The Glasgow-headquartered group reported a turnover of £196m in its year-end results for 2017, with a 19% rise in pre-tax profit to £9.3m. The results make 2017 Macfarlane’s eighth consecutive year of profit growth.
Prominent among its achievements for the year was the 10% increase in sales on Macfarlane’s packaging distribution division, up to £171.8m with 3% of this achieved from “organic growth”. The remainder was attributed to a number of acquisitions, most recently the purchase of Nottinghamshire-based Greenwoods Stock Boxes in September.
Chief executive Peter Atkinson said: “We are very pleased that our results show how we charted out a clear strategy for the business and we have executed it effectively. Our distributions are our main business, making up 80% of our revenue.
“As more people use the internet to buy products, more packaging is needed and we are well-positioned to make the most of that opportunity. We have also benefited from a need for bespoke packaging for high-end goods in industrial markets such as aerospace where components and items need protective packaging.”
While the packaging distribution branch grew its gross margin to 29.4%, the group’s manufacturing operations division’s margin fell from 43.8% in 2016 to 40.7% last year.
Manufacturing sales were recorded at £24.4m, a 1% rise on the year before. The slowed growth was attributed to “operational pressures” in the manufacture and design of packaging, as well as an “adverse exchange rate” impacting on Macfarlane’s labels business.
“While we were happy with our results overall, we were disappointed with the slow progress of manufacturing nonetheless,” said Atkinson. “We see this as a temporary issue however due to a number of factors.
“Having brought in two new pieces of business last year that turned out to be more complicated than we expected, we had to commit more operational costs to get things going, and we are also transitioning away from our self-adhesive labels into resealable which means one was slowing down as the other was growing.”
The group was able to reduce its net bank borrowing from £15.3m to £14.3m across the year and its pension deficit was reduced by £2.7m to £11.8m.
Macfarlane will consider a final dividend for shareholders of 1.5p per share, amounting to a full-year dividend of 2.1p per share – up from last year’s 1.95p per share. The decision, floated by the board, is subject to approval at a shareholders meeting in May.
Changes were made on the board at Macfarlane last year, with Graeme Bissett stepping down as chair. James Baird joined the board as non-executive director and audit committee chair in January this year, while non-executive director Mike Arrowsmith has signalled his intentions to step down later in the year.
His replacement will be announced following a selection process. The transition period, including the appointment of Stuart Paterson as chair, has so far been “seamless”, according to Atkinson, who is keen to see the board “refreshed, with new skills and business outlooks added”.
Over 2018, Macfarlane’s strategy is likely to be a “repetition of what we have done before”, related to continued acquisitions.
Atkinson said: “We tend to buy high-quality businesses that do not need fixing and can contribute to our own business with added geographical scope, or with new products and services. They tend to be circa £3m-£10m in turnover with owners hoping to retire without a clear family succession.
“These are rather tight parameters, but we do have a pipeline to work through and, it seems, with each acquisition we make, more people get in touch to show interest.”
Following its acquisition in September, Greenwood will continue to operate under its original name due to “its strong brand”, as did Leicester-based Nelsons for Cartons and Network Packaging in Wolverhampton following their acquisitions in 2016 and 2014 respectively.
Part of the NovuPak network of packaging distributors in Europe, Macfarlane plans to strengthen its presence on the continent by offering service for UK-based customers requiring UK coverage, and European customers wanting to consolidate their supply chain.
Macfarlane Group employs more than 850 people across 29 sites in the UK, as well as Ireland and Sweden, and services 20,000 customers in the UK, Europe and the US. Its customers come from sectors including consumer goods, food manufacturing, internet retail and electronics.
