Macfarlane hails acquisition benefits as profits rise

Macfarlane is eyeing more deals after posting a rise in half-year profits. Picture: Contributed
Macfarlane is eyeing more deals after posting a rise in half-year profits. Picture: Contributed
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Packaging group Macfarlane today said it was on the search for further acquisitions as it reported a rise in first-half sales and profits.

The firm struck a £1.8 million deal in May to take over the packaging arm of fellow Glasgow business Edward McNeil, and last month said it was paying up to £6.75m to buy Leicester-based Nelsons for Cartons and Packaging.

Macfarlane's new 'innovation lab' in Milton Keynes. Picture: Contributed

Macfarlane's new 'innovation lab' in Milton Keynes. Picture: Contributed

“Our strategy is to continue to deliver sustainable profit growth through focusing on added-value products and services in our key UK market sectors, combined with the execution of value-enhancing acquisitions,” chairman Graeme Bissett said today.

Chief executive Peter Atkinson told The Scotsman that the group had built up a “strong pipeline” of potential deals, with talks underway between a number of companies, but it was unlikely to conclude any more takeovers this year “mainly because we’ve got the integrations of the ones we’ve just bought to do, and the e-commerce sector will be very busy for us in the second half and we don’t want to be distracted from that”.

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His comments came as the group, which employs more than 780 people across 29 sites, posted an 8.1 per cent rise in pre-tax profits to £2m for the six months to the end of June, on turnover 3.7 per cent higher at £81.5m. The interim dividend, to be paid on 13 October, was lifted 3.8 per cent to 0.55p a share.

Macfarlane has been benefiting from rising demand for its packaging products from internet retailers, who accounted for more than a fifth of sales in the six-month period, and Bissett said the group expects to see a “seasonal uplift” in the second half of the year as online stores gear up for Christmas.

Atkinson said: “We’re focused on continuing to build our presence in that sector, and one investment we made in the early part of the year was setting up what we call the Macfarlane ‘innovation lab’ in Milton Keynes, which allows us to showcase to our customers all that we can do for them around e-commerce. That opened in March and already we have won at least one customer worth £1m and we hope to roll out more new business wins in the second half.”

The “uncertain economic climate” arising from the outcome of the EU referendum is likely to continue for a considerable time, Bissett said, adding: “The performance of the business in the period to 30 June 2016 reflects the successful implementation of our strategy and we will maintain that focus in the period ahead.”

Finance director John Love said Macfarlane had seen a “little bit of softening in demand” around the time of the Brexit vote, but business had returned to “more normalised” levels this month. Mainland Europe accounts for about £3m of the group’s annual sales.

Analysts at Shard Capital have pencilled in a rise in revenues for the full year to £184m, up from £169.1m in 2015. “This business exhibits steady growth, strong cash flow and regularly beats estimates,” the broker said.

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