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Mpac Group reports strong H1 performance, confirms positive full-year outlook

09:30, 10th July 2024
Paul Hill
PMH Capital

The UK is a 'hotbed' of engineering talent. Dyson, Bae Systems, McLaren, and high speed packaging and automation solutions firm Mpac Group (MPACFollow | MPAC.

This morning, the latter said that H1'24 trading had been strong - delivering sales (+15% to £61m vs £52.8m LY) and adjusted PBT significantly higher than H1'23 and 'in line' with FY24 expectations (Shore Capital: adjusted PBT and EPS of £10.5m and 38.7p on turnover up 5% to £120m).

Supported by robust order intake (£60m) and ending June with a closing backlog of £71m - which alongside recurring Services business and a "healthy pipeline" provides excellent revenue cover (my est 100%) to hit the £120m top line target.

Sure, adjusted PBT will be H2-weighted (est H1 40% vs H2 60%), but I suspect this is simply down to completing some early-stage, lower-margin clean energy projects in H1. Here future profit margins should improve, as economies of scale and learning curve benefits kick in.

Elsewhere, the blue-chip customer base was further extended in H1 after securing some new strategic OE accounts and repeat orders. As you may recall, MPAC has a client list to kill for - including household names such as Nestlé, GSK, CooperVision, Kellogg's, Diageo, Dexcom, Mars, and J&J.

In terms of the balance sheet, net debt closed June at £4.9m thanks to normal working capital flows (re debtors and WIP) - which are set to reverse in H2 and end Dec'24 with net cash of £2.9m.

Longer term, the Board are targeting 10% EBIT margins and LFL sales growth of 10% across the cycle - that will be achieved via a combination of market share gains (TAM $65bn-$70bn), operational excellence, a broadening of customer base, and innovation.

This is further underpinned by secular growth drivers of re/near-shoring, automation, and Industry 4.0 - where brand owners can not only reduce unit costs and downtime, but also materially lift productivity and ROIs.

CEO Adam Holland, commenting: "We are pleased to report that H1 trading is in line with the Board's expectations, leaving the Group well placed to meet full year expectations. We continued to gain momentum through the period and will report a substantial increase in revenue and profitability in H1'24 vs H1'23. We are well positioned to succeed in the attractive markets in which we operate and deliver on our strategic objectives."

Lastly, interims are scheduled for Tuesday, 10th September, with both Shore Capital and Equity Development today reiterating their fair values of 600p and 530p/share respectively.

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