Mpac Group plc
Annual Report and Accounts 2023
Smart thinking,
innovative solutions
We create faster, more efficient
automation and packaging systems
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.
Contents
01 Year at a glance
02 Who we are and what we do
04 Chairman’s introduction
05 New Mpac customers
06 Strategy: Our mission, purpose and values
07 Strategy: Customer focussed business model
08 Strategy: Goals and priorities
10 Operating review
14 Financial review
17 Principal risks and uncertainties
22 Section 172 statement
24 Chairman’s corporate governance statement
26 Board of Directors
28 Corporate governance report
32 Audit Committee report
36 Remuneration and Nomination Committee report
37 Annual Remuneration report
39 Remuneration policy
44 Directors’ report
47 Statement of Directors’ responsibilities
49 Independent Auditor’s report
54 Consolidated income statement
57 Statement of comprehensive income
58 Statements of changes in equity
60 Statements of financial position
61 Statements of cash flow
62 Accounting policies
69 Notes to the accounts
101 Five-year record
102 Principal divisions and subsidiaries
103 Notice of Annual General Meeting
108 Corporate information
mpac-group.com
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Year at a glance
Mpac Group plc
Annual Report & Accounts 2023
Good progress on the Group’s strategic initiatives
2023 order intake of £118.5m (2022: £83.8m)
Group full year revenue £114.2m (2022: £97.7m)
Statutory profit before tax of £4.7m (2022: £0.2m)
Underlying profit before tax of £7.1m (2022: £3.5m)
Basic earnings per share of 13.1p (2022: loss of 2.2p)
Underlying earnings per share of 26.2p (2022: 13.3p)
ORDER INTAKE
REVENUE
£118.5m
(2022: £83.8m)
£114.2m
(2022: £97.7m)
BASIC EARNINGS PER SHARE
UNDERLYING EARNINGS PER SHARE
13.1p
(2022: Loss of 2.2p)
26.2p
(2022: 13.3p per share)
PROFIT BEFORE TAX
NET ASSETS
£4.7m
(2022: £0.2m)
£64.0m
(2022: £62.2m)
REVENUE BY SECTOR
Food and beverage
£45.8m
Clean Energy
£9.1m
Healthcare
£41.6m
Other
£17.7m
REVENUE BY REGION
Americas
£56.7m
Asia
£9.7m
Europe, Middle
East & Africa
£47.8m
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Mpac Group plc
Annual Report & Accounts 2023
Who we are and 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 product manufacturing and packaging solutions.
We serve customers globally in the essential and growing sectors of healthcare,
clean energy, food and beverage, with engineering and services that increase
automation, safety, sustainability and cost effectiveness.
Headquartered in the UK, we have strategically located manufacturing and Service
hubs worldwide 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 solutions for the healthcare and clean energy 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 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 automation solutions 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
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.
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.
Clean energy
Developing partnerships and solutions
offering innovative scalable manufacturing
approach for lithium battery production line,
while reducing the unit cost.
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23 Corporate governance02 Strategic report48 Financial statements
We create and service superior automation
and packaging machines globally
Mpac Group plc
Annual Report & Accounts 2023
Sales by Sector (%)
3
Tadcaster
(UK)
215 people
6,500 m2
Wijchen (NL)
213 people
4,700 m2
Singapore
(SG)
14 people
Mississauga
(CA)
111 people
4,500m2
Cleveland
(US)
46 people
5,000m2
Manufacturing
Sales
Service
Original equipment manufacturing, combined
with a compelling service offering
Product
assembly
Filling &
Dosing
Product
handling
and infeed
Cartoning
Tray
forming
Case
packing
Palletising
£114.2m
(2022: £97.7m)
Revenue
40%
36%
16%
8%
Food & Beverage
Healthcare
Other
Clean Energy
4,000
Machines in service
4
Global manufacturing facilities
80
Countries served
4
Innovations centres
330
Global engineers and designers
8
Customer service hubs
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48 Financial statements23 Corporate governance02 Strategic report
Mpac Group plc
Annual Report & Accounts 2023
Chairman’s introduction
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“ I am pleased to report a successful turnaround in financial
performance in 2023 in addition to a smooth transition of Chief
Executive with the appointment of Adam Holland and the retirement
of Tony Steels. Adam subsequently initiated an assessment of
Mpac’s strategy and delivered a clearly defined set of strategic
objectives aimed at building upon the existing sound foundation
and delivering a growth agenda over a five-year period.”
ANDREW KITCHINGMAN CHAIRMAN
With the appointment of Adam Holland as Chief Executive in May 2023, the
Board initiated an evaluation of progress of our strategic objectives and to update
our strategic plans for the next five years. That exercise has been completed
and we now have five-year plans, focusing upon the growth potential from the
Food and Beverage and Healthcare sectors alongside the potentially exciting
opportunity from the emerging clean energy battery production sector.
Accessing the potential of our market sectors is underpinned by our
innovation and new product development roadmap, with new products and
a focus on software and platform developments, all supported by our
growing Service business.
Our investment proposition remains one of organic growth, augmented by
carefully selected acquisitions.
On pages 24 to 31 I discuss corporate governance and the Board’s activities
during the year.
Summary of results
Strong order intake in the year of £118.5m (2022: £83.8m) and Group revenues
of £114.2m (2022: £97.7m) represent a strong turnaround after supply chain
disruption impacted the prior year. Underlying profit before tax was in line with
revised market expectations at £7.1m (2022: £3.5m). Statutory profit before tax
was £4.7m (2022: £0.2m). Group net cash at 31 December was £2.1m after an
unwind of working capital (2022: net debt £4.7m).
Board changes
In 2022 I welcomed Adam Holland to the Board as Chief Operating Officer and
in May 2023 Adam was appointed as Chief Executive, following the retirement
of Tony Steels from the position.
I would like to take this opportunity to thank Tony Steels for his seven years of
service as Chief Executive at Mpac and for the service he provided to the Group.
Dividend
Having considered the trading results for 2023 and 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 2023.
Future dividend payments will be considered by the Board in the context
of 2024 trading performance and made when the Board believes it is
prudent to do so.
Outlook
The Group operates in a range of attractive growth sectors and geographic
markets and has demonstrated the ability to grow recurring Service revenue.
The opening order book of £72.5m (2022: £67.2m) is strong and diverse,
providing good coverage over 2024 forecast revenue, and I consider the
prospects for the Group over the medium term remain positive. I look forward
to reporting on the progress that will be made during 2024.
Andrew Kitchingman
Chairman
18 March 2024
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New Mpac customers
Mpac Group plc
Annual Report & Accounts 2022
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UK BATTERY
INDUSTRIALISATION
CENTRE
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Mpac Group plc
Annual Report & Accounts 2023
Strategy: Our mission, purpose and values
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OUR MISSION
We design, build and support
the machines that assemble
and package the products that
millions of people around the
world depend on.
OUR VALUES
INTEGRITY
We make and keep commitments.
We make decisions in an ethical
and transparent way. We value
diversity and inclusivity. We care,
respect and value others. We
drive a safer, healthier and more
sustainable future.
DRIVE
We act with a sense of urgency.
We believe in simpler, faster,
and focusing on what matters
to our customers. We do not
walk away from challenges.
We celebrate success.
EXPERTISE
We value expertise, curiosity
and shared insight. We take pride
in our work, the machines that
we create, and the services that
we provide to our customers.
We strive to continuously improve.
COLLABORATION
We work together, with our
customers, and our partners;
collaborating without boundaries
for the collective goal.
INNOVATION
We use our expertise to push
boundaries, creating exciting
new tailored solutions for
our customers.
MISSION
PEOPLE
VALUES
PURPOSE
OUR PURPOSE
Through innovative technology and exceptional service,
we help our customers to provide food and drink, healthcare,
and clean sustainable energy across the world.
Strategy: Customer focussed business model
The ‘One Mpac’ business model ensures we deliver consistent high-quality services
to our customers globally wherever they choose to locate a manufacturing site.
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.
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.
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 to develop
and optimise manufacturing processes. Our end-to-end capabilities help our
customers thrive in a changing world.
Mpac Group plc
Annual Report & Accounts 2023
7
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.
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INS T A L L
Consult
Our solutions live, breathe
and evolve, and so should
your business. 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.
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Mpac Group plc
Annual Report & Accounts 2023
Strategy: Goals and priorities
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GOING FOR GROWTH
Offering customers automation and
packaging solutions in our target
markets and growing our capacity to
support customers.
PEOPLE
Increasing employee engagement,
talent acquisition, development
and retention.
OUTSTANDING
CUSTOMER SERVICE
Deployment of new business tools to
support our Service teams, growing our
field service capacity.
GOING FOR
GROWTH
PEOPLE
OUTSTANDING
CUSTOMER
SERVICE
INNOVATION
A comprehensive programme to
extend our product range, including
packaging technology and battery
cell assembly capabilities
INNOVATION
OPERATIONAL
EXCELLENCE
OPERATIONAL EXCELLENCE
Focussing on project execution to drive
shorter lead times and on-time, in-full
delivery.
Strategy: Goals and priorities
New five year strategic cycle
The Group reviewed the overall strategy in the year and demonstrated it to be a clear and solid foundation for the future
prosperity of the business, whilst developing a new and revised set of strategic initiatives to deliver double digit annual growth
from the Group’s existing businesses and achieve a sustainable double digit return on sales. The five pillars were updated to
reflect the progress made and the focus within each pillar revised to deliver the most effective long term value for the Group.
Mpac Group plc
Annual Report & Accounts 2023
9
Going for
growth
2023 progress
Future plans
Customers
One Mpac
Global
Innovation
Retaining customers through
outstanding customer service
and broadening customer base
Integration of our Original
Equipment (“OE”) and
Service offerings to deliver
more compelling customer
propositions on a global basis
Expansion of the key account
management targeting and
acquisition programme
Develop and augment our clean
energy proposition
Outstanding
customer service
Service
Customers
Capacity
Systems
Expanded regional technical
resource and field service
teams
Expansion of the machine
healthcheck programme to all
areas of the business
Developing the bandwidth of
the technical service team
Excellence in project execution
programme to deliver greater
flexibility and responsiveness in
our service offering
Operational
excellence
One Mpac
One Mpac
One Mpac
Knowledge
Significant ERP upgrade
completed across the Group
ERP and business systems
blueprint deployment in
Cleveland, USA
Excellence programmes for
the project management,
operations and engineering
teams
Active programme of
knowledge sharing between
facilities
Innovation
Products
Products
Technology
Americas
Top load robotic cartoner
concept demonstrated
Extension of our battery cell
assembly capabilities and
overall clean energy proposition
Develop next generation
cartoning capabilities, including
extending our product offering
Extend Switchback product line
offering for Food and Beverage
and Healthcare markets
People
Skills
Knowledge
Talent
Skills
Graduation of second cohort of
Mpac Academy participants to
develop future leaders
Growth in breadth and depth of
the HR function
Development of a
comprehensive talent
acquisition and retention
process
Expansion of our training and
development programme to
engage more people across
the Group
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Mpac Group plc
Annual Report & Accounts 2023
Operating review
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“ I am delighted to present my first report as Chief Executive of Mpac Group plc,
announcing full year performance in line with expectations. In 2023, the Group
built momentum, reporting a substantial increase in revenue and profit in
H2 2023 over the first half year. Since joining the Group, I have said on many
occasions that Mpac is defined by Mpac people. I have been impressed by the
capability and dedication of Mpac people to serve our customers and to deliver
on our commitments. It is due to their hard work and expertise that we are able
to report record levels of order intake in 2023 and to start 2024 with a strong
and diverse order book providing good coverage of future revenues.”
ADAM HOLLAND CHIEF EXECUTIVE
Introduction
In my first full year with Mpac, and as Chief Executive since May 2023, my
focus has been on our customers, our people and our strategy.
Meeting with new and existing customers, the impact that Mpac can have on
production in our customers’ facilities is immediately apparent. Our equipment
sits at the heart of our customers’ operations, assembling and packaging the
products that their businesses produce. From the smallest business introducing
automation for the first time, to the largest multinational blue chip corporation
rolling out the latest factory expansion, Mpac performance is critical to the value
that our customers create. Our expertise, depth of understanding, and customer
insight is what sets us apart. Our focus on our customers in 2023 resulted in an
uptick in service performance, an increase in new equipment opportunities, and
record levels of order intake, providing the Group with a solid pipeline and
a strong and diverse order book going into 2024.
During 2023 I visited each of the Mpac operating sites and was fortunate
enough to spend time with very nearly every member of the global team.
As a project-based business, our people are critical to our success. From our
most recent apprentices to our most experienced colleagues, the dedication
and focus that our people bring to Mpac is outstanding. It is particularly
encouraging to see engineering hours increasing through the year as we
bring new people into the Group, complete training, and deploy them to
project activities. These activities, along with the actions that drive employee
engagement and retention, have been essential in supporting the growth
delivered in 2023, and setting the path for future years.
As part of my onboarding with the Group, and with the support of the Board, this
year we also critically assessed the Group strategy. The strategy has delivered
growth since 2016, and continues to provide a solid foundation for future growth
today. In 2022 the Group was impacted by short-term operational issues which
affected semiconductor supply chains globally, but performance in 2023 has
demonstrated that the fundamentals are sound. Maintaining a clear and stable
strategy helps our teams to focus on what is important, finding new ways to
deliver on firm objectives. In 2023 we saw an acceleration in growth, as we
started to implement new ways of delivering strategic change, focussing on
accessing the opportunities in the attractive markets in which we operate.
Operationally, the Group delivered a strong performance in 2023, growing
Original Equipment (“OE”) and Service order intake and revenue whilst
improving margins, and making good progress with the unwinding of working
capital. Mpac operates in large, resilient markets and has a significant
£118.5m
Overall Group order intake
(2022: £83.8m)
£72.5m
Order book for 2024
(2023: £67.2m)
£114.2m
Group revenue
(2022: £97.7m)
£82.4m
Original Equipment revenue
(2022: £74.6m)
£31.8m
Service revenue
(2022: £23.1m)
Revenue by geography
Americas £56.7m
Europe, Middle East
& Africa £47.8m
Asia £9.7m
opportunity to increase market share. By remaining focussed on executing
the long-term strategy of developing order intake growth, improving margins
through the development of our Service business and increased operational
efficiencies, the Group will continue to deliver profitable growth.
The scale of the opportunity with our customers in attractive growth markets
is clear. The Board and I are excited about the next growth phase for the
Group, and we remain well placed to deliver on our long-term strategy.
Strategic update
Under our stable Group strategy, we have adopted an updated set of strategic
initiatives, linked to a new five-year financial plan under which we seek
to deliver double digit annual growth from the Group’s existing businesses
and achieve a sustainable double digit return on sales. A key element of our
growth strategy is to focus on extending our customer base with new, global,
blue chip key accounts and in 2023 Mpac was successful in securing orders
from several of the targeted global customers, thereby providing a strong
platform for future growth. These blue chip customers chose Mpac due to the
quality of our engineered solutions, our ability to provide flexible automation
and packaging solutions and our global support infrastructure.
Our strategy remains focussed on our core markets, but with a broadening
customer base, an extended product portfolio and a well-executed
Service offering.
Our updated strategy focuses on the following five pillars to drive growth:
Going for Growth – Offering customers automation and packaging solutions in our
target markets, growing our capacity to support customers, and supporting the
development of our commercial team with a new programme: Sales Excellence.
Outstanding Customer Service – Deployment of new business tools to
support our Service teams, thereby growing our field service capacity. We
provide our customers with a comprehensive portfolio of service products to
ensure they maximise their return on investment.
Operational Excellence – Focussing on project execution, including project
management, engineering, operations and supply chain processes, supported
by integrated resource planning, to drive shorter project lead times and
on-time-in-full delivery.
Innovation – A comprehensive programme to extend our product range,
including packaging technology and further development of our battery cell
assembly capabilities.
People – Increasing employee engagement, talent acquisition, development
and retention.
Going for Growth
Our goal is to broadly double revenue from our existing businesses over our
five-year strategic planning period. Our addressable end market is substantial,
resilient to wider macro-economic cycles and growing. The Group’s objective
is to deliver sustainable growth in our target end markets, capturing market
share by increasing the number of touch points with our customers and the
amount of time that we spend with them. We have increased the size of our
commercial team and appointed additional experienced senior leaders. In 2023
we invested extensively in brand awareness and marketing, exhibiting at the
flagship Interpack (Europe) and Pack Expo (US) trade shows and launching
our first SEO programme to drive online presence. In 2024 we will continue to
expand our commercial teams and introduce a comprehensive sales excellence
programme to optimise our prospect pipeline and conversion rate.
Our opportunity in Clean Energy remains a focus for the Group. In July 2021,
the Group signed a contract with FREYR Battery (“FREYR”), a developer
of clean, next-generation battery cell production capacity, incorporating
24M Technologies (‘’24M’’) battery platform technology, 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
supplied by Mpac will support FREYR in achieving its ambitious plans for a
more sustainable future through semi-solid lithium-ion technology. Mpac
brings production equipment, services and know-how in the automation of
production processes, applied in this project to industrialise the battery cell
production. In June 2023, we announced the award of a pre-engineering order
to begin work to scope the requirements for Gigafactory production lines
for FREYR. In October 2023 we also announced the award of an engineering
contract for Ilika plc, to support their work on scaling up solid-state lithium-ion
technology, further cementing our position in the Clean Energy sector. The
Group continues to work closely and collaboratively with FREYR, 24M, Ilika and
others in the development of battery cell production capability.
Our strategy remains focussed on our core
markets complimented by outstanding
customer service.
Mpac Group plc
Annual Report & Accounts 2023
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Mpac Group plc
Annual Report & Accounts 2023
1212
Case study: Clean energy
During 2023, Mpac supported both FREYR and Ilika
in delivering several key milestones.
2024
Targeting full-speed
production in 2024.
2023
June
Mpac and Freyr begin
collaboration on their
US Gigafactory whilst
continuing support for
Norwegian projects.
2023
October
Interim milestone of
automatic electrode
casting with solvent slurry
at the CQP facility with
representatives from Nidec
Corporation present.
2023
March
Mpac successfully installs
system within CQP facility
ahead of Freyr’s Chapter
One opening event in
Mo i Rana Norway.
Detailed system
design, machine build,
commissioning and FAT
to be completed in 2024.
2024
Mpac successfully
completes Proof of
Principle work, a key
engineering milestone.
2023
December
Mpac, Ilika and the UK
Battery Industrialisation
Centre collaboratively
agree on concept for the
assembly system.
2023
December
Mpac, Ilika and the UK
Battery Industrialisation
Centre announce
£2.7m partnership for
industrialisation of solid-
state battery technology
for electric vehicles.
UK BATTERY
INDUSTRIALISATION
CENTRE
2023
October
“Following the official opening of the FREYR
CQP facility in Mo i Rana, we look forward to progressing
our relationship with Mpac and work together to meet
our ambitions for speed and scale in producing clean and
sustainable battery solutions.” Einar Kilde, EVP Project Execution FREYR
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Operating review continued
Outstanding Customer Service
We have made excellent progress in growing our Service business, supported
by expanding the field service and technical resources located in the regions
our customers operate. Our goal remains to generate a sustainable 30% of
Group revenue from these services and we are well on track to meet this target
after a very strong 2023. We will continue to help our customers meet their
operational needs by developing the experience and capacity of our Service
team aided by the deployment of Service business tools to both enhance our
customers’ experience and to provide business intelligence. The development of
digital service products with advanced engineering, information management,
connected services and machine insights underpins our offering and ensures
that our customers can fully embrace Industry 4.0.
Operational Excellence
Our strategic objective remains consistent: building an increasingly flexible
organisation which can respond with agility to our customers’ needs,
leveraging our global resources. Our global ERP and business systems
blueprint, already implemented in our facilities in the Netherlands, Canada
and the UK, was successfully rolled out to our facility in the US in H1 2023 and
provides the Group with a single, fully flexible, operating model. The updated
strategic plan for operational excellence will now focus on project execution,
with programmes for our project managers, engineering, and operations
teams. The goal is to further leverage our resources to reduce lead times and
maximise utilisation between the facilities.
Innovation
In 2023 we made significant progress in the development of our battery cell
assembly capabilities and introduced to the market the concept of our first
top load robotic cartoner, which will provide Mpac with access to a significant
additional market segment. The next phase of our innovation roadmap will
complete this launch, followed by a comprehensive and ambitious programme
to extend our cartoning and end of line product offering.
People
Our employees are critical to the success of our Group. In 2023 we elevated
our focus on people with the appointment of a senior HR leader, furthering
our attention on development, talent acquisition, retention and engagement.
During 2023 we also added HR managerial bandwidth, and are proud to
have completed the second year of our Mpac Leadership Academy. The 17
graduates from two cohorts of Mpac Academy now extend the pool of future
leaders available to the Group.
Environmental, Social & Governance
We are fully committed to improving our Environmental, Social & Governance
(‘’ESG’’) performance in all areas, meeting our own needs without compromising
the ability of future generations to meet theirs. Sustainability is also increasingly
important to our customers. Our engineered automation and packaging solutions
provide customers with sustainable and environmentally sound equipment that
support the global megatrends of reduction in packaging, particularly single-
use plastics, reducing waste and energy use, and increasing overall equipment
effectiveness. Our end-to-end capabilities help our customers to achieve their
sustainability goals.
Our approach to our people and the communities in which we operate as well
as governance considerations will be set out in our 2023 ESG report to be
published in the first half of 2024.
Acquisition strategy and update
The Board continues to seek and evaluate potential acquisition opportunities.
Our focus is to identify 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 key market sectors. The
Company will provide updates on acquisitions when appropriate to do so.
Outlook
Full year 2023 order intake was the highest ever for Mpac and the Group built
momentum throughout 2023, reporting a substantial increase in revenue and
profitability over the prior year. This momentum has continued into 2024,
with trading in line with expectations. The Group ended the year in a net
cash position, aided by working capital improvements which are expected to
continue in FY24. Our balance sheet remains healthy and provides us with the
ability to invest in the Group for growth.
We have an expanding order book and prospect pipeline from our existing and
target blue chip customers and an exciting new product development roadmap
to launch in the coming years. Under our new strategic and five-year plans we
are seeking to deliver OE and Service growth at improved margins, doubling
revenue from our existing businesses by the end of the strategic period. The
Board believes the Group’s long-term prospects are strong and that the Group
is well positioned to meet its strategic objectives.
Adam Holland, Chief Executive
18 March 2024
Our employees were critical to the success
of our Group in 2023, and will continue to be
integral to every success going forward.
Mpac Group plc
Annual Report & Accounts 2023
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Mpac Group plc
Annual Report & Accounts 2023
Financial review
14
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“ The Group delivered on its expectations to report
record order intake, a 17% revenue increase and a
doubling of pre tax profit, all whilst reducing the
2022 investment in working capital.’’
WILL WILKINS GROUP FINANCE DIRECTOR
Revenue and operating results
Group revenue of £114.2m (2022: £97.7m) represents an increase of 17%
compared to the previous year. OE revenue increased by 10% at £82.4m (2022:
£74.6m), underpinned largely by growth in EMEA and Asia. Services revenue
grew by 38% to £31.8m (2022: £23.1m), driven predominantly by growth in
the Americas and EMEA, assisted by the first service projects in the Clean
Energy sector. The rate of revenue growth in all regions benefitted from the
reduction in supply chain lead times and more consistent supplies of key
electronic components.
Overall order intake for the Group grew by 41% to £118.5m (2022: £83.8m),
due primarily to the reversal of prior deferrals in customer investment decision
making in the light of a more positive global economic outlook. We made
good progress with the closing 2023 order book which increased to £72.5m
(2022: £67.2m). The value of the closing order book continues to provide
good coverage over the forecast 2024 revenue. We remain vigilant to project
execution risk and the operational efficiency of the business.
As anticipated, revenue and profit before tax in H2 2023 were substantially
above H1 2023, aided by the normalisation of margins through 2023 with full
year underlying operating profit of £7.8m (2022: £3.9m), a 100% increase on
2022 and in line with market guidance.
The extension of project build times in 2022 was partially reversed during
2023, along with the timing of significant projects, led to lower working capital
and significantly improved cash generation during the year, though the level
remains above historical levels.
Underlying profit before tax for the year of £7.1m (2022: £3.5m), net of third
party interest charges of £0.7m (2022: £0.4m), was 103% up on 2022 and in
line with revised market guidance.
The extension of project build times in 2022 was partially reversed during 2023
leading to lower working capital and significantly improved cash generation
during the year.
Revenue by region was Americas £56.7m (2022: £52.8m), EMEA £47.8m
(2022: £37.5m) and Asia £9.7m (2022: £7.4m).
Key Performance Indicators:
The Group uses a range of measures to monitor progress against its strategic and financial plans. The key performance indicators are presented below:
£118.5m
Overall Group order intake
(2022: £83.8m)
£114.2m
Revenue
(2022: £97.7m)
£7.1m
Underlying profit before tax
(2022: £3.5m)
6.2%
Underlying PBT return on sales
(2022: 3.6%)
26.2p
Underlying EPS
(2022: 13.3p)
Statutory Key Performance Indicators:
The statutory measures relating to the underlying Key Performance Indicators above are as follows:
£4.7m
Profit before tax
(2022: £0.2m)
4.1%
PBT return on sales
(2022: 0.2%)
13.1p
Basic EPS
(2022: loss of 2.2p)
Revenue by sector was food & beverage £45.8m (2022: £45.7m), healthcare
£41.6m (2022: £30.1m), clean energy £9.1m (2022: £11.1m) and other £17.7m
(2022: £10.8m).
Individual OE contracts, and, to a lesser extent, contracts within 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 £86.3m (2022: £57.2m) was 51% above the prior year due to
customer orders being delayed from 2022 and the growing confidence in the
markets we serve. OE revenues of £82.4m (2022: £74.6m) were 10% ahead of
the prior year.
OE revenue generated in the Americas region was level with the prior year at
£40.8m (2022: £40.9m).
In EMEA, OE revenue in the year was £34.0m (2022: £27.8m), a growth of
22% due primarily to a recovery in the performance of our traditional markets
of healthcare, food and beverages offsetting the lower revenue from clean
energy. OE revenue in Asia was £7.6m (2022: £5.9m).
Service
Order intake for the Service division was 21% above 2022 at £32.2m
(2022: £26.6m). Service revenue of £31.8m (2022: £23.1m) was 38% above
the prior year.
Service revenue in the Americas showed strong growth at £15.9m compared to
£11.9m in 2022, with the increase being driven largely by the healthcare and food
& beverage sectors. EMEA revenue in the year was £13.8m compared to £9.7m
in 2022, driven by the commencement of service for the clean energy sector and
an appealing product proposal in the key markets of healthcare and food and
beverages. Asia revenue in the year was £2.1m compared to £1.5m in 2022.
Operating results
Gross profit was £31.6m (2022: £24.4m) and underlying selling, distribution and
administration costs were £23.8m (2022: £20.5m).
Underlying operating profit was £7.8m (2022: £3.9m). Underlying profit after
tax was £5.3m (2022: £2.7m) and statutory profit for the year was £2.7m (2022:
loss of £0.4m).
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,
reorganisation costs 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.
Reconciliation of underlying profit before tax to profit before tax
Underlying profit before tax
Non-underlying items
Defined benefit pension scheme –
other costs and interest
Acquisition costs
Reorganisation costs
Acquired intangible asset amortisation
Non-underlying items total
Profit before tax
Revenue (£m)
120
100
80
60
40
20
0
2019 2020 2021 2022 2023
2023
£m
7.1
0.4
–
(1.2)
(1.6)
(2.4)
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2022
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(0.3)
(0.6)
(1.6)
(3.3)
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Underlying profit before
tax (£m)
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6
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2019 2020 2021 2022 2023
Underlying operating return
on sales (%)
Net assets (£m)
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8
6
4
2
0
2019 2020 2021 2022 2023
70
60
50
40
30
20
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0
2019 2020 2021 2022 2023
Mpac Group plc
Annual Report & Accounts 2023
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Annual Report & Accounts 2023
Financial review continued
16
Net financing income was £0.8m (2022: £0.2m). Tax on underlying profit before
tax was £1.8m (2022: £0.8m). The tax charge on the Group’s profit before tax
was £2.0m (2022: £0.6m).
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 2023. 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 £11.0m (2022: £4.2m) with £8.0m of
borrowings drawn at both the 2023 and 2022 year ends. Net cash inflow
before reorganisation was £13.1m (2022: outflow of £12.8m) after a decrease in
working capital of £4.7m (2022: outflow of £17.7m) and defined benefit pension
payments of £2.3m (2022: £2.1m). Reorganisation costs of £0.8m (2022:
£0.8m) were paid in the year. Net taxation payments were £1.1m (2022: £0.4m).
Capital expenditure on property, plant and equipment was £1.1m (2022: £1.0m),
and capitalised product development expenditure was £1.5m (2022: £1.4m).
Net current assets at the end of the year were £15.1m (2022: £12.2m) and net
assets at the year end were £64.0m (2022: £62.2m).
The Group entered into a three-year funding agreement with HSBC in 2022,
which provides the Group with a £20.0m revolving credit facility (“Facility”) to
support future growth. The Facility also provides several 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 Group utilised £8.0m of the Facility in the year.
There were no significant changes during 2023 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 currencies other than the functional
currencies of its various operations.
Working capital
Pension schemes
The Group is responsible for defined benefit pension schemes in the UK and
the US, 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 2023 and was based on the information used for the
funding valuation work as at 30 June 2021, updated to reflect both conditions
at the 2023 year end and the specific requirements of IAS 19. The smaller US
defined benefit schemes were valued as at 31 December 2023, using actuarial
data as of 1 January 2023, 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 £32.2m (2022: £31.5m) which is included within the Group’s
assets. The value of the scheme’s assets at 31 December 2023 was £309.0m
(2022: £311.2m) and the value of the scheme’s liabilities was £276.8m (2022:
£279.7m). Despite the continuing volatility in financial markets around the
world in 2023, the scheme’s protection strategies, notably its use of Liability
Driven Investments, ensured that the surplus was protected.
The IAS 19 valuations of the US pension schemes showed an aggregated net
deficit of £1.8m (2022: £2.1m) with total assets of £7.7m (2022: £8.1m).
During the year the Company made payments to the UK defined benefit
scheme of £2.0m (2022: £2.0m).
The UK scheme’s triennial valuation as at 30 June 2021 reported a deficit of
£28.4m. The contributions are £2.0m per year, increasing at 2.1% per year, with
a recovery period of four years and six months. The scheme deficit on a triennial
valuation basis had reduced ahead of this projection at 31 December 2023.
Equity
Group equity at 31 December 2023 was £64.0m (2022: £62.2m). The
movement arises mainly from the profit for the year of £2.7m, a net actuarial
loss in respect of the Group’s defined benefit pension schemes of £1.7m and
changes in the fair value of cash flow hedges of £0.8m; all figures are stated
net of tax where applicable.
The global supply chain issues experienced in 2022 began to ease in early
2023, though supply chain lead times remain extended compared to earlier
years, with the consequent extension of the Group’s working capital cycle.
The improvements in supply chain management led to £4.7m of cash being
generated from working capital movements in the year, compared to a £17.7m
outflow of funds into working capital in 2022. Further improvements in working
capital levels are anticipated throughout 2024.
Will Wilkins
Group Finance Director
18 March 2024
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Principal risks and uncertainties
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 2023
17
Risk
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.
POLITICAL, ECONOMIC AND MARKET CYCLES
The Group is potentially affected by global political
and local and global 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 changing economic factors and
volatility, governmental activities, such as escalating
political tensions, regulation and taxation or as a
consequence of competitive developments within
the packaging machinery market.
Mitigation
2023 Movement
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.
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. Our One Mpac
strategy allows the business to flex capacity between sites to
help mitigate local cycles.
The usual market cycles have been disrupted by the heightened
global economic volatility, with shifts in sector demand and new
opportunities being accelerated. Mpac has benefitted from new
opportunities and sought to mitigate the impacts where possible,
including those from energy insecurity.
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.
In respect of mitigating against the impact of competitive
disruption, the Group actively monitors (via publicly available
information) and responds to both product and competitor
innovation, as well as seeking opportunities for acquisitions
where aligned to its strategic objectives.
Reducing
Whilst the supply chain issues relating to
unforeseen delays have largely been resolved,
lead times remain extended, which has extended
the overall lead times for projects and the
conversion of orders to cash. In partial mitigation
of this effect, inventory levels have been
increased and other options, including alternative
sources of supply, engineering rework and
closer management of the supply chain have
been employed.
Unchanged
Whilst the political environment is more consistent
than in previous periods, economic headwinds,
especially global interest rates and inflation,
have resulted in delays and changes to customer
investment intentions.
Current high employment levels around the
globe, in addition to driving inflation, have also
resulted in increased staff turnover, mitigated by
clear processes, established knowledge retention
and transfer practices and established local
management teams.
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Annual Report & Accounts 2023
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Principal risks and uncertainties continued
Risk
REGULATORY CHANGE
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.
The Group may also be affected by changes
in regulations affecting its manufacturing and
distribution processes, especially in areas such as
health and safety and environmental compliance.
Mitigation
2023 Movement
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, provides some mitigation against
sudden change.
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’s operations are closely monitored by internal processes,
emergent risk reviews and ongoing risk assessments to ensure both
regulatory compliance and a safe working environment.
Unchanged
The demand for new packaging and innovation in
this area has continued unabated, to the benefit
of the Group.
The proposed new EU Packaging Directive may
change the packaging market in Europe but
represents a positive opportunity for Mpac Group
as we support our customers on their journey to
a more sustainable future.
LOSS OF TRADING PARTNERS
The Group faces the general risk of trading
partners, including both customers and suppliers,
ceasing to operate or trade with Mpac; 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.
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.
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.
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.
Our One Mpac strategy allows the business to flex capacity
between sites to help manage fluctuations in business levels
and demand.
Customers – Unchanged
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. Although economic
circumstances have become more volatile, the
strength of our customer base has both increased
and diversified during the period, so this risk has,
overall, remained unchanged.
Suppliers remain at greater risk of distress in
difficult or changing market conditions and positive
steps towards additional supplier diversification
have been taken, though no material supplier
failures have been suffered in the period.
Unchanged
Although the Group is now pursuing larger
projects than usual, especially in the Clean Energy
sector (with Freyr and others), it utilises strong
contract management processes which have
ensured that the Group has partially mitigated
and contained the risks from cost over-runs and
delays. The Group continues to focus on plans
to flex, optimise and grow our staff and factory
resources to best manage expected growth.
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2023 Movement
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.
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
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.
Unchanged
The Group’s sites have demonstrated considerable
resilience to remain operational in changing
circumstances.
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.
Appropriate contractual protections continue to be
included in the Group’s contracts to mitigate the
direct financial cost of such an event.
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
reduced compared to 2022 and the use of
hedging, short quote validity periods and matching
of supply locations to customers continues to
minimise the impact.
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.
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.
AVAILABILITY OF FUNDING
The banking facilities in place prove insufficient
for the needs of the Group to meet its growth
objectives.
The Group has access to a £20.0m revolving credit facility with
HSBC committed to July 2025, of which £8.0m is currently drawn
and the Group holds cash balances of £11.0m.
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.
Increasing
The organisation and resource available to
malicious actors seeking to breach IT security
continues to develop rapidly.
The group maintains best practice in this area and
there has been no significant change in the period.
A third party expert review of Mpac IT security and
systems was completed, highlighting no significant
areas of concern.
Reducing
The committed HSBC facility plus available free
cash provide the Group with adequate funding
to meet its longer term strategic objectives and
operating capital requirements.
Mpac Group plc
Annual Report & Accounts 2023
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Mpac Group plc
Annual Report & Accounts 2023
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Principal risks and uncertainties continued
Risk
Mitigation
2023 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
£276.8m at 31 December 2023 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
£309.0m at 31 December 2023, 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 £2.1m per annum in respect
of deficit funding following an actuarial funding
valuation as at 30 June 2021. The UK scheme is
subject to a full actuarial funding valuation as at
30 June 2024 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.
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.
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 apprise 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 increased since the prior
year and have led to a slight improvement in
funding levels.
The investment strategy of the fund has been
largely derisked to eliminate investment and
inflation risk, though some asset valuation
risk remains.
The pension schemes remain at the risk of
being affected by regulatory changes.
The Group has a comprehensive risk management and review
process, including contract risk management, 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 litigation in the period.
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 has
recently rebranded and relaunched its whistle
blowing policy to encourage staff to be vigilant
in identifying any potential concerns and be
confident in speaking up.
23 Corporate governance02 Strategic report48 Financial statements Mpac Group plc
Annual Report & Accounts 2023
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Risk
Mitigation
2023 Movement
CONTRACTUAL OBLIGATIONS
The Group could fail to deliver contracted solutions
and/or fail in our contractual execution due to
delays, technical issues 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
Contracts are managed and delivered by programme
management teams that regularly review risks and take
appropriate action, including extensive validation processes,
assessments of execution risks and tight focus upon both
contract and change management.
Review and approval process for significant and higher-risk
contracts in place at Group level, including appropriate contract
risk management processes prior to acceptance.
Diversified nature of the Group mitigates exposure to single
contracts.
Unchanged
Stresses on global supply chains and the supply of
qualified staff continue to add risks to the Group’s
ability to deliver its contractual obligations.
Expanded range of products and applications
increases the risk of product delays and/or
quality issues.
Our drive for growth can expose us to more
onerous contractual terms.
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
Goverance issues is increasing. The challenge is
demonstrating the Group’s place in combating
these issues. Mpac is a low generator of
emissions and waste, with the greatest potential
impact of the Group to reduce emissions being
in the production of operationally and energy
efficient machinery.
48 Financial statements23 Corporate governance02 Strategic report
Mpac Group plc
Annual Report & Accounts 2023
Section 172 statement
22
Section 172(1) of the Companies Act 2006 (“S172”) requires the 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, the impact of the Company’s
operations on the community and the environment and the likely long-term consequences of their decisions.
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 2023, we employed 508 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 and develops the Group’s 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. During the year, the
Group employed its first HR Director to review and implement a new people strategy for the Group, which will include a five-year strategy to align
with the overall business strategy; globally align the Group’s vison, mission and values statement; review the communications and engagement plan;
updated Group objectives; review the reward and benefit structure across the Group; and design and implement a new talent acquisition process.
The Board is updated at each Board meeting on health and matters. There have been no significant accidents during the year. During the last quarter
of the year, a new hazard reporting system, SafetyQube, was implemented across all Group sites which enables increased emphasis on reporting
hazards and implementing preventative measures. The new system also enables enhanced accident reporting and any commonality in accidents to be
highlighted. Specific training is then provided to prevent similar accidents from happening in the future.
SUPPLIERS
The Group now has dedicated supplier managers based in both the Americas and EMEA who work closely with its suppliers to ensure that the
relationships are productive for all parties.
The Group’s Modern Slavery Act statement was reviewed and updated as part of a new Group supplier manual being drafted. The manual will also
include the Group’s Anti-Bribery and Ethics policies.
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 66.
CUSTOMERS
The Group has good relationships with its customers, some of whom are long-standing.
Regular meetings and discussions are held with the customers to keep them informed of the progress of their projects and for them to provide details
of any changes which they require to be made mid-project.
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 and aids local community projects through organisational support.
Further details on the Company’s strategy and long-term decisions are set out in the Chairman’s introduction and Operating review on pages 4 to 13. 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 44 to 46.
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 19 March 2024.
23 Corporate governance02 Strategic report48 Financial statements Mpac Group plc
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Chairman’s corporate governance statement
Mpac Group plc
Annual Report & Accounts 2023
24
ANDREW KITCHINGMAN
CHAIRMAN
“ We are committed to
excellence in corporate
governance, and maintain
clear policies and practices
that promote good
corporate governance.”
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As Chairman of the Company, I have pleasure in presenting the Corporate
Governance Statement for 2023.
The QCA Corporate Governance Code 2018 (“QCA Code”)
Sound governance is fundamental to ensuring that a Company is run effectively
and responsibly, which assists in a Company’s long-term success. Accordingly,
the Board has chosen to follow the QCA Code since 2018. The Board is aware
that the QCA has introduced a new Code which will come into effect for the
Company’s 2025 financial year, the Company is currently reviewing to assess if
there will be any changes to the Corporate Governance framework as a result
of this.
Due to the ever-changing nature of corporate governance, there is a need to
ensure that policies and practices are kept under review to ensure that the
Company meets the required standards, while also ensuring that these are in
line with the growth and overall strategic plan for the Company.
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.
The Company believes that during 2023 it has complied with the 10 principles
set out within the QCA Code as shown in the following table.
Andrew Kitchingman
Chairman
18 March 2024
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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 strategic aims and objectives of the Group are set by the Board. The
strategy is set out on pages 6 to 9 and on the Group’s website.
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.
The Annual General Meeting serves as the perfect opportunity to meet and
engage with its retail shareholders. When implementing the Group’s strategic
aims, the Board takes into account expectations of the Company’s shareholders
and also its wider stakeholders and social responsibilities.
4. Embed effective risk management, considering both opportunities and
threats, throughout the organisation.
The responsibility for the Group’s internal control and risk management
systems also falls under the Board’s remit.
The risks faced by the Group are regularly reviewed by the Board, which
ensures that the mitigation strategies in place are the most effective and
appropriate for the Group’s operations. The Group regularly reviews and
updates it's risk register, the principal risks to the Group are disclosed on pages
17 to 21 of the Strategic Report.
Maintain a Dynamic Management Framework
5. Maintain the Board as a well-functioning, balanced team led by the Chair.
In my role as Chairman, I regularly consider the operation of the Board as
a whole and the performance of the Directors individually. There is a Board
effectiveness test performed annually.
6. Ensure that between them the Directors have the necessary up-to-date
experience, skills and capabilities.
Directors attend seminars and industry events from time to time as appropriate
to assist with training.
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.
All appointments to the Board are on merit, but with due consideration to the
need for diversity on the Board. Such appointments are made to complement
the existing balance of skills and experience on the Board.
The Board carries out a formal internal 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.
The Company is committed to the Group operating to the highest standards of
ethical behaviour. In support of the Group’s business objectives, the Company
strives for excellence in all it does through five key values: honesty & integrity,
respect, empowerment & responsibility, delivery of commitments, and open
communication. More information about the Group’s Ethics Policy is available
on the Company’s website.
9. Maintain governance structures and processes that are fit for purpose and
support good decision-making by 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 attend the
Group’s offices and other Group events.
Build Trust
10. Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders.
The application of the QCA Code is monitored by the Board which will revise its
governance framework as necessary 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.
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Board of Directors
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Andrew Kitchingman FCA
Independent Non-Executive Chairman
Will Wilkins
Group Finance Director
Sara Fowler
Independent Non-Executive Director
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Appointment: Andrew joined the Board on 11 May
2016 as a Non-Executive Director and was appointed
Chairman of the Board on 19 April 2018.
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
External appointments:
Chairman of H.C. Slingsby PLC
Non-Executive Director of Andrew Sykes
Group plc
Chairman of British Board of Agrément
Treasurer of Ripon Cathedral
Adam Holland
Chief Executive Officer
Appointment: Adam joined the Board as Chief
Operating Officer on 1 November 2022 and was
appointed Chief Executive Officer on 17 May 2023.
Skills and experience: Adam is a Chartered Engineer
and Chartered Physicist, with a Masters degree in
Natural Sciences from the University of Cambridge,
and qualifications from Warwick Business School
UK and the Tuck School of Business USA. Adam
previously held a number of senior executive and
company director positions in global engineering
and technology companies including JCB, Siemens
and Rolls-Royce plc., and in the space and defence
sector at AEA Technology plc.
Key strengths:
Extensive Commercial and Operational experience
gained from roles based in both the UK and
internationally
Proven track record in business development
More than 20 years leading businesses to deliver
market share growth
Appointment: Will joined the Board as Group Finance
Director on 22 June 2018.
Appointment: Sara joined the Board on 6 March
2020 as a Non-Executive Director.
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, Group
Operations Director and a senior project director
role. 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
Doug Robertson
Independent Non-Executive Director
Appointment: Doug joined the Board on 1 November
2018 as a Non-Executive Director.
Committees: Chair of the Audit Committee and
member of the Remuneration and Nomination
Committee.
Skills and experience: Doug 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 multinational financial management
experience in both public and private companies
Strategic planning
Acquisitions and divestments
External appointments:
Non-Executive Director of HSS Hire Group plc
Non-Executive Director of Zotefoams plc
Committees: Chair of the Remuneration and
Nomination Committee and a member of the
Audit 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.
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
External appointments:
Chair of BHSF Group Limited
Matthew Taylor
Independent Non-Executive Director
Appointment: Matthew joined the Board on
21 October 2021 as an independent Non-Executive
Director.
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 CEO of
Bekaert SA, a role he held until 2020.
Key strengths:
Extensive senior executive experience
Steel and Manufacturing industry experience of
over 20 years
Strong experience of good corporate governance
External appointments:
Non-Executive Director of Surface Transforms plc
Non-Executive Director of Strip Tinning Holdings plc.
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Annual Report & Accounts 2023
Corporate governance report
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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 2023:
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 & Nomination
Committee. Further details on the role of the Remuneration & Nomination
Committee 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.
Directors
A J Kitchingman
Dr A Steels1
A P Holland
W C Wilkins
S A Fowler
D G Robertson
M G R Taylor2
Board Meeting
Attendance
10/10
3/4
10/10
10/10
10/10
10/10
9/10
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. Neither Executive Director
holds an external non-executive directorship.
1 Dr Steels stepped down as a Director on 17 May 2023.
2 Mr Taylor was unable to attend one of the meetings due to a clash in the diary.
Composition and independence of the Board
The Board currently 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 27. 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.
Non-Executive Directors
Each of the Non-Executive Directors has entered into a letter of appointment
with the Company, which sets out the duties of the Director and the time
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.
Our Board and Committee structure
Chairman
The Board
Company
Secretary
Remuneration and
Nomination Committee
Audit Committee
Executive Leadership Team
Chief Executive
Group Finance Director
Innovation Director
Regional Director – Americas
Regional Director – EMEA & APAC
Managing Director – UK
Managing Director – Netherlands
Managing Director – USA
Corporate Development Director
Group HR Director
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 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. 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.
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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 Committee and a combined
Remuneration & Nomination Committee, both of which operate within a scope
and remit defined by specific Terms of Reference determined by the Board.
These Terms of Reference are available on the Company’s website. The Annual
Report includes a report from each of these Committees describing the work
each Committee has undertaken during the year. 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.
How the Board operates
The Board is responsible for:
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;
relationships with shareholders and other major stakeholders;
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. Anything falling outside of the schedule of
Matters Reserved for the Board 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 11 times during the year. Directors
also have contact on a variety of issues between formal meetings and there
is also contact with the Executive Leadership Team of the Group. An agenda
and accompanying detailed papers, covering key business; governance
issues; and 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.
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.
The main activities of the Board during the year
During the year, the majority of the meetings were held in-person, with one
meeting held in Cleveland, USA.
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 this financial year included:
approval of annual and half-year report and financial statements;
dividend strategy;
review and approval of budget;
strategy review and its implementation;
clean energy strategy;
going concern and cash flow;
material customer proposals;
consideration of banking arrangements;
investor relations;
acquisitions and integration;
board succession planning; and
review of corporate structure.
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Corporate governance report continued
External advisers
The Board seeks advice on various matters from its nominated adviser Shore
Capital, joint-broker Liberum Capital, 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 role effectively.
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 and monitor 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 internal 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 2023 and the
results discussed by the Board. No substantive actions were required 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 17 to 21.
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.
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.
Business ethics
The Board is committed to the Group operating to the highest standards of
ethical behaviour. The Group’s Ethics policy 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.
23 Corporate governance48 Financial statements
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. The whistleblowing policy was re-branded as "Speak Up"
during the course of the year.
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 15 May 2024. The Notice of Annual General
Meeting is set out on pages 103 to 107 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.
Andrew Kitchingman
Chairman
18 March 2024
Shareholders
The Company welcomes contact with its shareholders and they can contact
the Company via the Investors section of the website. 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. 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 brokers, 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.
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Audit Committee report
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“ I am pleased to present
my report as Chair of
the Audit Committee
for the year ended
31 December 2023.”
DOUG ROBERTSON
CHAIR OF THE AUDIT COMMITTEE
Chair’s letter
Dear Shareholders,
I am pleased to present my report as Chair of the Audit Committee for the year
ended 31 December 2023. In this Report I have sought to provide investors
and other stakeholders with an understanding of the approach that the Audit
Committee (the “Committee”) has taken to provide assurance over the 2023
Annual Report and Accounts. The Statement of Directors responsibilities in
respect of the Annual Report can be found on page 47.
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 by 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 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 Committee receives reports from management covering the key areas of
estimation and judgement underpinning the financial statements and ensures
that the related disclosures reflect supporting information. It challenges
management to explain and justify their interpretation. The Committee is
supported in this by the external auditors who present their findings to the
shareholders in the Independent Auditor's Report.
The 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 ensure that the Committee’s agenda is kept under review and
aware of relevant developments. An internal evaluation of the Committee's
performance has been undertaken in respect of 2023 and the results discussed
by the Committee. No substantive actions were required as a result of the
Committee evaluation.
Doug Robertson
Chair of the Audit Committee
Audit committee report
The Committee met four times during 2023 and the following served as
members during the year.
Committee member
Meeting attendance
Doug Robertson – Chair
Andrew Kitchingman
Sara Fowler
Matthew Taylor
4/4
4/4
4/4
4/4
The following regularly attend meetings:
the Executive Directors
the Group Financial Controller
representatives from the external auditors, PKF Littlejohn LLP (‘PKF’)
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 and the Chair also has private meetings with the audit partners at
least twice per year.
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 27. The members of the Committee are all
independent non-executive directors. In addition to having extensive business
experience as detailed in their biographies, members of the Committee also
have extensive financial experience as recommended by the QCA Audit
Committee Guide.
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;
23 Corporate governance48 Financial statements
Reviewing the whistleblowing policy on an annual basis;
Reporting to the Board on how the Committee has discharged its
responsibilities; and
An assessment of the risk management process including the identification
of key risks and the monitoring and mitigation thereof.
The Terms of Reference for the Audit Committee can be found on
www.mpac-group.com.
Activities during the year
A summary of the Committee’s principal activities in 2023 is set out below:
Review the draft Annual Report and Accounts 2022 and draft preliminary
results announcement
Consideration of the effectiveness of the external audit process
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 auditor, or advisers related to the auditor, on non-audit services which
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 auditor.
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:
Review of the half-year results announcement Review of external auditor’s
memorandum
Clarity of the disclosures and compliance with financial reporting standards
and relevant financial and governance reporting requirements;
Review of Going Concern
Consideration of and approval of external audit fee quotation for 2023
Review and approval of the external audit plan for 2023
Review and approval of the non-audit work policy
Review of internal controls and risk management systems, including the
2023 internal audit plan
Review of whistleblowing arrangements and policy
Review of anti-bribery and corruption policy and procedures
Review of Group principal risks and uncertainties
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;
External auditor
PKF Littlejohn LLP was appointed as the Company’s auditor at the annual
general meeting on 17 May 2023.
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 Committee monitors the relationship with PKF to ensure that auditor
independence and objectivity are maintained. They assess auditor
independence by obtaining assurances from PKF that all partners and staff
involved are independent of any links to the Company 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.
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.
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Audit Committee report continued
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.
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 significant issues considered by the Committee in respect of the period
ended 31 December 2023 are set out on the following table.
The Committee made this assessment by:
Reviewing key messages proposed for the Annual Report;
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
Carrying value of goodwill
and acquired intangible
assets
Pension accounting
Capitalisation and carrying
value of internally developed
intangible assets
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,
with particular attention paid to contractual
changes made in the course of contract
performance.
The Group conducts extensive forecasting and
stress testing exercises to review the carrying
value of goodwill and acquired intangible assets
in line with the strategic plans to ensure that the
values are supportable.
External experts are used on an ongoing basis to
value the schemes in line with IAS19 and ensure a
consistent and appropriate level of disclosure.
Detailed reviews of assets developed internally
are undertaken internally by the Group, including
engineering, commercial and innovations staff,
to ensure capitalisation occurs where the criteria
in IAS38 are met and that the carrying values
of assets capitalised in prior periods are valued
appropriately.
The Group conducts extensive forecasting and
stress testing exercises for multiple scenarios,
including market disruption, currency volatility
and project uncertainty, 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.
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.
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.
Internal audit reports are produced following a site visit and completion of an
internal control questionnaire, providing details of how the internal controls
are being followed and what areas, if any, need improving and amending as
appropriate.
23 Corporate governance48 Financial statements
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 2023, there were
no reported incidents.
Doug Robertson
Chair of the Audit Committee
18 March 2024
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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;
each site is required to comply with defined policies, financial controls and
procedures and authorisation levels which are clearly communicated;
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 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.
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Remuneration and Nomination Committee report
“ 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.”
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 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:
reviewed the structure of the Long-Term Incentive Plan for 2024 awards
onwards;
reviewed the performance of the executive management incentive scheme
against their 2022 objectives and approved bonus payments;
approved executive management pay increases;
SARA FOWLER
CHAIR OF THE REMUNERATION
AND NOMINATION COMMITTEE
As Chair of the Remuneration and Nomination Committee ("the Committee"),
I am pleased to present the Committee’s report, which is presented in
three sections: the Committee Report, the Remuneration Report and the
Remuneration Policy.
set 2023 objectives and performance metrics for the executive management
incentive scheme;
reviewed the 2022 performance against the Long-Term Incentive Plan
performance target;
The Remuneration report, on pages 37 to 38, details the amounts earned
by the Directors in respect of the period to 31 December 2023 and is subject
to an advisory shareholder vote.
Committee report
Committee Composition and Meetings
The Committee’s members are the independent Non-Executive Directors,
whose biographies are set out on page 26.
The Terms of Reference of the Committee requires that it meets at least twice
a year. During 2023, the Committee met five times and the table below sets out
the attendance record of each member of the Committee:
Member
Sara Fowler
Andrew Kitchingman
Doug Robertson*
Matthew Taylor
Meeting attendance
5/5
5/5
4/5
5/5
* Doug Robertson was unable to attend one of the meetings due to a clash in the diary.
Additionally, the Chief Executive is invited to attend meetings as necessary.
reviewed the exit package for Dr. Steels;
board and senior management succession planning; and
reviewed the Committee’s Performance Evaluation.
Committee Evaluation
An internal evaluation of the Committee’s performance has been undertaken in
respect of 2023 and the results discussed by the Committee. No substantive
actions were required as a result of the Committee evaluation.
Nomination report
Appointment of Chief Executive Officer
When Tony Steels advised in early 2023 that he wished to retire from the
Group, the Committee considered who would be best to replace him as Chief
Executive Officer (CEO).
The committee reviewed its internal candidates first and Adam Holland was
highlighted as the successor. His extensive commercial and operational
experience, gained from previous roles based in the UK and internationally,
means that he is well placed to lead the Group in its future growth.
The role of Chief Operating Officer (COO) has been left vacant for now while
Adam settles into the CEO role and reviews what skills and experience are
required within the Group's executive leadership team as a whole. Should there
be a need to recruit a new COO in the future, a decision will be made as to
whether this will be a member of the executive leadership team, in which case
Adam will lead the recruitment process, or as a member of the Board, in which
case the Committee will be involved.
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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.
Dr Steels Exit Package
Upon retiring from the Group after the AGM in May 2023, Dr Steels was granted
his contractual notice of 12 months’ base salary and benefits, to be paid
monthly. This consists of £300,000 of salary, £20,000 of benefits and £77,000
of pension contributions.
Employment and promotion opportunities will be offered on the basis of merit
regardless of race, colour, religion, age, gender, 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.
2023 Remuneration report
Directors’ total remuneration
The remuneration of the Executive Directors for 2023 is made up as follows:
Executive Directors’ remuneration as a single figure (audited)
He has also been treated as a good leaver under the LTIP Rules and is therefore
eligible to receive his outstanding LTIP options should they vest in 2025, pro-
rated from the date of grant to the date of his retirement on 17 May 2023.
Dr Steels is also eligible to participate in the 2023 short-term incentive plan
and he received a payment of £150,000 under the plan.
The remuneration of the Non-Executive Directors for 2023 is made up as
follows:
Non-Executive Directors’ remuneration as a single figure (audited)
Salary
£000
All
benefitsa
£000
112
293
214
7
20
20
Short-
term
incentive
schemeb
£000
-
218
87
Pensionc
£000
29
32
53
Total
£000
148
563
374
2022
Total
£000
1,328
47
877
A J Kitchingman
D G Robertson
S A Fowler
M G R Taylor
2023
T Steelsd
A P Holland
W C Wilkins
2023
All taxable
benefits
£000
–
–
–
–
Fees
£000
86
57
57
58
Total
£000
86
57
57
58
2022
Total
£000
81
54
54
53
a Benefits include: Executive Directors – 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 39.
c The values are the amounts contributed by the Company into the Company’s Personal
Pension Plans for the Executive Directors.
d Tony Steels stepped down as a director on 17 May 2023 following the AGM. Details of his exit
package, not included in the above figures, are set out below
Mr Holland’s basic salary was increased from £250,000 to £318,000 with
effect from the close of the AGM, when Mr Holland was promoted from Chief
Commercial Officer to Chief Executive Officer, in line with that previously paid
to Mr Steels but subject to a 6% increase, in line with the average pay increase
awarded to employees in the UK.
Upon a review of base salaries for Dr Steels and Mr Wilkins it was agreed Dr
Steels would not receive a pay increase for 2023. However, it was agreed to give
Mr Wilkins a 6% increase, in line with the average increase for UK employees.
The 2023 bonus awards for Mr Holland and Mr Wilkins were based upon the
achievement of certain functional and personal targets, totalling 40% of salary.
In 2022 Mr Holland’s contract included a guaranteed bonus of £90,000 in April
2023 in recognition of the bonus foregone upon departure from his former
employer.
Directors’ interests in shares (unaudited)
The beneficial interests of Directors holding office at 31 December 2023
and persons connected with them in the ordinary shares of the Company
(excluding share options) were as follows:
A Holland
W C Wilkins
M G R Taylor
A J Kitchingman
S Fowler
Held at
1 January
2023
–
81,381
18,000
13,133
–
Acquired in
the year
12,680
4,813
–
–
10,000
Held at
31 December
2023
12,680
86,194
18,000
13,133
10,000
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 2023 and 19 March 2024.
Incentive scheme – Deferred share plan (audited)
No award under the Deferred share plan was made in 2023.
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Remuneration and Nomination Committee report continued
Long Term Incentive Plan (audited)
Conditional grants under the LTIP are now made on an annual basis rather than every three years. Details of conditional grants of Mpac Group plc ordinary shares
under the LTIP for each Director who held office during the year and who is eligible to participate in the plan are as follows:
End of
three-year
performance
period
31 Dec 2025
31 Dec 2024
31 Dec 2025
31 Dec 2024
Date of award
2 May 2023
10 June 2022
2 May 2023
10 June 2022
A Holland
W C Wilkins
T Steels
Number of shares
Face value
at grant (£000)
% of salary
Lapsed
Exercised
192,124
37,548
76,849
96,552
451.5
163
180.6
418
180%
79%
83%
139%
–
–
–
–
–
–
–
–
Balance
192,124
37,548
76,849
96,552
The face value of the 2022 and 2023 awards are calculated based on the closing share price on the day of grant, being 432.5p and 235p respectively. No shares
are anticipated to vest under any of the awards.
The award to Dr Steels will be restricted to a maximum of 46% of the above (44,173 shares) due to his retirement on 17 May 2023.
Performance Conditions
For the 2022 award:
Metric
EPS
Weighting
70%
ROCE
30%
Total
100%
For the 2023 award:
Metric
EPS
Weighting
70%
ROCE
30%
Total
100%
Performance condition
Cumulative Underlying EPS to exceed 180p over the three-year period to vest in full.
Vesting is reduced to 20% on a pro-rata basis if cumulative Underlying EPS is 140p over
the three-year period and is reduced to nil if it fails to reach 140p.
Average ROCE to exceed 40% over the three-year period to vest in full. Vesting is reduced
to 20% on a pro-rata basis if average ROCE is 30% over the three-year period and is
reduced to nil if it fails to reach 30%.
Performance condition
Cumulative Underlying EPS to exceed 140p over the three-year period to vest in full.
Vesting is reduced to 20% on a pro-rata basis if cumulative Underlying EPS is 110p over
the three-year period and is reduced to nil if it fails to reach 110p.
Average ROCE to exceed 40% over the three-year period to vest in full. Vesting is reduced
to 20% on a pro-rata basis if average ROCE is 30% over the three-year period and is
reduced to nil if it fails to reach 30%.
Threshold
target
140p
Stretch
target
180p
30%
40%
Threshold
target
110p
Stretch
target
140p
30%
40%
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.
Sara Fowler
Chair of the Remuneration and Nomination Committee
18 March 2024
23 Corporate governance48 Financial statements
Remuneration Policy
This part of the Remuneration and Nomination Committee’s report sets out
the Remuneration policy, which is designed to ensure that the remuneration
packages offered, and the terms of the contracts of service, are competitive
and 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”)
An 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. Further details of the performance
conditions can be found on page 38.
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. 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.
The current service contracts for Mr Wilkins and Mr Holland were entered into
on 22 June 2018 and 17 July 2022 respectively.
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Remuneration and Nomination Committee report continued
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.
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.
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.
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.
23 Corporate governance48 Financial statements
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.
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Short-term incentive scheme
Purpose and link to strategy
Operation
Opportunity
Performance metrics
Long Term Incentive Plan (“LTIP”)
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.
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 rolling 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 140p. 100% of the award is made if EPS is equal to or
exceeds 180p. Between these two points, allocation will be on a straight-line basis pro rata. If EPS is below 140p 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 30%. 100% of the award is made if ROCE equals or exceeds 40%. Between these two points, allocation will be
on a straight-line basis pro rata. If ROCE is below 30%, no award will be made in respect of ROCE.
23 Corporate governance48 Financial statements
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.
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Annual Report & Accounts 2023
Directors’ report
44
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:
Directors
Biographical details of the Directors currently serving on the Board and their
dates of appointment are set out on page 26.
Information
Strategic report
Directors' Remuneration Report
Reported
Pages 1 to 22.
Pages 37 to 38.
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 56 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 1 to 22 in particular the Outlook section on page 13. 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 2025, its financial resources including its cash
resources and access to borrowings, as set out in note 20 to the accounts on
page 81, 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
83 to 87. 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 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.
In accordance with Section 416(1)(a) of the Companies Act 2006, the Directors
who served during the year are as follows:
Executive Directors
Tony Steels1
Will Wilkins
Adam Holland2
Non-Executive Directors
Andrew Kitchingman
Sara Fowler
Douglas Robertson
Matthew Taylor
1 Resigned on 17 May 2023.
2 Was appointed COO effective 1 November 2022 and subsequently appointed CEO
effective 17 May 2023.
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.
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.
The Company maintained Directors’ and Officers’ Liability Insurance cover
throughout 2023. 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.
Directors and Directors’ interests
Directors’ interests in the Company’s shares as at 31 December 2023 are
shown on page 37. There are no shareholding requirements for Directors.
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Substantial shareholdings
At 31 December 2023, 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
3,455,000
1,095,000
% of issued
ordinary shares
16.87%
5.35%
Results and dividends
The Group’s profit for the year was £2.7m (31 December 2022: £0.4m loss). The
Board has decided to not pay a final dividend. An interim dividend was not paid
during 2023 (2022: none).
Dividends on the 6% preference shares are due for payment on 30 June and
31 December in each year and in 2023 amounted to £0.1m (2022: £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 2023, net of third-party income, amounted to £2.1m (2022: £1.7m), of
which £1.2m (2022: £0.5m) was charged to the consolidated income statement
and £0.9m (2022: £1.2m) was capitalised and included in development costs.
Share capital
At 31 December 2023, the Company’s issued share capital was £5,118,606
divided into 20,474,424 ordinary shares of £0.25 each plus 900,000 preference
shares of £1.00 each. Details of movements in issued share capital in the year
are set out in note 86 to the financial statements. Authority for the purchase of
up to 2,047,422 ordinary shares for cancellation was granted at the 2023 Annual
General Meeting and this authority expires at the end of the 2024 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 2,047,442 ordinary shares representing approximately 10% of the
issued ordinary share capital at the date of the notice convening the Annual
General Meeting.
EES Trustees International Limited is the trustee for the Company’s long-term
incentive arrangements for the benefit of the Group’s employees. As at
31 December 2023, it did not hold any shares. However, when the Trustee does
hold shares, it has agreed to waive all dividends and not to exercise voting
rights in respect of those shares.
Disclosure of information to the auditor
In accordance with section 418(2) of CA2006, 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
PKF Littlejohn LLP was appointed as statutory auditor on 17 May 2023 and a
resolution to approve their re-appointment will be proposed at the forthcoming
Annual General Meeting.
Annual General Meeting
The Annual General Meeting will take place on 15 May 2024. Notice of the
meeting can be found on pages 103 to 107.
Political donations
The Company made no political donations during the year 31 December 2023.
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 89 to 96.
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.
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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
2022 comparative
Globally
Purchased electricity
Combustion of fuel
Travel
KWH
intensity
(per
MWH
employee)a
1,314
2,878
2,671
5,850
KWH
intensity
(per
MWH
employee)a
293
785
1,776
4,597
CO2
intensity
(kg per
employee)a
1,074
1,097
3,361
CO2
intensity
(kg per
employee)a
653
932
4,837
CO2
(tonnes)
528
540
1,654
CO2
(tonnes)
108
154
798
KWH
intensity
(per
MWH
employee)a
1,381
3,447
2,981
7,444
CO2
intensity
(kg per
employee)a
1,339
1,392
2,634
CO2
(tonnes)
620
645
1,220
UK only
Purchased electricity
Combustion of fuel
Travel
KWH
intensity
(per
MWH
employee)a
421
761
2,665
4,816
CO2
intensity
(kg per
employee)a
981
976
1,996
CO2
(tonnes)
155
158
315
a Calculated using average number of employees in the year.
Carbon Emissions have been calculated using different parameters for 2023,
these updated parameters have been retrospectively applied to 2022, which
has driven a difference to the prior year disclosures.
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 programme.
Travel
The installation and commissioning of the FREYR Customer Qualification Plant
required extensive travel to their site in Mo i Rana, Norway, which offset the
reduction in emissions from the Group's travel reduction initiatives.
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 22. Such information is incorporated into
this Directors report by reference and is deemed to form part of this report.
Prism Cosec Limited
Company Secretary
18 March 2024
23 Corporate governance48 Financial statements
Statement of Directors’ responsibilities
in respect of the annual report and the financial statements
The Directors are responsible for preparing the Annual Report and Accounts 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 and Group 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 19 March 2024
and is signed on its behalf by:
Adam Holland
Chief Executive
Will Wilkins
Group Finance Director
18 March 2024
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Independent Auditor’s report
to the members of Mpac Group plc
Opinion
We have audited the financial statements of Mpac Group plc (the ‘parent
company’) and its subsidiaries (the ‘group’) for the year ended 31 December
2023 which comprise the Consolidated Income statement, the Statement of
Comprehensive Income, the Consolidated and Parent Company Statements
of Changes in Equity, the Consolidated and Parent Company Statements
of Financial Position, the Consolidated and Parent Company Statements
of Cash Flows and notes to the financial statements, including 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.
In our opinion:
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 2023 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
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
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. Our evaluation of the directors’ assessment of the
group’s and parent company’s ability to continue to adopt the going concern
basis of accounting included:
obtaining the group cash flow forecast for the period ended 31 December
2025 and ensuring mathematical accuracy of these forecasts;
assessing the reasonableness of the underlying assumptions, including
forecast levels of expenditure and contractual cash inflows used in preparing
the forecasts. To assess the reasonableness and timings of the cash inflows
and outflows, we used our knowledge of the business and compared the
forecasts to the directors’ previously approved budgets, historic performance
and information subsequent to the year end including board minutes and
management accounts;
verifying cash balances used in the forecast close to the date of sign off of
these financial statements;
reviewing management’s sensitivity analysis and performing our own
sensitivities to understand the key drivers of the forecasts. Where necessary,
we have evaluated potential mitigating factors that could be actioned by
management in the sensitised scenarios;
assessing the appropriateness of the going concern disclosures included in
the financial statements against the requirements of the relevant auditing
standards; and
Recalculated covenants during the going concern period to ensure ongoing
compliance.
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 or 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.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope
of our audit and the nature, timing and extent of our audit procedures. We
determined materiality for the financial statements to be:
Entity
Group
Parent company
Materiality
£’000
1,100 (2022: 950)
640 (2022: 625)
Performance
materiality at 70%
(2022: 60%)
£’000
770 (2022: 570)
448 (2022: 375)
Triviality
threshold (5%)
£’000
55 (2022: 47)
32 (2022: 31)
The benchmark for group materiality was selected as 1% of revenue in the year.
Revenue was deemed to be the most appropriate metric for group materiality
as revenue growth is a key performance indicator.
The benchmark selected for the parent company materiality was 1% of the
net asset value, as the parent company is not revenue generating, and the
significant balances in the financial statements are the investments in, and
amounts advanced, to the trading subsidiaries.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures. We have increased
the performance materiality from 60% to 70% of overall materiality for both the
group and parent company as this is our second year as auditors and we did not
identify any material errors or adjustments in the prior period.
While materiality for the group financial statements as a whole was set at
£1,100,000, each significant component of the group was audited to an overall
materiality ranging between £940,000 and £536,000, with performance
materiality set at 70%. We applied the concept of materiality in planning and
performing our audit and in evaluating the effects of misstatement.
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Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas
at greatest risk of material misstatement, and areas subject to significant
management judgement as well as greatest complexity, risk and size.
As part of designing our audit, we determined materiality, as above, and
assessed the risk of material misstatement in the financial statements. In
particular, we looked at areas involving significant accounting estimates and
judgement by the directors and considered future events that are inherently
uncertain. These areas of estimation and judgement included:
Revenue recognition over time on long term contracts;
Carrying value and impairment assessment of intangible assets, including
goodwill and acquired intangibles;
Carrying value of the investments and amounts advanced to the subsidiaries
(at the parent company level)
Pension asset/liability calculation and assumptions used thereon; and
Recognition of deferred tax assets based on unutilised losses within the group.
We also addressed the risk of management override of internal controls,
including among other matters consideration of whether there was evidence
of bias that represented a risk of material misstatement due to fraud.
A full scope audit was completed on the financial information of all of the
group’s significant operating subsidiaries by PKF Littlejohn LLP and no
component auditors were engaged. The key audit matters and how these
were addressed are outlined below.
Key audit matters
Key audit matters are those matters that, in our professional judgment,
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) we identified, including those
which 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.
High
Likelihood
Low
Carrying value of
goodwill and acquired
intangible assets
Revenue recognition
and accounting for
long term contracts
Accuracy of defined
benefit pension
liabilities and
scheme valuation
Low
Magnitude
High
23 Corporate governance48 Financial statements
Key audit matter
How our scope addressed the matter
Revenue recognition and accounting for long term contracts
(Note 1 and Note 18)
The group generates significant revenue through entering into contracts
with customers to design, engineer and manufacture machinery and
packaging solutions. The majority of revenue is recognised over time.
The group adopts an inputs based method for recognising contract
revenue by estimating total labour hours at the outset of a contract.
Revenue is then recognised over the life of the contract based on total
labour hours incurred as a percentage of total expected hours.
In applying this method, management judgement and estimation is
required, and there is a risk that revenue is not being recognised in
accordance with IFRS 15 Revenue from Contracts with Customers.
This includes the risk that contract assets and liabilities, and contract
fulfilment assets, at the year end are not accurate or complete. As a
result, this has been identified as a key audit matter.
Our audit work in this area included the following:
Updating our understanding of the information systems and related controls relevant
to each material income stream;
Evaluating the appropriateness of the information system used to record labour hours
and performing testing on the effectiveness of the key controls within the system;
Performing analytical review over the total labour hours recorded at each significant
component;
Evaluating management’s revenue recognition policy in line with IFRS 15, specifically
ensuring that performance obligations are met prior to revenue being recognised and
that revenue over time, as well as revenue at a point in time, is recognised in line with
the group’s accounting policy as well as IFRS 15;
Challenging management’s assumptions used in forecasting contract margin/
profitability as well as percentage of completion by reference to post year end
performance and historic evidence for a sample of revenue contracts open at
year end;
Testing a sample of closed contracts and assessing management’s historic
forecasting accuracy on a contract by contract basis by reviewing expected labour
hours and margins at contract inception to actual margins at completion;
Substantive testing of contract labour hours included in the revenue recognition
calculation, agreeing amounts to timesheets and other supporting information to test
the revenue and profit recognised.
Reviewing contract margins for indicators of any potential loss making contracts and
discussing with management whether these are onerous contracts per IAS 37.
Recalculating a sample of year-end adjustments to contract revenue as well as the
associated contract assets and contract liabilities recognised to ensure correctly
calculated and recognised in accordance with the stated accounting policies; and
Testing the recoverability of contract assets at year end with reference to post year
end contract performance.
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Key audit matter
How our scope addressed the matter
Carrying value of goodwill and acquired intangible assets (Note 12)
The group holds significant goodwill and acquired intangible assets
arising from historic acquisitions. When carrying out the goodwill and
acquired intangible impairment review, determining the recoverable
amount for the smallest identifiable group of assets that generates cash
flows that are largely independent of the cash flows from other assets
or group of assets (cash-generating unit (“CGU”)) requires management
to make judgements over several key inputs in the models for predicting
future revenue/future cash flow levels (discounted cash flow models).
Due to the high level of estimation uncertainty present in the
impairment test and the sensitivity of small changes to the assumptions
on the net present value of the assets in management’s model, we
identified the valuation of acquired intangibles and goodwill as a key
audit matter.
Our audit work in this area included the following:
Obtaining management’s impairment papers and value in use calculations along
with related workings to support the value in use of each CGU;
Testing the mathematical accuracy of the value in use calculations, as well as
challenging key assumptions used in the preparation of the discounted cash-flow
model, including the discount rate, growth rate of expected revenue (based on
orderbook) and operating profit margins;
Reviewing management’s identification of each CGU to ensure that it is consistent
with the associated intangible asset and whether the discount rates are reasonable
for each CGU;
Assessing the accuracy of historic forecasts to actual results to evaluate
management’s ability to forecast the CGU’s future cashflows;
Considering the reasonableness of cash flows included in the calculation through
comparison with current year performance and historic trends. We also confirmed
the consistency of the model with that being used to assess going concern;
Performing a sensitivity analysis on key assumptions to determine potential impact
on value in use in the event of an adverse movement in assumptions; and
Reviewing the disclosures in the financial statements in relation to the intangible
assets and associated estimates.
As outlined in Note 12, management have implemented a revised business plan in
one of the CGU where the current headroom over carrying value is sensitive to
reasonably possible changes in key assumptions which would result in a recoverable
amount below carrying amount.
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Key audit matter
How our scope addressed the matter
Accuracy of defined benefit pension liabilities and
scheme valuation (Note 24)
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 2023 the group’s net defined benefit asset was £30.4m
on an IAS 19 basis (2022: £29.4m). The total fair value of scheme
assets and present value of defined benefit obligations which form the
net defined benefit asset amounted to £316.7m (2022: £319.3m) and
£286.3m (2022: £289.9m), respectively.
IAS 19 Employee Benefits describes the recognition and measurement
of defined benefit pension schemes.
The valuation of these schemes at year end involve complex
judgements and assumptions.
Variations in these key assumptions such as discount rates or mortality
rates have the ability to significantly influence the net asset/liability
position of these schemes, and as such the scheme valuation is
considered as a key audit matter.
Our audit work in this area included the following:
Updating our understanding of the processes surrounding the valuation of pension
scheme assets and defined benefit obligations;
Obtaining the actuarial report prepared by management’s expert and assessed the
scope of their work, competence and independence;
Using an auditors 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;
Reconciling the pension balances disclosed within the financial statements to
management’s actuarial report;
Reviewing funding agreements between the pension trustees and the group,
including the latest triennial review performed in June 2021 and corroborated deficit
reduction payments with the fund administrator;
Testing a sample of the pension scheme assets to underlying documentation to
confirm ownership and valuation at the reporting date;
Reviewing disclosures relating to pension assets & liabilities to ensure that they are
in line with IAS 19 ‘Employee Benefits’.
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Other information
The other information comprises the information included in the Annual Report,
other than the financial statements and our auditor’s report thereon. The
directors are responsible for the other information contained within the annual
report. Our opinion on the group and parent company 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. 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 course of 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 this gives rise to a material misstatement in the financial
statements themselves. 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.
Opinions on other matters prescribed by the Companies Act 2006
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.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the
directors’ report.
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
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.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the
directors are responsible for the preparation of the group and parent company
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 group and parent company financial statements, the directors
are responsible for assessing the group 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.
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. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We obtained an understanding of the group and parent company and the
sector in which they operate to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial statements.
We obtained our understanding in this regard through discussions with
management, and our expertise of the sector.
We determined the principal laws and regulations relevant to the group and
parent company in this regard to be those arising from the Companies Act
2006, UK-adopted international accounting standards, the AIM Rules for
Companies, as well as local laws and regulations in the jurisdiction in which
the group and parent company operate.
23 Corporate governance48 Financial statements
We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the group and
parent company with those laws and regulations. These procedures included,
but were not limited to:
– conducting enquiries of management and those charged with governance
regarding potential instances of non-compliance;
– Discussing with external legal counsel regarding any material litigation
or claims;
– reviewing RNS announcements;
– reviewing legal and professional fees ledger accounts for evidence of any
litigation or claims against the group;
– discussing with local management with regards to the good standing of
the subsidiaries; and
– reviewing board minutes and other correspondence from management.
We also identified the risks of material misstatement of the financial
statements due to fraud. We considered, in addition to the non-rebuttable
presumption of a risk of fraud arising from management override of controls,
whether key management judgements could include management bias was
identified in relation to:
the recognition of revenue and contract assets/liabilities in relation to the
long-term contracts with customers;
the carrying value of the intangible assets (goodwill and acquired intangible
as well as internally generated intangibles); and
the valuation of the pension assets/liabilities.
We addressed these as outlined in the Key audit matters section above. The
potential for management bias also existed in the recognition of deferred
tax assets, valuation of the hedging arrangements and carrying value in the
parent company’s investments in subsidiaries in the year. Audit procedures
were performed in this regard to recalculate the balances with reference to
the underlying agreements or assess the carrying value of investments with
reference to the value in use calculations used for the going concern and
intangible asset impairment assessment.
We addressed the risk of fraud arising from management override of controls
by performing audit procedures which included, but were not limited to: the
testing of journals; reviewing accounting estimates for evidence of bias;
and evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.
Compliance with laws and regulations at the subsidiary level was ensured
through enquiry of management, communication with local specialists and
review of correspondence for any instances of non-compliance.
Because of the inherent limitations of an audit, there is a risk that we will not
detect all irregularities, including those leading to a material misstatement
in the financial statements or non-compliance with regulation. This risk
increases the more that compliance with a law or regulation is removed from
the events and transactions reflected in the financial statements, as we will
be less likely to become aware of instances of non-compliance. The risk is
also greater regarding irregularities occurring due to fraud rather than error,
as fraud involves intentional concealment, forgery, collusion, omission or
misrepresentation.
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.
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.
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Mark Ling
(Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
18 March 2024
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Consolidated income statement
for the year ended 31 December 2023
56
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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
(Loss)/earnings per ordinary share
Basic
Diluted
Note
1
4,5
3
1,4
8
8
9
11
11
Underlying
£m
114.2
(82.6)
31.6
(8.8)
(14.6)
(0.4)
7.8
–
(0.7)
(0.7)
7.1
(1.8)
5.3
2023
Non-underlying
£m
–
–
–
–
(3.9)
–
(3.9)
1.5
–
1.5
(2.4)
(0.2)
(2.6)
Underlying
£m
97.7
(73.3)
24.4
(8.1)
(11.9)
(0.5)
3.9
–
(0.4)
(0.4)
3.5
(0.8)
2.7
2022
Non-underlying
£m
–
–
–
–
(3.9)
–
(3.9)
0.6
–
0.6
(3.3)
0.2
(3.1)
Total
£m
114.2
(82.6)
31.6
(8.8)
(18.5)
(0.4)
3.9
1.5
(0.7)
0.8
4.7
(2.0)
2.7
13.1p
13.1p
Total
£m
97.7
(73.3)
24.4
(8.1)
(15.8)
(0.5)
–
0.6
(0.4)
0.2
0.2
(0.6)
(0.4)
(2.2)p
(2.2)p
23 Corporate governance48 Financial statements
Statement of comprehensive income
for the year ended 31 December 2023
Profit/(loss) for the period
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss
Actuarial 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 (expense)/income for the period
Total comprehensive income/(expense) for the period
Note
24
9
26
26
Group
2023
£m
2.7
(1.7)
–
(1.7)
(0.9)
0.4
1.3
0.8
(0.9)
1.8
2022
£m
(0.4)
(5.0)
1.3
(3.7)
2.1
(1.3)
–
0.8
(2.9)
(3.3)
Mpac Group plc
Annual Report & Accounts 2023
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48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Statements of changes in equity
for the year ended 31 December 2023
58
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Balance at 1 January 2022
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 2022
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 2023
Note
24
24
25
Share
capital
£m
5.0
–
Share
premium
£m
26.0
–
Translation
reserve
£m
0.3
–
Group
Capital
redemption
reserve
£m
3.9
–
Hedging
reserve
£m
(0.5)
–
Retained
earnings
£m
30.7
(0.4)
–
–
–
0.1
0.1
5.1
–
–
–
–
–
–
5.1
–
–
–
–
–
26.0
–
–
–
–
–
–
26.0
2.1
2.1
–
–
–
2.4
–
(0.9)
(0.9)
–
–
–
1.5
–
–
–
–
–
3.9
–
–
–
–
–
–
3.9
(1.3)
(1.3)
–
–
–
(1.8)
–
1.7
1.7
–
–
–
(0.1)
Total
equity
£m
65.4
(0.4)
(2.9)
(3.3)
0.1
–
0.1
62.2
2.7
(3.7)
(4.1)
0.1
(0.1)
–
26.6
2.7
(1.7)
(0.9)
1.0
–
–
–
27.6
1.8
–
–
–
64.0
23 Corporate governance48 Financial statements
Balance at 1 January 2022
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 2022
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 2023
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
34.5
0.6
–
–
–
0.1
0.1
5.1
–
–
–
–
–
–
5.1
–
–
–
–
–
26.0
–
–
–
–
–
–
26.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.9
–
–
–
–
–
–
3.9
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.3)
(2.7)
0.1
(0.1)
–
31.8
2.1
(2.3)
(0.2)
–
–
–
31.6
Total
equity
£m
69.4
0.6
(3.3)
(2.7)
0.1
–
0.1
66.8
2.1
(2.3)
(0.2)
–
–
–
66.6
Mpac Group plc
Annual Report & Accounts 2023
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48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Statements of financial position
as at 31 December 2023
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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
Interest-bearing loans and borrowings
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
Net assets
Equity
Issued capital
Share premium
Reserves
Retained earnings
Total equity
Note
Group
2023
£m
12
13
14
27
15
15
24
16
17
19
10
21
27
20
22
10
23
20
24
16
27
1
25
24.0
4.1
0.8
5.9
–
–
32.2
0.9
67.9
11.1
46.8
1.1
11.0
70.0
(1.3)
(8.0)
(43.8)
(0.9)
(0.9)
(54.9)
15.1
83.0
(0.9)
(1.8)
(11.4)
(4.9)
(19.0)
64.0
5.1
26.0
3.8
29.1
64.0
2022
£m
25.4
4.0
0.8
5.0
–
–
31.5
1.3
68.0
9.6
47.3
0.6
4.2
61.7
(1.4)
(8.0)
(39.0)
(0.1)
(1.0)
(49.5)
12.2
80.2
(0.9)
(2.1)
(11.1)
(3.9)
(18.0)
62.2
5.1
26.0
2.1
29.0
62.2
Company
2023
£m
0.9
0.3
0.8
0.2
63.8
22.3
32.2
–
120.5
–
11.7
–
0.4
12.1
–
(8.0)
(45.5)
–
–
(53.5)
(41.4)
79.1
(0.9)
–
(11.3)
(0.3)
(12.5)
66.6
5.1
26.0
3.9
31.6
66.6
2022
£m
1.1
0.1
0.8
–
63.8
25.6
31.5
–
122.9
–
8.0
–
(0.3)
7.7
–
(8.0)
(43.9)
–
–
(51.9)
(44.2)
78.7
(0.9)
–
(11.0)
–
(11.9)
66.8
5.1
26.0
3.9
31.8
66.8
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 £2.1m (2022: £0.6m profit). These financial statements were approved by the Directors
on 18 March 2024 and signed on their behalf by:
Adam Holland
Director
Registered number: 124855
Will Wilkins
Director
23 Corporate governance48 Financial statements
Mpac Group plc
Annual Report & Accounts 2023
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Statements of cash flow
for the year ended 31 December 2023
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 in inventories
– decrease/(increase) in contract assets
– (increase)/decrease in trade and other receivables
– increase in trade and other payables
– (decrease)/increase in provisions
– increase/(decrease) in contract liabilities
Cash flows from continuing operations before reorganisation
Acquisition and reorganisation costs paid
Cash flows from operations
Taxation paid
Cash flows from/(used in) operating activities
Investing activities
Capitalised development expenditure
Acquisition of property, plant and equipment
Loans with subsidiaries
Payment of deferred consideration
Cash flows used in investing activities
Financing activities
Interest paid
Proceeds from borrowings
Principal elements of lease payments
Cash flows used in financing activities
Net increase/(decrease) 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
Cash and cash equivalents as at 31 December comprise:
Cash at bank and in hand
Bank overdrafts
Note
5
12
13,27
13
24
12
13
21
Group
2023
£m
3.9
3.9
0.8
2.1
–
–
(2.3)
(1.7)
1.7
(0.3)
1.8
(0.1)
3.3
13.1
(0.8)
12.3
(1.1)
11.2
(1.5)
(1.1)
–
–
(2.6)
(0.7)
–
(1.1)
(1.8)
6.8
4.2
–
11.0
Group
2023
£m
11.0
–
11.0
2022
£m
–
3.9
0.9
2.0
–
0.2
(2.1)
(3.7)
(5.9)
(6.3)
1.7
0.5
(4.0)
(12.8)
(0.8)
(13.6)
(0.4)
(14.0)
(1.4)
(1.0)
–
(0.8)
(3.2)
(0.3)
8.0
(1.1)
6.6
(10.6)
14.5
0.3
4.2
2022
£m
4.5
(0.3)
4.2
Company
2023
£m
–
1.7
0.4
0.1
–
–
(2.1)
–
–
3.9
(1.4)
–
–
2.6
(0.4)
2.2
–
2.2
(0.2)
(0.3)
(0.2)
–
(0.7)
(0.6)
–
–
(0.6)
0.9
(0.3)
(0.2)
0.4
Company
2023
£m
0.4
–
0.4
2022
£m
(0.3)
1.4
0.3
0.1
–
0.1
(2.0)
–
–
(2.7)
0.9
–
–
(2.2)
(0.3)
(2.5)
–
(2.5)
–
–
(10.6)
–
(10.6)
(0.3)
8.0
–
7.7
(5.4)
4.0
1.1
(0.3)
2022
£m
–
(0.3)
(0.3)
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Accounting policies
62
The significant accounting policies as set out below apply to both the Group
and Company financial statements, as appropriate.
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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 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 2022 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.
23 Corporate governance48 Financial statements
Mpac Group plc
Annual Report & Accounts 2023
63
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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 10 to 13, Financial review on pages 14 to 16 and in the Principal
risks and uncertainties on pages 17 to 21.
The Directors have considered the trading outlook of the Group and Company
for a 24 month period ending 31 December 2025, its financial position, including
its cash resources and access to borrowings, as set out in the Financial review
on pages 14 to 16 and in note 20 to the accounts on page 81, 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 83 to 87. 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.
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Accounting policies continued
Accounting policies continued
64
The excess of the:
consideration transferred;
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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 11.8% to
17.9%, dependent on the CGU being assessed (2022: 12.7% to 13.9%).
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 ten 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
– 3 to 10 years
Product development
– 5 years
Software development
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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.
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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 goods 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.
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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.
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Accounting policies continued
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Share-based payments
The Group has applied the requirements of IFRS 2 Share- based payments.
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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.
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.
23 Corporate governance48 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 62 to 68.
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 but may be up to 48 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 10 to 13.
In the following table, revenue is disaggregated by primary geographical market, major product lines, sector and timing of revenue recognition.
Disaggregation of revenue
Sector
Clean Energy
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
2023
£m
9.1
41.6
45.8
17.7
114.2
34.0
80.2
114.2
2022
£m
11.1
30.1
45.7
10.8
97.7
24.3
73.4
97.7
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.
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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
Net financing income/(expense)
Profit before tax
Americas
EMEA
Asia
Total
Unallocated net assets
Total net assets
OE
£m
40.8
34.0
7.6
82.4
18.6
2023
Service
£m
15.9
13.8
2.1
31.8
13.0
Segment
assets
31.5
53.5
0.9
85.9
2023
Segment
liabilities
(19.0)
(41.3)
(0.3)
(60.6)
Total
£m
56.7
47.8
9.7
114.2
31.6
(23.8)
7.8
(3.9)
3.9
0.8
4.7
Segment
net assets
12.5
12.2
0.6
25.3
38.7
64.0
OE
£m
40.9
27.8
5.9
74.6
14.5
2022
Service
£m
11.9
9.7
1.5
23.1
9.9
Segment
assets
28.4
46.3
0.6
75.3
2022
Segment
liabilities
(18.0)
(46.1)
(0.2)
(64.3)
Total
£m
52.8
37.5
7.4
97.7
24.4
(20.5)
3.9
(3.9)
–
0.2
0.2
Segment
net assets
10.4
0.2
0.4
11.0
51.2
62.2
23 Corporate governance48 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
UK
Canada and USA
Rest of the world
2023
£m
18.4
28.4
1.1
49.8
6.8
9.7
114.2
By location of customer
2023
%
16
25
1
44
6
8
100
2022
£m
9.2
26.7
1.6
45.8
7.0
7.4
97.7
By location of assets
2023
£m
58.2
5.7
4.2
68.1
2022
%
9
27
2
47
7
8
100
2022
£m
53.2
6.7
8.1
68.0
2. Major customers
In 2023, the Group generated 21.9% (2022: 22.9%) of revenue from two customers. The most significant customer accounted for 13.9% (2022: 11.4%) of Group
revenue. The sales constituted both equipment and service, and were spread across a number of different geographic regions.
3. Other operating expense
Research and development costs (expensed as incurred)
Research and development UK tax credit
2023
£m
1.2
(0.8)
0.4
2022
£m
0.5
-
0.5
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Notes to the accounts continued
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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 £2.8m; 2022: £2.0m) (Note 6)
Cost of inventories recognised as an expense
Distribution and transport costs
Operating lease charges (Note 27)
Sales, marketing and office expenses
Product development expensed
Administrative expenses
Non-underlying amortisation of acquired intangible assets (Note 12)
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 or other services**
* Audit related assurance services include £30,000 (2022: £30,000) for the review of the half-year report.
** The current auditor does not provide non-audit services to the Group.
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5. Non-underlying items
Non-underlying items
Acquisition costs
Reorganisation costs
Amortisation of acquired intangible assets
Defined benefit pension schemes administration costs
Total non-underlying operating expenditure
Net financing income on pension scheme balances
Total non-underlying expense before tax
Deferred tax on pension scheme costs
Total non-underlying expense after tax
2023
£m
0.8
0.9
1.2
34.0
55.3
1.5
1.2
7.3
1.2
14.6
1.6
2.3
0.1
0.3
–
–
2023
£m
–
(1.2)
(1.6)
(1.1)
(3.9)
1.5
(2.4)
(0.2)
(2.6)
2022
£m
0.9
0.9
1.1
30.1
40.1
1.7
1.2
6.4
0.5
11.9
1.6
2.3
0.1
0.3
–
–
2022
£m
(0.3)
(0.6)
(1.6)
(1.4)
(3.9)
0.6
(3.3)
0.2
(3.1)
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.
23 Corporate governance48 Financial statements
5. Non-underlyng items continued
These measures are not defined by UK IAS and therefore may not be directly comparable to similar measures adopted by other companies. These alternative
performance measures should be considered in addition to, and are not intended to be a substitute for or superior to, UK IAS measures but provide useful
information on the performance of the Group and underlying trends.
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
2023
147
330
14
17
508
Period end
2023
17
Group
2023
27.3
4.7
2.0
–
34.0
2022
131
297
13
17
458
2022
17
2022
24.7
3.4
1.9
0.1
30.1
Average
2023
146
316
14
16
492
Average
2023
16
Company
2023
2.3
0.2
0.3
–
2.8
2022
142
292
13
17
464
2022
17
2022
1.4
0.3
0.2
0.1
2.0
The costs of the defined benefit pension schemes are disclosed in note 24.
£0.9m 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 39.
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Annual Report & Accounts 2023
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48 Financial statements23 Corporate governance
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Annual Report & Accounts 2023
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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 borrowings
Lease interest (IFRS 16)
Net financing income
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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
2023
£m
–
1.5
1.5
(0.1)
(0.5)
(0.1)
(0.7)
0.8
2023
£m
1.8
0.2
2.0
Included within the total taxation is a tax charge of £0.2m (2022: credit of £0.2m) 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 25.00% (2022: 25.00%)
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)
2023
£m
4.7
1.2
–
–
0.8
–
2.0
2022
£m
–
0.6
0.6
(0.1)
(0.2)
(0.1)
(0.4)
0.2
2022
£m
0.3
0.3
0.6
2022
£m
0.2
–
(0.2)
–
0.8
–
0.6
The main rate of UK corporation tax is 25% (2022: 25%) as enacted in the Finance Act 2022. 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.
23 Corporate governance48 Financial statements
Mpac Group plc
Annual Report & Accounts 2023
75
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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 25% (2022:
25%) except for deferred tax on the UK defined benefit pension scheme asset, which has been valued at 35%.
Deferred tax charge/(credit) on items in other comprehensive (expense)/income
Arising from actuarial gains/(losses)
2023
£m
–
2022
£m
(1.3)
10. Current tax assets and liabilities
Current tax assets of £1.1m (2022: £0.6m) and current tax liabilities of £0.9m (2022: £0.1m) for the Group, and current tax assets and liabilities of £nil (2022: £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 of 13.1p (2022: loss of 2.2p) is based upon the profit for the year of £2.7m (2022: loss of £0.4m) 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,if any, 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 £2.7m (2022: loss of £0.4m) 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 £2.7m (2022: loss of £0.4m). 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. Where a loss is made in a period, the basic and diluted loss per share will be equal.
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
2023
20,474,424
–
20,474,424
2022
20,261,505
41,304
20,302,809
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 26.2p (2022: 13.3p) in respect of underlying earnings per share and 26.2p (2022: 13.3p) 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 £5.3m (2022: £2.7m) which is calculated as follows:
Profit / (loss) for the period
Non-underlying items (net of tax)
Underlying profit for the period
2023
£m
2.7
2.6
5.3
2022
£m
(0.4)
3.1
2.7
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Notes to the accounts continued
76
12. Intangible assets
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Cost:
Balance at 1 January 2022
Additions
Disposals
Reclassification
Retranslation
Balance at 31 December 2022
Additions
Disposals
Reclassification
Retranslation
Balance at 31 December 2023
Amortisation and impairment losses:
Balance at 1 January 2022
Amortisation for the period
Disposals
Reclassification
Retranslation
Balance at 31 December 2022
Amortisation for the period
Disposals
Reclassification
Retranslation
Balance at 31 December 2023
Carrying amounts:
At 31 December 2022
At 31 December 2023
Group
Acquired
intangible
assets
£m
Product
develop-
ment
£m
Software
develop-
ment
£m
Assets
under
construction
£m
Goodwill
£m
13.2
–
–
–
–
13.2
–
–
–
–
13.2
–
–
–
–
–
–
–
–
–
–
–
13.2
13.2
13.1
–
–
–
1.1
14.2
–
–
–
(0.5)
13.7
4.1
1.6
–
–
–
5.7
1.6
–
–
–
7.3
8.5
6.4
3.8
1.2
–
–
0.3
5.3
0.9
(0.1)
–
(0.1)
6.0
2.5
0.6
–
–
0.2
3.3
0.3
(0.1)
–
–
3.5
2.0
2.5
2.8
0.2
–
0.2
–
3.2
0.7
–
–
–
3.9
1.0
0.3
–
0.2
–
1.5
0.5
–
–
–
2.0
1.7
1.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Software
develop-
ment
£m
Company
Assets
under
construction
£m
Total
£m
1.8
0.1
–
–
–
1.9
0.2
–
–
–
2.1
0.5
0.3
–
–
–
0.8
0.4
–
–
–
1.2
1.1
0.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.8
0.1
–
–
–
1.9
0.2
–
–
–
2.1
0.5
0.3
–
–
–
0.8
0.4
–
–
–
1.2
1.1
0.9
Total
£m
32.9
1.4
–
0.2
1.4
35.9
1.6
(0.1)
–
(0.6)
36.8
7.6
2.5
–
0.2
0.2
10.5
2.4
(0.1)
–
–
12.8
25.4
24.0
The amortisation for development costs is included in cost of sales in the consolidated income statement.
The carrying amounts of goodwill are £5.7m (2022: £5.7m) in respect of Mpac Lambert (acquired in 2019) and £7.5m (2022: £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 31 December 2025. 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 15.1% & 2.0% for
the UK and 16.3% & 2.0% for the Americas, respectively. In respect of Switchback, the recoverable amount exceeds the carrying amount by £0.3m. If the revenue terminal
growth rate was reduced by 0.25% to 1.75%, or the WACC increased by 0.25%, without any other changes, the carrying amount would equal the recoverable amount.
23 Corporate governance48 Financial statements
13. Property, plant and equipment
Cost:
Balance at 1 January 2022
Additions
Disposals
Reclassification
Retranslation
Balance at 31 December 2022
Additions
Disposals
Reclassification
Retranslation
Balance at 31 December 2023
Depreciation:
Balance at 1 January 2022
Charge for the period
Disposals
Reclassification
Retranslation
Balance at 31 December 2022
Charge for the period
Disposals
Reclassification
Retranslation
Balance at 31 December 2023
Carrying amounts:
At 31 December 2022
At 31 December 2023
14. Investment property
Group
Land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings and
vehicles
£m
1.9
0.1
–
–
0.1
2.1
0.1
–
–
–
2.2
0.2
0.1
–
–
–
0.3
0.1
–
–
–
0.4
1.8
1.8
2.9
0.4
(0.1)
0.3
0.1
3.6
0.1
(0.9)
(0.3)
–
2.5
1.5
0.3
–
–
0.1
1.9
0.3
(0.9)
–
–
1.3
1.7
1.2
4.6
0.4
–
(0.5)
–
4.5
0.8
–
0.3
(0.1)
5.5
3.7
0.5
–
(0.2)
–
4.0
0.5
–
–
(0.1)
4.4
0.5
1.1
Total
£m
9.4
0.9
(0.1)
(0.2)
0.2
10.2
1.0
(0.9)
–
(0.1)
10.2
5.4
0.9
–
(0.2)
0.1
6.2
0.9
(0.9)
–
(0.1)
6.1
4.0
4.1
Mpac Group plc
Annual Report & Accounts 2023
77
Company
Fixtures,
fittings and
vehicles
£m
Land and
buildings
£m
Total
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
–
–
–
–
0.4
0.3
–
–
–
0.7
0.2
0.1
–
–
–
0.3
0.1
–
–
–
0.4
0.1
0.3
0.4
–
–
–
–
0.4
0.3
–
–
–
0.7
0.2
0.1
–
–
–
0.3
0.1
–
–
–
0.4
0.1
0.3
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Balance at 1 January 2022 and 31 December 2022
Balance at 31 December 2023
Group
2023
£m
0.8
0.8
2022
£m
0.8
0.8
Company
2023
£m
0.8
0.8
2022
£m
0.8
0.8
Investment property is shown at cost. The fair value of the investment property at 31 December 2023 is £1.2m (2022: £1.2m) 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.
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Notes to the accounts continued
78
15. Investments
Cost of shares in subsidiaries
Balance at 1 January
Movement in year
Balance at 31 December
The Company’s subsidiary undertakings are shown in note 31.
2023
£m
63.8
–
63.8
2022
£m
63.8
–
63.8
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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 2026. 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 15.1% & 2.0% for the UK, 17.9% & 2.0% for the Netherlands and 16.3% & 2.0% for the Americas,
respectively.
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 6.1% has been charged on the loans, 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
2023
£m
–
2.2
–
2.2
2.2
Assets
2023
£m
–
–
–
2022
£m
–
3.1
–
3.1
3.1
2022
£m
–
–
–
2023
£m
(11.4)
–
(1.3)
(12.7)
(12.7)
Liabilities
2023
£m
(11.3)
(11.3)
(11.3)
2022
£m
(11.1)
–
(1.8)
(12.9)
(12.9)
2022
£m
(11.0)
(11.0)
(11.0)
Net
2023
£m
(11.4)
0.9
–
(10.5)
(10.5)
Net
2023
£m
(11.3)
(11.3)
(11.3)
2022
£m
(11.1)
1.3
–
(9.8)
(9.8)
2022
£m
(11.0)
(11.0)
(11.0)
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.
23 Corporate governance48 Financial statements
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Annual Report & Accounts 2023
79
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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 £10.1m of unrecognised deferred tax assets (2022: £9.5m) and the Company had £4.3m of unrecognised deferred tax assets (2022: £3.7m) 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
Employee benefits
Tax losses
Investment tax credits
Acquired intangible assets
Company
Employee benefits
Company
Employee benefits
Group
2023
£m
–
10.1
10.1
2022
£m
–
9.5
9.5
Balance at
1 January
2023
£m
(11.1)
2.9
0.2
(1.8)
(9.8)
Balance at
1 January
2022
£m
(12.5)
2.9
0.5
(2.0)
(11.1)
Recognised in
profit or loss
£m
Investment tax
credits utilised
Recognised
in other
comprehensive
income/(expense)
£m
Retranslation of
foreign differences
£m
Balance at
31 December
2023
£m
(0.3)
(0.7)
–
0.5
(0.5)
–
–
(0.2)
–
(0.2)
–
–
–
–
–
–
–
–
–
–
Recognised in
profit or loss
£m
0.2
(0.2)
–
0.2
0.2
Investment tax
credits utilised
–
–
(0.3)
–
(0.3)
Recognised
in other
comprehensive
income/(expense)
£m
1.2
–
–
–
1.2
Recorded on
acquisition
£m
–
0.2
–
–
0.2
Balance at
1 January
2023
£m
(11.0)
(11.0)
Balance at
1 January
2022
£m
(12.5)
(12.5)
Recognised in
profit or loss
£m
(0.3)
(0.3)
Recognised in
profit or loss
£m
0.2
0.2
Recognised
in other
comprehensive
income/(expense)
£m
–
–
Recognised
in other
comprehensive
income/(expense)
£m
1.3
1.3
(11.4)
2.2
–
(1.3)
(10.5)
Balance at
31 December
2022
£m
(11.1)
2.9
0.2
(1.8)
(9.8)
Balance at
31 December
2023
£m
(11.3)
(11.3)
Balance at
31 December
2022
£m
(11.0)
(11.0)
48 Financial statements23 Corporate governance
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Annual Report & Accounts 2023
Notes to the accounts continued
80
17. Inventories
Work in progress and raw materials
Finished goods
Group
2023
£m
4.0
7.1
11.1
2022
£m
2.9
6.7
9.6
Company
2023
£m
–
–
–
2022
£m
–
–
–
2022
£m
–
–
–
An amount of £nil (2022: £nil) has been charged in the year in respect of inventory write-downs.
18. Contract assets and 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
2023
£m
12.2
16.2
(17.5)
2022
£m
12.9
18.2
(14.5)
Company
2023
£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
–
–
(18.2)
16.2
14.5
(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
2023
£m
2.0
2022
£m
2.0
Company
2023
£m
–
2022
£m
–
23 Corporate governance48 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
Current liabilities:
Repayable in less than one year
Non-current liabilities:
Repayable between one and five years
Repayable in more than five years
Group
2023
£m
16.2
2.0
18.0
–
1.4
9.0
0.2
46.8
Group
2023
£m
8.0
–
0.9
8.9
2022
£m
18.2
2.0
17.7
–
1.6
7.7
0.1
47.3
2022
£m
8.0
–
0.9
8.9
Company
2023
£m
–
–
–
10.8
0.1
0.3
0.5
11.7
Company
2023
£m
8.0
–
0.9
8.9
2022
£m
–
–
–
3.7
0.1
2.1
2.1
8.0
2022
£m
8.0
–
0.9
8.9
Mpac Group plc
Annual Report & Accounts 2023
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An interest rate of 2% above the HSBC base rate is charged on the above loan repayable in less than one year, generating an expense of £0.5m (2022: £0.2m) that
has been recognised as part of the underlying finance expense in the income statement.
An interest rate of 6% is charged on the above loan repayable in more than five years, generating an expense of £0.1m (2022: £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 (2022: £0.1m).
48 Financial statements23 Corporate governance
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Annual Report & Accounts 2023
82
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Notes to the accounts continued
21. Reconciliation of net cash flow to movement in net funds
Group
Company
Net increase/(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 (debt)/funds
Movement in interest-bearing loans and borrowings:
Revolving credit facility
Movement in lease liabilities under IFRS 16:
Non-cash movement
Cash movement
Closing net debt
Analysis of net funds:
Cash and cash equivalents – Current assets
Interest-bearing loans and borrowings – Current liabilities
Interest-bearing loans and borrowings – Non current liabilities
Lease liabilities
Closing net (debt)/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
2023
£m
6.8
6.8
–
6.8
(10.0)
–
(2.1)
1.2
(4.1)
11.0
(8.0)
(0.9)
(6.2)
(4.1)
Group
2023
£m
17.5
17.4
–
1.2
3.0
4.6
0.1
43.8
2022
£m
(10.6)
(10.6)
0.3
(10.3)
7.6
(8.0)
(0.5)
1.2
(10.0)
4.2
(8.0)
(0.9)
(5.3)
(10.0)
2022
£m
14.5
15.3
–
1.2
3.8
3.6
0.6
39.0
2023
£m
0.9
0.9
(0.2)
0.7
(9.2)
–
(0.3)
–
(8.8)
0.4
(8.0)
(0.9)
(0.3)
(8.8)
Company
2023
£m
–
0.4
42.0
–
0.8
1.8
0.5
45.5
2023
£m
1.0
–
(0.1)
–
0.9
2022
£m
(5.4)
(5.4)
1.1
(4.3)
3.1
(8.0)
–
–
(9.2)
(0.3)
(8.0)
(0.9)
–
(9.2)
2022
£m
–
0.6
39.3
–
2.0
1.3
0.7
43.9
2022
£m
0.6
0.5
(0.1)
–
1.0
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.
23 Corporate governance48 Financial statements
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 2021 using the projected unit credit method. The market value of the
scheme assets at that date was £431.4m and the funding level was 94% of liabilities, which represented a deficit of £28.4m. The principal terms of the deficit
funding agreement between the Company and the Fund’s Trustees, which is effective until 31 December 2035, but is subject to reassessment every three years,
are that the Company will continue to pay a sum of £2.0m per annum to the scheme (increasing at 2.1 per cent. per annum) in deficit recovery payments.
The funding agreement focuses the scheme and the company on achieving a funding level which should permit the scheme to achieve risk transfer to an
alternative arrangement which the company would not be liable for the performance of. Based on annual tests, once the funding level on a technical provisions
basis reaches 103%, contributions will be redirected to an escrow account which can only be used by the scheme to either enable risk transfer or remedy a future
deficit arising and would be returned to the company should risk transfer be achieved without the funds being required. Should the funding level reach 110% of
technical provisions (including the value of the escrow account), contributions cease.
The deficit recovery period from 30 June 2021 was estimated to be four years and six months, which is scheduled to be formally reassessed following the
completion of the actuarial valuation being carried out as at 30 June 2024.
During the year, the Company paid deficit recovery contributions of £2.0m (2022: £2.0m).
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 2021, updated by the Company’s actuary to assess the value of the liabilities of the scheme at 31 December 2023. Scheme assets are stated at their
market value at 31 December 2023.
Mpac Group plc
Annual Report & Accounts 2023
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48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
84
Notes to the accounts continued
24. Employee benefits continued
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 2023 using the projected unit credit method. The valuations under IAS 19 at 31 December 2023 have been
based on these actuarial valuations, updated for conditions existing at the year end.
Employer contributions of £0.2m (2022: £0.2m) were paid during the year.
Assumptions
The key financial assumptions used to calculate scheme liabilities and the financing expense on pension scheme balances are as follows:
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Discount rate
Inflation rate
– CPI
– RPI
Increases to pensions in payment
– final salary benefits
– career average benefits
UK (Company)
2023
4.5%
2.6%
3.1%
2.6%
2.1%
2022
4.8%
2.8%
3.3%
2.8%
2.1%
USA
2023
4.8%
n/a
n/a
n/a
n/a
2022
5.0%
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
21.5 years
24.1 years
22.7 years
25.5 years
USA schemes
21.1 years
23.1 years
19.8 years
22.6 years
At 31 December 2023, the weighted average duration of the defined benefit obligation in the UK scheme was 11 years (2022: 12 years) and in the USA schemes was
8 years (2022: 8 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 2023
0.25% change in discount rate
0.25% change in inflation rate
Change in life expectancy by one year on average
UK scheme
£7.4m
£4.2m
£12.7m
USA schemes
£0.2m
n/a
£0.3m
23 Corporate governance48 Financial statements
Mpac Group plc
Annual Report & Accounts 2023
85
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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)
2023
£m
–
9.9
137.2
116.1
25.9
2.0
12.7
5.2
309.0
276.8
32.2
2022
£m
–
8.2
79.3
106.3
28.7
2.3
12.6
73.8
311.2
279.7
31.5
USA
Group
2023
£m
–
1.9
–
5.8
–
–
–
–
7.7
9.5
(1.8)
2022
£m
–
2.7
–
5.4
–
–
–
–
8.1
10.2
(2.1)
2023
£m
–
11.8
137.2
121.9
25.9
2.0
12.7
5.2
316.7
286.3
30.4
2022
£m
–
10.9
79.3
111.7
28.7
2.3
12.6
73.8
319.3
289.9
29.4
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)
2023
£m
–
(1.6)
0.9
(0.7)
2022
£m
–
(0.7)
1.1
0.4
USA
Group
2023
£m
–
0.1
0.2
0.3
2022
£m
–
0.1
0.3
0.4
2023
£m
–
(1.5)
1.1
(0.4)
2022
£m
–
(0.6)
1.4
0.8
The net pension expense/(income) is included in non-underlying items.
B) Statements of comprehensive income (“SOCI”)
The actuarial losses recognised in the SOCI in respect of pensions were £1.7m (2022: losses of £5.0m), comprising actuarial losses of £2.0m (2022: losses
of £5.8m) for the UK defined benefit pension scheme and actuarial gains of £0.3m (2022: £0.8m) for the USA schemes, all figures before tax.
Actual return on scheme assets
The actual return on scheme assets were gains of £1.4m (2022: losses of £129.5m), comprising gains of £0.9m (2022: losses of £130.3m) for the UK defined benefit
pension scheme and gains of £0.5m (2022: loses of £1.9m) for the USA schemes, all figures before tax.
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Notes to the accounts continued
86
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)
2023
£m
279.7
–
13.0
(3.5)
5.2
1.3
(18.9)
–
276.8
UK (Company)
2023
£m
311.2
14.7
0.9
2.0
(0.9)
(18.9)
–
309.0
2022
£m
417.4
–
7.4
1.1
(131.1)
5.3
(20.4)
–
279.7
2022
£m
453.1
8.0
(130.4)
2.0
(1.1)
(20.4)
–
311.2
USA
2023
£m
10.2
–
0.4
–
0.2
–
(0.9)
(0.4)
9.5
USA
2023
£m
8.1
0.4
0.5
0.2
(0.2)
(0.9)
(0.4)
7.7
2022
£m
12.4
–
0.3
–
(3.0)
–
(1.0)
1.5
10.2
2022
£m
9.9
0.2
(2.2)
0.2
(0.2)
(1.0)
1.2
8.1
Group
2023
£m
289.9
–
13.4
(3.5)
5.4
1.3
(19.8)
(0.4)
286.3
Group
2023
£m
319.3
15.1
1.4
2.2
(1.1)
(19.8)
(0.4)
316.7
2022
£m
429.8
–
7.7
1.1
(134.1)
5.3
(21.4)
1.5
289.9
2022
£m
463.0
8.2
(132.6)
2.2
(1.3)
(21.4)
1.2
319.3
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23 Corporate governance48 Financial statements
USA
Group
Mpac Group plc
Annual Report & Accounts 2023
87
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)
2023
£m
309.0
(276.8)
32.2
0.9
(2.9)
(2.0)
2022
£m
311.2
(279.7)
31.5
(130.4)
124.7
(5.7)
2023
£m
7.7
(9.5)
(1.8)
0.5
(0.2)
0.3
2022
£m
8.1
(10.2)
(2.1)
(2.2)
2.9
0.7
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
(Income)/expense recognised in the
income statement (see above)
Company contributions
Actuarial (losses)/gains recognised in
the SOCI
Retranslation
Net asset/(liability) for employee benefits
at 31 December
UK (Company)
2023
£m
31.5
0.7
2.0
(2.0)
–
32.2
2022
£m
35.7
(0.5)
2.0
(5.7)
–
31.5
USA
2023
£m
(2.1)
(0.3)
0.2
0.3
0.1
(1.8)
2022
£m
(2.5)
(0.3)
0.2
0.7
(0.2)
(2.1)
2023
£m
316.7
(286.3)
30.4
1.4
(3.1)
(1.7)
Group
2023
£m
29.4
0.4
2.2
(1.7)
0.1
30.4
2022
£m
319.3
(289.9)
29.4
(132.6)
127.6
(5.0)
2022
£m
33.2
(0.8)
2.2
(5.0)
(0.2)
29.4
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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.
Share-based payments
The Company currently operates a deferred share plan, though no options are currently outstanding under it. 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 report on pags 37 to 39 and in this note.
The Company operates a Long Term Incentive Plan (“LTIP”) for certain members of its senior management. Awards are anticipated to be made annually and were
awarded in 2022 and 2023. The key terms of both plans are set out in the Remuneration report on page 38 and were unchanged since inception.
The total number of shares conditionally granted under the 2022 LTIP was 187,740, at a market value of £4.33 per share, at the date of grant on 10 June 2022 and
remained outstanding at the year end. An expense of £nil has been recognised during the year (2022: £nil) within administration costs. No shares were forfeited,
exercised, expired or exercisable during the period.
The total number of shares conditionally granted under the 2023 LTIP was 504,247, at a market value of £2.35 per share, at the date of grant on 2 May 2023 and
remained outstanding at the year end. An expense of £nil has been recognised during the year within administration costs. No shares were forfeited, exercised,
expired or exercisable during the period.
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
88
Notes to the accounts continued
25. Capital and reserves
Share capital
Allotted, called up and fully paid
Ordinary shares of 25p each
2023
£m
5.1
2022
£m
5.1
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There were 20,474,424 (2022: 20,474,424) 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 none of the ordinary shares and it has agreed
to waive all dividends and not to exercise voting rights in respect of any future shares it owns. 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 report on page 38 and on page 87 in note 24.
At 31 December 2023, the employee trust held no ordinary shares of 25p each (2022: nil), representing 0.0% of the issued shares (2022: 0.0%). The shares held
by the trust at 31 December 2023 were purchased at an aggregate cost of £nil (2022: £nil). The trust purchased no additional shares in the year at a cost of £nil
(2022: £0.2m).
Included within retained earnings is the charge of £nil (2022: £0.1m) 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 2023 was £nil (2022: £nil).
Dividends
Dividends to shareholders paid in the period:
2023
£m
–
2022
£m
–
Having considered the trading results for 2023 and 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 2023. Future dividend payments will be considered by the Board in the context of 2024 trading performance
and when the Board believes it is prudent to do so.
23 Corporate governance48 Financial statements
26. Financial risk management
The Group has exposure to credit, liquidity and market risks from its use of financial instruments.
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
2023
£m
0.2
–
30.4
30.6
0.1
–
40.9
41.0
2022
£m
0.1
–
23.4
23.5
0.6
–
38.1
38.7
Company
2023
£m
–
0.5
22.3
22.8
–
0.5
50.9
51.4
2022
£m
–
2.1
22.6
24.7
–
0.7
43.9
44.6
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 2023 and 31 December 2023, derivative instruments in designated hedge relationships have been identified as Level 2.
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.
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Notes to the accounts continued
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
2023
£m
18.0
–
1.4
0.2
11.0
30.6
2022
£m
17.7
–
1.5
0.1
4.2
23.5
2023
£m
–
22.3
–
0.5
–
22.8
2022
£m
–
22.6
–
2.1
–
24.7
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.
23 Corporate governance48 Financial statements
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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:
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
2023
Credit
loss provisions
£m
–
–
–
–
–
–
Gross
£m
10.5
4.2
1.1
1.7
0.5
18.0
Total
£m
10.5
4.2
1.1
1.7
0.5
18.0
2022
Credit
loss provisions
£m
–
–
–
–
–
–
Gross
£m
10.5
3.7
1.6
0.6
1.3
17.7
Total
£m
10.5
3.7
1.6
0.6
1.3
17.7
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 14 to 16.
Contractual maturities of non-derivative financial liabilities
The non-derivative financial liabilities for the Group and the Company at 31 December were:
Current liabilities:
Interest-bearing loans and borrowings
Trade and other payables (excluding derivatives)
Lease liabilities
Non-current liabilities:
Interest-bearing loans and borrowings
Lease liabilities
Group
2023
£m
8.0
25.6
1.3
0.9
5.1
2022
£m
8.0
23.9
1.4
0.9
3.9
Company
2023
£m
8.0
42.0
–
0.9
–
2022
£m
8.0
35.0
–
0.9
–
Interest rates of 6% and 2% above the HSBC base rate are charged on the above interest-bearing loans, generating an expense of £0.5m (2022: £0.3m). The loans
relate to preference shares and the revolving credit facility drawdown. The preference share loan has no fixed maturity, the revolving credit facility is due to be
repaid in less than one year.
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.
48 Financial statements23 Corporate governance
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Notes to the accounts continued
26. Financial risk management continued
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 14 to 16.
Interest rate risk
Cash and cash equivalents
The cash profile at 31 December was:
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Group
Currency:
Sterling
Canadian dollar
US dollar
Euro
Company
Currency:
Sterling
Canadian dollar
US dollar
Euro
Cash at
floating
rates
£m
2023
Cash on which
no interest
received
£m
2.8
1.5
3.2
3.5
11.0
–
–
–
–
–
Cash at
floating
rates
£m
2023
Cash on which
no interest
received
£m
0.4
–
–
–
0.4
–
–
–
–
–
Total
£m
2.8
1.5
3.2
3.5
11.0
Total
£m
0.4
–
–
–
0.4
Cash at
floating
rates
£m
2022
Cash on which
no interest
received
£m
0.1
1.6
1.0
1.5
4.2
Cash at
floating
rates
£m
(0.3)
–
–
–
(0.3)
–
–
–
–
–
2022
Cash on which
no interest
received
£m
–
–
–
–
–
Total
£m
0.1
1.6
1.0
1.5
4.2
Total
£m
(0.3)
–
–
–
(0.3)
All cash surplus to immediate operational requirements is placed on deposit at floating rates of interest.
23 Corporate governance48 Financial statements
26. Financial risk management continued
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
2023
Borrowings at
fixed rates
£m
8.0
8.0
0.9
0.9
Borrowings at
floating rates
£m
2022
Borrowings at
fixed rates
£m
8.0
8.0
0.9
0.9
Total
£m
8.9
8.9
Total
£m
8.9
8.9
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 decreased/increased by £0.1m (2022: decreased/increased by £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 2022.
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 19, 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
2023
1.24
1.68
1.15
2022
1.24
1.62
1.17
Closing rate
2023
1.27
1.68
1.15
2022
1.21
1.64
1.13
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Notes to the accounts continued
26. Financial risk management continued
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
Company
2023
£m
–
(0.1)
(0.1)
2022
£m
–
(1.8)
(1.8)
2023
£m
–
–
–
2022
£m
–
–
–
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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 2023 or 2022, that had been designated as fair value hedges under IFRS 9
Financial instruments: recognition and measurement.
During the period, a credit of £1.7m for the Group (2022: £1.3m debit) and £nil for the Company (2022: £nil) was recognised in the statements of comprehensive
income in respect of cash flow hedges.
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
–
16.4
16.4
Less than
6 months
£m
–
–
–
2023
Between
6 and 12
months
£m
–
6.0
6.0
2023
Between
6 and 12
months
£m
–
–
–
Between
12 and 24
months
£m
–
1.4
1.4
Between
12 and 24
months
£m
–
–
–
Less than
6 months
£m
–
11.0
11.0
Less than
6 months
£m
–
–
–
2022
Between
6 and 12
months
£m
–
2.9
2.9
2022
Between
6 and 12
months
£m
–
–
–
Between
12 and 24
months
£m
–
–
–
Between
12 and 24
months
£m
–
–
–
Total
£m
–
23.8
23.8
Total
£m
–
–
–
Total
£m
–
13.9
13.9
Total
£m
–
–
–
23 Corporate governance48 Financial statements
26. Financial risk management continued
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 2023
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 2023
Mpac Group plc
Annual Report & Accounts 2023
95
2023
£m
(1.8)
0.4
1.3
(0.1)
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 2023 or during the year had a material value to the Group.
2023
GBP£0.3m
CA$28.9m
€7.2m
–
$0.4m
1:1
1US$:1.3436CA$
1CA$:0.6787€
£1.7m
£1.7m
(£0.1m)
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96
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.
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Group
Functional currency:
Sterling
Canadian dollar
Euro
Company
Functional currency:
Sterling
2023
US dollar
£m
–
5.1
–
5.1
US dollar
£m
12.5
2023
Euro
£m
–
0.3
–
0.3
Euro
£m
–
Total
£m
–
5.4
–
5.4
Total
£m
12.5
US dollar
£m
–
3.3
–
3.3
US dollar
£m
11.2
2022
2022
Euro
£m
–
1.9
–
1.9
Euro
£m
1.0
Total
£m
–
5.2
–
5.2
Total
£m
12.2
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 £0.3m (2022: £0.1m). 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 £0.3m (2022: £0.1m).
If sterling had been 10% stronger against all foreign currencies at 31 December 2023, Group equity would have decreased by £3.4m (2022: £3.2m decrease).
Conversely, if sterling had been 10% weaker against all foreign currencies at 31 December 2023, Group equity would have increased by £3.7m (2022: £3.5m
increase). 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 2023 is £8.8m (2022: £8.8m) 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.
23 Corporate governance48 Financial statements
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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
Land & buildings
£m
Group
Company
Cost
Balance at 1 January 2022
Additions
Disposals
Transfers
FX Translation
Balance at 31 December 2022
Additions
Disposals
Transfers
FX Translation
Balance at 31 December 2023
Depreciation
Balance at 1 January 2022
Charge for the period
Disposals
Transfers
FX Translation
Balance at 31 December 2022
Charge for the period
Disposals
Transfers
FX Translation
Balance at 31 December 2023
NBV of ROU assets 2022
NBV of ROU assets 2023
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
7.4
–
–
–
0.4
7.8
2.1
–
–
(0.1)
9.8
2.1
1.0
–
–
0.1
3.2
1.0
–
–
(0.1)
4.1
4.6
5.7
0.1
–
–
–
–
0.1
–
–
–
–
0.1
–
–
–
–
–
–
0.1
–
–
–
0.1
0.1
–
0.9
–
–
–
–
0.9
–
(0.1)
–
–
0.8
0.5
0.1
–
–
–
0.6
0.1
(0.1)
–
–
0.6
0.3
0.2
8.4
–
–
–
0.4
8.8
2.1
(0.1)
–
(0.1)
10.7
2.6
1.1
–
–
0.1
3.8
1.2
(0.1)
–
(0.1)
4.8
5.0
5.9
–
–
–
–
–
–
0.3
–
–
–
0.3
–
–
–
–
–
–
–
–
–
–
–
–
0.3
Group
Company
31 December
2023
£m
(5.3)
(2.1)
–
1.1
(0.1)
0.2
(6.2)
(4.9)
(1.3)
31 December
2022
£m
(6.0)
–
–
1.2
(0.1)
(0.4)
(5.3)
(3.9)
(1.4)
31 December
2023
£m
–
(0.3)
–
–
–
–
(0.3)
(0.3)
–
31 December
2022
£m
–
–
–
–
–
–
–
–
–
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 (2022: £nil).
48 Financial statements23 Corporate governance
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Annual Report & Accounts 2023
Notes to the accounts continued
98
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
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Group
Company
31 December
2023
£m
1.5
4.2
1.0
6.7
31 December
2022
£m
0.9
3.4
1.5
5.8
31 December
2023
£m
–
0.3
–
0.3
31 December
2022
£m
–
–
–
–
Group
2023
£m
0.1
Group
2023
£m
4.8
2022
£m
–
2022
£m
5.3
Company
2023
£m
0.1
Company
2023
£m
4.8
2022
£m
–
2022
£m
5.3
30. Related parties
Transactions with key management personnel
The compensation of key management personnel is disclosed in the Remuneration report on pages 37 to 39. Key management personnel comprise the Executive
Directors only:
Short-term employment benefits
Share based payments
Total key management personnel compensation
31 December
2023
£m
0.1
–
0.1
31 December
2022
£m
0.1
0.1
0.2
Identity of related parties
The Company has a related party relationship with its subsidiaries (see note 31), 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 2023 was £0.1m (2022: £0.1m).
23 Corporate governance48 Financial statements
31. 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.
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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
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 USA 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 Richmond, Inc. (USA)
Molmac Engineering Limited
Thrissell Limited
Mpac Group Holdings Limited
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During the year ended 31 December 2023, the Company received interest income from subsidiary undertakings of £0.4m (2022: £0.4m), management fees
of £2.7m (2022: £2.1m) and brand fees of £4.0m (2022: £3.4m).
At 31 December 2023, amounts owed by subsidiary undertakings to the Company were £21.9m (2022: £25.3m) and amounts owed by the Company to subsidiary
undertakings were £41.6m (2022: £39.2m) and are unsecured. The amounts owed by subsidiary undertakings to the Company are stated after a provision of
£13.6m (2022: £13.9m) representing amounts owed to the Company which are no longer considered recoverable.
At 31 December 2023, investments in subsidiaries by the Company were £63.8m (2022: £63.8m).
48 Financial statements23 Corporate governance
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Notes to the accounts continued
32. 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.
Capitalisation of development costs
The Group capitalises costs for product development projects. Initial capitalisation of costs is based on management’s judgement that technological and economic
feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model, and all
other recognition criteria within IAS 38 can be demonstrated. In determining the amounts to be capitalised, management makes assumptions regarding the expected
future cash generation of the project, discount rates to be applied and the expected period of benefits. The net book value of capitalised development costs was
£0.9m (2022: £2.0m).
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, along with the evolving regulation of pension schemes. The
Group is aware of a case involving Virgin Media and NTL Pension Trustee, which could potentially lead to additional liabilities for some pension schemes. This case
is subject to appeal and the impact (if any) is not known and will be assessed as relevant in future. 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 £2.2m (2022: £3.1m) 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.
23 Corporate governance48 Financial statements
Five-year record
Revenue
Underlying operating profit1
Non-underlying items
Operating profit
Net financing income/(expense)
Profit before tax
Taxation
Profit/(Loss) for the period from continuing operations
Profit for the period from discontinued operations
Profit/(Loss) for the period
Underlying operating return on sales1
Underlying earnings 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
2023
£m
114.2
7.8
(3.9)
3.9
0.8
4.7
(2.0)
2.7
–
2.7
6.8%
26.2p
13.1p
–
24.0
10.8
11.1
48.8
30.4
(72.1)
53.0
11.0
64.0
2022
£m
97.7
3.9
(3.9)
–
0.2
0.2
(0.6)
(0.4)
–
(0.4)
4.0%
13.3p
(2.2)p
–
25.4
9.8
9.6
49.2
29.4
(65.4)
58.0
4.2
62.2
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
£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
(57.7)
30.7
15.5
46.2
2019
£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
(50.1)
29.5
18.9
48.4
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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.
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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
23 Corporate governance48 Financial statements
Notice of Annual General Meeting
Notice is hereby given that the 112th Annual General Meeting (the “Meeting”)
of Mpac Group plc (the Company) will be held at the offices of Hudson Sandler
LLP, 25 Charterhouse Square, Barbican, London, EC1M 6AE on Wednesday
15 May 2024 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 14 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 2023 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 37 to 39 of the Annual Report and Accounts 2023.
Directors
3. To re-elect Mr. A J Kitchingman as a Director.
4. To re-elect Mr. A P Holland as a Director.
5. To re-elect Mr. W C Wilkins as a Director.
6. To re-elect Mr. D G Robertson as a Director.
7. To re-elect Mrs. S A Fowler as a Director.
8. To re-elect Mr. M G R Taylor as a Director
Auditors
9. To appoint PKF Littlejohn LLP as auditors of the Company to hold office
from the conclusion of this Meeting until the conclusion of the next general
meeting 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 £1,706,031 (representing
approximately one third of the total ordinary share capital in issue at 18
March 2024, 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 £1,706,031 in connection
with an offer by way of a rights issue, such authorities to expire at
the conclusion of the 2024 AGM or if earlier, at close of business on
15August 2025, 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 Act) 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 Act 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 £511,860;
such authority to expire at the conclusion of the 2025 Annual General
Meeting of the Company (or, if earlier, at close of business on 15 August
2025) 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.
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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 2025 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.
By order of the Board
PRISM COSEC LIMITED
Company Secretary
Registered in England and Wales No.
124855
18 March 2024
Registered office:
Station Estate
Station Road
Tadcaster
North Yorkshire
LS24 9SG
13. That if resolution 11 is passed, the Board be authorised in addition to any
authority granted under resolution 12 to allot equity securities (as defined
in the Act) 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 Act did not apply to any such allotment or sale,
such authority to be limited to the allotment of equity securities or sale of
treasury shares up to a nominal amount of £511,860 such authority to be
used only for the purposes of financing (or refinancing, if the authority is
to be used within 12 months after the original transaction) a transaction
which the Board of the Company determines to be either an acquisition or
a specified capital investment of a kind contemplated by the Statement of
Principles on Disapplying 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 2025 Annual General Meeting of
the Company (or, if earlier, at close of business on 15 August 2025) 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 2,047,422;
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
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Explanatory notes relating to the resolutions
Resolutions 1 to 11 are ordinary resolutions; resolutions 12 to 14 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 2023
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 2023, 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 37 to 38 of the Annual Report and Accounts 2023, for
the year ended 31 December 2023. The vote is advisory only.
Re-election of Directors
In accordance with best practice in corporate governance, resolutions 3 to 8
seek approval for the re-election of all Directors who served during the year.
Biographical information for each of the Directors is provided on page 26 of the
Annual Report and Accounts 2023.
The Board has no hesitation in recommending the 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 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 re-appoint PKF Littlejohn 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 £3,412,062, which is approximately
two-thirds of the nominal value of the issued ordinary share capital of the
Company as at 18 March 2024, being the latest practicable date prior to the
publication of this notice.
£1,706,031 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 15 August 2025. 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 £511,860, being approximately 10% of the total issued ordinary
share capital of the Company as at 18 March 2024.
The Pre-Emption Group Statement of Principles 2022 issued on 4 November
2022 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 10% 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 £511,860,
being approximately 10% of the total issued ordinary share capital of the
Company as at 18 March 2024, 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 2025 Annual General Meeting or at close of business on 15 August 2025,
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.
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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 2,047,442 ordinary shares,
representing approximately 10% of the issued ordinary share capital at 18
March 2024. The authority requested would replace a similar authority granted
last year and would expire at the end of the 2025 AGM, or if earlier, at close of
business on 15 August 2025.
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.
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 13 May 2024, 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.
Voting at the Meeting
2. Voting at the Meeting will be by way of poll rather than on a show of hands.
This is a more transparent method of voting as shareholder votes are
counted according to the number of shares held and will help to ensure an
exact and definitive result. If you will not be participating in the meeting in
person and wish to vote in advance, you may appoint a proxy as further
detailed in notes 3 to 11 below.
Appointment of proxies
3. 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.
4. 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).
5. 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.
6. In order to reduce the Company’s environmental impact, our intention is to
remove paper from the voting process as far as possible. You are therefore
asked to vote in one of the following ways:
Register your vote online through our registrar’s portal –
www.signalshares.com. You will need your investor code which is printed
on your share certificate or may be obtained by calling the Company’s
registrar, Link Group (‘Link’) on 0371 664 0300. 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.
Link has launched a shareholder app: LinkVote+. It’s free to download and
use and gives shareholders the ability to access their shareholding record
at any time and allows users to submit a proxy appointment quickly
and easily online rather than through the post. The app is available to
download on both the Apple App Store and Google Play.
CREST members may use the CREST electronic proxy appointment
service as detailed in note 9 below.
Proxymity Voting – if you are an institutional investor you may also
be able to appoint a proxy electronically via the Proxymity platform, a
process which has been agreed by the Company and approved by the
Registrar.
For further information regarding Proxymity, please go to www.proxymity.
io. Your proxy must be lodged by 12noon on Monday 13 May 2024 in
order to be considered valid or, if the meeting is adjourned, by the time
which is 48 hours before the time of the adjourned meeting. 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. An electronic proxy appointment
via the Proxymity platform may be revoked completely by sending an
authenticated message via the platform instructing the removal of your
proxy vote.
If you prefer, you may request a hard copy form from Link using the
numbers shown above and return it to Link Group, PXS 1, Central Square,
29 Wellington Street, Leeds, LS1 4DL
All proxy appointments, whether electronic or hard copy, must be received
by the Company’s registrar no later than 12 noon. on Monday 13 May 2024
(or, in the event that the meeting is adjourned, no later than 48 hours
(excluding any part of the day that is not a working day) before the time of
any adjourned meeting).
23 Corporate governance48 Financial statements
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 18 March 2024 (being the latest practicable business day prior to the
publication of this Notice), the Company’s ordinary issued share capital
consists of 20,474,424 ordinary shares, carrying one vote each. Therefore,
the total voting rights in the Company as at 18 March 2024
are 20,474,424.
Questions
13. We always welcome questions from our shareholders and we request that
shareholders submit their questions to the Board before the Meeting. We
will ensure that answers to questions are placed on the Company’s website.
You can submit questions up until 11 a.m. on 13 May 2024 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 can be found on the Company’s website at
www.mpac-group.com.
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Annual Report & Accounts 2023
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7.
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.
8. 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.
9. 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 &
International 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.
10. CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & International 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.
48 Financial statements23 Corporate governance
Mpac Group plc
Annual Report & Accounts 2023
Corporate information
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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
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London
E14 4HD
Nominated Advisor & Broker
Shore Capital and Corporate Limited
57 St James’s Street
London
SW1A 1LD
Joint Broker
Liberum Capital Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9LY
Registrars
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Tel: +44 (0)371 664 0300
www.signalshares.com
Share price
Available from:
FT Cityline – tel: +44 (0)905 817 1690
Certain national newspapers
Financial PR
Hudson Sandler LLP
25 Charterhouse Square
London
EC1M 6AE
Website
Further information is available at www.mpac-group.com
Timetable
Annual General Meeting
15 May 2024
Payment dates for preference dividend
30 June 2024 and 31 December 2024
Half-year announcement
September 2024
23 Corporate governance48 Financial statements
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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