for the remaining six months of the current financial year and are summarised below:

·   Due to a range of prolonged geopolitical and economic uncertainties within the UK and other markets, there is an increased risk that we are entering into a challenging trading environment. If this materialises, the length and depth of such an environment is unknown and may adversely affect our ability to deliver upon agreed strategic initiatives.  We may also need to adapt our business quickly in order to limit the impact upon the Group's results, prospects and reputation.

·   Failure to respond to strategic shifts in the market, including the impact of weaknesses in the economy as well as disruptive behaviour from competitors and changing customer needs (e.g. the move towards online retail) could limit the Group's ability to continue to grow revenues.

·   Customers are increasingly focused on the environmental impacts of packaging, changing their buying behaviours in response to climate and sustainability concerns.  Some investors are looking to invest in companies that demonstrate strong ESG credentials.  There is increasing regulatory focus around reporting disclosures and new requirements, such as the Plastic Tax introduced from April 2022.  This cost is recharged directly onto our customers.  If the Group is not proactive and transparent in how it is responding to environmental changes, this could lead to a loss of employees, customers and investors.

·   The Group's businesses are impacted by commodity-based raw material prices and manufacturer energy costs, with profitability sensitive to input price changes including currency fluctuations.  The principal components are corrugated paper, polythene films, timber and foam, with changes to paper and oil prices having a direct impact on the price we pay to our suppliers.

·   The Group's growth strategy has included a number of acquisitions in recent years. There is a risk that such acquisitions may not be available on acceptable terms in the future.  It is possible that acquisitions will not be successful due to the loss of key people or customers following acquisition or acquired businesses not performing at the level expected.  This could potentially lead to impairment of the carrying value of the related goodwill and other intangible assets.  Execution risks around the failure to successfully integrate acquisitions following conclusion of the earn-out period also exist.

·   The Group has a property portfolio comprising 1 owned site and 52 leased sites.  This multi-site portfolio gives rise to risks in relation to ongoing lease costs, dilapidations and fluctuations in value.

·   The increasing frequency and sophistication of cyber-attacks is a risk which potentially threatens the confidentiality, integrity and availability of the Group's data and IT systems.  These attacks could also cause reputational damage and fines in the event of personal data being compromised.

·   The Group needs continuous access to funding to meet its trading obligations and to support organic growth and acquisitions.  There is a risk that the Group may be unable to obtain funds and that such funds will only be available on unfavourable terms.  The Group's borrowing facility comprises a committed facility of up to £35m (£5m increase from 31 December 2022).  This includes requirements to comply with specified covenants, with a breach potentially resulting in Group borrowings being subject to more onerous conditions.

·   The Group's defined benefit pension scheme is sensitive to a number of key factors including investment returns, the discount rates used to calculate the scheme's liabilities and mortality assumptions.  Small changes in these assumptions could cause significant movements in the pension surplus/deficit.



 

Interim Results - Management Report (continued)

Cautionary Statement

This announcement has been prepared solely to provide additional information to shareholders to assess the Group's strategy and the potential for the strategy to succeed.  It should not be relied on by any other party or for any other purpose.

This report and the condensed financial statements contain certain forward-looking statements relating to operations, performance and financial status.  By their nature, such statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future.  There are a number of factors, including both economic and business risk factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.  These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report.  Nothing in this Interim Results Statement should be construed as a profit forecast or an invitation to deal in the securities of the Group.

Responsibility Statement

The Directors of Macfarlane Group PLC during the first six months of 2023 were

A. Gulvanessian  Chair                              

P.D. Atkinson       Chief Executive         

I. Gray                     Finance Director       

R. McLellan            Non-Executive Director/Senior Independent Director

J.W.F. Baird           Non-Executive Director                     

L.D. Whyte            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 24 August 2023 and signed on its behalf by

 

 

 

…………………………..                            ………………………

Peter D. Atkinson                            Ivor Gray

Chief Executive                                                Finance Director



 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2023

 



 







Six

months to

30 June

2023

£000


Six

months to

30 June

2022

£000


Year

to 31

December

2022

£000


Note

 





Continuing operations


 





Revenue

4

141,612


139,209


290,431

Cost of sales


(90,292)


(92,113)


(192,374)



 


 


 

Gross profit


51,320


47,096


98,057

Distribution costs


(5,265)


(5,169)


(10,736)

Administrative expenses


(35,255)


(32,323)


(65,825)



 


 


 

Operating profit

4

10,800


9,604


21,496

Finance costs

5

(813)


(747)


(1,562)



 


 


 

Profit before tax


9,987


8,857


19,934

Tax

6

(2,477)


(1,882)


(4,210)



 


 


 

Profit for the period from continuing operations

 

4

 

7,510


 

6,975


 

15,724



 


 


 

Discontinued operations

Loss for the period from discontinued operations


 

 

-


 

 

(87)


 

 

(87)



 


 


 

Profit for the period


7,510


6,888


15,637



 


 


 



 





Earnings per share from continuing operations

8

 





  Basic


4.74p


4.41p


9.94p



 


 


 

  Diluted


4.70p


4.36p


9.84p



 


 


 



 





Earnings per share from continuing and discontinued operations

8

 





  Basic


4.74p


4.36p


9.89p



 


 


 

  Diluted


4.70p


4.31p


9.78p



 


 


 



 





 

 



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2023

 







 

 

 

 

 

Six

months to

30 June

2023

£000


Six

months to

30 June

2022

£000


Year

to 31

December

2022

£000

Items that may be reclassified to profit or loss

Note

 





Foreign currency translation differences


(64)


5


45

Items that will not be reclassified to profit or loss


 





Remeasurement of pension scheme liability

11

1,700


(825)


(82)

Tax recognised in other comprehensive income


 





Tax on remeasurement of pension scheme liability

12

(425)


206


21



 


 


 

Other comprehensive income for the period, net of tax


 

1,211


 

(614)


 

(16)

Profit for the period


7,510


6,888


15,637



 


 


 

Total comprehensive income for the period


8,721


6,274


15,621



 


 


 



 





 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2023

 

Note

Share

Capital

£000

Share

Premium

£000

Revaluation

Reserve

£000

Own

Shares

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

At 1 January 2023

 

39,584

13,573

70

(7)

216

52,584

106,020


 

 

 

 

 

 

 

 

Comprehensive income

 







 

Profit for the period

 

-

-

-

-

-

7,510

7,510

Foreign currency

  translation differences

 

 

-

 

-

 

-

 

-

 

(64)

 

-

 

(64)

Remeasurement of

  pension scheme liability

 

11

 

-

 

-

 

-

 

-

 

-

 

1,700

 

1,700

Tax on remeasurement of

  pension scheme liability

 

12

 

-

 

-

 

-

 

-

 

-

 

(425)

 

(425)


 

 

 

 

 

 

 

 

Total comprehensive income

-

-

-

-

(64)

8,785

8,721


 

 

 

 

 

 

 

Transactions with shareholders








Dividends

7

-

-

-

-

-

(3,990)

(3,990)

Share-based payments

 

-

-

-

-

-

254

254


 

 

 

 

 

 

 

 

Total transactions with

  shareholders

 

-

 

-

 

-

 

-

 

-

 

(3,736)

 

(3,736)


 

 

 

 

 

 

 

 

At 30 June 2023

 

39,584

13,573

70

(7)

152

57,633

111,005

 

 

 

 

 

 

 

 

 



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

 

Note

Share

Capital

£000

Share

Premium

£000

Revaluation

Reserve

£000

Own

Shares

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

At 1 January 2022

 

39,453

13,148

70

-

171

42,052

94,894


 

 

 

 

 

 

 

 

Comprehensive income

 







 

Profit for the period

 

-

-

-

-

-

6,888

6,888

Foreign currency

  translation differences

 

 

-

 

-

 

-

 

-

 

5

 

-

 

5

Remeasurement of

  pension scheme liability

 

11

 

-

 

-

 

-

 

-

 

-

 

(825)

 

(825)

Tax on remeasurement of

  pension scheme liability

 

12

 

-

 

-

 

-

 

-

 

-

 

206

 

206


 

 

 

 

 

 

 

 

Total comprehensive income

-

-

-

-

5

6,269

6,274


 

 

 

 

 

 

 

Transactions with shareholders








Dividends

7

-

-

-

-

-

(3,677)

(3,677)

New shares issued

 

131

425

-

(7)

-

(549)

-

Share-based payments

 

-

-

-

-

-

337

337


 

 

 

 

 

 

 

 

Total transactions with

  Shareholders

 

131

 

425

 

-

 

(7)

 

-

 

(3,889)

 

(3,340)


 

 

 

 

 

 

 

 

At 30 June 2022

 

39,584

13,573

70

(7)

176

44,432

97,828

 

 

 

 

 

 

 

 

 

 



 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

 

Note

Share

Capital

£000

Share

Premium

£000

Revaluation

Reserve

£000

Own

Shares

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

At 1 January 2022

 

39,453

13,148

70

-

171

42,052

94,894


 

 

 

 

 

 

 

 

Comprehensive income

 







 

Profit for the period

 

-

-

-

-

-

15,637

15,637

Foreign currency

  translation differences

 

 

-

 

-

 

-

 

-

 

45

 

-

 

45

Remeasurement of

  pension scheme liability

 

11

 

-

 

-

 

-

 

-

 

-

 

(82)

 

(82)

Tax on remeasurement of

  pension scheme liability

 

12

 

-

 

-

 

-

 

-

 

-

 

21

 

21


 

 

 

 

 

 

 

 

Total comprehensive income

-

-

-

-

45

15,576

15,621


 

 

 

 

 

 

 

Transactions with shareholders








Dividends

7

-

-

-

-

-

(5,102)

(5,102)

New shares issued

 

131

425

-

(7)

-

(549)

-

Share-based payments

 

-

-

-

-

-

607

607


 

 

 

 

 

 

 

 

Total transactions with

  shareholders

 

131

 

425

 

-

 

(7)

 

-

 

(5,044)

 

(4,495)


 

 

 

 

 

 

 

 

At 31 December 2022

 

39,584

13,573

70

(7)

216

52,584

106,020

 

 

 

 

 

 

 

 

 

 





 



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) AT 30 JUNE 2023










30 June

2023


30 June

2022


31 December

2022

 

Note

£000


£000


£000

Non-current assets

 

 





Goodwill and other intangible assets

 

86,531


79,447


75,685

Property, plant and equipment

 

9,076


7,591


7,863

Right of use assets


35,287


33,807


33,938

Trade and other receivables


35


35


38

Deferred tax assets

12

106


19


105

Retirement benefit surplus

11

12,771


8,847


10,199

 

 

 

 

 


 

Total non-current assets

 

143,806


129,746


127,828

 

 

 

 

 


 

Current assets

 

 





Inventories

 

19,929


25,150


22,608

Trade and other receivables

 

54,878


60,833


59,347

Current tax asset

 

540


-


675

Cash and cash equivalents

10

5,863


6,804


5,706

 

 

 

 

 


 

Total current assets

 

81,210


92,787


88,336

 

 

 

 

 


 

Total assets

4

225,016


222,533


216,164



 

 

 


 

Current liabilities

 

 





Trade and other payables

 

53,176


61,184


54,577

Provisions

 

723


1,370


1,769

Current tax liabilities

 

1,024


524


304

Lease liabilities

10

7,042


6,139


6,641

Bank borrowings

10

9,190


16,473


9,143

 

 

 

 

 


 

Total current liabilities

 

71,155


85,690


72,434

 

 

 

 

 


 

Net current assets

 

10,055


7,097


15,902

 

 

 

 

 


 

Non-current liabilities

 

 





Deferred tax liabilities

12

10,517


8,241


8,222

Trade and other payables

 

1,576


908


-

Provisions

 

1,583


1,848


1,560

Lease liabilities

10

29,180


28,018


27,928

 

 

 

 

 


 

Total non-current liabilities

 

42,856


39,015


37,710

 

 

 

 

 


 

Total liabilities

 

114,011


124,705


110,144



 

 

 


 

Net assets

4

111,005


97,828


106,020



 

 

 


 

Equity

 

 



 

 

Share capital

 

39,584


39,584


39,584

Share premium

 

13,573


13,573


13,573

Revaluation reserve

 

70


70


70

Own shares

 

(7)


(7)


(7)

Translation reserve

 

152


176


216

Retained earnings

 

57,633


44,432


52,584

 

 

 

 

 


 

Total equity


111,005


97,828


106,020



 

 

 


 








 

 



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2023

 

 


Six

months to

30 June


Six   months to

30 June


Year

to 31

December


 

Note

2023

£000


2022

£000


2022

£000

Profit/(loss) before tax from:







Continuing operations


9,987


8,857


19,934

Discontinued operations


-


(87)


(87)


 

 


 


 

Total operations


9,987


8,770


19,847

Adjustments for:


 





   Amortisation of intangible assets


2,039


1,780


3,577

   Depreciation of property, plant, equipment


814


693


1,498

   Depreciation of right-of-use assets


3,843


3,768


7,542

   (Gain)/loss on disposal of property,plant,equipment


(4)


132


71

   Loss on disposal of subsidiaries


-


87


87

   Share-based payment expense


254


337


607

   Finance costs


813


747


1,562


 

 


 


 

Operating cash flows before movements in working capital


 

17,746


 

16,314


 

34,791

   Decrease/(increase) in inventories


3,253


(1,517)


1,025

   Decrease/(increase) in receivables


5,994


(586)


285

   Decrease in payables


(1,793)


(2,923)


(9,027)

   Decrease in provisions


(1,023)


(360)


(249)

   Pension contributions less current service costs


(625)


(1,322)


(1,838)


 

 


 


 

Cash generated from operations


23,552


9,606


24,987

   Income taxes paid


(2,192)


(2,322)


(5,251)

   Interest paid


(1,060)


(830)


(1,738)


 

 


 


 

Net cash inflow from operating activities


20,300


6,454


17,998


 

 


 


 

Investing activities

 

 



 

 

Acquisitions

9

(11,370)


(9,268)


(8,655)

Proceeds from sales of subsidiaries


-


166


166

Proceeds on disposal of property, plant and equipment

60


92


181

Purchases of property, plant and equipment

 

(1,366)


(2,271)


(3,285)


 

 


 


 

Net cash flows from investing activities

 

(12,676)


(11,281)


(11,593)


 

 


 


 

Financing activities

 

 



 

 

Dividends paid

7

(3,990)


(3,677)


(5,102)

Drawdown of bank borrowings

 

(316)


5,957


(865)

Repayment of lease obligations

10

(3,524)


(3,640)


(7,215)


 

 


 


 

Net cash flows from financing activities

(7,830)


(1,360)


(13,182)


 

 


 


 

Net decrease in cash and cash equivalents

(206)


(6,187)


(6,777)



 





Cash and cash equivalents at beginning of period

 

5,346


12,123


12,123


 

 


 


 

Cash and cash equivalents at end of period


5,140


5,936


5,346


 

 


 


 



 

MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

Reconciliation to condensed consolidated cash flow statement

 

 

 

 

 

Cash and cash equivalents per the balance sheet

 

 

 

 

 

10

Six months to 30 June 2023

£000

 

5,863


Six months to 30 June 2022

£000

 

6,804


Year to 31 December 2022

£000

 

5,706

Bank overdraft


(723)


(868)


(360)


 

 


 


 

Balances per the cash flow statement


5,140


5,936


5,346


 

 


 


 

 

1.         Basis of preparation

Macfarlane Group PLC is a public company listed on the London Stock Exchange, incorporated and domiciled in the United Kingdom and registered in Scotland.

The Group's annual financial statements for the year ended 31 December 2022 were prepared in accordance with United Kingdom adopted international accounting standards.  This condensed set of interim financial statements has been prepared in accordance with United Kingdom adopted International Financial Reporting Standard IAS 34 Interim Financial Reporting.

This condensed set of interim financial statements has been prepared applying the accounting policies that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2022.  There were no major changes from the adoption of new IFRS's in 2023.

Critical judgements and key sources of estimation uncertainty

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.

Critical judgements

The directors have assessed the impact of climate change and consider that this does not have a significant impact on these financial statements.

Property provisions of £2.3m have been recognised as at 30 June 2023 (31 December 2022: £3.3m), representing the directors' best estimate of dilapidations on property leases.  The directors have made the judgement that no provision is required for certain property leases where there is no intention to exit, having considered a number of factors including the extent of modifications to the property, the terms of the lease agreement, and the condition of the property.

No other significant critical judgements have been made in the current or prior year.

Key sources of estimation uncertainty

The key sources of estimation uncertainty that have a significant effect on the carrying amounts of assets and liabilities are discussed below:

·   The determination of any defined benefit pension scheme asset or liability is based on assumptions determined with independent actuarial advice. The key assumptions used include discount rate and inflation rate assumptions, for which a sensitivity analysis is provided in note 11.  The Directors consider that those sensitivities represent reasonable sensitivities which could occur in the next financial period.

·   The provision held against trade receivables considers 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.



 

 

MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.         Basis of preparation

Business activities, risks and financing

The Group's business activities, together with the factors likely to affect its future development, performance and financial position, are set out in the Interim Management Report.

The Group's principal financial risks in the medium term relate to liquidity and credit risk.  Liquidity risk is managed by ensuring that the Group's day-to-day working capital requirements are met by having access to committed banking facilities with suitable terms and conditions to accommodate the requirements of the Group's operations.  Credit risk is managed by applying considerable rigour in managing the Group's trade receivables. Although the current economic climate indicates an increased level of risk, the Directors believe that the Group is adequately placed to manage its financial risks effectively.

The Group's banking arrangement with Bank of Scotland PLC comprises a committed facility of £35m, expiring in December 2025, secured over the assets of Macfarlane Group UK Limited, GWP Group Limited and GWP Holdings Limited subsidiaries of Macfarlane Group PLC 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 profit projections, which they believe are based on prudent market data and past experience taking account of reasonably possible changes in trading performance given current market and economic conditions. The Directors are of the opinion that these projections show that the Group should be able to operate within its current facilities and comply with its banking covenants.

In assessing the going concern basis, the Directors have considered the Group's business activities, the financial position of the Group and the Group's risks and uncertainties.  The Directors have a reasonable expectation that 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 24 August 2023.  As in previous years, the set of condensed financial statements for the half-year is unaudited.

2.         Alternative performance measure

In addition to the various performance measures defined under IFRS the Group reports operating profit before amortisation as a measure to assist in understanding the underlying performance of the Group and its businesses when compared to similar companies.  Operating profit before amortisation is not defined under IFRS and, as a result, does not comply with Generally Accepted Accounting Practice ("GAAP") and is therefore known as an alternative performance measure.  Accordingly, this measure, which is not designed to be a substitute for any of the IFRS measures of performance, may not be directly comparable with other companies' alternative performance measures.  Operating profit before amortisation is defined as operating profit before customer relationships and brand values amortisation reconciled in the table below.

 

 

 

Continuing operations

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Operating profit before amortisation

12,839

11,384

25,073

Customer relationships/brand values amortisation

(2,039)

(1,780)

(3,577)


 

 

 

Operating profit

10,800

9,604

21,496


 

 

 

 



 

MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

3.         General information

Comparative figures for the year ended 31 December 2022 are extracted from Macfarlane Group's statutory accounts for 2022.  The information for the year ended 31 December 2022 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 23 February 2023 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.

4.         Segmental information

The Group's principal business segment is Packaging Distribution, comprising the distribution of packaging materials and supply of storage services in the UK, Ireland and Europe.  Other operations for the design, manufacture and assembly of timber, corrugated and foam-based packaging materials in the UK comprise one segment headed Manufacturing Operations.

 

 

 

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Group segment - total revenue

 


 

Packaging Distribution

123,955

123,533

259,651

Manufacturing Operations

20,194

17,739

35,045

Inter-segment revenue

(2,537)

(2,063)

(4,265)


 

 

 

Revenue

141,612

139,209

290,431


 

 

 

Trading results - continuing operations

 


 

Packaging Distribution

 


 

Total and external revenue

123,955

123,533

259,651

Cost of sales

(81,563)

(83,627)

(176,193)


 

 

 

Gross profit

42,392

39,906

83,458

Net operating expenses

(32,954)

(31,022)

(63,590)


 

 

 

Operating profit before amortisation

9,438

8,884

19,868

Amortisation

(1,461)

(1,379)

(2,774)


 

 

 

Operating profit

7,977

7,505

17,094


 

 

 

 

Manufacturing Operations

 



Total revenue

20,194

17,739

35,045

Inter-segment revenue

(2,537)

(2,063)

(4,265)


 

 

 

External revenue

17,657

15,676

30,780

Cost of sales

(8,729)

(8,486)

(16,181)


 

 

 

Gross profit

8,928

7,190

14,599

Net operating expenses

(5,527)

(4,690)

(9,394)


 

 

 

Operating profit before amortisation and impairment

3,401

2,500

5,205

Amortisation

(578)

(401)

(803)


 

 

 

Operating profit

2,823

2,099

4,402


 

 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

4.         Segmental information (continued)

 

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Operating profit - continuing operations

 



Packaging Distribution

7,977

7,505

17,094

Manufacturing Operations

2,823

2,099

4,402


 

 

 

Operating profit

10,800

9,604

21,496

Finance costs                     (note 5)

(813)

(747)

(1,562)


 

 

 

Profit before tax

9,987

8,857

19,934

Tax                                         (note 6)

(2,477)7,

(1,882)

(4,210)


 

 

 

Profit for the period from continuing operations

7,510

6,975

15,724

Loss for the period from discontinued operations

-

(87)

(87)


 

 

 

Profit for the period

7,510

6,888

15,637


 

 

 

 

 

30 June

2023

£000

30 June

2022

£000

31 December

2022

£000

Total assets

 



Packaging Distribution

183,439

192,221

188,866

Manufacturing Operations

41,577

30,312

27,298


 

 

 

Total assets

225,016

222,533

216,164


 

 

 

Net assets

 



Packaging Distribution

81,094

77,718

85,929

Manufacturing Operations

29,911

20,110

20,091


 

 

 

Net assets

111,005

97,828

106,020


 

 

 

 

5.         Finance costs

 

Six months

to 30 June

2023

£000

 

Six months

to 30 June

2022

£000

 

Year to 31

December

2022

£000


 



Interest on bank borrowings

399

279

616

Interest on leases

661

551

1,122

Finance income relating to defined benefit pension scheme (note 11)

(247)

(83)

(176)


 

 

 

Total finance costs from continuing operations

813

747

1,562


 

 

 








MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

6.         Tax

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Current tax

 



   UK corporation tax

2,376

1,786

3,680

   Foreign tax

291

113

253

   Prior year adjustments

24

(21)

(21)


 

 

 

Total current tax

2,691

1,878

3,912


 

 

 

Deferred tax      current year

(214)

4

207

                                prior year adjustments

-

-

91


 

 

 

Total deferred tax                                                           (note 12)

(214)

4

298


 

 

 

Total tax

2,477

1,882

4,210


 

 

 

Tax for the six months ended 30 June 2023 has been charged at 23.50% (2022 - 19.00%) representing the best estimate of the effective tax charge for the full year.  Deferred tax assets and liabilities at 30 June 2023 have been calculated based on the long-term corporation tax rate of 25%, which had been substantively enacted at that date.



 

MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

7.         Dividends

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Amounts recognised as distributions to equity holders in the period



Final dividend                    2.52p per share (2022: 2.33 per share)

3,990

3,677

3,677

Interim dividend                                              (2022: 0.90p per share)

-

-

1,425


 

 

 

Distributions in the period

3,990

3,677

5,102


 

 

 

An interim dividend of 0.94p per share, payable on 12 October 2023, was declared on 24 August 2023 and has therefore not been included as a liability in these condensed financial statements.

8.         Earnings per share

 

 

Earnings

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Profit for the period from continuing operations

7,510

6,975

15,724


 

 

 

Loss for the period from discontinued operations

-

(87)

(87)


 

 

 

Profit for the period from continuing and discontinued operations

7,510

6,888

15,637


 

 

 

 

Number of shares '000

30 June

2023

30 June

2022

31 December 2022

Weighted average number of shares in issue for the

purposes of basic earnings per share

 

158,337

 

157,987

 

158,162

Effect of Long-Term Incentive Plan awards in issue

1,574

1,834

1,661


 

 

 

Weighted average number of shares in issue for the

purposes of diluted earnings per share

 

159,911

 

159,821

 

159,823


 

 

 

 

 



Basic earnings per share from continuing operations

4.74p

4.41p

9.94p


 

 

 

Diluted earnings per share from continuing operations

4.70p

4.36p

9.84p


 

 

 

Basic earnings per share from discontinued operations

-p

(0.06)p

(0.06)p


 

 

 

Diluted earnings per share from discontinued operations

-p

(0.05)p

(0.05)p


 

 

 

Basic earnings per share from continuing and discontinued operations

 

4.74p

 

4.36p

 

9.89p


 

 

 

Diluted earnings per share from continuing and discontinued operations

 

4.70p

 

4.31p

 

9.78p


 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 
9.         Acquisitions

On 3 March 2023, Macfarlane Group UK Limited ("MGUK") acquired 100% of A.E. Sutton Limited, for a total consideration of £13.5m and inherited net cash/bank balances of £5.3m.  Contingent consideration of £2.5m is payable in the second quarters of 2024 and 2025, subject to certain trading targets being met in the two twelve-month periods ending on 29 February 2024 and 28 February 2025 respectively.

On 28 April 2023, MGUK acquired 100% of A & G Holdings Limited, the parent company of Gottlieb Packaging Materials Limited, for a total consideration of £4.2m and inherited net cash/bank balances  of £0.9m.  Contingent consideration of £0.8m is payable in the second quarters of 2024 and 2025, subject to certain trading targets being met in the two twelve-month periods ending on 30 April 2024 and 2025 respectively.

£2.1m was paid in 2023 to the sellers of GWP Holdings Limited, acquired in 2021, as the profit target was met for the twelve-month period ending 28 February 2023.  £0.8m was held back subject to conclusion of an outstanding warranty claim.

£0.8m was paid in 2023 to the sellers of Carters (Cornwall) Limited, acquired in 2021, as the profit target was met for the twelve-month period ending 31 March 2023.

Contingent considerations are recognised as a liability in trade and other payables and are remeasured to fair value of £3.8m at the balance sheet date based on a range of outcomes between £Nil and £5.6m.  Trading in the post-acquisition period supports the remeasured value of £3.8m.

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

 

 

 

Net assets acquired

Six months

to 30 June

2023

£000

Other intangible assets

7,838

Property, plant and equipment

2,241

Inventories

574

Trade and other receivables

1,522

Cash and bank balances

6,194

Trade and other payables

(1,817)

Current tax liabilities

(361)

Lease liabilities    

(1,521)

Deferred tax liabilities

(2,083)

 

 

Net assets acquired

12,587

Goodwill

5,047

 

 

Total consideration

17,634

Contingent consideration on acquisitions      Current year

(2,985)

                                                                                Prior years

2,915

 

 

Total cash consideration

17,564


 

Net cash outflow arising on acquisition

 

Cash consideration

(17,564)

Cash and bank borrowings acquired

6,194


 

Net cash outflow

(11,370)


 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

10.       Analysis of changes in net debt





 

Cash and

cash

equivalents

£000

 

Bank

borrowing

£000

 

Lease

liabilities

£000

 

Total

debt

£000

Total debt

 




At 1 January 2022

12,315

(9,840)

(34,942)

(32,467)

Non-cash movements




 

          Acquisitions

          Disposals

-

-

-

-

(739)

163

(739)

163

          New leases

          Exchange movements

          Lease modifications

-

-

-

-

-

-

(1,743)

(4)

(532)

(1,743)

(4)

(532)

Cash movements

(5,511)

(6,633)

3,640

(8,504)


 

 

 

 

At 30 June 2022

6,804

(16,473)

(34,157)

(43,826)

Non-cash movements




 

                Acquisitions

-

-

(895)

(895)

                Disposals

-

-

74

74

                New leases

-

-

(2,803)

(2,803)

                Exchange movements

-

-

4

4

                Lease modifications

-

-

(367)

(367)

Cash movements

(1,098)

7,330

3,575

9,807


 

 

 

 

At 31 December 2022

5,706

(9,143)

(34,569)

(38,006)

Non-cash movements




 

          Acquisitions

-

-

(1,521)

(1,521)

          Disposals

-

-

52

52

          New leases

          Exchange movements

          Lease modifications

-

-

-

-

-

-

(634)

57

(3,131)

(634)

57

(3,131)

Cash movements

157

(47)

3,524

3,634


 

 

 

 

At 30 June 2023

5,863

(9,190)

(36,222)

(39,549)


 

 

 

 

 

Total cash movements for 2022

(6,609)

697

7,215

1,303


 

 

 

 

 

Net bank debt

 

 

 

 

 

 

 

 

Net bank

debt

£000

 

At 30 June 2023

5,863

(9,190)

 

(3,327)


 

 

 

At 31 December 2022

5,706

(9,143)


(3,437)


 

 

 

 

Cash and cash equivalents (which are presented as a single class of asset on the balance sheet) comprise cash at bank and other short-term highly liquid investments with maturity of three months or less.



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

11.       Retirement benefit obligations

The figures below have been prepared by Aon based on the results of the triennial actuarial valuation as at 1 May 2020 updated to 30 June 2022, 31 December 2022 and 30 June 2023.  The scheme investments and the scheme's net surplus position as calculated under IAS 19 are as follows:

 

Investment class

30 June

2023

£000

30 June

2022

£000

31 December

2022

£000

Equities

 



UK equity funds

6,005

7,304

6,616

Overseas equity funds

15,608

13,234

13,671

Multi-asset diversified growth funds

12,259

27,061

12,674

Bonds

 



Multi asset credit fund

1,024

-

-

Liability-driven Investment funds

20,956

14,314

23,352

Other investments

 



European loan fund

7,024

6,332

6,546

Secured property income fund

5,638

7,293

5,670

Cash

736

1,010

1,957


 

 

 

Fair value of Scheme investments

69,250

76,548

70,486

Present value of Scheme liabilities

(56,479)

(67,701)

(60,287)


 

 

 

Pension scheme surplus

12,771

8,847

10,199


 

 

 

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

Assumptions

30 June 2023

30 June 2022

31 December 2022

Discount rate

5.30%

3.80%

4.80%

Rate of increase in pensionable salaries

0.00%

0.00%

0.00%

Rate of increase in pensions in payment

3% or 5%

for fixed increases

or 3.17% for LPI

3% or 5%

for fixed increases

or 3.22% for LPI

3% or 5%

for fixed increases

or 3.17% for LPI

PIE take up rate

65%

65%

65%

Inflation assumption (RPI)

3.40%

3.30%

3.40%

Inflation assumption (CPI)

2.80%

2.80%

2.80%

Life expectancy beyond normal retirement age of 65



Scheme member aged 55            Male                      22.6 years

22.9 years

22.6 years

                                                          Female                 24.3 years

24.5 years

24.2 years

Scheme member aged 65            Male

22.1 years

22.3 years

22.0 years

                                                                Female

23.5 years

23.7 years

23.4 years

Average uplift for GMP service

0.40%

0.40%

0.40%

 

 

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31 December

2022

£000

Movement in scheme surplus in the period

 



At start of period

10,199

8,267

8,267

Current service cost

-

(24)

(42)

Employer contributions

625

1,346

1,991

Past service costs (curtailed due to closure of the scheme)

-

-

(111)

Net finance income

247

83

176

Re-measurement of pension scheme liability in the period

1,700

(825)

(82)


 

 

 

At end of period

12,771

8,847

10,199


 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

11.       Retirement benefit obligations (continued)

Sensitivity to key assumptions

Key assumptions used for IAS 19 are discount rate, inflation and mortality.  If different assumptions were used, then this could have a material effect on the surplus.  Assuming all other assumptions are held static then a movement in the following key assumptions would affect the level of the surplus as shown below:-

 

Assumptions

30 June

2023

£000

30 June

2022

£000

31 December

2022

£000


 



Discount rate movement of +3.0%

20,327

32,495

21,698

Inflation rate movement of +0.25%

(541)

(848)

(577)

Mortality movement of +0.1 year in age rating

127

203

136

Positive figures reflect a reduction in scheme liabilities and therefore an increase in the scheme surplus.

 

Six months

to 30 June

2023

£000

Six months

to 30 June

2022

£000

Year to 31

December

2022

£000

Movement in fair value of Scheme investments

 



Scheme investments at start of period

70,486

100,423

100,423

Interest income

1,645

947

1,886

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

(1,800)

 (23,758)

(29,475)

Contributions from sponsoring companies

625

1,346

1,991

Contribution from scheme members

-

4

9

Benefits paid

(1,706)

(2,414)

(4,348)


 

 

 

Scheme investments at end of period

69,250

76,548

70,486

 

 

 

 

Movement in present value of Scheme liabilities

 



Scheme liabilities at start of period

(60,287)

(92,156)

(92,156)

Normal service costs

-

(24)

(42)

Past service costs (curtailed due to closure of the scheme)

-

-

(111)

Interest cost

(1,398)

(864)

(1,710)

Contribution from scheme members

-

(4)

(9)

Actuarial gain due to the changes in financial and experience

3,500

22,933

29,393

Benefits paid

1,706

2,414

4,348


 

 

 

Scheme liabilities at end of period

(56,479)

(67,701)

(60,287)


 

 

 

Basis of recognition of surplus

Macfarlane Group PLC, based on legal opinion provided, has an unconditional right to a refund of surplus assets assuming the full settlement of plan liabilities in the event of a wind up of the Macfarlane Group PLC Pension & Life Assurance Scheme (1974) (the 'Scheme').  Furthermore, in the ordinary course of business the trustees have no rights to unilaterally wind up the Scheme, or otherwise augment the benefits due to members of the Scheme.  Based on these rights, any net surplus in the Scheme is recognised in full.

Investments

The Trustees review the Scheme investments regularly and consult with the Company regarding any changes.

Funding

Following the completion of the triennial actuarial valuation at 1 May 2020, Macfarlane Group PLC is paying deficit reduction contributions of £1.25m per annum with a deficit recovery period of 4 years.  The Group paid a further £0.7m into the Scheme in H1 2022 to satisfy the debt agreed with the trustees in relation to the cessation of Macfarlane Labels Limited as a sponsoring employer.



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

12.       Deferred tax

Tax losses less

accelerated capital allowances

£000

 

Other intangible assets

£000

 

Retirement

Benefit

Obligations

£000

 

 

 

Total

£000

 

 

 



At 1 January 2022

(319)

(5,065)

(2,069)

(7,453)

Acquisitions

-

(971)

-

(971)

Credited/(charged) in income statement




 

      Current period

4

341

(349)

(4)

Charged in other comprehensive income

-

-

206

206

 

 

 

 

 

At 30 June 2022

(315)

(5,695)

(2,212)

(8,222)

Acquisitions

-

584

-

584

(Charged)/credited in income statement




 

      Current period

(488)

348

(154)

(294)

Charged in other comprehensive income

-

-

(185)

(185)

 

 

 

 

 

At 1 January 2023

(803)

(4,763)

(2,551)

(8,117)

Acquisitions

(124)

(1,959)

-

(2,083)

Credited/(charged) in income statement




 

                Current period

(31)

462

(217)

214

Credited in other comprehensive income

-

-

(425)

(425)

 

 

 

 

 

At 30 June 2023

(958)

(6,260)

(3,193)

10,411


 

 

 

 


 

 

 

 

Deferred tax assets

106

-

-

106

Deferred tax liabilities

(1,064)

(6,260)

(3,193)

(10,517)

 

 

 

 

 

At 30 June 2023

(958)

(6,260)

(3,193)

(10,411)


 

 

 

 

13.          Related party transactions

Related party transactions for 2022 are disclosed in note 27 of the 2022 Annual Report.  The directors are satisfied that, other than the changes in the Retirement Benefit Obligations disclosed in note 11 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 2023 will be disclosed in the Group's 2023 Annual Report.  Peter Atkinson and Ivor Gray hold option awards over 1,468,294 and 658,910 ordinary shares respectively under the Macfarlane Group PLC Long Term Incentive Plan awarded in 2020, 2021, 2022 and 2023.

There are no other related party transactions during the six-month period which require disclosure.



 

MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2023

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

14.          Post balance sheet events

There are no post balance sheet events requiring disclosure.

15.          Interim Report

The interim report will be posted to shareholders on 11 September 2023.  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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