For the year to 31 December 2023, Mpac Group reported results which were ahead on all key metrics. Revenue of £114.2m, +17%YoY, was 7% above ED outlook and EBITDA (adj.) of £10.7m, 12% above our outlook, a 9.4% margin (FY22: 7.0%). The closing order book of £72.5m was up 8%YoY, backed by record £118.5m order intake, an impressive +41%YoY. Mpac achieved its initial goal of a return to normalised operations and has established a firm platform for growth. Accordingly, the Group has launched a new five-year roadmap with an ambition to broadly double revenue from their existing businesses. We have raised our Fair Value from 485p/share to 530p/share with the prospect of FY25 adj. EBITDA c.40% above FY23.
 

Rebound from supply chain constraints
Having responded to the FY22 constraints imposed by the disruption to supply chains, which resulted in increased debt but importantly maintained customer support and loyalty, Mpac has accelerated through FY23 from 4%YoY revenue growth in H1 to 30%YoY in H2; +17%YoY for the year. The Americas rebounded similarly: H1 -19%YoY, H2 +42%YoY, reflecting a turnaround in Original Equipment (‘OE’) contribution (H2 +55%YoY), ending +7%YoY for the year.
 

Exposure to growing market verticals
The Group derives 40% and 36% of revenue from the Food & Beverage sector and Healthcare sector respectively, both of which display strong underlying growth drivers of product demand and environmentally innovative solutions. At present, Clean Energy accounts for 8% of revenue and continues to develop well. Mpac has retained its strong collaboration with FREYR Battery as well as diversifying the client base by adding Illika PLC. The Group also saw significant growth in Service revenue which now represent 28% of Group total.
 

5-year strategy launched
The new 5-year strategy emphasises five ‘Pillars for Growth’: a new ‘Sales Excellence’ programme to improve customer support and develop new markets; deployment of additional business tools to support the Service team proposition; a focus on project execution supported by integrated resources planning to reduce delivery lead-time and streamline supply chains; continued innovation, including the clean energy vertical; and a continued focus on talent acquisition, employee training and retention.
 

Outlook: Fair Value 530p
We introduce FY25 estimates which indicate adj. EBITDA c.40% above FY23 results. Given FY23 performance, the combination of underlying demand in Mpac’s core verticals and the Group’s innovative expertise, we raise our Fair Value to 530p/share, indicative of a FY24 EV/EBITDA multiple of 7.9x.