Mpac : Full-year Results Announcement 2020 - 30/03/21

30 March 2021 AIM: MPAC

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018

Mpac Group plc

("Mpac", "the Company" or "the Group")

Mpac, the global packaging and automation solutions Group, today announces its results for the 12 months to 31

December 2020

Resilient financial performance, successful acquisition and strong year end order book

Financial Highlights

• • Robust 2020 financial performance given the pandemic which demonstrates the resilient nature of Mpac's business

• • H2 order intake £53.4m (H1: £30.5m) contributing to strong closing order book of £55.5m (2019: £52.2m)

• • Group full year revenue £83.7m (2019: £88.8m)

• • 2020 H2 revenue 27% above H1 as customer investment returned to pre-pandemic levels

• • Underlying profit before tax of £6.3m (2019: £7.5m)

• • Underlying earnings per share of 31.4p (2019: 39.5p)

• • Statutory profit before tax of £2.9m (2019: £5.4m)

• • Basic earnings per share of 16.3p (2019: 29.7p)

• • Cash of £15.5m (2019: £18.9m)

• • The Board has decided not to recommend payment of a final dividend (2019: nil)

Operational and Strategic Highlights

• • Covid-19 resilience, agility and flexibility demonstrated by all employees ensured Mpac continued to provide essential customer service support

• • H2 Original Equipment quote activity, prospect pipeline and order intake returned to growth compared to pre-pandemic levels

• • Prior investment in expansion of commercial sales and marketing footprint in the Americas leveraged market strength

• • Successful acquisition of Switchback Group, Inc. - continues to trade ahead of management expectations and integration progressing well

• • Implementation of common business processes and successful initial roll out of Group ERP system enabling effective operations under 'One Mpac', our single entity business model

• • Agility to adapt, use of remote servicing technology and development of digital service solutions delivered good strategic progress in the Service business

• • Exciting portfolio of new products launched in the year - platform based full solution for healthcare sector and case packing range for food and beverage sector

• • Restructuring and integration of the Coventry operations into the Tadcaster site

Tony Steels, Chief Executive, commented:

"2020 has been a year like no other with the whole of society facing unprecedented challenges. Our priorities in the period were to ensure our facilities were made Covid-19 secure and to develop remote solutions to support our customers, while driving forward on our strategic aims with a full agenda, including the successful acquisition of Switchback. I am extremely pleased with the way in which the business responded to the pandemic. All employees and leadership deserve recognition for demonstrating agility, ingenuity, and proactivity, which helped to deliver another year of good progress on our strategy, sound financial performance, excellent cash generation and the strong, high quality, closing order book which we take into 2021.

Mpac is positioned to serve resilient end markets with long term growth potential leading to continuous customer demand.

Supported by our sizeable and increasingly diverse order book we remain well placed, serving Covid-19 resilient markets which have good underlying demand. 2021 has started well across all regions and after taking into consideration the challenge of predicting the impact of the pandemic the Board believes that the Group's long-term prospects remain positive''.

For further information, please contact:

Mpac Group plc

Tel: +44 (0) 2476 421100

Tony Steels, Chief Executive

Will Wilkins, Group Finance Director

Shore Capital (Nominated Adviser & Broker)

Tel: +44 (0) 20 7408 4050

Advisory

Patrick Castle Edward Mansfield Sarah Mather Broking

Henry Willcocks

Hudson Sandler

Tel: +44 (0) 20 7796 4133

Nick Lyon / Nick Moore

OPERATING REVIEW Tony Steels

I am pleased to present my report as Chief Executive of Mpac Group plc. I am sure that 2020 will be remembered as an extremely challenging year for the whole of society. When I reflect on how Mpac collectively, and our employees individually, responded to the pandemic, the speed and agility with which the Group pivoted to supporting our customers alongside the actions taken to ensure that the business continued to operate efficiently, with minimal disruption, I am proud to say that I consider 2020 a successful year for Mpac.

As we reported at the half year, the wellbeing of our employees and their families is our primary concern. Throughout the year, travel and social distancing restrictions have limited the opportunity for business development, to complete on-site service work and to install and commission equipment, the impact of which was mitigated by our investment in enabling technologies to provide remote customer support. While all sites have continued to operate, there have been periods of reduced operational levels to protect the wellbeing of our employees, resulting in full-year revenue and operating profit falling below that achieved in 2019.

In the second half of 2020, business development of Original Equipment ("OE") improved significantly, with revenue 19% above the comparable period in 2019. This return to growth contributed towards the good quality and diverse closing order book of 2020 (£55.5m), 6% above the opening 2020 order book (£52.2m). Service revenues grew to £19.6m (2019: £19.4m), a particularly pleasing performance given on-going travel restrictions hampering the development of our field service and installation revenue streams.

We made significant progress in our key strategic initiatives, with the broadening of our product portfolio, which included the launch of full-line solutions for customers in the healthcare sector, and the implementation of new operating business systems. This contributed to the Group producing a robust financial performance and cash generation, underpinned by a high-quality order book.

The successful acquisition of Switchback Group, Inc. ("Switchback") in September 2020 was a further significant milestone for the Group. The acquisition represents a compelling fit with Mpac's strategic intent of being a market leader in the provision of full-line packaging solutions for the pharmaceutical, healthcare and food and beverage sectors. Switchback, based near Cleveland, Ohio, USA is a market leader in the supply of packaging machinery to the high-growth craft beverage industry. It is benefiting from the shift towards recyclables, aluminium cans, and cardboard packaging. Critically, the acquisition also accelerates our expansion into the Americas market and provides a physical location in the USA for the Group to further leverage our Langen and Lambert brands in the region. Despite the ongoing travel restrictions good progress has been made with the integration of Switchback into the Group, with the rebranding to Mpac Switchback complete, the first commercial synergies with other Group businesses have been secured and the business is performing ahead of management expectations.

The unprecedented impact of the Covid-19 pandemic during 2020 resulted in a pause to the progress that we were making in our growth strategy, however we demonstrated our continued ability to execute acquisitions alongside our agility to adapt our resources to accelerate the use of digital technologies to engage with our customers and ensure we continued to provide high levels of support and service. The fundamentals remain unchanged and we believe that Mpac is on track to meet our long-term goals by leveraging the resilient pharmaceutical, healthcare and food and beverage sectors with our full-line solution offering and delivering an enhanced service proposition with our Industry 4.0 suite of products.

Further progress has been made in developing our range of Industry 4.0 solutions which are designed to offer customers opportunities to increase their Overall Equipment Effectiveness (OEE) through automatic control of the production process. Our innovation roadmap was designed to deliver an extensive range of features and solutions, including OEE monitoring, predictive maintenance, video instructions and facilitating connectivity via multiple devices through an enhanced Human Machine Interface. In the absence of physical trade shows to demonstrate these solutions, in 2020 we initiated a series of virtual trade shows, supported by media campaigns which have been very well received and allowed us to connect with a larger number of customers in a more targeted way.

Management's focus remains on delivering organic growth, extending our commercial reach to new customers with new products and services, supported by a comprehensive market-led development roadmap. Alongside this, our search for further complementary acquisition targets continues. The acquisition of Switchback and a greater physical presence in the critical US market represents another important step in delivering our strategy, augmented by deploying our innovation initiatives, which are focused on developing full solution product lines with a wider range of standard modules, for our target sectors of pharmaceutical, healthcare, and food and beverage.

I am excited about the next phase for the Group and am extremely pleased with our accomplishments so far. Despite the challenging investment cycle caused by the pandemic, I believe that we are firmly on track to deliver our long-term strategic plans and to take advantage of our enhanced position in growth markets.

Trading

The trading performance in 2020 was resilient given the backdrop of wider market uncertainty and travel restrictions. Overall order intake for the Group of £83.9m was down 4% on 2019, a 14% reduction on a like-for-like basis which excludes the impact of the Switchback acquisition. The Group experienced a significant upturn in order intake in the second half of the year when travel restrictions began to be eased prior to the second wave of the pandemic.

The Group enters 2021 with a customer diverse order book of £55.5m, £3.3m above the opening order book for 2020. We remain vigilant to project execution risk and are confident that the 2020 closing order book can be delivered at forecast margins. The timing of conversion of prospects into orders continues to vary based on our customers' investment plans and thus remains difficult to predict. Conversion rates were stronger in the second half of the year providing increased confidence that the impact of delayed customer investment on the Group has eased, resulting in the encouraging order book entering 2021.

Group revenues of £83.7m were down 6% compared with the previous year (10% below 2019 on a like-for-like basis). Original Equipment revenue of £64.1m (2019: £69.4m), supported by a robust performance in the Americas and growth in EMEA and the food and beverage sector, was down 8% compared to the prior year. Service revenue grew marginally by 1% to £19.6m, which is encouraging given the circumstances.

I am pleased to report underlying profit before tax for the year of £6.3m (2019: £7.5m), with a statutory profit before tax of £2.9m (2019: £5.4m).

Following the acquisition of Switchback and continued investment in new product development to support future growth, the Group retained a cash position of £15.5m (2019: £18.9m), providing the financial resources required to invest in the strategic initiatives which will deliver profitable growth in future years.

Strategic developments

Further progress has been made during 2020 to deliver our five-year strategic plan. The global pandemic caused a pause in the progress we had made delivering our growth plan. However, we believe an extension of our US presence and access to new markets in the region following the Switchback acquisition, plus the exciting roll-out of new products and good progress on our integrated business systems project, means Mpac remains on track to meet our broader strategic objectives. Furthermore, the growth opportunities from the markets in which we operate are aligned to our long-term goals.

I believe that it is due to the implementation of our strategic plans and continued focus on increasing the scale and diversity of the Group that the business was able to deliver a robust level of order intake, revenue, and underlying profitability during a challenging year in which customers in most regions and markets were re-evaluating their investment decisions.

Restructuring

During the year, the Group took the necessary restructuring actions associated with the integration of the business activities of our Coventry operation into our Tadcaster site. This move will deliver annual savings going forward and improve our customer experience. The enlarged site has the greater scale, scope, depth of knowledge and know-how to support customers and will help to deliver profitable growth as we ensure financial performance across the Group meets or exceeds expectations. The Group is committed to ensuring that all aspects of the organisation support the future growth of the business and targets continue to be met.

Acquisition strategy

The Board continues to actively seek and evaluate potential acquisition opportunities. The focus is finding businesses that will enhance our customer proposition in automation and packaging solutions, by extending our product range and our access to a broader range of customers in our target markets, adding value to the Group.

Moving forward

We continue to pursue our strategic goals, which were recalibrated during the year, and build on the strong foundations made towards achieving the three strategic priorities: Going for Growth, Make Service a Business and Operational Efficiency. Further information on these strategic priorities is provided in the Strategic Update.

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