Manufacturing has reached an inflection point. Gone are the days when global brands would simply outsource production to low-cost countries.
Instead, due to increasing tariffs, supply chain disruptions and geopolitics, there is now a much greater focus on making products closer to home.
What's more, the economics are turning more positive too, with many fully automated factories in the West becoming competitive with their more labour-intensive Asian rivals.
Great news for Mpac Group (MPAC) , a specialist provider of full-line, high-speed packaging and automation solutions to FMCG, healthcare, and clean energy businesses.
Indeed, like clockwork this morning, the company released positive H1'24 results and an 'in line' outlook - reporting adjusted EBIT and EPS up 105% and 134% respectively to £4.5m and 15.2p, on revenues +14% higher at £60.0m (£52.8m H1'23). This was driven by a 19% jump in equipment sales, improved operating leverage and higher gross margins (28.2% vs 23.9% H1'23), leading to a near doubling in RoCE to 18.1% vs 9.2% 12 months ago and EBIT margin progression (7.5% vs 4.2%).
Elsewhere, MPAC won a host of new customers (representing 30% of equipment orders), including 3 strategic accounts, which further broadened its client base. Several new innovative products were also launched, such as the 'Ostro' (mid range) and 'Horizon' (top load) cartoners. This was alongside good progress on new digital services, as well as Freyr and Ilika projects in EV batteries.
But that's not all. H1 order intake was again "strong" at £59.7m vs £56.1m H2'23 and £62.7m LY.
When combined with a £71.4m orderbook (£72.5m Dec'23), £2.5m/month of repeat service revenues, a healthy pipeline and improving EBIT margins (7.5% H1'24 vs 4.2% H1'23), this means excellent H2 visibility (est 100%) in order to hit house broker Shore Capital's FY24 forecasts of adjusted PBT and EPS of £10.5m and 38.7p respectively on turnover up 5% to £120m.
Sure, net debt closed June at -£4.9m (vs +£2.1m Dec'23) reflecting a working capital build (£9.8m) due to the timing of customer deposits on new orders. Yet equally, this WIP is expected to reverse as project milestones are met, with Shore Capital pencilling in a £2.9m net cash balance by year-end and 600p/share fair value.
CEO Adam Holland commenting: "I am pleased to report H1’24 trading in line with our expectations, ... [where] we have seen substantial increases in revenue, gross margin & operating returns. I remain confident that Mpac is well positioned to take advantage of the attractive opportunities within the substantial markets in which we operate."
Longer-term, the Board are aiming for 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 further broadening of the customer base, and innovation.
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