Macfarlane reports £1m profit boost and dual acquisitions

By Rhys Handley, Thursday 23 August 2018

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Macfarlane Group has posted a £12m rise in turnover, in its half-year results for 2018, and acquired two more packaging distribution companies.

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Atkinson: "Broadly, everything is in line with expectations"

Sales for H1 were £102m, up 14% on 2017 (£90m). The Glasgow-headquartered packaging and labels PLC also logged a £1m rise in pre-tax profit to £3.5m in the six months to 30 June.

The company has also acquired two new distribution businesses in deals worth £3.5m – Leicester-based Tyler Packaging on 31 July, and Harrisons Packaging in Leyland, Lancashire on 2 August. The businesses add 22 new members of staff to Macfarlane's headcount.

Finance director John Love said: “As can be seen in our rising profits, we are generating cash and we are keen to use it in a number of ways – one of those being acquisitions.

“Both Tyler and Harrisons looked like the good type of acquisitions that we pursue – good quality, cash-generating and profitable with good customer bases that are complementary to our existing market reach with little overlap. There is a lot of opportunity for synergy.

“While the two companies will benefit from Macfarlane resources and our product range, they also present an opportunity for add-ons to our own offering. For instance, Harrisons offers temperature-controlled food packaging, which our customers may be interested in.”

Both businesses will retain their branding with no planned changes to their operations and staffing, as Macfarlane will aim to make the most of their current success and continue their growth under the wing of a larger parent company.

Packaging distribution, especially in the industrial sector, was highlighted by chief executive Peter Atkinson as the strongest part of the business. Its growth in sales mirrored the larger group at 14% in H1 2018, with 5% coming from organic growth and 9% from the benefits of the 2017 acquisition of Nottinghamshire-based Greenwoods Stock Boxes.

Design and manufacture at the group’s Grantham and Westbury facilities was tipped as an area in need of improvement by Atkinson, following a “difficult 2017”. However, he said the department was on track to continue improving into 2019.

He pointed to “focusing on added-value products and services in our target market sectors” as key to achieving the company's year-end targets. Macfarlane broker Arden Partners continues to forecast the group’s final results for the year at £13.6m in pre-tax profit, although it raised its 2019 full-year expectations by 2.8% to £14.8m.

Atkinson said: “In the broadest terms, we are selling premium products and services as opposed to selling on a cost basis. For example, we sell both self-adhesive and resealable labels, with resealable labels adding value to our food packaging for an ageing population.

“We are benefiting the most from our distribution wing, especially in the industrial sector which includes engineering and medical. E-commerce also continues to grow apace.

“Broadly, everything is in line with expectations – our sales have grown through acquisitions and organic growth. Now we will be working to ensure that we grow in our target markets, and that the benefits of our acquisitions come through in the second half of the year.”

Net debt at the group was brought down to £11.1m, a drop of £3.6m since the end of 2017, enabling Macfarlane to continue operating comfortably within its £30m borrowing facility from Lloyds Bank, available until June 2022. Love said the goal was to continue bringing the debt down to give the group “a platform from which to continue making acquisitions”.

Macfarlane's shares were up 3.9% to 106p at the time of writing.

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