Forecast beating Macfarlane to repay furlough cash
Monday, July 6, 2020
Macfarlane Group has promised to repay the furlough cash it has received from the government’s Coronavirus Job Retention Scheme after reporting that lockdown and the Covid crisis hadn’t impacted sales as heavily as first feared.
While all of the group’s 31 sites have remained in production since March, 30% of its just shy of 1,000 workforce was placed on the Coronavirus JRS, with the group payroll bill benefiting to the tune of £1.3m.
Around 270 group employees remain on furlough.
Regardless though, chief executive Peter Atkinson said that from 1 July the firm will be making no more claims from the JRS and will repay the £1.3m it has claimed so far.
“We will clear the slate in terms of any monies owned to the government and will not incur any more costs on its behalf in respect to furlough.
“We want to do the right thing at the end of the day. The business hasn’t suffered as badly as we expected, so we think it’s only right that the money is used for more important things, to be blunt.”
In a trading update issued this morning, the packaging group said it had initially feared that year-on-year demand would fall by 20-25% in the March to June Q2 period.
In the update, the group said that while sales in the automotive, aerospace and high street retail sectors had been weak, stronger performances across the e-commerce, medical, food and household essentials sectors had helped to minimise the impact.
The company will release detailed half year figures next month.
While Atkinson welcomed the group’s positive Q2 performance and said he was confident that it would remain profitable in the current financial year, he tempered this with caution.
“Everyone talked about this being V-shaped, a sharp decline and sharp recovery. It looks from our point of view that the decline wasn’t as sharp as we expected, but we think the recovery will be longer.
“Our assumption at the moment is that we don’t see things getting back to ‘normal’ until probably Q4 2021. So, we’re assuming that levels of demand will be relatively low for a long-term period,” he said, citing the impact on demand from potentially high levels of unemployment and companies struggling to repay government support.
“I think there are still a few hurdles to get over, before we see things getting back to normality from a trading point of view.”
Last year, the group notched up its tenth consecutive year of growth, posting a pre-tax profit of £12m on sales of £225.4m to 31 December 2019, up 10% and 4% respectively year-on-year.
As a result of the pandemic, the acquisitive group has agreed with the respective vendors to press pause on two “fairly advanced” M&A deals until all parties have more visibility.
“We would be very hopeful that we could get back announcing acquisitions in the early part of 2021,” said Atkinson.
However, he hinted that, thanks to its strong financial position, the group was well placed to seize any M&A opportunities that might develop in the meantime.
“We’re keeping our ears and eyes open, and clearly if any opportunities were to arise we would be keen to have a look at them,” he said.