Gearing up for double digit growth
FY 2018 results:Bookings soared in H2 after a ‘challenging’ H1, driving better than expected 2018 results, and pushing the Dec’18 closing orderbook up 16% to a record £39.8m. Likewise turnover leapt 9% LFL (negligible impact from forex) to £58.3m (vs £53.4m LY) thanks to impressive performances from the US (+23% to £22.7m), UK (+59%, £11.6m) and Healthcare (+55%, £20.2m). Partially offset by “sluggish†demand in China and subdued order intake in EMEA for bespoke/customised solutions.
Furthermore, visibility is excellent. Here, based on the natural flow-through of the backlog, augmented by repeat Service business (eg spares), we estimate our upgraded 2019 £63.0m sales target (+8% YoY) is already >80% covered. As always though, investors need to be aware that there can be some lumpiness over period ends.
2018 operating profits came in at £1.4m (£1.3m) – equivalent to a 2.4% margin – despite incurring £1.2m of one-off costs to resolve 2 legacy contracts (previously flagged) and £0.6m on the PPF statutory levy. Underlying cashflows were strong at £4.1m (ie excluding £3.0m of pension recovery payments) bolstered by a +£1.9m working capital swing - leaving year end net cash at £27m (worth 134p/share), up from £24.9m in June ’18.
There seems to be little danger currently from commodity price pressures (eg steel & aluminium) and/or the Trump trade tariffs. Meaning that we have raised our adjusted EBIT forecasts for this year (+17.6%) and next (+16.0%) to £3.5m and £4.4m respectively - in turn boosting our valuation / share from 170p to 200p.
Mpac Group is focused on its Packaging Machinery business, Mpac Langen, which designs, precision engineers and manufactures packaging solutions, machinery and high specification automation, secondary packaging equipment and end-of-line robotics and at-line instrumentation and testing solutions as well as providing solutions including the design and integration of packaging systems.
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