Mpac reports that H1 revenue matched the Board’s expectations, with a strong order book in January and sound performance from acquired business. However, during Q2 the Original Equipment (OE) order book slowed appreciably and is now seen at c.£90m on 30 June versus £118.5m on 31 December 2024.
Concentrated predominantly in the US, Mpac reports growing uncertainty and reduced consumer confidence resulting in customers deciding to defer planned capital spending and cutting costs. This results in reduced cover for projected FY25 revenue, particularly in the Americas region, to the extent that FY25 revenue and (adj.) PBT are expected to be below Board expectations for the year.
The Group has implemented a series of strategic measures to adjust the cost base and improve efficiency. Notably, US operations are reorganised, with the Cleveland Ohio facility being consolidated with the Boston Massachusetts site, plus a reduction in capacity at the Mississauga facility in Canada.
Encouragingly, Mpac has also announced a buy-in transaction with Aviva Life & Pensions UK Ltd. to purchase a bulk annuity insurance policy for £249m. This covers all known pension liabilities, resulting in improved Group cashflow and balance sheet.
Despite the current difficulties in industrial markets evident in this external setback, it is worth noting Mpac’s transformational change in recent times. With a broadened and innovative product offering, specialist engineering expertise, and a firm focus on operational excellence and increasing market share, Mpac remains well placed to drive future growth.
Our fair value / share estimate moves to 650p from 865p, still well above current levels and indicative of a FY26E EV/(adj.) EBITDA multiple of 9.7x, below the market cap-weighted average of peers at 10.3x.
