COVID-19 has impacted businesses in many different ways. However for specialist high speed packaging & automation solutions provider Mpac, we think the pandemic will prove to be a long-term positive. Why?
Well the lockdowns have already started to accelerate both the reshoring of US production back from China (re supply chain disruption & US tariffs), and the adoption of the company’s expanding suite of Industry 4.0 solutions, such as remote diagnostics, virtual machine testing/commissioning & augmented reality training.
H1’20 turnover fell 20% (-32% LFL) to £36.6m YoY, due to deferred shipments, tough comparatives (record H1’19 of £45.8m) and difficulties accessing client sites. Yet equally no orders have been cancelled, whilst operating margins came in at a healthy 7.1% (adjusted EBIT £2.6m), thanks to favourable mix. Higher spare part volumes drove service revenues up +30% YoY - equivalent to 26% sales vs 17% LY. Moreover order intake declined by only -6% to £30.5m (£32.6m LY), underlining the natural resilience of their core markets: namely Healthcare (eg GSK, CooperVision, Bausch+Lomb), Food/Beverage (Ice-cream, popcorn) and pharmaceuticals.
Elsewhere, net funds closed June up £4.5m to £22.5m (or 112p/share vs £18.0m Dec’19), benefitting from tight working capital control (£3.5m inflow) and cash collection (re debtor days at pre CV19 levels). All told, providing plenty of fire-power in the event suitable M&A opportunities become available at attractive prices.
