Mpac warns on full-year profits amid 'challenging' trading
By Josh White
Date: Monday 11 Jul 2022
(Sharecast News) - High-speed packaging and automation company Mpac Group said in a trading update on Monday that it continued to make progress during its first half despite a "challenging" trading environment, although it warned on profit for the full year amid some serious operational difficulties.
The AIM-traded firm said it expected to report revenue ahead of last year and in line with its expectations for the six months ended 30 June.
As it previously announced, there had been increasing macroeconomic uncertainty and unprecedented volatility in the global supply chain.
That had impacted both the timing of order placement from customers, and was causing operational challenges, in particular around the sourcing of critical, customer specified electronic components.
The group said it was responding "dynamically" to meet customer expectations, including investing in inventory and work-in-progress to ensure it remained a reliable partner to customers.
However, the challenges had become more acute in recent months, resulting in extended lead times and cost inflationary pressures which were impacting its operational efficiencies and margins.
As a result, the group said it now expected that profit for the 2022 financial year would be "significantly below" current market expectations.
Mpac said supply chain and operational challenges were likely to continue for the rest of 2022, before easing in 2023.
In the meantime, the group said it had been proactive in implementing mitigation measures including the securing of alternative sources of electronic components, increasing its focus on reliable planning data from its recently-implemented ERP system, close management of its supply chain, and implementing cost savings initiatives.
Beyond the short-term operational challenges, the board said the longer-term outlook for the business remained "positive".
It said it was carrying forward a strong prospect pipeline and order book, concentrated on companies in its core, "resilient" end markets of healthcare and food and beverage, while its balance sheet remained "strong", providing it with the ability to invest in growth over the medium term and beyond.
"Over the recent past Mpac has created a business model which enables the group to flex with changing circumstances, however the unprecedented nature of the supply chain disruption will impact our full year results," said chief executive Tony Steels.
"I am confident our experienced management team will resolve the short-term challenges with the mitigation plans already in place, alongside the sound operational foundations established by implementing the 'One Mpac' business model.
"We remain confident in the long-term prospects for the group."
Mpac said it would announce its unaudited results for the six months ended 30 June on 8 September.
At 1438 BST, shares in Mpac Group were down 33.66% at 252.1p.
Reporting by Josh White at Sharecast.com.
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