We create packaging
and automation
ecosystems that
enhance manufacturing
to help businesses
adapt and grow
Annual Report and Accounts 2021
Mpac Group plc is an international
company listed on the London Stock
Exchange (symbol: MPAC), with a long
and proud history of delivering innovation
and excellence on a global basis. Our
business is focused on the creation of
manufacturing solutions that make and
package the products millions of people
worldwide depend on.
mpac-group.com
Contents
01 Year at a glance
02 Who we are. What we do
03 Automation Ecosystems
04 Chairman’s introduction
05 Strategy: Our mission sectors and values
06 Strategy: Business model
07 Strategy: Goals and priorities
08 Strategy: Case studies
11 Operating review
16 Financial review
19 Principal risks and uncertainties
24 Section 172 statement
26 Chairman’s corporate governance statement
28 Board of Directors
29 Corporate governance report
32 Audit Committee report
36 Remuneration and Nomination Committee report
37 Annual Remuneration report
39 Remuneration policy
43 Directors’ report
45 Statement of Directors’ responsibilities
Independent Auditor’s report
47
58 Consolidated income statement
59 Statement of comprehensive income
60 Statements of changes in equity
62 Statements of financial position
63 Statements of cash flow
64 Accounting policies
71 Notes to the accounts
105 Five-year record
106 Principal divisions and subsidiaries
107 Notice of Annual General Meeting
112 Corporate information
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Mpac Group plc
Annual Report & Accounts 2021
1
Year at
a glance
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Further good progress on the Group’s strategic initiatives
Excellent 2021 order intake of £117.9m, 40% above prior year (2020: £83.9m)
Group full year revenue £94.3m (2020: £83.7m)
Underlying profit before tax of £8.6m (2020: £6.3m)
Statutory profit before tax of £8.2m (2020: £2.9m)
Underlying earnings per share of 39.7p (2020: 31.4p)
Basic earnings per share of 39.1p (2020 restated: 20.8p)
Revenue by sector
Food and beverage
£45.3m
Pharmaceutical
£3.7m
Healthcare
£45.3m
Revenue by region
Americas
£63.3m
Asia
£4.3m
Europe, Middle
East & Africa
£26.7m
Order intake
£117.9m
(2020: £83.9m)
Revenue
£94.3m
(2020: £83.7m)
Underlying earnings per share
Basic earnings per share
39.7p
(2020: 31.4p per share)
39.1p
(2020 restated: 20.8p)
Cash
£14.5m
(2020: £15.5m)
Net assets
£65.4m
(2020 restated: £46.2m)
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Who we are
What we do
We support all brands and all locations with our global operations.
Our philosophy is ‘Ingenuity without limits'.
Mpac is a provider of full-line product manufacturing and packaging
solutions. We serve customers globally in the essential and growing
sectors of healthcare, pharmaceutical and food and beverage, with
engineering and services that increase automation, safety,
sustainability and cost effectiveness.
We are headquartered in the UK and have strategically located
manufacturing and Service locations to provide our customers with
local support and a global reach.
We are ‘One Mpac’, with four connected businesses that trade under
the globally respected brand names and product ranges of Lambert,
Langen and Switchback. Lambert specialises in full-line solutions for
the pharmaceutical and healthcare sectors. Langen and Switchback
provide secondary and tertiary packaging solutions for all sectors
in which we operate.
We provide packaging and automation solutions to fast-moving consumer
goods customers, enabling their products to be packaged for distribution to
their consumers, ensuring security, quality, sustainability and shelf appeal.
We ensure manufacturing consistency through whole-line integration; from
product assembly to primary packaging, cartoning to case packing and
palletisation – designed, delivered and supported globally, while protecting
the wider ecosystem we all live in.
We don’t just build machines however, we create full-line automation
ecosystems to develop and optimise manufacturing processes. Our
end-to-end capabilities help our customers thrive in a changing world.
The Group leverages its engineering expertise with cutting-edge
manufacturing technologies and proven machine design, and supports its
customers with world class service support, delivered locally. We are
a global organisation and can provide support to customers in any region.
Our sectors
Healthcare
We help achieve better patient outcomes through
advanced products, processes and packaging
formats. From contact lenses to wound care
products, we've got it covered.
Food and beverage
Pharmaceutical
With extensive experience in dealing with powders
to liquids, cereals to confectionary, our packaging
machinery covers a wide range of applications.
We support your pharmaceutical advances
cost effectively, from inhaler assembly to
transdermal patches.
2
Who we are
What we do
Ingenuity
without limits
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Whole Line
Using limitless ingenuity to align
global manufacturing
Global whole-line integration
Streamlining processes and identifying efficiencies
Creating opportunities for new products
Whole Life
Maintaining peak overall equipment
effectiveness for the lifespan of machines
Hands-on global experts providing local support
Maintaining peak OEE over machine lifespan
Transformational digital services
Whole Planet
Helping businesses grow globally while
embracing sustainability
Next-generation manufacturing for the next generation
Building efficient machines to optimise businesses
performance and in turn, reduce the damaging effects
on the environment
Reducing transportation footprints with remote service
assistance and smaller carton sizes
Mpac Group plc
Annual Report & Accounts 2021
3
Strategy:
Automation
Ecosystems
One Mpac
All our products and services operating as 'One Mpac' to deliver Automation Ecosystems
Product line specialty
Market leading secondary and end-of-line
packaging solution for food and beverage
and healthcare sectors
Flexible engineered modular assemblies
to support customers’ requirements
Manufacturing sites in EMEA and
Americas, serving customers in EMEA,
Americas and APAC
Global Service support offering
Product line specialty
Focus on medical and healthcare sector
device assembly and automation
Cutting-edge factory automation platforms
and transformational technologies
Manufacturing site in EMEA, serving
customers in EMEA, Americas and APAC
Exception customer service support
Product line specialty
Engineering machines for the canned
beverage industry, specialising in design,
build, integration of packaging systems
Cartoners, Trayformers, Carton Closers,
Case Erectors and Case Packers, and
Labelling machines
Manufacturing site in Americas, serving
customers in EMEA and Americas
Integrated Group Service supporting
customers globally
Assembly
Filling & Dosing
Primary packaging
Product handling
and infeed
Cartoning
Tray forming
Case packing
Palletising
Mpac Cube
We’ve folded the many sides of our automation service and support together to form the ‘Mpac Cube’.
Propelling production goals through Connectivity, Productivity and Sustainability
2
0
5
2
6
4
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Whole Line, Whole Life, Whole PlanetMpac's offer to customers has been shaped by delivering against these three pillars. The result is Automation Ecosystems
Mpac Group plc
Annual Report & Accounts 2021
4
Chairman’s
introduction
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
“ The Group made
substantial progress in
2021 delivering our five-
year strategic plan. The
initiatives have been
the driver of the strong
and profitable growth
we continue to report
since the strategy was
established. The 2020
Switchback acquisition
has been integrated into
the Group’s management
structures and continues
to trade ahead of
expectations. The Group
has not been immune
from the global supply
chain and resource
constraints arising from
the pandemic, but has
addressed them smoothly
and successfully to deliver
an improved financial
performance.”
Chairman’s introduction
In 2017, the Group completed a
strategic review, producing a set of
long-term strategic objectives aimed
at transforming the performance of
the Group over a five-year period.
As we approach the end of that
five-year period, I am pleased to
report that continued substantial
progress has been made against
these strategic objectives, continuing
to deliver improvements in all areas
of our financial performance. Our
strategy to focus on the high growth
Healthcare and Food and Beverage
sectors has been enhanced with
two strategically complimentary
acquisitions and the successful
completion of several technological
and product developments to support
growth in our Original Equipment and
Service businesses. Considerable
progress has been made in
improving operational efficiency
and productivity, underpinned by
the roll out of common ERP and
business systems across the Group.
Our investment proposition remains
one of sustained organic growth,
augmented by carefully selected
acquisitions.
2021 was the first full year of
trading since the acquisition of
Switchback Group Inc (‘’Switchback’’)
in September 2020. Our strategy
remains to focus on the high
growth Healthcare and Food &
Beverage sectors, underpinned by
the deployment of a comprehensive
product development roadmap
and a focus on software and
platform developments.
On pages 25 to 31 I discuss
corporate governance and the
Board’s activities during the year.
Summary of results
The growing performance in the year
is reflected in the order intake for the
Group of £117.9m (2020: £83.9m) and
Group revenues of £94.3m (2020:
£83.7m). Revenue growth in 2021 was
primarily due to the inclusion of a full
year of revenue from Switchback.
Underlying profit before tax was
above market expectations at £8.6m
(2020: £6.3m) and statutory profit
before tax was £8.2m (2020: £2.9m).
Group cash ended the year
at £14.5m (2020: £15.5m).
Acquisitions
In September 2020, the Group acquired
Switchback for £11.5m. During 2021,
Switchback has been further integrated
into the Group and continues to trade
ahead of management expectations.
The first of two tranches of deferred
consideration of £0.6m, associated with
the satisfaction of certain performance
targets in the year to 30 September
2021, was paid in October 2021.
The three-year performance criteria
associated with the 2018 acquisition
of Lambert Engineering (‘’Lambert”)
were not satisfied and consequently
the carrying value of the deferred
consideration of £2.4m was released
to the income statement as a credit to
non-underlying administrative expenses.
Board changes
I would like to welcome Matthew
Taylor to the Board.
Matthew joined the Board in October
2021 as Non-Executive Director with
over 20 years of global Executive
and Board experience within the
automotive, steel and manufacturing
sectors. Matthew has previously held
several executive level roles, including
CEO of J C Bamford Excavators, CEO
of Edwards Vacuum and more recently
CEO of Bekaert SA, a role he held until
2020. He is currently a Non-Executive
Director of Surface Transforms plc.
Matthew will serve on Mpac’s Audit
Committee and Remuneration &
Nomination Committee.
Dividend
Having considered the trading results
for 2021 and the opportunities for
investment in the growth of the
Group, together with the continued
uncertainty surrounding the impact of
the pandemic, the Board has decided
that it is not appropriate to pay a
final dividend. No interim dividend
was paid in 2021. Future dividend
payments will be considered by the
Board in the context of 2022 trading
performance and when the Board
believes it is prudent to do so.
Outlook
The Group operates in a range
of attractive growth sectors
and geographic market and has
demonstrated the ability to navigate
the current supply chain and resource
constraint challenges with minimal
impact. The opening order book
provides good coverage over 2022
revenue forecasts, and I consider
the prospects for the Group over
all time horizons to be positive. The
delivery of our long-term strategic
plans is generating orders, revenue
and margin growth and an improving
financial performance. I look forward
to reporting on the progress that will
be made during 2022.
Andrew Kitchingman
Chairman
16 March 2022
Andrew Kitchingman
Chairman
“ Mpac’s brand film “My Daddy’s Job” won
two trophies at the 2021 Cannes Corporate
Media & TV Awards in the Corporate Video
and Best Music categories. Narrated by the
daughter of an Mpac engineer, whose job
it is to “build the smartest robots”, the film
showcases our people’s limitless ingenuity,
and the innovations that evolve from it.”
Our mission
To be a global leader of high-speed packaging and
automation solutions focused on attractive growth
markets enhanced by a world-class service offer
programme to ensure maximum return on
customer investments;
Customer focused, responsive and flexible through
operational excellence underpinned by a global
competitive supply chain and internal activities
optimised to maximise efficiency;
Address our customers’ unmet needs by
leveraging market leading technology, innovation
and application know-how.
Our sectors
Healthcare
Supporting Healthcare Industries
as diverse as contact lenses, facial
tissues and dentifrice. Mpac supplies
innovative first-of-a-kind machinery
as well as standard packing and
testing equipment.
Pharmaceutical
To meet our customers’ diverse and
specialised demands, Mpac offers
a first-of-a-kind service for novel
dosing and packaging. Process
assurance via standard and custom
test equipment is available.
Food and beverage
Providing innovative solutions
for secondary and end-of-line
packaging. Cartoning and case
packing of bags, stick packs,
pouches, flow wrapped products,
bottles and more, to our customers’
requirements.
“ To create automation ecosystems
that enhance manufacturing to
help businesses to adapt and
grow. Advancing the world with
manufacturing solutions which
make a difference.”
Mpac purpose statement
Our values
Integrity
Deliver on our promise, respect
and value others.
Excellence
Always striving to be better.
Passionate
Be energised to deliver.
Innovation
Identify a need, think outside of
the box and deliver solutions.
Collaboration
Working together without
boundaries for the collective goal.
Mpac Group plc
Annual Report & Accounts 2021
5
Strategy:
Our mission,
sectors and
values
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Mpac Group plc
Annual Report & Accounts 2021
6
Strategy:
Business
model
Business model
The ‘One Mpac’ business model
ensures we deliver consistent high-
quality services to our customers
globally and wherever they choose
to locate a manufacturing site.
The Group offers its customers
automation and packaging solutions,
customised to their requirements
using a portfolio of proven modules
augmented with a customer specific
product package handling solution.
The implementation of our ‘One Mpac’
business model incorporates sales,
service, and operations functions.
Common processes are all monitored
and controlled by effective project
management. Service support is
provided through the life of the
product at the customers’ sites.
The capital equipment market is
cyclical by its nature with a high need
for responsiveness and flexibility to
adapt to customer demands and lead
time needs, seizing the opportunities
as they arise.
The Group is able to exploit synergies,
utilising best practice across the
sites and a shared services resource
in order to improve the operational
efficiencies.
This creates a model whereby we can
increase utilisation with the ability
to expand capacity with increased
demand and reduce capacity in
periods of lower demand.
What we do
We design, develop software,
precision engineer and manufacture
high speed packaging solutions,
first-of-a-kind machinery and
high specification automation,
secondary packing equipment and
end-of-line robotics with integrated
testing solutions. We do not just
build machines; we create full-line
automation ecosystems to develop
and optimise manufacturing
processes. Our end-to-end
capabilities help our customers
thrive in a changing world.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Optimise
We make sure your machine
stays up-to-date with the
latest modernisations and
automation upgrades. This
ensures minimal downtime
and less risk of serious
damage to your equipment
throughout the lifetime of
your lines.
Our bespoke whole life
service options, with remote
monitoring and servicing,
ensure unstoppable OEE and
keeps your machines in prime
condition, year after year.
Monitor
With your permission, our
experts can connect to your
control system to give you
a complete review of your
machine performance. By
doing so, we can predict and
prevent problems to ensure
consistency and compliance.
We also offer you actionable
insights to maximise your
equipment effectiveness.
M
O
N
I
T
O
R
Business model
E
O P TI M I S
S U S TAINABLE
P E R F ORMANCE
LIFE
E
VIC
E
L
O
H
W
R
E
S
D & BEVE
R
A
G
E
O O
F
C
O
N
S
U
L
T
I
N
R
N
&
O
D
V
A
T
A
N
D
I
O
N
S
L I G E NT
L O GIE
O
N
H
E
ALTH C A
E
R
G
L
I
L
N
O
E
B
I
N
A
L
T
E
G
W
HOLE
RATION
L
E
I N T
T E C H
INSTA L L
D
L
I
U
B
D
N
A
N
SIG
D E
Consult
Ecosystems live, breath and
evolve, and so should your
automation ecosystem.
That’s why we’re by
your side at every stage,
consulting with you to
understand your challenges
and solve your problems
before they occur. Ingenious
thinking is personal, so we
take the time to listen to
your needs and what you
want from your machines
and products.
Design and build
With your current and
future needs in mind, we
develop fresh ideas and
design innovative machines
to keep you ahead of the
competition.
Install
We install your new machine
at a time that suits you. To
get the most out of your
machine, our effective
employee training reduces
start-up costs and allows
your equipment to reach its
target performance quickly.
2021 progress
Future plans
Going for
growth
Innovation
Business development in
Clean Energy sector
Americas
Cross selling of Switchback and
Langen product lines
EMEA
Switchback product launch
and extending commercial
footprint
Americas
Leveraging Group
showcase facility
Service as
a business
Americas
Launch healthcare focused
business unit
Digital
Launch of Mpac Cube,
including iMi enhancements
and increased connectivity
Americas
Integration of product line
service teams
Systems
Enhanced Service CRM system
and prospect management
Operational
efficiency
One Mpac
Global supply chain, common
platforms and systems
Americas
Opening Group showcase
facility
One Mpac
Standardisation programme
to reduce lead times
Innovation
Products
Extended developments in
end-of-line case packing
Technology
Concept proving for clean
energy automation solution
Technology
Extend suite of Cube digital
and Industry 4.0 products
One Mpac
Maximise benefits from
common platforms and cross
business resources
Products
Cardboard tray erector
development to leverage
sustainability drive
People
Engagement
Personal development plan
process, employee health
and wellbeing, satisfaction
monitoring
Knowledge
Development and retention of
critical knowledge
Skills
Mpac Academy to develop
future leaders and retain the
best talent
Communication
Focus on internal
communication via new
intranet platform
Achieving
our
ambitions
The market and our customer demands continue to evolve, with
a clear need for full solutions to their packaging requirements
supported by a comprehensive services proposition to ensure
maximised return on their investments. Demand for data capture
and traceability throughout the product life-cycle is also an
increasing trend.
By utilising the impressive array of innovative engineering
solutions throughout the Mpac sites, supported by a focused
product development roadmap targeted on the attractive growth
markets, we will be well positioned to deliver growth beyond
industry forecasts.
The Group offers innovative solutions, working with the customers’
product development engineers and marketing functions on the
next generation of innovative products. By partnering with these
key global customers, Mpac will be well positioned to support the
customer from prototype to series production.
This capability should be leveraged across our global sales team
and into our global key accounts and prospects.
Service continued to represent a key opportunity based on a
substantial installed base and customers need for support to increase
productivity and to secure a return on the investment in equipment.
Product innovation and development is key to sustained growth in
the large and attractive markets we operate in. Our new product
development roadmap is focused on the needs of the market and
is orientated around digital led innovation.
‘One Mpac’ business model with a regionally focused, single
business entity model has been implemented. Mpac provides
local support on a global level, delivered via our region commercial
teams, supported by a global service and operations functions.
Customer responsiveness and reduced lead times are key
competitive advantages and as such we need to continuously
improve. By working on a global basis, operations and shared
services will be better able to increase operational efficiencies,
whilst simultaneously creating a flexible and responsive
manufacturing base and supply chain to quickly adapt to
changes in customer demand and investment cycles.
Mpac Group plc
Annual Report & Accounts 2021
7
Strategy:
Goals and
priorities
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Mpac Group plc
Annual Report & Accounts 2021
8
Strategy:
Mpac cube
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
We’ve folded the many sides of our automation support together
into one convenient service offer – Mpac Cube.
Mpac Cube is our online service engine that will propel our clients towards their
production goals through Connectivity, Productivity and Sustainability.
Advanced Engineering
Reduce your risk - model every aspect
of the process ahead of production with
our powerful 3D and POP innovation.
Connected Services
Keep your downtime down - we review
your problems remotely in minutes.
Core Services
Right first time, every time - skilled
technicians on site to keep downtime
to an absolute minimum.
Information Management
Everything at your fingertips - save time
and effort tracking down the information
you need.
Machine Insight
Insights drive improvements - our tools
provide deep insight to aid constant
improvement via intuitive solutions.
Training
Less waste, more productivity - state of
the art training materials to ensure new
operators land on their feet.
“ Our customers are data driven,
and what they can measure can
be improved. Having good machine
data helps our customers to sustain
and improve the productivity of their
manufacturing lines."
Mike Lewis Mpac Innovations Director
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Mpac were selected by Nestlé global procurement as a preferred supplier for
case packers product lines for plants in all regions. The first project in scope of this
agreement was for the supply of a newly designed Mpac Langen Alisio case packer
for a noodle packaging line in Europe.
Mpac Group plc
Annual Report & Accounts 2021
9
Strategy:
Case study
Nestlé
Preferred supplier to Nestlé
In 2020, Mpac completed the development of the Langen Alisio, a side
load case packer with speeds of up to 25 cases per minute which can
be used to load RSC cases and wrap-around cases. The development
project was scoped to meet the specific requirements of our
multinational customers and to extend Mpac’s reach into the growing
case packing market across all regions.
Nestlé requirements
A range of Best in Class topload and sideload case
packing solutions
Equipment to be highly flexible, accommodating
a range of case dimensions
Incorporating Intelligent Machine Interface (“iMi”)
with optional Industry 4.0 features
Flexible integration with robotic product handling
A variety of optional features in infeeds, case handling,
labelling, printing and closing
Mpac solutions
Newly developed class-leading flexible case
packaging solution
Incorporating Industry 4.0 package (condition and
performance monitoring and video instructions)
Extended range of infeed and labelling and
printing options
Speeds aligned to market expectations
Flexible integration with robotic product
handling and quick tool change-over times
“ Based on the reliable and flexible
technology proposed by Mpac Langen,
Nestlé chose the Alisio case packer as
the most suitable for our requirements.
Previous experience and continuous
improvements allow us to positively look
at future collaborations with Mpac.”
Oleksandr Slieptsov, Nestlé
Alisio case packer
2
0
5
2
6
4
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Mpac Group plc
Annual Report & Accounts 2021
10
Strategy:
Clean Energy
Case Study
Clean Energy Equipment Contract
In July 2021 Mpac announced that we signed a contract with FREYR Battery to supply casting
and unit cell assembly equipment for the battery cell production line at FREYR’s Customer
Qualification Plant in Mo i Rana, Norway. The FREYR contract follows three years of cooperation
with lithium-ion technology specialist 24M Technologies Inc, to industrialise and scale 24M’s
SemiSolid lithium-ion battery technology. The successful delivery of the development line has
potential to provide Mpac with access to an exciting new clean energy sector.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
24M developed
semi-solid Li-Ion
technology. This
technology allows
the creation of low
cost, recyclable and
less wasteful battery
systems.
Create revenue
through licencing and
production ramp-up
consultancy.
Technology partner.
Industrial solution for
battery production
automation to develop
the next generation of
the Casting and Unit
Cell Assembly system
for creating semi-solid
Li-Ion batteries.
Preferred supplier to
24M end customers.
Initially, Mpac are
supplying scalable
solutions to FREYR,
a Li-Ion battery
manufacturer based in
Mo i Rana in Norway,
who are using the 24m
semi-solid technology.
Targeting the energy
storage and electric
vehicle markets.
Leveraging renewable
energy and an eco-friendly
supply chain to reduce
environmental impact.
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
“ I believe Mpac has made
excellent progress in
2021, delivering significant
growth in order intake and
a financial performance for
2021, being above market
expectations. The positive
H1 2021 performance
continued into H2 and
the Group ended 2021
with both a strong closing
order book and a healthy
prospect pipeline,
providing an encouraging
outlook for 2022.”
Introduction
2021 has been a very successful year
for Mpac in which we continued to
make substantial progress with our
strategic plans and have delivered
order intake, margin and revenue
growth, an improved return on
sales, growth in underlying profit
before tax and a significantly higher
closing order book. The 2020
acquisition of Switchback was a
significant contributor to the 2021
revenue growth. The progress we
made in 2021 is a direct result of
the dedication and agility of our
employees in maintaining support for
our customers while ensuring that the
Group continued to operate efficiently,
with minimal disruption, despite the
operational challenges caused by
lengthening global supply chain lead
times, materials price increases and
the impact on labour availability due
to Covid-19 related issues.
The strong financial performance in
the year was driven by the Group’s
continued progress in delivering on the
‘One Mpac’ business model. The Group
remains focused on executing its long-
term strategy, including developing
Original Equipment (“OE”) order intake
growth and improving margins through
our Service business and increased
operational efficiencies. Delivery of
these strategic initiatives contributed to
an improved financial performance and
underlying profit before tax for the year
exceeding market expectations.
Since acquiring Switchback Group Inc
(“Switchback”) in September 2020
the business has made great progress
with the integration and is generating
synergies. The acquisition is a
compelling fit with Mpac’s strategic
intent of being a market leader in
the provision of full-line packaging
solutions for the Healthcare and Food
& Beverage sectors. Critically, the
acquisition accelerated our expansion
into the Americas market and, with
the move to a Showcase facility in
September 2021 and the rebranding
to Mpac, it provides a physical
location for the Group to further grow
our Langen and Lambert product lines
in the region. The business continues
to trade ahead of management
expectations.
As announced in July 2021, the Group
signed a contract with FREYR Battery
(“FREYR”), a developer of clean, next-
generation battery cell production
capacity, for the supply of casting and
unit cell assembly equipment to the
battery cell production line at FREYR’s
Customer Qualification Plant in Norway.
The equipment to be supplied by Mpac
will support FREYR in achieving its
ambitious growth plans for a more
sustainable future, with Mpac providing
equipment, services and know how to
industrialise the battery cell production.
This development line is due to be
completed in Q4 2022.
£117.9m
Overall Group order intake
(2020: £83.9m)
£78.4m
Order book for 2021
(2020: £55.5m)
£94.3m
Group revenue
(2020: £83.7m)
£74.1m
Original Equipment revenue
(2020: £64.1m)
£20.2m
Service revenue
(2020: £19.6m)
Revenue by geography
Americas £63.3m
Europe, Middle East & Africa £26.7m
Asia £4.3m
Tony Steels
Chief Executive
Mpac Group plc
Annual Report & Accounts 2021
11
Operating
review
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Mpac Group plc
Annual Report & Accounts 2021
12
Operating
review
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Our innovation focus in 2021 was
directed towards enhancing our
range of end of line packaging, full
line medical devices and healthcare
solutions and in developing our clean
energy battery automation offering.
Our end of line case packaging
products have been approved by a
global blue chip customer as their
preferred solution. We launched the
Mpac Cube in the year which brings
together all our existing service
products with a suite of digital
technologies aimed at providing our
customers Industry 4.0 capabilities
to enhance their productivity.
Our search for further
complementary acquisition targets
continues; however, management
focus remains on delivering organic
growth and extending our
commercial reach to new customers
with new products and services,
supported by a comprehensive,
market-led development roadmap.
We remain a relatively small player
in a multi-billion revenue market
with growth prospects.
The business fundamentals of Mpac
are strong, and I am excited about the
next phase for the Group. With the
opportunities within the clean energy
sector, together with an enhanced
position in the growing healthcare and
food & beverage sectors, we remain
on track to meet the objectives of our
long-term strategy.
Trading
The trading performance in 2021
was strong.
Group revenues of £94.3m (2020:
£83.7m) represent an increase of
13% compared to the previous year
(1% growth on a like-for-like basis).
OE revenue grew by 16% to £74.1m,
supported by strong growth in the
Americas and healthcare sector.
Services revenue grew by 3% to
£20.2m, driven mainly by growth in
EMEA. The rate of revenue growth
in all regions and for both OE and
Service was impacted by lengthening
supply chain lead times and,
particularly in Q4 2022, by the impact
on labour availability due to Covid-19.
Overall order intake for the Group
grew by 41% to £117.9m (38% growth
excluding the effect of the Switchback
acquisition (“like-for-like”)), with a
significant increase in order intake
from our OE business.
The increase in order intake drove
a rise in the value of the closing
2021 order book to £78.4m (2020:
£55.5m), with increased customer
diversification. The increased value
of the closing order book provides
extensive coverage over the forecast
2022 revenue. We remain vigilant
to project execution risk and are
confident that the quality of the
order book should result in continued
margin growth.
During 2021 we raised market profit
guidance in the half year results
announcement and I am delighted to
report that underlying profit before
tax in 2021 was £8.6m, an increase of
36% compared to £6.3m in 2020.
We ended the year with cash of
£14.5m, providing the Group with the
financial resources required to invest
in the strategic initiatives to deliver
profitable growth in future years.
The Group aims to achieve double digit
percentage revenue growth over the
medium-term, enabling an improved
return on sales, targeted at 10%.
Underlying operating return on sales
rose from 7.8% in 2020 to 9.3% in 2021,
highlighting the success of the Group’s
strategy. To support this intent, we
manage the business in two parts, OE
and Service and across three regions,
Americas, EMEA and Asia.
Revenue by region was Americas
£63.3m (2020: £46.7m), EMEA
£26.7m (2020: £31.3m) and Asia
£4.3m (2020: £5.7m).
Revenue by sector was food &
beverage £45.3m (2020: £34.8m),
healthcare £45.3m (2020: £44.5m),
pharmaceutical £3.7m (2020: £3.9m).
Individual OE contracts, and to a
lesser extent the Service business,
can be large. Accordingly, a few
significant orders can have a
disproportionate impact on the
growth rates seen in individual sectors
and regions from year to year.
Original Equipment
OE order intake of £96.0m (2020:
£62.4m) was 54% above the prior
year (54% on a like-for-like basis). OE
revenues of £74.1m (2020: £64.1m)
were 16% above the prior year (4%
on a like-for-like basis).
Mpac’s focus remains in the growth
sectors of healthcare and food &
beverage which continue to drive
our success.
OE revenue generated in the
Americas region was 48% above the
prior year at £53.4m (2020: £36.2m),
and 26% above prior year on a like
for like basis. The increase in revenue
was primarily generated from
customers in the food & beverage
sector and from both Langen and
Lambert products, alongside the
inclusion of full year revenue from
the Switchback product line.
In EMEA, OE revenue in the year
was £17.4m (2020: £23.7m) with the
reduction due primarily to the timing
of order placement from customers
in the region. Revenue in the region is
generated by our Lambert and Langen
product ranges, with an increase in
production from the Wijchen NL site
associated with machines sold into
the Americas region. Covid-19 related
restrictions were much more impactful
in the EMEA region.
“ FREYR Battery Chooses Mpac for Supply of
Battery Cell Assembly Equipment Package to
FREYR’s Customer Qualification Plant in Mo i Rana,
Norway. FREYR continues to advance Norway’s
first lithium-ion battery cell manufacturing facility
at industrial scale with a production line developed
to our own specifications.”
25 Corporate governance46 Financial statements
In Asia, revenue, which is predominantly
associated with orders from customers
in the food & beverage sector, was
£3.3m compared to £4.2m in 2020.
The region retained pandemic-related
travel restrictions for the majority of
the year, reducing opportunities for
business development.
Service
Order intake for the Service division
was 2% above 2020 at £21.9m (2020:
£21.5m). Growth in order intake in the
Americas region offset a reduction in
order intake in EMEA.
Revenue in 2021 of £20.2m was 3%
above the prior year (2020: £19.6m),
with growth mainly from the EMEA
region and from the Food &
Beverage sector.
Service revenue in the Americas
was £9.9m compared to £10.5m in
2020 with the reduction due mainly
to the timing of large individual
orders. EMEA revenue in the year
was £9.3m compared to £7.6m in
2020. Asia revenue in the year was
£1.0m compared to £1.5m in 2020,
with the Asia region impacted by
the continued pandemic related
travel restrictions.
Overall order prospects remain strong
and the total OE and Service closing
order book is 41% above the opening
order book and customer activity
levels remain robust across each
region and sector.
Pandemic
Managing supply chain lead times
and securing parts availability is a
daily challenge to our Operations and
Project Management teams. Several
OE project build lead times were
extended in the year due to supplier
parts and material delays, which we
actively manage with our customers.
The impact has been largely mitigated
by the Group’s robust and secure
supplier relationships; however, the
global shortage of certain electrical
components is expected to continue
into H1 2022.
In addition, travel restrictions
implemented to limit the spread of the
pandemic, particularly in EMEA and
APAC, continued to make completing
on-site service work and installation
and commissioning of equipment
challenging. To mitigate this, we utilise
digital solutions to provide services
remotely to ensure high customer
service levels are maintained.
Mpac is well positioned to service
these essential sectors and the
business continues to act proactively
to promote the range of newly
developed products and to offer
the customers creative and flexible
digital solutions for remote machine
acceptance and servicing.
The Board of Mpac continues to
monitor the situation carefully
across our customer, supplier, and
employee base.
Mpac business model ’One Mpac’
Core to our five-year strategic plan
is the evolution to a single entity
business model. We have operations
around the world and industry-leading
technologies and innovation which is
highly valued by our customers. None
of that is possible, of course, without
the commitment of our people.
Having a highly skilled, technical
workforce in place and ensuring
everyone can contribute at their
highest level and grow in their position
over the long term enables us to win
as a team. Through ‘One Mpac’ we are
developing leaders, whilst engaging
and empowering our global workforce.
With strong leaders, engaged
people and common processes we
strengthen the organisation and
create value for our customers and
shareholders.
Strategic update
The implementation of our strategic
plans and continued focus on
increasing the scale and diversity
of the Group is the driver to Mpac
reporting growth in order intake,
revenue, and underlying profitability
during a challenging year in which
all our sites were impacted by
lengthening global supply chain
lead times, price increases and
the availability of labour due to the
Covid-19 resurgence.
Our strategy focuses on three key
initiatives to drive growth:
Going for Growth – Offering
customers comprehensive
“Automation Ecosystems” solutions
in our target sectors.
Make Service a Business – Providing
customers with a comprehensive
portfolio of service products to
ensure they maximise their return
on investment; and,
Operational Efficiency – Operational
excellence and flexibility of supply
chain to increase responsiveness to
investment cycles.
Going for Growth
Our goal remains to grow Group
revenue by a double digit rate year
on year. The overall market is huge
and has fundamental growth drivers.
During 2021 we established a regional
sales approach supported by our single
entity model, ‘One Mpac’, offering
innovative packaging machinery
solutions from our extensive portfolio
of engineered modules, which is
delivering a wider range of machines
into new and existing customers.
Expansion in the Americas region
continued with the move in 2021
into a new US headquarters and
showcase facility from which Mpac
can promote, demonstrate, and
configure the Lambert, Langen and
Switchback product ranges to local
customers. Cross selling of the existing
product and service offering to new
and existing customers will be a key
driver of growth in 2022, through
Mpac Group plc
Annual Report & Accounts 2021
13
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
“ This new facility will offer our customers a
strategic high-tech environment which will
showcase all the Mpac offerings under one roof,
whilst offering our personnel the space we need
to grow all facets of the Group in the US.”
Dave Shepherd: President Mpac Switchback USA
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
14
Operating
review
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
ensuring we better understand the
customers’ evolving needs and extend
our proposition with a broader solution
approach.
The Group has undertaken a review
of our market approach and digital
platform customer proposition and
as a result, Mpac launched a new
Group-branded website (www.
mpac-group.com) and aligned its
commercial approach to the wider
Mpac product line websites. Our go
to market approach is now under a
unified Mpac brand supported by
strong product lines, covering all
aspects of automation and packaging
solutions. This has been supported by
a social media campaign, resulting in
a significant uptick in followers and
lead generation.
Innovation remains the key to long
term sustainable growth. During 2021
we have developed technologies to
support our solutions for the clean
energy sector in collaboration with
24M and FREYR Battery and have
launched the Mpac Cube, which
incorporates innovations focused
on improved machine performance,
digital enhancements plus further
Industry 4.0 enabled technology.
Furthermore, we have continued
to expand our full line solutions for
automation and packaging in the
healthcare market and expansion of
our end of line offering for the food
& beverage sector.
Make Service a Business
Our updated five-year Service
strategic growth plan complements
the OE growth initiatives and is built
around a world class Service support
function which uses innovative
digital technologies, complemented
by in-person field-based support
from a local operating model. Our
goal is to generate 30% of our
revenue from services.
Our customers have an extensive
globally installed base which they
expect to run continuously at high levels
of overall equipment effectiveness.
The trends within Industry 4.0 and
its enabling technological platforms
support our strategy to work with our
customers to ensure they maximise
their return on investment throughout
the life-cycle of the equipment. We
launched our Services product line
during the year under the brand Mpac
Cube. This brings together all our
existing service products with a suite of
digital technologies aimed at providing
our customer Industry 4.0 capabilities
to enhance their productivity.
now embedded these tools into our
Service product range.
As part of our strategic plan to
provide local support to global
customers, in 2021 we further
enhanced our Service model in the
Americas region with the formation
of an Americas healthcare service
business unit, which provides
proactive and responsive technical
support specific to the installed
machine base and product offering
in the healthcare sector.
Operational Efficiency
Our goal is to be a flexible
organisation which can respond
quickly and with agility to our
customer needs, leveraging our
global internal resources as one. This
is achieved through organisational
excellence, underpinned by a global
supply chain and supported by a
single business model, ‘One Mpac’.
The cross utilisation of resources
is now fully embedded within the
Group’s operations.
Throughout the pandemic the
requirement from customers for
digital technology and remote support
offerings increased significantly and
Mpac was able to fulfil this demand
and offer solutions for customers,
which ensured that most lost or
deferred ‘on site’ Service revenues
were mitigated with alternative
remote revenue streams. Mpac has
In early 2021 we deployed our global
ERP and business systems blueprint
to our facilities in Mississauga,
Canada and Tadcaster, UK, which
will support the strategy to leverage
the earlier deployments of common
engineering design platforms to our
manufacturing sites and the initial
ERP system at our facility in the
Netherlands.
Environmental, Social & Governance
We are fully committed to improving
our Environmental, Social &
Governance (‘’ESG’’) performance
in all areas and we are pleased with
our early progress. Sustainability is
at the core of the Mpac business
model. Our engineered automation
and packaging solutions provide
customers in the healthcare and
food & beverage sectors with
sustainable and environmentally
sound equipment that support the
global megatrends of reductions in
packaging use, particularly single-
use plastic packaging, and energy-
efficient machinery. Our end-to-end
capabilities help environmentally
focused businesses meet their ESG
targets and our evolving innovative
solutions offer our customers
opportunities to achieve their
sustainability goals.
There is an inverse relationship
between Mpac’s scope of influence
and the sustainability impact of the
packaging industry. The highest
potential to drive carbon footprint
reductions in the value chain is
downstream, where Mpac’s
leverage is to drive productivity
improvements through our
service products.
We encourage the culture and
adoption of continuous improvement
in sustainability.
“ Mpac Cube brings together all our existing service
products with a suite of digital technologies aimed
at providing our customer Industry 4.0 capabilities
to enhance their productivity.”
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
15
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Acquisition strategy and update
The Board continues to seek and
evaluate potential acquisition
opportunities, the focus of which is to
find 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
market sectors, adding value to the
Group. A number of opportunities
are currently under evaluation and
further updates will be provided
as appropriate.
Outlook
The Group made substantial progress
in 2021 in delivering our five-year
strategic plan with the strong
financial performance underpinned
by the Group’s progress in realising
the benefits of the ‘One Mpac’
business model.
The Group remains focused on
executing its long-term strategy of
delivering OE order intake growth
and improved margins, increasingly
through our digital services customer
offering, together with increased
operational efficiencies.
We announced in July 2021 that Mpac
was awarded a contract with FREYR
Battery to develop and build a clean
energy casting and unit cell assembly
line and this project has the potential
to open the clean energy sector to
Mpac in 2022. We remain focused on
delivering this first development line
and establishing Mpac’s position as
a trusted partner to provide battery
assembly automation in this exciting
and rapidly developing market.
Our opening 2022 order book
provides extensive coverage over
forecast revenue, and we have again
been successful in broadening
the diversity of our customers and
product range in the current order
book. Notwithstanding the potential
for ongoing uncertainties regarding
Covid-19, and the Ukraine crisis, which
we will continue to monitor closely,
the orderbook, prospect pipeline,
strong operational and management
team, means the Group’s prospects
remain positive and the year has
started on track.
The Group has both the financial
and managerial resource available
to develop the business, with the
prime focus being on organic growth.
This will be delivered through the
leveraging of its global position,
development of its products and
an improved and expanded service
offering to its customers. We
continue to evaluate complementary
acquisition opportunities.
Tony Steels
Chief Executive
16 March 2022
“ Our end-to-end capabilities help environmentally
focused businesses meet their ESG targets and our
evolving innovative solutions offer our customers
opportunities to achieve their sustainability goals.”
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
16
Financial
review
“ In 2021, Mpac returned
to growth, generating an
increase in margin and
profitability over 2020,
underpinned by our
approach to operate as
a single entity business
model, ‘One Mpac’, and
by leveraging the prior
investment in business
processes and systems.”
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Revenue and operating results
Group revenue in the year was
£94.3m (2020: £83.7m) with the
growth in 2021 primarily driven by
the 2020 acquisition of Switchback.
Revenue in the Original Equipment
(“OE”) division was £74.1m (2020:
£64.1m) and revenue in the Service
division was £20.2m (2020: £19.6m).
Order intake was £117.9m, an increase
of 41% from the previous year (2020:
£83.9m). Gross profit was £28.9m
(2020: £24.3m) and underlying selling,
distribution and administration costs
were £20.1m (2020: £17.8m).
Underlying operating profit was
£8.8m (2020: £6.5m). Underlying
profit after tax was £7.9m (2020:
£6.3m) and statutory profit for the
year was £7.8m (2020: £4.2m).
Non-underlying items
Non-underlying items merit
separate presentation in the
consolidated income statement to
allow a better understanding of the
Group’s financial performance, by
facilitating comparisons with prior
periods and assessments of trends
in financial performance. Pension
costs, acquisition-related items and
property transactions are considered
non-underlying items as they are not
representative of the core trading
activities of the Group and are not
included in the underlying profit
before tax measure reviewed by
key stakeholders.
Interest and taxation
Net financing expense was £0.1m
(2020: £nil). Tax on underlying profit
before tax was £0.7m (2020: £nil).
The tax charge on the Group’s
profit before tax was £0.4m
(2020: £1.3m credit).
Dividends
Having considered the opportunities
for investment in the growth of the
Group, the Board has decided that it is
not appropriate to pay a final dividend.
No interim dividend was paid in
2021. Future dividend payments will
be considered by the Board in the
context of future growth opportunities
and when the Board believes it is
prudent to do so.
Cash, treasury and funding activities
Cash at the end of the year was
£14.5m (2020: £15.5m). Net cash
inflow before reorganisation was
£0.8m (2020: £12.8m), after an
increase in working capital of £8.2m
(2020: £7.5m decrease) and defined
benefit pension payments of £2.6m
(2020: £3.0m). Reorganisation and
acquisition costs of £0.3m (2020:
£0.9m) were paid in the year. Net
taxation payments were £0.1m
(2020: £0.7m). Capital expenditure on
property, plant and equipment was
£1.5m (2020: £1.2m), and capitalised
product development expenditure
was £0.2m (2020: £1.8m). Net current
assets at the end of the year were
£12.5m (2020: £8.3m) and net assets
at the year end were £65.4m
(2020: £46.2m).
Key Performance Indicators
The Group uses a range
of measures to monitor
progress against it’s strategic
and financial plans. The key
performance indicators are
presented below:
£117.9m
Overall Group order intake
(2020: £83.9m)
£94.3m
Revenue
(2020: £83.7m)
£8.8m
Underlying operating profit
(2020: £6.5m)
9.3%
Underlying operating
return on sales
(2020: 7.8%)
£14.5m
Cash
(2020: £15.5m)
39.7p
Underlying EPS
(2020: 31.4p)
Will Wilkins
Group Finance Director
Statutory Key Performance Indicators
The statutory measures relating to the underlying Key Performance Indicators above are as follows:
£8.3m
Operating profit
(2020: £2.9m)
8.8%
Operating return on sales
(2020: 3.5%)
39.1p
Basic EPS
(2020: 20.8p)
25 Corporate governance46 Financial statements
Deferred consideration in respect
of the acquisition of Switchback of
£0.6m regarding the satisfaction of
certain performance targets in the
year to 30 September 2021, was paid
in October 2021.
The three-year performance criteria
associated with the 2018 acquisition
of Lambert Engineering (“Lambert”)
were not satisfied and consequently
the carrying value of the deferred
consideration of £2.4m was
released to the income statement
as a credit to non-underlying
administrative expenses.
The Group entered into a three-year
funding agreement with HSBC in
2019, which provides the Group with
a £10.0m revolving credit facility to
support future growth. This facility
also provides a number of other
opportunities to proactively manage
the Group’s cash and ensure that
the Group is well placed to react
to opportunities, both organic and
acquisition related, as they arise. The
facility was not utilised in the year.
There were no significant changes
during 2021 in the financial risks,
principally currency risks and
interest rate movements, to which
the business is exposed, and the
Group treasury policy has remained
unchanged. The Group does not
trade in financial instruments and
enters into derivatives (mainly forward
foreign exchange contracts) solely for
the purpose of minimising currency
exposures on sales or purchases in
other than the functional currencies
of its various operations.
Reconciliation of underlying profit before tax to profit before tax
Underlying profit before tax
Non-underlying items
Defined benefit pension scheme – past service cost GMP equalisation
Defined benefit pension scheme – other costs and interest
Acquisition costs
Reorganisation costs
Release of deferred consideration costs
Acquired intangible asset amortisation
Deferred consideration interest
Profit on disposal of Coventry facility
Non-underlying items total
Profit before tax
Mpac Group plc
Annual Report & Accounts 2021
17
Financial
review
2021
£m
8.6
–
(1.0)
(0.4)
–
2.4
(1.6)
(0.1)
0.3
(0.4)
8.2
2020
£m
6.3
(0.2)
(0.6)
(0.4)
(0.5)
–
(1.6)
(0.1)
–
(3.4)
2.9
Revenue (£m)
Underlying profit before tax (£m)
100
80
60
40
20
0
10
8
6
4
2
0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Underlying operating return on sales (%)
Net assets (£m)
10
8
6
4
2
0
2017
2018
2019
2020
2021
70
60
50
40
30
20
10
0
2017
2018
2019
2020
2021
2
0
5
2
6
4
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
Mpac Group plc
Annual Report & Accounts 2021
18
Financial
review
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Prior year adjustments
Following a review of the Group’s
compliance with certain technical
aspects of IAS 12, additional deferred
tax assets have been recognised
in the consolidated statement of
financial position. Deferred tax
liabilities have historically been
recognised on consolidation in
relation to acquired intangible assets;
however, deferred tax assets have not
been recognised in respect of losses
where there has been uncertainty
around when future taxable profits will
be generated to enable the Group to
utilise the losses. The Group has now
reconsidered the requirements of IAS
12 and, where taxable losses are held
which relate to the same jurisdiction
as the Group expects to benefit from
the intangible assets, deferred tax
assets have been recognised.
This adjustment has no impact on
the underlying results or cash flow of
the Group.
Pension schemes
The Group is responsible for defined
benefit pension schemes in the UK
and the USA, in which there are no
active members.
The IAS 19 valuation of the UK
scheme’s assets and liabilities was
undertaken as at 31 December 2021
and was based on the information
used for the funding valuation work
as at 30 June 2018, updated to reflect
both conditions at the 2021 year
end and the specific requirements
of IAS 19. The smaller US defined
benefit schemes were valued as at
31 December 2021, using actuarial
data as of 1 January 2021, updated for
conditions existing at the year end.
Under IAS 19 the Group has elected to
recognise all actuarial gains and losses
outside of the income statement.
The IAS 19 valuation of the UK
scheme resulted in a net surplus at
the end of the year of £35.7m (2020:
£14.0m) which is included within
the Group’s assets. The value of the
scheme’s assets at 31 December 2021
was £453.1m (2020: £440.9m) and
the value of the scheme’s liabilities
was £417.4m (2020: £426.9m).
The scheme was largely protected
from the sharp increase in inflation
forecasts by the liability matching
strategy, whilst strong growth in
asset values generated a significant
increase in the IAS 19 surplus.
The IAS 19 valuations of the US
pension schemes showed an
aggregated net deficit of £2.5m
(2020: £3.0m) with total assets of
£9.9m (2020: £10.1m).
During the year the Company made
payments to the UK defined benefit
scheme of £1.9m (2020: £1.9m) in
respect of the deficit recovery plan.
A contribution of £0.4m (2020: £0.8m)
in accordance with the profit-sharing
arrangement in the schedule of
contributions was also paid.
In 2019 the UK scheme’s triennial
valuation as at 30 June 2018 was
completed, with the reported deficit
reducing to £35.2m (30 June 2015:
£69.6m). The contributions remained at
the same level, but the recovery period
reduced to six years and one month
(30 June 2015: 14 years 2 months).
Further details are shown in note 24.
Lambert deferred consideration
The three-year performance criteria
associated with the acquisition of
Lambert were not satisfied and
consequently the carrying value of
the deferred consideration has been
released to the income statement.
Timing of individual order placement
and of project execution can have
a material impact on the trading
performance in any one year and
despite the targets not being met,
the trading performance of Lambert
since acquisition remains strong.
Furthermore, the release of the
deferred consideration is not an
indicator of an impairment in the
carrying value of the investment.
Equity
Group equity at 31 December 2021
was £65.4m (2020: £46.2m). The
movement arises mainly from the
profit for the year of £7.8m, a net
actuarial gain in respect of the
Group’s defined benefit pension
schemes of £12.8m, offset by
changes in the fair value of cash
flow hedges of £1.3m; all figures are
stated net of tax where applicable.
Will Wilkins
Group Finance Director
16 March 2022
25 Corporate governance46 Financial statements
The Board regularly considers the main risks that the Group faces and how to mitigate those risks. The principal risks
and uncertainties to which the business is exposed are summarised as follows.
Mpac Group plc
Annual Report & Accounts 2021
Risk
Covid-19
Mitigation
2021 Movement
The Group has identified three categories of risk
associated with the spread of Covid-19. Firstly,
the risk associated with customer confidence and
investment decision making which can directly
result either in projects being cancelled or delayed.
The second element is the risk of supply chain
disruption with demand for key components
exceeding supply coupled with disruption to
transportation. Finally, the risk of ongoing labour
efficiency due to government restrictions,
which would result in a production stoppage
whilst the facility was deep cleaned, and
employees were quarantined.
The Group implemented a series of measures to preserve cash,
reduce discretionary spend and to focus on digital marketing and
innovation to provide a shield from the worst commercial and
financial impact of the pandemic. The geographic diversity of
the customer base coupled with supplying the Covid-19 resilient
markets of Healthcare, Pharmaceutical and Food and Beverage
provide a mitigation to the impact from the pandemic.
The Group’s supply chain has been established to ensure there
are several options for all critical parts. The global supply chain
includes a blend of local suppliers alongside low-cost suppliers to
provide flexibility.
Unchanged
All employees have returned to work and project
execution and parts fulfilment activity has
returned to pre-pandemic levels.
Travel restrictions, particularly in EMEA and
APAC continue to restrict opportunities to
complete on-site service work and install
and commission equipment and in addition,
lengthening supply chain lead times due to
increase in global demand as economies recover
from the pandemic has become a headwind to
the timing of revenue development.
19
Principal
risks and
uncertainties
The Group continues to focus on protecting employee’s health and
wellbeing by implementing appropriate social distancing regimes
and increased hygiene routines at our plants. This, alongside an
operational footprint established with common engineering and
project management platforms, allows for project execution to be
relocated in the event of resource constraints or Group employees
being unavailable to work due to the pandemic.
Political, Economic and market cycles
The Group is potentially affected by global political
and local economic cycles and changes in a
number of industrial sectors, including Healthcare
and Food and Beverage industries. Such potential
changes include those arising as a consequence
of governmental activities, such as escalating
political tensions, regulation and taxation.
Brexit trade disruption
The impact on the Group of the UK leaving the
EU is limited to potential disruption of the flow of
trade between the Mpac business in Tadcaster
and customers and suppliers within the EU, and to
a lesser extent, on trade from the Mpac EU based
entity and customers within the UK.
Customers, suppliers, and Group operations are geographically
diverse, and the Group sells a range of products and services to a
number of industries in all parts of the world.
The usual market cycles have been disrupted by the pandemic,
with shifts in sector demand and new opportunities being
accelerated. Mpac has benefited from these disruptions, with the
investment in flexible, connected machinery having been rapidly
applied to new applications as required. In respect of mitigating
against the impact of political unrest, Mpac maintained a wide and
diverse customer and supplier base which is not dependent upon
any one jurisdiction.
Increased
The recent events in Ukraine demonstrate that
political tensions can have indirect implications
on supply chain and over a longer time horizon, on
customer investment decision making. However,
Mpac operates in markets which are less affected
by economic cycles than most and the Group can
flex to the demands of the customer base.
Trade disruption risk is partially mitigated by matching the
locations of customers and production within the Mpac Langen
business, flexible production facilities across three continents
along with limited reliance upon the UK market.
Specific actions were taken prior to the 2020 year end to minimise
the disruption caused by the late conclusion of the Brexit
agreements and these ensured that the UK site could service all
aspects of the UK installed machine fleet without the physical
presence of non-UK staff.
Decreasing
As the exit process has progressed through 2021
the uncertainty has started to reduce. The risk
continues to be mitigated by a low volume of
consignments, and by scheduling all requirements
well in advance.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Risk
Regulatory change
Mitigation
2021 Movement
20
Principal
risks and
uncertainties
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
The Group may be affected by changes in global
or national regulations across any of its key
sectors, examples of which include changes in
regulations which significantly change the
demand for our customer’s products or
restrictions upon/changes to the methods
of packaging and distribution.
Loss of trading partners
The Group faces the general risk of trading
partners, including both customers and suppliers,
ceasing to operate; the loss of any such partner
could have an adverse effect on the Group’s
operating results and financial condition, including
potentially affecting the viability of a subsidiary
company. A number of customers operate in
countries which may face a higher degree of
political risk than others.
Large one-off projects
The Group undertakes large, one-off projects
for its customers each year. Several risks follow
from the nature of this type of business, including
the potential for cost over-runs and delays in
performing the contract, with a consequent impact
on cash flows and profits. Also, the Group is prone
to potentially large fluctuations in business levels,
as demand can be volatile.
Loss of a key facility
The Group operates a number of sites around
the world and the loss of any one of them would
interrupt a revenue stream and could potentially
have an adverse effect on the Group’s operating
results and financial condition.
The Group, and the Group’s customers and
suppliers, may also be affected by sudden
restrictions in global logistics.
The Group’s products are used to produce and package a very
wide range of products and restrictions or changes to any one
product, especially within our key sectors where individuals are
reliant upon the sector daily, which provides some mitigation
against sudden change.
Unchanged
The demand for new packaging and innovation in
this area has continued unabated, to the benefit of
the Group.
The Group has extensive knowledge and experience in designing
machines to accept all kinds of products and packaging materials,
including those with the lowest environmental impact and
machines designed to minimize packaging material usage whilst
maintaining the customer’s product in perfect condition.
The Group has a diversified base of customers. In certain years
sales to a customer may be more than 15% of Group revenue,
although the sales would typically be both original equipment
and service, and to a number of different geographic regions.
The Group regularly reviews its trading relationships with
suppliers with the aim of ensuring that alternative sources of
supply are available.
Customers – Decreasing
Suppliers – Unchanged
The Group continues to enjoy a diverse, blue chip
customer base, so the impact of a loss of a single
customer is limited. The strength of our customer
base has both increased and diversified during the
year, so this risk has decreased. Suppliers, however,
are at greater risk of distress in difficult or changing
market conditions and positive steps towards
additional supplier diversification have been taken.
The Group utilises good project management practices, including
regular technical and commercial reviews of its major projects.
Resource capacity is regularly reviewed, alongside reviews of order
prospects lists.
Increased
Strong contract management processes have
ensured that the Group has broadly maintained
profitability from the ‘as sold’ level through to
completion.
Disaster recovery plans are in place for each site. IT infrastructures
are designed to have minimal inter dependence across the Group,
thereby not exposing a number of facilities to the failure of one
central system.
The diverse locations and common skill sets around the Group,
along with the Group’s investments in communication technology,
means that production could be moved from one site to another
at short notice if a site or its region were unable to function for a
period of time.
Unchanged
The Covid-19 pandemic highlighted the potential
for one of the Group’s sites to be temporarily closed
because of external circumstances and this risk
continues whilst, although prudent measures are
being taken, and the overall threat of the pandemic
has diminished, there remains no certainty
that a local outbreak could be contained whilst
maintaining operations. Appropriate contractual
protections are included in the Group’s contracts to
mitigate the direct financial cost of such an event.
25 Corporate governance46 Financial statements
Risk
Mitigation
2021 Movement
Exchange rate movements
The majority of the Group’s trading is conducted
outside of the UK and in currencies other than
sterling. Consequently, its financial performance
is affected by fluctuations in foreign exchange
rates, particularly as a result of changes in the
relative values of the US dollar, Canadian dollar,
euro, and sterling.
IT security
The Group holds sensitive data relating to its
employees, customers, and suppliers as well as
intellectual property and financial data. Should
security infringement occur the Group risks loss of
customers, disruption of normal operations, fines,
and reputational damage. Since the 2020 Covid
outbreak there has been a substantial rise
in cyber-criminal activity such as ransomware
and trojan deployment.
Availability of funding
The Group has a wide supply base in different countries and
monitors the relative values of currencies in making purchasing
decisions. The Group enters into forward foreign exchange
contracts to minimise currency exposures on sales and purchases
in other than the functional currencies of its operations.
Unchanged
Volatility in the foreign exchange markets has
been lower so far in 2021, and the use of hedging
and matching of supply locations to customers
continues to minimise the impact.
The Group continually reviews the effectiveness of its IT
security controls in consultation with external experts and
invests in industry best practice security software. The security
arrangements of the Group’s IT assets prevent unauthorised
access to core IT hardware. IT infrastructures are designed to have
minimal inter dependence across the Group. Cyber security user
training is employed as a final line of defence.
Unchanged
The Group maintains best practice in this area and
there has been no significant change in the period.
The banking facilities in place prove insufficient
for the needs of the Group to meet its growth
objectives.
The Group conducted an in-depth review of its requirements
and put in place a £10.0m revolving credit facility with HSBC
during 2019.
As at 31 December 2021, the Group holds cash balances of
£14.5m. It is considered that the Group has sufficient cash
resources to carry on in operational existence for the foreseeable
future without the use of the new facility, which thus provides
a substantial buffer against the Group being constrained by
restricted availability of funding.
Unchanged
The facility remains in place and undrawn, with the
cash balance and operational cash flow remaining
positive in the period.
It is considered that further funding would be
available should it be required.
Mpac Group plc
Annual Report & Accounts 2021
21
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
22
Principal
risks and
uncertainties
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Risk
Mitigation
2021 Movement
Liabilities of the Group sponsored
defined benefit pension schemes
The Group is responsible for the funding of a
defined benefit pension scheme in the UK, which
pays a levy to the Pension Protection Fund of an
amount outside the control of the Group, as well as
three smaller such schemes in the USA. Changes
in the value of the liabilities of the pension
schemes, which were valued in aggregate at
£429.8m at 31 December 2021 in accordance with
IAS 19, as a consequence of changes in interest
rates and mortality rates, amongst others, and
changes in the value of the assets of the pension
schemes, which were valued in aggregate at
£463.0m at 31 December 2021, are largely outside
the control of the Group. The valuation of these
schemes impact on the value of capital employed
in the Group and the extent to which, as a matter
of law, it has available as distributable profits. The
Group has responsibility for the adequate funding
of the pension schemes and is currently paying
to the UK scheme £1.9m per annum in respect
of deficit funding following an actuarial funding
valuation as at 30 June 2018. The UK scheme is
subject to a full actuarial funding valuation as at
30 June 2021, which will help inform its funding
requirements over the subsequent periods.
Litigation
The Group from time to time may be subject to
claims from third parties in relation to its current
and past operations, which could result in legal
costs and rulings against it that may have a
material effect on the Group’s operating results
and financial condition.
Supply chain
Timely, efficient supply of parts and purchased
components is critical to our ability to deliver to
our customers. Manufacturing and supply chain
continuity is exposed to external events that
could have significant adverse consequences,
including natural catastrophes, civil or political
unrest, changes in regulatory conditions, terrorist
attacks and disease pandemics – this applies to
our own manufacturing sites and those of our
key suppliers. The inability to deliver products/
solutions to customers would impact financial
performance and our reputation.
The Group and the pension schemes implement liability reduction
strategies where such opportunities exist, and the Group maintains
regular dialogue with its pension advisors on such matters. Regular
meetings are held with the trustee of the UK pension scheme, to
input into their asset investment decisions and to appraise the
trustee of the progress of the Group to help inform them in making
decisions which may impact the scheme funding requirements.
In particular, the Group and the trustees of the schemes have an
active programme of risk mitigation for the schemes, including
seeking to match investments to the underlying liabilities and
to provide options for the membership which can benefit both
themselves and the schemes. However, many factors which
impact the valuations and funding requirements of the pension
schemes are outside the control of the Group.
Unchanged
Discount rates have recovered since the prior year
and have led to the funding level of the scheme
increasing. This was assisted by the investment
strategy. The pension schemes remain at the risk
of being affected by regulatory changes.
The Group has a comprehensive risk management and review
process, which is aimed at minimising the risk of such claims
arising because of its actions. Insurance policies are in place to
cover some such incidences and third-party legal assistance is
sought as required.
Unchanged
No new material claims in the period.
Business continuity recovery plans are in place. We have
undertaken mitigation plans for sole-source suppliers,
sub-contractors and service providers to identify and qualify
alternative sources of supply where appropriate.
Increasing
Many areas of the globe are experiencing
increased supply chain issues and transportation
disruption that have been exacerbated by the
Covid-19 issues, alongside significant problems
with manufacturing and distribution of products.
25 Corporate governance46 Financial statements
Risk
Ethical breaches
The Group operates in highly regulated markets
requiring strict adherence to laws with risk areas
including Bribery & Corruption, International Trade
Laws, Human Rights, Modern Slavery and General
Data Protection Regulation.
Ethics or compliance breaches could cause harm
to the Group’s reputation, financial performance,
customer relationships and internal morale.
Contractual obligations
The Group could fail to deliver contracted solutions
and/or fail in our contractual execution due to
delays or breaches by our suppliers or other
counterparties.
Production delays, quality and warranty issues
could all cause unexpected losses and could
potentially lead to breach of contract and
expenses due to disputes and claims.
This could lead to loss of customers and
reputational damage within the industry alongside
loss of revenue and profit due to higher costs,
liquidated damages and/or other penalties.
Sustainability and climate change
The Group’s operations and strategies could be
deemed by stakeholders and potential investors
to fail to comply with national and international
targets on climate change reduction. This could
lead to issues with trading and employment and
financial penalties.
Mitigation
2021 Movement
A Group-wide ethics policy, which is reviewed by the Board
annually sets out the principals that the Board expects all
businesses and employees within the Group to adhere to.
Unchanged
No concerns raised in the year.
Mpac Group plc
Annual Report & Accounts 2021
23
Contracts are managed and delivered by programme management
teams that regularly review risks and take appropriate action.
Increasing
Stresses on global supply chains drives
increased risk.
Review and approval process for significant and higher-risk
contracts in place at Group level.
Diversified nature of the Group mitigates exposure to single
contracts.
The Group’s products and strategy naturally lend themselves to
be well placed environmentally. We partner with our customers to
drive their packaging solutions in a more environmentally friendly
manner, and consequently help them reduce emissions.
Increasing
The global focus on Environmental Social and
Governmental issues is increasing. Mpac is a
low generator of emissions and waste. The Board
is developing ESG measures and will report in
due course.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Section 172 of the Companies Act 2006 (“S172”) requires Mpac’s Directors to act in good faith and in the way that they consider to be most likely to promote the
success of the Company for the benefit of its members as a whole and, in doing so, to have regard to the interests of other stakeholders. The Directors should
also consider the desirability of maintaining high standards of business conduct, the need to act fairly between members of the Company and the likely long-term
consequences of their decisions.
24
Section 172
statement
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
In the table below, we set out our key stakeholder groups and how we engage with each of them. Each type of engagement is designed to foster effective and
mutually beneficial relationships so that we continue to work effectively with our stakeholders.
Stakeholder group
How we engage
Employees
As at 31 December 2021,
we employed 476 people in
the Group, based in the UK,
Canada, the United States,
the Netherlands, Singapore
and Thailand.
Our employees bring a broad
range of experience, expertise
and perspective to Mpac that
contributes to the delivery
of our strategic objectives.
The Board recognises
that employees are the
cornerstone of the business.
The Group is committed to developing its employment policies in line with best practice and providing equal opportunities for all, irrespective
of gender, age, marital status, sexual orientation, ethnic origin, religious belief or disability. Full and fair consideration is given to applications
for employment from people with disabilities having regard to their aptitudes and abilities.
Every reasonable effort is made to support those who become disabled, either in the same job or, if this is not practicable, in suitable
alternative work.
Emphasis is placed on training, effective communication and the involvement of employees in the development of the business. Information
is regularly provided on the progress of the Group through local review meetings, briefings and consultative bodies. Involvement in the
achievements of the business is encouraged through other means appropriate to each location.
The Board is updated at each Board meeting on health and safety matters. A number of employees throughout the year were absent due to
COVID, either because they tested positive or because they were having to self-isolate due to being in contact with someone else who had
tested positive. This does have an effect on morale within the businesses, but the management team have been able to mitigate this by the
use of contractors and recruiting new staff to tackle the increased order workload. Strict COVID protocols are in place at all Group sites with
regular temperature testing; the use of face coverings; social distancing where possible; and support staff working from home where local/
national regulations recommend.
Suppliers
The Group recognises and actively develops its relationships with its suppliers and works closely with them to ensure that the relationships
are productive for all parties.
The Group’s policy is to pay suppliers in line with its standard terms except where alternative arrangements have been agreed in advance with
individual suppliers. The Group does not follow any external procurement or payment code. The Group’s trade creditor days outstanding at
the year-end were 64.9.
During 2021 there have been a number of supply chain issues which have led to delays in deliveries of raw materials and electronic chips which
have had an effect on production schedules and have restricted output. This has been challenging to the Group and the procurement teams
have worked closely with the Group’s various suppliers to manage those delays and to mitigate them where possible by utilising existing product
stores or changing production schedules. At the beginning of 2022 there are signs that those supply chain issues may be starting to ease.
Customers
The Group has good relationships with its customers, some of whom are long-standing. The supply chain issues encountered by the businesses
have had an effect on the delivery of projects to some of our customers. In those cases, we work closely with the customers to inform them of the
delays and agree revised delivery timelines. This has resulted in the need, at times, for discussions to be held at senior levels between the Group and
customer to ensure that both parties are aware of the reasons for, and effects of, these delays and whether any contract penalty clauses are invoked.
Customers do change their specification mid-project which does result in the production timetable having to be amended to reflect
the changes.
We continue to keep our customers informed of the progress of their projects with regular meetings and discussions.
Communities
We believe that business should be a force for good in the communities in which we operate. We aim to support and inspire our employees to
make a difference in their communities.
The responsibility for community engagement is devolved to the local business units. The Group encourages employees to be involved in
charitable, educational or other social pursuits which contribute to the local community, provided they do not interfere with the performance
of the employee’s duties.
Further details on the Company’s strategy and long term decisions are set out in the Chairman’s introduction and Operating review. Further details of our
stakeholder engagement, including the impact of the Company’s operations on the environment, are set out in the Directors’ Report on pages 43 to 44.
Ethics policy
The Group’s Ethics policy is reviewed annually and updated as necessary. The policy, which is distributed to every Group employee and is available to view on the
Group’s website at www.mpac-group.com, sets out the values which Mpac seeks to encourage and certain principles governing the way it does business.
The strategic report was approved by the board and signed by Andrew Kitchingman, Chairman, on 16 March 2022.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
25
Corporate
governance
2
0
5
2
6
4
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
“ We are committed to
excellence in corporate
governance, and maintain
clear policies and practices
that promote good
corporate governance.”
Mpac Group plc
Annual Report & Accounts 2021
26
Chairman’s
corporate
governance
statement
As Chairman of the Company, I have pleasure in presenting the corporate
governance statement for 2021.
The QCA Corporate Governance Code 2018 (“QCA Code”)
The Board is collectively responsible to shareholders of the Company for the
effective oversight and long-term success of the Company. The Board believes
that sound governance is fundamental to this and has chosen to follow the
QCA Corporate Governance Code since 2018.
However, the Board recognises that corporate governance is not a static
process and that there is a need to ensure that policies and practices are kept
under review to ensure that we do meet the required standards and that this
area develops in line with the growth and overall strategic plans for the Group.
The Board considers that the policies, procedures and relevant systems,
which have been implemented to date, have given us a firm foundation for our
governance structure.
During 2021, the Company believes that it has complied with the 10 principles
set out within the QCA Code as shown on the opposite page.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Andrew Kitchingman
Chairman
16 March 2022
Andrew Kitchingman
Chairman
25 Corporate governance46 Financial statements
Principles of the QCA Code
Deliver Growth
How the Company has complied
1. Establish a strategy and business model which promote long-term value
for shareholders.
The Board has collective responsibility for setting the strategic aims and
objectives of the Group. Our strategy is articulated on pages 5 to 10 and
on our website.
Mpac Group plc
Annual Report & Accounts 2021
27
2. Seek to understand and meet shareholder needs and expectations.
3. Take into account wider stakeholder and social responsibilities, and their
implications for long-term success.
4. Embed effective risk management, considering both opportunities and
threats, throughout the organisation.
In the course of implementing our strategic aims, the Board takes into account
expectations of the Company’s shareholders and also its wider stakeholders
and social responsibilities.
The Board also has responsibility for the Group’s internal control and risk
management systems. The Board regularly reviews the risks faced and ensures
the mitigation strategies in place are the most effective and appropriate to the
Group’s operations.
Dynamic Management Framework
5. Maintain the Board as a well-functioning, balanced team led by the Chair.
6. Ensure that between them the Directors have the necessary up-to-date
experience, skills and capabilities.
7. Evaluate Board performance based on clear and relevant objectives,
seeking continuous improvement.
8. Promote a corporate culture that is based on ethical values and
behaviours.
9. Maintain governance structures and processes that are fit for purpose
and support good decision-making by the Board.
As Chairman, I regularly consider the operation of the Board as a whole and the
performance of the Directors individually.
The Directors attend seminars from time to time as appropriate, have regular
updates at Board meetings to assist with training and awareness of compliance
issues facing Boards of quoted companies, and also are made aware of
developments in governance generally.
The Board carries out a formal review annually in respect of its performance
over the previous year. The evaluation is informed by detailed questionnaires
completed by each Director, which are then summarised on an anonymous basis,
considered by the Board and action taken as appropriate.
All appointments to the Board will be on merit, but with due consideration
to the need for diversity on the Board. Such appointments will be made to
complement the existing balance of skills and experience on the Board.
The Company operates an open and inclusive culture and this is reflected in
the way that the Board conducts itself. The Non-Executive Directors regularly
attend the Group’s offices and other Group events. With a relatively small
employee base, such interactions mean it is relatively straightforward for the
Board to promote and assess the desired corporate culture.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Build Trust
10. Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders.
The Board will continue to monitor its application of the QCA Code and revise
its governance framework as appropriate as the Group evolves.
The Board recognises the importance of maintaining regular dialogue with
institutional shareholders to ensure that the Group’s strategy is communicated
and to understand the expectations of our shareholders.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
28
Board of
Directors
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Andrew Kitchingman FCA
Independent Non-Executive
Chairman
Dr Tony Steels
Chief Executive
Will Wilkins FCCA
Group Finance Director
Appointment: Andrew Kitchingman joined the Board
on 11 May 2016 as a Non-Executive Director and was
appointed Chairman of the Board on 19 April 2018.
Appointment: Tony Steels joined the Company and
was appointed to the Board as Chief Executive on
6 June 2016.
Committees: Member of the Audit Committee and the
Remuneration and Nomination Committee.
Skills and experience: Andrew is a Fellow of the Institute
of Chartered Accountants in England and Wales, and
formerly worked in senior positions in corporate finance
with a number of firms, including KPMG, Hill Samuel,
Albert E Sharp, Brewin Dolphin and WH Ireland.
Key strengths:
Strong experience of financial control and good
corporate governance
Expertise in equity and debt capital raising
Mergers & acquisitions
Other commitments: Non-Executive Director of Andrew
Sykes Group plc, Trustee of Northern Aldborough
Festival, Chairman of British Board of Agrément and
a member of the northern fundraising Board of Marie
Curie. He is a treasurer of Ripon Cathedral.
Skills and experience: Tony previously held a number of
senior UK and international management positions in
advanced technology and capital equipment industry,
most recently at Cytec Industries, Umeco plc and
Georg Fischer AG. He has degrees in both Engineering
and Management, together with a PhD in business
process modelling, augmented with over 30 years
industrial management experience.
Key strengths:
Capital Equipment Industry experience of more
than 20 years
Delivery of strategic transformations and sustainable
profitable growth
Extensive senior executive international business
development
Selection and development of high-performance
leadership teams
Appointment: Will Wilkins joined the Mpac Group Board
as Group Finance Director on 28 June 2018.
Skills and experience: Will is a Chartered Certified
Accountant and, prior to his appointment, he held a
variety of senior positions with the Company, including
Group Financial Controller and Group Operations
Director. He previously held a senior financial position
at BSH Home Appliances and began his career at Grant
Thornton in 1992.
Key strengths:
Extensive experience in improving business
systems, processes and controls
More than 25 years proven track record as a
senior finance professional with strong financial
reporting discipline
Cross functional practical experience in operations
and finance
Sara Fowler Independent
Non-Executive Director
Doug Robertson Independent
Non-Executive Director
Matthew Taylor Independent
Non-Executive Director
Appointment: Douglas Robertson joined the Mpac Group
Board on 1 November 2018 as a Non-Executive Director.
Appointment: Matthew Taylor joined the Mpac Group
Board on 21 October 2021 as a Non-Executive Director.
Appointment: Sara Fowler joined the Mpac Group
Board on 6 March 2020 as a Non-Executive Director.
Committees: Chair of the Remuneration and
Nomination Committee and a member of the Audit
Committee.
Committees: Chair of the Audit Committee and
member of the Remuneration and Nomination
Committee.
Skills and experience: Sara is a chartered accountant
and former partner with Ernst & Young (“EY”), a former
practising member of the Academy of Experts and a
CEDR accredited mediator. She had been with EY for
30 years, a partner for 17 years and senior partner for
EY Midlands for seven years until 30 June 2017. She was
on the Board of the Compulsory Purchase Association
and Chair of the CBI West Midlands.
Skills and experience: Douglas is a Fellow of the
Institute of Chartered Accountants in England and
Wales and was Group Finance Director of SIG plc until
he retired from the role in January 2017. Prior to joining
SIG, Doug was Group Finance Director of Umeco plc
and Seton House Group Limited. He spent his early
career with Williams plc in a variety of senior financial
and business roles.
Key strengths:
Extensive HR experience gained through her roles at
EY and as an accredited mediator
Extensive financial experience
Experience of developing the skills agenda
Key strengths:
Extensive multinational financial management
experience in both public and private companies
Strategic planning
Acquisitions and divestments
Other commitments: Chair of BHSF Group Limited,
Non-Executive Director of St Basils and a Non-
Executive Director of EY Foundation.
Other commitments: Non-Executive Director at both
HSS Hire Group plc and Zotefoams plc.
Committees: Member of the Audit Committee and the
Remuneration and Nomination Committee.
Skills and experience: Matthew has over 20 years of
Executive and Board of Directors experience within the
automotive, steel and manufacturing sectors across
the world, including Belgium, the UK and Hong Kong.
He has previously held several executive level roles
including CEO of J C Bamford Excavators, CEO of
Edwards Vacuum and more recently, he held the role
of CEO of Bekaert SA until 2020.
Key strengths:
Extensive senior executive experience
Steel and Manufacturing experience of over 20 years
Strong experience of good corporate governance
Other commitments: Non-Executive Director at both
Surface Transforms plc and Strip Tinning Holdings plc.
25 Corporate governance46 Financial statements
How the Board works
The Board has overall responsibility for the Company’s purpose; strategy;
business model; performance; capital structure; approval of key contracts
and major capital investment plans; the framework for risk management and
internal controls; governance matters; and engagement with shareholders
and other key stakeholders.
The Board remains committed to understanding the needs of our shareholders
and the wider stakeholders and it always considers how the Board’s decisions
impact them in the longer term. In the Section 172 on page 24 we explain
who the key stakeholders are and how the Directors engage with them.
The Board’s full responsibilities are set out in a formal schedule of matters
reserved for its decision.
Board meetings
The Board has an established schedule of meetings throughout the year,
with additional meetings convened when required. The Board addresses
several recurring items at each Board meeting, including strategic, operational
(including health & safety) and financial performance updates. The Directors
maintain a dialogue between Board meetings on a variety of matters.
The table below sets out the attendance record of individual Directors at the
Board meetings held during 2021:
Andrew Kitchingman
Dr Tony Steels
Will Wilkins
Sara Fowler
Douglas Robertson
Matthew Taylor1
1 Matthew Taylor was appointed to the Board on 21 October 2021.
Board
9/9
9/9
9/9
9/9
9/9
2/2
Composition and independence of the Board
The Board consists of six Directors: The Non-Executive Chairman, two
Executive Directors and three Non-Executive Directors. All the Non-Executive
Directors are considered independent.
Details of each Director’s experience and background are given in their
biographies on page 28. Their skills and experience are relevant and cover
areas including financial management and control, capital raising, capital goods
industries, banking, engineering, strategic planning, business development,
mergers and acquisitions and international management.
Appointments to the Board and re-election
The Board has delegated the tasks of reviewing Board composition, searching
for appropriate candidates and making recommendations to the Board on
candidates to be appointed as Directors to the Remuneration and Nomination
Committee. Further details on the role of the Remuneration and Nomination
Committee, together with details of the recruitment process for Matthew Taylor,
may be found on pages 36 to 38.
All Directors will offer themselves for annual re-election, in accordance with
best practice in corporate governance.
The Board considers all Directors to be effective and committed to their roles.
Division of responsibilities
The Chairman and Chief Executive have separate, clearly defined roles. The
Chairman leads the Board and is responsible for its overall effectiveness in
directing the Company, and the Chief Executive is responsible for implementing
the Group’s strategy and for its operational performance.
Executive Directors
The Executive Directors are full-time employees of the Company and have
entered into service agreements with the Company.
Mpac Group plc
Annual Report & Accounts 2021
29
Corporate
governance
report
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Our Board and Committee structure
Chairman
The Board
Executive Leadership Team
Company
Secretary
Remuneration and
Nomination Committee
Audit Committee
Chief Executive
Group Finance Director
Innovation Director
Regional Director – Americas
Regional Director - EMEA
The Board delegates certain responsibilities to its Committees, so that it can operate efficiently and give an appropriate level of attention and consideration to
relevant matters. The Company has an Audit Risk Committee and a combined Remuneration and Nomination Committee, both of which operate within a scope
and remit defined by specific terms of reference determined by the Board. The Annual Report includes a report from each of these Committees and describes
the work each Committee has undertaken during the year.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
30
Corporate
governance
report
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Non-Executive Directors
Each of the Non-Executive Directors has entered into a letter of appointment
with the Company, which set out the duties of the Director and commitment
expected. They are expected to commit at least 24 days per annum to their role
and are specifically tasked with:
bringing independent judgement to bear on issues put to the Board;
applying their knowledge and experience in considering matters such as
strategy, company performance, use of resources and standards of
conduct; and
ensuring high standards of financial probity and corporate governance.
How the Board operates
The Board is responsible for:
All Directors are expected to attend all meetings of the Board and any
Committees of which they are members, and to devote sufficient time to the
Company’s affairs to fulfil their duties as Directors. Where Directors are unable
to attend a meeting, they are encouraged to submit any comments on paper to
be considered at the meeting to the Chairman in advance to ensure that their
views are recorded and taken into account during the meeting.
Directors are encouraged to question and voice any concerns they may have
on any topic put to the Board for debate. The Board is supported in its work
by Board Committees, which are responsible for a variety of tasks delegated
by the Board. There is also an Executive Leadership Team composed of the
Chief Executive and Group Finance Director, and representatives from senior
management whose responsibilities are to implement the decisions of the
Board and review the key business objectives and status of projects.
developing Group strategy, business planning, budgeting and risk
management;
monitoring performance against budget and other agreed objectives;
setting the Group’s values and standards, including policies on employment,
health and safety, environment and ethics;
The main activities of the Board during the year
There are a number of standing and routine items included for review on each
Board agenda. These include the Chief Executive’s trading update, a health and
safety report, operations reports, financial reports, governance and investor
relations updates. In addition, key areas put to the Board for consideration and
review included:
relationships with shareholders and other major stakeholders;
approval of annual and half-year report and financial statements;
determining the financial and corporate structure of the Group (including
financing and dividend policy);
major investment and divestment decisions, including acquisitions, and
approving material contracts; and
Group compliance with relevant laws and regulations.
The Board retains control of certain key decisions through the schedule of
matters reserved for the Board. It has delegated other matters, responsibilities
and authorities to each of the Audit and Remuneration and Nomination
Committees and these are documented in the Terms of Reference of each of
those Committees. Anything falling outside of the schedule of matters reserved
or the Committee Terms of Reference falls within the responsibility and
authority of the Chief Executive, including all executive management matters.
Day-to-day management of the Company’s business is delegated to the
Executive Directors and in turn to senior members of the leadership team in
accordance with a clear and comprehensive statement of delegated authorities.
The Board meets at regular intervals and met nine times during the year.
Directors also have contact on a variety of issues between formal meetings and
there is also regular contact with the Executive Leadership Team and the wider
senior leadership of the Group. An agenda and accompanying detailed papers,
covering key business and governance issues and including reports from the
Executive Directors and other members of senior management, are circulated
to the Board in advance of each Board meeting. All Directors have direct access
to senior management should they require additional information on any of the
items to be discussed. A calendar of matters to be discussed at each meeting
is prepared to ensure that all key issues are captured.
At each meeting, the Board reviews comprehensive financial and trading
information produced by the management team and considers the trends in the
Company’s business and its performance against strategic objectives and plans.
It also regularly reviews the work of its formally constituted standing Committees
as described below and compliance with the Group’s policies and obligations.
dividend strategy;
review and approval of budget;
review against strategy;
implementation of strategy;
going concern and cash flow;
material customer proposals;
consideration of banking arrangements;
investor relations;
acquisitions and integration;
review of corporate governance and Group policies;
review of AGM business;
outcomes from the Board evaluation process;
briefings and review of conflicts of interest; and
Covid-19 updates.
During the year, the majority of the meetings were held virtually, with no Board
meetings held overseas, due to the Covid-19 pandemic. This did not impact
the Directors from undertaking their duties and all Directors participated fully
in the meetings.
The Board Committees
There are two Board Committees, the Audit Committee and the Remuneration
and Nomination Committee. Both Committees are composed of the three
Non-Executive Directors.
Each Committee has approved Terms of Reference setting out their
responsibilities, which were reviewed and approved by the Board during the
year and are available on the Company’s website www.mpac-group.com.
Details of the operation of the Board Committees are set out in their respective
reports. All of the Board Committees are authorised to obtain, at the Company’s
expense, professional advice on any matter within their Terms of Reference and
to have access to sufficient resources in order to carry out their duties.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
31
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
External advisers
The Board seeks advice on various matters from its nominated adviser Shore
Capital and Corporate Limited and other advisers as appropriate. The Board
also sought remuneration advice from KPMG LLP during the year.
Development, information and support
Directors keep their skillset up to date with a combination of attendance at
industry events, individual reading and study, and experience gained from other
Board roles. The Company Secretary ensures the Board is aware of any applicable
regulatory and governance changes and developments and updates the Board as
and when relevant. Directors are able to take independent professional advice in
the furtherance of their duties, if necessary, at the Company’s expense. Directors
also have direct access to the advice and services of the Company Secretary. The
Company Secretary supports the Chairman in ensuring that the Board receives the
information and support it needs to carry out its roles.
Conflicts of interest
Under the Company’s Articles, the Directors may authorise any actual
or potential conflict of interest a Director may have and may impose any
conditions on the Director that are felt to be appropriate. Directors are not able
to vote in respect of any contract, arrangement or transaction in which they
have a material interest and they are not counted in the quorum. A process is in
place to identify any of the Directors’ potential or actual conflicts of interest.
Performance evaluation
The Chairman considers the operation of the Board and performance of the
Directors on an ongoing basis as part of his duties and will bring any areas of
improvement he considers are needed to the attention of the Board. The Board
carries out an evaluation process each year in respect of its performance over
the previous year. The evaluation is informed by a detailed Board effectiveness
questionnaire completed by each Director and covering topics such as the
composition of the Board, the quality and timeliness of information provided,
relationships between the Board, shareholders and employees and succession
planning. The results are collated and reported to the Board for discussion.
An evaluation process has been undertaken in respect of 2021 and the results
discussed by the Board. No substantive actions were taken as a result of the
Board evaluation.
Accountability
The Company has in place a system of internal financial controls
commensurate with its current size and activities, which is designed to ensure
that the possibility of misstatement or loss is kept to a minimum. These
procedures include the preparation of management accounts, forecast variance
analysis and other ad-hoc reports. There are clearly defined authority limits
throughout the Group, including matters reserved specifically for the Board.
Risk management and internal control
Risks throughout the Group are considered and reviewed on a regular basis.
Risks are identified and mitigating actions put into place as appropriate.
Principal risks identified are set out in the Strategic report on pages 19 to 23.
Internal control and risk management procedures can only provide reasonable
and not absolute assurance against material misstatement. The internal control
procedures were in place throughout the financial year and up to the date of
approval of this report.
Business ethics
The Board is committed to the Group operating to the highest standards of
ethical behaviour. The Group’s Ethics policy, which was reviewed by the Board
during the year, sets out certain principles that the Board expects all businesses
within the Group to adhere to and certain values that should be embodied in the
day-to-day activities of the Group. It expects all employees of the Group, led by
the members of the Board and the Group’s senior management, to encourage
and support all other employees in acting in accordance with the policy. In
support of this policy and its principles, the Board has published guidance in
the Group Ethics policy, which is available on the Company’s website at
www.mpac-group.com/group-policies.
Whistleblowing
The Company has a whistleblowing procedure, details of which are provided to
all employees. Staff may report any suspicion of fraud, financial irregularity or
other malpractice to a senior manager, Executive Director, or an independent
helpline. The policy is reviewed by the Audit Committee every year and updated
as required. Details of any matters raised under this procedure are reported to
the Audit Committee.
Shareholders
The Company welcomes contact with its shareholders and they can contact
the Company via the Investors section of our website: www.mpac-group.com/
contact-us/. Directors are available to discuss any matters that shareholders
might wish to raise. They maintain communication with institutional
shareholders, other investors and analysts through meetings, particularly
following publication of the Group’s interim and full-year preliminary results.
Investor relations activity and a review of the shareholder register are quarterly
items on the Board’s agenda. The Board also regularly receives copies of
analysts’ and brokers’ briefings.
The Company strives to provide a clear, balanced and comprehensive level
of information and written material. The Company maintains a corporate
website, which contains regularly updated regulatory and other information.
The Annual Report and Accounts is a key communication document and is also
available on the Company’s website. The Company also issues both statutory
and non-statutory regulatory news announcements throughout the year to
update on financial, operational and other matters. The Company offers its
larger shareholders, either directly or via its broker, face-to-face meetings on
a bi-annual basis at a minimum to present and discuss performance and other
matters and obtain any feedback. These meetings are hosted by the Company’s
Chief Executive and Group Finance Director. The Company also hosts a briefing
for analysts, arranged by the Company’s financial public relations adviser, twice
a year to coincide with the announcement of its half-year and full-year financial
results to present and discuss the same matters.
Annual General Meeting (AGM)
All shareholders are encouraged to attend the AGM at which the Group’s
activities will be considered and questions answered. The Directors are available
to listen to the views of shareholders informally immediately following the AGM.
This year’s AGM will be held on Wednesday 4 May 2022. The Notice of Annual
General Meeting is set out on pages 107 to 111 and will be available on the
Company’s website at www.mpac-group.com. Separate resolutions are
provided on each issue so that they can be given proper consideration.
Financial and business reporting
The Board seeks to present a fair, balanced and understandable assessment of
the Group’s position and prospects in all half-year, final and any other ad-hoc
reports, and other information as may be required from time to time. The Board
receives a number of reports, including those from the Audit Committee, to
enable it to monitor and clearly understand the Group’s financial position.
Andrew Kitchingman
Chairman
16 March 2022
46 Financial statements25 Corporate governance
Main responsibilities of the Committee
Reviewing the financial statements and announcements relating to the
financial performance of the Company, including reporting to the Board on
the significant issues considered by the Committee in relation to the financial
statements and how these were addressed
Reviewing the scope and results of the annual audit and reporting to the
Board on the effectiveness of the audit process and how the independence
and objectivity of the auditors have been safeguarded
Reviewing the scope, remit and effectiveness of the internal audit function
and the Group’s internal control and risk management systems
Reviewing significant legal and regulatory matters
Overseeing the Company’s relations with the external auditor
Reviewing matters associated with the appointment, terms, remuneration,
independence, objectivity and effectiveness of the external audit process
and reviewing the scope and results of the audit
Reporting to the Board on how the Committee has discharged its
responsibilities
An assessment of the risk management process including the identification
of key risks and the monitoring and mitigation thereof
Terms of Reference for the Audit Committee can be found on
www.mpac-group.com
Mpac Group plc
Annual Report & Accounts 2021
32
Audit
Committee
report
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Chair’s letter
Dear shareholders,
I am pleased to present my report as Chairman of the Audit Committee for the
year ended 31 December 2021. In this Report I have sought to provide investors
and other stakeholders with an understanding of the approach that the Audit
Committee has taken to provide assurance over the 2021 Annual Report and
Accounts. The Directors’ responsibility statement in respect of the Annual
Report can be found on page 45.
The Committee has continued to play a key role within the Group’s governance
framework to support the Board in matters relating to financial reporting,
internal control and risk management. It has focused on ensuring that the
interests of the shareholders are properly protected in relation to the Group’s
financial reporting and internal control and challenging the decisions and
approach taken by management relating to the content, judgements and
disclosures within the Company’s financial statements.
The Board directs the Audit Committee to advise on whether the Annual Report
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company’s position and performance, business
model and strategy.
The Audit Committee receives reports covering the key areas of estimation
and judgement underpinning the financial statements from management
and ensures that the related disclosures reflect supporting information. It
challenges management to explain and justify their interpretation. The Audit
Committee is supported in this by the external auditors who present their
findings to the shareholders in the Independent Auditors Report.
The Audit Committee is responsible for ensuring that the relationships between
management, the external auditors and the Committee are appropriate and
provides information on how the Committee assesses the independence of the
external auditors in the Audit Committee Report.
As Chair I strive to ensure that the Committee’s agenda is kept under review
and aware of relevant developments. An evaluation of the Committee's
performance has been undertaken in respect of 2021 and the results discussed
by the Committee. No substantive actions were taken as a result of the
Committee evaluation.
The Audit Committee report was approved by the Committee at its meeting
held on 11 March 2022.
The Audit Committee has reflected upon the FRC Guidance on Audit
Committees and was satisfied that the principles concerning internal audit are
reflected in the responsibilities and function of the internal audit function.
“ I am pleased to present
my report as Chairman
of the Audit Committee
for the year ended
31 December 2021.”
Doug Robertson
Chairman of the Audit Committee
25 Corporate governance46 Financial statements
Audit committee report
The Committee met five times during 2021 and the following served as
members during the year.
Committee member
Meeting attendance
D Robertson – Chairman
A Kitchingman
S Fowler
M Taylor1
5/5
5/5
5/5
1/1
1 M Taylor was appointed with effect from 21 October 2021.
The following regularly attend meetings:
the Executive Directors
the Group Financial Controller
representatives from the external auditors, Grant Thornton
representatives from BDO, who provide independent support to the Internal
Audit function on a co-sourced basis
Other members of the management team may also be asked to attend
meetings for discussion on specific issues. The Committee also meets with the
external auditors at least twice each year without management being present.
The Committee is authorised to seek legal or other independent professional
advice as it sees fit but has not done so during the year.
The qualifications of Committee members are outlined in the Directors’
biographies on page 28. The members of the Committee are all independent
non-executive directors. The Board is satisfied that the Committee has
competence relevant to the sectors in which the Group operates and its
members have an appropriate level of experience in corporate and financial
matters and are financially literate. The Chair is a member of the Institute of
Chartered Accountants of England and Wales. He previously served as Group
Finance Director of SIG plc until he retired from the role. The Board is satisfied
that he has recent and relevant financial experience as required by the Code.
Assessing the annual report
The Committee has the responsibility to assess whether the Annual Report,
taken as a whole, is fair, balanced and understandable and provides the
information necessary for the shareholders to assess the Group’s position on
performance, business model and strategy.
The Committee made this assessment by:
Reviewing key messages proposed for the Annual Report;
Reviewing copies of the Annual Report at various stages during the drafting
process to ensure the key messages were being followed and were aligned
with the Company’s position, performance and strategy being pursued and
that the narrative sections of the Annual Report were consistent with the
financial statements;
Ensuring that all key events and issues that had been reported to the Board
in the executive Board reports during the year had been appropriately
referenced or reflected within the Annual Report;
Reviewing how alternative performance measures were used in the Annual
Report, ensuring completeness and accuracy of definitions, consistency
of use, relevance to users of the Annual Report and balance with statutory
metrics; and
Considering reports produced by both management and the external auditors
on principal matters and judgements in areas underpinning the financial
statements.
Mpac Group plc
Annual Report & Accounts 2021
33
Activities during the year
A summary of the Committee’s principal activities in 2021 is set out below:
Review the draft Annual Report and Accounts 2020 and draft preliminary
results announcement
Consideration of the re-appointment of Grant Thornton UK LLP as
external auditors
Review of results of internal control support procedures provided by
BDO LLP
Review internal audit plan for the year
Consideration of the effectiveness of the external audit process
Review of the half-year results announcement
Review of external auditor’s memorandum
Review of Going Concern
Review of the principal risks and uncertainties
Internal Control review and update
Consideration of and approval of external audit fee quotation for 2021
Review and approval of the external audit plan for 2021
Review and approval of the non-audit work policy
Review of internal controls and risk management systems
Review of Committee terms of reference for Board approval
Review of whistleblowing arrangements
Review of anti-bribery and corruption policy and procedures
Review of Group principal risks and uncertainties
External auditor
The Audit Committee monitors the relationship with the external auditor,
Grant Thornton UK LLP, to ensure that auditor independence and objectivity
are maintained.
The Committee assesses auditor independence by obtaining assurances from
Grant Thornton UK LLP that all partners and staff involved are independent of
any links to Mpac and confirmation that all partners and staff comply with their
ethics and independence policies and procedures which are fully consistent
with the FRC’s Ethical Standard
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
34
Audit
Committee
report
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Policies for non-audit services and engagement of
former employees of the external auditor
The Committee has in place policies that are reviewed annually relating
to the employment of former employees of the external auditor and the
engagement of the auditors, or advisers related to the auditors, on non-audit
services which as detailed in the Committee report for 2020 provide that the
external auditor will not undertake any non-audit related work other than tax
compliance services. These policies, which have been adopted formally by
the Board, require, inter alia, the Committee’s consent to any engagements or
employment, with appropriate confirmation of independence from the auditors
and the approval of the Committee.
External auditor reappointment
The Board, on the recommendation of the Audit Committee, has decided to put
the Group’s statutory audit for FY22 out to competitive tender. This process has
commenced and will complete in the second quarter of 2022, in good time for
planning of Interim procedures.
Significant growth of the Group, and audit fee increases, are key considerations
for this tender process. The Audit Committee will oversee the process to
ensure minimal disruption to the business. The Audit Committee has therefore
recommended to the Board that Grant Thornton UK LLP be reappointed at
the Annual General Meeting in 2022 to continue in the role until, either the
appointment of new auditors, or the reappointment of Grant Thornton UK LLP,
depending on the outcome of the audit tender process.
Financial reporting
The primary role of the Committee in relation to financial reporting is to review
with both management and the external auditors, and report to the Board the
appropriateness of, the annual and half-year financial statements, considering
amongst other matters:
Clarity of the disclosures and compliance with financial reporting standards
and relevant financial and governance reporting requirements;
Areas in which significant judgements have been applied, including
discussions on such matters undertaken with the external auditors; and
Whether the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the Company’s performance, business model and strategy.
In addition to the above, the Committee supports the Board in completing
its assessment of the adoption of the going concern basis of preparing the
financial statements. The Committee performed a robust review of the process
and underlying assessment of the Group’s longer-term prospects made by
management. These included:
The review period and its alignment with the Group’s strategic plans;
The assessment of the prospects of the Group after consideration of the Group’s
principal risks, current financial position, and ability to generate cash; and
The modelling of the financial impact of additional key scenarios which
encompass the potential impact of crystallisation of one or more of the
principal risks.
Significant issues considered by the Committee
The Committee reviews accounting papers prepared by management that
provide details of significant financial reporting issues, together with reports from
the external auditor prepared in conjunction with the interim and full-year results.
The significant issues considered by the Audit Committee in respect of the year
ended 31 December 2021 are set out on the following table.
Significant issue/accounting
judgement identified
How it was dealt with
Revenue recognition, the
application of IFRS 15,
and accounting for the
significant judgements
around open contracts
Impairment of goodwill
Pension accounting
Going concern and
business disruption
The valuation of contracts is carefully monitored
throughout the year, utilising both accounting data
and inputs from all aspects of the business, to
ensure contracts are always valued appropriately.
The Group conducts extensive forecasting and
stress testing exercises to review the carrying
value of goodwill in line with the strategic plans
to ensure that the values are supportable.
External experts are used on an ongoing basis to
value the scheme in line with IAS19 and ensure a
consistent and appropriate level of disclosure.
The Group conducts extensive forecasting and
stress testing exercises for multiple scenarios,
including the global supply chain crisis, the results
of which are reviewed regularly by the board,
including both realistic worst-case scenarios and
tests to determine what would be required to
challenge the going concern basis.
Internal audit
The Committee considers annually how the internal audit function operates in
the Group, including its Terms of Reference and whether this gives sufficient
assurance that the business and controls of the Group are reviewed adequately.
The Committee also approves the internal audit work plan each year. This
function is part of the Group’s finance department and its senior member
reports to the Committee at each meeting on its activities and has direct
access to the Chair as required.
The Committee reviewed the need for effectiveness and independence of the
internal audit functions, and it was decided that BDO LLP be engaged to provide
independent support to the internal audit function on a co-sourced basis.
25 Corporate governance46 Financial statements
Risk management and internal controls
The Group has established a system of risk management and internal controls.
The Committee is responsible for reviewing the systems of risk management
and internal control and has reviewed management’s progress in implementing
and maintaining such control systems during the year. The Committee is
satisfied that the internal control systems are operating effectively.
The Board has taken and will continue to take appropriate measures to ensure
that the chances of financial irregularities occurring are reduced as far as
reasonably possible by improving the quality of information at all levels in the
Group, fostering an open environment and ensuring that financial analysis is
rigorously applied. Any system of internal control can, however, only provide
reasonable, but not absolute, assurance against material misstatement or loss.
The major elements of the system of internal control are as follows:
Major commercial, strategic and financial risks are formally identified,
quantified and assessed during the annual budgeting exercise and presented
to and discussed with executive directors, after which they are considered by
the Board;
There is a comprehensive system of planning, budgeting, reporting and
monitoring. This includes monthly management reporting and monitoring of
performance and forecasts. Monthly reviews are embedded in the internal
control process and cover each principal site. Monthly reviews require the
Executive Leadership Team to consider, among other things, business
development, financial performance against budget and forecast, health and
safety and capital expenditure proposals, as well as a review of longer-term
business development and all other aspects of the business. In addition,
quarterly business reviews are carried out at each principal site and are
attended by the executive directors and local management teams
as appropriate;
There is an organisational structure with clearly defined lines of responsibility
and delegation of authority;
A programme of internal control reviews and specific investigations is carried
out. These are followed up during regular executive management visits.
The internal control reviews include assessments of compliance with Group
policies and procedures and findings are reported to the Audit Committee
and Board as appropriate; a formal risk management audit is regularly carried
out by Group personnel and external risk management consultants, which
covers physical damage, environmental and health and safety risks together
with business continuity issues; and
Formal reports including recommendations are sent to each site for action
and reported back to Group management. Progress reports are issued to the
Board for review and monitoring.
Whistleblowing
The Group has in place a Whistleblowing policy which details the formal
process by which an employee of the Group may, in confidence, raise concerns
about possible improprieties in financial reporting or other matters.
Whistleblowing is an annual item on the Committee’s agenda, and any
reported incidents will be notified to the Committee. During 2021, there were
no reported incidents.
FY 2022 Priorities
Completion of the Audit tender process;
Supporting the Group in addressing the requirements of Climate Related
Financial Disclosures; and
Internal audit review of the Switchback control environment.
Doug Robertson
Chairman of the Audit Committee
Each site is required to comply with defined policies, financial controls and
procedures and authorisation levels which are clearly communicated;
16 March 2022
Mpac Group plc
Annual Report & Accounts 2021
35
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
As Chair of the Remuneration and Nomination Committee ("the Committee"),
I am pleased to present the Committee’s report, which is presented in four
sections: the Committee Report, the Nomination Report, the Remuneration
Report and the Remuneration Policy.
36
Remuneration
and
Nomination
Committee
report
The Nomination report in the next column details the appointment of Matthew
Taylor as a new Non-Executive Director in October 2021.
The Remuneration report, on pages 37 to 38, details the amounts earned by
the Directors in respect of the period to 31 December 2021 and is subject to an
advisory shareholder vote. The Remuneration policy, on pages 39 to 42, was
approved by shareholders at the AGM on 6 May 2020 and is effective for a
period of three years from that date.
Committee report
Committee Composition and Meetings
Sara Fowler – Chair
Andrew Kitchingman
Doug Robertson
Matthew Taylor – appointed to the Committee on 21 October 2021
Duties and Terms of Reference
The duties of the Committee are as set out in its Terms of Reference which
is available on the Company’s website at www.mpac-group.com. The Terms
of Reference are reviewed annually by the Committee and any changes
recommended following this review are approved by the Board.
The Committee deals with all aspects of remuneration of the Executive
Directors and certain senior managers, and in identifying and nominating
members of the Board.
The Committee undertook the following main items of business during the year:
appointed a new Non-Executive Director;
reviewed the structure of the Long-Term Incentive Plan for 2022
awards onwards;
reviewed the performance of the executive management scheme against
their 2020 objectives;
approved executive management pay increases;
set 2021 objectives and performance metrics for the executive management;
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
The Committee’s members are the independent Non-Executive Directors,
whose biographies are set out on page 28.
reviewed the 2020 performance against the Long-Term Incentive Plan
performance target;
The terms of reference of the Committee requires that it meets at least twice a
year. During 2021, the Committee met four times and the table below sets out
the attendance record of each member of the Committee:
succession planning;
reviewed the Committee’s Performance Evaluation; and
reviewed the Committee’s Terms of Reference
Member
Sara Fowler
Andrew Kitchingman
Douglas Robertson
Matthew Taylor
Meeting attendance
4/4
4/4
4/4
1/1
Additionally the Chief Executive, a representative of Prism Cosec Limited, our
Company Secretary, and KPMG LLP, as the Company’s remuneration adviser,
are invited to attend meetings as necessary. Each of them has confidential
access to me at other times as required.
“ I am pleased to present
the Committee’s report
which is presented
in four sections: the
Committee Report, the
Nomination Report, the
Remuneration Report and
the Remuneration Policy.”
Sara Fowler
Chair of the Remuneration and
Nomination Committee
Duties and Terms of Reference
An evaluation of the Committee's performance has been undertaken in respect
of 2021 and the results discussed by the Committee. No substantive actions
were taken as a result of the Committee evaluation.
Nomination report
Appointment of Matthew Taylor
Resulting from the Board’s annual evaluation, and the Committee’s discussion
on Board succession, it was recognised that the appointment of a new Non-
Executive Director with C-Suite experience in the manufacturing sector would be
of benefit to the Company by strengthening the Board’s skills and knowledge.
Accordingly, the Committee led the process of identifying and recommending
an additional independent Non-Executive Director and, with the assistance of an
external recruitment agent, the process included the following considerations:
identifying key attributes and skills of the desired candidate, taking into
account the current composition of the Board;
reviewing the shortlist and arranging interviews; and
providing the Board with a recommendation of the preferred candidate.
The Committee unanimously agreed to recommend Matthew Taylor as an
independent Non-Executive Director to the Board. The appointment was approved
with effect from 21 October 2021. Matthew has over 20 years of executive and
board of directors’ experience within the automotive, steel and manufacturing
sectors across the world, including Belgium, the UK and Hong Kong.
25 Corporate governance46 Financial statements
Matthew was appointed to the Board in time for the annual two-day meeting
to discuss the Company’s current and future strategy. He was able to meet the
Executive and Non-Executive Directors and the entire Executive Leadership
Team during those two days. He has also been given access to past Board
and Committee papers and minutes. Given the restrictions imposed on travel
by Covid-19, he has not yet had the opportunity to visit the various Group
manufacturing sites but will do so once restrictions are lifted.
Diversity policy
The Group values diversity among its employees. In their day-to-day behaviour,
employees are expected not to discriminate in their relationships with each
other and with customers, suppliers and other business partners, and also to
encourage others to behave in a proper manner.
Employment and promotion opportunities will be offered on the basis of merit
regardless of race, colour, religion, age, sex, sexual orientation, disability and/
or national origin. The Group aims to ensure freedom from harassment and
bullying for all employees. It is the responsibility of each employee to act in non-
discriminatory ways at all times and if an employee sees an example of possible
discrimination, harassment or bullying taking place to bring those concerns to
the attention of the Group’s management.
2021 Remuneration report
Directors’ total remuneration
The remuneration of the Executive Directors for the years 2021 and 2020 is
made up as follows:
Executive Directors’ remuneration as a single figure (audited)
Salary
£000
248
182
All
benefitsa
£000
20
19
Salary
£000
232
170
All
benefitsa
£000
19
19
Short-
term
incentive
schemeb
£000
140
99
Short-
term
incentive
schemeb
£000
108
75
Gains
on share
options
£000
322
42
Gains
on share
options
£000
319
–
Pensiond
£000
63
18
Total
£000
793
360
Pensiond
£000
57
18
Total
£000
735
282
2021
T Steels
W C Wilkins
2020
T Steels
W C Wilkins
a Benefits include:
Dr Steels and Mr Wilkins – car allowance payments, income replacement insurance and
private medical cover.
b The performance criteria for the short-term incentive scheme is described in the
Remuneration policy on page 41.
c The amounts represent the values of the awards made in the form of conditional grants
which are exercisable no earlier than three years from the date of grant.
d The values are the amounts contributed by the Company into the Company’s Personal
Pension Plans for both Dr Steels and Mr Wilkins.
The remuneration of the Non-Executive Directors for the years 2021 and 2020
is made up as follows:
Mpac Group plc
Annual Report & Accounts 2021
Non-Executive Directors’ remuneration as a single figure (audited)
37
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
2021
All taxable
benefits
£000
–
–
–
Fees
£000
78
52
52
8
–
–
–
Total
£000
78
52
52
8
–
2020
All taxable
benefits
£000
–
–
–
Fees
£000
73
49
39
–
9
–
–
Total
£000
73
49
39
–
9
A J Kitchingman
D G Robertson
S A Fowler
M G R Taylor
(appointed
21 October 2021)
J L Davies
(resigned
5 March 2020)
Directors’ interests in shares (unaudited)
The beneficial interests of Directors holding office at 31 December 2021 and
persons connected with them in the ordinary shares of the Company (excluding
share options) were as follows:
T Steels
A J Kitchingman
W C Wilkins
Held at
1 January
2021
78,964
13,133
3,139
Acquired in
the year
31,170
–
4,088
Held at
31 December
2021
110,134
13,133
7,227
No Director holds, or held at any time during the year, a beneficial interest in
the Company’s preference shares. There were no changes in the Directors’
interests in shares between 31 December 2021 and 17 March 2022.
Incentive scheme – Deferred share plan (audited)
Details of conditional grants of Mpac Group plc ordinary shares under the
Company’s Deferred share plan yet to vest for each Director who held office
during the year and who is eligible to participate in the plan are as follows:
T Steels
W C Wilkins
Date of award
1 May 2019
1 May 2019
Basis
of award
(% of salary)
20.0
30.0
Number
of shares
35,409
33,407
Face value
at grant
(£000)
48
45
Awards are made following the achievement of personal objectives linked to
long-term strategic initiatives. The earliest date that awards can vest is three
years from the date of award. No awards were made during 2021.
On 30 March 2021, Dr Steels exercised his 2018 award over 58,811 shares. Total
value on day of exercise being £321,696.17 (share price of £5.47), 27,641 shares
were sold to settle his tax liabilities and the balance of 31,170 shares (valued at
£170,499.90) was kept.
On 30 March 2021, Mr Wilkins exercised his 2018 award over 7,713 shares. Total
value on day of exercise being £42,190.11 (share price of £5.47), 3,625 shares
were sold to settle his tax liabilities and the balance of 4,088 shares (valued at
£22,361.36) was kept.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
38
Remuneration
and
Nomination
Committee
report
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Long Term Incentive Plan (audited)
Details of conditional grants of Mpac Group plc ordinary shares under the LTIP yet to vest for each Director who held office during the year and who is eligible to
participate in the plan are as follows:
T Steels
W C Wilkins
Date of award
12 June 2019
12 June 2019
Number of shares
210,000
120,000
Face value
at grant
(£000)
349
199
% of salary
143%
111%
End of three-year
performance period
31 Dec 2021
31 Dec 2021
Face value of awards at the date of grant is calculated based on the closing share price of 166p per ordinary share.
For the 2019 award, the performance metrics selected reflect underlying business performance. 70% of the award of shares is based on cumulative Earnings Per
Share (“EPS”) performance over a three-year period. 30% of the award of shares is based on average Return-On-Capital-Employed (“ROCE”) over the same three-
year period. In respect of the percentage of the award that relates to EPS, 20% of the award is made if EPS is 85p. 100% of the award is made if EPS is equal to or
exceeds 115p. Between these two points, allocation will be on a straight-line basis pro rata. If EPS is below 85p, no award will be made in respect of EPS. In respect
of the percentage of the award that relates to ROCE, 20% of the award is made if ROCE is 20%. 100% of the award is made if ROCE equals or exceeds 30%.
Between these two points, allocation will be on a straight-line basis pro rata. If ROCE is below 20%, no award will be made in respect of ROCE.
Metric
Weighting
EPS
70%
ROCE
Total
30%
100%
Performance condition
Cumulative Underlying EPS to exceed 115p over the three-year period to vest in full.
Vesting is reduced to 20% on a pro-rata basis if cumulative Underlying EPS is 85p over
the three-year period and is reduced to nil if it fails to reach 85p
Average ROCE to exceed 30% over the three-year period to vest in full. Vesting is reduced
to 20% on a pro-rata basis if average ROCE is 20% over the three-year period and is
reduced to nil if it fails to reach 20%
Threshold
target
Stretch
target
Actual % Vesting
85p
115p
108.3p
57.5%
20%
30%
34.15%
30.0%
87.5%
On 11 March 2022, the share price was £4.50 and this has been used to estimate the value of shares vesting.
T Steels
W C Wilkins
Grant date
12 June 2019
12 June 2019
Vest date
12 June 2022
12 June 2022
Number of
shares at Grant
Estimated number of
shares to vest
210,000
120,000
183,736
104,992
Estimated value £
826,812
472,464
Awards will normally remain subject to a holding period of two years, commencing on the vesting date with the exception of sales to cover related personal tax
liabilities. There is currently no minimum shareholding requirement for Executive Directors.
During the year, the Committee considered the frequency of granting the LTIP awards and it was agreed that awards would now be granted on an annual basis,
rather than on a three-yearly basis as had been the case. This would enable eligible employees who joined the business in between grants to participate in the LTIP
at the next annual grant rather than a special award having to be made or having to wait for the next grant date in potentially three years’ time. The Committee
also reviewed the current performance metrics, together with the weighting allocated to each, and concluded that no changes were required. It is anticipated that
awards under the LTIP will be made during 2022 and these will be reported upon in the 2022 Annual Report.
Sara Fowler
Chair of the Remuneration and Nomination Committee
16 March 2022
25 Corporate governance46 Financial statements
Remuneration policy
This part of the Remuneration and Nomination Committee’s report sets out the
Remuneration policy which was approved by shareholders at the Annual General
Meeting on 6 May 2020, and will be effective until no later than 6 May 2023.
The Remuneration policy is designed to ensure that the remuneration packages
offered, and the terms of the contracts of service, are competitive and are
designed to attract, retain and motivate Executive Directors of the right calibre.
To achieve these goals, the Remuneration and Nomination Committee’s policy
is to establish fixed salary at around half of the total obtainable in the case of
excellent performance, with recognition and reward for achieving performance
targets annually and growth in the long term.
Remuneration packages
The main components of the package for each Executive Director are:
i. Basic salary
Basic salary is determined by taking into account the performance of the
individual and information on the rates of salary for similar jobs in companies
of comparable size and complexity in a range of engineering and other
technology industries.
ii. Incentive schemes
The Executive Directors participate in a short-term incentive scheme in
which the minimum bonus payable is nil and the maximum bonus payable is
120% of relevant salaries. The incentive is payable wholly in cash. The targets
against which performance is judged are primarily the Group’s key financial
performance indicators and personal objectives. The Directors’ personal
objectives are commercially sensitive and therefore remain, and are expected
to continue to remain, confidential to the Company. In some years, the targets
may be varied to reflect particular objectives determined by the Committee.
iii. Long Term Incentive Plan (“LTIP”)
A new LTIP, which was adopted by the Board on 10 June 2019, has been
introduced to incentivise Executive Directors and certain senior managers
over the longer term and encourage retention. 70% of the award of shares is
based on cumulative Earnings Per Share (“EPS”) performance over a three-
year period. 30% of the award of shares is based on average Return On
Capital Employed (“ROCE”) over the same three-year period. In respect of
the percentage of the award that relates to EPS, 20% of the award is made
if EPS is 85p. 100% of the award is made if EPS is equal to or exceeds 115p.
Between these two points, allocation will be on a straight line basis pro rata.
If EPS is below 85p, no award will be made in respect of EPS. In respect of
the percentage of the award that relates to ROCE, 20% of the award is made
if ROCE is 20%. 100% of the award is made if ROCE equals or exceeds 30%.
Between these two points, allocation will be on a straight line basis pro rata.
If ROCE is below 20%, no award will be made in respect of ROCE.
An award granted under the LTIP in the form of a conditional right giving
the participant a right to acquire ordinary shares in the Company if certain
conditions are met. Awards were made covering a three-year period. Awards
will normally vest following the end of the three-year performance period, once
it is determined whether and to what extent the performance conditions have
been achieved. Awards will normally remain subject to a holding period of two
years commencing on the vesting date. Standard malus, clawback and leaver
provisions apply.
iv. Pensions
Directors may choose to join the Mpac Group Personal Pension Plan, which is a
defined contribution scheme. Additionally, life assurance and income protection
policies are put in place for the Executive Directors.
Contracts of service
The Company’s policy is to offer contracts of employment that attract,
motivate and retain skilled employees who are incentivised to deliver the
Company’s strategy. The current service contracts were concluded with
Dr Steels on 6 June 2016 and with Mr Wilkins on 22 June 2018. These service
contracts are terminable on notice of one year given by the Company and six
months given by the Director. In the event of termination by the Company,
the Company has the option of making a payment of liquidated damages
equivalent to the value of 12 months’ salary, or the balance of the period to the
date of expiry if less, or of negotiating appropriate compensation reflecting
the principle of mitigation. In the event of a change of control in the Company,
if the Company terminates an Executive Director's contract within six months
of the change of control, or if an Executive Director terminates the contract
within six months of the change of control, the Company will be obliged to pay
liquidated damages equivalent to the value of 12 months’ salary. The purpose
of the change of control clause, which is reviewed regularly, is that the
contracts should provide reasonable and appropriate security to the director
concerned and to the Company.
Any commitment contained within the current Directors’ service contracts, or a
current employee’s contract of employment who is subsequently promoted to
the role of Director, will be honoured even where it may be inconsistent with the
Company’s Remuneration policy.
Letters of appointment
The Non-Executive Directors are not issued with a separate service contract
on appointment. The terms of their appointment are set out in their letter of
appointment. The Company does not make termination payments to Non-
Executive Directors in the event that a Non-Executive Director’s appointment
is terminated by the Company.
Mpac Group plc
Annual Report & Accounts 2021
39
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Termination
The Committee reserves the right to make additional liquidated damages
payments outside the terms of the Directors’ service contracts where such
payments are made in good faith in order to discharge an existing legal
obligation (or by way of damages for breach of such an obligation) or by way
of settlement or compromise of any claim arising in connection with the
termination of a director’s office or employment.
Non-Executive Directors
The fees of Non-Executive Directors are determined by the Board based upon
comparable market levels. The Non-Executive Directors do not participate in
the Company’s incentive schemes and nor do they receive any benefits or
pension contributions.
Mpac Group plc
Annual Report & Accounts 2021
40
Remuneration
and
Nomination
Committee
report
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Recruitment
The Committee reserves the right to make payments outside the Remuneration
policy in exceptional circumstances. The Committee would only use this right
where it believes that this is in the best interests of the Company and when it
would be disproportionate to seek the specific approval of the shareholders in
a general meeting.
When hiring a new Executive Director, the Committee will use the Remuneration
policy to determine the Executive Director’s remuneration package. To facilitate
the hiring of candidates of the appropriate calibre to implement the Group’s
strategy, the Committee may include any other remuneration component
or award not explicitly referred to in this Remuneration policy sufficient to
attract the right candidate. In determining the appropriate remuneration,
the Committee will take into consideration all relevant factors (including the
quantum and nature of the remuneration) to ensure the arrangements are in
the best interests of the Company and its shareholders.
The Committee may buy-out incentive arrangements forfeited on leaving
a previous employer after taking account of relevant factors including the form
of the award, any performance conditions attached to the award and when
they would have vested. The Committee may consider other components
for structuring the buy-out, including cash or share awards where there is
a commercial rationale for this.
Where the recruitment requires the individual to relocate appropriate relocation
costs may be offered.
Recruitment awards will normally be liable to forfeiture or clawback if the
Executive Director leaves the Company within the first two years of their
employment. Any such awards will be linked to the achievement of appropriate
and challenging performance measures and will be forfeited if performance or
continued employment conditions are not met.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
41
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Future Remuneration policy table
The following table provides a summary of the key components of the remuneration package for Directors:
Salary
Purpose and link to strategy
Operation
Opportunity
This is a fixed element of the Executive Directors’ remuneration and is intended to be competitive and attract, retain
and motivate.
Takes into account the performance of the individual and information on the rates of salary for similar jobs in companies
of comparable size and complexity in a range of engineering and technology industries.
Salary is normally reviewed annually. Ordinarily, salary increases will be in line with increases awarded to other employees
within the Group. However, increases may be made above this level at the Remuneration and Nomination Committee’s
discretion to take account of individual circumstances such as:
increase in scope and responsibility;
to reflect the individual’s development and performance in the role; and
alignment to market level.
Performance metrics
Not applicable, although individual performance is one of the considerations in determining the level of salary.
Benefits
Purpose and link to strategy
Operation
Opportunity
The benefits provided to the Executive Directors are intended to be competitive and attract and retain the right calibre
of candidate.
Benefits are paid to the Executive Directors in line with market practice.
Benefits are set at a level which the Remuneration and Nomination Committee considers:
are appropriately positioned against comparable roles in companies of a similar size and complexity in the relevant
market; and
provide a sufficient level of benefit based upon the role and individual circumstances.
Performance metrics
Not applicable.
Short-term incentive scheme
Purpose and link to strategy
Operation
Opportunity
Performance metrics
The short-term incentive scheme is intended to reward Executive Directors for the performance of the Group in the
financial year.
The Remuneration and Nomination Committee reviews the financial performance of the Group following the end of each
financial year and determines the payments to be made.
Maximum of 120% of salary.
The targets against which performance is judged are primarily the Group’s key performance metrics in each financial
year set annually by the Remuneration and Nomination Committee as well as personal objectives. In some years,
the targets for the short-term incentive scheme may be varied to reflect particular objectives determined by the
Remuneration and Nomination Committee. The Remuneration and Nomination Committee retains the ability to adjust
and/or set different performance measures if events occur (such as a change in strategy, a material acquisition/
divestment of a Group business, a change in prevailing market conditions, or a change in regulation which affects
the Group) which cause the Remuneration and Nomination Committee to determine that the measures are no longer
appropriate and that amendment is required so that they achieve their original purpose.
46 Financial statements25 Corporate governance
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Mpac Group plc
Annual Report & Accounts 2021
Long Term Incentive Plan (“LTIP”)
Purpose and link to strategy
42
Operation
Remuneration
and
Nomination
Committee
report
continued
Opportunity
Performance metrics
The LTIP is intended to incentivise Executive Directors and certain senior managers over the longer term in direct
alignment with shareholders’ interests and encourage retention.
An award granted under the LTIP in the form of a conditional right giving the participant a right to acquire ordinary
shares in Company if certain conditions are met. Awards were made covering a three-year period. Awards will normally
vest following the end of the three-year performance period, once it is determined whether and to what extent the
performance conditions have been achieved. Awards will normally remain subject to a holding period of two years,
commencing on the vesting date with the exception of sales to cover related personal tax liabilities. Standard malus,
clawback and leaver provisions apply.
The normal maximum award, covering the three-year plan period, is 300% of salary based on the value of the award at
the date of grant.
Performance metrics selected reflect underlying business performance. 70% of the award of shares is based on
cumulative Earnings Per Share (“EPS”) performance over a three-year period. 30% of the award of shares is based
on average Return On Capital Employed (“ROCE”) over the same three-year period. In respect of the percentage of
the award that relates to EPS, 20% of the award is made if EPS is 85p. 100% of the award is made if EPS is equal to or
exceeds 115p. Between these two points, allocation will be on a straight line basis pro rata. If EPS is below 85p no award
will be made in respect of EPS. In respect of the percentage of the award that relates to ROCE, 20% of the award is made
if ROCE is 20%. 100% of the award is made if ROCE equals or exceeds 30%. Between these two points, allocation will be
on a straight line basis pro rata. If ROCE is below 20%, no award will be made in respect of ROCE.
Pension
Purpose and link to strategy
Operation
Opportunity
The payment of a pension benefit is intended to form an integral part of an Executive Director’s remuneration package
that is competitive and attracts, retains and motivates the Director.
Directors may join the Mpac Group Personal Pension Plan, or alternatively, in lieu of payments to the pension scheme,
the Company may pay additional emoluments.
Any percentage increase in pension contributions will not exceed the percentage increase in salary.
Performance metrics
Not applicable.
Non-Executive Directors’ fees
Purpose and link to strategy
To attract and retain Non-Executive Directors of the right calibre.
Operation
The fees of Non-Executive Directors are determined by the Board based upon comparable market levels. The Non-
Executive Directors do not participate in the Company’s incentive schemes and nor do they receive any benefits or
pension contributions.
Statement of consideration of employment conditions elsewhere in the Group
The Group applies the same key principles to setting remuneration for its
employees as those applied to the Directors’ remuneration. In setting salaries
and benefits each business considers the need to retain and incentivise
key employees and the impact such policy has on the continued success
of the Group.
25 Corporate governance46 Financial statements
Reporting requirements
The following information is provided in other appropriate sections and is
included in this Directors’ report by reference and so is deemed to be part of it:
Subject to any restrictions in its Articles of Association and the Companies
Act 2006, the Directors may exercise any powers which are not reserved for
exercise by the shareholders.
Mpac Group plc
Annual Report & Accounts 2021
43
Directors'
report
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Information
Strategic report
Directors' Remuneration Report
Future development and events
occurring after the balance sheet date
Reported
Pages 2 to 24.
Pages 36 to 42.
Details can be found in the Strategic
Report on pages 2 to 24.
The Company maintained Directors’ and Officers’ Liability Insurance cover
throughout 2021. The Articles of Association of the Company permit it to
indemnify the Company’s officers, and officers of any associated company,
against liabilities arising from conducting Company business, to the extent
permitted by law. The Company’s Articles of Association, together with the
Directors’ Service Contracts, will be available for inspection at the AGM.
Business review
The Directors’ business review is set out as part of the Strategic report with
the results of the Group being set out in the consolidated income statement on
page 59 and in its related notes. The Group has overseas subsidiaries.
Going concern
The Group‘s activities together with the factors likely to affect its future
development, performance and position are as described within the Strategic
report on pages 2 to 24 in particular the Outlook section on page 15. The
Directors have considered the trading outlook, including the preparation of profit,
balance sheet and cash flow forecasts, for the Group for a 24-month period
ending 31 December 2023, its financial resources including its cash resources
and access to borrowings, as set out in note 20 to the accounts on page 83,
and its continuing obligations, including to its defined benefit pension schemes,
details of which are set out in note 24 to the accounts on pages 85 to 90. These
forecasts have been sensitised to cover a range of credible downside scenarios,
including the potential future impacts of the pandemic and the conclusions
remained unchanged. "Reverse stress tests", where scenarios were run to
determine the full extent of the Group's resilience to downside risks, did not
challenge the Group's conclusions under any plausible scenario. Performance
subsequent to the year-end suggests the forecasts remain appropriate. Having
made due enquiries, the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
Directors
Biographical details of the Directors currently serving on the Board and their
dates of appointment are set out on page 28.
The Directors who served during the year are as follows:
Executive Directors
Tony Steels
Will Wilkins
Non-Executive Directors
Andrew Kitchingman
Sara Fowler
Doug Robertson
Matthew Taylor1
1 Appointed to the Board on 21 October 2021.
The Company’s approach to the appointment and replacement of Directors is
governed by its Articles of Association (together with relevant legislation) and
takes into consideration any recommendations of the QCA Code.
Directors and Directors’ interests
Directors’ interests in the Company’s shares as at 31 December 2021 are shown
on page 37. There are no shareholding requirements for Directors.
Substantial shareholdings
At 1 March 2022, the Company had been notified, or is aware of, the following
interests in the issued ordinary share capital of the Company:
Schroder Investment Management Limited
Mr G V L Oury
Number of
ordinary shares
4,555,011
1,264,370
% of issued
ordinary shares
22.58%
6.27%
Results and dividends
The Group’s profit for the year was £7.8m (31 December 2020: £3.3m profit).
Having considered the trading results for 2021 and the opportunities for
investment in the growth of the Group, together with the continued uncertainty
surrounding the impact of the pandemic, the Board has decided that it is not
appropriate to pay a final dividend. An interim dividend was not paid during
2021 (2020: none).
Dividends on the 6% preference shares are due for payment on 30 June and
31 December in each year and in 2021 amounted to £0.1m (2020: £0.1m).
Research and development
Group policy is to retain and enhance its market position through the design and
development of specialist machinery and services. To achieve this objective,
engineering and product development facilities are maintained in the UK and
overseas. Research and development expenditure for the Group incurred in 2021,
net of third-party income, amounted to £1.1m (2020: £1.7m), of which £0.9m
(2020: £1.1m) was charged to the consolidated income statement and £0.2m
(2020: £0.6m) was capitalised and included in development costs.
Share capital
At 31 December 2021, the Company’s issued share capital was £5,942,885
divided into 20,171,540 ordinary shares of £0.25 each and 900,000 preference
shares of £1.00 each. Details of movements in issued share capital in the year
are set out in note 25 to the financial statements. Authority for the purchase
of up to 3,000,000 ordinary shares for cancellation was granted at the 2021
Annual General Meeting and this authority expires at the end of the 2022 AGM.
While this authority was not used during the year, the Directors consider it
appropriate to seek further authority from the shareholders at the forthcoming
Annual General Meeting for the Company to purchase its own shares.
Resolution 14, which will be proposed as a special resolution, will seek the
necessary authority to enable the Company to purchase for cancellation ordinary
shares in the market for a period of up to 12 months from the date of the meeting,
upon the terms set out in the resolution, up to a maximum number of 2,017,154
ordinary shares representing approximately 10% of the issued ordinary share
capital at the date of the notice convening the Annual General Meeting.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
44
Directors'
report
continued
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
EES Trustees International Limited holds shares as trustee in connection with
the Company’s long-term incentive arrangements for the benefit of the Group’s
employees; at 1 March 2022 it held 242,144 shares. The trustee has agreed
to waive all dividends and not to exercise voting rights in respect of shares
representing 1.2% of the issued share capital.
Information about the Company’s share capital is given in note 25 to the
accounts on page 91.
Disclosure of information to the auditor
As far as the Directors are aware, there is no relevant audit information of which
the Group’s auditor is unaware, and each Director has taken all reasonable steps
that they ought to have taken as a Director in order to make themselves aware
of any relevant audit information to establish that the Group’s auditors are
aware of that information.
Auditor
Grant Thornton UK LLP has indicated its willingness to continue in office as
auditor and a resolution to re-appoint them will be proposed at the forthcoming
Annual General Meeting.
Annual General Meeting
The Annual General Meeting will take place on 4 May 2022. Notice of the
meeting can be found on pages 107 to 111.
Political donations
The Company made no political donations during the year 31 December 2021.
Financial instruments
The financial risk management objectives of the Group, including details of the
exposure of the Company and its subsidiaries to financial risks including credit
risk, interest rate risk and currency risk, are provided in note 26 to the accounts
on pages 92 to 98.
Sustainability policy
The Group is committed not only to compliance with environmental legislation
but also to the progressive introduction of appropriate measures to limit the
adverse effects of its operations upon the environment. In particular, efforts are
made to minimise waste arising from operations, to recycle materials wherever
possible and to consider alternative methods of design or operation.
The Group aims both to reduce its costs by these means and to promote good
practice in the use of resources at sustainable levels.
Annual quantity of emissions
In accordance with the Companies Act 2006, Mpac Group plc is committed to
reporting emissions for the Group on an annual basis as set out in the following
tables. Emissions are measured as tonnes of CO2 equivalent from the Group’s
metered purchases of electricity and fuel consumed in the activities of the
Group for which it is responsible; an intensity ratio has also been included.
Additionally, a measure of the CO2 emitted by travel in the Group has been
included, representing the emissions from Group-operated vehicles and from
business- related flights taken by the Group’s employees. The methodologies
used for the calculation of the emissions are as follows. The emissions in
relation to electricity and gas have been calculated by the multiplication of
the metered usage by the emissions level provided by the supplier, or, where
this is not available, by publicly available equivalents. In the case of transport,
emissions are calculated based on the distances travelled multiplied by known
emissions levels of the vehicles or, where this is not available, from equivalent
publicly available data.
Globally
Purchased electricity
Combustion of fuel
Travel
UK only
Purchased electricity
Combustion of fuel
Travel
2020 comparative
Globally
Purchased electricity
Combustion of fuel
Travel
UK only
Purchased electricity
Combustion of fuel
Travel
KWH
intensity
(per
employee)a
2,955
4,513
MWH
1,389
2,121
KWH
intensity
(per
MWH
employee)a
327
1,030
1,994
6,280
CO2
intensity
(kg per
employee)a
689
830
555
CO2
intensity
(kg per
employee)a
463
1152
140
CO2
(tonnes)
324
390
261
CO2
(tonnes)
76
189
33
KWH
intensity
(per
MWH
employee)a
1,032
1,757
2,254
3,837
KWH
intensity
(per
MWH
employee)a
237
941
1,300
5,172
CO2
intensity
(kg per
employee)a
526
705
525
CO2
(tonnes)
241
323
240
CO2
intensity
(kg per
employee)a
303
951
75
CO2
(tonnes)
55
173
53
a Calculated using average number of employees in the year.
Energy efficiency
The Group continues to focus on reducing energy consumption and carbon
emissions and reviews have been undertaken and recommendations
implemented. Reviews of new and evolving technologies form an integral part
of a continuous operational review program.
Employee and other stakeholder engagement
Details of the Group's arrangements for engaging with employees, suppliers
and customers are required to be disclosed in this Directors' report and are set
out under the s.172 statement on page 24. Such information is incorporated into
this Directors report by reference and is deemed to form part of this report.
25 Corporate governance46 Financial statements
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have prepared the financial
statements in accordance with UK-adopted international accounting standards.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs
and profit or loss of the Company and Group for that period. In preparing these
financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK-adopted international accounting standards have
been followed, subject to any material departures disclosed and explained in
the financial statements; and
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Group and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the Group
and Company and enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In the case of each Director in office at the date the Directors’ report is approved:
so far as the Director is aware, there is no relevant audit information of
which the Group’s and parent Company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a Director in
order to make themselves aware of any relevant audit information and to
establish that the Group’s and parent Company’s auditors are aware of that
information.
This Responsibility statement was approved by the Board on 16 March 2022
and is signed on its behalf by:
Mpac Group plc
Annual Report & Accounts 2021
45
Statement
of Directors’
responsibilities
in respect of the annual
report and the financial
statements
Tony Steels
Chief Executive
Will Wilkins
Group Finance Director
16 March 2022
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
46
Financial
statements
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
e
c
n
a
n
r
e
v
o
g
e
t
a
r
o
p
r
o
C
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
F
i
2
0
5
2
6
4
Mpac Group plc
Annual Report & Accounts 2021
47
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Independent Auditor’s report
to the members of Mpac Group plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Mpac Group plc (the ‘parent
company’) and its subsidiaries (the ‘Group’) for the year ended 31 December
2021, which comprise the Consolidated income statement, the Statement
of comprehensive income, the Statements of changes in equity, the
Statements of financial position, the Statements of cash flow and notes to
the financial statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in their
preparation is applicable law and UK-adopted international accounting
standards and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group’s and the parent company’s ability to
continue as a going concern for a period of at least twelve months from when
the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the Directors’ use
of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
The responsibilities of the Directors with respect to going concern are
described in the ‘Responsibilities of Directors for the financial statements’
section of this report.
In our opinion:
Our approach to the audit
the financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31 December 2021 and
of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
the parent company financial statements have been properly prepared in
accordance with UK-adopted international accounting standards and as
applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the ‘Auditor’s responsibilities for the audit of the
financial statements’ section of our report. We are independent of the Group
and the parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the Directors’ use
of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s and the parent company’s ability
to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify the
auditor’s opinion. Our conclusions are based on the audit evidence obtained up
to the date of our report. However, future events or conditions may cause the
Group or the parent company to cease to continue as a going concern.
A description of our evaluation of management’s assessment of the ability
to continue to adopt the going concern basis of accounting, and the key
observations arising with respect to that evaluation is included in the ‘Key audit
matters’ section of our report.
Overview of our audit approach
Materiality
Key audit
matters
Scoping
Overall materiality:
Group: £645,000, which represents approximately 0.65% of the Group’s
revenue for the year.
Parent company: £480,000, which represents 1% of the parent company’s
total assets, restricted to approximately 75% of Group materiality.
Key audit matters were identified as:
Improper revenue recognition and judgements made on open contracts
(same as previous year);
Accuracy of defined benefit pension liabilities (same as previous year);
Going concern (same as previous year); and
Impairment of goodwill (Mpac Lambert CGU) (new in the current year)
Our auditor’s report for the year ended 31 December 2020 included one key
audit matter that has not been reported as a key audit matter in our current
year’s report. This related to the acquisition accounting of Switchback
Group, Inc. including the accuracy of intangibles, which was a transaction
that completed in the previous year and required no audit procedures in the
current year’s audit.
The Group engagement team carried out an audit of the financial
information (full scope audit) of certain components in the United Kingdom
and Netherlands. We issued Group instructions to a component auditor
in respect of their full scope audit of a component in Canada. The Group
engagement team performed specific scope procedures over one or more
classes of transactions, account balances and disclosures of the financial
information of a component in the United States of America and performed
analytical procedures over the remaining components in the Group.
The components where we performed full scope and specific scope audit
procedures represented 86% of consolidated revenue, 93% of consolidated
total assets and 96% of consolidated profit before tax.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
48
Independent Auditor’s report continued
Independent Auditor’s report continued
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those
that had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Description
Audit response
Key audit
matters
Disclosures
Our results
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Potential
financial
statement
impact
High
Low
Management
override of controls
Improper revenue
recognition and
judgements made
on open contracts
Accuracy
of defined
benefit pension
liabilities
Going concern
Impairment of
goodwill (Mpac
Lambert CGU)
Accuracy of
hedge accounting
Low
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
25 Corporate governance46 Financial statements
Key audit matter – Group
How our scope addressed the matter – Group
Improper revenue recognition and judgements made on open contracts
We identified improper revenue recognition and judgements made on
open contracts as one of the most significant assessed risks of material
misstatement due to fraud and error.
A significant proportion of the revenue of the Group is derived
through the sale of machinery, recognised through long term contract
accounting. Long-term contract accounting involves a high degree of
subjectivity and is susceptible to the risk of material misstatement.
Contracts that remain open at the year-end are most susceptible to
manipulation by management where there is an incentive to meet
performance targets.
Relevant disclosures in the Annual Report and Accounts 2021
Financial statements: note 1, Revenue and operating segments.
In responding to the key audit matter, we performed the following audit procedures:
assessed and tested revenue recognition policies to check these are reasonable and
applied correctly and consistently as part of our sampling on open contracts and the
related inputs and assumptions;
for a sample of open contracts, assessed whether the revenue and profit recognised
were in accordance with the Group’s accounting policies and International Financial
Reporting Standard (“IFRS”) 15 ‘Revenue from Contracts with Customers’ by agreeing
inputs to supporting documentation such as contract terms, supplier invoices and
timesheets and reperforming management’s calculations;
for the same sample of open contracts, challenged management’s assumptions
and assertions underpinning their forecast for the contract’s future performance
with reference to supporting evidence, such as forecasts and post year-end
contract performance;
tested the recoverability of contract assets and receivables on our sample of open
contracts by reference to post year end collection;
assessed management’s ability to forecast by comparing the forecast margin and
labour hours at the inception of the contract against the current forecast margin, and
corroborating any significant movement in margin and labour hours; and
examined those contracts identified as being at risk of incurring future losses during
the remaining life of the contract, and challenging management’s assumptions and
assertions relating to the future results of those contracts by reference to supporting
evidence, such as forecasts and post year end contract performance.
Our results
Based on our audit work, we did not identify any improper revenue recognition
or judgements made on open contracts, and we found that the assumptions
and judgements used in management’s application of the Group’s open contract
accounting were appropriate.
Mpac Group plc
Annual Report & Accounts 2021
49
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
50
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Independent Auditor’s report continued
Independent Auditor’s report continued
Key audit matter – Group
How our scope addressed the matter – Group
Accuracy of defined benefit pension liabilities
We identified the accuracy of defined benefit pension liabilities as one
of the most significant assessed risks of material misstatement due
to error.
The Group operates defined benefit pension schemes in the UK and
US that provide benefits to a number of current and former employees.
At 31 December 2021, the net defined benefit asset was £33.2 million.
The total fair (bid) value of scheme assets and present value of defined
benefit obligations which form the net defined benefit asset amount to
£463.0 million and £429.8 million respectively.
The valuation of the pension liabilities in accordance with IAS 19
‘Employee Benefits’ involves significant judgement and is subject to
complex actuarial assumptions. Small variations in those actuarial
assumptions can lead to a materially different defined benefit
pension scheme asset or liability being recognised within the
Group financial statements.
Relevant disclosures in the Annual Report and Accounts 2021
Financial statements: note 24, Employee benefits.
Going concern
We identified going concern as one of the most significant assessed
risks of material misstatement due to fraud and error.
Covid-19 remains a significant global economic event and its effects
remain subject to unprecedented levels of uncertainty. This could
adversely impact the future trading performance of the Group including,
but not limited to, the following factors:
Decline in future orders;
Issues with supply chain; and
Shutdown of operations.
These factors could have a significantly adverse impact upon the Group’s
revenues and profit margins derived from contracts with customers.
As such, this increases the extent of judgement and estimation uncertainty
associated with the Directors’ decision to adopt the going concern basis of
accounting in the preparation of the financial statements.
Relevant disclosures in the Annual Report and Accounts 2021
Financial statements: Accounting policies, Going concern.
In responding to the key audit matter, we performed the following audit procedures:
tested the accuracy and consistency of management’s accounting entries made to the
financial statements with reference to management’s expert’s year-end valuations;
evaluated the competence of management’s expert;
used an internal actuarial expert to inform our challenge of the assumptions used,
including discount rates, growth rates, mortality rates and the calculation methods
employed in the calculation of the pension liability;
tested the accuracy of underlying scheme data used by the Group’s actuary for
the purpose of calculating the scheme liabilities by agreement to scheme bank
statements for benefit payments and scheme contributions during the year; and
assessed disclosures made in the financial statements to determine compliance
with IAS 19.
Our results
Based on our audit work, we found the valuation methodologies to be balanced and
consistent with the expectation of our internal actuarial expert. We consider that the
Group’s disclosures in note 24 are in accordance with IAS 19. We found no material
errors in the calculations we tested.
In responding to the key audit matter, we performed the following audit procedures:
obtained management’s base case forecasts and calculations covering the period to
December 2023. We assessed how these forecasts were compiled and challenged
the accuracy of management’s forecasts, including the continued effects arising from
macro-economic uncertainties such as Brexit and Covid-19 on global supply chains;
tested the accuracy of the orderbook used in management’s base case forecast and
corroborated a sample of orders to supporting contracts or other proof of order;
assessed the reliability of management’s forecasting by comparing the accuracy of
actual financial performance to forecast information obtained in the prior year;
performed sensitivity analysis on key inputs to determine the impact of reasonably
possible changes in assumptions;
evaluated and challenged the assumptions applied in management’s most severe
downside scenario, primarily including a removal of non-orderbook revenues covering
the period to December 2023. We corroborated management’s explanations to
relevant documentation; and
assessed the adequacy of the going concern disclosures included within the
Accounting Policies section of the Financial Statements.
Our results
We have nothing to report in addition to that stated in the ‘Conclusions relating to going
concern’ section of our report.
25 Corporate governance46 Financial statements
Key audit matter – Group
How our scope addressed the matter – Group
Impairment of goodwill (Mpac Lambert CGU)
We identified impairment of goodwill (Mpac Lambert CGU) as one of the
most significant assessed risks of material misstatement due to error.
The process for assessing whether an impairment exists under
International Accounting Standard (IAS) 36 ‘Impairment of Assets’
is complex. When carrying out the goodwill impairment review,
determining the recoverable amount for the smallest identifiable part of
the entity (cash-generating unit (“CGU”)) requires management to make
judgements over several key inputs in the models for predicting future
revenue levels (discounted cash flow models).
Due to the high level of estimation uncertainty present in the
impairment test and the sensitivity of the related assumptions in
management’s model, we therefore identified the valuation of goodwill
in relation to the Mpac Lambert CGU as a significant risk.
Relevant disclosures in the Annual Report and Accounts 2021
Financial statements: note 12, Intangible Assets.
In responding to the key audit matter, we performed the following audit procedures:
obtained management’s impairment paper and impairment workings and critically
assessed management’s assessment of cash generating units;
tested that the methodology applied in the value in use calculation is in accordance
with the requirements of IAS 36;
tested the mathematical accuracy of management’s model, the calculation of the
discount rate and the key underlying assumptions such as revenue growth, margin
trends, capital expenditure and working capital requirements for the financial year
2022 budget (‘FY22’);
challenged management on their 2022-2024 cash flow forecast and orderbook
expectations and corroborated to relevant evidence such as external market data to
support key assumptions;
used our auditor expert to assess the appropriateness of management’s assumptions
used in calculating the discount rates used in the value in use calculation;
assessed the appropriateness management’s medium and long term growth rates
used in the forecast including comparison to economic and industry forecasts
where appropriate;
performed a sensitivity analysis in respect of the key assumptions, such as discount
and growth rates, to consider the level of headroom in management’s calculation; and
tested the accuracy and sufficiency of management’s accounts disclosures in
respect of goodwill and associated testing for impairment.
Our results
Based on our audit procedures, including our challenge of management, we did not
identify any material misstatement relating to impairment of goodwill in respect of the
Mpac Lambert CGU.
Management concluded that amendments were required to their impairment
review having considered our audit findings in relation to their application of IAS 36.
Management also concluded that additional disclosures were required in respect
of sensitivities.
Mpac Group plc
Annual Report & Accounts 2021
51
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
52
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Independent Auditor’s report continued
Independent Auditor’s report continued
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of
uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial statements as a whole We define materiality as the magnitude of misstatement in the financial statements that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of the users of these financial
statements. We use materiality in determining the nature, timing and extent of our audit work.
Materiality threshold
£645,000, which is approximately 0.65% of the
Group’s revenue.
£480,000, which is 1% of the parent company’s total
assets, restricted to its component materiality, being
approximately 75% of Group materiality.
Significant judgements made by auditor in
determining the materiality
In determining materiality, we made the following
significant judgements:
In determining materiality, we made the following
significant judgement:
This benchmark is considered the most appropriate
as we consider that it reflects the Company’s status
as a non-trading holding company.
Materiality for the current year is higher than the level
that we determined for the year ended 31 December
2020 to reflect the increase in Group materiality in the
current year.
Revenue is a key performance indicator for the
Group and is a key area of focus for stakeholders;
The development of the Group’s strategy and
operations into the clean energy sector indicated
that revenue was a more suitable materiality
benchmark compared to underlying profit before
tax used in the prior year, as management focus on
growing revenue in these new markets;
Revenue was identified as the primary benchmark
and key performance indicator highlighted in our
analysis of comparator businesses in the wider
industrial engineering sector; and
The measurement percentage we applied to
the revenue benchmark was at the lower end of
the range applied by the auditor to the revenue
balance of comparator businesses in the industrial
engineering sector to moderate the change in
materiality used in the current year’s audit.
Materiality for the current year is higher than the level
that we determined for the year ended 31 December
2020 to reflect the change in applicable benchmark
explained above and the increase in the Group’s activity
(both revenue and profit before tax) in the current year.
25 Corporate governance46 Financial statements
Materiality measure
Group
Parent company
Performance materiality used to drive
the extent of our testing
We set performance materiality at an amount less than materiality for the financial statements as a whole
to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
Performance materiality threshold
£480,000, which is approximately 75% of financial
statement materiality.
£360,000, which is approximately 75% of financial
statement materiality.
Significant judgements made by auditor in
determining the performance materiality
In determining to maintain the percentage of
performance materiality at the same level as the prior
year, we made the following significant judgements:
In determining to maintain the percentage of
performance materiality at the same level as the prior
year, we made the following significant judgements:
Specific materiality
the Group has no prior year going concern issues;
the Company has no prior year going concern issues;
the Group has a stable control environment; and
the Company has a stable control environment; and
few misstatements (corrected and uncorrected)
were identified in the prior year audit.
few misstatements (corrected and uncorrected) were
identified in the prior year audit.
We determine specific materiality for one or more particular classes of transactions, account balances or
disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
Specific materiality
We determined a lower level of specific materiality for
the following areas:
We determined a lower level of specific materiality for
the following areas:
Communication of misstatements to the
Audit Committee
Threshold for communication
Directors’ remuneration;
Directors’ remuneration; and
Related party transactions outside of the normal
course of business; and
Related party transactions outside of the normal
course of business.
Items reported as ‘non-underlying’ in the
consolidated income statement.
We determine a threshold for reporting unadjusted differences to the Audit Committee.
£32,500 and misstatements below that threshold that,
in our view, warrant reporting on qualitative grounds.
£24,000 and misstatements below that threshold that,
in our view, warrant reporting on qualitative grounds.
Mpac Group plc
Annual Report & Accounts 2021
53
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
54
Independent Auditor’s report continued
Independent Auditor’s report continued
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Revenue
£98.0m
FSM
£0.65m
c.0.65%
PM
£0.48m
75%
TFPUM
£0.17m
25%
Total assets
£100.9m
FSM
£0.48m
0.5%
PM
£0.36m
75%
TFPUM
£0.12m
25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the Group’s
and the parent company’s business and in particular matters related to:
Understanding the Group, its components, and their environments,
including Group-wide controls
The Group’s accounting process is primarily resourced through a central
function within the United Kingdom, with local finance functions in Canada,
the Netherlands, the United States of America, Singapore and the United
Kingdom. Each local finance function reports into the central Group finance
function based at the Group’s head office. The engagement team obtained an
understanding of the Group and its environment, including Group-wide controls,
and assessed the risks of material misstatement at the Group level.
We documented our understanding of the Group’s processes and controls over
the following areas of identified audit risk and performed walkthroughs on these
controls to confirm they are designed effectively:
Improper revenue recognition and judgements made on open contracts;
Accuracy of defined benefit pension liabilities;
Going concern;
Management override of controls; and
Impairment of goodwill (Mpac Lambert CGU).
Identifying significant components
Component significance was determined based on their relative share of key
Group financial metrics including revenue, underlying profit before tax and total
assets. For significant components requiring a full scope audit approach, we
or the component auditors obtained an understanding of the relevant controls
over the entity-specific financial reporting systems identified as well as the
centralised financial reporting system as part of our risk assessment.
Type of work to be performed on financial information of parent and other
components (including how it addressed the key audit matters)
For all significant risks and key audit matters identified, the Group engagement
team or component auditor obtained an understanding of the relevant controls
that management have implemented over the related processes.
For components classified as “individually financially significant to the Group”,
an audit of the financial information of the component using component
materiality (full-scope audit) was performed. We also considered whether any
components were likely to include significant risks of material misstatement to
the Group financial statements due to their specific nature or circumstances.
No such components were identified in the current year.
Performance of our audit
In order to address the audit risks identified during our planning procedures
the audit of the financial information of each of the following components was
completed by the Group engagement team using component materiality (full
scope audit):
Mpac Group plc (United Kingdom);
Mpac Lambert Limited (United Kingdom); and
Mpac Langen B.V. (the Netherlands).
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
55
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
We issued Group instructions to a component auditor in respect of their full
scope audit of Mpac Langen, Inc. (Canada).
The Group engagement team performed specific scope procedures over one or
more classes of transactions, account balances and disclosures of the financial
information of Mpac Switchback Inc. (United States of America).
The financial information of the remaining operations of the Group in Singapore
and the United Kingdom were subjected to analytical procedures carried
out by the Group engagement team with a focus on areas with significant
management judgement or estimation uncertainty such as revenue recognition
and judgements made on open contracts and management override of
controls, or where quantitatively significant to the Group’s balances.
The Group engagement team and component auditor performed audit
procedures in respect of certain classes of transactions and account balances
prior to the year end. Alongside these audit procedures, we evaluated the
Group’s internal control environment including both general and IT-based
systems and controls.
The Group engagement team visited the significant components in the United
Kingdom but due to the restrictions imposed due to Covid-19, the work on
overseas components was performed remotely. Due to the travel restrictions
in place, we were not able to meet the component auditors in person, however
we held detailed discussions with the component audit teams, including remote
reviews of the work performed, update calls on the progress of their fieldwork
and by attending the component audit clearance meetings with component
management via video call.
Our full-scope and specific-scope audit procedures provided coverage of 86%
of the Group’s consolidated revenue, 96% of the Group’s consolidated profit
before tax and 93% of the Group’s consolidated total assets.
Audit approach
Full-scope audit
Specific-scope audit
Analytical procedures
Number of
components
Coverage of
revenue
Coverage of
profit before
taxation
4
1
3
84%
2%
14%
83%
13%
4%
Communications with component auditors
Detailed audit instructions were issued to the component auditors of the
significant reporting components where a full scope approach had been
determined to be required, except for those significant components where the
component audit engagement leader was also part of the Group audit team.
The instructions highlighted the significant risks to be addressed through the
audit procedures and detailed the information that were required to be reported
to the Group engagement team.
The Group engagement team conducted a review of the work performed by the
component auditor, and communicated with the component auditor throughout
the planning, fieldwork and concluding stages of the Group audit.
Key working papers were prepared by the Group engagement team summarising
the Group engagement team’s review of component auditor files, except for
those components where the component audit engagement leader was also part
of the Group engagement team, in which situation, the Group audit engagement
leader reviewed key component audit working papers directly.
Changes in approach from previous year
The scope of the current year’s audit was similar to that in the prior year, other
than to add unpredictability to our Group scoping and risk assessment. The
Group engagement team carried out different audit procedures compared to
the prior year in respect of a component in the United States of America.
Other information
The Directors are responsible for the other information. The other information
comprises the information included in the Annual Report and Accounts 2021,
other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006
is unmodified
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the Directors’ report
for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the Directors’ report.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
56
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Independent Auditor’s report continued
Independent Auditor’s report continued
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
the parent company financial statements are not in agreement with the
accounting records and returns; or
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including
fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk
that material misstatements in the financial statements may not be detected,
even though the audit is properly planned and performed in accordance with
ISAs (UK).
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below:
Responsibilities of Directors for the financial statements
As explained more fully in the statement of Directors’ responsibilities, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
We determined the most significant legal and regulatory frameworks which
are directly relevant to specific assertions in the financial statements are
those related to the reporting framework, including UK-adopted international
accounting standards, the AIM Rules for Companies, the Companies Act
2006 and the relevant taxation regulations in the jurisdictions in which the
parent company and Group operate.
We obtained an understanding of how the parent company and the Group are
complying with those legal and regulatory frameworks by making inquiries
of management, those responsible for legal and compliance procedures, and
the company secretary. We corroborated our inquiries through our review of
Board minutes.
We assessed the susceptibility of the parent company’s and the Group’s
financial statements to material misstatement, including how fraud might
occur, by considering management’s incentives and opportunities for
manipulation of the financial statements. This included the evaluation of the
risk of management override of controls. We determined that the principal
risks were in relation to the estimation and judgemental areas with a risk
of fraud, including potential management bias, of revenue recognition and
judgements on open contracts and through management override of controls.
Our audit procedures included:
• Making enquiries of management concerning the parent company’s and the
Group’s policies and procedures relating to the identification, evaluation and
compliance with laws and regulations; the detection and response to the
risks of fraud; and the establishment of internal controls to mitigate risks
related to fraud or non-compliance with laws and regulations.
• We also enquired with management and those charged with governance
whether they were aware of any instances of non-compliance with laws
and regulations, and whether they had any knowledge of actual, suspected,
or alleged fraud. We corroborated the results of our enquires to relevant
supporting documentation.
25 Corporate governance46 Financial statements
Communications within the audit team in respect of potential non-compliance
with laws and regulations and fraud included the potential for fraud in relation
to the estimation and judgemental areas with a risk of fraud, including potential
management bias, revenue recognition and judgements on open contracts,
which we identified as a key audit matter, and through management override of
controls in the preparation of the financial statements.
For components at which audit procedures were performed, we requested
component auditors to report to us instances of non-compliance with laws
and regulations that gave rise to a risk of material misstatement of the Group
financial statements.
Use of our report
This report is made solely to the company’s members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
Rebecca Eagle
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
16 March 2022
Mpac Group plc
Annual Report & Accounts 2021
57
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
• Gaining an understanding of the controls that management has in place to
prevent and detect fraud.
• Challenging significant accounting assumptions, estimates and judgements
made by management, including those relevant to the estimation and
judgemental areas with a risk of fraud, including potential management
bias, of revenue recognition and judgements on open contracts.
• Journal entry testing, with a focus on journals indicating large or unusual
transactions or account combinations based on our understanding of the
business and those posted directly to the financial statements that related
to revenue.
• Obtaining an understanding of and testing significant identified related
party transactions.
• Performing audit procedures to consider the compliance of disclosures
in the financial statements with the applicable financial reporting
framework requirements.
• For components at which audit procedures were performed by the
component auditor, we requested the component auditor to report to us
instances of non-compliance with laws and regulations that gave rise to a
risk of material misstatement of the Group financial statements.
These audit procedures were designed to provide reasonable assurance
that the financial statements were free from fraud or error. The risk of not
detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error and detecting irregularities that result from
fraud is inherently more difficult than detecting those that result from error,
as fraud may involve collusion, deliberate concealment, forgery or intentional
misrepresentations. Also, the further removed non-compliance with laws
and regulations is from events and transactions reflected in the financial
statements, the less likely we would become aware of it.
The engagement partner’s assessment of the appropriateness of the
collective competence and capabilities of the engagement team included
consideration of the engagement team’s:
• Understanding of, and practical experience with, audit engagements
of a similar nature and complexity through appropriate training and
participation;
• Knowledge of the industry in which the parent company and the Group
operate; and
• Understanding of the legal and regulatory requirements specific to the
parent company and the Group.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Consolidated income statement
for the year ended 31 December 2021
58
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Note
1
3
4,5
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Other operating expenses
Operating profit/(loss)
Financial income
Financial expenses
Net financing income/(expense)
Profit/(loss) before tax
Taxation
Profit/(loss) for the period
Earnings/(loss) per ordinary share
Basic
Diluted
* See note 34 for further details of the prior year restatement.
1,4
11
11
9
8
8
Underlying
£m
94.3
(65.4)
28.9
(6.8)
(12.4)
(0.9)
8.8
–
(0.2)
(0.2)
8.6
(0.7)
7.9
2021
Non-underlying
£m
–
–
–
–
(0.5)
–
(0.5)
0.2
(0.1)
0.1
(0.4)
0.3
(0.1)
Underlying
£m
83.7
(59.4)
24.3
(6.8)
(9.9)
(1.1)
6.5
–
(0.2)
(0.2)
6.3
–
6.3
2020 Restated*
Non-underlying
£m
–
–
–
–
(3.6)
–
(3.6)
0.3
(0.1)
0.2
(3.4)
1.3
(2.1)
Total
£m
94.3
(65.4)
28.9
(6.8)
(12.9)
(0.9)
8.3
0.2
(0.3)
(0.1)
8.2
(0.4)
7.8
39.1p
38.1p
Total
£m
83.7
(59.4)
24.3
(6.8)
(13.5)
(1.1)
2.9
0.3
(0.3)
–
2.9
1.3
4.2
20.8p
20.7p
25 Corporate governance46 Financial statements
Statement of comprehensive income
for the year ended 31 December 2021
Profit/(loss) for the period
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Actuarial gains/(losses)
Tax on items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Currency translation movements arising on foreign currency net investments
Effective portion of changes in fair value of cash flow hedges
Reclassified to income statement from hedge reserve
Other comprehensive income/(expense) for the period
Total comprehensive income/(expense) for the period
* See note 34 for further details of the prior year restatement.
Note
24
9
26
26
Group
2021
£m
7.8
2020 Restated*
£m
4.2
20.7
(7.9)
12.8
(0.2)
(1.0)
(0.3)
(1.5)
11.3
19.1
(8.8)
2.2
(6.6)
(0.5)
0.8
(0.3)
–
(6.6)
(2.4)
Mpac Group plc
Annual Report & Accounts 2021
59
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Statements of changes in equity
for the year ended 31 December 2021
60
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Balance at 1 January 2020 on previous basis
Impact of restatement (Note 34)
Balance at 1 January 2020 (restated)
Profit for the period
Other comprehensive (expense)/
income for the period
Total comprehensive (expense)/
income for the period
Equity-settled share-based transactions
Purchase of own shares
Total transactions with owners,
recorded directly in equity
Balance at 31 December 2020 on previous basis
Impact of restatement (Note 34)
Balance at 31 December 2020 (restated)
Profit for the period
Other comprehensive (expense)/
income for the period
Total comprehensive (expense)/
income for the period
Equity-settled share-based transactions
Purchase of own shares
Total transactions with owners,
recorded directly in equity
Balance at 31 December 2021
Note
24
24
25
Share
capital
£m
5.0
–
5.0
–
Share
premium
£m
26.0
–
26.0
–
Translation
reserve
£m
1.0
–
1.0
–
Group
Capital
redemption
reserve
£m
3.9
–
3.9
–
Hedging
reserve
£m
0.3
–
0.3
–
Retained
earnings
£m
11.3
0.9
12.2
4.2
–
–
–
–
–
5.0
–
5.0
–
–
–
–
–
–
5.0
–
–
–
–
–
26.0
–
26.0
–
–
–
–
–
–
26.0
(0.5)
(0.5)
–
–
–
0.5
–
0.5
–
(0.2)
(0.2)
–
–
–
0.3
–
–
–
–
–
3.9
–
3.9
–
–
–
–
–
–
3.9
0.5
0.5
–
–
–
0.8
–
0.8
–
(1.3)
(1.3)
–
–
–
(0.5)
(6.6)
(2.4)
0.4
(0.2)
0.2
8.2
1.8
10.0
7.8
12.8
20.6
0.3
(0.2)
0.1
30.7
Total
equity
£m
47.5
0.9
48.4
4.2
(6.6)
(2.4)
0.4
(0.2)
0.2
44.4
1.8
46.2
7.8
11.3
19.1
0.3
(0.2)
0.1
65.4
25 Corporate governance46 Financial statements
Balance at 1 January 2020
Loss for the period
Other comprehensive (expense)/
income for the period
Total comprehensive (expense)/
income for the period
Equity-settled share-based transactions
Purchase of own shares
Total transactions with owners,
recorded directly in equity
Balance at 31 December 2020
Profit for the period
Other comprehensive (expense)/
income for the period
Total comprehensive (expense)/
income for the period
Equity-settled share-based transactions
Purchase of own shares
Total transactions with owners,
recorded directly in equity
Balance at 31 December 2021
Note
24
24
25
Share
capital
£m
5.0
–
Share
premium
£m
26.0
–
Translation
reserve
£m
–
–
Company
Capital
redemption
reserve
£m
3.9
–
Hedging
reserve
£m
–
–
Retained
earnings
£m
27.9
(2.1)
–
–
–
–
–
5.0
–
–
–
–
–
–
5.0
–
–
–
–
–
26.0
–
–
–
–
–
–
26.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.9
–
–
–
–
–
–
3.9
–
–
–
–
–
–
–
–
–
–
–
–
–
(6.3)
(8.4)
0.4
(0.2)
0.2
19.7
2.4
12.3
14.7
0.3
(0.2)
0.1
34.5
Total
equity
£m
62.8
(2.1)
(6.3)
(8.4)
0.4
(0.2)
0.2
54.6
2.4
12.3
14.7
0.3
(0.2)
0.1
69.4
Mpac Group plc
Annual Report & Accounts 2021
61
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Statements of financial position
as at 31 December 2021
62
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Non-current assets
Intangible assets
Property, plant and equipment
Investment property
Right-of-use assets
Investments
Amounts owed by group undertakings
Employee benefits
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Current liabilities
Lease liabilities
Trade and other payables
Current tax liabilities
Provisions
Net current assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Employee benefits
Deferred tax liabilities
Lease liabilities
Deferred contingent consideration
Net assets
Equity
Issued capital
Share premium
Reserves
Retained earnings
Total equity
* See note 34 for further details of the prior year restatement.
Note
12
13
14
27
15
15
24
16
17
19
10
21
27
22
10
23
20
24
16
27
30
1
25
Group
2020
Restated*
£m
2019
Restated*
£m
27.4
5.1
0.8
4.0
–
–
14.0
1.7
53.0
3.5
32.2
0.8
15.5
52.0
(0.8)
(41.1)
(0.4)
(1.4)
(43.7)
8.3
61.3
(0.9)
(3.0)
(4.9)
(3.4)
(2.9)
(15.1)
46.2
5.0
26.0
5.2
10.0
46.2
16.9
5.6
0.8
4.7
–
–
20.4
1.7
50.1
3.2
28.0
0.4
18.9
50.5
(0.9)
(30.9)
(0.7)
(1.3)
(33.8)
16.7
66.8
(0.9)
(3.1)
(7.9)
(3.9)
(2.6)
(18.4)
48.4
5.0
26.0
5.2
12.2
48.4
2021
£m
25.3
4.0
0.8
5.8
–
–
35.7
1.4
73.0
5.5
34.5
0.6
14.5
55.1
(1.8)
(39.5)
(0.7)
(0.6)
(42.6)
12.5
85.5
(0.9)
(2.5)
(12.5)
(4.2)
–
(20.1)
65.4
5.0
26.0
3.7
30.7
65.4
Company
2021
£m
1.3
0.2
0.8
–
63.8
14.2
35.7
–
116.0
–
4.7
–
4.0
8.7
–
(41.9)
–
–
(41.9)
(33.2)
82.8
(0.9)
–
(12.5)
–
–
(13.4)
69.4
5.0
26.0
3.9
34.5
69.4
2020
£m
1.7
1.6
0.8
–
63.8
11.0
14.0
–
92.9
–
4.6
–
3.4
8.0
–
(38.1)
–
–
(38.1)
(30.1)
62.8
(0.9)
–
(4.9)
–
(2.4)
(8.2)
54.6
5.0
26.0
3.9
19.7
54.6
The parent company has taken the exemption conferred by s.408 of the Companies Act 2006 not to publish the income statement of the parent company with
these consolidated accounts. The parent company profit for the year was £2.4m (2020: £2.1m loss). These financial statements were approved by the Directors on
16 March 2022 and signed on their behalf by:
Tony Steels
Director
Registered number: 124855
Will Wilkins
Director
25 Corporate governance46 Financial statements
Statements of cash flow
for the year ended 31 December 2021
Operating activities
Operating profit/(loss)
Non-underlying items included in operating profit
Amortisation of internally developed intangible assets
Depreciation
Profit on sale of property, plant and equipment
Other non-cash items
Pension payments
Working capital movements:
– (increase)/decrease in inventories
– increase in contract assets
– decrease/(increase) in trade and other receivables
– (decrease)/increase in trade and other payables
– (decrease)/increase in provisions
– (decrease)/increase in contract liabilities
Cash flows from continuing operations before reorganisation
Acquisition and reorganisation costs paid
Cash flows from operations
Taxation (paid)/received
Cash flows from/(used in) operating activities
Investing activities
Proceeds from sale of property, plant and equipment
Capitalised development expenditure
Acquisition of property, plant and equipment
Net cash flow on acquisition
Loans to subsidiaries
Payment of deferred consideration
Cash flows used in investing activities
Financing activities
Interest paid
Purchase of own shares
Principal elements of lease payments
Cash flows used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 31 December
Note
5
12
13,27
13
24
12
13
21
Group
2021
£m
8.3
0.5
0.6
1.8
0.1
0.3
(2.6)
(2.2)
(4.4)
1.0
(1.1)
(0.8)
(0.7)
0.8
(0.3)
0.5
(0.1)
0.4
2.0
(0.2)
(1.5)
–
–
(0.6)
(0.3)
(0.3)
(0.2)
(0.9)
(1.4)
(1.3)
15.5
0.3
14.5
2020
£m
2.9
3.6
0.3
1.1
–
0.4
(3.0)
0.2
(1.7)
(0.6)
4.1
0.1
5.4
12.8
(0.9)
11.9
(0.7)
11.2
0.2
(1.8)
(1.2)
(9.8)
–
(0.5)
(13.1)
(0.2)
(0.2)
(0.9)
(1.3)
(3.2)
18.9
(0.2)
15.5
Company
2021
£m
1.6
(1.5)
0.4
0.1
–
0.3
(2.3)
–
–
–
3.7
–
–
2.3
(0.2)
2.1
–
2.1
1.8
–
(0.1)
–
(3.0)
–
(1.3)
–
(0.2)
–
(0.2)
0.6
3.4
–
4.0
2020
£m
(0.7)
0.9
0.1
0.1
–
0.4
(2.7)
–
–
(1.6)
11.7
–
–
8.2
(0.1)
8.1
0.1
8.2
0.1
(1.2)
(0.1)
–
(11.7)
(0.5)
(13.4)
(0.1)
(0.2)
–
(0.3)
(5.5)
8.9
–
3.4
Mpac Group plc
Annual Report & Accounts 2021
63
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
64
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Accounting policies
The significant accounting policies as set out below apply to both the Group
and Company financial statements, as appropriate.
Basis of accounting
Mpac Group plc (the ”Company”) is a company incorporated and domiciled in
the UK. The Group financial statements consolidate those of the Company and
its subsidiaries (together referred to as the Group).
The financial reporting framework that has been applied in the preparation
of the financial statements is applicable law and UK-adopted international
accounting standards and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the Companies
Act 2006.
The financial statements have been prepared on the historical cost basis except
that derivative financial instruments, principally forward foreign exchange
contracts, are stated at fair value and non-current assets are stated at the lower
of previous carrying amount and fair value less costs to sell.
The preparation of financial statements in conformity with international
accounting standards requires the Directors to make judgements, estimates
and assumptions that affect the application of policies and reported amounts
of assets, liabilities, income and expenses. The estimates and assumptions are
based on historical experience and other factors considered reasonable at the
time, but actual results may differ from these estimates. Revisions to these
estimates are made in the period in which they are recognised.
The accounting policies, presentation and methods of computation applied
by the Group and Company in these financial statements are in the main
consistent with those applied in the 2020 financial statements. No new
accounting standards have been adopted in the year. A number of amendments
to accounting standards became effective during the period, but did not have
a material impact on the Group’s accounting policies.
IFRS 16 Leases
The Group leases various factories, equipment and cars. Rental contracts are
typically made for fixed periods of three to five years for equipment and 10-
20 years for properties. These may have extension options. Lease terms are
negotiated on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants, but leased
assets may not be used as security for borrowing purposes. An assessment of
how likely it is for the option to extend the lease to be exercised is performed
and if it is determined that the lessee is reasonably certain to exercise the
option then the term covered by the option is included in the lease term.
Leases are recognised as a right-of-use asset and a corresponding liability
at the lease commencement date. Each lease payment is allocated between
the liability and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a
straight-line basis.
IFRS 16 requires the capital element of the leases to be disclosed as a financing
cost, with the amortisation of the assets being treated as a non-cash item.
Assets and liabilities arising from a lease are initially measured on a present
value basis. Lease liabilities include the net present value of the following lease
payments (where they exist within a lease):
fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
variable lease payments that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value
guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the
lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease.
If that rate cannot be determined, the lessee’s incremental borrowing rate is
used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost, comprising the following:
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any
lease incentives received;
any initial direct costs; and
restoration costs.
Payments associated with short-term leases and leases of low-value assets
are recognised on a straight-line basis as an expense in profit or loss. Short-
term leases are leases with a lease term of 12 months or less. Low-value assets
comprise small items of workshop equipment, office furniture and machines.
Derivative financial instruments
The Group’s derivative financial instruments are measured at fair value and are
summarised below.
The Group uses forward foreign exchange contracts to mitigate exchange rate
exposure arising from forecast trade receivables in currencies other than the
functional currency of the operating entity.
Hedge effectiveness is determined at inception of the hedge relationship and
at every reporting year end through the assessment of the hedged items and
hedging instrument to determine whether there is still an economic relationship
between the two.
The critical terms of the foreign currency forwards entered into exactly match
the terms of the hedged item.
Hedge ineffectiveness may arise if the critical terms of the forecast transaction no
longer meet those of the hedging instrument, for example, if there was a change in
the timing of the forecast transactions from what was initially estimated.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
65
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
The hedged items and the hedging instrument are denominated in the same
currency and, as a result, the hedging ratio is always one to one. All forward
exchange contracts had been designated as hedging instruments in cash flow
hedges under IFRS 9.
All derivative financial instruments used for hedge accounting are recognised
initially at fair value and reported subsequently at fair value in the statement of
financial position.
To the extent that the hedge is effective, changes in the fair value of derivatives
designated as hedging instruments in cash flow hedges are recognised in other
comprehensive income and included within the cash flow hedge reserve in
equity. Any ineffectiveness in the hedge relationship is recognised immediately
in the income statement.
At the time the hedged item affects profit or loss, any gain or loss previously
recognised in other comprehensive income is reclassified from equity to
profit or loss and presented as a reclassification adjustment within other
comprehensive income.
If a forecast transaction is no longer expected to occur, any related gain or loss
recognised in other comprehensive income is transferred immediately to the
income statement. If the hedging relationship ceases to meet the effectiveness
conditions, hedge accounting is discontinued, and the related gain or loss is
held in the equity reserve until the forecast transaction occurs.
Non-underlying items and alternative performance measures
Non-underlying items are income and expenditure that, because of the
nature of the item, merit separate presentation in the income statement to
allow a better understanding of the Group’s financial performance by
facilitating comparisons with prior periods and assessments of trends in
financial performance.
Non-underlying items may include, but are not limited to, the impact on the
income statement of the Group’s defined benefit pension schemes including
administration charges and pension interest, acquisition or disposal costs and
the amortisation of acquired intangible assets, significant reorganisation costs,
profits or losses arising on discontinued operations, significant impairments of
tangible or intangible assets and related taxation. The Group elects to include
costs relating to the defined benefit pension scheme in non-underlying as there
is only one active employee of the Group in the scheme, so the costs would be
immaterial to the Group should the scheme not exist.
Accordingly, the Group uses alternative performance measures (“APMs”), in
addition to those reported under IFRS, as management believe these measures
enable the users of these financial statements to better assess the underlying
trading performance of the Group. The APMs used include underlying operating
profit, underlying profit before tax and underlying earnings per share.
A full breakdown of non-underlying items is provided in note 5 to the financial
statements, and a reconciliation of underlying profit back to the closest IFRS
measure is provided as part of note 11, which also includes a reconciliation of
underlying EPS back to its closest IFRS measure.
Recent accounting developments
At the date of this report, there were no new standards in issue which were
relevant to the Group and Company.
Going concern
The Group’s activities together with the factors likely to affect its future
development, performance and position are described within the Operating
review on pages 11 to 15, Financial review on pages 16 to 18 and in the Principal
risks and uncertainties on pages 19 to 23.
The Directors have considered the trading outlook of the Group and Company
for a 24 month period ending 31 December 2023, its financial position, including
its cash resources and access to borrowings, as set out in the Financial review
on pages 16 to 18 and in note 20 to the accounts on page 83, and its continuing
obligations, including to its defined benefit pension schemes, details of which
are set out in note 24 to the accounts on pages 84 to 90. Having made due
enquiries, the Directors have a reasonable expectation that the Group and
Company has adequate resources to continue in operational existence for the
foreseeable future.
For this reason, they continue to adopt the going concern basis in preparing the
financial statements.
Basis of consolidation
The Group financial statements comprise the consolidated results of the
Company and all of its subsidiary companies together with the Group’s share
of the results of its associated companies on an equity accounting basis.
A separate income statement dealing only with the results of the Company
has not been presented in accordance with section 408 of the Companies
Act 2006.
A subsidiary is a company controlled, directly or indirectly, by the Group. Control
is the power to govern the financial and operating policies of the subsidiary
company so as to obtain benefits from its activities. A subsidiary’s results
are included in the Group financial statements from the date that control
commences until the date that control ceases.
Intra-group balances and any unrealised gains and losses or income and
expenses arising from intra-group transactions are eliminated in preparing the
consolidated financial statements.
Business combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other assets
are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the:
fair values of the assets transferred;
liabilities incurred to the former owners of the acquired business;
equity interests issued by the Group;
fair value of any asset or liability resulting from a contingent consideration
arrangement; and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are, with limited exceptions, measured initially at their fair
values at the acquisition date.
Acquisition-related costs are expensed as incurred.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Accounting policies continued
Accounting policies continued
66
The excess of the:
consideration transferred;
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
amount of any non-controlling interest in the acquired entity; and
acquisition-date fair value of any previous equity interest in the
acquired entity.
Over the fair value of the net identifiable assets acquired is recorded as
goodwill. Where settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value as at the
date of exchange. The discount rate used is the entity’s incremental borrowing
rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified as a financial liability. Amounts classified
as a financial liability are subsequently remeasured to fair value with changes in
fair value recognised in profit or loss.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the statement of financial position date
are translated at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income statement.
Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date
of the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated at foreign exchange rates
ruling at the date the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on consolidation, are translated at foreign exchange rates
ruling at the statement of financial position date.
The revenues and expenses of foreign operations are translated at an average
rate for the year where this rate approximates to the foreign exchange rates
ruling at the dates of the transactions.
Exchange differences arising from the translation of foreign operations, and of
related qualifying hedges, are taken directly to the translation reserve. They are
released into the income statement upon disposal.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group’s interest in the fair value of the identifiable
assets and liabilities of the subsidiary or associated undertaking at the date
of acquisition.
Goodwill is recognised as an asset and is not amortised but is reviewed for
impairment at least annually on the basis of its value in use. Any impairment is
recognised immediately through the income statement and is not subsequently
reversed. Impairment losses recognised are allocated first to reduce the
carrying value of the goodwill the business relates to, and then to reduce the
carrying value of the other assets of that business on a pro-rata basis.
Annual impairment reviews of goodwill are undertaken and are determined
from value in use calculations for each cash generating unit (“CGU”) using
cash flow projections based on the latest three-year plan approved by the
Board. The key assumptions for the value in use calculations are those
regarding discount rates, growth rates and expected changes to selling prices
and direct costs during the period and are consistent with external sources of
information and the Board's view of long-term growth. Cash flows beyond the
period of the projections are extrapolated at growth rates that do not exceed
the long-term average growth rate for the relevant countries. The discount
rate applied to the cash flow forecasts for each CGU is based on a market
participant’s pre-tax weighted average cost of capital of between 12.4% to
16.4%, dependant on the CGU being assessed (2020: 12%).
On disposal of a subsidiary or associated undertaking, the attributable amount
of goodwill is included in the determination of the profit or loss on disposal.
Research and development
Research and development and related product development costs are charged
to the income statement in the year in which they are incurred unless they
are specifically chargeable to and recoverable from customers under agreed
contract terms or the expenditure meets the criteria for capitalisation.
Where the expenditure relates to the development of a new product for which
the technical feasibility and commercial viability of the product is identified,
where development costs can be measured reliably and where future economic
benefits are probable, development costs are capitalised and amortised over
their useful economic lives, up to a maximum of five years. The expenditure
capitalised includes costs of materials, direct labour and an appropriate
proportion of overheads. Such intangible assets are assessed for indicators
of impairment at least annually and any impairment is charged to the
income statement.
Other intangible assets
Other intangible assets are valued at cost less accumulated amortisation and
impairment charges and amortised on a straight-line basis over their estimated
useful economic life which is set on an item by item basis. All intangible assets
are tested for indicators of impairment at least annually and any impairment is
charged to the income statement.
The estimated useful economic lives of the Group's intangible assets are as follows:
Acquired intangible assets – 8 to 10 years
– 8 to 10 years
Product development
– 5 years
Software development
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
67
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less
accumulated depreciation and any provision for impairment in value.
Depreciation is provided on a straight-line basis to write off the cost, less the
estimated residual value, of property, plant and equipment over its estimated
useful life.
The annual depreciation rates used are as follows:
Freehold land
– nil
Freehold buildings
– 3% on cost or deemed cost
Leasehold property
– over life of lease
– 8% to 25%
Plant and machinery
Fixtures, fittings and vehicles – 10% to 33%
The carrying value of property, plant and equipment is reviewed at least
annually for indicators of impairment. Any change in value arising from
impairment is charged or credited (up to the carrying value prior to any previous
impairment) to the income statement for the year.
The useful lives and residual value of the Group's fixed assets are reviewed at
least annually.
Certain items of property that had been revalued to fair value on or prior to
1 January 2004, the date of transition to IFRS, are measured on the basis of
deemed cost, being the revalued amount at the date of the revaluation.
Investment property
Investment property, which is property held to earn rentals and/or for capital
appreciation, is stated at cost. Depreciation is based on cost less residual
value over its estimated useful life. Where the expected residual value exceeds
cost no depreciation is provided. Investment property is valued annually for
monitoring purposes only.
Investments
Investments in subsidiary undertakings are held at cost less provision for
any impairment in value. The carrying value of investments in subsidiary
undertakings are reviewed at least annually for indicators of impairment.
Revenue and contracts
Revenue
Revenue represents income derived from contracts for the provision of goods
and services by the Group and its subsidiary undertakings to customers in
exchange for consideration in the ordinary course of the Group’s activities.
Revenue is recognised in the Consolidated Income Statement when the
performance obligations in the contract with the customer are met.
Performance obligations
A proportion of the Group’s contracts recognised over time comprise a
variety of promises within the contracts, including, but not limited to, design
and engineering, procurement, machinery testing, delivery, installation and
commissioning and after sales services.
Under IFRS 15, the Group must evaluate the separability of the promised goods
or services based on whether they are ‘distinct’. A promised good or service is
‘distinct’ if both:
the customer benefits from the item either on its own or together with other
readily available resources; and
it is separately identifiable (i.e. the Group does not provide a significant
service integrating, modifying or customising it.)
It is the Group’s judgement that the vast majority of promises included within
contracts to customers are not distinct because a customer cannot benefit
from certain promises being fulfilled without others; therefore, promises are
bundled into set performance obligations. For the majority of contracts,
design, procurement, engineering and manufacture are considered to be
one performance obligation, installation and commissioning are considered
to be one performance obligation and after sales contracts are generally
negotiated and entered into at a later date and considered to be a separable
performance obligation.
Where contracts include more than one performance obligation, the transaction
price is allocated on a relative stand-alone selling price basis. The stand-alone
selling price is normally determined based on the observable price of a good
or service when the Group sells that good or service separately in similar
circumstances and to similar customers. If an observable price is not available,
the stand-alone selling price is determined based on an expected cost plus
margin approach.
Transaction price
At the start of the contract, the total transaction price is estimated as the
amount of consideration to which the Group expects to be entitled in exchange
for transferring the promised goods and services to the customer, excluding
sales taxes. The transaction price does not include estimates of consideration
resulting from contract modifications, such as change orders, until they have
been approved by the parties to the contract.
The transaction price is calculated after taking into account variable
consideration. Variable consideration includes, but is not limited to rebates
and penalties.
In determining the transaction price, variable consideration linked to potential
penalties or rebates arising under the terms of a contract is included only to
the extent it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur when the uncertainty associated
with the variable consideration is subsequently resolved. Variable consideration
is estimated using the “most likely amount” method.
Product warranties are included as part of the standard terms and conditions of
the majority of contracts; however, are not sold separately and; therefore, do not
constitute a separate performance obligation. Product warranty provisions are
accounted for based on historical data and a weighting of all possible outcomes
against their associated possibilities.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
68
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Accounting policies continued
Accounting policies continued
Revenue and profit recognition
Revenue is recognised as performance obligations are satisfied as control of
the goods and services is transferred to the customer. For each performance
obligation within a contract, the Group determines whether it is satisfied over
time or at a point in time. Performance obligations are satisfied over time if one
of the following criteria is satisfied:
the customer simultaneously receives and consumes the benefits provided
by the Group’s performance as it performs;
the Group’s performance creates or enhances an asset that the customer
controls as the asset is created or enhanced; or
the Group’s performance does not create an asset with an alternative use
to the Group and it has an enforceable right to payment for performance
completed to date.
With the exception of the supply of spare parts, installation services and certain
other service-based contracts, all of Mpac’s contracts are accounted for over
time. Supply of spare parts and installation services are recognised once the
supply or service is complete. Those recognised over time satisfy the third
criteria, above.
For each performance obligation to be recognised over time, the Group
recognises revenue using an input method, based on labour hours incurred
in the period. Labour hours have been selected as the most faithful depiction
of progress (and hence the transfer of goods and services) as this most
accurately reflects how Mpac provides value to the customer. Mpac delivers
innovative, efficient, and technically robust solutions, with the time allocated
to projects of Mpac engineers and technicians being the main driver to
bring projects to fruition. Material costs incurred are not considered to be
proportionate to the Group’s progress in satisfying progress on contracts for
which revenue is recognised over time and therefore revenue in respect of
materials is recognised at an amount equal to the cost of good used to
satisfy the performance obligation. Material costs are recognised on
contracts as incurred.
Revenue and attributable margin are calculated by reference to reliable
estimates of the total labour hours and labour hours to be incurred, after
making suitable allowances for technical and other risks. Revenue and
associated margin are therefore recognised progressively as labour hours are
incurred, and as risks have been mitigated or retired. The Group has determined
that this method faithfully depicts the Group’s performance in transferring
control of the goods and services to the customer.
If the over time criteria for revenue recognition are not met, revenue is
recognised at the point in time that control is transferred to the customer,
which is usually when legal title passes to the customer and the business has
the right to payment, for example, on delivery.
Contract modifications
The Group’s contracts are often amended for changes in customers’
requirements and specifications. A contract modification exists when the
parties to the contract approve a modification that either changes existing
or creates new enforceable rights and obligations. The effect of a contract
modification on the transaction price and the Group’s measure of progress
towards the satisfaction of the performance obligation to which it relates is
recognised in one of the following ways:
1. prospectively as an additional, separate contract;
2. prospectively as a termination of the existing contract and creation of a
new contract; or
3. as part of the original contract using a cumulative catch-up.
The majority of the Group’s contract modifications are treated under 3 (for
example, a change in the specification of the distinct goods or services for a
partially completed contract), although the facts and circumstances of any
contract modification are considered individually as the types of modifications
will vary contract-by-contract and may result in different accounting outcomes.
Costs to obtain a contract
The Group does not typically incur costs to obtain contracts that it would not
have incurred had the contracts not been awarded, such as sales commission.
Costs to fulfil a contract
Contract fulfilment costs in respect of over time contracts are expensed as
incurred. Contract fulfilment costs in respect of point in time contracts are
accounted for under IFRS 15.95 and are recognised as contract fulfilment
assets providing they:
are not within the scope of other standards;
relate directly to a contract (or an anticipated contract);
generate or enhance resources that will be used in satisfying performance
obligations in the future; and
are expected to be recovered from the customer.
Contract fulfilment assets are expensed at the point the corresponding revenue
is recognised.
Where assets have been recognised in respect of costs to fulfil a contract,
these are tested for impairment under IFRS 15.
Contract assets
A contract asset is a right to consideration conditional on something other than
the passage of time. Contract assets are tested for impairment under IFRS 9.
Contract liabilities
The contract liabilities represent the obligation to transfer goods or services to
a customer for which consideration has been received, or consideration is due,
from the customer.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
69
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Inventories
Inventories includes raw materials, work in progress and finished goods
recognised in accordance with IAS 2 in respect of contracts with customers
which have been determined to fulfil the criteria for point in time revenue
recognition under IFRS 15. Inventories are stated at the lower of cost, including
all relevant overhead expenditure, and net realisable value.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term fixed
deposits, and for the statements of cash flows they also include bank
overdrafts. Short-term deposits all have a maturity of less than 3 months
from the date of acquisition.
Share capital
When share capital is repurchased, the amount of consideration paid, including
directly attributable costs, is recognised as a change in equity. Repurchased
shares are classified as treasury shares and presented as a deduction from
total equity.
Preference share capital is classified as a liability as dividend payments are
not discretionary.
Dividends on the preference shares are disclosed as interest charges, are
recognised as a liability and are accounted for on an accruals basis. Dividends
on ordinary shares are only recognised in the period in which they are paid.
Financial instruments
IFRS 9 Financial instruments requires the classification of financial instruments
into different types for which the accounting requirement is different. The
Group has classified its financial instruments as follows:
short-term fixed deposits, principally comprising funds held with banks and
other financial institutions;
trade and other receivables are held at amortised cost;
trade and other payables are held at amortised cost;
borrowings are classified as other liabilities held at amortised cost; and
derivatives, comprising forward foreign exchange contracts and the deferred
contingent consideration on acquisition are classified as instruments with fair
value through profit or loss.
Financial instruments are initially measured at fair value. Their subsequent
measurement depends on their classification:
loans and receivables and other liabilities are held at amortised cost; and
instruments that are measured at fair value through profit or loss. Changes
in fair value are included in the income statement unless the instrument is
included in a cash flow hedge.
The Group applies cash flow hedge accounting to forward foreign exchange
contracts, held to reduce the exposure to movements in the future value of
foreign currency receipts and payments.
For those contracts included in an effective cash flow hedging relationship,
changes in the fair value of the hedging instrument are recognised in other
comprehensive income and taken to equity. When the hedged forecast
transaction occurs, amounts previously recorded in equity are recognised in the
income statement. Any ineffectiveness in the hedging arrangement is included
in the income statement.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade and other
receivables as well as contract assets, recording the loss allowance as lifetime
expected credit losses. These are the expected shortfalls in contractual cash
flows, considering the potential for default at any point during the life of the
financial instrument. In calculating the lifetime credit losses, the Group uses
its historical experience, external indicators and forward looking information to
calculate the expected losses. Refer to note 26 for further details.
Post-retirement and other employee benefits
The Group and Company account for pensions and other post-retirement
benefits under IAS 19 Employee benefits.
For defined benefit schemes, the net obligation is calculated separately for
each scheme by estimating the amount of future benefits that employees have
earned in return for their service in the current and prior periods. The benefit
is discounted to determine its present value, and the fair value of the schemes’
assets (at bid price) is deducted. The liability discount rate is either the yield
at the statement of financial position date on AA credit rated bonds that have
maturity dates approximating to the terms of the obligations or by a cash flow
matching method reflecting the duration of the liabilities, whichever more
accurately reflects the schemes’ pattern of cash flows. The calculations are
performed by qualified actuaries using the projected unit credit method. The
expense of administering the pension schemes and financing income/expense
of the schemes are recognised in the income statement. Past service costs/
credits and curtailment costs/credits are recognised in the periods in which
they arise. Actuarial gains and losses are recognised in the period in which they
arise in other comprehensive income.
Payments to defined contribution schemes are charged to the income
statement as incurred.
The net obligation in respect of long-term service benefits, other than pension
plans, is the amount of the future benefit that employees have earned in return
for their service in the current and prior periods. Obligations are measured at
their present value.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
70
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Accounting policies continued
Accounting policies continued
Share-based payments
The Group has applied the requirements of IFRS 2 Share- based payments.
The Group issues equity-settled share-based payments to certain employees.
These are measured at their fair value at the date of grant and are expensed
on a straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest, and adjusted for the effect of non-
market related conditions.
Charges made to the income statement in respect of share-based payments
are credited to retained earnings.
Provisions
A provision is recognised when the Group has a legal or constructive obligation
as a result of a past event and it is probable that an outflow of economic
benefits will be required to settle the obligation.
Interest receivable
Interest receivable is recognised in the income statement using the effective
interest method as defined in IFRS 9 Financial instruments.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets are added to the cost of those assets.
All other borrowing costs are recognised in the income statement in the period
in which they are incurred.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is
recognised in the income statement except to the extent that it relates to items
recognised in other comprehensive income, in which case it is recognised in the
statements of comprehensive income, or to items recorded directly in equity in
which case it is recorded directly in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the statement of financial
position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of
taxable profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill; the initial
recognition of other assets and liabilities that affect neither the taxable profit nor
the accounting profit; and differences relating to investments in subsidiaries to
the extent that they will probably not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised based on tax laws and
rates that have been enacted or substantively enacted at the balance sheet
date. Deferred tax is charged or credited to the income statement, except when
it relates to items charged or credited in other comprehensive income, in which
case the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
Government grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions. Government grants relating to costs are deferred
and recognised in profit or loss over the period necessary to match them with
the costs that they are intended to compensate. The Group continued to benefit
from a number of Covid-related grants in the course of 2021; albeit to a much
lower degree than 2020, including the ‘Coronavirus Job Retention Scheme’ in
the UK and the equivalent schemes in the countries in which it operates. No
deferred amounts remained at 31 December 2021 (31 December 2020: £nil).
Operating segments
An operating segment is a component of the Group that is engaged in business
activities from which it may earn revenues and incur expenses, and for which
discrete financial information is available. All operating segments’ results are
regularly reviewed by the Group’s chief operating decision maker, which is the
Board of Directors, in order to assess performance and make decisions about
the allocation of resources to each segment.
Errors
Where errors are discovered in respect of prior periods, adjustments are
made in accordance with IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors and revised statements are presented as required.
Where adjustments are made, the heading at the top of the note will state
‘Restated’ and a separate note detailing the nature, amount of correction and a
reconciliation between the balances provided. Where appropriate, a statement
of financial position for the opening position will be presented.
25 Corporate governance46 Financial statements
Notes to the accounts
1. Revenue and operating segments
All revenue information is prepared in accordance with the Group accounting policies shown on pages 64 to 70.
The following is a description of the principal activities, separated by reportable segments, from which the Group generates its revenue. The Board identifies the
reportable segments as the ones for which it regularly reviews financial information to assess their performance and make decisions around strategy and resource
allocation.
Original Equipment (”OE”)
The OE segments of the Group principally generate revenue from the make, pack and test of high-speed packaging solutions, first-of-a-kind machinery and high
specification automation, secondary packaging equipment and at line instrumentation solutions. The typical length of a contract for OE Equipment is 4 to 12
months. The contracts are accounted for over time unless the installation and commissioning consideration of the contact is a distinct performance obligation
that could be undertaken by a third party, in which case the contract is disaggregated with the equipment consideration recognised over time and the installation
consideration is recognised at a point in time. Where contracts are recognised over time, the consideration recognised is based on an estimate of labour costs
completed at the statement of financial position date as a proportion of total expected labour costs for the contract.
Service
The Service segment of the Group generates revenue from sales of spare parts and providing service engineers and support staff to customers enabling them
to maximise the benefits of their high-speed packaging solutions, first-of-a-kind machinery and high-specification automation, secondary packaging equipment,
end-of-line robotics and at line instrumentation solutions. Service contracts are usually short-term contracts and either have a fixed price or are based on time
and materials.
The Group’s revenue reflects the basis of the Group’s management and internal reporting structure. A commentary on the performance of the operating segments
during the year is provided in the Operating review on pages 11 to 15.
In the following table, revenue is disaggregated by primary geographical market, major product lines, sector and timing of revenue recognition.
Disaggregation of revenue
Sector
Pharmaceutical
Healthcare
Food and beverage
Other
Total
Timing of revenue recognition
Products and services transferred at a point in time
Products and services transferred over time
Total
2021
£m
3.7
29.2
45.3
16.1
94.3
19.3
75.0
94.3
2020
£m
3.9
37.7
34.8
7.3
83.7
23.4
60.3
83.7
The Group disaggregates revenue of OE and Service, together with the regional split, Americas, EMEA and Asia Pacific.
Information regarding the results of each operating segment is included overleaf. Performance is measured based on underlying segment gross profit. Unallocated
items comprise distribution and administrative expenditure. The unallocated items are excluded from segment profit or loss as they are not region specific.
Mpac Group plc
Annual Report & Accounts 2021
71
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
72
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notes to the accounts continued
1. Revenue and operating segments continued
The measurement of segment assets and liabilities excludes central items that are not allocated to the regions. Unallocated items comprise mainly of goodwill and
acquired intangible assets, net debt/funds (excluding the lease liabilities), pension assets/liabilities, taxation balances and net liabilities attributable to the Group’s
Head Office.
Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one period.
Segment information
Revenue
Americas
EMEA
Asia Pacific
Total
Gross profit
Selling, distribution and administration
Underlying operating profit
Unallocated non-underlying items included
in operating profit
Operating profit/(loss)
Net financing expense
Profit/(loss) before tax
OE
£m
53.4
17.4
3.3
74.1
20.3
2021
Service
£m
9.9
9.3
1.0
20.2
8.6
Americas
EMEA
Asia
Total
Unallocated net assets
Total net assets
* see note 34 for further details of the prior year restatement
Segment
assets
36.9
28.7
0.5
64.3
2021
Segment
liabilities
(22.2)
(25.2)
(0.3)
(45.9)
Total
£m
63.3
26.7
4.3
94.3
28.9
(20.1)
8.8
(0.5)
8.3
(0.1)
8.2
Segment
net assets
14.7
3.5
0.2
18.4
47.0
65.4
OE
£m
36.2
23.7
4.2
64.1
15.3
2020
Service
£m
10.5
7.6
1.5
19.6
9.0
Segment
assets
28.2
30.7
0.5
59.4
2020 Restated*
Segment
liabilities
(20.7)
(26.6)
(0.2)
(47.5)
Total
£m
46.7
31.3
5.7
83.7
24.3
(17.8)
6.5
(3.6)
2.9
–
2.9
Segment
net assets
7.5
4.1
0.3
11.9
34.3
46.2
25 Corporate governance46 Financial statements
1. Revenue and operating segments continued
Geographical information
Revenue
UK
Europe (excl. UK)
Africa and Middle East
USA
Americas (excl. USA)
Asia Pacific
Non-current assets (excluding taxation balances)
UK
Canada and USA
Rest of the world
2021
£m
7.7
17.2
0.7
56.9
7.2
4.6
94.3
By location of customer
2021
%
8
18
1
61
7
5
100
2020
£m
9.7
19.2
2.8
34.5
12.3
5.2
83.7
By location of assets
2021
£m
50.1
15.7
5.8
71.6
2020
%
12
23
3
41
15
6
100
2020
£m
35.2
13.2
2.9
51.3
2. Major customers
In 2021, the Group generated 16.7% (2020: 24.5%) of revenue from two customers. The most significant customer accounted for 10.0% (2020: 14.8%) of Group
revenue. The sales constituted both equipment and Service, and were spread across a number of different geographic regions.
3. Other operating expenses
Research and development costs (expensed as incurred)
2021
£m
0.9
2020
£m
1.1
Mpac Group plc
Annual Report & Accounts 2021
73
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
74
Notes to the accounts continued
4. Operating profit
Operating profit is arrived at after charging/(crediting):
Amortisation of software and product development (Note 12)
Depreciation of owned assets (Note 13)
Depreciation of right of use assets (Note 27)
Employee benefits (Company £2.1m; 2020: £2.2m) (Note 6)
Cost of inventories recognised as an expense
Government grants
(Profit)/loss on sale of fixed assets (Note 13)
Distribution and transport costs
Operating lease charges
Sales, marketing and office expenses
Product development expensed
Administrative expenses
Foreign exchange differences
Non-underlying release of deferred contingent consideration (Note 5)
Non-underlying amortisation of acquired intangible assets (Note 12)
Non-underlying profit on sales of fixed assets (Note 5)
Other non-underlying items (Note 5)
Fees payable to the Company’s auditor for the audit of the Company’s annual Financial Statements
Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries pursuant to legislation
Other fees paid to the current auditor
– audit related assurance services*
– taxation compliance services**
* Audit related assurance services include £31,000 (2020: £15,000) for the review of the half-year report.
** Taxation compliance services include £22,000 (2020: £34,000) for the provision of taxation compliance services.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
5. Non-underlying items
Non-underlying items
Acquisition costs
Reorganisation costs
Amortisation of acquired intangible assets
Profit on disposal of Coventry facility
Defined benefit pension scheme – Past service cost from GMP equalisation
Defined benefit pension schemes administration costs
Release of deferred contingent consideration
Total non-underlying operating expenditure
Interest on deferred and contingent acquisition consideration
Net financing income on pension scheme balances
Total non-underlying expense before tax
Deferred tax on pension scheme past service costs
Deferred tax on acquisition related intangibles and unused tax losses
Total non-underlying expense after tax
* see note 34 for further details of the prior year restatement
2021
£m
0.6
0.9
0.9
29.0
32.0
(0.4)
0.1
1.3
1.0
5.5
0.9
13.3
–
(2.4)
1.6
(0.3)
1.6
0.1
0.3
–
–
2020
£m
0.3
1.1
0.9
25.9
38.3
(2.4)
–
0.9
0.9
5.6
1.1
7.6
–
–
1.6
–
2.0
0.1
0.2
0.1
–
2021
£m
2020 Restated*
£m
(0.4)
–
(1.6)
0.3
–
(1.2)
2.4
(0.5)
(0.1)
0.2
(0.4)
0.3
–
(0.1)
(0.4)
(0.5)
(1.6)
–
(0.2)
(0.9)
–
(3.6)
(0.1)
0.3
(3.4)
0.1
1.2
(2.1)
25 Corporate governance46 Financial statements
5. Non-underlying items continued
The Group uses alternative performance measures (“APMs”), in addition to those reported under IFRS, as management believe these measures enable the users
of financial statements to assess the underlying trading performance of the business. The APMs used include underlying operating profit, underlying profit before
tax and underlying earnings per share. These measures are calculated using the relevant IFRS measure as adjusted for non-underlying income/(expenditure)
listed above. No Covid-related items are considered non-underlying.
6. Employee information
The number of people employed by the Group was:
Americas
EMEA
Asia Pacific
Head Office
Total
The number of people employed by the Company in EMEA was:
Employment costs were:
Wages and salaries
Social security costs
Employee benefits
– defined contribution schemes
– equity-settled share-based transactions
Period end
2021
147
302
13
14
476
Period end
2021
14
Group
2021
23.8
3.2
1.7
0.3
29.0
2020
132
316
13
11
472
2020
11
2020
20.7
3.0
1.8
0.4
25.9
Average
2021
139
302
13
12
466
Average
2021
12
Company
2021
1.4
0.2
0.2
0.3
2.1
2020
103
327
13
11
454
2020
11
2020
1.3
0.3
0.2
0.4
2.2
The costs of the defined benefit pension schemes are disclosed in note 24.
£0.2m of employment costs were capitalised in the year in relation to product development, see note 12 for more information.
7. Emoluments of Directors and interests in shares
Information on the emoluments of the Directors (page 37), together with information regarding the beneficial interests of the Directors and persons connected
with them in the ordinary shares of the Company, is included in the Remuneration report on pages 37 to 38.
Mpac Group plc
Annual Report & Accounts 2021
75
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
76
Notes to the accounts continued
8. Net financing income
Financial income:
Amounts receivable on cash and cash equivalents
Net interest received on pension scheme balances
Financial expenses:
Preference dividends paid
Interest on deferred contingent consideration
Lease interest (IFRS 16)
Net financing income
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Net interest received on pension scheme balances and interest on deferred consideration is included in non-underlying items.
9. Taxation
Tax charge/(credit):
Current tax
Deferred tax
Total
Included within the total taxation is a tax credit of £0.2m (2020: £0.4m) attributable to the non-underlying items set out in note 5.
Reconciliation of effective tax rate
Profit before tax
Income tax using the UK corporation tax rate of 19.00% (2020: 19.00%)
Research & development tax credits
Deferred tax movements on acquired intangible asset amortisation from increased future tax rate
Non-taxable release of deferred contingent consideration
Deferred tax movements on pension payments
Change in recognised deferred tax assets
Change in unrecognised deferred tax assets
Foreign tax charged at higher rates than UK corporation tax rate
Total charge/(credit)
* See note 34 for further details of the prior year restatement.
2021
£m
–
0.2
0.2
(0.1)
(0.1)
(0.1)
(0.3)
(0.1)
2020
£m
–
0.3
0.3
(0.1)
(0.1)
(0.1)
(0.3)
–
2021
£m
2020 Restated*
£m
0.4
–
0.4
2021
£m
8.2
1.5
(0.4)
0.4
(0.4)
(0.3)
(0.4)
(0.2)
0.4
0.4
0.6
(1.9)
(1.3)
2020 Restated*
£m
2.9
0.6
(0.1)
–
–
–
(1.0)
(1.1)
0.3
(1.3)
The main rate of UK corporation tax is 19% (2020: 19%) as enacted in the Finance Act 2021. The rate of deferred tax liability arising from the surplus in respect of
the UK defined benefit pension scheme is 35%.
In view of probable timing of the utilisation of brought forward losses, deferred tax assets have not been recognised on tax losses and timing differences in respect
of the Group companies in the UK and the USA.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
77
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
9. Taxation continued
Factors that may affect future tax charges
The Finance Act 2021 increased the main rate of corporation tax to 25% from 1 April 2023. Closing deferred tax balances have therefore been valued at 19% or 25%
(2020: 19%) depending on the date they expect to fully unwind, except for deferred tax on the defined benefit pension scheme, which has been valued at 35%.
Deferred tax charge/(credit) on items in other comprehensive (expense)/income
Arising from actuarial gains/(losses)
2021
£m
7.9
2020
£m
(2.2)
10. Current tax assets and liabilities
Current tax assets of £0.6m (2020: £0.8m) and current tax liabilities of £0.7m (2020: £0.4m) for the Group, and current tax assets of £nil (2020: £nil) for the
Company, represent the amount of income taxes recoverable and payable in respect of current and prior periods.
11. Earnings per share
Basic earnings/(loss) per ordinary share
The calculation of basic earnings/(loss) per ordinary share is based upon the profit for the year of £7.8m (2020 restated: £4.2m) and the weighted average number
of ordinary shares in issue during the year. The weighted average number of shares excludes shares held by the employee trust in respect of the Company’s
deferred share plan arrangements.
Diluted earnings per ordinary share
The calculation of diluted earnings per ordinary share is based upon the profit for the year of £7.7m (2020 restated: £4.2m) and the diluted weighted average
number of ordinary shares in issue during the year. The calculation of diluted earnings per ordinary share from continuing activities is based upon the profit for
the period from continuing activities of £7.8m (2020: £4.2m). For diluted earnings per ordinary share, the weighted average number of shares includes the diluting
effect, if any, of own shares held by the employee trust.
Weighted average number of ordinary shares (non-diluted) at 31 December
Effect of own shares and shares conditionally granted under the LTIP
Weighted average number of ordinary shares (diluted) at 31 December
2021
19,920,895
531,118
20,452,013
2020
19,955,307
589,920
20,545,227
Underlying and diluted underlying earnings per share
Underlying earnings per ordinary share and diluted underlying earnings per ordinary share, which are calculated on profit before non-underlying items, amounted
to 39.7p (2020: 31.4p) in respect of underlying earnings per share and 38.6p (2020: 31.2p) in respect of diluted underlying earnings per share.
The calculations of underlying earnings per ordinary share and diluted underlying earnings per ordinary share are based upon an underlying profit for the period of
£7.9m (2020: £6.3m) which is calculated as follows:
Profit for the period
Non-underlying items (net of tax)
Underlying profit for the period
* see note 34 for further details of the prior year restatement
2021
£m
7.8
0.1
7.9
2020 Restated*
£m
4.2
2.1
6.3
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
78
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notes to the accounts continued
12. Intangible assets
Cost:
Balance at 1 January 2020
Additions
Reclassification
Retranslation
Balance at 31 December 2020
Additions
Disposals
Reclassification
Retranslation
Balance at 31 December 2021
Amortisation and impairment losses:
Balance at 1 January 2020
Amortisation for the period
Reclassification
Retranslation
Balance at 31 December 2020
Amortisation for the period
Disposals
Reclassification
Retranslation
Balance at 31 December 2021
Carrying amounts:
At 31 December 2020
At 31 December 2021
Group
Acquired
intangible
assets
£m
Product
develop-
ment
£m
Software
develop-
ment
£m
Assets
under
construction
£m
Goodwill
£m
5.7
7.9
–
(0.4)
13.2
–
–
–
–
13.2
–
–
–
–
–
–
–
–
–
–
10.5
2.6
–
–
13.1
–
–
–
–
13.1
0.9
1.6
–
–
2.5
1.6
–
–
–
4.1
13.2
13.2
10.6
9.0
4.1
0.6
–
0.1
4.8
0.2
(1.2)
–
–
3.8
3.1
0.2
–
0.1
3.4
0.2
(1.2)
–
0.1
2.5
1.4
1.3
–
1.2
1.6
–
2.8
–
–
–
–
2.8
–
0.1
0.5
–
0.6
0.4
–
–
–
1.0
2.2
1.8
0.6
–
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Software
develop-
ment
£m
Company
Assets
under
construction
£m
Total
£m
–
1.2
0.6
–
1.8
–
–
–
–
1.8
–
0.1
–
–
0.1
0.4
–
–
–
0.5
1.7
1.3
0.6
–
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
1.2
–
–
1.8
–
–
–
–
1.8
–
0.1
–
–
0.1
0.4
–
–
–
0.5
1.7
1.3
Total
£m
20.9
12.3
1.0
(0.3)
33.9
0.2
(2.0)
–
–
32.9
4.0
1.9
0.5
0.1
6.5
2.2
(2.0)
–
0.1
7.6
27.4
25.3
The amortisation for development costs is included in cost of sales in the consolidated income statement.
The carrying amounts of goodwill are £5.7m in respect of Mpac Lambert (acquired in 2019) and £7.5m in respect of Switchback Group (acquired in 2020). The
Group tests goodwill at least annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the goodwill have been determined based on value in use calculations, using cash flow projections from the Group's mid-range
plan, the key assumptions included within this mid-range plan that affect the value in use calculations are revenue growth, margin growth and working capital
requirements. These assumptions have been sensitised (as per Investments – note 15) as part of current year testing.
The discount and growth rates within these assumptions are estimated using a pre-tax weighted-average cost of capital (“WACC”) that are indicative of current
market assessments of the time value of money, based on risks specific to the market in which the Group operates. The primary reasons for differences in the
rates between the CGUs are the differences in underlying risk-free rates and cost of debt across the geographical regions in which the Group’s CGUs are located.
The calculation uses pre-tax cash flow projections from the 3 year mid-range plan for the period ending 31st December 2024. At the end of the discrete budget
period, a terminal value is calculated based on terminal growth rate assumptions for each CGU. The WACC and terminal growth rates assessed for each CGU are
12.4% & 2.0% for the UK and 12.9% & 2.0% for the Americas, respectively. With respect to the Mpac Lambert CGU, the recoverable amount exceeds the carrying
value of the assets by £1.8m at 31 December 2021. A reasonably possible reduction in revenue growth in 2023 and 2024 from 10% to 6% would reduce the
recoverable amounts to £nil. A reasonably possible decrease in the operating margin generated by the CGU in the terminal value calculation from 12% to 11% would
reduce the excess of recoverable amounts to £nil. A reasonably possible increase in the discount rate from 12.4% to 13.5% would reduce the excess of recoverable
amounts to £nil.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
79
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
13. Property, plant and equipment
Cost:
Balance at 1 January 2020
Additions
Disposals
Reclassification
Retranslation
Balance at 31 December 2020
Additions
Disposals
Retranslation
Balance at 31 December 2021
Depreciation:
Balance at 1 January 2020
Charge for the period
Disposals
Reclassification
Balance at 31 December 2020
Charge for the period
Disposals
Balance at 31 December 2021
Carrying amounts:
At 31 December 2020
At 31 December 2021
14. Investment property
Group
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
vehicles
£m
4.1
0.1
–
–
–
4.2
0.5
(2.8)
–
1.9
1.4
0.1
–
–
1.5
0.1
(1.4)
0.2
2.7
1.7
2.9
0.5
(0.3)
–
–
3.1
0.1
(0.3)
–
2.9
1.5
0.3
(0.2)
–
1.6
0.2
(0.3)
1.5
1.5
1.4
5.9
0.6
(0.4)
(1.0)
0.1
5.2
0.9
(1.4)
(0.1)
4.6
4.4
0.7
(0.3)
(0.5)
4.3
0.6
(1.2)
3.7
0.9
0.9
Total
£m
12.9
1.2
(0.7)
(1.0)
0.1
12.5
1.5
(4.5)
(0.1)
9.4
7.3
1.1
(0.5)
(0.5)
7.4
0.9
(2.9)
5.4
5.1
4.0
Company
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
vehicles
£m
2.6
–
–
–
–
2.6
–
(2.6)
–
–
1.0
0.1
–
–
1.1
–
(1.1)
–
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
0.1
(0.4)
–
–
0.2
0.2
–
–
0.4
0.4
–
(0.3)
–
0.1
0.1
–
0.2
0.1
0.2
Balance at 1 January 2020 and 31 December 2020
Balance at 31 December 2021
Group
2021
£m
0.8
0.8
2020
£m
0.8
0.8
Company
2021
£m
0.8
0.8
Total
£m
3.1
0.1
(0.4)
–
–
2.8
0.2
(2.6)
–
0.4
1.4
0.1
(0.3)
–
1.2
0.1
(1.1)
0.2
1.6
0.2
2020
£m
0.8
0.8
Investment property is shown at cost. The fair value of the investment property at 31 December 2021 is £1.0m (2020: £1.1m) and has been arrived at on the basis
of a valuation carried out by independent valuers, Wilks Head & Eve LLP. The valuation, which conforms to International Valuation Standards, was arrived at by
reference to market evidence of transaction prices for similar properties.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
80
Notes to the accounts continued
15. Investments
Cost of shares in subsidiaries
Balance at 1 January
Acquisition of investment
Balance at 31 December
2021
£m
63.8
–
63.8
2020
£m
63.8
–
63.8
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
The Company’s subsidiary undertakings are shown in note 32.
Impairment review of investments
The Group tests the carrying value of investments at least annually or more frequently if there are indications that the value might be impaired.
The recoverable amounts of the carrying value have been determined based on value in use calculations, using cash flow projections from the Group’s mid-range plan,
the key assumptions included within this mid-range plan that affect the value in use calculations are revenue growth, margin growth and working capital requirements.
These assumptions have been prudently sensitised as part of current year testing. The discount and growth rates within these assumptions are estimated using a pre-tax
weighted-average cost of capital (“WACC”) that are indicative of current market assessments of the time value of money, based on risks specific to the market in which
the Group operates. The primary reasons for differences in the rates between the investments are the differences in underlying risk-free rates and cost of debt across
the geographical regions in which the Group’s investments are located. The calculation uses pre-tax cash flow projections from the 3 year mid-range plan for the period
ending 31st December 2024. At the end of the discrete budget period, a terminal value is calculated based on terminal growth rate assumptions for each investment.
The WACC and terminal growth rates assessed for each investment are 12.4% & 2.0% for the UK and 12.9% & 2.0% for the Americas, respectively. With respect to the
investment in Mpac Lambert, the recoverable amount exceeds the carrying value of the investment by £3.8m at 31 December 2021. The combination of a reasonably
possible reduction in revenue growth in 2023 and 2024 from 10% to 6%, a decrease in the operating margin generated by the company in the terminal value calculation
from 12% to 11% and a reasonably possible increase in the discount rate from 12.4% to 13.5% would reduce the excess of recoverable amounts to £nil. No other reasonably
possible changes in assumptions in the value in use calculation would generate any impairment in respect of the other investments held by the Company.
Amounts owed by Group undertakings
Amounts owed by Group undertakings for the Company are not repayable within 12 months of the year end of these financial statements.
A rate of interest of 3.75% has been charged on the loan, resulting in an interest receivable of £0.4m in the year for the Company.
16. Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Group
Employee benefits
Tax losses
Acquired intangible assets
Deferred tax assets/(liabilities)
Net deferred tax assets/(liabilities)
Company
Employee benefits
Deferred tax liabilities
Net deferred tax liabilities
2021
£m
–
3.4
–
3.4
3.4
Assets
2021
£m
–
–
–
2020 *Restated
£m
–
3.5
–
3.5
3.5
2020
£m
–
–
–
2021
£m
(12.5)
–
(2.0)
(14.5)
(14.5)
Liabilities
2021
£m
(12.5)
(12.5)
(12.5)
2020 Restated*
£m
(4.9)
–
(1.8)
(6.7)
(6.7)
2020
£m
(4.9)
(4.9)
(4.9)
Net
2021
£m
(12.5)
1.4
–
(11.1)
(11.1)
Net
2021
£m
(12.5)
(12.5)
(12.5)
2020 Restated*
£m
(4.9)
1.7
–
(3.2)
(3.2)
2020
£m
(4.9)
(4.9)
(4.9)
Deferred tax is measured at the rates that are expected to apply in the period when the temporary differences are expected to reverse, based on tax rates and
laws that have been enacted or substantively enacted by the statement of financial position date.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries and associates. As the earnings are continually reinvested by the Group, no tax
is expected to be payable on them in the foreseeable future.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
81
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
16. Deferred tax assets and liabilities continued
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of temporary differences arising in certain subsidiary companies.
These assets are only recognised to the extent that it is probable that taxable profits will be available against which the deferred tax asset can be utilised. At the year
end, the Group had £3.1m of unrecognised deferred tax assets (2020: £4.6m) and the Company had £2.1m of unrecognised deferred tax assets (2020: £1.2m) which
would become recoverable if the relevant companies were to make sufficient profits in the future. Under current tax legislation, these tax assets expire as follows:
Expiry
10 to 20 years
No expiry date
Movement in temporary differences during the year
Group
Employee benefits
Corporation tax losses
Investment tax credits
Acquired intangible assets
Group - Restated*
Employee benefits
Tax losses
Investment tax credits
Acquired intangible assets
Company
Employee benefits
Company
Employee benefits
* see note 34 for further details of the prior year restatement
Group
2021
£m
–
3.1
3.1
2020 Restated*
£m
–
4.6
4.6
Balance at
1 January
2021
£m
(4.9)
2.9
0.7
(1.9)
(3.2)
Balance at
1 January
2020
£m
(7.2)
1.3
1.3
(1.6)
(6.2)
Recognised in
profit or loss
£m
0.3
–
–
(0.1)
0.2
Recognised in
profit or loss
£m
0.1
1.6
–
0.2
1.9
Recognised
in other
comprehensive
income/(expense)
£m
(7.9)
–
–
–
(7.9)
Recognised
in other
comprehensive
income/(expense)
£m
2.2
–
–
–
2.2
Investment tax
credits utilised
–
–
(0.2)
–
(0.2)
Investment tax
credits utilised
–
–
(0.6)
–
(0.6)
Recorded on
acquisition
£m
–
–
–
–
–
Recorded on
acquisition
£m
–
–
–
(0.5)
(0.5)
Balance at
1 January
2021
£m
(4.9)
(4.9)
Balance at
1 January
2020
£m
(7.2)
(7.2)
Recognised in
profit or loss
£m
0.3
0.3
Recognised in
profit or loss
£m
0.1
0.1
Recognised
in other
comprehensive
income/(expense)
£m
(7.9)
(7.9)
Recognised
in other
comprehensive
income/(expense)
£m
2.2
2.2
Balance at
31 December
2021
£m
(12.5)
2.9
0.5
(2.0)
(11.1)
Balance at
31 December
2020
£m
(4.9)
2.9
0.7
(1.9)
(3.2)
Balance at
31 December
2021
£m
(12.5)
(12.5)
Balance at
31 December
2020
£m
(4.9)
(4.9)
46 Financial statements25 Corporate governance
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Mpac Group plc
Annual Report & Accounts 2021
82
Notes to the accounts continued
17. Inventories
Work in progress
Finished goods
Group
2021
£m
0.6
4.9
5.5
2020
£m
0.9
2.6
3.5
Company
2021
£m
–
–
–
2020
£m
–
–
–
2020
£m
–
–
–
An amount of £0.5m (2020: £0.1m) has been charged in the year in respect of inventory write-downs.
18. Contract assets & liabilities; contract fulfilment assets
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers traded over time.
Receivables, which are included in ‘Trade and other receivables’
Contract assets
Contract liabilities
Group
2021
£m
11.4
12.7
(17.5)
2020
£m
6.8
8.5
(18.2)
Company
2021
£m
–
–
–
Revenue recognised which is included in the contract liability balance at the
beginning of the period
Increases due to cash received, excluding amounts recognised as revenue during
the period
Transfers from contract assets recognised at the beginning of the period to
receivables
Increases as a result of changes recognised in the measure of progress
Group
Contract
assets
Contract
liabilities
Company
Contract
assets
Contract
liabilities
–
–
(8.5)
12.7
18.2
(17.5)
–
–
–
–
–
–
–
–
–
–
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have
original expected durations of one year or less.
The Group applies the practical expedient in paragraph 94 of IFRS 15 and recognises the incremental costs of obtaining contracts as an expense when incurred if
the amortisation period of the asset that the Group otherwise would have recognised is one year or less.
The Group’s contracts with customers are predominantly for one year or less, accordingly the Group applies the practical expedient in paragraph 63 of IFRS 15 and
does not adjust the promised amount of consideration for the effects of any financing component.
Contract fulfilment assets
These assets are recognised under paragraph 95 of IFRS 15 in respect of expenditure incurred which will satisfy future performance obligations.
Contract fulfilment assets
Group
2021
£m
0.8
2020
£m
1.0
Company
2021
£m
–
2020
£m
–
25 Corporate governance46 Financial statements
19. Trade and other receivables
Current assets:
Contract assets – see note 18
Contract fulfilment assets – see note 18
Trade receivables
Amounts owed by Group undertakings
Other receivables
Prepayments and accrued income
Foreign currency derivatives
20. Interest-bearing loans and borrowings
Non-current liabilities:
Repayable in more than five years
Group
2021
£m
12.7
0.8
15.1
–
1.2
4.5
0.2
34.5
Group
2021
£m
0.9
0.9
2020
£m
8.5
1.0
13.4
–
0.9
7.8
0.6
32.2
2020
£m
0.9
0.9
Company
2021
£m
–
–
–
3.0
–
0.7
1.0
4.7
Company
2021
£m
0.9
0.9
2020
£m
–
–
–
3.2
0.1
0.6
0.7
4.6
2020
£m
0.9
0.9
An interest rate of 6% is charged on the above loan, generating an expense of £0.1m (2020: £0.1m) that has been recognised as part of the underlying finance
expense in the income statement.
Preference shares
The preference shares carry a fixed cumulative preferential dividend at the rate of 6% per annum and on the winding-up of the Company entitle the holders to
repayment of the capital paid up thereon (together with a sum equal to any arrears or deficiency of the fixed dividend calculated to the date of the return of capital
and to be payable irrespective of whether such dividend has been declared or earned or not) in priority to any payment to the holders of the ordinary shares.
The preference shares do not entitle the holders to any further participation in the profits or assets of the Company.
The preference shareholders are not entitled to receive notice of or to attend or vote at any general meeting unless either:
at the date of the notice convening the meeting, the dividend on the preference shares is six months in arrears (for this purpose the dividend on the preference
shares is deemed to be payable half-yearly on 30 June and 31 December); or
the business of the meeting includes the consideration of a resolution for the winding-up of the Company, or for reducing its share capital or for sanctioning a
sale of the undertaking, or any resolution directly and adversely affecting any of the special rights or privileges attached to the preference shares.
There were no arrears in the payment of preference dividends at the statement of financial position date. Preference dividends paid amounted to
£0.1m (2020: £0.1m).
Mpac Group plc
Annual Report & Accounts 2021
83
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
84
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notes to the accounts continued
21. Reconciliation of net cash flow to movement in net funds
Group
Company
Net decrease in cash and cash equivalents
Change in net funds resulting from cash flows
Translation movements
Movement in net funds in the period
Opening net funds
Movement in lease liabilities under IFRS 16:
Non-cash movement
Cash movement
Closing net funds
Analysis of net funds:
Cash and cash equivalents – current assets
Interest-bearing loans and borrowings – non-current liabilities
Lease liabilities
Closing net funds
22. Trade and other payables
Current liabilities:
Contract liabilities – see note 18
Trade payables
Amounts owed to Group undertakings
Other taxes and social security
Other payables
Accruals and deferred income
Foreign currency derivatives
23. Provisions
Group
Balance at 1 January
Provisions created in the year
Utilised during the year
Unused amounts reversed
Balance at 31 December
2021
£m
(1.3)
(1.3)
0.3
(1.0)
10.4
(2.8)
1.0
7.6
14.5
(0.9)
(6.0)
7.6
Group
2021
£m
17.5
12.8
–
0.7
2.6
5.1
0.8
39.5
2020
£m
(3.2)
(3.2)
(0.2)
(3.4)
13.2
(0.3)
0.9
10.4
15.5
(0.9)
(4.2)
10.4
2020
£m
18.2
13.1
–
0.8
3.3
5.6
0.1
41.1
2021
£m
0.6
0.6
–
0.6
2.5
–
–
3.1
4.0
(0.9)
–
3.1
Company
2021
£m
–
0.8
37.8
–
0.6
1.7
1.0
41.9
2021
£m
1.4
0.3
(0.4)
(0.7)
0.6
2020
£m
(5.5)
(5.5)
–
(5.5)
8.0
–
–
2.5
3.4
(0.9)
–
2.5
2020
£m
–
0.5
34.3
–
0.4
2.2
0.7
38.1
2020
£m
1.3
1.2
(0.6)
(0.5)
1.4
Provisions are based on historical data and a weighting of all possible outcomes against their associated possibilities. Group provisions relate primarily to product
warranties. Except for specific identifiable claims, they are generally utilised within one year of the statement of financial position date.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
85
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
24. Employee benefits
Defined contribution pension schemes
The Group operates a number of defined contribution pension schemes for employees. Contributions to these schemes are recognised as an expense in the
consolidated income statement as they fall due.
Defined benefit pension schemes
The Group is responsible for defined benefit pension schemes in the UK and the USA. All schemes are funded by Group companies as necessary, at rates
determined by independent actuaries and as agreed between the trustees of the schemes and the sponsoring company.
The defined benefit pension schemes are administered by bodies that are legally separate from the Group. The trustees of the schemes are required by law to act
in the interest of the schemes and of all relevant stakeholders in the schemes. The trustees of the schemes are responsible for the investment policies in respect
of the assets of the schemes.
The pension schemes typically expose the Group to certain risks. These include the risk of investment under-performance, a fall in interest rates, an increase in life
expectancy and an increase in inflation.
UK pension scheme
The Group operated one defined benefit pension scheme in the UK in which future accruals ceased in November 2012. The assets of the scheme are held
separately from those of the Company and it is funded by the Company as necessary in order to ensure that the scheme can meet the expected benefit
obligations. The funding policy is to ensure that the assets held by the scheme in the future are adequate to meet expected liabilities, allowing for future increases
in pensions. The only assets of the scheme which are invested in the Company are an interest in the cumulative preference shares of the Company with an
estimated current market value of £0.2m.
The most recent formal actuarial valuation of the scheme was carried out as at 30 June 2018 using the projected unit credit method. The market value of the
scheme assets at that date was £411.3m and the funding level was 92% of liabilities, which represented a deficit of £35.2m. The principal terms of the deficit
funding agreement between the Company and the Fund’s Trustees, which is effective until 31 July 2024, but is subject to reassessment every three years are
as follows:
the Company will continue to pay a sum of £1.9m per annum to the scheme (increasing at 2.1 per cent. per annum) in deficit recovery payments;
if underlying operating profit (operating profit before non-underlying items) in any year is in excess of £5.5m, the Company will pay to the scheme an amount of
33% of the difference between the annual underlying operating profit and £5.5m, subject to a cap on underlying operating profit of £10.0m for the purpose of
calculating this payment; this part of the agreement will fall away in 2021 if the funding deficit is below certain levels; and
payments of dividends by Mpac Group plc will not exceed the value of payments being made to the scheme in any one year.
The deficit recovery period from 30 June 2018 was estimated to be six years and one month, which is scheduled to be formally reassessed following the
completion of the actuarial valuation being carried out as at 30 June 2021.
During the year, the Company paid deficit recovery contributions of £1.9m (2020: £1.9m). A contribution of £0.4m (2020: £0.8m), in accordance with the profit
sharing arrangement in the schedule of contributions, was also paid.
The Company accounts for pension costs under IAS 19 Employee benefits and the valuation used has been based on detailed actuarial valuation work carried out
as at 30 June 2018, updated by the Company’s actuary to assess the value of the liabilities of the scheme at 31 December 2021. Scheme assets are stated at their
market value at 31 December 2021.
USA pension schemes
In the USA, the Group has three defined benefit pension schemes, all of which are closed to future accrual. Formal independent actuarial valuations of the USA
pension schemes were carried out as at 1 January 2021 using the projected unit credit method. The valuations under IAS 19 at 31 December 2021 have been based
on these actuarial valuations, updated for conditions existing at the year end.
Employer contributions of £0.3m (2020: £0.3m) were paid during the year.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
86
Notes to the accounts continued
24. Employee benefits continued
Assumptions
The key financial assumptions used to calculate scheme liabilities and the financing expense on pension scheme balances are as follows:
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Discount rate
Inflation rate
– CPI
– RPI
Increases to pensions in payment
– final salary benefits
– career average benefits
UK (Company)
2021
1.8%
2.9%
3.4%
2.9%
2.2%
2020
1.4%
2.4%
2.9%
2.4%
2.0%
USA
2021
2.5%
n/a
n/a
n/a
n/a
2020
2.1%
n/a
n/a
n/a
n/a
The assumptions relating to longevity underlying the pension liabilities of the defined benefit pension schemes at the statement of financial position date are
based on standard actuarial mortality tables and include an allowance for future improvements in longevity. The assumptions are equivalent to expecting an
individual to live for a number of years as follows:
Current pensioner aged 65 – male
Current pensioner aged 65 – female
Future retirees currently aged 45 upon reaching age 65 – male
Future retirees currently aged 45 upon reaching age 65 – female
UK scheme
21.8 years
24.4 years
23.0 years
25.8 years
USA schemes
20.5 years
22.5 years
20.6 years
23.0 years
At 31 December 2021, the weighted average duration of the defined benefit obligation in the UK scheme was 14 years (2020: 15 years) and in the USA schemes was
9 years (2020: 10 years).
Significant actuarial assumptions for the determination of the defined benefit obligations are discount rate, inflation rate and mortality. The sensitivity analysis
below has been determined assuming that all other assumptions are held constant.
Changes in values of pension schemes’ liabilities before tax as at 31 December 2021
0.1% change in discount rate
0.1% change in inflation rate
Change in life expectancy by one year on average
UK scheme
£6.2m
£3.4m
£22.9m
USA schemes
£0.4m
n/a
£0.5m
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
87
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
24. Employee benefits continued
Categories of assets and funded status
The fair values of scheme assets were as follows:
UK equities
Overseas equities
Bonds – index linked gilts
Bonds – other
Properties – funds
Properties – directly owned
Absolute return funds
Other
Total fair (bid) value of scheme assets
Present value of defined benefit obligations
Defined benefit asset/(liability)
UK (Company)
2021
£m
1.5
56.5
153.3
37.8
35.0
2.2
122.7
44.1
453.1
417.4
35.7
2020
£m
1.3
47.4
136.8
64.2
35.5
2.2
120.4
33.1
440.9
426.9
14.0
USA
Group
2021
£m
–
3.1
–
6.8
–
–
–
–
9.9
12.4
(2.5)
2020
£m
–
3.1
–
6.4
0.6
–
–
–
10.1
13.1
(3.0)
2021
£m
1.5
59.6
153.3
44.6
35.0
2.2
122.7
44.1
463.0
429.8
33.2
2020
£m
1.3
50.5
136.8
70.6
36.1
2.2
120.4
33.1
451.0
440.0
11.0
All equities, bonds, property funds and absolute return funds have quoted prices in active markets. Directly owned properties are subject to an independent valuation.
Disclosed defined benefit pension income/expense for financial year
A) Components of defined benefit pension income/expense
Net defined benefit pension expense recognised in the consolidated income statement comprises:
Past service costs/(gains)
Interest expense/(income)
Administration costs
(Income)/expense recognised in
income statement
UK (Company)
2021
£m
–
(0.2)
1.0
0.8
2020
£m
0.2
(0.4)
0.8
0.6
USA
Group
2021
£m
–
0.1
0.2
0.3
2020
£m
–
0.1
0.1
0.2
2021
£m
–
(0.1)
1.2
1.1
2020
£m
0.2
(0.3)
0.9
0.8
Past service costs of £0.2m were recognised in the prior year in respect of the November 2020 ruling in relation to GMP equalisation.
B) Statements of comprehensive income (“SOCI”)
The actuarial gains recognised in the SOCI in respect of pensions were £20.7m (2020: losses of £8.8m), comprising actuarial gains of £20.2m (2020: losses of
£8.5m) for the UK defined benefit pension scheme and actuarial gains of £0.5m (2020: losses of £0.3m) for the USA schemes, all figures before tax.
Actual return on scheme assets
The actual return on scheme assets were gains of £30.2m (2020: £36.4m), comprising gains of £29.7m (2020: £35.4m) for the UK defined benefit pension scheme
and gains of £0.5m (2020: gains of £1.0m) for the USA schemes, all figures before tax.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Notes to the accounts continued
88
24. Employee benefits continued
Reconciliation of the present value of defined benefit obligations
Present value of defined benefit
obligations at 1 January
Past service cost/(gains)
Interest cost
Actuarial losses/(gains)
– changes in demographic assumptions
– changes in financial assumptions
– experience
Benefit payments
Retranslation
Present value of defined benefit
obligations at 31 December
Reconciliation of the fair value of scheme assets
Fair value of scheme assets at 1 January
Interest income
Actuarial gains/(losses)
– return on scheme assets
Company contributions
Administration expenses
Benefit payments
Retranslation
Fair value of scheme assets at
31 December
UK (Company)
2021
£m
426.9
–
5.8
7.7
(1.7)
(2.6)
(18.7)
–
417.4
UK (Company)
2021
£m
440.9
6.1
23.6
2.3
(1.0)
(18.8)
–
2020
£m
403.2
0.2
7.5
0.9
38.5
(3.4)
(20.0)
–
426.9
2020
£m
423.6
7.9
27.5
2.7
(0.8)
(20.0)
–
453.1
440.9
USA
2021
£m
13.1
–
0.3
–
(0.2)
–
(1.0)
0.2
12.4
USA
2021
£m
10.1
0.2
0.3
0.3
(0.2)
(0.9)
0.1
9.9
2020
£m
13.5
–
0.4
–
0.9
–
(1.2)
(0.5)
13.1
2020
£m
10.4
0.3
0.7
0.3
(0.1)
(1.2)
(0.3)
10.1
Group
2021
£m
440.0
–
6.1
7.7
(1.9)
(2.6)
(19.7)
0.2
2020
£m
416.7
0.2
7.9
0.9
39.4
(3.4)
(21.2)
(0.5)
429.8
440.0
Group
2021
£m
451.0
6.3
23.9
2.6
(1.2)
(19.7)
0.1
463.0
2020
£m
434.0
8.2
28.2
3.0
(0.9)
(21.2)
(0.3)
451.0
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
89
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
24. Employee benefits continued
Experience gains and losses for the year
Fair value of scheme assets
Defined benefit obligations
Net asset/(liability)
Actuarial gains/(losses) on scheme assets
Actuarial (losses)/gains on defined
benefit obligations
Net gain/(loss) recognised in the SOCI
during the year
UK (Company)
2021
£m
453.1
(417.4)
35.7
23.6
(3.4)
20.2
2020
£m
440.9
(426.9)
14.0
27.5
(36.0)
(8.5)
USA
Group
2021
£m
9.9
(12.4)
(2.5)
0.3
0.2
0.5
2020
£m
10.1
(13.1)
(3.0)
0.7
(1.0)
(0.3)
2021
£m
463.0
(429.8)
33.2
23.9
(3.2)
20.7
Movements in the net liability/asset of defined benefit pension schemes recognised in the Statements of financial position
Net asset/(liability) for employee benefits
at 1 January
Expense recognised in the income
statement (see below)
Company contributions
Actuarial (losses)/gains recognised in
the SOCI
Retranslation
Net asset/(liability) for employee benefits
at 31 December
UK (Company)
2021
£m
14.0
(0.8)
2.3
20.2
–
35.7
2020
£m
20.4
(0.6)
2.7
(8.5)
–
14.0
USA
Group
2021
£m
(3.0)
(0.3)
0.3
0.5
–
(2.5)
2020
£m
(3.1)
(0.2)
0.3
(0.3)
0.3
(3.0)
2021
£m
11.0
(1.1)
2.6
20.7
–
33.2
2020
£m
451.0
440.0
11.0
28.2
(37.0)
(8.8)
2020
£m
17.3
(0.8)
3.0
(8.8)
0.3
11.0
At the end of the life of the UK defined benefit pension scheme the Company has an unconditional right to a refund and any such refund would be paid out only on
a net of tax basis.
Defined benefit pension schemes income/expense recognised in the consolidated income statement
The income/expense is recognised in the following line items in the consolidated income statement:
Administrative expenses
Financial expense/(income)
Net pension expense/(income)
UK (Company)
2021
£m
1.0
(0.2)
0.8
2020
£m
1.0
(0.4)
0.6
USA
2021
£m
0.1
0.2
0.3
2020
£m
0.1
0.1
0.2
Group
2021
£m
1.1
–
1.1
2020
£m
1.1
(0.3)
0.8
The net pension expense/(income) is included in non-underlying items.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
90
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notes to the accounts continued
24. Employee benefits continued
Share-based payments
The Company currently operates a deferred share plan. Own shares are held in trust and granted to plan participants when certain conditions are met. Further
details of the Deferred share plan, including the performance conditions and vesting periods, are in the Remuneration and Nomination Committee report on
page 38 and in this note.
The share awards that were subject to conditional grants during the year were:
13 March 2018
1 May 2019
At 1 January
2021
73,434
68,816
142,250
Granted
–
–
–
Lapsed
–
–
–
Exercised
(73,434)
–
(73,434)
At 31 December
2021
–
68,816
68,816
Granting of all conditional awards and the exercise of such awards are at nil cost to the participant. The share-based compensation charge for the year amounted
to £0.1m (2020: £0.1m).
The fair value of the conditional awards made under the Deferred share plan has been based on the market price of the Company’s shares at the date of grant,
reduced by the assumptions made (for the purposes of this exercise) in respect of the present value of dividends expected to be paid (at the time of grant) during
the vesting period. The fair value of each conditional award is as follows:
Date of award
13 March 2018
1 May 2019
Fair value
per share
178.9p
134.7p
The company introduced a Long Term Incentive Plan (“LTIP”) for certain members of its senior management during 2019. The key terms of this are set out in the
Remuneration and Nomination Committee report on page 38 and were unchanged throughout the year. No additional incentives were issued in 2021.
The total number of shares conditionally granted under the LTIP was 555,000, at a market value of £1.66 per share, at the date of grant on 13 June 2019 and
remained outstanding at the year end. The awards are expected to vest at 87.5% based on the performance against the targets set by the scheme. An expense of
£0.2m has been recognised during the year (2020: £0.3m) within administration costs. No shares were forfeited, exercised, expired or exercisable during the period.
25 Corporate governance46 Financial statements
25. Capital and reserves
Share capital
Allotted, called up and fully paid
Ordinary shares of 25p each
Mpac Group plc
Annual Report & Accounts 2021
91
2021
£m
5.0
2020
£m
5.0
There were 20,171,540 (2020: 20,171,540) ordinary shares in issue at the year end. The holders of the ordinary shares are entitled to one vote per share at meetings
of the Company and to receive dividends as declared from time to time. At the year end, an employee trust held 242,144 of the ordinary shares and it has agreed to
waive all dividends and not to exercise voting rights in respect of these shares. The Company also has in issue 900,000 6% fixed cumulative preference shares of
£1 each (see note 20); these are classified as borrowings.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.
Capital redemption reserve
The capital redemption reserve records the historical repurchase of the Company’s own shares.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged
transactions that have not yet occurred.
Investment in own shares
Included within retained earnings is the carrying value of own shares held in trust for the benefit of employees. These shares are used to service the obligations of
the Company’s Deferred share plan. Further details of the Deferred share plan can be found in the Remuneration and Nomination Committee report on page 37
and on page 90 in note 24.
At 31 December 2020, the employee trust held 242,144 (2020: 277,402) ordinary shares of 25p each, representing 1.2% of the issued shares (2020: 1.4%), 68,816 of
which were subject to conditional grants. The shares held by the trust were purchased at an aggregate cost of £0.5m (2020: £0.4m). The trust purchased 38,176
additional shares in the year at a cost of £0.2m (2020: £0.2m).
Included within retained earnings is the charge of £0.3m (2020: £0.4m) in respect of the share-based payments, as disclosed in the Remuneration report on
page 38.
The market value of the shares held by the trust at 31 December 2021 was £1.2m (2020: £1.2m).
Dividends
Dividends to shareholders paid in the period:
2021
£m
–
2020
£m
–
Having considered the trading results for 2021 and the opportunities for investment in the growth of the Group, together with the continued uncertainty
surrounding the impact of the pandemic, the Board has decided that it is not appropriate to pay a final dividend. No interim dividend was paid in 2021. Future
dividend payments will be considered by the Board in the context of 2022 trading performance and when the Board believes it is prudent to do so.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
92
Notes to the accounts continued
26. Financial risk management
The Group has exposure to credit, liquidity and market risks from its use of financial instruments.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
These risks are regularly considered and the impact of these risks on the Group, and how to mitigate them, assessed. The Board of Directors is responsible for the
Group’s system of internal controls and has established risk management policies to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. The Audit Committee assists the Board in the discharge of its duty in relation to the maintenance of
proper internal controls. Further details regarding the Audit Committee can be found in its report on pages 32 to 35.
Categories of financial instruments
Financial assets:
Derivative instruments in designated hedge accounting relationships
Derivative instruments measured at fair value through income statement
Financial assets measured at amortised cost
Financial liabilities:
Derivative instruments in designated hedge accounting relationships
Fair value through income statement
Amortised cost
Group
2021
£m
0.2
–
30.8
31.0
0.8
0.6
27.4
28.8
2020
£m
0.6
–
29.8
30.4
0.1
3.5
27.1
30.7
Company
2021
£m
–
1.0
21.2
22.2
–
1.0
41.9
42.9
2020
£m
–
0.7
17.7
18.4
–
3.1
38.3
41.4
Financial assets measured at amortised cost comprises cash and cash equivalents and trade and other receivables, excluding foreign currency derivatives.
Financial liabilities at amortised cost comprises interest-bearing loans and borrowings, lease liabilities, trade payables, other payables and accruals.
IFRS 7 Financial instruments: disclosures for financial instruments that are measured in the Statements of financial position at fair value requires disclosure of fair
value measurements in the form of a three level fair value hierarchy, by class, for all financial instruments recognised at fair value. The Group uses the following
hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
At 1 January 2021 and 31 December 2021, derivative instruments in designated hedge relationships have been identified as Level 2, and contingent earn out
liabilities as Level 3.
Derivative instruments in designated hedge relationships
The Group has relied on analysis from third party specialists for complex valuations of forward exchange contracts. Valuation techniques have utilised observable
forward exchange rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant to this type of financial instrument.
Contingent earn out liabilities
The fair value of the contingent earn out liabilities arising from acquisitions is determined considering the value of estimated future payments, discounted to
present value. Payments are determined by mechanisms set out in each acquisition agreement, and are generally based on EBITDA performance over a 3-year
period. Estimated future payments are calculated using financial projections based on operational budgets for the next 12 months and then applying growth rate
assumptions for the following years where appropriate. Discount rates are reviewed annually for each acquisition, and range between 12.4% and 16.4%.
The most significant inputs, all of which are unobservable, are the estimated growth rates in future profits and the discount rates applied. The estimated fair value
increases if the growth rates increase or the discount rates decrease. The overall valuations are sensitive to both assumptions. The Board considers that changing
the above unobservable inputs to reflect other reasonably probable alternative assumptions would not result in a significant change in the estimated fair value.
25 Corporate governance46 Financial statements
26. Financial risk management continued
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises
principally from the Group’s receivables from customers and cash held at financial institutions. In addition, for the Company, a credit risk exists in respect of
amounts owed by Group undertakings.
Trade receivables and contract assets
The Group ensures that the provision of credit to customers is adequately managed by each individual business in order that the risk of non-payment or delayed
payment is minimised. The Group’s exposure to risk is influenced mainly by the individual characteristics of each customer, the industry and country in which
customers operate. The Group has a diversified base of customers. In certain years, sales to a customer may be more than 5%, although the sales would typically
be both original equipment and service, and to a number of different geographic regions.
The Group has written credit control policies which cover procedures for accepting new customers, setting credit limits, dealing with overdue amounts and
delinquent payers.
An impairment loss provision against trade receivables is created where it is anticipated that the value of trade receivables is not fully recoverable. No impairments
due to credit losses on contract assets have ever been experienced and none are predicted.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk for the Group and the Company at
31 December was:
Trade receivables
Amounts owed by Group undertakings
Other receivables
Foreign currency derivatives
Cash and cash equivalents
Group
Company
2021
£m
15.1
–
1.2
0.2
14.5
31.0
2020
£m
13.4
–
0.9
0.6
15.5
30.4
2021
£m
–
17.2
–
1.0
4.0
22.2
2020
£m
–
14.2
0.1
0.7
3.4
18.4
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant
financing component. In measuring the expected credit losses, the trade receivables have been assessed on an individual basis as the risk depends upon the
circumstances of the receivable, including the financial strength of the counterparty and the terms of the contract. They have been grouped based on the days
past due.
Trade receivables are written off (i.e. derecognised) when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the
invoice date and failure to engage with the Group on alternative payment arrangements, amongst others, are considered indicators of no reasonable expectation
of recovery.
Mpac Group plc
Annual Report & Accounts 2021
93
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
94
Notes to the accounts continued
26. Financial risk management continued
Credit loss provisions
The ageing of trade receivables and the expected credit loss provisions for the Group at 31 December were:
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Group
Not past due
Past due up to 30 days
Past due 31–60 days
Past due 61–90 days
Past due more than 91 days
2021
Credit
loss provisions
£m
–
–
–
–
–
–
Gross
£m
9.8
4.5
0.5
0.1
0.2
15.1
Total
£m
9.8
4.5
0.5
0.1
0.2
15.1
2020
Credit
loss provisions
£m
–
–
–
–
–
–
Gross
£m
7.4
3.7
1.2
0.6
0.5
13.4
Total
£m
7.4
3.7
1.2
0.6
0.5
13.4
The only receivable balances held by the Company are amounts owed by group undertakings and expected credit losses arising are not considered to be material.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to hold cash
and cash equivalents and maintain undrawn committed facilities at a level sufficient to ensure that the Group has available funds to meet its liabilities as they
become due. Further details of the Group’s treasury policies can be found in the Financial review on pages 16 to 18.
Contractual maturities of non-derivative financial liabilities
The non-derivative financial liabilities for the Group and the Company at 31 December were:
Current liabilities:
Trade and other payables (excluding derivatives)
Lease liabilities
Non-current liabilities:
Interest-bearing loans and borrowings
Lease liabilities
Group
2021
£m
20.5
1.8
0.9
4.2
2020
£m
22.0
0.8
0.9
3.4
Company
2021
£m
41.0
–
0.9
–
2020
£m
37.4
–
0.9
–
An interest rate of 6% is charged on the above interest-bearing loan, generating an expense of £0.1m (2020: £0.1m). The loan relates to preference shares and has
no fixed maturity.
Trade and other payables shown as current liabilities are expected to mature within six months of the statement of financial position date.
The contractual maturities of forward foreign exchange contracts that the Group and Company had committed at 31 December are shown in the Foreign currency
risk section in this note. The contractual maturity of lease liabilities is disclosed in note 27.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Group’s income or the value of its holdings
of financial instruments. Exposure to interest rate and currency risks arises in the normal course of the Group’s business. The Group does not trade in financial
instruments and enters into derivatives (principally forward foreign exchange contracts) solely for the purpose of minimising currency exposure on sales or
purchases in other than the functional currencies of its various operations.
The Group’s treasury policies are explained in the Financial review on pages 16 to 18.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
95
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
26. Financial risk management continued
Interest rate risk
Cash and cash equivalents
The cash profile at 31 December was:
Group
Currency:
Sterling
Canadian dollar
US dollar
Euro
Company
Currency:
Sterling
Canadian dollar
US dollar
Euro
Cash at
floating
rates
£m
2021
Cash on which
no interest
received
£m
6.0
4.1
1.3
3.1
14.5
–
–
–
–
–
Cash at
floating
rates
£m
2021
Cash on which
no interest
received
£m
3.9
0.1
–
–
4.0
–
–
–
–
–
Total
£m
6.0
4.1
1.3
3.1
14.5
Total
£m
3.9
0.1
–
–
4.0
Cash at
floating
rates
£m
2020
Cash on which
no interest
received
£m
5.4
3.2
4.1
2.8
15.5
–
–
–
–
–
Cash at
floating
rates
£m
2020
Cash on which
no interest
received
£m
3.2
0.2
–
–
3.4
–
–
–
–
–
All cash surplus to immediate operational requirements is placed on deposit at floating rates of interest.
Interest-bearing loans and borrowings
The profile of interest-bearing loans and borrowings at 31 December was:
Group and Company
Currency:
Sterling
Borrowings at
floating rates
£m
2021
Borrowings at
fixed rates
£m
–
–
0.9
0.9
Borrowings at
floating rates
£m
2020
Borrowings at
fixed rates
£m
–
–
0.9
0.9
Total
£m
0.9
0.9
Total
£m
5.4
3.2
4.1
2.8
15.5
Total
£m
3.2
0.2
–
–
3.4
Total
£m
0.9
0.9
The borrowings at fixed rates in sterling are the fixed cumulative preference shares which are explained in more detail in note 20.
The average rate of interest on the Group’s operating lease liabilities is 3.3%, details of the contractual maturity of the leases can be found in note 27.
Sensitivity to interest rate risk
If interest rates had been 100 basis points higher/lower throughout the period, net financial income (excluding on pension scheme balances) for the Group
would have increased/decreased by £0.1m (2020: £0.1m). This analysis assumes that all other variables, in particular foreign currency rates, remain constant and
considers the effect of financial instruments with variable interest rates. The analysis is performed on the same basis as for the year ended 31 December 2020.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
96
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notes to the accounts continued
26. Financial risk management continued
Foreign currency risk
The majority of the Group’s operations are outside of the UK, and therefore a significant portion of its business is conducted overseas in currencies other than
sterling. As explained on page 21, foreign currency risk is one of the principal risks and uncertainties to which the Group is exposed. The Group is exposed to both
transaction and translation risk.
Transactions in foreign currency are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the statement of financial position date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement.
The revenues and expenses of foreign operations are translated at an average rate for the period.
The assets and liabilities of foreign operations are translated at foreign exchange rates ruling at the statement of financial position date and foreign exchange
differences are taken directly to the translation reserve.
The following exchange rates (relative to sterling), which are significant to the Group, applied during the period:
US dollar
Canadian dollar
Euro
Average rate
2021
1.37
1.72
1.16
2020
1.29
1.72
1.13
Closing rate
2021
1.35
1.72
1.19
2020
1.37
1.74
1.12
Forward foreign exchange contracts
The Group enters into forward foreign exchange contracts solely for the purpose of minimising currency exposures on sale and purchase transactions. The Group
classifies its forward foreign exchange contracts used for hedging as cash flow hedges and states them at fair value.
Fair values
The fair value of forward foreign exchange contracts at 31 December was:
Cash flow hedges
Gain
Loss
Group
2021
£m
–
(0.5)
(0.5)
2020
£m
0.8
–
0.8
Company
2021
£m
–
–
–
2020
£m
–
–
–
The fair value is the gain/loss on all open forward foreign exchange contracts at the period end. These amounts are based on the market values of equivalent
instruments at the period end date and all relate to those forward foreign exchange contracts that have been designated as effective cash flow hedges under
IFRS 9 Financial instruments: recognition and measurement.
There were no open forward foreign exchange contracts, as at either 31 December 2021 or 2020, that had been designated as fair value hedges under IFRS 9
Financial instruments: recognition and measurement.
During the period, a debit of £1.3m for the Group (2020: £0.5m credit) and £nil for the Company (2020: £nil) was recognised in the statements of comprehensive
income in respect of cash flow hedges.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
97
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
26. Financial risk management continued
Contractual maturity date and future cash flows
The contractual maturity date and period when cash flows are expected to occur in relation to open forward foreign exchange contracts at 31 December were:
Group
Outflow
Inflow
Company
Outflow
Inflow
Less than
6 months
£m
(4.7)
24.5
19.8
Less than
6 months
£m
–
–
–
2021
Between
6 and 12
months
£m
(0.7)
8.3
7.6
2021
Between
6 and 12
months
£m
–
–
–
Between
12 and 24
months
£m
–
–
–
Between
12 and 24
months
£m
–
–
–
Less than
6 months
£m
(5.6)
13.5
7.9
Less than
6 months
£m
–
–
–
2020
Between
6 and 12
months
£m
(1.6)
5.4
3.8
2020
Between
6 and 12
months
£m
–
–
–
Between
12 and 24
months
£m
–
–
–
Between
12 and 24
months
£m
–
–
–
Total
£m
(5.4)
32.8
27.4
Total
£m
–
–
–
The following movements in the cash flow hedge reserve relate to the hedges relating to cash flows from foreign currency trade receivables.
Group
Opening balance 1 January 2021
Change in fair value of hedging instrument recognised in other comprehensive income (“OCI”)
Reclassified from OCI to profit or loss
Closing balance at 31 December 2021
Total
£m
(7.2)
18.9
11.7
Total
£m
–
–
–
2021
£m
0.8
(1.0)
(0.3)
(0.5)
No ineffectiveness arose during 2021. The hedging instrument refers to the forward contracts in their entirety, with hedging on a forward to forward basis.
The effect of hedge accounting on the Group’s financial position and performance is as follows, including the outline timing and profile of the hedging instruments:
Group
Carrying amount
Notional amount
US dollar to Canadian dollar
Canadian dollar to euro
GBP to euro
GBP to US dollar
Hedge ratio
Average forward rates
US dollar to Canadian dollar
Canadian dollar to euro
Change in the fair value of the currency forward (excluding amounts reclassified)
Change in the fair value of the hedged item used to determine hedge effectiveness
Amounts in the cash flow hedge reserve
No other currency pairs at 31 December 2021 or during the year had a material value to the Group.
2021
GBP£0.2m
CA$33.0m
€6.0m
€0.1m
$9.5m
1:1
1US$:1.2550CA$
1CA$:0.693€
(£0.5m)
(£0.5m)
(£0.5m)
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
98
Notes to the accounts continued
26. Financial risk management continued
Currency profile
The currency profiles at 31 December of cash and cash equivalents and interest-bearing loans and borrowings are shown within the interest rate risk section in
this note.
The following analysis of financial assets and liabilities (excluding net funds/debt) shows the Group and Company exposure after the effects of forward foreign
exchange contracts used to manage currency exposure.
The amounts shown represent the transactional exposures that give rise to net currency gains and losses which are recognised in the consolidated income
statement. Such exposures represent the financial assets and liabilities of the Group and the Company that are not denominated in the functional currency of the
business involved.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Group
Functional currency:
Sterling
Canadian dollar
Euro
Company
Functional currency:
Sterling
US dollar
£m
2021
Euro
£m
–
1.5
–
1.5
US dollar
£m
12.7
–
–
–
–
Euro
£m
–
2021
Total
£m
–
1.5
–
1.5
Total
£m
12.7
US dollar
£m
0.1
2.0
0.1
2.2
US dollar
£m
11.0
2020
2020
Euro
£m
0.1
–
–
0.1
Euro
£m
–
Total
£m
0.2
2.0
0.1
2.3
Total
£m
11.0
Sensitivity to foreign currency risk
Average exchange rates are used to translate the profits of foreign operations in the consolidated income statement. If sterling had been 10% stronger against
all foreign currencies during the year, the effect of this on the average exchange rates used to translate profits would have decreased Group profit for the year
by £0.4m (2020: £0.4m). If sterling had been 10% weaker against all foreign currencies during the year, the effect of this on the average exchange rates used to
translate profits would have increased Group profit for the year by £0.5m (2020: £0.5m).
If sterling had been 10% stronger against all foreign currencies at 31 December 2021, Group equity would have increased by £0.6m (2020: £1.1m increase).
Conversely, if sterling had been 10% weaker against all foreign currencies at 31 December 2021, Group equity would have decreased by £0.7m (2020: £1.3m
decrease). This analysis assumes that all other variables remain constant.
Fair values
The fair value of borrowings at fixed rates for both the Group and the Company at 31 December 2021 is £0.8m (2020: £0.8m) and has been calculated by
discounting the expected future cash flows at prevailing interest rates.
There are no other significant differences between book and fair values for any of the other financial assets or liabilities included in either the Group or Company
statement of financial position.
Capital management
Capital comprises total equity as shown in the statements of financial position. The Group’s policy is to maintain a strong capital base so as to maintain investor,
creditor and market confidence and to sustain the future development of the business. The Group manages its capital structure and makes adjustments to it
in light of the economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares.
The Group monitors capital through measures of earnings per share (see note 11), return on capital employed (profit for the period divided by average equity) and
tangible net worth (total equity before intangible assets and employee benefits, net of tax). There were no changes to the Group’s approach to capital management
during the year and neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
99
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
27. Leases
The right-of-use assets held at the balance sheet date relates to the following asset types:
Land & buildings
£m
Plant & machinery
£m
Motor vehicles
£m
Total
£m
Group
Cost
Balance at 1 January 2020
Additions
Transfers
Balance at 31 December 2020
Additions
Disposals
Transfers
Balance at 31 December 2021
Depreciation
Balance at 1 January 2020
Charge for the period
Balance at 31 December 2020
Charge for the period
Disposals
Transfers
Balance at 31 December 2021
NBV of ROU assets 2020
NBV of ROU assets 2021
Lease liabilities
Opening liability
Additions
Disposals
Payments made
Interest charge
Effect of movements in foreign exchange rates
Closing liability
Amounts falling due after more than one year
Amounts falling due in less than one year
5.0
–
–
5.0
2.4
–
–
7.4
0.6
0.7
1.3
0.8
–
–
2.1
3.7
5.3
0.1
–
–
0.1
–
–
–
0.1
–
–
–
–
–
–
–
0.1
0.1
0.4
0.2
–
0.6
0.3
–
–
0.9
0.2
0.2
0.4
0.1
–
–
0.5
0.2
0.4
5.5
0.2
–
5.7
2.7
–
–
8.4
0.8
0.9
1.7
0.9
–
–
2.6
4.0
5.8
31 December
2021
£m
(4.2)
(2.7)
–
0.9
(0.1)
0.1
(6.0)
(4.2)
(1.8)
31 December
2020
£m
(4.8)
(0.3)
0.1
0.9
(0.1)
–
(4.2)
(3.4)
(0.8)
The Group took advantage of the exemptions available not to capitalise short-term leases with a duration of less than 12 months or leases of low-value assets.
These leases have been treated as off-balance-sheet operating leases. There was no expense relating to either of these types of lease in the year (2020: £nil).
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
Notes to the accounts continued
100
27. Leases continued
The undiscounted payments under the leases fall due as follows:
Up to one year
One to five years
Over five years
Total undiscounted payments due under leases
28. Capital commitments
Capital investment contracted but not provided for
29. Contingent liabilities
Contingent liabilities in respect of guarantees and indemnities
related to sales and other contracts
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
31 December
2021
£m
1.2
3.6
1.8
6.6
31 December
2020
£m
0.9
2.6
1.1
4.6
Company
2021
£m
–
Company
2021
£m
3.7
2020
£m
–
2020
£m
1.9
Group
2021
£m
–
Group
2021
£m
3.7
2020
£m
0.1
2020
£m
1.9
30. Deferred contingent consideration
2020 - Switchback Group Inc
The fair value of the contingent consideration arrangement of £1.1m was estimated by calculating the present value of the future expected cash flows. The Group’s
forecasts identify that the maximum deferred consideration will be payable. Under IFRS 3, the Company is required to discount the contingent consideration at a
rate reflective of the risk of the amounts not falling due. This results in a discount to the total amount of £0.1m, which is expected to be amortised over the period
to which the amounts fall due through the interest charge. The interest during the period was £nil. The deferred consideration payable to ongoing employees of
Switchback is £0.3m, which is treated as additional remuneration and not included in the valuation of deferred consideration under IFRS3.
2019 - Lambert Automation Limited
On 1 May 2019, Mpac acquired the entire issued share capital of Lambert Automation Limited (“Lambert”), a provider of technology leading automation solutions
to the medical and consumer healthcare sectors, for an initial consideration of £15m (subject to adjustment for working capital movements) with a further £3.0m
subject to Lambert achieving certain earn-out criteria and tax recoveries.
The contingent consideration arrangement required the Group to pay the former owners of Lambert five times the average EBITDA of Lambert in excess of £2.5m
for three years ending 31 December 2021, up to a maximum payment of £2.5m. There was no minimum amount payable. As the business did not achieve the base
target no contingent consideration was paid, and the discounted provision of £2.4m has been released to non-underlying administrative expenses in the year.
A further £0.5m of consideration was contingent upon certain tax receipts from HMRC. This balance was settled in 2020.
25 Corporate governance46 Financial statements
30. Deferred contingent consideration continued
Reconciliation of movement in contingent earn-out consideration
Contingent earn-out liabilities as at 31 December 2019
Payments made during period
Unwinding of present value
Other fair value adjustments
Business acquisitions
Contingent earn-out liabilities as at 31 December 2020
Payments made during period
Unwinding of present value
Other fair value adjustments
Business acquisitions
Released to income statement
Contingent earn-out liabilities as at 31 December 2021
Group
£m
2.8
(0.5)
0.1
–
1.1
3.5
(0.6)
0.1
–
–
(2.4)
0.6
Company
£m
2.8
(0.5)
0.1
–
–
2.4
–
–
–
–
(2.4)
–
The contingent earn-out liabilities as at 31 December 2021 are all due within one year and are presented within other payables (Note 22).
31. Related parties
Transactions with key management personnel
The compensation of key management personnel is disclosed in the Remuneration report on pages 37 to 38. Key management personnel comprise the Executive
Directors only:
Short-term employment benefits
Share based payments
Total key management personnel compensation
31 December
2021
£m
0.8
0.2
1.0
31 December
2020
£m
0.7
0.2
0.9
Identity of related parties
The Company has a related party relationship with its subsidiaries (see note 33), Directors and the UK and USA defined benefit pension schemes. In the course of
normal operations, related party transactions entered into by the Group have been contracted on an arm’s-length basis.
Details regarding transactions involving the Directors and their remuneration can be found in the Remuneration report on pages 37 to 38.
The Group recharges the UK defined benefit pension scheme with the costs of administration incurred by the Group. The total amount recharged in the year to
31 December 2021 was £0.1m (2020: £0.2m).
Mpac Group plc
Annual Report & Accounts 2021
101
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
102
Notes to the accounts continued
32. Group entities
All intra-group related party transactions and outstanding balances are eliminated in the preparation of the consolidated financial statements of the Group and
therefore in accordance with IAS 24 Related party disclosures are not disclosed.
Subsidiary undertakings
Details of all subsidiary undertakings are shown below. Subsidiary undertakings are, unless otherwise shown in brackets below, registered in England and Wales.
Unless otherwise specified below, all subsidiaries are 100% owned by the Company.
Principal subsidiary undertakings
Registered office
6500 Kitimat Road, Unit 1, Mississauga, Ontario LN5 2B8, Canada
Edisonstraat 14, 6604 BV Wijchen, The Netherlands
8 Burn Road, #09-01 Trivex, Singapore 369977
Station Estate, Tadcaster, North Yorkshire, LS24 9SG
5638 Transportation Blvd., Garfield Heights, OH 44125, USA
Subsidiary undertakings registered at Mpac Group plc registered office
Arista Laboratories Europe Limited
Hartsvale Limited
Mpac Corporate Services Limited
Mpac ITCM Limited
Overseas subsidiary undertakings
Registered office
6500 Kitimat Road, Unit 1, Mississauga, Ontario LN5 2B8, Canada
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Molmac Engineering Limited
Thrissell Limited
Mpac Group Holdings Limited
Subsidiary undertakings
Mpac Langen, Inc. (Canada)
Mpac Langen B.V. (Netherlands)
Mpac Langen Pte. Ltd (Singapore)
Mpac Lambert Limited (UK)
Mpac Switchback Inc. (USA)
Mpac Machine Company Limited
Mpac Machinery Limited
Mpac Overseas Holdings Limited
Mpac Tobacco Machinery Limited
Subsidiary undertakings
1456074 Ontario, Inc. (Canada)
928142 Ontario, Inc. (Canada)
Mpac Corporation (USA)
ITCM North America, Inc. (USA)
Mpac Delaware, Inc. (USA)
Mpac Laboratories, Inc. (USA)
SASIB Corporation of America (USA)
Mpac Machine Company, Inc. (USA)
Mpac Richmond, Inc. (USA)
During the year ended 31 December 2021, the Company received interest income from subsidiary undertakings of £0.5m (2020: £nil), management fees of £2.3m
(2020: £2.3m) and brand fees of £3.0m (2020: £2.7m).
At 31 December 2021, amounts owed by subsidiary undertakings to the Company were £17.2m (2020: £14.2m) and amounts owed by the Company to subsidiary
undertakings were £37.8m (2020: £34.3m). The amounts owed by subsidiary undertakings to the Company are stated after a provision of £12.5m (2020: £12.2m)
representing amounts owed to the Company which are no longer considered recoverable.
At 31 December 2021, investments in subsidiaries by the Company were £63.8m (2020: £63.8m).
25 Corporate governance46 Financial statements
33. Accounting estimates and judgements
The development, selection and disclosure of the Group’s critical accounting policies and estimates, and the application of these policies and estimates, are
considered as part of the remit of the Audit Committee.
Estimates and judgements
Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the year in which the estimates are revised and in any future
years affected. The areas involving significant risk resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year
are as follows:
Significant judgements
Revenue recognition
The Group recognises revenue and gross margin on long-term contracts over time, in accordance with IFRS 15, based upon the total number of hours expected to
be used on the contract and the number of hours required to complete the contract. Labour hours have been selected as the most faithful depiction of progress
(and hence the transfer of goods and services) as this most accurately reflects how Mpac provides value to the customer. Mpac delivers innovative, efficient, and
technically robust solutions, with the time allocated to projects of Mpac engineers and technicians being the main driver to bring projects to fruition. Total expected
revenue, the number of hours and cost of materials to complete the contract reflect management’s best estimate of the probable future benefits and obligations
associated with the contract. Obligations on contracts may result in penalties due to late completion of contractual milestones or unanticipated costs due to
project modifications, unexpected conditions or events. Further detail in respect of revenue recognition is shown in the accounting policies note and note 1.
Labour hours have been selected as the most faithful depiction of progress (and hence the transfer of goods and services) as this most accurately reflects how
Mpac provides value to the customer. Material costs incurred are not considered to be proportionate to the Group’s progress in satisfying progress on contracts
for which revenue is recognised over time and therefore revenue in respect of materials is recognised at an amount equal to the cost of good used to satisfy the
performance obligation.
Areas of significant estimation
Pension accounting
Changes to key assumptions used for calculating the net pension asset/liability of the Group can have a significant impact on the accounting valuation of the
Group’s defined benefit pension schemes. The key assumptions used in calculating the net pension asset/liability for the Group are disclosed in note 24. The value
of the schemes’ liabilities is particularly sensitive to the discount, inflation and mortality rates used. An analysis of the impact on the net pension asset/liability to
changes in these assumptions is also disclosed in note 24.
Deferred tax
Management have recognised a deferred tax asset of £3.6m (2020: £3.4m) based on historic losses and investment tax credits. The assessment of this utilisation
is based on the Group’s latest budget, which is adjusted for significant non-taxable income and expenses, along with specific limits to the utilisation of the tax
credits. Further details of the asset is in note 16.
Impairment of goodwill
The Group considers whether intangible assets and/or goodwill are impaired. Where an indication of impairment is identified the estimation of recoverable value
requires assessment of the recoverable value of the cash generating units ("CGUs"). Determining whether goodwill balances are impaired requires an estimation
of the value in use of the CGUs to which the value has been allocated. The value in use calculation requires the Group to estimate the future cash flows anticipated
to arise from the CGUs and to apply a reasonable discount rate in order to calculate present value. The Group is required to perform an impairment review to
determine whether the carrying value of goodwill balances are less than the recoverable amount annually. The recoverable amount is based on a calculation of
expected future cash flows, which include estimates of future performance. Details of assumptions used in the review of goodwill balances are detailed in note 12.
Mpac Group plc
Annual Report & Accounts 2021
103
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
104
Notes to the accounts continued
34. Prior year adjustment
Following a review of the Group’s compliance with certain technical aspects of IAS 12, additional deferred tax assets have been recognised in the consolidated
statement of financial position. Deferred tax liabilities have historically been recognised on consolidation in relation to acquired intangible assets appropriately;
however, deferred tax assets have not been recognised in respect of losses where there has been uncertainty around when future taxable profits will be generated
to enable the Group to utilise the losses. The Group has now reconsidered the requirements of IAS 12 and, where taxable losses are held which relate to the same
jurisdiction as the Group entities expect to benefit from the intangible assets, deferred tax assets have been recognised.
This accounting change has no impact on the underlying results or the cash flow of the Group and no impact on the Company results
The impact of the adjustments on the Group financial statements are as follows:
Group statement of financial position
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Deferred tax liability
Effect on net assets
Retained earnings
Effect on total equity
Group income statement
Profit before tax
Taxation
Profit for the period
2020
as reported
£m
Adjustment
£m
(6.7)
44.4
8.2
44.4
1.8
1.8
1.8
1.8
2020
Restated
£m
(4.9)
46.2
10.0
46.2
2019
as reported
£m
Adjustment
£m
(8.8)
47.5
11.3
47.5
0.9
0.9
0.9
0.9
2020
as reported
£m
2.9
0.4
3.3
Impact of
restatement
£m
–
0.9
0.9
2019
Restated
£m
(7.9)
48.4
12.2
48.4
2020
Restated
£m
2.9
1.3
4.2
All of the taxation reported and restated has been considered to be non-underlying.
Earnings per share
The resultant impact on the earnings per share of the Group are summarised below:
Basic profit per share
Diluted profit per share
There is no impact on underlying and diluted underlying earnings per share.
2020
as reported
p
16.3
16.2
Impact of
restatement
p
4.5
4.5
2020
Restated
p
20.8
20.7
25 Corporate governance46 Financial statements
Five-year record
Revenue
Underlying operating profit/(loss)1
Non-underlying items
Operating profit/(loss)
Net financing expense
Profit/(Loss) before tax
Taxation
Profit/(Loss) for the period from continuing operations
(Loss)/profit for the period from discontinued operations
Profit/(Loss) for the period
Underlying operating return on sales1
Underlying earnings/(loss) per share1
Basic earnings/(loss) per share
Dividends per ordinary share in respect of the year
Intangible assets
Property, plant and equipment and investment property
Inventories
Trade and other receivables (including taxation)
Employee benefits
Trade and other payables (including taxation and provisions)
Cash
Net assets
1. Before non-underlying items
* See note 34 for further details of the prior year restatement
2021
£m
94.3
8.8
(0.5)
8.3
(0.1)
8.2
(0.4)
7.8
–
7.8
9.3%
39.7p
39.1p
–
25.3
10.6
5.5
36.5
33.2
(60.2)
50.9
14.5
65.4
2020 Restated*
£m
83.7
6.5
(3.6)
2.9
–
2.9
1.3
4.2
–
4.2
7.8%
31.4p
20.8p
–
27.4
9.9
3.5
36.6
11.0
2019 Restated*
£m
88.8
7.7
(2.4)
5.3
0.1
5.4
1.4
6.8
–
6.8
8.7%
39.5p
29.7p
–
16.3
11.7
3.2
31.1
17.3
(57.7)
30.7
15.5
46.2
(50.1)
29.5
18.9
48.4
2018
£m
58.3
1.4
(9.0)
(7.6)
0.2
(7.4)
1.4
(6.0)
–
(6.0)
2.4%
4.5p
(30.1)p
–
1.0
5.2
2.4
26.5
14.3
(36.7)
12.7
27.9
40.6
2017
£m
53.4
1.3
3.3
4.6
(0.3)
4.3
(1.9)
2.4
(0.8)
1.6
2.4%
4.2p
20.6p
–
0.9
4.8
2.4
22.7
11.4
(29.7)
12.5
30.3
42.8
Mpac Group plc
Annual Report & Accounts 2021
105
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
106
Principal divisions and subsidiaries
The divisions and subsidiary undertakings shown include those which principally affect the profits and net assets of the Group as at the date of this report.
Overseas companies operate and are incorporated in the countries in which they are based. In all cases, the class of shares held is ordinary equity shares (or
equivalent) and the proportion held is 100% unless otherwise indicated. Shares in the UK companies are held directly by Mpac Group plc and those in the other
overseas subsidiaries by intermediate holding companies.
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Americas
Mpac Langen, Inc.
6500 Kitimat Road, Unit 1
Mississauga
Ontario L5N 2B8
Canada
Tel: +1 905 670 7200
E-mail: info.americas@mpac-group.com
Mpac Switchback Group
5638 Transportation Blvd
Garfield Heights
OH 44125
USA
Tel: +1 216 290 6040
E-mail: info.switchback@mpac-group.com
Europe, Middle East & Africa
Mpac Langen B.V.
Edisonstraat 14
6604 BV Wijchen
The Netherlands
Tel: +31 24 648 6655
E-mail: info.emea@mpac-group.com
Mpac Lambert Limited
Station Estate
Tadcaster
North Yorkshire
LS24 9SG
United Kingdom
Tel: +44 (0)1937 832921
E-mail: sales.emea@mpac-group.com
Asia Pacific
Mpac Langen Pte. Ltd
8 Burn Road,
#09–01 Trivex,
Singapore 369977
Tel: +65 63 39 96 66
E-mail: info.asia@mpac-group.com
25 Corporate governance46 Financial statements
Notice of Annual General Meeting
Notice is hereby given that the 110th Annual General Meeting (the “Meeting”)
of Mpac Group plc (the Company) will be held at Hudson Sandler LLP, 25
Charterhouse Square, Barbican, London, EC1M 6AE] on Wednesday 4 May
2022 at 12 noon to consider and, if thought appropriate, to pass the following
resolutions, of which resolutions 1 to 11 will be proposed as ordinary resolutions
and resolutions 12 to 15 will be proposed as special resolutions:
Ordinary resolutions
Report and Accounts
1. To receive the audited annual accounts of the Company for the year ended
31 December 2021 together with the Directors’ report and the auditors’
report on those annual accounts.
2. To approve the Remuneration report, excluding the Remuneration Policy,
set out on pages 36 to 38 of the Annual Report and Accounts 2021.
Directors
3. To re-elect Mrs S A Fowler as a Director.
4. To re-elect Mr A J Kitchingman as a Director.
5. To re-elect Mr D G Robertson as a Director.
6. To re-elect Dr A Steels as a Director.
7. To re-elect Mr W C Wilkins as a Director.
8. To elect Mr M G R Taylor as a Director.
Auditors
9. To appoint Grant Thornton UK LLP as auditors of the Company to hold
office from the conclusion of this Meeting until the conclusion of the next
AGM at which accounts are laid before the Company.
10. To authorise the Audit Committee to determine the remuneration of
the auditors.
Directors’ authority to allot shares
11. To generally and unconditionally authorise the Directors pursuant to and
in accordance with Section 551 of the Companies Act 2006 (the Act), in
substitution for all previous authorities to the extent unused, to exercise all
the powers of the Company to allot shares in the Company and to grant
rights to subscribe for or to convert any security into shares in
the Company:
a) up to an aggregate nominal amount of £1,680,793 (representing
approximately one third of the total ordinary share capital in issue at
1 March 2022, being the latest date prior to publication of this
notice of meeting); and
b) comprising equity securities (as defined in Section 560 (1) of the Act)
up to a further aggregate nominal value of £1,680,793 in connection
with an offer by way of a rights issue, such authorities to expire at the
conclusion of the 2023 AGM or if earlier, at close of business on
4 August 2023, save that the Company may before such expiry make
an offer or agreement which would or might require shares to be
allotted or rights to subscribe for or convert any security into shares
to be granted after the authority ends.
For the purposes of this Resolution, ‘rights issue’ means an offer to:
a) shareholders in proportion (as nearly as may be practicable) to their
existing holdings; and
b) holders of other equity securities if this is required by the rights of those
securities or, if the Directors consider it necessary, as permitted by the
rights of those securities;
to subscribe for further securities by means of the issue of a renounceable
letter (or other negotiable document) which may be traded for a period
before payment for the securities is due, but subject in both cases to such
exclusions or other arrangements as the Directors consider necessary or
appropriate in relation to treasury shares, fractional entitlements, record
dates or legal, regulatory or practical problems in, or under the laws of,
any territory.
Special resolutions
Disapplication of pre-emption rights
12. That if resolution 11 is passed, the Board be authorised to allot equity
securities (as defined in the Companies Act 2006) for cash under the
authority given by that resolution and/or to sell ordinary shares held by
the Company as treasury shares for cash as if section 561 of the
Companies Act 2006 did not apply to any such allotment or sale, such
authority to be limited:
a) to allotments for rights issues and other pre-emptive issues; and
b) to the allotment of equity securities or sale of treasury shares
(otherwise than under paragraph (a) above) up to a nominal amount of
£252,144, such authority to expire at the conclusion of the 2023 AGM of
the Company (or, if earlier, at close of business on 4 August 2023) but, in
each case, prior to its expiry the Company may make offers, and enter
into agreements, which would, or might, require equity securities to be
allotted (and treasury shares to be sold) after the authority expires and
the Board may allot equity securities (and sell treasury shares) under
any such offer or agreement as if the authority had not expired.
Mpac Group plc
Annual Report & Accounts 2021
107
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
108
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notice of Annual General Meeting continued
Notice of Annual General Meeting continued
d) the authority hereby conferred shall (unless previously renewed or
revoked) expire at the end of the 2023 AGM, save that the Company
may before such expiry make a contract or agreement to make a
market purchase of its own ordinary shares which will or may be
executed wholly or partly after the expiry of such authority and the
Company may purchase such shares as if the authority conferred
hereby had not expired.
Notice of general meetings
15. That a general meeting of the Company, other than annual general
meetings of the Company, may be called on not less than 14 clear
days’ notice.
By order of the Board
PRISM COSEC LIMITED
Company Secretary
Registered in England and Wales No.
124855
16 March 2022
Registered office:
Station Estate
Station Road
Tadcaster
North Yorkshire
LS24 9SG
13. That if resolution 12 is passed, the Board be authorised in addition to any
authority granted under resolution 11 to allot equity securities (as defined
in the Companies Act 2006) for cash under the authority given by that
resolution and/or to sell ordinary shares held by the Company as treasury
shares for cash as if section 561 of the Companies Act 2006 did not apply
to any such allotment or sale, such authority to be:
a) limited to the allotment of equity securities or sale of treasury shares
up to a nominal amount of £252,144; and
b) used only for the purposes of financing (or refinancing, if the authority is
to be used within six months after the original transaction) a transaction
which the Board of the Company determines to be an acquisition or
other capital investment of a kind contemplated by the Statement
of Principles on Dis-applying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date of this notice,
such authority to expire at the end of the 2023 AGM of the Company
(or, if earlier, at close of business on 4 August 2023) save that, in each
case, the Company may before such expiry make offers, and enter
into agreements, which would, or might, require equity securities to be
allotted (and treasury shares to be sold) after the authority expires and
the Board may allot equity securities (and sell treasury shares) under
any such offer or agreement as if the authority had not expired.
Authority to purchase of own shares
14. That the Company be generally and unconditionally authorised for the
purpose of Section 701 of the Act to make market purchases (as defined in
Section 693 of the Act) of ordinary shares of 25 pence each in the capital of
the Company (‘ordinary shares’) provided that:
a) the maximum number of ordinary shares hereby authorised to be
purchased is 2,017,154;
b) the minimum price (exclusive of expenses) which may be paid for
such ordinary shares is 25 pence per share, being the nominal amount
thereof;
c) the maximum price (exclusive of expenses) which may be paid for such
ordinary shares shall be an amount equal to the higher of: (i) 5% above
the average of the middle market quotations for such shares taken from
The London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which the purchase is made; and
(ii) the price of the last independent trade of an ordinary share and the
highest current independent bid for an ordinary share as derived from
the London Stock Exchange Trading System (“SETS”); and
25 Corporate governance46 Financial statements
Mpac Group plc
Annual Report & Accounts 2021
109
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Explanatory notes relating to the Resolutions
Resolutions 1 to 11 are ordinary resolutions; resolutions 12 to 15 are special
resolutions. To be passed, ordinary resolutions require more than 50% of votes
cast to be in favour of the resolution whilst special resolutions require at least
75% of the votes cast to be in favour of the resolution.
Ordinary Resolutions
To receive the Annual Report and Accounts 2021
Resolution 1 is a standard resolution. The Companies Act 2006 requires
the Directors to lay before the Company in a general meeting copies of the
Company’s annual accounts, and the Directors’ report and auditor’s report
on those accounts. The Annual Report and Accounts 2021, which includes
this Notice of Annual General Meeting, will be available online at
www.mpac-group.com.
Remuneration Report
Resolution 2 seeks shareholders’ approval for the Directors’ Remuneration
report which is set out on pages 36 to 38 of the Annual Report and Accounts
2021, for the year ended 31 December 2021. The vote is advisory only.
Election and re-election of Directors
In accordance with best practice in corporate governance, all Directors are
standing for re-election. Resolutions 3 to 8 seek approval for the re-election of
the Directors.
Biographical information for each of the existing Directors is provided on page
28 of the Annual Report and Accounts 2021.
The Board has no hesitation in recommending the election or re-election of
the Directors to shareholders. In making these recommendations, the Board
confirms that it has given careful consideration to the Board’s balance of skills,
knowledge and experience and is satisfied that each of the Directors putting
themselves forward for election or re-election has sufficient time to discharge
their duties effectively, taking into account their other commitments.
Auditors
The auditors of a company must be appointed or re-appointed at each general
meeting at which the accounts are laid.
Resolution 9 seeks approval to appoint Grant Thornton UK LLP as the
Company’s auditors until the conclusion of the next general meeting of the
Company at which accounts are laid.
Resolution 10 seeks consent for the Audit Committee to determine the
remuneration of the auditors.
Directors’ authority to allot shares
Resolution 11 seeks consent for shareholders to grant the Directors authority to
allot shares or grant rights to subscribe for or convert securities into shares, up
to a maximum aggregate nominal value of £3,361,586, which is approximately
two-thirds of the nominal value of the issued ordinary share capital of the
Company as at 1 March 2022, being the latest practicable date prior to the
publication of this notice.
£1,680,793 of this authority is reserved for a fully pre-emptive rights issue
only which is the maximum permitted amount under best practice corporate
governance guidelines.
The authority will expire at the next Annual General Meeting of the Company or
if earlier, at close of business on 4 August 2023. The Directors have no current
intention of exercising such authority and will exercise this power only when
they believe that such exercise is in the best interests of the shareholders.
Special resolutions
Disapplication of pre-emption rights
Resolutions 12 and 13 will be proposed as special resolutions, each requiring a
majority of 75% of those voting to be in favour. If the Directors wish to allot new
shares and other equity securities, or sell treasury shares, for cash (other than in
connection with an employee share scheme), company law requires that these
shares are offered first to shareholders in proportion to their existing holdings.
Resolution 12 deals with the authority of the Directors to allot new shares
or other equity securities pursuant to the authority given by resolution 11, or
sell treasury shares, for cash without the shares or other equity securities
first being offered to shareholders in proportion to their existing holdings.
Such authority shall only be used in connection with a pre-emptive offer,
or otherwise, up to an aggregate nominal amount of £252,144, being
approximately 5% of the total issued ordinary share capital of the Company
as at 1 March 2022.
The Pre-Emption Group Statement of Principles supports the annual
disapplication of pre-emption rights in respect of allotments of shares and
other equity securities (and sales of treasury shares for cash) representing
no more than an additional 5% of issued ordinary share capital (exclusive
of treasury shares), to be used only in connection with an acquisition or
specified capital investment. The Pre-Emption Group’s Statement of Principles
defines ‘specified capital investment’ as meaning one or more specific capital
investment related uses for the proceeds of an issuance of equity securities, in
respect of which sufficient information regarding the effect of the transaction
on the Company, the assets that are the subject of the transaction and (where
appropriate) the profits attributable to them is made available to shareholders
to enable them to reach an assessment of the potential return.
Accordingly, and in line with the template resolutions published by the Pre-
Emption Group, resolution 13 seeks to authorise the Directors to allot new shares
and other equity securities pursuant to the authority given by resolution 11, or
sell treasury shares, for cash up to a further nominal amount of £252,144, being
approximately 5% of the total issued ordinary share capital of the Company
as at 1 March 2022, only in connection with an acquisition or specified capital
investment which is announced contemporaneously with the allotment, or
which has taken place in the preceding six-month period and is disclosed in the
announcement of the issue. If the authority given in resolution 13 is used, the
Company will publish details of the placing in its next Annual Report. If these
resolutions are passed, the authorities will expire at the end of the 2023 AGM or
at close of business on 4 August 2023, whichever is the earlier.
The Board considers the authorities in resolutions 12 and 13 to be appropriate
in order to allow the Company flexibility to finance business opportunities or to
conduct a rights issue or other pre-emptive offer without the need to comply
with the strict requirements of the statutory pre-emption provisions. The Board
does not intend to issue more than 7.5% of the issued share capital of the
Company for cash on a non pre-emptive basis in any rolling three-year period
(other than in connection with an acquisition or specified capital investment as
described in the Pre-Emption Group’s Statement of Principles) without prior
consultation with shareholders.
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
110
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Notice of Annual General Meeting continued
Notice of Annual General Meeting continued
Authority to purchase own shares
Resolution 14 seeks authority for the Company to make market purchases of
its own ordinary shares up to a maximum number of 2,017,154 ordinary shares,
representing approximately 10% of the issued ordinary share capital at 1 March
2022. The authority requested would replace a similar authority granted last
year and would expire at the end of the 2023 AGM, or if earlier, at close of
business on 4 August 2023.
In reaching a decision to purchase ordinary shares, the Directors will take
account of the Company’s cash resources and capital and the general effect
of such purchase on the Company’s business. The authority would only be
exercised by the Directors if they considered it to be in the best interests of the
shareholders generally and if the purchase could be expected to result in an
increase in earnings per ordinary share.
Notice of general meetings
Resolution 15 is an annual permission request for general meetings, other than
the AGM, to be called on 14 clear days’ notice. There is no current intention to
hold such a meeting but the Directors wish to retain the ability to call a meeting
on shorter notice if the circumstances should require it. The Companies
(Shareholders’ Rights) Regulations 2009 specify that approval must be sought
from shareholders by special resolution at an annual or subsequent general
meeting and the Company would need to make a means of electronic voting
available to all shareholders for any general meeting called on less than 21 clear
days’ notice. If passed, the resolution would remain valid until the end of the
2023 AGM, at which it is intended that a similar resolution will be proposed.
Notes relating to the Notice
The following notes explain your general rights as a shareholder and your right
to vote at this Meeting or to appoint someone else to vote on your behalf.
Entitlement to attend and vote
1. To be entitled to vote at the Meeting (and for the purpose of the
determination by the Company of the number of votes they may cast),
shareholders must be registered in the Register of Members of the
Company at close of trading on Monday 2 May 2022, or if the meeting
is adjourned, close of business on the day which is two days’ prior to the
adjourned meeting. In each case, changes to the Register of Members after
the relevant deadline shall be disregarded in determining the rights of any
person to attend and vote at the Meeting.
Appointment of proxies
2. Shareholders are entitled to appoint another person as a proxy to exercise
all or part of their rights to vote on their behalf at the Meeting. A shareholder
may appoint more than one proxy in relation to the Meeting provided that
each proxy is appointed to exercise the rights attached to a different ordinary
share or ordinary shares held by that shareholder. A proxy need not be a
shareholder of the Company.
3. In the case of joint holders, where more than one of the joint-holders purports
to appoint a proxy, only the appointment submitted by the most senior holder
will be accepted. Seniority is determined by the order in which the names of
the joint holders appear in the Company’s Register of Members in respect of
the joint holding (the first named being the most senior).
4. A vote withheld is not a vote in law, which means that the vote will not be
counted in the calculation of votes for or against the resolution. If no voting
indication is given, your proxy will vote or abstain from voting at his or her
discretion. Your proxy will vote (or abstain from voting) as he or she thinks
fit in relation to any other matter which is put before the Meeting.
5. You can vote either:
by logging on to www.signalshares.com and following the instructions;
you may request a hard copy form of proxy directly from the registrars,
Link Asset Services, on Tel: +44 (0)371 664 0391. Calls are charged at
the standard geographic rate and will vary by provider. Calls outside
the United Kingdom will be charged at the applicable international rate.
Lines are open between 09:00 – 17:30, Monday to Friday, excluding
public holidays in England and Wales. Alternatively, email Link at
shareholderenquiries@linkgroup.co.uk;
in the case of CREST members, by utilising the CREST electronic proxy
appointment service in accordance with the procedures set out below;
in order for a proxy appointment to be valid a form of proxy must be
completed. In each case, the form of proxy must be received by Link
Group at 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL
by 12 noon on Monday 2 May 2022.
6. If you return more than one proxy appointment, either by paper or
electronic communication, the appointment received last by the Registrar
before the latest time for the receipt of proxies will take precedence. You
are advised to read the terms and conditions of use carefully. Electronic
communication facilities are open to all shareholders and those who use
them will not be disadvantaged.
7. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so for the Meeting (and any
adjournment of the Meeting) by using the procedures described in the
CREST Manual (available from www.euroclear.com/site/public/EUI). CREST
Personal Members or other CREST sponsored members, and those CREST
members who have appointed a service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
8. In order for a proxy appointment or instruction made by means of CREST
to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’)
must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications and must contain the information required for
such instructions, as described in the CREST Manual. The message must
be transmitted so as to be received by the issuer’s agent (ID RA10) by the
latest time for receipt of proxy appointments specified above. For this
purpose, the time of receipt will be taken to mean the time (as determined
by the timestamp applied to the message by the CREST application host)
from which the issuer’s agent is able to retrieve the message by enquiry to
CREST in the manner prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST should be communicated
to the appointee through other means.
25 Corporate governance46 Financial statements
9. CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & Ireland Limited does not
make available special procedures in CREST for any particular message.
Normal system timings and limitations will, therefore, apply in relation
to the input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member, or sponsored member, or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting service provider(s)
take(s)) such action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST sponsors
or voting system providers are referred, in particular, to those sections of
the CREST Manual concerning practical limitations of the CREST system
and timings. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
10. If you are an institutional investor you may be able to appoint a proxy
electronically via the Proxymity platform. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 12
noon on Monday 2 May 2022 in order to be considered valid. Before you can
appoint a proxy via this process you will need to have agreed to Proxymity’s
associated terms and conditions. It is important that you read these
carefully as you will be bound by them and they will govern the electronic
appointment of your proxy.
Corporate representatives
11. Any corporation which is a shareholder can appoint one or more corporate
representatives who may exercise on its behalf all of its powers as a
shareholder provided that no more than one corporate representative
exercises powers in relation to the same shares.
Issued shares and total voting rights
12. As 1 March 2022 (being the latest practicable business day prior to the
publication of this Notice), the Company’s ordinary issued share capital
consists of 20,171,540 ordinary shares, carrying one vote each. Therefore,
the total voting rights in the Company as at 1 March 2022 are 20,171,540.
Questions
13. We always welcome questions from our shareholders and we request that
shareholders submit their questions to the Board before the AGM. We will
ensure that answers to questions are placed on the Company’s website.
You can submit questions up until 5pm on 3 May 2022 by emailing them to
cosec@mpac-group.com.
Communication
14. You may not use any electronic address (within the meaning of Section
333(4) of the Companies Act 2006) provided in either this Notice or any
related documents (including the form of proxy) to communicate with the
Company for any purposes other than those expressly stated.
Website giving information regarding the meeting
15. A copy of this Notice, and other information required by Section 311A of
the Companies Act 2006, can be found on the Company’s website at
www.mpac-group.com.
Mpac Group plc
Annual Report & Accounts 2021
111
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
46 Financial statements25 Corporate governance
Mpac Group plc
Annual Report & Accounts 2021
112
t
r
o
p
e
r
c
g
e
t
a
r
t
S
i
2
0
Corporate information
Registered office
Station Estate
Station Road
Tadcaster
North Yorkshire
LS24 9SG
Tel: +44 (0)2476 421100
Email: ho@mpac-group.com
Registered number
124855
Secretary
Prism Cosec Limited
Auditors
Grant Thornton UK LLP
The Colmore Building
20 Colmore Circus
Birmingham
B4 6AT
Nominated Advisor & Broker
Shore Capital and Corporate Limited
57 St James’s Street
London
SW1A 1LD
Financial PR
Hudson Sandler LLP
25 Charterhouse Square
London
EC1M 6AE
Registrars
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds
LS1 4DL
Share price
Available from:
FT Cityline – tel: +44 (0)905 817 1690
Certain national newspapers
Website
Further information is available at www.mpac-group.com
Timetable
Annual General Meeting
4th May 2022
Payment dates for preference dividend
30 June 2022 and 31 December 2022
Half-year announcement
September 2022
25 Corporate governance46 Financial statements
y
b
d
e
c
u
d
o
r
p
d
n
a
d
e
n
g
s
e
D
i
Printed sustainably in the UK
by Pureprint, a CarbonNeutral®
company with FSC® chain
of custody and an ISO 14001-
certified environmental
management system recycling
over 99% of all dry waste.
Mpac Group plc
Station Estate
Station Road
Tadcaster
North Yorkshire
LS24 9SG
Tel: +44 (0)2476 421100
Email: ho@mpac-group.com
mpac-group.com