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RNS
Macfarlane Group PLC  -  MACF   

Final Results

Released 07:00 22-Feb-2018

RNS Number : 5822F
Macfarlane Group PLC
22 February 2018
 

 

22 February 2018

 

ANNUAL RESULTS FOR THE YEAR TO 31 DECEMBER 2017

 

Financial Highlights

2017

2016

Year on Year Change

 

 

 

 

Turnover

£196.0m

£179.8m

+9%

Profit before tax

£9.3m

£7.8m

+19%

Diluted earnings per share

5.22p

4.64p

+13%

Proposed full year dividend

2.10p

1.95p

+8%

 

Macfarlane Group PLC achieved another year of growth in 2017 with sales of £196.0m, (2016: £179.8m) 9% ahead of the previous year and profit before tax of £9.3m (2016: £7.8m), 19% ahead of 2016.  The trading performance continued the positive trends of recent years and the results were in line with market expectations.

Trading

Packaging Distribution increased sales by 10% to £171.8m (2016: £155.9m) with 3% achieved from organic growth and the remainder from acquisitions, both those in 2017 and the full year benefit of those completed in 2016, all of which continue to perform well.  Gross margin in Packaging Distribution grew to 29.4%, (2016: 29.0%) reflecting the effective management of input price increases as well as a strong contribution from the Greenwoods' business acquired in September 2017.  This resulted in Packaging Distribution achieving a 20% increase in operating profit to £9.4m (2016: £7.8m).

Sales in our Manufacturing Operations at £24.2m (2016: £23.9m) were 1% up on the previous year.  Gross margin reduced from 43.8% in 2016 to 40.7% in 2017, mainly due to operational pressures in Packaging Design and Manufacture and an adverse exchange rate impact in our Labels business.  As a result, Manufacturing Division operating profit in 2017 was £0.7m, £0.2m below the 2016 result.

After charging interest of £0.8m (2016: £0.9m), Group profit before tax totalled £9.3m (2016: £7.8m) an increase of 19%.  Following the share issue in September 2017 to support the Greenwoods' acquisition, diluted earnings per share for 2017 increased by 13% from 4.64p to 5.22p per share.

Dividend

The Board is proposing a final dividend of 1.50 pence per share, amounting to a full year dividend of 2.10 pence per share, an 8% increase on the prior year's dividend of 1.95 pence per share.  Subject to the approval of shareholders at the Annual General Meeting on Tuesday 15 May 2018, this dividend will be paid on Thursday 7 June 2018 to those shareholders on the register at Friday 18 May 2018.

Net Bank Debt and Pension Scheme

The Group's net bank borrowing at 31 December 2017 decreased by £1.0m to £14.3m from £15.3m at the prior year-end.  The Group's existing bank facility with Lloyds Banking Group of £25.0 million is available until June 2019 and accommodates normal working capital requirements as well as supporting acquisition funding.  As part of the Group's long-term financing strategy, it is anticipated that these facilities will be extended or replaced over the course of 2018.

The Group's pension deficit at 31 December 2017 reduced by £2.7m to £11.8m, (2016: £14.5m) primarily due to the Group making deficit recovery contributions in the year.  Despite the continued reduction in the discount rate, which increased the value of the pension liabilities, this was largely offset by increases in the value of the scheme's holding in liability-driven investments, reflecting an appropriate prudent investment strategy for a mature pension scheme.

Board changes

Graeme Bissett stood down as Chairman at the end of September 2017 and the Board would like to thank Graeme for his contribution as Chairman and prior to that as a non-executive Director.

On 8 January 2018, James Baird was appointed to the Board as a non-executive Director and Chairman of the Audit Committee and brings with him considerable financial experience both in the UK and Europe.

Mike Arrowsmith has indicated his intention to step down from the Board later this year, having completed six years as a non-executive Director.  A process to recruit a replacement for Mike is under way and an announcement will be made once the selection process is complete.

Outlook

The Board remains confident that its strategy to position the business to serve key growth markets continues to be effective.

Commenting on the 2017 results, Stuart Paterson, Chairman, said:

"The 19% increase in pre-tax profits in 2017 represents the eighth consecutive year of profit growth for Macfarlane Group.  Group profitability in the year to date is ahead of the same period in 2017.

Our strategy continues to be the delivery of sustainable profit growth by focusing on added value products and services in our target market sectors, combined with efficiency improvements and the identification and completion of value-enhancing acquisitions.  This strategy, which continues to be refined, has served all stakeholders well in recent years and we remain confident that it will continue to do so.  Macfarlane Group's performance in 2017 reflects the successful implementation of this strategy and we are confident that the Group will demonstrate further progress in 2018."

 

Further enquiries:

Macfarlane Group

Tel: 0141 333 9666

 

Stuart Paterson                Chairman

 

 

Peter Atkinson                 Chief Executive

 

 

John Love                            Finance Director

 

 

 

 

 

Spreng Thomson

Tel: 0141 548 5191

 

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 60 years' experience in the UK packaging industry

·      Macfarlane Group's businesses are:

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

Labels designs and prints high quality self-adhesive and resealable labels, principally for FMCG companies

Packaging Design and Manufacture designs and produces protective packaging for high value, fragile products

·      Macfarlane Group employs over 850 people at 29 sites, principally in the UK, but also in Ireland and Sweden.

·      The company has 20,000+ 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.


 

Business Review

 

Group performance

Revenue

2017

£000

Profit

2017

£000

Revenue

2016

£000

Profit

2016

£000

Segment

 

 

 

 

Packaging Distribution

171,771

9,436

155,900

7,836

Manufacturing Operations

24,220

653

23,872

876

 

 

 

 

 

Revenue from continuing operations

195,991

 

179,772

 

 

 

 

 

 

Operating profit

 

10,089

 

8,712

Net finance costs

 

(828)

 

(901)

 

 

 

 

 

Profit before tax - continuing operations

 

9,261

 

7,811

 

 

 

 

 

Macfarlane Packaging Distribution is the UK's leading specialist distributor of protective packaging materials.  Macfarlane operates a Stock and Serve supply model from 21 Regional Distribution Centres (RDCs) and 3 satellite sites, supplying 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 and 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 and regular monitoring of 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.

Macfarlane Packaging benefits its customers by enabling them to ensure their products are cost-effectively protected in transit and storage by offering 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.

 

Base

business

Acquisition

impact

 

2017

 

2016

 

 

£000

£000

£000

£000

2017 Growth

 

 

 

 

 

 

Sales

160,236

11,535

171,771

155,900

10%

Cost of sales

(113,519)

(7,804)

(121,323)

(110,641)

 

 

 

 

 

 

 

Gross margin

46,717

3,731

50,448

45,259

11%

Net operating expenses

(38,648)

(2,364)

(41,012)

(37,423)

10%

 

 

 

 

 

 

Operating profit

8,069

1,367

9,436

7,836

20%

 

 

 

 

 

 

Macfarlane Packaging Distribution grew sales by 10% in 2017 comprising 3% organic growth in the base business and 7% from the contribution of the 2017 acquisitions of Greenwoods Stock Boxes and Nottingham Recycling Limited as well as the incremental full year contribution from the 2016 acquisitions of Nelsons for Cartons & Packaging Limited, Colton Packaging Teesside and the packaging business of Edward McNeil Limited.

The business achieved growth in the supply of protective packaging to internet retailers both directly and through our partnerships with major Third Party Logistics ("3PL") customers with over 22% of sales relating to internet retailers.  During 2017 our Innovation Lab contributed to a number of new business wins and will continue to play a key role in our sales growth plans for 2018 and beyond.

Gross margin in Packaging Distribution was 29.4%, (2016: 29.0%) with effective management of input price increases as well as a strong contribution from the Greenwoods' acquisition.

Overheads increased as a result of the impact of acquisitions, but cost control remained strong with an improving overhead to sales ratio of 23.9% compared with 24.0% in 2016.

Operating profit in the Packaging Distribution business at £9.4 million grew by 20% versus 2016.

 

Future Plans

2018 plans are focused on growing sales and improving profitability through the following actions:

Sales Growth

l Maintaining our focus on the growth potential for protective packaging in our key market segments -the e-commerce sector, National Accounts and 3PL operators;

l Accelerating the growth in new business through effective use of our Innovation Lab;

l Demonstrating our ability to support customers to reduce "The Significant Six" packaging costs to optimise their Total Cost of Packaging solutions;

l Developing our web-based offerings through www.macfarlanepackaging.com and Customer Connect to enable customers to further improve access to our full range of products and services;

l Growing sales of new products brought to the Group through recent acquisitions; and

l Offering a service for UK based customers requiring European coverage.

Efficiency Improvements

l Improving our sourcing capabilities and our partnerships with key strategic suppliers;

l Implementing further operational savings in logistics by expanding the use of the Paragon vehicle management system and extending our warehouse best practice programme;

l Reducing operating costs by evaluating opportunities to consolidate fragmented parts of the existing property footprint;

l Integrating recent acquisitions following the completion of the respective earn-out periods; and

l Maintaining our focus on working capital management to reduce borrowing levels.

Acquisition Growth

l Supplementing organic growth through the identification and completion of further suitable high quality acquisition opportunities.

 

Manufacturing Operations comprise our Packaging Design and Manufacture business and our Labels business.

 

2017

2016

 

£000

£000

 

 

 

Sales

24,220

23,872

Cost of sales

(14,364)

(13,418)

 

 

 

Gross margin

9,856

10,454

Overheads

(9,203)

(9,578)

 

 

 

Operating profit

653

876

 

 

 

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 primary raw materials are corrugate, timber and foam.  The business operates from two manufacturing sites in Grantham and Westbury, supplying both directly to customers and also through the RDC network of the Packaging Distribution business.

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.

2017 sales for Packaging Design and Manufacture were 1% above those in 2016 despite volatile demand in certain market sectors.  This volatility created operational pressures and as a result profitability in 2017 was below that in 2016.  However actions implemented in the second half of 2017 showed improved profitability and the sales team has a strong pipeline of new customer relationships, which should benefit the business in 2018.

 

Future Plans

2018 plans for Packaging Design and Manufacture are:

l Accelerating sales growth, particularly in target market sectors e.g. Defence, Aerospace and Medical;

l Prioritising sales activity on the higher added-value bespoke composite pack product range;

l Improving operational performance; and

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

Our Labels business designs and prints self-adhesive labels for major 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 dependency on a small number of major customers.  Management works closely with these key customers to ensure high levels of service and to introduce product and service development initiatives to achieve competitive differentiation.

Although sales in 2017 were at similar levels to 2016, this was in line with our plans as we proactively exited relationships with lower margin customers, mainly in the lower added value and increasingly competitive self-adhesive labels market.  As the general public focuses on the issues of food waste and easy to open packs increases, the demand for resealable packaging is creating growth opportunities for the Macfarlane Labels' Reseal-it range.  Profit levels in 2017 were similar to those achieved in 2016 despite the unfavourable impact of exchange rates.

Future Plans

2018 plans for Labels are: -

·     Maintaining of the strategic focus on higher added value products and services to rebalance sales between our resealable and self-adhesive label ranges;

·     Continuing improvement in operational efficiency to mitigate sales price pressure; and

·     Developing the Reseal-it product in the US through the Printpack partnership, in Europe through new business wins and in the UK through penetration with key retailers.

 

 

2018 Outlook

Our sales efforts will focus on those segments of the retail market, such as e-commerce, which are forecast to show continued above average growth rates and those industrial markets where customers recognise the added value of a specialist protective packaging distributor.

During 2018 we will continue to look to acquire good quality protective packaging businesses, improve our geographic coverage, expand across the Macfarlane network the new products introduced by recent acquisitions, improve our operational efficiency by leveraging our property footprint and working more closely with strategic suppliers.

Macfarlane businesses all have strong market positions with differentiated product and service offerings.  We have a flexible business model and a clear strategic plan incorporating a range of actions, which are being effectively implemented and are reflected in our consistent, profitable growth in recent years.

Our future performance is largely dependent on the successful execution of actions to grow sales, increase efficiencies and bring high quality acquisitions into the Group.  With a focus on the most attractive UK market sectors for our products and services, combined with our successful track record of growth and acquisitions, we expect 2018 to be another year of progress for Macfarlane Group.

 

The principal risks and uncertainties faced by Macfarlane Group and factors mitigating these risks are detailed below.  These risks are complemented by an overall governance framework including clear and delegated authorities, business performance monitoring and appropriate insurance cover for a wide range of potential risks.  There is a dependence on good quality local management, which is supported by an investment in training and development and ongoing performance evaluation.

Risk Description

Mitigating Factors

Raw material prices

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 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 works closely with its supplier base to manage the scale and timing of price increases to end-users effectively.  Our IT systems monitor and measure our effectiveness in recovering supplier price changes. Where possible, alternative supplier relationships are maintained to minimise supplier dependency.  We work with customers to redesign packs and reduce packing cost to mitigate the impact of cost increases.

Funding defined benefit pension scheme

The Group's defined benefit pension scheme is sensitive to a number of key factors; investment returns, discount rates used to calculate scheme liabilities and mortality assumptions. The IAS 19 valuation of the Group's defined benefit pension scheme as at 31 December 2017 estimated the scheme deficit to be £11.8m, a decrease of £2.7m during 2017.  Small changes in these assumptions could mean that the deficit increases.

 

The scheme was closed to new members in 2002.

Benefits for active members were amended by freezing pensionable salaries at 30 April 2009 levels.

A Pension Increase Exchange option is available to offer flexibility to pensioners in the current level of pension benefits and the rate of future increases.

The investment profile is constantly reviewed to ensure continued matching of investments with the liability profile of the scheme.

Property

Given the multi-site nature of its business, the Group has a property portfolio comprising 3 owned sites and 32 leased sites of which 3 are sublet.  This portfolio gives rise to risks in relation to ongoing lease costs, dilapidations and fluctuations in value.

Where a site is non-operational the Group seeks to assign, sell or sub-lease the building to mitigate the financial impact.  If this is not possible, rental voids are provided on vacant properties taking into consideration the likely period of vacancy and incentives to re-let.

Financial liquidity, debt covenants, interest rates

The Group needs continuous access to funding to meet its trading obligations and to support organic growth and acquisitions.  There is a risk that the Group may be unable to obtain funds or that such funds will only be available on unfavourable terms.  The Group's borrowing facility comprises a committed facility of up to £25m. This includes requirements to comply with covenants, with a breach potentially resulting in borrowings being subject to more onerous conditions.

The Group seeks to maintain an appropriate level of committed bank facilities that provides sufficient headroom above peak projected borrowing requirements.  The Group continually monitors net debt and forecast cash flows to ensure that it will be able to meet its financial obligations as they fall due.  Compliance with debt covenants is monitored on a monthly basis and sensitivity analysis is applied to forecasts to assess the impact on covenants.

The existing facility, which is only partly utilised are in place until June 2019. As part of the Group's long-term financing strategy it is expected that this facility will be renewed or extended in 2018.

Decentralised structure

The Packaging Distribution business model reflects a decentralised approach with a high dependency on effective local decision-making.  There is a risk that the decentralised management control is less effective and local decisions do not meet corporate objectives.

 

The Group ensures that our staff have the right working environment, information and sales tools to enable them to meet corporate objectives.  A comprehensive management information system is also maintained with key performance indicators monitored consistently and regularly with actions taken when required.

Working capital

The Group has a significant investment in working capital in the form of trade receivables and inventories.  There is a risk that this investment is not fully recovered.

Inventory levels and order patterns are regularly reviewed and risks arising from holding bespoke stocks are managed by obtaining order cover from customers.

Acquisitions

The Group's growth strategy includes acquisitions as demonstrated in recent years. There is a risk that such acquisitions will not be available to the Group on acceptable terms in the future.

There is also a risk that the acquisitions will not be successful due to the loss of key people or customers following the acquisition or the acquired business not performing at the level expected which could potentially lead to impairment in the carrying value of the related intangible assets.  There are also execution risks around the failure to successfully integrate the acquired business into the Group.

 

The Group carefully reviews potential acquisition targets, ensuring that the focus is on businesses which complement the existing Group profile and provide opportunity for growth.  Having made a number of acquisitions in recent years, the Group has established due diligence and integration processes and procedures.  The use of earn-out mechanisms mitigates risk in the post-acquisition period.

The Group has a comprehensive management information system in place to monitor post-acquisition performance.

Goodwill and other intangible assets are tested for impairment on an annual basis.

 

There are a number of other risks that we manage which are not considered to be key risks.  In addition the Group is subject to the impact of general economic conditions including the uncertainty caused by Brexit, the competitive environment and risks associated with business continuity including cyber-security.  These are mitigated in ways common to all businesses and not specific to Macfarlane Group.

Viability statement

The Board has considered the Group's viability as part of its ongoing programme to manage risk.  Each year the Board reviews the Group's strategic plan for the forthcoming three-year period and challenges the Executive team on the plan's risks.  The plan reflects the Group's businesses, which have a broad spread of customers across a range of different sectors with some longer term contracts in place.  The assessment period of three years has been chosen as it is consistent with the Board's review of Group strategy, including assumptions regarding future growth rates for existing businesses and acceptable levels of performance in the period.

A robust financial model covering a three year period is maintained and regularly updated. The model is subject to sensitivity analysis which flexes a number of the main assumptions, namely: - future revenue growth, gross margins, operating costs, finance costs and working capital management.  The results of flexing these assumptions, both individually and in aggregate, are used to determine whether additional bank facilities will be required during the three year period.  The results indicated that no additional facilities would be required and assumed that existing facilities, due for renewal in June 2019 would be renewed on the current terms.

The Board has carried out a robust assessment of the principal risks facing the Group and how these risks affect the prospects of the Group and the strategic plan.  The review and analysis also considers the principal risks facing the Group as described on the current and previous page, which could prevent the Group from achieving its strategic objectives and the potential impact these risks could have on the Group's business model, future performance, solvency and liquidity over the assessment period.

The Directors' assessment has been made with reference to the resilience of the Group and the strength of its financial position, the Group's current strategy, the Board's risk appetite and the Group's principal risks and how these are managed.  Based on the assessment of these risks and the sensitivity analysis undertaken, the Board of Directors have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, for the next three years to December 2020.

 

Going Concern

The Directors, in their consideration of going concern, have reviewed the Group's cash flow forecasts and revenue projections, which are based on the Directors' past experience and their assessment of the current market outlook for the business.  The Group's business activities, together with the factors likely to affect its future development, performance and financial position are set out in the Chairman's Statement and Business Review above.

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 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. The Directors believe that the Group is adequately placed to manage its financial risks effectively, despite any economic uncertainty.

The Group's principal banking facility is in place until June 2019.  The Directors are of the opinion that the Group's cash forecasts and revenue projections, taking account of reasonably possible changes in trading performance given current market and economic conditions, show that the Group should be able to operate within its current facilities and comply with its banking covenants.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least the next twelve months.  For this reason they continue to adopt the going concern basis in preparing the financial statements.

Cautionary Statement

The Chairman's Statement and the Business Review on pages 1 to 7 have been prepared to provide additional information to members of the Company 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.

Responsibility Statement of the Directors

The responsibility statement below has been prepared in connection with the company's full annual report for the year ending 31 December 2017.  Certain parts of the full annual report are not included within this announcement.  The Directors of Macfarlane Group PLC are

S.R. Paterson                    Chairman

P.D. Atkinson                   Chief Executive

J. Love                                 Finance Director

M. Arrowsmith                Non-Executive Director and Senior Independent Director

R. McLellan                        Non-Executive Director

J. Baird                                Non-Executive Director

To the best of the knowledge of the Directors (whose names and functions are set out above), the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit for the Company and the undertakings included in the consolidation taken as a whole; and

Pursuant to Disclosure and Transparency Rules, Chapter 4, the Directors' Report of the Company's annual report includes a fair review of the development and performance of the business and the position of the Company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced by the business.

 

 

Peter Atkinson                                                                 John Love

Chief Executive                                                                Finance Director

22 February 2018                                                              22 February 2018


Macfarlane Group PLC

Consolidated income statement

For the year ended 31 December 2017

 

 

 

 

Note

 

2017

£000

 

2016

          £000

Continuing operations

 

 

 

Revenue

3

195,991

179,772

Cost of sales

 

(135,687)

(124,059)

 

 

 

 

Gross profit

 

60,304

55,713

Distribution costs

 

(8,208)

(7,622)

Administrative expenses

 

(42,007)

(39,379)

 

 

 

 

Operating profit

3

10,089

8,712

Finance costs

4

(828)

(901)

 

 

 

 

Profit before tax

 

9,261

7,811

Tax

5

(1,837)

(1,761)

 

 

 

 

Profit for the year

7

7,424

6,050

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

Basic

7

5.22p

4.67p

 

 

 

 

 

 

 

 

Diluted

7

5.22p

4.64p

 

 

 

 

 

 

Consolidated statement of comprehensive income

For the year ended 31 December 2017

 

 

 

Note

2017

£000

2016

          £000

Items that may be reclassified to profit or loss

 

 

 

Foreign currency translation differences - foreign operations

 

45

195

Items that will not be reclassified to profit or loss

 

 

 

Remeasurement of pension scheme liability

10

(223)

(5,552)

Tax recognised in other comprehensive income

 

 

 

                Tax on remeasurement of pension scheme liability

11

38

1,000

                Long-term corporation tax rate change

11

-

(146)

 

 

 

 

Other comprehensive expense for the year, net of tax

 

(140)

(4,503)

Profit for the year

 

7,424

6,050

 

 

 

 

Total comprehensive income for the year

 

7,284

1,547

 

 

 

 

 


 

 

Macfarlane Group PLC

Consolidated statement of changes in equity

For the year ended 31 December 2017

 

 

 

 

Note

Share

Capital

£000

Share

Premium

£000

Revaluation

Reserve

£000

Translation

Reserve

£000

Retained

Earnings

£000

 

Total

£000

 

 

 

 

 

 

 

 

At 1 January 2016

 

31,153

1,018

70

59

1,172

33,472

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

-

6,050

6,050

Foreign currency translation differences

 

 

-

 

-

 

-

 

195

 

-

 

195

Remeasurement of pension liability

 

10

 

-

 

-

 

-

 

-

 

(5,552)

 

(5,552)

Tax on remeasurement of pension liability

 

11

 

-

 

-

 

-

 

-

 

1,000

 

1,000

Long-term corporation tax rate change

 

11

 

-

 

-

 

-

 

-

 

(146)

 

(146)

 

 

 

 

 

 

 

 

Total other comprehensive income

-

-

-

195

1,352

1,547

 

 

 

 

 

 

 

 

Transactions with shareholders

 

 

 

 

 

 

 

Dividends

6

-

-

-

-

(2,358)

(2,358)

Credit for share-based payments

 

-

-

-

-

108

108

Issue of share capital

12

2,931

3,623

-

-

-

6,554

 

 

 

 

 

 

 

 

Total transactions with shareholders

2,931

3,623

-

-

(2,250)

4,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

 

34,084

4,641

70

254

274

39,323

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

-

7,424

7,424

Foreign currency translation differences

 

 

-

 

-

 

-

 

45

 

-

 

45

Remeasurement of pension liability

 

10

 

-

 

-

 

-

 

-

 

(223)

 

(223)

Tax on remeasurement of pension liability

 

11

 

-

 

-

 

-

 

-

 

38

 

38

 

 

 

 

 

 

 

 

Total other comprehensive income

-

-

-

45

7,239

7,284

 

 

 

 

 

 

 

 

Transactions with shareholders

 

 

 

 

 

 

 

Dividends

6

-

-

-

-

(2,854)

(2,854)

Charge for share-based payments

 

-

-

-

-

(180)

(180)

Issue of share capital

12

5,303

8,334

-

-

-

13,637

 

 

 

 

 

 

 

 

Total transactions with shareholders

5,303

8,334

-

-

(3,034)

10,603

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2017

 

39,387

12,975

70

299

4,479

57,210

 

 

 

 

 

 

 

 


 

 

Macfarlane Group PLC

Consolidated balance sheet at 31 December 2017

 

 

Note

2017

£000

2016

£000

Non-current assets

 

 

 

Goodwill and other intangible assets

 

57,234

44,002

Property, plant and equipment

 

8,630

7,770

Other receivables

 

296

425

Deferred tax assets

11

2,407

2,878

 

 

 

 

Total non-current assets

 

68,567

55,075

 

 

 

 

Current assets

 

 

 

Inventories

 

15,465

12,986

Trade and other receivables

 

52,578

48,572

Cash and cash equivalents

9

2,013

1,930

 

 

 

 

Total current assets

 

70,056

63,488

 

 

 

 

Total assets

3

138,623

118,563

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

49,100

43,202

Current tax payable

 

741

1,020

Finance lease liabilities

9

245

395

Bank borrowings

9

16,346

17,206

 

 

 

 

Total current liabilities

 

66,432

61,823

 

 

 

 

Net current assets

 

3,624

1,665

 

 

 

 

Non-current liabilities

 

 

 

Retirement benefit obligations

10

11,823

14,537

Deferred tax liabilities

11

3,048

1,697

Trade and other payables

 

13

781

Finance lease liabilities

9

97

402

 

 

 

 

Total non-current liabilities

 

14,981

17,417

 

 

 

 

Total liabilities

3

81,413

79,240

 

 

 

 

Net assets

 

57,210

39,323

 

 

 

 

Equity

 

 

 

Share capital

12

39,387

34,084

Share premium

12

12,975

4,641

Revaluation reserve

 

70

70

Translation reserve

 

299

254

Retained earnings

 

4,479

274

 

 

 

 

Total equity

3

57,210

39,323

 

 

 

 

 


Macfarlane Group PLC

Consolidated cash flow statement

For the year ended 31 December 2017

 

 

Note

2017

£000

2016

£000

 

 

 

 

Net cash inflow from operating activities

9

6,482

3,294

 

 

 

 

 

 

 

 

Investing activities

 

 

 

Acquisitions

8

(8,337)

(8,718)

Proceeds on disposal of property, plant and equipment

 

210

57

Purchases of property, plant and equipment

 

(1,740)

(1,144)

 

 

 

 

Net cash used in investing activities

 

(9,867)

(9,805)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

Dividends paid

6

(2,854)

(2,358)

Proceeds from issue of share capital (net of issue expenses)

12

7,637

5,554

(Repayment)/drawdown on bank borrowing facility

 

(860)

4,167

Repayments of obligations under finance leases

9

(455)

(329)

 

 

 

 

Net cash generated by financing activities

 

3,468

7,034

 

 

 

 

Net increase in cash and cash equivalents

9

83

523

 

 

 

 

Cash and cash equivalents at beginning of year

 

1,930

1,407

 

 

 

 

Cash and cash equivalents at end of year

9

2,013

1,930

 

 

 

 

 


Macfarlane Group PLC

Notes to the financial information

For the year ended 31 December 2017

1.         General information

             The financial information set out in this preliminary announcement does not constitute the Company's statutory financial statements as defined in Section 435 of the Companies Act 2006 and has been extracted from the full statutory accounts for the years ended 31 December 2017 and 31 December 2016 respectively.

The financial statements for 2017 were approved by the Board of Directors on 22 February 2018.  The auditor's report on the statutory financial statements for the year ended 31 December 2017 was unqualified pursuant to Section 498 of the Companies Act 2006 and did not contain a statement under sub-section 498 (2) or (3) of that Act.

The comparative figures for the financial year ended 31 December 2016 are not the Company's statutory accounts for that financial year.  Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies.  The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Details regarding the impact assessments for forthcoming IFRSs in financial years 2018 and 2019 will be set out in the Annual Report.

2.         Basis of preparation

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

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. The Directors believe that the Group is adequately placed to manage its financial risks effectively despite any economic uncertainty.

The Group's principal bank borrowing arrangement with Lloyds Banking Group PLC comprises a committed borrowing facility of £25 million available until June 2019 with an additional option to increase it further to £30 million.  The facility bears interest at normal commercial rates and carries standard financial covenants in relation to interest cover and levels of headroom over certain trade debtors of the Group.

The Directors are of the opinion that the Group's cash forecasts 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, show that the Group should be able to operate within its current facilities and comply with its banking covenants.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least the next twelve months.  For this reason they continue to adopt the going concern basis in preparing the financial statements for the year ended 31 December 2017.

Judgements, assumptions and estimation uncertainties

In preparing the 2017 financial statements from which this financial information has been extracted, management has made judgements, assumptions and estimates, which affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses.  Actual results may differ from the amounts estimated.  Estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to estimates are recognised prospectively.

The judgements, assumptions and estimation uncertainties made in applying accounting policies that have the most significant effect on the amounts recognised in these financial statements and therefore have the most significant risk of resulting in a material adjustment are as follows:-

(i)  Retirement benefit obligations

The valuation of the pension deficit is affected by small movements in key actuarial assumptions

(ii) Trade and other receivables

The provision for doubtful receivables is based on judgemental estimates over recoverable amounts

3.         Segmental information

The Group's principal business segment is Packaging Distribution, comprising the distribution of packaging materials and supply of storage and warehousing services in the UK.  This constitutes over 85% of Group revenue and profit.  The Group's Manufacturing Operations segment comprises the design, manufacture and assembly of timber, corrugated and foam-based packaging materials in the UK, the design, manufacture and supply of self-adhesive labels to a variety of FMCG customers in the UK & Europe and the design, manufacture and supply of resealable labels to a variety of FMCG customers in the UK, Europe and the USA.  No individual business segment within Manufacturing Operations represents more than 10% of Group revenue or income.

 

 

 

2017

£000

2016

£000

Packaging Distribution

 

 

Revenue

171,771

156,187

Cost of sales

(121,323)

(110,928)

 

 

 

Gross profit

50,448

45,259

Net operating expenses

(41,012)

(37,423)

 

 

 

Operating profit

9,436

7,836

 

 

 

Manufacturing Operations

 

 

Revenue

28,191

28,031

Cost of sales

(18,335)

(17,577)

 

 

 

Gross profit

9,856

10,454

Net operating expenses

(9,203)

(9,578)

 

 

 

Operating profit

653

876

 

 

 

 

            

 

2017

£000

2016

£000

 

Group segment - total revenue

 

 

 

 

Packaging Distribution

 

171,771

156,187

 

Manufacturing Operations

 

28,191

28,031

 

Inter-segment revenue

 

(3,971)

(4,446)

 

 

 

 

 

 

External revenue - continuing operations

 

195,991

179,772

 

 

 

 

 

 

 

 

 

 

 

Operating profit - continuing operations

 

 

 

 

Packaging Distribution

 

9,436

7,836

 

Manufacturing Operations

 

653

876

 

 

 

 

 

 

Operating profit - continuing operations

10,089

8,712

 

Finance costs

 

(828)

(901)

 

 

 

 

 

 

Profit before tax

 

9,261

7,811

 

Tax

 

(1,837)

(1,761)

 

 

 

 

 

 

Profit for the year

 

7,424

6,050

 

 

 

 

 

 

 

 

Assets

Liabilities

Net assets

 

 

£000

£000

£000

 

Group segments

 

 

 

 

Packaging Distribution

124,069

74,324

49,745

 

Manufacturing Operations

14,554

7,089

7,465

 

 

 

 

 

 

Net assets 2017

138,623

81,413

57,210

 

 

 

 

 

 

 

 

 

 

 

 

Assets

Liabilities

Net assets

 

 

£000

£000

£000

 

 

 

 

 

 

Packaging Distribution

105,034

72,503

32,531

 

Manufacturing Operations

13,529

6,737

6,792

 

 

 

 

 

 

Net assets 2016

118,563

79,240

39,323

 

 

 

 

 

 

 

 

 

 

 

 

4.         Finance costs

 

2017

£000

2016

£000

 

 

 

 

 

 

 

Interest on bank borrowings

(462)

(480)

 

 

Interest on obligations under finance leases

(18)

(48)

 

 

Net interest expense on retirement benefit obligation (see note 10)

(348)

(373)

 

 

 

 

 

 

 

Total finance costs

(828)

(901)

 

 

 

 

 

 

                   

 

5.        Tax

2017

£000

2016

£000

Current tax

 

 

   United Kingdom corporation tax at 19.25% (2016: 20.00%)

(1,551)

(1,409)

   Foreign tax

(62)

(79)

   Prior period adjustments

49

83

 

 

 

Total current tax

(1,564)

(1,405)

 

 

 

Deferred tax

 

 

   Current year

(273)

(196)

   Prior period adjustments

-

(160)

 

 

 

Total deferred tax (see note 11)

(273)

(356)

 

 

 

 

 

 

Total

(1,837)

(1,761)

 

 

 

The standard rate of tax based on the UK average rate of corporation tax, is 19.25% (2016 - 20.00%).  Taxation for other jurisdictions is calculated at the rates prevailing in these jurisdictions.  The actual tax charge for the current and previous year varies from 19.25% (2016 - 20.00%) of the results as set out in the consolidated income statement for the reasons set out in the following reconciliation:-

 

2017

£000

2016

£000

 

 

 

Profit before taxation

9,261

7,811

 

 

 

Tax on profit at 19.25% (2016 - 20.00%)

(1,783)

(1,562)

Factors affecting tax charge for the year:-

 

 

    Non-deductible expenses

(95)

(122)

    Difference on overseas tax rates

(8)

-

    Changes in estimates related to prior years

49

(77)

 

 

 

            Tax charge for the year

(1,837)

(1,761)

 

 

 

            Effective rate of tax for the year

19.8%

22.5%

 

 

 

 

6.        Dividends

2017

£000

2016

£000

            Amounts recognised as distributions to equity holders in the year:

 

 

Final dividend for the year ended 31 December 2016 of 1.40p per share                   (2015 - 1.29p per share)

 

1,909

 

1,608

Interim dividend for the year ended 31 December 2017 of 0.60p per share        (2016 - 0.55p per share)

 

945

 

750

 

 

 

 

2,854

2,358

 

 

 

In addition to the amounts shown above, a proposed dividend of 1.50p per share will be paid on 7 June 2018 to those shareholders on the register at 18 May 2018.  This is subject to approval by shareholders at the Annual General Meeting on 15 May 2018 and has not been included as a liability in these financial statements.

 

7.         Earnings per share

            The calculation of the basic and diluted earnings per share is based on the following data:

 

2017

£000

2016

£000

 

 

 

Earnings for the purposes of earnings per share

Profit for the year from continuing operations

 

7,424

 

6,050

 

 

 

 

 

 

Number of shares in issue for the purposes of calculating basic and diluted earnings per share

2017

No. of

shares '000

2016

No. of

shares '000

 

 

 

Weighted average number of shares in issue for the

purposes of basic earnings per share

 

142,228

 

129,496

Effect of dilutive potential ordinary shares due to share options

-

859

 

 

 

            Weighted average number of shares in issue for the

purposes of diluted earnings per share

 

142,228

 

130,355

 

 

 

 

 

 

Basic Earnings per share

5.22p

4.67p

 

 

 

 

 

 

Diluted Earnings per share

5.22p

4.64p

 

 

 

8.         Acquisitions

On 21 September 2017, the Group's subsidiary, Macfarlane Group UK Limited acquired the packaging business and selected assets of Greenwoods Stock Boxes Limited and 100% of the issued share capital of company Nottingham Recycling Limited, for a consideration of approximately £17.2 million.  £7.97 million was paid in cash on acquisition, and £6.0 million was settled by the issue of shares.  The deferred consideration of £3.25 million is payable in the final quarter of 2018, subject to certain trading targets being met in the twelve month period ending on 20 September 2018. 

In 2016, Macfarlane Group UK Limited acquired the business of Colton Packaging Teesside and the packaging business of Edward McNeil Limited for a combined consideration of approximately £3.0 million.  £2.7 million was paid in cash on acquisition, with the deferred consideration of £0.3 million payable in 2017, provided certain targets were achieved.  £0.25 million was paid in 2017.

In 2016 the Group acquired 100% of Nelsons for Cartons & Packaging Limited for a consideration of £7.2 million.  £4.7 million was paid in cash on acquisition, £1.0 million was settled by the issue of shares, with the deferred consideration of £1.5 million payable in two equal instalments in the final quarter of 2017 and 2018, subject to certain trading targets being met in the two twelve month periods ending on 29 July 2017 and 29 July 2018 respectively.  £0.75 million of this was paid in 2017 with the remainder payable in 2018.

All of these businesses are accounted for in the Packaging Distribution segment.  Goodwill arising on these acquisitions is attributable to the anticipated future profitability of the distribution of Group product ranges in the UK and anticipated operating synergies from future combinations of activities with the Packaging Distribution network. Fair values assigned to net assets acquired and consideration paid and payable are set out below:-

 

 

Greenwoods

£000

 

Nelsons

£000

Colton &

McNeil

£000

 

2017

£000

 

2016

£000

Net assets acquired

 

 

 

 

 

Other intangible assets

9,185

-

-

9,185

4,552

Property, plant and equipment

712

-

-

712

195

Inventories

1,109

-

-

1,109

1,542

Trade and other receivables

2,736

-

-

2,736

1,728

Cash and bank balances

625

-

-

625

696

Trade and other payables

(1,179)

-

-

(1,179)

(1,837)

Current tax liabilities

(12)

-

-

(12)

(256)

Finance lease liabilities

-

-

-

-

(7)

Deferred tax liabilities

(1,587)

-

-

(1,587)

(828)

 

 

 

 

 

 

Net assets acquired

11,589

-

-

11,589

5,785

Goodwill arising on acquisition

5,627

-

-

5,627

4,386

 

 

 

 

 

 

Total consideration

17,216

-

-

17,216

10,171

 

 

 

 

 

 

Contingent consideration on acquisitions

 

 

 

 

 

Current year

(3,250)

-

-

(3,250)

(1,820)

Prior years

-

750

246

996

2,063

 

 

 

 

 

 

Shares

(6,000)

-

-

(6,000)

(1,000)

 

 

 

 

 

 

Total consideration

7,966

750

246

8,962

9,414

 

 

 

 

 

 

Net cash outflow arising on acquisition

 

 

 

 

 

Cash consideration

(7,966)

(750)

(246)

(8,962)

(9,414)

Cash and bank balances acquired

625

-

-

625

696

 

 

 

 

 

 

Net cash outflow

(7,341)

(750)

(246)

(8,337)

(8,718)

 

 

 

 

 

 

 

 

9.        Notes to the cash flow statement

2017

£000

2016

£000

 

 

 

Operating profit

10,089

8,712

Adjustments for:

 

 

    Amortisation of intangible assets

1,580

1,117

    Depreciation of property, plant and equipment

1,391

1,267

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

5

(18)

 

 

 

Operating cash flows before movements in working capital

13,065

11,078

 

 

 

    Increase in inventories

(1,370)

(885)

    Increase in receivables

(1,163)

(3,450)

    Increase in payables

1,570

1,280

    Adjustment for pension scheme funding

(3,285)

(2,906)

 

 

 

Cash generated by operations

8,817

5,117

    Income taxes paid

(1,855)

(1,295)

    Interest paid

(480)

(528)

 

 

 

Net cash inflow from operating activities

6,482

3,294

 

 

 

 

Movement in net debt

 

 

Increase in cash and cash equivalents

83

523

Decrease/(increase) in bank borrowings

860

(4,167)

Repayment of obligations under finance leases  

455

329

 

 

 

Movement in net debt in the year

1,398

(3,315)

Opening net debt

(16,073)

(12,758)

 

 

 

Closing net debt

(14,675)

(16,073)

 

 

 

Net debt comprises:

 

 

Cash and cash equivalents in statement of cash flows

2,013

1,930

Bank borrowings

(16,346)

(17,206)

 

 

 

Net bank debt

(14,333)

(15,276)

Obligations under finance leases                 Due within one year

(245)

(395)

                                                                                    Due outwith one year

(97)

(402)

 

 

 

Closing net debt

(14,675)

(16,073)

 

 

 

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

 

10.       Pension scheme

Macfarlane Group PLC sponsors a defined benefit pension scheme for certain active and former UK employees - the Macfarlane Group PLC Pension & Life Assurance Scheme (1974) ("the scheme"). 

The scheme is administered by a separate Board of Trustees composed of employer nominated representatives and member nominated Trustees and is legally separate from the Group.  The assets of the scheme are held separately from those of the Group in managed funds under the supervision of the Trustees.  The Trustees are required by law to act in the interest of all classes of beneficiary in the scheme and are responsible for investment policy and the day-to-day administration of benefits.  The scheme was closed to new entrants during 2002.

The scheme provides qualifying employees with an annual pension of 1/60 of pensionable salary for each completed year's service on attainment of a normal retirement age of 65.  Pensionable salaries were frozen for the remaining active members at the levels current at 30 April 2009 with the change taking effect from 30 April 2010 and as a result no further salary inflation applies for active members who remained in the scheme.  Active members' benefits also include life assurance cover, albeit the payment of these benefits is at the discretion of the scheme's Trustees.

On withdrawing from active service a deferred member's pension is revalued from the time of withdrawal until the pension is drawn.  Revaluation in deferment is statutory and since 2010 has been revalued on the Consumer Price Index ("CPI") measure of inflation.  Revaluation of pensions in payment is a blend of fixed increases and inflationary increases depending on the relevant periods of accrual of benefit.  For pensions in payment, the inflationary increase is currently based on the Retail Price Index ("RPI") measure of inflation or based on Limited Price Indexation ("LPI") for certain defined periods of service.

During 2012, Macfarlane Group PLC agreed with the Board of Trustees to amend benefits for pensioner, deferred and active members in the defined benefit pension scheme by offering a Pension Increase Exchange ("PIE") option for deferred and active members after 1 May 2012.  The Group will consider continued actions to manage and control the deficit in 2018.

Balance sheet disclosures

The fair value of the scheme investments, present value of the scheme liabilities and the expected rates of return have been based on the provisional results of the actuarial valuation as at 1 May 2017, updated to the year-end.

 

2017

£000

2016

£000

2015

£000

2014

£000

2013

£000

Investment class

 

 

 

 

 

Equities

17,694

17,112

16,788

15,893

15,079

Multi-asset diversified funds

21,533

21,509

25,476

18,541

16,414

Liability-driven investment funds

28,534

26,532

14,107

22,195

-

Bonds

-

-

11,119

11,263

22,534

Secured property income fund

6,606

-

-

-

-

European loan fund

6,562

6,334

-

-

-

Other (cash and similar assets)

31

6,321

303

98

211

 

 

 

 

 

 

Fair value of scheme assets

80,960

77,808

67,793

67,990

54,238

Present value of scheme liabilities

(92,783)

(92,345)

(79,311)

(81,863)

(70,134)

 

 

 

 

 

 

Deficit in the scheme

(11,823)

(14,537)

(11,518)

(13,873)

(15,896)

Related deferred tax asset

    (see note 11)

 

2,010

 

2,471

 

2,073

 

2,775

 

3,179

 

 

 

 

 

 

Net pension scheme liability

(9,813)

(12,066)

(9,445)

(11,098)

(12,717)

 

 

 

 

 

 

The Trustees review the investments of the scheme on a regular basis and consult with the Company regarding any proposed changes to the investment profile.  During 2017, the short-term cash holding at 31 December 2016 was invested in a Secured property income fund.

The ability to realise the Scheme's assets at, or very close to, fair value was considered when setting the investment strategy. The Scheme's investment strategy has 84% of the assets being able to be realised at fair value on a daily or weekly basis. The remaining assets have monthly or quarterly liquidity, however, whilst the income from these helps to meet the Scheme's cash flow needs, they are not expected to require to be realised at short notice.

The present value of the scheme liabilities is derived from cash flow projections over a long period of time and is thus inherently uncertain.

The scheme's liabilities were calculated on the following bases as required under IAS 19:

Assumptions

2017

2016

2015

2014

2013

 

 

 

 

 

 

Discount rate

2.50%

2.70%

3.70%

3.50%

4.50%

Rate of increase in salaries

0.00%

0.00%

0.00%

0.00%

0.00%

Inflation assumption (RPI)

3.30%

3.30%

3.10%

3.00%

3.40%

Inflation assumption (CPI)

2.30%

2.30%

2.10%

2.10%

2.50%

 

 

 

 

 

 

Life expectancy beyond normal retirement date of 65

 

 

 

 

 

Male

23.7 years

22.8 years

22.7 years

22.7 years

22.6 years

Female

25.7 years

25.3 years

25.3 years

25.1 years

25.1 years

 

 

2017

2016

2015

2014

2013

Movement in scheme deficit

£000

£000

£000

£000

£000

 

 

 

 

 

 

At 1 January

(14,537)

(11,518)

(13,873)

(15,896)

(18,898)

Current service cost

(105)

(95)

(152)

(126)

(148)

Employer contributions

3,390

3,001

2,834

5,480

2,748

Net finance cost

(348)

(373)

(438)

(594)

(775)

Remeasurement of pension scheme liability

 

(223)

 

(5,552)

 

111

 

(2,737)

 

1,177

 

 

 

 

 

 

At 31 December

(11,823)

(14,537)

(11,518)

(13,873)

(15,896)

 

 

 

 

 

 

Funding

UK pension legislation requires that pension schemes are funded prudently.  Following the triennial actuarial valuation of the scheme at 1 May 2014, the Company agreed a new schedule of contributions with the Pension Scheme Trustees, which assumed a recovery plan period of 10 years.  The next triennial actuarial valuation being carried out at 1 May 2017 is in progress and likely to be concluded in the first half of 2018.

 

2017

2016

Movement in fair value of scheme assets

£000

£000

 

 

 

Scheme assets at start of period

77,808

67,793

Interest income

2,065

2,470

Return on scheme assets (excluding interest income)

3,730

9,610

Contributions from sponsoring companies

3,390

3,001

Contribution from scheme members

72

72

Benefits paid

(6,105)

(5,138)

 

 

 

Scheme assets at end of period

80,960

77,808

 

 

 

 

2017

2016

Movement in present value of defined benefit obligations

£000

£000

 

 

 

Defined benefit obligations at start of period

(92,345)

(79,311)

Current service cost

(105)

(95)

Interest cost

(2,413)

(2,843)

Contribution from scheme members

(72)

(72)

Changes in assumptions underlying the defined benefit obligations

(3,953)

(15,162)

Benefits paid

6,105

5,138

 

 

 

Defined benefit obligations at end of period

(92,783)

(92,345)

 

 

 

Sensitivity to key assumptions

The 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 results disclosed.  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

2017

£000

2016

£000

2015

£000

 

 

 

 

Discount rate movement of +0.1%

1,485

1,478

1,142

Inflation rate movement of +0.1%

(473)

(471)

(404)

Mortality movement of +0.1 year in age rating

278

277

214

Positive figures reflect a reduction in the scheme liabilities and therefore a reduction in the scheme deficit.  The sensitivity information has been prepared using the same method as adopted when adjusting the results of the latest funding valuation to the balance sheet date and is consistent with the approach adopted in previous years.

All of the sensitivity information assumes that the average duration of liabilities in the scheme is seventeen years.

 

11.      Deferred tax

2017

£000

2016

£000

 

 

 

At 1 January

1,181

1,511

Acquisitions

(1,587)

(828)

Charged in income statement       Current year

(273)

(196)

                                                                    Change in estimates for prior years

-

(160)

Credited/(charged) in other comprehensive income

                    Remeasurement of pension scheme liability

 

38

 

1,000

                    Long-term corporation tax rate change

-

(146)

 

 

 

At 31 December

(641)

1,181

 

 

 

Deferred tax assets

 

 

On retirement benefit obligations (see note 10)

2,010

2,471

Corporation tax losses

397

407

 

 

 

Disclosed as deferred tax assets

2,407

2,878

 

 

 

Deferred tax liabilities

 

 

On accelerated capital allowances

On other intangible assets

(231)

(2,817)

(160)

(1,537)

 

 

 

Disclosed as deferred tax liabilities

(3,048)

(1,697)

 

 

 

 

 

 

 

 

 

At 31 December

(641)

1,181

 

 

 

Reductions in the UK corporation tax rate to 17% (effective from 1 April 2020) were substantively enacted on 6 September 2016.  This will reduce the Company's future current tax charge accordingly.  The deferred tax assets at 2016 and 2017 have been calculated based on this rate.

 

12.      Share capital

2017

£000

2016

£000

 

 

 

Allotted, issued and fully paid:

 

 

At 1 January

34,084

31,153

Issued during the year

5,303

2,931

 

 

 

At 31 December

39,387

34,084

 

 

 

Share premium

 

 

At 1 January

4,641

1,018

Issue of new shares during the year

8,697

3,869

Expenses of share issue

(363)

(246)

 

 

 

At 31 December

12,975

4,641

 

 

 

The Company has one class of ordinary shares of 25p each, which carry no right to fixed income. Each ordinary share carries one vote in any General Meeting of the Company.

On 18 September 2017, the Company announced a placing of 12,121,212 ordinary shares at a price of 66p per share for a total value of £8,000,000.  These shares were admitted to the official List of the London Stock Exchange on 21 September 2017.  On 21 September 2017, the Company's subsidiary, Macfarlane Group UK Limited acquired the trade, goodwill and selected assets of the packaging business of Greenwoods Stock Boxes Limited and the whole of the issued share capital of Nottingham Recycling Limited.  As part of the initial consideration, the Company issued 9,090,909 ordinary shares at a value of 66p per share as non-cash consideration to the Vendors, an effective value of £6,000,000.  These shares were also admitted to the official List of the London Stock Exchange on 21 September 2017.

On 26 July 2016, the Company announced a placing of 10,000,000 ordinary shares at a price of 58p per share.  These shares were admitted to the official List of the London Stock Exchange on 29 July 2016.  On 29 July 2016, the Company acquired the whole issued share capital of Nelsons for Cartons & Packaging Limited.  As part of the initial consideration, the Company issued 1,724,137 ordinary shares at a value of 58p per share as non-cash consideration to the Vendors, for a total value of £1,000,000, which were also admitted to the official List of the London Stock Exchange on 29 July 2016.

13.       Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, 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 2017 will be disclosed in the Group's Annual Report for the year ending 31 December 2017.

On 8 May 2015, Peter Atkinson and John Love were granted option awards over 775,254 and 360,026 ordinary shares respectively under the Macfarlane Group PLC Long Term Incentive Plan.  These awards lapsed on 22 February 2018.

The directors are satisfied that there are no other related party transactions occurring during the year which require disclosure.

 

14.       Posting to shareholders and Annual General Meeting

The Annual Report and Accounts will be sent to shareholders on Wednesday 4 April 2018 and will be available to members of the public at the Company's Registered Office, 21 Newton Place, Glasgow G3 7PY from Friday 6 April 2018.

The Annual General Meeting will take place at the Double Tree by Hilton Hotel, Cambridge Street Glasgow G2 3HN at 12 noon on Tuesday 15 May 2018.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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