20.01.2025
Ahead of the high-speed packaging technology specialist Mpac Group (LON: MPAC) announcing its 2024 Final Results in late April, the company last week issued a Trading Update.
When I recently featured the group upon acquisition news, on Wednesday 2nd October, I stated that:
“I have been a long-time fan of this group, they touched 665p three years ago, before collapsing back to 184p this time last year, so I have been pleased to see this recent action spurred on by such sensible deals and money-support.
At the current levels I would suggest that holders should just sit back and enjoy the ride, while new investors should quickly add some MPAC shares into their portfolios, because I am sure more good news will ensue.”
They were then trading at 445p, last week the shares closed at 563p – a very respectable 26.5% improvement in just four months.
However, the upward progression is still very much in play, with analysts valuing the shares as a Buy at up to 865p.
The Business
With some 1,000 employees globally, the Tadcaster-based packaging and automation solutions company is engaged in engineering and technology, designing, precision engineering, manufacturing, and supporting high-speed packaging equipment and solutions.
It also operates in the Americas, EMEA and Asia Pacific, while its segments include Original Equipment and Service.
The OE segment is engaged in the making, packing and testing of packaging solutions, machinery and high-specification automation, secondary packaging equipment and at line instrumentation solutions.
The Service segment is engaged in selling spare parts and providing service engineers and support staff to customers, enabling them to maximize the benefits of their packaging solutions, machinery and automation, secondary packaging equipment, end-of-line robotics and at line instrumentation solutions.
It serves customers in sectors, including health and personal care/pharmaceutical, food and beverage, consumer goods and clean energy.
Major clients include Unilever, Nestle, Diageo, Philips, Advent, Kellogg’s, P&G, Bausch & Lomb, Astra Zeneca, 3M and Dexcom.
Trading Update
As anticipated, the second-half pre-tax profit was substantially above H1 24, aided by improving project margins and operational efficiencies.
For the year to end-December 2024, the group put in a very good performance, and it now expects that it will report underlying pre-tax profits in line with market expectations of £10.5m (£7.1m).
In the second-half year, it completed two strategic acquisitions, CSi Palletising and BCA Automation, both of which are integrating well into the group.
Those purchases helped to take net debt at the year-end up to £37.0m (£2.1m net cash).
The business activity and prospect pipeline, especially in its Healthcare and Food & Beverage markets continues to be strong – the Order Book at the year-end was up over 50% at £111.0m (£72.5m), which gives the group good current year revenue coverage.
Management Comment
CEO Adam Holland stated that:
“We are pleased with full year 2024 financial performance, which is in line with market expectations. 2024 has proved to be a transformational year for the Group, with the acquisitions of CSi, BCA and Siga Vision providing the platform for a step change in scale and profitability, accelerating our progress towards our strategic objectives.
The acquisitions materially diversify the Group's portfolio enabling the Group to provide a fuller line offering, as well as access to new customer relationships providing a platform for continued robust organic growth.
We anticipate reporting for 2024 record levels of revenue, with underlying profit before tax breaking through the £10m mark for the first time.
We start 2025 with a larger and more diverse order book from our resilient end markets providing a high level of coverage over forecast revenue, supporting delivery of our expectations for further growth in the year ahead.''
The Equity
There are some 30.07m shares in issue.
The larger holders include Schroder Investment Management (16.33%), Charles Stanley (6.07%), G Oury (3.64%), James Laverdiere (3.52%), Gresham House Asset Management (2.52%), BennBridge (1.83%), Castlefield Investment Partners (1.11%), Unicorn Asset Management (1.05%), Canaccord Genuity Wealth (1.00%), D&F Financial Services (0.83%), and Avellemy (0.73%).
Broker’s Views
Analysts Robin Speakman and Akhil Patel, at Shore Capital Markets, are very excited about Mpac’s future prospects.
Conservatively, they have a 700p a share fair value on the stock.
For 2024 they estimate £122.5m (£114.2m) revenues, with adjusted pre-tax profits of £10.5m (£7.1m), and earnings of 35.6p (25.9p) per share.
For the current year to end-December 2025 they see £218.0m sales, £17.8m profits and 44.2p in earnings.
Next year their estimates are for £233.0m turnover, £21.4m profits and 52.4p earnings per share.
Sanjay Vidyarthi, at Panmure Liberum, rates the group’s shares as a Buy, looking for 800p a share.
For 2024 his estimates are for £129.0m sales, £10.5m profits and 34.8p per share in earnings.
His 2025 figures suggest £209.0m sales, £18.6m in profits, with 45.6p earnings.
2026 could show £228.0m revenues, £22.0m profits and 54.1p in earnings per share.
Analysts Mike Jeremy and Rachel Haye, at Equity Development, have a fair value of 865p on the group’s shares.
Their estimates are for revenues of £129.8m in 2024, with £10.2m profits and 31.8p earnings.
The 2025 year could report £218.1m sales, £16.9m profits and 43.4p earnings.
For the 2026 year they see £233.1m revenues, £21.7m profits and 54.7p earnings per share.
My View
This group really is a robotics specialist in processing machine-building, for clients requiring solutions for packaging machinery, cartoning and case handling, particularly in the food and beverage and healthcare sectors, and now emerging in the field of clean energy.
The group’s Order Book gives it a great cover as it progresses into 2025, and at better operating margins.
If you are a new investor don’t be put off by the price rise over the last year, having lifted up from 335p to 565p, because the group’s Management have got a good hold of the business and know exactly where they are taking it on a global basis.
The analyst Price Objectives are not outlandish enough to deter fresh impetus in the shares.
The shares were up to 1,037p way back in April 1996, ten years later they were down to just 34.44p.
They hit 590p in mid-November last year, which is a level that I see being easily burst through before the end-April results announcement, while the 650p-700p price range is very possible in 2025.
(Profile 19.12.19 @ 182p set a Target Price of 235p*)
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