3 weeks ago, we thought the coronavirus would be a Chinese/Italian phenomena impacting global supply chains, but not triggering full/partial lockdowns across large swathes of the planet. How things have changed.
Indeed since then just about every country has been affected, with many industries literally at a standstill. Mpac is certainly not in this camp, since it provides machinery, spares & engineering expertise to strategically important sectors like healthcare, pharmaceuticals and food/beverage (see below) that will keep us all alive through this challenging period.
difficulties accessing client premises to fulfil shipments (re social distancing). Sure this is frustrating, however we reckon the majority of its orderbook (£52.2m Dec’19) should be completed at a later date. Yes, delays will undoubtedly hit 2020 results – probably more so in Q2 than H2. Yet the longer term fundamentals of Industry 4.0, direct to consumer deliveries and the shift towards more environmentally friendly packaging, continue to play to Mpac’s strengths. On top, there’s repeat service/aftermarket revenue which should keep things ticking over.
Elsewhere the balance sheet is strong, sporting £18.1m of net cash (89p/share) as at Feb’20 (ie £19m less £0.9m of preference shares), alongside a fully undrawn £10m credit line. Moreover the group has come through these types of short, sharp, economic shock before. And besides, there are other levers to pull if things were to significantly deteriorate. Not least, reducing capex (£2.3m 2019), discretionary spend and non-essential purchases.