Glasgow's Macfarlane Group 'well advanced' with potential acquisitions as profits build

Packaging stalwart weathering industry headwinds as growth strategy and tight cost controls pay off.

Macfarlane Group, the Glasgow-headquartered packaging provider, is “well advanced” with a number of potential bolt-on deals as it continues to benefit from strategic acquisitions and tackle tough market conditions.

Unveiling full-year results which showed that profits were up 10 per cent despite a dip in revenues, chief executive Peter Atkinson also said he was hopeful that the Chancellor “can get on top of interest rates and help economic conditions” when he delivers his spring Budget next week.

The results for 2023 showed that adjusted group profit before tax grew to £25.8 million, from £23.5m the year before, even though group revenue fell by 3 per cent, year on year, to £280.7m. The board is proposing a final dividend of 2.65p per share, taking the total dividend for 2023 to 3.59p, up 5 per cent on the previous year.

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

The group’s core packaging distribution business saw revenues decrease by 6 per cent to £244.9m, while manufacturing operations delivered revenue growth of 16 per cent to £35.8m, helped by recent acquisitions. Macfarlane said the double-digit growth in annual group profits had been achieved through the completion of three “high quality” acquisitions in 2023, effective management of input prices, good progress in Europe and stronger new business momentum, helping to offset weak customer demand in the UK and Ireland, sales price deflation and inflation in operating costs.

Atkinson said: “We have resilience in our business model that allows us to know which levers to pull and which buttons to press. We are not expecting much change to conditions in 2024. If things do improve it’s going to be a minor improvement. Uncertainty around what’s happening in terms of UK politics and the wider world means that customers are really careful about what they buy and where they buy it from.”

He added: “In 2024, we have a strong pipeline [of potential deals] and are well advanced with a number of opportunities. We expect to announce news as the year unfolds.”

Headquartered in Glasgow, Macfarlane Group employs more than 1,000 people at 39 sites, principally in the UK, as well as in Ireland, Germany and the Netherlands. The business has been listed on the main market of the London Stock Exchange since 1973.

Atkinson said that despite the challenging backdrop the group had maintained its headcount at around the same level as the year before, adding: “As we go further into 2024 we still have some gaps in our workforce that we want to fill, particularly in the sales arena.”

Analysts at house broker Shore Capital noted: “Despite well-publicised weaker industry volumes and pricing, the group has showcased its robust business model, with management’s key strategic actions/focus on new customer development and pricing/cost control improving profitability and margins. We believe the group trades on an unjustified discount to peers with similar industry qualities (i.e. growth opportunities, strong margins and solid cash generation metrics) and to its historic valuation multiples.”

Shares in Macfarlane nudged higher in morning trade.

Glasgow packaging group Macfarlane on track with profits despite ‘challenging conditions’