Macfarlane reports ‘resilient’ results ahead of expectations

Richard Stuart-Turner
Thursday, February 25, 2021

Macfarlane Group achieved both sales and pre-tax profit growth in 2020, with its results ahead of its previous expectations, despite the challenging market conditions due to the impact of the coronavirus pandemic.

Macfarlane's pre-tax profit was £13m in 2020, up 9.6% on 2019
Macfarlane's pre-tax profit was £13m in 2020, up 9.6% on 2019

In its preliminary results posted this morning (25 February) for the year ended 31 December 2020, the Glasgow-headquartered packaging giant recorded turnover of £230m, up 2.1% on the £225.2m it achieved in its 2019 results. These have been restated due to backdated duty, which the group said is a historical issue that has no impact going forward.

The company’s pre-tax profit was £13m, up 9.6% on its 2019 figure of £11.9m.

Macfarlane said at the outset of the pandemic, it acted decisively and responsibly to ensure it protected the interests of its employees as well as other key stakeholders, while all of its sites remained operational serving customers throughout the year.

Macfarlane chief executive Peter Atkinson told Printweek: “I think the announcement this morning demonstrates the resilient performance in the business. A relatively solid sales result and [pre-tax profit] increasing by almost 10%.

“So for a year that has clearly had lots and lots of challenges, I think what we’ve done in terms of 2020 has been very resilient and reflects very well on all the people.

“The year was an interesting shape because we started Q1 2% up, and then as we went into lockdown we reversed and went down by 5% versus the previous year, but then during Q3 we recovered and were 5% up versus last year and we ended the year [in Q4] very strongly at over 7% up.”

The company’s packaging distribution division increased sales by 2.6% in 2020 to £201.7m (2019: £196.7m). Sales revenue from existing customers benefited from underlying strength in the e-commerce, household essentials and medical sectors.

This was partially offset by weaker demand from the sectors most affected by Covid-19, namely automotive, aerospace, high street retail and hospitality.

Sales also benefited from the company’s 2019 acquisitions of Ecopac and Leyland Packaging, as well as its January 2020 acquisition of Armagrip.

Gross margin in packaging distribution at 32.5% showed improvement on the prior year (2019: 31.1%) and Macfarlane said it reflected effective management of input price movements, customer mix changes and increased online activity.

The growth in sales and margin was partially offset by an increase in bad debt and end of lease property provisions totalling £1.9m, which resulted in the division achieving a 12.8% increase in operating profit to £14m (2019: £12.4m).

Sales in Macfarlane’s manufacturing operations division were down by 0.9% on the previous year at £28.3m (2019: Restated £28.5m).

The company said strong demand from the food, medical and household essentials sectors in its labels business was more than offset by weaker demand from the aerospace and automotive sectors in its packaging design and manufacture business.

“Sales in [packaging design and manufacture] reduced by 20% versus the previous year and in the year that business actually made a small loss,” said Atkinson.

“But we completed a restructuring programme at the end of Q3, packaging design and manufacture was profitable in Q4 and has also been profitable in the early weeks of 2021 as well.”

Operating profit in manufacturing operations decreased to £0.4m in 2020 (2019: Restated £1.1m).

The group’s net bank borrowing at 31 December 2020 reduced to £0.5m from £12.7m at the previous year-end. Macfarlane said the improved cash position has been achieved primarily through effective management of working capital.

The company also said the full benefit of all government support and deferral programmes totalling £5.4m was repaid during the year.

Macfarlane’s pension deficit at 31 December 2020 reduced to £1.5m (2019: £6.5m).

Basic and diluted earnings per share for 2020 were 6.45p (2019: Restated 6.09p) and 6.42p (2019: Restated 6.07p) respectively.

The board is proposing a final dividend of 1.85 pence per share, amounting to a full year dividend of 2.55 pence per share.

The prior year dividend of 0.69 pence per share was impacted by the cancellation of the proposed final dividend of 1.76 pence per share, as one of Macfarlane’s key Covid-19 cash conservation measures.

The company's share price jumped by 12% in early trading this morning to 95.2p and stood at 94p at the time of writing.

The business added 2021 has started well despite the ongoing impact of Covid-19. It said there are still “significant uncertainties about the duration of disruption caused by lockdowns and the consequential impact on demand levels which means that 2021 will be another challenging year”.

However, the company’s board is confident that it is well positioned to benefit when the UK economy begins to recover.

Atkinson said that while acquisitions it was hoping to bring to fruition in 2020 were put on hold due to cash conservation reasons, following agreement with the sellers, conversations restarted in the second half of the year “and we are very hopeful that we will announce more acquisitions in the early parts of 2021”.


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