Glasgow's Macfarlane Group flags further progress despite cost and supply headache: shares jump

Macfarlane Group, the Glasgow-headquartered protective packaging provider, has battled Covid-19, inflationary pressures and supply shortages to report higher sales, profits and an increased shareholder dividend.

Results for the six months to the end of June revealed turnover of £133.5 million, an increase of 26.5 per cent on a year earlier. Operating profit before amortisation and impairment at £11.1m and profit before tax at £7.8m both more than doubled, year on year.

The group pointed out that this also marked a 24.2 per cent increase in sales and a doubling of profit before tax compared to the same period in 2019, prior to any impact from the pandemic.

The latest result was given a boost from recent strategic acquisitions.

Headquartered in Glasgow, Macfarlane Group employs more than 1,000 people at 39 sites, principally in the UK, as well as in Ireland, Sweden and the Netherlands.

Meanwhile, the interim dividend has been increased by 24.3 per cent to 0.87p per share and the firm’s pension scheme has moved into surplus.

Chairman Stuart Paterson said the firm was benefiting from the “ongoing structural shift” to e-commerce trading and a recovery in certain industrial sectors which were impacted by Covid in the first half of 2020. He expects that the group's full-year result will be ahead of previous expectations.

Paterson said: “Despite ongoing difficult operating conditions due to Covid-19, significant inflationary pressure on input costs and supply shortages of some materials, the business has produced a strong profit performance.

“Packaging distribution has grown sales through strong demand from existing customers in the e-commerce retail and medical sectors and recovery in a number of industrial sectors. Demand from the aerospace, high street retail and hospitality sectors continues to be weak.

“New business activity has increased significantly compared to the same period in 2020 and Carters has traded strongly since acquisition.”

The Scots group announced that it was buying Carters Packaging, which is based in Redruth, Cornwall, for £4.5 million at the start of April. It said the acquisition was in line with its declared strategy of building its business through a combination of organic and acquisitive growth.

Macfarlane chief executive Peter Atkinson said the firm had “not been touched too greatly to date” by supply issues though it had faced a “small number” of driver shortages, while rising oil and cardboard prices have also had to be factored in. He highlighted the group’s “very strong supply base”.

Elaborating on the interim results, Paterson said the group’s manufacturing operations had benefited from the acquisition of GWP, a protective packaging manufacturing and distribution business based in Wiltshire, which is “performing ahead of expectations”, and a strong recovery in the packaging design and manufacture division which returned to profit following a restructuring.

Analysts at house brokerage Shore Capital noted: “The outlook and long-term opportunity for Macfarlane in its field of protective packaging solutions, with its solid platform for growth, continue to look very bright to us.”

Paterson told investors: “We expect the second half of 2021 to be challenging as we anticipate further inflationary pressure on input prices, continuing supply constraints on most raw materials and operating costs increasing due to staffing pressures.

“However, the group has previously demonstrated effective management of these challenges and, as a result of this and the performance in [the first half], the board expects the group will exceed its previous expectations for the full year.”

Shares rose sharply in the wake of the results.

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